Core Insights - The article discusses the Q3 results for Nuveen Churchill Direct Lending Corp (NYSE: NCDL), which recently went public alongside other private BDCs earlier in the year [1]. Group 1: Company Overview - Nuveen Churchill Direct Lending Corp is a Business Development Company (BDC) that focuses on generating income through various security types, including CEFs, ETFs, mutual funds, and individual preferred stocks [1]. Group 2: Analyst Background - ADS Analytics, the team behind the analysis, consists of experienced analysts from leading global investment banks, specializing in research and trading [1].

Financial Data and Key Metrics Changes - The company reported net investment income of $0.58 per share for Q3 2024, fully covering the regular quarterly distribution of $0.45 per share and a special distribution of $0.10 per share [7][32] - Total GAAP net income for the quarter was $0.67 per share, up from $0.37 per share in the previous quarter, positively impacted by net realized and unrealized gains [36] - The net asset value per share increased to $18.15 from $18.03 at the end of Q2 2024 [10][38] Business Line Data and Key Metrics Changes - Investment activity during Q3 was approximately $226 million, primarily focused on senior secured first lien loans [8][17] - The investment portfolio's fair value increased to $2.05 billion from $1.99 billion at the end of Q2 2024 [39] - First lien debt represented approximately 90% of the fair value of the overall portfolio, maintaining a steady percentage [18][46] Market Data and Key Metrics Changes - The company observed an increase in competitive dynamics in the private credit market, leading to additional spread compression, albeit at a slower pace than in the previous quarter [12] - The weighted average yield on debt and income-producing investments at cost declined to 10.9% from 11.3% at the end of Q2 2024 [46] - The watch list increased to 5.6% of the overall portfolio fair value, reflecting proactive portfolio management [49] Company Strategy and Development Direction - The company is focused on rotating out of higher-priced, lower-spread upper middle market positions into traditional middle market opportunities, which offer wider spreads and more attractive terms [9][18] - The strategy emphasizes maintaining a diversified portfolio across various metrics, including sponsor relationships and industry sectors [27] - The company aims to capitalize on increased M&A activity expected as the interest rate reduction cycle begins [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the U.S. economy's resilience and steady revenue growth from portfolio companies, despite elevated interest rates [15] - The company anticipates continued strong performance into 2025, driven by a robust pipeline of investment opportunities [26] - Management highlighted the importance of maintaining strong relationships with private equity sponsors to drive deal flow [62] Other Important Information - The company has a share repurchase program, utilizing approximately $14 million of the $100 million allocated, with plans to continue buying back shares as trading occurs at a discount to NAV [52][85] - The third lockup release occurred on October 21, increasing the number of shares available for trading significantly [53] Q&A Session Summary Question: Is there any white space across the broader Churchill platform to further penetrate the market? - Management noted a 30% increase in firms where new deals are being done and ongoing efforts to expand relationships with new private equity LPs [60][62] Question: What is the current deal flow and tone with sponsors? - Management reported a continued increase in deal activity, with Q3 showing a 60% year-over-year increase in senior lending activity [65] Question: How was amendment activity in the quarter? - There was no significant increase in amendment activity, with stable yields on new floating rate investments [68] Question: What is the size of the upper middle market portfolio being rotated to the core middle market strategy? - The upper middle market portion is approximately $200 million, which is about 10% of the total portfolio [74] Question: Can you describe the increase in the watch list investments this quarter? - The increase in the watch list was due to proactive portfolio management, with no new non-accruals during the quarter [80]

CHURCHII Nuveen Churchill Direct Lending Corp. (NCDL) Third Quarter 2024 Earnings 7 November 2024 Disclosure This presentation is for informational purposes only. It does not convey an offer of any type and is not intended to be, and should not be construed as, an offer to sell, or the solicitation of an offer to buy, any securities of Nuveen Churchill Direct Lending Corp. (the "Company," "NCDL," "we," "us" or "our"). Any such offering can be made only at the time an offeree receives a prospectus relating t ...

