Nuveen Churchill Direct Lending Q1 2025 Earnings Report

Nuveen Churchill Direct Lending EPS Results

• Actual EPS: $0.53
• Consensus EPS: $0.57
• Beat/Miss: Missed by -$0.04
• One Year Ago EPS: N/A

Nuveen Churchill Direct Lending Revenue Results

• Actual Revenue: $53.59 million
• Expected Revenue: $56.01 million
• Beat/Miss: Missed by -$2.42 million
• YoY Revenue Growth: N/A

Nuveen Churchill Direct Lending Announcement Details

• Quarter: Q1 2025
• Date: 5/8/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 11:00AM ET

Nuveen Churchill Direct Lending (NYSE:NCDL) (NYSE:NCDL) is a closed-end management investment company that seeks to provide shareholders with attractive risk-adjusted returns through a diversified portfolio of direct lending instruments. Established in early 2022, NCDL focuses on privately negotiated debt investments in middle-market companies, primarily within the United States. The fund offers investors access to a segment of the credit markets that has historically been less correlated with public debt markets, aiming to capture yield premiums associated with private lending.

The fund’s investment strategy centers on senior secured loans, unitranche financings and selectively structured mezzanine debt. By targeting companies with established cash flows and proven business models, NCDL aims to preserve capital while seeking current income. Its portfolio is diversified across industries such as healthcare, business services, industrials and consumer products, helping to mitigate concentration risk and enhance overall portfolio stability.

Nuveen Churchill Direct Lending is sub-advised by Churchill Asset Management, an affiliate of Nuveen, which itself is a leading global investment manager. Churchill brings deep credit research capabilities and direct lending expertise, leveraging its established relationships with corporate borrowers, sponsors and financial intermediaries to source proprietary investment opportunities. Nuveen’s broader platform supports the fund with risk management, compliance and distribution resources.

The fund is organized as a publicly traded trust and intends to utilize leverage to enhance total return potential, within the parameters approved by its board of trustees. Investors in NCDL gain exposure to a specialized segment of private credit, backed by the combined resources and experience of Nuveen and Churchill Asset Management.

Nuveen Churchill Direct Lending Q1 2025 Earnings Call Transcript

Key Takeaways

• Neutral Sentiment: NCDL reported net investment income of $0.53 per share in Q1, or $0.56 excluding $0.03 per share of one-time financing costs tied to debt optimization. Management said the regular $0.45 quarterly dividend remains covered and sustainable for the foreseeable future.
• Positive Sentiment: The company continues to emphasize a high-quality, diversified portfolio, with over 200 investments, top 10 exposures at just 13% of fair value, and non-accruals still very low at 0.4% of fair value. Leverage and coverage metrics also remain conservative, with net leverage at 4.9x and interest coverage at 2.4x.
• Negative Sentiment: NAV declined to $17.96 per share from $18.18 at year-end, mainly due to modest valuation declines in watchlist names and $0.24 per share of net realized and unrealized losses. One additional portfolio company was placed on non-accrual during the quarter.
• Positive Sentiment: Management sees NCDL as well-positioned to navigate tariff-driven volatility, saying most portfolio revenues are domestic and tariff risk is limited to less than 10% of the portfolio. They expect market dislocation could create attractive opportunities and may support wider spreads over time.
• Positive Sentiment: NCDL continued active portfolio rotation and capital structure optimization, including selling $65 million of upper middle market assets, refinancing debt, and resetting CLO pricing to lower borrowing costs. The company also said it had more than $200 million of liquidity and is maintaining an active share repurchase program trading at a discount to NAV.

Presentation

[Operator]

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 Paun, Head of Investor Relations for NCDL. Robert, please go ahead.

[Robert Paun, Head of Investor Relations at Nuveen Churchill Direct Lending]

Good morning and welcome to Nuveen Churchill Direct Lending Corp.'s first quarter 2025 earnings call. Today I'm joined by NCDL's Chairman, President and CEO, Ken Kencel, and Chief Financial Officer, Shai Vichness. 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.

