Trinity Capital (TRIN) Q3 2025 Earnings Transcript

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DATE

Wednesday, Nov. 5, 2025 at 12 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Kyle Brown
• Chief Financial Officer — Michael Testa
• Chief Operating Officer — Jerry Harter

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TAKEAWAYS

• Net Investment Income -- Net investment income of $37 million for Q3 2025, a 29% increase compared to the same quarter last year and equivalent to $0.52 per basic share, with 12% coverage of the quarterly distribution.
• Net Asset Value (NAV) -- Total net asset value of $998 million as of Q3 2025, up 8% quarter over quarter from Q2 to Q3 2025, with NAV per share rising from $13.27 in Q2 to $13.31 in Q3.
• Assets Under Management (AUM) -- Platform AUM increased to more than $2.6 billion, up 28% year over year.
• Dividend -- $0.51 per share in cash, continuing the 23-quarter streak of uninterrupted distributions.
• Return on Equity -- 15.3% return on average equity, cited among the highest in the BDC sector.
• Weighted Average Effective Portfolio Yield -- 15%, maintained in a declining rate environment.
• Nonaccruals -- Investments on nonaccrual totaled $20.7 million at fair value as of Q3 2025, or 1% of the debt portfolio.
• Originations and Fundings -- $471 million funded during Q3 2025.
• New Commitments -- $773 million in new commitments and $1.2 billion total unfunded commitments as of Q3 2025 quarter end; 94% of unfunded commitments remain subject to further diligence and investment committee approval.
• Equity Capital Raised -- $83 million raised via ATM program in Q3 2025, at a 19% average premium to NAV.
• Co-Investment Vehicle Contribution -- Provided approximately $3.3 million, or $0.05 per share, in incremental net investment income.
• Nonaccrual Portfolio Movement -- Four companies were on nonaccrual, unchanged quarter over quarter, with one new nonaccrual added and one removed due to realization.
• Portfolio Diversification -- 21 industries represented; no borrower makes up more than 3.4% of total exposure at cost, with finance and insurance the largest sector at 15%.
• Leverage Ratio -- Net leverage increased slightly to 1.18x at quarter end.
• Off-Balance Sheet Assets -- $409 million in off-balance sheet assets, including a newly ramping $200 million vehicle, and remaining vehicles funded approximately 75%.
• Compensation Expense -- Rise attributed directly to ongoing team expansion and the launch of a UK office; not due to one-time items.
• Interest Rate Sensitivity -- Majority of loans have rate floors; CEO Brown stated, "rate cuts have had a limited impact," and further reductions are expected to have a muted effect on returns and lower funding costs.
• PIK Income Exposure -- Less than 2% of income sourced from payment-in-kind, characterized as nominal.
• Fundraising Initiatives -- A third SBIC fund in progress is anticipated to add over $260 million of capacity, and a new joint venture has been established with a large asset manager.
• Watch List Credits -- Credits on the internal "watch" list dropped by around half, some due to capital raises and others due to realization or migration to nonaccrual.

SUMMARY

Trinity Capital (NASDAQ:TRIN) management reported a record net asset value of $998 million, emphasizing uninterrupted dividend coverage and sector-leading return on equity. They underscored disciplined underwriting, broad portfolio diversification, and strong portfolio yield of 15% in the face of rate declines, with most loans protected by rate floors. Growth capacity was highlighted with substantial unfunded commitments, active fundraising, and platform expansion, including new ventures and SBIC funds. The firm clarified that its off-balance sheet vehicles are structured primarily for third-party capital generation and earn management and incentive fees rather than relying on internal leverage. The internal management structure aligns employee and shareholder interests by integrating management company ownership and asset exposure.

• Michael Testa stated, "Estimated undistributed taxable income is approximately $63 million or 84¢ per share."
• Portfolio companies attracted $2.3 billion in new equity capital, supporting management's assertions of borrower strength and ongoing access to financing.
• The current investment pipeline was described by CEO Brown as "exploding," with no material sector concentration and growing demand across all five verticals.
• CEO Brown explained that the leverage ratio strategy is to reduce it over time, supported by third-party fund growth and not by maximizing short-term returns through leverage.
• Exposure to consumer receivables is minimal, with COO Harter specifying, "2.4% at fair value of our portfolio is what we would classify as consumer products and services."
• The new joint venture and conversion of a prior vehicle into a private BDC are intended to diversify and scale platform income, according to management's strategic remarks on fund structure evolution.
• Write-down and restructuring of the Nomad Health investment resulted in two-thirds conversion of debt to equity, with Jerry Harter confirming the risk is now marked-to-market and the situation still evolving.

