PHOENIX, Nov. 1, 2023
/PRNewswire/ -- Trinity Capital Inc. (Nasdaq: TRIN)
("Trinity Capital" or the "Company"), a leading provider of
diversified financial solutions to growth-stage companies, today
announced its financial results for the quarter ended September 30, 2023.
Third Quarter 2023 Highlights
- Total investment income of $46.4 million, an increase of
20.0% year-over-year
- Net investment income ("NII") of $23.4 million, or $0.58 per basic share, an increase of
25.6% year-over-year
- Net increase in net assets resulting from operations of
$16.8 million, or $0.42 per basic share
- 17.6% Return on Average Equity "ROAE" (NII/Average
Equity)
- 8.0% Return on Average Assets "ROAA" (NII/Average
Assets)
- An increase in Net Asset Value to $13.17 per share
- Aggregate debt and equity investment commitments of
$228.3 million
- Total gross investments funded of $149.1 million, comprised of $81.2 million in five new
portfolio companies, $65.9 million across 10 existing
portfolio companies and $2.0 million into the joint venture (the
"JV")
- Debt principal repayments of $176.7 million, including $101.1 million from early repayments and
refinancings, $42.1 million from
scheduled/amortizing repayments and $33.5 million of assets sold to the JV
- Declared an 11th consecutive regular dividend
increase, with the third-quarter distribution coming in at
$0.54 per share, consisting of a
regular dividend of $0.49 per share,
an increase of 2.1% from the regular dividend declared in the
second quarter of 2023, and a supplemental cash dividend of
$0.05 per share
"We're very pleased with our overall third quarter performance
and record NII," said Steve Brown,
Chairman and Chief Executive Officer of Trinity Capital. "Our
unique lending platform positions us as the partner of choice for
our portfolio companies as we support them through their various
growth stages, all while generating meaningful returns for our
shareholders."
"The team has done a great job managing the portfolio and we
continue to see strong equity support from the sponsors of our
companies," added Kyle Brown,
President and Chief Investment Officer of Trinity Capital. "The
opportunity to invest in solid performing companies is accelerating
as they increasingly turn to direct lending solutions to fuel their
growth, and we stand ready to assist them with our diverse
offerings using our combination of on- and off-balance sheet
capital."
Third Quarter 2023 Operating Results
For the three months ended September 30, 2023, total
investment income was $46.4 million compared
to $38.7 million for the quarter
ended September 30, 2022. The effective yield on the average
debt investments at cost was 16.7% and 15.2% for the
periods ended September 30, 2023 and 2022, 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 third quarter of 2023
were $12.2 million compared
to $10.8 million during the third quarter of 2022.
The increase was primarily attributable to higher compensation
associated with additional headcount and amortization of restricted
stock grants.
Interest expense for the third quarter of 2023
was $10.8 million compared
to $9.3 million during the third quarter of 2022.
The increase is primarily attributable to an increase in average
debt outstanding and an increase in the weighted average interest
rate on total debt.
Net investment income was approximately $23.4 million,
or $0.58 per share, based on 40.1 million basic
weighted average shares outstanding for the third quarter of 2023,
compared to $18.6 million, or $0.56 per
share, for the third quarter of 2022 based on 33.1 million basic
weighted average shares outstanding.
Net unrealized depreciation of $4.7
million during the third quarter of 2023 was primarily
attributable to $10.5 million of
depreciation related to credit-specific adjustments and
$0.4 million related to the impact of
interest rate changes, partially offset by the flip of $4.1 million to realized losses and $2.1 million of appreciation related to general
market conditions.
For the third quarter, net realized loss on investments was
approximately $1.9 million, primarily attributable to the
loss in one portfolio company that was previously written down on
an unrealized basis in prior quarters.
In the third quarter, net increase in net assets resulting from
operations was $16.8 million, or $0.42 per
share, based on 40.1 million basic weighted average shares
outstanding. This compares to a net decrease in net assets
resulting from operations of $12.0
million, or $0.36 per share, based on
33.1 million basic weighted average shares outstanding for the
third quarter of 2022.
