UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): |
(Exact name of Registrant as Specified in Its Charter)
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Item 2.02 Results of Operations and Financial Condition.
On November 3, 2022, Trinity Capital Inc. (the “Company”) issued a press release announcing its financial results for the third quarter ended September 30, 2022. Such press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 furnished herewith, is being furnished and shall not be deemed “filed” for any purpose of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such Section. The information in this Current Report on Form 8-K shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 7.01 Regulation FD Disclosure.
On November 3, 2022, the Company disseminated an earnings presentation to be used in connection with its conference call and live webcast to discuss its third quarter 2022 financial results on November 3, 2022, at 5 p.m. Eastern time. A copy of the earnings presentation is furnished as Exhibit 99.2 to this Current Report on Form 8-K and incorporated into this Item 7.01 by reference.
The information furnished in this Item 7.01 and Exhibit 99.2 attached hereto is being furnished and shall not be deemed “filed” for any purpose of Section 18 of the Exchange Act, or otherwise subject to the liabilities of such Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit Number |
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Description |
99.1 |
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99.2 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Trinity Capital Inc. |
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Date: |
November 3, 2022 |
By: |
/s/ Steven L. Brown |
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Steven L. Brown |
Exhibit 99.1
Trinity Capital Inc. Reports Third Quarter 2022 Financial Results
PHOENIX, (November 3, 2022 /PRNewswire/) -- Trinity Capital Inc. (Nasdaq: TRIN, TRINL) (“Trinity Capital” or the “Company”), a leading provider of diversified financial solutions to growth stage companies, today announced its financial results for the quarter ended September 30, 2022.
Third Quarter 2022 Highlights
Year-to-Date 2022 Highlights
“Trinity generated exceptional third quarter NII performance, far exceeding our core quarterly dividend, and reflecting the strength and scale of our portfolio,” said Steven Brown, Chairman and Chief Executive Officer of Trinity Capital. “We are executing against our strategy with the objective outlook needed in this challenging macro environment. Our fortified balance sheet and robust lending platform position us to deliver strategic financing to our existing portfolio companies while identifying the next generation of growth stage companies in which to invest. As we head into the fourth quarter of 2022, we will continue to utilize accretive, innovative growth levers to deploy capital and drive long-term shareholder value.”
Kyle Brown, President and Chief Investment Officer of Trinity Capital, added, “Our experienced management team and best-in-class financing solutions will allow us to capitalize on the current VC market and industry trends. Trinity continues to meet the evolving needs of the venture debt ecosystem and add value beyond the term sheet for our portfolio companies.”
Third Quarter 2022 Operating Results
For the three months ended September 30, 2022, total investment income was $38.7 million compared to $21.8 million for the quarter ended September 30, 2021. This represents an effective yield on the average debt investments at cost of 15.2% and 15.8% for the periods ended September 30, 2022, and 2021, respectively. Effective yields generally include the effects of fees and income accelerations attributed to early loan repayments and other one-time events and may fluctuate quarter-to-quarter depending on the amount of prepayment activity.
Total expenses, excluding interest expense and excise tax expense, for the third quarter of 2022 were $10.1 million compared to $5.6 million during the third quarter of 2021. The increase was primarily attributable to increased employee headcount and higher professional fees. Interest expense for the third quarter of 2022 was $9.3 million compared to $5.1 million during the third quarter of 2021. The increase is primarily attributable to the increase in the weighted average borrowings outstanding during the quarter under our KeyBank Credit Facility and additional debt issuance of our 7% Notes due 2025 (“2025 Notes”).
Net investment income was approximately $18.6 million, or $0.56 per share based on 33.1 million basic weighted average shares outstanding for the third quarter of 2022, compared to $11.1 million or $0.42 per share for the third quarter of 2021 based on 26.6 million basic weighted average shares outstanding.
Third quarter 2022 net realized losses on investments were approximately $0.6 million compared to a net realized gain of $0.7 million during the third quarter of 2021.
Net unrealized depreciation was $30.0 million during the third quarter of 2022, compared to net unrealized appreciation of $15.4 million during the third quarter of 2021.
Third quarter 2022 net decrease in net assets resulting from operations was $12.0 million, or $(0.36) per share based on 33.1 million basic weighted average shares outstanding. This compares to a net increase in net assets resulting from operations of $27.2 million or $1.02 per share based on 26.6 million basic weighted average shares outstanding for the third quarter of 2021.
Trinity's higher weighted average share count for the third quarter of 2022 as compared to the third quarter of the prior year is primarily related to the 3.7 million shares of common stock issued in August 2022. The increase for the nine-month period in 2022 as compared to the same period in the prior year is the result of approximately 6.9 million shares of common stock issued in connection with overnight offerings in 2022, approximately 316,000 shares issued under the dividend reinvestment plan and ATM program and approximately 689,000 net shares issued in connection with restricted stock awards.
