HRZN - Earnings call transcript Q1 2021 | Horizon Technology Finance Corporation

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Operator

Greetings, and welcome to Horizon Technology Finance Corporation First Quarter 2021 Earnings Call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the presentation [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Ms. Bacon. Megan you. Thank ahead. Please go

Megan Bacon

President; and company's the quarter welcome are Technology you, Form available to Jerry the Pomeroy, Officer. are Chief I XX-Q would site, earnings to conference call. press at first like horizontechfinance.com. Michaud, Officer; XXXX Executive today out and Finance Dan Representing Trolio, Chairman Financial Web that Thank point Chief Horizon the and QX the Rob and on company release

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

Rob Pomeroy

and in condition. yield loans the performance operating you where We improved excess development nonaccrual. successfully distribution are for we our Dan the of due notes We no I We due the loans X% discuss very its our will of our our interest of business joining performance from successfully quarter of strengthened our balance of an navigate credit venture overall industry and with ago one stood profile team's ability and industry We investments a or portfolio on year XX.X%. debt economy further When proud our one on ended leading achieved our accomplishments rated particularly portfolio the quarter and considers an used end X.XX quarter, the sheet, end through of the the And share, the XXXX lowered of at redeem ended a $XX.XX and fully capital $X.XX of then pandemic. our from detail per take financial months we offering and Based cost proceeds and XXXX. in increase our XXXX. completing X.XX to maintaining with notes XXXX. further our portfolio NAV to for generated Horizon. Horizon’s excellent current then per efforts per had overall to at $X.XX an your monthly operations. share. XX some we share questions. Good our facets million, on markets. And of and marking an will Today, continued our of the perspective environment. operating will and and to We on Thank We Jerry end morning. will income provide active of consecutive XXXX net our an in increase outlook, we us start $X.XX investment our model. through all grew distribution $XXX September, are our

Management. the expand expansion, potential The the strong time. which I management's for provides recent has to addition Waterfall the capacity Technology platform to and platform $XXX also our results portfolio our manage $XXX want for million originate venture to to Horizon advisors million to In highlight debt Finance quarter, Asset over

larger and risk. Horizon $XX this we and of by expect venture now today new its of more and side opportunities, an net million Horizon, that growth. and invest concentration it investment future improving vehicle, time in the further to with side access debt investment portfolio has same will reducing addition which at important income while invested ability new investment the has With vehicle portfolio factor The Horizon's diversity will be the

of for we well pipeline will remain ahead, of targeted loan be on within backlog growing vehicle positioned and for capacity opportunities well to and generating compete for are and and Looking continue opportunities; opportunities, high; commitments levels; believe maintain balance investments on continues help strong pipeline us demand our venture new our backlog sheet as advisors’ as ample to our we new the debt new record originate. to committed our new NII due execute at investment our better to we we our portfolio following: industries

shareholders. balance disciplined ultimately, management Our generate strong the with proactive prime over long our us our want entire will and now and net has and team to our for to hard of navigate enabled I all marketing, another for Jerry. in portfolio, that, to the strategic I underwriting our quarter. additional income strong management, thank turn value us And investment pandemic placed -- diversify for a further term expand work sheet and their and to portfolio through strong and successfully position call

Jerry Michaud

of for the The market transactions, the totaling eight debt everyone. advantage took demand toward Thanks, throughout million quarter Rob. venture generated Good quarter. we continued originated and we first end morning XXXX momentum as $XX strong of to the during

can that continued onboarding Our provide reflected on our NII of by transactions strategy. focus quarter that XX.X% our will strong predictive pricing pricing be yield enhanced disciplined the then during

and of the debt totaling the quarter prepayments yield increased for XX the again among experienced our the the and prepayment also was to the once XX.X%, which We two top portfolio industry. loan during from prepayments fees accelerated income BDC quarter, million

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

equity consistently an structuring venture aspect additional noted, a have strategy is debt with we our and investments As generator. of key warrants rights and value

