Trinity Capital Inc Stock

Good morning. My name is Angela, and I will be your conference operator today. At this time, I would like to welcome everyone to Trinity Capital's second quarter 2026 earnings conference call, which is being held on August 5, 2026. [Operator Instructions] It is now my pleasure to turn the call over to Ben Malcolmson, Trinity Capital's Head of Investor Relations.

Thank you, and welcome to Trinity Capital's second quarter 2026 earnings conference call. Speaking on today's call are Kyle Brown, Chief Executive Officer; Sarah Stanton, General Counsel and Chief Compliance Officer; Michael Testa, Chief Financial Officer; and Gerry Harder, Chief Operating Officer. Also joining us for the Q&A portion of the call is Ronald Kundich, Chief Credit Officer.

Earlier today, we released our financial results, which are available on our website at ir.trinitycapital.com. As a reminder, certain statements on this call may be considered forward-looking under federal securities laws. For a full discussion of the risks and uncertainties related to these statements, please refer to our most recent SEC filings. With that, please allow me to turn the call over to Trinity Capital CEO, Kyle Brown.

Thanks, Ben, and thank you to everyone joining today. Trinity Capital leads the BDC space in year-to-date shareholder return as we continue to build a differentiated platform, fueled by a diversified five-vertical lending enterprise, a managed funds business generating income in addition to our portfolio returns, and an internally managed structure that keeps our interests aligned with shareholders. We believe these unique advantages are driving our consistent outperformance.

I'd like to spotlight some shareholder-friendly news from Q2. As of June 30, TRIN's total shareholder return is the best in the BDC space over the last 1, 3, and 5 years. From our IPO in 2021 to the end of Q2, TRIN stock has delivered a total return of 174%, far outpacing the S&P 500's 114% and the BDC index's 58% over that same time period. We're paying a $0.17 monthly dividend through the end of Q3, and TRIN shareholders have been the recipients of a consistent distribution for approaching 7 consecutive years now.

Our managed funds platform continues to grow at a healthy pace, and income generated from the platform contributed 6% of investment income in Q2. Looking forward, we have 202 warrant positions and 129 portfolio companies, which have the potential to provide incremental upside to our shareholders. Here are some highlights from TRIN's performance during the second quarter. Our net asset value grew 9% quarter-over-quarter and 37% year-over-year to a record $1.3 billion. Also, NAV per share increased from $13.27 to $13.47 quarter-over-quarter.

Platform AUM increased to $3.2 billion, up 36% year-over-year. Our originations engine is as strong as ever, achieving a record $619 million of fundings in Q2, along with $709 million of commitments. We maintain strong credit with non-accruals improving to less than 1% of the portfolio at fair value. Net investment income per share of $0.51 covered our dividend and reflects a strong earnings power of the portfolio. It was a quarter defined by outperformance across NAV, originations, and credit quality. We remain confident in our earnings trajectory and dividend stability heading into the second half of 2026.

We continue to grow strategically. Q2 fundings were up 69% year-over-year, and our pipeline is thriving. $700 million in accepted term sheets and $1.2 billion in total unfunded commitments as of June 30. Of those unfunded commitments, 91% remain subject to ongoing diligence and investment committee approval, with just 9% unconditional, a structure that preserves underwriting discipline for future deployments. Our originations activity reflects consistent performance across Trinity's five lending verticals, driven by an experienced team and a proprietary pipeline.

As a direct lender, we do not rely on syndicated deals and also have immaterial overlap with other BDCs, giving our investors access to a genuinely diversified and differentiated portfolio. During Q2, we announced the acquisition of Equipment Leasing Services, a middle-market equipment financing firm that remains a standalone portfolio company and adds another income generator to the TRIN platform. Our joint venture with Capital Southwest is a co-investment vehicle focusing on first-out senior secured loans in the lower middle market.

This strategic partnership, which features joint decision-making and now includes a scaling portfolio, allows us to diversify into a complementary segment of the lower middle market with a proven partner, while minimizing risk and providing stable income for our investors. Subsequent to quarter-end, we transitioned our listing to the New York Stock Exchange, a milestone we're proud of and one we believe better positions us in the financial sector and provides improved daily liquidity within our stock. Our goal since day one hasn't changed: out-earn the dividend, grow the business, and do it the right way.

That means originating our own deals, underwriting them to our own standards, and making decisions as one aligned team. That alignment starts with structure. As an internally managed BDC, there is no external manager collecting fees. Our employees, management, and board own the same shares as our shareholders. So our commitment to consistent dividends and long-term value creation isn't a talking point. It's a financial reality. We operate like shareholders because we are shareholders. And the fees generated through our managed funds flow back to the BDC, creating incremental income that benefits shareholders directly rather than flowing to a third party.

Our five lending verticals provide meaningful diversification while keeping us directly within our core competencies. Each vertical is staffed by dedicated originators, underwriters, and portfolio managers, creating a scalable model that drives results without sacrificing focus. The people executing that model are why it works, and Trinity's unique culture enables us to attract and retain a world-class team of originators and underwriters. What we've built and continue to build is a platform with real breadth, growing scale, and a managed funds business that's delivering meaningful incremental income.

None of it is accidental. It's a product of deliberate decisions made the same way quarter after quarter, year after year. The pipeline is active, underwriting discipline is intact, and our capitalization strategy has been constructed to grow earnings power over time. TRIN is built different, built for this moment, and built to last. From here, General Counsel Sarah Stanton, who leads our corporate development efforts, will walk through our updates on the managed funds platform. Sarah?

Thank you, Kyle. Our managed funds and joint ventures continue to scale meaningfully, with more than $800 million of capacity across these strategies. The managed funds platform contributed $0.03 per share to our $0.51 NII in Q2, enhancing returns for TRIN beyond the income generated by our BDC portfolio. And two recent additions are poised to drive further growth: our SBIC fund, now adding significant low-cost liquidity, and our Capital Southwest joint venture, extending our reach into the lower middle market.

Our SBIC fund has now closed more than $75 million in equity commitments and is already being deployed. At a 2:1 debt-to-equity ratio with low-cost leverage from the federal government, the SBIC fund is expected to create more than $250 million of incremental platform capacity at full scale, with a potential to upsize beyond that based on new SBA guidelines. Meanwhile, our joint venture with Capital Southwest has given us an efficient entry into the lower middle market, a complementary segment we can now access with strong credit discipline alongside a highly respected partner.

With this JV, we now co-manage several vehicles that diversify our capitalization sources, expand our originations power, and broaden our capital base without diluting shareholders. The managed funds platform is doing exactly what it was designed to do: generate incremental returns beyond our interest income, increase our investment capacity, and widen our pool of available capital. The foundation is in place, and we expect this platform to become an increasingly meaningful contributor for earnings over time. With that, I'll hand it to CFO Michael Testa for a closer look at our financial results. Michael?

Thank you, Sarah. Our financial performance remains strong in Q2. We generated $87 million in total investment income, a 25% year-over-year increase, and $41.6 million in net investment income, or $0.51 per share, representing 100% of our quarterly distribution. Our quarter-over-quarter decrease in net investment income per share primarily reflects lower dividend income compared to Q1, which included a non-recurring dividend from one of our equity investments. Additionally, Q2 origination activity was back-end weighted, meaning the full income benefit of our record funding will be more fully reflected in Q3.

Net assets grew 9% to a record $1.3 billion, up 37% year-over-year. NAV per share increased $0.20 to $13.47, 1.6% quarter-over-quarter, driven primarily by accretive ATM issuances. This accretion more than offset the modest net unrealized and realized depreciation. On the capitalization front, Q2 was an active quarter. In May, we closed our inaugural investment-grade public bond offering of $300 million 5-year senior unsecured notes, which adds long-dated fixed-rate debt to our liability stack and extends our maturity profile.

We raised $100 million through our equity ATM program at an average 24% premium to NAV, which is directly accretive to our existing shareholders. Net leverage was 1.18x at quarter-end, consistent with our target range. Total platform liquidity increased to $939 million, driven in large part by the close of our SBIC fund. And lastly, a few other metrics worth highlighting. Estimated undistributed taxable income stands at approximately $66 million, or $0.71 per share, equivalent to more than 4 months of distributions.

We continue reinvesting this spillover for shareholders while maintaining consistent and meaningful dividends. Our 15.2% return on average equity and 15% effective portfolio yield are among the highest in the BDC sector, and PIK remains immaterial at 1% of income. And now our COO, Gerry Harder, will walk you through our portfolio performance from here. Gerry?

Thank you, Michael. Our portfolio continues to perform well and remains highly diversified. Across 22 industries, no single borrower exceeds 4% of total exposure, and our largest sector concentration, finance and insurance, is 14% at cost and spread across 17 companies. We believe diversification and strong underwriting are excellent risk mitigators. Portfolio quality held steady quarter-over-quarter. 99% of debt investments at fair value are performing, and our average internal credit rating remained consistent at 3.0 on our 1 to 5 scale, reflecting broad-based strength across the book.

