Nuveen Churchill Direct Lending Corp. Announces Second Quarter 2024 Results

Rhea-AI Summary

Nuveen Churchill Direct Lending Corp. (NYSE: NCDL) reported its Q2 2024 results, highlighting net investment income of $0.57 per share and declaring a Q3 regular distribution of $0.45 per share. The company's NAV per share decreased to $18.03 from $18.21 in Q1 2024. NCDL's portfolio fair value grew to $2.0 billion across 198 companies, with a focus on first-lien term loans (90.6%). The company maintained a 12.3% annualized dividend yield based on Q2 NAV. Investment income increased to $55.1 million, while net expenses rose to $24.1 million. The company's debt-to-equity ratio increased to 1.04x, with $290.0 million available for additional borrowings.

Positive

• Net investment income of $0.57 per share
• 12.3% annualized dividend yield
• Portfolio fair value increased to $2.0 billion
• Investment income rose to $55.1 million
• $290.0 million available for additional borrowings

Negative

• NAV per share decreased to $18.03 from $18.21 in Q1 2024
• Net expenses increased to $24.1 million
• Net change in unrealized loss of $(12.1) million
• Debt-to-equity ratio increased to 1.04x from 0.82x in Q1 2024
• Two new portfolio companies added to non-accrual status

Insights

Financial Analyst

NCDL's Q2 2024 results show a mixed performance. The company reported $0.57 net investment income per share, but faced a $0.20 per share loss on investments. The NAV declined from $18.21 to $18.03 per share quarter-over-quarter, indicating some portfolio pressure.

Positively, NCDL maintained its $0.45 regular quarterly distribution and added a $0.10 special distribution, resulting in an attractive 12.3% annualized yield. The portfolio's fair value grew to $2.0 billion, demonstrating continued expansion.

However, the increase in non-accrual loans from 0.4% to 1.4% at amortized cost is concerning and warrants monitoring. The debt-to-equity ratio also rose from 0.82x to 1.04x, indicating increased leverage.

Credit Risk Analyst

NCDL's portfolio quality shows signs of stress. The addition of two new companies to non-accrual status, increasing non-accruals from 0.4% to 1.4% at amortized cost, is a red flag. This, coupled with the $12.1 million unrealized loss primarily from two underperforming companies, suggests potential credit deterioration.

The weighted average Internal Risk Rating remained stable at 4.1, but this doesn't capture the recent non-accrual additions. The portfolio's concentration in first-lien loans (90.6%) provides some risk mitigation. However, the increased leverage (debt-to-equity ratio of 1.04x) could amplify potential losses if credit issues persist.

Investors should closely monitor portfolio quality trends in upcoming quarters, particularly given the challenging economic environment.

Market Research Analyst

NCDL's Q2 results reflect the current dynamics in the private credit market. The company's ability to deploy $305 million in new investments showcases the strong demand for private credit. However, the slight decrease in weighted average yield from 11.7% to 11.4% year-over-year indicates ongoing spread compression in the market.

The company's focus on middle-market lending and its diversified portfolio across 198 companies and 26 industries provide resilience. However, the addition of non-accrual loans suggests that even well-diversified portfolios aren't immune to economic pressures.

NCDL's 12.3% dividend yield is attractive in the current market, but investors should weigh this against the potential for further credit deterioration and NAV pressure if economic conditions worsen.

Reports Net Investment Income of $0.57 per Share

Declares Third Quarter Regular Distribution of $0.45 per Share

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 (the “Adviser”), and by its sub-adviser, Churchill Asset Management LLC (“Churchill”), today reported financial results for the quarter ended June 30, 2024.

