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Edited Transcript of TPVG.N earnings conference call or presentation 5-Nov-20 10:00pm GMT

·35 min read

Q3 2020 Triplepoint Venture Growth BDC Corp Earnings Call Menlo Park Nov 7, 2020 (Thomson StreetEvents) -- Edited Transcript of Triplepoint Venture Growth BDC Corp earnings conference call or presentation Thursday, November 5, 2020 at 10:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Christopher M. Mathieu TriplePoint Venture Growth BDC Corp. - CFO * James P. Labe TriplePoint Venture Growth BDC Corp. - Chairman & CEO * Sajal K. Srivastava TriplePoint Venture Growth BDC Corp. - President, CIO, Secretary, Treasurer & Director ================================================================================ Conference Call Participants ================================================================================ * Christopher Whitbread Patrick Nolan Ladenburg Thalmann & Co. Inc., Research Division - EVP of Equity Research * Finian Patrick O'Shea Wells Fargo Securities, LLC, Research Division - VP and Senior Equity Analyst * Kevin Fultz JMP Securities LLC, Research Division - Analyst * Ryan Patrick Lynch Keefe, Bruyette, & Woods, Inc., Research Division - MD ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good afternoon, ladies and gentlemen, and welcome to the TriplePoint Venture Growth BDC Third Quarter 2020 Earnings Conference Call. (Operator Instructions) This conference call is being recorded and a replay of the call will be available in an audio webcast on the TriplePoint Venture Growth BDC website. Company management is pleased to share with you the company's results for the third quarter 2020. 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 would like to direct your attention to the customary safe harbor disclosure in the company's release regarding forward-looking statements and remind you that during this call, management will make certain statements that relates to future events or the company's future performance or financial conditions, which are considered forward-looking statements under federal securities laws. 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 do 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 would like to turn the call over to Mr. Labe. -------------------------------------------------------------------------------- James P. Labe, TriplePoint Venture Growth BDC Corp. - Chairman & CEO [2] -------------------------------------------------------------------------------- Thank you, operator, and good afternoon, everyone. We hope that our shareholders and their families are healthy and are staying that way during this pandemic. Our priority is protecting the health of our employees, and together with our venture capital partners and entrepreneurs, supporting our portfolio companies during this uncertain time. We're now 8 months into the pandemic, and our adviser continues to operate and conduct business remotely to source and close transactions. In this environment, our portfolio companies have all adapted COVID-adjusted plans, and a number are outperforming these plans and more than 86% of our portfolio companies have also raised capital here in 2020. After the initial pause earlier in the year, new deals are getting done in our venture capital markets and these investments as well as our new originations are in sectors that are geared for success in the COVID environment. So with this pandemic as a backdrop, we remain cautious but are experiencing the signs of continued growth, not only through the doubling of signed term sheets and 5x the amount of customer fundings this past quarter versus the previous quarter, but also with the growth activity well underway here in the fourth quarter. We believe this positive trend will continue in our business and serve as a basis for meaningful growth in 2021. This is due to several reasons. The first is our focus on technology. We are living in a different world and one of uneven consequences. The technology sector is one of the more sustainable parts of the economy today and is in an area for investment for the foreseeable future. TriplePoint will continue to benefit from this trend as we provide loans and invest primarily in technology-driven companies and sectors, many of them experiencing tailwinds and stand to benefit in this environment. Many of our portfolio companies operate in the virtual and digital technology world today, and TPVG is well positioned to take advantage of this ecosystem as new venture capital investments remain focused in it. Another trend that favors our continued growth in 2021 is venture capital investment and fundraising activity. The venture capital investment pace at later-stage companies, typically the venture growth stage companies that we target for our loans, continues to be brisk and is on track to be at least equal to or even exceeding last year, which in itself was a record. In fact, the venture capital mega deal count alone is projected to set a record in 2020 according to the NVCA, National Venture Capital Association for those not familiar with it. All these factors translate into increased new business opportunities for TPVG right through the end of this year and into 2021. Our select group of leading vendor capital investors and the funds with whom we have had these long-standing profitable relationships have also raised more than $50 billion since 2018, of which $35 million of that alone was raised last year and this year to date, including several of our select funds, which closed new multibillion-dollar funds here in 2020. Believe me, this provides plenty of dry powder to support our existing portfolio companies as well as for all this new and growing investment activity. Another trend that we're benefiting from in this