Financial Data and Key Metrics Changes - The company generated net investment income (NII) of $0.32 per share, which is $0.01 below the declared distribution level [9] - The net investment income for Q3 2024 was $0.32 per share compared to $0.36 per share in Q2 2024 and $0.53 per share in Q3 2023 [42] - The company's net asset value (NAV) as of September 30 was $9.06 per share, down from $9.12 as of June 30, 2024, and $10.41 as of September 30, 2023 [45] - Total investment income for the third quarter was $25 million compared to $29 million in the prior year period [38] Business Line Data and Key Metrics Changes - The portfolio grew to $684 million, with 9 debt investments totaling $93 million funded during the quarter [15] - The debt portfolio yield was 15.9% for the quarter, down from 17.1% in the same quarter last year [39] - The company closed $173 million in new loan commitments and approvals, ending the quarter with a committed backlog of $190 million, up from $138 million at the end of Q2 [23] Market Data and Key Metrics Changes - Approximately $38 billion was invested in VC-backed companies in Q3, indicating a stable investment pace compared to 2023 [26] - The total exit value for Q3 was $10 billion, the lowest in five quarters, but there were signs of renewed interest in the life sciences market [27] - The company has a pipeline of over $1 billion in debt opportunities, indicating strong potential for future growth [29] Company Strategy and Development Direction - The company aims to grow its portfolio while maintaining a strong credit profile and maximizing the value of stressed investments [11] - A strategic partnership with Monroe Capital and Wendel Group is expected to enhance capital and scale, benefiting the company's investment strategies [13][14] - The company remains committed to sourcing high-quality investments to generate sustainable NII and build long-term shareholder value [32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the venture lending market, citing a growing demand for venture debt capital and a strong pipeline of opportunities [12] - The macroeconomic environment is beginning to improve, which is expected to positively impact repayment activities and investment opportunities [43] - Management noted that while the overall VC ecosystem has been challenging, conditions are showing signs of improvement, particularly in the life sciences sector [30] Other Important Information - The company experienced 4 loan prepayments totaling $38 million, indicating an improving venture market [18] - The onboarding debt investment yield was 13.2%, remaining high compared to historical levels [20] - The company has no borrowings outstanding under its KeyBanc credit facility, providing ample capacity for portfolio growth [36] Q&A Session Summary Question: Update on non-accrual loans and timelines for resolutions - Management is working on various strategies for non-accruals, with some expected to resolve in Q4 and others potentially extending into H1 2025 [47] Question: Details on resolved non-accruals - One non-accrual, Nexii, was sold to a high-quality buyer, and the company retains debt and equity in the new entity [49] Question: Outlook on the improving market and pipeline - The market is believed to be improving, with a strong pipeline of quality opportunities, although it is still early to predict consistency [55] Question: Balance sheet management and cash utilization - The company plans to utilize cash on the balance sheet efficiently, balancing committed backlog and funding expectations [58] Question: Improvement in fair value of non-accrual Swift - Swift is undergoing stabilization with new capital, and management is working on strategies to maximize asset value [60] Question: ATM share issuance pace - The pace of ATM share sales is dictated by capital sources and funding needs, with expectations of fluctuations based on market conditions [63] Question: Strategy for improving stock price - The focus remains on delivering performance and growing the portfolio, which is believed to positively impact stock price [65] Question: Consideration of off-balance sheet vehicles - The company consistently evaluates off-balance sheet vehicles but currently has no plans in place [66] Question: NII generation and distribution coverage - The company aims to cover distributions with NII, factoring in costs and expected growth in the balance sheet [68]

Company Performance - Horizon Technology Finance reported quarterly earnings of $0.32 per share, missing the Zacks Consensus Estimate of $0.35 per share, and down from $0.53 per share a year ago, representing an earnings surprise of -8.57% [1] - The company posted revenues of $24.56 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 3.22%, and down from $29.14 million year-over-year [2] - Over the last four quarters, the company has surpassed consensus EPS estimates two times but has not beaten consensus revenue estimates [2] Stock Performance - Horizon Technology Finance shares have lost about 23.1% since the beginning of the year, contrasting with the S&P 500's gain of 22.1% [3] - The current consensus EPS estimate for the coming quarter is $0.32 on revenues of $25.62 million, and for the current fiscal year, it is $1.23 on revenues of $102.81 million [7] Industry Outlook - The Financial - SBIC & Commercial Industry, to which Horizon Technology Finance belongs, is currently in the bottom 19% of over 250 Zacks industries, indicating a challenging environment [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact stock performance [5]