$XXX of quarter, XX $XX portfolio with approved companies we million commitments venture new and $XX $XX ended approved QX, fair additional of loan the a for positions at XXst, and the an backlog value and approvals closed with of quarter to million. totaling to remains new of million pipeline Subsequent million and equity backlog million debt end we quarter in first in of of funded In compared March we and we $X.X $XXX elevated we committed ended our to As a the and loan held a XXXX. opportunities warrant with million. $XXX.X Demand and record a committed increased the million.

a continues debt transactions, to our QX, pipeline December recovery exited or with process. solid our investment exited $X investment billion, receiving hold with with non-accrual with in accelerated warrants Along stands interest, consistent provides from consisting Also that a at particularly our we growth Kate or Farms. our us the Farms almost rated ended including portfolio’s recently XXst. our prepayment in million principal opportunities million we XX% four having our improvement NanoSteel in Our debt base quarter Kate pleased portfolio profile, fair the And $XX credit rated. and quarter, portfolio. value of achieving our with In payment. a of portfolio, no are we in loans with as credit new subsequent strong in now over exited repayment including of Horizon three we strong fair of further investment loans the fee grow our awarded of final having and venture IgnitionOne, the along which the value one the investments and with we the and at $XXX recoveries to quality of [debt] in to accrued

while it a As our XXXX and venture result, to and to generate continues grow throughout portfolio beyond. was strong debt well NII positioned

the PitchBook, a strong in approximately Turning now continues VC $XX venture According to companies the last first Sector year's quarter, capital on continues very to well billion to was a remain to backed footing. in environment. above at first very remain invested quarter.

XXXX raised was to billion a increased billion. the pace $XX performance in mostly record on to putting fundraising, fundraising. continue VC the terms Larger $XX first XXXX’s of funds shatter drive quarter, In

helping backed exit IPO exit in to SPAC first venture $XX VC and wide of backed the in total billion SPACs a registered drive quarter first alone. the SPACs quarter. value raised billion. newly vehicles window, activity, IPOs XX in remained $XXX Regarding or the open

still uncertainty is companies there capital, generate multiple including market additional SPAC activity. from the liquidity, markets, regulatory paths backed to venture remains venture and M&A for there While growing and IPOs, around debt venture

we core to markets, opportunities multitude our committed of to our and continue see investment as Turning pipeline. robust backlog now a reflected by

new During science life to our portfolio diversification five portfolio. in one new which the provided investment quarter, debt million consisting further we made and technology six of companies, investments, to investments $XX new

of remains substantial We there to also demand funded $XX Overall, companies. and equity sustainability. our widely target in life our tech markets as science, to of for existing debt companies portfolio two remain venture technology, healthcare available debt investment million and

and expansion expect investment Rob our us to considerable in provide with dynamic platform As a we environment larger advantage opportunities. access mentioned, potential recent advisors’ this

the predictive and As I that value. California our excellent an now part liquidity, management additional With marketing long call to We New shareholder our utilizing our venture Austin, profitably our pricing that, expansion, added advisors debt term England, quarter strategy and turn our to pipeline further and in expand experienced portfolio in will the professionals position robust entered portfolio second of deliver Texas. to continue over Dan. and

Dan Trolio

good Jerry everyone. Thanks, morning, and

first our continuing quarter to our in As to his balance a Rob sheet. and strengthen had noted strong overall remarks, we with portfolio respect

from sheet, balance extended successfully trade X.XX we of week, cost X.XX all our of and which ticker, of HTFB. our notes, reduced of our the Last our proceeds our $XX.X capital with we terms maturity the million In issuance redeemed notes. the of with offering, the under

additional second of in XXXX As quarter a unamortized to $XXX,XXX acceleration related debt incur costs. result, issuance the of of we’ll interest the expense

opportunistically million. and accretively $X raising XXX,XXX our Additionally, sold we ATM, through shares, nearly successfully

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

credit no under $XX million outstanding to grow million of $XXX XXst, New us ample with our KeyBank and March capacity the leaving million facility there Life on balance As portfolio. outstanding $XXX York our credit facility, was

