New Mountain Finance Corporation Q2 FY2025 earnings call

• Adjusted net investment income of $0.32 per share covered the $0.32 per share dividend paid. - Net asset value per share declined $0.24 from Q1, with 95% of investments green and 80% exposure to senior-oriented assets. - Lending in sectors like health care, IT, etc., with loan-to-value at 45%. - Planned $0.32 dividend payable on Sept 30, supported by strong recurring earnings and dividend protection program through 2026. - Entered stock repurchase program, with $16M shares repurchased YTD and $31M remaining authorization. - Portfolio credit performance strong mostly, with modest declines in 3 positions; 95% green, 2.1% of fair value in challenged names. - Refinancing plans for 7.5% convertible notes and 8.25% unsecured notes maturing/callable in Q4. - Monetized $15M position in Office Ally's common equity and received full repayment on ARCOS preferred shares. - Average yield of portfolio decreased slightly to 10.6% in Q2, but total yields attractive for risk. - Diversified portfolio across 124 companies, top 10 issuers 25% of fair value.

Adjusted net investment income for the quarter was $0.32 per share. Net asset value per share was $12.21, a decline of $0.24 compared to Q1. 95% of investments were green on the heat map, and the portfolio had nearly 80% exposure to senior-oriented assets. Loan-to-value ratio stood at 45%. Lending was chiefly in sectors like health care, information technology, software, insurance services, and infrastructure services. Revenue contribution percentages weren't explicitly provided, but key absolute figures included adjusted net investment income per share and net asset value per share changes.

• Announced $0.32 dividend payable on Sept 30 to shareholders of record on Sept 16. - Dividend supported by strong recurring earnings, increased portfolio activity, and dividend protection program through 2026. - Expect deal flow trends to normalize as private equity deal activity picks up. - Ongoing stock repurchase program with $31M remaining authorization. - Plan to refinance 7.5% convertible notes and 8.25% unsecured notes, access unsecured debt market and lock in interest rate hedges.

• Tariff impact on a consumer products company in the portfolio, affecting performance and needing liquidity support. - Operational challenges in dental health care business due to labor inflation, lower patient volumes, and price pressure. - Market uncertainties related to deal activity constraints, tighter new issue spreads, and below normal private equity deal activity.

Q: Question on health care names, specifically dental downgrade and veterinary industry headwinds.

A: Dental sector has secular tailwinds but limited pricing levers and is operationally intensive; idiosyncratic issues with downgraded dental name. Veterinary sector has good tailwinds, Alliance Animal Health performing well.

Q: On red downgrade consumer products business, tariff exposure and risk to other businesses.

A: Consumer products name had tariff exposure, was yellow before, tariff situation still volatile; minimal risk in other portfolio businesses.

Q: On Edmentum write-downs, secular trends in education space.

A: Edmentum is EdTech serving K-12, well-positioned to address learning loss, stable underlying performance but has securities accreting ahead in capital structure.