Hercules Capital, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

Commitments and Contingencies

12 Months Ended

Dec. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

The Company’s commitments and contingencies consist primarily of unfunded commitments to extend credit in the form of loans to the Company’s portfolio companies. As of December 31, 2024, a portion of these unfunded contractual commitments are dependent upon the portfolio company reaching certain milestones before the debt commitment becomes available. Furthermore, the Company’s credit agreements with its portfolio companies generally contain customary lending provisions which allow the Company relief from funding obligations for previously made unfunded commitments in instances where the underlying portfolio company experiences materially adverse events that affect the financial condition or business outlook for the portfolio company. Since a portion of these commitments may expire without being drawn, unfunded contractual commitments do not necessarily represent future cash requirements. As such, the Company’s disclosure of unfunded contractual commitments includes only those which are available at the request of the portfolio company and unencumbered by future or unachieved milestones.

As of December 31, 2024 and December 31, 2023, the Company had approximately $448.5 million and $335.3 million, respectively, of available unfunded commitments, including undrawn revolving facilities, which were available at the request of the portfolio company and unencumbered by future or unachieved milestones. In order to draw a portion of the Company's available unfunded commitments, a portfolio company must submit to the Company a formal funding request that complies with the applicable advance notice and other operational requirements. The amounts disclosed exclude unfunded commitments (i) for which, with respect to a portfolio company's agreement, a milestone was achieved after the last day on which the portfolio company could have requested a drawdown funding to be completed within the reporting period; and (ii) related to the portion of portfolio company investments assigned to or directly committed by the Adviser Funds as described in “Note -13 Related Party Transactions”. The fair value of the Company’s unfunded commitments is considered to be immaterial as the yield determined at the time of underwriting is expected to be materially consistent with the yield upon funding, given that interest rates are generally pegged to market indices and given the existence of milestones, conditions and/or obligations embedded in the borrowing agreements.

As of December 31, 2024 and December 31, 2023, the Company’s unfunded contractual commitments available at the request of the portfolio company, including undrawn revolving facilities, and unencumbered by milestones were as follows:


(in thousands)	Unfunded Commitments (1) as of
Portfolio Company	December 31, 2024		December 31, 2023
Debt Investments:
Earnix, Inc.	$	41,250	$	—
Arcus Biosciences, Inc.	37,500		—
Thumbtack, Inc.	30,000		40,000
GoEuro Travel GmbH	26,250		—
Armis, Inc.	25,000		—
Marathon Health, LLC	24,250		—
Disc Medicine, Inc.	22,500		—
Pindrop Security, Inc.	19,375		—
Coronet Cyber Security Ltd.	17,000		—
Locus Robotics Corp.	16,250		—
Akero Therapeutics, Inc.	15,000		15,000
Dragos, Inc.	13,000		13,000
Aryaka Networks, Inc.	12,500		—
WellBe Senior Medical, LLC	12,000		—
Harness, Inc.	11,550		—
Alector, Inc.	10,500		—
CoreView USA, Inc.	10,000		—
Strive Health Holdings, LLC	8,299		—
Suzy, Inc.	8,000		12,000
Heron Therapeutics, Inc.	8,000		4,000
Viridian Therapeutics, Inc.	8,000		—
PayIt, LLC	8,000		—
Curana Health Holdings, LLC	7,500		—
ATAI Life Sciences N.V.	7,000		—
Dashlane, Inc.	5,000		2,137
Babel Street	4,367		3,375


