HTGC - Earnings call transcript Q4 2024

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Operator

Hello, and welcome, everyone, to the Hercules Capital Fourth Quarter and Full Year 2024 financial results. [Operator Instructions] Please be advised that today's conference is being recorded.

Now it's my pleasure to turn the call over to the Senior Director, Investor Relations and Corporate Communications, Michael Hara. Please proceed.

Michael Hara

Thank you, Carmen. welcome full conference year and fourth for everyone, and quarter XXXX. afternoon, to call Hercules the Good With us Seth on Scott Bluestein, the call today and Investment from Chief Officer; and Meyer, CEO CFO. Hercules are

be webcast XX were web released page Investor call. section today's and Investor Hercules' financial days be conference accessed An available just Hercules archived results from investor.htgc.com. Relations least following will market the for after close at can replay at the Relations on

of make may and any we be call, statements forward-looking based are may assumptions this in but During risks filings in from of the to, investment website. the annual not reasons, own our forward-looking our that limited on SEC's financial the XX-K results and differ current statements a statements making including, on Actual relied upon should are during forward-looking These not and identified made on this expectations. decision. future report not guarantees performance Form call available other publicly number for

statements the forward-looking future. today's are no made assumes Hercules any this made to over I'll to call of update And that, turn with statements obligation in date. And such only the call Scott. as during Any

Scott Bluestein

several growth Hercules controlled thank sheet for all and performance business year Hercules financial and another conservatively. managing Michael, platform the Earnings We performance you, new Thank growth Call. was and demonstrate solid strong balance and for Capital. Capital able joining you full the QX XXXX XXXX records operating set while to year of and and were record

fundings, income, position record record highlighted put by was and year-end record where again billion XXXX. all BDC for of net at gross a from the credit to declare supplemental than more once Driven of income investment managing in $X.X XX% business, new distribution which our in investment total us total approximately performance XXXX is program our both private the of growth we Our assets, funds of an Hercules shareholders. Capital and were now by increase a

significant of achievement investment activity, XXXX Hercules This the we of the ecosystems. billion since commitments serving and the inception. our achieved investment to in debt surpassed celebrated commitment a $XX as and cumulative Capital underscores milestone mark in our venture reached growth in capital platform which needs XX years stage

and inception since our success talented made Our that been and placed us. borrowers by dedication have the employees work possible and their tremendous the has our investors trust with of

doing and we and well commitment served stage best what unwavering interest companies the and and us going years focus growth of forward. in to believe our guide is will XX the on last us Our venture our shareholders for help incredibly always continuous has stakeholders

active growth license, than our more of manage from an income increase an of fundings growing billion, Strong some SBA X.X% approval million, year of increase net ROAA Record RIA, of which quarterly in XX% XXXX. XX% X.X% our full Annual $X.XX million, year-over-year. year-over-year. Record increase net X billion, XXXX, year-over-year. the company ROAE XX.X% XXXX for of business. $XXX.X and of of generated increase of the now AUM and for SBA received and million dividends year-over-year. our approximately $X.X of we $X.X X.X%. platform excludes year in full growth and funds which Record portfolio $XXX.X funds. dividend SBIC of income debt an highlights million Total the total of portfolio of recap me year investment full $XXX Consistent achievements Let fourth gross total XXXX for XXXX an income investment of private

shareholders. KBRA, rating And delivering X distributions consecutive years to X our Moody's our from ratings supplemental and of DBRS. investment-grade agencies, Reaffirmed Fitch, Morningstar

volatility macro As same time, in the growth ongoing companies more and the global we enter At change and landscape certain and changes environment. ] particularly we broadly, new given higher-than-normal sectors. market a the place administration stage XXXX, geopolitical taking we continue in the anticipate to [ for and favorable expect business

credit GAAP Our XX.X% and new includes to XX% in our we business underwritings under capital benefit our enhance technology-oriented support to our XXXX, flexibility in to across seeing more will to material debt markets already of we QX, liquidity M&A, We near-term maintaining opportunities. we which sheet QX. exposure, Over this well favorable to for advantage for that balance billion defensively, from maturities. at of We QX screens more manage no XX%. are more XXXX. activity, the believe expectation tightening to is liquidity take with a market maximum more market positioned leverage position, in lien compared platform come was that maintaining incredibly higher-than-normal continuing in $X.X see first originations fruition to are and and in and while This continue further businesses our intend and

investment stage this year M&A exit was finished terms across activity and a And this be stronger QX capital this And of the no that is key markets venture stage ecosystem. quarters of different. with to strong our and equity the respect investments growth differentiator of in one overall and growth activity. business venture venture The seasonally and year. venture will market capital capital activity

