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Nuveen Churchill Direct Lending Corp. (NCDL)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 NII per share was $0.53, down from $0.56 in Q4 2024; NAV per share declined to $17.96 from $18.18 as net realized/unrealized losses of $(0.24) per share offset distributions . The Board declared a Q2 2025 regular dividend of $0.45 per share .
  • Results missed Wall Street consensus: EPS of $0.53 vs $0.563* (miss of $0.033), and investment income of $53.586M vs $56.008M* (miss of ~$2.42M). Management cited ~$0.03 per-share nonrecurring financing costs that pressured NII this quarter .
  • Balance sheet optimization continued: $300M unsecured notes (6.65% swapped to SOFR+230 bps), CLO-1 reset (AA tranche to SOFR+143 bps), reducing weighted average debt spread to SOFR+202 bps and diversifying funding; available liquidity was $222M at quarter-end .
  • Credit metrics remained resilient: first-lien debt at 90.5% of the portfolio, non-accruals at 0.4% of FV (two names), WA internal risk rating steady at 4.1; leverage increased to 1.31x D/E (1.25x net) in line with operating near the upper end of the 1.0–1.25x target .
  • Management expects limited direct tariff impact (high-risk exposure <10% of portfolio; >90% domestic revenues), and sees potential for modest spread widening and improved lending terms if volatility persists .

What Went Well and What Went Wrong

What Went Well

  • Portfolio resilience and diversification: 210 portfolio companies, top 10 only 13.0% of FV; 90.5% first-lien debt and 94.6% floating-rate debt provide defensive positioning .
  • Liability management lowered borrowing costs: inaugural $300M unsecured notes (swapped to floating), termination of Wells Fargo facility, and CLO-1 reset reduced the weighted average spread to SOFR+202 bps and extended reinvestment periods .
  • Dividend stability and shareholder returns: paid Q1 regular $0.45 and final $0.10 special distribution (12.4% total annualized distribution yield based on Q1 NAV); declared Q2 regular dividend of $0.45 . “We continue to feel good about our ability to cover the dividend for the foreseeable future” — CFO Shai Vichness .

What Went Wrong

  • NII and investment income pressure: NII per share declined to $0.53 (from $0.56) and investment income fell to $53.586M (from $57.076M) largely on lower base rates; ~$0.03 per-share nonrecurring financing costs further reduced NII .
  • Valuation headwinds: net realized/unrealized losses of $(12.431)M, or $(0.24) per share, driven by underperformance in certain watchlist names; NAV per share fell to $17.96 .
  • Estimate misses: EPS and investment income both came in below S&P Global consensus; EPS miss of ~$5.8% and investment income miss of ~$4.3% (see Estimates Context) *.

Financial Results

Quarterly Trends (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Investment Income ($USD Thousands)$60,281 $57,076 $53,586
Net Investment Income per Share ($)$0.58 $0.56 $0.53
Net Realized & Unrealized Gains (Losses) per Share ($)$0.09 $(0.02) $(0.24)
Net Increase in Net Assets from Operations per Share ($)$0.67 $0.54 $0.29
NAV per Share ($)$18.15 $18.18 $17.96
Annualized ROE on NII (%)12.6% 12.4% 12.1%
Annualized ROE on NI (%)14.7% 12.1% 6.6%
Net Interest Margin (bps)330–340 (approx; FV yield 10.9%, avg cost ~7.7% implied) 323 360

Q1 2025 vs Wall Street Consensus (S&P Global)

MetricActual Q1 2025Consensus Q1 2025Surprise
Primary EPS ($)$0.53 $0.563*-$0.033 (~-5.8%)
Investment Income ($USD)$53,586,000 $56,007,500*-$2,421,500 (~-4.3%)
# EPS Estimates—6*—
# Investment Income Estimates—4*—

Values marked with * retrieved from S&P Global.

Portfolio Composition & Balance Sheet (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Investments at Fair Value ($USD Thousands)$2,046,887 $2,081,379 $2,077,570
Portfolio Companies (#)202 210 210
First-Lien Debt (% FV)90.1% 90.6% 90.5%
Subordinated Debt (% FV)8.3% 7.7% 7.8%
Equity Investments (% FV)1.7% 1.8% 1.7%
Floating-Rate Debt (% FV)94.3% 94.7% 94.6%
Weighted Avg Yield, at Cost (%)10.9% 10.3% 10.1%
Weighted Avg Yield, at FV (%)10.9% 10.4% 10.2%
Non-Accruals (% FV)~0.5% 0.1% 0.4%
Debt-to-Equity (x)1.11x 1.15x 1.31x
Net Debt-to-Equity (x)1.03x 1.10x 1.25x
Liquidity ($USD Millions)$361 $250 $222
Weighted Avg Internal Risk Rating4.2 4.1 4.1

Credit & KPI Trends (oldest → newest)

KPIQ3 2024Q4 2024Q1 2025
Net Leverage (Portfolio Companies) (x)4.9x 4.9x 4.9x
Interest Coverage (First-Lien TMM) (x)2.1x 2.2x 2.4x
Weighted Avg New Floating Spread (basis points)~500 ~459 ~481
Weighted Avg Coupon on New Fixed (%)13.67% 12.00% 12.57%
Gross Commitments ($USD Thousands)$225,612 $162,663 $166,239
Net Funded Investment Activity ($USD Thousands)$47,543 $31,642 $4,669

