8-K
Trinity Capital Inc. (TRIN)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): **** August 4, 2022
TRINITY CAPITAL INC.
(Exact name of Registrant as Specified in Its Charter)
| Maryland | 814-01341 | 35-2670395 |
|---|---|---|
| (State or Other Jurisdiction<br>of Incorporation) | (Commission File Number) | (IRS Employer<br>Identification No.) |
| 525<br><br><br><br> | |
|---|---|
| 1 N 1^st^ Street Suite 302 Phoenix , Arizona | 85004 |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s Telephone Number, Including Area Code: ( 480 ) 374-5350
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934. Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
|---|---|---|---|---|
| Common Stock, par value $0.001 per share<br><br>7.00% Notes Due 2025 | | TRIN<br><br>TRINL | | Nasdaq Global Select Market<br><br>Nasdaq Global Select Market |
Item 2.02. Results of Operations and Financial Condition
On August 4, 2022, Trinity Capital Inc. (the “Company”) issued a press release announcing its financial results for the second quarter ended June 30, 2022. Such press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 furnished herewith, is being furnished and shall not be deemed “filed” for any purpose of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such Section. The information in this Current Report on Form 8-K shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 7.01 Regulation FD Disclosure
On August 4, 2022, the Company disseminated an earnings presentation to be used in connection with its conference call and live webcast to discuss its second quarter 2022 financial results on August 4, 2022, at 5 p.m. Eastern time. A copy of the earnings presentation is furnished as Exhibit 99.2 to this Current Report on Form 8-K and incorporated into this Item 7.01 by reference.
The information furnished in this Item 7.01 and Exhibit 99.2 attached hereto is being furnished and shall not be deemed “filed” for any purpose of Section 18 of the Exchange Act, or otherwise subject to the liabilities of such Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
| Ugust 12 | ||
|---|---|---|
| Exhibit Number | **** | Description |
| 99.1 | Earnings Press Release, dated August 4, 2022 | |
| 99.2 | | Earnings Presentation, dated August 4, 2022 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | |
|---|---|---|---|
| | Trinity Capital Inc. | ||
| | | ||
| August 4, 2022 | By: | /s/ Steven L. Brown | |
| | | Name: | Steven L. Brown |
| | | Title: | Chief Executive Officer |
Exhibit 99.1
Trinity Capital Inc. Reports Second Quarter 2022 Financial Results
PHOENIX, (August 4, 2022 /PRNewswire/) -- Trinity Capital Inc. (Nasdaq: TRIN) (“Trinity Capital” or the “Company”), a leading provider of financing solutions to growth stage companies, today announced its financial results for the quarter ended June 30, 2022.
Second Quarter 2022 Highlights
●Total investment income of $33.5 million, an increase of 71.8% year-over-year
●Net investment income (“NII”) of $15.7 million, or $0.51 per share, an increase of 55.4% year-over-year
●Aggregate debt and equity investment commitments of $302.3 million during Q2 2022
●Total gross investments funded of $193.8 million, comprised of $117.0 million across 11 new portfolio companies and $76.8 million across 17 existing portfolio companies
●Unscheduled early principal repayments of $16.8 million
●Investment portfolio of $1.05 billion at fair value, an increase of 75.8% from Q2 2021
●13.5% Return on Average Equity “ROAE” (NII/Average Equity)
●5.9% Return on Average Assets “ROAA” (NII/Average Assets)
●Net asset value (“NAV”) per share decreased to $14.62 from $15.15 on March 31, 2022
●Declared a distribution of $0.57 per share, consisting of a regular dividend of $0.42 per share for the second quarter, an increase of 5.0% from Q1 2022, and a supplemental cash dividend of $0.15 per share
Year-to-Date 2022 Highlights
●Total investment income of $65.3 million, an increase of 77.4% year-over-year
●Net investment income of $31.3 million, or $1.07 per share, an increase of 80.9% year-over-year
●Total gross investments funded of $416.3 million, an increase of 98.7% year-over-year
“Trinity generated $132 million of net portfolio growth at fair value in the second quarter, with our investment portfolio surpassing $1 billion for the first time — a major milestone for our company,” said Steven Brown, Chairman and Chief Executive Officer of Trinity Capital. “We have built a brand and business that is well positioned to capitalize on the increasing market demand for debt and equipment financing solutions to growth stage companies. We have a disciplined strategy in place and a tenured leadership team that can manage our business through changing economic conditions. Our performance this quarter demonstrates that we are achieving our vision of building one of the world’s best lending platforms.”
Kyle Brown, President and Chief Investment Officer of Trinity Capital, added, "We are capitalizing on market conditions while taking a judicious approach towards investment decisions. Our fundamentals are as strong as ever and we are focused on executing on a strategy that is versatile in an evolving financial landscape. We have strong momentum heading into the second half of the year and look forward to driving long-term value for our shareholders.”
Second Quarter 2022 Operating Results
****
For the quarter ended June 30, 2022, total investment income was $33.5 million compared to $19.5 million for the quarter ended June 30, 2021. This increase is primarily attributable to the larger portfolio of earning assets year-over-year.
Effective yield on the average debt investments was 13.8% and 15.9% for the periods ended June 30, 2022 and 2021, respectively. The lower effective yields in the current quarter are attributed to the significantly lower early repayments compared to the second quarter of 2021. 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 expenses, excluding interest expense, for the second quarter of 2022 were $10.0 million compared to $5.0 million during the second quarter of 2021. The increase was primarily attributable to increased employee headcount, higher stock-based compensation, higher variable compensation and higher professional fees. Interest expense for the second quarter of 2022 was $7.8 million compared to $4.4 million during the second quarter of 2021 attributed to the higher debt outstanding under the bonds issued in August and December 2021 and higher borrowings under our credit facility.
