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Hercules Announces Third Quarter 2017 Financial Results and Declares a $0.31 per Share Quarterly Distribution


Company surpassed $7.0 billion milestone in Total Debt Commitments
since inception

Completed a $125.0 million strategic venture loan portfolio
acquisition from Ares Capital

Hercules to remain an "Internally Managed" BDC for the foreseeable

Q3 2017 Financial Achievements and Highlights

  • Net Investment Income "NII" of $24.0 million, or $0.29 per share
    • Total Investment Income of $45.9 million
    • New Debt and Equity Commitments of $154.4 million
    • Total Gross Fundings of $146.7 million
    • Unscheduled early principal repayments "early payoffs" of
      $114.7 million
  • Distributable Net Operating Income "DNOI," a non-GAAP measure, of
    $25.8 million, or $0.31 per share
  • 14.1% GAAP Effective Yields
  • $335.6 million of available liquidity for future portfolio and
    earnings growth, subject to existing terms and covenants
  • Net regulatory leverage of 49.4%(1) and
    regulatory leverage of 66.2%
  • Total Shareholder Returns "TSR" of 4.3%, 71.7% and 104.6%, one,
    five and seven-year, respectively, as of September 30, 2017
  • 12.1% Return on Average Equity "ROAE" (NII/Average Equity)
  • 6.4% Return on Average Assets "ROAA" (NII/Average Assets)

Year-to-date ending September 30, 2017 Financial Achievements and

  • NII of $71.9 million for the nine months ending September 30, 2017,
    or $0.88 per share, an increase of 7.0%, compared to $67.2 million for
    the nine months ending September 30, 2016
    • Total Investment Income of $140.7 million
    • New Equity and Debt Commitments of $551.4 million
    • Total Gross Fundings of $487.3 million
    • Unscheduled early principal repayments of $381.4 million
  • Sixteen (16) Announced or Completed Portfolio Company M&A Liquidity
  • ~$0.19 per share, or ~$16.0 million of projected 2017 earnings

(1) Net regulatory leverage is defined as regulatory
leverage less cash balance at period end.

(2) Per share calculation based on weighted shares of
common stock outstanding of 82.1 million, and subject to change based on

Q4 2017 financial performance and any tax adjustments at 2017

Capital, Inc.
(NYSE:HTGC) ("Hercules" or the "Company"), the
leading specialty financing provider to innovative venture growth stage
companies backed by leading venture capital firms, today announced its
financial results for the third quarter ended September 30, 2017.

The Company also announced that its Board of Directors has declared a
third quarter cash distribution of $0.31 per share, that will be payable
on November 20, 2017, to shareholders of record as of November 13, 2017.

Manuel A. Henriquez, founder, chairman and chief executive officer of
Hercules, commented, "Our strong origination momentum continued in Q3
2017, despite this typically being our slowest period, with
approximately $154 million in new commitments, bringing us to a total of
over half a billion dollars in new commitments through the end of Q3
2017. In addition to our team's strong origination activities, we also
had gross fundings of more than $487 million, through the end of Q3
2017. During the quarter, we also continued to experience
higher-than-expected levels of unscheduled early payoffs of
approximately $115 million, $15 million higher than anticipated.
Finally, our ability to identify and work with some of the most
promising and innovative venture growth stage companies was evidenced by
the sixteen (16) portfolio company M&A liquidity events that were
announced or completed through the end Q3 2017."

Henriquez continued, "As we turn our attention to Q4 2017, we remain
well positioned to potentially achieve another record year for new
commitment originations. We expect to achieve this potential new record
while also completing several strategic initiatives that strengthen our
competitive leadership position and enhance our capabilities, as we
continue to pursue our ‘slow and steady' portfolio growth strategy and
increase shareholder value. First, we successfully closed our inaugural
investment grade institutional bond offering of $150 million of 4.625%
Notes, as we look to retire a portion of our 6.25% Notes, which is
expected to be accretive to shareholder value as well as optimize our
balance sheet and help lower our overall cost of capital. Second, we
recently announced an agreement with Ares Capital to acquire their
venture lending portfolio for approximately $125 million. The
transaction reinforces our position as the leading and largest
venture-focused BDC in the industry. In addition, the newly acquired
assets are expected to be immediately accretive to Hercules' Q4 2017
earnings by approximately $0.01 per share. Together, these events
demonstrate our continuous efforts to expand our growing market
leadership presence while enhancing our overall investment portfolio and
strengthening our balance sheet. These activities, in conjunction with
our disciplined investment approach, should allow the Company to
continue to navigate an increasingly competitive market."

Q3 2017 Review and Operating Results

Debt Investment Portfolio

Hercules successfully extended new debt and equity commitments to seven
(7) companies, five (5) new and two (2) existing companies, totaling
$154.4 million, and gross fundings of $146.7 million.

During the quarter, Hercules realized unscheduled early principal
repayments of $114.7 million, nearly $15.0 million higher than expected,
which along with normal scheduled amortization of $21.0 million,
totaling $135.7 million in total debt repayments.

Net investment loan portfolio decreased by ($9.7) million, which
included origination growth of $9.8 million, despite higher than
anticipated early repayments, offset by ($19.5) million of net changes
attributed to conversions, liquidations and fees.

The Company's total investment portfolio, (at cost and fair value) by
category, quarter-over-quarter is highlighted below:

Total Investment Portfolio: Q2 2017 to
Q3 2017

(in millions)   Debt   Equity   Warrants   Total Portfolio
Balances at Cost at 6/30/17 $ 1,324.0   $ 135.1   $ 42.0   $ 1,501.1  
New fundings(a) 145.5 0.6 0.6 146.7
Warrants not related to Q3 2017 fundings - - 0.1 0.1
Early payoffs(b) (114.7 ) - - (114.7 )
Principal payments received on investments (21.0 ) - - (21.0 )
Net changes attributed to conversions, liquidations, and fees   (19.5 )   (0.5 )   (3.2 )   (23.2 )
Net activity during Q3 2017   (9.7 )   135.2     (2.5 )   (12.1 )
Balances at Cost at 9/30/17 $ 1,314.3   $ 135.2   $ 39.5   $ 1,489.0  
Balances at Value at 6/30/17 $ 1,287.6   $ 75.4   $ 32.5   $ 1,395.5  
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