Good day, ladies and gentlemen, and welcome to the Hercules Capital Q3 2017 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to our host for today's call, Mr. Michael Hara. You may begin.

Thank you, Marie. Good afternoon, everyone, and welcome to Hercules' conference call for the third quarter 2017. With us on the call today from Hercules are Manuel Henriquez, Founder, Chairman and CEO; and David Lund, Interim Chief Financial Officer. Hercules' third second quarter 2017 financial results were released just after today's market close and can be accessed from Hercules' investor relations section at htgc.com. We have arranged for a replay of the call on Hercules' web page or by using the telephone number and passcode provided in today's earnings release. During this call, we may make forward-looking statements based on current expectations. Actual financial results filed with the Securities and Exchange Commission may differ from those contained herein due to timing delays between the date of this release and in the confirmation and final audit results. In addition, the statements contained in this release that are not purely historical are forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in those forward-looking statements, including, without limitation, the risks and uncertainties, including the uncertainties surrounding the current market turbulence, and other factors we identify from time to time in our filings with the Securities and Exchange Commission. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions can be proved to be inaccurate, and as a result, the forward-looking statements based on those assumptions also can be incorrect. You should not place undue reliance on these forward-looking statements. Forward-looking statements contained in this release are made as of the date hereof, and Hercules assumes no obligation to update the forward-looking statements or subsequent events. To obtain copies of related SEC filings, please visit sec.gov or our website, htgc.com. With that, I will turn the call over to Manuel Henriquez, Hercules Chairman and Chief Executive Officer.

Thank you, Michael, and good afternoon, everyone, and thank you for joining us today for the Hercules Capital third quarter 2017 earnings call. I would like to say welcome back, David Lund, for the many years of service you provided us and recognition of having you come back as our Interim CFO. For those of you who may recognize David Lund's name, David was our former CFO from the IPO back in 2005 through 2011, where he oversaw a period of tremendous growth for Hercules Capital, which included the difficult period of time during the whole global credit crisis of 2008-2010, where he did an amazing job during a challenging period for the entire industry, if not the world. I am delighted to have a trusted, seasoned and experienced executive such as David and a confidant that I have with David as our interim CFO in conjunction with working with Gerard. David will oversee our outstanding accounting and finance department, along with Gerard. David's prior knowledge and experience with Hercules Capital became the logical choice to help us oversee during this transition period and, most importantly, the integration of our new acquired loan portfolio, as well as help oversee the other potential acquisitions that we're currently evaluating and reviewing as we continue to focus on growth of the overall company. David, thank you and welcome back as our interim CFO. During today's call, I will be discussing the following items, an overview of our strong financial results and selected achievements during the quarter; our recent acquisition of the Aries Capital Venture lending portfolio; our successful and oversubscribed inaugural investment-grade institutional bond offering of $150 million; a quick summary of the select venture capital marketplace activities; and conclude with a brief outlook for Q4 2017 and the first half of 2018.…

Thank you, Manuel. And good afternoon and evening, ladies and gentlemen. I am pleased to report our third quarter results. Today I would like to focus on the following read that impacted our third quarter earnings. Our origination platform realized losses in unrealized appreciation in the portfolio and income statement performance in the quarter, credit outlook, NAV performance and our liquidity. With that, let's turn my attention to the origination platform. Our originations platform continues to demonstrate its resiliency. We had total investment fundings of $146.7 million in the third quarter, from a total of about 16 portfolio companies, offset by $135.7 million in payments from unscheduled early payoffs and regularly scheduled amortization, for net investment portfolio growth of $11 million. On a cost basis, our debt investment portfolio balance ended at $1.314 billion at the end of the third quarter. Our core yields were 12.6%, up from 12.1% in the previous quarter due to the origination of high-yielding loans at the end of the second quarter continuing into the first half of Q3. Further, we announced our acquisition of the Aries Venture loan portfolio for approximately $125 million, yielding approximately 11%. We expect to see about a 2% NII per share impact based on 82.5 million weighted shares outstanding as of September 30, 2017. I would now like to discuss the realized and unrealized activity that occurred during the quarter. We had net realized losses of $24.5 million in the third quarter, which was primarily the result of 2 positions. In Q3, our investment in Sky Cross Inc. was deemed wholly worthless and written off and an investment in a second portfolio company was sold resulting in a realized loss. The loss on those positions was already reflected in net asset value through unrealized depreciation in prior quarters. We…

[Operator Instructions]. Your first question comes from the line of John Hecht, from Jefferies.

