Q4 2024 Trinity Capital Inc Earnings Call
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Unknown Executive: music Please stand by, your program will begin momentarily.
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David: Good morning, My name is David and I'll be your conference operator today at this time I'd like to welcome everyone to Trinity Capital's fourth quarter and full year 2024 earnings conference call.
David: Good morning, my name is David and I'll be your conference operator today. At this time, I'd like to welcome everyone to Trinity Capital's fourth quarter and full year 2024 earnings conference call. All participants have been placed in a listen-only mode and the floor will be open for questions following the presentation.
David: All participants have been placed in a listen only mode and the floor will be opened for questions. Following the presentation.
Ben Malcolmson: It is now my pleasure to turn the call over to Ben Malcolmson, Head of Investor Relations for Trinity Capital. Thank you and welcome to Trinity Capital's earnings conference call for the full year and fourth quarter of 2024.
Speaker Change: It is now my pleasure to turn the call over to Ben Malcolmson head of Investor Relations for Trinity capital.
Speaker Change: Thank you and welcome to Trinity Capital's earnings conference call for the full year and fourth quarter of 2024.
Ben Malcolmson: Today, our speakers are Kyle Brown, Chief Executive Officer, Michael Testa, Chief Financial Officer, and Jerry Harder, Chief Operating Officer.
Kyle Brown: Today, our speakers are Kyle Brown, Chief Executive Officer, Michael <unk>, Chief Financial Officer, and Jerry harder Chief operating officer.
Ben Malcolmson: Also joining us for the Q&A portion of the call is Ron Kundich, Chief Credit Officer.
Ron: Also joining us for the Q&A portion of the call is Ron <unk> Chief Credit Officer.
Ben Malcolmson: Trinity's financial results were released earlier today and can be accessed on our investor relations website at ir.trinitycap.com. Before we begin, I would like to remind everyone that certain statements made during this call may be deemed forward-looking statements under federal securities laws. Because forward-looking statements involve known and unknown risks and uncertainties, we encourage you to refer to our most recent SEC filings for information on certain risk factors.
Ron: Turning to <unk> financial results were released earlier today and can be accessed on our Investor Relations website at IR Dot Treaty cap Dot com.
Ron: Before we begin I would like to remind everyone that certain statements made during this call maybe deemed forward looking statements under federal securities laws, because forward looking statements involve known and unknown risks and uncertainties. We encourage you to refer to our most recent SEC filings for information on certain risk factor.
Ben Malcolmson: Trinity Capital assumes no obligation or responsibility to update any forward looking statements.
Ron: Trinity Capital assumes no obligation or responsibility to update any forward looking statements now. Please allow me to turn the call over to Trinity capital CEO Karl Brown.
Kyle Brown: Now, please allow me to turn the call over to Trinity Capital's CEO, Kyle Brown. Thank you, Ben. And thanks, everyone, for joining us today. 2024 was an excellent year for Trinity Capital, as our strategies continue to perform well, and we achieved record results. Major milestones from 2024 include $116 million of net investment income, or $2.20 per share, a record $1.2 billion of funding, the launch of our sponsor finance and asset-backed lending verticals, giving us five complementary yet diverse business verticals. The expansion of Trinity's lending platform into Europe with the establishment of a London-based team. An official launch of our RAA's first co-investment vehicle, which further capitalizes the business and provides incremental income to our BDC shareholders.
Karl Brown: Thank you Ben and thanks, everyone for joining US today 2024 was an excellent year for Trinity capital as our strategy is continuing to perform well and we achieved record results.
Karl Brown: Major milestones for 2024 and include $116 million of net investment income or $2 20 per share a record $1 $2 billion of fundings the launch of our sponsor finance and asset back lending verticals, giving us five complementary diverse business verticals the expansion of trinity's lending platform into.
Karl Brown: Europe with the establishment of a London based team.
Karl Brown: And the official launch of our our A's first co investment vehicle, which further capitalizes the business and provides incremental income to our BDC shareholders.
Kyle Brown: We finished the year with an especially strong fourth quarter. Here are some highlights from Q4. We delivered a net investment income of $35 million, a 38% increase versus Q4 of last year. Net asset value grew to $823 million, up 9% from $757 million in the prior quarter. Platform AUM reached a record by exceeding $2 billion and Trinity paid a fourth quarter cash dividend of $0.51 per share, representing our 20th consecutive quarter of a consistent or growing dividend. During the fourth quarter, our five business verticals continue to perform well, feeling growth and profitability. As a reminder, we've grown into a direct lending platform compromised of five business verticals, tech lending, equipment financing, life sciences, asset-backed lending, and sponsor finance, focused on private equity-backed businesses.
Karl Brown: We finished the year with especially strong fourth quarter here are some highlights from Q4.
Karl Brown: We delivered net investment income of $35 million or 38% increase versus Q4 of last year net.
Karl Brown: Net asset value grew to $823 million up 9% from $757 million in the prior quarter.
Karl Brown: But from AUM reached a record by exceeding $2 billion.
Karl Brown: And Trinity paid a fourth quarter cash dividend of 51 cents per share, representing our 20th consecutive quarter of consistent or growing dividend.
Karl Brown: During the fourth quarter, our five business verticals continue to perform well fueling growth and profitability. As a reminder, we've grown into a direct lending platform compromise of five business verticals Tech lending you couldnt financing lifestyle.
Karl Brown: In life Sciences asset backed lending and sponsor finance focused on private equity backed businesses.
