Triplepoint Venture Growth BDC Corp (TPVG) 2018 Q4 法說會逐字稿

Good afternoon, and welcome to the TriplePoint Venture Growth Fourth Quarter 2018 Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Andrew Olson, Chief Financial Officer. Please go ahead.

Thank you, operator, and thank you, everyone, for joining us today. We are pleased to share with you our results for the fourth quarter and fiscal year 2018. 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 may make certain statements that relate to future events or the company's future performance or financial condition, which may be considered forward-looking statements under federal securities law. We ask you that you refer to the most recent filing with the Securities and Exchange Commission for important factors that could cause the 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. 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 tpvg.com.

And with that, I'll turn the call over to Jim.

Thanks, Andrew, and good afternoon, and welcome everybody. Today marks a really special day for us. Today is the fifth anniversary of our IPO and the day that we launched TPVG. On this anniversary, I'm not only pleased to share our outstanding performance of the past quarter, but also what was a record-setting 2018 and 5 years of outstanding growth achievements and results for our shareholders behind that.

Before getting to the quarter and what was truly a stellar year, let's talk about the past 5 and some of the highlights that we achieved since our IPO through this past December. We made cumulative commitments of more than $1.6 billion. We made cumulative investment fundings of more than $1 billion. We increased our investment portfolio 3.5x since the IPO. And we paid out $7.08 per share in distributions as of this past December, which provided a cash-on-cash aggregate return of 47.2% based on our original $15 per share IPO price. We're also proud to state that in the period since the IPO, we have covered our dividend and that includes paying 2 special dividends as well in the period. And we believe we are the only venture lending VC to do so over that period.

These are just some of the highlights during the first 5 years, with this past year 2018 being a year where we finished with several all-time performance records for the business representing our very best year yet as we set the following company records: a record in an annual investment income, a record in our annual net investment income, a record in customer fundings, a record in portfolio growth and size, a record in dividends that we paid to our shareholders and a record in earnings per share.

While it's great to share these performance records, there's also a list of other achievements in 2018, including having a third portfolio company now to be acquired by Amazon and another portfolio company, which debuted as one of the biggest tech IPOs of the year. We also increased our available borrowings under our credit facility, we obtained shareholder approval for increased leverage and received our exempted relief from the SEC to commit coinvestment across the TriplePoint platform. It was a remarkable year.

Let me wrap up these opening remarks by sharing some of the amazing fourth quarter results. As I know Sajal and Andrew will be providing much greater detail, because what I'd really like to talk and focus about is 2019. The fourth quarter, once again, to use most repeated word here in my remarks, is one of records also. This included new records in quarterly debt and equity investment commitments, new quarterly records in net investment income, earnings, customer fundings and portfolio growth, and a record quarter in dividends that we paid out to our shareholders.

We also ended the quarter with an all-time high in the venture growth originations pipeline, which could translate nicely into new business here in 2019. But the plans are not to rest on these laurels or all these long list of records, but actually to look at the past 5 years. And this past record-setting year is only the beginning of what we plan to accomplish in the years ahead. As a reminder, although TPVG is only 5 years old today, we're not newcomers at all to venture lending. The senior members of our management team, in fact, each have decades of experience and were among the first to develop the investment class now known as venture lending. The venture growth segment that TPVG targets is only 1 portion of the overall business of our sponsor, TriplePoint Capital LLC.

TriplePoint Capital was founded almost 15 years ago by our senior team and were a leading global financing provider to venture capital backed companies across all stages of their development. In fact, for the year ended December 31, I should also point out that the TriplePoint platform at the sponsor level, signed up 1 -- sorry, signed up more than $1.6 billion of term sheets last year and based on the publicly available information, this made TriplePoint one of the largest nonbank venture lenders globally last year.

Believe me, we really know the venture lending business and all of our business is also what we call 100% direct. All of our business is directly originated. We're an originations machine with many referrals from our select venture capital investors. We don't work with brokers or agents. There aren't any loan participations. We don't do loan purchases. We don't have club or syndication partners in our loans. We are in control. We don't make secondary purchases of stock in companies that we don't have relationships with either. We don't lend to distressed public companies and we don't lend to middle market companies. We believe these direct originations provide us with a true edge in the marketplace.

