Q3 2022 Trinity Capital Inc Earnings Call

November 3, 2022

[music].

Good afternoon, My name is Chelsea and I will be your conference operator today.

At this time I would like to welcome everyone Judy Trinity Capital start quarter 2022 earnings Conference call.

Our hosts for todays call are Steve Brown, Chairman and Chief Executive Officer, David <unk>, Chief Financial Officer, Michael.

Michael <unk>, Chief Accounting Officer.

Jerry harder Chief operating officer, and Sarah Staunton General Counsel.

Ron <unk> Chief Credit Officer is also present.

Brown, President and Chief investment Officer is out of the country and we will not be joining us on today's call.

Today's call is being recorded and will be made available for replay at eight P. M Eastern time.

The replay dial in number is 880 397410 and no conference I'd is required for access.

At this time, all participants have been placed in a listen only mode and the floor will be opened for your questions. Following the presentation.

If you would like to ask a question at that time. Please press star one on your telephone keypad.

If at any point. Your question has been answered you may remove yourself from the queue by pressing star Q.

We ask that one posing your question. Please pickup your handset to allow optimal sound quality.

Lastly, if you should require operator assistance, please press star zero.

It is now my pleasure to turn the call over to Sarah Stanton. Please go ahead.

Thank you Chelsea and welcome everyone to Trinity Capital Earnings Conference call for the third quarter of 2022.

Trinity's third quarter 2022 financial results were released just after today's market close and can be accessed from Trinity Investor Relations website at IR Dot Trinity cap Dot Com AR.

A replay of the call is available on <unk> website or by using the telephone numbers provided in today's earnings release.

Before we begin I would like to remind everyone that certain statements that are not based on historical facts 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.

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 November three 2022.

Therefore, you are advised that time sensitive information may no longer be accurate at the time of any replay listening or transcript reading.

Now allow me to introduce Trinity capital, Chairman and CEO , Steve Brown.

Sarah and thank you to everyone joining us today.

I want to begin our call by putting the current market conditions, we are seeing in the context.

Estimated BC deal count in Q3 was the lowest since Q4 2020.

This market volatility and Investor Hesitancy is impacting every sector of the private and public financial markets. Given this backdrop. It is not surprising that there have been fewer public listings and exits in 2022 after historic levels in the previous two years.

We all recognize that these are tumultuous times, but this is also a period where great investment opportunity can provide strong returns to investors given the decline in traditional VC transactions. There is a clear and consistent market demand for financing solutions to become an attractive alternative to dilutive equity raises and down rounds as enterprise.

Values pullback.

Trinity with its best in class financing platform has the market presence and track record needed to capitalize on this environment.

<unk> sectors of emerging innovation.

It is also important to point out the VC fund raising activity was still approximately $29 billion in the third quarter and reached a record high for the first nine months of 2022, according to pitch book.

Dry powder was at an all time high at the end of the third quarter with $290 billion of capital available to support portfolio companies and make continued investments in disruptive technologies.

Although we are dealing with the complications of the current market. It is clear that investing in technology and innovation remains critical to our future.

That Trinity we have seen these markets before going back to 2008 and 2009 and then again in 2020 in each of these periods the BDC sector, including those investing in venture backed growth stage companies proved to be resilient through the volatility.

We have been assembling the team to manage growth as well as steward portfolio companies that find themselves under stress. We believe we have built a differentiated platform and have assembled a world class team to work with our portfolio companies as they address business fundamentals in their markets. We are committed to working with our portfolio companies to reach successful outcomes for all stakeholders.

And our underwriting process remains as vigilant as ever.

Now, let's turn to our performance this quarter.

As you saw in our earnings release. This afternoon, we generated strong NII performance grew our portfolio increased our dividend for the seventh consecutive quarter and improved our liquidity.

As I mentioned from an earnings perspective, we began to see the benefit of interest rate increases in Q3 with 62% of our debt investments are floating rate.

More than 75% of our borrowings are fixed rate.

As we indicated in our filings today, given our current investment mix of 100 basis point increase in the prime rate adds an additional $4 8 million of interest income or <unk> 14 per share to our annual earnings.

Our Q3 net investment income increased by 19% from Q2 to a record $18 6 million.

NII per share of 56% for Q3 represents a 5% increase from the prior quarter and a 124% coverage in our core dividend.