Kyle Brown: These verticals each have their own experienced team that leads the originations, credit, and portfolio management functions, which gives them the ability to scale efficiently. Our investments in these strategic growth initiatives have generated extraordinary momentum, highlighting our commitment to expanding the platform and broadening our investment opportunities. Trinity Capital is first an alternative asset management company in addition to a direct lender. We seek efficiencies by scaling our business, our balance sheet at the public company level and we're building out our asset management business to invest alongside the BDC across our business vertical. What makes us different from externally managed BDCs is that when you buy Trinity stock, you're buying into a pool of diversified assets across our various verticals, and you're buying into a management company with the opportunity to also manage third-party capital.
Karl Brown: These verticals each have their own experience team that leaves the originations credit and portfolio management functions, which gives them the ability to scale efficiently.
Karl Brown: Our investments in these strategic growth initiatives have generated extra ordinary momentum.
Karl Brown: Letting our commitment to expanding the platform and broadening our investment opportunities.
Karl Brown: <unk> Capital's first and alternative asset manage the company. In addition to a direct lender, we seek efficiencies by scaling our business our balance sheet at the public company level and we're building out our asset management business to invest alongside the BDC across our business verticals, what makes us different from externally managed bdcs is that when you buy a trinity stock.
Karl Brown: You're buying into a pool of diversified assets across our various verticals and you're buying into a management company with the opportunity to also manage third party capital.
Kyle Brown: Additionally, as an internally managed BDC, our employees, management, and board all own the same shares as our investors. This structure creates 100 percent alignment with our shareholders as we strive to deliver growing returns for our investors. Turning to deployment, we maintain strong, a strong investment pipeline, including $693 million of unfunded commitments, leaving us well-positioned for continued growth. And as a reminder, the vast majority of these unfunded commitments are subject to ongoing diligence and approval by our investment committee. Credit underwriting and portfolio management ultimately determine our success over the long term. We have a unique structure of collaboration among our originations, credit, and portfolio teams to manage our inbound opportunities and active portfolio companies.
Karl Brown: Additionally, as an internally managed BDC, our employees management and board all on the same shares our investors. This structure creates a 100% alignment with our shareholders.
Karl Brown: As we strive to deliver growing returns for our investors.
Karl Brown: Turning to deployment, we maintained strong a strong investment pipeline, including $693 million of unfunded commitments, leaving us well positioned for continued growth and as a reminder, the vast majority of these unfunded commitments are subject to ongoing due diligence and approval by our investment Committee.
Karl Brown: Credit underwriting and portfolio management ultimately determine our success over the long term, we have a unique structure of collaboration among our originations credit and portfolio teams to manage our inbound opportunities and active portfolio companies.
Kyle Brown: We are very selective and follow a rigorous diligence process where only a small percentage of our deals reach the underwriting stage. This methodical approach mitigates risk and positions us to excel in all macroeconomic cycles. Underpinning our process are three core principles that are fundamental to our culture. exhibiting uncommon care for employees, customers and stakeholders, serving our clients by being partners rather than just money, and providing outsized returns for our shareholders. Continuous investment in building our teams and improving our systems is key to our growth, enabling us to further diversify our investments to create a best-in-class direct lending platform.
Karl Brown: We are very selective and follow a rigorous diligence process, where only a small percentage of our deals reached the underwriting stage. This methodical approach mitigates risk and positions us to excel in all macroeconomic cycles.
Karl Brown: Underpinning our process, our three core principles that are fundamental to our culture.
Karl Brown: Exhibiting uncommon care for our employees customers and stakeholders, serving our clients by being partners rather than just money.
Karl Brown: And providing outsized returns for our shareholders.
Karl Brown: Continuous investment in building, our teams and improving our systems is key to our growth, enabling us to further diversify our investments to create a best in class direct lending platform.
Kyle Brown: As we look ahead to 2025 and beyond, we're excited about the future and look forward to continuing to capitalize on our momentum as we grow and maximize value for our shareholders.
Karl Brown: As we look ahead to 2025 and beyond we're excited about the future and look forward to continuing to capitalize on our momentum as we grow and maximize value for our shareholders.
Michael Testa: And with that, I'll turn the call over to Michael Testa, our CFO, to discuss financial results in more detail. Michael. Thank you, Kyle. In the fourth quarter, we achieved record total investment income. $71 million. a 48% increase over the same period in 2023. Our effective yield on the portfolio for Q4 was once again an industry-leading 16.4%, and our core yield, which excludes fee income, remains strong at 14.7% despite industry-wide yield compression. Net investment income for the fourth quarter was $35 million or $0.58 per basic share compared to $25 million or $0.57 per basic share in the same period of the prior year.
Karl Brown: That I will turn the call over to Michael <unk>, our CFO to discuss financial results in more detail Michael.
Michael: Thank you Kyle.
Michael: In the fourth quarter, we achieved record total investment income of $71 million.
Michael: A 48% increase over the same period in 2023.
Michael: Our effective yield on our portfolio for Q4 was once again, an industry, leading 16, 4% and our core yield which excludes fee income remained strong at 14, 7% despite industry wide yield compression.
Michael: Net investment income for the fourth quarter was $35 million 58 per basic share compared to $25 million or 57 per basic share in the same period of the prior year.
Michael Testa: This quarter's earnings experienced a benefit of increased fee income from higher early portfolio payoffs and fundings within our equipment financing vertical. Our net investment income per share represents 114% coverage of our quarterly distribution. Our estimated undistributed taxable income is approximately $67 million, or $1.08 per share. We continue to reinvest this capital for the benefit of our investors while maintaining a consistent and meaningful distribution. Our platform continues to generate strong returns for our BDC shareholders with ROAE of 17.4% based on net investment income over average equity, and ROAA of 7.6% based on net investment income over average total assets.
This quarter's earnings experienced the benefit of increased fee income from higher early portfolio payoffs and fundings within our equipment financing vertical.
Michael: Our net investment income per share represents 114% coverage of our quarterly distribution.
Michael: Our estimated undistributed taxable income is approximately $67 million or $1 eight per share.
