Q1 2025 Trinity Capital Inc Earnings Call
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Katie: Good morning. My name is Katie and I'll be your conference operator today. At this time, I would like to welcome everyone to Trinity Capital's first quarter, 2025 earnings conference call.
Katie: All participants have been placed in a listen-only mode, and the floor will be open for questions following the presentation. 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 first quarter of 2025. Today our speakers are Kyle Brown, Chief Executive Officer, Michael Testa, Chief Financial Officer, and Jerry Harder, Chief Operating Officer.
Speaker Change: Also joining us for the Q&A portion of the call are Ron Kundich, Chief Credit Officer and Sarah Stanton, General Counsel and Chief Compliance Officer.
Speaker Change: 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.
Speaker Change: Because four-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. Now please allow me to turn the call over to the CEO of Trinity Capital, Kyle Brown.
Thank you, Dad, and thanks to everyone for joining us today.
Kyle Brown: Before addressing the macro environment, we wanted to share some quick highlights from a solid Q1 for Trinity Capital.
Kyle Brown: We delivered $32.4 million in that investment income, a 29% increase versus Q1 of last year.
Our net asset value grew to a record $833 million.
Kyle Brown: Platform AUM, increased to more than $2.1 billion. Our credit quality remains strong, with not a cruel, staying consistent, and representing less than 1% of the portfolio at fair value.
Kyle Brown: And Trinity paid a first quarter cash dividend of 51 cents per share representing our 21st consecutive quarter of a consistent or increased regular dividend.
Kyle Brown: Before we dive deeper into Q1 performance, we do want to address macroeconomic and geopolitical conditions that are currently at play.
Kyle Brown: We've been closely monitoring the recent tariff announcements and have been discussions with all of our portfolio companies to determine the potential impact on their operational performance.
Kyle Brown: Credit qualities of the utmost importance to us, particularly during periods of market volatility. The portfolio management team is actively engaged with every single one of our portfolio companies to analyze the effects of tariffs, quantify the potential impact across our all risk factors and safeguard the health of our investments.
Kyle Brown: In overwhelming majority of our portfolio companies are domestically headquartered and have very limited exposure to imported goods or international sales As such, most do not expect a near-term impact operations as a direct result of terrorists imposed by the United States or other countries The United States, the United States, the United States, the United States,
Kyle Brown: Jerry will address the portfolio in greater detail during his portion to call.
Kyle Brown: Every event of dollar matters to us, and we have demonstrated in previous periods of market uncertainty that we are committed to finding positive outcomes for our partners and most importantly our shareholders.
Kyle Brown: In terms of debt servicing during this volatile time, almost all of our companies are privately funded by venture capital firms or private equity groups. That have dried powder.
Kyle Brown: Additionally, we have not seen an unusual uptick in requests for amendments or delayed payments.
Kyle Brown: Times of volatility can create opportunities as well. As we experience during the COVID years when we are able to turn macro trials in the great pathways of growth for us, we see this as a moment in time to be thoughtfully opportunistic as well.
Kyle Brown: The top of our funnel is expanding and our underwriting process remains strict as we continue to mature as the best in class direct lender to growth oriented businesses.
Kyle Brown: We are building an after management business that is resilient even during the ads and flows market.
R5, complimentary business verticals, sponsor finance, equipment finance
Kyle Brown: Tech lending, asset back lending and life sciences, position us to have a diversified portfolio that can be durable, regardless of macro conditions.
Kyle Brown: As we continue to expand into the future, we want to emphasize the internally managed structure that we operate under.
Kyle Brown: As an internally managed BDC, our employees, management, the board, we all alone the same shares as our investors.
Kyle Brown: This structure creates great alignment with our shareholders as we strive to deliver growing returns for our investors.
Kyle Brown: Additionally, all the fees and incentives that come with being an asset manager under the RIA that we own.
Kyle Brown: Float or Shareholders, which drives more income, increases our valuation and grows the platform.
Kyle Brown: All along we said that we're going to out earn the dividend and grow the BBC and we continue to do just that.
has continued growth as possible for a few reasons.
Kyle Brown: We are positioned well in the private credit space, focused on late stage VC into the lower middle market.