Net Asset Value
As of September 30, 2022, NAV per share decreased to $13.74, compared to $14.62 on June 30, 2022. The decrease in NAV was primarily the result of fair value adjustments on two portfolio companies and valuation adjustments due to market volatility and interest rate fluctuations. Total net assets at the end of the third quarter of 2022 increased by 5.3% to $482.5 million, compared to $458.3 million at the end of Q2 2022.
Portfolio and Investment Activity
As of September 30, 2022, Trinity Capital’s investment portfolio had an aggregate fair value of approximately $1.04 billion and was comprised of approximately $751.2 million in secured loans, $246.0 million in equipment financings and $45.0 million in equity and warrants across 112 portfolio companies.
During the third quarter, the Company originated $128.1 million of total new commitments. Third quarter investments funded totaled approximately $94.2 million, which was comprised of $28.9 million of investments in seven new portfolio companies and approximately $65.3 million of investments in 15 existing portfolio companies. Investment fundings during the quarter for loans totaled $48.0 million, equipment financings totaled $44.6 million and warrants and equity investments totaled $1.6 million. The Company’s floating rate loans accounted for approximately 62.2% of its debt portfolio based on principal outstanding as of September 30, 2022 as compared to 64.4% as of June 30, 2022.
Proceeds received from repayments of the Company's debt investments during the third quarter totaled approximately $79.9 million, which included $48.5 million from early debt repayments from secured loans. The portfolio increased by $21.1 million or approximately 2.0% on a cost basis and decreased by $8.9 million or approximately 0.8% at fair value as compared to June 30, 2022.
As of the end of the third quarter, loans to four portfolio companies and one equipment finance borrower were on non-accrual status with a total fair value of approximately $13.9 million, or just 1.3% of the Company’s investment portfolio at fair value.
2
The following table shows the distribution of the Company’s loan and equipment financing investments on the 1 to 5 investment risk rating scale at fair value as of September 30, 2022 and December 31, 2021 (dollars in thousands):
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September 30, 2022 |
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December 31, 2021 |
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Investment Risk Rating |
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Investments at |
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Percentage of |
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Investments at |
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Percentage of |
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Scale Range |
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Designation |
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Fair Value |
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Total Portfolio |
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Fair Value |
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Total Portfolio |
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4.0 - 5.0 |
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Very Strong Performance |
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$ |
92,008 |
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9.2 |
% |
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$ |
84,785 |
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11.5 |
% |
3.0 - 3.9 |
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Strong Performance |
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320,087 |
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32.1 |
% |
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236,466 |
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32.1 |
% |
2.0 - 2.9 |
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Performing |
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537,260 |
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53.9 |
% |
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396,846 |
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53.9 |
% |
1.6 - 1.9 |
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Watch |
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38,484 |
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3.9 |
% |
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13,427 |
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1.9 |
% |
1.0 - 1.5 |
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Default/Workout |
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9,339 |
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0.9 |
% |
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4,444 |
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0.6 |
% |
Total |
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$ |
997,178 |
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100.0 |
% |
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$ |
735,968 |
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100.0 |
% |
As of September 30, 2022, the Company’s loan and equipment financing investments had a weighted average risk rating score of 2.9.
Secondary Offering
In August 2022, the Company closed an underwritten public offering of $55.0 million of its common stock at a public offering price of $15.33 per share. The offering was upsized from its announced offering of $50.0 million. In connection with the offering, the underwriters exercised their option in part to purchase additional shares of common stock resulting in additional net proceeds to the Company of $2.0 million.
Liquidity and Capital Resources
As of September 30, 2022, the Company had approximately $246.6 million in available liquidity, including $34.1 million in cash and cash equivalents. At the end of the period, the Company had $212.5 million in available borrowing capacity under its credit facility subject to existing terms, advance rates and regulatory and covenant requirements. During the quarter, the borrowing capacity under the credit facility with KeyBank was increased by $50.0 million to a total of $350.0 million with the addition of two new banks to the lending syndicate.
As of September 30, 2022, Trinity's leverage was approximately 118% as compared to 130% as of June 30, 2022. The decrease in the leverage ratio was primarily attributable to repayments on the credit facility partially offset by borrowings under the 2025 Notes.
Distributions
On September 15, 2022, the Company’s Board of Directors declared a dividend of $0.60 per share with respect to the quarter ended September 30, 2022, which was paid on October 14, 2022, to shareholders of record as of September 30, 2022. The Company’s Board of Directors previously expressed the intent to declare an equal supplemental cash dividend of $0.15 per share in the fourth quarter of 2022 for total supplemental cash dividends equal to $0.60 per share in 2022.
