Nuveen Churchill Direct Lending Corp. Q3 FY2025 earnings call

Key Points:

• Ken Kencel discussed Q3 results, noting net investment income of $0.43 per share, down from $0.46 per share in Q2.
• Gross originations were $29 million in Q3 vs. $48 million in Q2, intentional to maintain leverage at the upper end of the target range.
• Market conditions: M&A activity rebounded, the Federal Reserve began an interest rate cut cycle, and NCDL benefits from a floating rate portfolio and debt structure.
• Churchill platform saw strong asset growth and new originations; the portfolio remains healthy with strong credit fundamentals.
• Originations in Q3 were weighted towards senior loans, with $22 million out of $29 million in gross originations in senior loans.
• Portfolio diversification remains key, with the top 10 companies representing less than 14% of the fair value.
• Nonaccruals were 0.4% of fair value and 0.9% of cost basis, with two new nonaccruals in Q3.

Net investment income for the third quarter was $0.43 per share, down from $0.46 per share in the second quarter. Gross originations totaled approximately $29 million in Q3 compared to $48 million in Q2. Net asset value was $17.85 per share as of September 30, 2025, down from $17.92 per share as of June 30, 2025. The investment portfolio had a fair value of $2 billion as of September 30, 2025. The portfolio consists of 213 companies, with the top 10 portfolio companies representing less than 14% of the total fair value. Senior loans make up approximately 90% of the fair value of the portfolio.

Forward-Looking Statements:

• Declared a $0.45 per share quarterly dividend for Q4, consistent with prior quarters.
• Expect to continue redeploying capital from repayments into traditional middle market transactions.
• Optimistic about the private credit market and NCDL's position, with shares trading at a discount to net asset value and offering a ~12% annualized yield.

Risks:

• Market volatility in private credit funds, particularly BDC stock prices, though NCDL has no exposure to Tricolor and First Brands.
• Interest rate sensitivity due to a predominantly floating rate portfolio, but benefits from a floating rate debt capital structure.
• Potential for broader-based challenges in the portfolio if market conditions change, though no evidence of such challenges currently.

Q: On nonaccruals in the portfolio, when were the investments made and what changed?

A: Shai Vichness said the two nonaccrual investments were made in 2021, related to softness in top line and industry trends, with senior loans typically having higher recoveries than junior capital.

Q: On stock trading at 80% of NAV and leverage at upper end, plans for improvement?

A: Ken Kencel mentioned focus on originating high-quality assets, comfortable with earnings within range, and shares undervalued with attractive yield.

Q: On portfolio outlook and repayments, expected trends?

A: Shai Vichness said repayments at 3% in Q3, expected to continue close to long-range assumption of 5%, with focus on redeploying proceeds into attractive investments.

Q: On competition in core middle market?

A: Ken Kencel said not seeing private credit firms moving down market or new entrants in larger core middle market transactions, insulated due to relationships.

Q: On portfolio company performance, revenue and EBITDA growth?

A: Ken Kencel said portfolio companies in noncyclical industries have solid single-digit growth in revenues and cash flow, focused on market leaders with growth plans.

Q: On origination pipeline and quality?

A: Ken Kencel said strong deal pipeline with high-quality deals, spreads stabilized in 450-500 range, and focus on GP-led transactions with supportive private equity firms.