TriplePoint Venture Growth BDC Corp.

Good afternoon, ladies and gentlemen. Welcome to the Triple Point Venture Growth BDC Second 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 Triple Point Venture Growth BDC website. Company management is pleased to share with you the company's results for the second quarter of 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. Labe, I'd 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 the 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 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.tpvg.com. Now, I'd like to turn the conference over to Mr. LeBay.

Thank you, operator. Good afternoon, and thank you all for joining the TPVG second quarter earnings call. We made strong progress during this past quarter, from exceeding our funding target to maintaining high credit quality, and to increasing our portfolio yield, return on average equity, and net asset value, or NAV. The most notable progress is the continued rise we are seeing in signed term sheets. which was one of the highest quarterly totals in TPVG's history. Additionally, our pipeline increased 50% over last quarter and it has more than doubled since a year ago. We have substantial liquidity to meet this increased demand and we're on course to achieve the growth targets we outlined for the second half of the year and drive consistent long-term growth of investment income and net asset value. The venture capital operating environment is remarkably strong right now. In the first half of 2021, the totals for venture capital investments, exits, and fundraising neared or exceeded the totals for all of 2020. Deals of larger sizes continued to get announced. And we're witnessing more investments specifically in late-stage companies, which is a market where TPVG operates. A total of $109 billion has been committed in the first half of the year to this stage, already matching the total for all of 2020. A total of 123 U.S. venture capital-backed companies IPO'd in the first half. 33 of them were SPACs. The market factors are in our favor, and as you will hear, our warrant and equity portfolio stands to continue to benefit. along with our expectation of increased portfolio company exit events. As we focus on capitalizing on this robust environment, it's critically important to maintain a disciplined approach to portfolio growth, and we don't ever want to compromise on credit quality. For that reason, we focus on high-quality companies that will enable us to generate strong returns from our debt investments as well as from our equity and warrant positions. In the second quarter, we took important steps to meet this critical objective. While we under-earned our distribution for the quarter, the trends in our portfolio remain strong in terms of signed term sheets, increased fundings, and high credit quality. We expect to continue to generate NII in excess of our distribution over the long term as we have cumulatively done so since our IPO. We're particularly excited about TPVG's promising and deep portfolio, all created by our model of working with a select group of leading venture capital investors and having a targeted focus on venture growth stage companies. This has provided a solid foundation for us to execute against our plan. Our portfolio companies enable major changes in how people live, work, and use technology. Large-scale technology-driven transformations I think everyone sees are well underway in software, health and wellness, or as I think of it, health tech, robotics, e-commerce, fintech, and other sectors. The particular set of circumstances produced by COVID have accelerated significant market disruptions through technology and digital transformation. We've witnessed wholesale changes in enterprise and consumer behavior. These all promise to speed market acceptance of new products and services going forward. All good news for our portfolio companies. We believe the tailwinds associated with these changes will persist well past the continued rollout of vaccines. It will continue to drive outsized growth across many of our portfolio companies. TPVG will continue to benefit from investments in many of these tailwind sectors, such as health tech. Curology, Nurex, Medli, and Hydro are some of the companies in this sector where consumer demand combined with regulatory actions are driving massive disruptions in telemedicine, on-demand pharmaceutical delivery, and connected fitness. Last quarter alone, for example, Hims completed its $1.6 billion stack. Capsule raised $300 million, and Temple closed the $220 million equity round. Bray Orange, Enjoy, and Transfix are all examples of our companies benefiting from the supercharged robotics and automation sector. COVID exposed the fragility of the world supply chain. There's great need for continued investment in robotics and logistics to support the ever-growing shift to online procurement. In this sector, Enjoy announced a $1.2 billion SPAC merger last quarter, and Gray Orange and Transfix have each raised over $125 million. SavageX, Grove, Minted, and Rent the Runway are examples of many of our e-commerce companies which have been boosted by the pandemic-driven change on the retail landscape. It impacted consumer purchasing behavior forever. Brands are now able to build relationships with their customers directly through digital marketing. E-commerce companies Imperfect Foods and SavageX both announced closing equity rounds greater than $100 million this year. Upgrade, Digit, and Active Hours are just a few of our companies that are fintech recipients of the huge disruption underway in the core monetary infrastructure of the economy and the capital markets. The pandemic accelerated changes in legacy banking systems and payment platforms. New lending platforms are underwriting risk and taking advantage of big data to address segments of the population that are currently underserved. Revolut, as an example, recently announced the closing of an $800 million equity round at a $33 billion valuation. The positive trends and our excitement in these technology sectors, if you can't tell, continues. We foresee substantial equity fundraising activity in the venture capital industry as a whole and within our portfolio in particular. It's a testament to our portfolio's quality. We believe future venture lending opportunities are large and plentiful given today's environment. This robust industry-wide equity financing activity continues to create demand for debt to complement or top off an equity raise in some cases. For many companies planning to raise equity, in today's environment, debt enables them to accelerate growth in order to achieve higher valuations when they raise. In fact, we're now seeing demand is back again from those companies that raised large equity rounds last year, some of whom actually paid off their lines with us when they closed their round, and now they're seeking debt again. The volatility in the pipe market of recent years for SPACs is also created in a number of situations where companies are now expecting the process to take longer, and they're raising more equity and debt with us to continue to remain private. Today's market is ripe for TriplePoint's venture lending strategy, and our portfolio is poised to continue to reap these rewards. As we've highlighted in the past, a fundamental strength is our differentiated platform. Triple Point Capital will continue to benefit from the sustainable tailwinds of the innovation economy. This is led by our deep relationships with founders and entrepreneurs, as well as leading venture capital firms. We'll continue to stick to our disciplined approach to the investment process based on identifying promising deal flow and standing at the ready with our deep liquidity to deliver attractive returns from our portfolio of debt Warrant, and Equity Investment. I'll now turn the call over to Sajal.

Thank you, Jim, and good afternoon. As Jim mentioned, the venture capital markets and the demand for venture lending continue to be particularly robust, and we are making disciplined progress as we execute on our playbook for 2021. With regards to investment activity, During the second quarter, TriplePoint Capital signed 250.8 million of term sheets with venture growth stage companies, our fourth highest quarterly level for venture growth stage signed term sheets since TPVG's IPO seven years ago, and we closed 102.5 million of debt commitments to six companies at TPVG. Signed term sheets and closed commitments were both up from last quarter. We continue to invest in high-quality companies in attractive and growing sectors. Sajal Srivastava, James Labe, Steven Mitchell Levinson, Mike Wilhelms One is an online marketplace, and the last one is in the business of acquiring and rolling up profitable small businesses that sell on Amazon and other marketplaces. During the second quarter, we also received warrants valued at $2.2 million in seven portfolio companies in conjunction with our debt commitments, as compared to receiving warrants valued at $1.6 million in 13 companies last quarter. This increase demonstrates that we are capturing more equity upside potential from our portfolio companies while still raising the bar on yield. We also made three direct equity investments valued at $200,000 during the quarter, of which one has more than doubled during the same quarter, again, reflecting the access we have to high-quality investment opportunities and the robust equity environment. This brings our total to $2.5 million of direct equity investments to six companies year-to-date. During the second quarter, we funded $76 million in debt investments to seven companies, which exceeded the high end of the $50 to $75 million range we guided for quarterly gross fundings for Q2. Approximately 95% of our fundings came from new debt commitments that we closed in Q2, so a real healthy statistic and demonstration of our efforts to drive utilization of our commitments more effectively. So far, we have funded over 18 million of new loans here in the third quarter. Consistent with prior guidance, we expect gross fundings for Q3 and Q4 to come in between 100 and 150 million per quarter, which is supported by our pipeline, our backlog of signed term sheets, higher utilization rates of new commitments at close, sizable unfunded commitments, as well as the pattern of our portfolio companies Drawing on existing unfunded commitments towards the second half of the year. We also continue to build a high yielding portfolio with the debt investments we funded during the quarter, carrying a weighted average annualized portfolio yield of 13.2% at origination, which is up from 12.6% last quarter for new investments. During the quarter, we had loan prepayments of 46 million, and as a result, we achieved an overall weighted average annualized portfolio yield on total debt investments of 13.9% for the quarter. Excluding prepayments, core portfolio yield was 12%, slightly up from 11.9% last quarter. Here in the third quarter, we've had 18 million of loan prepayments, generating $400,000 of accelerated income. We continue to see substantial equity fundraising activity in the venture capital industry and within our portfolio in particular, which is, again, a testament to our portfolio's quality. During the quarter, five portfolio companies raised over $600 million of capital in total, in addition to 10 portfolio companies raising over $700 million of capital in total in Q1. Moving on to credit quality, the credit outlook for our portfolio remains strong, with 90% of our debt investments in our top two categories. Consistent with Q1, no obligors were added to categories 3, 4, and 5. and no obligors were placed on non-accrual during the second quarter. In fact, the weighted average investment ranking of our debt investment portfolio improved to 2.06 compared to 2.11 as of the end of Q1. During the quarter, one company was upgraded from category three to category two as a result of completing a financing, leaving only one company in category three, which is Prodigy Finance, an international graduate student lending company. During Q2, Prodigy paid down $5 million on outstanding loans to us, and we're pleased to report that here in Q3, Prodigy completed its first securitization, issuing $228 million of investment-grade asset-backed securities, and our remaining loans will now switch from pick interest to cash pay interest. Based on these and other developments at Prodigy, we expect to upgrade them to Category 2 here in Q3. Our one Category 4 portfolio company, Roli, continues to be our only loan on non-accrual, and our mark was flat with last quarter prior to currency fluctuations. During the quarter, Talkspace completed their SPAC merger, and as of the end of the quarter, we have a total unrealized gain of $600,000 based on our warranted equity positions in the company, even though the company never drew on their debt line and their unfunded commitment expired unused. This brings TPVG's total to three successfully completed SPAC mergers. We also have five portfolio companies with announced SPAC mergers in process. Bird Rides, Enjoy, Inspirato, and Sonder all announced their SPACs in Q2, and Live Learning Technologies announced its SPAC during the first quarter. Our cost basis in equity and warrants in these five companies totals $1.7 million, with a fair value of $3 million as of Q2. Generally, we do not mark up our investments in these types of situations until merger exchange ratios are announced, and then we further discount the fair values given the uncertainty associated with their completion. As you can see, there hasn't been a slowdown in exit activity within our portfolio. In fact, we continue to have more than a dozen TPVG portfolio companies actively exploring IPOs, SPAC mergers, or M&A, which if consummated, could unlock substantial additional value for our shareholders from our equity and warrant portfolio. In addition, the private equity raising activity for our portfolio companies continues to result in significant enterprise value accretion, particularly in the fintech and software sectors. One portfolio company that I would like to highlight is Revolut, a company that the TriplePoint platform has supported since their Series A equity round in 2016. and TPVG has been involved with since their Series C equity round as both a lender and an investor in the company. The Revolut team has built a global leader in the FinTech space and announced in Q3 an equity raise at a 33 billion valuation. Although we have not completed our fair value process for Q3, we estimate TPVG's equity and warrant investments to be valued between 10 and 20 million up from $1.8 million as of Q2, or an increase between $0.25 and $0.60 per share to net asset value. While still unrealized gains, this is another great development in the TPVG portfolio, but more importantly, not the only one that we believe would deliver meaningful gains, as we have many portfolio companies that are heads down and doing great things. Clearly, we are excited by the outlook for both unrealized and realized gains on the equity and warrant portfolio, which position us to provide shareholders with capital gains and to grow net asset value. But we're also pleased with the solid credit outlook and the strong yield profile for the portfolio. And as Jim mentioned, we will not compromise our highly selective investment strategy and our thoughtful portfolio construction for growth's sake. We have a track record of covering our distribution since inception and have plenty of spillover income to cover the recent shortfall compared to NII. Our large pipeline, strong levels of signed term sheets, increasing commitment growth, higher utilization rates, and meaningful levels of unfunded commitments are great indicators for near-term portfolio growth, which we believe will enable us to cover the distribution on a quarterly basis this year. but we're not going to force portfolio growth unnaturally. Jim and I are now starting our 23rd year of working together and our track record is unmatched. We've been through several market cycles together and have consistently delivered exceptional performance throughout by being thoughtful and focused and we're quite excited for what's in store for TPVG. With that, I'll now turn the call over to Chris.