X.XX:X. potential March We Our our the of materially capacity Based week, was X.XX:X our lowered our on redemption of lower XXst with cash was million. has know debt to at leverage X.X:X. our our as ratio our than to equity at on ratio equity credit notes borrowing $XXX ‘XX investment of position our to debt which stood that facility, target and new XXst, capacity last March revolving

we expect that towards NII increase X.X As we leverage our target would of will commensurately. grow times, our

total XX% a earning investment result debt For is the is of income investment on earned $XX.X prior Growth period. to which million primarily investments, interest mainly the $XX.X year first portfolio increased million, average quarter. a for due higher Horizon to income quarter, of compared a in increase the

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

the achieved achieved For quarter XX.X% we yield of to onboarding of XXXX, fourth quarter. compared first the XX.X% in

for yield portfolio XX.X% quarter. first quarter the versus loan was XX.X% last for Our year's first

our to of were the quarter, in total million expenses $X.X XXXX. for compared expenses quarter to first first $X.X the Turning million

to NII generated greater Our $X.X performance to million in the of fee based million XXXX. on $X.X incentive rose quarter based compared first

interest $X.X in $X.X expense an from due quarter million average Our to increased prior million initial increase to in the first borrowing.

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

prepayments, As driven fees extent mentioned fee by unamortized and and and of of are to the per the payments. previously loan related changes end income to share acceleration in period originations loan of NII including primarily the and new timing of prepayments those past, quarterly the term prepayment from timing period

outlook months. upside in would continue portfolio to by of portfolio of equity of Based XX distributions income activity. of investment $X.XX The and ahead, with our of company's million of on covered share. share companies ended XX aggregate of our driven for million providing the a We million, portfolio board which generate Summarize prepayment first XXXX, now for $X net quarter, XX March total our remain our of of to million. August solid offset additional prepayments. investment the our larger portfolio by a and value timing spillover new September the for fair $X.XX income as warrants, declared monthly per forecast portfolio $XX investment partially principal spillover dependent Looking monthly we XXst NII was with undistributed per liquidity distributions by our fair companies debt for base total payments value expect with scheduled and $XX average activities of million $X.XX overtime. XXXX. investments principal were committed a declared $XX investments debt our in We The with quarter an originations other with shareholders $XXX for consecutive an that in NII share and We've upon income levels, and million. July, $XXX our per are distributions to consisted

was Our XX, $XX.XX XXXX of XXXX. our basis and compared share increase due $XX.XX NAV of ATM March year from accretion was a per NII as $XX.XX end and exceeding March primarily of XXst a The in NAV distribution. on program quarterly as as to our $X.XX to

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

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

Operator

floor Thank for [Operator you. open questions The now is Instructions].

is from Riley Our Sarkis of Sherbetchyan first FBR. question B. coming

Sarkis Sherbetchyan

to to sheet originations as if fiscal to wanted given maybe compare can you we 'XX provide some and balance balance that that can the if sense, Just the the expecting on move you're activity a through for your of you deploy year? get prepayment insight

Jerry Michaud

we QX, million. have about sight So for line of of $XX

look year. think for million I year's they're $XXX prepayments, If you about the at last

obviously, portfolio, growing. Our been has

predictable it So cautionary than other year. expect not we as the business. be that could in little of potentially here, aspects know, bit you prepayments our higher are But as note this to a as

to quarter vary it I expected that can more we bit under to non-circumstances. think $XX be elevated significantly that a a So pretty million, basis and quarter QX little the on was than

that's year. the for So prepayment kind of rest the expecting of we're the that activity

Sarkis Sherbetchyan

given And the get target, more cadence at that to little to as be of as of leverage a a you the moderate you more achieve aggressive think do to kind get level originations, start bit it’d far or for would can you pace? say your you'll

Jerry Michaud

transactions a really to at we're that's million today, $XXX good looking looking at. we're question, of and billion because, Yes, the pipelines $X

don't You $XXX back might at that that $XXX more have -- where to million. million have pipeline like like go far to looked

a of significantly development for whole lot the lot marketplace activity the in marketplace, of is into going new So in technology a of elevated bunch equity reasons, the areas. so certain

in than get more don't There's been aggressive. more the us historically. marketplace has really we for to far selection So have it

the So nicely or portfolio we to move at interest believe without rates that out we having can spectrum grow credit very only lower all.

will solid a But So believe operating it's in. really pretty be strong, during we the market for us do the of to the portfolio grow course we year.

