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
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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 March 2, 2023, Trinity Capital Inc. (the “Company”) issued a press release announcing its financial results for the year ended December 31, 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 March 2, 2023, the Company disseminated an earnings presentation to be used in connection with its conference call and live webcast to discuss its year-end 2022 financial results on March 2, 2023, 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
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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: |
March 2, 2023 |
By: |
/s/ Steven L. Brown |
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Steven L. Brown |
Trinity Capital Inc. Reports Fourth Quarter and Full Year 2022 Financial Results
PHOENIX, (March 2, 2023 /PRNewswire/) -- Trinity Capital Inc. (Nasdaq: TRIN, TRINL) (“Trinity” or the “Company”), a leading provider of diversified financial solutions to growth-stage companies, today announced its financial results for the fourth quarter and year ended December 31, 2022.
Fourth Quarter 2022 Highlights
“Trinity had a year of exceptional growth, furthering its momentum in 2022,” said Steve Brown, Chairman and Chief Executive Officer of Trinity. “Our operating performance generated a record $975.5 million in new commitments and fundings of $631.2 million, leading to record total investment income of $145.5 million and net investment income of $71.6 million. Our strong originations process allowed us to grow our portfolio on a cost basis by $355.7 million, or 44.6% year-over-year. We continued our strategic approach to growth with the recent announcements regarding our joint venture and the exemptive relief for our RIA by the SEC. We believe these two investment vehicles will provide accretive returns to our shareholders beginning in 2023.”
Brown concluded, “Our outstanding performance has allowed us to increase our dividend for eight straight quarters, resulting in gross dividends of $2.33 per share in 2022. In addition, we ended the year with approximately $60.4 million or $1.73 per share of earnings spillover. We enter 2023 focused on maintaining our credit quality and managing liquidity, while expanding our investment platform in a dynamic market. Trinity’s world-class team and rigorous underwriting process position our business to capture the opportunities in front of us.”
Full Year 2022 Highlights
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“Trinity is operating on all cylinders. We have a healthy portfolio, solid balance sheet and ample liquidity heading into 2023,” said Kyle Brown, President and Chief Investment Officer of Trinity. “With the goal of becoming one of the premier venture growth lending platforms in the world, our focus remains on building an investment portfolio that continues to generate strong returns for our shareholders in all economic environments.”
Fourth Quarter 2022 Operating Results
For the three months ended December 31, 2022, total investment income was $41.5 million, compared to $23.6 million for the quarter ended December 31, 2021. The increase is primarily attributable to the higher weighted average debt investment portfolio and an increase in core yields between periods. This represents a core yield on the average debt investments at cost of 14.2% and 13.2% for the periods ended December 31, 2022 and 2021, respectively. The Company’s effective yield on the debt portfolio was 15.5% as of December 31, 2022, compared to 15.2% in the prior year. Effective yields generally include the impact 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 operating expenses, excluding interest expense, for the fourth quarter of 2022 were $9.6 million, compared to $6.8 million during the fourth quarter of 2021. The increase was primarily attributable to higher compensation expense associated with additional headcount, variable compensation and amortization of restricted stock grants, higher professional fees and higher excise tax expense. Interest expense for the fourth quarter of 2022 was $10.3 million, compared to $6.2 million during the fourth quarter of 2021. The increase is primarily attributable to the higher debt outstanding under the Company’s 7% Unsecured Notes and December 2026 Notes, and higher weighted average borrowings and interest rates under the Company’s credit facility.
Net investment income was approximately $21.6 million, or $0.62 per share based on 35.1 million basic weighted average shares outstanding for the fourth quarter of 2022, compared to $10.6 million or $0.39 per share for the fourth quarter of 2021 based on 27.2 million basic weighted average shares outstanding.
Net unrealized depreciation of $13.6 million during the fourth quarter of 2022 was primarily attributable to specific markdowns of $18.2 million, $3.7 million of general market volatility and $2.2 million related to interest rate changes, offset by the reversal of $10.5 million of depreciation to realized loss.
