Horizon Technology Finance Announces Fourth Quarter and Full Year 2020 Financial Results
Horizon Technology Finance Corporation (HRZN) reported its Q4 and full-year 2020 financial results, revealing a decline in net investment income (NII) to $3.9 million ($0.21 per share) from $6.5 million ($0.43 per share) in 2019. The total investment portfolio stood at $352.5 million, with a net asset value of $212.6 million ($11.02 per share). Despite a challenging year, new loans amounting to $76.6 million were funded in Q4. Monthly distributions of $0.10 per share were declared for April, May, and June 2021, showcasing a proactive portfolio management strategy.
- Raised total net proceeds of approximately $10.8 million through ATM offering.
- Funded 25 loans totaling $198.6 million for the full year 2020.
- Monthly distributions maintained at $0.10 per share through June 2021.
- Decline in net investment income per share from $1.52 in 2019 to $1.18 in 2020.
- Net realized losses on investments increased to $14.7 million for 2020 from $4.2 million in 2019.
- Decrease in total investment income from $13.0 million in Q4 2019 to $10.1 million in Q4 2020.
FARMINGTON, Conn., March 2, 2021 /PRNewswire/ -- Horizon Technology Finance Corporation (NASDAQ: HRZN) ("Horizon" or the "Company"), a leading specialty finance company that provides capital in the form of secured loans to venture capital backed companies in the technology, life science, healthcare information and services, and sustainability industries, today announced its financial results for the fourth quarter and full year ended December 31, 2020.
Fourth Quarter 2020 Highlights
- Net investment income ("NII") of
$3.9 million , or$0.21 per share, compared to$6.5 million , or$0.43 per share for the prior-year period - Total investment portfolio of
$352.5 million as of December 31, 2020 - Net asset value of
$212.6 million , or$11.02 per share, as of December 31, 2020 - Annualized portfolio yield on debt investments of
13.0% for the quarter - Funded nine loans totaling
$76.6 million during the quarter - Raised total net proceeds of approximately
$10.8 million with "at-the-market" ("ATM") offering program - Experienced liquidity events from three portfolio companies
- Cash of
$46.7 million and credit facility capacity of$174.8 million as of December 31, 2020 - Held portfolio of warrant and equity positions in 68 companies as of December 31, 2020
- Undistributed spillover income of
$0.32 per share as of December 31, 2020 - Subsequent to quarter end, declared distributions of
$0.10 per share payable in April, May and June 2021
Full Year 2020 Highlights
- Net investment income of
$20.7 million , or$1.18 per share for 2020, compared to$20.5 million , or$1.52 per share, for the prior year - Achieved portfolio yield on debt investments of
14.6% for 2020 - Funded 25 loans totaling
$198.6 million ; experienced liquidity events from 17 portfolio companies
"Despite one of the more challenging years, we managed our investment portfolio and capital through 2020 to position ourselves to generate strong results and continue expanding our portfolio as we enter 2021," said Robert D. Pomeroy, Jr., Chairman and Chief Executive Officer of Horizon. "Although our fourth quarter NII of
"In addition, during the quarter, we made significant progress in successfully exiting several underperforming loans. While this had an impact on realized losses, our portfolio at the end of the year reflects an enhanced credit profile as we enter 2021," continued Mr. Pomeroy. "With the liquidity on our balance sheet, a strong backlog and pipeline of attractive opportunities, and a high market demand for venture debt, we believe we are well situated to take advantage of compelling investment opportunities and to continue delivering attractive returns for our shareholders."
