Record Year-to-Date Total Debt and Equity
Commitments of $971.7 Million
Record Year-to-Date Total Fundings of $634.0
Million
Surpassed $12.0 Billion in Cumulative Total
Debt Commitments since Inception
Q2 2021 Net Asset Value per Share Increased
3.1% to $11.71 from Q1 2021
Record Undistributed Earnings Spillover of
$160.2 Million, or $1.38(1) per Ending Shares Outstanding
Q2 2021 Financial Achievements and Highlights
- Net Investment Income “NII” of $37.0 million, or $0.32 per
share, an increase of 3.6% year-over-year
- Total Investment Income of $69.6 million, an increase of 2.3%
year-over-year
- Total gross new debt and equity commitments of $440.8 million
- Net Hercules’ debt and equity commitments of $399.7
million(2)
- Total gross fundings of $278.7 million
- Net Hercules’ fundings of $246.9 million(2)
- Unscheduled early principal repayments or “early loan
repayments” of $167.9 million
- $610.0 million of available liquidity, subject to existing
terms and covenants
- 11.8% Return on Average Equity “ROAE” (NII/Average Equity)
- 5.9% Return on Average Assets “ROAA” (NII/Average Assets)
- GAAP leverage of 87.7% and regulatory leverage of 83.8%(3)
- Net Asset Value “NAV” increased to $11.71 from $11.36, an
increase of 3.1% from Q1 2021
- 12.7% GAAP Effective Yield and 11.5% Core Yield(4), a non-GAAP
measure
Year-to-date ending June 30, 2021 Financial
Highlights
- NII of $71.5 million, or $0.62 per share
- Total investment income of $138.3 million
- Record new equity and debt commitments of $971.7 million, an
increase of 85.8% year-over-year
- Record total fundings of $634.0 million, an increase of 73.3%
year-over-year
- Net debt investment portfolio growth of $139.3 million
- Unscheduled early loan repayments of $359.4 million
Footnotes:
- $1.40 per Weighted Average Shares Outstanding
- Net Hercules’ commitments and fundings are net of what was
assigned to the private funds during the quarter
- Regulatory leverage represents debt-to-equity ratio, excluding
the Company’s Small Business Administration “SBA” debentures
- 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
second quarter ended June 30, 2021.
“During Q2 2021, Hercules generated 100% coverage of our base
dividend distribution with NII, delivered solid NAV accretion and
maintained our strong liquidity position to fund our disciplined
and controlled growth strategy,” stated Scott Bluestein, chief
executive officer and chief investment officer of Hercules. “As a
result, the Company was able to offset elevated repayment
activities, deliver net debt portfolio growth of nearly $57 million
and achieve the highest internal credit rating in our history. This
strong operating performance extended the momentum from Q1, which
led to record levels of new debt and equity commitments and total
fundings of nearly $972 million and $634 million, respectively, for
the first half of 2021.”
Bluestein added, “With the public and private equity markets
performing exceptionally well, our technology and life sciences
portfolio companies are benefitting from multiple ways to raise new
capital or achieve liquidity events. Our equity and warrant
portfolio has continued to march in parallel with the public
markets, with 26 of our portfolio companies announcing or
completing exit events year-to-date, of which 10 have completed
initial public offerings. This has generated record undistributed
earnings spillover of over $160 million, giving us additional
flexibility to continue to invest in our team and platform for the
long term while also delivering strong shareholder returns.”
Q2 2021 Review and Operating Results
Debt Investment Portfolio
Hercules delivered new debt and equity commitments totaling
$440.8 million and fundings totaling $278.7 million.
During the second quarter, Hercules realized early loan
repayments of $167.9 million, which along with normal scheduled
amortization of $19.6 million, resulted in total debt repayments of
$187.5 million.
