Horizon Technology Finance Corporation

Greetings and welcome to the Horizon Technology Finance Corporation first quarter 2025 earnings call. At this time, all participants are in a 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 is now my pleasure to introduce Megan Bacon, Director of Investor Relations and Marketing. Thank you. You may begin.

Thank you, and welcome to Horizon Technology Finance Corporation's first quarter 2025 conference call. Representing the company today are Rob Pomeroy, Chairman and Chief Executive Officer, Jerry Michaud, President, Dan Dvorsets, Chief Operating Officer and Chief Investment Officer, and Dan Trollio, Chief Financial Officer. I would like to point out that the Q1 earnings press release and Form 10-Q 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 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, 2024. 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. Today we will update you on our quarterly performance and our current operating environment. Dan DeVorsitz will take us through recent business and portfolio developments. Jerry will then discuss the current status of the venture lending market. And Dan Trollio will detail our operating performance and financial condition. We will then take questions. We began 2025 with guarded optimism that markets were improving and that it was going to be a growth-focused year for Horizon. However, the macro environment, including tariff-related uncertainty over the past several weeks, has dampened our optimism and directly impacted our potential recovery from some of our stressed assets, which was a significant factor in the decrease in our NAV at the end of the quarter. Until the worldwide volatility in the market subsides, the venture capital ecosystem is unlikely to return to the positive path forward, which we had hoped for earlier in the year. Our comments today will focus on our first quarter results and our outlook going forward. Turning to our specific results for the quarter, we generated net investment income of 27 cents per share. As we look to grow our portfolio in future quarters, it is our goal to deliver NII at or above our declared distributions over time. Despite the headwinds, we were able to fund new investments and grow our debt portfolio by $20 million during the first quarter. Based on our outlook and our undistributed spillover income, our board declared regular monthly distributions of 11 cents per share through September 2025. We once again achieved a portfolio yield on debt investments at or near the top of the BDC industry. We were able to increase our investment capacity early in the year by raising equity from our at-the-market program. We have continued capital support from our lenders under our credit facilities as shown by the recent closing of an increase in the commitment amount and extension of the maturity date of our New York Life credit facility. We increased our committed and approved backlog to nearly $236 million providing us with a solid base of opportunities to further grow our portfolio over time. As we previously disclosed, in order to further align our advisor and shareholders' interests, our advisor has agreed to waive a portion of its quarterly income incentive fees. If after the payment of such portion, the company's net investment income for the quarter would be less than the distributions declared it. Finally, Monroe Capital, the owner of our advisor, completed its partnership with Wendell Group, a French investment company. Monroe, and by extension our advisor, continue to operate independently. As part of the Monroe family, Horizon will benefit from the additional capital, scale, and commitment of the partnership between Monroe and Wendell Group. We are continuing to support and work closely with our portfolio companies as we focus on maximizing the value of our stressed investments and preserving NAB. Moving forward, Despite the near-term macro challenges, we remain guardedly optimistic about Horizon's prospects for the following reasons. Our portfolio yield remains among the industry's highest, which we expect will lead to increased NII over time. Our committed backlog is growing, and our pipeline remains full with quality opportunities to invest in new companies. Our liquidity and balance sheet remains strong. And finally, our markets are still active and demand for venture debt capital remains high. We look forward to being a key supplier of such capital. Again, we appreciate your continued interest and support in the Horizon Technology Finance Platform. I will now turn the call over to Dan, Jerry, and Dan to give you the details of our first quarter results and progress.

