Trinity Capital Inc.

Good morning. My name is Stephanie, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Trinity Capital's fourth quarter 2025 earnings conference call. All participants have been placed on a listen-only mode, and the floor will be open for questions following the presentation. If you'd like to ask a question at that time, please press star 1 on your keypad. If any question has been answered, you may remove yourself from queue by pressing star 2. It is now my pleasure to turn the call over to Ben Malcolmson, Trinity Capital's Head of Investor Relations. Please go ahead.

Thank you, and welcome to Trinity Capital's fourth quarter 2025 earnings conference call. Speaking on today's call are Kyle Brown, Chief Executive Officer, Michael Testa, Chief Financial Officer, and Jerry Harder, Chief Operating Officer. Joining us for the Q&A portion of the call are Ron Kundich, Chief Credit Officer, and Sarah Stanton, General Counsel and Chief Compliance Officer. Earlier today, we released our financial results, which are available on our website at ir.trinitycapital.com. Before we begin, please note that certain statements made during this call may be considered forward-looking under federal securities laws. Please review our most recent SEC filings for further information on the risks and uncertainties related to these statements. With that, please allow me to turn the call over to Trinity Capital CEO, Kyle Brown.

Thank you, Ben, and thanks, everyone, for joining us today. Trinity Capital is experiencing strong momentum right now, and our investors are seeing the benefits from our diversified platform, our internally managed structure, and our continued growth. 2025 was a banner year for us. We achieved records in many major operating categories. Our five complementary verticals continue to drive real diversification, and our internally managed structure creates a creative value for shareholders. Together, those advantages clearly differentiate Trinity in the private credit space. Major highlights from 2025 include excellent operating results with record-setting net investment income of $144 million, or $2.08 per share, a transition to monthly dividends, providing more frequent income for shareholders, as well as continued consistency of our distributions. Sustained momentum with our originations engine as we achieved a record $1.5 billion of fundings, and $2.1 billion of commitments, and significant growth of our managed funds business through the establishment of several co-investment vehicles, which provide new liquidity to the platform and incremental income to trend shareholders. We finished the year with an especially strong fourth quarter. Here are some of the highlights from Q4. We delivered $40 million in net investment income, 15% increase compared to Q4 of last year, Our net asset value grew 10% quarter over quarter to a record $1.1 billion. Platform AUM increased to more than $2.8 billion, up 38% year over year. We maintained strong credit quality with non-accruals at less than 1% of the portfolio at a fair value. Trinity paid a fourth quarter cash dividend of 51 cents per share and announced a 17 cents per month distribution for the first quarter. Trinity shareholders have now been the beneficiaries of more than six consecutive years of a consistent or increased dividend. Trinity Capital continues to outperform in key metrics. Our return on equity and effective yield rank at or near the top in the BDC space. Our NAV has grown 33% year over year, while our credit metrics have remained strong and consistent. Since our IPO five years ago, TrinStock has delivered a cumulative total return of 109%, far outpacing both the peer average of 70% and the S&P 500's 82% over that same time period. Looking forward, we have an ever-growing managed funds business, as well as 209 warrant positions and 130 portfolio companies, which have the potential to provide incremental upside to our shareholders. We have entered 2026 with strong momentum. In Q4, we funded $435 million, bringing full-year investments to $1.5 billion, 21% more than the prior year's total. Our investment pipeline remains robust, with $1.2 billion in total unfunded commitments as of year-end. As a point of emphasis, 93% of our unfunded commitments remain subject to rigorous ongoing diligence and investment committee approval, while only 7% of these commitments are unconditional. Our originations activity reflects consistent growth in all of our verticals across the Trinity platform, powered by an elite team of originators and underwriters. We are a direct lender. We own the pipeline. We do not depend on syndicated deals, and we have immaterial overlap with other BDCs. all of which give our investors access to a highly differentiated portfolio of investments through our five business verticals. All the while, we remain deeply committed and disciplined to our underwriting approach and credit performance, which are crucial to our long-term success. I'd like to share a few thoughts that are newsworthy topics of late regarding AI and the software space. Really, anyone saying that AI is going to end software is off-base, and anyone saying AI will not change software is also off-base. The recent overreaction around AI's impact on the software industry is not new to us. We've been dealing with AI-driven disruption for more than three years, and we've made thoughtful decisions to strategically diversify our portfolio and opportunistically