Hercules Capital, Inc. (NYSE:HTGC) Q4 2022 Earnings Call Transcript

Ryan Lynch: Well, I guess my question was more on the trends that we’re seeing because while there was a record number of capital raised in 2022, the trend from investing on a quarterly basis decelerated significantly throughout 2022. Fourth quarter was very weak. And then when you look at the exit activity, that really dropped throughout the year significantly. So my question is really, do you expect these trends to turn around or to continue in 2023? And what does that mean for your business, even kind of forgetting about 2021, but I know those were kind of years or maybe somewhat exacerbated by kind of the frothy mix of the interest rates. But do you see these trends sort of turning around that we saw in the second half of 2022? And if not, what does that mean for the venture capital landscape?

Scott Bluestein: Sure. So Q4, both with respect to funds raised and dollars invested was down if you look at it relative to Q3. We do expect that to turn around. I’m not going to predict whether that happens in Q1 or Q2. We look at things on a 6- to 12-month basis. And based on everything that we’re seeing, conversations that we’re having, we believe that you will see an uptick over the course of 2023. With respect to exit activity, which was another comment that you made in terms of trends, again, I would sort of distinguish between some of the overall industry data and just the empirical evidence that we see in our own portfolio. Quarter-to-date, we’ve had 7 companies out of 105 companies announced or closed M&A transactions.

We certainly are not seeing any uptick with respect to IPO activity. But as we’ve been indicating publicly over the course of the last several quarters, we expect and we are seeing a tremendous uptick in M&A activity. And again, based on conversations we’re having across the portfolio, we actually expect that trend to continue to accelerate into the first half of 2023.

Operator: Thank you. This concludes the Q&A session. I’d now like to turn the call back over to Scott for any closing remarks.

Scott Bluestein: Thank you, Josh, and thanks to everyone for joining our call today. As a final note, we will be participating in the RBC 2023 Financial Institutions Conference in New York on March 7. If you would like to arrange a meeting with the Hercules management team, please contact RBC or Michael Hara. We look forward to reporting our progress on our Q1 2023 earnings call. Thank you. .

Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.