Nuveen Churchill Direct Lending (NCDL) 7 Nov 24 2024 Q3 Earnings call transcript

Key Highlights:

- Nuveen Churchill Direct Lending Corp. reported strong third quarter results, with net investment income of $0.58 per share, fully covering its regular quarterly distribution of $0.45 per share and special distribution of $0.10 per share. - The company's investment portfolio performed well, with no new non-accruals during the quarter and investment activity primarily focused on senior secured first lien loans from its traditional middle market pipeline. - Management expressed optimism about the company's positioning as a leader in the core middle market, citing a strong performance track record, deep network of sponsor relationships, and extensive LTE commitments across the broader Churchill platform. - The company reported a net asset value of $18.15 per share at September 30, up from $18.03 at June 30, driven by strong deployment and increased leverage utilization. - Credit quality remains strong, with portfolio company total leverage of 4.9x, interest coverage of 2.1x, and a weighted average asset yield of just below 11%. - The company is focused on optimizing its portfolio by continuing to deploy capital in core middle market senior loan investments, leveraging its strong origination platform and deep relationships with private equity firms. Market and Economic Environment:

Nuveen Churchill Direct Lending Corp. continues to see steady revenue and EBITDA growth from its portfolio companies, with inflationary pressures moderating and the Federal Reserve beginning a rate reduction cycle, which is expected to spur increased M&A activity. The competitive dynamics in the private credit market have increased, driving additional spread compression, but the company believes its focus on the core middle market enables it to remain largely insulated from pricing pressure. Financial Performance:

The company generated net investment income of $0.58 per share in the third quarter, up from $0.57 per share in the second quarter. This was driven by higher interest income, despite a modest tightening in spreads and a decline in base rates. The debt-to-equity ratio remained consistent at 1.11x, within the company's target range of 1x to 1.25x. The net asset value per share increased to $18.15 from $18.03 at June 30, driven by net realized and unrealized gains. Looking Ahead:

Nuveen Churchill Direct Lending Corp. remains optimistic about its positioning in the core middle market, with a strong focus on portfolio diversification, rigorous investment process, and a highly differentiated origination and sourcing model. The company is well positioned for continued strong performance, particularly given its standing as one of the largest and most active BDCs focused on the core middle market. Analysts' Insights:

During the earnings call, analysts asked about the company's origination platform and potential for further expansion. Management responded by highlighting a 30% increase in new deals with existing firms and ongoing efforts to expand relationships and investment activity. Analysts also inquired about amendment activity and the company's junior debt strategy. Management noted that amendment activity has moderated quarter-over-quarter and that the junior debt strategy is heavily grounded in LP relationships, with stable pricing and attractive opportunities. Conclusion:

Nuveen Churchill Direct Lending Corp.'s strong third quarter results and optimistic outlook for the remainder of the year and into 2025 underscore its position as a leader in the core middle market. The company's focus on portfolio diversification, rigorous investment process, and strong relationships with private equity firms will continue to drive its success.