Hercules Capital's Investment Portfolio Surges, Net Assets Up 10%

TL;DR

HCXY is crushing it with massive investment growth and rising NAV, making it a strong buy for venture debt exposure.

AI Summary

Hercules Capital, Inc. (HCXY) reported a significant increase in net assets and investment income for the nine months ended September 30, 2025. Total investment income rose to $395.063 million, up from $371.807 million in the prior year period, a 6.26% increase. Net investment income also saw a healthy rise to $254.744 million, compared to $244.684 million in the same period of 2024, representing a 4.11% increase. The company's total investments at fair value increased substantially to $4,306.154 million as of September 30, 2025, from $3,659.978 million at December 31, 2024, a 17.66% growth. This growth was primarily driven by an increase in non-control/non-affiliate investments. Despite a net realized loss of $61.049 million for the nine months ended September 30, 2025, compared to a net realized gain of $1.825 million in 2024, the net change in unrealized appreciation was $55.214 million, a significant improvement from a depreciation of $44.982 million in the prior year. Total net assets increased to $2,189.865 million from $1,989.581 million, and net asset value per share rose to $12.05 from $11.66. The company also issued $1,664.362 million in debt and repaid $1,285.836 million in debt during the nine-month period.

Why It Matters

Hercules Capital's robust growth in investment income and net assets signals strong performance in its venture debt strategy, which is crucial for investors seeking exposure to high-growth, innovative companies. The increase in net asset value per share from $11.66 to $12.05 demonstrates value creation for shareholders. This competitive edge in providing flexible financing to technology and life sciences companies positions HCXY favorably against traditional lenders, impacting the broader market by fueling innovation. Employees benefit from the company's expansion, while customers gain access to vital capital, fostering a dynamic ecosystem.

Risk Assessment

Risk Level: medium — The company reported a significant net realized loss of $61.049 million for the nine months ended September 30, 2025, a stark contrast to the $1.825 million gain in the prior year. This indicates potential volatility in its investment portfolio. While net unrealized appreciation improved, the substantial realized loss suggests that some investments are not performing as expected, posing a risk to future profitability.

Analyst Insight

Investors should consider HCXY for its strong growth in net assets and investment income, but remain vigilant regarding the increased net realized losses. A diversified portfolio approach is recommended, and monitoring future realized gains/losses will be key to assessing long-term stability.

Financial Highlights

debt To Equity

1.02

revenue

$395.063M

operating Margin

N/A

total Assets

$4.410B

total Debt

$2.151B

net Income

$254.744M

eps

$12.05

gross Margin

N/A

cash Position

$29.274M

revenue Growth

+6.26%

Revenue Breakdown

Key Numbers

• $395.063M — Total Investment Income (Increased by 6.26% year-over-year for the nine months ended September 30, 2025)
• $254.744M — Net Investment Income (Increased by 4.11% year-over-year for the nine months ended September 30, 2025)
• $4.306B — Total Investments at Fair Value (Increased by 17.66% from December 31, 2024, to September 30, 2025)
• $12.05 — Net Asset Value per Share (Increased from $11.66 at December 31, 2024)
• $61.049M — Net Realized Loss (Significant loss for the nine months ended September 30, 2025, compared to a gain in the prior year)
• $55.214M — Net Change in Unrealized Appreciation (Positive change for the nine months ended September 30, 2025, reversing prior year's depreciation)
• $2.189B — Total Net Assets (Increased from $1.989 billion at December 31, 2024)
• 181,776 — Shares of Common Stock Outstanding (As of September 30, 2025, up from 170,575 at December 31, 2024)
• $1.664B — Issuance of Debt (For the nine months ended September 30, 2025, indicating active capital management)
• $1.285B — Repayment of Debt (For the nine months ended September 30, 2025, demonstrating debt management)

Key Players & Entities

• Hercules Capital, Inc. (company) — Registrant in the 10-Q filing
• $395.063 million (dollar_amount) — Total investment income for the nine months ended September 30, 2025
• $371.807 million (dollar_amount) — Total investment income for the nine months ended September 30, 2024
• $254.744 million (dollar_amount) — Net investment income for the nine months ended September 30, 2025
• $244.684 million (dollar_amount) — Net investment income for the nine months ended September 30, 2024
• $4,306.154 million (dollar_amount) — Total investments at fair value as of September 30, 2025
• $3,659.978 million (dollar_amount) — Total investments at fair value as of December 31, 2024
• $61.049 million (dollar_amount) — Net realized loss for the nine months ended September 30, 2025
• $1.825 million (dollar_amount) — Net realized gain for the nine months ended September 30, 2024
• $55.214 million (dollar_amount) — Net change in unrealized appreciation for the nine months ended September 30, 2025