[Robert Paun, Head of Investor Relations at Nuveen Churchill Direct Lending]

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. I would like to turn the call over to Ken.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

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.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

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 Asset Management 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.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

Our leaders at Churchill Asset Management 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 of the U.S. and global economies, we believe that we are well-positioned to continue delivering strong returns for our shareholders.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

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 0.5%. 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 5x and an interest coverage ratio of 2.4x 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. Finally, our balance sheet and capital structure remains strong with no near-term debt maturities.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

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. 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.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

This review has been updated bi-weekly 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.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

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. 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.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

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 $0.53 per share, which was impacted by one-time interest and debt financing expenses totaling $0.03 per share. Excluding these non-recurring items, net investment income totaled $0.56 per share, in line with our fourth quarter 2024 results.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

These results reflect the continued strong performance of our investment portfolio, as well as shareholder-friendly actions we implemented following our Initial Public Offering, 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 originations 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.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

Our Net Asset Value was $17.96 per share at March 31, 2025, compared to $18.18 per share as of December 31st, 2024. The decline in Net Asset Value quarter-over-quarter was primarily due to modest valuation declines in some of our watchlist names. In terms of the recent market environment, following the tariff announcements in early April, public credit markets have experienced increased volatility as spreads have widened, and the resurgence of the Broadly Syndicated Loan market that we saw last year has taken an 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.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

As I outlined earlier, historically, market volatility has led to attractive opportunities in the direct lending space, which has exhibited greater stability than the BSL 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.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

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.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

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.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

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. 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 4.9x and interest coverage of 2.4x on traditional middle market first lien loans. These metrics are a direct result of conservative structuring and relatively low attaching points that we target when underwriting new transactions. This conservative approach has served us well in the elevated rate environment.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

During the first quarter, one portfolio company was placed on non-accrual status with a cost of $14.5 million and a fair value of $4.8 million. Despite this one addition, our total non-accrual 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-accrual status, we believe that this metric compares favorably versus BDC industry averages. We continue to remain focused on diversification as a key risk mitigant 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 Private Equity relationships.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

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 and established investor in the core middle market with deep long-term relationships, which provides NCDL with a strong information and sourcing advantage.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

We remain confident in the company's positioning as a leader in the core middle market direct lending space, given our long-standing track record, deep network of sponsor relationships, and extensive Limited Partner 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. Now I'll turn the call over to Shai to discuss our financial results in more detail.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

Thank you, Ken, and good morning, everyone. I will now review our first quarter results in more detail. We reported Net Investment Income of $0.53 per share in the first quarter, compared to $0.56 per share for the fourth quarter of 2024. As Ken mentioned in his remarks, Net Investment Income in the quarter was negatively impacted by approximately $0.03 per share of non-recurring interest and debt financing expenses related to the acceleration of deferred financing costs associated with paying off and terminating our credit facility with Wells Fargo, as well as the impact of the reset of one of our Collateralized Loan Obligations. Both of these moves were aimed at optimizing our debt financing and reducing ongoing borrowing costs. Excluding these non-recurring expenses, Net Investment Income was $0.56 per share in the first quarter.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

Total Investment Income decreased to $53.6 million in the first quarter, compared to $57.1 million in the fourth quarter of 2024, primarily driven by a decline in interest income due to the decline in base rates. In April, we paid a total dividend of $0.55 per share, consisting of a regular quarterly dividend of $0.45 per share and a special dividend of $0.10 per share. In aggregate, this $0.55 per share dividend equates to an annualized yield of approximately 12% based on our quarter-end net asset value.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

As a reminder, the $0.10 special dividend paid in April was the fourth and final special dividend that we declared at the time of our IPO in January of 2024. In the first quarter, our total GAAP net income was $0.29 per share compared to $0.54 per share in the fourth quarter of last year. Our first quarter net income included $0.24 of net realized and unrealized losses, largely due to valuation declines in a few watchlist names. Our gross debt-to-equity ratio at March 31st was 1.31x compared to 1.15x at year-end 2024. Our net debt-to-equity ratio, net of cash, was 1.25x compared to 1.1x at year-end 2024.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