Financial Performance - Net investment income for Q3 2024 was $0.58 per share, fully covering regular and special distributions[2] - Investment income increased to $60.3 million in Q3 2024, up from $41.7 million in Q3 2023, driven by increased investment activity[8] - Total investment income for the three months ended September 30, 2024, was $60,280,000, an increase of 44.2% compared to $41,746,000 for the same period in 2023[19] - Net investment income per share for the three months ended September 30, 2024, was $0.58, a decrease of 6.5% from $0.62 in the same period last year[19] - The net increase in net assets resulting from operations for the three months ended September 30, 2024, was $36,643,000, compared to $20,149,000 in the prior year, reflecting an increase of 81.6%[19] Portfolio Investments - The company funded $203.2 million in portfolio investments during Q3 2024, compared to $305.0 million in Q2 2024[6] - The fair value of the company's portfolio investments rose to $2.05 billion across 202 portfolio companies, up from $1.99 billion in Q2 2024[4] - The number of new portfolio companies increased to 18, compared to 14 in the same period last year, representing a growth of 28.6%[20] - The total number of portfolio companies at the end of the period was 202, up from 174 in the previous year, marking an increase of 16.1%[20] - The count of investments rose to 457, up from 363 in the previous year, indicating a growth of 25.9%[20] Expenses and Gains - Net expenses rose to $28.8 million in Q3 2024, compared to $20.1 million in Q3 2023, primarily due to higher interest and management fees[9] - Total expenses before expense support and incentive fees waived were $34,287,000, an increase of 70.5% from $20,091,000 in the same period last year[19] - The company recorded a net realized gain of $1.1 million in Q3 2024, compared to a net loss of $(13.1) million in Q3 2023[10] Debt and Equity - The debt to equity ratio increased to 1.11x as of September 30, 2024, compared to 1.04x at June 30, 2024[11] - The weighted average yield of debt and income-producing investments decreased to 10.9% as of September 30, 2024, from 11.9% a year earlier[8] - The weighted average annual interest rate on new debt investments at par was 9.63%, down from 12.07% in the previous year, indicating a decrease of 20.2%[20] Distributions - The company declared a fourth quarter regular distribution of $0.45 per share, payable on January 28, 2025[3]

Financial Performance - The company reported new gross commitments at par of $225.612 million for the three months ended September 30, 2024, compared to $216.710 million for the same period in 2023, reflecting an increase of approximately 4.1%[247] - Net investments funded were $203.159 million for the three months ended September 30, 2024, up from $150.866 million in the prior year, representing a growth of about 34.7%[247] - Total investment income for the three months ended September 30, 2024, increased to $60.3 million, up from $41.7 million for the same period in 2023, representing a growth of 44.5%[267] - Net investment income for the three months ended September 30, 2024, was $31.5 million, compared to $21.7 million for the same period in 2023, an increase of 45.0%[268] - The net realized gain on investments for the three months ended September 30, 2024, was $1.1 million, compared to a net realized loss of $(13.1) million for the same period in 2023[277] - The net change in unrealized gains for the three months ended September 30, 2024, was $4.1 million, attributed to market spread tightening and positive credit performance[278] Investment Portfolio - The portfolio companies increased from 161 at the beginning of the period to 202 by the end of the period, indicating a growth of 25.5%[247] - Total investments as of September 30, 2024 amounted to $2,075,365, with first-lien debt at amortized cost of $1,855,467 and fair value of $1,843,607[251] - The size of the investment portfolio increased to $2.1 billion as of September 30, 2024, compared to $1.5 billion as of September 30, 2023, reflecting a growth of 40%[270] - The average portfolio company investment was $10,274 as of September 30, 2024, compared to $10,133 at the end of 2023[251] - The healthcare and pharmaceuticals sector represented 14.18% of the portfolio as of September 30, 2024, up from 12.72% at the end of 2023[253] Debt and Financing - The weighted average annual interest rate on new debt investments at par was 9.63% for the three months ended September 30, 2024, down from 12.07% in the same period of 2023[247] - The weighted average yield on debt and income-producing investments at cost decreased from 11.72% to 10.86% from December 31, 2023 to September 30, 2024[254] - The percentage of debt investments bearing a floating rate was 94.25% as of September 30, 2024, compared to 94.61% as of December 31, 2023[254] - The company’s subordinated debt as of September 