Hercules Capital (HTGC) 5 May 202020 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Hercules Capital Q1 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. Instructions]. [Operator

like Michael conference sir. Hara. now speaker to hand Mr. today, Please to would over the your I go ahead,

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

can Relations were XXXX just after htgc.com. and financial section close Investor Hercules's results released be first from Hercules' market accessed at today's

replay the today's and call a webpage for by using number Hercules' arranged telephone or passcodes have We of earnings at the in provided release.

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

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

and incorrect. are that Although inaccurate which result of a any reasonable, statements also assumptions forward-looking assumptions can those those we prove statements forward-looking assumptions be the 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. this to that, over turn will I With

Thank everyone all staying today. and that thank for healthy. is hope Michael and you us We joining safe you

times. teams employees, and appreciation these ecosystem demonstrated have during financial gratitude to my tremendous I acts workers, essential remarks safe. difficult first also family I by our commitment keep performing partners resiliency members, extraordinary and us who our management acknowledge begin and to our would recognize like workers like all and to expressing would friends who selfless are and to who neighbors and prepared and to company are healthcare responders our and

COVID at will QX As the am in be today of going a business this overview of provide brief focus result believe call the more areas discuss a the pandemic, then different. time. of attention require XX I that and our our to of context performance and we

briefly highlights performance Let of some key me recap the of strong for our QX.

We early of million fundings million $XX resulted total and debt base $XX.X or QX, at debt originated $XXX $XX.X share, loan We gross of income commitments of the net distribution. delivered In million. of $X.XX million investment of growth investment record we and amortization, and had income record resulting of nearly $XXX in million repayments generated XXX% we cost. equity coverage in $XXX and new of cash per which million investment

X.XX, investment coming ratings economic primarily with debt credits, XX our of to rating a on two pandemic. by changed Overall, due with in portfolio the companies driven on average the decreased deteriorating biggest credit credit internal three our as to we quality Credit of QX the portfolio in shift and conditions rated QX. weighted X.XX, compared between the

credits less to of and continue make Our than entire rated rated four X.X% portfolio. debt the five up

on not the a portfolio May Quarter-to-date, cost a have with total non-accrual. or debt of cumulative remained value low X.X% company's approximately million Non-accruals non-accruals investments fair any cost as percentage as X, respectively. and value, companies on new investment $XX.X fair of and respectively, investment four and $X.X we and at with of million, X% added

QX Our strong. overall performance was in

of created are all Our by an unknown has will and and the that began extensive long shelter March this two the results the funds in of cuts situation global pandemic remains the COVID-XX situation provide to and and frequently much The the evolving fed domestic shutdown March companies. more forward. going The duration anticipated changing impacts and in place resulting orders term were economy Seth for partially with to and continuing. ecosystem and at and is unprecedented point. economy respect impact impacted the rate guidance

we I best believe that three for want our areas of company. detail specific to doing specific environment update our and are business that the and to position in this on provide we are shareholders things an stakeholders

First, employee well-being and the business. continuity of our

primary our from employees Effective ensuring to business. transition the what while continuity safe obligation and to of March we the decision our across our work home. healthy we do XX, can made our early to is of workforce One six to states entire keep

We March across had late tests prepared for this and performed February early with organization. the of a that in series internal were

to to business ordinary of and of designed home, our implemented keep ability any a operate our to as have interruptions have items productive material our course. we at and experienced We series not or engaged today, employees the in

an is expect to Although, of our for the a emphasis and on continuity us. business operations normal with not a for some still plan our time, return to pandemic new we the to a begun normal employees the while return we do have of with well-being

strength. in We and importance liquidity environment. believe sheet this that balance liquidity is of utmost Second, the

$XXX of to We transactions QX activity. anticipated significantly us provides ongoing the our During available ended business coverage liquidity series our our of of substantial and that QX, with commitments completed $XXX.X enhanced we fund million with a liquidity, ability which position. of million unfunded

the ordinary $XX month alone. of was a be was by in for and million source $XXX March case from payoffs, million and again executed where in the receive liquidity have expect received delayed QX supplemented early $XXX private the payoffs in drop of in the and always payments Of Our placement we million our to June business our liquidity been received early of Early $XX amortization. million principal of that February. payoffs will further we course

we a although level relative At lower to to continue we year. time, at be this early what experienced expect to last payoffs likely healthy,

on For we expect although million, today, know number $XXX payoffs $XX change between QX this and million we materially. be what could early to based

this and sheet heading was with strong maturities it remains XXXX. balance no strong crisis into until today Our near-term material due

detail over capital. QX, stack of is of in XX% our will provides of remarks. in flexibility which debt provide obligations his As of us additional terms unsecured operating with Seth greater comprised

credit Finally, this virtually crisis, Since and resulting all to pandemic companies time continuing. the and that it emphasized impact inception, diversification has cornerstone philosophy. will believe the by true occurred are likely the given are be of impacted We shutdowns take that key have Hercules that portfolio as investment of our to and economic quality. the ascertain

We defensive also should diversified well. us serve and that our positioning believe

