Breaking Down New Mountain Finance Corporation (NMFC) Financial Health: Key Insights for Investors

Are you looking for a Business Development Company (BDC) that focuses on direct lending solutions? Have you considered how New Mountain Finance Corporation (NMFC) aligns with your investment strategy? With a recent announcement of a first quarter 2025 distribution of $0.32 per share and a portfolio with a fair value of $3,104.5 million as of December 31, 2024, it's worth exploring the financial health of this company. NMFC reported a net investment income of $34.5 million, or $0.32 per weighted average share, for the fourth quarter of 2024. But what does this mean for investors like you? Let's delve into the key insights.

New Mountain Finance Corporation (NMFC) Revenue Analysis

New Mountain Finance Corporation (NMFC) primarily generates revenue through investments in middle-market companies, mainly via debt securities. The company functions as a lender, earning income from interest payments on loans and capital gains from its investments. Mission Statement, Vision, & Core Values of New Mountain Finance Corporation (NMFC).

Here's a breakdown of NMFC's primary revenue sources:

• Interest Income: Accounts for approximately 90% of total revenue and remains stable.
• Fee Income: Contributes about 5% to the total revenue, also exhibiting stability.
• Capital Gains: Represents roughly 5% of the total revenue and shows an increasing trend.

For the trailing twelve months ending December 31, 2024, New Mountain Finance reported revenue of $371.67 million. However, this represents a year-over-year decrease of 20.9%.

Total Investment Income for the year ended December 31, 2024, was $366.7 million, compared to $341.4 million for the year ended December 31, 2023.

Key factors influencing New Mountain Finance Corporation's business economics include:

• Interest Rate Environment: Prevailing interest rates significantly impact profitability; higher rates can increase yield on debt investments but also raise borrowing costs.
• Credit Quality: The creditworthiness of invested companies is crucial; defaults on loans can lead to financial losses.
• Investment Selection: Skillful investment selection that generates attractive returns while managing risk is vital for sustainable profitability.
• Operating Efficiency: Keeping operating costs low helps maximize income available to shareholders.

Key performance indicators for New Mountain Finance Corporation's financial performance include:

• Net Investment Income (NII): A critical metric reflecting profitability from investment activities. For the fiscal year 2024, New Mountain Finance Corporation reported NII of $2.34 per share.
• Total Investment Income: For the year ended December 31, 2024, this was $366.7 million, compared to $341.4 million for the year ended December 31, 2023.
• Weighted Average Yield on Debt Investments: As of December 31, 2024, this was 12.2%.
• Leverage Ratio: As of December 31, 2024, the debt-to-equity ratio was approximately 1.2x.
• Dividend Yield: The company declared total dividends of $1.32 per share for the year 2024.

The company's investment strategy targets defensive growth businesses with recurring revenue, sustainable secular growth drivers, and strong free cash flow. As of December 31, 2024, the portfolio had a fair value of $3,104.5 million of investments in 121 portfolio companies, with a weighted average YTM at Cost of approximately 11.0%.

New Mountain Finance Corporation (NMFC) Profitability Metrics

Understanding New Mountain Finance Corporation's (NMFC) profitability is crucial for investors. Profitability metrics reveal how efficiently NMFC generates earnings relative to its revenue, assets, and equity. These metrics provide insights into NMFC's financial health and sustainability.

Analyzing NMFC's profitability involves examining several key indicators:

• Gross Profit Margin: Indicates the percentage of revenue remaining after deducting the cost of goods sold (COGS). A higher gross profit margin suggests greater efficiency in production and cost management.
• Operating Profit Margin: Measures the percentage of revenue remaining after deducting operating expenses, excluding interest and taxes. This metric reflects the company's efficiency in managing its core business operations.
• Net Profit Margin: Represents the percentage of revenue that translates into net income after all expenses, including interest and taxes, have been paid. It provides a comprehensive view of overall profitability.

To fully assess NMFC's profitability, it is essential to analyze trends over time and compare its ratios with industry averages. This comparative analysis helps determine whether NMFC's profitability is improving, declining, or consistent with its peers.

Operational efficiency plays a significant role in NMFC's profitability. Effective cost management and favorable gross margin trends can positively impact the bottom line. Investors should closely monitor these factors to gauge the company's ability to maintain and improve its profitability.

While specific, up-to-date figures for the 2024 fiscal year are not available, examining historical data and industry benchmarks can provide valuable context. For instance, a review of past financial statements would reveal trends in gross profit, operating profit, and net profit margins. Comparing these figures with those of similar companies in the finance sector would offer insights into NMFC's relative performance.

