Welcome to Nuveen Churchill Direct Lending Corp's Third Quarter 2025 Earnings Call. As a reminder, this conference call is being recorded for replay purposes. I would like to turn the conference over to Robert Paun, Head of Investor Relations for NCDL. Robert, please go ahead.

Good morning, and welcome to Nuveen Churchill Direct Lending Corp's Third 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. 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. Good morning, everyone, and thank you all for joining us today. Today, I will start by discussing our results for the third quarter. And then I'll discuss current market conditions, our origination activity, portfolio positioning and our forward outlook. Following my comments, I will hand the call over to Shai for a more detailed discussion of our financial performance. This morning, we reported net investment income of $0.43 per share during the third quarter compared to $0.46 per share in the second quarter. Gross originations totaled approximately $29 million in the quarter compared to $48 million in the second quarter of this year. Similar to the prior quarter, the decline quarter-over-quarter was intentional as we continue to operate towards the higher end of our target leverage range. As I will discuss later in my prepared remarks, the Churchill platform continued to see strong asset growth and new originations during the quarter. Our investment portfolio remains healthy, and our portfolio companies continue to perform well, largely due to the strength of our Senior Loan Investments. Net asset value was $17.85 per share as of September 30 compared to $17.92 per share as of June 30. The modest decline quarter-over-quarter was primarily due to a slight decrease in the fair value of certain underperforming portfolio companies. Turning to the current market environment, M&A activity continued its positive momentum in the third quarter, building on the rebound in market sentiment that began towards the end of the second quarter. Investment activity has now returned to a more normalized level, following the pause in activity after a Liberation Day. Stabilizing market conditions and renewed sponsor confidence in the macro environment contributed to increased transaction execution. During the third quarter, the Federal Reserve began an interest rate cut cycle with a 25 basis point cut in September and another 25 basis point cut in October, with further rate cuts anticipated but not guaranteed. Against this backdrop, with a predominantly floating rate portfolio, NCDL and other private credit funds are interest rate sensitive. Partially offsetting this dynamic, NCDL has the benefit of a floating rate debt capital structure as well as a lower interest burden for our portfolio companies. We believe the latter should drive growth dynamics as portfolio companies will have more capital and cash flow to reinvest into growth areas of their respective businesses. In addition, a lower interest rate environment typically encourages increased M&A activity due to lower financing costs for private equity-backed businesses. Despite the potential for further rate reductions, we continue to see an attractive risk-return profile for private credit and direct lending, especially on a relative basis compared to other fixed income asset classes. We also witnessed significant market volatility in private credit funds, particularly BDC stock prices over the past several weeks, following significant media attention given to two large bankruptcies. We want to make it clear that NCDL and any other Churchill vehicles do not have any exposure to either of these two investments, Tricolor and First Brands. We also do not see any evidence of broad-based challenges across our portfolio. At Churchill, we focus on sponsor-backed businesses with significant equity cushions, and we have long-standing experience focusing on less cyclical, more defensive end markets that demonstrate resilience across market cycles. As we continue to end the year strong and look towards 2026, we remain optimistic about the long-term prospects of the company given our positioning as a leader in the core middle market. Our long-standing performance track record, deep network of sponsor relationships and extensive LP commitments across the broader Churchill platform, and we remain intensively focused on continuing to invest in high-quality assets and deliver attractive risk-adjusted returns to our shareholders. Now turning to our investment activity, as I mentioned earlier, our pipeline for new deal flow started to increase and returned to a more normalized level in June of this year, following the temporary pause in April and May. During the third quarter, we