Good afternoon, ladies and gentlemen. Welcome to the TriplePoint Venture Growth BDC Corp. Second Quarter 2022 Earnings Conference Call. At this time, all lines have been placed in a listen-only mode. After the speakers' remarks, there will be an opportunity to ask questions and instructions will follow at that time. This conference is being record and a replay of the call will be available in an audio webcast on the TriplePoint Venture Growth website. Company management is pleased to share with you the Company's results for the second quarter of 2022. Today representing the Company is Jim Labe, Chief Executive Officer and Chairman of the Board; Sajal Srivastava, President and Chief Investment Officer; and Chris Mathieu, 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. Labe.

Thank you, operator. Good afternoon, everyone, and welcome to TriplePoint Venture’s second quarter 2022 earnings call. Against a backdrop of macroeconomic uncertainty, we continue to make strong progress executing against the plan that we laid out at the beginning of the year. Demand for our debt financing in the quarter was strong, and we maintained our focus working with our select leading venture capital investors and continuing with our disciplined approach of investing in what we believe are the highest quality venture growth deals. During the second quarter, we achieved several key objectives, including growing our portfolio to record levels, over earning the dividend and generating strong portfolio yields. During the past few quarters, we have gradually been bringing up our portfolio leverage and in the second quarter, we are pleased to have hit our target leverage range. We exceeded our funding goals last quarter, funding more than $157 million of debt investments and have maintained strong momentum heading here into the second half of 2022. Specifically, we've signed more than 803 million of new term sheets at venture growth stage companies at TPC, our sponsor. This is the highest for any quarter since our IPO. We also entered into new debt commitments of $260 million during the quarter and additionally, our pipeline is now grown to more than $2 billion for venture growth stage companies at quarters end. Turning to the portfolio. Our earnings power remains strong. We generated NII of $0.41 per share in the quarter and exceeded our $0.36 dividend. A third of our portfolio companies have raised an aggregate of more than $1.7 billion of capital in the first half of this year. In terms of the overall venture capital market, it continues to hold its own. Here is a few stats of the fundamentals. Private…

Thank you, Jim, and good afternoon. We remain disciplined during the second quarter, generating strong results despite volatile markets and continue to execute against our 2022 plan to grow and diversify the portfolio while increasing our use of leverage. Regarding second quarter investment portfolio activity, TriplePoint Capital signed a record $803.6 million of term sheets with venture growth stage companies and we closed a record $259.9 million of debt commitments to 17 companies at TPVG. Signed term sheets and closed commitments were up from Q2 2021 levels of approximately $251 million and $103 million, respectively. We also received warrants valued at $2.1 million in 16 portfolio companies and made $700,000 of direct equity investments in four companies. Of the 17 companies, we committed debt capital during the quarter, 13 were new portfolio companies and four were existing portfolio companies. During the second quarter, we funded $157.6 million in debt investments to 20 portfolio companies, which was well above our $50 million to $100 million guidance range for Q2. Q2 fundings represented an increase from $76 million in debt investments to seven companies in Q2 2021. The increase in fundings was related to the strong origination activity during the quarter where approximately two thirds of our fundings came from new debt commitments that closed in Q2, which reflects our efforts to drive utilization of our new commitments more efficiently. To be clear, we funded companies with strong existing equity and cash reserves in many cases, topping off recent financings and extending their runway well into 2023 and 2024. We expect to see 50% to 75% of our existing unfunded commitments to be drawn given the strong existing cash balances and continued fundraising activities of our portfolio companies typically at the end of the draw periods, if utilized. The debt investments we…

