TRIN - Earnings call transcript Q4 2024

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Operator

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. [Operator's Instructions] It is now my pleasure to turn the call over to Ben Malcolmson, Head of Investor Relations for Trinity Capital.

Ben Malcolmson

Thank you, and welcome to Trinity Capital's Earnings Conference Call for the Full Year and Fourth Quarter of 2024. Kyle and Executive Officer. Gerry are Chief Michael speakers Officer; Financial Harder, our Brown, Officer; Chief Testa, Today, Chief Operating joining Officer. Q&A Ron the us the Also is call portion Kundich, of Credit Chief for accessed Trinity's financial earlier Investor released results website ir.trinitycap.com. on can at today Relations our and were be

to you and to filings encourage I update to Because statements certain our under securities certain everyone laws. statements risks unknown be factors. made SEC we and we begin, statements. assumes to remind refer may most recent or forward-looking Before for risk during statements deemed known uncertainties, involve any forward-looking would like forward-looking responsibility that this call on information no Trinity Capital federal obligation

over Kyle Capital's Now please to allow Trinity me Brown. call CEO, to the turn

Kyle Brown

finished provides the team income Trinity's our lending X the quarter. of of diverse year Europe incremental BDC co-investment complementary vehicle, an and lending results. everyone, was launch of $XXX from the first our record the strategies We million and RIA's and with the of us today. Ben, per share, fundings, year Trinity London-based establishment and you, our with asset-backed and platform to capitalizes $X.X well, Major business income verticals, net expansion record perform a billion investment a joining thanks, business the official into we Capital of of XXXX especially for finance for verticals, achieved sponsor strong milestones continue as or excellent yet $X.XX us an giving include launch shareholders. further Thank fourth which XXXX our to

growing in million, of $XXX of versus Net QX value last XX% X% million delivered a to Here are some increase from highlights net consistent Platform consecutive a quarter up $XXX representing a of grew investment asset reached a from $X.XX year. billion, income prior million, We Trinity $XX dividend QX. exceeding the $X cash quarter share, our dividend. by a fourth XXth or and record AUM of quarter. paid per

perform fourth well, quarter, the to and verticals growth continued fueling During profitability. our X business

As a businesses. financing, lending leads their life scale we've comprised platform portfolio verticals focused of team equity-backed management own the private each tech and a asset-backed them into lending experienced and to grown have the originations, reminder, ability X sponsor on lending, These verticals: business finance equipment which sciences, efficiently. direct functions, credit gives that

company a these the you're out BDCs Capital assets opportunities. stock, third-party across when platform Our growth our externally the investment our by also management to various initiatives momentum, direct with generated that across our verticals at our different our an and company opportunity business invest level, a BDC of is business asset us managed makes capital. you're into a company investments buying business, manage from strategic have is We management the extraordinary to buying Trinity building highlighting commitment seek What into and our Trinity public buy lender. you to pool verticals. alongside and the to in diversified broadening addition balance asset management efficiencies first we're in alternative sheet expanding our scaling

strive internally an our Additionally, the management investors. investors. for creates XXX% structure our our and managed as BDC, as shares alignment same all Board as employees, shareholders own This we returns deliver our with growing to

the our million and ongoing vast by $XXX ultimately portfolio are continued the reminder, diligence -- success And as positioned us maintain management subject We strong growth. deployment. a underwriting of investment these well of leaving term. unfunded long to investment for committee. approval Credit commitments, our to strong unfunded and Turning pipeline, including over majority determine commitments a

credit among manage portfolio inbound our opportunities collaboration of and structure unique a and companies. portfolio active to have our We originations, teams

customers for our our by our of systems rigorous being Underpinning our money diligence a in platform. small cycles. our and core employees, clients and than excel and improving approach our percentage care direct very Continuous underwriting create macroeconomic This serving fundamental mitigates us all rather follow risk culture, that stakeholders, to process shareholders. providing to a outsized stage. to enabling are selective X to positions the We in our partners our lending to and just where teams exhibiting building uncommon further our for a us key deals is best-in-class investment our are returns and reached diversify process growth, methodical principles only are investments

continuing as Michael and we Testa, our As capitalize detail. that, future XXXX grow discuss to And call our momentum forward results shareholders. on maximize excited to to the the to about for to with and more CFO, I'll Michael? in look we financial look ahead over our we're turn and beyond, value

