Nuveen Churchill Direct Lending Corp.

Welcome to Nuveen Churchill Direct Lending Corp's fourth quarter and full year 2024 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the management team's prepared remarks. As a reminder, this conference call is being recorded for replay purposes. I'd like to turn the call over to Robert Pawn, Head of Investor Relations for NCDL. Robert, please go ahead.

Good morning and welcome to Naveen Churchill Direct Lending Corp's fourth quarter and full year 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 risks, 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-K, 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. Good morning, everyone, and thank you all for joining us today. I'd like to start by discussing our results for the fourth quarter and full year, and then I'll provide some thoughts on the current market and economic environment and our forward outlook for 2025. After that, I'll hand the call over to Shai for a more detailed discussion of our financial performance. Before I go through our results, I'd like to briefly reflect on the last 12 months. This past year has been a very successful one for NCDL. First, we completed our initial public offering in January of 2024 and listed on the New York Stock Exchange. Second, NCDL generated an ROE of 12.4% on net investment income for the full year. Third, NCDL paid total distributions of $2.10 per share for the year, resulting in an attractive 11.6% yield based on our year-end 2024 net asset value. Fourth, our investment team deployed over $950 million of new investments within NCDL, an increase of over 40% year over year. Additionally, We took steps to continue to optimize our balance sheet and capital structure by issuing $300 million of unsecured notes in January of this year. And finally, our investment portfolio remained resilient as we ended the year with only one portfolio company on non-accrual status representing 0.1% of the total portfolio at fair value. Overall, we are pleased with the results for the fourth quarter. capping off a strong year of financial and operating performance for the company. During the fourth quarter, we generated net investment income of 56 cents per share, which fully covered our regular distribution and previously declared special dividend, totaling 55 cents per share. For the full year, we reported net investment income of $2.26 per share. These reflect the continued strong performance of our investment portfolio, primarily driven by the strength of our senior loan investments, as well as the shareholder-friendly actions we implemented following our IPO, including the maintenance of our pre-IPO management fee rate and full waiver of incentive fees for five quarters. Similar to recent quarters, investment activity during the fourth quarter was primarily focused on senior secured first lien loans from our traditional middle market pipeline. New originations totaled $163 million for the quarter. Based on our current leverage profile, which is near the midpoint of our target range, we remain focused on investing in our traditional middle market pipeline, which benefits from wider spreads and generally more attractive terms while continuing to deploy capital and utilize leverage. The strength of our earnings during the quarter drove an increase in our net asset value to $18.18 per share at December 31st, 2024, up from $18.15 per share at the end of the third quarter. Looking ahead to the start of 2025, we remain confident in the company's positioning as a leader in the core middle market direct lending space, given our longstanding track record, deep network of sponsor relationships, and extensive LP commitments across the broader platform, which enable us to continue to see a wide range of attractive investment opportunities while remaining highly selective. From an overall market perspective, credit quality remains strong as we continue to see solid, resilient performance from our portfolio companies. While we believe interest rates will remain at elevated levels throughout 2025, The much anticipated rate cuts of 75 basis points in the second half of last year did provide some relief for borrowers. While we also continue to observe an increase in the competitive dynamics in the private credit market, which drove spread compression in 2024, we have seen spreads left off in the fourth quarter. Against this backdrop, 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. This past year, we witnessed the resurgence of the BSL market. Despite this resurgence, the Churchill platform experienced a record year of origination volume, which reflects the unique and attractive opportunities that we see in the traditional middle market where Churchill is focused. While BSL volume reached a record 1.6 trillion in 2024, the market was driven largely by refinancings within the large corporate and upper middle markets, while direct lending still comprised approximately 90% of middle market new LBO volume. In our view, given the size and scope of the middle market, there is significant opportunity for both the BSL and direct lending markets to coexist, given their focus on different issuer profiles. As far as the economic environment, our belief remains that a healthy and resilient US economy will continue in the near term. One year ago, there was a lot less certainty in the overall macroeconomic environment, as