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TriplePoint Venture Growth BDC Corp. misses on earnings expectations. Reported EPS is $0.27 EPS, expectations were $0.3.

Operator: Good afternoon, ladies and gentlemen. Welcome to the TriplePoint Venture Growth BDC Corp. First Quarter 2025 Earnings Conference Call. At this time, all lines have been placed in a listen-only mode. After the speaker’s remarks, there will be an opportunity to ask questions, and instructions will follow at that time. This conference is being recorded, and a replay of the call will be available in an audio webcast on the TriplePoint Venture Growth website. Company management is pleased to share with you the company’s results for the first quarter of 2025. Today, representing the company is Jim Labe, Chief Executive Officer and Chairman of the Board; Sajal Srivastava, President and Chief Investment Officer; and Mike Wilhelms, Chief Financial Officer.

Before I turn the call over to Mr. Labe, I’d like to direct your attention to the customary Safe Harbor disclosure in the company’s press release regarding forward-looking statements, and remind you that during this call, management will make certain statements that relate to future events or the company’s future performance or financial condition, which are considered forward-looking statements under federal securities law. 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 does 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 reflects 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’d like to turn the conference over to Mr. Labe.

Jim Labe: Thank you, Operator. Good afternoon, everyone. And welcome to TPVG’s first quarter earnings call. Following some positive developments in the venture markets in the fourth quarter, venture capital dealmaking continues to absorb and assess the uncertainties over tariffs, and the broader equity market sell-off and macroeconomic volatility, and the impacts that all of these have on their portfolio companies. With that said, investment activity remains underway and we’re experiencing strong demand from quality venture growth companies, some of which is fueled by this market. Given this backdrop, we continue to remain selective and capitalize on attractive lending opportunities, particularly in the sectors we’re focused on, as we stay on our course of portfolio diversification and investment sector rotation.

We also remain focused on proactively managing the portfolio and maintaining our strong liquidity to position TPVG for the future. Q1 signed term sheets with venture growth stage companies at our sponsor, TriplePoint Capital, finished strong and marked the second consecutive quarter of more than $300 million in signed term sheets at venture growth stage companies. It now totals almost $640 million during the last two quarters. Debt commitment to TPVG also increased in Q1, as new debt commitments to venture growth stage companies in the quarter reached two-year highs, and this strong pace continues into this quarter. Fundings for the quarter landed at $28 million and while we’re only slightly past one-third of the way into the current second quarter, we’ve already funded more than $50 million.

The Q2 fundings to-date compare favorably with our quarterly fundings guidance, and we believe starts to reflect the early results of the increases we’re experiencing in the signed term sheets, commitments, fundings, and pipeline, as well as the increasing investment activity by our select venture capital investors over the last few quarters. Activity in our market is being driven both by the entrepreneurs and the investors who increasingly recognize venture lending as a strategic tool. Some drivers behind the increasing demand we’re experiencing, including the mounting backlog of high-quality companies in the IPO queue, waiting for public markets to reopen. Quality growth stage companies pushing off timing of their next equity financing round, companies executing on their growth plans, those seeking financing for accretive and opportunistic acquisitions, and given these market volatilities, quality companies previously without debt whom are turning increasingly towards debt as part of their financing and capitalization strategies in this market.

Going forward, we expect this strengthening demand for venture lending to continue throughout the year, fueling our expectations of renewed portfolio growth in 2025. As these venture growth companies seek strategic financing for these reasons and amid the fluctuating capital markets and macroeconomic uncertainties. During the quarter, we generated net investment income of $0.27 per share and declared our regular $0.30 per share dividend. We’re pleased with the pace of our signed term sheets and fundings to-date and recognize that portfolio growth, as well as prepayment activity over the course of the year will have a material impact on our ability to cover our distribution. We will be continue — we will continue to be mindful of both as the year progresses.

Turning to the portfolio, for the first quarter, there were no credit downgrades and there was one upgrade. No new companies were added to the watch list. We will continue to be vigilant during these market conditions and we’ll discuss credit in more detail shortly. One portfolio note to address are these tariffs, which continue to be unpredictable and whose changing nature make it a difficult exercise to fully assess the impact on our portfolio. Based on our analysis of the portfolio and subject to any future tariff announcements and implementation changes, which are evolving daily and subject to country-specific negotiations, we believe we have a small handful of TPVG companies with exposure and primarily those consumer and e-commerce businesses sourcing from overseas, which Sajal will cover in more detail.