Michael Testa

Kyle. over XX% increase In same achieved you, we quarter, of fourth a Thank the investment in total income $XX the record XXXX. million, period

XX.X% industry-leading $XX million $X.XX which Our of core Net quarter per the basic year. strong XX.X% effective the basic yield, million same industry-wide $X.XX for fourth yield remained was in compared or income, fee income and once share despite yield per QX compression. share on $XX excludes was investment again at the our prior or an for period portfolio the to

portfolio of within benefit from quarter's fundings equipment This income earnings vertical. and fee our early the payoffs increased financing experienced higher

quarterly distribution. investment per share income XXX% of net our Our coverage represents

$X.XX estimated share. $XX million Our per is income or taxable approximately undistributed

We meaningful of continue capital to reinvest maintaining our for investors distribution. a and this consistent benefit while the

investment average based to our income XX.X% average income X.X% investment shareholders Our of BDC platform of strong assets. for generate ROAE equity over on and total ROAA continues with over on net returns based net

net due per to income increase The the accretive from exceeding declared million, XXXX. and of XXXX. As XX, share at $XX.XX $XXX corresponding our from was offerings of September And of QX, the NAV the as NAV was $XX.XX ATM net primarily XX, $XXX of December end as per September million increase in XXXX, portfolio was share dividend. activity, up an XX, assets our investment

sale warrant positions. from and equity of we approximately gains the fourth net of During quarter, million, X realized $X.X primarily the

a on warrants we majority loans, science lending especially a in received tech of our the As verticals. and life reminder,

liquidity enhanced raising our $XXX.X XX of ATM across facility total our our and banks in During commitments of proceeds private sheet closing placement offering. a the credit upsizing million quarter, million the by we further syndicate diversified of from program, million $XXX strengthened and $XX balance debt gross

per benefits approximately BDC. We vehicle provided co-investment in subsidiary, also realize which million our continue incremental share the to in or our of of new investment to the RIA venture net income our joint QX and the $X.X $X.XX under

During QX, million these vehicles. we syndicated $XX to

incremental private XXXX, shareholders. $XXX returns than we for more of of management vehicles, assets and accretive our capital growth XX, providing As million under to had in December these

Our ratio, debt was of outstanding represents hand, net which X.XXx as XXXX. leverage principal on less XX, December cash

both a sources, and the strong opportunistic raised wholly through BDC capital to program, strong to position owned flexibility. launched from provides be Our capital with flexibility ATM our raising liquidity RIA in subsidiary which marketplace. provide pipeline and we the diverse manage by the end, debt quarter Trinity capital further Subsequent with a

As not issued additional date, debt of we this under any have this program.

our convertible proceeds of right to holder and elected Additionally, we all the we million, on to convertible under notes. their retired elected our These convertible debt gains dilution common liquidated debt use million and the $XXX to debt with conversion facility. notes issuing were of equity approximately available from credit avoid of retire of of $XX XXXX and our repayments, exercise fully received of note notes At use the the obligations option, outstanding of our further impact cash early stock. the shares our

the until obligations result extinguishments, impact have on share due these August XXXX. debt debt convertible approximately no further based we subsequent repayment be outstanding As the shares. of QX $X.XX the NAV the current will debt of We estimate a per from

these turn long-term and shareholders. to early obligations, Gerry call to to to quarter, which be strong platform platform detail. in performance our COO, were While Trinity more portfolio issued reflect the performance our of now Gerry? of our there to and is debt extinguishment a Harder, impact will an IPO, NAV the discuss the over first the the Trinity benefit prior in I'll

