Q1 2024 TriplePoint Venture Growth BDC Corp Earnings Call
Okay.
Operator: Good afternoon, ladies and gentlemen. Welcome to the TriplePoint Venture Growth BBC Club first quarter 2024 earnings conference call. At this time, all lines have been placed in a listen-only mode.
Good afternoon, ladies and gentlemen.
Operator: 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, 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, Jim Labe, Chief Executive Officer and Chairman of the Board, Sajal Srivastava, President and Chief Investment Officer, and Chris Mathieu, Chief Financial Officer, will be speaking.
Welcome to the Triple play venture growth, maybe C Corp, first quarter 2024 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.
Functions will follow at that time.
This conference is being recorded and a replay of the call will be available and the audio webcast on the triple joint 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 Lebesgue, Chief Executive Officer, and Chairman of the board.
Sure most of our President and Chief investment Officer and Chris.
Chris Mathieu Chief Financial Officer.
Operator: 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. It reminds 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.
Speaker Change: Before I turn the call over to Mr Law, but I want to direct your attention to the customary safe Harbor disclosure in the company's press release regarding forward looking statements.
Operator: 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
Speaker Change: And remind you that during this call management will make certain statements that relate to future events.
Speaker Change: Company's future performance or financial condition, which are considered forward looking statements under federal Securities law.
Speaker Change: You are asked to refer to the company's most recent filings with the Securities Exchange Commission for important factors that could cause actual results to differ materially from these statements.
Speaker Change: The company, there's not undertake any obligation to update any forward looking statements or projections unless required by law.
Speaker Change: 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.
Speaker Change: [laughter] obtain copies of our latest SEC filings. Please visit the company's website at Www Dot P. P D G dot com.
Speaker Change: Now I'd like to turn the conference over to Mr. Jose.
James P. Labe: Good afternoon, everyone, and welcome to TPBG's first quarter earnings call. During the first quarter, we continue to navigate the current venture capital market. While the market remains slow, and deal activity and deal values 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.
Jose: Good afternoon, everyone and welcome to <unk> first quarter earnings call.
Jose: During the first quarter, we continue to navigate through the current venture capital market.
Jose: 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 D. C markets may gradually begin to improve.
Jose: This includes growing demand and triple point capital from what we believe our quality venture growth companies and companies across the venture stages.
James P. Labe: 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 we over-earned our regular quarterly dividends. Since going public in 2014, and including the first quarter dividend, cumulative dividends to shareholders now total $15.45 per share.
Jose: Complementing these initial positive signs we continue to make progress in the first quarter with.
Jose: With increased fundraising activity and strengthening performance at our portfolio companies and in building our pipeline.
Jose: Setting a strong foundation heading into the second half of this year.
Jose: As we progress through the year, our focus will be on positioning <unk> for the future, while continuing to maintain our strong portfolio yield and liquidity as well as managing the portfolio.
Jose: Turning to our quarterly results, we generated net investment income of $15 5 million or <unk> 41 per share and over earned our regular quarterly dividend.
Jose: Since going public in 2014, and including the first quarter dividend cumulative dividends to shareholders now totals $15 45 per share.
James P. Labe: 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 dividends. 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 continue 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.
Jose: Over this 10 year period, we've exceeded our dividends on accumulative basis, and our objective is to continue to generate NII in excess of our regular quarterly dividend.
Jose: Of note. We also continue to maintain sizeable spillover income.
Jose: During the quarter, we improved our gross leverage ratio to 127 times and further enhance our liquidity based primarily on prepayment activity, which included two prepayments totaling $38 million.
Jose: During the quarter, we continued to manage the portfolio and are encouraged by a number of positive portfolio company development and an increase in the value of the equity and warrant portfolio.
James P. Labe: 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.
Jose: One of these developments, what's the growing number of fundraising rounds by our portfolio companies, which we believe signals assigned this stream.
Jose: During the quarter eight of our portfolio companies completed ground raising $584 million in aggregate.
Jose: Presenting a sizable quarterly as well as year over year increase.
James P. Labe: Additionally, post-quarter, several companies have raised rounds, and others are raising this quarter. TPBG's long-term position in the venture lending market will continue to prioritize TPBG's long-term position, 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 for 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, however, labels it as a different category of companies.
Jose: Additionally, post quarter several companies have raised rounds and others are raising this quarter.
Jose: We will continue to prioritize TPB ge's long term position in the venture lending market and.
Jose: And we expect the remainder of the year to be more active.
Jose: To this end, we're continuing on the path of diversifying the portfolio.
Jose: Including the sector and geographic rotation, we've been talking about the last several quarters.
Jose: In many respects, we think of it as being a new crop of investment sectors as well as venture growth company profile.
Jose: The NVCA labels it is a different tier of companies.
James P. Labe: 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 their business models. They're on more moderate cash burn levels, they have reasonable growth objectives, and a projected path to profitability.
Jose: In this environment investors have become far more cautious and selective and we believe the new and emerging crop with venture companies is strong.
Jose: A number of venture growth companies have already gone through valuation resets and dealt with the market challenges.
Jose: The company said was just did business models.
Jose: There are more moderate cash burn levels.
Jose: We have reasonable growth objectives and are projecting path to profitability there.
James P. Labe: They're gaining a great deal of interest and traction from investors. Our focus will continue to be on 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.
Jose: We're gaining a great deal of interest and traction from investors.
Jose: Our focus will continue to be on investing in companies operating in these attractive sectors and ones that have recently raised stretch capital.
Jose: Ample cash runways at backing from our select venture investors.
Jose: The management teams and whose business models have attractive unit economics and high retention rates.
Jose: We will also continue to evaluate hold sizes debt to equity ratio deal structures and other key metrics.
James P. Labe: We're excited by the increase in signed term sheets. Following the 70% increase in venture growth signed term seats 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 we are in the second quarter already.
Jose: We're excited by the increase in signed term sheets.
Jose: Following the 70% increase in venture growth signed term sheets that we experienced in the fourth quarter.
