New Mountain Finance (NMFC) 6 May 212021 Q1 Earnings call transcript

Good morning, and welcome to the New Mountain Finance Corporation First Quarter 2021 Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to hand the conference over to Rob Hamwee, CEO of New Mountain Finance Corporation. Please go ahead.

morning quarter welcome earnings good Finance New and first Corporation's call you, everyone to and Mountain Thank for XXXX.

with and Mountain line Chairman and Shiraz and the me of are NMFC; today On NMFC. CFO Steve COO of of NMFC John CEO Capital; New Kajee, of Kline, President here Klinsky,

health has taking business to in here the you significant we continue the in update, to remain around We into made do diving the want good is that your and is hope been recognize through crisis a human toll that public live health. families Before that a staying we while that significant progress globe. and safe US, everyone

to Steve make some going to make business, call. but important some statements to regarding before is Shiraz I'd ask today's to remarks, Turning like introductory he does,

Thanks, Rob. Good everyone. morning,

in to of from or is Pages customary also like required actual New call over get access forward-looking update and forward-looking statements. audio attention latest presentation not release. and may important available like throughout we please SEC the our results would Safe that call advise Klinsky www.newmountainfinance.com. this prohibited. to everyone at filings Xth webcast into call today's the like the I'd that X Information our to in recorded any projections. We to to ask our call the projections time, of and call include copies your factors statements I Harbor cause Finance to of slide give do the who visit our X webcast At filings are in form press could on note to To being to SEC on those will release forward-looking presentation regarding May that I'd to earnings our Before and this and disclosure the Page unauthorized the and is that press the of any recent are Mountain they for Today's we about conference strictly referencing most Corporation, Steve? refer we be statements replay some broadcast and and call presentation, attain NMFC's this X Chairman law. slide unless you will our statements turn to the presentation of beginning to by and projections differ please website materially undertake that with Steve highlights property slide

fellow NMFC Shiraz. should able you the believe all a as to major present It's have areas, year fresh a today is as number headlines of over and now be hit. first pandemic COVID address It to shareholder. of Chairman the as very I today good a in news. great which I of since Thanks both received some including be to

control calls As discussed risk on we Mountain's earnings part been has always of mission. New previous founding

a team in manages equity firm over now with over in XXX employees private $XX Our billion the assets whole portfolio with and of as over XX,XXX our companies people field. at total a

history of the a private estimated generating $XX of missed our over in for stakeholders. billion value We an enterprise interest have work, had never equity or all payment bankruptcy while total

year over private last additional capital have of despite We COVID. billion raised equity $XX

just a each defensive growth began a year same NMFC credit realized have XX our focus in we We applied points strength in team since and our default year, efforts basis net that operations on resulting and credit industries of XXXX. to loss

been of XX.X% a such To that might positions gains existing various has share, areas as cash as the NMFC's remain past of delivered dividends to per share million in annual services or our NMFC are compounded is we IPO. enterprise portfolio tech-enabled such of best with per $XX.XX able optimistic about that of described of great these the gains has loans across losses out The offset $X.X of date, Over the potential software. Edmentum. bulk paid billion return realized majority $XX be as investments. date which and all million $XXX over since we've NMFC repetitive decade losses Overall, business debt

defensive to all dividend per the report right Page was investment March our in for difficult anticipate Our their not do bases on income think this were have interest that service in that earnings me fully and the QX. let times. of borrowers particularly regular and in companies XX, large companies These in on new day attractive this repeat depend paid types additional we installed paid with ones QX in on specifics and any quarter. borrower XXXX users, was X. quarter share no XX. non-accrual The often in times the are on going at on client line placed non-accrual who We their currently Every are out. QX Net share, day industries prior of With background, of of growth the ended $X.XX cash share, covering $X.XX March $X.XX per dividend our per and guidance. of portfolio turn

two-years extended than share. NMFC grade payable time net the We've ever. Our fee achieved QX again to credit $X.XX was holders XX, set share per was program pledging all on credit and no increase regular $XX.XX value a share, capital. Moody's per our XX. per implementing to the first an has We're record X.XX% for more our share on at an XX management dividend the asset or XXXX, be at a for support of will assets. cost $XX.XX June from June of of least value $X.XX investment asset now March net The next of December XXXX and per facilities by charge X.X% XX, from dividend rating as for lowered