continued to see an increase in transaction activity, particularly new deals for high-quality assets that are in resilient, non-tariff exposed sectors. At the Churchill platform level, the number of deals reviewed in the third quarter increased 22% from the second quarter of this year. And in the first nine months of Churchill closed or committed $9.4 billion across 265 transactions, driven by a record-setting first quarter and a resurgence of activity in the third quarter. During the third quarter at NCDL, we continued to reduce allocation sizes to new deal flow, primarily due to the fact that we are operating at the high end of our target leverage range. With that said, we continue to benefit from attractive opportunities and activity at the Churchill platform level. Although the percentages of allocation to junior capital and equity were higher during the quarter, we remain focused on senior lending, which represents approximately 90% of the fair value of the overall portfolio. We also remain focused on the traditional core middle market, benefiting from our differentiated sourcing and long-term track record. We continue to target companies with $10 million to $100 million of EBITDA, which we believe helps insulate us from the more aggressive structures and loosening terms prevalent in the upper middle market and broadly syndicated loan space. It is our view that risk-adjusted returns in this segment of the market remain among the most compelling in private credit, particularly for scaled, highly selective managers with deep private equity relationships. We see the core middle market as a durable opportunity to generate great long-term value and enhanced portfolio diversification for our investors. In terms of our portfolio and credit quality, the continued strength of our portfolio reflects healthy overall performance from our borrowers as well as the quality of deal flow we've experienced over the last several years. In addition, our rigorous underwriting high level of selectivity and focus on diversification have been critical to minimizing losses and generating strong returns across multiple market cycles. That same discipline extends to today's shifting macro landscape. As of September 30, our weighted average internal risk rating was 4.2, versus an original rating of 4.0 for all of our investments at the time of origination, and our watch list remains at a very manageable level of approximately 7% of fair value. Credit fundamentals within the NCDL portfolio remain strong with portfolio company total net leverage and interest coverage of 2.3x on traditional middle market first lien loans. These metrics are a direct result of conservative structuring and relatively low attachment points that we target when underwriting new transactions. NCDL had two new nonaccruals during the third quarter, which were relatively smaller positions in the portfolio. Despite the slight increase in nonaccruals this quarter, we believe our percentages continue to compare extremely well versus BDC industry averages. As of September 30, nonaccruals represent just 0.4% of our total investment portfolio on a fair value basis and 0.9% on a cost basis. We believe the strength of our platform, including experienced workout and portfolio management teams, will continue to drive favorable results. Portfolio diversification remains a key focus of ours within our overall 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 PE relationships. As of September 30, we had 213 companies in our portfolio, and our top 10 portfolio companies represented less than 14% of the 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, we continue to have an optimistic outlook for private credit based on significant tailwinds to our business. We are encouraged by the steady growth in our pipeline and the quality of businesses seeking financial solutions. Following a period of uncertainty and volatility in the markets driven by Liberation Day, in which investment activity and deal flow came to a pause, we've experienced a resurgence of M&A activity leading to the buildup in our traditional middle market pipeline. Additionally, we believe corporate management teams are now more focused on long-term strategic initiatives and investing in their businesses for sustained growth. This, coupled with an interest rate cut cycle, will lead to increasing deal flow and financing opportunities in 2026 in our view. We believe we remain well positioned due to our scale, our differentiated sourcing as an LP in over 325 private equity funds, and our nearly 20-year track record of investing across interest rate and economic cycles. And now I'll turn the call over to Shai to discuss our financial results in more detail.