Q2 included minimal net realized losses and net unrealized depreciation. As a reminder, asset valuations are conducted each quarter with independent third-party valuation firms, reviewed by our independent auditor, and approved by our board. A multi-layered process designed to give investors confidence in the marks on our balance sheet. The number of companies on non-accrual remained at 5, with no changes to the non-accrual list from Q1. As of June 30, non-accruals represented less than 1% of the total debt portfolio, a level we continue to manage actively.

Net of refinancings, early repayments totaled approximately $108 million in Q2, which continues to be elevated relative to historical averages. Early repayments are inherently difficult to predict, but often reflect portfolio company strength. Borrowers reaching a point where they can access the broader capital markets on their own terms by achieving key milestones or completing equity raises. The timing lag between repayments and redeployment of capital into new earning assets can create a near-term drag on interest income, though this is partially mitigated by prepayment penalties and the acceleration of fees and OID at payoff.

Overall, we are encouraged by our portfolio churn as our loan book continues to refresh in a beneficial way. 70% of the portfolio at cost has been originated since the start of 2025, with pre-2024 vintages now below 8%. And the average duration of realized loans currently stands at 30 months. This portfolio turnover signals portfolio health, as new deals typically imply longer cash runways and fresher equity support. First lien coverage remains strong at 89% of total principal, secured by first position liens on enterprise value, equipment, or both.

For enterprise value-backed loans, the weighted average LTV was 24%. Net of refinancings, Q2 fundings broke down across our five verticals as follows: 37% to sponsor finance, 26% to equipment finance, 18% to tech lending, 10% to asset-based lending, and to healthcare and life sciences, with the remaining 4% syndicated to off-balance sheet entities. Our portfolio remains defensively positioned, first lien bias, low LTVs, and disciplined underwriting built for consistency across cycles. That foundation is what allows us to keep delivering on what matters most: reliable dividends, NAV stability, and long-term value creation. With that, we'll open the line for questions. Operator, please go ahead.

[Operator Instructions] Our first question today comes from Finian O'Shea with Wells Fargo.

I want to start out on the JVs, sort of a two-parter. The Senior Credit Corp to start, it looks like the investment period was extended there, seeing if that's something normal or should we expect it to sort of sunset, raise another one kind of thing. And then separately the SBIC, it looks like you've got that started in the ground. Any guide on what the top-line fee contribution might be on that vehicle?

Hi, Finn. It's Sarah. I'll hit your JV question first. So, you are correct that we did extend the investment period of Senior Credit Corp 2022 through the end of this year based on mutual agreement with our JV partner. We're exploring various options for that vehicle in order to continue it. So it remains to be seen exactly what will happen there, but it is functioning well. It's been a successful partnership for us, and so we do intend to continue to syndicate deals to that vehicle through the end of this year.

And then, hey, Finn, the second question on the SBIC fund, you know, that was, we did something unique there. We raised all third-party capital, primarily from banks for that. You know, we've just closed on it, and we need to go out and deploy it so we can generate the management fees and incentive fees, which are market, I mean, like a 2-and-20 type split, and will provide some pretty significant incremental upside via the RIA over time. But we've got to get that money out the door now that we've closed on it.

Appreciate that. Then just top line, the activity sort of held up at, you know, good levels, a little bit different geography in the other fee income. Any context on the nature of activity there? Is it normal prepays or sort of other types of amendment fees?

Yes, I mean this quarter you saw prepayment fee income slightly down compared to the prior quarter. A lot of that is due to the seasoning of those deals that do pay off. And also from a funding perspective, a lot of our record fundings this quarter was back-end weighted during the quarter. So you'll see the benefit of that portfolio growth fully realized in the next quarter. Typically, when we see strong to kind of overperforming payoffs, that ends up adding incremental income.

Because we're pulling through fees and prepayment fees. We just happened to have some older loans pay off where we didn't get that same benefit, and they happened at the very beginning of the quarter, and we couldn't put that money to work until the end of the quarter. So we had a little bit of a timing issue and missed out on some interest income.

Okay, it's helpful. If I could backtrack, I forgot to throw one in on the JVs. The Capital Southwest partners also in the ground. Is that the payout or interest or dividend rate to you? Is that the expected rate or was it sort of a late funding and what sort of yield should we expect next quarter otherwise?

Yes, I mean, it's still ramping. It's not fully leveraged. But our return for that JV should be very similar to the rest of our core yields, you know, 13% to 15%.

Thank you. Our next question comes from Erik Zwick with Lucid Capital Markets.

First one, just taking a look at the investment risk rating table in your press release, looks like there was a pretty nice increase in those loans, kind of in those top two categories, the 3 to 5 rated. I'm curious if there was any larger loans that were re-rated or if it was more broadly across the board and if so, what were some of the contributing factors to the improvement there?

Thanks for your question. This is Gerry, and perhaps Ron can chime in. It was actually a pretty quiet quarter from a risk standpoint. So, you know, I think in the performing and strong performing, I think that's reflective of onboarding new credits and you know, we're very pleased with the quality of those investments. You know, as we noted, the lower part of the risk table has been very steady and improving. So we think credit's in a very good place right now.

Yes, this is Ron. I'll add just a little bit to that. There were a few credits that you see in that performing category get upgraded to strong performing. It's kind of nice, along with our strategy on the vertical side. One was an equipment deal, one was finance, and one was tech lending out of the UK.

Diversified improvement within the portfolio as well. Thanks for the color there. And as you mentioned, nice to see that the kind of lower risk ratings, you know, continue to be stable. I guess that's consistent, non-accruals, same number of, I think 5 credits there. Any potential progress towards resolutions of any of those credits in the near term or the next couple of quarters could see any changes, anything rolling off?

This is Ron again. We're actively working on 5 credits, as you would imagine. The quick answer is hopefully over the next few quarters, you'll see some activity we'll be able to share with you. Nothing too tangible to report today, but working them all.

Thank you. Our next question comes from Jason Stewart with Compass Point.

On the equity warrant positions, these are largely non-yielding and they're, I guess, becoming increasingly large at 12% of the portfolio. What level are you comfortable with this part of the portfolio becoming and are there any methods or strategies that you can use to help you're contemplating to work that percentage lower?

So nearly 50% of those are actually earning right now and so the other 50% are going to be either small diversified positions we've taken into companies we're invested in where we get a right to invest, and we've seen that over time be a great strategy for us, and then warrants, right? And the value of these going up is really reflective of some solid companies that are mature, late stage heading towards an M&A or IPO, and they're gaining value. They're getting investment.

And so, these assets yielding, that's great for us, and the others continue to build value. They're backed by the strongest PE groups and VC groups in the country. And we think when the market turns towards more IPOs and M&A activity, we'll continue to see that those provide incremental upsides to either cover losses for TRIN or provide incremental income to TRIN shareholders.

Okay, all right, that's a good color right there. Question on the expenses. I mean, it looks like pretty good operating leverage and a good expense number in Q2. Just give us some context on how to think about that going forward, given the growth and originations. I mean, record originations and sequentially lower comp is pretty impressive. How should we pull all that together for the rest of the year?

Yes, I think the Q2 numbers are probably a good number to start with going for the second half of the year. I mean, we built this platform to scale, so we've been investing in advance with hiring originators, PMs, and the credit team and investing in the platform to the infrastructure.

Thank you. [Operator Instructions] We'll move next to Christopher Nolan with Ladenburg Thalmann.

With the acquisition of ELS, are you going to increase the portfolio exposure to equipment financing?

So, interesting enough, that business originates, you know, middle-market equipment leases. That does not require much or anything from our balance sheet. We have lines of credit with banks where we're able to make a margin or spread or arbitrage, if you will. And then it's really a syndicate desk. So it generates a lot of fee income. We do intend to grow that business significantly over time across the country. And that's going to be incremental upside as those fees are primarily generating origination fees.

And then those leases are offloaded to a syndicate of banks that they have in place. And so it doesn't require much balance sheet, and it can create a lot of income for us over time.

You got a lot of balls in the air strategically in terms of all these funds and so forth like that, how should we look at the expense run rate going forward?

I mean, Mike touched on it a little bit right there. We, and we've said this before, we're always about a year in advance with regards to hiring. We have a 1-year, 3-year, 5-year plan that we're executing on right now. We've built a team, we've invested in the systems so that we can make sure we have the originations and direct pipeline that we can then downstream into our fund management business, which we're building, you know, slowly and yet over time. And that will provide incremental income for investors.

But as a, you know, we're more strategic, like an asset manager, obviously not your typical BDC. This is an operating company. We're thinking about growth in advance and hiring and making sure we have the team in place to execute on that plan.

Finally, any plans to do any special distros to lower the spillover income?

I think that if we are successful continuing to build the pipeline, if we're successful continuing to build our fund management business, which can generate new NAV and income, I would love the problem with being forced to give our shareholders, and everyone sitting around this table right now, more money.

Thank you. Our next question comes from Chris Muller with Citizens Capital Markets.

Looking at effective yields, they dropped 80 basis points in the quarter, which was the same as core yield, so it doesn't seem like a fee impact played into that. So can you just talk me through that dynamic that's pushing overall yields lower? Is it just the timing mismatch that you guys talked about?