environment is the continued liquidity and fundraising by companies as well as the exit activity that everyone is seeing out there with venture capital-backed technology companies this year. We're seeing this not only within our own portfolio companies, but within the broader venture ecosystem as well, further validating the needs of these companies for venture lending. This activity continues to be robust this year and includes everything from the emergence of the SPACs to multibillion-dollar acquisition exits. Increased opportunities for venture lending in today's environment also includes providing financing for many of the companies out there that are actively considering opportunistic acquisitions in the COVID era. Companies which are also planning for growth, using both equity and debt as part of their additional runway and financing strategy plans, and companies supplementing their equity raises among many other uses. It's also a nice pickup that we're experiencing from companies, which are outperforming their earlier COVID shell plans, as I think of them. Instead of following these shell plans, which might have called for rounds of further layoffs today or further reductions in burn or marketing, a number of these companies are beginning to hire again and are increasing their burn rate to support growth well beyond these initial shell plan expectations, all of which obviously creates additional opportunities for us to support their growth. While we're pleased with the portfolio's health and our progress, please don't misunderstand, we also remain cautious during these uncertain times and are mindful of COVID's potential impact. Most of our portfolio companies have adapted to this environment, but we are closely monitoring the portfolio for any challenges that may arise. Fortunately, we have the right team to manage our portfolio and maintain its stability. Turning to the quarter and to sum up our solid performance for this past quarter, we over earned our distribution to shareholders. We decreased our leverage. We increased our net asset value. We improved our liquidity position. We experienced no new credit downgrades. And we grew the levels of signed term sheets, debt investment fundings, commitments and also the size of our overall pipeline. Our liquidity remains strong and our pipeline is growing, and all of this adds up to what we believe is the foundation for a strong year and momentum going into 2021. This will be our last earnings call before year-end, and Sajal and Chris will be going into more detail on our portfolio and finances. But I want to stress that we are encouraged by the signs of recovery in our business, our prospects for growth heading into 2021 and beyond and the continuing venture capital investment trends in technology. And once again, we expect to over earn our distribution for this year. We wish all of you continued good health during this period, and I'd now like to turn the call over to Sajal. -------------------------------------------------------------------------------- Sajal K. Srivastava, TriplePoint Venture Growth BDC Corp. - President, CIO, Secretary, Treasurer & Director [3] -------------------------------------------------------------------------------- Thank you, Jim, and good afternoon. During the third quarter, TriplePoint Capital signed $146 million of term sheets with venture growth stage companies, up from $93 million of signed term sheets during the second quarter and almost double the $80 million of term sheets signed during the first quarter, reflecting continued strong demand for debt financing. During the third quarter, TPVG closed $87 million of debt commitments with 9 companies, up 5x from the $14 million of closed debt commitments during the second quarter. The industry-leading position of the TriplePoint capital platform, not only has resulted in significant deal flow for TPVG from our select VCs and their venture growth stage portfolio companies, but also enables us to co-invest across the platform's many investment vehicles, so we do not miss out on deal flow due to transaction size, while also optimizing the hold size for us at TPVG. During the quarter, we funded $38 million of debt investments to 5 companies, almost double the $21 million we had funded last quarter. We also invested $300,000 of equity in 2 companies and received warrants in 6 companies valued at $600,000. We expect to see fundings return to the $50 million to $100 million range per quarter here in Q4 and grow in 2021. During Q3, we had $49 million in portfolio company principal prepayments, which resulted in an overall weighted average portfolio yield of 14.1% for the quarter. Excluding prepayments, core portfolio yield was a stable and impressive 12.8% and slightly up from the 12.7% last quarter. Although we expected prepayment activity to be slower, we believe the higher levels reflect continued durability of our portfolio companies and the venture lending market as a whole. We also received the $17 million of paydowns on revolving commitments and $19 million of scheduled principal amortization during the quarter. Year-to-date, we have received over $130 million of early and scheduled principal payments from our portfolio companies, which demonstrates the short term and amortizing nature of our loans and also serves as a meaningful source of liquidity for TPVG each quarter. As of the end of September, 30% of our debt investments were fixed rate loans and 70% were floating rate loans. Of those floating rate loans, 90% have prime floors set to 4.25% or higher. All the new floating rate loans we're originating have the same targeted yields as our existing loans, but have floors set at the current prime rate and therefore, have higher spreads. We continue to make progress diversifying our portfolio