NMFC

• Credit and Portfolio Performance

  • 88% of the portfolio carries a green (lowest risk) rating, with challenged red and orange risk categories declining sequentially; non-accruals at fair value improved meaningfully from 2.6% last quarter to 1.5% this quarter
  • Net asset value per share declined 3 cents (30 basis points) quarter-over-quarter, driven by a write-down on the non-accruing Convey position, partially offset by unrealized gains and accretive share repurchases
  • Non-green positions carry a weighted average mark of 67 cents on the dollar, with substantial de-risking already reflected in current portfolio valuations
  • Cumulative net realized losses since the 2011 IPO total $101 million across $10.6 billion of total investments

• Strategic and Operational Activities

  • The company repurchased approximately $9 million of stock in Q2 at a ~27% discount to book value; year-to-date repurchases total $66 million, leaving $80 million in remaining buyback capacity
  • Origination activity was light in the quarter: $73 million in new originations, offset by $105 million in sales and repayments, leaving the portfolio effectively fully invested; yields on new investments exceed yields on repaid positions
  • The portfolio is diversified across 113 companies, with the top 10 single-name issuers representing 24% of total fair value (excluding SLPs and net lease funds)
  • Proactive liability management: closed a $150 million private placement with a delayed funding date in Q2, and extended the maturity of the corporate revolving credit facility to 2031 after quarter end; nearly 60% of outstanding debt now matures in 2029 or later, and the company continues to increase the floating rate share of liabilities to reduce asset-liability mismatch
  • Management has voluntarily and permanently reduced management incentive fees, with an effective 15% rate already in place for Q2 2026 ahead of the scheduled 2027 permanent reduction
  • New Mountain and executive insiders increased their collective ownership to ~18% of total outstanding shares as of June 30, 2026, up 100 basis points sequentially and 400 basis points year-over-year

• Investment Strategy

  • The company focuses on defensive, non-cyclical sectors with recurring revenue, stable margins, and consistent cash flow generation across economic environments
  • Management is actively pursuing exits of concentrated equity positions to increase portfolio diversification and reduce reliance on non-cash PIC income
  • The company prioritizes acquiring discounted positions in the secondary market where the firm’s industry-specific underwriting gives it a competitive advantage

• Management projects that net investment income will continue to fully cover the 25 cent per share quarterly dividend in upcoming quarters, consistent with historical performance
  • The Q3 2026 dividend of 25 cents per share was declared, payable September 30 to shareholders of record as of September 16
  • Management expects further improvement in portfolio diversification and income quality over the coming quarters as equity positions are monetized
  • Management is cautiously optimistic that overall direct lending deal activity will pick up in the second half of 2026, supported by an uptick in recent deal flow and a substantial backlog of private equity sponsor exits
  • Future share repurchases will be conditional on maintaining adequate excess capital and remaining within the company’s stated leverage range

New Mountain Finance Corporation is a business development company focused on direct lending with no distinct reported product segments in this transcript. Overall portfolio segment breakdown by seniority is as follows: 80% of the portfolio is senior in nature (including first lien investments, SLPs, and net lease investments), 6% is equity positions, and the remaining 14% falls into other non-senior debt categories. Total investment income for Q2 2026 was $61 million, a 11% decrease from the prior quarter. PIC income (from original structured assets and modified restructured assets) represented 16% of total investment income, while 84% came from non-PIC investment income. Total net expenses were approximately $37 million, broadly unchanged quarter-over-quarter. Adjusted net investment income was 26 cents per share, and net asset value per share was $10.89 as of quarter end.

• Cross currents in the macro environment create uncertainty, including conflicting signals around inflation, consumer health, labor markets, and commodity prices, ongoing geopolitical conflicts, accelerating technological change related to AI, and persistent valuation gaps between buyers and sellers
  • The portfolio faces markdown pressure from negative market sentiment, particularly for software/AI-exposed sectors driven by widespread fears of a so-called "SaaSpocalypse"
  • Industry-wide M&A and direct lending origination volume was muted in Q2 2026, down 55% quarter-over-quarter and 13% year-over-year for the first half
  • Approximately $160 million in unfunded commitments and 2027 debt maturities need to be managed, despite available capacity under existing credit facilities

Q: Can you provide more detail on your planned equity position monetization, including the number of positions and progress of exit processes? / A: Management expects to exit several smaller equity positions within the next one to two quarters. There are also active exit processes underway for multiple larger positions, though exact timing for these larger exits is uncertain. All planned exits are expected to be accretive to shareholder value, and management is highly focused on executing these transactions.\n\nQ: With a portion of your unsecured debt maturing over the next two years, what spread levels do you expect to achieve when you refinance this debt? / A: If management successfully executes on its strategic priorities (monetizing equity positions, increasing portfolio diversification, reducing PIC income), it expects to secure lower borrowing costs when it returns to the unsecured debt market. Existing maturing debt is relatively high-cost, so refinancing is viewed as a long-term opportunity to reduce overall financing costs.\n\nQ: Do you need a significant pickup in M&A activity to exit the majority of your equity positions, or can exits be achieved under current market conditions? / A: Management notes that M&A market conditions have been improving, which will support both new origination and planned exits. Management does not need a material change in market conditions to execute exits, as the underlying equity positions are currently performing well. Exiting these positions will leave the portfolio more diversified with improved income quality.\n\nQ: What should we expect for the pace of originations and repayments for the remainder of 2026, and are there any catalysts for increased activity outside of M&A? / A: Management reports that deal pipelines have already seen an increase in activity relative to the slow first half of 2026. Increased activity is the primary catalyst for higher origination and repayment volumes in the second half, supported by improving M&A conditions.