Yes, you know, it's a combination of a number of things. I mean, the product mix, you know, on this quarter, very noted, you know, this is a strong sponsor finance quarter deployment. The prior quarter, you had a lot of life sciences. So that's impacting some of those sponsor finance deals or higher quality, lower spreads. And, you know, yes, some of that was one-time non-recurring fees in the prior period, you know, prepayment income is flowing through in our effective yield and dividend income as well. So income from, you know, the RIA should offset that long term. So we feel really optimistic about our strong industry-leading effective yield.

Yes, and some of that, even with regards to some of those stronger deals Mike's talking about, that's going to be our PE-backed lower middle market business that can drag down overall yields. But our goal and our strategy has always been to build these verticals and then align the right type of capitalization with each of these vehicles. And so we are and have been working on making sure that we're aligning our leverage and cost of capital with the type of risk we're taking. And over time, as each of those verticals scale, we'll see margins at appropriate levels that help us make sure we're not having a drag on earnings.

Got it, that context is very helpful. And then I guess looking at NII, it's just covering the base dividend now, but we have two rate hikes priced in through mid-year '27, and it sounds like the portfolio growth in Q2 is not fully reflected yet. So are there any one-timers that impacted Q2 there that we should be aware of, and how are you thinking about the trajectory of NII in the back half of the year?

Yes, I think Kyle mentioned we're going to continue to grow that investment income, continue to cover the dividend. There wasn't a whole lot of non-recurring income in Q2. Prepayments, we do expect to continue to be elevated in the current market. And depending when we could redeploy that and depending on the type of deal or seasoned vintage of those deals prepaying in that quarter, you'll see that flow through.

Yes, I think I mentioned it earlier on with Finn's question, but we did have significant payoffs. They happened real early in the quarter. They did not provide us with the pull-through kind of back-end fees and prepayment fees that we typically see because they were older, more mature loans. And then we funded a record quarter, but a lot of it happened late in the quarter, so we just saw less income coming in. So we had, there's just a bit of a gap in timing that threw that off a little bit.

And then, you know, just to repeat, like, you know, our main lever on increasing earnings per share over time is going to be our fund management business and the management fees and incentive fees. And so, you know, growth is really important because it gives us the ability to go out and raise capital and third-party capital that we can manage and generate new fee income as we downstream those assets.

You know, I don't see, you know, we're not going to see, like other BDCs, you know, the cost of debt, it's going up. We already have a relatively high cost of debt. And, you know, we disclose how the impacts of rate increases or decreases affect us. And, you know, it just doesn't affect us like everyone else in the same way. And so I don't see that being something that's going to be detrimental regardless of which way rates go for us. And there might be some benefits there with certain moves.

Thank you. This concludes today's question and answer session. I will now turn it back to CEO Kyle Brown for closing remarks.

On behalf of the Trinity Capital team, thank you for joining us today. This has been a strong quarter by nearly every measure, and we're excited about where we're headed. We continue to work hard for our shareholders. We look forward to updating you on Q3 results on November 4. Have a great day. Thanks.

This concludes today's conference. Thank you for participating. You may now disconnect.

Thank you, and welcome to Trinity Capital's First Quarter 2026 Earnings Conference Call. Speaking on today's call are Kyle Brown, Chief Executive Officer; Sarah Stanton, General Counsel and Chief Compliance Officer; Michael Testa, Chief Financial Officer; and Gerry Harder, Chief Operating Officer. Also joining us for the Q&A portion of the call is Ron Kundich, Chief Credit 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, allow me to turn the call over to Trinity Capital's CEO, Kyle Brown.

Thanks, Ben, and thank you, everyone, who is joining us today. Trinity Capital continues to perform because of our diversified lending platform of 5 complementary verticals, our ever expanding managed funds platform that delivers incremental income to Trinity shareholders and our internally managed structure that ensures total alignment between investors and employees.

To start off, here are some highlights from Trinity's performance during the first quarter. Our net asset value grew 7% quarter-over-quarter and 40% year-over-year to a record $1.2 billion. Platform AUM increased to more than $2.9 billion, up 36% year-over-year. Our originations engine remained robust, achieving $306 million of fundings and $396 million of commitments. We maintained strong credit with nonaccruals at 1% of the portfolio at fair value.

Furthermore, I'd like to spotlight some shareholder-focused results from Q1. We're paying a $0.17 monthly dividend through the end of Q2, and Trinity shareholders have now been the beneficiaries of more than 6 consecutive years of a consistent distribution. Also, we are scheduled to announce our Q3 dividend in June subject to Board approval. Trinity's year-to-date total return leads the BDC space. And since our IPO 5-plus years ago, Trinity has delivered a cumulative return of 119% far outpacing the S&P 500's 86% over the same time period. Our return on equity remains one of the best in the BDC space, achieving 15.8% in Q1.

Our managed funds platform continues to grow at a calculated pace and income generated from that platform continued -- contributed $0.04 to our $0.53 per share net investment income in Q1. And looking forward, we have 197 more positions in 127 portfolio companies, which have the potential to provide incremental upside to our shareholders.

We continue to grow strategically and thoughtfully. In Q1, we funded $306 million, 39% more than the first quarter of 2025. Our investment pipeline remains robust with $1.2 billion in total unfunded commitments and $300 million of term sheets accepted as of March 31. As a point of emphasis, 94% of our unfunded commitments remain subject to rigorous ongoing diligence and investment committee approval, while only 6% of these commitments are unconditional. Our origination activity reflects consistent performance across the lending verticals within the Trinity platform driven by our experienced team of originators and underwriters.

As a direct lender with a proprietary pipeline, we do not rely on syndicated deals and maintain immaterial overlap with other BDCs, providing our investors with access to a highly differentiated portfolio across our 5 complementary lending verticals. At the same time, we remain firmly committed to disciplined underwriting and strong credit performance, which are essential to our long-term success. The only notable intersect with some other BDCs is through our newly announced joint venture with Capital Southwest, a co-investment vehicle that is focusing on a first-out senior secured loans in the lower middle market. This partnership with [indiscernible] internally managed BDC allows us to diversify into a new segment of the lower middle market with a proven partner while minimizing risk and providing stable income for our investors.

To briefly touch on the AI and software topic. Enterprise SaaS is currently 10% of our portfolio. Many of those are PE-backed [indiscernible] middle market companies that have successfully integrated AI to enhance their offerings, increasing the value, not eroding it. The strongest companies continue to adapt and execute. We are not seeing deterioration in our software exposure, rather, companies with top-tier management teams, durable moats and flexible strategies are increasingly distinguishing themselves.

With respect to AI itself, we are not trying to pick winners at the application layer. Our exposure is focused on the infrastructure side through our equipment financing platform, which has deep experience financing data centers, GPUs, CPUs and power assets. That's the backbone of the AI ecosystem and it benefits regardless of which applications win. We remain focused on building a diversified portfolio that consistently delivers strong returns through all macroeconomic cycles.

Our consistent performance is driven by 3 defining strengths: our differentiated structure, disciplined underwriting and world-class team. Our 5 complementary verticals, sponsored finance, equipment finance, tech lending, asset-based lending and life sciences, providing meaningful diversification while keeping us firmly within our core competencies. Each vertical is powered by dedicated teams, originators, underwriters and portfolio managers forming a scalable, highly efficient operating model that drives results.

Structurally, as an internally managed BDC, there is no external manager collecting fees. And our employees, management and board all own the same shares as our investors, increasing alignment and a shared commitment to consistent dividends and long-term value creation. We operate like shareholders because we are shareholders. Our structure also supports premium valuation because investors own the management company and the underlying assets. The management incentive fees generated through our managed fund business flow to the BDC, creating incremental income and enhancing value and fueling growth, all for the benefit of our shareholders.

Our people are the foundation of everything we've built at Trinity. Our high-performance culture is rooted in humility, trust, integrity, uncommon care and continuous learning with an entrepreneurial spirit. This culture enabled us to consistently attract and retain the best people who are the driving force behind our sustained growth.

Since we started Trinity, the goal has never changed, out earn the dividend, grow the business and do it the right way. That means originating our own deals, underwriting them through our own vigorous standards and making important decisions as one internally managed team whose interest fully aligned with our shareholders, not third-party managers. What we have built and continue to build is a platform with real breadth and growing scale, and with our managed funds platform continue to expand, we are adding scale and diversification in ways that few BDCs can replicate. That's not an accident. It's structural. We did not stumble into this position. We have strategically built it. The pipeline is active. Our underwriting discipline is intact.

We believe our capitalization strategy positions us well to grow earnings power as the market continues to evolve. Trinity is not your typical BDC, and that is precisely the point. We are differentiated by design and built to last, regardless of market conditions.

Now to provide a more fulsome update on our managed funds platform. I'd like to turn the call over to our General Counsel and Chief Compliance Officer, Sarah Stanton, who is spearheading many of our corporate development initiatives. Sarah?