through a combination of new investment activity as well as through prepayments. As of quarter's end, our 71 portfolio companies are spread across 33 subsectors, with our largest concentration in business application software, which represents 11% of our outstanding portfolio. Our top 5 investments represent 28% of our total debt investment portfolio on a fair value basis, down from 35% a year ago; and our top 10 investments represent 52% of our debt investment portfolio, down from 60% a year ago as well. During the quarter, 4 portfolio companies raised over $430 million of capital. This brings our total to 22 portfolio companies raising over $2.8 billion of capital since the beginning of the year. Approximately 70% of our portfolio companies have 12 months or more of cash runway. Moving on to credit quality. The weighted average investment rating of our debt investment portfolio was essentially flat with the prior quarter's rating of 2.0. Under our rating system, loans are rated from 1 to 5, with 1 being the strongest credit quality and new loans are typically initially rated 2. During the quarter, 2 companies were upgraded from category 2 to 1 and 1 company was removed from category 5. No obligors were added to categories 3, 4 or 5, no obligors were downgraded during the quarter and no new obligors were placed on nonaccrual during the quarter. During the quarter, we closed out the credit situation on [Montre] and removed them from category 5 on our credit watch list and from our nonaccrual list, leaving no remaining companies in category 5. We have only one company rated 4 on our watch list, Roli, a music technology company. During the quarter, we saw an increase in the value of our position in Roli as a result of progress the company made during the quarter, which culminated in the launch of their Lumi keyboard on October 1, favorable product reviews and strong initial demand and sales. We hope to see momentum -- we hope to see this momentum translate into continued favorable trends for the company and our investment. We have 4 portfolio companies rated category 3 due to the impact of COVID on their businesses as well as on their financing and strategic activities. All 4 companies are currently in the midst of financing our strategic activities, have experienced some delays, but are looking to complete these activities over the next 1 to 2 quarters. Our highly experienced teams are in regular and active conversations with these companies and their investors, and we have a playbook for action if the outlook for these activities, their businesses or their credit situations change. We sold a portion of our holdings in CrowdStrike, resulting in additional $4.9 million of realized gains in Q3, bringing our total to $24.3 million of realized gains on that name alone and also recorded $1.1 million of realized gains on our Medallia Holdings. We continue to hold shares in both companies, representing $2.7 million of unrealized gain as of September 30, and expect to exit our remaining positions over the next 1 to 2 quarters. These realized gains were offset by the realized loss from the disposition of Montre , resulting a net realized gains of $4.1 million for the quarter. While credit losses are part of the business, the beauty of venture lending is that additional return and value creation potential exists due to the warrants and equity investments, which did not only offset these losses, but also generate net gains in excess of credit losses over time, which is consistent with our sponsor's track record. As we have noted in the past, it generally requires a longer time horizon than the average term of our loans for these gains to materialize. But on a cumulative basis, TPVG's credit losses net of realized warrant equity gains are $15.3 million over the past 6.5 years since our IPO, which represents 0.6% of our cumulative commitments and 1% of our cumulative fundings. So far in Q4, we've had 3 announced portfolio company liquidity and exit events, including Freshley's acquisition by Nestlé for up to $1.5 billion; Hims in-process back merger; and Qubole's acquisition by Idera. Such transactions have resulted in $30 million in loan prepayments and $2.4 million in accelerated income prior to any warrant and equity gains. We're excited by the fact that we continue to hold 100 warrants and equity investments in 70 companies and anticipate more liquidity events in the near future. As I close out, managing our existing portfolio has always been our highest priority, but is even more important during periods of significant volatility. We are pleased on a number of fronts with the performance and developments within the portfolio, which we believe reflect the uniqueness of our investment strategy, the quality and durability of our portfolio companies, the potential for additional returns and value accretion from our investments over the long term and of course, the experience and efforts of our team. With that, I'll now turn the call over to Chris to highlight some of the key financial metrics achieved during the quarter. -------------------------------------------------------------------------------- Christopher M. Mathieu, TriplePoint Venture Growth BDC Corp. - CFO [4] -------------------------------------------------------------------------------- Great. Thank you, Sajal, and hello, everyone. Let me take you through an update on the results for the third quarter of 2020. Total investment and other income was $23.1 million for the third quarter of 2020 as compared to $15.7 million for the third quarter of 2019. The weighted average annualized portfolio yield was 14.1% on total debt investments for the third quarter of 2020 as compared to 13% for the prior year. The increase in total investment and other income was primarily