Highlights for Q4 and Full-Year 2014
- Spillover Taxable Income (taxable
income in excess of dividends paid) as of December 31, 2014 of
~$16.7 million, or ~$0.27 per share
- Q4 2014 Distributable Net Operating
Income, or “DNOI”, of ~$18.6 million, or $0.29 per share
- Total Investment Assets at fair value
of ~$1.02 billion as of December 31, 2014, up ~12.1%
year-over-year
- Net Realized Gains of ~$20.1
million through December 31, 2014, or $0.33 per share; Net Realized
Gains of ~$7.1 million in Q4 2014, or $0.11 per share
- Record level for 2014 Total New Debt
and Equity Commitments of ~$904.8 million, up ~28.3% year-over
year; Record Q4 2014 Total New Debt and Equity Commitments of
~$317.1 million, up ~152.3% quarter-over-quarter
- Record Total New Fundings of ~$621.3
million of debt and equity investments during 2014, up ~25.5%
year-over year; Total New Fundings of ~$207.8 million of debt
and equity investments during Q4 2014, up ~164.5%
quarter-over-quarter
- Realized record levels of Unscheduled
Early Payoffs of ~$358.3 million in 2014 and ~$146.7 million in Q4
2014, excluding normal amortization of ~$135.8 million and ~$30.8
million, respectively
- Q4 2014 Net Investment Income, or
“NII”, of ~$15.9 million, or $0.25 per share, which includes ~$0.6
million of convertible debt extinguishment expense
- Strong liquidity position With ~$377.1
million available as of December 31, 2014
Hercules Technology Growth Capital, Inc. (NYSE: HTGC)
(“Hercules” or the “Company”), the leading specialty finance
company focused on providing senior secured loans to venture
capital-backed companies in technology-related industries,
including technology, biotechnology, life science, and energy &
renewable technology, at all stages of development, today announced
its financial results for the fourth quarter and year ended
December 31, 2014.
The Company also announced that its Board of Directors has
declared a fourth quarter cash dividend of $0.31 per share, that
will be payable on March 19, 2015, to shareholders of record as of
March 12, 2015; the thirty-eighth consecutive dividend since
inception bringing total dividends declared since inception to
$10.30 per share.
“Our strong finish in Q4 capped a record year for Hercules. New
originations exceeded $900 million for the year, a record for the
company, and more importantly, reaching nearly $5 billion in
commitments since our December 2003 inception. Moreover, we were
especially gratified to see another year of successful portfolio
company exits from IPO and M&A events, generating over $20
million in net realized gains in 2014,” said Manuel Henriquez,
chairman and chief executive officer of Hercules Technology Growth
Capital.
Henriquez added, “2014 was an extraordinary and transformative
year for Hercules. We experienced unprecedented levels of early
pay-offs “repayments” which, when coupled with our normal
amortization, totaled nearly half a billion dollars ($500 million),
or ~50% of our loan portfolio, turned over. Our outstanding team of
investment professionals proved our market leadership position and
platform’s resiliency by successfully originating over $900 million
in new commitments, funding over $600 million in new loans, and
replacing the $500 million in loan run-off. This achieved an
impressive net year-over-year investment portfolio growth of ~$129
million, on a cost basis. By successfully rebuilding our investment
portfolio to over $1 billion by year-end, we have effectively
lowered the composite age of our loan portfolio and expect to see
materially lower levels of early pay-offs/repayments in 2015. As a
result, we expect our overall GAAP yields to revert back to our
“core yields” of 12.0% to 13.0%, which excludes any beneficial
impact attributed to early loan pay-off fees and income
accelerations. We remain focused on pursuing a path of slow and
steady growth and continuing to selectively build our investment
portfolio throughout 2015. We anticipate ending 2015 with an
investment portfolio of ~$1.3 to $1.5 billion, subject to market
conditions and early pay-off activities remaining relatively
low.”
Henriquez concluded, “I am very proud of our achievements for
both the fourth quarter and the year. Our ability to have generated
earnings spill-over in 2014 of approximately $17 million or $0.27
per share, should afford us the flexibility to maintain our current
dividend levels to our shareholders as we continue to build up our
investment portfolio throughout 2015. Our accomplishments are only
made possible by the amazing effort of our entire team, as well as
the support and confidence placed on us by our venture partners and
innovative venture growth entrepreneurs.”
Fourth Quarter Review and Operating Results
Investment Portfolio
During the fourth quarter, Hercules entered into new commitments
to provide debt and equity financings of ~$317.1 million, and
funded ~$207.8 million of debt and equity investments to new
and existing portfolio companies.
