Q4 2020 Net Asset Value “NAV” per Share
Increased 9.7% to $11.26 from Q3 2020
Q4 2020 Net Investment Income Provides 116%
Coverage of Base Distribution Payout
Record FY 2020 Total Investment Income
Increased 7.2% Year-over-Year
Record FY 2020 Net Investment Income Increased
9.7% Year-over-Year
Record Undistributed Earnings Spillover of
$107.7 Million, or $0.94(1) per Ending Shares Outstanding
Record Available Liquidity of $673.3
Million
Q4 2020 Financial Achievements and
Highlights
- Net Investment Income “NII” of $42.2 million, or $0.37 per
share, an increase of 5.1% year-over-year
- Provides 116% coverage of base distribution payout
- Total Investment Income of $75.3 million, an increase of 6.7%
year-over-year
- Q4 new debt and equity commitments of $150.8 million
- Q4 total gross fundings of $129.8 million
- Unscheduled early principal repayments or “early loan
repayments” of $282.3 million
- $673.3 million of available liquidity, subject to existing
terms and covenants
- 13.8% Return on Average Equity “ROAE” (NII/Average Equity)
- 6.6% Return on Average Assets “ROAA” (NII/Average Assets)
- GAAP leverage of 100.6% and regulatory leverage of
93.0%(2)
- Net Asset Value “NAV” increased to $11.26 from $10.26, up 9.7%
from Q3 2020
- 13.3% GAAP Effective Yield and 11.8% Core Yield(3), a non-GAAP
measure
Full-year ending December 31, 2020 Financial Achievements and
Highlights
- Record Total Investment Income of $287.3 million, an increase
of 7.2%, compared to $267.9 million for the 12 months ending
December 31, 2019
- Record NII of $157.1 million, or $1.39 per share, an increase
of 9.7%, compared to $143.3 million for the 12 months ending
December 31, 2019
- New equity and debt commitments of $1.19 billion for the 12
months ending December 31, 2020
- Total fundings of $761.2 million for the twelve months ending
December 31, 2020
- Record unscheduled early loan repayments of $709.0 million for
the 12 months ending December 31, 2020
Footnotes:
(1) $0.95 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
fourth quarter and full-year ended December 31, 2020.
“Despite the unique challenges of 2020, Hercules was able to
reach several new financial and operating milestones,” stated Scott
Bluestein, chief executive officer and chief investment officer of
Hercules. “Notably, we closed over $1.0 billion in new debt and
equity commitments for the third consecutive year, delivered record
total investment income and net investment income, each growing
7.2% and 9.7%, respectively, and maintained the strong credit
quality of our debt investment portfolio. In addition, during Q4
our portfolio generated net investment income in excess of our base
shareholder distribution and this allowed us to declare a $0.05
supplemental distribution to our shareholders.”
Bluestein added, “Our Technology and Life Sciences segments
continue to be well positioned throughout the COVID-19 pandemic.
Access to liquidity for our portfolio companies continues to be
strong as evidenced by record-breaking venture capital fundraising
and investments in 2020.”
Bluestein concluded, “As Hercules enters 2021, we do so from a
position of strength with record liquidity, conservative leverage
and strong originations momentum. We made significant investments
throughout 2020 in our team, infrastructure and systems. We added
talent to all levels of the organization and made a series of
investments in our technology and systems that we believe will best
position us for future growth.”
Q4 2020 Review and Operating Results
Debt Investment Portfolio
Hercules delivered new debt and equity commitments totaling
$150.8 million and gross fundings totaling $129.8 million.
During the fourth quarter, Hercules realized early loan
repayments of $282.3 million, which along with normal scheduled
amortization of $18.3 million, resulted in total debt repayments of
$300.5 million.
