Trinity Capital Inc. Q2 FY2026 earnings call

Overall Company Performance & Shareholder Returns

• Trinity Capital reports leading year-to-date total shareholder return in the BDC sector, ranking first over the last 1, 3, and 5-year periods. From the 2021 IPO through Q2 2026, total return reached 174%, outpacing the S&P 500's 114% and the BDC index's 58% return over the same period.
• A 17 cent monthly dividend is maintained through the end of Q3 2026, marking nearly seven consecutive years of consistent shareholder distributions.
• Total net asset value (NAV) grew to a record $1.3 billion, up 9% quarter-over-quarter and 37% year-over-year; NAV per share rose 20 cents quarter-over-quarter to $13.47, a 1.6% increase driven primarily by accretive ATM equity issuances.
• Q2 2026 generated $87 million in total investment income (25% YoY growth) and $41.6 million in net investment income (NII), equal to 51 cents per share which fully covered the quarterly dividend. Return on average equity reached 15.2% and effective portfolio yield hit 15%, both among the highest in the BDC sector.

Originations & Capitalization

• Record Q2 originations reached $619 million in new fundings (69% YoY growth) alongside $709 million in total commitments. As of quarter-end, the pipeline holds $700 million in accepted term sheets and $1.2 billion in total unfunded commitments, with 91% still subject to diligence and approval to preserve underwriting discipline.
• In Q2, Trinity closed its inaugural $300 million 5-year investment-grade senior unsecured bond offering, extending its maturity profile and adding long-dated fixed-rate debt. It also raised $100 million via its ATM equity program at an average 24% premium to NAV, which is directly accretive to existing shareholders.
• Net leverage ended the quarter at 1.18x, consistent with management's target range, while total platform liquidity increased to $939 million, boosted by the new SBIC fund closing.

Portfolio Quality & Diversification

• The portfolio is highly diversified across 22 industries, with no single borrower representing more than 4% of total exposure, and the largest sector concentration (finance and insurance) at only 14% of portfolio cost.
• 99% of debt investments at fair value are performing, non-accruals hold at less than 1% of the portfolio, and the average internal credit rating remained stable at 3.0 on a 1-5 scale, with just five companies on non-accrual unchanged from Q1.
• Early repayments net of refinancings hit $108 million in Q2, elevated versus historical averages, but management notes this generally signals portfolio company strength, and is partially offset by prepayment penalties and accelerated fee income. 70% of the portfolio by cost has been originated since the start of 2025, with pre-2024 vintages now below 8% of the portfolio.
• 89% of total principal is backed by first-position liens, with a weighted average loan-to-value of 24% for enterprise value-backed loans, reflecting conservative underwriting.

Strategic Updates

• Subsequent to Q2 end, Trinity transitioned its stock listing to the New York Stock Exchange, which management expects to improve sector positioning and daily stock liquidity.
• The company acquired Equipment Leasing Services (ESL), a middle market equipment financing firm that operates as a standalone off-balance sheet fee-generating business.
• The joint venture with Capital Southwest, focused on lower middle market first-out senior secured loans, continues to scale, providing exposure to a complementary market segment with a proven partner while limiting risk.
• The managed funds platform now has over $800 million in total capacity, including the new SBIC fund which has closed over $75 million in equity commitments and is expected to reach $250 million in incremental platform capacity at full scale with low-cost government leverage.

Trinity Capital operates five core lending verticals, with Q2 2026 net fundings broken down as follows: 1) Sponsor Finance: 37% of total Q2 net fundings; 2) Equipment Finance: 26% of total Q2 net fundings, with the recent acquisition of Equipment Leasing Services (ESL) adding off-balance sheet fee-generating equipment financing capacity; 3) Technology Lending: 18% of total Q2 net fundings; 4) Asset-Based Lending: 10% of total Q2 net fundings; 5) Healthcare and Life Sciences: 5% of total Q2 net fundings. The managed funds and joint venture segment contributed 6% of Q2 2026 total net investment income, and added $0.03 per share to the $0.51 Q2 net investment income per share. Total managed platform AUM reached $3.2 billion as of Q2 end, a 36% year-over-year increase.

• Management maintains confidence in the company's positive earnings trajectory and dividend stability for the second half of 2026. The full income benefit from Q2's record back-end-weighted originations will be mostly reflected in Q3 2026 results.
• The SBIC fund and managed funds platform are expected to become an increasingly meaningful contributor to total earnings over time, delivering incremental upside to shareholders via market-standard management and incentive fees.
• Q2 2026 operating expense levels are expected to hold for the second half of 2026, as the platform was built in advance of current growth to support scalable expansion.
• Management expects NII to grow in the back half of 2026, with the timing gap from early Q2 prepayments and late Q2 originations resolved, and portfolio growth fully reflected in earnings.

• Elevated early repayments create near-term interest income drag due to the timing lag between repayment and capital redeployment into new earning assets, though this is partially mitigated by prepayment penalties and accelerated fees.
• Uncertainty around future market activity for IPOs and M&A impacts the timing of value realization for equity warrant positions, which currently represent 12% of the portfolio.
• The large $1.2 billion unfunded commitment pipeline carries execution risk, as 91% of commitments are still subject to due diligence and investment committee approval, and may not close as expected.
• Changes in market interest rates can impact portfolio yields and net interest margins, though management notes Trinity's exposure is more limited than peer BDCs.

Q: The Senior Credit Corp JV investment period was extended; will this vehicle sunset or be continued, and what fee contribution can we expect from the new SBIC fund? / A: The investment period was extended by mutual agreement through the end of 2026, and management is exploring options to continue the successful partnership, continuing to syndicate deals to it through year-end. The SBIC fund raised all third-party primarily bank capital, uses a standard 2-and-20 fee structure, and will generate meaningful incremental fee upside over time once capital is fully deployed.

Q: What drove the increase in top-tier credit-rated loans, and is there progress on resolving the five existing non-accrual credits? / A: The improvement primarily came from onboarding high-quality new originations, with a small number of existing credits upgraded across multiple verticals (equipment, finance, UK tech lending) for broad-based portfolio improvement. Management is actively working all five non-accrual positions, and expects potential visible progress over the next few quarters, with no concrete updates to share at this time.

Q: Equity warrants now make up 12% of the portfolio; what level is comfortable, and do you plan to reduce this share? / A: Nearly 50% of the warrant positions are currently income-generating. The remaining half are small diversified positions from portfolio company investments backed by top PE and VC firms, built to provide incremental upside to the portfolio. Management expects these to gain value as IPO and M&A markets pick up, and is comfortable with the current allocation as a source of upside.

Q: With the ESL acquisition, will you increase balance sheet exposure to equipment financing, and how should we think about future expense run rates? / A: ESL originates middle market equipment leases that are almost entirely offloaded to a bank syndicate, requiring little to no Trinity balance sheet use, and generates steady fee income. Management expects significant growth for the ESL business over time as an incremental income source. For overall expenses, the team and infrastructure were hired and built in advance of current growth plans, so the Q2 2026 expense run rate is expected to hold for the second half of 2026 as the platform scales.