Michael: We continue to reinvest this capital for the benefit of our ambassadors, while maintaining a consistent and meaningful distribution.
Michael: Our platform continues to generate strong returns for our BDC shareholders with ROE of 17, 4% based on net investment income over average equity.
Michael: And ROE of seven 6% based on net investment income over average total assets.
Michael: As of December 31, 2024, our NAV.
Michael Testa: As of December 31st, 2024, our NAV was $823 million, up from $757 million as of September 30th, 2024. and our corresponding NAV per share was $13.35 at the end of Q4. An increase from $13.13 as of September 30, 2024. The increase in net assets per share was primarily due to the portfolio activity, accretive ATM offerings, and net investment income exceeding the declared dividend.
Michael: With $823 million up from $757 million as of September 30th 2024.
Michael: And our corresponding NAV per share was $13 35 at the end of Q4 and.
Michael: An increase from $13.13 as of September 30 of 2024.
Michael: The increase in net assets per share was primarily due to portfolio activity accretive ATM offerings and net investment income exceeding the declared dividend.
Michael Testa: During the fourth quarter, we realized net gains of approximately $9.3 million, primarily from the sale of two equity and warrant positions. As a reminder, we receive warrants on a majority of our loans, especially in the tech lending and life science firms. During the quarter, we strengthened our balance sheet, enhanced our liquidity by raising $50 million of gross proceeds from the ATM program, further upsizing our credit facility of $600 million in total commitments across a diversified syndicate of 13 banks, and closing a $142.5 million private placement debt off. We also continue to realize the benefits of our co-investment in our joint venture and our new vehicle under the RIA subsidiary, which in Q4 provide approximately $1.9 million or $0.03 per share of incremental net investment income to the BBC.
Michael: During the fourth quarter, we realized net gains of approximately $9 $3 million.
Michael: Primarily from the sale of two equity and warrant positions.
Michael: As a reminder, we received warrants on a majority of our loans, especially in the tech lending and life science verticals.
Michael: During the quarter, we strengthened our balance sheet enhanced our liquidity by raising $50 million of gross proceeds from the ATM program further upsizing, our credit facility of $600 million and told commitments across a diversified syndicate of 13 banks and closing 142, and a half million dollar private place.
Michael: <unk> debt offering.
Michael: We also continue to realize the benefits of our co investment in our joint venture and our new vehicle under the RIAA subsidiary, which in Q4 provide approximately $1 $9 million or <unk> <unk> per share of incremental net investment income to the BDC.
During Q4, we syndicate $77 million to these vehicles.
Michael Testa: During the Q4, we syndicated $77 million to these vehicles. As of December 31st, 2024, we had more than $302 million of assets under management in these private vehicles, providing incremental capital for growth and a creative returns to our shareholders. Our net leverage ratio, which represents principal debt outstanding with cash on hand, was 1.08 times as of December 31st, 2024. Our strong liquidity position with diverse capital sources, both from capital raised by the BDC and through our wholly owned RIA subsidiary, provide Trinity with the flexibility to manage a strong pipeline and be opportunistic in the marketplace.
Michael: As of December 31, 2024, we had more than $302 million of assets under management in these private vehicles, providing incremental capital for growth and accretive returns to our shareholders.
Michael: Our net leverage ratio, which represents principal debt outstanding less cash on hand.
Michael: 1.08 times as of December 31, 2024.
Michael: Our strong liquidity position with diverse capital sources, both from capital raised by the BDC and through our wholly owned <unk> subsidiary provides <unk> with the flexibility to manage a strong pipeline and be opportunistic in the marketplace.
Michael: Subsequent to quarter end, we launched a debt ATM program, which provides further capital raising flexibility as of this date, we have not issued any additional debt under this program.
Michael Testa: Subsequent quarter end, we launched a debt ATM program, which provides further capital raising flexibility. As of this date, we have not issued any additional debt under this program. Additionally, we retired all the debt outstanding under our 2025 notes of approximately $153 million and the holder of our convertible notes elected exercise their conversion rate on the $50 million of convertible notes.
Michael: Additionally, we retired all of the debt outstanding under our 2025 notes of approximately $153 million and the holder of our convertible notes elected exercise their conversion rate on the $50 million of convertible notes.
Michael Testa: At our auction, we elected to use cash to retire the convertible note and avoid further dilution impact of the issuing shares of our economist. These debt obligations were fully liquidated with available proceeds received from early debt repayments, equity gains, and the use of our credit facility. As a result of these subsequent debt extinguishments, we have no further debt obligations due until August 2026. We estimate the Q1 NAV impact from the repayment of the convertible debt will be approximately $0.27 per share based on the current outstanding share.
Michael: At our option, we elected to use cash to retire the convertible note and avoid further dilution impact of issuing shares of our common stock.
Michael: These debt obligations were fully liquidated with available proceeds received from early debt repayments equity gains and the use of our credit facility.
Michael: As a result of these subsequent debt extinguishment, we have no further debt obligations due until August 2026.
Michael: We estimate the Q1 NAV impact from the repayment of the convertible debt will be approximately 27 cents per share based on the current outstanding shares.
Michael Testa: While there is an impact to NAV in the first quarter, the early extension of these debt obligations, which were issued prior to our IPO, reflect the strong performance of the Trinity platform and will be a long term benefit to Trinity shareholders.
Michael: While there is an impact to <unk> in the first quarter. The early extinguishment of these debt obligations, which were issued prior to our IPO reflect the strong performance of the <unk> platform will be a long term benefit to train shareholders.
