Hercules Capital (HTGC) 4 May 232023 Q1 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Hercules Q1 2023 Earnings Conference Call.

At this time, all participants are in 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.

to Managing the Director like speaker, to now Hara, Michael of would hand conference over today's I Investor Relations. Michael. ahead, go Please

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

An archived be conference available days Investor the call. at on the for least webcast replay following will Relations webpage XX

the During this a from should statements the relied in financial identified as our future. the date, this this upon These publicly our expectations. including, forward-looking differ on assumes call, statements investment today's during call results for in are may but reasons, making not based filings be website. and any risks of to Hercules are of we are decision. and make any obligation made in update call on no during not and forward-looking statements annual not Actual Any forward-looking Form assumptions performance current available statements forward-looking SEC's own that on made of other and guarantees XX-K number statements may made to, such only limited report the future

to over And call with that, turn I'll Scott. the

Earnings thank you and Michael, joining Hercules QX you, for Call. Thank the Capital all XXXX

in class, Capital of performance record market largest a in the quarter of volatile backdrop, asset record operating partially and Hercules competitor by our QX. performance failure despite another operating Following driven our delivered XXXX in the

ecosystem year of venture asset the unwavering of strong operating commitment the an to XX-plus and the on diversification, to stage to of platform our emphasis we with our and and service. built consistently that the ability speaks results we have that growth liability prudent an Our history underwriting employees, and strength deliver quality

and does business and and come and performance inception or financial history, easily operates Building a XXXX strong at lending Since growth scale stage not in venture our throughout accident. that credit have consistently delivers steadfast sheet, continuously diversifying strong core and sides our and strengthening underwriting, of patient maintaining our disciplined and we balance team investing both liquidity sticking on principles; our systems. in by focused with steady, and

unexpected From the our terms. of our capital $X.X which and manages wholly-owned billion platform and than facilities raised increased credit of beginning capabilities and enhanced our XXXX, that our funds. reach three And competitive in believe venture with RIA, creation growth with further strengthen the our our more a presented new significantly with expanded in now better with and has we flexibility we tremendous the We landscape. lending stage private environment in presence our opportunity and and further grow changes QX, leadership position will in the our are

successfully. believe The intend current be and terms offense and in uniquely both of to and we new do We market credit. to so are disciplined requires a combination able and defense selective on of tight that to playing do positioned business we skilful

strengthen of QX the across of added originations quarter and steps was additional took in have organization capabilities the we in now office We full-time talent and to our another an investment sophistication. functionality where employees. excess company back platform XXX

enhance fund quarter, new additional vehicle we and credit private to established BDC. liquidity in a the the During raised also capital

of with made provide of our XXXX. the QX, billion confidence us business increase of the than end we The and trajectory investments platform, that optimism more we XX.X% year-over-year. in manage for our assets have of an continuing the $X.X of As across remainder of

million. portfolio led QX. key first highlights which momentum This in deliver growth, earnings over positions fundings debt quarterly quarter continue to to excess XXXX quarter with $XXX debt of have million able of $XXX us drive that performance to for our which Let We investment investment of out for we to XXXX. net over fifth me our the gross million, able is of recap in started $XXX with growth strong portfolio the some favourably consecutive net of been to record be

originations driven QX and both by our delivering teams, Our technology activity strong during the life funding performance was sciences quarter.

Consistent expand of were demonstrated more slight funded to different that core and new companies continued were during able strength debt our we our were in to capital what which achieve We quarter. Our saw again two activity borrower while show funding between technology companies weighted companies. performance throughout balance milestones XXXX, verticals, to with towards funding new with QX XX portfolio nine the relationships. our numerous we relationship commitments

to also strengthens current we able QX, were several borrowers, new provide six commitments companies. in our strong to incumbency In position which

the the of fundings expect We landscape. in follow-on We to our that momentum failure and the and best-in-class selectively that saw SVB acumen this present we avoid to bank that regional the intend in deals marginal themselves trend are across existing The we terms turmoil portfolio companies use XXXX. many following continue seeing. increased opportunities of to and general originations, of underwriting accelerated XXXX target to experience in QX best throughout currently