Net investment income (“NII”) was approximately $15.7 million, or $0.51 per share for the second quarter of 2022, compared to $10.1 million or $0.38 per share for the second quarter of 2021. The 55.4% increase in NII year-over-year is primarily attributable to the higher investment income on the larger investment portfolio offset by higher interest and operating expenses.
Second quarter 2022 net realized loss from investments was approximately $9.6 million, primarily related to the loss on a legacy loan to one portfolio company, compared to a net realized gain of $2.0 million during the second quarter of 2021.
Net unrealized depreciation was $13.8 million during the second quarter of 2022, compared to net unrealized appreciation of $12.6 million during the second quarter of 2021. The unrealized depreciation was related to valuation adjustments of $24.3 million primarily due to three underperforming credits and mark-to-market adjustments in connection with general market volatility offset by the reversal of $10.5 million of previously recorded unrealized depreciation to realized losses and investment income.
Second quarter 2022 net decrease in net assets resulting from operations was $7.7 million, or $0.25 per share. This compares to a net increase in net assets resulting from operations of $24.7 million, or $0.93 per share, for the second quarter of 2021. Net assets resulting from operations per share during the second quarter of 2022 reflects realized and unrealized depreciation during the period as well as Trinity's larger weighted average share count for the quarter, primarily reflecting approximately 3.3 million shares issued in connection with a follow-on offering completed in April 2022 and restricted stock awards issued under our long-term stock incentive plan.
Net Asset Value
As of June 30, 2022, NAV per share decreased to $14.62, compared to $15.15 on March 31, 2022. The decrease in NAV was primarily driven by the Company’s net loss for the quarter, dividend distributions and the impact of additional shares issued during the quarter offset by the accretive issuance of our common stock. Total net assets at the end of the second quarter of 2022 were $458.3 million, compared to $424.0 million at the end of Q1 2022. The increase in total net assets was attributable to the net issuance of common stock for $59.9 million, offset by the net loss for the quarter and dividend distributions.
Portfolio and Investment Activity
As of June 30, 2022, Trinity Capital’s investment portfolio had an aggregate fair value of approximately $1.05 billion and was comprised of approximately $769.7 million in secured loans, $224.9 million in equipment financings and $56.5 million in equity and equity-related investments, including warrants across 108 portfolio companies.
During the second quarter, the Company originated $302.3 million of total new commitments. Second quarter investments funded totaled approximately $193.8 million, which was comprised of $117.0 million of investments in 11 new portfolio companies and approximately $76.8 million of investments in 17 existing portfolio companies. The Company continues to shift its portfolio to floating rate loans with approximately 64.4% of its debt portfolio at floating rates as of June 30, 2022, compared to 59.6% as of March 31, 2022.
Proceeds received from repayments of the Company's debt investments during the second quarter totaled approximately $44.4 million, which included $16.8 million from early debt repayments. The
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portfolio increased by $145.5 million or approximately 15.8% on a cost basis, and by $131.7 million or approximately 14.3% at fair value as compared to March 31, 2022.
As of June 30, 2022, loans to three portfolio companies and an equipment financing to one portfolio company were on non-accrual status with a total fair value of approximately $5.9 million, or 0.6% of the fair value of the Company’s debt investment portfolio.
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 June 30, 2022 and December 31, 2021 (dollars in thousands):
| | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | | **** | June 30, 2022 | **** | December 31, 2021 | **** | ||||||
| Investment Risk Rating | | | | Investments at | **** | Percentage of | **** | Investments at | **** | Percentage of | | ||
| Scale Range | | Designation | | Fair Value | | Total Portfolio | **** | Fair Value | | Total Portfolio | **** | ||
| 4.0 - 5.0 | | Very Strong Performance | | $ | 62,719 | | 6.3% | | $ | 84,785 | 11.5% | | |
| 3.0 - 3.9 | | Strong Performance | | 382,593 | | 38.5% | | 236,466 | 32.1% | | |||
| 2.0 - 2.9 | | Performing | | 529,285 | | 53.2% | | 396,846 | 53.9% | | |||
| 1.6 - 1.9 | | Watch | | 18,706 | | 1.9% | | 13,427 | 1.9% | | |||
| 1.0 - 1.5 | | Default/Workout | | 1,290 | | 0.1% | | 4,444 | 0.6% | | |||
| Total | | | | $ | 994,593 | 100.0% | | $ | 735,968 | 100.0% | |
As of June 30, 2022 and December 31, 2021, the Company’s debt investments had a weighted average risk rating score of 3.0 for each period.
Notes Offering
Subsequent to quarter end, in July 2022, the Company closed an underwritten public offering of an additional $50.0 million in aggregate principal amount of 7.00% notes due 2025 (the "Notes") and the underwriters subsequently exercised their option to purchase an additional $7.5 million of the Notes. The Notes were issued at 99.52% of the principal amount per note and are traded on the Nasdaq Global Select Market under the trading symbol “TRINL”.
Liquidity and Capital Resources
As of June 30, 2022, the Company had approximately $93.2 million in available liquidity, including $13.2 million in cash and cash equivalents. At the end of the period, the Company had $80.0 million in available borrowing capacity under its credit facility subject to existing terms, advance rates and regulatory and covenant requirements.
As of June 30, 2022, Trinity's leverage or debt-to-equity ratio was approximately 130% as compared to 120% as of March 31, 2022. The increase in the leverage ratio was attributable to borrowings under the Company’s credit facility.
Distributions
On June 15, 2022, the Company’s Board of Directors declared a cash dividend of $0.57 per share with respect to the quarter ended June 30, 2022, which was paid on July 15, 2022, to shareholders of record as of June 30, 2022, consisting of a regular quarterly dividend of $0.42 per share and a supplemental cash dividend of $0.15 per share. The Company’s Board of Directors previously expressed the intent to declare equal supplemental cash dividends of $0.15 per share in the third and fourth quarters of 2022 for a total supplemental cash dividends equal to $0.60 per share in 2022, subject to Board of Director approval each quarter.