FAQ

Risk Factors

• Credit Risk and Investment Portfolio Performance [high — financial]: Hercules Capital's performance is directly tied to the creditworthiness of its portfolio companies. A net realized loss of $61.049 million for the nine months ended September 30, 2025, compared to a gain of $1.825 million in the prior year, highlights the potential for significant realized losses. While unrealized appreciation improved to $55.214 million from a depreciation of $44.982 million, the volatility in realized gains/losses poses a risk.
• Interest Rate Sensitivity [medium — market]: As a debt and equity investor, Hercules Capital is exposed to interest rate fluctuations. Rising interest rates can increase borrowing costs for the company and potentially impact the ability of its portfolio companies to service debt, affecting investment income and the fair value of investments. Interest expense increased to $66.817 million for the nine months ended September 30, 2025, from $57.156 million in the prior year.
• Valuation of Investments [medium — operational]: The fair value of the company's investments, totaling $4.306 billion as of September 30, 2025, is subject to estimation and judgment. Changes in market conditions or the financial health of portfolio companies can lead to significant fluctuations in unrealized appreciation or depreciation, impacting net asset value. The net change in unrealized appreciation was $55.214 million for the nine months ended September 30, 2025.
• Leverage and Debt Management [medium — financial]: Hercules Capital actively uses debt to finance its investments. The company issued $1.664 billion in debt and repaid $1.286 billion during the nine months ended September 30, 2025. While this demonstrates active capital management, a significant reliance on debt increases financial leverage and the risk associated with debt servicing and refinancing.
• Regulatory Compliance and Changes [low — regulatory]: As a business development company (BDC), Hercules Capital is subject to specific regulatory requirements. Changes in regulations governing BDCs or investment companies could impact its operations, investment strategies, and profitability. The company's ability to maintain its status as a regulated investment company is crucial.

Industry Context

Hercules Capital operates in the venture debt and specialty financing sector, providing capital to venture capital-backed companies and private equity-backed companies at various stages of growth. The industry is characterized by a need for specialized underwriting, active portfolio management, and sensitivity to economic cycles and interest rate environments. Competition comes from other BDCs, private debt funds, and traditional lenders willing to take on risk.

Regulatory Implications

As a Business Development Company (BDC), Hercules Capital is subject to regulations under the Investment Company Act of 1940. This includes limitations on leverage and requirements for distributing at least 90% of taxable income to shareholders annually. Compliance with these regulations is critical for its operational structure and tax status.

What Investors Should Do

1. Monitor credit quality of the investment portfolio.
2. Assess the impact of interest rate changes on net investment income and portfolio valuations.
3. Evaluate the company's leverage strategy and debt management.
4. Analyze the drivers of unrealized appreciation/depreciation.

Key Dates

• 2025-09-30: Quarterly Report Filing (9 months ended) — Provides updated financial performance, investment portfolio details, and financial condition as of Q3 2025.
• 2024-12-31: Previous Fiscal Year End — Benchmark for year-over-year growth in assets, net assets, and NAV per share.

Glossary

PIK interest income

Payment-in-kind interest income, where interest is paid in the form of additional debt or equity rather than cash. (Contributes to total investment income and reflects the nature of financing provided to portfolio companies.)

Net Asset Value (NAV) per share

The market value of a company's assets minus its liabilities, divided by the number of outstanding shares. (A key metric for BDCs, indicating the per-share value of the company's investments and overall financial health.)

Fair Value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. (Crucial for valuing Hercules Capital's investment portfolio, which constitutes the majority of its assets.)

VIE

Variable Interest Entity, an entity that is not controlled by its shareholders due to contractual arrangements. (Indicates specific financial arrangements and potential consolidation requirements for Hercules Capital.)

Year-Over-Year Comparison

Hercules Capital has demonstrated robust growth in its investment portfolio, with total investments at fair value increasing by 17.66% from December 31, 2024, to September 30, 2025. This growth has translated into higher total investment income (+6.26%) and net investment income (+4.11%). However, the company experienced a notable shift from a net realized gain to a significant net realized loss, while unrealized appreciation improved substantially. Net asset value per share has also seen a positive uptick, reflecting overall portfolio appreciation despite realized losses. Debt levels have increased, indicating continued reliance on leverage to fund growth.

