Trinity Capital Inc. Reports First Quarter 2024 Financial Results

Rhea-AI Summary

Trinity Capital Inc. reported a remarkable performance in the first quarter of 2024, highlighting record net investment income of $25.2 million, total investment income of $50.5 million, and a return on average equity of 16.1%. The company also saw growth in total gross investment commitments, net assets, and various investments, along with an increase in regular quarterly dividend. Trinity's diversified investment platform and strong business fundamentals indicate a positive outlook for the future.

Positive

• Record net investment income of $25.2 million in Q1

• Record total investment income of $50.5 million

• 16.1% Return on Average Equity

• Total gross investment commitments increased to $286.8 million

• Net Asset Value of $626.3 million

• 13th consecutive increase in the regular quarterly dividend

• Diverse capital offerings to assist growing companies

Negative

• Increased total operating expenses and excise taxes

• Higher interest expense due to an increase in debt outstanding

• Net unrealized depreciation on investments during Q1

• Some portfolio companies on non-accrual status

• Decrease in NAV per share due to net unrealized depreciation

• Increased leverage ratio to 118%

Insights

Financial Analyst

Trinity Capital Inc.'s report for the first quarter of 2024 reveals a net investment income (NII) that has significantly risen year-over-year, highlighting effective capital management. The increase in NII to $25.2 million is remarkable, particularly when considering the sharp 30.1% spike relative to the previous year. This performance is pivotal for income-focused investors, suggesting a robust yield-generation capability. Trinity's return on average equity (ROAE) of 16.1% is indicative of efficient equity utilization and could bode well for the company's financial health and shareholder value. With a keen eye on the reported leverage ratio, now at 118%, up from 106%, there are implications for risk exposure which will require monitoring over successive quarters to gauge their long-term debt management strategy. Nevertheless, these financial fundamentals paint a promising landscape for potential investment opportunities.

Investment Portfolio Manager

Focusing on Trinity's portfolio composition, we observe a substantial increase in gross investment commitments to $286.8 million and a well-diversified portfolio across secured loans, equipment financings and equity and warrants. The first lien loans make up 75.3% of the debt portfolio, providing a layer of safety as they hold priority in repayment. The shift in their investment risk rating, with a higher proportion of assets rated for 'Strong Performance,' signals a potentially reduced risk profile. However, the increase in assets on non-accrual status to $30.4 million warrants attention, as it represents potential distress within certain portfolio segments. Strategic considerations ought to be made regarding the evaluation of credit risks and the efficacy of the company's underwriting standards. Investors should consider the implications of these operational factors on long-term returns and risk mitigation.

Market Research Analyst

The increased demand for private credit signified by Trinity's expansion and rising total investment income to $50.5 million is reflective of broader market dynamics. With their emphasis on supporting growth-stage companies, Trinity is well-positioned to capitalize on this burgeoning segment. The company's strategic issuance of new notes and management of its debt-to-equity ratio implies a forward-thinking capital deployment strategy that aligns with market opportunities. However, investors should gauge the broader economic climate, as rising interest rates and market volatility could influence the performance of private credit providers and their portfolio companies. Trinity's proactive liquidity management, including the expanded credit facility for their JV, suggests a cushion against short-term market fluctuations, which should instill some investor confidence.

Record Net Investment Income of $25.2 Million in Q1

Record Total Investment Income of $50.5 Million

Return on Average Equity of 16.1%

PHOENIX, May 1, 2024 /PRNewswire/ -- Trinity Capital Inc. (Nasdaq: TRIN) ("Trinity" or the "Company"), a leading provider of diversified financial solutions to growth-stage companies, today announced its financial results for the first quarter ended March 31, 2024.