Kyle Brown: With regard to our capitalization, we are building a foundation for a managed account business, offering high net worth and institutional investors access to our growing direct lending business, which offers Trinity Capital new income streams.
Kyle Brown: From a talent attraction and retention standpoint, we are hyper focused on culture attracting the best The only industry as we continue this growth trajectory
Kyle Brown: Underpinning our culture, our six pillars, humility, trust, integrity, uncommon care, continuous learning and an entrepreneurial spirit.
Kyle Brown: and three core principles are foundational to us, exhibiting uncommon care for our employees, customers and stakeholders.
Kyle Brown: serving our clients by being partners rather than just money and providing outsider turns for our shareholders. We look forward to continuing to create a company that our people, partners and shareholders are proud of.
Kyle Brown: We're experiencing tremendous momentum, right now as we continue to grow a best in class platform.
Kyle Brown: Signalling confidence in our platform, subsequent to quarter end, Moody's assigned us an investment grade rating, attributable to our growing performance record since inception.
Kyle Brown: Relatively low reliance on secured funding sources and our strong capitalization and liquidity.
Kyle Brown: This rating from one of the most respected agencies will open up access to cheaper capital and a new pool of investors for us.
Kyle Brown: Turning to our platform performance, we maintain a strong investment pipeline including $623 million in unfunded commitments as of the end of Q1, leaving us well positioned for continued portfolio growth in 2025.
Kyle Brown: More than 90% of these unfunded commitments are subject to ongoing diligence and approval by our investment committee.
Kyle Brown: During the quarter, we increased our NAF through net investment income that exceeded our dividend and creative ATM offerings.
Kyle Brown: The decrease in now per share was mostly driven by the impact of the early retirement of the convertible notes in February .
Kyle Brown: which Michael will address in further detail later in the call. This debt extinguishment removes the overhang to our investors, and we firmly believe this payoff will be a net positive for our shareholders in the coming quarters.
Kyle 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 that manage our inbound opportunities and active portfolio companies.
Kyle Brown: We are very selective and follow a rigorous diligence process. We are only a small percentage of our deals reached the underwriting stage.
Kyle Brown: This methodical approach mitigates risk and positions us to excel in all macroeconomic cycles.
Kyle Brown: And with that, I'll turn the call over to our CFO , Michael Testa, to discuss our finance results in more detail. Michael?
Thank you, Kyle.
Michael Testa: In the first quarter we achieved total investment income of $65 million, a 30% increase over the same period in 2024.
Michael Testa: Our effective yield on a profiler for Q1 was once again among the best in the industry at 15.3% and our core yield, which excludes the income, remains strong at 14.1%.
Michael Testa: The decline in our effective yield is quarter, was primarily driven by lower fee income from early debt repayments and a Q1 early repayments will well below our historical average.
Michael Testa: Our core yield reflects the full quarter impact of 50 basis point set rate cuts from the prior quarter.
None investment income for the first quarter was $32.4 million.
Michael Testa: or 52 cents per basic share compared to $25.2 million, or 54 cents per basic share in the same period of the prior year.
Michael Testa: Our investment income per share represents 102% coverage of our quarterly distribution.
Michael Testa: Our estimated undistributed taxable income is approximately $67 million or $1.04 per share.
Michael Testa: We continue to reinvest this capital for the benefit of our investors while maintaining a consistent and meaningful distribution.
Michael Testa: Our platform continues to generate strong returns for our BDC shareholders, with ROAE of 15.5% based on net investment income over average equity.
Michael Testa: and ROAA of 7.1% based on net investment income over average toll assets.
As of March 31st, 2025, our NAV was $833 million.
up from $823 million as of December 31st, 2024.
Michael Testa: and our core spotting nap per share was $13.5 at the end of 2.1, a decrease from $13.35 at the end as of December 31, 2024.
Speaker Change: As Kyle explained, the decrease in net assets per share was propelled due to the repayment of
Speaker Change: The orders of our Converbal Notes elected to exercise their conversion rate on the $50 million of notes during Q1.
Speaker Change: Error option, we elected to use cash to retire the notes and avoid the impact of further delusion by issuing shares of our common stock.
Speaker Change: These notes were fully liquidated with available proceeds received from early debt repayments, equity gains in the use of a credit facility.
