Welcome to Nuveen Churchill Direct Lending Corp.’s Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] I’d like to turn the call over to Robert Paun, Head of Investor Relations. Please proceed.

Good morning, and welcome to Nuveen Churchill Direct Lending Corp.’s third quarter 2024 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. 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. Now, I would like to turn the call over to Ken.

Thank you, Robert, and thank you, everyone, for joining us on the call today. I’d like to start by discussing our results for the third quarter, and then I’ll provide some thoughts on the current market and economic environment and our outlook for the coming months. After that, I’ll hand the call over to Shai for a more detailed discussion of our financial performance. Overall, we are very pleased with the returns we generated this quarter, reflecting the strength of our platform, the earnings power of NCDL and the continued growth of the private credit markets. This morning, we reported strong third quarter results. We delivered net investment income of $0.58 per share, fully covering our regular quarterly distribution of $0.45 per share and our $0.10 per share special distribution. Our investment portfolio continued to perform well, primarily driven by the strength of our senior loan investments and we had no new non-accruals during the quarter. Investment activity during the third quarter was approximately $226 million of new originations was primarily focused on senior secured first lien loans from our traditional middle market pipeline. As we discussed last quarter, now that NCDL’s portfolio is essentially fully ramped, we are focused on rotating out of higher priced, lower spread, upper middle market positions and into our traditional middle market pipeline, which benefits from wider spreads and generally more attractive terms. Our strong results in the quarter led to an increase in our net asset value to $18.15 per share at September 30 from the $18.03 per share that we reported as of June 30. As we look towards the end of the year and into 2025, we remain optimistic about NCDL’s positioning as a leader in the core middle market. Given our long-standing performance track record, deep network of sponsor relationships…

Thank you, Ken, and thank you all for joining us to review our third quarter results. For Q3, we generated net investment income of $0.58 per share compared to $0.57 per share in the second quarter of 2024. Our total investment income increased by $5.2 million or 9% quarter-over-quarter, driven by higher interest income as a result of continued strong deployment and increased leverage utilization, which helped to offset the modest tightening in spreads that we saw during the quarter as well as the decline in base rates. In October, we paid a total dividend of $0.55 per share, consisting of a regular dividend of $0.45 per share and a special dividend of $0.10 per share. In aggregate, this $0.55 dividend equates to an annualized yield of approximately 12.1% based on our quarter end net asset value. As a reminder, the $0.10 per share special dividend that we paid in October was our second of four special dividends that we declared at the time of our IPO earlier this year. The two remaining special dividends will be paid through the second quarter of 2025 to shareholders of record as of November 11 of this year and February 12, 2025. As discussed previously, we intend to operate with a supplemental dividend program that sees us paying out a portion of the excess earnings over and above our regular dividend, allowing us to deliver the benefits of higher returns in the current environment to shareholders as well as grow our NAV. Our total GAAP net income for the quarter was $0.67 per share compared to $0.37 per share in the second quarter. Our third quarter net income was positively impacted by $0.09 per share of net realized and unrealized gains. We generated approximately $0.02 per share of realized gains on repayments and…

Thank you, Shai. In closing, I want to congratulate our team on another strong quarter of results as we continued to fully earn both our regular and special dividends on a per share basis. We are excited about the prospects ahead, as we believe we are well positioned to take advantage of the significant market opportunities and our ability to continue to reward shareholders with an attractive distribution yield. I will now turn the call over to the operator for Q&A.

Thank you. We will now conduct a question-and-answer session. [Operator Instructions] Our first question comes from Brian Mckenna with Citizens. Please proceed.

Great. Thanks. And I hope everyone is doing well. I appreciate all the commentary on your origination platform and really your large network of middle market private equity firms. I'm curious though, is there any white space across the broader Churchill platform to further penetrate this part of the market in terms of expanding or adding new relationships from here? And I guess, are there any other ways to further leverage these relationships that can ultimately drive additional benefits to NCDL?

Yes. Thanks, Brian. It's Ken. No, it's a great question. And we focus a lot on the ongoing effort to expand firms that we're seeing deals from and expand our relationship base. I would make a couple of comments. One is we've had pretty good success there this year, about 30% increase in firms where we're doing new deals with those firms. So in that sense, expanding those relationships deal-wise. The other thing I would say is that we have – as I think you're aware, an ongoing allocation to new investments in new private equity funds every year. So each year, we're adding 7 to 10 new private equity LP relationships. Obviously, those relationships are based upon an assessment of their performance, their track record, their history of investing in complementary industries such as software and health care and business services. So we have both the effort to broaden out our relationships with deal activity, but also new LP relationships being brought into the fold on an annual basis, and we're constantly scouring the market environment for high-quality firms, maybe spinning off from existing relationships of ours or otherwise. So there is a continued white space, which is driving an increase in the scope of our investment activity. But I can't overstate how important those relationships are to driving deal flow and investment activity. About 75% of our senior lending activity is with firms where we have an LP relationship. So we've done the homework. We've done the research. We understand their performance and their track record. And obviously, the ongoing dialogue with them as an LP drives tremendous continuity and deal activity with them.

