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.

Great. Thanks, Sajal, and hello, everybody. During the fourth quarter, we continued to significantly grow portfolio assets while operating and admin expenses were stable. We continued to see favorable utilization rates on new debt commitments to our portfolio companies. We deployed capital using our attractive sources of leverage and increased the overall leverage ratio to our current target levers while maintaining excellent credit quality in the portfolio. And we entered 22 with a record portfolio size a diversified capital structure, and ample liquidity at the ready. Let me take you through an update on the financial results for the fourth quarter and the full year of 2021. Total investment income was $25 million for the fourth quarter with a portfolio yield of 14.9% on total debt investments as compared to $23 million or 15.2% for the prior year period. Total investment income was $87 million for the full year, 2021, as compared to $91 million for the prior year period. We are pleased that the onboarding yields continue to be strong and stable, and given the prepayments, we reported a weighted average portfolio yield of 14.9% for the quarter and 13.7% for the full year. We reported a new record for portfolio fair value of $865 million at year end, an increase of 37% from a year ago. Given much of the growth in the portfolio occurred in the second half of the year, the full benefit was not yet felt in Q4. While this was certainly a great outcome, we expect to see increased benefit of a larger portfolio, including a continued growth in quarterly interest income and NII in 2022, as we have now reached more scale in the debt investment portfolio. Total operating expenses were $13 million for the fourth quarter as compared to $11.5 million for the prior year period. Consistent with prior periods, operating expenses for the fourth quarter consisted of interest expense, base management fees, incentive fees, and general and administrative expenses. Total operating expenses for the full year of 2021 were $46 million as compared to $43 million in the prior year period. The increase in overall operating expenses is primarily driven by an increase in portfolio assets, an increase in the use of attractive leverage, and growth in pre-incentive fee income. Net investment income, or NII, at year end was $12.9 million, or 42 cents per share for the fourth quarter, compared to $11.9 million, or 39 cents per share for the prior year period. Net investment income was $41 million, or $1.33 per share for the full year, compared to $47.9 million or $1.57 per share for the prior year period. There was little volatility in the realized and unrealized gains for the fourth quarter with just $1 million of net gains in the period. Net asset value increased quarter over quarter and year to date. The net increase in net assets resulting from operations was $13.9 million or $0.45 per share for the fourth quarter, while for the full year, Net increase in net assets resulting from operations was $76.6 million, or $2.47 per share. 2021 compares favorably to 2020, where net increase in net assets from operations was $35 million, or $1.16 per share. Net asset value at year-end was $434 million, or $14.01 per share, an increase of $1.04, or 8% increase compared to $400 million or $12.97 per share as of the prior year end. I'm pleased to announce that our Board of Directors has declared a regular quarterly distribution of $0.36 per share to stockholders of record as of March 15th and will be paid on March 31st. In addition to over-earning the dividend this quarter, we continue to retain significant spillover income, which now totals $12.5 million or $0.40 per share at the end of the year to support additional regular and special supplemental distributions in the future. As we continue to experience portfolio growth over time and further record portfolio loan prepayments, we expect to maintain net investment income at levels that cover current regular quarterly distributions consistent with our long-term track record. I'd also note that in this current period, NII to dividend coverage was 113% for the fourth quarter. As Sajal discussed, and for modeling purposes, we expect total annual gross fundings in 2022 to be in the range of 400 to 600 million, with our pace of fundings increasing over the course of the year. Now let's move to unfunded investment commitments. We're pleased to note that we continue to experience high utilization rates on new commitments during the fourth quarter. Given the robust pipeline that we mentioned earlier, we ended the quarter with 191 million of unfunded commitments to 22 portfolio companies. Of the 191 million, 131 million of that total will expire during 22, and the remainder will expire in 23 or later. 70% of these unfunded commitments have contractual floating interest rates, all of which have a prime rate floor set to 3.25% or higher. This compares to the existing loan portfolio outstanding which had 52% contractual floating interest rates. So now just a quick update on our credit facility, our term notes, and overall liquidity. As of year end, there was $270 million outstanding on our fixed-rate investment-grade term notes and another $200 million outstanding on our floating-rate credit facility. We ended the year with a 1.08 times leverage ratio, also known as an asset coverage ratio of 192%. With the growth in the debt investment portfolio during the year, we successfully reached our target leverage as of the end of the year. As far as 2022 goes, we have recorded $89 million of portfolio loan prepayments already this year, which has generated more than $3 million of accelerated income. Strong prepayment activity in January has added to an already strong liquidity base, and as of today, with the consideration of the newly issued term debt this week, and the resulting pay down on our credit facility, we have a leverage ratio of approximately 0.9 times. We continue to have the overall target leverage range of one times to 1.2 times leverage. The revolving credit facility as compared to our fixed term debt allows us to efficiently manage our interest expense by reducing our outstanding debt from time to time when prepayments occur within the portfolio. As of year end, the company had total liquidity of 209 million consisting of cash of $59 million and $150 million under our revolving credit facility. In addition to this strong liquidity, the existing seasoned and diversified portfolio provides cash flows which bodes well for sustained liquidity throughout 2022. We continue to see ongoing contractual repayments of principal and also loan prepayments as a natural and important part of the high-quality and diversified lending portfolio that we have. As we reported on Monday, we successfully closed and funded our third investment-grade private notes offering and received $125 million. This fixed-rate, five-year term debt provides additional accretive financing for the benefit of our shareholders. Notably, the pricing on the notes reflected a 310 basis point spread to the value of the U.S. five-year Treasury on the day we priced, representing a tightening or improvement of 85 basis points from the spread on our last deal we did back in March of 2021, and a 97 basis point improvement to our issuance we did in March of 2020. With this transaction now complete, it brings us to $395 million in total private term debt. With the proceeds of this offering, we did fully pay down our revolving credit facility, which we expect to draw upon when needed to further grow the portfolio with accretive leverage. over time for the benefit of our shareholders. With the completion of the financing this week and against a backdrop of rising interest rates, 100% of our current outstanding leverage is at a fixed rate, while 52% of our debt portfolio is floating rate, and so we stand to benefit from higher rates over time. With this transaction now complete, we have three layers of term debt maturities with the earliest to occur in 2025. So this completes our prepared remarks. And so at this point, we'd like to take questions. So operator, if you could prepare the line.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then two. And our first question will come from Finian O'Shea with Wells Fargo Securities. Please go ahead.

