Nov 11, 2025 6:00 AM Eastern Standard Time Hercules Capital Announces Upcoming Event for the Financial Community Share SAN MATEO, Calif.--(BUSINESS WIRE)--Hercules Capital, Inc. (NYSE: HTGC) ("Hercules,†"Hercules Capital,†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 that members of the executive management tea ...

Core Viewpoint - The Zacks SBIC & Commercial Finance industry is facing challenges due to declining interest rates, which may lead to margin compression and lower investment income, while asset quality remains at risk from prolonged high rates affecting borrowers' repayment ability [1][5][8]. Industry Overview - The Zacks SBIC & Commercial Finance industry consists of companies that provide financing to small and mid-sized privately held firms, often underserved by traditional banks [3]. - These companies offer customized financing solutions, including senior debt instruments and equity capital, for various transactions such as buyouts and growth initiatives [4]. Key Themes - **Declining Interest Rates**: The Federal Reserve has lowered interest rates to 3.75–4%, which will likely reduce loan yields for many industry players with floating-rate loans, impacting net investment income [5]. - **Loan Origination and Refinancing**: Despite the challenges, loan origination and refinancing activities are expected to improve due to rising demand amid economic growth [6]. - **Asset Quality Concerns**: The industry may experience asset quality deterioration as prolonged high interest rates could hinder portfolio companies' ability to service debt [8]. - **Regulatory Changes**: The 2018 amendment to the Investment Company Act eased leverage limits, allowing companies to increase their debt-to-equity leverage, providing more funding flexibility [9][10]. Industry Performance - The Zacks SBIC & Commercial Finance industry ranks 209 out of over 250 Zacks industries, placing it in the bottom 14%, indicating underperformance in the near term [11][12]. - Over the past year, the industry has collectively lost 13%, while the S&P 500 and Zacks Finance sector have gained 14.2% and 9.7%, respectively [15]. Valuation Metrics - The industry has a trailing 12-month price-to-tangible book (P/TB) ratio of 0.96X, significantly lower than the S&P 500's 12.55X, indicating a substantial discount compared to the broader market [17][18]. Company Highlights - **Ares Capital Corp. (ARCC)**: A specialty finance firm focusing on U.S. middle-market companies, with a market cap of $14.5 billion and total debt of $15.6 billion as of Sept. 30, 2025. The company has seen growth in total investment income and is expected to continue this trend [19][21]. - **Hercules Capital, Inc. (HTGC)**: A specialty finance company providing venture capital to technology and life science firms, with a market cap of $3.3 million and a total investment portfolio valued at $4.31 billion as of Sept. 30, 2025. The company is expected to benefit from rising demand for customized financing [22][24]. - **Runway Growth Finance Corp. (RWAY)**: Focuses on providing senior secured loans to growth-stage companies, with a market cap of $357.4 million and a total investment portfolio valued at $946 million as of Sept. 30, 2025. The company is expected to sustain growth in investment income amid favorable regulatory trends [26][28].

Core Viewpoint - Hercules Capital (HTGC) has experienced a significant increase in its aggregate dividend yield, reaching double digits after a 14% decline from its late summer peak to a recent low [1] Group 1: Company Performance - The recent dip in HTGC's stock price has led to a more attractive dividend yield for investors [1] - The equity market's daily price fluctuations contribute to long-term wealth creation or destruction [1] Group 2: Investment Strategy - Pacifica Yield focuses on long-term wealth creation by targeting undervalued high-growth companies, high-dividend stocks, REITs, and green energy firms [1]

Core Insights - The article discusses updates on companies during earnings season, highlighting specific performance metrics and strategic developments in the business development company (BDC) sector and consumer staples industry. Group 1: Business Development Companies (BDCs) - Hercules Capital (HTGC) reported a strong third-quarter performance with total investment income of $138.1 million, bringing the year-to-date figure to a record $395.1 million, up 6.4% from the same period in 2024 [6] - Third-quarter net investment income reached $88.6 million, contributing to a year-to-date total of $254.7 million, which is up 4.1% compared to the previous year [6] - HTGC's third-quarter originations hit $846 million, totaling $2.87 billion for the first three quarters, positioning the company to exceed the 2024 record of $3.12 billion [7] - The net asset value (NAV) of HTGC is currently $12.05, reflecting a 1.8% increase from the previous quarter, despite challenges in the BDC sector [10] - HTGC achieved 122% coverage of its $0.40 quarterly base distribution, indicating strong financial health and the potential for supplemental payments [11] Group 2: Consumer Staples - Kimberly-Clark (KMB) announced an unexpected acquisition of Kenvue (KVUE), aiming to create a global health and wellness leader, which led to a 12.5% drop in KMB's shares while KVUE's shares rose by 17% [13] - The acquisition is seen as a strategic move to enhance market penetration similar to Proctor & Gamble, with both companies highlighting expected synergies [14] - The volatility in KMB's shares is anticipated to continue until the deal closes in the second half of 2026, but the recommendation is to hold KMB shares despite the recent drop [15]

