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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(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 May 4, 2023, Trinity Capital Inc. (the “Company”) issued a press release announcing its financial results for the first quarter ended March 31, 2023. 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 May 4, 2023, the Company disseminated an earnings presentation to be used in connection with its conference call and live webcast to discuss its first quarter 2023 financial results on May 4, 2023, at 6 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: |
May 4, 2023 |
By: |
/s/ Steven L. Brown |
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Steven L. Brown |
Trinity Capital Inc. Reports First Quarter 2023 Financial Results
PHOENIX, May 4, 2023 – Trinity Capital Inc. (Nasdaq: TRIN and TRINL) (“Trinity Capital” or the “Company”), a leading provider of diversified financial solutions to growth-stage companies, today announced its financial results for the first quarter ended March 31, 2023.
First Quarter 2023 Highlights
“Our performance in the first quarter generated record NII results, providing 117% coverage on our regular dividend,” said Steven Brown, Chairman and Chief Executive Officer of Trinity Capital. “Trinity’s differentiated platform is positioned to capitalize on investment opportunities in a dynamic market as companies seek a partner that can support them through their various growth stages. Our veteran team, diversified portfolio and strong balance sheet, supported by our joint venture, are as healthy as ever as we provide financial solutions that meet the needs of growth-stage businesses.”
Kyle Brown, President and Chief Investment Officer of Trinity Capital, added, “Trinity is well positioned given recent volatility in the banking industry, which has fundamentally changed the market. Businesses are looking for more stable, non-bank solutions for their financing needs and we intend to capitalize on this opportunity with a combination of on- and off-balance sheet solutions. Our core priorities of portfolio management and credit quality remain firmly rooted in our operating process. We continue to track markets and maintain constant oversight and communication with our portfolio companies as they navigate the current economic environment. Trinity continues to realize its vision as an emerging leader, providing diversified financial solutions to the global growth economy.”
First Quarter 2023 Operating Results
For the three months ended March 31, 2023, total investment income was $41.5 million compared to $31.8 million for the quarter ended March 31, 2022. This represents an effective yield on the average debt investments at cost of 15.2% and 16.3% for the periods ended March 31, 2023 and 2022, respectively. The decrease in the effective yield is attributed to lower fees and income acceleration as a result of lower early repayments. 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 operating expenses and excise taxes, excluding interest expense, for the first quarter of 2023 were $11.1 million compared to $9.4 million during the first quarter of 2022. The increase was primarily
1
attributable to higher compensation associated with additional headcount, variable compensation, amortization of restricted stock grants and higher professional fees.
Interest expense for the first quarter of 2023 was $11.1 million compared to $6.8 million during the first quarter of 2022. The increase is primarily attributable to an increase in borrowings under the 2025 Notes and the KeyBank Credit Facility, and increased interest rates under the credit facility due to an increase in SOFR.
Net investment income was approximately $19.3 million, or $0.55 per share based on 35.1 million basic weighted average shares outstanding for the first quarter of 2023, compared to $15.6 million or $0.57 per share for the first quarter of 2022 based on 27.4 million basic weighted average shares outstanding.
Net unrealized appreciation of $3.5 million during the first quarter of 2023 was primarily attributable to $2.8 million related to specific portfolio adjustments in connection with improved performance by the portfolio companies, $1.4 million related to interest rate changes and $0.3 million due to the reversal of unrealized depreciation to realized losses, offset by $1.0 million related to general market volatility.
First quarter 2023 net realized loss on investments was approximately $0.4 million, primarily attributable to a loss in one portfolio company.
First quarter 2023 net increase in net assets resulting from operations was $22.5 million, or $0.64 per share based on 35.1 million basic weighted average shares outstanding. This compares to a net decrease in net assets resulting from operations of $9.1 million or $0.33 per share based on 27.4 million basic weighted average shares outstanding for the first quarter of 2022.
Trinity Capital’s higher weighted average share count for the three-month period ended March 31, 2023, as compared to the prior year is primarily the result of shares issued under public equity offerings in April and August of 2022, shares issued under the Company’s ATM program and dividend reinvestment plan and the issuance of restricted stock to officers and employees under the 2019 Trinity Capital Inc. Long Term Incentive Plan, offset by shares purchased under the Company’s stock repurchase program.