Gerald Harder

of our of Trinity with remain of business We type, Michael. quarter, growth end you, loans, fourth XX% to approximately X% of dedicated industry companies equipment last offer on our our at every while consisted evolving At size, with strategies to call, transaction verticals, portfolio ability of across companies. total Thank cycle. consistent to equity focus our investment composition diversify the diversification enhancing stage secured strengthen base X warrants. financings, the and solutions our our portfolio which across platform our supporting on customized earnings The a their has prior quarters and to remained X% growth-oriented executing cost continued client XX% geography. Since basis, and financing our

the exposure, across and cost. portfolio term asset-backed categories, industry is with is loans insurance, portfolio Our exposure across facilities. representing both of our finance XX industry and segmented XX.X% This warehouse spread largest includes borrowers and XX at

medical to and collectively up technology, basis. devices green Our sciences-related representing portfolio In the XX.X% next industries largest and concentrations industry our to a X.X% approximate life as XX% follows: life XX% cost X.X% X% of equipment cost, X portfolio made at X% aggregate, respectively. on total and of asset-backed fundings are went the financing, to our XX% verticals, sciences lending, Among QX business our of breakdown to lending. tech to in finance, sponsor

basis. our represents of a portfolio end total the our of exposure of of company debt X.X% our on X.X% portfolio largest debt As cost QX, and portfolio

on debt a largest basis. represent XX.X% XX collectively portfolio cost of our total Our investments

Now on our focus credit performing of approximately to turning portfolio our fair of our value credit. improved a quality with portfolio The XX.X% quarter-over-quarter basis.

X attributable as of strong internal of is performance. X X of fourth based companies the credit average Our rating originations stood with rating quarters with at within fourth existing last combination This system in the our on very credit the as credits quarter credit quarter. to a for the indicating upgrades rating portfolio well to X.X is to rating consistent X new average and strong each

and portfolio, from the fair At the lowest company, debt in percentage decrease tech credits a unchanged from value QX. $XX.X very by credits fair nonaccrual or liens added basis, our a portfolio within a XX% of of end X backed of on virtually from cost number our the within QX a approximately had of the basis. on nonaccrual remained value while improvement tiers As X.X% nonaccrual slight nonaccrual cost X, principal credit from first was lending a outstanding million, on Basket at decreased quarter. of with fully One total Quarter-over-quarter, portfolio remained million total portfolio fair the to realized approximately equipment both slight end, our a quarter both. total of $X representing QX, enterprise, was basis debt credits to At additional a value. One position Sun our removed at our cost QX. relative companies was on and the of QX nonaccrual was portfolio

demonstrate secure that liens, in may we in and portfolio's our portfolio end are $X.X importance these not emphasize collectively For utmost instances asset financings management In loan-to-value raised portfolio of market. full that QX, XX% healthy collectively overlevered and raised even as In than was billion XXXX. XX%, our XX% quality from have equity. year first not credit companies be QX $X.X the quality loan-to-value ability less covered Trinity. position while In companies the are our of funding of to generally to by these companies of in in want all the to debt our encouraging ever-changing weighted and our increase to the -- portfolio position. billion, of are to stats statistics our an XXXX, speak our loan a a These of companies closing, portfolio service average when a XX%

and is we members our for hallmarks staff our and Trinity's like resolutions partners. both always that investors shareholders, think and of our that One strive benefit operate

open for Before we we'd to like call, the conclude questions. Operator? our line

Operator

Instructionss] our from take [Operator's Casey question Compass We'll from Alexander Point. first

Casey Alexander

was answered. question my Actually, I'm fine.

Matthew Hurwit

question our with from Jefferies. then Hurwit We'll Matthew next take

Matthew Hurwit

signs results. credit how helping practices on or nonaccruals you're are are of the first keep warning there into My I we just low -- Can what characteristics early And you're deterioration maintained or Congrats you've in terms share low? any so question XXXX with head borrower as nonaccruals. us watching? on low hope well. is you anything

Ronald Kundich

experts Matthew. with X importantly, Sorry, discussion we Kundich, strategy. vertical. Officer, but is have to underwriters on Ron rigor quarterly This are our Street vertical, basis, talk don't and Credit shared to underwriters, our good a underwriting Ron. we Yes, that around we've vertical Within have you the more each just Chief that today. within

within portfolio have that We experience have managers vertical so and that forth.