Trinity Capital's higher weighted average shares outstanding for
the three-month period ended September 30,
2023, as compared to the prior year, is primarily the result
of shares issued during the quarter.
Net Asset Value
Total net assets at the end of the third quarter of 2023
increased by 18.2% to $569.5 million, compared to $482.0 million at the end of the second
quarter of 2023. The increase in total net assets was primarily
driven by net investment income that exceeded the declared
dividends as well as the issuance of common stock at a premium to
NAV per share, partially offset by net realized and unrealized
losses on investments. As a result, NAV improved to $13.17 from $13.15 per share.
Portfolio and Investment Activity
As of September 30, 2023, Trinity
Capital's investment portfolio had an aggregate fair value of
approximately $1.1 billion and
was comprised of approximately $840.7
million in secured loans, $223.2 million in equipment financings and
$52.7 million in equity and
warrants across 121 portfolio companies. The Company's debt
portfolio is comprised of 74.5% first lien loans and
25.5% second lien loans, with 73.8% of the debt portfolio at
floating rates based on principal outstanding.
During the third quarter, the Company originated approximately
$228.3 million of total new
commitments and funded approximately $149.1 million, which was comprised of
$81.2 million of investments in
five new portfolio companies, $65.9 million of investments in 10 existing
portfolio companies and a $2.0 million investment in the JV. Gross
investment fundings during the quarter for secured loans totaled
$140.7 million, equipment
financings totaled $3.1 million and
warrant and equity investments totaled $5.3 million.
Proceeds received from repayments of the Company's debt
investments during the third quarter totaled approximately
$176.7 million, which included
$33.5 million of investments
sold to the JV, $42.1 million
from normal amortization and $101.1 million from early debt repayments
and refinancings. The investment portfolio decreased by
$26.8 million on a cost basis, a
decrease of 2.3%, and $31.5 million
on a fair value basis, a decrease of 2.7%, as compared to
June 30, 2023. Total assets under
management, including the assets in the JV, totaled $1.3 billion.
As of the end of the third quarter, secured loans to
two portfolio companies and equipment financings to two
portfolio companies were on non-accrual status with a total fair
value of approximately $28.0 million, or 2.6% of the Company's
debt investment portfolio at fair value.
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 September 30, 2023 and December 31, 2022 (dollars in thousands):
|
|
|
|
September 30,
2023
|
|
December 31,
2022
|
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
|
|
$
|
34,728
|
|
3.3 %
|
|
$
|
2,729
|
|
0.3 %
|
3.0 - 3.9
|
|
Strong
Performance
|
|
|
225,408
|
|
21.2 %
|
|
|
239,872
|
|
22.9 %
|
2.0 - 2.9
|
|
Performing
|
|
|
740,097
|
|
69.6 %
|
|
|
756,596
|
|
72.1 %
|
1.6 - 1.9
|
|
Watch
|
|
|
38,584
|
|
3.6 %
|
|
|
39,315
|
|
3.7 %
|
1.0 - 1.5
|
|
Default/Workout
|
|
|
17,540
|
|
1.6 %
|
|
|
10,317
|
|
1.0 %
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt Investments
excluding Senior Credit Corp 2022 LLC
|
|
|
1,056,357
|
|
99.3 %
|
|
|
1,048,829
|
|
100.0 %
|
|
|
Senior Credit Corp 2022
LLC
|
|
|
7,484
|
|
0.7 %
|
|
|
—
|
|
—
|
Total Debt
Investments
|
|
$
|
1,063,841
|
|
100.0 %
|
|
$
|
1,048,829
|
|
100.0 %
|
As of September 30, 2023, the
Company's loan and equipment financing investments had a weighted
average risk rating score of 2.8, as compared to 2.8 as of
June 30, 2023. The Company'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 its 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
from quarter to quarter.