At the end of the first quarter, our net asset value was $17.96 per share compared to $18.18 per share at December 31st, 2024. The decline was largely driven by the $0.24 per share of net realized and unrealized losses during the quarter, and slightly offset by the impact of our share repurchases, which had a positive impact of approximately $0.04 per share. As of March 31st, our investment portfolio had a fair value of $2.08 billion, in line with the fair value at year-end. Gross originations totaled $166 million, and gross investment fundings totaled $153 million. This compares to $163 million and $151 million of gross originations and gross investment fundings, respectively, in the fourth quarter of last year.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

New originations accounted for 12 of the transactions done during the first quarter, totaling approximately $90 million. Additionally, we continue to benefit from add-on financing opportunities, which allow us to generate 11 deals in the form of incremental transactions for existing portfolio companies totaling approximately $25 million. We also saw drawdowns of approximately $37 million on our delayed draw term loans in the quarter, as our portfolio companies continue to be active in growing via acquisitions. Repayments in the first quarter totaled 4.7% compared to 4.6% in the fourth quarter of last year, and remained in line with our long-range assumption of 5% per quarter. We had full repayments on three deals totaling $53 million and partial prepayments for another $31 million.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

We also sold $65 million worth of upper middle market investments, continuing our strategy of rotating out of lower spread upper middle market investments and into our traditional middle market pipeline. On a net basis, we deployed approximately $5 million during the first quarter. Looking ahead, we expect to continue to deploy capital primarily into traditional middle market transactions, rotate the portfolio away from more liquid upper middle market assets, and redeploy cash received from repayments. Our total portfolio consisted of 210 names as of the end of the first quarter, in line with the number of names at year-end 2024. The investment portfolio remains highly diversified, with the top 10 portfolio companies accounting for only 13% of the fair value of the total portfolio, down slightly from 13.2% in the prior quarter.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

Our largest exposure is only 1.5% of the total portfolio, and our average position size is 0.5%. We continue to view this high level of diversification by position size as a key risk mitigation tool, particularly in today's uncertain economic environment. As far as asset selection, our new originations during the quarter were weighted towards traditional middle market senior loans, representing more than 83% of the dollars deployed during the quarter, with the balance deployed into the upper middle market as well as into junior debt and equity investments. This focus on the traditional middle market segment, we believe, will benefit NCDL shareholders as we see meaningfully higher spreads and tighter documentation terms in the traditional middle market versus the upper middle and BSL markets. Spreads in the quarter were largely unchanged again in the 475 over range.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

Our weighted average yield on debt and income-producing investments at cost decreased slightly to 10.1% at the end of the first quarter from 10.3% at the end of the fourth quarter of last year. While new transactions during the quarter focused on first lien loans, we also opportunistically invested in a few subordinated debt transactions, which accounted for 8% of gross commitments. At the end of the first quarter, first lien loans represented 90.5% of the total portfolio, while junior debt and equity comprised 7.8% and 1.7%, respectively.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

As a reminder, we remain committed to the target allocations that we communicated at the time of our IPO with a target of 85%-90% senior loans and the balance in junior debt and equity co-investments, with equity staying in that low single-digit percentage range. Turning to credit quality, as Ken mentioned earlier, we believe we are entering this period of economic uncertainty from a position of strength based on the overall quality of our investment portfolio. As an example, at the end of the first quarter, we had only two names on non-accrual, representing just 0.4% on a fair value basis and 1% at cost, putting one portfolio company on non-accrual during the quarter. Additionally, our weighted average internal risk rating remained steady quarter-over-quarter at 4.1 at the end of the first quarter.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

Our watchlist, consisting of names with internal risk ratings of 6% or worse, also remains at a relatively low level of 6.7% at the end of the first quarter. Finally, our conservative approach to underwriting is highlighted by our weighted average net leverage of 4.9x and interest coverage of 2.4x for our traditional middle market senior loans at the end of the quarter. As far as the right-hand side of our balance sheet is concerned, specifically leverage utilization, our debt-to-equity ratio increased to 1.31x at March 31st compared to 1.15x at year-end 2024.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

