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Nuveen Churchill Direct Lending Corp. (NCDL)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 performance was solid but mixed: Primary EPS (NII/share) was $0.46, essentially in line with S&P Global consensus $0.463*, while investment income of $53.1M was ~2% below the $54.2M consensus*, driven by lower average balances and higher fees after fee waivers expired .*
  • NAV/share slipped modestly to $17.92 from $17.96 in Q1, as $0.46 of NII and $0.45 of distributions were offset by $(0.14) of net realized/unrealized losses; annualized ROE on NII was 10.3% .
  • Credit remained resilient: first-lien exposure at 90%, weighted avg. yield at cost ~10.1%, and non-accruals at just 0.2% of fair value (down from 0.4% in Q1) across 207 companies; risk rating steady at 4.1 .
  • Balance sheet/capital actions: leverage reduced to 1.26x (from 1.31x in Q1); ~$304M liquidity; completed the $99.3M buyback (~5.9M shares) in July; declared Q3’25 dividend of $0.45 .
  • Key catalysts: durability of dividend coverage despite fee step-ups, ongoing portfolio rotation toward core middle market, and pristine non-accruals; watch the pace of originations, spread trends, and any further liability cost optimization .

What Went Well and What Went Wrong

  • What Went Well

    • Non‑accruals improved to 0.2% of FV with no new non‑accruals in the quarter; weighted average risk rating steady at 4.1, underscoring stable credit quality .
    • Capital return and balance sheet strength: completed $99.3M buyback (~5.9M shares) and ended with ~$304M of liquidity and no near-term maturities .
    • Management emphasized portfolio resilience: “Our portfolio remains healthy, with a low non-accrual rate of 0.2% on a fair value basis… As we look to the remainder of the year, we remain focused on maintaining our highly disciplined approach to underwriting…” (Ken Kencel) . CFO added, “With over $300 million of liquidity and no near-term debt maturities, we remain well-positioned…” .

  • What Went Wrong

    • Earnings pressure from higher fees and one-time financing costs: NII/share fell to $0.46 (from $0.53 in Q1) as expenses rose ~16% with base management fee stepping to 1% and incentive waivers ending; $0.03/share from accelerated financing costs also weighed on the quarter .
    • Investment income softened ~6% QoQ on slightly lower average balances and flat yields amid a small decline in SOFR, contributing to an investment income miss vs. consensus* .*
    • Valuation marks: net realized and unrealized losses of $(0.14)/share (including a loss on an underperformer) pressured net income and NAV trajectory .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Investment income ($M)$55.089 $53.586 $53.132
Primary EPS (NII/share)$0.57 $0.53 $0.46
Net income per share$0.37 $0.29 $0.32
NAV per share$18.03 $17.96 $17.92
Annualized ROE on NII12.6% 12.1% 10.3%
Total distributions/share$0.55 $0.55 $0.45

KPIs and Portfolio

KPIQ2 2024Q1 2025Q2 2025
Investments at FV ($B)$1.991 $2.078 $1.993
Portfolio companies (#)198 210 207
First‑lien debt (% FV)90.6% 90.5% 90.0%
WA yield at cost11.3% 10.1% 10.1%
Debt‑to‑equity1.04x 1.31x 1.26x
Net interest margin—360 bps 358 bps
Non‑accruals (% FV)—0.4% 0.2%

Results vs. S&P Global Consensus (Q2 2025)

ItemActualConsensusSurprise
Primary EPS (NII/share)$0.46 $0.463*In line
Investment income ($M)$53.1 $54.19*−$1.1M (~2% miss)

*Values retrieved from S&P Global.

Notes:

  • Company also disclosed $0.03/share of non‑recurring financing cost acceleration; excluding this, management indicated underlying NII would be $0.49 and referenced a “consensus of $0.56” on their slide, but we anchor to S&P Global consensus above .*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Regular dividendQ3 2025$0.45/share (maintained through Q1–Q2’25) $0.45/share declared (payable Oct 28; record Sep 30) Maintained
Target leverageOngoingOperate within 1.0x–1.25x; comfortable near upper end Maintain target range; positioned to operate within it Maintained
Share repurchase plan12‑mo authorization$99.3M authorization outstanding (Q1) Completed on July 21, 2025; ~5.9M shares repurchased Completed

Earnings Call Themes & Trends

Note: A Q2 2025 earnings-call transcript was not available in our corpus; we use Q1 2025 and Q4 2024 calls for trend context.

