Trinity Capital Inc.

Good morning, ladies and gentlemen. My name is Jim, and I will be your conference operator today. At this time, I would like to welcome everyone to Trinity Capital's third quarter 2024 earnings conference call. All participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. All participants have been placed in a listen-only mode, or pardon me, I just already said that. As I stated, the call will be open for your questions after the prepared remarks. It is now my pleasure to turn the call over to Ben Malcolmson Head of Investor Relations for Trinity Capital. Please go ahead.

Thank you and welcome to Trinity Capital's earnings conference call for the third quarter of 2024. Today we are joined by Kyle Brown, Chief Executive Officer, Michael Testa, Chief Financial Officer, and Jerry Harder, Chief Operating Officer. Also joining us for the Q&A portion of the call are Ron Kundich, Chief Credit Officer, and Sarah Stanley, Chief Compliance Officer and General Counsel. Trinity's financial results were released earlier today and can be accessed on our investor relations website at ir.trinitycap.com. Before we begin, I would like to remind everyone that certain statements made during this call may be deemed forward-looking statements under federal securities laws. Because these forward-looking statements involve known and unknown risks and uncertainties, We encourage you to refer to our most recent SEC filings for information on some of these risk factors. Trinity Capital assumes no obligation or responsibility to update any forward-looking statements. Now, allow me to turn the call over to Trinity Capital's CEO, Kyle Brown. Thank you, Ben.

Thanks, everyone, for joining us today. In the third quarter, our strategies performed strongly, helping us deliver record results. Top highlights from Q3 include record net investment income of $29 million, a 26% increase versus Q3 of last year. Net asset value grew to $757 million, up 11% from $680 million last quarter. Platform AUM reached a record $2 billion. In Q3, we made a record... $459 million in investments, gross fundings, which was largely driven by $406 million of secured loans, and included debt investments to 11 new portfolio companies. Trinity paid a cash dividend of 51 cents per share, representing our 19th consecutive quarter of a consistent or increased dividend. We're proud of our performance in Q3, as our five distinct business verticals continue to fuel our growth and take market share. As a reminder, our verticals are tech lending, equipment finance, life science, warehouse financing and sponsor finance, which focuses on private equity-backed businesses. Each of our business verticals has its own experienced team to lead originations, credit, and portfolio management functions, giving them the ability to scale efficiently. Our strategic growth initiatives have generated extraordinary momentum, highlighting our commitment to expanding the platform. Trinity Capital is first an alternative asset management company, as well as a direct lender. We continue to see efficiencies of scaling our balance sheet at the public company level, and we're now hyper-focused on building out our asset management business to invest in our various business verticals. We're different than externally managed BDCs in that when you buy our stock, you're buying into a pool of diversified assets, yes, but you're also buying into a management company. We are not like externally managed BDCs that are simply a pool of assets. It's also important to note that because we're an internally managed BDC, our employees, management, and board all own the same shares as our investors. This maintains 100% alignment with our shareholders and a focus on delivering growing returns for our investors. Earlier this year, we expanded into Europe, giving us increased global exposure and better access to an active tech landscape, which in turn allows us to support high-growth companies across multiple continents. We intend to replicate the success that we've had here in the U.S. with our complementary lending businesses in Europe and beyond. Regarding deployment, we maintain a strong investment pipeline, including $606 million in in unfunded commitments, leaving us well-positioned for our continued growth. As a reminder, a vast majority of Trinity's unfunded commitments are subject to ongoing diligence and approval by our investment committee. Credit and underwriting, portfolio management are all fundamental to our success over the long term. We have a unique structure characterized by collaboration between originations, credit, and portfolio teams to manage our inbound opportunities and active portfolio companies. We remain very selective and adhere to a rigorous diligence process. Only a small percentage of inbound deals reach the underwriting stage. This proactive approach greatly mitigates risk and positions us to excel in all macroeconomic cycles. At Trinity, we pride ourselves on three core principles, exhibiting uncommon care for our employees, customers, and stakeholders. Two, serving our clients by being partners rather than just money. And three, by providing outsized returns for our shareholders. Investing in our teams and systems is key to our growth, and enabling us to further diversify our investments to create a best-in-class direct lending platform. We are excited about the future and look forward to continuing to capitalize on our momentum as we continue to maximize value for our shareholders. And with that, I'll turn the call over to Michael Testa, our CFO, to discuss financial results in more detail. Michael?