Core Points - GT Medical Technologies, Inc. has secured a $35 million venture loan facility to support its strategic commercial and clinical expansion plans for GammaTile® [1][2][3] - The initial funding of $15 million has been provided by Horizon Technology Finance Corporation, which will enable the company to enhance access to care for patients with brain tumors [1][2][4] - GammaTile® is a targeted radiation therapy solution designed to reduce tumor recurrence by delivering radiation directly to the tumor cavity, minimizing damage to healthy tissue [4][6] Company Overview - GT Medical Technologies aims to improve the lives of patients with brain tumors and has developed GammaTile®, which is FDA-cleared for treating newly diagnosed and recurrent malignant intracranial neoplasms [6] - Since its market release in March 2020, GammaTile has been adopted by over 100 leading institutions, with ongoing expansion [6] Financial Partnership - The partnership with Horizon Technology Finance Corporation is expected to allow GT Medical Technologies to invest more resources into GammaTile and expand its commercial teams to reach more patients [6][4] - Horizon Technology Finance specializes in providing capital to venture-backed companies in various sectors, including healthcare [7]

Core Viewpoint - Horizon Technology Finance (NASDAQ:HRZN) continues to exhibit an unfavorable risk and reward profile, with deteriorating financial performance and significant challenges in the venture capital ecosystem [3][4][6] Financial Performance - Q2 2024 investment income was $26 million, down from $28 million in the prior year, translating to $0.36 per share compared to $0.54 per share in Q2 2023 [5] - NAV per share declined from $9.65 in Q1 2024 to $9.12 in Q2 2024, driven by high financing costs and a shrinking portfolio size [5] - The portfolio size decreased as loan repayments of $34 million outpaced new debt investments of $11 million during the quarter [5] Market Dynamics - The venture capital market is facing a significant lack of exit opportunities, impacting the ability of VC-backed companies to return capital to investors [5] - Current yield levels for new investments are lower than the overall portfolio yield, with onboarding yields at 13.7%, approximately 220 basis points below the portfolio average [5] Leverage and Risk - HRZN's debt to equity ratio stands at 1.36x, approximately 18% above the sector average, indicating elevated financial risk [5] - The company trades at a premium over NAV with a P/NAV of ~1.24x, allowing for potential share issuance to pay down debt and fund new investments [5] Dividend Coverage - Dividend coverage is at ~109%, providing minimal margin of safety, with expectations that HRZN may need to revisit its dividend policy by the end of 2024 or early 2025 [6]

Core Viewpoint - Horizon Technology Finance (HRZN) has experienced a decline in portfolio quality and net investment income (NII), leading to a downgrade in its investment rating due to concerns over future distribution sustainability and high premium to net asset value (NAV) [17]. Company Overview - HRZN operates as a business development company (BDC) focused on debt investments, with a public inception in 2010 and a management fee of 2% of gross assets [2]. - The stock price has depreciated by approximately 26.7%, but total return, including distributions, has increased nearly 200% since inception [2]. Financial Performance - HRZN has a dividend yield of about 12.1%, making it attractive for income investors, with monthly distributions that provide flexibility for shareholders [5]. - The latest reported NII was $0.36 per share, down from $0.54 per share in the previous year, indicating a decline in earnings [12]. - The portfolio size has decreased from $711 million to $646.9 million [12]. Portfolio Strategy - The portfolio is primarily focused on life sciences (40%) and technology (35%), with significant exposure to software (23%), medical devices (22%), and biotechnology (18%) [10]. - Approximately 85% of investments are in senior secured first lien debt, which prioritizes repayment in case of defaults [10]. - All portfolio investments are on a floating rate basis, benefiting from higher interest rates [11]. Interest Rate Outlook - HRZN's price currently trades at a premium to NAV of about 24%, higher than the three-year average of 18.6%, suggesting it may be overpriced [6]. - The relationship between HRZN's price and federal funds rate has been inverse; price increased when rates were cut to near zero in 2020 but declined with aggressive rate hikes in 2022 and 2023 [6][7]. - Anticipation of potential interest rate cuts may increase borrower volume, presenting opportunities for HRZN to offset NII losses [9]. Credit Quality Concerns - The number of portfolio companies rated at the lowest quality (1) has increased to 5, representing 7.9% of total investments, indicating deteriorating credit quality [13]. - The overall credit quality of the portfolio has weakened due to prolonged high interest rates, raising concerns about future performance [12][13]. Dividend Sustainability - The current monthly dividend of $0.11 per share is covered by NII at a rate of 109%, but there are concerns that a reduction may be necessary if NII continues to decline [15][16]. - Historical data shows that HRZN has previously cut its distribution, raising concerns about future sustainability if portfolio quality does not improve [16].

