Good afternoon, my name is Leo, and I will be your conference operator today. At this time, I would like to welcome everyone to the Trinity Capital's Fourth Quarter and Full Year 2021 Earnings Conference Call. Our hosts for today's call are Steve Brown, Chairman and Chief Executive Officer; Kyle Brown, President and Chief Investment Officer; David Lund, Chief Financial Officer; and Sarah Stanton, General Counsel; Gerry Harder, Chief Credit Officer; Michael Testa; Chief Accounting Officer and Ron Kundich, Senior Managing Director are also present. Today's call is being recorded and will be available for replay beginning at 8 P.M. Eastern Time. A replay of the webcast is available on Trinity Capital’s Investor Relations website. It is now my pleasure to turn the call over to Sarah Stanton. Please go ahead.

Thank you, Leoand welcome everyone to Trinity Capital’s earnings conference call for the fourth quarter and full year of 2021. Trinity's fourth quarter and full year 2021 financial results were released today after market closed and can be accessed from Trinity's Investor Relations website at ir.trincap.com. A replay of the call is available at Trinity's web page or by using the 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, March 3, 2022. 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 everyone joining us today. I want to take just a moment at the top of this call and mention that we have been watching as the tragic events in Eastern Europe have unfolded. And our thoughts are with those people who have been affected by these events. While we continue to monitor the events, we're not aware of any of our portfolio companies that are currently affected by the situation. Now turning to Trinity's exciting performance this past year. 2021 was a transformational year for Trinity Capital. Since our IPO early in the year, we have driven exceptional portfolio growth and generated record new commitments. In the fourth quarter, we built upon our already strong performance, as we continue to execute successfully against our business strategy, doing what we said we would do and delivering on key financial and operating metrics. Trinity continues to benefit from a favourable VC operating environment as we are seeing a large volume of strong credit opportunities. The deal flow in the growth market has been very active, which has fueled originations and record net portfolio growth for Trinity since entering the public markets. The Venture Capital ecosystem was exceptional this past year with record funding and strong fundraising activity. Our business model and strategy at Trinity ensures that we are built for in any economic cycle, the steps we have taken in 2021 to optimize our capital structure while continuing our rigorous and conservative underwriting process, will ensure that we have the right portfolio companies in our book to weather any potential down cycle. We continue to build an industry leading unique venture lending and equipment finance platform that sets us apart and meets the evolving needs of our portfolio companies and prospective partners. Our extensive network…

Thanks Steve and good afternoon everyone. 2021 was an exceptional year in terms of growth and foundational in terms of the path we've laid, the quarters and years to come. I want to dig into some 2021 highlights, which include consecutive quarters of meaningful portfolio growth, enhancements to our operations through team expansion, and fortifying our balance sheet through several strategic cat raises and subsequent capital deployment, as well as establishing consistency maximizing returns to shareholders through our quarterly dividend. Our impressive performance is largely attributable to our people here at Trinity and our credible team and their commitment to fostering and maintaining long standing relationships in the VC space has been critical -- been a critical driver for our business. Investing in our team continues to be a priority as we make new hires, expanding our team and coverage across the country. Trinity now has boots on the ground in Austin, the Bay Area in Boston deepening our relationships in these regions, and as a result, opportunities have subsequently continued to grow, which is a leading indicator for future fundings. Our outstanding results were highlighted by a record $757 million in new commitments for 2021, with $247.9 million in new commitments originating in Q4 alone. In 2021, we funded a total gross investments of $558 million, an increase of 115% year-over-year. During the quarter, the company originated approximately $197.5 million in gross fundings, leading to net portfolio growth on a cost basis $159.1 million and expanding our investment portfolio to $797 million on a cost basis. At year end, our portfolio had a fair value of $873.5 billion, an increase of 76.9% year-over-year. The composition of our portfolio remained relatively consistent throughout 2021 with manufacturing once again, making up over one quarter of our total portfolio. Professional, scientific, and…

