Hercules Capital, Inc.

Hercules reported Q1 2026 total investment income of $141.5 million, up 3% quarter-over-quarter and 18.4% year-over-year. Net investment income was $88.1 million, or $0.48 per share, up 1.3% quarter-over-quarter and 13.8% year-over-year. Core investment income was $134.9 million, up 16.8% year-over-year, and core yield was 12.2% versus 12.5% in Q4, while effective yield was 12.8% versus 12.9%. NAV per share was $11.90, down $0.23, or 1.9%, from Q4. The company generated record originations of over $1.81 billion and gross fundings of over $706 million, with GAAP leverage at 115.4% and available liquidity of $454.5 million at the BDC; liquidity was over $1 billion across the platform. Management guided Q2 core yield to 12% to 12.5%, prepayments to $350 million to $500 million, SG&A to $27.5 million to $28.5 million, RIA expense allocation around $4.5 million, and quarterly RIA dividend contribution of $2 million to $2.5 million.

Scott Bluestein emphasized that Hercules is sticking to a credit-first model while operating through volatile markets, and said the firm is benefiting from its permanent-capital structure and institutional funding base. He highlighted record originations, a growing platform of about $6.1 billion of assets, and a deliberate tilt toward tighter underwriting and stronger structure over chasing a few extra basis points of yield. His tone was confident and defensive: optimistic about 2026 deployment, but disciplined about balance-sheet management, diversification, and monitoring AI-related disruption and market volatility.

Seth Meyer framed Q1 as a strong operating quarter, pointing to record total investment income of $141.5 million and NII of $88.1 million, or $0.48 per share. He noted operating expenses of $58.1 million, with interest expense and fees at $30.8 million and SG&A at $27.2 million, and said the weighted average cost of debt stayed at 5.1%. He also highlighted $300 million of 5.35% unsecured notes due 2029, more than $50 million raised through the ATM, and quarter-end liquidity of $454.5 million in the BDC, plus over $1 billion across the platform. For Q2, he guided core yield to 12% to 12.5%, prepayments to $350 million to $500 million, and SG&A to $27.5 million to $28.5 million.

Analysts focused on why Hercules’ strong credit and ROE performance appears disconnected from market perceptions of software exposure and AI risk. Management replied that venture/growth underwriting is structurally different, with targets like under 1x debt-to-ARR, sub-20% LTV, and debt-to-invested-equity below 30%, and stressed portfolio diversification and strong performance outside software. Questions also centered on the jump in expected Q2 prepayments and how the company would use the resulting capital; management said the repayments are mostly tied to known M&A events, should support slightly higher fee income, and could be redeployed across technology subsectors and life sciences. On PIK, management said the decline reflects both payoffs of 2024-2025 vintages and a deliberate shift to deprioritize PIK in new deals, since cash income is preferred and PIK had approached an internal limit around 10.5% of revenue.