What's Next for Horizon Technology Finance? It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.37 on $27.94 million in revenues for the coming quarter and $1.48 on $110.4 million in revenues for the current fiscal year. This business development company is expected to post quarterly earnings of $0.53 per share in its upcoming report, which represents a year-over-year change of -8.6%. The consensus EPS ...

Debt Investment Portfolio - As of June 30, 2024, the total fair value of the debt investment portfolio is $609.1 million, representing 94.2% of the total portfolio[244] - The largest debt investments at cost represented 24% of total debt investments outstanding as of June 30, 2024[245] - The biotechnology sector accounted for 18.2% of the debt investments at fair value as of June 30, 2024, up from 16.2% as of December 31, 2023[245] - The medical device sector represented 23.0% of the debt investments at fair value as of June 30, 2024, compared to 20.5% at the end of 2023[245] - The company’s debt investments are primarily secured by first liens, with 85.0% of the portfolio consisting of Senior Term Loans as of June 30, 2024[240] - As of June 30, 2024, 99% of the outstanding principal amount of debt investments bore interest at floating rates, compared to 94% as of December 31, 2023[349] Investment Activity - The company made new debt and equity investments totaling $12.1 million for the three months ended June 30, 2024, compared to $46.6 million for the same period in 2023[244] - The company received principal payments of $11.8 million on investments during the three months ended June 30, 2024[244] - The company’s total portfolio investment activity resulted in an ending portfolio value of $646.9 million as of June 30, 2024[244] - Average debt investments at fair value decreased by $45.3 million, or 6.6%, to $642.2 million for the three months ended June 30, 2024 compared to $687.5 million for the same period in 2023[249] - The company funded a $25.0 million debt investment to a new portfolio company, Hometeam Technologies, Inc. on July 30, 2024[345] Financial Performance - Total investment income decreased by $2.4 million, or 8.7%, to $25.7 million for the three months ended June 30, 2024 compared to the same period in 2023[250] - Net investment income for the three months ended June 30, 2024 was $12.9 million, down from $16.1 million in the same period of 2023, reflecting a decrease of 19.5%[249] - Total investment income for the six months ended June 30, 2024 was $51.8 million, down from $56.2 million in the same period of 2023[262] - Total investment income decreased by $4.3 million, or 7.7%, to $51.8 million for the six months ended June 30, 2024, compared to the same period in 2023[263] - Interest income on debt investments decreased by $3.5 million, or 6.5%, to $50.5 million for the six months ended June 30, 2024, primarily due to a decrease of $65.6 million, or 9.4%, in average earning debt investments[263] Expenses and Income - Total expenses increased by $0.5 million, or 4.6%, to $12.4 million for the three months ended June 30, 2024 compared to the same period in 2023[254] - Interest expense increased by $0.8 million, or 10.6%, to $7.9 million for the three months ended June 30, 2024 due to an increase in average borrowings[255] - Total expenses decreased by $1.2 million, or 4.3%, to $25.6 million for the six months ended June 30, 2024[266] - Interest expense increased by $1.8 million, or 12.6%, to $16.1 million for the six months ended June 30, 2024, due to an increase in average borrowings of $11.7 million, or 2.7%[267] Gains and Losses - Net realized gains on investments totaled $2.5 million for the three months ended June 30, 2024, compared to net losses of $16.5 million in the same period of 2023[260] - Net unrealized depreciation on investments totaled $24.5 million for the three months ended June 30, 2024, primarily due to the underperformance of certain portfolio companies[261] - Net realized gains on investments totaled $2.5 million for the six months ended June 30, 2024, compared to net losses of $16.7 million for the same period in 2023[272] - Net unrealized depreciation on investments totaled $28.5 million for the six months