Hercules Capital, Inc. (NYSE:HTGC) Q3 2019 Earnings Conference Call - Final Transcript
Oct 30, 2019 • 05:00 pm ET
[Operator Instructions] The first question is from Tim Hayes of B. Riley FBR. Your line is open.
Hi, good afternoon guys. Thanks for taking my questions and congrats on a great quarter. My first one, can you just touch on the supplemental dividend. I know you made some comments, but this is your fourth straight quarter of supplemental dividend payments. How do you think about these dividends in relation to the amount of spillover you'd like to keep on hand?
Yes, first Tim, thanks for the comments. It's the third straight quarter where we've issued a supplemental distribution, there was a gap in between Q3 and Q4, where we didn't have one.
Sure, our goal as we stated on the last several calls is to really focus and drive total shareholder return and there are two ways to do that. One is obviously through the base distribution and the second is through the supplemental. Given the trajectory of the business, particularly in Q1 and Q2 and Q3 of this year, we felt and the Board supported our decision to declare the supplemental distributions, which had increased on a quarterly basis as the performance of the business has continued to improve throughout the year.
The base dividend for us is really driven primarily off of what we believe the business can generate from a core income perspective. If you look at our business now, we're now at a point where we're covering the base distribution alone from core income, so we're not really relying as Seth mentioned on non-core income associated with pay-offs or accelerations.
The spillover is something that we look at from two different perspectives. One, we look at it as a way for us to continue to invest and expand the platform and the scale and depth of our team and we think that, that's an important thing to be able to do without impacting NII on a go forward basis.
And the second point is, as we've sort of shown, we look at that as a way for us to continue to deliver supplemental dividends to our shareholders as a way to increase and drive total shareholder return. We don't have a specific dollar threshold in mind in terms of what we plan to keep from a spillover perspective. But as we get towards the end the year, that's something that the management team and board will be evaluating and as I mentioned in my comments based on what we're seeing right now, and based on obviously our performance quarter-to-date, we hope and we expect to be in a position where we can deliver a larger special distribution to shareholders once we do the true-up subsequent to year end.
Okay, yes, that makes sense. I appreciate the additional comments there. And then, if I could just pick on the dividend, again you talked about the quarterly dividend and how you've handily covered it with NII for the past two quarters, irrespective of the early prepayment income