TriplePoint Venture Growth(TPVG) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Unaudited financials as of September 30, 2023, reflect decreased assets and net assets, increased liabilities, and a net decrease in net assets for the nine months due to unrealized losses Consolidated Statements of Assets and Liabilities As of September 30, 2023, total assets decreased, total liabilities increased due to higher borrowings, and total net assets and NAV per share declined Consolidated Statements of Assets and Liabilities (in thousands, except per share data) | | September 30, 2023 (unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Investments at fair value | $870,178 | $949,276 | | Cash and cash equivalents | $105,003 | $51,489 | | Total assets | $998,480 | $1,014,533 | | Liabilities | | | | Revolving Credit Facility | $210,000 | $175,000 | | Total Notes, net | $392,663 | $392,000 | | Total liabilities | $624,380 | $594,593 | | Net Assets | | | | Total net assets | $374,100 | $419,940 | | Net asset value per share | $10.37 | $11.88 | Consolidated Statements of Operations Total investment income increased, but significant net realized and unrealized losses led to a net decrease in net assets for the nine-month period Key Operating Results (in thousands, except per share data) | | For the Three Months Ended Sep 30, 2023 | For the Three Months Ended Sep 30, 2022 | For the Nine Months Ended Sep 30, 2023 | For the Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total investment and other income | $35,738 | $29,698 | $104,518 | $84,475 | | Total operating expenses | $16,634 | $12,838 | $47,998 | $41,414 | | Net investment income | $19,104 | $16,860 | $56,520 | $43,061 | | Net realized and unrealized gains/(losses) | $(16,956) | $(16,428) | $(67,548) | $(51,337) | | Net increase (decrease) in net assets | $2,148 | $432 | $(11,028) | $(8,276) | | Net investment income per share | $0.54 | $0.51 | $1.59 | $1.35 | | Net increase (decrease) in net assets per share | $0.06 | $0.01 | $(0.31) | $(0.26) | Consolidated Statements of Changes in Net Assets Net assets decreased for the nine months ended September 30, 2023, primarily due to operational decrease and shareholder distributions, partially offset by common stock issuance Changes in Net Assets for the Nine Months Ended September 30, 2023 (in thousands) | Description | Amount | | :--- | :--- | | Balance as of December 31, 2022 | $419,940 | | Net decrease in net assets from operations | $(11,028) | | Issuance of common stock, net | $6,191 | | Distributions reinvested in common stock | $1,870 | | Distributions from distributable earnings | $(42,693) | | Offering costs | $(180) | | Balance as of September 30, 2023 | $374,100 | Consolidated Statements of Cash Flows Net cash provided by operating activities significantly reversed to positive for the nine months, driven by lower investment funding and higher principal payments, increasing total cash Cash Flow Summary for the Nine Months Ended September 30 (in thousands) | | 2023 | 2022 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $63,029 | $(107,297) | | Net cash provided by (used in) financing activities | $175 | $63,149 | | Net change in cash, cash equivalents and restricted cash | $63,204 | $(44,148) | | Cash, cash equivalents and restricted cash at beginning of period | $59,260 | $59,147 | | Cash, cash equivalents and restricted cash at end of period | $122,464 | $14,999 | Consolidated Schedules of Investments Total investments at fair value decreased, with the portfolio diversified across high-growth industries, and non-accrual debt investments showing a significant fair value decline Total Investments by Type (in thousands) | Investment Type | Cost (Sep 30, 2023) | Fair Value (Sep 30, 2023) | Cost (Dec 31, 2022) | Fair Value (Dec 31, 2022) | | :--- | :--- | :--- | :--- | :--- | | Debt Investments | $851,489 | $782,853 | $888,586 | $852,951 | | Warrant Investments | $29,951 | $42,634 | $29,427 | $48,414 | | Equity Investments | $42,687 | $44,691 | $41,394 | $47,911 | | Total Investments | $924,127 | $870,178 | $959,407 | $949,276 | - As of September 30, 2023, debt investments on non-accrual status had a total cost of $94.8 million and a fair value of $39.2 million[52] Notes to Consolidated Financial Statements The notes detail the company's organization, accounting policies, related party agreements, borrowings, and commitments, including fee structure and unfunded commitments - The company is externally managed by TriplePoint Advisers LLC, a subsidiary of TriplePoint Capital LLC, and pays a base management fee of 1.75% of average adjusted gross assets and a two-part incentive fee based on net investment income and capital gains[88][96][97] - As of September 30, 2023, the company had $141.9 million in unfunded commitments to 17 portfolio companies, a significant decrease from $324.0 million to 37 companies at year-end 2022[162] - For the nine months ended September 30, 2023, the company's net investment income was $1.59 per share, and distributions from net investment income were $1.20 per share[174] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, portfolio activity, and liquidity, noting increased net investment income, a net decrease in net assets due to unrealized losses, and adequate liquidity Portfolio Composition, Investment Activity and Asset Quality The investment portfolio's fair value decreased, investment activity slowed, and asset quality declined with an increase in the weighted average credit ranking and non-accrual investments Portfolio Composition by Fair Value (in thousands) | Investment Type | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Debt investments | $782,853 | $852,951 | | Warrant investments | $42,634 | $48,414 | | Equity investments | $44,691 | $47,911 | | Total | $870,178 | $949,276 | Investment Activity (Principal Funded, in thousands) | Period | Funded Debt Investments | Equity Investments | | :--- | :--- | :--- | | Nine Months Ended Sep 30, 2023 | $100,863 | $202 | | Nine Months Ended Sep 30, 2022 | $321,988 | $5,688 | Debt Portfolio Credit Quality by Fair Value | Credit Category | Sep 30, 2023 (%) | Dec 31, 2022 (%) | | :--- | :--- | :--- | | Clear (1) | 11.7% | 6.6% | | White (2) | 74.6% | 81.9% | | Yellow (3) | 8.8% | 10.4% | | Orange (4) | 2.2% | 1.1% | | Red (5) | 2.7% | 0.0% | | Weighted Avg. Ranking | 2.10 | 2.06 | Results of Operations Total investment income increased, but operating expenses rose, and net realized losses, partially offset by unrealized gains, led to a net decrease in net assets for the nine-month period - Total investment income for Q3 2023 increased to $35.7 million from $29.7 million in Q3 2022, primarily due to a larger income-bearing debt portfolio and higher yields[236] - Operating expenses for Q3 2023 rose to $16.6 million from $12.8 million year-over-year, largely because interest expense increased to $9.3 million from $7.2 million due to higher borrowings and interest rates[241][245] - In Q3 2023, the company recognized net realized losses of $25.6 million, mainly from the write-off of Hi.Q, Inc. This was partially offset by net unrealized gains of $8.6 million[249][252] Weighted Average Annualized Portfolio Yield on Total Debt Investments | Period | 2023 | 2022 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | 15.1% | 13.8% | | Nine Months Ended Sep 30 | 14.8% | 14.5% | Liquidity and Capital Resources The company maintained strong liquidity with substantial cash and undrawn credit facility capacity, a healthy asset coverage ratio, and significantly reduced unfunded commitments Capital Resources as of September 30, 2023 (in millions) | Resource | Amount | | :--- | :--- | | Cash and cash equivalents (incl. restricted) | $122.5 | | Credit Facility Availability | $140.0 | | Total Liquidity | $262.5 | Outstanding Debt as of September 30, 2023 (in millions) | Liability | Amount | | :--- | :--- | | Revolving Credit Facility | $210.0 | | 2025 Notes | $70.0 | | 2026 Notes | $200.0 | | 2027 Notes | $125.0 | | Total | $605.0 | - The company's asset coverage ratio was 162% as of September 30, 2023, exceeding the required minimum of 150%[287] - Unfunded commitments totaled $141.9 million as of September 30, 2023, a substantial reduction from $324.0 million at the end of 2022[289] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is primarily exposed to interest rate risk, affecting floating-rate assets and liabilities, with hypothetical rate changes impacting net investment income, and also has unhedged foreign currency risk - As of September 30, 2023, approximately 62.1% ($523.7 million) of the debt portfolio bore floating interest rates, while 34.7% ($210.0 million) of outstanding debt had floating rates[309][310] Annual Impact on Net Investment Income from Hypothetical Interest Rate Changes (in thousands) | Change in Interest Rates | Net (decrease) in net investment income | | :--- | :--- | | Up 300 basis points | $8,185 | | Up 100 basis points | $2,728 | | Down 100 basis points | $(2,603) | | Down 300 basis points | $(6,803) | - The company has exposure to foreign currency exchange rate risk but deemed it acceptable and had no hedging transactions in place as of September 30, 2023[312] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the 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[315] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[316] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is facing a putative securities class action lawsuit alleging federal securities law violations, with a lead plaintiff appointed and an amended complaint expected - A shareholder filed a putative securities class action complaint against the Company and certain officers and directors in June 2023, alleging violations of federal securities laws[318] Item 1A. Risk Factors No material changes to risk factors were noted, except for an added disclosure regarding geopolitical conflicts and their potential negative impact on portfolio companies - The company added a risk factor concerning geopolitical conflicts, such as the Israel-Hamas war and the Russia-Ukraine conflict, which could negatively affect portfolio companies with foreign operations and cause market volatility[321] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2023, the company issued common stock under its dividend reinvestment plan, exempt from Securities Act registration - In Q3 2023, 75,545 shares of common stock were issued under the dividend reinvestment plan for a total of $0.8 million[323] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the period - None[324] Item 5. Other Information This section provides an updated table of the company's fees and expenses, including base management, incentive, interest, and other expenses, along with historical common stock data Annual Expenses (as a percentage of net assets) | Expense Type | Percentage | | :--- | :--- | | Base management fee | 4.79% | | Incentive fee | 4.04% | | Interest payments on borrowed funds | 10.18% | | Other expenses | 2.18% | | Total annual expenses | 21.19% | - The closing sales price of the company's common stock was $9.46 per share on October 31, 2023[336] Item 6. Exhibits This section lists the exhibits filed with the quarterly report, including CEO and CFO certifications and Inline XBRL documents - The report includes CEO and CFO certifications under Rule 13a-14 and Section 906 of the Sarbanes-Oxley Act, along with XBRL data files[339]