First Quarter 2024 Highlights

• Record total investment income of $50.5 million, an increase of 21.5% year-over-year
• Record net investment income ("NII") of $25.2 million, or $0.54 per basic share, an increase of 30.1% year-over-year
• Net increase in net assets resulting from operations of $14.5 million, or $0.31 per basic share
• 16.1% Return on Average Equity "ROAE" (NII/Average Equity)
• 7.5% Return on Average Assets "ROAA" (NII/Average Assets)
• Net Asset Value of $626.3 million, or $12.88 per share at the end of Q1
• Total gross investment commitments of $286.8 million
• Total gross investments funded of $242.7 million, comprised of $182.9 million across eight new portfolio companies, $57.4 million across 12 existing portfolio companies and $2.4 million into Trinity's joint venture (the "JV")
• Debt principal repayments of $148.5 million, including $43.4 million from early repayments on debt investments
• 13^th consecutive increase in the regular quarterly dividend after the first-quarter distribution of $0.51 per share, an increase of 2.0% from the regular dividend declared in the fourth quarter of 2023

"Trinity's diversified investment platform continued to execute during the first quarter, delivering strong origination performance and record net investment income for our shareholders," said Kyle Brown, Chief Executive Officer of Trinity. "Our business fundamentals remain strong, and we continue to benefit from increasing private credit demand while adhering to our rigorous approach to underwriting and portfolio management."

Brown further highlighted, "We believe that Trinity's experienced team and differentiated investment strategy position us to perform in any market environment. Interest in direct lending solutions is accelerating, and we stand ready to assist growing companies with our diverse capital offerings."

First Quarter 2024 Operating Results

For the three months ended March 31, 2024, total investment income was $50.5 million compared to $41.5 million for the quarter ended March 31, 2023. This represents an effective yield on the average debt investments at cost of 15.8% and 15.2% for the periods ended March 31, 2024 and 2023, respectively. Effective yields generally include the effects of fees and income accelerations attributed to early loan repayments and other one-time events and may fluctuate quarter-to-quarter depending on the amount of prepayment activity. 

Total operating expenses and excise taxes, excluding interest expense, for the first quarter of 2024 were $13.2 million compared to $11.1 million during the first quarter of 2023. The increase is primarily attributable to higher compensation and benefits associated with additional headcount, variable compensation and amortization of restricted stock grants.

Interest expense for the first quarter of 2024 was $12.1 million compared to $11.1 million during the first quarter of 2023. The increase is primarily attributable to an increase in the average debt outstanding and an increase in the weighted average interest rate on total debt.

Net investment income was approximately $25.2 million, or $0.54 per share based on 46.7 million basic weighted average shares outstanding for the first quarter of 2024, compared to $19.3 million or $0.55 per share for the first quarter of 2023 based on 35.1 million basic weighted average shares outstanding.

During the three months ended March 31, 2024, our net unrealized depreciation totaled approximately $12.0 million, which included net unrealized appreciation of $3.8 million from our warrant investments, net unrealized depreciation of $3.4 million from our equity investments and net unrealized depreciation of $12.4 million from our debt investments.

Net realized gain on investments was approximately $1.4 million, primarily attributable to the equipment financing to Core Scientific, Inc.

Net increase in net assets resulting from operations was $14.5 million, or $0.31 per share, based on 46.7 million basic weighted average shares outstanding. This compares to a net increase in net assets resulting from operations of $22.5 million, or $0.64 per share, based on 35.1 million basic weighted average shares outstanding for the first quarter of 2023. Trinity's higher weighted average shares outstanding for the first quarter as compared to the same period in the prior year was mostly attributable to additional shares issued during the quarter.

Net Asset Value

As of March 31, 2024, total net assets increased to $626.3 million, compared to $611.2 million as of December 31, 2023. The increase in total net assets was primarily driven by net investment income that exceeded the declared dividend and proceeds received from the shares issued under the ATM program during the quarter, partially offset by net unrealized depreciation on investments. The change in NAV per share to $12.88 from $13.19 per share in the prior quarter was primarily attributed to new restricted stock awards and net unrealized depreciation on investments, partially offset by the accretive issuances of shares under the ATM program.

