Trinity Capital (TRIN) 6 Mar 242023 Q4 Earnings call transcript

Good afternoon. My name is Jamie, and I will be your conference operator today. At this time, I would like to welcome everyone to Trinity Capital's Fourth Quarter and Full Year 2023 Earnings Conference Call.

Our hosts for today are: Kyle Brown, Chief Executive Officer; Michael Testa, Chief Financial Officer; Gerry Harder, Chief Operating Officer; and Ben Malcolmson, Head of Investor Relations. Ron Kundich, Chief Credit Officer; and Sarah Stanton, Chief Compliance Officer and General Counsel, are also present. recorded X:XX be P.M. being beginning for is approximately at call and available will replay This Eastern. Investor [Operator turn to of the is call Ben Instructions]It now over Trinity my Capital's pleasure to Relations, Malcolmson. Head ahead. go Please

provided most Trinity you of Kyle today, reading.Now for accurate to and Trinity refer there any may XXXX. CEO, of any A or note these Because Capital these accessed any Jamie, website information information today's certain allow at by using of the statements Quarter these or guidance factors actual may or call relating cause XX, to forward-looking forward-looking could only of historical results reported the over March the on obligation laws. and the implied materially for facts forward-looking listening responsibility replay are the We telephone call like were factors. financial transcript you, Conference expressed Trinity's prior time to that unknown as known update information at today you be on everyone based release.Before number Year Fourth would this differ begin, and Capital's to under statements. replay on that financial the website encourage markets to and Trinity our Thank statements.Please uncertainties, will made not remind be Earnings to federal some from turn to call that deemed me to Relations securities are Call in be Capital's on Therefore, that results longer released from I XXXX. Brown. ir.trinitycap.com. no time-sensitive our forward-looking by Full be during our including please advised Investor we call, financial welcome filings statements speaks important involve are the to those and that statements recent the risk statements risks SEC can earnings or to opening this available of assumes no

management assets exceptional XXXX. of quarterly This dividend industry-wide income, operating to $XX management. a growth strategies our XXth with consecutive $X.XX the investment the Platform continuing to record Thanks, Ben. significantly a per the our portfolio in our tremendous you, delivered metrics, long-term benefit million Trinity our portfolio streams, management the a financial we our record diversified strategy, all increased in assets to QX, pressure balance our to our of operating and us pushing of platform, to increase net revenue AUM environment banking XXXX, joining of for of of under for in today. and million our efforts sheet, from emphasized billion in and outperformed regular platform. $XXX everyone, strengthened allowed records total and enhanced navigate quarter, include this Thank fourth fundings performance face quarterly quarter a million we In advanced our multiple setting round dividend.In accomplishments record throughout grew making results quarter XXXX, under XX% industry performance while out the the $X.X grow year Most fourth with we us incredibly to talented multiple across year-over-year. XX% up challenging to approximately year-over-year, $XXX shareholders. share year our proactive we notably, disruption fundings of team.Headline partnered in the record to contributing several borrowers our

management lending, each Sciences, ecosystem companies.We've we distinct equipment opportunities of business tech in warehouse lending, market we by to vertical believe and we've an scale that its across pursue investment organized launched provides hired San diversification. our Additionally, team, to commitment widens excellent the opportunities: credit we example office location with satellite originations, around scaling to this of We The of opened own and our a the and the continue Trinity's vertical since our portfolio XXXX. growth-oriented strategy, deal performance And time, asset Life growing as platform of in expand Sciences Life invest best-in-class business which funnel Diego financing our dedicated teams. attractive and teams. talent our vertical in our

with total lending XX, appointments cost us experienced our and footprint portfolio.Within our we a As markets. East talent originators portfolio footprint tech Sciences continue the several nearly teams. vertical, basis new in X million to of expanded adding proven a our to our New XXXX, in our $XXX In regional XXXX, Life of by Coast York on of XX% giving and approximately tech sits represents we at grow deal December our presence major Boston,

We to direct realize of our also XXXX. benefits joint venture began in the lending