Manuel, I appreciate your update on the externalization contract and I know it must have been a tough decision, but appreciate all the effort you guys put into that. The first question I have is just sort of modeling perspective, is that $1.45 billion in loans at the end of the quarter - expected loans in that range at the end of the quarter, does that include the Aries acquisition of the Aries portfolio?

It technically does not fully include it because when we did this - so the answer is, no, it doesn't. So with the Aries portfolio, you're probably going to be closer to the $1.55 billion level when you fully include the Aries portfolio and giving way to the early amortization. So I would tell you that you're looking at a portfolio that with Aries would probably be between $1.5 billion to $1.55 billion with Aries in it.

And does the Aries portfolio have similar - once you I guess you've embedded it in your portfolio will it have any meaningful impacts on the yield or anything? Or is it fairly consistent with respect to its characteristics?

Well the Aries portfolio, first of all, was a high quality portfolio, which is why we transacted. Aries did a really good job of underwriting that book. It has lower yields than e typically see. It's probably - we're anticipating it when we fully onboard the loan book, it's probably going to be in the low 11%s. So we think it's going to be probably between 11% and 11.2% on a blended basis when we finally onboard the loans to that, versus our currently we're seeing our yields rising. So we expect at this point when we look at our Q4 forecast we're exciting to see a possibility of anywhere 10 to 20 basis points degradation in our overall core yields. But as I said, until we fully onboard the loan book that's an estimate that we're forecasting right now to see the 12.6% maybe leg down to be 10 to 20 basis points in Q4.

Okay. That's very helpful. And then you mentioned you had a more favorable competitive environment, which is improving core yields, but also it sounds like a favorable environment where you even getting some potential other portfolio acquisition opportunities. I wonder if you can shed a little light on both. In the core yields, is that like-for-like structured loan you're seeing loan stabilize or you're actually seeing yields improve? And how much room does that have to grow, do you think? And second, on the portfolio acquisitions, maybe just give us a little color on what you're seeing and where.

So, as I said in the beginning of the call, one quarter doesn't make a trend. So I want to be cautious of that. But the signs that I'm seeing from our deal teams are quite encouraging. Now it's not going up 150, 200 basis points. Let me be very clear. My enthusiasm is tempered to the tune of probably 50 basis points that we're seeing a nice gradual rise to be occurring here. But if that could turn into a much more increase in rise if the environment that we're beginning to see is taking shape. We're not seeing a lot of our smaller venture debt players out there making any meaningful origination. In fact, most of them are seeing portfolio contractions or concentrations in their books. We in the in turn are seeing pretty steady ad consistent opportunities. We remain very yield stingy, if you will, when we underwrite. But we're seeing encouraging signs and when we look a - for example, in Aries, willing to sell us their portfolio, I think that gives you some indications of what we think that the broader industry is doing, where venture lending is a very complex and a very difficult asset class to originate. And if you don't have that brand and that deal flow, the amount of early repayments can actually bury you quickly. And so we're beginning to see signs where a lot of these players who are coming into venture lending flirting with the asset class is not working out as they anticipated and they're beginning to show signs of leaving it, which is why we're beginning to see a nice gradual increase in yields that I think will come into full force probably in Q2 of '18.

Your next question comes from the line of Ryan Lynch, from KBW.

First one, just wanted to get a clarification on exactly when do you anticipate the Aries transaction closing. I know you guys announced it today, but do you guys expect it to close very soon? Or is that going to close later in the quarter?

It literally closed this morning, I think it is. So the ink and the paint is still wet. But everything was papered and closed this morning. I have to give credit to both teams, Aries and our team it officially closed this morning. We now have the process of onboarding all the loans and getting all the terms and conditions in our systems and getting all that done. So until it's all in the system to really have a strong forecast on yields is difficult to do. Of course, we can compute them mathematically but until it's in the system. Conversely, we expect the portfolio to be accretive immediately commencing in November 1. We expect the portfolio to be about $0.02 accretive in earnings and I think that as we look forward to that we probably may be able to get a little bit more than $0.02 accretion out of it. But I think that right now $0.02 per quarter on the acquisition is something that we feel pretty confident about with what we know right now.

Okay. Great. And then when you gave the guidance of about $75 million to $125 million of kind of net growth in the fourth quarter including the transaction, it looks like that could potentially be pretty conservative. If I look at the commitments you guys have closed quarter-to-date through October, it's about $60 million. With the Aries transaction, that's $125 million. Add those together, that's $185 million in the first month of the quarter. And if I look at early repayoffs payment of $75 million to $100 million, it feels like net growth of $75 million to $125 million could be pretty conservative. Is that kind of a conservative number in your mind?