Portfolio and Investment Activity

As of March 31, 2024, Trinity's investment portfolio had an aggregate fair value of approximately $1.4 billion and was comprised of approximately $1.0 billion in secured loans, $277.6 million in equipment financings and $75.5 million in equity and warrants across 128 portfolio companies. The Company's debt portfolio is comprised of 75.3% first lien loans and 24.7% second lien loans, with 75.4% of the debt portfolio at floating rates based on principal outstanding.

During the first quarter, the Company originated approximately $286.8 million of total new commitments and funded approximately $242.7 million, which was comprised of $182.9 million of investments in eight new portfolio companies, $57.4 million of investments in 12 existing portfolio companies and $2.4 million of investments in the JV. Gross investment fundings during the quarter for secured loans totaled $187.4 million, equipment financings totaled $50.1 million and warrant and equity investments totaled $5.3 million.

Proceeds received from repayments of the Company's debt investments during the first quarter totaled approximately $148.5 million, which included $43.4 million from early repayments on debt investments and $55.4 million of assets sold to the JV. The investment portfolio increased by $100.7 million, or approximately 7.6%, on a cost basis, and by $88.7 million, or approximately 7.0%, at fair value as compared to December 31, 2023. Total assets under management, including the assets in the JV, increased by 10.2% to a total of $1.6 billion.

As of the end of the first quarter, secured loans to four portfolio companies and equipment financings to one portfolio company were on non-accrual status, with an aggregate fair value of approximately $30.4 million, or 2.4% of the Company's debt investment portfolio at fair value.

The following table shows the distribution of the Company's loan and equipment financing investments on the 1 to 5 investment risk rating scale at fair value as of March 31, 2024 and December 31, 2023 (dollars in thousands):

				March 31, 2024						December 31, 2023
Investment Risk Rating   Scale Range		Designation		Investments at Fair Value			Percentage of Total Portfolio			Investments at Fair Value			Percentage of Total Portfolio
4.0 - 5.0		Very Strong Performance		$	56,991			4.4 %		$	40,584		3.3 %
3.0 - 3.9		Strong Performance			275,107			21.4 %			277,867		22.9 %
2.0 - 2.9		Performing			875,950			68.0 %			805,730		65.9 %
1.6 - 1.9		Watch			65,410			5.1 %			56,740		4.6 %
1.0 - 1.5		Default/Workout			5,539			0.4 %			33,452		2.7 %
Total Debt Investments excluding Senior Credit Corp 2022 LLC					1,278,997			99.3 %			1,214,373		99.4 %
		Senior Credit Corp 2022 LLC (1)			9,394			0.7 %			7,704		0.6 %
Total Debt Investments				$	1,288,391			100.0 %		$	1,222,077		100.0 %
_____________
(1) An investment risk rating is not applied to Senior Credit Corp 2022 LLC.

As of both March 31, 2024 and December 31, 2023, the Company's loan and equipment financing investments had a weighted average risk rating score of 2.7. Trinity's grading scale is comprised of numerous factors, two key factors being liquidity and performance to plan. A company may be downgraded as it approaches the need for additional capital or if they are underperforming relative to their business plans. Conversely, they may be upgraded upon a capitalization event or if they are exceeding their plan. As such, the overall grading may fluctuate quarter-to-quarter.

Liquidity and Capital Resources

As of March 31, 2024, the Company had approximately $172.0 million in available liquidity, including $12.0 million in unrestricted cash and cash equivalents. At the end of the period, the Company had approximately $160.0 million in available borrowing capacity under its credit facility with KeyBank, subject to existing terms and advance rates and regulatory and covenant requirements.

