Net Investment Income provides 106% Coverage of
Base Distribution Payout
Record Q3 New Debt and Equity Commitments and
Total Fundings
Maintains Strong Liquidity of $465.1
Million
Undistributed Earnings Spillover of $78.2
Million, or $0.68(1) per Ending Shares Outstanding
Q3 2020 Financial Achievements and
Highlights
- Net Investment Income “NII” of $38.7 million, or $0.34 per
share
- Provides 106% coverage of base distribution payout
- Total Investment Income of $70.3 million
- Record Q3 new debt and equity commitments of $514.3 million, an
increase of 113.1% year-over-year
- Record Q3 total gross fundings of $265.5 million, an increase
of 50.0% year-over-year
- Unscheduled early principal repayments or “early loan
repayments” of $190.8 million
- $465.1 million of available liquidity, subject to existing
terms and covenants
- 13.6% Return on Average Equity “ROAE” (NII/Average Equity)
- 6.4% Return on Average Assets “ROAA” (NII/Average Assets)
- GAAP leverage of 111.4% and regulatory leverage of
102.9%(2)
- Net Asset Value “NAV” increased to $10.26 from $10.19, up 0.7%
from Q2 2020
- 12.6% GAAP Effective Yield and 11.3% Core Yield(3), a non-GAAP
measure
Year-to-date ending September 30, 2020 Financial
Highlights
- NII of $115.0 million, or $1.03 per share, an increase of
11.4%, compared to $103.2 million for the nine months ending
September 30, 2019
- Total investment income of $211.9 million, an increase of 7.4%,
compared to $197.3 million for the nine months ending September 30,
2019
- New equity and debt commitments of $1.04 billion
- Total fundings of $631.4 million
- Net debt investment portfolio growth of $113.6 million
- Unscheduled early loan repayments of $426.7 million
Footnotes:
(1) $0.69 per Weighted Average Shares Outstanding (2) Regulatory
leverage represents debt-to-equity ratio, excluding the Company’s
Small Business Administration “SBA” debenture (3) Core Yield
excludes early loan repayments and one-time fees, and includes
income and fees from expired commitments
Hercules Capital, Inc. (NYSE: HTGC) (“Hercules” or the
“Company”), the largest and leading specialty financing provider to
innovative venture, growth and established stage companies backed
by some of the leading and top-tier venture capital and select
private equity firms, today announced its financial results for the
third quarter ended September 30, 2020.
“We delivered an unseasonally strong record third quarter of
originations and fundings of $514 million and $266 million,
respectively, while maintaining the overall strong credit quality
of the debt investment portfolio,” stated Scott Bluestein, chief
executive officer and chief investment officer of Hercules. “With a
record debt investment portfolio and stabilizing core yields, our
net investment income produced 106% coverage of our base
shareholder distribution and allowed us to declare a $0.02
supplemental distribution on top of our base distribution to our
shareholders.”
Bluestein added, “Looking forward, we will continue to
vigilantly monitor our portfolio companies and their future
liquidity needs as they address the economic uncertainty associated
with the ongoing global health pandemic. With strong liquidity and
conservative leverage, we are well positioned to help our
management teams through this period of volatility and believe we
will enter 2021 in a position of relative strength.”
Q3 2020 Review and Operating Results
Debt Investment Portfolio
Hercules delivered new debt and equity commitments totaling
$514.3 million and gross fundings totaling $265.5 million.
During the third quarter, Hercules realized early loan
repayments of $190.8 million, which along with normal scheduled
amortization of $20.6 million, resulted in total debt repayments of
$211.4 million.
The new debt investment origination and funding activities lead
to net debt investment portfolio growth of $4.8 million during the
third quarter, on a cost basis.