Thank you, Kyle. We are encouraged by the strategic and steady growth of our managed funds business, which diversifies our capitalization sources and generates fee income that benefits TRIN shareholders. AUM for our managed funds now sits at $400 million across 4 vehicles with meaningful new funding capacity coming from our recently announced SBIC fund, as well as expansion into the lower middle market with the addition of our Capital Southwest joint venture, I'll discuss in a moment.

Our managed funds platform continues to enhance returns for TRIN, contributing $0.04 per share to NII in Q1, roughly 8% of the $0.53 total. We continue to thoughtfully raise managed funds to fuel our growth and minimize public shareholder dilution. Q1 brought 2 noteworthy developments in our managed funds platform. First, we held an initial close of $45.3 million in equity commitments to our new SBIC fund, constituting more than half of our target of $87.5 million of equity commitments. The SBIC fund will benefit from attractive low-cost leverage from the small business administration at a 2:1 debt-to-equity ratio and is expected to add more than $260 million of incremental capacity to the platform once it is fully scaled. Earlier this week, we announced our final license approval from the SBA, and we expect to begin deploying out of the fund this quarter.

Second, as Kyle mentioned, we entered into a joint venture with Capital Southwest which provides an efficient avenue for Trinity to expand into a new complementary segment of the lower middle market, while maintaining strong credit underwriting alongside a highly respected partner in the space. With this new JV, we now co-manage several co-investment vehicles that diversify our capitalization sources or allow us to strategically expand our originations power without diluting shareholders.

Our managed funds business is generating new income above and beyond the interest income and equity returns from our BDC's portfolio investments, all to the benefit of TRIN shareholders. These initiatives demonstrate our ability to strategically grow, expand investment capacity and further diversify our capital base.

I'd now like to turn the call over to CFO, Michael Testa, to discuss our financial results in more detail. Michael?

Thank you, Sarah. Our operational and financial performance remained strong in the first quarter. We generated $90.1 million of total investment income, a 38% year-over-year increase and $44.5 million in net investment income or $0.53 per basic share, representing 104% coverage of our quarterly distribution. Estimated undistributed taxable income is approximately $68 million or $0.78 per share, which is equivalent to more than 4 months of distributions. We continue to reinvest the spillover for the benefit of our shareholders while maintaining a consistent and meaningful distribution.

Our platform continues to deliver best-in-class performance. In Q1, we generated 15.8% return on average equity and a 15.8% weighted average effective portfolio yield, both of which are at the top of the BDC sector. Tilt continues to be an immaterial function of our business with 1% of our income based on Tilt. And lastly, approximately 2/3 of our debt portfolio is either fixed rate or already at its interest rate floor, making us less sensitive to rate cuts than many of our peers.

Total net assets grew 7% to a record $1.2 billion, up 40% year-over-year. NAV per share moved from $13.42 to $13.27. The decrease reflects realized and unrealized losses in the quarter and the dilutive impact of our annual restricted stock award issuance, partially offset by accretive ATM issuances and now earning our distributions. NAV per share remains up 2% year-over-year.

Turning to our capital position. We raised $78.4 million through our equity ATM program during the quarter, at an average premium to NAV of 12%. Our net leverage ratio decreased to 1.15x from 1.18x quarter-over-quarter. Total platform liquidity stood at over $500 million as of the end of Q1, including capacity across our managed funds.

To discuss our portfolio performance in more detail, I'll now pass the call over to our COO, Gerry Harder. 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 4% of total exposure. Our largest industry concentration, finance and insurance accounts for 14.5% of the portfolio at cost and is diversified across 25 portfolio companies. Portfolio quality remained consistent quarter-over-quarter with 99% of debt investments performing at fair value. On a 1 to 5 scale, where 5 indicates very strong performance, the average internal credit rating was 3.0, a slight improvement over last quarter and reflecting broad-based strengthening across the book.

Before discussing our realized and unrealized activity for the quarter, I want to remind everyone of Trinity's quarterly asset valuation process, which has performed in conjunction with third-party valuation firms. These specialists provide an independent assessment of our asset valuations and their conclusions, along with the Trinity team's internal assessments are subject to approval by our Board of Directors and review by our independent auditor. This rigorous process tests our assumptions and methodologies and provides healthy checks and balances, all of which are in place to give investors confidence in our asset valuations.

With that context, our Q1 results included approximately $10 million of net realized losses and $5 million of net unrealized depreciation. The realized loss was primarily driven by the equity conversion of 2 loans, partially offset by the exit of one warrant position. The net unrealized depreciation reflected a combination of broader market valuation dynamics and mark-to-market adjustments on certain positions.

During the first quarter, we saw a strong portfolio churn with $114 million in early repayments. This figure is a slight increase over the 2025 quarterly average early repayments of approximately $83 million. Additionally, our loan book continues to skew toward a greater number of new portfolio companies. 60% of our portfolio at cost has been originated since the start of 2025 and investments from pre-2024 vintages now comprise less than 12% of the portfolio at cost.

Quarter-over-quarter, the number of portfolio companies on nonaccrual went from 4 to 5. During Q1, one debt financing that was on our watch list in Q4 was placed on nonaccrual status. As of March 31, nonaccruals represented approximately 1% of the total debt portfolio.

At quarter end, 88% of total principal was secured by first position leans on enterprise value, equipment or both. For enterprise backed loans, the weighted average loan to value was 19% and consistent with previous quarters.

Across our 5 business verticals, the approximate breakdown of our fundings in Q1 was as follows: 41% to life sciences, 22% to equipment financing, 13% to sponsor finance, 13% to tech lending and 11% to asset-backed lending. Looking ahead, our portfolio remains defensively positioned with a strong first lien bias and low loan to values.

Our disciplined underwriting culture and diversified platform allow us to continue delivering consistent dividends and net asset value 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?

[Operator Instructions] And our first question will come from Finian O'Shea with Wells Fargo Securities.

Yes. So Kyle, I was interested in the opening commentary on your sort of AI focus, that's obviously where a lot of the money is going in VC and maybe it's not -- maybe it's a little risky. It sounds odd from a debt perspective for the companies that don't work out. But there's also presumably a ton of upside on the equity perspective and seeing if you see those rounds if your originators look at if they're in the sort of equity flow and if that's an opportunity to maybe construct a portfolio of those names, a few losers maybe, but maybe a few spectacular winners as well.

Yes. Thanks for the question, Fin. Actually, as it is related to AI, we're not taking really any -- making many at all investments in venture debt as it relates to AI. Almost everything we're doing relative to AI is lower middle market, small public companies, private equity-backed deals and really kind of primarily all the equipment financing that goes around that. And so we see this as a great opportunity for a couple of reasons. One, we have mission-critical equipment as our collateral, GPUs, CPUs, power generation equipment. And they have real value. They have real value in kind of any environment. And so we also we love that we can get in there and finance equipment that doesn't depend on whether or not a company can become the next disruptor. And so most of our investments there are all focused on primarily equipment or at scale private equity-backed lower middle market companies. So I hope that answers your question.

Yes. That's helpful. A follow-on on the origination LifeSci was the sort of [indiscernible] this quarter, it looks like seeing if there's anything to that, if it's more your team being better built out and such or more the market opportunity, the deal flow and where we might expect that to continue to trend?

Fin, this is Gerry Harder. Yes. I don't know that I'd read any long-term trends into that, right? The deal flow can be idiosyncratic from quarter-to-quarter. Our Life Sciences team had a great quarter in Q1. Some of that's driven by activity at JPMorgan, which occurs very early in the quarter. So I don't know that I would expect that trend necessarily to continue. That's the great thing about our diversified platform, right, is our 5 verticals that are very complementary. And sometimes we'll see outsized performance from one of them in any given quarter.

Our next question will come from John Hecht with Jefferies.

First question, just kind of on a -- brief modeling question is, anything to think about like expense requirements or human resource requirements given your growth into the new fund vehicles? Or should we think of them just kind of linear growth as the company grows?

John, it's Mike. Actually, having the benefit of these all being co-investment vehicles, we're using the same resources, the same origination platform, portfolio management, credit underwriting. There's limited back office and operations support for these new vehicles, but that's minimal. So it's really the benefit of co-investing along the Trinity platform.

Okay. So just general scale across this for the visible future?

Yes. I mean we've built this platform intentionally to be able to scale long term, and we continue to hire, invest in people and systems and infrastructure. But a lot of the leverage you get with SBIC particularly, we've done SBIC vehicles. We started with an SBIC asset manager. So that is a platform we know a vehicle we know how to operate.

Yes. And then maybe can you tell us like because you are in -- your diversified in several sectors including some more, call it, traditional sectors and in some more tech-oriented sectors. For the pipeline now, are you seeing different sectors where deals are getting done more smoothly than others and/or pricing has moved outward more than others at this point in time?

