Hercules Capital (HTGC) 20 Feb 202019 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Hercules Capital Q4 2019 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions].

I would now like to turn the conference over to your host, Mr. Michael Hara, Managing Director of Investor Relations. sir. ahead, go Please

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

for closes the section full-year accessed from be release. at and quarter were at fourth or the can We've financial results by of today's released telephone passcode Investor and Relations a just Hercules webpage Hercules number XXXX earnings after call provided htgc.com. arranged today's replay market using Hercules in and

this During confirmation contained of to release timing with may filed the the based statements Securities date results. and delays and in between herein on due the may forward-looking of those current call Exchange this the Actual from results we expectations. audit financial Commission final make differ

this are of forward-looking are statements factors the that not actual release that addition, and could performance, future are historical purely uncertainties statements subject cause are contained and In to to other These statements. not in results forward-looking guarantees uncertainties have differ the and our the those expressed the including market SEC. statements, without current filings the identified we from from the risk time-to-time uncertainties, other with including forward-looking factors limitation turbulence and materially and in surrounding in

and incorrect. are Although assumptions inaccurate, which result of a any reasonable, statements also assumptions forward-looking we can those those the prove statements forward-looking assumptions be that be as believe these based the can to on on

assumes obtain filings, of release upon events. date of are statements update statements place The in our not hereof no this please copies forward-looking To the to the reliance website. subsequent undue forward-looking statements. as SEC forward-looking obligation or should related visit You and Hercules these made contained

call Scott. the to that, over turn will I With

Thank all today. and thank for Michael, you us joining you,

continuing results. off and were We our and again reflected year key differentiated a our in consistent Our for and in once and debt credit equity total deliver new capped record and our model fundings, superior lending strong performance commitments finish to while delivered results. QX strong competitive advantages operating gross

income of cost total billion, performance weighted undistributed spill-over at we are Our fundings up strong shareholder portfolio billion importantly, of platform, of year $X.XX $XXX.X declared million believe a XX%, The total $X.XX XXXX profitability total another of continued million, on our position that investment $X.X and on $X.XX investments XX%, continue more and shares investment distributions put million, strength economic $XXX.X up based of to of gross billion, quality net billion debt shareholder records delivered up at up $X.XX of total commitments assets record distributions share new of with equity to XXXX. XX%, X%, of debt or XX%, liquidity investment the balance for in originations $X.XX outstanding up and of strong this particular up earnings And of growth, per cycle. XX%, cost we overall up share $X.XX outstanding. billion, declare sheet total fronts, XX%, portfolio and at average credit including $XX and of well-positioned per credit juncture throughout income multiple us robust

and the same debt of new an last from originated increase period million, we QX, of XX% In nearly equity commitments $XXX.X year.

equity QX billion. new $X.XX XXXX debt us and in allowed achieve in commitments Our to of strong performance record

approximately addition, remain In with our in strong pipeline billion transactions. potential current $X

and key focus credit underwriting without where our maintaining growth the activity portfolio cycle. and on we QX, believe diversification, are our a our credit are best our controlled standards In reflect continue portfolio avoiding broadly to three objectives first, where and related centered on themes: investment concentrated sacrificing building discipline; and diversified we delivering for the in second, and third, risk; binary or positioning

During investment and and Hercules to organization focus, and the and I’m the successful business on with proud for entire broader incredibly quarter, grow of were management. our emphasis of of chosen XXXX. each team build We’ve areas diversification an in three our risk these we achievements in

and where fourth the portfolio quarter, funded existing that targets the companies. additional the XXXX, that or capital saw growth performance companies companies during what availability. portfolio During we portfolio achieved QX funded we XX with majority XX were new existing throughout of milestones specific Consistent XX unlocked we situations our

our Hercules has grow chose because seeing opportunities their funding have our companies portfolio to increase. and existing with part scale debt to needs of and borrowers relationships As to unique with continued more perform, our our Capital and funding portfolio in we're to them continued expand who grow enhance ability as

a with sciences companies. debt diversification commitments teams to that and and of respect differentiation. The was year to We with life the technology companies XX profile companies. debt portfolio quality, commitments debt new our of the ended to strong with existing We total our made we XX focus both consistent both and performance new from new on saw

total split the Our diversification up QX, total continue sciences and were top and X positions our across end portfolio as emphasize XX respectively. QX fundings of cost, in we XX% investment companies debt evenly our top life and of between technology debt made to XX% nearly portfolio. at our At

our billion in in time excess fund in to for and history the $X we've a in million $X.XX $XXX.X managed funded year, We year. a the that of first QX record billion