This equity in total strength our as quarter. debt our fourth and the commitments well as reflected in fundings was

million. debt In key we of of commitments performance Let fundings QX, million for of gross the and $XXX highlights me over over recap total our now gross originated some and equity QX. $XXX of

performance billion $X.XX funding we of billion. record committed year, For nearly approximately of capital $X.X and delivered the

income quarterly the GAAP income were total million We million share of coverage investment $XX.X per per $X.XX of of share. As we and very or generated to XXX% leverage result, base of with net $X.XX $XXX.X achieve despite of quarter a able ending conservative distribution XX.X%. investment our

compression seen partially over and offset new will potential us that competitive utilizing provides in further regard. expect We with believe quarters net rates base help liquidity spread up have to near abundance last of in originations. distinct throughout this bring an several we on of XXXX, we leverage, growth the term, the slowly drive leverage lower-than-normal declines a which portfolio to Having available debt while some advantage

This of quarterly comfortably We cover our a excludes equity a our early million in in of puts return the This over core generated yield quarterly be yield in environment. to QX portfolio solid XX%, current core income, distribution is rate seventh and effective QX prepayment XX.X%. generated a $XXX of repayments. from XX.X% of continue our GAAP on benefit in of and very base or a which able accelerations to consecutive of the position to quarter fees, fee us

yields rates declined declining largely Core compression spread from new originations. coming QX, base XX.X% on some in from and

year, of approximately portfolio end of floor XX% the already the of has contractual our reached on rates. As the

and Our instead well balance growth to of more very positioned our sheet objectives leverage believe we with remains risk. support assets, conservative leverage low which us the cost to quality continue ability continued and chasing to with higher-yielding have provides of originations on focus

disciplined The of with focus on emphasis our was to a QX in diversification. an on approach origination deployment capital efforts maintaining

our commitments were activity In QX, to our originations driven teams. of new to technology XX% fundings life were sciences approximately sciences XX% Our our life approximately technology of both QX companies, companies. while and by was

of X funded relationships. which were new We borrower capital debt in companies to QX, XX different

quality borrower This credit during XX portfolio, to reflective balanced underlying our quarter new companies, we we different know which and relationships. of originations history of were year, on the where XX funded is For the to deployment of select, the and the prioritize capital focus the capital high-quality new approach within borrowers. performance

several commitments our borrowers during quarter, our businesses. capital unique to our speaks which We also as the portfolio scale increased to their companies grow ability alongside they to

from -- QX. to The QX and in sorry, from unfunded $XXX.X that approximately continued commitments Our momentum saw in $XXX on XX accelerated has QX. originations million available decreased we in million

February our closed the of commitments million. deal QX XX, have of Since and of $XXX.X teams and new XXXX, as million funded $XXX.X close

We we continue number signed, nonbinding we and million expect as progress sheets, grow additional in $XXX.X term in have of commitments QX. this pending to to an

are with XXXX, throughout of saw the backdrop year. activity much the during portfolio exit Given the our we that we market in pleased

included events and announcing portfolio company had we X portfolio which sciences life QX, technology acquisitions. companies In M&A portfolio X X in our

companies For an complete year, event. we XX announced or M&A the had portfolio

remained Early loan So IPO. healthy for year-end, Post within in repayments activity our million in XXXX. had our exit confidentially to decreased an filed we approximately guidance $XXX slightly to QX which one million. company was portfolio $XXX of million, $XXX

capital attributable M&A to of or a equity which as prepayments events overall. Approximately positive we our signal view events, were XX% QX

quarter-over-quarter. stable XXXX, the Credit expect range although For be in we debt $XXX progress this of could as quarter. change the to million, of in quality million portfolio we investment to remained the QX $XXX prepayments

the Our and of our at from weighted in X.XX rating average internal credit increased lower end slightly X.XX historical normal rating QX of the range. remains

credits slightly versus in and increased to in X XX.X% modestly compared QX. Our QX Grade XX.X% credits in X XX% QX. Grade XX.X% to decreased X to

of percentage with total nonaccrual an million, X.X% portfolio fair Our on the rated rated of X our had approximately at X and In cost respectively, credits and investment investment from in $XX.X X.X%. and [ or respectively. X.X% ] number and decreased credits X%. companies to by X a QX and fair cost on and We debt X.X% X.X% our increased value million investment of as $XX.X value, QX, to nonaccrual loans decreased

our our portfolio With and and respect pleased seeing credit what level, by monitoring a broader book remains remain portfolio to are generally we outlook, on we enhanced.

more focus current valuation deployment and noticeable venture a of an market the certain less are noted approaching emphasis how in have much capital a on investments emphasis capital of shift on for broadly. new We and with investors

last is likely support may months capital market. that terms This current XX their in XX from in to willingness to inflated and raised valuations own of that raise the their struggle new closely current over the we current to will companies watching are money This equity to ability as portfolio new companies. existing continue at arguably syndicates investors test something

had comprised of by on million of investments Hercules realized QX $XX.X of the of primarily $XX.X gross $XX.X million, offset gains During losses million, losses. to XXXX, due gain equity realized net

