Good afternoon ladies and gentlemen. Welcome to the TriplePoint Venture Growth BDC Corp. Second Quarter 2023 Earnings Conference Call. [Operator Instructions] This conference is being recorded and a replay of the call will be available and the audio webcast on the TriplePoint Venture Growth website. Company management is pleased to share with you that the company's results for the second quarter of 2023. Today, representing the company is Jim Labe, Chief Executive Officer and Chairman of the Board; Sajal Srivastava, President and Chief Investment Officer; and Chris Mathieu, Chief Financial Officer. 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 and remind 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. 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 the latest SEC filings, please visit the company's website at www.tpvg.com. Now, I'd like to turn the conference over to Mr. Labe.

Good afternoon, everyone and welcome to TPVG's second quarter earnings call. I'll start by talking about the venture market. The data speaks for itself. As the National Venture Capital Association PitchBook data shows in the first half of 2023, the venture capital ecosystem has struggled to adapt to market dynamics that we haven't seen in years. PitchBook further states that this shift in the landscape has impacted all the sectors in all the stages of the venture ecosystem. They're all well below the high watermark set in the past 2 years. Deal value, it's down 46%, exit values, 77% and fundraising is down 73%. That's all over the first half of 2023 compared to last year. Investment activity by the venture funds into private companies continues to be really volatile. During this period, evaluation resets that we've been talking about in these calls, investors have pulled back on the amount of capital they're deploying, primarily driven by the uncertainty in the broader economy and financial markets. We believe the continued disconnects out there between public market multiples and valuations and private market valuations, combined with the lack of IPO and M&A exits these days and the withdrawal of the nontraditional growth investors has made it very difficult for many later in growth stage companies to raise capital. As we've been discussing during these past several quarters and we'll get into further, venture lending has been impacted by these conditions as well, most notably by this reduced level of equity investing. Leveraging the power of the TriplePoint Capital platform and in our experience gained over the past 18 years, our focus in the second quarter and year-to-date continues to be 3 priorities that we believe will enable us to navigate through the current market and position TPVG to benefit as conditions…

Thank you, Jim and good afternoon, everyone. During the second quarter, TriplePoint Capital, our global investment platform and the adviser to TPVG, signed $114 million of term sheets with venture growth stage companies compared to $199 million of term sheets in Q1 which reflects our approach to originations across our platform in light of current market conditions. Given our continued focus on TPVG's overall leverage position, during the quarter, we allocated $18 million of new commitments with 4 companies to TPVG including 1 new portfolio company, Tempus Ex Machina, a company backed by Andreessen Horowitz, Silver Lake and others which provides analytics and data sets from sporting events using AI and machine learning. During the second quarter, TPVG funded $30.6 million in debt investments to 8 portfolio companies which is at the lower end of our guided range for the quarter. These investments carried a weighted average annualized portfolio yield of 16.4% at origination. Of the $30.6 million funded during the quarter, $17.1 million was related to existing unfunded commitments and the remaining $13.5 million was from new commitments made during the quarter. As Chris will cover in more detail, our unfunded commitments are at $180 million as of today, with $63 million set to expire this quarter and another $32 million by year-end. Similar to our experience during the pandemic, we continue to see lower-than-expected utilization of existing unfunded commitments prior to their expiration and are projecting fundings for both Q3 and Q4 to be in the $25 million to $50 million range per quarter. We also expect loan prepay and contractual amortization activity from the existing portfolio to potentially match or exceed fundings in Q3, similar to our experience in Q2. During Q2, our $34 million of loan prepayments helped increase our weighted average annualized portfolio yield on…

Thank you, Sajal and hello, everyone. During the second quarter, the earnings power of the portfolio remained strong as we generated substantial core interest income from our loan portfolio and stable portfolio yields, while TPVG continued to hold a diversified portfolio. As we entered the second half of the year, we believe our current liquidity position and unfunded commitments are well matched and combined with contractual cash flows from our existing, seasoned and diversified portfolio positions us well into 2024. Given our outlook on long-term liquidity, we expect to reduce overall leverage ratios and capitalize on new investment opportunities in 2024. Total investment income was $35.2 million as compared to $27.4 million for the second quarter of '22. This increase of 28% was due to growth in the average portfolio size and higher investment yields. Our portfolio yield was 14.7% on total debt investments this quarter as compared to 14.5% for the second quarter of '22. Excluding prepayment-related income, portfolio yield was 14.1% which was down from 14.7% in Q1, primarily due to lower deferred fees associated with unfunded commitments which expired during Q2 compared to Q1. Onboarding yields continue to be strong and stable. Loan prepayments contributed less than 1% of the total portfolio yield this quarter with a total of $33.8 million of principal prepayments and $1.4 million of accelerated income. Operating expenses were $16.3 million as compared to $14.8 million for the second quarter of '22. These expenses consisted of $9.9 million of interest expense, $4.5 million of management fees and $1.9 million of G&A expenses. Due to the shareholder-friendly terms of the total return requirement under the incentive fee structure, our incentive fee expense was reduced by $3.8 million during the second quarter and $7.5 million for the 6 months ended June 30. We earned net…

[Operator Instructions] Our first question will come from Crispin Love with Piper Sandler.

