Q2 2023 TriplePoint Venture Growth BDC Corp Earnings Call
Yeah.
Good afternoon, ladies and gentlemen, welcome to the Triple point venture gross B D. C Corp, second quarter 2023 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 is being recorded in a replay of the call will be available in the audio webcast on the Triple point ventured growth web site.
Company management is pleased to share with you that the company's results for the second quarter of 2023 today, representing the company is Jim <unk>, Chief Executive Officer, and Chairman of the board such all Srivastava, President and Chief Investment Officer, and Chris Mathew Chief Financial Officer before.
Before I turn the call over to mission Bay I'd like to direct your attention to safe Harbor disclosure and the company's press release regarding forward looking statements and remind you that during this calm management will make certain statements 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 that does not undertake any obligation to update any forward looking statements or projections unless required by law investor.
Investors are cautioned not to place undue reliance on any for looking statements made during the call, which reflect management's opinions only as of today.
Shifting copies of the latest filings. Please visit the company's website at Www Dot T. P V G dotcom.
Now I'd like to turn the conference missile the Bay.
Good afternoon, everyone and welcome to T. P V G second quarter earnings Cole.
Start by talking about the venture market.
Data speaks for itself.
As a national venture Capital Association Pitchbook data shows in the first half the 20th twenty-three the venture capital ecosystem has struggled to adapt to market dynamics that we haven't seen in years pitch.
Pitchbook further states at this shift in the landscape has impacted all the sectors and all the stages of the venture ecosystem.
They're all well below the high watermark set in the past two years.
Deal value, it's down 46%.
Exit values, 77%.
Fund raising is down 73% that's all over the first half of the 20th twenty-three compared to last year.
Investment activity by the venture funds into private companies continues to be really volatile. During this period of evaluation research that we've been talking about in the east coast investors have pulled back in the amount of capital, they're deploying primarily driven by the uncertainty and the broader economy and financial Mark.
It.
We believe the continued disconnects out there between public market multiples and valuations and private market valuations.
Combined with the lack of IP Owen M&A exits these days and the withdrawal of the non traditional growth investors has made it very difficult for many later and gross stage companies to raise capital.
Cause we've been discussing during these past several quarters and we'll get into further venture lendings been impacted by these conditions as well most notably by this reduce level of equity investing.
Leveraging the power to the Triple play capital platform and in our experience gained over the past 18 years or focus in the second quarter and year to date continues to be three priorities that we believe will enable us to navigate through the current market and position T. P V G to benefit as conditions improve.
Through time.
Having been through many of these venture capital market cycles, we believe it's a period of demonstrating patient and taking timely advantage of lending opportunities with this market backdrop.
Specifically, our priorities are focused on maintaining our earnings power in our strong liquidity.
Managing the portfolio and positioning T. P V G for the future.
Regarding your earnings power with a portfolio of almost 940 million, we generated net investment income or NII of 18.8 million or 53 cents per share as we once again over earned her regular quarterly dividend of 40 cents per share.
T. P V. G also achieved a weighted average portfolio yield for the second quarter of 14.7%.
We're also focus on maintaining strong liquidity in a diversified capital structure, adding to T. P V G stable Foundation.
Based on current liquidity exceeding our unfunded commitment and cash flows from our existing portfolio. We believe we have ample liquidity well into 2024.
Another priority continues to be to manage and monitor the portfolio that starts with frequent contact we're having with our portfolio companies and their investors on an active basis.
In addition, our teams are out there they're monitoring portfolio company plans and business progress we're regularly assessing their financial condition and capital structure matters and there's always an active review of capital needs in financing strategies.
We're very proactive these days given today's full Italian market.
The social is gonna discuss we're working our way through some exciting credit Scuse me existing credit issues created by these macroeconomic convince her market changes.
Last quarter, almost 90% of the portfolio on a fair value basis was performing at our two best credit scores and we believe are adapting well to these current market conditions.
This includes 14 companies that raise capital year to date.
