TriplePoint Venture Growth BDC Corp.

Good afternoon, ladies and gentlemen, and welcome to the Triple Point Venture Growth Fourth 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 fourth quarter and full fiscal year 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 Matthew, 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 refer to the company's most recent filing with the Securities and Exchange Commission for important factors that could cause actual results to differ materially from these statements. www.tpvg.com Now I will turn the call over to Mr. LeBay.

Thanks, operator, and good afternoon, everybody. The fourth quarter was strong and helped us achieve a great finish to 2019. We set some new annual records and delivered excellent returns to our shareholders as our venture lending platform continued to perform well. We're also encouraged by a great start to the new year, which continues our momentum on a path towards good results in 2020. Before covering the quarter's results, I'd like to share a few highlights from 2019 as well as some notable achievements since our IPO, which was only six short years ago this very month. Our story has been one of continued growth, performance, and strong returns for our shareholders. Since the IPO, We've made cumulative commitments of more than $2.4 billion. We've made cumulative investment fundings of more than $1.5 billion. We increased our investment portfolio fivefold, and we also paid out $8.52 per share in distributions, which provided a cash-on-cash aggregate return of more than 56% on our original $15 per share IPO price. In 2019, as I mentioned, we also set new annual performance benchmarks for our business, including record investment income, which was also up 13.5% over 2018, record net investment income, record portfolio growth to a level that was up 45% over the prior year, and an all-time record as well in investment fundings, which was also up 58% over the prior year. We also over-earned our dividend for the year, resulting in a spillover income for this year. In addition, in 2019, we had three IPOs occur within the portfolio, CrowdStrike, Medallia, and Fiverr, and we had another three companies which were acquired. We also increased our funding capacity under our credit facility obtained our first investment grade rating ever, achieved a return on average equity of more than 12%, and made very good progress towards diversification within the portfolio. Sajal and Chris will be providing more detail, but I'd like to wrap up and quickly turn to a few high-level fourth quarter accomplishments we're especially proud of. These include setting a new quarterly record in portfolio investment fundings, In fact, a doubling over the previous quarter. And new debt and equity commitments, which were up 44% over the previous quarter. On top of this, TPC ended the quarter with an all-time high in its originations pipeline size, which should translate into new business for our company in 2020. So we're continually asked, what makes us special and how do we achieve these results? For sure, it's our experience and our reputation and relationships. Although TPVG is only six years old, we're not new to venture lending as the senior members of our management team each have decades of experience, and we were among the first to develop the investment class now known as venture lending. Our sponsor, TriplePoint Capital, was founded more than 15 years ago by this senior team and is a leading global financing provider to venture capital-backed companies across all stages of their development. We believe our direct relationships, both with our leading select venture capital investors and with our companies, provides us with an edge in the marketplace. As a footnote, we sometimes get asked about today's market conditions and outlook given current broader global concerns and macroeconomic developments. While the venture capital ecosystem and the markets we operate in are not totally isolated or insulated, they are not affected by such global and macro concerns as directly as the broader national and global trading markets might be. We work with a select group of venture capital investors who, combined, have raised more than $50 billion in the last four years. In fact, several raised more than $20 billion collectively Last year, 2019 alone. These firms have considerable dry powder to support their existing companies and make new investments. Overall, the U.S. venture capital market remains healthy and activity continues to be robust. In 2019 alone, total capital raised for U.S. venture funds as a whole reached $46.3 billion, according to the NVCA, which is the National Venture Capital Association. This marks the second highest annual total in the past decade. In the late stage venture market segment, which includes our venture growth companies, the deal count surpassed 2,500 for the first time ever in 2019, finishing the year at nearly 2,600 deals, totaling more than $85 billion invested. While we're proud of TPVG's performance last year and the previous six years, It's only the beginning. We plan to build upon the success in the years to come and, as I mentioned, we're already entering 2020 with the largest originations pipeline in our sponsor's history. That's important because TPVG's portfolio is driven by the originations pipeline among other factors which helps drive earnings growth. We will stay on our path to achieve our 2020 goals and objectives While this market demand is strong and deal flow continues to increase, we can continue this performance while maintaining our underwriting standards, pricing, and investment strategy because of the strength and reputation of the TriplePoint Global Platform. We will also continue to run our business by the four R's, with the first three being reputation, references, and relationships. And as we continue to say, if you're doing the first three right, you will get the fourth R, which is returns. I can't overemphasize reputation and its importance in the venture capital community and venture ecosystem. It's at the very heart of our business. I'll now turn the call over to Sajal.