Net investment portfolio growth during the fourth quarter, on a
cost basis, was ~$23.0 million, with originations and funding
activities offsetting ~$177.5 million in normal amortization and
unscheduled early pay offs “repayments.” 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 Portfolio Balances at Cost at 9/30/14
$ 929.6 $ 43.9 $
38.8 $ 1,012.3 New fundings*
199.6 5.2 3.0 207.8 Unscheduled paydowns (146.7 ) - - (146.7 )
Principal reduction on investments (30.8 ) - - (30.8 ) Net changes
attributed to conversions, liquidations, and fees 0.3
(4.7 ) (2.9 ) (7.3 ) Net activity during Q4
2014 22.4 0.5 0.1
23.0
Balances at Cost at 12/31/2014 $
952.0 $ 44.4 $
38.9 $ 1,035.3
Balances at Value at 9/30/14 $
907.9 $ 68.6 $
22.4 $ 998.9 Net activity during
Q4 2014 22.4 0.5 0.1 23.0 Net change in unrealized appreciation /
(depreciation) (6.4 ) 2.6 2.6
(1.2 )
Balances at Value at 12/31/2014 $
923.9 $ 71.7 $
25.1 $ 1,020.7 *New fundings
includes $17.7 million of restructured / refinanced fundings
Net investment portfolio growth for 2014, on a cost basis, was
~$129.0 million, with originations and funding activities
offsetting ~$494.1 million of normal amortization and unscheduled
early pay offs “repayments.” The Company’s total investment
portfolio, valued at cost and fair value by category,
year-over-year, is highlighted below:
(in millions)
Loans Equity
Warrants Total Portfolio Balances at Cost
at 12/31/13 $ 835.9 $ 36.8
$ 33.6 $ 906.3 New
fundings** 600.4 10.3 10.6 621.3 Unscheduled paydowns (358.3 ) - -
(358.3 ) Principal reduction on investments (135.8 ) - - (135.8 )
Net changes attributed to conversions, liquidations, and fees
9.8 (2.7 ) (5.3 ) 1.8 Net
activity during 2014 116.1 7.6
5.3 129.0
Balances at Cost at
12/31/2014 $ 952.0 $ 44.4
$ 38.9 $ 1,035.3
Balances at Value at 12/31/2013
$ 822.0 $ 52.7 $
35.6 $ 910.3 Net activity during
2014 116.1 7.6 5.3 129.0 Net change in unrealized appreciation /
(depreciation) (14.2 ) 11.4 (15.8 )
(18.6 )
Balances at Value at 12/31/2014 $
923.9 $ 71.7 $
25.1 $ 1,020.7 **New
fundings includes $54.7 million of restructured / refinanced
fundings
As of December 31, 2014, 100% of the Company’s debt investments
were in a first lien senior secured position, and approximately
98.2% of the debt investment portfolio was priced at floating
interest rates with Prime or LIBOR-based interest rate floors,
which we believe will effectively position us to benefit from
eventual increases in market rate.
Unfunded Commitments
As of December 31, 2014, Hercules had record unfunded debt
commitments of ~$339.0 million, representing potential future
portfolio growth. Approximately $191.3 million of these unfunded
commitments are contingent upon the portfolio company achieving
certain performance milestones prior to Hercules’ debt commitments
becoming available. Hercules intends to continue to institute
funding or performance-based milestone requirements to mitigate
risk in connection with its unfunded debt commitments. Since these
commitments may expire without being drawn upon, unfunded
commitments do not necessarily represent future cash requirements
or future earning assets for Hercules.
Signed Term Sheets
Hercules finished the fourth quarter of 2014 with ~$108.2
million in signed non-binding term sheets with eight new and
existing companies. Signed non-binding term sheets are subject to
satisfactory completion of Hercules’ due diligence and final
investment committee approval process as well as negotiations of
definitive documentation with the prospective portfolio companies.
These non-binding term sheets generally convert to contractual
commitments in approximately 90 days from signing. It is important
to note that not all signed non-binding term sheets are expected to
close and do not necessarily represent future cash requirements or
investments.
Core Portfolio Yield (“Core Yield”) and Effective Portfolio
Yield
Hercules’ “Core Yield” excludes any benefits from the accretion
of fees and income related to early loan repayments attributed to
the acceleration of unamortized fees and income as well as
prepayment fees. During the fourth quarter of 2014, the Company’s
loan portfolio investments generated Core Yields of ~13.0%. Our
effective portfolio yields, including the effects of fee and income
accelerations attributed to early payoffs, restructuring, loan
modifications and other one-time event fees, generated an effective
yield in the fourth quarter of 2014 of ~16.0%, or 70 bps lower than
the third quarter of 2014 of ~16.7%. 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 Equity and Warrant Portfolio
Hercules held equity positions in 42 portfolio companies with a
fair value of ~$71.7 million and a cost basis of ~$44.4 million as
of December 31, 2014.