driven by an increase in the average debt investment portfolio size and also by fees earned from loan prepayments. Total operating expenses were $10.9 million for the 3 -- for the third quarter of 2020 as compared to $8.6 million for the third quarter of 2019. Total operating expenses for the quarter consisted of $3.5 million of interest expense, $3.3 million of management fees, $3.1 million of incentive fees and $1 million of general and administrative expenses. The increase in overall operating expense is primarily driven by an increase in the gross assets of the company and overall increase in borrowings and are offset by lower administrative and G&A costs associated with significant operating efficiencies in 2020. Net investment income for the third quarter was $12.2 million or $0.40 per share compared to $7.1 million or $0.29 per share in the third quarter of 2019. Return on average equity based on net investment income for the quarter was a very healthy 11.8% despite the lower leverage we reported in the quarter. Net realized gains on investments totaled $4.1 million and net unrealized losses on investments for the third quarter were $1.9 million, resulting in a net increase in net asset value from net gains of $2.2 million or $0.07 per share. Net realized gains are the result of $6 million of gains realized on the sale of CrowdStrike and Medallia stock, offset by $1.9 million of losses associated with the final disposition of the [Montre] investment. Net unrealized losses resulted from $4.9 million of the reversal of previously recorded unrealized gains on CrowdStrike and Medallia, offset by $1.4 million of the reversal of previously recorded unrealized losses on Montre as well as $1.2 million of unrealized gains from fair value adjustments on the rest of the portfolio. Net asset value, or NAV, increased from $13.17 to $13.28 per share, up 1% from Q2 2020. The net increase in net assets from operations for the third quarter was $14.4 million or $0.47 per share. We reported unfunded commitments totaling $168 million, of which $32 million was dependent upon portfolio companies reaching certain milestones. Of the $168 million of unfunded commitments, $85 million or 51% of this total will expire in 2020 and $83 million will expire during 2021, if not drawn prior to expiration. In addition, all of our unfunded commitments have an index rate of U.S. prime rate with a floor set to 3.25% or higher. We continue to maintain strong liquidity to fund our new origination activity as we head towards year-end. Some of this strength has come from proactive efforts this year, including the accretive sale of common stock in January, generating $80 million; and the closing of our first investment-grade unsecured debt in March, generating $70 million. We believe our high-quality portfolio continues to have a positive impact on our liquidity position, which has generated strong loan prepayments and principal loan amortization during the first 9 months of the year. In addition to our strong current liquidity, the existing seasoned and diversified portfolio has contractual cash flows over the next 5 quarters of $274 million, which bodes well for the sustained liquidity well into 2021. This strong liquidity and our modest leverage position gives us dependable funding capacity in excess of our existing unfunded commitments to grow the portfolio. As of September 30, the company had total current liquidity of $214 million, consisting of $26 million in cash and $188 million of availability under our revolving credit facility. We continue to have the flexibility under our existing accordion feature to expand the current $300 million commitment to an additional $100 million. The revolving credit facility as compared to fixed rate debt allows us to efficiently manage our interest expense and reduce outstanding balances when prepayments occur within our portfolio. Aggregate outstanding balances as of September 30 were $257 million, consisting of $75 million of exchange-listed fixed rate baby bonds, which mature in 2022, $70 million of private term debt, which matures in 2025; and $112 million outstanding under our multiyear revolving credit facility. Given our aggregate borrowings as of September 30, we've reported a leverage ratio of just 0.63x leverage or an asset coverage ratio of 259% at the low end of our leverage target of 1x leverage. We have generated NII of $1.18 per share and have paid distributions of $1.08 per share. So $0.10 per share of income in excess of our distributions with more than a quarter to go, and that is after the impact of issuing 5.7 million new shares in January in connection with the public equity offering. On top of that, we have $7.3 million of spillover income from 2019. In addition, our NAV as of September 30 of $13.28 per share is only $0.06 per share lower than our NAV pre-COVID as of December 31, 2019. During the third quarter, we distributed $0.36 per share from ordinary income as part of our regular quarterly distribution. Net investment income provided 110% coverage of the quarterly distribution despite leverage being at the lower end of our target range. And further, we have undistributed earnings spillover from net investment income of approximately $10 million or another $0.33 per share to support additional distributions to shareholders in the future. Pleased to announce that for the fourth quarter of 2020, our Board of Directors has declared a distribution of $0.36 per share on October 29 to shareholders of record as of November 27. The payment date for this distribution will be on December 14. So this completes our prepared remarks. And now at this time, we'd be happy to take your questions. And so operator, could you please queue up the line for questions? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) The first question comes from Finian O'Shea from Wells Fargo. -------------------------------------------------------------------------------- Finian Patrick O'Shea, Wells Fargo Securities, LLC, Research Division - VP and Senior Equity Analyst [2] -------------------------------------------------------------------------------- Just first question, high level, appreciating the robust fund leverage profile and such. This quarter, we saw a little bit lower commitments and then you were selling some stock in the market. Is this at all indicative of any near-term desire to generate liquidity, position the company for a more conservative outlook in any sense? Or maybe it's one-off, but any comment you have there to describe that sort of pattern we saw this quarter? -------------------------------------------------------------------------------- Sajal K. Srivastava, TriplePoint Venture Growth BDC Corp. - President, CIO, Secretary, Treasurer & Director [3] -------------------------------------------------------------------------------- Sure. Sajal here. I'll start, and then please, Jim and Chris, jump in. So Fin, I'd say the deleveraging that occurred this quarter was more as a result of our portfolio companies, so the prepayment activity and the scheduled principal amortization. So not necessarily conscious of us proactively looking to maintain a large cash reserves or deleverage ourselves. I think the benefit of using warehouse facilities is that we're able -- when we do get prepayment activities, we're able to pay down our credit lines, delever, save on interest expense. So our shareholders benefit from that. But I'd say, really, it was more of a function of our portfolio companies. I would then counter and say I think an important thing to notice is that our level of term sheets -- signed term sheets have been relatively consistent, if not growing, quarter-over-quarter, but the rate of commitment of TPVG has increased as our liquidity has increased, our unfundeds have reduced. And so I'd say it's the opposite. I think we're seeing strong market conditions, as Jim talked about, in the VC equity ecosystem and the venture lending ecosystem. And so I think we're positioning for continued growth in demand, which we're seeing, not only here in Q4, but going into 2020 as well. Jim, Chris any thought? -------------------------------------------------------------------------------- James P. Labe, TriplePoint Venture Growth BDC Corp. - Chairman & CEO [4] -------------------------------------------------------------------------------- Yes. I can only add that I think the word caution and cautious may have been applicable in the early COVID onset in quarters, but there's absolutely not a pattern here. And if anything, I agree with Sajal, not only have the commitments been up this past quarter versus the previous one, but we're pretty much positioning and gearing up as well as staffing up now for increased originations and the growth activity we see. So there is not a pattern that at least we're aware of. -------------------------------------------------------------------------------- Finian Patrick O'Shea, Wells Fargo Securities, LLC, Research Division - VP and Senior Equity Analyst [5] -------------------------------------------------------------------------------- Yes. Yes. Understood. But of course, I was just talking about this brief moment in the balance sheet. As -- but that's all very helpful. Just another small question on the loan, GoEuro, I think you added a small convert, a follow-on. Was that in conjunction -- they raised a large round. Were you sort of jumping in on that? Or is that something that's normal for you to invest in a follow-on? Or is that consistent with your co-investment style? Any color you have there? And that's all for me. -------------------------------------------------------------------------------- Sajal K. Srivastava, TriplePoint Venture Growth BDC Corp. - President, CIO, Secretary, Treasurer & Director [6] -------------------------------------------------------------------------------- Good question. Yes. And so as you saw, GoEuro did announce a capital raise during the quarter. And given that a part of our strategy, not only of getting the equity kickers, but is getting access to those private rounds that traditional investors can't get access to. And so by benefit of the lending relationship plus prior equity investments that we've made in the company, we were able to get access to this round that occurred here in Q3 and did our pro rata investment and participated in that round. So we view that as -- a benefit of the lending relationship was getting access to invest in that round. -------------------------------------------------------------------------------- Operator [7] -------------------------------------------------------------------------------- The next question comes from Devin Ryan of JMP Securities. -------------------------------------------------------------------------------- Kevin Fultz, JMP Securities LLC, Research Division - Analyst [8] -------------------------------------------------------------------------------- This is Kevin Fultz on for Devin. So just a question around portfolio company liquidity. Can you provide some insight into the cash runway that existing portfolio companies have? -------------------------------------------------------------------------------- Sajal K. Srivastava, TriplePoint Venture Growth BDC Corp. - President, CIO, Secretary, Treasurer & Director [9] -------------------------------------------------------------------------------- Kevin, good to meet you. This is -- oh sorry, Jim. Let me start and then please jump in. As mentioned during my section, so we've seen some fantastic equity raising activity on a year-to-date basis within the