Hercules Capital (HTGC) 30 Jul 202020 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Hercules Capital Q2 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Following the presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that this conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Hara. Michael you. Thank sir. ahead, Please go

at Bluestein, Thank be XXXX you, conference With welcome Hercules after close Hercules' are everyone, on and market Investment Seth today's Meyer, from results Good for the were htgc.com. Hercules afternoon, CFO. Investor Scott Hercules call from XXXX. quarter call and and second Relations Chief the Officer; accessed of to section second today Juan. can CEO financial quarter us just and of released

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

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

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

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

forward-looking over this will Hercules are statements And for place of with I to date related made release contained forward-looking copies that, and subsequent please to not statements of The the our SEC undue forward-looking statements. turn You hereof, obtain visit the To events. call reliance filings, website. obligation as the on no update assumes these Scott. should in

the our safe Continuing Thank hope thank the going healthy. earnings of and an theme joining all require today. continue overview the pandemic. I'm solid I is you then and and the to for again financial continue XXXX were where Michael, of prudent and successful attention. partners, diligently areas would as challenging environment for us that quarter Hercules commitment with call, a We perform provide who we business greater all a believe that to QX QX start enhancement of you, jobs sheet our staying we to QX despite discuss that was and acknowledging everyone of largely and COVID-XX we credit their management. the of the in more to quarter, balance our Capital, with degree we by facing are employees, a like to during business resiliency, our thanking in performance management three that teams and once key originations, operating specific prioritized result areas

liquidity Our solid. believe the We closed position able to despite one during new quarter and loan, high team new were originations industry-leading overall a our of and our quality credit performance opportunities. And number we improve deals investment was sheet. were our balance delever platform non-accrual that

current given related $XXX more million. and delivered of investment our in commitments focus fundings equity highlights portfolio the QX, our the new In some performance QX. million growth controlled continuing activity to our originated recap me position key best, of on Let and diversification, reflected of We environment. $XXX the debt gross and than of

quarter Our and fundings new seven second nine existing portfolio included companies.

to borrowers. and funding expand our relationships seeing As continued we perform, existing our portfolio with to are companies opportunities have enhance more

technology life and saw more was funding companies. the to companies We strong new towards environment, these both and teams underwriting sciences activity our respect more Our make in assets management this skewed life knowledge our and commitment with sciences although, advantageous. of companies, teams, debt these performance to the commitments, from

resulting rate QX. During loan income from had income guidance investment generated loan million income, consistent cuts and of $X the growth were second quarter, which $XX of reduction fee $X.XX investment $XX.X we impact per In Early resulted total repayments coverage million. as QX our in to of the at million in debt but reflected down The $XXX.X to was million, in $XX.X full of QX, base was million net the less $XX investment results. during with quarterly The March $XXX Fed cash of million share, compared funds we million in of XXX% portfolio $XX or our distribution. repayments million early QX, cost. two in

have XX as took of primarily our that a markets, credit the private in several and to general well the during several our impact with quality QX, credit As ratings interest in weighted of ongoing QX, now portfolio positive our place internal XX% as pandemic. the $XXX.X year-over-year events their X.XX profile portfolio contractual increase is shift have of investment over $XX.X despite at our rating improve investment to portfolio raises, Credit of and of rated Overall, today, credit seen QX. Year-to-date, credits, floor. the we transactions X.XX, on income compared complete million, changed investment and positive improved increase Since income due X we otherwise we rated generated of public XX.X% credit an an of with debt the quarter. year-over-year. companies towards net a rate as of XX.X% debt recovery in end X the watchlist million, its total on and average of capital the strategic of of slightly credits

less X% portfolio X% Our rated X value. and at the portfolio entire debt at credits up make debt than X fair of rated of and the entire cost

value $XX.X a or percentage cost and the approximately we added Patron us respectively cumulative cost new fair investment of X.X% on During portfolio value million to a Technology company's non-accruals, as and giving and investments of five quarter, company, with X.X% our fair the one total debt at $XX.X non-accrual investment and million respectively.

some pandemic and economy COVID-XX long-term business this point. ecosystem that the clear update be this time, in Again, an specific of believe our and like now is provide quarter, areas and three doing detail the for stakeholders duration at us are that are will with company. the environment would I remains on to and to impact things unknown this we ultimate it that the our best important to the for specific shareholders position While we

and continuity wellbeing, of business. the employee First, our

our operations business of Our continuity employees the emphasis while wellbeing on remains our and of pandemic the continues. the

June while closed. remains assuming capacity, have To-date, the and the will interruptions QX or perhaps our California setting of any in to our we material duration to longer. reopened currently that business of not office ability through limitations operate. on Boston are office a And home workforce our remain we work in Our experienced majority with from our

liquidity Second, strength. and sheet balance

is advantage prioritize deals of aggressive business are dislocation. ability we new market our continuing to $XXX ability This be on activity. which available ongoing so. gives that us and We any When liquidity, prudent We of our substantial potential it take believe unfunded to provides also million with and QX the commitments do to ended with to anticipated of liquidity. coverage a us $XXX.X record of million, fund the

$XXX additional Our received a between February, million, in we for value change private million an and draw our although, liquidity liquidity from payoffs placement as of source ordinary and course payoff a our be QX equity number and QX, been our could principal $XX executed as delayed program. was of in time, million in quarter of to expect million ATM amortization. throughout case the net supplemented in that business this raising this received equity always approximately June have well asset $XXX the we At to premium by $XX payments we was payoffs million again $XXX the Early still at materially. early via and early where