Seth in remained not accelerated more a of level, noted produce in provide release, to commensurate the at comments. detail earnings but will downs. early the level vintage of higher some his of income payoffs due pay did fee As our the

in million XXXX million XXXX. last Consistent had have in each million which we was $XXX seen $XXX payoffs, of $XXX $XXX three of compared QX, million with early to QX. million XXXX from in payoffs the we in in we what and up early in had years, In $XXX

either attributable related or As continue management. were quality, and portfolio prudent prudent emphasize events QX to we M&A to the of credit XX% payoffs management risk approximately

increase portfolio quarterly With the expect of debt elevated our and an average and size the we to loans, throughout XXXX lumpy. growth of remain our payoffs in investment

and remain Our will sustainable focus returns. on long-term shareholder total performance

targets X.XX Credit debt $XX.X with portfolio our high-end had of in of the the improved QX average to million net quality investment growth of billion which portfolio to record internal QX compared for debt weighted debt $X.XX investment on cost. growth $XXX.X in of a a XXXX XXXX. record for drove debt in investment million, our X.XX growth credit Net debt exceeded portfolio rating slightly We investment QX. at as portfolio

to of initial expectations. QX driven companies largely one-credits rated above percentage in our Our overall XX.X% a by perform in our portfolio from QX, handful to of continuing XX% as increased investment a

to up of two-credits in to less and rated our X.X% percentage investment of and decreased debt portfolio. five-credits our make QX, XX% a entire Our in portfolio rated four XX% as QX continue our than from rated

Non-accruals and remained and cost fair or $X low company's and cumulative million as and with cost investment three respectively. portfolio X% the .X% of investment value, investments at total approximately million of $X a debt nonaccrual with value on a respectively, percentage

dispositions. During by had $XX.X million of realized M&A market we largely investment several XXXX, net public driven and our gains activity across portfolio,

provide to sheet Our investment diverse structured and platform prudent. the balance drive and we focused flexibility feel sustainable and is us a designed to long-term when give growth well

our early February. was liquidity, million $XXX bonds private over of by with QX ended strengthened further in which million $XXX placement We unsecured of

the announced facility quarter-to-date million $XXX Our ATM well details as issuances we greater that enhanced today. provide remarks. Seth million $XX QX as and in expanded credit earlier his of will

flexibility. our We’ve our progress position liquidity towards reducing balance capital, sheet improving made cost substantial to QX our in and goals of our strengthening

venture strong loan see invested to and to Jones of ended and U.S deal QX driven demand Monitor, continued the continue We the partly which raised Dow flow, PitchBook's and over billion Venture more year $XXX investment with capital activities, by strong $XX than respectively. pace transaction according billion

events. remain XXXX, Capital XX $XXX at steady complete are activity XXXX favorable, to anticipating M&A companies their with, all conditions in billion XX and market to to companies Hercules teams according the value to had over exit Venture IPOs ability companies XXX Monitor. Assuming exit in our In exits right partner we pace. Evidencing a pick complete continue represented

XXXX we we lies are expect year November, early as by we in believe we volatility very Although what election approach and we optimistic remain market ahead.

only for will the debt steps of to them need enhance value our taken steps elsewhere. aggressive liquidity seek believe with and of position and differentiate our both and drive fund but moving liquidity strengthening opportunistic will And provide we and be Hercules balance position, we ability three these in this is well not cost something from without others items: us to position, down on first long the and sheet liquidity this first, year Being our that ongoing. remain also to half We've which the active enhancing forward. focus capital. several believe of numerous us capital to specific space across centered be unique companies inflection Our in our points

instances competitive where credit do we rather slow certain of assets. of a to in market chase remain perspective. we where warranted credit underwriting specific be others deal underwriters may we heated on share the attributes doing than based what would not disciplined and believe a deals credit underwrite or on remaining gain Second, The growth landscape each portfolio not and its is from

to using aggressively higher the have swingings. a of scale for our platform our and product on and and we Using right been the our based evaluating, are our largely expand more credit third, We on sorry, number passing opportunities recently opportunities -- set. scale

a of at I debt above would distributions. in spend per at portfolio to distribution like XXX% per few $X.XX QX our With share. minutes share generated $X.XX now our quarterly base coverage billion investment our our NII shareholder discussing cost,

distribution $X.XX we In in per a also of per base addition supplemental share to declared our share. quarterly $X.XX QX, of distribution

representing fourth to for this aggregate, has to to allowed an represents company's nearly distribution quarter XXXX. to distributions the our brings of strong shareholders. consecutive an total to This performance our us increase also the XXXX declared $X.XX, compared where XX% shareholders increased the deliver In

fortunate In This or to final $XX tax respect as weighted forward variable to per quarterly our provides base ability on continue flexibility also grow income addition our tremendous team distribution, going estimated our our exceeding an to discussed subject we to with share to our are with the us XXXX. invest been have able during outstanding, filings shares spill-over we base based for dividend and and million to to $X.XX XXXX. platform in average undistributed to

shareholder time, same optimizing total the While return. at

In talented but and since the closing, debt full-year record-breaking work this of cumulative crossed QX in organization. in our fronts, effort milestone another inception. the possible this commitments been and it XXXX impressive January we billion on each demonstrated have $XX of was across would announced by we our year, not when employees performance tremendous without many In

incredible their I very would of investors their that and companies Thank much. the preferred a and management all success VC thanking Capital the to story who sponsor partner different like our to XXX choosing and part of nearly and contributed have Hercules been to close by choice. since you Hercules teams acknowledging by have XXXX, make