(in thousands)	Unfunded Commitments (1) as of
Portfolio Company	December 31, 2024		December 31, 2023
AlphaSense, Inc.	$	4,000	$	—
Saama Technologies, LLC	3,875		3,875
Allvue Systems, LLC	3,590		3,590
LogRhythm, Inc.	3,143		—
Zappi, Inc.	2,571		2,571
Loftware, Inc.	2,277		2,277
Streamline Healthcare Solutions	2,200		2,200
New Relic, Inc.	2,176		2,176
Sumo Logic, Inc.	2,000		2,000
Ceros, Inc.	1,707		1,707
LogicSource	1,209		1,209
TaxCalc	1,166		—
LinenMaster, LLC	1,000		1,000
3GTMS, LLC	886		1,182
Main Street Rural, Inc.	874		10,500
Fortified Health Security	840		840
Omeda Holdings, LLC	731		731
Flight Schedule Pro, LLC	646		639
DroneDeploy, Inc.	625		6,250
Dispatch Technologies, Inc.	563		625
ShadowDragon, LLC	333		333
Zimperium, Inc.	196		3,727
Automation Anywhere, Inc.	—		29,400
Checkr Group, Inc.	—		23,625
Skydio, Inc.	—		22,500
Tarsus Pharmaceuticals, Inc.	—		20,625
Kura Oncology, Inc.	—		19,250
Tipalti Solutions Ltd.	—		10,500
Next Insurance, Inc.	—		10,000
Senseonics Holdings, Inc.	—		8,750
Elation Health, Inc.	—		7,500
Modern Life, Inc.	—		6,500
Phathom Pharmaceuticals, Inc.	—		6,120
Brain Corporation	—		5,000







Leapwork ApS	—		3,900



Riviera Partners LLC	—		3,000
Cutover, Inc.	—		2,650
Plentific Ltd	—		2,625
Altumint, Inc.	—		2,500
Yipit, LLC	—		2,250
Annex Cloud	—		1,750
ThreatConnect, Inc.	—		1,600
Ikon Science Limited	—		1,050
Agilence, Inc.	—		800
Constructor.io Corporation	—		625
Enmark Systems, Inc.	—		457
Alchemer LLC	—		445
Cybermaxx Intermediate Holdings, Inc.	—		390



















Cytracom Holdings LLC	—		72
Total Unfunded Debt Commitments:	444,699		330,828


(in thousands)	Unfunded Commitments (1) as of
Portfolio Company	December 31, 2024		December 31, 2023
Investment Funds & Vehicles(2)
Forbion Growth Opportunities Fund II C.V.	2,072		2,748
Forbion Growth Opportunities Fund I C.V.	1,757		1,757
Total Unfunded Commitments in Investment Funds & Vehicles:	3,829		4,505

Total Unfunded Commitments	$	448,528	$	335,333

(1)For debt investments, amounts represent unfunded commitments, including undrawn revolving facilities, which are available at the request of the portfolio company. Amount excludes unfunded commitments which are unavailable due to the borrower having not met certain milestones. These amounts also exclude $139.7 million and $127.7 million of unfunded commitments as of December 31, 2024, and December 31, 2023, respectively, to portfolio companies related to loans assigned to or directly committed by the Adviser Funds as described in “Note -13 Related Party Transactions”.

(2)For investment funds and vehicles, the amount represents uncalled capital commitments in private equity funds.

The following table provides additional information on the Company’s unencumbered unfunded commitments regarding milestones, expirations and type:


(in thousands)	December 31, 2024		December 31, 2023
Unfunded Debt Commitments:
Expiring during:
2024	$	—	$	291,896
2025	251,941		3,004
2026	147,840		7,537
2027	10,553		14,078
2028	6,040		6,547
2029	24,149		3,590

2030	4,176		4,176

Total Unfunded Debt Commitments	444,699		330,828

Unfunded Commitments in Investment Funds & Vehicles:
Expiring during:
2030	1,757		1,757
2032	2,072		2,748
Total Unfunded Commitments in Investment Funds & Vehicles	3,829		4,505
Total Unfunded Commitments	$	448,528	$	335,333

The following tables provide the Company’s contractual obligations as of December 31, 2024 and December 31, 2023:


As of December 31, 2024:	Payments due by period (in thousands)
Contractual Obligations(1)	Total		Less than 1 year		1 - 3 years		3 - 5 years		After 5 years
Debt(2)(3)	$	1,783,265	$	170,000	$	891,000	$	283,790	$	438,475
Lease and License Obligations(4)	23,976		3,246		6,640		5,589		8,501
Total	$	1,807,241	$	173,246	$	897,640	$	289,379	$	446,976


As of December 31, 2023:	Payments due by period (in thousands)
Contractual Obligations(1)	Total		Less than 1 year		1 - 3 years		3 - 5 years		After 5 years
Debt(5)(3)	$	1,570,000	$	105,000	$	689,000	$	411,000	$	365,000
Lease and License Obligations(4)	26,741		2,539		6,629		6,248		11,325
Total	$	1,596,741	$	107,539	$	695,629	$	417,248	$	376,325

(1)Excludes commitments to extend credit to the Company’s portfolio companies and uncalled capital commitments in investment funds.

