Good afternoon, ladies and gentlemen. Welcome to the TriplePoint Venture Growth BDC Corp. First Quarter 2024 Earnings Conference Call. [Operator Instructions] This conference is being recorded, 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 first quarter of 2024. 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 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 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 would like to turn the conference over to Mr. Labe.

Good afternoon, everyone, and welcome to TPVG's first quarter earnings call. During the first quarter, we continue to navigate through the current venture capital markets. While the market remains slow and deal activity and deal value have yet to improve, there continues to be unique opportunities in this market for us as well as initial signs that overall VC markets may gradually begin to improve. This includes growing demand at TriplePoint Capital from what we believe are quality venture growth companies and companies across the venture stages. Complementing these initial positive signs, we continue to make progress in the first quarter with increased fundraising activity and strengthening performance at our portfolio companies and in building our pipeline, setting a strong foundation heading into the second half of this year. As we progress through the year, our focus will be on positioning TPVG for the future while continuing to maintain our strong portfolio yield and liquidity as well as managing the portfolio. Turning to our quarterly results. We generated net investment income of $15.5 million or $0.41 per share and overearned our regular quarterly dividend. Since going public in 2014 and including the first quarter dividend, cumulative dividends to shareholders now total $15.45 per share. Over this 10-year period, we've exceeded our dividends on a cumulative basis, and our objective is to continue to generate NII in excess of our regular quarterly dividend. Of note, we also continue to maintain sizable spillover income. During the quarter, we improved our gross leverage ratio to 1.27x and further enhanced our liquidity based primarily on prepayment activity, which included 2 prepayments totaling $30.8 million. During the quarter, we continued to manage the portfolio and are encouraged by a number of positive portfolio company developments and an increase in the value of the equity and…

Thank you, Jim, and good afternoon. Investment pipeline activity increased for the third consecutive quarter as TriplePoint Capital signed $130 million of term sheets with venture growth stage companies compared to $100 million in Q4 and $58 million in Q3, reflecting an increase in origination activity by our investment team, an increase in direct referrals from our select venture capital funds and more importantly, an increase in what we believe are high-quality companies looking for debt financing. With regards to new investment allocation to TPVG during the first quarter, TriplePoint Capital allocated $10 million in new commitments with one new portfolio company to TPVG compared to $4 million in new commitments with 2 existing portfolio companies in Q4 and $6 million of new commitments with 3 companies in Q3. The commitment made during the first quarter was to FitOn, an all-in-one health and wellness and preventative care platform. During Q2, we've closed $20.5 million of new commitments with one new portfolio company in the AI and software industry and one existing portfolio company in the financial technology industry. During the quarter, TPVG funded $13.5 million in debt investments to 3 portfolio companies, which is down from $24.4 million in debt investments to 6 portfolio companies in Q4 and slightly higher than the $12.7 million we funded to 5 companies in Q3. These funded investments carried a weighted average annualized portfolio yield of 14.3% in origination. Approximately 75% of the fundings this quarter came from new investment origination during the quarter. Our quarterly gross funding target continues to be in the $25 million to $50 million range, and we expect to be at the higher end of the range as we increase the allocation of new investments to TPVG over the course of the year. During Q1, we had $30 million…

Thank you, Sajal, and hello, everyone. During the first quarter, we made notable progress on a number of financially focused efforts, which we believe have improved our overall position. We generated strong interest income from our diversified loan portfolio. As expected, we intentionally had another light quarter of originations and fundings. We overearned this quarter's dividend, and we also improved leverage to 1.27x on both a gross and net basis. At the same time, we made further progress reducing unfunded commitment levels in the first quarter from $118 million to $73 million. And as a result, TPVG has ample liquidity at the ready to support our existing portfolio companies, satisfy our unfunded commitments and make selective new investments. For the first quarter, total investment income was $29.3 million with a portfolio yield of 15.4% as compared to $33.6 million with a portfolio yield of 14.7% for the prior year period. The decrease in total investment income was primarily driven due to lower average debt portfolio as compared to a year ago. For the first quarter, total operating expenses were $13.8 million as compared to $15.1 million for the prior year period. These expenses consisted of $7 million of interest expense, which was lower this quarter due to reduced overall leverage; $4.3 million of base management fees; $611,000 of administrative expenses; and $1.8 million of G&A expenses, which were generally flat to last quarter. Due to the shareholder-friendly total return requirement under the incentive fee, there was no incentive fee this quarter. Further, we expect limited incentive fee expense during the remainder of 2024. For the first quarter, net investment income totaled $15.5 million or $0.41 per share compared to $18.6 million or $0.53 per share for the prior year period. For the first quarter, net realized losses on investments totaled…