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Conference Call
Trinity Capital will hold a conference call to discuss its second quarter 2022 financial results at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) on Thursday, August 4, 2022.
To listen to the call, please dial (866) 342-8591, or (203) 518-9713 internationally, and reference Conference ID: TRINQ222 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) 388-6509 or (402) 220-1111.
About Trinity Capital Inc.
Trinity Capital (Nasdaq: TRIN), an internally managed specialty lending company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended, is a leading provider of debt, including loans and equipment financing, to growth stage companies, including venture-backed companies and companies with institutional equity investors. Trinity's investment objective is to generate current income and, to a lesser extent, capital appreciation through investments consisting primarily of term loans and equipment financings and, to a lesser extent, working capital loans, equity 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.
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, including the impact of the COVID 19 pandemic on the economy, financial markets, our business, our portfolio companies and our industry. 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.
Contact
Vibhor Garg Director, Marketing Trinity Capital, Inc. vgarg@trincapinvestment.com
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TRINITY CAPITAL INC.
Consolidated Statements of Assets and Liabilities
(In thousands, except share and per share data)
| | | | | | | |
|---|---|---|---|---|---|---|
| | **** | June 30, | **** | December 31, | ||
| **** | | 2022 | | 2021 | ||
| | (Unaudited) | | | | ||
| ASSETS | | | ||||
| Investments at fair value: | | | ||||
| Control investments (cost of $36,704 and $38,994, respectively) | | $ | 24,788 | | $ | 32,214 |
| Affiliate investments (cost of $29,604 and $41,609, respectively) | | 23,837 | | 32,192 | ||
| Non-control / Non-affiliate investments (cost of $1,000,290 and $717,253, respectively) | | 1,002,449 | | 809,064 | ||
| Total investments (cost of $1,066,598 and $797,856, respectively) | | 1,051,074 | | 873,470 | ||
| Cash and cash equivalents | | 13,226 | | 31,685 | ||
| Restricted cash | | — | | 15,057 | ||
| Interest receivable | | 8,600 | | 5,551 | ||
| Deferred credit facility costs | | | 2,848 | | | 2,308 |
| Other assets | | 14,432 | | 9,047 | ||
| Total assets | | $ | 1,090,180 | | $ | 937,118 |
| | | | ||||
| LIABILITIES | | | ||||
| KeyBank Credit Facility | | $ | 220,000 | | $ | 81,000 |
| August 2026 Notes, net of $2,391 and $2,679, respectively, of unamortized deferred financing costs | | | 122,609 | | | 122,321 |
| 2025 Notes, net of $3,021 and $3,616, respectively, of unamortized deferred financing costs | | 121,979 | | 121,384 | ||
| December 2026 Notes, net of $1,661 and $1,842, respectively, of unamortized deferred financing costs | | | 73,339 | | | 73,158 |
| Convertible Notes, net of $2,201 and $2,515, respectively, of unamortized deferred financing costs and discount | | | 47,799 | | | 47,485 |
| Credit Suisse Credit Facility | | | — | | | 10,000 |
| Distribution payable | | | 17,873 | | | 9,803 |
| Security deposits | | 12,515 | | 10,840 | ||
| Accounts payable, accrued expenses and other liabilities | | 15,724 | | 14,594 | ||
| Total liabilities | | **** | 631,838 | | **** | 490,585 |
| | | | ||||
| Commitments and contingencies (Note 6) | | | ||||
| | | | ||||
| NET ASSETS | | | ||||
| Common stock, $0.001 par value per share (200,000,000 authorized, 31,355,832 and 27,229,541 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively) | | 31 | | 27 | ||
| Paid-in capital in excess of par | | 430,464 | | 368,609 | ||
| Distributable earnings/(accumulated loss) | | 27,847 | | 77,897 | ||
| Total net assets | | **** | 458,342 | | **** | 446,533 |
| Total liabilities and net assets | | $ | 1,090,180 | | $ | 937,118 |
| NET ASSET VALUE PER SHARE | | $ | 14.62 | | $ | 16.40 |
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TRINITY CAPITAL INC.