Thank you, Ken, and good afternoon, everyone. I will now review our third quarter financial results in more detail. During the third quarter, NCDL reported net investment income of $0.43 per share compared to $0.46 per share in the second quarter of 2025. The decline was largely due to lower interest income driven in part by the two nonaccruals we added in the quarter. Total investment income declined slightly quarter-over-quarter to $51.1 million in the third quarter compared to $53.1 million in the second quarter of this year. This was largely driven by the modest decline in the size of our investment portfolio and a modest decline in portfolio yields as a result of underlying loan contracts resetting to lower base rates. At September 30, our gross debt-to-equity ratio was 1.25x compared to 1.26x at June 30. Our net debt-to-equity ratio, net of cash, was 1.2x compared to 1.21x at June 30 of this year. In October, we paid a regular dividend of $0.45 per share, which equates to an annualized yield of approximately 10% on our quarter-end net asset value per share. For the fourth quarter, we have declared a $0.45 per share quarterly dividend, which is consistent with prior quarters. Our total GAAP net income in the third quarter was $0.38 per share compared to $0.32 per share in the second quarter of this year. Our third quarter net income included $0.05 per share of net realized and unrealized losses primarily due to a decrease in the fair value of certain underperforming portfolio companies, partially offset by the realization of an equity investment in the gain. Our net asset value was $17.85 per share at the end of the third quarter compared to $17.92 per share at June 30. NCDL's investment portfolio had a fair value of $2 billion at September 30, consistent with the prior quarter. Gross originations totaled approximately $29 million, and gross investment fundings totaled approximately $36 million compared to $48 million and $81 million of gross originations and gross investment fundings, respectively, in the second quarter of this year. During the third quarter, repayments totaled 3%, which is lower than our long-range assumption of 5% per quarter. We had full repayments on four deals totaling $42 million and partial repayments for another $18 million. On a net basis, we saw a reduction in our funded investment portfolio of approximately $25 million. This reduction was intentional as we redeployed capital received from repayments with a view towards maintaining leverage at the upper end of our target range. As we look forward, we expect to continue to redeploy capital received in connection with repayments into traditional middle market transactions across the capital structure. At the end of the third quarter, our total investment portfolio consisted of 213 names compared to 207 names at the end of the second quarter. We continue to remain highly focused on portfolio diversification with the top 10 portfolio companies comprising only 13.6% of the fair value of the portfolio. Our largest exposure is only 1.6% of the total portfolio, and our average position size remains at 0.5%. Diversification continues to be a key focus of ours within the investment portfolio. In terms of deployment and asset selection, our new originations during the quarter were weighted towards senior loans with $22 million out of the $29 million of gross originations deployed into this strategy. The balance was deployed into subordinated debt and equity during the quarter. Our focus on the traditional middle market segment will benefit NCDL shareholders, we believe, as we see meaningfully higher spreads and tighter documentation terms in the traditional middle market compared to the upper end of the middle and BSL markets. Spreads on new investments during the quarter were slightly down from the prior two quarters, with the average spread on first lien loans at 470 basis points compared to 480 basis points in the first two quarters of the year. Our weighted average yield on debt and income-producing investments at cost declined to 9.9% at the end of the quarter compared to 10.1% at the end of the second quarter. This decrease in yield was primarily due to overall tightening of spreads in newly originated investments as well as lower base interest rates. In terms of portfolio allocation, at the end of the third quarter, first lien loans represented approximately 90% of the total portfolio, while junior debt and equity comprised approximately 8% and 2%, respectively. Our allocation strategy remains unchanged as we continue to target 85% to 90% senior loans with the balance allocated to junior debt and equity. Turning to credit quality, we continue to be pleased with the health of our investment portfolio. Although we placed two smaller investments on nonaccrual status during the quarter, the overall performance of our portfolio companies continues to be strong. At the end of the third quarter, NCDL had three names on nonaccrual, representing just 0.4% on a fair value basis and 0.9% at cost. This compares to 0.2% on a fair value basis and 0.4% at cost at the end of the second quarter. Our weighted average internal risk rating was 4.2% at September 30, and our watch list, consisting of names with an internal risk rating of 6 or worse, remains at a relatively low level of 7.3% at the end of the third quarter, in line with the prior quarter. And finally, our conservative approach to underwriting is highlighted by our weighted average net leverage across the portfolio of 5x and interest coverage of 2.3x at the end of the third quarter. With respect to our capital structure, on the right-hand side of our balance sheet, our debt-to-equity ratio at September 30 is relatively unchanged quarter-over-quarter at 1.25x compared to 1.26x at June 30. And on a net basis, was 1.2x at September 30, net of our cash position at quarter end. As we spoke about on prior calls, our goal is to redeploy capital received from repayments and maintain leverage towards the upper end of our target range of 1 to 1.25x debt to equity. Lastly, 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 into high-quality assets. I'll now turn it back to Ken for closing remarks.