Thank you, Kyle. In the third quarter, we achieved a record total investment income of $61.8 million. resulting a 33% increase over the same period in 2023. Our effective yield on the portfolio for Q3 was once again an industry-leading 16.1%, and our core yield, which excludes fee income, was strong at 14.9%. Net investment income for the third quarter was $29 million, or $0.54 per basic share, compared to $23 million, or $0.58 per basic share, in the same period of the prior year. The increase of $6 million, or 26%, year-over-year net investment income growth is primarily attributable to the continued earnings power of Trinity's growing platform, while the decrease in net investment income per share is mostly attributable to the shares issued over the past year. Our net investment income per share represents 106% coverage of our quarterly distributions. Our estimated undistributed taxable income is approximately $64.5 million or $1.12 per share. We continue to reinvest this capital for the benefit of our investors while maintaining a consistent and meaningful distribution. Our platform continues to generate strong returns for our BDC shareholders with ROAE of 16.2% based on net investment income over the average equity and ROAA of 7.1% based on net investment income over average total assets. As of September 30th, 2024, our NAV was $757 million, up from $680 million as of June 30th, 2024. And our corresponding NAV per share was $13.13 at the end of June 3rd, an increase from $13.12 as of June 30, 2024. The increase in net assets per share was primarily due to the net investment income exceeding the declared dividend and a creative ATM offering, partially offset by the portfolio activity and new RSA issuances in September. During the quarter, we continue to strengthen our balance sheet enhanced liquidity through a variety of capital markets activities. We expanded our ATM program, and in Q3, we raised $80 million in gross proceeds and an accretive premium to NAV to fund our ongoing portfolio growth. We further upsized our credit facility to $510 million in total commitments, which is diversified across a total of 13 banks. We raised $115 million through the issuance of investment-grade unsecured notes maturing in 2029. and these notes are callable after two years and trade on their ticker, TRI&I. And subsequent to end of the quarter, we further enhance our liquidity position by raising $142.5 million of unsecured private placement notes, with maturities ranging from 2027 to 2029. Our reliance on secured debt continues to be at a conservative level and adjusted for the recent private placement issuance is under 30%. We also continue to realize the benefits of a co-investment in a joint venture and vehicles under the RIA subsidiary, which in Q3 provide approximately $1.6 million, or 3 cents per share, of incremental income to the BDC. During Q3, we syndicated $41 million to these vehicles. As of September 30th, we had more than $250 million of assets under management in these private vehicles, providing incremental capital for growth and accretive returns to our shareholders. Our net leverage ratio, which represents principal debt outstanding, that's cash on hand, was 1.2 times as of September 30th, 2024. Our strong liquidity position with diverse capital sources, both from capital raised by the BDC and through our wholly-owned RIA subsidiary, provide Trinity with the flexibility to manage a strong pipeline and be opportunistic in the marketplace. I'll now turn the call over to our COO, Jerry Harder, to discuss our portfolio performance and platform in more detail. Jerry. Thank you, Michael. Since our last earnings call, Trinity has continued to focus on executing across our five business verticals, which strengthen and diversify our platform. while enhancing our ability to offer customized financing solutions to our evolving client base of growth-oriented companies. We remain dedicated to supporting companies at every stage of their growth journey. At the end of the third quarter, on a cost basis, our total portfolio consisted of approximately 76% secured loans, 18% equipment financing, 4% equity, and 2% warrants. The composition of our portfolio remained consistent with prior quarters, with diversification across investment type, transaction size, industry, and geography. Our portfolio is segmented across 22 industry categories, with our largest industry exposure, finance and insurance, representing 18.1% of the portfolio at cost. This exposure is spread across 15 borrowers and includes both term loans and asset-backed warehouse facilities. Our next largest industry concentrations are medical devices and space technology, representing 11.4% and 9.8% of the portfolio at cost, respectively. Life sciences related industries collectively made up 26.3% of our total portfolio on a cost basis. Among our five business verticals, the detailed breakdown of our fundings in Q3 was as follows. 39.8% to tech lending, 29.4% to life sciences, 15.7% to warehouse financing, 9.1% to equipment financing, and 5.4% to sponsor finance. As on the end of Q3, our largest debt financing is to Solaris Corporation, which represents 3% of our debt portfolio and 2.8% of our total portfolio on a cost basis. Our 10 largest debt investments collectively represent 22.4% of our total portfolio on a cost basis. Now turning our focus to credit. The credit quality of our portfolio improved quarter over quarter with approximately 98.6% of our portfolio performing on a fair value basis. Our average internal credit rating for the third quarter stood at 2.9 based on our 1 to 5 rating system, with 5 indicating very strong performance. This rating is an increase from the average credit rating in each of the last four quarters and is attributable to a combination of credit upgrades to existing portfolio companies, as well as strong originations of new credits within the third quarter. As a percentage of the debt portfolio on a cost basis, credits within the lowest two tiers remain virtually unchanged from Q2. Quarter over quarter, while the number of portfolio companies on non-accrual increased from four to five, our non-accrual credits decreased on both a cost and fair value basis. Our portfolio company, Nexi, was removed from non-accrual as a transaction was fully realized in Q3 at a very slight decrease versus our Q2 net asset value. Two smaller credits, SunBasket and FormLogic, were placed on non-accrual within the quarter. At the end of Q3, our non-accrual credits had a total fair value of approximately $22.2 million, representing 1.4% of the total debt portfolio, a slight decrease from Q2. At quarter end, 80% of our total principal outstanding was backed by first position liens on enterprise, equipment, or both. For our financings covered by all asset liens, The weighted average loan to value sits at 22.1%, while over two-thirds of these companies have a loan to value of less than 15%. These statistics demonstrate that our portfolio companies are generally not over-levered and are in a healthy position to service the debt, even in instances when our loan may not be in first position. Year-to-date through September 30th, our portfolio companies have collectively raised $2.9 billion of equity, already surpassing the total amount our portfolio raised in all of 2023. 32 of Trinity's portfolio companies raised equity in Q3 versus 26 in Q2 and 22 in Q1. These encouraging stats speak to our portfolio's quality and ability to secure funding in an evolving market. In closing, we want to emphasize that our credit quality and portfolio management are of the utmost importance to Trinity. One of Trinity's hallmarks is that our staff members think and operate like shareholders, and we always strive for resolutions that benefit both our investors and our partners. At this time, we'd like to open the line for questions. Operator?