The new debt investment origination and funding activities lead
to a net debt investment portfolio increase of $56.8 million during
the second 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: Q2 2021 to
Q1 2021
Equity & Other (in millions) Debt
Investments Warrants Total Portfolio
Balances at Cost at 3/31/21
$
2,182.0
$
196.5
$
25.3
$
2,403.8
New fundings(a)
268.1
10.1
0.9
279.1
Fundings assigned to External Funds
(30.3
)
(1.3
)
(0.1
)
(31.7
)
Principal payments received on investments
(19.6
)
—
—
(19.6
)
Early payoffs
(167.9
)
—
—
(167.9
)
Net changes attributed to conversions, liquidations, and fees
6.5
(70.2
)
(1.0
)
(64.7
)
Net activity during Q2 2021
56.8
(61.4
)
(0.2
)
(4.8
)
Balances at Cost at 6/30/21
$
2,238.8
$
135.1
$
25.1
$
2,399.0
Balances at Value at 3/31/21
$
2,185.1
$
237.3
$
42.0
$
2,464.4
Net activity during Q2 2021
56.8
(61.4
)
(0.2
)
(4.8
)
Net change in unrealized appreciation (depreciation)
1.5
55.1
4.9
61.5
Total net activity during Q2 2021
58.3
(6.3
)
4.7
56.7
Balances at Value at 6/30/21
$
2,243.4
$
231.0
$
46.7
$
2,521.1
(a) New fundings amount includes $3.0 million associated
with revolver loans during Q2 2021.
Debt Investment Portfolio Balances by Quarter
(in millions)
Q2 2021 Q1 2021 Q4 2020 Q3
2020 Q2 2020 Ending Balance at Cost
$2,238.8
$2,182.0
$2,099.5
$2,283.7
$2,278.9
Weighted Average Balance
$2,192.0
$2,119.0
$2,246.0
$2,217.0
$2,248.0
Debt Investment Portfolio Composition by Quarter
(% of debt investment portfolio)
Q2 2021 Q1 2021
Q4 2020 Q3 2020 Q2 2020 First Lien
Senior Secured
82.1%
82.7%
84.2%
85.5%
83.5%
Floating Rate w/Floors
96.8%
96.8%
96.9%
97.9%
97.9%
Effective Portfolio Yield and Core Portfolio Yield (“Core
Yield”)
The effective yield on Hercules’ debt investment portfolio was
12.7% during Q2 2021, as compared to 13.2% for Q1 2021. The Company
realized $167.9 million of early loan repayments in Q2 2021
compared to $191.5 million in Q1 2021, or a decrease of 12.3%.
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 11.5% during Q2 2021, within
the Company’s expected range of 11.0% to 12.0%, and decreased
slightly compared to 11.6% in Q1 2021. 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 $69.6 million for Q2 2021,
compared to $68.0 million in Q2 2020. The increase is primarily
attributable to an increase in total fee income between
periods.
Non-interest and fee expenses were $17.1 million in Q2 2021
versus $15.6 million for Q2 2020. The increase was due to higher
employee compensation and stock-based compensation expenses.
Interest expense and fees were $16.7 million in Q2 2021,
compared to $16.7 million in Q2 2020.
The Company had a weighted average cost of borrowings comprised
of interest and fees, of 5.4% in Q2 2021, as compared to 5.0% for
Q2 2020. The increase is primarily due to the acceleration of fee
recognition for the partial paydown of the SBA debentures and
securitizations, due to the reinvestment period ending.
NII – Net Investment Income
NII for Q2 2021 was $37.0 million, or $0.32 per share, based on
114.7 million basic weighted average shares outstanding, compared
to $35.7 million, or $0.32 per share, based on 111.6 million basic
weighted average shares outstanding in Q2 2020. The increase is
primarily attributable to an increase in the total fee income
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 June 30,
2021, (including net loan, warrant and equity activity) on
investments, totaled ($86.2) 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 $12.0 billion, the total realized
gain/(loss) since inception of ($86.2) million represents
approximately 72 basis points “bps,” or 0.72%, of cumulative debt
commitments, or an effective annualized loss rate of 4.0 bps, or
0.04%.