While we're proud of TPVG's performance over the past 5 years, again, we think of it as only the beginning. We're excited to build upon this past success in the years to come. And as I mentioned, we're entering 2019 at TPVG with the largest originations pipeline in history. That's important because our portfolio is driven by originations pipeline, among other factors, which in turn helps drive earnings growth.

While this market demand is strong and the deal flow continues to increase, I also want to emphasize that we're not compromising our underwriting standards, our pricing or investment strategies. we plan to capitalize on this demand, while continuing to maintain our time-tested and careful investment approach. We will selectively invest in companies with innovative technologies and services backed by these select venture capital investors.

So let me wrap up. We see great growth opportunities here in 2019, both in the venture capital equity and the venture lending markets. We plan to continue to capitalize on these opportunities in a significant way, given the strength and reputation of the TriplePoint global platform and the quality of the venture growth stage companies we're seeing in the pipeline. We'll continue to work with our select leading group of venture capital investors and these are firms that have sponsored some of the biggest tech and life science successes during the past few decades, hence, drive the high quality of our portfolio companies. While we're moving forward into 2019 with this abundance of investment opportunities and strong outlook, rest assured, as I always say, we will continue to focus on what we call the 4Rs that have always been the foundation of our business: reputation, relationships, references and returns.

I'll now turn the call over to Sajal.

Thank you, Jim, and good afternoon, everyone. In Q4, we signed a record $323 million of term sheets at TriplePoint Capital then closed $190 million of debt commitments with 12 companies. For the year, TriplePoint Capital signed a record $885 million of term sheets then we closed $508 million of debt commitments with 28 companies.

During the fourth quarter, we added 8 new companies to the portfolio bringing our total additions for the year to 21. New customers in the quarter included Clutter, an on-demand storage company that lets customers store and retrieve their stuff without actually leaving their house. Clutter has raised $100 million of capital from Sequoia Capital, Atomico, Google and others. We're pleased to report that here in Q1, Clutter announced it raised $200 million from the SoftBank Vision Fund. Lovepop is a maker of 3D pop-up greeting cards for all occasions. Lovepop has raised more than $22 million from investors, including Highland Capital and Kevin O'Leary from the Shark Tank. Qubole delivers a self-service platform for big data analytics built on Amazon, Microsoft, Google and Oracle cloud. Qubole has raised more than $75 million from Lightspeed Venture Partners, Norwest Venture Partners, CRV, IVP and others.

Quip designs and delivers oral care products, advice and services. Quip has raised more than $60 million from investors, including Sherpa Capital. Health IQ is an insurance company rewarding those with healthy lifestyles with lower rates using its proprietary data and carrier relationships. Health IQ has raised more than $80 million from Andreessen Horowitz, Foundation Capital, Ribbit Capital, CRV and others. HomeLight is a leading marketplace for finding real estate professionals that helps homeowners sell homes faster and for more money. HomeLight has raised more than $50 million from investors, including Menlo Ventures and Crosslink Capital. Sonder is a tech-driven hospitality company offering spaces built for travel and life in cities around the world. Sonder has raised more than $135 million of capital from Greylock Partners, Spark Capital and others. Capsule is a healthcare technology company rebuilding the pharmacy from the inside out. Capsule has raised more than $70 million from investors, including Thrive Capital.

During Q4, we funded a record $120 million of debt investments to 11 companies and acquired warrants valued at $2 million in 12 companies. The new debt investments funded during the quarter had a weighted average portfolio yield of 14.2%. For the year, we funded a record $265 million to 27 companies. We are particularly proud to have grown the investment portfolio to its largest level ever of $433 million with 57 companies, as compared to $372 million with 42 companies at the end of 2017. We continue to see the strong level of demand so far in 2019, having closed $131 million of new commitments and funded $74 million of investments so far. We had $26 million of principal prepayments during Q4, which contributed an additional 4% to our core portfolio yield of 14% for the quarter, bringing total portfolio yield to an impressive, but not record-setting 18%.

