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Hercules Capital (HTGC) Q2 Earnings Miss, Revenues Decline Y/Y

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Hercules Capital Inc.’s (HTGC - Free Report) second-quarter 2020 net investment income of 32 cents per share lagged the Zacks Consensus Estimate by a penny. The bottom line declined 11.1% from the year-ago reported figure.

Results reflected lower total investment income. However, a fall in operating expenses was a tailwind. Moreover, the balance sheet position remained strong during the quarter.

Net investment income was $35.7 million, up 1.2% from the prior-year quarter.

Total Investment Income & Expenses Decline

Total investment income was $68 million, down 1.9% from the year-ago quarter. The downside was mainly due to lower core yields and a fall in early loan repayments. The top line lagged the Zacks Consensus Estimate of $69.3 million.

Total quarterly operating expenses decreased 5% year over year to $32.3 million. The decline resulted from a fall in total employee compensation costs.

Solid Portfolio Value & New Commitments

The fair value of Hercules Capital’s total investment portfolio was $2.4 billion as of Jun 30, 2020.

In the reported quarter, the company provided $266.2 million in new debt and equity commitments as well as realized early loan repayments of $85.4 million.

Strong Balance Sheet Position

As of Jun 30, 2020, Hercules Capital’s net asset value was $10.19 per share compared with $10.55 on Dec 31, 2019.

The company had $510.9 million in liquidity — including $35.9 million of unrestricted cash and cash equivalents, and $475 million in credit facilities — as of Jun 30, 2020.

At the end of the second quarter, the weighted average cost of debt — comprising interest and fees — was 5.0%, down from 5.2% at the end of the prior-year quarter.

Our Take

Hercules Capital’s loan origination activity continues to be on track, which will likely support the top line in the quarters ahead. However, as the company continues to undertake efforts to improve originations, expenses are expected to increase in the near term, thereby, hurting profits to an extent.

Hercules Capital, Inc. Price, Consensus and EPS Surprise

 

Hercules Capital, Inc. Price, Consensus and EPS Surprise

Hercules Capital, Inc. price-consensus-eps-surprise-chart | Hercules Capital, Inc. Quote

Currently, Hercules Capital carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Date of Other Finance Stocks

KKR & Co. Inc. (KKR - Free Report) , TriplePoint Venture Growth BDC Corp. (TPVG - Free Report) and FS KKR Capital Corp. (FSK - Free Report) are scheduled to announce quarterly numbers on Aug 4, Aug 5 and Aug 10, respectively.

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