New Hire
On September 20, 2022, the Company announced the appointment of Lauren Cosentino as Managing Director, Life Sciences in the Research Triangle Park region of North Carolina. Ms. Cosentino, an established leader with over a decade of experience in the venture ecosystem, has been supporting venture capital-backed growth stage companies, primarily focused on the life sciences vertical.
3
Conference Call
Trinity Capital will hold a conference call to discuss its third quarter 2022 financial results at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) on Thursday, November 3, 2022.
To listen to the call, please dial (800) 245-3047 or (203) 518-9765 internationally, and reference Conference ID: TRINQ322 if asked, approximately 10 minutes prior to the start of the call.
A taped replay will be made available approximately two hours after the conclusion of the call and will remain available for seven days. To access the replay, please dial (800) 839-7410 or (402) 220-6067.
About Trinity Capital Inc.
Trinity Capital Inc. (Nasdaq: TRIN and TRINL), an internally managed business development company, is a leading provider of diversified financial solutions to growth-stage companies with institutional equity investors. Trinity Capital’s investment objective is to generate current income and, to a lesser extent, capital appreciation through investments including term loans, equipment financings and equity-related investments. Trinity Capital believes it is one of only a select group of specialty lenders that has the depth of knowledge, experience and track record in lending to growth stage companies. For more information, please visit the Company’s website at www.trinitycap.com.
Forward-Looking Statements
This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties, including the impact of the COVID 19 pandemic on the economy, financial markets, our business, our portfolio companies and our industry. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in filings with the Securities and Exchange Commission ("SEC"). The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release. More information on risks and other potential factors that could affect the Company's financial results, including important factors that could cause actual results to differ materially from plans, estimates or expectations included herein or on the webcast/conference call, is included in the Company's filings with the SEC, including in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's most recently filed annual report on Form 10-K and subsequent SEC filings.
Contact
Vibhor Garg
Managing Director, Marketing
Trinity Capital Inc.
ir@trincapinvestment.com
4
TRINITY CAPITAL INC.
Consolidated Statements of Assets and Liabilities
(In thousands, except share and per share data)
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September 30, |
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December 31, |
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2022 |
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2021 |
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(Unaudited) |
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ASSETS |
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Investments at fair value: |
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Control investments (cost of $46,949 and $38,994, respectively) |
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$ |
28,714 |
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$ |
32,214 |
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Affiliate investments (cost of $28,718 and $41,609, respectively) |
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9,508 |
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32,192 |
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Non-control / Non-affiliate investments (cost of $1,012,060 and $717,253, respectively) |
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1,003,953 |
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809,064 |
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Total investments (cost of $1,087,727 and $797,856, respectively) |
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1,042,175 |
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873,470 |
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Cash and cash equivalents |
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34,141 |
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31,685 |
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Restricted cash |
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— |
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15,057 |
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Interest receivable |
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8,899 |
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5,551 |
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Deferred credit facility costs |
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3,092 |
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2,308 |
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Other assets |
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8,442 |
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9,047 |
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Total assets |
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$ |
1,096,749 |
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$ |
937,118 |
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LIABILITIES |
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2025 Notes, net of $4,426 and $3,616, respectively, of unamortized deferred financing costs |
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$ |
178,074 |
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$ |
121,384 |
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KeyBank Credit Facility |
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137,500 |
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81,000 |
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August 2026 Notes, net of $2,247 and $2,679, respectively, of unamortized deferred financing costs |
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122,753 |
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122,321 |
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December 2026 Notes, net of $1,567 and $1,842, respectively, of unamortized deferred financing costs |
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73,433 |
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73,158 |
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Convertible Notes, net of $2,042 and $2,515, respectively, of unamortized deferred financing costs and discount |
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47,958 |
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47,485 |
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Credit Suisse Credit Facility |
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— |
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10,000 |
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Distribution payable |
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21,073 |
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9,803 |
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Security deposits |
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14,903 |
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10,840 |
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Accounts payable, accrued expenses and other liabilities |
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18,591 |
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14,594 |
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Total liabilities |
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614,285 |
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490,585 |
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Commitments and contingencies (Note 6) |
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NET ASSETS |
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Common stock, $0.001 par value per share (200,000,000 authorized, 35,122,433 and 27,229,541 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively) |
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35 |
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27 |
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Paid-in capital in excess of par |
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487,655 |
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368,609 |
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Distributable earnings/(accumulated loss) |
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(5,226 |
) |
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77,897 |
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Total net assets |
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482,464 |
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446,533 |
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Total liabilities and net assets |
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$ |
1,096,749 |
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$ |
937,118 |
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NET ASSET VALUE PER SHARE |
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$ |
13.74 |
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$ |
16.40 |
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5
TRINITY CAPITAL INC.
