Earnings Call Transcript - TPVG Q1 2025

Operator, 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, CEO

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 deal-making 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 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. 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, President and Chief Investment Officer

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, Chief Financial Officer

Thank you, Sajal, and hello, everyone. During the first quarter, we funded debt investments 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, Operator

Thank you. Our first question comes from Crispin Love from Piper Sandler. Please go ahead.

Crispin Love, Analyst

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, President and Chief Investment Officer

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, Analyst

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, President and Chief Investment Officer

Sure. As I mentioned earlier, we began the year with significantly improved conditions in the venture market. Our portfolio companies have seen an increase in fundraising and investment activity by venture capitalists, along with a positive outlook for capital markets and exits. This is expected to positively impact our obligors' credit quality. However, due to recent volatility and geopolitical uncertainties, it’s challenging to determine the real-time effects. We are closely monitoring portfolio company performance and will adjust as necessary. Thus far, we have not observed an immediate impact from tariffs on affected companies, and we are approaching the situation daily. Overall, we have not seen any significant impact, but commenting on the outlook for the rest of the year remains difficult due to the volatile market conditions.

Crispin Love, Analyst

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

Operator, Operator

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

Doug Harter, Analyst

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, CEO

Mike, do you want to take that question?

Mike Wilhelms, Chief Financial Officer

We have a target leverage of 1.3 to 1.4 times. Our focus is on growing the portfolio, and we plan to achieve this through debt capital rather than repurchasing shares, which would also increase our leverage.

Doug Harter, Analyst

Okay. Thank you.

Operator, Operator

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

Casey Alexander, Analyst

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, President and Chief Investment Officer

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, Analyst

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, President and Chief Investment Officer

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, Analyst

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

Sajal Srivastava, President and Chief Investment Officer

Correct. Correct. Yeah.

Casey Alexander, Analyst

Okay. Great. It's positive that Outfittery was upgraded. I thought I heard you mention that it was intended to be repaid, but then I heard extended, and I'm not clear on what that means. Are you using this transaction as a chance to exit that loan, or will you still be involved after the deal?

Sajal Srivastava, President and Chief Investment Officer

As I mentioned earlier, our loan was assumed and extended. So, we stayed involved with two private companies, which means there was no expectation for it to be paid off. Instead, we now benefit from having senior security within a much larger enterprise that has a strong profitability profile.

Casey Alexander, Analyst

Really? I mean, why would a change of control not automatically trigger the ability to demand repayment? Am I mistaken?

Sajal Srivastava, President and Chief Investment Officer

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, Analyst

Okay. Regarding the share repurchase, the dividend yield on the stock is 20%. Shareholders may benefit more from a repurchase than from investing new capital. In the years following your initial IPO, you engaged in significant share repurchases. I'm interested in understanding the hesitation to pursue them now, especially since the numbers clearly favor shareholders if you proceed with share buybacks.

Sajal Srivastava, President and Chief Investment Officer

I will address that, and then Mike can add his thoughts. As Jim mentioned, considering our pipeline and the funding of our portfolio, we can enhance our leverage organically through deployment. This will help us achieve our goals of diversifying our portfolio, diversifying obligors, and increasing net interest income. We believe that the visibility we have for near-term portfolio growth makes this a more effective use of resources. If we do not see that growth, we can look into other options to address the dividend yield and our under-leveraged position. However, given our current opportunities and the quality we see, it makes sense to invest in portfolio growth, as it aligns with achieving other long-term strategic objectives for TPVG that are in the best interest of our stakeholders.

Casey Alexander, Analyst

All right. Thank you for taking my questions.

Operator, Operator

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

Brian McKenna, Analyst

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, President and Chief Investment Officer

I’ll address that. Brian, the 13.3% is pretty much in line with our previous quarter. The yield from our Q1 assets is similar to what we're seeing in Q2, though it is down compared to last year due to the Federal Reserve lowering rates over the past year. This reflects the current market situation, but we are still attracting high-yielding, high-quality assets. Regarding sector rotation, we are pleased with the companies we've added, especially in the last two quarters, as most of our investments have gone into new obligors and sectors where we had less presence, such as AI and enterprise software. We’re excited to expand our exposure to these strong sectors, particularly given the current market volatility.

Brian McKenna, Analyst

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, President and Chief Investment Officer

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, Analyst

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 has 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, President and Chief Investment Officer

I believe we've discussed this in previous calls. Absolutely, we are always learning. Anyone who claims otherwise is not managing a credit business effectively. Over the last couple of years, we've gained significant insights. Jim and I have navigated multiple cycles together throughout our 25 years of collaboration. We learn something new every day. Each cycle presents unique challenges across different sectors, funds, and syndicates. The key takeaway from recent years is that we operated in a zero interest rate environment, which made capital-intensive business models appealing to both equity investors and lenders. When capital costs shifted, the changing market conditions made it more difficult for those high burn businesses to reduce their expenditures to reasonable levels. Additionally, there have been syndicate challenges involving non-traditional investors in the capital structure. Venture capitalists behave differently than strategic or financial investors, leading to varied priorities in pricing, company valuation, and investment protection. These insights emphasize the importance of maintaining an appropriate leverage ratio relative to the equity base. The encouraging news is that, as we deploy our resources today, we're drawing on the lessons from the past 25 years. With Jim’s nearly 40 years of pioneering work in the industry, we are enthusiastic about our current strategies and the ways we are adapting to and managing through the current environment.

Brian McKenna, Analyst

Helpful. Thanks, Sajal.

Operator, Operator

Our next question comes from Christopher Nolan from Ladenburg Thalmann. Please go ahead.

Christopher Nolan, Analyst

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

Sajal Srivastava, President and Chief Investment Officer

Mike…

Mike Wilhelms, Chief Financial Officer

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, Analyst

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, President and Chief Investment Officer

Yeah. I would say…

Christopher Nolan, Analyst

This is a genuine concern, as you have to wonder if the Board really understands what they are doing if they are approving this.

Sajal Srivastava, President and Chief Investment Officer

Yes, I would agree with that. Given that we have floating rate loans with prime floors, as rates decrease, we won't see a reduction in yield, which is positive. We will benefit when our cost of capital decreases, particularly with our floating or revolving facility. However, we face challenges due to concentration and the variability of our portfolio. To manage this and transition away from sectors vulnerable to recession or economic difficulties, we need to grow the portfolio. It's a balancing act. We believe that as long as we focus on high-quality portfolio growth to meet our long-term goals, such as diversification and sector rotation, we are on the right path. While we are not ruling out other options in the long-term, for the next one to two quarters, we believe growing the portfolio is the best capital strategy.

Christopher Nolan, Analyst

Okay. Thank you.

Operator, 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, CEO

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, Operator

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