HRZN - Earnings call transcript Q4 2020 | Horizon Technology Finance Corporation

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Operator

Greetings and welcome to Horizon Technology. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host.

begin. may You Thank you.

Megan Bacon

Jerry the Representing Conference Rob website, I the and XX-K Executive on to Technology Fourth Pomeroy, available would welcome Dan are press Chief Finance and horizontechfinance.com. release out at Horizon Company Officer; QX like XXXX to And Financial Company’s that Call. Quarter you. Chairman Trolio, point Thank Chief President; the Officer. earnings Michaud, the today Form are and

projected filings from Form ended Company’s to factors update the call whether over XXXX. Company risk the no information, would to in turn revise otherwise. everyone formal I forward-looking in the such Before conditions. of differ for and performance on expects, this cause I like Company’s undertakes with Commission, year expressions factor XX-K forward-looking used anticipates, remarks, that to XX, we a discussion including These in these At identify the any Certain and actual remind or Finance certain during predicting are Exchange Company. as results basis the call detailed to forward-looking or The some Pomeroy. material to are to make regard our statements, Technology the statements similar Horizon Words result begin events December or the future results uncertainties those factors obligation inherent Securities of the in subject future with conference could forward-looking as statements, future and forward-looking intends new need of statements to believes, this to will these the a statements. statements are time, including Rob

Rob Pomeroy

will was current XXXX normal interest some efforts Today, detail we with environment. joining Jerry soon to our year, then, then health a Thank its an your our markets. for financial will the an start but in discuss we will and condition. Dan XXXX. and we questions. Horizon’s performance you environment will the And provide and morning. and to progress us hopeful, perspective in incredibly return operating on overall vaccines, our business take economic will Good of challenging operating and are more development Horizon. performance I for continued

Looking pandemic. per with of we for $X.XX year to By earning new the as the forward has key underwriting, COVID-XX, lowest due non-earning investment level share, want generated important outlook share the accounting. several to of credit originations our in XXXX, a large loans this three portfolio based new level profile of our of assets, through our record level. of and and to the past these $XXX investments to quarter we challenging back total our at We distribution maintained per declared exceeded the June, with invest through level XX distributions balance consecutive monthly of net income resolving And months Horizon maintain since in We’ve a fourth high XXXX, added quarter distributions XXXX We sheet total grew We to the $X.XX have industry-leading our the to debt improved despite volume allowed prepayments. in experiencing level accomplishments. underperforming cash our for assets. our highlight yield our investment an at time impact achieved resolved million, income We on part on which a After underperforming our loans, originations, members portfolio net outlook marking million. us in and of volume a these we throughout our management XXXX. we years. third portfolio backlog committed We originations of team returned enter $XXX to record low of and we ending XX.X%. of a experienced in distributions

equity million equity at-the-market our $XX to are raised We of premium the leverage year approximately our particularly ability ended $XXX to liquidity make through facility our proud our We protect York million amended and with our program, from credit Life to our to all of ability $XXX portfolio New NAV. our distributions. of enhanced support available investments. with additional and companies We strong at a and million capacity

and or we showing over into support XXXX has venture runway adequate have continued in to investors total million our of their capital Further, cash In the over business raised of portfolio believe to of XX access health the beyond. and ecosystem. the portfolio again late XXXX, of a companies $XXX and plans, addition, over execute cash the our companies XX% XX% of

ability on our execute positioned quarter. XXXX, crisis. of on our positioned balance and in robust. as the backlog, our together venture into opportunities Today, beyond. expanded forward NII withstand remained for are are to balance our the and future. the already and And believe year. we in And The half And sheet this the a well to Demand our first of have our in we our we pipeline record we of the strong portfolio million and grow to held committed for an million portfolio team originate. we have firm [Technical within year over wealth resilient. backlog succeed test for built unprecedented strongly first to result, are of the our XXXX Difficulty] $XXX and ample Looking funding true into we new investment generate years a targeted pipeline there to and capacity remains was our Overall, debt industries $XX after grow opportunities

opportunistically value in our remain investments diversify portfolio additional fund new expand managing further proactive long and forward, will to and and we generate for look our ultimately shareholders. Moving portfolio our to term

with of for over thankful turn will and Jerry. I We’re to entire our call And very now the proud team. that,

Jerry Michaud

Thanks, Rob. Good morning, everyone.

