Q1 2022 Trinity Capital Inc Earnings Call

May 9, 2022

No.

Operator: [music] Please stand by. Your program is about to begin. If you need audio assistance during today's conference, please press star zero.

Operator: Good afternoon. My name is Katherine and I will be your conference operator today. At this time I would like to welcome everyone to Trinity Capital's first quarter 2022 earnings conference call. Our host for today's call, are Steve Brown, Chairman and Chief Executive Officer, Kyle Brown, President and Chief Investment Officer, David Lund, Chief Financial Officer, Michael Testa, Chief Accounting Officer, and Sarah Stanton, General Counsel. Gerry Harder, Chief Operating Officer and Ron Kundich, Chief Credit Officer, are also present.

Operator: Today's call is being recorded and will be made available for replay at 8 PM Eastern time. The replay dial number is 800-938-0997 and no call ID is required for access. At this time, all participants have been placed in a listen only mode and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your telephone key pad. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. If you should require operator assistance, please press star zero. We ask that you please pick up your handset to allow optimal sound quality. It is now my pleasure to turn the call over to Sarah Stanton. Please go ahead.

Sarah Stanton: Thank you, Katherine, and welcome everyone to Trinity Capital's earnings conference call for the first quarter of 2022. Trinity's first quarter 2022 financial results were released today after market close, and can be accessed from Trinity's Investor Relations website at IR.TrinityCap.com. A replay of the call is available at Trinity's web page or by using this telephone number provided in today's earnings release. Before we begin, I would like to remind everyone that certain statements that are not based on historical fact made during this call, including any statements relating to financial guidance, may be deemed forward looking statements under federal securities laws. Because these forward looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward looking statements.

Sarah Stanton: We encourage you to refer to our most recent SEC filings for information on some of these risk factors. Trinity Capital assumes no obligation or responsibility to update any forward-looking statements. Please note that the information reported on this call speaks only as of today, May 9th, 2022, therefore, you are advised that time sensitive information may no longer be accurate at the time of any replay, listening or transcript reading. With that, allow me to introduce Trinity Capital's Chairman and CEO, Steve Brown.

Steven Louis Brown: Thank you Sarah, and thank you to everyone joining us today.

Steven Louis Brown: As you saw in our earnings release this afternoon we continued to build on the momentum we established in 2021 with another record quarter for fundings in this first quarter of 2022.

While we drove exceptional portfolio growth and remain committed to executing against our long-term growth initiatives, we are fully aware of the changing economic environment and will continue investing with the same stewardship we have demonstrated since we first began investing in 2008.

We've continued to improve our operations, scale our business and further broaden our extensive network in both the VC and equipment financing industries, thereby allowing us to deliver returns for our shareholders with strong net investment income performance and significant realized gains. We continued to strengthen our balance sheet after quarter end with a $57.5 million common stock offering in April that was accretive to NAV and an expansion of our credit facility.

Public market volatility, rising interest rates, inflation and geopolitical uncertainty has so far set the backdrop for 2022, but we still see immense opportunity. Deal flow is moving steadily and Trinity continues to generate strong originations. Our business remains strong in. Our rigorous and consistent underwriting process ensures that our portfolio is built for any cycle.

Trinity is well positioned to capitalize on opportunities in the emerging growth venture debt market as an industry leader and a partner of choice for management teams.

While the team will go into greater detail on the first quarter results, I wanted to share just a few of the key performance highlights.

Our growing portfolio contributed to strong operating performance in Q1, allowing us to declare a quarterly dividend of 40 cents per share, an increase in 11% above the prior quarter. This is the fifth quarter in a row that we have increased our dividend.

In March, we also announced a special distribution of 15 cents per share, distributing a spillover income from 2021. As we have previously stated, our Board has indicated its intent to declare equal special dividends in each of the subsequent quarters of 2022, for a total of 60 cents per share in special dividends for 2022- subject to further Board approval.

Subject to further Board approval.

We recognized $52.6 million of realized gains during the quarter, primarily from the sale of our equity positions Lucid and Matterport.

We delivered a strong quarter in both commitments and deployments, originating $305.6 million in new commitments and funding $222.5 million in gross deployments across 31 portfolio companies.

Q1 net investment income was $15.6 million, or 57 cents per basic share, exceeding our declared regular core quarterly dividend by 17 cents per share.

Our credit quality in the portfolio remains strong, with 98% of our debt investments at cost performing.

Subsequent to quarter-end, we strengthened our liquidity position by selling $57.5 million of our common stock and we upsized our KeyBank credit facility by $100 million to a total capacity of $400 million. Collectively, these moves increased our capacity to fuel our growth.

Additionally, we announced the promotions of two senior executives, as well as a key hire in our new life sciences vertical, demonstrating our commitment to investing in our team and supporting the continued growth of our industry leading lending platform.

Trinity's innovative, energetic and collaborative culture continues to be a differentiator and attracting and retaining top talent in our industry. Kyle will provide more color on this in a moment.

With regards to the RIA progress, we have stated previously, in Q3 of 2021, we filed an application with the SEC for exemptive relief to form a registered investment adviser. If approved, we believe the RIA will provide flexibility for synergistic investment opportunities and create additive earnings for our internally managed BDC. The review process is still within our expected timeline and we continue to work with the SEC on their review of our application.

Despite the long predicted shift in the public markets and the IPO window essentially shot, the VC operating market remained healthy, with VCs adding $70 billion to the existing $230 billion of dry powder, according to PitchBook, which may help lessen the impact of the general market downturn.

In spite of the current market conditions, Trinity continues to perform at record levels. Our business, our team and our portfolio companies are growing at a stable yet healthy rate.

I have confidence in our unique venture lending and equipment financing platform's ability to generate meaningful growth in any economic cycle. We've strengthened our team to further that performance and will maintain a deliberate and disciplined approach to offering capital solutions to the growth-stage companies across industries.

With that, I will now turn the call over to Kyle Brown, our President and Chief Investment Officer, for some further thoughts on our progress and more detail on the market. Kyle.

Kyle Steven Brown: Thanks, Steve, and good afternoon everyone. Q1 marked the 8th consecutive quarter of portfolio growth, proving that we are sustainably building for scale. This is no small feet and a reflection of our hard working and dedicated team here at Trinity. Everything we do is around our unique team, our culture of continuous learning, our entrepreneurial spirit, keeps our business at the forefront of technology and innovation. We believe the best return on investment is the investment we make in our own people.

Turning now to our results, our impressive originations continued in Q1, with $305.6 million and new commitments representing an increase of 23.3% from Q4 of 2021. We funded approximately $222.5 million of new investments, leading our portfolio to grow to $921.1 million on a cost basis, an increase of 15.4% over Q4 2021.

Our $222.5 million of deployments during the quarter reached 31 portfolio companies, including $103.9 million in gross deployments in 10 new portfolio companies and $118.6 million in gross deployments to 21 existing portfolio companies. Gross deployments were partially offset by $96.5 million in principal repayments, of which $69.7 million was from early repayments in $26.8 million was from normal amortization.