Consolidated Statements of Operations
(In thousands, except share and per share data)
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Three Months Ended |
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Nine Months Ended |
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September 30, 2022 |
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September 30, 2021 |
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September 30, 2022 |
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September 30, 2021 |
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INVESTMENT INCOME: |
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Interest income: |
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Control investments |
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$ |
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1,239 |
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$ |
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1,288 |
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$ |
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4,235 |
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$ |
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3,860 |
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Affiliate investments |
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— |
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273 |
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862 |
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1,155 |
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Non-Control / Non-Affiliate investments |
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35,915 |
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19,098 |
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92,974 |
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50,103 |
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Total interest income |
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37,154 |
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20,659 |
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98,071 |
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55,118 |
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Fee income: |
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Non-Control / Non-Affiliate investments |
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1,535 |
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1,131 |
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5,921 |
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3,468 |
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Total fee income |
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1,535 |
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1,131 |
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5,921 |
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3,468 |
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Total investment income |
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38,689 |
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21,790 |
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103,992 |
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58,586 |
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EXPENSES: |
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Interest expense and other debt financing costs |
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9,306 |
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5,112 |
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23,864 |
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14,153 |
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Compensation and benefits |
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7,315 |
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|
|
|
3,677 |
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20,647 |
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|
11,043 |
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Professional fees |
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1,261 |
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|
|
762 |
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2,984 |
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|
|
|
1,979 |
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General and administrative |
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1,520 |
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|
|
1,116 |
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|
|
|
4,555 |
|
|
|
|
2,955 |
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Total expenses |
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19,402 |
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|
|
|
10,667 |
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|
|
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52,050 |
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30,130 |
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NET INVESTMENT INCOME/(LOSS) BEFORE TAXES |
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19,287 |
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11,123 |
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51,942 |
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|
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28,456 |
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Excise tax expense |
|
|
|
657 |
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|
|
|
— |
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|
|
|
1,987 |
|
|
|
|
— |
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|
|
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NET INVESTMENT INCOME |
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|
|
18,630 |
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|
|
|
11,123 |
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|
|
|
49,955 |
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|
|
|
28,456 |
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NET REALIZED GAIN/(LOSS) FROM INVESTMENTS: |
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|
