Yahoo Finance

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 over earned 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 ten-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 1.27 times and further enhanced our liquidity based primarily on prepayment activity, which included two 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 warrant portfolio. One of these developments was the growing number of fundraising rounds by our portfolio companies, which we believe signals a sign of strength. During the quarter, eight of our portfolio companies completed rounds, raising $584 million in aggregate, representing a sizable quarterly as well as year-over-year increase. Additionally, first quarter, several companies have raised rounds and others are raising this quarter. We'll continue to prioritize TPVG's long-term position in the venture lending market and we expect the remainder of the year to be more active.

To this end, we're continuing on the path of diversifying the portfolio, including the sector and geographic rotation we've been talking about the last several quarters. In many respects, we think of it as being a new crop of investment sectors as well as venture growth company profiles. The NVCA labels it as a different camp of companies. In this environment, investors have become far more cautious and selective, and we believe the new and emerging crop of venture companies is strong. A number of venture growth companies have already gone through valuation resets and dealt with the market challenges. These are companies that have adjusted business models. They're on more moderate cash burn levels. They have reasonable growth objectives and are projecting paths to profitability.

They're gaining a great deal of interest and traction from investors. Our focus will continue beyond investing in companies operating in these attractive sectors and ones that have recently raised fresh capital, have ample cash runways, have backing from our select venture investors, have prudent management teams and whose business models have attractive unit economics and high retention rates. We'll also continue to evaluate hold sizes, debt to equity ratios, deal structures and other key metrics. We're excited by the increase in signed term sheets. Following the 70% increase in venture growth signed term sheets that we experienced in the fourth quarter term sheets signed by TriplePoint Capital increased an additional 30% in the first quarter to a total of $130.5 million.

And here in the second quarter already, we've signed almost $30 million of new term sheets at TriplePoint Capital. Many of these signed term sheets are in investment sectors that are consistent with the same sectors that our select venture investors have and are continue to shift into. This includes AI, cyber security, climate and digital health. In addition, there's increased and renewed interest in vertical software, hardware and robotics, semiconductors, applied tech, environmental and sustainability technologies, and aerospace as examples. As we've been citing, this includes a number of our portfolio of companies that are already operating in these stronger performing categories, with some making considerable progress, such as Corelight, Loft Orbital, Hover [ph], Arcadia Power, Flash, Calderos [ph], Overtime, and others.

Through both discussions with our select VC's, as well as reflecting on transactions, we've recently signed up and others that we're continuing to evaluate in this market on an ongoing basis. New investment activity in particular has pivoted towards, no surprise, the artificial intelligence applications and infrastructure category. Some of our companies come to mind. For example, K Health, which pairs clinicians with advanced AI to provide data driven, personalized care around the clock and FitOn, a leading digital wellness platform that serves as an always on individual full gym and wellness coach with no equipment needed. Uniphore, which introduced the first multimedia AI and data platform built specifically for the enterprise using generative, knowledge and emotional AI, is another one.

Although the overall VC markets continue to remain sluggish, particularly for growth stages, there are a few emerging signs of future promise. Dry powder, the undeployed funds at venture capital firms remain significant, at $300 billion across the venture landscape. On an increasing basis, we are hearing the word optimistic make its way into more conversations with venture capital investors and companies. We're hearing it usually in connection with increased opportunities for new investments, but also on the outlook for a future pickup in venture M&A and IPO activity. We believe that once the IPO markets come back and M&A activity returns to more historical levels, it will be a sea change for growth stage companies, especially those companies within our portfolio that are outperforming in this market.

It will also attract growth stage investors to return to the market. With our outstanding warrant positions in more than 97 portfolio companies and equity positions within more than 46 portfolio companies, we believe we stand to benefit in this additional way to our debt returns when the market returns to a better M&A and IPO landscape. In the meantime, we'll continue to position TPVG for when the overall VC market conditions improve. TriplePoint Capital, our sponsor will continue to invest in its people and our platform, including building our originations and investment teams, portfolio management capabilities and our support staff. TriplePoint is well positioned to capture the business as overall market conditions improve. For now, we'll remain active in the market and plan to continue building a pipeline consisting of venture growth stage companies positioned for strength under current market conditions.

These are all critical elements for the long-term that we believe position us to build NAV and create sustainable shareholder value. With that, I'll turn the call over to Sajal.

