TriplePoint Venture Growth BDC Corp.

Good afternoon, ladies and gentlemen, and welcome to the Triple Point Venture Growth's third quarter 2019 earnings conference call. At this time, all lines have been placed in a listen-only mode. After the speaker's remarks, there will be an opportunity to ask questions, and instructions will follow at that time. This conference call is being recorded, and a replay of the call will be available as an audio webcast on the Triple Point Venture Growth website. Company management is pleased to share with you the results of the company for the third quarter 2019. Today, representing the company is Jim Labe, Chief Executive Officer and Chairman of the Board, Sajal Srivastava, President and Chief Investment Officer, and Chris Mathew, Chief Financial Officer. Before I turn the call over to Mr. Labe, I would like to direct your attention to the customary safe harbor disclosure in the company's press release regarding forward-looking statements and remind you that during this call management will make certain statements that relate to future events or the company's future performance or financial condition which may be considered forward-looking statements under federal securities law. You are asked to you refer to the company's Most recent filings with the Securities and Exchange Commission for important factors that could cause actual results to differ materially from these statements. The company does not undertake any obligation to update any forward-looking statements or projections unless required by law. Investors are cautioned not to place undue reliance on any forward-looking statements made during the call. which reflect management's opinions only as of today. To obtain copies of our latest SEC filings, please visit the company's website at www.ppvg.com. Now, I will turn the call over to Mr. LeBay.

Thanks, operator, and good afternoon, everybody. We had some mixed results this quarter. We also had many positive events and developments, which benefits us and the continued growth in scaling at TPVG and what is shaping up to be a really strong originations and fundings year. Before I get to those successes, let me address the mixed results. As many of you know, prepayments have been a very important part of the business. In fact, we've experienced at least one every quarter for almost the past three years, but we can't control the size or magnitude of them. We've had one large prepayment already here in the fourth quarter, for example, which if it did happen in the third quarter, last quarter, it would have led to us achieving NII in excess of the dividend for the quarter. And we're only 40 days into the current quarter right now. We've always said to judge our performance on a full year basis. So on a year-to-date basis, our dividend is covered. In fact, given the recent fourth quarter prepayment I just mentioned, The dividend should be more than covered as well. But of more importance, I look at the strong growth in our investment portfolio, which is generating more core investment income and approaching the scale where we may not be dependent on any of these prepayments in order to cover our dividend. I'm pleased with that, and I believe we can get there as we continue to lever up. With regard to the volatility of our public stock holdings last quarter, Once again, it's not in our control, but I'm very pleased that our venture lending business has what I call the secret sauce. This is the warrant and equity kickers that are part of our debt investments. It allows us to generate even higher total returns. Even after this reduction in the public stock prices we had this past quarter, we're still sitting on more than $16 million of gains at the Q3 closing prices. So we see upside on top of originating these attractive high-yielding loans. The other benefit of this venture lending secret sauce is that it allows us to offset any bumps in the credit that we may have along the way. So we take comfort that there were absolutely no new names added, and the credit issues were isolated to the unique circumstances of these individual underlying companies. So as I look to NAV, we are basically $0.03 or so below where we started the year, and it appears it may be potentially higher when we factor in the fourth quarter's prepayment that I just mentioned. I believe the continued growth, scale, and diversification path we are on will benefit us in the future, and we made great progress on that front this last quarter. We grew the portfolio to a record level and our outlook for the full year continues again to be exceptionally strong. Our fundamental venture growth lending investment strategy, venture capital relationships, reputation, investment discipline, and our growing portfolio of companies backed by our select group of leading venture capital investors continues to be the fuel that's going to drive us to the strong finish for the year and what I think is an accelerated start as we head into 2020. So with that, here's a summary of some of the other highlights from the quarter. Our pipeline continues to grow from the volume of direct leads from these venture capital investors. In fact, it's now more than a record $2 billion in size at the TriplePoint platform. We signed $301 million worth of new term sheets at Venture Growth stage companies. This was our second highest ever. The investment portfolio grew to its highest level, a record $526 million through funding $83 million in new debt investments during the quarter. During the quarter, we also had another one of our portfolio companies where we hold equity go public. This was Medallia. and it's currently