Realized Gains/(Losses)
During Q2 2021, Hercules had net realized losses of ($14.3)
million comprised of gross realized gains of $47.8 million due to
the sale of equity and warrant investments, offset by ($62.1)
million of gross realized losses primarily due to the write-off of
one legacy equity investment that had a fair value of $0.
Unrealized Appreciation/(Depreciation)
During Q2 2021, Hercules recorded $60.0 million of net
unrealized appreciation, primarily from net unrealized appreciation
from our debt, equity and warrant investments.
Portfolio Asset Quality
As of June 30, 2021, the weighted average grade of the debt
investment portfolio, at fair value, improved to 1.93, compared to
2.01 as of March 31, 2021, based on a scale of 1 to 5, with 1 being
the highest quality. Hercules’ policy is to generally adjust the
credit grading down on its portfolio companies as they approach
their expected need for additional growth equity capital to fund
their respective operations for the next 9-14 months. Various
companies in the Company’s portfolio will require additional rounds
of funding from time to time to maintain their operations.
Additionally, Hercules may selectively downgrade portfolio
companies, from time to time, if they are not meeting the Company’s
financing criteria, or underperforming relative to their respective
business plans.
As of June 30, 2021, grading of the debt investment portfolio at
fair value, excluding warrants and equity investments, was as
follows:
Credit Grading at Fair Value, Q2 2021 - Q2 2020 ($ in
millions)
Q2
2021
Q1
2021
Q4
2020
Q3
2020
Q2
2020
Grade 1 - High
$
637.2
28.4
%
$
497.5
22.8
%
$
411.0
19.6
%
$
406.5
17.9
%
$
443.6
20.1
%
Grade 2
$
1,192.7
53.1
%
$
1,240.7
56.8
%
$
1,027.9
49.1
%
$
1,053.1
46.5
%
$
877.9
39.6
%
Grade 3
$
403.8
18.0
%
$
426.2
19.5
%
$
621.3
29.7
%
$
772.3
34.1
%
$
849.7
38.3
%
Grade 4
$
8.4
0.4
%
$
20.4
0.9
%
$
25.3
1.2
%
$
26.7
1.2
%
$
25.0
1.1
%
Grade 5 - Low
$
1.3
0.1
%
$
0.2
0.0
%
$
8.9
0.4
%
$
5.9
0.3
%
$
20.1
0.9
%
Weighted Avg.
1.93
2.01
2.16
2.22
2.30
Non-Accruals
Non-accruals decreased slightly as a percentage of the overall
investment portfolio in the second quarter of 2021. As of June 30,
2021, the Company had three (3) debt investments on non-accrual
with an investment cost and fair value of approximately $23.0
million and $7.7 million, respectively, or 1.0% and 0.3% as a
percentage of the Company’s total investment portfolio at cost and
value, respectively.
Compared to March 31, 2021, the Company had four (4) debt
investments on non-accrual with an investment cost and fair value
of approximately $24.1 million and $8.0 million, respectively, or
1.0% and 0.3% as a percentage of the total investment portfolio at
cost and value, respectively.
Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2
2020 Total Investments at Cost
$2,399.0
$2,403.8
$2,315.4
$2,505.8
$2,501.4
Loans on non-accrual as a % of Total Investments
at Value
0.3%
0.3%
0.5%
0.3%
0.5%
Loans on non-accrual as a % of Total
1.0%
1.0%
1.3%
0.9%
2.4%
Investments at Cost
Liquidity and Capital Resources
The Company ended Q2 2021 with $610.0 million in available
liquidity, including $18.4 million in unrestricted cash and cash
equivalents, and $591.6 million in available credit facilities and
SBA Debentures, subject to existing terms and advance rates and
regulatory and covenant requirements.