Sajal Srivastava: 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 teams, 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 TBVG during the first quarter, TriplePoint Capital allocated $10 million in new commitments with one new portfolio company to TBVG, compared to $4 million in new commitments with two existing portfolio in Q4 and $6 million of new commitments with three companies in Q3.

The commitment made during the first quarter was to FitOn an all in one health and wellness and preventative care platform. Here in 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, TBVG funded $13.5 million in debt investments to three portfolio companies, which is down from $24.4 million in debt investments to six portfolio companies in Q4 and slightly higher than the $12.7 million we funded to five companies in Q3. These funded investments carried a weighted average annualized portfolio yield of 14.3% in originations. 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 of loan prepayments, with prepayment related income contributing to an overall weighted average portfolio yield of 15.4% in line with the past two quarters levels of prepayment activity and portfolio yield. Excluding prepayment, core portfolio yield was 14.7%, up from 14.4% in Q4 and 14.1% in Q3. With regards to fundraising activity, as Jim mentioned, eight portfolio companies with debt outstanding raised $584 million during the quarter, up from five portfolio companies raising $157 million last quarter and three companies raising $47 million in Q3.

Monza represented the lion's share of the fundraising activity, having raised approximately $430 million at a $5 billion valuation during the quarter. This data does not include Metropolis or Cohesity's announced financings. As we discussed during our last earnings call, we are seeing capital raising activity within our portfolio picking up and have several portfolio companies either in active fundraising discussions or expecting to launch a fundraising process shortly. Approximately $200 million of new capital was raised by our portfolio companies in April alone. We believe this fundraising activity should bode well for the long-term credit quality of our portfolio companies as well as for the potential value of our warrant and equity portfolio.

As of March 31, we held warrants in 97 companies and held equity investments in 46 companies with a total fair value of $78 million. Our warrant and equity portfolio experienced a $6 million net unrealized gain in fair value or $0.16 per share for the quarter, primarily driven by new equity round valuations, improving public trading multiples and continued financial performance of our portfolio companies, as well as improving stock prices for our publicly held portfolio. During the quarter, the aligned [ph] company was acquired by Orchard Technologies, Dia & Company was acquired by FullBeauty Brands and Underground Enterprises completed its asset sale and liquidation process. Dia and Underground were removed from the credit watch list and we realized losses of $8.9 million from these events, of which 5.1 was previously recognized on an unrealized basis in prior quarters.

During the quarter, two companies were downgraded from category 2 to category 3, primarily due to short runway in conjunction with upcoming financing or strategic events already underway, and are expected to be either upgraded or removed from the watch list upon completion. One portfolio company, TFG Holdings with a fair value of approximately $18 million, was downgraded from category 3 to category 4 during Q1 and was acquired here in Q2. Our loan has been paid off in cash and a seller note in line with our mark for Q1 and will be removed from our watch list in Q2. One portfolio company Outdoor Voices, which is in the strategic process, was downgraded from category 4 to category 5, and we expect the process to be completed in Q2. While our total percentage of category 3, 4 and 5 investments rose slightly this quarter, I would like to point out that we expect upgrades to a few of our category 3 rated investments over the course of 2024 as a result of achieving sustained profitability and/or completing financing events that are underway, as well as the fact that we've already removed TFG, a category 4 rated loan here in Q2 as a result of its acquisition.

Managing our existing portfolio continues to be a high priority for us as a result of increased equity fundraising, increased acquisition activity and improving operational performance by our portfolio companies, we expect credit to continue to stabilize over the course of 2024 with the frequency of new credit development slowing and in certain cases, the potential for upgrading of credit ratings. With regards to the new investment opportunities, as Jim mentioned, we are seeing what we believe are more companies of higher quality starting to come to the equity and debt markets, and we believe that these new investments have the potential to be a very strong vintage of venture capital and venture lending opportunities. We believe our efforts over the past year to reduce leverage and unfunded commitments to boost liquidity from prepayments and repayments, proceeds from sale under our ATM program, as well as extending and the upcoming renewal of our credit facility, put TPVG in a position to take advantage of the improving pipeline of new deals as the year unfolds.