ended June 30, 2024, compared to $6.9 million for the same period in 2023[273] Cash and Borrowings - Cash and investments in money market funds increased to $113.7 million as of June 30, 2024, from $73.1 million as of December 31, 2023[274] - As of June 30, 2024, total borrowings outstanding were $715 million, with $442.7 million net after unamortized debt issuance costs[293] - The Key Facility was amended to increase the commitment amount to $150 million and extend the maturity date to June 20, 2029[294] - The NYL Facility had $181 million in notes issued as of June 30, 2024, with an interest rate of 6.34%[301] - The 2022 Asset-Backed Notes had an outstanding principal balance of $100 million as of June 30, 2024, with a fixed interest rate of 7.56%[307] Regulatory and Compliance - The company is regulated as a Business Development Company (BDC) and has elected to be treated as a Regulated Investment Company (RIC) for tax purposes[241] - The company is required to maintain asset coverage of at least 150% as a BDC, limiting the amount it may borrow[290] - The company intends to distribute all or substantially all of its investment company taxable income to remain subject to taxation as a RIC[290] Advisor and Management Fees - The Advisor earned $3.0 million in management fees for the three months ended June 30, 2024, down from $3.3 million in 2023[323] - For the six months ended June 30, 2024, the Advisor's management fees were $6.5 million, compared to $9.5 million in the same period of 2023[323] - Under the Administration Agreement, the Advisor earned $0.4 million for the three months ended June 30, 2024[325] - The Advisor's earnings under the Administration Agreement for the six months ended June 30, 2024, were $0.9 million, slightly up from $0.8 million in 2023[325] Other Financial Metrics - The weighted average credit rating of debt investments was 3.1 as of June 30, 2024, indicating a stable level of risk[246] - The company believes its current cash and cash generated from operations will be sufficient to meet working capital and capital expenditure commitments for at least the next 12 months[291] - Total contractual obligations amount to $599.216 million, with $197.871 million due within one year[314] - Unfunded commitments as of June 30, 2024, stand at $137.5 million, with no undrawn revolver commitments[314] Performance and Market Conditions - The company anticipates continued competition and potential impacts from economic trends, including inflation and supply chain disruptions[235] - The company expects that rising interest rates could materially affect net income due to increased borrowing costs[353] Non-Cash Income - For the three months ended June 30, 2024, 1.4% of total investment income was attributable to non-cash PIK interest, down from 3.4% in the same period of 2023[332] - For the six months ended June 30, 2024, 3.3% of total investment income was attributable to non-cash PIK interest, compared to 3.8% for the same period in 2023[332] - The proportion of total investment income from ETPs not received in cash increased to 6.6% for the three months ended June 30, 2024, from 3.1% in 2023[334] - For the six months ended June 30, 2024, the proportion of total investment income from ETPs not received in cash was 6.7%, up from 4.7% in 2023[334] Recent Transactions - MyForest Foods Co. prepaid its outstanding principal balance of $3.8 million on July 10, 2024, while Lemongrass Holdings, Inc. prepaid $6.3 million on July 11, 2024[342] - Slingshot Aerospace, Inc. prepaid its outstanding principal balance of $20.0 million on July 12, 2024[343] - The company recorded a fair value of $10.9 million for assets related to Nexiican Holdings Inc. following an asset purchase agreement[344]