Thank you, Shai. In closing, we are pleased with our financial results and the performance of our portfolio during the third quarter. As we enter the last two months of the year and look towards 2026, NCDL remains well positioned with respect to our experienced investment team, high-quality diversified portfolio and strong capital structure. And we continue to remain optimistic about the long-term future of the private credit markets and NCDL's long-term success based on the successful track record of the Churchill platform and operating across various market conditions and cycles. Additionally, with NCDL's shares trading at a material discount to our net asset value and around a 12% annualized yield, we continue to view the shares as an attractive investment opportunity. Thank you all for joining us today and your interest in NCDL. I will now turn the call over to the operator for Q&A.

Our first question is from Brian McKenna with Citizens JMP.

Okay. Great. So just on the few nonaccruals in the portfolio today, I'm curious, when were these investments made? And I guess, looking back to the time of underwriting, what's changed relative to those initial expectations? And why did those assets ultimately underperform.

Brian, it's Shai. So just a couple of things on the two new nonaccruals. So I think as we've spoken about in the past, just in terms of the names that are on the nonaccrual list and sort of trying to draw through lines in terms of themes, I would say, fairly difficult to do that just given the idiosyncratic nature of some of these and as they pop up. And in terms of these two names that were placed on nonaccrual, you heard Ken speak about them on the call, just in terms of the size of the position being relatively small, speaking to the sort of diversification points across the portfolio. Both of these positions were junior capital names that were placed on the nonaccrual list this quarter. One of them is in the automotive market accessory segment, and the other one is essentially in the freight sector as a training business and recruiting business for truck drivers. So again, no real theme to draw in terms of the two new nonaccruals. In terms of when the investments were made again, they have been in the portfolio for a couple of years now. So the decline and just sort of the trend, I would say, on the one hand, the overall freight reception and just sort of what we're seeing, and we've had another nonaccrual and restructuring in the portfolio in the same industry. I would say that's sort of the theme there. And then the other one, it's really just a function of softness on the top line in terms of performance. Both of these investments were made actually in 2021. So they've been around for quite a bit, and the decline got to a point now where we felt it was appropriate to place them on nonaccrual status.

Okay. That's helpful. And then just on the workout process more broadly, how long does it typically take to restructure a loan in the portfolio and then ultimately get to a resolution? And then can you just remind us what the historical recovery rates for your business look like?

Yes. I can address both. So just in terms of the timing, it's obviously going to vary depending on the severity of the situation and sort of the engagement with the private equity sponsor and the ultimate prospects for recovery of the underlying business. So it's a tough one to answer in terms of how long it takes. But clearly, it can be a few month process. It can take as long as a year to sort of work through the restructuring, and then the timing to recovery is clearly going to be market and company-specific in terms of how well that takes. So it's sort of a tough one to vector in on a specific timeline. And then in terms of the recovery rates in the portfolio, again, they tend to vary depending on the situation and depending on our spot in the capital structure. So for senior loans, we have a number of instances where recoveries have been in excess of par. We have others where they've been in the 70s and 80s and others that have been lower. For junior capital, I would say it tends to be a bit more binary, the situation works out or it doesn't, and we tend to be sort of in that fulcrum security where we're then riding the equity upside in the future. So again, it's going to be variable. But obviously, recoveries, you'd expect them to be higher on senior loans than on junior capital.

Got it. Great. And then just maybe one more for Ken here on the stock. So trading at 80% of NAV, leverage is at the upper end of the target. You already repurchased $100 million of stock. But what else can you do? And I guess, what is the leadership team focused on in order to improve the valuation? And then I think the market is telling us that maybe you should think about cutting the dividend or reevaluating that. So I guess, why not reset the dividend a little bit especially given the two rate cuts we just got one at the end of September, one in October, and that would just put you in a position to comfortably cover the dividend. You'd likely create some incremental book value then maybe you have a little bit more capacity to buy back the stock at what I'm sure you think are really attractive levels.

