Trinity Capital Inc
For the period ended Sep 30, 2024. Filed Oct 30, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 30, 2024
TRIN$17.80+0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0000950170-24-092284
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-30.
0000950170-24-118600
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 77 previous paragraphs and 150 current paragraphs.
65 unchanged; 12 reworded; 73 added; 0 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 5 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (73)
Current report
Results of Operations
Current report
The following discussion and analysis of our results of operations encompasses our consolidated results for the three and nine months ended September 30, 2024 and 2023.
Current report
Investment Income
Current report
The following table sets forth the components of investment income (in thousands). The components of investment income have been updated to a preferred presentation and the prior year has been amended to conform with the new preferred presentation.
Current report
For the three and nine months ended September 30, 2024, total investment income was approximately $61.8 million and $166.9 million, respectively, which represents an approximate effective yield of 16.1% and 16.0%, respectively, on the average investments during the year. For the three and nine months ended September 30, 2023, total investment income was approximately $46.4 and $134.0 million, respectively, which represents an approximate effective yield of 16.7% and 15.9%, respectively, on the average investments during the year. The increase in investment income for the three and nine months ended September 30, 2024 is due to higher interest income and amortization of OID and EOT based on an increased principal value of income producing debt investments.
Current report
Operating Expenses and Excise Taxes
Current report
Our operating expenses are comprised of interest and fees on our borrowings, employee compensation, professional fees, general and administrative expenses, and excise taxes. Our operating expenses totaled approximately $32.4 million and $23.0 million for the three months ended September 30, 2024 and 2023, respectively, and $85.6 million and $69.2 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in our operating expenses for the three and nine months ended September 30, 2024 is discussed with respect to each component of such expenses below.
Current report
Interest Expense and Other Debt Financing Costs
Current report
Our interest expense and other debt financing costs are primarily comprised of interest and fees related to our secured borrowings, the 7.00% Notes due 2025 (the “2025 Notes”), the 4.375% Notes due 2026 (the “August 2026 Notes”), the 4.25% Notes due 2026 (the “December 2026 Notes”), the 7.875% Notes due March 2029 (the “March
Current report
2029 Notes”), the 7.875% Notes due September 2029 (the “September 2029 Notes”) and the 6.00% Convertible Notes due 2025 (the “Convertible Notes”). Interest expense and other debt financing costs on our borrowings totaled approximately $16.9 million and $10.8 million for the three months ended September 30, 2024 and 2023, respectively, and $42.9 million and $33.9 million for the nine months ended September 30, 2024 and 2023, respectively. Our weighted average effective interest rate, comprised of interest and amortization of fees and discount, was approximately 7.7% and 7.3% for the three months ended September 30, 2024 and 2023, respectively, and 7.6% and 7.2% for the nine months ended September 30, 2024 and 2023, respectively. The increase in interest expense for the three and nine months ended September 30, 2024 was primarily due to increased borrowings and increased base rate under our credit facility with KeyBank, National Association (the “KeyBank Credit Facility”).
Current report
Employee Compensation and Benefits
Current report
Employee compensation and benefits totaled approximately $11.5 million and $8.7 million for the three months ended September 30, 2024 and 2023, respectively, and $31.3 million and $24.7 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in employee compensation expenses for the three and nine months ended September 30, 2024 relates primarily to the increased variable compensation related to a higher headcount and stock-based compensation. As of September 30, 2024 and 2023, the Company had 86 and 63 employees, respectively.
Current report
Professional Fees Expenses
Current report
Professional fees expenses, consisting of legal fees, accounting fees, third-party valuation fees, and talent acquisition fees, totaled approximately $1.3 million and $1.3 million for the three months ended September 30, 2024 and 2023, respectively, and $3.4 million and $4.1 million for the nine months ended September 30, 2024 and 2023, respectively. The decrease in professional fees expenses for the three and nine months ended September 30, 2024 resulted primarily from a decrease in legal fees, third-party valuation fees and other consulting fees.
