HTGC
Hercules Capital, INC
NYSE
8-K: Hercules Capital Reports Record Full-Year 2024 Results and Announces New Supplemental Distribution
Sentiment:
Earnings Release
13 February 2025 4:30 PM
Hercules Capital announces record full-year 2024 results, including total investment income of $493.6 million and NII of $325.8 million, and declares a new supplemental cash distribution of $0.28 per share for 2025.
Worse than expected
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
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.
Summary
- Hercules Capital reported record full-year 2024 total investment income of $493.6 million, a 7.1% increase year-over-year.
- Net Investment Income (NII) for the full year was a record $325.8 million, or $2.00 per share, up 7.2% year-over-year.
- Gross fundings for the full year reached a record $1.81 billion, a 13.0% increase year-over-year.
- For Q4 2024, NII was $81.1 million, or $0.49 per share, providing 123% coverage of the base cash distribution.
- Total gross debt and equity commitments for Q4 2024 were $619.5 million.
- The company announced a new supplemental cash distribution for 2025 of $0.28 per share, payable over four quarters.
- Hercules had over $1.1 billion of available liquidity as of year-end, inclusive of adviser funds.
- Assets Under Management (AUM) increased by 14.2% year-over-year to approximately $4.8 billion.
- The company's net asset value (NAV) was $11.66 per share, a 2.3% increase from Q3 2024.
- The effective yield on the debt investment portfolio was 13.7% during Q4 2024, while the core yield was 12.9%.
Sentiment
Score: 7
Explanation: The document presents a mixed picture. While there are record full-year results and a new supplemental distribution, there are also some negative aspects such as decreased Q4 investment income and realized losses. The overall tone is positive, but the underlying data suggests some challenges.
Positives
- Record full-year total investment income and NII demonstrate strong financial performance.
- The increase in gross fundings indicates robust business activity and demand for Hercules' financing solutions.
- The supplemental cash distribution enhances shareholder value.
- High NII coverage of the base distribution provides financial stability.
- Strong liquidity position offers flexibility for future investments and operations.
- Increase in NAV per share reflects positive asset growth.
- The company's asset-sensitive debt investment portfolio benefits from floating interest rates.
- The weighted average grade of the debt investment portfolio remains relatively high at 2.26.
- The decrease in loans on non-accrual indicates improved asset quality.
- The company has closed new gross debt and equity commitments of $250.2 million and funded $201.3 million since the close of Q4 2024 and as of February 10, 2025.
Negatives
- The decrease in total investment income for Q4 2024 compared to Q4 2023 is primarily attributable to a lower weighted average yield on the debt investment portfolio.
- Net realized losses of ($33.5) million in Q4 2024 were primarily due to the write-off of two debt investments.
- Non-interest and fee expenses increased in Q4 2024 due to higher employee compensation and general and administrative expenses.
- Interest expense and fees increased in Q4 2024 due to higher weighted average borrowings and higher interest rates.
- The effective yield on Hercules' debt investment portfolio decreased from 14.4% in Q3 2024 to 13.7% in Q4 2024.
- The company had one debt investment on non-accrual with an investment cost and fair value of approximately $61.3 million and $18.2 million, respectively, as of December 31, 2024.
Risks
- The company's performance is subject to various risks and uncertainties, including those discussed in its Annual Report on Form 10-K.
- Unfunded commitments may not necessarily represent future cash requirements, but they could pose a risk if a significant portion is drawn.
- Signed non-binding term sheets are subject to due diligence and final approval, and may not convert to contractual commitments.
- Changes in interest rates could impact the company's net income.
- The company's portfolio companies may require additional rounds of funding, and downgrades may occur if they underperform.
- The company's variable distribution policy could result in fluctuating dividend payments.
- The determination of the tax attributes of the company's distributions is made annually and may not be representative of quarterly determinations.
- The company's investments in equity and warrant positions are subject to market fluctuations and could result in losses.
- The company's portfolio companies may not complete their IPOs or pending merger announcements may not close.
- The company's reliance on venture capital-backed companies exposes it to the risks associated with that sector.
Future Outlook
Hercules is maintaining its current base distribution and declaring a new supplemental cash distribution program for 2025, reflecting the scale and sustained earnings power of its platform.
