Yahoo Finance Horizon Technology Finance Corp (HRZN) Q1 2024 Earnings Call Transcript Highlights: Key ...
Portfolio Size: Grew slightly to $711 million.
Debt Investments Funded: $33 million across five debt investments.
Loan Prepayments and Refinances: Totaling $20 million.
Debt Portfolio Yield: 15.6% for the quarter.
Warrant and Equity Positions: Held in 99 companies, fair value of $31 million.
New Loan Commitments: Closed at $37 million.
Committed and Approved Backlog: $168 million.
Investment Income: $26 million for the quarter.
Net Investment Income (NII) Per Share: $0.38.
Net Asset Value (NAV) Per Share: $9.64 as of March 31.
Total Investment Portfolio: $711 million.
Release Date: May 01, 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) reported a slight growth in portfolio size to $711 million in Q1, indicating stable business expansion.
The company continues to generate strong net investment income (NII), which has consistently covered distributions for over six years, showcasing financial stability.
HRZN's debt portfolio yield of 15.6% for the quarter remains one of the highest in the BDC industry, reflecting the profitability of their venture lending strategy.
The company has maintained a robust pipeline with $1.8 billion in potential deals, demonstrating strong market demand and reputation.
HRZN has a solid liquidity position with $91 million available, providing ample capacity for future investments and operational flexibility.
Negative Points
Challenges in the venture capital environment persist, with a notable decline in VC investment in later-stage companies by 36% from the previous year.
HRZN experienced a decrease in investment income to $26 million from $28 million in the prior period, primarily due to lower interest income on debt investments.
The company faces increased competition in the venture debt market, particularly from larger players with more aggressive pricing strategies.
There are ongoing concerns with unrealized losses in the portfolio, indicating potential valuation issues and investment risks.
HRZN's net asset value (NAV) per share decreased to $9.64 from $9.71 in the previous quarter, reflecting some pressures on asset valuations.
Q & A Highlights
Q: Could you discuss the write-up of the Evelo investment and the significant write-down quarter over quarter? A: Gerald Michaud, President, Director - After a failed clinical trial, the market was quite depressed, leading to a conservative valuation around $1 million. However, there's ongoing work to maximize the value of Evelo's assets, with potential positive developments expected in the next quarters.
Q: Can you provide an update on the additional nonaccruals and the related fair value marks? A: Daniel Devorsetz, COO, EVP, CIO - Both companies on nonaccrual have potential value in their technology and business assets, with third-party interest. Efforts are ongoing to maximize recoveries, which might take a quarter or two more to materialize.
Q: What is the mix between existing companies and new platform companies in the backlog, and what are the expectations for repayment activity? A: Daniel Devorsetz, COO, EVP, CIO - The backlog primarily consists of committed milestones to existing borrowers. Originations are slow as the company is cautious, ensuring only high-quality venture debt investments are funded.
Q: What caused the lower interest income this quarter? A: Daniel Trolio, CFO, EVP, Treasurer - The lower interest income was due to a combination of lower portfolio size, decreased prepayment activity, and the absence of fee accelerations that typically accompany repayments.
Q: Are convertible transactions or preferred capital competing with venture debt markets? A: Gerald Michaud, President, Director - These equity solutions are not in competition but are often part of a broader financing mix that includes venture debt. The market is seeing more realistic equity contributions, which helps in structuring supportive venture debt arrangements.
Q: How are you competing with larger players in the venture debt market? A: Gerald Michaud, President, Director - Horizon competes effectively on price and can manage size constraints through strategic capital raising and collaborations, especially with tech banks post-SVB crisis, allowing competitive and attractive financing solutions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