We delivered on both strong commitments and deployments in the quarter originating $128 million in new commitments and funded $94 million across 22 portfolio companies.

Our credit quality in the portfolio remains stable with 97% of our debt investments at cost performance.

This is a key demonstration of the strength of our investment criteria as well as the granularity and diversification of our portfolio.

Our growing portfolio contributed to our solid operating performance, allowing us to increase our regular quarterly dividend from <unk> 42 to <unk> 45 per share. This is the seventh consecutive quarter that we have increased our dividend and this quarter's regular dividend was 36% higher than one year ago.

In addition, we delivered against our promise to provide a supplemental dividend of <unk> 15 per share for the third consecutive quarter year to date, we've paid out 45 per share supplemental dividend and we previously expressed intent to the core supplemental cash dividend in the fourth quarter of 2022 subject to our board approval.

While our portfolio benefited from public listings and exits over the last year, we are not dependent on that dynamic to generate returns for our shareholders. Our thesis has always been that we deliver strong yields from our portfolio and the capital gains can be used to deliver supplemental dividends or absorb realized loss.

Yes.

These estimated spillover income is $67 million.

Primarily generated from our capital gains earlier in the year.

Our NAV per share declined by 88, or 6% to $13 74 per share compared to Q2.

The decline in NAV was driven by our unrealized depreciation which was primarily attributed to fair value marks on two portfolio companies as well as general market volatility and interest rate changes during the quarter, we strengthened our liquidity position by reopening our 7% notes and issuing an additional $57 5 million of these.

Note, we also sold $57 million of our common stock and upsize, our keybank credit facility by $50 million to a total of $350 million.

At Trinity Culture continues to be a critical part of our strategy over the last 14 years, we have intentionally created an environment that fosters individual talent and encourages an entrepreneurial mindset.

<unk> unique spirit has allowed us to source and hired the talent needed to continue our growth.

Accordingly, we are focused on building out our new life Sciences team and to that end. We further expanded our origination team with the addition of Lauren Constantino, our managing director located in Raleigh, North Carolina, who has over a decade of experience in the venture ecosystem, primarily in the life science verticals as.

As we move into the last quarter of 2022, we will continue to execute our strategies to meet the evolving needs of the venture debt ecosystem, while working to support our existing portfolio companies. Our differentiated platform is positioned for profitable growth and we remain squarely focused on driving shareholder returns I will now hand, it over to Jeff.

<unk> Harper, our chief operating officer to provide updates on our portfolio composition and investment performance Jerry.

Thanks, Steve I'd like to start my remarks today by reminding our investors Trinity employs a rigorous and time tested underwriting process.

Maintain a dedicated portfolio management staff.

<unk> function is to monitor our credit risk stay in constant communication with our portfolio companies and their equity stakeholders. These.

<unk> have served us well and have been the driving forces behind our successful investment track record and we will continue to follow them as we scale, our business and expand our portfolio.

Building on the record total fundings in the first half of the year Trinity originated $128 million in new commitments in Q3.

We funded $94 million, including $29 million in deployments to seven new portfolio companies and $65 million in gross deployments to <unk> existing portfolio of companies.

Gross deployments were partially offset by $80 million and principal repayments of.

Of which $49 million from early repayments and $31 million from normal amortization.

We finished the quarter with $350 million of unfunded commitments substantially all of which are subject to ongoing diligence and approval by our investment Committee.

Our pipeline remains strong despite the challenging macro environment.

The composition of our portfolio remains relatively consistent with prior quarters.

Represents strong diversification across 21 different industries.

Our debt investments are split between venture debt and equipment financings at fair value, 75% of our debt portfolio or $751 million is.

As a secured loans.

About 25% or $246 million is invested in equipment financing.

Remainder of our portfolio $45 million at fair value comprised of equity and warrants.

I'd like to directly address some recent developments with one of our portfolio companies and the digital asset sector.

On October 27 core scientific one of the largest publicly traded crypto mining companies in the U S filing.

<unk> filed an 8-K announcing that its operating performance and liquidity had been severely impacted.

Its board and made the decision to not make payments coming due in late October and early November with respect to several of its equipment and other financings.

Released further went on to state the core scientific has been exploring a number of potential strategic alternatives.