Jerry Harder: I'll now turn the call over to our COO, Jerry Harder, to discuss our portfolio performance of Platform in more detail. Jerry. Thank you, Michael. Since our last earnings call, Trinity has continued to focus on executing our strategies across our five business verticals. to strengthen and diversify our platform. while enhancing our ability to offer customized financing solutions to our evolving client base of growth oriented We remain dedicated to supporting companies at every stage of their growth. At the end of the fourth quarter on a cost basis, our total portfolio consisted of approximately 75% secured loans, 18% equipment finance, 5% equity and 2%.
Speaker Change: I'll now turn the call over to our CFO, Jerry harder to discuss our portfolio performance of platform in more detail Gary.
Speaker Change: Thank you Michael since.
Speaker Change: Since our last earnings call Trinity has continued to focus on executing our strategies across our five business verticals with strengthen and diversify our platform, while enhancing our ability to offer customized financing solutions to our evolving client base of growth oriented companies, we remain dedicated to supporting companies.
Speaker Change: At every stage of their growth cycle.
Speaker Change: At the end of the fourth quarter on a cost basis. Our total portfolio consisted of approximately 75% secured loans.
Speaker Change: 18% equipment financings.
Speaker Change: 5% equity and 2% warrants.
Jerry Harder: The composition of our portfolio remained consistent with prior quarters, with diversification across investment type, transaction size, industry and geography. Our portfolio is segmented across 21 industry categories, with our largest industry exposure, finance and insurance, representing 18.1% of the portfolio at cost. This exposure is spread across 15 borrowers and includes both term loans and asset backed warehouse. Our next largest industry concentrations are medical devices and green technology, representing 9.7% and 8.3% of the portfolio at cost, respectively. In aggregate, life sciences related industries collectively made up 25.5% of our total portfolio on a cost.
Speaker Change: The composition of our portfolio remained consistent with prior quarters with diversification across investment type transaction size industry and geography.
Speaker Change: Our portfolio is segmented across 21 industry categories with our largest industry exposure finance and insurance, representing 18, 1% of the portfolio at cost.
Speaker Change: This exposure is spread across 15 borrowers and includes both term loans and asset backed warehouse facilities.
Speaker Change: Our next largest industry concentrations are medical devices, and green technology, representing nine 7% and eight 3% of the portfolio at cost respectively.
Speaker Change: In aggregate life Sciences related industries collectively made up 25, 5% of our total portfolio on a cost basis.
Speaker Change: Among our five business verticals, the approximate breakdown of our fundings in Q4 went as follows.
Jerry Harder: Among our five business verticals, the approximate breakdown of our fundings in Q4 went as follows. 33% to Equipment Financing. 28% to sponsor finance. 27% to tech lens. 7% to Life Sciences and 3% to Asset Backers. As of the end of Q4, our largest portfolio company debt exposure represents 3.1% of our debt portfolio and 2.9% of our total portfolio on a cost-based Our 10 largest debt investments collectively represent 23.3% of our total portfolio on a cost.
Speaker Change: 33% to equipment financing.
Speaker Change: 28% to sponsor finance.
Speaker Change: 27% to tech lending.
Speaker Change: 7% to life Sciences, and 3% to asset backed lending.
Speaker Change: As of the end of Q4, our largest portfolio company would get exposure represents three 1% of our debt portfolio and two 9% of our total portfolio on a cost basis.
Speaker Change: Our 10 largest debt investments collectively represent 23, 3% of our total portfolio on a cost basis.
Speaker Change: Now turning our focus to credit.
Jerry Harder: Now turning our focus to credit. The credit quality of our portfolio improved quarter over quarter, with approximately 99.2% of our portfolio performing on a fair value basis. Our average internal credit rating for the fourth quarter stood at 2.9 based on our one to five rating with five indicating very strong. This rating is consistent with the average credit rating in each of the last two quarters and is attributable to a combination of credit upgrades to existing portfolio companies, as well as strong originations of new credits within the fourth quarter. As a percentage of the debt portfolio on a cost basis, credits within the lowest two tiers remain virtually unchanged from Q2.
Speaker Change: Credit quality of our portfolio improved quarter over quarter with approximately 99, 2% of our portfolio performing on a fair value basis.
Speaker Change: Our average internal credit rating for the fourth quarter stood at 2.9 based on our 1% to five rating system with five indicating very strong performance.
Speaker Change: This rating is consistent with the average credit rating and each of the last two quarters and is attributed attributable.
Speaker Change: Attributable to a combination of credit upgrades to existing portfolio companies as well as strong originations of new credits within the fourth quarter.
Speaker Change: As a percentage of the debt portfolio on a cost basis credits within the lowest two tiers remained virtually unchanged from Q3.
Speaker Change: Quarter over quarter, the number of portfolio companies on non accrual remained at five.
Jerry Harder: Order over quarter, the number of portfolio companies on non accrual remained at five, while our non accrual credits decreased on both a cost and fair value. One portfolio company, Sun Basket, was removed from non-accrual and was fully realized in Q4, and a very slight decrease relative to our Q3 fair value. One additional credit from our tech lending portfolio with a cost basis of approximately $3 million was added to non-accrual within At the end of Q4, our nonaccrual credits had a total fair value of approximately $12.7 million, representing 0.8% of the total debt portfolio, a slight improvement from Q3.
Speaker Change: While our non accrual credits decreased on both a cost and fair value basis.
Speaker Change: One portfolio company Sun basket was removed from non accrual and was fully realized in Q4, and a very slight decrease relative to our Q3 fair value.
Speaker Change: One additional credit from our tech lending portfolio with a cost basis of approximately $3 million was added to non accrual within the quarter.
Speaker Change: At the end of Q4, our nonaccrual credits at a total fair value of approximately $12 $7 million.
Speaker Change: Representing 0.8% of the total debt portfolio, a slight improvement from Q3.
Speaker Change: At quarter end, 77% of our total principal outstanding was backed by first position liens on enterprise equipment or both.