Since activity our QX. weighted XX, half as and Given second to close strong closed funding in of of XXXX, X.X commitments one QX we our has towards performance be team QX, the million. and of funded million May new funding deal of expect the

additional $XXX have term signed pending in sheets. an million non-binding of commitments We

benefit be better and deal get our able is quality out as plays from expect to and We balance the this. favourably liquidity continue year sheet and to to terms positioned to

equity the the to selective and public pressure remain in stayed Valuations situation. across private and companies markets particular due capital in side. under on SVB markets, financial have for and equity in QX and both the the the Volatility increased markets more credit

capital created, Given the help market recently disrupted provide dislocation established navigate from to lending credit new challenges program recent the the we the companies a to events.

this prioritize will we in opportunities underwriting we credit with a remain over to credit, transactions credit-first always to expect on premium. yield volatility. quality a maintained serve patient risk continue approach chasing higher always historical and well, to we periods particularly us our these Hercules culture has of new will disciplined with Consistent and and

portfolio liquidity the to strong QX, financial markets. and company said during reflect activity, with During our broader investment M&A M&A industry the closing pressure continue Having and QX, ongoing continued was QX, also Oak closed which the exhibit that, events closed the exits The transaction additional announced Bio, transactions on first quarter. equity on in which M&A Provention to subsequently We portfolio eight XX. May XX. announced in of new acquisition had March Street acquisition one in and was of April in announced previously Sanofi's for

submission, week have acquired us agreement the into and Bio by they that Iveric new this a addition, announced one Pharma pipeline. In current definitive in confidential IPO Astellas entered added two to giving we be

underwriting continue great expect which selective We work come, and to teams validates M&A our to do. see activity to our strong the quarters investment the across in that portfolio

million, As million QX our $XXX we of loan repayments an to million, anticipated from $XXX approximately increased increase $XXX and early slightly further XXXX. above to in QX guidance $XXX in million

the and between increase in could expect as to this For prepayments QX to further driven large by progress M&A, million, change quarter. $XXX although in million we part $XXX we XXXX,

to reflects The quality market promising increasing the quarters, despite market. continue well identify our growth levels the volatility, stage loan last the most of target of prepayments to the the several in team's companies as as portfolio and over ability our

second expect record and of our income investment or share. of generated is per $XX.X we per This net QX, of record XXX% continue investment our coverage share, that and distribution record income we of In investment million delivering in $X.XX total net to consecutive $XXX.X $X.XX income, of QX. providing million trend base quarter

continued Our rate a portfolio for increases of indicative which certain and platform, and our balance effective recent loans. very liquidity our well robust XX.X% across net generated conservative leverage in yield of remains XX%, at the higher onboarding positioned. of a yield new GAAP With is QX sheet very a regulatory XX.X% core yields and

Credit quality of debt remains stable. strong the portfolio investment and

of of rating at but average range. higher X.XX in slightly normal low the historical X.XX than credit rating weighted Our our end QX, was still the internal

in decreased XX.X% QX. credits three and compared two XX.X% grade XX.X% QX. one to were versus in Our credits slightly at QX grade Grade slightly higher to in XX.X%

up were and in four X% QX. rated portfolio X.X% credits made the of five credits rated Our

end have an and the and total investments a $X.X respectively, million two X.X% on investment cost and non-accrual as value company's percentage same QX, of investment with debt the or $XX.X X.X% cost portfolio million value As and of approximately we fair respectively. the at of of

emphasis a Our investment strong on diversification as performance of credit consistent discipline our credit and key our of strategy. result cornerstones and is

and seeing by credit portfolio enhanced in a We our what the monitoring continue witnessed banking level have are the our we result turmoil side of business. of increased on QX, be pleased to as we and

year of approximately last approximately the growth investment debt our positions, debt of across XX% the XX%. senior ago. approximately decline QX, XX-plus end across median loan-to-value first from portfolio and QX, valuations over average is our our of stage in end a secured was investment investment Despite the X% up many was portfolio companies weighted for lien the of approximately the As portfolio in debt as months, of loan-to-value the XX%

deliver confidence This performance. ability defensive strong us portfolio to credit continue gives in to positioning our