Did you say that you expect third quarter and fourth quarter new debt fundings to be in the range of $25 million to $50 million per quarter. And if that was the case, was the previous guide there, $100 million to $150 million per quarter?

Crispin, it's Sajal. The previous guidance was $25 million to $75 million. That's the guidance we gave last quarter. And so given that we're just focused on utilizing the existing unfunded commitments and given the market environment, we're taking the target to $25 million to $50 million.

Okay, that's helpful. And then just on leverage, at 1.67x right now, I'm curious what the reasons are for maintaining that leverage through the end of the year rather than bringing it down through an equity raise as it's much higher than where you typically run at. I think you've said in the past that kind of would typically run, I think it was 1.25x or less or 1.4x or less. So, curious about the reasoning there.

Yes. This is Chris. So certainly, raising equity is an option. We have the ATM program that we can use currently. It's a much smaller program, obviously. We do have the option. We have our active shelf to do an overnight offering, if that made sense. But right now, what we're focused on is what we can control which is deployment of capital and managing the portfolio. But certainly, an overnight equity offering is something that is open to companies that are listed.

Next question will come from Vilas Abraham with UBS.

With the decline in NAV and the jump in leverage, are you pushing up against any covenant issues with the revolver? Or just how should we think about that?

That's a good question. This is Chris. We look at that on a regular basis, not just at quarter end but throughout the quarter and we're comfortable with where we are on existing covenants, whether it's on the term debt or on the revolvers, we're fine.

Okay. And you talked about in the prepared comments, 14 companies portfolio raising capital year-to-date. Is it fair to assume those are largely all down around still?

Vilas, this is Sajal. So I would say the majority are flat to down, although there are some that were up. I would say the majority tend to be from existing investors with, again, a few that were led by new external investors.

Okay. And maybe last one. You touched on taking advantage of opportunities after the SCB collapse. Can you talk about what that means, what's the time frame there? And from a personnel perspective, do you feel like you're well positioned to take advantage or do you need to add head count in certain areas?

It's a great question, Vilas. So as we mentioned last time as well, there's some very good opportunities in light of the SCB development but these are not overnight situations. They're a little bit over the long term. So in the short term, what this means is these are opportunities. I talked about this last time as well, where banks are -- the separation between banks for bank, bank services, credit cards, foreign exchange, things they do and lending that the market is a little bit more separated and lending now doesn't mean from a commercial bank, it can absolutely mean from a nonbank and that's become more important than ever since the days of SCB. So we actively are talking at the platform level and have instances where we've replaced SCB loans, ones where we're currently evaluating these and also ones as we play out the rest of the pipeline this year and next year that will continue to be growing opportunities. But it's not like these companies replaced SCB in a day or overnight. And to address this, yes, we absolutely have been and continue to staff up for what we see improvement in the markets overall but also in wake of the SCB development.

The next question will come from Casey Alexander with Compass Point.

I'm curious why you would carry $78 million in cash and not use some portion of that cash to pay down the revolving credit facility and report a lower leverage ratio. I mean it seems to me that if you took $40 million of that, it would bring the leverage ratio down to 1.56, still not within your range but maybe a little less eye-popping. Is there a technical reason why you're not doing that?

Yes Casey, thanks. This is Chris. So yes, we're more about managing cash to make sure we have the liquidity for funding transactions. And oftentimes, you'll see from month to month or quarter end, we'll have higher cash balances in readiness to fund new transactions that occur kind of within a 5-day notice window. That's all that is. Rather than paying down for optics, we wanted to make sure we were ready to fund transactions.

Okay. Secondly, I think you mentioned that 10 companies had raised $300-some million. Growth-stage companies, late-stage growth companies need a lot more than $30 million and that would be the average of what you mentioned. I mean, so is it -- is what you're seeing sort of stopgap equity deals to kick the can down the road because these don't sound like the type of funding that's going to last 2 or 3 years?

