Earnings call transcript: Hannon Armstrong Reports Strong Q1 2026 Results

Hatteras Financial Corp (HASI) reported robust financial performance for Q1 2026, surpassing earnings expectations with an adjusted EPS of $0.77, compared to the forecasted $0.6864. This resulted in a 12.18% earnings surprise. The company also exceeded revenue projections, achieving $124.23 million against the anticipated $110.8 million. Following the earnings release, the stock saw a modest aftermarket increase of 0.85%, reflecting investor confidence.

Hannon Armstrong’s Q1 2026 performance was characterized by significant profitability and operational efficiency. The company reported a 31% year-over-year increase in adjusted earnings, reaching $102 million, and maintained a strong portfolio yield of 9.2%. Asset growth was notable, with managed assets increasing to $16.4 billion and fee-generating assets surging by 130%.

Hannon Armstrong exceeded both EPS and revenue forecasts, with a 12.18% earnings surprise and a 12.12% revenue surprise. This performance marks a continuation of the company’s strong growth trajectory.

The stock price increased by 0.85% in aftermarket trading, reflecting a positive investor response to the earnings beat. The stock remains near its 52-week high, indicating sustained market confidence.

Future guidance remains optimistic, with EPS forecasts for upcoming quarters and fiscal years indicating continued growth. The company projects EPS of $0.79 for Q2 2026 and $3.09 for FY2026, supporting a positive long-term outlook.

CEO Jeffrey Eckel stated, "Our Q1 results underscore our commitment to delivering strong financial performance and strategic capital management. We are poised to continue this momentum throughout the year."

During the earnings call, analysts inquired about the company’s capital strategy and future investment plans. Executives emphasized their focus on optimizing capital structure and exploring new growth opportunities in sustainable infrastructure.

Operator: Greetings, welcome to HASI’s first quarter 2026 earnings conference call and webcast. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Aaron Chew, Senior Vice President of Investor Relations.

Aaron Chew, Senior Vice President of Investor Relations, Hatteras Financial Corp (HASI): Thank you, operator, and good afternoon to everyone joining us today for HASI’s first quarter 2026 conference call. Earlier this afternoon, HASI distributed a press release reporting our first quarter 2026 results, a copy of which is available on our website, along with the slide presentation we will be referring to today. This conference call is being webcast live on the investor relations page of our website, where a replay will be available later today. Some of the comments made in this call are forward-looking statements, which are subject to risks and uncertainties described in the Risk Factors section of the company’s Form 10-K and other filings with the SEC. Actual results may differ materially from those stated. Today’s discussion also includes some non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is available in our earnings release and presentation.

Joining us on the call today are Jeff Lipson, the company’s President and CEO, as well as Chuck Melko, our Chief Financial Officer. Also available for Q&A is Susan Nickey, our Chief Client Officer. To kick things off, I will turn it over to our President and CEO, Jeff Lipson, who will begin on slide 3. Jeff?

Jeff Lipson, President and Chief Executive Officer, Hatteras Financial Corp (HASI): Thank you, Aaron, and welcome to our first quarter 2026 earnings call. We are pleased to report a strong start to 2026 with outstanding financial results and a positive outlook for the business. In Q1, adjusted EPS was $0.77, driven by growth in revenue across the board, along with 0 new share issuances from our ATM. Adjusted ROE was 15.7%, the highest quarterly level in our history. Adjusted recurring net investment income was up 29% year-over-year to $101 million, and our managed assets were up 13% year-over-year to $16.4 billion. We continue to execute on our 2026 business plan, and we are reaffirming our 2028 guidance of $3.50 to $3.60 adjusted earnings per share and adjusted ROE of 17%.