Yes. There's been decreased activity right now as it relates to kind of software and -- but there's been kind of significant increase in activity as it relates to manufacturing, infrastructure, AI and then everything that goes along with that. And so we're seeing -- I mean that market is robust right now. And we love that space because we can generate outsized returns and it's complicated. And there's a lot of problems to figure out and solve for. It's not just as easy as stroking a check. And so because of that, it's not a race to the bottom on pricing, and we can generate kind of alpha returns by getting smart and really understanding the space like we have always done, whether it's space or defense, getting the weeds, understanding it at a granular level, and that's how we can stand out and generate higher fees and have wider spreads. So everything around space, AI infrastructure and then just generally manufacturing in the U.S. for us is booming right now.

Our next question will come from Brian McKenna with Citizens.

Great. So your managed funds business generated about 120 basis points of ROE on an annualized basis in the quarter. But as this platform continues to scale from here, how should we think about the overall contribution of the firm-wide ROE over the next several years? And then as you launch new strategies over time, how much on balance sheet capital do you plan to invest here to help seed some of these newer vehicles?

Yes. I mean our goal is for you to think of us one day as a publicly traded fund management business, and that requires us to be -- to do 2 things really well: continue to build out bespoke manufacturing, the verticals and really interesting products where we can generate outsized returns on the investments we make and then go out and provide a sampling of different offerings to private investors, whether it's pension funds or banks or retail investors. And so what we've done is create multiple funds that meet those investors where they're at and then give them access to our growing and bespoke interesting manufacturing. So it is very difficult to raise capital, and we are just chopping wood and grinding away doing it.

But money finds good deals, and so we're really focused on being that really good deal and continuing to build up that manufacturing. And so over time, we hope to just continue to build out those funds and create value NAV accretion through the manager and then new income for shareholders as we do it.

Okay. That's helpful. And then on the lower middle market opportunity, I appreciate the comments on the new JV and the partnership with the leader in this part of the market. But what else can you do here? And I guess how are you thinking about building versus buying versus partnering? And then I guess, could the lower middle markets ultimately end up becoming the 6th vertical of Trinity?

That's a good question. And I'm not going to give any forward-looking guidance here. But we have historically done a really good job of building businesses. I mean I think what we've done with 5 different unique businesses that all run independent of one another is we are good at building them and hiring great talent and in this case, partnering with someone who has been doing this for a very, very long time and working with them and making joint decisions with them, gets us in that business in a really unique way with a great partner and a great track record, giving us exposure, giving us the ability to diversify some of our assets into a new space that's stable and provides great new income. So I don't think our strategy is changing.

[Operator Instructions] And our next question will come from Erik Zwick with Lucid Capital Markets.

I believe you used the word robust when you described the pipeline earlier in your prepared comments. Wondering if you could provide a little bit more color in terms of how that looks across your lending verticals and also where are spreads today in the pipeline for what you're underwriting and adding to the portfolio compared to the existing portfolio?

Sure. So I mentioned it before, but I mean, anything around manufacturing and equipment is booming right now. And I would say across the platform, we've been growing at a 30% to 40% annual growth rate as far as deployment goes. I don't see that changing anytime soon. Each of those businesses in each of our verticals is really growing at a different pace depending on where they're at scale wise. But lower middle market, I think, is going to continue to be a robust business, this baby boomer and transfer of wealth that's happening. It's real. We are seeing it. And that's right in our sweet spot, that kind of $20 million to $100 million check sizes. So I think you'll continue to see us be really active in that space.

And any thoughts there on kind of how spreads you're looking in the market today relative to the existing portfolio?

Yes. We have not -- I mean it depends on the vertical, but we might -- we're seeing maybe a little more pressure on tech lending or life sciences, but then we're seeing some really interesting returns in the lower middle market and then with our equipment financing business. And so overall, it's really nothing notable one way or the other.

Okay. I appreciate that. And then just looking at the income statement, the fee income has really ramped up the past 2 quarters, and I think some of that is due to the success you're having on the managed fund side. So just curious if there was a 1Q number, if there was anything kind of nonrecurring in the quarter or if that's a good number to kind of build off going forward?

Yes. I mean, you did see some elevated repayments this quarter. Those are hard to predict going forward. But I think we do feel comfortable with looking out at least one quarter that will continue to be higher than our normal. But that does prepayments, you get the benefit on more recent deals, the accelerated OID and prepayment penalty that we have. But those do reoccur. But yes, there is some of that coming in, in Q1.

Our next question will come from Christopher Nolan with Ladenburg Thalmann.

On the new vehicles, are they going to be co-investing the same portfolio companies as TRIN?

Chris, this is Sarah. Thanks for the question. So with respect to the SBIC fund, that will be a co-invest vehicle with deals originated by TRIN. So it will essentially take a piece of every deal that's eligible for an SBIC fund in accordance with our allocation policy, there are some nuances, as you know, with SBIC eligibility. For instance, the portfolio company has to be located in the United States.

And then with respect to the Capital Southwest joint venture, that will be largely transactions originated by Capital Southwest. And that -- those will be kind of first out senior loans placed into that joint venture. And we will be underwriting those alongside Capital Southwest and we'll get -- it's kind of -- it's 50-50 governance, so we'll have a say on what assets go into that vehicle.

Also -- and can we expect higher leverage ratios as you try to -- as you finance the new SBIC sub?

No, that's not the plan. So I'm glad you brought it up. We did something different with the SBIC fund and something different than BDCs have done historically, so we're told, which is, we went out and raised third-party capital. So utilizing our adviser that TRIN shareholders own 100% of. We were able to go out and raise third-party capital, which we can then leverage [indiscernible] providing us with $270 million of new AUM that we can charge management fees and incentive fees on, we started April 1. And we'll use those to co-invest alongside of TRIN.

So it doesn't -- we didn't approach it the same way most groups do, which is take your own equity off your balance sheet and get more leverage. We're utilizing other people's money because we have the ability to do that. And that's our strategy with the Trinity Capital Advisor.

Great. And final question. As the outlook for growing in the lower middle market area, does that include -- start making equity investments in these companies and possibly taking control positions?

No. We're focused on being a lender. And as you know, our returns historically for 20 years now have been primarily rate and fee income, and that is still the vast majority of our income and the returns we generate are not based on equity upside or warrants. And that's not -- the strategy is not changing.

Our next question will come from Paul Johnson with KBW.

Yes. So does the SBIC fund that was recently obtained for the [ RIA ] fund, does that mean that it's unlikely going forward that there would ever be an SBIC license eligible for the BDC on balance sheet? Or is it just -- that it's just way more valuable within the RIA to allow you to raise capital under like an SBIC fund type of structure?

Yes. Good question. For us, it's way more valuable because we don't have to issue new shares, right, at TRIN to pull together that $70 million. And generating management fees and incentive fees on new capital is just new revenue, right, without issuing new shares. So this is the strategy, and we want to deleverage TRIN BDC over time. And doing more vehicles like this gives us more liquidity and new income so that we can deleverage TRIN over time, putting us in a great spot to have liquidity and the ability to be opportunistic. So the more off-balance sheet vehicles we can ramp up, it just gives us more control and derisks the BDC.

Thank you. This does conclude our question-and-answer session. So I'd like to turn the call back over to Kyle Brown, CEO, for closing remarks.

Well, on behalf of Trinity Capital team, thank you for joining the call today. We appreciate your continued interest and investment in Trinity Capital, and we look forward to updating you on Q2 results during our next earnings call in August 5. Have a great day. Thanks.

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

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.

[Operator Instructions]

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 Gerry 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's 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 5 complementary verticals continue to drive real diversification and our internally managed structure creates accretive 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 of 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 Trinity 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, a 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 fair value. Trinity paid a fourth quarter cash dividend of $0.51 per share and announced a $0.17 per month distribution for the first quarter. Trinity shareholders have now been the beneficiaries of more than 6 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 5 years ago, TRIN stock 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 5 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 3 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 a 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 proportionately. 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, PIK continues to be a nominal portion of our income with less than 2% of our income based on PIK, another one of TRIN's 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 in 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. TRIN 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 3 things: our differentiated structure, disciplined underwriting and world-class team. Our 5 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, 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 outearn 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 remained 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 $0.17 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 $0.84 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 remained 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. Full 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, at 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 $0.04 per share of incremental net investment income benefit in Q4. We syndicated $47 million to these vehicles during the quarter, and as of December 31, we managed $400 million in assets across our private vehicles. Our net leverage ratio remained consistent at 1.18x at quarter end, with strong liquidity, diversified capital sources and capacity across the Trinity platform, we are well positioned to underwrite a robust pipeline, maintain strict credit discipline 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, Gerry Harder. Gerry?

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 1 to 5 scale, where 5 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 nonaccrual remained at 4. During Q4, 2 relatively small debt financings were added to nonaccrual status while 2 prior nonaccrual investments were realized and rolled off. As of December 31, 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 5 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?

[Operator Instructions]

Our first question comes from Casey Alexander of Compass Point.

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 position to play offense. And because of your 5 verticals, your software position appears to be indexed below most of the peer group. So I'm wondering is there an opportunity that is going to be arising for you to take advantage of the turmoil if other platforms 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.

Yes. Casey, thanks for the question. Yes, 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 earnest in the last 2 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, I think, $3 million to $30 million of EBITDA, lower middle market software companies with AI -- that are AI-enabled, it's a massive opportunity. We think there's going to be a lot of consolidation of a lot of these companies that maybe couldn't get to scale. 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.

