HTGC
Hercules Capital, INC
NYSE
8-K: Hercules Capital Announces Q1 2025 Results: Exceeds $1 Billion in Commitments, Declares $0.47 Dividend
Sentiment:
Earnings Release
1 May 2025 4:30 PM
Hercules Capital reports strong Q1 2025 results, including over $1 billion in gross debt and equity commitments and a total cash distribution of $0.47 per share.
Capital raise
The company closed an offering of $287.5 million of 4.750% convertible unsecured notes due 2028.
During the first quarter 2025, the Company sold 2.0 million shares of common stock under the equity ATM program for total net proceeds of $39.4 million (net of $0.7 million of offering expenses).
During April 2025, the Company sold 2.2 million shares of common stock under the equity ATM program for total net proceeds of $41.5 million (net of $0.3 million of offering expenses).
Summary
- Hercules Capital announced its Q1 2025 financial results, reporting total gross debt and equity commitments of $1.02 billion.
- Gross fundings for the quarter totaled $539.1 million.
- The company's net investment income (NII) was $77.5 million, or $0.45 per share.
- NII per share provided 113% coverage of the base cash distribution.
- Hercules received an investment grade rating upgrade to BBB (high) from Morningstar DBRS.
- The company closed an offering of $287.5 million of 4.750% convertible unsecured notes due 2028.
- Net GAAP leverage was 97.4%, and net regulatory leverage was 82.7%.
- Available liquidity was over $1.0 billion, inclusive of the Adviser Funds.
- The undistributed earnings spillover was $159.6 million, or $0.92 per ending share outstanding.
- Assets under management exceeded $5.0 billion, an 11.0% increase year-over-year.
- The Board of Directors declared a first quarter 2025 total cash distribution of $0.47 per share, comprised of a $0.40 per share base distribution and an $0.07 per share supplemental distribution.
Sentiment
Score: 8
Explanation: The document presents a positive outlook with strong financial results, including exceeding $1 billion in commitments and an investment grade rating upgrade. While there are some negative aspects, the overall tone is optimistic and indicates a healthy financial position.
Positives
- The company achieved over $1.0 billion in gross debt and equity commitments.
- The investment grade rating upgrade from Morningstar DBRS to BBB (high) reflects the company's strong financial position.
- Assets under management increased significantly, exceeding $5.0 billion.
- The company maintains a strong liquidity position with over $1.0 billion available.
- Net debt investment portfolio increased by $269.8 million during the first quarter on a cost basis.
- 98.0% of the debt investment portfolio is priced at floating interest rates, which can be advantageous in a rising interest rate environment.
Negatives
- Net Asset Value (NAV) per share decreased by 0.9% to $11.55.
- Early loan repayments decreased by 41.5% from the previous quarter.
- Total investment income decreased to $119.5 million from $121.6 million in Q1 2024.
- Net realized losses of ($1.6) million primarily due to losses on warrant and equity investments and losses from foreign exchange movements.
- The number of loans on non-accrual increased quarter-over-quarter.
Risks
- Economic uncertainty could impact portfolio company performance and repayment ability.
- The company's policy of adjusting credit grading down as portfolio companies approach their need for additional funding could lead to increased perceived risk.
- Unfunded commitments of $455.7 million represent a potential future cash requirement.
- Interest rate sensitivity analysis indicates a potential decrease in net income if interest rates decline.
- The decrease in NAV per share was primarily attributed to the change in net unrealized losses during the quarter.
Future Outlook
Hercules has pending commitments of $682.5 million in signed non-binding term sheets outstanding as of April 28, 2025. The company also has closed new gross debt and equity commitments of $141.0 million and funded $147.8 million since the close of Q1 2025.
Management Comments
- Scott Bluestein, CEO, stated that the company drove a robust start to 2025, achieving over $1.0 billion in gross debt and equity commitments.
- Bluestein highlighted the strong origination performance, with assets under management surpassing $5.0 billion.
- Bluestein expressed pride in the investment grade rating upgrade from Morningstar DBRS, citing the company's scale and diversified investment platform.
