NMFC's Net Assets Plunge Amidst Rising Unrealized Losses

TL;DR

**NMFC is bleeding cash and value, signaling a tough road ahead for investors.**

AI Summary

New Mountain Finance Corporation (NMFC) reported a significant decrease in net assets and investment income for the nine months ended September 30, 2025. Total investment income fell to $249,682 thousand from $280,471 thousand in the prior year, a decrease of 11%. Net investment income also declined to $103,268 thousand from $111,381 thousand, representing a 7.3% drop. The company experienced substantial net realized and unrealized losses of $59,534 thousand, a sharp contrast to the $24,619 thousand loss in the previous year. Net assets attributable to New Mountain Finance Corporation decreased by $96,713 thousand, from $1,353,339 thousand at December 31, 2024, to $1,256,626 thousand at September 30, 2025. This decline was primarily driven by distributions declared to stockholders of $102,833 thousand and share repurchases totaling $37,253 thousand. Basic earnings per share decreased to $0.40 from $0.81, while diluted earnings per share also fell to $0.40 from $0.78. The company's total investments at fair value decreased from $3,091,024 thousand to $2,943,619 thousand.

Why It Matters

This filing reveals a challenging period for NMFC, with significant declines in investment income and net assets. For investors, the substantial net realized and unrealized losses, coupled with reduced earnings per share, signal potential headwinds for future returns and dividend sustainability. Employees might face pressure if the company's financial performance continues to deteriorate, impacting growth opportunities. Customers of NMFC's portfolio companies could see reduced access to capital or increased scrutiny on existing loans. In the broader market, NMFC's performance reflects the ongoing pressures in the credit market, particularly for business development companies (BDCs) navigating fluctuating interest rates and credit quality concerns, potentially impacting the competitive landscape for middle-market lending.

Risk Assessment

Risk Level: high — The risk level is high due to a significant decrease in total net assets by $96,713 thousand, from $1,353,339 thousand to $1,256,626 thousand, and a substantial increase in net realized and unrealized losses to $59,534 thousand for the nine months ended September 30, 2025, compared to $24,619 thousand in the prior year. This indicates deteriorating portfolio performance and a reduction in shareholder equity.

Analyst Insight

Investors should consider reducing their exposure to NMFC given the significant decline in net assets and increasing unrealized losses. Re-evaluate the company's ability to sustain its dividend given the reduced net investment income and consider reallocating capital to more stable BDCs or alternative income-generating assets.

Financial Highlights

debt To Equity

1.45

revenue

$249,682,000

operating Margin

N/A

total Assets

$3,088,909,000

total Debt

$1,765,383,000

net Income

$103,268,000

eps

$0.40

gross Margin

N/A

cash Position

$63,684,000

revenue Growth

-11.0%

Revenue Breakdown

Key Numbers

• $249.68M — Total Investment Income (Decreased by 11% from $280.47M year-over-year for the nine months ended September 30, 2025.)
• $103.27M — Net Investment Income (Decreased by 7.3% from $111.38M year-over-year for the nine months ended September 30, 2025.)
• $59.53M — Net Realized and Unrealized Losses (Increased significantly from $24.62M year-over-year for the nine months ended September 30, 2025.)
• $1.26B — Total Net Assets (Decreased by $96.71M from $1.35B at December 31, 2024, to September 30, 2025.)
• $0.40 — Basic Earnings Per Share (Decreased from $0.81 year-over-year for the nine months ended September 30, 2025.)
• $0.40 — Diluted Earnings Per Share (Decreased from $0.78 year-over-year for the nine months ended September 30, 2025.)
• $102.83M — Distributions Declared to Stockholders (Significant capital outflow for the nine months ended September 30, 2025.)
• $37.25M — Repurchase of Shares (Capital outflow under Old Repurchase Program for the nine months ended September 30, 2025.)
• $12.06 — Net Asset Value Per Share (Decreased from $12.55 at December 31, 2024, to September 30, 2025.)
• 104,189,336 — Shares Outstanding (Decreased from 107,851,415 at December 31, 2024, to September 30, 2025.)

