Hercules Technology Growth Capital, Inc. (NYSE: HTGC)
(“Hercules”), the leading specialty finance company focused on
providing senior secured loans to venture capital-backed companies
in technology-related markets, including technology, biotechnology,
life science, and cleantech industries, at all stages of
development, announced today its financial results for the third
quarter ended September 30, 2012.
Third Quarter 2012 Highlights:
- Record high total investment income of
$23.9 million, an increase of 27.8%, in the third quarter of 2012,
compared to $18.7 million for the third quarter of
2011.
- Increased NII during the quarter by
32.6% to approximately $11.4 million, as compared to $8.6 million
in the third quarter of 2011. NII per share was $0.23, up 15.0%, on
48.8 million outstanding shares for the third quarter of 2012,
compared to $0.20 per share on 43.1 million outstanding shares in
the third quarter of 2011.
- Increased DNOI by approximately 31.6%
to $12.5 million compared to $9.5 million in the third quarter
of 2011. DNOI per share was $0.26, up 18.2%, on 48.8 million
outstanding shares for the third quarter of 2012, compared to $0.22
per share on 43.1 million outstanding shares in the third quarter
of 2011.
- Record high total investment assets
increased 34.3% year over year to approximately $774.5 million as
of September 30, 2012, compared to $ 576.5 million as of September
30, 2011.
- Originated approximately $136.4 million
in total debt and equity commitments to new and existing portfolio
companies.
- Funded approximately $91.4 million of
debt and equity investments during the third quarter.
- Received approximately $38.4 million in
principal repayments, including $7.8 million of early
principal repayments and $30.6 million in scheduled
principal payments.
- Ended the third quarter with
approximately $261.8 million in available liquidity, including
$107.1 million in cash, $24.7 million in available SBA borrowing
capacity and $130.0 million in bank credit facility
availability.
- Declared a quarterly dividend
of $0.24 per share payable on November 21, 2012, to
shareholders of record as of November 14, 2012; the twenty-ninth
consecutive dividend since inception bringing total dividends
declared since inception to $7.64 per share.
“Our third quarter results reflect significant growth of our
investment portfolio as we reported record investment income and
record investment assets for the third consecutive quarter," said
Manuel A. Henriquez, Hercules co-founder, chairman and chief
executive officer. “We continued to see strong demand for venture
debt during the quarter, despite continued global economic
uncertainty and the upcoming U.S. elections. As a result, we
delivered better than expected originations for the quarter and
have hired a number of senior professionals, five of which are in
the technology group, focused on accelerating our growth and
capitalizing on the many opportunities we see in the market. At the
same time, we have bolstered and strengthened our balance sheet,
adding well over $100 million in additional diversified sources of
liquidity in September and October, to support portfolio growth for
the fourth quarter of 2012 and beyond."
Third Quarter Review and Operating Results
Investment Portfolio
As of September 30, 2012, over 99.3% of the Company’s debt
investments were in a senior secured first lien position, and 99.3%
of the debt investment portfolio was priced at floating interest
rates or floating interest rates with a Prime or LIBOR based
interest rate floor, well positioned to benefit should market rates
move in either direction.
Hercules entered into commitments to provide debt and equity
financings of approximately $136.4 million to new and existing
portfolio companies.
The Company funded approximately $90.8 million and
$0.6 million in debt and equity investments, respectively, to new
and existing portfolio companies during the third quarter.
Hercules received approximately $38.4 million of
principal repayments, including approximately $7.8 million of
early principal repayments and approximately
$30.6 million in scheduled principal payments in the
third quarter.
Net investment growth on Hercules’ portfolio was approximately
$49.1 million on a cost basis.
Hercules recorded approximately $2.6 million of net unrealized
appreciation from its loans, warrant and equity investments.
