Horizon Technology Finance(US:HRZN)2025-10-28 20:31Debt Investments - As of September 30, 2025, 97.0% ($543.6 million) of the debt investment portfolio at fair value consisted of Senior Term Loans[254] - As of September 30, 2025, the company had 39 debt investments valued at $560.2 million, representing 92.9% of the total portfolio[262] - Total debt investments amounted to $560.2 million, a decrease of 12.3% from $638.8 million on December 31, 2024[265] - The five largest debt investments at cost represented 25% of total debt investments outstanding as of September 30, 2025[265] - As of September 30, 2025, 100% of the outstanding principal amount of debt investments bore interest at floating rates, compared to 99% as of December 31, 2024[396] Investment Performance - The company reported a net realized loss on investments of $22.5 million for the three months ended September 30, 2025[262] - Net realized losses on investments totaled $22.5 million for the three months ended September 30, 2025, compared to $33.9 million for the same period in 2024[283] - During the nine months ended September 30, 2025, net realized losses on investments totaled $31.8 million, primarily due to the settlement of multiple investments and the realization of warrant investments[303] - Net unrealized depreciation on investments for the nine months ended September 30, 2025, totaled $13.8 million, primarily due to unrealized depreciation of various debt and equity investments[305] Financial Results - The total portfolio value as of September 30, 2025, was $603.5 million, a decrease from $697.9 million as of December 31, 2024[262] - Total investment income increased by $1.8 million, or 7.1%, to $26.3 million for the three months ended September 30, 2025, compared to $24.6 million for the same period in 2024[270] - Interest income on debt investments rose by $1.1 million, or 4.8%, to $24.3 million for the three months ended September 30, 2025[271] - For the nine months ended September 30, 2025, total investment income decreased by $1.0 million, or 1.3%, to $75.4 million compared to the same period in 2024[289] - Interest income on debt investments decreased by $3.4 million, or 4.6%, to $70.4 million for the nine months ended September 30, 2025, primarily due to a decrease in average earning debt investments[290] Expenses and Fees - Total expenses decreased by $0.4 million, or 3.2%, to $12.0 million for the three months ended September 30, 2025[277] - Total expenses increased by $0.2 million, or 0.4%, to $38.1 million for the nine months ended September 30, 2025[297] - Fee income increased by $0.6 million, or 46.7%, to $2.0 million for the three months ended September 30, 2025[273] - Fee income increased by $2.3 million, or 88.0%, to $5.0 million for the nine months ended September 30, 2025, driven by a higher amount of principal prepayments[292] Borrowings and Debt Facilities - The company expects to finance its investments through borrowings subject to a 150% asset coverage test[255] - Total borrowings outstanding as of September 30, 2025, amounted to $757.75 million, with a net balance of $424.03 million after debt issuance costs[327] - The outstanding principal balance under the NYL Facility was $181.0 million as of September 30, 2025, with a borrowing capacity of $69.0 million[317] - The Key Facility commitment was increased to $150 million, with a potential total commitment of $300 million, and the interest rate was adjusted to 7.35% as of September 30, 2025[329] - The NYL Facility had an outstanding balance of $181 million as of September 30, 2025, with a borrowing capacity of $69 million[334] Cash and Liquidity - As of September 30, 2025, cash and investments in money market funds amounted to $128.5 million, an increase from $97.5 million as of December 31, 2024[307] - Operating activities provided cash of $87.1 million for the nine months ended September 30, 2025, while financing activities used cash of $57.0 million[322] - 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[326] Regulatory and Compliance - The company must distribute at least 90% of its net ordinary income and net short-term capital gains to qualify as a RIC, avoiding corporate-level tax[368] - The company operates as a RIC and is required to distribute at least 90% of its investment company taxable income to avoid corporate-level U.S. federal income tax[390] Advisor Fees - For the three months ended September 30, 2025, the Advisor earned $2.7 million, a decrease of 10% from $3.0 million in the same period of 2024[373] - For the nine months ended September 30, 2025, the Advisor earned $8.9 million, down from $9.5 million in 2024, reflecting a decline of approximately 6.3%[373] - The Advisor earned $0.4 million under the Administration Agreement for the three months ended September 30, 2025, compared to $0.4 million in 2024[375] - The Advisor earned $1.2 million under the Administration Agreement for the nine months ended September 30, 2025, slightly down from $1.3 million in 2024[375] Economic Environment - Economic activity has accelerated, but inflation in the U.S. rose due to global supply chain issues and strong consumer demand, before falling to lower levels at the end of 2023[400] - Persistent inflationary pressures and foreign currency exchange volatility could affect the profit margins of the company's portfolio companies[400]