Net Asset Value
Total net assets at the end of the first quarter of 2023 increased by 2.2% to $469.7 million, compared to $459.6 million at the end of Q4 2022. The increase in total net assets was primarily driven by net investment income that exceeded the declared dividend and net unrealized appreciation. The decrease in NAV per share to $13.07 from $13.15 per share was primarily driven by additional shares issued through restricted stock awards.
Portfolio and Investment Activity
As of March 31, 2023, Trinity Capital’s investment portfolio had an aggregate fair value of approximately $1.1 billion and was comprised of approximately $808.0 million in secured loans, $239.1 million in equipment financings and $44.4 million in equity and warrants across 115 portfolio companies, including the Company’s investment in the JV. The Company’s debt portfolio is comprised of 71.5% first lien loans and 28.5% second lien loans, with 70.0% of the debt portfolio at floating rates based on principal outstanding.
During the first quarter, the Company originated approximately $43.2 million of total new commitments. First quarter investments funded totaled approximately $70.4 million, which was comprised of a $5.0 million investment in one new portfolio company, a $5.2 million investment in the JV and approximately
2
$60.2 million of investments in 11 existing portfolio companies. Investment fundings during the quarter for loans totaled $35.9 million, equipment financings totaled $31.3 million and warrant and equity investments totaled $3.2 million.
Proceeds received from repayments of the Company's debt investments during the first quarter totaled approximately $82.8 million, which included $42.1 million of investments sold to the JV, $27.6 million from normal amortization and $13.1 million from early debt repayments. The investment portfolio decreased by $6.4 million on a cost basis, a decrease of 0.6%; and by $2.9 million on a fair value basis, a decrease of 0.3% as compared to December 31, 2022.
As of the end of the first quarter and consistent with the prior 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 $23.9 million, or just 2.3% of the Company’s debt investment portfolio at fair value.
The following table shows the distribution of the Company’s loan and equipment financing investments on the 1 to 5 investment risk rating scale at fair value as of March 31, 2023 and December 31, 2022 (dollars in thousands):
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March 31, 2023 |
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December 31, 2022 |
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Investment Risk Rating |
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Designation |
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Investments at |
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Percentage of |
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Investments at |
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Percentage of |
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4.0 - 5.0 |
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Very Strong Performance |
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$ |
2,513 |
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0.2% |
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$ |
2,729 |
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0.3% |
3.0 - 3.9 |
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Strong Performance |
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285,484 |
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27.3% |
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239,872 |
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22.9% |
2.0 - 2.9 |
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Performing |
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719,752 |
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68.8% |
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756,596 |
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72.1% |
1.6 - 1.9 |
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Watch |
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19,270 |
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1.8% |
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39,315 |
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3.7% |
1.0 - 1.5 |
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Default/Workout |
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16,450 |
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1.6% |
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10,317 |
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1.0% |
Total Debt Investments excluding i40, LLC |
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1,043,469 |
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99.7% |
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1,048,829 |
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100.0% |
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i40, LLC |
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3,629 |
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0.3% |
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— |
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0.0% |
Total Debt Investments |
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$ |
1,047,098 |
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100.0% |
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$ |
1,048,829 |
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100.0% |
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As of March 31, 2023, the Company’s loan and equipment financing investments had a weighted average risk rating score of 2.8 as compared to 2.8 as of December 31, 2022. Trinity Capital'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 event or if they are exceeding their plan. As such, the overall grading may fluctuate quarter-to-quarter.
Liquidity and Capital Resources
As of March 31, 2023, the Company had approximately $174.8 million in available liquidity, including $8.3 million in unrestricted cash and cash equivalents. At the end of the period, the Company had
3
approximately $166.5 million in available borrowing capacity under its credit facility with KeyBank, subject to existing terms and advance rates and regulatory and covenant requirements.