Aside from this, we’ve been following our well-prescribed path to portfolio diversification and industry sector rotation, continuing to actively add new borrowers in durable, high-potential sectors such as AI. Many companies we added to our portfolio this past quarter are reflective of this investor shift towards AI, including TetraScience, ThoughtSpot and Airdew [ph]. TetraScience is an AI-native data management solution for scientific use cases. ThoughtSpot is an AI analytics platform for all enterprises. And Airdew is accelerating the performance of large AI models and infrastructure. We’re excited by the market opportunity AI presents and believe AI will be a massive megatrend that persists for many years to come. Other companies reflecting our continued diversification and investment sector rotation include those operating in innovative and specialized software solutions, deep tech, machine learning, robotics, cybersecurity and satellite technologies, insure tech, fintech, health tech and others.

All these sectors offer exciting investment opportunities and are experiencing strong investment momentum. As we’ve stated on past calls, our focus in these new sectors continues to be on companies that have recently raised capital, have ample cash runways, backing from our select venture capital investors and prudent management teams with business models that have attractive unit economics and high retention rates. We continue to place an emphasis on today’s stronger companies and opportunities in this market including better capitalized growth stage companies, those with higher levels of revenues, promising growth trajectories, visibility to profitability and business models reflective of today’s venture market conditions and valuations.

We also continue to factor in and consider both potential tariff issues that could be faced and the possibility of any future macroeconomic recessionary effects when evaluating prospects as well, including actively avoiding sectors that are experiencing first order direct effects from tariffs or government spending reductions. While we’ll continue to maintain our careful discipline and opt for quality over quantity, given the market conditions and the pickup in investment activity by our select venture investors, we see increased deployment of our capital and venture growth stage investments, concentrating solely on our investment sectors of focus, as well as increasing portfolio developments through the year, all of which we believe will enable us to continue to execute on our plan to increase TPVG scale, durability, portfolio diversification and income generating assets with the objective to grow the portfolio.

With that, let me turn the call over to Sajal.

Sajal Srivastava: Thank you, Jim, and good afternoon. Regarding investment portfolio activity during Q1, TriplePoint Capital signed $315 million of term sheets with venture growth stage companies, compared to $130 million of term sheets in Q1 2024 and $323 million in Q4. With regards to new investment allocation to TPVG during the first quarter, we allocated $77 million in new commitments with five companies to TPVG, compared to $10 million in Q1 2024 and $72 million in Q4. 80% of the commitments made during the first quarter were to new portfolio companies in the AI and enterprise software sectors, reflecting our focus on obligors’ diversification and sector rotation. During the first quarter, we funded $28 million in debt investments to five companies, as compared to $14 million to three companies in Q1 and $50 million to three companies in Q4.

These funded investments carried a weighted average annualized portfolio yield of 13.3%, down slightly from 13.5% in Q4. TPVG was at the low end of our guided range for fundings, primarily due to timing, with a number of fundings occurring immediately after quarter end, as demonstrated by our $50 million of fundings already here in the second quarter. During Q1, we had $17 million of loan prepayments, primarily from more season loans, resulting in an overall weighted average portfolio yield of 14.4%, as compared to core portfolio yield of 14.1%, excluding prepayments, which was slightly down from core portfolio yield of 14.2%, excluding prepayments in Q4. Four portfolio companies with debt outstanding raised $137 million during the quarter, compared to six portfolio companies raising $96 million in Q4.

As of quarter end, we held warrants in 102 companies and equity investments in 48 companies, with a total fair value of $117 million, flat from Q4. As Jim mentioned, no new companies were added to our credit watch list during the quarter, and the weighted average, sorry, the weighted investment ranking of our debt investment portfolio was 2.12, as compared to 2.27 as at the end of the prior quarter. One company, Outfittery, was upgraded from Category 3 to Category 2 as part of its announced merger with Lookiero, where our loans were assumed in full and extended. The combined business, which will continue to focus exclusively on European markets, announced they are projected to generate over $130 million in revenues this year. We continue to have the same five companies in our Category 4 ranking.

