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HTGC Has NII Miss With Good NAV Gain

|About: Hercules Capital, Inc. (HTGC)

The projections from Yahoo Finance for Hercules Capital (HTGC)

Earnings Estimate Current Qtr. (Jun 2018) Next Qtr. (Sep 2018) Current Year (2018) Next Year (2019)
No. of Analysts 11 11 11 12
Avg. Estimate 0.28 0.32 1.24 1.35
Low Estimate 0.25 0.29 1.15 1.22
High Estimate 0.32 0.35 1.33 1.45
Year Ago EPS 0.31 0.29 1.19 1.24

Revenue Estimate Current Qtr. (Jun 2018) Next Qtr. (Sep 2018) Current Year (2018) Next Year (2019)
No. of Analysts 10 10 11 12
Avg. Estimate 49.56M 51.78M 203.67M 229.85M
Low Estimate 44.8M 49.39M 190.2M 198.39M
High Estimate 50.6M 54.38M 210.28M 260.05M
Year Ago Sales 48.45M 45.87M 190.88M 203.67M
Sales Growth (year/est) 2.30% 12.90% 6.70% 12.90%

NII/share was $0.2612 compared to a projection of $0.28 and dividend of $0.31.

TII or revenue was $45.876 million compared to a projection of $49.560 million.

There was a share jump - so the timing or deployment of new money looks to be a likely issue.

My spreadsheets:

Q2-18 Q1-18 Q4-17 Q3-17 Q2-17 Q1-17 Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14 Q4-13 Q3-13 Q2-13 Q1-13
Realized & Unrealized Gains 29.286 -20.117 -6.152 9.099 7.874 -28.266 -18.996 7.036 -13.879 -5.802 -5.967 -19.515 -14.029 8.926 4.736 -3.818 -5.360 3.881 6.033 15.421 3.269 1.657
Realized & Unrealized Gains/share 0.3359 -0.2376 -0.0734 0.1101 0.0956 -0.3472 -0.2468 $0.0949 -$0.1907 -$0.0815 -$0.0838 -$0.2730 -$0.1959 $0.1391 $0.0743 -$0.0599 -$0.0856 $0.0619 $0.0951 $0.2538 $0.0535 $0.0308

