Harold Zagunis - Chief Financial Officer Jim Labe - Chairman and Chief Executive Officer Sajal Srivastava - President and Chief Investment Officer.

Casey Alexander - Compass Point Research & Trading Finian O'Shea - Wells Fargo Securities.

Good afternoon, ladies and gentlemen, and welcome to TriplePoint Venture Growth's Third Quarter Earnings Conference Call. At this time, all lines have been placed in a listen-only mode. After the speakers’ 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 the call over to Harold Zagunis, Chief Financial Officer of TriplePoint Venture Growth. Mr. Zagunis, please go ahead..

Thank you, Austin. And thank you, everyone for joining us today. We are pleased to share with you our results for the third quarter. 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 this call we will 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 website at www.tpvg.com. With that, I'll turn it over to Jim..

Thanks, Harold, and welcome everyone to our third quarter earnings call. Let me start by congratulating the Chicago Cubs, even though we’re out in San Francisco here, for an impressive win the World Series last week.

I think the Cubs are a great example of the based-on analogy that we’ve been using to describe the venture lending business, and also our strategy at TPVG. This business is about the stretch, the nine inning game, and really the whole season. It’s not about an inning or two, a quarter or two. You’ve got to know when to swing and when to take a pitch.

You need an experienced and talented team, great coaches, a proven game plan, and patience to be the winner. The third quarter was a solid inning for us and we’re in the lead. There will be many more successes and victories. With that, let me talk specifically about our third quarter results.

We achieved our highest ever total quarterly investment income, $12.5 million. We grew our portfolio for the fifth quarter in a row and have built our largest portfolio since the IPO, more than $300 million. We had a weighted average portfolio yield during the quarter of 15.1%. We have three record-breaking portfolio company exits.

Dollar Shave Club was acquired for more than $1 billion from Unilever. This was reported to be the highest multiple ever paid for an e-commerce venture backed company. Jet.com was acquired for more than $3 billion by Walmart. This was reported to be the largest venture backed e-commerce acquisition ever. It was also the largest acquisition in the U.S.

in the quarter. Nutanix also completed their much anticipated public offering. This was the largest tech IPO of the year, and it’s traded well ever since. Based primarily on these remarkable events, we recognized almost $5 million of net realized and unrealized gains on our investment portfolio.

On top of that, during the quarter, our public portfolio company EndoChoice announced its acquisition by Boston Scientific.

I’m really pleased to say that our net investment income or NII exceeded our dividend by $0.04 per share and when combined with our portfolio gains and share repurchases under our stock buyback program, we boosted our net asset value or NAV by $0.39 per share.

We are demonstrating the power in the potential at TriplePoint platform and we expect this to translate into continued portfolio growth in this quarter, as well as 2017. The successes this quarter are not one-time or short-lived.

We believe they will continue given our pipeline, the profile of our portfolio of companies and our prospects, and their backing by our select venture capital investors. These are investors associated with some of the biggest tech and life science successes over the past several decades.

As M&A activity continues to grow and as the IPO market opens to high-quality tech companies they will be further beneficial to our debt and equity and warrant portfolio. Our approach and our patience continue to different us from the others. We continue to be very positive on the outlook for venture lending in our venture growth business.

The pipeline is strong and we’re encouraged by the high quality of deals we are out there seeing. We will continue to keep our heads down and apply our time-tested approach of focusing on just venture growth stage companies. We’re not out there chasing deals for the sake of volume.

We’re being highly selective with our ad debt and swinging only at the right pitches. We’re encouraged by our year-to-date progress. We plan to continue on our path of deploying capital and growing the portfolio, covering our dividend, and boosting our net asset value, all of this with the backdrop of our best-in-class fee structure among the BDCs.

Again, the way I think of this is, we’re still only in the early innings, but we continue on our path to dependence. With that, I would like to turn the call over to you, Sajal..

Thank you Jim, and good afternoon everyone. In Q3, we signed $89 million of venture growth term sheets at TriplePoint Capital and closed $69 million of new commitments at TPVG with six companies. Consistent with our approach, these were all privately held companies, backed by our select venture capital investors.

Since some of them are repeat customers, let me highlight one new customer and one repeat customer.

The first is Eero, which offers a next-generation Wi-Fi solution for the consumer market through unique mesh networking technology, Eeros device provides better coverage, faster speeds, useful functions like monitoring and limiting Wi-Fi access by user of and easier control through your mobile phone.

