HRZN Horizon Technology Finance Corporation

- First Quarter 2024 Net Investment Income per Share of $0.38; NAV per Share of $9.64 -

- Debt Portfolio Yield of 15.6% -

- HRZN Ends Quarter with Committed Backlog of $168 Million -

- Declares Regular Monthly Distributions Totaling $0.33 per Share through September 2024 -

Horizon Technology Finance Corporation (NASDAQ: HRZN) (“Horizon” or the “Company”), an affiliate of Monroe Capital, and a leading specialty finance company that provides capital in the form of secured loans to venture capital-backed companies in the technology, life science, healthcare information and services, and sustainability industries, today announced its financial results for the first quarter ended March 31, 2024.

First Quarter 2024 Highlights

• Net investment income (“NII”) of $12.6 million, or $0.38 per share, compared to $13.0 million, or $0.46 per share for the prior-year period
• Total investment portfolio of $711.1 million as of March 31, 2024
• Net asset value of $332.1 million, or $9.64 per share, as of March 31, 2024
• Annualized portfolio yield on debt investments of 15.6% for the quarter
• Horizon funded five loans totaling $33.5 million
• Raised total net proceeds of approximately $12.0 million with “at-the-market” (“ATM”) offering program
• Experienced liquidity events from three portfolio companies
• Cash of $71.3 million and credit facility capacity of $159.0 million as of March 31, 2024
• Held portfolio of warrant and equity positions in 99 companies as of March 31, 2024
• Undistributed spillover income of $1.30 per share as of March 31, 2024
• Subsequent to quarter end, declared distributions of $0.11 per share payable in July, August and September 2024

“During the first quarter, we were selective with respect to new originations in light of the challenging venture debt environment, while our investment portfolio continued to generate net investment income that exceeds our distributions,” said Robert D. Pomeroy, Jr., Chairman and Chief Executive Officer of Horizon. “We also continued to work diligently toward maximizing outcomes for our stressed investments, as we maintained active relationships with all of our portfolio companies. Despite the challenges in the venture market, we believe there are positive market signs, including an increase in demand from quality companies. Accordingly, we seek to grow our portfolio, while we remain cautious with respect to new originations. As always, we will continue to focus on maximizing NAV.”

First Quarter 2024 Operating Results

Total investment income for the quarter ended March 31, 2024 was $26.1 million, compared to $28.0 million for the quarter ended March 31, 2023, primarily due to lower interest income on investments from the debt investment portfolio.

The Company’s dollar-weighted annualized yield on average debt investments for the quarter ended March 31, 2024 and 2023 was 15.6% and 16.3%, respectively. The Company calculates the dollar-weighted annualized yield on average debt investments for any period measured as (1) total investment income (excluding dividend income) during the period divided by (2) the average of the fair value of debt investments outstanding on (a) the last day of the calendar month immediately preceding the first day of the period and (b) the last day of each calendar month during the period. The dollar-weighted annualized yield on average debt investments is higher than what investors will realize because it does not reflect expenses or any sales load paid by investors.

Total expenses for the quarter ended March 31, 2024 were $13.1 million, compared to $14.8 million for the quarter ended March 31, 2023. The decrease was primarily due to a $2.7 million decrease in performance-based incentive fees related to an Incentive Fee Cap for the three months ended March 31, 2024 due to the cumulative incentive fees paid exceeding 20% of cumulative pre-incentive fee net return during the applicable quarter and the 11 preceding full calendar quarters, and a $0.04 million decrease in the base management fee. The decrease was partially offset by a $1.0 million increase in interest expense.

Net investment income for the quarter ended March 31, 2024 was $12.6 million, or $0.38 per share, compared to $13.0 million, or $0.46 per share, for the quarter ended March 31, 2023.

For the quarter ended March 31, 2024, there was a slight net realized gain on investments, compared to net realized loss on investments of $0.2 million, or $0.01 per share, for the quarter ended March 31, 2023.

For the quarter ended March 31, 2024, net unrealized depreciation on investments was $4.0 million, or $0.12 per share, compared to $7.5 million, or $0.26 per share, for the prior-year period.

