Financial Data and Key Metrics Changes - The company generated net investment income (NII) of $0.27 per share, consistent with the previous quarter but down from $0.38 per share in the same quarter last year [26] - The net asset value (NAV) decreased to $7.57 per share from $8.43 at the end of the previous quarter and $9.64 a year ago, primarily due to fair value adjustments and distributions [27] - Investment income for the first quarter was $25 million, slightly down from $26 million in the prior year period, attributed to lower interest and fee income [24] Business Line Data and Key Metrics Changes - The portfolio at the end of the first quarter stood at $690 million, with new debt investments totaling $100 million and equity investments of $2 million [11] - The debt portfolio yield was 15% for the quarter, compared to 15.6% in the same quarter last year, while onboarding yields were 13%, up from 12.6% in the previous quarter [24][12] - The company funded nine debt investments during the quarter, with a significant portion directed towards life science and technology sectors [11] Market Data and Key Metrics Changes - Approximately $92 billion was invested in VC-backed companies in the first quarter, marking a 19% increase from the previous quarter, driven largely by large AI deals [17] - The exit market for VC-backed tech and life science companies remains nearly shut due to tariff-related uncertainties, impacting investor sentiment [18] - The S&P Biotech Select Industry Index is down 14% year over year, reflecting cooling investor sentiment in the life sciences market [18] Company Strategy and Development Direction - The company aims to grow its portfolio while maintaining a focus on high-quality investments, particularly in the tech and life science sectors [10] - The management remains selective in originating loans due to the current macroeconomic environment, with a commitment to optimizing returns from stressed investments [15] - The partnership with Monroe Capital is expected to enhance capital access and operational support, aiding in portfolio growth [9] Management's Comments on Operating Environment and Future Outlook - The management expressed guarded optimism for 2025, despite macroeconomic headwinds impacting recovery from stressed assets [6] - The company anticipates that the venture debt market will remain active, providing opportunities for investment despite current challenges [10] - Management highlighted the importance of maintaining strong liquidity and a robust balance sheet to navigate the current environment [23] Other Important Information - The company declared regular monthly distributions of $0.11 per share through September 2025, supported by undistributed spillover income of $1 per share [7][26] - The company has a committed backlog of $236 million, providing a solid base for future portfolio growth [8] Q&A Session Summary Question: How is the company managing spillover earnings in the current uncertain environment? - The company plans to continue growing distributions through 2025 and will manage spillover earnings quarterly, with confidence in covering distributions over time [32][34] Question: What is the quality of deals currently being pursued? - The company is seeing a higher bar for transaction selection, focusing on companies with strong operational performance and quality VC backing [36][37] Question: Will the company raise leverage ratios to grow the portfolio? - The target leverage ratio is around 1.2x to 1.3x, with the current ratio at 1.29x, indicating a cautious approach to leverage [41] Question: Is there any discussion about cutting the base management fee? - The company’s base management fee is competitive with industry standards, and it is reviewed regularly [43] Question: How does the company plan to address the frozen market conditions? - The company is focusing on generating yield through higher returns from existing portfolio companies rather than relying on warrant expectations [55][52] Question: What is the impact of tariffs on the portfolio? - The primary impact of tariffs is the uncertainty they create, affecting market transactions rather than direct exposure to specific tariffs [63] Question: Has the partnership with Monroe Capital provided additional resources? - The partnership is expected to enhance operational support and focus on stabilizing and growing the business [66]
Horizon Technology Finance(HRZN) - 2025 Q1 - Earnings Call Transcript