- First Quarter 2023 Net Investment Income per
Share of $0.46; NAV per Share of
$11.34 -
- Debt Portfolio Yield of 16.3% -
- Grew Portfolio Year over Year by 39% to
$715 Million -
- Horizon Platform Ends Quarter with Committed
Backlog of $218 Million,
Including $187 Million in HRZN
Commitments -
- Declares Regular Monthly Distributions
Totaling $0.33 per Share -
FARMINGTON, Conn., May 2, 2023
/PRNewswire/ -- Horizon Technology Finance Corporation (NASDAQ:
HRZN) ("HRZN", "Horizon" or the "Company"), 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, 2023.
First Quarter 2023 Highlights
- Net investment income ("NII") of $13.0
million, or $0.46 per share,
compared to $5.7 million, or
$0.26 per share for the prior-year
period
- Total investment portfolio of $715.3
million as of March 31,
2023
- Net asset value of $321.7
million, or $11.34 per share,
as of March 31, 2023
- Annualized portfolio yield on debt investments of 16.3% for the
quarter
- HRZN funded eight loans totaling $40.2
million
- HRZN's investment adviser, Horizon Technology Finance
Management LLC ("HTFM"), originated $46.7
million through its lending platform ("Horizon Platform"),
inclusive of the loans funded by Horizon
- Raised total net proceeds of approximately $7.2 million with "at-the-market" ("ATM")
offering program
- Experienced liquidity events from five portfolio companies
- Cash of $43.5 million and credit
facility capacity of $133.3 million
as of March 31, 2023
- Held portfolio of warrant and equity positions in 99 companies
as of March 31, 2023
- Undistributed spillover income of $0.81 per share as of March 31, 2023
- Subsequent to quarter end, declared distributions of
$0.11 per share payable in July,
August and September 2023
- Horizon announced that HTFM, Horizon's investment adviser, had
entered into a definitive agreement to be acquired by an affiliate
of Monroe Capital LLC, a premier boutique middle market asset
manager
"In the face of an increasingly challenging macro environment,
we were able to deliver NII of $0.46
per share for the quarter – once again exceeding our distributions
– and a strong debt portfolio yield of over 16%, driven by the
rising rate environment and our predictive pricing strategy," said
Robert D. Pomeroy, Jr., Chairman and
Chief Executive Officer of Horizon. "We also selectively originated
additional venture debt loans while maintaining a solid committed
backlog of debt investments, many of which are subject to the
achievement of certain milestones by our borrowers. Given our
strong balance sheet and disciplined underwriting, we believe we
can further prudently grow HRZN's portfolio of debt
investments."
"While credit was impacted due to the macroeconomic uncertainty
and volatility in the banking sector, we remain laser-focused on
working with our portfolio companies to assist them in a difficult
capital raising environment," continued Mr. Pomeroy. "As we look
ahead, we believe the Horizon Platform and HRZN continue to be well
positioned to deliver additional value to its shareholders."
First Quarter 2023 Operating Results
Total investment income for the quarter ended March 31, 2023 grew 97.4% to $28.0 million, compared to $14.2 million for the quarter ended March 31, 2022, primarily due to growth in
interest income on investments resulting from an increase in the
average size of the debt investment portfolio and an increase
in the base rate for most of the Company's variable
rate debt investments.
The Company's dollar-weighted annualized yield on average debt
investments for the quarter ended March 31,
2023 and 2022 was 16.3% and 12.4%, 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, 2023 were $14.8
million, compared to $8.4
million for the quarter ended March
31, 2022. The increase was primarily due to a
$3.7 million increase in interest
expense, a $1.0 million increase in
the base management fee and a $1.6
million increase in the performance-based incentive fee.
Net investment income for the quarter ended March 31, 2023 was $13.0
million, or $0.46 per share,
compared to $5.7 million, or
$0.26 per share, for the quarter
ended March 31, 2022.
For the quarter ended March 31,
2023, net realized loss on investments was $0.2 million, or $0.01 per share, compared to a slight net
realized gain on investments, for the quarter ended March 31, 2022.
For the quarter ended March 31,
2023, net unrealized depreciation on investments was
$7.5 million, or $0.26 per share, compared to $2.2 million, or $0.10 per share, for the prior-year period.