Consolidated Statements of Operations
(In thousands, except share and per share data)
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Three Months Ended | | Six Months Ended | ||||||||
| **** | **** | June 30, 2022 | **** | June 30, 2021 | **** | June 30, 2022 | **** | June 30, 2021 | ||||
| INVESTMENT INCOME: | **** | | **** | | | **** | **** | | **** | | | **** |
| Interest income: | | | | | | | ||||||
| Control investments | | $ | 1,365 | | $ | 1,266 | | $ | 2,738 | | $ | 2,572 |
| Affiliate investments | | 433 | | 443 | | 862 | | 882 | ||||
| Non-Control / Non-Affiliate investments | | 30,713 | | 16,405 | | 57,317 | | 31,004 | ||||
| Total interest income | | | 32,511 | | | 18,114 | | | 60,917 | | | 34,458 |
| Fee income: | | | | | | | | | | | | |
| Non-Control / Non-Affiliate investments | | | 947 | | | 1,362 | | | 4,386 | | | 2,337 |
| Total fee income | | | 947 | | | 1,362 | | | 4,386 | | | 2,337 |
| Total investment income | | 33,458 | | 19,476 | | 65,303 | | 36,795 | ||||
| | | | | | ||||||||
| EXPENSES: | | | | | ||||||||
| Interest expense and other debt financing costs | | 7,761 | | 4,425 | | 14,559 | | 9,041 | ||||
| Compensation and benefits | | 6,877 | | 3,370 | | 13,331 | | 7,366 | ||||
| Professional fees | | | 891 | | | 570 | | 1,723 | | 1,216 | ||
| General and administrative | | 1,558 | | 1,031 | | | 3,035 | | | 1,780 | ||
| Total expenses | | 17,087 | | 9,396 | | 32,648 | | 19,403 | ||||
| | | | | | | | | | | | | |
| NET INVESTMENT INCOME (LOSS) BEFORE TAXES | | | 16,371 | | | 10,080 | | | 32,655 | | | 17,392 |
| | | | | | ||||||||
| Excise tax expense | | | 657 | | | — | | | 1,331 | | | 58 |
| | | | | | ||||||||
| NET INVESTMENT INCOME | | 15,714 | | 10,080 | | 31,324 | | 17,334 | ||||
| | | | | | ||||||||
| NET REALIZED GAIN/(LOSS) FROM INVESTMENTS: | | | | | ||||||||
| Control investments | | (228) | | — | | (228) | | — | ||||
| Affiliate investments | | (9,633) | | 1,491 | | (9,633) | | — | ||||
| Non-Control / Non-Affiliate investments | | 244 | | 504 | | 52,888 | | 4,590 | ||||
| Net realized gain/(loss) from investments | | (9,617) | | 1,995 | | 43,027 | | 4,590 | ||||
| | | | | | ||||||||
| NET CHANGE IN UNREALIZED APPRECIATION/(DEPRECIATION) FROM INVESTMENTS: | | | | | ||||||||
| Control investments | | (804) | | (4,530) | | (5,136) | | (12,084) | ||||
| Affiliate investments | | 6,913 | | (1,892) | | 3,650 | | (8,204) | ||||
| Non-Control / Non-Affiliate investments | | (19,929) | | 19,052 | | (89,652) | | 48,394 | ||||
| Net change in unrealized appreciation/(depreciation) from investments | | (13,820) | | 12,630 | | (91,138) | | 28,106 | ||||
| | | | | | | | | | | | | |
| NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | (7,723) | | $ | 24,705 | | $ | (16,787) | | $ | 50,030 |
| | | | | | ||||||||
| NET INVESTMENT INCOME PER SHARE - BASIC | | $ | 0.51 | | $ | 0.38 | | $ | 1.07 | | $ | 0.69 |
| NET INVESTMENT INCOME PER SHARE - DILUTED^(1)^ | | $ | 0.48 | | | 0.38 | | $ | 1.02 | | $ | 0.69 |
| | | | | | ||||||||
| NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE - BASIC & DILUTED | | $ | (0.25) | | $ | 0.93 | | $ | (0.58) | | $ | 2.00 |
| | | | | | ||||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC & DILUTED | | | 30,955,022 | | | 26,478,747 | | | 29,188,790 | | | 25,024,925 |
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Exhibit 99.2
| Second Quarter 2022Investor Presentation | |||
|---|---|---|---|
| © 2022 Trinity Capital Inc. | 2FORWARD LOOKING STATEMENTS | DISCLAIMER<br>Trinity Capital Inc. (the “Company”) cautions that this presentation may contain forward‐looking statements that are based on current expectations and assumptions about future events, and which are not based in historical fact. The forward‐looking statements in this presentation are based on current conditions as of the date of this presentation, and include, but are not limited to, statements regarding our financial objectives, beliefs, strategies, anticipated future operating results and cash flows, operating expenses, investment originations and performance, available capital, and payment of future dividends and stockholder returns. Although our management believes that the expectations reflected in any forward‐looking statements are reasonable, actual results could differ materially from those expressed or implied in the forward‐looking statements. By their nature, these forward‐looking statements involve numerous assumptions, uncertainties and risks, both general and specific. The risk exists that these statements may not be fulfilled. We caution readers of this presentation not to place undue reliance on these forward‐looking statements, as a number of factors could cause future Company results to differ materially from these statements. Forward‐looking statements may be influenced in particular by factors such as fluctuations in interest rates and stock indices, the effects of competition in the areas in which we operate, and changes ineconomic, political and regulatory conditions, including as a result of the coronavirus (COVID‐19) pandemic. When relying on forward‐looking statements to make decisions, investors should carefully consider the aforementioned factors as well as other uncertainties and events. Historical results discussed in this presentation are not indicative of future results. The information disclosed in this presentation is made as of the date hereof and reflects Trinity Capital Inc.’s current assessment of its financial performance for the