A break-down of the Company’s total investment portfolio valued
at cost and fair value by category, quarter over quarter, is
highlighted below:
(in millions) Loans Equity Warrants
Total
Balances at Cost at 6/30/2012 $ 661.2
$ 51.1 $ 31.4 $ 743.7 Net
activity during Q3 2012* 50.0 (3.7) 2.8
49.1
Balances at Cost at 9/30/2012 $ 711.2
$ 47.4 $ 34.2 $ 792.8 Q/Q
Change 7.6% -7.2% 8.9% 6.6%
Balances
at Value at 6/30/12 $ 647.1 $ 47.6
$ 28.1 $ 722.8 Net activity during Q3
2012* 50.0 (3.7) 2.8 49.1 Net unrealized depreciation (3.3)
3.9 2.0 2.6
Balances at Value at
9/30/12 $ 693.8 $ 47.8 $
32.9 $ 774.5 Q/Q Change 7.2% 0.4% 17.1% 7.2%
*Net activity includes fee and OID collections and
amortization during the quarter
Unfunded Commitments
As of September 30, 2012, Hercules had unfunded debt commitments
of approximately $66.0 million. Since these commitments may expire
without being drawn upon, unfunded commitments do not necessarily
represent future cash requirements or future earning assets for
Hercules. Approximately $39.5 million of these unfunded commitments
are dependent upon the portfolio company reaching certain
milestones before the Hercules debt commitment would become
available.
Signed Term Sheets
Hercules finished the third quarter of 2012 with approximately
$133.5 million in signed non-binding term sheets with 13 new and
existing companies. These non-binding term sheets generally convert
to contractual commitments in approximately 45 to 60 days from
signing. Non-binding outstanding term sheets are subject to
completion of Hercules’ due diligence and final approval process as
well as negotiation of definitive documentation with the
prospective portfolio companies. It is important to note that not
all non-binding term sheets are expected to close and do not
necessarily represent future cash requirements. Closed commitments
generally fund 70-80% of the committed amount in aggregate over the
life of the commitment.
Portfolio Effective Yield
The effective yield on the Company’s debt portfolio investments
during the quarter was 14.4%. Excluding the effect of fee
accelerations that occurred from early payoffs and one-time events,
the adjusted effective yield for the third quarter of 2012 was
13.9%, up approximately 60 basis points from the adjusted effective
yield in the second quarter of 2012 of 13.3%. The effective yield
is derived by dividing total investment income by the weighted
average earning investment portfolio assets outstanding during the
quarter which exclude non-interest earning assets such as warrants
and equity investments.
Existing Warrants Portfolio and Potential Future
Gains
Hercules held warrant positions in approximately 117 portfolio
companies, with a fair value of approximately $32.9 million at
September 30, 2012, up 20.5% from approximately $27.3 million at
September 30, 2011. The increase was primarily driven by the
addition of 27 new warrant positions and offset in part by the
liquidation of eight warrant investments and the sale of six
warrant investments for realized gains.
During the quarter, one of Hercules' portfolio companies
completed its IPO:
As of September 30, 2012, four portfolio companies had
filed Form S-1 Registration Statements with the SEC in
contemplation of a potential IPO:
- Glori Energy, Inc.
- iWatt, Inc.
- Paratek Pharmaceuticals, Inc
- One company filed a Form S-1
Registration confidentially under the JOBS Act.
There can be no assurances that these companies will complete
their IPOs in a timely manner or at all.
Income Statement
Total investment income in the third quarter of 2012 was
approximately $23.9 million compared to approximately $18.7 million
in the third quarter of 2011.
Interest expense and loan fees were approximately $6.1 million
during the third quarter of 2012 as compared to $4.3 million in the
third quarter of 2011.
The Company had a weighted average cost of debt comprised of
interest and fees of approximately 6.7% in the third quarter of
2012 versus 6.5% during the third quarter of 2011.
Total operating expenses, excluding interest expense and loan
fees, for the third quarter of 2012 was $6.5 million as compared to
$5.8 million for the third quarter of 2011.