[Second Quarter 2024 Financial Results Overview](index=1&type=section&id=Horizon%20Technology%20Finance%20Announces%20Second%20Quarter%202024%20Financial%20Results) Horizon Technology Finance reports its Q2 2024 financial performance, highlighting key financial metrics and strategic operational achievements [Financial & Operational Highlights](index=1&type=section&id=Second%20Quarter%202024%20Highlights) For the second quarter of 2024, Horizon Technology Finance reported Net Investment Income (NII) of $0.36 per share and a Net Asset Value (NAV) of $9.12 per share, maintaining a strong portfolio yield, securing a new credit facility, and declaring monthly distributions through December 2024, while remaining prudent in new originations Second Quarter 2024 Highlights | Metric | Value | | :--- | :--- | | Net Investment Income (NII) | $12.9 million, or $0.36 per share | | Total Investment Portfolio | $646.9 million | | Net Asset Value (NAV) | $328.8 million, or $9.12 per share | | Annualized Debt Portfolio Yield | 15.9% | | Undistributed Spillover Income | $1.28 per share | - The company strengthened its balance sheet by closing a new **$100 million** senior secured credit facility[1](index=1&type=chunk)[5](index=5&type=chunk) - Management noted a prudent approach to new originations in Q2, focusing on sourcing high-quality investments for the second half of the year, and expects a return to portfolio growth[52](index=52&type=chunk) - Declared monthly distributions of **$0.11 per share** for October, November, and December 2024[5](index=5&type=chunk)[27](index=27&type=chunk) [Operating Results](index=1&type=section&id=Second%20Quarter%202024%20Operating%20Results) Detailed review of Q2 2024 operating performance, covering investment income, expenses, and net investment income [Investment Income and Expenses](index=1&type=section&id=Investment%20Income%20and%20Expenses) Total investment income for Q2 2024 was $25.7 million, a decrease from $28.1 million in the prior-year period, primarily due to lower interest income, while total expenses rose slightly to $12.4 million from $11.9 million, driven by higher interest expense Investment Income and Expenses | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Total Investment Income | $25.7 million | $28.1 million | | Total Expenses | $12.4 million | $11.9 million | - The increase in total expenses was primarily due to a **$0.8 million** increase in interest expense[39](index=39&type=chunk) [Net Investment Income (NII)](index=1&type=section&id=Net%20Investment%20Income) Net investment income for the second quarter of 2024 was $12.9 million, or $0.36 per share, representing a decrease from the $16.1 million, or $0.54 per share, reported in the same quarter of the previous year Net Investment Income | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net Investment Income | $12.9 million | $16.1 million | | NII per Share | $0.36 | $0.54 | [Realized and Unrealized Gains/Losses](index=2&type=section&id=Realized%20and%20Unrealized%20Gains%2FLosses) In Q2 2024, the company recorded a net realized gain on investments of $2.5 million, a significant turnaround from a $16.5 million net realized loss in Q2 2023, but also experienced net unrealized depreciation of $24.5 million, compared to a small unrealized appreciation in the prior-year period - Net realized gain on investments was **$2.5 million** (**$0.07 per share**) for Q2 2024, compared to a net realized loss of **$16.5 million** (**$0.55 per share**) for Q2 2023[54](index=54&type=chunk) - Net unrealized depreciation on investments was **$24.5 million** (**$0.69 per share**) for Q2 2024, compared to net unrealized appreciation of **$0.6 million** (**$0.02 per share**) for the prior-year period[40](index=40&type=chunk) [Portfolio and Investment Activity](index=1&type=section&id=Portfolio%20Summary%20and%20Investment%20Activity) Summary of Horizon's investment portfolio, including its composition, yield, and recent investment and repayment activities [Portfolio Summary](index=1&type=section&id=Portfolio%20Summary) As of June 30, 2024, Horizon's total investment portfolio was valued at $646.9 million, with the debt portfolio, valued at $609.1 million, consisting of 54 secured loans and generating a dollar-weighted annualized yield of 15.9% for the quarter Portfolio Summary | Portfolio Metric | As of June 30, 2024 | | :--- | :--- | | Total Investment Portfolio (Fair Value) | $646.9 million | | Debt Portfolio (Fair Value) | $609.1 million | | Number of Secured Loans | 54 | | Warrant, Equity & Other Investments (Fair Value) | $37.8 million | | Number of Companies (Warrant/Equity) | 103 | - The dollar-weighted annualized yield on average debt