trading above its IPO price. But our positions in CrowdStrike and Farfetch were impacted by that recent volatility in the public tech stocks, resulting in a partial reversal of some of our unrealized gains. We also increased the warehouse facility during the quarter to 300 million and this adds capacity for us to fund additional growth and it's the largest facility in the venture lending industry. Another development during the quarter was receiving an investment-grade credit rating from DBRS, acknowledging what is now our 15-year-plus triple-point platform track record in the venture lending industry. And finally, we were pleased to welcome Chris Matthew, who started as our new CFO, bringing considerable prior BDC and 40s Act company experience to the firm. Confirmed by some of my recent rounds in the meetings with some of these select venture capital investors, we remain excited about the outlook for increased investment activity in 2020. We see this not only through the growing originations pipeline that I mentioned, which is translating also into very strong demand for venture lending, but we're being told this by the front lines of our venture investors. Despite the volatility in the public markets, As they head into 2020, they are predicting the continuation of this very brisk and unabated pace in venture capital investment, particularly in technology in these rapidly growing sectors. Our select group of leading venture capital investors, in fact, have raised more than $50 billion in the last four years and are associated with some of the biggest successes in technology over the past several decades. The investors all tell me that they're not driven by a particular public stock or two here or there, or certain headline grabbers or sentiments in the business media, but by the proven fundamentals of successful investing in venture capital. These are investors' focus on the long term and building companies from scratch. Given this robust market we are participating in and the continuing demand for venture lending, We are on track to what we expect will be a strong finish for the year. At the expense of stealing Sajal or Chris's thunder, this is further validated by the high level of new customer fundings we've already experienced in this current quarter alone. Sajal and Chris will get into more details on this development. And again, we're only 40 days into the current quarter. To wrap up, We are excited about the opportunities ahead for our venture growth lending business and are confident once again of achieving another year of earnings in excess of our dividend. We plan to capitalize on the record pipeline and build upon some of the records and achievements of 2019, which we believe will translate into continued growth in 2020. I'll now turn the call over to Sajal.

Thank you, Jim, and good afternoon, everyone. During the third quarter, we signed 301 million of term sheets at Triple Point Capital and closed 81 million of debt commitments. On a year-to-date basis, we signed 755 million of term sheets and closed 379 million of debt commitments with 21 companies. The first new company commitment closed in the quarter was Moda Operandi, which is an e-commerce platform for fashion discovery that connects consumers directly with established and emerging designers from around the world. Moda has raised more than $290 million of capital from NEA, Apex, LVMH, and other investors. The second new company commitment added was Nurex, which is a healthcare services company and telehealth platform covering aspects of adult health. Nurex has raised more than $90 million of capital from Kleiner Perkins, Y Combinator, Union Square Ventures, and other investors. As Jim mentioned, we achieved a record level for our investment portfolio this quarter as a result of funding 85 million of debt investments with a 13% weighted average yield on new fundings to nine companies. We also funded 1 million of equity investment in two companies. New to date, we have funded 247 million of debt investments to 20 companies, an increase of 71% as compared to 145 million to 19 companies over the first nine months of 2018. During Q3, we had only 1 million in portfolio company prepayments, which contributed to our 13% overall weighted average quarterly portfolio yield. Without prepayments, our portfolio yield was 12.8%. During the quarter, we also received 41 million of scheduled amortization and repayments on short-term loans and revolving loan commitments, which was higher than normal. Scheduled principal amortization is generally between six and nine million a quarter. On a year-to-date basis, we have 101 million of portfolio company prepays. Core portfolio yield without prepayments was impacted slightly by the reduction in the U.S. prime rate, as well as utilization by some of our portfolio companies under short-term maturity options and or revolving loan commitments during the quarter. As a reminder, since December 2018, the U.S. prime rate has been reduced from 5.5% to 5%, and post Q3 is now at 4.75%. As of Q3, 31% of our funded debt investments were fixed rate loans, and 69% of our funded debt investments were floating rate loans. Of those floating rate loans, 74% had prime rate floors set to no less than 4.75%. In fact, 57% had prime rate floors in excess of 5%. So we are well positioned in the decreasing rate environment, especially given our warehouse credit facility is variable rate based. As you know, there is a time lag between when we make a commitment and when an obligor draws. So of our $331 million of unfunded commitments, 73% had prime rate floors set to no less than 4.75%. and in fact 63% had