Jim Labe - CEO Harold Zagunis - CFO Sajal Srivastava - President and Chief Investment Officer

Sam Chao - Credit Suisse Joathan Block - Wells Fargo Securities

Good afternoon ladies and gentlemen, and welcome to TriplePoint Venture Growth's Q2 2015 Earnings Conference Call. At this time, all lines have been placed in a listen-only. After the speaker's remarks, there will be a question-and-answer period and instructions will follow at that time. This conference call is being recorded and a replay of the call will be available as an audio webcast on the TriplePoint Venture Growth website. I would now like to turn over to Harold Zagunis, Chief Financial Officer at TriplePoint Venture Growth. Mr. Zagunis please go ahead.

Thank you, Cintel. And thank you everyone for joining us today. We're pleased to share with you our results of the second quarter of 2015. Here with me are Jim Labe, Chief Executive Officer and Chairman of the Board; and Sajal Srivastava, President and Chief Investment Officer. Before I turn the call over to Jim, I would like to direct your attention to the customary Safe Harbor disclosure in our press release regarding forward-looking statements. And remind you that during call, we may make certain statements that relate to future events or the company's future performance or financial condition, which may be considered forward-looking statements under federal securities law. We ask that you refer to our most recent filings with the Securities and Exchange Commission for important factors that could cause actual results to differ materially from these statements. We do not undertake any obligation to update our forward looking statements or projections unless required by law. To obtain copies of our latest SEC filings please visit our Web site at www.tpvg.com. With that, I'll turn it over to Jim.