Bank Facilities
As of June 30, 2021, there were $1.7 million 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 June 30, 2021, Hercules’ GAAP leverage ratio, including
its Small Business Administration “SBA” debentures, was 87.7%.
Hercules’ regulatory leverage, or debt-to-equity ratio, excluding
its SBA debentures, was 83.8% and net regulatory leverage, a
non-GAAP measure (excluding cash of approximately $18.5 million),
was 82.4%. Hercules’ net leverage ratio, including its SBA
debentures, was 86.4%.
Available Unfunded Commitments – Representing 12.7% 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 June 30, 2021, the Company had $327.3 million of available
unfunded commitments at the request of the portfolio company and
unencumbered by any milestones, including undrawn revolving
facilities, representing 12.7% of Hercules’ total assets. This
increased from the previous quarter of $257.9 million of available
unfunded commitments or 10.0% of Hercules’ total assets.
Existing Pipeline and Signed Term Sheets
After closing $440.8 million in new debt and equity commitments
in Q2 2021, Hercules has pending commitments of $402.5 million in
signed non-binding term sheets outstanding as of July 26, 2021.
Since the close of Q2 2021 and as of July 26, 2021, Hercules has
closed new debt and equity commitments of $27.0 million and funded
$23.4 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 and some portion
may be assigned or allocated to private funds managed by Hercules
Adviser prior to or after closing. 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 June 30, 2021, the Company’s net assets were $1.36
billion, compared to $1.32 billion at the end of Q1 2021. NAV per
share increased 3.1% to $11.71 on 115.9 million outstanding shares
of common stock as of June 30, 2021, compared to $11.36 on 115.8
million outstanding shares of common stock as of March 31, 2021.
The increase in NAV per share was primarily attributed to the net
change in unrealized appreciation and a decrease in liabilities
between periods.
Interest Rate Sensitivity
Hercules has an asset sensitive debt investment portfolio with
96.8% of its debt investment portfolio being priced at floating
interest rates as of June 30, 2021, with a Prime or LIBOR-based
interest rate floor, combined with 99.9% 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 June 30, 2021, 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)
$
(3)
$
(21)
$
18
$
-
(50)
$
(3)
$
(14)
$
11
$
-
(25)
$
(3)
$
(7)
$
4
$
-
25
$
3,425
$
7
$
3,418
$
0.03
50
$
6,893
$
14
$
6,879
$
0.06
75
$
10,339
$
21
$
10,318
$
0.09
100
$
13,862
$
28
$
13,834
$
0.12
200
$
29,236
$
56
$
29,180
$
0.25
(1) Source: Hercules Capital Form 10-Q for Q2 2021 (2) EPS
calculated on basic weighted shares outstanding of 114,654.
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 67 portfolio companies with a
fair value of $229.9 million and a cost basis of $133.8 million as
of June 30, 2021. On a fair value basis, 62.6% or $143.9 million is
related to existing public equity positions.
Warrant Portfolio
Hercules held warrant positions in 93 portfolio companies with a
fair value of $46.7 million and a cost basis of $25.1 million as of
June 30, 2021. On a fair value basis, 31.4% or $14.7 million is
related to existing public warrant positions.
Portfolio Company IPO and M&A Activity in Q2 2021 and YTD
Q3 2021
IPO Activity
As of July 26, 2021, Hercules held debt, warrant or equity
positions in 10 portfolio companies that have completed their IPOs
and eight (8) companies that have registered for their IPOs or have
entered into definitive agreements to go public via a merger or
special purpose acquisition company “SPAC,” including:
Completed:
- In July 2021, Hercules’ portfolio company Couchbase, Inc.
(NASDAQ: BASE), a provider of a leading modern database for
enterprise applications, completed its initial public offering of
8.3 million shares of common stock at an initial offering price of
$24.00 per share on the Nasdaq Global Select Market. Hercules
initially committed $70.0 million in venture debt financing
beginning in August 2018 and currently holds warrants for 105,530
shares of common stock as of June 30, 2021.