During the quarter, refinancings of existing portfolio companies accounted for $29.4 million of the early repayments.

We also received $62.3 million in gross proceeds from equity and warrant liquidations. We finished the quarter with $277.3 million of unfunded commitments, giving us good visibility into the funding opportunities over the next 12 months.

The composition of our portfolio remained relatively consistent, with manufacturing once again making up approximately one quarter of our total portfolio. Professional, scientific and technical services made up 22.2%, followed by information, making up approximately 10%.

Diving deeper in our portfolio composition, at fair value, approximately 76.1% of our debt portfolio, or $649.5 million, is comprised of secured loans and 23.9%, or $204.3 million, is invested in equipment financing. This represents a slight percentage decrease in equipment financing from Q4 2021 but, as we have said in the past, equipment financing deals generally fund over subsequent periods to the commitment date and will fluctuate quarter-to-quarter.

The balance of our portfolio, approximately $65.5 million of fair value is comprised of equity and warrants. The $72 million decrease in our equity investments from the fourth quarter is driven primarily the sale of our equity investments in Lucid and Matterport.

We believe we are a destination company attracting and retaining top talent. We recently welcome to the team of veteran in the venture ecosystem, Robert Lake as Managing Director of life science. Rob has been in supporting venture capital back growth stage companies for over 18 years, primarily in the life sciences industry, and has funded over $1.6 billion in debt transactions during his career. He will be a valuable member to our team as we continue to grow and expand our portfolio.

Building a best-in-class tenured leadership team remains a key priority for our team. Along with hiring top-notch individuals, we are also focused on developing our own talent and creating a leadership team for the future, as demonstrated by the promotions of two senior executives in Q1. Gerry Harder has been promoted from Chief Credit Officer to serve as the company's first Chief Operating Officer, where he will steward corporate infrastructure and operational initiatives to support platform growth and new business creation.

Ron Kundich, who formally served as Senior Vice President of Loan Originations, has been promoted to Chief Credit Officer, succeeding Mr. Harder in the role. In his new role, Mr. Kundich will oversee Trinity Capital lending, underwriting and credit processes. These promotions demonstrate our commitment to investing in our own people and building our business for tomorrow.

The public market slowdown we've been anticipating, resulted in a decrease of M&A and IPO activity compared to previous quarters. As of today, May 9th, 2022, two portfolio companies- Greenlight Bio and Rigetti- successfully completed their de-SPAC transaction in Q1, while Footprint and Presto continue moving towards their own de-SPAC transactions.

I'd like to emphasize that we have always been a direct lender, first and foremost, and while we have certainly benefitted from our equity and more positions in the very hot venture capital ecosystem in 2021, we have have not been dependent on it for our success, as demonstrated by our strong net investment income.

Our vision has been to build the world's number one lending platform for growth-stage companies, with a diversified portfolio of many and multiple product offerings. We're well on our way to fulfilling that objective.

Now I'll turn the call over to David Lund, our Chief Financial Officer, to discuss our financial performance in more detail. David.

David Michael Lund: Thank you, Kyle. We appreciate everyone taking time to listen into today's call.

To echo, Steve and Kyle's comments on Trinity's continued strong performance against the current market backdrop, our financial discipline is a significant contributor to our continued performance.

Not only has our underwriting process been consistent and effective, but we have also strengthened our capital structure ahead of these long anticipated headwinds.

Our debt portfolio, which is now 59.6% floating rate compared to 32.1% a year ago, is well positioned as interest rates rise.

On the borrowing side, approximately 74% of our outstanding debt at the end of the first quarter was at fixed rates. In addition, we've recently increased our capacity under the credit facility with KeyBank by $100 million to a total of $400 million and also increased the availability by $75 million, bring total availability to $275 million.

As we discussed in our 10Q, filed today, a 100 basis point increase in the prime rate would have the effect of adding $2.5 million, or approximately eight cents per share, to our annual net investment income.

So that 50 basis point increase announced last week should have a positive impact to our future earnings.

We anticipated and successfully prepared for a changing market which pushed us on a solid financial footing for the quarters ahead.

Diving into our financial and operating results for the first quarter, we recorded total investment income of $31.8 million and $8.2 million or a 34.9% increase over the $23.6 million of total investment income recorded during the fourth quarter of 2021, and an increase of 83.9% compared to the same period of 2021.

And an increase of 84% compared to the same period of 2021.

This increase was attributable to higher interest income of $6.9 million on a larger loan portfolio and $1.3 million of higher fee income compared to Q4.

Our effective yield on the portfolio for Q1 was 16.3%, an increase of over 100 basis points from Q4, primarily driven by higher risk to interest income and amortization of OID based on the larger portfolio, as well as increased non-recurring fee income, which fluctuates based on investment activity and early repayment activity.

We expect our earlier repayments to be between $45 and $50 million in Q2 and our effective yield to normalize between 15.2% and 15.5%.

We've incurred a total of $6.8 million of total interest expense and amortization of deferred financing costs on our various debt facilities, as compared to $6.2 million in Q4.

The increase was primarily driven due to the issuance of the December 2026 notes in December of 2021, as well as a higher average outstanding balance on our Key Bank facility.

For Q1, our weighted average cost of debt, including interest in fee amortization, was 5.9% compared to 6.7% in Q4. The decrease was due to the lower cost of our December 2026 notes and the lower amortization expense with the maturity of our prior credit facility with Credit Suisse.

Our operating expenses, which are comprised of compensation, professional expenses and general and administrative expenses, were approximately $8.8 million during Q1, as compared to approximately $6.8 million during Q4.

The increase of approximately $2 million or 30.2%, was driven by increased compensation expenses related to higher headcount and variable compensation and higher DNO expense.

We are investing in our team and believe that our new senior level promotions and hires will benefit our bottom line.

As a result of this operating activity, net investment income for the first quarter was $15.6 million, or 57 cents per basic share, as compared to $10.6 million, or just 39 cents per basic share in the preceding quarter.

We recorded net unrealized depreciation of $77.3 million, attributed primarily to the flip from the unrealized depreciation in our equity portfolio tied to our positions in Lucid and Matterport as we sold our equity positions in these companies during Q1.

This was offset by net realized gains at $52.6 million in Q1, again largely attributed to realizing gains from our equity positions in Lucid and Matterport, as well as other realized gains in our equity and warrant portfolios.

The difference between the unrealized appreciation and our realized gains, solely on Lucid and Matterport, of approximately $19 million was attributable to the drop in the public stock price between the valuation date at December 31st, 2021 and the price at which we were able to eventually sell the shares after the respective lockup periods ended.

While we have been fortunate to capitalize on the recent strong performance of companies in our portfolio to generate shareholder returns, we are not equity investors and we will generally sell our equity positions as soon as it is practical to do so.

Net assets decreased by approximately 5% to $424 million, or NAV of $15.15 cents per share, compared to Q4 net assets of $446.5 million dollars or NAV of $16.40 cents per share.