Q2-18 Q1-18 Q4-17 Q3-17 Q2-17 Q1-17 Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14 Q4-13 Q3-13 Q2-13 Q1-13
Total investment income 48.700 50.198 45.865 48.452 46.365 47.472 45.102 43.538 38.939 39.380 47.132 38.126 32.494 36.875 37.019 34.001 35.770 33.210 41.021 34.525 30.957
Interest income 45.846 42.981 43.607 42.435 40.506 42.861 42.680 39.952 39.621 36.474 34.127 40.339 35.240 30.559 31.895 33.340 30.536 30.846 28.265 36.184 30.294 28.929
Fee income 3.686 5.719 3.804 3.430 7.946 3.504 4.792 5.150 3.917 2.465 5.253 6.793 2.886 1.935 4.980 3.679 3.465 4.924 4.945 4.837 4.231 2.028
Fee Income Percent 7.44% 11.74% 7.58% 7.48% 16.40% 7.56% 10.09% 11.42% 9.00% 6.33% 13.34% 14.41% 7.57% 5.95% 13.51% 9.94% 10.19% 13.76% 14.89% 11.79% 12.25% 6.55%
PIK Income YTD 4.696 2.308 9.960 5.242 4.656 2.199 7.319 5.317 3.243 1.535 4.037 2.796 1.584 0.655
PIK Income Quarter 2.388 2.308 2.787 .586 2.457 2.199 2.002 2.074 1.708 1.535 1.241 1.212 .929 .655
PIK/TII ratio 4.82% 4.74% 5.55% 1.28% 5.07% 4.74% 4.22% 4.60% 3.92% 3.94% 3.15% 2.57% 2.44% 2.02%
Q2-18 Q1-18 Q4-17 Q3-17 Q2-2017 Q1-17 Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14 Q4-13 Q3-13 Q2-13 Q1-13
Total investment income 45.876 48.700 50.198 45.865 48.452 46.365 47.472 45.102 43.538 38.939 39.380 47.132 38.126 32.494 36.875 37.019 34.001 35.770 33.210 41.021 34.525 30.957
Net investment income 22.774 26.063 24.518 23.973 25.275 22.678 33.117 23.776 23.354 20.097 20.137 23.590 16.781 12.993 15.899 18.995 18.551 18.304 18.864 21.560 17.610 15.032
Investments @ fair value 1.702 1.484 1.542 1.417 1.395 1.406 1.424 1.321 1.212 1.291 1.201 1.152 1.239 1.387 1.299 0.999 0.991 0.891 0.910 0.983 1.211 0.968
Wt Av Share Count 87.199 84.666 83.843 82.607 82.395 81.420 76.968 74.157 72.762 71.199 71.239 71.496 71.593 64.163 63.766 63.779 62.588 62.695 63.419 60.750 61.145 53.823
TII/share $0.5261 $0.5752 $0.5987 $0.5552 $0.5880 $0.5695 $0.6168 $0.6082 $0.5984 $0.5469 $0.5528 $0.6592 $0.5325 $0.5064 $0.5783 $0.5804 $0.5432 $0.5750 $0.5237 $0.6752 $0.5646 $0.5752
NII/share $0.2612 $0.3078 $0.2924 $0.2902 $0.3067 $0.2785 $0.4317 $0.3206 $0.3210 $0.2823 $0.2827 $0.3299 $0.2344 $0.2025 $0.2493 $0.2978 $0.2964 $0.2919 $0.2975 $0.3549 $0.2880 $0.2793
NAV/share $10.22 $9.72 $9.96 $10.00 $9.87 $9.76 $9.90 $9.86 $9.66 $9.81 $9.94 $10.02 $10.26 $10.47 $10.18 $10.22 $10.42 $10.58 $10.51 $10.42 $10.09 $10.00
Wt Av Yield - effective 13.5% 14.3% 14.2% 14.1% 14.9% 13.4% 14.4% 14.6% 14.4% 13.2% 14.2% 16.4% 13.8% 12.9% 16.0% 16.7% 16.9% 15.1% 15.1% 17.7% 15.7% 14.3%
Wt Av Yield - core 12.7% 11.9% 12.5% 12.6% 12.1% 12.2% 12.9% 13.2% 13.4% 12.9% 13.3% 12.6% 13.2% 12.8% 13.0% 13.8% 13.9% 15.1% 15.1% 17.7% 15.7% 14.3%
Wt Av Yield - coupon 10.1% 9.5% 9.8% 9.6% 9.3% 8.9% 9.2% 9.2% 9.2% 9.1% 9.2% 9.4% 9.8% 10.2% 10.3% 10.7% 10.6%
NII/TII Ratio 49.64% 53.52% 48.84% 52.27% 52.16% 48.91% 69.76% 52.7% 53.6% 51.6% 51.1% 50.0% 44.0% 40.0% 43.1% 51.3% 54.6% 52.2% 59.2% 52.6% 51.0% 48.7%
Q4-16 included $8 million from a litigation settlement. This is not included in investment income - but is included in net investment income. Excluding this, NII was $0.3263
Non-accrual Dollars at Cost 2.8 12.3 14.8 14.0 43.6 107.5 43.9 46.2 34.5 49.8 47.4
Non-accrual as % Investments at Value 0.0% 0.0% 0.0% 0.2% 0.3% 1.3% 0.4% 0.7% 0.2% 2.1% 1.9% 2.7% 1.9% 1.0%