Portfolio Summary and Investment Activity

As of March 31, 2024, the Company’s debt portfolio consisted of 54 secured loans with an aggregate fair value of $670.8 million. In addition, the Company’s total warrant, equity and other investments in 103 portfolio companies had an aggregate fair value of $40.3 million. Total portfolio investment activity for the three months ended March 31, 2024 and 2023 was as follows:

($ in thousands)

For the Three Months Ended March 31,

 

2024

2023

 

Beginning portfolio

$

709,085

 

$

720,026

 

 

 

 

New debt and equity investments

 

34,569

 

 

47,008

 

 

 

 

Less refinanced debt balances

 

(11,250

)

 

—

 

 

 

 

Net new debt and equity investments

 

23,319

 

 

47,008

 

 

 

 

Principal payments received on investments

 

(10,500

)

 

(6,815

)

 

 

 

Payment-in-kind interest on investments

 

1,382

 

 

1,204

 

 

 

 

Early pay-offs and principal paydowns

 

(9,143

)

 

(32,941

)

 

 

 

Accretion of debt investment fees

 

1,261

 

 

1,448

 

 

 

 

New debt investment fees

 

(309

)

 

(300

)

 

 

 

Proceeds from sale of investments

 

(41

)

 

(6,520

)

 

 

 

Net gain (loss) on investments

 

8

 

 

(168

)

 

Net unrealized depreciation on investments

 

(3,960

)

 

(7,537

)

 

 

 

Other

 

14

 

 

(93

)

 

 

 

Ending portfolio

$

711,116

 

$

715,312

 

Portfolio Asset Quality

The following table shows the classification of Horizon’s loan portfolio at fair value by internal credit rating as of March 31, 2024 and December 31, 2023:

($ in thousands)

March 31, 2024

 

 

December 31, 2023

 

 

Number of Investments

Debt Investments at Fair Value

Percentage of Debt Investments

 

Number of Investments

Debt Investments at Fair Value

Percentage of Debt Investments

 

Credit Rating

 

 

 

 

 

 

 

 

4

13

$

197,989

29.5

%

 

11

$

150,367

22.4

%

 

3

36

 

407,237

60.7

%

 

39

 

452,911

67.6

%

 

2

1

 

14,546

2.2

%

 

2

 

39,343

5.9

%

 

1

4

 

51,001

7.6

%

 

4

 

27,551

4.1

%

 

Total

54

$

670,773

100.0

%

 

56

$

670,172

100.0

%

 

As of March 31, 2024 and December 31, 2023, Horizon’s loan portfolio had a weighted average credit rating of 3.1, with 4 being the highest credit quality rating and 3 being the rating for a standard level of risk. A rating of 2 represents an increased level of risk and, while no loss is currently anticipated for a 2-rated loan, there is potential for future loss of principal. A rating of 1 represents deteriorating credit quality and high degree of risk of loss of principal.

As of March 31, 2024, there were four debt investments with an internal credit rating of 1, with an aggregate cost of $96.0 million and an aggregate fair value of $51.0 million. As of December 31, 2023, there were four debt investments with an internal credit rating of 1, with an aggregate cost of $72.5 million and an aggregate fair value of $27.6 million.

Liquidity and Capital Resources

As of March 31, 2024, the Company had $90.7 million in available liquidity, consisting of $71.3 million in cash and money market funds, and $19.4 million in funds available under existing credit facility commitments.

As of March 31, 2024, there was $60.0 million in outstanding principal balance under the $150.0 million revolving credit facility (“Key Facility”). The Key Facility allows for an increase in the total loan commitment up to an aggregate commitment of $300.0 million. There can be no assurance that any additional lenders will make any commitments under the Key Facility.

Additionally, as of March 31, 2024, there was $181.0 million in outstanding principal balance under the $250 million senior secured debt facility with a large U.S.-based insurance company at an interest rate of 6.18%.

Horizon Funding Trust 2022-1, a wholly-owned subsidiary of Horizon, previously issued $100.0 million of Asset-Backed Notes (the “2022 Notes”) rated A by a ratings agency. The 2022 Notes bear interest at a fixed interest rate of 7.56% per annum. The reinvestment period of the 2022 Notes ends November 15, 2024 and the stated maturity is November 15, 2030. As of March 31, 2024, the 2022 Notes had an outstanding principal balance of $100.0 million.

During the three months ended March 31, 2024, the Company sold 1,053,796 shares of common stock under its ATM offering program with Goldman Sachs & Co. LLC and B. Riley FBR, Inc. For the same period, the Company received total accumulated net proceeds of approximately $12.0 million, including $0.3 million of offering expenses, from these sales.

As of March 31, 2024, the Company’s net debt to equity leverage ratio was 116%, below the Company’s 120% targeted leverage. The asset coverage ratio for borrowed amounts was 173%.

Liquidity Events

During the quarter ended March 31, 2024, Horizon experienced liquidity events from three portfolio companies. Liquidity events for Horizon may consist of the sale of warrants or equity in portfolio companies, loan prepayments, sale of owned assets or receipt of success fees.

In February, with the proceeds of a new loan from the Horizon Platform, Ceribell, Inc. (“Ceribell”) paid its outstanding principal balance of $11.2 million on its venture loan, plus interest and end-of-term payment. HRZN continues to hold warrants in Ceribell.