Speaker Change: While the Converbal Note Repayment caused an impact of map per share in the first quarter, the early conversion of these dead obligations which were issued prior to our IPO reflect a strong performance of the Trinity platform will be a long-term benefit to Trinity shareholders.
Speaker Change: Additionally, $152.5 million of our 2025 notes matured in January , and we're repaid and full. As a result of these data statements, we have no further dead obligations to until August
Speaker Change: As Kyle mentioned earlier, received a BAA-3 Investment Grade Rating with a stable
Speaker Change: This rating is further underwriting track record, strong performance, and our crease, gale, and business diversification
Speaker Change: The recent payoff of past debt coupled with the ability to access the capital of markets, positions as effectively to capitalize on new opportunities in the coming quarters
Speaker Change: During the quarter, we enhance liquidity by raising $31 million of proceeds from the equity ATM program.
Speaker Change: and Average Premium of Nav of 17% and we raised $4 million of gross proceeds from our net ATM program. We'll all add a premium to par.
Speaker Change: We also continue to realize the benefits of our co-investment vehicles, which in Q1 provide approximately $2.2 million or $3 cents per share of incremental net investment income benefit to the BDC.
During Q1, we syndicate $35 million to these vehicles.
Speaker Change: As of March 31, 2025, we had over 320 million dollars of assets on their management in these private vehicles, providing incremental capital for growth and a creative return to our shareholders.
Speaker Change: Our net leverage ratio, which represents principled debt outstanding, was cash on hand, which 1.15 times as of March 31, 2025.
Speaker Change: Our strong liquidity position with diverse capital sources both from capital raised by the BBC and through our wholly owned R.A. subsidiary provides attorney with the flexibility to manage a strong pipeline and opportunistic in the marketplace.
Michael Testa: I'll now turn the call over to our COO Jerry Harder to discuss our portfolio performance and platform in more detail, Jerry. Thank you, Michael. I'd like to begin by expanding on Kyle's remarks regarding the impact of tariffs on both our portfolio companies and our business processes.
Jerry Harder: Over the past several weeks, our portfolio management teams have reached out to all of our portfolio companies to better understand the potential impact of tariffs on their business models and financial projections.
Jerry Harder: Based on these discussions, we believe that our portfolio has very limited direct exposure to the impact of tariffs and we are remaining in close contact with our portfolio companies as they navigate through the economic impact of the evolving trade policies.
Jerry Harder: We have also added an additional process step to our underwriting flow to ensure that we have a clear understanding of potential direct or indirect tariff risks before any funding is released to either new or existing portfolio companies.
Jerry Harder: As a reminder, a vast majority of our unfunded commitments are subject to ongoing diligence and approval by our investment committee.
Jerry Harder: We will continue to follow these additional processes related to tariffs for as long as necessary to ensure that we are deploying our capital in a prudent fashion.
Jerry Harder: Turning back to the general composition of the portfolio at the end of the first quarter on a cost basis.
Our total portfolio consisted of approximately 75% secured loans.
Jerry Harder: 19% equipment financing, 4% equity, and 2% warrants. The composition of our portfolio continues to be diversified across investment type, transaction size, industry, and geography.
Jerry Harder: Our portfolio is segmented across 22 industry categories with our largest industry exposure, finance and insurance, representing 16.9% of the portfolio at cost.
Jerry Harder: This portion of the portfolio is spread across 16 borrowers and includes both turn loans and asset to the back warehouse facilities.
Jerry Harder: Our Psychic Largest Industry Exposure is Medical Devices representing 12.3% of our portfolio at cost and spread across 11 borrowers.
Jerry Harder: Across our five business verticals, the approximate breakdown of our fundings in Q1 was as follows.
38% to equipment financing.
29% to life sciences
18% to sponsor finance [inaudible]
Jerry Harder: As of the end of key one, our largest portfolio company debt exposure represents 4% of our debt portfolio and 3.7% of our total portfolio on a cost basis.
Jerry Harder: Our 10 largest debt investments collectively represent 23.4% of our total portfolio on a cost basis.
Now turning our attention to credit.
