Horizon Technology Finance Corporation

Greetings and welcome to the Horizon Technology Finance Corporation first quarter 2020 earnings call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Megan Bacon. Please go ahead.

Thank you, and welcome to the Horizon Technology Finance first quarter 2020 conference call. Representing the company today are Rob Pomeroy, Chairman and Chief Executive Officer, Jerry Michaud, President, Dan Trollio, Chief Financial Officer, and Dan Dvoracic, Chief Investment Officer. I would like to point out that the Q1 earnings press release and Form 10Q are available on the company's website at horizontechfinance.com. Before we begin our formal remarks, I need to remind everyone that during this conference call, Horizon Technology Finance will make certain forward-looking statements, including statements with regard to the future performance of the company. Words such as believes, expects, anticipates, intends, or similar expressions are used to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ on a material basis from those projected in these forward-looking statements, and some of these factors are detailed in the risk factor discussion in the company's filings with the Securities and Exchange Commission, including the company's Form 10-K for the year ended December 31, 2019. The company undertakes no obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise. At this time, I would like to turn the call over to Rob Pomeroy.

Good morning. These are extraordinary times we are experiencing, and our hearts go out to all of those suffering from both the coronavirus pandemic and the economic shutdown. When we last spoke to everyone in early March, COVID-19 was just beginning to reach the U.S., and we felt the gathering storms. The rapidity and depth of its onset has had a dramatic impact on all of our lives and on businesses worldwide. Everyone now has had a family member or friend touched by the disease and many families are suffering from the loss of income. But life goes on and we must carry on. So I'd like to thank you for taking time today to hear Horizon's update. The events of the first quarter have come on us quickly and unexpectedly. We believe our efforts over the past few years to grow and diversify our portfolio and to strengthen our balance sheet have placed us in a position to navigate through these unprecedented times. Against this backdrop, we did have a productive first quarter. During the quarter, we grew the size of our debt portfolio for the eighth consecutive quarter. We generated net investment income of 26 cents per share below our distribution due to traditionally lower prepayment activity in the first quarter. Our debt investment yield was 13.2%. Our NAV as of March 31st was $11.48, down approximately 3% from year end. Most of this reduction is a result of stress on some of our portfolio companies related to the COVID-19 pandemic and the resulting shutdown's economic impact. We ended the quarter with $119 million of capacity to support our portfolio companies and to selectively make new investments. As it became clear that COVID was going to have a major impact on the economy, we took certain steps to prepare. During early March, we borrowed an additional $30 million on our key credit facility to boost our balance sheet liquidity. In April, we acquired the 50% interest of our partner in our joint venture. The former joint venture is now wholly owned by Horizon, and in future reporting periods, its assets will be consolidated with the assets of Horizon. This acquisition will allow us to fully control the management of these assets through this uncertain time. From a credit standpoint, the COVID situation and the economic shutdown have impacted the credit profile of our portfolio. We have been communicating regularly, as we always do, with all of our portfolio companies. We are prepared to support our portfolio companies as appropriate in concert with their investors' support and their management's necessary cost cutting. The liquidity of our borrowers is paramount in the current environment. Accordingly, the credit ratings and fair values of our investments reflect the increased risks that our borrowers may not be able to access additional capital and their operations may be negatively impacted by the economic shutdown. Turning to our investment activity in the first quarter, we funded six new loans totaling $51 million and increased our debt investments on a net cost basis by $25 million from December 31st. This first quarter activity carried over from the momentum generated in the second half of 2019. Entering the second quarter of 2020, our committed backlog and overall pipeline remain active despite the pandemic. Demand for venture debt within our target industries continues to be strong and, in fact, may be increasing as companies seek additional liquidity and funding sources in these uncertain times. We are selectively pursuing new invest opportunities in companies that meet our high bar of liquidity. New originations may slow if the economic shutdown continues and recession worsens. While our outlook is cautious, we are maintaining our current monthly distribution level at 10 cents per share through September. It is our board's policy to set our distribution where it can be covered by NII over time. The distribution level reflects our outlook for the balance of 2020 and our spillover income at March 31st. I'm proud of the entire Horizon team as they have been working remotely since the start of the pandemic in the U.S. while maintaining the same high level of service to our customers and stakeholders. We will continue to focus on managing our portfolio and supporting our portfolio companies while we look to opportunistically fund new investments. By doing so, we look to continue to generate additional long-term value for our shareholders. We'll now turn the call over to Jerry, who will update you on our business development efforts and market environment, and then to Dan, who will detail our operating performance and financial condition.