Q2 2019 Earnings Call
Good morning, and welcome to the New Mountain Finance Corporation, Q2, 29 chain conference call.
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<unk> of the New Mountain Corporation, Sorry Finance Corporation. Please go ahead.
Thank you and good morning, everyone welcome to New Mountain Finance Corporation second quarter earnings call for 2019.
On the line with me here today are Steve Klinsky, chairman of the NFC and CEO of New Mountain capital.
John Klein, President and COO of NFC and Sharav catchy.
Oh I see.
Equally ASCII is going to make some introductory remarks, but before he does I'd like to ask the sharav to make some important statements regarding today's call.
Excellent.
Good morning, everyone.
Well, we'll get into the presentation like to advise everyone that today's call and bus crashed shopping accordingly.
Please note that they are the property of New Mountain Finance Corporation and that any price broadcast in any form is critical.
Information about the audio replay of this call is available at our August earnings press release.
I would also like to call your attention to the customary safe Harbor disclosure you know personally and on page two of the slide presentation regarding forward looking statements.
Today's conference call and webcast may include forward looking statements and projections and we ask that you are fortunate most recent filings with the SEC.
Important factors that could cause actual results to differ materially from those statements and projections.
We do not undertake to update all forward looking statements or projections unless required by law.
Great copies of our latest SEC filings.
Access the slide presentation that we will be referencing throughout this call.
Please visit our website at Www Dot New Mountain Finance dotcom.
At this time I'd like to turn the call over to Steve Klinsky Animosities trimming will give some highlights beginning on page four of the slide presentation Steve.
The team will go through the details in a moment.
Let me start by presenting the highlights of another strong quarter for New Mountain finance.
Your mom Financers net investment income for the quarter ended June Thirtyth 2019.
Was 35 cents per share once again at the high end of our guidance of 33 to 35 cents per share.
More than covering our quarterly dividend of 34 cents per share.
New Mountain absence book value was generally unchanged at $13.41 per share.
Reflecting stable financial market conditions, and no material idiosyncratic credit changes.
We're also able to announce our regular dividend, which were the thirtyth straight quarter will again be 34 cents per share an annualized yield of approximately 10% based on last friday's close.
The company had another productive quarter of deal generation.
Investing $183 million in gross originations versus moderate repayments of $68 million.
It's continued balance sheet growth wasn't PERC funded by our early July equity issuance and keeps us fully levered in our target range.
Credit quality remains strong with once again, no new non accruals.
I and other members of new mountain continued to be very large owners of our stock.
The aggregate ownership of 10.1 billion shares approximately 12% of total shares outstanding.
Finally, the broader Mount platform that supports I don't know if see continues to grow with over 20 billion of assets under management.
And over 150 team members.
In summary, we are pleased with Allomap sees continued performance and progress overall with that let me turn the call back over to Rob Hamwee.
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Thank you Steve.
Before diving into the details of the quarter as always I'd like to give everyone. A brief review and then that she and our strategy.
As outlined on page six of our presentation.
And then let's see it's externally managed by new Mountain capital, a leading private equity firm.
Since the inception of our debt investment program in 2008.
We have taken new mountains approach to private equity and applied it to corporate credit with a consistent focus on defensive growth business models and extensive fundamental research within industries that are already well functioning.
Or more simply put.
We did that in recession resistant businesses that we really know and that we really like.
We believe this approach results in a differentiated and sustainable model.
It allows us to generate attractive risk adjusted rates of return across changing cycles and market conditions.
To achieve our mandate, we utilize the existing new mountain investment team as our primary underwriting resource.
Turning to page seven you can see our total return performance from our IPO in May 2011 through August 2nd 2019.
In the over eight years since our IPO, we have generated a compounded annual return to our initial public investors.
Nearly 11%.
Meaningfully higher than our peers into higher yielding debt and approximately a thousand basis points per annum above relevant risk free benchmarks.
Page eight goes into a little more detail around relative performance against our peer set.
Benchmarking against weak.
<unk> largest externally managed bdcs that have been public at least as long as we have.
Page nine shows return attribution.
Total cumulative return continues to be largely driven by our cash dividend, which in turn has been more than 100% covered.
That hasn't the bar on the far right illustrates.
Over the years, we have been public we have effectively maintaining a stable book value inclusive of special dividend well generating a 10.3% cash on cash return for our shareholders.
We attribute our success to one our differentiated underwriting platform.