10 of them last quarter raise more than $326 million alone.
Several of our portfolio companies are growing their expanding and they're executing according to their individual financial plans and also operating ahead of plan.
What was that fewer achieving positive EBITDA.
We upgraded credit ratings on three of the portfolio companies, which had strong performance and they had projected cast runways extending beyond our loan maturity date.
We upgraded pill club is at Sloan was assumed in conjunction with the sale of the company.
This quarter for a few portfolio companies, primarily those which we have been previously talking about and Ah <unk>, we lowered their credit ratings throat due to some ongoing challenges and developments they had in the quarter.
Given the broader market and current challenging times, we will continue to proactively work through the issues, which can arise in this environment and we remain engage with the rest of the portfolio.
We've been through many of these cycles in the past and we believe an upturn in the market is dependent on the return of stability in the public market.
And technology company multiple specifically as.
As well as technology companies digesting and adapting to today's new environment.
His venture investors remain can't regain confidence in valuations and valuation metrics. We believe it will enable companies to obtain values based on expectations for future year revenues.
And exceed their current private valuations.
In the interim many companies will remain on their paths of bringing down operating burned to conserve cash and to extend their runways.
As we've mentioned before in these calls the environment for many venture growth stage companies. This change from business plan to growth at all cause.
Transitioning into plans of conserve cash at all costs.
The third priority I mentioned is our focus on Tpa Vg's longterm positioning and leadership in the venture lending market.
We're looking to capitalize on changes in the competitive landscape that have occurred in adventure lending markets since the Silicon Valley Bank crisis earlier this year.
We're continuing to set the groundwork for when market conditions improve as well and we're taking advantage of those opportunities. We are seeing in the current market environment.
We see resilience for example, and the Fintech software enterprise cyber security Healthtech and travel segments among other sectors.
These companies are all looking to capitalize and utilizing our debt to help accelerate their planned or in some cases were helping finance opportunistic acquisitions.
These are the type of sectors and use cases will continue to focus on in the near term in our pipeline today reflects this strategy.
Well, it's a pretty challenging market for T. P V. G. It's about working through this period of volatility in building our pipeline for the future.
I continue to see and witness glimmers of progress on the horizon and growing signs of increase investment activity. This includes pockets of technology investments being funded and operating in today's recalibrated and very valuations sensitive environment.
The entrepreneur. So we meet with now are sharply focused on the path to profitability as opposed to top line growth.
Many of the venture capitalist we've spoken with of shared an optimistic outlook that they have for increased investment activity in 2024.
They tell us about a growing pick up an investment activity at their funds and while it's still early they continue to expect to see improvement into next year.
We believe this a reasonable assessment.
Given the more than 290 billion out there of estimated dry powder that venture capital funds raised in 21, and 22, which is yet to be invested according to pitch book and V. C. A.
Well Barbara wrote results will continue depend upon our ability to deploy capital and effectively manage credit based on our track record and our success investing more than 13 billion of venture loan to cross the Triple point capital platform and our experienced multi cycle tested team.
We believe we are in a position to capitalize on opportunities over the long term.
We believe venture lending is about investing for the long term, which includes obtaining worn inequity investments in the portfolio, which now span across 119 companies that T. P V G.
As we progress through the remainder of the year, we expect to continue to focus on their priorities, we've outlined here as well as draw upon triplepoint capitals differentiated strategy in order to continue to capitalize on market opportunities over the long term.
With that let me turn the call over to use agile. Thank.
Thank you Jim and good afternoon, everyone. During the second quarter Triplepoint capital R Global and lessons platform and the advisor to TPG signed $114 million a term sheets with venture growth stage companies compared to $199 million term sheets in Q1, which reflects our approach to originations across our platform in light of current more.
<unk> conditions.
Given our continued focused on T. P V jeez overall leverage position during the quarter, we allocated $18 million, a new commitments with for companies to TPG, including one new portfolio company Tempus ex machina.
