Good afternoon, my name is [Rylan] and I will be your conference operator today. At this time, I would like to welcome everyone to the Trinity Capital's Second Quarter 2021 Earnings Conference Call. Our hosts for today's call are Steve Brown, Chairman and Chief Executive Officer; Kyle Brown, President of Chief Investment Officer; David Lund, Chief Financial Officer; and Sarah Stanton, General Counsel; Gerry Harder, Chief Credit Officer; and Michael Testa; Chief Accounting Officer are also present. Today's call is being recorded and will be available for replay beginning at 8 P.M. Eastern Time. The replay dial number is 1-800-839-7410. Note that no call ID is required for access. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. [Operator Instructions] It is now my pleasure to turn the call over to Sarah Stanton. Please go ahead.

Thank you, [Rylan] and welcome everyone to Trinity Capital’s earnings conference call for the second quarter of 2021. Trinity's second quarter 2021 financial results were released just after today's market closed and can be accessed from Trinity's Investor Relations website at ir.trincapinvestment.com. A replay of the call is available at Trinity's web page, also using this telephone number provided in today's earnings release. Before we begin, I would like to remind everyone that certain statements that are not based on historical facts made during this call, including any statements relating to financial guidance may be deemed forward-looking statements under Federal Securities Laws. Because these forward-looking statements involve known and unknown risks and uncertainties. There are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. We encourage you to refer to our most recent SEC filings for information on some of these risk factors. Trinity Capital assumes no obligation or responsibility to update any forward-looking statements. Please note that the information reported on this call speaks only as of today, August 5, 2021. And therefore, you are advised that time sensitive information may no longer be accurate at the time of any replay listening or transcript reading. With that allow me to introduce Trinity Capital's Chairman and CEO Steve Brown.

Thank you, Sarah. And thank you to all of those who are joining us today. I hope that you're healthy and enjoying the summer months. Q2 was another quarter of momentum and progress at Trinity. We continue to prudently deploy the proceeds from our February 2021 IPO, and we originated total commitments of nearly $127 million, setting a record for the company and expanding our investment portfolio to $598 million at fair value. Further, we generated net investment income that meaningfully covered our second quarter dividend. This performance is a direct result of the strong contributions that we have seen from the investment professionals that joined our origination and credit teams in the past few quarters. Each of these talented individuals brings established high quality networks among executives and investors in the emerging growth Venture Capital Community. As I mentioned on the last call investment in technology and innovation remains a top priority for Trinity and as a result, we are seeing continued expansion in our opportunities, which is the top of our pipeline funnel. As Kyle and David will expand upon later in the call. I would like to review a few key highlights of our second quarter performance. We declared a dividend of $0.29 cents per share and increase over prior quarter and in line with our stated goal of increasing our dividend as we grow our platform. We originated $126.5 million in new commitments, and more importantly funded $122.4 million in gross deployments across 17 portfolio companies a record quarter for Trinity. Q2 net investment income was $10.1 million or $0.38 per share comfortably covering our dividend of $0.29 on a GAAP basis. This comparison net investment income of $7.3 million or $0.31 per share in Q1 of 2021. Our NAV per share had a nice increase…

Thanks, Steve. Good afternoon, everyone. Our performance in the first half of 2021 is proof that we've been able to scale and scale quickly to the addition of best-in-class talent. We continue the momentum from Q1 into the second quarter. We built a strong infrastructure at Trinity attracting subject matter experts across both venture lending and equipment financing. To continue the growth of our investment platform. We're benefiting from strong market tailwinds and have demonstrated that we are building a differentiated team that offers our investors the opportunity to participate in a proven specialty finance asset class and create significant value at current trading levels relative to our peers. Turning now to the investment portfolio, we maintained a highly diverse portfolio across a number of attractive sectors that are backed by brand name Venture Capital sponsors, manufacturing leads our portfolio composition making up almost one quarter of our total portfolio, followed by professional scientific and technical services and internet based retail trade. Our Q2 deployments are consistent across these same industries. In aggregate, these three industries make up about half of our portfolio. Our portfolio will continue to evolve in accordance with Venture Capital Funding and we remain optimistic in other innovative sub sectors such as ag tech and food tech, frontier tech and artificial intelligence and robotics. Our portfolio remains heavily weighted towards domestic opportunities both the West and Northeast in tandem with the Venture Capital investment areas. Approximately 77% of our debt portfolio or $398 million is comprised of secured loans and $121 million or 23% is invest in equipment financing. Our equipment finance business will continue to be a focus for us, as we provide an attractive alternative and compliment to the tech banks. We believe we are continuing to emerge as the leading equipment financing solution…

