Horizon Technology Finance Corp Q3 FY2024 earnings call

• Portfolio grew to $684 million in Q3 with new originations of $93 million, offsetting prepayments. • Net investment income was $0.32 per share, $0.01 below declared distribution. • Board declared regular monthly distributions of $0.11 per share through March 2025. • Enhanced investment capacity by raising equity via at-the-market program. • Committed and approved backlog increased to $190 million from $138 million. • Strategic partnership with Monroe Capital and Wendel Group announced, expected to close in Q1 2025. • Venture industry showing signs of improvement with life science IPOs and increased interest in acquisitions. • Balance sheet strengthened with $18 million raised via ATM program and $20 million in debt capital raised in October.

In the third quarter, the portfolio grew to $684 million. Net investment income was $0.32 per share, $0.01 below the declared distribution level. The debt portfolio yield was at or near the top of the BDC industry at 15.9%. New originations totaled $93 million, with $40 million in principal prepayments. As of quarter end, 91% of the fair value of the debt portfolio consisted of 3 and 4 rated debt investments, and 9% was rated 2 or 1.

• Expect portfolio growth in Q4 with pipeline producing growth. • Board declared monthly distributions of $0.11 per share through March 2025. • Optimistic about originating new high-quality venture debt investments due to robust pipeline and improving market conditions. • Anticipate generating net investment income to cover distributions over time, with expectation to earn incentive fees again in coming quarters.

• Uncertainties in predicting future results which could cause actual results to differ from forward-looking statements. • Macroeconomic impacts that could affect the venture ecosystem and portfolio performance. • Prepayment risks and potential impacts on net investment income. • Risks associated with the deferral of incentive fees due to net realized and unrealized losses on the portfolio.

Q: Give an update on non-accrual loans and timelines for resolutions?

A: Dan Devorsetz said some nonaccruals resolved in Q3, others in Q4 or early 2025 with various strategies. Jerry Michaud discussed specific examples like Evelo and Swift.

Q: How does the pace of shares sold via ATM dictate?

A: Dan Trolio said it's balanced with expected funding in the quarter, considering debt facilities and other capital sources.

Q: Thoughts on stock price and off-balance sheet vehicles?

A: Dan Trolio said focused on delivering performance, not specific stock price strategies, and currently no plans for off-balance sheet vehicles.

Q: NII generation and distribution, including incentive fee?

A: Dan Trolio said they consider all factors, expect to gradually earn back incentive fees towards end of next year to full amount.

Q: On spillover income and realized losses?

A: Dan Trolio explained realized loss from Nexii transaction had little impact on NAV, spillover impacted by operating income and NII vs distribution.

Q: Yields on new investments?

A: Dan Trolio said yields maintained nicely, with portfolio yield remaining strong despite index rate cuts.