Earnings Call Transcript - TPVG Q1 2021

Operator, Operator

Good afternoon ladies and gentlemen and welcome to the TriplePoint Venture Growth BDC First Quarter 2021 Earnings Conference Call. This conference call is being recorded and a replay of the call will be available and an audio webcast on the TriplePoint Venture Growth BDC website. Company management is pleased to share with you the company’s results for the fourth quarter and full fiscal year 2020. Today, representing the company is Jim Labe, Chief Executive Officer and Chairman of the Board; Sajal Srivastava, President and Chief Investment Officer; and Chris Mathieu, Chief Financial Officer. Before I turn the call over to Mr. Labe, I would like to direct your attention to the customary Safe Harbor disclosure in the company’s release regarding forward-looking statements and remind you that during this call, management may 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’re asked to refer to the company’s most recent filing 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 reflect 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 would like to turn the call over to Mr. Labe.

Jim Labe, CEO

Thank you, operator. Good afternoon and thanks for joining us for our First Quarter 2021 Earnings Call. It has been a little more than a year into the pandemic, and we liken the changes during this period to a pendulum swing. In the early months of the pandemic, the overriding focus was on survival and now more than a year later, the pendulum has swung the other way today. The topics of focus are now on record levels of venture capital investment, record valuations, record exit activity, and the strong demand for venture lending. The venture capital ecosystem has demonstrated its strength and its resilience during 2020, and we are all off to a robust start here in 2021. The strong investment activity environment enhances the prospects and credit quality of our existing portfolio companies. It also drives demand for debt financings from new companies, enabling us to achieve our portfolio growth goals. Over the course of the year, our focus remains on continuing to execute on our playbook and the work we're doing now will translate to a very busy second half of the year, given this pickup in venture investment, venture fundraising and our growing pipeline. As we progress through the remainder of the year, we will remain disciplined and balanced in response to adapting to the post-COVID recovery. We will continue our exclusive focus on high-growth companies backed by our group of leading select venture capital investors. Given our experience in the field and our franchise, TPG has never been better positioned to capitalize on today's market. When you have substantial liquidity lined up and combine it with standing venture capital relationships and a strong pipeline, that's the formula for driving outsized growth. During the first quarter, we continued to position ourselves to take advantage of the strong demand we are seeing from venture growth stage companies. We expect this to continue throughout 2021 and in the first quarter we increased signed term sheets by 142% year over year. Our pipeline continues to be more than a billion. We expect to accelerate funding throughout 2021 and our ample liquidity has been further enhanced in the first quarter through upsizing our credit facilities and completing our second investment-grade notes offering under very attractive terms. During the quarter, we also increased our Net Asset Value (NAV), which was driven by growing our Earnings Per Share (EPS) to 38 cents and the significant progress we have made in strengthening our credit quality, which has resulted in TPG's very strong credit outlook. While we under-earned our distribution for the quarter, we expect to make it up during the year based on prepayment, our healthy spillover income, and our expectation that fundings will continue to accelerate throughout the year. We remain in a strong position to generate Net Investment Income (NII) in excess of our distribution over the long term. In fact, over the last four years and cumulatively since our IPO, we have over earned our distribution. We've also paid three special distributions, including one that we just made last week. Additionally, another trend that we will benefit from is the acceleration of exit events and their income contracts. During the first quarter, 50 venture capital-backed companies went public, including our portfolio companies, HIMS and View, which completed their SPAC mergers during the first quarter. There are currently two additional TPG portfolio companies that are in the process of going public via a SPAC and a number of others in very active discussions. Our portfolio companies remain strong, and we are pleased with how they have adapted to the new environment, putting 2020 behind them and positioning themselves to excel in the emerging post-COVID world. Market conditions remain very favorable for us. In the first quarter, a record $52 billion of capital was deployed across almost 1,300 deals in the late-stage venture market. This is the segment in which TPG operates and targets. More importantly, we remain in regular and active dialogue with our select venture capital investors to help maintain a high-quality pipeline consistent with our investment objectives. We have not stopped or dropped our venture capital partner interactions to chase near-term deal flow per our playbook. Now is the time to be just as proactive in our interactions with them as we were a year ago during the peak of the pandemic. This helps us gain insight, understand market dynamics, and match our activity alongside them, ensuring we remain ready to support their existing and new venture growth stage portfolio companies. To summarize, we are bullish about TPG's outlook; the fundamentals are there, the demand is robust, and the second quarter is already off to a strong start. We have a sizable backlog, pipeline, and liquidity position, and we expect to continue to draw on our differentiated platform, best-in-class management, and strong relationships with select venture capital investors to grow prudently. As we look to the future, we continue to foresee a strong and stable yield from our high-quality portfolio and anticipate more portfolio exit events. We are excited about the outlook for the remainder of 2021. I'd now like to turn the call over to Sajal.

