Executive Summary

Q1 2025 delivered net investment income (NII) of $34.6M, or $0.32 per share, covering the $0.32 dividend; total investment income (revenue) was $85.7M, down ~5% year over year, and NAV per share declined $0.10 to $12.45 .
Credit quality remained strong: ~96.5% of the portfolio rated green, nonaccruals ~1.2% ($38M), and first-lien/senior assets increased to ~77% of the portfolio .
The company reduced its Wells Fargo Holdings Credit Facility spread from SOFR+215 bps to SOFR+195 bps, and reiterated the dividend protection program (up to $0.02 per quarter) through 2025–2026; Board re-affirmed a $0.32 per share Q2 dividend .
Versus consensus, EPS was in-line and revenue modestly below: EPS $0.32 vs $0.322, revenue $85.7M vs $86.7M; minimal estimate variance suggests limited near-term revisions, while management highlighted buyback authorization of up to $47M as an added potential catalyst *.

What Went Well and What Went Wrong

What Went Well

Strong credit quality and portfolio resilience: ~96.5% of fair value rated green, no red-rated names; senior orientation increased to ~77% of assets .
Liability optimization: Wells ABL facility repriced to SOFR+195 bps and extended to March 2030; management expects further refinancing opportunities in 2025–2026 to lower financing costs .
Strategic progress on PIK reduction and position diversification: PIK share of total investment income fell to 8% (from 10% in Q4), and top exposures were reduced through exits/repayments (e.g., UniTek, Casa) .
- “We have made meaningful progress on our strategic priorities including PIK reduction, diversifying our top investments and reducing the cost of our liabilities.” – CEO John Kline .

What Went Wrong

Revenue softness and NAV drift: total investment income declined YoY to $85.7M and NAV per share fell $0.10 vs Q4, driven in part by modest equity valuation declines (e.g., UniTek adjustments) .
Spread compression persists across direct lending; while stabilized, tighter spreads weigh on originations’ yields, making upfront fees and base-rate sensitivity key headwinds if SOFR declines .
Select junior/equity tranches carried conservative marks and limited near-term income contribution, with complexity in specific capital structures (e.g., UniTek) prompting continued investor questions about realized vs accrued performance .

Financial Results

Summary Financials (oldest → newest)

Metric	Q3 2024	Q4 2024	Q1 2025
Total Investment Income (Revenue, $USD Millions)	$95.3	$91.0	$85.7
EPS (Primary/Adjusted NII per share, $)	$0.34 (Adj.) / $0.33 (GAAP NII)	$0.32	$0.32
Dividends Declared per Share ($)	$0.33–$0.34 (incl. supplemental)	$0.32	$0.32
NAV per Share ($)	$12.62	$12.55	$12.45

Q1 2025 Actual vs S&P Global Consensus

Metric	Consensus	Actual
EPS (Primary)	$0.322*	$0.32
Revenue ($USD Millions)	$86.7*	$85.7

Values with asterisk (*) retrieved from S&P Global.

Investment Portfolio Composition (as of March 31, 2025)

Category	Fair Value ($USD Millions)	% of Total
First Lien	$1,959.0	64.3%
Senior Loan Funds (SLP III & IV) & NMNLC	$386.9	12.7%
Second Lien	$187.1	6.1%
Subordinated	$104.9	3.4%
Preferred Equity	$243.3	8.0%
Common Equity & Other	$166.4	5.5%
Total	$3,047.7	100.0%

KPIs and Balance Sheet Highlights (Q1 2025)

KPI	Value
Portfolio Fair Value	$3,047.7M
NAV (Total)	$1,342.2M
NAV per Share	$12.45
Statutory Debt/Equity	1.15x (1.09x net of cash)
Cash & Equivalents	$85.5M
Available Revolving Capacity	$1,168.8M
% Portfolio Rated Green (Fair Value)	96.5%
Nonaccruals	~$38M (1.2% of FV)
Floating Rate Assets / Liabilities Mix	86.5% / 50% (pro forma trend to ~75% liabilities floating)
Weighted Avg Portfolio Yield	~10.7% (down modestly QoQ)
YTM at Cost (weighted avg)	~10.2%
PIK Interest as % of Total Investment Income	8% (Q1, vs 10% in Q4)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per Share	Q2 2025	$0.32 (Q1 2025)	$0.32 (payable Jun 30; record Jun 16)	Maintained
Dividend Protection Program	FY 2025–2026	In place (extended 2024)	Confirmed availability up to $0.02/quarter support through 2026	Maintained/Clarified
Liability Mix (Floating %)	Next 9–12 months	Target ~74–75% floating liabilities	Tracking toward ~75% floating liabilities post maturities	Maintained
Cost of Debt (Wells ABL)	Effective Q1 2025	SOFR + 2.15%	SOFR + 1.95%; maturity extended to Mar 2030	Lowered cost/Extended tenor