Fourth Quarter 2020 Operating Results
Total investment income for the quarter ended December 31, 2020 was
The Company's dollar-weighted annualized yield on average debt investments for the quarter ended December 31, 2020 and 2019 was
Net expenses for the quarter ended December 31, 2020 were
Net investment income for the quarter ended December 31, 2020 was
For the quarter ended December 31, 2020, net realized loss on investments was
For the quarter ended December 31, 2020, net unrealized appreciation on investments was
Full Year 2020 Operating Results
Total investment income for the year ended December 31, 2020 was
Horizon's dollar-weighted annualized yield on average debt investments for the year ended December 31, 2020 and 2019 was
For the full year ended December 31, 2020, net investment income was
For the full year ended December 31, 2020, net realized loss on investments was
For the full year ended December 31, 2020, net unrealized appreciation on investments was
Portfolio Summary and Investment Activity
As of December 31, 2020, the Company's debt portfolio consisted of 34 secured loans with an aggregate fair value of
($ in thousands) | For the Three Months Ended | For the Full Year Ended | ||
2020 | 2019 | 2020 | 2019 | |
Beginning portfolio | $ 311,750 | $ 281,519 | $ 319,551 | $ 248,441 |
New debt investments | 76,913 | 65,548 | 198,561 | 200,832 |
Less refinanced debt investments | — | — | — | (17,500) |
Net new debt investments | 76,913 | 65,548 | 198,561 | 183,332 |
Investment in controlled affiliate investment | — | 1,311 | — | 1,900 |
Principal payments received on investments | (4,485) | (4,300) | (24,829) | (17,369) |
Early pay-offs | (30,644) | (23,773) | (121,429) | (94,321) |
Accretion of debt investment fees | 815 | 986 | 3,895 | 3,865 |
New debt investment fees | (938) | (905) | (2,353) | (2,669) |
New equity | — | — | — | 240 |
Warrants received in settlement of fee income | — | — | 978 | — |
Proceeds from sale of investments | (134) | (2,137) | (8,335) | (4,548) |
Dividend income from controlled affiliate investment | — | 1,013 | 118 | 2,236 |
Distributions from controlled affiliate investment | — | — | — | (715) |
Net realized loss on investments | (17,672) | (302) | (13,727) | (4,192) |
Net unrealized appreciation on investments | 17,139 | 579 | 313 | 3,201 |
Other | (199) | 12 | (198) | 150 |
Ending portfolio | $ 352,545 | $ 319,551 | $ 352,545 | $ 319,551 |
Portfolio Asset Quality
The following table shows the classification of Horizon's loan portfolio at fair value by internal credit rating as of December 31, 2020, September 30, 2020 and December 31, 2019:
($ in thousands) | December 31, 2020 | September 30, 2020 | December 31, 2019 | ||||||||
Number of | Debt | Percentage | Number of | Debt | Percentage | Number of | Debt | Percentage | |||
Credit | |||||||||||
4 | 6 | $ 77,950 | 5 | $ 67,893 | 4 | $ 45,339 | |||||
3 | 24 | 240,933 | 21 | 198,841 | 26 | 216,128 | |||||
2 | 3 | 12,875 | 3 | 12,752 | 3 | 24,888 | |||||
1 | 1 | 1,737 | 5 | 19,400 | 2 | 2,000 | |||||
Total | 34 | $ 333,495 | 34 | $ 298,886 | 35 | $ 288,355 | |||||
As of December 31, 2020, Horizon's loan portfolio had a weighted average credit rating of 3.2 compared to 3.1 as of September 30, 2020 and December 31, 2019, respectively, with 4 being the highest credit quality rating and 3 being the rating for a standard level of risk. A rating of 2 represents an increased level of risk and, while no loss is currently anticipated for a 2-rated loan, there is potential for future loss of principal. A rating of 1 represents deteriorating credit quality and high degree of risk of loss of principal.
As of December 31, 2020, there was one debt investment with an internal credit rating of 1, with a cost of
Liquidity and Capital Resources
As of December 31, 2020, the Company had
As of December 31, 2020, there was
Additionally, as of December 31, 2020, there was
Horizon Funding Trust 2019-1, a wholly-owned subsidiary of Horizon, previously issued
During the three months ended December 31, 2020, the Company sold 915,340 shares of common stock under its ATM offering program with Goldman Sachs & Co. LLC and B. Riley FBR, Inc. For the same period, the Company received total accumulated net proceeds of approximately
As of December 31, 2020, the Company's debt to equity leverage ratio was
Liquidity Events
During the quarter ended December 31, 2020, Horizon experienced liquidity events from three portfolio companies. Liquidity events for Horizon may consist of the sale of warrants or equity in portfolio companies, loan prepayments, sale of owned assets or receipt of success fees.
