HTGC
Hercules Capital, INC
NYSE
10-Q: Hercules Capital Reports Q1 2025 Results: Investment Portfolio Reaches $3.9 Billion
Sentiment:
Quarterly Report
1 May 2025 4:16 PM
Hercules Capital's Q1 2025 results show a robust investment portfolio valued at $3.9 billion, despite a net decrease in net assets resulting from operations.
Worse than expected
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.
Summary
- Hercules Capital's investment portfolio reached $3.9 billion in Q1 2025.
- The company reported a net decrease in net assets resulting from operations of $50.3 million.
- Net investment income was $77.5 million, or $0.45 per share.
- The company issued $287.5 million in convertible notes due in 2028.
- The company declared a cash distribution of $0.40 per share and a supplemental distribution of $0.07 per share.
- The company sold 2.0 million shares of common stock for net proceeds of $39.4 million.
- The company's weighted average cost of debt was 4.9%.
Sentiment
Score: 6
Explanation: The document presents a mixed sentiment. While the investment portfolio continues to grow, there are concerns about net losses and unrealized depreciation. The company's ability to navigate the current economic environment and generate sustainable returns will be key.
Positives
- The investment portfolio continues to grow, reaching $3.9 billion.
- The company successfully issued $287.5 million in convertible notes.
- The company continues to generate investment income and distribute dividends to shareholders.
Negatives
- The company experienced a net decrease in net assets resulting from operations.
- Net realized losses were recorded for the period.
- There was a net change in unrealized depreciation on investments.
Risks
- Changes in interest rates could negatively impact net investment income.
- Macroeconomic market developments could negatively impact the company and its portfolio companies.
- The company's financial results could be negatively affected if a significant portfolio investment fails to perform as expected.
Future Outlook
The company intends to continue to operate in order to generate cash flows from operations, including income earned from investments in our portfolio companies. Our primary use of funds will be investments in portfolio companies and cash distributions to holders of our common stock.
Industry Context
Hercules Capital operates in the specialty finance sector, focusing on venture capital-backed technology and life sciences companies. The company's performance is influenced by broader market trends, interest rate fluctuations, and the success of its portfolio companies. The company's focus on high-growth sectors positions it to benefit from innovation and expansion in these areas, but also exposes it to risks associated with early-stage companies and market volatility.
Comparison to Industry Standards
- Hercules Capital is a business development company (BDC), and its performance can be compared to other BDCs such as Ares Capital Corporation (ARCC), Main Street Capital Corporation (MAIN), and Prospect Capital Corporation (PSEC).
- These companies also invest in debt and equity of private companies, but their investment strategies, portfolio compositions, and risk profiles may differ.
- Hercules Capital's focus on technology and life sciences distinguishes it from some other BDCs that may have broader investment mandates.
- The company's weighted average yield on debt investments and its asset coverage ratio are key metrics to compare against industry averages and benchmarks.
- The company's performance can also be compared to venture capital and private equity funds that invest in similar sectors, although BDCs have different regulatory and tax structures.
Stakeholder Impact
- Stockholders will receive a cash distribution of $0.40 per share and a supplemental distribution of $0.07 per share.
- The company's performance will impact the value of stockholders' investments.
- The company's ability to generate sustainable returns will be key for long-term stockholder value.
Next Steps
- The company will continue to monitor macroeconomic market developments and their impact on its business.
- The company will continue to evaluate its overall liquidity position and take proactive steps to maintain the appropriate liquidity position based upon the current circumstances.
- The company intends to timely distribute to its stockholders substantially all of its annual taxable income for each year.
Related Party Transactions
- The company has a shared services agreement with the Adviser Subsidiary, through which the Adviser Subsidiary has access to the Company's human capital resources and other resources and infrastructure.
- The company may from time-to-time make investments alongside the Adviser Funds or assign a portion of investments to the Adviser Funds in accordance with the Company's allocation policy.
Key Dates
- 2003-12: Hercules Capital, Inc. was incorporated.
- 2006-01-01: Hercules Capital elected to be treated as a Regulated Investment Company (RIC).
- 2018-06-28: The 2018 Equity Incentive Plan and 2018 Non-Employee Director Plan were approved by stockholders.
- 2018-09-24: The Company issued $40.0 million in aggregate principal amount of 6.250% interest-bearing unsecured notes due October 30, 2033.
- 2020-02-05: The Company issued $50.0 million in aggregate principal amount of 4.280% interest-bearing unsecured notes due February 5, 2025.
- 2020-06-03: The Company issued $70.0 million in aggregate principal amount of 4.310% interest-bearing unsecured notes due June 3, 2025.
- 2020-11-04: The Company issued $50.0 million in aggregate principal amount of 4.500% interest-bearing unsecured notes due March 4, 2026.
- 2021-03-04: The Company issued $50.0 million in aggregate principal amount of 4.550% interest-bearing unsecured notes due March 4, 2026.
- 2021-09-16: The Company issued $325.0 million in aggregate principal amount of 2.625% interest-bearing unsecured notes due September 16, 2026.
- 2022-01-20: The Company issued $350.0 million in aggregate principal amount of 3.375% interest-bearing unsecured notes due January 20, 2027.
- 2022-06-22: The Company completed a term debt securitization in connection with which an affiliate of the Company issued $150.0 million in aggregate principal amount of 4.950% interest-bearing asset-backed notes due on July 20, 2031.
- 2024-07-16: The Company fully repaid the aggregate outstanding $105.0 million principal and $2.5 million of accrued interest pursuant to the terms of the July 2024 Notes.
- 2024-11-26: The Company entered into a fifth amendment to its revolving credit agreement with Sumitomo Mitsui Banking Corporation.
- 2025-02-05: The Company entered into the Third Amendment to the SMBC Letter of Credit Facility Agreement.
- 2025-02-05: The Company fully repaid the aggregate outstanding $50.0 million principal and $1.1 million of accrued interest pursuant to the terms of the February 2025 Notes.
- 2025-03-10: The Company issued $287.5 million in aggregate principal amount of 4.750% interest-bearing convertible unsecured notes due on September 1, 2028.
- 2025-04-23: The Board declared a cash distribution of $0.40 per share and a supplemental cash distribution of $0.07 per share to be paid on May 20, 2025.
- 2025-04-29: The Company sold 2.2 million shares of common stock for $41.5 million of net proceeds through its ATM program.
Keywords
investment portfolio, net investment income, debt investments, equity investments, financial results, Hercules Capital
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%.
Disclaimer: This summary was generated by artificial intelligence and its accuracy is not guaranteed. The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.