- In July 2021, Hercules’ portfolio company Wheels Up Partners
LLC (NYSE: UP), a provider of subscription club memberships for
private-jet flyers, completed its reverse merger initial public
offering with Aspirational Consumer Lifestyle Corp. (NYSE: ASPL), a
special purpose acquisition company. Hercules initially committed
$23.0 million in venture debt financing beginning in December
2017.
- In July 2021, former Hercules’ portfolio company Rapid Micro
Biosystems (NASDAQ: RPID), a provider of an automated microbial
quality control device and platform, completed its initial public
offering of 7.9 million shares of common stock at an initial
offering price of $20.00 per share on the Nasdaq Global Select
Market. Hercules initially committed $18.0 million in venture debt
financing beginning in March 2018.
- In June 2021, Hercules’ portfolio company Century
Therapeutics, Inc. (NASDAQ: IPSC), a preclinical biotech
developing allogeneic stem cell treatments for multiple cancers,
completed its initial public offering of 10.6 million shares of
common stock at an initial offering price of $20.00 per share on
the Nasdaq Global Select Market. Hercules initially committed $20.0
million in venture debt financing beginning in September 2020 and
currently holds warrants for 16,112 shares of common stock as of
June 30, 2021.
- In June 2021, Hercules’ portfolio company Sprinklr, Inc.
(NYSE: CXM), a developer of a social media management platform
designed to provide digital transformation for enterprise
businesses, completed its initial public offering of 16.6 million
shares of common stock at an initial offering price of $16.00 per
share on the New York Stock Exchange. Hercules currently holds
700,000 shares of common stock as of June 30, 2021.
- In June 2021, Hercules’ portfolio company Zeta Global
Holdings (NYSE: ZETA), a provider of a SaaS-based customer
relationship management (CRM) platform and professional marketing
services, completed its initial public offering of 14.8 million
shares of common stock at an initial offering price of $10.00 per
share on the New York Stock Exchange. Hercules initially committed
$15.0 million in venture debt financing beginning in November 2007
and currently holds 295,861 shares of common stock as of June 30,
2021.
- In June 2021, Hercules’ portfolio company Xometry (NASDAQ:
XMTR), a leading AI-enabled marketplace for on-demand
manufacturing, completed its initial public offering of 6.9 million
shares of common stock at an initial offering price of $44.00 per
share on the Nasdaq Global Select Market. Hercules initially
committed $15.0 million in venture debt financing beginning in May
2018 and currently holds warrants for 87,784 shares of Preferred
Series B stock as of June 30, 2021.
- In June 2021, Hercules’ portfolio company Proterra Inc.
(NASDAQ: PTRA), a leading commercial electric vehicle
technology and manufacturing company, completed its reverse merger
initial public offering with ArcLight Clean Transition Corp.
(NASDAQ: ACTC), a special purpose acquisition company. Hercules
initially committed $30.0 million in venture debt financing
beginning in May 2015 and currently holds 455,890 shares of common
stock as of June 30, 2021.
- In June 2021, Hercules’ portfolio company 23andMe Inc.
(NASDAQ: ME), a provider of consumer DNA-testing products,
completed its reverse merger initial public offering with VG
Acquisition Corp. (NYSE: VGAC.U), a special purpose acquisition
company. Hercules currently holds 828,360 shares of common stock as
of June 30, 2021.
- In April 2021, Hercules’ portfolio company Privia Health
Group, Inc. (NASDAQ: PRVA), a technology-driven, national
physician enablement company that collaborates with medical groups,
health plans and health systems, completed its initial public
offering of 19.5 million shares of common stock at an initial
offering price of $23.00 per share on the Nasdaq Global Select
Market. Hercules initially committed $35.0 million in venture debt
financing beginning in August 2016.
