Horizon Technology Finance Corp Q1 FY2025 earnings call

• Started 2025 with guarded optimism but macro environment dampened it, impacting NAV. - Funded $100 million in debt investments and $2 million in equity investments in Q1. - Board declared regular monthly distributions of $0.11 per share through September 2025. - Committed and approved backlog near $236 million. - Advisor waived portion of quarterly income incentive fees. - Positive news from portfolio companies like Emalex Biosciences and Kodiak Robotics; negative events with InBrace and Standvast.

During the first quarter, Horizon generated net investment income of $0.27 per share. The debt portfolio grew by $20 million to $690 million. Onboarding debt investment yield was 13%, and the debt portfolio yield was 15%, among the highest in the BDC industry. As of March 31, 89% of the fair value of the debt portfolio consisted of 3 and 4 rated debt investments, while 11% was rated 2 or 1. The company held warrant and equity positions in 105 portfolio companies with a fair value of $32 million.

• Guardedly optimistic despite near-term macro challenges. - Portfolio yield remains among industry's highest, committed backlog growing, liquidity strong. - Board declared distributions of $0.11 per share through September 2025. - Anticipate NII to cover distributions over time as portfolio grows and macro environment normalizes.

• Macro environment volatility affecting portfolio recovery. - Exit markets closed for VC-backed companies, especially in life science and tech. - Tariff-related uncertainty dampening optimism and impacting stressed assets. - Negative portfolio events with InBrace and Standvast due to lack of exit markets and macro volatility.

Q: How is Horizon thinking about managing spillover earnings and covering dividends during uncertain times?

A: Dan Trolio noted they review quarterly with the Board, declared distributions through September 2025, and expect prepayments to impact income.

Q: What's the quality of deals Horizon is seeing?

A: Jerry Michaud said there's a higher bar for selecting deals, with strong equity support and realistic valuations; pipeline is wide at top, narrow at bottom.

Q: Plan to raise leverage ratios to grow portfolio?

A: Dan Trolio said target net leverage is around 1.2-1.3 times, currently at 1.29, and they aim to stay within that range.

Q: Thoughts on base management fee?

A: Dan Trolio said blended rate is close to comps when calculated, and they review it relative to market.

Q: Impact of timing on EPS and dividend coverage?

A: Dan Trolio said timing issues affect EPS each quarter, with some funding slipping into the next quarter.

Q: Onboarding yields and portfolio returns?

A: Jerry Michaud explained onboarding yield is cash-on-cash, actual portfolio yield depends on prepayments and other events; currently expecting portfolio yield in 15%-16% range.

Q: Soli Organic blockage notice and exposure?

A: Jerry Michaud said ongoing dialogue with senior lender and management, related to ongoing process with Soli.

Q: Consumer exposure and tariff impact?

A: Jerry Michaud said minimal direct consumer exposure, and tariffs caused market uncertainty rather than specific company impact.

Q: Wendel Monroe partnership impact?

A: Rob Pomeroy said partnership closed, providing scale and support, with ongoing help from Monroe for Horizon's businesses.

Q: Soli default and nonaccrual?

A: Dan Trolio said if no interest payments, it would go to nonaccrual, and they will reassess fair value as the situation evolves.