TriplePoint Venture Growth BDC Corp.

Good afternoon, ladies and gentlemen, and welcome to Triple Point Venture Growth BDC fourth quarter 2020 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 won't follow at that time. This conference call is being recorded, and a replay of the call will be available in an audio webcast on the Triple Point Venture Growth BDC website. Company management is pleased to share with you the company's results for the fourth quarter and full fiscal year 2020. Today representing the company, 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 may make certain statements that relate to future events or the company's future performance or financial conditions. which are considered future forward-looking statements under the federal securities law. You are asked to refer to the company's most recent filings with the security and exchange commissions 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 not cautioned to place undue reliance on any forward-looking statements made during the call which reflects Management's opinions only as of today. To obtain copies of our latest SEC filings, please visit the company's website at www.tpvg.com. Now, I will turn the call over to Mr. LeBay. Thank you, Operator.

Good afternoon and thanks for joining us for our fourth quarter and year-end 2020 earnings call. 2020 was clearly an unprecedented year and we would like to acknowledge our dedicated professionals for their unrelenting commitment last year, as well as take this opportunity to thank our venture capital partners and entrepreneurs for their ongoing support and collaboration, which remains a core differentiator for us and also a critical driver in our success. Before we review the quarter and talk about 2020, I'd like to mention that the TriplePoint team is off to the races in a big way in 2021 already. This past Monday, we closed $200 million in our private notes offering. In January, we upsized our revolving credit facilities, and we continue to see liquidity events in the portfolio this year. The pipeline and deals under evaluation are also continuing to grow significantly. and our strategic financing expansion plans are underway. This is the power of the TriplePoint platform at work, and we are demonstrating our experience and leadership in the venture lending market bar none. The great start to this year is all part of the continuing story coming off a very successful 2020. The strong results in 2020, in fact, amid the global pandemic, Highlights further are unique triple point venture lending platform, the quality and resilience of our portfolio, and our longstanding relationships with our select venture capital investors. We're pleased with the performance of the portfolio and the significant progress we have made advancing our playbook quarter by quarter for all of last year, including deploying capital strategically and taking steps to position TPVG for growth. While Chris and Sajal will go into greater detail on the quarter and year's end results, I wanted to share just a few of the key 2020 performance highlights. We realized almost $30 million of gross capital gains last year, not only offsetting our credit losses, but more importantly, it served as a basis of making another special distribution to our shareholders while also allowing for significant spillover income generating This was the third time, in fact, that we have made a special distribution of shareholders over the last six years. We also over-earned our dividend for the year, and the amount over-earned increased each successive quarter as the year unfolded. This was the fourth year in a row that TPVG has over-earned its distributions for the year. Cumulatively, in fact, we have also over-earned our distribution since the date of our IPO and achieved this important objective. During the year, our portfolio continued to generate strong yields and we continued our focus to diversify it and further strengthen its credit quality. Finally, we enhanced our liquidity position markedly through a number of capital financing transactions during the year. which Chris and Sajal will get a lot more into. The significant progress we made last year has now set the stage, as I mentioned, for 2021 and beyond. Given the power of our differentiated platform, our longstanding relationships and reputation with our select venture capital investors, and the most experienced and best-in-class management team in venture lending, We are well positioned to capitalize on the strong demand we're seeing from the venture growth stage companies for all of our debt financing solutions. Today's market conditions, as folks probably know, remain highly favorable as well. The venture capital market is coming off its strongest year ever on record. New investment activity is robust. According to the NVCA, or National Venture Capital Association, Venture capital investment in the United States broke another record in 2020, topping $150 billion for the first time. Further, venture capital firms raised approximately $74 billion last year, which includes several of our select venture capital investors whose funds collectively raised more than $20 billion of that. For our venture growth stage companies, which operate in the late stage venture capital market segment. The total deal count was estimated at more than 3,400 deals covering more than $100 billion. That was invested last year. And the spike in exit and liquidity events for VC-backed companies in the last half, particularly of 2020, including the emergence of SPACs as IPO exits, have further fueled the favorable venture market conditions. The market strength from 2020 has continued so far unabated here into 2021. We expect demand for venture lending to remain strong. Most companies have adapted to the new environment and 2020 is behind them. Our companies remain bullish on their plans and the opportunities this year in what soon may seem to be the emerging post-COVID stages. As we survey the landscape, We are identifying new investment opportunities that have risen over the last year due to changes in how people live, work, and use technology. As highlighted throughout the pandemic, the technology sector is extremely resilient and we expect to benefit from the continued investment in this space as we provide loans and invest primarily in technology-driven companies and industries. Many of our companies are in direct-to-consumer goods and services, virtual collaboration businesses, cloud-based enterprise solutions, internet security, real estate technology, and several other sectors experience outside growth in this environment. We believe that these will continue to be major drivers for us going forward, and when combined with our sponsors' exceptional reputation, our experienced team, and the power of the TriplePoint platform, all of these factors translate into exciting new opportunities. I'd like to wrap up with some closing comments and observations. We are proud of the steps we took during the past year that have enabled us to post strong results in these uncertain times and also to advance important objectives that will drive our future success. Specifically, as we look to the year ahead, you have heard we are advantageously positioned to accelerate our growth and continue to provide shareholders with exceptional long-term returns. Our teams are active, and in today's venture markets, the strong prospects for our venture lending business model, our reputation-driven industry-leading platform, and some new use cases and expanded financing products with our enhanced ability to scale the business to take advantage of the strong fundamentals of the venture ecosystem have made us more excited today than we've ever been. We look forward to continuing to work closely with our portfolio companies and our select venture capital investors and entrepreneurs, many of whom have emerged from a very challenging year and are now in a very strong position and extremely Thank you, Jim, and good afternoon.

