Financial Data and Key Metrics Changes - The company generated net investment income (NII) of $0.27 per share in Q4 2024, down from $0.32 per share in Q3 2024 and $0.45 per share in Q4 2023 [40] - For the full year 2024, NII was $1.32 per share, covering regular monthly distributions of the same amount [10][40] - The net asset value (NAV) decreased to $8.43 per share at year-end 2024, compared to $9.06 per share at the end of Q3 2024 and $9.71 per share at the end of Q4 2023 [44] Business Line Data and Key Metrics Changes - The portfolio grew to $698 million in Q4 2024, up 2% from $684 million at the end of Q3 2024 [33] - The debt portfolio yield was 14.9% for Q4 2024, down from 16.8% in Q4 2023 [38][21] - New originations totaled $61 million in Q4 2024, partially offset by $12 million in scheduled principal payments and $13 million in prepayments [42] Market Data and Key Metrics Changes - Approximately $75 billion was invested in VC-backed companies in Q4 2024, leading to a total investment of $209 billion for the year, which is an increase from 2023 but still below the highs of 2021 and 2022 [25] - The exit value for VC-backed companies in 2024 was $37 billion, indicating a recovery but still below levels from 2019 to 2021 [27] Company Strategy and Development Direction - The company aims to continue growing its portfolio and generating NII that covers distributions, with a strong pipeline of investment opportunities exceeding $1 billion [28][30] - The focus remains on high-quality venture debt investments, particularly in technology and life sciences sectors [28][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the venture ecosystem recovering, supported by a strong pipeline and active markets for venture debt capital [14][30] - The macro environment is gradually improving, which is expected to enhance the fundraising capabilities of VC-backed companies [30][41] Other Important Information - The company closed a new $100 million senior secured credit facility and raised $20 million through convertible debt offerings, strengthening its balance sheet [12][33] - The advisor agreed to waive a portion of its quarterly income incentive fees if NII falls below declared distributions [12] Q&A Session Summary Question: Key drivers to return to $0.33 dividend rate - Management indicated that prepayments and portfolio growth will be key drivers to return to covering the distribution [48][50] Question: Portfolio marks this quarter - Marks were primarily driven by challenges in fundraising and exit markets for some companies, leading to markdowns mainly on debt investments [56][58] Question: Specific credits and their status - Evelo Biosciences has been moved to a recovery asset category, with future recovery dependent on contractual transactions [60] - Swift Health Systems is still in an extended fundraising process and has not yet resolved its situation [64] Question: Impact of federal government spending cuts - The life sciences sector faces uncertainty due to potential spending cuts, but there are also positive signs such as lower drug development costs and increased IPO activity [68][89] Question: Effect of Fed easings on yields - Fed easings had an impact, with the third quarter rate cut having a larger effect than the fourth quarter [80][82] Question: Share repurchases impact on NAV - Share repurchases added approximately $0.02 to NAV per share [90]
Horizon Technology Finance(HRZN) - 2024 Q4 - Earnings Call Transcript