Company backed by Andreasen, Horowitz, Silverlake, and others, which provides analytics and datasets from sporting events, using AI and machine learning.
During the second quarter TVD G funded $30.6 million in debt investments to eight portfolio companies, which is at the lower end of our guided range for the corner.
These investments carried a weighted average annualized portfolio yields a 16.4% at origination.
Of the 30.6 million funded drink <unk>.
$17.1 million was related to existing unfunded commitments and the remaining $13.5 million was from new commitments made during the quarter.
As Chris will cover more detail are unfunded commitments are at 180 million as of today with 63 million set to expire this quarter and another 32 million by year end.
Similar to our experienced during the pandemic, we continue to see lower than expected utilization of existing unfunded commitments prior to their exploration and are projecting fundings for both Q3 and Q4 to be into $25 million to $50 million range per quarter.
We also expect loan prepay and contractual amortization activity from the existing portfolio to potentially match or exceed fundings in Q3 similar to our experienced in Q2.
During Q2 R $34 million of loan prepayments helped increase are weighted average annualized portfolio yield on total debt investments to 14.7% for the quarter excluding.
Excluding prepayment related income core portfolio yield was 14.1%.
We expect the increase in prime rate in Q2, and again last week to benefit yield during the second half of 2023 as well.
Or that investment portfolio company count at the end of Q T was 56 represented 21 different subsectors in our top 10 portfolio companies represent 34% of our total debt investments.
And Q2, seven portfolio companies raised $304 million of capital and three portfolio companies, which close rounds in Q1 raised an additional 22 million during the second quarter, bringing our <unk>, our total to 14 portfolio companies raising $390 million of capital here today or.
Portfolio companies saw an increase in aggregate amounts raised in Q2 over Q1, we.
We believe this bodes well for not only the operating runway avs portfolio companies lab, but also for their future credit outlook.
Quite the challenging environment during the quarter, we sold our warrants an equity investments and toast, which had completed its I P. O in 2021, and we recorded a realized gain of 3 million, bringing your cumulative grocery wise gains for more than equity investments since TBB jeeze IPO to $48 million the.
The interesting story on toast is that they never drew on the adventure loan commitment we made to them in 2018.
And her $3 million realized gains represents 100 times multiple on her original fair value of the warrant we received we.
We continue to hold 184 worn equity investments and 115 companies with a total cost in fair value of $71 million and 89 million respectively as as if keep too we.
We believe revolute world remit monzo upgrades signify cohesively and passport labs, there's some of the higher profile portfolio companies that could potentially drive future upside value over time as market conditions improve.
Although we saw a slight improvement and are weighted average credit score from Q2, we did see ongoing stress with existing companies on our credit watch list the situations developed either during the quarter or shortly thereafter that warranted further credit downgrades and fair value reduction.
We also downgraded to new names and upgraded for names during the quarter.
88% of our portfolio on a fair value basis is performing at our two best credit scores and we believe are adapting well to current market conditions during.
During the second quarter, we upgraded three obligations with a total of $33 million, a principal balance, including mountebank flash parking and mockingbird from category to category, one due to strong performance above expectations in cash runway.
In addition, during the quarter, we remove pill club with a principal balance of $20 million from category three in conjunction with its acquisition by our portfolio Company 30 Madison doubts.
The outstanding principal balance was assumed and fall under new loan structure secured by 30 Madison the zones or current accruing income and rated category to this was a positive outcome and a testament to our team skills and managing a challenging credit situations.
And Q2, we added one company to category three mystery tackle box with the principal balance of 5 million and one company. The category for made renovations with the principal balance of 10 million due to development and strategic financing process.
With regards to our other category for rated asset Rowley, we continue to see improved operating performance. The company increased sales in Q4 22 and has performed to plan in 2023 with new product initiatives targeted for the second half that should be catalysts for growth.
With regards to category five assets.