portfolio. I think the number was -- let's see, year-to-date basis, we've had 22 portfolio companies raised over $2.8 billion of capital since the beginning of the year. And that 75% of our portfolio companies have at least 12 months of cash runway. And then in any given quarter, we have between 3 to 6 portfolio companies raising equity. So that number is always -- theoretically, should increase as quarters go on. -------------------------------------------------------------------------------- Kevin Fultz, JMP Securities LLC, Research Division - Analyst [10] -------------------------------------------------------------------------------- Okay. Great. That's helpful. And then in terms of finding new ways of performing due diligence. Over the past 7 months of the pandemic, have there been any changes in how you've done diligence or you found new ways to perform that in a remote work environment? -------------------------------------------------------------------------------- Sajal K. Srivastava, TriplePoint Venture Growth BDC Corp. - President, CIO, Secretary, Treasurer & Director [11] -------------------------------------------------------------------------------- Great. Jim, do you want to take that one? -------------------------------------------------------------------------------- James P. Labe, TriplePoint Venture Growth BDC Corp. - Chairman & CEO [12] -------------------------------------------------------------------------------- Yes. And I was just going to provide the same numbers as previous -- Sajal did in that question. And nice to meet you as well. Yes, so the -- end of the day, the due diligence process hasn't changed. And if anything, it's probably a little more advantageous because everything is remote. We're able to pretty easily contact investors, customer references, all the things that we do and typically more because of the current environment affording those opportunities. So the level of work, the level of investment committee details is not only the same, it's even more improved and it's always been, which is a very, very high level. -------------------------------------------------------------------------------- Kevin Fultz, JMP Securities LLC, Research Division - Analyst [13] -------------------------------------------------------------------------------- Okay. That's helpful. And then lastly, I know on previous calls, you've mentioned that deal pricing hadn't materially changed since the onset of the pandemic. Just curious if you've seen an improvement in documentation over that period at all. -------------------------------------------------------------------------------- James P. Labe, TriplePoint Venture Growth BDC Corp. - Chairman & CEO [14] -------------------------------------------------------------------------------- Do you want to grab that, Sajal? -------------------------------------------------------------------------------- Sajal K. Srivastava, TriplePoint Venture Growth BDC Corp. - President, CIO, Secretary, Treasurer & Director [15] -------------------------------------------------------------------------------- Sure. Yes. I would say venture -- I'd say one of the benefits of our platform is we have pretty thorough -- or elaborate loan docs and pretty consistent, and I think consistent is a pretty important aspect of being a premier lender. And so I would say we have not seen any material change in the structure, legal or financial or covenant profile of our loans. And I think that's something that our companies -- portfolio companies and VC sponsors think very highly of that consistency. So I'd say they've always been tight and lender-friendly and balanced and no particular changes over the past couple of quarters. -------------------------------------------------------------------------------- Operator [16] -------------------------------------------------------------------------------- Our next question comes from Christopher Nolan of Ladenburg Thalmann. -------------------------------------------------------------------------------- Christopher Whitbread Patrick Nolan, Ladenburg Thalmann & Co. Inc., Research Division - EVP of Equity Research [17] -------------------------------------------------------------------------------- Ladenburg Thalmann. Sajal, did you -- or Chris, did you guys mention what the prepayment estimate is for the fourth quarter? If you did, I missed it. -------------------------------------------------------------------------------- Christopher M. Mathieu, TriplePoint Venture Growth BDC Corp. - CFO [18] -------------------------------------------------------------------------------- Yes. We did not mention the prepayment estimate, but we do have -- we did announce that we had $32 million of actual prepayments already this quarter that generated about $2.4 million of accelerated income. So that's already out there this evening with the release. -------------------------------------------------------------------------------- Christopher Whitbread Patrick Nolan, Ladenburg Thalmann & Co. Inc., Research Division - EVP of Equity Research [19] -------------------------------------------------------------------------------- Okay. So no guidance, right? -------------------------------------------------------------------------------- Christopher M. Mathieu, TriplePoint Venture Growth BDC Corp. - CFO [20] -------------------------------------------------------------------------------- Correct. -------------------------------------------------------------------------------- Christopher Whitbread Patrick Nolan, Ladenburg Thalmann & Co. Inc., Research Division - EVP of Equity Research [21] -------------------------------------------------------------------------------- Okay. Turning to Roli. Couple of questions on Roli. Roli nonaccrual, a fair number of its credit seem to be