TriplePoint Venture Growth(TPVG) - 2019 Q4 - Annual Report

Part I Business TriplePoint Venture Growth BDC Corp. invests in venture growth stage companies, primarily in technology and life sciences, providing secured debt financing and equity investments to maximize total return - The company's investment objective is to maximize total return to stockholders, focusing on current income and capital appreciation by lending to venture growth stage companies in technology, life sciences, and other high-growth industries[12] - TPVG is an externally managed BDC, regulated under the 1940 Act, and has elected to be treated as a RIC for U.S. federal income tax purposes[11] - The company's core investment philosophy is described as the "Four Rs": Relationships, Reputation, References, and Returns[27][28] Financing Facilities as of December 31, 2019 | Facility | Total Commitment | Maturity Date | | :--- | :--- | :--- | | Credit Facility | $300 million (with accordion to $400M) | November 30, 2022 | | 5.75% Notes | $74.75 million | 2022 | Key Attributes of Debt Financing Products | Product | Size Range | Yield-to-Maturity | Term | | :--- | :--- | :--- | :--- | | Growth Capital Loans | $5M - $50M | 10% - 18% | 36-60 months | | Equipment Financings | $5M - $25M | 10% - 15% | 36-48 months | | Revolving Loans | $1M - $25M | Prime + 1% to 10% | 12-36 months | Portfolio Credit Quality as of December 31, 2019 | Credit Category | Fair Value ($ thousands) | % of Total Debt Investments | | :--- | :--- | :--- | | Clear (1) | $121,866 | 20.2% | | White (2) | $425,016 | 70.3% | | Yellow (3) | $31,103 | 5.1% | | Orange (4) | $22,956 | 3.8% | | Red (5) | $3,577 | 0.6% | | Total | $604,518 | 100.0% | Risk Factors The company faces significant risks across its business structure, investment portfolio, and securities, including dependency on key personnel, market volatility, conflicts of interest, and illiquid investments - Business & Structural Risks: The company is dependent on its executive officers and the Adviser's senior team, particularly Messrs. Labe and Srivastava, with their loss potentially harming investment objectives[165] - Leverage Risks: The reduction in asset coverage requirement to 150% allows increased leverage, magnifying potential gains and losses, and increasing default risk and NAV volatility[189][190] - Investment Risks: The portfolio's concentration in technology and life sciences makes it vulnerable to sector downturns, with venture growth stage companies facing competition, capital dependency, and default risks[246][251] - Conflicts of Interest: The advisory fee structure, based on gross assets, may incentivize leverage, while the incentive fee structure could encourage riskier investments for higher returns[237][238] - Valuation Risk: A majority of the company's illiquid investments are Level 3 assets, valued in good faith by the Board, with inherent uncertainty and potential for material differences from realized values[212] Properties The company does not own material physical properties; its executive offices are provided by its Administrator under an Administration Agreement - The company does not own any material physical properties and its executive offices are provided by its Administrator[314] Legal Proceedings The company, its Adviser, and subsidiaries are not currently subject to any material pending legal proceedings expected to impact financial condition or operations - The company is not currently subject to any material pending legal proceedings[315] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities TPVG common stock trades on the NYSE, with prices fluctuating relative to NAV, and the company declared $1.44 per share in distributions for 2019, intending to distribute taxable income to maintain RIC status 2019 Quarterly Stock Performance and Distributions | Quarter | NAV per Share | High Closing Price | Low Closing Price | Distributions per Share | | :--- | :--- | :--- | :--- | :--- | | Q1 2019 | $13.59 | $13.76 | $11.12 | $0.36 | | Q2 2019 | $14.19 | $14.50 | $13.31 | $0.36 | | Q3 2019 | $13.47 | $17.04 | $14.33 | $0.36 | | Q4 2019 | $13.34 | $16.98 | $13.92 | $0.36 | - Total distributions of $1.44 per share were declared and paid for the year ended December 31, 2019[321] - The company intends to distribute at least 90% of its net ordinary income and net realized short-term capital gains to maintain its RIC tax treatment[322] - No securities were repurchased during the fourth quarter of the fiscal year ended December 31, 2019[329] Selected Financial Data The company demonstrated significant growth in investment income and total assets from 2015 to 2019, with total investment income reaching $73.4 million in 2019 and consistent annual distributions of $1.44 per share Selected Financial Data (2015-2019) | (in thousands, except per share data) | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total investment and other income | $73,387 | $64,648 | $51,510 | $43,635 | $42,086 | | Net investment income | $38,253 | $34,989 | $26,266 | $23,011 | $21,959 | | Net increase in net assets from operations | $31,758 | $36,562 | $19,227 | $11,126 | $15,521 | | Net investment income per share | $1.54 | $1.71 | $1.61 | $1.42 | $1.46 | | Distributions per share | $1.44 | $1.54 | $1.44 | $1.44 | $1.44 | | Total assets | $684,148 | $467,054 | $510,284 | $434,222 | $382,323 | | Total liabilities | $351,642 | $132,523 | $275,339 | $218,359 | $150,677 | | Net assets | $332,506 | $334,531 | $234,945 | $215,863 | $231,646 | Management's Discussion and Analysis of Financial Condition and Results of Operations In 2019, TPVG's investment portfolio grew significantly to $653.1 million, driving total investment income to $73.4 million, while maintaining strong credit quality and increasing borrowings under its Credit Facility Portfolio Composition by Investment Type (Fair Value) | Investment Type | Dec 31, 2019 ($ thousands) | Dec 31, 2018 ($ thousands) | | :--- | :--- | :--- | | Debt investments | $604,518 | $405,347 | | Warrant investments | $22,090 | $17,514 | | Equity investments | $26,521 | $10,556 | | Total | $653,129 | $433,417 | Investment Activity Summary (Year Ended Dec 31) | (in thousands) | 2019 | 2018 | | :--- | :--- | :--- | | New Debt Commitments | $507,419 | $508,378 | | Funded Debt Investments | $418,093 | $263,941 | | Principal Prepayments | $164,118 | $185,735 | | Unfunded Commitments (End of Period) | $226,083 | $294,306 | Results of Operations (Year Ended Dec 31) | (in thousands) | 2019 | 2018 | | :--- | :--- | :--- | | Total investment income | $73,387 | $64,648 | | Total operating expenses | $35,134 | $29,659 | | Net investment income | $38,253 | $34,989 | | Net realized/unrealized losses | ($6,495) | $1,573 | | Net increase in net assets | $31,758 | $36,562 | - The weighted average annualized portfolio yield on total debt investments was 15.0% for 2019, down from 17.1% in 2018, primarily due to a lower impact from prepayments[399][402] - As of December 31, 2019, the company had $262.3 million outstanding under its $300 million Credit Facility and $74.8 million in 5.75% Notes due 2022[192][415][416] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, with 70.0% of its debt portfolio and 77.8% of outstanding debt bearing floating rates, impacting net investment income sensitivity to rate changes - As of December 31, 2019, approximately 70.0% ($441.8 million principal) of the debt portfolio bore interest at floating rates, while 77.8% ($262.3 million) of outstanding debt was floating rate[447] Interest Rate Sensitivity Analysis (Annual Impact on Net Investment Income) | Change in Interest Rates | Net (Decrease) / Increase ($ thousands) | | :--- | :--- | | Up 300 basis points | $3,679 | | Up 100 basis points | $90 | | Up 50 basis points | ($808) | | Down 50 basis points | ($393) | | Down 100 basis points | $918 | - The company did not have any interest rate hedging transactions in place as of December 31, 2019[451] Consolidated Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for 2019, including key statements and notes, along with the unqualified audit opinion from Deloitte & Touche LLP Consolidated Statement of Assets and Liabilities Highlights (as of Dec 31) | (in thousands) | 2019 | 2018 | | :--- | :--- | :--- | | Total Investments at Fair Value | $653,129 | $433,417 | | Total Assets | $684,148 | $467,054 | | Total Liabilities | $351,642 | $132,523 | | Total Net Assets | $332,506 | $334,531 | | Net Asset Value per Share | $13.34 | $13.50 | - The financial statements were audited by Deloitte & Touche LLP, which provided an unqualified opinion on both the financial statements and the effectiveness of internal control over financial reporting as of December 31, 2019[457][464] - Note 4 details the company's investment valuation process, confirming the majority of investments are classified as Level 3 assets, valued in good faith by the Board using unobservable inputs[572][581] - Note 6 provides details on borrowings, including the $300 million Credit Facility maturing in 2022 and the $74.8 million of 5.75% Notes due 2022[612][620] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2019, with no material changes reported during the fourth quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[681] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2019[685] - There were no material changes in the company's internal control over financial reporting during the fourth quarter of 2019[687] Other Information This section provides estimated annual expenses as a percentage of net assets, totaling 10.57%, including base management, incentive fees, interest payments, and other expenses Estimated Annual Expenses (as a % of net assets) | Expense Category | Percentage | | :--- | :--- | | Base management fee | 2.58% | | Incentive fee | 2.44% | | Interest payments on borrowed funds | 3.73% | | Other expenses | 1.82% | | Total annual expenses | 10.57% | Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the company's forthcoming 2020 Proxy Statement - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the forthcoming 2020 Proxy Statement[700] Executive Compensation Information concerning executive compensation is incorporated by reference from the company's forthcoming 2020 Proxy Statement - Information regarding executive compensation is incorporated by reference from the forthcoming 2020 Proxy Statement[702] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership of certain beneficial owners and management is incorporated by reference from the company's forthcoming 2020 Proxy Statement - Information regarding security ownership is incorporated by reference from the forthcoming 2020 Proxy Statement[703] Certain Relationships and Related Transactions and Director Independence Information on certain relationships, related party transactions, and director independence is incorporated by reference from the company's forthcoming 2020 Proxy Statement - Information regarding related transactions and director independence is incorporated by reference from the forthcoming 2020 Proxy Statement[704] Principal Accountant Fees and Services Information detailing principal accountant fees and services is incorporated by reference from the company's forthcoming 2020 Proxy Statement - Information regarding principal accountant fees and services is incorporated by reference from the forthcoming 2020 Proxy Statement[705] Part IV Exhibits, Financial Statement Schedules This section lists financial statements included in Item 8 and exhibits filed with the Annual Report on Form 10-K, noting no separate financial statement schedules are provided - This section lists all financial statements, which are located in Item 8, and all exhibits filed with the report[707][708] - No separate financial statement schedules are filed, as the relevant information is included elsewhere in the report[711]