Hey, everyone. Good afternoon. First question for Jim and Sajal. You talked about the opportunity opening up even more so post-quarter with market conditions. Are you seeing in real time improvements in items like warrants, EOT, coupon, or any of the above? How are the conditions for new origination and term sheets?

Yeah, let me take it. So, Finn, I would say, listen, if you looked at the assets we onboarded in the quarter, 14.4% weighted average portfolio yield. So I'd say we've always done our best to maximize both the debt pricing and the warrant structure as well as any other covenant element. yes, we're always looking to take advantage of opportunity to increase rates and increase our warrant coverage.

I very well appreciate that. And just on this quarter, overall fundings were obviously very strong, and at least in good part due to due to your delayed draw, unfunded profile. And that was largely before more significant volatility. A little bit did start, you know, on the interest rate side before year end, but, you know, nothing like we've seen in the first quarter. So was there any sort of macro impact or was a lot of this idiosyncratic or, you know, due to the the vintage of the unfunded profile, and if there's any color you could provide there.

Yeah, Finn, I would say it's none of the above. So I would say if we look at the breakdown of the fundings in the quarter, it actually had a significant portion of it was due to the new commitments we closed in the quarter, which were actually obviously were transactions that we sourced and signed earlier in the quarter or in Q3. So I would say The seasonality we always see in Q4 is more driven by end of year as companies close out their budgets, finish their financing plans. Let's say they raised equity, now they raise debt. I think the second element is they look to boost their balance sheets for year-end purposes, for audit, for potential fundraising activity in future years or in the next year. To then contrast in terms of the volatility that we're seeing here in 2022, Again, it's in our K for year to date. Fundings have been light. So, again, it just shows you the resiliency and the difference of venture lending as an asset class, venture growth stage lending. We're not seeing any excess or increase in fundings. And that's why, again, we're guiding to Q1 to be consistent with prior years as being a seasonally low quarter for us. So not impacted by the volatility from a fundings perspective.

Sure, helpful, and I suppose one final, if I may, you know, assuming the bond, the new bond stays, and none of your others seem to be too near maturity, that equates to a pretty generous capital structure, you know, giving you the ability to lever up to, you know, almost anything within perhaps regulatory guidelines. Does this change the direction of what you're willing and able to leverage the portfolio at? Chris, do you want to take this one?