Thank you, Kyle. And thank you, everyone for joining us on today's call. As Steven Kyle emphasized we had a very busy and successful year at Trinity. Not only did we break records quarter after quarter in terms of commitments and fundings, but we've also taken the opportunity to strengthen our team, enhance our balance sheet and build a strong and resilient venture lending platform as we enter 2022. I will take this opportunity to walk you through our financials results for the fourth quarter of 2021, as well as highlighting certain key operating results for the year. Kyle provided an overview with portfolio earlier, but I wanted to briefly touch on our loan composition, approximately 74% of our secured loan portfolio is in floating rate securities as compared to 37% at the end of 2020. Over the course of 2021, we strategically repositioned our secured loan portfolio to focus on floating rate securities, leaving us prepared for the expected rise in interest rates in 2022. As a reminder, our equipment financings are generally structured as fixed rate loans. Turning to our operating results. During Q4, we recorded a total investment income of $23.6 million, an increase of $1.8 million or 8.3% over the $21.8 million of total investment income recorded during the third quarter. The increase was attributable to higher interest income of $2.5 million on a larger loan portfolio, and $1 million of higher one time fees offset by approximately $1.7 million of lower accelerated income as early payoffs were $49 million lower as compared to Q3. Income from early repayments will fluctuate quarter-to-quarter based on the amount of principal repayments and the vintage of the loans repaid. Our effective yield on the portfolio for Q4 was 15.2%, which was a decrease from Q3, primarily driven by the…

[Operator Instructions] We'll take our first question from Ryan Lynch of KBW. Your line is open.

Hey, good afternoon, and thanks for taking my questions. Congrats on the nice quarter. And more importantly, congrats on the really nice 2021. The first question that I wanted to dig into to make sure that that I'm, understanding the math correctly on the Exits of Matter and Matterport and Lucid. If I look at the combined fair value of those two investments as of 1,231, I get like a $79 million fair value. You guys talked about your exit price and to one of around $60 million. So does that mean that, we should expect a basically a $19 million decrease in the fair value, upon Exits given kind of the sell off of some of those investments in the first quarter?

Yeah. Ryan, this is Steve. That is correct. And I'll maybe have Gerry sort of just comment on, how we value that at the end of the quarter and then subsequently what happened.

Yeah. Sure. No, the $19.1 million is correct, Ryan. And of course, from a valuation perspective, so publicly traded securities marked with a small discount for lack of marketability, but following standard accounting guidelines there. So you're thinking about it right, it's $19.1 million is going to be the difference.

Okay. Just wanted to make sure I was accounting so that correctly, obviously, very successful investments upon exit. The one thing – the other thing, I wanted to touch on too is just, there is very little prepayments in this quarter. I would have thought just from such an active quarter that we would have seen more pre-payments in the quarter. And we've heard other BDCs in the past talk about when the market is really active like this, if you're not seeing big levels or strong levels of pre-payments that can be a concern for the quality of that portfolio, when everything is transacting pretty freely. So what would you say to something like that if people were concerned by the low level of prepayments in a pretty active market in the fourth quarter?

Yeah, Ryan, I think that, the prepayments are going to vary quarter-to-quarter. We actually had a fair amount of prepayments. As you'll recall, in Q3, we were able to outpace that with our originations and net add to the portfolio. I think it just worked out that in Q4, we didn't have as many and we also had, obviously, large originations and added meaningful amounts to the portfolio on a net basis. So no concerns with the quality and the credit quality of the portfolio right now and don't think that, that one quarter event is indicative of anything negative at all.

Yeah, Ryan, this is Gerry. I would agree with that, and we also talked, Kyle mentioned in his prepared remarks, a small handful of companies that are planning their exit via public offerings. So those things take some time, as you know to get through the SEC approval and de-SPAC process. So pre-payments, we have limited visibility they come and go, I wouldn't read anything negative into it from a credit quality standpoint.