To our ability to consistently generate the vast majority of our and I only from stable cash interest income in an amount that covers our dividend.
Three our focus on running the business with an efficient balance sheet and always fully utilizing inexpensive appropriately structured leverage before accessing what [laughter] equity and four our alignment of shareholder and management interest.
Our highest priority continues to be our focus on risk control and credit performance.
We believe over time is the single biggest differentiator of total return in the BDC space.
Credit performance continues to be strong.
No material quarter over quarter credit deterioration in any single name.
For the fourth consecutive quarter and nine of the last 10 quarters, we have had no new non accruals.
If you refer to page 10.
We once again layout the cost basis of our investments.
The current portfolio and our cumulative investments.
Thanks to the inception of our credit business in 2020.
And then show what has migrated down the performance ladder.
Since inception, we have made investments of approximately $6.9 billion in 267 portfolio companies.
Which will be eight representing just 125 million upon migrated to non accrual of which only four representing 43 minutes Clos.
Thus far resulted in realized default.
Furthermore, effectively 100% of our portfolio.
Fair market value is currently rated one or two on our internal scale.
Page 11 shows leverage multiples for all of our holdings over seven and a half million dollars. When we entered an investment and leverage levels for the same investment at the very end of their most recent reporting period.
Well not a perfect metric.
[laughter] asset by asset trend that leverage multiple is a good snapshot of credit performance.
And helps provide some degree of empirical fundamental support for our internal ratings and marks.
As you can see by looking at the table leverage multiples are roughly flat or trending in the right direction. It's only a few exceptions.
Three loans that have had negative migration of two and a half turns or more or the same three names we have discussed in prior quarters.
As a reminder, one loan previously restructured didnt them the prospects remain bright.
A second loan issuer, where we believe the likelihood of the payment default is low.
A recent equity contribution from the sponsor that resulted in a 29% loan pay downs.
And the third issuer in early July completed a process, which resulted in a significant equity infusion that meaningfully people I forgot position.
The chart on page 12 helps track the company's overall economic performance since its IPO.
At the top of the page we show how the regular quarterly dividend is being covered out of net investment income.
And you can see we continue to more than cover 100% of our cumulative regular dividend out of it.
The bottom of the page we focus on below the line items.
First we look at realized gains and realized credit and other losses as you can see looking at the row highlighted in Green, we've had success generating real economic gains every year.
A combination of equity gains portfolio company dividends and trading profits.
Conversely realized losses, including default losses highlighted in orange have generally been smaller and less frequent and show that we're typically not avoiding non accruals by selling poor credits at a material loss prior to actual default.
As highlighted in Blue we continue to have a net cumulative realized gains which currently stands at $18 million.
Looking further down the page, we can see that cumulative net unrealized depreciation highlighted in grey stands at $50 million and cumulative net realized and unrealized losses highlighted in yellow.
$32 million.
The net result of all of this is that you know over eight years as a public company. We have earned net investment income of $643 million again total cumulative net losses, including unrealized.
32.
Turning to page 13, we have seen significant growth in the portfolio over the last year, if we had increased our statutory leverage.
0.81 from 22.
[laughter] early July equity offering.
Consistent with this strategy, we articulated when received shareholder authorization to increase leverage significantly more than 100% of the growth in asset has come from senior securities.
At through repayments in sales non first lean to actually shrunk on an absolute basis by $125 million.
Well first of all it's grown by $778 million.
I will now turn the call over to John Kline.
And she's president to discuss market conditions.
Yes.
Uh huh.
Thanks, Rob.
As outlined on page 14 middle market deal flow increased throughout the quarter. After a slow start to the year in Q1.
Loan spreads in the international markets continued to be stable at levels that are supportive of our lending strategy.
Over the last couple of quarters Weve seen material increases in enterprise value multiples in our core sectors.
The highest quality businesses in the private market currently trade for multiples as high as 15 to 22 times EBITDA.
Against this backdrop, we have seen some pressure on that structure, but generally speaking the sizes of sponsor equity contributions have increased far more never acquired debt commitments.
Overall, there continues to be heavy competition for loans to high quality businesses, although lenders have shown more caution towards businesses that have exposure too uncertain end markets.
Looking forward new deal flow continues to be very strong as we benefit from both the active financing market and continued momentum with our sponsor clients.
Turning to page 15. This year, we have seen why were switched from being a tailwind to a headwind.
Thus far in 2019 life worth declined from 2.8% in early January to 2.2% today.