During the third quarter of 2012, the Company recorded
approximately $2.6 million of net unrealized appreciation from its
loans, warrant and equity investments. Of the $2.6 million of
unrealized appreciation, $3.2 million of appreciation was due to
market or yield adjustments in fair value determinations, $12.0
million of depreciation was primarily attributable to collateral
based impairments on investments in two portfolio companies, and
$11.4 million of appreciation was related to the reversal of net
unrealized depreciation to realized losses on loans, warrants and
equity.
A break-down of the net unrealized appreciation in the
investment portfolio is highlighted below:
(in millions) Q3-12 Unrealized
Appreciation/(Depreciation) Loans Equity Warrants Total
Collateral based impairments $ (8.7 ) $ (2.1 ) $ (1.2 ) $ (12.0 )
Reversals due to Loan Payoffs & Warrant/Equity sales 6.9
4.1 0.4 11.4 Fair Value Market/Yield Adjustments* Level 1
& 2 Assets - (1.5 ) 0.6 (0.9 ) Level 3 Assets (1.5 )
3.4 2.2 4.1 Total Fair
Value Market/Yield Adjustments (1.5 ) 1.9 2.8 3.2
Total Unrealized Appreciation/(Depreciation) $ (3.3 )
$ 3.9 $ 2.0 $ 2.6 *Level 1 assets are
generally equities listed in active markets and level 2 assets are
generally warrants held in a public company. Observable market
prices are typically the primary input in valuing level 1 and 2
assets. Level 3 asset valuations require inputs that are both
significant and unobservable. Generally, level 3 assets are debt
investments, warrants, and equities held in a private company.
Hercules recognized net realized losses of approximately $9.1
million on its investment portfolio in the third quarter.
Cumulative net realized losses on investments since October 2004
to date total approximately $48.1 million, on a GAAP basis. When
compared to total commitments of approximately $3.1 billion over
the same period, the net realized loss since inception represents
approximately 1.6% of total commitments or an annualized loss rate
of approximately 19 basis points.
NII – Net Investment Income
NII for the third quarter of 2012 was approximately $11.4
million, compared to $8.6 million in the third quarter of
2011, representing an increase of approximately 32.6%. NII per
share for the third quarter of 2012 was $0.23, up 15.0%, based on
48.8 million basic weighted shares outstanding, compared to $0.20
based on 43.1 million basic weighted shares outstanding in the
third quarter 2011.
DNOI - Distributable Net Operating Income
DNOI for the third quarter was approximately $12.5 million or
$0.26 per share, as compared to $9.5 million or $0.22 per share in
the third quarter of 2011. DNOI measures Hercules’ operating
performance exclusive of employee stock compensation, which
represents expense to the Company but does not require settlement
in cash. DNOI does include paid-in-kind, or “PIK”, and back-end
fees that generally are not payable in cash on a regular basis but
rather at investment maturity. Hercules believes disclosing DNOI
and the related per share measures are useful and appropriate
supplements and not alternatives to GAAP measures for net operating
income, net income, earnings per share and cash flows from
operating activities.
Dividends
The Board of Directors has declared a third quarter cash
dividend of $0.24 per share that will be payable
on November 21, 2012 to shareholders of record as
of November 14, 2012. This dividend would represent the
Company’s twenty-ninth consecutive dividend declaration since its
initial public offering, bringing the total cumulative dividend
declared to date to $7.64 per share.
Share Repurchases
In July 2012, the Board of Directors approved extending
Hercules’ share repurchase program through February 2013. During
the third quarter of 2012 the Company did not repurchase shares of
its common stock.
Liquidity and Capital Resources
The Company ended the third quarter with
approximately $261.8 million in available liquidity, including
$107.1 million in cash, $24.7 million in SBA borrowing capacity and
$130.0 million in credit facility availability.