Hercules held warrant positions in 124 portfolio companies with
a fair value of ~$25.1 million and a cost basis of ~$38.9 million
as of December 31, 2014.
IPO and M&A Activities
As of December 31, 2014, Hercules held warrant and equity
positions in seven (7) portfolio companies that had filed Form S-1
Registration Statements in anticipation of a potential IPO:
- Box, Inc. (completed IPO in January
2015)
- Zosano Pharma, Inc. (completed IPO in
January 2015)
- Inotek Pharmaceuticals, Inc. (completed
IPO in February 2015)
- Good Technology
- Three (3) companies filed a Form S-1
Registration Statement confidentially under the JOBS Act.
During the fourth quarter of 2014, Hercules’ portfolio company,
Neothetics, Inc. (NASDAQ: NEOT), completed its initial public
offering.
In February 2015, Hercules’ portfolio company, ViewRay Inc.,
filed an S-1 Registration with the SEC in contemplation of a
potential initial public offering. ViewRay had previously filed
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
Year-Over-Year
Total investment income for the fourth quarter of 2014 was
~$36.9 million, an increase of 11.1%, as compared to ~$33.2 million
in the fourth quarter of 2013. The increase is based on higher
effective yields due to fees from one-time events and early
repayments. Total investment income was basically flat compared to
the third quarter of 2014 of ~$37.0 million.
Interest expense and loan fees were approximately $9.3 million
during the fourth quarter of 2014 as compared to approximately $9.0
million in the fourth quarter of 2013. The net increase is
primarily due to the issuance of $103.0 million of the senior
unsecured 2024 Notes and the $129.3 million of 2021 Asset-Backed
Notes “securitization.”
The Company had a weighted average cost of debt comprised of
interest, fees and loss on debt extinguishment of approximately
6.7% in the fourth quarter of 2014 versus 6.4% during the fourth
quarter of 2013. This increase is primarily attributed to the
approximately $600,000 loss on debt extinguishment due to the
retirement of approximately $23.2 million of Convertible Senior
Notes in the fourth quarter of 2014.
Total operating expenses, excluding stock-based compensation,
for the fourth quarter of 2014 were ~$17.7 million, an increase of
~39.4%, as compared to ~$12.7 million for the fourth quarter of
2013. This increase is primarily due to General and Administrative
expenses, and an increase in new hires and variable incentive
compensation expenses.
Quarter-Over-Quarter
Total operating expenses, excluding stock-based compensation,
for the fourth quarter of 2014, were ~$17.7 million, an increase of
~24.6%, as compared to ~$14.2 million in the third quarter of 2014.
The increase was primarily related to General and Administrative
expenses due to corporate initiatives, and an increase in new hires
and variable incentive compensation. Interest expense for the
fourth quarter of 2014 was ~$9.3 million as compared to ~$7.9
million in the third quarter of 2014. The net increase is primarily
due to the issuance of $103.0 million of the senior unsecured 2024
Notes and the $129.3 million of 2021 Asset-Backed Notes
“securitization.” The table below highlights the differences:
Q4 2014 to Q3 2014 Operating Expense Comparison
(dollars in thousands, except per share data)
Q4 2014 Q3 2014
Variance Per Share Impact
Interest Expense and Loan Fees $ 9,252 $ 7,859 $ 1,393 $
(0.02 ) General and Administrative $ 3,226 $ 2,397 $ 829 $
(0.01 ) Compensation and Benefits $ 5,229 $ 3,922 $ 1,307 $
(0.02 ) Total Opex Per Share Impact $ 17,707 $ 14,178 $
3,529 $ (0.05 )
Realized Gains/ (Losses)
During the year ended December 31, 2014, we recognized net
realized gains of ~$20.1 million, or $0.33 per share on the
portfolio. These net realized gains included gross realized gains
of ~$24.0 million primarily from the sale of investments in seven
portfolio companies. These gains were partially offset by gross
realized losses of ~$3.9 million primarily from the liquidation of
our investments in fifteen portfolio companies.
Hercules recognized net realized gains of ~$7.1 million, or
$0.11 per share, during the fourth quarter of 2014. This net gain
was comprised of ~$10.3 million of gross realized gains primarily
from the sale of investments in four portfolio companies. These
gains were offset by gross realized losses of ~$3.2 million
primarily from the liquidation of warrant and equity investments in
six portfolio companies.