It is. And the reason why it is that I've been burdened once already trying to give a good indication of what early payoff activities are. And for 3 quarters, I have not been able to get it nailed down appropriately and it's a plus or minus - these days $50 million swing. So maybe I'm just burned by trying to be conservative. So, yes, I think it's conservative.

Sure. What is, I know it's difficult to predict early prepayments that can fluctuate pretty wildly quarter -to-quarter, but what is generally driving the slowdown that you guys are expecting in early repayments?

So as I indicated, and I've done this a million times [indiscernible], there are 4 components of early payoff activities. The first one, we can't control, M&A. We're picking great companies. Those companies are being acquired. That's a positive outcome of good portfolio selection. So, M&A is one of the events. Number two is some encouraging signs, if you will, of our companies being quite successful, they're maturing and eventually migrating to more traditional bank financing that they can achieve when they're operating an EBITDA positive. So there's a natural sequencing of our companies maturing and eventually migrating off the books. The element where we're seeing an ebbing begin to occur is that we're seeing hedge funds and other non-sophisticated non-experienced financial lenders who went into the asset class and they started taking on losses and realizing that venture lending is much more difficult than they anticipated. And we're beginning to see signs of them pulling back and pulling out of the industry, causing us to be encouraged by those signs. Are kind of the three high-level items that I would share with you that give us that confidence that we're seeing in the marketplace.

Okay. That's all for me. I just did want to say I appreciate the discussions you had around the externalization and also appreciate your guys' decision to stay internal.

Thank you very much. And I will say that your forum, as difficult as it was, was actually a very, very helpful in that process. So I'm very thankful to KBW and that forum with all those investors. That was a very good forum. So thank you for that.

Your next question comes from the line of Jonathan Bock, from Wells Fargo Securities.

So 1 quick item I want to put out, Manuel. There were 2 points as it relates to externalization that had people worried. One, if you did it, it relates to compensation for handing over something of value without receiving compensation for it. You absolutely appreciate the decision you made. But the second one was that if we didn't do it, I think the comment was we can't necessarily guarantee key personnel being kept around. And so this solidifies it probably one last time, Manuel, do you believe that under the current compensation scheme that you'll likely be able to maintain and continue to build the best-in-class venture platform that you've built and would like to continue to do so in the future?

So as I've said many, many times, every individual in this earth is free to go as they please and we hire and we work with some of the most talented, highly skilled individuals in our organization. It is up to every organization to work hard to keep those people motivated and incentivized. Specific to your question, I do believe that in Fiscal 2018 that, and we're still running our models now, I do believe that we're going to see an increase in SG&A. I don't know what that level is, but I would probably if pushed for a number, I probably would think that SG&A will probably rise anywhere between $500,000 to maybe $1 million a quarter. I don't think it has to go to that level, but there's clearly a need to retain and encourage and motivate our key personnel responsible for this outstanding performance that we have accomplished over the years. So, yes, I do believe that they'll be a slight increase in SG&A; it's not going to go through the rood, but I do believe that probably a modest increase in SG&A in Fiscal 2018. What exactly that is, until I rerun the forecast for 2018 our models, I don't know. But I think that if you want to walking around number $500,000 to $1 million a quarter is probably a good number.

Sure. Appreciate that. And while the detail is certainly helpful, I think folks weren't necessarily afraid of compensating employees more for good performance as you've delivered, it was the fear that one wouldn't be able to retain employees. And so is it your belief that you'll be able to retain key employees over time?

Jonathan, as you know, our employees are very important to me. They are the bedrock of this organization and a critical, critical component. The decision on compensation ultimately does not just rest on me; it rests on our independent board of directors. I think that they're highly aware and attuned the need to make sure that we incentivize and retain our key employees. So at this point, I believe that with our focus on remaining internally managed with the acquisition of the Aries portfolio, with our strong access to the capital markets for liquidity, we are the platform of choice that have the ability for them to execute and deliver on what they want to be doing, which is a venture lending. And because we are that platform with that scale, I hope and believe that those key employee flight risk may be contained. But again, I say as I always say, everyone is a free agent. But I believe that our key employees will stick around, but I cannot give you that assurances because everyone has the ability to make their decisions.