Core scientific was current on its payments to Trinity through October we have placed the financing to core scientific on nonaccrual effective November one pending the outcome of future developments of the company.

As of September 30th Trinity holds an investment in core scientific collateralized by critical computing equipment with a cost basis of $24 million.

Fair value of $19 4 million, which is approximately 81% of cost.

In subsequent conversations following the announcement the company indicated that they are working toward a more detailed proposal that will be shared with their lenders.

While the specifics and viability of such plans that may be proposed by the company remained to be seen a portfolio team continues to be in close communication with the company and is exploring all available options to obtain the best possible return for the benefit of our shareholders.

In aggregate Trinity holds equipment finance facilities with three public companies and the digital asset space.

Core scientific hut, eight mining and clean spark.

As of September 30, these financings represent $65 million or less than 6% of our total investments on a cost basis.

$60 million on a fair value basis.

For an overall fair value to cost ratio of 92, 3%.

There are certainly challenges being faced by all companies in the digital asset sector, including the prolonged decrease in the price of bitcoin and an increase in electricity costs.

<unk> as a core scientific indicated in their recent filings liquidity and overextension of debt or the central issues in their operations issues that did not exist at the time of our underwriting.

Based on the most current available public data our other two digital asset clients headache, and clean spark are materially less debt and dramatically better debt to equity ratios as compared to core scientists.

In addition to the challenges of core scientific or financing to some tech health was placed on non accrual in the third quarter.

<unk> health is a legacy asset that is not part of our new life Sciences business.

<unk> entered the Trinity portfolio in July of 2021, when they acquired a Trinity portfolio company, which we originally financed in 2017.

As of September 30th alone Defentect health care at a cost of $15 $7 million and a fair value of $8 9 million.

Representing 56, 5% fair value to cost.

Our portfolio team is working closely with the company to obtain the best outcome for our shareholders.

Notwithstanding the issues with core scientific and Fintech health, our overall credit quality remained stable with 97% of our portfolio performing as of September 30th away.

Our weighted average risk rating of the portfolio was $2 nine down slightly compared to the point now in the prior quarter with the change primarily driven.

By the two credits that we've discussed today.

I'm going to pass the call to David Love to discuss our operating performance in more detail Dave.

Thank you Jerry and thank you to everyone listening in today.

Our differentiated investment approach financial discipline and strong balance sheet are proving out the strength of our investment strategy as we delivered strong results for the third quarter, even in a disrupted market.

Turning to our third quarter financial results, we delivered record total investment income of $38 7 million, a 15, 5% increase over the $33 $5 million of total investment income recorded during the second quarter of 2022.

An increase of 77, 5% compared to the same period of 2021.

This increase from the prior quarter was attributable to higher interest and fee income of $3 1 million on a larger loan portfolio, coupled with a higher average interest rates.

The increase was also driven by $2 1 million of higher fee and accelerated income from early loan repayments.

Our effective yield on the portfolio for Q3 was 15, 2%.

An increase from 13, 8% in the second quarter, primarily driven by the increase in fee income, which fluctuates based on the investment activity and early repayment.

Repayment activity.

Our core yield, which excludes nonrecurring fee income increased to 13, 5% from 12, 9% in the prior quarter due to the rise in base rates on our floating rate loans.

Our debt portfolio continues to be well positioned ahead of the anticipated rate hikes with 61, 9% of our debt investments at floating rates.

On the borrowing side approximately 75, 9% of our outstanding debt at the end of the third quarter was at fixed rates as.

As we disclosed in our 10-Q filed today, a 100 basis point increase in the prime rate would have the net effect.

$6 million or <unk> 56 per basic share as compared to $15 7 million or <unk> 51.

Per basic share in the preceding quarter on a higher average weighted share count.

We recorded net unrealized depreciation of $30 million during the quarter.

We recognized unrealized depreciation of $17 $8 million, and our debt portfolio and $12 $2 million on our equity and warrant portfolio.

Approximately $18 6 million of the unrealized depreciation was related to the performance of issues on two portfolio companies that Jerry discussed previously.

The remainder of the unrealized depreciation was primarily related to mark to market adjustments due to general market volatility and interest rate changes.

Our operating activities generated strong returns for our shareholders with our Aro AE based on NII over average equity of 15, 4% and our auto based on NII over average total assets of six 8%.

