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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Horizon Technology Finance Corporation | NASDAQ:HRZN | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.06 | 0.52% | 11.64 | 11.50 | 11.67 | 11.61 | 11.53 | 11.55 | 227,253 | 01:00:00 |
- 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
“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
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