Core Insights - The article emphasizes the importance of a hybrid investment strategy that combines classic dividend growth stocks with Business Development Companies, REITs, and Closed End Funds to enhance investment income while achieving total returns comparable to traditional index funds [1]. Investment Strategy - The investment approach focuses on high-quality dividend stocks and assets that provide long-term growth potential, which can significantly contribute to income generation [1]. - A balanced portfolio that includes both growth and income-generating assets can lead to efficient investment income and total returns that align with the S&P 500 [1].

Group 1 - The article presents a bullish perspective on investing in high-quality Business Development Companies (BDCs), highlighting their attractive double-digit yields and uncorrelated income streams [1] - Roberts Berzins has over a decade of experience in financial management, focusing on helping top-tier corporates with financial strategies and large-scale financings [1] - Berzins has contributed to the institutionalization of the REIT framework in Latvia, aiming to enhance the liquidity of pan-Baltic capital markets [1] Group 2 - The article mentions Berzins' involvement in developing national SOE financing guidelines and frameworks to channel private capital into affordable housing [1] - Berzins holds a CFA Charter and an ESG investing certificate, indicating a strong background in investment analysis and sustainable investing [1] - His experience includes an internship at the Chicago Board of Trade, showcasing a diverse financial background despite residing in Latvia [1]

Financial Data and Key Metrics Changes - The company generated net investment income (NII) of $0.27 per share, consistent with the previous quarter but down from $0.38 per share in the same quarter last year [26] - The net asset value (NAV) decreased to $7.57 per share from $8.43 at the end of the previous quarter and $9.64 a year ago, primarily due to fair value adjustments and distributions [27] - Investment income for the first quarter was $25 million, slightly down from $26 million in the prior year period, attributed to lower interest and fee income [24] Business Line Data and Key Metrics Changes - The portfolio at the end of the first quarter stood at $690 million, with new debt investments totaling $100 million and equity investments of $2 million [11] - The debt portfolio yield was 15% for the quarter, compared to 15.6% in the same quarter last year, while onboarding yields were 13%, up from 12.6% in the previous quarter [24][12] - The company funded nine debt investments during the quarter, with a significant portion directed towards life science and technology sectors [11] Market Data and Key Metrics Changes - Approximately $92 billion was invested in VC-backed companies in the first quarter, marking a 19% increase from the previous quarter, driven largely by large AI deals [17] - The exit market for VC-backed tech and life science companies remains nearly shut due to tariff-related uncertainties, impacting investor sentiment [18] - The S&P Biotech Select Industry Index is down 14% year over year, reflecting cooling investor sentiment in the life sciences market [18] Company Strategy and Development Direction - The company aims to grow its portfolio while maintaining a focus on high-quality investments, particularly in the tech and life science sectors [10] - The management remains selective in originating loans due to the current macroeconomic environment, with a commitment to optimizing returns from stressed investments [15] - The partnership with Monroe Capital is expected to enhance capital access and operational support, aiding in portfolio growth [9] Management's Comments on Operating Environment and Future Outlook - The management expressed guarded optimism for 2025, despite macroeconomic headwinds impacting recovery from stressed assets [6] - The company anticipates that the venture debt market will remain active, providing opportunities for investment despite current challenges [10] - Management highlighted the importance of maintaining strong liquidity and a robust balance sheet to navigate the current environment [23] Other Important Information - The company declared regular monthly distributions of $0.11 per share through September 2025, supported by undistributed spillover income of $1 per share [7][26] - The company has a committed backlog of $236 million, providing a solid base for future portfolio growth [8] Q&A Session Summary Question: How is the company managing spillover earnings in the current uncertain environment? - The company plans to continue growing distributions through 2025 and will manage spillover earnings quarterly, with confidence in covering distributions over time [32][34] Question: What is the quality of deals currently being pursued? - The company is seeing a higher bar for transaction selection, focusing on companies with strong operational performance and quality VC backing [36][37] Question: Will the company raise leverage ratios to grow the portfolio? - The target leverage ratio is around 1.2x to 1.3x, with the current ratio at 1.29x, indicating a cautious approach to leverage [41] Question: Is there any discussion about cutting the base management fee? - The company’s base management fee is competitive with industry standards, and it is reviewed regularly [43] Question: How does the company plan to address the frozen market conditions? - The company is focusing on generating yield through higher returns from existing portfolio companies rather than relying on warrant expectations [55][52] Question: What is the impact of tariffs on the portfolio? - The primary impact of tariffs is the uncertainty they create, affecting market transactions rather than direct exposure to specific tariffs [63] Question: Has the partnership with Monroe Capital provided additional resources? - The partnership is expected to enhance operational support and focus on stabilizing and growing the business [66]