Understand. Appreciate that. Next question just relates to the use of the ATM. Walk us through why one would choose to even in very small amounts access that market relative to the cash balance, et cetera, that you have over the past quarter. And what's your view on its use, going forward?

So the ATM is an extremely accretive and beneficial product to sue. It's actually probably one of the greatest tools that a CEO can have at their disposal, not the single equity raise and to dial in modest equity capital raises that are highly accretive to net asset value for our shareholders. As to the second part of your question, I'm not going to get into our strategy behind ATM, because that is a proprietary strategy that we use and it's been very beneficial and very effective for our balance sheet and balance sheet management. The third element of your question is very critical. The ATM as an example, we just turned it on in late Q3 when we started to have the realization of the possibility of an Aries transaction. So to put that in context, I have $140 million of cash and I'm going to deploy $125 million of that to buy the Aries portfolio. I have my bank lines available to me, but why would I want to have a negative spread on cash on the balance sheet when I can actually deploy that cash and make it immediately accretive by doing the acquisition, which we did. And when you actually do your models, you will see the conversion of $125 million of cash into interest-earning assets becomes a pretty spectacular accretive benefit for the shareholders and our company. So because of that, I will always dial in a set number of capital dollars that I plan to raise over an ATM over a 6- to 9-month period of time and then gradually do that without adversely impacting the stock by doing it at a very accretive way.

Appreciate that. Appreciate your comments, the work that went around your decision and also likely the returns that can be generated by your key team employed with you heretofore and for quite a while from now.

Your next question comes from the line of Timothy Hayes, from BRB Riley FBR.

Back to the Aries portfolio, can you just talk a little about the characteristics of the portfolio and why you decided to pull the trigger on this acquisition versus maybe some others you vetted over the past several quarters? And then you gave some color around the yield profile. Can you also just give us an indication of kind of how the maturity profile stacks up versus your portfolio? And also just the types of industries of the portfolio companies, as well?

Sure. As I said, the reason why we transacted is that Aries did a great job of underwriting. It's not often you see a great quality book come available. And I have a very strong belief that Aires is a good shop and a great underwriter and that certainly was proven true when we bought their portfolio. So the portfolio is heavily tech orientated and , in fact, I think it has little to no life sciences exposure in it. So it's a heavily tech orientated portfolio where I can point to you that our tech book is about 32%, 35% of our exposure and by augmenting our book with the Aries we start getting a better balance of tech to life sciences. So that's one of the reasons. Number two, on duration, let me try it - well, I don't remember exact duration, but I remember we have approximately 11 [indiscernible] , I think it is, that we acquired. So 11 unique portfolio companies on the lending side. We have a smattering of warrants and equity positions that make up about $4.5 million, $5 million of that transaction. But the vast majority, $120 million of it, is interest-earning loans that we believe when we put them in our system will have a yield somewhere in the neighbourhood of an 11% , 11.2%. The average duration, if I remember correctly, I think it has about 18 to 22 months left in the portfolio. And most have a maturity somewhere in the neighbourhood of about 2020, if I remember correctly. But apologies. I don't have specific all the obligores there in front of me. But it's about 11 of them with a yield 11%, 11.2% mostly all tech.

Great. That's really helpful. Thank you. And then just a follow-up from me, given the infrastructure that you have built out today, how large do you see the portfolio growing to kind of over time? And then can you just give us an idea the type of operating leverage you can achieve as you , I guess, surpass new milestones, whether it's $1.5 billion to $2 billion marks, et cetera?

If the competitive trends that we're seeing continue to come in our direction, I think that you can look at Fiscal 2018 a loan portfolio on the debt side, not including our equity and warrant positions, that can probably be between $1.7 billion and $1.8 billion on the debt side. And I reserve a little bit on that because if the broader macroeconomics continues to improve as we expect, obviously, we'll be giving guidance to our investor community, our shareholder community and analysts later on in early part of '18, but if the trends continue rising yields and early payoff begin to truly ebb, then it translates into significant portfolio growth and accretion by having those loan runoff that we've been experiencing stay on the books and continue to earn interest income. That is all highly favorable for our shareholders in the process. Right now I guess I would tell you we're being a little bit more guarded because we like what we're seeing. It is encouraging. We have the liquidity to capitalize on it. And to your macro question, prior to the acquisition of the Aries portfolio, my net leverage position was only 50%. Post the Aries acquisition, I believe it's about 65% leverage when I exclude my cash back from my leverage on that. So I still have plenty of room to grow the book. We've given our deal teams the authority and the latitude to be a bit more aggressive right now. And so we intend to make a very strong message to the market that we intend to grow our credit book, going forward, in 2018.

