Hercules Technology Growth Capital Inc.’s (HTGC) first-quarter change in net assets of 16 cents per share was slightly short of the Zacks Consensus Estimate of 19 cents. However, this compares favorably with the change in net assets of 14 cents in the prior-year quarter.

Results for the reported quarter benefited primarily from a 22.3% year-over-year decrease in operating expenses. However, the lower-than-expected expenses were more than offset by a 38.8% decrease in top line. Hercules ended the quarter with a much stronger balance sheet and high level of liquidity.
Total investment income for the reported quarter came in at $12.5 million, down 38.8% from $20.5 million in the prior-year quarter. Both interest and fees decreased compared to the year-ago quarter.
Total operating expenses were $6.9 million for the reported quarter, down 22.3% from $8.9 million in the year-ago quarter. This decrease is primarily attributable to lower compensation expense related to bonus accrual. On a year-over-year basis, interest expense decreased 35.9% to $2.0 million and loan fees decreased 68.5% to $0.3 million.
Net investment income (before investment gains and losses) for the reported quarter came in at $5.6 million or 16 cents per share, compared with $11.6 million or 35 cents in the year-ago quarter. The decrease was primarily attributable to lower fees and lower interest earned.
The fair value of Hercules’ total investment portfolio was approximately $380.0 million as on March 31, 2010, compared to $370.4 million as on December 31, 2009. The company funded and restructured approximately $87.0 million to new and existing portfolio companies during the reported quarter.
Net Asset Value
As on March 31, 2010, Hercules’ net asset value was $10.11 per share, compared to $10.29 as on December 31, 2009. This decrease in net asset value was due primarily to the company’s issuance of long term management incentives in the form of restricted stock.
Dividend Update
Concurrent with the earnings release, Hercules declared a quarterly dividend of 20 cents per share. The dividend will be paid on June 18, 2010 to shareholders of record as on May 12, 2010. This would represent the company’s nineteenth consecutive dividend payment since its initial public offering.
Share Repurchase Update
During the reported quarter, the board of Hercules authorized the repurchase of common shares worth $35 million. The company repurchased 25,125 common shares at a total cost of approximately $234,000 as of March 31, 2010.
Hercules is a well capitalized specialty finance company providing debt and equity growth capital to technology and life science companies at all stages of development. As with the gradual recovery of the overall economic condition many technology companies are surpassing others with respect to earnings, Hercules has started experiencing growth with improvement in valuations within its portfolio companies.

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