Thanks Harold and welcome everyone. We had another exceptional quarter which reflects our BDC highly specialized and differentiated approach to venture lending's and the strong market conditions which are out there. As we look ahead given all these factors in our venture lending model we see a very strong finish to the year. This quarter's performance is also a reflections of our efforts to build more than just a great portfolio of TPVG we're building a franchise. I believe we make great progress since our IPO on March 2014. Our playbook building TPVG's franchise is no different in the plan we put together 10 years ago when we started our sponsors TriplePoint capital which quickly became and is a widely recognized leader in the venture lending industry today. TriplePoint will continue to be tunnel focused on our powerful differentiators what we call the four R’s; relationships, reputation, references and return. We continue to develop and maintain relationships with a highly select group of venture capital investors. These include firms associated with some of the biggest tech and life science success of the past several decades. Some of which we work with now almost 30 years. We continue to protect and extend our reputation we see to make every VCN entrepreneur we worked with a reference to work with us again and again. And we strive to generate a growing portfolio with attractive risk adjusted returns. Our BDC is still young we're only year and half old. We are patiently intelligent we making that happen at TPVG. We're building another great franchise within the TriplePoint capital platform, more contribution to being the long term industry leader and innovator. Turning to the Q2 performance our net investment income or NII was 6.3 million, $0.38 per share. We once again exceeded our dividend we recognized some of $800,000 of unrealized gains in the quarter including gains related to IPO of one of our customer, Endochoice. This should translate into realize gains after the lockup period expires and we're able to sell our shares. Our unrealized gains during the quarter added another $0.05 to our earnings bringing our net change in net assets to $0.43 for the quarter. And our NAV hit $14.54 as of June 30. During the first six months of 2015 our NII was 11.2 million or $0.84 per share. So far this year our undistributed net operating income is about $3.5 million or $0.21 per share. To date all of the undistributed income this year has been generated from investment and fee income none of it has been for realized gains. Another impressive highlight for this quarter was our portfolio yields which came in at 17.9%, when including the impact of prepayments. All of these great data points continued to demonstrate the earnings power of the specialized and differentiated venture lending model, which we have at our BDC. Endochoice's IPO represents the second customer that we've no help to get from the red zone to the end zone. We think this is a last 20 yards of financing to the touchstone. This quarter we offload [ph] one customer which previously paid us off, returned for follow on transaction, which I think is another example of this strategic nature of our debt. Subsequent to quarters' end we also had one additional customer Medallia join the so called billion dollar club, which now brings us to total six companies in this club. Also subsequent to quarters' end we completed a very first AV bond offering with the ticker symbol TPVZ, which we upsize due to institutional participation. Such capital is not only more flexible than our revolving credit facility but it also provides fix rate financing which given our 17.9% portfolio yield this past quarter allows us to put it to work in and accretive manner overtime. It also represents another step in our playbook for building our TPVG franchise, diversifying our capital sources and helping enable us to meet the strong demand in our marketplace. We are grateful for this support of our new stakeholders. I'd like to share some market data and also some inside and venture capital from sometime I spent recently with top venture capital firms in Silicon Valley, New York and Boston and in London as well and the accompanying impact, it has in our venture lending market. Financial venture capital association tells us that venture capital firms invested in almost 1,200 deals in the second quarter, representing some $18 billion of deal volume. This was up 32% from the previous quarter, venture capital is on track this year to exceed the 50 billion of investments, we made back in 2014. What's driving this investment activity is not only the quality of these very promising venture capital back companies but also the strong fund raising environment for the venture capital funds themselves. Several of the VC funds I met with confirmed what I had already heard from other funds in the past quarters, that this fresh capital is going to translate into strong investment activity over the next two to four years. That they continue to be focused on the most promising companies whose experienced entrepreneurs and that they are aware of, but not fazed by macro-economic factors, such as the issues in Greece or how the Chinese stock market is trading, they're excited buying continued actively evaluate opportunities today in software, cloud, internet security, e-commerce, storage, virtual reality, mobile medical, digital currency and that's just a name of few of the industries and they're investing in promising companies across all these sectors. The venture lending market complements this centric capital markets, so what's a strong centric capital fund raising and investment environment means for us translate into strong future demand for our venture lending. Not only for the companies looking for debt financing, now, but also in the future as either new venture capital backed company's get funded or existing companies grow up and need more capital. Given our long experience over several cycles, it's our assessment these indicators continued to be strong and positive. Our venture capital investors nevertheless continue to be very thoughtful and selective in this market and we continue to acquire time tested highly selected approach which includes balancing risk and return parameters. Take my word for it, we're not out there chasing volume, we're not chasing deals, nor are we doing things that are inconsistent with our reputation or impeccable track record. I've been in this business for more than 30 years and this August marked 16th year that Sajal and I have been working together. As we look ahead, we continue to be excited by the market demand, our large pipeline, our growth potential, our strong liquidity and the continued support and deal flow from our select venture capital investors. We intend to continue to capitalizing this demand, but I can’t stress enough again that we're not in a rush to deploy our capital simply for the sake of growing. We have our playbook and are being careful in our approach like we've always been in the past, which now expands almost 30 years of venture lending. The good news for our stakeholder is that our yield profile is high, our portfolio quality is solid and we've demonstrated the strong steady state return profile of the business. As I said, we expect to end the second half of this year with a strong finish and are making progress deploying our fresh capital. We also expect to cover our full year's dividend at the current level from our year-end earnings. On top of that, we believe warrant and equity gains are on their way. With that it's a backdrop, let me now turn the call over to Sajal who will provide us with more details about the investment activity and portfolio composition.