XXXX, pipeline, fair by financing December of to sheet As unfunded are fee committee. off-balance provides and loan shareholders. QX, ongoing interest, this But mentioned we've prior calls, in of in to and milestones at to unfunded ended a the and $XXX.X value BBC commitments. accretive subject million $X.X provided unfunded venture our of for $XXX with dividend XX, and performance equipment XXXX approval commitments as of as XXXX.We and our joint reminder, million Trinity's subject vehicle investment earnings many are approximately In the our all commitments a including incremental strong returns investment diligence of to and assets million income capital term growth had

mature before, moving larger key be and our This pipeline. XXXX.As is team head are to deal said we forward. committed of and We growth result, momentum will success into selection Trinity's disciplined cornerstone more selective to very and the our great as and the we will our process, is to credit enter underwriting we remain a businesses and adhering seeing as the

create we've provide at value all culture and We differentiated to is unique of here and of are the which to uncommon strive that every around platform, platform learning of X us beyond to internally with built of key pillars around that trust, with deep an above We humility, committed our continue lender, is investors. continuous Trinity. originators strategically operators. BDC, excellence Trinity our creating direct expectations to a we lending part integrity, pipeline or care, country entrepreneurialism, the built located relationships to clients sponsors, to factor interests.Another allows alignment a structure managed our with as our in and own through that best shareholders' banks the as XXX% employees, And opportunities maintain bring that's whether

commitment supported to our was $X by portfolio XX companies. nearly billion of to result by sponsors. the the raised and opportunities quality portfolio developed as wide of aggregate relationships us companies Trinity, of array For in an In a allows we've a our invest XXXX,

of more Our capital for for funding investors. X high-quality a being for doing and Trinity uncommon and exceptionally focus on outsized employees they clients; continue here continues them.We and to portfolio companies care our of partners; be money dilutive well at exhibiting our secure for source to than less things our the Trinity: returns just growth seek, providing

Mike? trajectory over the with XXXX strong with providing that, We this and one to the I'll expect be call continuing to the platform. years forward companies, growth-oriented opportunity for a us sponsor-backed look CFO. to We XXXX to to continue come.And Testa, in expand our into turn Michael to this

everybody joining welcome Thank you, us and today. Kyle, to

achieved we XX% XXXX. same $XX investment XX% increase for million, set XXXX. several Kyle $XXX record was in increase income million, total a in Total period a in QX, income key As mentioned, the over we records of In XXXX areas over investment XXXX.

Our core yield on strong once the QX again was portfolio for at XX.X%.

record yield XX.X% yield, income, basic for XX.X%, of year. from an core excludes the in the of million period from $XX.X per down slightly increase was nonrecurring was $X.XX $X.XX share to same Our Net $XX.X or a investment basic XX% the income quarter prior compared or fee which million prior quarter. core share, per the

Our the distributions income regular outearned of million represents quarterly our with year we per approximately $XX than net XXX% investment in $X.XX throughout undistributed more or supplemental distribution.Having ended XXXX, our income share. and coverage

platform returns X.X%, ROAA operating XX.X% all at average based over strong over end net equity low leverage income while range. NII average ROAE, Our total with shareholders our to continues with investment for target on of of assets of our on based and the generate

and net $XX.XX increased share by of $XXX per Year-over-year per $X.XX company's $X.XX accretive record of This the result income increase QX. net liquidity. from $XX.XX and dividends offering.Moving asset investment primarily December NAV increased million increased share per from up XX, XXXX, equity share, share. As value the in exceeding to was NAV per to X% NAV declared

million XXXX, total and of of of undrawn we comprised As December million approximately facility our unrestricted cash $XXX $X of under and capacity cash credit XX, $XXX equivalents. in million liquidity had