Jose: Term sheet signed by Triple point capital increase an additional 30% in the first quarter to a total of $135 million.
Jose: And here in the second quarter already.
James P. Labe: We've signed almost 30 million 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 continue to shift into. This includes AI, cybersecurity, 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.
Jose: We've signed almost 30 million of new term sheets at Triple point capital.
Jose: Many of these signed term sheets are an investment sectors that are consistent with the same sectors that our select venture investors have and are continuing to shift into.
Speaker Change: This concludes.
Speaker Change: Cyber security climate and digital health.
Speaker Change: In addition, there is increased in renewed interest in vertical software hardware and robotics semiconductor supply tech environmental and sustainability technologies and aerospace sorry aerospace since examples.
James P. Labe: As we've been citing, this includes a number of our portfolio companies that are already operating in these stronger performing categories, with some making considerable progress, such as Coraline, Lost Orbital, Hover, Arcadia Power, Flash, Calderos, Overtime, and others, through both discussions with our select VCs and as well as reflecting on transactions we've recently signed up on and others that we're continuing to evaluate in this market on an New investment activity in particular has pivoted towards, no surprise, the artificial intelligence applications and infrastructure category.
Speaker Change: As we've been citing this includes a number of our portfolio companies that are already operating in the stronger performing categories with some making considerable progress.
Speaker Change: Such as coraline, whilst orbital hover Arcadia tower flash caldera overtime and others.
Speaker Change: Through both discussions with our select VC.
Speaker Change: 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.
Speaker Change: New investment activity in particular has pivoted towards no surprise, the artificial intelligence applications and infrastructure category.
James P. Labe: 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. Unifor, which introduced the first multimedia AI and data platform built specifically for the enterprise using generative knowledge and emotional AI, is another one.
Speaker Change: Some of our companies come to mind for example, Cato, which payers clinicians with advance AI. They provide data driven personalized care around the clock.
Speaker Change: And fit on a leading digital wellness platform that serves as an always on individuals both Jim and wellness coach with no equipment needed.
Speaker Change: Uniform, which introduced the first multi maybe.
Speaker Change: AI and data platform built specifically for the enterprise using generative knowledge and emotional AI is another one.
Speaker Change: Okay.
James P. Labe: Although the overall leasing markets continue to remain sluggish, particularly for growth stages, there are a few emerging signs of future problems. Dry Powder, the undeployed funds, and 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 in connection with the outlook for a future pickup in venture M&A and IPO activity.
Speaker Change: Although the overall leasing market continued to remain sluggish, particularly for growth stages. There are a few emerging signs of future problems.
Speaker Change: Dry powder, the unemployed funds and venture capital firms remained significant at $300 billion across the venture landscape.
Speaker Change: On an increasing basis, we are hearing the word optimistic make its way into more conversations with venture capital investors and companies.
Speaker Change: We're hearing it usually in connection with increased opportunities for new investments, but also on the outlook for future pickup in venture M&A and IPO activity.
James P. Labe: We believe that once the IPO markets come back and M&A activity returns to more historical levels, there will be a sea change for growth stage companies, especially those companies within our portfolio that are outperforming in this market, which 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 in 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.
Speaker Change: We believe that once the IPO market has come back in the M&A activity returns to more historical levels. It will be a sea change for growth stage companies.
Speaker Change: Especially those companies within our portfolio that are outperforming in this market.
Speaker Change: It will also attract growth stage investors to return to the market.
Speaker Change: With our outstanding warrant positions and more than 97 portfolio companies.
Speaker Change: And the equity positions within more than 46 portfolio companies.
Speaker Change: We believe we stand to benefit in the traditional way to our debt returns when the market returns to a better M&A and IPO landscape.
James P. Labe: 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 now and create sustainable shareholder value. With that, I'll turn the call over to Sajal.
Speaker Change: In the meantime.
Speaker Change: We will continue to position <unk> for when the overall DC market conditions improve.
Speaker Change: Triple point capital our sponsor will continue to invest in its people and our platform, including building, our Oregon, our originations and investment teams portfolio management capabilities and our support staff.
Speaker Change: Triple point is well positioned to capture the business as overall market conditions improve.
Speaker Change: For now we will remain active in the market and plan to continue building a pipeline consisting of venture growth stage companies positioned first trained under current market conditions.
Speaker Change: These are all critical elements for the long term that we believe position us to build and create sustainable shareholder value.
Speaker Change: With that I'll turn the call over to Sergio Thank you, Jim and good afternoon investment pipeline activity increase for the third consecutive quarter as Triple point capital signed a $130 million of term sheets with venture growth stage companies compared to $100 million in Q4 and $58 million in Q3, reflecting.
Sajal K. 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 team, an increase in direct referrals from our select venture capital funds, and more importantly, an increase in what we believe are high-quality With regards to new investment allocation to TVBG during the first quarter, TriplePoint Capital allocated $10 million in new commitments with one new portfolio company to TVBG compared to $4 million in new commitments with two existing portfolio companies in Q4 and $6 million of new commitments with three companies in Q3.
Sergio: The increase in origination activity by our investment team and 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.
Sergio: With regards to new investment allocation to <unk> during the first quarter Triple point capital allocated $10 million in new commitments with one new portfolio company to TPG compared to $4 million in new commitments with two existing portfolio companies in Q4 and $6 million of new commitments with three companies in Q3.
Sajal K. Srivastava: The commitment made during the first quarter was to fit an all-in-one health and wellness and preventative care plan. 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 financial technologies. During the quarter, TVBG 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 but slightly higher than the $12.7 million we funded to five companies in Q3.
Sergio: <unk> made during the first quarter was to fit on an all in one health and wellness and preventative care platform here in Q2, we've closed $25 billion of new commitments with one new portfolio company in the AI and software industry and one existing portfolio company and the financial technology industry.
Sergio: During the quarter <unk> 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 refunded to five companies in Q3.
Sajal K. Srivastava: These funded investments carried a weighted average annualized portfolio yield of 14.3% at origination. Approximately 75% of the funding 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 TPBG 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 of 15.4%, in line with the past two quarters' levels of prepayment activity and portfolio.