On a net basis, our debt-to-equity ratio was 1.25x net of our cash position at quarter end. This incremental leverage utilization is in line with our expectations at the time of our IPO and was driven primarily by a reduction in our outstanding shares as a result of activity on our share repurchase program, the issuance of debt in connection with a reset of NCDL CLO I and associated borrowings on our corporate revolver. We expect to continue to be able to deploy capital efficiently and operate towards the upper end of our target range of 1x-1.25x debt to equity. As we spoke about on our last call, we also took an additional step towards optimizing our capital structure in the first quarter.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

In January of this year, we issued $300 million of unsecured notes due in 2030 at a fixed coupon of 6.65%, which we swapped to a floating rate of Secured Overnight Financing Rate plus 230 basis points. We were pleased with the execution of our inaugural bond offering and the reception that we received from the capital markets. This issuance further diversified and strengthened our capital structure and balance sheet. In connection with our unsecured bond issuance, we received two investment grade ratings from Fitch and Moody's. Also in January this year, we terminated in full our Wells Fargo financing facility using a portion of the proceeds from the unsecured note issuance to repay the outstanding borrowings on the facility.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

Finally, in February, we priced a reset of the NCDL CLO I transaction, reducing borrowing costs on the financing through the AA tranche from SOFR plus 166 basis points to SOFR plus 143 basis points. In addition, we were able to secure a five-year reinvestment period, up from four years previously. With this reset, we replaced approximately $59 million of CLO debt with borrowings on our corporate revolver. In aggregate, these transactions reduced the overall weighted average spread on our debt from SOFR plus 214 basis points to SOFR plus 202 basis points. With over $200 million of available liquidity as of the end of the first quarter and no near term debt maturities, we remain well positioned to take advantage of attractive investment opportunities, fund our unfunded commitments and fund the remainder of our share repurchase program.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

As discussed, our focus for the near term is on optimizing the asset mix within the portfolio and actively reinvesting cash received from repayments and sales. In advance of the expiration of our share repurchase plan in March, we extended the program for another 12 months, giving us additional time to utilize the $99.3 million on authorization. Through May 2nd, we've utilized approximately $85 million under the program, leaving approximately $15 million remaining. The program increased its level of activity in early 2025 and in April based on the increased trading volume in the shares of NCDL and the recent volatility in the public equity markets, allowing us to purchase shares at a meaningful discount to NAV. I'll now turn it back to Ken for closing remarks.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

Thank you, Shai. In closing, we believe we are well positioned with respect to our high quality investment portfolio, conservative investment approach, and strong capital structure to navigate the current market environment. Additionally, we continue to believe NCDL is uniquely positioned for long-term success and remain optimistic about the company's outlook based on our experienced team and our long-term successful track record of investing and operating across various market conditions and cycles. Lastly, I'd like to thank our team for its continued strong execution. I'd like to thank all of you for joining us today and your interest in NCDL. I will now turn the call over to the operator for Q&A.

[Operator]

Thank you. At this time, we'll conduct our question and answer session. If you like to ask question, please star one on your telephone keypad. A confirmation tone will indicate that your line on the question queue. You may press star two, if you like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please while we poll the question. Your first question comes from Brian McKenna with Citizens JMP. Please state your question.

[Brian McKenna, Analyst at Citizens JMP]

Thanks. Good morning, everyone. I appreciate, you know, the detail on the $0.03 per share of non-recurring costs in the quarter. You know, if I adjust for this and then, you know, layer in full management and incentive fees that will kick in during the second quarter, you know, the implied NII is about $0.01 above the $0.45 regular quarterly dividend. I'm assuming you still feel good about the quarterly dividend moving forward and the coverage there. Any thoughts would be helpful. I guess, too, you know, are there any other levers you can pull to drive some incremental NII throughout the year? I know you're still maybe remixing the portfolio, maybe just hash out that opportunity as well.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

