Quarterly report [Sections 13 or 15(d)]

Investments

v3.26.3
Investments
 9 Months Ended
Sep. 30, 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 and nine months ended September 30, 2026 and 2025.
(in thousands) Three Months Ended September 30, 2026 Nine Months Ended September 30, 2026
Portfolio Company(1)
Type Fair Value as of September 30, 2026 Interest & Dividend Income Fee Income Net Change in Unrealized Appreciation (Depreciation) Realized Gain (Loss) Interest & Dividend Income Fee Income Net Change in Unrealized Appreciation (Depreciation) Realized Gain (Loss)
Control Investments
Coronado Aesthetics, LLC Control $ 180  $ —  $ —  $ (42) $ —  $ —  $ —  $ (38) $ — 
Gibraltar Acquisition LLC(2)
Control 62,136  1,153  32  (242) —  3,422  98  816  — 
Hercules Adviser LLC(3)
Control 49,942  2,238  —  (742) —  6,491  —  (3,481) — 
Tectura Corporation Control 9,772  174  —  740  —  515  —  431  — 
Total Control Investments $ 122,030  $ 3,565  $ 32  $ (286) $ —  $ 10,428  $ 98  $ (2,272) $ — 
Affiliate Investments
Annex Cloud
Affiliate
 $ 3,036  $ —  $ —  $ (289) $ 5  $ —  $ —  $ (289) $ 5 
Total Affiliate Investments
 3,036  —  —  (289) 5  —  —  (289) 5 
Total Control & Affiliate Investments
 $ 125,066  $ 3,565  $ 32  $ (575) $ 5  $ 10,428  $ 98  $ (2,561) $ 5 
(in thousands) Three Months Ended September 30, 2025 Nine Months Ended September 30, 2025
Portfolio Company(1)
Type Fair Value as of September 30, 2025 Interest & Dividend Income Fee Income Net Change in Unrealized Appreciation (Depreciation) Realized Gain (Loss) Interest & Dividend Income Fee Income Net Change in Unrealized Appreciation (Depreciation) Realized Gain (Loss)
Control Investments
Coronado Aesthetics, LLC Control $ 344  $ —  $ —  $ 31  $ —  $ —  $ —  $ 275  $ — 
Gibraltar Acquisition LLC(2)
Control 60,193  1,123  44  (118) —  3,786  124  386  — 
Hercules Adviser LLC(3)
Control 43,510  2,100  —  (712) —  6,100  —  1,320  — 
Tectura Corporation Control 8,276  174  —  (1,742) —  516  —  (3,381) — 
Total Control Investments $ 112,323  $ 3,397  $ 44  $ (2,541) $ —  $ 10,402  $ 124  $ (1,400) $ — 
(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 September 30, 2026 and September 30, 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 September 30, 2026 and December 31, 2025:
(in thousands) September 30, 2026 December 31, 2025
Investments at
Fair Value		 Percentage of
Total Portfolio		 Investments at
Fair Value		 Percentage of
Total Portfolio
Senior Secured Debt $ 4,568,831  94.3 % $ 4,209,798  94.2 %
Unsecured Debt 77,146  1.6 % 69,614  1.6 %
Preferred Stock 57,771  1.2 % 52,735  1.2 %
Common Stock 89,063  1.8 % 86,275  1.9 %
Warrants 46,290  1.0 % 41,162  0.9 %
Investment Funds & Vehicles 6,802  0.1 % 7,063  0.2 %
Total $ 4,845,903  100.0 % $ 4,466,647  100.0 %
A summary of the Company’s investment portfolio, at value, by geographic location as of September 30, 2026 and December 31, 2025 is shown as follows:
(in thousands) September 30, 2026 December 31, 2025
Investments at
Fair Value		 Percentage of
Total Portfolio		 Investments at
Fair Value		 Percentage of
Total Portfolio
United States $ 4,373,284  90.3 % $ 4,035,927  90.4 %
United Kingdom 131,959  2.7 % 118,031  2.7 %
Netherlands 114,239  2.4 % 117,344  2.6 %
Israel 68,634  1.4 % 67,280  1.5 %
Germany 58,410  1.2 % 50,386  1.1 %
Switzerland 48,514  1.0 % 35,504  0.8 %
Sweden 21,386  0.4 % 18,244  0.4 %
Canada 18,109  0.4 % 16,841  0.4 %
Ireland 10,901  0.2 % 4,729  0.1 %
Singapore —  0.0 % 1,827  0.0 %
Other(1)
467  0.0 % 534  0.0 %
Total $ 4,845,903  100.0 % $ 4,466,647  100.0  %
(1)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 September 30, 2026 and December 31, 2025:
(in thousands) September 30, 2026 December 31, 2025
Investments at
Fair Value		 Percentage of
Total Portfolio 		Investments at
Fair Value		 Percentage of
Total Portfolio
Application Software(1)
$ 1,124,669  23.2 % $ 1,045,146  23.4 %
Drug Discovery & Development 1,021,317  21.1 % 1,039,712  23.3 %
Healthcare Services, Other(1)
909,478  18.8 % 776,321  17.4 %
Consumer & Business Services(1)
367,226  7.6 % 441,467  9.9 %
Defense Technologies 312,021  6.4 % 140,458  3.1 %
Cybersecurity(1)
200,668  4.1 % 163,932  3.7 %
Healthcare Technology & Digital Health(1)
136,408  2.8 % 126,476  2.8 %
System Software(1)
121,824  2.5 % 308,613  6.9 %
Medical Devices & Equipment 118,674  2.5 % 77,257  1.7 %
Diversified Financial Services 112,078  2.3 % 105,896  2.4 %
Biotechnology Tools 79,433  1.6 % 23,164  0.5 %
Electronics & Computer Hardware 67,947  1.4 % 66,992  1.5 %
Space Technologies 61,742  1.3 % 47,816  1.1 %
Energy Technologies(1)
59,307  1.2 % 30,346  0.7 %
Consumer & Business Products 41,387  0.9 % 8,810  0.2 %