The quarter-over-quarter decrease of $1.25 per share in NAV was primarily the result of the aforementioned flip between unrealized depreciation and realized gain, $5.8 million of unrealized depreciation and the impact of additional shares issued under our restrictive stock and DRIP programs, slightly offset by the net investment income that exceed both our regular and supplemental dividends.

Slightly offset by the net investment income that exceed both our regular and supplemental dividends.

Our NAV per share grew robustly on a year-over-year basis, increasing by $1.46 per share compared to the first quarter of 2021.

Despite the challenging market, Trinity has maintained its financial and underwriting discipline, which has allowed us to continue growing our originations and portfolio.

I will now hand the call over to Mike Testa, our Chief Accounting Officer, who will discuss our credit performance, liquidity and capital allocation efforts. Mike.

Michael Testa: Thanks, Dave. To begin with credit quality, our portfolio continued to perform for the first quarter of 2022, with over 90% of our portfolio on [inaudible].

Currently have three portfolio companies on non-accrual, with the carrying cost basis of 417.2 million and a fair value of $ million, representing just 0.5% of the fair value of the debt investment portfolio.

Our average credit rating for the first quarter improved slightly to three point one based on our one to five rating systems, with five indicating very strong performance.

Moving to liquidity, available liquidity as of March 31, 2022 was approximately $94.7 million, including approximately $28.7 million unrestricted cash and cash equivalent and a borrowing capacity of approximately $66 million under our credit facility, subject to existing terms and conditions.

Under our credit facility, subject to existing terms in condition.

Subsequent to the first quarter we announced a pair of positive updates to our capital structure that enhanced our [inaudible].

First, on April 5th, we announced an offering of our common stock which generated $50 million in gross proceeds, as well as an additional $7.5 million from the exercise of our underwriting- underwriters over allotment option.

Second, we upsized our Key Bank credit facility by $100 million, raising the total size of this facility from $300 million to $400 million.

The stock offering and credit facility upsize reflect the confidence our investors and lenders have in our business to continue drive home- drive income and the strength of our venture debt portfolio to perform through market fluctuation.

Our leverage increased approximately 120% from 104% in the fourth quarter and prior to the equity raise we completed in April. As a reminder, we have communicated that our target leverage ratio is between 115% and 135%, depending on the timing of investment activity.

Regarding our efforts to maximize returns for shareholders, on March 15th, 2022, our Board declared a cash dividend of 40 cents per share for the first quarter of 2022, representing 11% increase from Q4 2021, as well as a 15 cents per share supplemental dividend to partially distribute spillover income earned in 2021. Both dividends were paid on April 15th, 2022. Our GAAP net investment income generated coverage of approximately 143% of our regular dividend for the quarter.

We anticipate declaring both a regular core dividend and a 15 cent per share supplemental dividend for the second quarter of 2022, subject to our Board's approval.

Finally our net investment income and realized gains in Q1 combined with our earnings spillover from 2021 have generated earnings spillover at the end of Q1 of approximately $73.2 million, or $2.62 cents per share based on our outstanding shares at the end of the quarter.

This spillover allows us the opportunity to continue to make investments in our portfolio and generate additional returns for our shareholders, as well as consider additional Investor distributions.

Echoing the sentiments of my colleagues, Trinity is on a strong operational and financial footing as we head into the second quarter. Our resilient portfolio and expanding liquidity has fuelled us for further growth in the quarters ahead. With that, I will now open the line up for questions. Operator.

Operator: And again, if you would like to ask a question, please press star and one on your touch tone phone. You can remove yourself from the queue by pressing the pound key. Will take our first question today from Brian Lynch with KBW. Your line is open.

Brian Lynch: Good afternoon. Thanks for taking my questions. The first one just has to do with kind of the environment that we sit in today in the venture capital ecosystem. You know, how would you describe it as a whole - both being a manager of a bunch of venture back loans which are obviously, you know valuations have come down in a lot of, in a lot of space, certainly in the public markets is going to transfer to the private markets, but also, as you know, a manager who's looking to deploy additional capital environment? So can you kind of- I think what would obviously be, I think, pretty negative and will be positive. So how would you just describe the environment as a whole to that?

Steven Louis Brown: Yes, thanks, Ryan, this is Steve. We've talked about this before, but I think the environment where valuations are being repriced in the VC market is not necessarily a negative, you know, for our model and for Trinity. We've seen that throughout the years and even though valuations get repriced down, down rounds occur where there's a new commitment to our portfolio companies which ultimately allows us to get repaid. So clearly there's a repricing going on in the VC world, but then the other thing that we look at is the dry powder, and I mentioned that in my remarks. There is a lot of dry powder available right now for the right portfolio companies in the VC sector and, as you know, we have been working hard to ensure that we've got those portfolio companies in our portfolio. So I think, generally speaking, you know, the downward trend in pricing or the downward trend in valuation is not necessarily a negative, and we certainly see capacity with the VCs to continue to support and Kyle, maybe you just touch on the positive side of it, which is the opportunity that is presented in this kind of market.

Valuations are being repriced in the B C market is not necessarily a negative, you know, for for our model and FR Trinity we've seen that throughout the years and even though valuations get repriced down, downgrs occur where there's a new commitment to our portfolio companies which ultimately allows us to get repaid. So clearly there's a repricing going on in the B C world. But then the other thing that we look at is the dry powder, and I mentioned that in my remarks. There is a lot of dry powder available right now for the right portfolio companies in the V C sector and, as you know, we have been working hard to ensure that we've got those portfolio companies in our portfolio. So I think, generally speaking, you know, the down, the downward trend in pricing or the downward trend in valuation is not necessarily a negative, and we certainly see. Capacity with the VCs to continue to support and how maybe you just touch on the positive side of it, which is the opportunity that is presented in this kind of market.

Capacity with the VCs to continue to support and how maybe you just touch on the positive side of it, which is the opportunity that is presented in this kind of market.

Kyle Steven Brown: Sure. We believe the companies that continue to grow at a rapid pace, who have the ability to and have the right financial backing, will continue to get funding. Companies that have the ability to kind of see around the corner towards profitability will continue to get backing. And then there are, with reset evaluations, that are going to be very mature, companies that are growing right in with the metrics that we're looking for that simply need an additional 6 to 12 months of runway to continue to achieve those milestones, to continue to achieve that growth and make sure that they're not subject to diluted down rounds just because of where the market's at. There will be some really interesting opportunities for very strong companies who maybe are looking for a debt bridge that maybe weren't looking for that before. So you know, there are there's some market volatility there, but out of it there's also some opportunity.

Brian Lynch: Okay. That's helpful backdrop kind of David I have one for you.

It look like the the portfolio had some additional write-downs in it outside of just the reversals from Lucid and Matterport. Can you describe what was the nature of those additional write-downs? Were they mark-to-market adjustment? Were they changes to the market? Or was there specific creditor queues as that kind of curled those additional write-downs?

David Michael Lund: There were two portfolio companies that we took small write-downs on during the quarter- mark to market and some of the judgmental. So the rest portfolio was pretty stable, but we did have two adjustments in that category.

Brian Lynch: What are those two companies?

