Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Trinity Capital Inc (TRIN, Financial) reported record net investment income of $29 million, a 26% increase compared to the same quarter last year.
- The company's net asset value grew to $757 million, an 11% increase from the previous quarter.
- Trinity Capital Inc (TRIN) achieved a record total investment income of $61.8 million, marking a 33% increase over the same period in 2023.
- The effective yield on the portfolio for Q3 was an industry-leading 16.1%, with a strong core yield of 14.9%.
- Trinity Capital Inc (TRIN) expanded its platform AUM to a record $2 billion, driven by significant investments and fundings.
Negative Points
- The company experienced an increase in nonaccruals, with the number of portfolio companies on nonaccrual rising from four to five.
- Operating expenses have been growing, with Q3 expenses expected to be a run rate for the next quarter.
- There was a realized loss in the quarter due to the realization of a position previously marked down in fair value.
- The company issued a significant amount of stock through its ATM program, increasing shares outstanding by more than 10% quarter-over-quarter.
- Despite strong growth, there is investor concern about maintaining credit quality amid rapid expansion.
Q & A Highlights
Q: How does Trinity Capital ensure credit quality while experiencing rapid growth in originations?
A: Gerald Harder, Chief Operating Officer, explained that Trinity Capital maintains credit quality through diversification across its business verticals, each led by experienced individuals focusing on origination and credit. The company is built to scale, and its track record demonstrates strong credit quality over time.
Q: Why does Trinity Capital prefer using an ATM program over a syndicated equity offering for raising equity?
A: Kyle Brown, CEO, stated that the ATM program is a more efficient and cost-effective way to raise equity, with a 1% fee compared to 6-8% for overnight offerings. This approach is beneficial for shareholders and aligns with the company's strategy to be opportunistic in raising both equity and debt.
Q: What was the driver of the realized loss in the quarter?
A: Michael Testa, CFO, noted that the realized loss was primarily due to the position in Nexi, which was marked down in previous quarters. The realization was neutral from a NAV perspective due to prior adjustments.
Q: How does Trinity Capital plan to manage operating expenses as it grows?
A: Kyle Brown, CEO, mentioned that while the company is currently focused on growth and hiring, it expects to see efficiencies of scale over the next 12 months. The company is not optimizing for lower expenses at the moment but is focused on growing earnings and building the team.
Q: Can Trinity Capital sustain its current level of originations?
A: Kyle Brown, CEO, believes the current level of originations is sustainable due to balanced growth across business verticals. The company maintains rigorous credit and underwriting standards, and the percentage of deals reaching completion has not changed, indicating a strong pipeline.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