Dan? Thanks, Rob, and good morning to everyone. Our portfolio at the end of the first quarter stood at $690 million as the high-quality loans we originated during the quarter were offset by prepayments, amortization, and unrealized depreciation in our existing portfolio. In the first quarter, we funded nine debt investments totaling $100 million and two equity investments of $2 million. $31 million of the new debt investments were to three new portfolio companies, all well-sponsored companies with growing revenue in our core life science and technology markets. We also continued to build a sizable pipeline across our target sectors. Looking ahead to Q2, as Rob noted, we are watching the macro environment very closely. We continue to believe we are positioned well for portfolio growth over the long term, but given the current environment, we remain selective in originating loans. During the quarter, we experienced five loan prepayments, including two refinancings, totaling $68 million in prepaid principal. Based on anticipated additional prepayment activity in the quarter, we expect a more positive impact on NII in Q2. Our onboarding debt investment yield of 13% during the first quarter remained consistent with our historic levels. We expect to continue to generate strong onboarding yields with our current pipeline of opportunities, which we believe will generate strong net investment income over time. Our debt portfolio yield of 15% for the quarter was once again one of the highest yielding debt portfolios in the BDC industry. Our ability to generate these industry-leading yields continues to be a testament to our venture lending strategy and their execution of such strategy across various market cycles and interest rate environments. As of March 31st, we held warrant and equity positions in 105 portfolio companies with a fair value of $32 million. Structuring investments with warrants and equity rights is a key component of our venture debt strategy and a potential generator of shareholder value. In the first quarter, we closed $157 million in new loan commitments and approvals, and ended the quarter with a committed and approved backlog of $236 million, compared to $207 million at the end of the fourth quarter. We believe our pipeline, combined with our committed backlog, with most of our funding commitments subject to companies achieving certain key milestones, provides solid base to prudently grow our portfolio. As of quarter end, 89% of the fair value of our debt portfolio consisted of three and four rated debt investments, while 11% of the fair value of our portfolio was rated two or one. During the first quarter and subsequently in April, we received positive news from several of our portfolio companies, most notably MLX Biosciences and Kodiak Robotics. MLX announced that it met the endpoints in its pivotal trial for its drug to treat Tourette syndrome. which trial is the final clinical step to obtain FDA approval. In other positive news, Kodiak, a developer of autonomous trucking technology, became the first company to publicly announce the use of driverless trucks in commercial operations. Kodiak also recently announced its intention to go public via a business combination with a SPAC backed by Ares at a $2.5 billion valuation. Unfortunately, as we have mentioned, we have also experienced negative portfolio events. Most significantly, our investments in both Embrace and StandVast were impacted by the lack of exit markets and the broader macro volatility, including tariffs, resulting in the downgrade of both to a one-rated investment and reduction in fair values to zero in the quarter. As we manage our stress investments, we continue to collaborate closely with all of our portfolio companies and utilize a variety of strategies to seek to optimize returns and create opportunities for potential future value. To summarize, we continue to work diligently on our current portfolio while maintaining an opportunistic approach toward originating new loans in the current environment. Over time, and as the macro environment normalizes, we believe we are positioned to grow our portfolio, which should lead to increased NII that covers our regular monthly distributions over time. With that, I'll turn it over to Jerry for a look at the overall venture industry and current environment. Thank you very much, Dan.

Turning to the venture capital environment, according to Pitchfork, Approximately 92 billion was invested in VC-backed companies in the first quarter, up 19% from the fourth quarter of 2024 and the highest level since the first quarter of 2022. However, the elevated deal value was once again due in meaningful part to large AI deals that represented a significant portion of the quarterly value. With the tariff-related uncertainty in the marketplace, exit markets for VC-backed tech and life science companies remain nearly shut. Specifically, we saw some momentum for biotech IPOs starting to build in Q4 and continue into January. However, the uncertainty related to policy announcements regarding increasing tariffs on pharmaceuticals, the decrease in NIH and FDA funding, and the HHS pause on the development of key vaccines is resulting in significant investor pullback in the life science market, and the IPL market all but disappearing. To date, the S&P Biotech Select Industry Index, XPI, is now down 14% year over year, reflecting cooling investor sentiment. With continued volatility in the equity markets, investors and M&A acquirers are sitting on the sidelines waiting for greater certainty. That said, with less equity options available to VC-backed tech and life science companies, Venture debt is a significant option for early-stage companies to extend liquidity runway while they wait for better market conditions to raise equity or complete M&As. This has created opportunity for Horizon to seek high-quality, well-sponsored tech and life science companies to add to its portfolio. Q1's total exit value of $56 billion was the highest quarterly total since the fourth quarter of 2021. Nearly 40% of the total exit value was achieved through just one IPO. Until the tariffs and other macro headwinds clear up, we expect the exit market to remain relatively closed in the near term. With that said, should market conditions persist well past the second quarter, with VCs needing to find exits for their longstanding portfolio companies, it will become even more challenging for VCs to return capital to their limited partners and raise new capital, putting even more pressure on the whole VC ecosystem. To sum up, we remain committed to sourcing high quality, well-priced investments as we seek to grow our portfolio. We believe market conditions, while very challenging, present a unique opportunity for experienced venture debt firms, including Horizon, to add high quality, high yielding debt investments to their portfolios. For Horizon, such opportunities, when combined with this historical prepayment activity, should generate NII that will cover its regular monthly distributions over time. With that, I will now turn the call over to Dan Trollio.