Key Players & Entities

• New Mountain Finance Corporation (company) — registrant
• NASDAQ Global Select Market (regulator) — exchange for common stock and notes
• $249,682 thousand (dollar_amount) — total investment income for nine months ended September 30, 2025
• $280,471 thousand (dollar_amount) — total investment income for nine months ended September 30, 2024
• $103,268 thousand (dollar_amount) — net investment income for nine months ended September 30, 2025
• $111,381 thousand (dollar_amount) — net investment income for nine months ended September 30, 2024
• $59,534 thousand (dollar_amount) — net realized and unrealized losses for nine months ended September 30, 2025
• $24,619 thousand (dollar_amount) — net realized and unrealized losses for nine months ended September 30, 2024
• $1,256,626 thousand (dollar_amount) — total net assets as of September 30, 2025
• $1,353,339 thousand (dollar_amount) — total net assets as of December 31, 2024

FAQ

Risk Factors

• Investment Portfolio Performance [high — financial]: The company experienced substantial net realized and unrealized losses of $59,534,000 for the nine months ended September 30, 2025, a significant increase from $24,619,000 in the prior year. This indicates a deterioration in the fair value of the investment portfolio.
• Declining Net Asset Value [high — financial]: Total net assets decreased by $96,713,000 from $1,353,339,000 at December 31, 2024, to $1,256,626,000 at September 30, 2025. This decline was driven by distributions of $102,833,000 and share repurchases of $37,253,000.
• Reduced Earnings Per Share [medium — financial]: Basic earnings per share fell to $0.40 from $0.81, and diluted earnings per share decreased to $0.40 from $0.78 for the nine months ended September 30, 2025, compared to the prior year. This reflects lower profitability on a per-share basis.
• Decreased Investment Income [medium — financial]: Total investment income for the nine months ended September 30, 2025, was $249,682,000, an 11% decrease from $280,471,000 in the prior year. Net investment income also declined by 7.3% to $103,268,000.
• Leverage and Borrowings [medium — financial]: Total borrowings stood at $1,765,383,000 as of September 30, 2025, a decrease from $1,836,710,000 at December 31, 2024. While borrowings have decreased, the company remains significantly leveraged.
• Fair Value of Investments [medium — market]: Total investments at fair value decreased from $3,091,024,000 at December 31, 2024, to $2,943,619,000 at September 30, 2025. This reduction is a direct consequence of realized and unrealized losses.

Industry Context

New Mountain Finance Corporation operates in the Business Development Company (BDC) sector, which provides financing to middle-market companies. The industry is sensitive to interest rate changes and economic cycles, impacting investment income and the valuation of portfolios. Competition among BDCs for attractive investment opportunities remains a key factor.

Regulatory Implications

As a BDC, NMFC is subject to regulations under the Investment Company Act of 1940. Changes in accounting standards or regulatory interpretations could impact financial reporting and operational flexibility. Compliance with debt covenants and capital requirements is crucial for maintaining financial stability.

What Investors Should Do

1. Monitor investment portfolio performance and the trend of realized and unrealized losses.
2. Analyze the sustainability of distributions declared to stockholders ($102.83M).
3. Evaluate the impact of interest rate changes on net investment income.
4. Assess the company's leverage and debt management strategies.

Glossary

Net assets

The total value of a company's assets minus its liabilities. For NMFC, this represents the equity attributable to common stockholders. (A key indicator of the company's overall financial health and value, which has decreased by $96,713,000.)

Investment income

Income generated from a company's investments, typically including interest, dividends, and capital gains. (The primary revenue driver for NMFC, which saw an 11% decline to $249,682,000.)

Net realized and unrealized losses

Losses incurred from selling investments (realized) and the decrease in the market value of investments still held (unrealized). (A significant factor impacting NMFC's net assets, with these losses increasing substantially to $59,534,000.)

Net asset value per share (NAV per share)

The total value of a company's assets minus its liabilities, divided by the number of outstanding shares. (Measures the per-share value of the company's investments, which decreased to $12.06 from $12.55.)

Distributions declared to stockholders

Payments made by the company to its shareholders, often from earnings or capital. (A significant outflow of capital for NMFC, totaling $102,833,000 for the nine months ended September 30, 2025.)

Share repurchases

The company buying back its own shares from the open market, reducing the number of outstanding shares. (Another form of capital outflow for NMFC, amounting to $37,253,000.)