Non-accrual as % Investments at Cost 0.2% 0.8% 0.9% 1.1% 2.9% 7.0% 2.9% 3.3% 2.5% 3.7% 3.8% 4.1% 3.7% 2.9%
Q2-18 Q1-18 Q4-17 Q3-17 Q2-2017 Q1-17 Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14
Convertible notes 224.269 223.878 223.488 223.097 222.898 222.542 0 0 0 17.572 17.478 17.461 17.399 17.375 17.345 40.012 73.060 72.789
Asset backed notes 30.698 33.156 48.650 64.860 86.865 100.388 107.972 115.531 127.461 127.227 126.995 129.300 129.300 133.503 145.349 27.951 46.574 63.782
2022+2024+2025 notes 302.038 326.859 326.573 251.716 251.478 251.240 354.308 346.322 346.069 208.560 208.307 253.364 253.364 273.364 273.364 273.364 170.364 170.364
SBA Debentures 188.457 188.299 188.141 187.983 187.824 187.669 187.501 187.333 187.165 186.997 186.829 190.200 190.200 190.200 190.200 190.200 190.200 190.200
Credit Facility 58.323 0 0 0 0 5.016 0 0 61.003 50.000 0 49.622 0 0 0 0 0
Debt 803.785 782.192 786.852 727.656 749.065 761.839 654.797 649.186 660.695 601.359 589.609 590.325 639.885 614.442 626.258 531.527 480.171 497.135
Debt/share 9.2178 9.2386 9.3848 8.8076 9.0911 9.3569 8.5074 8.7542 9.0802 8.4462 8.2765 8.2568 8.9378 9.5763 9.8212 8.3339 7.6719 7.9294
Debt/share to NAV 90.19% 95.05% 94.23% 88.08% 92.11% 95.87% 85.93% 88.79% 94.00% 86.10% 83.25% 82.40% 87.11% 91.46% 96.47% 81.54% 73.63% 74.95%
Interest + loan fees 13.240 10.561 13.039 10.499 10.602 12.445 10.005 10.149 8.850 8.006 9.480 8.890 9.151 9.367 9.252 7.859 7.625 9.224
Interest expense/share 0.1518 0.1247 0.1555 0.1271 0.1287 0.1528 0.1306 0.1369 0.1216 0.1237 0.1331 0.1243 0.1278 0.1460 0.1451 0.1232 0.1218 0.1471
Interest expense/TII 28.86% 21.69% 25.98% 22.89% 21.88% 26.84% 23.44% 22.50% 20.33% 20.56% 24.07% 18.86% 24.00% 28.83% 25.09% 21.23% 22.43% 25.79%
Annualized Int exp/Debt 6.59% 5.40% 6.63% 5.77% 5.66% 6.53% 6.11% 6.25% 5.36% 5.33% 6.43% 6.02% 6.20% 6.10% 5.91% 5.91% 6.35% 7.42%
PWAY - Int exp/Debt 351 bps 650 bps 757 bps 833 bps 924 bps 687 bps 829 bps 725 bps 805 bps 787 bps 777 bps 1038 bps 760 bps 680 bps 1009 bps 1079 bps 1055 bps 768 bps
Reported wt av cost of debt 6.4% 5.3% 5.6% 5.5% 6.3% 5.9% 6.0% 5.8% 5.5% 6.2% 5.6% 6.1%
On 4-24-18 HTGC offered $75 million of 5.25% notes due 2025 - sold as HTXZ
In the fall of 2017 HTGC redeemed HTGY and sold standard 2022 bonds rated BBB+ by Kroll (BBB- by S&P) at 4.625% - resulting in high offerings costs in Q4-17
On 7-05-16 HTGC offered $69 million of 6.25% notes due 2024 - sold as HTGX in a third offering
On 5-03-16 HTGC offered $72.9 million of 6.25% notes due 2024 - sold as HTGX in second offering
On 7-14-14 HTGC offered $103 million of 6.25% notes due 2024 - sold as HTGX
On 11-05-14 HTGC offered $129.3 million of asset backed 3.524% notes due 2021
On 9-19-12 HTGC offered $75 million of 7% notes due 2019 - sold as HTGY

Assessments and Observations

Friday's closing price of $13.56 was (1356/1022) 32.68% above NAV. HTGC is expensive.

Friday's yield was (31 x 4 /1356) 9.14% in a sector where the average yield is close to 10%.

Despite investing in venture capital companies, HTGC has managed to have NAV stability along with dividend stability over the long term.

Dividend coverage is recently lacking - and it is not projected for 2019. Given those two attributes - I would be hesitant to pay a premium to own HTGC.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.