Financial Highlights for the Quarter Ended June 30, 2024

• Net investment income per share of $0.57
• Total net realized and unrealized loss on investments per share of $(0.20)
• Net increase in net assets resulting from operations per share of $0.37
• Net asset value ("NAV") per share of $18.03, compared to $18.21 per share as of March 31, 2024
• Paid second quarter regular distribution of $0.45 per share and the first of four special distributions of $0.10 per share on July 29, 2024, which represents a 12.3% total annualized yield based on the second quarter NAV per share
• Declared third quarter regular distribution of $0.45 per share

“I am pleased with the momentum NCDL has maintained, generating net investment income to support an attractive 12.3% annualized dividend yield to shareholders,” said Ken Kencel, President and Chief Executive Officer of NCDL and Churchill. “Our focus on the middle market—coupled with our strong diversification, rigorous investment process, and differentiated sourcing model—positions NCDL to take advantage of the attractive opportunities we see in the private credit market.”

“We have constructed a defensive portfolio, with stable credit quality that is balanced across multiple measures—whether looking at sponsor, position size, or industry,” said Shai Vichness, Chief Financial Officer of NCDL and Churchill. “The fair value of our assets rose to $2.0 billion, and looking ahead we remain confident that we will continue to execute our strategy and provide strong risk-adjusted returns to our shareholders.”

Distribution Declaration

The Company’s Board of Directors (the "Board") has declared a third quarter 2024 regular distribution of $0.45 per share payable on October 28, 2024 to shareholders of record as of September 30, 2024. On January 10, 2024, the Board declared four special distributions of $0.10 per share, to be paid over a one-year period, with the next distribution payable on October 28, 2024 to shareholders of record as of August 12, 2024.

PORTFOLIO AND INVESTMENT ACTIVITY

As of June 30, 2024, the fair value of the Company's portfolio investments was $2.0 billion across 198 portfolio companies and 26 industries. This compares to $1.8 billion as of March 31, 2024 across 195 portfolio companies and 26 industries.

As of June 30, 2024, the Company’s portfolio based on fair value consisted of approximately 90.6% first-lien term loans, 7.8% subordinated debt investments, and 1.6% equity investments. As of March 31, 2024, the Company’s portfolio based on fair value consisted of 89.0% first-lien term loans, 9.3% subordinated debt investments, and 1.8% equity investments.

For the three months ended June 30, 2024, the Company funded $305 million of portfolio investments and received $100 million of proceeds from principal repayments and sales, compared to $204.3 million and $54.9 million for the three months ended March 31, 2024, respectively.

As of June 30, 2024 and March 31, 2024, the weighted average Internal Risk Rating of the portfolio at fair value was 4.1 and 4.1 (4.0 being the initial rating assigned at origination), respectively, and loans on non-accrual status represented 1.4% of total investments at amortized cost (or 0.5% of total investments at fair value) and 0.4% at amortized cost (or 0.1% at fair value), respectively. Two new portfolio companies were added to non-accrual status during the quarter.

RESULTS OF OPERATIONS

Investment Income

Investment income, primarily attributable to interest and fees on our debt investments, increased to $55.1 million for the three months ended June 30, 2024, from $37.1 million for the three months ended June 30, 2023, primarily due to increased investment activity driven by an increase in deployed capital, slightly offset by a decrease in the weighted average yield of debt and income producing investments. As of June 30, 2024, the weighted average yield of debt and income producing investments at fair value decreased to 11.4%, compared to 11.7% as of June 30, 2023, as a result of spread tightening.

Net Expenses

Net expenses increased to $24.1 million for the three months ended June 30, 2024, compared to $18.4 million for the three months ended June 30, 2023, 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, higher average interest rates, the use of the senior secured revolving credit facility in the third quarter of 2023 and the completion of two debt securitizations on December 7, 2023 and March 14, 2024, respectively. The increase in management fees was driven by the Company's increase in total assets. Under the terms of the advisory agreement, the Adviser is waiving the incentive fee on income and the incentive fee on capital gains for the first five quarters beginning with the calendar quarter in which the IPO was consummated (i.e., beginning with the calendar quarter ended March 31, 2024 through the calendar quarter ending March 31, 2025).