The Company’s total investment portfolio, (at cost and fair
value) by category, quarter-over-quarter is highlighted
below:
Total Investment Portfolio: Q3 2020 to
Q2 2020
(in millions) Debt Equity Warrants
Total Portfolio Balances at Cost at 6/30/20
$
2,278.9
$
191.7
$
30.8
$
2,501.4
New fundings
262.5
1.0
2.0
265.5
Warrants not related to Q3 2020 fundings
—
—
0.1
0.1
Early payoffs(a)
(190.8
)
—
—
(190.8
)
Principal payments received on investments
(20.6
)
—
—
(20.6
)
Net changes attributed to conversions, liquidations, and fees
(46.3
)
0.6
(4.1
)
(49.8
)
Net activity during Q3 2020
4.8
1.6
(2.0
)
4.4
Balances at Cost at 9/30/20
$
2,283.7
$
193.3
$
28.8
$
2,505.8
Balances at Value at 6/30/20
$
2,216.3
$
125.7
$
21.5
$
2,363.5
Net activity during Q3 2020
4.8
1.6
(2.0
)
4.4
Net change in unrealized appreciation (depreciation)
43.4
6.5
3.0
52.9
Total net activity during Q3 2020
48.2
8.1
1.0
57.3
Balances at Value at 9/30/20
$
2,264.5
$
133.8
$
22.5
$
2,420.8
(a)Early payoffs include $4.1 million of paydowns on
revolvers during Q3 2020.
Debt Investment Portfolio Balances by Quarter
(in millions)
Q3 2020 Q2 2020 Q1 2020 Q4
2019 Q3 2019 Ending Balance at Cost
$2,283.7
$2,278.9
$2,242.9
$2,170.1
$2,101.3
Weighted Average Balance
$2,217.0
$2,248.0
$2,178.0
$2,164.0
$2,061.0
Debt Investment Portfolio Composition by Quarter
(% of debt investment portfolio)
Q3 2020 Q2 2020
Q1 2020 Q4 2019 Q3 2019 First Lien
Senior Secured
85.5%
83.5%
83.0%
84.0%
84.8%
Floating Rate w/Floors
97.9%
97.9%
97.8%
97.4%
97.6%
Effective Portfolio Yield and Core Portfolio Yield (“Core
Yield”)
The effective yield on Hercules’ debt investment portfolio was
12.6% during Q3 2020, as compared to 12.2% for Q2 2020. The Company
realized $190.8 million of early loan repayments in Q3 2020
compared to $85.4 million in Q2 2020, or an increase of 123.4%.
Effective yields generally include the effects of fees and income
accelerations attributed to early loan repayments, and other
one-time events. Effective yields are materially impacted by the
elevated or reduced levels of early loan repayments and derived by
dividing total investment income by the weighted average earning
investment portfolio assets outstanding during the quarter, which
excludes non-interest earning assets such as warrants and equity
investments.
Core yield, a non-GAAP measure, was 11.3% during Q3 2020, within
the Company’s expected range of 11.0% to 12.0%, and decreased
slightly compared to 11.5% in Q2 2020. Hercules defines core yield
as yields that generally exclude any benefit from income related to
early repayments attributed to the acceleration of unamortized
income and prepayment fees and includes income from expired
commitments.
Income Statement
Total investment income increased to $70.3 million for Q3 2020,
compared to $69.2 million in Q3 2019, an increase of 1.6%
year-over-year. The increase is primarily attributable to a higher
average debt investment balance offset by lower core yields due to
the impact of the Fed Funds cut in March 2020 between periods.
Non-interest and fee expenses were $15.0 million in Q3 2020
versus $15.4 million for Q3 2019. The decrease was due to lower
general and administrative expenses offset by higher employee
compensation expenses.
Interest expense and fees were $16.6 million in Q3 2020,
compared to $15.0 million in Q3 2019. The increase was due to
higher weighted-average borrowings between periods.
The Company had a weighted average cost of borrowings comprised
of interest and fees, of 5.1% in Q3 2020, as compared to 5.1% for
Q3 2019.
NII – Net Investment Income
NII for Q3 2020 was $38.7 million, or $0.34 per share, based on
113.5 million basic weighted average shares outstanding, compared
to $38.9 million, or $0.37 per share, based on 104.3 million basic
weighted average shares outstanding in Q3 2019. The decrease is
attributable to a higher average debt investment balance offset by
an increase in total operating expenses and lower core yields
between periods.
Continued Credit Discipline and Strong Credit
Performance
Hercules’ net cumulative realized gain/(loss) position, since
its first origination activities in October 2004 through September
30, 2020, (including net loan, warrant and equity activity) on
investments, totaled ($65.0) million, on a GAAP basis, spanning
over 16 years of investment activities.
When compared to total new debt investment commitments during
the same period of over $11.0 billion, the total realized
gain/(loss) since inception of ($65.0) million represents
approximately 59 basis points “bps,” or 0.59%, of cumulative debt
commitments, or an effective annualized loss rate of 4.0 bps, or
0.04%.
