Oct 29, 2026 earnings call — Platform growth, originations, and stable credit
Hercules reported record originations of $3.44 billion for the first 3 quarters of 2026, up 20% year-over-year.
Revenue $0.1B (est $0.1B) · EPS $0.47 (est $0.47)
Key quotes
"For the first 3 quarters of 2026, we delivered record originations of $3.44 billion, an increase of 20% year-over-year, and record fundings of $1.93 billion, an increase of 9.9% year-over-year."
"Our weighted average internal credit rating in Q3 improved to 2.12 compared to the 2.17 rating in Q2 and remains well within our normal historical range."
"During the third quarter, we raised $325 million of 5-year institutional 6.3% unsecured notes and repaid $325 million of unsecured notes that matured in September 2026."
Analyst Q&A 7
core yield drivers and G&A comp
Q (Finian O'Shea · Wells Fargo): Analyst asked why core yields showed slight compression and what would allow stabilization. He also asked if the lower G&A compensation expense this quarter was a one-off or should be modeled going forward.
A: Management said their Q4 core-yield guidance is 11.8% to 12% and they have high confidence yields will stay in that range. They do not expect further material compression. For G&A, they said this quarter was slightly lower due to originator compensation adjustments and excise tax and expect it to normalize to prior-quarter averages.
"And based on everything that we are seeing through today, we have a high degree of confidence that our core yields will be that 11.8% to 12% range." — Scott Bluestein (CEO)
RIA expense allocation vs AUM growth
Q (Merrill Ross · Compass Point Research & Trading): Analyst asked why expenses allocated to the RIA fell quarter to quarter even though RIA AUM is growing. He wanted the drivers of the step down.
A: Management said two factors explain it. RIA AUM is growing but fund deployments take time and the firm invests in funds when launching them. Also, the RIA allocation moves with BDC G&A because a portion is driven by originator variable compensation and tax expense.
"So the RIA AUM is growing overall, though it does take time for deployments to kind of ramp up." — Andrew Olson (CFO)
spreads, prepayments, and AI positioning
Q (John Hecht · Jefferies): Analyst asked if spreads, prepayment fees, or other fee components have changed in recent deals. He also asked how the firm positions itself for AI-related activity and infrastructure.
A: Management said there is nothing material changing in prepayment economics or end-of-term economics and that core yields should stabilize around 11.8% to 12%. On AI, they said they avoid pure-play AI and GPU financings and instead invest in sectors that enable AI adoption (power, energy, networking, communications) and sectors that benefit (defense tech and space tech).
"Prepayment economics remain largely consistent with what we've seen historically." — Scott Bluestein (CEO)
credit outlook and sector allocation
Q (Benjamin Graham · Piper Sandler): Analyst asked for more detail on forward credit indicators and how they are behaving. He also asked where management prefers to put incremental capital, life sciences or tech.
A: Management said the credit outlook remains stable and that 100% of debt portfolio companies on accrual are current on contractual principal and interest. They said they will not give sector guidance but target an asset allocation about 50-50 between life sciences and technology, with diversification inside each vertical.
"Based on everything that we're seeing as of today, our credit outlook remains stable." — Scott Bluestein (CEO)
capital scarcity and Europe impact
Q (Christopher Nolan · Ladenburg Thalmann): Analyst asked whether the earlier comment about scarce capital referred to credit or venture equity. He also asked if turmoil in Europe is causing companies to migrate out of Europe.
A: Management clarified the scarcity comment referred to private credit, not the venture capital market, and that venture capital activity and fundraising remain strong year-to-date. On Europe, they said they have seen no impact so far, are watching developments, and that over 90-plus percent of their business is centered in the U.S.; international activity will remain limited to selected geographies.
"So that was more of a reference to just private credit, so not a reference to the VC market." — Scott Bluestein (CEO)
ROE outlook and prepayment impact on NII
Q (Christopher Muller · Citizens): Analyst asked if ROEs are at or near a trough with rising rates and how much of a $0.03 NII decline was due to elevated prepayment fees.
A: Management said internal modeling expects ROE to start rising as prepayments rebound in Q4 and that ROEs have likely reached a floor. They said nearly all of the $0.03 NII decline was due to prepayments, and noted Q3 prepayment activity was one of their slowest quarters, with prepayments falling from $572.1 million to $148.3 million quarter-over-quarter.
"So as Andrew said, almost the entirety of that decline was attributable to the fact that prepayments went from $572.1 million to $148.3 million quarter-over-quarter." — Scott Bluestein (CEO)
equity write-downs, software fundraising, LOI outcomes
Q (Paul Johnson · KBW): Analyst asked whether the equity write-down was driven by a single investment or multiple companies. He also asked about venture capital support for software companies and how often LOIs convert to exits or payoffs.
A: Management said the write-down was broad-based, including a conversion of debt to equity that moved a portion of unrealized losses but was not net new unrealized depreciation, and no single position was material. They said year-to-date the software portfolio has seen capital inflows and multiple exits, though not every software company raises capital. On LOIs, historically a majority under LOI close, but timing can vary from Q4 to many months later, so they expect a high percentage to close but timing is uncertain.
"There was a conversion of debt to equity that we transferred over a portion of unrealized that was not net new unrealized depreciation." — Andrew Olson (CFO)