Horizon Technology Finance Corporation

Greetings and welcome to the Horizon Technology Finance Corporation third quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A brief 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 is now my pleasure to introduce you, your host, Megan Bacon, Director, IR, and Marketing. Please go ahead.

Thank you, and welcome to Horizon Technology Finance Corporation's third quarter 2022 conference call. Representing the company today are Rob Pomeroy, Chairman and Chief Executive Officer, Jerry Michaud, President, and Dan Trollio, Chief Financial Officer. I would like to point out that the Q3 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, the company will make certain forward-looking statements, including statements with regard to the future performance of the company. Words such as believe, expect, anticipate, intend, 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, 2021. 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.

Welcome, everyone, and thank you for your interest in Horizon. As we always do on our quarterly calls, I will update you on our performance and our current overall operating environment. Jerry will then discuss our business development efforts, our portfolio events, and our markets, and Dan will detail our operating performance and financial conditions. We will then take some questions. It was another excellent quarter for Horizon and our advisor, Horizon Technology Finance Management, despite the challenging macroeconomic environment. Our earnings exceeded our distributions for the quarter, while we continued to responsibly grow our portfolio, improve our credit quality, and maintain our capacity to fund future growth through our strong balance sheet. For the quarter, we generated net investment income of 43 cents per share, well above our distributions of 30 cents per share. Based on our results and outlook, we are very pleased to declare a 10% increase in our monthly distributions to 11 cents per share beginning in January 2023. as well as declare a $0.05 per share special distribution payable in December. Note that this is the third consecutive year we have made a $0.05 per share special distribution. We maintained undistributed spillover income of $0.67 per share as of the end of September. We are confident in our platform's ability to generate NII that covers our distributions over time and are very pleased to distribute additional earnings to our shareholders. We grew the portfolio by $57 million, resulting in a value at quarter end of $635 million. The Horizon brand continues to resonate in the venture debt community, and our advisor continues to source and win high-quality venture debt investments. We finished the quarter with a committed and approved backlog of $252 million and a pipeline of opportunities of over $1 billion. As we look to further grow our portfolio in the current environment, we will remain selective and disciplined when making new investments. We strengthened our balance sheet through our at-the-market program by raising $19 million of equity capital at a premium to MAV. As a result, we ended the quarter with $105 million. We achieved a strong portfolio yield on our debt investments of 15.9% for the quarter, as our yield benefited from the rising rate environment and profitable liquidity. We ended the quarter with NAV of $11.66 per share, a slight reduction from June 30, 2022. And finally, our credit profile improved during the quarter, with 97% of our portfolio rated three or higher as of September 30, and with no loans on non-accrual. As always, we are consistently and actively managing our investments to maintain credit quality. Notwithstanding our strong results for the third quarter, we are cautious as we have seen the venture debt market tighten in recent months. The market is immune from the macro headwinds. The venture capital ecosystem is an exception. Capital raising by the VCs, M&A, and IPO exits, and follow-on equity rounds are all impacted by inflation, a looming recession, and higher interest rates. We are focused on these macro issues as we manage our existing portfolio and select the right new investment opportunity. For the quarter, our advisors platform funded $106 million in due debt investments across our targeted industries, including $89 million funded at HRZM. All of our new loans carry floating rates based upon prime, and the recent increases in the prime rate have resulted in higher onboarding yields, higher prime rate floors. The existing portfolio has also benefited from the higher rates, as evidenced by our strong interest income. We remain cautious as the venture debt market adjusts to higher interest rates and the prospect for further increases. The fact that both our portfolio growth and prepayment activity will be tempered by increased rates, as well as the current economic environment. While we have a record high committed backlog Many of our commitments require that our portfolio companies achieve performance or fundraising milestones. The current economic environment meeting these milestones may be more difficult. While the IPO market has drastically shrunk and M&A activity has significantly slowed, we still believe that there will be opportunities for prepayment activity from our portfolio companies being sold, raising significant new rounds of equity, or being refinanced by larger debt facilities. We have seen this in previous choppy markets and will expect some prepayments, but at a lower level than our recent historically high levels. Summary, the Horizon team has performed well in the current market. We have the right team with experience through previous periods of market dislocation to successfully execute under current conditions. Accordingly, our outlook for the balance of this year and next is guardedly optimistic. We believe that with the innovation that is partially fueled by our capital, the dynamics of the venture technology market are resilient. With that, I will now turn the call over to Jerry and Dan to give you more details and color on our performance. Jerry?