Current report
General and Administrative Expenses
Current report
General and administrative expenses include insurance premiums, rent, state taxes and various other expenses related to our ongoing operations. Our general and administrative expenses totaled approximately $2.2 million and $1.7 million for the three months ended September 30, 2024 and 2023, respectively, and $6.2 million and $4.7 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in general and administrative expenses for the three and nine months ended September 30, 2024 was primarily due to additional office rent and related expenses.
Current report
Allocated Expenses to Trinity Capital Adviser, LLC
Current report
The resource sharing agreement (the “Sharing Agreement”) with the Adviser Sub provides the Adviser Sub with access to the Company's human capital resources, facilities and systems. Under the terms of the Sharing Agreement, we allocate the related expenses of such shared resources to the Adviser Sub based on total assets under management by the Adviser Sub and us. The Company's total expenses are net of such expenses allocated to the Adviser Sub of $0.1 million for the three and nine months ended September 30, 2024. As of September 30, 2024, there was $0.1 million receivable due from the Adviser Sub.
Current report
Excise Taxes
Current report
Our excise taxes totaled approximately $0.6 million and $0.6 million for the three months ended September 30, 2024 and 2023, respectively, and $1.9 million and $1.9 million for the nine months ended September 30, 2024 and 2023, respectively.
Current report
Net Investment Income
Current report
For the three months ended September 30, 2024 and 2023, we recognized approximately $61.8 million and $46.4 million, respectively, in total investment income as compared to approximately $32.4 million and $23.0 million, respectively, in total expenses, including excise tax expense, resulting in net investment income of $29.4 million and $23.4 million, respectively. For the nine months ended September 30, 2024 and 2023, we recognized approximately $166.9 million and $134.0 million, respectively, in total investment income as compared to approximately $85.6 million and $69.2 million, respectively, in total expenses including excise tax expense, resulting in net investment income of $81.3 million and $64.8 million, respectively.
Current report
Net Realized Gains and Losses
Current report
Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption of an investment or a financial instrument and the cost basis of the investment or financial instrument, without regard to unrealized appreciation or depreciation previously recognized, and includes investments written off during the period.
Current report
During the nine months ended September 30, 2024, our gross realized gains primarily consisted of the repayment of two equipment financing positions and the sale of one equity position. Our gross realized losses primarily consisted of the sale of one equity position, the sale of one debt position, the repayment of one debt position and the conversion of debt positions in four portfolio companies. During the nine months ended September 30, 2023, our gross realized gains primarily consisted of the repayment of one loan, one equipment financing, and one warrant, and our gross realized losses primarily consisted of the exit of our debt, equipment financing and equity positions in four portfolio companies.
Current report
The net realized gains (losses) from the sales, repayments, or exits of investments for the three and nine months ended September 30, 2024 and 2023 were comprised of the following (in thousands):
Current report
Net Change in Unrealized Appreciation / (Depreciation) from Investments
Current report
Net change in unrealized appreciation/(depreciation) from investments primarily reflects the net change in the fair value of the investment portfolio and financial instruments and the reclassification of any prior period unrealized appreciation or depreciation on exited investments and financial instruments to realized gains or losses.
Current report
Net unrealized appreciation and depreciation on investments for the three and nine months ended September 30, 2024 and 2023 is comprised of the following (in thousands):
Current report
During the three months ended September 30, 2024, our net unrealized appreciation totaled approximately $8.9 million, which included net unrealized appreciation of $3.0 million from our warrant investments, net unrealized appreciation of $2.0 million from our equity investments and net unrealized appreciation of $4.0 million from our debt investments.
Current report
During the nine months ended September 30, 2024, our net unrealized appreciation totaled approximately $7.5 million, which included net unrealized appreciation of $6.6 million from our warrant investments, net unrealized appreciation of $2.7 million from our equity investments and net unrealized depreciation of $1.8 million from our debt investments.
Current report
During the three months ended September 30, 2023, our net unrealized depreciation totaled approximately $4.7 million, which included net unrealized appreciation of $0.6 million from our warrant and equity investments and net unrealized depreciation of $5.3 million from our debt investments.