I'll take that, Casey. This is Sajal. So I would say, keep in mind -- so I'd say the -- what's changed, right, a year ago or 2 years ago, right, as you said, right, companies would raise equity rounds every 3 to 6 months versus the more average of 12 to 18 months. And so I would say the other key thing is companies have been bringing their burn rates down. So I would say it's a hybrid between raising what they need to have sufficient runway in anticipation of either times getting better or market conditions getting better. For a number of others, it's on the path to get to profitability. For some others, it's to milestones that investors have agreed to that then unlock future tranches of capital. So I'd say it's a combination of all those scenarios. But also given where valuations are, no one is motivated necessarily where multiples are to over raise equity in this environment given the debt dilution impact.

Lastly, one of the companies that you mentioned that was in the [indiscernible] category, it sounded like you were saying Luko. I can't find that in the schedule of investments. What am I doing wrong?

Yes. Sorry, it's called Demain, D-E-M-A-I-N, Demain. Luko is their...

D-E-M-A-I-N. Sounds like domain?

Demain, correct.

Next question will come from Ryan Lynch with KBW.

Just following up on one of Casey's questions regarding the cash balance. I guess I'm still not understanding why the cash balance is that high. I mean I think you mentioned you expect fundings in the third quarter of $25 million to $50 million. You also expect to receive some prepayments to probably offset that. So I just want to understand what's the need to have $90 million of cash if you're only expecting to fund $25 million to $50 million in the quarter plus...

Yes, Ryan, maybe just to add on to what Chris said. So again, part of it is in anticipation of liquidity. I think the other point is we collect cash at the end of the month. So that's also cash coming in from portfolio company payments. And so again, it's a little bit of -- you've got -- you have cash ready for fundings, you collect cash from the monthly payments from customers. And then obviously, correct post, now we pay down our lines, post end of month or end of quarter after the cash frees up. And so again, it's a fund timing thing more than anything as the primary reason.

Yes. A good example is we did pay down the line just recently, $65 million. So we don't keep that outstanding all the time. It's a revolver where we can draw and pay back.

Yes, understood. And then the other one, I just wanted to make sure I was kind of understanding the dynamics going on here. So I think you said you expect leverage to sort of remain the same throughout 2023 and then deleverage -- start to deleverage in 2024. I know that's not assuming any sort of like capital raise or anything like that. But I guess, to the extent that leverage stays flat and then decreases throughout 2023 and then decreases in 2024, is that just the function of the interplay between the level of funding you expect from existing borrowers to sort of decline as we roll into 2024 and some of those unfunded commitments roll off? Is that kind of the interplay that's going to drive your expectations right there?

That's exactly right. So what we're basically doing is looking at the unfunded commitment levels going from the $200 million down to $180 million and looking at the expected fundings of those unfunded commitments. And then also layering in some level of the unknown which is the prepayment factor. So we do have some line of sight on Q3 prepayments but we just don't have that information for Q4. So we do expect some level of prepay which would help towards that deleveraging. But right now, it's just too early to tell.

Next question will come from Christopher Nolan with Ladenburg Thalmann.

Given the status of the -- or the slowdown in the venture debt market, who do you expect to take you out on these maturing investments?

Chris, again, on a number of our investments that are amortizing. So it's not a bullet-type structure on other transactions where there -- we generally see equity capital. So when robust equity comes back, we'd look to equity. And then the nonbank lenders in venture lending continue to evaluate opportunities. And so I'd say it's a function of all 3, prepays -- sorry, equity raises, from amortization, normal amortization and then it's a smaller amount is refi. Refis have always generally been a small percentage of our business.

And then I guess as a more general question, I mean, the slowdown in the venture debt market, I mean, obviously, SCB went away but were major funds really hobbled by SCB seizure and that just sort of has thrown a wrench into the works?

Yes. I would say from a venture capital fund perspective, there's really not been any change. They've all recovered from their own issues with SCB and their own banking things at the fund level. In terms of their underlying companies, there's definitely been the transition in many cases from SCB to other banks. But what venture lenders are benefiting from, again, is the fact that newer banks aren't necessarily in the market these days to go out and lend to these companies. They're very fine -- they're fine preventing -- providing the banking services. For the lending requirements, this has been new opportunities to turn to nonbanks and recognize the value and importance of them on the lending side. So if you will, there's room for both and opportunities for both. But these are things that are taking some time. There's a little pause when you change banks. We also want to continue to be cautious and selective in this environment. But definitely, that's one of many parts of the future opportunities here for nonbank.

Appears there are no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Jim Labe for any closing remarks.

Thank you, operator. As always, I'd like to thank everyone for listening and participating in today's call. We look forward to talking with you all again next quarter. Thanks again and have a nice day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.