We'll take our next question from Doug Harter of UBS.

This is Cory Johnson on for Doug. So I was just wondering, are there any parts of your portfolio that give you any concern or either -- perhaps 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 the time?

Cory, thanks for the question. So historically, we focus on industries that are emerging that are disrupt -- 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 shorter-term duration and fully amortizing, in many cases, 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.

We'll take our next question from Brian McKenna with Citizens.

Okay. Great. So I know the focus today is continuing to go deeper across all 5 of your verticals. I'm curious, though, and you touched on the deployment environment a little bit, but given the pickup in volatility, 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 go from 5 verticals to 6.

Great question. And Sarah is 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 a 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.

Yes. 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 there's outflows happening. 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 5 years. And so that's what we're hoping to achieve. And as we wrap up kind of SBIC fund and roll into kind of future fundraising, we're really positive on it right now.

[Operator Instructions]

We'll take our next question from Erik Zwick with Lucid Capital Markets.

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

Yes. 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?

Yes. I mean, Erik, our backlog, as you've seen, it's over $1 billion, 1/3 of that is to our equipment channel. So as they build out their manufacturing lines, they're going to fund alongside that. And a small percentage of that $1 billion is subject to legal miles -- legally-binding -- most of it is subject to milestones or additional due diligence.

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

I appreciate the commentary from all of you there. Just turning to credit quality a little bit. It's nice to see that nonaccrual still remain very low and well below peer averages, as you mentioned, did have 2 realizations, but then 2 new credits added to the nonaccrual. To the extent that you can comment on ZUUM and 3DEO. Anything noteworthy in their developments there that have been moved to nonaccrual and then how you are approaching working with them to get them through the difficulties.

Thanks, Erik. This is Ron. Yes, 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 stop making payments in Q4. So they're put on the nonaccrual list. We're actively working them as we speak. And we expect to have -- as of today, we'll see what the outcomes are.

We'll move now to Christopher Nolan with Ladenburg Thalmann.

Gerry -- I think it was Gerry 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, are these things mostly or tangentially related to AI.

Well, it's all of the above, right? We've got some portfolio companies accessing the public markets. We've got other portfolio companies raising through their VC or PE sponsors. I don't know that within our portfolio, I would say much is directly related to AI.

I mean, yes, I've nothing to add to that.

Yes. This -- 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. 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.

Yes. The only issue with that point is 70% of the VC dollars going towards AI or AI-related stuff. So it seems to be pretty concentrated.

Yes, 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 revenue base, right, and not sort of new entrants 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, 5 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 currently is?

Yes. 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 -- in every 1 of those deals already had an AI filter and underwriting filter put into it. So meaning we are looking at these companies and understanding their moat, right, understanding how and what their AI road map looks like and so the investments we've been making, I mean, 2.5 years ago, they called the machine learning, and that's what we were looking at.

And now it's called AI, right? And so 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.

Yes. And I would add, Chris, as Kyle said in his prepared remarks, right, enterprise software is about 9% of our assets. About 3/4 of that is originated by our sponsor finance team, so these will be 18 months or newer cohorts and backed by private equity, where we're in front of their dollars, right? They've got significant cash in these businesses. So from a valuation standpoint, 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.

We'll take our next question from Mickey Schleien with Clear Street.

Most of the high-level questions have been asked. Just one high-level question on my behalf. 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 there software buried elsewhere in the portfolio or is that the total amount?

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

Yes. I mean that's the concentration of where Software-as-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 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 this AI revolution is accretive to them and not an imminent threat in underwriting. So yes, pure SaaS, 9.3% embedded elsewhere, sure. I 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, it's 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 nonrecurring 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.

Yes, Mickey, this is Mike. There was a tick 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 tick up with average outstanding loan balance of our revolver. But yes, 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 the revolver in the term loan.

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

Well, on behalf of the Trinity Capital team, thank you for joining us today. Now 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 6. 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.

"

"

"

"

"

" Compass Point Research

" Jefferies LLC

"

" Keefe, Bruyette, & Woods

" Wells Fargo Securities

" B. Riley Securities

" Ladenburg Thalmann

Good morning. My name is Angela, and I will be your conference operator today. At this time, I would like to welcome everyone to Trinity Capital's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to Ben Malcolmson, Trinity Capital's Head of Investor Relations.

Thank you, and welcome to Trinity Capital's Third 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's CEO, Kyle Brown.

Thanks, Ben, and thanks, everyone, for joining us today. To start off, we're pleased to highlight several key achievements from a strong Q3 for Trinity Capital as we continue to mature as a best-in-class alternative asset manager focused on the private credit space. We delivered $37 million in net investment income, a 29% increase compared to Q3 of last year. Our net asset value grew 8% quarter-over-quarter to a record $998 million. Platform AUM increased to more than $2.6 billion, up 28% year-over-year. We maintained strong credit quality with nonaccruals at 1% of the portfolio at fair value. And we distributed a third quarter cash dividend of $0.51 per share, marking the 23rd consecutive quarter of a consistent dividend for our shareholders.

Trinity Capital continues to outperform across key metrics. Our return on equity and effective yield rank among the best in the BDC space. Our NAV has grown 32% year-over-year, while our credit metrics have remained consistent. Since our IPO nearly 5 years ago, Trend stock has delivered a cumulative return of 114%, far outpacing both the peer average of 63% and S&P 500 78% over the same time period. And looking forward, we have a growing asset management business, generating new income as well as 210 warrant positions in 133 portfolio companies, which have the potential to provide incremental upside to our shareholders as IPO and M&A activity continue to rebound.

We entered the fourth quarter with excellent momentum. And in Q3, we funded $471 million, bringing year-to-date investments to $1.1 billion, nearly matching all of 2024's total. Our investment pipeline remains robust with $773 million of new commitments in Q3 and $1.2 billion in total unfunded commitments as of quarter end. Important to note that 94% of our unfunded commitments remain subject to rigorous ongoing diligence and investment committee approval, while only 6% of these commitments are unconditional. Our originations activity reflects consistent growth in all our verticals across the Trinity platform. It's a powerful flywheel fueled by our lead team of originators, and we own the pipeline. We do not depend on syndicated deals and have immaterial overlap with other BDCs, all of which give our investors access to a highly differentiated portfolio of investments through our 5 business verticals. All the while, we remain deeply committed to disciplined underwriting and credit performance, which are the bedrock of our long-term success.

I would like to touch on 2 noteworthy topics concerning the private credit space. First, let's talk about rate cuts. To date, rate cuts have had a limited impact on our business. Unlike most BDCs, the majority of our loans include interest rate floors at or near the original closing levels. This means that when rates decline, our income does not decline proportionately. Looking ahead, additional rate cuts are expected to have a muted impact on our returns, partially due to a majority of our portfolio having already hit their floor rates, which could drive some early repayments and the capturing of prepayment fees and restructuring fees. Further rate cuts would also lower our borrowing costs by reducing the interest expense on our floating rate credit facility. And secondly, PIK is a nominal portion of our income with less than 2% of our income based on PIK. We continue to strategically raise equity, debt and off-balance sheet vehicles to fuel our growth. In Q3, we raised $83 million of equity through our ATM program at a 19% average premium to NAV. We closed a new joint venture with a large asset manager to provide new liquidity and earnings. We converted a separate vehicle into a private BDC, which is now actively raising money.

In addition, we're in the process of raising outside capital for our third SBIC fund, which provides low-cost leverage and is expected to add over $260 million of capacity to our platform. Together, these initiatives underscore our ability to scale the platform and expand investment capacity. The funds I just discussed are managed by our wholly owned RIA Trinity Capital Advisor, which manages third-party capital and generates new income above and beyond the interest and equity returns from our BDC's investment portfolio. As shareholders of Trinity Capital, investors benefit from the fees collected by our managed fund business. I'm going to be a broken record on this point in every call going forward. What we are building is not your typical BDC. We are building a platform that can scale while driving up earnings and NAV. We believe our consistent performance is driven by our differentiated structure, disciplined underwriting and world-class team.

Our 5 complementary business verticals, sponsor finance, equipment finance, tech lending, asset-based lending and life sciences position us to maintain a diversified portfolio while staying closely aligned with our core competencies. Each vertical is supported by a dedicated originations team, underwriters, portfolio managers, together forming a highly effective and scalable operating model. Structurally, as an internally managed BDC, our employees, management and Board hold the same shares as our investors, promoting complete alignment of interest and a shared commitment to delivering consistent dividends and long-term value. This structure also supports a premium valuation as shareholders benefit from ownership of both the management company and the underlying assets. In addition, the management and incentive fees generated through our managed funds business flow directly into the BDC, creating incremental income streams, enhancing valuation and fueling platform 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 and retain the best people in the industry and fuels our continued growth trajectory. From the onset, our goal has been clear to consistently outearn our dividend while growing the BDC. We continue to deliver on that mission. Trinity Capital is strategically positioned within the private credit market, supported by a differentiated pipeline, disciplined underwriting and a growing platform. And on the capitalization front, we're laying the foundation for a managed funds business that will expand our direct lending strategy and create additional income streams for Trinity shareholders. Overall, we remain very bullish about the opportunities before us. We're committed to building a company that aims to deliver outsized returns for our investors while demonstrating uncommon care for our people and partners.