Manufacturing Technology 39,350  0.8 % 20,190  0.4 %
Communications & Networking 33,652  0.7 % 26,263  0.6 %
Financial Technologies(1)
26,576  0.5 % 8,971  0.2 %
Sustainable and Renewable Technology(1)
8,000  0.2 % 5,413  0.1 %
Information Services(1)
3,759  0.1 % 3,200  0.1 %
Semiconductors 329  0.0 % 158  0.0 %
Media/Content/Info 44  0.0 % 32  0.0 %
Drug Delivery 14  0.0 % 14  0.0 %
Total
 $ 4,845,903  100.0 % $ 4,466,647  100.0 %
(1)Effective September 30, 2026, the Company added the “Cybersecurity”, “Energy Technologies”, “Financial Technologies” and “Healthcare Technology & Digital Health” industry categories, which include investments previously classified within “Application Software”, “Consumer & Business Services”, “Healthcare Services, Other”, “Information Services”, “Sustainable and Renewable Technology” and “System Software”. Prior period amounts have been reclassified to conform to the current period presentation.
No single portfolio investment represents more than 10% of the fair value of the Company’s total investments as of September 30, 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”, “Consumer & Business Services”, and “Defense Technologies” 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 September 30, 2026 and December 31, 2025, the Company’s ten largest portfolio companies represented approximately 25.6% and 28.6%, respectively, of the total fair value of the Company’s investments in portfolio companies. As of September 30, 2026 and December 31, 2025, the Company had seven and seven portfolio companies, respectively, that represented 5% or more of the Company’s net assets. As of September 30, 2026, the Company had three equity investments which represented approximately 49.9% 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 September 30, 2026 and December 31, 2025:
Percentage of debt investments (at fair value), as of
September 30, 2026 December 31, 2025
Senior Secured First Lien
All assets including intellectual property 77.1  % 72.8  %
All assets with negative pledge on intellectual property 5.0  % 9.5  %
“Last-out” with security interest in all of the assets 5.9  % 7.0  %
Equipment-Only Lien
 0.8  % 0.0  %
Total senior secured first lien position 88.8  % 89.3  %
Second lien 9.5  % 9.1  %
Unsecured 1.7  % 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 September 30, 2026 and December 31, 2025:
(in thousands) Fair Value
Derivative Instrument Statement Location September 30, 2026 December 31, 2025
Foreign currency forward contract Other assets $ 338  $ 50 
Total $ 338  $ 50 
Net realized and unrealized gains and losses on derivative instruments recorded by the Company during the three and nine months ended September 30, 2026 and 2025 are in the following locations in the Consolidated Statements of Operations:
(in thousands) Three Months Ended September 30, Nine Months Ended September 30,
Derivative Instrument Statement Location 2026 2025 2026 2025
Foreign currency forward contract Net realized gain (loss) - Non-control / Non-affiliate investments $ (38) $ —  $ (13) $ (1,551)
Foreign currency forward contract Net change in unrealized appreciation (depreciation) - Non-control / Non-affiliate investments (16) 593  288  (452)
Total $ (54) $ 593  $ 275  $ (2,003)
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 September 30, Nine Months Ended September 30,
2026 2025 2026 2025
Contractual interest income $ 106,863  $ 97,533  $ 315,080  $ 280,771 
Exit fee interest income 12,294  14,246  43,237  39,264 
PIK interest income 10,563  14,475  35,819  41,583 
Dividend income 2,100  2,100  6,300  6,600 
Other investment income(1)
2,406  2,803  8,235  8,082 
Total interest and dividend income $ 134,226  $ 131,157  $ 408,671  $ 376,300 
Recurring fee income $ 3,395  $ 2,945  $ 9,582  $ 8,379 
Fee income - expired commitments 338  454  1,648  1,486 
Accelerated fee income - early repayments 2,156  3,537  10,864  8,898 
Total fee income $ 5,889  $ 6,936  $ 22,094  $ 18,763 
(1)Other investment income includes OID interest income and interest recorded on other assets.

As of September 30, 2026 and December 31, 2025, unamortized capitalized fee income was recorded as follows:
(in millions) September 30,
2026		 December 31,
2025
Offset against debt investment cost $ 43.9  $ 42.5 
Deferred obligation contingent on funding or other milestone 9.5  9.8 
Total Unamortized Fee Income $ 53.4  $ 52.3 
As of September 30, 2026 and December 31, 2025, loan exit fees receivable were recorded as follows:
(in millions) September 30,
2026		 December 31,
2025
Included within debt investment cost $ 52.9  $ 48.6 
Deferred receivable related to expired commitments 4.4  4.5 
Total Exit Fees Receivable $ 57.3  $ 53.1