INDUSTRY GLOSSARY

• BDC (Business Development Company): A publicly-traded investment firm providing debt and equity capital primarily to small or emerging growth companies, subject to regulatory leverage and asset guidelines.
• Nonaccrual: Securities or loans in a portfolio that are no longer generating income due to borrower payment default or concern about collectability; moved out of accrual accounting.
• PIK (Payment-in-Kind): A form of interest payment where borrowers pay lenders with additional securities rather than cash.
• ATM Program (At-the-Market Offering Program): A mechanism that enables companies to raise incremental equity capital by selling shares directly into the secondary market at prevailing market prices.
• SBIC (Small Business Investment Company): A government-backed investment fund providing growth capital to small and medium-sized enterprises, frequently leveraged with U.S. Small Business Administration funding.

Full Conference Call Transcript

Kyle Brown: Thanks, Ben, and thanks, everyone, for joining us today. 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 maintain strong credit quality with nonaccruals at 1% of the portfolio at fair value.

And we distributed a third-quarter cash dividend of 51¢ per share, marking the twenty-third 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 five years ago, TrendStock has delivered a cumulative return of 114%, far outpacing both the peer average of 63% and S&P 578% over the same time period.

And looking forward, we have a growing asset management business generating new income, as well as 210 more 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. 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. 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 five business verticals. All the while, we remain deeply committed to disciplined underwriting and a credit performance which are the bedrock of our long-term success. I would like to touch on two 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 proportionally. 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 gonna 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 five 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 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 Tela perspective, we're passionate about fostering a vibrant culture rooted in humility, trust, integrity, uncalling care, continuous learning, which 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 out-earn 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 growing platform. 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 Trin 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 Testa: 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 52¢ per basic share, representing 12% coverage of our quarterly distribution. Estimated undistributed taxable income is approximately $63 million or 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 remains 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 26, our balance sheet and capital structure remains strong 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 $4.9 million in assets across our private vehicles. Our net leverage ratio increased slightly to 1.18 times 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 Harter.

Jerry Harter: 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, 99% of investments performing at fair value. On our one to five scale, where five indicates very strong performance, the average internal credit rating was 2.9. Consistent with prior quarters and reflecting the addition of high-quality originations and continued strong portfolio management.

Quarter over quarter, the number of portfolio companies on nonaccrual remained steady at four, during Q3, one new company was added to nonaccrual status while one 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: You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question. Our first question comes from Casey Alexander with Compass Point. Please go ahead.

Casey Alexander: Hi, good afternoon. Thanks for taking my questions. Probably good morning there in Phoenix. Hey, Casey. You know 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.

Kyle Brown: Yeah. I Casey, there's I think with the question looking at our liquidity and our and our ability to allocate investment 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 gonna get more share or higher share. But we're consistently allocating off of the bill of 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 gonna try to grow it as much as we can.

I mean, that's the like, the strategy though, Casey, is the more capital we can raise via the RIA and the various funds we're setting up, 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 a you know, our new BDC that we manage. And we're out there raising money to the kinda wealth channel. Then we have a couple, you know, larger partnerships with large credit funds that we're now managing, and, we're gonna 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.

Casey Alexander: Yeah. I get all that. But how much capacity do you have? At the moment?

Kyle Brown: Yeah. So currently, the new vehicle is just ramping up. So there's you know, $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 two vehicles, they're probably 75% or so funded to date. And those, you know, had the benefit of increasing capacity as we, deploy or raise additional cat equity as well as leverage in each of those two.

Casey Alexander: Okay. Thank you for taking my question.

Kyle Brown: Sure. Thanks, Casey.

Operator: We'll go next to John Hecht with Jefferies. Please go ahead.

John Hecht: Hey, guys. Congrats on another good quarter. You know, a little bit of a related question to the last question is, you know, you guys are, in five verticals. You have your multiple funds. You run, I guess, Yeah. 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?

Kyle Brown: Yeah. So we have continued more or five years to be about a year ahead. From a employment standpoint. We are you know, we're planning out one, three, five year plans, and we've hired in advance of that. And so, we're reaching, some interesting you know, points right now where we have some efficiencies of scale And a lot of our deployment growth and AUM growth doesn't necessarily correlate, you know, to employment additions, at least in the same way. But we are you know, we have a we have a with our five verticals right now, we have a road and a path towards continued growth. With the team that we have.

And, you know, we're still hiring, and we're still recruiting great talent. But, you know, we've already hired for what we think is a very achievable 2026 plan. Right now.

Jerry Harter: Yeah. Guess, this is Jerry. I would add to that, right, the current managed accounts are co-investment vehicles. Right? So, you know, they're taking ratable portions of you know, the investments in the five verticals where you know, we're we're already performing. And so, you know, we don't need to add any additional types of capability You know, the businesses we've been doing for a longer period of time, tech lending, equipment financing, life sciences lending, Our app, we're 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 twenty six, but the other businesses are pretty well scaled.