Yeah. So I think our targets are the same. We're kind of looking at 1.1 times leverage. I think you're right. It does give us the greater flexibility to get there and stay there. By having that floor on the term debt, which the earliest maturity is three years out, so there's three, four, and five-year maturities now on the liability side, so that's good for us. And then we can ebb and flow with the revolver. But, yeah, with that greater flexibility, it really just gives us better treasury management, I would say, as opposed to trying to jack up the leverage.

Great. Thanks so much.

The next question will come from Crispin Love with Piper Sandler. Please go ahead. Thanks, and good afternoon.

Congrats on a great quarter here. Just first, can you speak to some of the key drivers of the strength that we saw in the fourth quarter? And what I'm getting at here is, was the net investment income both driven more by the 3Q fundings that were pretty healthy or the 4Q fundings? And then also, what would that mean for first quarter net investment income? Would it make sense to see a slight pullback from the 42-cent number that we saw in the quarter given seasonality and other factors? Or would you expect the 4Q fundings and outlook to keep that NII somewhat steady? Chris, do you want to take that one?

Yeah, I think clearly the late fundings that happened in Q3 provided full benefit in Q4 as they were outstanding for the full period. Onboarding yields remained consistent, so with just larger gross assets, we enjoyed better use of our credit facility, better ROE for sure in Q4 as we grew the book. A lot of the fundings in Q4 were also back-end loaded, so a lot of fundings in December, and that bodes very, very well for Q1 and Q2 as those Fundings that happened in December, where we may only have had two or three weeks of NIM to those, we now have full quarterly benefit. You know, pulling down that a little bit is the prepayments I mentioned that largely occurred in the January timeframe. So the pickup of accelerated income on those deals will offset a little bit of the top-line gross interest rate. But, yeah, definitely as we see the growth in the portfolio, prior period, prior quarter work clearly helps future periods.

All right, thanks. That's helpful, Culler. And then you added nine portfolio companies in the quarter, I guess a net nine. And after looking at my model, it seems like that's the most additions that you've had, and that comes off of even a solid number of ads in the third quarter. What do you see as some of the reasons for the large number of portfolio company ads that partly catch up as kind of some deals that got pushed later during COVID or just the healthy VC environment or anything else that you would call out? Yeah, go ahead, Jim.

No, I was just going to say I think it's a reflection of the healthy, robust venture environment for sure, but it's also many of the drivers that we talked about, the uncertainties with potential public and private market valuations in the future, a little bit of some of today's market and inflationary other concerns, but also with all the equity being raised last year, financing strategies being put together for this year, And Compass, let's start adding and bringing in a little bit more debt to our structures. But, Sajal, I know you wanted to add something to that.

Yeah, I would just say more specifically for Q4 purposes, again, I think that's just the natural end of year that we see in Q4, the seasonality of, again, companies looking to boost their balance sheets. I think the strong commitments that were closed, Some of it was from unfunded commitments that expired at year end, but I think, again, it's just more of the, you know, we had guided at the beginning of the year that the second half was going to be very busy, and we were building up to a very busy second half, and so we delivered on that as expected.

Great. Thanks, Jim and Sajal. And just one quick one, more of a clarification on the guide. Sajal, I think I just missed the tail end of that. your remarks and the prepared remarks. But so what I have is that 400 to 600 million gross fundings for the year, the range of 50 to 75 for the first quarter. And then did you give a number for the second quarter that you're expecting?

Correct. Yeah. So again, similar last year, we just see that the pickup, you know, the first half is generally slower than the second half, just given the, again, the fundraising environment and the buildup and the need for cash towards the end of the year. So we said 50 to 75 for Q1, 50 to 100 for Q2, and then 100 to 200 million. Again, these are gross numbers, not including the impact of prepayments for Q3 and Q4.

Perfect. Thanks. That's helpful.

The next question will come from Kevin Foltz with JMP Securities. Please go ahead.

Hi, good afternoon, and thank you for taking my questions. Other venture lenders have recently talked about how equity market volatility has led to an increase in companies looking to debt solutions as the equity markets are less attractive right now. You touched on this a bit in your prepared remarks, but just curious if you're seeing a similar trend.

Jim, go ahead. Yeah, absolutely. It's part of the market dynamics today, and it is accounting for some of the increased pipeline, increased activity, and deal flow we see. Absolutely a reflection of today's market.

Okay. That makes sense. And then just a follow-up question on my model. So based on the disclosure on interest rate risk, an increase in rates would have an immediate positive impact on net investment income growth. Just curious if you could share what the weighted average prime floor is for floating rate investments.

