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Hercules Capital (HTGC) Q4 Earnings In Line, Revenues Rise

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Hercules Capital, Inc.’s (HTGC - Free Report) fourth-quarter 2017 net investment income (NII) of 29 cents per share was in line with the Zacks Consensus Estimate. However, the figure declined 32.6% from the year-ago quarter. This includes the one-time impact of the 2024 Notes redemption plus the non-recurring interest overlap due to the 30-day redemption period.

Results reflected higher revenues, growth in investment portfolio and a rise in net asset value. However, increase in operating expenses was an undermining factor.

Distributional Net Operating Income for the quarter came in at $26.1 million or 31 cents per share compared with $34.5 million or 45 cents per share in the prior-year quarter.

For 2017, the company reported NII of $1.16 per share, declining from $1.34 per share recorded in the prior year. The figure came in line with the Zacks Consensus Estimate.

Total Investment Income Improves, Expenses Rise

Total investment income in the reported quarter was $50.2 million, up 5.7% from the year-ago period. The increase was mainly driven by debt investment portfolio growth, a greater weighted average principal outstanding of the company's debt investment portfolio and a higher level of unscheduled early repayments. The figure surpassed the Zacks Consensus Estimate of $48.2 million.

For 2017, total investment income came in at $190.9 million, up 9% from the previous year. Also, the figure surpassed the Zacks Consensus Estimate of $188.9 million.

Total operating expenses during the quarter rose 14.9% year over year to $25.7 million. The rise was led by an increase in all expense components except total general and administrative costs.

Total Portfolio Value & New Commitments

The fair value of Hercules Capital’s total investment portfolio was $1.54 billion as of Dec 31, 2017. In the reported quarter, the company provided approximately $330.5 million in new debt and equity-financing commitments to new and existing portfolio companies.

Balance Sheet

As of Dec 31, 2017, Hercules Capital’s net asset value was $9.96 per share compared with $9.90 as of Dec 31, 2016.

The company had $286.3 million in liquidity, including $91.3 million in unrestricted cash and cash equivalents and $195 million in credit facilities as of Dec 31, 2017.

At the end of the fourth quarter, the weighted average cost of debt comprising interest and fees was 6.4%, up from 5.9% in the prior-year quarter. The increase was primarily driven by the impact of the accelerations of unamortized deferred financing costs from the redemption of 2019 and 2024 Notes.

Our Take

Hercules Capital’s loan origination activity continues to be on track and it strategically deploys its capital while maintaining a balanced and diversified approach across various industries and sectors. However, elevated expense levels, owing to its efforts to enhance originations, are expected to hurt the bottom line.

Hercules Capital, Inc. Price, Consensus and EPS Surprise
 

Hercules Capital, Inc. Price, Consensus and EPS Surprise | 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.

Stocks in the same space, including FS Investment Corporation and Garrison Capital Inc. , are scheduled to announce results on Mar 1 and Mar 6, respectively.

A stock from the finance space, which has already released fourth-quarter results, is BB&T Corporation . Its adjusted earnings of 84 cents per share for the quarter outpaced the Zacks Consensus Estimate of 80 cents. Results reflected a rise in revenues driven by higher rates and loan growth. However, an increase in operating expenses and higher credit costs were the undermining factors.

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