Executive Summary

Record total investment income of $137.5M and record net investment income of $88.7M; EPS was $0.50, with NII covering 125% of the base distribution, and NAV/share rose 2.5% q/q to $11.84 .
Strong beat versus Wall Street: EPS $0.50 vs $0.472* consensus; TII $137.5M vs $129.5M* consensus. Both EPS and “revenue” (TII) beat; estimate revisions likely skew higher after record fundings and early repayments . Values retrieved from S&P Global.
Credit improved: loans on non‑accrual fell to 0.2% of total investments at cost (down from 1.8% in Q1), and weighted average credit grade improved to 2.26 from 2.31 .
Liquidity and funding catalysts: $350M 6.000% notes due 2030, MUFG facility increased to $440M, and available liquidity of $785.6M; these actions support originations momentum and shareholder distributions .
Management emphasized robust pipeline and consistent core income, positioning for continued strong origination/funding despite seasonal Q3 slowdown; this narrative is a positive stock reaction catalyst .

What Went Well and What Went Wrong

What Went Well

Record fundings ($709.1M) and second consecutive quarter with >$1B new commitments drove net portfolio growth; CEO: “robust pipeline of high‑quality investment opportunities…record fundings” .
Earnings quality and coverage: NII of $88.7M ($0.50/share) provided 125% coverage of the base distribution ($0.40) .
Credit quality/tone improved: non‑accruals declined to 0.2% of portfolio cost; weighted average grade improved to 2.26 from 2.31 .

What Went Wrong

Net realized losses of ($57.6M) in the quarter (debt, warrants, FX), partially offset by $47.8M net unrealized appreciation .
Operating and interest costs rose y/y: non‑interest and fee expenses $26.5M vs $24.0M; interest expense and fees $25.7M vs $21.5M; reflects higher borrowings and facility utilization .
EPS down slightly y/y ($0.50 vs $0.51) due to higher weighted average shares (176.8M vs 160.7M) despite higher TII/NII .

Financial Results

Metric	Q2 2024	Q4 2024	Q1 2025	Q2 2025
Total Investment Income ($USD Millions)	$125.0	$121.8	$119.5	$137.5
Net Investment Income ($USD Millions)	$82.4	$81.1	$77.5	$88.7
EPS (NII before gains, Basic) ($USD)	$0.51	$0.49	$0.45	$0.50
GAAP Effective Yield (%)	—	13.7	13.0	13.9
Core Yield (%)	—	12.9	12.6	12.5
ROAE (%)	—	17.0	15.7	17.1
ROAA (%)	—	8.9	8.0	8.6
NAV per Share ($USD)	—	$11.66	$11.55	$11.84

KPIs and Balance Sheet

KPI	Q4 2024	Q1 2025	Q2 2025
First Lien Senior Secured (%)	91.0	90.9	91.0
Floating Rate w/Floors (%)	97.4	98.0	97.8
Loans on Non‑Accrual (% of total at cost)	1.7	1.8	0.2
Available Liquidity ($USD Millions)	$658.8	$615.6	$785.6
Net Regulatory Leverage (%)	69.9	82.7	78.7
Shares Outstanding (Millions)	170.6	173.3	181.7
Undistributed Earnings Spillover ($USD Millions)	$163.6	$159.6	$134.1

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Base + Supplemental Distribution	Q2 2025	$0.40 + $0.07 (Q1)	$0.40 + $0.07	Maintained
Core Yield Expected Range	2025	12.25%–12.75% (Q1 commentary)	12.0%–12.5% (Q2 within range)	Lowered range
MUFG Credit Facility	As of Q2 2025	$400.0M (Q1)	$440.0M	Increased
Unsecured Notes	Q2 2025	$287.5M 4.75% converts (Mar’25)	$350.0M 6.000% notes due 2030	New issuance
Interest Rate Sensitivity Table	As of Q2 2025	Updated as of Q1	Updated as of Q2	Maintained disclosure