maturing or matured at 10/31. Were those extended or renewed? -------------------------------------------------------------------------------- Sajal K. Srivastava, TriplePoint Venture Growth BDC Corp. - President, CIO, Secretary, Treasurer & Director [22] -------------------------------------------------------------------------------- Yes. Chris, we're in the process of working on a global restructuring of our outstanding indebtedness with them based on the -- we were waiting for the product launch and positive developments that happened during the third quarter. -------------------------------------------------------------------------------- Christopher Whitbread Patrick Nolan, Ladenburg Thalmann & Co. Inc., Research Division - EVP of Equity Research [23] -------------------------------------------------------------------------------- Got you. And if I heard you correct, Sajal, Roli is a musical products maker? -------------------------------------------------------------------------------- Sajal K. Srivastava, TriplePoint Venture Growth BDC Corp. - President, CIO, Secretary, Treasurer & Director [24] -------------------------------------------------------------------------------- Yes, a musical technology company. They make keyboards, synthesizers, plus software and other technology. -------------------------------------------------------------------------------- Operator [25] -------------------------------------------------------------------------------- (Operator Instructions) The next question comes from Ryan Lynch of KBW. -------------------------------------------------------------------------------- Ryan Patrick Lynch, Keefe, Bruyette, & Woods, Inc., Research Division - MD [26] -------------------------------------------------------------------------------- First one, just a higher-level question. As we are still in the middle of this downturn, but we're -- we've been in a bit at this point, are you surprised by -- as a higher level, how well that your overall portfolio has held up? I mean, you've mentioned earlier, you're now only down a few pennies since this year. And also how strong the venture ecosystem has really held up during this downturn? -------------------------------------------------------------------------------- James P. Labe, TriplePoint Venture Growth BDC Corp. - Chairman & CEO [27] -------------------------------------------------------------------------------- Yes. I would ask... -------------------------------------------------------------------------------- Sajal K. Srivastava, TriplePoint Venture Growth BDC Corp. - President, CIO, Secretary, Treasurer & Director [28] -------------------------------------------------------------------------------- Yes... -------------------------------------------------------------------------------- James P. Labe, TriplePoint Venture Growth BDC Corp. - Chairman & CEO [29] -------------------------------------------------------------------------------- Go ahead. You can start, Sajal. -------------------------------------------------------------------------------- Sajal K. Srivastava, TriplePoint Venture Growth BDC Corp. - President, CIO, Secretary, Treasurer & Director [30] -------------------------------------------------------------------------------- Yes. I was going to say, Ryan, again, I think we're -- Jim and I are now in our 22nd year of working together across 2 leading platforms. We've seen our fair shares of cycles. And so I think it's too early to get overly confident or excited about -- the pandemic is far from over. We're second wave, third wave. So I think we are pleased to see that the thesis that we had articulated to our investors of how working with these select VCs and -- the better select VCs and their portfolio companies and our experience and track record, the thesis was that these funds and their portfolio companies at the venture growth stages outperformed not only during good times, but also during more challenging times. And so I'd say that we're not surprised in the sense that we're showing the performance that we have because, again, that was always the thesis. The best deals go to the best VCs, and so we should see better track record. I would say, I think we are pleased but not surprised to see the rate of equity investment activity for the venture asset class as a whole. There's no doubt that our -- again, our experience across the cycles, the company started during periods of volatility. I mean Jim and I can go back to Facebook and YouTube and Netflix back in the day, prior cycles. And so we're not surprised to see premier venture funds deploy capital during periods of volatility to take advantage of dislocation, valuations and potentially less competition on the VC side. So I think sort of -- it's playing out, but we're not getting overly confident. It's -- I think part of -- that's why we're keeping also substantial liquidity to be able to take advantage of opportunity. But also the world can change, things can change, and so we just always want to be prepared. Jim, anything to add? -------------------------------------------------------------------------------- James P. Labe, TriplePoint Venture Growth BDC Corp. - Chairman & CEO [31] -------------------------------------------------------------------------------- Yes. It's very hard to because maybe after 22 years, we think alike. And absolutely, VC is not always good times, but it's -- it's also a wrong word to use during this phase, but it's really the quality of our companies and the VCs that we continue and have always worked with, which is part of managing through whatever we want to call it. This new norm and adjusting the plans to profitability and many of the things underway, which results in some performance. And again, we talked earlier about the uptick in growth