No explicit revenue/EPS quantitative guidance was issued; management emphasized stable dividend coverage and multiple “levers” (refinancing, redeploying equity into loans, portfolio activity) to offset potential base-rate headwinds .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 & Q4)	Current Period (Q1 2025)	Trend
Credit Quality	~97% green; minimal nonaccruals; strong underwriting in defensive sectors	96.5% green; no red names; nonaccruals ~1.2%	Stable/Strong
PIK Reduction	Target lower PIK; exits expected in 2025	PIK share down to 8% of TII; $32M PIK monetized (UniTek, Kaseya, North Anglia)	Improving
Liability Optimization	IG notes issued; revolvers upsized/extended; mix trending more floating	Wells ABL repriced to SOFR+195; further refi opportunities in 2025/26	Positive
Tariffs/Macro	Low tariff exposure; portfolio in acyclical sectors	Management highlights negligible tariff risk; ~2% vs ~13% peers	Continues favorable positioning
M&A/Deal Flow	Episodic; spreads tighter; expectation of pickup in 2025	Spreads stable; supply limited; selective origination at 9–10% unlevered returns	Mixed; disciplined deployment
AI/Technology Tie-ins	Noted sector exposure; cybersecurity headwinds at HelpSystems	UniTek repositioned toward AI data centers; partial sale realized/retained stake	Strategic pivot benefits

Management Commentary

“Adjusted net investment income for the quarter was $0.32 per share… Our net asset value per share of $12.45 declined $0.10… over 96% of our portfolio is green on our heat map with no red names.” – Chairman Steven Klinsky .
“We increased senior-oriented assets from 75% of the portfolio in Q4 to 77% as of the close of Q1… our liability stack continues to improve… repricing of the Wells Fargo credit facility from SOFR+215 to SOFR+195.” – CEO John Kline .
“Pro forma for… maturities over the next 9 months, we expect our mix will shift towards 75% floating and 25% fixed [liabilities]… while we would expect to see earnings pressure in scenarios where base rates decrease, we are evolving our capital structure to help offset that.” – COO Laura Holson .
“For Q1, PIK interest income represented only 8% of total investment income, down from 10% in the fourth quarter… we collected $32 million of PIK income associated with… UniTek… Kaseya… North Anglia.” – CFO Kris Corbett .

Q&A Highlights

UniTek transaction mechanics and income: Management explained warrant conversion and preferred tranches; NMFC received $42M cash, retaining ~$67M fair value, and is accruing on super-senior preferred going forward .
Spread environment: Spreads have stabilized; slight OID improvement at the margin amid low supply and ample dry powder; still able to originate at ~9–10% unlevered returns in high-quality credits .
Dividend coverage amid potential SOFR declines: Multiple levers (refi of higher-cost debt, portfolio velocity, dividend protection program) to maintain coverage; further optimization expected .
PIK trajectory: Management reiterated intent to reduce PIK exposure to low-teens percentage over time (10–12% target), with progress expected through repayments and monetizations .

Estimates Context

Q1 2025 EPS in-line: Actual $0.32 versus consensus $0.322; revenue slightly below: Actual $85.7M versus consensus $86.7M. Given modest variances, estimate revisions should be limited; focus shifts to Q2 dividend coverage and liability-cost tailwinds from refinancing * *.
Consensus depth: 6 EPS estimates and 4 revenue estimates contributed to Q1 consensus, indicating reasonable coverage for a BDC [GetEstimates].
Values marked with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

Stable dividend coverage with explicit protection through 2026 reduces downside risk if base rates decline; near-term trading may key off confirmation of coverage and any buyback execution post blackout .
Liability repricing and refinancing opportunities (e.g., Wells ABL to SOFR+195, IG bonds ladder) should provide incremental NII tailwinds, partially offsetting spread/base-rate headwinds .
Continued PIK reduction and monetizations (e.g., UniTek, Office Ally path) improve cash yield quality and market perception—supportive for valuation multiple normalization .
Credit quality remains a differentiator: ~96.5% green, negligible orange/yellow exposure, and ~1.2% nonaccruals underpin stable NAV and dividend confidence .
Sector positioning (healthcare IT, software, business services) and low tariff sensitivity provide defensive characteristics—management emphasized negligible direct tariff risk vs peers .
Portfolio seniority (~77% senior, ~~65% first-lien) and ample liquidity (~~$1.17B revolver availability) offer flexibility to redeploy into higher-quality cash-yielding loans as market activity permits .
Watch near-term catalysts: repurchase program up to $47M, Q2 portfolio activity/fee trends, and any updates on refinancing of 2025 maturities—each can influence sentiment and price-to-book convergence .

Footnote: Values marked with asterisk (*) retrieved from S&P Global.

New Mountain Finance Corp (NMFC)·Q1 2025 Earnings Summary