Thank you, Jim and good afternoon everyone. We continue to see strong demand for venture growth stage lending with 62 million of signed term sheets in Q2 another 42.5 million signed so far in Q3 and the pipeline continues to grow. After we received the proceeds from our follow-on equity offering at the beginning of Q2 we began adding new commitments to TPVG with 57.5 million entered into Q2 along with 50 million of new commitments so far in Q3. During Q2 we funded investments for 7.5 million in two companies, made 500,000 equity investment in one company and acquired warrants valued at 600,000 in five companies. Our total weighted average portfolio yield excluding prepayments was 14.3% and has been greater than 14% for every single quarter since our IPO. During the quarter three of our customer prepaid there outstanding loans totaling 47 million which brought our total weighted average portfolio yield to 17.9%. So far in Q3 we have funded another 10 million of investment and have visibility on more. At quarter's end our unfunded commitments totaled 147.5 million to eight companies of which 17 million is depended on the company's reaching certain milestones before the debt commitments becomes available to them. 35 million will expire during 2015 and 112 million will expire during 2016 if not drawn prior to exploration. As of today our unfunded commitments total 177.5 million to 8 companies. Since these commitments may expire without being drawn upon unfunded commitments do not necessarily represents future cash requirement or future earnings assets for the company. Overtime we expect generally about 75% of our gross unfunded commitments to eventually be drawn. Moving on to credit quality as of June 30 the weighted average internal credit rating of the debt investment portfolio was 2.01, up from 2.06 at the end of the prior quarter. As a reminder under our system loans are rated from 1 to 5 with 1 being the strongest credit rating and all new loans initially rated 2. During the quarter three category two rated customers paid us off, we funded loans to two obligors which we rated 2 and we added intermodal to category four when it acquire the assets of core-aid [ph] and enter in to a loan with us for the full outstanding principle balances including the end of term payments and accrued fees. This an upgrade from where we rated core-aid in Q1. Regarding other key performance indicators of our portfolio as of June 30 the weighted loan to enterprise value at the time of origination for our portfolio excluding intermodal with approximately 8%. Approximately 21% of our total debt portfolio consisted of floating rate loans and approximately 27% of our debt investments consisted of growth capital loans where the borrower has a term loan from a bank in priority to our senior lien. Both represents slight uptick from Q1 given the significant amount of prepay activity in Q2. We had five customers close follow on equity rounds in Q2. While not all of our customers need additional equity capital we generally view our customers doing so as a positive indicator as it typically improves our financial profile and their ability to service our debt. We expected to exit and liquidity events within the portfolio start in the second half of this year and we were pleased to see Endochoice’s successful IPO which closed in Q2. As Harold will discuss shortly Endochoice IPO and the follow on equity rounds I previously mentioned led to an unrealized gain on our warrants and equity during the quarter. We still expect additional exit events including prepays in the second half of the year. On the strategic development front we submitted our pre-screen summary to the SPA and have a favorable discussion with them two weeks ago. We are actively working on our SPIC application and expect to have it submitted around the end of the quarter. On June 26 we submitted our exempted relief application to the SEC which if granted will enable TPVG to co-invest with other vehicles on the TriplePoint capital platform. On July 30 we successfully completed our first AV bond offering which is part of our plan for levering the business after a recent equity raise and for building a track record for potential credit ratings and securitizations down the road. We continue to get interest for participation in our revolving credit facility and we'll explore a potential increase in conjunction with renewing the facility in late Q4, early Q1. Before I turn the call over to Harold I thought it will helpful to talk a little bit about our outlook for portfolio growth and unfunded commitments. As a reminder given our externally managed structure as part of the TriplePoint capital global platform our sponsor TriplePoint capital is always in the market originating proprietary deal flow from our select venture capital investors for investment opportunities across all stages of venture back company's life span. TPVG serves as our sponsor's primary vehicle for allocating venture growth stage transactions. However during period when TPVG is unable to enter into new commitments our sponsors is able to allocate new commitments to its other funding vehicle which enables it to continuously originate venture growth stage deal flow and be a constant source of capital to venture growth Stage Company seeking debt. This gives TPVGs significant flexibility to run its business so that we don’t have to raise capital below NAV. Think of it like the water facet where we essentially started turning the [indiscernible] off for new commitments in late Q4 as we approached the high end of our target leverage ratio and then turned it back on after receiving the proceedings from our follow on equity offering in Q2. This does however create an element of lumpiness as it takes time for new signed term sheets to turn into closed new commitments and for new commitments to turn into fundings. Our unfunded commitments help smooth this lumpiness out. However, fundings were light in Q2 but they’re not reflective of our expectations for fundings of portfolio growth on a go forward basis. We expect to return to higher funding rate soon and expect to deploy our recently raised capital over the next four to six months. Fundings in Q3 are at 10 million so far and we have visibility on more towards the quarters in. I also wanted to point out that unfunded commitments are nothing new to the venture lending industry unless middle market companies which typically use equity and debt to finance their acquisitions, our venture back customers raise equity from VCs and debt from us to fund the development of technology and products and then grow and expand their businesses and get to the end zone. We typically enter into our debt commitments shortly after an equity round where VC is invested and this is an important credit factor for us. It shows strong and fresh support by the Company’s investors and helps deepen the equity cushion below our debt. We believe unfunded commitments provide our stakeholders insight and visibility into our backlog and investing activities. They show that we are actively engaged in the marketplace, structuring quality deals with quality companies, which we expect to translate into funded assets, three to 12 months from when we enter into them. We think that magnitude of our unfunded commitments reflects the strength of the originations platform of our sponsor and how well our four R’s approach is working. High quality companies backed by great VCs want to work with us. Having said all this, the SEC rulebook for the BDC industry with regards to unfunded commitments is still a work in progress. But let me be very clear, regardless of where the SEC ultimately comes out, we are fully compliant with all current guidance from the SEC staff on unfunded commitments for the BDC industry including the treatment of milestone based unfunded commitments and senior secured. Our compliance with this guidance was reflected by the SEC declaring our recent shelf registration statement effective, which allow that to successfully complete our Baby Bond offerings. While we are in active discussions with the SEC to provide our perspective as they look to finalize the rulebook we are also being proactive in our efforts on unfunded commitments. We continue to be thoughtful about structuring our deals in particular with regards to the magnitude of new commitments and the time period for which they are available while balancing the likelihood of a customer drawing out. We are working on ways with our customers to structure our deals with our lifespan financing approach to support their continued growth while managing the impact of a large unfunded commitment. We are also regularly reviewing our unfunded commitments with our existing customers to determine the time of draw and in certain cases may work with our customers to reduce commitments to the extent they don’t plan on drawing. We also expect to benefit from the flexibility of our exempted relief application, if approved because it will enable TPVG to co-invest with our sponsor and its current and future vehicles. We are already seeing the benefit of our plan with three recent transactions funding all or a portion of the commitment at close. Rest assure, we will continue to place the highest priority on working with great VCs and great companies as our track record shows that great things happen when you do. I know this is a long discussion but something we felt important to cover. With that I’ll turn the call over to Harold to review the financial highlights for the second quarter and give you an overview of our financial position.