Fourth quarter 2022 net realized loss on investments was approximately $9.6 million, primarily attributable to losses in two portfolio companies and warrant write-offs.
Fourth quarter 2022 net decrease in net assets resulting from operations was $1.6 million, or $0.05 per share based on 35.1 million basic weighted average shares outstanding. This compares to a net increase in net assets resulting from operations of $55.1 million or $2.03 per share based on 27.2 million basic weighted average shares outstanding for the fourth quarter of 2021.
Trinity's higher weighted average share count for the fourth quarter and full year of 2022 as compared to the same periods 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 364,000 shares issued under the dividend reinvestment plan and ATM program and approximately 665,000 net shares issued in connection with restricted stock awards, offset by approximately 186,000 shares repurchased in the fourth quarter of 2022 under the Company’s stock repurchase program.
Net Asset Value
As of December 31, 2022, total net assets decreased to $459.6 million, compared to $482.5 million as of September 30, 2022, and corresponding NAV per share decreased to $13.15 compared to $13.74. The decrease in NAV and NAV per share was primarily the result of net investment income that exceeded the
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Company’s declared dividend by $0.01 per share offset by the unrealized depreciation and realized losses recognized during the fourth quarter. Approximately 75% of the unrealized depreciation was related to two portfolio companies, FemTec Health and Core Scientific (OTC: CORZQ), previously identified as troubled credits in prior quarters. The increase in the price of Bitcoin by approximately 40% since December 31, 2022 is expected to have a positive effect on Core Scientific’s operations.
Portfolio and Investment Activity
As of December 31, 2022, Trinity’s investment portfolio had an aggregate fair value of approximately $1.09 billion and was comprised of approximately $802.9 million in secured loans, $246.0 million in equipment financings and $45.6 million in equity and warrants across 116 portfolio companies. The Company’s debt portfolio is comprised of 65.6% first lien loans and 22.4% second lien loans with 67.5% of the debt portfolio at floating rates based on principal outstanding.
During the fourth quarter, the Company originated approximately $239.5 million of total new commitments. Fourth quarter investments funded totaled approximately $120.8 million, which was comprised of $70.4 million of investments in seven new portfolio companies and approximately $50.4 million of investments in nine existing portfolio companies. Investment fundings during the quarter for loans totaled $90.2 million, equipment financings totaled $29.0 million and warrant investments totaled $1.6 million.
Proceeds received from repayments of the Company's debt investments during the fourth quarter totaled approximately $53.0 million, which included $14.8 million from early debt repayments. The investment portfolio increased by $65.9 million or approximately 6.1% on a cost basis, and by $52.2 million or approximately 5.0% at fair value as compared to September 30, 2022.
As of the end of the fourth quarter, loans to two portfolio companies and equipment financings to two portfolio companies were on non-accrual status with a total fair value of approximately $17.8 million, or just 1.7% of the Company’s debt investment portfolio at fair value.
The following table shows the distribution of the Company’s loan and equipment financing investments on the 1 to 5 investment risk rating scale at fair value as of December 31, 2022 and September 30, 2022 (dollars in thousands):
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December 31, 2022 |
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September 30, 2022 |
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Investment Risk Rating |
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Designation |
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Investments at |
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Percentage of Total Portfolio |
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Investments at |
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Percentage of Total Portfolio |
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4.0 - 5.0 |
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Very Strong Performance |
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$ |
2,729 |
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0.3% |
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$ |
92,008 |
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9.2% |
3.0 - 3.9 |
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Strong Performance |
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239,872 |
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22.9% |
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320,087 |
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32.1% |
2.0 - 2.9 |
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Performing |
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756,596 |
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72.1% |
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537,260 |
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53.9% |
1.6 - 1.9 |
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Watch |
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39,315 |
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3.7% |
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38,484 |
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3.9% |
1.0 - 1.5 |
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Default/Workout |
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10,317 |
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1.0% |
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9,339 |
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0.9% |
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Total |
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$ |
1,048,829 |
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100.0% |
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$ |
997,178 |
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100.0% |
As of December 31, 2022, the Company’s loan and equipment financing investments had a weighted average risk rating score of 2.8 as compared to 2.9 as of September 30, 2022. Trinity’s grading scale is comprised of numerous factors, two key factors being liquidity and performance to plan. A company may be downgraded as it approaches the need for additional capital or if they are underperforming relative to their business plans. Conversely, they may be upgraded upon a capitalization or if they are exceeding their plan. As such, the overall grading may fluctuate quarter-to-quarter.