Headquartered in San Francisco, Eero has raised approximately $80 million of equity capital from Index Ventures, Menlo Ventures, First Round Capital, Shasta Ventures, and Redpoint. The second is the rest of runway, which is probably best summarized as the Netflix model for high faction.

The company rents high end clothing and accessories for a fraction of the retail price for weddings, parties, and other special occasions, and just recently started offering everyday wardrobe options. The company operates a sophisticated logistics platform to manage customer demand, inventory, shipping, and even dry-cleaning.

The company is based in Europe, and has raised more than $100 million of equity capital from technology crossover ventures, Highland Capital, Kleiner Perkins, Bain Capital and others. During Q3, we funded $15 million of debt investments to three companies and acquired warrants valued at 300,000 in five companies.

The weighted average yield at origination for the assets funded this quarter was 15%. Fundings for quarter were affected by the acquisitions of Jet.com and Dollar Shave as we are expecting them to utilize their facilities.

Our weighted average portfolio yield on the debt portfolio during the quarter was 15.1%, excluding the impact of prepayments this quarter, the weighted average portfolio yield was 13.7%, which is up from 13.2% last quarter.

I would like to point out that we do not include the income from the expiration of unfunded commitments in our portfolio yield, even though others do. We report that income as other income. If we were to include this income then we would have reported portfolio yield of 16.8% instead of 15.1% this quarter.

At quarter’s end, our unfunded debt investment commitments totaled $115.5 million to eight companies of which $38 million is depended upon the companies reaching certain business or time-based milestones before the debt commitment becomes available to them.

$38.5 million of the $115.5 million will expire during 2016, $72 million will expire in 2017, and the rest will expire in 2018. During Q3, we had $83 million of unfunded commitments expire or terminate early, which again was mostly related to Jet.com on Dollar Shave Club.

With regards to portfolio performance and quality, as Jim mentioned, we have three successful portfolio exits, Jet.com Dollar Shave, and Nutanix and one pending acquisition, which was announced in Q3 and is expected to close in Q4.

We had approximately 500,000 of realized warrant and equity gains from Dollar Shave Club and 500,000 of realized warrant gains from Jet.com. We had $3.7 million of unrealized gains related to Nutanix and approximately $160,000 related to the Endochoice announcement.

Also during the quarter, our portfolio company MapR Technologies announced a $50 million equity round, as well as plans for filing an IPO next year. As of September 30, the weighted average internal credit rating of the debt investment portfolio was 2.05 as compared to 2.06 at the end of the prior quarter.

As a reminder, under our rating system, loans are rated from 1 to 5, with 1 being the strongest credit rating and new loans are initially generally rated two. During the quarter, we added $10 million of new fundings to category two, 5 million of new fundings to category one.

We moved 10 million of loans from category two due to prepayment, upgraded $16 million of loans from category Q2 category one, and downgraded 17 million of loans from category two to category three. As we have said before, credit upgrades and downgrades factor not only financing performance, but also capital raises and exit events underway as well.

We’re pleased to report a positive outcome at KnCMiner as we expect a full recovery. Our fair value as of the end of the quarter to be conservative includes risk and time-based discounts to our full recovery expectation.

These recoveries include cash from completed asset sales, as well as annual cash distributions that we will receive from Go Green Light, a company that purchased KnC’s bitcoin mining business. Our recoveries have to go through the legal and tax process before they can be distributed, which we expect to begin within the one to two quarters.

Before I turn the call over to Harold, I want to remind investors that TPVG is part of the TriplePoint Capital global platform. Our sponsored TriplePoint Capital or TPC as we call it, is one of the handful of firms in the venture lending business.

TPC provides venture loans across all stages of development of the venture capital backed companies lifespan from the seed and early-stage stages through the growth stage and beyond.

As a result of this widely acknowledged industry-leading platform, TPVG stands to benefit from our sponsor being in continued dialogue with our select group of investors, some of the best, if not the best in the industry, discussing our investments and the progression of their portfolio companies. We are actively in the trenches.

In some cases we are literally calling on their portfolio companies, years ahead of when they become candidates for a venture growth loan from TPVG. We’re proud to say that our select sponsors and entrepreneurs view us a trusted financing partner and we often get first looks and sometimes even the only look.

We don't rely on brokers or agents, we don't finance public companies, and we don't finance companies that other lenders have done down. Volume and size do not build the franchise. Relationships, references, and reputations do.

As Jim said, this is a nine inning game and while our BDC is young, we literally have been playing the game since it was invented. With that, I’ll now turn the call over to Harold to review the financial highlights for the third quarter..

Thank you Sajal. For the third quarter, our total investment and other income was $12.5 million.