daily headlines were filled with cautionary macro and market signals. As the market gained more clarity on inflation and interest rates, the US economy ended 2024 on strong footing after a year of surprisingly robust growth. and many of the concerns from a year ago have now subsided. While our portfolio remains healthy and continues to perform well, we are monitoring and proactively managing any potential impact of policy changes from the new administration. Based on our focus on non-cyclical and services-oriented businesses, as well as the diversification of our portfolio, we continue, we currently do not expect a material impact from new policies. With that said, we remain focused on actively managing our portfolio and being mindful of any potential changes that could have an impact on future company performance. Now turning to our investment activity. Despite lower M&A industry activity in 2024, scaled and relationship-driven managers remain quite busy throughout the past year, with help from robust portfolio activity such as refinancings and add-on acquisitions. Across the Churchill platform, the firm had a record year of investment activity, investing over $13 billion across approximately 400 transactions. This robust activity from the Churchill platform also benefited NCDL, as our investment team originated 163 million of new investment commitments during the fourth quarter. In line with our current portfolio allocation, our new commitments were focused on senior lending, which represented 98% of NCDL's origination activity. First lien debt remained steady as a percentage of the NCDL portfolio, representing over 90% of the 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. One of the benefits of the Churchill platform is the size and scale of our incumbent portfolio, which we believe drives differentiated access to high-quality investment opportunities for our existing portfolio companies. We also believe that continuing to invest in these companies that we know well leads to better long-term credit performance and reduces underwriting risk. In 2024, over 70% of our new commitments were to existing borrowers or long-term Churchill relationships. Looking at our portfolio and credit quality, company performance across our overall portfolio continued to remain strong and healthy, reflecting the quality of the deal flow we have experienced over the last several years. Our weighted average internal risk rating remains at 4.1 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 5.9% of fair value. Additionally, we are pleased with the credit fundamentals within the NCDL portfolio, with portfolio company total net leverage of 4.9 times and interest coverage of 2.2 times on traditional middle market first lien loans. 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 given the recent rate cuts in the second half of 2024. During the fourth quarter, we did not add any new non-accruals, and we had two companies removed from non-accrual status following the successful restructuring of their outstanding debt. In one case, the portfolio company received incremental support from its sponsor, and NCDL received a partial pay down of our pre-restructuring debt at par. Our workout team was instrumental in driving these successful restructurings, and we look forward to continuing to actively manage both situations in hopes of maximizing value for NCDL shareholders. As a result of these two completed restructurings, our total non-accrual percentage declined to just over 0.1% of fair value and 0.4% of cost as of year-end. With a highly diversified portfolio of over 200 companies and only one name on non-accrual status, we believe that this metric compares favorably versus BDC industry average. 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 selectivity, facilitated by the significant proprietary deal flow our sourcing engine is able to generate from the breadth and depth of our PE relationships. As of December 31st, We had 210 companies in our portfolio, and our top 10 investments represented only 13.2% of the total portfolio, showing further diversification than the 14.1% we reported for this metric as of September 30th. This diversification is critical as we seek to maintain exceptional credit quality and originate additional attractive opportunities. As we look ahead to the start of 2025, we continue to see significant growth opportunities within the private credit market, and we are optimistic about the prospects of increased M&A activity, which we have started to see in our investment pipeline despite a slow start to the year in January. 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. Furthermore, we continue to 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 that all the elements are there to generate a strong value proposition for investors. Therefore, we believe that the risk-adjusted returns available to scaled, highly selective managers like Churchill with deep, longstanding private equity relationships in the core middle market are among the most attractive in the private credit market today. In summary, We feel good heading into 2025 with respect to quality deal flow generation, the health of our underlying portfolio companies, and our ability to generate attractive risk-adjusted returns for our investors. And now, I'll turn the call over to Shai to discuss our financial results in more detail.