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Hercules Tech (HTGC) Up 0.7% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Hercules Technology (HTGC - Free Report) . Shares have added about 0.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Hercules Tech due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Hercules Capital Q4 Earnings Beat Estimates, Costs Rise
Hercules Capital’s fourth-quarter 2021 net investment income of 35 cents per share beat the Zacks Consensus Estimate of 33 cents. However, the bottom line fell 5.4% from the year-ago quarter figure.
The company recorded a fall in total investment income and higher expenses during the quarter. The balance sheet position remained strong and new commitments were robust.
Net investment income was $40.4 million, down 4.3% year over year.
In 2021, net investment income was $150 million or $1.29 per share, down from $157.1 million or $1.39 per share in 2020.
Total Investment Income Down, Expenses Rise
Total investment income in the quarter under review was $72.5 million, down 3.8% from the year-ago quarter. The top line marginally lagged the Zacks Consensus Estimate of $72.6 million.
In 2021, total investment income declined 2.2% to $281 million.
Total quarterly gross operating expenses rose 1.5% to $33.7 million. The rise was mainly due to an increase in total employee compensation costs.
Portfolio Value & New Commitments Solid
The fair value of Hercules Capital’s total investment portfolio was $2.43 billion as of Dec 31, 2021.
In the fourth quarter, the company delivered $947.8 million in gross new debt and equity commitments and realized early loan repayments of $425.8 million.
Balance Sheet Position Strong
As of Dec 31, 2021, Hercules Capital’s net asset value was $11.22 per share compared with $11.26 as of Dec 31, 2020.
The company had $627.7 million in liquidity, including $133.1 million of unrestricted cash and cash equivalents and $494.6 million in credit facilities, as of Dec 31, 2021.
At the end of the quarter, the weighted average cost of debt, comprising interest and fees, was 4.5%, down from 5.2% at the end of the prior-year quarter.
First-Quarter 2022 Outlook
Prepayments are expected to slow down and be between $150 million and $250 million. Consistent with the previous year, prepayments are expected to result in a lower acceleration fee recognition rate of 2.5-3% due to the average vintage of the prepayments.
The company expects a core yield of 11-11.5%.
The anticipated interest rate hikes in 2022 are projected to benefit the company’s core yield going forward.
Management expects interest expenses to remain stable compared to the prior quarter.
The company expects $3.6 million or 3 cents per share of loss on debt extinguishment related to the premium on early redemption and acceleration of unamortized debt issuance costs to be reflected at a realized loss in the quarter.
The settlement of the $230 million of convertible notes is expected to impact the net asset value and have a short-term dilutive impact on net investment income. This, combined with the lower expected prepayments, fewer calendar days, and higher expected payroll taxes will likely lead to lower net investment income per share.
Selling, general and administrative (SG&A) expenses are anticipated to be between $19 million and $20 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -6% due to these changes.
VGM Scores
Currently, Hercules Tech has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Hercules Tech has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Hercules Tech (HTGC) Up 0.7% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Hercules Technology (HTGC - Free Report) . Shares have added about 0.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Hercules Tech due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Hercules Capital Q4 Earnings Beat Estimates, Costs Rise
Hercules Capital’s fourth-quarter 2021 net investment income of 35 cents per share beat the Zacks Consensus Estimate of 33 cents. However, the bottom line fell 5.4% from the year-ago quarter figure.
The company recorded a fall in total investment income and higher expenses during the quarter. The balance sheet position remained strong and new commitments were robust.
Net investment income was $40.4 million, down 4.3% year over year.
In 2021, net investment income was $150 million or $1.29 per share, down from $157.1 million or $1.39 per share in 2020.
Total Investment Income Down, Expenses Rise
Total investment income in the quarter under review was $72.5 million, down 3.8% from the year-ago quarter. The top line marginally lagged the Zacks Consensus Estimate of $72.6 million.
In 2021, total investment income declined 2.2% to $281 million.
Total quarterly gross operating expenses rose 1.5% to $33.7 million. The rise was mainly due to an increase in total employee compensation costs.
Portfolio Value & New Commitments Solid
The fair value of Hercules Capital’s total investment portfolio was $2.43 billion as of Dec 31, 2021.
In the fourth quarter, the company delivered $947.8 million in gross new debt and equity commitments and realized early loan repayments of $425.8 million.
Balance Sheet Position Strong
As of Dec 31, 2021, Hercules Capital’s net asset value was $11.22 per share compared with $11.26 as of Dec 31, 2020.
The company had $627.7 million in liquidity, including $133.1 million of unrestricted cash and cash equivalents and $494.6 million in credit facilities, as of Dec 31, 2021.
At the end of the quarter, the weighted average cost of debt, comprising interest and fees, was 4.5%, down from 5.2% at the end of the prior-year quarter.
First-Quarter 2022 Outlook
Prepayments are expected to slow down and be between $150 million and $250 million. Consistent with the previous year, prepayments are expected to result in a lower acceleration fee recognition rate of 2.5-3% due to the average vintage of the prepayments.
The company expects a core yield of 11-11.5%.
The anticipated interest rate hikes in 2022 are projected to benefit the company’s core yield going forward.
Management expects interest expenses to remain stable compared to the prior quarter.
The company expects $3.6 million or 3 cents per share of loss on debt extinguishment related to the premium on early redemption and acceleration of unamortized debt issuance costs to be reflected at a realized loss in the quarter.
The settlement of the $230 million of convertible notes is expected to impact the net asset value and have a short-term dilutive impact on net investment income. This, combined with the lower expected prepayments, fewer calendar days, and higher expected payroll taxes will likely lead to lower net investment income per share.
Selling, general and administrative (SG&A) expenses are anticipated to be between $19 million and $20 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -6% due to these changes.
VGM Scores
Currently, Hercules Tech has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Hercules Tech has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.