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Hercules Capital (HTGC)
NYSE:HTGC
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Hercules Capital
(NYSE:HTGC)67Neutral
Positive Factors
Dividend Coverage
Despite the $0.02 sequential decline in NII per share, base dividend coverage remained elevated at 123%, and undistributed earnings spillover ended the year at $0.96 per share, providing significant cushion and flexibility on future dividends.
Investment Portfolio
The investment portfolio (at fair value) increased 2.8% sequentially (and +13% YOY) to $3.66B, driven by net fundings of $362M.
Negative Factors
New Origination
New origination was lighter this quarter, with the Hercules team nearly doubled up by venture-rival Trinity Capital.
Hercules Capital (HTGC) vs. S&P 500 (SPY)
Market Cap
$3.27B
Dividend Yield8.46%
Average Volume (3M)1.26M
Price to Earnings (P/E)11.7
Beta (1Y)1.00
Revenue Growth-1.49%
EPS Growth-29.48%
CountryUS
Employees100
SectorFinancial
Sector Strength93
IndustryAsset Management Services
Share Statistics
EPS (TTM)1.61
Shares Outstanding173,154,660
10 Day Avg. Volume1,913,746
30 Day Avg. Volume1,261,364
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)6.75
Price to Cash Flow (P/CF)-28.00
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$21.30Price Target Upside14.52% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering5
Hercules Capital Business Overview & Revenue Model
Company DescriptionHercules Capital, Inc. (HTGC) is a leading specialty finance company focused on providing flexible and innovative debt solutions to venture capital-backed companies in technology, life sciences, and sustainable and renewable technology industries. As a business development company (BDC), Hercules Capital offers debt financing solutions designed to meet the specific needs of growing companies, helping them scale their operations while minimizing equity dilution.
How the Company Makes MoneyHercules Capital makes money primarily through the interest and fees charged on the debt financing provided to its portfolio companies. The company earns interest income from the loans it extends, which typically have higher interest rates due to the venture capital-backed nature of its clients. In addition to interest income, Hercules Capital often receives warrant positions, which can provide additional upside potential if the portfolio companies perform well. The company also benefits from prepayment and other fees associated with its lending activities. Hercules Capital's revenue model is further supported by its ability to secure capital at competitive costs, allowing it to maintain a favorable net interest margin. Strategic partnerships with venture capital firms and strong relationships with portfolio companies contribute to its earnings by enabling deal flow and providing insights into emerging industry trends.
Hercules Capital Financial Statement Overview
Summary
Despite strong operational efficiency and a solid balance sheet, Hercules Capital faces significant profitability and cash flow challenges. The recent downturn in net income and negative free cash flow highlight these issues, impacting the overall financial performance score.Income Statement
The income statement shows a mixed performance. The revenue growth has been erratic with a substantial revenue drop from 2023 to 2024. Gross and EBIT margins are positive, demonstrating good operational efficiency in 2023, but the net profit margin for 2024 is zero due to no net income, which is concerning. Overall, the company has strong operational capability but faces profitability challenges.65
Positive
Balance Sheet
The balance sheet is robust with a high equity ratio, indicating financial stability and low reliance on debt. The debt-to-equity ratio is manageable, showing conservative leverage. Return on equity in 2023 was strong, but the lack of net income in 2024 affects ROE negatively. Overall, the balance sheet suggests a solid financial foundation, albeit with risks due to recent net income issues.70
Positive
Cash Flow
Cash flow analysis reveals volatility, with negative free cash flow in 2024 due to negative operating cash flow. The operating cash flow to net income ratio was strong in 2023, but the negative free cash flow in 2024 shows cash management challenges. The cash flow statement indicates potential liquidity issues that need addressing.55
Neutral
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 415.93M | 460.67M | 184.64M | 255.13M | 297.77M | Gross Profit |
| 361.69M | 459.07M | 140.79M | 218.16M | 268.78M | EBIT |
| 237.39M | 387.57M | 272.93M | 174.16M | 227.26M | EBITDA |
| 0.00 | 405.29M | 250.62M | 213.39M | 224.43M | Net Income Common Stockholders |
| 262.97M | 337.48M | 156.83M | 174.16M | 227.26M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 42.68M | 98.90M | 2.90B | 133.12M | 198.28M | Total Assets |
| 3.83B | 3.42B | 3.03B | 2.60B | 2.62B | Total Debt |
| 18.19M | 1.56B | 1.58B | 1.24B | 1.30B | Net Debt |
| -24.48M | 1.46B | 1.56B | 1.11B | 1.10B | Total Liabilities |
| 1.84B | 1.61B | 1.63B | 1.29B | 1.33B | Stockholders Equity |
| 1.99B | 1.80B | 1.40B | 1.31B | 1.29B |
| Cash Flow | Free Cash Flow | |||
| -118.09M | 67.39M | -424.91M | 128.51M | 207.66M | Operating Cash Flow |
| -118.09M | 68.28M | -424.80M | 128.62M | 207.80M | Investing Cash Flow |
| -705.00K | -887.00K | -114.00K | -106.00K | -137.00K | Financing Cash Flow |
| 119.20M | 22.75M | 314.52M | -229.87M | -85.04M |
Hercules Capital Technical Analysis
Negative
18.60
Price Trends
20.16
Negative
19.47
Negative
19.00
Negative
Market Momentum
-0.35
Positive
31.46
Neutral
9.30
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HTGC, the sentiment is Negative. The current price of 18.6 is below the 20-day moving average (MA) of 20.34, below the 50-day MA of 20.16, and below the 200-day MA of 19.00, indicating a bearish trend. The MACD of -0.35 indicates Positive momentum. The RSI at 31.46 is Neutral, neither overbought nor oversold. The STOCH value of 9.30 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for HTGC.