These are not new situations or reflective of our recent originations. These are companies that we generally identified years ago as challenged, and we continue to work with them and their investors to target profitability, liquidity and or exit events. With regards to tariffs, as Jim mentioned, although the situation is evolving, we have reviewed our portfolio to identify those companies potentially impacted and continue to monitor the potential near-term and long-term impact. We have not seen any impact to our AI, software, B2B and enterprise-focused portfolio companies, and believe that the risk, if any, lies with our consumer and e-commerce companies. We benefit from the fact that many of our consumer and e-commerce companies are either European companies primarily selling in Europe or U.S. companies that source locally.

The few U.S. and European companies that we have determined may have some U.S. tariff exposure are primarily companies that source their products throughout Asia and sell in the U.S. Most of them are actively working to see if there are opportunities to change their supply chains and source products in lower tariff regions, increase pricing and/or expand their sales outside of the U.S. We expect to know more as the administration’s long-term approach is solidified, but we as of yet have not seen any material business impact to these few companies, but they are all preparing for it. On a more broader basis, we are seeing a significant increase in the volatility in the market and macro activity. As of yet, we have not seen material changes in venture capital equity investment activity from traditional venture capital investors.

Although there was optimism earlier in the year that the IPO and M&A markets would open soon in 2025, we believe that the capital markets are closed for the time being, which is creating increased demand for investment capital, including debt financing. We expect more will be known over the course of the year, but as Jim mentioned, we continue to see and manage our pipeline in a disciplined fashion and probe prospective companies and the potential impact of these sources of volatility on their businesses as we determine whether they are worthy of our capital. As we step back, we saw improving market conditions in the venture capital market in the first quarter, both from a deal activity basis and from an equity fundraising perspective, and believe those events will bode well for the outlook for our obligors and their credit quality.

But given the recent volatility and the geopolitical uncertainty, we will continue to real-time assess portfolio company performance and outlook over the course of the year and update our marks and values accordingly. During the quarter, we’ve also participated in Revolut’s secondary process, selling $2.3 million of our holdings, resulting in a realized gain of $2.3 million on our initial investment. The secondary process was originally announced in August 2024 at a $45 billion valuation primarily for Revolut employees. We continue to hold $34.4 million of warrants and equity at fair value in Revolut. As some of our investors may be aware, Revolut just filed its annual financials in April and announced the revenues of $4 billion, up 72%, and net profit of 1 billion, roughly double from 2023.

In closing, we remain focused on executing our plan for position TPVG for 2025 and beyond by building overall scale, diversification and durability, targeting well-positioned and well-capitalized new customers in attractive sectors, and increasing the pace of new commitments and investment fundings. We will remain disciplined and mindful of the volatile market environment as we continue along the path with the goal of driving TPVG’s earning power over the course of 2025. With that, I will now turn the call over to Mike.

Mike Wilhelms: Thank you, Sajal, and hello, everyone. During the first quarter, we funded debt investment totaling $28 million and had a relatively low level of prepayments and early repayments of $18 million when compared to recent quarters, which resulted in an increase to the debt portfolio by $5 million. With the strong investment pipeline previously mentioned by Jim and the company’s current liquidity strength, we believe we are well positioned to grow our portfolio and create long-term shareholder value. We ended the quarter with $117 million of floating rate unfunded investment commitments, of which $19 million was dependent upon certain portfolio companies reaching specific milestones. This represents a 60% increase from a year ago, reflecting the continued expansion of our investment pipeline over recent quarters.

TPVG has ample liquidity to support our existing portfolio companies and satisfy our unfunded commitments. As of March 31, 2025, the company had total liquidity of $337 million consisting of cash, cash equivalents, and restricted cash of $42 million and available capacity under its revolving credit facility of $295 million. Of the $295 million of available capacity under the revolving credit facility, there was $124 million of available borrowing base that could be drawn as of March 31, 2025. We reduced our leverage profile during the quarter, ending with a leverage ratio of 1.10 times. After netting the cash on our balance sheet, our net leverage stood at 0.97 times. Given the cash we have on our balance sheet, the available borrowing base at quarter end and our target leverage range of 1.3 times to 1.4 times, we believe we have the funding capacity to meaningfully grow our investment portfolio.