Great. Thank you, Sajal, and hello, everyone. During the second quarter, we continued to generate substantial core interest income from our high-quality loan portfolio and continued to see strong and stable utilization rates on new debt commitments. We deployed capital using our attractive sources of leverage, which consisted of $390 million of fixed rate long-term investment grade notes, and a $350 million revolving credit facility that we renewed in July, while maintaining overall solid credit quality and increasing diversification in the portfolio. I'll now take you through the financial results for the second quarter of 2022. Total investment income was $27 million as compared to $20 million for the second quarter of 2021. This increase of 35% was largely due to the growth in the average portfolio size as well as higher portfolio yields. Our portfolio yield was 14.5% on total debt investments this quarter as compared to 13.9% for the second quarter of last year. Onboarding yields continue to be strong and stable. Loan prepayments contributed 1.7% to the portfolio yield this quarter with a total of $50 million in principal prepayments and $3.1 million of accelerated income. While we were very successful in funding new investments, totaling $157 million, approximately 30% was funded in the closing weeks of the quarter, which bodes well for the strong topline investment income growth in Q3 and beyond. Operating expenses were $14.8 million as compared to $10.9 million for the second quarter of last year. Operating expenses for the quarter consisted of $6.1 million of interest expense, $3.9 million of management fees, $3.2 million of incentive fees, and $1.6 million of general and administrative expenses. The increase in overall operating expenses primarily driven by an increase in the portfolio assets and increase in the use of attractive leverage and the growth in…

Thank you. We'll now begin the question-and-answer session. [Operator Instructions] Our first question comes from Finian O'Shea from Wells Fargo. Please go ahead.

Hi, everyone. Good afternoon and thanks. First question on portfolio company fundraising [your] numbers sounded very good, I think, $1.7 billion in the first half. I'm seeing if you could unpack that a bit and if it reflects the sort of median venture debt borrower. Was this number – the fundraising number concentrated or fairly well spread out and overlying your key borrowers? And then sort of second part, what did you see in terms of the magnitude of valuation change in these new fundraising rounds?

Hi, Fin. It’s Sajal here. I'll take the first cut. So just packing through, so in Q2, we had 13 companies raise about $900 million, so a pretty diverse pool in terms of – so it's not one or two companies raising the lion share. So I think, again, that's a great data point in terms of the spreading of the capital raise across the portfolio. And then the other really interesting statistic is the majority of the rounds have been at or above upticks in valuations. So again, I think it's a testament to the quality of our companies that they're able to raise and that they're able to raise at either existing valuations or premium to prior round valuations.

Okay. That's helpful. And then, is there any category in venture that VCs are backing away from? I know that's usually how problems start when they do is a certain line of business goes out of vogue. Is this sort of a broad drawdown cost cutting extend the runway type thing? Or are you seeing VCs sort of pivot away from any sub-industry or anything like that?

Yes. It's an interesting dynamic. I would say we're not seeing any specific sub-sector of tech as kind of toxic or not attracted capital. I mean, I'll pick on crypto again, we're not – we don't have portfolio companies in crypto, but while the crypto market is quite challenged, there are a number of investors that see this as an opportunity and are looking at that as a sector to invest in. So I would say, from our perspective, our goal is to lend to companies in those sectors that are attracting follow-on financing from our select group. And I think that's our primary focus, but I would say overall, the theme is those companies and sectors that are capital intensive or with burn rates that are higher than necessary or growth rates that are unnecessarily high because of the burn rate are less attractive. So I don't think its sector specific. I think it's more of financial discipline specific.

Okay. Very well. Thank you.

The next question comes from Crispin Love from Piper Sandler. Please go ahead.

Thanks, and good afternoon, everyone. For your new debt investments, they came in a little bit better than I think your initial expectations were for the second quarter. And I appreciate the reaffirm guide that you gave for the second half, but just as we're looking at the third and fourth quarter, would you expect the third quarter to be closer to the lower end of that $100 million to $200 million guide that you gave, just given that strong activity that we saw at the end of the second quarter, if there was any pull forward there in originations that closed in the second quarter versus the third, or do you think you could still get to the midpoint for the third quarter? Just any color there would be great.

Great question, Crispin. So I'd say, the third quarter is generally a seasonal quarter, right. Given the summer and vacation schedule, although I think from our perspective, given the backlog, we would expect to come in consistent with that range, consistent with prior quarters probably towards the lower end, and then Q4 tends to be the busier quarter and so mid-to-high end of that range, your perspective. As we look to Q2, I would say there's a little bit of pulling from Q3 into Q2. I also think given the expectation of rates and rate increases and the frequency of it, I definitely think there was motivation on both sides, lender and obligor to get deals done faster. I think we were using that as an opportunity to close given the – but again, given with floating rate, it was less relevant, but I think again, companies were looking to lock in capital. So I'd say, that was how we look at the Q2 activity.

