New Mountain Finance (NMFC -1.65%), a business development company focused on lending to upper middle market U.S. businesses, released its second-quarter results on August 4, 2025. Net investment income per share was $0.32 for Q2 2025, in line with analyst estimates, ensuring full coverage of its quarterly dividend. However, total revenue (GAAP) came in at $34.5 million, falling considerably short of the $84.57 million consensus (GAAP) revenue estimate, amounting to a miss of 59.2% (GAAP). The quarter saw a continued decline in net asset value per share and profitability metrics (GAAP), with annualized dividend yield rising due to a lower share price. Overall, the quarter reflected steady dividend coverage and portfolio discipline but highlighted challenges from falling revenue and persistent pressures on returns.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| Net Investment Income per Share (Non-GAAP) | $0.32 | $0.32 | $0.36 | (11.1%) |
| Investment Income (Revenue, GAAP) | N/A | $84.57 million | $94.59 million | N/A |
| Net Asset Value per Share | $12.21 | $12.45 | (1.9%) | |
| Dividend Declared per Share | $0.32 | $0.34 | (5.9%) | |
| Annualized Dividend Yield | 12.3 % | 11.0 % | 1.3 pp |
Source: Analyst estimates for the quarter provided by FactSet.
Business Overview and Strategy
New Mountain Finance is a business development company, or BDC, which means it invests primarily in loans to private U.S. companies, mostly through first lien secured loans. Assets are largely concentrated in sectors seen as stable and growing—software, healthcare, and business services—which together make up nearly 68.7% of the portfolio as of Q2 2025.
The primary focus has been on building a portfolio that balances stable returns with low credit risk. To achieve this, New Mountain Finance has been shifting steadily toward more senior loans—these are loans that are paid back first if a borrower faces trouble. This increased focus on seniority has raised the senior asset mix to 78%, up from 75% as of Q2 2024. Management also places emphasis on rigorous credit selection, portfolio diversification, and ongoing regulatory compliance as key success factors.
Quarterly Highlights and Performance Drivers
Net investment income (GAAP) was $0.32 per share for Q2 2025. This exactly matched the GAAP consensus estimate and covered the full dividend declared for the period. However, total revenue (GAAP) fell to $34.5 million, missing analyst expectations by more than $50 million (GAAP revenue). This GAAP revenue miss stands out as a key development
The annualized dividend yield rose to 12.3%, compared to 11.0% for Q2 2024. which also led management to repurchase $9.6 million of its stock, using a board-approved buyback program of up to $47 million. Repurchases like this send a signal that the management sees value in the shares at current price levels.
Risk management remains central. Approximately 95% of the portfolio by fair value is rated “green” on the internal credit scoring system as of Q2 2025, implying the vast majority are meeting or beating expectations. Only one portfolio company carries a “red” rating, which denotes material weakness, but this accounts for just 0.5 % of total assets by value. The investment portfolio included 124 companies at quarter end, but down from $3.09 billion in total value on December 31, 2024, to $3.01 billion on June 30, 2025.
Portfolio turnover was active. During Q2 2025, $122.2 million of new investments were originated, but this was more than offset by repayments ($141.4 million) and asset sales ($13.7 million), resulting in a net decrease. The company has continued to moderate exposure to any single borrower, further diversifying its portfolio to reduce risk.
From a funding and liquidity standpoint, statutory debt-to-equity was 1.17x (1.13x net of cash), up modestly compared to last quarter but still within the company’s stated target. Cash and equivalents totaled $57.4 million and the company maintains access to over $1 billion in undrawn credit, supporting its lending activities. There was also a positive regulatory development in July, as New Mountain Finance received a third license for its Small Business Investment Company (SBIC) program from the U.S. Small Business Administration. This extends its ability to access cheaper debt funding and expand lending in the future. Also, the Dividend Protection Program—allowing up to $0.02 per share in quarterly dividend support—remains in force through the end of calendar year 2026, offering some stability if earnings dip below dividend payout levels.
A notable event during the quarter was the extension of the Dividend Protection Program, providing additional stability for the declared dividend if net investment income comes under pressure. The dividend declined to $0.32 per share, down from $0.34 in Q2 2024.
Looking Ahead
Management did not offer formal earnings or revenue guidance for the next quarter or for fiscal 2025. While leadership cited confidence in the ability to optimize financing costs and reposition the funding structure as interest rates shift, there are no specific figures or targets for future performance. The outlook highlighted a continued strategic focus on maintaining credit discipline, managing leverage, and reducing reliance on PIK income.
Investors should keep an eye on further net asset value changes, any continued shifts in the dividend level, and the trajectory of PIK income as an indicator of cash earnings quality. Monitoring portfolio diversification, leverage movements, and further asset quality trends will be important in understanding New Mountain Finance’s stability and income-generating potential heading into the rest of fiscal 2025. The quarterly dividend was maintained at $0.32 per share for Q3 2025.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