Thank you. Ladies and gentlemen, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing the pound key. Once again, that is the star and 1 to ask a question. We'll hear first today from Casey Alexander at Compass Point.

Good afternoon. I guess it's still morning here, so good morning. And thank you for taking my question. I think this is sort of a multi-part question, but it's an extraordinary amount of originations during the quarter, And investors have sort of been trained to be somewhat wary of growth that comes at that kind of pace. And so I'm curious how you feel about growing at that kind of pace and still making sure that credit quality stays really pristine. You know, you did have a couple new non-accruals in this quarter. One of them, which is an equipment finance company, And so I think it's just something that investors are always going to keep an eye on when you're growing at that pace and would really like to hear from you how you intend to keep that credit quality pristine when you're growing at such a rapid pace.

Hey, Casey. Good to talk to you this morning. This is Jerry. I'll start out with that one on the multi-part. So, you know, we are aware of that sentiment from investors, that weariness, and we're But the way we think about it is the diversification across our business verticals. And we've got extremely experienced individuals who are focusing on these verticals, both leading the vertical market and also leading the credit within the vertical market. So we built Trinity intentionally to scale. And, you know, our credit quality is going to show itself over time as it has, you know, throughout our track record. So, you know, we very much want our investors to believe that, that we've built this to scale, and we're going to show folks that we have.