Turning to our operating results, for the first quarter, total investment income was $22.5 million with a portfolio yield of 14.4%, as compared to $29.3 million with a portfolio yield of 15.4% for the prior year period. The decrease in total investment income was due primarily to a lower average debt portfolio as compared to a year ago, while the lower portfolio yield reflected the impact of prime rate reductions and less accelerated prepayment income in the quarter. For the first quarter, total operating expenses were $11.7 million, as compared to $13.8 million for the prior year period. These expenses consisted of $6.4 million of interest expense, $3.3 million of base management fees, $602,000 of administrative agreement expenses and $1.4 million of G&A expenses.

Due to the shareholder-friendly total return requirement under the incentive fees, there were no incentive income, sorry, there were no income incentive fees during the first quarter of 2025 and 2024. We expect limited to no incentive fee expense during the remainder of 2025. The company’s net investment income for the first quarter of 2025 was $10.7 million or $0.27 per share, as compared to a net investment income of $15.5 million or $0.41 per share for the first quarter of 2024. For the first quarter of 2025, net realized gains on investments totaled $2.3 million, resulting primarily from the partial sale of equity in one portfolio company. During the first quarter of 2024, the company recognized net realized losses on investments of $8.8 million.

Net change in unrealized losses and investments was $0.3 million for the current quarter, consisting of $2.5 million of net unrealized losses from the reversal of previously recorded unrealized gains on investments realized during the period, and $1.6 million on the debt investment portfolio, resulting from fair value adjustments, offset by $2.6 million of net unrealized gains from foreign currency adjustments, and $1.2 million of net unrealized gains on the existing warrant and equity portfolio, resulting from fair value adjustments. During the first quarter of 2024, the company recognized net unrealized gains on investments of $1.3 million. The company’s net increase in net assets resulting from operations for the first quarter of 2025 was $12.7 million or $0.32 per share, as compared to net increase in net assets resulting from operations of $8 million or $0.21 per share for the first quarter of 2024.

As of March 31, 2025, net asset value was $347 million or $8.62 per share, compared to $345.7 million or $8.61 per share, as of December 31, 2024. On April 30, our Board declared a regular quarterly dividend of $0.30 per share, with a record date of June 16th to be paid on June 30th. We continue to retain sizable undistributed income with estimated spillover income of $42.5 million or $1.06 per share at the end of the period. We are focused on increasing our net investment income in the coming quarters through debt investment portfolio growth and increasing balance sheet leverage. Now, an update on our debt capital structure and balance sheet leverage. As of quarter end, total debt outstanding was $380 million, consisting of $375 million in fixed rate investment grade term notes and $5 million drawn on our $300 million revolving credit facility.

During the quarter, we raised $50 million in aggregate principal through a private issuance of senior unsecured investment grade notes due February 2028. In March, $70 million of senior unsecured investment grade notes matured and was fully repaid. This net reduction in fixed rate term debt reduced our leverage ratio, which declined from 1.16 times as of December 31, 2024, to 1.10 times as of March 31, 2025. We have three term debt maturities scheduled for March 2026, February 2027 and February 2028. Later this year, we plan to evaluate refinancing options for the $200 million of notes maturing in March 2026. In April 2025, DBRS reaffirmed TPVG’s investment grade rating in connection with the fixed rate term notes, assigning a BBB low long-term issuer rating with a stable trend outlook.

This completes our prepared remarks today, and so, Operator, could you please open the line for questions at this time?

Operator: Thank you. [Operator Instructions] And our first question comes from Crispin Love from Piper Sandler. Please go ahead.

Crispin Love: Thank you and good afternoon. First, can you share your fundings outlook for the second quarter and beyond? You called out more than $50 million in funding so far in the second quarter. So, have you updated your $25 million to $50 million quarterly fundings guide for 2Q, or more importantly, your expectations for later in the year? And apologies if I missed that in my prepared remarks.