as So science in Equipment imagine, might example. vertical than different. you different lending each venture is the for is space, life debt

that believe results that quality. have to us credit And with we structure bring end vertical. for the of each pipeline the important led expertise the to really we've shown it's within has at the So we on that rigor front

Matthew Hurwit

how approaching level? Is your for you leverage then on room are currently? just maintain around environment? leverage are it current the current increase And on goal leverage, leverage in Great. thoughts you the to how growth? do Or to see Or your

Kyle Brown

we've want -- and this to So leverage. to messaged in Kyle. time messaged do we've the this decrease about how this we Matthew, is really is it. over We think continue past,

take really to assets downstream opportunities. because leverage ability accounts more off But it ramp the create sense it Our into we managed assets us that new around make fund, accounts downstream of the level X:X. that more those and money and and to we makes ability leverage then when of to down. is healthy up to sheet sometimes some raise idea those have keep into back liquidity deals sure to balance a gives managed kind of We'll

time, we'll create, be And earnings opportunistic the less to and out course, RIA have us the more so leverage of for level, build out the have liquidity along BDC ability over we build as and which way. at will to see the there,

to we it. how We share. can earnings that's increasing intend the per as RIA continue new about it to decrease that also over generates earnings time decrease So and while think we

Operator

question Doug with take from our next UBS. We'll Harter

Douglas Harter

do target appetite the kind continue of see deployment order of last mentioned, in in Somewhat Xx of to the that piggybacking capital -- kind of just at ATM? Kyle? to How the you pace off the you of question. raise leverage think do about And how off kind the maintain to you

Kyle Brown

a of It's raise the at It's level, that's about way BDC We to a accretive think in less doing done really we're financing. equity. investors. when we Sure. historically we've ATM equity just-in-time way as and or expensive. think it most the But the to raising efficient way, in debt

ability so we need where not but think there what capital, that as build with shareholders. And we And needed, ATM we in And and to about have to tap liquidity as deployment, we'll is be extent -- it. into build we a will the the will accounts. managed the now dilutive that's RIA those we additional the way to we'll how

So to Mike, add anything yes, to you do that? want

Michael Testa

we're our balance sheet. would Yes, again, say sources asset just Doug, diversifying of I trying the diversify that, capital we're side thoughtful, being our like to

ATM end, raising -- just-in-time So we're looking with have we had subsequent capital. more quarter -- inaugural we flexibility launched placement a debt to debt private issuance debt issuance.

RIA retail, So the the also balance beyond looking beyond just through institutional, sheet, but the private vehicles and RIA. through

So additional open opportunities all different to providing up we channels, scale, will and more grow flexibility us. as

Operator

We'll [Operator's our Johnson Paul question KBW. next from Instructions] with take

Paul Johnson

are bond quarter, retirement quarter? guys the any is for But next so you that conversion next settling be quantify On via for impact. way that the sounds there dilutive it like there to any won't cash, expense

Michael Testa

result $XX conversion debt. of rate to in cost Yes. as a where on noted at share impact my million -- of In that extinguish that of it's per remarks, current prepared $X.XX an I NAV estimate the

Paul Johnson

Got Switching the must that portfolio. the over missed it. fintech say dependent would portfolio, the companies bank detail. many curious exposure I for of the to in just terms you I'm how have are in on partnerships business? of

Gerald Harder

partnerships. such not I those this of -- That's don't business models uncommon to a know is great It's question. for require some Yes. Gerry.

one that company we're we there's So partnerships, underwrite deeply the in but so goal approval -- Similarly, that a -- through, underwriting. sciences making right, standpoint. shot on considering multiple those with like in that much right? that from a wouldn't in and thinking we're our underwriting, in life And sure drug banks

on to in be additional multiple are bank with board partnerships, there if queue. there have So

something question about underwrite, exposure. it's great a we but we So limit talk our we as and

