Strategy Inc

Hercules posted record Q2 2026 total investment income of $149.1 million, up 5.4% sequentially and 8.5% year-over-year. Record net investment income was $92.9 million, or $0.50 per share, up 5.5% quarter-over-quarter and 4.7% year-over-year, with 125% coverage of the base dividend and 106% coverage of the full dividend including the supplemental payout. NAV per share rose to $12.15 from $11.90, up $0.25 quarter-over-quarter, driven by net realized and unrealized appreciation. Total new debt and equity commitments were over $927 million and gross fundings were over $647 million in Q2; early loan repayments were $572.1 million, well above guidance. For Q3, management expects core yield of 11.8%-12%, prepayments of $200 million-$300 million, gross SG&A of $25 million-$26 million, RIA expense allocation of about $4.7 million, and a quarterly RIA dividend of about $2 million-$2.5 million. The company also said it issued $325 million of five-year unsecured notes due in 2031 after quarter-end, and ended Q2 with $652.9 million of available liquidity in the BDC and more than $1 billion at the platform level.

Scott Bluestein said Q2 showed record operating performance, robust deal flow, and stable credit while the company stayed disciplined on underwriting and balance-sheet management. He emphasized that Hercules is not chasing aggressive market pricing, preferring to stay selective even as pipeline activity and venture capital funding remain strong. He also highlighted the growing role of Hercules Adviser and said the platform can now keep supporting companies longer rather than being refinanced out as they scale.

Andrew Olson framed Q2 as another exceptional quarter, pointing to record total investment income, record debt investment income, and record net investment income. He cited core yield of 12%, effective yield of 13.4%, gross operating expenses of $61.1 million, interest expense and fees of $31.1 million, and SG&A of $30 million, while noting leverage improved meaningfully to 103.9% GAAP and 88.5% regulatory leverage. He said liquidity remained strong at $652.9 million at the BDC and more than $1 billion at the platform level, and that the post-quarter $325 million unsecured note issuance was meant to repay debt and fund originations.

Analysts focused on the deployment backdrop, seasonal Q3 slowdown, prepayment mix, portfolio quality, competition from banks, and the sustainability of strong portfolio company equity raises. Management said Q3 is typically seasonally lower but still expects a robust quarter, and that the pipeline is as strong as they can recall, though quality is mixed and they are being selective. On prepayments, they said most of the elevated Q2 activity came from M&A or cash after equity raises, while the higher grade-3 bucket was largely due to proactive downgrades ahead of equity raises rather than material stress.