TriplePoint Venture Growth BDC Corp.

Good afternoon, ladies and gentlemen, and welcome to the TriplePoint Venture Growth BDC first quarter 2021 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 is being recorded, and a replay of the call will be available in an audio webcast on the TriplePoint Venture Growth BDC website. Company Management is pleased to share with you the company's results for the first quarter 2021. 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. LeBay, I'd like to direct your attention to the customary safe harbor disclosure in the company's press release regarding forward-looking statements. I remind you that during this call, management will make certain statements that relates to future events or the company's future performance or financial condition, which are considered forward-looking statements under federal securities law. You are asked to 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 statement 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.tpvg.com. Now I'd like to turn the conference call over to Mr. LeBay.

Thank you, Operator. Good afternoon and thank you for joining us for our first quarter 2021 earnings call. It's been a little more than a year into the pandemic, and we liken the changes during this period to a pendulum swing. In the early months of the pandemic, the overriding focus was on survival. And now, more than a year later, the pendulum has swung the other way. Today, the topics of focus are now on record levels of venture capital investment, record valuations, record exit activity, and the strong demand for venture lending. The venture capital ecosystem has demonstrated its strength and its resilience during 2020 and we're all off to a robust start here in 2021. The strong investment activity environment enhances the prospects and credit quality of our existing portfolio companies. It also drives demand for debt financings from new companies, enabling us to achieve our portfolio growth goals over the course of the year. Our focus remains on continuing to execute on our playbook and the work we're doing now will translate to a very busy second half of the year, given this pickup in venture investment, venture fundraising and our growing pipeline. As we progress through the remainder of the year, we will remain disciplined and balanced in response to adapting to the post-COVID recovery. We will continue our exclusive focus in high growth companies backed by our group of leading select venture capital investors. Given our experience in this field and our franchise, TPVG has never been better positioned to capitalize on today's market and for what we think of as riding the wave. When you have substantial liquidity lined up and combine it with longstanding venture capital relationships and a strong pipeline, that's the formula for driving outsized yields. During the first quarter, We continue to position ourselves to take advantage of the strong demand we are seeing from venture growth stage companies. We expect this to continue throughout 2021. In the first quarter, we increased signed term sheets by 142% year over year, and our pipeline continues to be more than a billion. We expect to accelerate funding throughout 2021 and are poised to draw on our ample liquidity which we further enhanced in the first quarter through upsizing our credit facilities and also completing our second investment grade notes offering under very attractive terms. During the quarter, we also increased NAV which was driven by growing our EPS to 38 cents and the significant progress we have made in strengthening our credit quality which has resulted in TPVG's very strong credit outlook. While we under-earned our distribution for the quarter, we expect to make it up during the year based on prepayments, our healthy spillover income, and our expectation that fundings will continue to accelerate throughout the year. We remain in a strong position to generate NII, or net investment income, in excess of our distribution over the long term as we always have. In fact, over the last four years and cumulatively since our IPO, we have over-earned our distribution. We've also paid three special distributions, including one that we just made last quarter. Additionally, another trend that we will benefit from is the acceleration of exit events and their income contributions. During the first quarter, 50 venture capital-backed companies were publicly listed, including our portfolio companies, HIMS and VIEW, which completed their SPAC mergers during the first quarter. There's currently two additional TPVG portfolio companies that are in the process of going public via a SPAC and a number of others in very active discussions. Our portfolio companies remain strong and we are pleased how they have adapted to the new environment, putting 2020 behind them. and positioning themselves to excel in the emerging post-COVID world. Market conditions remain very favorable for us. For the first quarter, a record $52 billion of capital was deployed across almost 1,300 deals in the late-stage venture market. This is the segment which TPVG operates in and targets. More importantly, We remain in regular and active dialogue with our select venture capital investors to help maintain a high-quality pipeline consistent with our investment objectives. We have not stopped or dropped our venture capital partner interactions to chase near-term deal flow. Per our playbook, now is the time to be just as proactive in our interactions with them as we were a year ago during the peak of the pandemic. This helps us gain insight, understand market dynamics, match our activity alongside of them and remain ready to support their existing and new venture growth stage portfolio companies as these opportunities develop. To summarize, we're bullish on TPVG's outlook. The fundamentals are there, the demand is robust, and the second quarter is already off to a strong start. We have a sizable backlog, pipeline, and liquidity position, and we expect to continue to draw on our differentiated platform, our best-in-class management, and our strong and select venture capital investor relationships to grow in a very prudent manner. As we look to the future, we continue to foresee a strong and stable yield from our high-quality portfolio and continued accretion in our warrant and equity positions which includes our anticipation of more portfolio exit events and are excited on the outlook for the remainder of 2021. I'd now like to turn the call over to Sajal.