Okay. And then just one last one for me, and I'll hop back in the queue. $20 million of net fund of gross fundings over $250 million – or $250 million of commitments in the fourth quarter, those are really large numbers, kind of a two-part question. Can you just talk about kind of the investments in the growth that you've made in the infrastructure of Trini to be able to layer on $200 million of gross fundings in a single quarter? And then I'd love to just hear, there's obviously a lot of things that the market is thinking about right now in terms of interest rates, inflation, geopolitical stuff. I'd just love to hear, if you could provide a little bit of an outlook on, what you guys are seeing in terms of capital deployment in the first quarter?

Yes, Kyle, do you want to touch on the growth?

So, we built this team to scale, Ryan. And so we continue to hire kind of ahead of the plan. We continue to do that. We've also – our system is built for scale. We've talked about how we differentiate ourselves from our peers, not doing kind of the cradle and grave approach, but having teams and systems where we can really file a lot of opportunities through it. So we've hired in advance, and this is not a surprise to us. The tide has risen a bit with venture activity in general, but this is not a surprise to us. We are hiring the best people in the world are executing on the plan, and the system was built to handle that type of volume.

And then any comments on the outlook for Q1?

So we had -- I mentioned in the remarks that we had record opportunities and heading into Q1 and with also record commitments of $247.9 million in Q4. These are trends that lead to fundings typically. And we expect that to continue.

Okay. Appreciate this afternoon and nice quarter.

Thanks. Thanks, Ryan.

We'll take our next question from Finian O'Shea of Wells Fargo.

Hi, guys, good afternoon, especially Jordan last on the line. I want to ask a question about some new credits this quarter. Looks like you guys put on about $31 million to some cryptocurrency mining companies. It seems like that could be a vertical where you could almost put as much money into it as you wanted to. So we're just really curious about how you guys think about sizing those divisions relative to the rest of portfolio? Thanks.

Yeah, good question. This is Steve. We've been thinking a lot about that and talking about that for a long time. And Gerry, you might just touch on sort of how we think about the current portfolio relative to what we funded more equipment base, but that's do you want to touch on that.

Sure. Happy to. So yeah, as Steve mentioned, these are equipment financing. And the portfolio companies that we've on boarded, they are leaders in their space, they have very strong balance sheets. And most importantly, very strong equipment and excellent relationships with their equipment providers that we feel is an acceptable credit risk, particularly with our equipment financings, which amortize straight out of the gate, as you know. So as you mentioned, yeah, you could probably deploy about as much money as you want it in that space, we're being very selective.

All right, cool. Thank you, guys. That's all for me.

Thanks, Fin.

We’ll move next to Casey Alexander of Compass Point.

Hi. I was just wondering, I know you'd like to get the equipment financing as a percentage of the total portfolio up to a little bit higher number, and you did have a successful quarter for deployments there. But we've heard from other folks that are in this business that some of the supply chain restrictions have actually given them problem getting some money to work and the actual equipment itself cannot be delivered on timely basis. Have you seen that you have demand for equipment financing, but you're not actually putting the money out, because the equipment can't get to the end destination?

Don't know, Casey, if we've really seen our funding to our equipment financings delayed through supply chain issues. Certainly, some of our portfolio companies in manufacturing space are facing and working through supply chain challenges. And we've got that reflected accordingly in our portfolio risk assessments. So we haven't really seen a slowdown of the funding of equipment though, to answer your specific question.

My next question for David is, the team is being built to scale, so you're kind of bringing the guys in ahead of the actual production that you expect them to produce? So should we expect to see some of the comp expenses move ahead of some of the production that we would expect from those folks that are coming on?

Yeah, I think that's a fair assessment, Casey. We will be hiring over the course of the year, we've already started to into this quarter as well, in order to be able to do that. But you will also be using technology to monitor some of the portfolio and the systems and so on as well. But you can't expect compensation expense to be going up during the course of this year.

Okay, great. I expect I would imagine that you'd give us more detail on that at the Analysts Day later on this month.

Yes, we will.

All right, great. Thank you very much for taking my questions, and really nice move in NAV this quarter. Congratulations.

