New Mountain Finance Q1 Earnings Call Highlights

Key Points

• NMFC sold about $470 million of illiquid positions at ~94% of book value, creating liquidity used to delever and fund opportunistic moves including roughly $57M of buybacks by March 31 (plus ~$9M since), a new $50M authorization (leaving ~$80M total buyback capacity), secondary-market purchases, and higher-yield deployments; insiders bought shares (Chairman bought 1.5M), lifting New Mountain ownership to ~17%.
• Management cut the quarterly dividend to $0.25 (payable June 30) from $0.32, but says the payout is fully covered by adjusted net investment income (Q1 adjusted NII was $0.32 per share, aided by a $6.1M fee waiver) and expects ongoing coverage.
• NAV fell to $10.92 (down $0.23 pro forma), while portfolio health remains largely intact with 91% of assets rated green, non-accruals at 2.6%, and leverage at a net debt-to-equity of 1.08x; management flagged expected recoveries at several stressed credits and continuing redeployment into cash-yielding loans.

New Mountain Finance NASDAQ: NMFC executives highlighted a quarter marked by portfolio repositioning, share repurchases, and a reduced dividend as the business development company discussed first-quarter 2026 results and its outlook for redeploying liquidity created by a large portfolio sale.

Leadership update and dividend changes

President and CEO John Kline opened the call by noting a management change: CFO and Treasurer Kris Corbett will leave at the end of May “to pursue another career opportunity.” Kline said COO Laura Holson will assume the additional duty of interim CFO until a successor is found.

Chairman Steve Klinsky said adjusted net investment income (NII) was $0.32 per share for the first quarter, matching and covering the $0.32 per share dividend paid March 31. He attributed support for results to recurring income from the loan portfolio and a “full voluntary incentive fee waiver of $6.1 million.”

Looking to the current quarter, Klinsky announced a $0.25 per share dividend payable June 30 to shareholders of record as of June 16. He said the company expects the dividend to be “more than covered by the earnings from our core business.” Kline also referenced that the revised $0.25 quarterly payout is fully covered by net investment income.

Strategic pivot after $470 million portfolio sale

Klinsky said the company made what he characterized as a “very positive and well-timed strategic pivot” by selling about $470 million of “some of our most illiquid and hardest to value positions” at 94% of December 31 book value, with the transaction closing and funding in March. He said the liquidity has allowed NMFC to delever and pursue opportunities “at far less than $0.94 on the dollar.”

Management outlined several uses of proceeds and areas of focus:

• Share repurchases: Klinsky said NMFC bought back stock at roughly $8 per share, or about a 27% discount to book value. About $57 million of buybacks were completed by March 31 and about $9 million since, leaving roughly $30 million under the original authorization. He said the board added an incremental $50 million authorization. Kline later said the company maintained about $80 million of buyback authorization going forward.
• Secondary market purchases: Klinsky described buying “oversold” credits, including one investment in a “multi-billion dollar public company” purchased at “2x EBITDA and at $0.65 on the dollar,” which he said traded up about 10 points after the first purchase.
• Higher new-issue yields: Management said spreads have widened and new deployments are being made at “significantly higher and more attractive yields” than a year ago.
• Monetizing equity and former defaults: Klinsky and Kline pointed to “forward momentum” at former default situations including Benevis, UniTek, and Permian, with a goal of selling at above current marks and redeploying into cash-yielding loans.

Klinsky also highlighted insider purchases, saying he bought 1.5 million shares during the quarter and other New Mountain Capital leaders also bought shares. He said New Mountain ownership increased from about 14% to about 17% of shares outstanding.

NAV movement, risk ratings, and non-accruals

Kline said net asset value (book value) ended the quarter at $10.92 per share, down $0.23 from $11.15 for fourth-quarter pro forma results reflecting the secondary sale. He attributed about two-thirds of the quarter’s write-down to broader market movements, with the remaining one-third tied to credit-specific changes.

He cited tailwinds at Benevis and UniTek, partially offset by a restructuring at Affordable Care and a change to wind-down assumptions at Northstar, which he said is in liquidation and represents about $20 million of value. Kline said the company expects cash recovery on Northstar to begin next year.

On portfolio health, Kline said 91% of the portfolio was rated green on NMFC’s internal risk scale, while orange and red names represented 3.5% of fair value. Non-accruals at fair value rose to 2.6%, which he called a modest increase from last quarter. During Q&A, Kline clarified the new non-accrual additions were Affordable Care’s first lien position and Convey.

Kline said he expects Affordable Care to come off non-accrual in coming quarters as lenders complete a change in control and implement a new capital structure featuring a smaller cash-pay first lien loan and a larger equity account held by former lenders, management, and doctors. He also said NMFC recruited a new leader at Convey alongside the lender group and is “optimistic” about a near-term recovery.

Portfolio activity, yields, and financing

Holson said first-quarter originations totaled $117 million, offset by $492 million of sales and repayments, primarily tied to the secondary portfolio sale. She said originations were focused on defensive growth “power alleys” including healthcare, business services, and IT infrastructure and security, along with several discounted secondary purchases.

She said the portfolio’s average yield increased to 11.1% during the quarter, reflecting higher-yielding originations versus repayments and a “higher for longer” shift in the forward curve. In response to analyst questions, Holson said the reported 15.5% yield on new fundings was a weighted average that includes original issue discount and the impact of buying loans at “material discounts” in the secondary market.

Holson also addressed market pricing, saying typical unitranche spreads have widened roughly 25 to 50 basis points versus late 2025, and that software-related credits have widened more. Kline added that dispersion within software has become “pretty wide,” citing a range of roughly SOFR+550 to SOFR+1,000 basis points depending on perceived business-model quality.

Corbett reviewed balance sheet metrics, stating the portfolio was $2.3 billion at fair value with $2.4 billion of total assets at March 31. Total liabilities were $1.4 billion, including $1.2 billion of statutory debt outstanding, and NAV was $1.0 billion, or $10.92 per share. Net debt-to-equity was 1.08x, within the company’s stated 1.0x to 1.25x target range.

Corbett said total investment income was $69 million, down 11% from the prior quarter, while net expenses fell 18% to $37 million including the fee waiver. He added that 98% of total investment income was recurring in the quarter and that 83% of investment income was paid in cash, up from 77% in the prior quarter. He said the company collected about $35 million of previously accrued PIK income as part of the secondary sale.

On liquidity, Corbett said NMFC had more than $2 billion of total borrowing capacity, with about $690 million available on revolving lines subject to borrowing base limits, versus $190 million of unfunded commitments. He also said less than 1% of outstanding debt matures in 2026 and that 60% matures in or after 2029, adding that the company remains focused on accessing the unsecured market in 2026.

About New Mountain Finance NASDAQ: NMFC

New Mountain Finance Corp. is a closed-end, externally managed business development company (BDC) that provides customized debt and equity capital solutions to U.S. middle-market companies. As a BDC organized under the Investment Company Act of 1940, New Mountain Finance invests in sponsor-backed and founder-led businesses that span a range of industry sectors, with a focus on companies demonstrating resilient growth and recurring revenue streams.

The company's investment portfolio typically includes first-lien senior secured loans, second-lien and junior debt instruments, mezzanine financing and equity co-investments.

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