Nuveen Churchill Direct Lending Corp. Announces Fourth Quarter and Full Year 2023 Results

Rhea-AI Summary

Nuveen Churchill Direct Lending Corp. (NYSE: NCDL) reported strong financial results for the full year and three months ended December 31, 2023. Net investment income per share increased to $0.66, total net realized and unrealized gain per share improved to $0.07, and net income per share rose to $0.73. The company declared a total fourth quarter distribution of $0.55 per share, representing a 12.0% total annualized yield based on the fourth quarter net asset value per share. NCDL's portfolio investments grew to $1.6 billion across 179 portfolio companies and 25 industries. The weighted average internal risk rating of the portfolio remained stable at 4.1. Investment income increased to $161.8 million, while total expenses rose to $77.7 million. The company had $67.4 million in cash and cash equivalents and $951.9 million in total debt outstanding as of December 31, 2023.

Positive

• Strong financial performance with increased net investment income per share and total net realized and unrealized gain per share.
• Declared a total fourth quarter distribution of $0.55 per share, representing a 12.0% total annualized yield based on the fourth quarter net asset value per share.
• Portfolio investments grew to $1.6 billion across 179 portfolio companies and 25 industries.
• Stable weighted average internal risk rating of the portfolio at 4.1.
• Increased investment income to $161.8 million, driven by higher weighted average interest rates and increased investment activity.
• Total expenses rose to $77.7 million due to higher interest and debt financing expenses and management fees.
• Maintained liquidity with $67.4 million in cash and cash equivalents and $951.9 million in total debt outstanding.
• Conference call scheduled to discuss fourth quarter and full year 2023 financial results.

Negative

• Total expenses increased to $77.7 million, primarily due to higher interest and debt financing expenses and management fees.
• Net debt to equity ratio increased slightly to 1.26x as of December 31, 2023.
• The shifting environment in base interest rates may continue to affect investment income in the future.

Insights

Financial Analyst

The reported financial results by Nuveen Churchill Direct Lending Corp. for the year ended December 31, 2023, indicate a positive trajectory in net investment income and net asset value, which are critical metrics for investors. The increase in net investment income per share from $0.62 to $0.66 and the growth in net asset value per share from $17.96 to $18.13 reflect a solid financial performance. Additionally, the total net realized and unrealized gain per share shows a turnaround from a loss in the previous quarter to a gain, which suggests improved portfolio valuation and potential for capital appreciation.

The declaration of a consistent distribution, along with special distributions, signals confidence in the company's ability to generate sufficient income to support payouts. This could be attractive to income-focused investors. The year-over-year increase in portfolio investments and the expansion into more industries and companies demonstrate diversification and growth strategy execution. However, investors should be mindful of the increased expenses, particularly interest and debt financing expenses, which could impact future net investment income margins.

From a liquidity perspective, the availability of capital for additional borrowings and the current net debt to equity ratio provide insight into the company's leverage and risk profile. A slight decrease in the net debt to equity ratio year-over-year indicates a conservative approach to leverage, which could be reassuring for risk-averse investors.

Market Research Analyst

Considering the broader market context, the performance of Nuveen Churchill Direct Lending Corp. must be evaluated against the backdrop of increasing interest rates and the potential for economic slowdown. The company's ability to increase its weighted average yield on debt investments in a rising rate environment is notable and could be indicative of strong credit underwriting and portfolio management capabilities.

The lack of loans on non-accrual status as of December 31, 2023, is a positive sign of portfolio health and may be favorably viewed in comparison to industry peers, where non-performing assets can be a concern. The record net investment income achieved in 2023 and the most active investment quarter in the company's history suggest a robust deal flow and effective capital deployment, which are key performance indicators in the direct lending space.

Investors should consider the potential impacts of the company's differentiated sourcing model and significant liquidity position on its ability to capitalize on investment opportunities and manage risks in a dynamic market environment.

Economist

The reported financial results of Nuveen Churchill Direct Lending Corp. and its economic implications warrant a closer look at the macroeconomic factors influencing its performance. The company's increased investment income can be partially attributed to the rising interest rate environment, as indicated by the increased weighted average yield on debt investments. However, this also raises the cost of borrowing, as seen in the increased interest and debt financing expenses.

