Hercules Capital (HTGC) AI Stock Analysis

• Market Cap: $3.10B
• Dividend Yield: 9.06%
• Average Volume (3M): 1.30M
• Price to Earnings (P/E): 13.3
• Beta (1Y): 0.71
• Revenue Growth: -7.29%
• EPS Growth: -38.60%
• Country: US
• Employees: 100
• Sector: Financial
• Sector Strength: 85
• Industry: Asset Management
• EPS (TTM): 0.45
• Shares Outstanding: 175,426,130
• 10 Day Avg. Volume: 1,042,139
• 30 Day Avg. Volume: 1,297,027
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.00
• Price to Cash Flow (P/CF): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 1.71
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: 14.68
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $19.58
• Price Target Upside: 12.08% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 6

Hercules Capital's overall stock score reflects a mix of strengths and challenges. The company shows strong valuation with an attractive dividend yield and positive sentiment from recent earnings and corporate events. However, financial performance issues, particularly in revenue decline and cash flow, coupled with a weak technical outlook, temper the overall score.

Positive Factors

Drug Approval

Livmarli becomes the first approved drug for cholestatic pruritus in patients with ALGS and PFIC, marking a significant step in its global expansion.

Earnings

HTGC offers a durable NOI profile with its earnings multiple now more in line with upper quartile peers.

Negative Factors

NOI Conversion

HTGC has been far from immune to the private markets morass with just 69% TTM NOI conversion.

Write-down

Annex Cloud was written down by 63ppt QoQ and moved to non-accrual.

Hercules Capital Business Overview & Revenue Model

Company Description

Hercules Capital, Inc. is a business development company. The firm specializing in providing venture debt, debt, senior secured loans, and growth capital to privately held venture capital-backed companies at all stages of development from startups, to expansion stage including select publicly listed companies and select special opportunity lower middle market companies that require additional capital to fund acquisitions, recapitalizations and refinancing and established-stage companies. The firm provides growth capital financing solutions for capital extension; management buy-out and corporate spin-out financing solutions; company, asset specific, or intellectual property acquisition financing; convertible, subordinated and/or mezzanine loans; domestic and international corporate expansion; vendor financing; revenue acceleration by sales and marketing development, and manufacturing expansion. It provides asset-based financing with a focus on cash flow; accounts receivable facilities; equipment loans or leases; equipment acquisition; facilities build-out and/or expansion; working capital revolving lines of credit; inventory. The firm also provides bridge financing to IPO or mergers and acquisitions or technology acquisition; dividend recapitalizations and other sources of investor liquidity; cash flow financing to protect against share price volatility; competitor acquisition; pre-IPO financing for extra cash on the balance sheet; public company financing to continue asset growth and production capacity; short-term bridge financing; and strategic and intellectual property acquisition financings. It also focuses on customized financing solutions, emerging growth, mid venture, and late venture financing. The firm invests primarily in structured debt with warrants and, to a lesser extent, in senior debt and equity investments. The firm generally seeks to invest in companies that have been operating for at least six to 12 months prior to the date of their investment. It prefers to invest in technology, energy technology, sustainable and renewable technology, and life sciences. Within technology the firm focuses on advanced specialty materials and chemicals; communication and networking, consumer and business products; consumer products and services, digital media and consumer internet; electronics and computer hardware; enterprise software and services; gaming; healthcare services; information services; business services; media, content and information; mobile; resource management; security software; semiconductors; semiconductors and hardware; and software sector. Within energy technology, it invests in agriculture; clean technology; energy and renewable technology, fuels and power technology; geothermal; smart grid and energy efficiency and monitoring technologies; solar; and wind. Within life sciences, the firm invests in biopharmaceuticals; biotechnology tools; diagnostics; drug discovery, development and delivery; medical devices and equipment; surgical devices; therapeutics; pharma services; and specialty pharmaceuticals. It also invests in educational services. The firm invests primarily in United States based companies and considers investment in the West Coast, Mid-Atlantic regions, Southeast and Midwest; particularly in the areas of software, biotech and information services. The firm prefers to invest between $10 million to $250 million in equity per transactions. It invests generally between $1 million to $40 million in companies focused primarily on business services, communications, electronics, hardware, and healthcare services. The firm invests primarily in private companies but also have investments in public companies. For equity investments, the firm seeks to represent a controlling interest in its portfolio companies which may exceed 25% of the voting securities of such companies. The firm seeks to invest a limited portion of its assets in equipment-based loans to early-stage prospective portfolio companies. These loans are generally for amounts up to $3 million but may be up to $15 million for certain energy technology venture investments. The firm allows certain debt investments have the right to convert a portion of the debt investment into equity. It also co-invests with other private equity firms. The firm seeks to exit its investments through initial public offering, a private sale of equity interest to a third party, a merger or an acquisition of the company or a purchase of the equity position by the company or one of its stockholders. The firm has structured debt with warrants which typically have maturities of between two and seven years with an average of three years; senior debt with an investment horizon of less than three years; equipment loans with an investment horizon ranging from three to four years; and equity related securities with an investment horizon ranging from three to seven years. The firm prefers to invest through its balance sheet capital. The firm formerly known as Hercules Technology Growth Capital, Inc. Hercules Capital, Inc. was founded in December 2003 and is based in Palo Alto, California with additional offices in Connecticut; Boston, Massachusetts; San Diego, California; Westport, Connecticut; Elmhurst, Illinois; Santa Monica, California; McLean, Virginia; New York, New York; Radnor, Pennsylvania; and Washington, District of Columbia and London, United Kingdom.