The new debt investment origination and funding activities lead
to a net debt investment portfolio decrease of ($184.2) million
during the fourth 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: Q4 2020 to
Q3 2020
(in millions) Debt Equity &
Inv.Funds Warrants Total Portfolio
Balances at Cost at 9/30/20
$
2,283.7
$
193.3
$
28.8
$
2,505.8
New fundings(a)
122.2
7.4
0.2
129.8
Warrants not related to Q4 2020 fundings
—
—
0.1
0.1
Early payoffs(b)
(282.3
)
—
—
(282.3
)
Principal payments received on investments
(18.3
)
—
—
(18.3
)
Net changes attributed to conversions, liquidations, and fees
(5.8
)
(10.5
)
(3.4
)
(19.7
)
Net activity during Q4 2020
(184.2
)
(3.1
)
(3.1
)
(190.4
)
Balances at Cost at 12/31/20
$
2,099.5
$
190.2
$
25.7
$
2,315.4
Balances at Value at 9/30/20
$
2,264.5
$
133.8
$
22.5
$
2,420.8
Net activity during Q4 2020
(184.2
)
(3.1
)
(3.1
)
(190.4
)
Net change in unrealized appreciation (depreciation)
14.2
94.3
15.2
123.7
Total net activity during Q4 2020
(170.0
)
91.2
12.1
(66.7
)
Balances at Value at 12/31/20
$
2,094.5
$
225.0
$
34.6
$
2,354.1
(a) New fundings amount includes $604K fundings associated
with revolver loans during Q4 2020. (b) Early payoffs include $3.64
million of paydowns on revolvers during Q4 2020.
Debt Investment Portfolio Balances by Quarter
(in millions)
Q4 2020 Q3 2020 Q2 2020 Q1
2020 Q4 2019 Ending Balance at Cost
$2,099.5
$2,283.7
$2,278.9
$2,242.9
$2,170.1
Weighted Average Balance
$2,246.0
$2,217.0
$2,248.0
$2,178.0
$2,164.0
Debt Investment Portfolio Composition by Quarter
(% of debt investment portfolio)
Q4 2020
Q3 2020
Q2 2020
Q1 2020
Q4 2019
First Lien Senior Secured
84.2%
85.5%
83.5%
83.0%
84.0%
Floating Rate w/Floors
96.9%
97.9%
97.9%
97.8%
97.4%
Effective Portfolio Yield and Core Portfolio Yield (“Core
Yield”)
The effective yield on Hercules’ debt investment portfolio was
13.3% during Q4 2020, as compared to 12.6% for Q3 2020. The Company
realized $282.3 million of early loan repayments in Q4 2020
compared to $190.8 million in Q3 2020, or an increase of 48.0%.
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 11.8% during Q4 2020, within
the Company’s expected range of 11.0% to 12.0%, and increased
compared to 11.3% in Q3 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 $75.3 million for Q4 2020,
compared to $70.6 million in Q4 2019, an increase of 6.7%
year-over-year. The increase is primarily attributable to a higher
weighted average debt investment balance and fee income from higher
early loan repayments between periods.
Non-interest and fee expenses were $16.0 million in Q4 2020
versus $14.5 million for Q4 2019. The increase was due to higher
general and administrative expenses, tax expenses and higher
employee compensation expenses.
Interest expense and fees were $17.2 million in Q4 2020,
compared to $16.0 million in Q4 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 5.2% in Q4 2020, as compared to 5.0% for
Q4 2019.
NII – Net Investment Income
NII for Q4 2020 was $42.2 million, or $0.37 per share, based on
113.9 million basic weighted average shares outstanding, compared
to $40.1 million, or $0.38 per share, based on 105.6 million basic
weighted average shares outstanding in Q4 2019. The increase is
attributable to a higher average debt investment balance and fee
income from higher early loan repayments 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 December
31, 2020, (including net loan, warrant and equity activity) on
investments, totaled ($79.7) 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 $11.1 billion, the total realized
gain/(loss) since inception of ($79.7) million represents
approximately 72 basis points “bps,” or 0.72%, of cumulative debt
commitments, or an effective annualized loss rate of 4.5 bps, or
0.04%.
Realized Gains/(Losses)
During Q4 2020, Hercules had net realized losses of ($14.7)
million primarily from gross realized losses on the write-off or
termination of equity, warrant and loan investments of ($22.4)
million. These gross realized losses were offset by gross realized
gains of $7.7 million due to the sale of the Company’s equity
investments.
Unrealized Appreciation/(Depreciation)
During Q4 2020, Hercules recorded $123.7 million of net
unrealized appreciation, all of which was net unrealized
appreciation from our debt, equity and warrant investments.
