Blue Owl Capital's Q4 Earnings Meet Estimates, Top Line Falls Y/Y

By Megan Graham

Social media creators are suing over browser extensions designed to find discounts for online shoppers at checkout, claiming the services are stealing their rightfully earned sales commissions.

The lawsuits spotlight the continuing quest to know which ads really work, a holy grail for marketers reflected in the cliché often attributed to 19th-century retailer John Wanamaker: "Half the money I spend on advertising is wasted; the trouble is I don't know which half."

Digital media has since made it much easier to tell what happens after people see ads and to reward what works. But it remains tricky to capture everything that fuels consumer decisions, a challenge that could get an airing as the creators' lawsuits proceed.

Many social-media creators earn money through a practice called affiliate marketing, in which they collect a cut of sales when online tracking technology shows that consumers saw their content before making purchases. Special e-commerce URLs called affiliate links similarly share revenue with those who spread them.

Affiliate marketing spending in the U.S. is expected to total about $12 billion this year, up from $10.72 billion in 2024, according to research firm Emarketer.

The plaintiffs say extensions such as PayPal Honey, Capital One Shopping and Microsoft Shopping, which automatically find and apply coupons for users, improperly take credit for purchases. A browser extension from Swedish buy-now-pay-later company Klarna has been accused of doing the same.

"If the customer clicks on...the Plaintiff's affiliate link and then at checkout clicks on the Honey pop-up, then the business tracks the sale as originated from Defendant, and Plaintiff will receive no credit for the purchase," one suit against PayPal said. "Honey erases Plaintiffs' affiliate links and replaces it."

A spokeswoman for PayPal Honey said that it "follows industry rules and practices, including last-click attribution, which is widely used across major brands." She added that the company disagrees with the claims in the lawsuits.

PayPal, the digital payments company, acquired Honey for about $4 billion in 2020.

A spokeswoman for Capital One also said the company disagrees with the premise of the complaints. A spokesman for Microsoft said the company is still reviewing the complaints but believes the claims are without merit. He added that the feature follows "common industry standards and rules." Klarna declined to comment.

A U.S. District judge for Northern California in recent weeks approved consolidating numerous suits against Honey into one case, with plaintiffs including Wendover Productions, which has more than 4.7 million followers on YouTube. Other lawsuits have popped up in the past month and a half around the country.

The extensions' practices are likely "more so slimy than illegal," said Nate O'Brien, a creator who is co-founder of digital marketing company Santrel Media and whose own retired YouTube channel on personal finance, productivity and other topics has 1.3 million subscribers. He isn't a plaintiff in any of the cases. But various plug-ins have eaten away about 10% of O'Brien's potential revenue from affiliate marketing, he estimated.

Jenna Kutcher, another creator who focuses on digital marketing content and isn't a plaintiff in any of the cases, said she tracks her own results closely, aiming to spot any outliers in the data.

"As the industry shifts, it's clear that third-party tools like Honey are affecting how affiliate marketing works, and the bigger concern is that creators aren't getting credit for the sales they drive," Kutcher said.

Cathrin Manning, a creator and affiliate marketer, said affiliate payments to discount extensions could lead creators to promote other products or find other ways to make money altogether.

"We can't continue doing our job if we're not getting paid," she said.

But creators' complaints and the new lawsuits introduce one big question to the courts: In the world of last-click attribution, does the reward belong to the creators?

"I think the difficulty that these creators will have is establishing that those commissions were theirs, that they're legally entitled to them in the first place, and that Honey is doing something unlawful by swapping out the affiliate code," said Robert Freund, a lawyer focused on advertising and e-commerce issues.

The suits largely charge that creators have some legal entitlement to the commission that results from a sale if a consumer follows the affiliate link, Freund said.

"But that's not how last-click works," he said.

Last-click attribution credits only the most recent click before a purchase and gives no credit to anything else that might have contributed to a purchase decision before that.

Freund said he expects PayPal and other extension owners to argue that creators weren't entitled to the commissions if a consumer also used a browser extension before buying.

"They'll probably try to say, 'maybe these customers wouldn't have made a purchase at all without our plug-in.... By choosing to click on our app and have us tell them that they got the best discount available, that pushed them over the edge to make the sale,'" he predicted.

Whether the proceedings result in any changes to how affiliate marketing works might rely on whether creators redirect their pushback to the brands themselves.

"I think it'll just depend on the bottom line for these retailers," Freund said.

Write to Megan Graham at megan.graham@wsj.com

Financial and business services company PRA Group, Inc. PRAA is set to report its fourth-quarter 2024 results on Feb. 19, 2025, after the closing bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings and revenues is pegged at 45 cents per share and $276.77 million, respectively.

See the Zacks Earnings Calendar to stay ahead of market-making news.

The earnings estimate for the to-be-reported quarter has remained stable over the past 60 days. The bottom-line projection indicates a year-over-year improvement of 304.6%. Also, the Zacks Consensus Estimate for quarterly revenues suggests a year-over-year increase of 25%.