Although portfolio liquidity companies our does determining important companies crisis. one guarantee be best future, not are which this for ample ability liquidity a factor weather positioned will company's succeed in having to the in to

looking Let's to liquidity the with entire address liquidity debt on portfolio up of Loans portfolio, our months make less has investment approximately liquidity. Of six over less which first than or debt with current balance that of has sheet. of XX% of months XX% liquidity, we portfolio. our approximately XX% outstanding sheet. with months X% the When another liquidity currently XX-plus XX outstanding XX-plus estimate entire at of three balance currently XX-plus on months months have of XX% or loans of debt our liquidity of portfolio

least companies life XX in $XX excess have we data currently our million. these hand fund month have XX-plus within the with on that of Specifically, a sciences on portfolio, XX debt their to most have of for available. XX based investments at we cost businesses basis recent cash

while our nine cost billion. our current at largest of are The than reporting companies again portfolio, investments have two that capitalization based public greater the through on technology current year-end, cash other least have sheet the all have most available. we market at liquidity XX on with next current recent balance XX for $X months In

have late throughout subordinated the on $X.X new capital last Since Many was and our the new execute impact strategic raise raised. or as call debt totaling and COVID-XX expanding have over continued capital of XX companies portfolio of economic companies billion beginning, raised our country February, in portfolio transactions. to was our equity earnings debt

have transactions. two closed M&A working and new of both currently events, or which companies raises had have our of In strategic are capital several addition, on we either new

make investments debt XX of our at cost. less top than portfolio debt up Our XX%

of months While sheet of of but have each liquidity of $XXX on in recent fiscal earnings of of situation, these raised XX Three terms call new balance rounds varying impacted have capital reporting to a companies sheet each be will all current degree in equity on February excess our cost likely XX. substantial our least through the XXXX. least have one since liquidity on and at them at year-end current top last investment most million of XX as balance currently of the by all

Let's Approximately on cost know and software again debt this expect continue during two and behave our We that period on volatility. largest verticals, to approximately we we on and Currently, and three portfolio information these a is period in now companies, to basis what perform on is of two drug of verticals life sciences, of focus relative our our at our companies debt during today. better delivery uncertainty discovery, portfolio expect in XX% additional drug exposures. XX% and some as respectively. XX%, sectors core this sector between differently diversification split to technology would invested based

services, that have companies Sectors or companies estate, certain markets sell not parts oil rely business and and real hospitality consciously We some gas, within the we retail, media or of although direct part debt these medical portfolio into in devices, in end portfolio certainly restaurants, consumer capacity. and advertising. investments more in our on do may are in any are watching

closely. We are companies monitoring those

capitalization publicly XX.X XX. approximately Approximately as XX% value average at ratio weighted weighted equity had companies, public times March These life traded capitalization XX. a the these investments of debt billion as cost in to Based public March market public market on average for of at debt of companies. are our $X of cost public of our companies the sciences equals

X.XX technology approximately is debt a average these is our estimated which to of as reporting our our In software believe conservative. weighted XX% annual most or recurring revenue have classified are portfolio, point companies, recent times, attachment contractual the recurring we model. period of revenue companies as Of software-driven

XXXX, The many shed quarter startups companies thousands our in in doing spreading including tech this pandemic okay. the in tech-enabled the jobs, NVCA. venture and capital be strong far, them the first venture so PitchBook full $XX But venture puts portfolio. gathered In position of a and the that funds in to some the year, and fund growth by total own the of year. overall, XX raised stage That $XX capital U.S., for a firms appear COVID-XX of billion raised economy to has hurt cash billion to data as according forcing weakens. capitalists them

stringent the monitoring we engagement portfolio their of redoubled result companies credit have current a As our with capital environment, procedures our providers. already and and

actively Our liquidity, maintaining working book focus partners over an appropriate and be managing as will our of term through our level companies situation. financial credit near this proactively we on the manage with and

opportunity to will We and focus. be our investment growth but portfolio will continue at term near look not evaluate new

to We of it once quality investment believe we that some of better want will. we opportunities positioned to we and when advantage to be it as arises the take opportunity stabilization expect get new the profile and see

per at With quarterly uncertainty, to NII XXX% share QX like declared portfolio are cost, our QX. share. our would to our distribution have spend changes any our generated per discussing base I shareholder distribution. $X.XX we not consecutive coverage few share debt economic cash billion our investment current of base quarterly current Despite distribution per Finally, minutes distribution $X.XX the of our and in above $X.XX a fourth at we making for

invest investment income per we earnings our In $X.XX to fortunate in grow ability our the spillover provides us distribution, base distribution in with able flexibility to platform. to also been final continue our net base exceeding estimated $XX This our our to respect addition subject variable and million team in to going filing. forward to or share, QX our with to to and additional are undistributed quarterly tax have an

all. for spirit, maintaining employees In expectations. unprecedented as high all support our wishes for and like in everyone. important, each hope most to their We whoa and perform of closing, to talented and us we re helping for our sincere their for those standards equally up our pandemic these would challenging acknowledge and our and times are tremendous certainly of affected well-being and I focus. safety effort for dedicated being And high the families thank by send and stressful to this

now to the call much. over will Seth. very turn you Thank I And

for This with the most another and Scott inception. grateful of the considering am we strongest solid ladies Hercules diversified balance portfolios you the good virus, Thank one entered and and sheet with quarter our and was I the afternoon COVID introduced challenges gentlemen. period the since

quarter, increased successfully first $XX credit million of the Bank size Union to raised $XXX further million million the we our $XXX our close and at in unsecured which led funded of expanding institutional facility $XX debt, In investor equity, deepening and million was $XXX million, from base. of

$XX conditions. Scott, in we well-timed, June. current million were by mentioned given debt additional of These As unsecured draw market will the the steps

will balance our personally, diversification and uncertain believe all is us that this we we the our time a very broaden Although taken professionally both portfolio serve us, strengthen and steps have well. for sheet to of

year, of sponsor, their through underwriting further enhancing teams the the with legal, the difficult last a have like up stage, companies communications portfolio diversifying building dimensions manage geography Over standards, this. and while our all our to our and just and in our time finance financial been sector, partners, we credit, necessary operations course deal, portfolio streamlining by