All right. My next question relates to that. Because of the large amount of originations that you had in this quarter, You also sold a considerable amount of stock to the equity ATM program that actually increased shares outstanding by more than 10% quarter over quarter. If you think about that, that seems like an amount that, that maybe might be more appropriate for a syndicated stock offering, as opposed to being out in the market every day with an ATM program of that size. How do you balance the scales of where you raise equity and the manner in which you raise equity relative to that rate of growth?

Yeah, Casey, this is Kyle. We're being opportunistic, raising both equity and debt. We're looking at the opportunities in front of us, and we're taking advantage of them. This is a really efficient way to raise equity. We're doing it on balance sheet at the public company level. We're doing it off balance sheet under the RIA, and we're doing it in a way that's accretive to investors. So we'll continue to deploy capital if the opportunity is there. We'll continue to raise equity and debt when the opportunity is there, and we're going to do it in the most efficient manner in a way that's good for investors, which I think we've shown.

I'm not sure that entirely answers my question. Because the question was, how do you balance between an ATM versus a syndicated equity offering, knowing that when you're raising equity to that extent, being out in the market every day has some impact on the valuation of the stock?

You're talking about doing it overnight opposed to an ATM, Casey? Correct. Correct. Yeah. I mean... We've done a fair bit of that. I mean, we've been doing it for five years now, and I guess every time we do an ATM, every time we do an overnight, the stock has been affected in a big way. That's probably affected shareholders in a more negative way, and it's more costly. I mean, we use the ATM. It's a 1% fee, 1% to raise equity. We do an overnight. It's at a cost of 6% to 8%. So if we can access the ATM, it costs a lot less. It saves money for shareholders.

All right. Thank you for taking my questions.

Yeah, you bet.

Thank you. Our next question comes from Christopher Nolan at Ladenburg-Tallman. Go ahead, please.

Hey, guys. Hey, Chris. Mike, what was the driver of the realized loss in the quarter?

Yeah, that was one of the positions we noted Jerry's remarks. That was Nexi that was realized this quarter. Again, we had marked that down fair value in the past quarters. So from a NAV perspective, it was mutual on that realization. You saw an unrealized flip. So, yeah, that was the big driver there.

Great. Next question is operating expenses. It seems to be growing. Where are you guys making your investments, and what's the – run rate we should expect for coming quarters?

Yeah, I think Q3, you saw that tick off. Again, we've been making hires throughout the first half of the year and into this quarter, as Jerry said, building out the five different verticals and each of the team underneath that. So I think Q3 is probably a good run rate you'll see for the next quarter or so.

Great. Final question, for these off balance sheet vehicles, what's your threshold in terms of an IRR? I know you're looking at various strategies, but try to see what's the minimum IRR that you seek from them?

Right now, since it's a co-investment vehicle, the return should be very similar to the return on an investment in TrinStock. I think the profile, again, we expect having fees also to increase the IRR in these off-balance sheet vehicles. But, yeah, I think overall to the investor of that off-balance sheet vehicle, it would be very similar to TRIN.

For me, thank you.

Thank you.

Thanks, Chris.

Bryce Rowe with B. Reilly. You have our next question. Awesome. Thank you.

Good morning. A couple of questions here, maybe just a piggyback on Chris's question about expenses. Obviously, in growth mode, you've been growing the expense base. And one advantage that internally managed BDCs have, and you can see it with Maine, Hercules, Capital Southwest, is a much lower kind of operating leverage ratio, expense ratio, well below 2% in at least two of those three cases. You all are maybe a little earlier in your stage of growth at this point, but Kyle, maybe you can just comment on when you think you might see the inflection point in terms of your leverage ratio or expense ratio from a three to maybe three to 4% level right now and maybe working its way down, at what point will we start to see that inflect?