In March 2024, the Company closed an underwritten public offering of $100.0 million in aggregate principal amount of 7.875% notes due 2029 (the "March 2029 Notes") and the underwriters subsequently exercised their option to purchase an additional $15.0 million of the March 2029 Notes. The March 2029 Notes are traded on the Nasdaq Global Select Market under the trading symbol "TRINZ." On April 16, 2024, the Company caused notice to be issued to the holders regarding the Company's exercise of its option to redeem a portion of the issued and outstanding 2025 Notes. The Company will redeem $30.0 million in aggregate principal amount of the $182.5 million in aggregate principal amount of outstanding 2025 Notes on May 17, 2024.

As of March 31, 2024, Trinity's leverage or debt-to-equity ratio was approximately 118% as compared to 106% as of December 31, 2023. The increase in the leverage ratio was primarily attributable to the increase in total debt outstanding to fund net portfolio growth.

During the three months ended March 31, 2024, Trinity utilized its ATM offering program to sell 1.7 million shares of its common stock at a weighted average price of $14.84 per share, raising $24.3 million of net proceeds.

As of March 31, 2024, the JV had approximately $94.5 million in available liquidity, including $64.0 million of uncalled capital, $30.3 million of availability under the JV's credit facility and $0.2 million of cash and cash equivalents. During the quarter, the JV expanded its credit facility to $120 million.

Distributions

On March 14, 2024, the Company's Board of Directors declared a dividend of $0.51 per share with respect to the quarter ended March 31, 2024, which was paid on April 15, 2024, to stockholders of record as of March 28, 2024.

Conference Call

Trinity will hold a conference call to discuss its first quarter 2024 financial results at 9:00 a.m. Pacific Time (12:00 p.m. Eastern Time) on Wednesday, May 1, 2024.

To listen to the call, please dial (800) 245-3047, or (203) 518-9765 internationally, and reference Conference ID: TRINQ124 if asked, approximately 10 minutes prior to the start of the call.

A taped replay will be made available approximately two hours after the conclusion of the call and will remain available for seven days. To access the replay, please dial (800) 839-2389 or (402) 220-7204.

About Trinity Capital Inc.

Trinity (Nasdaq: TRIN), an internally managed business development company, is a leading provider of diversified financial solutions to growth stage companies with institutional equity investors. Trinity's investment objective is to generate current income and, to a lesser extent, capital appreciation through investments, including term loans, equipment financings and equity-related investments. Trinity believes it is one of only a select group of specialty lenders that has the depth of knowledge, experience, and track record in lending to growth stage companies. For more information, please visit the Company's website at www.trinitycap.com.

Forward-Looking Statements

This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in filings with the Securities and Exchange Commission ("SEC"). The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release. More information on risks and other potential factors that could affect the Company's financial results, including important factors that could cause actual results to differ materially from plans, estimates or expectations included herein or on the webcast/conference call, is included in the Company's filings with the SEC, including in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's most recently filed annual report on Form 10-K and subsequent SEC filings.

TRINITY CAPITAL INC. Consolidated Statements of Assets and Liabilities (In thousands, except share and per share data)
		March 31,				December 31,
		2024				2023
		(Unaudited)
ASSETS
Investments at fair value:
Control investments (cost of $43,972 and $43,807, respectively)		$	34,989			$	32,861
Affiliate investments (cost of $13,421 and $11,006, respectively)			14,004				11,335
Non-Control / Non-Affiliate investments (cost of $1,362,605 and $1,264,503, respectively)			1,314,869				1,230,984
Total investments (cost of $1,419,998 and $1,319,316, respectively)			1,363,862				1,275,180
Cash and cash equivalents			11,967				4,761
Interest receivable			13,312				11,206
Deferred credit facility costs			1,955				2,144
Other assets			18,596				17,691
Total assets		$	1,409,692			$	1,310,982
LIABILITIES
KeyBank Credit Facility		$	190,000			$	213,000
2025 Notes, net of $1,531 and $2,015, respectively, of unamortized deferred financing costs			180,969				180,485
August 2026 Notes, net of $1,382 and $1,526, respectively, of unamortized deferred financing costs			123,618				123,474
March 2029 Notes, net of $3,191 and $0, respectively, of unamortized deferred financing costs			111,809				—
December 2026 Notes, net of $1,008 and $1,102, respectively, of unamortized deferred financing costs			73,992				73,898
Convertible Notes, net of $1,084 and $1,243, respectively, of unamortized deferred financing costs and discount			48,916				48,757
Distribution payable			24,808				23,162
Security deposits			11,114				12,287
Accounts payable, accrued expenses and other liabilities			18,150				24,760
Total liabilities			783,376				699,823
NET ASSETS
Common stock, $0.001 par value per share (200,000,000 authorized, 48,643,194 and 46,323,712 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively)			49				46
Paid-in capital in excess of par			659,194				633,740
Distributable earnings/(accumulated deficit)			(32,927)				(22,627)
Total net assets			626,316				611,159
Total liabilities and net assets		$	1,409,692			$	1,310,982
NET ASSET VALUE PER SHARE		$	12.88			$	13.19

