• Net Investment Income: $0.32 per share, $0.01 below declared distribution level.
• Portfolio Growth: Increased by 6% in the third quarter.
• Debt Investment Yield: 15.9% for the quarter.
• New Loan Commitments: $173 million in new loan commitments and approvals.
• Available Liquidity: $125 million as of September 30, consisting of $87 million in cash and $38 million in available credit.
• Debt-to-Equity Ratio: 1.28:1 as of September 30.
• Investment Income: $25 million for the third quarter.
• Total Expenses: $12.4 million for the quarter.
• Net Asset Value (NAV): $9.06 per share as of September 30.
• Undistributed Spillover Income: $1.27 per share as of September 30.
• Monthly Distributions: $0.11 per share declared for January, February, and March 2025.

• Warning! GuruFocus has detected 4 Warning Sign with HRZN.

Release Date: October 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Horizon Technology Finance Corp (NASDAQ:HRZN) achieved a portfolio yield on debt investments at or near the top of the BDC industry.
• The company grew its portfolio by 6% in the third quarter and increased its committed and approved backlog, providing a solid base for future growth.
• Horizon Technology Finance Corp (NASDAQ:HRZN) raised equity from its at-the-market program, enhancing its investment capacity.
• The company has a robust pipeline of over $1 billion in debt opportunities, indicating strong future growth potential.
• Horizon Technology Finance Corp (NASDAQ:HRZN) has a strong liquidity position with $125 million in available liquidity, providing ample capacity to grow its portfolio.

Negative Points

• Net investment income of $0.32 per share was $0.01 below the declared distribution level.
• The company experienced a reduction in NAV from $9.12 to $9.06 per share during the quarter.
• Prepayments remain on the lower end of historical levels, impacting income generation.
• The company continues to experience a deferral of incentive fees due to net realized and unrealized losses on its portfolio.
• There are ongoing challenges with nonaccrual loans, with some resolutions expected to extend into the first half of 2025.

Q & A Highlights

Q: Can you provide an update on the nonaccrual loans and the expected timelines for their resolution? A: Daniel Devorsetz, COO and CIO, explained that some nonaccrual loans were resolved in Q3 through acquisitions or other transactions. A few others are still being worked on and may be resolved in Q4 or the first half of 2025, each with its own specific timeline and strategy.

Q: How did the resolutions of nonaccrual loans in Q3 compare to your expectations? A: Daniel Devorsetz noted that one loan, Nexii, was resolved by selling assets to a high-quality buyer, resulting in debt and equity in the new company. Gerald Michaud, President, added that Evelo's life science assets were consolidated into a holding company, with transactions underway to monetize these assets and pay down Horizon's loan.

Q: Can you discuss the current market environment and pipeline for new deals? A: Daniel Devorsetz stated that the market is improving, with a strong pipeline of quality opportunities. Although some deals have been awarded, they have not yet closed. The expectation is for Q4 to be a growth quarter, with the pipeline at its strongest in a while.

Q: How do you plan to manage the balance sheet and cover the dividend given the current cash levels and NII? A: Daniel Trolio, CFO, explained that they plan capital sources each quarter based on expected funding needs, using cash, debt facilities, and equity. The venture debt portfolio generates prepayments annually, which helps cover distributions over time.

Q: What factors dictate the pace of share sales through the ATM program? A: Daniel Trolio mentioned that the pace is determined by comparing capital sources to expected funding needs each quarter. The volume of trading in the ATM and debt facility capacity also influence the decision.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.