In November, Horizon received proceeds and equity totaling
In December, Mohawk Group Holdings ("Mohawk") (NASDAQ: MWK) prepaid its outstanding principal balance of
In December, Vero Biotech, LLC ("Vero") prepaid its outstanding principal balance of
Net Asset Value
At December 31, 2020, the Company's net assets were
For the quarter ended December 31, 2020, net increase in net assets resulting from operations was
Stock Repurchase Program
During the quarter ended December 31, 2020, the Company did not repurchase any shares of its common stock. From the inception of the stock repurchase program through December 31, 2020, the Company has repurchased 167,465 shares of its common stock at an average price of
Recent Developments
Subsequent to December 31, 2020 pursuant to private foreclosure sales, the Company has received net proceeds of approximately
On January 14, 2021, the Company funded a
On January 15, 2021, the Company funded a
On February 23, 2021, the Company funded a
On February 25, 2021, the Company funded a
Monthly Distributions Declared in First Quarter 2021
On February 26, 2021, the Company's board of directors declared monthly distributions of
Monthly Distributions
Ex-Dividend Date | Record Date | Payment Date | Amount per Share |
March 17, 2021 | March 18, 2021 | April 16, 2021 | |
April 19, 2021 | April 20, 2021 | May 14, 2021 | |
May 17, 2021 | May 18, 2021 | June 15, 2021 | |
Total: |
After paying distributions of
When declaring distributions, the Horizon board of directors reviews estimates of taxable income available for distribution, which may differ from consolidated net income under generally accepted accounting principles due to (i) changes in unrealized appreciation and depreciation, (ii) temporary and permanent differences in income and expense recognition, and (iii) the amount of spillover income carried over from a given year for distribution in the following year. The final determination of taxable income for each tax year, as well as the tax attributes for distributions in such tax year, will be made after the close of the tax year.
Conference Call
The Company will host a conference call on Wednesday, March 3, 2021, at 9:00 a.m. ET to discuss its latest corporate developments and financial results. To participate in the call, please dial (877) 407-9716 (domestic) or (201) 493-6779 (international). The access code for all callers is 13715731. The Company recommends joining the call at least 10 minutes in advance. In addition, a live webcast will be available on the Company's website at www.horizontechfinance.com.
A webcast replay will be available on the Company's website for 30 days following the call.
About Horizon Technology Finance
Horizon Technology Finance Corporation (NASDAQ: HRZN) is a leading specialty finance company that provides capital in the form of secured loans to venture capital backed companies in the technology, life science, healthcare information and services, and sustainability industries. The investment objective of Horizon is to maximize its investment portfolio's return by generating current income from the debt investments it makes and capital appreciation from the warrants it receives when making such debt investments. Headquartered in Farmington, Connecticut, Horizon also has regional offices in Pleasanton, California and Reston, Virginia. To learn more, please visit www.horizontechfinance.com.
Forward-Looking Statements
Statements included herein may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in Horizon's filings with the Securities and Exchange Commission. Horizon undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.
Contacts:
Investor Relations:
ICR
Garrett Edson
ir@horizontechfinance.com
(860) 284-6450
Media Relations:
ICR
Chris Gillick
HorizonPR@icrinc.com
(646) 677-1819
Horizon Technology Finance Corporation and Subsidiaries Consolidated Statements of Assets and Liabilities | |||||
December 31, | December 31, | ||||
2020 | 2019 | ||||
Assets | |||||
Non-affiliate investments at fair value (cost of | $ 343,498 | $ 294,304 | |||
Non-controlled affiliate investments at fair value (cost of | 7,547 | 8,597 | |||
Controlled affiliate investments at fair value (cost of | 1,500 | 16,650 | |||