Jerry Harder: The credit quality of our portfolio remains consistent quarter over quarter with approximately 99.1% of our portfolio performing on a fair value basis.
Jerry Harder: Our average internal credit rating for the first quarter stood at 2.9, based on our 1-5 rating system, with five indicating very strong performance.
Jerry Harder: This rating is consistent with the average credit rating in each of the last three quarters and is attributable to strong originations of new credits within the first quarter and excellent work by our portfolio management team with existing portfolio companies.
Jerry Harder: As a percentage of the debt portfolio on a cost basis, credits within the lowest two tiers improved slightly as compared to Q4.
Thank you. Bye.
Jerry Harder: quarter of a quarter, the number of portfolio companies on not a cruel remain consistent at five.
Jerry Harder: During Q1, one additional portfolio was added to the non-accrual list while one existing non-accrual was realized in the corner.
Jerry Harder: Subsequent to quarter-end, an additional non-accural credit was realized at the Q1 fair value.
Jerry Harder: At the end of Q1, our non-acrual credits had a total fair value of approximately $15.2 million representing 0.9% of the total debt portfolio. A very slight increase has compared to the
Jerry Harder: A quarter and 78% of our total principle outstanding was backed by first position leans on enterprise, equipment or both.
Jerry Harder: For our financing's covered under all asset means, the weighted average loan to value as of the end of Q1 was 23%.
Jerry Harder: While 53% of our portfolio companies have a loan to value of less than 15%
Jerry Harder: 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 where our loan may not be in first position.
Jerry Harder: In Q1, our portfolio company is collectively raised more than $900 million of equity. Our portfolio is strong and continues to be able to secure funding even in a challenging market.
Jerry Harder: In closing, we want to emphasize that our credit quality and portfolio management are of the utmost importance to Trinity. One of Trinity 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.
Jerry Harder: Before we conclude our call, we would like to open the line for questions. Operator?
Speaker Change: Thank you at this time. If you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question. We'll pause for just a moment to allow questions to queue.
Speaker Change: Thank you. Our first question will come from Casey Alexander with Compass Point. Your line is open.
Casey Alexander: Yeah, I'm just kind of hoping you can put me in the right direction here. I mean, the fourth quarter had a 3% increase in portfolio investments,
Casey Alexander: and then you were a net-reginator again in this quarter and yet interesting come dropped about 5% quarter over quarter. Can you give me some color and point me in the right direction for me to help me understand why it would drop quite that much?
Hey, Casey.
Speaker Change: So, a couple things. One, you know, we saw the effects of that rate cut last year, kind of moved through the portfolio. I think we're actually in a really great position going forward as it relates to rate cuts and having the majority of our portfolio.
Speaker Change: We're really already at kind of base floor rates so you know we feel good about that but there was some effects [inaudible]
Speaker Change: of that rate cut. We also saw a pretty strong decrease in payoffs.
Speaker Change: and that resulted in a few cents of less of earnings that we typically see in just pull-forward fees. So those two things right there, that was the majority of the decrease.
guy.
Speaker Change: But a fast follow on to that. How do you see, you know, generally when you get into a more uncertain environment?
Speaker Change: Pay off slow down even more. Would that be your expectation that we would see a slow down and pay off at least in 2Q and 2Q and 3Q while the market is digesting the new economic format?
Speaker Change: Yeah, you know what, in Q1, I think that's a lot of the delays and are kind of regular payoffs, they were pushed to this quarter, subsequent to quarter end, we've already received
Speaker Change: Our normal pay-offs that we see in a quarter. So you'll see that bounce back.
Speaker Change: and we also have other payoffs pending. So, you know, we'll see how that plays out. We can't predict how that will play out, but already we've seen normal payoffs this quarter.
Speaker Change: which will obviously help with earnings. That's great. That's good information. Thank you, Kyle. My last question is that medical devices is a pretty substantial portion of the portfolio.
and in talking to people...
Speaker Change: You know, what I've been told is that a large percentage of the components that goes into medical devices actually does come from Asia.
Speaker Change: Can you comment what your investigation into tariff impacts found specifically relative to medical devices?
KKC, this is Ron Kundich, Shum,
Good question as Jerry alluded to in his prepared remarks.
We took an extremely deep dive into the portfolio.
all across the board.