Portfolio Summary and Investment Activity
As of March 31, 2023, the
Company's debt portfolio consisted of 57 secured loans with an
aggregate fair value of $684.6
million. In addition, the Company's total warrant, equity
and other investments in 101 portfolio companies had an aggregate
fair value of $30.8 million.
Total portfolio investment activity for the three months
ended March 31, 2023 and 2022 was as
follows:
($ in
thousands)
|
For the Three Months
Ended
March
31,
|
|
2023
|
2022
|
Beginning
portfolio
|
$
720,026
|
$
458,075
|
|
|
|
New debt
investments
|
47,008
|
94,485
|
|
|
|
Principal payments
received on investments
|
(6,815)
|
(2,095)
|
|
|
|
Payment-in-kind
interest on investments
|
1,204
|
—
|
|
|
|
Early pay-offs and
principal paydowns
|
(32,941)
|
(12,050)
|
|
|
|
Accretion of debt
investment fees
|
1,448
|
1,006
|
|
|
|
New debt investment
fees
|
(300)
|
(925)
|
|
|
|
Proceeds from sale of
investments
|
(6,520)
|
(21,280)
|
|
|
|
Net realized (loss)
gain on investments
|
(168)
|
30
|
|
|
|
Net unrealized
depreciation on investments
|
(7,537)
|
(2,237)
|
|
|
|
Other
|
(93)
|
—
|
|
|
|
Ending
portfolio
|
$
715,312
|
$
515,009
|
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, 2023 and December 31, 2022:
($ in
thousands)
|
March 31,
2023
|
|
December 31,
2022
|
|
|
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
|
9
|
$ 108,482
|
15.8 %
|
|
8
|
$
93,832
|
13.7 %
|
|
3
|
38
|
483,615
|
70.6 %
|
|
47
|
557,554
|
81.2 %
|
|
2
|
7
|
87,206
|
12.7 %
|
|
2
|
26,822
|
3.9 %
|
|
1
|
3
|
5,251
|
0.9 %
|
|
3
|
8,250
|
1.2 %
|
|
Total
|
57
|
$ 684,554
|
100.0 %
|
|
60
|
$ 686,458
|
100.0 %
|
|
As of March 31, 2023 and
December 31, 2022, Horizon's loan
portfolio had a weighted average credit rating of 3.0 and 3.1,
respectively, 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, 2023, there were
three debt investments with an internal credit rating of 1, with an
aggregate cost of $20.3 million and
an aggregate fair value of $5.3
million. As of December 31,
2022, there were three debt investments with an internal
credit rating of 1, with an aggregate cost of $20.9 million and an aggregate fair value of
$8.3 million.
Liquidity and Capital Resources
As of March 31, 2023, the Company
had $112.3 million in available
liquidity, consisting of $43.5
million in cash and money market funds, and $68.8 million in funds available under existing
credit facility commitments.
As of March 31, 2023, there was
$15.0 million in outstanding
principal balance under the $125.0
million revolving credit facility ("Key Facility").
The Key Facility allows for an increase in the total loan
commitment up to an aggregate commitment of $150.0 million. There can be no assurance that
any additional lenders will make any commitments under the Key
Facility.
Additionally, as of March 31,
2023, there was $176.8 million
in outstanding principal balance under the $200 million senior secured debt facility with a
large U.S.-based insurance company at an interest rate of
5.57%.
Horizon Funding Trust 2019-1, a wholly-owned subsidiary of HRZN,
previously issued $100.0 million of
Asset-Backed Notes (the "Notes") rated A+(sf) by Morningstar Credit
Ratings, LLC. The Notes bear interest at a fixed interest
rate of 4.21% per annum. The reinvestment period of the
Notes ended July 15, 2021 and the
stated maturity is September 15,
2027. As of March 31, 2023, the
Notes had an outstanding principal balance of $37.8 million.
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, 2023, the 2022 Notes had an outstanding
principal balance of $100.0
million.
During the three months ended March 31,
2023, the Company sold 605,848 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 $7.2 million, including $0.2 million of offering expenses, from these
sales.
As of March 31, 2023, the
Company's net debt to equity leverage ratio was 124%, above the
Company's 120% targeted leverage. The asset coverage ratio
for borrowed amounts was 172%.