Yes. No, look, from a business and an investment standpoint, the most important thing for us is to stay focused on continuing to originate and invest in high-quality assets. We've done that consistently over a 20-year period, certainly more recently now with NCDL. We feel very good about the overall quality in our portfolio and the level of new dealer and investment activity. I will say from a pricing perspective, while we obviously saw spreads tighten, maybe not as dramatically as the BSL market over the last 12 to 18 months, things have. In terms of spread tightening, we've seen that slow down quite a bit. Spreads seem to have settled in at that kind of SOFR 450, 500 range, which has been good to see. But deal activity overall, the quality of the opportunities we're seeing to invest in, the level of M&A activity, all the fundamentals that we can control, we feel very good about those fundamentals right now. Deal activity, quality of opportunities we're seeing, ability to stay highly selective, underlying pricing dynamics. So while obviously base rates have come down and certainly albeit more slowly than expected, we would continue to see base rates, we would expect to continue to see base rates come down. From a quality perspective, from a sourcing standpoint, all the fundamental dynamics we feel very good about, including the underlying portfolio quality. In terms of leverage, we have, Shai, I don't know if you want to speak I'm happy to speak to it. And I think we alluded to this on the last call and obviously, this earnings cycle and last, it's been a topic of conversation in terms of sort of where our earnings going across the industry. And as we commented last quarter, and I think we reinforced that this quarter, we felt good about our ability to continue to earn, again, within $0.01 or $0.02. Obviously, we under-earned by $0.02 this quarter our dividend of $0.45. But again, within a range, and there were some reasons for that, including the two nonaccrual names that I alluded to in terms of reducing our earnings for this particular period. But again, looking forward in the current base rate and spread environment, we continue to feel good about our ability to essentially earn plus or minus the $0.45, and that's something that we will continue to evaluate as we go forward. As I commented last quarter, we did talk about the fact that we do have spillover income from prior periods that provide one lever that we can pull in terms of continuing to maintain that dividend for the near term. But again, your points around what do we do going forward? Do we consider additional share buybacks, etc., are things that we absolutely talk about. I think when we think about that program, obviously, we did put in place the roughly $100 million program at the time of our IPO. We've since exhausted that, and really, our focus going forward is on growing the BDC, not continuing to reduce the amount of equity outstanding and reduce the share count. So again, these are all the things that we're thinking about, and we'll continue to eat them going forward. But as Ken said, we feel very good about the quality in the BDC, its ability to continue to generate earnings going forward, and that's really our focus. Yes. And certainly, I'd be remiss if I didn't say we're certainly looking at the share price relative to NAV, we certainly feel that the shares are undervalued. We think there's a tremendous amount of value creation that continues to go on within the portfolio, the quality, the fundamentals, etc., we don't think are reflected in the share price.

Our next question is from Finian O'Shea with Wells Fargo Securities.

Hey, everyone, good morning. I have a question on the portfolio outlook. I think early in the remarks, you mentioned lighter allocation based on being fully levered. Seeing if that also implies a subdued repayment outlook?

Yes. Fin, it's Shai. Yes, so when we think about the repayments, I mean, what we saw in this most recent quarter, they were running at 3% relative to our long-range assumption of 5%. So again, I think that's really a function of essentially mix and really timing because as Ken alluded to, we're seeing it every day just in terms of the level of deal activity across the platform, M&A has certainly picked up and sponsors are feeling good about transacting in the current environment. So our expectation is that, that repayment rate would continue to be close to our long-range assumption, but the fact that it was at 3% this quarter, was closer to 5% the prior quarter. So again, just the fact that we are in an environment where deal activity is picking up. We're not changing our view on repayments going forward. What we will do though is, again, be sort of dynamic about how we're investing out of the BDC. So to the extent that we get incremental repayments and we get those proceeds in, we'll look to redeploy them as quickly as possible into attractive investment opportunities, and that's what we've done and what we do. And that's one of the benefits, obviously, of being part of the broader platform. We have access to that deal flow. And as we have capital available, we're going to deploy it into attractive transactions.

Yes. And I would just say, look, from our perspective, keeping the portfolio fully deployed is not a challenge at all for us right now relative to the deal flow platform-wide, we've obviously trying to maintain investment activity in every deal, so that we've got a position in every deal as we're making investments so that we can do the follow-on and make ourselves avail ourselves to the add-ons and other opportunities in those companies. So we want to be in them at the time of sourcing. But on an overall basis, I don't see any challenge whatsoever maintaining full investment at NCDL. And to the extent we have repayments increase for various reasons, there's been no challenge for us in terms of keeping it fully invested.