Liquidity and Capital Resources
As of September 30, 2023, the
Company had approximately $257.2 million in available liquidity,
including $7.2 million in unrestricted cash and cash
equivalents. At the end of the period, the Company had
approximately $250.0 million in
available borrowing capacity under its credit facility with
KeyBank, subject to existing terms and advance rates and regulatory
and covenant requirements.
As of September 30, 2023, Trinity Capital's leverage or
debt-to-equity ratio was approximately 94% as compared to
138% as of June 30, 2023. The decrease in the
leverage ratio was primarily attributable to repayments on the
credit facility from the net proceeds received from stock issuances
during the quarter.
During the three months ended September
30, 2023, Trinity Capital utilized its ATM offering program
to sell 863,970 shares of its common stock at a weighted average
price of $14.55 per share, raising
$12.3 million of net proceeds.
Secondary Offering
In August 2023, the Company closed
an underwritten public offering of 5,190,312 shares of its common
stock at a public offering price of $14.45 per share, resulting in net proceeds to
the Company of approximately $72.5
million, after deducting discounts and commissions and
offering expenses. In connection with the offering, the
underwriters exercised their option in part to purchase 500,000
additional shares of common stock resulting in additional net
proceeds to the Company of $6.9
million.
Distributions
On September 13, 2023, the
Company's Board of Directors declared a regular and supplemental
dividend totaling $0.54 per
share with respect to the quarter ended September 30, 2023, which was paid on
October 13, 2023, to stockholders of
record as of September 30, 2023. The
Board of Directors generally determines and announces the Company's
dividend distribution on a quarterly basis.
CEO Transition
On September 6, 2023, the Company
announced that, as part of the Company's long-term succession plan,
its Board of Directors has named Kyle
Brown as Chief Executive Officer, effective January 1, 2024. At the same time, Trinity's
current CEO, Steve Brown, will
become Executive Chairman of the Board of Directors and remain a
voting member of the Company's investment committee.
Conference Call
Trinity Capital will hold a conference call to discuss its third
quarter 2023 financial results today at 9:00
a.m. Pacific Time (12:00 p.m. Eastern
Time).
To listen to the call, please dial (800) 225-9448, or (203)
518-9708 internationally, and reference Conference ID: TRINQ323 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 (888) 214-9523 or
(402) 220-4935.
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, 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)
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2023
|
|
|
2022
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Investments at fair
value:
|
|
|
|
|
|
|
Control investments
(cost of $44,046 and $43,375, respectively)
|
|
$
|
33,120
|
|
|
$
|
37,313
|
|
Affiliate investments
(cost of $10,692 and $28,580, respectively)
|
|
|
11,143
|
|
|
|
1,528