Financial Data and Key Metrics Changes - The company generated net investment income (NII) of $0.27 per share, unchanged from the previous quarter but down from $0.38 per share in the same quarter last year [27] - The net asset value (NAV) decreased to $7.57 per share from $8.43 at the end of the previous quarter and $9.64 a year ago, primarily due to fair value adjustments and distributions [28] - Investment income for the first quarter was $25 million, a slight decrease from $26 million in the prior year period, attributed to lower interest and fee income [25] Business Line Data and Key Metrics Changes - The total investment portfolio at the end of the first quarter stood at $690 million, with debt investments in 53 companies valued at $644 million and equity investments in 110 companies valued at $46 million [27] - New originations totaled $102 million, offset by $11 million in scheduled principal payments and $68 million in prepayments [27] - The debt portfolio yield was 15%, slightly down from 15.6% in the same quarter last year, while onboarding yields were 13%, up from 12.6% in the previous quarter [25][12] Market Data and Key Metrics Changes - Approximately $92 billion was invested in VC-backed companies in the first quarter, a 19% increase from the previous quarter, driven largely by significant AI deals [18] - The S&P Biotech Select Industry Index is down 14% year-over-year, indicating cooling investor sentiment in the life sciences market [19] - The exit market for VC-backed tech and life science companies remains nearly shut due to macroeconomic uncertainties, impacting the overall venture capital ecosystem [20] Company Strategy and Development Direction - The company aims to grow its portfolio while maintaining a focus on high-quality, well-sponsored tech and life science companies [20] - The management remains selective in originating loans due to the current macro environment, with a commitment to optimizing returns from stressed investments [16] - The partnership with Monroe Capital is expected to provide additional capital and scale, enhancing the company's ability to navigate current market challenges [9] Management's Comments on Operating Environment and Future Outlook - Management expressed guarded optimism for the year despite recent macroeconomic headwinds, including tariff-related uncertainties impacting recovery from stressed assets [5] - The company anticipates that as the macro environment normalizes, it will be positioned to grow its portfolio and increase NII to cover distributions over time [16] - Management highlighted the importance of maintaining a strong liquidity position, with $126 million in available liquidity as of March 31 [23] Other Important Information - The company declared regular monthly distributions of $0.11 per share through September 2025, supported by undistributed spillover income of $1 per share [27] - The advisor has agreed to waive a portion of its quarterly income incentive fees if NII falls below declared distributions [7] - The company is actively managing its portfolio to optimize returns and mitigate risks associated with stressed investments [15] Q&A Session Summary Question: How is the company managing spillover earnings in the current uncertain environment? - Management indicated that they plan to continue growing distributions through 2025 and will manage spillover earnings quarterly, reviewing them in discussions with the board [32][34] Question: What is the quality of deals currently being pursued? - Management noted a higher bar for selecting transactions, focusing on companies performing well operationally and backed by quality VCs, while being selective due to the current market conditions [36][38] Question: Is there a plan to raise leverage ratios to grow the portfolio? - The target leverage ratio is around 1.2x to 1.3x, with the current ratio at 1.29x, indicating a cautious approach to leverage [42][43] Question: How does the company plan to address the high dividend payout relative to debt yields? - Management stated that they review equity needs and funding pipelines quarterly, considering the balance between dividends and investment returns [47][48] Question: What is the impact of tariffs on the portfolio? - Management indicated that while there is some uncertainty due to tariffs, most portfolio companies have planned for potential impacts, and the overall effect has been more about market volatility than specific tariff issues [65][66] Question: What resources are available from the recent Monroe partnership? - The partnership is expected to provide support in stabilizing and growing the business, with ongoing collaboration to enhance operational effectiveness [68][69]

Company Performance - Horizon Technology Finance reported quarterly earnings of $0.27 per share, missing the Zacks Consensus Estimate of $0.33 per share, and down from $0.38 per share a year ago, representing an earnings surprise of -18.18% [1][2] - The company posted revenues of $24.52 million for the quarter, missing the Zacks Consensus Estimate by 9.22%, and down from $26.13 million year-over-year [2] - Over the last four quarters, the company has surpassed consensus EPS estimates only once [2] Stock Outlook - Horizon Technology Finance shares have lost about 2.3% since the beginning of the year, while the S&P 500 has declined by 6% [3] - The current consensus EPS estimate for the coming quarter is $0.33 on revenues of $27.69 million, and for the current fiscal year, it is $1.31 on revenues of $112.8 million [7] Industry Context - The Financial - SBIC & Commercial Industry, to which Horizon Technology Finance belongs, is currently in the bottom 44% of over 250 Zacks industries, indicating potential underperformance compared to the top 50% of industries [8] - The outlook for the industry can significantly impact the stock's performance, as empirical research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [8]