Yeah, I think, listen, I mean, it's apples and oranges when you're comparing us to even a capital southwest. I mean, we've got 100 employees, nearly 100 employees, and they've got 30. We have fundamentally just different businesses. And so we're building this business right now. We are hiring employees. Our expenses, we're not optimizing for lowering our expenses right now for earnings. We're growing earnings. And so you will see that as we continue to scale. You'll see that number come down. But we've been able to continue to build a team higher in advance and grow earnings for investors at the same time. And I think you're going to continue to see that. There will be efficiencies of scale. Uh, you will see like main street, you, they have a thriving off balance sheet, probably, you know, management business now, and they've been able to downstream some of their expenses there. You'll see that with us as well. And so, you know, I think, I think over the next 12 months, you'll see that number probably from a ratio percentage come down. Uh, but we are, we are growing this business. If opportunity is there for us to continue growing, we're going to keep doing it. We're going to keep hiring. ahead of that, like we've done historically, while also increasing returns for investors at the same time. We've been able to do that.

Yeah, understood. Not trying to say that, you know, I get the apples to oranges, but just thinking about holistically the benefit of internally managed and, you know, why internally managed BDCs trade at a premium. And I think that's part of it, the fact that you can capture operating leverage as you grow. So, appreciate that. You'll see that one.

You'll see that with us, and you'll see that leverage. You'll also see that as we continue to manage more money off balance sheet and generate more management fees and incentive fees. You'll see that benefit as being an internally managed business as well there.

Yeah, okay. The hiring and the focus on growth has certainly paid off in terms of originations picking up, and especially here in the third quarter, just kind of how do you guys, how should we as, I guess, investors and analysts think about the pace of originations? Can you sustain this level of originations over the foreseeable future, or will it be kind of more ebbs and flows in terms of what the overall number looks like?

If you break down the originations between our different business verticals, you'll see it's pretty balanced. Each of those verticals is growing at a nice clip right now. We do think the originations is sustainable. We are a little bit ahead of plan, but it's really not. We don't feel like we're over our skis from an origination standpoint. Most of those deals, you know, our credit and our underwriting is as focused as ever. And we're not seeing some increased percentage of deals get across the finish line. This is exactly how we've done things historically. The amount of deals that are crossing the finish line, that percentage has not changed. And so we're seeing a larger top of funnel because we've expanded business verticals. And so as we continue to build out these businesses, we think the origination is sustainable for us.

Last one for me. When you look at maybe the breakdown of the portfolio, it looks like the warrant portfolio saw a nice uptick both from a cost basis and fair value basis perspective. Is that just purely a function of getting warrants with some of the new originations?

Yeah, I mean, yeah, that's, you know, a lot of that has to do with the venture debt business. And you see, you know, we have a large war portfolio. As the market improves, that can go up. And so we're seeing some of the benefits of that there.

Yeah, okay.

All right. Thanks so much.

You bet.

Matthew Hurwitz at Jefferies. Please go ahead and... Hi, guys.

Just wondering if we could have a bit more detail on the puts and takes from the non-accruals decreasing quarter on quarter. I know you mentioned Nexi and then two companies that were added, but it might be good to have some detail on those two companies and any other puts and takes.

Sure. Hey, Matthew. This is Ron Gundage, Chief Credit Officer. Thanks for the question. The two companies that were added to the non-accrual last quarter, one of them was a small equipment financing, and the other one was an aged term loan in our venture debt practice. I'd call it a quote-unquote normal transition, right? Nothing abnormal about those two credits. They just got to a point where we prudently put them on non-accrual. Of course, Nexi rolled off as a result of you know, recognizing that transaction during the quarter. The most important note is, as we look at our non-accruals, that credit bucket decreased on both a cost and a fair market value basis, Q3 versus Q2. So, you know, consistent with the other things you've heard in the Q&A here, you know, the underwriting rigor remains strong at the top of the funnel or at the top of the portfolio, if you will. And important to note that each vertical, as Jerry alluded to, has its own distinct team, and included in that team is a portfolio management team that manages each portfolio and their experts in their respective verticals.

Okay, great. Thanks. And then could you just provide what the timeline typically is to get from a signed term sheet to a commitment, and then from a commitment to a

funded loan I can see that they've all grown nicely but yeah if you could provide some color there yeah it really depends on the the business but I think generally speaking you know 90 to 120 days from start to finish yeah I see so from signed term sheets of funding okay signed term sheets of funding yeah 45

45 days. Okay. Okay, great. And then last, if I could just ask how you think about the dividend and when to increase it. There's some discussion of rates impacting earnings. So just your thoughts there.