In Registration or SPAC:
- In July 2021, Hercules’ portfolio company Gelesis Inc.,
a biotherapeutics company advancing superabsorbent hydrogels to
treat excess weight and metabolic disorders, announced it has
entered into a definitive agreement for a reverse merger initial
public offering with Capstar Special Purpose Acquisition Corp.
(NYSE: CPSR), a special purpose acquisition company. Upon
completion of the merger, the combined company will be listed on
the New York Stock Exchange under the ticker symbol “GLS.” Hercules
initially committed $3.0 million in venture debt financing in
August 2008 and currently holds 227,013 shares of common stock,
243,432 shares of Preferred Series A-1 stock and 191,626 shares of
Preferred Series A-2 stock as of June 30, 2021.
- In July 2021, Hercules’ portfolio company Nextdoor, a
provider of a social network that connects neighbors, announced it
has entered into a definitive agreement for a reverse merger
initial public offering with Khosla Ventures Acquisition Co. II
(NASDAQ: KVSB), a special purpose acquisition company. Upon
completion of the merger, the combined company will be listed on
the Nasdaq Global Select Market under the ticker symbol “KIND.”
Hercules currently holds 328,190 shares of common stock as of June
30, 2021.
- In July 2021, Hercules’ portfolio company Planet Labs,
an earth data and analytics company, announced it has entered into
a definitive agreement for a reverse merger initial public offering
with dMY Technology Group IV Inc. (NYSE: DMYQ), a special purpose
acquisition company. Upon completion of the merger, the combined
company will be listed on the New York Stock Exchange under the
ticker symbol “PL.” Hercules initially committed $25.0 million in
venture debt financing beginning in June 2019 and currently holds
warrants for 357,752 shares of common stock as of June 30,
2021.
- In May 2021, Hercules’ portfolio company Valo Health
LLC, a technology company using human-centric data and
artificial intelligence powered computation to transform the drug
discovery and development process, announced it has entered into a
definitive agreement for a reverse merger initial public offering
with Khosla Ventures Acquisition Co. (NASDAQ: KVAC), a special
purpose acquisition company. Upon completion of the merger, the
combined company will be listed on the Nasdaq Global Select Market
under the ticker symbol “VH.” Hercules initially committed $20.0
million in venture debt financing beginning in June 2020 and
currently holds 510,308 shares of Preferred Series B stock and
warrants for 102,216 shares of common stock as of June 30,
2021.
- In March 2021, Hercules’ portfolio company Rocket Lab, a
developer of launch and space systems, announced it has entered
into a definitive agreement for a reverse merger initial public
offering with Vector Acquisition Corp. (NASDAQ: VACQ), a special
purpose acquisition company. Upon completion of the merger, Rocket
Lab will be listed on the Nasdaq Global Select Market under the
ticker symbol “RKLB.” Hercules initially committed $100.0 million
in venture debt financing beginning in June 2021.
- In March 2021, Hercules’ portfolio company VELO3D, a
developer of metal laser sintering printing machines intended to
offer 3D printing, announced it has entered into a definitive
agreement for a reverse merger initial public offering with Jaws
Spitfire Acquisition Corp. (NYSE: SPFR), a special purpose
acquisition company. Upon completion of the merger, VELO3D will be
listed on the New York Stock Exchange under the ticker symbol
“VLD.” Hercules initially committed $12.5 million in venture debt
financing beginning in May 2021.
- In March 2021, Hercules’ portfolio company Pineapple Energy,
LLC, a U.S. operator and consolidator of residential solar,
battery storage and grid services solutions, announced that it
entered into a definitive merger agreement with Communications
Systems, Inc. (NASDAQ: JCS), and IoT intelligent edge products and
services company. Upon closing, CSI will commence doing business as
Pineapple Energy, and expects shares of the combined company to
continue to trade on the Nasdaq Global Select Market under the new
ticker symbol “PEGY.” Hercules initially committed $12.3 million in
venture debt financing beginning in December 2010 and currently
holds 17,647 shares of Class A Units as of June 30, 2021.