I and I to of NAV change certain realized topics bit statement and with Similar unrealized focus highlights, leverage material. my bit outlook. and more a normal performance activity, a will the the to on cover due liquidity circumstances, income by the depth followed added Scott, will

$X.XX the Net per performance turn small a a investment in level $XX.X in Total the portfolio $XX.X let's a million to income paid income and the due unamortized $XX.X share investment income increase in or quarter-over-quarter the despite million quarter our vintage the in to with size due quarter. fees and to largely X.X% from the by record record off. interest QX, to that, to and million payoffs, income prior the With in increased supported one-time QX. was by lower of increase increased total quarter, that compared income attention highlights. statement of associated a Fee loans growth

the February related yields effective the the increase current the XX.X% Our partial XX% of the and and XX.X% respectively, driver the fourth and the unamortized quarter. paid quarter. The size due fees that in and effective quarter for in core XX.X%, the in compared yields primary again were to to the first the impact cuts of with cut quarter one-time loans in rate The associated reduced full off. prior of to Fed the core the and the yield in was impact

in decreased expenses, an for margin XX.X% in compared prior compared prior XX.X% income to reason income investment the to was Net the quarter. the core Prime quarter operating decreases decrease increase to of decrease due The to due rate and to the the quarter. the the primarily in

expenses. to Turning

million flat Interest a use quarter facility. greater the million $XX.X in increased the $XX with first and well for issuance expenses million increase of operating in prior quarter stock credit payroll in million increased G&A expenses million SG&A to compensation quarter for taxes higher impact January normal $XX.X guidance guidance and increased fees total my $XX.X compared from grants. the $XX return of to The as seasonal commensurate with as to February. fundings levels the and Our expenses in the prior the million consistent was quarter. of the to reflected quarter, to $XX.X expense from slightly with consistent increased and prior

quarter. average increase weighted X.X%, Our a cost was the small to compared debt of prior

realized Now unrealized let's' NAV, focus activity. on and

driver the represented of share in the change NAV. our done of million, excluding ATM per of equity the for $X.XX to new The the was of declined an by main decreased a issuance share. quarter, $XX.X $X.XX per net our decrease raised. premium impact unrealized share NAV $XX.X to depreciation at offset During This NAV per X% million

collateral-based $X remaining depreciation portfolio, sales The the Our million the portfolio as equity drivers on or due depreciation impairments. of and mark-to-market $XX.X million mark-to-market to million $XX.X were on which unrealized depreciation of appreciation yield million as on warrant as of our The warrant as of well unrealized mark-to-market and difference to for depreciation related the reversals debt by was only to the the and net well approximately key was of driven equity $XX.X related adjustments million our of $X.X portfolio of portfolio. loan write-off.

points a respect would more I few like to detail to with provide NAV this quarter. the

First, XX the the of or just ATM the decline mark-to-market warrants largely equity impairments $X.X rest was were for adjustments. depreciation driven and our The quarter. excluding impact adjustments the of loan Collateral-based million raise the on to equity, was portfolio. mark-to-market X% attributable by

to on Second, adjustments. the attributable depreciation portfolio market loan we experienced of million yield hypothetical $XX.X

in volatility that debt loans our with identify believe of paid-in we multiple the portfolio Given to is The was primarily Hercules first is market. investors. important in debt low the lien March, it portfolio from the and loan seen broader institutional that companies secured and yields leverage made capital between syndicated differences significant senior to

contractual much and with In on past over to to an addition, based the XX months maturity between typically XX months of are shorter in duration a duration loans experience years. XX XX typical XX Hercules actual

Lastly, of which protection many cash have sheet volatility. on can of significant our balance borrowers in positions periods extreme substantial provide

the quarter basis and March funding since new see spike dramatic correlation XXX quarter yields our first Reuters and the SMI, has Finally, yields secondary which market in did of spiked points material between points basis or the during we indices implied in Friday. actual index such any reflected as not in XXX as decreased the through first

from this off we For the XX Biotech a rebound To XX.X%, section, we write-off $X.X $X from the $XX XX% of positions, have close March since of in gains equity S&P were and losses indices the significant which realized and offset certain of Tech legacy of S&P equity comprised million in net the seen and million disposal portfolio, had of gains respectively. warrant equity of and QX, warrants. of million by

leverage. of our the the quarter, quarter, Next, to and funding quarter facilities, due I discuss partially would respectively GAAP the the our prior XXX.X%, increased sheet, slightly the leverage which cash out and the was XXX.X% the and and our like in the respectively. balance XXX.X%, regulatory to regulatory to compared GAAP on end growth At was XXX.X% credit Netting leverage with

the We XXX%. business of a manage continue targeted approximately to leverage with

program the quarter. in this, equity we $XX.X Consistent new capital with an million raised first additional ATM the of under

as and volatility, measure proactive to approval. a approval be equity of to extreme in As with result approval Board shareholders NAV, The to able our issue are our market seeking previous the we a consistent of request below approach turbulent markets. is subject

we Although during NAV, for necessary we BDC again a share have the raise and need opportunity to itself. as this or plans precaution, or capital presents need additional capital be below see no severely crisis current this impacted equity should prices

the Our in announced liquidity million $XX million total of capacity quarter is credit than increased announced commitment the strong ending At same we the for more $XXX draw of million available facility $XX liquidity to a June. $XXX by an million private placement, million the February. supported $XXX and a both additional time, with in