Net assets per share decreased to $13 74 per share compared to Q2 of $14 62 per share.

The quarter over quarter decrease of 88 per share was primarily the result of the unrealized depreciation.

The combined core and supplemental distributions to shareholders, but exceeded our NII by <unk> <unk>.

Offset by our accretive equity issuance.

Lastly, our estimated spillover from realized gains remained strong at approximately $67 million and we will continue to digest easily realized gains in the portfolio as we navigate these challenging market conditions.

I am encouraged by the results we've generated from the financial discipline, we have shown as we've executed on our strategy.

Trinity is well positioned to capitalize on rising rates and to identify quality investment opportunities and challenging environment.

I will now hand, the call over to Mike <unk>, Our Chief Accounting Officer, who will discuss our credit performance liquidity and capital allocation.

Thanks, Steve starting with credit quality, our portfolio of companies continue to perform well in the third quarter 2022, with approximately 97% of our portfolio performing at cost.

At the end of the third quarter, we had five portfolio companies on non accrual for the cost basis of $35 9 million and a fair value of $13 9 million, representing just one 3% from the fair value of the investment portfolio.

Our average credit rating for the third quarter stood at $2 nine based on a one to five rating scale with five indicating strong performance.

This remains consistent with our average credit rating of three <unk> in Q2 and reflects a relatively stable performance of our portfolio companies that we continue to closely monitor.

Moving to liquidity during.

During Q3, we expanded the availability under our credit facility to $350 million, enabling us to strengthen our liquidity position.

As of September 30, we had total liquidity of approximately $247 million comprised of approximately $213 million of undrawn capacity under our credit facility and $34 million in unrestricted cash and cash equivalents.

We continue to be active in the capital markets, completing an accretive equity offering in August which generated $57 million in gross proceeds.

We reopened our 7% notes due 2025.

<unk> successfully sold $57 5 million of additional notes as a reminder, the 7% notes, including this most recent addition.

Our callable by Trinity beginning on January 2023, and our <unk>.

Traded on NASDAQ under trading symbol <unk>.

As of September 30, 76% of our debt was at fixed rates with the majority of our investments are floating rates.

Expect further base rate increases to positively impact our net interest margin.

Our net leverage ratio, which represents principal debt outstanding less cash on hand decreased to one one times from one three times.

Our strong balance sheet with leverage on a lower end of our target range provides greater financial flexibility.

Certain capital markets.

We continue to believe that our modest leverage strong liquidity and continued access to capital are important components of our strategy.

We are actively managing our liquidity and continue to explore all capital options that will be accretive to our shareholders such as investments under our plan.

On September 15th our board declared a cash dividend of <unk> 45 per share for the third quarter of 2022, representing.

Representing a 7% increase from Q2.

This is the seventh quarter in a row that we have increased our core dividend.

Our GAAP and Eni generate coverage of approximately 124% of our regular dividend for the quarter.

Additionally, the board approved <unk> 15 per share supplemental dividend both dividends were paid on October 14 2022.

We anticipate declaring a dividend for the fourth quarter and December subject to the board's approval.

Our accumulated undistributed earnings spillover at the end of Q3 of approximately 67 million or one.

$1 91 per share continues to afford us the opportunity to further invested capital for the benefit of our investors.

We maintain a consistent and meaningful distribution to ourselves.

We look forward to closing out the year strong.

I'd like to turn the call back over to Steve for final comments.

Thanks, Mike I want to leave you with four points that highlight like Trinity represents an attractive investment opportunity for current and prospective investors.

First Trinity stock is trading at a meaningful discount to our NAV per share based on where Trinity is trading and based on our most recently stated regular dividend Trinity stock is currently yielding nearly 16% when including our supplemental dividend of <unk> 15, or stock is yielding over 21%.

Our regular dividend is fully supported by consistent net investment income coverage.

Third as mentioned previously we have approximately $67 million of capital gains spillover that allows us to offset potential capital losses continue to invest for the benefit of our shareholders or distribute the gains of supplemental dividends and finally with 97% of our portfolio performing with our current liquidity.

<unk>. We believe we are in a strong position to continue to grow revenues and earnings. This is something we have delivered on consistently since going public.

City is strong our portfolio is healthy.