|
|
Non-Control /
Non-Affiliate investments (cost of $1,097,814 and $1,081,629,
respectively)
|
|
|
1,072,289
|
|
|
|
1,055,545
|
|
Total investments
(cost of $1,152,552 and $1,153,584, respectively)
|
|
|
1,116,552
|
|
|
|
1,094,386
|
|
Cash and cash
equivalents
|
|
|
7,230
|
|
|
|
10,612
|
|
Interest
receivable
|
|
|
10,920
|
|
|
|
9,971
|
|
Deferred credit
facility costs
|
|
|
2,334
|
|
|
|
2,903
|
|
Other
assets
|
|
|
13,890
|
|
|
|
8,567
|
|
Total
assets
|
|
$
|
1,150,926
|
|
|
$
|
1,126,439
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
KeyBank Credit
Facility
|
|
$
|
100,000
|
|
|
$
|
187,500
|
|
2025 Notes, net of
$2,498 and $3,948, respectively, of unamortized deferred financing
costs
|
|
|
180,002
|
|
|
|
178,552
|
|
August 2026 Notes, net
of $1,670 and $2,103, respectively, of unamortized deferred
financing costs
|
|
|
123,330
|
|
|
|
122,897
|
|
December 2026 Notes,
net of $1,195 and $1,474, respectively, of unamortized deferred
financing costs
|
|
|
73,805
|
|
|
|
73,526
|
|
Convertible Notes, net
of $1,403 and $1,882, respectively, of unamortized deferred
financing costs and discount
|
|
|
48,597
|
|
|
|
48,118
|
|
Distribution
payable
|
|
|
23,353
|
|
|
|
21,326
|
|
Security
deposits
|
|
|
14,464
|
|
|
|
15,100
|
|
Accounts payable,
accrued expenses and other liabilities
|
|
|
17,912
|
|
|
|
19,771
|
|
Total
liabilities
|
|
|
581,463
|
|
|
|
666,790
|
|
|
|
|
|
|
|
|
NET
ASSETS
|
|
|
|
|
|
|
Common stock, $0.001
par value per share (200,000,000 authorized,
43,246,612 and
34,960,672 shares issued and outstanding as of
September 30, 2023 and
December 31, 2022, respectively)
|
|
|
43
|
|
|
|
35
|
|
Paid-in capital in
excess of par
|
|
|
590,819
|
|
|
|
480,532
|
|
Distributable
earnings/(accumulated deficit)
|
|
|
(21,399)
|
|
|
|
(20,918)
|
|
Total net
assets
|
|
|
569,463
|
|
|
|
459,649
|
|
Total liabilities
and net assets
|
|
$
|
1,150,926
|
|
|
$
|
1,126,439
|
|
NET ASSET VALUE PER
SHARE
|
|
$
|
13.17
|
|
|
$
|
13.15
|
|
TRINITY
CAPITAL INC.
Consolidated
Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
|
|
|
|
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
September 30, 2023
|
|
|
September 30, 2022
|
|
|
September 30, 2023
|
|
|
September 30, 2022
|
|
INVESTMENT
INCOME:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Control
investments
|
|
$
|
|
1,038
|
|
|
$
|
|
1,239
|
|
|
$
|
|
3,238
|
|
|
$
|
|
4,235
|
|
Affiliate
investments
|
|
|
|
248
|
|
|
|
|
—
|
|
|
|
|
366
|
|
|
|
|
862
|
|
Non-Control /
Non-Affiliate investments
|
|
|
|
43,749
|
|
|
|
|
35,915
|
|
|
|
|
126,491
|
|
|
|
|
92,974
|
|
Total interest and
dividend income
|
|
|
|
45,035
|
|
|
|
|
37,154
|
|
|
|
|
130,095
|
|
|
|
|
98,071
|
|
Fee and other
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliate
investments
|
|
|
|
543
|
|
|
|
|
—
|
|
|
|
|
1,671
|
|
|
|
|
—
|
|
Non-Control /
Non-Affiliate investments
|
|
|
|
860
|
|
|
|
|
1,535
|
|
|
|
|
2,255
|
|
|
|
|
5,921
|
|
Total fee and other
income
|
|
|
|
1,403
|
|
|
|
|
1,535
|
|
|
|
|
3,926
|
|
|
|
|
5,921
|
|
Total investment
income
|
|
|
|
46,438
|
|
|
|
|
38,689
|
|
|
|
|
134,021
|
|
|
|
|