The forward LIBOR curve currently suggest that three month LIBOR could decline by 50 to 100 basis points in the coming quarters.
As shown on page 15, if this does occur and I per share could be pressured by approximately one and a half to three cents per quarter.
However, we believe that the current spread environment and increased balance sheet leverage will enable us to successfully address this potential downward trend in the base rate.
Turning to portfolio activity on pages, 16, and 17 and MFC had a good quarter with total originations of $183 million offset by $68 million from portfolio repayments, representing a 115 million dollar expansion of our investment portfolio.
Our new investments were highlighted by a number of middle market club deals within our core verticals.
Most of which supported new sponsor backed by us.
As I touched on earlier many of these new private transactions are capitalized with meaningfully higher amounts of equity as a percentage of the total purchase price.
East purchase multiples, which has steadily increased over the past year enhance the loan to value ratios on our investments indicates strong sponsor support.
Validate the attractiveness of the defensive growth niches that we target.
Pages 18, and 19 show our continued origination momentum since the end of the quarter, where we have invested $241 million in new transactions with de Minimis loan repayments.
At least two of our new loans are eligible for our FDIC investing program, which we continue to expand.
As mentioned earlier, we have seen robust high quality deal flow in our sponsor finance business.
And looking forward, we have a very solid pipeline of new investment opportunities in our core defensive growth verticals.
Turning to page 20, our mix of originations continues to skew meaningfully towards first lien loans accounted for nearly 75% of total new originations this quarter.
73% of our repayments were second lien loans and only 27% of repayments were first lien loans.
Overall.
Our mix continues to shift towards first lien assets consistent with our stated plan to employ increased portfolio level leverage with a more senior oriented asset mix.
As shown on page 21, and then a few asset level portfolio yield has declined since Q1 from 10% to 9.4%.
Approximately 40 basis points of this decline is due to the downward shift in the lab worker and 20 basis points of the decline is due to the aforementioned shift towards first lien assets.
We have offset this decrease in asset level yield primarily through our proactive strategy of increasing portfolio level leverage.
While we are mindful of the potential continued decrease in live work, we remain comfortable with our portfolio yield was solidly supports our quarterly dividend.
The top of page 22 shows a balanced portfolio across our defensive growth oriented sectors.
In the services section of the Pie chart, we break out subsectors to give better insight into the significant diversity within our largest sector. The chart on the bottom left of the page presents our portfolio by asset type, where you can see the shift towards first lien oriented assets that we discussed earlier on the call.
The chart in the lower right shows that virtually all of our portfolio is performing broadly in line with expectations and we have no performing loans that have a substantially elevated risk of non accrual.
Finally, as illustrated on page 23, we have a diversified portfolio with our largest and best at 3% or fair value and the top 15 investments accounting for 36% not their value.
With that I will now turn it over to our CFO Shiraz Kajee to discuss the financial statements and key financial metrics.
Thanks, John .
For more details on our financial results in today's commentary.
Please refer to the Form 10-Q , those five last evening with the FCC.
I would like to turn your attention to slide 24.
The portfolio had approximately $2.7 billion in investments at fair value at June Thirtyth 2019.
In total assets of $2.8 billion, we had total liabilities of $1.7 billion.
Which total statutory debt outstanding was 1.4 billion, excluding $165 million of drawn SP a guaranteed debentures.
And asset value of $1.1 billion or $30.41 per share was down four cents from the prior quarter.
Oh statutory debt to equity ratio was 1.22 to one.
Pro forma for the equity raise we had in early July .
On slide 25, we show historical leverage ratios the step up in leverage over the past five quarters is in line with our current target statutory debt to equity ratio.
On the slide we also show a historical NPV.
Adjusted for the cumulative impact of special dividends, which shows the stability of our book value since our IPO.
On Slide 26, we show our quarterly income statement results.
We believe that <unk>.
It was the most appropriate measure of our quarterly performance.
This slide highlights that while we realized and unrealized gains and losses can be volatile below the line. We continued to generate stable net investment income above the line.
Focusing on the quarter ended June 32019, we had total investment income of $66.5 million, an increase of $2.3 million in the prior quarter, primarily due to higher interest income from the entry increased asset base.
Total net expenses of 38.6 million.
$1.9 million increase from the prior quarter, primarily due to additional borrowing cost somehow increase debt balance.
As in prior quarters, the investment advisor continues to waive certain management fees.
Effective annualized management fee for this quarter was 1.29%.