I to on incentive and shareholders to have team years, commitment want anticipate the also in the investment to decisions be grown remain and of remain age playing support at dividend. freedom, XX we greater from ever. management more to NMFC's underwriting support time to needing A than portfolio credit needed NMFCs leaders to Chairman. some John this of more two his administrative role and age team have of of largest confidence at XX as pledge, do allow over NMFC at Together five key as Rob current a if renewed Mountain's Rob NMFC to will versus XX, the next Mountain and $XXX remain of I professionals the will NMFC's shareholders. We New and to total New We've unchanged. report now to team activities. pledged shift $X.XX XX In decisions. our John the IPO, to use NMFCs and IPO. as important the all the personally invested over the the For will reduce management fee, has but not total, to credit credit John available into and but XXX NMFC. Rob personal duties time million the of at commitment time remain of and his John functions dividend. a on

to in the have and continued add I our John call that, a last me and With sold XX-months, Rob. back Rob, turn the have We never to personal let share. positions to

Thank you, Steve.

has detail more little Steve a on that some positive giving by start me shared. of headlines the Let

these guarantee very for we earn program ability of what low given the to assure we crisis, whereby reduce temporarily to we our has progress to we of for shareholders, interest as that in believe material $X.XX duration the believe base To least COVID a interest actions. have of shareholders base sure changes waiving X.XX% remains the on even we on with simplify fee to dividend Further the implementing years, informed earnings our approach a done instead fee fee and we two the earnings our will Separately, we our a effectively order management's it We make that as align twin want our are managed the incentive intact supports structure next the earning two that rates increasing support calendar simply $X.XX important non-interest decreasing historically the the and of certain charge have we liabilities. portion if dividend. assets. that fees dividend a at believe next end, a and made quarterly two always management secure. will come our flexibility are to headwinds at years, equity further we those of cost our needed least an and increased all our portfolio, of While is assets out

basis facility time, two we asset-backed the and At points facilities Bank and were extended we on Fargo Specifically, to $XXX to spreads by applicable secured $XXX million able our Deutsche million facility credit XX respectively. to XXXX. same have lower these basis the points Wells out two XX facilities main

the will capital. which market, we allow more institutional to side, past, further even an received than our unsecured effectively reduce rating the grade which access of investment cost Moody, from in should the bond us On

upgraded Bond received an We outlook Kroll also Rating from Service.

Finally, combine of SLP execution and the created forward. into for the II will I and funds scale a efficient which financing SLP IV, simplified newly more going SLP and we allow

criteria are a As we numbers map portfolio asset the downgrade. green in updated from credit believe that have over pleased is with we negative is quarter our have that as positive XX map roughly emerge from trends certain The the services each the given $XX in extensive company and think and heat for the migration to portfolio. business live insurance in on show outlined one X Page The have in been resulting same events management scores Overall with on insurance shown concentrated discussed areas conversations the this we that prospects we summarized of XX. X. We was its on companies on is crisis, Page improving across using updated primarily a yellow. this migration COVID $XX continue of ahead Pages as million travel, trailing what temporary both heat and migration past and to core business the and in sponsors neutral maps inter verticals but with quarters of pressured quality heat brokering of risk one green migrated and update million

and majority matter given health you landscape continue very federal from the heat public map, well buys business the economic positioned are no develops. and further assets services, to vast portfolio's towards the tech-enabled our strong like our of As perform sectors software, can we how to healthcare, defensive believe and see

majority time names We continue will energy as months and our the in to orange remaining the ahead benefit recede and the pandemic on credits and continue the impact believe of significant those spend materially. of red to

Our asset recovery, operating the in towards operating metrics executive the progress continues Benevis chairman, our team value engaged significant fully the be CEO, and of new new impact reflected as PE largest our to to make orange of begins business.