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
Portfolio credit qualityNon‑accruals down to ~0.1% FV; WA risk rating ~4.1; diversified portfolio 0.4% FV on non‑accruals; risk rating 4.1; watchlist ~6.7% FV Non‑accruals 0.2% FV; WA risk rating 4.1 Stable/Healthy
Tariffs / macroMonitoring policy shifts; expect continued resilience Detailed tariff impact analysis; high‑risk exposure <10% of portfolio; largely domestic revenue base No new tariff details in release; continued disciplined underwriting Vigilant; de‑risked
Spread/yield dynamicsSpreads stabilized at 475–500; yields down with SOFR declines Spreads ~475; yields at cost ~10.1% (down slightly); expect modest widening if volatility persists WA yield at cost 10.1%; yields largely flat QoQ Stable to slightly lower
Capital structure & costsOptimizing: revolver repriced; later issued $300M unsecured notes; CLO reset planned $300M unsecured due 2030; CLO‑I reset; avg spread on debt reduced from +214 bps to +202 bps Unsecured 27% of debt; ample liquidity; financing mix detailed; swap on notes active Improving cost mix
Portfolio rotationEmphasis on core middle market; rotate from upper MM/BSL Continued rotation; ~$65M UMM sales in Q1 Net funded activity −$81M; new commitments $48M; core focus maintained Ongoing rotation
Shareholder returns$0.45 regular + special payouts; buyback active $0.45 regular + final $0.10 special in April; buyback extended Q3’25 $0.45 dividend declared; $99.3M buyback completed Maintained returns

Management Commentary

  • CEO Ken Kencel: “Our portfolio remains healthy, with a low non-accrual rate of 0.2% on a fair value basis, and no new non-accruals during the quarter… we remain focused on maintaining our highly disciplined approach to underwriting…” .
  • CFO Shai Vichness: “We completed our nearly $100 million share repurchase program in July… With over $300 million of liquidity and no near-term debt maturities, we remain well-positioned…” .
  • Q1 context on dividend coverage and levers: “We continue to feel good about our ability to cover the dividend… there is an opportunity… to drive some incremental earnings… rotation trade… and liability management to bring down our cost of financing” .

Q&A Highlights

The Q2 2025 transcript was not available in our corpus. For context, Q1 2025 Q&A indicated:

  • Dividend coverage remains a focus; management expects to cover the $0.45 regular dividend and sees levers in spread opportunities, portfolio rotation, and financing costs .
  • Leverage policy: operate at the upper end of 1.0x–1.25x but not materially higher; use rotation and repayments to remain opportunistic .
  • Market dynamics: competitive spreads roughly ~475–500 bps; potential for widening if volatility persists; focus remains on high‑quality, largely domestic, service‑oriented credits (software/healthcare/business services) .

Estimates Context

  • S&P Global consensus for Q2 2025 Primary EPS (NII/share) was $0.463; NCDL reported $0.46, essentially in line*. Investment income consensus was $54.19M vs. actual $53.13M (≈2% miss)* .*
  • Company identified $0.03/share non‑recurring financing cost acceleration; excluding this, underlying NII would have been higher, but we anchor to reported GAAP and S&P consensus for comparisons .*
  • Implication: Modest estimate risk downward on investment income if yields/base rates drift lower and balances remain below Q1 levels; EPS trajectory should benefit from liability cost actions and portfolio rotation if originations/risk remain disciplined .*

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Dividend appears well-supported by NII even post fee step-up; management reaffirmed focus on coverage and maintained the $0.45 dividend into Q3’25 .
  • Credit quality remains a differentiator: minimal non‑accruals (0.2% FV), diversified book, and stable risk ratings should limit downside in a softer macro .
  • Near‑term earnings headwinds (higher fees, one‑time financing costs, slightly lower balances) are tactical; structural tailwinds include optimized funding (CLO reset, unsecured mix) and ongoing rotation to higher‑spread core MM loans .
  • Watch spread trends and base rate path: yields were flat QoQ but below prior year; incremental widening would benefit asset yields, while lower SOFR pressures top line .
  • Completed buyback provides per‑share support; with liquidity of ~$304M and leverage at 1.26x, balance sheet remains positioned to fund selective growth and commitments .
  • NAV drift modestly lower despite low credit losses; valuation marks remain the swing factor for GAAP earnings, but income engine and capital actions help stabilize NAV over time .
  • Trading implication: Narrative centers on durable income and credit quality over growth; catalysts include sustained dividend coverage, evidence of spread tailwinds, and further liability cost optimization .