Thanks, Jerry, and good morning, everyone. As Rob and Dan noted, despite headwinds, we were able to grow the portfolio of debt investments in the first quarter. as we continue to work towards sustained growth with the goal to continue to cover our regular monthly distributions over time. We also strengthen our balance sheet by completing an amendment to our New York Life facility and by utilizing our ATM program to successfully and equitably sell over 400,000 shares early in the quarter. These actions demonstrate our continued ability to opportunistically access the debt and equity markets. In addition, we continue to diligently work with all of our portfolio companies to optimize outcomes for our investments and improve our credit quality. As such, we believe we remain well positioned to grow our portfolio and create additional value for our shareholders moving forward. As of March 31st, we had $126 million in available liquidity, consisting of $77 million in cash and $49 million in funds available to be drawn under our existing credit facilities. We currently have no borrowings outstanding under our $150 million KeyBank credit facility, $181 million outstanding on our $250 million New York Life credit facility, and $90 million outstanding on our $100 million Nuveen credit facility, leaving us with ample capacity to grow our portfolio of debt investments. Our debt-to-equity ratio stood at 1.54 to 1 as of March 31st, and netting out cash on our balance sheet, our net leverage was 1.29 to 1, which was within our target leverage. Based on our cash position and our borrowing capacity on our credit facilities, our potential new investment capacity as of March 31st was $307 million. Turning to our operating results, for the first quarter, we earned investment income of $25 million compared to $26 million in the prior year period. primarily due to lower interest income and fee income on our debt investment portfolio. Our debt investment portfolio on a net cost basis stood at $700 million as of March 31st, up 3% compared to $678 million as of December 31st, 2024. For the first quarter of 2025, we achieved onboarding yields of 13% compared to 12.6% achieved in the fourth quarter of 2024. Our loan portfolio yield was 15% for the first quarter compared to 15.6% for last year's first quarter. Total expenses for the quarter were $13.4 million compared to $13.1 million in the first quarter of 2004. Our interest expense increased to $8.7 million from $8.2 million in last year's first quarter due to an increase in our average borrowings. Our base management fee was $3.2 million, comparable with the prior year period. We received no performance-based incentive fees in the first quarter as we continued to experience a deferral of incentive fees otherwise earned by our advisor under our incentive fee cap and deferral mechanism. The deferral in the quarter was driven by net realized and unrealized losses on our portfolio. While we expect the advisor will return to earning incentive fees, as we previously mentioned, the advisor has agreed to waive a portion of any incentive fee in a quarter where we do not earn our distributions. Net investment income for the first quarter of 25 was 27 cents per share compared to 27 cents per share in the fourth quarter of 24 and 38 cents per share for the first quarter of 24. The company's undistributed spillover income as of March 31 was $1 per share. We anticipate that the size of our portfolio, along with our portfolio's higher interest rates and our predictive pricing strategy, will enable us to continue generating NII that covers our distribution over time. To summarize our portfolio activities for the first quarter, new originations totaled $102 million, which were partially offset by $11 million in scheduled principal payments and $68 million in principal prepayments and partial paydowns. We ended the quarter with a total investment portfolio of $690 million. As of March 31st, the portfolio consisted of debt investments in 53 companies with an agri-fare value of $644 million, and a portfolio of warrant, equity, and other investments in 110 companies with an agri-fare value of $46 million. Based upon our outlook and our under-suited spillover income, our board declared monthly distributions of $0.11 per share for July, August, and September 2025. We remain committed to providing our shareholders with distributions that are covered by our net investment income over time. Our NAV as of March 31st was $7.57 per share, compared to $8.43 as of December 31st, 2024, and $9.64 as of March 31st, 24. The 86-cent reduction in NAV on a quarterly basis was primarily due to adjustments to fair value in our paid distributions, partially offset by net investment income and accreted sales of equity. As we've consistently noted, nearly 100% of the outstanding principal amount of our debt investments bear interest at floating rates with coupons that are structured to increase if interest rates rise with interest rate floors that will mitigate the impact of decreasing interest rates. This concludes our opening remarks. We'll be happy to take questions you may have at this time.

Thank you. We will now conduct a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in a question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we post our first question.