Unrealized Appreciation/ (Depreciation)
During the fourth quarter of 2014, the Company recorded ~$1.2
million of net unrealized depreciation from its loans, warrant and
equity investments. Of the ~$1.2 million of unrealized
depreciation, ~$6.9 million of depreciation was primarily
attributable to net collateral based impairments on debt, equity
and warrant investments in nine portfolio companies, ~$12.3 million
of appreciation was due to market or yield adjustments in fair
value determinations, and ~$6.6 million of depreciation was related
to reversals of prior appreciation due to loan payoffs and sales of
warrant and equity investments.
A break-down of the net unrealized appreciation/ (depreciation)
in the investment portfolio is highlighted below:
Three Months Ended December 31, 2014
(in millions) Loans Equity Warrants Total Collateral based
impairments $ (10.6 ) $ - $ (0.4 ) $ (11.0 ) Reversals of Prior
Period Collateral based impairments 4.1 -
- 4.1
Net Collateral based
impairments (6.5 ) - (0.4 )
(6.9 ) Reversals due to Debt Payoffs &
Warrant/Equity sales (0.3 ) (6.3 )
- (6.6 ) Fair Value Market/Yield
Adjustments Level 1 & 2 Assets - 3.9 (0.5 ) 3.4 Level 3 Assets
0.4 5.0 3.5 8.9
Total Fair Value Market/Yield Adjustments 0.4
8.9 3.0 12.3
Total Unrealized Appreciation/(Depreciation) * $
(6.4 ) $ 2.6 $ 2.6
$ (1.2 ) * Excludes unrealized
depreciation from escrow receivable and taxes payable
Continued Credit Discipline and Performance
Cumulative net realized losses on investments, since our first
origination commencing in October 2004, through December 31, 2014,
totaled ~$12.0 million, on a GAAP basis. When compared to total
commitments of ~$4.9 billion over the same period, the net realized
loss since inception represents ~24 basis points “bps” or 0.24% of
total commitments, or an annualized loss rate of ~2 bps.
NII – Net Investment Income
NII for the fourth quarter of 2014 was ~$15.9 million, including
~$600,000 of convertible debt extinguishment expense, compared to
~$18.9 million in the fourth quarter of 2013, representing a
decrease of ~15.9%. NII per share for the fourth quarter of 2014
was $0.25 based on ~63.1 million basic weighted average shares
outstanding, compared to $0.31 based on ~60.7 million basic
weighted average shares outstanding in the fourth quarter 2013.
NII for the fourth quarter of 2014, as compared to the third
quarter of 2014, was primarily impacted by the increases in
interest expenses and loan fees attributed to the issuance of
$103.0 million of the senior unsecured 2024 Notes (as defined
herein) outstanding for the entire fourth quarter compared to third
quarter, issuance of $129.3 million of asset-backed notes (as
defined herein) “securitization” issued in the fourth quarter of
2014, higher General and Administrative costs and higher employee
related costs.
The table below highlights the differences:
Q4 2014 to Q3 2014 Operating Expense Comparison
(dollars in thousands, except per share data)
Q4 2014 Q3 2014
Variance Per Share Impact
Interest Expense and Loan Fees $ 9,252 $ 7,859 $ 1,393 $
(0.02 ) General and Administrative $ 3,226 $ 2,397 $ 829 $
(0.01 ) Compensation and Benefits $ 5,229 $ 3,922 $ 1,307 $
(0.02 ) Total Opex Per Share Impact $ 17,707 $ 14,178 $
3,529 $ (0.05 )
Adjusted NII – Adjusted Net Investment Income
(Non-GAAP)
Adjusted NII was $0.26 per share on ~63.1 million basic weighted
average shares outstanding for the fourth quarter of 2014. Adjusted
NII measures operating performance excluding ~$600,000 of
convertible debt extinguishment expense, an expense incurred in
relation to the exercise and retirement of the Convertible Senior
Notes in the fourth quarter of 2014. Please refer to the
“Reconciliation of Net Investment Income to Adjusted NII” table for
more details.
DNOI - Distributable Net Operating Income
DNOI for the fourth quarter was ~$18.6 million or $0.29 per
share, as compared to ~$20.5 million or $0.34 per share in the
fourth quarter of 2013. DNOI measures Hercules’ operating
performance, exclusive of employee stock compensation, which
represents expense to the Company but does not require settlement
in cash. DNOI includes paid-in-kind, or “PIK”, and back-end fees
that are generally 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 fourth quarter cash
dividend of $0.31 per share. This dividend would represent the
Company’s thirty-eighth consecutive dividend declaration since its
initial public offering, bringing the total cumulative dividend
declared to date to $10.30 per share. The following shows the key
dates of our fourth quarter 2014 dividend payment:
Record Date
March 12, 2015 Payment Date March 19, 2015
Hercules' Board of Directors maintains a variable dividend
policy with the objective of distributing four quarterly
distributions in an amount that approximates 90% to 100% of our
taxable quarterly income or potential annual income for a
particular year.