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Control investments |
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|
|
(105 |
) |
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|
|
(2,725 |
) |
|
|
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(333 |
) |
|
|
|
(2,725 |
) |
Affiliate investments |
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|
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(608 |
) |
|
|
|
— |
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|
|
|
(10,241 |
) |
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|
|
1,491 |
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Non-Control / Non-Affiliate investments |
|
|
|
111 |
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|
|
|
3,391 |
|
|
|
|
52,999 |
|
|
|
|
6,490 |
|
Net realized gain/(loss) from investments |
|
|
|
(602 |
) |
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|
|
666 |
|
|
|
|
42,425 |
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|
|
|
5,256 |
|
|
|
|
|
|
|
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|
|
|
|
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|
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|
||||
NET CHANGE IN UNREALIZED APPRECIATION/(DEPRECIATION) FROM INVESTMENTS: |
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|
|
|
|
|
|
|
|
|
|
|
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|
|
|
||||
Control investments |
|
|
|
(391 |
) |
|
|
|
13,172 |
|
|
|
|
(11,455 |
) |
|
|
|
1,088 |
|
Affiliate investments |
|
|
|
(13,443 |
) |
|
|
|
(5,960 |
) |
|
|
|
(9,794 |
) |
|
|
|
(14,165 |
) |
Non-Control / Non-Affiliate investments |
|
|
|
(16,194 |
) |
|
|
|
8,180 |
|
|
|
|
(99,917 |
) |
|
|
|
56,575 |
|
Net change in unrealized appreciation/(depreciation) from investments |
|
|
|
(30,028 |
) |
|
|
|
15,392 |
|
|
|
|
(121,166 |
) |
|
|
|
43,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
|
$ |
|
(12,000 |
) |
|
$ |
|
27,181 |
|
|
$ |
|
(28,786 |
) |
|
$ |
|
77,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
NET INVESTMENT INCOME PER SHARE - BASIC |
|
$ |
|
0.56 |
|
|
$ |
|
0.42 |
|
|
$ |
|
1.64 |
|
|
$ |
|
1.11 |
|
NET INVESTMENT INCOME PER SHARE - DILUTED |
|
$ |
|
0.53 |
|
|
|
|
0.40 |
|
|
$ |
|
1.55 |
|
|
$ |
|
1.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE - BASIC |
|
$ |
|
(0.36 |
) |
|
$ |
|
1.02 |
|
|
$ |
|
(0.94 |
) |
|
$ |
|
3.02 |
|
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE - DILUTED |
|
$ |
|
(0.36 |
) |
|
$ |
|
0.94 |
|
|
$ |
|
(0.94 |
) |
|
$ |
|
2.77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC |
|
|
|
33,098,332 |
|
|
|
|
26,641,084 |
|
|
|
|
30,506,292 |
|
|
|
|
25,569,565 |
|
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED |
|
|
|
36,537,607 |
|
|
|
|
29,974,419 |
|
|
|
|
33,945,567 |
|
|
|
|
28,902,900 |
|
6
Third Quarter 2022 Investor Presentation Exhibit 99.2
FORWARD LOOKING STATEMENTS | DISCLAIMER Trinity Capital Inc. (the “Company”) cautions that this presentation may contain forward-looking statements that are based on current expectations and assumptions about future events, and which are not based in historical fact. The forward-looking statements in this presentation are based on current conditions as of the date of this presentation, and include, but are not limited to, statements regarding our financial objectives, beliefs, strategies, anticipated future operating results and cash flows, operating expenses, investment originations and performance, available capital, and payment of future dividends and stockholder returns. Although our management believes that the expectations reflected in any forward-looking statements are reasonable, actual results could differ materially from those expressed or implied in the forward-looking statements. By their nature, these forward-looking statements involve numerous assumptions, uncertainties and risks, both general and specific. The risk exists that these statements may not be fulfilled. We caution readers of this presentation not to place undue reliance on these forward-looking statements, as a number of factors could cause future Company results to differ materially from these statements. Forward-looking statements may be influenced in particular by factors such as fluctuations in interest rates and stock indices, the effects of competition in the areas in which we operate, and changes in economic, political and regulatory conditions, including as a result of the coronavirus (COVID-19) pandemic. When relying on forward-looking statements to make decisions, investors should carefully consider the aforementioned factors as well as other uncertainties and events. Historical results discussed in this presentation are not indicative of future results. The information disclosed in this presentation is made as of the date hereof and reflects Trinity Capital Inc.’s current assessment of its financial performance for the most recent period reported. Actual financial results filed with the Securities and Exchange Commission in the future may differ from those contained herein in the event of additional adjustments recorded prior to the filing of its financial statements. The information contained in this presentation should be viewed in conjunction with Trinity Capital Inc.'s most recently filed Quarterly Report on Form 10-Q, Annual Report on Form 10-K or Registration Statement on Form 424B1. We undertake no obligation to update the information contained herein to reflect subsequently occurring events or circumstances, except as required by applicable securities laws and regulations. This presentation does not constitute a prospectus and should under no circumstances be understood as an offer to sell or the solicitation of an offer to buy our common stock or any other securities nor will there be any sale of the common stock or any other securities referred to in this presentation in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of such state or jurisdiction. Nothing in these materials should be construed as a recommendation to invest in any securities that may be issued by Trinity Capital Inc. or as legal, accounting or tax advice.