companies remained ample selectivity capital having our from nearly $X raising needed that capital QX, capital are we investors, billion portfolio and new additional when monitor. with and sensitivity Despite our important in capital valuation strong first to across For in XX two more liquidity ability quarter. the closely portfolio factors companies, in venture raise the raising

provide make result existing outstanding of XX% of Loans, months debt terms X.X% or months portfolio liquidity. are from our outstanding our funding of has current debt currently seeing less investors, inclusive with on we have has debt at liquidity market estimate what balance liquidity portfolio while portfolio our currently contractually which facilities approximately to the across another investment XX approximately of to volatility, a of on our portfolio, our approximately recent wanted up When in we sheet. of months portfolio we with As of entire committed liquidity outstanding XX% XX% X that of looking of liquidity. of XX-plus XX-plus six update equity a brief months

we have realized We had This warrant by QX. of available During of of of exchange, of with sale on of our strong Hercules the approximately due $XXX of of investments $X $X and private gains gains foreign liquidity due in to comprised to offset over positions. funds, write-off net million $XXX,XXX was Inclusive end QX the of million. million. billion net of realized $X.X the QX, as liquidity gains liquidity ended equity

we with later-stage we done potentially fundraising both and muted are with a result best $XXX activity of This BCA. higher currently data quarter, billion, million. take venture of facility to the investment turmoil the at first our and at was gathered credit $XXX the banking the better quality letter by market position seeing million ecosystem that During transactions as more commitments investment billion advantage to The of increased affected SMBC to unfunded $XX.X PitchBook us activity in to the turmoil. at and during according capital levels $XX respectively, from quarter

trillion over and invest share. or going continue of spillover the shareholder with stay to amount investment fundraising of expect pick $XXX with highs, platform. to and capital to forward goes respect historic at the to years than much With The to exceeding the added entering undistributed spillover continues earnings on. activity undistributed the our prior with earnings to We XXXX, to provide and we invest year per $X.XX up our levels available team QX at as flexibility $X.X lower ability exited us in million distributions

to For for consecutive maintained out a able This of and to QX, total shareholder pay $X.XX a base we at supplemental distributions. of $X.XX our our $X.XX was XXth of of quarter being distribution distribution a declared shareholders. supplemental our distribution

competitively business. take growth strong given as assets, We and and to earnings we our and advantage market core and are elevated result, the highs. the well remain performance optimistic our to in has how business conditions of closing, of In historic a grow our our about power continued generating QX, power income opportunities positioned earnings

selective staying new with for our and XXXX, strong largely invest teams our maintaining disciplined in consistent themes underwritings core reflect and a XXXX liquidity sheet position remain balance and they to and on platform. continuing while Our and will

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

I over call Seth. will turn to now the

kick afternoon, Thank way and complemented Hercules' strengthening a by and was portfolio to you, growth. support was The gentlemen. Scott, sheet to XXXX. our balance good great our and performance quarter growth first current anticipated off ladies

accretive $XXX capital. by to the the renewed ATM advantage SMBC and of credit we million quarter, first executed increased the facility, and In from MUFG of facility $XX raising the a of credit letter of $XXX $XXX million total million, subsequently took million

We higher maintain just available what million we quarter to million a year continue end, strong than than liquidity of as ago. maintained the more $XXX of $XXX

credit than in is us fixed helping XX% to the of XX% keep unsecured, costs facilities, is access ready optionality our high. rate low leverage increase Despite and our more and financing

explore maintaining standards. our liquidity to ways needs to the consistent while invest manage continue as increase cost-effective and opportunities We more return our to credit

ourselves well RIA. continue managed positioned our adding We've most platform, wholly by capital owned by our to recently scaling additional

communicated, previously to move our the beyond our dividends relief BDC the As later and returns further for we expense this year and expect delivering RIA start to enhance to BDC shareholders. the

review the statement the activity, areas: performance and liquidity NAV following With leverage outlook. income these points unrealized and and in and the mind, let's financial highlights, realized

the exceeded by $XXX on This prior increase quarter and and business Starting at in underwriting with was a the statement debt current that million income growth total quarter row year $XXX.X performance an rates. the highlights. second driven investment in million benchmark new portfolio solid in the income and