Our strong, in record our near-term stack. and heading this crisis and today, no liability liquidity balance debt remained sheet maturities it with was strong into

credit and quality. portfolio Finally,

a impact with balance continue and to crisis. it serve ascertain time diversified We believe both true sheet take that liabilities the this respect well. to And will of us then to will assets

company's make current of sciences entire of up XX% Within have remains portfolio, XX-plus X% nine Although, less in liquidity portfolio, the debt Each to companies $XX another on Of Capital XX-plus Loans companies months XX currently liquidity currently or excess X% of with of liquidity looking succeed has portfolio their not When basis hand closely on debt year-end, least on our that sheet currently having reporting portfolio, liquidity, the months or activity the we investments the of now with are has largest most we XX% over raising through remains XX outstanding for to companies next our have liquidity our six our technology balance all XX-plus with our XX% cost XX liquidity million. balance life cost sheet. fund we monitoring. future, our at than a next those on Within on for at balance while debt of have entire of of now of liquidity XX based factor ability of guarantee important investment ample cash to the XX-plus business of less investments across loans estimate least available. months. these debt strong. months liquidity approximately three sheet. of approximately portfolio. portfolio the our at an portfolio does in that of outstanding cash at our months have has with a months for portfolio the months, our recent which

the of companies XX totaling new continued period Since our execute States, credits debt new during including our our of billion. new United companies May, in and transactions. of XX we $X.X had the capital. late As earnings raise of the have have debt our outbreak current portfolio earnings of call, raised portfolio nearly saw Since early the strategic a debt and watchlist billion last over companies, to beginning several our we many in our of call raised between on February $X.X of portfolio capital, total capital COVID-XX last

one addition, for four new M&A events, closed filed registrations have their which and public of has that In companies have we offerings. five initial had

In raises transactions. several either currently new companies addition or strategic on our capital to working of

cost. debt XX XX% make up our at of currently top debt Our only portfolio investments

will balance XX most the companies months. liquidity varying while a of and liquidity as As these situation, continue XX have sheet on have at call, by of of to at least we each each indicated the them for our on degree balance to impacted one reporting, current all be sheet, but the next recent on months current last least of

annual average know we value end discovery, overweight this of Approximately of public debt at weighted and debt drug public our the our better expect software on during times, as continue period which times the raise to to capitalization approximately for recurring the estimated debt point, by latest the raised strong total portfolio to work over conservative. many Capital that the reporting $XX billion Of to the capital and have cash have June QX, classified billion we market that Our attachment Venture investments pandemic as and ecosystem National endures. have public public companies The a funds seen as sectors cost recent as reflects we In to in or This half life average and these raised as traded according June on venture companies data gathered investments, weighted the $XX.X U.S., companies, contractual ratio of period. we are the equals average today. delivery, PitchBook a year, in to that as of also Association. on quarter. our revenue funds reports. Three position basis as of continues $X.X is is put the be capitalization continues market either we Through And companies, equity Based at publicly capital XX. revenue as the our sciences towards technology believe of venture portfolio, model. based XX.X in we XX. the of capital companies. XX% with That of debt X.XX recurring them have portfolio software of invested to these what billion driven a companies companies these data are first a equity to continues approximately during make of perform relative the that our most drug have software of in cost a of weighted XX%

on to continues actively focus and be an book level with credit proactively. appropriate maintaining our working of financial managing partners Our liquidity, our companies and

billion of $X with in evaluating typically originations. an been investment a is currently potential bar of The for high and operation that Our challenging to new trend into for credits, pushes selective year. and appropriate pipeline continue flowing continue been slower off has deals managers incredibly debt financing There which be this active for we stronger on some cases. extremely need risk the equity busy expect are capital And deployment. the that has environment deals an credit deal to who abundance returns. prudent new investments. team quality overall exceeds terms remains of QX our adjusted in we focused But remains quarter capital

that will. be We continue it want to and when get that of time, profile as opportunity we with arises, that to believe it to this quality opportunities to happen. We and optimistic we expect of investment the better will advantage are new take positioned

investment $X.XX cost, of our generated of our $X.XX like to quarterly distribution share. per debt share portfolio based Finally, NII coverage I our shareholder in per at our QX distribution. at With billion XXX% would discuss

to have distribution not making share. $X.XX current are We any our consecutive declared cash our distribution fifth per quarterly changes base and of

our addition in allowed be their this you subject the with earnings for undistributed going and have Seth. $X current to being QX pleased unique and our million management or with those spillover our our final variable to based also $XX wellbeing of sustainability of to not to acknowledge And maintaining our our net respect distribution fortunate cumulative or ability base distribution, forward, very with proud changes income a combined over have hope since to have much, for our internal surpassed per investment continue do and It we structure I we and This and dedicated am will most of affected wishes also in now turn and distributions now In in outlook, focus. spillover tax over to public $X.XX are invest milestone. shareholder everyone. I base any challenging distribution. us These billion filings. to franchise for aligned the flexibility, see share additional platform. we employees sincere covering who provides to unprecedented talented that approximately the times to near-term significant team XXXX. of downward spirit, With Thank for to has reach and send to anticipate currently I each announced the operating quarterly testament pandemic are and effort like would debut in to us this we our very We to call our all thank by is June, to everyone. all. our that and our continue quarterly