Sergio: These funded investments carried a weighted average annualized portfolio yield of 14, 3% at origination.
Sergio: Approximately 75% of the funding this quarter came from new investment origination during the quarter.
Sergio: 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 TPG over the course of the year.
Sergio: During Q1, we had $30 million of loan prepayments.
Sergio: 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.
Sajal K. Srivastava: Excluding prepayment, core portfolio yield was 14.7%, up from 14.4% in Q4 and 14.1% in Q3. With regard 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 finances.
Sergio: Excluding prepayment core portfolio yield was 14, 7% up from 14, 4% in Q4 and 14, 1% in Q3.
Sergio: With regards to fund raising 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.
Sergio: Monzo represented the lion's share of the fund raising activity, having raised approximately $430 million at a 5 billion valuation during the quarter. This data does not include metropolis or cohesive these announced financings.
Sajal K. Srivastava: As we discussed during our last earnings call, we are seeing capital raising activity within our portfolio picking up, and we 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 Warren and Equity portfolio.
Sergio: As we discussed during our last earnings call, we are seeing capital raising activity within our portfolio of picking up and have several portfolio companies either enacted fundraising discussions we're expecting to launch a fund raising process shortly.
Sergio: Approximately $200 million of new capital was raised by our portfolio companies in April alone.
Sergio: We believe this fund raising 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.
Sajal K. Srivastava: As of March 31st, we held 9 warrants in 97 companies and held equity investments in 46 companies with a total fair value of $78 million. Our Warren 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 Align Company was acquired by Orchard Technologies, D.N.
Sergio: As of March 31, we held warrant to 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 <unk> 16 per share for the quarter.
Sergio: Primarily driven by new equity round valuation improving public trading multiples and continued financial performance of our portfolio companies as well as improving stock prices for our publicly held portfolio.
Sergio: During the quarter. The aligned company was acquired by Orchard Technologies DN Company was acquired by full beauty brands and underground enterprises completed the asset sale or liquidation process.
Sajal K. Srivastava: The Company was acquired by Full Beauty Brands, and Underground Enterprises completed a facet sale and liquidation process. D and Underground were removed from the credit watch list, and we realized losses of $8.9 million from these events, of which $5.1 million 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 runways in conjunction with upcoming financing or strategic events already underway, and they are expected to be either upgraded or removed from the watch list upon completion.
Sergio: Underground were removed from the credit watch list and we realized losses of $8 9 million from these events of which $5. One was previously recognized on an unrealized basis in prior quarters.
Sergio: During the quarter two companies were downgraded from category two to category three 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.
Sajal K. Srivastava: 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.
Sergio: One portfolio company <unk> holdings with a fair value of approximately $18 million was downgraded from category three to category four during Q1 and was acquired here in Q2.
Sergio: 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.
Sergio: One portfolio company outdoor voices, which is in the strategic process was downgraded from category four to category five and we expect the process to be completed in Q2.
Sajal K. Srivastava: 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 improved operational performance by our portfolio companies.
Sergio: While our total percentage of category three four and five investments rose slightly this quarter, we'd like to point out that we expect upgrades to a few of our category three rated investments over the course of 2024 as a result of achieving sustained profitability and are completing financing events that are underway as well as the fact.
Sergio: That we bought even move <unk> a category four rated loans here in Q2 as a result of its acquisition.
Sergio: Managing our existing portfolio continues to be a high priority for us as a result of increased equity fund raising 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 developments.
Sergio: And in certain cases, the potential for upgrading of credit ratings.
Sajal K. Srivastava: 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 an upgrading of credit ratings. With regard to 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.
Sergio: With regards to new investment opportunities as Jim mentioned, we are seeing what we believe are more companies and 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.
Sajal K. Srivastava: We believe our efforts over the past year to reduce leverage and unfunded commitments, to boost liquidity from prepayments and repayments, FOSIs from sale under our ATM program, as well as extend and the upcoming renewal of our credit facility put TDBG 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 to achieve our goals of increased portfolio durability and diversification.
Sergio: We believe our efforts over the past year to reduce leverage and unfunded commitments to boost liquidity from prepayments and repayments.
Sergio: Proceeds from sale under ATM program as well as extending in the upcoming renewal of our credit facility puts <unk> in a position to take advantage of the improving pipeline of new deals as the year unfolds.
Sergio: We believe that by returning to portfolio growth over the course of 2024 and into 2025 and by continued focus on smaller hole sizes and industry sector rotation with companies that are generally recently raised new equity capital. We will continue along our goals of increased portfolio durability and diversification.
Sajal K. Srivastava: As we look to onboard 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 dividends. 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 Warren and equity portfolio.
Sergio: As we look to onboard 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.
Sergio: Finally, as equity fund raising activity continues by our portfolio companies and public market multiples improves we expect to see improvement in the fair value of our warrant and equity portfolio.
Sajal K. Srivastava: 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 TPBG and our shareholders in terms of 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.
Sergio: In closing we remain focused on our business and we'll continue to follow our long term playbook of generating strong returns for fellow shareholders and we look forward to what's in store for <unk> 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 <unk>.
Sergio: 24, and 2025 with that I'll now turn the call over to Chris.
Christopher M. 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 in funding. 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, TPBG has ample liquidity at its disposal to support our existing portfolio companies, satisfy our unfunded commitments, and make selective new investments.
Christopher M. Mathieu: Thank you, Joe and Hello, everyone.
Christopher M. Mathieu: During the first quarter, we made notable progress on a number of financially focused efforts, which we believe have improved our overall position.
Christopher M. Mathieu: We generated strong interest income from our diversified bond portfolio as expected, we intentionally had another light quarter of originations and fundings.
Christopher M. Mathieu: We over earned this quarter's dividend and we also improved leverage to one to two seven times on both the gross and net basis.
Christopher M. Mathieu: 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, <unk> has ample liquidity at the ready to support our existing portfolio companies satisfy our unfunded commitments and make selective new investments.