Moving on to credit quality. As of December 31, the weighted average internal credit rating of the debt investment portfolio was a record best 1.87 as compared to 2.09 as of Q3. 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 generally rated 2 upon closing. During the fourth quarter, on a net basis, there were 2 more companies in category 1 versus last quarter, representing $83 million of net additional principal balance, and there were 5 more companies in category 2 versus last quarter, representing $21 million of net additional principal balance. With regards to category 3, one portfolio company totaling $34 million of principal balance was upgraded from 3 to 2, and one portfolio company totaling $20 million of principal balance was downgraded from 2 to 3. Finally, 1 portfolio company totaling $3 million of principal balance was downgraded from 4 to 5.

As Jim mentioned, our press release was a rather long list of successes. I would briefly like to talk about a few of them as well as some additional ones not in the release. A year ago, our top 5 obligors referred -- represented 57% of our total portfolio. As of Q4 2018, we've been fully or partially prepaid on 4 of those top 5 positions, grown our total portfolio and taken advantage of our exemptive relief order to coinvest across our larger platform such that our top 5 represented only 44% of our total portfolio at year-end. And here in Q1 2019, as a result of prepayment and continued investment activity so far, the top 5 represents around 30%.

We're really proud of the $1.71 NII per share for the year, which was materially in excess of our $1.44 of distributions per share and enabled us to pay our shareholders a $0.10 special dividend in December. We met consensus estimates for Q1 and then beat consensus for Q2, Q3, Q4 and fiscal 2018. We're even more proud of our $1.78 of net increase and net assets per share, which enabled us to increase our net asset value by $0.25 from Q4 2017 even after paying that $0.10 special dividend per share.

Our core portfolio yield without the benefit of prepays increased from 13.6% at the beginning of the year and remained at 14% in both Q3 and Q4. 14 of our portfolio companies raised equity rounds in 2018. 4 of our portfolio companies were acquired or went public. So far in Q1, 4 portfolio companies have raised rounds and 2 have announced acquisitions. As Jim mentioned, Amazon has purchased 3 of our portfolio companies: Ring, PillPack and Eero, and SoftBank has invested equity in 3 of our companies: Clutter, Cohesity and View.

Finally, as I previously mentioned, we raised $94 million in equity -- in an equity offering in August. As our investors have seen, since that offering, we have closed $384 million of commitments and funded almost $220 million of investments.

Before I hand the call off to Andrew, I thought it'd be helpful to share some of our strategic goals and objectives we have for TPVG here in 2019. As Jim mentioned, the industry-leading position of our platform and the hard work of our team has resulted in significant direct deal flow from our select VCs and strong demand for venture growth stage lending for high quality companies, which reflects the natural progression of these VCs and our portfolio companies following continued strong equity investment activity and their thoughtfulness on how to optimize their capital structures with both debt and equity.

There has been no change in what we've been doing, how we structure or price our deals or deal quality. If anything, we continue to raise the bar in terms of what qualifies as a TriplePoint worthy customer and investment. Volatility in the public markets only helps drive more demand for debt as venture capital backed companies recognize they may need more capital until the IPO or M&A events and we serve as a less dilutive and complementary source of capital.

As we look to 2019, we have a clear near-term path to continue to grow and scale TPVG. Our expectation this year for portfolio growth is for quarterly portfolio fundings to be in the $75 million to $150 million range on a gross basis, up from our target in prior years of $50 million to $100 million per quarter. So on a full year basis, we see at least $300 million of gross fundings, but really, we expect to be somewhere between $400 million and $600 million of gross fundings given we had $294 million of unfunded commitments as of Q4. As a reminder, fundings typically occur in the last month of the quarter and don't contribute meaningfully from an income perspective until the next quarter.