$XX.X or quarter-over-quarter was income a another investment Net record record per NII a million, in $X.XX share at X.X% increase QX.

in and was XX%, to quarter. effective leveling in respectively, to yield little as the increase rate an The result core benchmark to in of yields movement compared first due increases. expected a no the quarter and XX.X% Fed forecasting a quarters. and in from increase in XX.X% XX.X% due our hereafter prior coupon yield Our were core interest coming We're core the the to of the

expenses. to Turning

costs to from of and the to growth prior the to in of prior million higher million investment gross to the debt. of and RIA, Our expenses Net $XX.X quarter. cost expenses weighted quarter increased compared $XX.X $XX operating expense million the quarter our fees the Interest recharged for in average portfolio were operating due slightly million increased million. to $XX the $XX

in the above RIA, for from the versus increased funding the million guidance quarter, on SG&A forecast. the were expenses to cost slightly my SG&A $XX.X to quarter Net of expenses our $XX million. $XX.X million at higher prior recharge

Our debt utilization greater weighted cost the to of a compared X.X%, of credit the prior the portfolio. was average investment to reflecting of slight a due quarter, facilities growth increase

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

represented of an $X.XX quarter-over-quarter. share. During NAV quarter, share increased NAV the our per per share increase to per $XX.XX X.X% This

$XX.X net the of disposed investment appreciation in the net unrealized drivers $X.X reversals income and the change due of to sales quarter, paid increase main in The for mainly to supplemental due were distribution. including of prior or the of million, offset by unrealized appreciation million, ATM dividends net the investments written accretion off,

expected the to was million with which of of by the prepayment to correlates of for This the $XX.X Our loan QX. valuing to portfolio's guidance intention appreciation primarily million half company's our before certain driven approximately maturity. $XX appreciation to at due relates unrealized increased investments prepay proceeds portfolio, loans

gain gains of of net realizations gains $X to a unrealized other of investments prior million exchange, sale on $X.X resulted million of by net to offset $X.X equity million realized due due of warrants. write-off realized of the the and and in reversal The foreign appreciation comprised

Moving to and leverage liquidity.

to our XXX.X% Our cash regulatory balance sheet, GAAP respectively, to increased the net cash the respectively. with leverage regulatory higher on and out decreased maintaining prior and Netting slightly a XXX.X% end. to XXX.X%, positions XX.X%, balance leverage quarter and which the quarter leverage over compared due were GAAP and

available ended with million As $XXX the mentioned, we quarter of liquidity.

We Inclusive well strong the owned in $X liquidity the this nearly RIA of available believe reminder, billion liquidity. and positions platform raised Hercules these environment. of the operating flexible managed our wholly by funds us a current capital by our amounts, As excludes subsidiary. has

renewal in credit to should and maturities, the the MUFG to ability of additional the QX giving With raise debt the the near-term we SMBC increase letter of no facility be facility, decide support to we have the capital business. opportunistic us

raised during $X.XX We in approximately to quarter continue the ATM opportunistically market NAV. the and million, resulting access $XX accretion to an

to target remains end, leverage the our $XX another we strong have our business and the further ensuring within strengthening new quarter demand Following support liquidity million, raised range. very position

Finally, the outlook points.

the core remainder we range XX.X%. be our to XX.X% at expect XXXX, For yield to of

a going a additional portfolio hike the core and with is reminder, floating XXXX As our recent XX% debt in floor, forward. rate will benefit our any of interest so yield

as by to to difficult very Although activity second predict, communicated quarter. $XXX we Scott, prepayment million expect million in in $XXX the

We to the experienced quarter. due expect the sheet balance growth our expense in interest to quarter second to prior increase first compared quarter the

For the expect to SG&A million. second we $X.X to RIA quarter, and allocation expense million $X expenses to $XX approximately million $XX million of our be

continuing to our that taken and we're In well of remainder the steps we've closing, our strengthen ensure sheet positioned scale platform, for the balance to XXXX.

