Trinity Capital (US:TRIN)2023-03-03 03:03Financial Data and Key Metrics Changes - Total assets increased by 20% to $1.1 billion compared to the end of 2021 [5] - Investment portfolio at cost grew by 45%, generating total investment income of $145.5 million [5] - Net investment income (NII) for Q4 was $21.6 million, representing a 104% increase year-over-year, and $71.6 million for the full year, an 83% increase [5][19] - The company declared combined regular and supplemental dividends totaling $2.33 per share for 2022, an 85% increase over 2021 [6] - Return on average equity based on NII increased to 17.9% [6] Business Line Data and Key Metrics Changes - Originated $976 million in new commitments and funded $631 million across 66 portfolio companies [7][8] - The portfolio grew to $1.1 billion on a fair value basis, a 25% increase [8] - The effective yield on the portfolio for Q4 was 15.5%, up from 15.2% in Q3 [17] - Core yield increased to 14.2% from 13.5% in the prior quarter [17] Market Data and Key Metrics Changes - The company ended Q4 with $393 million of unfunded commitments, providing a strong pipeline for future fundings [9] - Approximately 95% of the debt investments at cost were performing [21] - The average credit rating for the portfolio was 2.8, slightly lower than the previous quarter [21] Company Strategy and Development Direction - The company is focusing on cautious investment opportunities while navigating a volatile market [10] - Plans to expand the life sciences team and enhance the platform for future growth [8] - The joint venture and RIA structure are expected to provide additional fee income and off-balance sheet growth [10][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for growth despite market challenges, emphasizing the importance of sound judgment in investment decisions [10] - The company is monitoring portfolio companies closely, maintaining communication to manage credit risk effectively [11][21] - Management noted that venture capital investors are still willing to support companies that are slightly underperforming, but valuations have decreased [34][36] Other Important Information - The company repurchased approximately 186,000 shares at an average price of $10.77 per share, demonstrating commitment to shareholder value [23] - NAV per share decreased to $13.15 from $13.74, primarily due to unrealized depreciation and realized losses [15] Q&A Session Summary Question: Can you provide insights on portfolio company liquidity and fundraising? - Management actively monitors portfolio liquidity on a company basis, focusing on ensuring 18 to 24 months of runway for new investments [25][26] Question: What is the target leverage level? - The target leverage range is 115% to 135%, with plans to maintain it at the upper end [29] Question: Any thoughts on equity raises given the stock price? - Management is cautious about equity raises but will consider them if stock price reacts positively [30] Question: When can we expect the first fund from the RIA to be operational? - The first fund is expected to be operational within the next six months, contributing to fee income [33] Question: What is the current trend in loan spreads? - The company continues to push on pricing, with spreads trending upwards [41] Question: What are the expectations for M&A activity? - Increased M&A activity is anticipated, particularly in private equity, while traditional exit markets may be less active [44]