[Operator Instructions] Today's first question comes from Finian O'Shea with Wells Fargo.

First one on the credit facility. I appreciate the update there. Can you -- actually 2 parts, sort of. Can you touch on what has set up the issue of needing to finish documentation? I don't think we've come across that issue, if that's routine or something more related to recent performance? And then, Chris, I think you flagged last quarter that the paydown was planned to satisfy or eventually satisfy, but until then, to pay down for the diversification test, correct me if I'm wrong. If that's still the case, are you at a point where you're able to draw? Or how far from that would you be given the current portfolio?

Great. Yes. So let me take both of those. So the timing on the credit facility, all the syndicate partners are engaged, and the commitment levels will remain the same. It really was to do with our year-end financial reporting and getting the documentation done. So it was the close proximity to our issuance of our K. We didn't get the approvals and the documents done. So they're going through, I would say, the normal cadence. We just added another 30 or 60 days to the time period to get the documentation done to avoid the drama associated with doing that in the ordinary course. On the other question you had, we have no need anymore to gross up the balance sheet. We don't have any nonqualifying assets in the unfunded commitment bucket any longer. That was cleared out over the last 2 or 3 quarters. So we successfully paid down the credit facility right after the end of the quarter of Q1 and did not need to gross up the balance sheet again. So that issue is behind us. And as Jim mentioned about the diversification of geo and sector-specific opportunities in the future, we don't expect currently that, that would return to be an issue. So you should expect gross and net leverage to be more tightly coordinated as opposed to the outlier that you saw in the prior couple of quarters.

Okay. Great. And I guess a follow-up for Sajal. It sounds like it's more constructive on the VC funding backdrop. I think you flagged a few examples on portfolio companies seeking and/or attaining financing. From the outside, we hear storylines, figures like this from all the venture BDCs every quarter, and it's hard to really tell what it means. So if you were to communicate just more in, say, plain English or give some anecdotal examples of how much the fundraising is improving for companies that need it, that would allow for a more constructive or comfortable outlook on our end. Anything you're able to do there would be appreciated.

Let me start with -- listen, I think the data shows the overall VC market continues to be challenging. So let's just be clear, VC fundraising investment activity, it was either flat or down Q1 to Q4. So the VC investment continues to be slow, and we're hoping to see that pick up. I think as Jim said, there are certain sectors or certain pockets where we're seeing more activity than others. But to be very clear, it's still a very tough market in the VC world. What we're excited about or pleased with is within our portfolio, we're seeing our portfolio companies increase the frequency and the magnitude of their equity fundraising efforts, which I think is very important in terms of, as we said, overall credit outlook and credit quality. And I think the other good news is not only are the sizes of the raise is increasing, but it's also companies across the credit rating. So it's not just the Category 1 and Category 2. We've got Category 3 portfolio companies raise equity as well. And so I think the distribution of the fundraising activity, the size of the fundraising, the frequency of the fundraising all are important. Again, initial indicators. It doesn't mean we're out of the woods. But as we said, we expect credit to stabilize over the course of '24, and we think these are all positive data points. And then here in Q2, again, seeing continued strong equity fundraising activity by our portfolio companies is a positive sign.

And our next question comes from Crispin Love with Piper Sandler.

First, can you just discuss your views on the net investment income and fundings trajectory and when you think you could be north of that $50 million quarterly number? I think you're still saying kind of $25 million to $50 million. Just given the portfolio here has decreased for 4 consecutive quarters, do you think you're getting back to a point where you can begin growing the portfolio? And then also, what are your expectations for NII per share with it just sitting above the dividend in the most recent quarter?