Chris?

The weighted average prime floor, almost everything in the portfolio now is at three and a quarter. Okay.

Okay. That's helpful. I'll leave it there. Congratulations on a really nice quarter.

The next question will come from Casey Alexander with Compass Point. Please go ahead.

Yeah, hi. Good afternoon. I'm not quite sure that he asked that question entirely the right way. I want to ask it a little different about the first quarter. I mean, you know, the, you know, Interesting total income was up 34% quarter over quarter. We know what the portfolio balance was coming into the quarter. So my question is, in terms of the prepays that you had during the fourth quarter, was there a loan or two loans that had a higher than normal amount of prepayment, accelerated prepayment income that boosted that quarter relative to other quarters? Chris, can you take that one?

Yeah, so we did have prepays, and I would say not outsized to other quarters. So there's different components, right? There's accelerated income from EOTs, and some have prepayment fees, and some have both. So it's really a combination. I think a couple of, maybe six months ago or a year ago, we did talk about vintage matters, and so... You can have a loan that's earlier in its life cycle where you get a bigger pickup from end-of-term payments, which are fixed percentages of a loan that have not yet accreted into income. Sometimes you pick up more income on an earlier prepay. If something's gone 75% of its original loan term, you pick up less accelerated income. So those are the type of things that kind of are a little muddying of the analysis.

Right. I get that. So what I'm asking is, were there some that prepaid very early in their life and thus generated a much higher percentage of accelerated income than normal?

You know, Casey, looking at Q4, I'm just, you know, the largest prepaid was ClassPass, which was, again, a seasoned asset. So not one that we would expect that generated exceptional or wasn't early in the life cycle. So I'd say, no, there weren't any In Q4, now here in Q1, and I think you and others have written about with Casper, obviously with Casper, we had a fee built in. So that $3 million number here that we've guided in Q1 reflects a significant amount from Casper, given how that loan was structured as a result of their take private transactions.

I was going to ask about Casper because you guys have definitely broken new ground with BDCs. I think back to when you had an infinite return on warrants because you had a company that got taken over before your loan ever funded. And in this case, you're announcing the funding of a loan and at the same time announcing the prepayment of the loan because you did a $9 million loan on November 22nd and you're announcing the prepayment of it. And that loan had a six and a half month maturity to it with a 10% prepayment. That doesn't sound like a venture debt loan. So I'm curious about the nature of that specific loan, you know, earning 20% on a six and a half month piece of paper.

Yeah, obviously, take private is not a normal thing that we see in our portfolio. And so that's when our credit team jumped on, saw an opportunity. And again, we felt it made a lot of sense. And so I'd say, yes, we are not in the business of take private runway extension financing. That was an anomaly to support an existing portfolio company through a, as you said, a transaction where we had clear line of sight on.

Yeah, okay. That's what I assumed it was. Well, I mean, opportunistically, it's a great return for the shareholders, so congratulations on that one. The $89 million prepays in the first quarter, do you know how much of that came out of the clear category or not?

Yeah, so all of those were clear.

All of those were clear.

Yeah, we anticipated that those would be prepaid prior to reporting. And so as a subsequent event, we knew that those were coming through.

Right. So absent other things moving up into the clear category during the first quarter, it would be reasonable to expect the clear category to come down a little bit when you report. Do you want to?

Correct. That's right.

Yeah. Okay. Great. All right. Thank you. Thank you for taking my questions. I appreciate it.

The next question will come from Christopher Nolan with Ladenburg Thalman. Please go ahead.

Hey, guys. Congratulations on the quarter. Chris, in your comments, you mentioned that dividend coverage, you expected dividend coverage by NII in 2022, and that's a change from earlier verbiage and earlier calls where you said dividend coverage would be covered by EPS long term. Was that intentional?

I think what I said was that we covered with we covered our dividend with NII in the fourth quarter, and I think our consistent message is that we would cover our dividends quarter over quarter over the long term with a combination of current period NII and the spillover income that we have. So that's consistent.

Okay. And then I guess the basic question is prepayments. I mean, this is a headwind for you guys, and going forward, I mean, Do you think you can maintain these leverage levels? I mean, it sounds like everything you say that the first quarter, your overall investment balance is actually going to decline quarter over quarter, given $89 million in prepays and guidance in the first quarter of $50 to $75 million in gross fundings.