$X.X $XX.X an already The on any have million $X.X were due impact to and debt and of extinguishment. investments, net losses the unrealized million million realized $XX.X and value. as equity on XXXX X in losses investments on recognized write-off not from therefore, of did million debt the was warrant million asset loss out losses $XX.X from from

from asset BDC $XX.XX, X.X% an QX liquidity Our QX of liquidity share the $XXX.X platform. the ended was increase per over of in and value net $X.X billion of QX XXXX. across million We in strong with

transactions. quality of a the Our to debt position ratings aggressively continues credit investment-grade balance X us ability relative healthy and afford liquidity, sheet to low compete peers with on us to and cost our well

we the discussed in a during QX. As saw significant capital earlier, improvement ecosystem venture

rebounding we activity investment QX, venture Venture capital capital-backed quarter's was U.S. billion by last at in gathered call. of from M&A exit VCA. PitchBook discussed XX% to venture the companies levels increase data XXXX XX% for activity $XXX $XX.X capital finished billion, investment billion, $XX.X finished from billion. QX an according for of saw XXXX increased from In and $XX.X XXXX, lower that XXXX. Fundraising activity on activity and at

raising muted new activity remain fewer portfolio data raising historical in a with prior healthy that in to approximately norm. reflect companies across more with up back capital quarter. believe QX, but and numbers remained companies our raising the with the the the the million Consistent for that going ecosystem XX continued will million $XXX increased dollars. reversion public, from pre-COVID during $XXX raised IPO the capital, from recent QX, aggregate ecosystem We

of billion companies year, new higher which was capital of companies XX we capital of the speaks over of our a momentum have amount which raising overall new had the equity billion raised market in already XXXX. over that than Quarter-to-date we companies to of QX, some $X portfolio in portfolio For in capital, $X.X seeing. raised number the portfolio are capital, new

outstanding. shares performance with undistributed operating over in increasing strong XXXX, QX spillover or to exited $X.XX million per our $XXX earnings ending we Given

For distribution each share equally $X.XX XXXX, of of for $X.XX supplemental per we new are total distributions over our quarterly base distribution declared a of maintaining $X.XX, QX, of we will a be shareholder the and which quarters, quarter. quarter per X next $X.XX for distributed or

operating scale, fifth being our of distribution base institutionalized with a competitive to of levels. our able record provide our quarterly In our rapidly shareholders, changing continues supplemental and drive a consecutive platform distribution. our This to and top capitalize macro regular to business and ability environment on performance our our closing, on to forward is lending year

its of delivered accelerations excludes fees Hercules seventh or million QX, quarterly from early of income, core consecutive prepayment quarter benefit In again prepayments. fee of $XXX over the which

dedication, capabilities is and private the and of the continued our our equity capital place efforts venture tremendous to every attributable day. trust with employees success Our us XXX-plus and that partners

to choice. investors thankful companies, that management to of their teams, are continue partner many make We the and Hercules

will turn I over now Seth. the to call

Seth Meyer

Scott, and good gentlemen. ladies you, Thank and afternoon,

As anniversary of the capped for quarter Scott off records mentioned, XX-year fourth with Capital. number a our Hercules

record In balance low many broke Hercules in managing addition investment leverage liquidity. net . in dimensions, with quarterly income, conservatively sheet activity annual strong funding including and while investment XXXX, and to total all and income the records

X% platform $X.X by XXXX validating at billion, was operating of XX% our expenses less year operating than growing by scale our while the noninterest another of approximately to benefits year-over-year. AUM approximately grew

our investment XXX% points of the in of putting ended into the average on reduction us half prime second and base QX rate of in return basis position Our strong coverage net dividend our XX% despite year provided at very income a XXX heading the XXXX, equity XXXX.

a weighted to XXXX, cost to we During advantage new be leverage be take our able more of us low, in environment of in X% position favorable expect and a was XXXX. remained what the business approximately debt conservatively putting to average

During a we providing favorably SBIC priced year, of debt. with us new $XXX the license, million added

to X until good In million and more SMBC commitment cover cost-effective letter available $XXX addition, and facility subsequent manner. of $XXX February now a credit extended year-end, of a we to we renewed our XXXX unfunded our upsized led credit SMBC available portion facility by million with in by years, our

ATM in $X.X of entire the Inclusive let's over by statement RIA year review funds, We BDC. million continued billion million liquidity mind, the platform. liquidity private for In liquidity supplement approximately our XXXX, program. With performance in managed approximately and the was throughout to the with this fees, of in we raising net income available available year all highlights, ended $XXX $XXX the via