Yes. Let me start with fundings, Crispin. This is Sajal here. So again, we continue to have our target of $25 million to $50 million. I think we're focused on our target of $25 million to $50 million. We're mindful, obviously, of our leverage ratio. And so as we look to what funds that $25 million to $50 million, it's a combination of contractual portfolio repayments, prepayment activity as well as use of our ATM. And so we want to obviously manage our expectations there. And I think a combination of that 2 is also -- as I mentioned in my prepared remarks, as we increase the allocation for new investments, then that will enable us to be towards the higher end of that range. I think we don't want to overset expectations in terms of exceeding that range. I think, again, let market conditions continue to stabilize and improve, and I think we can have a conversation about exceeding it. But I'd say right now, our goal is to use the liquidity that we have and expect to have to maintain the range that we've targeted.

Okay. Great. And then I guess, just any expectation on NII per share going forward, just sitting pretty close to the dividend?

Yes. Crispin, this is Chris. So when we think about kind of the long-term view of NII, I guess, I would describe it as we think of a lot of different components there, kind of top line yields. Certainly, you heard news today, no change in prime rate. So I think our storyline on top line yields are stable and strong. When you think about prepayment frequency, size and vintage -- vintage matters. We've spoken about that in the past. When a loan prepays that has only been around half its life, there's a lot more additional fee income or accelerated fees that we can enjoy. So that's -- we know prepayments are a natural part of the venture lending model, and we look forward to them. And they typically have been coming in 1 or 2 a quarter. We have line of sight on a couple that we've spoken about in the past. And then I guess the other part is cost of capital or cost of debt. And as I mentioned, our term debt right now for the next 2 and 3-plus years is pretty locked in at attractive pricing. So when we think about cost of debt on the existing balance sheet, we're in a good place there. And the other variable, I guess, I would say, is on the operating expense side. So we've had some volatility from excise tax in 2023, given the overearning of the dividend. We've had a couple of quarters where we had some legal fees from some workouts. So it's those types of things that we think about when we look at covering the NII threshold that we've been at. So -- and of course, the likelihood of incentive fees in coming back. So we reported no incentive fee this quarter. It looks like based on where we are from a NAV decline over 2023, that it looks like it will take at least a few quarters to have that come back. So all that said, it creates a view of a pretty stable NII and dividend.

And then can you just give an update on where leverage is today? Is it safe to assume it's pretty close to where it was at the end of the quarter? And are you able to utilize the credit facility today to fund investments? I'm not sure if I missed that.

Yes. So we are at the same level of leverage now, maybe slightly less today. And then as far as use of the facility, we have full use of it. We can advance and borrow in the ordinary course. It's fully compliant, in full use, and the revolving period is in good order. So there's no restrictions or limitations on that use.

And our next question comes from Vilas Abraham with UBS.

You touched on this a little bit with your previous answers. But just on new money yields versus existing portfolio yield, can you just talk about that? It sounds like you think it's going to be stable. I thought I felt there might be some compression on the levels there. Just talk about the spreads and any dynamics there that we should be thinking about moving forward.

Vilas, it's Sajal. Yes. I would say -- so our new asset yield has been pretty consistent, 14.3%, so generally stable, and we continue to expect that to be stable for a couple of reasons. One is, obviously, we set the prime rate to the current prime rate on our transactions. We have -- for those floating rate transactions, we have about 40% of our book is fixed rate investments and so -- and then as we look to the targeted rates for what our team originates that. So I'd say we expect to continue to maintain our portfolio yield for new assets regardless of rate environment.

Okay. And yes, you mentioned fixed rate investments. What's your ability now to make those kinds of investments just given that kind of general expectation is that rates are going to be lower at some point in the next 1 to 2 years?

Yes. I'd say we're opportunistic when it comes. It's a function of as we look to overall structure and credit and risk of a transaction. So it's absolutely something our deal teams are considering and our credit teams are evaluating. And so I would say there's no -- it's not 100%, but it's very much opportunistic and depending on the company and the structure and the opportunity.