prime rate floors set to 5% or higher. As we originate new loans, we focus on total debt return thresholds. So we adjust our target spreads based on the then current prime rate and set it as a floor. So protected in a decreasing rate environment and increasing when prime goes up. Moving on to credit quality. The weighted average investment ranking of our debt investment portfolio was 1.97 as compared to 2.05 at the end of the prior quarter. As a reminder, under our rating system, loans are rated from 1 to 5, with 1 being the strongest credit rating, and new loans are initially generally rated 2. No new companies were added to our watch list during the quarter. Two portfolio companies were upgraded from white to clear due to strong performance. MAP-R Technologies, a portfolio company where we had only equipment financings outstanding, was removed from category red during the quarter. As reported in the press, MAP-R sold to HP Enterprises during the quarter and we were repaid in line with our Q2 mark and incurred a 1.5 million realized loss. We experienced a 3 million reduction in value in the fair value of our loans in ROLI, a UK-based music technology company which is currently rated orange due to delays in its fundraising activities as well as general performance below plan. We are actively working with the company and its investors to get the company on a path to profitability. One portfolio company, Cambridge Broadband, a telecommunications company based in the UK, was downgraded from orange to red during Q3 and we took our fair value mark down to zero for our term loans Due to continued delays in the company's M&A process, we are working with the company and its investors on exploring alternatives. During the quarter, we downgraded our loan to Harvest Power, an organic waste management company from yellow to orange, and took a reduction fair value on our loan of approximately $7 million as a result of the company beginning an accelerated process late in the quarter to explore strategic alternatives. We expect this situation to be resolved here in Q4. On a net basis, our unrealized credit marks represented 52 cents on a per share basis, or 3.7% of Q2's net asset value. As we look to these credit developments, we would say the only common factor is underperformance by these companies, and as a result, capital raising or strategic processes taking longer than expected, or not going as well as expected, and as a result, we've been collaborating with the companies and their investors for soft landings. Cambridge Broadband represents our last telecom investment and Harvest represents our last energy and cleantech related investment. As mentioned earlier, during the quarter, Medallia had its successful IPO and has traded up since. Our gains in Medallia were offset by volatility with the warrant and equity investments associated with our public portfolio companies CrowdStrike, and Farfetch. As a result, the prior gains in our public equity and warrant portfolio were reduced by 5.2 million, or 21 cents on a per share basis, which was 1.5% of Q2's net asset value. Having said that, as a reminder, our cost basis in these investments were low to begin with, and even with the volatility, we have over 16 million of net unrealized gains on the equity and warrants from these three companies. on a year-to-date basis, we've had 14 million of net unrealized gains from our equity and warrant portfolio and 12 million of net unrealized losses. So the equity kickers have offset any credit-related impacts to NAV and again demonstrate the uniqueness of our venture growth stage lending model and our ability to preserve NAV even with credit impairments. We continue to see robust fundraising activity in the portfolio with seven portfolio companies raising over 400 million of equity in total in private rounds during the quarter. We also have a number of portfolio companies exploring exit options, including IPOs, despite the public markets. As of quarter's end, our top five positions represented 34.6% of the total debt investment portfolio on a fair value basis, down from 37.5% last quarter and 54.1% from Q3 2018. We continue to make progress in diversifying our portfolio, thanks in part to overall portfolio growth and utilization of our co-investment capabilities. Since receiving our exemptive order, TBVG has made 13 co-investments with TPC's proprietary vehicles, and this gives us meaningful financial flexibility as we scale the business. As Jim mentioned, On a year-to-date basis, our NII is in excess of our dividend, and our NAV is only three cents less than where we started the year. We are on track for an especially strong Q4 to close out the year. In particular, just over one month into Q4, we've signed 43 million of new term sheets, closed 61 million of debt commitments, and funded 94 million of debt investments. On top of that, we've had 26 million in prepays, which has generated significant additional interest income here in Q4, which as Jim mentioned would have enabled us to more than cover the dividend if it incurred in Q3, but clearly puts us in a strong position for Q4. We have put all the excess cash on hand as of the end of Q3, and the prepays received here in Q4 back to work. So barring any more prepays, we expect our leverage ratio to increase as we approach quarter end. As a reminder, our portfolio covers the dividend without prepayments at the higher end of our target leverage ratio. So as a result, we're heads down focused on growing the portfolio and a strong start to 2020. I'll now turn the call over to Chris to highlight some of the key financial metrics achieved during the quarter.