Hercules Technology Growth Capital, Inc. Q2 2010 Earnings Call Transcript

Hercules Technology Growth Capital, Inc. Q2 2010 Earnings Call Transcript
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Hercules Technology Growth Capital, Inc. (HTGC)

Q2 2010 Earnings Call

August 05, 2010 5:00 p.m. ET

Executives

Jason Gold - IR

Manuel Henriquez - CEO

David Lund - CFO

Allyn Woodward - Director

Analysts

John Hecht

Troy Ward

Vernon Plack

Jason Arnold

Jason Deleeuw

Henry Coffey

Jesper Bergs

Douglas Harter

Presentation

Operator

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Previous Statements by HTGC
» Hercules Technology Growth Capital, Inc. Q1 2010 Earnings Call Transcript
» Hercules Technology Growth Capital, Inc. Q4 2009 Earnings Call Transcript
» Hercules Technology Growth Capital, Inc. Q2 2009 Earnings Call Transcript

Good day, ladies and gentlemen and welcome to the Hercules Technology Q2, 2010 Growth Capital earnings call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, today's call is being recorded.

At this time, I would now like to turn the conference over to your host, Mr. Jason Gold. Sir, you may begin.

Jason Gold

Thank you, Joe and good afternoon everyone. On the call today are Manuel Henriquez, Hercules Co-Founder, Chairman and CEO; and David Lund, the company CFO. Our second quarter 2010 financial results were released just after today's market closed. They can be accessed from the company's website at www.htgc.com. We've arranged for a taped replay of today's call which will be available through our website or by using the telephone numbers and pass code provided in today's earnings release.

I would like to call your attention to the Safe Harbor disclosure in our earnings release regarding forward-looking information. Today's conference call may include forward-looking statements and projections. We ask that you refer to our most recent filings with the SEC for important risk factors that could cause actual results to differ materially from these projections. We do not take any obligations to update our forward-looking statements unless required to do so by law. To obtain copies of our latest SEC filings, please visit sec.gov or visit our website at htgc.com.

I would now like to turn the call over to Manuel Henriquez, Hercules Co-Founder, Chairman and CEO. Manuel?

Manuel Henriquez

Thank you Jason and good afternoon and thank you everyone for joining us today. I'd like to start off the call by providing a brief summery of our operating performance and results for second quarter 2010, as well as my customary observations on both the venture capital environment, the overall landscape and compatible landscape and then turn the call over to David Lund, our CFO, to run some more specific performance numbers for Hercules in the second quarter.

To that let me first begin by saying that, as we indicated to you in the first quarter, we have continued and remained focused on building our invested portfolio and continued to with our desire to build our earnings growth to start increasing our dividend.

Thanks to the hard work of our employees, you say this manifest itself with over $217 million of commitments closed during the second quarter alone. When taking to account what we did in the first quarter towards commitment, we are not at a run rate, not seen since the second quarter of 2008.

A very impressive loan origination effort, while the rest of the colony continues to grow out of the recession period that we were in, in a very slow pace. To that end because of this asset growth that we've seen, we recorded $6.9 million of net interest income or NII for GAAP earnings of approximately $0.19 per share.

Total invested assets at the end of the quarter were $435 million and we are well positioned for growth for the second half of the year with both a very robust pipeline of over $1 billion in opportunity, this suddenly after harvesting over $217 million of transactions in the second quarter.

This should give you some indication of Hercules continued dominance or I should say continued growing position within the venture capital landscape as one of the largest venture debt providers in the market place,

This growth was also helped fueled by our recent and final approval for a second SPA license for $75 million. A process by which we had anticipated to have fully by the first quarter 2010 and the spilling over to May of 2010.

That said, we're grateful with our continued relations with the SPA and more importantly a very long terms stable source of growth capital to fuel the Hercules business as we look to the future for continued growth.

On the credit side, given the continued softness that we're seeing in consumer spending and giving the anemic economy that we're still seeing in market place, we very strongly that our investment in Spa Chakra, and investment that we worked very diligent through the bankruptcy process to help the company emerge our of bankruptcy, continues to show signs of languishing or inability to be able to get itself into a cash slope, positive growth business, because of that, we're forced to make a very different business decision and investor decision as to weight the differences of continue to support the company or re-evaluate strategically alternatives.

Given our concern about long term consumer spending, we though that was prudent to put the Spa Chakra investment behind us and we took measures in the second quarter of fully running down that investment to cause no further distraction for Hercules NS team on a go forward basis, since it's performance out of bankruptcy has been anything but stellar.

I'll be happy to answer more questions on that in the Q&A. On a non accrual side our non-accrual status remains flat to insignificant on a fair market value basis on assets. It basically 0.01% or insignificant in terms of non-accruals, which further validates our continued credit performance.

Overall, I am extremely happy to see the overall credit performance of the portfolio. I think that many of the credit issues that we had concerns about are now behind us. This does not mean we're not working through some of the credit issues that we have in some of our companies.

Most of the transactions have been written down, including Spa Chakra, may in fact re-come up as recoveries as we decide on different strategic options to take for those companies as we go through a more in-depth analysis on which directions the company may or may not go in and if they are able to close additional runs to equity capitals.

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