And just to clarify, when you say be more aggressive, you again you're not talking about chasing yields down or sacrificing anything that's outside of the traditional Hercules credit box, right?

I'm an old-school Boston guy. I don't like taking credit risk. I'm an old Yankee lender. So I like to put money out and get it back. So , no, we are not chasing yields and we're not doing silly underwriting. I refuse to do that. And I'd rather miss earnings than go down the balance sheet. I think we've seen that witnessed - that strategy play out recently in the last few quarter's earnings calls. Not a very good strategy to pursue.

Your next question comes from the line of Henry Coffey, from Wedbush.

So I'm trying to make some sense out of this discussion around core yields. I know the number was at 12.1% in the second quarter. There was a lot of expressed anxiety that it would break below that as recently even as a few weeks ago and now we're at 12.6%. And I think I may have misheard you, but were you talking about an 11% to an 11.2% kind of number? Or how does that fit into the dialogue?

No, we expected when we first indicated our conversation in Q2, we thought that our core yields will continue the pace of competitive environment, and we though that they would leg down as much as potentially 11.7%. And potentially 12.2% was I think the range that we had given. So we were pleasantly surprised when we actually ended up realizing 40 basis points on the higher end higher than we anticipated. But I will tell you most of it is driven probably by portfolio rotations, meaning that we had some early payoff activities on companies that had lower yield than we had anticipated would be paying off, and as those lower yields once off they actually make the broader portfolio rise in doing so. So that's some of the things that we had not anticipated with the type of companies that paid us off. The normal profile of that is somewhat shifted in Q3. So we had lower yielding loans actually pay us off earlier than anticipated. And then of course the inverse of that is we also onboarded some newer loans that had higher yields than we anticipated, but also we began to eat away at the negative cash drag. So as we convert that cash into interest-earning assets, that's also another accretive component of the process.

The 11.7% that you were referring to was yields on new investments?

No, it was the expected overall weighting of the core portfolio that given the trend line that we experienced, to give you some context, we went from 12.9% in Q4 to 12.2% in Q1 to 12.1% in Q2 of '17. So we extrapolated that given what we realized and we thought we were going to break through 12% in Q3. And in fact, the deal tea did a phenomenal job of finding alternative credits that were able to get yields slightly higher than that. So our new loans onboarding were actually higher yields than we anticipated, coupled with what I said a minute ago of lower-margin loans at lower-yielding loans actually paid us off sooner than we anticipated, and that helped us increase our yields.

Could you give us some insight into what the core yields on the newly originated product was like?

Henry, I don't have that in front of me, but if I remember a ballpark is somewhere in the mid to low 12%s I think it was is what we're looking at, but I'm happy to kind of follow up. But I believe it was somewhere in the neighbourhood around 12% to 12.2% was the new loans.

Going to this issue of externalization and I know it must have been a pretty dramatic thing for you because in the past you've been very adamant about being internally managed, but is there a vehicle by which you could, in essence, create your own legal entity that's the manager and that that manager could then sponsor funds, et cetera, outside of the BDC world?

So don't take my comments the wrong way. I am so done with externalization that I am happily remaining internally managed for quite some time. I think that we have explored with our independent advisers and our boards the broad range of options and permutations and I believe that the decision that we've made is actually the right one for now, for the foreseeable future. And I think this is the right decision and I'm telling you that with unbelievable conviction that this is the right decision, to remain internally managed for quite some time.

And you don't see Hercules , for example, originating a third-party lease portfolio or a third-party asset-based facility or something for someone else?

There's a lot of issues when it comes to the '40 Act regarding internally managed and joint transactions and affiliated transactions. Clearly, the investment community and the shoulder community is very much aware that I fully support an ABL relationship. I fully support and equivalent leasing company. It only makes our platform more competitive and more dynamic. I think that down the road if there's a way of finding a scalable solution at an internally managed BDC that I truly bears fruit, I think that we'll explore that. But right now I just want to focus on what I know best, and that is internally managing and deliver strong shareholder value. But right now I do not want to even flirt with anything in externalization in any permutation. That has become a third rail for me. So I just want to go forward and build the franchise and the company that I know we can build and we should have as Hercules Capital, internally managed.

Excellent. And then looking at your sort of capital liquidity debt equation, you obviously - you have about $200 million of commitments from the redemption of the existing notes as well as the Aries portfolio. Is that the way to think about it?