Underground enterprises with a 6 million principal balance was grout downgraded to category five due to a revised expectations for an extended recovery process in conjunction with its bankruptcy filing on may 1st.
Lucco with a principal balance of $17.4 million was downgraded a category five as a result of its announced agreement in June to be acquired by Admiral group of UK based insurance company as well as its intent to sell certain business units and assets to other parties.
The fair value Mark for Q2 represents our expected recovery from the sale to admiral and expectations of value for the disposal of its remaining assets.
Health I Q with the principal balance of $25.1 million was downgraded the category five during the second quarter due to ongoing challenges with the company's execution and strategic efforts.
Fair value Mark for Q2 represents a revised expectations for an extended restructuring in recovery process and our team is actively engaged with the company and other stakeholders.
Van move with a principal balance of 22.5 million was downgraded to category five during the second quarter subsequent to the end of the second quarter. As a result of an unsuccessful M&A process. The company was declared bankrupt in the Netherlands.
This was a particularly surprising and disappointing outcome is van move was a 14 year old company that had raised over 180 million of equity capital and was widely regarded as one of the leaders of the E bike market.
Meaningful historical revenues and launch a new line to be bikes. This year. The company was unable to attract additional capital strategic partners were early in the process and actively working to maximize our recovery.
Although these credit developments impacted in a b this quarter with van move in health IQ, representing approximately 70% of DNA V reduction.
We expect some of these situations such as van move Lucco, an underground to be resolved over the next three to six months, while the others have time for recovery is our teams managed through these situations.
As Jim discussed we believe the increase in stressed assets is directly related to challenging conditions in the venture capital equity fund raising market and in the market for emanate transactions by both public and private companies.
Venture capital back companies that have had success raising capital in the past are having a difficult time in the current environment and will continue to experience such challenges unless market conditions improve or they delay their capital raising efforts until market conditions approve.
We believe that once public market multiple stabilize overall sentiment in outlook improve and equity investors begin to deploy this significant dry powder. They have under management, we will start to see the market recover.
While we're pleased to see an increasing number of portfolio companies raise rounds, and Q2, and we are making progress on our recoveries. The market is still currently challenging and we continue to remain proactive and diligent as we manage through this environment.
Although we believe that we are in a challenging part of the cycle for venture capital investing we've effectively manage through cycles before which is reflected in a longterm performance at the Triple point capital platform and it gvg since Tvs and G. G. 's inception, 10 years ago are cumulative net loss rate has remained under 2% of human of commitments.
Or 20 basis points per annum, and three per cent of fundings or 30 basis points per annum.
Our underwriting processes have been refined not only over the past 10 years since D. V V. Jeez IPO, but also the 18 years since we started the triple point capital platform and the 24 years that Jim and I have been working together.
Utilize a rigorous approach to both fundamental credit analysis, and qualitative and quantitative assessment of high growth venture capital back companies and we regularly review and adjust our decision, making based on market conditions and dynamics.
Considering current market dynamics and conditions were applying our underwriting metrics credit standards and credit decisions to reflect the new market realities.
Although credit losses aren't expected part of that venture lending model as we reexamine our historical losses, they tend to be unique situations as opposed to having common themes for the outcomes that occurred.
They all fundamentally ran out of cash and we are either unable to raise a follow on round of financing were successfully complete a sale their business or assets in excess of our loan balances. They occurred for unique reasons, which we do not believe we're forseeable are expected at the time of underwriting.
Keep in mind that an important element of the venture learning model is the impact of the equity kicker in the form of warrants a direct equity investments. These valve investments have the potential to drive meaningful realise gains offset credit losses and help grow any overtime.
Since TVZ Jeeze IPO, we have generated $48 million gross realized games with one name in particular generating 27 million in gross realized games, which demonstrates the potential of what one successful exit can have this.
As mentioned earlier, we currently hold 184, one in equity investments and 115 companies as a quarters and believe many have the potential for success in the future.