Christopher M. Mathieu: 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 a 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.
Christopher M. Mathieu: 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.
Christopher M. Mathieu: The decrease in total investment income was primarily driven due to lower average debt portfolio as compared to a year ago.
Christopher M. Mathieu: For the first quarter total operating expenses were $13 $8 million as compared to $15 1 million for the prior year period.
Christopher M. Mathieu: These expenses consisted of $7 million of interest expense, which was lower this quarter due to reduced overall leverage.
Christopher M. Mathieu: $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 four. Due to the shareholder-friendly total return requirement under the incentive fee, there was no incentive fee this quarter.
Christopher M. Mathieu: $4 3 million of base management fees $611000 of administrative expenses and $1 $8 million of G&A expenses, which were generally flat to last quarter.
Christopher M. Mathieu: Due to the shareholder friendly total return requirement under the incentive fee there was no incentive fee this quarter.
Christopher M. Mathieu: Further, we expect limited incentive at the expense of the company 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 in 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.
Christopher M. Mathieu: Further we expect limited incentive fee expense during the remainder of 2024.
Christopher M. Mathieu: For the first quarter net investment income totaled $15 5 million or <unk> 41 per share compared to $18 6 million or <unk> 53.
Christopher M. Mathieu: Per share for the prior year period.
Christopher M. Mathieu: For the first quarter net realized losses on investments totaled $8 8 million.
Christopher M. Mathieu: This was primarily in connection with the write off of investments of two portfolio companies.
Christopher M. Mathieu: Note $5 1 million or 58% of the realized loss on these companies was previously included in unrealized losses.
Christopher M. Mathieu: 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.
Christopher M. Mathieu: For the first quarter, the 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 recorded 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 As of quarter end, the net asset value was $341 million, or $9.02 per share, compared to $346 million, or $9.21 per share, as of year end.
Christopher M. Mathieu: For the first quarter net change in unrealized gains on investments was $1 3 million.
Christopher M. Mathieu: Consisting of $6 2 million of net unrealized gains on our warrant and equity portfolio, resulting from fair value adjustments and $4 $9 million of net unrealized gains from the reversal of previously recorded unrealized losses from the investment portfolio that were realized during the period.
Christopher M. Mathieu: Reduced by $9 8 million of net unrealized losses on that portfolio, resulting from fair value adjustments.
Christopher M. Mathieu: As of quarter end net asset value was $341 million or.
Christopher M. Mathieu: Or $9 <unk> per share compared to $346 million or $9 21 per share as of year end.
Christopher M. Mathieu: We declared a regular quarterly dividend of $0.40 per share, with a record date of June 14th to be paid on June 29th. 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.
Christopher M. Mathieu: We declared a regular quarterly dividend of <unk> 40 per share with a record date of June 14th to be paid on June 29. In addition to over earning the dividend we continue to retain sizable undistributed income.
Christopher M. Mathieu: Which totaled $42 3 million or $1 12 per share at the end of the period.
Christopher M. Mathieu: 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.
Christopher M. Mathieu: Now just an update on unfunded investment commitments overall liquidity and balance sheet leverage.
Christopher M. Mathieu: We successfully reduced our unfunded commitments from $118 million at year end to $73 million at quarter end.
Christopher M. Mathieu: As of quarter end total liquidity was $312 million consisting of $1 million in cash and 312, sorry $311 million available under the revolving credit facility.
Christopher M. Mathieu: We had $38 million of prepayments and $6 8 million of scheduled principal amortization generating $37 6 million of liquidity during the quarter.
Christopher M. Mathieu: 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.
Christopher M. Mathieu: We continue to maintain a diversified capital structure.
Christopher M. Mathieu: 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.
Christopher M. Mathieu: Pay down our revolving credit facility improved our overall leverage during the quarter. We ended the quarter with a leverage ratio of one seven times.
Christopher M. Mathieu: 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, 2027. Existing lenders are engaged in driving the documentation closing in an orderly manner.
Christopher M. Mathieu: 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 32025 with final maturity on May 31 of <unk>.
Christopher M. Mathieu: 27 existing lenders are engaged in driving to documentation closing in an orderly manner.
Operator: We have three steps on the ladder of term debt maturities with the maturity scheduled to occur in 2025, 2026, and 2027. The most near term is $70 million maturing in March of 25. Given the very attractive 4.5% fixed interest rate on this balance, we expect to keep this balance outstanding until it's 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.
Christopher M. Mathieu: We have three steps to the latter of term debt maturities with the maturity scheduled to occur in 2025, 2026 and 2027.
Christopher M. Mathieu: The most near term is $70 million maturity in March of 25, given the very attractive four 5% fixed interest rate on this balance we expect to keep this balance outstanding until its scheduled maturity dip.
Christopher M. Mathieu: 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.
Operator: 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. However, given the very favorable rates on the existing notes, we do not expect to prepay or refinance these amounts until near their original maturity date. In connection with the term notes, DBRS assigned an investment grade credit rating to those transactions and recently reported a triple D low rating and investment grade issuer rating. In addition, DBRS increased its outlook on TPBG to stable. So this completes our prepared remarks today. And, Operator, could you please open the line for questions at this time?
Christopher M. Mathieu: Later this year, we will evaluate the refinancing of the two remaining maturities, which include 200 million at four 5% fixed rate due in March of 2026, and $125 million at 5% fixed rate and due February of 2027.
Christopher M. Mathieu: To allow ample opportunity and time to consider cost effective alternatives.
Christopher M. Mathieu: 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 D. Vrs assigned an investment grade credit rating in connection with those transactions and recently reported a triple B low rating an investment grade issuer rating. In addition, <unk> increased its outlook on TPG to stable.
Speaker Change: So this completes our prepared remarks today and so operator could you. Please open the line for questions at this time.
Operator: Absolutely, if you would like to ask a question, please press star then 1. To remove yourself from the queue, please press star then 2. Today's first question comes from Timmy and O'Shea with Wells Fargo. Please go ahead.
