Summary of Hercules Capital Q2 2026 Earnings Call

1Key Financial Results and Metrics

Total Investment Income: $149.1 million, up 5.4% quarter-over-quarter and 8.5% year-over-year.

Net Investment Income (NII): $92.9 million ($0.50 per share), a 5.5% increase quarter-over-quarter and 4.7% year-over-year, covering the base distribution by 125%.

Record Originations: $2.74 billion for the first half of 2026, a 35.6% year-over-year increase.

Gross Fundings: $1.35 billion for the first half of 2026, an 8.5% year-over-year increase.

Net Asset Value (NAV): Increased by $0.25 to $12.15 per share, reflecting a 2.1% quarter-over-quarter growth.

Leverage Ratios: GAAP leverage decreased to 103.9%, with available liquidity of $652.9 million in the BDC.

2Strategic Updates and Business Highlights

Continued focus on disciplined underwriting and maintaining a strong balance sheet.

Portfolio remains diversified with approximately 50% in life sciences and 50% in technology.

The company has managed $6.1 billion in assets, with a stable credit performance and a weighted average internal credit rating of 2.17.

Hercules Adviser, the private credit fund business, is managing nearly $2 billion and has contributed significantly to NII.

The company is leveraging technology and AI to enhance operational efficiencies and maintain competitive advantages.

3Forward Guidance and Outlook

Q3 Expectations: Anticipate a seasonal slowdown in originations, with prepayment activity expected to normalize to $200 million-$300 million.

Core yields are projected to be in the range of 11.8%-12%.

The company remains optimistic about the investment environment and expects to capitalize on market opportunities in the second half of 2026.

4Bad News, Challenges, or Points of Concern

Credit Quality: A slight increase in Grade 3 credits to 32.7% from 28.6% in Q1, raising concerns about potential underperformance.

Market Volatility: The company noted ongoing market volatility and the potential for M&A valuations and timing to be less certain.

Increased Competition: Observations of aggressive lending from banks and non-banks, which could pressure margins and deal quality.

5Notable Q&A Insights

Management confirmed expectations for a seasonal slowdown in Q3 but maintained confidence in a robust pipeline for the remainder of the year.

Prepayment activity was primarily driven by M&A and equity financing, indicating strength in portfolio companies.

The company is cautious about market conditions and is focused on maintaining quality in new underwritings despite increased competition.

Insights into AI usage highlighted a disciplined approach to governance and data protection, ensuring proprietary information remains secure. Overall, Hercules Capital reported strong financial performance in Q2 2026, with a solid outlook despite some concerns regarding credit quality and competitive pressures. The company remains focused on strategic growth while maintaining a disciplined approach to investment and risk management.