Speaker Change: I can report that our life science portfolio received significant feedback from their companies, even quantified feedback from many companies around the impact of tariffs and specific to your question, the impact on tariffs with regard to their supply chain.
and there was no alarming findings.
Speaker Change: I hesitate to give you any specifics here on this call, but it was…
Speaker Change: Very good. I classify our tariff impact within the portfolio as well, quote, unquote low, as Jerry alluded to in his prepared remarks so.
ongoing review, ongoing analysis.
Thank you.
Casey Alexander: Well, Jerry, the only thing I'd add, while I've no doubt that what you say is true Casey with respect to the components, you know, medical devices in generally tend to be higher margin devices where the subcomponent costs.
Casey Alexander: or just not a big part of, you know, the overall labor burden and material product costs. So, you know, that's why I think the quantified impact for the med devices tends to be low.
Speaker Change: All right. Thank you for taking my questions. Appreciate it. Thank you.
Doug Harder: Thank you. Our next question comes from Doug Harter with UBS. Your line is open.
This is Cory Johnson , one for Doug.
Speaker Change: So this quarter, excuse me sorry, this quarter commitments were at you know slow space that they've been in a while. Can you talk just a little bit about what was the high matter that timing, change even the market, any business decisions that turn or anything?
Speaker Change: So, I want to make sure I heard you right, or did you reference commitments, funny, funny commitments? Yeah.
Speaker Change: So listen, we took a page out of our COVID playbook and when you see large kind of macro economic conditions deteriorate or change it's really important for us to
Speaker Change: Focus on our portfolio first, kind of take a defensive stance [inaudible]
Speaker Change: Understand where the wind is blowing and how what's going on is going to impact businesses and then really invest into companies that are benefiting from it.
Speaker Change: We did just that. We slowed some of our originations efforts.
Speaker Change: We had to make sure that we put a new filter in place so that any deal that we were looking at funding, any new deal in the pipeline, we understood the effects of tariffs and whether or not we wanted to fund that company we had to apply sensitization from a credit standpoint to each of those companies.
Speaker Change: to make sure that they still have the, you know, cash life or EBITDA or cash flow that we thought they had. And so what that meant was us.
Speaker Change: Slowing down and funding a little bit less in Q1. Now those deals can go away. The pipeline is robust.
Speaker Change: It's growing. We have a significant deal flow right now and it's led us into Q2 with an understanding of
Speaker Change: who is benefiting you from it, and who is not, and giving us...
Speaker Change: You know, a really interesting point to invest in these companies going forward. So anyway, commitments are down simply by choice and we're still monitoring what's going on, but that's not a trend.
Speaker Change: and so you would say or would you say now that you've kind of been able to assess things and you feel like a bit more comfortable and that commitments will go back up in 2Q or are you still playing it a little bit more defensively?
that are benefiting from this.
Speaker Change: We have seen within Q1 and carrying in the Q2 pretty significant uptick in CAPEX spin for companies that manufacture in the U.S.
Speaker Change: Our equipment business is poised to benefit from that. You saw that with nearly a third of our deployments in Q1 or equipment over a third.
Speaker Change: and I don't think that's going to slow down. So that's a great differentiator for us as a lender. We can look at that and say great. We're poised to really benefit from this if it continues.
Speaker Change: I think manufacturing in the US is a good place to be, and we're really focused on it. I'm not going [inaudible]
Speaker Change: You know, it's gonna be two or three times what we did in Q1, but the pipeline is very strong right now.
Gallup, thank you.
Speaker Change: Thank you. Our next question comes from Christopher Nolan with Leidenberg Thalman. Your line is open. Hey, guys. The stock, the common stock is yielding 14.5% or so, which is pretty close to what your core yield is. How does that affect your consideration of raising additional common equity?
Mike: Hey Chris, it's Mike here. I appreciate the question. Yeah, it's something we're modeling. You know, we look at we're only going to raise capital.
Speaker Change: when it creates our investors. So, you know, we raised about 31 million this quarter on
Speaker Change: Again, that's efficient way of raising capital. It's lower than we've done in the past, but we're looking at all the different levers from liquidity on balance sheet to off balance sheet returns for deploying on balance sheet versus indicating. [inaudible]
Speaker Change: in raising more capital and the benefit, the creative benefits we get from those fundings being in the RAA, so.