Year-Over-Year Comparison

Compared to the prior year, New Mountain Finance Corporation has experienced a notable downturn. Total investment income decreased by 11% to $249.68 million, and net investment income fell by 7.3% to $103.27 million. The company also saw a substantial increase in net realized and unrealized losses, rising from $24.62 million to $59.53 million. Consequently, total net assets declined by $96.71 million, and both basic and diluted earnings per share significantly decreased to $0.40 from $0.81 and $0.78, respectively.

Key Financial Figures

• $0.01 — ich registered Common stock, par value $0.01 per share NMFC NASDAQ Global Select Mar

Filing Documents

• nmfc-20250930.htm (10-Q) — 11184KB
• nm-nmfcx3rdaruncommitted.htm (EX-10.1) — 34KB
• nmfc-093025xex311.htm (EX-31.1) — 10KB
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• 0001496099-25-000035.txt ( ) — 73318KB
• nmfc-20250930.xsd (EX-101.SCH) — 109KB
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FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION Item 1.

Financial Statements

Financial Statements New Mountain Finance Corporation Consolidated Statements of Assets and Liabilities as of September 30, 2025 (unaudited) and December 31, 2024 3 Consolidated Statements of Operations for the three and nine months ended September 30, 2025 (unaudited) and September 30, 2024 (unaudited) 4 Consolidated Statements of Changes in Net Assets for the three and nine months ended September 30, 2025 (unaudited) and September 30, 2024 (unaudited) 5 Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 (unaudited) and September 30, 2024 (unaudited) 6 Consolidated Schedule of Investments as of September 30 , 2025 (unaudited) 7 Consolidated Schedule of Investments as of December 31, 2024 38 Notes to the Consolidated Financial Statements of New Mountain Finance Corporation (unaudited) 67 Report of Independent Registered Public Accounting Firm 117 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 118 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 138 Item 4.

Controls and Procedures

Controls and Procedures 139

OTHER INFORMATION

PART II. OTHER INFORMATION 140 Item 1.

Legal Proceedings

Legal Proceedings 140 Item 1A.

Risk Factors

Risk Factors 140 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 141 Item 3. Defaults Upon Senior Securities 143 Item 4. Mine Safety Disclosures 143 Item 5. Other Information 143 Item 6. Exhibits 144

Signatures

Signatures 145 2 Table of Contents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements New Mountain Finance Corporation Consolidated Statements of Assets and Liabilities (in thousands, except shares and per share data) (unaudited) September 30, 2025 December 31, 2024 Assets Investments at fair value Non-controlled/non-affiliated investments (cost of $ 2,224,517 and $ 2,298,083 , respectively) $ 2,173,373 $ 2,277,352 Non-controlled/affiliated investments (cost of $ 129,720 and $ 124,254 , respectively) 94,686 112,776 Controlled investments (cost of $ 708,084 and $ 679,587 , respectively) 675,560 700,896 Total investments at fair value (cost of $ 3,062,321 and $ 3,101,924 , respectively) 2,943,619 3,091,024 Securities purchased under collateralized agreements to resell (cost of $ 30,000 and $ 30,000 , respectively) 13,500 13,500 Cash and cash equivalents 63,684 80,320 Interest and dividend receivable 44,169 42,379 Derivative asset at fair value 5,834 — Receivable from affiliates 334 213 Other assets 17,769 19,265 Total assets $ 3,088,909 $ 3,246,701 Liabilities Borrowings Unsecured Notes $ 990,999 $ 978,503 Holdings Credit Facility 308,063 294,363 2022 Convertible Notes 258,782 260,091 SBA-guaranteed debentures 196,205 300,000 NMFC Credit Facility 31,032 27,944 Deferred financing costs (net of accumulated amortization of $ 48,017 and $ 63,971 , respectively) ( 19,698 ) ( 24,191 ) Net borrowings 1,765,383 1,836,710 Interest payable 18,072 17,109 Payable to broker 13,460 3,230 Payable for unsettled securities purchased 10,412 — Management fee payable 9,619 10,467 Incentive fee payable 2,801 8,625 Deferred tax liability 1,478 1,410 Derivative liability at fair value 821 7,423 Other liabilities 4,197 2,436 Total liabilities 1,826,243 1,887,410 Commitments and contingencies (See Note 9) Net assets Preferred stock, par value $ 0.01 per share, 2,000,000 shares authorized, none issued — — Common stock, par value $ 0.01 per share, 200,000,000 shares authorized, 107,851,929 and 107,

View Full Filing

View this 10-Q filing on SEC EDGAR