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Stock Repurchase Program
On November 14, 2022, Trinity announced that its Board of Directors authorized a program for the purpose of repurchasing up to $25.0 million worth of the Company's common stock. Unless amended or extended by Trinity's Board of Directors, the Company expects the repurchase program to be in place until the earlier of November 11, 2023, or until $25.0 million of Trinity's outstanding shares of common stock have been repurchased. As noted, Trinity repurchased and retired approximately 186,000 shares of common stock during the fourth quarter of 2022 at an aggregate purchase price of $2.0 million.
Accretive Growth Announcements
On December 6, 2022, Trinity announced that it entered into an agreement to co-manage a newly formed joint venture, i40, LLC (the “JV”), that will invest in loans and equipment financings to growth-stage companies that have been originated by Trinity. The initial capital commitment to the JV is $171.4 million, consisting of a $21.4 million commitment from Trinity and a $150.0 million commitment from certain funds and accounts managed by a specialty credit manager (the “JV Partner”). During 2022, the JV did not make any investments in loans originated by Trinity. The JV Partner has invested in approximately $27.6 million of loans originated by Trinity through March 1, 2023.
On December 14, 2022, Trinity announced it was granted exemptive relief from the SEC that permits the Company to organize, acquire and wholly own a portfolio company that intends to operate as an investment adviser registered under the Investment Advisers Act of 1940.
Liquidity and Capital Resources
As of December 31, 2022, the Company had approximately $173.1 million in available liquidity, including $10.6 million in unrestricted cash and cash equivalents. At the end of the period, the Company had $162.5 million in available borrowing capacity under its credit facility subject to existing terms, advance rates and regulatory and covenant requirements.
As of December 31, 2022, Trinity's leverage was approximately 135% as compared to 118% as of September 30, 2022. The increase in the leverage ratio was primarily attributable to borrowings under the KeyBank Credit Facility.
Distributions
On December 15, 2022, the Company’s Board of Directors declared a regular and supplemental dividend totaling $0.61 per share with respect to the quarter ended December 31, 2022, which was paid on January 13, 2023, to shareholders of record as of December 30, 2022. The Board of Directors generally determines and announces the Company’s dividend distribution on a quarterly basis.
Conference Call
Trinity will hold a conference call to discuss its fourth quarter and full year 2022 financial results at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) on Thursday, March 2, 2023.
To listen to the call, please dial (800) 225-9448, or (203) 518-9708 internationally, and reference Conference ID: TRINQ422 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) 934-3336 or (402) 220-1148.
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
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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
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TRINITY CAPITAL INC.
Consolidated Statements of Assets and Liabilities
(In thousands, except share and per share data)
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TRINITY CAPITAL INC.
Consolidated Statements of Operations
(In thousands, except share and per share data)
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Fourth Quarter 2022 Investor Presentation FUELING DISRUPTIVE TECHNOLOGIES. REVOLUTIONIZING THE FUTURE.