Management Comments
- Scott Bluestein, CEO, stated that the company reached a landmark achievement of $20 billion in cumulative debt commitments in Q2 2024.
- Bluestein added that record gross funding activity in 2024 surpassed the previous record set in 2023.
- Bluestein noted that the company generated net investment income of $0.49 per share in Q4, which provided 123% coverage of the base distribution and increased the undistributed earnings spillover to $163.6 million.
- The company is committed to its fundamental principles of staying disciplined on credit and underwriting, maintaining ample liquidity and prudent leverage, and expanding the capacity of its private funds.
Industry Context
Hercules Capital, as the largest specialty finance company focused on venture growth loans, benefits from the increasing demand for capital from innovative, venture capital-backed companies in the technology and life sciences industries. The company's ability to maintain a high-quality portfolio and generate strong returns positions it well within the competitive landscape.
Comparison to Industry Standards
- While specific competitor data isn't provided in the document, Hercules' focus on venture debt financing distinguishes it from traditional lenders and BDCs with broader investment mandates.
- Companies like TriplePoint Venture Growth (TPVG) and Oxford Square Capital (OXSQ) also operate in the venture debt space, but Hercules' larger AUM and longer track record provide a competitive advantage.
- Hercules' effective yield of 13.7% and core yield of 12.9% are competitive within the BDC sector, reflecting its ability to generate attractive returns on its investments.
- The company's focus on first lien senior secured debt (91.0% of the debt investment portfolio) aligns with industry best practices for risk management.
Stakeholder Impact
- Shareholders will benefit from the supplemental cash distribution and the potential for future growth.
- Portfolio companies will have access to capital to fund their growth and operations.
- Employees will be impacted by changes in compensation and benefits.
- The company's performance will impact its relationships with creditors and other stakeholders.
Next Steps
- The company will continue to execute its investment strategy and manage its portfolio.
- Hercules will pay the declared distributions to stockholders.
- The company will hold a conference call to discuss the financial results.
- Hercules will continue to monitor its portfolio companies and manage its unfunded commitments.
- The company will continue to evaluate potential investment opportunities and deploy capital.
Key Dates
- December 2003: Hercules Capital inception
- October 2004: Hercules Capital first origination activities
- June 2016: Hercules committed $93.2 million in venture debt financing to Snagajob.com, Inc.
- October 2019: Hercules committed $24.0 million in venture debt financing to Ikon Science
- December 2019: Hercules committed $20.0 million in venture debt financing to Kineta, Inc.
- January 13, 2023: Date of the Letter of Credit Facility Agreement with SMBC
- March 21, 2023: Date of the First Amendment to Letter of Credit Facility Agreement with SMBC
- June 28, 2024: Date of the Second Amendment to Letter of Credit Facility Agreement with SMBC
- June 2024: Hercules initially committed $58.0 million in venture debt to Voyager Technologies, Inc.
- May 2024: Hercules committed $22.5 million in venture debt financing to Sandata Technologies, LLC
- October 2024: Sandata Technologies, LLC was acquired by HHAeXchange
- November 2024: Snagajob.com, Inc. was acquired by JobGet
- November 2024: Kineta, Inc. entered into a definitive agreement to be acquired by TuHURA Biosciences, Inc.
- December 2024: Ikon Science was acquired by Vela Software
- December 31, 2024: End of Q4 and Full-Year 2024 reporting period
- January 2025: Voyager Technologies, Inc. confidentially filed for an IPO
- 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.
- February 5, 2025: 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.
- February 5, 2025: The Company entered into the Third Amendment to the SMBC LC Facility, extending the final maturity date to February 5, 2028.
- February 10, 2025: Hercules has pending commitments of $578.5 million in signed non-binding term sheets outstanding.
- February 11, 2025: Hercules Capital Declares a Total Cash Distribution of $0.47 per Share for the Fourth Quarter 2024
- February 11, 2025: Hercules Capital Announces New Supplemental Cash Distribution of $0.28 per Share
- February 13, 2025: Hercules has scheduled its fourth quarter and full-year 2024 financial results conference call
- February 26, 2025: Record Date for Q4 2024 distribution payment
- March 5, 2025: Payment Date for Q4 2024 distribution payment
Keywords
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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