Moving to slide four, it’s important to highlight how our Q1 results represent particularly strong performance in light of the ongoing volatile geopolitical and macroeconomic developments impacting financial and energy markets. Most notable, of course, is the Iran war, creating volatility, particularly in oil prices and jet fuel availability. Separately, the increase in power prices in the U.S. has created affordability challenges. Additionally, credit and liquidity challenges have emerged in the private credit sector with implications across financial and credit markets. Despite these challenges impacting the economy, our business has remained consistently profitable with ongoing earnings growth as we effectively address this volatility. In fact, certain of these developments reinforce the value of renewable energy and HASI’s investment thesis. For example, once installed and operational, renewable energy projects have minimal operating costs and do not depend on an ongoing supply of fuels, but instead are powered by naturally replenishing resources.

Renewable energy projects are less vulnerable to geopolitical volatility and bolster energy independence and national security, and they provide a high degree of cost certainty and visibility. The intermittency of renewables can be increasingly improved by continued storage development. In addition, beyond the implications for renewable energy, the recent geopolitical and macroeconomic uncertainty has also served to accentuate the prominent attributes underpinning HASI’s business model of offering differentiated capital solutions to clients supported by project cash flows. This business model results in HASI offering our investors low risk, diversified exposure to growth in U.S. energy transition infrastructure, stability and visibility of long-term predictable revenue, and a proven track record of exceptional risk-adjusted returns. In the face of this backdrop, we continue to demonstrate the resilience of our business and our ability to execute at a high level with strong operating results.

Turning to page five, we closed more than $460 million in new transactions in the quarter that will be held at CCH1 and on our balance sheet. We increased fee-generating assets 130% year-over-year to $1.1 billion. In terms of the returns on these investments, new asset yields on portfolio transactions closed in the quarter remain over 10.5% for the eighth quarter in a row. Supported by the increase in new asset yields over this period, our portfolio yield rose 90 basis points year-over-year to 9.2%. Finally, we continue to optimize our balance sheet in the first quarter of 2026.

As Chuck will provide greater detail on shortly, we were active issuing low-cost, long-duration debt and redeeming higher coupon debt while issuing no ATM shares in the quarter. Turning to slide 6, we highlight the investment activity for the quarter, including a robust Q1 total volume of $637 million, of which $462 million will be held by CCH1 and on our balance sheet. This volume keeps us on pace for the $2 billion-$3 billion expectation for 2026 that we discussed on the Q4 call. The investments were well diversified and underwritten with attractive risk-adjusted returns. Our investment platform is continuing to deliver on our goals and fueling the continued growth in our profitability. Turning to page 7. On Monday, we jointly announced with Ameresco the creation of Neogenyx Fuels, a newly formed joint venture representing the spin-off of Ameresco’s biofuels business.

We are excited about co-investing in what we expect to be the premier developer and owner/operator of biofuels projects. Ameresco has been a partner of HASI for over 20 years and across more than 60 investments, and we have tremendous familiarity and confidence in Mike Backus and their team. This investment fits well into the HASI business model as it includes a very strong partner, an asset class, renewable natural gas, in which we have extensive experience, operating projects that we were able to diligence, a business model well suited to current and expected future market demand, and a structure that provides a priority position on cash flows. Neogenyx’s existing portfolio of operating projects allow the company to have scale from day one and a strong pipeline of identified development opportunities that will facilitate future growth.

Our investment in the venture is initially $400 million. We will own 30% of the enterprise with a priority position on debt cash distributions until a hurdle return is achieved. Our long-term expected return on investment is higher than our typical investment, given the large upside potential of the business. Turning to page 8, our pipeline remains greater than $6.5 billion as end market dynamics, including consolidation, continue to result in a wide variety of developers and sponsors seeking project-level capital. In addition, power demand continues to result in an elevated level of development activity. Policy items are well understood and workable. I also want to mention a definitional change. We first introduced the concept of what we call the next frontier in our Q4 2024 call to illustrate the tremendous growth opportunities for the business.

We continue to pursue certain of these asset classes and will disclose closings as they occur. However, from a presentation perspective, we have recategorized these into the 3 existing core segments and an other susta