Jerry Harder: At quarter end, 77% of our total principal outstanding was backed by first position liens on enterprise, equipment, or both. for Financings Covered by All Assets. The weighted average loan-to-value as of the end of Q4 was 23%. while 65% of these companies have a loan to value of less than These statistics demonstrate that our portfolio companies are generally not over levered and are in a healthy position to service the debt, even in instances when our loan may not be in first position. In Q4, our portfolio companies collectively raised $1.9 billion of equity. In full year 2024, our portfolio companies collectively raised $4.7 billion, a 69% increase from 2020.
Speaker Change: For our financings covered by all asset liens, the weighted average loan to value as of the end of Q4 was 23%.
Speaker Change: While 65% of these companies have a loan to value of less than 15%.
Speaker Change: These statistics demonstrate that our portfolio companies are generally not over levered.
Speaker Change: In a healthy position to service the debt even in instances when our loan may not be in first position.
Speaker Change: In Q4, our portfolio companies collectively raised $1 9 billion of equity.
Speaker Change: And full year 2020 for our portfolio companies collectively raised $4 7 billion.
69% increase from 2023.
Jerry Harder: These encouraging stats speak to our portfolio's quality and ability to secure funding in an ever-changing market. In closing, we want to emphasize that our credit quality and portfolio management are of the utmost importance. One of Trinity's hallmarks is that our staff members think and operate like shareholders, and we always strive for resolutions that benefit both our investors and our partners.
Speaker Change: These encouraging stats speak to our portfolios quality and ability to secure funding and an ever changing market.
Speaker Change: In closing, we want to emphasize that our credit quality and portfolio management of the utmost importance to Trinity.
Speaker Change: One of Trinity's hallmarks is that our staff members think and operate like shareholders.
Speaker Change: We strive for resolutions that benefit both our investors and our partners.
Unknown Executive: Before we conclude our call, we'd like to open the line for questions. Operator? At this time, if you'd like to ask a question, please press the star and one keys on your telephone keypad. Keep in mind, if you'd like to remove yourself from the question queue, you may do so by pressing star and 2.
Speaker Change: Before we conclude our call we'd like to open the line for questions.
Speaker Change: Later.
Speaker Change: At this time, if you'd like to ask a question. Please press the star and <unk> on your telephone keypad keep in mind, if you'd like to remove yourself from the question queue. You may do so by pressing star and two.
Speaker Change: We will take our first question from Casey Alexander from Compass Point. Please go ahead. Your line is open.
Casey Alexander: We'll take our first question from Casey Alexander from Compass Point. Please go ahead. Your line is open.
Mike: Actually Mike My question was answered so im fine. Thank you.
Casey Alexander: Actually, my question was answered, so I'm fine, thank you. Thank you.
Speaker Change: Thanks, guys. Thanks Keith.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: We'll take our next question then from Matthew <unk> with Jefferies. Your line is open.
Matthew Hurwit: We'll take our next question then from Matthew Hurwit with Jeffreys, your line is open. Hi, everyone. Congrats on the results. Hope you're well.
Matthew: Hi, everyone. Congrats on the results.
Speaker Change: Hope you're well my first question is just on <unk>.
Matthew Hurwit: My first question is just on how you've maintained low non accruals. Can you share with us what practices or borrower characteristics are helping keep non accruals so low? And are there any early warning signs as we head into 2025? in terms of credit integration or anything you're watching. Thanks. Sorry, Matthew.
Speaker Change: You've named low.
Matthew: Maintained low non accruals.
Matthew: Can you share with us what practices are borrowed borrower characteristics are helping keep nonaccrual so low and are there any early warning signs as.
Matthew: As we head into 2025.
Matthew: In terms of credit duration or anything you're watching thanks.
Ron: Sorry, Matt This is Ron Chief Credit Officer, Ron can niche.
Ron Kundich: This is Ron, Chief Credit Officer Ron Kundich. Good to talk to you today. Yeah, we've shared with the street on a quarterly basis, discussion around our underwriting rigor, and more importantly, our five vertical strategy. Within each vertical, we don't just have underwriters, but we have underwriters that are experts within that vertical. We have portfolio managers that have experience within that vertical, and so forth. So as you might imagine, each vertical is different. Equipment lending is different than venture debt in the life science space, for example. So it's really important for us to have that expertise within each vertical.
Matthew: Good to talk to you today.
Matthew: Yes, we've shared with the street on a quarterly basis discussion around our underwriting rigor.
Matthew: And more importantly, our five vertical strategy.
Matthew: Within each vertical we don't just have underwriters, we have underwriters better experts within that vertical we are portfolio managers.
Matthew: Experience within that vertical and so forth. So as you might imagine each vertical is different equipment lending is different than venture debt and the life Science space. For example, so it's really important for us to have that expertise within each vertical and we believe that that structure with a rigor.
Matthew Hurwit: And we believe that that structure with the rigor that we bring at the front end of the pipeline has led to the results we've shown on credit quality. Great, thank you.
Matthew: Now we bring at the front end of the of the pipeline has led to the results we've shown on credit quality.
Matthew: Great. Thank you and then on leverage.
Kyle Brown: And then on leverage, how are you approaching leverage in the current environment? Is your goal to maintain it around the current level or do you see room to increase leverage for growth? Or just how are your thoughts on So, we've messaged, this is Kyle, hey Matthew, we've messaged this in the past and this is how we think about it. We really do want to continue over time to decrease leverage. Our ability to raise money off balance sheet and create new liquidity, you know, gives us the ability to downstream some of those assets into managed accounts and keep a really healthy level of leverage around kind of one-to-one.
Speaker Change: How are you approaching leverage in the current environment is your goal to maintain it around the current level or do you see room to increase leverage for growth or just how are you your thoughts on leverage currently.