Yeah, I think we've kept the dividend steady. We certainly could have increased it, but we're really focused on just keeping it stable, building earnings per share, seeing some of that NAV growth, and then we'll, with the board, decide on when to increase it. Our goal as an internally managed BDC with managed funds now is to grow earnings over time and grow the dividend over time. That is our stated goal. We'll decide on a quarterly basis when to when to bring that up as we see earnings continue to drive forward. Okay, thanks.

You bet. Finian O'Shea with Wells Fargo Securities. Please go ahead. Your line is open.

Hey, everyone. Good morning. A lot of discussion on internal today, but seeing you're only getting maybe a touch of credit for that in your stock price, We're seeing if there's any appetite to flip over to external and how you would look at that sort of debate. Thank you.

No, we're not doing it. We're not thinking about it. This internal structure is ideal for what we do. We have done a great job of raising capital internally. through the public markets, through the capital markets. We've delivered a best-in-class return to investors. We have delivered over $8 per share since we went public. We've raised over a billion dollars of equity in debt. We're now raising money off balance sheet. All of the management fees and incentive fees, 100% go to investors. We can drive up earnings per share. We can drive up and be best-in-class ROEs. We are an asset management company in a BDC wrapper, and it is awesome for investors. We are not ever going to do that. We're not thinking about it. And we are this growth story with a really consistent and great dividend. So that's what shareholders need to know. That's what they need to understand. And hopefully over time, we'll get the price that we deserve, which is much higher than where it is right now. And I think our shareholders are pretty excited about what we're doing.

Very good. Thanks so much. That's all for me.

Our next question will come from Paul Johnson at KBW.

Yeah, good morning. Thanks for taking my questions. Just wanted to ask, I'm sorry if you said it on the call, I just didn't catch it, but how are the, just the AUM and Collectively in the JV and the RIAA, how's that been scaling? I think it was close to about 500 million last quarter.

Is there any growth there this quarter versus last? Yeah, Paul, this is Mike.

We did syndicate close to 40 million this quarter. Our balance sheet just continues to ramp, so I think you'll see that. Again, in the joint venture, there is a bit of seasoning that goes on. So a lot of the prior quarter fundings get syndicated the following quarter. So you'll see that next quarter from this quarter in the joint venture. But then also the vehicle, the private vehicle under the RA subsidiary, that's just going to continue to ramp. We are looking to obtain leverage at a bank facility for that. So we're building up capacity there. in that vehicle as well.

Thanks for that.

And then one question on the improvement in the credit rating. I think Bryce may have asked this question, but so the improvement of 2.9 versus 2.7, is that primarily just due to the strong growth this quarter or were there meaningful upgrades in credit ratings and then my second question for that would be just can you just remind us you know for any new investment I guess for a new company new platform investment where where do those get placed in terms of the sort of default credit rating initially when it's placed into the portfolio and that's that's a great question this is Jerry I can take that so Yeah, we did see improvements this quarter. Now, some of it is a little bit of rounding, right? So it was, you know, 2.7 something, now to 2.8 high something. So, you know, it looks maybe, you know, at one decimal place, like a bigger jump than it is. But nonetheless, you know, we did have, you know, we spoke in our prepared remarks about the amount of capital that our portfolio companies raised. Like, they had a great quarter, right, in terms of capital raising. And so, you know, the two biggest factors within our credit rating system are cash runway and performance to plan. And so, you know, you can imagine cash runway, you know, improving for a number of credits that did raise capital. When we bring in new credits, you know, they will generally land, you know, around that high end of what we call performing. So in that 2.9, 3.0 range. We like our new credits to show us for a bit before we place them in one of the upper tiers. But I think we did bring in a very strong cohort this quarter. So I think the uptick was a function of capital raising, portfolio companies performing well, and strong originations, kind of in equal parts.

Got it. Thanks. That's very helpful.