Speaker Change: I appreciate the modeling exercise in the math for raising capital on balance sheet versus how I trickle down and leverage a number of moving parts to the benefit of our investors.
Great. And then, really into that, I guess the um...
Speaker Change: The new vehicle that you guys are raising, the separate match funds would.
Take a bigger here.
Speaker Change: Roll going forward. How do you guys allocate deals between those separate magic counts and the BDC?
Speaker Change: So, you know, we think about the managed accounts as just additional liquidity, right? And so, you kind of just touched out our goal. Our overall encompassing goal is to grow.
Speaker Change: Earnings grow the dividend. So earn it out, earn it and grow up. That's our goal. We've sent it over and over again. Our managed accounts give us.
Speaker Change: The ability to generate new income. So there is a quarterly shuffle that happens and making sure that we...
Speaker Change: We do that, and that in some quarters might mean we need to raise some additional equity, common equity, that in right now and frankly in the rest of this year a lot of that is focused on brazing.
Speaker Change: off balance sheet, private funds, and generating new income there.
Speaker Change: And so we meet twice a week. We look at the model. We try to make sure that we are keeping leverage around that kind of one-to-one mark and over time, hoping to decrease that, giving ourselves more liquidity while also increasing earnings.
Speaker Change: The answer is it's not an exact answer because the output just has to be EPS is stable and growing.
Speaker Change: Great, final question. What do you think the impact will be on the fair valuation of your portfolio company investments? Will this increase the base rate, the risk free rate?
Speaker Change: and then on top of that, you have the risk premiums. Any color on that be great.
Speaker Change: on a periodic basis. How does the terrorist impact the methodology and does it impact, does it
and thus lower your fair value.
Speaker Change: Yeah, I think, certainly Chris, in valuing the equity portion of our portfolio, right, that's going to be a function of market multiples as of June 30th when the marks are affected, right? So, to the extent that trade policies are affecting the markets where portfolio companies.
Speaker Change: You know, find themselves, then that could certainly affect those marks.
Speaker Change: You know, with respect to the debt portfolio, if we've got performing debt instruments.
Speaker Change: You know, we're going to value that with a discounted cash flow, and I think based on what we know today, I would say it would be unlikely that we would across the board add to the discount rate.
Speaker Change: as we value that portfolio, however, and the record is two months away and we can't say what may or may not happen, but based on what we know today, we don't think we would need to make such an encompassing portfolio wide adjustment.
Okay, thanks, Jerry. Okay, see you guys.
Speaker Change: Thank you. Our next question comes from Paul Johnson with KBW. Your line is open.
Yeah, good afternoon. Thanks for taking my question.
Thank you. Bye. Bye.
Um, um,
Speaker Change: Lower Deals in the portfolio of the last several quarters. Do you think that's reflective?
Kind of your push into like a broader...
Speaker Change: Grower, Origination Burials, including some sponsor back deals, or there are other things in there, like a lower activity that you might think are a bigger factor.
Speaker Change: Yeah, we haven't seen a lot of the compression. I think across all five verticals combined that I think other BDCs and lenders generally have experienced the majority of that is
The effects of, you know, the rates changing. [inaudible]
Speaker Change: and then us growing our more upstream and more mature sponsor finance business which
Speaker Change: I think investors should be pretty excited about, right? These are more mature companies, less volatility, they really balance out the portfolio. And so, you know, there's, there's, there's, it's pretty manoeuvre but there is some. [inaudible]
and C. I would 100% trade the...
The diversification and de-risking of the portfolio.
Speaker Change: for the small change in yield, right? And so what this doesn't take into account though is our hundred-plus warrant positions.
Speaker Change: Right? That are outstanding that we can't necessarily tell you which one is going to work and win, but those are all options that we have out there right now that can provide some, you know, and have historically provided.
Speaker Change: Upside that covers any kind of losses that we might expect and then provide additional upside. So those are out there as well.
Thanks, appreciate that, thanks for the...
Speaker Change: Fuller there. And then I can't, I may have missed it on the call, but I was just wondering if you could remind us as how much of the portfolio is sort of first lean about any sort of additional lender or bank.
