Trinity Capital Inc. Q3 FY2024 earnings call

• Kyle Brown highlighted record net investment income, NAV growth, AUM record, and strong dividend. - Michael Testa discussed investment income growth, yield, NAV, capital markets activities including ATM expansion, credit facility upsizing, note issuances, and RIA co-investment benefits. - Gerry Harder talked about portfolio performance across verticals, credit quality improvement, portfolio composition, and portfolio companies raising significant equity.

In the third quarter, Trinity Capital achieved strong results. Record net investment income was $29 million, a 26% increase vs Q3 2023. Net asset value grew to $757 million, up 11% from the previous quarter. Platform AUM reached a record $2 billion. Q3 saw $459 million of gross fundings, largely driven by $406 million of secured loans and investments in 11 new portfolio companies. The dividend was $0.51 per share, 19th consecutive quarter of consistent or increased dividend. Portfolio composition by cost: 76% secured loans, 18% equipment finance, 4% equity, 2% warrants. Fundings breakdown: tech lending 39.8%, life sciences 29.4%, warehouse financing 15.7%, equipment finance 9.1%, sponsor finance 5.4%.

Kyle Brown mentioned looking forward to updating 2024 results during the next call in February and invited participation in the investor event in Manhattan on November 19.

None explicitly detailed in depth, but the call noted forward-looking statements involve known and unknown risks and uncertainties, and investors are encouraged to refer to recent SEC filings for risk factors.

Q: How to balance growing at a rapid pace while keeping credit quality pristine?

A: Gerry Harder said diversification across verticals and experienced teams focusing on verticals and credit within them help maintain credit quality.

Q: How to balance between ATM vs syndicated equity offering?

A: Kyle Brown said they are being opportunistic, using ATM as an efficient way to raise equity at a lower cost for investors.

Q: What was the driver of realized loss in the quarter?

A: Michael Testa said it was related to the realization of Nexi's transaction and prior fair value markdowns.

Q: When will operating expense ratio inflect?

A: Kyle Brown said as they continue to scale, efficiencies of scale will lead to the ratio coming down over the next 12 months while growing the business.

Q: Can originations be sustained?

A: Kyle Brown said originations are balanced across verticals, sustainable as they've expanded verticals and credit/underwriting remains focused.

Q: What's the timeline from signed term sheet to funded loan?

A: Kyle Brown said generally 90 to 120 days, with term sheet to funding taking about 45 days.

Q: Thoughts on dividend and when to increase it?

A: Kyle Brown said they focus on keeping dividend stable, growing earnings per share and NAV, then the Board will decide on increase.

Q: Appetite to flip to external management?

A: Kyle Brown said they are not considering flipping to external management, as internal structure is ideal and they've delivered strong returns.

Q: How is AUM scaling in JV and RIA?

A: Michael Testa said they syndicated $40 million this quarter, and the RIA balance sheet continues to ramp with plans to obtain leverage for the vehicle.

Q: Details on credit rating improvement and new investments?

A: Gerry Harder said credit rating improvement was due to capital raising, portfolio companies performing well, and strong originations; new investments land in the high performing range initially.

Q: European expansion and impact on non-qualified assets?

A: Michael Testa said non-qualified assets are a small portion, and they can use credit facilities in foreign currencies to manage FX risk, with plans to grow the European team with local experts.

Q: Outlook for RIA channel growth and operating leverage?

A: Kyle Brown said they are focused on raising capital for the RIA as a co-investment vehicle and for different verticals, aiming to generate management and incentive fees that flow to investors.