Horizon Technology Finance Corporation Third Quarter 2024 Earnings Overview

Horizon Technology Finance Corporation (NASDAQ: HRZN) reported its earnings for Q3 2024, revealing a net investment income (NII) of $0.32 per share—slightly below the distribution level. The company maintains monthly distributions of $0.11 per share through March 2025, alongside a 6% growth in its portfolio, totaling $684 million. The debt portfolio yield reached 15.9%, one of the highest in the Business Development Company (BDC) sector.

Key Takeaways

• NII of $0.32 per share, marginally below distribution level.
• Monthly distributions of $0.11 per share planned until March 2025.
• Portfolio increased by 6% to $684 million; portfolio yield at 15.9%.
• Additional nine new debt investments totaling $93 million.
• $38 million in prepayments indicate a healthier venture market.
• Backlog of $190 million in approved loans.
• Successfully raised over $18 million through an at-the-market program.
• Available liquidity of $125 million with no outstanding borrowings as of September 30.
• Debt-to-equity ratio stands at 1.28, indicating potential investment capacity of $356 million.
• Optimistic outlook for growth in the venture debt market, especially in technology and life sciences.
• Investment income for Q3 at $25 million, lower than $29 million from Q3 2023.
• Decline in NAV per share to $9.06 due to distributions and fair value adjustments.
• Ongoing progress on resolving non-accrual loans, with some expected resolutions in Q4 and early 2025.

Company Outlook

• Optimism regarding sourcing new venture debt investments.
• Focus on portfolio growth and credit quality through Q4 2024 and into 2025.

Bearish Highlights

• NII per share decreased from $0.53 in Q3 2023.
• Declining NAV due to distributions and fair value adjustments.

Bullish Highlights

• High portfolio yield ranks among the best in the BDC industry.
• Strong liquidity position with $125 million accessible cash.
• New investment potential of $356 million.

Misses

• Investment income lower than previous year’s quarter.
• Notable realized losses, especially tied to the Nexii transaction.

Q&A Highlights

• CFO Dan Trolio announced plans to gradually restore the incentive fee by the end of next year.
• Spillover income recorded at $1.27, with no minimum target established.
• Stable yields on new investments despite cut in index rates.
• CEO Rob Pomeroy stressed commitment to strong portfolio yields and shareholder returns.

In summary, Horizon Technology Finance navigated the third quarter focusing on stability and growth. While it faced challenges, the firm remains committed to its investment strategies and shareholder distributions. The outlook is cautiously optimistic as the company seeks to capitalize on market improvements while expanding its investment portfolio.