Hercules Capital (NYSE:HTGC) Posts Quarterly Earnings Results, Meets Expectations

Hercules Capital (NYSE:HTGC) posted its earnings results on Thursday. The financial services provider reported $0.50 earnings per share for the quarter, meeting analysts’ consensus estimates of $0.50, Zacks reports. The business had revenue of $134.41 million for the quarter, compared to analysts’ expectations of $146.71 million. Hercules Capital had a net margin of 59.85% and a return on equity of 16.05%. The firm’s revenue for the quarter was up 8.4% on a year-over-year basis. During the same quarter in the previous year, the firm posted $0.50 earnings per share.

Here are the key takeaways from Hercules Capital’s conference call:

• Record quarterly performance: Total investment income reached $149.1 million and net investment income was $92.9 million, or $0.50 per share. NII covered the base distribution by 125% and the full distribution, including the $0.07 supplemental, by 106%.
• Hercules reported record first-half originations of $2.74 billion, up 35.6% year over year, while assets under management grew 14.4% to approximately $6.1 billion. Management expects both the public BDC and private-credit funds to contribute to future growth.
• Credit performance remained relatively stable, with non-accrual investments representing just 0.1% of portfolio fair value, while leverage declined materially to 103.9% on a GAAP basis and available BDC liquidity stood at $652.9 million. The company also issued $325 million of five-year unsecured notes after quarter-end to support refinancing and future originations.
• Prepayments surged to $572.1 million in Q2 but are expected to normalize to $200 million-$300 million in Q3, reducing prepayment-related revenue. Management also guided core yield lower to 11.8%-12% as higher-yielding legacy assets are replaced and the impact of prior rate cuts continues.
• Management noted that banks and other lenders have become increasingly aggressive on deal structures, while a growing number of companies in the pipeline may not meet Hercules’ underwriting standards. Q3 originations are expected to be seasonally lower and back-end weighted.

Hercules Capital Price Performance

HTGC traded down $0.03 during midday trading on Thursday, hitting $15.95. The company had a trading volume of 2,041,355 shares, compared to its average volume of 1,330,578. Hercules Capital has a twelve month low of $13.70 and a twelve month high of $19.67. The company has a market capitalization of $2.98 billion, a PE ratio of 9.01 and a beta of 0.79. The company has a debt-to-equity ratio of 1.14, a quick ratio of 1.89 and a current ratio of 1.89. The firm’s 50-day simple moving average is $15.69 and its 200-day simple moving average is $15.84.

Hercules Capital Increases Dividend

The business also recently disclosed a quarterly dividend, which will be paid on Tuesday, August 18th. Shareholders of record on Tuesday, August 11th will be given a $0.40 dividend. This represents a $1.60 annualized dividend and a yield of 10.0%. The ex-dividend date is Tuesday, August 11th. This is a boost from Hercules Capital’s previous quarterly dividend of $0.07. Hercules Capital’s dividend payout ratio is 90.40%.

Wall Street Analyst Weigh In

A number of research analysts have commented on HTGC shares. UBS Group raised their price target on shares of Hercules Capital from $15.00 to $15.50 and gave the stock a “neutral” rating in a research note on Monday, May 18th. Weiss Ratings reiterated a “hold (c)” rating on shares of Hercules Capital in a research note on Wednesday, June 17th. Citizens Jmp dropped their target price on Hercules Capital from $24.00 to $22.00 and set a “market outperform” rating for the company in a report on Wednesday, April 22nd. Keefe, Bruyette & Woods decreased their price target on Hercules Capital from $19.00 to $18.00 and set an “outperform” rating on the stock in a research note on Thursday, April 16th. Finally, Piper Sandler upped their price target on Hercules Capital from $16.50 to $17.00 and gave the company a “neutral” rating in a research report on Wednesday, May 6th. One analyst has rated the stock with a Strong Buy rating, four have given a Buy rating and three have issued a Hold rating to the company’s stock. According to MarketBeat, Hercules Capital has a consensus rating of “Moderate Buy” and an average price target of $18.21.

Institutional Trading of Hercules Capital

Several hedge funds have recently modified their holdings of the stock. Marshall Wace LLP acquired a new stake in shares of Hercules Capital in the third quarter valued at approximately $11,199,000. Qube Research & Technologies Ltd lifted its holdings in Hercules Capital by 425.6% during the 2nd quarter. Qube Research & Technologies Ltd now owns 580,414 shares of the financial services provider’s stock worth $10,610,000 after buying an additional 469,989 shares in the last quarter. HRT Financial LP boosted its position in Hercules Capital by 100.9% in the 2nd quarter. HRT Financial LP now owns 558,010 shares of the financial services provider’s stock valued at $10,200,000 after buying an additional 280,198 shares during the last quarter. Credit Agricole S A bought a new position in Hercules Capital in the 3rd quarter valued at $5,271,000. Finally, Jump Financial LLC increased its stake in shares of Hercules Capital by 150.6% in the 4th quarter. Jump Financial LLC now owns 361,092 shares of the financial services provider’s stock valued at $6,796,000 after buying an additional 217,017 shares during the period. 19.69% of the stock is owned by institutional investors.

Hercules Capital Company Profile

Hercules Capital, Inc is a specialty finance company organized as a business development company (BDC) that provides tailored debt financing solutions to high‐growth companies. Through its external management structure, Hercules Capital extends senior secured loans, subordinated debt and growth capital designed to support research and development, expansion initiatives and working capital needs. The firm primarily partners with venture capital and private equity sponsors to finance innovative enterprises across various developmental stages.

The company’s investment portfolio is concentrated in technology, life sciences and sustainable and renewable technology sectors, reflecting its focus on industries with strong growth prospects and recurring capital requirements.