Thank you, Sajal. For the second quarter, our total investment and other income was $11.6 million representing the weighted average portfolio yield of 17.9% on our investment for the period held. Of the 17.9% yield, 10.6% was from cash coupon payments, 6:10s of a percent was from the original issue discount of upfront facility fees and warrants, 3.1% was from the accretion of end of term payments, and 3.6 was from the impact of prepayment. Excluding the impact of prepayment, the weighted average portfolio yield for the quarter was 14.3%, generally consistent with that of previous quarters. Our expenses this quarter were $5.3 million compared to $4.9 million in the prior quarter. Our base management fee was $1.4 million, our income incentive fee and capital gain incentive fee totaled $1.6 million, our debt expenses were $1.2 million and our administrative and general expenses were $1.1 million. For the second quarter, we recorded net investment income and core investment income of approximately $6.3 million or $0.38 per share. I would like to remind you that core net investment income is a non-GAAP financial measure. We believe core net investment income is an important measure of the investment income that we will be required to distribute each year since capital gains incentive fees are accrued based on unrealized gains, but are not earned until realized gains accrued. For a reconciliation of core net investment income to net investment income, please see the press release, we issued this afternoon. Keep in mind, these per share numbers reflect the impact of a higher weighted share count than in previous quarters due to the equity offering at the end of March. This quarter we had net unrealized gains in our investment of $0.8 million or $0.05 per share. Net unrealized gains were primarily due to changes in fair value on our warrant and equity investments from five portfolio companies closing equity rounds and EndoChoice going public. We exercise our warrants in EndoChoice in the second quarter and now have an equity investment in EndoChoice in the former of common stock. Our net increase and net assets resulting from operations for the second quarter was $7 million or $0.43 per share, reflecting the $0.05 of net unrealized gains and $0.38 of net investment income. On an annualized return basis our net increase in net assets this quarter represented an 11.8% return on our average net assets and both out net investment income and our core net investment income represented a 10.5% return on average net assets. I'll remind you again that core net investment income is a non-GAAP measurement and is provided in addition to but not as a substitution for net investment income. As of June 30, we had 70 investments in 28 companies. Our investments included 38 debt investments, 25 warrant investments and 7 direct equity investments. The total cost and fair value of these investments were approximately $207.9 million and $208.3 million respectively. At the end of the second quarter, the company's net assets were approximately $242 million or $14.54 per share compared to approximately $238 million or $14.48 per share as of March 31, The increase in net assets in the second quarter was a result of net increasing assets exceeding our dividend. At June 30, our total cash position was $97.4 million, which included the proceeds from prepayments that occurred on the last day of period. At the end of the quarter, we had $61 million of debt against our credit facility, a 0.25 times leverage which was consistent with our average leverage throughout the quarter. On July 30, we priced our Baby Bond offering raising $48.3 million after underwriting fees in operating cost. The notes [ph] has a five year term with a two year non-comp provision and a fix 6.75% interest rate. We used the proceeds to pay down our revolving credit facility and we’ll draw back on that facility as refund investments. Our dividend distributions are based on earnings generated over the year, through the first six months of 2015 we generated net investment income of over $11.2 million or $0.84 per share. Our net increase and net assets for the first six months totaled nearly $9.8 million or $0.73 per share. As in 2014, when we paid out a special dividend and had a still over based on our earnings and not any capital gains distribution. We continue to cover our dividends with our ordinary income. In fact, through June 30, we estimate we've earned $3.5 million or $0.21 per share, more in taxable income than we've distributed. As Jim and Sajal mentioned, we anticipate a strong finish to the year. We are making progress, deploying our fresh capital and expect to cover our four years dividend at the current level from our earnings. For the third quarter of 2015, our Board of directors declared a dividend of $0.36 per share, payable on September 16th to stockholders of record as of August 31. Now, I'll turn the call back over to Jim.