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Regular Dividend per Share ($)Q2 2025$0.45 (Q4’24 declared for Q1’25) $0.45 declared for Q2’25 Maintained
Supplemental/Special Dividends20254×$0.10 special (last paid Apr 28, 2025); thereafter supplemental targeting ~50% excess earnings Final $0.10 paid; continue supplemental approach Transition completed
Leverage Target (Debt-to-Equity)Ongoing1.0–1.25x; operate near upper end Maintain at upper end; not moving higher Maintained
Liability Cost Outlook2025Reprice revolver to SOFR+200 bps; evaluating unsecured/CLO reset Achieved SOFR+202 bps weighted average after CLO reset and notes issuance Improved
Share Repurchase AuthorizationThrough 2026$99.3M plan; $57.6M used through Feb 25, 2025 Extended 12 months; ~$84.5M used through May 2, 2025; ~$50M remaining Extended/Active

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4 2024)Current Period (Q1 2025)Trend
Tariffs/MacroMonitoring policy changes; core middle market largely insulated Portfolio review shows high-risk exposure <10%; >90% domestic revenues; expect limited direct impact; spreads could modestly widen with volatility Heightened vigilance; early insulation; potential pricing tailwind
Spreads/PricingTraditional MM spreads stabilized at ~475–500; BSL tighter New floating ~481 bps; anticipate modest widening if volatility persists Slight downtrend Q4→Q1; potential widening ahead
Leverage/Balance SheetTarget 1.0–1.25x; rising within range; revolver repriced 1.31x D/E (1.25x net); maintain upper end; not taking higher At upper end; disciplined stance
Liability ManagementPlanning unsecured issuance and CLO reset Executed $300M notes; CLO-1 reset; reduced WACD to SOFR+202 bps Achieved and improved
Credit QualityNonaccruals declined to 0.1% FV in Q4; watch list ~5.9% Nonaccruals 0.4% FV (two names); WA risk rating 4.1 Slight deterioration but still low
Portfolio Mix90%+ first lien; rotation from UMM to TMM 90.5% first lien; continued rotation; sold ~$65M UMM in Q1 Stable senior focus; rotation ongoing
Share Repurchases$57.6M used through Feb; plan effective ~$84.5M used through May; ~$50M remaining; program scales with discount Increased activity at wider discount

Management Commentary

  • “We generated net investment income of $0.53 per share which was impacted by onetime interest and debt financing expenses totaling $0.03 per share” — CEO Ken Kencel .
  • “We issued $300 million of unsecured notes and refinanced one of our CLOs allowing us to reduce our borrowing costs going forward” — CFO Shai Vichness .
  • “Our portfolio is highly diversified… only 0.4% of the total portfolio on non-accrual status… we remain focused on maintaining underwriting discipline” — CEO Ken Kencel .
  • “High-risk exposure is limited to less than 10% of our overall portfolio… we believe we are well insulated from the direct impact of tariffs” — CEO Ken Kencel .

Q&A Highlights

  • Dividend coverage: Management reiterated confidence in covering the $0.45 regular dividend post-fee changes; sees levers to support incremental NII via rotation, potential spread widening, and liability management .
  • Buyback strategy: Authorization extended 12 months; program scales purchases as discount widens; ~$35–40M in Q1 and ~$50M in Q2 through early May; ~$50M remains .
  • Leverage stance: Comfortable operating at upper end of 1.0–1.25x; not planning to take leverage higher; will use rotation and repayments to stay opportunistic .

Estimates Context

  • EPS: Actual $0.53 vs consensus $0.563*; miss of ~$0.033 per share (~5.8%) — nonrecurring ~$0.03 per-share financing costs were a headwind this quarter .
  • Investment income: Actual $53.586M vs consensus $56.008M*; miss of ~$2.42M (~4.3%).
    Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • NCDL delivered stable NII and maintained the regular dividend despite lower base rates and nonrecurring financing costs; ongoing dividend coverage remains a focal point supported by rotation into higher-spread TMM assets and liability cost reductions .
  • The quarter’s estimate misses appear driven by base-rate declines and one-time costs; absent the ~$0.03 per-share nonrecurring items, NII per share would have aligned with Q4 levels, narrowing the EPS gap .
  • Balance sheet optimization is tangible: reduced borrowing spreads (to SOFR+202 bps) and diversified funding should support net interest margin and earnings durability into 2H 2025 .
  • Credit remains resilient with low nonaccruals (0.4% FV), stable WA risk rating (4.1), and senior-first lien mix at ~90%; watchlist modestly higher but within manageable bounds .
  • Active buyback at a discount to NAV is accretive; ~$84.5M repurchased to date and ~$50M authorization remaining provides a supportive technical for the stock .
  • Macro/tariffs: management’s borrower-by-borrower assessment suggests limited direct impact; should volatility persist, expect modest spread widening and improved terms—a potential tailwind for forward NII .
  • Near-term trading: watch for signs of spread widening, additional CLO refinancings, and continued rotation away from UMM; medium-term, stable dividend and credit quality underpin the thesis while NAV accretion from buybacks offers upside .
Note: All document-based figures and statements are cited. Values marked with * retrieved from S&P Global.