Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Trinity Capital Inc (TRIN, Financial) achieved record investment income of $27 million, a 21% increase compared to the same quarter last year.
- Net asset value (NAV) grew to a record $680 million, up from $626 million in the previous quarter.
- Platform assets under management (AUM) reached a record $1.7 billion, up 36% year-over-year.
- Trinity Capital Inc (TRIN) paid a cash dividend of $0.51 per share, marking the 18th consecutive quarter of consistent and growing dividends.
- The company expanded into Europe, providing global exposure and better access to an active tech landscape.
Negative Points
- Portfolio companies on non-accrual decreased to 4% in Q2 from 5% in the first quarter, indicating some ongoing credit quality issues.
- The weighted average cost of debt increased slightly from the prior quarter to 7.6%, which could impact profitability.
- The net investment income per basic share decreased to $0.53 from $0.61 in the same period of the prior year.
- The company has a significant amount of unfunded commitments, totaling $436 million, which could pose a risk if not managed properly.
- The expansion into Europe and the launch of new business verticals may require significant investment and could impact short-term profitability.
Q & A Highlights
Q: Can you talk about the decline in non-accrual assets and the pace of resolution on the remaining ones?
A: We promoted a company off the non-accrual list during the quarter, and it is now a performing asset. The remaining four companies are in various stages of workout. One notable company, Nexii, has gone through the Canadian equivalent of bankruptcy and has reconstituted itself, with part of our debt rolling forward and another part converting to equity. The other three companies remain in the same status as last quarter. - Ron Kundich, Chief Credit Officer
Q: Should we expect Trinity to carry debt for the new venture with Eagle Point, similar to Senior Credit Corp?
A: Currently, it's just an equity investment. As the investment grows, we will evaluate whether it makes sense from a tax and income perspective to bifurcate our investment. - Michael Testa, Chief Financial Officer
Q: Should we look at Senior Credit Corp as a senior loan fund?
A: It's a co-investment vehicle that invests ratably alongside the BDC. - Kyle Brown, Chief Executive Officer
Q: Will the move into Europe be outside the BDC due to the 1940 Act limits on non-US investments?
A: We will continue to optimize our investments in Europe. Currently, we have plenty of room in our "bad asset" bucket, which is under 10% full. For now, we will be making some investments at the BDC level. - Sarah Stanton, Chief Compliance Officer
Q: Any consideration of getting SBA licenses?
A: Yes, we are considering it and are working through the process. More to come on that. - Kyle Brown, Chief Executive Officer
Q: Can you talk about the leverage expected in the new co-investment vehicle and the original JV?
A: We are focused on one-to-one leverage for the co-investment vehicles, mirroring what we do at the publicly traded BDC. - Kyle Brown, Chief Executive Officer
Q: What is the mix of unfunded commitments and how is the pipeline building across the multiple verticals?
A: We broke the business into verticals to scale and brought in veterans to run each. The pipeline has continued to increase, and the mix of deployment this quarter is indicative of future growth. Our venture debt business is growing slower on a percentage basis, while other verticals like warehouse, sponsor finance, life science, and equipment are growing faster. - Kyle Brown, Chief Executive Officer
Q: What is the asset sensitivity position of the BDC in the context of potential rate cuts?
A: We have floor rates on almost all our deals, exceeding 12%. This protects us in a rate-decreasing environment as our revenue remains stable while our cost of debt decreases. - Kyle Brown, Chief Executive Officer
Q: Do you have a weighted average floor rate for the portfolio?
A: We can follow up with the exact number, but it is in the ballpark of the weighted average coupon rate shown in our presentation. - Kyle Brown, Chief Executive Officer
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