Thanks again Harold. At this point, we'll be happy to take your questions. Operator, could you please open up the line?

[Operator Instructions] Our first question is come from Douglas Harter with Credit Suisse. Your line is now open.

Hi, this is actually Sam Chao filling in for Doug Harter. Just wanted to go back to the prepays, I mean you guys had a higher prepay level, I was just wondering, how we should think about the trends, I mean you guys did kind of cover this in the prepared remarks, but what you've been seeing post 2Q been kind of consistent with what you expect during the second half of the year?

This is Sajal, I’ll answer your questions. So, there is no overall trend with regards to prepays. I think, consistent with the guidance that we said earlier in the year and we expected prepay to start with typically one a quarter and so as we looked at the rest of the year, we still expect that guidance.

Got it. And then my second question was -- I know, you guys are focused on disciplined growth, given the discount to NAV you guys are currently trading at, is there a point where you guys might actually consider a share buyback?

So, I think, we’ll first look at the market conditions and so we've looked at strong conditions in the venture capital market, we look at the strong demand for debt and we look -- we see a strong demand for -- strong backlog have unfunded commitments, we see strong portfolio yield with 17.9% this quarter. So, I think -- and we know that again we see strong demand for the rest of the year. So, I think at this point we see the opportunity to -- in a controlled fashion deploy the capital in a timely way and generate great returns. If we didn’t see that then we would definitely consider. But I think it's again premature at this time and again we're building a franchise and we see quality deal flow and we think this is again one step along the way of building a great business.

The next question comes from Jonathan Block with Wells Fargo Securities. Your line is open.

Starting first perhaps with a view, not just on earnings per say, but on stable earnings growth that generated through leverage. Sajal you mentioned that it is your intension to continue to grow the portfolio which we would expect. But there is a choice right, one could grow the portfolio utilizing leverage or what we see -- is the term note issuance or the retail bond issuance which comes at a heavy price at times at the expense of profitability on a going forward basis. So trying to understand what the reason for that issuance really was right. The system that buy that are always happy to do issuance at any time and so why jeopardize or lower profitability now before we’re above book value because it just creates a greater divide for you pick up at higher interest cost.

It's a great question, happy to answer. So I think we'll start off with by saying just as we looked as a result of the capital raise and the equity base, our historic track record of having our targeted leverage ratio between 0.6 and 0.8. So I think the first benefit is this allows us to get back to that target leverage ratio given the size of our existing credit facilities of 200 million. We look at the fact that there is been talk about interest rate going up and down we're actually expecting -- everyone is expecting to see them. And so the timing to lock in fixed rate capital make sense to do that now. Again we also look to the strong demand for debt in our business and in our marketplace and our ability to deploy the capital quickly and to generate fantastic return again 14% without prepayment for every single quarter since the IPO is another benefit. We also look to our ability to diversify our capital sources in particular as we prepare for renewal on our warehouse facility towards the end of the year. So those are all important factors and I think we also look at the fact as we look at the SPIC and our ability to have the capital to contribute to it when that process moves forward. And the fact that you can't necessarily time when markets are open and so we felt again in the grand scheme of building a franchise we felt the market conditions were appropriate.