invest in adjacent sectors to the AI space. Enterprise SaaS is currently 9% of our portfolio. Many of those are private equity-backed, lower middle market companies that have, over the last few years, introduced new AI tools to their offerings. Software, and particularly incumbent and trusted software, is the means of integrating these new AI efficiencies. The strongest companies continue to adapt and perform well. We're not seeing any weakness in our software investments. The companies with the best management teams, the strongest moats, and most versatile strategies continue to separate themselves from the pack. More importantly, we're also not placing bets on individual AI winners and losers. We are proactively marketing our services to SaaS companies that want to on-prem their compute. Our equipment finance business has been active in the space for multiple years and has the ability and experience to provide CapEx financing for data centers, GPUs, CPUs, and power generation equipment. We're investing in the picks and shovels that power the entire ecosystem. This is the infrastructure that every AI application depends on, regardless of which companies rise or fall in the application layer. We strongly believe that AI versus SaaS debate is not a zero-sum game. We'll continue to keep the portfolio diversified and our investment approach nimble as we identify new and underserved markets to generate alpha returns for our shareholders. Moving to rate cuts, so far, they've had little impact on our business. Based on our modeling, additional cuts would likely have a muted effect on our earnings power. Unlike most other lenders, the majority of our loans have interest rate floors set at or near the original levels. So, When rates come down, our income does not fall proportionally. In fact, much of the portfolio is already at those floors. Further cuts could actually accelerate early repayments, allowing us to capture prepayment or restructuring fees. And at the same time, lowering rates would reduce the interest expense on our floating rate credit facility, lowering our cost of capital. And lastly, PIC continues to be a nominal portion of our income, with less than 2% of our income based on PIC, another one of TRNS differentiators in the BDC space. We continue to strategically raise equity, debt, and off-balance sheet capital to fuel our growth. In 2025, the first quarter of 2026, we closed several co-investment vehicles with leading asset managers, adding liquidity and generating management fees. We also converted a separate vehicle into a private BDC that is actively raising capital. At the same time, we're seeing strong momentum and capital-raising efforts for our third SBIC fund, which will provide attractive low-cost leverage and is expected to add more than $260 million of incremental capacity to the platform once scaled. Together, these initiatives demonstrate our ability to thoughtfully grow, expand investment capacity, and further diversify our capital base. What we are building is not your typical BDC. Our wholly owned managed fund business oversees third-party capital and generates new income, above and beyond the interest and equity returns from our BDC's portfolio investments. Trend shareholders benefit from these fees collected by our managed funds business, We are building a platform that can scale while driving up earnings and NAV. We believe our consistent performance is driven by three things. Our differentiated structure, disciplined underwriting, and world-class team. Our five complementary verticals, sponsor finance, equipment finance, tech lending, asset-based lending, and life sciences allow us to stay diversified while operating squarely within our core competencies. Each vertical has dedicated originators, underwriters, and portfolio managers and creating a scalable and highly effective operating model. Structurally, as an internally managed BDC, our employees, management, and board own the same shares as our investors, increasing alignment and a shared commitment to consistent dividends and long-term value creation. That structure also supports a premium valuation because shareholders own both the management company and the underlying assets. The management and incentive fees generated through our managed fund business flow directly to the BDC, creating incremental income, enhancing value, fueling growth, all for the benefit of our shareholders. From a talent perspective, we're passionate about fostering a vibrant culture rooted in humility, trust, integrity, uncommon care, and continuous learning with an entrepreneurial spirit. Our unique culture enables us to attract, retain the best people in the industry, which fuels our continued growth trajectory. From day one, our objective has been simple, consistently out-earn the dividend while growing the BDC. and we continue to execute on that commitment. Trinity is strategically positioned to capitalize on the opportunities ahead, supported by a diversified pipeline, disciplined underwriting, and an expanding managed funds platform. We are not your typical BDC, and that differentiation matters. We're building more than a portfolio. We're building a durable, aligned, and scalable platform designed to compound value over time. And as we look to 2026 and beyond, we believe our best days are still ahead. With that, I'll turn the call over to our CFO, Michael Testa, to discuss our financial results in more detail. Michael. Thanks, Kyle.