Thank you.

We'll take our next question from Sarkis Sherbetchyan of B. Riley Securities.

Hey, good afternoon, and thank you for taking my question here, and congrats on the quarter. My question is going to relate to kind of the dividend strategy. And also, you know, with 1Q 2022 dividend that's kind of subject to approval for later this month. Like any changes in strategy, are you going to, focus on just the recurring kind of regular dividend, boosted with a special. Just help us understand how you're thinking about that, especially given the recent monetization in the equity portfolio?

Good questions, Sarkis. Thanks for that. So, we're going to continue to think about our dividend strategy, our normal core dividend strategy, the same way we have. We're growing our business. We're scaling our business. We have intended to increase our earnings and our dividend. And we plan to continue that. As you know, we typically meet with our board, sort of middle of the last month of the quarter, which is coming up here, we'll do the same. And we will consider both our normal dividend strategy. And we'll consider this extraordinary game that we had, and talk about what would be an appropriate level of dividend or distribution and the timing on that we're excited to consider that. We'll be talking about that with our board. And we will, you know, let the market know, as soon as we've made that decision sort of middle of the month.

Understood. That's helpful. And we'll wait for that update. And I guess, as we kind of step back and look at the current environment, clearly public markets have seen a lot of volatility as we speak with folks on the private side, you know, they're saying that the, the ball hasn't really creeped in there yet. But I guess as you step back and look at the VC ecosystem, you seeing venture debt become, I suppose, more so in the conversation as opposed to kind of the equity as in are companies now kind of coming back and saying, gee, you know, at these valuations, I'd rather talk to the venture debt lenders as opposed to kind of raising equity, but what are your thoughts or senses around what's happening here real time?

So, you know, I would say the answer would be, yes, we have seen that. There has not been major trends though. With that theme in mind. I'd say it's been pretty consistent. You know, we are lending capital to private companies backed by private companies. And in typically, you know, in that growth stage, the valuations are not necessarily directly correlated to the values of the companies we're funding. So we've not seen that -- we've not really seen that yet. Although, it will come up from time-to-time. It's not something kind of driving the market right now.

Understood. I'll hop back in the queue for someone else. Thank you.

Thanks, Sarkis.

[Operator Instructions] We'll move next to Christopher Nolan of Ladenburg Thalmann.

Hey, guys, congratulations on the quarter. And congrats on those gains, it's quite impressive. My question turns on capital structure for Trinity, you're already covering the dividend with earnings and your leverage ratio is somewhat low. What's the appetite right now for taking the leverage higher given your growth prospects?

Hey, this, Dave, because we are charging be about 1.25 on our leverage. We're only at one at the end of the year. So, obviously, we would like to take advantage, because I think we get better returns for our shareholders as we continue to use leverage. So investors can anticipate that that will be our strategy.

And David, do you participate making reach net leverage threshold this year?

We will -- I wouldn't believe we would hit that. Clearly, we have great goals for origination and the best case, we're going to have to fund it through that an equity. So you can anticipate that we wouldn’t be approaching that target.

Great. And I guess on the dividend, if you're going to take the leverage up like that then we should assume that the dividend is going to go up along with it, is that part of the strategy here?

That would be a forward looking statement, I think. But yes, clearly, if we -- we will target to distribute 90% to 100% of our earnings. And as we grow the portfolio, as we did in the fourth quarter and continue to do so in the future, we would anticipate that earnings and distributions would go up that's all subject to marketplace.

Great, thanks.

Thanks, Chris.

[Operator Instructions] And to conclude, there we have no further questions at this time. I'd be happy to return the call to our hosts for any concluding remarks.

Thank you. And thanks for everybody joining us today. We really are excited about Trinity the year that we had. And I would just say, we're most excited about the people and this team that we're building. It is best-in-class. We're very excited about where we're headed at Trinity. Thank you for your support. And we'll look forward later this month to give you a great update about things to come. Thanks again.

This does conclude today's program. You may now disconnect your lines, and everyone have a great day.