most recent period reported. Actual financial results filed with the Securities and Exchange Commission in the future may differ fromthose contained herein in the event of additional adjustments recorded prior to the filing of its financial statements. The information contained in this presentation should be viewed in conjunction with Trinity Capital Inc.'s most recently filed Quarterly Report on Form 10‐Q, Annual Report on Form 10‐K or Registration Statement on Form 424B1. We undertake no obligation to update the information contained herein to reflect subsequently occurring events or circumstances, except as required by applicable securities laws and regulations.This presentation does not constitute a prospectus and should under no circumstances be understood as an offer to sell or thesolicitation of an offer to buy our common stock or any other securities nor will there be any sale of the common stock or any other securities referred to in this presentation in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of such stateor jurisdiction. Nothing in these materials should be construed as a recommendation to invest in any securities that may be issued by Trinity Capital Inc. or as legal, accounting or tax advice. | |
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| © 2022 Trinity Capital Inc. | 3<br>Company OverviewFinancial HighlightsPortfolio HighlightsVenture Capital and Lending Market411202731Supplemental Information33Analyst CoverageINVESTOR PRESENTATION | AGENDA | |
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| COMPANYOVERVIEW | |||
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| © 2022 Trinity Capital Inc. | 5<br>Market Capitalization<br>14 Year Track Record(4)<br>Annualized Dividend Yield<br>Portfolio(2)<br>$93.2 MillionAvailable Liquidity<br>Liquidity(2)<br>75 Companies Warrant Positions23 CompaniesEquity Positions$35.2 BillionOpportunities$2.2 BillionFundings268Investments148Exits84 Companies Debt Positions<br>Internally Managed -Business Development Company | Nasdaq -TRIN<br>Structure | TickerBBBInvestment Rating(5)130%Debt to EquityTRINITY CAPITAL OVERVIEW<br>Secured loans and equipment financing to growth stage companies backed by technology banks, venture capital and private equity firms<br>Business(4) Historical information includes information and data related to Trinity Capital's predecessor funds, the first of which was launched in 2008, through June 30, 2022. The predecessor funds were merged with and into Trinity Capital on January 16, 2020, immediately after which Trinity Capital began operating as a business development company.(1) Based on the closing price of TRIN on August 3, 2022.(5) Credit rating assigned by Egan-Jones Ratings Company, an independent, unaffiliated rating agency. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time. There can be no assurance that this rating will remain for any given period-of-time.(2) As of June 30, 2022.<br>$14.62(2)NAV per Share$469.2 Million(1)Market Cap15.8%(3)June 30, 2022(3) Annualized based on the $0.57 dividend (including $0.15 supplemental dividend) declared for Q2 2022 and a closing stock price of $14.47 on June 30, 2022 |
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| © 2022 Trinity Capital Inc. | 6<br>We understand the growth stage world and provide more than money to our portfolio company partnersDeep OperatingExperienceHighly experienced executive team with startup experienceDecades of in-depth high-tech experienceNumerous U.S. and International patents issuedOne Stop –Loans & Equipment FinancingProviding term loans and equipment financing to growth stage companiesFlexible financing solutions based on the company’s requirementFinancing solutions to a highly fragmented, underserved marketRobust & Scalable PlatformRobust and scalable systems for origination, underwriting and monitoringSeparation of origination, underwriting and monitoring duties aides “positive feedback” loop52 dedicated professionals with a unique culture built over 14+ yearsWHY IS TRINITY DIFFERENT | ||
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| © 2022 Trinity Capital Inc. | 7<br>Term Loans<br>Axiom Space is developing the world’s first commercial space station. InvestorSyndicateC5 Capital, TQS Advisors, Declaration PartnersUse of LoanGeneral corporate purposes<br>Petal's aim is to bring financial innovation and opportunity to everyone, using modern technology to help people build credit, avoid debt, and spend responsibly. InvestorSyndicateTarsadiaInvestments, ValarVentures, CUNA Mutual Use of LoanExtension of runwaySelect ExamplesSENIOR & SUBORDINATED TERM LOANS<br>g20g21g55g41g50g45g51g54g4g19g4g55g57g38g51g54g40g45g50g37g56g41g40g4g48g51g37g50g59g83g86g79g4g59g77g88g76g4g56g76g73g4g38g69g82g79g87<br>g20g22g38g37g39g47g41g40g4g38g61g4☺g50g55g56g45g56g57g56g45g51g50g37g48g4g39g37g52g45g56g37g48g39g83g81g84g69g82g77g73g87g4g44g69g90g73g4g54g69g77g87g73g72g4g41g85g89g77g88g93g4<br>g20g23g55g56g45g48g48g4g38g57g54g50g45g50g43g4g39g37g55g44g39g83g81g84g69g82g77g73g87g4g77g82g4g43g86g83g91g88g76g4g49g83g72g73g4g69g82g72g4g55g88g77g80g80g4g38g89g86g82g77g82g75g4g39g69g87g76 | ||