As of March 31, 2023, Trinity Capital's leverage or debt-to-equity ratio was approximately 131% as compared to 135% as of December 31, 2022. The decrease in the leverage ratio was primarily attributable to the increase in total net assets during the first quarter of 2023.
Distributions
On March 14, 2023, the Company’s Board of Directors declared a dividend of $0.47 per share with respect to the quarter ended March 31, 2023, which was paid on April 14, 2023, to stockholders of record as of March 31, 2023.
Conference Call
Trinity Capital will hold a conference call to discuss its first quarter 2023 financial results at 3:00 p.m. Pacific Time (6:00 p.m. Eastern Time) on Thursday, May 4, 2023.
To listen to the call, please dial (800) 343-4849, or (203) 518-9856 internationally, and reference Conference ID: TRINQ123 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) 839-9145 or (402) 220-6080.
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 and 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. Trinity 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.
Contact
Vibhor Garg
Managing Director, Marketing
Trinity Capital, Inc.
ir@trincapinvestment.com
4
5
TRINITY CAPITAL INC.
Consolidated Statements of Assets and Liabilities
(In thousands, except share and per share data)
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March 31, |
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December 31, |
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2023 |
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2022 |
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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 $44,096 and $43,375, respectively) |
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$ |
38,442 |
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$ |
37,313 |
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Affiliate investments (cost of $28,580 and $28,580, respectively) |
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7,688 |
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1,528 |
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Non-control / Non-affiliate investments (cost of $1,074,533 and $1,081,629, respectively) |
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1,045,401 |
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1,055,545 |
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Total investments (cost of $1,147,209 and $1,153,584, respectively) |
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1,091,531 |
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1,094,386 |
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Cash and cash equivalents |
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8,344 |
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10,612 |
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Interest receivable |
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10,450 |
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9,971 |
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Deferred credit facility costs |
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2,713 |
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2,903 |
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Other assets |
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10,264 |
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8,567 |
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Total assets |
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$ |
1,123,302 |
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$ |
1,126,439 |
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LIABILITIES |
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KeyBank Credit Facility |
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$ |
183,500 |
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$ |
187,500 |
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2025 Notes, net of $3,465 and $3,948, respectively, of unamortized deferred financing costs |
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179,035 |
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178,552 |
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August 2026 Notes, net of $1,959 and $2,103, respectively, of unamortized deferred financing costs |
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123,041 |
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122,897 |
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December 2026 Notes, net of $1,381 and $1,474, respectively, of unamortized deferred financing costs |
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73,619 |
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73,526 |
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Convertible Notes, net of $1,722 and $1,882, respectively, of unamortized deferred financing costs and discount |
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48,278 |
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48,118 |
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Distribution payable |
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16,885 |
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21,326 |
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Security deposits |
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15,277 |
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15,100 |
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Accounts payable, accrued expenses and other liabilities |
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13,997 |
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19,771 |
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Total liabilities |
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653,632 |
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666,790 |
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NET ASSETS |
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Common stock, $0.001 par value per share (200,000,000 authorized, 35,925,764 and 34,960,672 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively) |
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36 |
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35 |
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Paid-in capital in excess of par |
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484,951 |
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480,532 |
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Distributable earnings/(accumulated deficit) |
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(15,317 |
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(20,918 |
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Total net assets |
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469,670 |
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459,649 |
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Total liabilities and net assets |
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$ |
1,123,302 |
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$ |
1,126,439 |
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NET ASSET VALUE PER SHARE |
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$ |
13.07 |
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$ |
13.15 |
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6
TRINITY CAPITAL INC.