Net Realized Gain (Loss) and Net Change in Unrealized Gains (Losses) on Investments

Net realized gains increased to $1.0 million for the three months ended June 30, 2024, compared to $218 thousand for the three months ended June 30, 2023. The increase in the net realized gain was primarily driven by full or partial paydowns of our investments. For the three months ended June 30, 2024, the Company recorded a net change in unrealized loss of $(12.1) million, which resulted from a decrease in fair value primarily attributable to two underperforming portfolio companies. This compares to a net unrealized loss of $(4.2) million for the three months ended June 30, 2023.

Liquidity and Capital Resources

As of June 30, 2024, the Company had $71.0 million in cash and cash equivalents and $1.0 billion in total aggregate principal amount of debt outstanding. Subject to borrowing base and other conditions, the Company had approximately $290.0 million available for additional borrowings under its existing credit facilities, as of June 30, 2024. At June 30, 2024, the Company's debt to equity ratio was 1.04x compared to 0.82x at March 31, 2024.

CONFERENCE CALL AND WEBCAST INFORMATION

Nuveen Churchill Direct Lending Corp. will hold a conference call to discuss its second quarter 2024 financial results today at 11:00 AM 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 +1 (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 ("Churchill"). 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 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 is a registered investment advisor and majority-owned, indirect subsidiary of TIAA.

Forward-Looking Statements

This press release contains historical information and “forward-looking statements” with respect to the business and investments of NCDL, including, but not limited to, statements about NCDL’s future performance and financial performance and financial condition, which 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 Securities and Exchange Commission, including changes in the financial, capital, and lending markets; general economic, political and industry trends and other external factors, and the dependence of NCDL’s future success on the general economy and its impact on the industries in which it invests. 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)
	June 30, 2024			December 31, 2023
Assets	(Unaudited)
Investments
Non-controlled/non-affiliated company investments, at fair value (amortized cost of $2,023,384 and $1,666,169, respectively)	$	1,990,856		$	1,641,686
Cash and cash equivalents		70,986			67,395
Restricted cash		50			50
Interest receivable		18,299			17,674
Receivable for investments sold		2,650			3,919
Prepaid expenses		93			13
Other assets	$	—		$	127
Total assets	$	2,082,934		$	1,730,864
Liabilities
Secured borrowings (net of $8,029 and $7,941 deferred financing costs, respectively) (See Note 6)	$	1,020,721		$	943,936
Payable for investments purchased		17,790			—
Interest payable		21,292			9,837
Due to adviser for expense support (See Note 5)		—			632
Management fees payable		3,590			3,006
Distributions payable		30,108			22,683
Directors’ fees payable		127			96
Accounts payable and accrued expenses		2,934			2,789
Total liabilities	$	1,096,562		$	982,979
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, 54,705,779 and 41,242,105 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively	$	547		$	412
Paid-in-capital in excess of par value		1,019,617			776,719
Total distributable earnings (loss)		(33,792)			(29,246)
Total net assets	$	986,372		$	747,885
Total liabilities and net assets	$	2,082,934		$	1,730,864
Net asset value per share (See Note 9)	$	18.03		$	18.13

CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share and per share data)
	Three Months Ended June 30,						Six Months Ended June 30,
		2024			2023			2024			2023
Investment income:
Non-controlled/non-affiliated company investments:
Interest income	$	53,018		$	36,292		$	102,096		$	69,679
Payment-in-kind interest income		1,529			551			3,521			872
Dividend income		33			24			341			40
Other income		509			234			726			470
Total investment income		55,089			37,101			106,684			71,061
Expenses:
Interest and debt financing expenses		18,721			14,298			35,662			27,041
Management fees (See Note 5)		3,590			2,475			6,854			4,781
Incentive fees on net investment income		3,075			—			7,534			—
Professional fees		693			964			1,403			1,554
Directors' fees		127			95			255			191
Administration fees (See Note 5)		484			350			1,026			659
Other general and administrative expenses		466			357			743			528
Total expenses before expense support and Incentive fees waived		27,156			18,539			53,477			34,754
Expense support (See Note 5)		—			(144)			—			(158)
Incentive fees waived (See Note 5)		(3,075)			—			(7,534)			—
Net Expenses after expense support		24,081			18,395			45,943			34,596
Net investment income		31,008			18,706			60,741			36,465
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) on non-controlled/non-affiliated company investments		1,017			218			(2,608)			6,699
Net change in unrealized appreciation (depreciation)
Non-controlled/non-affiliated company investments		(12,102)			(4,242)			(8,045)			(15,379)
Income tax (provision) benefit		282			(376)			141			(762)
Total net change in unrealized gain (loss)		(11,820)			(4,618)			(7,904)			(16,141)
Total net realized and unrealized gain (loss) on investments		(10,803)			(4,400)			(10,512)			(9,442)
Net increase (decrease) in net assets resulting from operations	$	20,205		$	14,306		$	50,229		$	27,023
Per share data:
Net investment income per share - basic and diluted	$	0.57		$	0.61		$	1.13		$	1.23
Net increase (decrease) in net assets resulting from operations per share - basic and diluted	$	0.37		$	0.47		$	0.93		$	0.91
Weighted average common shares outstanding - basic and diluted		54,789.044			30,621.009			53,773.698			29,679.378

PORTFOLIO AND INVESTMENT ACTIVITY
(information presented herein is at amortized cost; dollar amounts in thousands)
	Three Months Ended June 30,
		2024			2023
Investments:
Total investments, beginning of period	$	1,814,985		$	1,293,592
Purchase of investments		304,976			102,103
Proceeds from principal repayments and sales of investments		(99,977)			(5,759)
Payment-in-kind interest		1,529			551
Amortization of premium/accretion of discount, net		854			628
Net realized gain (loss) on investments		1,017			218
Total investments, end of period	$	2,023,384		$	1,391,333
Portfolio companies at beginning of period		195			153
Number of new portfolio companies funded		11			9
Number of portfolio companies sold or repaid		(8)			(1)
Portfolio companies, end of period		198			161
Count of investments		434			329
Count of industries		26			23

	Six Months Ended June 30,
		2024			2023
Investments:
Total investments, beginning of period	$	1,666,169		$	1,225,573
Purchase of investments		509,305			202,017
Proceeds from principal repayments and sales of investments		(154,873)			(45,361)
Payment-in-kind interest		3,521			872
Amortization of premium/accretion of discount, net		1,870			1,533
Net realized gain (loss) on investments		(2,608)			6,699
Total investments, end of period	$	2,023,384		$	1,391,333
Portfolio companies at beginning of period		179			145
Number of new portfolio companies funded		34			20
Number of portfolio companies sold or repaid		(15)			(4)
Portfolio companies, end of period		198			161
Count of investments		434			329
Count of industries		26			23

See Notes to Consolidated Financial Statements

BPS-3773662PR-Q0824W

View source version on businesswire.com: https://www.businesswire.com/news/home/20240806047675/en/

Investors:

Investor Relations

NCDL-IR@churchillam.com

Media:

Prosek Partners

Madison Hanlon

Pro-churchill@prosek.com

Source: Nuveen Churchill Direct Lending Corp.

FAQ

What was NCDL's net investment income per share in Q2 2024?

NCDL reported net investment income of $0.57 per share for Q2 2024.

What is the Q3 2024 regular distribution declared by NCDL?

NCDL declared a Q3 2024 regular distribution of $0.45 per share.

What was NCDL's portfolio fair value as of June 30, 2024?

As of June 30, 2024, NCDL's portfolio fair value was $2.0 billion across 198 portfolio companies.

What is NCDL's annualized dividend yield based on Q2 2024 NAV?

NCDL maintained a 12.3% annualized dividend yield based on the Q2 2024 NAV per share.

How did NCDL's debt-to-equity ratio change in Q2 2024?

NCDL's debt-to-equity ratio increased to 1.04x as of June 30, 2024, compared to 0.82x at March 31, 2024.