NAV and liquidity, finally, leverage unrealized the realized activity, and and financial outlook.

statement and year growth investment measure, portfolio. the debt income, non-GAAP performance income highlights. primarily Core first $XXX.X million. to income $XXX.X throughout was investment our driven the QX a Total in Turning million, a the by was solid in

Core million, prepayments. in income benefit to investment or $X.XX the loan recognized per share, investment income as a result decreased QX. excludes $XX.X Net of of income

fourth reduction respectively, largely core XX.X% modestly securities. Our by effective on prior to to Fed in the and decline quarter. The decreased approximately X in lien the quarter the yield the XX.X%, and our and yields focus months driven the in XX.X% in compared XXX basis rate during first and of points XX.X% last core was quarter the

from rate gross quarter. impact after compared of be floor As future million are million loans $XX.X And of of our Fourth and prior fees credit SBIC Interest approximately to the RIA. in any Net the the facility. of prior the and XX% the rate utilization decreased activity to of recent result expenses the ATM the $XX.X as to expense were quarter year-end, to contractual in of thus, the at a due reductions of due $XX.X reductions. recharged use lower the quarter to will million costs muted. facilities $XX.X operating million

just million, have to quarter. from facility $XXX of expenses RIA, SBIC were fourth million the Net of million. SG&A decreased $XXX the to guidance. SG&A the below $XX.X the We new recharged out in $XX.X cost available drawn million the down my

of X% Our weighted quarter-over-quarter. average slightly decreased cost debt to

quarter. or assets activity. XX% NAV total Switching decreased to for Our over ROAE NII And to unrealized the NII over ROAA X.X%. and decreased or our realized and to fourth average equity average

increased share increase per represents to NAV the quarter, our share This X.X% was $X.XX by share. ATM. an per $XX.XX of main per driver use the The the of quarter-over-quarter. accretion During to NAV due

investment-related attributable investments million investment warrant appreciation, and of Our attributable $XX.X and net million unrealized publicly warrant exchange of foreign million on payables, movements debt depreciation $X.X unrealized net net the foreign attributable million was held $X.X currency the unrealized equity equity other net primarily to funds, to of million attributable movements. to movements the unrealized in traded $X.X depreciation privately of and to unrealized on impact net valuation movements net investments, of depreciation $XX.X valuation of depreciation net of

attributable million realization Hercules a quarter's upon addition, depreciation to In event. reversal recorded $XX.X previous appreciation of

Moving to leverage and liquidity.

the quarter. nearly with We respectively. Our XX.X% GAAP sheet, and to of leverage on million and was leverage Netting with XX.X% regulatory cash to decreased XX.X%, available respectively, the utilization due and in ATM net compared liquidity. leverage prior ended the and GAAP the quarter XX.X%, the quarter $XXX the our of balance to out regulatory

As excludes available wholly our funds companies the amounts, positions managed subsidiary. liquidity. RIA a raised billion by strong us The of $X.X platform the and Hercules the well had by these capital than owned of reminder, portfolio support new more liquidity source this our Inclusive opportunities. to existing

Finally, on the points. outlook

quarter, the between interest expect compared future in note there benchmark QX XXXX XXXX, days excluding XX.XX% And will and the For fewer any that yield I interest accordingly. be first revenue changes. to X to XX.XX%, which core our we QX would reduce are

approximately a floor. our is its XX% As and more of is XX% than presently, reminder, portfolio prime-based a our floating contractual of with portfolio at debt floor

in our first communicated expect difficult compared remain the flat Scott, to we expense to $XXX million $XXX in by interest quarter, very predict prepayment to the as quarter quarter. first million Although we prior activity to expect

$XX.X gross of million million. an quarter, first million of $X.X the to and approximately we SG&A allocation $XX.X For approximately expect expenses expense RIA

always the higher taxes As expenses. benefit reminder, quarter first payroll and a has

opportunistically the million. prior $X guidance. Finally, our portion increase strong This to $X.X over used which of invest from opportunities. call call. a the closing, well dividend reoccur quarterly existing to remains sheet Carmen, In will expect to RIA in you. another my to throughout balance best our be quarterly is our we approximately operator year, I to million to now will as turn the begin Q&A portfolio support to the to of over the as the

Operator

Citizens line first is from the Our with Instructions] JMP. question Brian [Operator McKenna of

Brian Mckenna

little is see to it's you've another see could on record it up what within I but another now another origination expect you being And XXXX based great pipeline to investment end the getting everything was X business, a the this and of guess could reasonable the here, year. it row portfolio? today, activity. set record a I records know front. double-digit year year in on at, growth years early across I'm

Scott Bluestein

Brian. Thanks, Sure.

the I we're think us. is this that certainly will record year if there, quality short answer is, credit for be hopeful another

not commitments. pending closed Right commitments million, of think we're an proven terms off for now, in years additional over us arguably million color a growth. activity. our to the sake I I which to provided are start signed puts we've start QX just to off That some that had we've chase early that in of quarter-to-date, and years great the $XXX best the X in $XXX of showing book market deals terms going the the of we're last

new to it, So credit it, optimistic the our about us And support incredibly that positioned us is record of on sheet we're the very to for result allow there business the front. new another if take could to advantage business well for yet the be of environment and is year quality balance XXXX.