Debt Investments - As of March 31, 2025, 87.5% ($563.3 million) of the debt investment portfolio at fair value consisted of Senior Term Loans[230] - The total debt investments at fair value as of March 31, 2025, were $643.567 million, compared to $638.779 million at the end of 2024[239] - The largest debt investments represented 23% of total debt investments outstanding as of March 31, 2025[239] - Biotechnology sector debt investments increased to $99.806 million (15.5% of total portfolio) as of March 31, 2025, from $80.988 million (12.7%) at the end of 2024[239] - As of March 31, 2025, the company's debt investments had a weighted average credit rating of 3.1, with 24.7% rated 4, 64.5% rated 3, 8.4% rated 2, and 2.4% rated 1[240] - As of March 31, 2025, 99% of the outstanding principal amount of the company's debt investments bore interest at floating rates[334] Investment Performance - The total portfolio value decreased from $697.891 million on December 31, 2024, to $689.553 million on March 31, 2025[237] - Total investment income decreased by $1.6 million, or 6.2%, to $24.5 million for the three months ended March 31, 2025, compared to $26.1 million for the same period in 2024[244] - Interest income on debt investments decreased by $2.4 million, or 9.3%, to $23.5 million for the three months ended March 31, 2025, primarily due to a decrease in the Prime Rate[245] - PIK interest income decreased by $1.1 million, or 79.4%, for the three months ended March 31, 2025, accounting for 1.2% of total investment income[246] - Net unrealized depreciation on investments totaled $32.2 million for the three months ended March 31, 2025, primarily due to the underperformance of portfolio companies[258] New Investments - New debt and equity investments for the three months ended March 31, 2025, amounted to $102.439 million, compared to $34.569 million for the same period in 2024[237] - The net new debt and equity investments for the three months ended March 31, 2025, were $73.689 million, significantly higher than $23.319 million in 2024[237] Cash and Financing Activities - As of March 31, 2025, the company had cash and investments in money market funds totaling $74.0 million, down from $97.5 million as of December 31, 2024[259] - The company reported cash used in operating activities of $13.2 million and cash used in financing activities of $10.2 million for the three months ended March 31, 2025[270] - The company expects to raise additional equity and debt capital opportunistically to support future growth, subject to market conditions[272] - The company believes its current cash, cash generated from operations, and funds available from Credit Facilities will be sufficient to meet working capital and capital expenditure commitments for at least the next 12 months[274] Expenses and Fees - Total expenses increased by $0.3 million, or 2.1%, to $13.4 million for the three months ended March 31, 2025, compared to $13.1 million for the same period in 2024[251] - Interest expense increased by $0.5 million, or 6.4%, to $8.7 million for the three months ended March 31, 2025, due to an increase in average borrowings[252] - The Advisor earned $3.2 million and $3.5 million in base management fees for the three months ended March 31, 2025 and 2024, respectively[308] - The Advisor earned $0.4 million under the Administration Agreement for the three months ended March 31, 2025 and 2024[311] Capital Structure - The company has a stock repurchase program authorized for up to $5.0 million, which allows repurchases at prices below the net asset value per share[265] - The company issued $57.5 million of 4.875% unsecured notes due in 2026, with a maturity date of March 30, 2026[289] - The company issued $50.0 million of 6.25% unsecured notes due in 2027, with a maturity date of June 15, 2027[290] - The company raised $20.0 million from the issuance of 7.125% convertible notes due in 2031, with net proceeds of approximately $18.6 million[291] - As of March 31, 2025, the total outstanding principal balance of the 2031 Convertible Notes was $20.0 million[296] - The company had total contractual obligations of $693.3 million as of March 31, 2025, with $126.5 million due within one year[298] - The company had unfunded commitments of $200.0 million as of March 31, 2025, including $20.0 million of undrawn revolver commitments[299] Regulatory and Taxation - The company has elected to be treated as a RIC under Subchapter M of the Code, which generally exempts it from corporate-level income taxes[231] - The company must distribute at least 90% of its net ordinary income and net short-term capital gains to qualify as a RIC[305] - A portion of distributions may be deemed a return of capital if taxable earnings fall below total distributions made[306] - The company has adopted an "opt out" dividend reinvestment plan (DRIP) for common stockholders, allowing cash distributions to be automatically reinvested unless stockholders opt out[307] Market Conditions and Economic Factors - Inflation is accelerating in the U.S. and globally, driven by supply chain issues, geopolitical events, and rising energy prices, which may impact profit margins of portfolio companies[340] - Economic activity is accelerating, but market volatility is exacerbated by geopolitical tensions and uncertainties surrounding the 2024 U.S. elections[340] - Persistent inflationary pressures and foreign currency exchange volatility could affect profit margins of portfolio companies[340] - The company expects to continue funding investments through borrowings, which may increase costs in periods of elevated interest rates[339] - The interest payable on various facilities is based on different rates plus margins, indicating a complex interest rate environment[336] Interest Rate Sensitivity - The company’s net income is highly dependent on the difference between borrowing rates and investment rates, with potential adverse effects from significant market interest rate changes[339] - A 300 basis point increase in interest rates would result in a net asset change of $17,707,000, while a decrease of 300 basis points would lead to a change of $(6,633,000)[335] - The company has floating interest rate provisions in its credit facilities, with a floor of 0.10% per annum based on a prime rate index[336] - Hedging instruments have been used to protect against interest rate fluctuations, but may limit benefits from lower interest rates on fixed-rate investments[336] Advisor and Management Changes - On March 31, 2025, Momentum US Bidco LLC acquired 75% of the outstanding equity interests of Monroe Capital Intermediate Holdings, LLC, resulting in a change in control of the Advisor[310] - The company has relied on exemptive relief from the SEC since June 30, 2023, allowing greater flexibility for co-investments with other accounts managed by the Advisor[312]