Operator: Absolutely.
Speaker Change: To ask a question. Please press Star then one.
Operator: Move yourself from the queue. Please press Star then two.
Finian O'shea: Today's first question comes from Finian O'shea with Wells Fargo. Please go ahead.
Christopher M. Mathieu: Hey everyone, good afternoon. First one on the credit facility. I appreciate the update there. Can you, actually, actually two 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 before, if that's routine or something more related to recent performance. And then Chris, I think you flagged last quarter that the pay down was planned to satisfy, and eventually be satisfied, 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? Thanks.
Speaker Change: Yes.
Speaker Change: Hey, everyone. Good afternoon.
Christopher M. Mathieu: First one on the.
Christopher M. Mathieu: Credit facility.
Christopher M. Mathieu: The update there.
Christopher M. Mathieu: Can you actually two parts sort of can you touch on what.
Speaker Change: What has set up to.
Christopher M. Mathieu: Issue of needing to finish documentation I don't think we've.
Christopher M. Mathieu: Hum.
Speaker Change: From a cross site issue, if that's routine or something.
Christopher M. Mathieu: More related to recent performance and then Chris I think you flagged last quarter that the.
Christopher M. Mathieu: Pay down was plans.
Christopher M. Mathieu: Two two.
Christopher M. Mathieu: To satisfy.
Christopher M. Mathieu: Or eventually satisfy but until then.
Christopher M. Mathieu: To pay down for the diversification test correct me if I'm wrong, if that's still the case.
Christopher M. Mathieu: Are you at a point, where you're able to draw or or how far from that would you be.
Christopher M. Mathieu: Given the current portfolio. Thanks.
Christopher M. Mathieu: Great, yeah, 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 had to do with our year-end financial reporting and getting the documentation done. So it was in the close proximity to our issuance of our K. We didn't get the approvals and the documents done. So they're going through the, I would say, normal cadence.
Speaker Change: Great Yeah. So let me take let me take both of those so the timing on the credit facility all of 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 a close proximity to our issuance of our K, we didn't get that.
Christopher M. Mathieu: The approval is in the documents done so they're going through that I would say that normal cadence. We just added another 30 or 60 days to the the time period to get the documentation done to avoid the drama.
Christopher M. Mathieu: 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 non-qualifying assets in the unfunded commitment bucket any longer. That was cleared out over the last two or three 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.
Christopher M. Mathieu: Associated with doing that in the ordinary course on the other question you had.
Christopher M. Mathieu: We we have no need any more to gross up the balance sheet we.
Christopher M. Mathieu: We don't have any non qualifying assets and the unfunded commitment bucket any longer that was cleared out over the last two or three quarters.
Christopher M. Mathieu: 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 would would return.
Christopher M. Mathieu: 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 that to 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.
Christopher M. Mathieu: To be an issue so you should expect.
Christopher M. Mathieu: Gross and net leverage to be more.
Christopher M. Mathieu: Tightly coordinated as opposed to the outlier that you saw in the prior couple of quarters.
Christopher M. Mathieu: Yeah.
Operator: Okay, great. Thanks.
Speaker Change: Okay, great Thanks and.
Speaker Change: Follow up for <unk>.
Sajal K. Srivastava: And as a follow-up for... Sajal, it sounds like it's more constructive on the VC funding backdrop. I think you flagged a few examples of portfolio companies seeking and or attaining financing from, you know, 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. And so if you were to, you know, 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, you know, constructive or comfortable outlook on our end. Anything you're able to do there would be appreciated. Thank you.
Operator: Sigal it sounds like it is.
Sajal K. Srivastava: More constructive on the.
Sajal K. Srivastava: VC funding backdrop, I think you flagged a few examples on portfolio companies seeking <unk> attaining financing from.
Sajal K. Srivastava: From the outside.
Sajal K. Srivastava: Here.
Sajal K. Srivastava: We hear storylines figures like this from.
Sajal K. Srivastava: All da Vinci, Bdc's every quarter and it's hard to really.
Sajal K. Srivastava: Well what it means so if you were to.
Sajal K. Srivastava: Communicate just more than say plain English or give some anecdotal examples of how much the fund raising is improving for companies that need it.
Sajal K. Srivastava: That would allow for a more.
Sajal K. Srivastava: Constructive or comfortable outlook on our end and anything you're able to do there.
Sajal K. Srivastava: It would be appreciated thank you.
Sajal K. Srivastava: You know, let me start by saying that the data shows that the overall VC market continues to be challenging. So, let's just be clear, VC fundraising investment activity was either flat or down from Q1 to Q4, so, you know, 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.
Speaker Change: Yes, let me start with listen I think.
Sajal K. Srivastava: The data shows that the overall DC market continues to be challenging so, let's just be clear VC fund raising investment activity. Please.
Sajal K. Srivastava: 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 DC world.
Operator: 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, the overall credit outlook and credit quality. And I think the other good news is that not only are the sizes of the raises increasing, but it's also companies across the credit rating. So, it's not just, you know, Category 1 and Category 2.
Sajal K. Srivastava: We're excited about our pleased with is within our portfolio, we're seeing our portfolio companies increase the frequency and the magnitude of their equity fund raising efforts, which I think is very important in terms of as we said overall credit outlook and credit quality.
Operator: We've got Category 3 portfolio companies raising equity as well. So, I think the distribution of the fundraising activity, the size of the fundraising, and the frequency of the fundraising are all important. Again, initial indicators don'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. Great! Thank you so much.
Operator: 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 ratings. So it's not just the category one category two and we've had category three portfolio companies raise equity as well and so I think the distribution.
Operator: The fund raising activity the size of the fund raising the frequency of the fund raising.
Operator: 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 'twenty four and we think these are all positive data points and then here in Q2.
Operator: <unk> seen continued strong equity fundraising activity by our portfolio companies.
Operator: Positive sign.
Operator: Yeah.
Speaker Change: Great. Thank you so much.
Operator: Okay.
Operator: I apologize, and our next question comes from Crispin Love with Piper Sandler. Please go ahead.
