Hercules Capital Declares a Total Cash Distribution of $0.48 per Share for the Fourth Quarter 2023

Rhea-AI Summary

Hercules Capital, Inc. (HTGC) declares a total cash distribution of $0.48 per share for the fourth quarter of 2023, consisting of a base distribution of $0.40 per share and a new supplemental distribution of $0.08 per share. The company's Board of Directors aims to distribute 90% to 100% of its taxable quarterly income or potential annual income for the year. The distribution payment dates are set for February 28, 2024, and March 6, 2024.

Insights

Financial Analyst

The announcement of Hercules Capital's total cash distribution of $0.48 per share, which includes a base distribution and a supplemental distribution, signals a strong financial position and a commitment to returning value to shareholders. This distribution policy, aiming to approximate 90% to 100% of the company's taxable quarterly income, aligns with the typical structure of a regulated investment company (RIC), designed to maximize tax efficiency for investors.

From a financial perspective, the supplemental distribution suggests that Hercules may have experienced a surplus in earnings, reflecting robust operational performance. However, investors should be cautious, as distributions that significantly exceed earnings could potentially erode the capital base of the company over time. It is also important to note that while the Board maintains a variable distribution policy, the actual tax attributes of the distributions may vary and thus, the stated tax advantages could be subject to change upon annual assessment.

Tax Expert

The designation of a significant percentage of Hercules' distributions as 'Qualified Interest Income' (QII) is a critical tax consideration for foreign investors. The 81.44% QII figure implies that a majority of the income distributed may be exempt from U.S. withholding tax for non-U.S. shareholders, potentially enhancing the attractiveness of Hercules shares to international investors. This tax-efficient structuring is a strategic aspect of Hercules' financial management, which could influence the company's stock demand and liquidity in global markets.

However, shareholders must ensure proper documentation to benefit from this exemption and it's essential to understand that the tax treatment of distributions can have a significant impact on net returns. Investors, particularly those based outside the U.S., should consult with tax professionals to fully understand the implications of these distributions on their personal tax situations.

Market Analyst

The announcement of a supplemental distribution, in addition to the base distribution, may be perceived positively by the market as an indicator of Hercules' financial health. However, the market will also consider the sustainability of such distributions. If the supplemental distributions become a recurring pattern, it could set a precedent that shareholders may come to expect, which in turn could place pressure on the company to maintain or increase distributions in the future, regardless of actual earnings.

Investors should also consider the broader economic environment and sector performance when evaluating the impact of this news. For instance, if the venture capital and private equity sectors are experiencing growth, Hercules' performance and distribution policy could be sustainable. Conversely, in a downturn, the company's ability to maintain such distributions may be challenged.

The Total Cash Distribution of $0.48 per Share for the Fourth Quarter 2023 is Comprised of a Base Distribution of $0.40 per Share and a New Supplemental Distribution of $0.08 per Share

SAN MATEO, Calif.--(BUSINESS WIRE)-- Hercules Capital, Inc. (NYSE: HTGC) (“Hercules” or the “Company”), the largest and leading specialty finance provider to innovative, venture, growth and established stage companies backed by some of the leading and top-tier venture capital and select private equity firms, is pleased to announce that its Board of Directors has declared a fourth quarter 2023 total cash distribution of $0.48 per share. The following shows the key dates of the fourth quarter 2023 distribution payment:

Record Date	February 28, 2024
Payment Date	March 6, 2024

Hercules' Board of Directors maintains a variable distribution policy with the objective of distributing four quarterly distributions in an amount that approximates 90% to 100% of the Company’s taxable quarterly income or potential annual income for a particular year. In addition, during the year, the Company’s Board of Directors may choose to pay additional supplemental distributions, so that the Company may distribute approximately all its annual taxable income in the year it was earned, or it can elect to maintain the option to spill over the excess taxable income into the coming year for future distribution payments.

The determination of the tax attributes of the Company's distributions is made annually as of the end of the Company's fiscal year based upon its taxable income for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of its distributions for a full year. Of the distributions declared during the quarter ended December 31, 2023, 100% were distributions derived from the Company’s current and accumulated earnings and profits. There can be no certainty to stockholders that this determination is representative of the tax attributes of the Company’s 2024 full year distributions to stockholders.

Pursuant to Internal Revenue Code Section 871(k), certain funds generate “Qualified Interest Income” (QII) that may be exempt for U.S. withholding tax on foreign accounts. A regulated investment company (“RIC”) is permitted to designate distributions of QII as exempt from U.S. withholding tax when paid to non-U.S. shareholders with proper documentation.

The percentage of QII for distributions declared for the fourth quarter ended December 31, 2023 on Hercules’ common stock is 81.44%.

About Hercules Capital, Inc.

Hercules Capital, Inc. (NYSE: HTGC) is the leading and largest specialty finance company focused on providing senior secured venture growth loans to high-growth, innovative venture capital-backed companies in a broad variety of technology, life sciences and sustainable and renewable technology industries. Since inception (December 2003), Hercules has committed more than $18 billion to over 640 companies and is the lender of choice for entrepreneurs and venture capital firms seeking growth capital financing. Companies interested in learning more about financing opportunities should contact info@htgc.com, or call (650) 289-3060.

Hercules, through its wholly owned subsidiary business, Hercules Adviser LLC (“Hercules Adviser”), also maintains an asset management business through which it manages investments for external parties. Hercules Adviser is registered as an investment adviser under the Investment Advisers Act of 1940.

Hercules’ common stock trades on the New York Stock Exchange (NYSE) under the ticker symbol “HTGC.” In addition, Hercules has one retail bond issuance of 6.25% Notes due 2033 (NYSE: HCXY).

Forward-Looking Statements

This press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We may use words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may” and similar expressions to identify forward-looking statements. Forward-looking statements are not guarantees of future performance and should not be relied upon in making any investment decision. Such statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations. While we cannot identify all such risks and uncertainties, we urge you to read the risks discussed in our Annual Report on Form 10-K and other materials that we publicly file with the Securities and Exchange Commission. Any forward-looking statements made in this press release are made only as of the date hereof. Hercules assumes no obligation to update any such statements in the future.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240213236932/en/

Michael Hara

Investor Relations and Corporate Communications

Hercules Capital, Inc.

(650) 433-5578

mhara@htgc.com

Source: Hercules Capital, Inc.

FAQ

What is the total cash distribution per share declared by Hercules Capital, Inc. for the fourth quarter of 2023?

Hercules Capital, Inc. declared a total cash distribution of $0.48 per share for the fourth quarter of 2023.

What is the breakdown of the total cash distribution per share for the fourth quarter of 2023?

The total cash distribution of $0.48 per share for the fourth quarter of 2023 includes a base distribution of $0.40 per share and a new supplemental distribution of $0.08 per share.

What is the aim of Hercules Capital's Board of Directors regarding distribution policy?

Hercules Capital's Board of Directors aims to distribute 90% to 100% of the company's taxable quarterly income or potential annual income for the year.

How are the distribution payment dates set for the fourth quarter of 2023?

The distribution payment dates for the fourth quarter of 2023 are February 28, 2024, and March 6, 2024.

What percentage of Qualified Interest Income (QII) was designated for distributions in the fourth quarter of 2023?

81.44% of Qualified Interest Income (QII) was designated for distributions in the fourth quarter of 2023 on Hercules' common stock.