Brian Mckenna

your think on you the this be the RIA, How think going you're market you year. size Can fundraising term contribution from just just XXXX And how capital this this to helpful. should the to get it capital. about next well? of That's the invested? earnings et then fees, the believe AUM raise you quickly talk And to about and earn HTGC ultimately, longer how cetera, can to fund in Great. really that long this? as takes potential I Okay. RIA in begins And we to then as

Scott Bluestein

overall growing credit fund platform. be of a to really Thanks, exciting The private Hercules the Brian. business continues part and

But expect have that X in have the given been capital. to the how would managing and aggressively we've as call to funds in this are next an currently we over on publicly X to have of . point deploy We we any next at disclosed credit of don't sort performed some private consistently said, fund. to distinct trying the how be first or We market so institutional make we've additional fund terms raise disclosure well year those funds. able

the to as can quickly some We'll appropriate money market I when obviously to so goal how it possible. our much we terms never raise going. as as terms make in invest and that's disclosure think consistent in But how of it's public of approached pretty is as historically, do we've

quality a just it's goal enough capital Our raise always BDC being position or us go after sake capital the the market deployment. the to have allows to the without in fund has appropriately of to deploy been, we private forced whether in capital for that in where overall business into credits

both to would both see the So in fund continued stakeholders in BDC we're the our I XXXX. in growth and manage the growth the going to managed more of continue and business investors, mentality. But to with private growth controlled, private expect BDC a business fund for

generated With the earnings private I'll have to Seth from that. the address business, funds respect power

Seth Meyer

quarterly continue guided XXXX. it, wouldn't of what the off that's expect the and a I it earnings coming impacting Just growth when to occurring we that's next wouldn't that year funds. beyond the in of for and RIA, but we close guidance, and I certainly current as to foresee reflective would that distribution update the of out dividend my timing launch be the fund I the that, change expectations

Operator

the Crispin from Love with Piper line of Sandler. comes question Next

Crispin Love

X bucket. you realized investments quality, credit million in had the now, but nonaccrual On losses $XX a of in couple X from a pickup and grade debt just

detail $XX unrealized companies million much an your you views forward? which going how also, of was So the on what and And both credit those, can drove previously? of

Seth Meyer

the to in of other million related guided, approximately you dimensions million was that? Scott Convoy realization do as the event. $XX amount $XX was Scott, that cover to So want was of that, the the that and

Scott Bluestein

million, in that unrealized. $XX Sure. already million Yes. about $XX.X of was the of Crispin,

largest and That little impact half of our year. went driver of single the value. terms of 'XX, second that efforts began in of The culminated net in QX asset investment completion loss was XXXX. just efforts an We our crystallization in very workout nonaccrual realized the was the a this on So Convoy in workout the workouts.

into realized just position. we a . unrealized that crystallized So

The realized only That on filing on X the was had substance ended of with investors. company that up a loss substantial We together pretty public to small other investment debt there as biotech was recovery a was well. loss worked liquidated. investment company a We bankruptcy. that the debt position, but realized

So of in realized those biggest were activity. drivers loss the X terms the

And again, as unrealized $XX.X out in an been $XX.X loss of million the XXXX. had already million recognized

relates want of X in X see so rated terms generally credit X.X% as the correct. our QX. QX, a There grade X credits; $XXX.X about are bucket you Grade below. grade We still small at In the is of and to in it movement In overall X.X% was norm. below was to X% portfolio X, or in million,

we're we're So still the X.X%, below closer to at but the of that typically average that, certainly seen. we've high end

fundraising. that the to in move And the proactively that credits was X X credits in down quarter. X grade having from those change biggest were Grade trouble We

next Our X we update of can our call. more and on to teams a are with days credits, expect the over working we to actively that substantive each have those speak XX would QX

a of credit portfolio by Weighted the what as we're pretty Outside pleased X.XX. you rating look when whole, at seeing. of average that,

able we with my from equity. saw I raising in amount we made I syndicates, certain QX, that in continuing capital, real remarks is high new the caveat healthy the make is companies valuations. of struggling change raise seen X.XX that a essentially The would have that comment one that with prepared to to no So being see

pushback. companies valuations, now from substantial in right to relatively so they're and ecosystem. just approaching in, And market high new for that And we've the across the if come but not 'XX that they're portfolio really investors raise seen our money at 'XX getting

outside see I want pretty that But watching our that we're said. right out. to how just that something that's material plays what now closely. portfolio we We in nothing see So of