30, 2024, included second lien term loans of $67,947 and mezzanine debt of $99,925[250] - Total debt obligations as of September 30, 2024, amount to $1,101,964, with $217,500 due in 1 to 3 years, $112,750 due in 3 to 5 years, and $771,714 due in more than 5 years[342] Liquidity and Capital Structure - The company had $130.0 million available under the Wells Fargo Financing Facility and $137.3 million under the SMBC Corporate Revolver as of September 30, 2024, ensuring sufficient liquidity for operations[282] - The company provided $311.1 million from financing activities during the nine months ended September 30, 2024, primarily from common share issuances and secured borrowings[283] - The company raised $99.3 million from its IPO on January 29, 2024, by issuing 5,500,000 shares at a price of $18.05 per share[284] - The company has authorized a total of 500,000,000 shares of common stock, with all shares initially designated as common stock[284] - The company has entered into a share repurchase plan allowing for the purchase of up to $99.3 million of its common stock at prices below its net asset value (NAV) per share[297] Risk Management - Approximately 83% of the company's debt investments have financial covenants, indicating a strong focus on risk management[248] - The company has a weighted average interest coverage ratio of 2.1x for its first-lien loans, suggesting a healthy ability to meet interest obligations[248] - The company is focusing on investing in defensive businesses with low cyclicality and strong free cash flow generation[257] - The ongoing geopolitical conflicts and financial institution failures have introduced significant volatility in the financial markets, impacting market risks[371] - The Company is exposed to valuation risk due to investments in illiquid debt and equity securities of private companies[372] Interest Rate Sensitivity - Interest income and expenses are sensitive to fluctuations in interest rates, impacting net investment income significantly[373] - The Company estimates that a 300 basis point increase in interest rates could result in a net income increase of $18,343,000[378] - A 300 basis point decrease in interest rates could lead to a net income decrease of $18,326,000[378] - Approximately 5.75% of the Company's debt investments bear interest at a fixed rate, while 94.25% bear interest at a floating rate as of September 30, 2024[375] - 99.59% of the floating rate debt investments are subject to interest rate floors as of September 30, 2024[375] Regulatory and Compliance - The company has elected to be treated as a RIC under the Code, which allows it to avoid U.S. federal income taxes on distributed income[364] - The company must distribute at least 90% of its investment company net taxable income to qualify for RIC tax treatment[308] - The SEC granted an exemptive order allowing the Company to participate in negotiated co-investment transactions with certain affiliates[346] - Shareholders are subject to transfer restrictions for 365 days following the IPO prospectus date, with varying limitations thereafter[303] - The Board declared a fourth quarter regular dividend of $0.45 per share, payable on or around January 28, 2025[369]

Core Viewpoint - Nuveen Churchill Direct Lending Corporation (NCDL) has shown stable performance in Q2 2024, with a positive alpha of approximately 6.5%, despite uncertainties in the broader Business Development Company (BDC) sector [3][5]. Financial Performance - NCDL's net investment income per share for Q2 2024 was $0.57, an increase of $0.01 from the previous quarter, indicating a relatively stable income stream compared to peers [5]. - The dividend coverage ratio stands at approximately 126% when adjusted for supplemental distributions, which is significantly above the BDC sector average [5]. - The forward yield based on the base dividend is around 10.3%, reflecting an attractive investment opportunity [5]. Investment Activity - During Q2, NCDL originated $360 million in new loans, with over 95% being first lien senior secured loans, leading to a fair value portfolio increase of about $196 million [5]. - The proportion of first lien senior loan investments in the portfolio has risen to nearly 91% based on fair value [5]. Leverage and Risk Management - NCDL's leverage increased from 0.82x to 1.04x, which is still below the sector average, indicating a cautious approach to portfolio expansion [5]. - The company recognized an unrealized loss of $0.20 per share due to two underperforming investments, but this is mitigated by the high quality of the portfolio, which is primarily composed of defensive investments backed by private equity sponsors [5]. Conclusion - Based on the Q2 2024 earnings data, the rating for NCDL has been upgraded from hold to buy, as the company has demonstrated the ability to grow its portfolio conservatively and maintain strong dividend coverage [6].