Thank you, Jim, and good afternoon, everyone. During the fourth quarter, we signed 114 million of term sheets with venture growth stage companies at TriplePoint Capital and closed 129 million of debt commitments with 10 companies at TPVG. On a fiscal year basis, we signed 869 million of term sheets and closed 507 million of debt commitments with 29 companies at TPVG. As Jim mentioned, we achieved a record level for our investment portfolio this quarter and as a result of funding 171 million of debt investments with a 13.5% weighted average yield to 16 companies. We also invested 200,000 of equity in one company and received the warrants in 15 companies valued at 3 million. On a fiscal year basis, we funded 418 million of debt investments to 33 companies as compared to 264 million to 24 companies During Q4, we had $31 million in portfolio company prepayments, which contributed to our 15.3% overall weighted average quarterly portfolio yield. Without prepayments, our portfolio yield was 13.1%. During the quarter, we also received $7 million of scheduled amortization and repayment. During 2019, we had $164 million of portfolio company prepays as compared to $186 million of prepays in 2018. Core portfolio yield was stable despite the reduction in the U.S. prime rate during 2019. As a reminder, since December 2018, the U.S. prime rate has been reduced from 5.5% to 5%, and during Q4 was at 4.75%. As of Q4, 30% of our funded debt investments were fixed rate loans, and 70% of our funded debt investments were floating rate loans. Of those floating rate loans, 83% had prime rate floors set to 4.75%, and in fact, 67% had prime rate floors of 5% or higher. Given the prime rate drop now to 4.25%, I'm pleased to say that 96% of our floating rate loans have a prime floor set to 4.25% or higher. So we are well positioned in a decreasing rate environment, especially given our warehouse credit facility is based on a variable rate as well. We further believe we're insulated from declining rates based on our unfunded commitments. Of our $226 million of unfunded commitments, 59% have prime rate floors set to 4.75% or higher, 62% have prime rate floors set to 4.5% or higher, and 100% have prime rate floors set to 4.25% or higher. As we originate new loans, we generally focus on total debt return thresholds, so we adjust our target spreads based on the then current prime rate and set it as the floors. So well 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 1.94 at the end of Q4, as compared to 1.97 at the end of the prior quarter. 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. During the quarter, three companies were upgraded from white to clear, one company was downgraded from white to yellow, and we downgraded one company, Harvest Power, from orange to red. As we mentioned in our equity offering prospectus in January, during Q4, we reduced the mark on our loan to Harvest Power from $7.5 million to $4.2 million as a result of the company completing an accelerated process to sell and liquidate assets. We received $2.4 million against the $4.2 million recovery value in Q4 and expect to receive the remaining $1.8 million in the first half of 2020. During the fourth quarter, we had $1.5 million of unrealized loss attributed to the continued volatility of our public warrant and equity investments associated with our public portfolio companies CrowdStrike and Medallia. Having said that, our cost basis in these investments were low to begin with, and even with the public stock price volatility, we have over $14 million of net unrealized gains on the equity warrants from these two companies as of December 31st. In addition, during the quarter, we sold our public holdings of Farfetch Limited, realizing a $1.3 million gain and resulting in the reversal of $1.1 million of prior unrealized gains. I would like to highlight that despite already covering our dividend through NII as a result of the total return requirement of our best-in-class fee structure, our incentive fee for the quarter was reduced by $1.2 million, resulting in five additional cents per share of NII to investors. We continue to see robust fundraising activity in the portfolio, with 10 portfolio companies raising over $1.1 billion of equity in total in private rounds during the quarter, and we see this robust fundraising activity continuing here in Q1. As of quarter's end, our top five positions represented 27.4% of the total debt investment portfolio on a fair value basis, down from 34.5% last quarter and from 44.3% in Q4 2018. We continue to make progress in diversifying our portfolio Thanks in part to overall portfolio growth, prepays, and utilization of our co-investment capabilities. Since receiving our exemptive order, TPVG has made 16 co-investments with TPC's proprietary vehicles, and this gives us meaningful financial flexibility as we scale the business. As I look to the goals we set for 2019, we are pleased to have achieved our targets for portfolio growth while maintaining our portfolio yield and more importantly, significant portfolio diversification, which culminated in us achieving an investment grade credit rating, over earning our dividend and hitting our target leverage ratio and enabled our equity capital raise here in 2020 to support continued scale and diversification. Before I hand the call over to Chris, I thought it would be helpful to share some strategic goals and objectives we have for TPVG here in 2020. As Jim mentioned, the industry-leading position of our platform has resulted in significant direct deal flow from our select VCs and strong demand for venture growth stage debt for high-quality companies, which reflects the natural progression of these VCs and their portfolio companies following continued strong equity investment activity and thoughtfulness on how to optimize their capital structures with both debt and equities. As a result, we see a path to continue to scale and diversify TPVG here in 2020, not only from a portfolio perspective, but from a balance sheet perspective as well. Our expectation this year for portfolio growth is for quarterly fundings to be in the 75 to 150 million range on a gross basis. On a full year basis, we expect to see at least 300 million of gross fundings, but really expect to be somewhere between 400 and 600 million of fundings, Given we had $226 million of unfunded commitments as of Q4. As a reminder, fundings typically occur in the last month of the quarter and don't contribute meaningly from an income perspective until the next quarter. We expect the core yield profile of our portfolio to be stable and will continue to be leading the industry in the 12% to 14% range, again, prior to the impact of prepays. With regards to prepays, they continue to be a part of the business. Looking back, we've had material prepays in 10 of the past 12 quarters. We think this activity could potentially slow down a bit in 2020. For example, we haven't had a prepay yet in Q1, which will benefit, though, our ability to scale the portfolio and maintain a higher leverage ratio. Given our investment-grade credit rating and shareholder approval in 2018 for the lower asset coverage requirements, We intend to take advantage of using leverage to serve as the primary source of funding portfolio growth for us for the rest of 2020. Plus, we intend to continue to take advantage of our exemptive relief order to co-invest with other entities in the TriplePoint platform and further diversify as we scale, as well as take advantage of some of the other partnerships and origination programs among us, TriplePoint Capital, and our strategic partners. As stated when we received approval for the lower asset coverage, our goal is to run at our target leverage ratio more consistently with short peaks above and prior to equity capital raises. With that, let me say that as we look ahead for 2020, we will continue to be highly disciplined and expect our portfolio to grow in a manner that is accretive to our stockholders and provides them with an attractive yield on their investment while achieving our goals of scale and diversification. I'll now turn the call over to Chris to highlight some of the key financial metrics achieved during the quarter and fiscal year.