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| © 2022 Trinity Capital Inc. | 8<br>Equipment Financing<br>Select ExamplesEQUIPMENT FINANCING<br>g20g21g39g51g49g52g37g50g45g41g55g4g59g45g56g44g4g39g37g52g41g60g4g54g41g53g57g45g54g41g49g41g50g56g55g49g69g82g89g74g69g71g88g89g86g77g82g75g4g41g85g89g77g84g81g73g82g88g4g69g82g72g4g44g69g86g72g4g37g87g87g73g88g87<br>g20g22g44g37g54g40g59g37g54g41g4g37g55g4g37g4g55g41g54g58g45g39g41g41g85g89g77g84g81g73g82g88g4g69g88g4g39g89g87g88g83g81g73g86g4g48g83g71g69g88g77g83g82<br>g20g23☺g50g40g57g55g56g54g61g4g37g43g50g51g55g56g45g39<br>Nature’s Fyndis a food company creating versatile alternative proteins to nourish the world’s growing popula-tion while nurturing the planet.InvestorSyndicateSoftBank, Breakthrough Energy Ventures, Blackstone Strategic PartnersUse of Equipment FinancingFood production equipmentEmerald Cloud Labis a remote-controlled life science laboratory that allows scientists to conduct their<br>experiments without being anchored to a physical lab.InvestorSyndicateFounders Fund,Schooner Capital, Alcazar CapitalUse of Equipment FinancingLaboratory Equipment | ||
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| © 2022 Trinity Capital Inc. | 9Multiple shared portfolio companieswith top Venture Capital Firms<br>We have established inter-creditoragreements with the banks<br>Combining with bank debt results in a lower blendedcostto our customers<br>We provide equipment financing and incremental debt capitalRelationships with top market share bankscatering to majority of VC-backed companies<br>PARTNERSHIP WITH TOP VCs ANDTECHNOLOGY BANKS | ||
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| © 2022 Trinity Capital Inc. | 10<br>Investor SyndicateRevenue & Gross MarginsBusiness Model(1)Includes historical information of Trinity Capital's predecessor funds, the first of which was launched in 2008, through June30, 2022. Past performance is not indicative of future results. Investment results may vary significantly over any given time period.FINANCIALSDEBT STRUCTURECAPITALIZATIONMANAGEMENTPRODUCT & MARKETProduct DifferentiationMarket PotentialIndustry & Start-up ExperienceBOD Make-upFund Vintage & Dry CapitalCollateralCash LifeUNDERWRITING APPROACH AND RISK MITIGATIONDisciplined investment approach keeps our annualized loss rate at 25 Bps and is more than offset by realized gains on warrant/equity investments(1) | ||
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| FINANCIAL HIGHLIGHTS | |||
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| © 2022 Trinity Capital Inc. | 12Total Investment Income of $33.5MNet Investment Income (“NII”) of $15.7MNet Interest Margin (“NIM”) of 10.6%NII per share of $0.51 provides 121.4% of regular distribution coverageIncreased the second quarter dividend distribution to $0.42 per share, a 5% increase over the dividend declared in the prior quarterDeclared supplemental dividend of $0.15 per shareRobust EarningsLeading Originations PlatformPortfolio AssetsLiquidityCredit RatingTotal Debt Investments (at cost): $1,008.0MTotal Investments (at cost): $1,066.6MEffective Yield: 13.8%Core Yield: 12.9%Debt & equity commitments in 2Q22: $302.3MDebt & equity fundings in 2Q22: $193.8MNet portfolio growth at Cost: $145.5MNet portfolio growth at FMV: $131.7MAvailable Liquidity: $93.2M (subject to existing terms and covenants of the Company’s credit facility)Debt to Equity: 130%<br>Egan Jones BBB(1)Stable OutlookQ2 2022 HIGHLIGHTS(1) Credit rating assigned by Egan-Jones Ratings Company, an independent, unaffiliated rating agency. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time. There can be no assurance that this rating will remain for any given period of time. | ||
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| © 2022 Trinity Capital Inc. | 13<br>For the three months ended (In 000’s, except per share amounts)06/30/202203/31/202212/31/202109/30/202106/30/2021Total Investment Income$33,458$31,845$23,607$21,790$19,476Interest expense and other debt financing costs7,7616,7986,2415,1124,425Compensation and benefits6,8776,4554,4753,6773,370General and administrative3,1062,9832,3151,8781,601Total Operating Expenses17,74416,23613,03110,6679,396Net Investment Income (NII)15,71415,60910,57611,12310,080Net Realized Gain / (Loss) from Investments(9,617)52,6447,4526661,995Net Change in Unrealized Appreciation / (Depreciation) from Investments(13,820)(77,318)37,08215,39212,630Net Increase (Decrease) in Net Assets from Operations$(7,723)$(9,065)$55,110$27,181$24,705Net Investment Income (NII) per Share –Basic$0.51$0.57$0.39$0.42$0.38Net Increase (Decrease) in Net Assets resulting from Operations per Share –Basic$(0.25)$(0.33)$2.03$1.02$0.93Weighted Average Shares Outstanding –Basic30,95527,41727,20126,64126,479QUARTERLY INCOME STATEMENT | ||
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| © 2022 Trinity Capital Inc. | 14INCOME SOURCE & PORTFOLIO YIELD TRENDS<br>$521$578$741$865$1,008<br>15.9%15.8%15.2%16.3%13.8%<br>13.4%13.1%13.2%12.9%12.9%<br>10.8%10.8%10.8%10.7%11.6%8.0%9.0%<br>10.0%<br>11.0%12.0%13.0%<br>14.0%<br>15.0%16.0%17.0% $200 $300 $400 $500 $600 $700 $800 $900 $1,000 $1,1002Q213Q214Q211Q222Q22PORTFOLIO YIELDS<br>Total Debt Investments (Cost, $ in million)<br>Effective Yield (including fee income)<br>Core Yield (excluding fee income)<br>Weighted Average Coupon RateStrong Yields Produce Solid Investment Income<br>61.9%64.6%69.8%60.3%71.3%21.0%18.3%17.5%19.0%21.6%17.1%17.1%12.7%20.7%7.1% $‐ $3,000 $6,000 $9,000 $12,000 $15,000 $18,000 $21,000 $24,000 $27,000 $30,000 $33,0002Q213Q214Q211Q222Q22SOURCES OF INVESTMENT INCOME<br>Loans ‐ Cash + OID<br>Equipment Financing ‐ Cash + OID<br>Accelerated OID + Fees | ||
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| © 2022 Trinity Capital Inc. | 15<br>NET INVESTMENT INCOME (NII) PER SHARE BRIDGE | ||