Company Overview Financial Highlights Portfolio Highlights Venture Capital and Lending Market 4 11 20 26 30 Supplemental Information 32 Analyst Coverage INVESTOR PRESENTATION | CONTENTS
COMPANY OVERVIEW
Market Capitalization 14 Year Track Record(4) Annualized Dividend Yield Portfolio(2) $246.6 Million Available Liquidity(5) Liquidity(2) 77 Companies Warrant Positions 25 Companies Equity Positions $38.2 Billion Opportunities $2.2 Billion Fundings 275 Investments 153 Exits 85 Companies Debt Positions Internally Managed - Business Development Company | Nasdaq – TRIN & TRINL Structure | Ticker BBB Investment Rating(6) 118% Debt to Equity TRINITY CAPITAL OVERVIEW Secured loans and equipment financing to growth stage companies backed by technology banks, venture capital and private equity firms Business Based on the closing price of TRIN on November 2, 2022. As of September 30, 2022 Annualized based on the $0.60 dividend (including $0.15 supplemental dividend) declared for Q3 2022 and a closing stock price of $12.53 on September 30, 2022 Historical information includes information and data related to Trinity Capital's predecessor funds, the first of which was launched in 2008, through September 30, 2022. The predecessor funds were merged with and into Trinity Capital on January 16, 2020, immediately after which Trinity Capital began operating as a business development company. Includes $34.1M of cash and cash equivalents. Credit rating assigned by Egan-Jones Ratings Company, an independent, unaffiliated rating agency. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time. There can be no assurance that this rating will remain for any given period-of-time $13.74(2) NAV per Share $415.7 Million(1) Market Cap 19.2%(3) September 30, 2022
We understand the growth stage world and provide more than money to our portfolio company partners Deep Operating Experience Highly experienced executive team with startup experience Decades of in-depth high-tech experience Numerous U.S. and International patents issued One Stop – Loans & Equipment Financing Providing term loans and equipment financing to growth stage companies Flexible financing solutions based on the company’s requirement Financing solutions to a highly fragmented, underserved market Robust & Scalable Platform Robust and scalable systems for origination, underwriting and monitoring Separation of origination, underwriting and monitoring duties aids “positive feedback” loop 56 dedicated professionals with a unique culture built over 14+ years WHY IS TRINITY DIFFERENT
Term Loans Axiom Space is developing the world’s first commercial space station. Investor Syndicate C5 Capital, TQS Advisors, Declaration Partners Use of Loan General corporate purposes Petal aims to bring financial innovation and opportunity to everyone, using modern technology to help people build credit, avoid debt, and spend responsibly. Investor Syndicate Tarsadia Investments, Valar Ventures, CUNA Mutual Use of Loan Extension of runway Select Examples SENIOR & SUBORDINATED TERM LOANS 01 SENIOR / SUBORDINATED LOAN Work With The Banks 02 BACKED BY INSTITUTIONAL CAPITAL Companies Have Raised Equity 03 STILL BURNING CASH Companies in Growth Mode and Still Burning Cash
Equipment Financing Select Examples EQUIPMENT FINANCING 01 COMPANIES WITH CAPEX REQUIREMENTS Manufacturing Equipment and Hard Assets 02 HARDWARE AS A SERVICE Equipment at Customer Location 03 INDUSTRY AGNOSTIC Nature’s Fynd is a food company creating versatile alternative proteins to nourish the world’s growing population while nurturing the planet. Investor Syndicate SoftBank, Breakthrough Energy Ventures, Blackstone Strategic Partners Use of Equipment Financing Food production equipment Emerald Cloud Lab is a remote-controlled life science laboratory that allows scientists to conduct their experiments without being anchored to a physical lab. Investor Syndicate Founders Fund, Schooner Capital, Alcazar Capital Use of Equipment Financing Laboratory Equipment
Multiple shared portfolio companies with top Venture Capital Firms We have established inter-creditor agreements with the banks Combining with bank debt results in a lower blended cost to our customers We provide equipment financing and incremental debt capital Relationships with top market share banks catering to majority of VC-backed companies PARTNERSHIPS WITH TOP VCs AND TECHNOLOGY BANKS
Investor Syndicate Revenue & Gross Margins Business Model Includes historical information of Trinity Capital's predecessor funds, the first of which was launched in 2008, through September 30, 2022. Past performance is not indicative of future results. Investment results may vary significantly over any given time period. FINANCIALS DEBT STRUCTURE CAPITALIZATION MANAGEMENT PRODUCT & MARKET Product Differentiation Market Potential Industry & Start-up Experience BOD Make-up Fund Vintage & Dry Capital Collateral Cash Life UNDERWRITING APPROACH AND RISK MITIGATION Disciplined investment approach keeps our annualized loss rate at 23 bps and is more than offset by realized gains on warrant/equity investments(1)
FINANCIAL HIGHLIGHTS
Total Investment Income of $38.7M Net Investment Income (“NII”) of $18.6M Net Interest Margin (“NIM”) of 11.5% NII per share of $0.56 provides 124.4% of regular distribution coverage Increased the third quarter regular dividend distribution to $0.45 per share, a 7.1% increase over the regular dividend declared in the prior quarter Declared supplemental dividend of $0.15 per share Robust Earnings Leading Originations Platform Portfolio Assets Liquidity Credit Rating Total Debt Investments (at cost): $1,028.4M Total Investments (at cost): $1,087.7M Effective Yield: 15.2% Core Yield: 13.5% Debt & equity commitments in 3Q22: $128.1M Debt & equity fundings in 3Q22: $94.2M Net portfolio growth at cost: $21.1M Available Liquidity: $246.6M (includes $212.5M subject to existing terms and covenants of the Company’s credit facility) Debt to Equity: 118% Egan Jones BBB(1) Stable Outlook Q3 2022 HIGHLIGHTS (1) Credit rating assigned by Egan-Jones Ratings Company, an independent, unaffiliated rating agency. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time. There can be no assurance that this rating will remain for any given period of time.