Consolidated Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
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Three Months Ended |
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Three Months Ended |
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March 31, 2023 |
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March 31, 2022 |
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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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1,116 |
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$ |
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1,373 |
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Affiliate investments |
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34 |
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428 |
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Non-Control / Non-Affiliate investments |
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39,381 |
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26,605 |
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Total interest income |
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40,531 |
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28,406 |
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Fee income: |
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Affiliate investments |
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453 |
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— |
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Non-Control / Non-Affiliate investments |
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554 |
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3,439 |
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Total fee income |
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1,007 |
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3,439 |
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Total investment income |
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41,538 |
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31,845 |
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EXPENSES: |
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Interest expense and other debt financing costs |
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11,081 |
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6,798 |
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Compensation and benefits |
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7,617 |
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6,455 |
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Professional fees |
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1,417 |
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832 |
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General and administrative |
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1,495 |
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1,477 |
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Total expenses |
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21,610 |
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15,562 |
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NET INVESTMENT INCOME/(LOSS) BEFORE TAXES |
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19,928 |
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16,283 |
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Excise tax expense |
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597 |
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674 |
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NET INVESTMENT INCOME |
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19,331 |
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15,609 |
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NET REALIZED GAIN/(LOSS) FROM INVESTMENTS: |
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Non-Control / Non-Affiliate investments |
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(365 |
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52,644 |
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Net realized gain/(loss) from investments |
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(365 |
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52,644 |
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NET CHANGE IN UNREALIZED APPRECIATION/(DEPRECIATION) FROM INVESTMENTS: |
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Control investments |
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408 |
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(4,331 |
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Affiliate investments |
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976 |
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(3,264 |
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Non-Control / Non-Affiliate investments |
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2,136 |
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(69,723 |
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Net change in unrealized appreciation/(depreciation) from investments |
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3,520 |
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(77,318 |
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NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
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$ |
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22,486 |
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$ |
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(9,065 |
) |
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NET INVESTMENT INCOME PER SHARE - BASIC |
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$ |
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0.55 |
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$ |
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0.57 |
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NET INVESTMENT INCOME PER SHARE - DILUTED |
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$ |
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0.52 |
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$ |
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0.54 |
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NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE - BASIC |
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$ |
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0.64 |
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$ |
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(0.33 |
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NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE - DILUTED |
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$ |
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0.60 |
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$ |
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(0.33 |
) |
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WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC |
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35,074,076 |
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27,416,943 |
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WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED |
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38,740,871 |
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30,768,333 |
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7
First Quarter 2023 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 March 31, 2023. 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 March 31, 2023. Based on the closing price of TRIN of $12.32 on May 3, 2023. Annualized based on the $0.47 dividend declared for Q1 2023 and a closing stock price of $12.73 on March 31, 2023. Includes $8.3 million of cash and cash equivalents and $166.5 million of available borrowing capacity on our KeyBank Credit Facility. 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) 287 Investments 165 Exits $1.1B Assets Under Management(2) MARKET CAP / DIVIDEND YIELD 14.8% Annualized Dividend Yield(4) $443.1M Market Cap(3) $13.07 NAV per share(2) $808.0M Secured Loans 59 Companies $239.1M Equipment Financings 30 Companies $44.4M Equity & Warrants 92 Companies $2.4B Fundings $174.8M Available Liquidity(5) BBB Investment Rating(6) 131% Debt-to-Equity
THE TRINITY PLATFORM i40, LLC (the “JV”) invests in loans and equipment financings originated by Trinity, with an initial equity capital commitment of up to $171 million. The JV began making investments in Q1 2023. Subsequent to quarter-end, the JV credit facility with KeyBank was closed. 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 raise funds off the balance sheet in a complementary way. In an evolving market, platform diversification further strengthens Trinity’s position to capture market share and differentiates its financing solutions Trinity’s foundation was built on its successful investment track record supporting growth-stage businesses through secured loans and equipment financings. Registered Investment Advisor (“RIA”) Joint Venture (“JV”) Business Development Company (“BDC”) Additional liquidity Fee and interest income Incremental returns Co-investment opportunities On/off-balance sheet growth Capability expansion BDC JV RIA
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 55 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
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 March 31, 2023. 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 24 bps and is more than offset by realized gains on warrant/equity investments(1)
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 SECURED TERM LOANS 01 SECURED LOANS Partner with the banks 02 BACKED BY INSTITUTIONAL CAPITAL Companies have raised significant 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 for clinical trials
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 fees and accelerated income from prepayments. Total Investment Income of $41.5M Net Investment Income (“NII”) of $19.3M Net Interest Margin (“NIM”) of 11.1% NII per share of $0.55 provides 117.0% of regular distribution coverage Increased the fourth quarter regular dividend distribution to $0.47 per share, a 2.2% increase over the regular dividend declared in the prior quarter Robust Earnings Total Debt Investments (at cost): $1,083.6M Total Investments (at cost): $1,147.2M Effective Yield(2): 15.2% Core Yield(3): 14.3% Debt & equity commitments in 1Q23: $43.2M Debt & equity fundings in 1Q23: $70.4M Unfunded commitments(1) as of 3/31/2023: $338.7M Term sheets signed as of 3/31/2023: $312.0M Q1 2023 HIGHLIGHTS Leading Originations Platform Portfolio Assets
Net Investment Income covered regular dividend by 117.0% in 1Q23 Nine consecutive quarterly dividend increases 14.8% annualized regular dividend yield(1) SOLID SHAREHOLDER RETURNS Annualized based on the $0.47 dividend declared for Q1 2023 and a closing stock price of $12.73 on March 31, 2023.