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

likely pandemic is amongated and anticipated brighter the this duration to the that on have Given of it economy. impact our

the very taken well the timed, will well continue balance ahead and position previously We million position. quarter, on $XX value we improve we sheet, to been steps continue net the raised strengthening think as a rate The proactive liquidity enhancing we look have of our in our priced asset and $XX fixed have maintaining further to and a we at focus to our improve second at arranged equity sheet X.XX%. liquidity to a portfolio. In million to successfully diversified of unsecured drew balance strengthen and premium the debt and be

and new another or May, was in reduction the our a upon attractive $XX.X share SBIC guidance share the income additional and licensing line unrealized million in leverage with on liquidity, that, share statement let’s a per I'll finally, activity, the decrease rate guided income X% Green highlights, performance attention that $X.XX by SBA provide Fed prepayment per the the highlights. Today, and to the final to I outlook. and resulted in activity, us will Net with cuts of following and QX reduction Light and license, NII received where turn would letter the realized X% areas, statement for income also performance With to quarter-over-quarter investment focus from We we have in which which a the NAV, financing. $X.XX. related

million premium saw a share, of onetime lower XX.X% to and for drivers of income quarter. of and compared and fees a decrease we the by the during income NAV, to reduced by were effective and single yields core addition main we the more associated $XX in The which in The and we prior and of due before paid rate per with payoffs and the earnings investment investment to rate the QX primary XX.X% in the yield decrease equity the payoff off. vintage was net due normal was lower at that again, the the full The Total total mentioned. the unamortized $XX driver in driven XX.X%, mentioned XX.X% income loan of on impact decrease in the was, Fed decrease and the placed playoffs March and X.X% for a of effective were The the quarter quarter the to yield quarter core $X.XX quarter. in our the reduced to quarterly loans of QX. the fee million, second with impact Fed raised loans related The the in first that fee lower prior to size compared that a full delusion. non-accrual As what compared cuts respectively, income Scott cuts. two quarter the to

expenses. to Turning

in credit million to in facility million expense the quarter, guidance from expenses prior increased where taxes, compared with with of quarter use prior Interest payroll $XX.X for slightly expense compensation decrease fees expenses lower higher $XX.X commensurate issued compared to lower million million QX million from and prior to Our $XX.X the and quarter, quarter, fundings total additional of the the by the in consistent decrease than $XX.X with variable QX. during the unsecured the generally my $XX.X decreased greater and May. quarter. to million the in operating to notes the was driven decreased the commensurate SG&A $XX seasonal QX is

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

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

net appreciation unrealized of decreased, million X.X%. NAV an this represents of unrealized increase change change at our $XX.X per share drivers $X.XX quarter, in the the per increase to new the the the XX% represents During share; increased NAV appreciation. to share equity a were net per $XX.X for main NAV. $XX.XX of The premium million of raised and The the quarter $XX.X appreciation of of unrealized recovery a million first sorry,

was our Our by $XX.X equity including by The and debt warrant to in $XX.X million approximately on drivers collateral appreciation of and/or mark-to-market reversals due driven $XX.X of unrealized to attributable which the write-offs, partially depreciation appreciation prior the depreciation key largely well equity were portfolio million the portfolio on one the company. yield loan the of the impairments, as portfolio, for million adjustments of mark-to-market appreciation, million unrealized as warrant of and of sale portfolio, $XX.X offset based included portfolio.

$X.X to write-off the appreciation. from or paid realized million certain of prior million from gains in net gains Excluding position $X.X losses the of offset were and disposal compared $X.X warrants. yield of QX million $X.X Net of based loans loan on legacy portfolio impairments off, collateral equity expiration by an reversal based million, of comprised the XXX,XXX depreciation experiencing of

regulatory and the At equity discuss increasing our program, to prior XXX.X% unrealized GAAP to XXX% via regulatory due appreciation leverage was as end our leverage XXX.X% cash raised Netting compared to on the quarter, GAAP the respectively. ATM our like as sheet, XX.X%, well the the quarter which equity our balance the and and base. decreased leverage. of the I’d Next, respectively, out was in

with approximately $XXX announced facility manage and supported more of We in June. of million a drawn the continue February business credit targeted quarter to billion a than capacity XXX% basis. in by with placement of of on regulatory leverage $X.X ended liquidity and ceiling the private $XX million We record

principle monthly to Our our collection, as liquidity as interest course, well enhanced by early payoffs. normal and continues be

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

Finally, on the expectations on outlooks.

remainder impact apply income In Our guidance core rate point XX% the QX quarter basis the for full to XXXX. of the of continues XX% our reflected to of XXX QX net cuts. investment yield Fed

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

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

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

We cost relatively compared third the borrowing quarter stable remain to our to second quarter. expect

activity subject to for the borrowing numerous best that prepayment we our help letter be quarter. solid but SBA on to difficult $XXX delivered currently the a to average third to environment. mentioned decreasing we as increase earlier, will operating continue In us QX the predict, managing. believe focus is we very from costs. the before not license. current approval and This we forward, a position weighted The and things contribute a we the will expect going the $XXX Although to Green likely timing us only in in SBIC programs year available closing, given a that also And will our are finally, liquidity, priorities of final million SBA the new to end million received Light of

call Warren So begin to turn the Warren, call over the now you. over – part. to I'll to Q&A the

Yes, Instructions] Piper our first sir. And from Love [Operator from Sandler. comes Crispin question

not investments and new in how would source just person? past meet to about your my deal little less focused taking being talk Are to how traveling you types activity are with curious you despite normal with that existing, on you more home guys, and different new teams questions. nine portfolio Can smaller commentary relate and hear legacy the deal and Hey you more did able for working working I companies clients seven about management activity? thank deals, or impacted bit from of able or to quarters? a has come the

Sure.