Core Insights - Hercules Capital Inc. (HTGC) reported better-than-expected third-quarter 2025 results, with shares gaining nearly 1% in after-market hours. The net investment income was 49 cents per share, exceeding the Zacks Consensus Estimate by a penny, although it represented a 3.9% decline from the previous year [1][8]. Financial Performance - Net investment income for the quarter was $88.6 million, reflecting a year-over-year increase of 6.5% [2][8]. - Total investment income reached $138.1 million, up 10.3% from the same quarter last year, driven by a larger weighted average debt investment portfolio. This figure also surpassed the Zacks Consensus Estimate of $132.5 million [3][8]. - Total gross operating expenses increased by 21% year over year to $53.6 million, attributed to rising costs across nearly all components, excluding tax expenses and general administrative costs [3][8]. Portfolio and Commitments - As of September 30, 2025, the fair value of Hercules Capital's total investment portfolio was $4.31 billion. The company experienced early loan repayments totaling $262.3 million during the quarter, alongside normal scheduled amortization of $2.3 million, leading to total debt repayments of $264.6 million [4]. - In the third quarter, Hercules Capital secured $846.2 million in gross new debt and equity commitments, with $504.6 million in gross new funding [4]. Balance Sheet Strength - Hercules Capital's net asset value as of September 30, 2025, was $12.05 per share, an increase from $11.66 as of December 31, 2024 [5]. - The company maintained $655 million in liquidity, which included $29.4 million in unrestricted cash and cash equivalents, and $625.6 million in credit facilities [5]. - The weighted average cost of debt remained stable at 5.1% year over year [5]. Strategic Outlook - The lack of global diversification may limit Hercules Capital's growth prospects. However, the rising demand for customized financing is expected to support total investment income, despite the anticipated increase in expenses due to efforts to enhance originations [6].

Core Viewpoint - Hercules Capital reported quarterly earnings of $0.47 per share, missing the Zacks Consensus Estimate of $0.48 per share, and down from $0.51 per share a year ago, indicating an earnings surprise of -2.08% [1][2] Financial Performance - The company posted revenues of $138.09 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 4.25%, compared to revenues of $125.25 million a year ago [2] - Over the last four quarters, Hercules Capital has exceeded consensus revenue estimates two times [2] Stock Performance - Hercules Capital shares have declined approximately 11.7% since the beginning of the year, while the S&P 500 has gained 17.2% [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating expectations of underperformance in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.48 on revenues of $134.11 million, and for the current fiscal year, it is $1.91 on revenues of $523.56 million [7] - The trend of estimate revisions for Hercules Capital was unfavorable prior to the earnings release, which may impact future stock movements [5][6] Industry Context - The Financial - SBIC & Commercial Industry, to which Hercules Capital belongs, is currently ranked in the bottom 17% of over 250 Zacks industries, suggesting potential challenges ahead [8]

Group 1 - The article does not provide any relevant content regarding company or industry insights [1]