103,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense and
other debt financing costs
|
|
|
|
10,783
|
|
|
|
|
9,306
|
|
|
|
|
33,850
|
|
|
|
|
23,864
|
|
Compensation and
benefits
|
|
|
|
8,693
|
|
|
|
|
7,315
|
|
|
|
|
24,660
|
|
|
|
|
20,647
|
|
Professional
fees
|
|
|
|
1,272
|
|
|
|
|
1,261
|
|
|
|
|
4,101
|
|
|
|
|
2,984
|
|
General and
administrative
|
|
|
|
1,659
|
|
|
|
|
1,520
|
|
|
|
|
4,700
|
|
|
|
|
4,555
|
|
Total
expenses
|
|
|
|
22,407
|
|
|
|
|
19,402
|
|
|
|
|
67,311
|
|
|
|
|
52,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INVESTMENT
INCOME/(LOSS) BEFORE TAXES
|
|
|
|
24,031
|
|
|
|
|
19,287
|
|
|
|
|
66,710
|
|
|
|
|
51,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excise tax
expense
|
|
|
|
625
|
|
|
|
|
657
|
|
|
|
|
1,876
|
|
|
|
|
1,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INVESTMENT
INCOME
|
|
|
|
23,406
|
|
|
|
|
18,630
|
|
|
|
|
64,834
|
|
|
|
|
49,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET REALIZED
GAIN/(LOSS) FROM INVESTMENTS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Control
investments
|
|
|
|
—
|
|
|
|
|
(105)
|
|
|
|
|
—
|
|
|
|
|
(333)
|
|
Affiliate
investments
|
|
|
|
—
|
|
|
|
|
(608)
|
|
|
|
|
(26,251)
|
|
|
|
|
(10,241)
|
|
Non-Control /
Non-Affiliate investments
|
|
|
|
(1,868)
|
|
|
|
|
111
|
|
|
|
|
(2,593)
|
|
|
|
|
52,999
|
|
Net realized
gain/(loss) from investments
|
|
|
|
(1,868)
|
|
|
|
|
(602)
|
|
|
|
|
(28,844)
|
|
|
|
|
42,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN
UNREALIZED APPRECIATION/(DEPRECIATION) FROM
INVESTMENTS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Control
investments
|
|
|
|
(4,083)
|
|
|
|
|
(391)
|
|
|
|
|
(4,865)
|
|
|
|
|
(11,455)
|
|
Affiliate
investments
|
|
|
|
374
|
|
|
|
|
(13,443)
|
|
|
|
|
27,502
|
|
|
|
|
(9,794)
|
|
Non-Control /
Non-Affiliate investments
|
|
|
|
(1,008)
|
|
|
|
|
(16,194)
|
|
|
|
|
562
|
|
|
|
|
(99,917)
|
|
Net change in
unrealized appreciation/(depreciation) from
investments
|
|
|
|
(4,717)
|
|
|
|
|
(30,028)
|
|
|
|
|
23,199
|
|
|
|
|
(121,166)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS
|
|
$
|
|
16,821
|
|
|
$
|
|
(12,000)
|
|
|
$
|
|
59,189
|
|
|
$
|
|
(28,786)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INVESTMENT INCOME
PER SHARE - BASIC
|
|
$
|
|
0.58
|
|
|
$
|
|
0.56
|
|
|
$
|
|
1.75
|
|
|
$
|
|
1.64
|
|
NET INVESTMENT INCOME
PER SHARE - DILUTED
|
|
$
|
|
0.55
|
|
|
|
|
0.53
|
|
|
$
|
|
1.66
|
|
|
$
|
|
1.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN NET
ASSETS RESULTING FROM OPERATIONS PER SHARE -
BASIC
|
|
$
|
|
0.42
|
|
|
$
|
|
(0.36)
|
|
|
$
|
|
1.60
|
|
|
$
|
|
(0.94)
|
|
NET CHANGE IN NET
ASSETS RESULTING FROM OPERATIONS PER SHARE -
DILUTED
|
|
$
|
|
0.40
|
|
|
$
|
|
(0.36)
|
|
|
$
|
|
1.52
|
|
|
$
|
|
(0.94)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC
|
|
|
|
40,119,009
|
|
|
|
|
33,098,332
|
|
|
|
|
37,091,030
|
|
|
|
|
30,506,292
|
|
WEIGHTED AVERAGE SHARES
OUTSTANDING - DILUTED
|
|
|
|
43,850,034
|
|
|
|
|
36,537,607
|
|
|
|
|
40,822,055
|
|
|
|
|
33,945,567
|
|
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SOURCE Trinity Capital Inc.