Here's a hypothetical example of how profitability metrics might be presented (note: these are not actual NMFC figures):

Such a table would typically be accompanied by an analysis of the factors driving these changes, such as improved cost controls or increased revenue.

Further insights into the company's values and objectives can be found at: Mission Statement, Vision, & Core Values of New Mountain Finance Corporation (NMFC).

New Mountain Finance Corporation (NMFC) Debt vs. Equity Structure

Understanding how New Mountain Finance Corporation (NMFC) finances its operations is crucial for investors. This involves analyzing its debt levels, debt-to-equity ratio, and recent financing activities.

As of December 31, 2024, NMFC had $80.3 million in cash and cash equivalents and total statutory debt outstanding of $1,560.9 million. The company’s statutory debt to equity was 1.15x (or 1.11x net of available cash). Additionally, the company had $300.0 million of SBA-guaranteed debentures outstanding. As of September 30, 2024, the Company had $1,007.9 million of available capacity on its NMFC Credit Facility, Holdings Credit Facility, Unsecured Management Company Revolver and the NMNLC Credit Facility II.

Here's a breakdown of NMFC's debt and equity structure:

• Overview of Debt Levels:
• As of December 31, 2024, New Mountain Finance Corporation had total statutory debt outstanding of $1,560.9 million.
• The company also had $300.0 million in SBA-guaranteed debentures outstanding.
• Debt-to-Equity Ratio:
• As of December 31, 2024, NMFC's statutory debt-to-equity ratio was 1.15x, or 1.11x net of available cash.
• For comparison, as of September 30, 2024, the statutory debt-to-equity ratio was 1.26x.
• Recent Debt Issuances and Credit Ratings:
• KBRA assigned a rating of BBB- to New Mountain Finance Corporation's $300 million, 6.20% senior unsecured notes due 2027. The rating outlook is stable.
• KBRA also assigned a BBB- rating to New Mountain Finance Corporation's $300 million 6.875% senior unsecured notes due February 1, 2029.
• Balancing Debt and Equity:
• New Mountain Finance Corporation strategically manages its debt and equity to maintain financial flexibility.
• The company's gross and net leverage as of June 30, 2024, were 1.21x and 1.12x, respectively, within its target net leverage range of 1.0x to 1.25x.

The following table summarizes key financial metrics:

NMFC actively manages its liabilities, as evidenced by recent transactions and statements from company leadership. For instance, in the third quarter of 2024, they upsized and extended their NMFC Credit Facility at a lower cost and completed an attractively priced unsecured note issuance.

See also Exploring New Mountain Finance Corporation (NMFC) Investor Profile: Who’s Buying and Why?

New Mountain Finance Corporation (NMFC) Liquidity and Solvency

Liquidity and solvency are crucial indicators of a company's financial health, revealing its ability to meet short-term obligations and sustain long-term operations. For New Mountain Finance Corporation (NMFC), analyzing these metrics provides insights into its operational efficiency and financial stability. Let's delve into NMFC's liquidity position, working capital trends, and cash flow dynamics to gauge its financial resilience.

Assessing New Mountain Finance Corporation's (NMFC) Liquidity:

Liquidity ratios offer a snapshot of NMFC's ability to cover its immediate liabilities with its current assets. Two key ratios to consider are the current ratio and the quick ratio.

• Current Ratio: The current ratio, calculated as current assets divided by current liabilities, indicates the extent to which NMFC's short-term assets can cover its short-term liabilities.
• Quick Ratio: The quick ratio, also known as the acid-test ratio, is a more conservative measure of liquidity. It excludes inventory from current assets, providing a clearer picture of NMFC's ability to meet its immediate obligations with its most liquid assets.

Analysis of Working Capital Trends:

Working capital, defined as the difference between current assets and current liabilities, reflects NMFC's operational efficiency and short-term financial health. Monitoring trends in working capital can reveal whether NMFC is effectively managing its resources.

A positive working capital balance suggests that NMFC has sufficient liquid assets to cover its short-term liabilities, while a negative balance may indicate potential liquidity issues. Analyzing changes in working capital over time can highlight areas of improvement or concern in NMFC's financial management.

Cash Flow Statements Overview:

Cash flow statements provide valuable insights into NMFC's cash inflows and outflows from its operating, investing, and financing activities. Examining these cash flow trends can reveal the sustainability of NMFC's operations and its ability to generate cash.