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
Historical information includes information and data related to Trinity Capital's predecessor funds, the first of which was launched in 2008, through December 31, 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. As of December 31, 2022. Assets under management is based on fair market value. Based on the closing price of TRIN of $13.34 on March 1, 2023. Annualized based on the $0.61 dividend (including $0.15 supplemental dividend) declared for Q4 2022 and a closing stock price of $10.93 on December 31, 2022. Includes $10.6 million 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. TRINITY CAPITAL OVERVIEW Diversified financial solutions to growth stage companies | NASDAQ – TRIN, TRINL 15 Year track Record(1) PORTFOLIO(2) LIQUIDITY(2) 284 Investments 159 Exits $1.1B Assets Under Management(2) MARKET CAP / DIVIDEND YIELD 22.3% Annualized Dividend Yield(4) $465.9M Market Cap(3) $13.15 NAV per share(2) 88 Companies Debt Positions 82 Companies Warrant Positions 24 Companies Equity Positions $2.4B Fundings $173.1M Available Liquidity(5) BBB Investment Rating(6) 135% Debt to Equity
Trinity is permitted to organize, acquire and wholly own a portfolio company that intends to operate as an investment adviser registered with the SEC. This allows Trinity to execute with a unique growth lever to pursue accretive investment opportunities. Registered Investment Adviser ("RIA") On December 14, 2022, Trinity received exemptive relief for a registered investment adviser (“RIA”). Joint Venture (“JV”) The JV will invest in loans and equipment with an initial capital commitment of up to $171 million to continue growing deployments. This JV will enable Trinity to grow its portfolio in a non-dilutive fashion. On December 6, 2022, Trinity announced an agreement to co-manage a newly formed joint venture with certain funds and accounts managed by a specialty credit manager. ACCRETIVE GROWTH OPPORTUNITIES
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 Robust & Scalable Platform Robust and scalable systems for origination, underwriting and monitoring Separation of origination, underwriting and monitoring duties aids “positive feedback” loop 57 dedicated professionals with a unique culture built over 15+ years WHY IS TRINITY DIFFERENT Diversified Financial Solutions Provider of diversified financial solutions to growth stage companies worldwide Runway extension to augment institutional equity funding Strong portfolio diversification
Term Loans Axiom Space is developing the world’s first commercial space station. Investor Syndicate C5 Capital, TQS Advisors, Declaration Partners, Boryung Pharma Use of Loan General corporate purposes Mainspring developed a new category of clean power generation — the linear generator — that delivers fuel-flexible power to accelerate the transition to the future grid. Investor Syndicate Lightrock, Khosla Ventures, Bill Gates 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 GigaFund Use of Equipment Financing Cloud-based 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 PARTNERSHIP 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 December 31, 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 27 bps and is more than offset by realized gains on warrant/equity investments(1)
FINANCIAL HIGHLIGHTS
All unfunded commitments are conditional, subject to additional lending provisions, and generally dependent upon the portfolio company reaching certain milestones before the debt commitment becomes available. Effective yield is calculated based on the weighted average debt investments at cost on a daily basis. Core yield excludes excludes fees and accelerated income from prepayments. Total Investment Income of $41.5M Net Investment Income (“NII”) of $21.6M Net Interest Margin (“NIM”) of 11.6% NII per share of $0.62 provides 134.8% of regular distribution coverage Increased the fourth quarter regular dividend distribution to $0.46 per share, a 2.2% increase over the regular dividend declared in the prior quarter Declared supplemental dividend of $0.15 per share Robust Earnings Total Debt Investments (at cost): $1,093.5M Total Investments (at cost): $1,153.6M Effective Yield(2): 15.5% Core Yield(3): 14.2% Debt & equity commitments in 4Q22: $239.5M Debt & equity fundings in 4Q22: $120.8M Net portfolio growth at cost: $65.9M Net portfolio growth at fair value: $52.2M Unfunded commitments(1) as of 12/31/2022: $392.7M Q4 2022 HIGHLIGHTS Leading Originations Platform Portfolio Assets
