Horizon Technology Finance(US:HRZN)2020-11-04 19:42Financial Data and Key Metrics Changes - The company generated net investment income of $0.34 per share, which exceeded distributions, marking a decrease from $0.42 per share in Q3 2019 [48] - Total investment income for the third quarter was $12.3 million, an 8% increase from $11.4 million in the prior year period, primarily due to a 21% increase in interest income on investments [45] - The debt portfolio yield was 15.1% for the quarter, down from 17.7% in the same quarter last year [46] - The company's NAV as of September 30 was $11.17 per share, a decrease from $11.64 as of June 30, 2020 [51] Business Line Data and Key Metrics Changes - The company made a total of $16 million in investments during the quarter, with an onboarding yield of 11.9% [28] - The debt investment portfolio on a net cost basis stood at $319 million, a 10% reduction from June 30, 2020 [46] - The company experienced $43 million in principal prepayments during the quarter, which significantly contributed to net investment income [29] Market Data and Key Metrics Changes - Approximately $38 billion was invested in VC-backed companies in Q3, which was on par with the prior year quarter despite COVID-19 [37] - $14 billion was raised in VC fundraising during the third quarter, surpassing the total of $55 billion raised in 2019 [38] - The IPO window opened considerably in Q3, with 37 venture-backed IPOs contributing to a total exit value of $104 billion, the second highest total on record [39] Company Strategy and Development Direction - The company maintains a cautious approach to its venture lending strategy, incorporating a COVID-19 impact analysis in underwriting new investments [26] - The company aims to selectively pursue new investment opportunities while managing its portfolio proactively [22] - The company plans to maintain its monthly distribution level at $0.10 per share through March 2021, reflecting its outlook for the remainder of 2020 and early 2021 [23] Management's Comments on Operating Environment and Future Outlook - Management noted that while some portfolio companies faced challenges, others thrived during the pandemic, leading to a mixed impact on the portfolio [14] - The company expects to see growth in the fourth quarter, supported by a strong pipeline of new investment opportunities totaling $372 million [34] - Management expressed confidence in the portfolio's ability to grow despite the economic downturn, with over 90% of portfolio companies having adequate cash resources [21] Other Important Information - The company raised nearly $13 million in low-cost and accretive net equity through its at-the-market stock offering during the quarter [12] - The company downgraded its debt investments in three companies, placing them on nonaccrual status due to uncertain outcomes [16] - The company has a committed backlog of $96 million, with $60 million committed to current life science portfolio companies [33] Q&A Session Summary Question: Expectations for repayments and portfolio growth in Q4 - Management noted that prepayments exceeded originations in Q3 but expressed confidence in portfolio growth for Q4, with a strong pipeline of transactions [60] Question: Current yields and covenants on new investments - Management indicated that pricing has remained consistent during COVID-19, with a stronger covenant position due to ongoing uncertainty [63] Question: Discussion on downgraded credits - The third downgraded credit was Titan Pharmaceuticals, which is in the process of settlement [67] Question: Availability of the New York Life facility - Management explained that the availability decreased due to prepayments and that the facility is in a good position for future originations [73] Question: ATM equity capital raise rationale - Management stated that the equity capital raise was opportunistic, taking advantage of favorable market conditions to support future growth [82]