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

from Our John Instructions] question [Operator Hecht will Jefferies. from come

together you quarter world. putting I sale to the Scott, strong the that just -- sort did -- referred the Citizens to of in kind SVB on First Congratulations to and kind that, to you a and of opportunities referred market. good, presented disruptions you stable, an of unstable

how And for opportunities portfolio or then I'm affect First ecosystem maybe of If what operate Hercules to stepping it does that SVB you challenges back create your time? that is wondering, over opportunity it going describe and is if you the boil as changes, terms was? there the us how and could largely few perspective then in think But from does to mean your about to are quarters, does Citizens for what in companies an which work? that either -- back next

want or a will couple John. on to won't what take speak things. Thanks, comments A but couple Citizens situation. SVB of do, of can't minute make I the certainly a Sure. to to First maybe We

in the happened SVB venture thing absolutely say, health certainly to their credit certainly with do vibrancy first the QX, had from lending ecosystem. of what to nothing had to do nothing that venture And with the it our want perspective, book. I to or of quality The

years. What their pressure mismatch the as asset and team tremendous a happened business. for part Valley quarter the a for We, the respect and liability XX which was result first ecosystem a of organization, SVB an have an perspective. instrumental created to in of Bank in that deposit from for was the terms last significant SVB management, Silicon of obviously

failure approximately of a As the employees bank. for saddened feel we XX,XXX we the the by firm, terribly are obviously and the of bank,

we the Having happened as for that, to said HTGC. what tremendous view opportunity quarter SVB in first a

You saw that some in our of QX of the positivity of impact early numbers. terms

You're seeing our in of more over of has both continued grow of failure to term numbers of that have quality were we our pipeline sheets. press pipeline that reported in the of now The since quality. release, impact publicly million $XXX terms and in size SVB where in signed terms our

and realistically, honor opportunity stage the the to fund we at venture and also ecosystem. the commitment as at that our XX-plus growth look companies an up make look We opportunity us year for helping it to

positioned. positioned the space been in We market. we by be to venture from of only that has advantage the created lending exit well the aggressively are lender opportunity believe SVB's very We are the able take to

they without certainly you to I I'm other know guys. not aware in but relation smaller but liquidity liquidity There's totally them, -- close familiar do had too, their of I we're think lenders, that strained to with some being terribly venture positions,

that getting So is Meaning situation are other participants to are weakened is market the you favorable? the current which strengthened? outside market also by the question competitive relative of guys, SVB,

be respect the I with across absolutely that, we John, signs SVB to just with lending don't because mentioning that stress not appropriate, some Without landscape, Sure. venture say are think will seeing respect others. names, to but would that I of

to are I tell we I can speak incredibly you well are can we that positioned. perspective, only how from our And positioned.

platform. ended of this regulatory over the ended the managed XXX%. business we available in net conservative billion with We HTGC under always ended BDC, have balance We with regulatory liquidity of sheet. QX sorry, year $X million $XXX over liquidity of across with net QX a We leverage with the --

team, made investments the in have our have tremendous significant systems over in couple employees. over XXX We of infrastructure. added last our to to we we We ensure to our in left void potentially and organization We full-time do years, to whatever new currently and need and we the to continue by in that do positioned intend QX fill SVB talent others. are the to

Crispin And question from will with Sandler. come Piper our next Love

Scott, little to you avoiding of just that prepared on you're currently that, you in on early the speak then accelerating the remarks currently? And also bit seeing your said closed that funding in you're marginal on Can what half you're confidence seeing. back a the quarter. deals expand second just

what general that not deal those Crispin, a I'm much, at exactly with respect say Sure. we're which seeing be on make right the to we're marginal our record because, too to continues avoiding comment, going obviously, pipeline now levels. deals. to front I'll is

simply of vast investment about underwriting which Our and those. are that passing transactions team, the number credit that on are to XX meet full-time XX record is and looking of seeing comprised transactions, we're now screens our evaluating seeing, tractions a majority at of employees. Screening, not we the

continue quarters And we'll couple tell and you, many deals out. get next plays have will done to that over the how see in the market, see of those of to I we

terms new of very We are in business. selective being

quality to the strong effort that We be. most and right able business business where is we underwriting is the making be credit that tight and parameters. our our But new have of very balance to meets sheet sure want it aggressive now when be part the important on single to new on

credit, And specifically, Codiak of and on your then portfolio one BioSciences. companies, just

in late there is March, for So out they publicly. which filed bankruptcy

just So on of recovery expect might curious there. type what you

$XX.X of $XX about be to looks over that a which million loan, principal at million third cash $XX the Just had looking your million now. quarter compared and a sheet, balance as their little they to

anything recovery pointing But there out? on cash cash the quarter just given their been or curious worth since burn has disclosures. if position on you're what based a unclear their else So full third confident