We expect that core yield profile of our portfolio will be stable and will continue to be leading in the industry in the 13% to 14% range, again, prior to the impact of prepays. With regards to prepays, they continue to be a regular part of the business. Looking back, we had at least 1 prepay every single quarter over the past 2 years and 10 in the past 12 quarters. In fact, we've already had 2 here in 2019. We expect to see that pattern of 1 on average per quarter in 2019, and along with our expected originations and increased leverage, is something our board is taking into consideration as we consider possible increases in our dividend policy on a go-forward basis.

Given our strong outlook for portfolio growth, we are grateful to our shareholders for approving a lower asset coverage requirement, which will enable us to take advantage of using leverage to serve as the primary source of funding portfolio growth for us here in 2019, plus we intend to continue to take advantage of our exemptive relief order, which we received in 2018 as well to coinvest with other entities in the TriplePoint platform and further diversify as we scale.

With that, let me say, as we look ahead, we're particularly excited for what 2019 has in store for us and our shareholders. We will continue to be highly disciplined and expect to grow our portfolio in a manner that is accretive to our stockholders and provides them with an attractive yield on their investment. The trust you have placed in us motivates this team to remain aligned, focused and enthusiastic.

I'll now turn the call over to Andrew to highlight some of the key financial metrics achieved during the quarter and fiscal year.

Thank you, Sajal. As mentioned by Jim and Sajal, 2018 was an exceptional year. Before we get into the quarterly figures, I thought I would highlight some of the many milestones reached for the fiscal year 2018. We ended the year with a record total investment income of $64.6 million, record net investment income of $36.6 million, record net investment income per share of $1.71, record net change and net assets per share of $1.78, record ending portfolio investments of $433 million, and in addition, we out earned our distributions for the second consecutive year with net investment income and we paid $1.54 per share.

Even with that, our quarterly results were equally impressive. Q4 total investment and other income was $17.8 million or $0.72 per share compared to $11.1 million or $0.64 per share for the same quarter of 2017. Our investment portfolio generated a weighted average portfolio yield of 18% during the quarter, including prepayments and other activity and 14% without. This is compared to 13.6% and 13.4% -- 13.5% in Q4 2017, respectively. The increase in total investment income and yield relative to the prior year was primarily due to portfolio growth and higher prepayment and other income related to portfolio turnover. In addition, the increase in recurring portfolio income is mainly due to the cumulative rise in benchmark interest rates.

Expenses during the quarter were $7.6 million, consisting of interest and fee expense of $1.9 million, base management fee of $1.7 million, income incentive fee of $2.6 million and administrative and general expenses of $1.4 million. Net investment income for the fourth quarter was up nearly 99% to $10.2 million or $0.41 per share compared to $5.1 million or $0.30 per share in the fourth quarter of 2017. We recognized net realized losses of $17,000 or $0.0 per share in the fourth quarter of 2018 from foreign exchange activities and had net change in unrealized depreciation during the quarter of approximately $900,000 or $0.04 per share, consisting of mark-to-market activity on the investment portfolio.

The mark-to-market depreciation was primarily concentrated in our public warrant investments, specifically our investment in Farfetch Limited, a publicly traded warrant, with a cost basis of $169,000, which depreciated approximately $1.6 million during the period. But since that period -- since the end of the quarter, that position has nearly appreciated $1.8 million here in 2019. That increase in net assets for the quarter was $9.3 million or $0.38 per share compared to $3.9 million or $0.22 per share in the prior year.

During the quarter, we generated a return on average equity of 11% and a return on average assets of 8.6% on an annual basis and generated ROAE and ROAA of 13.4% and 8.9% for the fiscal year December 31, 2018, respectively.

Now turning to the balance sheet. We funded $119.8 million of debt and equity investments to 11 companies during the quarter and had 1 company repay its outstanding obligations prior to maturity in the amount of $26.4 million. We also had 1 company repay its outstanding obligation at maturity in the amount of $5 million and had principal amortization on the remaining portfolio of $7.3 million. All told, we ended the quarter with long-term investments of $433.4 million or up 16.5% from the prior year.