Great. Thank you. I appreciate that color, Sajal. And then just – can you give a little bit more detail on the liquidity among your portfolio companies, then if you have any metrics on hand about how much liquidity some of those companies have to last six months a year longer, or just any other qualitative info you can share? I think Jim might have said something about two years of cash on hand, but I didn't really catch what that was. So if you could clarify that as well, that'd be awesome.

Yes. No problem. It's a good question and a salient one to ask these days. So I don't think I mentioned it in the prepared remarks, but as a last quarter, just over two-thirds of our companies had 12 months more cash in terms of cash runway, yes. It is something that we are continuing to monitor and as a very wise practice these days.

Great. Thank you. I appreciate the color.

The next question comes from Kevin Fultz from JMP Securities. Please go ahead.

Hi. Good afternoon, and thank you for taking my questions. Now just question around loan to value trends in the portfolio. Clearly there has been a significant pullback in private company valuations. I'm just curious if you have a sense how LTV ratios have changed in the portfolio and where that currently stands and also if you could remind us where you underwrite new deals on the LTV basis?

Sure. So we target LTVs under 25% at time of origination as of Q2, as in the 10-Q, I believe we're between 7% and 8%, LTV for the portfolio, which is relatively flat to where we were as of Q1. So no material change in terms of portfolio LTV and as mentioned, the majority of the fundraising of our portfolio companies year-to-date have been at or flat or at upticks in valuations. So I'd say – as Jim said, listen, I think the reality of where the public multiples are and fundraising activity of the rest of the year, we expect our portfolio companies to continue to be able to raise, but I think again, raising flat is – flat is the new up and up is amazing, but I'd say, we continue to expect to hold in that range of that 7% to 9% over the next couple of quarters.

Got it. That's good to hear and I'll leave it there. Congratulations on a nice quarter.

The next question comes from Casey Alexander from Compass Point. Please go ahead.

Yes, good afternoon. We've seen the volatility of the equity markets and a lot of things get pushed down in values in the equity markets. And your onboarding yields are going up, which suggests that maybe you have a little bit more leverage in your negotiations with companies coming in. Does that include – are you getting a better basis on the equity slices that you're taking alongside of the debt investments that you're making, and would it be your expectation that the vintage that you're lending to right now would generate higher ROEs than maybe we had been used to over the past few years?

Yes. Casey, great question. Absolutely. So I would say, absolutely as we look to the companies that are getting funded in this environment, right. They're getting benchmarked off of current multiples. The insight we're hearing from the VCs is, hey, let's use current multiples as the basis for our entry point, but as we look to exit, hey, we're expecting five year average from the 13x to 19x or six year averages as our exit multiple. So I would say absolutely, we are expecting on a balance basis this class to generate higher return, given where valuations are and new round valuations are being set. As we look to how we structure our deal, obviously it's yield and – the yield from the coupon side and the debt side and the balance of the equity kicker side. So we're never going to subsidize one – like, that's not a reason to charge less to get more equity kickers, but I would say as Jim mentioned, we're looking to push both up. So we're definitely looking to – there is a premium for capital in this environment and you want to pick great companies and there is a cap to what our total returns could be, but we are definitely – companies are willing to pay a premium to be with a high quality trusted dependable partner and we're seeing it on both the debt side of pushing the yields up and on the equity kicker percentage of total ownership of these companies.

And I can only add that's historically what we've seen as well, and it’s opportunistic times.

Okay. Thank you for that. Secondly, just because I have a bad attention span, can you guys review what your guidance is for the third quarter, fourth quarter originations and sort of how you expect prepayments to offset that?

Yes. Sure, Casey. So we got it to a $100 million to $200 million of gross fundings per quarter for Q3 and Q4 consistent with prior guidance. Again, given seasonality a little bit of pulling of originations in Q3 to Q2, Q1, sorry, Q3 to be at the lower end of the range. Q4 to be at the higher end of that $100 million to $200 million range from a funding – gross fundings perspective. We continue to expect to have one prepay a quarter, and I think that's our – those were your questions.

But did you say also, do you expect in the second half of year sort of regular amortization totaling around $50 million?

We currently – we always have regular amortization not the second half of the year isn't – more unique, but I believe correct, the portfolio cash flows and Chris jump in for the second half of the year are in excess of $60 million.

Great. All right. Thank you for taking my question. So I appreciate it.

