Hercules Capital (NYSE:HTGC) Posts Quarterly Earnings Results, Meets Estimates

Key Points

• Hercules Capital met earnings expectations: Quarterly EPS was $0.47, in line with consensus, while revenue of $135.69 million fell short of the $144.11 million estimate and declined from the prior year’s $0.49 EPS.
• Growth and credit performance remained solid: Year-to-date originations rose 20% to a record $3.44 billion, assets under management increased 17.7% to about $6.5 billion, and non-accruals remained limited to two loans.
• The company reduced its dividend amid higher funding costs: The quarterly dividend was cut to $0.07 from $0.40, while the cost of debt increased to 5.4% and GAAP leverage rose to 111.1% as Hercules funded portfolio growth.

Hercules Capital (NYSE:HTGC - Get Free Report) released its quarterly earnings results on Thursday. The financial services provider reported $0.47 earnings per share for the quarter, meeting analysts' consensus estimates of $0.47, Zacks reports. The company had revenue of $135.69 million during the quarter, compared to the consensus estimate of $144.11 million. Hercules Capital had a net margin of 67.68% and a return on equity of 16.01%. During the same period in the previous year, the business earned $0.49 earnings per share.

Here are the key takeaways from Hercules Capital's conference call:

• Record growth and originations: Year-to-date originations reached a record $3.44 billion, up 20% year over year, while assets under management grew 17.7% to approximately $6.5 billion. Management expects 2026 to exceed 2025 records for commitments and fundings.
• Strong earnings and distribution coverage: Third-quarter net investment income was $87.3 million, or $0.47 per share, covering 118% of the base distribution and 100% of the base plus supplemental distribution. NAV per share increased nearly 1% quarter over quarter to $12.26.
• Credit quality remained stable: The weighted-average internal credit rating improved to 2.12, non-accruals remained limited to two loans, and all accruing debt investments were current on scheduled principal and interest payments. PIK income also declined as a percentage of revenue.
• Constructive fourth-quarter outlook: Management expects prepayments to normalize to $200 million-$300 million in Q4, supporting higher total investment income and net investment income, while ROE is expected to begin improving from what executives characterized as a likely floor.
• Higher funding costs and leverage: The weighted-average cost of debt rose to 5.4% from 5.2%, while GAAP leverage increased to 111.1% from 103.9% as borrowings funded portfolio growth. Management also guided to core yield of 11.8%-12%, reflecting continued competitive pressure on pricing.

Hercules Capital Price Performance

Shares of Hercules Capital stock traded up $0.32 during trading on Thursday, reaching $16.93. 1,113,063 shares of the company's stock were exchanged, compared to its average volume of 1,863,959. The company has a debt-to-equity ratio of 1.03, a quick ratio of 1.37 and a current ratio of 1.37. Hercules Capital has a 1-year low of $13.70 and a 1-year high of $19.13. The company has a market cap of $3.17 billion, a P/E ratio of 8.42 and a beta of 0.82. The firm's 50-day moving average price is $17.02 and its 200 day moving average price is $16.20.

Hercules Capital Cuts Dividend

The firm also recently declared a quarterly dividend, which will be paid on Tuesday, November 17th. Stockholders of record on Tuesday, November 10th will be paid a $0.07 dividend. This represents a $0.28 annualized dividend and a dividend yield of 1.7%. The ex-dividend date is Tuesday, November 10th. This is a negative change from Hercules Capital's previous quarterly dividend of $0.40. Hercules Capital's dividend payout ratio is 79.60%.

Analyst Ratings Changes

A number of analysts have recently weighed in on the company. LADENBURG THALM/SH SH cut their target price on Hercules Capital from $21.00 to $20.00 and set a "buy" rating for the company in a research report on Friday, July 31st. UBS Group raised Hercules Capital from a "neutral" rating to a "buy" rating and boosted their price target for the company from $15.50 to $18.50 in a research note on Tuesday, September 1st. Finally, Weiss Ratings raised shares of Hercules Capital from a "hold (c)" rating to a "hold (c+)" rating in a research report on Wednesday. One equities research analyst has rated the stock with a Strong Buy rating, five have given a Buy rating and two have issued a Hold rating to the company's stock. Based on data from MarketBeat.com, Hercules Capital presently has an average rating of "Moderate Buy" and an average price target of $18.89.

Hercules Capital Company Profile

Hercules Capital, Inc is a business development company and specialty finance firm that provides debt financing to innovative, growth-oriented companies. The company focuses primarily on venture capital-backed businesses in the technology, life sciences, and sustainable and specialty technology sectors.

Hercules Capital offers secured loans and other forms of growth capital designed to support companies through various stages of development, including expansion, acquisitions, recapitalizations, and initial public offerings.