- 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.
There can be no assurances that companies that have yet to
complete their IPOs will do so.
M&A Activity
- In June 2021, Hercules’ portfolio company ExtraHop Networks
Inc., a cloud-native network detection and response provider,
announced that they entered into an agreement to be acquired by
private equity firms Bain Capital and Crosspoint Capital for $900.0
million. The acquisition was completed in July. Hercules initially
committed $15.0 million in venture debt financing beginning in
September 2020 and currently holds warrants for 154,784 shares of
common stock as of June 30, 2021.
- In May 2021, Hercules’ portfolio company Greenphire, a
leader in global clinical trial financial process automation,
announced that they have reached an agreement to be acquired by
Thoma Bravo, a leading private equity investment firm focused on
the software and technology-enabled services sector. Terms of the
acquisition were not disclosed. Hercules initially committed $6.0
million in venture debt (via Ares Capital venture portfolio
acquisition) financing beginning in November 2017.
- In May 2021, Hercules’ portfolio company Vela Trading
Systems LLC, an independent provider of trading and market
access technology for global multi-asset electronic trading,
announced that they have merged with Exegy Inc., a provider of
low-latency global market data solutions, predictive trading
signals and hardware training platforms for the financial services
industry. Terms of the acquisition were not disclosed. The merger
was backed by Marlin Equity Partners, a global investment firm with
over $7.5 billion of capital commitments under management. Hercules
initially committed $20.0 million in venture debt financing
beginning in June 2017.
- In April 2021, Hercules’ portfolio company Message Systems
(a.k.a. SparkPost), a worldwide provider of message management
solutions and services for email service providers, social networks
and large enterprises, announced that they have reached an
agreement to be acquired by MessageBird BV, a provider of
cloud-based communications services, for approximately $600.0
million. Hercules initially committed $25.0 million in venture debt
financing beginning in January 2015.
Subsequent Events
1. As of July 26, 2021, Hercules has:
- Funded $23.4 million to new and existing commitments since the
close of the second quarter 2021.
- Pending commitments (signed non-binding term sheets) of $402.5
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 – June 30, 2021 Closed
Commitments(a)
$971.7
Q3 2021 Closed Commitments (as of July 26,
2021)(b)
$27.0
Year-to-Date Closed Commitments
$998.7
Q3 2021 Pending Commitments (as of July
26, 2021)(b)
$402.5
Year-to-Date 2021 Closed and Pending
Commitments
$1,401.2
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.
2. On July 1, 2021, the Company fully redeemed the aggregate
outstanding $75.0 million of principal and $0.6 million of accrued
interest pursuant to the redemption terms of the April 2025 Notes
Indenture. The Company accelerated $1.5 million of debt issuance
costs associated with the extinguishment of the debt.
Conference Call
Hercules has scheduled its second quarter 2021 financial results
conference call for July 29, 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: 1598912 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 1598912.