The first question comes from Douglas Harder with UBS. Please proceed. Hi, sorry, this is, uh, Corey, uh, Corey Johnson on for, for Doug.

Um, so, you know, you guys have mentioned how, um, you expect to cover your, um, your dividend over time. Um, and currently you have a, you know, $1 in spillover earnings. Um, so how are you thinking about, like, you know, we, we sort of talked about how this, um, environment is sort of like uncertain and, um, how that might be slowing some of the growth and ability to cover that here in the meantime. But we could also be in this period for some time. So how are you thinking about managing that spillover and how deeply, how much of it you might give back over time?

Yeah, as we mentioned, I think last quarter, a similar question related to the distribution. Each quarter, If you look back the last three quarters, we've been able to grow the distribution. And so the plan is to continue to do that through 2025. And as we mentioned, every quarter, we expect to have prepayments. And as you plan out the quarter, you can never determine which quarter that they will happen and the impact on income for the quarter. So this quarter, we had about $68 million in prepayments and refinance. A couple of those were related to refinance and a pay down a revolver. So the fee income was a little bit less than you would normally expect at that level. And as you mentioned, of course, the $1 spillover is something we'll continue to manage throughout the year. We review that every quarter in discussions with the board and set the distribution. And I'll just point out that we declare distribution through September of 25. And so the confidence is there to continue to cover and pay that distribution, as we mentioned, over time.

All right. Thank you. And just as a follow-up, so, you know, you didn't mention how it's, you know, currently it's, I guess, since some of the markets for venture equity are, you know, closed at the moment, that venture debt is the, you know, other option. And so it's an opportunity for you guys. And so you've expanded, you know, your backlog and your debt portfolio grew. Can you sort of just talk about how the quality of deal that you're seeing is come across your table at the moment? Are there a lot of good ones? Are there more that you would rather pass on? What's that look like at the moment for you?

Hi, this is Jerry. Yep, you kind of hit on it. There's definitely a significantly higher bar relative to selecting the kind of transactions that we would be pursuing in today's market in addition to strong continued equity support based on realistic valuations in today's market versus what they were in 21 and 22. The quality investors, the quality of their funds, because many VCs haven't been able to return capital LPs and they have limited ability to continue to fund portfolio companies. So Just on that side of the equation, the bar has been lifted significantly. But there are a lot of companies, or there certainly are companies out there today that are performing very well operationally. They're continuing to be funded by high-quality VCs who do have liquidity. And so those are the kinds of deals that we are looking at. And that does, I have to say, obviously shrink The pipeline is very wide at the top. It's very narrow at the bottom. And that's the way we have been selecting transactions in this current environment.

And that's going to continue, at least as I indicated, probably for the next couple quarters. Great. Thank you.

The next question comes from Christopher Nolan with Ladenburg-Thalman. Please proceed.

Hey, just to follow up on those questions, is the plan to graze the leverage ratios if you're going to grow the portfolio in coming quarters?

I think we mentioned each quarter our target leverage net of cash is around 1.2, 1.3 times. We may go above that slightly in a quarter, but that's still our target. You know, we ended this quarter net of cash 1.29. There was some activity afterwards with the cash on the balance sheet where we paid down some debt. So we're towards the lower range of that today, but the goal is to stay within that range.

And is the plan to not tap the ATM in coming quarters, just given where the stock price is?

Well, we look at our equity needs debt and equity needs each quarter, look at the funding requirements. pipeline and what we have related to prepayments, and we make that determination on a quarterly basis. We don't make that determination flat throughout the year.

You guys have a 2% base management fee. The industry is closer to $150. Any discussion of cutting the base management fee?

Our base management fee has two tiers to it. It's 2% up to $250. $250 million and $1.6 after that. So our blended rate is probably closer to $1.6, $1.7, and we review that to the market in our comps, and we're right where our comps are when you actually do the calculations.

Two more questions. One, were there any timing issues, deals closing late in the quarter, which might have resulted in the EPS coming in below where the dividend is?

Well, there definitely is timing issues every quarter, and you try to manage the debt outstanding and the cash on the balance sheet related to that timing. And, you know, some funding slips into the second quarter. So timing always has an impact on it. Can't say specifically that, you know, drove the NII this quarter.

Final question. Given where the stock price is and given where the dividend is, you're paying out roughly 14.7% by my estimate of equity as dividend. Your debt yields are 15%. How does that math work where if you raise new equity, you're paying 14.7% of it out? And even if you invest it, you're only getting 15%. I mean, something has to give.