Thank you, Kyle. And thank you everyone for joining us on today's call. Following our first quarter as a public company, we extended the momentum and delivered strong results across all key financial metrics, delivering record originations and net portfolio growth, as well as maintaining a high quality credit book with ample liquidity. My remarks today will cover our venture loan and equipment financing, portfolio growth and some drivers of our operating performance. On the latter I will focus specifically on return performance, credit performance and liquidity. Beginning with our portfolio growth, we had a record quarter of -- for commitments and funding during Q2 we entered into approximately $127 million of new commitments and deployed $122 million across 17 portfolio companies. This brings our commitments in the first half of 2021 to a record $251 million as we continue to prudently deploy capital and grow a diverse investment portfolio post IPO. We funded $115.4 million in secured loans 12 portfolio companies, we funded $5.5 million in equipment loans to three companies. And we made $1.5 million of equity investments in two portfolio companies. Gross deployments were partially offset by approximately $69 million in principal repayments, which is consistent with the $67 million in repayments we received in Q1. Of the $69 million in aggregate, $51 million was from early principal repayments and $18 million was from normal amortization. In addition, we received $11 million in proceeds from the sales of our warrant and equity investments. We believe that the elevated level of early repayments reflects the ability of many of our portfolio companies to raise new capital, scale their businesses and return our capital, generating strong returns to Trinity shareholders. As a result of the $42 million of net investment activity, and approximately $5 million of accretion OID and…

[Operator Instructions] And we will take our first question from Ryan Lynch at KBW. Please go ahead. Your line is open.

Hey, good afternoon, and thanks for taking my questions. First-off, really great quarter guys all around. My first question was regarding the RIA. Did you guys receive any guidance I am not sure if there was any precedent like when [indiscernible] received the -- received exemptive relief for opinion [indiscernible], I was just wondering, if there was any guidance on how long the SEC typically takes to review that? As well as, have you already started talking with any potential LPs would be interested in working in a fund like that or investing in something like that? And then just lastly on the RIA, is the strategy anticipated today to be consistent with the strategy that you're currently pretty assets on your balance sheet, the same sort of strategy? And this would just be a way to diversify and how larger hold sizes? Or are you looking to pursue any sort of different strategies with within the RIA that just wouldn't fit well on our Trinity's balance sheet?

Thanks for the question, Ryan. So let me just take them in order. Relative to timing, we expect this to be a 9 to 12 month process as sort of the feedback we're getting. So it's going to be a while, but we're excited to get it on file and start the process. Relative to investors, we've certainly had some preliminary discussions and we'll continue to have ongoing discussions around the right partners to have relative to that. And as I mentioned in my comments relative to strategy, at this time, this is really sort of a perfect opportunity for us to be able to do some things that are larger than we can do on the balance sheet. And of course, as you know, some of our larger customers, some of our stronger customers. And we'd like to keep those as long as we can. So, the first priority here is to be able just to expand the platform may continue to offer more of what we offer, we see a lot of deals that are larger than we can handle with our same system and process and what we do and how we do it. So that's really the main thing. Will there be some other strategies? The answer is likely over time there'll be synergistic strategies things that complement and are similar to what we do. But it's too early to talk about sort of what those might be.