JV's credit $XXX continued venture, on additional December we with uncalled of capital investment the availability Additionally, And as liquidity. XX, to provides have joint and approximately our million of which had facility. co-invest

leverage December debt cash X.XXx hand, of XXXX. XX, net on less was represents which Our principal ratio, as outstanding

lower of our that range, Our strong to strong the and targeted end opportunistic position a flexibility the be in we with pipeline leverage provides the manage the liquidity currently Trinity marketplace. and fact are at

now [ to NAV, During discuss in Trinity.I performance proceeds the platform call at QX, we in long-term Gerry? our the another to ] more COO, expanded sales ATM $XX and detail. will over agent. and program to approximately added of we million turn Harder premium In quarter, the raised growth our further Gerry our a portfolio supporting

tremendous XXXX. Trinity Michael. experienced you, Thank Capital growth in

systematic beyond, with investment forces we're in type, hyper-focused scale as of segmentation approach representing at and largest well and have industry peers. size, and constructed industries culture driving investment to portfolio core our The as prior Trinity its with differentiate we the diversification transaction XX.X% and with for success, on composition from portfolio shows XX XXXX maintaining and remained technology, continue As our values our geography.We've space platform disciplined across portfolio the been diversify consistent that quarters exposure which the cost. of our industry across intentionally and varied and a our

of and Sciences a on investment a of scheduled cost vertical. deal portfolio was Finance equipment the to to recently announced financing. of one mentioned the Life of of closed comprised medical of in just our financing This shows portfolio cost Rocket of our biotechnology basis.I'd with XX% technology. year-end portfolio prior in services with provider regulatory XX.X% leading value to Equipment aggregate address on our fair We As and Launch and investments million for our Satellite mix total $XXX.X Healthcare Equipment financings and at million earlier, like minimal represent Advanced equipment $XXX year-end further a technology of Space our and year-end cost a exposure. commitment devices, Lab, a represented a

X However, and amortization subsequent the of in repaid approximately addition principal. $XX payments, to million scheduled to year-end company

in were following to the cost historical Additionally, venture, an our their of to debt approximately completion Lab Rocket portion early line merger. in to million, equipment our totaling basis.During our X our joint syndicated investment on with of we QX, payoff asset $XX including remaining early our a repayments financing of a X.X% portfolio principal bringing Hut digital of debt the average,

million We joint in a remained companies also quality from scheduled our repayments fair stable of received venture.Shifting The on approximately of million and our portfolio $XX credit. gears portfolio to with basis. to XX.X% performing of $XX our credit sales value proceeds

X X.X% the our X each quarter credit average average debt and Our rating At stood in of with a representing with loss line This portfolio indicating fourth of system, in X to value reinforces strong on rating total rating X.X% low fair with rates. we internal is quarters at our nonaccrual, record for $XX.X total had performance. very based Trinity's rating companies credit of on approximately X last of million, portfolio. track X the the year-end,

common removed lieu this Chapter $XX.X of our bankruptcy January Core and after Scientific million nonaccrual election investment respectively.Subsequent exit includes status our our its XX value investment from to in million, and Core of investment. receive in of shares debt its in Scientific and However, cost our fair a we from $XX.X to figure year-end, XXXX at stock

only shareholders. value anticipate As for past, in communicated of fair our the investors of Core debt our of we position an X.X% equity the and our of basis. other Outside X on a have represented we in not assets portfolio our benefit equity are Scientific, nonaccrual making general, would orderly sale

dedicated approach management professionals and asset who quality, a team and a the have on We vigilant of are quality solely overall and investment health they focused we'd We both time, open portfolio to questions. Operator? continue to portfolio take of portfolio our ability and that shareholders.At for company companies. benefit this resolutions the in their confident the our to line find like remain to

[Operator Abraham Instructions] to Vilas go first We'll UBS. with

I first my one, just capital ask management. to wanted For about

So QX, you balance relevered the in but equity tapped the ATM sheet also issuance. for

do you've you that range like looks supporting opportunity that leverage the which to do, X.X to clearly X.X So balance to is as you X? expect think talked about in about And there's 'XX, still growth before? target how an the

Kyle. this is Vilas,

to be that we expect X leverage and X.X. So ratio between

of will I managing the and market to think balance history, benefits new some with ability us keep than presents. lower are experience even or to ample to capital we giving be further in us that beginning sheet the really off really income and of our the that experience the expectations generating what the some gives some leverage opportunistic of liquidity is future maybe

And of so going to increase continue the leverage, going add to so we're though, sure build dividend balance we to that we I benefit think to the appropriately.As that seen, to continue We're and you've it. we that to can and make in that do continue equity shareholders outearn sheet.