Realized Gains/(Losses)
During Q3 2020, Hercules had net realized gains/(losses) of
$(48.5) million primarily from gross realized losses of ($50.0)
million, offset by gross realized gains of $1.5 million from the
sale of the Company’s equity holdings.
Unrealized Appreciation/(Depreciation)
During Q3 2020, Hercules recorded $52.8 million of net
unrealized appreciation, all of which was net unrealized
appreciation from our debt, equity and warrant investments.
Portfolio Asset Quality
As of September 30, 2020, the weighted average grade of the debt
investment portfolio, at fair value, improved to 2.22, compared to
2.30 as of June 30, 2020, based on a scale of 1 to 5, with 1 being
the highest quality. Hercules’ policy is to generally adjust the
credit grading down on its portfolio companies as they approach
their expected need for additional growth equity capital to fund
their respective operations for the next 9-14 months. Various
companies in the Company’s portfolio will require additional rounds
of funding from time to time to maintain their operations.
Additionally, Hercules may selectively downgrade portfolio
companies, from time to time, if they are not meeting the Company’s
financing criteria, or underperforming relative to their respective
business plans.
As of September 30, 2020, grading of the debt investment
portfolio at fair value, excluding warrants and equity investments,
was as follows:
Credit Grading at Fair Value, Q3 2020 - Q3 2019 ($ in
millions)
Q3
2020
Q2
2020
Q1
2020
Q4
2019
Q3
2019
Grade 1 - High
$
406.5
17.9
%
$
443.6
20.1
%
$
390.4
17.7
%
$
387.3
18.0
%
$
237.9
11.4
%
Grade 2
$
1,053.1
46.5
%
$
877.9
39.6
%
$
818.1
37.3
%
$
1,180.5
55.0
%
$
1,331.2
64.0
%
Grade 3
$
772.3
34.1
%
$
849.7
38.3
%
$
917.2
41.8
%
$
509.9
23.7
%
$
479.0
23.1
%
Grade 4
$
26.7
1.2
%
$
25.0
1.1
%
$
54.3
2.5
%
$
69.0
3.2
%
$
29.7
1.4
%
Grade 5 - Low
$
5.9
0.3
%
$
20.1
0.9
%
$
15.5
0.7
%
$
1.8
0.1
%
$
2.1
0.1
%
Weighted Avg.
2.22
2.30
2.34
2.15
2.17
Non-Accruals
Non-accruals decreased as a percentage of the overall investment
portfolio in the third quarter of 2020. As of September 30, 2020,
the Company had five (5) debt investments on non-accrual with an
investment cost and fair value of approximately $23.5 million and
$6.2 million, respectively, or 0.9% and 0.3% as a percentage of the
Company’s total investment portfolio at cost and value,
respectively.
Compared to June 30, 2020, the Company had five (5) debt
investments on non-accrual with an investment cost and fair value
of approximately $61.1 million and $11.5 million, respectively, or
2.4% and 0.5% as a percentage of the total investment portfolio at
cost and value, respectively.
Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3
2019 Total Investments at Cost
$2,505.8
$2,501.4
$2,466.3
$2,402.0
$2,336.3
Loans on non-accrual as a % of Total
Investments at Value
0.3%
0.5%
0.0%
0.0%
0.1%
Loans on non-accrual as a % of Total
0.9%
2.4%
0.8%
0.4%
0.4%
Investments at Cost
Liquidity and Capital Resources
The Company ended Q3 2020 with $465.1 million in available
liquidity, including $27.6 million in unrestricted cash and cash
equivalents, and $437.5 million in available credit facilities,
subject to existing terms and advance rates and regulatory and
covenant requirements.
During the three months ending September 30, 2020, the Company
did not sell any shares of common stock under the equity ATM
program. During the nine months ending September 30, 2020, the
Company sold approximately 6.0 million shares of common stock,
which were issued under the equity ATM program, for total
accumulated net proceeds of approximately $73.9 million, including
$810,000 of offering expenses, all accretive to net asset value. As
of October 26, 2020, approximately 16.2 million shares remain
available for issuance and sale under the Equity Distribution
Agreement.