Financial Performance - Q3 2025 total new debt and equity commitments reached $846.2 million, a 96.5% increase year-over-year[2] - Record Q3 2025 total fundings amounted to $504.6 million, reflecting an 85.5% year-over-year increase[2] - Total investment income for Q3 2025 was $138.1 million, up 10.3% from Q3 2024[2] - Net investment income (NII) for Q3 2025 was $88.6 million, or $0.49 per share, providing 122% coverage of the base cash distribution[1][5] - Year-to-date total new debt and equity commitments reached $2.87 billion, a 38.2% increase year-over-year[6] - Year-to-date total fundings were $1.75 billion, an increase of 30.9% year-over-year[6] - Total investment income for the nine months ended September 30, 2025, was $395.1 million, an increase from $371.8 million in 2024[60] - Net investment income for the three months ended September 30, 2025, was $88.6 million, compared to $83.2 million for the same period in 2024[60] - Core investment income on a non-GAAP basis for Q3 2025 was $124,746,000, up from $113,257,000 in Q3 2024, reflecting a year-over-year increase of 10.2%[62] Asset and Investment Management - The company had over $1.0 billion of available liquidity as of the end of Q3 2025[1] - Net asset value (NAV) increased to $12.05, a 1.8% rise from Q2 2025[6] - The net asset value (NAV) per share increased by 1.8% to $12.05, with total net assets remaining at $2.2 billion[37] - As of September 30, 2025, the total investments at cost amounted to $4,290.8 million, an increase from $4,192.5 million in Q2 2025[26] - Total investments at fair value increased to $4,306.2 million as of September 30, 2025, up from $3,660.0 million at December 31, 2024[57] - Hercules' net asset value per share increased to $12.05 as of September 30, 2025, from $11.66 at December 31, 2024[57] Debt and Leverage - Hercules' GAAP leverage ratio was 99.5%, while the regulatory leverage ratio was 83.6% as of September 30, 2025[29] - The GAAP leverage ratio as of September 30, 2025, was 99.5%[64] - The net leverage ratio, after accounting for cash and cash equivalents, was 98.2%[64] - The GAAP regulatory leverage ratio was reported at 83.6% as of September 30, 2025[65] - The net regulatory leverage ratio, after adjustments, stood at 82.3%[65] - Total liabilities rose to $2,220.3 million as of September 30, 2025, compared to $1,842.0 million at December 31, 2024[57] Investment Commitments - The Company closed $846.2 million in new debt and equity commitments in Q3 2025, with pending commitments of $425.5 million as of October 28, 2025[33] - Hercules has committed over $25 billion to more than 700 companies since its inception in December 2003[51] - The Company has $437.5 million of available unfunded commitments, representing 9.9% of total assets[32] Portfolio and Financing Activities - Hercules committed $120.0 million in venture debt financing to Akero Therapeutics, which announced an acquisition by Novo Nordisk for up to $5.2 billion[45] - Hercules Capital committed $50.0 million in venture debt financing to SingleStore, Inc. and holds 580,983 shares of Preferred Series E stock as of September 30, 2025[49] - Signal AI received a $165.0 million growth-equity investment led by Battery Ventures, with Hercules committing $30.0 million in venture debt financing[49] - HilleVax, Inc. entered a merger agreement with XOMA Royalty Corporation, with Hercules having committed $150.0 million in venture debt financing[49] Interest Rate Sensitivity - 97.8% of the debt investment portfolio was priced at floating interest rates, indicating high sensitivity to interest rate changes[38] - The debt investment portfolio's GAAP effective yield was 13.5% in Q3 2025, compared to 13.9% in Q2 2025[12] - The effective yield on a GAAP basis for Q3 2025 was 13.5%, down from 13.9% in Q2 2025[63] - The core yield remained stable at 12.5% for both Q3 2025 and Q2 2025[63] Non-Accrual Loans - The number of loans on non-accrual increased to 1.1% of total investments at value, with a cost percentage of 1.2% as of September 30, 2025[26][24]