In July 2012, Hercules closed an additional issuance of its
7.00% Senior Unsecured Notes due 2019 (the “April 2019 Notes”) that
the Company had originally issued on April 17, 2012. Hercules
issued approximately $41.5 million in additional April 2019 Notes,
bringing the total amount of April 2019 Notes issued in the single
series to approximately $84.5 million. The April 2019 Notes trade
on the NYSE under the trading symbol "HTGZ."
In September 2012, Hercules closed a public offering
of $75.0 million in aggregate principal amount of its
7.00% Senior Unsecured Notes due 2019 (the "September
2019 Notes"). In October 2012, the Company closed two
over-allotment options of the September 2019 Notes in the amounts
of $10.0 million and approximately $900,000, bringing the total
aggregate principal amount of September 2019 Notes issued to
approximately $85.9 million. The September 2019 Notes trade on the
New York Stock Exchange (the "NYSE") under the trading symbol
"HTGY."
As of September 30, 2012, Hercules did not have any outstanding
borrowings under the Wells Fargo credit facility. Hercules has
a committed credit facility with Wells Fargo for
approximately $75.0 million in initial credit capacity under
a $300.0 million accordion credit facility. Additional
lenders may be added to the facility over time to reach up to an
aggregate of $300.0 million. We expect to continue discussions
with various other potential lenders to join the Wells facility;
however, there can be no assurances that additional lenders will
join the facility.
Pricing at September 30, 2012 under the Wells
Fargo credit facility was LIBOR+3.50% with a floor of
4.25%.
Hercules has access to $55.0 million under the Union Bank
facility. Union Bank and RBC Capital Markets have made
commitments of $30.0 million and $25.0 million,
respectively. As of September 30, 2012, Hercules did not have any
outstanding borrowings under the Union Bank/RBC credit
facility.
Pricing at September 30, 2012 under the Union
Bank credit facility is LIBOR+2.25% with a floor of 4.0%.
The Company locked in a rate of 2.245%, or 3.049% including
annual fees, per annum for 10 years on $24.3 million of SBA
debentures which were borrowed in September 2012. In August 2012,
Hercules repaid $24.7 million of SBA debentures priced at 6.405%,
including annual fees. At September 30, 2012, Hercules had
approximately $200.3 million in outstanding debentures
under the SBIC program, as part of its total potential maximum
debentures of $225.0 million allowed under the SBIC program.
In September 2012, Hercules received approval from the SBA to
borrow $24.7 million in debentures under its second SBIC license.
There can be no assurances what the pricing will be or whether we
will draw on any possible commitment.
Subsequent to quarter end, Hercules completed a follow-on public
offering of 3.1 million shares of its common stock at a price of
$10.85 per share, resulting in proceeds of approximately $33.6
million, excluding offering related expenses.
Net Asset Value
At September 30, 2012, the Company’s net assets were
approximately $469.1 million, down 1.2% as compared to $474.8
million as of June 30, 2012.
As of September 30, 2012, net asset value per share was $9.42 on
49.8 million outstanding shares, compared to $9.54 on 49.7 million
shares as of June 30, 2012.
Portfolio Asset Quality
As of September 30, 2012, grading of the debt portfolio at fair
value, excluding warrants and equity investments, was as
follows:
Grade 1 $117.0 million or 16.9% of the total portfolio Grade
2 $418.5 million or 60.3% of the total portfolio Grade 3 $139.3
million or 20.1% of the total portfolio Grade 4 $16.4 million or
2.4% of the total portfolio Grade 5 $2.5 million or 0.3% of the
total portfolio
At September 30, 2012, the weighted average loan grade of the
portfolio was 2.12 on a scale of 1 to 5, with 1 being the highest
quality, compared with 2.08 as of June 30, 2012. Hercules’ policy
is to generally adjust the grading down on its portfolio companies
as they approach the need for additional equity capital.
Subsequent Events
1. As of October 30, 2012, Hercules has:
a. Closed commitments of approximately $73.6
million to new and existing portfolio companies, and funded
approximately $29.2 million since the close of the third
quarter.
b. Pending commitments (signed non-binding
term sheets) of approximately $166.0 million.