 

TRINITY CAPITAL INC. Consolidated Statements of Operations (In thousands, except share and per share data) (Unaudited)
		Three Months Ended					Three Months Ended
		March 31, 2024					March 31, 2023
INVESTMENT INCOME:
Interest and dividend income:
Control investments		$		852			$		1,116
Affiliate investments				385					34
Non-Control / Non-Affiliate investments				48,155					39,381
Total interest and dividend income				49,392					40,531
Fee and other income:
Affiliate investments				866					453
Non-Control / Non-Affiliate investments				195					554
Total fee and other income				1,061					1,007
Total investment income				50,453					41,538
EXPENSES:
Interest expense and other debt financing costs				12,144					11,081
Compensation and benefits				9,864					7,617
Professional fees				720					1,417
General and administrative				1,929					1,495
Total expenses				24,657					21,610
NET INVESTMENT INCOME/(LOSS) BEFORE TAXES				25,796					19,928
Excise tax expense				639					597
NET INVESTMENT INCOME				25,157					19,331
NET REALIZED GAIN/(LOSS) FROM INVESTMENTS:
Non-Control / Non-Affiliate investments				1,351					(365)
Net realized gain/(loss) from investments				1,351					(365)
NET CHANGE IN UNREALIZED APPRECIATION/(DEPRECIATION) FROM INVESTMENTS:
Control investments				1,963					408
Affiliate investments				254					976
Non-Control / Non-Affiliate investments				(14,217)					2,136
Net change in unrealized appreciation/(depreciation) from investments				(12,000)					3,520
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		$		14,508			$		22,486
NET INVESTMENT INCOME PER SHARE - BASIC		$		0.54			$		0.55
NET INVESTMENT INCOME PER SHARE - DILUTED		$		0.52					0.52
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE - BASIC		$		0.31			$		0.64
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE - DILUTED		$		0.30			$		0.60
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC				46,748,386					35,074,076
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED				50,595,651					38,740,871

 

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SOURCE Trinity Capital Inc.

FAQ

<p>What was Trinity Capital Inc.'s net investment income in Q1 2024?</p>

Trinity Capital Inc. reported a net investment income of $25.2 million in Q1 2024.

<p>What was the total investment income for Trinity Capital Inc. in Q1 2024?</p>

Trinity Capital Inc. recorded a total investment income of $50.5 million in Q1 2024.

<p>What is Trinity Capital Inc.'s ticker symbol?</p>

Trinity Capital Inc.'s ticker symbol is TRIN.

<p>How many new portfolio companies did Trinity Capital Inc. invest in during Q1 2024?</p>

Trinity Capital Inc. invested in eight new portfolio companies during Q1 2024.

<p>What was the increase in Trinity Capital Inc.'s regular quarterly dividend in Q1 2024?</p>

Trinity Capital Inc. increased its regular quarterly dividend by 2.0% in Q1 2024.