• Adjusted Net Investment Income: $0.32 per share for Q4 2024.
• Net Asset Value (NAV) per Share: $12.55, a decline of $0.07 or 0.6% from the previous quarter.
• Dividend: $0.32 per share, payable on March 31, 2025.
• Investment Income: $91 million for Q4 2024, a 2% decrease from the prior year.
• Total Assets: $3.2 billion as of December 31, 2024.
• Total Liabilities: $2 billion, with statutory debt outstanding at $1.6 billion.
• Portfolio Investments: Over $3 billion at fair value as of December 31, 2024.
• Debt to Equity Ratio: 1.15 to 1, net of available cash.
• Recurring Investment Income: 96% of total investment income in Q4 2024.
• Floating Rate Loan Portfolio: 86% floating rate, 14% fixed rate.
• Portfolio Yield: Increased to 11% for Q4 2024.
• Leverage Maturity Schedule: Over 60% of debt matures in or after 2028.

• Warning! GuruFocus has detected 6 Warning Signs with NMFC.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• New Mountain Finance Corp (NASDAQ:NMFC) reported adjusted net investment income of $0.32 per share, covering their regular dividend.
• The company announced a $0.32 dividend payable on March 31, supported by strong recurring earnings.
• NMFC successfully sold a stake in Unitec Global Services, resulting in a $42 million return and retaining a 31% ownership stake.
• The portfolio is well-positioned in defensive growth industries, with 97% of assets rated green, indicating strong credit quality.
• NMFC's loans are primarily in senior-oriented assets, with a focus on high-quality industries and strong free cash flow conversion.

Negative Points

• Net asset value per share declined by $0.07 or 0.6%, indicating a slight decrease in portfolio value.
• The company experienced a slower start to 2025 than expected, potentially impacting future activity levels.
• There are concerns about the cybersecurity market affecting Health Systems, a significant portfolio company.
• Spreads have tightened, leading to challenges in finding attractive pricing for new deals.
• The market environment remains uncertain, with potential headwinds from political and regulatory volatility.

Q & A Highlights

Q: At the exit evaluation of Unitec, how does that enterprise value compare to the enterprise value used to inform the mark at Q4? A: John Kline, President and CEO, stated that the enterprise value is modestly higher, aligning with the big picture expectations.

Q: With uncertainties in the market potentially slowing activity, how comfortable are you with lowering your PIK exposure this year? A: John Kline expressed confidence in reducing PIK positions, noting that while the year started slower than expected, they anticipate showing progress by the Q1 call and remain optimistic about achieving their strategic goals.

Q: Regarding the allocation to increase senior loans, will the mix between first lien loan funds, net lease, and others remain the same? A: John Kline confirmed that within the senior category, the mix will remain the same.

Q: Do you think the market spreads have stabilized, and how much of the portfolio is vulnerable to repricing activity? A: Laura Holson, COO, noted that spreads have stabilized and are expected to remain so, especially if M&A activity picks up. She mentioned that most deals that could reprice have likely already done so, given the sophistication of their sponsored clients.

Q: How do you view the current market environment for direct lending, and what are your expectations for M&A activity in 2025? A: Laura Holson stated that direct lending remains attractive, with compelling deal structures. They expect increased M&A activity due to factors like private equity dry powder and attractive financing markets, despite some volatility and uncertainty.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.