Okay. That that's super helpful. And I appreciate that. That is, we're extremely -- early in that sort of process. But I appreciate just the high level thoughts as we see here today. The other question was, obviously, you guys had very, very strong earnings this quarter, I think maybe some accelerated fees might have helped that out. But earnings were well in excess of the dividend this quarter, I know, you guys have been kind of slowly increasing it. And I think as we look out and see future earnings, they should be above the dividend. So it seems like, dividend increases -- are likely to continue. I was just wondering, do you think that they could potentially increase closer in line with the earnings power or you're going to -- as we stated today, think more or like, like a gradual step up in the dividend rate?

That's a great question. And it'll be an interesting and fun discussion with our Board this next quarter based on how we perform. We've made it clear all along that we want to walk the dividend up as we grow the platform and we grow earnings. That's what we're doing, we certainly exceeded a little bit and had some nice cushion. Having some spillover is not a bad thing in this business. So we'll consider that. But I think, we will look at both of those situations and determine how quickly we walk this up. But we have said, we're going to grow this platform, we've said we want to increase our dividends. We're doing that and we'll continue to do that.

Okay. And then just last one for me at this point. You guys had some really nice growth this quarter. It sounds like your guys pipeline continues to be really strong. But just within the strength in the Venture Capital ecosystem today, we've heard some other BDCs talk about, it's hard to keep the math on their books, which is a good thing because they're able to access these and potentially some nice gains. Well, it's always good to get your money back as a lender, but it's also hard to grow your portfolio in this environment. Based on kind of how your pipeline fits today and as you look at pre-payments, do you think the second half of the year you guys will be able to have meaningful portfolio growth similar levels that we saw -- of net growth similar to what we saw in Q2?

I think we're going to continue to see net portfolio growth. That's the short answer. How we get there? We’ve remain to be same based on the pre-payments versus sort of the origination pace. We are -- when you look at our pre-payments, and Kyle mentioned, it's a little larger than it's been in the past. But that's from a real dollar perspective, if you actually look at sort of as a ratio, compared to the size of our balance sheet, it hasn't changed a lot over the last few quarters. So that's encouraging to us. And, we have said this before, our opportunities continue to grow because of the team we're building and the platform we're building. And that is the best indicator for continued growth and originations and ultimately the portfolio you have to deal with pay-offs. I've heard different responses on different calls about what's going to happen in the future. And I don't know at the end of this know exactly. But I do believe based on where we're at our platform, our pipeline and how we're managing this business that we will continue to see growth, sort of in line with what we projected in the first place. And then there's a lot of fees and income that we weren't counting on, which is accretive and great. So time will tell Ryan, but I feel good about our ability to grow our portfolio.

Okay, that's good to hear. Really nice quarter guys, then, and also happy to hear the announcement about the RIA, and how that can be. I appreciate the time this afternoon.

Thanks, Ryan.

And our next question will come from Christopher Nolan from Ladenburg Thalmann. Please go ahead. Your line is open.

Hey, guys. Steve, last quarter, you guys provided gross origination target of $280 million for 2021. And you guys have taken -- gone a long way to reach that, any update to that growth target?

I wouldn't give an exact number on where we at. I would say that we have certainly adjusted upwards where we think we're going to be obviously with what's happened year-to-date, over $200 million and a pipeline that we see. That is certainly a good, achievable number. But I think certainly internally exactly where that number is going to end up, Chris, I'm not sure. And we want to report on that right now. But I do think we're going to see some increase. Yes.

Great. And then [FTF] media, which was not accrual last quarter, as I didn't see it on the schedule of investments, any color and the exit from that period?

Kyle, do you want to touch on that one?

Sure. Thanks for the question. So we did consider that financing realized there was a small IP sale that we recognize within Q2, I think there's a small possibility of some additional IP sales down the road, but I think it's very remote. So we considered that financing realized in Q2, and that -- the settlement exceeded where we are carrying that investment at fair value at the end of Q1.

