Quarterly report [Sections 13 or 15(d)]

Investments

v3.26.1
Investments
 3 Months Ended
Mar. 31, 2026
Schedule of Investments [Abstract]  
Investments Investments
Control and Affiliate Investments
As required by the 1940 Act, the Company classifies its investments by level of control. “Control investments” are defined in the 1940 Act as investments in those companies that the Company is deemed to “control”. Under the 1940 Act, the Company is generally deemed to “control” a company in which it has invested if it owns 25% or more of the voting securities of such company or has greater than 50% representation on its board. “Affiliate investments” are investments in those companies that are “affiliated companies” of the Company, as defined in the 1940 Act, which are not control investments. The Company is deemed to be an “affiliate” of a company in which it has invested if it owns 5% or more, but generally less than 25%, of the voting securities of such company. “Non-control/non-affiliate investments” are investments that are neither control investments nor affiliate investments. For purposes of determining the classification of its investments, the Company has included consideration of any voting securities or board appointment rights held by the Adviser Funds.
The following table summarizes the Company’s realized gains and losses and changes in unrealized appreciation and depreciation on control and affiliate investments for the three months ended March 31, 2026 and 2025.
(in thousands) Three Months Ended March 31, 2026
Portfolio Company(1)
Type Fair Value as of March 31, 2026 Interest & Dividend Income Fee Income Net Change in Unrealized Appreciation (Depreciation) Realized Gain (Loss)
Control Investments
Coronado Aesthetics, LLC Control $ 158  $ —  $ —  $ (60) $ — 
Gibraltar Acquisition LLC(2)
Control 62,167  1,128  35  213  — 
Hercules Adviser LLC(3)
Control 44,137  2,101  —  (2,137) — 
Tectura Corporation Control 9,786  170  —  445  — 
Total Control Investments $ 116,248  $ 3,399  $ 35  $ (1,539) $ — 
(in thousands) Three Months Ended March 31, 2025
Portfolio Company(1)
Type Fair Value as of March 31, 2025 Interest & Dividend Income Fee Income Net Change in Unrealized Appreciation (Depreciation) Realized Gain (Loss)
Control Investments
Coronado Aesthetics, LLC Control $ 47  $ —  $ —  $ (22) $ — 
Gibraltar Acquisition LLC(2)
Control 58,900  1,567  39  (941) — 
Hercules Adviser LLC(3)
Control 45,017  1,900  —  2,827  — 
Tectura Corporation Control 11,770  170  —  113  — 
Total Control Investments $ 115,734  $ 3,637  $ 39  $ 1,977  $ — 
(1)In accordance with Rules 3-09, 4-08(g), and Rule 10-01(b)(1) of Regulation S-X, (“Rule 3-09”, “Rule 4-08(g)”, and “Rule 10-01(b)(1)”, respectively), the Company must determine if its unconsolidated subsidiaries are considered “significant subsidiaries”. As of March 31, 2026 and March 31, 2025, there were no unconsolidated subsidiaries that are considered “significant subsidiaries”.
(2)Gibraltar Acquisition LLC is a wholly-owned subsidiary, which is the holding company for their wholly-owned affiliated portfolio companies, Gibraltar Business Capital, LLC and Gibraltar Equipment Finance, LLC. The subsidiary has no significant assets or liabilities, other than their equity and debt investments and equity interest in Gibraltar Business Capital, LLC and Gibraltar Equipment Finance, LLC, respectively.
(3)Hercules Adviser LLC is owned by Hercules Capital Management LLC and presented with Hercules Partner Holdings, LLC which are both wholly owned by the Company. Please refer to “Note 1 - Description of Business” for additional disclosure.
