Financial Data and Key Metrics Changes - The company generated net investment income (NII) of 1.37 per share, primarily due to higher interest rates on floating rate debt investments [10][41] - The net asset value (NAV) declined to 10.41 per share as of September 30, 2023, and 0.11 per share for April, May, and June 2024, along with a special distribution of 709 million in the fourth quarter, with new originations of 63 million in the fourth quarter, including debt investments to three new and three existing portfolio companies [12] Market Data and Key Metrics Changes - Venture capital investment activity in 2023 was the lowest in four years, with approximately 67 billion in 2023, as the exit markets remained largely closed [61] - The company expects a gradual increase in demand for venture debt in 2024 as market conditions improve [63] Company Strategy and Development Direction - The company aims to prudently grow its portfolio of debt investments while maximizing the value of its current investments [24][34] - The focus remains on sourcing and originating new debt investments to take advantage of market opportunities, particularly in sectors like AI and life sciences [30][34] - The company plans to maintain a disciplined approach to structuring and pricing transactions to continue generating strong NII [13][41] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging venture capital environment in 2023 but expressed optimism for gradual improvement in 2024, particularly in sectors with strong investor interest [30][99] - The management highlighted the importance of maintaining close relationships with portfolio companies to navigate the uncertain macro environment [59][100] - There are indications of improving market conditions, with an increase in public life science IPOs and some M&A activity observed [99] Other Important Information - The company raised nearly $39 million in net proceeds from a common stock offering in June 2023, strengthening its balance sheet [37] - The debt-to-equity ratio stood at 1.4:1 as of December 31, 2023, with a target leverage of 1.2:1 [68] - The company completed its first co-investment with Monroe Capital in December, which is expected to enhance its ability to originate quality venture debt investments [55] Q&A Session Summary Question: Update on portfolio companies and recent sales - Management confirmed that Nexii is undergoing a restructuring process and is expected to find a new home soon [77] Question: Outlook for leverage ratio and ATM use - The company plans to assess capital needs and activity levels to determine the use of ATM and leverage going forward [80][93] Question: Comments on stressed assets and market dynamics - Management noted that both market-wide issues and idiosyncratic problems within portfolio companies have contributed to the stress observed [96] Question: Potential for G&A cost savings from Monroe acquisition - Management indicated that there may be incremental G&A cost savings from the acquisition of the Monroe platform [101] Question: Consideration of excise tax in spillover distribution - The company considers the excise tax implications when planning spillover distributions, but it is not a significant expense [108]
Horizon Technology Finance(HRZN) - 2023 Q4 - Earnings Call Transcript