For the three months ended For the three months ended Nine Months Ended September 30 (In 000’s, except per share amounts) 09/30/2022 06/30/2022 03/31/2022 12/31/2021 09/30/2021 Total Investment Income $38,689 $33,458 $31,845 $23,607 $21,790 Interest expense and other debt financing costs 9,306 7,761 6,798 6,241 5,112 Compensation and benefits 7,315 6,877 6,455 4,475 3,677 General and administrative* 3,438 3,106 2,983 2,315 1,878 Total Operating Expenses 20,059 17,744 16,236 13,031 10,667 Net Investment Income (NII) 18,630 15,714 15,609 10,576 11,123 Net Realized Gain / (Loss) from Investments (602) (9,617) 52,644 7,452 666 Net Change in Unrealized Appreciation / (Depreciation) from Investments (30,028) (13,820) (77,318) 37,082 15,392 Net Increase (Decrease) in Net Assets from Operations $(12,000) $(7,723) $(9,065) $55,110 $27,181 Net Investment Income (NII) per Share – Basic $0.56 $0.51 $0.57 $0.39 $0.42 Net Increase (Decrease) in Net Assets resulting from Operations per Share – Basic $(0.36) $(0.25) $(0.33) $2.03 $1.02 Weighted Average Shares Outstanding – Basic 33,098 30,955 27,417 27,201 26,641 QUARTERLY INCOME STATEMENT * General and administrative expenses includes excise tax expense.
INCOME SOURCE & PORTFOLIO YIELD TRENDS Strong Yields Produce Solid Investment Income
NET INVESTMENT INCOME (NII) PER SHARE BRIDGE
For the three months ended Nine Months Ended September 30 (In 000’s, except per share amounts) 09/30/2022 06/30/2022 03/31/2022 12/31/2021 09/30/2021 Assets Total investments at fair value $ 1,042,175 $ 1,051,074 $919,348 $873,470 $677,246 Cash and cash equivalents 34,141 13,226 28,684 31,685 25,313 Restricted cash - - - 15,057 15,000 Interest receivable 8,899 8,600 6,482 5,551 4,481 Other assets 11,534 17,280 11,425 11,355 5,367 Total Assets $1,096,749 $1,090,180 $965,939 $937,118 $727,407 Liabilities 2025 Notes, net of unamortized deferred financing cost $178,074 $121,979 $121,681 $121,384 $121,098 Credit facilities 137,500 220,000 134,000 91,000 9,474 August 2026 Notes, net of unamortized deferred financing cost 122,753 122,609 122,465 122,321 122,436 December 2026 Notes, net of unamortized deferred financing cost 73,433 73,339 73,251 73,158 - Convertible Notes, net of unamortized deferred financing cost and discount 47,958 47,799 47,639 47,485 47,350 Distribution payable 21,073 17,873 15,389 9,803 8,959 Security deposits 14,903 12,515 11,549 10,840 7,705 Accounts payable, accrued expenses, and other liabilities 18,591 15,724 15,924 14,594 11,379 Total Liabilities $614,285 $631,838 $541,898 $490,585 $328,401 Net Assets $482,464 $458,342 $424,041 $446,533 $399,006 Shares outstanding 35,122 31,356 27,983 27,230 27,148 Net Assets per Share (NAV per share) $13.74 $14.62 $15.15 $16.40 $14.70 BALANCE SHEET
NET ASSET VALUE (NAV) PER SHARE BRIDGE
Diversified Borrowings ($ in million) at 9/30/2022 Funding Source Debt Commitment Outstanding Principal Undrawn Commitment Stated Maturity Interest Rate Notes: 2025 Unsecured Notes (1) $182.5 $182.5 - January 16, 2025 (2) 7.0% Convertible Notes $50 $50 - December 11, 2025 6.0% August 2026 Unsecured Notes $125 $125 - August 24, 2026 4.375% December 2026 Unsecured Notes $75 $75 - December 15, 2026 4.25% Bank Facility: KeyBank Credit Facility $400 (3) $137.5 $262.5 October 27, 2026 Adjusted Term SOFR + 2.85% DEBT CAPITAL STRUCTURE The 2025 Unsecured Notes trade on the Nasdaq Global Select Market under the symbol “TRINL.” Callable at par in January 2023. Represents maximum facility amount of which $350 million is available as of September 30, 2022.