No. to be very clear and maybe we - and it's a good question for clarifications. Because of the strong demand for loan volume that we're seeing, the original $150 million of the new investment-grade bond offering that we did, we had anticipated that we would be retiring $150 million of our old legacy bonds. But not for the fact that we're now seeing a pretty robust pipeline, we have now chosen to only retire $75 million of our legacy 6.25% bonds. So at least for right now, we're only going to announce and retire $75 million and we're retaining $75 million of proceeds of that new bond offering to be redeployed immediately into new investments. So that kind of gives you a little bit of confidence that what we're seeing in our pipeline that we're not retiring fully the initial bond offering because of demand for capital that we're seeing.

So you have more than enough cash sitting around to do all this. What is the thought process in 2018 about becoming a regular issuer of investment-grade debt? Do you think there's a market for it? Is that going to be a new source of capital and asset growth for Hercules? Or was this more of a one-and-done opportunity?

No. I will tell you that since this is our first inaugural debut, I thought that we had had an outstanding series of conversations and presentations with investors, many of which had not been exposed to prior to the investment-grade market. I can give you with absolute assurances the transaction was already upsized from $100 million to $150 million and we still was oversubscribed on a very healthy level. There's no question that we intend to access the investment-grade market in early 2018, and if things continue we could actually even do it sooner. But most likely, we probably access the investment-grade market again in 2018 and continue to do that, given the terrific terms that we received for our inaugural offering. We expect to obviously subsequent offerings to be tighter, of course.

And our final question comes from the line of Casey Alexander, from Compass Point Research.

Obviously, at this stage of the ballgame most of my questions have been asked and answered. But you did - first of all, in the how did you go about credit underwriting the Aries portfolio? And were these assets that you had bid on in a competitive process when they were originally underwritten?

Without sounding arrogant, the answer is, yes. Almost every one of the transactions that we ended up purchasing from Aries we were on the opposing side competing with Aries in some of those deals on yield. So that gives us significant leg up. But I would tell you that our outstanding credit team took an amazing process of literally reunderwriting these credits. We had very strong confirmatory data from Aries. Aries has done a great job of underwriting. So that really made this process a lot easier. But we went through a typical Hercules underwriting confirmatory process. We knew those credits most of them, quite well. And that's what we did. So we're very comfortable in the underwriting and the methodical process. This is not done in 30 days. I think the whole process cradle to grave probably took on almost over 9 days to get it done. So this was not something that was done overnight and it had to go through our investment committee and our very methodical process of underwriting.

That's really interesting. So what you're saying then is that not only did you buy a portfolio that you know well, but there is a competitor that has been directly competing with you and decreasing yields as a result of that competition who is now leaving the market. Is that correct?

Well, certainly I can't speak to what Aries' strategy is, if they're leaving the market or not.

Well, they said on their conference call that they are.

Okay. Well, I wasn't part of that conference call. So first of all, then I'm grateful for that announcement. So I'm encouraged by that announcement. So, yes, your extrapolations of the facts are critical and, yes, the conclusion is correct, whereby a competitor of mine which was doing loans at a lower yield is now leaving the market and now you're beginning to see the consolidation that I believe will continue, especially in the venture lending. And we have the liquidity and the wherewithal and the scale to start taking advantage of those opportunities as they surface.

Well, that leads me to my last question, which is you seemed to sort of headbob towards the fact that you think there's going to be more portfolios like this to buy. Did I read that right?

I'll be very clear, we are evaluating two of them right now.

There are no further questions at this time. I turn the call back over to Manuel.

Thank you. Thank you, Operator, and thank you, everybody, for joining us today and for our call. As I said, we are very proud of our decision to remain internally managed. I think and our board of directors think deeply that is the right decision for the shareholders long term. We will be participating at the Jefferies second annual London BDC summit in London, Zurich, and Frankfurt next week, along with four other BDCs that we're touring Europe with the Jefferies team. I'm looking forward to meeting our European shareholders and bondholders. In addition, we will be presenting at the Wells Fargo Thought Leadership Forum on December 6 and 7. We will have both David and Gerard with us in New York presenting at the conference along with us. If anybody has an interest in meeting with the Hercules team, please contact Jefferies for the European portion of the trip or Wells Fargo for the New York or Michael Hara doing our trip to New York, as well. With that, I'd like to say thank you everybody and thank you for your time this evening.

That concludes today's conference call. You may disconnect.