TriplePoint Venture Growth BDC Corp. Q3 FY2025 earnings call

• Q3 marked progress in furthering the strategy to increase scale, durability, income-generating assets, and NAV. - Took advantage of strong demand from high-quality venture growth stage companies to grow the debt investment portfolio, with Q3 fundings exceeding guided range. - Signed nearly $1 billion of term sheets for venture growth stage companies in the last 3 quarters. - Portfolio diversification continued with commitments to 9 new borrowers year-to-date, focusing on more mature companies with strong profiles. - Actively investing in sectors leveraging AI, as well as verticalized software, fintech, aerospace and defense, etc., with emphasis on U.S. companies with visibility to profitability. - Sponsor announced discretionary share purchase program and adviser waived income incentive fee for 2026.

During the third quarter, TPVG experienced its highest level of debt commitments and fundings since 2022, with Q3 fundings significantly exceeding the guided range, reaching the highest level in 11 quarters. Year-to-date, TPC has signed $978 million of term sheets. The adviser allocated $182 million in new commitments with 12 companies to TPVG. The debt investment portfolio grew by over $73 million during Q3, with new fundings exceeding prepayment, repayment, and amortization. Year-to-date, $194 million was funded to 22 companies at a weighted average yield of 12.1%. As of quarter end, warrants were held in 112 companies and equity investments in 53 companies with a total fair value of $134 million, up from $127 million in Q2. The debt portfolio had a weighted average yield of 13.2% for Q3, with 66% of the portfolio being floating rate and 46% of those floating rate loans at their floors as of September 30.

• Q4 new fundings target in $25 million to $50 million range. - Plan to refinance $200 million March 2026 notes with combination of new fixed rate unsecured notes and revolver capacity in Q1 2026. - Renewing $300 million revolving credit facility, preliminary terms constructive and favorable. - Declared regular quarterly distribution of $0.23 per share and supplemental distribution of $0.02 per share, payable December 31. - Sponsor TriplePoint Capital launched $14 million share repurchase program, purchased about 591,000 shares by quarter end with $10 million available.

• Monitoring and working through credit situations, primarily from pre-market change period. - Interest rate changes could impact net investment income, with lower base rates reducing interest expense on floating rate revolving debt but also affecting yield on loans.

Q: Can you just discuss what you need to see in order to increase your funding guide? The last couple of quarters have been very active. I believe you mentioned early on that you expect fundings to remain solid. Is the key driver there, leverage and liquidity holding you back or other factors at play? I guess I'm asking it's more internal factors rather than external as you look at it?

A: Crispin, this is Sajal. So I would say, obviously, quality of opportunity and credit quality selectivity drives number one. But I would say, absolutely, we're very much focused on the upcoming refinancing of our debt. And so we're mindful of liquidity and leverage ratios going into that for the time being. And then coming out of that, we'll, again, adjust and act accordingly.

Q: Last quarter, you were able to give some guidance in terms of about the number of repayments you expected for each quarter for the upcoming quarters. Has your view -- as the market seems to possibly be heating up, has your view on the pace of prepayments possibly changed? And do you have any line of sight into any upcoming repayments or realization?

A: Hi Cory, it's Sajal. I'll take this first. So I would say our guidance continues to be to expect prepayment a quarter for 2026, just based on market conditions. But more importantly, given the amount of prepay activity that we've seen over the past 2 years and the newer vintages we're putting in place, we would expect that pace to generally slow down. And so that's why we're guiding to 1 on average per quarter. As we mentioned in our filings, here in Q4, we've had a little more than 1 in terms -- and these were more unique situations, Thirty Madison and Moda and another portfolio company, so I'd say Q4 was an exception. But generally, we continue to expect one a quarter. But again, those loans that will be prepaying will be our more seasoned loans. So we're not expecting significant or material excess income from an NII perspective.

Q: On the debt refinance, as I recall, this $200 million note is investment grade. Is that correct?

A: Yes, it is.

Q: And also as I recall, that to be index eligible for investment grade, the debt amount, I believe, has to be, what, $200 million or so and above. Is that correct?

A: That's one of the factors. Yes, it is.

Q: And so Yes, I guess my basic question is, if you're using a combination of new notes and the bank facility, is it fair to say that the new notes that you're going to be issuing will not be investment-grade index eligible. Is that correct?

A: No, that's not. We're expecting to issue roughly $100 million to $125 million. That number is to be finalized, but we're expecting that to be investment grade.

Q: But not index eligible, which I believe impacts the rate -- the coupon rate a little bit, doesn't it?

A: Correct. So again, given the quantum and given where rates are, we don't think having a significant -- that large of long-term fixed rate debt in this environment makes sense given, again, the prepayment activity that we experienced and wanting to have the ability to use our revolver to pay down as we have prepays.

Q: And I guess on a related question is where do you see the leverage ratio going? From your -- from Jim's comments, it sort of -- and Sajal's comments, it sort of indicates that the portfolio is going to grow in the fourth quarter.

A: We're actually not expecting -- given the prepayment activity that we're seeing in the fourth quarter, we're expecting little to no growth. Our guidance from a leverage standpoint is 1.3 to 1.4. As you know, Chris, we came in at 1.32. I think we'll come in right about that level at the end of December as well. Our guidance is 1.3 to 1.4