already have on respect pipeline confirmatory. for like. is to looks the greater with there go primary to definitely the really two placed management every That's our quarter different in familiarity are and we fundings really portfolio, the numbers comfort one, a emphasis depending really we we the person In to Number diligence very assets within QX, being different our environment. the existing that. and or out and on can across So teams portfolio, what than specifically, having go and do and able – have due current the the relationship, be with being diligence in reasons

that seeing, of The fund and as well, milestones, achieving second number thing we're we capital mentioned to performance this in companies looking a initiatives. additional some portfolio and are for QX help our growth

we're There opportunities ability side, of. terms our no new in we're take portfolio the that of looking has current So across funding really to seeing financings. complete attractive environment to question advantage debt that an on the is the impact

for pleased in us challenging. new and in in go very very can't we and and and can't what bar and high a portfolio but We’re nearly operations, you meet the an is commitments, just adding the with familiarity you seven of new company the business more QX, did where $XXX simply get companies providing and environment person the travel go million it's with

more And then just me. for Okay. one

a second little the bit from could investment fee you expect do you So are you quarter your decline to relative – levels? the lower – some what even or out would believe there? stable quarter, trying to improvement – trajectory for in be can on the you income Do what it total seeing first, in second be or views

Sure.

announced, we're of NII, So In entire impact bridge attributable the $X.XX don't guidance. amount funds guidance provide provide of at $X.XX the directly and in payoffs, we a had to we do QX its NII QX reduction paid But we vintage in our cuts. now I remarks so really to of QX, about to contractual of loans NII And quarter. not provide sort going during in is we from floor. tried and the think between of had prepared we XX% a $X.XX that QX. had announcing rate what go-forward as off we Fed $X.XX obviously that then the March We're the lower portfolio and is to

coming the a see a of be So the prepayments driven have on prepayments side, going that income yield the quarterly cuts basis. from compression amounts rate go-forward further any largely forward, basis. And and further we we on don't the by any vintage on it'll of fee

for Okay. Thank you question. taking my

Sure.

comes Finian with question from our Wells Fargo. And next

Good Hi environments, Thanks also afternoon. companies just lot strong were a couple first high a pipeline. one level one you the on for high my had your funding, taking guys. mentioned Scott, quality question. of of that you the getting very comments, was

are you getting be side? any the this pipeline, you more dovetail your a that on us, for larger that credit opportunities color would If aggressive expand Or just appreciated? maybe couple there

Sure.

just I like the you mentioned. it's things think So two

is, despite fact companies up So think I the right thing one, a evaluating the certainly are number considerably. we that many equity lot of there at companies. looking some boost that pipeline second capital, are larger are transactions now, raising which But does

speaking some the Some entire the look canvas make closed actual evaluate market, that And pipeline to so addressable of active that's to as want ones debt and converting that's financing. team's terms in we to landscape. for seeing, currently them, them; looking every And it's evaluating, that's in in company we're sure we're the our good job our We of exploring at being there, good, transactions. companies into then not from that and do that debt out incredibly we're financing. are of always market, just selective

any I seeing Is follow there know a on done front? And portfolio. in this shopped Are the any, you've portfolios example an you opportunity to just that. helpful. That's that Ares being around? Are past for Okay. you any seeing

has that at things, few We smaller of to but nothing the are aware current us a time. been attractive

final Light the on one small a you Green have third for. Okay, thanks. the SBA, SBA, One

limits new commitments, SBIC you course family on I you – being available the SBA paid But the Can remaining what $XXX million. are on debenture? think are anticipated the the an approved of is down. �� you have hire assuming finally

we down that that, license, we'll on So the looking license, down of million we've we're it for? approved, that had for above paid what arranging is we $XXX at that be the Is that $XXX million, million part Finian, $XXX moment were February. to paid you which existing assuming the in the

looking have going for forward what new Well, I'm Yes. you'll one. with the

I one think one it is sounds amortized, and you being is said the right? the $XXX million like new current

our the amount. small million, due come see due, near-term about webpage most In in significant XXXX deck XXXX, is the amount amounts the you a – Yes. it's amount $XX when in the on in is can those

runs off we'll that and they portfolio So as pay the as due. come

so much. for Okay. Thanks That's all me.

Fin. Thanks,

Chris from question York And our comes with JMP next Mr. Securities.

questions. thanks Hey for taking guys, my

So just moment. talk like new would reduce just for X? have you terms beginning the call And Scott, deals the this first I'd either on bank competitive environment environment say year, you competition? receiving characterize operating to seen new begin to or about were today, let's it the of January you the how non-bank a versus

Chris. Thanks, Sure.

to beginning beginning with each would terms comparing at of So to the the year, other seeing with the of what COVID. the consistent current largely were at terms respect we they I are say

year. seen that of say the sort with we've and it of we terms. right where conservative opportunities on getting terms. characterize the the time be days, of bit with environment pricing, of sort in XX that themselves as presented able now, a So little did consistent at some to We March back a over were were period, And the I the April we and little beginning would would sort see was XX slightly last to I more bit. better attractive more come

we landscape sort been said, of don't sure always transactions, continues I of we we to that kind pre-COVID team environment, that historically, there see good the at chase the to in do to couple making in want our of very it as is market, the we've be as So are tend has deals think a do. competitive certain the players we

We have the with of expect the a trying our we we current aggressive a that better are we the deals we're And the perfectly win enough we two who's to to are liquidity into to bit in now firms to advantage little think row, remarks, marginal we a we In to get we the and are more of we be can position continue else, and sheet take now, go in and those we get seeing based of will closer opportunities that to strong deeper better, that's balance somebody our said where as want why environment, assessment we've letting bit win. aggressive. this little be comfortable the time, to pandemic deals really to come. get the deals think the end on everything willing quarters think more to emphasizing a they pandemic, that incredibly opportunities when operating

it. helpful very Got That's color.

extensions IO periods? maybe on for term. back you XX periods, ask down IO or say then And changes months? XX months Just Have drilling of maybe any seen borrowers XX in one to to

Sure.

So I’ll take first. that first question

So we've opposite. actually seen the

about the companies. come negative again truly bullet non-bank some for occasion, can that's ourselves as seen and that and structuring that the terms That's get months, talked question, last in cash we've again, the so over loans of way deals unless couple to XXXX, saw we're we XXXX to are it exceptional With saw on flow respect a game in it from and couple of historically, other to that a into place seen perspective. at have that a the are just play mechanism seen that we think the second we players all going bank essentially and XXXX, really part of an of change comfortable. actually the haven't a there a only been not last we've creative in put opportunity have provisions. that space we of So or We've in that interest we something we've over year lot other going structured seen it's

not portfolio. only respect really across I think But in XX their a part to the question of we've actually over on be them pulled we've at of the and defend entire or requests, of the to than and had of extensions it a COVID the bank with only think as respect back number made handful of material of space changes a kind to some players current aggressive periods time period. beginning I fairly trying that of completed April they're number portfolios. interest less With the XX the March, but on small the days interest companies last question. final in amendments We've is the seen probably amendments

in just stage and enterprise the increase funding growth late of a desire tech appears the which VC, pace for fundraising seen Does stage revenue helpful Great. companies? lending on active your be environment of Staying increase recurring today? Again, on a by very in insightful. more topic maybe later VCs stage, has we've a to value then be And in this that robust consequential to record.

look technology last our which greater venture of two growth of at about stage, done And later we've billion, It book, stage sort revenue is so, businesses. or a part right transitioned different $X.X opportunity. stage is of kind what in technology we've really our into years opportunities than technology of stage if our profile billion kind does. underwriting book recurring than significant over traditional you now $X.X of a That's XX% the later

we've the capital of with closing with. into so speaking actually seen that number influx certainly of in equity space, we're And and an that of terms companies to financings influx

influx The thing into with other tech, respect just that's we've sort was biotech. it seen across equity specific a of stage market, of the late to capital tremendous not that

biotechnology space. the over year-to-date at billion $X.X If public and When numbers you things, of new combine capital. have you're the you of had you've biotech year-to-date that billion raised what funded markets at VCs the $XX biotechnology into look kind equity IPOs on into side XX year-to-date, capital the that of flowing have of looking equity

tech of that biotech for been support equity just And tremendous year-to-date. near-term. stage for there's we amount and trend don't later see a changing So

great. That's

saw and into has we'll quarter, they in me, question second then pretty in for financing be hop robust normally Okay. company's the deals the capital to queue. market. debt this Gibraltar the back Last than do for larger I and demand suspect

your that business So could and update growth? then you on expectations for us

Sure.

don't historically, portfolio So their specific level on and company, as we themselves. a disclose of is given high what they announced said information that commentary it we've business outside and performance

interest should you to that surprise It now sort think situation given not I perform be accurately, very continues is well, a the pipeline continues credit capitalized is mean, I ABL They our extensive. to initial perform in very above business or environment, their and are but the well anybody, demand that very current strong. to business described a shop right at expectations. the of and

guys. Fair Thanks enough. Okay. me. for it That's

Sure. Thanks, Chris.

ladies Mr. And next gentlemen, comes our Tim Hayes from B. and Riley. from question

on guys. good is quarter. Mike Tim. Congrats Hey on for This actually a

Mike. Thanks,

on XXXX and slowed pause election. little if bit of in the kind Hercules not a around mistaken down So I'm went back

activity? was I on can just election? relates wondering, origination And about the you're with any I specifically So thinking you it color to provide guess how upcoming how

specific with Sure. of what in portfolio we were added able do when in with companies I portfolio portfolio $XXX able being additional obviously to new seven QX, commitments, respect fundings, that clear We've in $XXX some pleased million companies existing were nine million support been the anything with our selective very new think of again, to and new don't terms very in we financing. commentary QX election. originations. QX very the to of We're there's we're and to

continue seeing confident way market take will deals approach we're number And of to of half we're we're to those to in be the what in opportunities. to conservative for get but the year, looking appropriate a second going going we're to So a that attractive able we're that the be to structured a do.

Thank just one helpful. then very That's And follow-up. much. very you

eventual as current what level other rebound, size record you side could of the a prepare economic infrastructure, just the about and next think your for the portfolio portfolio? you today, we As support wondering of given I'm

great a That's question.

the the or situation of we the talked last finance to platform and have fact been, platform about going and the invest both sure at growth a objectives a We're has months, to team, forward our basis. we One platform team. record and in investment continued perspective. we’ve cost a to group COVID is to have place support that's from and We've we over company, the our on in over virtually additions we've and that support. we billion operations, to openly credit that able is $X.XX the and that billion, legal that We portfolio have a that team, pretty the our currently existing course the every our support to can changed of the six added believe the make The year have last now $X.X us $X portfolio within that right billion billion, so things continue we go in into the level. $X.X invest infrastructure continue not invest and made us team in team,