Financial Data and Key Metrics Changes - The company reported net investment income of $0.57 per share, exceeding both the regular quarterly distribution of $0.45 per share and a special distribution of $0.10 per share, resulting in an annualized dividend yield of approximately 12.3% [18][5] - Total net income for the quarter was $0.37 per share, impacted by $0.20 per share of net realized and unrealized losses [19] - The debt-to-equity ratio at the end of the quarter was 1.04x, consistent with prior guidance [19] - Net asset value per share decreased by approximately 1% to $18.03, primarily due to unrealized losses on two nonaccrual investments [20] Business Line Data and Key Metrics Changes - The company experienced significant investment activity with $360 million in new originations, over 95% of which were first lien senior secured loans [5][23] - The fair value of assets grew by approximately $196 million quarter-over-quarter, largely due to record high new originations [21] - The portfolio consisted of nearly 200 investments, with the top 10 investments representing only 14.4% of the total portfolio [12][22] Market Data and Key Metrics Changes - Credit quality remains strong despite inflationary pressures, with a weighted average internal risk rating of 4.1 and a watch list at a manageable level of 3.8% of fair value [11][26] - The average position size in the portfolio is 0.5%, which serves as a key risk mitigation tool [23] - The company noted modest spread compression in the first half of the year, but remains insulated from pricing pressures in the broadly syndicated loan market [6][42] Company Strategy and Development Direction - The company focuses on a high level of portfolio diversification across various metrics, emphasizing credit quality and rigorous investment processes [13][14] - The strategy includes prioritizing core middle market senior loan investments, which are believed to provide strong long-term risk mitigation characteristics [10][16] - The company aims to maintain a disciplined approach to underwriting, avoiding riskier investments and focusing on high-quality businesses [15][38] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the U.S. economic environment, noting resilience and a lack of evidence for an imminent recession in their core middle market portfolio [7][34] - The company anticipates strong performance in the second half of 2024, supported by a robust pipeline of investment opportunities [13][30] - Management highlighted the importance of deep relationships with private equity sponsors, which provide a competitive advantage in sourcing deals [16][39] Other Important Information - The company has a share repurchase program with approximately $92.8 million remaining under the program as of quarter end [27] - The second lockup release saw 35% of nonaffiliated pre-IPO shares released, nearly quadrupling the public float since the IPO [28] Q&A Session Summary Question: Outlook for new investments in the second half of the year - Management indicated a robust pipeline and continued strong origination activity, with optimism for new deal activity to grow as a percentage of overall investments [30][32] Question: Economic outlook and revenue/EBITDA growth across portfolio companies - Management reported positive revenue and EBITDA growth across the majority of portfolio companies, indicating a healthy portfolio [34] Question: Insights on nonaccruals and resolution timelines - Management stated that they are actively working with sponsors and borrowers to resolve nonaccruals, but no specific timelines were provided [36][37] Question: Timeline for rotating out of upper middle market loans - Management confirmed a robust pipeline of traditional middle market opportunities and indicated that the rotation strategy is progressing well [37] Question: Competition from other direct lenders in the middle market - Management noted that while there is competition, established players with strong relationships are benefiting from market consolidation, and new entrants are less impactful in the core middle market [43][45]