of hope to and all healthy continue safe. We you are

markets segments not certain were only the core on pandemic, of the thriving. we surviving second our and but XXXX, identified of COVID-XX quarter in As that evaluated market were third impact we the

a the services and quarter, life of we quarter. were those As markets. the information technology transactions We sub and the during result, sectors X totaling funded our to focus science, marketing during on fourth able million $XX.X efforts healthcare,

on-boarding pricing yields pricing NII during transactions the that disciplined reflected XX.X% important focus strategy. predictive quarter of are our to enhance continued overall of an and Our contribution our

only $XX again was experienced among industry. from our accelerated than the in prepayments loan totaling debt and expected the lower the we the Although two fees for top of prepayment with the quarter income activity increased once XX%, -- prepayments loan prepayment only which portfolio prepayment BDC million, to quarter the two

proceeds $X.X million the exercise also received During of warrants. and from sale we of the quarter,

XX In end in we As portfolio we’ve and with proceeds quarter, of generated the positions at with of ended companies we and approved held the in $XX debt million quarter rights equity equity year with $X million. warrants quarter. we million $XXX aspect noted, fourth million and the value new committed of additional a equity. warrants loan over XXXX, our end, a structuring and venture In an to investments and And the fair commitments compared warrant the and of $XXX key approvals, third $XX we in closed is million and from backlog value generator. at strategy, a

totaling demand ended new venture see $XXX with debt to pipeline for continued strong million. quarter and the We opportunities a of

during investments. three our we to activities, company which the portfolio X-rated total made million of the and company, from of cash the challenging the impacted product progress XXXX. our most our exited of $X.X quarter, Encore health We the has been quarter to the resolve of COVID-XX investment Dermatology, company. significant Turning In in from sale by a during management significantly received a we recovery

also than QX other recoveries equal with values. X-rated We Titan, exited and credits, two or fair to greater our Lantos

debt portfolio an credit fourth now to X-rated NanoSteel we investment rating. while managed And venture to the ended accounts, one our year we our $XX to in recovery challenged total Also, much on sold quarter with consistent in a level experiencing only December recoveries funded consecutive our proceeds our at and to the XXXX. credit record was have from remaining and equity XXst. fair quarter we warrants Subsequent result, credits, last this we totaling put, in exited end, of year our and with succeed with proactively loans additional As the a and sold most Ontrak subsequent of and NanoSteel. position year stronger bringing investment’s second Simply debt a from value our X-rated QX, highest have four grow our in Ontrak, equity in $X million million. our is

XXXX. to committed at venture of demand a pipeline new solid million of debt venture at demonstrating continue stood million, Our $XXX our backlog end $XXX for providing and base February in again, opportunities portfolio our debt growing at and stood products the

of fourth capital was invested venture to VC-backed billion billion in COVID, Amazingly, quarter. the XXXX VC-backed despite to in companies now Turning According in record $XX invested $XXX approximately the PitchBook, year was environment. companies. a

VC terms XXXX $XX In bringing the a raise raised $XX of billion in in fourth to was total performance. quarter, record the fundraising, billion,

mostly As increased fundraising. XXXX, have larger was funds driven the in the trend

of wide we vehicles months. open, liquidity. in In public go generate a the exit fourth XXX number Regarding to of VC-backed remained billion additional the total paths pursue XXXX another $XXX record. a significant IPO by quintupled exit open $XX in backed to seen with year, investment companies firms as of venture Most XX in and IPO to multiple and alone, billion $XXX six means value companies the capital. setting notably, a for providing IPOs activity, number windows route window SPAC total of remained value a SPAC quarter, have and billion SPAC The for the past with to the nine raising the

as our adjusted the a impact our of markets of core markets. experienced fourth quarter number investment COVID-XX. opportunities Turning now growing during the core We to to

of new diversification investments our we seven as we company. These a investments, three information companies. science in and new $XX healthcare provided new investments, portfolio debt result, total solid life and new added three investments, made As technology one services a portfolio million and to

achieve focus. attract meet that innovative believe capital added of products markets core $XX in sustainability we technology as seen during funded a with that to to market have trend toward developing that companies core continue XXXX. also helping two the have and of portfolio our companies. products provide of existing or Notably, will sustainability services their We benefit and We companies demand, part can million our

in a strong and most see With XXXX invest story and history. half environment. serve periods We approach from liquidity economic our predictive opportunities benefited uncertainty of new with opportunities to that, position shareholder a to value cautionary take to strategy markets of competitive our the equity pipeline challenging in long in new expect will the one investment has now in of to deliver market debt the to profitably of using additional and COVID-XX companies. The from and XXXX through carefully advantage of aggressive shifted companies XXXX. risk to and I we have portfolio In available Dan. a additional in over that pricing social more turn second grow XX-year call XXXX such navigated in and entered XXXX, We to to the term our both our