Our operational and financial performance remains strong in the fourth quarter. We generated $83 million in total investment income, a 17.5% year-over-year increase, and $40 million in net investment income, or $0.52 per basic share. representing 102% coverage of our quarterly distribution. Beginning in January, 2026, we transitioned to a monthly dividend of 17 cents per share, maintaining the same aggregate quarterly payout and aligning the timing of our distributions with the recurring nature of our investment income. Estimated undistributed taxable income is approximately $69 million or 84 cents per share. which we continue to reinvest for the benefit of our shareholders while maintaining a consistent and meaningful distribution. Our platform continues to deliver top-tier performance, generating 15.3% return on average equity, among the highest in the BDC space. And our weighted average effective portfolio yield remains strong at 15.2% for the quarter, despite the declining rate environment. Net asset value per share increased from $13.31 at the end of Q3 to $13.42 at the end of Q4, reflecting accretive capital raises. Toll NAV rose 10% to $1.1 billion, up from $998 million at the end of Q3. We further strengthened our capital base by raising $95 million through our equity ATM program during the quarter. and an average premium to NAV of 12%. During the quarter, we also entered into a new secured term loan, extending the maturity profile of our liabilities and further diversifying our capital base. The facility was priced at a spread below our existing revolving credit facility, contributing to an improvement in our overall cost of debt. Additionally, in Q4, we raised $28 million of gross proceeds through our debt ATM program, at a 1% premium to PAR. Our co-investment vehicles continue to enhance returns, contributing approximately $3.1 million, or 4 cents per share, of incremental net investment income benefit in Q4. We syndicated $47 million to these vehicles during the quarter, and as of December 31st, we managed $400 million in assets across our private vehicles. Our net leverage ratio remained consistent at 1.18 times at quarter end. With strong liquidity, diversified capital sources, and capacity across the Trinity platform, we're well positioned to underwrite a robust pipeline, maintain strict credit disciplines, and deploy capital in high conviction opportunities. To discuss our portfolio performance in more detail, I'll now pass the call over to our COO, Jerry Hart. Jerry?

Thank you, Michael.

Our portfolio continues to demonstrate exceptional strength, driven by broad diversification across 22 industries, with no single borrower representing more than 3.9% of total exposure. Our largest industry concentration, finance and insurance, accounts for 14.6% of the portfolio at cost and is diversified across 25 portfolio companies. credit quality remained consistent quarter over quarter with over 99% of debt investments performing at fair value. On our one to five scale, where five indicates very strong performance, the average internal credit rating was 2.9, consistent with prior quarters and reflecting the addition of high quality originations and continued strong portfolio management. Quarter over quarter, the number of portfolio companies on non-accrual remained at four, During Q4, two relatively small debt financings were added to non-accrual status, while two prior non-accrual investments were realized and rolled off. As of December 31st, non-accruals totaled $15.2 million at fair value, representing less than 1% of the total debt portfolio. At quarter end, 85% of total principal was secured by first position liens on enterprise value, equipment, or both. For enterprise-backed loans, the weighted average loan to value remained consistent at 17%. During 2025, our portfolio companies collectively raised more than $7.8 billion in equity, emphasizing the strength of our borrowers and their continued access to capital. Across our five business verticals, we're seeing deployment begin to smooth out more evenly, a trend we expect to continue in future quarters. The approximate breakdown of our fundings in Q4 was as follows, 27% to sponsor finance, 25% to equipment financing, 20% to life sciences, 15% to tech lending, and 13% to asset-backed lending. Looking ahead, our portfolio remains defensively positioned with a strong first lien bias and low loan-to-values. Our momentum, disciplined underwriting, and diversified platform allow us to continue delivering consistent dividends and NAV growth. With a shareholder-first mindset, our team remains focused on building a best-in-class BDC that generates sustained long-term value for our investors. Before we conclude our call, we'd like to open the line for questions. Operator?

Thank you. If you'd like to ask a question, press star 1 on your keypad. To leave the queue at any time, press star two. Once again, that's star one to ask a question. We'll pause for just a moment to allow everyone the chance to join the queue. Thank you. Our first question comes from Casey Alexander of Compass Point. Please go ahead, your line is now open.

