TriplePoint Venture Growth BDC Corp. Q3 FY2024 earnings call

• Jim Labe highlighted increasing NAV by 3%, over-earning dividend, strong portfolio yield, improved credit score, renewed $300 million credit facility with accordion to $400 million, enhanced liquidity, reduced non-accrual companies, additional term sheets post quarter end, and net realized/unrealized gains.
• Sajal Srivastava discussed signed term sheets, new investments in portfolio companies like Panorama Education and Aquilas, debt investments, prepayments, warrant and equity gains, and Good Eggs acquisition leading to credit improvement.
• Matthew Galiani reported investment income, expenses, net investment income, NAV, declared quarterly distribution, unfunded commitments, leverage at 1.11x, and liquidity at $339 million.

NAV increased by 3% to $9.10 per share. Net investment income (NII) was $13.8 million, equaling $0.35 per share. Weighted average portfolio yield was 15.7% for the quarter, with core yield increasing 1% over the previous quarter. Weighted average credit score improved with three upgrades and one downgrade. Liquidity ended the quarter at $340 million. Warrant positions were in 95 portfolio companies and equity investment positions in 48. The Revolut warrant and equity positions contributed to the NAV increase.

• Q4 debt funding target in 25 million to 50 million range.
• Prepayment activity in 2025 depends on market conditions, equity fundraising, and vintage seasoning.
• Expect pace of contractual principal amortization and repayments to increase in 2025, focusing on growing portfolio and replacing prepaid/repaid loans.

• Venture capital markets recovery is uneven.
• Lack of IPOs and M&A exit opportunities for venture growth stage companies remains a major obstacle.
• Need for caution in investment given current market conditions, opting for quality over quantity.

Q: Just first off, just on the news of the day with Trump winning the Presidential election, can you just discuss some of the potential implications, whether it's positives or negatives for TriplePoint deal activity and just the venture capital ecosystem as a whole?

A: Hi, Crispin. I'll take the question. Listen, I think it's too early for us to opine on the impact to the venture markets or interest rates or inflation. We're far from experts on that. I think what we can opine on is, we do think that potentially this new administration will see a more favorable M&A environment, and so we think that our portfolio companies and capital markets will see some benefits. So we think exit activity should improve, which will be, potentially positive for capital markets activities, which could theoretically be beneficial for potential IPO activity as well. But too soon to say, and yes, we're far from experts on that.

Q: Just on credit quality, I was just scanning the 10-Q during the prepared remarks, but it looks like non-improvement costs improved to $29 million from $68 million last quarter. Sajal, can you just discuss some of the major changes driving the decrease there?

A: Sure, yes. Kind of two obligors. The improvement was due to two obligors. One was Good Eggs, which we announced last quarter, had been acquired subsequent to quarter end by GrubMarket, and so that was the removal of them. We did receive equity in GrubMarket as a result. And then the second one was we put Moda Operandi back on accrual as a result of us modifying our loans to them in conjunction with them raising a new round of financing.

Q: Hey, what was the portfolio company that drove the realized loss, please?

A: It was Good Eggs. It was as a result of the acquisition and our receiving equity for our debt instrument. We took a realized loss.

Q: Interest expenses declined, helping drive your net investment income up quarter-over-quarter. What was the catalyst for that decline?

A: Yes. I think in particular, lower utilization on the credit facility, just given where we had lower fundings and prepay activities, so we didn't have to utilize the revolver and so benefited from it. And then, of course, we had the lower expense of the term loan at, I think, under 5%.

Q: Just on your comments around, not being as a favorable time to invest, being a little bit more cautious, not time to quite open the spigot for deployment. Can you just kind of expand on that a little bit and just describe, I guess, why you're a little bit more cautious now? Is it holding back and waiting for more M&A activity, or what's kind of the reasoning there?

A: Yes, I'll take that question. Sorry, go ahead, Jim. Jim Labe: No, that's all right. Go ahead, Sajal. Sajal Srivastava: I was going to say, I think it's an important thing just to see where the venture capital equity investors are deploying their capital and their pace of investment. So I think, Paul, it's important for us. We want to make sure that we're lending to those companies that are attracting follow-on capital from those investors. And so while we have a strong pipeline and companies reach out, new companies every quarter, in some quarters there are companies in sectors that can attract capital. And so that's why they're calling lenders or reaching out. So for us, we don't want to be pressured to put, or we're not pressured to put capital out the door. So we want to be very selective to ensure that we're lending to companies, as Jim described, that have recently raised financing, that have validated their last rounds, or in industry sectors that are experiencing growth or businesses that are growing. And so you've got to manage the timing of when they come to market versus when companies that may not have those favorable characteristics come to market and choose not to work with them, even though it's low-hanging fruit.