Hercules Technology Growth Capital, Inc.’s HTGC fourth-quarter results marked the company’s third consecutive earnings miss. The company reported net investment income (“NII”) of 25 cents per share, missing the Zacks Consensus Estimate of 30 cents. Moreover, it compared unfavorably with the year-ago figure of 31 cents per share.
Further, the full-year net investment income of $1.13 per share also missed the Zacks Consensus Estimate of $1.22, declining 7.4% year over year.
Results were hit by elevated level of expenses, which more than offset the rise in total investment income. However, Hercules Technology continued with its efficient capital deployment activities on the back of a solid liquidity position.
Distributional Net Operating Income (“DNOI”) for the fourth quarter came in at $18.6 million or 29 cents per share compared with $20.5 million or 34 cents per share in the fourth quarter of 2013. For 2014, DNOI stood at $81.3 million or $1.31 per share versus $79.4 million or $1.34 per share in 2013.
During the year, the company incurred a loss of approximately $600,000 million due to the retirement of $23.2 million Convertible Senior Notes in the fourth-quarter 2014.
Performance in Detail
Hercules Technology’s total investment income in the reported quarter came in at $36.9 million, climbing 11% from the prior-year quarter on the back of increased fees as well as total interest income. However, the figure fell short of the Zacks Consensus Estimate of $37.4 million.
Total investment income for 2014 rose 2.8% year over year to $143.7 million. Nevertheless, it marginally missed the Zacks Consensus Estimate of $145 million.
Total operating expenses escalated 42.3% year over year to $20.4 million. The rise was prompted by an increase in all the components, partly offset by a fall in loan fees.
As of Dec 31, 2014, the weighted average cost of debt comprising interest, fees and loss of debt extinguishment, was 6.7% versus 6.4% as of Dec 31, 2013.
Net investment income (before investment gains and losses) for the quarter came in at $15.9 million, down 15.7% year over year.
Business Highlights
The fair value of Hercules Technology’s total investment portfolio was $1.02 billion as of Dec 31, 2014, up 2.2% from Sep 30, 2014.
In the quarter, the company provided approximately $317.1 million and $207.8 million in debt and equity-financing commitments and investments, respectively, to new and existing portfolio companies.
As of Dec 31, 2014, Hercules Technology’s net asset value was $10.18 per share, compared with $10.51 as of Dec 31, 2013.
The company had $377.1 million in liquidity, including $227.1 million in cash and $150 million in credit facilities as of Dec 31, 2014.
Our Viewpoint
We foresee further potential for top-line growth, based on Hercules Technology’s meaningful investments in booming sectors such as technology. Moreover, the company’s increased capital-deployment activities are expected to boost investors’ confidence.
Nevertheless, an uncertain economic environment might increase cost of funding and limit the company’s growth, going forward.
Currently, Hercules Technology carries a Zacks Rank #2 (Buy).
About Other Mortgage Investment Firms
Among other mortgage investment companies, Ares Capital Corporation. ARCC reported fourth-quarter 2014 core earnings of 42 cents per share, which outpaced the Zacks Consensus Estimate of 39 cents.
American Capital, Ltd. ACAS reported fourth-quarter 2014 net operating income per share of 12 cents, lagging the Zacks Consensus Estimate of 17 cents.
THL Credit, Inc. TCRD is scheduled to report earnings on Mar 10, 2015.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment