TriplePoint Venture Growth BDC Corp.

Good afternoon, ladies and gentlemen, and welcome to the TriplePoint Venture Growth BDC Corp. Fourth 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 call is being recorded, and a replay of the call will be available in the audio webcast on the TriplePoint Venture Growth website. Company management is pleased to share with you the company's results for the fourth quarter and full fiscal year of 2021. Today representing the company is Jim LeBay, Chief Executive Officer and Chairman of the Board, Sajul Srivastava, President and Chief Investment Officer, and Chris Matthew, Chief Financial Officer. Before I turn the call over to Mr. LeBay, 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 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 the latest SEC filings, please visit the company's website at www.tpbg.com. Now I'd like to turn the conference over to Mr. Jim LeBay. Please go ahead.

Thank you, Operator. Good afternoon, everyone. And thank you for joining TPVG's fourth quarter and full year 2021 earnings call. 2021 was a year in which we generated strong results and returns for shareholders as we executed against the playbook we established at the beginning of the year. This culminated in the fourth quarter, which included achieving several new records since our IPO, including portfolio size, signed term sheets, and closed debt financing commitments. We continue to capitalize on the thriving venture capital environment throughout the year while building a significant pipeline and maintaining TPVG's proven and disciplined approach of working with select venture capital investors. For the fourth quarter, we grew the investment portfolio to a record $865 million. and achieved a weighted average portfolio yield of almost 15%. Our funding succeeded our target range and represented the second highest funding quarter since our IPO. In the quarter, we more than doubled our debt financing commitments over the previous quarter, achieved leverage within our target range, and continued to diversify the portfolio. Our portfolio of high-quality, technology-driven venture growth stage companies also remain very healthy with strong credit quality. The quarter was topped off by delivering net investment income of 42 cents per share, over-earning our dividend. Our net asset value, or NAV, also grew on a quarterly as well as a yearly basis. The NAV accretion during the year continued to benefit from the equity investments and warrant kickers that we negotiate as part of our debt commitment, demonstrating the strong upside potential of the portfolio, as well as reflecting the many attractive rounds that our portfolio companies close during the year. As we originate new loans, We continue to pick up additional equity and warrant kickers that we believe will further drive capital gains upside in our portfolio and create long-term shareholder value. In terms of market opportunities here in 2022, we're encouraged by the outlook for venture lending and for TPVG. The choppiness and rotations in today's public technology markets can benefit our venture lending business. which is somewhat counterintuitive and not necessarily apparent on the surface. There are several factors behind how these market uncertainties are generating increased demand for venture lending. First, the venture capital markets remain robust, providing us with an excellent operating environment in which to execute. By all accounts, 2021 was a record-breaking year in venture markets. Total venture deal value was $330 billion, almost double that at 2020. The market's especially strong for growth-stage companies within the late-stage venture capital market segment in which we operate, where the total deal count in 2021 was over 5,000 deals, representing some $228 billion in investment. So far this year, the momentum continues. Venture capital deal investment activity, particularly among our select group of leading investors, has continued unabated here into early 2022. Second, there are several trends that we're seeing in today's market, which is driving incremental demand for TPVG. The longer timelines for SPAC and IPO transactions are prompting some companies to evaluate debt solutions. This increased timing to exit creates and fuels opportunities for our debt financing. In other cases, many companies that completed equity rounds last year are either now seeking debt or seeking to upsize their debt with us or returning to TPVG for additional debt capital as a way to complement and enhance their equity raises in light of their future financing strategies, especially given the potential for unknown shifts that occur could occur in future private or the public market valuations. In still other cases, there's a number of companies out there seeking additional runway for future equity round timing purposes. As I think of it, last year was really, call it the year of the equity raise, and although companies are still raising equity capital, we are witnessing a swing towards layering in more debt financing this year in the strategies at many, many companies. This serves as another strong driver to the steadily growing pipeline we have. Finally, already again early into this year, we're already seeing increased acquisition and consolidation opportunities as another continuing driver. While today's market conditions favorably increase demand, As we look to our existing portfolio companies, we're very pleased with the strong position that they're in. They have