In March, HRZN received a principal paydown of $1.1 million on its venture loans to NextCar Holding Company, Inc. (“NextCar”). HRZN continues to hold warrants in NextCar.

In March, Engage3, LLC paid its outstanding principal balance of $7.5 million on its venture loan, plus interest, end-of-term payment and prepayment fee.

Net Asset Value

At March 31, 2024, the Company’s net assets were $332.1 million, or $9.64 per share, compared to $321.7 million, or $11.34 per share, as of March 31, 2023, and $324.0 million, or $9.71 per share, as of December 31, 2023.

For the quarter ended March 31, 2024, net increase in net assets resulting from operations was $8.7 million, or $0.26 per share, compared to $5.3 million, or $0.19 per share, for the quarter ended March 31, 2023.

Stock Repurchase Program

On April 26, 2024, the Company’s board of directors extended the Company’s previously authorized stock repurchase program until the earlier of June 30, 2025 or the repurchase of $5.0 million of the Company's common stock. During the quarter ended March 31, 2024, the Company did not repurchase any shares of its common stock. From the inception of the stock repurchase program through March 31, 2024, the Company has repurchased 167,465 shares of its common stock at an average price of $11.22 on the open market at a total cost of $1.9 million.

Recent Developments

In April 2024, the Company sold 526,581 shares of common stock under the 2023 Equity Distribution Agreement. For the same period, the Company received total accumulated net proceeds of approximately $5.8 million, including $0.1 million of offering expenses, from these sales.

On April 1, 2024, Provivi, Inc. (“Provivi”) paid down $4.7 million of the principal amount of its loans outstanding and $0.3 million of its ETPs under the Venture Loan and Security Agreement by and among the Company and Provivi, dated as of June 15, 2020, as amended.

On April 11, 2024, we funded a $0.5 million equity investment to an existing portfolio company, Better Place Forests Co.

On April 22, 2024, Camp NYC, Inc. paid down $1.0 million of the principal amount of its loan outstanding.

Monthly Distributions Declared in Second Quarter 2024

On April 26, 2024, the Company’s board of directors declared monthly distributions of $0.11 per share payable in each of July, August and September 2024. The following tables show these monthly distributions, which total $0.33 per share:

Monthly Distributions

Ex-Dividend Date

Record Date

Payment Date

Amount per Share

June 17, 2024

June 17, 2024

July 16, 2024

$0.11

July 17, 2024

July 17, 2024

August 15, 2024

$0.11

August 16, 2024

August 16, 2024

September 13, 2024

$0.11

 

 

Total:

$0.33

After paying distributions of $0.33 per share and earning net investment income of $0.38 per share for the quarter, the Company’s undistributed spillover income as of March 31, 2024 was $1.30 per share. Spillover income includes any ordinary income and net capital gains from the preceding tax years that were not distributed during such tax years.

When declaring distributions, Horizon’s board of directors reviews estimates of taxable income available for distribution, which may differ from consolidated net income under generally accepted accounting principles due to (i) changes in unrealized appreciation and depreciation, (ii) temporary and permanent differences in income and expense recognition, and (iii) the amount of spillover income carried over from a given year for distribution in the following year. The final determination of taxable income for each tax year, as well as the tax attributes for distributions in such tax year, will be made after the close of the tax year.

Conference Call

The Company will host a conference call on Wednesday, May 1, 2024, at 9:00 a.m. ET to discuss its latest corporate developments and financial results. To participate in the call, please dial (877) 407-9716 (domestic) or (201) 493-6779 (international). The access code for all callers is 13745236. The Company recommends joining the call at least 5 minutes in advance. In addition, a live webcast will be available on the Company’s website at www.horizontechfinance.com.

A webcast replay will be available on the Company’s website for 30 days following the call.

About Horizon Technology Finance

Horizon Technology Finance Corporation (NASDAQ: HRZN), externally managed by Horizon Technology Finance Management LLC, an affiliate of Monroe Capital, is a leading specialty finance company that provides capital in the form of secured loans to venture capital backed companies in the technology, life science, healthcare information and services, and sustainability industries. The investment objective of Horizon is to maximize its investment portfolio’s return by generating current income from the debt investments it makes and capital appreciation from the warrants it receives when making such debt investments. Horizon is headquartered in Farmington, Connecticut, with a regional office in Pleasanton, California, and investment professionals located throughout the U.S. Monroe Capital is an $18 billion asset management firm specializing in private credit markets across various strategies, including direct lending, technology finance, venture debt, opportunistic, structured credit, real estate and equity. To learn more, please visit horizontechfinance.com.