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 $12.0
billion to over 530 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 the ticker symbol “HTGC.” In addition, Hercules has
one retail bond issuance of 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) June 30, 2021 December 31, 2020
Assets Investments: Non-control/Non-affiliate investments
(cost of $2,307,766 and $2,175,651, respectively)
$ 2,444,849
$ 2,288,338
Control investments (cost of $77,901 and $65,257, respectively)
66,491
57,400
Affiliate investments (cost of $13,307 and $74,450, respectively)
9,750
8,340
Total investments in securities, at value (cost of $2,398,974 and
$2,315,358, respectively)
2,521,090
2,354,078
Cash and cash equivalents
18,447
198,282
Restricted cash
5,766
39,340
Interest receivable
19,063
19,077
Right of use asset
8,039
9,278
Other assets
6,167
3,942
Total assets
$ 2,578,572
$ 2,632,997
Liabilities Debt (net of debt issuance costs)(1)
$ 1,177,515
$ 1,286,638
Accounts payable and accrued liabilities
36,886
36,343
Operating lease liability
7,813
9,312
Total liabilities
$ 1,222,214
$ 1,332,293
Net assets consist of: Common stock, par value
116
115
Capital in excess of par value
1,163,910
1,158,198
Total distributable earnings
192,332
133,391
Total net assets
$ 1,356,358
$ 1,291,704
Total liabilities and net assets
$ 2,578,572
$ 2,623,997
Shares of common stock outstanding ($0.001 par value,
200,000,000 authorized)
115,867
114,726
Net asset value per share
$ 11.71
$ 11.26
(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 and B 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 June
30, Six Months Ended June 30,
2021
2020
2021
2020
Investment income: Interest and dividend income
Non-control/Non-affiliate investments
$ 60,276
$ 62,667
$ 123,258
$ 128,005
Control investments
1,029
731
1,828
1,377
Affiliate investments
1
157
2
377
Total interest income
61,306
63,555
125,088
129,759
Fee income Commitment, facility and loan fee income
Non-control/Non-affiliate investments
5,263
3,511
8,666
7,707
Control investments
15
5
23
10
Total commitment, facility and loan fee income
5,278
3,516
8,689
7,717
One-time fee income Non-control/Non-affiliate investments
2,975
897
4,541
4,111
Total one-time fee income
2,975
897
4,541
4,111
Total fee income
8,253
4,413
13,230
11,828
Total investment income
69,559
67,968
138,318
141,587
Operating expenses: Interest
14,490
15,076
29,240
29,608
Loan fees
2,220
1,650
5,020
3,444
General and administrative Legal expenses
526
991
954
1,890
Tax expenses
1,746
899
3,184
2,034
Other expenses
3,542
3,973
6,710
7,998
Total general and administrative
5,814
5,863
10,848
11,922
Employee compensation Compensation and benefits
8,349
7,180
18,153
15,394
Stock-based compensation
2,926
2,515
5,670
4,955
Total employee compensation
11,275
9,695
23,823
20,349
Total gross operating expenses
33,799
32,284
68,931
65,323
Expenses allocated to the Adviser Subsidiary
(1,204)
—
(2,137)
—
Total net operating expenses
32,595
32,284
66,794
65,323
Net investment income
36,964
35,684
71,524
76,264
Net realized and change in unrealized appreciation
(depreciation) on investments: Net realized gain (loss) on
investments Non-control/Non-affiliate investments
47,861
141
55,631
7,108
Affiliate investments
(62,143)
—
(62,143)
—
Total net realized gain (loss) on investments
(14,282)
141
(6,512)
7,108
Net change in unrealized appreciation (depreciation) on investments
Non-control/Non-affiliate investments
3,075
23,613
21,097
(34,816)
Control investments
(5,255)
2,642
(3,553)
(5,209)
Affiliate investments
62,229
(315)
64,338
(10,305)
Total net change in unrealized appreciation (depreciation) on
investments
60,049
25,940
81,882
(50,330)
Total net realized and change in unrealized appreciation
(depreciation) on investments:
45,767
26,081
75,370
(43,222)
Net increase (decrease) in net assets resulting from
operations
$ 82,731
$ 61,765
$ 146,894
$ 33,042
Net investment income before investment gains and losses per
common share: Basic
$ 0.32
$ 0.32
$ 0.62
$ 0.69
Change in net assets resulting from operations per common share:
Basic
$ 0.71
$ 0.55
$ 1.27
$ 0.29
Diluted
$ 0.65
$ 0.55
$ 1.21
$ 0.29
Weighted average shares outstanding: Basic
114,654
111,558
114,480
110,256
Diluted
129,572
111,729
122,188
110,504
Distributions paid per common share: Basic
$ 0.39
$ 0.32
$ 0.76
$ 0.72
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210729005948/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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