Operator: Operator.
Operator: I apologize our next question comes from Christopher <unk> with Piper Sandler. Please go ahead.
Operator: Thanks, I appreciate you taking my question. First, can you just discuss your views on the net investment income and funding trajectory and when you think you could be north of that 50 million quarterly number? I think you're still saying kind of 25 to 50 million, just given the portfolio here has decreased for four consecutive quarters. Do you think you're getting back to a point where you can begin growing the portfolio? And also, what are your expectations for NII per share with it just sitting above the dividend in the most recent quarter?
Crispin Elliot Love: I appreciate you taking my question first can you just discuss your views on the net investment income and funding trajectory and when you think you could be north of that 50 million quarterly number I think you're still kind of $25 million to $50 million just given the portfolio.
Operator: For four consecutive quarters do you think youre getting back to a point, where you can begin growing the portfolio and then also what are your expectations for NII per share what they just sitting on top of that dividend in the most recent quarter.
Sajal K. Srivastava: Yeah, let me start with funding, Crispin. This is Sajal here.
Operator: Yeah, Let me start with fundings Christmas essential here. So so again, we continue to have our target of 25 to 50 I think we're focused on our target of 25% to 50 <unk>.
Sajal: Mindful, obviously of our leverage ratio and so as we look to what funds at $25 to 50, it's a combination of contractual portfolio repayments.
Sajal K. Srivastava: So again, we continue to have our target of 25 to 50. I think we're focused on our target of 25 to 50, and we're mindful, obviously, of our leverage ratio. And so, as we look to what funds that 25 to 50, it's a combination of contractual portfolio repayments, prepayment activity, as well as use of our ATM.
Sajal K. Srivastava: Prepayment activity as well as the use of our ATM and so we want to obviously.
Sajal K. Srivastava: And so, obviously, you know, manage our expectations there. And I think a combination of that, too, 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, you know, 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, you know, use the liquidity that we have and expect to have to maintain the range that we've targeted.
Sajal K. Srivastava: Manage our expectations, there and I think a combination of that too is also as I mentioned in my prepared remarks.
Sajal K. Srivastava: As we increased 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.
Sajal K. Srivastava: But I'd say right now our goal is to use the liquidity that we have and expect to have to.
Sajal K. Srivastava: To maintain the range that we've targeted.
Christopher M. Mathieu: Okay, great. And then, I guess, any expectation on NII per share going forward, just sitting pretty close to DIMDA?
Speaker Change: Okay, Great and then I guess, just any expectation on NII per share going forward.
Christopher M. Mathieu: Pretty close to doing that.
Christopher M. Mathieu: Yeah, Crispin, this is Chris. So when we think about kind of the long-term view of NIOD, I guess, I would describe it as we think of a lot of different components there, kind of top-line yields. Certainly, you've heard the news today, no change in prime rates. So I think, you know, our storyline on top-line yields is stable and strong. When you think about prepayment frequency, size, and vintage, you know, vintage matters.
Christopher M. Mathieu: Yes.
Christopher M. Mathieu: Kristen This is Chris so when we think about kind of the long term view of NII. This I guess I would describe it is we think of a lot of different components, there kind of top line yields.
Christopher M. Mathieu: Certainly you've heard news today no change in prime rates. So I think are are still relying on top line yields are stable and strong.
Christopher M. Mathieu: Think about prepayment frequency size and vintage vintage matter as we've spoken about that in the past when a loan prepays that has only been around the half that's why if there is a lot more.
Christopher M. Mathieu: We've spoken about that in the past, when a loan prepays, it 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, you know, prepayments are a natural part of the venture lending model, and we look forward to them. And they typically come in one or two a quarter. We have a line of sight on a couple that we've spoken about in the past.
Christopher M. Mathieu: Additional fee income or accelerated fees that we can enjoy so thats. We know prepayments are a natural part of the venture lending model and we look forward to them.
Christopher M. Mathieu: And they typically have been coming in one or two a quarter. We have line of sight on a couple that we've spoken about in the past and then I guess the other party is cost of capital our cost of debt and as I mentioned, our term debt right now for the next two and three plus years is pretty low.
Christopher M. Mathieu: And then I guess the other part is the cost of capital or the cost of debt. And as I mentioned, our term debt right now for the next two and three-plus years is pretty locked in at attractive prices. So when we think about the 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 over-earning of the dividend.
Christopher M. Mathieu: Locked in at attractive pricing, so when we think about cost of debt on the existing.
Christopher M. Mathieu: 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 over earning of the dividend. We had a couple of quarters, where we had some legal fees from some workouts. So it's those type of things that we think about when we look at covering.
Christopher M. Mathieu: 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. And, of course, the likelihood of incentive fees coming back. So we reported no incentive fee this quarter. It looks like, based on where we are from in a NAV decline over 2023, that it looks like it'll 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.
Christopher M. Mathieu: <unk>.
Christopher M. Mathieu: The NII the threshold that we've been at so and of course, the the likelihood of incentive fees.
Christopher M. Mathieu: Coming back so we reported no incentive fee this quarter it looks like based on where we are from a nap decline.
Christopher M. Mathieu: 2023 that it looks like it will take at least a few quarters to have that come back. So all of that that said it creates a view of a pretty stable NII and dividend.
Christopher M. Mathieu: Okay, great question, thank you. 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.
Speaker Change: Okay, great. Thank you 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 for this credit facility today to fund investments I'm not sure if I missed that.
Christopher M. Mathieu: Yes, so we are at the same level of leverage now, maybe slightly less today. And then, as far as use of the facility is concerned, we have full use of it. We can advance and borrow. In the ordinary course, it's fully compliant and in full use, and the revolving period is in good order. So there are no restrictions or limitations on that.
Christopher M. Mathieu: Yes.
Christopher M. Mathieu: At the same level of leverage now maybe slightly less.
Christopher M. Mathieu: Today, and then as far as use of the facility we have full use of it.