The table below summarizes our year-to-date closed and pending
commitments as follows:
Closed Commitments and Pending Commitments (in millions)
January 1- September 30, 2012 Closed Commitments $376.7
Q4-12 Closed Commitments (as of October 30, 2012) $73.6
Total year-to-date 2012 Closed Commitments(a)
$450.3 Pending Commitments (as of October 30, 2012)(b)
$166.0
Total year-to-date $616.3
Notes:
a. Closed Commitments may include renewals of
existing credit facilities. Not all Closed Commitments result in
future cash requirements. Commitments generally fund over the two
succeeding quarters from close.
b. Not all pending commitments (signed
non-binding term sheets) are expected to close and do not
necessarily represent any future cash requirements.
2. On October 3, 2012, Hercules closed a public offering of 3.1
million shares of its common stock at a price of $10.85 per
share, resulting in proceeds of approximately $33.6
million, excluding other offering expenses.
3. In October 2012, in connection with the public offering
of $75.0 million in aggregate principal amount of the
September 2019 Notes, the underwriters exercised their
over-allotment option for an additional $10.9 million in
aggregate principal amount of the September 2019 Notes, bringing
the total size of the offering to approximately $85.9
million.
4. In October 2012, Hercules’ portfolio company Nextwave
Pharmaceuticals reached a definitive agreement to be acquired by
Pfizer Inc. (NYSE: PFE). Pfizer is exercising the option to acquire
NextWave and will make a payment of $255 million to NextWave
shareholders at the close of the deal. NextWave shareholders are
eligible to receive additional payments of up to $425 million if
certain sales milestones are met for a total potential transaction
value of $700 million.
Conference Call
Hercules has scheduled its 2012 third quarter financial results
conference call for November 1, 2012 at 2:00 p.m. PST (5:00 p.m.
EST). To listen to the call, please dial (877) 304-8957 or (408)
427-3709 approximately 10 minutes prior to the start of the call. A
taped replay will be made available approximately three hours after
the conclusion of the call and will remain available for seven
days. To access the replay, please dial (855) 859-2056 or (404)
537-3406 and enter the passcode 24141891.
About Hercules Technology Growth Capital, Inc.:
Hercules Technology Growth Capital, Inc. (NYSE: HTGC)
(“Hercules”) is the leading specialty finance company focused on
providing senior secured loans to venture capital-backed companies
in technology-related markets, including technology, biotechnology,
life science, and cleantech industries, at all stages of
development. Since inception (December 2003), Hercules has
committed more than $3.0 billion to over 215 companies and is the
lender of choice for entrepreneurs and venture capital firms
seeking growth capital financing.
Hercules’ common stock trades on the New York Stock Exchange
("NYSE") under the ticker symbol "HTGC."
In addition, Hercules has two outstanding bond issuances of
7.00% Senior Notes due 2019—the April 2019 Notes and September 2019
Notes—which trade on the NYSE under the symbols “HTGZ” and “HTGY,”
respectively.
Companies interested in learning more about financing
opportunities should contact info@htgc.com, or call
650-289-3060.
Forward-Looking Statements:
The information disclosed in this release is made as of the date
hereof and reflects Hercules most current assessment of its
historical financial performance. Actual financial results filed
with the Securities and Exchange Commission may differ from those
contained herein due to timing delays between the date of this
release and confirmation of final audit results. These
forward-looking statements are not guarantees of future performance
and are subject to uncertainties and other factors that could cause
actual results to differ materially from those expressed in the
forward-looking statements including, without limitation, the
risks, uncertainties, including the uncertainties surrounding the
current market volatility, and other factors we identify from time
to time in our filings with the Securities and Exchange Commission.
Although we believe that the assumptions on which these
forward-looking statements are based are reasonable, any of those
assumptions could prove to be inaccurate and, as a result, the
forward-looking statements based on those assumptions also could be
incorrect. You should not place undue reliance on these
forward-looking statements. The forward-looking statements
contained in this release are made as of the date hereof, and
Hercules assumes no obligation to update the forward-looking
statements for subsequent events.