Our liquidity collections continues May, to be interest collections. principal principal in months April interest In as enhanced by expected. and our have normal come course of and monthly the and

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

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

XXXX. basis our the are but reductions QX our full rate core of result updating net income the cut, March. the remainder we reflected cuts rate partially guidance XX% the In point to of the multiple to by in XXX Fed, Fed a only impact QX, investment of the reflected for XX% yield As

quarterly approximately the impact to negative be delivered per to $X.XX in earnings cuts relative $X.XX a to QX. what we expect from We to share rate

end Prime their our the loans As quarter, rate at and loans are XXX% the of of floor. base of variable XX% our of

increases As a we rate income. do impact a quarterly result, investment not to net on material further expect have our

For my SG&A million $XX.X prior with guidance. quarter of expenses the million, expect second quarter, to $XX.X we consistent

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

million although in million Scott $XX to the to $XXX second difficult prepayment predict, we activity in quarter. very as Finally, mentioned, expect

put solid we address the a all us, we believe Hercules is are in Capital positioned faced behind In to challenges quarter closing, as well XXXX. we with

Q&A our to I call will to the call. Cathy turn of the over Cathy, begin session over you. now

Instructions]. [Operator

there is the somebody Operator, queue? in

Hayes. We Yes. have do Tim

you right? Can me guys. hear Hi all

Yes. We do, Tim.

Yes.

just thanks been for the Great. taking of and over conversations good past of Okay. afternoon on portfolio what forbearance? question. far months companies touch Well, your how and for portfolio type you extension so at modification couple my or your with Can loan has is or some percentage

Sure. Thanks Tim.

I of So second the that part first. will take

As as X, company request agreement. have current had payment so period, we May actually the or of very forbearance few of deferrals

has a been expect. of We have arisen. where situations had handful you I think conversation The have of that would less as than sort

sort a of impact The businesses. in first their weeks, be to the couple trying what how of of position out pandemic duration would of figure everyone uncertainty was and the and would it

company We you of environments, of getting decisively business, costs to of them as Boards saw most maximization liquidity, of the aggressively work our extension. on our management and do and fairly focusing teams the act home out current cutting in runway of transition terms companies to from would portfolio to the expect

prepared equity a entire our or That portfolio, subordinated a sign. pleased As fifth remarks, our of positive that's raise February seen certainly the have XX. XX I mentioned of new was capital companies, we were so to also in since very

and we have ensure volatility. decisiveness preserve and runway the to that of sheet return I have an where what to pandemic extended sort we balance a survive think enough sort of of sheet, companies part normal think period second are liquidity of you what begin Right But to the extend is starting the look to got have balance about far now, and like. new to uncertainty seen action in so would the to companies

principal borrowers I those type you the asking point addressed been this Have How that? structure to from That's of appreciate some have investments at helpful support you companies? follow-on interest arisen Have else you are guys with they or done removed forbearance. have deferral? maybe anything of from met some some Scott. where granted that. for [Indiscernible] the any to Or alongside sponsor? the you or a loans of type covenants

Yes.

very I what we It's payments. we mentioned, few than an have had to-dare so far. handful. less immaterial loans there been as with so have instances to to our any modifications It's a to seen So of where make respect have part of

constructive We discussion portfolio of are with all having our companies.

Our that the have we an view play doing is in what to can we our weather to role help companies storm. important

As and our are why we liquidity of position. liquidity on companies in remarks, focused portfolio the prepared we sort piece strong mentioned this are is a the of very vast majority in sitting

so the us them come thinner. ask There are certainly how And to liquidity other payment it's where significant balance certainly for we in much sheet. on don't a liquidity amount some expect to given to not is portfolio. is much companies relief

number have very portfolio have our done amendments something companies. a small XXX than of had of again, handful where we helpful and a we less have supportive to that We be But processed there. it's

of then so kind you It comments looks comments would over now? And more growth work. being some priority like liquidity you a back to or your it. here, just are Got clarifying your to not right switching mind still putting around capital on quarter-to-date, putting far, Okay. context

of you expect strong to balance? that maintain if if replace Or think forward? wondering, there. can the enough runoff in kind contraction But you lot there's just portfolio? do your a going So uncertainty you of I still think maybe net the pipeline out you is know

Yes.

of comment more as right. we the view geared ourselves fiduciaries think, towards, credit, is I

an be. Hercules always been thing think going class. credit in is that this the has platform. We don't in difficult to It Credit the are duration of has our environment is credit a where to underwrite asset you I know pandemic what separated

new So for of deal bar in incredibly the us is hot. activity terms

offset by increase that ecosystem. demand will stating in across tremendous a had that we I Now have the

at team deal been opportunities. has new Our evaluating exploring, actively looking

actually you pipeline right now, strong. out As pointed remains our

approximately of million new quarter-to-date. commitments closed have We $XX

expect signed get I that and and which another weeks. few the have will million continuing of to some deals, in XXXX engaged signed We of evaluate next up up are over actively team is would new commitments the screen

going I work on point an growth trying two. be the next We extended to that focus is, uncertainty. sure period to the the sustainable to want through on think that not we the make portfolio, we are the duration over be platform and is or can quarter focus of credit, economic making is

Yes. makes sense. That absolutely

are you do I clarification percentage appreciate if Okay. unfunded or had the milestone year say would of or fiscal then achievement know, what to you unlocked could be guess And much XXXX? the you how in based? commitments if there. And potentially