How the Company Makes Money

Hercules Capital makes money primarily through the interest and fees charged on the debt financing provided to its portfolio companies. The company earns interest income from the loans it extends, which typically have higher interest rates due to the venture capital-backed nature of its clients. In addition to interest income, Hercules Capital often receives warrant positions, which can provide additional upside potential if the portfolio companies perform well. The company also benefits from prepayment and other fees associated with its lending activities. Hercules Capital's revenue model is further supported by its ability to secure capital at competitive costs, allowing it to maintain a favorable net interest margin. Strategic partnerships with venture capital firms and strong relationships with portfolio companies contribute to its earnings by enabling deal flow and providing insights into emerging industry trends.

Hercules Capital Financial Statement Overview

Summary

Hercules Capital faces challenges with declining revenue and profitability, evidenced by negative net income and cash flow in the TTM period. The balance sheet remains strong with low leverage, but operational cash flow issues and negative free cash flow are significant concerns. These factors indicate the need for financial improvements to bolster investor confidence.

Income Statement

Hercules Capital's income statement shows a declining trend in revenue over the recent periods, decreasing from $460.7 million in 2023 to $388.3 million in TTM (Trailing-Twelve-Months). The net income turned negative in TTM, indicating challenges in profitability. Gross profit margin remains high, indicating efficient cost management despite revenue decline. However, the negative net income and declining revenue growth are concerning.

Balance Sheet

The balance sheet reveals a strong equity position with stockholders' equity consistently high relative to total assets, resulting in a healthy equity ratio. However, the debt-to-equity ratio is low due to minimal debt levels. This indicates low leverage, which is generally positive, but it also reflects limited growth through financing. The return on equity has seen fluctuations, impacted by varying net income levels.

Cash Flow

Cash flow analysis shows negative operating cash flow in TTM, indicating cash management issues. Free cash flow is also negative, reflective of operational challenges. The free cash flow to net income ratio is unfavorable, showing inefficiencies in converting earnings to cash. A positive aspect is the significant investing cash inflow in TTM, possibly from asset sales or investments.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
415.93M	460.67M	184.64M	255.13M	297.77M
	Gross Profit
361.69M	459.07M	140.79M	218.16M	268.78M
	EBIT
237.39M	387.57M	272.93M	174.16M	227.26M
	EBITDA
0.00	405.29M	250.62M	213.39M	224.43M
	Net Income Common Stockholders
260.13M	337.48M	156.83M	174.16M	227.26M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
42.68M	98.90M	2.90B	133.12M	198.28M
	Total Assets
3.83B	3.42B	3.03B	2.60B	2.62B
	Total Debt
18.19M	1.56B	1.58B	1.24B	1.30B
	Net Debt
-113.12M	1.46B	1.56B	1.11B	1.10B
	Total Liabilities
1.84B	1.61B	1.63B	1.29B	1.33B
	Stockholders Equity
1.99B	1.80B	1.40B	1.31B	1.29B
Cash Flow		Free Cash Flow
-118.79M	67.39M	-424.91M	128.51M	207.66M
	Operating Cash Flow
-118.09M	68.28M	-424.80M	128.62M	207.80M
	Investing Cash Flow
-705.00K	-887.00K	-114.00K	-106.00K	-137.00K
	Financing Cash Flow
119.20M	22.75M	314.52M	-229.87M	-85.04M

Hercules Capital Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 17.47
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HTGC, the sentiment is Negative. The current price of 17.47 is above the 20-day moving average (MA) of 17.42, below the 50-day MA of 18.52, and below the 200-day MA of 18.88, indicating a neutral trend. The MACD of -0.19 indicates Negative momentum. The RSI at 43.45 is Neutral, neither overbought nor oversold. The STOCH value of 40.04 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for HTGC.

Hercules Capital Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TRIN	75 Outperform	$900.37M	6.82	16.12%	14.24%	48.54%	6.64%
TSLX	74 Outperform	$1.96B	11.06	11.06%	8.82%	5.00%	-24.20%
GBDC	71 Outperform	$3.80B	10.42	8.88%	11.75%	16.10%	-24.30%
GSBD	71 Outperform	$1.25B	19.39	3.96%	15.71%	-28.04%	-69.52%
HTGC	70 Outperform	$3.10B	13.26	11.30%	9.06%	-7.29%	-38.60%
NMFC	65 Neutral	$1.10B	9.86	8.11%	13.11%	-3.55%	-20.43%
Sector *	64 Neutral	$12.61B	9.79	7.95%	16985.69%	12.77%	-3.98%

Hercules Capital Corporate Events

Hercules Capital Closes $287.5M Convertible Notes Offering

On March 10, 2025, Hercules Capital, Inc. successfully closed a private offering of $287.5 million in 4.750% Convertible Unsecured Notes due 2028. The net proceeds of approximately $278.39 million will be used to fund investments in debt and equity securities and for general corporate purposes. The Convertible Notes, which are unsecured and bear interest semiannually, provide holders the option to convert them into cash, shares, or a combination thereof, with a conversion rate set at 46.5631 shares per $1,000 principal amount. This strategic financial move is expected to bolster Hercules Capital’s investment capabilities and strengthen its position in the venture growth financing market.

Hercules Capital Announces $250M Convertible Notes Offering

On March 5, 2025, Hercules Capital announced its plan to offer $250 million in Convertible Unsecured Notes due 2028, with an option for initial purchasers to buy an additional $37.5 million to cover overallotments. These notes will be offered to qualified institutional buyers and certain non-U.S. persons, subject to market conditions. The proceeds will be used for investments in debt and equity securities and general corporate purposes. The notes will mature on September 1, 2028, and will not be registered under the Securities Act, limiting their offer or sale in the U.S. without registration or exemption.