In addition, at the end of the year, our Board of Directors may
choose to pay an additional special dividend, or fifth dividend, so
that we may distribute approximately all of our annual taxable
income in the year it was earned, or electing to maintain the
option to spill over our excess taxable income into the coming year
for future dividend payments.
The determination of the tax attributes of the Company's
distributions is made annually as of the end of the Company's
fiscal year based upon its taxable income for the full year and
distributions paid for the full year. Of the dividends declared
during the year ended December 31, 2014, 100% were distributions of
ordinary income and spillover earnings. However, there can be no
certainty to shareholders that this determination is representative
of what the tax attributes of its 2015 distributions to
shareholders will actually be.
During the year ended December 31, 2014, the Company had an
excess taxable income spillover of $16.7 million, ~$0.27 per share,
which will be carried forward toward distributions to be paid in
2015.
Liquidity and Capital Resources
The Company ended the fourth quarter with ~$377.1 million in
available liquidity, including ~$227.1 million in cash and $150.0
million in available credit facilities. As of December
31, 2014, 100% of the Company’s debt outstanding was in fixed
rate debt instruments, well positioning Hercules for any increase
in short term rates, should they occur.
Bank Facilities
Hercules has a committed credit facility with Wells
Fargo for $75.0 million in initial credit capacity under
a $300.0 million accordion credit facility. 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 December
31, 2014 under the Wells Fargo credit facility was
LIBOR+3.50% with a floor of 4.0%. As of December 31, 2014, Hercules
did not have any outstanding borrowings under the Wells Fargo
credit facility.
Hercules has a committed credit facility with Union Bank
for $75.0 million in initial credit capacity under
a $300.0 million accordion credit facility. Pricing
at December 31, 2014 under the Union Bank
credit facility is LIBOR+2.25% with no floor. As of December 31,
2014, Hercules did not have any outstanding borrowings under
the Union Bank credit facility.
Convertible Senior Notes
As of December 31, 2014, Hercules had ~$17.3 million in 6.00%
convertible senior notes which mature in April 2016 (the
“Convertible Senior Notes”).
The Convertible Senior Notes are comprised of ~$17.6 million in
aggregate principal amount outstanding less ~$300,000 in remaining
unaccreted discount initially recorded upon issuance of the
Convertible Senior Notes. These Convertible Senior Notes became
convertible on July 1, 2014 and continue to be convertible through
March 31, 2015. During the fourth quarter of 2014, holders of
~$23.2 million of the Convertible Senior Notes elected to exercise
their conversion rights. Upon conversion of the Convertible Senior
Notes, the Company has the choice to pay or deliver, as the case
may be, at our election, cash, shares of our common stock or a
combination of cash and shares of the Company’s common stock. The
current conversion price of the Convertible Senior Notes is ~$11.36
per share of common stock, in each case subject to adjustment in
certain circumstances.
Senior Unsecured Notes
As of December 31, 2014, Hercules had ~$103.0 million in
aggregate principal amount of its 6.25% Senior Unsecured Notes due
2024 (the “2024 Notes”). The 2024 Notes are listed on the New York
Stock Exchange under the trading symbol “HTGX.”
As of December 31, 2014, Hercules had ~$170.4 million in 7.00%
Senior Unsecured Notes (the “2019 Notes”). These notes are
comprised of ~$84.5 million of notes maturing in April 2019 (the
”April 2019 Notes”) and ~$85.9 million of notes maturing September
2019 (the “September 2019 Notes”). The April 2019 Notes and
September 2019 Notes are listed on the New York Stock Exchange
under the trading symbols “HTGZ” and “HTGY,” respectively.
Asset Backed Notes
As of December 31, 2014, Hercules had ~$16.1 million outstanding
of the initial $129.3 million in aggregate principal amount of
fixed-rate asset-backed notes (the “2017 Asset-Backed Notes”),
which were rated A1(sf) by Moody’s Investors Service, Inc. The 2017
Asset-Backed Notes have a fixed interest rate of 3.32% per annum
and a stated maturity of December 16, 2017.