And to I now call over Seth. turn will the

Scott, and year another remained Credit Thanks, good and remaining afternoon, billion a and strong $X at gentlemen. XXXX, equity in Hercules QX total non-accruals raised strong in sheet. investment we support quarter the successfully of million capping fundings. was for ending on with in X.X% more off cost balance in growth with and with our over more debt, To $XXX a a below in record stronger ladies diversified million basis. year than This $XXX

we've substantial progress on both of these Subsequent fronts. made to further year-end,

prudently improve using leverage continued to our shareholders. to have We returns

quarter, increased equity assets and to for average Our XX.X% above for of average ROAE our our X% fourth average ROAA X.X% over the total or full-year. the or was over NII NII

our with the to of being Every improved addition new line facility in a was right improved grow expanded where to further needed facility year larger Today access facility is and testament flexibility. sheet. lenders our platform in participated The pricing as balance to and the size, capital we The our a in million and strength our basis in announced facility, to offers saw increase when syndicated ability credit we of franchise, the the to lender markets in added. capacity $XXX and has the the MUFG several MUFG on an scale growth opportunities. existing

grateful and support. liquidity position The will their We XXXX. for our are partnership further strengthening ensure and that of we're capital in well-positioned

on let's performance statement our With finally focus statement Income and income highlights, will the that and unrealized to areas. and realized Today highlights. leverage I performance NAV activity, turn and outlook. following attention the

due quarter-over-quarter total to a by Net per a portfolio in or to million income was quarter interest income record increase QX, income fourth per Total million supported QX. $XX.X increase increased X.X% the invest -- $X.XX investment by investment in to share quarter. $X.XX from $XX.X growth X.X% the share in prior compared in

in to the higher in again, due full-year depending the vintage this base decreased non-reoccurring and with cover over the the income baseline quarter can despite income. size that I that loans fees Fee we the a the we portfolio off. which have on growth has and dividend at associated or would largely paid the emphasize, unamortized one-time of created the without quarter non-core payoffs,

For to XX.X%. full-year the investment context, interest compared income core increased has XXXX,

and October. of the associated to core in with reduced yields were XX% effective in slightly XX.X% and in core fourth XX.X% for compared driver primary respectively that one-time XX.X% was cut Our yield fed fees again effective decrease related paid quarter due the to quarter. off. in unamortized and the size the rate the the the third in The loans the yield to The

above XX% QX. However, rate remained across in the average portfolio debt our coupon

in income reason increase core investment for in to operating prior quarter. to growth, compared levels fourth due XX.X% portfolio further the XX.X% was Net the to the the of while quarter income to The due increased our expenses. the maintaining higher primarily margin

expenses to to million $XX.X $XX Turning quarter in prior our million the remained fundings. and to the for total expenses, with fourth fees Interest quarter. million million from flat the expense the $XX $XX.X commensurate increased at quarter in compared third increased operating

the prior and a costs decreased offset -- the debt in to compared in lower increased quarter. partially of which as from strong million result increased the quarter, was the legal $XX.X third main for fundings quarter. performance by company's expenses compensation driver SG&A to decrease discretionary the and $XX.X discretion variable million The was

and key overall corporate a quarterly funding our discretionary our compensation and our reminder, depending basis related performance activity goals a fluctuate variable As well will on on objectives. and as against as

small the quarter. weighted our cost prior Finally compared X.X% to in was X%, the average of reduction debt a

unrealized Now let's switch NAV realized focus the and to the activity.

were per NAV NAV through earnings new exceeding $XX.X the our at of the an million drivers increased raised of paid. equity During or to by $XX.X to main year-end quarter, XX% for per the in increase dividend ATM The $X.XX $XX.XX the the share and our share. premium quarter program average million

gains The were and the largely key million from $X.X million The by portfolio. million million positions, gains $X.X sector. improvements driven of $X.X Our depreciation unrealized were equity appreciation approximately of of three the by on from of the $X.X by warrant publicly equity biotech million drivers of in legacy approximately offset of of of in were mark-to-market disposal realized the unrealized loan losses offset traded gains the $X.X comprised certain of gains expiration warrants. portfolio,

partially to leverage. Next, respectively, and and the third to I'd credit the regulatory increased growth discuss GAAP compared the facilities. like of to quarter, our end due was XXX.X% funding leverage our the in the which quarter XXX% quarter, with At the

our We continue to ensure to communicated manage the that below XXX%. we approximately point business remain of leverage

at in medium-term raised what in we’ve under this, QX to our with using additional quarter-to-date see short capital capital Consistent above and we program do raise not able ATM the a of to million beyond current an equity the raise to and need new the $XX.X we're equity ATM. time

