Nuveen Churchill Direct Lending Corp.

Welcome to Naveen Churchill Direct Lending Corp's third quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I'd like to turn the call over to Robert Porn, Head of Investor Relations. Please proceed.

Good morning and welcome to Naveen Churchill Direct Lending Corp's third quarter 2024 earnings call. Today I'm joined by NCDL's Chairman, President, and CEO, Ken Kinsell, and Chief Financial Officer, Shai Vickness. Following our prepared remarks, we will be available to take your questions. Today's call may include forward-looking statements. Such statements involve known and unknown risk uncertainties and other factors, and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates, and projections about the company, our current and prospective portfolio investments, our industry, our beliefs and opinions, and our assumptions. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict. Actual results may differ materially from those expressed or forecasted in the forward-looking statements. We ask that you refer to the company's most recent filings with the SEC for important risk factors. Any forward-looking statements made today do not guarantee future performance, and undue reliance should not be placed on them. The company assumes no obligation to update any forward-looking statements at any time. Our earnings release, 10-Q, and supplemental earnings presentation are available on the investor relations section of our website at ncdl.com. Now I would like to turn the call over to Ken.

Thank you, Robert, and thank you, everyone, for joining us on the call today. I'd like to start by discussing our results for the third quarter, and then I'll provide some thoughts on the current market and economic environment and our outlook for the coming months. After that, I'll hand the call over to Shai for a more detailed discussion of our financial performance. Overall, we are very pleased with the returns we generated this quarter. for flanking the strength of our platform, the earnings power of MCDL, and the continued growth of the private credit markets. This morning, we reported strong third quarter results. We delivered net investment income of 58 cents per share, fully covering our regular quarterly distribution of 45 cents per share and our 10 cents per share special distribution. Our investment portfolio continued to perform well, primarily driven by the strength of our senior loan investments, and we had no new non-accruals during the quarter. Investment activity during the third quarter, with approximately $226 million of new originations, was primarily focused on senior secured first lien loans from our traditional middle market pipelines. As we discussed last quarter, now that NCDL's portfolio is essentially fully ramped, we are focused on rotating out of higher priced, lower spread, upper middle market positions and into our traditional middle market pipeline, which benefits from wider spreads and generally more attractive terms. Our strong results in the quarter led to an increase in our net asset value to $18.15 per share at September 30, from the $18.03 per share that we reported as of June 30. As we look towards the end of the year and into 2025, we remain optimistic about NCDL's positioning as a leader in the core middle market, given our longstanding performance track record, deep network of sponsor relationships, and extensive LP commitments across the broader Churchill platform, which enable us to continue to see a wide range of attractive investment opportunities. As we assess the overall market, credit quality and portfolio company performance remain strong, despite the persistence of elevated interest rates. As inflationary pressures on borrowers ease moderately, we saw a long-anticipated 50 basis coin Fed rate cut in September, The other theme we've observed is an increase in the competitive dynamics in the private credit market, which drove additional spread compression in Q3, albeit at a slower pace than in the second quarter. In the face of increased competition, we believe that our focus on the core middle market enables us to remain largely insulated from the pricing pressure, increased volatility, and generally weaker terms that we see in the upper middle and BSL markets. We believe that traditional middle market companies with EBITDA of between 15 and 75 million tend to be lower levered, better structured, less cyclical, and more focused on growth industries such as business and healthcare services. When backed by the operating expertise and capital support of leading private equity sponsors, we believe all of the elements are there to generate a strong value proposition for investors. As a result, we believe that the risk-adjusted returns available to scaled, highly selective managers like Churchill with deep, long-standing private equity relationships in the core middle market are among the most attractive in the private credit market today. With respect to the macroeconomic environment, we believe a healthy and resilient U.S. economy will continue in the near term. We continue to see steady revenue and EBITDA growth from our portfolio companies with inflationary pressures moderating. We also believe that the beginning of a rate reduction cycle will spur increased M&A activity, which we have already begun to see in our investment pipeline. As a result, we feel quite positive heading into 2025 with respect to both deal flow generation and health of our underlying borrowers. Turning to deployment, deal activity and originations across the Churchill platform continued at a strong pace this quarter, which benefited NCDL. Our investment team originated approximately $226 million of new investment commitments in NCDL during the quarter. Our new commitments were focused on senior lending, which