Excited to continue to execute our investment strategy going forward our team will maintain the highest standards in the last few months of 2022 and into the new year and with that operator, we would be happy to open the line for questions.

Thank you Sir.

At this time, if you would like to ask a question. Please press the star and <unk> on your Touchtone phone.

If at any time you find your question has been addressed you may remove yourself from the queue by pressing star Q.

As a reminder, we do ask that when posing your question you pick up your handset for optimal sound quality.

That is star one to ask a question.

Our first question will come from Christopher Nolan with Ladenburg Thalmann. Your line is open.

Yes.

Was there a nonaccrual investment which left the portfolio this quarter.

No I don't believe so.

Okay and then.

I guess.

I guess, we're coming in with this core scientific that's sort of where we may see a situation, where you might actually have to take possession of the assets.

Are you prepared to do that and.

Is that something which.

Do you think he can get recovery on it.

If it gets to them.

As with all our equipment financings.

Our collateral the financed equipment.

In the case of core scientific we completed audits.

Earlier this year in the last several months.

Equipments tagged it's in poor locations, we know where those are.

And if that becomes the best outcome for our shareholders and we're certainly prepared to do that.

Okay. That's it for me thanks.

Thanks for thank you.

Our next question will come from Ryan Lynch with K B W. Your line is open.

Hey, good afternoon.

First of all I, just want to make sure I understood. This correctly. It looked like you guys had about $18 million of unrealized.

Losses on your debt portfolio.

How much was representative from.

From Sterne <unk> and core scientific and then.

What was the nature of the remaining write downs on the debt portfolio was it was it was a credit related mark to market related or what was kind of the breakdown. If you had to kind of.

Estimate for the remaining write downs outside of core and a fantastic.

Yeah. Ryan this is Jerry thanks for the question.

I think the.

Fintech.

Mark down is approximately.

$7 million I think I'm alone.

I'm sorry on the loan yeah. So we also have an equity position with <unk>.

<unk> that was a complicated transaction.

We acquired.

Warmer portfolio company that we had underwritten in 2017.

We took 7 million unrealized Malone and I think approximately the same amount.

On the equity.

<unk> and then core scientific was about a $4 million.

And Brian This is Dave the other portion really was related to interest rate.

Impact on our fixed rate loans that are in equipment.

Because.

Our fixed rates.

And we did have rising rates, but just not really performance related to the rest of the portfolio.

From a practical standpoint, we believe we will get that back over time as the market recovers.

Okay and then.

On a core scientific I understand this is it.

Question to try to answer because I know, it's a very fluid process, but.

And it sounds like you guys are still waiting on some more information from that company, but how did you guys arrive at your guys' current fair value Mark.

Yeah.

Yes.

For the September 30th.

Keeping in mind their announcement was October 27th but we.

The 930, Mark was using a discounted cash flow.

It was clear at September 30th that.

The company was going to be a liquidity challenge through at least the first quarter of 2023 that was a known so we have the company on our watch list and increased discount rate. Accordingly. So that's how we did the mark to market that was appropriate from a GAAP standpoint.

And I would also say that we discussed the evaluation with our third party valuation firm and our approach to it and they felt it was appropriate manner to approached valuation as well.

Okay.

Understood. That's all for me thanks for taking my questions.

Thanks, Brian .

As a reminder, that is star one to ask a question.

Our next question will come from Casey Alexander with Compass point Your line is open.

Yes, just to clarify that last point, if you valued it as of September 30, using a discounted cash flow analysis and now and now its on non accrual that led us to suspect that there is a further markdowns coming on the core scientific loan in the fourth quarter, all things being equal how they stand right now.

Yes, I think it's a little early to say that KC right.

We're exploring all possible options.

With respect to that financing the company has indicated that they expect to communicate.

<unk> to all their lenders, we don't know what that is yet or what that looks like so.

It's a little too early to call what's going to happen.

You don't want to give that forward looking statements.

<unk>.

There's a forced liquidation value out there, we know that and we hope that that's not the outcome, but we're going to work towards the best outcome that we can.

We just felt it was prudent to put it on non accrual given the uncertainty.

Regardless of that particular investment.

Yes, I certainly understand.

That and agree with your decision there.

Do you know I mean, these machine prices R. R.

Generally fungible theres transactions to take place in the market, where do you think that your loan to value on that stands right now.