Speaker Change: So we've messaged this is Kyle Hey, Matthew we've messaged. This in the past and this is how we think about it we really do want to continue over time to decrease leverage our ability to raise money off balance sheet and create new liquidity gives us the ability to downstream some of those assets into managed accounts and keep.
Speaker Change: A really healthy.
Speaker Change: The level of leverage around kind of one to one will ramp it up sometimes when it makes sense too because we have more deals to funds more opportunities. But then the idea is to make sure that we do.
Kyle Brown: We'll ramp it up sometimes when it makes sense to because we have, you know, more deals to fund, more opportunities, but then the idea is to make sure that we, you know, downstream those assets into managed accounts to get that leverage back down. So, over time, as we build out the RIA and build out earnings there, you know, we'll see and have the ability to have less leverage at the BDC level, which will create, of course, more liquidity for us to be opportunistic along the way. So, that's how we think about it. We, you know, intend over time to continue to decrease that as the RIA generates new earnings and we can decrease it while also increasing earnings per share.
Speaker Change: Downstream those assets into managed accounts to get that leverage back down and so over time as we build out the RIAA and build out earnings there.
Speaker Change: C and have the ability to have less leverage at the BDC level, which will create of course more liquidity for us to be opportunistic along the way. So that's how we think about it we intend over time to continue to decrease that as there are a generates new earnings and we can decrease while also increasing earnings per share.
Speaker Change: Sure.
Speaker Change: Yeah.
Matthew Hurwit: Great. Thanks very much and congrats on the results. Thank you, Matt.
Speaker Change: Great. Thanks, very much and congrats on the results.
Speaker Change: Thank you Matthew.
Speaker Change: We will take our next question from Doug Harter with UBS. Please go ahead. Your line is open.
Doug Harder: We'll take our next question from Doug Harder with UPS. Please go ahead, your line is open. Thanks. Somewhat piggybacking off the last question, you know, how do you think about kind of the appetite to continue to raise capital off of the ATM? And, you know, kind of, how do you see the pace of deployment in the, you know, in order to maintain leverage, you know, kind of at that one times target you just mentioned, Kyle? Sure, we, you know, we think of financing. It's less expensive. It's really the most efficient way to raise equity. But you know, when we think about raising equity or debt at the BDC level, you know, we're doing it in a way, and we've historically done in a way that's accretive to investors.
Doug Harter: Thanks, so much.
Doug Harter: Piggybacking off the last question.
Doug Harter: How do you think about kind.
Doug Harter: Kind of the appetite to continue to raise capital off of the ATM.
Doug Harter: And.
Doug Harter: Kind of how do you see the pace of deployment and the yes.
Doug Harter: In order to maintain leverage kind of at that one times target that you just mentioned Phil.
Doug Harter: Shall we think of the ATM as just in time financing.
Doug Harter: It's it's less expensive, it's really the most efficient way to raise equity.
Doug Harter: But when we think about raising equity or debt at the BDC level, we're doing it in a way and we've historically done in a way thats accretive to investors and so what we have with the or as the ability and liquidity there now to where we will.
Kyle Brown: And so what we have with the RIA is the ability and liquidity there now to where, you know, we will as we build deployment, we'll build those managed accounts and to the extent, you know, we need additional capital, you know, we'll tap into the ATM as needed, but not in a way that will be dilutive to shareholders.
Doug Harter: As we build deployment.
Doug Harter: <unk> will build those managed accounts and to the extent, we we need additional capital will will tap into the ATM as needed.
Doug Harter: But not in a way that will be dilutive to shareholders and that's how we think about it so.
Michael Testa: And that's how we think about it. So, yeah, Mike, you want to add anything to that? Yeah, Doug, I would say that, again, we're being thoughtful, trying to diversify our capital sources, just like we're diversifying the asset side of our balance sheet. So, we're looking, you know, we launched a debt ATM subsequent to quarter end, you know, have more flexibility with raising just-in-time debt capital. We had inaugural private placement issuance, debt issuance. So, looking beyond institutional retail, beyond just the balance sheet, but also, you know, in through the RIA and private vehicles through the RIA.
Doug Harter: Yes, Mike you want to add anything to that yeah, Doug I would tell you that again, we're being thoughtful trying to diversify our capital sources just like we are diversifying the asset side of our balance sheet. So we're looking we launched the debt ATM subsequent to quarter end have more flexibility.
Doug Harter: Disability with raising just in time debt capital, we had inaugural private placement issuance debt issuance. So looking beyond institutional retail beyond just the balance sheet, but also through the <unk> and.
Speaker Change: Private vehicles.
Doug Harter: So the RNA, so all different channels.
Michael Testa: So, all different channels providing additional flexibility as we grow and scale, more opportunities will open up to us.
Doug Harter: Adding additional flexibility as we grow and scale more opportunities will open up to us.
Doug Harter: Great I appreciate it thank you.
Doug Harder: Great. Appreciate it. Thank you.
Doug Harter: Thanks.
Speaker Change: And once again, if you'd like to ask a question. Please press the star and one keys on your telephone keypad.
Unknown Executive: And once again, if you'd like to ask a question, please press the star and one keys on your telephone keypad.
Paul Johnson: We'll take our next question from Paul Johnson with KBC. Go ahead, your line is open. Yeah, good afternoon. Thanks for taking my question on the bond conversion next quarter.
Speaker Change: I'll take our next question from Paul Johnson with <unk>. Please go ahead. Your line is open.
Paul Johnson: Yes. Good afternoon. Thanks for taking my question on the.
Speaker Change: Bond conversion next quarter.
Michael Testa: Sounds like you guys are settling that via cash, so there won't Any dilutive impact, but is there any way to quantify the the retirement expense for that for next? Yeah, in my premier marks, I noted an estimate of $0.27 per share on NAV impact as a result of that. the conversion rate in current where it's at $66 million of of a cost to extinguish that. Got it. Thanks for that. I missed that detail. Thanks for that.
