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Hercules Capital (HTGC) Q2 Earnings Beat on Higher Revenues

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Shares of Hercules Capital, Inc.’s (HTGC - Free Report) gained 3.3% following the release of second-quarter 2018 results after the markets closed. Adjusted net investment income of 29 cents per share beat the Zacks Consensus Estimate by a penny. However, the figure was 6.5% below the year-ago quarter level.

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

The results exclude the one-time expense of 3 cents per share related to the redemption of 2024 Notes. Including this, Distributional Net Operating Income came in at $25.6 million or 29 cents per share, down from $27.2 million or 33 cents per share in the prior-year quarter.

Total Investment Income Improves, Expenses Rise

Total investment income was $49.6 million, up 2.3% from the year-ago period. The increase was mainly driven by higher loan origination activity and an overall rise in the core yield. Also, the figure surpassed the Zacks Consensus Estimate of $48.4 million.

Total operating expenses rose15.6% year over year to $26.8 million. The increase was largelydue to higher interest expenses, loan fees and total employee compensation costs.

Total Portfolio Value & New Commitments

The fair value of Hercules Capital’s total investment portfolio was $1.70 billion as of Jun 30, 2018.

In the reported quarter, the company provided $462.7 million in new debt and equity-financing commitments to 15 new companies and 14 existing portfolio companies.

Balance Sheet

As of Jun 30, 2018, Hercules Capital’s net asset value was $10.22 per share compared with $9.72 as of Mar 31, 2018. The rise was mainly driven by a change in unrealized depreciation and realized losses and unrealized gains, and accretive proceeds from ATM activity and public equity offering during the quarter.

The company had $221.2 million in liquidity, including $59.5 million in unrestricted cash and cash equivalents and $161.7 million in credit facilities as of Jun 30, 2018.

At the end of the second quarter, the weighted average cost of debt comprising interest and fees was 6.4%, up from 5.5% a year ago. The rise was mainly owing to the one-time non-cash acceleration of unamortized fees associated with the redemption 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 to some extent.

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.

Earnings Release Dates for Other Finance Stocks

Garrison Capital Inc. (GARS - Free Report) , TCP Capital Corp. (TCPC - Free Report) and FS Investment Corporation (FSIC - Free Report) are scheduled to announce results on Aug 7, Aug 8 and Aug 9, respectively.

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