Nuveen Churchill Direct Lending Corp.

Welcome to Nuveen Churchill Direct Lending Corp's first quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. 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 first quarter 2025 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, 10Q, 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. During my prepared remarks, I will discuss our results for the first quarter and then discuss our origination activity, portfolio positioning, and our forward outlook. After that, I'll hand the call over to Shai for a more detailed discussion of our financial performance. Before I go through our financial results for the quarter, I'd like to take a moment to comment on current market conditions and our positioning as a leader in the core middle market direct lending space. We have witnessed significant market volatility in the equity and credit markets over the past several weeks, driven by the announcement and implementation by the current administration of broad-based tariffs, upending global trade, at least in the short term. During periods of economic uncertainty like we're experiencing today, It is important to remain focused on our core values and pillars that have benefited Churchill over the past 20 years. We have deep expertise, substantial experience, strong relationships, significant size and scale, and a differentiated approach to sourcing and originating high-quality deal flow. Our ability to navigate these market conditions and environment stems from our experienced investment operating and management teams. Our leaders at Churchill have been investing and operating in the private credit market through various cycles, including the great financial crisis, COVID, the recent rate hike cycle, and other periods of volatility and challenging conditions. While we expect near-term volatility to continue, driven by uncertainty around tariffs and the impact to the U.S. and global economies, we believe that we are well positioned to continue delivering strong returns for our shareholders. We believe we are entering this uncertain economic time from a position of strength based on a number of key factors. First, our investment portfolio is largely concentrated in non-cyclical and service-oriented businesses. Second, our portfolio is highly diversified Our average position size is one half of 1%. Our largest investment is only 1.5% of the total portfolio. And our top 10 portfolio companies represent only 13% of the portfolio. Third, our conservative approach to underwriting is supported by several key metrics, including a weighted average portfolio company net leverage of under five times, and an interest coverage ratio of 2.4 times at the end of the first quarter. Fourth, our total non-accrual percentage remains extremely low at 0.4% of portfolio fair value at quarter end. And finally, our balance sheet and capital structure remains strong with no near-term debt maturities. But it is still too early to tell where trade policy lands and the ultimate impact on the economy, we will lean in on our experience and conservative investment approach to navigate through these uncertain times. Historically, periods of stress and volatility in markets have led to attractive opportunities in the private credit market, and we are well positioned to take advantage of these opportunities as they present themselves. Since the initial tariff announcements earlier this year, Churchill as a firm has been actively analyzing the potential implications across our portfolio on a borrower by borrower basis. This review has been updated biweekly to reflect the evolving landscape. Following recent revisions to the previously announced tariffs, our team completed an updated assessment using the most current information available and held a comprehensive portfolio review with members of the investment committee, portfolio management and risk teams. Our early findings suggest that the majority of the portfolio remains largely insulated from direct negative impacts related to new tariffs due to several key factors. A primarily domestic revenue base with over 90% of NCDL's senior loan portfolio company revenues derived from the U.S. A significant portion of our portfolio is comprised of domestic service-oriented businesses And many portfolio companies maintain flexible supply chains capable of shifting sourcing to less impacted geographies. And finally, our borrowers have historically demonstrated the ability to preserve margins by passing through changes to input costs to end consumers. This analysis ultimately led us to categorizing each portfolio company as either low, medium, or high risk, based on direct revenue costs and supply impacts from tariffs. In NCDL, high risk exposure is limited to less than 10% of our overall portfolio. While we believe we are well insulated from the direct impact of tariffs, we are cognizant of the elevated level of macroeconomic risk and uncertainty in the current environment and are continuing to monitor our portfolio closely for signs of stress. We remain in close contact with private equity sponsors and borrowers, and our investment team will continue to monitor the portfolio as new information emerges and the impacts both direct and indirect become more evident. Now turning to our results for the first quarter. We generated net investment income of 53 cents per share. which was impacted by one-time interest and debt financing expenses totaling 3 cents per share. Excluding these non-recurring items, net investment income totaled 56 pence per share, in line with our fourth quarter 2024 results. These results reflect the continued strong performance of our investment portfolio, as well as shareholder-friendly actions we implemented following our IPO including the maintenance of our pre-IPO management fee rate and full waiver incentive fees for five quarters, which concluded at the end of the first quarter. New Origination totaled $166 million for the first quarter, compared to $163 million in the fourth quarter of last year. Investment activity in the quarter was primarily focused on senior secured first lien loans, and we remain focused on investing into our core traditional middle market pipeline, which we believe benefits from wider spreads and generally more attractive terms than the upper middle and broadly syndicated markets. Our net investment value was $17.96 per share at March 31, 2025, compared to $18.18 per share as of December 31, 2024. The decline in net asset value quarter per quarter was primarily due to modest valuation declines in some of our watch list names. In terms of the recent market environment, following the tariff announcements in early April, public credit markets have experienced increased volatility and spreads have widened. And the resurgence of the BSO market that we saw last year has taken abrupt pause. On the other hand, the private credit markets continue to operate efficiently. And direct lending deals are still getting done in this environment. In fact, nearly every deal that was in process prior to April has either gotten done or has continued to progress. And our investment team remains very busy. As I outlined earlier, historically, market volatility has led to attractive opportunities in the direct lending space, which has exhibited greater stability than the BSO market over time. Although we haven't yet seen a material widening of spreads in our market, we would expect to see modestly wider spreads and more favorable lending terms should the current market volatility persist. Turning to our investment activity, at a platform level, Churchill continues to be extremely active, as investment activity volume was up 60% year over year in the first quarter. This follows a record year in 2024 for the Churchill platform. investing over $13 billion across approximately 400 transactions for the full year. NCDL also benefited from the activity at the platform level. Our new commitments remain focused on senior lending, which represented 91% of NCDL's origination activity in the first quarter. First lien debt remained steady as a percentage of the NCDL portfolio, representing over 90% of the fair value of the overall portfolio. 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 from 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 the first quarter, approximately 44% of our new commitments in NCDL were to existing borrowers or long-term Churchill relationships. In terms of the portfolio and credit quality, company performance across our overall portfolio remained healthy, which we believe reflects the quality of the deal flow we've experienced over the last several years, as well as our selective approach to investing and the diversification of our portfolio. 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 below 7% of fair value. Additionally, as I mentioned earlier, 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 2.4 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. During the first quarter, one portfolio company was placed on non-accrual status for the cost of $14.5 million and a fair value of $4.8 million. Despite this one addition, our total non-equal percentage is still extremely low at 0.4% of fair value and 1% of cost as of March 31st. With a highly diversified portfolio of over 200 companies and only two names on non-equal status, we believe that this metric compares favorably versus BDC industry averages. We continue to 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 March 31st, we had 210 companies in our portfolio. And as I mentioned earlier, our top 10 portfolio companies represented only 13% of total fair value. This diversification is critical as we seek to maintain exceptional credit quality and originate additional attractive opportunities. From a forward-looking perspective in an uncertain economic environment, we will remain focused on maintaining underwriting discipline, selectively investing in high quality companies and proactively managing our current investment portfolio. Since the inception of the firm nearly 20 years ago, each time we have been faced with market dislocation, Churchill has not only navigated through these challenging conditions, but also opportunistically taken advantage of such environments. We have been and continue to be a trusted, an established investor in the core middle market with deep long-term relationships, which provides NCDL with a strong information and sourcing advantage. And 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 Churchill platform. which have enabled us to continue to see a wide range of attractive investment opportunities while remaining highly selective. And now I'll turn the call over to Shai to discuss our financial results in more detail.