Okay. Great. That's helpful. Thanks, Ken. And then just a question on deal activity more broadly. Sponsor deals are starting to pick up here, but we really haven't seen a real inflection yet in related activity. I think, getting some clarity around the election helps. But what are you seeing across the platform today in terms of new deal flow? And has there been any change in tone with sponsors more recently? And then from here, I know a lot can change and happen across the markets, but what do you see as the biggest driver for an acceleration in sponsor M&A into 2025?

Sure. Well, it's quite interesting. We actually have seen a continued increase in deal activity as we've gone through 2024. I think certainly, clarity around interest rates, a recognition that rates have peaked and are obviously coming down. And I think is lending to more clarity around opportunities in the marketplace. I think it's lending itself to buyers and sellers coming together more regarding price and underlying terms. So deal activity, as we see it actually has already begun to pick up. In fact, if you look across our platform, Q2 was a very strong quarter for us in terms of deal activity. Q3 was even stronger. If you look at our level of activity in senior lending, in 2024, it's up over 60% year-over-year from 2023, and we're up about 30% overall, including all of our investments year-over-year on the platform. So senior lending up 60% and quarter-over-quarter activity has been very strong. So I think a lot of that is attributable to the fact that in the core middle market, the primary amount of activity is really new deal LBO activity. In fact, about 88% of the activity in the core middle market lending space is new deals. And I think that is certainly benefiting us in terms of our level of investment activity and deal flow across the platform. So we're super busy right now, and we continue to be – our pipeline is quite good going into the fourth quarter, and we expect a very solid color as we move forward.

Got it. Thanks. I will leave it there and congrats on another strong quarter.

Thanks, Brian.

The next question comes from Maxwell Fritscher with Truist. Please proceed.

Hi, good morning. I'm on for Mark Hughes. Can you give us a sense on how amendment activity was, if any, in the quarter?

Yes. Max, it's Shai. Happy to comment on that. We really didn't see a big pickup quarter-over-quarter. One of the things that we commented on both last quarter and this quarter, and you see it kind of in the yield metrics in the portfolio, this phenomenon around repricing of existing transactions for borrowers that we know and like and that are performing continued quarter-over-quarter, but frankly, it really wasn't an uplift, if anything, it was kind of a moderation of that trend. And you also see that kind of translate into kind of the spreads that we were able to realize on investments quarter-over-quarter. We've actually been pretty stable on new floating rate investments at roughly 500 over SOFR. And I think that's indicative of a market where activity, yes, is picking up. As Ken just commented on in terms of new deals, but I would say that the pace of repricing, if you will, and those related amendments has moderated quarter-over-quarter.

Got it. Thank you. And you had mentioned that your top of the capital structure priority. But can you comment on how spreads and competition for the junior debt is holding up?

Yes. I'd comment on it. It's Ken. I would say, it's interesting. If you look at our junior debt strategy, it is heavily grounded in those LP relationships. In fact, virtually 100% of our junior capital investments are coming directly from those LP relationships. So where there is a subordinated debt investment, it is very much coming straight from the private equity from where we have that LP connectivity in that history. And the same, frankly, for equity co-investments. So while senior lending is probably 75% or so LP relationships, it's highly curated and coming directly from the sponsors. If you look at the overall pricing in our junior capital business, it's been extremely stable. It's been running around 13.75% to 14% on a consistent basis, really over the entirety of 2024. So we are seeing some very attractive opportunities. Obviously, it’s a much smaller percent of the portfolio overall. We’re being very selective. But where we can get good relative value, we’re dipping into those opportunities. And again, we’re not out in the market competing on price with other subordinated lenders. We’re really seeing those opportunities directly from the sponsor where they have a situation and they need a junior capital lender, and we’re obviously a long-standing partner of theirs.

Okay. Appreciate the answers. Thank you, both.

Thank you.

[Operator Instructions] Our next question comes from Derek Hewett, Bank of America. Please proceed.

Good morning. So what’s the size of that upper middle market portfolio that will be rotated to the core middle market strategy? And then from a yield perspective, what’s the unlevered yields of those two strategies, so we can kind of get a sense of what the potential could be for top line growth?