In summary, as Jim said, we're focused on maintaining the financial strength of Gvg remaining in frequent contact with our select B CS and portfolio companies are focused on our portfolio and stabilizing credit and are preparing for the future given our existing scale and strong portfolio. We expect to continue to deliver strong investment income authors.
<unk> the company to further benefit when market conditions improve.
With that I will now turn the call over to Chris.
Thank you saw Joh N Hello, everyone.
During the second quarter the earnings power of the portfolio remains strong as we generated substantial core interest income from our loan portfolio and stable portfolio yields while T. P. V. G continued to hold a diversified portfolio.
As we entered the second half of the year, we believe our current liquidity position and unfunded commitments are well matched and combined with contractual cash flows from our existing seasoned and diversified portfolio positions us well into 2024.
Given our outlook on long term liquidity, we expect to reduce overall leverage ratios and capitalize on new investment opportunities in 2024.
Total investment income was 25 or $35.2 million as compared to $27.4 million for the second quarter of 22. This increase of 28% was due to growth in the average portfolio size and higher investment yields our portfolio yield was 14.7% on total debt investments. This <unk>.
Water is compared to 14.5% for the second quarter of 22.
Excluding prepayment related income portfolio yield was 14.1, which was down from 14.7 in Q1, primarily due to lower deferred fees associated with ozzfest commitments, which expired during Q2 compared to Q1.
Onboarding yields continued to be strong and stable.
Lone prepayments contributed less than 1% of the total portfolio yield this quarter with a total of $33.8 million, a principal prepayments and 1.4 million of accelerated income.
Operating expenses were $16.3 million as compared to 14.8 million for the second quarter of 22.
These expenses consisted of 9.9 million of interest expense, four and a half million dollars of management fees and $1.9 million of G&A expenses.
Due to the shareholder friendly terms of the total return requirement under the incentive fee structure, our incentive fee expense was reduced by $3.8 million during the second quarter and $7.5 million for the six months ended June 30th.
We are in net investment income of $18.8 million or 53 cents per share compared to $12.7 million.41 per share in the same period in 2022.
Net realized gains on investments for the second quarter or $1.9 million. This primarily included realized gains of $2.9 million from the sale of publicly listed common stock and Toast Inc.
The net changing unrealized losses on investments for the second quarter was $41.6 million consisting of $37.8 million of net unrealized losses on the debt investment portfolio $1.3 million of net realized losses on the warrant an equity portfolio and $2.5 million from a reversal of previously recorded Unreal I.
Gains from investments we realized during this period.
As a quarter and the company's net assets worth $379.4 million or $10.70 per share compared to $414 million or $11.69 per share as of March 31st.
Our board of directors declared a regular quarterly dividend of 40 cents per share. The dividend is from ordinary income to stockholders of record as of September 15th to be paid on September 29th.
In addition to over earning the second quarter dividend, we continue to retain undistributed income, which totaled $32.1 million or 90 cents per share at the end of the period support additional regular in Suffolk supplemental dividends in the future.
The NII to dividend coverage was strong at 133% for the second quarter.
Now just an update on unfunded investment commitments overall liquidity and sources and status of balance sheet leverage.
We ended the second quarter with $205 million of unfunded investment commitments down from 254 million last quarter and $54 million dependent upon the portfolio company, reaching certain milestones.
All of these unfunded an investment commitments have contractual floating interest rates.
The decline in these balances are primarily due to new findings and commitment explorations in excess of any new commitments that we closed during the second quarter.
Of the total amount 88 million are set to expire in Q3 $32 million in Q4, and $57 million and 2024 in fact $25 million of unfunded commitments have already expired or were terminated in Q3 today.
Given these recent expiry expertise are unfunded commitments are approximately $180 million as of today.
Given this activity total unfunded commitments are well matched against our current liquidity position, which <unk>, which we believe puts T. P V G and a favourable position as we look to make new commitments and Delever the portfolio we.
We expect that 25 to 50 per cent of the current unfunded commitments will expire without funding.