You know, again, it's just something we'll look at each quarter as far as raising equity or not, and based on the fundings and the yields, you know, what you mentioned is exactly one of the things we look at every quarter.

Okay, that's it for me, guys. Thank you. Once again, to ask a question, that's star 1 on your telephone keypad. Our next question comes from Paul Johnson with KBW. Please proceed.

Yeah, good morning. Thank you for taking my questions. Following up on Chris's question a little bit, I think you mentioned 13% onboarding yields. I mean, is that what you're seeing in the market? I mean, just because the cover, what you guys have is roughly like a 16% cost of equity today, you would need to be generating like a 20% plus return at the asset level. So are you Do you include like warrant returns or any other sort of expected item that would increase that over the long term?

Well, you know, clearly onboarding yields is not reflective of what, and it looks historically, what the portfolio actually yields on an ongoing basis. And yeah, some of that in, you know, in stronger markets, we have more exit activity So the overall portfolio yield can get up into the range that you were kind of mentioning, Paul. But in today's market with exits being, you know, fewer and not as exciting, actually, compared to historical periods, you know, that the portfolio yield will probably, I think in the 16% range, 15, 16% range, continue for at least the next couple quarters until we start seeing better optimism in the M&A and IPO markets. You know, there are some things going on in our couple, you know, a few of our portfolio companies, Stan mentioned a couple, but there is some optimism relative to some of our stronger portfolio companies, our four-rated credits, three-rated credits, where there is some activity that does give us some confidence relative to some exit opportunities over the next couple of quarters. But we have to see how they play out because in the last couple of quarters, we've come very close on a couple of our portfolio companies from getting what look like reasonable exits. And the buyers essentially pulled back, especially over the last 90 days, just literally pulled back And the reasons we got were basically they were frozen. They needed more indications about overall market volatility before they were willing to move. So that's the market we operate in today. And it's frustrating at times. But again, for some of the quality portfolio companies we have, there is interest in high quality technology companies because at the end of the day, the kinds of companies that buy these companies need new technology as they move forward. So there is a bit of a pull toward those kinds of companies, but there just isn't enough in the market today to be able to say with great confidence what's going to happen over the next couple of quarters. We need greater certainty in a lot of the macro issues that everybody is quite aware of.

Paul has that. Go ahead. I'm sorry. No, no, that's just.

Yeah, Paul, this is Rob. I was just going to comment on your question about onboarding yields. Just for clarity, the onboarding yield is a cash on cash return in the transaction, assuming it goes to term. without any benefit of any warrant upside or otherwise, that onboarding yield turns into the actual portfolio yield based on accelerated fees from prepayments and other events. And so to get to the ROE we need, you can do the math with the leverage, the spread of the cost of debt.

Okay. Yes, that's helpful.

Thanks for that. I mean, but just, you know, given how frozen the market is, as you kind of say, you know, and the potential for that to continue for some time, I mean, has that, have you approached that part of your strategy any differently in terms of, you know, the warrant and the equity kickers? You know, is there, has that, you know, made you rethink, you know, how hard you push for that in deals?

Well, I think overall, yeah. I mean, that's not necessarily just a recent phenomenon. I think over the last few quarters, especially as we look at valuations of companies very closely now, given valuations that were in existence in 21-22 compared to what just the significant decline in valuations over the last really almost two years now, which is part of the issue. Of course, it's been a long running, uh, a problem for the venture capital market in general. That's one of the reasons exits have been so hard is, is it's hard to get companies back to valuations that make sense in today's market. So, yeah, we, we, we look at, you know, um, other, other ways of, of propping up, um, returns through higher, higher, um, yields, more fee income, um, end of term payments and things like that. We're much more focused on getting our yield from those kind of events versus a warrant expectation.

Thanks. That's helpful once again. And then I was hoping maybe you could expand a little bit on the disclosure and the press release just regarding solely organics post-quarter receiving the blockage notice from Western Alliance. That loan, I think it was marked at 96 last quarter. I believe it was around 91 or so this quarter, fair value cost. I mean, was there any sort of ongoing action or any ongoing discussion with the sponsor there? I mean, I guess what changed so quickly kind of between the most previous quarters and getting the blockage notice in April?

