Trinity Capital (US:TRIN)2021-05-06 20:41Investment Strategy and Portfolio - Trinity Capital Inc. reported an investment objective focused on generating current income and capital appreciation through investments primarily in term loans and equipment financings [220]. - The company targets growth stage companies with expected annual revenues of up to $100 million, emphasizing investments in under-financed segments of the private credit markets [221]. - As of the latest reporting period, Trinity Capital Inc. has structured loans and equipment financings with initial interest-only periods of up to 24 months, generally amortizing over a total term of up to 60 months [222]. - The company is required to invest at least 70% of its total assets in qualifying assets in accordance with the 1940 Act, with up to 30% allowed in non-qualifying assets [220]. - The company has a history of managing investments through a series of transactions that included the acquisition of Legacy Funds and their respective assets [225]. - As of March 31, 2021, the company's investment portfolio had an aggregate fair value of approximately $535.7 million, up from $493.7 million as of December 31, 2020, representing an increase of about 8.1% [242]. - The investment portfolio comprised approximately $335.7 million in secured loans (62.6% of fair value), $128.0 million in equipment financings (23.9%), and $72.0 million in equity and equity-related investments (4.2%) as of March 31, 2021 [242][243]. - During the three months ended March 31, 2021, the company made approximately $44.5 million of investments in 6 new portfolio companies and $42.6 million in 13 existing portfolio companies, totaling approximately $87.1 million [248]. - The company received approximately $67.0 million in proceeds from repayments of investments during the same period, including $40.8 million from early repayments [248]. - As of March 31, 2021, the company's ten largest portfolio companies represented approximately 40.9% of the total fair value of its investments, down from 42.5% as of December 31, 2020 [247]. - The weighted average time to maturity of debt in the portfolio was approximately 3.0 years as of March 31, 2021 [245]. - The company's loan and equipment financing investments had a weighted average risk rating score of 3.2 as of March 31, 2021, indicating a stable investment quality [257]. - As of March 31, 2021, loans to three portfolio companies were on non-accrual status, with a total fair market value of approximately $1.4 million, representing 0.3% of the fair value of the investment portfolio [259]. Financial Performance - Total investment income for the three months ended March 31, 2021, was approximately $17.3 million, representing an effective yield of 15.5%, compared to $12.2 million and a yield of 15.0% for the same period in 2020 [264]. - Operating expenses increased to approximately $10.1 million for the three months ended March 31, 2021, up from $6.6 million in the same period of 2020 [265]. - Net investment income for the three months ended March 31, 2021, was approximately $7.3 million, compared to $5.7 million for the same period in 2020 [271]. - The company realized a net gain on investments of approximately $2.6 million for the three months ended March 31, 2021, compared to a net loss of approximately $0.9 million for the same period in 2020 [272]. - Net unrealized appreciation on investments for the three months ended March 31, 2021, was approximately $15.5 million, compared to a depreciation of $24.3 million for the same period in 2020 [276]. - The net increase in net assets resulting from operations for the three months ended March 31, 2021, was approximately $25.3 million, while there was a net decrease of approximately $19.5 million for the same period in 2020 [278]. - Basic and fully diluted net increase in net assets per common share for the three months ended March 31, 2021, was $1.08, compared to a decrease of $1.97 for the same period in 2020 [279]. Cash and Liquidity - As of March 31, 2021, the company had cash, cash equivalents, and restricted cash of $51.3 million, down from $61.1 million as of December 31, 2020 [284]. - The company experienced a net decrease in cash and cash equivalents of $9.8 million for the three months ended March 31, 2021, compared to a net increase of $79.5 million for the same period in 2020 [283]. - Available borrowings under the Credit Facility as of March 31, 2021, were approximately $72.5 million, compared to $42.0 million as of December 31, 2020 [284]. - The company has a Credit Facility with a borrowing capacity of up to $300.0 million, with outstanding amounts of approximately $45.0 million as of March 31, 2021, down from $135.0 million as of December 31, 2020 [285][288]. - The company declared a distribution of $0.28 per share on March 23, 2021, which was paid on April 16, 2021, with no distributions declared in the same period of the previous year [298]. Risk Management and Valuation - Trinity Capital Inc. has a significant portion of its investments classified as Level 3 assets under ASC 820, indicating a reliance on unobservable inputs for valuation due to the nature of lending to venture capital-backed growth stage companies [235]. - The company has engaged independent valuation firms to assist in valuing certain investments on a quarterly basis, focusing on portfolio investments with potential for material fluctuations in valuation results [233]. - The fair value of the company's investments may fluctuate significantly from period to period due to the inherent uncertainty in determining values for illiquid securities [235]. - The company’s investment risk rating system categorizes investments on a scale of 1 to 5, with 23.8% rated as very strong performance and 0.2% in default/workout status as of March 31, 2021 [257]. - Approximately 32.1% of the company's debt investments at fair value were floating-rate investments as of March 31, 2021 [306]. - The company does not currently engage in hedging activities but may consider them in the future to manage interest rate and currency exchange rate fluctuations [310]. - The company has contractual obligations totaling approximately $223.4 million as of March 31, 2021, including payments due for the Credit Facility, 7.00% Notes, and Convertible Notes [296]. Market Impact - The company experienced a significant impact on its market risks due to the economic effects of the COVID-19 pandemic, introducing volatility in financial markets [303].