Portfolio Asset Quality
As of December 31, 2020, the weighted average grade of the debt
investment portfolio, at fair value, improved to 2.16, compared to
2.22 as of September 30, 2020, based on a scale of 1 to 5, with 1
being the highest quality. Hercules’ policy is to generally adjust
the credit grading down on its portfolio companies as they approach
their expected need for additional growth equity capital to fund
their respective operations for the next 9-14 months. Various
companies in the Company’s portfolio will require additional rounds
of funding from time to time to maintain their operations.
Additionally, Hercules may selectively downgrade portfolio
companies, from time to time, if they are not meeting the Company’s
financing criteria, or underperforming relative to their respective
business plans.
As of December 31, 2020, grading of the debt investment
portfolio at fair value, excluding warrants and equity investments,
was as follows:
Credit Grading at Fair Value, Q4 2020 - Q4 2019 ($ in
millions)
Q4 2020
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Grade 1 - High
$
411.0
19.6
%
$
406.5
17.9
%
$
443.6
20.1
%
$
390.4
17.7
%
$
387.3
18.0
%
Grade 2
$
1,027.9
49.1
%
$
1,053.1
46.5
%
$
877.9
39.6
%
$
818.1
37.3
%
$
1,180.5
55.0
%
Grade 3
$
621.3
29.7
%
$
772.3
34.1
%
$
849.7
38.3
%
$
917.2
41.8
%
$
509.9
23.7
%
Grade 4
$
25.3
1.2
%
$
26.7
1.2
%
$
25.0
1.1
%
$
54.3
2.5
%
$
69.0
3.2
%
Grade 5 - Low
$
8.9
0.4
%
$
5.9
0.3
%
$
20.1
0.9
%
$
15.5
0.7
%
$
1.8
0.1
%
Weighted Avg.
2.16
2.22
2.30
2.34
2.15
Non-Accruals
Non-accruals increased as a percentage of the overall investment
portfolio in the fourth quarter of 2020. As of December 31, 2020,
the Company had seven (7) debt investments on non-accrual with an
investment cost and fair value of approximately $31.0 million and
$11.9 million, respectively, or 1.3% and 0.5% as a percentage of
the Company’s total investment portfolio at cost and value,
respectively.
Compared to 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 total investment portfolio at
cost and value, respectively.
Q4 2020
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Total Investments at Cost
$2,315.4
$2,505.8
$2,501.4
$2,466.3
$2,402.0
Loans on non-accrual as a % of Total Investments at Value
0.5%
0.3%
0.5%
0.0%
0.0%
Loans on non-accrual as a % of Total Investments at
Cost
1.3%
0.9%
2.4%
0.8%
0.4%
Liquidity and Capital Resources
In November 2020, the Company announced a private offering
totaling $100.0 million in aggregate principal amount of $50.0
million 4.50% Notes due March 2026 (the “March 2026 A Notes”) and
$50.0 million 4.55% Notes due March 2026 (the “March 2026 B
Notes”). The issuance of $50.0 million of the March 2026 A Notes
occurred on November 4, 2020 and the issuance of $50.0 million of
the March 2026 B Notes is expected to occur in March 2021.
The Company ended Q4 2020 with $673.3 million in available
liquidity, including $198.3 million in unrestricted cash and cash
equivalents, and $475.0 million in available credit facilities,
subject to existing terms and advance rates and regulatory and
covenant requirements.
During the three months ending December 31, 2020, the Company
sold 306,000 shares of common stock under the equity ATM program,
for total accumulated net proceeds of approximately $3.6 million,
including $190,000 of offering expenses. During the twelve months
ending December 31, 2020, the Company sold approximately 6.3
million shares of common stock, which were issued under the equity
ATM program, for total accumulated net proceeds of approximately
$77.2 million, including $1.0 of offering expenses, all accretive
to net asset value. As of February 22, 2021, approximately 16.2
million shares remain available for issuance and sale under the
Equity Distribution Agreement.
On October 27, 2020, HC 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 HC IV
which will be used for investment purposes, subject to the issuance
of a capital commitment by the SBA and customary procedures.
Bank Facilities
As of December 31, 2020, there were no 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.