Investors should consider the potential for continued rate hikes by central banks as a response to inflationary pressures, which could further affect the company's cost of capital and investment income. The company's strategic positioning and experienced investment team may be key in navigating these challenges and exploiting market dislocations.

The shift in the SOFR, which is a benchmark for setting interest rates on loans and financial instruments, is particularly relevant. Changes in base interest rates will directly impact the company's returns on floating-rate loans, which are a significant part of its portfolio. The company's performance should be monitored in relation to future economic and monetary policy developments that could influence its investment income and cost of debt.

NEW YORK--(BUSINESS WIRE)-- Nuveen Churchill Direct Lending Corp. (NYSE: NCDL) (“NCDL” or “the Company”), a business development company externally managed by its investment adviser, Churchill DLC Advisor LLC, and by its sub-adviser, Churchill Asset Management LLC ("Churchill"), today reported financial results for the full year and three months ended December 31, 2023.

Financial Highlights for the Quarter Ended December 31, 2023

(all metrics compared to third quarter 2023, unless otherwise noted)

• Net investment income per share of $0.66, compared to $0.62
• Total net realized and unrealized gain per share of $0.07, compared to $(0.04)
• Net income per share of $0.73, compared to $0.58
• Net asset value per share of $18.13, compared to $17.96
• Declared a total fourth quarter distribution of $0.55 per share, which represents a 12.0% total annualized yield based on the fourth quarter net asset value ("NAV") per share

"We are proud of NCDL’s successful IPO, which expands access to our institutional-caliber, leading middle market private credit platform to retail investors,” said Ken Kencel, President and Chief Executive Officer of Churchill. “With our experienced investment team, scaled investment platform, differentiated sourcing model and significant liquidity position, we believe NCDL is well positioned to take advantage of an attractive investment environment."

“We achieved record net investment income in 2023, an outstanding year characterized by continued earnings momentum,” said Shai Vichness, Chief Financial Officer. “In particular, Q4 2023 was the most active investment quarter in NCDL’s history. We ended the year with ~$425 million of available capital and reasonable leverage levels that we believe will allow us to operate opportunistically in the current market environment. This positions us to selectively invest to drive yield growth and strong dividend coverage.”

Distribution Declaration

The Company’s Board of Directors has declared a first quarter 2024 distribution of $0.45 per share. The first quarter 2024 distribution is payable on April 29, 2024, to shareholders of record as of March 30, 2024. On January 10, 2024, the Board declared four special distributions of $0.10 per share, payable over the next year, the first of which is payable to shareholders of record as of March 30, 2024. Please refer to the Company's Form 10-K for additional details related to these distributions.

PORTFOLIO AND INVESTMENT ACTIVITY

As of December 31, 2023, the fair value of the Company's portfolio investments, was $1.6 billion, across 179 portfolio companies and 25 industries. This compares to $1.2 billion as of December 31, 2022 across 145 portfolio companies and 23 industries.

For the year ended December 31, 2023, we funded $589.0 million of portfolio investments and received $146.4 million of proceeds from principal repayments and sales, compared to $502.3 million and $49.3 million for the year ended December 31, 2022, respectively.

As of December 31, 2023, the weighted average internal risk rating of the portfolio at fair value was 4.1, which is unchanged from the prior year. There were no loans on non-accrual status as of December 31, 2023, compared to 1.20% at amortized cost (or 0.74% at fair value) as of December 31, 2022.

RESULTS OF OPERATIONS

Investment Income

Investment income, attributable to interest and fees on our debt investments, increased to $161.8 million for the year ended December 31, 2023, from $82.5 million for the prior year, primarily due to an increase in interest income from higher weighted average interest rates and increased investment activity driven by an increase in our deployed capital. As of December 31, 2023, the weighted average yield (based upon fair value) of our debt investments increased to 11.9%, compared to 10.9% as of December 31, 2022, primarily due to increases in base interest rates. The shifting environment in base interest rates, such as the Secured Overnight Financing Rate ("SOFR") and any applicable alternate rates, may continue to affect our investment income in the future.