As of December 31, 2014, Hercules had ~$129.3 million
outstanding in aggregate principal of fixed-rate asset-backed notes
(the “2021 Asset-Backed Notes”), which were rated A(sf) by Kroll
Bond Rating Agency, Inc. The 2021 Asset-Backed Notes have a fixed
interest rate of 3.524% per annum and a stated maturity of April
16, 2021.
SBIC Debentures
At December 31, 2014, Hercules had ~$190.2 million in
outstanding debentures under the SBIC program.
Leverage
Hercules’ debt to equity ratio at December 31, 2014 was ~95.1%.
However, if the outstanding cash at December 31, 2014 of ~$227.1
million was deducted from total debt of ~$626.3 million and divided
by total equity of ~$658.9 million, then the net leverage ratio
would be ~60.6%.
As of December 31, 2014, the Company’s asset coverage ratio
under our regulatory requirements as a business development company
was ~250.8%, excluding the SBIC debentures as a result of our
exemptive order from the SEC. Given the SEC exemptive order relief,
the Company has the potential capacity on its balance sheet to add
leverage of ~$222.8 million, bringing the maximum potential
leverage to ~$849.1 million, or ~128.9%, as of December 31, 2014,
if it had access to such additional leverage.
Net Asset Value
As of December 31, 2014, the Company’s net assets were ~$658.9
million, an increase of ~1.4% as compared to ~$650.0 million as of
December 31, 2013. Net assets were ~$656.2 million as of September
30, 2014.
As of December 31, 2014, net asset value per share was $10.18 on
~64.7 million outstanding shares, representing a decrease of ~3.1%
compared to $10.51 on ~61.8 million outstanding shares as of
December 31, 2013. Net asset value per share was $10.22 on ~64.2
million outstanding shares as of September 30, 2014.
Portfolio Asset Quality
As of December 31, 2014, grading of the loan portfolio at fair
value, excluding warrants and equity investments, was as
follows:
Grade 1 $195.8 million or 21.2% of the
total portfolio Grade 2 $479.0 million or 51.8% of the total
portfolio Grade 3 $183.5 million or 19.9% of the total portfolio
Grade 4 $39.9 million or 4.3% of the total portfolio Grade 5 $25.7
million or 2.8% of the total portfolio
At December 31, 2014, the weighted average loan grade of the
portfolio at cost was 2.24 on a scale of 1 to 5, with 1 being the
highest quality, compared with 2.20 as of December 31, 2013 and
2.07 as of September 30, 2014. 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 February 26, 2015, Hercules has:
a. Closed debt and equity commitments of
~$150.8 million to new and existing portfolio companies.
b. Pending commitments (signed non-binding
term sheets) of ~$36.0 million.
The table below summarizes our year-to-date closed and pending
commitments as follows:
Closed Commitments and Pending Commitments (in millions)
Q1-15 Closed Commitments (as of February 26, 2015)(a) $150.8
Pending Commitments (as of February 26, 2015)(b) $36.0
Year-to-date 2015 Closed and Pending Commitments
$186.8
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. In January 2015, Hercules’ portfolio company, Box, Inc.
(NYSE: BOX), completed its initial public offering. The shares held
by Hercules in Box are subject to certain restrictions that govern
the timing of our divestment and may thus impact our ultimate gain
or (loss). In the case of Box, we are subject to a customary IPO
lockup period and are restricted from selling shares of common
stock for approximately six months from the date of the initial
public offering. The potential gain is subject to the price of the
shares when Hercules exits the investment.
3. In January 2015, Hercules’ portfolio company, Zosano Pharma
Corporation (NASDAQ: ZSAN), completed its initial public
offering.
4. In February 2015, Hercules’ portfolio company, Inotek
Pharmaceuticals Corporation (NASDAQ: ITEK), completed its initial
public offering.
5. In February 2015, Zillow, Inc. (NASDAQ: Z) completed its
acquisition of Hercules portfolio company Trulia, Inc. for $2.5
billion in a stock-for-stock transaction and formed Zillow Group,
Inc. Hercules no longer holds investments in the company.
6. In February 2015, Hercules’ portfolio company, ViewRay Inc.,
filed an S-1 Registration with the SEC in contemplation of a
potential initial public offering of $69.0 million. ViewRay had
previously filed confidentially under the JOBS Act.
7. Two companies have filed a Form S-1 Registration Statement
confidentially under the JOBS Act.
8. In February, Hercules’ Board of Directors approved redemption
of $20.0 million (face value) of the $84.5 million in issued and
outstanding aggregate principal amount of the Company’s April 2019
Notes (CUSIP No. 417096888), and the notice for this redemption has
been provided. Hercules intends to make additional redemptions on
the April 2019 Notes throughout the 2015 calendar year, depending
on its anticipated cash needs. Hercules will provide notice for and
complete all redemptions in compliance with the terms of the base
indenture, as supplemented by the first supplemental indenture.