Leverage
As of December 31, 2020, Hercules’ GAAP leverage ratio,
including its Small Business Administration “SBA” debentures, was
100.6%. Hercules’ regulatory leverage, or debt-to-equity ratio,
excluding its SBA debentures, was 93.0% and net regulatory
leverage, a non-GAAP measure (excluding cash of approximately
$198.3 million), was 77.6%. Hercules’ net leverage ratio, including
its SBA debentures, was 85.3%.
Available Unfunded Commitments – Representing 6.9% 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 December 31, 2020, the Company had $179.8 million of
available unfunded commitments at the request of the portfolio
company and unencumbered by any milestones, including undrawn
revolving facilities, representing 6.9% of Hercules’ total assets.
This decreased from the previous quarter of $242.5 million of
available unfunded commitments or 9.7% of Hercules’ total
assets.
Existing Pipeline and Signed Term Sheets
After closing $150.8 million in new debt and equity commitments
in Q4 2020, Hercules has pending commitments of $248.0 million in
signed non-binding term sheets outstanding as of February 18, 2021.
Since the close of Q4 2020 and as of February 18, 2021, Hercules
has closed new debt and equity commitments of $294.4 million and
funded $196.3 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 December 31, 2020, the Company’s net assets were $1.29
billion, compared to $1.17 billion at the end of Q3 2020. NAV per
share increased 9.7% to $11.26 on 114.7 million outstanding shares
of common stock as of December 31, 2020, compared to $10.26 on
114.3 million outstanding shares of common stock as of December 31,
2020. The increase in NAV per share was primarily attributed to the
net change in unrealized appreciation and earnings exceeding the
distribution paid in Q4 of $0.05 per share.
Interest Rate Sensitivity
Hercules has an asset sensitive debt investment portfolio with
96.9% of its debt investment portfolio being priced at floating
interest rates as of December 31, 2020, with a Prime or LIBOR-based
interest rate floor, combined with 100% 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 December 31, 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)
$
(9
)
$
(83
)
$
74
$
-
(50)
$
(9
)
$
(55
)
$
46
$
-
(25)
$
(9
)
$
(28
)
$
19
$
-
25
$
2,259
$
28
$
2,231
$
0.02
50
$
4,517
$
55
$
4,462
$
0.04
75
$
6,589
$
83
$
6,506
$
0.06
100
$
8,907
$
110
$
8,797
$
0.08
200
$
20,110
$
221
$
19,889
$
0.17
(1) Source: Hercules Capital Form 10-K for Q4 2020 (2) EPS
calculated on basic weighted shares outstanding of 113,898.
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 59 portfolio companies with a
fair value of $224.7 million and a cost basis of $189.9 million as
of December 31, 2020. On a fair value basis, 61.6% or $138.3
million is related to existing public equity positions.
Warrant Portfolio
Hercules held warrant positions in 100 portfolio companies with
a fair value of $34.6 million and a cost basis of $25.7 million as
of December 31, 2020. On a fair value basis, 38.0% or $13.1 million
is related to existing public warrant positions.
Portfolio Company IPO and M&A Activity in Q4 2020 and YTD
2021
IPO Activity
As of February 18, 2021, Hercules held debt, warrant or equity
positions in two (2) portfolio companies that had completed their
IPOs and five (5) companies that have entered into definitive
agreements to go public via a special purpose acquisition company
“SPAC,” including:
- In December 2020, Hercules portfolio company DoorDash, Inc.
(NYSE: DASH), a technology company that connects customers with
local and national businesses in more than 4,000 cities and all 50
states across the United States, Canada, and Australia, completed
its initial public offering of 33.0 million shares of common stock
at an initial public offering price of $102.00 per share on the New
York Stock Exchange. Hercules currently holds 525,000 shares of
common stock as of December 31, 2020.
- In December 2020, Hercules portfolio company 908 Devices
Inc. (NASDAQ: MASS), a pioneer of purpose-built handheld and
desktop mass spectrometer devices for chemical and biomolecular
analysis, completed its initial public offering at an initial
public offering price of $20.00 per share on the Nasdaq Global
Market. Hercules initially committed $15.0 million in venture debt
financing beginning in February 2017 and currently holds warrants
for 49,078 shares of common stock as of December 31, 2020.