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’24, Q1’25)	Current Period (Q2’25)	Trend
Originations & Fundings Momentum	Record 2024 fundings; favorable 2025 origination backdrop; disciplined underwriting	Second consecutive quarter >$1B commitments; record $709.1M fundings	Improving
Core Yield & Rate Floors	Core yield down modestly with rate cuts; ~50% at contractual floors (Q4/Q1)	Core yield 12.5% within 12.0–12.5% range; asset‑sensitive portfolio	Stable
Liquidity & Leverage	>$1B platform liquidity; conservative leverage under/near 1:1	$785.6M liquidity; GAAP leverage 97.4%; net regulatory leverage 78.7%	Strong/Stable
Credit Quality & Non‑Accruals	Non‑accruals 1.7%–1.8%; vigilant downgrades ahead of funding needs	Non‑accruals fell to 0.2%; weighted avg grade improved to 2.26	Improving
Private Funds/AUM Expansion	AUM managed >$5B; RIA dividends to BDC	AUM >$5.3B; first close of 4th institutional private credit fund	Expanding
Capital Markets Actions	$287.5M converts (4.75%) in Mar’25	$350M 6.000% notes; MUFG facility raised to $440M; ATM issuance in Q2	Accretive/liquidity enhancing
Seasonal Outlook	Expect muted exits near‑term; seasonally strong Q4; volatility into 2025	Management notes seasonally slower Q3 but bullish FY25 originations	Mixed seasonality; positive full‑year

Management Commentary

CEO: “Our vibrant ecosystem and industry‑leading investment team has provided a robust pipeline…over $1.0 billion of new debt and equity commitments…record fundings of over $709.0 million in Q2…our net investment income of $0.50 per share provided 125% coverage of our base distribution…core income in excess of $100.0 million for nine consecutive quarters” .
CEO: “We successfully raised a new institutional bond of $350.0 million, renewed and increased our credit facility with MUFG to $440.0 million…position us well to evaluate and potentially identify the best risk‑adjusted opportunities” .
CFO (call): “We added…another $500,000,000 split between $350,000,000 unsecured notes and nearly $150,000,000 via our ATM” .

Q&A Highlights

Analysts probed originations cadence and funding outlook into seasonally slower Q3; management remained bullish on FY25 record commitments/fundings .
Clarifications on capital structure and liquidity: $350M notes and increased MUFG facility plus ATM issuance to support growth while moderating leverage .
Tone: confident on pipeline/credit, cautious on exit activity seasonality; reiterated asset sensitivity and rate floors .

Estimates Context

Metric	Q4 2024 Consensus	Q4 2024 Actual	Delta	Q1 2025 Consensus	Q1 2025 Actual	Delta	Q2 2025 Consensus	Q2 2025 Actual	Delta
EPS ($USD)	0.503*	0.49	(0.013)*	0.468*	0.45	(0.018)*	0.472*	0.50	+0.028*
Total Investment Income ($USD Millions)	126.167*	121.784	(4.383)*	125.433*	119.511	(5.922)*	129.465*	137.459	+7.994*

Values retrieved from S&P Global.

Key Takeaways for Investors

Earnings beat on both EPS and TII; record fundings and elevated early repayments materially boosted effective yield and revenue; expect near‑term estimate revisions upward . Values retrieved from S&P Global.
Credit improvement (non‑accruals down to 0.2%) and better portfolio grading reduce downside risk to NII; supports dividend visibility .
Liquidity and funding actions ($350M notes, MUFG $440M, ATM) provide dry powder without excessive leverage creep; positive for sustained originations and shareholder returns .
Watch early loan repayments: Q2 early repayments rose 102.9% vs Q1, materially impacting effective yield; this can swing quarterly TII/NII .
Core yield stable at 12.5% within lowered range; asset‑sensitive portfolio with rate floors moderates downside from future cuts .
NAV/share increased 2.5% q/q; accretive ATM issuance and unrealized gains offset realized losses; continued NAV stability bolsters total return profile .
Trading implications: Positive catalyst from clean beat and credit improvement; near‑term seasonality may temper Q3 prints, but FY momentum intact; consider buying dips ahead of Q3 with eye on early repayment cadence and pipeline conversion .

Additional Relevant Press Releases (Q2 2025)

Priced and closed upsized institutional notes offering: $350M 6.000% notes due 2030 (pricing June 11; closing June 16); also referenced in Q2 earnings release [3:—] [2:—].
Declared total cash distribution of $0.47/share for Q2 2025 (base $0.40 + supplemental $0.07) with QII designation details .
IR calendar: announced date for release of Q2 2025 financial results and conference call (July 17) .

Prior Two Quarters’ Earnings (for Trend)

Q1 2025: TII $119.5M, NII $77.5M ($0.45/share), core yield 12.6%, GAAP effective yield 13.0%, non‑accruals 1.8%, liquidity $615.6M .
Q4 2024: TII $121.8M, NII $81.1M ($0.49/share), core yield 12.9%, GAAP effective yield 13.7%, non‑accruals 1.7%, liquidity $658.8M .

Notes: “Revenue” referenced herein aligns with Total Investment Income for a BDC. All yield/leverage measures follow company definitions. Non‑GAAP measures (Core Yield, Net Regulatory Leverage) per company reconciliations .

Hercules Capital, Inc. (HTGC)·Q2 2025 Earnings Summary