This includes companies such as Edge AI, Standard Bots, Valar Atomics and Airalo, all of which raised new equity financing rounds at upticks in their valuations. In fact, in total, during the quarter, 8 active TPVG debt portfolio companies raised approximately $1.2 billion of equity, a meaningful increase from the fourth quarter when 2 companies raised a total of $71 million. Touching on the role of software companies in the AI era, we want to reiterate our view on software and implications to our portfolio. Our investment posture has consistently been to finance the disruptors, not the disruptive. The companies we finance are not the legacy incumbents whose business models are threatened by AI.
Our investments are in the nimble, AI native and AI-enabled companies. We continue to believe AI will be a net tailwind to our software portfolio rather than a headwind or an existential threat. We’re also encouraged by signs of increased growth-oriented activity to venture-backed companies, including strategic M&A activity, particularly in the AI infrastructure. In fact, one of our AI debt investments from last year, Observe AI, was acquired by Snowflake for $650 million during the quarter. The transaction happened quickly and yielded an attractive return on our investment, plus the equity investment we held in Observe was exchanged for publicly traded shares in Snowflake, which is included in our portfolio as of quarter end.
As a reminder, we have a sizable equity investment and warrant portfolio with warrant positions in 117 portfolio companies and equity investments in 60. And as we’ve also previously noted, we hold warrant and/or equity positions in a number of companies that have appeared in industry publications on their notable top IPO candidates list, including Cohesity, ZEVS, Revolut, Dialpad, Filevine and others. We believe these holdings have the potential to be meaningful contributors to our returns in the future, assuming exit activity continues to increase. TPVG also continues to have the strong support of our platform sponsor, TriplePoint Capital, a leader in the venture lending market with a highly regarded brand name and direct origination capabilities.
In fact, our sponsor continued to execute on its discretionary share purchase program of TPVG stock during the quarter. And as a further sign of TPC’s commitment to TPVG, TPC is also the company’s top shareholder, presently holding nearly 5% of the company’s stock outstanding. Additionally, as we previously announced, the adviser waived its full quarterly income incentive fee for each quarter in 2026. Further demonstrating the company’s commitment to implementing shareholder-friendly measures, the Board of TPVG has authorized a discretionary 12-month share buyback program of up to $12.5 million. This is our third stock buyback program based on economic and market conditions over the last 10 years. We recognize there is meaningful work ahead to further strengthen the portfolio.
We remain diligent on that effort and aiming to capture the powerful AI tailwinds in favorable market conditions. As we look ahead, focus remains on disciplined underwriting, maintaining a prudent balance sheet, further diversifying our portfolio and continuing to rotate the book out of the legacy 2020 through 2022 vintage consumer sectors. At the end of the day, our short-term plan is grounded in steady execution quarter-over-quarter and step-by-step to increase our income-generating assets, earnings power and NAV to create enduring shareholder value over the long term. With that, let me turn the call over to Sajal.
Sajal Srivastava: Thank you, Jim, and good afternoon. Q1 was another quarter of disciplined execution and progress as we continue to build a strong foundation and position TPVG for the long term. Beginning with investment activity, TriplePoint Capital signed $256 million of term sheets with venture growth stage companies during Q4, up from $207 million of signed term sheets during Q4 2025.
With regards to new investment allocation to TPVG during the first quarter, given the refinancing of our $200 million term debt tranche, where we elected to reduce our outstanding term debt and lean into our revolver as well as the current level of unfunded commitments, our adviser allocated $1 million in new commitments with 2 companies to TPVG as compared to $90 million of new commitments to 12 companies in Q4. We expect to increase our allocation of new commitments as unfunded commitments expire and as we receive prepayments and repayment over the rest of the year.
During the quarter, our fundings of $26.5 million to 7 companies were within our guided range of $25 million to $50 million for quarterly fundings. These funded investments carried a weighted average annualized portfolio yield of 12.9%. This compares to $92.8 million of fundings to 16 companies in Q4 with an average annualized portfolio yield of 12%. The higher onboarding yields this quarter reflects asset mix as we funded fewer revolving and ABL loans and more term loans during the quarter in addition to slightly higher OID. During Q1, we had $23.6 million in loan prepays, resulting in an overall weighted average portfolio yield of 13.5%.