Sure.

commitments. now have we XX/XX. right flat So is number as of million about it was from available of $XXX unfunded essentially where That

Number unfunded called of couple a where the there's think every did that sort we reasons bank draw. I to company have that. asked up on for available the one, run not of expected and had commitments

liquidity position. think understand I a companies that strong partner sheet, to balance strong that we that have the have chosen very understand with Hercules we have a

so them need unfunded the them March, not. to draw quarters as some unfunded over in there are commitments available they the use but them vast see those will commitments, extent they or kept the available and of of that to the And a decided course next few majority

of do degree available fair the sight a significant amount line of that $XXX commitments. majority unfunded drawn. there have not million that of of a into be is We expect of that And to we

I fund our be terms period available to unlock unfunded business short to other of we XXX% of unfunded exact but time the absolute to the balance commitments. that managing milestone could liquidity sheet next are have on over the have ensure able of what number commitments based don't in we

Okay. It detail Thanks, Scott, incremental the for was quarter. this especially very helpful.

good So congrats on quarter. I hope you are doing well a and all

Tim. Thanks

from is Your JMP of Chris York next question Securities.

Thanks my guys. Hi for taking questions.

the BDCs you the credit aware, one of crisis. are well before are you As begin to operations

or capital your for in Now I portfolio? venture serve current Scott, I crisis experienced the companies for future how outcomes may are than capital XXXX very whether think in your hold a you credit the and can am ecosystem environment venture different curious, to backed recognize XXXX. portfolio the your the proxy as relative

hope Sure. you are Thanks well. Chris. I

things of couple a there. So

that highlight are mix there changed is So portfolio I today one, Hercules different to substantially. pre-XXXX certainly very first, relative financial has Number crisis. our Hercules about some that would global things

you our XXXX, to what a exposure a be If our have was we stage to a of established in at stage third we exposure XXXX, companies, exposure early looked would third third XXXX, investment book had in considered stage expansion companies. companies and to

Today have early part years, market. this we and completely the the last over really we the several exited of highlighted stage

in our we stage. classify what now, in right of business expansion business classify established XX% of XX% and So our about is as is what stage we as

back to global look stage bucket. XXXX venture the crisis as were it debt, losses the earlier financial the you saw at the that majority XXXX, in you of If relates

So that's position basis, we were will, relative something XXXX on better that us of in than period and we a uncertainty, XXXX. that think

also crisis. is in ecosystem would than was that point today the there liquidity XXXX, there out XXXX during that financial significantly more I

will liquidity financial that back activity in volatility, was there is intentional very a If the to extreme there's or sort of you most on look companies substantial stoppage gradually. situation. crisis. outperform historically periods at of economic to the this sidelines was that of abrupt allow in place sitting economy takes cases a the recession slowing the case believe and This not last This of and we relative

will everybody still we that, key to next question environment said home clear the be months get is the into differently start QX. if The be as continues for work several having a duration, and versus in to right. over us answered unknown from QX Now, up if things

very That's great helpful. Very, color.

Program? of an know Now are have SBIC Payroll the switch and funds companies eligible to partner SBA. receive your historical a whether of Protection from you been I Curious going gears. term with a long am to I any portfolio operator

several apply, companies under the get receive funding So PPP approved program. we had have and

that, Can you by quantify chance?

ones sort target a it, not. going and companies moving of are are still or have whether keep it's some received So discussing the they that it to

to So I exact would about it But I of for XX somewhere don't have companies. ballpark the you. numbers XX sort between at

Okay. Last question.

you not BDCs an have buyback You one active of had one have are few Historically, the to place. in program.

internally volatility, about light stocks having been of there volatility quarter the that BDC and potential your you? extreme discussion available and tool in the So to future in price stock the any has in first

Yes.

really historically. during at something are buyback key much in to XXXX. basis. making players the The and we available relative as as at evaluate we is a believe to in that us in It other did not So focus liquidity a have space. we maintain on that that because will be have look on us program We of us a had was number going a of QX we that for possible go-forward place to sure for tool QX differentiator

I for going that say wanted am gave there leave the and others your But chance helpful. a to the it is portfolio I on to and ask. to runway liquidity very, you give disclosure Agreed. companies very

be thanks and So well.

Chris. Thanks well. Stay

Jefferies. is John Your next Hecht of question from

the appreciates color the guys. helpful. all It's and the very afternoon I Good details on portfolio.

venture similarly And the deals in at able would on of kind about I origination just are have diligence, respected of to kind do to deployment diligence, the question say? time capitalists that thinking I more is, same platform, of fact have guess First terms Or distance to is in pace? of by the this environment? your complete close deals I the people that, behavior you

Sure.

with So out in to our to and tell time of too current in environment. meet tell the is Obviously, being flying deliberate I early terms are diligence person. respect methodical in will frame. team we to very not that the companies you

to of bit little are of all different sort way transitioning of a due diligence. a doing we So

extended. the so And expect would to I close time be to

typically three between weeks. from four If to our business you term somewhere look at signed deal, and sheet historically, close

is due that that messaging a we that to management want make on as need and like four we fundings longer to. the take we much things things have look I expectations make focused than weeks. diligence sure If that given we team on is, right, We the have team Current as things longer. getting rather take the as given board. team to six that just will doing now the are And sure get

from that's to think a a nothing but so And close perspective, might something time an would you extension see I of material. little be that I that think bit

go partners remarks seen date prepared And we from our we off have ecosystem. I VC pretty can In is in think have is of that activity, our mentioned to-date. in telling. We statistic seen continued we and of the terms VC it only what what support to