Yeah, so we've been working with the senior lender, the management team, and the investors on Soli for a number of quarters now. As new capitals come in, they look for external investors or an acquisition of the company. That's been occurring for, that's been a process that's been ongoing for a while. And we continue that dialogue now when there is activity going on. This latest notice that we got from the senior lender was just part of that process. And as they get to the finish line on some of these situations that are evolving and we believe will be successful, the senior lender needed to – take this action. So, we needed to disclose it, and we did, but there are dialogues that continue to happen with all parties.

Got it. Thank you. And just a few more, if I can, another credit-specific question. I noticed StanVast, I believe it may have some e-commerce, I don't know if it's an e-commerce aggregator or if it just has some exposure there. I mean, we've seen some weakness in that industry. Is that the only type of particular company that you have like that? Is there any more, I guess I would ask, any more sort of consumer exposure that you see in the portfolio that might be susceptible to some sort of any sort of consumer slowdown? And one additional to that, I would also ask if there's any sort of meaningful tariff sort of exposure in any of your companies in terms of hardware manufacturing, anything like that. Um, that might be impacted.

Sure. Um, you're right. Yes. Stand vast did operate in the 3pl space and and so that that they, they weren't selling to consumers, but they were certainly adjacent to the consumer market. So that had a had an impact on the eventual outcome there. We have intentionally over the last number of years managed our portfolio out of consumer facing and direct to e-commerce transactions. We currently have one transaction in the portfolio that's directly e-commerce, that's Havenly, and they're actually performing quite well. But we are not actively looking to grow that into that sector. In terms of the tariffs in general, We have addressed that, looked at all of our portfolio companies in terms of specific impacts to their products, not a ton. In terms of how their supply chains work, we're still working through that, but we expect that while there'll be some displacement, most of them have planned for it.

Yeah, I'll add to that, Paul, this is Rob, that the real impact of the tariffs on our portfolio, as we mentioned in the body of the script, was just a great uncertainty and, you know, the shocks to the market, stock markets on again, off again, targeted industries. It's not specific to a specific tariff or a specific country or anything. It was people nearing the finish line on transactions in a more calm environment could have and would have gotten done that were jolted into, well, we're just paralyzed, we're not going to do anything.

So that's the fundamental part of the comments we made earlier. Got it. Appreciate that.

I guess if I can just ask one more. I mean, the recent Lindell-Monroe partnership, I mean, can you say You know, if there's been any sort of additional resources you've been able to access or anything that's been, you know, given in support of the BDC, I guess, to assist in whether it's just recovery efforts or potentially expanding verticals to capture, you know, some different industries such as like the AI, some of the AI investment going on. Is there anything, I guess, notable that you could mention there?

Well, the deal's closed, been closed for 30 days. So the real impact is that the deal's closed now and that Monroe and Horizon, we can be focused on our businesses and the things that we need to do, especially in light of the market we're in. This is a business that continues to operate independent of Blundell. However, the fact that it's closed is really focused now everybody's attention on the things we need to do to stabilize and grow and all of Monroe's segments. So I think we will see over time the strong benefit of the scale. And for Horizon, we're getting good help from Monroe on all the places we need help. And so from that standpoint, that's been ongoing and continuing, and I think we'll be ramped up as we go forward.

Great. Thank you. That's all for me. The next question comes from Mitchell Pinn with Oppenheimer.

Please proceed.

Thanks so much. Hey, guys. I just had a follow-up on Soli. Morning. Morning. I just had a follow-up on Soli. It looks like you say it's a default has occurred. Do you guys have a cross default so that you're essentially going, you have to put it on non-accrual this quarter?

So as related to non-approval, this, you know, just occurred as far as getting the blockage and looking into the default and looking into that currently. So if we don't collect any interest payments as has been noted in the blockage, then, yeah, that will have to be on non-approval.

Got it. Okay. And do you Are you comfortable with the marks or would you have to reassess, you know, next quarter, this quarter, I guess, to figure out what the value is?

Yeah, so, you know, we will obviously reassess the mark as we get more detail and work more through the credit, as Dan mentioned. You know, it's been ongoing, and there's still activity that still has to, you know, come to fruition. And so, that will factor into the fair value going forward.

Okay. That's all. Thank you so much.

Thank you.

Thank you. At this time, I would like to turn the call back over to management for closing comments.

We want to thank you all for joining us this morning. We really do appreciate your continued interest and support in Horizon. We look forward to speaking with you again soon. This will conclude our call.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.