Sajal Srivastava, James Labe, Steven Mitchell Levinson, Mike Wilhelms and equally important, being sponsored by a well-established, highly regarded and proven global investment platform, Triple Point Capital. Our playbook for 2020 was to take a quarter-by-quarter approach and in Q1, despite coming off a particularly strong 2019, we took actions to set TPVG up to weather the storm and further sharpened our focus on our team, our portfolio companies and our venture capital relationships, as well as strategically raised equity and our first investment grade debt offering to give us significant liquidity. In Q2, investors really began to see the benefit of our differentiated venture growth stage lending approach, our resilient portfolio, and in particular, the benefit of our sponsor relationship whereby our platform stepped up with a 50 million backstop facility to provide its support of TPVG and enhance our financial strength. While TPVG never needed to use the facility, We appreciated the commitment during a volatile period. Q3 was generally consistent with Q2, but based on feedback from our venture capital partners, activity of our investment team, and continued real-time strategic planning, we began to shift to offense again, so to speak. The strategy paid off in Q4 with a strong finish for 2020 that has set us up for success and growth here in 2021. In every quarter of 2020, we generated income in excess of our distribution and increased our portfolio yield. Even more importantly, throughout the year, we demonstrated the core differentiators of venture growth stage lending related to both credit quality and the realized warranted equity gains we generated. More specifically, during the fourth quarter, TriplePoint Capital signed 172 million of term sheets with venture growth stage companies, and closed 73 million of debt commitments to six companies at TPVG. We received warrants valued at 2 million in 11 portfolio companies and made equity investments of half a million in three portfolio companies. For the full year, TPC signed 490 million of term sheets with venture growth stage companies and we closed 277 million of debt commitments with 23 companies at TPVG. We acquired warrant investments representing 3.8 million of value and made equity investments of $2.3 million. During the fourth quarter, we funded $67 million in debt investments to nine companies, representing an increase of 77% from the third quarter. The debt investments funded during the quarter carried a weighted average annualized portfolio yield of 14.3% at origination. During the year, we funded $205 million in debt investments to 24 companies with a weighted average annualized portfolio yield of 13.5% at origination. During Q4, we had loan repayments of $74 million, and as a result, we achieved an overall weighted average portfolio yield of 15.2% for the quarter. Excluding prepayments, core portfolio yield was 12.2%. In 2020, we had $203.4 million in portfolio company prepayments, resulting in an overall weighted average portfolio yield of 13.8% for the yield. Excluding prepayments, core portfolio yield was 12.5% for the full year. Sajal Srivastava, James Labe, Steven Mitchell Levinson, Mike Wilhelms Sajal Srivastava, James Labe, Steven Mitchell Levinson, Mike Wilhelms This brings our total to 27 portfolio companies raising over $3 billion of capital during 2020, with more than 70% of our portfolio companies having 12 months or more of cash runway. Moving on to credit quality, the weighted average investment ranking of our debt investment portfolio was essentially flat with the prior quarter's rating of 2.1. Under our rating system, loans are rated from 1 to 5, with 1 being the strongest credit quality, and new loans are generally rated 2 initially. During the quarter, one portfolio company was upgraded from Category 2 to 1, one company was upgraded from Category 3 to 2 as a result of closing of financing, and one company was removed from Category 3 as a result of its acquisition and prepayment of our loan in full. We downgraded one company from Category 2 to 3, given their continued impact from COVID, and one company, Notel, was downgraded from Category 3 to 5. We downgraded Notel to Category 5 in the fourth quarter after their unsuccessful attempts to both raise an external round of financing and complete a strategic sale. The company filed for bankruptcy in January of 2021. However, prior to the filing, we sold our loans to a third party for a 50% cash recovery and a potential equity kicker, which will be finalized when the bankruptcy process is completed and the new company emerges. Importantly, the credit situation is now behind us. I would like to highlight that our Q4 mark represents our cash recovery in Q1 from the loan sale only and not the potential future value from the equity kicker when finalized. Unrealized losses on Notel during the quarter were offset by unrealized gains from improved performance and upgrades and other watch list obligors, as well as continued strong realized and unrealized gains from our equity and warrant investments. During the quarter, we sold our remaining positions in CrowdStrike and Medallia, as well as realized gains from the sale of Freshly to Nestle, generating $4.2 million in total from these three companies. From a track record perspective, since our IPO almost seven years ago, TPVG's net credit losses are $11.4 million, which represents 0.4% of our cumulative commitments and 0.7% of our cumulative fundings, or roughly 10 basis points per year. As of December 31, 2020, we held warrants in 64 companies and equity investments in 24 companies with a total cost and fair value of $49.1 million and $50.4 million, respectively. 