Bank Facilities
As of September 30, 2020, there were $37.5 million in
outstanding borrowings under the Hercules’ $400.0 million committed
credit facility with Union Bank as Agent and no outstanding
borrowings under the Hercules’ $75.0 million committed credit
facility with Wells Fargo Capital Finance, for a total of $37.5
million.
Leverage
As of September 30, 2020, Hercules’ GAAP leverage ratio,
including its Small Business Administration “SBA” debentures, was
111.4%. Hercules’ regulatory leverage, or debt-to-equity ratio,
excluding its SBA debentures, was 102.9% and net regulatory
leverage, a non-GAAP measure (excluding cash of approximately $27.6
million), was 100.6%. Hercules’ net leverage ratio, including its
SBA debentures, was 109.0%.
Available Unfunded Commitments – Representing 9.7% of Total
Assets
The Company’s unfunded commitments and contingencies consist
primarily of unused commitments to extend credit in the form of
loans to select portfolio companies. A portion of these unfunded
contractual commitments are dependent upon the portfolio company
reaching certain milestones in order to gain access to additional
funding. Furthermore, the Company’s credit agreements contain
customary lending provisions that allow us relief from funding
obligations for previously made commitments. In addition, since a
portion of these commitments may also expire without being drawn,
unfunded contractual commitments do not necessarily represent
future cash requirements.
As of September 30, 2020, the Company had $242.5 million of
available unfunded commitments at the request of the portfolio
company and unencumbered by any milestones, including undrawn
revolving facilities, representing 9.7% of Hercules’ total assets.
This increased from the previous quarter of $165.1 million of
available unfunded commitments or 6.7% of Hercules’ total
assets.
Existing Pipeline and Signed Term Sheets
After closing $514.3 million in new debt and equity commitments
in Q3 2020, Hercules has pending commitments of $45.4 million in
signed non-binding term sheets outstanding as of October 26, 2020.
Since the close of Q3 2020 and as of October 26, 2020, Hercules has
closed new debt and equity commitments of $85.8 million and funded
$77.0 million.
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.
Net Asset Value
As of September 30, 2020, the Company’s net assets were $1.17
billion, compared to $1.16 billion at the end of Q2 2020. NAV per
share increased 0.7% to $10.26 on 114.3 million outstanding shares
of common stock as of September 30, 2020, compared to $10.19 on
114.2 million outstanding shares of common stock as of June 30,
2020. The increase in NAV per share was primarily attributed to the
net change in unrealized appreciation and earnings exceeding the
distribution paid in Q3 of $0.02 per share.
Interest Rate Sensitivity
Hercules has an asset sensitive debt investment portfolio with
97.9% of its debt investment portfolio being priced at floating
interest rates as of September 30, 2020, with a Prime or
LIBOR-based interest rate floor, combined with 97.1% of its
outstanding debt borrowings bearing fixed interest rates, leading
to higher net investment income sensitivity.
Based on Hercules’ Consolidated Statement of Assets and
Liabilities as of September 30, 2020, the following table shows the
approximate annualized increase/(decrease) in components of net
income resulting from operations of hypothetical base rate changes
in interest rates, such as Prime Rate, assuming no changes in
Hercules’ debt investments and borrowings. These estimates are
subject to change due to the impact from active participation in
the Company’s equity ATM program and any future equity
offerings.
(in thousands) Interest Interest Net
EPS(2) Basis Point Change Income(1)
Expense Income
(75)
$
(53
)
$
(45
)
$
(8
)
$
-
(50)
$
(53
)
$
(30
)
$
(23
)
$
-
(25)
$
(53
)
$
(15
)
$
(38
)
$
-
25
$
2,197
$
15
$
2,182
$
0.02
50
$
4,581
$
30
$
4,551
$
0.04
75
$
6,964
$
45
$
6,919
$
0.06
100
$
9,471
$
60
$
9,411
$
0.08
200
$
21,622
$
121
$
21,501
$
0.19
(1)
Source: Hercules Capital Form 10-Q for Q3 2020
(2)
EPS calculated on basic weighted shares outstanding of 113,489.
Estimates are subject to change due to impact from active
participation in the Company's equity ATM program and any future
equity offerings.
Existing Equity and Warrant Portfolio
Equity Portfolio
Hercules held equity positions in 55 portfolio companies with a
fair value of $133.8 million and a cost basis of $193.3 million as
of September 30, 2020. On a fair value basis, 31.1% or $41.6
million is related to existing public equity positions.