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
(unaudited) (dollars in thousands, except per share
data) September 30, 2012 December
31, (unaudited) 2011 Assets
Investments: Non-control/Non-affiliate investments (cost of
$788,526 and $642,038, respectively) $ 771,184
$ 651,843 Affiliate investments (cost of $4,256 and $3,236,
respectively) 3,275 - Control investments (cost of $0 and $11,266,
respectively) - 1,027 Total
investments, at value (cost of $792,782 and $656,540, respectively)
774,459 652,870 Cash and cash equivalents 107,093 64,474 Interest
receivable 7,774 5,820 Other assets 20,187
24,230 Total assets $ 909,513
$ 747,394
Liabilities Accounts payable and
accrued liabilities $ 9,491
$ 10,813 Wells Fargo Loan -
10,187 2019 Notes 159,490 - Long-term Liabilities (Convertible
Debt) 71,165
70,353 Long-term SBA Debentures 200,250
225,000 Total liabilities 440,396
316,353
Net assets consist of: Common stock, par
value 51 44 Capital in excess of par value 535,707 484,244
Unrealized depreciation on investments (18,618 ) (3,431 )
Accumulated realized losses on investments (40,993 ) (43,042 )
Distributions in excess of investment income (7,030 ) (6,774 )
Total net assets 469,117
431,041 Total liabilities and net assets $ 909,513
$ 747,394
Shares of common stock outstanding
($0.001 par value, 100,000,000 authorized) 49,785 43,853 Net
asset value per share $ 9.42
$ 9.83
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands,
except per share data)
Three Months Ended September 30, Nine Months Ended
September 30, 2012 2011
2012 2011
Investment Income: Interest income Non Control/Non Affliate
investments $ 21,512 $ 16,405 $ 62,502 $ 50,146 Affliate
investments 238 5 686 9 Control investments -
- - 777 Total interest income
21,750 16,410 63,188
50,932 Fees Non Control/Non Affliate investments
2,150 2,264 6,936 7,639 Affliate investments 1 - 1 - Control
investments - 10 -
84 Total fees 2,151 2,274
6,937 7,723 Total investment income
23,901 18,684 70,125
58,655 Operating expenses: Interest 4,908 3,408 13,309 8,803
Loan fees 1,169 881 2,977 2,493 General and administrative 2,445
1,659 6,126 6,196 Employee Compensation: Compensation and benefits
2,919 3,273 9,566 9,888 Stock-based compensation 1,109
870 3,111 2,518
Total employee compensation 4,028 4,143
12,677 12,406 Total operating expenses
12,550 10,091 35,089
29,898 Net investment income 11,351 8,593 35,036
28,757 Net realized gains (loss) on investments Non Control/Non
Affliate investments (9,091 ) (1,601 ) 2,049
3,429 Total net realized gain (loss) on
investments (9,091 ) (1,601 ) 2,049
3,429 Net increase (decrease) in unrealized
appreciation (depreciation) on investments Non Control/Non Affliate
investments 2,372 (730 ) (12,922 ) 4,148 Affliate investments 113
(53 ) (2,265 ) (3,425 ) Control investments -
14 - (3,546 ) Total net unrealized
(depreciation) appreciation on investments 2,485
(769 ) (15,187 ) (2,823 ) Total net realized
and unrealized gain (loss) (6,066 ) (2,370 )
(13,138 ) 606 Net increase (decrease) in net assets
resulting from operations $ 4,745 $ 6,223 $ 21,898
$ 29,363
Net investment income before provision for
income taxes and investment gains and losses per common share:
Basic $ 0.23 $ 0.20 $ 0.71 $ 0.67 Net
increase in net assets resulting from operations per common share
Basic $ 0.09 $ 0.14 $ 0.44 $ 0.67
Diluted $ 0.09 $ 0.14 $ 0.44 $ 0.67
Weighted average shares outstanding Basic 48,750
43,071 48,130 42,920
Diluted 48,808 43,337 48,237
43,251
HERCULES TECHNOLOGY GROWTH
CAPITAL, INC.