Sajal Srivastava, President and Chief Investment Officer

Thank you, Jim. Good afternoon. As Jim mentioned, during the quarter we executed on the playbook we developed last year in anticipation of a strong recovery in the venture capital and venture lending ecosystems in 2021. Our playbook for the first quarter was aimed at positioning our business and team to prepare for and execute on driving capital efficiency, credit quality, and portfolio growth throughout the year. Key objectives for the quarter included building strong funding capacity and overall liquidity, increasing our use of leverage, diversifying and reducing our cost of capital, concluding prior credit situations, and of course, originating high-quality and high-yielding investments. We accomplished most, if not all, of these objectives during the quarter. However, our earnings were impacted by the significant prepayment activity we've experienced over the past several quarters on our overall portfolio size, despite strong new commitments, growing investment funding, and stable core portfolio yields. We believe any shortfall is temporary and will be more than made up during the rest of the year as the fundamentals of our industry and our business continue to be strong. Regarding investment portfolio activity during the quarter, TriplePoint Capital signed $192 million of term sheets with venture growth stage companies and we closed $90 million of debt commitments to seven companies at TPG. Both signed term sheets and closed commitments were up from last quarter. Three portfolio companies were fintech or financial technology companies, two were in the consumer fitness or fitness tech category, and two are companies in the mobility category, with one focused on warehouse automation with software and robots, and the other an e-bike manufacturer. Almost all these companies have recently raised equity rounds, and many actually have enterprise values greater than half a billion. We also received warrants valued at $1.6 million in 13 portfolio companies as a result of these commitments and new fundings, compared to receiving warrant investments representing $3.8 million of value in 26 companies during all of 2020. Given the strong equity investment activity within our portfolio, we made four direct equity investments valued at $2.3 million this quarter. Last year, we made direct equity investments of $2.3 million in eight companies. During the first quarter, we funded $56.9 million in debt investments to seven companies, which aligned with the guidance we provided of targeted gross fundings between $50 million and $75 million for Q1 and Q2. The debt investments we funded during the quarter carried a weighted average annualized portfolio yield of 12.6% at origination. The yield profile this quarter reflects the strong credit profile and substantial cash reserves of the obligors funded. In fact, one obligor funded is EBITDA positive, and another has several billion in cash reserves. As noted in today’s earnings release, we have funded over $20 million of new loans, just one month into the second quarter. We also have funding requests in process from our portfolio for roughly an additional $25 million to $30 million here in May. As a result, we expect to come in towards the higher end of the $50 million to $75 million targeted gross funding range for the second quarter, consistent with prior guidance. We expect gross fundings for Q3 and Q4 to come in between $100 million and $150 million per quarter supported by our backlog. As we build our backlog, we see the pattern of our portfolio companies drawing on existing unfunded commitments towards the second half of the year, with substantial equity fundraising activity in the venture capital industry and within our portfolio specifically, which we believe is a testament to its quality. During the quarter, 10 portfolio companies raised over $700 million in capital, along with five portfolio companies raising over $200 million in capital last quarter and 27 portfolio companies raising rounds during 2020 overall. Robust venture capital industry-wide equity financing activity has several positive implications. First, it creates demand for debt to complement or top off an equity raise. Second, for others, it allows them to accelerate growth even faster to achieve higher valuations when they ultimately raise equity, and therefore