Hercules Capital Inc (HTGC) Posts Record Earnings for Q4 and Full-Year 2023
Total Investment Income: Q4 2023 saw a 22.4% increase year-over-year, reaching $122.6 million.
Net Investment Income (NII): Q4 2023 NII rose by 38.5% year-over-year to $86.0 million, or $0.56 per share.
Full-Year Investment Income: A 43.2% increase year-over-year, totaling $460.7 million.
Full-Year NII: Grew by 61.7% year-over-year to $304.0 million.
Total Gross Fundings: Reached a record $1.6 billion for the full year, marking a 9.1% increase year-over-year.
Assets Under Management: Approximately $4.2 billion, up 15.3% year-over-year.
Liquidity: Over $1.0 billion of available liquidity as of year-end, inclusive of Adviser Funds managed by Hercules Adviser LLC.
Hercules Capital Inc (NYSE:HTGC) released its 8-K filing on February 15, 2024, detailing a year of record financial results despite a challenging market environment. Hercules Capital, a specialty finance company, provides senior secured loans to high-growth, venture capital-backed companies across various technology and life sciences industries.
Financial Performance and Portfolio Highlights
CEO Scott Bluestein highlighted the company's successful execution of key themes for 2023, leading to record total investment income and net investment income for both the fourth quarter and the full year. The company's diligent credit discipline and strong credit performance have been pivotal in achieving these results. Hercules' total investment portfolio, at cost and fair value, experienced a net decrease of $73.2 million during Q4 2023, primarily due to early loan repayments.
The effective yield on Hercules' debt investment portfolio was 15.3% for Q4 2023, with core yield at 14.3%, exceeding the company's expected annual range. Total investment income for Q4 2023 was $122.6 million, a significant increase from the previous year, primarily due to a higher weighted average debt investment portfolio and increased fee income from early payoffs.
Operational Efficiency and Credit Quality
Operating expenses decreased in Q4 2023, contributing to the rise in net investment income. Hercules' net cumulative realized gain/(loss) position since inception in October 2004 through December 31, 2023, represents an effective annualized loss rate of 0.014%, demonstrating the company's credit discipline.
As of December 31, 2023, the weighted average grade of the debt investment portfolio was 2.24, with the company maintaining a proactive approach to credit grading adjustments. Non-accrual loans decreased quarter-over-quarter, with only one debt investment on non-accrual at the end of Q4 2023.
Liquidity, Leverage, and Future Outlook
Hercules ended Q4 2023 with substantial liquidity, including $743.9 million available, and a GAAP leverage ratio of 87.1%. The company's net asset value (NAV) per share increased to $11.43, reflecting the net change in unrealized appreciation and accretion from the sale of ATM equity.
Looking ahead, Hercules has a robust pipeline with $506.5 million in signed non-binding term sheets as of February 13, 2024. The company's asset-sensitive debt investment portfolio positions it well to benefit from interest rate fluctuations, with the majority of its debt investment portfolio priced at floating interest rates.
Hercules Capital's solid financial results and strategic positioning underscore its commitment to delivering shareholder value and its capability to navigate through market challenges. For more detailed information, investors and stakeholders are encouraged to review the full 8-K filing.
Explore the complete 8-K earnings release (here) from Hercules Capital Inc for further details.
This article first appeared on GuruFocus.