investments for the quarter was **15.9%**, compared to **16.3%** for the quarter ended June 30, 2023[1](index=1&type=chunk) [Investment Activity](index=2&type=section&id=Investment%20Activity) During the second quarter, Horizon funded four new loans totaling $11.5 million, experienced significant principal repayments and early pay-offs amounting to $56.4 million, and one liquidity event from a portfolio company Investment Activity (Q2 2024) | Activity (Q2 2024) | Amount (in thousands) | | :--- | :--- | | New Debt and Equity Investments | $12,065 | | Principal Payments Received | ($11,803) | | Early Pay-offs and Principal Paydowns | ($44,610) | - The company funded four loans totaling **$11.5 million** during the quarter[5](index=5&type=chunk) - One liquidity event occurred during the quarter, which can include sales of warrants/equity, loan prepayments, or success fees[23](index=23&type=chunk)[50](index=50&type=chunk) - Divergent Technologies, Inc. prepaid its outstanding principal balance of **$33.8 million** on its venture loan[10](index=10&type=chunk) [Portfolio Asset Quality](index=2&type=section&id=Portfolio%20Asset%20Quality) The weighted average credit rating of Horizon's loan portfolio was 3.1 as of June 30, 2024, with the portion of the portfolio rated 1 (highest risk) increasing to 7.9% of fair value, comprising five investments in this category Credit Rating Distribution | Credit Rating | % of Debt Portfolio (Fair Value) as of June 30, 2024 | | :--- | :--- | | 4 (Highest Quality) | 27.5% | | 3 (Standard Risk) | 60.3% | | 2 (Increased Risk) | 4.3% | | 1 (Highest Risk) | 7.9% | - The loan portfolio maintained a weighted average credit rating of **3.1**, where 4 is the highest quality and 1 represents a high degree of risk[42](index=42&type=chunk) - As of June 30, 2024, there were five debt investments with the lowest internal credit rating of 1, with an aggregate fair value of **$48.0 million**[9](index=9&type=chunk) [Liquidity and Capital Resources](index=3&type=section&id=Liquidity%20and%20Capital%20Resources) Overview of Horizon's liquidity, capital position, and recent financing activities, including credit facilities and ATM offerings [Liquidity and Capital Position](index=3&type=section&id=Liquidity%20and%20Capital%20Position) As of June 30, 2024, Horizon had $150.3 million in available liquidity, including cash and available credit, with its leverage at 100% (debt net of cash to equity), below its target of 120%, having raised $17.1 million in net proceeds from its ATM offering program and added a new $100 million credit facility during the quarter - Total available liquidity was **$150.3 million**, comprising **$116.9 million** in cash and money market funds and **$33.4 million** available under credit facilities[43](index=43&type=chunk) - A new **$100 million** senior secured credit facility was closed on June 21, 2024, further strengthening the balance sheet[1](index=1&type=chunk)[46](index=46&type=chunk) - The company's ratio of debt net of cash to equity was **100%**, which is below the target of **120%**[49](index=49&type=chunk) - Raised approximately **$17.1 million** in total net proceeds from selling 1,516,249 shares under its "at-the-market" (ATM) offering program[5](index=5&type=chunk)[48](index=48&type=chunk) [Net Asset Value and Shareholder Activities](index=4&type=section&id=Net%20Asset%20Value%20and%20Shareholder%20Activities) Summary of Horizon's Net Asset Value (NAV) per share, distribution declarations, and stock repurchase program updates [Net Asset Value (NAV)](index=4&type=section&id=Net%20Asset%20Value) The company's Net Asset Value (NAV) per share was $9.12 as of June 30, 2024, a decrease from $11.07 per share a year prior and $9.71 at the end of 2023, resulting in a net decrease in net assets from operations for the quarter of $9.1 million Net Asset Value per Share | Date | NAV per Share | | :--- | :--- | | June 30, 2024 | $9.12 | | December 31, 2023 | $9.71 | | June 30, 2023 | $11.07 | - For Q2 2024, the net decrease in net assets resulting from operations was **$9.1 million**, or (**$0.26 per share**), compared to a net increase of **$0.2 million**, or **$0.01 per share**, in Q2 