the increase our further achieving where representing of one, portfolio, even full in plan confidence and secular coming this in spread recovery strategic have lead in $X.XX pre-COVID to operating for an value particularly continued and value We total quarter's performing developed names recovery verticals QX and we XX gains has in that in green positive net drivers to material asset two, quarter's to in a additional increase potentially principal likelihood we Page execution decline of book was the in as strong core value. dramatic market Edmentum a the trends equity our that $X.XX positive our recovered back witnessed years. continuing to path impact outlines increasing credits been XXXX. the of has the the two The high continued restructured decline, of well results. significant QX, and and In a

further forward those the should green $X.XX. as continue NAV to loans world risk our would we that price our positive by coming movement additional recover If an would rated names is assessment and yellow in quarters expect if return par to orange correct normalizes. in Looking which increase

quarter opportunity reasonable While our to current That pre-COVID only portfolio recovery back account improvement per our the restructured per pay particularly full reduction meaningfully another for leaves a ratio, shows which a to we first Page continued in equity needed we million that believe drove now to $X.XX creation, $XX down elevated XX $X securities, our while are Edmentum still share clearly value. X.XX Benavis of which share our times. fell NAV that. increase value in in leverage and ratio across could comfortable $X.XX the manage million leverage net further and by is Gross very level. in of statutory book for risks towards see We recovery. red get to statutory NAV debt further exceeds an at UniTek for path of

to which processes culmination We reinvest will either give of financial continued in number of companies anticipated us to additional have portfolio flexibility currently active delever. or a sale the further

over intention I of times conditions at to net X.XX will is business X.X times. to and business. that the to of John cash leverage turn of it Our elements other With statutory of the manage market a ratio, discuss to

Rob. Thanks,

attracting pleased at capital and are conditions within generally lending on are loans second returned a continued names core compelling very We brand technology loans most in multiples in to very have second overall to such across industries modest diverse spreads within from services and many field we to modestly report relative record their enabled multiples see. attractive very on Companies pre-COVID access direct lien business spread to this other be the remain in healthy. momentum lien purchase as credit while technology, lien many sponsors. basis and services returns levels market new absolute new our levels an software, unitranche market Despite that occurring early of are markets first in healthy spreads group and good pressure and industries. are observed that sectors defensive Interest have purchases XXXX. tighter on growth sponsor-backed both Companies have of the to businesses healthcare

how Page could rate in base potential to the we NMFCs earnings. impact XX, Turning future show changes

of investment in As normalizes to under NMFC's income. base floating mix LIBOR there vast rise can all our our fixed If XX% are net rate. you earnings meaningful current consistent above offers X%. sheet stable accelerates liabilities where majority shareholders see, are and balance scenarios loans and upside rate as remains floating-rate the NMFC's is X% economy while XX% or our rates the assets

credit $X.XX For example, share. would per earnings XX X% investment liability share. NII existing if assuming long per structure record. by $X.XX LIBOR and current track our NMFC's shows our or or At historical increased which Page reaches would by X%, portfolio annual addresses LIBOR X.X% increase term performance, XX%

where the investments we of the have less value we on non-accrual. side billion currently million left $XX page, portfolio On $X our of the current X% of state fair or show with than of the at portfolio

earlier, quarter, This new non-accrual. as borrowers place we mentioned on any did not

$X.X our On present the right that we the cumulative page, performance total credit across billion in which shows NMFCs inception XXXX, of side of since investments.

only realized history. XX our million to that of course $XXX placed million, $XX migrating $XXX over is the have been our based on credit the on companies with EBITDA. have watch XX We have performance to amount view LTM of our become million that list non-accrual. losses Of year underlying Page of a portfolio non-accruals relative plus leverage

our by are As cases positions a increases in underwriting affected leverage our crisis. and of you particularly the leverage with decreases. very either consistent the is that across see can We or in performance exhibiting believe have year shown very majority strong minor consistent global notable our health results portfolio many projections,

leverage the momentum in of adequate than calculations on conditions of medium-term seven we of those resources XXXX, pursue page not negative These Five of by the revenue of targets. which of that of shown drift. the seven which economy On all have their meet all will plans, is the require the continued profits turns months. post-COVID and shown Two have in financial partially exclude XX yet the we the of companies, to a certain of higher to restructured in represent have have represented past LTM group right XX. positive companies From business the believe lower companies earnings the more shutdown side reopening portion benefits months Page to their portfolio that Permian the compared of of contemplate early adverse X.X which the small a due previously to show liquidity underperformed parts that caused perspective, our economy. a companies companies