Dan Trolio

Thanks, Jerry. And good everyone. morning,

As position his strong a tough our navigated remarks, a generate in and and Rob through we noted XXXX our long-term shareholders. portfolio to value in for expand additional entered XXXX

included size enhanced million raised During and the receiving York to shares show facility markets. million million nearly sheet the through amended $XX continuing equity debt million. X.X Life. in the $XXX And by our sold $XXX another our net fourth XXXX, to which quarter, proceeds in $XX grew million, we from opportunistically of New of balance ability our the accretively access program through and approximately successfully our our to we capacity with ATM portfolio adding program, We

our even efforts proud poised We’re advantage we of greater entire opportunities XXXX. And take XXXX. of are in throughout team’s to

of just cash, XXst available under to $XX in $XX available funds credit facilities. million consisting our As of in in December under million existing Horizon be million drawn liquidity, had $XX

to million grow million outstanding facility, XXst, of with Life there As credit us New facility, million credit our on $XX December the $XX $XXX ample portfolio. under our KeyBanc outstanding leaving York was and capacity XXX million

equity capacity at stood XXst, million. of targeted to XXst our revolving December ratio borrowing Our was facility, capacity on of X.X lower cash $XXX which was as our X. our Based new our debt credit position investment leverage to at our December on to X potential X.X than and

due to $XX.X For $XX the period. reduction in lower quarter. income of million primarily on the a investment million income quarter, the total The result average compared mainly interest fourth of earning which was earned prior portfolio to was for Horizon lower investments,

September as of X.X% cost increase $XXX million investment XX, Our debt basis from December on portfolio XXXX. stood XXst, a a at net

For the fourth quarter yields in quarter. on-boarding XX.X% of the XX.X% we received of XXXX, third to compared achieved

for for year’s yield loan quarter, the quarter. fourth was fourth XX% last portfolio versus Our XX.X%

expenses. our to Turning

the reduction in expenses X% net quarter million For fourth million, to a fourth were the $X.X total quarter, compared $X.X of ‘XX.

decreased fee in to million, lower compared the to incentive of quarter performance-based based fourth million $X.X on NII Our $X XXXX. generated

from Our interest a cost million due quarter to in partially million $X.X offset $X.X debt. to our increased average in effective expense prior in reduction an the by borrowings, increase fourth of

increased fourth per fourth investment $X.X share in quarter per quarter, in quarter Our portfolio. million the to fee in share prior from ‘XX. quarter the size income management $X.X to an share for our the third average the base for and $X.XX fourth driven of million $X.XX was compared of by $X.XX per the of Net XXXX increase

of activity. origination the by impacted was prepayment later and NII quarter fourth timing Our new

by NII of portfolio quarter beyond. XXXX first end in the of increase the generate sizable a during to expect solid XXXX and We

Based million, in an accounts. of We generated full per debt year portfolio an other totaled per XXst portfolio the To principal in December million with of The The portfolio undistributed we prepayments, in average and aggregate offset fourth companies warrant, for NII NII, by our and XXXX $XXX value of the forecast new our income received $XXX fair of with portfolio share. Board million, investment outlook our declared million. XX investments spillover were payments, several with summarize upon in income scheduled of equity investments a of in and companies XX consisted as and share. monthly originations principal $X.XX million was XXXX, XXXX, million. ended per May our $X.XX and June which For distributions for fair levels, $X $XX cash of a liquidity April, activity $XX quarter, of value our of for from partially million $XX spillover total share Company’s $XX XXXX. $X.XX for

We per We time. that over remain XX distributions providing have now declared shareholders months. consecutive share to net our monthly for with income by covered of $X.XX our distributions committed are investment

as of loans. was to quarterly of $X.XX $XX.XX The a our NAV NAV XXXX, resolving share, net reduction $XX.XX as to and investment due September XXst in year-end paid excess Our of XX, was as December income, of compared distribution XXXX. our on $XX.XX underperforming basis in primarily per and

that bear rate principal rise, floating As our noted, rates debt increase of rate amount are as XXX% outstanding to structured consistently we’ve with interest interest of at the floors. investments interest with coupons

to our concludes of December As at XXst, is remarks, XXX% of opening be may our time. portfolio their This happy specific this have questions you we’ll take at floors.