David Michael Lund: Yeah, Ryan. So the two companies we have on non-accrual, one has been on non-accrual- that's Store Intelligence. We took a small unrealized depreciation within the quarter. Second Credit is actually one of our controlled positions. Workwell Prevention & Care moved from watch lists into non-accrual. We took a small unrealized depreciation with that one as well.

Brian Lynch: Okay, and then just our last question.

You mentioned this in your prepared comments, but you guys hired Rob Lake to get into the life sciences space. Excuse me. Can you just talk about what he brings and what that looks like from ramping up? Because that's not a sector you guys have that super active into the past. So, I would just love to have any sort of timeline that we should have set before you guys can be active in that space. Does he need to hire out a team? Can he be active today? Does he need to get more integrated? Just what does that look like going forward?

Multiple speakers: Yes, we're really excited to bring Rob on board. He's built multiple teams within the life science industry at Oxford, Bridge as well. We've said this over and over again: we intend to be a number one lender in the space, in the venture back growth stage space, and life science is part of that. What we intend to do is continue to focus on companies that are raising institutional capital who are well into revenue, and we're looking to underwrite and take execution risk- not any different than what we do on our tech side. So as we step into the space more and more, we're going to make sure we bring on professionals who have been there, done that, and we're going to make sure we're not taking technology risk, FDA risk, et cetera. We're going to focus on taking execution risk. Gerry want to add anything else to that? No, it's well stated, Kyle. Now we've got a strong leader on board in Rob and our focus is now turned to building out the remainder of that team, building on our business model and our credit policy. We're going to do it thoughtfully, the Trinity way and, as Kyle said, we'll be focusing on those growth stage opportunities, just like we are doing in tech.

Brian Lynch: Okay. Understood. I appreciate the time this afternoon.

Multiple speakers: Thanks, Brian. Thanks, Brian.

Operator: We'll take our next question from Finian O'Shea with Wells Fargo. Your line is open.

Finian Patrick O'Shea: Hi, everyone. Good afternoon. Can you give us some color on the viaPhoton- I hope I'm pronouncing it right- deal post quarter? It looked like you brought in a partner. I'm not sure if you've sold down and syndicated in the past, but if that's the case it was there a sort of, fee on top of the loan and if you can describe the nature of the partner? If it's a like-minded lender or a bank or lp- any color you could give there?

I hope I'm pronouncing it right- deal post quarter? It looked like you brought in a partner. I'm not sure if you've sold down and syndicated in the past, but if that's the case it was there a sort of, fee on top of the loan and if you can describe the nature of the partner? If it's a like-minded lender or a bank or lp- any color you could give there?

fee on top of the loan and if you can describe the nature of the partner? If it's a like-minded lender or a bank or lp- any color you could give there?

Multiple speakers: Well, I don't know that we had a partner on that deal, Finian. Yeah, we're just shaking our heads going "I don't think we part on that deal." That's just a Trinity position.

Finian Patrick O'Shea: Okay. I could be reading that wrong, of course, apologies. And second question: can you give us any context on how we should model compensation? What are the sort of drivers? Is it origination? is it assets? Is it performance? That moved up a couple million quarter-to-quarter and trying to figure out where to go from here.

David Michael Lund: Yes. This is Dave. We added seven people in the quarter and had some promotions as well, and we also had some supplemental bonuses. I think what you see is for this quarter is probably a good run rate at this point. We will add people during the course of this year. So, we'll kick up a little bit depending upon those people, but I think the first quarter kind of good proxy to the remaining year.

Multiple speakers: Okay. So that's the run rate for this year? Or as a percent of the asset base going forward? Yes, that's a good basis for the range of 2022. Trying to tell you what 2023 would look like would be something I couldn't really give you good clarity on, but I think it's a good proxy for the rest this year.

Going forward. Yes, that's a good basis for the range of 2000 and twent two trying to tell you what 23 wouldn't look like would be something I couldn't really give you good clarity on, but I think it's a good proxy for the rest this year.

Finian Patrick O'Shea: Okay and did the performance of last year- obviously Lucid was a big hit. Was that a big driver there? If you're able to sort of give any color, meat on the bone on how much performance plays into the rewards and so forth? Doesn't- I ask, as we probably won't see something like that this year with how the markets are playing out- asking if that'll sort of be a headwind on compensation?

giveven any color meet on the bone on how much performance plays into the rewards and so forth, doesn't I ask, as we probably won't see something like that this year without the markets are playing out assisting- if that'll sort of be a headwind on compensation?

David Michael Lund: Yeah. We did, with the approval Board, put a plan in place to have kind of a long-term incentive program that will cover the next seven quarters for our employees. It's kind of a retention, as well as a bonus based on the performance of really what happened in this first quarter. We had a stellar performance and we had $52 million of realized gains. There are not many BDCs that can point to that type of performance. So, we did put a retention program in place to cover the next seven quarters. But again, that's subject to approval, quarter to quarter, based on ongoing performance the company.

Finian Patrick O'Shea: Okay. Makes sense. Thanks so much.

Multiple speakers: Thanks, Fin. Thanks, Fin.

He said.

Operator: As a reminder, if you would like to ask a question, please press star and one on your telephone key pad. We'll go next to Christopher Nolan with Ladenburg Thalmann. Your line is open.

Christopher Whitbread Patrick Nolan: Hi, guys. In terms of setting the dividend, should we be looking at the new 40 cents as a consistent base dividend going forward?

should we be looking at the new 40 cents as a consistent base dividend going forward?

Steven Louis Brown: It will depend upon, obviously, the performance each quarter that we have.

Certainly that's a target. We don't raise our dividend without the expectation that that would be the run rate. So, I think that that's probably a reasonable expectation, at least through the rest of this year, and it may go up if it performance continues to be as stellar as it has been.

Christopher Whitbread Patrick Nolan: Okay. Then, given the growth rate that you guys are looking at, and given that your stock trades at premium, is the increase in the credit facility, just sort of, just some insurance? It seems like, to me, that you guys have flexibility either to raise fixed rate debt or more equity. I mean, are your thoughts going forward in terms of increasing capital?

Just some insurance. It seems like to me that you guys have flexibility, get to raise fixed rate debt or more equity. I mean, are your thoughts going forward in terms of increasing capital?

Kyle Steven Brown: It provides liquidity on kind of an almost just as needed basis. We are growing the portfolio. We do use that as something of a warehouse, then look to do fixed rate borrowing if the market allows, and maybe even a securitization at some point in time. But, we do use it to fund the continued growth of the portfolio.

Christopher Whitbread Patrick Nolan: Got it. Final question: non-accruals- you've got Store Intelligence and Utility Associates. What's the third company in non-accrual?

Multiple speakers: The third one is-. Yeah. the third one is Work Well. And just as a reminder the Utility, that's simply an unsecured financing that was brought into the BDC at formation. So, it's a performing company but it's a paid in kind interests without a security interest, so we carry that on non-accrual and have since inception.

Yeah the third one is work well. And just as a reminder the utility that's simply an unsecured. Financing that was brought into the BDC formation. So it's a performing company but it's a paving kind interests without a security interest that we carry that on nonaccrual and have since inception.