XX. February raised portfolio shelter put were call February our started was XX, XX. in in billion pandemic escalate restrictions early XX place earnings Since February Our companies largely have place The $X.X to last The really subsequent of and in to mid-March. of excess in new of capital.

with I discussions, partners active, suggest But had our financed seen by these VC are also going so our that the that company very is money get am teams pleased tell to support management can far certainly to key I because companies. productive happen. with we from but you to just is what And not not partners. not that we have the that VC we have going needs every going Now that

Okay. And markets you those potential then you impact in of competitors. sort buy seeing to of shakeout was, some eyeing that any competition? Are were second of over the That's any history opportunities have adjacent helpful. chances with your the question had opportunities some as this

John. it's too address that. early to certainly thin opportunities. I There Yes. will be

I think there probably extent be the quarter next will there now, that and after. quarter they those opportunities, to are the

portfolio Our primary continue sure focus platform. be that our support our right are to to able is on and making our best to portfolio, companies our positioned expand grow we to existing business, and now

update Thanks Great. the guys. for very much

Thanks Sure. John.

Your West O'Shea next is question Finian of from Fargo.

me quarter. Hi guys. on on. for Good Thanks the afternoon. having Congratulations

Chris earlier. First question to from follow

developments with treasury from to that SBA. and For are including ability are showing capital to seeing companies recent PPP, the the the access survive criticism, access to companies the those and

So are are seeing challenges? those companies that the they access PPP, critical

we Boards to eligible be up. together have need that allow certainly the that a number not that something The a loan Hercules with and make didn't take an consider. because To we decision. daily. decision to management a and it's PPP their is extent fluid to exchanging team will why decision a is considered of exact we That's that's it's to helpful number continue to be obviously something them the So give to do

are and Some that to in of likely loans. our to companies those I terms keep companies companies retain helpful of for received allowing It's think slightly incredibly worse are number very cases were and a did We guidance those approved companies updated make the funds. treasury, received return some the to the funds the of in companies after them those applied liquidity have initially employees. that been have of And positions in funds. PPP decision receiving small from

couple that's it think next it's kept have the the the and I very ones been once I kept have greater companies the of to opinion will it, we get and certainly valuable of many as helpful to that we visibility been needed. something but exactly how weeks, think in companies,

you just for company. context a portfolio And the Thank there. follow-on the

to down names, all Seatgeek, the or tech $XX it that of most So like million larger looks XXX of you cost. unfunded and drew one its from of marked XX

So benchmark outlook that not for to sports And was the or credit based? based based, things reopen? if this concerts here, your given credit are last most such reopening amongst and and what's guidelines,

Sure.

We would have every we is is a the breach I that company. can in we not What do on different. specific now. that be any them information confidential and to So company to have. provide comments any portfolio are going past you the never not It of are tell going individual we

one commentary a That collateral-based positions. that is not and Seatgeek, of on largest obviously Seatgeek loan. the market-based our some liquidity positions specific have I bucket. provided a is that to larger is as That respect positions very you company with impairment. mentioned, a of does adjustment in our is yield that

you the Okay. an for And I Thank Seth. you. your give update us if maybe for plans facilities? on your Can Thank to me. follow-on, : SBIC you renew may, all or color. extend one that's And for

for thanks question. And the Sure.

funding to in SBA So the we partner look SBIC a our continue at the great and is portfolio companies.

makes for us. evaluate license to applying continue We another to sense will whether

fullest that the have to we continue to the extent. We facility use

so continue we moment. that to update is And no would opportunity. give see at this it good as a there we But

Thank you.

Fin. Thanks

Your Lynch question from Ryan is next of KBW.

for and through that portfolio. afternoon valuation My I just those kind thanks to you of walk all versus my first Can said, mark-to-market process? you you most broad-based the has of the with questions. question adjustments Good taking believe are well. maybe apply of decline insight you adjustments? how loans were Hi. were because into guys there in those do And greater guys when such, took in you took your credit the not the credit-related. Hope write-downs than venture overall but portfolio. you look broad-based a other leveraged spreads for we mark-to-market and lot much middle X% loans, your at markdowns spreads market Just lending is approximately guys

be a process would So helpful. just walk that into

is Ryan, Seth. Absolutely. this

we past all, very made of that we first consistent with processes. So sure are our

How meeting growth are that liquidity company it they against original And meeting adjustments just we it therefore those it very on volatile each to markets make sustainable benchmarks? the how Is those so call past the is is generation really its We go original the that experienced performing and or So actually steps as have liquidity far plan, objectives? portfolio own have? and we thesis. portfolio Is our the process sustaining we at as and adjuster. performance the its its well look is in determine are that it through company underwriting against that our steps thesis. against performing

at benchmark this was we all going that consistent adjustment SMI, SMI actually. measure a XX-K disclose Where make the second that in in yield. portfolio. The the do we And as against It's is, the we our point?