Uh huh.

Yes, if it comes to.

When it comes to a forced liquidation.

Based on the latest market transaction data that we've seen.

The value of that equipment, and <unk> is probably in the $9 million to $11 million range.

Okay, great. Thank you.

That's my only question. Thanks, I appreciate you taking my questions.

Thanks, Kim welcome.

Thank you.

Our next question will come from Bryce Rowe with B Riley Your line is open.

Thanks, Good evening I appreciate you taking the question here.

I guess I wanted to start just on the balance sheet and leverage.

So you saw leverage come down quarter over quarter.

And just wanted to get a feel for how you expect to manage balance sheet leverage, especially now that we see.

The valuation below NAV, and really probably limit your ability to raise equity capital here. So if you could just.

Stick to how we how we should expect a balance sheet leverage to kind of play out over the next several quarters and how you expect to manage it.

Yes. This is Dave.

We've always indicated that we would be comfortable operating.

Two to 135 range on debt to equity I think we're still within that bound.

Very comfortably.

We are taking on other initiatives that we are in process right now that we will discuss that later date, but we are coming.

Coming up with.

The alternatives to that funding.

Mechanism.

Okay. Thanks, Dave and then.

Maybe wanted to just hit on on the expense side.

Any kind of.

Forward look from a from an expense perspective.

In terms of.

New hires I think you guys have ramped the team.

Fairly fairly aggressively over the over the last.

12 months to 18 months and just wanted to get a feel for where you stand now obviously being internally managed.

Got a huge competitive advantage.

To try to capture operating leverage as you do grow the balance sheet.

Yes. This is Steve.

We're going to continue to judiciously add to the team we've been doing that and it has paid dividends literally but it certainly helped us continue to grow revenues and so we will do that judiciously.

And we're excited to do that.

<unk> in the prepared remarks, we added.

The new.

Personnel to our life Sciences team.

They're in the Raleigh Durham area, and we're excited about that so.

We'll continue to do that judiciously.

Okay.

Okay, and then maybe maybe one more for me.

This is more of a modeling question, but Dave was there any reversed interest in the quarter tied to the addition of the non accruals.

No.

Yes.

Okay, I think thats it for me appreciate it.

Thank you Brian .

Our next question will come from Jordan <unk> with Wells Fargo Securities. Your line is open.

Hi, guys. Just one question a follow up on our core scientific.

Can you tell us what that equipment. When it was purchased was purchased new.

At this time.

Yes, it was.

Okay. Thank you.

Thank you.

Once again that is star one to ask a question.

We have no further questions in the queue at this time.

I would like to turn the floor back to Steve Brown, Chief Executive Officer for closing remarks.

Thank you Chelsea and thanks to everyone for joining the call again today.

One final note, we will be participating with both the Jefferies BDC summit on November 16th and the cave UW Midtown March on December 14th both of which are taking place in New York.

I'd like to arrange a meeting with kind of the management team. Please contact each of the financial institutions mentioned directly or through process, our investment relations firm.

We look forward to reporting fourth quarter and year end results and 2023. Thank you.

Yeah.

Thank you ladies and gentlemen, this does conclude Trinity capital third quarter 2022 earnings Conference call. We appreciate your participation and you may disconnect at any time.

[music].

Sure.

[music].

Good afternoon, My name is Chelsea and I will be your conference operator today.

At this time I would like to welcome everyone to the Trinity capital start quarter 2022 earnings Conference call.

Our hosts for todays call are Steve Brown, Chairman and Chief Executive Officer.

David Lund Chief Financial Officer.

Michael Pester, Chief Accounting Officer.

Jerry harder Chief operating officer, and Sarah Statin General Counsel.

<unk> Chief Credit Officer is also present.

Kyle Brown, President and Chief investment Officer is out of the country and will not be joining us on today's call.

Today's call is being recorded and will be made available for replay at eight P. M Eastern time.

The replay dial in number is 808 397410 and no conference I D is required for access.

At this time, all participants have been placed in a listen only mode and the floor will be opened for your questions. Following the presentation.

If you'd like to ask a question at that time. Please press star one on your telephone keypad.

At any point. Your question has been answered you may remove yourself from the queue by pressing star Q.

We ask that one posing your question. Please pick up your handset to allow optimal sound quality.