Liquidity Events
During the quarter ended March 31,
2023, Horizon experienced liquidity events from five
portfolio companies. Liquidity events for Horizon may consist of
the sale of warrants or equity in portfolio companies, loan
prepayments or partial paydowns, sale of owned assets or receipt of
success fees.
In February, Canary Medical Inc. prepaid its outstanding
principal balance of $7.5 million on
its venture loan, plus interest, end-of-term payment and prepayment
fee. HRZN continues to hold warrants in the company.
In February, Embody, Inc. paid its outstanding principal balance
of $2.5 million on its venture loan,
plus interest and end-of-term payment.
In February, HRZN received a partial paydown of $3.2 million on its venture loan to Unagi
Inc.
In March, Alula Holdings, Inc. prepaid its outstanding principal
balance of $13.9 million on its
venture loan, plus interest, end-of-term payment and prepayment
fee. HRZN continues to hold warrants in the company.
In March, F-Star Therapeutics, Inc. prepaid its outstanding
principal balance of $5.0 million on
its venture loan, plus interest, end-of-term payment and prepayment
fee.
Net Asset Value
At March 31, 2023, the Company's
net assets were $321.7 million, or
$11.34 per share, compared to
$280.0 million, or $11.68 per share, as of March 31, 2022, and $318.4
million, or $11.47 per share,
as of December 31, 2022.
For the quarter ended March 31,
2023, net increase in net assets resulting from operations
was $5.3 million, or $0.19 per share, compared to a net increase in
net assets resulting from operations of $3.5
million, or $0.16 per share,
for the quarter ended March 31,
2022.
Stock Repurchase Program
On April 28, 2023, the Company's
board of directors extended the Company's previously authorized
stock repurchase program until the earlier of June 30, 2024 or the repurchase of $5.0 million of the Company's common
stock. During the quarter ended March
31, 2023, the Company did not repurchase any shares of its
common stock. From the inception of the stock repurchase program
through March 31, 2023, 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 2023, the Company sold 272,303
shares of common stock under the ATM offering program. For the
same period, the Company received total accumulated net proceeds of
approximately $3.1 million,
including $0.1 million of
offering expenses, from these sales.
IMV Inc. ("IMV") (NASDAQ: IMV; TSX: IMV), announced on
May 1, 2023 that the Nova Scotia
Supreme Court has issued an initial order (the "Initial Order")
granting IMV and its subsidiaries protection under the Companies'
Creditors Arrangement Act (R.S.C., 1985, c. C-36) and IMV will seek
the recognition of the Initial Order in the United States by filing a petition
commencing proceedings under the Chapter 15 of the United States
Bankruptcy Code.
Monthly Distributions Declared in Second Quarter 2023
On April 28, 2023, the Company's
board of directors declared monthly distributions of $0.11 per share payable in each of July, August
and September 2023. The following table shows these monthly
distributions, which total $0.33 per
share:
Monthly Distributions
Ex-Dividend
Date
|
Record Date
|
Payment Date
|
Amount per
Share
|
June 15,
2023
|
June 16,
2023
|
July 14,
2023
|
$0.11
|
July 17,
2023
|
July 18,
2023
|
August 15,
2023
|
$0.11
|
August 16,
2023
|
August 17,
2023
|
September 15,
2023
|
$0.11
|
|
|
Total:
|
$0.33
|
After paying distributions of $0.33 per share and earning net investment income
of $0.46 per share for the quarter,
the Company's undistributed spillover income as of March 31, 2023 was $0.81 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, the Horizon 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 3, 2023, 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 13737098.
The Company recommends joining the call at least 10 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) 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 in Austin,
Texas, Chicago, Illinois,
Reston, Virginia and Portland, Maine. 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 HRZN's filings with the Securities
and Exchange Commission. HRZN 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.