That’s it from me. Thank you.

Thanks, Chris.

And we will take our next question from Casey Alexander at Compass Point. Please go ahead. Your line is open.

Yes. Hi, good afternoon. I noticed that the 7 new -- I mean the $45 million of investments in 10 existing portfolio companies. And I would have thought that that would have been through more weighted towards equipment finance, but equipment finance quarter-over-quarter, the balance of equipment finance loans actually declined, both in real terms and as a percentage of the total portfolio. So I was just wondering if you had any color on what was happening on that side of the portfolio?

Yes, it's a good question, Casey. And I think the answer is that business is a little bit cyclical. We did have less originations on that part of the portfolio from an equipment perspective. But our commitments are up and in line with where we think they're going to be the balance of this year, sort of relative to what we're doing on the loan side, I think some of our equipment, companies had large capitalization events where they raise capital and sort of maybe put-off taking down some equipment, but we think that's going to happen. It's just been pushed back. So we don't think we're going to lose that. We just think it's been pushed back. But when we look at in talking with Kyle and the team and sort of where we're at in that business, we feel like we're going to continue to maintain a similar sort of ratio, net 65, 35, 70, 30, over time relative to the portfolio. So it'll be cyclical, and it happens and this particular quarter was -- it was weighted towards loans, but I'd also give kudos to our loan origination team, they had a great quarter and outperform meaningfully. So….

Yes, I would agree. Would equipment share be one of those that had a financing that maybe put-off some of their new activity?

That's a good question. I don't think that happened relative to equipment share, and we were sort of fully sort of invested with equipment share. So I don't think they necessarily….

No, we didn't have an investment in potential this quarter.

Okay. good.

Okay. And then, in relation to the mark on Lucid and Matterport. Is it safe to say that those were because of the lockup provisions that still exist on those, that the $39 million and the markup -- mark on Matterport are still at some discount to the fair value of the shares?

Hey Casey, its correct. This is Dave. The -- we did take us -- look like -- just kind of I would say it probably not the appropriate term. But to the full markup, that would be -- because of we have a six month lockup on both those positions.

Do you know approximately what percentage that that discount is?

Between 21% and 27%, on either one of those particular positions?

All right. Great. Thank you. That's very helpful. All right. Thanks very much.

Thanks, Casey.

And we will take our next question from Sarkis Sherbetchyan from B. Riley Securities. Please go ahead. Your line is open.

Hey, this is Sarkis Sherbetchyan. Thanks for taking my question here. Just wanted to see if you can speak to the current pricing environment as you're underwriting an originating, any color on whether the band in your origination yields are changing?

Kyle do you want to touch on that?

Yes, this is Kyle. We have seen the market be competitive. We have also seen an influx of deals. Overall, we've not had to forfeit pricing, and we do not see any material change in our overall yield or pricing right now.

Great, that's super helpful. And as far as kind of the pipeline is concerned? I think you mentioned, the pipeline is still strong. You're kind of into the second half of the year any quantitative metrics you can provide, whether it's up sequentially, and to what degree?

I don't know that we're reporting specific figures on that. I would say that we would -- we continue to be well above the mark that we set for the year from a top funnel perspective. And the fundings have obviously shown -- have shown that as well. So we continue to be well above our plan for the year from a top line perspectives and anticipate if our closing rate continues at the rate it has for many quarters that funding rate we continue to be able to work as well.

Got it.

Sarkis. Go ahead, Sarkis. No, no go ahead. Yes.

Sorry it sound like you had something to add?

No, no, that's all right. That's all right. Go ahead.

I just wanted to also kind of understand if you're seeing a similar level of kind of accelerated repayment activity here in 3Q, and just kind of any incremental color you can give on as the capital comes back, if you're able to kind of smartly deploy it back into the business?