Investment Growth - Total investments increased from $1,293,592,000 in June 30, 2023 to $2,023,384,000 by June 30, 2024, representing a growth of approximately 56.5%[220] - The number of portfolio companies increased from 161 at the end of June 30, 2023 to 198 by June 30, 2024, indicating a growth of 22.9%[220] - The company funded 11 new portfolio companies in the three months ended June 30, 2024, compared to 9 in the same period of 2023, reflecting a 22.2% increase[220] - The total number of investments increased from 329 to 434 from June 30, 2023 to June 30, 2024, representing a growth of 32%[220] - The portfolio size grew to $2.0 billion as of June 30, 2024, compared to $1.4 billion as of June 30, 2023[242] Financial Performance - The company generated a net realized gain of $1,017,000 on investments for the three months ended June 30, 2024, compared to a gain of $218,000 in the same period of 2023[220] - Total investment income increased to $55.1 million for the three months ended June 30, 2024, up from $37.1 million for the same period in 2023, primarily due to increased investment activity[242] - Net investment income for the three months ended June 30, 2024, was $31.0 million, up from $18.7 million for the same period in 2023[240] - The company recorded a net realized gain on investments of $1.0 million for the three months ended June 30, 2024, compared to a net realized gain of $218 thousand for the same period in 2023[247] Debt and Financing - The weighted average reported annual EBITDA of the debt portfolio was $76.5 million as of June 30, 2024[222] - Approximately 83% of the company's debt investments have financial covenants, indicating a strong risk management approach[222] - The company reported a weighted average interest coverage ratio of 2.2x for its first lien term loans, indicating solid earnings relative to interest obligations[222] - Interest and debt financing expenses increased to $18.7 million for the three months ended June 30, 2024, from $14.3 million for the same period in 2023, driven by higher average daily borrowings[244] - Average daily borrowings for the three months ended June 30, 2024, were $939.0 million, compared to $774.4 million for the same period in 2023[244] - Total debt obligations as of June 30, 2024, amount to $1,028,750, with $772,000 due in more than 5 years[302] Market Conditions and Risks - The company is focusing on investing in defensive businesses with low cyclicality and strong free cash flow generation amid macroeconomic challenges[231] - The company has seen a tightening of spreads in newly originated investments, attributed to increased competition in the loan market[229] - The ongoing geopolitical conflicts and inflationary pressures have introduced significant volatility in the financial markets, impacting the company's market risks[324] - The company's net investment income may be adversely affected by significant changes in market interest rates[325] Shareholder Returns and Distributions - The company intends to make quarterly distributions to common shareholders based on taxable earnings, with a dividend of $0.45 declared for May 1, 2024[257] - The Board declared a third quarter regular dividend of $0.45 per share, payable on or around October 28, 2024[322] - The company intends to distribute between 90% and 100% of its annual taxable income to shareholders, although it cannot assure that distributions will be made at a specific level[274] IPO and Capital Raising - The company closed its initial public offering (IPO) on January 29, 2024, with its common stock trading on the NYSE under the symbol "NCDL" starting January 25, 2024[213] - The company closed its IPO on January 29, 2024, issuing 5,500,000 shares at a price of $18.05 per share, raising total cash proceeds of $99.3 million[254] - Total shares issued from inception through June 30, 2024, include 7,888,094 shares for $142.4 million on January 5, 2024, and 5,497,609 shares for $100 million on November 3, 2023[256] Liquidity and Cash Management - Cash and cash equivalents increased by $3.6 million for the six months ended June 30, 2024, with $266.9 million used in operating activities[253] - The company regularly evaluates its liquidity position due to uncertain economic outlook and market volatility[250] - The primary uses of cash include investment purchases, operational costs, debt service, and shareholder distributions[250] Valuation and Interest Rate Sensitivity - The company has engaged independent third-party valuation firms to assist in determining the fair value of its illiquid debt and equity securities[324] - The company's net investment income is sensitive to fluctuations in interest rates, particularly due to the difference between investment and borrowing rates[325] - A 300 basis point increase in interest rates could result in a net income increase of $12,705,000, while a 300 basis point decrease could lead to a net income decrease of $12,705,000[330] Related-Party Transactions and Governance - The Company has entered into several related-party transactions, including Advisory and Sub-Advisory Agreements[305] - The Company is permitted to co-invest with affiliates under certain conditions as per the SEC's exemptive order[306] - The annual retainer for Independent Directors will increase from $100,000 to $120,000 effective January 1, 2025[323] - The annual retainer for the Chair of the Audit Committee will increase from $10,000 to $12,000 effective January 1, 2025[323] - The Lead Independent Director will receive an annual retainer of $12,000 effective January 1, 2025[323]