2023[24](index=24&type=chunk) [Distributions](index=4&type=section&id=Monthly%20Distributions) The Board of Directors declared monthly distributions of $0.11 per share for October, November, and December 2024, with the company's undistributed spillover income standing at $1.28 per share as of June 30, 2024 Monthly Distributions Declared | Payment Date | Amount per Share | | :--- | :--- | | October 16, 2024 | $0.11 | | November 14, 2024 | $0.11 | | December 13, 2024 | $0.11 | | **Total** | **$0.33** | - The company's undistributed spillover income was **$1.28 per share** as of June 30, 2024[5](index=5&type=chunk)[27](index=27&type=chunk) [Stock Repurchase Program](index=4&type=section&id=Stock%20Repurchase%20Program) The company's stock repurchase program was extended until June 30, 2025, or until $5.0 million of common stock is repurchased, with no shares repurchased during the second quarter of 2024 - The stock repurchase program was extended to June 30, 2025[12](index=12&type=chunk) - No shares of common stock were repurchased during the quarter ended June 30, 2024[12](index=12&type=chunk) [Recent Developments (Subsequent to Quarter End)](index=4&type=section&id=Recent%20Developments) Key portfolio activities and strategic updates occurring after the second quarter's close, including loan prepayments and new investments [Portfolio Activity After Quarter End](index=4&type=section&id=Portfolio%20Activity%20After%20Quarter%20End) Subsequent to the end of the second quarter, Horizon received principal prepayments from three portfolio companies totaling $30.1 million, and additionally funded a new $25.0 million debt investment to a healthcare solutions company - Several portfolio companies prepaid their outstanding loans after quarter end: - Lemongrass Holdings, Inc. prepaid **$6.3 million**[13](index=13&type=chunk) - MyForest Foods Co. prepaid **$3.8 million**[14](index=14&type=chunk) - Slingshot Aerospace, Inc. prepaid **$20.0 million**[25](index=25&type=chunk) - On July 30, 2024, the Company funded a new **$25.0 million** debt investment to a company providing home-based healthcare solutions[26](index=26&type=chunk) - An Asset Purchase Agreement involving Nexiican and Nexii closed on July 24, 2024, which was factored into the fair value determination of the investments as of June 30, 2024[15](index=15&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) Presentation of Horizon's consolidated financial statements, including assets, liabilities, and operational results for the period [Consolidated Statements of Assets and Liabilities](index=6&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) As of June 30, 2024, Horizon reported total assets of $787.4 million, total liabilities of $458.6 million, and total net assets of $328.8 million, compared to total assets of $802.4 million and net assets of $324.0 million at the end of 2023 Consolidated Statements of Assets and Liabilities | (In thousands) | June 30, 2024 (unaudited) | December 31, 2023 | | :--- | :--- | :--- | | Total Investments at Fair Value | $646,862 | $709,085 | | Total Assets | $787,405 | $802,356 | | Total Liabilities | $458,627 | $478,375 | | Total Net Assets | $328,778 | $323,981 | | NAV per Common Share | $9.12 | $9.71 | [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) For the three months ended June 30, 2024, the company's total investment income was $25.7 million, with net investment income of $12.9 million, and after accounting for a net realized and unrealized loss of $22.0 million, the net decrease in net assets from operations was $9.1 million Consolidated Statements of Operations | (In thousands, except per share data) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Total Investment Income | $25,678 | $28,117 | | Net Investment Income | $12,914 | $16,073 | | Net Realized and Unrealized Loss | ($22,047) | ($15,921) | | Net (Decrease) Increase in Net Assets | ($9,133) | $152 | | NII per Share | $0.36 | $0.54 | | Net (Decrease) Increase in Net Assets per Share | ($0.26) | $0.01 |