And just as a reminder the utility that's simply an unsecured. Financing that was brought into the BDC formation. So it's a performing company but it's a paving kind interests without a security interest that we carry that on nonaccrual and have since inception.

Financing that was brought into the BDC formation. So it's a performing company but it's a paving kind interests without a security interest that we carry that on nonaccrual and have since inception.

Christopher Whitbread Patrick Nolan: Okay, because I'm looking at the queue and Workwell is not marked as non-accrual on the scheduled investments [inaudible].

Multiple speakers: Yes it's a non-accrual. It should be. Okay. Okay, No problem. Okay. Thank you very much for taking my questions.

Multiple speakers: Alright, Chris. Thanks, Chris.

Operator: We'll go now to Casey Alexander with Compass Point. Your line is open.

Casey Jay Alexander: Hi. I'm sorry, at one point in time during the prepared remarks I got distracted a little bit. I didn't hear the explanation regarding the material exit fee earned in the quarter. Can you go over that again for me please?

Multiple speakers: In particular, we had an exit fee for Rigetti, and we earned $1 million as a result of our investment and they're actually raising capital and becoming public. Upon completion of their de-SPAC right? So there was a $1 million pop that we received in the quarter.

Casey Jay Alexander: So that was just- that was around three cents a share?

Kyle Steven Brown: Yes, just 3 - 3.5. Right in there.

Multiple speakers: Well, I missed what you mentioned that was worth eight cents a share. I apologize. I mean I-. Yeah, no worries. The increase in the interest rates if they go up 100 basis points with the Fed on the-. Gotcha. -and it would be worth about eight cents in additional net earnings. Between our portfolio increase, as well as the cost on our debt, the net effect would be about $2.5 million or eight cents on the year. Alright. Thank you very much for clarifying that for me. I appreciate it. Thanks for taking my questions.

Multiple speakers: Alright. Thanks, Casey. Thanks, Casey.

Operator: Once again, if you would like to ask a question, that is star and one on your telephone key pad. We will pause a moment to allow any further questions to queue.

Thank.

Operator: And it does appear that we have no further questions in queue at this time.

Steven Louis Brown: Alright. Well, thank you all for participating in the call. We appreciate your attendance here. We're working hard on your behalf and we'll continue to do so, in good markets and in bad, to provide the best return for our shareholders. Thank you for participating today.

Operator: This does conclude today's program. Thank you for your participation. You may disconnect at any time.

The.

The the.

Good afternoon. My name is Katherine and I will be your conference operator today at this time. I would like to welcome everyone to Trinity capals's first quarter 2022 earnings conference call. Our host for today's call, our Steve Brown, Chairman and Chief Executive Officer, Kyle Brown, President and Chief Investment Officer, David lund, Chief Financial Officer, Michael testa, Chief accounting Officer, and Sarah Stanton, general counsel, Jerry harder, Chief Operating Officer and ronkunditch, Chief Credit Officer, are also present.

Today's call is being recorded and will be made available for replay at eight PM Eastern time. The replay dial number is eight hundred nine 3, eight zero nine 9, seven and no call ID is required for access at this time. All participants have been placed in a listen only mode and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your telephone key pad. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. If you should require operator assistance, please press star zero. We ask that you please pick up your handset to allow optimal sound quality. It is down my pleasure to turn the call over to Sarah Stanton. Please go ahead.

Thank you kthern, and welcome everyone to Trinity capital' earnings conference call for the first quarter of 2020. twotrinity's first quarter 2020. two financial results were released today after market clothes and can be accessed from Trinity's Investor Relations website at I Dot Trinity capast Dot com. A replay of the call is available at Trinity's web page or by using this teleslephone number provided in today's earnings release. Before we begin, I would like to remind everyone that certain statements that are not based on historical fact made during this call, including any statements relieating to financial guidance, may be deemed forward looking statements under federal securities laws. Because these forward looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements.

We encourage you to refer to our most recent SEC filings for information on some of these risk factorstrinity capital assumes no obligation or responsibility to update any forward-looking statement. Please note that the information reported on this call speaks only as of today, may ninth 2022. therefore, you are advised that time sensitive information may no longer be accurate at the time of any replay, listening or trans or transcript reading. With that, allow me to introduce Trinity capitals. Chairman and CEO D Brown.

Thank you Sarah, and thank you to everyone joining us today.

As you saw in our earnings release this afternoon we continued to build on the momentum we established in 2021 with another record quarter for fundings in this first quarter of 2020. -two and.

While we drove exceptional portfolio growth and remain committed to executing against our long-term growth initiatives, we are fully aware of the changing economic environment and will'll continue investing with the same stewardship we have demonstrated since we first began investing in two thousand and eight and.

We've continued to improve our operations, scalarour business and further broaden our extensive network in both the VC and equipment financing industries, thereby allowing us to deliver returns for our shareholders with strong net investment income performance and significant realized gains. We continued to strengthen our balance sheet after quarter end with a $57.5 million common stock offering in April that was accretive to NAV and an expansion of our credit facility.

Public market volatility, rising interest rates, inflation and geopolitical uncertainty has so far set the backdrop for 2022, but we still see immense opportunity. Deal flow is moving steadily and Trinity continues to generate strong originationsour business remains strong in. Our rigorous and consistent underwriting process ensures that our portfolio is built for any cycle.

Trinity is well positioned to capitalize on opportunities in the emerging growth venture debt market as an industry leader and a partner of choice for management teams.

While the team will go into greater detail on the first quarter resul, I wanted to share just a few of the key performance highlights.

In March, we also announced a special distribution of 15 cents per share, distributing a spillover income from 2021. As we have previously stated, our Board has indicated its intent to declare equal special dividend in each of the subsequent quarters of 2022, for a total of 60 cents per share in special dividends for 2022.

Subject to further Board approval.

We recognized 52.6 million of realized gains during the quarter, primarily from the sale of our equity positions. elucid and matter port.

We delivered a strong quarter in both commitments and deployments, originating 305.6 million in new commitments and funding 222.5 million in gross deployments across 31 portfolio companies.

Q1 net investment income was 15.6 million, or 57 cents per basic share, exceeding our declared regular core quarterly dividend by 17 cents per share.

Our credit quality in the portfolio remains strong, with 98% of our debt investments at cost performing.

Subsequent to quarter end, we strengthened our liquidity position by selling 57.5 million of our common stock and we upsized our KeyBank credit facility by one million to a total capacity of four million. Collectively, these moves increased our capacity to fuel our growth.

Additionally, we announced the promotions of two senior executives, as well as a key her in our new life sciences vertical, demonstrating our commitment to investing in our team and supporting the continued growth of our industry leading lending platform.

Trinity's innovative, energetic and collaborative culture continues to be a differentiator and attracting and retaining top talent in our industry. coyle will provide more color on this in a moment.

With regards to the RIA progress, we have stated previously. In Q3 of 2021, we filed an application with the SEC for exempttive relief to form a registered investment adviser. If approved, we believe the RIA will provide flexibility for synergistic investment opportunities and create additive earnings for our internally managed BDC. The review process is still within our expected timeline and we continue to work with the SEC on their review of our application.