around the or discussion every into sheet. balance plays certainly that so, thought And building

that on XXXX to don't we refinance look opportunistically side. debt but the on is we borrowings, will I'd The immediate add only our any also throughout maturities have to thing

Helpful. portfolio. And JV the just then, on

it's per $XXX pace million you closer couple try quarters million or that The So we around in expect get should that capacity up of that think, to that to Is $XX for I continue to $XX I quarter. million believe. the portfolio? to about to, million so as now, last $XXX

Yes.

sheet that just see the a basis, new to entities. continue be theme JV or off general of on an separate assets. theme entity assets it's you'll I think, and a the BDC, And or ongoing consistent balance whether I will be separate of that adding alongside a regular co-investing adding think

Ladenburg Christopher to Nolan with Thalmann. next go We'll

the for the quarter? higher was fee in income the What driver

ago. and It's Yes. here. or It's early combination had another nice from of that X, a a X we in the fees that came on It's Mike some quarter, the years Testa combination. noted was a funded of repayment physician repayments X we [ ] Hut

at But benefit the with fees come So we get that our we got of that. quarter, in nice on also, some in financings repayment structuring quarter. equipment upfront of the the that

being could see that to quarter you and this vertical, in in skewed QX. recognized our fees equipment those fundings So financing the --

also that? And Great. activity and Rocket to very turning Space we the And then front expensive Labs. for I big Space on see be tends business. funding should like guess, to more a commitments

Yes.

in looking investor et businesses stage I discussion for finance just prepared think, As that and mission-critical discussed remarks, other equipment in we've vertical equipment support past general, start Chris, I'd we're right? cetera. with our the for technology, and strong capitalization growth in unique with

I fits So Space equipment think that within definitely target. vertical

to it's but that so than really equipment on And industry, extent, if sense. one that us, an we're focused makes any exciting Space for the more

guess I And Great. a final question.

your BDC flow slower in the deal just slowdown sector. technology of BDC are venture the from -- seeing peers Some just

equipment competitors experiencing seem say? the don't to would fair And who are in be You consider guys to Is that. your biggest you financing that area?

Kyle. is this Chris,

different is They venture-backed. companies, So, There's not all be is financing, really similarities are They I so small a there, market, but multiple think benefits And one by venture, very right? have cetera. those equipment could are of that not verticals, differentiated PE-backed. could and which be we et public all the having these business. influenced

I scaling Our there. of to the The angle, commercialized Life was a last we really really primarily discombobulated, nonpublic Healthcare of financing peers. boxes I smaller year challenging, groups Science a many a last then, peers. type It's altogether. there, pretty the approval mention say, different more kind business, of venture think of would have tailwinds there's just not little and business seen quarters focusing equipment lot bit notable couple in and over market -- peers, though.On on debt we're playing rapidly primarily.It's just our us we're with than just And post-FDA different products, so

out compete And a would not -- single say I'd would there's even with. group point I so, that I we directly

I that's VC think, on PE-backed I'd notable side.Sorry, just groups we're and companies there. not for one growth-stage of There's nonanswer. -- the equipment mention there's best-in-class a the

We'll Paul Johnson to go KBW. next with

Just one on Labs. Rocket more

like on sort sounded any income post-quarter. there down big correctly, And million repayment why I prepayment? heard expected? that so fee was sure to the curious of make loan or the I'm with just that was is associated Just a pretty it $XX there pay sudden

company Yes. capital, of funding, convertible us bit. to down equity the I in subsequently question? new the other a significant million paid note subsequent a that of raised What part was mean the of a $XXX amount and over

Yes. recognize Did we the income? fee

Fee income.

Yes.

So of and facility of this the was timing their the and Paul, was scripted, timing capital. the timing somewhat the in company's additional their issue need refinance a facility that. There prior of Trinity to

we million as we So they [ ] repaid first that of after $XX year-end, the of satisfied year expected. need as and us the shortly

Rocket the that curious I'll kind Chris a that maybe that technology, with on, different to just bit then, a way, but see meaningful of the makes think within guess, so there, a down. all. that's And sense. be Space That pay post-quarter but get in a asked that's XX% But that lower Labs opportunity little again and in is or obviously, bit, exposure little portfolio. I ask I'm you may your the you of thoughts maybe portfolio

Sure.