Our processes valuation. going to the

was took consideration the is say, So that for this And consistent in We compared why yield. we answer bit the this the instance, I consider our in portfolio, then do ours against we emphasizing also benchmark very quarter, of highly and portfolio time the kind in to into runway a the to movements your mentioning. Scott cash volatility. and environment. spent extra process between portfolio question, differentiation liquid that little those of the That's

important are this? attention What situation. The shorter paid really our to And what through environment? the how the term get be that our to how is the value So, considering liquidity protracted current sponsors? we longer company's on positioned? should impact would COVID Hopefully this. dimensions portfolio versus

would you add that, there Is Scott? anything else to

Ryan, I maybe specifics. would few and a just things, of one couple then high-level add a

apply did quarters. that make evaluation of them a I have what to and we think process that's that's sure the that all QX. you a in consistently process, exactly most procedures across always what set And important and we thing you done of any have is

it's think not We things also happen of the his as important yield. prepared context. some or the use remarks our had lending. has market is to Venture I just The lower periods maybe historically. benchmark hypothetical volatility had of extreme Seth reiterate lending because to in index middle-market SMI I upper think that middle SMI

is XXX QX of I we the think that down points. use in that basis about one that maybe SMI XXXX highlights was quarter index where

For context in our adjustments market QX yield had portfolio. of we market-based about XXXX, in hypothetical of million $X.X

basis this was down If that of XX. of SMI the year, XXX QX March as points you to compare

saw percentage down our about QX three it XXXX QX market-based QX million or a in we of adjustments million in that's basis. of times basis of on was into what unrealized XXXX So yield hypothetical about And in appreciation that $XX this of a multiple year. $X.X turned of

historically seen actually process for material using So was what we that our procedures. very us, have to mark, relative and

background. good That's Okay. That makes sense.

decent and capital the I in about your amount portfolio I going and the You in curious, way is just venture April. thinking companies February, early a environment are guys a the gave of than think raised to much But as think well raised firms March significant and amount XX in March, liquidity several today. your of this of capital regarding respond the You portfolio positions raised, environment to in last we recent capital capital are months. how some people would portfolio am statistics say, crisis? your really companies I have good guys February have different companies as the of and that raises over as the

today? their willingness I to started through you your portfolio ecosystem venture environment more to your equity to has been community I to recently, there think, venture just you been investors thoughts more sort the start the top gotten February wanted as has capital portfolio of you this Have deployment, your to since slow while get just capital on investors has portfolio raise across, and the some So uncertain? do see, commit of of capital those in how lot whether have trending or see started down guess, venture companies companies a it's and market, capital held

it's about is this Ryan, XX XX And now days right. or old. only fluid,

tell an to companies can XX we So far. of what that able we is billion. you haven't portfolio raised time have sort be What evaluate fully. to of again I assess seen period And extended had that's $X.X and so

a Some in lot of tell I February. activity you that activity came also can came that late of in March.

And activity some including of in that April. very has recently, come

are the of private give I any reasons that out of of very on the companies late backed going drug have to one including seen not couple though to discovery, to-date would why that rounds large biotech think we terms and portfolio our publicly companies. as data noticeable we larger point a week. markets, did much also and last companies weeks including drug behave public So differently ago our several we traded we detail in we seen available raise slowdown And have than this I or have is across publicly our financing portfolio, some continue development one of life companies. sciences as the technology traded

will trajectory to term early of terms the be. too tell So long in what

they additional in key get pick we methodically, portfolio want going is to is support. part as a as diversified tremendous do, environment every think them competitive firms expect continue VC their through of this positive equity amount going for That's that differentiator. liquidity you have to would And go the to not why the to they to support. have that a think to I company believe I the they us having a put But is work. portfolio that to available to them are companies

I as capital who are what's importance, sense. is can. That expect driving million wondering, would just $XXX million think of companies holding the their long as Yes. this companies, early? to early $XX positions repay you I be am I makes just on they loans and liquidity of everybody And environment like to would sort prepayments you upmost QX. in then where in mentioned of

in are why environment? people repaying So this early

early. in is if in terms of context, some our of one each because it's as different is is them some our some did months, why I reasons of helpful runway provides refinance Look, provided think expect sitting the loan on may much see we XX that I portfolio right. there detail of that companies we think And cases, make QX. for XX years In sense case. Again, three we and as in our to of one in matures it that to and or QX

healthy a ecosystem now. also is right There

are where there done. are So there situations getting that is still refinancings certain some

terms company or of We going to a platform chase have the yields. market in never or that's structure been

ago that We was that's now. put our model together XX and this firm have consistently said years since

comfortable called in it's something structure So if we that to don't going to we asked with refinance one are on out. do tell and a of our companies yield stronger think us them we to on feel position and us don't that's us defensible, or

And of then March as your just you credit of advance advance rates, curious, your levels your the of that borrow facilities, is et facilities. is XX, one guys rates available $XXX just with housekeeping on through and you cetera one. leverage to the for with million write-downs only In a press today? given available that well of last, full kind of $XXX a these as release, are around as Or these that portion facilities. I am and on portfolio talk covenants credit about million capacity when

available. made sure the certainly absolutely we have is given that environment, amount No, the full

ready. the current in and So that wouldn't asking But sometimes necessarily you get the fully instance, in are. are It's absolutely pump available. correct we it we prime

and hope are and questions. are time I guys all Those today you Great. appreciate safe. all Okay. the my well

Be Ryan. well. Thanks

of question from next Christopher is Your Nolan Ladenburg Thalmann.

portfolio Hi guys. focus the to growing relatively prepayments, you strong have is not simply are the cash because the Scott, position? build you and

growing So have not not in does that we term But going mean growth that not We short not were in the did growth. that we right. say in would not that we our It portfolio. two We that said does different QX. on growth are focus mean half QX. things, not are be not a to

that sure our responsibility up. capital. and up going our is signing companies at, investors' We there. impact going current the fiduciaries for $XXX million relates as we Our not very our evaluating, continue focus fundamental be our believe screening, holds portfolio grow are to that making is confident And and portfolio clear are period going We new to to closing term of that true the as pipeline short be we let's is believe focus were extended of still be to that we portfolio is that by given actively deals. on year an our on are to we on in the But of it looking this uncertainty COVID-XX.