Crispin Love

companies debt Do by to think Scott. the talked fourth add companies that key callouts capital, helpful. of the and for driven Great, that In are or definitely quarters, slowdown you've waiting you activity Very back-end you've election waiting pickup in mostly? saw in there down in the about was rates recent significant had activity to quarter. other was a healthier drivers fundings fourth post leading you a quarter? into the or election after any And other loaded -- of come

Scott Bluestein

Yes.

uplift numbers, . caution and post We ecosystem. guide X period. the saw QX, I saw. that did we and action our that uncertainty biggest in funding Fed Fed in across QX saw just the were election think the we rate the our just call, expected we When an time about we drivers did QX overall spoke QX to we post but and what election outcome, that's exactly

think seen that to really and the once expect clear in momentum just what uncertainty once we've down. the new in both business September a it of Fed was lifted, side, do December, don't election became was the I and to of we lot the slow on again going

that's quarters. other basis fact XXX points the think the tailwind been base over the that now down is I a roughly thing are last rates X

And I so a think lot of that. are companies looking take advantage of to

in likely less and environment notion also foreseeable is of there sort becoming will think, increasingly that we're numerous that additional stay XXXX the future. to cuts for to come the in companies You're likely. And the current the be I recognition now seeing, rate

think at are we're saying, just if So to looking going I it do it now. companies and something, do let's

they come to wait down frankly for to come further. may down continue not Let's because not much rates

Operator

O'Shea with the from of Finian line comes question next Our Fargo Wells Securities.

Finian O'Shea

move XX.X% guidance. to to about I yields wanted the over core

imply at then end remind you a new will money year assumptions? And sort today? the deployment number? the can what so, your that First, portfolio of they that that's at if yields core deploying does the And you're what's be us global of with

Seth Meyer

Fin. Thanks,

portfolio. And second XX.XX would guidance a So our Scott, want yes, was the average yield entire do That be global number. to for is QX. take you core XX.XX part? the the That to over

Scott Bluestein

Yes. Sure.

the QX, the Fin, you XX.X%. of look XX.X% cut rate The across So QX in the at very portfolio end core yield at quarter. the QX, was of if in totality Fed

impact quarter. the same back no in towards saw that virtually to Fed in XX.X% drove So QX. roughly XX.X%. thing QX impact in the The where end entire the of QX, action rate hit was the We happened which

very little core impact QX. yield So in on

flow range. originating the We gave. to through we're currently QX, Seth consistently gave is we that expect why now, that to to in Right XX% XX.X% which guidance that

yield our right target. core So within

year be this shows yield guidance objectives our by stated able -- Seth deploy we that range core to that provided. up holding in the for apply modeling our Our will to to

So overall, confident range. think we hit now we're on of that seeing XX% that feel that stabilize in being and think target maintain are XX% going in in that our funding And we our terms right objectives everything deployment, based capital of both yields core I yield that very the to we range. core can

Finian O'Shea

Okay. That's helpful.

these going of it to meaningful of Is come upmarket? nature more I. as just should question, in you all is out in But lower embedded change you And what seeing portfolio sort your fees is the but years, are a related secular the anticipate place of grown. the been Or better know of in recent Obviously, the than coming term there's -- the market over fees Or been this it's grind end-of-term end origination. back in as fee of do. longer if has structures? in we

Scott Bluestein

Sure.

in minds, really things. lien one, it's of gone conservative first exposure. fairly in terms X-or-so We've Fin, significantly X been Number originations we've combination, think last a years. over the in our of up I

mid-XXs. Our in it X years look first if was it . the you ago, lien exposure, at

it's stakeholders are lending the overall Today, shareholders slightly lower and upstream We've we we of because that's willing generally maturity XX%. and long Those terms in a our the scale and been things to companies sophistication at of interest gone make think we've that and best of come to. in that that's X economics, trade with term.

one. that's So number

two, a deploy asset ecosystem Number of are larger amount and in every to vertical. lot tremendous the is in of managers liquidity capital a looking there

managers how asset of last worked. the try That or are deals to just over growth market stage do handful for structured have, we market. large not historically so part the of And priced typically has the seeing the in years,

prime fees, So lower those sofa versus rates. LIBOR-based economics, historically rates are or lower

And We We think long that obviously share. work so think we And that's system. just will reacted take don't to defend market make sustainable. to that's we've through way the to that lasting. don't its time sure that some

effective confident to where when think manage we look end for going at we're I be maintain actually And we're the that to yield, how day, business, very our core the the of you but we target are includes that able which manage it of XX% despite core to year. the on solving yield, yield benefit at generating We a prepays, QX consistently the fact the and effective come XXX this that have a XX% base by and for are yield rates the accelerations including somewhere basis in between the we XX.X% down portfolio, points.