they raise debt to help finance that accelerated growth. Finally, for those companies that have raised equity capital and already have debt, it allows them to delay drawing on existing lines and in many cases, to pay off outstanding debt to save on interest expenses. Although, given their cash burn profile, there's always the potential to revisit a debt financing with them. We are seeing all three of these trends right now. In addition to equity investors willing to invest earlier while still rewarding anticipated future growth from a valuation perspective, the robust equity environment is generally very positive, improving the outlook and liquidity of existing portfolio companies. As a result, we also receive accelerated fees and income from prepayments, given our portfolio quality, our unique access to these financing rounds, and a robust exit environment. We are also increasing our direct equity investment activity to take advantage of our relationships for the benefit of our shareholders. These are not purchases of secondary positions from third-party marketplaces or sellers; rather, we are selectively investing in rounds typically led by one or more of our select VC funds and investing alongside them in most cases in existing obligors and in other cases, future obligors. These are rounds that are generally not available to many other venture capital investors, so we believe this is something very differentiated for our shareholders that we expect will have a long-term benefit not only from the potential upside of the investments but also from cementing our relationship as a lender to these companies. During Q1, we had loan prepayments of $36 million, which resulted in an overall weighted average annualized portfolio yield on total debt investments of 13.3% for the quarter. Excluding prepayments, the core portfolio yield was 11.9%. As Chris will discuss in detail later, these were more seasoned loans that paid off early this quarter. Here in the second quarter, we have experienced about $46 million in prepayments generating more than $2 million in accelerated income. At the end of the quarter, our 71 portfolio companies were spread across 30 subsectors, with our largest concentration again in business application software, representing nearly 11.5% of our portfolio. Moving on to credit quality during the quarter, one company was removed from category one as a result of a prepayment, and one company was removed from category five as part of the sale of our notes, which was consistent with our fair value mark on that investment. As of Q4, based on the continued progress of our two category three obligors, we expect to upgrade both over the next one to two quarters. Our one category four portfolio company, Rolly, is our only loan on non-accrual and continues to build momentum with its business, and we are cautiously optimistic for their continued progress in 2021. During the quarter, two portfolio companies completed their SPAC mergers, HIMS and View, with our positions in both companies reflecting an additional net unrealized gain of $1.2 million. Our portfolio companies, Talkspace and Live Learning Technologies, announced their SPAC mergers during the first quarter, as well as mentioned in today's earnings release, subsequent to quarter-end, portfolio company Sonder and Enjoy also announced SPAC mergers. Generally speaking, we don't mark up our investments in these companies until merger exchange ratios are announced, and when they are, we further discount given the uncertainty associated with their completion. So this generally results in gains in our investment on an unrealized basis after the SPAC merger closes, rather than before. While there has been some slowdown in new SPAC issuances, there hasn't been a slowdown in exit activity within our portfolio. In fact, we have nearly a dozen TPG portfolio companies actively exploring SPAC exits, IPOs, or M&A exits this year. If consummated, these will unlock additional value for our shareholders from our equity and warrant portfolio. In closing, we continue to follow our long-term playbook of nurturing strong relationships with our select venture capital partners and meeting the needs of their venture growth stage companies through deliberate and disciplined portfolio growth while generating strong returns for shareholders. With that, I'll now turn the call over to Chris.