Christopher M. Mathieu: In advance and borrow in the ordinary course, its fully compliant and in full use and the revolving period is in good order, so theres no restrictions or limitations.
Christopher M. Mathieu: On that use.
Operator: Okay, great. Thanks. I appreciate you taking the time to answer all my questions.
Speaker Change: Okay, great. Thanks, I appreciate you taking all my questions.
Operator: Thank you. And our next question comes from Vilas Abraham with UBS. Please go ahead.
Operator: Thank you and our next question comes from Vilas Abraham with UBS. Please go ahead.
Operator: Hi, everybody, and thanks for taking the question. You touched on this a little bit in your previous answers, but just on new money yields versus existing portfolio yields. Can you just talk about that? It sounds like you think it's going to be stable. I thought I saw there might be some compression in the levels there. Just talk about the spreads and any dynamics there that we should be thinking about moving forward.
Vilas T. Abraham: Hi, everybody and thanks for taking the question.
Operator: You touched on this a little bit with your.
Operator: Previous answers, but just on.
Operator: New money yields versus the existing portfolio yield can you just.
Operator: Talk about that it sounds like you think it's going to be stable I thought I thought there might be some compression in.
Operator: The level of Theyre, just in and just talk about the spreads and any dynamics there that we should be thinking about moving forward.
Sajal K. Srivastava: Hi Vilas, it's Sajal. Yeah, I would say so our new asset yield has been pretty consistent, you know, 14.3%. So, generally stable. And we continue to expect that to be stable for a couple reasons. One is obviously, you know, 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, you know, the targeted rates for what our team originates at. So, I'd say we expect to continue to maintain our, you know, portfolio yield for new assets, regardless of the rate environment.
Operator: It'd be less subtle yeah, I would say so.
Sajal K. Srivastava: Our new asset yield has been pretty consistent 14, 3%.
Sajal K. Srivastava: So generally stable and.
Sajal K. Srivastava: And we continue to expect that to be stable for a couple of reasons. One is obviously.
Sajal K. Srivastava: He said the prime rate to the current prime rate on our transactions, we have floating rate transactions, we have about 40% of our book is fixed rate investments.
Sajal K. Srivastava: And so and then as we look to the targeted rates for what our team originated debt. So so I would say.
Sajal K. Srivastava: We expect to continue to maintain our.
Sajal K. Srivastava: The portfolio yield for new assets, regardless of rate environment.
Sajal K. Srivastava: Okay, and yeah, you mentioned fixed-rate investments. What's your ability now to make those kinds of investments, just given that the kind of general expectation is that rates are going to be lower at some point in the next one to two years?
Speaker Change: Okay, and you mentioned fixed rate investments whats your ability now to to make those kinds of investments just given that kind of general expectation is that.
Speaker Change: Our rates are going to be lower at some point in the next.
Vilas: One to two years.
Sajal K. Srivastava: Yeah, I'd say we're opportunistic when it comes to. It's a function of as we look at the overall structure, 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 100%, but it's very much opportunistic and depends on the company, the structure, and the opportunity.
Vilas: Yes, I'd say, we're opportunistic when it comes it's a function of as we look to overall structure in credit and risk of a transaction. So it's absolutely something our deal teams are considering in our credit teams are evaluating and so I would say theres no.
Sajal K. Srivastava: It's not 100%, but it's very much opportunistic and depending on the company and the structure.
Sajal K. Srivastava: The opportunity.
Sajal K. Srivastava: Okay. 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're at a trough here, 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?
Speaker Change: Okay Gotcha.
Sajal K. Srivastava: The general message on.
Sajal K. Srivastava: <unk> I guess is it fair to you know some of your comments and.
Sajal K. Srivastava: Kind of interpret that you feel like we are.
Sajal K. Srivastava: Sure.
Sajal K. Srivastava: We're at a trough.
Sajal K. Srivastava: And just given some of the dynamics you're seeing in the portfolio around some of the upgrade you are expecting in.
Sajal K. Srivastava: I think you mentioned credit stabilization throughout the year.
Sajal K. Srivastava: We're kind of flat to up here as we go through the year.
Sajal K. Srivastava: Yeah, listen, teams are hard at work, managing the priorities, and the portfolio is a high priority. You know, I think we feel good about the equity fundraising activity. Listen, I think credit is stabilizing, but, you know, it's still a very, you know, challenging venture, the overall venture capital market. And so we want to be mindful and practical and reasonable about our expectations. But again, I think we're seeing some positive indicators. We're also feeling good about, you know, the public equity markets and at least where those multiples are as we look at our public, sorry, our private Warren equity portfolio.
Sajal K. Srivastava: Yeah listen the teams are hard at work managing the priorities portfolio is a high priority.
Sajal K. Srivastava: Think we feel good about the equity fund raising activity listen I think credit is stabilizing but it's still a very challenging adventure overall venture capital market and so we want to be mindful and practical and reasonable a better expectation, but again I think we're seeing some positive indicators.
Sajal K. Srivastava: <unk> we're also.
Sajal K. Srivastava: Selling good about the public equity markets and at least where those multiples are that as we look to our public.
Sajal K. Srivastava: We obviously saw some value accretion here this quarter, and we expect if markets continue to stabilize and improve, we will 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, you know, this still continues to be a challenging environment, but we're, you know, we're doing a good job managing through it.
Sajal K. Srivastava: Private warrant and equity portfolio, we obviously saw some value accretion here this quarter and we expect if markets continue to stabilize improve we would see some more fair value coming there. So I'd say, it's a balance.
Sajal K. Srivastava: But we don't want to be too optimistic we want to be real and this.
Sajal K. Srivastava: Still continues to be challenging environment, but where we're doing a good job managing through it.
Sajal K. Srivastava: If I could just squeeze one more in here, you talked a little bit about shifts in terms of sector and in geography, in terms of strategy. Have you considered at all a shift in the stage of the venture-backed companies you invest in, you know, namely trying to go maybe a little bit later stage? And is that even possible given TriplePoint's setup? Just curious about your thoughts there.
