Hercules Capital, Inc. (NYSE:HTGC) Q3 2019 Earnings Conference Call - Final Transcript

Oct 30, 2019 • 05:00 pm ET

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Hercules Capital, Inc. (NYSE:HTGC) Q3 2019 Earnings Conference Call - Final Transcript

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Executive
Scott Bluestein

fundings, total investment income, net investment income and total portfolio investments and assets, all while maintaining our historical strong credit discipline and underwriting standards.

In Q3 our originations platform delivered new debt and equity commitments of $241.3 million, an increase of nearly 3% from the same period last year. For the first nine months of 2019, we delivered $1.19 billion in new debt and equity commitments, an increase of nearly 24% compared to the same period last year. Since the close of Q3 and as of October 29, Hercules has already closed an additional $191 million of new commitments and we have pending commitment of an additional $36 million in singed non-binding term sheet. Year-to-date through October 29, our closed new debt and equity commitments are at $1.4 billion.

With two full months remaining in 2019, we have already delivered a new historical record of annual commitments for 2019. In addition, our current pipeline remains strong with approximately $1 billion in potential transactions. Our investment related activity in Q3 reflects our focus on three key themes and our views on the current market and competitive environment.

First, building and maintaining a broadly diversified portfolio and avoiding concentrated risk. Second, delivering controlled growth, without sacrificing our credit and underwriting standards and discipline. And third, positioning the portfolio best for where we believe we are in the credit cycle. During Q3, we were successful in each of these three areas and I am incredibly proud of the entire Hercules Investment team and broader organization for our achievements during Q3 and year-to-date.

Our belief since inception and throughout the course of our 15 year history has been that portfolio diversification is essential to achieving a long term, sustainable success in the venture and growth stage lending space. During the third quarter, we funded six new and 14 existing portfolio companies. The majority of the 14 existing portfolio companies that we funded during Q3 are situations where our portfolio companies achieved specific performance milestones or growth targets that unlocked additional capital.

We believe that this both speaks to the quality of our portfolio, but also our ability to support our companies, as they grow and scale. We ended the quarter with a total of 95 debt portfolio companies. The profile of the six new companies that we made debt commitments to reflects our focus on quality, diversification and differentiation. We closed new financings with a blend of technology and life sciences companies and the 14 portfolio companies that we completed fundings with also reflects a similar make up. In all, our total fundings in Q3 were split evenly between technology and life sciences companies.

At the end of Q3 our top five and top 10 debt positions made up 16% and 28% of our total debt portfolio at cost respectively. Our focus remains on being intentionally diversified by stage, sector, geography and sponsor. In the current market and macro environment, we believe that this will best position us for sustained success. The $177 million