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| © 2022 Trinity Capital Inc. | 16<br>(In 000’s, except per share amounts)06/30/202203/31/202212/31/202109/30/202106/30/2021AssetsTotal investments at fair value$ 1,051,074 $919,348$873,470$677,246$597,696Cash and cash equivalents13,22628,68431,68525,31319,124Restricted cash--15,05715,00015,341Interest receivable8,6006,4825,5514,4814,065Other assets17,28011,42511,3555,3675,221Total Assets$1,090,180$965,939$937,118$727,407$641,447LiabilitiesCredit facilities$220,000$134,000$91,000$9,474$68,947August 2026 Notes, net of unamortized deferred financing cost122,609122,465122,321122,436-2025 Notes, net of unamortized deferred financing cost121,979121,681121,384121,098120,832December 2026 Notes, net of unamortized deferred financing cost73,33973,25173,158--Convertible Notes, net of unamortized deferred financing cost and discount47,79947,63947,48547,35047,214Distribution payable17,87315,3899,8038,9597,682Security deposits12,51511,54910,8407,7058,812Accounts payable, accrued expenses, and other liabilities15,72415,92414,59411,3798,240Total Liabilities$631,838$541,898$490,585$328,401$261,727Net Assets$458,342$424,041$446,533$399,006$379,720Shares outstanding31,35627,98327,23027,14826,491Net Assets per Share (NAV per share)$14.62$15.15$16.40$14.70$14.33BALANCE SHEET | ||
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| © 2022 Trinity Capital Inc. | 17<br>NET ASSET VALUE (NAV) PER SHARE BRIDGE | ||
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| © 2022 Trinity Capital Inc. | 18Diversified Borrowings ($ in million) at 6/30/2022<br>Funding SourceDebt CommitmentOutstanding PrincipalUndrawn CommitmentStated MaturityInterest RateNotes:2025 Unsecured Notes (1)$125 (1)$125 (1)-January 16, 2025 (2)7.0%Convertible Notes$50$50-December 11, 20256.0%<br>August 2026 Unsecured Notes$125$125-August 24, 20264.375%<br>December 2026 Unsecured Notes$75$75-December 15, 20264.25%Bank Facility:KeyBank Credit Facility$400$220$180October 27, 2026Adjusted Term SOFR + 2.85%DEBT CAPITAL STRUCTURE<br>(1)Subsequent to quarter-end, the Company issued an additional $57.5M of the 2025 Unsecured Notes and began trading on the Nasdaq Global Select Market under the symbol “TRINL.”(2)Callable at par in January 2023. | ||
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| © 2022 Trinity Capital Inc. | 19<br>Distributable Net Income covered regular dividends by 121.4% in 2Q22Supplemental Dividend of $0.15 from 2021 spillover incomeStrong Earnings and Dividend GrowthSOLID SHAREHOLDER RETURNS<br>$0.49 $0.76 $1.03 $1.31 $1.60 $1.93 $2.29 $2.69 $3.11 $0.15$0.30<br>$0.22$0.27$0.27$0.28$0.29$0.33$0.36$0.40$0.42$0.00$0.05$0.10$0.15<br>$0.20<br>$0.25<br>$0.30$0.35$0.40<br>$0.45$0.00$0.50$1.00$1.50$2.00$2.50<br>$3.00$3.502Q203Q204Q201Q212Q213Q214Q211Q222Q22Dividend Growth<br>Cumulative Regular Dividends<br>Cumulative Supplemental Dividends<br>Quarterly Dividends | ||
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| PORTFOLIOHIGHLIGHTS | |||
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| (1)Based on Fair Market Value© 2022 Trinity Capital Inc. | 21Industry Diversification(1)Geography Diversification(1)<br>25.4%24.3%8.0%6.7%6.6%4.8%3.8%20.4%<br>Professional, Scientific, and Technical ServicesManufacturingInformationHealthcare and Social AssistanceReal EstateRetail TradeFinance and InsuranceIndustry Diversification(1)Other <= 3.5% individual industry<br>45.1%<br>45.1%9.9%9.9%5.0%5.0%9.7%9.7%0.6%0.6%22.1%22.1%International7.6%PORTFOLIO DIVERSIFICATIONAt June 30, 2022 | ||
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| © 2022 Trinity Capital Inc. | 22PORTFOLIO SUMMARY(1)Based on Fair Market Value<br>$551,894 $184,074 $100,732 $36,770 Total Portfolio: By TypeAt Fair Value as of December 31, 2021In $000<br>Secured LoanEquipment FinancingEquityWarrant<br>$769,659 $224,934 $23,289 $33,192 Total Portfolio: By TypeAt Fair Value as of June 30, 2022In $000<br>Secured LoanEquipment FinancingEquityWarrant<br>June 30, 2022December 31, 2021CostFair ValueCostFair ValueTypeAmount%Amount%Amount%Amount%Secured Loan$776,52472.9%$769,65973.2%$557,62769.8%$551,89463.2%Equipment Financing231,47521.7%224,93421.4%183,29823.0%184,07421.1%Equity37,8583.5%23,2892.2%42,0465.3%100,73211.5%Warrants20,7411.9%33,1923.2%14,8851.9%36,7704.2%Total$1,066,598100.0%$1,051,074100.0%$797,856100.0%$873,470100.0% | ||
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| © 2022 Trinity Capital Inc. | 23(1)Based on outstanding principal(2)Based on Fair Market Value<br>50.7%40.0%43.2%40.4%35.6%49.3%60.0%56.8%59.6%64.4%2Q213Q214Q211Q222Q22FIXED VS FLOATING DEBT INVESTMENTS(1)<br>Fixed<br>Floating<br>66.4%69.2%63.2%70.6%73.2%20.2%16.1%21.1%22.2%21.4%8.8%10.6%11.5%2.6%2.2%4.6%4.1%4.2%4.6%3.2%2Q213Q214Q211Q222Q22TOTAL PORTFOLIO BY INVESTMENT TYPE(2)<br>Loans<br>Equipment Finance<br>Equity<br>WarrantPivoting to floating rate portfolio<br>Strong Asset Diversification<br>PORTFOLIO TRENDS | ||