Industry Context
Hercules Capital, as a leading specialty finance provider, benefits from the increasing demand for venture debt among high-growth, innovative companies. The company's focus on technology and life sciences aligns with sectors experiencing significant investment and growth. The investment grade rating upgrade positions Hercules favorably compared to its peers, potentially lowering its cost of capital and attracting more investors.
Comparison to Industry Standards
- As a BDC, Hercules Capital's performance can be compared to other publicly traded BDCs such as Ares Capital Corporation (ARCC), Main Street Capital Corporation (MAIN), and Prospect Capital Corporation (PSEC).
- Hercules' focus on venture debt distinguishes it from some BDCs with broader investment mandates.
- The company's GAAP leverage ratio of 99.9% and regulatory leverage of 85.2% are important metrics to compare against industry averages and regulatory limits for BDCs.
- The 13.0% GAAP effective yield and 12.6% core yield are key indicators of the profitability of Hercules' debt investment portfolio and can be benchmarked against peers.
- The non-accrual rate of 1.8% at cost and 0.5% at value is a critical measure of credit quality and should be compared to industry averages to assess Hercules' risk management.
Stakeholder Impact
- Shareholders will receive a total cash distribution of $0.47 per share.
- Portfolio companies will benefit from Hercules' continued investment activity.
- Employees will be impacted by the company's overall financial performance.
- The company's strong financial position benefits its creditors.
Next Steps
- The company will continue to deploy capital into venture growth loans.
- Hercules will monitor the performance of its existing portfolio companies.
- The company will manage its liquidity and leverage ratios.
- Hercules will evaluate potential new investment opportunities.
Key Dates
- December 2003: Hercules Capital inception
- October 2004: Hercules first origination activities
- March 31, 2025: End of Q1 2025
- April 28, 2025: Date of pending commitments and closed commitments since Q1 2025 close
- April 29, 2025: Date of announcement of Q1 2025 cash distribution
- May 1, 2025: Date of press release and Q1 2025 financial results conference call
- May 13, 2025: Ex-dividend date and record date for Q1 2025 distribution
- May 20, 2025: Payment date for Q1 2025 distribution
Keywords
Hercules Capital, financial results, venture debt, investment income, debt commitments, fundings, NII, dividend, assets under management, liquidity, portfolio, leverage
HTGC
Hercules Capital, INC
NYSE
Sector: Financial Services
Filings with Classifications
Delay expected
8 July 2025 2:09 PM
Beneficial Ownership Disclosure Amendment
- The filing is a remediation for a disclosure that should have been submitted in 2021, indicating a delay in the initial reporting of beneficial ownership.
Capital raise
20 June 2025 4:17 PM
Annual Meeting Results
- Proposal 3 sought authorization for the Company to sell or issue shares of its common stock at a price below its then-current net asset value (NAV) per share.
- This proposal was not authorized by stockholders, which limits the company's ability to raise capital through equity issuance below NAV.
Capital raise
16 June 2025 5:23 PM
Debt Offering and Credit Facility Amendment
- The company issued and sold $350,000,000 in aggregate principal amount of its 6.000% Notes due 2030 in a public offering.
Capital raise
1 May 2025 4:30 PM
Earnings Release
- The company closed an offering of $287.5 million of 4.750% convertible unsecured notes due 2028.
- During the first quarter 2025, the Company sold 2.0 million shares of common stock under the equity ATM program for total net proceeds of $39.4 million (net of $0.7 million of offering expenses).
- During April 2025, the Company sold 2.2 million shares of common stock under the equity ATM program for total net proceeds of $41.5 million (net of $0.3 million of offering expenses).
Worse than expected
1 May 2025 4:16 PM
Quarterly Report
- The company experienced a net decrease in net assets resulting from operations, indicating a less favorable financial performance compared to previous periods.
- Net realized losses were recorded for the period, suggesting challenges in the company's investment strategies.
- There was a net change in unrealized depreciation on investments, indicating a decline in the value of the company's portfolio.
Capital raise
24 April 2025 9:04 PM
Proxy Statement
- The company is seeking authorization to sell or issue shares of its common stock at a price below its then-current net asset value per share.