Despite a long predicted shift in the public marketts and the IPO window essentially shot, the VC operating market remained healthy, with BCs adding seven billion it to the existing 23 billion of dry powder, according to pitch book, which may help lessen the impact of the general market downturn.

In spite of the current market conditions, Trinity continues to perform at record levels. Our business, our team and our portfolio companies are growing at a stable yet healthy rate.

I have confidence in our unique venture lending and equipment financing platform's ability to generate meaningful growth in any economic cycle. We strengthened our team to further that performance and will maintain a deliberate and disciplined approach to offering capital solutions to the growth-stage companies across industries.

With that. I will now turn the call over to Kyle Brown, our President and Chief Investment Officer, for some further thoughts from our progress in more detail on the market, Kyle.

Thanks Steve, and good afternoon everyone. Q1 marked the eighth consecutive quarter of portfolio growth, proving that we are sustainably building for scale. This is no small feet and a reflection of our hard working and dedicated team. Here at Trinity, everything we do is's around. Our unique team, our culture of continuous learning, our entrepreneurial spirit, keeps our business at the forefront of technology and innovation. We believe the best return on investment is the investment we make in our own people.

Turning now to our results, our impressive originations continueed in Q1 with 305.6 million and new commitments representing an increase of 23% from Q4 of twentthousand and 21. we funded approximately 222.5 million of new investments, leading our portfolio to grow to nine hundred and 21 point one million on a cost basis, an increase of fifteen point 4% over Q4 2000 and y one

Our 222 mill of deployments during the quarter reached 31 portfolio companies, including 103.9 million in gross deployments to end new portfolio companies and 118.6 million in gross deployments to 21 existing portfolio companies. Gross deployments were partially offset by 96, five million in principal repayments, of which 69.7 million was from early Al repayments in 26.8 million was from normal amortization.

During the quarter, refinancings of existing portfolio companies accounted for 29.4 million of the early repayments.

We also received 60 60- two point three million in gross proceeds from equity and warrant liquidations. We finished the quarter with 277.3 million of unfunded commitments, giving us good visibility into the funding opportunities over the next 12 months.

The composition of our portfolio remained relatively consistent, with manufacturing once again making up approximately one quarter of our total portfolio. Professional scientific and technical services made up 22%, followed by information, making up approximately tentwo percent.

Diving deeper in our portfolio composition. At fair value, approximately 76% of our debt portfolio, or 649, five million, is comprised of secured loans and 24%, or 204.3 million, investedin equipment financing. This represents a slight percentage decrease in equipment fincing from Q2 021 but, as we have said in the past, equipment financing deals generally fund over subsequent period to the commitment date and will fluctuate quarter-to-quarter.

The balance of our portfolio, approximately 65.5 million of fair value compred equity and warrants. The 72 million decrease in E investments from the fourth quarter is dven primarily by the sale of oureity investments in Lucid and me port.

We believe we are a destination company attracting and retaining top talent. We recently welcome to the team of veteran and adventure or ecosystem. Robert Lake is managing Director of life science. Rob has been in supporting venture capital back grow stage companies for over 18 years, primarily in the life sciences industry, and has funded over one point six day ion a debt transactions during his career to be a valuable numberber our team as we continue to grow and expand our portfolio.

Building a best-in-class tenuure leadership team remains a key priority for our team. Along with hiring top-notch individuals, we are also focused on developing our own talent, creating a leadership- the leadership team for the future, as demonstrated by the promotions of two senior executives in Q1. Jerry hardn has been promoted from Chief Credit Officer to serve as the company's first Chief Operating Officer, where he will ste recorporate infrastructure and operational initiatives to support platform growth and new business creation.

Ron kundich, who formally served as Senior Vice President of loan originations, has been promoted to Chief Credit Officer, succeeding MR harder in the role. In his new role, MR kundits will oversee training, capital lending, underwriting and credit processes. These promotions demonstrate our commitment to investing in our own people and building our business for tomorrow.

The public market slowdown we've been anticipating, resulting in a decrease of MA and IPO activity compared to previous quarters. As of today, may nth 2022, two portfolio companies- greenline bio and woaggetti- successfully completed their desbackc transaction in Q1, while footprint in presto continue moving towards their own desbackc transactions.

'd like to emphasize that we have always been a direct lender, first and foremost, and while we have certainly benefited from our equity and more positions in the very hot venture capital ecosystem in 2000, twent thousand 21, we have have been dependent on it for our success IAS, demonstrated by our strong net investment income.

Our vision has been to build the world's number one lending platform for growth-stage companies, with a diversified portfolio, many and multiple product offerings. We're well on our way: fulfil objectives.

Now I'll turn the call over to David Len, our Chief Financial Officer, to discuss our financial performance in more detail. David.

Thank you, ko. We appreciate everyone taking time to listen to today's call.

To echo, Steve and college's comments: trunity's continued strong performance against the current market backdrop. Our financial discipline is a significant contributor to our continued performance.

Not only has our underwriting process in consistent and effective, So we have also strengthened our capital structure ahead of these long pated headwinds.

Our debt portfolio, which is now 60% floating rate compared to 32% a year ago, is well positioned as interest rates rise.

On the borrowing side, approximately 74% of our outstanding debt at the end of the first quarter was at fixed rates. In addition, we ve recently increased our capacity under the credit facility with KeyBank by $1 million to a total of $4 million and also increased the availability by $75 million, bring total availability to two hundred and $75 million.

As we discussed in our 10 -q filed a today, a 100 basis point increase in the prime rate would have the effect of adding $2.5 million, or approximately eight cents per share, to our annual net investment income.

So that 50 basis point increase announced last week should have a positive impact to our future earnings.

We anticipated and successfully prepared for a changing market which pushed us on a solid financial footing for the quarters ahead.

Diving into our financial and operating results. For the first quarter, we recorded total investment income of $31.8 million and $8.2 million, or a 35% increase over the $23.6 million of total investment income recorded during the fourth quarter of 2021.

And an increase of 84% compared to the same period of 2021.

This increase was attributable to higher interest income of $6.9 million on a larger loan portfolio and $1.3 million of higher fee income compared to Q4.

Our effective yield on the portfolio for Q1 with 16%, an increase of over one hundred basis points from Q4, primarily driven by higher K interest income and amortization of OID based on the larger portfolio, as well as increased nonrecurring fee income, which fluctuates based on investment activity and early repayment activity.

We expect our earlier repayments to be between 45 and $5 million in Q2 and our effective yield to normalize between fifteen point two and 16%.

We've incurred a total of $6.8 million of total interest expense and amortization of deferred financing costs on our various debt facilities, as compared to $6.2 million in Q4.

The increase was primarily driven due to the issuance of the December 2026 notes in December of 2021, as well as the higher average outstandting balance on our key bank facility.

For Q1, our weighted average cost of debt, including interest in fee amortization, was 6% compared to 7%. In q,4. The decrease was due to the lower cost of our December 2026 notes and the lower amortization expense with the maturity of our prior credit facility with credit sues.