9. In February 2015, Hercules’ Board of Directors approved a
$50.0 million open market share repurchase program. Hercules may
repurchase shares of its common stock in the open market, including
block purchases, at prices that may be above or below the net asset
value as reported in our then most recently published financial
statements. Hercules anticipates that the manner, timing, and
amount of any share purchases will be determined by Hercules
management based upon the evaluation of market conditions, stock
price, and additional factors in accordance with regulatory
requirements. Pursuant to the Investment Company Act of 1940, as
amended, Hercules is required to notify shareholders program when
such a program is initiated or implemented. The repurchase program
does not require Hercules to acquire any specific number of shares
and may be extended, modified, or discontinued at any time.
10. In February 2015, changes in the payment schedule of
obligors in the 2017 Asset-Backed Notes collateral pool triggered a
rapid amortization event in accordance with the sale and servicing
agreement for the 2017 Asset-Backed Notes. Due to this event, the
2017 Asset-Backed Notes are expected to fully amortize within the
first half of 2015.
Conference Call
Hercules has scheduled its fourth quarter 2014 financial results
conference call for March 2, 2015 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
internationally 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 83315302.
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 industries, including technology,
biotechnology, life science, and energy & renewable technology,
at all stages of development. Since inception (December 2003),
Hercules has committed more than $4.9 billion to over 310 companies
and is the lender of choice for entrepreneurs and venture capital
firms seeking growth capital financing. Companies interested in
learning more about financing opportunities should contact
info@htgc.com, or call 650.289.3060.
Hercules’ common stock trades on the New York Stock Exchange
(NYSE) under the ticker symbol "HTGC."
In addition, Hercules has three outstanding bond issuances of
7.00% Notes due April 2019, 7.00% Notes due September 2019, and
6.25% Notes due July 2024, which trade on the NYSE under the
symbols “HTGZ,” “HTGY,” and “HTGX,” respectively.
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 (dollars
in thousands, except per share data) December
31, 2014 December 31, 2013 Assets Investments:
Non-control/Non-affiliate investments (cost of $1,019,799 and
$891,059, respectively) $ 1,012,738 $ 899,314 Affiliate investments
(cost of $15,538 and $15,238, respectively) 7,999
10,981 Total investments, at value (cost of
$1,035,337 and $906,297, respectively) 1,020,737 910,295 Cash and
cash equivalents 227,116 268,368 Restricted cash 12,660 6,271
Interest receivable 9,453 8,962 Other assets 29,257
27,819 Total assets $ 1,299,223 $ 1,221,715
Liabilities Accounts payable and accrued
liabilities $ 14,101 $ 14,268 Long-term Liabilities (Convertible
Senior Notes) 17,345 72,519 2017 Asset-Backed Notes 16,049 89,557
2021 Asset-Backed Notes 129,300 - 2019 Notes 170,364 170,364 2024
Notes 103,000 - Long-term SBA Debentures 190,200
225,000 Total liabilities $ 640,359 $ 571,708
Net assets consist of: Common stock, par value 65 62 Capital
in excess of par value 657,233 656,594 Unrealized depreciation on
investments (17,076 ) 3,598 Accumulated realized losses on
investments 14,079 (15,240 ) Distributions in excess of investment
income 4,563 4,993
Total net
assets 658,864 650,007
Total
liabilities and net assets $ 1,299,223 $ 1,221,715
Shares of common stock outstanding ($0.001 par
value, 100,000,000 authorized) 64,715 61,837
Net asset value
per share $ 10.18 $ 10.51
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (dollars in
thousands, except per share data) Three Months Ended
December 31, Twelve Months Ended December 31,
2014 2013 2014
2013
Investment income: Interest income Non-Control/Non-Affiliate
investments $
31,800
$
27,580
$
124,776
$
121,302
Affiliate investments
95
685
1,842
2,369
Total interest income
31,895
28,265
126,618
123,671
Fees Non-Control/Non-Affiliate investments
4,976
4,929
17,013
16,016
Affiliate investments
4
16
34
26
Total fees
4,980
4,945
17,047
16,042
Total investment income 36,875 33,210 143,665 139,713 Operating
expenses: Interest 7,864 7,545 28,041 30,334 Loan fees 1,388 1,466
