Horizon Technology Finance(US:HRZN)2022-08-02 20:46Debt Investments - As of June 30, 2022, the total debt investment portfolio at fair value was $551.6 million, representing 95.5% of the total portfolio[193] - New debt investments for the three months ended June 30, 2022, amounted to $159.2 million, compared to $67.3 million in the same period of 2021, reflecting a 136% increase[193] - The ending portfolio value as of June 30, 2022, was $577.5 million, up from $404.1 million as of December 31, 2021, indicating a growth of 42.8%[193] - The five largest debt investments represented 22% of total debt investments outstanding as of June 30, 2022, compared to 26% as of December 31, 2021[196] - The company’s debt investments in the biotechnology sector totaled $130.3 million, accounting for 23.6% of the total debt investments as of June 30, 2022[195] - As of June 30, 2022, 76.2% of debt investments were rated 3, indicating a standard level of risk[197] - The dollar-weighted annualized yield on debt investments decreased to 13.4% for the six months ended June 30, 2022 from 15.0% in the same period in 2021[214] - As of June 30, 2022, 100% of the outstanding principal amount of the company's debt investments bore interest at floating rates[289] Investment Income and Expenses - Total investment income increased by $5.1 million, or 37.8%, to $18.6 million for the three months ended June 30, 2022 compared to the same period in 2021[200] - Interest income on debt investments rose by $5.2 million, or 42.0%, to $17.7 million for the three months ended June 30, 2022, driven by a $155.8 million, or 42.5%, increase in the average size of the debt investment portfolio[200] - Total expenses increased by $2.6 million, or 35.2%, to $9.9 million for the three months ended June 30, 2022 compared to the same period in 2021[203] - Interest expense increased by $1.3 million, or 43.0%, to $4.2 million for the three months ended June 30, 2022, primarily due to a $104.5 million, or 47.5%, increase in average borrowings[204] - Net investment income for the three months ended June 30, 2022 was $8.6 million, compared to $6.1 million for the same period in 2021[200] - For the six months ended June 30, 2022, total investment income increased by $6.1 million, or 22.8%, to $32.8 million compared to the same period in 2021[213] - Total expenses for the six months ended June 30, 2022 increased by $3.8 million, or 26.3%, to $18.3 million compared to the same period in 2021[215] - Base management fee expense increased by $1.2 million, or 32.5%, to $4.8 million for the six months ended June 30, 2022 due to the increase in average debt investments[217] Cash and Financing Activities - As of June 30, 2022, the company had cash and investments in money market funds totaling $76.3 million, up from $45.9 million as of December 31, 2021[224] - Operating activities used cash of $110.7 million for the six months ended June 30, 2022, while financing activities provided cash of $141.4 million for the same period[233] - The company expects to raise additional equity and debt capital opportunistically to support future growth[235] - The company believes that 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[237] Debt Issuance and Obligations - The company issued $57.5 million of 4.875% notes due in 2026, with a stated maturity of March 30, 2026, and may be redeemed at a price of $25 per security plus accrued interest[243] - An additional $50.0 million of 6.25% notes due in 2027 were issued, with a total of $7.5 million sold under the underwriters' option, maturing on June 15, 2027[244] - The outstanding principal balance under the Key Facility was $74.5 million as of June 30, 2022, compared to $53.5 million as of December 31, 2021[231] - The outstanding principal balance under the NYL Facility increased to $136.8 million as of June 30, 2022, from $78.8 million as of December 31, 2021[232] - Total contractual obligations as of June 30, 2022, amounted to $558.05 million, including $368.55 million in borrowings and $189.5 million in unfunded commitments[254] - The company is required to maintain a reserve cash balance, with approximately $0.9 million classified as restricted investments as of June 30, 2022[251] Investment Performance - The company realized net losses on investments totaling $0.9 million, an improvement from net losses of $3.7 million for the same period in 2021[222] - Net unrealized depreciation on investments for the six months ended June 30, 2022, was $2.3 million, compared to net unrealized appreciation of $4.7 million for the same period in 2021[223] - The company received principal payments of $6.96 million on investments for the six months ended June 30, 2022, down from $8.08 million in the same period of 2021[193] Economic Outlook - Economic activity is accelerating across sectors and regions, but inflation is showing signs of acceleration in the U.S. and globally due to supply chain issues and rising energy prices[295] - Inflation is likely to continue in the near to medium-term, particularly in the U.S., which may lead to tighter monetary policy[295] - Persistent inflationary pressures could affect profit margins of portfolio companies[295] Tax and Regulatory Compliance - The company has made requisite distributions to stockholders to qualify for tax treatment applicable to RICs, generally distributing at least 90% of investment company taxable income[280] - The company evaluates tax positions to determine if they are "more-likely-than-not" to be sustained, with no material uncertain tax positions reported as of June 30, 2022[282] Advisor and Management Fees - The Advisor earned $4.7 million and $8.3 million during the three and six months ended June 30, 2022, respectively, under the Investment Management Agreement[264] Shareholder Activities - During the three months ended June 30, 2022, the company sold 868,230 shares of common stock under the 2021 Equity Distribution Agreement, generating net proceeds of approximately $10.3 million[227] - For the six months ended June 30, 2022, the company sold 1,118,401 shares of common stock under the 2021 Equity Distribution Agreement, resulting in net proceeds of approximately $14.2 million[229] - The company has adopted a dividend reinvestment plan (DRIP) for common stockholders, allowing cash distributions to be automatically reinvested unless opted out[261]