substantial cash runway on hand. TPVG portfolio companies raised a staggering $5.8 billion of fresh equity capital last year. Another promising factor is that many of these portfolio companies actually stand to benefit in this inflationary environment, along with the labor shortages and the supply chain backups. It's driving many businesses to invest in or accelerate their purchase of the efficiency-enhancing IT products and services that are offered by our portfolio companies. TPVG portfolio companies provide elegant technology solutions through productivity and supply chain software, AI, security, identity, Robotics and other technologies that help customers greatly increase the efficiency and the turnaround time, as well as helping drive down the cost of their businesses. In other words, we believe the fundamentals continue to remain as good as they've ever been for privately held venture capital-backed tech companies, not only as a result of those earlier COVID-initiated developments, which did favor the further adoption of new technology products and services, but now also in this rising cost environment in today's market. In enterprise tech, the prolonged supply chain disruptions and labor shortages are prompting a lot of businesses to invest in automation and robotics technology at an even more accelerating rate. Within health tech, we're seeing increased traction in telemedicine, pharmaceutical deliveries, connected fitness products. And in consumer tech and fintech and sure tech, prop tech, technology has permanently changed consumer behavior in a way that enables these companies to benefit from faster-than-ever market acceptance of new products and services. The ecosystem continues to be favorable for venture lending, while the barriers to entry remain high, hoping to preserve TPVG's advantages. and our ability to capitalize in today's market. Reputation, references, and relationships continue to drive our business, and we believe that based on our long track record of Sao Jo and I working together for what is now more than 22 years through many of these cycles, as well as with our deep industry relationships, it gives us a significant edge in the market. To wrap up, Our success last year is a result of our consistent execution of the playbook. Our relationships with a select group of top-tier VCs and entrepreneurs continues to provide us with unparalleled access to high-quality deal flow. With the recent completion of our third investment grade offering, we have significant liquidity now to continue funding and closing financings within our large and growing pipeline of high-quality venture growth companies. We believe our portfolio and business is strategically positioned for the future, and we're excited about the outlook for this year. We believe 2022 will be the year of continued execution, growth, and performance, and we remain poised to provide strong returns to our shareholders. Let me now turn the call over to you, Sajal.

Thank you, Jim, and good afternoon. We are pleased with our execution in 2021 against the quarterly playbook we put together based on the resilience of the venture equity and venture lending markets despite the pandemic and our disciplined approach to growth. In this quarter's investor deck, which you can find on our website, we included a new slide, slide number 16, which I think does a great job summarizing the results of our playbook along with key performance indicators. which I'm proud to say all improved every single quarter in 2021. In particular, our fundings, core portfolio yield without the impact of prepayments, the size and diversity of our funded portfolio, the value of our warrant and equity investments, our net asset value, and our leverage ratio all increased each quarter, while our portfolio loan-to-value, portfolio credit score, and percentage of loans on non-accrual decreased each quarter. Our playbook and performance not only demonstrated the core differentiators of our venture growth stage lending strategy, but also the benefit of the 22-year track record that Jim and I have together, the quality and perseverance of our team, and equally important, the benefit of being sponsored by Triple Point Capital, a well-established, highly regarded, and proven global investment platform. During the fourth quarter, TriplePoint Capital signed a record $725 million of term sheets with venture growth stage companies, and we closed $232 million of debt commitments to 16 companies at TPVG. We received warrants valued at $3 million in 18 portfolio companies and made equity investments totaling $2.7 million in five portfolio companies. For the full year, TriplePoint Capital signed a record $1.5 billion of term sheets with venture growth stage companies, and we closed $541 million of debt commitments with 34 companies at TPVG, of which 27 were new obligors and 7 were existing obligors. We also acquired warrant investments representing $8.5 million of value and made $5.2 million of equity investments. During the fourth quarter, we funded $161 million in debt investments to 19 companies, representing an increase of 38% from the third quarter and exceeding the target range we provided. The debt investments funded during the quarter carried a weighted average portfolio yield of 14.4% at origination. During the full year, we funded $411 million of debt investments to 39 companies, with a weighted average portfolio yield of 13.5% at origination. Also during Q4, we had 61 million of loan prepayments, resulting