The leading VC company beat estimates and posted new business records.

Hercules Capital (NYSE:HTCG) announced its results for the fourth quarter and full-year ended December 31, 2019. One of the largest providers of venture capital and venture debt, it set many new records, both quarterly as well as the financial year. (BusinessWire)

Hercules: Quarterly result

Hercules’ GAAP EPS of $0.38 for the fourth quarter beat consensus estimates by $0.03. Revenue, or total investment income of $70.58 million beat estimates by $1.11 million and grew 24.1% year-on-year.

“Our record fourth-quarter net investment come (NII) produced 119% coverage of our base shareholder distribution which combined with our record undistributed earnings spillover, puts us in a position of strength moving into 2020,” said CEO and Chief Investment Officer Scott Bluestein.

It delivered a 15.4% Return on Average Equity (“ROAE” or NII/Average Equity). Its Return on Average Assets (“ROAA” or NII/Average Assets) was 7.3%.

“Total fourth-quarter commitments increased nearly 14 percent to $283.9 million, core yields were within management’s targeted range of 12 to 13 percent, credit quality remained high and the debt investment portfolio expanded to $2.17 billion at cost,” said Bluestein.

Hercules said its weighted average cost of borrowings comprised of interest and fees, was 5.0% in Q4 2019. That compared to 5.3% for Q4 2018.

Excellent liquidity

The Company ended Q4 2019 with $235.5 million in available liquidity. This included $64.4 million in unrestricted cash and cash equivalents, and $171.1 million in available credit facilities.

Concurrently, Hercules announced that it had replaced its existing $200.0 million MUFG Union Bank N.A. credit facility with a $400.0 million facility, with all existing lenders and several new lenders providing commitments. The new facility comes at a lower interest rate of LIBOR plus 2.50%.

Note that earlier this month Hercules announced its private offering totaling $120.0 million of 5-year, unsecured, investment-grade bonds with interest rates between 4.28% and 4.31%.

“Our combined total potential new liquidity has been greatly enhanced,” said Seth Meyer, CFO.  “It will allow us to continue to pursue the growth of our investment portfolio,”

Outlook

“Looking forward, we have confidence in the Hercules’ portfolio,” said Bluestein.  “It reflects our rigorous credit-driven investment strategy and the overall resiliency of the VC ecosystem.”

“As we enter 2020, the macro environment will undoubtedly be influenced by the upcoming U.S. presidential election and the late stages of the economic cycle.”

However, Hercules is in a sound financial position with ample liquidity. Further, it has a diversified balance sheet both on the asset and liability side.

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