Crispin. Thanks, Sure.

out, did that about are we with for have cooperatively have have the file $XX Bankruptcy we the lien constructively investors. with mean end worked do does the not going of XXX positions creditor first and as the pointed QX. for debt of a the the bankruptcy that on at to out senior company us a you secured had one When As position. million of principal outstanding. filing, company, filed, with company and we loss we Subsequent advisers to that

have We pay cash million $XX received already downs. of

So that million. $XX to been principal million has loan $XX reduced

The in on pool currently that principal company remains current of monetize, to with through consultation looking feel in X XXX% and there The ultimate all no to of that assets while about payments recovery Hercules. their May guarantees interest position. of And the and good situations, obviously, the are date any are Hercules these vast company has of a advisers. they very we

what for just is also we that words. just would say said I not us,

We of record able workouts to very able have situations. and track to being navigate long be a challenging bankruptcy through

with organization, strong have If Codiak very we're to and as specifically an last to we will we, bankruptcies seeing had workouts look believe anything we've lead a different outcome. the had, and at that recoveries, several respect not you that

will question JMP Fultz, our Securities. Kevin And from next come

XQ might demand I capital above gap know a BDC in but you view reached the 'XX accelerated in wanted just review venture report high the the first X.Xx, to XXXX question is of that of which late-stage as first monitor, highlights within there at your from And the and My the sound quarter another call, earnings figure a PitchBook VC. late-stage to recently NBCA point ratio funding has get closely first the I supply has well. in compares that quarter. the figure decade X.Xx to that essentially, shows familiar

what capital shift for venture your availability stage market that in raise the also ability your companies and in of to what mean seeing within capital. is on companies, what and curious both just portfolio I'm additional the view in late-stage terms own could you're

Sure. comments seeing management There comment and remains is investors respect the be equity and we companies. continues Thanks the are on couple what firms there valuation. be are where there. absolutely Kevin. question, valuation and What to disconnect want available with late-stage for venture be the A amount is that think the where from a capital entrepreneurs and sidelines, significant to capital a valuation want which for to seeing I of on of a perspective on to teams

And will The for is capital what periods there's the there valuations QX. of will delicate at these sort It in be there and a is the be part, in That is deals a typically happens get some most point, capital the that during sitting It be not start on dance. sidelines QX. done. of will period will these slow away. to in there And will QX. going meet

a with The other would we're that data least period it are to dark seen, this a comment is the seeing VC sort although data of the worst investments that winter at market. that add with respect up the and down to that is, our broader that I think QX out make of doesn't respect NBCA the equity with and from PitchBook folks was thinking of the sort materially, of sort I there view we've

the to if market, numbers approximately the of and funding funding, When that numbers the the were QX XXXX, compare steady $XX of between state you year achieve billion as per X,XXX down compare billion. XXXX, venture that invested. sort we were view period, to of there you numbers venture which XXXX the are those and approximately in companies that materially. was between $XX deals totaled XXXX But the approximately approximately and XXXX, so what to during able QX X,XXX In and the received market COVID

currently down in So still we comparative the what are to on the view a were way that fairly we materially, QX, healthy. basis as the numbers market. And although the market, normal that's viewing

than curious rate just the in current market then more, the opportunity initially one if accelerated RIA a can. at conditions more private if to you are presenting I'm funds anticipated? And scale I

said what of Absolutely. year. second we the up would call, to in last from dividend the the on And is we RIA be which BDC continue reiterate to this to the I expect distributions the to half begin able

benefiting begin benefit be the the our the expect distributions HTGC in not from shareholders business this expense shareholders for year So of of BDC. to only from second from the half up to to will reimbursement, we the RIA

for is just the but There in the BDC, in us, tremendous fund also business. not momentum private

significant amount If new you announced the is that private million of about on specifically take year advantage funds in currently $XXX of million capital which we We private deployed last did look of in alone. vehicle, and most was at seeing. the that's of the in QX. we're funded That launch $XXX to top what recently, we designed fund fundings market a dislocation we private that a about business