Portfolio Composition
The following table shows the fair value of the Company’s portfolio of investments by asset class as of March 31, 2026 and December 31, 2025:
(in thousands) March 31, 2026 December 31, 2025
Investments at
Fair Value		 Percentage of
Total Portfolio		 Investments at
Fair Value		 Percentage of
Total Portfolio
Senior Secured Debt $ 4,469,019  94.6 % $ 4,209,798  94.2 %
Unsecured Debt 71,126  1.5 % 69,614  1.6 %
Preferred Stock 53,449  1.1 % 52,735  1.2 %
Common Stock 78,659  1.7 % 86,275  1.9 %
Warrants 42,507  0.9 % 41,162  0.9 %
Investment Funds & Vehicles 7,227  0.2 % 7,063  0.2 %
Total $ 4,721,987  100.0 % $ 4,466,647  100.0 %
A summary of the Company’s investment portfolio, at value, by geographic location as of March 31, 2026 and December 31, 2025 is shown as follows:
(in thousands) March 31, 2026 December 31, 2025
Investments at
Fair Value		 Percentage of
Total Portfolio		 Investments at
Fair Value		 Percentage of
Total Portfolio
United States $ 4,249,172  90.0 % $ 4,035,927  90.4 %
United Kingdom 152,389  3.2 % 118,031  2.7 %
Netherlands 115,004  2.4 % 117,344  2.6 %
Israel 66,148  1.4 % 67,280  1.5 %
Germany 49,417  1.1 % 50,386  1.1 %
Switzerland 47,763  1.0 % 35,504  0.8 %
Canada 18,432  0.4 % 16,841  0.4 %
Sweden 18,395  0.4 % 18,244  0.4 %
Ireland 4,770  0.1 % 4,729  0.1 %
Singapore —  0.0 % 1,827  0.0 %
Other(1)
497  0.0 % 534  0.0 %
Total $ 4,721,987  100.0 % $ 4,466,647  100.0  %
(1)Effective March 31, 2026, the Company’s investment portfolio based in Denmark has been consolidated with “Other”. Prior year amounts have been reclassified to conform to the current presentation.
The following table shows the fair value of the Company’s portfolio by industry sector as of March 31, 2026 and December 31, 2025:
(in thousands) March 31, 2026 December 31, 2025
Investments at
Fair Value		 Percentage of
Total Portfolio 		Investments at
Fair Value		 Percentage of
Total Portfolio
Application Software $ 1,113,788  23.6 % $ 1,087,954  24.3 %
Drug Discovery & Development 1,089,920  23.1 % 1,039,712  23.3 %
Healthcare Services, Other 890,720  18.9 % 838,508  18.8 %
System Software 507,172  10.7 % 472,144  10.6 %
Consumer & Business Services 474,202  10.0 % 449,631  10.1 %
Defense Technologies 157,631  3.3 % 140,458  3.1 %
Diversified Financial Services 106,304  2.3 % 105,896  2.4 %
Medical Devices & Equipment 81,619  1.7 % 77,257  1.7 %
Electronics & Computer Hardware 66,735  1.4 % 66,992  1.5 %
Space Technologies 53,167  1.1 % 47,816  1.1 %
Consumer & Business Products 42,187  0.9 % 8,810  0.2 %
Sustainable and Renewable Technology 35,804  0.8 % 35,759  0.8 %
Communications & Networking 32,063  0.7 % 26,263  0.6 %
Information Services 25,634  0.6 % 25,889  0.6 %
Biotechnology Tools 24,060  0.5 % 23,164  0.5 %
Manufacturing Technology 20,753  0.4 % 20,190  0.4 %
Semiconductors 187  0.0 % 158  0.0 %
Media/Content/Info 31  0.0 % 32  0.0 %
Drug Delivery 10  0.0 % 14  0.0 %
Total $ 4,721,987  100.0 % $ 4,466,647  100.0 %
No single portfolio investment represents more than 10% of the fair value of the Company’s total investments as of March 31, 2026 or December 31, 2025.
Concentrations of Credit Risk
The Company’s customers are primarily privately held companies and public companies which are active in the “Application Software”, “Drug Discovery & Development”, “Healthcare Services, Other”, “System Software”, and “Consumer & Business Services” sectors. These sectors are characterized by high margins, high growth rates, consolidation and product and market extension opportunities. Value for companies in these sectors is often vested in intangible assets and intellectual property.
Industry and sector concentrations vary as new loans are recorded and loans are paid off. Investment income, consisting of interest, fees, and recognition of gains on equity and warrant or other equity interests, can fluctuate materially when a loan is paid off or a related warrant or equity interest is sold. Investment income recognized in any given year can be highly concentrated among several portfolio companies.