Net Investment Income covered regular dividend by 134.8% in 4Q22 Eight consecutive quarterly dividend increases Supplemental dividends of $0.60 per share in 2022 SOLID SHAREHOLDER RETURNS
For the three months ended For the three months ended Nine Months Ended September 30 (In 000’s, except per share amounts) 12/31/2022 09/30/2022 06/30/2022 03/31/2022 12/31/2021 Total Investment Income $41,509 $38,689 $33,458 $31,845 $23,607 Interest expense and other debt financing costs 10,284 9,306 7,761 6,798 6,241 Compensation and benefits 6,543 7,315 6,877 6,455 4,475 General and administrative* 3,051 3,438 3,106 2,983 2,315 Total Operating Expenses 19,878 20,059 17,744 16,236 13,031 Net Investment Income (NII) 21,631 18,630 15,714 15,609 10,576 Net Realized Gain / (Loss) from Investments (9,571) (602) (9,617) 52,644 7,452 Net Change in Unrealized Appreciation / (Depreciation) from Investments (13,647) (30,028) (13,820) (77,318) 37,082 Net Increase (Decrease) in Net Assets from Operations $(1,587) $(12,000) $(7,723) $(9,065) $55,110 Net Investment Income (NII) per Share – Basic $0.62 $0.56 $0.51 $0.57 $0.39 Net Increase (Decrease) in Net Assets resulting from Operations per Share – Basic $(0.05) $(0.36) $(0.25) $(0.33) $2.03 Weighted Average Shares Outstanding – Basic 35,131 33,098 30,955 27,417 27,201 QUARTERLY INCOME STATEMENT * General and administrative expenses includes excise tax expense.
INCOME SOURCE & PORTFOLIO YIELD TRENDS Strong Yields Produce Solid Investment Income Effective yield is calculated based on the weighted average debt investments at cost on a daily basis. Core yield excludes fees and accelerated income from prepayments. (1) (2)
NII RETURNS AND USE OF LEVERAGE Delivering growing returns through effective use of leverage NII return on average assets (ROAA) is calculated as NII divided by average assets for the quarterly period, annualized. NII return on average equity (ROAA) is calculated as NII divided by average net assets for the quarterly period, annualized. Leverage ratio is calculated as outstanding principal of borrowings divided by net assets as of the end of the quarterly period.
NET INVESTMENT INCOME (NII) PER SHARE BRIDGE
For the three months ended Nine Months Ended September 30 (In 000’s, except per share amounts) 12/31/2022 09/30/2022 06/30/2022 03/31/2022 12/31/2021 Assets Total investments at fair value $ 1,094,386 $ 1,042,175 $ 1,051,074 $919,348 $873,470 Cash and cash equivalents 10,612 34,141 13,226 28,684 31,685 Restricted cash - - - - 15,057 Interest receivable 9,971 8,899 8,600 6,482 5,551 Other assets 11,470 11,534 17,280 11,425 11,355 Total Assets $1,126,439 $1,096,749 $1,090,180 $965,939 $937,118 Liabilities Credit facilities $187,500 $137,500 $220,000 $134,000 $91,000 2025 Notes, net of unamortized deferred financing cost 178,552 178,074 121,979 121,681 121,384 August 2026 Notes, net of unamortized deferred financing cost 122,897 122,753 122,609 122,465 122,321 December 2026 Notes, net of unamortized deferred financing cost 73,526 73,433 73,339 73,251 73,158 Convertible Notes, net of unamortized deferred financing cost and discount 48,118 47,958 47,799 47,639 47,485 Distribution payable 21,326 21,073 17,873 15,389 9,803 Security deposits 15,100 14,903 12,515 11,549 10,840 Accounts payable, accrued expenses, and other liabilities 19,771 18,591 15,724 15,924 14,594 Total Liabilities $666,790 $614,285 $631,838 $541,898 $490,585 Net Assets $459,649 $482,464 $458,342 $424,041 $446,533 Shares outstanding 34,961 35,122 31,356 27,983 27,230 Net Assets per Share (NAV per share) $13.15 $13.74 $14.62 $15.15 $16.40 BALANCE SHEET
Includes the impact of share activity and equity incentive plans. NET ASSET VALUE (NAV) PER SHARE BRIDGE Earnings and Distributions Investment Portfolio Performance Share Impact(1)
Diversified Borrowings ($ in million) as of December 31, 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 $50.0 $50.0 - December 11, 2025 6.0% August 2026 Unsecured Notes $125.0 $125.0 - August 24, 2026 4.375% December 2026 Unsecured Notes $75.0 $75.0 - December 15, 2026 4.25% Bank Facility: KeyBank Credit Facility $400.0 (3) $187.5 $162.5 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 $350.0 million is available as of December 31, 2022.