It is important to note that the investment advisor cannot recoup fees previously waived.
This results in second quarter, Eni of $27.9 million or 35 cents per weighted average share which was at the high end to FFO guidance and more than covered our Q2 regular dividend of 34 cents per share.
As a result of the net unrealized depreciation in the quarter quarter ended June 30, it keeps US 19, what an increase in net assets, resulting from operations of $23.8 million.
Slide 27 demonstrates.
Our total investment income is recurring in nature and predominantly paid in cash.
As you can see 97% of total investment income is recurring.
And cash income remained strong at 87, starting this quarter.
We believe this consistency shows the stability and predictability of our investment income.
Turning to slide 28, as briefly discussed earlier, our Eni for the second quarter covered our Q2 dividend.
Given our belief that our Q3 2019, and I will fall within our guidance of 33 to 35 cents per share.
Our board of Directors has declared a Q3 2019 dividend.
34 cents per share, which will be paid on September 27 2019.
To holders of record on September 15th 2019.
On slide 29, we highlight our various financing sources.
Taking into account SP, a guaranteed debentures, we have almost $1.9 billion of total borrowing capacity at quarter end.
During Q2, we paid down our 2014 convertible notes that came due.
This is done by adding one new lender and $45 million of additional capacity to our wells Fargo credit facility.
Upsizing, our Deutsche Bank credit facility by $50 million and issuing an incremental $86 million of 2018 convertible notes.
As a reminder, both a wells Fargo and Deutsche Bank credit facilities covenants are generally tied to the operating performance of the underlying businesses that we lend to rather than to the marks are falling investments at any given time.
Finally on slide 13, we show our leverage maturity schedule.
As we've diversified our debt issuance, we have been successful at ladder, our maturities to better manage liquidity.
Importantly, we currently have no near term maturities.
With that I would like to tend to pull back over to Rob.
Thanks for US it continues to remain our intention.
Okay, 34 cents per share on a quarterly basis for future quarters. So long as an i. I covered the dividend in line with our current expectations.
In closing I would just like to say that we continue to be pleased with our performance to date.
Most importantly credit perspective, our portfolio overall continues to be quite healthy.
Once again, we'd like to thank you for your support and interest.
And at this point turn things back to the operator.
To begin human operator.
Thank you we will now begin the question and answer session.
To ask a question you May proceed Star then one on your telephone K pads.
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At this time, we will pause momentarily to assemble Everest huh.
Your first question comes from Chris Kotowski Open Hama go ahead. Please.
Hi, good good Hey, good morning, I was just curious you know looking at page 20 of your your slide deck and you know the originations are primarily first lien and and and the prepayments or second lien and it. It just seems like every BDC, we cover says that they're shifting their portfolio mix more towards.
First lien.
And I'm just wondering are the seconds, just not getting done or is it a different structure or are the seconds. Just migrating to you know different kind of a vehicle that though that took them as phones or oh, what what is happening in the market there that.
That let's all the Bdcs kind of.
Seem to be shifting in the same direction.
Yeah. It's a good question, it's a combination of a number of things and fair. You know we are still doing second means right. It's just we're doing a lot relative to what we're doing in the past and we're sort of matching repayments come second liens, you know to the extent, we gain new second lien net.
Competing evolve over time, but but more fundamentally I think number one a unit tranche has become more popular in the sort of mid market up in the market. That's just taking share from first lien second lien so that decreases the supply of second lien.
Do you have other significant participant I, particularly well were seeing a lot more of now our private equity.
Investors in fund limited partner in fund are taking pieces of a sponsor that second liens and three you are you are just seeing other.
Non traditional players or participate in the market as well so there's still a pretty robust.
A second lien market, but it's a combination of those things that kind of balancing supply and demand there.
Okay.
And.
I I noted also just for you specifically I think in the subsequent events section you said you had roughly 240.
A million in commitments does that pretty much speak for the whole amount of equity that you just raised or do.
Uh huh.
Or do you anticipate taking leverage up a little bit more from the the 122 pro forma that you have here.
So it certainly does that you know trying to.
For the equity that we raised yeah, we do have pretty good visibility of some repayments coming in so we actually have six of our portfolio companies in the last.
Kind of maybe five or six weeks have announced assigned M&A deals that will result in take out. So we're you know we're also.
Going to be using that in the coming weeks and months as a source of capital to fund the the pipeline. So as always we're <unk> yeah, we remain to start with.