At quarter end, we held 144 investments in 57 companies with a cost of $435 million and a fair value of approximately $433 million. The company's debt portfolio ended the quarter with a cost of $414 million, of which 59% of the debt investments carried floating rates. Our unfunded commitments totaled $294 million to 20 companies, of which $87.5 million is dependent upon the companies reaching milestones. And of those commitments, $183 million will expire in 2019, and $111 million will expire in 2020, if not drawn prior to expiration.

We ended the quarter with total liquidity of $197 million consisting of cash of $10 million and $187 million of undrawn availability under our revolving credit facility. Total outstanding borrowings as of quarter end were up -- were approximately $96 million consisting of $75 million of long-term fixed rate notes, $23 million drawn under our revolving credit facility, which put us at a leverage ratio of 0.29x, below our target range, but given our -- but gives us ample headroom to expand the portfolio without accessing additional capital in the short run.

We ended the quarter with net assets of $335 million or $13.50 per share. This is up $0.25 from $13.25 per share in the prior year. During the fourth quarter, we distributed $0.46 per share consisting of our $0.36 quarterly dividend and a $0.10 special dividend. For the year, we distributed $1.54 per share of income and ended with projected spillover income of $4.6 million or $0.19 per share.

With that, I'm pleased to announce that for the first quarter of 2019, our Board of Directors declared a distribution of $0.36 per share payable on March 29, to stockholders of record as of March 20. This marks the 20th consecutive quarter we have increased or maintained our quarterly distribution rate.

Now with that, I'll turn the call back over to Jim.

Thanks, Andrew. Before I open up the call for questions, we announced today that Andrew will be leaving the company on March 22 to pursue other opportunities. We wish him well and I'd like to take a minute to thank you, Andrew, for your help and contributions during the short period you were here, and we're very pleased to announce that Chris Gastelu will become our interim CFO as of that date, while we conduct our search for a permanent CFO. Chris has been serving as a consultant to TPVG since 2014, and prior to his own consulting business, he was a Managing Director at UBS in New York City in financial services and specialty finance.

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

(Operator Instructions) Our first question will come from Fin O'Shea of Wells Fargo.

Just to start with a couple housekeeping items. Well, actually first, I want to congratulate Mr. Olson for moving on. It's been a pleasure working with you. Sorry, about that. Looking at -- Sajal, you mentioned some of the deals this quarter were platform wide allocated, can you give us a little more color there on a vertical sense if deals were all evenly allocated or some in the early late-stage strategies for example? And then sort of if you can quantify given its low rates of leverage, what TriplePoint the BDC received on this quarter's origination?

Yes, sure. Let me start and Andrew, if you want to jump in. So Fin, to be clear, all the coinvestment activity that was completed and on a go-forward basis, are all in our venture growth stage strategy. So TPVG is only lending to venture growth stage companies. I think the interesting dynamic is we're seeing even more robust and even higher quality companies with significant scale, be it revenues -- hundreds of millions of dollars of revenue, billions of dollars of enterprise value, looking for a larger transactions. And so with our co -- our exemptive relief order, we're allowed or we're able to diversify these larger lumpier loans per se with our TPVG investing and then our private funds investing alongside in the same strip, same transaction, same terms. And so I believe, we had 2 transactions in Q4. And I don't think we've reported yet how many here in Q1.

All right. okay. I know you mentioned there, I actually wanted to ask as a follow-on, with some of the more famous unicorns reaching their sort of liquidity IPO chapter. What -- can you tell us about or remind us of your typical enterprise value issuer in terms of the proposition you offer at TriplePoint? And if that is changing, if that is gliding up given the dynamics of the market and your platform's growth?