Warrant Portfolio
Hercules held warrant positions in 108 portfolio companies with
a fair value of $22.5 million and a cost basis of $28.8 million as
of September 30, 2020. On a fair value basis, 30.9% or $7.0 million
is related to existing public warrant positions.
Portfolio Company IPO and M&A Activity in Q3 2020
IPO Activity
As of October 26, 2020, Hercules held warrant or equity
positions in three (3) portfolio companies that had filed
Registration Statements in contemplation of a potential IPO,
including:
- Three (3) portfolio companies filed confidentially under the
JOBS Act.
- In August 2020, Hercules portfolio company Oak Street
Health, Inc. (NYSE: OSH), a fast-growing network of
value-based, primary care centers for adults on Medicare, completed
its initial public offering of 15.6 million shares of common stock
at an initial public offering price of $21.00 per share on the New
York Stock Exchange. Hercules initially committed $30.0 million in
venture debt financing in August 2017 and an additional $50.0
million in April 2019.
- In September 2020, Hercules portfolio company Palantir
Technologies Inc. (NYSE: PLTR), a data analytics platform
focused on the government and financial sectors, completed its
direct listing at a reference price of $7.25 per share on the New
York Stock Exchange. Hercules currently holds 2,085,421 shares of
common stock as of September 30, 2020.
- In September 2020, Hercules portfolio company Outset
Medical, Inc. (NASDAQ: OM), a medical device company which
provides a hemodialysis system for kidney diseases, completed its
initial public offering of 9.0 million shares of common stock at an
initial public offering price of $27.00 per share on the Nasdaq
Global Market. Hercules committed $25.5 million in venture debt
financing beginning in September 2013 and currently holds 38,243
shares of common stock and warrants for 62,794 shares of common
stock as of September 30, 2020.
- In October 2020, Hercules portfolio company Codiak
BioSciences, Inc. (NASDAQ: CDAK), a clinical-stage biotech
company focused on pioneering the development of exosome-based
therapeutics as a new class of medicines, completed its initial
public offering of 5.5 million shares of common stock at an initial
public offering price of $15.00 per share on the Nasdaq Global
Market. Hercules initially committed $25.0 million in venture debt
financing in September 2019.
There can be no assurances that companies that have yet to
complete their IPOs will do so.
M&A Activity
- In July 2020, Hercules’ portfolio company Postmates
Inc., a leader in on-demand food delivery, announced that it
has reached a definitive agreement to be acquired by Uber
Technologies, Inc. (NYSE: UBER), a ride-hailing company offering
services that include peer-to-peer ridesharing, ride service
hailing, and food delivery, for approximately $2.65 billion in an
all-stock transaction. Hercules initially committed $20.0 million
in venture debt financing in July 2018 and currently holds warrants
for 189,865 shares of common stock as of September 30, 2020.
- In August 2020, Hercules’ portfolio company Yumanity
Therapeutics, Inc., a clinical-stage biopharmaceutical company
that is developing disease-modifying therapies for
neurodegenerative diseases, announced that they have entered into a
definitive merger agreement with Proteostasis Therapeutics, Inc.
(NASDAQ: PTI), a clinical-stage biopharmaceutical company
developing small molecule therapeutics to treat cystic fibrosis and
other diseases caused by dysfunctional protein processing. The
combined company will operate under the name Yumanity
Therapeutics, Inc. and trade on the Nasdaq Global Market under
the ticker symbol “YMTX.” The transaction has been approved by the
boards of directors of both companies. The merger is expected to
close during the fourth quarter of 2020, subject to customary
closing conditions, including the approval of the merger agreement
by the shareholders of PTI. Hercules initially committed $20.0
million in venture debt financing in December 2019 and currently
holds 73,110 shares of Class C Preferred Units, as of September 30,
2020.
- In September 2020, Hercules’ portfolio company Patron
Technology, Inc., a technology developer whose products help
live event organizers create better experiences for attendees and
deeper relationships with sponsors through a complete, data-driven
event technology solution, announced that they have been acquired
by Vector Capital, a private equity firm specializing in
transformational investments in established technology
businesses.
Subsequent Events
1.
As of October 26, 2020, Hercules has:
a.
Funded $77.0 million to new and existing
commitments since the close of the third quarter 2020.
b.
Pending commitments (signed non-binding
term sheets) of $45.4 million.