As a quarter and the company had current liquidity of $199 million, consisting of $89 million in cash and $110 million available under the revolving credit facility and.
In addition to this current liquidity the existing portfolio provides contractual cash flows, which bodes well for sustained liquidity.
Lone prepayments are a natural part of our venture lending model and while prepayments are difficult to project and are expected to vary from quarter to quarter. We believe that there will be one to two portfolio companies with loan prepayments each quarter to occur over time, we currently expect $30 million to $45 million in low loan prepay.
Payments in Q3.
We continue to maintain averse diversified capital structure as of June 30th an aggregate of $395 million was outstanding in fixed rate investment great term notes and $240 million was outstanding on our floating rate revolving credit facility, which has a total commitment available.
To T P B G a $350 million D.
<unk> has issued an investment grade credit rating on the company and in April of twenty-three reaffirm the investment grade issue a rating of Triple B.
Our fixed rate borrowings account for 62% of our outstanding leverage at quarter end, while 60% of our debt investments are at floating rates and have benefited from increasing interest rates over time.
With our latest fixed rate debt offering completed in Q1 of 2022, we have three steps to the ladder of debt maturities with the maturity to occur in 2025, 26 and 27.
We ended the quarter with a gross leverage ratio of 1.67 times and at 1.44 times net leverage ratio, which is net of cash on hand.
We expect to maintain this level of gross leverage through the end of the year, while deploying our existing cash into new investments from funding requests sourced from our existing unfunded commitments, we expected deleverage the portfolio in the first half of 2024, as we received the contractual amortization and periodic prepayments and.
Portfolio.
During the next four quarters, we expect $180 million in cash flows.
From contractual principal payments from the portfolio, excluding any prepayments and proceeds from the sale of private or public equity securities and the portfolio that we may receive overtime.
Last year, we announced the launch of an ATM issuance program no shares have been issued as of today, but we may look to issue shares over the coming year.
So this completes our prepared remarks, we'd be happy to take your questions and so operator could you. Please open the line at this time.
We will now begin the question and answer session.
To ask a question in my Quest star them on your Touchtone phone.
If you're using a speaker phone please pick up your handset before pressing the keys.
Two withdrawal from the question could you please print started to.
At this time, we will pause momentarily to some more roster.
Our first question will come from Crispin Love with Piper Sandler.
You may not go ahead.
Thank you I. Appreciate you taking my questions did you say that you expect third quarter in fourth quarter knew that funding to be in the range of $25 million to $50 million per quarter and if that was the case with a <unk> previous died there 100 to 159 per quarter.
Oh, Hi, Chris from the <unk> the previous guidance was 25% to $75 million. That's the guidance, we gave last quarter and so given.
Given that we're just focused on utilizing the existing unfunded commitments and given the market environment, where taken a target to 25 to 50 million.
Okay <unk> and then just on leverage at 1.67 times right now I'm curious what the reasons are for maintaining that leverage through the end of the year rather than not bring me down through an equity range.
It's much higher than where you typically run out I think you've said in the past.
What typically one I think it was 1.25 times in the last for 1.4 times or less so curious about the reasoning there.
Yeah. This is chrissie certainly X raising equity as an option we have the a T. M program that we can use currently it's a much smaller program. Obviously, we do have the option we have our active shelf to do an overnight offering if that made sense, but right now what we're focused on is what we can control, which is deployment of capital and <unk>.
Managing the portfolio, but certainly overnight.
Overnight equity offering is something that is open to companies that are listed.
Alright. Thank you I appreciate you taking my questions.
The next question will come from <unk> Abraham with you B S. You may not go ahead.
Everybody. Thanks for taking my question.
The decline in any in the Jumpin leverage are you pushing up against any covenant issues with the revolver or just how should we think about that.
Oh, that's a that's a good question. This is Chris Yeah, we we look at that on a regular basis not just at quarter end, but throughout the quarter.
We're comfortable with where we are on an existing covenants, whether it's on the term data on the revolvers were fine.