And excluding prepays, our core portfolio yield was 12.6% — this compares to $44 million of loan prepays and overall weighted average portfolio of 12.7% with prepays and 12.1% without prepays in Q4. During the first quarter, our investment portfolio remained relatively flat as new fundings were offset by prepayment, repayments and amortization within the portfolio. Our 55 obligor count remained consistent with Q4 as well.
As mentioned last quarter, although we continue to see robust demand for debt financing from venture growth stage companies as demonstrated by our $103 million of new term sheets and $26 million of funding so far in Q2, our quarterly target for new fundings continues to be in the $25 million to $50 million range for 2026. With regards to credit activity during the first quarter, Flink was upgraded from Yellow (3) to White (2) as a result of closing a strategic equity round and continued performance. Three consumer-related portfolio companies were downgraded during the quarter as a result of subsector headwinds and slower revenue or EBITDA growth, among other factors.
The first being Forum Brands, also known as Lyra Collective, which originally started out as a platform to acquire online e-commerce sellers and over the years has positioned and focused itself as a consumer product company — sorry, consumer packaged goods company with brands in the personal care and family categories. Despite sector challenges and volatility from tariffs, Forum is starting to show growth year-over-year and continues to be EBITDA positive, both at its brand level and on a consolidated basis.
Outfittery, which is a German custom fashion subscription service for men and women, in 2025, merged with its direct competitor in Spain, Lookiero and continues to make progress in realizing synergies of its merger despite slower-than-expected growth and has near-term line of sight to meaningful EBITDA here in 2026. Finally, Hydrow, a fitness-focused hardware and subscription company, has been experiencing industry-wide demand challenges. However, the company continues to make significant progress improving margins, cutting costs and growing EBITDA. As Jim mentioned, during the quarter, one portfolio company, Observe, was acquired by Snowflake. In connection with the acquisition, the company prepaid its $16 million outstanding loan, and we received shares of Snowflake.
This is a promising development, especially considering we funded our loan to Observe in Q4 2025 and bodes well for additional exit activity we anticipate over the course of 2026. As of year-end, we held warrants in 117 companies and equity investments in 60 companies with a total fair value of $144 million, up $6 million from $138 million of fair value in Q4 with the primary driver being Revolut, which continues to perform exceptionally well with recent media reports mentioning the company is targeting an IPO with $150 million to $200 million valuation target.
Our playbook continues to be focused on building a strong foundation for TPVG and positioning TPVG for the long term by strengthening our balance sheet, driving portfolio scale and quality, rotating the portfolio into newer vintages, increasing the earnings power of our business and growing net asset value and shareholder value over the long term. With that, I will now hand the call over to Mike.
Mike Wilhelms: Thank you, Sajal, and good afternoon, everyone. Total investment and other income for the first quarter was $22.8 million. Our weighted average annualized portfolio yield on debt investments was 13.5% compared to 12.7% in the prior quarter. The increase in yield reflects amendments on certain investments and accelerated income from prepayment activity, partially offset by lower base rates. Approximately 2/3 of our debt portfolio remains floating rate and 79% of those loans are now at their prime rate floors. As a result, we expect the impact of any further interest rate reductions on our net investment income to be limited, particularly as lower base rates would also reduce interest expense on our floating rate borrowings under the revolving credit facility.
Net investment income for the quarter was $9.1 million or $0.23 per share compared to $9.9 million or $0.25 per share in the prior quarter. Net investment income for the quarter fully covered our $0.23 per share dividend. Net asset value as of March 31, 2026, was $8.65 per share compared to $8.73 per share at December 31, 2025. As Sajal discussed in detail, we saw some migration within the portfolio, which contributed to a net unrealized loss of $7 million on active debt investments. An additional $2 million of unrealized losses were driven by foreign currency adjustments and reversals of previously recorded unrealized gains on investments realized during the period.