As noted earlier, this represented a weighted average portfolio yield of 15.1%, of which 10.5% was from coupon payments, 0.8% was from the accretion of upfront facility fees and warrants, 2.4% was from the accretion of end of term payments, and 1.4% was a result of prepayments.

The weighted average portfolio yield without the benefited prepayments was 13.7% this quarter. We calculate weighted average portfolio yield of the annualized rate of interest income divided by the amortized cost of debt investments during the period.

As Sajal reminded you, it does not include fees or other income from the termination or expiration of commitments. Our expenses this quarter were $6 million. Our base management fee was $1.4 million. Our income incentive fee was $1.6 million. Our net debt expenses were $2 million. And our administrative and general expenses were $1 million.

Our net investment income was $6.5 million. On an annualized return basis, our net investment income represented a 12.3% return on average net assets. This quarter, we had net realized and unrealized gains of $4.9 million or $0.31 per share.

The primary reasons for these gains, as discussed earlier on the call, were the acquisitions and IPOs of some of our portfolio companies. Our net change in net assets resulting from operations for the third quarter was $11.4 million or $0.71 per share.

As of September 30, the company's net assets were approximately $214 million or $13.44 per share, compared to approximately $212 million or $13.05 per share as of June 30.

The increase in net asset value was a result of our net change in net assets during the quarter exceeding our $0.36 per share quarterly distribution, in addition to the impact on NAV of our share repurchases. As of September 30, we had 89 investments in 32 companies.

Our investments included 53 debt investments, 28 foreign investments, and eight direct equity investments. The total cost in fair value of these investments was approximately $307 million and $309 million, respectively. As of September 30, 37% of our debt investments were floating rate. As of September 30, our total cash position was $20.8 million.

At the end of the quarter, we had $57 million of debt drawn on our $200 million revolving credit facility. Included in our baby bonds we are approximately 0.5 times levered at the end of the quarter. We continue to expect to increase our leverage ratio to our target of 0.6 to 0.8 times over the next several quarters.

As we have reminded you in previous earnings call, our net interest income covers our dividend rate at the lower end of our target leverage range without any additional benefit of prepayments.

Pursuant to our board approved $25 million share repurchase program, we have purchased nearly 1 million shares at a cost of $10.9 million since late last year, included nearly 300,000 shares at a cost of $3.4 million during the third quarter. Our board also approved extending the program by another 12 months.

For the fourth quarter of 2016 our Board of Directors declared a dividend of $0.36 per share, payable on December 16 to stockholders of record as of November 30. This marks the 11th consecutive quarter since our IPO. We have maintained or raised our quarterly dividend rate.

We further note that our net investment income through September 30 has exceeded our dividends paid through that date by $0.04 and we entered 2016 with $0.10 per share of spillover income. Now, I’ll turn the call back over to Jim..

Thanks again Harold. Before I open the call up for questions, we announced today that Harold will be leaving the company at the end of the year. I’d like to take a minute to thank Harold for his help over the many years.

As you may recall he became TPVG’s CFO right after the IPO, and has made tremendous contributions during our rookie years as a public company. We wish him well and as mentioned to be with us through the end of the year and we’ve commenced the search for a new CFO. Again many thanks, Harold. At this point, we’ll be happy to take your questions.

Operator, could you please open up the line..

Sure. We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Casey Alexander with Compass Point Research & Trading. Please go ahead. .

Hi, good afternoon.

Jim, at 0.5 times lever do you still have a lot of room to move into your target leverage ratio? You talked about being willing to take a pitch and at the same point in time, the pace of originations is probably not what you had hoped it would be, tell me how you are balancing the two and trying to get to that target leverage ratio?.

Yes. So, I think we've always talked about the strong finish and looking in 2017 and the same being of getting to the 0.6 to 0.8 target leverage ratio.

Just as I can think of the San Francisco Giants where they don't win the pin at every single year, it’s every other year, and the originations as far as I'm concerned is very strong, the market is good, our pipeline is good, and we’re feeling real good, and I think you're seeing the commitments reflecting that and we will continue to do so.

Funding sometimes can be a little bit affected and as Sajal mentioned, particularly because of some good developments, acquisitions and IPO, some of the fundings we thought would be funded this quarter weren’t and so as the fundings increase, definitely the leverage ratio will increase and we are already about 0.51, so we're not too far from 0.6 to 0.8..

Okay.

On KnCMiner, has there been any recoveries yet or any recoveries subsequent to the end of the quarter and is that still included in the orange category at this point in time?.

