Hercules Capital (HTGC) Q2 Earnings Meet Estimates, Costs Rise

Hercules Capital Inc.’s HTGC second-quarter 2021 net investment income of 32 cents per share was in line with the Zacks Consensus Estimate. The figure indicates no change from the year-ago quarter’s reported number.

The company recorded an increase in total investment income in the reported quarter. The balance sheet position remained strong and new commitments were robust. However, an increase in expenses hurt results to some extent.

Net investment income was $37 million, up 3.6% from the prior-year quarter.

Total Investment Income Improves, Expenses Rise

Total investment income was $69.6 million, up 2.3% from the year-ago quarter. The rise was driven by an increase in total fee income. The top line, however, lagged the Zacks Consensus Estimate of $69.8 million.

Total gross operating expenses rose 4.7% year over year to $33.8 million. The rise resulted from an increase in total employee compensation costs and loan fees.

Portfolio Value & New Commitments Solid

The fair value of Hercules Capital’s total investment portfolio was $2.52 billion as of Jun 30, 2021.

In the reported quarter, the company delivered $440.8 million in new debt and equity commitments as well as realized early loan repayments of $167.9 million.

Balance Sheet Position Strong

As of Jun 30, 2021, Hercules Capital’s net asset value was $11.71 per share compared with $11.26 as of Dec 31, 2020.

The company had $610 million in liquidity — including $18.4 million of unrestricted cash and cash equivalents, and $591.6 million in credit facilities — as of Jun 30, 2021.

At the end of the reported quarter, the weighted average cost of debt, comprising interest and fees, was 5.4%, up from 5% at the end of the prior-year quarter.

Our Take

Hercules Capital’s loan origination activity continues to be on track, which is likely to support top-line growth in the quarters ahead. Nevertheless, as the company continues to undertake efforts to improve originations, expenses are expected to keep flaring up, thereby, hurting profits.

Hercules Capital, Inc. Price, Consensus and EPS Surprise

Hercules Capital, Inc. price-consensus-eps-surprise-chart | Hercules Capital, Inc. Quote

Currently, Hercules Capital carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Dates of Other Finance Stocks

Gladstone Investment Corporation GAIN, Main Street Capital Corporation MAIN and FS KKR Capital Corp. FSK are scheduled to announce quarterly results on Aug 2, Aug 5 and Aug 9, respectively.

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