• Operating Cash Flow: Cash flow from operating activities reflects NMFC's core business operations. Positive operating cash flow indicates that NMFC is generating sufficient cash from its primary activities to cover its expenses and investments.
• Investing Cash Flow: Cash flow from investing activities includes transactions related to the purchase and sale of long-term assets, such as property, plant, and equipment (PP&E). These cash flows can indicate NMFC's investment strategies and growth initiatives.
• Financing Cash Flow: Cash flow from financing activities involves transactions related to debt, equity, and dividends. These cash flows can reveal NMFC's capital structure and its approach to funding its operations.

By examining these cash flow trends, investors can gain a deeper understanding of NMFC's financial stability and its ability to generate sustainable returns.

Potential Liquidity Concerns or Strengths:

Based on the analysis of liquidity ratios, working capital trends, and cash flow statements, it's essential to identify any potential liquidity concerns or strengths that may impact NMFC's financial performance. Factors such as changes in industry conditions, shifts in market dynamics, and internal management decisions can influence NMFC's liquidity position.

For example, a significant increase in debt or a decline in operating cash flow may raise concerns about NMFC's ability to meet its obligations. Conversely, strong operating cash flow and efficient working capital management may indicate a solid liquidity position.

Here is an example of how NMFC has been doing:

Understanding these aspects of NMFC's financial health is crucial for investors. For more in-depth information, see: Mission Statement, Vision, & Core Values of New Mountain Finance Corporation (NMFC).

New Mountain Finance Corporation (NMFC) Valuation Analysis

When considering an investment in New Mountain Finance Corporation (NMFC), assessing whether the stock is overvalued or undervalued is crucial. Several key financial metrics and market indicators can help in this evaluation. Here's a breakdown of important factors:

Valuation Ratios:

• Price-to-Earnings (P/E) Ratio: As of April 2025, NMFC's P/E ratio is around 9.46. This indicates how much investors are willing to pay for each dollar of earnings.
• Price-to-Book (P/B) Ratio: The P/B ratio is approximately 0.78. A P/B ratio of less than 1 may suggest that the stock is undervalued relative to its book value.
• It is important to note that different sources may provide slightly different P/E and P/B ratios depending on the data and calculation methods used. For example, one source lists the P/E ratio as 8.8 and the P/B ratio as 0.70 as of April 11, 2025.
• Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: Some data indicates an EV/EBITDA ratio of 0.00. Other sources don't provide a specific EV/EBITDA ratio.

Stock Price Trends:

• Over the past 12 months, NMFC's stock has experienced volatility.
• The 52-week high is $12.805, while the 52-week low is $8.8437.
• As of April 17, 2025, the last price is $9.74.

Dividend Information:

• Dividend Yield: NMFC offers a high dividend yield. As of April 17, 2025, the dividend yield is around 13.142%. Other sources list the dividend yield as high as 14.01%, so it's important to check the source and date.
• Annual Dividend: The annual dividend is $0.32 per share.
• Payout Ratio: One source lists the payout ratio as 129.31%. Another source lists the payout ratio as 96.93%.
• Dividend Frequency: Dividends are paid quarterly.
• The last ex-dividend date was March 17, 2025, and the payment date was March 31, 2025.

Analyst Consensus:

• The analyst consensus rating for NMFC is 'Hold.'
• The average 12-month price target is $11.00.
• This price target represents a potential increase of 17.77% from the current price of $9.34.

Additional Factors:

Here is a table with some additional data:

It's important to consider these metrics in combination with other financial data and qualitative factors to form a comprehensive investment decision.

New Mountain Finance Corporation (NMFC) Risk Factors

Investing in New Mountain Finance Corporation (NMFC) involves navigating a landscape of both internal and external risks that can significantly impact its financial health. These risks span industry competition, regulatory changes, and broader market conditions. Understanding these factors is crucial for investors aiming to make informed decisions.

Industry Competition: The financial sector is intensely competitive. NMFC faces competition from other business development companies (BDCs), private equity funds, and traditional lenders. This competition can pressure NMFC's ability to secure attractive investment opportunities and maintain favorable lending terms. Increased competition may lead to lower yields on investments, impacting overall profitability.

Regulatory Changes: Regulatory changes pose a significant risk. As a BDC, NMFC operates under specific regulations, including those set forth by the Investment Company Act of 1940. Changes in these regulations can affect NMFC's operational flexibility, capital requirements, and ability to leverage its investments. For example, changes in regulations governing leverage ratios could restrict NMFC's ability to grow its portfolio and generate returns.

Market Conditions: Broader economic and market conditions also play a critical role. Economic downturns, rising interest rates, or credit market disruptions can negatively impact NMFC's portfolio companies. These conditions can lead to decreased revenues and profitability for NMFC's borrowers, increasing the risk of loan defaults and impacting NMFC's asset quality. Additionally, fluctuations in interest rates can affect NMFC's net interest margin, which is the difference between the income generated from its investments and the cost of its borrowings.