Current report
During the nine months ended September 30, 2023, our net unrealized appreciation totaled approximately $23.2 million, which included net unrealized appreciation of $7.4 million from our warrant and equity investments and net unrealized appreciation of $15.8 million from our debt investments.
Current report
Net Increase (Decrease) in Net Assets Resulting from Operations
Current report
Net increase in net assets resulting from operations during the three and nine months ended September 30, 2024, totaled approximately $24.4 million and $69.7 million, respectively. Net increase in net assets resulting from operations during the three and nine months ended September 30, 2023, totaled approximately $16.8 million and $59.2 million, respectively.
Current report
Net Increase (Decrease) in Net Assets Resulting from Operations and Earnings Per Share
Current report
For the three months ended September 30, 2024, basic and diluted net increase in net assets per common share were $0.45 and $0.43, respectively. For the nine months ended September 30, 2024, basic and diluted net increase in net assets per common share were $1.38 and $1.33, respectively.
Current report
For the three months ended September 30, 2023, basic and diluted net decrease in net assets per common share were $0.42 and $0.40, respectively. For the nine months ended September 30, 2023, basic and diluted net increase in net assets per common share were $1.60 and $1.52, respectively.
Current report
Financial Condition, Liquidity and Capital Resources
Current report
Our liquidity and capital resources are generated primarily from the net proceeds of offerings of our securities, including our “at-the-market” offering, the 2025 Notes offering, the Convertible Notes offering, the August 2026 Notes offering, the December 2026 Notes offering, the March 2029 Notes offering and the September 2029 Notes offering, borrowings under the KeyBank Credit Facility, and cash flows from our operations, including investment sales and repayments, as well as income earned on investments and cash equivalents. Our primary use of our funds includes investments in portfolio companies, payments of interest on our outstanding debt, and payments of fees and other operating expenses we incur. We also expect to use our funds to pay distributions to our stockholders. We have used, and expect to continue to use, our borrowings, including under the KeyBank Credit Facility or any future credit facility, as well as proceeds from the turnover of our portfolio, to finance our investment objectives and activities.
Showing the first 40 of 73 passages. Open the source sections for the rest.
Reworded paragraphs (12)
Previous wording
On December 5, 2022, the Company entered into a joint venture agreement with certain funds and accounts managed by a specialty credit manager (collectively, the “JV Partner”) to co-manage Senior Credit Corp 2022 LLC (the “JV”). The JV invests in secured loans and equipment financings to growth-stage companies that have been originated by the Company. To achieve these goals, the Company has agreed to offer the JV the opportunity to purchase up to 40% in dollar amount, but not less than 25% in dollar amount, of the entire amount of each secured loan and equipment financing advance originated by the Company during the period commencing on September 1, 2022 and ending on June 5, 2026.
Current wording
On December 5, 2022, the Company entered into a joint venture agreement with certain funds and accounts managed by a specialty credit manager to co-manage Senior Credit Corp 2022 LLC, a Delaware limited liability company (the “JV”). The JV invests in secured loans and equipment financings to growth-stage companies that have been originated by the Company.
Previous wording
On March 17, 2023, the Company formed an unconsolidated wholly owned subsidiary, Trinity Capital Adviser LLC (“Adviser Sub”). The Company was granted exemptive relief by the SEC that permits the Company to organize, acquire, wholly own and operate the Adviser Sub as an investment adviser registered under the Investment Advisers Act of 1940, as amended (the “Adviser Act”). The Adviser Sub may provide investment advisory and related services to one or more investment vehicles (the “Adviser Funds”) in the future with ownership by one or more unrelated third-party investors (“External Parties”) and receive fee income for such services.