Maybe paying our current target at 1.2 to 1.3 that that that we've talked about in the past. Obviously you know at a moment in time, we may be at 118, maybe at 136, but at least you know moving towards that based on a balancing originations repayment.
And any equity offerings.
I think you know we always strive I think we've been very successful in never having a significant lead from an equity offering that has that had any impact on our earnings that's immaterial.
Okay, well great. That's it for me thank you.
Yeah. Thank you.
Thank you. Your next question comes from CNN Shale Wells Fargo go ahead. Please.
Event.
Hi, guys. Good morning, sort was on mute there for a second notebooks that I was excited that someone that actually it's a rare rarely perhaps is my name correctly. The traditional way [laughter]. Just first question on allocation does the advice or ever retain any form of upfront economics before.
ER allocation to new mountain and other funds.
No. That's a hard include and very simple now.
So do you do you have a split in terms of how you record or account for upfront fees in terms of.
Below the line yield enhancements and and you know.
Bull widen meeting Oh, Oh idea crude and.
Topline fee income.
Yeah. So so again so to be Super clear right all the economics flow to the underlying vehicles, whether it's the BDC or any of our privately managed fund non accrue in any way shape or form to the management company or any affiliate at the management company in terms of how we split any of those upfront economics from an accounting perspective between in quarter or in your recognized income and Oh like D. That is obviously accreted over the life of the of the of the alone.
It really depends frankly on the type of origination and it can range from.
In fully syndicated but if it all goes into Allied D. Towards you know she'll bilateral they can all be upfront fee to most of the time in some kind of club format, it's going to be some some split between some ideas and some upfront upfront fees.
I have a little bit to the to the activity that that that we used to that two to two originated so India and economics are the same but from an accounting perspective, obviously it moves around a little bit not it's not immaterial frankly.
Sure that's helpful and and.
Tying that in with the commentary on less second lien would we expect to see more of the the direct and club format. So should more income trend.
Into into O I D sort of smoothing out income versus.
Versus a syndication.
Let's look at them up at the margin and look you've seen that in the last couple of quarters right with you know we've had less a one time fee income, but I would I would say its.
It's a small and be anyone quarter, there can be some volatility because you could have a couple of big Ah you know.
Bilateral originations that that generate significant fees.
Thank you and just so one on unitek seem to have been a.
<unk> driver this quarter on unrealized markdowns is there any.
Key shift I know you've been on this has been obviously a a longstanding.
The name there.
Well say as required attention and I know you guys have we've talked about it many times.
On earnings calls, but is there any.
Anything break through here that that led to this downdraft or was it more.
You know something with the market or an equity round anything any color you could possibly give us.
Yeah, I mean, that's the high level color. If it's nothing that we think has any impact on the long term realizable value of unitek. There was a couple of operating hiccups at the company in the last quarter and we you know we try to be you know sort of real time from a valuation perspective, it's probably as a percentage of the overall position even to change wasn't bad meaningful.
But you know we don't think anything that's happened there.
As as any impact on our long term ability.
Two two recognizing feet value there as one of our you know kind of key equity portfolio companies.
But you know, obviously update everybody and as that evolves.
Thanks for the color that's all for me.
You got it thanks.
Thank you yeah, I will take the opportunity to remind everyone that it is star followed by one to register for a question today.
Your next question comes from Ryan Lynch, Kate Spade W. Baird go ahead. Please.
Hey, Ryan.
Hey, Good morning, guys and question on Slide number 14, where you're talking about the purchase price multiples in the market today at these high quality businesses.
My question is is you talk about purchase price multiples in the 15 to 22 range, but that.
[noise] increase valuation typically been bridge by larger sponsor equity check. So my question is are you, saying that maybe a couple of years ago 15 times buyout multiple would you had about you know seven and a half turns of an equity check back then southern half turns of leverage might be 50 50 split.
Now that same companies going for 20 times by out are you, saying that.
That the loan to value still saying the same thing indeed, the equity sponsors putting in kind of 10 times and ER, putting in 10 times and then there's 10 times leverage on that business are you, saying that the leverage is staying at that seven times leverage in the equity sponsors putting in more like 13 odd plus times Oh, yeah, that's yet to lap the latter the latter I mean, maybe that maybe you know two years ago. It was seven at seven equity excuse me seven debt eight equity after the 15 purchase and today. It's 120 times purchase the seven may have crept up to seven and a half our eight.
But the balance the other four to four and a half turns is cash equity.