Sajal Srivastava: Oh! Hi, Crispin. This is Sajal. I’ll take it. So, as we said, yes, our outlook for the first half of the year is $25 million to $50 million a quarter. And so, we have not changed the outlook for Q2 on a full year or, sorry, midyear basis when we combine Q1 and Q2. So, we think we’ll make up the shortfall for Q1 here in Q2.

Crispin Love: Okay. Sounds good. And then, just looking at the credit metrics, first quarter appears to be pretty stable. No material losses in realized or unrealized and the migration in your credit categories was pretty positive. So, can you speak to your views on credit today, the outlook going forward, especially with the environment being much different today versus the end of the first quarter?

Sajal Srivastava: Sure. And I — as I said in my prepared remarks, we started off the year seeing really improved market conditions in the venture market. Our portfolio companies increased fundraising activity, increased investment activity by VCs, positive outlook for the capital markets and the exit environment. And so, again, expecting that to bode well for our obligors in credit quality. But obviously, with Liberation Day and other volatility and geopolitical uncertainty, it’s hard to assess that’s a real-time impact. So, I would say, we’re on top of the portfolio monitoring company performance and outlook, and then we’ll adjust accordingly. But also, as I said, listen, we have not seen an immediate impact of tariffs so far to those companies that would be impacted or have some impact.

So, I think we’re taking it day-by-day real time, but we have not seen a material impact. But I think it’s hard to comment and outlook for the rest of the year right now, just given the volatile market conditions.

Crispin Love: Great. Thank you. It all makes sense and I appreciate the comments, Sajal.

Operator: The next question comes from Doug Harter from UBS. Please go ahead.

Doug Harter: Thanks. I was hoping you could talk about your willingness to do share repurchase as a way to kind of bring leverage up to the target range versus making new investments and how you think about that tradeoff?

Jim Labe: Mike, do you want to take that question?

Mike Wilhelms: Yeah. I mean, we are — as I mentioned in my prepared remarks, we have a target leverage of 1.3 times to 1.4 times. So, for us, we’re looking to, as we’ve stated throughout the prepared remarks, grow the portfolio and we plan to do that with debt capital rather than repurchasing any shares that would have the same effect of bringing our leverage up.

Doug Harter: Okay. Thank you.

Operator: The next question comes from Casey Alexander from Compass Point. Please go ahead.

Casey Alexander: Yeah and thanks for taking my questions. I’ve got a few here. Sajal, in that guide, normally you give us some view of what you expect repayments and prepayments might be during the quarter. Do you have any view of that in the second quarter?

Sajal Srivastava: Yeah. I think, Casey, we still expect, on average, one to two prepayments per quarter. I think, as we saw in Q1 and in Q4, we’re seeing these are from older vintages. So, the impact from an NII perspective is low. So, we don’t expect it to materially impact NII, but we still expect one to two a quarter.

Casey Alexander: Okay. And then, secondly, curious how, that was the sale of Revolut. This is like a multi-pronged question. I’m curious how you guys got in there, because you’re not actually employees. Did you have the opportunity to sell more? And also, how did the sale compare to your fourth quarter mark on those shares?

Sajal Srivastava: Yeah. So, I’d say the Revolut launched this process, I believe it was August of 2024. And, as mentioned, it was intended to be an employee-only transaction. And then, over the course of 2024, I guess, based on strong investor demand, they opened it up to a very small percentage to its institutional investors. So, we were able to participate through thanks to Revolut, allowing us and other institutional investors to secondary a very, very small amount. So, it was very much thanks to Revolut and it’s a very controlled process for secondary. So, we don’t see the opportunity unless Revolut opens it up again, which there’s been some talk in the press about potentially another secondary, but it’s all speculation at this point. And then, yeah, generally kind of on par with our mark, maybe a little bit of transaction costs, but I believe generally in line.

Casey Alexander: So, the $2.3 million or $2.5 million gain was mostly a reversal of previously unrealized gains then?

Sajal Srivastava: Correct. Correct. Yeah.

Casey Alexander: Okay. Great. On Outfittery, it’s great that it was upgraded. I thought I heard you say — I misunderstood because it sounded like the intention was for it to be repaid, but then I heard extended, and I’m not sure what’s what there, whether you’re using the transaction as an opportunity to exit that loan or if you’re still going to be in it subsequent to the deal?