(2)Includes $279.0 million in principal outstanding under the SBA Debentures, $50.0 million of the February 2025 Notes, $70.0 million of the June 2025 Notes, $50.0 million of the June 2025 3-Year Notes, $50.0 million of the March 2026 A Notes, $50.0 million of the March 2026 B Notes, $119.5 million of the 2031 Asset-Backed Notes, $40.0 million of the 2033 Notes, $325.0 million of the September 2026 Notes, and $350.0 million of the January 2027 Notes as of December 31, 2024. There was also $283.8 million outstanding under the SMBC Facility and $116.0 million outstanding under the MUFG Bank Facility as of December 31, 2024.

(3)Amounts represent future principal repayments and not the carrying value of each liability. See “Note 5 – Debt”.

(4)Leases and license obligations includes contractual amounts related to short-term leases.

(5)Includes $175.0 million in principal outstanding under the SBA Debentures, $105.0 million of the July 2024 Notes, $50.0 million of the February 2025 Notes, $70.0 million of the June 2025 Notes, $50.0 million of the June 2025 3-Year Notes, $50.0 million of the March 2026 A Notes, $50.0 million of the March 2026 B Notes, $150.0 million of the 2031 Asset-Backed Notes, $40.0 million of the 2033 Notes, $325.0 million of the September 2026 Notes and $350.0 million of the January 2027 Notes as of December 31, 2023. There was also $94.0 million outstanding under the SMBC Facility and $61.0 million outstanding under the MUFG Bank Facility as of December 31, 2023.

Certain premises are leased or licensed under agreements which expire at various dates through July 2034. Total rent expense, including short-term leases, amounted to approximately $3.5 million, $3.4 million, and $3.2 million, during the years ended December 31, 2024, 2023, and 2022, respectively. The Company recognizes an operating lease liability and a ROU asset for all leases, with the exception of short-term leases. The lease payments on short-term leases are recognized as rent expense on a straight-line basis. The discount rate applied to measure each ROU asset and lease liability is based on the Company’s incremental weighted average cost of debt. The Company considers the general economic environment and its credit rating and factors in various financing and asset specific adjustments to ensure the discount rate applied is appropriate to the intended use of the underlying lease. While some of the leases contained options to extend and terminate, it is not reasonably certain that either option will be utilized and therefore, only the payments in the initial term of the leases were included in the lease liability and ROU asset.

The following table sets forth information related to the measurement of the Company’s operating lease liabilities and supplemental cash flow information related to operating leases as of December 31, 2024 and 2023:


(in thousands)	Year Ended December 31, 2024		Year Ended December 31, 2023
Total operating lease cost	$	2,873	$	2,382
Cash paid for amounts included in the measurement of lease liabilities	$	1,865	$	2,499


	As of December 31, 2024		As of December 31, 2023
Weighted-average remaining lease term (in years)	7.81		8.68
Weighted-average discount rate	6.85	%	6.79	%

The following table shows future minimum lease payments under the Company’s operating leases and a reconciliation to the operating lease liability as of December 31, 2024:


(in thousands)	As of December 31, 2024
2025	$	3,088
2026	3,179
2027	3,452

Thereafter	14,090
Total lease payments	23,809
Less: imputed interest & other items	(5,615)
Total operating lease liability	$	18,194

The Company may, from time to time, be involved in litigation arising out of its operations in the normal course of business or otherwise. Furthermore, third parties may try to seek to impose liability on the Company in connection with the activities of its portfolio companies. While the outcome of any current legal proceedings cannot at this time be predicted with certainty, the Company does not expect any current matters will materially affect the Company’s financial condition or results of operations; however, there can be no assurance whether any pending legal proceedings will have a material adverse effect on the Company’s financial condition or results of operations in any future reporting period.