- The company has no immediate plans to sell or issue shares of its common stock at a price below net asset value, but is asking for stockholder approval now so that it has flexibility if in the future it determines that such a sale is in stockholders best interests.
- These sales typically must be undertaken quickly in an attempt to protect the value of your investment so it is critical that we have stockholder approval ahead of time.
Better than expected
24 April 2025 4:16 PM
Proxy Statement
- The company's performance relative to its peer group was generally at or above the 90th percentile, and in most cases at the 100th percentile, measured using ROAA, ROE and AASR.
Capital raise
24 April 2025 4:16 PM
Proxy Statement
- Hercules Capital is seeking stockholder approval to sell or issue Shares, in one or multiple public or private offerings, at a purchase price below the then-current NAV during the 12-month period expiring on the anniversary of the Annual Meeting, subject to the conditions and stockholder protections described herein.
- The number of Shares sold or issued in Below-NAV Sale may not exceed 25% of the number of thencurrent outstanding Shares.
- The purchase price of each Share sold in a Below-NAV Sale may not be more than 25% below the then-current NAV per Share.
Capital raise
6 March 2025 1:35 AM
Capital Markets Transaction
- Hercules Capital is issuing $250 million in convertible unsecured notes due 2028 in a private placement.
- The initial purchasers have an option to purchase an additional $37.5 million to cover overallotments.
- The notes are convertible into common stock at an initial conversion price of approximately $21.48 per share.
- The company intends to use the net proceeds for investments and general corporate purposes.
Capital raise
5 March 2025 7:53 AM
8-K Filing
- Hercules Capital plans to offer $250.0 million aggregate principal amount of its Convertible Unsecured Notes due 2028.
- The Company plans to grant the initial purchasers an option to purchase up to an additional $37.5 million principal amount of the Convertible Notes to cover overallotments, if any.
Capital raise
13 February 2025 4:30 PM
Earnings Release
- During Q4 2024, the Company sold 8.0 million shares of common stock under the agreement for total net proceeds of approximately $152.0 million (net of $1.6 million of offering expenses).
- During January 2025, the Company sold 2.0 million shares of common stock under the equity ATM program for total net proceeds of $39.8 million (net of $0.3 million of offering expenses).
- The Company has 30.0 million shares remaining available for issuance and sale under the equity ATM program, as of December 31, 2024.
Worse than expected
13 February 2025 4:30 PM
Earnings Release
- Q4 2024 NII decreased compared to Q4 2023 due to a lower weighted average yield on the debt investment portfolio and an increase in total net operating expenses.
Capital raise
12 December 2024 4:40 PM
Equity Offering Announcement
- Hercules Capital may issue and sell up to 30,000,000 shares of its common stock.
- The company intends to use the net proceeds from this offering to fund investments in debt and equity securities, make acquisitions, retire certain debt obligations, and for other general corporate purposes.
Capital raise
12 December 2024 11:36 AM
Prospectus Supplement
- Hercules Capital is offering up to 30 million shares of common stock through an at-the-market offering.
- The company intends to use the net proceeds to fund investments, acquisitions, retire debt, and for general corporate purposes.
Worse than expected
12 December 2024 11:36 AM
Prospectus Supplement
- The document indicates that the company may sell shares below NAV, which would result in immediate dilution to existing shareholders.
Better than expected
2 December 2024 4:47 PM
Credit Facility Amendment
- The increase in the credit facility and the extension of the maturity dates are better than the previous terms.
Better than expected
30 October 2024 4:30 PM
Quarterly Report
- The company reported record total investment income and net investment income, exceeding previous results and expectations.
Worse than expected
30 October 2024 4:16 PM
Quarterly Report
- The company's net change in unrealized appreciation (depreciation) was negative for the three and nine months ended September 30, 2024.
- The company's net realized gain (loss) was negative for the three months ended September 30, 2024.
Capital raise
30 October 2024 4:16 PM
Quarterly Report
- The Company may from time-to-time issue and sell shares of its common stock through public or ATM offerings.