Christopher Nolan, CFO

Great. Thanks, Sajal. Hello everyone. Let me take you through an update on the financial results for the first quarter of 2021. Total investment income was $20 million with a portfolio yield of 13.3% on total debt investments for the first quarter, as compared to $20.8 million and 12.7% for the first quarter of 2020. Operating expenses were $11.1 million as compared to $8.6 million for the first quarter of 2020. Operating expenses for the quarter consisted of $4.4 million of interest expense, $2.9 million of base management fees, $2.2 million of income incentive fees, $0.5 million of administrative agreement expenses, and $1 million of general and administrative expenses. We recorded net investment income of $8.9 million or $0.29 per share, and a net increase in net assets resulting from operations of $11.9 million or $0.38 per share during the first quarter. The company recorded net realized losses on investments of $15.7 million or $0.51 per share, consisting primarily of the sale of the company's investments in Notel, which was rated a category five credit on the company's watchlist. Net unrealized gains on investments for the first quarter were $18.6 million or $0.60 per share, resulting primarily from the reversal and recognition of previously recorded unrealized losses associated with Notel, as well as net unrealized gains on fair value adjustments to the existing portfolio, offset partially by $1.4 million of unrealized losses due to changes in foreign exchange rates. As of the end of the quarter, the company's total net assets were $401.8 million or $13 per share, compared to $400.4 million or $12.97 per share at December 31st. I'm pleased to announce that our board of directors has declared a distribution of $0.36 per share from ordinary income on April 29th to stockholders of record, as of June 16th, to be paid on June 30th. We have significant spillover income, totaling approximately $14 million or $0.45 per share at the end of the quarter to support additional distributions in the future. Before I share an update on commitments and availability of capital for investing, I would like to remind everyone that while prepayments are a natural part of our venture lending model, it does come with a great deal of uncertainty. We previously shared with you that portfolio company liquidity events, such as IPOs or M&A events, often occur with little advanced notice of loan prepayments. One aspect of prepayment activity is that the origination vintage of a loan that prepays really does matter, given the nature of income acceleration when a loan prepays. The characteristics of income change; the longer the loan remains outstanding. For example, should a loan repay or prepay in its first year, we would recognize a comparatively higher level of income acceleration compared to a loan prepaid in its second or third year. For example, as mentioned earlier, we already had $46 million in loan prepayments in Q2, generating more than $2 million in accelerated income. This compares to $36 million of prepayments in Q1, which generated approximately $2.2 million in income. Now, let's move on to our commitments. We reported unfunded commitments totaling $168 million based on our success in increasing commitments by $90 million for the quarter. $122 million of this total will expire during 2021 if not drawn prior to expiration. In addition to all of our unfunded commitments, we have a prime rate floor now set to 3.25% or higher. The company ended the quarter with a record level of investment funding capacity resulting from successful debt raises and strong cash flows from the portfolio. We continue to see the ongoing amortization of principal and loan prepayments as a natural and very positive aspect of a high-quality and diversified venture lending portfolio. At quarter-end, the company increased its total liquidity to $466 million compared to $252 million as of December 31st. Our total liquidity consisted of $116 million in cash and $350 million of availability under our credit facility. As previously reported, as of year-end, we increased our total commitments under the credit facility to $325 million and extended the revolving period to November of 2022, further extending the scheduled maturity date to May of 2024. This amendment enhanced our effective borrowing capacity during the extended term of the credit facility. In January, we further increased total commitments under the credit facility to $350 million and added an additional lender to the bank syndicate. We also have the flexibility to increase the line further to $400 million under the existing accordion feature. In March, we completed a $200 million private institutional notes offering. These notes are unsecured and bear interest at a rate of 4.5% per year, payable semi-annually and maturing in March of 2026. DBRS issued an investment-grade credit rating in connection with the transaction. Recall that we completed our first investment-grade institutional notes offering in March of 2020 for a total of $70 million, which remains outstanding today. With the proceeds from the offering, we immediately paid down $118 million outstanding on our credit facility. On April 5th, we fully redeemed at par our traded baby bonds, which carried a higher interest rate of 5.75%. With this redemption complete, we expect to lower our cost of capital going forward. During the month of March, we incurred approximately $360,000 in interest expense from the date we closed the 2026 notes to the date we were permitted to redeem the baby bonds. In connection with the redemption, we do expect to record a realized loss on repayment of debt of approximately $660,000. In the second quarter, we will re-borrow under our credit facility over the remainder of the year to grow the portfolio with creative debt financing to benefit our shareholders. We expect that we will have sufficient available capital to execute on the funding estimates that have been previously provided. Aggregate outstanding borrowings at the end of the quarter were $345 million and consisted of $270 million of private debt notes and $75 million of baby bonds. As of quarter-end, there were no debts outstanding under our credit facility. We ended the quarter with an 0.86 times leverage ratio or an asset coverage ratio of 217%. Following the baby bond redemption completed just a few days after the end of the quarter, we note that the leverage ratio is 0.57 times or on a pro forma basis. During the first quarter, DBRS maintained its investment-grade rating on TPG, given the strength and diversity of the portfolio and reasonable level of leverage we maintain. In April, DBRS confirmed the company's investment-grade triple B long-term issuer rating and upgraded TPG's trend outlook to stable. That concludes our prepared remarks. At this time, we'd like to take your questions. Operator, if you could please open the line for questions.

Operator, Operator

Ladies and gentlemen, at this time we'll begin the question and answer session. Our first question today comes from Finn O'Shea - Wells Fargo Securities. Please go ahead with your question.

Finn O'Shea, Analyst

Hi everyone. Good afternoon. Just a couple higher-level questions for you. First, with the SPACs or exits in general, you mentioned a couple were announced recently, and Jim said there was a lot of active dialogue. Can you give us a high-level overview of portfolio-wide how these valuation discussions compare to your portfolio marks and where you see them relative to your portfolio marks?