in an overall weighted average portfolio yield of 14.9%. Excluding prepayments, core portfolio yield was 12.3%, up from 12.1% in Q3. In 2021, we had 161 million of loan prepayments, resulting in an overall weighted average portfolio yield of 13.7% for the year. Excluding prepayments, core portfolio yield was 12.1% for the full year. As at the end of the year, our 91 portfolio companies were spread across 35 subsectors, with our largest concentration in business application software, which represents nearly 13% of our portfolio. During the year, we increased the number of funded portfolio companies by 50% to 49 outstanding obligors as of Q4, as compared to 33 as of Q4 2020. As Jim mentioned, we continue to see strong equity fundraising activity in our portfolio, which is a testament to its quality. During the quarter, 13 portfolio companies raised over $2 billion of capital, bringing the total to 33 portfolio companies raising over $5.8 billion of capital during 2021, on top of 29 companies raising over $3 billion in 2020. Moving to credit quality, This quarter we achieved one of our best quarterly credit quality rankings with our weighted average credit ranking of 1.87 compared to 1.94 as of the end of Q3 and 2.13 as of the end of Q420. During Q4 and the entire fiscal year, no new obligors were added to categories four or five and no new obligors were placed on non-accrual. During Q4, Five portfolio companies were upgraded from Category 2 to 1, and two portfolio companies were downgraded from Category 2 to 3. But we are pleased to report that one of these companies has already raised capital, and the other company has achieved positive adjusted EBITDA. As of year-end, we held warrants in 81 companies, up from 64 companies as of Q4 2020, and held equity investments in 40 companies, up from 24 companies as of Q4 2020. with a total cost and fair value of $63 million and $108 million respectively. This $108 million of fair value is double the fair value of our worn inequity investments as of Q420 of $50 million. 2021 was an unprecedented year for gains from our worn inequity portfolio, with some of our most positive movers including Revolut, WorldMit, and Upgrade due to private rounds of financing, and ForgeRock and Toast due to IPOs, resulting in $36.1 million of net realized and unrealized gain on investments, or $117 per share for the year. We continue to be excited for the monetization of these upside components and kickers associated with our high-yielding debt investments over time. Consistent with the track record of our sponsor, we expect Warren and Equity Investments to generate realized gains significantly in excess of any realized losses. All this performance culminated in an increase in our net asset value of 104 per share to 1401 per share from our net asset value of 1297 per share as of December 2020, which is also an increase from our pre-pandemic net asset value of 1334 per share in December 2019. To take a step back, 2021 was also an exceptional year for our sponsor, TriplePoint Capital, and the TriplePoint platform as a whole. TriplePoint Capital continues to be both the industry leader and the largest non-bank lender to technology companies across the globe, backed by who we believe are the best venture capital funds. Having signed term sheets across the platform and across all technology strategies of more than $2.5 billion in 2021, Keep in mind, TriplePoint's mandate is not to be everything to everyone, but rather a partner to the best technology-focused venture capital funds, and the platform's performance in 2021 reflects the huge addressable market these funds represent and our strong relationships with them. The TriplePoint platform's unmatched brand and reputation, differentiated approach, growing AUM on a global basis, and diversified funding vehicles has benefited TPVG in numerous ways, including access to significant venture growth stage deal flow, crossover investment from our blue chip institutional investors across vehicles, and also from portfolio diversification. In 2021, 90% of TPVG's deals were co-investments with other platform vehicles, enabling TPVG to meet the large and growing needs of venture growth stage companies regardless of transaction size, while maintaining a robust and diversified portfolio. With regards to portfolio growth here in 2022, our range forecast for gross investment fundings for the full year is between $400 and $600 million, with Q1, similar to last year, likely in the range of $50 to $75 million for the quarter due to seasonality, a range of $50 to $100 million for Q2, and then increasing to a range of $100 million to $200 million each quarter on a gross basis for the third and fourth quarters. As Jim mentioned, we believe that the current market volatility creates demand for additional capital, including venture debt, and we expect this to translate into strong fundings over the second half of the year, but we will not compromise our discipline and quality for portfolio growth's sake. With regards to loan prepayments, they continue to be a part of the business, and we appreciate getting our capital back as well as the accelerated income that is generated. Here in Q1, we've already had loan prepayment activity from Casper as a result of its take private transaction, from Sonder as a result of its SPAC, and from virtual instruments and others. In closing, we are proud of our performance in 2021 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 now turn the call over to Chris.