Forward-Looking Statements

Statements included herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in Horizon’s filings with the Securities and Exchange Commission. Horizon undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Statements of Assets and Liabilities

(Dollars in thousands, except share and per share data)

 

March 31,

December 31,

 

 

2024

 

2023

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

Non-affiliate investments at fair value (cost of $721,456 and $716,077, respectively)

$

684,895

 

$

693,730

 

Non-controlled affiliate investments at fair value (cost of $28,689 and $28,677, respectively)

 

12,577

 

 

1,132

 

Controlled affiliate investments at fair value (cost of $15,028 and $14,428, respectively)

 

13,644

 

 

14,223

 

Total investments at fair value (cost of $765,173 and $759,182, respectively)

 

711,116

 

 

709,085

 

Cash

 

46,921

 

 

46,630

 

Investments in money market funds

 

21,879

 

 

26,450

 

Restricted investments in money market funds

 

2,533

 

 

2,642

 

Interest receivable

 

16,579

 

 

13,926

 

Other assets

 

3,260

 

3,623

 

Total assets

$

802,288

$

802,356

 

 

 

 

 

 

Liabilities

 

 

 

 

Borrowings

$

452,490

 

$

462,235

 

Distributions payable

 

13,099

 

 

11,011

 

Base management fee payable

 

1,058

 

 

1,052

 

Incentive fee payable

 

295

 

 

—

 

Other accrued expenses

 

3,225

 

 

4,077

 

Total liabilities

 

470,167

 

 

478,375

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Net assets

 

 

 

 

Preferred stock, par value $0.001 per share, 1,000,000 shares authorized, zero

shares issued and outstanding as of March 31, 2024 and December 31, 2023

 

—

 

 

—

 

Common stock, par value $0.001 per share, 100,000,000 shares authorized,

34,637,343 and 33,534,854 shares issued and 34,469,878 and 33,367,389 shares outstanding as of March 31, 2024 and December 31, 2023, respectively

 

37

 

 

36

 

Paid-in capital in excess of par

 

463,539

 

 

450,949

 

Distributable earnings

 

(131,455

)

 

(127,004

)

Total net assets

 

332,121

 

 

323,981

 

Total liabilities and net assets

$

802,288

 

$

802,356

 

Net asset value per common share

$

9.64

 

$

9.71

 

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Statements of Operations (Unaudited)

(Dollars in thousands, except share and per share data)

 

 

For the Three Months Ended

 

 

March 31,

 

 

2024

 

2023

 

Investment income

 

 

 

 

From non-affiliate investments:

 

 

 

 

Interest income

$

24,468

 

$

26,195

 

Fee income

 

268

 

 

638

 

Payment-in-kind interest income

 

1,216

 

 

1,204

 

From controlled affiliate investments:

 

 

 

 

Interest income

 

11

 

 

—

 

Payment-in-kind interest income

 

166

 

 

—

 

Total investment income

 

26,129

 

 

28,037

 

Expenses

 

 

 

 

Interest expense

 

8,161

 

 

7,120

 

Base management fee

 

3,162

 

 

3,201

 

Performance based incentive fee

 

295

 

 

2,978

 

Administrative fee

 

433

 

 

440

 

Professional fees

 

665

 

 

658

 

General and administrative

 

429

 

 

445

 

Total expenses

 

13,145

 

 

14,842

 

Net investment income before excise tax

 

12,984

 

 

13,195

 

Provision for excise tax

 

379

 

 

184

 

Net investment income

 

12,605

 

 

13,011

 

 

Net realized and unrealized loss

 

 

 

 

Net realized gain (loss) on non-affiliate investments

 

11

 

 

(168

)

Net realized loss on non-controlled affiliate investments

 

(3

)

 

—

 

Net realized gain (loss) on investments

 

8

 

 

(168

)

 

Net unrealized depreciation on non-affiliate investments

 

(14,214

)

 

(8,383

)

 

Net unrealized appreciation on non-controlled affiliate investments

 

11,433

 

 

846

 

Net unrealized depreciation on controlled affiliate investments

 

(1,179

)

 

—

 

Net unrealized depreciation on investments

 

(3,960

)

 

(7,537

)

Net realized and unrealized loss

 

(3,952

)

 

(7,705

)

 

Net increase in net assets resulting from operations

$

8,653

 

$

5,306

 

Net investment income per common share

$

0.38

 

$

0.46

 

 

Net increase in net assets resulting from operations per common share

$

0.26

 

$

0.19

 

Distributions declared per share

$

0.38

 

$

0.33

 

Weighted average shares outstanding

 

33,579,743

 

 

28,227,100

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240430382271/en/

Investor Relations: ICR Garrett Edson ir@horizontechfinance.com (646) 200-8885

Media Relations: ICR Chris Gillick HorizonPR@icrinc.com (646) 677-1819