For the three months ended For the three months ended Nine Months Ended September 30 (In thousands, except per share amounts) 03/31/2023 12/31/2022 09/30/2022 06/30/2022 03/31/2022 Total Investment Income $41,538 $41,509 $38,689 $33,458 $31,845 Interest expense and other debt financing costs 11,081 10,284 9,306 7,761 6,798 Compensation and benefits 7,617 6,543 7,315 6,877 6,455 General and administrative(1) 3,509 3,051 3,438 3,106 2,983 Total Operating Expenses 22,207 19,878 20,059 17,744 16,236 Net Investment Income (NII) 19,331 21,631 18,630 15,714 15,609 Net Realized Gain / (Loss) from Investments (365) (9,571) (602) (9,617) 52,644 Net Change in Unrealized Appreciation / (Depreciation) from Investments 3,520 (13,647) (30,028) (13,820) (77,318) Net Increase (Decrease) in Net Assets from Operations $22,486 $(1,587) $(12,000) $(7,723) $(9,065) Net Investment Income (NII) per Share – Basic $0.55 $0.62 $0.56 $0.51 $0.57 Net Increase (Decrease) in Net Assets resulting from Operations per Share – Basic $0.64 $(0.05) $(0.36) $(0.25) $(0.33) Weighted Average Shares Outstanding – Basic 35,074 35,131 33,098 30,955 27,417 QUARTERLY INCOME STATEMENT General and administrative expenses include 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 strong 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 (ROAE) 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 thousands, except per share amounts) 03/31/2023 12/31/2022 09/30/2022 06/30/2022 03/31/2022 Assets Total investments at fair value $ 1,091,531 $ 1,094,386 $ 1,042,175 $ 1,051,074 $919,348 Cash and cash equivalents 8,344 10,612 34,141 13,226 28,684 Interest receivable 10,450 9,971 8,899 8,600 6,482 Other assets 12,977 11,470 11,534 17,280 11,425 Total Assets $1,123,302 $1,126,439 $1,096,749 $1,090,180 $965,939 Liabilities KeyBank Credit Facility $183,500 $187,500 $137,500 $220,000 $134,000 2025 Notes, net of unamortized deferred financing cost 179,035 178,552 178,074 121,979 121,681 August 2026 Notes, net of unamortized deferred financing cost 123,041 122,897 122,753 122,609 122,465 December 2026 Notes, net of unamortized deferred financing cost 73,619 73,526 73,433 73,339 73,251 Convertible Notes, net of unamortized deferred financing cost and discount 48,278 48,118 47,958 47,799 47,639 Distribution payable 16,885 21,326 21,073 17,873 15,389 Security deposits 15,277 15,100 14,903 12,515 11,549 Accounts payable, accrued expenses, and other liabilities 13,997 19,771 18,591 15,724 15,924 Total Liabilities $653,632 $666,790 $614,285 $631,838 $541,898 Net Assets $469,670 $459,649 $482,464 $458,342 $424,041 Shares outstanding 35,926 34,961 35,122 31,356 27,983 Net Assets per Share (NAV per share) $13.07 $13.15 $13.74 $14.62 $15.15 BALANCE SHEET
Includes the impact of share activity and equity incentive plans. NET ASSET VALUE (NAV) PER SHARE BRIDGE Earnings and Distributions Investment Portfolio Performance Share Impact(1)
Diversified Borrowings ($ in millions) as of March 31, 2023 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) 7.00% Convertible Notes $50.0 $50.0 - December 11, 2025 6.00% 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) $183.5 $166.5 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 at any time on or after January 16, 2023. Represents maximum facility amount of which $350.0 million is available as of March 31, 2023.