2020 was an unprecedented year for realizing gains from our warranted equity portfolio, and given the strong market conditions and activity already underway in 2021, we are optimistic for the continued unlacking of substantial value from these assets over time. In fact, a couple of notable events in Q1 so far include HMSA's successful SPAC merger completion, VIEWS' anticipated completion of their SPAC merger, and Group Internets, who goes by Talkspace, announced SPAC merger. Our equity and warrant positions in these three companies are valued at $1.9 million as of 12-31. In addition, several other portfolio companies are in active fundraising and strategic discussions. We continue to be excited for the near-term monetization of these very special components associated with our high-yielding debt investments. And over the long term, we expect warrant and equity investments to generate realized gains in excess of our realized losses, which is consistent with the track record of TriplePoint Capital, whose platform-wide realized gains are multiples of its platform-wide credit losses, which is unmatched in the industry. As we look to credit in 2021, We saw last year that venture capital-backed companies in general were extremely resilient to the impact of the pandemic, but there were a few subsectors in our portfolio, such as travel, real estate, and capital markets-dependent fintech companies that were negatively impacted. Monitoring and working with our companies in these subsectors and their VC investors was a key element of our playbook, and as we closed out last year, we feel we resolved or exited many, if not all, those situations. So that we can focus 2021 on new investments. More broadly, as we look to 2021, we believe our execution in 2020 and year-to-date here in 2021 has provided us with a strong foundation and momentum for advancing our goal of increasing the size of our investment portfolio and the scale and diversification of TPVG while meeting the needs of our select venture capital firms and their venture growth stage portfolio companies. As Jim mentioned, the key tailwinds for us are our sponsors' exceptional reputation, relationships, and collaborative approach, which were only further demonstrated during the volatility of 2020, along with a particularly robust venture capital equity fundraising and investment environment, which is translating into a strong pipeline for us. In addition, based on our extensive relationships with our select VC investors and the growing needs of their portfolio companies, Sajal Srivastava, James Labe, Steven Mitchell Levinson and then increased to $100 million to $150 million range per quarter on a gross basis for the third and fourth quarters. With regards to prepays, they continue to be a part of the business, and we appreciate getting our capital back as well as the accelerated income, but it doesn't help our goal to maintain a scaled and fully diversified portfolio, and so we are working on ways to maintain our investments after companies raise large rounds of financing. On a liquidity front, with the closing of TBVG's second investment-grade private notes offering, combined with our recent success extending and expanding our revolving credit facility, we have lowered our cost of capital, increased our liquidity position, and diversified and broadened our funding sources. We are pleased to have had more than 30 investors in the notes offering this week and to now have eight banks in our revolving credit facility. We intend to take advantage of this leverage to fund portfolio growth for us here in 2021. We also intend to continue to benefit from 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 JV and syndication partnerships among us, our sponsor, and our strategic partners. With regards to the dividend, we're proud to have declared our third special dividend since our IPO, funded primarily from the realized Warren Equity Gains, and to still have generated net investment income in excess of our distributions during a year like 2020 while operating at such low leverage. We continue to have significant spillover income, but more importantly as we reach a more consistent scale of our portfolio and we see more frequent realized gains, we expect to review both our regular and special dividend policies. In closing, we are proud of our performance during 2020 and are excited to pursue our objectives for this year But we will maintain a deliberate and disciplined approach to growth, and we will continue to follow our long-term playbook with a focus on generating strong returns for shareholders, meeting the needs of venture growth stage companies, and further nurturing strong relationships with our select venture capital partners. With that, I'll turn it over to Chris.