The table below summarizes the Company’s
year-to-date closed and pending commitments as follows:
Closed Commitments and Pending
Commitments (in millions)
January 1 – September 30, 2020 Closed
Commitments(a)
$1,037.3
Q4 2020 Closed Commitments (as of October
26, 2020)(a)
$85.8
Year-to-Date 2020 Closed
Commitments
$1,123.1
Q4 2020 Pending Commitments (as of October
26, 2020)(b)
$45.4
Year-to-Date 2020 Closed and Pending
Commitments
$1,168.5
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.
Subsequent to September 30, 2020 and as of
October 26, 2020, the Company sold 306,401 shares of its common
stock under the 2020 Equity Distribution Agreement. As of October
26, 2020, 16.2 million shares remain available for issuance and
sale under the 2020 Equity Distribution Agreement.
3.
On October 27, 2020, HT IV was licensed to
operate as a Small Business Investment Company (SBIC) under the
SBA. This additional license has a 10-year term. The Company will
gain access to $175 million of capital through the SBA debenture
program, in addition to its regulatory capital contribution of
$87.5 million to HT IV which will be used for investment purposes,
subject to the issuance of a capital commitment by the SBA and
customary procedures.
Conference Call
Hercules has scheduled its third quarter 2020 financial results
conference call for October 29, 2020 at 2:00 p.m. PT (5:00 p.m.
ET). To listen to the call, please dial (877) 304-8957 (or (408)
427-3709 internationally) and reference Conference ID: 4431939 if
asked, 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 4431939.
About Hercules Capital, Inc.
Hercules Capital, Inc. (NYSE: HTGC) is the leading and largest
specialty finance company focused on providing senior secured
venture growth loans to high-growth, innovative venture
capital-backed companies in a broad variety of technology, life
sciences and sustainable and renewable technology industries. Since
inception (December 2003), Hercules has committed more than $11.0
billion to over 520 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 ticker symbol HTGC. In addition, Hercules has two
retail bond issuances of 5.25% Notes due 2025 (NYSE: HCXZ) and
6.25% Notes due 2033 (NYSE: HCXY).
Category: Earnings
Forward-Looking Statements
This press release may contain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995. You should understand that under Section 27A(b)(2)(B) of
the Securities Act of 1933, as amended, and Section 21E(b)(2)(B) of
the Securities Exchange Act of 1934, as amended, or the Exchange
Act, the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995 do not apply to forward-looking
statements made in periodic reports we file under the Exchange
Act.
The information disclosed in this press 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 SEC 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 the Company identifies from time to time in its
filings with the SEC. Although Hercules believes 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 CAPITAL, INC. CONSOLIDATED STATEMENTS OF ASSETS
AND LIABILITIES (dollars in thousands, except per share
data) September 30, 2020 December 31, 2019
Assets Investments: Non-control/Non-affiliate investments
(cost of $2,352,003 and $2,248,524, respectively)
$
2,355,935
$
2,232,972
Control investments (cost of $65,242 and $65,333, respectively)
55,092
59,746
Affiliate investments (cost of $88,584 and $88,175, respectively)
9,800
21,808
Total investments in securities, at value (cost of $2,505,829 and
$2,402,032, respectively)
2,420,827
2,314,526
Cash and cash equivalents
27,554
64,393
Restricted cash
20,507
50,603
Interest receivable
19,506
20,207
Right of use asset
9,884
11,659
Other assets
5,723
580
Total assets
$
2,504,001
$
2,461,968
Liabilities Accounts payable and accrued liabilities
$
28,782
$
30,306
Operating lease liability
9,753
11,538
SBA Debentures, net (principal of $99,000 and $149,000,
respectively)(1)
98,668
148,165
2022 Notes, net (principal of $150,000 and $150,000,
respectively)(1)
148,907
148,514
July 2024 Notes, net (principal of $105,000 and $105,000,
respectively)(1)
103,869
103,685
February 2025 Notes, net (principal of $50,000 and $0,
respectively)(1)
49,493
—
2025 Notes, net (principal of $75,000 and $75,000, respectively)(1)
73,256
72,970
June 2025 Notes, net (principal of $70,000 and $0, respectively)(1)
69,233
—
2033 Notes, net (principal of $40,000 and $40,000, respectively)(1)
38,582
38,501
2027 Asset-Backed Notes, net (principal of $200,000 and $200,000
respectively)(1)
197,521
197,312
2028 Asset-Backed Notes, net (principal of $250,000 and $250,000,
respectively)(1)
247,579
247,395
2022 Convertible Notes, net (principal of $230,000 and $230,000,
respectively)(1)
227,786
226,614
Credit Facilities
37,492
103,919
Total liabilities
$
1,330,921
$
1,328,919
Net assets consist of: Common stock, par value
115
108
Capital in excess of par value
1,225,823
1,145,106
Total distributable earnings (loss)
(52,858
)
(12,165
)
Total net assets
$
1,173,080
$
1,133,049
Total liabilities and net assets
$
2,504,001
$
2,461,968
Shares of common stock outstanding ($0.001 par value,
200,000,000 authorized)
114,317
107,364
Net asset value per share
$
10.26
$
10.55
(1) The Company’s SBA Debentures, February 2025 Notes, June 2025
Notes, 2033 Notes, 2025 Notes, 2022 Notes, 2027 Asset-Backed Notes,
2028 Asset-Backed Notes, 2022 Convertible Notes, and July 2024
Notes, as each term is defined herein, are presented net of the
associated debt issuance costs for each instrument.