Sajal Srivastava: Yeah. No. As I mentioned in my remarks, our loan was assumed and our loan was extended. So, we stayed in — it was a private-to-private, so these are two private companies, so it wasn’t a scenario to be paid off. It was a scenario where we now have the benefit of security, being senior security in an enterprise much larger now with a strong profitability profile.

Casey Alexander: Really? I am — I mean, why would a private — just a change of control, I thought, would automatically trigger an ability to demand repayment. Am I mistaken?

Sajal Srivastava: Yeah. It was, again, a coordinated consolidation of the company, so I would say it wasn’t a scenario where we wanted to demand repayment or had the opportunity to.

Casey Alexander: Okay. And then, back to the share repurchase, I mean, the dividend yield on the stock is 20%. There is likely greater leverage for shareholders in a repurchase than there is in putting new money out. And you have in the past, in the few years after your initial IPO, you did do some substantial share repurchases. I’m curious why the reluctance to do them now when it — when the math clearly works in favor of shareholders if you do some share repurchases?

Sajal Srivastava: Yeah. I’ll take that, Casey, and then Mike, you can jump in. But I’d say, as Jim talked to, given the pipeline and the line of sight, the portfolio funding, so we can increase our leverage organically through deployment and it’s going to help achieve our objectives of portfolio diversification, obligor diversification and growing NII. So we think, given the line of sight we have to near-term portfolio growth, it’s a better use. And then if we don’t see that portfolio growth, then exploring other options and other ways to, you know, address the dividend yield, address being under-leveraged. But I think where we see the opportunity and the quality and achieving the other strategic long-term objectives for TPVG makes sense to deploy in portfolio growth, because it — again, it helps us achieve some of the other elements of the playbook that we’ve articulated that are in the better long-term interest of the stakeholders.

Casey Alexander: All right. Thank you for taking my questions.

Operator: The next question comes from Brian McKenna from Citizens. Please go ahead.

Brian McKenna: Thanks. Good evening, everyone. I appreciate all the detail on quarter-to-date funding. Two more questions on that front. Apologize if I missed these, but any sense of the weighted average yield on these investments? I’m curious how this compares to 13.3% reported in the first quarter. And then what does the sector mix of these investments look like?

Sajal Srivastava: Yeah. I’ll take this. So, Brian, generally the 13.3% is kind of consistent with where we were last quarter. So generally the yield asset of the Q1 assets and what we’re seeing here in Q2 as well, obviously down year-over-year, just given the Fed the rates that have come down since a year ago. So I would say that kind of is dealing with the reality, but, again, still attracting high-yielding, high-quality assets. And then as we look at sector rotation, I think that’s even, we’re very proud of the companies that we’ve added, particularly the last two quarters, where not only the majority of our deployment has been into new obligors, but they’ve also been in new sectors or in sectors that we’ve been underrepresented, such as AI and enterprise software. And so, really glad to expo — increase our exposure to those other sectors and really solid, strong vertical sectors, particularly given the volatility in the market right now.

Brian McKenna: Got it. That’s helpful. And then I guess on the portfolio rotation, I mean, where are you in this process? Is there a way to think about how much more the portfolio on a percent basis still needs to be rotated? I’m just trying to think through that a little bit more as well?

Sajal Srivastava: Yeah. I would say we still have a couple of quarters to go, I would say, early in the journey. And it’s not just about sector rotation. It’s about portfolio scale. And so it’s about increasing the earnings power of the business to ensure coverage of distribution. So I’d say early, hard at work. We’re not going to rush it. We’re going to continue to be disciplined as we look at opportunities. So I’d say those are our goals, but we’re not going to get there overnight. We’re going to take our time and do it methodically and thoughtfully.

Brian McKenna: Okay. That’s helpful. And then one more follow up, if I may. Just a bigger picture question. So it feels like the industry and your business is finally on the other side of a pretty lengthy downturn here. TriplePoint is operated through a number of different cycles and operating environments over the past two decades. So reflecting back a little bit on the last few years, I mean, is there anything that you’ve learned from this most recent downturn? Anything you maybe would have done differently from a portfolio or business perspective? And then, ultimately, what are you doing today to make sure you’re in the best position to navigate kind of any and all environments moving forward?

