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]
Horizon Technology Finance(HRZN) - 2024 Q2 - Quarterly Report