HERCULES
CAPITAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended September
30,
Nine Months Ended September
30,
2020
2019
2020
2019
Investment income: Interest income Non-control/Non-affiliate
investments
$
64,403
$
62,696
$
192,408
$
176,568
Control investments
740
1,055
2,117
3,119
Affiliate investments
232
493
609
1,740
Total interest income
65,375
64,244
195,134
181,427
Fee income Commitment, facility and loan fee income
Non-control/Non-affiliate investments
2,985
3,591
10,692
11,069
Control investments
5
5
15
13
Affiliate investments
—
26
—
186
Total commitment, facility and loan fee income
2,990
3,622
10,707
11,268
One-time fee income Non-control/Non-affiliate investments
1,974
1,372
6,085
4,602
Total one-time fee income
1,974
1,372
6,085
4,602
Total fee income
4,964
4,994
16,792
15,870
Total investment income
70,339
69,238
211,926
197,297
Operating expenses: Interest
14,807
13,857
44,415
39,927
Loan fees
1,824
1,138
5,268
5,793
General and administrative Legal expenses
673
1,586
2,563
4,212
Tax expenses
994
815
3,028
1,706
Other expenses
3,624
3,967
11,622
10,398
Total general and administrative
5,291
6,368
17,213
16,316
Employee compensation Compensation and benefits
7,181
7,559
22,575
23,372
Stock-based compensation
2,522
1,443
7,477
8,716
Total employee compensation
9,703
9,002
30,052
32,088
Total operating expenses
31,625
30,365
96,948
94,124
Net investment income
38,714
38,873
114,978
103,173
Net realized gain (loss) on investments
Non-control/Non-affiliate investments
(48,501
)
4,807
(41,393
)
13,633
Total net realized gain (loss) on investments
(48,501
)
4,807
(41,393
)
13,633
Net change in unrealized appreciation (depreciation) on
investments Non-control/Non-affiliate investments
54,299
(26,351
)
19,483
15,533
Control investments
646
2,489
(4,563
)
421
Affiliate investments
(2,111
)
(547
)
(12,416
)
(3,773
)
Total net unrealized appreciation (depreciation) on investments
52,834
(24,409
)
2,504
12,181
Total net realized and unrealized gain(loss)
4,333
(19,602
)
(38,889
)
25,814
Net increase(decrease) in net assets resulting from
operations
$
43,047
$
19,271
$
76,089
$
128,987
Net investment income before investment gains and losses per common
share: Basic
$
0.34
$
0.37
$
1.03
$
1.03
Change in net assets resulting from operations per common share:
Basic
$
0.38
$
0.18
$
0.68
$
1.29
Diluted
$
0.38
$
0.18
$
0.67
$
1.29
Weighted average shares outstanding: Basic
113,489
104,314
111,342
99,615
Diluted
113,744
104,655
111,590
100,043
Distributions paid per common share: Basic
$
0.32
$
0.34
$
1.04
$
0.98
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201029006007/en/
Michael Hara Investor Relations and Corporate Communications
Hercules Capital, Inc. 650-433-5578 mhara@htgc.com
Hercules Capital (NYSE:HTGC)
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