Horizon Technology Finance(HRZN) - 2024 Q3 - Quarterly Report

Investment Portfolio - As of September 30, 2024, the total fair value of the debt investment portfolio is $633.3 million, representing 92.6$684.0 million, a decrease from $709.1 million as of December 31, 2023[233]. - The company’s portfolio composition includes 53 debt investments valued at$633.3 million, 86 warrants valued at $18.7 million, and 17 equity investments valued at$14.0 million as of September 30, 2024[233]. - The total debt investments at fair value were $633.3 million as of September 30, 2024, down from$670.2 million as of December 31, 2023[236]. - Average debt investments at fair value decreased by $43.9 million, or 6.4$641.3 million for the nine months ended September 30, 2024 compared to $685.2 million for the same period in 2023[258]. Investment Performance - The company made new debt and equity investments totaling$94.1 million for the three months ended September 30, 2024, compared to $89.4 million for the same period in 2023[234]. - The company reported net new debt and equity investments of$85.8 million for the three months ended September 30, 2024, compared to $66.9 million for the same period in 2023[234]. - The company received net realized losses on investments amounting to$33.9 million for the three months ended September 30, 2024[234]. - Net realized loss for the three months ended September 30, 2024, was $(33.9) million, compared to$(11.8) million in the same period of 2023[241]. - Net realized losses on investments totaled $31.4 million for the nine months ended September 30, 2024, compared to$28.5 million for the same period in 2023[272]. - Net unrealized appreciation on investments was $0.9 million for the nine months ended September 30, 2024, contrasting with a net unrealized depreciation of$24.4 million for the same period in 2023[273]. Income and Expenses - Total investment income decreased by $4.6 million, or 15.7$24.6 million for the three months ended September 30, 2024, compared to $29.1 million in the same period of 2023[243]. - Interest income on debt investments decreased by$2.3 million, or 9.1%, to $22.8 million for the three months ended September 30, 2024, primarily due to a decrease of$86.6 million, or 12.6%, in average earning debt investments[243]. - Total investment income decreased by $8.9 million, or 10.5$76.4 million for the nine months ended September 30, 2024 compared to the same period in 2023[259]. - Total expenses increased by $0.7 million, or 6.4$12.4 million for the three months ended September 30, 2024, compared to $11.6 million in the same period of 2023[249]. - Interest expense increased by$0.8 million, or 11.8%, to $7.9 million for the three months ended September 30, 2024, due to an increase in average borrowings of$24.5 million, or 5.9%[250]. - Interest expense increased by $2.6 million, or 12.3$24.0 million for the nine months ended September 30, 2024 due to an increase in average borrowings[267]. Management and Fees - The Advisor earned $3.0 million and$3.2 million in management fees for the three months ended September 30, 2024 and 2023, respectively, and $9.5 million and$12.7 million for the nine months ended September 30, 2024 and 2023, respectively[318]. - Under the Administration Agreement, the Advisor earned $0.4 million for the three months ended September 30, 2024, and$1.3 million and $1.2 million for the nine months ended September 30, 2024 and 2023, respectively[321]. - Base management fee expense decreased by$0.4 million, or 4.6%, to $9.2 million for the nine months ended September 30, 2024 due to a decrease in average gross assets[268]. - Performance-based incentive fee expense decreased by$2.8 million, or 90.5%, to $0.3 million for the nine months ended September 30, 2024 due to the Incentive Fee Cap and Deferral Mechanism[269]. Debt and Financing - The company is externally managed and has a regulatory structure as a BDC, allowing it to finance investments through borrowings subject to a 150$0, with a borrowing capacity of $150.0 million[282]. - The outstanding principal balance under the NYL Facility was$181.0 million as of September 30, 2024, with a borrowing capacity of $69.0 million[283]. - The company issued$50.0 million in notes to Nuveen Noteholders at an interest rate of 7.38% as of September 30, 2024, with $29.9 million available for borrowing[300]. - The 2022 Asset-Backed Notes had an outstanding principal balance of$91.0 million as of September 30, 2024, down from $100.0 million as of December 31, 2023[303]. - The company has total contractual obligations of$644.9 million as of September 30, 2024, including $436.97 million in borrowings and$189.88 million in unfunded commitments[310]. - Unfunded commitments as of September 30, 2024, amounted to $189.9 million, including$20.0 million of undrawn revolver commitments[310]. Market Conditions and Risks - The company anticipates continued challenges from supply chain disruptions and increased inflation impacting future performance[224]. - The company’s net income is dependent on the difference between the borrowing rate and the investment rate, with rising interest rates potentially reducing net investment income[350]. - Inflation is showing signs of acceleration in the U.S. and globally, which could affect the profit margins of the company's portfolio companies[351]. - Persistent inflationary pressures may lead to tightening monetary policy, impacting the company's portfolio companies[351]. Future Outlook - The company expects to raise additional equity and debt capital opportunistically to support future growth[287]. - The company believes its current cash and available funds will be sufficient to meet working capital and capital expenditure commitments for at least the next 12 months[289]. - The company intends to distribute all or substantially all of its investment company taxable income to remain subject to taxation as a RIC[288]. Regulatory and Accounting Changes - The company is evaluating the impact of adopting ASU 2023-07, which improves reportable segment disclosure requirements, effective for fiscal years beginning after December 15, 2023[343]. - The adoption of ASU 2022-03 did not have a material impact on the company's consolidated financial statements[344].