Finian O'Shea

your a debt of very lot if I perhaps to unsecured And Seth. going you start in There's to helpful. That's stack roll. that's a do for or can bonus

has. it think I already

think any the you I this up in predict there's level or how debt you Should post are mentioned directions X leaning.. you'd on might expect any unsecured of to paid if in you well this shape the color sort hard quarter of provide mix we us release.

Seth Meyer

a good That's Yes. Fin. question, Yes. Thanks.

In million matures. that pay for $XXX private So February of placement have we on million did June, X. That's a we off XXXX. all $XX unsecured

maturing You're We years. 'XX. correct more the some that next 'XX over do and in significant X have others

that, more will go unsecured, secured it should said such the just to As favor as not industry secured will and necessitating the do scale We longer the as well dipping market But would heavily. the no and we're opportunistic far in side warrant as too weighted the size of required to be as we always Hercules meaning that a sheet decision. doesn't market rates itself we've Capital the in that side. mix heavily that unsecured itself a balance into heavy between the stay of

majority unsecured. vast will the So be

Operator

the line with of from Our Hecht next John please. Jefferies. question, moment, Comes X

John Hecht

leverage I offset midpoint to run an I ratio one so First But what's the conservative the that I you recently? your your guess would decline is balance of be forth. -- it's kind guys increase now sheet in think below to leverage, especially is know target. of a for rates and desire the

Scott Bluestein

Yes.

distinct into of advantages heading X the John, that think, have I that's we XXXX.

compression of You're respect exactly credit liquidity of intend a that's competitive new rates being onboarding we seeing what puts to to with some with to bit space, And on us base the with a down underlevered advantage that by space, across leverage. a both originations little private aggressive more distinct to the yield in do. respect be coming across and to able BDC some being yields lot on offset

we GAAP when seeing But utilizing at below offset that capital norms our take that conservative more frankly, to are share intentionally good to you be across aggressively, aggressively and You leverage deploy a continue at been correct yield overall we're to terms that that XX.X%, of and leverage that of when look compression our because portion look market our this is targets. well we've and our at leverage of think going you in historical ecosystem. below by we're XX.X%, regulatory year, right able the now, leverage

John Hecht

obviously, maybe allocation? And that changes of will year, from kind industry. administration approach and focused subsectors hot you kind perspective... thoughts follow-ups. decreased that modify of about your side whether increased anything it's where what to of Just this technological front a in that then you're or from are the on the Any mean to thinking might non-related the your the people what on

Scott Bluestein

the be investment more where time honest, great being Life sectors and we lot frankly, out going telegraphed more tech both we're John, where of some Sciences the more into thinking some that and and of market sectors side conservative. to spent a about Yes. and and side And question. question. aggressive rotation on our teams, to certainly have to aggressively being we're aggressively some the started have not And

new with to originations. investment solutions. that would particularly activity, characterized bullish be activity, for less But general respect the overall, technology of the more and in expect going react new terms absolutely XXXX, to to pretty environment to are do more backdrop we we we administration more Arguably, of is we're and technology-enabled both by that M&A what rhetoric. in in looking say terms started capital think have I an policy to regulation, markets we at

think So going a waking momentum. volatility, and done. lot with we overall come of of of of what just lot up think see what their actually lot caveat to got to I accounts people every check a that lot a a to Twitter was this there's positive morning lot is a said The is, of uncertainty,

could like. very sort this closely a are business pretty new year that on impact bullish of should look actually . So that we respect credit. volatility have we're watching in because with real of to the But market, what terms

Operator

the line of with Christopher Ladenburg Thalmann. Nolan From

Christopher Nolan

the you on the your last Are follow-up sufficient to question so the leverage, is to dividend Scott, leverage. targeting a cover supplemental? plus EPS on

Seth Meyer

very driving we're that sure on keeping return So make see thanks, But moment, a the dry Chris, for the to as leverage investors. being clear we've been been opportunities. a we Scott continue targeting to the We'll in leverage that evaluate market. our plan we we're question. of good to powder has our giving up At anticipation opportunistic.

no X.XX, that a historically, distance $X.XX fair stay than further leverage away Our that from north ceiling is and billion. communicated we'll we've

we have then. fair a distance until and So that, off a ways that of we're go would we