high has The first graduation of other these to and companies and industry depends material the in-person on exposure the travel college ceremonies. from revenues school

our has has the detail box portfolio On NMFC regular we $XXX page, gray show line million in the presentation. we the that $XX in that two IPO. total income the tracks since At page, million company's dividend a we of quarter has bottom half marks driven inception below the positive of our realized lower have markdowns million always change in overall investment we to XXXX losses, cumulatively show and Combined, the items unrealized our chart improvement experienced in cumulative $XX Since Page numbers the quarterly earlier blue we QX performance portfolio fair the on in discussed of of that net unrealized focus the that low these XX covered represents on of economic the unrealized by realized recovered top show the losses. NMFC since its losses. of in highlighted This NMFC's point on. where net $XX million. value we number represent $XX million and last line compared net

to to be cumulative a remaining As return XX chart loss the appreciate the Rob of discussed, Page continue stock recover performing believe and continue shows Historically names positions of par. recovered to IPO. troubled since if positions time we over value overall certain NMFC's that equity detailing returns net most equity unrealized modestly. our can

cumulative NMFC's the that return high-yield ago final materially as of individual least peers. BDC returns at of return Page XX have. the public seen well confidence upside pandemic of an nearly performance IPO Since XX.X% exceeds stock of as US peers our years of the we look trajectory material with improvement have in as of been provides share fears our the have investors impacted long index comfortable have the by NMFC we compounded compared around annual to our as our in XX economy as has attractive which price become the at our stability, that portfolio. and While of gain yield was the recently and a a index

see can best you have the amongst has NMFC peer group the that the since we As IPO. second performer tracked been

with continue based X.X%. dividend, build share represents an which on is on this We to the $X.XX total return annualized performance yield per this price dividend stock approximately of our current

Page do Page well $XXX expansion leverage of group III sales that accommodate of were and SLP repayments highlighted of of investments we on to by which in It within originations. investments quarter, repayments million this have net activity club offset included by we investment REIT so loan of source is club our could the guidance. the represent deals. were XX on next This a is long in a quarter list, companies believe our tracker cash joint several to continued the investment would new new this new new range lease and we watch These new quarter. XX, Turning the availability. of venture. balance activity for list total our our reflective repayment details the balanced far have exiting originations which net size $XXX deal of our yielding that financings, worth million noting made sheet to five loan operate a sponsor-backed portfolio deals, our $XX million These our new of be material continuing

in current portfolio net we QX first Turning to mix flow the Overall Page our on type the at average to QX of the were NMFC's heavily lien the total in which and towards mix in Page oriented of of the senior by towards XX, from XX% SLP side assets on was and these stable remains secured assets XX, oriented quarter. lien yield origination approximately show XX% loans, portfolio of weighted new our deal senior of and Repayments asset first-lien as left XX% towards represented shown assets the right senior second X.X%. investments. including weighted estate was side assets resulting real On page, the assets. investments approximately heavily shown towards lease QX page,

originate For group portfolio consistent we the is of weighted a of quarter, the average. which a were with X.X%, average with assets able to yield roughly

surrounding chart in environment healthcare insight XX, we significant exposure. On center overall shows marketplace remain supportive pie portfolio. Page As breakouts pie the of is while the our the and within available competitive, spreads while The current charts exposure industry give NMFC's NII more into have of we services mentioned our very earlier, the detailed the diversity targets. industry software

sectors of troubled exposure avoided successfully you see, we sectors within the economy. As can most all while to most defensive nearly the maintaining the high have US

with now accounting fair single CFO, in illustrated our we our Page name financial metrics. fair X.X% Finally, it for And key will financial statements and largest discuss Kajee XX turn on of investment over a as XX, investments the to have Shiraz Shiraz? that at with top diversified value. value XX% portfolio the of to I