Okay understand and in particular comments related to the SBIC. So perhaps maybe one additional enhancement as it relates to the retail note issuance. Give us a sense -- you mentioned that you are currently in compliance as a result of your shells [ph] being effective. That’s a point in time what we're trying to understand is where does this rule book kind of really settle is it asset coverage or is it liquidity to cover unfunded commitment. And if it's liquidity to cover unfunded commitments -- we notice un-fund commitments continuing to grow, now those do term into funding. But we're trying to see how you feel on managing the business when we see one venture lender lowering unfunded commitment, yet here they continue to expand. So how investors understand the difference in approach and perhaps may something I and everybody else is missing.

Sure I'll answer first then Harold and Jim please. So I would take first our unfunded commitments have gone down. So you look quarter over quarter and so I think managing unfunded commitments is important and as we said it’s something we're being particularly proactive about we're not saying that we're looking to grow unfunded commitments and to expand them beyond the current level. Again I think it's an important nuance that we include both milestone base and non-milestone base unfunded commitments because that’s the guidance from the SEC. So from our perspective I think it's still a working progress with regards to SEC, with regards to where they come out finally in the final rule book. But I think to your point, I think they are focusing on both comments or both items, both the asset coverage and on ensuring people have liquidity or match liquidity at the time that they file registration statement.

I think the operational work here on from the whole subject is, this is a working progress. It’s dynamic, there is a lot of noise out there. This is something that just corrupt the last few months and we're not going to run the business based in a certain thing that just is a dynamic moving target here, we’re going to run it for the long term and the better venture back deals and their needs.

But again we are encouraging or we are structuring our deals with either smaller upfront commitments or requiring fundings that close. So again we’re being very cognizant of wanting to increase fundings and not necessarily have a greater than what we have backlog of unfunded commitments.

And then just as we step forward, you mentioned that you’re planning on having the NAC effectively spilled out or with the former application being submitted for a green light letter by the end of this quarter. I am just curious so I mean so would it be your intention -- normally this isn’t something that you kind of prefund -- would it be your intention to try to leverage before that and then access capital or I think you did mentioned that you accessed liquidity to fund a potential $37.5 million for un-eventual SBIC license, getting it started and build. What’s the game plan there now that you’ve met and had discussions with folks at the SPA?

So I think that we can’t control the process with the SPA and so I think to the extent that it moves in aggressive time frame then we will definitely use the capital that we’ve raised and we’re encouraged by at least the time guides that they’ve given us. But we also see strong market conditions, two great company, we had some great names that we added to the portfolio this particularly in the pipeline of yielding assets and more in equity gains is strong. So at the same time we also want to use that capital to generate fantastic returns to the investors as well. So, I think whichever comes first we’d like to use our proceeds intelligently that way but we think both are -- we were encouraged by the outlook for both.

And then just last question, just because equity capital issuance is extremely important to many investors and while it is absolutely clear that when you making loans at rates at which you’re making them, then good things can happen. From an NOI perspective as those funding get on balance sheet. The question investors would have and are likely to going to pose to you over the next several months is, is it your intention to raise equity capital in the event that you are below your target leverage and your perspective on over-equitization of the balance sheet today? Let’s assume that fundings don’t occur, guidance on equity capital issuance before deployment would be helpful and thank you for taking my questions.

So as you know, we don’t have shareholder approval to raise equity below that. And so our long term goal is to, like we did before, prove the business model. We raised equity recently and the Baby Bond so we will put that capital to work and get back to our target level of leverage between 0.6 and 0.8 and then we’ll see, we’ll take some opportunities to look at what our options are at that point.

And also to add on top of that again, we’ve heard the feedback too from investors and our perspective as well is, we believe we deserve to trade at a great premium and so we recognize not pulling the trigger the second you trade in the band where you need to and so that’s important to us. We believe we should trade at a significantly higher premium and we have the patience to make that happen.

[Operator Instructions] That concludes this afternoon’s question-and-answer session. I will now turn the call back over to Jim Labe for some concluding remarks.

Thanks operator. I’ll close again by saying and expressing my appreciation to all of you for your continued interest and support in TriplePoint Venture Growth BDC Corp. We will continue to build our franchise and portfolio and remain disciplined and focused on what matters most to us, which again is what we call the four R’s; reputation, relationships, references, and of course returns. Thanks again and we’ll speak with you soon.

That concludes today’s call. You may now disconnect.