John Hecht: Okay. And then, another question is, you know, you noted that you're giving your unique footprint and the unique and the verticals, there's limited overlap with other BDCs. So I guess a couple comp or questions on that is, one is who do you perceive as your competition in the various verticals And second is given, I guess, given a lower amount of overall competition, how are kinda new deal spreads relative to where they were, say, six months ago?

Kyle Brown: Yeah. 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 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, you know, we're dealing directly with the company. The CEO, 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 know, relationship-driven business. And in our space where we write 20 to a $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 you know, your typical BDC or private credit company in the middle market. When it comes to competition, it's gonna vary in a really unique way. Depending on the vertical. And so, I mean, I could I could sit here and list out you know, multiple competitors for each individual vertical, but know, 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 you know, yielding BDC for investors. And so I hope that answers your question. I'm gonna spend I'm 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.

John Hecht: No. I appreciate the context. Thank you very much.

Operator: Our next question comes from Doug Harter with UBS. Please go ahead.

Cory Johnson: 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, you know, why that's the case? Is that just you know, the is that more hiring? There are other possible, like, one-timers in there and do you do you expect that to sort of continue to grow over the next coming quarters?

Kyle Brown: Yeah. That's that's us ramping up. I mean, that's that's hiring. We've added to the team. We had added some incredible talent to the team. Were growing. And we also we also launched a team in The UK and an office there to replicate the success we've had here in the in The US. And so not one-time, you know, expenses, but just further team growth. And additions to the team. You know, we're we're still in growth mode. And as far as you know, 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, so we're gonna keep growing.

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

Jerry Harter: Yeah. This is Jerry. I can I can take that one, Cory? So yeah. The, you know, watch, watch decreased significantly from Q3. That, you know, so we're pleased with that. Know, one of the particular companies, landed on the watch list in the prior quarter as they were trying to close some financing. You know, they've got both the term sheet for financing and an offer for M&A. So we're feeling, you know, much more secure about that, position. You know, one of the companies on watch prior quarter became partially realized And so, you know, the loan portion that remains you know, went on nonaccrual.

So you know, it went from watch downward, but you know, overall portfolio health is good. We continue to monitor closely. You know, you'll hear us say all of our verticals you know, include their own originations, underwriting, and portfolio management. And, you know, overall, portfolio health, happy with at this point in time.

Cory Johnson: Thank you.

Operator: And as a reminder, ladies and gentlemen, if you'd like to ask a question, you may do so by pressing star one. Our next question comes from Paul Johnson with KBW. Please go ahead.

Paul Johnson: Hey, good afternoon. Thanks for taking my questions. Can you just maybe if you can take us a little bit further through what I guess, occurred with kinda Nomad Health during the quarter. Looks like you chose to write off pretty significant portion of that. Prior to that investment going on nonaccrual. So I'd be curious to hear kind of what transpired there.

Jerry Harter: Yeah. It's a little this is Jerry again. Thanks for the question. A little bit. Complicated. So, you know, the investment as I mentioned in the prior question, was partially realized. So what ended up happening about two-thirds 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 you know, the impact to NAV. From that investment. The remaining one-third, remains debt. You know, out of an abundance of caution. We're keeping that on nonaccrual. As this plays out. Know? And it's interesting situation because the equity portion of the transaction is realized. But, you know, the story is far from over. Right?

The company continues to exist. And, you know, we're optimistic that, can accrete some value and, you know, 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.

Paul Johnson: Got it. Appreciate that. I mean, why would you choose to take a more accelerated approach to that, I guess, you know, 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 you know, different from what you expected, and this was kind of the best path forward?

Jerry Harter: Yeah. This you know, Michael and I were talking about that just yesterday. Right? So not really atypical in terms of how the investment was handled. And you know, they've realized portion is realized from an accounting perspective. Right? And that's, you know, GAAP accounting, how we have to do it. And so, you know, it wasn't really an election that we elected to do it that way. You know, the debt portion that was converted to equity is realization. And, you know, and so we marked that equity position to market which, you know, you could argue is pessimistic or optimistic. But, you know, the company remains.

They're operating And, you know, I would say from the equity standpoint, there's far more upside than downside. At this point.

Paul Johnson: Got it. So as a result of the restructuring, are you in the control of the equity at this point, or how where did you, I guess, fall in terms of your ownership and what you kinda have in the residual?

Jerry Harter: Yes. It's not a control position, but know, we have a significant stake, and, you know, a seat at the table. As the company moves forward.