As of March 31, 2026 and December 31, 2025, the Company’s ten largest portfolio companies represented approximately 26.2% and 28.6%, respectively, of the total fair value of the Company’s investments in portfolio companies. As of March 31, 2026 and December 31, 2025, the Company had seven portfolio companies each, respectively, that represented 5% or more of the Company’s net assets. As of March 31, 2026, the Company had two equity investments which represented approximately 49.2% of the total fair value of the Company's equity investments, and each represented 5% or more of the total fair value of the Company’s equity investments. As of December 31, 2025, the Company had two equity investments which represented approximately 48.4% of the total fair value of the Company’s equity investments, and each represented 5% or more of the total fair value of the Company’s equity investments.
Investment Collateral
In the majority of cases, the Company collateralizes its investments by obtaining a first priority security interest in a portfolio company’s assets, which may include its intellectual property. In other cases, the Company may obtain a negative
pledge covering a company’s intellectual property. The Company's investments were collateralized as follows as of March 31, 2026 and December 31, 2025:
Percentage of debt investments (at fair value), as of
March 31, 2026 December 31, 2025
Senior Secured First Lien
All assets including intellectual property 72.6  % 72.8  %
All assets with negative pledge on intellectual property 9.1  % 9.5  %
“Last-out” with security interest in all of the assets 6.9  % 7.0  %
Total senior secured first lien position 88.6  % 89.3  %
Second lien 9.8  % 9.1  %
Unsecured 1.6  % 1.6  %
Total debt investments at fair value 100.0  % 100.0  %
Derivative Instruments
The Company enters into forward currency contracts from time to time to help mitigate the impact that an adverse change in foreign exchange rates would have on the value of the Company’s investments denominated in foreign currencies. The following is a summary of the fair value and location of the Company’s derivative instruments in the Consolidated Statements of Assets and Liabilities held as of March 31, 2026 and December 31, 2025:
(in thousands) Fair Value
Derivative Instrument Statement Location March 31, 2026 December 31, 2025
Foreign currency forward contract Other assets $ 522  $ 50 
Total $ 522  $ 50 
Net realized and unrealized gains and losses on derivative instruments recorded by the Company during the three months ended March 31, 2026 and 2025 are in the following locations in the Consolidated Statements of Operations:
(in thousands)   Three Months Ended March 31,
Derivative Instrument Statement Location 2026 2025
Foreign currency forward contract Net change in unrealized appreciation (depreciation) - Non-control / Non-affiliate investments $ 472  $ (840)
  Total $ 472  $ (840)
Investment Income
The Company’s investment portfolio generates interest, fee, and dividend income. The composition of the Company’s interest income and fee income is as follows:
(in thousands) Three Months Ended March 31,
  2026 2025
Contractual interest income $ 104,082  $ 87,817 
Exit fee interest income 14,698  10,228 
PIK interest income 12,914  13,473 
Dividend income 2,100  2,400 
Other investment income(1)
2,609  1,654 
Total interest and dividend income $ 136,403  $ 115,572 
Recurring fee income $ 2,912  $ 2,680 
Fee income - expired commitments 563  317 
Accelerated fee income - early repayments 1,658  942 
Total fee income $ 5,133  $ 3,939 
(1)Other investment income includes OID interest income and interest recorded on other assets.
As of March 31, 2026 and December 31, 2025, unamortized capitalized fee income was recorded as follows:
(in millions) March 31,
2026		 December 31,
2025
Offset against debt investment cost $ 43.6  $ 42.5 
Deferred obligation contingent on funding or other milestone 11.5  9.8 
Total Unamortized Fee Income $ 55.1  $ 52.3 
As of March 31, 2026 and December 31, 2025, loan exit fees receivable were recorded as follows:
(in millions) March 31,
2026		 December 31,
2025
Included within debt investment cost $ 49.5  $ 48.6 
Deferred receivable related to expired commitments 5.9  4.5 
Total Exit Fees Receivable $ 55.4  $ 53.1