Current wording
On March 16, 2023, the Company formed an unconsolidated wholly owned subsidiary, Trinity Capital Adviser LLC, a Delaware limited liability company (“Adviser Sub”). The Company was granted exemptive relief by the SEC that permits the Company to organize, acquire, wholly own and operate the Adviser Sub as an investment adviser registered under the Investment Advisers Act of 1940, as amended (the “Adviser Act”). The Adviser Sub may provide investment advisory and related services to one or more investment vehicles (the “Adviser Funds”) with ownership by one or more unrelated third-party investors and receive fee income for such services.
Previous wording
On June 28, 2024, the Company and a specialty credit manager (the “Class A Member”) funded a portion of their respective capital commitments to commence operations of a credit fund, EPT 16 LLC (“EPT 16”), a Delaware limited liability company. EPT 16 has acquired and intends to acquire, hold and, as applicable, dispose of investments that have been originated by the Company.
Current wording
On June 28, 2024, the Company and a specialty credit manager funded a portion of their respective capital commitments to commence operations of a credit fund, EPT 16 LLC, a Delaware limited liability company (“EPT 16”). EPT 16 has acquired and intends to acquire, hold and, as applicable, dispose of investments that have been originated by the Company.
Previous wording
The Company records dividend income on an accrual basis to the extent amounts are expected to be collected. Dividend income is recorded when dividends are declared by the portfolio company or at such other time that an obligation exists for the portfolio company to make a distribution. The Company recorded $0.3 and $0.5 million, respectively, in dividend income during the three and six months ended June 30, 2024 and no dividend income was recorded during the three and six months ended June 30, 2023.
Current wording
The Company records dividend income on an accrual basis to the extent amounts are expected to be collected. Dividend income is recorded when dividends are declared by the portfolio company or at such other time that an obligation exists for the portfolio company to make a distribution. During three and nine months ended September 30, 2024, the Company recorded $0.5 million and $1.0 million, respectively, in dividend income. During the three and nine months ended September 30, 2023, the Company recorded $0.1 million and $0.1 million, respectively, in dividend income.
Previous wording
As of June 30, 2024, our investment portfolio had an aggregate fair value of approximately $1,424.8 million and was comprised of approximately $1,002.6 million in secured loans, $332.6 million in equipment financings, and $89.6 million in equity and warrants, across 136 portfolio companies. As of December 31, 2023, our investment portfolio had an aggregate fair value of approximately $1,275.2 million and was comprised of approximately $885.3 million in secured loans, $336.8 million in equipment financings, and $53.1 million in equity and warrants, across 120 portfolio companies.
Current wording
As of September 30, 2024, our investment portfolio had an aggregate fair value of approximately $1,686.9 million and was comprised of approximately $1,269.7 million in secured loans, $305.1 million in equipment financings, and $112.2 million in equity and warrants, across 145 portfolio companies. As of December 31, 2023, our investment portfolio had an aggregate fair value of approximately $1,275.2 million and was comprised of approximately $885.3 million in secured loans, $336.8 million in equipment financings, and $53.1 million in equity and warrants, across 120 portfolio companies.
Previous wording
Multi-Sector Holdings consist of the Company's investments in Senior Credit Corp 2022 LLC, Trinity Capital Advisers LLC and EPT 16 LLC. These entities invest or manage investments in secured loans and equipment financings to growth-stage companies that have been originated by the Company. The portfolio companies held by the Multi-Sector Holdings represent a diverse set of geographical classifications, which are similar to those in which the Company invests directly. See “Note 1 – Organization and Basis of Presentation” in the notes to the consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion.
Current wording
Multi-Sector Holdings consist of the Company's investments in Senior Credit Corp 2022 LLC, Trinity Capital Adviser LLC and EPT 16 LLC. These entities invest or manage investments in secured loans and equipment financings to growth-stage companies that have been originated by the Company. The portfolio companies held by the Multi-Sector Holdings represent a diverse set of geographical classifications, which are similar to those in which the Company invests directly. See “Note 12 – Related Party Transactions” in the notes to the consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion.