I mean, it's really quite quite interesting.
And when you gave that business is then even actually more safer than it was a couple of years ago. If if if your leverage is is flat or maybe up slightly but there is now a much larger evaluation equity check behind you.
Yeah. It's an interesting question right at the end of the day. The business is still the same business it everything else in the world hasn't changed the.
Projection of cash flows et cetera, it hasn't changed so in that sense. It's still the same credit has been however, with all that incremental capital beneath you that does have an impact on sponsor behavior and so to the extent there are issues. The propensity of the sponsor to inject incremental capital is modified a and I would argue that given the magnitude of these changes I do think it's a safe credit on an all in system wide basis.
Okay. That's that's that's interesting.
You guys have always been very efficient with capital plan in particular around in any sort of of capital raising activity.
My question was if I look at and this is pretty consistent from prior quarters, but over what did your originations on slide 16, 17, 18, and 19 for the second and third quarter, you guys always take kind of a smaller investment bite size or the off a much larger debt troche anywhere from 10 2030, 40% of kind of the overall tranche.
So I'm wondering.
Does.
Does that help out your your ability to deploy capital more efficiently, meaning if you do raise equity capital of any one time. If you guys have a list of.
Eight.
You know investments that you guys are looking to make can you just increase your allocation size. Because you guys have so much capacity in that that traction that allows you to put capital to work so much more efficiently than others or.
Am I thinking about that the wrong way.
I would say there is some of that and that is a piece of the puzzle, but I would say probably more importantly is.
The thing that allows us frankly to be so efficient is it.
The fact that our unlike most of our peers, our BDC relative to our total credit platform is the preponderance of our assets right. So the vast majority of our allocations are going into the BDC as opposed to many other instances not every other instance, but many other instances the BDC is a much much smaller piece of the total platform. So its getting a small percentage. So it's hard to move the needle by dialing up allocations are doing one or two extra deals.
And then that also frankly intersects with the fact that our footprint.
Again relative to our total credit platform is actually quite meaningful I mean, where you know we we.
We were able to.
Frankly, you don't get what we want in most instances because of our footprint and then finally.
The market has come to us in terms of our industries right there.
More and more deals as sponsored capital I think I get a lot of credit to new mountain as a platform for being ahead of the curve in areas like health care I T Enterprise software technology enabled business services, that's where the sponsor money's going so the share of our addressable market of the total biomarker data total biomark is growing but the industry is we target as a share of that market is increasing quite substantively, frankly, allowing us I think to see greater and greater flow. So it's really all those things coming together.
That that makes any sense.
Yeah, Yeah that makes sense and that's that's that's good and helpful commentary.
Those were all my questions I appreciate the time today.
Great. Thank you.
Thank you we have a follow up question from Fin O'shea Wells Fargo go ahead. Please.
Hi, guys. Thanks, just a small follow on came to mind.
Yes, given your expertise on health care.
Are you seeing any.
Pockets of stress or perhaps the therefore interest to you guys on the services side understanding Oh a popular.
Private equity strategy in recent years has been roll ups of you know certain health care services and then we're seeing some of those those flare up a bit and BDC portfolios do you have any high level commentary on on that area of the market.
So so yes, it's obviously that that that is an area. We spend an incredible amount of time and then we've been very successful then on the private equity side. You know it is a it is a sector, where you have winners and losers for sure and that's really been true for for decades, and I think that well continue to be the case and you think that's where.
The value of of not just being.
Taking a good sector, but being able to go down two or three levels into the niches at the micro level and take the better healthcare service companies versus the worst healthcare service companies is a critical importance on so yes. There clearly are pockets of strength. We currently don't have any in our portfolio material. One there's always things that are underperforming a little bit here or there, but nothing that you know.
We are particularly worried about and we actually continue to think there's great opportunity given the research capabilities of the broader new mountain platform in that sector.
But it is a it is.
It is not for the non educated frankly, it's not for the metabolism tough its a tough sector to know you know what's going to happen without having really deep expertise in connectivity in the in the marketplace.
Got it appreciate the color. Thank you again.
Yes, very welcome.
Thank you again, if you have a question. Please press Star then one.
Thank you. This concludes our question and answer session I would like to turn the conference back over to Rob Hamwee for closing remarks.
Great. Thank you very much and thank you everyone for your interest and support and we look forward to speaking with everyone again next quarter and that's always the interim any color any questions don't hesitate to call us directly.
I have a great day bye bye.