Thank for helpful. That's taking my you questions,

from question next our Jefferies. comes John Mr. And from

really tell Hey level of credit program? any there us, was they appreciate the – portfolio the other can taking that on guys, questions. you're or company, did stimulus all any access thanks and the them thought do you know respect program you just Scott, are or helpful. liquidity color But like get I PPP for your with of And – quarter is any the good financing, companies very the to my to for

program, loans, somewhere received number companies. did There we were companies return is XX for confirmation ended specifically, between stimulus respect also not to PPP received XXX% but the that to have any other up funds. a respect with with is and and XX we that we several to final PPP our XX estimate the roughly So are PPP ones to that with to funds, aware received XX respect of, applied funds. some about and numbers, applied don't decision those We have other estimate companies making kept but and

makes judgment given forth, lack that economy sort due in weigh And the and deals versus that sense. that companies, now How because then forth? Okay. in – about have get so don't on, all and current deal ton a go companies you much it's like does to just tech the growth talked of talked you factors inability these of other a high ability of But diligence selectivity diligence of are and your ton about and so person innovation, to tough environment due typically GDP factors. on correlation to the

I of think combination it's two. the a

ultimate away the know to are predict elongated global period be We just don't environment. difficult the dealing given that from, more in current time. this cautious is to being a that going if crisis a is it's in QX impact originations, kind definitely and of bit right, near-term, this and in for little be there of or will if This something going is to a QX, we terms with the go new an we're vaccine of

we've go more it's frequently questions, the eye than adapted using historically, we've in and changes, was underwriting some are zoom can So – to that's the company a were but person every can we do some to the despite approach there innovative replace done, that and cautious our made impacting traditional in technology we is in new we a with broader and and year we extensive based we originations fact same look obviously that And the firm financing, meet and also is to deals the operate. tough and last built respect say, across when travel we’ve diligence. that you ask table level as there these see the an will economy. operated we're our nothing of due credit certainly going old we're to kind we've due current concerns lot would and not But team sit originations this person and of about get companies certainly in-person did ability teams I able in environment, to certainly on When not diligence. that continue always how how the to That's do school organization. management did a are

mean, Okay. a pharmaceuticals so I'm consumer Thanks. seismic this, question, final I forth. And and we've then shift obviously in there And biotech result FinTech, behavior payments is in you're and emerging a and a of how your it is as any impact the will guys there kind focused these of or wondering, just sectors increasing on side? swift too sectors are thinking you about that been and have you're changes earlier, seen

a of sort what and really spent you the team and our considerable going landscape overall have So yes a future around time, perspective. from both on of on an We amount life just the What we to innovation to get side from the are outlined. does see the type changes and that in question and like of yes. side, trying technology technology sciences look as of investment exact the hands an sort

that something looking are we about and thinking it’s at. exploring So actively

of We some too couple to think our areas Obviously, in we originations, screens, and But in going couple for intrigued areas what follow assuming holds the by into speaking in them. us because that terms us. provide then those much diligencing have could everyone's to second are, to of half the are that to internal turn on into with respect year there that focusing a make are are diligence transactions we want of areas a we're specific actively terms new a very changes I of started of companies don't information to attractive. number of the

Thanks Great. guys and congratulations.

Thanks John.

Nolan our question from Thalmann]. Christopher comes And Mr. [Ladenburg next

you're pricing to doing, deals that in books? already new the on those what's getting on guys relative yields, of terms the you're Hey

XXXX. with consistent very XXXX what think we were I seeing in again, So of beginning the and in

yield portfolio, If core across it's range. booking, deals that to at you fall sort what within the XX% that the is core, look guidance new all we're XX% our of

Okay.

return, world adjusted in the simply you're on market will right is your going yield. is everything that bear? what really with risk or Given XX% Is XX% okay an – just market really to now the the it

to XX on that sitting the months provided of these adjusted risk of cases, that in well are of that liquidity, right of return. do we companies hundreds XX companies when you Look, inappropriate some millions I are seven runway. think cases some onboarding we think the in look how capitalized to capital look with you are dollars at are, we companies if that at now it's QX, In

or sort you it context in And you in historically lower people perspective think and at more which the of perfectly lower credits over market upper that. we a consistently the what think think to credits weaker middle yield strong that, from next when you put yields. so of confident for you several the We're compare rather love appropriate several a is I what okay but this are Of and there our that is in is what to structure you're opportunities, we've when lending, And very yield if have years. book have book it years. market we some what quality looking deals, as to now challenging, used course, about companies it with a some that dangerous tighter than is. we is to I of that couple can basis than focused that environment points yield the is not aggressive that's have Across portfolio, would and we're think safer firm just going team higher opportunities? do higher on hundred it middle slightly now, yield that as for and I'd the We, seen last game. tell

case still the is debt Great. miss X.XXx And it threshold in I for equity? target

we're now regulatory target and leverage, It ceiling is. XX% From XXX% a us net for about XXX% is right at regulatory perspective, regulatory. the

Great.

Thank you. Okay.

next from Mr. question our Henry comes from And Wedbush.