- In January 2021, Hercules portfolio company Achronix
Semiconductor Corp., a semiconductor developer of FPGA and
eFPGA devices, announced it has entered into a definitive agreement
for a reverse merger initial public offering with ACE Convergence
Acquisition Corp. (NASDAQ: ACEV), a special purpose acquisition
company. Upon completion of the merger, Achronix will be listed on
the Nasdaq Global Market under the ticker symbol “ACHX.” Hercules
initially committed $38.0 million in venture debt financing
beginning in June 2011 and currently holds warrants for 360,000
shares of Preferred Series C stock and 750,000 shares of Preferred
Series D-2 stock as of December 31, 2020.
- In February 2021, Hercules portfolio company Wheels Up
Partners LLC, a provider of subscription club memberships for
private-jet flyers, announced it has entered into a definitive
agreement for a reverse merger initial public offering with
Aspirational Consumer Lifestyle Corp. (NYSE: ASPL), a special
purpose acquisition company. Upon completion of the merger, the
Wheels Up will be listed on the New York Stock Exchange under the
ticker symbol “UP.” Hercules initially committed $23.0 million in
venture debt financing beginning in December 2017.
- In January 2021, Hercules portfolio company Proterra, a
leading commercial electric vehicle technology and manufacturing
company, announced it has entered into a definitive agreement for a
reverse merger initial public offering with ArcLight Clean
Transition Corp. (NASDAQ: ACTC), a special purpose acquisition
company. Upon completion of the merger, the Proterra will be listed
on the Nasdaq Global Market under the ticker symbol “PTRA.”
Hercules initially committed $30.0 million in venture debt
financing beginning in May 2015 and currently holds warrants for
36,360 shares of common stock, warrants for 477,517 shares of
Preferred Series 4 stock and 99,280 shares of Preferred Series 5
stock as of December 31, 2020.
- In February 2021, Nerdy, the parent company of Hercules
portfolio company Varsity Tutors, a technology developer of
an online tutoring platform, announced it has entered into a
definitive agreement for a reverse merger initial public offering
with TPG Pace Tech Opportunities (NYSE: PACE), a special purpose
acquisition company. Upon completion of the merger, Nerdy will be
listed on the New York Stock Exchange under the ticker symbol
“NRDY.” Hercules initially committed $50.0 million in venture debt
financing beginning in August 2019.
- In February 2021, Hercules portfolio company 23andMe
Inc., a provider of consumer DNA-testing products, announced it
has entered into a definitive agreement for a reverse merger
initial public offering with VG Acquisition Corp. (NYSE: VGAC.U), a
special purpose acquisition company. Upon completion of the merger,
23andMe will be listed on the New York Stock Exchange under the
ticker symbol “ME.” Hercules currently holds 360,000 shares of
common stock as of December 31, 2020.
There can be no assurances that companies that have yet to
complete their IPOs will do so.
M&A Activity
- In September 2020, Hercules’ portfolio company Insurance
Technologies, LLC, a provider of sales and regulatory
automation solutions for the insurance and financial services
industries, announced that they entered into a definitive agreement
with Thomas H. Lee Partners, a premier private equity firm
investing in growth companies, under which Thomas H. Lee will
acquire a majority stake in Insurance Technologies. Hercules
initially committed $17.5 million in venture debt financing in
March 2018.
- In November 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. The acquisition was completed in December
2020. Hercules initially committed $20.0 million in venture debt
financing in July 2018 and currently holds 32,991 shares of Uber
common stock as of December 31, 2020.
- In November 2020, Hercules’ portfolio company Urovant
Sciences (NASDAQ: UROV), a clinical-stage biopharmaceutical
company focused on developing and commercializing innovative
therapies for urologic conditions, announced that they have entered
into a definitive merger agreement with Sumitovant Biopharma, a
global biopharmaceutical company developing investigational
medicines across a range of disease areas targeting high unmet
need, for Sumitovant to acquire the outstanding shares of Urovant
common stock not already owned by Sumitovant. Hercules initially
committed $45.0 million in venture debt financing in February 2019
and currently holds warrants for 99,777 shares of common stock, as
of December 31, 2020.