Hercules Capital Risk Analysis
Hercules Capital disclosed 118 risk factors in its most recent earnings report. Hercules Capital reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Hercules Capital Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $5.11B | 10.02 | 19.26% | 5.06% | 51.80% | 12.05% | |
76 Outperform | $15.07B | 9.43 | 12.40% | 8.34% | 19.95% | -10.57% | |
72 Outperform | $1.45B | 22.62 | 3.96% | 14.52% | -28.04% | -69.52% | |
67 Neutral | $3.27B | 11.74 | 13.71% | 8.46% | -1.49% | -29.48% | |
64 Neutral | $14.34B | 10.61 | 9.28% | 4.07% | 18.04% | -9.54% | |
58 Neutral | $702.74M | ― | -8.57% | 16.35% | 8.24% | -207.60% | |
53 Neutral | $470.78M | 28.87 | 3.28% | 12.62% | ― | -66.59% |
* Financial Sector Average
Performance Comparison
HTGC
Hercules Capital
18.60
2.14
13.00%
MAIN
Main Street Capital
57.65
15.18
35.74%
PNNT
Pennantpark Investment
7.17
1.21
20.30%
ARCC
Ares Capital
22.45
3.71
19.80%
TCPC
BlackRock TCP Capital
8.26
-0.94
-10.22%
GSBD
Goldman Sachs BDC
12.24
-1.33
-9.80%
Hercules Capital Earnings Call Summary
Earnings Call Date: Feb 13, 2025 | % Change Since: -9.62% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Positive
The earnings call for Hercules Capital, Inc. reflected strong financial performance and growth, highlighted by record investment income and solid liquidity. However, concerns such as realized losses and a decline in core yield suggest challenges in maintaining yield levels. The overall sentiment is positive, with significant achievements outweighing the noted challenges.Highlights
Record-Breaking Financial Performance
Hercules Capital, Inc. achieved record total investment income of $493.6 million, a 717.1% increase year over year, and record net investment income of $325.8 million, a 7.2% increase year over year.
Significant Platform Growth
The total platform AUM increased by more than 14% year over year to approximately $4.8 billion.
Strong Liquidity Position
The company ended Q4 with strong liquidity of $658.8 million in the BDC and over $1.1 billion of liquidity across the platform.
Continued Supplemental Distributions
Declared a new supplemental distribution of $0.28 for 2025, distributed equally over the next four quarters, marking the fifth consecutive year of supplemental distributions.
Venture Capital Ecosystem Growth
Venture capital investment activity increased 29% from 2023, with $209 billion in investment activity for 2024.
Lowlights
Realized Losses on Debt Investments
During Q4 2024, Hercules had net realized losses of $33.5 million, primarily due to $53.9 million from the write-off of two debt investments.
Core Yield Decline
The core yield decreased from 13.3% in Q3 to 12.9% in Q4, largely due to declining base rates and spread compression on new originations.
Increase in Credit Risk
The rated four credits increased to 4.6% from 2.3% in Q3, indicating a slight increase in credit risk.
Company Guidance
During the Hercules Capital, Inc. Q4 and full year 2024 earnings call, several key metrics were highlighted, underscoring the company's robust performance. Hercules achieved record total gross fundings of $1.81 billion, a 13% increase year-over-year, and record total investment income of $493.6 million, marking a staggering 717.1% rise from the previous year. The company also reported record net investment income of $325.8 million, up by 7.2% year-over-year. Hercules Capital's annual Return on Average Equity (ROAE) was 17.2%, and Return on Average Assets (ROAA) was 7.3%. The total platform Assets Under Management (AUM) grew by more than 14% to approximately $4.8 billion, and the net debt portfolio expanded by $457 million. The balance sheet maintained a conservative leverage of 89.6%, with over $1.1 billion in liquidity across the platform. Hercules reaffirmed its investment-grade ratings from four agencies and continued its trend of delivering supplemental distributions to shareholders for the fifth consecutive year. The company is poised to capitalize on a favorable business landscape in 2025, with plans to leverage its strong liquidity and manage its balance sheet defensively.Hercules Capital Corporate Events
Private Placements and FinancingBusiness Operations and Strategy
Hercules Capital Closes $287.5M Convertible Notes Offering
Positive
Mar 10, 2025
On March 10, 2025, Hercules Capital, Inc. successfully closed a private offering of $287.5 million in 4.750% Convertible Unsecured Notes due 2028. The net proceeds of approximately $278.39 million will be used to fund investments in debt and equity securities and for general corporate purposes. The Convertible Notes, which are unsecured and bear interest semiannually, provide holders the option to convert them into cash, shares, or a combination thereof, with a conversion rate set at 46.5631 shares per $1,000 principal amount. This strategic financial move is expected to bolster Hercules Capital’s investment capabilities and strengthen its position in the venture growth financing market.
Private Placements and Financing
Hercules Capital Announces $250M Convertible Notes Offering
Neutral
Mar 5, 2025
On March 5, 2025, Hercules Capital announced its plan to offer $250 million in Convertible Unsecured Notes due 2028, with an option for initial purchasers to buy an additional $37.5 million to cover overallotments. These notes will be offered to qualified institutional buyers and certain non-U.S. persons, subject to market conditions. The proceeds will be used for investments in debt and equity securities and general corporate purposes. The notes will mature on September 1, 2028, and will not be registered under the Securities Act, limiting their offer or sale in the U.S. without registration or exemption.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.