-- exposure itself, industry, you and exposure is. could within break even could the our we So how really it granular that it down really show one

mission-critical pieces even really advance of of And there. that outside focused cetera. company, these generally.So investors equity pieces are et there's that of we're outside equipment, pretty off-the-shelf of than mission-critical lower of raising trail to within So Space diversified of the use against we're capital. equipment And the manufacturing the different an a those a the even going capital industry, equipment financing lot nonspecialized providing and value and a of equipment, equipment. that's industry, We equipment, of that have They right? be type it, and typically significant on So are amount companies and equipment. financing pieces that's we're we equity -- find case

And equity one so infrastructure-type significant with needs to companies to as really just industry the CapEx and of there's That finance. go because industry industry. particular We're amount flowing we're that to significant exposure well. seeing is has that able which particular that in a and requirements,

it. the not exposure whether industry. lot it, continue pieces that different think But so, equipment real not. market as industry us, expanding about don't it lot was you'll it as to see or within probably equipment well.So with to And show there of a of have and industry about a or and you're we of mission-critical really needs that for there's that talking the value because We company

for it. guys -- do Got Core And lockup any to kind or you last Scientific one shares? you of subject me. The guys shares, with restriction those period are

shares. This is million again. X.XX with We Kyle ended QX

We sense and to shareholder any to makes subject are we're value. in not those manner timely shares going that to hold, a liquidate maximize

We'll Instructions] B. next to Rowe [Operator go with Riley. Bryce

good East you I from start a afternoon made, Coast. Wanted Kyle. guess, the maybe to comment on

talk companies mature see You you they're what and bit mean you're And that sheet? a from and larger, little both guess, from we've what was larger, more -- a a larger from on-balance then Equipment of more perspective, said might about and or growth entering deal that process obviously, Space a we little the your the typically.Can another bit recently seen, here entering might all you pipeline. putting it pipeline sheet than companies mature I I deal, investment deal think Finance off-balance

Yes.

pretty QX, to started of significant top think funnel. really a QX, to last see year, So I increase we

of up also, vein, get the funnel finish the requirements the for bottom and line deals the we to in really for tightened We funding. also across that same

alternative actually and seen are decreased what all the well that top getting were of And are mature fund we of satisfied to we've So that bank, of on has more solutions. across capable capital, those their positioned from source deals probably then come percentage But follow permanent are of are needs for there board. commitments, now we with the commitments. the ability and make through in really looking companies a

to really deals. quality top companies.So of of to positioned just those provide capital And so significantly the we're well funnel, we're -- increased

down seeing quality it some deals we But increased XX% reflects. attractive filtering for of there's road. certainly, Average well. Now we're that of are size really the less also mature year it a deal of last as companies -- us, lot further that's just so out kind

are more the solution our for type which of the first first shows just and also we solution portfolio banks. We but different significantly of second seeing of lien, looking alternative majority lien, type kind opportunities, lien you are a to saw and less type is companies

and So robust, we we're what feel we're good proactive and where positioned there. on opportunistic Pipeline about fund. we is we're being being

It's size lot And want Yes. granular hear that we and do committed right? granularity. would industry among to And very that remain we about I quarter-on-quarter, talk across things. portfolio us you something to other a add our financing be across

to our we level on so felt that's clarify reassure that to that granularity. committed to we why important Lab, position of And it are was investors the Rocket right,

lose we them check the don't want sheet that When off-balance will to funding to lender. us keep them. course, we're ability to, want the vehicles future We continue to of sure give We but want grow else. Yes, and the the into size, incumbent of them ability the our them well, to grow. and is companies the companies help continue really making just somebody do yes, keep to a fund to lot

off sheet enter like putting one ability new deal much price balance do to this, that. I too the see at at a transactions our so higher trend. and enter risking you'll while into give not us vehicles then And any point also into think And capital

point. or related and But the secured like you maybe us price whether in you that, to side would with of imagine a the and unsecured question idea funding up 'XX. And to strong. an notes about your about trying how liquidity you're fundings of of how kind I helpful. But really equation, here question. the curious debt funding maybe, pipeline your to of how more mean, active you that's just That's obviously, is be it? was kind market? thinking right. profile, and think the give some ATM, with available facility would liquidity at NAV. about with sounds premium record I There about get running it think expanding All have this a the the It

Yes. listen, mean making got the going sure sure I right? it's things, side, those of making financing. to debt We're a all be that combination out. we've it's On we're tuned secured

that most raise equity we efficiently. sure making are We

liquidity We and on- ample now have off-balance sheet. right really

we've As indicated, XXX% that are charging off-balance -- that to raising is which owned of we sheet shareholders' capital We're fees further. management incentive on additional that by liquidity our bolster capital, and fees will even trend.