Expenses

Total expenses increased to $77.7 million for the year ended December 31, 2023, compared to $37.0 million for the year ended December 31, 2022, primarily due to an increase in interest and debt financing expenses and management fees. Interest and debt financing expenses increased due to higher average daily borrowings and higher average interest rates. The increase in management fees were driven by our deployment of capital and our increased invested balance.

Liquidity and Capital Resources

As of December 31, 2023, the Company had $67.4 million in cash and cash equivalents and $951.9 million in total aggregate principal amount of debt outstanding. Subject to borrowing base and other conditions, the Company had approximately $215.0 million available for additional borrowings under its existing credit facilities, as of December 31, 2023. Year-end net debt to equity was 1.26x and 1.33x as of December 31, 2023 and December 31, 2022, respectively.

CONFERENCE CALL AND WEBCAST INFORMATION

Nuveen Churchill Direct Lending Corp. will hold a conference call to discuss its fourth quarter and full year 2023 financial results today at 12:00 PM Eastern Time. All interested parties may participate in the conference call by dialing (866)-605-1826 approximately 10-15 minutes prior to the call; international callers should dial (215)-268-9877. Participants should reference Nuveen Churchill Direct Lending Corp. when prompted.

A live webcast of the conference call will also be available on the Events section of the Company's website at https://www.ncdl.com/news/events. A replay will be available under the same link following the conclusion of the conference call.

About Nuveen Churchill Direct Lending Corp.

Nuveen Churchill Direct Lending Corp. (NCDL) is a specialty finance company focused primarily on investing in senior secured loans to private equity-owned U.S. middle market companies. NCDL has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended. NCDL is externally managed by its investment adviser, Churchill DLC Advisor LLC, and by its sub-adviser, Churchill Asset Management LLC. Both the investment adviser and sub-adviser are affiliates and subsidiaries of Nuveen, LLC (“Nuveen”) the investment management division of Teachers Insurance and Annuity Association of America (“TIAA”) and one of the largest asset managers globally. Churchill Asset Management LLC is a leading capital provider for private equity-backed middle market companies and operates as the exclusive U.S. middle market direct lending and private capital business of Nuveen and TIAA. Churchill Asset Management is a registered investment advisor and majority-owned, indirect subsidiary of Teachers Insurance and Annuity Association of America.

Forward-Looking Statements

Certain information contained herein may constitute “forward-looking statements” that involve substantial risks and uncertainties. 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 us, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” “outlook,” “potential,” “predicts” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond NCDL’s control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements including, without limitation, the risks, uncertainties and other factors identified in NCDL’s filings with the SEC. Investors should not place undue reliance on these forward-looking statements, which apply only as of the date on which NCDL makes them. NCDL does not undertake any obligation to update or revise any forward-looking statements or any other information contained herein, except as required by applicable law.

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (dollars in thousands, except share and per share data)
	December 31, 2023				December 31, 2022
Assets
Investments
Non-controlled/non-affiliated company investments, at fair value (amortized cost of $1,666,169 and $1,225,573, respectively)	$	1,641,686			$	1,200,376
Cash and cash equivalents		67,395				39,270
Restricted cash		50				50
Due from adviser expense support (See Note 5)		—				1,147
Interest receivable		17,674				11,898
Receivable for investments sold		3,919				719
Contribution receivable		127				458
Prepaid expenses		13				41
Total assets	$	1,730,864			$	1,253,959
Liabilities
Secured borrowings (net of $7,941 and $5,675 deferred financing costs, respectively) (See Note 6)	$	943,936			$	699,772
Payable for investments purchased		—				56
Interest payable		9,837				8,812
Due to adviser expense support (See Note 5)		632				1,147
Management fees payable		3,006				2,211
Distributions payable		22,683				14,325
Directors’ fees payable		96				96
Accounts payable and accrued expenses		2,789				2,583
Total liabilities	$	982,979			$	729,002
Commitments and contingencies (See Note 7)
Net Assets: (See Note 8)
Common shares, $0.01 par value, 500,000,000 and 500,000,000 shares authorized, 41,242,105 and 28,650,548 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively	$	412			$	287
Paid-in-capital in excess of par value		776,719				548,600
Total distributable earnings (loss)		(29,246	)			(23,930	)
Total net assets	$	747,885			$	524,957
Total liabilities and net assets	$	1,730,864			$	1,253,959
Net asset value per share (See Note 9)	$	18.13			$	18.32

CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except share and per share data)
		For the Years Ended December 31,
			2023				2022				2021
Investment income:
Non-controlled/non-affiliated company investments:
Interest income		$	156,868			$	79,868			$	34,902
Payment-in-kind interest income			3,644				789				113
Dividend income			101				225				213
Other income			1,143				1,571				1,062
Total investment income			161,756				82,453				36,290
Expenses:
Interest and debt financing expenses			61,206				25,695				9,827
Management fees (See Note 5)			10,509				7,464				4,049
Professional fees			3,455				1,811				1,316
Directors' fees			383				383				383
Administration fees (See Note 5)			1,598				1,111				660
Other general and administrative expenses			751				684				324
Total expenses before expense support			77,902				37,148				16,559
Expense support (See Note 5)			(158	)			(179	)			(522	)
Net expenses after expense support			77,744				36,969				16,037
Net investment income before excise taxes			84,012				45,484				20,253
Excise taxes			6				—				—
Net investment income			84,006				45,484				20,253
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) on non-controlled/non-affiliated company investments			(7,952	)			(262	)			819
Net change in unrealized appreciation (depreciation):
Non-controlled/non-affiliated company investments			714				(27,912	)			6,194
Income tax (provision) benefit			(830	)			(24	)			—
Total net change in unrealized gain (loss)			(116	)			(27,936	)			6,194
Total net realized and unrealized gain (loss) on investments			(8,068	)			(28,198	)			7,013
Net increase (decrease) in net assets resulting from operations		$	75,938			$	17,286			$	27,266
Per share data:
Net investment income per share - basic and diluted		$	2.52			$	1.95			$	1.58
Net increase (decrease) in net assets resulting from operations per share - basic and diluted		$	2.27			$	0.74			$	2.12
Weighted average common shares outstanding - basic and diluted			33,385,880				23,279,341				12,849,333

PORTFOLIO AND INVESTMENT ACTIVITY (information presented herein is at amortized cost; dollar amounts in thousands)
	For the Years Ended December 31,
		2023				2022
Investments:
Total investments, beginning of period	$	1,225,573			$	770,298
Purchase of investments		589,000				502,250
Proceeds from principal repayments and sales of investments		(146,428	)			(49,264	)
Payment-in-kind interest		3,268				789
Amortization of premium/accretion of discount, net		2,708				1,762
Net realized gain (loss) on investments		(7,952	)			(262	)
Total investments, end of period	$	1,666,169			$	1,225,573
Portfolio companies at beginning of period		145				96
Number of new portfolio companies funded		45				52
Number of portfolio companies sold or repaid		(11	)			(3	)
Portfolio companies at end of period		179				145
Count of investments		385				288
Count of industries		25				23

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240226700070/en/

Investors:

Investor Relations

NCDL-IR@churchillam.com



Media:

Prosek Partners

Madison Hanlon

Pro-churchill@prosek.com

PS-3410504PR-O0224W

Source: Nuveen Churchill Direct Lending Corp.

FAQ

What was Nuveen Churchill Direct Lending Corp.'s net investment income per share for the quarter ended December 31, 2023?

Net investment income per share was $0.66.

How much was the total fourth quarter distribution per share declared by the company?

The company declared a total fourth quarter distribution of $0.55 per share.

How many portfolio companies did Nuveen Churchill Direct Lending Corp. have investments in as of December 31, 2023?

The company had investments in 179 portfolio companies.

What was the weighted average internal risk rating of the portfolio as of December 31, 2023?

The weighted average internal risk rating of the portfolio was 4.1.

How much did investment income increase to for the year ended December 31, 2023?

Investment income increased to $161.8 million.

What was the company's total debt outstanding as of December 31, 2023?

The company had $951.9 million in total debt outstanding.

When is the first quarter 2024 distribution payable to shareholders?

The first quarter 2024 distribution is payable on April 29, 2024.

What was the company's year-end net debt to equity ratio as of December 31, 2023?

The year-end net debt to equity ratio was 1.26x.

Where can interested parties access the live webcast of the conference call to discuss financial results?

A live webcast of the conference call will be available on the Events section of the Company's website at https://www.ncdl.com/news/events.