And then just a quick question on the European expansion. I guess, how is the foreign exposure, how would that affect the non-qualified assets in the portfolio? I don't think it's a very big piece of the portfolio, but You know, would that require any kind of second credit facility or any sort of multi-credit facility to be able to expand that business? And, you know, how would that flow through, I guess, the interest statement? Because I think I may have seen that some of those loans pay in dollars, but if you could expand on that, it would be helpful. Yeah, Paul, I'll start and the rest of the team chime in. From a non-qualified bucket, as you mentioned, European or foreign investments would fall under there. Right now, that bucket is overall, all the non-qualified assets are about 13%. So plenty of room in that bucket to continue to fund those assets that are foreign. Right now, the majority of our loans and financings are all in U.S. dollars. As you mentioned, we do have the ability to lend in a foreign denominated currency, which we could utilize a credit facility in that foreign currency to minimize the FX risk.

Yeah, our goal there is just to repeat what we've done here, over there. And with the RIA, it gives us the ability to raise capital. So when we do start having some issues maybe with growth there, with the size of that bucket, we have the ability to raise capital in a vehicle that's dedicated just to that purpose. So we have a really great opportunity to grow it. We have a great opportunity to raise additional capital dedicated to those investments.

Got it. Thanks for that.

And then I would imagine that you're looking at a lot of new sponsors for that market. I guess if that's true, I mean, what is kind of the threshold for a new deal, a new sponsor?

Is there a deeper diligence process just because it's a new market? How does that work?

Yeah. I mean, I'll run, you can, you can jump in as well here, but, um, you know, we're not doing anything that, uh, that we haven't, that we haven't done historically. So we've been doing business in Europe at a smaller scale for 10 years. Um, And so, deals have to go through the same exact process.

This is Ron. It's the same underwriting rigor that we use here in the States. The gentleman we've brought on to lead that effort is a venture debt pro who's been lending to venture-backed companies out there for over a decade. And he's a known quantity. He's known to us. We didn't hire a stranger, right? We hired... someone that we have some track record with on a personal level as well. So, you know, the question is a good one, but, you know, for now it's, you know, same marching orders, same underwriting criteria. Jerry mentioned a couple of the portfolio criteria earlier in an earlier answer. So same process.

Yeah. And as we build out that team, you know, we're going to bring in, individuals who are experienced doing business in that geography. We're not looking to send over from Phoenix or the Bay Area. We're going to grow that team with folks that are in markets in the UK.

Got it. Appreciate that. It's helpful. It's all for me. Thanks. Thank you.

Our next question comes from Doug Harder with UBS.

Thanks. Hoping you could talk about your outlook to continue to grow the RIA channel and, you know, kind of how we should think about the operating leverage for that to fall to the bottom line for trend shareholders.

Hey, Doug. Yeah, we're really focused on rating capital for the RIA. both as a kind of co-investment vehicle for across the platform, and then also raising capital specifically for our different verticals and getting the appropriate leverage for the different risks that each of those businesses take. And so that's a big focus for us now and into next year. Our goal there is to raise capital where we can charge management fees and incentive fees, all of which will flow to our investors it's going to be a big part of our future. I can't give you specific numbers. I hope to give you more detailed information in the not-so-distant future. But in raising capital is a slog. It's difficult. It's hard. It takes a long time to raise capital privately. And we have been at it for a while. We've seen some success. We hope to see more of it in the not-so-distant future.

Great. Thank you.

And that concludes our Q&A portion for today's conference. I'm pleased to turn the floor back to CEO Kyle Brown for any additional or closing remarks.

Thank you. We're proud of the third quarter results and look forward to updating you on our 2024 results during our next call in February. Also, we look forward to seeing many of you at our investor event in Manhattan on November 19th. If you'd like to attend, please contact our head of investor relations, Ben Malcolmson. I'd like to thank everybody for participating in our call today. We appreciate your interest and investment in Trinity Capital. Have a great rest of your day. Thanks.

Ladies and gentlemen, this does conclude today's conference, and we thank you all for your participation. You may now disconnect.