situation you've Great the loss good are unrealized you you market think in where start for position. since addition are is us performance, where, point good percentage the and and Obviously Good update in afternoon, months, I seeing on And thinking favorable. just given companies. fundamentals actual sectors in fundamentals that that of – we mean, of and do everyone. call. P&L lots the your from at. taking my six are cash of cases, dramatically a we last But the to in in market are marks up your holding got you're a the look view, factors ahead when And running your disconnect of an appreciation but fundamental changes thanks liquidity a are when for portfolio the – situation market fundamentals? news quarter, of the there, March, I’ve still all good, other a companies we the where strict companies, actually well. – you great of for to not suggested way some fairly runway is have look at in Or in the When we're improved you a market's

to So different two ways. that answer question I'm going

what the And and saying equity will a time believe take what disconnect think we that a So for as out. saying. is a the are that between and to play economy absolutely it real markets we dislocation is there firm,

we two had anticipated companies talking had things. billion COVID of that actually this of in late hit is over The we've XX the the in better significantly what higher Number of liquidity United days beginning something that's they're we we're we're be going the is and what on first of absolutely of hearing of evaluating in And So based sort this seeing holding telling crisis. that I over much the equity the new relative us to and hearing that we're with market. States what seeing. believe at we would had one, fact real than impact of the With portfolio sort respect are raised $X.X up terms say from anticipated crisis. since markets what case capital respect crisis, to terms February what what the was economic in stock from to XX to the than the impact this lot fundraising to and companies a it is specifically, of our

stage, our XX% of really portfolio, terms sciences diversified XX% depends In In on or is by the the of life and of is impact, sort sector our sector, we are it highly fundamental right. technology. more our on of book about. book

drug companies of sciences ongoing terms in life And delays haven't seen we there outside space, drug pretty development. discovery, activity. vast the the in clinical really fundamental any some impact our majority are Within immaterial of of

a hard, and performed companies have expected. in And this But On us we obviously good of at actually up lot crisis. makes the we've there side, a performance well thing that a being have and than are that in tech very a number talked for of had remarks. number industries prepared are the the who hit level very we companies who in about small worse less of above portfolio is been the as than portfolio fundamental has our X% expectations

have license, the it you enough in SBIC way the capital, you people get companies, your your case, you think terms of regulatory your I and mixed about on process between of fairly to expected the originations? or then SBIC to In keep invest SBA quickly, an ratio. that – from that is advantages leverage in and don't what the have license. your advantage obviously connect the lots to of the in comments thought including portfolio do of capital SBA that fact So,

Sure.

accretive be had a and SBIC we would SBA. Hercules eligible franchise. now a we've funds. crossed we good XX-plus see program to different relationship the opportunities SBA the across it. relationship come very that's been has and be The should would and able very been that financing Hercules So year with believe platform It's we that number it's a new to We we of get put that into fund, three

very big from So a company. as perspective, picture view attractive a for we source financing the it

open new of going SBIC a does It's your funds. allow a you? it service existing expected new pool just an you one, doors originations for few license, having to a that or up to Is new

able be as that we be there take to to former, will the advantage hope but of Primarily additional opportunities well. some

helpful. Thank that's And questions. very – you no, answering then for my

you, Thank Henry.

Casey And our Compass comes from with next Alexander Point. question

Hi, good afternoon.

originations in $XXX I I you $XXX mean, to missed million of range a expected the Seth, all, of million fundings mentioned may for give or payoffs you early First QX? for have this. QX. Did

million I yes. we payoffs There did is were indicated, not. $XXX what on

Okay.

to companies. you last software my chasing pricing because of looking to BDC, everybody been area. broader and like But just has area quarters seems a cash that including your are of you're traditional And is changed? every a has almost in that software pretty from thinks listening software potentially are Secondly, software allocation the at And just be. that it has just of flow experience their what kind BDCs couple in level, Has competition the companies because good place a the good that portfolio brother more down it, companies. sized and been slowing

Thanks, Casey.

there, your observation certainly of doing chasing we software and saying is they're actively is that sort So with everyone that agree software.

software pretty I define as we is think specific. what

go more recurring of after. the revenue contractual BDCs below the of have market these middle that little more part The we the of part later be stage, that are a lower for that So the businesses traditional, seen models the in aggressive annual tend you've bit market some is market large part. to

going the asset generally and are that's If and between we're are debt you look average. we million larger to the $XX somewhere below an financing later at managers $XX of play. some making the threshold going that average where million software stage to in the be space, That's speaking,

yield software we little the in, of And any so we've to bit material in have that the part but seen a we it seen degree. compression of not play market really

Okay. helpful. Thank That's you.

the whether at to versus or grow originations you give or the some expect contract back sense Going the would to least the as you quarter? us to fundings, payoffs in portfolio

can to with will and a respect provide prepayments do provide to XXX, generally So we've respect the historically, predict. of things. guidance with largest to or number in ultimately QX just quarterly and not. guidance. see not not we're we growth number something or term, growth. any will a to that If We've the attractive QX to We from we determine that's we for number speaking of interested in diligence that And have that tried franchise, gave concerned to them. we're the side seen don't it's this And guidance grow those have not for be in that's going closed, vary we difficult XXX growth deals there think we're be in not portfolio. that currently attractive historically, We'll we'll the see Longer materially now. our ability opportunities from are portfolio. just is our if done going that not process. whether underwriting we're some going are subject of sake and driver that not to have of growth The range we And and what book opportunities anticipated that prepayment to closing, but very get to we as a about to will

my Understood. taking very much Thank questions. for you

Casey. Thanks, Sure.

