Trinity Capital Inc. Reports Fourth Quarter and Full Year 2023 Financial Results
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Insights
The reported Record Quarterly Net Investment Income of $25.1 million and Annual Net Investment Income of $89.9 million for Trinity Capital Inc. reflect a robust financial performance, with a noteworthy year-over-year increase in both metrics. The Return on Average Equity (ROAE) of 16.9% for the fourth quarter is particularly striking, as it signifies the company's efficiency in generating profits from shareholders' equity. A ROAE significantly above the industry average can attract investor attention, potentially impacting the company's stock price positively. However, investors should also consider the company's leverage ratio, which increased to 106%, as this could imply a higher risk profile.
Trinity's strategy of off-balance sheet growth and the consistent increase in its regular quarterly dividend are indicators of a strong financial position and management's confidence in the company's cash flow stability. The undistributed earnings spillover of $64.5 million also suggests a cushion for future dividends or reinvestment into the business. However, the impact of increased operating expenses and excise taxes on future net income should be monitored closely.
Trinity Capital's expansion in both its portfolio size and assets under management, which now stands at $1.5 billion, demonstrates an aggressive growth trajectory that can be appealing to growth-oriented investors. The record total gross investments funded of $641.8 million, with a substantial portion in new portfolio companies, highlights the company's commitment to diversifying and expanding its investment reach.
From a market perspective, the diversification in secured loans, equipment financings and equity and warrants across 120 portfolio companies, along with a majority of loans being first lien, suggests a balanced approach to risk management. The investment risk rating distribution shows a predominance of investments in the 'Performing' category, which could reassure investors about the quality of the portfolio. Nevertheless, the slight shift in the weighted average risk rating score from 2.8 to 2.7 warrants attention to potential changes in portfolio risk.
Trinity Capital's disclosure of three portfolio companies' secured loans and two equipment financings being on non-accrual status offers transparency about potential default risks within its investment portfolio. The subsequent removal of the equipment financing to Core Scientific, Inc. from non-accrual status post-bankruptcy proceedings highlights the dynamic nature of such investments and the importance of legal outcomes on the valuation of assets. Investors should be aware that while such restructurings can lead to recovery of value, they could also result in volatility in reported financials.
The company's proactive capital raising activities, demonstrated by the use of its ATM offering program to raise $45.2 million, show strategic financial management, providing liquidity that supports ongoing operations and portfolio growth. However, the issuance of common stock at a premium to NAV per share could dilute existing shareholders' equity, which is a legal and financial factor for investors to consider.
Record Quarterly Net Investment Income of
Record Annual Net Investment Income of
Return on Average Equity Hits
Fourth Quarter 2023 Highlights
- Record total investment income of
$47.8 million 15.2% year-over-year - Record net investment income ("NII") of
$25.1 million $0.57 15.9% year-over-year - Net increase in net assets resulting from operations of
$17.7 million $0.40 16.9% Return on Average Equity "ROAE" (NII/Average Equity)8.3% Return on Average Assets "ROAA" (NII/Average Assets)- Net Asset Value increased to
$13.19 $13.17 - Record total gross investment commitments of
$340.7 million - Record total gross investments funded of
$267.4 million $220.0 million $47.1 million $0.3 million - Debt principal repayments of
$108.9 million $42.9 million $41.4 million $24.6 million - 12th consecutive increase in the regular quarterly dividend after the fourth-quarter distribution of
$0.50 2.0% from the regular dividend declared in the third quarter of 2023
"Trinity had a tremendous year in 2023, marked by record fundings and investment income along with continued growth in our portfolio," said Kyle Brown, Chief Executive Officer of Trinity. "Our off-balance sheet growth strategies continued to ramp, and we expect them to contribute to our growth in 2024."
Brown further highlighted, "Our strong performance has allowed us to increase our regular dividend for twelve straight quarters, resulting in distributions of
Full Year 2023 Highlights
- Record total investment income of
$181.9 million 25.0% year-over-year - Record net investment income of
$89.9 million $2.31 25.6% year-over-year - Record total gross investments funded of
$641.8 million 1.7% year-over-year - Net investment portfolio growth at cost of
$165.7 million 14.4% year-over-year - Total platform assets under management of
$1.5 billion 29.0% year-over-year - Undistributed earnings spillover of
$64.5 million $1.39
Fourth Quarter 2023 Operating Results
For the three months ended December 31, 2023, total investment income was
Total operating expenses and excise taxes, excluding interest expense, for the fourth quarter of 2023 were
Interest expense for the fourth quarter of 2023 was
Net investment income was
Net unrealized depreciation of
Net realized gain on investments was
Net increase in net assets resulting from operations was
Trinity's higher weighted average shares outstanding for the fourth quarter was attributed to additional shares issued during the year.