Sajal Srivastava: Yeah. I think we’ve answered this a couple of calls. Absolutely. Always learning. So anyone that tells you that they haven’t or shouldn’t or won’t — it’s not the way to run a credit business. So absolutely. There’s been a fair amount of learning over the past couple of years. Every cycle again, Jim and I have been through multiple cycles together, as you mentioned, over our now 25 years of working together. So I’d say we’re learning every day. And I say it’s different. It’s very much stage sectors, funds, syndicates. I mean, every cycle there’s some new elements. But I would say, the big thing to take away from the past couple of years is, we were operating in a zero interest rate environment.

And so we saw business models that were quite capital intensive that both equity investors and lenders were supportive of. And when the cost of capital changed, the market conditions changed. It was harder than we all thought for those high burn businesses to bring that burn back down to more reasonable levels. So I’d say that’s one element. And then I think we definitely saw an element of syndicate issues with non-traditional investors in the cap table. And so VCs act differently than strategics, then act differently than financial investors. And so, they have different alignment in terms of their objectives when they have — when it comes to pricing, the valuation of a company or protecting an investment. So I’d say these are some of the takeaways, appropriate amounts of leverage vis-à-vis the equity base.

So I’d say the great news is, as we deploy now, we’ve learned from the 2025 years, Jim and I together, Jim’s almost 40 years in the industry as a pioneer. And so and we’re excited about what we’re seeing and how we’re deploying today and learning from that and managing through the current environment.

Brian McKenna: Helpful. Thanks, Sajal.

Operator: [Operator Instructions] Our next question comes from Christopher Nolan from Ladenburg Thalmann. Please go ahead.

Christopher Nolan: Hey, guys. What percentage of the debt investments are at their floors?

Sajal Srivastava: Mike…

Mike Wilhelms: Roughly 35%. Yeah. Sorry, I jumped in there. Yeah. Roughly 35%. So we have 62% of the portfolio is floating and roughly 35% is at the floor.

Christopher Nolan: All right. Can you walk me through this dynamic? Because I’m going to go back to a dug in case we’re talking about these repurchases and it makes no sense to me. You’ve got a good chunk of your investment portfolio no longer at the floor. The forward curve is implying more than one Fed rate cut. Your 10-Q shows that your earnings are impacted by lower rates. Your new investments are show the yields are. Your dividend yield is 20.4%. Your stock is trading 32% below book. And you want to grow the portfolio rather than buy back stock. I mean, it just seems to be a no brainer to buy back stock and aggressively. And I don’t mean to…

Sajal Srivastava: Yeah. I would say…

Christopher Nolan: …but it’s a — this is a real, it’s a real question mark, because who — I mean, if the Board is signing off on this, you got to ask whether or not they really know what they’re talking about?

Sajal Srivastava: Yeah. I mean, Chris, I’d say so. So, again, I think the again, by virtue of them being at the floors, it means that as rate goes down, rates go down, that we won’t see reduction in yield. So that’s the good news, right? Of having fixed rate, sorry, floating rate loans with prime floors that are locked in. So we won’t see — we’ll only see the benefit as our cost of capital and the leverage side on our floating or revolving facility reduces. I think the issue, though, is, listen, one of the challenges we have is our concentration and our chunkiness and lumpiness. And so the only way to achieve that plus rotate out of sectors that may be more impacted by recession or other challenging economic environments is to grow the portfolio.

So it’s a balance. We’re not saying — so we’re saying as long as we continue to see, have line of sight of high quality portfolio growth to achieve long-term objectives like portfolio diversification, sector rotation, increasing. Some of the other goals and objectives, making ourselves more diversified, we think that’s the right to navigate in the near-term. And then again, we’re not suggesting in the long-term that isn’t an option or in the realm of possibility. But as we look to the next one to two quarters, we think that’s the best use of capital.

Christopher Nolan: Okay. Thank you.

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

Jim Labe: Thank you, Operator. As always, I’d like to thank everyone for listening and participating in today’s call. We look forward to updating you and talking with you all again next quarter. Thanks again and have a nice day.

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