Hey, Brian. Thanks for the question. It's Shai here. On both of those, with respect to the dividend coverage going forward, I think your math is directionally accurate, right, in terms of the effect of the increase in the management fee, as well as the implementation of the incentive fee going forward. That I think is correct. With respect to our ability to continue to cover, you know, we set that $0.45 kind of regular dividend level with that in mind, right? Thinking about kind of what our forward assessment is of the earnings power of the vehicle and the ability to cover that dividend.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

The short answer is yes, we continue to feel good about our ability to cover the dividend for the foreseeable future. Obviously, as we evaluate the macro situation, and sort of where base rates go in the future, you know, that'll be something that we discuss and focus on. We did all that with the forward view in mind, and a high degree of confidence in our ability to continue to earn that dividend at the $0.45 level. In terms of the other levers that we can pull, I think there's a few factors there, right?

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

One is we think about the current environment and what does that mean for ongoing sort of spreads in the marketplace. You know, interestingly, we've seen spreads be, you know, basically unchanged for the last three quarters now, if you look at our new origination activity. We're really not seeing continued tightening of spreads. If anything, we would expect spreads to start going the other way. I think there's an opportunity there to, you know, eke out some incremental yield in the portfolio. We also still have a reasonable amount of rotation left to go. You will have seen and heard in my comments, we sold $65 million of upper middle market sort of liquid assets, which tend to be lower spread last quarter. We'll continue to seek opportunities, you know, for that rotation trade as we move forward.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

The redeployment of any repayments that we get. I think there is an opportunity there to drive some incremental earnings. The last piece of it is just sort of the liability management exercise in thinking about, you know, our financings, including, you know, if you look at our CLOs, we have a couple in there that have higher cost of capital than where the current market is. As those exit their non-call periods, you know, we'll be evaluating those as opportunities to continue to bring down our cost of financing going forward.

[Brian McKenna, Analyst at Citizens JMP]

Okay, great. That's helpful. Then just on buyback, you know, leverage is sitting kind of at the upper end of the target. I think you feel comfortable with it there. You know, stock's trading at almost 80% of NAV today. You know, does it make sense to lean in more opportunistically on repurchases? Did you disclose the actual amounts for how much you bought back in the first quarter, and how much you bought back quarter to date? I know you mentioned you extended the buyback. You have $15 million left on the remaining authorization. Did you keep the $15 million unchanged or, you know, why not increase that just given where the stock's trading?

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

Yeah. A couple of comments there. Maybe taking kind of in reverse order. In terms of the extension of the authorization, we did extend the timing. We kicked it out another 12 months. We did not touch yet the amount on authorization. You know, that's a conversation that we have regularly, obviously internally with our board. And we'll continue to evaluate sort of that trade, right? Whether it's, you know, appropriate to increase or not. One thing I would comment on though, is in terms of just your question about being opportunistic, is that the program is designed in and of itself to effectively be opportunistic on kind of a programmatic basis.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

What I mean by that is it's structured such that as the discount to NAV increases, the percentage of average daily trading volume that we're buying increases. That's designed to do exactly that, right? Take advantage of the deeper discounts. The level of activity under the program as we moved into this year, and certainly kind of post-Liberation Day, became more active. I think we are taking advantage of that opportunity. I think you can sort of do the math, right, in terms of what we disclosed last quarter in terms of how much we purchased versus how much we purchased through this quarter and then through the quarter to date, which is the May date that we just referenced on the call.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

I believe that number was something like $35 million-$40 million in purchases, in Q1, an additional, sort of $15 million or so, in Q2 through the date that we just referenced.

[Brian McKenna, Analyst at Citizens JMP]

Okay, that's super helpful. I'll leave it there. Thank you.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

Excellent. Thank you.

[Operator]

Your next question comes from Doug Harter with UBS. Please state your question.

[Doug Harter, Analyst at UBS]

Thanks. Can you just talk about, you know, your expectations for leverage? You know, any willingness to kind of let that move a little bit higher if you see opportunities, you know, kind of in the, in the current market, or is it gonna be coming more from, rotation?