Core Viewpoint - Horizon Technology Finance (NASDAQ:HRZN) has underperformed the BDC market by approximately 15% since December last year, primarily due to deteriorating fundamentals and risk exposures [1][2] Financial Performance - In Q1 2024, HRZN generated investment income of $26 million, down from $28 million in the prior period, driven by spread compression [3] - Interest expenses increased to $8.2 million from $7.1 million in Q1 2023, attributed to higher financing costs rather than increased debt volumes [3] - Net investment income for Q1 2024 was $0.38 per share, a decline from $0.45 per share in Q4 2023 and $0.46 per share in Q1 2023 [3] - Net Asset Value (NAV) decreased from $9.71 per share in the prior quarter to $9.64 per share [3] Investment Activity - HRZN closed $37 million in new loan commitments and approvals in Q1 2024, funding $32 million, which exceeded $20 million in total prepaid principal from existing loans [3] - The onboarding yield for Q1 investments was 13.4%, significantly lower than the total portfolio debt yield of 15.6% [3] Market Conditions - The current venture capital (VC) transaction environment is challenging, with new loan origination expected to progress slowly [3] - Despite some improvement in M&A and IPO markets, VC deal volumes remain low, potentially leading to negative net investment volumes in upcoming quarters [3] Portfolio Quality - The proportion of "category 1" investments, indicating deteriorating credit quality, increased from 4.1% to 7.6% of total portfolio value [3] - The likelihood of writing off these investments poses a significant risk to HRZN's net investment income generation [3] Investment Outlook - HRZN's current yield of 11.7% is considered insufficient given the associated risks, especially when compared to the sector average BDC yield of 11.6% [4] - The overall assessment indicates that there are better risk-reward opportunities in the BDC sector than investing in Horizon Technology Finance [4]

Core Viewpoint - Horizon Technology Finance (NASDAQ:HRZN) has seen a price decline of nearly 10% since the last coverage, prompting a reassessment of its investment potential, particularly in light of its high dividend yield and changing credit quality [1][3][29] Financial Performance - The current dividend yield for HRZN is 11.4%, with monthly distributions appealing to income-focused investors, especially those nearing retirement [3][21] - HRZN reported a net investment income (NII) per share of $0.38 for Q1, with total investment income at $26.1 million, indicating a coverage rate of 115% for its dividend [9][21] - The net asset value (NAV) per share has decreased from $11.34 in Q1 2023 to $9.64, attributed to a reduction in portfolio companies and an increase in non-accruals [12][29] Portfolio Composition - HRZN's portfolio consists of $711.1 million in debt investments, with an annualized yield of 15.6%, and over 90% of the portfolio is in senior secured debt, providing a layer of risk mitigation [5][8] - The largest industry exposures are in life sciences (39%) and technology (38%), with a focus on software, medical devices, and biotech [6][8] - The company has funded five loans totaling $33.5 million in Q1, which may contribute to future interest income and NAV growth [12] Interest Rate Environment - HRZN has capitalized on the higher interest rate environment by focusing on floating rate debt investments, which can increase income as rates rise [7][29] - However, the rising interest rates have also strained portfolio companies, leading to a decline in credit quality, with investments rated at the lowest quality (1) increasing from 4.1% to 7.6% [15][16] Valuation and Market Position - The share price has decreased from around $13 to the $11.50 range, currently trading at a premium to NAV of nearly 20%, which is more attractive compared to previous premiums [26][29] - The average Wall Street price target for HRZN is $10.54, indicating a potential downside of 8.8% to fair value, with the highest target at $15 and the lowest at $8.75 [28] Investment Outlook - Despite the drop in credit quality, HRZN continues to support its monthly distributions, and the current price presents a more favorable entry point for potential investors [29] - Current shareholders are advised to hold, while new investors should exercise caution due to the increased vulnerability of HRZN's investments in a prolonged high-interest rate environment [29]