Exhibit 99.1
Hercules Announces Record Fourth Quarter and
Year-End 2006 Financial Results
Declares Sixth Consecutive Dividend, $0.30 Per Share
PALO ALTO, Calif.--(BUSINESS WIRE)--Feb. 7, 2007--Hercules
Technology Growth Capital, Inc. (NASDAQ:HTGC), a leading specialty
finance company providing growth financing to venture capital and
private equity sponsored companies in the technology and life science
industries, today announced its financial results for the fourth
quarter and year ended December 31, 2006, and the declaration of its
sixth consecutive quarterly dividend.
"We are extremely pleased with our performance and achievements
during 2006. During the year, we demonstrated our ability to originate
new investment opportunities by entering into $242.5 million of debt
and equity commitments and funding a total of $196.0 million of such
commitments to 38 portfolio companies. We also significantly bolstered
our balance sheet and permanent capital base by raising gross proceeds
of $151.0 million from the sale of common stock and successfully
increasing our credit facility by an additional $50.0 million with
Citibank to $150.0 million in borrowing capacity. In addition, we
recognized approximately $3.3 million of realized gains from four exit
events with an IRR in excess of 30% from each of the portfolio
investments. We have also expanded our origination team and added
geographic locations as we continue to expand our national presence,"
said Manuel A. Henriquez, Chairman and CEO of Hercules.
"Our results for the fourth quarter and 2006 serve as a testimony
to Hercules growing brand awareness within the venture market place.
It is our goal to create a financing platform to offer technology and
life science companies a broad offering of structured financing
solutions to meet their needs throughout their life cycle, from seed
financing to post IPO needs. I am very proud of our team's
accomplishments in 2006. We continue to demonstrate the ability to
grow our investment portfolio and diversify our product offerings to
companies at all stages of development while maintaining our credit
performance," commented Henriquez.
Highlights for the Fourth Quarter ended December 31, 2006
included:
-- Revenues were approximately $8.7 million, a 100% increase
compared with $4.3 million in the fourth quarter of 2005.
-- Net investment income before taxes increased to $3.5 million
or $0.21 per share compared with $941,000 or $0.10 per share
in Q4 2005, an increase of 271%.
-- Net income was approximately $3.9 million or $0.23 per share
on a weighted average of 16.9 million basic shares outstanding
during the quarter measured against a loss of $200,000 or
$0.02 per share on 9.8 million weighted average shares
outstanding at December 31, 2005.
-- New debt commitments increased by $32.5 million to four new
portfolio companies and $6.0 million to one existing portfolio
company.
-- Debt investments funded in the quarter totaled approximately
$63.0 million to 16 new and existing portfolio companies.
-- Total debt and equity investment portfolio value as of year
end was $283.2 million in 56 portfolio companies.
-- Successfully completed two equity offerings generating gross
proceeds of approximately $110.0 million, on the sale of 8.2
million shares.
-- Paid a dividend of $0.30 per share representing the fifth
consecutive quarterly dividend.
Henriquez also commented, "Our investment portfolio of both debt
and equity continues to expand, affording us the ability to leverage
our cost structure and in turn drive our revenue and profitability. We
continue to see a robust deal pipeline of potential investing
opportunities leading into 2007. In addition, our growing warrant and
equity portfolio should allow us to participate in additional new exit
events or warrant realization in calendar 2007 and beyond, subject to
market conditions. As of the end of 2006, our warrant portfolio offers
us the opportunity to invest approximately $31.6 million, by
exercising our warrants, in the equity of our portfolio companies.
This growing warrant portfolio coupled with our existing direct equity
portfolio of approximately $8.1 million at fair value as of December
31, 2006, affords us the ability to potentially harvest additional
returns to support our dividends or retaining those gains to grow our
book value for the benefit of our shareholders. In terms of market
conditions, we remain optimistic that the recent M&A activities for
venture backed companies may continue in 2007, while the technology
IPO market is beginning to show increasing signs of life."
Highlights for the Year ended December 31, 2006:
-- Revenues approximated $29.5 million for 2006, were a record
and represented a 177% increase from $10.7 million in 2005.
-- Record net investment income before provision for income tax
was $11.1 million, or $0.83 per share, including FASB 123R
compared to 2005 net investment income of $1.5 million, or
$0.22 per share, representing an increase of 629%.
-- Total new debt commitments during 2006 were $239.5 million to
32 portfolio companies, as compared to $211.0 million to 28
companies in the year 2005.
-- Total debt funding for 2006 totaled $193.0 million to 35
portfolio companies, as compared to $175.3 million to 28
portfolio companies in the prior year.
-- Total unfunded debt commitments were $55.5 million as of
December 31, 2006. This figure compares to $30.5 million of
unfunded debt commitments as of December 31, 2005.