Head of you in the room.
Speaker Change: Paul, this is Ron, again, 78% of the portfolio is first lane, not encumbered by any senior debt. That's a pretty direct answer to your specific question. Happy to.
Speaker Change: You know, elaborate if you have any follow ups. Yeah, me in the second lean or sub or or meds layers that we take there. Frankly, those are the more mature companies.
You know, we take the position of…
Speaker Change: You know, partnering with a bank provides a lower blended cost to capital for the company and we would be more than willing to be the senior facility. But that lower blended cost to capital ends up putting the company in a better position so when we do it.
Speaker Change: That typically just means that's a more mature company, later stage, better credit quality. And so we just rarely see issues with those loans.
and any of your borrowers, that's all thanks.
Speaker Change: No, we've not seen an uptick at all with companies requesting capital.
Speaker Change: or looking for, you know, additional draws above and beyond. And you got to remember, we...
Speaker Change: If we don't, in many cases, we actually have milestones in place, so a company can't just...
Speaker Change: Call us up and ask for my money. They will have to have achieved something.
Speaker Change: or hit some milestone to access additional capital. But then on the majority, the vast majority, I want to say 90% of the portfolio are outstanding commitments. We have, we have to underwrite the deal and approve it before we release capital and it's at our discretion. Thank you.
Speaker Change: Thank you. Once again, if you would like to ask a question, please press star one on your telephone keypad.
Speaker Change: Our next question comes from Sean Paul Adams with the Riley Securities. Your line is open.
Speaker Change: Good afternoon. You guys have a pretty good track record of this, a stable dividend, congrats on 21 quarters without a cut. But, you know, this quarter's NII kind of had a narrow margin, you know, versus the dividend payout. How committed are you guys when it comes to, you know, the dividend or dividend increases and do you guys currently have any plans to build more spillover?
Speaker Change: Good questions. So, you know, a couple of things. One, you know, the keeping for BDCs, keeping the dividend and not decreasing it, that is...
Speaker Change: That's BDC 101 right there, right? So we are we are very focused on keeping the dividend and growing the dividend. Our board will meet and decide on whether to keep it or increase it.
Speaker Change: and our goal internally is to cover the dividend and increase that coverage over time.
Speaker Change: We had less coverage in this corner for the reasons we've already stated.
Speaker Change: Payoffs alone account for three to four cents of regular earnings per share that we just didn't see.
Speaker Change: this quarter. There were a few other things that I just, you know,
Speaker Change: that we're just specific to this quarter. So, you know, our goal is to build it and grow it. I think, you know, generally speaking, right now if we're going to over earn the dividend and we're still generating a 14% dividend yield, what does it, we're clearly not being...
Speaker Change: Our stock is not reflecting its true value in that scenario right there. So increasing the dividends doesn't make a lot of sense because we're not getting a lot of credit for that. Let's hope.
Speaker Change: You know, building nav and focusing on building nav has been what we've done now for consecutive quarters. We'll probably continue doing that. But the board will meet quarterly to decide whether or not we want to.
Speaker Change: Build that spillover. And then at some point, of course, we have to distribute out 90 plus percent of earnings. So, you know, if we are successful doing what I just said, we're going to be forced to send out special dividends at some point.
Speaker Change: to the benefit of shareholders. So that's a problem we really want to have.
Speaker Change: Got it. Got it. Thank you for the color. And you know, when you're looking at forward quarters, you know, if there is a material crunch on the earnings front, you know, how are you looking at the balance of the dividend distribution versus the nav? [inaudible]
We feel really good about covering our dividend.
Speaker Change: and, you know, all right, well, that was easier than I thought, but we feel really good about covering the dividends.
Thank you.
Sounds good. I appreciate the color. You bet.
Speaker Change: Thank you. It appears we have no further questions at this time. I'll now turn the call back over to CEO Kyle Brown for closing remarks.
Kyle Brown: All right, well, we'd like to thank everybody for participating in our call today. We appreciate your interest and investment in Trinity Capital. We look forward to updating you on our second quarter results at our earnings call in August 6th. Have a great rest of your day. Thanks. Bye.