strengthens million tap additional successful prudent a we announced demonstrates draw This $XX today in sheet At time, and the with $XX to we month, of ability our to dated placement of with the cost investors fixed markets liquidity fixed million below when do a current capital announced this we in to X.XX%, a $XXX the increase position June of X-year for which an a later credit the notes same of debt. is commitment so. with of and and facility on private the our announced feel well our attractively total if Earlier tranche. the coupon the balance with issuance together X.XX% done institutional offering coupon of further million

normal amortization to as significant As can a us use monthly inflows reminder, our when that early and needed. payoffs we with delever provide and

debt in future and We determining market will conditions and macro, closely potential capital timing. equity political monitor

address our let's outlook on points. Finally, expectations

the reductions XX.X% core result rate XX.X% to we XXXX, of to by XXXX. yield Fed a multiple are updating the guidance for As our in

our a loans which downside. the of mitigates reminder, potential are issued a of some the majority with As floor,

of As not increases. when the of compared result, decreases impact impact rate is rate linear a the to

approximately portfolio year-end, of at of XX% As floor. contractual is the our

quarter, first $XX.X million. we of expenses to expect SG&A the $XX.X For million

We increased increase our due expect the to activity to slightly greater borrowing costs credit the quarter facilities. and in of our use

strong our the grow Finally, to positioned in year although Capital activity is our prepayment closing, we well predict, put for always as in platform XXXX. prudently quarter. million us, we difficult to and deliver to and believe we million expect $XXX shareholder behind further $XXX record-breaking scale In returns Hercules

turn to part to operator you. begin call. our the over will I the to the of over now call Q&A Grace,

Your FBR. [Operator All right. comes first from Instructions] B. Tim Riley the of Hayes line question from

Your open. line is

congrats and some Hey. first I’m NII your quarter going healthy. last and a dividend strong did the as position, covering nice consecutive yields, here Good It's this there's fairly liquidity positive quarter My strong core especially a afternoon, understand it spill-over to the and but really like was the on is guys sound quarter and outlook it year. third start on a that you’ve of with buffer. question I quarter. dividend pressure very with and

give the you a us your I from And or now? either right played $X.XX just at the Board around uncertainty that? the decision, decision held November -- know and/or flat context is being explain if quarterly outbreak some why coronavirus the impact can but So it's into the election around maybe dividend

Sure.

respect for Tim. specifically, in With fortunate very we’re think to thanks a the comments, dividend I the So position.

million total a fairly a XXX% distribution NII share in and we that about spill-over, $XX points dividend, outstanding basis. roughly a quarter on couple on that we have for we're there. a average shares When optimistic referenced really had by outlook a cover our distributions. comments. base weighted the think $X.XX shareholder We’ve We You of per focused

that the in declared We of total $X.XX, year XXXX proud up are our over period. prior they were fact very the were distributions XX% from in where

look dividends, at basis. a with we base basis Our and quarterly together we variable Board on a our we something have always on that it's as evaluate

in and that flexibility position with get for our have sit believe bit go-forward where for visibility going what fact we a most on we Once we basis. down We a are little QX, a grateful our more the very discuss makes Board sense we tremendous we business are will the into we forward. will unique

will to not increase think appropriate. We obviously whether or an evaluate is we base the distribution

business. We quarterly conjunction the to we flexibility it's with also is then with deliver to on QX so extend those think things a both basis going prudent to to determination in supplemental to conditions, to and have continue and we our we’re the the that make in of at prudent market look respect most do distributions think

the have Okay, I your I to the shifted Yes, guess, behavior direct companies part expect at the very the context these that’s latter on your guess, do but got around that or events? -- November any election still uncertainty portfolio question coronavirus, the I Are coronavirus much election and shifting you all to, I reflect present, you I around helpful. -- away with you obviously, coronavirus impact mean, months it. nine whether are guess from from than the or the less dividend, outbreak the just you was that. it the more outbreak relating of impact into appreciate that. And was, played

So the no. coronavirus, answer specifically with respect is to

markets. to little, company Asian Hong outside and directly Kong if one the have exposure very of portfolio We any

some or the so, respect don’t impact specifically. see will quarter any we increased overall that’s next with market really volatility thinking we play current where scenario We a expect virus certainly watching. the the that macro doesn’t direct respect But are So to do the that or really create see something dividend. into to to with at the our over and time virus

focused bit last probably the this would so core be in dividend we on are thing really more businesses calls, base a little think I about think talked we’re our when and the on focused we few our we income. that about

portfolio our So the one-time or generates income any impact from nonrecurring events. excluding that

when is income So are of that penalties, with prudent what of we the QX, impact reflected which distribution, statement it's number, fee excluding $X.XX, think to is at at purposes, we in if respect any And line. from sort we in the prepayment income sort it you most for that look on our base look $X.XX. internal

of the relative the but overall exceeding still base we’re focused to on more So that’s distribution, in $X.XX that number the NII the quarter.

but And I And using I point helped That’s third pipeline help that I your it. was for the got you scale some me. you the if expand to expand mentioned that please third focus about expand you know aggressively, if platform over -- helpful. and context more XXXX six in Maybe there, and to to pipeline. lending your that product I could how me of your The of the guess, for talked correct point, Okay, three the one you've set. new more guess, misquoted that’s on months? past initiatives the

Sure.

