Hercules Capital (HTGC) Q2 2024 earnings summary

Executive summary

• Achieved record Q2 2024 total investment income of $125.0 million, up 8% year-over-year, and net investment income of $82.4 million ($0.51/share), with assets under management rising to $4.6 billion, a 14.7% increase year-over-year.

• Q2 2024 gross fundings reached $461.5 million, contributing to $1.07 billion for the first half, the highest in company history.

• Maintained a defensive balance sheet with high liquidity ($482 million) and low leverage (GAAP leverage 94.8%), positioning for continued growth amid expected market volatility.

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

• Price-to-NAV stood at 1.87x as of July 26, 2024, reflecting a premium to peers.

Financial highlights

• Q2 2024 total investment income was $125.0 million, up from $116.2 million in Q2 2023; net investment income was $82.4 million, up nearly 9% year-over-year.

• Net investment income per share was $0.51, covering 128% of the base distribution.

• Net asset value per share was $11.43, down 1.7% quarter-over-quarter.

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

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

Outlook and guidance

• Management expects continued portfolio growth, supported by $482 million in available liquidity and a new SBIC V license for $175 million in SBA debentures.

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

• Anticipate Q3 interest expense to rise slightly and SG&A expenses of $22 million-$23 million.

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

• Maintain a defensive approach, prioritizing asset quality and liquidity.