-- New equity investments during 2006 totaled $3.0 million to
five portfolio companies, compared to $3.5 million to six
portfolio companies in 2005.
-- Recorded realized gains of approximately $3.3 million,
attributed to sales of warrants and equity held in four
portfolio companies.
-- Overall weighted average yield to maturity on the loan
portfolio was 12.64%, down slightly compared to 12.87% in 2005
attributed to expansion to both early stage companies and
asset based financing offered to more mature companies seeking
revolver type financing solutions.
-- Declared and paid $1.20 in dividends during 2006 of which
88.5% represented ordinary income.
Fourth Quarter Review and Operating Results
During the quarter, Hercules entered into agreements to provide
debt financing of $38.5 million to four new portfolio companies and
one existing portfolio company. Also during the period, Hercules
funded $18.3 million in debt investments to these four new portfolio
companies and funded an additional $44.7 million to 12 existing
portfolio companies.
Proceeds from principal repayments were approximately $16.8
million. These repayments comprised normal amortization of principal
of approximately $8.9 million, early repayments of approximately $2.5
million from one well-performing portfolio company, repayments of $4.7
million from two portfolio companies that were acquired and a $700,000
pay-down on a revolving working capital line.
The fair value of Hercules' portfolio as of December 31, 2006 was
approximately $283.2 million, representing investments in 56 portfolio
companies. This is an increase of $106.6 million over the $176.7
million as of December 31, 2005, which represented investments in 31
portfolio companies. Included in the amounts noted above is the fair
value of the Company's warrant and equity portfolio. As of December
31, 2006 the fair value of the equity portfolio was $8.1 million
representing investments in 11 portfolio companies. There were seven
equity investments representing a fair value of approximately $4.9
million as of December 31, 2005.
The fair value of Hercules warrant portfolio was $8.4 million at
December 31, 2006. This represents warrants held in 54 companies, an
increase of 64% from $5.2 million in the fourth quarter of 2005. These
warrant holdings would allow Hercules to invest $31.6 million in the
equity of its portfolio companies.
As of December 31, 2006, Hercules' unfunded debt commitments were
approximately $55.5 million to 16 portfolio companies. In addition,
the Company executed non-binding terms sheets with three prospective
portfolio companies, representing approximately $16.0 million. These
proposed investments are subject to the completion of the Company's
due diligence and final approval process, as well as the negotiation
of definitive documentation with the prospective portfolio companies.
The overall weighted average yield to maturity on the Company's
loan portfolio was approximately 12.64% as of December 31, 2006.
Yields to maturity are computed using interest rates at inception of
the loan, and include amortization of loan facility fees, commitment
fees and market premiums or discounts over the expected life of the
debt investments, weighted by their respective costs when averaged and
are based on the assumption that all contractual loan commitments have
been fully funded.
The continued growth of Hercules debt investments led to revenues
during the period of $8.7 million, a 100% increase compared to $4.3
million in the fourth quarter of 2005.
Net investment income before provision for income taxes for the
fourth quarter was approximately $3.5 million, compared with
approximately $941,000 in the fourth quarter of 2005, an increase of
271%. Net investment income before provision for income taxes on a
basic per share basis during the fourth quarter of 2006 was $0.21 per
share, based upon 16.9 million weighted average basic shares
outstanding, and compared with $0.10 per share in the comparable
quarter of 2005, based on 9.8 million weighted average basic shares
outstanding.
During the fourth quarter of 2006, the Company recognized net
realized and unrealized gains of approximately $447,000. The net gains
were generated from realized gains of approximately $1.0 million on
the sale of warrants of one portfolio company and the sale of common
stock in one additional portfolio company offset by net unrealized
losses and changes in the portfolio.
The yield to maturity and operating results drove net income
during the fourth quarter of 2006 to $3.9 million compared with a net
loss of $200,000 in the fourth quarter of 2005. Basic net income was
$0.23 per share, based upon 16.9 million weighted average basic shares
outstanding, as compared with a net loss of $0.02 per share in the
comparable quarter of 2005, based upon 9.8 million weighted average
basic shares outstanding.
During 2006, Hercules declared and distributed $1.20 in dividends
to its shareholders. Hercules has determined that it has met the tests
under the IRS regulations to be taxed as a Regulated Investment
Company ("RIC") as of January 1, 2006 and will make that election in
conjunction with the filing of its 2006 tax return. Accordingly, 88.5%
of the dividends to its shareholders represent ordinary income for tax
purposes comprised of operations from 2006 and the distribution of
accumulated earnings and profits and 11.5% represents a return of
capital.
Liquidity and Capital Resources
At December 31, 2006, net assets were approximately $255.4
million, with a net asset value per share of $11.65.
In December 2006, the Company used $50.0 million of the proceeds
from the equity offering to reduce our debt to $41.0 million as of
December 31, 2006. As of December 31, 2006 Hercules had $109.0 million
available for future borrowings, subject to existing terms and advance
rates, under its $150.0 million credit facility with Citibank.