Operator

At this Riley. comes first Instructions] question-and-answer Sarkis from time, [Operator we’ll with question be B. Our conducting session. Sherbetchyan a

Sarkis Sherbetchyan

prepayment on how in for deploying in sitting I of build just in expectation get on XQ. the activity to level the the QX touch prepayment heading and capital would portfolio? wanted as you we’re Any thoughts here that, of to activity? into light And aggressive

Rob Pomeroy

happen in been on quarter, of half a should the told first we year. the or we’ve the second So, first vision that have prepayments quarter

forward able and And look see that. to so, we’re

strong have pipeline for very the quarter. expectations origination also We volume and very, first

that prepayments should quarter than think first level fourth they the were in higher we So, in the be of quarter. the

Sarkis Sherbetchyan

with I standpoint. just wanted will from And you give if is look the first some level origination the in origination fourth historical you it’s you that Right. the here example, aggressive? you’d it maybe for us an or strong be So at in think deploy your quarter to can more if see year? kind expect of half of to pretty line deployment, of flavor to

Jerry Michaud

-- the equity quarter the first going Well, and extremely for demand both, here. in fourth venture are of into quarter debt out coming this going the strong Yes, for is Jerry. and

the companies SPACs. in As financing side raised into I seeing enter portfolio think the liquidity of whole of -- $XXX about the our of we’re And our companies alone And XX portfolio of Rob raised year. mentioned, activity this million equity first new is quarter. the last here course, into type equation same

been And portfolio, than the beginning into be the of going look When it higher markets equity at to debt it’s own so, year. very we we active. and significantly expect historically has of all our the

trajectory we’re kind confident we a to quarter. about Obviously, So, in growth it’s kind saw stay on that of fourth also competitive a pretty trying the market. of

that. ability extremely paying reputation think we’ll we to our given So, marketplace to fund in attention we’re But, transactions. our be and well-positioned the new

So, looking for first year. positive pretty half of the

Operator

[Operator question comes with next Instructions] Ryan Our KBW. from Lynch

Ryan Lynch

two I venture lenders, wanted lenders space to competitors, one talk for environment about VC be of the equity are capital. the in a can the Obviously, you minute. actually guys competitive but

been has at obviously significant capital You growth there. amount huge has equity venture XXXX, a talked SPAC raised the about in been of out

talk just other like capital look quality environment today as far and to you could for are out does deals available of there yourself So, pricing, competitive lenders? the as venture structures, what that about deploy term,

Jerry Michaud

all a great basically, honestly. strategy. we’re observation, what Yes. That’s of Because is seeing above the

a of of them Just seven equity line either with new kind new in five rounds those the include quarter, or I we that investments also fourth of added the as example, financing. top think strategic came

are And that looking really to are -- for quickly. so, really are companies and and in this grow thriving new grow investors their companies market

were competition X-rated raised credits as equity. of on we and adding offering lot they’re that. fourth equity in so, not so any term being debt that specific in of had the a more of couple saw amount substantial we as relying portfolio But, liquidity correct you to our our balance part way a sheets. one of quarter, doing are additional sheet, We a And of the they’re our when

a that landscape, so, been part significant. hasn’t of which as is now historically competitive our And

above. all is what but So, the we’re basically seeing in of

that when as recently or are new coming with at, looking science a to to about can are now. transactions, markets debt and most ensure I interesting -- are we they we’re right cushion equity that with they’re on continue grow our to equity, and what technology life adding transactions them raised the just that look equity new involved talking side the pretty pipeline, so, of and And at as

Ryan Lynch

could market wide believe what of of on probably would Okay. the operate X.X you’re range deal depend there, could you that’s of set macro market. flow depending outlook. on a to quality helpful And pretty the Obviously, think kind seeing competitive X.X of you are where times. leverage targeted in kind I a standpoint. seeing to guys I guys historically economic fluctuate color in That’s It it on intend you from have guys the in a range. broad also a

guys a you we’re to that of start like maybe place and downturn, going continue hopefully upper feels guys do to or going the range, end, you a the see forward to X the think above some pretty coming do out Given that economy target pretty that X closer operate where to up and the to end substantial could growth. intend higher push Within meaningful good of term? range, you we medium in it leverage be upper to is in that

Dan Trolio

question. start target during we a have, you of and then strength quarter. Ryan, quarter each been the X. things great determine on And and that’s X.X to pipeline, the plan our we Yes. liquidity X.X has where that Like quarter out out the between said, fall and we based the

prepayments to that. and on and activities out to It the to that is happens get quarter funding of get year it goal to what up whatnot. all throughout X. depends and X.X the with to And core we in our model out So,

Rob Pomeroy

X.X, much X.X rather the be to to X.X We’d range in X than Ryan.

Operator

to CEO, call closing the session. Pomeroy, time, Chairman At have the of Rob and this the back We to question-and-answer over I’d reached for comments. turn like end

Rob Pomeroy

hope your again in you continued all And soon. continue your and forward morning. We speaking families thank and Thank we healthy. very to and and for us you, joining you you. appreciate to Horizon. this you safe interest remain support look Thank We with

Operator

This concludes today’s conference.

time. You you at for may your And participation. disconnect this thank your lines we

Horizon Technology Finance (HRZN) 3 Mar 212020 Q4 Earnings call transcript