By Bill Peters

Dan Loeb's hedge fund also took new stakes in Capital One and Discover

Daniel Loeb's Third Point hedge fund sold off its position in Apple Inc. in the fourth quarter, while boosting its holdings in electric-vehicle maker Tesla Inc. and social-media giant Meta Platforms Inc.

The investment firm sold off all of its 930,000 shares in Apple (AAPL). But it acquired 120,000 shares of Meta (META), boosting its stake in the company to 665,000 shares. Loeb's firm also bought an extra 100,000 shares of Tesla (TSLA), raising its total holdings to 500,000 shares.

Tesla shares were down 0.2% after hours. Shares of Apple and Meta were down fractionally.

Elsewhere, the fund took new stakes in credit-card giants Capital One Financial Corp. (COF) and Discover Financial Services (DFS). It picked up 925,000 shares of Capital One and 640,000 shares of Discover.

Third Point also sold off all its positions in retailer Bath & Body Works Inc. (BBWI) and pharmacy chain CVS Health Corp. (CVS)

-Bill Peters

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Hercules Capital Inc.’s HTGC fourth-quarter 2024 net investment income of 49 cents per share matched the Zacks Consensus Estimate. The bottom line, however, declined 12.5% from the year-ago quarter.

See the Zacks Earnings Calendar to stay ahead of market-making news.

Results primarily benefited from a decent balance sheet position and robust funding commitments. However, lower net investment income and a rise in operating expenses were headwinds.

Net investment income was $81.1 million, down 5.7% year over year.

For 2024, net investment income per share of $2.00 lagged the consensus estimate of $2.01 and declined 3.8% year over year. Net investment income was $325.8 million, up 7.2% from 2023.

HTGC Investment Income Down, Expenses Rise

Total investment income in the fourth quarter was $121.8 million, down marginally from the year-ago quarter. Also, the top line lagged the Zacks Consensus Estimate of $124.09 million. The fall was mainly due to a lower weighted average yield on the debt investment portfolio.

For 2024, total investment income grew 7.1% to $493.6 million. The top line lagged the Zacks Consensus Estimate of $495.9 million.

Total gross operating expenses jumped 13.9% to $43.5 million. The rise was due to an increase in all cost components except loan fees.

HTGC Portfolio Value & New Commitments Remain Solid

The fair value of Hercules Capital’s total investment portfolio was $3.66 billion as of Dec. 31, 2024.

In the fourth quarter, the company delivered $619.5 million in gross new debt and equity commitments and $468 million in gross new funding. It realized early loan repayments of $225.2 million.

Hercules Capital’s Balance Sheet Position Decent

As of Dec. 31, 2024, Hercules Capital’s net asset value was $11.66 per share, up from $11.43 as of Dec. 31, 2023.

As of Dec. 31, 2024, the company had $658.8 million in liquidity, including $113.1 million of unrestricted cash and cash equivalents, and $545.7 million in credit facilities and SBA debenture.

At the end of the quarter, the weighted average cost of debt, comprising interest and fees, was 5%, up from 4.9% at the end of the prior-year quarter.

Our View on HTGC Stock

Hercules Capital’s absence of global diversification limits the company’s growth prospects. Further, efforts to improve originations will likely keep expenses elevated, hurting bottom-line expansion. Nonetheless, rising demand for customized financing will likely aid total investment income.

Hercules Capital Stock Price, Consensus and EPS Surprise

Hercules Capital, Inc. price-consensus-eps-surprise-chart | Hercules Capital, Inc. Quote

Currently, Hercules Capital carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Finance Companies

The Carlyle Group Inc. CG reported fourth-quarter 2024 post-tax distributable earnings per share of 92 cents, which missed the Zacks Consensus Estimate by 8%. The figure compared favorably with earnings of 86 cents per share in the year-ago quarter.

CG’s results were hurt by an increase in expenses. However, an increase in segment fee revenues and a rise in assets under management (AUM) balance offered support.

Ares Capital Corporation’s ARCC fourth-quarter 2024 core earnings of 55 cents per share missed the Zacks Consensus Estimate of 58 cents. The bottom line reflects a decline of 12.7% from the prior-year quarter.

The results were primarily affected by an increase in expenses. Nonetheless, an improvement in the total investment income and the company’s robust portfolio activities supported ARCC’s results to some extent.

Zacks Investment Research

Business development company Blue Owl Capital Corporation OBDC is set to report fourth-quarter 2024 results on Feb. 19, 2025, after the closing bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at 46 cents per share and the same for revenues is pinned at $395.59 million.

See the Zacks Earnings Calendar to stay ahead of market-making news.

The fourth-quarter earnings estimate remained stable over the past 60 days. However, the bottom-line prediction indicates a year-over-year decline of 9.8%. The Zacks Consensus Estimate for quarterly revenues implies a year-over-year fall of 3.8%.