Casey it’s Sajal here. So all of the asset sales has been completed at KnC and so we’re now working through the legal packs and bankruptcy process with the trustee and with the court and so we expect that to occur, as I mentioned during my part of the call, the distributions to begin over the next one to two quarters.

We still have it in Orange and once we are sort of clear through the legal and bureaucratic stuff, we will plan to upgrade it. .

Okay. Thank you for that.

Your additions to yellow, low because I know that you guys don't discuss the that stuff between quarters, can you talk about your additions to yellow kind of who are talking about and maybe what some of the color is on the issues there?.

Yes, as we mentioned during the call we upgrade and downgrade customers based on their financial performance, industry sector dynamics, capital raising efforts, and then for some potential exit events underway, and so I would say the one company this quarter [indiscernible] that we downgraded - was downgraded related to those factors..

Okay.

Nutanix, was that priced based upon the end of the quarter or based upon when you're third-party valuation was able to get to them sometime post the quarter.?.

It’s probably the company at the end of the quarter. We used the stock price on the closing date of 930. Now because we have a lockout period for six months we’ve discounted that price a little bit consistent with best practice. .

Okay thank you and lastly and I apologize for this, I have a short attention span, so you will have forgive me, can you walk me through the composition of the gains one more time for the quarter please, and I apologize for this, but it is better….

No we are very proud of them, we will talk, happy to talk..

As Sajal said, 500,000 was from Dollar Shave warrant and equity, 500,000 was Jet.com, 3.7 was unrealized gains from Nutanix warrant and equity, and the rest was a combination of various factors..

And 160 was related to Endochoice realized basis..

Okay great. Alright. Thank you for that. I think - let me just make sure I don't have anything else. Okay that's it from me for the moment. I’ll jump back into the queue and come back if I have anything else thank you..

Okay, thanks Casey..

And our next question comes from Jonathan Bock with Wells Fargo Securities. Please go ahead..

Hi guys, Finian O'Shea in for Jonathan this evening.

How are you?.

Hi Fin..

Hi Fin..

Hi. I just wanted to start off with congratulations on the very good quarter.

First a question on other income I think you described that as principally related to the run-off or expiration of unfunded commitments, is that - just as a refresher, is that the major driver to that other income and is - do newly signed term sheets also have a big impact?.

No, the driver is unfunded, it is expiration of unfunded commitment. That’s primarily what drives the magnitude of other income. When we enter into a new term sheet and a new commitment we may get upfront facility fees and warrants, but those are our liability to value of our unfunded commitments.

Upon expiration that amount is taken into income and that’s what happened this quarter. .

And Finn if you look at our, actually our Q and our detailed financials, we actually breakout other income, our line items showing the sources, one is expiration terminations of unfunded commitment and then to the extent we receive other fees if we charge audit fees or which is a small part of - a very small part of the business then, that shows the majority as you can see in Q3 versus unfunded commitment terminations..

Okay very well.

With the - so you have about 50-50 roughly split of credit facility in the senior notes, what’s the outlook, is that an ideal balance there or should we foresee more term debt as you continue to ramp up the book a little bit?.

Well I mean, our plan is to use our revolving credit facility as our primary funding source to get up to our target leverage ratio and so our goal is and then once we achieve our target leverage ratio, or approach it markets participating and willing to raise more capital, and then use that capital to pay down the revolving facility and then use the revolver then to grow back up to the target leverage ratio again..

Got it, very well.

And with kind of spillover approaching I think levels where we last saw a special dividend can you also remind us of kind of your philosophy there, is this going to be sort of a safeguard or something you’re looking at releasing in the near term?.

Certainly the board will make decisions as to what our dividends will be, but our current plan is to spillover any debt income into next year..

Okay, very well.

And just one more portfolio company question, can you provide any commentary post of [indiscernible] quarter to today on Mine Candy?.

Really there has been no material change since last quarter, other than the - they actually made an announcement earlier this week of their first wave as new products for their Moshi Monsters franchise and also announced their new Atlanta product line, and so in addition to that our data has begun to amortize..

Okay, very well. And thank you guys again and congratulations on the very good quarter..

Thanks Fin..

Thank you..

[Operator Instructions] This time I’m showing no further questions. I would like to turn the conference back over to Jim Labe for any closing remarks..

Thanks. I’ll close again by expressing my appreciation to all of you for your continued interest and also your support in TriplePoint Venture Growth. We look forward to meeting our investors in the upcoming World Conference in New York on December 7 and 8. And I would like to thank everyone here again for listening and we’ll speak with you again soon.

Good-bye..

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