The increase of approximately $2 million or 30%, was driven by increased compensation expenses related to higher headcount and variable compensation and higher dno expense.

We are investing in our team and believe that our new senior level promotions and hires will benefit our bottom line.

As a result of this operating activity, net investment income for the first quarter with $15.6 million, or 57 cents per basic share, as compared to $10.6 million, or just 39 cents per basic share in the preceding quarter.

We recorded net unrealized depreciation of $77.3 million, attributed primarily to the flip from the unrealized depreciation in our equity portfolio tied to our positions and looed at matapuort as we sold our equity positions in these companies during Q1 and.

This was offset by net realized gains at $52.6 million in Q1, again largely attributed to realizing gains from our equity positions and loocid and matapport as weather, as well as other realized gains in our equity and warrant portfolios.

The difference between the unrealized appreciation and our realized gains solely unlo to the matter port of approximately $19 million was attributable to the drop in the public stock price between the valuation date at December thirty-first 20 and 21 and the price at which we were able to eventually sell the shares after the respective lockup periods ended.

While we have been fortunate to capitalize on the recent strong performance for companies in our portfolio to generate shareholder returns, we are not equity investors and we will generally sell our equity positions as soon as it is practical to do so.

Net assets decreased by approximately 5% to $424 million, or any of the $15 and 15 cents per share, compared to Q4 net assets of four hundred and forty-six point five million dollars, or any of the of $16 in 40 cents per share.

The quarter-over-quarter decrease of dollar 25 per share in aand NAV was primarily the result of the aforementioned splp between unrealized depreciation and realized gain. Five point me: $8 million of unrealized depreciation and the impact of additional shares issued under our restrictive stock and DRIP programs.

Slightly offset by the net investment income that exceed both our regular and supplemental dividends.

Our NAV per share grew robustly on a year-over-year basis, increasing by a dollar 46 per share compared to the first quarter of 2021.

Despite the challenging market Trinity has maintained its financial and underwriting discipline, which has allowed us to continue growing our originations and portfolio.

I will now hand the call over to Mike testa, our Chief accounting Officer, who will discuss our credit performance, liquidity and capital allocation efforts Mike.

Thanks Dave. To begin with credit quality, our portfolio continued to perform to the first quarter of 2022, with over 90% of our portfolio on natple.

Currently have three portfolio companies are noton accrual with the carrying cost basis of 17.2 million and a fair value of four million, representing just 0% of the fair value of the debt investment portfolio.

Our average credit rating for the first quarter improved slightly to three point one based on our one to five rating systems, with five indicating very strong performance.

Moving to liquidity, available liquidity as of March 31 2022 was approximately 94.7 million, including approximately 28.7 million unrestricted cash and cash equivalents and a barrowing capacity of approximately sixty-six million.

Under our credit facility, subject to existing terms in condition.

Subsequent to the first quarter we announced a pair of positive updates to our capital structure that enhanceced our.

First on April fifth, we announced an offering of our common stock which generated five million and gross proceeds, as well as an additional seven point five million from the exercise of our underwriting underwriters overall allotment option.

Second we upsizeed our KeyBank credit facility by one million, raising the total size of this facility from three million of fourhundred.

The stock offering and credit facility upsize reflect the confidence our investors and lenders have in our business to continue drive home, drive income and the strength of our venture debt portfolio to perform through market fluctuations.

Our leverage increased approximately 120% from one 4% in the fourth quarter and prior to the equity rays we completed in April . As a reminder, we have communicated that our target leverage ratio is between one hundred and fifteeny percent in one chhundred and 35%, depending on the timing of an investment activity.

Regarding our efforts to maximize returns per shareholders. On March fifteenth 2022, our barard declared a cash dividend of 40 cents per share for the first quarter of 2022, representing 11% increase from 10 or two 24- 1, as well as a 15 cents per share supplemental dividend to partially distribute spillover income earned in thousand and y-one. Both dividends were paid on April 15 2022. our GAAP net investment income jgeneranary coverage of approximately one hundred and 40- three percent of our regular dividend for the quarter.

We anticipate declaring both a regular core dividend and a 15 cent per share supplemental dividend for the second quarter of 2022, subject to our Board's approval.

Finally our net of 10 come and realize. Gains in Q1, combined with our earnings spillover from 2021 have generated earnings spillover at the end of Q1 or approximately 73.2 million, or $2 and 62 cents per share from design our outstanding shares at the end of the quar.

This doilver allows us the opportunity to continue to make investments in our portfolio and generate additional returns for our shareholders, as well as consider additional Investor distributions.

thankcguing the sentiments of my colleaguue. Training is on a strong operational and financial footing as we head into the second quarter. Our resilient portfolio and expanding theliquidity liquidity has fueled us for further growth in the quarters ahead. With that, I will now open the line up for questions operator.

And again. If you would like to ask a question, please press star and one on your touch ST phone. You can remove yourself from the Q by pressing the pound key. Will take our first question today from Brian Lynch with KBW. Your line is open.

Good afternoon things are taking my questions. The first one just has to do with kind of the environment that we sit in today and the venture capital ecosystem. You know, how would you describe it as a whole, both being a a manager of a bunch of venture back loans which are obviously, you know valuation, have come down in a lot of, in a lot of space, certainly in the public markets, is's going to transfer to the private markets, but also, as you know, a manager who looking to deploy additional capital environment. So can you kind of ex, I think, what would obviously be, I think, pretty negative and will be positive. So how would you just describe the environment as a whole to today?

Yes I thanks Ryan this is we've talked about this before. But I think the environment where.

Valuations are being repriced in the B C market is not necessarily a negative. You know, for for our model and for Trinity, we've seen that throughout the years and even though valuations get repriced down, downgrs occur where there's new commitment to our portfolio companies which ultimately allows us to get repaid. So clearly there's a repricing going on in the B C world. But then the other thing that we look at is the dry powder, and I mentioned that in my remarks. There is a lot of dry powder available right now for the right portfolio companies in the V? C sector and, as you know, we have been working hard to ensure that we've got those portfolio companies in our portfolio. So I think, generally speaking, you know, the down, the downward trend in pricing or the downward trend in valuation is not necessarily a negative, and we certainly see.

Capacity with the BCs to continue to support and how maybe you just touch on the positive side of it, which is the opportunity that is presented in this kind of market.

Sure yes, we believe the companies that are continue to grow at a rapid pace, who have the ability to and have their right financial backing, will continue to get funding. Companies that have the ability to kind of see around the corner towards profitability but continue to get backing. And then there are, with reset evaluations, that are going to be very mature companies that are growing right in with the metrics that we're looking for that simply need an additional six to 12 months of runway to continue to achieve those milestdown, to continue to achieve that growth and make sure that therethey're not subject to lout down around just because of where the markets. There will be some really interesting opportunities for very strong companies who maybe are looking for a debt bridge that maybe weren't looking for that beforefor. So you know, there are there's some marketof volatility there, but out of it there's also some opportunity.

Okay that's helpful backdrop kind of de and I want for you.