Yeah, good morning, and thanks for taking my questions. You know, on most of these calls so far this quarter, we've been talking a lot more defense than offense, but I think Trinity appears to be in a, in a position to play offense. And because of your five verticals, your software position appears to be indexed below most of the peer groups. So I'm wondering, you know, as is there an opportunity that is going to be arising for you to take advantage of the turmoil if, if other platforms are, are, unwilling or unlikely to continue with software loans, is there an opportunity to convert some of those to equipment finance loans where you have a collateralized position on it in front of the enterprise value and thereby earn some better spreads and better risk-adjusted rates of return?

Yeah, hey, Casey. Thanks for the question. Yeah, we see it that way. I mean, one of the reasons why our percentage of assets in that category is low is because we entered that space really in Ernst in the last two years. And that's because valuations were significantly too high and pricing was very low. And we decided to enter when we did as valuations started to come down. And we thought that was a great entry point our attachment rates could be lower. We could have more aggressive pricing. And so we are being opportunistic right now. I think in particular, our kind of sponsor finance, you know, think three to 30 million of EBITDA, lower middle market software companies with AI and that are AI enabled. It's a massive opportunity. We think there's going to be a lot of consolidation. A lot of these companies that maybe couldn't get to scale and, And so with access to the capital markets, with access in our fund management business to private capital, we have liquidity, and we will continue to be opportunistic there.

Thank you. We'll take our next question.

Thank you. We'll take our next question from Doug Harder of UBS. Please go ahead. Your line is open.

Hi, this is Corey Johnson on for Doug. So I was just wondering, are there any parts of your portfolio that give you any concern or either in or perhaps, you know, areas that you've lent to traditionally but you're a bit more cautious around currently? And are there any verticals that you're particularly looking to lean into a bit more during this time?

Hey, Corey, thanks for the question. So, you know, historically, we focus on industries that are emerging, that have disruptive technology, moats around that technology. They are well capitalized. Equity dollars are flowing into that particular industry. That has always been part of our underwriting, and that hasn't changed. So our investment philosophy and kind of where we direct dollars continues to evolve and change over time as new and emerging technologies kind of ramp up. And so we'll just continue to see where the market is going, where equity dollars are flowing. And then, of course, with our loans being in shorter-term duration and fully advertising in many cases, you know, we continue to get paid off where industries are evolving and maybe not receiving as much equity dollars. And so that continues to bleed off in industries that are not getting the attention they used to, and new dollars are being deployed into emerging markets. And so that has been our philosophy. That continues to be the philosophy going forward.

Great. Thank you. Thank you. We'll take our next question from Brian McKenna with Citizens. Please go ahead. Your line is open.

Okay, great. Thanks. So I know the focus today is continuing to go deeper across all five of your verticals. I'm curious, though, and you touched on the deployment environment a little bit, but given the pickup and volatility, you know, there's clearly dislocation across the sector. I mean, would you ever think about leaning into any strategic opportunities here if the environment stays like this? You clearly have a strong and liquid balance sheet. You have access to debt and equity capital. So I'm wondering if this would be a period where we could actually see you go from five verticals to six.

Great question. And, you know, Sarah's kicking me. No forward-looking statements here. So it's a great point. We are going to continue to be opportunistic. I mean, we are making sure that we have plenty of ample liquidity available to us. So that in a market where there is volatility, and I would say most of the volatility that we're seeing so far has little to do with kind of portfolio volatility, but much more to do with kind of valuation volatility. Our game plan all along has been to make sure that we have liquidity to take advantage of markets when there is less liquidity, less competition. maybe private companies with funds that have reached their duration where we can be opportunistic and jump in there. And so the answer is absolutely yes, and we'll continue to kind of keep our eyes open and be opportunistic as opportunities present themselves.

Okay, that's helpful, Kyle. And then one more, if I may. I know growth of the RIA and your third-party asset management business is a big focus area for this year. What are you hearing from these LPs, potential investors in some of these third-party funds with all the focus, all the volatility in and around private credit today? And I'm trying to figure out for Trinity, could this actually be a positive for this business, related fundraising, related growth as some of these allocators maybe look to diversify away from some of the larger players in the upper middle markets and really as folks look to kind of have more exposure to uncorrelated assets and performance?

