Hercules Capital, Inc. Q4 FY2025 earnings call

• 2025 was a year of record operating performance, with new financial and performance records set, including record originations, fundings, and investment income.
• Q4 2025 featured record originations of $1,060,000,000 and gross fundings over $522,000,000, with total investment income of $137,400,000.0 and net investment income of $87,000,000.
• AI is viewed as a net positive for the business, with the company focusing on disciplined underwriting and asset diversification.
• The private credit funds business has provided meaningful benefits, with $65,000,000 in cumulative benefits since inception in 2021 and over $1,000,000,000 raised in 2025.
• Credit quality of the debt investment portfolio remained strong, with a weighted average internal credit rating of 2.2 and grade one and two credits at 66.6%.

Hercules Capital, Inc. achieved strong financial performance across its segments. In 2025, the company set records for new debt and equity commitments ($3,920,000,000.00), gross fundings ($2,280,000,000.00), and net debt portfolio growth. The BDC and private credit funds business contributed significantly, with the company managing over $5,700,000,000.0 of assets, a 20% increase from year-end 2024. Q4 saw record originations of $1,060,000,000 and gross fundings over $522,000,000. The private credit funds business, wholly owned, managed nearly $2,000,000,000 in committed equity and debt capital and raised over $1,000,000,000 in 2025.

• Expect a robust new business environment in 2026 with strategic M&A, capital markets activity, and support for the innovation economy.
• Anticipate a favorable originations market in 2026, with the company intending to manage the business defensively while seizing opportunities.
• Core yield is expected to decline slightly in Q1.
• Prepayments in Q1 are expected to be in the range of $150,000,000 to $200,000,000.

• Market and macro volatility, including valuation reset in certain sectors.
• Credit risks from lower early payoffs.
• Potential impact of AI disruption on some software companies, though the company is positioned to mitigate risks through conservative underwriting.

Q: Given the dislocation in public markets, is there incremental opportunity to deploy capital?

A: Sure. We think there are interesting opportunities to play offense. Our liquidity position is robust, and our teams are looking to take advantage of market dislocation.

Q: Drill into software portfolio composition?

A: System software is different from application software. We are confident in software companies focusing on core mission-critical solutions embracing AI.

Q: View on M&A and IPO activity in 2026?

A: M&A is expected to be robust, while the IPO market is muted with larger IPOs driving dollar volume.

Q: Venture capitalists using debt more?

A: Growth in the ecosystem and companies utilizing debt contribute to our business growth, but we maintain disciplined underwriting.