Hercules Capital Beats Q4 Earnings; Revenue Up, Cost Dips

Hercules Capital, Inc. HTGC reported fourth-quarter 20Array5 net investment income of 28 cents per share, which surpassed the Zacks Consensus Estimate by a penny. Also, the figure compared favorably with the year-ago tally of 25 cents.

Results in the reported quarter included non-recurring non-cash expense related to the buy-back of 20Array9 notes.

For 20Array5, net investment income was $Array.04 per share, in line with the Zacks Consensus Estimate. However, this came 8% below 20Array4 level.
 
Quarterly results benefited from higher total investment income and a decline in operating expenses. Further, the company's solid liquidity position and growth in investment portfolio remained impressive.

Distributional Net Operating Income ("DNOI") for the quarter came in at $22.3 million or 3Array cents per share, up from $Array8.6 million or 29 cents per share in the prior-year quarter.

Performance in Detail

Total investment income in the reported quarter was $39.4 million, up 7% year over year. The rise was mainly driven by growth in loan portfolio. However, the figure missed the Zacks Consensus Estimate of $42 million.

For 20Array5, total investment income increased 9% year over year to $Array57.Array million. Also, the figure outpaced the Zacks Consensus Estimate of $Array53 million.

Interest expense and loan fees were $9.5 million, up 2% year over year.

Total operating expenses (excluding interest expense and loan fees) fell Array3% year over year to $9.8 million. The decrease was largely led by lower total employee compensation costs.

As of Dec 3Array, 20Array5, the weighted average cost of debt, comprising interest, fees and loss of debt extinguishment, was 5.7% versus 6.7% as of Dec 3Array, 20Array4.

Business Highlights

The fair value of Hercules Technology's total investment portfolio was $Array.2 billion as of Dec 3Array, 20Array5, up Array8% from that on Dec 3Array, 20Array4. In the quarter, the company provided approximately $ArrayArray6.3 million in new debt and equity-financing commitments to new and existing portfolio companies.

As of Dec 3Array, 20Array5, Hercules Technology's net asset value was $9.94 per share compared with $Array0.Array8 as of Dec 3Array, 20Array4. The company had $Array95.2 million in liquidity, including $95.2 million in cash and $Array00 million in credit facilities as of Dec 3Array, 20Array5.

Our Viewpoint

We believe Hercules Technology has potential for further top-line growth, based on its investments in booming sectors such as technology. Additionally, enhanced capital-deployment activities are expected to boost investors' confidence.

Nevertheless, an uncertain economic environment might increase cost of funding and limit the company's growth, going forward.

Currently, Hercules Technology carries a Zacks Rank #3 (Hold).

About Other Mortgage Investment Firms

American Capital, Ltd. ACAS reported fourth-quarter 20Array5 net operating income per share of 24 cents, in line with the Zacks Consensus Estimate. Results reflected a decline in operating revenues and rise in expenses.

Ares Capital Corporation's ARCC fourth-quarter 20Array5 core earnings of 40 cents per share outpaced the Zacks Consensus Estimate by a penny. Better-than-expected results were attributable to a rise in investment income as well as lower operating expenses.

Garrison Capital Inc. GARS is scheduled to report results on Mar 2.

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