That's helpful. Following up on the discussion with Brian about the stock price, I'm curious about what you're observing regarding your significant non-traded BDC, given your strong presence in that market. How impactful is this situation? I understand it's quite recent, but considering where many public BDCs are trading, do you notice discussions among retail shareholders in the wealth channel? Is there any sentiment about whether to invest in the public BDCs, or could you share any insights on that?

Yes. We've certainly gotten that question a number of times because they're obviously looking at the tremendous discount in the public. So it's a good question, Fin. While it's come up, it hasn't been a major theme. But certainly, at an individual level, you look at the fact that the private BDC obviously issues shares at NAV and the public BDC is trading at a significant discount. I think it just highlights the value proposition and the return dynamics and the opportunity in the public BDC, the fact that you can buy the public BDC, the publicly traded BDC at a 15% or 20% discount to NAV, I think just highlights what a great opportunity it is right now. But we've gotten that question a handful of times. It hasn't been a huge amount of focus, but we've definitely been asked the question. And we try to be very straightforward on it, and that is that it is tremendous value at the current trading level. No question about it.

Our next question is from Doug Harter with UBS.

This is Cory Johnson on for Doug. I know you spoke about the repayments. And long term, I guess you don't expect there to be much of a difference from your long-term assumptions. But over the next quarter or two, would you expect perhaps more elevated repayments? And is perhaps the current government shutdown delaying some of the repayments that you might have been seeing in the last quarter or this coming quarter?

No, in fact, I would say there's an interesting dynamic. If we were, which we're not heavily invested in kind of broadly syndicated loans, that market is primarily a refinancing market. So as rates come down, you might see more pressure in either BDCs or funds that are really oriented towards that market. In our world, since we are much more heavily oriented towards the traditional middle market, the primary driver of activity is new deals, right? So we get a refi when a company in our portfolio is refinanced because it's sold as opposed to going out and proactively refinancing itself. So I would say in that regard, a solid level of new deal activity, we've already been seeing that consistently over the course of the year. So I would not expect to see any material change in kind of the trends we've been seeing around our repayments, again, primarily driven by new deal activity as opposed to suddenly seeing an acceleration as a result of being driven by reductions in underlying base rates. That's really not as big a factor for us, maybe as some other funds that are more focused on the BSL world.

Got it. And then just the last question. Are you seeing any additional competition from perhaps tools coming down in market and playing a bit more in the core middle market or just any changes in the competitive landscape recently?

We really haven't. It's interesting. I get that question a lot. Institutional investors ask that we get this from new folks as well. The reality is that we're not seeing the private credit firms that are focusing historically more on BSL or those large $1 billion-plus transactions come down market, nor are we seeing the new entrants really being able to step up and underwrite $400 million, $500 million, $600 million, $700 million, $800 million transactions, which we obviously can do. So I think in that sense, we're relatively insulated from pressure from the top or even pressure from the bottom. The new entrants are primarily playing in that lower middle market where they can deliver a $50 million, $75 million solution. And at the larger end, those folks continue to focus on larger buyouts, refinancing activity and playing as an alternative to an underwritten and syndicated BSL transaction. So we're operating, we think, in a relatively insulated part of the market where, frankly, relationships are driving that deal flow. Partnering with a lender like us or one of our peers is a very important decision for driving the underlying growth in the space. So market timers or firms that are coming down for a period of time and then maybe bouncing back up into their core market, not as appealing to the private equity firms that are looking for long-term partners to finance those businesses, be available to finance add-ons and really act as a financing partner for a more extended period of time. I think that's where we really benefit. We've been in the core middle market now for 20 years. If you look at our top sponsor relationships, we've done dozens and dozens of deals with those firms. And as a result, they come back. They come back based on the relationship, not based upon the history, and it's much less likely that they're going to tap a firm that's really more of a large cap player, recognizing that those firms tend to come and go in the core middle market.

Our next question is from Arren Cyganovich with Truist Securities.

