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Hercules Capital (HTGC) Q1 Earnings Beat on Higher Revenues

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Hercules Capital, Inc.’s (HTGC - Free Report) first-quarter 2018 net investment income of 31 cents per share beat the Zacks Consensus Estimate by a penny. Also, the figure was 10.7% above the year-ago quarter level.

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

Distributional Net Operating Income came in at $28.4 million or 34 cents per share, up from $24.5 million or 30 cents per share in the prior-year quarter.

Total Investment Income Improves, Expenses Fall

Total investment income was $48.7 million, up 5% from the year-ago period. The increase was mainly driven by an expected high level of early loan pay-offs. The figure lagged the Zacks Consensus Estimate of $49.4 million.

Total operating expenses during the quarter declined 4.4% year over year to $22.6 million. The fall was mainly attributable to lower interest expenses, loan fees and total general and administrative costs.

Total Portfolio Value & New Commitments

The fair value of Hercules Capital’s total investment portfolio was $1.48 billion as of Mar 31, 2018.

In the reported quarter, the company provided approximately $266 million in new debt and equity-financing commitments to new and existing portfolio companies.

Balance Sheet

As of Mar 31, 2018, Hercules Capital’s net asset value was $9.72 per share compared with $9.96 as of Dec 31, 2017. The decline was mainly due to a change in unrealized depreciation and realized losses, offset by accretive proceeds from ATM activity during the quarter.

The company had $313.2 million in liquidity, including $118.2 million in unrestricted cash and cash equivalents and $195 million in credit facilities as of Mar 31, 2018.

At the end of the first quarter, the weighted average cost of debt comprising interest and fees was 5.3%, down from 6.3% in the prior-year quarter. The fall was mainly owing to the redemption of remaining outstanding 7.00% notes due 2019 and the partial redemption of outstanding aggregate principal amount of 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 #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Dates for Other Finance Stocks

Garrison Capital Inc. (GARS - Free Report) , TCP Capital Corp. (TCPC - Free Report) and FS Investment Corporation are scheduled to announce results on May 8, May 9 and May 10, respectively.

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