Previous wording
Multi-Sector Holdings consist of the Company's investments in Senior Credit Corp 2022 LLC, Trinity Capital Advisers LLC and EPT 16 LLC. These entities invest or manage investments in secured loans and equipment financings to growth-stage companies that have been originated by the Company. The portfolio companies held by the Multi-Sector Holdings represent a diverse set of industry classifications, which are similar to those in which the Company invests directly. See “Note 1 – Organization and Basis of Presentation” in the notes to the consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion.
Current wording
Multi-Sector Holdings consist of the Company's investments in Senior Credit Corp 2022 LLC, Trinity Capital Adviser LLC and EPT 16 LLC. These entities invest or manage investments in secured loans and equipment financings to growth-stage companies that have been originated by the Company. The portfolio companies held by the Multi-Sector Holdings represent a diverse set of industry classifications, which are similar to those in which the Company invests directly. See “Note 12 – Related Party Transactions” in the notes to the consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion.
Previous wording
As of June 30, 2024 and December 31, 2023, the Company’s ten largest portfolio companies represented approximately 27.4% and 31.6%, respectively, of the total fair value of the Company’s investments in portfolio companies. As of June 30, 2024 and December 31, 2023, the Company had seven and four portfolio companies, respectively, that represented 5% or more of the Company’s net assets.
Current wording
As of September 30, 2024 and December 31, 2023, the Company’s ten largest portfolio companies represented approximately 26.0% and 31.6%, respectively, of the total fair value of the Company’s investments in portfolio companies. As of September 30, 2024 and December 31, 2023, the Company had six and four portfolio companies, respectively, that represented 5% or more of the Company’s net assets.
Previous wording
During the six months ended June 30, 2024, we invested approximately $349.3 million in 18 new portfolio companies, approximately $114.9 million in 23 existing portfolio companies, and approximately $9.2 million in the multi-sector holdings, excluding deferred fees. During the six months ended June 30, 2024, we received an aggregate of $328.9 million in proceeds from repayments and sales of our investments, including proceeds of approximately $83.7 million from early repayments on our debt investments and $153.2 million sales of investments.
Current wording
During the nine months ended September 30, 2024, we invested approximately $680.1 million in 30 new portfolio companies, approximately $241.2 million in 27 existing portfolio companies, and approximately $11.4 million in the multi-sector holdings, excluding deferred fees. During the nine months ended September 30, 2024, we received an aggregate of $527.3 million in proceeds from repayments and sales of our investments, including proceeds of approximately $184.2 million from early repayments on our debt investments and $194.4 million sales of investments.
Previous wording
The following table provides a summary of the changes in the investment portfolio for the six months ended June 30, 2024 and the year ended December 31, 2023 (in thousands):
Current wording
The following table provides a summary of the changes in the investment portfolio for the nine months ended September 30, 2024 and the year ended December 31, 2023 (in thousands):
Previous wording
As of both June 30, 2024 and December 31, 2023, our debt investments had a weighted average risk rating score of 2.7.
Current wording
As of September 30, 2024 and December 31, 2023, our debt investments had a weighted average risk rating score of 2.9 and 2.7, respectively.
Previous wording
As of June 30, 2024, loans to three portfolio companies and equipment financings to one portfolio company were on non-accrual status with a total cost of approximately $55.6 million, and a total fair value of approximately $24.0 million, or 1.8%, of the fair value of the Company’s debt investment portfolio. As of December 31, 2023, loans to three portfolio companies and equipment financings to two portfolio companies were on non-accrual status with a total cost of approximately $60.8 million, and a total fair value of approximately $43.2 million, or 3.5%, of the fair value of the Company’s debt investment portfolio.
Current wording
As of September 30, 2024, loans to three portfolio companies and equipment financings to two portfolio company were on non-accrual status with a total cost of approximately $47.2 million, and a total fair value of approximately $22.2 million, or 1.4%, of the fair value of the Company’s debt investment portfolio. As of December 31, 2023, loans to three portfolio companies and equipment financings to two portfolio companies were on non-accrual status with a total cost of approximately $60.8 million, and a total fair value of approximately $43.2 million, or 3.5%, of the fair value of the Company’s debt investment portfolio.