Speaker Change: It sounds like you guys are settling that cash so there won't be any dilutive impact, but is there any way to quantify the.
Speaker Change: The retirement expense for that for next quarter.
Speaker Change: Yes.
Speaker Change: Premier marks I noted.
Speaker Change: Estimate of 27 cents per share our NAV impact as a result of that.
Speaker Change: The conversion rate and current where it's at $66 million.
Speaker Change: Of.
Speaker Change: Yeah.
Speaker Change: Our cost to extinguish that debt.
Speaker Change: Got it thanks for that I missed missed missed that that detail thanks for that.
Paul Johnson: Switching over to the portfolio, I'm just curious, you know, in terms of the fintech exposure in the portfolio, how many of the companies would you say are dependent on bank partnerships for Yeah, I don't know.
Speaker Change: Switching over to the portfolio I'm just curious in terms of the Fintech exposure in.
Speaker Change: In the portfolio how many of the companies would you say are dependent on bank partnerships for for business.
Jerry Harder: Yes, I don't know this is Jerry that's good that's a great question.
Jerry Harder: This is Jerry. That's good. That's a great question. It's not uncommon for, you know, some of those business models to require such partnerships. So, you know, but in our underwriting, we're thinking that through, right, and making sure that there's multiple banks in that, in those partnerships, right. And so, you know, much like we wouldn't underwrite a life sciences company with, you know, one shot on from a drug approval standpoint. Similarly, you know, we're deeply considering that in the underwriting. So, if there are bank partnerships, there have to be multiple on board, you know, with additional in queues.
It's not uncommon for.
Jerry Harder: Some of those business models to require such partnerships, so but in our underwriting we're thinking that through right and making sure that there is.
Jerry Harder: Multiple.
Jerry Harder: Banks in that in.
Jerry Harder: In those partnerships right and so much.
Jerry Harder: Much like we wouldn't underwrite a life Sciences company with one shot on goal from a from a drug approval standpoint. Similarly, we're deeply considering that in the underwriting so if their bank partnerships there have to be multiple onboard.
Kyle Brown: So, it's a great question and something we talk about as we underwrite, but we limit our exposure.
Jerry Harder: Additionally in Q. So it's a great question and something we talk about as we underwrite we limit our exposure.
Kyle Brown: Hey, this is Kyle. I'll add something else. We are, you know, our ABL group that does warehouse loans is, you know, primarily focused on fintech. And we are really, in many of those cases, when we're senior, we are the replacement for the bank. So, we're providing that advance against receivables there. And then for more mature companies, we're partnering with a bank. So, a lot of the fintech exposure that we have and a lot of it that we'll have going forward is really more asset-backed lending, where we're doing receivable type things. So, we like that. We like that position with fintech.
Kyle Brown: As Kyle I'll add something else, we are in our ABL group that does warehouse loans is primarily focused on fintech.
Kyle Brown: And we are really in many of those cases, when we're senior we or the replacement for the bank. So we're providing that advanced against receivables there.
Kyle Brown: And then for more mature companies, we're partnering with a bank. So a lot of the fintech exposure that we have in and a lot of the dental that we'll have going forward is really more asset back lending where were doing receivable type financing.
At a nice loan to value or loan to cost against those receivables. So we like that we like that position with fintech companies.
Got it I appreciate it that's helpful details there.
Paul Johnson: Got it. Appreciate it. That's, that's helpful details there.
Paul Johnson: And then, you know, on just one investment, one of the non-accruals this quarter, I just wanted to ask, you know, I know it's a small loan, looks like a, you know, small tranche of space perspective was placed on non-accrual this quarter. But I'm just wondering, I mean, just because that's such a novel industry, I mean, again, understanding that the one small loan, I mean, is there anything to read into that in terms of trends within that industry?
Kyle Brown: And then just.
Kyle Brown: One investment one of the non accruals. This quarter just wanted to ask you know I know, it's a small loan it looks like a small tranche of space perspective was placed on nonaccrual this quarter, but.
Kyle Brown: Just wondering I mean, just because thats such a novel industry I mean.
Kyle Brown: Again understanding that the one small loan I mean is there anything to read into that in terms of <unk>.
Kyle Brown: Trends within that industry or is this more of an idiosyncratic issue issue related to a space perspective.
Ron Kundich: Or is this more of an idiosyncratic issue, issue related to space perspective?
Ron Kundich: Yeah, this is Ron Kundich, Chief Credit Officer. I think it's company specific. Paul, I don't think there's anything industry wide that we're concerned with. This is a company, as you alluded to, is a small, you know, venture debt term loan situation. The bulk, I shouldn't say the bulk, a large part of our space portfolio is related to our equipment finance vertical. As you know, in the equipment finance vertical, we are lending against New equipment, specific equipment, we have an asset that's tangible that we can liquidate if we needed to in a distressed situation. So when you think about us and you think about space, keep that in mind.
Ron: Yes. This is Ron <unk> Chief Credit Officer.
Ron: I think it's company specific Paul I don't think Theres anything.
Industry wide that we're concerned with this as a company as you alluded to it was a small venture debt term loan situation.
Ron: Bulk probably shouldnt say the bulk a large part of our space.
Ron: Portfolio.
Ron: Related to our equipment finance vertical.
Ron: As you know in the equipment finance vertical we are lending against <unk>.
Ron: New equipment specific equipment, we have an asset thats tangible that we can liquidate if we needed to in a distressed situation. So when you think about US and you think about space keep that in mind again space perspective, our loan to them did not fall into that category.
Ron Kundich: Again, space perspective, our loan to them did not fall into that category. It was, as you alluded to, a small loan, venture term debt. The company is still attempting to raise some capital, so we're monitoring it closely.