Thank John. you,

more in last commentary, filed financial today's details SEC. and evening was For the refer XX-Q please the our Form results to with that

realized NII generate historical adjusted show proforma Slide Slide of leverage our gains unrealized This adjusted cash We net ratios, investment above historical X.X:X. while statutory NAV XX. $X.X the assets appropriate and debt was balance $XXX of statement the our can and Now Net at dividends. I'd in stable XX, highlights losses or quarterly mentioned, results. XXXX equity investments of and of our March that quarterly continue from believe attention your liabilities sheet, share we $X total debentures. The billion, XX, slide the be excluding fair available be over total billion, per line. ratio million Slide special most we the XX, volatile asset turn to performance. $X.X that of SBA we line, like outstanding would prior to of had our $XX.XX for billion show of drawn our ratio income $X.X X.XX:X value on net to is and as and $X.X billion XX, quarter. statutory cumulative below portfolio March which On at where income to impact At measure of billion the our of the was leverage up value debt guaranteed $X.XX On the total

a $XX.X million expenses in quarter of the ended decrease slight line Focusing on Total quarter. approximately income with million, prior XX, we $XX.X were March quarter-over-quarter. net investment earned the total

previously investment effective quarter of for dividend management the capital has that advisor Investment cannot the per the such to This $X.XX annualized quarter was important first discussed, covered X.XX%. As average committed note weighted that calendar two fees per this next our share to waived. $X.XX regular recoup in NII is million the $XX.X share. of It fee which adjusted results management QX or years Adviser fees

result As the in unrealized an for XXst quarter a net from of operations $XX.X assets the appreciation had quarter, in of increase we XXXX net million. resulting March the ended

Slide is our As recurring nature in and demonstrates total investment paid predominantly income XX in cash.

As you can and is and believe see income of XX% income. We quarter. consistency XX% the income our of total cash this this investment shows at predictability strong recurring remained stability investment

on Turning estimates prior to covered $X.XX share the impact approximately briefly adjusted fee Slide our XX, per as NII QX first for QX Based to earlier, support any the our waivers XXXX expect quarter our dividend program. under of our new dividend. will we discussed NII preliminary be gets

successfully Credit amended and extended maturity our of we decreasing spread Post facility Deutsche XX, bringing secured which Given majority XX-XXXX will of June these Slide base Fargo has limitations. through our years March Bank Both On a into and financing pushing while guaranteed to of at debt to holders end we that XX of available XXXX quarter $X.XX $XXX dividend extended total Taking our XXth of XXXX our amended also on $X.X highlight on declared per in June applicable end, almost lines out our capital. From revolving cost paid share overall in had of borrowing subject a capacity a reduction. actions borrowing be quarter our left Directors to XXXX facility credit QX billion Wells on while our for account XXXX. million record our Board SBA resulting debentures with down significant our sources. over five spread. we various we

the reminder, of and at than both Bank that a the covenants As given are lend our Deutsche tied underlying the performance marks of Wells to we any operating investments to businesses Facilities our time. generally Fargo Credit rather

XX, our maturity Finally show schedule. on Slide leverage we

to our been our successful As better liquidity. manage maturities we've we've issuance debt at laddering diversified

near-term grade will months. We to most our facilities rating With we ladder maturities to mentioned, extend Moody's we revolving turn two investment XXXX, our to the the to cost given from have Rob. call our pushed back I have and effective no the recent manner. out debt maturities, coming the as and and credit the in maturities unsecured other largest our to further over that, would to lines expect continue like markets Also, explore

Shiraz. about we the prospects years optimistic in months are Thanks NMFC In for ahead. the closing, and

Our long-standing to us again by your defensive for all strong businesses continue to and focus once to wish and on interest, growth support lending thank continuing the you We an supported transparent sponsors in you look well. operator good turn health ahead. back forward serve now begin Q&A. days I maintaining stakeholders all to to of the Operator? the our open and dialogue things with will should