Okay. Got you. And just a general message on NAV, I guess. Is it fair to listen to your comments and kind of interpret that you feel like we are at a trough year and, just given some of the dynamics you're seeing in the portfolio around some of the upgrades you're expecting, and I think you mentioned credit stabilization throughout the year, that we're kind of flat to up here as we go through the year?

Yes. Listen, the teams are hard at work managing the priorities. Portfolio is a high priority. I think we feel good about the equity fundraising activity. Listen, I think credit is stabilizing, but it's still a very challenging venture -- overall venture capital market. And so we want to be mindful and practical and reasonable, better expectations. But again, I think we're seeing some positive indicators. We're also feeling good about the public equity markets and at least where those multiples are. As we look to our public -- sorry, our private warrant and equity portfolio, we obviously saw some value accretion here this quarter, and we expect, if markets continue to stabilize and improve, we would see some more fair value coming there. So I'd say it's a balance, but we don't want to be too optimistic. We want to be real, and this still continues to be a challenging environment, but we're doing a good job managing through it.

Okay. If I could just squeeze one more in here. You talked a little bit about shift in terms of sector and geography in terms of the strategy. Have you considered at all a shift in the stage of venture-backed companies you invest in, namely trying to go maybe a little bit later stage? And is that even possible given TriplePoint's setup? Just curious around your thoughts there.

Yes. Listen, I think as a credit manager, our job is to evaluate all of our performance and investment strategies. So we're obviously always looking at our performance. I would say you bring up an interesting point. I think in the bigger picture, given the economic environment and the capital markets environment, we are absolutely seeing companies stay private longer. And as a result, we're seeing demand from companies later in the stages. We call it lower venture middle market or these are EBITDA positive venture capital-backed companies that are coming back to us for follow-on financing or that -- companies that were overfunded with equity during their venture stages or early growth stages but now recognize that they're going to be private for longer. And so we're absolutely looking at those opportunities. We're excited about those opportunities, assuming the yield profile fits. But yes, we are absolutely seeing opportunities from later than what we call venture growth, EBITDA positive or lower venture middle market companies, and they absolutely fit into the investment strategy of TPVG and are actively deploying capital and looking at opportunities there.

And our next question comes from Paul Johnson with KBW.

Most of mine have been asked, but I wanted to ask you about the $584 million raise or so during the quarter for your portfolio companies. I think you said it, but I might have missed the company name, but I was wondering if that was skewed by any just one particular company or deal that was in that number?

Yes. Paul, it was -- one named Monzo raised $430 million of the $584 million.

Got it. And then how much ability do you have to kind of push on those borrowers that are running up to their kind of maturity dates, possibly getting tied on cash runway? I mean how much ability do you have to sort of push them to go back to market and raise, of course, where it's possible, even in the case where that's likely to be a down round?

Yes. Listen, our approach is to be proactive. So it's before they're pushing up against short runway or pushing up against the maturity wall. So I think our approach has always been, and we pride ourselves on the collaboration with not only the companies, but their sponsors, our select VCs. So our goal is to be as proactive as possible and to encourage them to raise capital either internally and externally. So I would say we are absolutely encouraging. And I think the sponsors, the VCs as well and the entrepreneurs, everyone is realistic and wants where it makes sense. And so I'd say it's very much a collaborative conversation, but the key is to do it before runway gets short. The challenges, what we see in this environment is these events are taking longer. And so that's the key is companies are in process. Rounds used to happen within a matter of months, and now it's taking longer. We're seeing term sheets may not necessarily close. So it's being proactive during that process of fundraising that is important from a credit management perspective.

And our next question comes from Christopher Nolan with Ladenburg Thalmann.

All my questions have been asked. Thanks.

And this concludes our question-and-answer session. I'd like to turn the conference back over to Mr. Labe for any closing remarks.

Thanks, operator. As always, I'd like to thank everyone for listening and participating in today's call. I hope you found it helpful. We look forward to updating and talking with you again next quarter. Thanks again, and have a nice day. Goodbye.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.