Yes. Hey Derek, it’s Shai. Thanks for the question. A couple of comments there. I would characterize kind of the upper middle market, more liquid asset portion of the portfolio. It’s circa $200 million relative to the $2 billion, so call it 10%. And that number obviously has come down a little bit since our IPO. As you recall, obviously, we called in all of our sort of uncalled capital that we raised in the private phase, pre-IPO and then the $100 million or so that we raised in the IPO that we deployed, and we’ve been busy sort of rotating into the middle market, the traditional middle market pipeline and you saw that with the roughly $50 million of sales that we executed on. I would caution, though, that, again, not all of those assets are going to be readily liquid or readily liquid necessarily at a price that we like. So we’re going to be thoughtful about how we execute on that rotation strategy going forward. But I would expect that we continue to execute on that successfully as we have done over the prior quarter. In terms of the differential in yields, and you kind of see it show up, you saw it last quarter, you see it this quarter in terms of the yield pickup, if you will. I would say that, that premium for traditional middle market relative to BSL certainly, obviously, upper middle market sort of somewhere in between is as wide as, call it, 200 basis points. So historically, that’s ranged between 100 basis points to 200 basis points in terms of that spread between traditional middle market and BSL. And I would say it’s at the wider end today because that spread tightening has really impacted the BSL market as that has come back really strong with increased liquidity there. I would say, in our market, that spread tightening has been much more modest. So we’re executing today, call it, in and around 500 as you saw in the materials. And in the BSL and upper middle market, you could be down in the 300s, low 300s from a spread perspective. So hopefully, that gives you some context there.

Thank you.

Great. Thank you.

The next question comes from Paul Johnson with KBW. Please proceed.

Yes. Thanks for taking my questions. Can you just talk a little bit about just the increase in the watch list investments this quarter. Obviously, non-accruals were stable. How would you kind of describe some of the new companies going on watch list this quarter? Were the idiosyncratic and kind of what level of maintenance or does the company require at this point?

Yes. Thanks, Paul, for the question. So a couple of comments there, right? As you look across our portfolio and just the health overall, I would say, first, looking at non-accruals, obviously, no new non-accruals during the quarter. So we were very pleased with the ongoing performance in general. When you think about how we manage the portfolio, and I know we’ve got a pretty granular scale running from 1 to 10. I think the moves that you’re seeing within the risk rating table that we publish is really emblematic of our proactive portfolio management approach, right? We’re pretty quick to downgrade names slower to upgrade, and we’re really doing that in response to the conditions that we see. And as you look at the watch list and the moves in the categorization, obviously, the further down the list that you move, the more maintenance that’s required. But again, overall, very good shape. There really aren’t any sort of trends or themes that we would call out on the names moving around. Obviously, we’ve used the term idiosyncratic before, but that modest increase in the watch list is going to be obviously, company specific. No major concerns to highlight. And as always, we’re going to work those situations to maximize value for shareholders here. So again, key takeaway here is portfolio is in really good shape. Obviously, no new non-accruals and the movement within the watch list is really just a function of our proactive management of the portfolio.

Thank you. That’s all for me.

Great. Thanks a lot, Paul.

The next question comes from Brian Mckenna with Citizens. Please proceed.

Okay. Great. Thanks for the follow-up. I might have missed this, but on the stock repurchase plan, it looks like you bought back $40 million of stock to date through October. So how much came through in the third quarter? How much in October? And then just given where the stock is trading currently around 95% of NAV. Can you just re-highlight how the repurchase program is structured, and then ultimately, the magnitude of buybacks as the discount to NAV widens?

Yes. So we haven’t exactly published the specifics, Brian, on kind of the percentages at each level, but I can broadly comment as I’ve done in the past, that we are increasing our percentage of average daily trading volume that we purchased under the program as the discount to NAV increases. So modest purchases when we’re close to NAV and obviously increasing as a percentage of average daily trading volume as we move down in terms of price. So that’s active. It’s working. And again, we’re buying at a discount to NAV. I would say the trends in terms of the purchases obviously increased in the last quarter with the increase in volume, that we saw as we’ve got more shares coming off of lockup. So the amount that’s freely tradable is increasing our average volume, and I think has moved into kind of the 80,000 range from sort of 50,000 in the prior quarter. So again, buying a little bit more shares, but just looking at the amount of the program that we’ve used, $14 million of $100 million, and based on how we’re trading and where we’re trading. We’ve obviously got a lot of firepower left on that program, and we’ll continue to utilize it as we’re trading at a discount here.

Got it. Thank you.

Thank you.

Thank you. At this time, I would like to turn the floor back to Mr. Ken Kencel for closing remarks.

Great. Well, thank you all again for joining us on the call today. Hopefully, you found information informative and helpful as you assess our fund and performance. We’re obviously very bullish and excited as we move forward here into the fourth quarter. I feel very good about the investment opportunities we’re seeing and the opportunity to deploy capital. I want to thank you all again for joining us. And hopefully, everyone has a great holiday season. We look forward to our next call in the New Year.

Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.