Yes, no. Again, no change. If anything, I would -- and please, Jim jump in. Fin, I think the beauty is we have such deep and trusted relationships with our select group of leading VC funds. And so they look to us as partners and problem solvers, although they're not a problem. And so as they look to preparing their kind of the best of the best for their exit events and having sufficient runway, they -- a number of these companies either lever up and then raise big rounds or raise big rounds and then lever up. I'll use 1 example, is Clutter, which is a, again, the storage company we closed in Q4. We entered into a debt commitment with them in Q4. They drew on our facility, and then here in Q1, they raised $200 million from SoftBank. So I think the use of proceeds is still the same. We're working with companies that are trying to achieve amazing things. They're going for the touchdown and they're using combination of debt and equity to achieve that, and they're not going to let market volatility stop them from achieving their goals. They're not depended on IPO or M&A. They want to conquer the world and they're using us and equity capital to do it. From an LTV perspective, I think it's been relatively flat, Andrew, you tell me, I mean, there are 8%, 9% right?

Yes, yes. It's remained relatively consistent across the life of TriplePoint Venture Growth. And we ended the quarter or ended the year with about 9% of LTV on the portfolio.

Our next question comes from Ryan Lynch of KBW.

First, Sajal, I wanted to talk about sort of our own funding -- quarterly funding guidance you gave of $75 million to $100 million. That's a pretty substantial increase over historically where you guys were kind of in the $50 million to $100 million range. Can you just talk about what's driving your confidence in your ability to increase fundings meaningfully as well as also maintain a good portfolio diversification, which you talked about earlier in the call, of reducing those top 5 investments substantially?

Yes. So first, Ryan, great question. So I'll start off with, the guidance we gave is $75 million to $150 million. So that's even higher at the top end, and so I'd say it's multiple factors. I think one is just the significant backlog that we have in the form of existing unfunded commitments and the fact that, again, on average, our customers draw between 50% and 75% of that unfunded commitment generally within 6 to 12 months from when we enter into it. Plus more importantly, is we're seeing higher utilization at the time of close. I believe of the customers we closed in Q4, 50% of them actually drew at close. And so, again, no change in our underwriting methodologies. These companies had cash. Again, I'll use the example of Clutter, which well capitalized using our capital and then raising a big monster round of financing. So I'd say it's backlog. It's our customers using our capital. It's also overall just demand for debt is particularly strong. And so we're seeing strong -- I mean, as Jim said in his prepared remarks, the pipeline is the strongest it's ever been at this time of the year. So unprecedented levels from high-quality companies backed by our VCs. And so we continue to feel confident that the demand from really great awesome companies that we have visibility on today will enable us to hit these portfolio growth targets that we have for the year.

And not just jump too much into the fray here and agree with all the prior comments, I would just add that definitely our reputation, references and relationships is starting to continue to gel and get around. We have significant deal flow from the select folks we've been running with, with long-standing profitable relationships for quite a while. And this is strong demand. There's record amounts of equity of $1 billion funds among our select investors, good activity. We have a good name, good reputation, a good business and it's driving this. And in fact, quite frankly, we're increasing the bar for some of the quality. So although we're going to write -- and see record fundings and record business, we're anticipating here in 2019. I want to emphasize, we're not changing any of our practices and the diversification is great because of the exemptive relief. So we're accomplishing a lot of things at once, but there's continued great supplemental that we're doing...

And I would only add, Ryan, we're not whale hunting. So as we look to the beauty of our sponsor and our origination capabilities, there's no doubt we're seeing strong demand across the board, all stages, all sectors. But, in particular, on venture growth, it's not that we're getting calls from 5 or 10 companies looking for $50 million to $100 million debt facilities. The beauty is, the TriplePoint Capital global platform is the only platform that can digest those kinds of transactions. And so -- and the benefit to our public shareholders is that we can now allocate an appropriate risk-diversified transaction to TPVG, enter into that transaction with that customer, allocate to TPVG and our various private pools of capital to close those transactions.

Okay. That's helpful color. And then next I wanted to talk about Slide 28 with the portfolio yield as well as some of the prepayments that you had. Obviously, you guys have seen a big jump in the effective portfolio yield over the last several quarters, including the most recent quarter. I know you said you expect maybe -- I think you had 2 prepayments in the first quarter of '19, expect at least 1 per quarter going forward. Can you just talk or is there anything different that you guys are doing as far as structuring or types of investments you guys are looking for that's kind of driven this big increase in prepayments that we've seen over the last several quarters and looks like you guys expect going forward in 2019? And then, part 2 maybe of the question is, given your anticipation of at least 1 prepayment per quarter going forward with some meaningful prepayments in the last several quarters, you guys have had a effective yield of 17% to 18%. Is it reasonable to expect a yield in that level going forward?