So we ourselves have, a and we're We're as our to give ourselves put creating as this a for platform position possible that. in focused on opportunistic many beneficial to grow way options be and shareholders. liquidity really in to that's

return to Abraham UBS. We'll Vilas now with

were ask to wanted timing, the RIA side share? on on specifically able updates you're just to of I that things if there any

give exactly on going how when. much can't timing be the is rolled We you of capital out, to how and it

and expectation changed. hasn't we'll been Our QX, and start deploying guidance in that that has

question. maybe picture just of kind bigger one then And last Okay.

mentioned You of Sciences the XX% Life of as book XX/XX.

particular thinking just of that could you about term? to? I now term, just deploying and be helpful. yes, And that, vertical concentration are color there the longer how get Just longer any would attractiveness that there the guess

great. Yes. That's

and excited grow We our incredible industry. back Life We into Healthcare significant there, that really business. seeing see about dollars equity opportunities Science flow are to

to it's From grow. standpoint, of what we're really picture, bank asset about think or our management very out we business. we're there's an want verticals you massive continue big business mentioned these assets in here, I and -- our really to the verticals, a doing able one going so complementary to not not that goes different to overall we're volatility see have a on sector, If impact diversify

and respectively. focused of them, diversifying really verticals into different And so, we're each these on growing

continue seeing build. Life you'll so, Science And

You'll these as verticals. see that platform overall business. some see across or the And percentage further probably complementary diversification grow of that into you'll exposure we build

to We'll Point. next Compass with Casey go Alexander

one higher shrinking is debt is read which in portfolio, amounts part right, of your portfolio, the the You if of your of still that mentioned the but second lien XX% venture still a space. release I

curious between lending I'm and equipment that how So splits finance. secured

kind of position you in has sort feel lien you a up there? comfortable the typical that And what's structure makes of and second end

one bit. on Yes. Gerry ping pong and will a little this I just

So some all transactions. second are Casey, be going all the way term typically partnering stronger that's None financings, the our of just these lending secured with and lien vertical loans. those of loans, in us There the we of are -- to equipment overall those the think they we deals, are tech financing about provides providing They're company. is are be capital. deals going lower, bank. And those of more to some for and willing where very capital, the they're receivable strong it's enable may cost bank into a runway just because it typically the

in That's whole the generally And with and capital is bank providing we the cost we and willing go the do that's the how thing, we're with came it, company. so look partnering if into at those bank. lot that deals better just a for having bank mindset just it.But there, to a our it down to a lower we of off -- pay the

to a runway also benefit do way the and the extending further. by business way that it's And partner so with a it's the banks, company we and

buy out Do position? you right bank to have the the their of

say gladly I included would to the our do. that relationships option in the that was up. be they working in docs. would an even would such we expect I take with But that is our if Generally, docs, bank And not typically, is that explicitly that

my question. That's only

Brown, to Officer, Executive the to closing session. back conclude question-and-answer any remarks. over that And this turn for will additional Kyle or like time, I'd At call Chief today's

don't with your meeting. and to Have for We'd last today. like groundwork a Thanks, to Jamie. York in forward We're team any a rest We results way Capital. XXXX Trinity investment New everybody our laid month, Bye. this joining of will key for out in months scale and a unique thank over to profitable later meeting XX reach proud in hesitate this your schedule to we've Ben great our the day. Boston and Please interest management business call participating and appreciate look we the of and stakeholders. Thanks. investors to and and feel our like be to in investors.Lastly,

Once again, today's your for does gentlemen, you conclude participation. ladies and that program. Thank

at time. disconnect may You this