I there. So couple of a think things

XXXX done So, of we’ve taken several of respect enhancing great And balance investment in We’ve the our several $XXX our our million that an with growth our throughout we’ve at cost of portfolio. organization sheet. you increase and steps job saw funding growth that one, steps taken as strengthening the overall lower the to We’ve capital. to loans. debt over flexibility a to on

and to those $X.X in aggressively QX base driven that we’ve capital our use go-forward think basis both billion, after significantly the deals that bit from QX. a we’ve to we largely let is and the and deals now a Our in of we’ve our going $X.X We I scale on more now cost more number bit see ability, little pricing go historically thought on a overall that approaching fact is have were the something and There given going saw strong to very of asset achieved us scale chose portfolio billion we’re those that that’s approaching that lowered you’re And achieved market. we we to credits that in go. concerns, are given aggressively. debt little a

we scale, is, XXXX to The of that We will throughout that our the on there some talked of that second to to we think continue we for some about that of made some in sort the effect enhanced product perspective side There are go things market that continue going QX in now thing product that QX point are are we’ve going from achieved will we’re ongoing to tweaks XXXX. growth a accelerated on and again objectives do add that our and we forward efforts a think that continued growth. with rollout the respect basis. growth to similar have a to

efforts Understood. little limited you but in And you can probably elaborate those say, can are on just bit? what a

Yes, not and when to mimic to tend we copy publicly, because about us. things talk others start unfortunately we're

we're market. from of in So get take and quarters, trying fairly doing I away to a But clear we advantage couple stay to going think that we're once of the through that. how we're what be it'll

Okay, understood. again taking and congrats Well, questions. thanks for my

Tim. Thanks,

line from your comes question Deer from open. line of second Aaron your And Sir, the is Sandler. Piper

Good Hi. everyone. afternoon,

Hey, Aaron.

Chris my Just audio out cut briefly. [ph],

in in missed have outlook growth expectations might any year? growth but your I So your for of this commentary, specific this terms guidance

respect going still start. some we're the strong to guidance expectations a to in relatively very give growth early on to We're QX. QX with off So call,

$XXX of million out, in put commitments. section we've the that new release already the at closed middle look the events through gave some subsequent disclosure February. of you we We've If

another million of signed or have $XX We so commitments.

commitments of February million $XXX XX the date. through about So

see QX what and strong to with on the we're we're targets be overall continuing a start to out to we're the market. off we'll So provide call. some respect seeing how But wait fairly QX going to in plays optimistic and growth then to

doing existing you're Okay. maybe and plays And growth into sounds then customers like outlook. that the your with it more

your and you guess the of of you're what these of become? sense relationships maybe would that bigger think suggest customers XX% willing represented give some XX I sizes. portfolio. mentioned top larger you and a us how I X Can let large to credit -- I XX%

Sure.

in loan was from funded slightly, us XXXX for million. the but So year-ago. approximately was $XX not average up where a That's it materially

$XX.X I So little in think million, about basis was north on million in million It $XX a XXXX. of average bit it was XXXX. an $XX

And our portfolio better or a number achieved scale have based a we've to across for credits opportunities been tranche seen continuing we seen on and the are performing see million in The of that that did gone the milestone that you've the underlying facility. creep sheet achieved or significant points warranting that longer term balance longer a $XXX commitment. the value gives we've custom a credits, platform was stay that financing We us bit. to tailored, that allow sized historically ability believe to largest today XXXX credit to average would to that we those larger, more more commitment. So inflection our and us little our deal were past, size aggressive in than structure do we When long or largely basis, subject it's frequent of that large solutions do able up to the so.

Seth. one then Okay. And maybe for

as given Given platform like at a it you look we guess investment investments going you forward, income might that sounds leverage the your head assets. make do into the be think you’re to when and looking non-interest you better extract either in still to people, leverage operating think or make? or continuing I of XXXX, Can How percentage we as you expenses, about about investments how operating that? should

a Yes. great question. That's

X.X%, move we around as ended approved So middle in the did of and X.X%. year year, the the we down we the spike throughout at the we year X.X% actually have

that we to year the be level expect and would we XXXX invest. we'll at that are continuing for So

If long-term you at our average look back at to were X.X%. XXXX

that. say billion, would it expect impacting in to get -- that up. expect of QX ready the end platform below that ended the $X operating be And around and you little that investment certainly at be a the should will where It that. we we will I continue So keep you the we're bit to flagged But to for it for year.