Yeah, Chris, this is Sajid. Let me take a cut. Listen, I think we're fundamentally driven by credit quality. So I would say having prepayment activity or strong prepayment during a period of volatility is a good thing, and we're pleased with that. And then again, I think from a funding's perspective, expecting this one to be a lighter quarter from a funding, despite the volatility and everything going on in the world, we again believe is a demonstration of just the strength of our venture growth stage lending strategy and the quality of the companies we work with. So I would say, you know, the up and down leverage, it's part of the business. And I think that's why, again, we, you know, look to balance our cap structure with term debt and the revolver so we have the ability to kind of, you know, benefit from when they're quick ramp-ups and then when they're prepays. And then I think being thoughtful and disciplined how we build our cap structure and not, you know, raising too soon or too late is also our approach. Great. Thanks, Tajal.

The next question will come from Ryan Lynch with KBW. Please go ahead.

Hey, good afternoon, and thanks for taking my question. The first one is kind of a follow-up question. What would you kind of discuss as far as operating earnings and interest income in Q1? So you have $3 million you guys disclosed of prepayment income. thus far in Q1. Can you guys, just to give us some perspective, can you provide what the total level of prepayment income was in the fourth quarter, just so that we kind of have some sort of level set comparison of where that was?

Yeah, so in Q4, accelerated prepayment income was in the $4.5 million range, kind of in the aggregates. Okay.

And that's compared to the $3 million you guys have already received in Q1 thus far. Right. Yeah. Apples to apples. That's right. Okay. Perfect.

And then the other couple of questions I have, the other one was on, you know, kind of your quarter to date, which kind of goes broader than just what we did in the first quarter. But when I see something like $432 million of TPC-directed originations across their platform, you know, Is there any way for me to kind of understand, and again, this will fluctuate from quarter to quarter probably on your capital availability, but how much would I expect of those commitments would be allocated to TPBG? And again, I know that's going to depend on how much capital you guys have at the BDC and the available liquidity at the BDC and leverage levels and those sort of things, but is there a way I can get a ballpark of just what should I expect when I see a $432 million commitment number across their platform? What should I expect kind of flowing from the commitment standpoint to the BGC?

Yeah, Ryan, let me answer. So I'd say generally speaking, TBBG does and should participate in all of those transactions because it's a venture growth stage and it's in the venture growth stage strategy, which is what TBBG focuses on. I think the impact is, again, the hold sizes and the portfolio diversification. So, you know, again, depending on, and I don't have the insight on how lumpy that $422 million is. I don't think it's $400 million transactions, but let's say if it was $400 million and $122, right, obviously, you know, we would, you know, TPVG would get up to its hold size and that's it. And so we would see in that scenario, if these were lumpy deals, that would be the scenario where TBVG would get the least amount by virtue of the fact that it would only be up to its hold size. And these are big deals, but to the extent that they're more normal in the 20 to 50 million range, then you would see a bigger percentage of that 422.

I mean, would you say, and maybe you don't answer this, but fine, but would you say that TBVG would in general, if you have diversified, you know, pool, you know, commitments, would they, would TBVG be getting the majority of, Like over 50% or under 50% of that?

It's hard to say. Again, all of our growth stage vehicles, they co-invest together. So one doesn't get priority over the other. They go together. So again, it's a function. It's an allocation based, as you said, on hold size, transaction size, portfolio, industry exposure, things like that. So hard to quantify without looking at the underlying individual transactions. But I think, again... The great news is, you know, two months into the year, we've already got another $422 million kind of new business origination, and that doesn't include, you know, what backlog from last year that didn't close yet or that didn't close last year that's now closing this year. Yeah, I got you.

And then just the one last one. Did you guys say that your leverage target is one time to 1.2 times? That's equity. I guess one, is that correct? That's a leverage target. And then did that change recently? Because I had a different number of that on the page.

Chris?

Yeah, it's been consistently 1 to 1.1 times leverage, and we've spoken that from time to time given the profile of prepayments consistently occurring within the portfolio that if we went to 1.2 times, we would expect it to come back down into our 1.1 times. So that's been consistent for quite a while now.

Okay. That's all for me. I appreciate the time this afternoon and next quarter.

Thank you. This concludes our question and answer session. I would like to turn the conference back over to Mr. Jim LeBay for any closing remarks. Please go ahead.

Thank you, Operator. As always, I'd like to thank everyone for participating in the call, and we'd also look forward to talking with you again next quarter with some good news as well. Thanks again. Take care.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.