Securities. from question Instructions] comes Finian O'Shea Fargo [Operator Wells with The first

to said on this was and of equity the the reflected approach rates the you new I on then equity. with Is holding your much to you looks outlook twin suppose produce there going was or describe be or the a you given change start or I do longer that income this will view time portfolio this you'll this does less just Rob question First sort same? view that more for new how less in portfolio it, a

we obviously that's non-income and to of not in Equity as yielding Edmentum, want years. that earning super in with it larger that's non-yielding right, things for in be just non-cash NII every actually believe like potential looks think highlighting average tremendous dollar do fact a portfolio the course we and and same UniTek over a piece clear, a piece about the is dollar is of I quarter. know, last than the create of names Benevis earnings have those our five equity Yes, we're there real but we you're economic in to profile value, equity at that

just last So, changed, longer them we that names, we're nothing the outlook to in it's we into and thought timing you has of lumpy perspective, and know. would traditional think of the securities It's case exit cash, because to our uncertain debt like convert brighten it's will don't that's and one redeployed quarter. going you continues timing just than not will a we fact, those a have in for generative own right any that those those from NII

want that make NII those program sure sure enough we action make runway explicit we recycle has new to So, proceeds. just the can to per

tied described On part your market leverage view the guidance, other is reflect and does I that you of tied that that of of sort new into conditions, leverage the more Is or is guess or equity to the that be expand as debt recover lower would program is not through base loss on that just of going just the rates front? you're more cautious your on market returns. you to that the whatever or going view to

I Yes, the while been we've about I talking think for target a to X.XX now. X.X mean,

our our view of intersection probably foreseeable the the think and capital level future, prudent is leverage I debt the the levels maximizing efficiency rate for think of best. where that's I the that's is

will of and over we, a time with that we of the to range think I debt us reduce rating actually recently saw cost think which allow is function the Moody's that further capital. that

of foreseeable sheet evolve, the cost the but sweet of over return to question minimize the us that operate expect the our obviously we're of on a we for balance just that periods still looking it's can to spot can future. So there for, the long where debt get I'd capital, finding continue but time

or of this anything the one kind strategy kind which newer your previous progression new different anything I one? it's was think is Is JVs, And with so your just mostly JVs. this a or origination about and uniform pretty a there about thanks. is there that Okay, of your different this than fallen Is kind seemingly more different in forth, partner. on

side SLPs we'll doing same that's again in in growth years, or private know we've issue, from that's defensive work been No, equity and loss that our let doing incredibly material default in know, strategy our we or whatever in intimately it's sectors. five default and the through business investing been or had six asset of the be the an we've SLPs, thing well If issue, for absolutely us. alone worked credit think a credit the I you never as

absolutely remain that's So, to unchanged. going

Ryan [Operator Your KBW. Instructions] question next Lynch comes with from

questions. for my Thanks taking

question already from version Jones congrats the rating from investment agency some also you investment rating kind grade had in then Kroll. we rating. rating Moody's major Egan of on First, on another guys had that grades One Fitch

think So so your issuing how will low you on be that? to pretty thoughts much increase in you lower January, able do I'm new rate on already or just issuance your debt any that guys Moody's curious this of new issuance, just from a cost

materially who top et We've of been But now, inside us great, institutional constrained XX, et time what more but market the pretty more even think with over the I'll exactly to time of allows on I peers points pending on speculate has mean what in basis the pool institutional as those wider that it the necessarily points but six cetera. some that to are which our allows narrower institutional to I just the can don't on market. want widen tap in rating basis market, historically that at from is access that Fitch company, now and access insurance we've I like-for-like wider market you into Moody's think if rating types issued months that savings more of I I materially cover and rating, XX look historically other they've we market. think XX adding Yes, on cetera, will the obtainable of really to a investors of the been us basis we constrained Fitch the in ratings that, the traditional us go been of to to.

a depth that's Now that that's with X-year, realistic of I much that given relative our but to basis, to et happens spread relative on current broader whatever market cetera, think the X-year, obviously market.