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

Yeah. I think we really are committed to that range that we put out there, Doug. It's really a function of, again, one to 1.25. We have said previously, and we've been consistent on this point all along, is that, based on our view of the quality of our portfolio that's skewed towards senior lending representing over 90% of the assets in the book, that we're comfortable operating at the upper end of that target range. I expect we'll hold there. We do have levers to pull to allow us to continue to be opportunistic in the market, namely the rotation. Obviously as we get repayments under our in our existing portfolio, the ability to redeploy.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

We do have dry powder. You know, I don't know that we would be comfortable taking that leverage ratio much higher than what it is today. I do think there still, you know, presents an opportunity for us to be opportunistic, to take advantage of wider spreads and deploy as we see those opportunities. The answer to your question is kind of a bit of both, right? We will still remain active in the market. We'll be opportunistic. We have more to go in terms of rotation. Given where kind of broadly syndicated loans are bid, right, there's still an opportunity to sell at attractive levels in that upper middle market and kind of BSL category in our book and then rotate. That's where we'll look to do that.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

Again, our view right now is that we're really not intending to move leverage higher from here.

[Doug Harter, Analyst at UBS]

Thank you.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

Thank you.

[Operator]

A reminder to the audience, to ask a question at this time, press star one on your telephone keypad. You can remove yourself from the queue by pressing star two. Once again, to queue up for a question, press star one on your phone now. Our next question comes from Maxwell Fritscher with Truist Securities. Please state your question.

[Maxwell Fritscher, Analyst at Truist Securities]

Hi, good morning. I'm calling in for Mark Hughes.

[Maxwell Fritscher, Analyst at Truist Securities]

You had noted that the direct lending or direct lending had taken back some share from the BSL market, has this had any positive effect on competition in the core middle market, maybe some competitors going back up market?

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

Yeah, Max, it's Ken. Thank you for the question. I think that, you know, our size and scale, you know, in the core middle market and our ability to finance larger businesses is a real advantage right now. There are really just a handful of what I would call core middle market direct lenders that can step up and write, you know, significant checks to finance those businesses. As a result, you know, I feel like we're in a very nice position to be able to take advantage of those opportunities. You know, as we've seen, you know, over, historically in times of market stress, the liquid market tends to go offline.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

The larger scale direct lenders, and certainly the core middle market, lenders like ourselves, can take advantage of that by stepping into that void. I would expect that the companies we finance would skew larger over the next quarter or two. I'd also expect that they would continue to be of the highest quality. If you look at the market today, the deals that are really getting done are the A+ credits that can demonstrate no real tariff impact, you know, strong businesses with significant cash flow market leaders. Shai, I think, mentioned on the call, and I did as well, that, you know, our deal flow remains very strong.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

In fact, we didn't have a single deal as we moved from March to April and post-Liberation Day that did not continue to progress. I think that speaks to the quality of the deals we're seeing. I think the competitive dynamics will be better as a result of that scaling to larger opportunities and the large cap market really being waylaid. We're looking forward to good opportunities. We have not seen Interestingly, we've really not seen spreads move appreciably at this point, although the BSL market has moved a bit on the secondary side, 50-100 basis points. We would absolutely expect spreads to move over the next several months in a positive way.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

Spreads today for high quality mid-market deals in the core middle market are hovering in that 475 range, 475-500. You know, I could certainly envision a scenario where they moved out a bit. I certainly think the quality of the deal flow we're seeing and the size of the companies, I would expect to be somewhat larger. I think we're looking at an opportunity here, but an opportunity with what might be a somewhat reduced volume, because it's really on the quality deals, on the deals that can demonstrate really no tariff dynamics that are gonna be the prevalent, certainly of what we're financing.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

Areas like Software, Healthcare, and Business Services that are primarily domestic businesses, where there's demonstrated market leadership, strong cash flow, are really where we're going to focus. As you know, we've never been, you know, chasing, you know, kind of yield on marginal opportunities. I think, you know, it's certainly possible that the overall level of deal flow, in the core middle market may come in a notch, just given the focus on quality. I think that will be offset and potentially even more than offset by the runway and the widening of that aperture of deals that we'll see at the upper end of the market.