On January 30, 2007, Hercules received notification from the
United States Small Business Administration "SBA" that its initial
application for leverage under its Small Business Investment Company
"SBIC" license was approved allowing Hercules to commence drawing up
to $50.0 million of leverage under its first tranche of capital from
the SBA.
The Company ended the fourth quarter with $16.4 million in cash
and cash equivalents.
Portfolio Asset Quality
In light of these current and historical activities, as of
December 31, 2006, grading of the debt portfolio, excluding warrants
and equity investments was as follows:
Grade 1 Investments totaled approximately $9.2 million or 3.5% of
the total portfolio
Grade 2 Investments totaled approximately $220.4 million or 82.5% of
the total portfolio
Grade 3 Investments totaled approximately $29.3 million or 11% of
the total portfolio
Grade 4 Investments totaled approximately $7.8 million or 3% of the
total portfolio
Grade 5 Investments totaled approximately $0 million or 0% of the
total portfolio
At December 31, 2006, the weighted average loan grade of Hercules'
loan portfolio based on Management's assessment was 2.14 on a scale of
1 to 5, with 1 being the highest quality, compared with 2.17 as of
September 30, 2006. Hercules' policy is to adjust the grading on its
portfolio companies as they approach the point in time when they will
require additional equity capital. As expected, various companies in
the portfolio will require additional funding in the near term and
have therefore been downgraded until the potential new equity funding
is complete.
During the fourth quarter, one previously graded 4 company and one
previously graded 3 company fully repaid their outstanding debt
balances upon the sale of the companies having a positive effect on
the overall portfolio grading.
Hercules' portfolio diversification at fair value as of December
31, 2006 within the technology and life sciences industries was
approximately as follows:
-- 41.0% in biopharmaceutical companies
-- 14.0% in software companies
-- 11.0% in electronics and computer hardware
-- 7.0% in consumer and business product companies
-- 7.0% in medical device and equipment companies
-- 7.0% in communications and networking companies
-- 4.0% in Internet companies
-- 6.0% in semiconductor companies
-- 3.0% in energy companies
"While we continue to see a robust pipeline of opportunities
across all stages of the technology and life sciences spectrum, our
investments in the life sciences - biopharmaceutical sector tend to
emulate the current trend of investing by venture capitalists. In the
near term, we believe this composition will remain relatively
unchanged, however, we continue to evaluate all opportunities without
a specific focus on any one sector or stage," commented Henriquez.
Subsequent Events
On January 3, 2007, in connection with our capital raise of
approximately $78 million December 2006, the underwriters exercised
their over-allotment option and purchased an additional 840,000 shares
of our common stock for additional gross proceeds to the company of
approximately $11 million.
The Board of Directors declared a fourth quarter dividend of $0.30
per share. The dividend will be payable on March 19, 2007 to
shareholders of record as of February 19, 2007. The ex-dividend date
is February 15, 2007. This was the Company's sixth consecutive
dividend declaration since its initial public offering, and brings the
total cumulative dividend declared to date to $1.525 per share.
Conference Call
Hercules has scheduled its 2006 fourth quarter and year-end
financial results conference call for February 7, 2007 at 2:00 p.m.
PST (5:00 p.m. EST). To listen to the call, please dial (800) 320-2978
or (617) 614-4923 approximately 10 minutes prior to the start of the
call. A taped replay will be made available approximately two hours
after the conclusion of the call and will remain available for one
week. To access the replay, please dial (888) 286-8010 or (617)
801-6888 and enter passcode 46156746.
The Hercules financial results conference call will be available
via a live webcast on the investor relations section of the Hercules
website at http://www.HerculesTech.com. Access the website 15 minutes
prior to the start of the call to download and install any necessary
audio software. An archived webcast replay will be available on the
website for 12 months.
About Hercules Technology Growth Capital, Inc.:
Founded in December 2003, Hercules Technology Growth Capital, Inc.
is a NASDAQ traded specialty finance company providing growth
financing to venture capital and private equity sponsored companies in
the technology and life science industries. The Company primarily
finances privately-held companies backed by leading venture capital
and private equity firms and also may finance certain publicly-traded
companies. Hercules' strategy is to evaluate and invest in a broad
range of ventures active in technology and life science industries and
to offer a full suite of growth capital products up and down the
capital structure to prospective clients ranging from early-stage
growth to expansion stage companies. The Company's investments are
originated through its principal office located in Silicon Valley, as
well as additional offices in the Boston, Boulder and Chicago areas.
Providing capital to publicly-traded or privately-held companies
backed by leading venture capital and private equity firms involves a
high degree of credit risk and may result in potential losses of
capital.