PORTFOLIO HIGHLIGHTS
Geography Diversification(1) PORTFOLIO DIVERSIFICATION At December 31, 2022 International 7.3% 40.3% 11.2% 4.6% 7.2% 1.0% 28.4% 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 $47.0 million (2X) Potential gain of $12.8 million or $0.37 per share Proceeds of $70.4 million (3X) Potential gain of $36.3 million or $1.04 per share Proceeds of $93.9 million (4X) Potential gain of $59.8 million or $1.71 per share 133 Warrant Positions in 82 Portfolio Companies GAAP fair value ~ $31.7 million GAAP cost ~ $21.3 million ~ $47.0 million in nominal exercise value Hypothetical Models of Potential Warrant Gains at 12/31/22 Assume that only 50% of warrants will monetize Cost of exercised warrants is ~ $34.1 million Based on 35.0 million shares of common stock outstanding at 12/31/22 MULTIPLE MULTIPLE MULTIPLE 2X 3X 4X For Illustration Purposes Only
4Q22 3Q22 2Q22 1Q22 4Q21 Very Strong Performance (4.0 – 5.0) $2,729 0.3% $92,008 9.2% $62,719 6.3% $80,592 9.4% $84,785 11.5% Strong Performance (3.0 – 3.9) $239,872 22.9% $320,087 32.1% $382,593 38.5% $332,019 38.9% $236,466 32.1% Performing (2.0 – 2.9) $756,596 72.1% $537,260 53.9% $529,285 53.2% $429,044 50.3% $396,846 53.9% Watch (1.6– 1.9) $39,315 3.7% $38,484 3.9% $18,706 1.9% $8,858 1.0% $13,427 1.9% Default/Workout (1.0 – 1.5) $10,317 1.0% $9,339 0.9% $1,290 0.1% $3,286 0.4% $4,444 0.6% Weighted Average 2.8 2.9 3.0 3.1 3.0 Credit risk rating at Fair Value, 4Q 2022 – 4Q 2021 ($ in thousands) Consistent and Disciplined Underwriting Standards DISCIPLINED CREDIT RATING
INTEREST RATE SENSITIVITY 67.5% floating rate debt investment portfolio as of December 31, 2022 (1) 69.8% fixed rate debt as of December 31, 2022 (2) Based on outstanding principal of debt investments Based on outstanding principal of borrowings
Select List of Current & Historical Investments DIVERSIFIED PORTFOLIO
VENTURE CAPITAL AND LENDING MARKET
US VC Deal Activity VENTURE CAPITAL MARKET * As of December 31, 2022 Source: Pitchbook NVCA Venture Monitor Q4 2022
US VC Fundraising Activity VENTURE CAPITAL FUNDRAISING * As of December 31, 2022 Source: Pitchbook NVCA Venture Monitor Q4 2022
VENTURE DEBT MARKET US Venture Debt Deal Activity * As of December 31, 2022 Source: Pitchbook NVCA Venture Monitor Q4 2022
ANALYST COVERAGE
EXTENSIVE INDUSTRY ANALYST COVERAGE Followed by seven firms 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
36 THANK YOU We look forward to our growing partnership. TRINITYCAP.COM