Our Christopher question with Ladenburg Thalmann. from come will Nolan next

things and venture participating bank capital you a just Would new on follow-up consider Scott, two the space? in the a earlier strategically, question. targeting

We're The is the business to our better into being works not that business. relying think without that on tied in deposits. banking answer We no.

no. would answer the so And be

Second VC question is affect to going the how do business? lending you think is AI

So that optimistically. that AI think AI then, the landscape. obviously pretty is We're life something there to across very watching are and at We accelerate course, the scenarios ability positive sciences closely. think innovation has well. as and that We we're looking negative scenarios further of it technology

some And optimistic certain economy. health is have disruptive. will that mean the Every of on current the pretty AI have we're the innovation the there AI while new impact that AI concerns do is overall, innovative for phenomenon. about few years, of could sort what is overall actually businesses, about we

Point & Research come from Trading. Alexander next Our Casey question Compass will

many position Bank, and your a positions a the they does more SVB, also hammer also with opportunities you you Scott, to with in that guys what you joint with companies? competitor. those in incumbency create companies stack partner described down were seat, had curious from and for ways, you lending companies. take those your to I'm position a But as Silicon Valley senior

secondly, that of Bank, then take talent And Valley Has to of of of key been been to make advantage with migration talent? of any hires Silicon some been have a lot that dispersion that some gone able the there's Hercules able of has around.

questions, for great Sure. there. A questions thanks and couple of Casey, your

of Valley ours great competitive First in a that was and thing, collaborative terms venture the relationship. the I finance many you partner across helping partnership, of the would mentioned capital to us years, I Silicon respect ecosystem. over great companies Bank tell with

as that that, tremendous just will in opportunity a of pointed and few bar that with who partnering we life have help high position. able both with comfortable pretty given do bank of SVB and were partner partner to to a side. us a be incumbency firms on out, in market, terms said for of deals one our technology was Having creates that you the of terms strategically lock the down with, to have something do we We we sciences the the handful

also XXX% say partner will our with Citizens date, of has First that to honored those portfolio. to the I deals, respect across commitments

opportunity developed to take QX. in First Citizens some on those is disruption there don't added respect an certainly contemplating there just we to we market partnering we companies them continue be continues negative but share to to the but to with currently were expect that not that that partnered with situation prior deals any And that are for to fund on. us partnered those in regard, that were

With the course with seen in group that in that of pleased for the business that the days, from with for have we very XX have very my of team. we're from remarks, SVB handful thought There we've well fit and employees. SVB And I over XX culture to made a date respect of handful Hercules hires that tremendous of what and to the would the last team. that to and comment we we respect employees identified were made opening we talent, a

follow-on as borrowers question much was million, drawn were XX the new you direct us existing can there how companies, is tell My XX commitments other out so of you of and million, out Out of down borrowers. off gross borrowers unfunded that being opposed X $XXX $XXX fundings called originations? of were to

to I existing $XXX companies, in the part and the quarter, portfolio Sure. you approximately to breakdown. fundings new as were from million companies. of commitments Approximately give new fundings $XXX fundings Roughly commitments. were of fundings can $XXX about unfunded $XXX new fundings of new million million the fundings the of million were

O'Shea come of Wells Our will question Finian next from Fargo.

or provide economics private fund vehicle? it's the for the RIA what of and Can any on detail part us you a new if separate means Hercules'

same a fee in the and way funds, RIA. as provide new the two So first management to will, fund fee the performance the

of of second question, part your part RIA your answer So yes, is to fund. to it existing the

Scott back similar the XXXX. immediate in the mentioned in of very expense will with what And half and It relief so provide consistent term.