- In December 2020, Hercules’ portfolio company Actifio
Inc., a data management company that helps companies with data
continuity to be better prepared in the event of a security breach
or other need for disaster recovery, announced it reached an
agreement to be acquired by Google. Terms of the acquisition were
not disclosed. Hercules initially committed $40.0 million in
venture debt financing beginning in July 2015.
- In December 2020, Hercules portfolio company Neos
Therapeutics, Inc. (NASDAQ: NEOS), a commercial stage
pharmaceutical company developing and manufacturing central nervous
system-focused products, announced that they entered into a
definitive merger agreement with Aytu BioScience, Inc. (NASDAQ:
AYTU), a specialty pharmaceutical company focused on
commercializing novel products that address significant patient
needs. Neos will merge with a wholly owned subsidiary of Aytu in an
all-stock transaction. Hercules initially committed $26.5 million
in venture debt financing beginning in March 2014 and currently
holds 125,000 shares of common stock, as of December 31, 2020.
- In January 2021, Hercules portfolio company Wattpad, the
developer of a global multi-platform entertainment company for
original stories and leading social storytelling platform,
announced its unanimous approval of a definitive agreement to be
acquired by Naver, South Korea’s internet conglomerate and home of
WEBTOON™, a leading global digital comics platform. Naver is
expected to acquire Wattpad in a cash and stock transaction valued
at more than an estimated USD $600.0 million, subject to customary
adjustments and other terms. Hercules initially committed $10.0
million in venture debt financing beginning in February 2016.
Subsequent Events
- As of February 18, 2021, Hercules has:
- Funded $196.3 million to new and existing commitments since the
close of the fourth quarter 2020.
- Pending commitments (signed non-binding term sheets) of $248.0
million.
The table below summarizes the Company’s year-to-date closed and
pending commitments as follows:
Closed Commitments and Pending
Commitments (in millions)
Q1 2021 Closed Commitments (as of February
18, 2021)(a)
$294.4
Q1 2021 Pending Commitments (as of
February 18, 2021)(b)
$248.0
Year-to-Date 2021 Closed and Pending
Commitments
$542.4
Notes:
- Closed Commitments may include renewals of existing credit
facilities and equity commitments. Not all Closed Commitments
result in future cash requirements. Commitments generally fund over
the two succeeding quarters from close.
- Not all pending commitments (signed non-binding term sheets)
are expected to close and do not necessarily represent any future
cash requirements.
Conference Call
Hercules has scheduled its fourth quarter and full-year 2020
financial results conference call for February 23, 2021 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: 1585214 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
1585214.
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 $11.1
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) December 31, 2020 December 31, 2019
Assets Investments: Non-control/Non-affiliate investments
(cost of $2,175,651 and $2,248,524, respectively)
$
2,288,338
$
2,232,972
Control investments (cost of $65,257 and $65,333, respectively)
57,400
59,746
Affiliate investments (cost of
$74,450 and $88,175, respectively)
8,340
21,808
Total investments in securities, at value (cost of $2,315,358 and
$2,402,032, respectively)
2,354,078
2,314,526
Cash and cash equivalents
198,282
64,393
Restricted cash
39,340
50,603
Interest receivable
19,077
20,207
Right of use asset
9,278
11,659
Other assets
3,942
580
Total assets
$
2,623,997
$
2,461,968
Liabilities
Accounts payable and accrued liabilities
$
36,343
$
30,306
Operating lease liability
9,312
11,538
SBA Debentures, net (principal of $99,000 and $149,000,
respectively)(1)
98,716
148,165
2022 Notes, net (principal of $150,000 and $150,000,
respectively)(1)
149,039
148,514
July 2024 Notes, net (principal of $105,000 and $105,000,