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| © 2022 Trinity Capital Inc. | 24HYPOTHETICAL WARRANT UPSIDE<br>•Investment of $20.9 million (50%)•Proceeds of $41.9 million (2X)•Cost of $31.3 million •Potential gain of $10.6 millionor $0.34 per share<br>•Investment of $20.9 million (50%)•Proceeds of $62.8 million (3X)•Cost of $31.3 million •Potential gain of $31.5 millionor $1.01 per share<br>•Investment of $20.9 million (50%)•Proceeds of $83.9 million (4X)•Cost of $31.3 million •Potential gain of $52.5 millionor $1.67 per shareRecent and Pending Portfolio Company M&A Liquidity EventsFootprint and E la Carte (dba Presto) have entered into definitive merger agreements with Special Purpose Acquisition Companies (SPACs)125 Warrant Positions in 75 Portfolio CompaniesGAAP fair value ~ $33.2 millionGAAP cost ~ $20.7 million~ $41.9 million in nominal exercise value Hypothetical Models of Potential Warrant Gains at 6/30/22Assume that only 50% of warrants will monetizeCost of exercised warrants is ~ $31.3 millionBased on 31.4 million shares of common stock outstanding at 6/30/22<br>MULTIPLE<br>MULTIPLE<br>MULTIPLE<br>2X<br>3X4XFor Illustration Purposes Only | ||
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| © 2022 Trinity Capital Inc. | 25<br>$518$578$736$854$995<br>3.13.13.03.03.011.522.5<br>3<br>3.5 $‐ $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 $1,1002Q213Q214Q211Q222Q22<br>Total Debt Investments (FV, $ in million)<br>Weighted Investment Credit Rating<br>2Q221Q224Q213Q212Q21Very Strong Performance (4.0 –5.0)$62,7196.3%$80,5929.4%$84,78511.5%$62,87210.9%$83,91516.2%Strong Performance (3.0 –3.9)$382,59338.5%$332,01938.9%$236,46632.1%$224,28738.8%$204,90639.5%Performing (2.0 –2.9)$529,28553.2%$429,04450.3%$396,84653.9%$267,39146.3%$199,44938.5%Watch (1.6–1.9)$18,7061.9%$8,8581.0%$13,4271.8%$16,1942.8%$29,8205.7%Default/Workout (1.0 –1.5)$1,2900.1%$3,2860.4%$4,4440.6%$6,9191.2%$3430.1%Weighted Average3.03.13.03.13.1Credit risk rating at Fair Value, 2Q 2022 –2Q 2021 ($ in thousands)Consistent and Disciplined Underwriting StandardsDISCIPLINED CREDIT RATING | ||
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| © 2022 Trinity Capital Inc. | 26<br>Select List of Current & Historical InvestmentsDIVERSIFIED PORTFOLIO | ||
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| VENTURE CAPITALAND LENDING MARKET | |||
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| © 2022 Trinity Capital Inc. | 28US VC Deal ActivityVENTURE CAPITAL MARKET<br>Source: Pitchbook NVCA Venture Monitor Q2 2022<br>$30$38$37$28$32$45<br>$42$50$73<br>$86<br>$83$89$145<br>$146$167$342<br>$1443,402 4,401 4,868 4,587 5,567 6,910 8,061 9,932 10,866 11,543 10,389 11,303 11,900 12,899 12,578 17,637 9,421 ‐ 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 $‐ $50 $100 $150 $200 $250 $300 $350 $40020062007200820092010201120122013201420152016201720182019202020211H22# of DealsDollar Invested (billions)<br>VC dollars<br># of deals | ||
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| © 2022 Trinity Capital Inc. | 29US VC Fundraising ActivityVENTURE CAPITAL FUNDRAISING<br>Source: Pitchbook NVCA Venture Monitor Q2 2022<br>$34$30<br>$18<br>$17<br>$25<br>$23<br>$23<br>$38$44$52<br>$44<br>$61<br>$71<br>$85<br>$139<br>$122 $‐ $20 $40 $60 $80 $100 $120 $140 $1602007200820092010201120122013201420152016201720182019202020211H22Billions<br>Capital Raised ($) | ||
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| © 2022 Trinity Capital Inc. | 30VENTURE DEBT MARKET<br>$4$8$8<br>$11<br>$17<br>$15<br>$15<br>$25<br>$32<br>$33$34$151,075 1,370 1,656 2,033 2,561 2,434 2,660 2,783 3,177 3,075 3,456 1,221 ‐ 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 $‐ $5 $10 $15 $20 $25 $30 $35 $40201120122013201420152016201720182019202020211H22# of DealsDollar Invested (billions)<br>Venture Debt<br># of deals<br>US Venture Debt Deal ActivitySource: Pitchbook NVCA Venture Monitor Q1 2022 | ||
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| ANALYST COVERAGE | |||
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| © 2022 Trinity Capital Inc. | 32Followed by Six FirmsTrinity Capital is followed by the analysts listed above. Please note that any opinions, estimates or forecasts regarding Trinity Capital’s performance made by these analysts are theirs alone and do not representopinions, forecasts or predictions of Trinity Capital or its management. Trinity Capital does not by its reference above or distribution imply its endorsement of or concurrence with such information, conclusions orrecommendations.<br>Ryan Lynch(initiated coverage 2/23/21)<br>Finian O’Shea(initiated coverage 2/23/21)Vilas Abraham(initiated coverage 2/23/21)Casey Alexander(initiated coverage 2/23/21)Christopher Nolan(initiated coverage 2/23/21)EXTENSIVE INDUSTRY ANALYST COVERAGE<br>Mitchell Penn(initiated coverage 5/3/21) | ||
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| SUPPLEMENTAL INFORMATION | |||
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| © 2022 Trinity Capital Inc. | 34BUSINESS DEVELOPMENT COMPANY (BDC)REGULATED INVESTMENT COMPANY (RIC)Trinity Capital Inc. is an Internally Managed BDC under the 1940 Act and has elected to be treated as a RIC for Federal Income Tax Purposes beginning with its Taxable Year ending December 31, 2020Regulated by the SEC under the Investment Company Act of 1940 (the “1940 Act”)Leverage limited to approximately 2:1 debt/equityInvestments are required to be carried at fair valueMajority of Board of Directors must be independentOffer managerial assistance to portfolio companiesDistribute taxable income as dividend distributions to shareholders, subject to approval by Trinity Capital’s Board of DirectorsMandates asset diversificationEliminates corporate taxation Allows for the retention of capital gains and/or spillover of taxable incomeREGULATION & STRUCTURE | ||
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| We look forward to our growing partnership.THANK YOU | |||
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