Net Asset Value
As of December 31, 2023, total net assets increased to
Portfolio and Investment Activity
As of December 31, 2023, Trinity's investment portfolio had an aggregate fair value of approximately
During the fourth quarter, the Company originated approximately
Proceeds received from repayments of the Company's debt investments during the fourth quarter totaled approximately
The following table shows the distribution of the Company's secured loan and equipment financing investments on the 1 to 5 investment risk rating scale at fair value as of December 31, 2023 and September 30, 2023 (dollars in thousands):
December 31, 2023 | September 30, 2023 | |||||||||||||||||
Investment Risk Rating | Investments | Percentage | Investments | Percentage | ||||||||||||||
Scale Range | Designation | Fair Value | Total | Fair Value | Total | |||||||||||||
4.0 - 5.0 | Very Strong Performance | $ | 40,584 | 3.3 | % | $ | 34,728 | 3.3 | % | |||||||||
3.0 - 3.9 | Strong Performance | 277,867 | 22.9 | % | 225,408 | 21.2 | % | |||||||||||
2.0 - 2.9 | Performing | 805,730 | 65.9 | % | 740,097 | 69.6 | % | |||||||||||
1.6 - 1.9 | Watch | 56,740 | 4.6 | % | 38,584 | 3.6 | % | |||||||||||
1.0 - 1.5 | Default/Workout | 33,452 | 2.7 | % | 17,540 | 1.6 | % | |||||||||||
Total Debt Investments excluding Senior | 1,214,373 | 99.4 | % | 1,056,357 | 99.3 | % | ||||||||||||
. | Senior Credit Corp 2022 LLC (1) | 7,704 | 0.6 | % | 7,484 | 0.7 | % | |||||||||||
Total Debt Investments | $ | 1,222,077 | 100.0 | % | $ | 1,063,841 | 100.0 | % | ||||||||||
(1) | An investment risk rating is not applied to Senior Credit Corp 2022 LLC. |
As of December 31, 2023, the Company's secured loan and equipment financing investments had a weighted average risk rating score of 2.7 as compared to 2.8 as of September 30, 2023. Trinity's grading scale is comprised of numerous factors, two key factors being liquidity and performance to plan. A company may be downgraded as they approach the need for additional capital or if they are underperforming relative to their business plans. Conversely, they may be upgraded upon a capitalization or if they are exceeding their plan. As such, the overall grading may fluctuate quarter-to-quarter.
As of the end of the fourth quarter, secured loans to three portfolio companies and equipment financings to two portfolio companies were on non-accrual status with a total fair value of approximately
Liquidity and Capital Resources
As of December 31, 2023, the Company had approximately
As of December 31, 2023, Trinity's leverage or debt-to-equity ratio was approximately
During the three months ended December 31, 2023, Trinity utilized its ATM offering program to sell 3.1 million shares of its common stock at a weighted average price of
As of December 31, 2023, the JV had approximately
Distributions
On December 14, 2023, the Company's Board of Directors declared a regular and supplemental dividend totaling
Conference Call
Trinity will hold a conference call to discuss its fourth quarter and full year 2023 financial results at 9:00 a.m. Pacific Time (12:00 p.m. Eastern Time) on Wednesday, March 6, 2024.
To listen to the call, please dial (800) 225-9448, or (203) 518-9708 internationally, and reference Conference ID: TRINQ423 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) 839-7414 or (402) 220-6068.
About Trinity Capital Inc.