respectively)(1)
103,942
103,685
February 2025 Notes, net (principal of $50,000 and $0,
respectively)(1)
49,522
—
April 2025 Notes, net (principal of $75,000 and $75,000,
respectively)(1)
73,351
72,970
June 2025 Notes, net (principal of $70,000 and $0, respectively)(1)
69,272
—
March 2026 A Notes, net (principal of $50,000 and $0,
respectively)(1)
49,550
—
2033 Notes, net (principal of $40,000 and $40,000, respectively)(1)
38,610
38,501
2027 Asset-Backed Notes, net (principal of $180,988 and $200,000
respectively)(1)
178,812
197,312
2028 Asset-Backed Notes, net (principal of $250,000 and $250,000,
respectively)(1)
247,647
247,395
2022 Convertible Notes, net (principal of $230,000 and $230,000,
respectively)(1)
228,177
226,614
Credit Facilities
—
103,919
Total liabilities
$
1,332,293
$
1,328,919
Net assets consist of:
Common stock, par value
115
108
Capital in excess of par value
1,158,198
1,145,106
Total distributable earnings (loss)
133,391
(12,165
)
Total net assets
$
1,291,704
$
1,133,049
Total liabilities and net assets
$
2,623,997
$
2,461,968
Shares of common stock outstanding ($0.001 par value,
200,000,000 authorized)
114,726
107,364
Net asset value per share
$
11.26
$
10.55
(1) The Company’s SBA Debentures, February 2025 Notes, June
2025 Notes, 2033 Notes, April 2025 Notes, 2022 Notes, 2027
Asset-Backed Notes, 2028 Asset-Backed Notes, 2022 Convertible
Notes, July 2024 Notes, and March 2026 A 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 December
31, Twelve Months Ended December 31,
2020
2019
2020
2019
Investment income: Interest and dividend income
Non-control/Non-affiliate investments
$
67,581
$
64,925
$
259,989
$
241,491
Control investments
740
894
2,857
4,014
Affiliate investments
(76
)
267
533
2,008
Total interest income
68,245
66,086
263,379
247,513
Fee income
Non-control/Non-affiliate investments
7,081
4,486
23,858
20,157
Control investments
6
5
21
18
Affiliate investments
—
—
—
186
Total fee income
7,087
4,491
23,879
20,361
Total investment income
75,332
70,577
287,258
267,874
Operating expenses:
Interest
15,190
14,669
59,605
54,596
Loan fees
2,001
1,285
7,269
7,078
General and administrative
4,725
4,573
18,910
19,183
Tax expenses
1,257
519
4,285
2,226
Employee compensation
Compensation and benefits
6,421
7,621
28,996
30,993
Stock-based compensation
3,576
1,811
11,053
10,526
Total employee compensation
9,997
9,432
40,049
41,519
Total operating expenses
33,170
30,478
130,118
124,602
Other income(loss)
—
—
—
—
Net investment income
42,162
40,099
157,140
143,272
Net realized gain (loss) on investments
Non-control/Non-affiliate investments
(563
)
2,890
(41,956
)
16,523
Control investments
—
—
—
—
Affiliate investments
(14,149
)
—
(14,149
)
—
Total net realized gain (loss) on investments
(14,712
)
2,890
(56,105
)
16,523
Net change in unrealized appreciation (depreciation) on
investments
Non-control/Non-affiliate investments
108,756
(458
)
128,238
15,074
Control investments
2,292
1,174
(2,271
)
1,595
Affiliate investments
12,674
906
259
(2,866
)
Total net unrealized appreciation (depreciation) on investments
123,722
1,622
126,226
13,803
Total net realized and unrealized gain(loss)
109,010
4,512
70,121
30,326
Net increase(decrease) in net assets resulting from
operations
$
151,172
$
44,611
$
227,261
$
173,598
Net investment income before investment gains and losses per common
share:
Basic
$
0.37
$
0.38
$
1.39
$
1.41
Change in net assets resulting from operations per common share:
Basic
$
1.32
$
0.42
$
2.02
$
1.71
Diluted
$
1.31
$
0.42
$
2.01
$
1.71
Weighted average shares outstanding:
Basic
113,898
105,634
111,985
101,132
Diluted
114,263
106,072
112,267
101,569
Distributions paid per common share:
Basic
$
0.34
$
0.35
$
1.38
$
1.33
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210223005937/en/
Michael Hara Investor Relations and Corporate Communications
Hercules Capital, Inc. 650-433-5578 mhara@htgc.com
Hercules Capital (NYSE:HTGC)
Historical Stock Chart
From Mar 2024 to Apr 2024
Hercules Capital (NYSE:HTGC)
Historical Stock Chart
From Apr 2023 to Apr 2024