Horizon Technology Finance Corp Q3 FY2025 earnings call

Mike Balkin:

• Announced merger with MRCC, now expected to complete in early 2026, which will increase assets under management and benefit from Monroe Capital's support.
• Added new originators in Q3, aiming to originate larger venture loans to top companies and return to growth trajectory.
• Generated net investment income of $0.32 per share, NAV per share grew 5%, Board declared distributions of $0.11 per share through March 2026.
• Strengthened balance sheet via equity raises and convertible note issuance.

Paul Seitz:

• Portfolio stood at $603 million at quarter end, funded $15 million in debt investments in Q3, pipeline of larger venture loan opportunities growing.
• Onboarding debt investment yield was 12.2%, debt portfolio yield 18.6% (among highest in BDC industry).
• Held equity positions in 95 portfolio companies with fair value $40 million, committed and approved backlog $119 million.
• Venture capital market warming, exit markets opening, but life sciences have valuation challenges.

Dan Trolio:

• Strengthened balance sheet by raising $40 million via convertible notes and $10 million via ATM program.
• Operating results: investment income $26 million, net investment income $0.32 per share, NAV per share $7.12.
• Liquidity: $151 million available, net leverage 0.94:1 below target, potential new investment capacity $460 million.

Net investment income for the quarter was $0.32 per share. NAV per share grew 5% to $7.12. The portfolio yield on debt investments was at or near the top of the BDC industry. The company raised $40 million through 5.5% unsecured convertible notes due 2030 and $10 million via an at-the-market program. The portfolio stood at $603 million at quarter end.

• Board declared regular monthly distributions of $0.11 per share through March 2026.
• Expect portfolio growth in Q4 driven by pipeline, with $10 million funded in October and $50 million in commitments.
• Aim to get net leverage back to target range of 1.2 to 1.3x over next quarters.
• Onboarding yields expected to remain around 12-12.5% going forward.

• Forward-looking statements subject to uncertainties in predicting future results, factors detailed in SEC filings could cause actual results to differ from projections. The merger with MRCC completion was impacted by federal government shutdown, now expected in early 2026.

Q: Cory Johnson asked about VC market heating up, exit trends, and net leverage. Paul Seitz responded that payoffs/prepayments should revert to historical standards, and Dan Trolio mentioned net leverage should return to target range in next 1-2 quarters.

Q: Paul Johnson inquired about portfolio yield sustainability and the acquired debt portfolio. Daniel Trolio stated historical portfolio yield is around 14.5-15%, and the acquired portfolio was from a co-lender exiting the market.

Q: Christopher Nolan asked about focus on larger credits post-MRCC merger, use of ATM, base management fee, and target ROE. Daniel Trolio said focus on larger credits won't dramatically change yields, ATM used as usual but not when trading below book, base management fee reviewed annually, and no specific targeted ROE on new capital from Monroe deal.