So I'll take a first stab and feel free to add in, but our guidance has always been consistently -- we anticipate on average 1 to 2 prepayments per quarter. The portfolio is growing. So obviously, there's going to be as we grow more growth in that kind of activity. But as a lender recall, we don't mind, we actually like getting prepayments. It says that we're doing something right with these companies when they get acquired, when they go public, but also we love the income that it contributes as well as the yield contributions. And I think on a continued basis, we want to see that continue to...

Yes. And just to parse through the -- a little bit further, as we look to the prepayment activity, Ryan, over the, let's say, 1 to 2 years, I think the beauty of our prepayment activity is the primary reasons for the prepays have been the customers have been acquired, right, so the touchdown that we talked about, right? And so, you can't do anything more. The company got acquired or went public. And so, to have a meaningful percentage of the prepays due to that, we put that up on the win column.

I think the second largest reason for prepay has been raising monster rounds of equity financing where these companies have potentially overfunded themselves with equity that's sitting in a bank earning negative interest or no interest. We've got a 14%, 15-something-percent loan. We use that analogy in prior calls at half time. So they pay us off. We get nice prepayment acceleration. We go sit on the bench and wait to be called back in, late Q3, late -- early Q4 of the proverbial football game where they need us to come back. And then, it's actually been only a few, I'd say, less than a handful of scenarios where we've been refinanced by other lenders. And so -- and usually those have been scenarios or companies where we opted not to continue the relationship. And so, I'd say, that's generally how the prepays have broken out.

No change in how we've structured, no change in terms of the profile of companies that we lend to. We do not lend to distressed companies that are bridge financing, out of cash, that were short-term financing partners to them, that's not the relationships we have. Now with regards to the yield profile, again, as you saw, I mean, our yields at the core portfolio have been 13% to 14% regardless of the impact of prepays. That's regardless of the impact of prime, it's been relatively consistent. Now we can't control who prepays and when they prepay. But as you know, the more mature the loan is, the less of an impact it has from a yield perspective because you've already recognized the majority of that into term payment, which -- and potentially other fees, which may cause that income acceleration. And so I'd say again, we can't guarantee that with every prepay, it's going to cause portfolio yield to bump north of 14% because to the extent it's a more robust loan prepay, it's not going to have so much impact. But at the end of the day, still leading the charge and from the asset class from a yield perspective.

Our next question comes from Christopher Nolan of Ladenburg Thalmann.

Andrew, congratulations and wish you the best.

Thank you, Chris.

Sajal, the $75 million to $150 million in guidance that you provided, back of the envelope, it indicates to me that if you achieve that full year regulatory debt to equity ratio, it'd be north of 2x. And what's the priority here, to grow the portfolio or to not dilute shareholders on a NAV per share basis?

Yes, I mean, I think right now, in order for us to even get to the 1 to 1 ratio, we could fund potentially $240 million of incremental debt. So in fund loans, we have incremental debt. And so we look at it as we've kind of given the guidance previously, as we reduced our asset coverage ratio to provide us the headroom. We don't expect to over lever the business, but we want to put it at an adequate leverage point where we're generating the right amount of risk return to our investors. And so, we think over the short run using debt to fund the growth is the right approach.

Plus the reality of prepays, right? So this is, again, given here in the first quarter, we've had, was it $56 million of prepays? So the beauty, Chris is, it's redeploying that capital. So yes, again, from our perspective, we think that looking to leverage as the primary source of funding the portfolio growth this year as well as redeploying the capital from the prepays that we already had and expect to have.

Yes, I understand that. But my point is, what's the reasonable level of leverage? Because by my calculation, if you achieve $300 million in incremental portfolio growth, your regulatory debt to equity is 1.18 and is that a reasonable level of leverage?