Lastly, if you should require operator assistance, please press star zero it.

It is now my pleasure to turn the call over to Sarah Stanton. Please go ahead.

Thank you Chelsea and welcome everyone to Trinity Capital Earnings Conference call for the third quarter of 2022.

Trinity's third quarter 2022 financial results were released just after today's market close and can be accessed from Trinity Investor Relations website at IR Dot Trinity cap dotcom.

A replay of the call is available on <unk> website or by using the 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 facts made during this call, including any statements relating to financial guidance, maybe deemed forward looking statements under federal Securities laws.

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 November three 2022.

Therefore, you are advised that time sensitive information may no longer be accurate at the time of any replay listening or transcript reading.

Now allow me to introduce Trinity capital, Chairman and CEO , Steve Brown.

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

I want to begin our call by putting the current market conditions. We are seeing in the context estimated BC deal count in Q3 was the lowest since Q4 of 2020.

This market volatility and Investor Hesitancy is impacting every sector of the private and public financial markets. Given this backdrop. It is not surprising that there have been fewer public listings on exits in 2022 after historic levels in the previous two years.

An attractive alternative to dilutive equity raises and down rounds as enterprise values pullback.

Trinity with its best in class financing platform has the market presence and track record needed to capitalize on this environment and identify sectors of emerging innovation.

Dry powder was at an all time high at the end of the third quarter with $290 billion of capital available to support portfolio companies and made continued investments in disruptive technologies.

Although we are dealing with the complications of the current market. It is clear that investing in technology and innovation remains critical to our future.

The Trinity we have seen these markets before going back to 2008 and 2009 and then again in 2020 in each of these periods the BDC sector, including those investing in venture backed growth stage companies proved to be resilient through the volatility.

And our underwriting process remains as vigilant as ever.

Now, let's turn to our performance this quarter.

As you saw in our earnings release. This afternoon, we generated strong NII performance grew our portfolio increased our dividend for the seventh consecutive quarter and improved our liquidity.

As I mentioned from an earnings perspective, we began to see the benefit of interest rate increases in Q3 with 62% of our debt investments are floating rate and more than 75% of our borrowings are fixed rate.

Our Q3 net investment income increased by 19% from Q2 to a record $18 6 million.

NII per share of 56 cents for Q3 represents a 5% increase from the prior quarter and a 124% coverage in our core dividend.

We delivered on both strong commitments and deployments in the quarter originating $128 million in new commitments and funded 94 million across 22 portfolio companies.

Our credit quality in the portfolio remains stable with 97% of our debt investments at cost performance.

This is a key demonstration of the strength of our investment criteria as well as the granularity and diversification of our portfolio.

Our growing portfolio contributed to our solid operating performance.

Allowing us to increase our regular quarterly dividend from 42 to 45 cents per share. This is the seventh consecutive quarter that we've increased our dividend and this quarter's regular dividend was 36% higher than one year ago.

In addition, we delivered against our promise to provide a supplemental dividend of <unk> 15 per share for the third consecutive quarter year to date, we have paid out 45 per share in supplemental dividends and we previously expressed intent to the core supplemental cash dividend in the fourth quarter of 2022 subject to our board approval.

While our portfolio benefited from public listings and exits over the last year, we are not dependent on that dynamic to generate returns for our shareholders. Our thesis has always been that we deliver strong yields from our portfolio and that capital gains can be used to deliver supplemental dividends or absorb realized loss.

Yes.

These estimated spillover income is $67 million.

Primarily generated from our capital gains earlier in the year.

Our NAV per share declined by 88, or 6% to $13 74 per share compared to Q2.

Notes.

We also sold 57 million of our common stock and upsize, our keybank credit facility by $50 million to a total of $350 million.

Unique spirit has allowed us to source and hired the talent needed to continue our growth.

Harder, our chief operating officer to provide updates on our portfolio composition and investment performance Jerry.

Thanks, Steve I'd like to start my remarks today by reminding our investors that Trinity employs a rigorous and time tested underwriting process we may.

Maintain a dedicated portfolio management staff, whose sole function is to monitor our credit risk stay in constant communication with our portfolio companies and their equity stakeholders. These.

These processes have served us well and have been the driving forces behind our successful investment track record and we will continue to follow them as we scale, our business and expand our portfolio.