Sajal Srivastava, President and Chief Investment Officer

Generally speaking, most of the SPAC mergers have been at premiums to the valuations at which we received our warrants. As I explained during my prepared remarks, the challenge when they announce the SPACs is that they put out an enterprise value, but they don't actually disclose the exchange ratios. Therefore, we don't mark up our warrant or equity investments until more information is known. For example, when the merger ratios or exchange ratios are publicly filed, we then further discount, given the uncertainty associated with the SPACs being completed.

Finn O'Shea, Analyst

Okay, that's helpful. And also, Sajal, could you recap your commentary about the robust debt demand being very strong paired with the robust equity fundraising environment? Logically, that might suggest that equity would be overtaking the demand for debt. So what's the main driver? Are companies staying private for longer? Are there more companies looking to add more debt to their balance sheets? How would you outline that?

Sajal Srivastava, President and Chief Investment Officer

I'd look at it a couple of ways. First, it's just given venture capital investment activity; there are more companies out there. The market opportunity continues to grow based on VC fundraising and VC investment activity in general. Another key element, as Jim remarked on, is that we're now at the other end of the pendulum where we're in growth mode. Everyone is growing fast and faster. As a result, they are using a combination of equity and debt, with some employing only debt and some only equity. We are seeing all of the above, and we remain focused on the quality of companies that approach us.

Finn O'Shea, Analyst

Okay, that’s helpful. That's all for me. Thank you.

Operator, Operator

Our next question comes from Casey Alexander from Compass Point. Please go ahead with your question.

Casey Alexander, Analyst

Hi, good afternoon, and thanks for taking my questions. Was there a mismatch in the timing of repayments versus the timing of originations during the quarter? Did repayments come early in the quarter while originations were stacked towards the back of the quarter?

Christopher Nolan, CFO

Yes, generally that is what happens, Casey. Fundings tend to occur towards the end of the quarter, particularly in the last month, while prepayments can happen earlier in the quarter. I think we had announced on our year-end results that we already had some prepayments, so that was definitely the case for Q1 and is fairly typical.

Casey Alexander, Analyst

Okay, just to clarify, the repayments you did have came from investments that were later in their maturity cycles, so they generated less accelerated income associated with them, right?

Christopher Nolan, CFO

I would say that directionally that is true, but it was not significant.

Casey Alexander, Analyst

Got it. And since you’ve had a number of transactions that involve SPACs, just to confirm, when a SPAC deal closes, you get paid off on the debt, and the clock doesn't start ticking on your ability to monetize the equity until approximately six months after the SPAC deal closes. Is that correct?

Jim Labe, CEO

It's actually a mix, Casey. In certain situations where we have a direct equity investment alongside warrants, we are more likely to be subject to a lockup. In scenarios where we are just a general warrant holder, we are less likely to be subject to a lockup.

Casey Alexander, Analyst

That's interesting. I didn't realize that. Okay, and that's all of my questions. I'll step back in the queue if I have any more.

Operator, Operator

Our next question comes from Christopher Nolan from Latin Burke Feldman. Please go ahead with your question.

Christopher Nolan, Analyst

Hey guys, thank you for taking my questions. On the equity investments that Jim referred to in his prepared statement, equity investments are roughly 7% of the portfolio. Now, what percentage are you looking to increase them going forward?

Jim Labe, CEO

We're not managing the business by a fixed percentage. Equity investments are opportunistic, and we're being very selective with them. Only in this environment and some of the better high-quality companies we’re seeing do we feel it beneficial to have a small slice of participation alongside our debt financing. Generally, it will always be a smaller percentage of our business and a more of an enhancement to yields and returns and opportunistic investment in today’s environment.

Christopher Nolan, Analyst

Right, so it would be a side-by-side of equity and debt you're looking at in those types of transactions?

Jim Labe, CEO

Generally, that’s the case. In some rare cases, equity may start and then we do the debt; in other cases, debt starts and then we'll have the right to invest some equity as part of the deal.

Christopher Nolan, Analyst

As a more general venture capital question, how would you characterize the venture capital equity environment? Are the terms that VCs are securing from companies similar to what they would have been a year ago, or are they more favorable for the companies now? Just trying to get a sense of the leverage in terms of venture capital equity funding.

Jim Labe, CEO

While we don't like using the word 'robust,' there is an incredible amount of equity capital available right now, with significant participation from non-traditional participants. There are record valuations, record amounts of equity financing, and a hundred million is becoming the new norm for these venture growth-stage companies. In terms of terms, they have become more competitive due to the amount of equity available; this does not directly affect venture lending but is more of a concern within the equity world. Our focus remains on working with our select venture capital investors, who are associated with the best tech and life science deals in recent decades.

