Horizon Technology Finance (HRZN) Q3 Earnings call transcript Oct 30, 2024

Horizon Technology Finance Corporation (HTFC) held its third quarter 2024 earnings call, revealing a strong performance and a positive outlook for the company. The call, led by Chairman and CEO Robert Pomeroy, highlighted a growing portfolio, a focus on credit quality, and a strategic partnership with Monroe Capital that will enhance the company's capabilities.

A Growing Portfolio and Credit Profile

HTFC reported a net investment income of $0.32 per share in the third quarter, slightly below the declared distribution level. Despite this, the company is optimistic about its future performance, aiming to deliver net investment income at or above its declared distributions over time. HTFC's portfolio grew by 6% in the third quarter, reaching $684 million, and the company has a solid base of opportunities to further grow its portfolio in the future.

The company's credit profile has also improved, with 91% of the fair value of its debt portfolio consisting of 3- and 4-rated debt investments, compared to 88% at the end of the second quarter. This focus on credit quality and originating high-quality investments is expected to maximize the value of HTFC's portfolio over the long term.

A Strong Macro Environment and Active Markets

HTFC's performance is not isolated to its portfolio. The overall venture ecosystem is showing signs of recovery, with approximately $38 billion invested in VC-backed companies in the third quarter, despite a slowdown from previous years. The life sciences sector, in particular, is seeing renewed interest from investors, with several IPOs and fundraisings in the sector. This positive environment is expected to lead to increased demand for venture debt capital, a niche that HTFC is uniquely positioned to provide.

Strategic Partnership with Monroe Capital

HTFC also announced a strategic partnership with Monroe Capital, a move that will provide the company with additional capital scale and commitment. This partnership is expected to benefit HTFC through enhanced investment capacity and the ability to provide venture debt financing to high-quality technology and life science companies. The transaction is expected to close in the first quarter of 2025.

Looking Ahead: Optimism and Challenges

Looking forward, HTFC remains optimistic about its prospects. The company's pipeline is full of quality opportunities, and its liquidity and balance sheet are strong. However, challenges remain, including the ongoing macroeconomic uncertainty and the potential for continued volatility in the venture ecosystem. HTFC's management remains committed to maintaining credit quality and providing support to its portfolio companies, ensuring optimal investment outcomes.

Conclusion

HTFC's third quarter earnings call painted a picture of a company in a strong position, with a growing portfolio, a focus on credit quality, and a strategic partnership that will enhance its capabilities. Despite challenges, the company remains optimistic about its future prospects and the opportunities in the venture ecosystem. As HTFC navigates these challenges and opportunities, it is poised for continued growth and success.