Yeah, I mean, I personally love the volatility. There has been a massive amount of inflows for years going into just a small number of upper middle market firms. And with rates low, they've been able to deploy and deliver decent returns. Well, that's changed. And now we have an opportunity to stand out in a unique way by delivering outperforming results. And I think investors, they're going to love that. And we have the ability to generate higher returns. And we've been doing it consistently. And so, you know, there's outflows happening. You see it, you're seeing in the news often now. I think what we're seeing is more and more interest and more inflows as we continue to build out our fund management business. So I see this as a really great year and opportunity for us to stand out in a unique way in what has been a crowded space for the last five years. And so that's what we're hoping to achieve. And as we wrap up SBIC fund and roll into future fundraising, we're really positive on it right now.

All right, I'll leave it there. Thanks so much.

Thank you. Once again, if you'd like to ask a question, please press star and one on your keypad now. We'll take our next question from Eric Swick with Lucid Capital Markets. Please go ahead. Your line is open.

Thanks. Hello, everyone. Just as I take a look at the kind of breakdown of your fourth quarter originations, both in terms of absolute amount and dollar terms, you know, more weighted towards the existing portfolio, which, you know, I think is just a testament that you selected the you know, solid companies to invest in. They're growing and have more needs. Curious, you know, looking towards the pipeline today, is the mix still weighted, you know, maybe more heavily towards existing portfolio needs versus, you know, new needs? And kind of curious also what that might mean in terms of your perception of, you know, the quality of new investments that you're looking at, whether tighten spreads or more competition has impacted the attractiveness there.

Yeah, I think over the last year, we've been focused on new logos and new investments, and that has been the majority of our deployment. And then I think our portfolio is unique. When we are deploying to our current portfolio, a lot of that is going to be equipment financing facilities where they have multiple draw schedules, and if they're hitting their milestones and growing, then we're building out more capacity. or if they're delayed draw term loans, these companies have reached some, again, hit milestones, hit hurdles, and earned their ability to receive more capital. So it's all new investments to growing companies, and that's the vast majority of our fundings, and that's not going to change, I don't think. You guys want to add anything to that?

Yeah, I mean, Eric, our backlog, as you've seen, it's over a billion dollars. A third of that is to our equipment channel. So as they build out their manufacturing lines, we're going to fund along inside that. And a small percentage of that billion dollars is subject to legally binding. Most of it's subject to milestones or additional due diligence.

Yeah, I think it'd be fair to say the number of the number of new logos in Q4 was relatively small, right? And so I think that's idiosyncratic. I don't expect that to continue at that level, but, you know, we're pleased to deploy to those existing portfolio companies.

Thanks. I appreciate that, the commentary from all of you there. Just turning to credit quality a little bit, it's nice to see that, you know, non-accrual still remains, you know, very low and well below peer averages, as you mentioned, did have two realizations, but then two new credits added to the non-recrual list. To the extent that you can comment on Zoom and 3DEO, anything, you know, noteworthy in their developments there that has been moved to non-recrual and then how you, you know, are approaching working with them to get them through the difficulties.

Thanks, Eric. This is Ron. Yeah, those two clients, those are Legacy borrowers, they've been in the portfolio for quite some time. They're a bit storied. And at the highest level, they got in positions where they stopped making payments in Q4. So they're put on the non-accrual list. We're actively working them as we speak. And, you know, we expect to have, as of today, you know, we'll see what the outcomes are.

Excellent. Thanks, Ron. Thanks, all. That's all for me.

Thank you. We'll move now to Christopher Nolan with Landberg Thalman. Please go ahead. Your line is open.

Hey, guys. Hey, Jerry. I think it was Jerry or Ron. You mentioned that you're seeing portfolio companies raise more capital, equity. Can you give a little color? Is this private equity sales or these follow-on investments from existing investors or Are these things mostly or tangentially related to AI?

Boy, it's, you know, all of the above, right? You know, we've got some portfolio companies accessing the public markets. We've got other portfolio companies, you know, raising through their VC or PE sponsors. I don't know that within our portfolio, I would say much is directly related to AI or I mean, yeah, I have nothing to add to that.