Contacts:
Investor Relations:
ICR
Garrett Edson
ir@horizontechfinance.com
(860) 284-6450
Media Relations:
ICR
Chris Gillick
HorizonPR@icrinc.com
(646) 677-1819
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,
|
|
|
2023
|
|
2022
|
|
|
(unaudited)
|
|
|
|
Assets
|
|
|
|
|
Non-affiliate
investments at fair value (cost of $724,162 and $721,248,
respectively)
|
$
714,466
|
|
$ 720,026
|
|
Non-controlled
affiliate investments at fair value (cost of $0 and $0,
respectively)
|
846
|
|
—
|
|
Total investments at
fair value (cost of $724,162 and $721,248,
respectively)
|
715,312
|
|
720,026
|
|
Cash
|
19,844
|
|
20,612
|
|
Investments in money
market funds
|
23,698
|
|
7,066
|
|
Restricted investments
in money market funds
|
2,987
|
|
2,788
|
|
Interest
receivable
|
13,843
|
|
13,573
|
|
Other assets
|
2,554
|
|
2,761
|
|
Total
assets
|
$
778,238
|
|
$ 766,826
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Borrowings
|
$
439,645
|
|
$ 434,078
|
|
Distributions
payable
|
9,365
|
|
9,159
|
|
Base management fee
payable
|
1,059
|
|
1,065
|
|
Incentive fee
payable
|
2,978
|
|
1,392
|
|
Other accrued
expenses
|
3,508
|
|
2,684
|
|
Total
liabilities
|
456,555
|
|
448,378
|
|
|
|
|
|
|
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, 2023 and December 31, 2022
|
—
|
|
—
|
|
Common stock, par value
$0.001 per share, 100,000,000 shares authorized,
28,544,822 and 27,920,838
shares issued and 28,377,357 and 27,753,373 shares outstanding as
of
March 31, 2023 and December 31, 2022,
respectively
|
30
|
|
29
|
|
Paid-in capital in
excess of par
|
393,312
|
|
385,921
|
|
Distributable
earnings
|
(71,659)
|
|
(67,502)
|
|
Total net
assets
|
321,683
|
|
318,448
|
|
Total liabilities
and net assets
|
$
778,238
|
|
$
766,826
|
|
Net asset value per
common share
|
$
11.34
|
|
$
11.47
|
|
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,
|
|
|
2023
|
|
2022
|
|
Investment
income
|
|
|
|
|
Interest income on
investments
|
|
|
|
|
Interest income on
non-affiliate investments
|
$
27,399
|
|
$
13,853
|
|
Fee income on
non-affiliate investments
|
638
|
|
351
|
|
Total investment
income
|
28,037
|
|
14,204
|
|
Expenses
|
|
|
|
|
Interest
expense
|
7,120
|
|
3,424
|
|
Base management
fee
|
3,201
|
|
2,244
|
|
Performance based
incentive fee
|
2,978
|
|
1,424
|
|
Administrative
fee
|
440
|
|
362
|
|
Professional
fees
|
658
|
|
577
|
|
General and
administrative
|
445
|
|
344
|
|
Total
expenses
|
14,842
|
|
8,375
|
|
Net investment
income before excise tax
|
13,195
|
|
5,829
|
|
Provision for excise
tax
|
184
|
|
100
|
|
Net investment
income
|
13,011
|
|
5,729
|
|
Net realized and
unrealized loss
|
|
|
|
|
Net realized (loss)
gain on non-affiliate investments
|
(168)
|
|
30
|
|
Net realized (loss)
gain on investments
|
(168)
|
|
30
|
|
Net unrealized
depreciation on non-affiliate investments
|
(8,383)
|
|
(2,287)
|
|
Net unrealized
appreciation on non-controlled affiliate investments
|
846
|
|
—
|
|
Net unrealized
appreciation on controlled affiliate investments
|
—
|
|
50
|
|
Net unrealized
depreciation on investments
|
(7,537)
|
|
(2,237)
|
|
Net realized and
unrealized loss
|
(7,705)
|
|
(2,207)
|
|
Net increase in net
assets resulting from operations
|
$
5,306
|
|
$
3,522
|
|
Net investment income
per common share
|
$
0.46
|
|
$
0.26
|
|
Net increase in net
assets per common share
|
$
0.19
|
|
$
0.16
|
|
Distributions declared
per share
|
$
0.33
|
|
$
0.30
|
|
Weighted average shares
outstanding
|
28,227,100
|
|
21,904,160
|
|
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SOURCE Horizon Technology Finance Corporation