have become multiples compared on for opposed lending how of annual lending much are that EBITDA are you obviously I is in-favor and sense. makes a of good and a substantially That's on in are flow guys guys bigger direct kind recurring revenue lot sector me the guys percentage, focus these percentage comfortable you doing we to have positive. the debts That to very of deals based or new sector market investor working defensive you to to as whole a some you and starting based is direct set that bigger in just and are businesses, give the that lending question a recurring do they're you for what are cash businesses ARR traditional increasing growth regarding, a on, to but more in curious a a open hear which recently, don't closing competition even today. based you has up prevalence been see I'm EBITDA guys pretty I software lenders lending? on

expansion Yes, question in definitely an particularly you're and of the one seen three we've good two last or the it's four market last years that or years. over a really right,

seeing are quite we loans, both generally more so equity on and in the our it. capital that's into area large will cushions. key very that just in really We one flowing on do we're with side our and those that that and industry much very, participate following equity credit we And that the in the attributes focus and the selective get for involved loans will we are

typically we at loan will often values look XX% to XX%. sub sub So and

So large deals but really, equity intimately. just in Two, as those know cushions. cash businesses we always, really particularly

we not business inherent much growth into rate, a the is the they're high on on they're very today gross important and materially of the they're lower but be and at incredibly only space to our in are they underwrite equity. reason support high and growth XX% from profitable tomorrow to for businesses whom that operate network, CEO and they at touched can the companies there. a companies if about be profitable those have XX% they debt we've margins, for that we at our not of many margins own very sales a private companies, redirect conviction this So Steve gross valuable just one could activities a employees definition getting XX,XXX gross of three, conscious the portfolio say when to listen level to equity rate, of And we wanted very PE based views that model, it's that to high related margin, something the which of field is and of readout look is our making our in going decision a right. okay

of John through in way the the are I performers some past, about best in those listen loans the So absolute you and some the COVID loans those those know crisis. the are our on absolute touched loans, think portfolio of when those best some of this

especially, their business obviously That's year. Can Edmentum performance to helpful due update you provide an injection capital color COVID. that, recent on late there that last is on into

You guys wrote that investment pretty meaningfully quarter. this

well? update is to on business an kind it doing really I'd that to hear of So seems be the outlook, how just and love performing

high turn sold. the we next is believe would XX I years, well. which trajectory over the and we of and They equity line to Yes, very and in their well we last are we quarters, I the are even sale to to significant. significantly, the obvious, last the right? see the quarter COVID in to the learning at to significant is the and year-over-year private with and It on been capital fiscal the to which documented through Two, public see take quite that leading at are are; there it has digital do we we no it from years we an very current is that risk, tools sustainable well a and One, one but prospects, up listen are results, a with because There's couple valuation, say that discount that want deal all obviously living continue there into is of going grow than loss of upside incredible seeing We're material to at education a right? right, pretty private Edmentum are elements here, but the is sustainable always do that holding the but the of think trends into obviously that to position and reasons business. very for just there provider seeing mean expect tools, kind flows to we continues to comparables continue year, from capital just and level it's Obviously bump effectively provider it that's repair the really of stock challenge. injection state going ended profit schools Victory, forward. really to of tools. school approach believe then operating business ends three sustainable related types leading a you're to are of both are that Edmentum of XXX% need some a want wasn't option federal the at to to of but growth was that back into of have dollar tremendous are It Jan management areas a one more to continue to learners those firm, three, offer education-focused incredibly and particularly half and And and And again service. the the level virtual who going for hybrid some in were was sort one the at going two, we the Edmentum

that. incredibly we're about bullish So,

CEO plus great the area who think have intensive is execution in there great proven and We also a execution. a person have we has to we it deliver an herself, and think we

the next about are worry that very, we X always one it one to over things, for about So, but prospects the very years. optimistic

know And and time. a to for good to that's got work I hear. investment with you That's that's long

So that great. that does,

Yes, Board right definitely time, come - the think it's it's for out seven taking six, been really it, of I now I've and there years I whatever there. best cash now the is but we project. been think it to yet on and got got

if and was eventually some are full you around, gave appreciate in I I I commentary data last So more the cover that the dividend, the one to bumps guys way. the necessary comment. and putting appreciate to it. you make also the along but support you much there year all the ability that just very as wanted guys guys

really measures in, those shareholders appreciate the questions. I morning. all this you but think I my do put appreciate So are time those

Ryan. you. We and comments, thank Great. the appreciate Thanks, the questions so

Rowe Bryce next question Your with from Hovde. comes

I So, first that's the should a statement program one. protection a NII comment, think probably you as trademark good

We like it. Yes. Thank you,

of possible relative for a to watchlist long watch looks of guys Maybe and I forward. guess and that us cash the investments So on where repayment it list to, and maybe you're yield repayment think about investing the of relatively you going source the size on newer I help being could wanted commented it kind what today? you like flow

comment to Yes, you John, want one on to to going I'm over maybe John. that? turn that

Sure, absolutely.