Core Viewpoint - Horizon Technology Finance Corporation is under investigation for potential securities fraud and unlawful business practices following disappointing financial results [1][3]. Financial Performance - For the fourth quarter and full year ended December 31, 2024, Horizon reported total investment income of $23.5 million, which was below the consensus estimate of $26.1 million and represented a decline both year-over-year and from the previous quarter [3]. - The net asset value per share decreased to $8.43 from $9.06 in the previous quarter, attributed to "stressed investments" by the CEO [3]. Market Reaction - Following the announcement of the financial results, Horizon's stock price fell by $0.96 per share, or 9.95%, closing at $8.65 per share on March 5, 2025 [4].

Company Overview - Horizon Technology Finance Corporation announced its investment portfolio update for the three months ended March 31, 2025[5]. - The company is listed on The Nasdaq Stock Market under the ticker symbol HRZN[3]. - The company has 4.875% Notes due 2026 and 6.25% Notes due 2027 listed on the New York Stock Exchange[3]. - Robert D. Pomeroy, Jr. serves as the Chief Executive Officer of Horizon Technology Finance Corporation[9]. Financial Reporting - The press release regarding the financial results was issued on April 9, 2025[5]. - The report does not indicate any emerging growth company status[4]. - The financial information provided is not deemed "filed" under the Securities Exchange Act of 1934[6]. - The report includes an interactive data file embedded within the Inline XBRL document[7].

Core Viewpoint - Horizon Technology Finance Corporation is under investigation for potential violations of federal securities laws and unlawful business practices, following disappointing financial results that led to a significant drop in stock price [1][2][3]. Financial Performance - For the fourth quarter and full year ended December 31, 2024, Horizon reported total investment income of $23.5 million, which was below the consensus estimate of $26.1 million and represented a decline from both the previous quarter and year-over-year [2]. - The net asset value per share decreased to $8.43 from $9.06 in the previous quarter, attributed to "stressed investments" by the CEO [2]. Stock Market Reaction - Following the announcement of the financial results, Horizon's stock price fell by $0.96 per share, or 9.95%, closing at $8.65 per share on March 5, 2025 [3].

Core Viewpoint - Horizon Technology Finance Corporation is under investigation for potential violations of federal securities laws and unlawful business practices, following disappointing financial results that led to a significant drop in share price [1][3]. Financial Performance - For the fourth quarter and full year ended December 31, 2024, Horizon reported total investment income of $23.5 million, which was below the consensus estimate of $26.1 million and represented a decline both year-over-year and from the previous quarter [3]. - The net asset value per share decreased to $8.43 from $9.06 in the previous quarter, attributed to "stressed investments" by the CEO [3]. - Following the announcement of these results, Horizon's share price fell by $0.95, closing at $8.65 on March 5, 2025, down from $9.60 on March 4, 2025 [3].