Kyle Brown

the focused This is replacement we ABL something in of bank. for that Kyle. the are many group we're fintech. I'll we -- -- does add when else. those primarily warehouse our We is are And senior, loans really on cases,

So partnering companies, mature bank. receivables then we're advance there. we're with against a providing more And for that

forward of more it a cost really fintech doing loan to lending So have financing of or exposure that receivable type is receivables. where going nice and asset-backed we have against the we'll loan-to-value lot a at that lot those a we're

fintech like that companies. with we position So

Paul Johnson

Appreciate novel of Or wanted nonaccruals details That's on ask, And within trends of into on read it. terms idiosyncratic I know quarter. such industry, I just investment, again, because there I industry? this Got it. nonaccrual just understanding helpful to loan. this perspective? a just that one then that's one perspective a mean, to there. in of quarter, anything a small that's like related issue to just more mean, the I is mean, of looks it's placed a that small tranche a It was But I small an one is space wondering, this space loan.

Ronald Kundich

is Ron Officer. Chief Kundich, Yes. This Credit

don't bulk concerned company, we're it's small space portfolio I think shouldn't of think company bulk, specific, related I -- was to term I our The that situation. a is debt as venture loan to, part alluded Paul. industry-wide the it say you is with. our large there's equipment This a vertical. finance a anything

equipment. in new you we vertical, As are equipment against know, finance equipment, the specific lending

we can We situation. to have in an we that's a liquidate tangible needed distressed if asset that

debt. capital. you us category. It you loan when that about mind. about to still keep to think some raise space, our you Again, think into is attempting not in was, The fall term loan and small them to, a company space So did alluded perspective, as that venture

we're So monitoring it closely.

Operator

Ladenburg Nolan question We'll from with next Thalmann. take our Christopher

Christopher Nolan

EPS targeting from outside XXXX? you for entities are the for these RIA What contribution

Michael Testa

Chris, Mike. it's

we've to immediately, had we're XXXX, the our model for our down pushed that allocations, through expenses going expense get RIA. see As AOP reimbursement for you'd and

as information see well we any from and XXXX given dividends, do you'll the anticipate the coming RIA. back RIA dividends expense fees forward-looking managed allocation, any as on from those haven't up in income under but We

Kyle Brown

say of we as to going do. now we as We're working it's it's our I'd part fast big -- have be -- the on X Regulators future. Yes, managing. others. we're move don't a accounts

we're execute, kind really we execution more so and to are then an and looking the building. And start and of ready year of poised RIA as this at of

Christopher Nolan

Got you.

make Trump focus. happening a America The science exposure? everything is making space administration again, question. that How in Second healthy affect your life does

Kyle Brown

bio on do that. about think see that. any not We think primarily. what We don't focus just impact. of about we We don't pharma. obviously We ton It's a immediate or

on we're device I scale at products. post that's primarily companies FDA-approved we where med So focused mean focus. primarily

don't so just we And far, lot see there. exposure a of

Christopher Nolan

question. Final Great.

On ATM, this unsecured would the for notes? debt be

Ronald Kundich

right, That's Chris.

We have TRIN, X that for past eligible are TRINL debt issuances year debt program. and at that from ATM the trading TRINZ

Christopher Nolan

Okay.

the so but utilize And of the facility, would the sort general as idea to less, be right? alternative ATM the facility an

Ronald Kundich

mean same prevailing all options time. over it time. going I for equity. on makes what And the look sense. to the program as debt the at at raise Yes. It's at price based debt can the We efficient. It's of the is the we're ATM financial the

measure other yield, against debt prevailing activities have. we'll all-in that we the So secured market that or all

Operator

questions there closing on Kyle line further any the Brown, now CEO, And the to call no I turn remarks. are at back the this time. will for

Kyle Brown

investment great and on participating May look earnings call a rest of interest We on updating to call Well, our next everybody we appreciate your our Capital, thank X. we'd Have you day. and QX Thanks. like today. to in for forward in during results Trinity your

Operator

may participation, your This now disconnect. today's you you Thank and program. does conclude for

Trinity Capital (TRIN) 26 Feb 252024 Q4 Earnings call transcript