Yeah, I mean, I think what you're seeing is just what you've been seeing for years now, which is the VC market is robust. You know, there's nearly $100 billion deployed in Q4. And so the companies we're lending to, they're growing, they're raising capital. And so it's just it's really not a surprise that they were able to raise it with the size of the market where it is today.

Yeah, the only issue at that point is 70% of the VC dollars are going towards AI or AI-related stuff. So it seems to be pretty concentrated.

Yeah, I would agree with that, Chris, except if you think about it, right, because our portfolio, we enter at that growth stage, right? So we're entering in businesses that are actively growing a revenue base and not sort of new entrance into a space. So I think maybe some of the newer VC dollars are going into AI-driven companies, but companies that were founded, say, five years ago that are now in growth stage and are raising equity, that's more what the trend portfolio looks like.

Great. And then as a follow-up question, given all the turmoil that's affecting software and things like that, Is there any consideration of having the entire investment portfolio valued more frequently than it currently is?

Yeah, I mean, the answer is no. And I think maybe that would make more sense if you had a significantly larger exposure to enterprise SaaS. Our exposure is relatively low, and it's relatively new. With SaaS, And every one of those deals already had an AI filter, an underwriting filter put into it. we are looking at these companies and understanding their moat, right? Understanding how and what their AI roadmap looks like. And so the investments we've been making, I mean, two and a half years ago, they called it machine learning. And that's what we were looking at. And now it's called AI, right? And so, you know, I think AI will continue to evolve and it will continue to be tools that a lot of our companies are utilizing But it's not necessarily changing, and we have not seen within our portfolio any detriment to those companies.

Yeah, and I would add, Chris, as Kyle said in his prepared remarks, enterprise software is about 9% of our assets. About three-quarters of that is originated by our sponsor finance team. So these will be 18 months or newer cohorts, and backed by private equity where companies you know, we're in front of their dollars, right? They've got significant cash in these businesses. So from a valuation standpoint, you know, we feel good about where we are in a first lien role there. Now, has their equity valuation changed? Probably, right? But from our debt standpoint, we don't see degradation in the debt valuations in that case.

Okay. Thank you, guys.

Thanks, Chris.

Thank you. We'll take our next question from Mickey Schlein with Clear Street. Please go ahead. Your line is open.

Most of the high-level questions have been asked Just one high-level question on my behalf. You know, we see different ways of defining portfolios in terms of industry segments across the space. I do see your software allocation that you mentioned of, what was it, 9.3. Is your software buried elsewhere in the portfolio, or is that the total amount?

Yeah, I mean, the answer to that is the total amount of enterprise software companies that we are currently invested into.

Yeah, I mean, that's the concentration of where software is a service business model, right? Certainly within other types of portfolio companies, they're going to be using software and AI and machine learning tools and software. So, yes, there is some embedded inclusion there, but this is something that, as we underwrite these companies, we're keenly aware of that they've got to show how the AI revolution is accretive to them and not an imminent threat in underwriting. So, yeah, pure SaaS, 9.3%. Embedded elsewhere, sure. Couldn't tell you exactly where and how much, though.

I understand. Could you also give us a sense of the proportion of the portfolio that's invested in second lien investments?

Yes, 15%. I think that was in the prepared remarks. So we're going to be 85% attached to first lien on enterprise equipment or both.

Terrific. And lastly, was there anything non-recurring in interest expense for the quarter? Because interest expense went up more than your debt balances, and the incremental debt was at lower cost. So I'm just trying to triangulate that.

Yeah, this is Mike. There was a kick-up in early repayments this quarter. So you'll see there was some acceleration of OID included in interest income.

I was referring to interest expense.

On the expense side, no. I mean, I think you'll see that take up with average outstanding loan balance of our revolver. But yeah, on the expense side, it's been... We actually improved our cost of debt this quarter with the secured term financing, but that's going to be fluctuated. The floating rate is... revolver in the terminal.

I understand. Those are all my questions this afternoon. I appreciate your time. Thank you.

Thanks.

Thank you. At this time, we've reached our allotted time for questions. I'll now turn the call back to Kyle Brown for any additional or closing remarks.

Well, on behalf of the Trinity Capital team, thank you for joining us today. We appreciate your continued interest and investment in Trinity Capital, and we look forward to updating you on Q1 results during our next earnings call on May 6th. Have a great day. Thanks.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.