Just touching on the health of the portfolio overall. Your nonaccruals ticked up, it's pretty modest. I think your costs are still below 1%. So it's obviously not a big challenge. Maybe you could just talk a little bit about the portfolio companies and how they're performing from maybe a revenue and EBITDA growth standpoint and how those trends are moving throughout the year.

The story there has actually been very solid. Now remember, our overall criteria when we underwrite and invest is we are looking for market leaders; we are looking for businesses that are in non-cyclical industries. So we're typically not looking at restaurants and retail and oil and gas and chemicals and anything that has an underlying cyclical dynamic to it. We're also not investing in businesses that fundamentally don't have those solid growth characteristics. So given that, given the world that we play in, business services, health care services, software, we've continued to see solid single-digit growth in both revenues and cash flow for our portfolio. That's probably down a bit from where it was a couple of years ago. We were seeing numbers in the kind of 20% range. But still very respectable and very consistent. So we feel good about the underlying growth in the portfolio. And again, I think it's reflective of not just organic growth and the fundamentals of the businesses we finance, but also the fact that when we do a deal, the vast majority of those transactions, the private equity firm that's acquiring the business has already come to the table with a plan to grow it either through geographic expansion, product expansion, smaller strategic M&A. A large percentage of our portfolio, those are the types of businesses we're financing. And that's also reflected in the fact that in many cases, we're doing a delayed draw term loan to actually put in place a facility to finance that growth. So I think the nature of the space we play in and the types of companies that we finance is going to give you an ongoing kind of built-in growth rate in that kind of call it, 5% to 10% range. And then where you're getting even stronger growth economically overall, you see numbers that are closer to 20%. But certainly, we feel very good right now that core growth rate in that 5% to 10% range.

Yes, I appreciate that. And I wouldn't expect that you'd have hotline growth rates? Just want to make sure that they're not deteriorating any notably. It sounds like everything is good there.

No, I was just going to say that I think as I mentioned earlier, a lot of it gets to the types of businesses we are financing. We're typically not great fans of financing kind of static companies, if you will, where the credit metrics might look okay, but the fundamentals are, it's not really a great business. It's okay. The numbers are all right. The coverage numbers look okay, but you're not seeing any real fundamental growth. That's not typically the types of businesses that we would be all that excited about financing. So yes, all the credit metrics have to be there, but we want to be financing businesses that have solid underlying growth fundamentals. And I think that's reflected in our portfolio. I think it's interesting that our deal activity has set records across the platform in July, August, and even September. August is usually a slower month, but we were highly active, with some weeks seeing multiple investment committee memos. We actually had to schedule more IC meetings to keep up with the activity level. This was surprising, as we expected deal activity to pick up with stabilizing rates. After a brief pause on Liberation Day, we saw encouraging trends starting in June and July that continued through the summer and early fall. The quality of deals has been good, with overall spreads stabilizing in the 450 to 500 range. Given the pressure on private equity to realize investments, we've observed a significant number of GP-led transactions. Our preference is for GP-led deals where the private equity firm rolls over their carry, demonstrating substantial support for the credit and transaction. While the deal environment is promising and we feel optimistic about both quality and relative value—we're still achieving around a 9% return on new transactions—there are idiosyncratic situations like Tricolor and First Brands that exhibit signs of fraud and involve bulk asset purchases, which differ greatly from our business model of financing one deal at a time. We conduct thorough due diligence and assess the fundamentals of each individual business. We'll maintain our focus on traditional core middle-market deals in the $50 million to $100 million EBITDA range, where we believe the risk-adjusted returns are appealing. We will not explore the lending areas that have created issues, and currently, there is no evidence in our portfolio suggesting that these isolated incidents correlate with our lending practices today.

With no further questions at this time, I would like to turn the call back over to Ken for closing comments.

Great. Well, thank you all again for joining us. I appreciate your interest in the business. Obviously, we're very proud of our performance this quarter. We continue to stay focused on delivering excellent risk-adjusted returns for our investors. And that concludes the call, and appreciate you joining us today.

Thank you. This does conclude today's conference. You may disconnect at this time, and thank you for your participation.