5,919 4,807 General and administrative 3,226 2,523 10,209 9,354
Employee Compensation: Compensation and benefits 5,229 1,186 16,604
16,179 Stock-based compensation 2,711 1,626
9,561 5,974 Total employee compensation
7,940 2,812 26,165 22,153
Total operating expenses 20,418 14,346 70,334 66,648 Loss on
debt extinguishment (Long-term Liabilities - Convertible Senior
Notes) (558 ) - (1,581 ) - Net
investment income 15,899 18,864 71,750 73,065 Net realized
gain on investments Non-Control/Non-Affiliate investments
7,106 3,527 20,112 14,836
Total net realized gain on investments 7,106 3,527 20,112 14,836
Net increase in unrealized appreciation (depreciation) on
investments Non-Control/Non-Affiliate investments (1,945 ) 1,863
(17,392 ) 12,370 Affiliate investments (425 ) 643
(3,282 ) (825 ) Total net unrealized appreciation
(depreciation) on investments (2,370 ) 2,506
(20,674 ) 11,545 Total net realized and unrealized
gain (loss) 4,736 6,033 (562 )
26,381 Net increase in net assets resulting from operations
$ 20,635 $ 24,897 $ 71,188 $ 99,446 Net
investment income before investment gains and losses per common
share: Basic $ 0.25 $ 0.31 $ 1.13 $ 1.22
Change in net assets per common share: Basic $ 0.32 $ 0.40 $
1.12 $ 1.67 Diluted $ 0.32 $ 0.39 $ 1.10
$ 1.63 Weighted average shares outstanding Basic
63,105 60,712 61,862
58,838 Diluted 63,766 63,419
63,225 60,292 Dividends declared per common
share: Basic $ 0.31 $ 0.31 $ 1.24 $ 1.11
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
NON GAAP FINANCIAL MEASURES
(in thousands, except per share
data)
Three Months Ended December 31, Year Ended December
31, 2014 2013 2014 2013
Reconciliation of Net Investment Income to Adjusted NII Net
Investment Income 15,899 18,864 71,750 73,065 Loss on debt
extinguishment (Long-term Liabilities - Convertible Senior Notes)
558 - 1,581 - Adjusted net investment
income (1) $ 16,457 $ 18,864 $ 73,331 $ 73,065
Adjusted net investment income before
investment gains and losses per common share:
Basic $ 63,105 $ 60,712 $ 61,862 $ 58,838 Weighted average
shares outstanding Basic $ 0.26 $ 0.31 $ 1.19 $ 1.24 (1)
Adjusted net investment income is calculated as net investment
income, excluding the Loss on debt extinguishment (Long-term
Liabilities - Convertible Senior Notes).
Adjusted Net Investment Income, or “Adjusted NII”, consists of
GAAP Net Investment Income, excluding the Loss on debt
extinguishment (Long-term Liabilities – Convertible Senior Notes),
divided by the weighted average basic shares outstanding for the
period under measurement.
Hercules believes that providing Adjusted NII affords investors
a view of results that may be more easily compared to other
companies by adjusting for non-recurring events, 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 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 December 31, Year Ended December
31, Reconciliation of Net investment income to DNOI
2014 2013 2014 2013 Net investment
income $ 15,899 $ 18,864 $ 71,750 $ 73,065 Stock-based compensation
2,711 1,626 9,561 5,975 DNOI $ 18,610 $
20,490 $ 81,311 $ 79,040 DNOI per share-weighted average
common shares Basic $ 0.29 $ 0.34 $ 1.31 $ 1.34 Weighted
average shares outstanding Basic 63,105 60,712
61,862 58,838
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.
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
NON GAAP FINANCIAL MEASURES
(in thousands, except per share
data)
December 31, 2014 Total Debt $ 626,258 Cash and cash
equivalents (227,116 ) Numerator: net debt (total debt less
cash and cash equivalents) $ 399,142 Denominator: Total net
assets $ 658,864 Net Leverage Ratio 60.6 %
Net leverage ratio is calculated by deducting the outstanding
cash at December 31, 2014 of ~$227.1 million from total debt of
~$626.3 million divided by our total equity of ~$658.9 million,
resulting in a net leverage ratio of 60.6%. These measures are not
intended to replace financial performance measures determined in
accordance with GAAP. Rather, they are presented as additional
information because management believes they are useful indicators
of the current financial performance of the Company’s core
businesses.
Hercules Technology Growth Capital, Inc.Michael Hara,
650-289-3060 HT-HNInvestor Relations and Corporate
Communicationsmhara@htgc.com
Hercules Capital (NYSE:HTGC)
Historical Stock Chart
From Jun 2024 to Jul 2024
Hercules Capital (NYSE:HTGC)
Historical Stock Chart
From Jul 2023 to Jul 2024