to And you. below year ratio, the charges the the ratio continued X.XX that then to quarter which which of mechanism what's of keep you impacts that primary the turn see your in unrealized and elevates rest going it second manage assuming debt-to-equity levels equity, depreciation elevated Got level? be your to

Sure.

course in payoffs the we normal Number source for a early of So one, historical been the couple liquidity things. has as one us of mentioned, amortization. always

If business million quarterly at on prepayments this and now, back of look course on between normal we have and you low-end going amortization. between $XX XX-plus course had high-end the million non-normal years $XXX somewhere the inflows

That in repayments so. to do provides to aware to that are we get guidance need activity quickly of That's quarter-to-date seeing to QX. currently that that our are early based $XX million where did a the continue. we what with ability on QX gave very us into the we million we delever $XXX should on we Based of, situation trend portfolio, we expect we in of why generally

remarks, in perspective low already of the With mentioned respect SMI point the corrected into back has to itself depreciation basis XXXs. a the his impairments, XXX Seth from

end that in something quarter It's million that's themselves. some what of go-forward But could have yield now, and early would program reverse ATM quarter in speculate to monitor on too adjustments we the actually of if impairments watch basis. So will were as place we We us hypothetical the collateral-based well. will the obviously for that you $XX see obviously to be.

situation outside no approval under have as of raise ask have our shareholders able to asset into proper But ATM. current in that historically it's do should have absolutely value. net plans As plans we we volatility, to flexibility that extreme sure are to But so. of going remarks, below the think it. done usage no get for equity we to issue current do appropriate that just to to we We Seth in to we we have thing be his stock and to that mentioned make use periods ever

for it you. Thank That's Great. me.

Compass is Your Point. next from of question Alexander Casey

Hi. Good morning.

because what extent environment? their a funding home while business is environment, at single are line Your development particular able a a to get doesn't largest to companies to your and work were And having and at that be you time portfolio transfers to are down to drug well not cost To next really portfolio transfer thus It discovery. accelerate a work in round that process may slow well at just capital development to home requires transfer increase and it in that's human a labs. environment. home work to

for Casey. question. the Hi Thanks Yes.

So a things of couple there.

are very environments. were in cases companies. biotechnology development, many scrappy work drug in are environments. from many them companies actually discovery, drug started home used employee that remote The bases to These first, So companies of are

to a basis. pretty all. have to that ability or the either up and already a from so, And impact perspective, companies those lot have switch And to function not we management set virtually on a at were seen actually quick and an operate overall of

Certainly could we some have has instances down. be some a and the couple slowed of been impacted ongoing of continue the seen have portfolio to trials had have that and in were of we lab work

built the as have have note that in you statistical with long that assets with are are could of pretty multiple that are a provided single months to companies. are These balance on positioned XX, companies in These companies are to early information sheet potentially liquidity weather companies to those stage thing the capitalized. case. XX, most important the we respect think These clinic. of respect incredibly the XX with are how those storm part for to I some well-capitalized asset this that companies, not and

Okay. Thank you.

maturities XX next of what coming the Secondly, in percentage your months? has portfolio debt during due

Zero.

SBIC are would but we some already That actually due paid a September Casey, in had single February. a debenture. off where we in we in position that be it was So

No, not yours, Seth.

loan XX Not companies. portfolio percentage of in liabilities. months? the What your dues Your portfolio your is next

fair. That's Sorry.

on Casey, can you back but we get that. hand we that Yes. to don't have on

Okay.

companies they their funds into older Secondly, not newer in invest cross invested and in investors private many with BDCs equity funds. are run in traditional cases, are Do permitted having to that VC difficulty same because type some portfolio have more of investors limitation?

yes. some In cases,

Okay.

it's don't I underwrite at or the credit the down we right, certainly we the of do we look we only funding just not think syndicate, philosophically names at able to whether road. do is name, because being investors, that thing the the the makeup but the things are historically. We in the assess the additional not terms important of not there every that's looking talked transaction one syndicate. when at looking And about of and spend the in to to time

which of of looking should and amount the or there and at to available need firms arise. So if funded the actually to co-invest liquidity fund out spend fair cross-invest, is we a time ability the trying VC understand

Okay.

particular impact in of that portfolio the in portfolio prune conditions couple Lastly, to the exposure may a How conditions to not of changed you the push out? does past, this some try environment your opportunities your you as of couple areas guys and the that advantaged kind thought of you taken actively financial next thoughts want of about have change actively for years. economic have of to the portions were well

not, have be very to current us that tell saw the where for credits made think decisions to amount north that paid philosophy is in can credit off credit go-forward we that stop deploy principal can If Those are driven QX in get to a what reduced instances to years I And out either prune And those same term to going worked basis. that's the of XX% and with, helpful our the on about comfortable of environment. management did from growth short of get I we a we It's I you tell the not a to of certain opportunity in to that we full. not have in one or that here. actions that see that credits those are is the you we question. we not actively being an it, are is do growth great last credit the going efforts several over perspective, a we going out or hurts QX. comment whether were focus it prepayments again

hope I everyone All again my well you questions. right. for Well, is thank and taking

Thanks Casey.

Operator?

more There no questions are queue. in

ahead. go right. All Scott,

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

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

now may disconnect. You