represented 98 percent of NCDL's origination activity. First lien debt remained steady as a percentage of the NCDL portfolio, representing approximately 90 percent of fair value of the overall portfolio. We will continue to prioritize opportunities to deploy capital in core middle market senior loan investments as we pursue portfolio growth and diversification as a public company. We feel this asset class provides strong long-term risk mitigation characteristics, including floating rates, generally lower leverage, and traditional financial covenants in our core middle market transactions. One of the key benefits in differentiating factors of NCDL is the power of incumbency that the Churchill platform provides. We continue to source attractive investment opportunities from our existing portfolio companies, and we believe that continuing to invest in these companies that we know well leads to better long-term credit performance and reduces underwriting risk. In terms of credit quality, company performance across our overall portfolio remains strong and healthy, reflecting the quality of the deal flow we've experienced over the last several years. Our weighted average internal risk rating remains at 4.2 versus an original rating of 4.0 for all of our investments at the time of origination. And our watch list remains at a very manageable level of 5.6% of fair value. Additionally, we are pleased with the credit fundamentals within the NCDL portfolio. With portfolio company total leverage of 4.9 times, interest coverage of 2.1 times on a first lien senior loans, and a weighted average asset yield of just below 11%. These metrics are a direct result of conservative structuring and relatively low attachment points that we target when underwriting new transactions. This conservative approach has served us well in the elevated rate environment. And we would expect these metrics to improve as rates come down further over the remainder of 2024 and into 2025. During the third quarter, we did not add any new non-accruals. And the level of non-accruals remained very low as of quarter end, at roughly one-half a percent of fair value and 1.4 percent of cost. With a highly diversified portfolio, of over 200 companies and only three names on non-accrual status, we believe this metric compares favorably versus BDC industry averages. We remain focused on diversification as a key risk mitigation tool in our investment portfolio. This has been achieved with a continued high level of investment selectivity, facilitated by the significant proprietary deal flow, our sourcing engine, is able to generate from the breadth and depth of our private equity relationships. As of September 30, we had 202 companies in our portfolio, and our top 10 investments represented only 14.1 percent of the total portfolio, down from 14.4 percent as of June 30. This diversification is critical as we seek to maintain exceptional credit quality and originate additional attractive opportunities. Looking ahead, we believe we are well positioned for continued strong performance for the remainder of the year and into 2025, particularly given our standing as one of the largest and most active BDCs focused on the core middle market. As we've spoken about in the past, our outlook is driven by our approach to portfolio construction and management. with three key factors worth reiterating. First, NCDL has a strong focus on a high level of portfolio diversification across a number of key metrics. We have constructed a defensive portfolio that is balanced across multiple measures, whether you're looking at sponsor, position size, or industry. We've achieved this level of diversification across all our different investment vehicles across the platform, and it represents a consistent commitment embedded in Churchill's DNA. Second, we have a rigorous investment process that puts credit quality above all else. As we look for opportunities to underwrite, we focus on high-quality, market-leading businesses that operate in recession-resistant industries with leading market positions and high barriers to entry backed by top-tier private equity sponsors. Our strong deal flow and unique sourcing model enables us to maintain a rigorous investment process and strong credit discipline. We're also carefully attuned to the interest burden facing both our existing portfolio companies as well as new borrowers. This consideration influences our conservative approach to structuring new transactions with lower overall leverage and tighter covenant packages. This discipline is crucial, particularly in an environment where spreads are tighter and terms are more aggressive. That is why we're willing and able to walk away from certain deals that we assess are too risky. And the third factor that is especially important is our highly differentiated origination and sourcing model. We enjoy strong private equity LP relationships. Over nearly two decades, Churchill has worked with approximately 500 middle market private equity firms. In fact, today, Churchill has commitments to over 310 leading U.S. middle market private equity funds and sits on over 245 advisory boards. We have been and continue to be a trusted and established investor in the core middle market with deep long-term relationships, which provides NCDL with a strong information and sourcing advantage. Before handing it over to Shai, I'd like to add that we are extremely proud of our team and our recent results are evidence of their hard work and dedication. We believe NCDL is uniquely positioned for long-term success and remain optimistic about the company's outlook. And we believe NCDL is well-positioned to benefit from increased transaction activity that we expect in 2025. And now, I'll turn the call over to Shai to discuss our financial results in more detail.