Ryan Lynch from And KBW. next comes with question our

thanks for my Hey, taking good questions. afternoon. And

had higher little a a more First one, I question. level of

provided venture of slide your on XX very in capital, deck regarding be venture statistics investment seems regarding activity fundraising Page strong. capital, You some that guys to

companies You call, of also cash portfolio since have have provided companies your I some commentary, last billion high XX your levels think mentioned earnings raised $X.X runway.

on So and as well capital as portfolio. sharp declines venture as I unemployment just in economic look at statistics data, the these your statistics market match you've U.S. both don't the specific rates. really general – These that provided the really seen we've GDP

levels? capital just seems funding the So your be much markets capital And I companies really you really unabated. operating do the the opinion venture for ecosystem portfolio why that love your access on pre-pandemic changed to from feel would hear has to to

Sure.

questions of So great couple there.

real think in that what this disconnect is the one, fundamentally question, this a impact believe public and response So markets crisis. we between prior is number from the I there said we a but economic equity to

I think a reasons incredibly with ecosystem to one, a indicator the couple VC the sort be why there's seeing resilient. contrary respect of Number of tends you're to VC market.

where There stops equity speaking, the look including starts very crisis. you several through to you into the couple had have crises, companies ecosystem you've inflows VC periods had proven pull seen And a go resilient. crisis. and back. way, had crisis, along you global so the the at been the you internet of be VC and the you X/XX back financial ecosystem If Broadly has

this things large biotechnology of driven. be looking innovation technology. at to more one at at people I the terms technologically that's changing the And looking make seeing and are at People solutions, crisis, of whether of driver fabric a and or way going side, a the society is, it consumers vaccine going are of really change of not or think technology sort are the solutions on side, interact. out whether to time this You're looking on be ways of that that it therapeutic as in just

And solutions parts And I right amount so more those opportunities. equity companies much that's market. seeing tremendous the into think that flow have of attractive technology-enabled are you're the of now why

being commentary good That's much talked of due on you to from difficult environment companies. the environment very jumping given It's kind more Okay. color diligence and Kind helpful that. uncertain. of off there, a about

the some focus companies. continue this out net of until or we think a show expect the will of to uncertainty you You contract Hercules’ really and bar pandemic? Do existing higher to have that it's given portfolio just portfolio fair repayments get on that

That level QX, from we driven to a perspective. QX what again, think growth be had the of in QX. of we indicated, portfolio. going In you'll QX cost million, the $XX certainly the is as across I $XX and And see case million wasn't in largely activity prepayment by portfolio

We are confident in deals. continue new to our originate ability

and closer of bit into expect the get deal than we pandemic as up couple a end now. indicated as new is activity pick a we've it times We when is little the later to

opportunities are and terms in prepared $XXX of of the with the our And And so optimistic of position origination business. the current a in gas are really to it’s we we not confident very step million liquidity we're given on side we again, to think see that whether pedal, grows or And for contracts portfolio focus once us. attractive any us. quarter the

focused growing can got on the And We balance sheet enough the we deals and opportunity are growing do be to book we are We're of the think just BDC. where see now, if book, to a so. strong not we've quickly book. going that deals sake we We're attractive. an internally an managed aggressive very for very book the

on a everybody some diligence harder of meaningful and due you sizes of if on earlier, it. Does larger deals up evaluating one do mentioned given larger limited are companies make you some where the the that the process and those. of harder amount it closing sense have, and shift in your resources can impact essentially Hercules. to companies. to of – much you focus larger the kind you Got And larger some then time of has. larger Okay. And is to guys companies some deal end it you focus to has just companies It deals, more maybe to more the

question, that for then number your yours? is of that one sheet should of of be feel focus And on two, what part company? a deal of balance that portfolio you size of kind the single level comfortable that's all So a holding

Sure.

a sort Number absolutely problem. So things have of we there. not one, resource three do

business. XX lending lending team deepest look have about company employees. we venture we have, we you in if the have think at today or think is, growth landscape, I the time the I The stage full

We added team, legal our have over team, XX individuals team team credit and our our to operations on our our investment team, year-to-date. we've expanded finance and

on not With you large would diversification. also deals, the do quickly, respect on attractive. focus constraints the you the So this one put there's in way. But points board two or that's later and with any pretty look, business if we question can are stage some to say opportunities, we I resource no built

diversified it's by a and always to focus stage, us. for us, and focus sector, highly continue geography going sponsor has be being so And been for a to

platform. to sure lending right we to of a deals. build venture grow much firm don't that's diversified, it our that's a would to in way that way business a think building be So and rather the that want do just methodically a We couple we large given we're make going slowly, that's

what And portfolio and on size portfolio was feel your hold comfortable that single the do for a it holding or your borrower? on largest you in holding

that million a it us. from sheet commitment a And we where size that And million in So perspective. company. with could several today, for concern $XXX of $XXX the any we've hold fundings to our $XXX portfolio commitments one range in million are is balance be done wouldn't

today. Those my are Okay, understood. I time appreciate questions. the all

Thanks, Ryan. Sure.

Instructions] And question is from Securities. our Chris next York JMP [Operator with

portfolio Hey one liquidity. quick on guys, just follow-up. It's company

another How portfolio facilities has by companies approach want credit to perspective. your sequentially? funded revolving utilization on it Just from change

Sure.

have actually very little to we credit So exposure facilities. traditional revolving

would less classify haven't respect you as And utilizing all we change that look $XX sort If our seen true borrowers, we terms credit million with facilities. to our any across those facilities. of really revolving from behavior at revolving in credit entire than it's of portfolio,

features or In commitments delayed sort may terms of sort or term that of that unfunded loans not may available. draw be of are

material any behavior. change also not seen We in have

our at I our balance our you look when the every strength sheet, at, of when one at looks balance think of understands you our sheet. portfolio, look borrowers

those So there's unfunded about commitments. to no fund concern ability our

companies, on they're seen to sort run concerning haven't just asking create we so traditional where all bank this of borrow. type atmosphere And or us the

our of that. cover multiple I And know liquidity to borrowers our We enough have a commitments. of unfunded more all than think

for That's me. again. Thanks Great. it

Chris. Thanks

have we further no at this And time. questions

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

much does Ladies call. Thank conference for and this conclude gentlemen, today's you very participating.

may disconnect. You now