- The Company currently sells shares through its equity distribution agreement with JMP Securities LLC (JMP) and Jefferies LLC (the 2023 Equity Distribution Agreement).
- The 2023 Equity Distribution Agreement provides that the Company may offer and sell up to 25.0 million shares of its common stock from time to time through JMP or Jefferies, as the Company's sales agents.
- Sales of the Company's common stock, if any, may be made in negotiated transactions or transactions that are deemed to be at the market, as defined in Rule 415 under the Securities Act, including sales made directly on the NYSE or similar securities exchange or sales made to or through a market maker other than on an exchange, at prices related to the prevailing market prices or at negotiated prices.
- Additionally, on August 7, 2023, the Company sold 6.5 million shares of common stock through an upsized public offering pursuant to an underwriting agreement with Morgan Stanley & Co. LLC, UBS Securities, and Wells Fargo Securities, LLC as joint book-running managers to sell.
- As of September 30, 2024, approximately 13.6 million shares remain available for issuance and sale under the current equity distribution agreement.
Delay expected
16 August 2024 4:16 PM
Shareholder Meeting Results
- The annual meeting was initially held on June 20, 2024, and then adjourned to August 15, 2024, specifically to vote on Proposal 3.
Capital raise
16 August 2024 4:16 PM
Shareholder Meeting Results
- The document details the approval for the company to sell or issue shares of its common stock at a price below its then-current NAV per share.
- This authorization provides the company with the option to raise capital by issuing shares below NAV.
Better than expected
1 August 2024 4:20 PM
Quarterly Report
- The company reported record total gross fundings, total investment income, and net investment income, all exceeding previous periods.
Capital raise
21 June 2024 8:32 AM
Annual Meeting Results
- Proposal 3, which was adjourned, concerns the authorization of the Company to sell or issue shares of its common stock at a price below its then-current NAV per share.
Delay expected
21 June 2024 8:32 AM
Annual Meeting Results
- The vote on Proposal 3, regarding the authorization to sell shares below NAV, was delayed and will be held on August 15, 2024.
Better than expected
2 May 2024 4:31 PM
Quarterly Report
- The company reported record Q1 commitments and fundings, significantly exceeding previous periods.
- Net investment income increased by 20.9% year-over-year, indicating strong financial performance.
- The company's net asset value per share increased by 1.7%, demonstrating growth in shareholder value.
Capital raise
2 May 2024 4:31 PM
Quarterly Report
- The company sold 3.7 million shares of common stock under the ATM program during Q1 2024 for net proceeds of approximately $66.4 million.
- The company has 13.6 million shares remaining available for issuance and sale under the equity ATM program.
Capital raise
2 May 2024 4:17 PM
Quarterly Report
- The company issued and sold 3.7 million shares of its common stock through its equity distribution agreement, receiving net proceeds of approximately $66.4 million.
- As of March 31, 2024, approximately 13.6 million shares remain available for issuance and sale under the current equity distribution agreement.
Better than expected
2 May 2024 4:17 PM
Quarterly Report
- The company's net investment income increased by approximately 21% year-over-year.
- The company's total assets increased by approximately 8% since the end of 2023.
- The company's net asset value per share increased by approximately 2% since the end of 2023.
Capital raise
23 April 2024 4:18 PM
Proxy Statement
- The company is seeking authorization to sell or issue shares below NAV, up to 25% of outstanding shares, with a maximum discount of 25%.
- The company argues that this flexibility is needed to take advantage of investment opportunities during volatile market conditions, maintain RIC status, manage debt-to-equity ratios, and avoid less favorable capital-raising methods.
Capital raise
15 February 2024 4:31 PM
Earnings Release
- The company sold 6.5 million shares of common stock under the ATM program for total net proceeds of approximately $99.9 million during Q4 2023.
- The company has 17.3 million shares remaining available for issuance and sale under the equity ATM program.
Better than expected
15 February 2024 4:31 PM
Earnings Release
- The company's Q4 and full-year results exceeded expectations with record total investment income and net investment income.
- The company's core yield of 14.3% for Q4 2023 exceeded the expected annual range of 13.8% to 14.0%.
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