Okay.
And talk.
Talk about in the prepared comments 14th of companies portfolio raising capital year to date is it fair to assume those or.
Largely all down around still.
Oh I'd be less as a subtle so I would say the majority are flat to down. Although there are some that were up I would say the majority tend to be from existing investors with again, a few that were led by <unk>.
New external investors.
Okay.
The last one you touched on it's taken advantage of opportunities after the F. C. B collapse can you talk about what that means.
What what's the time frame there from personnel perspective, do you feel like you're well positioned to to take advantage of our do you need to add a head count in certain areas. Thanks.
Yeah, that's a great question Vila some so as we mentioned last time as well.
There's some very good opportunities in wake of the FCB development, but these are not overnight situations are a little bit over the long term. So in the short term. What this means is these are opportunities I talked about this lewis time, as well where banks are.
The separation between banks for Bang Bang services.
[noise] cards foreign exchange things, they do and lending market is a little bit more separated and lending now doesn't mean from a commercial bank can absolutely mean from a non bang and it's become more important than ever.
Since the days of S. C. B. So we actively are talking at the platform level and have instances, where we've replaced FCB loans ones were current evaluating these and also ones as we play out the rest of the pipeline. This year next year that will continue to be growing up or tuna.
<unk>, but it's not like these companies replace this we'd be in a day or overnight into address this yes, we absolutely have been and continue to staff up for what we see <unk>.
Improvement.
In the market's overall, but also and wait to the F C B development.
Thank you very much.
Our next question will come from Casey Alexander with Compass point you.
You May now go ahead.
Yeah, I'm curious why you would carry $78 million in cash and not use you know some portion of that cash to pay down the revolving credit facility and report a lower leverage ratio seems.
Seems to me that if you. If you took 40 million to that it would bring the leverage ratio down to 1.56 still not within your range, but but.
Maybe a little less eye-popping is there a technical reason why why why you're not doing that.
Yeah Casey. Thank thanks. This is Chris so yeah, we're more of a more about managing cash to make sure. We have the liquidity for funding transactions and often times, you'll see from month to month or quarter and will have higher cash balances in readiness to to fund new transactions that that occur kind of within a five.
Five day notice window, that's all that is rather than.
Paying down for optics, we wanted to make sure we were ready to fund transactions.
Okay Secondly.
I think you mentioned it 10 companies had raised 300 and some million.
You know.
Growth stage company's late stage growth companies need a lot more than 30 million and that would be the average of of what you mentioned I mean so.
Is it is what you're seeing sort of stop gap equity deals to kick the can down the road because these don't sound like the type of funding that's gonna last two or three years.
I'll I'll take that case, if there's a <unk>. So I would say keep in mind. So I'd say the the let's change right at a year ago or two years ago right. As you as you said right companies would raise equity rounds every three to six months versus the more average of 12 to 18 months and so I would say the other key thing is coming.
He had been bringing their burn rates down so I would say, it's a hybrid between raising what they need to have sufficient runway in anticipation of either times getting better market conditions getting better for a number of others on the path to get to profitability for some others, it's to milestones and investors have agreed to that then.
Unlock future charges of capital So I'd say, it's a it's a combination of all of those scenarios, but also have given where valuations are no. One is motivated necessarily where multiples are too to over raise equity in this environment, given the depth dilution or impact.
Lastly, one of the companies that you mentioned it was in the Red category.
It sounded like you were saying Lucco I can't find that in the schedule of investments what am I doing wrong, yeah, sorry that Sir it's called demand D. E. M. A I N domain Lucco is there sorry, there E M a I.
So it's like domain.
Domain correct.
Yeah. Okay. Thank you alright, that's all my questions I appreciate it.
Next question will come from Brian Lynch with K B W.
You may not go ahead.
Hey, good afternoon, just hung up on on one case. These questions regarding the cash balance I guess I'm still not understanding why the cash balances that high I mean, I think you mentioned you expect funding during the third quarter of 25 to 50 million.
