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Hercules Capital (HTGC) Q4 Earnings Beat on Higher Revenues

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Hercules Capital Inc.’s HTGC fourth-quarter 2019 net investment income of 38 cents per share outpaced the Zacks Consensus Estimate of 36 cents. The bottom line grew 18.8% from the year-ago quarter’s reported figure.

Results benefited from higher total investment income and an increase in net asset value. However, rise in operating expenses acted as a headwind.

Distributional net operating income was $41.9 million or 40 cents per share, up from $33.9 million or 35 cents per share in the prior-year quarter.

For 2019, net investment income of $1.41 per share outpaced the Zacks Consensus Estimate of $1.40. The bottom line grew 18.5% from the year-ago figure.

Total Investment Income & Expenses

Total investment income for the quarter was $70.6 million, up 24.1% from the year-ago quarter. The upside was mainly driven by a higher average debt investment balance and rise in income from acceleration from early loan repayments. The top line beat the Zacks Consensus Estimate of $68.9 million.

For 2019, total investment income was $267.9 million, up 28.9% year over year. The figure surpassed the Zacks Consensus Estimate of $266.2 million.

Total quarterly operating expenses jumped 15.9% year over year to $30.5 million. The increase resulted from a rise in all expense components, except for stock-based compensation costs.

Total Portfolio Value & New Commitments

The fair value of Hercules Capital’s total investment portfolio was $2.3 billion as of Dec 31, 2019.

In the reported quarter, the company provided $283.9 million in new debt and equity commitments.

Balance Sheet Position

As of Dec 31, 2019, Hercules Capital’s net asset value was $10.55 per share compared with $9.90 on Dec 31, 2018.

The company had $235.5 million in liquidity, including $64.4 million in unrestricted cash and cash equivalents, and $171.1 million in credit facilities, as of Dec 31, 2019.

At the end of the fourth quarter, the weighted average cost of debt, comprising interest and fees, was 5%, down from 5.3% from the prior-year quarter end.

Our Take

Hercules Capital’s loan origination activity continues to be on track. However, elevated expense levels might hurt the bottom line to some extent. As the company undertakes efforts to improve originations, expenses will likely remain elevated.

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.

Performance & Earnings Release Dates of Other Finance Stocks

Ares Capital Corporation’s ARCC fourth-quarter 2019 core earnings of 45 cents per share met the Zacks Consensus Estimate and were in line with the year-ago quarter’s figure.

FS KKR Capital Corp. FSK and Capitala Finance Corp. (CPTA - Free Report) are scheduled to announce results on Feb 28 and Mar 2, respectively.

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