and new investments and some of the COVID area investments, and we've been through cycles and been through this before. And if you stick to the better venture capital-backed companies and the better venture capital funds, which is at the heart of our model, you make it through these periods and then some. -------------------------------------------------------------------------------- Ryan Patrick Lynch, Keefe, Bruyette, & Woods, Inc., Research Division - MD [32] -------------------------------------------------------------------------------- Okay. That's helpful commentary. And then in your, guys, press release, you mentioned in the fourth quarter, Hims is going public through a merger with a SPAC. I just wanted to -- have you guys -- hear your opinion on -- obviously, there's been a huge increase in SPAC formation really over the last year. And I wanted to know, do you think that the increased formation of those is going to be large enough that it could actually potentially have a meaningful impact on VC-backed companies' exit strategies? Or is it simply just another structure of a -- that -- of a company that would already -- that would likely be taken out just via a different structure, whether it's an IPO or an acquisition or something like that? Do you think that the increased formation of SPACs is going to have a meaningful impact on the ability of these venture-backed companies to have more extra opportunities? -------------------------------------------------------------------------------- Sajal K. Srivastava, TriplePoint Venture Growth BDC Corp. - President, CIO, Secretary, Treasurer & Director [33] -------------------------------------------------------------------------------- Yes. It's a really good question, Ryan. So I'd say at a high level, I think we're pleased and welcome the emergence of SPACs. I think it's still very early as an asset class -- or an exit class, I guess, better phrase. There have been some initial transactions within our TriplePoint platform. I think we're up to 4 or 5 portfolio companies that have either completed or have announced these merger events. I think it's still early in terms of for -- well, let's wear multiple hats. So as a lender, I think we're pleased because, usually, these events are takeout events for our debt. And so it's an opportunity for us to get our capital back. It's the exit, it's the touchdown that we play to. And so we get our loans back, we get our acceleration of income, fantastic. I think as we look to our equity kickers, it's a little balanced in the sense that, yes, these are some great valuations that are occurring with the SPAC liquidity events, but they do require longer roll-forward or lock-up periods for existing investors than a traditional IPO. And so at least we've seen, in general, 9 to 12 months versus the usual 180 days for a typical IPO. I then think to your other comment of, are the companies that are going through the SPAC process companies that would have gone public or may not have gone public and is this a new -- I think it's still too early to tell. I definitely think that SPACs or an interesting form of exit, but you still have to be IPO-ready. You can't just decide tomorrow you don't want to go public as a SPAC. And so I think there's a fair amount of prep work that companies have to do in order to be ready. And so then the question is, do you go public on your own, do you go for the SPAC or -- again, and then it has merger-like qualities. And so would you take an all-cash deal versus an -- and so I think, again, it's still too early. I think our VC partners are really kind of seeing the data points, seeing some of the track records from existing events, and I think we'll learn more to see. But I think generally, a positive thing because, again, it causes growth and acceleration, and theoretically, the need for more debt for companies to accelerate growth to get ready for a SPAC exit. -------------------------------------------------------------------------------- James P. Labe, TriplePoint Venture Growth BDC Corp. - Chairman & CEO [34] -------------------------------------------------------------------------------- I would only add, SPACs have emerged here during COVID. And I would agree with Sajal, I think it's a little speculative to see what the long-term or even kind of near-term effects on venture capital exits overall is going to be. I think the majority of exits from making the rounds are continue -- going to continue to be IPOs and M&As. But this is a factor now, and there will be some SPACs. It's just not, at least currently, seen as a huge, major significant exit in the future. But again, it's speculative. We'll see where it goes. And it does have to be companies that are IPO-ready, absolutely. -------------------------------------------------------------------------------- Operator [35] -------------------------------------------------------------------------------- This concludes our question-and-answer session. I would like to turn the conference back over to Jim Labe for closing remarks. -------------------------------------------------------------------------------- James P. Labe, TriplePoint Venture Growth BDC Corp. - Chairman & CEO [36] -------------------------------------------------------------------------------- Thank you, operator. We'd like to thank our stakeholders and all our TriplePoint friends and everyone on the line for listening or participating in our call. And we hope everyone continues to remain healthy and look forward to talking with you next quarter. Thanks a lot. Goodbye. -------------------------------------------------------------------------------- Operator [37] -------------------------------------------------------------------------------- That concludes today's call. You may now disconnect.