Horizon Technology Finance Unveils Q3 2024 Results

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Horizon Technology Finance Unveils Q3 2024 Results

Horizon Technology Finance Corporation (NASDAQ: HRZN) has announced its earnings for the third quarter of 2024. The company's net investment income (NII) per share came in at $0.32, slightly below the announced distribution level. The company reported that it will distribute $0.11 per share monthly until March 2025 and indicated that its portfolio has grown by 6% to reach $684 million. The debt portfolio return of 15.9% is recorded as one of the highest rates in the Business Development Company (BDC) sector.

Despite a lower net investment income and a decline in net asset value (NAV) per share compared to the same quarter last year, HRZN appears optimistic about its future growth, particularly in the venture capital debt market within the technology and life sciences sectors.

Key Points:

  • Net investment income (NII) per share of $0.32, slightly below the announced distribution level.
  • Monthly distribution of $0.11 per share announced until March 2025.
  • Portfolio grew by 6% to $684 million, with a debt portfolio return of 15.9%.
  • A total of nine new debt investments worth $93 million focused on high-quality credits were made.
  • Early repayments of $38 million indicate an improvement in the venture market.
  • There is $190 million in committed and approved credit backlog.
  • Over $18 million raised from the market (ATM program) and $20 million through convertible bonds in October.
  • As of September 30, $125 million in available liquidity and no unpaid debt.
  • The debt-equity ratio is 1.28, with a potential new investment capacity of $356 million.
  • A robust pipeline of $1.2 billion indicates optimism for future portfolio growth in the venture capital debt market.
  • Q3 investment income was $25 million, down from $29 million in Q3 2023.
  • NAV per share was $9.06, indicating a decrease due to distributions and fair value adjustments.
  • Progress has been made in resolving non-accrual loans, with some resolutions expected in Q4 and early 2025.

Company Outlook: Horizon Technology Finance is optimistic about finding new high-quality venture capital debt investments. They aim to grow the portfolio by focusing on maintaining credit quality in Q4 2024 and 2025. A strong pipeline of $1.2 billion is expected to support future growth.

Negative Points:

  • Net investment income per share dropped from $0.53 in Q3 2023 to $0.32.
  • NAV per share declined due to distributions and fair value adjustments.

Positive Points:

  • Portfolio yield ranks among the highest in the BDC sector.
  • Strong liquidity position with $125 million in available liquidity and no unpaid debt.
  • Potential for new investment capacity of $356 million.

Underperformance:

  • Q3 investment income was lower than the previous year.
  • The company faced significant realized losses primarily due to the Nexi transaction.

Q&A Highlights: CFO Dan Trolio confirmed plans to gradually reclaim incentive fees by the end of next year. The carried income was reported at $1.27, with no designated minimum target for this. Despite a 50-basis point cut in index rates, returns on new investments remained stable. CEO Rob Pomeroy emphasized a commitment to strong portfolio returns and shareholder payouts.

In conclusion, Horizon Technology Finance Corporation navigated the third quarter by striking a strategic balance between growth and stability. Despite facing some challenges, the company has secured new capital and continues to adhere to its investment strategy and shareholder distributions. The outlook for Horizon Technology Finance remains cautiously optimistic as it seeks to capitalize on market improvements and expand its investment portfolio.

InvestingPro Predictions: Horizon Technology Finance Corporation's (NASDAQ: HRZN) recent earnings report can be contextualized with additional predictions from InvestingPro. The company's current market value stands at $360.96 million, reflecting its position in the venture capital debt market.

One of the most noteworthy InvestingPro insights is that HRZN is set to make "significant dividend payments to shareholders." This aligns with the company's announcement of a monthly distribution of $0.11 per share until March 2025. The current dividend yield is an impressive 15.27%, making it particularly attractive for income-focused investors. Moreover, InvestingPro highlights that HRZN has "paid uninterrupted dividends for 15 years," showcasing a long-term commitment to shareholder returns despite market fluctuations.

However, investors should note that the stock is "trading near a 52-week low" and has experienced a significant price drop with a total return of 17.19% over the last three months. This price movement is associated with the reported decline in NAV per share and lower net investment income compared to the previous year.

The company's trailing twelve-month revenue as of Q2 2024 stands at $109.13 million, indicating a modest growth of 6.41%. This slight growth supports management's optimistic outlook regarding portfolio expansion and the potential of the venture capital debt market.

It's important to mention that InvestingPro offers eight additional insights for investors evaluating HRZN, providing a more comprehensive analysis for those looking to delve deeper into the investment potential of Horizon Technology Finance.