up start come it that to to it those As into generate BDC. portfolio, will then the the and up additional performance turn builds fees, revenues management the from which eventually dividends will

two shareholders, add made fund business would When privately HTGC's the commitment that that publicly private we commitment. we from fund business accrete and years XXX% just to the benefit private public about that and of committed launched And that. to we remain ago, half Fin, of to a benefit the and I'll

the in wholly business which will BDC. a RIA, subsidiary the owned be is do under we private public that anything of So the fund

next Lynch with KBW. Our from comes Ryan question

that if a as just First of set collapse of kind the collapse sort or of investor their you the been one just in aftermath I and companies, support SVB lot had I there the investors as you existing broadly is action in was DC sentiment details opportunity willingness mentioned around the from the far post marketplace? the SVB, of equity the shift on about to talk curious and has the BC goes. could any

trends of SVB been if as the the those been have I sure getting as post of trends going activity you've the wasn't for level not. any seen of lower quarters. have several Obviously, worse last investment acceleration of But kind sort or far just

a was Obviously, couple to Thanks, for Bank weeks, of sort equity of what were don't necessarily. on think catch surprise And the happened. a the any failure, and just the I figure sort credit lot just seen Ryan. and vast think what side ecosystem. with of step of majority taking the people a first side happened on their out post sort back to of breath Silicon we've the I Valley of acceleration

banks SVB, additional turmoil, obviously, Obviously, that additional been some currently Republic, options. there's subsequent First are some exploring strategic regional to

think The saw SVB. acceleration obviously post uncertainty. credit we continue the anything there's There's that specific an in of lot to terms volatile. be I So markets of don't and equity markets a now right

outperform, conservatively managed. quarters. in our We ensuring be take that, opportunity focus advantage a can that And set positioned BDC continue next whatever us of and be continues our is think, to on that's to benefit continues well puts control, able the to great to and we what to portfolio couple position credit and of we incredibly that the over

the account And had, question mentioned appreciation I is about $XX million book. other loan of your repair in you

drove half to you Can was and love the that about you expected other why I of it to of the increased. due appreciation prepay. to talk what said I hear book given think environment? half would the market companies just just that

about Can this release, million you your actually $X.X press depreciation of that held in what funds. of about in warrants related or companies also equity talk was some portfolio there? and equity million? Were behind are driver the to some privately talked then positions revalued warrant unrealized you that And up investment those of doing marketplace rounds drove what your $X

Sure. Thanks.

So as through revalue we you entire every the go and quarter, know, portfolio.

performance companies the individual do their on based So we'll adjustments we'll against original portfolio underwriting through plan. on go and our

faster they're that approval performing progressing companies rounds an are FDA process. having those maybe of capital bit little raised, For they're maybe faster through a better,

the use, should they're both as if portfolio market do to portfolio to benchmark overall the benchmark SMI rates based be tweak slightly obviously, private. portfolio analysis will those interest that see yield And on index, valuation go where and the debt well. a the and on They a we positions, through compared the equity adjusting companies, we'll we

beyond on appreciation impairments as we really consistent. mentioned, that for half the based of the did about very stayed it's you So the for The mark-to-market, early performance. that, that repayments,

we on nonaccrual that small maintained only loans, noticed those. had very two valuation, You consistent adjustments

basis a mind not on with our portfolio up. Keeping interest -- rate of XX% is basis. that better in is adjusted performing floating the And having portfolio in so benchmark floor our reductions as -- net-net, that values so than writing a we're market the goes thesis

on was equities? the you on debt the then portfolio. that to So want comment do private And Scott,

One, to and positions, on valuation respect Sure. things. appreciation of up unrealized the we of the the with is continued result Ryan, that respect respect and the the the wholly Hercules a owned majority growth an the Advisor, substantial with investment was two of with in raised warrant That from funds. to appreciation which fund $X.X registered private we two came private new million adviser. to launched equity first AUM and

closing remarks. I like turn for would Scott to At this it time, to back over

reporting our today. progress have a all, Thank and and thanks you on Thank everyone our our XXXX you, earnings day. joining to to for Mark, QX forward call great We look call.

the program. Thank everybody, participation for This conference. today's concludes you, your in

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