Total investments at fair value (cost of | 352,545 | 319,551 | |||
Cash | 19,502 | 6,465 | |||
Investments in money market funds | 27,199 | 9,787 | |||
Restricted investments in money market funds | 1,057 | 1,133 | |||
Interest receivable | 4,946 | 5,530 | |||
Other assets | 1,908 | 1,535 | |||
Total assets | $ 407,157 | $ 344,001 | |||
Liabilities | |||||
Borrowings | $ 185,819 | $ 152,050 | |||
Distributions payable | 5,786 | 4,669 | |||
Base management fee payable | 563 | 519 | |||
Incentive fee payable | 975 | 1,613 | |||
Other accrued expenses | 1,417 | 1,095 | |||
Total liabilities | 194,560 | 159,946 | |||
Commitments and contingencies | |||||
Net assets | |||||
Preferred stock, par value | — | — | |||
Common stock, par value | 19 | 16 | |||
Paid-in capital in excess of par | 271,287 | 226,660 | |||
Distributable earnings | (58,709) | (42,621) | |||
Total net assets | 212,597 | 184,055 | |||
Total liabilities and net assets | $ 407,157 | $ 344,001 | |||
Net asset value per common share | $ 11.02 | $ 11.83 | |||
Horizon Technology Finance Corporation and Subsidiaries Consolidated Statements of Operations | ||||||||
For the Three Months Ended | For the Year Ended | |||||||
December 31, | December 31, | |||||||
2020 | 2019 | 2020 | 2019 | |||||
Investment income | ||||||||
Interest income on investments | ||||||||
Interest income on non-affiliate investments | $ 9,217 | $ 10,818 | $ 41,503 | $ 36,247 | ||||
Interest income on affiliate investments | 157 | 194 | 689 | 839 | ||||
Total interest income on investments | 9,374 | 11,012 | 42,192 | 37,086 | ||||
Fee income | ||||||||
Prepayment fee income on non-affiliate investments | 434 | 923 | 2,345 | 2,296 | ||||
Fee income on non-affiliate investments | 223 | 23 | 1,335 | 1,490 | ||||
Fee income on affiliate investments | 35 | 4 | 45 | 17 | ||||
Total fee income | 692 | 950 | 3,725 | 3,803 | ||||
Dividend income | ||||||||
Dividend income on controlled affiliate investments | — | 1,013 | 118 | 2,236 | ||||
Total dividend income | — | 1,013 | 118 | 2,236 | ||||
Total investment income | 10,066 | 12,975 | 46,035 | 43,125 | ||||
Expenses | ||||||||
Interest expense | 2,342 | 2,121 | 9,673 | 8,330 | ||||
Base management fee | 1,593 | 1,501 | 6,458 | 5,556 | ||||
Performance based incentive fee | 975 | 1,614 | 5,187 | 6,966 | ||||
Administrative fee | 276 | 276 | 1,016 | 907 | ||||
Professional fees | 445 | 492 | 1,540 | 1,537 | ||||
General and administrative | 312 | 280 | 1,190 | 968 | ||||
Total expenses | 5,943 | 6,284 | 25,064 | 24,264 | ||||
Performance based incentive fee waived | — | — | — | (1,848) | ||||
Net expenses | 5,943 | 6,284 | 25,064 | 22,416 | ||||
Net investment income before excise tax | 4,123 | 6,691 | 20,971 | 20,709 | ||||
Provision for excise tax | 222 | 239 | 222 | 239 | ||||
Net investment income | 3,901 | 6,452 | 20,749 | 20,470 | ||||
Net realized and unrealized (loss) gain on investments | ||||||||
Net realized loss on non-affiliate investments | (18,644) | (302) | (14,686) | (4,173) | ||||
Net realized loss on controlled affiliate investments | — | — | (12) | — | ||||
Net realized loss on investments | (18,644) | (302) | (14,698) | (4,173) | ||||
Net unrealized appreciation on non-affiliate investments | 17,020 | 576 | 1,585 | 1,196 | ||||
Net unrealized appreciation (depreciation) on non-controlled affiliate investments | 120 | — | (1,014) | 2,019 | ||||
Net unrealized appreciation (depreciation) on controlled affiliate investments | — | 3 | (258) | (14) | ||||
Net unrealized appreciation on investments | 17,140 | 579 | 313 | 3,201 | ||||
Net realized and unrealized (loss) gain on investments | (1,504) | 277 | (14,385) | (972) | ||||
Net increase in net assets resulting from operations | $ 2,397 | $ 6,729 | $ 6,364 | $ 19,498 | ||||
Net investment income per common share | $ 0.21 | $ 0.43 | $ 1.18 | $ 1.52 | ||||
Net increase in net assets per common share | $ 0.13 | $ 0.45 | $ 0.36 | $ 1.45 | ||||
Distributions declared per share | $ 0.30 | $ 0.30 | $ 1.25 | $ 1.20 | ||||
Weighted average shares outstanding | 18,794,836 | 14,847,376 | 17,534,528 | 13,478,234 | ||||
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SOURCE Horizon Technology Finance Corporation
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