And 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 remained strong in the third quarter. We generated $75.6 million in total investment income, a 22% year-over-year increase and $37 million in net investment income or $0.52 per basic share, representing 102% coverage of our quarterly distribution. Estimated undistributed taxable income is approximately $63 million or $0.84 per share, which we continue to reinvest for the benefit of our investors 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 remained strong at 15% for the quarter despite the declining rate environment.

Net asset value per share increased from $13.27 at the end of Q2 to $13.31 at the end of Q3, reflecting accretive capital raises. Total NAV rose 8% to $998 million, up from $924 million at the end of Q2. We further strengthened our capital base by raising $83 million through our equity ATM program during the quarter at an average premium to NAV of 19%. With no debt maturities until August 2026, our balance sheet and capital structure remains strong and positioned to scale earnings per share while maintaining moderate leverage. Our co-investment vehicles continue to enhance returns, contributing approximately $3.3 million or $0.05 per share of incremental net investment income in Q3. We syndicated $120 million to these vehicles during the quarter and as of September 30, managed $409 million in assets across our private vehicles.

Our net leverage ratio increased slightly to 1.18x at quarter end. With strong liquidity, diversified capital sources and capacity across the Trinity platform, we are well-positioned to underwrite a robust pipeline, maintain strong credit discipline and deploy capital into high conviction opportunities. To discuss our portfolio performance in more detail, I'll now pass the call over to our COO, Jerry Harder. Jerry?

Thank you, Michael. Our portfolio continues to demonstrate exceptional strength, driven by broad diversification across 21 industries with no single borrower representing more than 3.4% of total exposure. Our largest industry concentration, finance and insurance accounts for 15% of the portfolio at cost, diversified across 20 borrowers. Credit quality remained consistent quarter-over-quarter with 99% of investments performing at fair value. On our 1 to 5 scale, where 5 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 nonaccrual remained steady at 4. During Q3, one new company was added to nonaccrual status, while prior nonaccrual investment was realized and rolled off. As of September 30, nonaccruals totaled $20.7 million at fair value, representing 1% of the total debt portfolio. At quarter end, 84% 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 stood at 18%.

During Q3, portfolio companies collectively raised $2.3 billion in equity capital, underscoring both the strength of our borrowers and their continued access to capital in the current environment. Looking ahead, our momentum, disciplined underwriting and diversified platform position us to continue delivering consistent dividends and NAV growth. With a shareholder-first mindset, our team remains focused on building a top-performing 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?

[Operator Instructions] Our first question comes from Casey Alexander with Compass Point.

You noted that you have $409 million off-balance sheet assets and a new JV. I'm just curious how much current capacity do you have in the off-balance sheet vehicles at this point in time? I know that number can grow because you can always create more of them, but I'm curious how much capacity you have there at this time.

Yes. Casey, there's -- I think with the question looking at our liquidity and our ability to allocate investments each quarter, it grew this quarter. You saw that. I think you'll continue to see that in our allocation policy, we look to which vehicles have more liquidity than others. And those are going to get more share or a higher share, but we're consistently allocating based off of available liquidity. So, I don't think in any period, one vehicle like the BDC that has more liquidity would be under-allocated investments.

We're going to try to grow it as much as we can. I mean that's like the strategy, though, Casey, is the more capital we can raise via the RIA and the various funds we're setting up, that's just new income, right, and above and beyond what our loans generate. And it has a huge impact on our earnings long-term. So, our goal is to grow it as fast as possible. We've got our new BDC that we manage, and we're out there raising money through the kind of wealth channel. And then we have a couple of larger partnerships with large credit funds. that we're now managing, and we're going to try to funnel as much as we can there. And so long as we stay really active and grow kind of the manufacturing side and deployment side of the business, it gives us new earnings potential going forward.

I get all that. But how much capacity do you have at the moment?

Yes. So currently, the new vehicle is just ramping up. So, there's $200 million or so of current capacity there. We'll look to increase that by setting up a debt facility there. And then the other 2 vehicles, they're probably 75% or so funded to date, and those had the benefit of increasing capacity as we deploy or raise additional equity as well as leverage in each of those 2.

We'll go next to John Hecht with Jefferies.

Congrats on another good quarter. A little bit of a related question to the last question is you guys are in 5 verticals. You have multiple funds you run, I guess, but you are focused on scaling the enterprise. How do we think about the capacity of the team right now? How much can that originate and manage in a period? And what are kind of the thresholds where you would need to bring in new resources in any of those verticals?

Yes. So, we have continued over the last 5 years to be about a year ahead from an employment standpoint. We're planning out 1-, 3-, 5-year plans, and we've hired in advance of that. And so, we're reaching some interesting points right now where we have some efficiencies of scale. And a lot of our deployment growth and AUM growth doesn't necessarily correlate to employment additions, at least in the same way. But we are -- we have a -- with our 5 verticals right now, we have a road and a path towards continued growth with the team that we have. And we're still hiring and we're still recruiting great talent, but we've already hired for what we think is a very achievable 2026 plan right now.

Yes, I guess -- this is Jerry. I would add to that, right? The current managed accounts are co-investment vehicles, right? So, they're taking ratable portions of the investments in the 5 verticals where we're already performing. And so, we don't need to add any additional types of capability. The businesses we've been doing for a longer period of time, tech lending, equipment financing, life sciences lending are at or very close to scale, right? So, we're continuing to scale in some of the newer verticals, the sponsor finance and ABL. So, you might see some headcount growth there in '26, but the other businesses are pretty well scaled.

And then another question is you noted that given your unique footprint and the unique and the verticals, there's limited overlap with other BDCs -- so I guess a couple of questions on that is, one is, who do you perceive as your competition in the various verticals? And second is, I guess, given a lower amount of overall competition, how are kind of new deal spreads relative to where they were, say, 6 months ago?

Yes. I mean, to answer your last question there, we just -- we don't see the same rate compression or spread compression and difficulties that the middle market and upper middle market are experiencing right now for a handful of reasons, right? Our verticals are more niche in nature. They're still big markets, and we can really scale them in a unique way. But in our world, we're dealing directly with the company, the CEO, the CFO, the team, we are underwriting the transaction. We're not out there buying syndicated deals and doing some of the things that private credit companies in the middle market and upper middle market are doing. Because of that, it's a very relationship-driven business. And in our space, where we write $20 million to $100 million checks, there's less competition. And so, we just -- we have not seen that spread compression. We're still delivering great returns well above your typical BDC or private credit company in the middle market.

When it comes to competition, it's going to vary in a really unique way depending on the vertical. And so I could sit here and list out multiple competitors for each individual vertical, but we are tracking ourselves to other BDCs from a competition standpoint and performance standpoint, and we're trying to be -- what we're building and what we're trying to perform to here is a best-in-class BDC on the KPIs that matter there, NAV growth, a consistent dividend, right? Earnings per share, keeping it consistent, growing. having our nonaccruals stay incredibly low and being a very, very consistent yielding BDC for investors. And so, I hope that answers your question. I can spend a lot of time going through and trying to figure out the top competitors in each individual vertical, but we're really tracking towards being a best-in-class BDC.

Our next question comes from Doug Harter with UBS.

This is Cory Johnson on for Doug. I noticed that the compensation expense over the last couple of quarters has been going up quite a bit. Can you talk about a little bit about why that's the case? Is that just -- is that more hiring? Are there other possible like one-timers in there? And do you expect that to sort of continue to grow over the next coming quarters?

Yes, that's us ramping up. I mean that's hiring. We've added to the team, added some incredible talent to the team, and we're growing. And we also launched a team in the U.K. and an office there to replicate the success we've had here in the U.S. And so not onetime expenses, but just further team growth. And additions to the team, we're still in growth mode. And as far as the way we compare ourselves to our larger peers, we're very small, and we have a lot of growth potential and opportunity in front of us, and we're going to keep growing.

And then just also it looks like you were able to make good progress on your watch credit. Can you maybe just talk a little bit about what exactly occurred there? And then how are your portfolio companies in general, just how are they doing in regards to being able to raise additional investor capital?

Yes. This is Jerry. I can take that one, Cory. So yes, the watch decreased significantly from Q3 that -- so we're pleased with that. One of the particular companies landed on the watch list in the prior quarter as they were trying to close some financing. They've got both a term sheet for financing and an offer for M&A. So, we're feeling much more secure about that position. One of the companies on watched prior quarter became partially realized. And so, the loan portion that remains went on nonaccrual. So went from watch downward. But overall, portfolio health is good. We continue to monitor closely. You'll hear us say all of our verticals include their own originations, underwriting and portfolio management. And overall, portfolio health, we're happy with at this point in time.

[Operator Instructions] Our next question comes from Paul Johnson with KBW.