For more information, please visit www.HerculesTech.com, or
www.HTGC.com. Companies interested in learning more about financing
opportunities should contact info@HTGC.com, or call (650) 289-3060.
Forward-Looking Statements:
The statements contained in this release that are not purely
historical are forward-looking statements. These forward-looking
statements are not guarantees of future performance and are subject to
uncertainties and other factors that could cause actual results to
differ materially from those expressed in the forward-looking
statements including, without limitation, the risks, uncertainties and
other factors we identify from time to time in our filings with the
Securities and Exchange Commission. Although we believe that the
assumptions on which these forward-looking statements are reasonable,
any of those assumptions could prove to be inaccurate and, as a
result, the forward-looking statements based on those assumptions also
could be incorrect. You should not place undue reliance on these
forward-looking statements. The forward-looking statements contained
in this release are made as of the date hereof, and Hercules assumes
no obligation to update the forward-looking statements for subsequent
events.
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
December 31,
---------------------------
Assets 2006 2005
------------- -------------
Investments, at value (cost of
$279,946,465 and $176,004,865,
respectively) $283,233,751 $176,673,226
Deferred loan origination revenue (3,450,971) (2,729,982)
Cash and cash equivalents 16,404,214 15,362,447
Interest receivable 2,906,831 1,479,375
Prepaid expenses 538,348 1,310,594
Deferred Tax Asset - 1,454,000
Property and equipment, net 829,494 77,673
Other assets 680,542 20,546
------------- -------------
Total assets 301,142,209 193,647,879
Liabilities
Accounts payable 540,376 150,081
Income tax payable - 1,709,000
Accrued liabilities 4,189,011 1,436,468
Short-term loan payable 41,000,000 76,000,000
------------- -------------
Total liabilities 45,729,387 79,295,549
------------- -------------
Net assets $255,412,822 $114,352,330
============= =============
Net assets consist of:
Par value $ 21,927 $ 9,802
Capital in excess of par value 259,151,229 114,524,833
Unrealized appreciation on investments 2,807,946 353,093
Accumulated realized gains (losses) on
investments (1,069,290) 481,694
Distributions in excess of investment
income (5,498,990) (1,017,092)
------------- -------------
Total net assets $255,412,822 $114,352,330
============= =============
Shares of common stock outstanding ($0.001
par value, 30,000,000 authorized) 21,927,034 9,801,965
============= =============
Net asset value per share $ 11.65 $ 11.67
============= =============
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
STATEMENTS OF OPERATIONS
Three Months Ended Year Year
December 31, Ended Ended
------------------------ December 31, December 31,
2006 2005 2006 2005
------------ ----------- ------------ ------------
Investment income:
Interest $ 7,770,428 $3,976,210 $26,278,090 $ 9,791,214
Fees 918,950 363,638 3,230,366 875,429
------------ ----------- ------------ ------------
Total investment
income 8,689,379 4,339,848 29,508,456 10,666,643
Operating expenses:
Interest 1,315,469 770,319 5,770,485 1,800,536
Loan fees 122,750 411,840 809,907 1,098,507
Compensation and
benefits 2,201,549 1,353,860 5,778,862 3,705,784
General and
administrative 1,368,350 805,658 5,408,785 2,285,038
Stock-based
compensation 189,000 57,000 617,600 252,000
------------ ----------- ------------ ------------
Total operating
expenses 5,197,118 3,398,677 18,385,639 9,141,865
Net investment
income before
provision for
income tax and
investment gains
and losses 3,492,261 941,171 11,122,817 1,524,778
Income tax expense - (255,000) 643,088 255,000
------------ ----------- ------------ ------------
Net investment
income (loss) 3,492,261 686,171 10,479,729 1,269,778
Net realized and
unrealized gain
(loss) 447,323 (885,695) 903,869 834,787
------------ ----------- ------------ ------------
Net increase in net
assets resulting
from operations $ 3,939,584 $ (199,524) $11,383,598 $ 2,104,565
============ =========== ============ ============
Net investment loss
per common share:
Basic $ 0.21 $ 0.10 $ 0.83 $ 0.22
============ =========== ============ ============
Diluted $ 0.20 $ 0.10 $ 0.82 $ 0.22
============ =========== ============ ============
Net income (loss)
per common share:
Basic $ 0.23 $ (0.02) $ 0.85 $ 0.30
============ =========== ============ ============
Diluted $ 0.23 $ (0.02) $ 0.84 $ 0.30
============ =========== ============ ============
Weighted average
shares outstanding
Basic 16,897,000 9,802,000 13,352,000 6,939,000
============ =========== ============ ============
Diluted 17,196,000 9,802,000 13,527,000 7,016,000
============ =========== ============ ============
CONTACT: Hercules Technology Growth Capital, Inc.
Main, 650-289-3060
info@herculestech.com
David Lund, 650-289-3077
dlund@herculestech.com