Operator, Operator

Our next question comes from Ryan Lynch from KBW. Please go ahead with your question.

Ryan Lynch, Analyst

Hey, good afternoon, guys. I just want to discuss the environment for deploying capital. It seems like based on your commentary, the venture capital equity markets will continue to be strong with several SPAC mergers announced, yet that could potentially put pressure on net growth in the portfolio. Can you discuss the dynamics of growing your portfolio on a net basis given robust exit opportunities in the current environment?

Jim Labe, CEO

I would say this is a function of pipeline and portfolio management. We would look at the existing unfunded commitments and how robust equity and M&A activity impacts actual utilization and timing of utilization of existing unfunded commitments. It's a balancing act focusing on new originations, the new pipeline, and ensuring we have certainty regarding utilization.

Ryan Lynch, Analyst

If I'm correct, you deployed $2.3 million in direct equity investments in four companies this quarter without debt. Why shift your strategy in this manner going forward, and what framework do you use to specifically choose those companies?

Chris Mathieu, CFO

Let me clarify that of the four equity investments made during the quarter, all were existing portfolio companies. Given the robust equity environment and our relationships with these companies, we see opportunities to invest early in their equity rounds. We believe this approach will strengthen our partnership, provide insight into their operations, and allow us to enhance our debt financing when the opportunity arises. Historically, our direct equity investments tended to be smaller, but due to the exit environment, we feel it is better to make slightly larger investments in connection with these relationships.

Ryan Lynch, Analyst

Understood. Just one quick modeling issue: Chris, you mentioned $2 million of accelerated income in this quarter, which is already more than the $2.2 million from all of Q1. Do you happen to have the accelerated income from Q4 2020?

Jim Labe, CEO

I believe we have that in the earnings release. I can follow up with you on that.

Operator, Operator

Devin Ryan from JMP, please go ahead.

Devin Ryan, Analyst

Most of my questions have been asked, but I would start with a higher-level one on the stock market. You touched on it and it's impacting the business a bit too, given the slowdown in new IPOs, but there was a record number of IPOs announced in Q1. I'm curious if some recent market indigestion is changing the appetite of some of the portfolio companies around their appetite to go public via SPACs, or if it will take a few quarters to work through the process even if we don’t see another IPO quarter like the first quarter.

Jim Labe, CEO

The dozen or so portfolio companies pursuing exits this year are exploring all three forms: SPACs, traditional IPOs, and M&A. No doubt the SPAC market has been impacted by some accounting and regulatory changes, but we are still seeing existing SPAC sponsors active, reaching out, and exploring conversations with companies. So, it hasn't necessarily slowed down existing SPAC sponsors' interest, although it may have slowed down new SPAC sponsors' ability to raise capital. In general, SPACs empower portfolio companies, allowing them to make decisions about going public.

Devin Ryan, Analyst

Great color and thanks for the nuance. Are there any areas where you see more interesting opportunities from a sub-sector perspective compared to others in the market?

Jim Labe, CEO

Our model is to invest in those sectors where our select venture capital partners are directing their capital. We want to lend to those sectors attracting equity dollars because that validates enterprise value and generates significant liquidity. Generally, all sectors are performing well, but we focus on those attracting equity investments.

Devin Ryan, Analyst

Got you. Thank you so much. I appreciate it.

Operator, Operator

Our next question is a follow-up from Casey Alexander from Compass Point. Please go ahead.

Casey Alexander, Analyst

I want to clarify one thing that Chris said. You mentioned that the effective leverage ratio pending the repayment of the baby bond was 0.57. Was that correct?

Jim Labe, CEO

That's right. Just take the leverage as of the end of the quarter, use cash to pay down and you get 0.57.

Operator, Operator

The gentlemen is showing no additional questions. I'd like to turn the conference call back over to Mr. Labe for any closing remarks.

Jim Labe, CEO

Thank you, Operator, and thanks to everyone for joining our call today. As you can tell, we are pretty bullish about our prospects for the remainder of the year, as the fundamentals are strong, demand is robust, and we have a healthy backlog pipeline and liquidity to achieve our goals in 2021. Thanks for your continued support, and we look forward to talking to you on our next earnings call. Have a good day, everyone.

Operator, Operator

Ladies and gentlemen, with that, we will conclude today's conference call. We thank you for attending. You may now disconnect your lines.