You also expect to receive.
Some somebody prepayments, probably offset that so I just don't understand why what's the the need to have $90 million of cash. If you are expecting to find $25 million to $50 million in the quarter, Yeah, right, maybe just add onto what Chris said, so so again part of it is in anticipation liquidity I think the other point is we collect cash at the end of the month.
So that's also cash coming in.
<unk> portfolio company payments and so again, it's a little bit of you've got a bad cash ready for fundings you collect cash from the.
The monthly payments from customers and then obviously correct post.
Now we pay down our lines post end of month or end of quarter. After the cash freeze up and so again.
It's a fun miletich timing thing more than anything is the primary reason.
Yeah, a good a good example, as we did we did pay down the line just recently $65 million. So we don't keep that outstanding all the time.
It is a revolver, where we can draw and payback.
Understood.
And then the other one I just wanted to make sure I was kind of understanding the dynamics going on here. So I think your accent you expect levers just sort of remain the same throughout 2023, and then deleverage start to deleverage in in 2024.
I know, that's not assuming any sort of like capital raised or anything like that but I guess to the extent that leverage state flat and then decreases throughout 2023 and a decrease in 2024 is that just the function of the interplay between the level of funding do you expect from existing borrowers to sort of.
Decline as we roll into 2024, and some of those unfunded commitments Rohloff is is that kind of the the interplay that bad that's gonna drive your your expectations right there.
That's exactly right. So what we're basically doing is looking at the unfunded commitment levels going from the 200 down to 180 and and looking at the expected fundings of those unfunded commitments.
And then also layering in some level of the unknown, which is the prepayment factor. So we do have some line of sight on Q3 <unk>.
Prepayments, but we just don't have that information for Q4. So we do expect some level of prepay, which would help towards that deleveraging, but right now it's just too early to tell.
Okay I understand that that's all for me.
Next question will come from Christopher Nolan with Ladenburg Thalmann.
I'll go ahead.
Given the status of the or the slowdown in the venture that market.
Who do you expect to take you out uhm needs maturing investments.
Oh of course, you know again on on a number of our investments their amortizing so it's not a bullet.
Bullet type structure on other transactions, where there are bullets.
Generally see equity capital also and robust equity comes back we'd look to equity and then they're the non-bank lenders and venture lending you know continue to evaluate opportunities and so I'd say, it's a function of all three prepays sorry equity raises.
Yeah, it's from amortization normal amortization and then it's a smaller amount is refi refis have always generally been a small percentage of our business.
<unk> and then I guess is it more general question I mean, the slowdown in the venture that market I mean, obviously FCB went away, but you know we're <unk>.
Major funds really hobbled.
<unk> S V B seizure and that's just sort of is.
Thrown a wrench into.
The works.
Yeah, Yeah, I would say from a venture capital fund perspective, there's really not been any change they've all recovered from their own issues with FCB in their own banking things that the funding level in terms of their underlying companies, there's definitely been the transition many.
Cases from Seb to other banks, but what venture lenders are benefiting from again is the fact that.
Newer banks aren't necessarily in the market. These days to go out in Lin to these companies, they're very fine they're fine preventing the providing.
Providing the banking services for the lending requirements. This has been new opportunities to turn to none banks and recognize the value and importance of them on the lending side. So if you will.
There is room for both and opportunities for both but these are things that are taking some time, there's a little pause when you change banks.
We also want to continue to be cautious and selective.
In this environment, but definitely that's one of many parts.
Parts of the future opportunities here for non-bank. Thanks, Thanks, Jim.
Appears there are no further questions.
Includes our question and answer session I would like to turn the conference back over to Mister Jim of the Bay for any closing remarks.
Thank you operator is always I'd like to thank everyone for listening and participating in today's call. We look forward to talking with you all and again next quarter. Thanks, again and have a nice day.
The conference is not included thank you for your time today's presentation you may not disconnect.