Can you just maybe if you can take us a little bit further through what, I guess, occurred with kind of Nomad Health during the quarter. It looks like you chose to write off a pretty significant portion of that prior to that investment going on nonaccrual. So, I'd be curious to hear kind of what transpired there.

Yes. It's a little -- this is Jerry again. Thanks for the question. A little bit complicated. So, the investment, as I mentioned in the prior question, was partially realized. So, what ended up happening about 2/3 of that debt position was converted to equity. So that's realized from the accounting perspective. That's a realized transaction. And this is where you see the impact to NAV from that investment. The remaining 1/3 remains debt out of an abundance of caution. We're keeping that on nonaccrual as this plays out. And it's an interesting situation because the equity portion of the transaction is realized, but the story is far from over, right? The company continues to exist, and we're optimistic that, that can accrete some value and be a good story at the end of the day. But mark-to-market, this is where it is right now, and that's what you're seeing reflected in the SOI and the realized results.

Appreciate that. I mean, why would you choose to take a more accelerated approach to that, I guess, and basically realize or charge off so much of the investment in a relatively kind of accelerated fashion. I mean, was there anything sort of atypical here in the outcome of the situation that was just different from what you expected and this was kind of the best path forward?

Yes. Michael and I were talking about that just yesterday, right? So not really atypical in terms of how the investment was handled. And the realized portion is realized from an accounting perspective, right? And that's GAAP accounting, how we have to do it. And so, it wasn't really an election that we elected to do it that way. The debt portion that was converted to equity is realization. And so, we marked that equity position to market, which you could argue is pessimistic or optimistic. But the company remains, they're operating. And I would say from the equity standpoint, there's far more upside than downside at this point.

So as a result of the restructuring, are you in the control of the equity at this point? Or where do you, I guess, fall in terms of your ownership and what you kind of have in the residual.

It's not a control position, but we have a significant stake and a seat at the table as the company moves forward.

And one last thing for me. I was just wondering just kind of broadly, if you could touch on, if any -- if there's sort of any underlying exposure within the portfolio to consumer receivables either via any of the fintech investments, any of those companies that rely on any sort of -- any one of those receivables structures? That's all for me.

No. The answer is no. The portfolio is incredibly granular and diversified, very little exposure to anything consumer whatsoever. And anything that is consumer is very sticky, has strong retention of customers, and we have a very high mark for any kind of consumer deal to get to the finish line here. And so no, I mean, the portfolios remains incredibly stable with 99% of it performing. And then we focused on one individual credit out of over 100 here, but historically, our loss rate has remained very low with our realized gains offsetting all losses and providing some incremental upside to investors. And so, we don't see any trends that would reflect any change from our historical performance over nearly 20 years on that loss rate.

Yes. And specifically on 2 items that you called out, our asset-based lending is focused on B2B receivables. And those, frankly, are some of the highest performing financings in the portfolio. And with respect to consumer, on our SOI, 2.4% at fair value of our portfolio is what we would classify as consumer products and services. So very low exposure to consumer.

Our next question comes from Finian O'Shea with Wells Fargo Securities.

Kyle, it sounded like we're still pretty upbeat on growth. Can you talk about the split between the BDC issuing in the market, secondary ATM and so forth versus the RIA? And then should we expect the BDC had a pretty good bit this past quarter. Share prices across the industry are also lower. So, seeing if you think that it's as attractive in the context of what you're seeing in the origination pipeline?

Yes. I'll start at the end there. The pipeline is exploding, where we deal, which is late-stage VC-backed companies heading towards an IPO or liquidity event into the lower middle market, $3 million to $15 million of EBITDA sponsor-backed, like this market is robust. It's growing. Private credit companies who have raised too much money, who have to deploy too much money. They're focused on middle market, upper middle market. It's just wide open, and we are seeing kind of a really robust pipeline right now in our -- where we deal. As far as capital raising goes, everything comes down to earnings per share, EPS, and when we talk about and we meet twice a week, our executive team and FP&A group on how we're going to capitalize, how we're going to raise capital to meet the deployment needs that our business has. And it all comes down to EPS and making sure we don't dilute shareholders, right? I mean I'm one of our largest shareholders of Trinity, our executive team and every single person in our company owns Trin shares. We have no incentive to dilute shareholders.

And so it's always a combination of equity issuances at the BDC level, downstreaming assets into our new funds that we've set up and with a huge emphasis on raising third-party capital, which we can generate new management fees, incentive fees and then the more permanent capital vehicles or permanent like that we set up, our RIA has NAV growth and NAV accretion because we can value those long-term income streams. And it's just icing on the cake for our shareholders. And so, we're hyper focused on EPS, making sure it's consistent. And we have been working for a couple of years now on building that foundation to where we can see it grow with our managed fund business, and we're there, and we're scaling and executing on that plan right now. So, it's a really exciting time for us.

And just a follow-up on the sort of exploding pipeline -- managers across the space, they're sort of mixed. Some are more optimistic that it will come back, but no one else is really saying that. No one is that excited. Now to be fair, we haven't heard all of the venture peers yet. So maybe that will transpire in the more life side or tech front. But seeing if there's any concentration there, are you seeing a lot more in, say, late-stage growth or equipment finance vis-a-vis like an ABL or a sponsor finance?

So, we've got 5 different verticals, and it's becoming more and more balanced across those verticals. People still think of us as a venture debt business. You're not a venture debt business. That's about 25% of our deployment. thereabouts. And we have a huge emphasis on equipment right now. We're seeing more and more CapEx needs for U.S.-based companies who are manufacturing their goods here. We're seeing more and more needs for asset-backed lending for companies that have -- that are disrupting the kind of legacy financial sector. We are seeing more and more of these lower middle market companies get picked up and bought, and there's a need for financing there. And so, we are -- and we've been doing this for years now, but we have been diversifying into complementary segments of the market. And so no, there's no concentration in any one of our verticals right now. It's pretty spread out, and the portfolio is looking more and more spread out each quarter.

Our next question comes from Sean-Paul Adams with B. Riley Securities.

It looks like nonaccruals were relatively flat quarter-over-quarter, but the overall rankings for the watch and defaults within the portfolio went down by approximately half. Can you just share a little bit more color about any changes in the portfolio health for those companies?

Yes. I mean, thanks. That was noted on an earlier question. So yes, nonaccruals was pretty consistent. Watch list credits dropped significantly compared to prior quarter. And we saw movement both up and down, right? So, the current nonaccrual includes an investment that was prior on watch. And then 2 other investments were promoted out of watch list as they raised capital and continue to improve their performance. So overall, we think the health of the portfolio is as strong as ever. The credits on the watch list are the ones that we're obviously working most actively, but seeing fewer members in that club is definitely a good thing.

And we'll go next to Christopher Nolan with Ladenburg Thalmann.

What's the plan on the leverage ratio going forward, up or down?

Plan is down for a variety of reasons, right? Right now, we utilize it and kind of scale it up as we load up on deals and then downstream them into our new funds that we're setting up. But long-term, our ability to generate new income via the RIA gives us the ability and have liquidity there, gives us the ability to lower that leverage ratio. We're not trying to maximize returns. I mean we can ratchet that thing up and generate better earnings per share, but that's not the plan. The plan is to lower the leverage, create ample liquidity so we can be opportunistic at the right time and get the proper ratings that will give us the ability to lower our cost of debt capital. And so, our off-balance sheet growth and activity really gives us that ability to lower that leverage ratio over time.

Now the off-balance sheet vehicles, and you guys are not the only ones who do this, but things such as an SLF, I mean, isn't that just sort of like second lien type of risk there? I mean because -- you're in equity in a levered vehicle, inside a levered vehicle.

No. I get that, that's how some BDCs do JVs to ramp up leverage. That's not what we're doing. We're raising third-party capital that we can utilize and co-invest alongside of the loans we're funding and then charge management fees and incentive fees. And we have very little equity in any of those deals. Some we don't have any. And so, we're doing it very different. It's a fund management business where we can offer to investors who can't hold a public security. It gives us the ability to offer up our manufacturing to a different subset of investors and generate income by doing so.

And final question for these off-balance sheet vehicles, are they set up like a fund where investors can call their investments at some point?

Right now, no. Right now, we have a couple of separately managed accounts. And then we have a perpetual BDC, private BDC that investors can -- and it's focused on the wealth management segment. Those are the 3 funds we have currently. But what this gives us the ability to do is raise funds in whatever way we need to. And so, we are exploring a larger institutional co-investment fund. And then we are in the middle of fundraising and closing out our third SBIC fund, which is focused primarily on banks and investors that have had success with us in our previous 2 SBIC funds. So, it's going to come in multiple forms so that we can be investors where they are.

It appears we have no further questions at this time. I will now turn the program back to Kyle Brown for any additional or closing remarks.

Great. On behalf of the Trinity Capital team, thank you for joining us today. We appreciate your continued interest and investment in Trinity Capital. We look forward to sharing our fourth quarter and 2025 results on our next earnings call in February. Have a great day. Thanks.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.