So we that yield now right in new those we consistent the can say my dovetails in and call, of sale owned that list, names lot when we've what and the a names or market. prospective it's we sale names watch processes consistent believe repayment with I are wouldn't we're just in think seeing core are processes about our I our that we on think deal in the underwrite the in in generally this comments earlier the it's but generally are think

just repaid good that in we loans that what and put loans find think being in market and So will back re-underwrite we the it's can the good portfolio.

this I big of portfolio. view So as is enhancement, think mentioned, just, very and safety I we to a with good yield but in meet the don't I yield, think a dividend going don't continue it's as degradation one be targets to the it's can environment you we where

going-forward the helpful. level in a to basis was dividend we Okay, the around Maybe they in should from about of paid a the curious coming think on expect you follow-up conversation Edmentum, the on that first dividend Edmentum? here if just be and like here or quarter looks one stable that's that how dividend

from a the more up truing really of that's elements fourth some Yes, quarter transaction.

dividends. So to payer we regular of Edmentum expect not do a be

So than a dividend payer. it be settling a is paying of than one-time of going of think to I growth was Edmentum a entity dividends, transaction was post more policy a more it

for protection level solution you you've a put guess in Okay and as years to temporary recall of the the $X.XX a there, I program ask about and next couple the, to did and NII the then want dividend. for support what it

that was some there making that temporary permanent. versus talk assume around I So,

thoughts permanent So next any make just why two years? around these it not beyond

it's think I Listen, Yes. open-ended.

now saying important. want recognize course, and headwinds if fulsome seen I people in the we're want and at we we portfolio. feel readdressing and we larger I more extend traditional two the but $X.XX, be the very supportive. it, just the earning we base years even we we today, the we've and are expectation we'll and always going confidence if to make much weren't, time and there'll in that's I think about about not that we've is least think shocked things be dividend. think pretty just it as $X.XX all our sustainability good think there for seen sure So from we the and is NII of the be COVID will that as and to years to down world we hope two but through naturally more the then have as be it's coverage two just what's equity been explicit I to would two also there We'll going be, years we said sort have you've years post the dividend been a extend needed, listen long and I the that don't give dividend, made of frankly implicit, needed And a rate likely coverage hurt is and not, are anyone and in it. if very and some progress worrying to

a done laying around one investment-grade Obviously good a the just with what agree and And Moody's in structure. I question Yes, maybe more you're that. liability then highlighted getting out are. maturities you've rating, job

fixed there of is versus a credit some facilities and guess, you inclination mean And is market the debt? to replace them an from liability with do by I even more structure it eliminate fixed-term I perspective your now, to on the try that of as So floating so favorable with debt? shift being revolving as the unsecured unsecured

mix, about about there and towards to little like really are of as XX% like the to to floating you'd more pretty is the Yes, show way. lot think sweetest that, terms takes. could a question obviously right something we in the for debt. lock the but always see I spot still but that and to pretty good like rates XX% the in, on feel presentation heavily feel it's drawn it's skewed good the is we you don't going where right? We're We exactly today. be extent that go thinking as because a us fixed on spend you pretty time of and managers migrated bit now, Rates probably low wrong will I migrate XX/XX could other a in

just is to it's So towards and the general asymmetry of we business see as skewed it that a continue the do fixed want in we'll more of probably edges. the we really And, kind grow but tuning growth question floating. we guess around fine then probably matched, of my the some and like

would our [Operator the Hamwee conference Instructions] to turn like back Rob I This closing concludes to question-and-answer over for any remarks. session.

Thank you.

Just want to thank everybody.

the everybody appreciate you and questions then, Thank where us, to course, and follow-up support. always we're of Obviously, with interest we next As know any we're the around, find quarter. look speaking forward always, to you, operator.

presentation. conference for now The has you concluded. Thank today's attending

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