Investment Portfolio Performance - As of September 30, 2025, the total fair value of the investment portfolio increased to $4,306.2 million from $3,660.0 million as of December 31, 2024, representing a growth of approximately 17.6%[302] - The fair value of the investment portfolio increased to $4.31 billion as of September 30, 2025, from $3.66 billion as of December 31, 2024[327] - The total fair value of debt investments was $4,095,558,000, an increase from $3,494,601,000 as of December 31, 2024[333] - The ten largest portfolio companies represented approximately 28.9% of the total fair value of investments as of September 30, 2025, down from 31.6% in 2024[329] Investment Commitments and Fundings - The net total investment commitments originated by Hercules Capital and the Adviser Funds reached $2,205.1 million, up from $1,651.1 million in the same period last year, indicating a year-over-year increase of about 33.5%[304] - Gross debt fundings for new portfolio companies amounted to $1,057.4 million, compared to $992.0 million in the previous year, reflecting a growth of approximately 6.6%[304] - The company has originated over $24.0 billion in commitments across more than 700 companies since inception[299] Income and Yield - The total investment income for the three months ended September 30, 2025, was $138.1 million, compared to $125.2 million for the same period in 2024[323] - The core investment income from the debt portfolio for the three months ended September 30, 2025, was $124.7 million, compared to $113.3 million in 2024[323] - The weighted average effective yield on debt investments decreased to 13.5% as of September 30, 2025, down from 14.4% a year earlier[310] - As of September 30, 2025, the total yield was 13.0%, down from 13.8% in the same period of 2024, while the effective yield decreased from 14.4% to 13.5%[322] Portfolio Management and Debt - The company actively manages approximately $5.5 billion of assets as of September 30, 2025[299] - The number of portfolio companies with debt outstanding increased to 122 as of September 30, 2025, compared to 118 as of December 31, 2024[310] - Approximately 97.8% of the debt investment portfolio was priced at floating interest rates with a floor as of September 30, 2025[330] - The percentage of debt bearing a floating rate was 97.8% as of September 30, 2025, slightly up from 97.4% at the end of 2024[310] Operating Expenses and Income - Operating expenses for the three months ended September 30, 2025, totaled approximately $49.5 million, an increase from $42.1 million in the same period of 2024[342] - Employee compensation and benefits totaled approximately $16.5 million for the three months ended September 30, 2025, compared to $12.1 million in 2024, and $47.1 million for the nine months ended September 30, 2025, compared to $42.9 million in 2024[347] - The net increase in net assets resulting from operations for the three months ended September 30, 2025, was $119.7 million, compared to $68.7 million for the same period in 2024[336] Unrealized Gains and Losses - The net change in unrealized appreciation on investments was approximately $33.0 million for the three months ended September 30, 2025, compared to a net unrealized depreciation of $13.9 million in 2024[355] - The gross unrealized appreciation on portfolio investments was $55.7 million for the three months ended September 30, 2025, compared to $28.8 million in 2024[354] - The company recorded a net change in unrealized appreciation of $51.0 million for the nine months ended September 30, 2025, compared to a net unrealized depreciation of $52.1 million in 2024[355] Cash Flow and Liquidity - Operating activities used $370.2 million in cash during the nine months ended September 30, 2025, compared to $88.8 million in the same period of 2024, primarily due to a $283.1 million increase in net purchases of investments[365] - Financing activities provided $304.3 million of cash during the nine months ended September 30, 2025, a significant increase from $17.5 million in the same period of 2024, driven by a $122.6 million increase in equity issued[367] - Available liquidity as of September 30, 2025, was $655.0 million, including $29.4 million in cash and cash equivalents[369] Debt and Interest Rate Sensitivity - The company had $2,180.0 million of debt outstanding as of September 30, 2025, with $425.0 million due within the next year[378] - A hypothetical 200 basis point increase in interest rates could result in a decrease of $26,147,000 in income and an EPS decline of $0.12[388] - The net investment income is dependent on the difference between borrowing rates and investment rates, with rising interest rates potentially increasing costs and reducing income[390] - The majority of debt borrowings under Credit Facilities bear interest at a floating rate, while other outstanding debt is at a fixed rate[387] Adviser Subsidiary and Management Services - The Adviser Subsidiary provides investment advisory and management services to the Adviser Funds in exchange for an asset-based fee[359] - The Adviser Funds invest in debt and equity investments in technology-related and life sciences companies[360] - For the three months ended September 30, 2025, dividend income from the Adviser Subsidiary was $2.1 million, up from $1.8 million in the same period of 2024, while interest income decreased to $0 from $0.2 million[362]

Core Insights - The article discusses Hercules Capital, Inc. (NYSE: HTGC) and compares it with Trinity Capital Inc. (TRIN) to evaluate their financial strategies and performance [1]. Group 1: Company Overview - Hercules Capital, Inc. is highlighted as a significant player in the financial management sector, particularly in shaping financial strategies for top-tier corporates [1]. - Trinity Capital Inc. is mentioned in the context of a comparative analysis with Hercules Capital, indicating a focus on investment opportunities within the sector [1]. Group 2: Analyst Background - Roberts Berzins, with over a decade of experience in financial management, has contributed to institutionalizing the REIT framework in Latvia, enhancing liquidity in pan-Baltic capital markets [1]. - His expertise includes developing national SOE financing guidelines and frameworks for channeling private capital into affordable housing [1].