New Mountain Finance Corp Q1 FY2025 earnings call

• Adjusted net investment income of $0.32 per share covered the $0.32 per share dividend. • Net asset value per share declined $0.1 but showed stable credit performance. • Over 96% of portfolio green on heat map, low tariff exposure (2% vs 13% peer average). • Lending in sectors with low tariff, funding, and regulatory exposure. • Loan-to-value at 43%, senior oriented assets increased to 77% of portfolio. • Reduced top positions, re-priced Wells Fargo credit facility, monetizing non-yielding equity, PIK income decreased from 19% to 17%. • Non-accruals very low, only $38 million or 1.2% of portfolio on non-accrual.

Adjusted net investment income for the quarter was $0.32 per share. Net asset value per share was $12.45, declining $0.1 or 80 basis points. Over 96% of the portfolio is green on the heat map with no red names. NMFC has only 2% exposure to tariff-sensitive sectors versus 13% average for peers. Loan-to-value stands at 43%. PIK income and second lien income is falling while first lien assets are growing. Revenue contribution: Over 96% of portfolio green, 2% tariff exposure vs 13% peer average, lending in healthcare, IT, etc.

• Announced a $0.32 dividend payable on June 30th to shareholders. • Dividend Protection Program can provide up to $0.02 of extra dividend support per quarter. • Board authorized a stock repurchase program to buy back up to $47 million of NMFC shares. • Expect continued progress on reducing PIK income to lower teens range.

• Potential impact of market volatility on spreads and returns. • Uncertainty in forward rate curve affecting refinancing and income. • Complexity in some portfolio company capital structures leading to valuation challenges. • Impact of base rate changes on refinancing costs and overall returns for the industry.

Q: Finian O'Shea asked about UniTek's complicated capital structure, warrant appreciation, and write-downs.

A: John Kline explained UniTek's capital structure, cash invested, accrued PIK, and the transaction details, noting retained stake and value held.

Q: Robert Dodd inquired about market outlook, spread widening, and levers to cover dividend in a declining rate cycle.

A: John Kline discussed optimizing financing, portfolio activity in Q2, potential refinancing opportunities, and impact of base rate changes.

Q: Arthur Winston asked about PIK income direction, balance sheet matching, and Dividend Protection Program timing.

A: John Kline said PIK income is moving in the right direction, balance sheet is in good shape, and Dividend Protection Program is in place for 2025 and 2026.