So, I did mention, from a real dollar perspective, when you kind of go back in history, we're seeing larger dollars, obviously, but our portfolio is larger, we have larger deals on the books. But as you look at it, just kind of apples-to-apples we're not seeing any meaningful change, and I don't expect any meaningful change in this quarter. We will always say we don't know. And we don't. But we're seeing relatively consistent as a ratio of our total portfolio in pay-offs. And we are committed Sarkis to build this platform to add to our team, which we've been doing. So that should we get those, pay-offs, we'll be able to net -- increase the portfolio. We've -- we believe we're set to do that. And we think -- we're going to do that. And the one other thing I would mention still probably 30% of our loan portfolio is equipment financing. And if you get an equipment pay-off, and we do occasionally, you get all the payments, you get all the profit all the way through the timeline. So that's not a bad day at all. And from a practical standpoint, you're going to get every dollar you would have gotten, and then you have a long time to redeploy that before, you're sort of back to where you want it to be from a yield perspective. So it's the loan portfolio that you get the prepayments, you get your fees, and then you have some time to get that back out. But I, I feel good about where teams at. Where our platforms at. The pipeline that we can keep up whatever prepayment pace we see to continue growing the portfolio.

Fantastic. That's all for me. Thank you.

Thanks, Sarkis.

[Operator Instructions] And we will take a question from Brock Vandervliet from UBS. Please go ahead. Your line is open.

Hey, everybody. Good afternoon. I heard you flagged the shelf registration. How do you kind of think about the leverage ratio and the goal of lifting it to 125 versus that shelf at least in our model, we've got a very gentle rise in leverage over a pretty long period of time. I'm just kind of wondering what your latest thoughts are on capital and leverage?

Yes, Brock thanks for that. We finished the quarter at 0.6521. And I mentioned in my remarks, we want to get it to over time, 1.25 the debt markets are sort of ripe right now for lower cost financing. So we're certainly considering all options, layering on some additional debt as we grow the portfolio and then maybe looking to add some equity is a thought, but we're going to like consider all the options we have. But we're excited to get that shelf on file, because it really does provide sort of the full range of options. David, do you want to add to that or comment on that?

Yes I would agree.

I mean, it gives us options to go-to-market for the equity, do an ATM program. But more importantly, I think leverage up where we can get better returns for our investors. So we'll continue to march on that order and get up where -- we're at 1 and approaching 1.25 eventually.

Got it. And just separately, the shift, which is intentional from fixed to floating seems to be moving pretty smartly. I was just curious if you're -- our clients kind of indifferent about that relationship. Because they've got just other priorities, then that -- the debt structure or you having to aggressively really coach relationships to go to the floating option?

No, it’s not really accepted in the marketplace to kind of go to the floating rate with a floor that's not too dissimilar from where we want to be from the start. And our friends in the marketplace have established that over time is a reminder when we formed the BDC the bulk of our portfolio that we rolled in was SBIC SBA debt, it was fixed rate debt. So, we had leases and we also structure a loan, sort of from a fixed rate perspective, knowing that we would immediately on all new transactions on the loan side move the floating and it's just worked very nicely and kind of transitioning exactly the way you want. And of course, the belief is really you're just play out in payments, and they're fixed. So it's working the way we wanted to and the market is pretty accepting, because that's sort of the -- that's what happens out there so yes.

Yes, clearly, we've been able to grow that portfolio. So there hasn't been a lot of pushback on that. I'd say we were more of an outlier with fixed rate loans than we were moving to the floating rate.

Got it. Okay. Thanks for taking my questions.

And I will go ahead and turn the call back over to Steve Brown, Chief Executive Officer for any additional closing remarks.

Thanks, Ryan. Just want to thank everybody for participating in the call today. And as always, we appreciate your investment and your support with Trinity. We're excited about the progress. We plan to continue that and working hard on your behalf this quarter and looking forward to reporting on that at the end of Q3. Thanks again.

This concludes today's program. Thank you for your participation. And you may disconnect at anytime.