Speaker Change: Okay, if I could just squeeze one more in here.
Sajal K. Srivastava: A little bit about shift in terms of sector.
Sajal K. Srivastava: And geography in terms of 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 tripled.
Sajal K. Srivastava: Triple points set up just curious around your thoughts there.
Sajal K. Srivastava: Yeah, listen. I think, you know, as a credit manager, our job is to evaluate all of our performance and investment strategy. So we're obviously always looking at our performance. But I would say you bring up an interesting point.
Speaker Change: Yeah listen I think as a credit manager our job is to evaluate all of our performance and investment strategy. So.
Sajal K. Srivastava: Always looking at our performance I would say you bring up an interesting point I think in the bigger picture given the economic environment in the capital markets environment, We are absolutely seeing companies stay private longer.
Sajal K. Srivastava: 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, you know, we're seeing demand from companies later in the stages, I call it, we call it, the 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 were 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.
Sajal K. Srivastava: And as a result, we are.
Sajal K. Srivastava: We're seeing demand from companies.
Sajal K. Srivastava: Later in the stages I call we call it.
Sajal K. Srivastava: Lower venture middle market or these are EBITDA positive venture capital backed companies.
Sajal K. Srivastava: That are coming back to us for follow on financing or that were 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.
Sajal K. Srivastava: And so we're absolutely looking at those opportunities. We're excited about those opportunities, assuming the yield profile fits. But yeah, 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 TVBG, and they are actively deploying capital and looking at opportunities.
Sajal K. Srivastava: But yes, we are absolutely seeing.
Sajal K. Srivastava: From 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 TPG and our.
Sajal K. Srivastava: Are actively deploying capital and looking at opportunities there.
Operator: All right. I appreciate all the color. Thank you.
Speaker Change: Alright, I appreciate all the color. Thank you.
Operator: Okay.
Operator: Thank you. And our next question comes from Paul Johnston with KBW. Please go ahead.
Speaker Change: Thank you.
Paul Conrad Johnson: Comes from Paul Johnston.
Paul Conrad Johnson: Please go ahead.
Operator: Yeah, thanks for taking my questions. Most of mine have been asked, but I wanted to ask just about the 584 raised 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.
Paul Conrad Johnson: Yes, thanks for taking my questions most of mine have been asked.
Operator: But I.
Operator: Wanted to ask just about the 584 Reyes.
Operator: 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.
Operator: One particular company or deal that was in.
Operator: And that number.
Sajal K. Srivastava: Yes, Paul, it was one name Monzo raised $430 of the $584.
Speaker Change: Yes, Paul It was one day Monzo raised 430 of the 584.
Speaker Change: Got it thanks.
Sajal K. Srivastava: And then, how much, you know, how much ability do you have to kind of push on those borrowers that, you know, are running up, you know, to their kind of maturity dates, possibly getting tight on, you know, cash runway? I mean, how much ability do you have to sort of push them to go back to market and raise, of course, you know, where it's possible, even in the case where that's, you know, likely to be a down round? Yeah.
Sajal K. Srivastava: And then how much.
Sajal K. Srivastava: How much ability do you have to kind of push on those borrowers that are.
Sajal K. Srivastava: Are running up.
Sajal K. Srivastava: They're kind of maturity dates.
Sajal K. Srivastava: Possibly getting tight on cash runway.
Sajal K. Srivastava: I mean, how much ability do you have sort of pushed them to go back to market.
Sajal K. Srivastava: <unk> of course, where it's where it's possible even in the case, where that's likely to be a down round.
Sajal K. Srivastava: Yeah, listen, our approach is to be proactive. So it's before they're pushing up against the short runway or pushing up against the maturity wall.
Speaker Change: Yes listen our approach is to be proactive so it's before.
Sajal K. Srivastava: <unk> against short runway are 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 they are sponsors our select VC. So our goal is to be as proactive as possible and to encourage them to raise capital either into.
Sajal K. Srivastava: 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 or 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 to invest where it makes sense. And so I'd say it's very, very much a collaborative conversation.
Sajal K. Srivastava: Donnelley and externally so I would say we are absolutely encouraging and I think the sponsors the vcs as well and the entrepreneurs.
Sajal K. Srivastava: Everyone is.
Sajal K. Srivastava: Realistic and launched.
Sajal K. Srivastava: Where it makes sense and so I'd say, it's very very much a collaborative conversation, but the key is to do it before runway gets short the challenges what we see in this environment. As these events are taking longer and so thats. The key as companies are in process round used to happen within a matter of months and now it's taking longer we're seeing.
Operator: But the key is to do it before the runway gets short. The challenge is, what we see in this environment, these events are taking longer. And so that's the key: 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.
Operator: Term sheets may not necessarily close so it's being proactive during that process. The fund raising that is important from a credit management perspective.
Operator: Got it. I appreciate that. That's all for me. Thanks.
Speaker Change: Got it I appreciate that.
Speaker Change: All for me thanks.
Operator: Thank you. And our next question comes from Christopher Nolan with Roddenberry Filemen. Please go ahead. All my questions have been answered. And this concludes our question and answer session. I'd like to turn the conference back over to Mr. LaBelle for any closing remarks.
Operator: And our next question comes from Christopher home.
Christopher Whitbread Patrick Nolan: Please go ahead.
Christopher Whitbread Patrick Nolan: All my questions have been asked thanks.
James P. Labe: Thank you.
Operator: A question and answer session.
Operator: The conference back over to Mr. O'brien for any closing remarks.
James P. Labe: 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. 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.
James P. Labe: Thanks, operator.
James P. Labe: As always I'd like to thank everyone for listening and participating in today's call.
James P. Labe: Found it helpful. We look forward to updating and talking with you again next quarter.
James P. Labe: Thanks, again and have a nice day.
Operator: 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.
James P. Labe: Goodbye. Thank you.
Operator: This conference call. Thank you all for attending today's presentation you may now.
Operator: Now disconnect your lines will have a wonderful day goodbye.
Operator: Yeah.
Operator: [music].
Operator: Okay.