These unrealized losses were partially offset by $6.3 million of net unrealized gains on the warrant and equity portfolio, most notably from the Revolut fair value increase this quarter. Total operating expenses for the quarter were $13.2 million, net of income incentive fee waivers compared to $12.2 million in the prior quarter. The increase in operating expenses quarter-over-quarter was primarily driven by higher interest rate expense following the March refinancing associated with the increased utilization of the revolving credit facility and higher coupon on the recently issued $75 million notes, partially offset by lower general and administrative expenses. During the quarter, $1.8 million of income incentive fees were earned but fully waived by the adviser.
As a reminder, the adviser’s waiver of the quarterly income incentive fee remains in place through the end of fiscal year 2026. Turning to portfolio activity. We maintained a disciplined approach to new originations and fundings during the quarter. We funded $27 million of new debt investments and received $25 million of repayments during the quarter. Consistent with our focus on reducing unfunded commitments, new originations to TPVG were limited to $1 million for the quarter. As of March 31, 2026, we had total liquidity of $112 million, including $9 million of cash and $103 million of availability under our revolving credit facility.
As mentioned in our prior quarter call, we utilized our revolving credit facility and cash on hand to help address the March 2026 unsecured note maturity and reposition our capital structure. Our fixed rate debt is now 56% compared to 80% at year-end. We remain within our target leverage range and ended the quarter with a gross leverage ratio of 1.27x, down from 1.33x in the prior quarter and a net leverage ratio of 1.25x compared to 1.20x in the prior quarter. We had $207 million of unfunded commitments at the end of the quarter, down from $260 million at year-end. Of these commitments, approximately $51 million are milestone-based and contingent upon borrowers achieving specified performance targets.
The remaining commitments continue to be well laddered over the next several years with approximately $97 million in the 9 months remaining in 2026, $83 million in 2027 and $27 million in 2028. With the March 2026 debt maturity fully addressed, our capital management strategy remains focused on financial flexibility while optimizing our overall fixed to floating debt mix and managing our forward maturity profile. While certain maturities are more concentrated in 2028 as a result of recent refinancing activity, we are actively managing that profile and expect to address those opportunistically well in advance of their respective due dates.
We were pleased that in early April, DBRS reaffirmed our investment-grade credit rating at BBB low with a stable outlook, reflecting the strength of our platform and our continued focus on maintaining a prudent balance sheet. As mentioned by Jim, subsequent to quarter end, our Board authorized a 12-month stock buyback program to repurchase up to an aggregate of $12.5 million of its common stock in the open market at prices below net asset value per share in accordance with Rule 10b-18 under the Securities Exchange Act of 1934. The timing, manner, price and amount of any share repurchases will be determined by the company based upon evaluation of economic and market conditions and other factors.
We believe the program reinforces our focus on enhancing shareholder value. In summary, we maintained a disciplined and selective approach during the quarter, actively managing the portfolio while maintaining dividend coverage and addressing our near-term liabilities. We remain focused on strengthening the portfolio and preserving balance sheet flexibility. That concludes our prepared remarks. Operator, please open the line for questions.
Operator: [Operator Instructions] Our first question today is from Crispin Love with Piper Sandler.
Benjamin Graham: This is Ben Graham on for Crispin Love. I’m just wondering if you could talk about where you’re most interested in putting incremental capital today, at least broadly, what areas of technology you’re most focused on? And then on software specifically, there’s obviously been a lot of noise and moves in the public markets. And I’m just wondering if software is an area where you see opportunities for debt investments? Or are you more likely to stay away from it in the near term?
James Labe: Yes. I think — this is Jim speaking. I think our future continues to be more in AI investing that is being done by the majority of the venture capital funds that we’re working with and — these are not legacy software, historic enterprise software kind of investments. At the forefront of venture lending, this is the category that we’re most interested in. But also, AI is a broad term. Obviously, some of the things I mentioned, cybersecurity, robotics, aerospace and defense and the other verticalized software areas are the ones that remain a strong part of our existing pipeline and future deals under evaluation.
Benjamin Graham: Awesome. And then if you could also maybe just share your latest views on your expectations for M&A and IPO activity for the year. And speaking of this AI disruption, if that has sort of shifted your expectations given the market’s reaction there?
