Hercules Capital (HTGC) Q2 2024 earnings summary

Executive summary

• Achieved record Q2 2024 gross fundings of $461.5M and total investment income of $125.0M, with net investment income at $82.4M, up 8.8%-9% year-over-year.

• Assets under management reached $4.6B, up 14.7% year-over-year, and investment portfolio fair value grew to $3.57B.

• Maintained a defensive balance sheet with high liquidity ($482M) and low leverage (GAAP leverage 94.8%).

• Portfolio diversified across technology, life sciences, and healthcare, with 97.4% of debt investments at floating rates.

• NII per share was $0.51, providing 128% coverage of the base distribution.

Financial highlights

• Q2 2024 total investment income was $125.0M, up 7.5%-8% year-over-year; NII was $82.4M, up 8.8%-9% year-over-year.

• Net asset value per share was $11.43, down 1.7% from Q1 2024.

• Return on equity for Q2 was 19.2%; return on average assets was 9.6%.

• Net realized and unrealized losses totaled $40.5M in Q2 2024, mainly due to portfolio valuation adjustments.

• Ended Q2 with $482M in liquidity.

Outlook and guidance

• Management expects continued portfolio growth, supported by $482M in available liquidity and a new $175M SBIC license.

• Q3 core yield expected between 13.3%-13.5%, with prepayments forecasted at $200M-$300M.

• SG&A expenses for Q3 expected at $22M-$23M; interest expense to rise slightly due to balance sheet growth.

• Maintain a defensive approach, prioritizing asset quality and flexibility amid expected market volatility.

• Board declared a Q3 2024 base distribution of $0.40 per share and a supplemental $0.08 per share.