NEW MOUNTAIN FINANCE CORPORATION 2026 Q2 Earnings Call

Good morning, everyone. Welcome to New Mountain Finance Corporation's second quarter 2026 earnings call. On the line with me here today are Steve Klinsky, Chairman of NMFC and CEO of New Mountain Capital, Laura Holson, COO, interim CFO, and Treasurer of NMFC. Steve is going to make some introductory remarks. Before he does, I'd like to ask Laura to make some important statements regarding today's call.

Thanks, John. Good morning, everyone. Before we get into the presentation, I would like to advise everyone that today's call and webcast are being recorded. Please note that they are the property of New Mountain Finance Corporation and that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available in our August third earnings press release. I would also like to call your attention to the customary safe harbor disclosure in our press release and on pages two and three of the slide presentation regarding forward-looking statements. Today's conference call and webcast may include forward-looking statements and projections. We ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from those statements and projections.

We do not undertake to update our forward-looking statements or projections unless required to by law. All materials referenced during today's call, including the earnings press release, earnings presentation, and Form 10-Q, are available on our website at www.newmountainfinance.com. At this time, I'd like to turn the call over to Steve Klinsky, NMFC's Chairman, who will give some highlights beginning on page six of the slide presentation.

Steve? Thanks, Laura. It's great to be able to address you all today, both as NMFC's Chairman and as a major fellow shareholder.

Adjusted net investment income for the second quarter was $0.26 per share, covering our $0.25 per share dividend that was paid in cash on June 30th. Looking forward to Q3, we would like to announce a $0.25 dividend payable on September 30th to shareholders of record as of September 16th. Consistent with our historical practice, we project the net investment income will continue to cover the quarterly dividend in the upcoming quarters. Our net asset value per share of $10.89 declined $0.03, or just 30 basis points compared to Q1, reflecting stable credit performance across the portfolio. Notably, non-accruals at fair value improved meaningfully from 2.6% last quarter to 1.5%.

During the quarter, we repurchased approximately $9 million of stock at approximately $8 per share, or about a 27% discount to book value. Year-to-date, we have repurchased approximately $66 million of stock, leaving us with approximately $80 million of total remaining capacity. Future buybacks will be predicated on having adequate excess capital, as well as making sure that we are appropriately within our stated leverage range. As I stated in the past, I believe that NMFC continues to be oversold. Overall, NMFC's book value has been stabilizing, as evidenced by these recent quarterly results. We believe that blind fears of a universal SaaSpocalypse have been excessive. We have marked many of our well-performing loans lower based on negative market sentiments overall and pursuant to fair value accounting standards and believe that there could be upside in the coming quarters as these loans move back towards par.

We are executing our stated strategy of finding bargains in the secondary market to build book value as they trade up, and we are optimistic that we will have catalysts upcoming for some of our equity positions in the portfolio if they perform on or above plan. We believe that risk-adjusted returns in direct lending are improving in this new market environment that is characterized by slightly higher pricing and lower average leverage multiples on new originations. We have pledged to voluntarily and permanently reduce our fees to be shareholder-friendly. Finally, NMFC is paying a cash yield of 15% at Friday's closing stock price, which is a level that is approximately two times as high as high-yield bond index averages, and with a dividend which we feel is sustainable based on the anticipated earnings power of the portfolio for the foreseeable future.

I and my fellow NMC executives remain the largest shareholders of NMFC stock, and our ownership position has been increasing over time. Overall, New Mountain ownership increased by 100 basis points sequentially and 400 basis points versus prior year to approximately 18% of total shares outstanding as of June 30th. We thank you as always for your ownership and partnership, and we are working diligently to serve your interests in the months and years ahead. With that, let me turn the call over to John for more details and comments.

Thank you, Steve. I would like to begin on page seven, which offers an overview of our approach to direct lending. First and foremost, we focus only on select parts of the economy that we believe are defensive and have sustainable tailwinds. The businesses that we invest in tend to have recurring or naturally reoccurring revenue models, stable margins, and are cash flow generative in many different economic environments. Overall, NMFC's focus on stable, non-cyclical sectors is more important than ever as we consider current economic risks, which include supply chain disruptions, weak consumer confidence, and persistent inflationary pressure. Importantly, NMFC provides heightened transparency around our industry niches as opposed to the standard practice of using broad sector classifications. This practice provides our investors with more clarity into specific types of companies that we invest in.

Page eight provides key performance statistics showing a long-term track record of delivering consistent enhanced yield by minimizing credit losses and distributing virtually all of our excess income to shareholders. Since our IPO in 2011, NMFC has returned over $1.5 billion to shareholders through our dividend program, generating an annualized return of approximately 10%. Our dividend yield as of Friday's closing stock price is 15% annualized based on what we believe are sustainable earnings. Our loan-to-value ratio is just 49% and includes the latest view of enterprise value at our portfolio companies. Importantly, we recalculate this metric every quarter to ensure we are accurately reflecting evolving market conditions and their impact on the valuation of our borrowers. Turning to page nine, we have made excellent progress on our strategic priorities so far this year. The portfolio sale, which closed in late Q1, reduced PIK income and improved our position diversity.

On the liability side, we continue to actively term out the maturities of our debt stack. Looking forward, we remain focused on further improving these same metrics. Over the next year, we believe that there are potential realization opportunities for many of our most concentrated positions. These exits would catalyze more diversity in the portfolio and in many cases, reduce PIK income. Additionally, there are several other smaller preferred and common stock positions that could be sold in the near term. We believe that ongoing momentum on the asset side of our balance sheet will position us well for continued improvement on our liability mix and cost of financing. As shown on page 10, 88% of the portfolio carries a green risk rating. The red and orange categories, which represent our most challenged positions, both declined this quarter.

We did see an increase in the yellow category, which represents modestly underperforming positions. Non-green names carry a weighted average mark of approximately $0.67, reflecting substantial de-risking already captured in the current portfolio marks. Turning to page 11, we provide a graphical analysis of NAV changes during the quarter, resulting in a book value of $10.89, a $0.03 decline compared to $10.92 for Q1. The main driver of the decline this quarter was a write-down on our non-accruing position in Convey, partially offset by a handful of unrealized gains, as well as accretive share repurchases. Page 12 addresses NMFC's credit performance. For the quarter, non-accruals at fair value stood at 1.5%, which was a meaningful improvement from 2.6% last quarter. Finally, on the right side of the page, we show our cumulative track record since IPO.

During that time, NMFC has made $10.6 billion of investments while realizing losses, net of realized gains, of $101 million. We remain focused on reversing losses through pull-to-par improvements on certain loans and through aforementioned exits on our equity positions. I will now turn the call over to Laura to discuss the current market environment and provide more details on NMFC's quarterly performance.