PORTFOLIO HIGHLIGHTS
Geography Diversification(1) PORTFOLIO DIVERSIFICATION As of March 31, 2023 International 6.3% 39.0% 12.3% 4.2% 7.3% 0.9% 29.5% Based on fair market value. Consists of the fair value of our investment in the JV as of March 31, 2023. The portfolio companies held within the JV’s investment portfolio represent a diverse set of geographic regions generally consistent with those in which we invest directly. Joint Venture(2) 0.5%
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 $47.6 million (2X) Potential gain of $13.2 million or $0.37 per share Proceeds of $71.3 million (3X) Potential gain of $36.9 million or $1.03 per share Proceeds of $95.1 million (4X) Potential gain of $60.7 million or $1.69 per share 135 Warrant Positions in 82 Portfolio Companies GAAP fair value ~ $27.0 million GAAP cost ~ $21.3 million ~ $47.6 million in nominal exercise value Hypothetical Models of Potential Warrant Gains at 3/31/2023 Assume that only 50% of warrants will monetize Cost of exercised warrants is ~ $34.4 million Based on 35.9 million shares of common stock outstanding at 3/31/2023 MULTIPLE MULTIPLE MULTIPLE 2X 3X 4X For Illustration Purposes Only
1Q23 4Q22 3Q22 2Q22 1Q22 Very Strong Performance (4.0 – 5.0) $2,513 0.2% $2,729 0.3% $92,008 9.2% $62,719 6.3% $80,592 9.4% Strong Performance (3.0 – 3.9) $285,484 27.4% $239,872 22.9% $320,087 32.1% $382,593 38.5% $332,019 38.9% Performing (2.0 – 2.9) $719,752 69.0% $756,596 72.1% $537,260 53.9% $529,285 53.2% $429,044 50.3% Watch (1.6– 1.9) $19,270 1.8% $39,315 3.7% $38,484 3.9% $18,706 1.9% $8,858 1.0% Default/Workout (1.0 – 1.5) $16,450 1.6% $10,317 1.0% $9,339 0.9% $1,290 0.1% $3,286 0.4% Weighted Average 2.8 2.8 2.9 3.0 3.1 Credit Risk Rating of Debt investments at Fair Value, 1Q 2023 – 1Q 2022 ($ in thousands)(1) Consistent and Disciplined Underwriting Standards DISCIPLINED CREDIT RATING The total fair value of debt investments excludes our debt investment in the JV, which was $3.6 million as of March 31, 2023. (1)
INTEREST RATE SENSITIVITY 70.0% floating rate debt investment portfolio as of March 31, 2023(1) 70.2% fixed rate debt as of March 31, 2023(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 March 31, 2023 Source: Pitchbook NVCA Venture Monitor Q1 2023
US VC Fundraising Activity VENTURE CAPITAL FUNDRAISING * As of March 31, 2023 Source: Pitchbook NVCA Venture Monitor Q1 2023
VENTURE DEBT MARKET US Venture Debt Deal Activity * As of March 31, 2023 Source: Pitchbook NVCA Venture Monitor Q1 2023
ANALYST COVERAGE
EXTENSIVE INDUSTRY ANALYST COVERAGE Followed by seven firms Ryan Lynch (initiated coverage 2/23/2021) Finian O’Shea (initiated coverage 2/23/2021) Vilas Abraham (initiated coverage 2/23/2021) Bryce Rowe (initiated coverage 9/16/2022) Casey Alexander (initiated coverage 2/23/2021) Christopher Nolan (initiated coverage 2/23/2021) Mitchell Penn (initiated coverage 5/3/2021) 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