Key Financial Figures

• $0.001 — ich registered Common Stock, par value $0.001 per share HTGC New York Stock Exchange

Filing Documents

• htgc-20250930.htm (10-Q) — 7326KB
• htgcq3202510q-exx311.htm (EX-31.1) — 10KB
• htgcq3202510q-exx312.htm (EX-31.2) — 10KB
• htgcq3202510q-exx321.htm (EX-32.1) — 5KB
• htgcq3202510q-exx322.htm (EX-32.2) — 4KB
• htgcq3202510qcleancopy.pdf (10-Q) — 11538KB
• 0001280784-25-000041.txt ( ) — 46666KB
• htgc-20250930.xsd (EX-101.SCH) — 110KB
• htgc-20250930_cal.xml (EX-101.CAL) — 78KB
• htgc-20250930_def.xml (EX-101.DEF) — 665KB
• htgc-20250930_lab.xml (EX-101.LAB) — 1006KB
• htgc-20250930_pre.xml (EX-101.PRE) — 851KB
• htgc-20250930_htm.xml (XML) — 7804KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION 3 Item 1. Consolidated Financial Statements 3 Consolidated Statements of Assets and Liabilities as of September 30, 2025 (unaudited) and December 31, 2024 3 Consolidated Statements of Operations for the three and nine months ended September 30, 2025 and 2024 (unaudited) 4 Consolidated Statements of Changes in Net Assets for the three and nine months ended September 30, 2025 and 2024 (unaudited) 5 Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 (unaudited) 6 Consolidated Schedule of Investments as of September 30, 2025 (unaudited) 7 Consolidated Schedule of Investments as of December 31, 2024 21

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 34 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 72 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 89 Item 4.

Controls and Procedures

Controls and Procedures 90

OTHER INFORMATION

PART II. OTHER INFORMATION 91 Item 1.

Legal Proceedings

Legal Proceedings 91 Item 1A.

Risk Factors

Risk Factors 91 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 92 Item 3. Defaults Upon Senior Securities 92 Item 4. Mine Safety Disclosures 92 Item 5. Other Information 92 Item 6. Exhibits and Financial Statement Schedules 93

SIGNATURES

SIGNATURES 98 Table of Contents

: FINANCIAL INFORMATION

PART I: FINANCIAL INFORMATION In this Quarterly Report, the "Company," "Hercules," "we," "us" and "our" refer to Hercules Capital, Inc., its wholly owned subsidiaries, and its affiliated securitization trust unless the context otherwise requires.

CONSOLIDATED FINANCIAL STATEMENTS

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS HERCULES CAPITAL, INC. CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (in thousands, except per share data) September 30, 2025 (unaudited) December 31, 2024 Assets Investments, at fair value: Non-control/Non-affiliate investments (cost of $ 4,185,403 and $ 3,603,961 , respectively) $ 4,193,831 $ 3,546,799 Control investments (cost of $ 105,460 and $ 104,916 , respectively) 112,323 113,179 Total investments, at fair value (cost of $ 4,290,863 and $ 3,708,877 , respectively; fair value amounts related to a VIE $ 176,463 and $ 229,486 , respectively) 4,306,154 3,659,978 Cash and cash equivalents 29,274 42,679 Foreign cash (cost of $ 131 and $ 70,445 , respectively) 130 70,445 Restricted cash (amounts related to a VIE $ 21,087 and $ 3,297 , respectively) 21,087 3,297 Interest receivable 36,327 32,578 Right of use asset 15,333 16,778 Other assets 1,862 5,836 Total assets $ 4,410,167 $ 3,831,591 Liabilities Debt (net of unamortized debt issuance costs of $ 28,867 and $ 14,310 , respectively; amounts related to a VIE $ 88,391 and $ 118,769 , respectively) $ 2,151,138 $ 1,768,955 Accounts payable and accrued liabilities 52,577 54,861 Operating lease liability 16,587 18,194 Total liabilities $ 2,220,302 $ 1,842,010 Net assets consist of: Common stock, par value $ 182 $ 171 Capital in excess of par value 2,101,709 1,900,490 Total distributable earnings 87,974 88,920 Total net assets $ 2,189,865 $ 1,989,581 Total liabilities and net assets $ 4,410,167 $ 3,831,591 Shares of common stock outstanding ($ 0.001 par value and 300,000 authorized) 181,776 170,575 Net asset value per share $ 12.05 $ 11.66 See notes to consolidated financial statements 3 Table of Contents HERCULES CAPITAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share data) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Investment income: Int

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