After you including prepayments in that?

No, I'm just sort of back of the envelope, just assuming the portfolio grows $75 million per quarter.

Right now, we have under $100 million of leverage on net assets of $335 million. So we have quite a bit of room just even to get up to that 1 to 1 debt-to-equity ratio. So we think we're -- with the prepay and with what we anticipate to fund, we wouldn't expect us to push it above that 1 to 1. We think that 1 to 1 is a reasonable buffer. There might be periods where we were slightly above that, but we wouldn't see -- we wouldn't anticipate any period, where we...

Yes, that's a great -- maybe to get to your bigger question, Chris, right? In the guidance that we gave when we got shareholder approval on our expectation for target leverage, right, we don't need to lever the business up more than 1 to 1, given the return profile of our assets. But having said that, we did say that, during periods where portfolio growth in between capital raises to optimize when we raise equity, we would expect to go north of 1 to 1 to take advantage of that in building portfolio and then waiting for prepays and/or the capital markets to cooperate.

Our next question comes from Casey Alexander from Compass Point.

Yes. Can you tell us what the loan or loans were that prepaid in the fourth quarter that created that amount of extra income?

Yes, it was -- there was 1 loan, which was a prepayment and that 1 that repaid at maturity. The prepayment was the primary driver of the income, and that was View, which is an existing portfolio company. They partially prepared their position with us. They still have existing debt positions with us, or equipment loans that will -- that continue on.

Did they complete the investment with SoftBank?

I don't know if View has publicly announced what has, but we know a significant amount of capital has been funded.

Okay. I may be wrong, but your unfunded commitments, I'm pretty sure that that's record level also. How much of your guidance of funding $75 million to $150 million per quarter is driven by the high level of unfunded commitments that you have right now?

Casey, I think it's a combination of unfunded commitments plus it's the pipeline. It's the -- I think, we had $130 million of deals closed so far this quarter, another $100 million of signed term sheets. So I don't think it's relying on the -- although it's pipe -- or it's backlog with the unfunded commitments. It's also a function of the robustness of the pipeline, the deals that we won, the deals that we're bidding. And actually as Andrew has pointed out, it's actually not a record as a percentage of the portfolio. But again, I think it's the challenge with unfunded commitments or existing portfolio companies, when companies raise large amounts of equity, they may have an unfunded commitment, but we may sit and that may expire unutilized or remaining available amounts may expire undrawn. So you can't rely solely on unfunded commitments to be the source of portfolio growth.

Okay. Could you review for me, again, you guys did give what, up to the date the first quarter fundings and the first quarter repayments were?

Yes, sure.

Yes. The first quarter fundings were $73.8 million and repayments to date -- early principal repayments to date were $56 million.

$56 million. Okay. So you're already in the bottom end of your fundings guidance for the quarter with still 3 weeks to go?

Yes.

Our next question is a follow-up from Ryan Lynch of KBW.

Just one follow-up on -- I'm trying to get a sense, as we kind of talked about the prepayments, it depends on kind of where the life cycle they are that will kind of drive the OID in potential prepayment fees. You guys had $56 million of early prepay or repayments in Q1. Can you at least give us a sense, or if you can quantify how -- where in the life cycle are those prepayments? And what should we expect from a prepayment or accelerated OID standpoint from those prepayments that have already occurred in Q1?

Yes. I don't think we specifically ever disclose the amount, but we would typically expect 1% to 2% of the total loan value to be accelerated income.

This concludes our question-and-answer session. I would like to turn the conference back over to Jim Labe for any closing remarks.

Thanks, operator. I'll close, again, by expressing my appreciation to all of you for your continued interest. And if you can't tell, we're really, really happy here on our very fifth year anniversary of this day to talk about all these records, not just for the quarter, not just for the year, but also for the entire last 5-year period. So thank you, again, for your support. I hope you share our excitement here as we go forward with TriplePoint Venture Growth. Thanks, and we'll speak to you all again soon.

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