Hercules Capital, Inc. · NYSE:HTGC
Hercules Capital — Proxy Contest (October 2018)
21 slides from Hercules Capital's proxy contest presentation, Oct 29, 2018
Slide 1: Regulatory Relief and Incremental Use of Leverage and Shareholder Value Creation
October 2018 REGULATORY RELIEF AND INCREMENTAL USE OF LEVERAGE AND SHAREHOLDER VALUE CREATION TM Financing the Growth of Tomorrow’s Companies TodayOctober 2018 REGULATORY RELIEF AND INCREMENTAL USE OF LEVERAGE AND SHAREHOLDER VALUE CREATION TM Financing the Growth of Tomorrow’s Companies Today
Slide 2: Important Notice: Disclaimer and Forward Looking Statements
IMPORTANT NOTICE: DISCLAIMER AND FORWARD LOOKING STATEMENTS This presentation may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You should understand that under Section 27A(b)(2)(B) of the Securities Act of 1933, as amended, and Sect
Slide 3: Key Presentation Topic Overview
KEY PRESENTATION TOPIC OVERVIEW Letter to Stockholders and The Small Business Credit Availability Act (the “SBCAA”) Key Attributes that Enhance Hercules Capital’s use of Modest Increased Leverage HTGC’s Guidance for Asset Coverage Ratio “ACR” HTGC’s Plan for Reduced Asset Coverage Requirement Buildi
Slide 4: Letter to Stockholders
LETTER TO STOCKHOLDERSLETTER TO STOCKHOLDERS
Slide 5: Special Meeting of Hercules Capital Stockholders: To Our Stockholders
SPECIAL MEETING OF HERCULES CAPITAL (HTGC) STOCKHOLDERS To Our Stockholders: We will be holding a Special Meeting of Stockholders of Hercules Capital, Inc. on December 6, 2018 at 9:00 AM, Pacific Time, at our headquarters, 400 Hamilton Avenue, Suite 310, Palo Alto, CA 94301 (the “Special Meeting”).
Slide 6: Special Meeting of Hercules Capital Stockholders: We Urge a Vote FOR
SPECIAL MEETING OF HERCULES CAPITAL (HTGC) STOCKHOLDERS To Our Stockholders, continued: We urge stockholders to vote “FOR” this proposal: • Increasing the regulatory cushion through a lower minimum asset coverage requirement gives the Company additional flexibility to manage capital to take advantag
Slide 7: HTGC Board Approved Reducing Asset Coverage Requirement Under the SBCAA
HTGC BOARD APPROVED REDUCING ASSET COVERAGE REQUIREMENT UNDER THE SMALL BUSINESS CREDIT AVAILABILITY ACT • The Small Business Credit Availability Act (the “SBCAA”) was included in the Omnibus Spending Bill and was signed into law on March 23, 2018 • The SBCAA, among other things, modifies the applic
Slide 8: Key Attributes That Enhance Hercules Capital's Use of Incremental Leverage
KEY ATTRIBUTES THAT ENHANCE HERCULES CAPITAL’S USE OF INCREMENTAL LEVERAGEKEY ATTRIBUTES THAT ENHANCE HERCULES CAPITAL’S USE OF INCREMENTAL LEVERAGE
Slide 9: Key Attributes That Enhance Hercules Capital's Use of Modest Increased Leverage
KEY ATTRIBUTES THAT ENHANCE HERCULES CAPITAL’S USE OF MODEST INCREASED LEVERAGE • INTERNALLY MANAGED BDC - No incentive to grow assets under management “AUM” for fees • Our compensation is based on earnings and credit performance Internally Managed BDC • Incentivized to maintain disciplined credit u
Slide 10: HTGC's Guidance for Asset Coverage Ratio
HTGC’s GUIDANCE FOR ASSET COVERAGE RATIO “ACR”HTGC’s GUIDANCE FOR ASSET COVERAGE RATIO “ACR”
Slide 11: HTGC Guidance for Asset Coverage Ratio
