Kyle Brown: Hi Ryan, it’s a combination of everything you said there, right? It’s – we’ve got some really interesting levers in place so that we don’t have to increase our leverage to generate new returns and higher returns for investors. And so, keeping it in that range of kind of 1.1 to 1.3. I mean that gives us some reflects on a quarterly basis to satisfy and make sure we close the deals, we need to close. And also utilizing our off-balance sheet activity there to decrease the leverage ratio. And so, we have some really great flex with our leverage. But long-term less leverage and higher returns, we actually have the ability to do that with our off-balance sheet activity.
Ryan Lynch: Okay. Yes, makes sense. I would just say, yes, if you have the ability to do that, I think that makes a lot of sense just given the ROE is already very, very high today and having some balance sheet flexibility, I think, is valuable given the current market backdrop. The other question I had was, can you provide an update on where the situation with Core Scientific stands? Obviously, we know what’s going on there with that investment at least from the backdrop. It looks like it was maybe written up slightly in the quarter but still remains at a heavy discount. There’s been a big move in Bitcoin prices. I’m not sure what the equipment has done. But just can you give an update on that investment? And — have you seen any changes in the underlying market recently given the big move higher in Bitcoin over the last several months?
Ron Kundich: This is Ron, Ryan. I’ll go first, and maybe Gerry will tack on. You know where it’s at. But there’s been a couple of significant updates within the quarter. The claim amount and our collateral amount, has been finalized with the company, which is obviously a positive thing. And the company has also come to agreement with the equipment lenders under three different restructuring options. So continues to move forward through the process. You asked a question about Bitcoin, maybe Gerry, if you want to tackle that one. I think you tagged that on at the end of your question Ryan?
Gerry Harder: Yes. I think – so here’s what I’d say, right? The collateral amount and the – collateral and the claim amount were finalized with the company. That’s what they’re bringing into court. We understand the company is very close to reaching agreement with convertible note holders, but as of right now, we haven’t heard that that’s finalized. The judge in the case needed to recuse themselves, there’s a new judge. We think the judgment date is at or around the end of the year. And so, we can’t really say what will happen, what the court judgment will make. But as Ron alluded to the agreement, the Trinity and the company have reached as well as all the other equipment lenders. The company has three debt repayment options, A, B, C, they can choose which suits them best.
So we consider those three options do discounted cash flow analysis to value our holdings and still maintained relatively high discount rate just to account for the overall risk. We will have an equitization option as well to consider moving forward. The valuation and the exact terms of that are not completely clear at this time. So it’s impossible for us to say what we might pick. We expect to make that election within Q4. And we’re going to do what, we believe is in the best interest of our shareholders when we make that decision.
Ryan Lynch: Okay. Understood. I appreciate the time today.
Operator: And we have our next question from Bryce Rowe with B. Riley.
Bryce Rowe: Thanks. Good afternoon from the East Coast. I wanted to ask, you made the comment and you made the same comment last quarter about your portfolio companies continuing to attract new capital. I think last quarter, it was 30 companies. This time, it’s 45, and the new capital is up $1.4 billion to $2.4 billion. Can you just speak to kind of what’s driving that and maybe speak to the message that might be counter, to what we’re hearing or what you might hear more broadly with the venture capital ecosystem? Thanks.
Kyle Brown: Sure. So look, I think that certain industries raising capital is challenging right now. And though what we have seen in our own portfolio and across the board, there is a lot of equity flowing. It’s just coming at damaging down rounds for investors – to the tune of 20% to 75%. I mean, we’ve seen that with our own portfolio. Even companies doing well and still growing or – they’re going to have a correction in their valuation, many of which have been delaying what has become kind of the inevitable. And we’re seeing that pipeline, just kind of push through and companies are trying to – they’re having to take the pain and move forward. And so majority of our investments are relatively mature companies who have real technology, real businesses that are worth something, and we have technology that has real value and somebody is going to pay something for it.
So, we’ve just seen that play out over and over again within our portfolio. And there’s – the market and our own portfolio, there’s always going to be a handful of deals we’re working on. It has to be. That’s our industry, right? And since we founded Trinity, we’ve seen that our warrants and upside potential, they cover our losses and provide some incremental upside to investors. And so, we’ve got a very dedicated portfolio team. We’ve got one individual for every 12 to 15 portfolio companies. That’s all they do, and we’re being incredibly proactive to renegotiate and provide incremental upside within our own portfolio as it’s easy right now. New deals, you can see it. They are priced tire. We’re getting more warrants. They’re very exciting.
It’s an interesting time to be investing in making new investments. But we’re actually within our own portfolio as new equity flows in, we’re being very proactive on making sure we create those upside potential – that upside potential. So what we can cover any outside, or losses we might have in the future and create some additional upside for investors. So, we’re trying to be really consistent there.
Bryce Rowe: Great. That’s helpful. And maybe a couple of follow-ups related to that answer. Number one, you talked about the top of the funnel kind of getting bigger and then you just also talked about kind of your team. How do you think about the employee base and the employee base growing with the better opportunity set that you’re seeing and especially in the context of being internally managed and different from an externally managed BDC that doesn’t have salary and benefit – direct salary and benefit type of expense on the income statement. Can you talk about kind of the opportunity there from an employee – or capturing more employee perspective?
Kyle Brown: Yes. We have taken a real sniper approach to new employees. We are looking for the best talent in the industry. We’ve got a pipeline filled with potential people across the platform. And we’re being very opportunistic about who we bring on board, and we continue to hire in advance. So we’ve — that’s been a theme for us from the beginning. We wanted to get this platform to scale. We have a vision for what we want to build here. Five years out in the future and then some, and we’re hiring according to that plan. And so we’re not – the BDC is not to scale yet. I think there’s some real efficiencies we’ll see as we continue to grow and increase assets. And – but we’re excited about the people we’re bringing on board.
We’re going to continue to hire in advance for the plan that we’re trying to execute on right now, all the while taking into account the fact that we want to make sure that we increase earnings per share and focus on the ROE growth. And so we balance those two things. And – we’re going to continue to hire in advance and continue to build the platform.
Bryce Rowe: Got it. Appreciate those comments.
Kyle Brown: Yes, thanks Bryce.
Operator: And we have our next question from Casey Alexander with Compass Point.