Ron: As you alluded to a small loan venture termed ad com.
Ron: Is is still attempting to raise some capital so we're monitoring it closely.
Ron: I appreciate it that's all for me. Thank you.
Paul Johnson: That's all from me.
Unknown Executive: Thank you.
Unknown Executive: Thanks.
Paul Johnson: Thanks, Paul.
Christopher Nolan: We'll take our next question from Christopher Nolan with... Thelman. Please go ahead, your line is open.
Speaker Change: We will take our next question from Christopher Nolan with Ladenburg.
Paul Johnson: Please go ahead your line is open.
Christopher Nolan: Hey, guys.
Kyle Brown: Kyle, what are you targeting for the EPS contribution from these outside RIA entities for 2025?
Speaker Change: What are you targeting for the Contra EPS contribution from these outside.
Christopher Nolan: Entities for 2025.
Michael Testa: Hey, Chris, it's Mike. As we're going through our AOP and our model for 2025, you'd see immediately we've had expense allocations, reimbursement for expenses, they get pushed down to the RIA. We haven't given any forward-looking information on any dividends, but we do anticipate in 2025, as well as expense allocation, you'll see dividends coming back up from the RIA from those fees and income Managed under the RA. Yeah, it's gonna be it's a big part of our future. You know, I'd say the we have two, two accounts we're managing, we're working on others. you know regulators don't move as fast as we do and so we are kind of poised and ready to execute and you know we're looking at this year is more of execution of the RIA and then it really started building.
Hey, Chris This is Mike.
Christopher Nolan: Going through our <unk> in our.
Our model for 2025, you'd see immediately we've had.
Christopher Nolan: Expense allocations.
Christopher Nolan: Bruce meant for expenses, they get pushed down to the RIAA.
Christopher Nolan: We haven't given any forward looking information on any dividend, but we do anticipate in 2025 as well as expense allocation youll see dividends coming back up from the RIAA from those fees and income.
Christopher Nolan: Under the <unk>.
Christopher Nolan: Yes, it's going to be it's a big part of our future.
Christopher Nolan: We know too.
Christopher Nolan: Two accounts, we're managing we're working on others.
Christopher Nolan: Regulators don't move as fast as we do so.
Christopher Nolan: We are kind of poised and ready to execute and we're looking at this year is more of an execution of the RNA.
Christopher Nolan: And then really start building.
Christopher Nolan: Got you second question.
Christopher Nolan: Gotcha.
Christopher Nolan: Second question. Um...
Christopher Nolan: The Trump administration is making make America healthy again I focus.
Kyle Brown: The Trump administration is making make America healthy again. How does everything happening in that space affect your life? We think about that. We obviously think about that. You know, and we don't see any, any immediate impact. We don't do a ton of bio or pharma. It's just not what we focus on primarily. So we're focused on primarily med device companies at scale, post FDA approved products. I mean, that's, that's primarily where we focus. And so far, we just don't see a lot of exposure there.
Christopher Nolan: How does everything happening in that space affect your life science exposure.
Christopher Nolan: We think about that we obviously think about that.
Christopher Nolan: And we don't see any immediate impact we don't do a ton of bio pharma. It's just not what we focus on primarily so we're focused on primarily med device companies at scale post FDA approved products I mean, that's that's primarily where we focus and so far we just don't see a lot of exposure there.
Speaker Change: Great final question on the date ATM with this before unsecured notes.
Christopher Nolan: Great.
Christopher Nolan: Final question. On the date ATM, would this be for unsecured notes? That's right, Chris. We have two debt issuances from the past year, trading at TRINI and TRINZ that are eligible for that debt ATM. Okay, and so the general idea would be utilize the facility less, but the ATM is sort of an alternative to the facility. Yeah, I mean, we're going to look at all options, you know, based on what makes financial sense. And, you know, the ATM program for the debt is the same as the equity, it's, it's efficient, we can raise it over time, it's at the prevailing price of the debt at the time.
Chris: That's right, Chris we have two debt issuances from past year.
Speaker Change: Trading at tier Ini T Ryan that.
Chris: That are eligible for that debt ATM program.
Chris: And so the general idea would be utilize the facility less but the <unk> alternative to the facility right.
Chris: Yes, I mean, we're going to look at all options.
Chris: Based on what makes financial sense and.
Chris: The ATM program for the debt is the same as the equity. It is efficient we can raise it over time is that the prevailing price of the debt at the time so the prevailing.
Kyle Brown: So the prevailing falling yield, we'll measure that against, you know, all the other market activities, or secured debt that we have.
Chris: All in yield will measure that against all the other market activities.
Secured debt that we have.
Christopher Nolan: Okay, that's it for me, thanks guys, good quarter. Thanks, Chris.
Chris: Okay. That's it from me thanks, guys good quarter.
Speaker Change: Thanks, Chris.
Chris: Okay.
Unknown Executive: And there are no further questions on the line at this time.
Speaker Change: And there are no further questions on the line at this time I will now turn the call back to CEO, Kyle Brown for any closing remarks.
Kyle Brown: I will now turn the call back to the CEO, Kyle Brown, for any closing remarks. Well, we'd like to thank everybody for participating in our call today. We appreciate your interest and investment in Trinity Capital, and we look forward to updating you on Q1 results during our next earnings call on May 7th. Have a great rest of your day. Thanks.
Speaker Change: Well, we'd like to thank everybody for participating in our call today. We appreciate your interest and investment in training to capital and we look forward to updating you on Q1 results. During our next earnings call in May have a great rest of your day.
Speaker Change: This does conclude today's program. Thank you for your participation and you may now disconnect.
Unknown Executive: This does conclude today's program. Thank you for your participation, and you may now Yeah.
Speaker Change: Okay.
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