Trinity Capital Inc. (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 Capital's investment objective is to generate current income and, to a lesser extent, capital appreciation through investments, including term loans and equipment financings and equity-related investments. Trinity Capital 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. | ||||||||
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
ASSETS | ||||||||
Investments at fair value: | ||||||||
Control investments (cost of | $ | 32,861 | $ | 37,313 | ||||
Affiliate investments (cost of | 11,335 | 1,528 | ||||||
Non-Control / Non-Affiliate investments (cost of | 1,230,984 | 1,055,545 | ||||||
Total investments (cost of | 1,275,180 | 1,094,386 | ||||||
Cash and cash equivalents | 4,761 | 10,612 | ||||||
Interest receivable | 11,206 | 9,971 | ||||||
Deferred credit facility costs | 2,144 | 2,903 | ||||||
Other assets | 17,691 | 8,567 | ||||||
Total assets | $ | 1,310,982 | $ | 1,126,439 | ||||
LIABILITIES | ||||||||
KeyBank Credit Facility | $ | 213,000 | $ | 187,500 | ||||
2025 Notes, net of | 180,485 | 178,552 | ||||||
August 2026 Notes, net of | 123,474 | 122,897 | ||||||
December 2026 Notes, net of | 73,898 | 73,526 | ||||||
Convertible Notes, net of | 48,757 | 48,118 | ||||||
Distribution payable | 23,162 | 21,326 | ||||||
Security deposits | 12,287 | 15,100 | ||||||
Accounts payable, accrued expenses and other liabilities | 24,760 | 19,771 | ||||||
Total liabilities | 699,823 | 666,790 | ||||||
NET ASSETS | ||||||||
Common stock, | 46 | 35 | ||||||
Paid-in capital in excess of par | 633,740 | 480,532 | ||||||
Distributable earnings/(accumulated deficit) | (22,627) | (20,918) | ||||||
Total net assets | 611,159 | 459,649 | ||||||
Total liabilities and net assets | $ | 1,310,982 | $ | 1,126,439 | ||||
NET ASSET VALUE PER SHARE | $ | 13.19 | $ | 13.15 | ||||
TRINITY CAPITAL INC. | ||||||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||||||
INVESTMENT INCOME: | ||||||||||||||||||||
Interest and dividend income: | ||||||||||||||||||||
Control investments | $ | 942 | $ | 1,007 | $ | 4,179 | $ | 5,418 | ||||||||||||
Affiliate investments | 659 | — | 1,025 | 862 | ||||||||||||||||
Non-Control / Non-Affiliate investments | 43,114 | 39,593 | 169,636 | 132,556 | ||||||||||||||||
Total interest and dividend income | 44,745 | 40,600 | 174,840 | 138,836 | ||||||||||||||||
Fee and other income: | ||||||||||||||||||||
Affiliate investments | 487 | — | 2,158 | — | ||||||||||||||||
Non-Control / Non-Affiliate investments | 2,602 | 909 | 4,857 | 6,664 | ||||||||||||||||
Total fee and other income | 3,089 | 909 | 7,015 | 6,664 | ||||||||||||||||
Total investment income | 47,834 | 41,509 | 181,855 | 145,500 | ||||||||||||||||
EXPENSES: | ||||||||||||||||||||
Interest expense and other debt financing costs | 10,446 | 10,284 | 44,296 | 34,148 | ||||||||||||||||
Compensation and benefits | 8,434 | 6,543 | 33,093 | 27,189 | ||||||||||||||||
Professional fees | 1,307 | 1,129 | 5,407 | 4,113 | ||||||||||||||||
General and administrative | 1,896 | 1,520 | 6,598 | 6,075 | ||||||||||||||||
Total expenses | 22,083 | 19,476 | 89,394 | 71,525 | ||||||||||||||||
NET INVESTMENT INCOME/(LOSS) BEFORE TAXES | 25,751 | 22,033 | 92,461 | 73,975 | ||||||||||||||||
Excise tax expense | 684 | 402 | 2,560 | 2,389 | ||||||||||||||||
NET INVESTMENT INCOME | 25,067 | 21,631 | 89,901 | 71,586 | ||||||||||||||||
NET REALIZED GAIN/(LOSS) FROM INVESTMENTS: | ||||||||||||||||||||
Control investments | — | (3,877) | — | (4,210) | ||||||||||||||||
Affiliate investments | — | — | (26,251) | (10,241) | ||||||||||||||||
Non-Control / Non-Affiliate investments | 773 | (5,694) | (1,820) | 47,304 | ||||||||||||||||
Net realized gain/(loss) from investments | 773 | (9,571) | (28,071) | 32,853 | ||||||||||||||||
NET CHANGE IN UNREALIZED | ||||||||||||||||||||
Control investments | (21) | 12,174 | (4,884) | 719 | ||||||||||||||||
Affiliate investments | (122) | (7,841) | 27,380 | (17,635) | ||||||||||||||||
Non-Control / Non-Affiliate investments | (7,993) | (17,980) | (7,433) | (117,898) | ||||||||||||||||
Net change in unrealized appreciation/(depreciation) from investments | (8,136) | (13,647) | 15,063 | (134,814) | ||||||||||||||||
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING | $ | 17,704 | $ | (1,587) | $ | 76,893 | $ | (30,375) | ||||||||||||
NET INVESTMENT INCOME PER SHARE - BASIC | $ | 0.57 | $ | 0.62 | $ | 2.31 | $ | 2.26 | ||||||||||||
NET INVESTMENT INCOME PER SHARE - DILUTED | $ | 0.54 | 0.57 | $ | 2.19 | $ | 2.14 | |||||||||||||
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE - BASIC | $ | 0.40 | $ | (0.05) | $ | 1.98 | $ | (0.96) | ||||||||||||
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE - DILUTED | $ | 0.39 | $ | (0.05) | $ | 1.89 | $ | (0.96) | ||||||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC | 44,308,189 | 35,131,465 | 38,910,150 | 31,672,089 | ||||||||||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED | 48,103,914 | 38,649,085 | 42,705,875 | 35,189,709 | ||||||||||||||||
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SOURCE Trinity Capital Inc.
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