HTGC GUIDANCE FOR ASSET COVERAGE RATIO “ACR” • We expect to continue our prudent and controlled use of leverage and remain well below the 150% asset coverage limit. We do not anticipate going below 167% asset coverage/1.5x leverage for the foreseeable future. • Upon shareholder approval to increase
Slide 12: HTGC's Plan for Reduced Asset Coverage Requirement
HTGC’s PLAN FOR REDUCED ASSET COVERAGE REQUIREMENTHTGC’s PLAN FOR REDUCED ASSET COVERAGE REQUIREMENT
Slide 13: HTGC Plan for Reduced Asset Coverage Requirement: Key Elements
HTGC PLAN FOR REDUCED ASSET COVERAGE REQUIREMENT KEY ELEMENTS • No Change to our “first position” senior secured investment focus and historical loan portfolio orientation with attractive risk-adjusted yields • No Change to our direct origination venture-lending focus or thematic investment underwri
Slide 14: Prudent Approach to Leverage Since Inception
HTGC’s PLAN FOR REDUCED ASSET COVERAGE REQUIREMENT PRUDENT APPROACH TO LEVERAGE SINCE INCEPTION § HTGC has demonstrated and maintained a cautious and prudent approach to leverage since inception December 2003 (1) • Regulatory leverage currently 65.2% ; Since inception, typically below 73.0% (1) • Ne
Slide 15: Relaxed Asset Coverage Ceiling Improves Risk Profile
RELAXED ASSET COVERAGE CEILING IMPROVES RISK PROFILE WE INTEND TO OPERATE WITH A GREATER CUSHION WHICH WILL HELP OUR FLEXIBILITY AND SEEK TO REDUCE RISK FOR DEBT AND EQUITY HOLDERS New Regulatory Leverage Limit under the Small Business Credit Availability Act 2.00 2.00x 1.80 1.60 Expanded Cushion 1.
Slide 16: Key Performance Highlights
KEY PERFORMANCE HIGHLIGHTSKEY PERFORMANCE HIGHLIGHTS
Slide 17: Building Off of HTGC's Strong Historical Stockholder Returns
BUILDING OFF OF HTGC’S STRONG HISTORICAL STOCKHOLDER RETURNS 160% (b) Total Shareholder Return % (TSR) vs. BDCs & Wells Fargo BDCS Index 140% 120% 100% 80% 60% 40% 11.6% 20% 2.6% 3.6% 67.0% 36.8% 38.5% 27.0% 11.9% 23.9% 150.4% 66.4% 102.0% 0% 1- Year 3-Year 5-Year 7-Year (a) HTGC Peer Group Wells Fa
Slide 18: Portfolio Highlights and Strong Track Record
PORTFOLIO HIGHLIGHTS AND STRONG TRACK RECORDPORTFOLIO HIGHLIGHTS AND STRONG TRACK RECORD
Slide 19: Strong High Quality Portfolio and Track Record
STRONG HIGH QUALITY PORTFOLIO AND TRACK RECORD First Lien Senior Secured, Floating Rate- • 85.9% “true” first lien senior secured and generally only lender • 97.2% floating rate loans with interest rate floors focused Portfolio • Debt investments in 88 companies Broadly Diversified, Rapidly Amortizi
Slide 20: Hercules' Investment Portfolio: Q2 2018
HERCULES’ INVESTMENT PORTFOLIO: Q2 2018 Investment Type Breakout Floating vs. Fixed Rate 2.0% 2.8% 7.1% Sr. Secured First Lien 12.8% Sr. Secured Last Out Floating Equity Investments Fixed Warrant Positions 78.1% 97.2% Industry Breakout Hercules Investments by Geography Communications & Networking 26
Slide 21: To Vote
TO VOTE The proxy statement is now available. You may use one of the following methods to provide your voting instructions: Vote by Internet: Online at www.proxyvote.com. Have your 16-digit control number listed on the proxy card or voter instruction card and follow the instructions; or Vote by Tele