Hercules Capital Inc. recently reported impressive fourth-quarter results, with a net investment income of 56 cents per share, surpassing the Zacks Consensus Estimate of 50 cents. This marked a remarkable 38.5% increase from the previous year’s quarter.
The standout results were fuelled by a surge in total investment income and a reduction in expenses. Additionally, the company’s balance sheet remained robust, and new commitments were strong, further underscoring its solid performance.
The company’s net investment income stood at $86 million, a significant 38.5% increase year over year, exceeding our estimated $72.2 million.
For the entirety of 2023, the net investment income reached $304 million or $2.09 per share, up from $188.1 million or $1.48 per share in 2022.
Total Investment Income Improves, Expenses Down
During the quarter, the total investment income reached $122.6 million, marking a substantial 22.4% increase from the previous year’s quarter and surpassing the Zacks Consensus Estimate of $116 million.
For the entire year of 2023, the total investment income surged by 43.2% to $460.7 million, also surpassing the consensus estimate of $454 million.
Furthermore, the company managed to reduce total gross operating expenses by 4.7% year over year to $38.2 million, primarily due to lower total employee compensation costs. Our estimate for this metric was $44.3 million.
Portfolio Value & New Commitments Solid
As of December 31, 2023, the fair value of Hercules Capital’s total investment portfolio stood at an impressive $3.25 billion. Additionally, during the fourth quarter, the company posted $413.9 million in gross new debt and equity commitments, and $307 million in gross new funding. It also realized early loan repayments of $277.7 million.
Balance Sheet Position Strong
As of December 31, 2023, Hercules Capital’s net asset value stood at $11.43 per share, compared with $10.53 as of December 31, 2022. The company reported $743.9 million in total liquidity including $98.9 million of unrestricted cash and cash equivalents, and $645 million in credit facilities. The weighted average cost of debt, comprising interest and fees, was 4.9%, up from 4.6% at the end of the prior-year quarter.
Outlook
Hercules Capital’s impressive loan origination activity points to a promising top-line growth in the foreseeable future. However, while the company endeavors to bolster originations, expenses may see an uptick.
Performance of Other Finance Companies
Other finance companies such as Ares Capital Corporation (ARCC) reported fourth-quarter 2023 core earnings of 63 cents per share, surpassing the Zacks Consensus Estimate of 59 cents. The Carlyle Group Inc. (CG) posted fourth-quarter post-tax distributable earnings per share of 86 cents, exceeding the Zacks Consensus Estimate of 75 cents.
Throughout the years, Hercules Capital has managed to consistently deliver solid performance, and its latest earnings report only solidifies its standing as a force to be reckoned with in the investment world.
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