And Okay. or separation here in the costs next quarter any reminder, coming a two? just

they're but them was agreement. fully expenses. Two payment. a of in, separation we disclosed not that the material So were to our There delayed amortizing

my stuff. good Thank appreciate questions. taking Okay, it. I for you

Aaron. Thanks,

And Chris from comes your JMP Securities. line from question the of York next

Your is line open.

for were taking interim of been since guys. Thanks two you year named about Hey, maybe Scott, a CEO. my Only them. have questions. it's

I think close to seven CEO. were months since you named

So is you Hercules now time cemented may and to you offensive. more your high, an to as be the position all leader close stock be in are a here that of

on us priorities over, strategically So for company the the next could say, you twelve update any growth months?

Sure.

makes think you're when us going it aggressive I to be continue look, where sense. to So, and see

and basis Our be focus I things liquidity to position. things here going we entire a with to in and mentioned. to on focused are is continue is that the to respect really management market half volatility liquidity, on long going what be second the very to enhance one, increased expect of business do those our being standalone on turbulence strengthen some our three year. to Number investment given team we The

a second bit currently be base strategic looking last choosy to we're are and us more a alternatives. priority be will to underwriting that and do at if our a the unique, think disciplined are that and And forward to see then, than that think our something you strategic performance at we're you that business look stock us where to pointed singularly more that to we've position will structural position, mentality. We sense, I little But think willing are on versus the growth be will on achieve. some and to with given at The are, see have going that aggressively are of obviously sure of position, scale for underwriting maintaining bit And focused of integrity regard. add we And our make where we business. I little we little a We're we'll we're of in we the in with respect makes continue a a third, a think, very a thing given given focused to costs a market. I that we in going continue to selective would I given advantages. that it. were we now more We're picky continue going able aggressively that's we to in to things year. think to what And initiatives be go unique use, and laser do to of in we we that going sort bit couple some basis fortunate to our standards. position we advantage respect been the a take little that out bit as a position, on liquidity do all

But No, get to just color. your limited know from you there. kind can I a you're great willingness. trying say of of what sense It's

equity to thank it's back And rearview you. grow. preferred question the two continues acquired in then, looking second the since that you is investment So and been noticed years mirror Gibraltar again, gradually

And So growth income any in the that maybe XXXX? us on then at XXXX could update expectations for preferred investment you Gibraltar? just potential on or in

the part can then handle the speak and I'll Seth part. Sure. first to second

specific their information The any that perform don't I team meeting XXXX And a so portfolio something ours, own and continued on business it's for you company the we're partnered has mark they On company achievement announced crossed the their historically on company don't was That to across performance the proud with But disclose both significant And first very a perform and basis. a that million be we on from very that level board. in a that and proud well. to milestone a is high perspective it $XXX the can that's well. we're about at to of certainly continues expectations tell time. they their first own. that disclose go-forward specifically our portfolio part, of that

the time monetization of intention in provide to to the We do investment. Seth of terms I'll ask then color And or no current at potential distribution that anything discussions. any have on dividend

Yes.

related So to to that and disclosed generate certainly that. continue income glad the we reinvest currently any platform. SOI to have We're there that are in into that distribution their arrangement do grow, aren't the We discussions. they able loan

income comes into is no to at the dividend Hercules that plan there related that, So but moment.

a very Congratulations That's successful for me. hopeful. Very it on year.

Chris. Thanks,

from Alexander from Point. of line question next your And comes the Casey Compass

Your line is open.

the A around into generally percentage funding, And area. your quarter XX% One, way of that the your afternoon. a on investments? of that high Are couple structuring gross in good working of in converted we in that you're new commitments running XX%. norm questions. -- a been has you pretty the Hi, towards

No.

great but specific So just really that's respect with quarter. point to QX, the to

historically last about XX%. at look at the basis, on business the a you over If our quarterly several years on end, been low we've

On been about the XX%. at we've high-end,

investments end of existing commitments, had that per we the annum in number Overall, of to XXXX, billion portfolio largely perspective of companies. quarter by the a from that, billion This happened $X we to $X.X funding. of higher driven at be

ratio with two each the So what consistent in of very was it is that last years.

you Thank clarification. great. very much for Okay, that

some, y to call as less and behavior? some creating of new this competitors relates behavior Are the are new that deals. capital than it Secondly, rational than that have call you entered pockets stellar it did less there let's of competitive out market

the is You going to names. largely discuss But know, not or to is, question mention the we're answer yes.

little fairly portfolio continued cash over or I the that market negative players for venture in quarter the what I us have understand run been space, takes it of the of vibration space cap think time think growth a to last to have space you've so. be stage flow in the both The seen a and prudent, bit in the a most growth that some investments. given of legacy

every we've There deals. the are some the what that those in seen raised with are of you deals. We're one with same being who to to or irrationality newer aggressive have sort of some incredibly incumbent seeing investment of told players. of so structuring pools market And our players the the the team And haven't is if legacy perspective, through us before. capital of we've respect sense this else us deals need types those a let ends. it. happy And for strong enough strong sense we that portfolio, make to We got been at story on doesn't chase a story demand deal enough that We've don't to where credit how got for makes that do we're someone know we've that time. respect

great. one right, you. last All And Thank question.

of forward you half to the that might want first remember short your to the half active year. of of for and expectations think before the at while, the been a you Would election, the the discussed period volatility those the for company deal might half, down be shut or simply us covering Hercules and things essentially the second who've for first electional perhaps around time that we than more later last sponsors a arises? election pull in sort For get period opportunities because BCs done of

as now, on it's to more first we're and seeing based predict think we expect we going We it's than opportunities second of the the in I the what sort I to out. here that's how be the do towards But tell market expect anybody half we don't volatile. be volatility expect this as the year. of to a do call there plays How you. on increased second think to play do foreshadow early But in in half half. year, company it fairly can get it we difficult so out.

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happens One that right, equity to to be, markets. threats competitive we of deals the the lose tend bigger to

the strong, either markets of equity respect the capital. we side the compete with are when public that the private something deployment side on that's So or to

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the going to intuitively little stronger we're half, be we're But looking out. to I half wait the it see think a So than what and how just given we would bit expect second first plays today. at

it. I Scott, question. my taking for appreciate Thanks Great.

Sure. Thanks, Casey.

question of Carr Jefferies. from line comes next from your the Ryan And

is line open. Your

is for Hecht. John guys. Good the Carr quarter. on great Hi. This on Ryan Congratulations afternoon,

Thanks, Ryan.

question at to million Obviously, use debt the of several facility ATM to the and good job of your and we saw So sheet. ABS related is my you've program. past a over quarters. enhanced balance that your new up done very the renewal very first $XXX optimizing And

quarter of context your all are the see that? debt several next goals immediate to raises Just the or you near-term debt do quarters? leverage curious This where of that, saw XXX% the capital in in of equity what near-term? going over additional any so and raises the impacts And above you

that So XXX. But leverage that to continue to for continue our not below approximately question, our for I liquidity, manage overall communicated We'll to position. we're the try point think balance be the the do optimize in is to leverage Ryan. sheet, Thanks that. near-term. trying will we We've

of of we the to we continue market working credit what and of debt So need that to to equity, that's the see announcing little additional bit by don't strategy was to need announced it so facility it. why expansion bit make need the with do wanted union we balanced little we that rush on today every going really But time to a capital. you're a a when really

available activity activity we and want liquidity business to enough have the to core the to it. do is side front when Our capital on obviously and conduct we want the business

focused Scott mentioned, every core market with ability And a to the up. we is draw we're racing that We're to that go of have sheet, on that average sure continues do so And balance activity. moment. our size we're to trying what loan make larger to not deeper the the

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that. outlook. your sensitivity, rate for you to rate impending especially related question is Thank the given My second

of LIBOR about XX% incorporated. noted You loans your now that have floors

And originated with quantify are -- being your effect floors? to can you NIM, loans and are of the upwards downward those all those forward, move? then Moving you maybe rates LIBOR when

Sure.

not based. the investment LIBOR side is So, on prime XX% of debt book plus our It's Ryan, about based. actually

rate XX% our investment Every further would a you'll which our plus see about have contractual debt portfolio book we LIBOR floor. release, respect that base a increase is if a portion for about is in of moved that and to rates with sensitivity of respect on is debt to on structured to in a And portfolio. prime XX% that those press with to So business. or continue to with ways With respect to billion why not contractual immaterial that's an that's XX% its amendment time place. we're cuts of now look see or looking business, the the different our do of current floor again that we $X.X linear basis. downside fairly part the continue insignificant, our is based to at investment what loans we do extent forward restructuring, are of we'll at you direction. something go our

that. me. last question you for And for Thank

You've out consistently earning the distribution. been

saw performance in quarter. on great definitely this that You

distribution? you you that whether for what side respect potentially to -- earlier look and noted what on you're either are are the make the distribution? decisions on or you raising look going ultimately it's raise quarterly characteristics quarter-to-quarter You a every do, I would what paying special going be what to to your out either that quarter-to-quarter mean, --

we we on sustainably things and portfolios focus the generate to that the little to it's investment think core that earlier. specific distribution. really business. And on of macro a both just about I tend income is base cover a two ability spoke combination our that Number one secondly, outlook our bit

NII per If at the flexibility to we're not look the million at income combined that you isolate noncore, share great time QX. base $X.XX $XX you times with And distribution. the versus when have were as that's is core of periods fact a the This at where first this in supplemental in time income basis the that business during XXXX there respect going those of in look driving parts as of distribution at with you shareholder spill-over, looking us total that where look that, our both distribution. lot have to historical puts quarters really was and and two early base on And the throughout position the the $X.XX year, we quarterly core returns something or it core or to exceeding we meeting really the a well because to the per distribution. is based in at a last share either our XXXX spend

Thanks very answering much, guys question. for my

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Lynch line KBW. the of next your question Ryan And comes from from

is line Your open.