James Labe: Yes. As I mentioned briefly in the prepared remarks, the — the AI valuations, we had one example of a company observed that we cited, but also it seems there has been a slow but steady pickup in M&A activity, and we are seeing increased interest in AI opportunities for mergers and acquisitions. And more importantly, we’re seeing in our warrant and equity portfolio an increase quarter-over-quarter and last quarter, in particular, in terms of interest levels, valuations for companies that could be prospective acquired M&A. Should tech IPOs come back for venture companies as well, there’s a lot of signs there. That could also help.
But certainly, M&A activity is on the rise and interest levels in a number of our portfolio companies from this AI frothiness, however you want to think of it.
Operator: [Operator Instructions] The next question is from Paul Johnson with KBW.
Paul Johnson: So I was just wondering if I could just make it a little bit more clear. Mike kind of touched on this. In terms of the breakdown of the unrealized losses this quarter, I believe you said $7 million or loss related to the debt portfolio. Is that?
James Labe: That’s correct.
Paul Johnson: Okay. Is that credit related? Or is that more mark-to-market spread widening or some mix of the 2?
Mike Wilhelms: Those were primarily related to the 3 downgrades from White to Yellow that Sajal went through. So we had 3 downgrades in the quarter. And so that $7 million of unrealized losses was related primarily to those downgrades. And then we also had about $2 million of FX-related unrealized losses, bringing us to roughly $9 million. And then as I mentioned, we had roughly $6 million of unrealized gains related to the Revolut markup. And so our net unrealized gains for the quarter — sorry, our net unrealized loss for the quarter was roughly $3 million.
Paul Johnson: Got you. Okay. So primarily credit — negative credit-related movements going negatively on the debt portfolio with the offset being primarily from the write-ups in those equity investments?
Mike Wilhelms: That’s correct. equity and warrant investments. That’s correct.
Paul Johnson: And then in terms of the loan amendments, were those amendments associated with those credits that you mentioned that were written down? Or were these just kind of normal course amendments to loans?
Mike Wilhelms: That was actually — yes, I mentioned that in my prepared — I think you’re referring to what I mentioned as it related to our yield. And so that — there were a few amendments, but most notably, there was an amendment to our — one of our top 10 debt positions that was in the middle of an M&A activity and just looking to extend their term ever so slightly. And so we paused the interest rates in the fourth quarter. So it was more of a function of the fourth quarter was — the yield was a little muted given that amendment, and then we returned to a more normalized rate in the first quarter.
Paul Johnson: Got it. Okay. Yes, thanks for clarifying that. And then just wondering on the share repurchase, how interested you are, I guess, in being active with that? And I just ask given where you guys are at, I mean, at this point, you’ve seemed to kind of stabilize the portfolio, still some legacy stuff to work through. You’re waiving fees on top of that. But if you were active with the share repurchase at this point, I mean, scale of the BDC is one of the smallest in the space. I don’t know if there’s mean we all appreciate, of course, the benefit of the share buybacks.
I don’t know how much of a benefit there would be to reducing shareholder equity significantly more than where we’re at today. So I was just wondering to kind of get your thoughts on how active you would look to be utilizing that in the market based on where you are today?
Mike Wilhelms: Yes, understood. I mean when we initially sized it at the $12.5 million that was approved by the Board, the $12.5 million represents roughly 6% of our current market cap. We surveyed our respective BDC peers and found most fall between 5% to 7% of market cap. There are a few outliers that are closer to 10%. So that was in part on our sizing. We also factored in our unfunded commitments, leverage and upcoming debt maturities also when we came to that, which I think, Paul, you’re kind of alluding to is that we are factoring all of that in.
As it relates specifically to your question as far as timing and how active we want to — we recognize that it’s a shareholder-friendly initiative. We want to make a meaningful dent in that program, but we do need to keep in mind our unfunded commitments and our overall liquidity. And so as far as timing on that, that’s TBD. Did that answer your question, Paul?
Paul Johnson: Yes.
Operator: Showing no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Jim Labe for any closing remarks.
James Labe: As always, I’d like to thank everyone for listening and participating in today’s call. We look forward to updating 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.
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TPVG Q1 2026 Earnings Call Transcript was originally published by The Motley Fool