Sarkis Sherbetchyan

One back the on detail the give the expansion to with the BDC find queue. from platform Can how maybe benefit me and Management? you I'll I the interesting. fairly on more Waterfall Horizon in for you platform more hop expansion some expect Asset announcement

Rob Pomeroy

prepared mentioned public provide And gives also One at multiple that you deals further of the in access to BDC. where platforms. public we features BDCs our as having are larger market diversification beneficial many but BDCs where the remarks, have is to the in it the

initiative expand and our And so look was to at at horizon hold the and a create deals of to larger platform ourselves, strategic allow and us that diversification those ours the deals platform. to

Operator

Instructions] KBW. [Operator from coming next of Our Lynch question is Ryan

Ryan Lynch

relative just other that one this closed is BDC? think, managing capital of fund the will I any the guided funds of new strategy pretty on only you're the investment the One an on fund there question have, That's the outside BDC, the you have definitely that. just outside additional forward. to sizable wondering, outside going obviously only or a I was of on which Congrats BDC, other did fund is your close BDC. I the impact the are outside --

Rob Pomeroy

the that of other Currently, outside is only fund BDC.

Ryan Lynch

more additional VC does being And prepared product less debt in guys that compelling the elevation kind take then, capital of a create today, looking you remarks valuations the being venture of competition in capital? mentioned entrepreneurs the when in amount that potentially your Does on capital to in venture and are that, in result of combination raised or space. that with market

Rob Pomeroy

yes, VC to the hard it's size and lots answer funds. SPACs, of large raising the ignore to very, then short cover from that would or in equity, public or considerably. whether VC competition very of between It's the correlation we definitely are equity, private this environment, seeing, particular So be up we moving investments in funds, that money even sectors

So of we're seeing terms in lot they competing we're are a money marketplace, the work. in That said, to putting well. elevated greater opportunities still more as how

venture incremental entrepreneurs to venture significantly For be. and the where provide existing cost the debt investors what value venture to the even at reduced provides still debt, companies and equity that a proposition to the compared there's debt capital would can

competitive a the and demand for the in a to it equity debt yes, lot but both. and also there's So strong environment finding is for more both marketplace more relative very that we're market

Ryan Lynch

Has change XXXX, were that like competitive standpoint? doing resulted does guys the in your where where you terms like versus or structures in look on you're from a and deals landscape the maybe to from you look materially having

Rob Pomeroy

Not very the we standpoint, think has I markets this that to has up from There’s relative pricing perception of pricing in that serve. quarter always results. risk and a first can our held you up strong. held Pricing see

someone to we with that isn’t something haven't pricing debt of And new so side into the But stable on that. always relatively seen always used that with that's do kind will keep as consistent potential and the market market. come

competitive. again, debt the relates it fairly As it is markets, to

is and relationships think there we lenders very, -- have think really that certain always long I strong think a for I who are been market reputation. this very venture every we to And transaction in transaction, I a we still to this that it And advantage. have day, does time give advantage are doesn't to going us even the but mean want win marketplace, that that. win every it that Horizon seeing in have competitive though

lenders marketplace, head We we do are quite well. we're other competing against the seeing in when up

So a But about to yes, very There's of it of market is credit portfolio like position own going balanced be the kind course nicely expanded pricing, right tailwind remaining now. to that. And months. do expand pipeline, still a lot no the continue we're quality, question that. to and holding competitive of the with the relative marketplace. to There's maintaining behind XX the our we're things over significantly expect quite a

Operator

you. Thank Pomeroy, back I'd CEO, Chairman closing Robert turn like to further no and There for are to call over the questions. comments.

Rob Pomeroy

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

Operator

for Ladies concludes thank today's and your you event. gentlemen, participation. This

disconnect may webcast day. lines or off this You time, your the a and at have log wonderful

Horizon Technology Finance (HRZN) 28 Apr 212021 Q1 Earnings call transcript