NON GAAP FINANCIAL MEASURES
(in thousands, except per share
data)
Three Months Ended September 30, 2012
2011 Reconciliation of
Adjusted NII to Net Investment Income Net Investment Income $
11,351 $ 8,593 Dividends paid on unvested restricted shares (1)
(249 ) (175 ) Net investment income, net of dividends
paid on unvested restricted shares $ 11,102 $ 8,418
Net investment income before investment
gains and losses per common share: (2)
Basic $ 0.23 $ 0.20
Adjusted net investment income before
investment gains and losses per common share: (3)
Basic $ 0.23 $ 0.20 Weighted average shares
outstanding Basic 48,750 43,071
(1) Unvested restricted shares as of the dividend record date in
the second quarter of 2012 and 2011 was approximately 1,037,000 and
795,246 respectively (2) Net investment income per share is
calculated as the ratio of income and losses allocated to common
shareholders divided by shares outstanding. (3) Adjusted net income
per share is calculated as Net investment income per share, adding
dividends paid on unvested restricted shares to the amounts of
income and losses allocated to common shareholders.
Adjusted net investment income per basic and diluted share,
”Adjusted NII” consists of GAAP net investment income, excluding
the impact of dividends paid on unvested restricted common stock
divided by the weighted average basic and fully diluted share
outstanding for the period under measurement. For reporting
purposes, Hercules calculates net investment income per share and
change in net assets per share on a basic and fully diluted basis
by applying the two-class method, under GAAP. This GAAP method
excludes unvested restricted shares and the pro rata earnings
associated with the shares from per share calculations.
Hercules believes that providing Adjusted NII affords investors
a view of results that may be more easily compared to other
companies and enables investors to consider the Company’s results
on both a GAAP and Adjusted basis. Adjusted NII should not be
considered as an alternative to, as an independent indicator of the
Company’s operating performance, or as a substitute for Net
Investment Income per basic and diluted share (each computed in
accordance with GAAP). Instead, Adjusted NII should be reviewed in
connection with Hercules’ consolidated financial statements, to
help analyze how the Company is performing. Investors should use
Non-GAAP measures only in conjunction with its reported GAAP
results.
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
NON GAAP FINANCIAL MEASURES
(in thousands, except per share
data)
Three Months Ended September 30,
Reconciliation of DNOI to Net investment income 2012
2011 Net investment income $ 11,351 $ 8,593 Stock-based
compensation 1,109
870
DNOI $ 12,460 $ 9,463 DNOI per share-weighted average common
shares Basic $ 0.26 $ 0.22 Weighted average shares
outstanding Basic 48,750 43,071
Distributable Net Operating Income, “DNOI” represents net
investment income as determined in accordance with U.S. generally
accepted accounting principles, or GAAP, adjusted for amortization
of employee restricted stock awards and stock options. Hercules
views DNOI and the related per share measures as useful and
appropriate supplements to net operating income, net income,
earnings per share and cash flows from operating activities. These
measures serve as an additional measure of Hercules’ operating
performance exclusive of employee restricted stock amortization,
which represents expenses of the Company but does not require
settlement in cash. DNOI does include paid-in-kind, or PIK,
interest and back end fee income which are generally not payable in
cash on a regular basis, but rather at investment maturity or when
declared. DNOI should not be considered as an alternative to net
operating income, net income, earnings per share and cash flows
from operating activities (each computed in accordance with GAAP).
Instead, DNOI should be reviewed in connection with net operating
income, net income (loss), earnings (loss) per share and cash flows
from operating activities in Hercules’ consolidated financial
statements, to help analyze how Hercules’ business is
performing.
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