[Maxwell Fritscher, Analyst at Truist Securities]

Understood. Thank you. You'd mentioned your strong deal flow and strong new investments in the quarter. I was just wondering how the pipeline is shaping up in terms of the mix of new versus incumbent borrowers, and maybe in your answer you kind of answered that in a different way. Yeah, how's the pipeline shaping?

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

You know, the pipeline remains, you know, quite good. You know, and I think that, you know, the fact that, you know, we are, you know, through our Private Equity and Junior Capital Team, an LP in 300 private equity funds, gives us kind of a built-in deal flow, if you will. You know, when deals are getting done, the odds are very good. Certainly with our LP base and our relationships, we're seeing them. It has led to, you know, ongoing new investment activity that has enabled us to remain very selective. Pipeline is actually quite good, and I think that's reflective of the fact that, you know, the quality that we're focusing on, and the types of deals we're financing are generally non-tariff impacted. You see that in our current portfolio.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

I think we quoted 90% or so are companies that are either minimally or not impacted by tariffs. That continues to be the case in terms of what we're looking at today. As a result, pipeline, you know, looks quite good. Certainly some of those deals are coming in that are a bit larger in size that historically might have gone to the BSL market, we're seeing some of that as well. We're certainly shying away from turning down, not pursuing credits where we think there is either a tariff implication in some way, shape, or form, either on the revenue side or the cost side, or businesses that we think have a higher probability of being impacted in any type of recessionary dynamic.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

You know, I think, you know, overall, you know, as we think about the market today, we still see tariffs as a tariff dynamic that we would hope we'd see some resolution in a, you know, reasonable period of time here, just given the dynamics, both political and economic, that would mitigate in favor of that occurring. We, you know, of course, are mindful of the fact that if we do slip into more of a recessionary dynamic, we need to be financing companies that are really in recession-resistant industries and market leaders. That being said, pipeline's good. We're staying very selective, and it tends to skew larger.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

At this point, we haven't seen any appreciable widening of spreads, but we're certainly hopeful that we would start to see it, as we move through the quarter.

[Maxwell Fritscher, Analyst at Truist Securities]

Thank you. Last one from me, and sorry if I missed this in the prepared remarks, but, with the understanding that there is a little bit of a lag effect, has the full impact of the base rate changes last quarter completely made its way through the portfolio?

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

Yeah. I think you're right, Max. It's Shai. There is essentially a one-quarter lag, if you will, with respect to how the assets reset. Now they don't all reset exactly on quarter end. Again, our view is that when we think about the weighted average SOFR that we experienced during the quarter, it was roughly 4.3, down about 15 basis points from the prior quarter. Again, as you think about the forward curve and kind of what that means, I think it's fair to assume sort of a one-quarter lag relative to the curve, noting obviously that, you know, the curve and then what really plays out in terms of SOFR obviously, can differ materially.

[Maxwell Fritscher, Analyst at Truist Securities]

Very good. Thanks, Shai. Thanks, Ken.

[Shai Vichness, CFO at Nuveen Churchill Direct Lending]

Thank you.

[Operator]

Thank you. We have reached the end of the question and answer session. I'll now turn the call over to Ken Kencel for closing remarks.

[Ken Kencel, Chairman, President, and CEO at Nuveen Churchill Direct Lending]

Great. Well, thank you, operator, and thank you all for joining us today. We remain very much open to taking your calls. Any follow-up questions you may have, we're certainly available to respond. As a general matter, as we indicated, we feel well-positioned in the market environment going forward. Significant dry powder across our platform and within the BDC ability to take advantage of those opportunities as they become available. And again, thank you for joining the call. We look forward to taking time to talk with you next quarter.

[Operator]

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• Ken Kencel, Chairman, President, and CEO
• Robert Paun, Head of Investor Relations
• Shai Vichness, CFO

Analysts

• Brian McKenna, Analyst at Citizens JMP
• Doug Harter, Analyst at UBS
• Maxwell Fritscher, Analyst at Truist Securities