HTGC
Hercules Capital, INC
NYSE
8-K: Hercules Capital Announces Record Q1 Commitments and Fundings, Declares $0.48 Dividend
Sentiment:
Quarterly Report
2 May 2024 4:31 PM
Hercules Capital reported record first-quarter commitments and fundings, alongside a total cash distribution of $0.48 per share.
Better than expected
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
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.
Summary
- Hercules Capital reported a record first quarter with total gross debt and equity commitments of $956.0 million, an 81.7% increase year-over-year.
- Total gross fundings reached a record $605.2 million, a 27.1% increase year-over-year.
- The company's total investment income for Q1 2024 was $121.6 million, a 15.7% increase year-over-year.
- Net investment income (NII) for Q1 2024 was $79.2 million, or $0.50 per share, a 20.9% increase year-over-year, providing 125% coverage of the base cash distribution.
- The company's undistributed earnings spillover reached $142.7 million, or $0.88 per ending share outstanding.
- Assets under management increased to approximately $4.5 billion, a 14.7% increase year-over-year.
- The company declared a total cash distribution of $0.48 per share for the first quarter of 2024, consisting of a $0.40 base distribution and a $0.08 supplemental distribution.
- The net debt investment portfolio increased by $325.3 million during the first quarter.
- The company's net asset value (NAV) per share increased by 1.7% to $11.63.
Sentiment
Score: 9
Explanation: The document conveys a very positive sentiment due to record financial results, strong growth metrics, and a substantial dividend payout. The company's management also expresses confidence in future performance.
Positives
- The company experienced record Q1 commitments and fundings, demonstrating strong growth.
- Net investment income increased significantly year-over-year, providing strong coverage for the base distribution.
- The company's assets under management and net asset value per share both increased.
- The company has a substantial undistributed earnings spillover, providing flexibility for future distributions.
- The company's net debt portfolio grew significantly during the quarter.
- The company has a high percentage of floating rate loans, which benefits from rising interest rates.
Negatives
- Early loan repayments decreased by 42.0% compared to the previous quarter.
- The number of loans on non-accrual increased by one quarter-over-quarter.
- The effective yield on the debt investment portfolio decreased slightly from 15.3% to 14.9%.
- The core yield decreased from 14.3% to 14.0%.
Risks
- The company's portfolio companies may require additional rounds of funding, which could impact their credit quality.
- The company may selectively downgrade portfolio companies if they are not meeting financing criteria or underperforming.
- Unfunded commitments represent a potential future cash requirement, although some may expire without being drawn.
- The company's interest rate sensitivity analysis shows a potential decrease in net income with decreasing interest rates.
- There is no guarantee that pending merger announcements will close.
Future Outlook
The company is well-positioned to leverage its strategic position, scale, balance sheet, and liquidity to capitalize on an improving market environment. They will continue to focus on prudent underwriting, maintaining a strong balance sheet, and carefully monitoring their investment portfolio.
Management Comments
- Scott Bluestein, chief executive officer and chief investment officer of Hercules, stated that 2024 is off to a tremendous start with record Q1 commitments and fundings.
- Bluestein also noted that the company reached a milestone of more than $20.0 billion in cumulative debt commitments.
- Management emphasized their commitment to prudent underwriting and maintaining a strong balance sheet.
Industry Context
Hercules Capital operates in the specialty finance sector, providing debt financing to venture-backed companies. The company's strong performance reflects the continued demand for venture debt and the company's ability to capitalize on opportunities in the market. The company's focus on technology, life sciences, and sustainable and renewable technology aligns with current industry trends.
Comparison to Industry Standards
- Hercules Capital's 81.7% year-over-year increase in total gross debt and equity commitments significantly exceeds the average growth rate of many other BDCs.
- The 27.1% year-over-year increase in total gross fundings is also a strong performance compared to industry averages.
- The company's net investment income growth of 20.9% year-over-year is a positive indicator of its operational efficiency and portfolio performance.
- The 125% coverage of the base cash distribution by NII is a strong indicator of the company's ability to sustain its dividend payments.
- The company's net regulatory leverage of 81.7% is within the typical range for BDCs, indicating a balanced approach to debt management.
- The 14.9% effective yield and 14.0% core yield are competitive within the BDC sector, reflecting the company's ability to generate attractive returns on its investments.
- Compared to peers such as Ares Capital (ARCC) and Main Street Capital (MAIN), Hercules demonstrates a higher growth rate in commitments and fundings for the quarter, though these companies have different investment strategies and risk profiles.
Stakeholder Impact
- Shareholders will benefit from the increased dividend payout and the growth in net asset value.
- Employees may benefit from the company's strong performance and growth.
- Portfolio companies will continue to receive funding and support from Hercules Capital.
- Creditors will be reassured by the company's strong financial position and liquidity.
Next Steps
- The company will continue to monitor its investment portfolio and pursue new investment opportunities.
- The company will pay the declared cash distribution on May 21, 2024.
- The company will continue to utilize its ATM program for potential future capital raises.
Key Dates
- 2003-12: Hercules Capital inception date.
- 2004-10: Hercules first origination activities.
- 2024-03-31: End of the first quarter 2024.
- 2024-04-30: Date of the distribution announcement and pending commitments update.
- 2024-05-02: Date of the earnings press release and conference call.
- 2024-05-13: Ex-dividend date for the Q1 2024 distribution.
- 2024-05-14: Record date for the Q1 2024 distribution.
- 2024-05-21: Payment date for the Q1 2024 distribution.
Keywords
venture lending, specialty finance, debt financing, equity commitments, net investment income, cash distribution, asset management, portfolio company, non-accrual loans, leverage, net asset value
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.
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.
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.
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.
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
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.
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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