It look like the the portfolio had some additional write-downs in it outside of just the reercials from Lucid and matter. pard can described what. What is the nature of those additional write-down where they mark-to-market adjustment mean the cameames to the market, or was there specimific creditor to as that kind of corwte, those additional write-downs?

There were two portfolio companies that we took small pite-downs on during the quarter mark- market, some of the judgmental. So the rest portfolio was pretty stable but we did have two adjustments in that category.

What are those two companies?

Yes Ryan. So the two companies we have on nonaccrual. one has been on nonaccrual- that store intelligence. We took a small unrealized depreciation within the quarter. Second credit is actually one of our controled positions. workwell prevention care MO from watch listists into nonaccrual, which took a small unrealized depreciation with that one as well.

And then just our last question.

You mentioned this, your prepared comments, but you guys hired roout roadway to get into the, the life sciences space. Accuse me, can you just talk about what he brings and what that looks like from ramping up, because that's not a spectr. You guys have that super active in the past So I would just love to he any sort of timeline that we should have set to perbefore you guys can be tive in that space. Does he need to hire out a team? Can you be tive today? Is he need to get more integrated? Just want of them look like going forward.

Yes we're really cited to bring Rob on board. He built multiple teams within the life science industry at Oxford bridge as well. you- we've said this over and over again- we intend to be a number one lender in the space and the venture back. Gross Stage space and life science. Part of that mean, and what we intend to do is continue to focus on companies that are raising institutional capital who'are well into revenue. We're looking to underwrite and take execution risk- not not any different than what we do on ourtech side, and so as we step into the space more and more, we're going tomake sure we bring on professionals who have been there done that. They're going to make sure we're not taking technology risk, F DA risk, et cetera. We're going to focus on taking execution risk. Jerry want to add anything else to that? No, it's well stated Kyle, you know now we've got a strong leader on board in Rob and our focus is now turn to building out the remainder of that team, building on our business model and our credit policy. We're going to do it thoughtfully, definity way and, as cal said, we'll be focusing on those gross Stage opportunities, just like we are doing in tech land.

Okay understood. I appreciate the time this afternoon.

Thanks rest, Thank you.

We'll take our question from phineian oche with Wells Fargo, your line is open.

However everyone good afternoon. Can you give us some color on the viaf pton?

Hope I'm pronouncing it right dealold post quarter. I looked like you brought in a partner. I'm not sure if you've sold down and syndicated in the past. But if that's the case it was there a sort of.

Fee or on top of the loan, and if you can describe the nature of partner, if it's a like-minded lender or a bank or lp- any color you could give there.

Well I don't know that we had a partner on that deal and ING's going: don't think we do the partner on that deal. That's just is a trity position.

Okay it could be reading that wrong, of course, acologies. And second question: can you give us any context on how we should model compensation? What are the sort of drivers? Is it origination, is it assets? Is it performance that moved up a couple million quarter-to-quarter and trying to figure out where to go from here.

yesand. This day we added seven people in the quarter and had some promotions as well, and we also had some supplemental bonuses. I think what you see is for this quarter is probably a good run rate at this point. We will add people during the course of this year So we'll tick up a little bit depending upon those people. But I think the first quarter this kind of good proxy to the remaining year.

Okay So that's the run rate for this year, or as a percent of the asset base.

Going forward. Yes, that's a good pbashasis for the range of 2000 and twent two trying to tell youwhat and 23 wouldn't look like would be something I couldn't really give you good clarity on, but I think it's a good proxy for the rest of this year.

Okay did the performance of last year? Obviously elucid was a big hit. Was that a big driver there? And if you're able to sort of.

Yes we did with the approval Board put a plan in place to have kind of a long-term incentive program that ll cover the next seven quarters for our employees. It's kind of a retention as well as a bonus based on the performance of really what happened in this first quarter. We had a stellar performance and we had $52 million of realized gains or not many dbcs that can point to that techbook performance. So we did put a retention program in place the cover the next seven quarters but again that' subject to approval quarter to quarter based on ongoing performance. The company.

ok makes sense. Thanks so much.

Thank then.

He said.

And as a reminder, if you would like to ask a question, please press star and one on your telephone you pad. We'll go next to Christopher nolin with laddenberg' solalmonman. Your line is open.

ok guys, in terms of setyting the dividends.

Should we be looking at the few 40 cents as a consistent base di then going forward?

It will depend upon obviously, the performance each quarter that we have.

Certainly that's a target. We don't raise our dividend without the expectation that that would be the run rate. So I think that that's probably a reasonable expectation, at least through the rest of this year, and of may go up if it performance continues to be as stellar as it has been.

Okay then, given the growth rate that you guys are looking at, giving up your STO premium is the increase in the credit facility, just sort ofa.

Just some insurance. It seems like to me that you guys have flexibility getither to raise fixed rate debt or more equity. I mean, are your thoughts going forward in terms of increasing capital?

It provides liquidity on kind of an, an almost just as needed basis. We are growing the portfolio. We do use that as something of a warehouse, then look to fix rateight on borrowing if the market allows, and maybe even a securitization at some important time. But we do use it to fund the continued growth as the portfolio.

Got and final question: nonaccruals because store intelligence and the utility associates. What's the third company and nonaccrual?

The third one is wee.

Yeah the third one is work well.

And just as a reminder the utility that's simply an unsecured.

Financing that was brought into the BDC formation. So it's a performing company but it's a paving kind interests without a security interest that we carry that on nonaccrual and have since inception.

Okay because I'm looking at the queue and it worked well, but mark is nonaccrual on the scheduled's investments stru.

Yes it is based on non. A go again of the up. It should be okay. Okay no paup, okay. Thank you very much. Sigma questions.

A disttct ch.

' going now to Casey ale, xan.der, with Compass point, your line is open.

I'm sorry. At one point in time during the prepared remarks I got distracted a little bit. I didn't hear the explanation regarding the material exit fee earned in the quarter. Can you go over that again for me please?

In particular, we had an exitc for baghetti and we earned $1 million as a result of our investment and their and they're actually raising capital in becoming public. So upon completion of their dfectc right these, So there was T one million AR pop that we received in the quarter.

So that was just. That was around three cents of share.

Yes just period three and a half briten there.

Well I I missed what you mentioned. It was worth eight cents a share. I apologize, I mean I it Yeah nowwords' the increase in the interest rates if they go up 100 basis points with the Fed on the pratcha, and it would be worth about eight cents in additional net earnings between our portfolio increase, as well as the cost on our debt, and net effect would be about $2.5 million or eight cents on the year. All right, Thank you very much for clarifying that for me. I appreciate it. Thanks for taking my questions.

Thank.

And once again, if you would like to ask a question, that is Star and one on your telephone key had. We will pause a moment to allow any further questions to queue.

Thank.

And it does appear that we have no further questions in queue at this time.

All right well. Thank you all for participating in the call. We appreciate your attendance here. We're working hard on your behalf and we'll continue to do so, in good markets and then bad, to provide the best return for our shareholders. Thank you for participating today.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.

Q1 2022 Trinity Capital Inc Earnings Call

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