The next question comes from Christopher Nolan from Ladenburg Thalmann. Please go ahead.

Hey guys. Pencil and Pixel, given your comments, is that a third quarter realized loss?

Chris, do you want to take that?

So yes, so we fully hit the NAV in Q2, but it'll flip from an unrealized loss to our realized loss in Q3. No impact on Q3 just geography.

Got it. And given the cautious comments, you guys just sort of painted on the market and given also your comments that you expect earnings to exceed the dividend, what's your thoughts in terms of leverage? Do you want to take some risk off and decrease the leverage? Are you going to increase it? What are the thoughts around that?

Yes. I think, Chris, our perspective is we've been jumping up and down over the years from a leverage ratio perspective. And so one of our – after getting the investment grade rating from DBRS, we said to our investors that we wanted to take advantage of that rating and the low cost to fix rate debt and run at a higher leverage, just to, as we said demonstrate the earnings profile of this business, when you have a 13% yielding portfolio at scale really should drive great NII and ROEs. But then as we said, given prepayment activity, that's always, what's kind of dropped our leverage down. And so I think, our goal is, we'd like to run at higher leverage, but the reality is with prepayment activity with portfolio amortization, it's generally hard to do that, but again, we wanted to demonstrate to our investors, our ability to do what we said and to attempt to run at a slightly higher leverage ratio.

Great. And I guess my final question is how many of your companies have bank loans or some sort of bank financing, which is ahead of your debt investments and because growth capital loans, I'm not sure if that's first lien senior secured on top of banks or…

We disclose in our 10-Q that, and we qualified as those companies that have term loans from banks or term loans plus revolvers, and it's approximately 25% as the end of Q2, which is the same as where it was at Q1.

Great. Okay. Thanks guys.

The next question is from Ryan Lynch from KBW. Please go ahead.

Hey, good afternoon. I'm trying to get a little more clarity on the total nature of the roughly $27 million of total realized and unrealized losses in the quarter. What of that is contributed to kind of markdowns and valuation [indiscernible] equity investments that spreads versus write-downs related to credit. I know you had the $13 million write downs from Pencil and Pixel. I'm just curious, are there any other credit write-downs that specifically impacted or contributed to that total $27 million?

Yes. So there was one other kind of, I'll call it, category that I mentioned where we hit the fixed rate loans that we have in the portfolio with what we call a market rate adjustment. So for those, it was about a kind of in the aggregate for those loans about a $2.5 million unrealized adjustment for those given the double increase in prime rate during Q3. I'm sorry, Q2.

That was just spread related versus anything credit…

Yes. That's correct. Yes, they're white credits, they're performing at or better than expectation is just the fact that they were fixed rate deals rather than any kind of credit impairment or issue.

And the other thing I just want to talk about, I want to make sure I'm understanding this correctly. I believe – and correct me if I'm wrong. You said 50% to 75% of your unfunded commitments you expect to be drawn. I was kind of curious to get what the timeframe was around that just because I do the math on that, it's like $170 million to $250 million of additional funding that you would expect. When I look at your balance sheet today, it looks like you guys are kind of at your – your leverage target is right around $9 million – those target potentially fluctuate. And then $60 million of total amortization in the back half of the year, and then you'll have some prepayments as well, but that's a large number. So it depends on when – when the timeframe you expect those to be funded. Is my number correct? And then also kind of what was the timeframe you expect those to fund?

Yes. So I can start. I guess the first point is that we do have a kind of a scheduled maturity for the various portfolio companies we have. Generally, we give them six to 12 months to drawdown on the availability of the commitment. I think I had mentioned $100 million of our unfunded commitments would expire if not drawn by the end of the year. And then the rest of that kind of is spread out ratably over 2023. So it's not a near-term expectation that there would be heavy draws even for those that do draw, but that'll be over the next nine to 12 months as well.

And then on top of that, about a third of the unfunded commitments are milestone based. So again, the portfolio companies have to achieve those milestones in order to access that capital and not all of them have actually done that.

Okay. All right. I appreciate the time this afternoon.

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

Great. Thank you. As always, we'd like to thank everyone here for listening and participating in our call today. We absolutely look forward to talking with you all again, next quarter. Thanks again, and have a nice day. Goodbye.

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