We believe that by returning to portfolio growth over the course of 2024 and into 2025, and by continued focus on smaller hold sizes and industry sector rotation with companies that have generally recently raised new equity capital, we will continue along our goals of increased portfolio durability and diversification. As we look to onboarding new loans, we intend to maintain our strong yield profile not only by maintaining spreads, but also by continuing to incorporate fixed rate investments, which along with anticipated portfolio growth, will bode well for our ability to continue to cover our dividend. Finally, as equity fundraising activity continues by our portfolio companies and public market multiples improve, we expect to see improvement in the fair value of our warrant and equity portfolio.

In closing, we remain focused on our business and will continue to follow our long-term playbook of generating strong returns for fellow shareholders and we look forward to what's in store for TPVG and our shareholders for what we believe will be improving conditions in both the overall venture capital and venture lender markets over the course of 2024 and 2025. With that, I'll now turn the call over to Chris.

Christopher Mathieu: 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 over earned this quarter's dividend and we also improved leverage to 1.27 times 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 $8.8 million. This was primarily in connection with the write-off of investments of two portfolio companies. Of note, $5.1 million or 58% of the realized loss on these companies, was previously included in unrealized losses and was reclassified from unrealized to realized in the quarter. As such, $3.8 million of the realized loss in 2024 had no impact on net asset value in the quarter. For the first quarter, net change in unrealized gains on investments was $1.3 million, consisting of $6.2 million of net unrealized gains on the warrant and equity portfolio resulting from fair value adjustments and $4.9 million in net unrealized gains from the reversal of previously reported unrealized losses from the investment portfolio that were realized during the period reduced by $9.8 million of net unrealized losses on the debt portfolio resulting from fair value adjustments.

As of quarter end, net asset value was $341 million or $9.02 per share, compared to $346 million or $9.21 per share as of yearend. We declared a regular quarterly dividend of $0.40 per share with a record date of June 14 to be paid on June 29. In addition to over earning the dividend, we continue to retain sizable undistributed income, which totaled $42.3 million or $1.12 per share, at the end of the period. Now just an update on unfunded investment commitments, overall liquidity and balance sheet leverage. We successfully reduced our unfunded commitments from $118 million at year end to $73 million at quarter end. As of quarter end, total liquidity was $312 million, consisting of $1 million in cash and $311 million available under the revolving credit facility.

We had $30.8 million of prepayments and $6.8 million of scheduled principal amortization, generating $37.6 million of liquidity during the quarter. We continue to maintain a diversified capital structure. As of the end of the quarter, a total of $434 million of debt was outstanding, consisting of $395 million of fixed rate investment grade notes and $39 million outstanding on our revolving credit facility, which has a $350 million total aggregate commitment. We paid down our revolving credit facility and improved our overall leverage during the quarter. We ended the quarter with a leverage ratio of 1.27 times. This week, we entered into an amendment to our credit facility which extends the revolving period into Q3 so that we can finish documenting the annual renewal of the facility.

We expect that the new revolving period will mature on November 30, 2025, with final maturity on May 31 of 2027. Existing lenders are engaged in driving to documentation closing in an orderly manner. We have three steps to the ladder of term debt maturities with the maturity scheduled to occur in 2025, 2026 and 2027. The most near term is $70 million maturity in March of 2025. Given the very attractive 4.5% fixed interest rate on this balance, we expect to keep this balance outstanding until its scheduled maturity. Depending on market conditions at that time, we expect to either issue a new tranche of similarly sized notes in Q1 of 2025 or use our revolving credit facility to pay off those notes at maturity. Later this year we will evaluate the refinancing of the two remaining maturities, which include $200 million at 4.5% fixed rate due in March of 2026 and $125 million at 5% fixed rate and due February of 2027 to allow ample opportunity and time to consider cost effective alternatives.

Given the very favorable rates on the existing notes, we do not expect to prepay or refinance these amounts until near their original maturity dates. In connection with the term notes, DBRS has signed an investment grade credit rating in connection with those transactions and recently reported a BBB low rating and investment grade issuer rating. In addition, DBRS increased its outlook on TPVG to stable. So this completes our prepared remarks today. And so, operator, could you please open the line for questions at this time?

See also

15 Countries with the Lowest Saving Rates in Europe and

10 Best Carfax Alternatives to Check Vehicle History.

To continue reading the Q&A session, please click here.