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Hercules Capital (HTGC) Q1 Earnings Miss, Revenues Rise

Zacks Equity Research

Hercules Capital, Inc.’s HTGC first-quarter 2019 net investment income of 30 cents per share missed the Zacks Consensus Estimate by a penny. The bottom line also was 3.2% lower than the year-ago figure. Results in the reported quarter included one-time charge of $1.6 million or 2 cents per share related to the full redemption of 6.25% notes due 2024.

Results were adversely impacted by rise in operating expenses. However, higher revenues, increase in net asset value and growth in investment portfolio acted as tailwinds.

Distributional net operating income came in at $32.5 million or 34 cents per share, compared with $28.4 million or 34 cents per share in the prior-year quarter.

Total Investment Income Improves, Expenses Rise

Total investment income was $58.80 million, up 20.7% from the year-ago quarter. This upside was mainly driven by higher average debt investment balance and an overall rise in the core yield. The figure marginally lagged the Zacks Consensus Estimate of $58.82 million.

Total operating expenses jumped 31.5% year over year to $29.8 million. The increase was mainly due to higher interest expenses, loan fees, general and administrative costs, and total employee-compensation costs.

Total Portfolio Value & New Commitments

The fair value of Hercules Capital’s total investment portfolio was $2.1 billion as of Mar 31, 2019.

In the reported quarter, the company provided $414.8 million in new debt and equity-financing commitments. Further, since the close of first-quarter2019 and as of Apr 30, 2019, Hercules closed new debt and equity commitments of $153.5 million to new and existing portfolio companies.

Balance Sheet Position

As of Mar 31, 2019, Hercules Capital’s net asset value was $10.26 per share compared with $9.90onDec 31, 2018. This rise was mainly driven by net realized gains on investments and a net change in unrealized appreciation.

The company had $247.2 million in liquidity, including $16.5 million in unrestricted cash and cash equivalents and $230.7 million in credit facilities, as of Mar 31, 2019.

At the end of the first quarter, the weighted average cost of debt comprising interest and fees was 5.8%, up from 5.3% from the prior-year quarter end.

Distribution Update

Concurrently, Hercules Capital announced a quarterly distribution of 32 cents per share, representing a hike of 3.2% from the prior payout. Additionally, the company declared a supplemental cash distribution of 1 cent per share. Both these distributions will be paid on May 20, 2019, to shareholders of record as on May 13.

Our Take

Hercules Capital’s loan origination activity continues to be on track. The company strategically deploys its capital while maintaining a balanced and diversified approach across various industries and sectors. However, elevated expense levels might hurt the bottom line to some extent.

Hercules Capital, Inc. Price, Consensus and EPS Surprise

 

Hercules Capital, Inc. Price, Consensus and EPS Surprise | Hercules Capital, Inc. Quote

Currently, Hercules Capital carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Results of Other Finance Stocks

Ares Capital Corporation’s ARCC first-quarter 2019 core earnings of 48 cents per share surpassed the Zacks Consensus Estimate of 42 cents. The bottom line increased 26.3% from the year-ago quarter.

Ally Financial Inc.’s ALLY first-quarter 2019 adjusted earnings of 80 cents per share surpassed the Zacks Consensus Estimate of 79 cents. Further, the bottom line compared favorably with the prior-year quarter’s figure of 68 cents.

CIT Group Inc.’s CIT first-quarter 2019 earnings from continuing operations of $1.18 per share surpassed the Zacks Consensus Estimate of $1.09. In the prior-year quarter, the company recorded adjusted earnings from continuing operations of 74 cents. Notably, the reported quarter did not have any noteworthy items.

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