Paul Johnson: Got it. And one last thing for me. I was just wondering just kinda 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 relied on any sort of any one of those receivables structures. That's all for me.

Kyle Brown: No. The answer is no. The portfolios incredibly granular and diversified. Very little exposure to anything consumer. Whatsoever, and anything that is consumer has 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 portfolio's remains incredibly stable with know, 99% of it. Performing. And then, you know, you know, we focused on one individual credit out of over a 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 our historical performance over nearly twenty years. On that loss rate.

Jerry Harter: Yeah. And specifically, two items that you, you know, called out. Our asset-based lending is focused on b to b receivables. And those, you know, frankly, are some of the highest performing financings in the portfolio. And with respect to consumer, you know, on our SOI, 2.4% at fair value of our portfolio is what we would classify as consumer products and services. So exposure to consumer.

Operator: Our next question comes from Finian O'Shea with Wells Fargo Securities. Please go ahead.

Finian O'Shea: Hey, everyone. Good afternoon. 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, you know, the BC 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.

Kyle Brown: Yes. I'll start at the end there. Pipeline's exploding. Where we deal, is late stage, VC backed companies heading towards an IPO or liquidity events, into the lower middle market, you know, three to 15 million of EBITDA, sponsor backed. Like, this market is robust. It's it's 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 kinda really robust pipeline right now. In our 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 FPNA group, on how we're gonna capitalize, how we're gonna raise capital to meet the deployment needs that are 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 TrinShares. We have no incentive. To dilute shareholders. And so it's 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 with a huge emphasis.

On raising third-party capital we can generate new management fees incentive fees, and then the more permanent capital vehicles or permanent light 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 we're hyper-focused on EPS, making sure it's consistent. And we have been working for a couple 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 we're scaling and executing on that plan right now. So it's a it's a it's a really exciting time. For us.

Finian O'Shea: Appreciate that. And just a follow-up on you know, the sort of exploding pipeline You know, managers across the space, they're they're sort of mixed. Some are you know, more optimistic that it'll come back, but no one else is really saying that. No one's that excited to be fair, we haven't heard all of the venture peers yet. So maybe that'll transpire in the more life sci 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?

Kyle Brown: So we've got five different verticals And it's becoming more and more balanced across those verticals. You know, 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, you know, huge emphasis on equipment right now. We're seeing more and more CapEx needs for US-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. You know, 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 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 there's no concentration in any one of our verticals right now. It's pretty, you know, it's pretty spread out, and the portfolio is looking more and more spread out. Each quarter.

Finian O'Shea: Very good. All from me. Thanks so much.

Kyle Brown: Thanks, Ben.

Operator: Our next question comes from Sean Paul Adams with B. Riley Securities. Please go ahead.

Sean-Paul Adams: Hey, guys. Good afternoon. 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?

Jerry Harter: Yeah. I mean, thanks. That was noted on earlier questions. So nonaccruals was pretty consistent. Watch list credits, dropped significantly. Compared to prior quarter. And, you know, we saw movement both up and down. Right? So, you know, the current nonaccrual includes an investment that was prior on watch. And then two other investments, were promoted out of watch list as you know, they raised capital and continued to improve their performance. So, you know, overall, we think the health of the portfolio you know, is as strong as ever. You know, the, you know, the credits on the watch list are the ones that we're obviously working actively.

But, you know, seeing fewer members in that club is definitely a good thing.

Sean-Paul Adams: Got it. Appreciate it.

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

Christopher Nolan: Hey, guys. What's the plan on the leverage ratio going forward, up or down?

Kyle Brown: Plan is down. For a variety of reasons. Right? Right now, we utilize it and kinda 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, you know, our ability to generate new income via the RIA gives us the ability and to have liquidity there. Gives us the ability to lower that leverage ratio. We're not trying to maximize returns. I mean, we could we could 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 will give us the ability to lower our cost of that capital. And so our off-balance sheets growth and activity really gives us that ability to lower that leverage ratio over time.

Christopher Nolan: 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 Right now you're in equity in a levered vehicle inside a levered vehicle.

Kyle Brown: No. I get 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 coinvest 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 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 you know, our manufacturing to a different subset of investors. And generate income by doing so.

Christopher Nolan: Okay. And final questions for these off-balance sheet vehicles. Are they set up like a fund where investors can call their investments at some point?

Kyle Brown: Right now, no. Right now, we have a couple 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 three funds we have currently, but what this gives us the ability to do is raise funds in whatever way we need to. And so, you know, we are exploring, a larger institutional coinvestment 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 two SBIC funds.

So it's going to come in multiple forms so that we can beat investors where they are.

Christopher Nolan: Okay. Thanks, Kyle.

Kyle Brown: Yep.

Operator: 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.

Kyle Brown: 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.

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

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