Record Originations and Fundings
All-time record originations of over $1.81 billion in Q1 2026; gross fundings of over $706 million leading to $298 million of net debt investment portfolio growth.
Hercules Capital, Inc.
· HTGC
May 5th, 2026
Summary
- Earnings Call Date:
- 2026-05-05
- Change Since:
- -5.78%
- Next Earnings Date:
- 2026-07-30
Earnings Call Sentiment
PositiveThe call presented multiple record operational achievements (all-time originations, record investment income, strong NII, AUM growth, solid liquidity and tight credit metrics) which substantially outweigh the negatives (modest NAV decline driven by $45M of unrealized markdowns, higher leverage and rising expenses amid market volatility). Management emphasized defensive underwriting, strong cash coverage of distributions, and significant redeployment optionality from expected prepayments. While volatility and near-term valuation uncertainty are noted, the tone and metrics indicate robust performance and confidence in execution.
Company Guidance
For Q2 management reiterated that core yield should remain relatively flat, guiding to a 12.0%–12.5% range (Q1 core yield 12.2%, GAAP effective yield 12.8%), and that prepayments should increase materially to $350–$500 million (driven largely by M&A) providing redeployment optionality; they also expect interest expense to rise (Q1 interest expense $30.8M; weighted average cost of debt 5.1%), SG&A of $27.5–$28.5M with an RIA expense allocation of ~$4.5M, an RIA dividend to HTGC of ~$2.0–$2.5M, and emphasized strong liquidity ($454.5M in the BDC, >$1.0B across the platform) and balance-sheet dynamics (Q1 GAAP leverage 115.4% / regulatory 99.7%, net GAAP 113.5%), noting that >75% of prime‑based loans are at contractual floors and ~98% of the debt portfolio is floating with floors.
Record Investment Income and NII Growth
Record total investment income of $141.5 million (up 3% quarter-over-quarter and 18.4% year-over-year); core investment income $134.9 million (up 16.8% YoY); net investment income (NII) $88.1 million or $0.48 per share (up 1.3% Q/Q and 13.8% YoY).
Assets Under Management Expansion
Managing approximately $6.1 billion of assets, an increase of 21.8% year-over-year, supported by growth in both the public BDC and private credit funds business.
Strong Liquidity and Capital Access
Platform liquidity of over $1 billion (including funds managed by the RIA) and $454.5 million of available liquidity in the BDC; issued $300 million of 5.35% unsecured notes due 2029 and raised ~ $52 million via ATM in Q1.
Solid Credit Quality and Portfolio Metrics
Weighted average internal credit rating of 2.11 (stable vs. prior quarter); Grade 1 and 2 credits increased to 70.5% (from 66.6%); only one loan on nonaccrual representing ~0.2% of portfolio at cost; first-lien exposure ~89%.
Return Performance
Return on average equity (ROAE) of 16.9% in Q1 (up from 16.4% in Q4); ROAA of 8.1% and GAAP effective yield of 12.8% with core yield of 12.2% (guidance expects core yield relatively flat in Q2).
Prepayments and Redeployment Optionality
Early loan prepayments of $225.8 million in Q1; management expects Q2 prepayments materially higher in the range of $350 million to $500 million (driven largely by M&A), providing redeployment flexibility.
PIK Profile and Cash Collections
PIK declined to ~9.1% of total revenue from 10.5% in FY2025; ~91% of Q1 PIK was part of original underwriting (PIK by design) and 98% of PIK income came from loans rated 1–3; collected $15.3 million cash on accrued PIK in Q1.
Operational Scale and Team Expansion
Platform staffing of 120 employees with 65 investment/credit professionals and over 25 finance/accounting professionals; leadership expansion with internal promotion and a returning CFO, positioned to scale the platform.
Undistributed Earnings and Distribution Coverage
Undistributed earnings at quarter end of $149.1 million ($0.80 per ending share outstanding); NII covered base distribution by 120% and full distribution (including $0.07 supplemental) by 102% — 23rd consecutive quarter with a supplemental distribution.
Operator
Good afternoon. My name is Stephanie, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Hercules Capital First Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference may be recorded. [Operator Instructions] I will now turn the call over to Michael Hara, Managing Director of Investor Relations. Please go ahead.
Michael Hara
Thank you Stephanie. Good afternoon everyone and welcome to Hercules conference call for the first quarter of 2026. With us on the call today from Hercules are Scott Bluestein, CEO and Chief Investment Officer; and Seth Meyer, CFO. Hercules financial results were released just after today's market close and can be accessed from Hercules' Investor Relations section at investor.htgc.com. An archived webcast replay will be available on the Investor Relations web page following the call. During this call, we may make forward-looking statements based on our own assumptions and current expectations. These forward-looking statements are not guarantees of future performance and should not be relied upon in making any investment decision. Actual financial results may differ from the forward-looking statements made during this call for a number of reasons, including, but not limited to, the risks identified in our annual report on Form 10-K and other filings that are publicly available on the SEC's website.
Any forward-looking statements made during this call are made only as of today's date, and Hercules assumes no obligation to update any such statements in the future. A...
Subscribe to unlock transcripts
Get The Fly Pro 7 days for free