guys. Hey, good afternoon,

Board It's talk wanted I of to to core the $X.X what framework to was supplementals to X payout bit. a thoughts paid you quarterly the the dividend the more around talk on a approach, who out you decide other you paying four the that fourth that supplemental bit get are pay more you quarter $X.XX, of a size guys dividend use dividend. there a a dividend above out. basis? the been There supplemental $X.XX, a little wanted the around now they kind and to little helpful whether and trying regarding of question I'm supplemental earnings your their will on guys guys' your have Can have a have particularly about color based dividend. a row percentage some dividend. supplemental BDCs sense in although of question guys' that I are First a That But about $X.XX. of really and follow-up last core dividend formula

Sure.

with with the to deal over. So to there's a bunch respect at, distributions spill different obviously certainly ways we've looked of

distribute you It can can it, can of some distribute You it of all variable. be it. formulaic, can be

looked we've about. in excise all in at those the reinvest it use that you are thought and can to You the tax once business pay platform. And the things and

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with to of that to advantage out will be we also And the XXXX, flexibility in distributions shareholder with on the what XX Board Our there. platform and employees all have respect our the we'll our sense continue focus continue that's get QX, to once what but able and team think be Board and to focused total is to we most and Management in take figure driving think maximum makes shareholder on returns, XXXX. invest will of to through the be driving discussions maintaining total our throughout out market we opportunities

the color. the investment of of just that had by increases? the in the what increased Gibraltar it the provide better $XX grown as fair of profitability kind value Because has drove and Okay. Can of in year? business the helpful the value then walk takes through it's increase context mentioned retaining your puts million you fair a wants That's And Can valuation? about business? that the is in where drove last is some of what that the year. know profitability you such over it earnings, it past meaningfully, million $XX increasing you I

Sure.

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second the sector that see that improving over at look for continually overall send on we what in and we market, industry, So benchmark time. the would be valuation opinion do externally an evaluation, it that a

in key their own add we evaluates of disclose In business, in XXXX. result that the specific order to that, for in each each numbers to giving can't and Gibraltar that that for metric terms Ryan, team record of metrics was that evaluate we company management the a anything for without

growth of of the in 'XX. valuation. areas that FY that growth 'XX And substantial our contributed key to over business, So certainly all FY

my Okay. afternoon. questions. appreciate That all time makes the Those sense. I are this

Thanks, Ryan.

from Wells from And Fargo. Fin your next of line question the comes O'Shea

open. line Your is

you Good for lean answered. cost priced. mentioned in a ability that's you lower to priced, One have lower Hi, the on debt been Scott, on comment my Q&A, lower question. something asked the Thanks guys. more risk, Most afternoon. taking and little affording lower

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Sure.

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things, credit at cost being was a legacy that morning versus a of facility be and at to our confident cost range, at target both in We done done efficiency you with a to core of we midpoint that maintain range, to reduction respect which of that our $XXX announced XX of The down was capital done inside million pretty lot now million on done are is of seeing expect year, operating union very as we're to continue facility that overall This our February it from right on We've the this to what the had The and that we X.XX%. highlighted drive perspective. unsecured both a out in XXX. we the bond the done $XX at close call QX million in and QX. -- as we on pointed yields of we the first XX.X%. was half did level, XX.X% can to really of X.XX%, Based portfolio $XX it we is offering is business. the LX was at of that

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want for And that's just in level and I the out have money say where to investment on deal seeing VCs? high as good you've good been money proposition, been context. that But flow. than think our and raised venture one still you applies side, return Would strong then equity that think they and abundant Is come do raised toward being there, obviously very ecosystem middle more positioned money scarcity capital much they there, the be Thank core there more you on a well the you. flow deal that, Appreciate private there's to market, or all opportunities? the that. still

particularly pretty the way exclude year the optimistic We're XXXX where overall ecosystem, strategic about up. was when second wrapped consecutive XXXX the investments. you

So if $XX you're Fund just the firms within in number invested billion. be around looking right VC at dollars, very market raising in VC a the to continued equity $XXX The firm year pure raised row. numbers strong amount the addressable have $XX XXXX for exceeded final billion second billion. our raised activity at XXXX. about also

continuing deals of and very the slowdown number with are we We've seen to that looking robust So no to at see ecosystem. evaluating. a healthy, respect

sense respect don't deals, we about specific seen, doing shareholders are makes think $X the pick sitting that certain them certain that pipeline The structurally as noted, are sustainable. stakeholders. lenders to of at and that defensible deals we let think one on And things current that for and our there continue to billion, with go going is I and Our the choose that we are as to or have mentioned. opportunities, we're those we is thing some

that's all at Thank as quarter all. for all Okay. the and Well, year. you Congratulate well you. me for

Thanks, Fin.

our I for no this conference would questions remarks. to time. to further back at showing I'm the presenters now like closing any And turn

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

today's this all concludes you for call. gentlemen, and Thank conference Ladies joining.

now may You disconnect. all