Scott Bluestein

about to on that base and something the of run of we need our $X.XX to would spillover, hold noted, end we business, the view When . near is I dividend the supplemental paid that which, the we that we NII the out $X.XX quarter. where The million is just add base is Chris, business And managing see Yes. dear distribution our or is being is at hearts. as very $XXX.X and When share that per distribution that [indiscernible]. we're how point. we're thinking

to we in really comfortably to the of just position able with strong rate us as we a thing to sure to NII puts spillover which to cover much of be can continue continue sure to think that distribution that right make the environment. is that and to our make irrespective base that do we that as So ultimately shareholders, the things do. we're returning right we

Christopher Nolan

reconsideration the of out there -- given Follow-up SEC possible moving for going are Great. you the all new AFFE, twins with the any rule. getting pieces the by question. . AFFE administration, on

Seth Meyer

and we SEC, them different extent build this it can I supporting moment, been but would to So at waiting or that to are like moment, be what at forward nothing the it the and we're has not directly we But that that legislation see time. months X address into been feels the already. participate issue something the yet, know put administration -- in forward has sponsor pushed from who the groups to

this at So there's report time progress that interested we topic. yes, remain to than, no other in

Operator

of question Paul KBW. line Johnson the a have We from with

Paul Johnson

a certain raise were Or to this by syndicate higher of held essentially cohort just more maybe this talking syndicate companies companies when maybe what are you're capital. with reference certain so becoming exactly more that at to much here, struggling about you're a sensitivity valuations? of to Scott, referring a to sensitive Is is you that markets in certain of that to we the that that referencing are I'm valuations companies raise like are investors -- much are curious here? DC DCs

Scott Bluestein

a last of Yes. seen we we No, new What that handful over broad-based quarters investments is at of much than on focused years. looking I investors have it's more have handful pretty valuation think Paul. are the over comment, new seen the last

to or valuation more to that investor seeing, some extent an but every So case, are market investor, financing in have you to certainly, arguably looking coming much is cases, in for and company a that that sensitive raised that discussion. of large a the what new valuation new is at we company not what in 'XX the 'XX, round now a is in inflated

is And their essentially we companies. ability fund to so what some of fund And have of that existing terms in. those company's willingness syndicates in continue company some money to investor syndicate that own current coming and is that new more there see legacy the on without puts in stress to started its to pressure on existing

next several and that the it how So it's place watching see over plays that situations, quarters. handful it we're want it We've something a but watching, in take we're closely. of out is seen we to small something

Paul Johnson

it. on went also maybe little terms year. little was bit bit update like That's It getting looks just were down And on a a pretty commitments, helpful. they stable unfunded I it just maybe broadly of like Got wondering then more they in quarter-over-quarter. looks all an

liquidity revolver Just terms in starting possibly see it of on to you're get you're an trying to draws, what portfolio at all? where seeing companies, within stretched update maybe get

Scott Bluestein

Yes.

overall, the declined quarter. So in unfunded our commitments

slightly to down. over That's down at unfunded consistent, it of terms quarters starting So any QX, million. at QX. or choosing last been noticeable is in trends if from to $XXX.X the it relatively in draw trend seeing draw. of although companies not not look to We're number, sort commitments $XXX That the you several million end of has

lot booked time, we The X caveat that to those companies the X less draw. we seeing that where much base higher to would were had are years at commitments where be unfunded on the instances rates are that those had some maybe the portfolio X ago or likely where deals companies because are a existing rates

last lot couple a that unfunded a over of commitments in those to seen let companies decline that's of contributed we've expire. quarters. just partly So has commitments trend that unfunded And the

Paul Johnson

again. one, just Last Thanks, That's helpful. it. on Got volunteer.

a it's the been unrealized I closed this very for like a you obviously position quarter? looks much . guys. the do fourth any successful portion have It of gains investment way how of really that to drove you you was out in quarter, that the quantify This quarter. wondering,

Scott Bluestein

the driver realized on terms equity $XX biggest the quarter of in the of realized was on . million investment. in front, the gains gains That roughly in the that range

Paul Johnson

was if and X/XX any from quarter actually, to kind of market. that a Got also meant during is And quantify the to there investment the that from way appreciation if I it. additional there ask

Scott Bluestein

QX. was the investment exited So in

of the be wouldn't on end anything of the So sheet as there QX. balance

driver during that If was quarter. equity the you positions the at biggest the Palantir. roughly million, on of million $XX The for so quarter, look entire gains $XX.X realized the

meaningful other We also the where during public we exited had some partially equity several positions appreciation quarter.

Got Okay. it.

Operator

see to Scott questions I final turn comments. the queue, further as for And call back I will Bluestein no in

Scott Bluestein

our XXXX Thank for you, forward today. on our joining progress to call look to everyone our earnings Carmen, everybody. reporting thanks QX We and Thanks, call.

Operator

with that, today's we And conference. you. conclude Thank

now may disconnect. You

Hercules Capital (HTGC) 13 Feb 252024 Q4 Earnings call transcript