Recent earnings reports and filings highlight several operational, financial, and strategic risks:

• Credit Risk: The risk of borrowers defaulting on their loans remains a primary concern. NMFC's portfolio consists primarily of debt investments in middle-market companies, which may be more susceptible to economic downturns than larger, more established businesses.
• Interest Rate Risk: Changes in interest rates can affect NMFC's profitability. While some of NMFC's loans have floating interest rates, a rapid increase in rates could strain borrowers' ability to repay, leading to defaults.
• Liquidity Risk: Maintaining sufficient liquidity to meet funding obligations and make new investments is crucial. Economic uncertainty and market volatility can impact NMFC's ability to access capital markets on favorable terms.

Mitigation strategies and plans are essential for managing these risks. NMFC employs several strategies to mitigate potential adverse effects:

• Diversification: NMFC diversifies its investment portfolio across various industries and borrowers to reduce concentration risk.
• Active Monitoring: NMFC actively monitors its portfolio companies, assessing their financial performance and identifying potential issues early on.
• Conservative Underwriting: NMFC adheres to a disciplined underwriting process, carefully evaluating the creditworthiness of potential borrowers.
• Hedging Strategies: NMFC may use hedging strategies to mitigate interest rate risk and manage its exposure to market fluctuations.

Understanding these risks and mitigation strategies is vital for investors in New Mountain Finance Corporation. For more insights into the company's values and mission, refer to Mission Statement, Vision, & Core Values of New Mountain Finance Corporation (NMFC).

New Mountain Finance Corporation (NMFC) Growth Opportunities

New Mountain Finance Corporation (NMFC) is a business development company (BDC) focused on providing direct lending solutions to U.S. middle market companies backed by top private equity sponsors. NMFC's investment objective is to generate current income and capital appreciation.

NMFC primarily targets businesses in the middle market that, consistent with New Mountain's private equity platform, are high quality, defensive growth companies in industries that are well-researched by New Mountain. The company focuses on defensive growth businesses that generally exhibit characteristics such as acyclicality, sustainable secular growth drivers, niche market dominance, high barriers to competitive entry, recurring revenue and strong free cash flow, flexible cost structures, and seasoned management teams.

Here's a detailed look at the future growth prospects for New Mountain Finance Corporation:

• Key Growth Drivers: NMFC targets defensive growth sectors such as enterprise software, healthcare, tech-enabled business services and life sciences.
• Strategic Initiatives: NMFC's strategy includes diversifying its top positions, optimizing the fund's liabilities, and exiting PIK (payment-in-kind) positions.
• Acquisitions: New Mountain Capital, the investment firm associated with NMFC, has a history of acquisitions across various sectors. For instance, they acquired Machinify in January 2025 and combined it with a healthcare intelligence and payment platform.

NMFC's mandate is to achieve superior risk-adjusted returns despite economic volatility. Since its IPO, NMFC has invested over $10.0 billion and realized losses of only $67 million (net of realized gains) while paying out approximately $1.4 billion in dividends.

As of December 31, 2024, NMFC's NAV was $1,353.3 million, and its portfolio had a fair value of $3,104.5 million of investments in 121 portfolio companies, with a weighted average YTM at Cost of approximately 11.0%. For the three months ended December 31, 2024, the company generated $33.1 million of originations, $158.9 million of cash repayments and realized $58.9 million of asset sales.

NMFC's portfolio is primarily composed of senior secured loans and select junior capital positions in growing businesses. As of December 31, 2024, 97% of its portfolio was rated 'green,' indicating strong performance.

NMFC's investment approach leverages the resources, investing experience, knowledge, and relationships of the broader New Mountain Capital platform.

NMFC focuses on U.S. middle market businesses with annual EBITDA between $10 million and $200 million, investing through primary originations and open-market secondary purchases, with investment sizes up to $200 million.

NMFC has a stock repurchase program in place, allowing the company to repurchase up to $50 million worth of its common stock. The program is expected to be in place until the earlier of December 31, 2025, or until $50 million worth of shares have been repurchased.

The average one-year price target for New Mountain Finance Corporation is $12.50, with forecasts ranging from a low of $11.11 to a high of $13.65.

NMFC's revenue for the quarter ending December 30, 2024, was $29.72 million, bringing the company's revenue in the last twelve months to $267.20 million.

Here is a table summarizing key financial data as of December 31, 2024:

See Mission Statement, Vision, & Core Values of New Mountain Finance Corporation (NMFC).