Market Overview

Hercules Capital Reports Third Quarter 2019 Financial Results

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Achieved Record Net Investment Income of $38.9 Million, or $0.37 per Share, which provides 116% Coverage of Base Distribution Payout

Set Record Q3 New Debt and Equity Commitments and Total Fundings of $241.3 Million and $177.0 Million, Respectively

Record Total Debt Investments of $2.10 Billion at Cost, Driven by Debt Investment Portfolio Growth of $24.1 Million

Received Reaffirmed Investment Grade Credit and Corporate Ratings of BBB and BBB+ from DBRS and KBRA, respectively

Completed an Investment Grade Bond Offering of $105.0 Million of 4.77% Notes due 2024

Q3 2019 Financial Achievements and Highlights

  • Record Net Investment Income "NII" of $38.9 million, or $0.37 per share, an increase of 32.7% year-over-year
    • Total Investment Income of $69.2 million, an increase of 31.6% year-over-year
  • Distributable Net Operating Income(1) "DNOI," a non-GAAP measure, of $40.3 million, or $0.39 per share
  • Record Q3 new debt and equity commitments of $241.3 million, an increase of 2.6% year-over-year
    • Record Q3 fundings of $177.0 million, an increase of 24.3% year-over-year
  • Unscheduled early principal repayments or "early loan repayments" of $140.1 million
  • 14.9% Return on Average Equity "ROAE" (NII/Average Equity)
  • 7.5% Return on Average Assets "ROAA" (NII/Average Assets)
  • GAAP leverage of 111.5% and regulatory leverage of 97.8%(2)
  • 13.4% GAAP Effective Yields and 12.4% Core Yields(3), a non-GAAP measure

Year-to-date ending September 30, 2019 Financial Highlights

  • NII of $103.2 million, or $1.03 per share, an increase of 32.0%, compared to $78.1 million for the nine months ending September 30, 2018
    • Total investment income of $197.3 million, an increase of 30.8%, compared to $150.9 million for the nine months ending September 30, 2018
  • New equity and debt commitments of $1.19 billion, an increase of 23.6%, compared to $963.8 million for the nine months ending September 30, 2018
    • Total fundings of $784.8 million, an increase of 11.2%, compared to $706.1 million for the nine months ending September 30, 2018
  • Net debt investment portfolio growth of $348.4 million for the nine months ending September 30, 2019

Footnotes:

(1) Distributable Net Operating Income, "DNOI" represents net investment income as determined in accordance with GAAP, adjusted for amortization of employee restricted stock awards and stock options.

(2) Regulatory leverage represents debt-to-equity ratio, excluding our Small Business Administration "SBA" debentures

(3) Core Yield excludes early loan repayments and one-time fees, and includes income and fees from expired commitments

Hercules Capital, Inc. (NYSE:HTGC) ("Hercules" or the "Company"), the largest and leading specialty financing provider to innovative venture, growth and established stage companies backed by some of the leading and top-tier venture capital and select private equity firms, today announced its financial results for the third quarter ended September 30, 2019.

"We delivered another solid quarter of originations with record Q3 total fundings of $177 million and remain on pace to achieve another record year on multiple fronts," stated Scott Bluestein, chief executive officer and chief investment officer of Hercules. "For the first nine months of 2019, our debt investment portfolio grew by more than $348 million to $2.1 billion at cost, which in turn produced record net investment income of nearly $39 million, or $0.37 per share in Q3, resulting in 116% coverage of our base distribution. Our strong growth and prudent deployment of our investment strategy has produced more than a 7% increase in our total distributions compared to the same nine-month period year-over-year."

Bluestein concluded, "With our portfolio growth year-to-date, the continued strengthening of our balance sheet and our prudent use of increased leverage, our shareholders have ultimately received significant benefits with strong increases in both return-on-equity and return-on-assets of 14.9% and 7.5% respectively, and increased distributions throughout the year. As we march toward the finish line in 2019, we continue to focus on prudently growing our debt investment portfolio and delivering strong and sustainable total shareholder returns while maintaining our stringent and proven credit underwriting standards."

Q3 2019 Review and Operating Results

Debt Investment Portfolio

Hercules delivered new debt and equity commitments totaling $241.3 million and fundings totaling $177.0 million.

During the third quarter, Hercules realized early loan repayments of $140.1 million, which along with normal scheduled amortization of $16.7 million, resulted in total debt repayments of $156.8 million.

The new debt investment origination and funding activities lead to net debt investment portfolio growth of $24.1 million during the third quarter, on a cost basis.

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

Total Investment Portfolio: Q3 2019 to Q2 2019

 
(in millions)

Debt

Equity

Warrants

Total Portfolio

Balances at Cost at 6/30/19

$

2,077.2

 

$

203.6

 

$

34.9

 

$

2,315.7

 

New fundings(a)

 

176.5

 

 

 

0.5

 

 

177.0

 

Warrants not related to Q3 2019 fundings

 

 

 

0.3

 

 

0.3

 

Early payoffs(b)

 

(140.1

)

 

 

 

 

(140.1

)

Principal payments received on investments

 

(16.7

)

 

 

 

 

(16.7

)

Net changes attributed to conversions, liquidations, and fees

 

4.4

 

 

(2.6

)

 

(1.6

)

 

0.2

 

Net activity during Q3 2019

 

24.1

 

 

(2.6

)

 

(0.8

)

 

20.7

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