Nuveen Churchill Direct Lending Corp. (NCDL) Earnings

Management highlights

### Financial Results - Q2 2026 net investment income was 41 cents per share, fully covering the 36 cents per share base quarterly distribution; net income was 7 cents per share, including 34 cents per share in net realized and unrealized losses. - Total investment income declined to $44.3 million from $46.3 million in Q1 2026, driven by a modestly smaller portfolio and slightly lower portfolio yields. - Net asset value (NAV) per share was $17.19 at quarter end, a 1.8% decline from $17.50 in Q1, driven by realized and unrealized losses on a small number of underperforming assets. - The board declared a Q3 2026 distribution of 38 cents per share, consisting of a 36 cent base distribution and 2 cent supplemental distribution. ### Portfolio and Market Activity - Q2 2026 gross originations at NCDL were $12.1 million, down from $82.9 million in Q1, an intentional slowdown to manage leverage toward target range plus transaction timing (Q2 underwritten deals closed in July). Across the broader Churchill platform, over 80 transactions totaling $4.3 billion were closed/commitments, outperforming broader market trends. - Investment fundings totaled $24.8 million, while sales and repayments totaled $67.5 million (a 3.4% quarterly runoff rate, below the long-term 5% target due to muted private equity M&A activity). - Direct lending spreads widened early in Q2 but stabilized at 475-500 bps over for traditional first lien loans; weighted average yield on debt investments remained 9.3% quarter over quarter. - The portfolio is well-diversified: 244 portfolio companies, top 10 holdings represent 13% of total fair value, maximum single exposure is 1.6% and average position size is 0.4%. Software exposure is just 2.4% of fair value, a deliberate choice to avoid high-leverage, high-disruption risk from AI innovation. ### Credit Quality - Non-accrual assets increased to 2.7% of the portfolio on a cost basis (1.5% on a fair value basis), up from 1.3% (0.6%) in Q1, but remain well below current BDC industry averages and long-term historical averages. - The internal watch list (risk rating 6+) increased to 10.8% of fair value from 8.4% in Q1, consistent with long-term historical averages. - Core credit metrics remain strong: portfolio company average total net leverage is 5.2x, and interest coverage improved to 2.5x from 2.3x in Q1, reflecting conservative underwriting standards. ### Capital Structure and Strategic Initiatives - Gross debt-to-equity was 1.29x at quarter end, net debt-to-equity was 1.23x, within the target 1-1.25x range. - Post-quarter end, NCDL redeemed its $297.9 million CLO3 at par and completed a $100 million tap of its 2030 unsecured notes (100% purchased by parent TIA), bringing total unsecured notes to $400 million (41% of outstanding debt) and maintaining a pro forma weighted average cost of debt of SOFR + 188 bps, unchanged from last quarter. - Post-quarter end, NCDL closed a joint venture with an institutional partner with a $106 million total equity commitment (NCDL contributes 87.5%). The JV was seeded with $150 million of first lien loans, will target a $300 million total portfolio with ~2x leverage, and is expected to be accretive to long-term earnings while providing incremental deal pipeline capacity.

Guidance

Management did not issue formal numerical guidance, but provided the following forward-looking outlooks: - Transaction activity has rebounded to more normalized levels in June and July 2026 after a slow Q2, and the firm expects to continue actively reinvesting repayment proceeds into high-quality core middle market assets to maintain leverage at the upper end of the target range. - The joint venture is expected to be fully ramped to its $300 million target portfolio size within 12 months of closing. - The firm maintains a long-term optimistic outlook for the private credit industry, and expects its focus on the core traditional middle market to continue delivering structural advantages and compelling risk-adjusted returns. - The portfolio allocation target will remain roughly 90% senior secured first lien loans, with a marginal shift in incremental new deployment toward equity over junior debt to capture future NAV appreciation.

Segment performance

NCDL reports segment allocation by asset class rather than product segments: 1. First lien loans: Represented 89.6% of the total $1.9 billion fair value investment portfolio at June 30, 2026, contributing the majority of investment income with an average spread of 475 bps and a weighted average overall portfolio yield on debt investments of 9.3%. 2. Junior debt: Comprised 7.3% of the total portfolio fair value, with $1.4 million of Q2 2026 gross originations. 3. Equity positions: Made up 3.1% of the total portfolio fair value, with $4.8 million of Q2 2026 gross originations, and the firm is intentionally increasing equity allocation marginally for capital appreciation.

Risks & headwinds

- Elevated public market volatility, ongoing geopolitical tensions, and negative market sentiment around private credit have created market uncertainty, and have contributed to muted private equity M&A and LBO volume in the first half of 2026. - Persistent inflation above the Federal Reserve's target and a resilient labor market have shifted rate expectations, with markets now pricing in potential rate cuts rather than the earlier expected rate cuts, creating a higher-for-longer rate environment that can challenge leveraged borrower performance. - AI-driven disruption poses unquantified uncertainty for technology and software sector borrowers, though NCDL's low software exposure mitigates this risk. - Increased redemption activity in private BDCs has created negative market narrative that disconnects from underlying portfolio fundamentals. - The addition of four new non-accrual assets and the increase in the watch list percentage, while still within historical ranges, creates downside risk to NAV and earnings if these underperformers do not stabilize.

Analyst Q&A

• Q: How does management balance the choice to allocate incremental new capital to equity for NAV appreciation versus junior debt for immediate yield pickup? /

  A: The core portfolio focus remains 90% senior secured first lien loans, which management views as a highly attractive attractive risk-adjusted trade. The shift toward more equity allocation is a marginal change: equity positions from prior investments are maturing, creating opportunities for capital gains that can be redeployed into new deal flow. The firm is only slightly de-emphasizing junior debt, and still actively allocates capital to the segment, with roughly 40% of Q2 deployment going to junior debt. Additional equity opportunities also come from attractive co-investments with high-quality middle market private equity funds the firm already has long-term relationships with.

• Q: What is the timeline to ramp the new joint venture, how do the JV asset yields compare to NCDL's balance sheet assets, and what is the expected ROE profile? /

  A: The JV was seeded with $150 million of existing first lien loans at launch and is targeting a $300 million total portfolio. Management expects to reach this full target within 12 months. JV assets will be nearly 100% senior secured first lien loans, identical in profile to the assets NCDL holds on its own balance sheet, with similar yield characteristics. The JV will use ~2x leverage, which will generate incremental accretive returns for NCDL.

• Q: Can management provide additional context on the quarter's increase in non-accruals and the higher watch list percentage? Are there industry or credit trends driving this increase? /

  A: The four new non-accrual additions are all completely idiosyncratic, company-specific situations across four different industries with no unifying theme, industry trend, or connection to AI disruption. All four have ongoing incremental capital and support from their private equity sponsors, as expected. Even with the quarterly increase, non-accrual and watch list percentages remain well below BDC industry averages and in line with NCDL's own long-term historical averages, so performance remains solid on a relative basis.