Financial Data and Key Metrics Changes - The net asset value per share increased to $18.21 from $18.13 in the previous quarter, driven by net investment income and a modest increase in valuations despite unrealized losses on one portfolio company [11][12] - The company reported net income of $0.57 per share for the quarter, with net realized and unrealized gains of $0.01 [10][11] - The debt to equity ratio at the end of the quarter was 0.82, slightly below the target range of 1.0 to 1.25 [117] Business Line Data and Key Metrics Changes - New originations totaled $207 million across 34 investments, a significant increase from $91 million in the first quarter of 2023 [12][91] - The portfolio remained heavily weighted towards senior loans, representing 89% of the portfolio, with only 1.8% in equity co-investments and the remainder in junior debt [92][119] - The weighted average interest rate on new origination decreased by approximately 95 basis points, with spreads tightening in both the upper middle market and traditional middle market [93][94] Market Data and Key Metrics Changes - The broadly syndicated loan market saw a resurgence, leading to increased competition and tighter spreads in the upper middle market [7][8] - The company noted a mixed quality in deal flow, with increased refinancing activity and a focus on maintaining selectivity and credit discipline [8][9][10] Company Strategy and Development Direction - The company aims to maintain a high level of discipline and selectivity in evaluating investment opportunities, focusing on the core middle market [9][30] - The strategy includes a commitment to a supplemental dividend program to deliver higher returns to shareholders [35][90] - The company is positioned to optimize its liability structure by accessing the unsecured debt market as conditions stabilize [94] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to source attractive investments despite a competitive environment, emphasizing the importance of relationships with private equity sponsors [6][30] - The outlook for deal activity is expected to improve as certainty regarding interest rates stabilizes [44][126] - Management acknowledged the challenges in the broader market but emphasized the company's insulated position in the core middle market [88][89] Other Important Information - The company has a diversified portfolio with 195 companies, and the top ten positions account for only 12.6% of the total portfolio [84][118] - One junior capital investment was placed on non-accrual status, representing only 0.13% of the portfolio's fair value [120] - The company has implemented a share repurchase program with approximately $2.1 million utilized so far [121] Q&A Session Summary Question: Context on deployment into the secondary market and future rotations - Management indicated that the deployment into the secondary market represented about 40% of origination during the quarter, with plans to rotate into core middle market investments over time [17][18] Question: Expectations for deal activity in upcoming quarters - Management noted that while Q1 was not as active as Q4, year-over-year comparisons showed significant improvement, and they expect continued growth in deal activity as interest rate certainty improves [43][44] Question: Insights on credit quality and non-accruals - Management confirmed that only one company was added to the non-accrual list, emphasizing the overall good credit quality of the portfolio and the proactive management approach [61][103] Question: Themes observed in industry discussions - Management highlighted the importance of scale and differentiated sourcing as key themes, noting that only a few firms can effectively compete in the current environment [49][130]

Nuveen Churchill Direct Lending Corp. Announces First Quarter 2024 Results Reports Net Investment Income of $0.56 per Share Declares Second Quarter Regular Distribution of $0.45 per Share NEW YORK, May 9, 2024 - Nuveen Churchill Direct Lending Corp. (NYSE: NCDL) ("NCDL" or the "Company"), a business development company externally managed by its investment adviser, Churchill DLC Advisor LLC (the "Adviser"), and by its sub- adviser, Churchill Asset Management LLC ("Churchill"), today reported financial result ...