Distributable Net Income covered regular dividends by 124.4% in 3Q22 Supplemental Dividend of $0.15 from 2021 spillover income Strong Earnings and Dividend Growth SOLID SHAREHOLDER RETURNS
PORTFOLIO HIGHLIGHTS
Geography Diversification(1) 43.8% 10.5% 4.8% 8.7% 0.8% 23.0% International 8.4% PORTFOLIO DIVERSIFICATION At September 30, 2022 (1) Based on Fair Market Value
Based on outstanding principal Based on Fair Market Value Well positioned for rising interest rates Strong Asset Diversification PORTFOLIO TRENDS
HYPOTHETICAL WARRANT UPSIDE Proceeds of $53.0 million (2X) Potential gain of $16.2 million or $0.46 per share Proceeds of $79.5 million (3X) Potential gain of $42.7 million or $1.22 per share Proceeds of $106.0 million (4X) Potential gain of $69.2 million or $1.97 per share Recent and Pending Portfolio Company M&A Liquidity Events Presto Automation (fka E la Carte) completed its de-SPAC Footprint has entered into a definitive merger agreement with a Special Purpose Acquisition Company (SPAC). 126 Warrant Positions in 77 Portfolio Companies GAAP fair value ~ $30.2 million GAAP cost ~ $20.5 million ~ $53.0 million in nominal exercise value Hypothetical Models of Potential Warrant Gains at 9/30/22 Assume that only 50% of warrants will monetize and an investment to exercise of $26.5 million Total cost of exercised warrants is ~ $36.8 million Based on 35.1 million shares of common stock outstanding at 9/30/22 MULTIPLE MULTIPLE MULTIPLE 2X 3X 4X For Illustration Purposes Only
3Q22 2Q22 1Q22 4Q21 3Q21 Very Strong Performance (4.0 – 5.0) $92,008 9.2% $62,719 6.3% $80,592 9.4% $84,785 11.5% $62,872 10.9% Strong Performance (3.0 – 3.9) $320,087 32.1% $382,593 38.5% $332,019 38.9% $236,466 32.1% $224,287 38.8% Performing (2.0 – 2.9) $537,260 53.9% $529,285 53.2% $429,044 50.3% $396,846 53.9% $267,391 46.3% Watch (1.6– 1.9) $38,484 3.9% $18,706 1.9% $8,858 1.0% $13,427 1.9% $16,194 2.8% Default/Workout (1.0 – 1.5) $9,339 0.9% $1,290 0.1% $3,286 0.4% $4,444 0.6% $6,919 1.2% Weighted Average 2.9 3.0 3.1 3.0 3.1 Credit risk rating at Fair Value, 3Q 2022 – 3Q 2021 ($ in thousands) Consistent and Disciplined Underwriting Standards DISCIPLINED CREDIT RATING
Select List of Current & Historical Investments DIVERSIFIED PORTFOLIO
VENTURE CAPITAL AND LENDING MARKET
US VC Deal Activity VENTURE CAPITAL MARKET * As of September 30, 2022 Source: Pitchbook NVCA Venture Monitor Q3 2022
US VC Fundraising Activity VENTURE CAPITAL FUNDRAISING * As of September 30, 2022 Source: Pitchbook NVCA Venture Monitor Q3 2022
VENTURE DEBT MARKET US Venture Debt Deal Activity * As of September 30, 2022 Source: Pitchbook NVCA Venture Monitor Q3 2022
ANALYST COVERAGE
Followed by seven firms EXTENSIVE INDUSTRY ANALYST COVERAGE Ryan Lynch (initiated coverage 2/23/21) Finian O’Shea (initiated coverage 2/23/21) Vilas Abraham (initiated coverage 2/23/21) Bryce Rowe (initiated coverage 9/16/22) Casey Alexander (initiated coverage 2/23/21) Christopher Nolan (initiated coverage 2/23/21) Mitchell Penn (initiated coverage 5/3/21) Trinity Capital is followed by the analysts listed above. Please note that any opinions, estimates or forecasts regarding Trinity Capital’s performance made by these analysts are theirs alone and do not represent opinions, forecasts or predictions of Trinity Capital or its management. Trinity Capital does not by its reference above or distribution imply its endorsement of or concurrence with such information, conclusions or recommendations.
SUPPLEMENTAL INFORMATION
BUSINESS DEVELOPMENT COMPANY (BDC) REGULATED INVESTMENT COMPANY (RIC) Trinity Capital Inc. is an Internally Managed BDC under the 1940 Act and has elected to be treated as a RIC for Federal Income Tax Purposes beginning with its Taxable Year ending December 31, 2020 Regulated by the SEC under the Investment Company Act of 1940 (the “1940 Act”) Leverage limited to approximately 2:1 debt/equity Investments are required to be carried at fair value Majority of Board of Directors must be independent Offer managerial assistance to portfolio companies Distribute taxable income as dividend distributions to shareholders, subject to approval by Trinity Capital’s Board of Directors Mandates asset diversification Eliminates corporate taxation Allows for the retention of capital gains and/or spillover of taxable income REGULATION & STRUCTURE
We look forward to our growing partnership. THANK YOU