Thank you, Jim, and good afternoon. As Jim mentioned, during the quarter, we executed on the playbook we put together last year in anticipation of a strong recovery in the venture capital and venture lending ecosystems in 2021. Our playbook for the first quarter was intended to position our business and our team to prepare for and to execute on driving capital efficiency, credit quality, and portfolio growth over the course of the year. Key objectives for the quarter included building strong funding capacity and overall liquidity, increasing our use of leverage, diversifying and reducing our cost of capital, concluding prior credit situations, and, of course, originating high-quality and high-yielding investments. We accomplished most, if not all, of these objectives during the quarter. However, our earnings were impacted by the significant prepay activity we've experienced over the past several quarters on our overall portfolio size despite strong new commitments, growing investment fundings and stable core portfolio yield. As in the past, we believe any shortfall is temporary. and will be more than made up during the rest of the year as the fundamentals of our industry and our business continue to be strong. With regards to investment portfolio activity, during the quarter, Triple Point Capital signed 192 million of term sheets with venture growth stage companies and we closed 90 million of debt commitments to seven companies at TPVG. Both signed term sheets and closed commitments were up from last quarter. Three portfolio companies were fintechs or financial technology companies. Two were in the consumer fitness or better yet fitness tech category. And two were companies in the mobility category with one focused on warehouse automation with software and robots and the other an e-bike manufacturer. Almost all these companies have raised equity rounds recently and many actually have enterprise values greater than half a billion. We also received warrants valued at $1.6 million in 13 portfolio companies as a result of these commitments and new fundings as compared to receiving warrant investments representing $3.8 million of value in 26 companies during all of 2020. Given the strong equity investment activity within our portfolio, which I'll actually discuss in more detail later, we made four direct equity investments valued at $2.3 million. in 2020 as a whole, we made direct equity investments of 2.3 million in eight companies. During the first quarter, we funded 56.9 million in debt investments to seven companies, which was in line with the guidance we gave of targeted gross fundings between 50 and 75 million for Q1 and Q2. The debt investments we funded during the quarter carried a weighted average annualized portfolio yield of 12.6% at origination, The yield profile this quarter reflects the strong credit profile and substantial cash reserves of the obligors funded. In fact, one obligor funded is EBITDA positive, and another has several billion of cash reserves. As noted in today's earnings release, we have funded over 20 million of new loans just one month into the second quarter, and we have funding requests in process from portfolio companies for roughly an additional 25 to 30 million here in May. As a result, we expect to come in towards the higher end of the $50 to $75 million targeted gross funding range for the second quarter. Consistent with prior guidance, we expect gross fundings for Q3 and Q4 to come in between $100 and $150 million per quarter, supported by the backlog we are building, as well as the pattern of our portfolio companies drawing on existing unfunded commitments towards the second half of the year. We are seeing substantial equity fundraising activity in the venture capital industry as a whole and within our portfolio in particular, which we believe is a testament to its quality. During the quarter, 10 portfolio companies raised over $700 million in capital in total, in addition to five portfolio companies raising over $200 million in capital last quarter and 27 portfolio companies raising rounds during 2020 as a whole. Robust venture capital industry-wide equity financing activity does three things. First, it creates demand for debt to complement or top off an equity raise and to be drawn upon in the future. Second, for others, it allows them to accelerate growth even faster in order to achieve higher valuations when they ultimately raise equity, and therefore they raise debt to help finance that accelerated growth. Sajal Srivastava willing to invest earlier while still rewarding anticipated future growth from a valuation perspective. The robust equity environment is generally very positive, improving the outlook and liquidity of existing portfolio companies, and as a result, we also receive accelerated fees and income from prepays. Given our portfolio quality, our unique access to these rounds of financing, and a robust exit environment, we are also increasing our direct equity investment activity to take advantage of our relationships for the benefit of shareholders. These are not purchases of secondary positions from third-party marketplaces or sellers. Rather, we're actually selectively investing in rounds typically led by one or more of our select VC funds and investing alongside of them in most cases in existing obligors and in other cases, future obligors. These are rounds that are generally aren't even available to many other venture capital investors. So we think this is something very differentiated for our shareholders that we expect will have a long-term benefit of not only the upside potential from the investments, but also from cementing our relationship as a lender to these companies. During Q1, we had loan prepayments of $36 million, and as a result, we achieved an overall weighted average annualized portfolio yield on total debt investments of 13.3% for the quarter, excluding prepayments. Core portfolio yield was 11.9%. As Chris will go into detail later, these were more season loans that paid off early this quarter. Here in the second quarter, we have had about 46 million in prepays, generating more than 2 million of accelerated income. At the end of the quarter, our 71 portfolio companies were spread across 30 subsectors with our largest concentration, again, in business application software, which represents nearly 11.5% of our portfolio. Moving on to credit quality, during the quarter, one company was removed from category one as a result of a prepay, and one company was removed from category five as part of the sale of our notes, which was consistent with our fair value mark on that investment as of Q4. Based on the continued progress of our two category three obligors, we expect to upgrade both over the next one to two quarters. Our one category four portfolio company, Roli, is our only loan on non-accrual and continues to build momentum with its business, and we are cautiously optimistic for their continued progress here in 2021. During the quarter, two portfolio companies completed their SPAC mergers, HIMS and VIEW, with our positions in both companies reflecting an additional net unrealized gain of 1.2 million. Our portfolio companies, Talkspace and Live Learning Technologies, announced their SPAC mergers during the first quarter as well. As mentioned in today's earnings release, subsequent to quarter end, portfolio companies Sonder and Enjoy also announced SPAC mergers. Generally speaking, we don't mark up our investments in these companies until merger exchange ratios are announced. And when they are, we further discount given the uncertainty associated with their completion. So that generally results in gains in our investment on an unrealized basis after the SPAC merger closes rather than before. While there has been some slowdown in new SPAC issuances, there hasn't been a slowdown in exit activity within our portfolio. In fact, we have another almost dozen TPVG portfolio companies actively exploring SPAC exits, IPOs, or M&A exit this year, which if consummated will unlock additional value for our shareholders from our equity and warrant portfolio. In closing, we continue to follow our long-term playbook of nurturing strong relationships with our select venture capital partners and meeting the needs of their venture growth stage companies through deliberate and disciplined portfolio growth while generating strong returns for shareholders. With that, I'll now turn the call over to Chris.