Horizon Technology Finance Announces Fourth Quarter and Full Year 2021 Financial Results


FARMINGTON, Conn., March 1, 2022 /PRNewswire/ — Horizon Technology Finance Corporation (NASDAQ: HRZN) (“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, 2021.

Fourth Quarter 2021 Highlights

  • Net investment income (“NII”) of $8.1 million, or $0.39 per share, compared to $3.9 million, or $0.21 per share for the prior-year period
  • Total investment portfolio of $458.1 million as of December 31, 2021
  • Net asset value of $245.3 million, or $11.56 per share, as of December 31, 2021
  • Annualized portfolio yield on debt investments of 16.2% for the quarter
  • HRZN funded 17 loans totaling $79.9 million
  • HRZN’s investment adviser, Horizon Technology Finance Management LLC (“HTFM”), originated $118.2 million through its lending platform (“Horizon Platform”), inclusive of the HRZN loans
  • Raised total net proceeds of approximately $12.8 million with “at-the-market” (“ATM”) offering program
  • Experienced liquidity events from seven portfolio companies
  • Cash of $45.9 million and credit facility capacity of $92.8 million as of December 31, 2021
  • Held portfolio of warrant and equity positions in 76 companies as of December 31, 2021
  • Undistributed spillover income of $0.51 per share as of December 31, 2021
  • Subsequent to quarter end, declared distributions of $0.10 per share payable in April, May and June 2022

Full Year 2021 Highlights

  • Net investment income of $28.2 million, or $1.41 per share for 2021, compared to $20.7 million, or $1.18 per share, for the prior year
  • Achieved portfolio yield on debt investments of 15.7% for 2021
  • HRZN funded 49 loans totaling $297.1 million; experienced liquidity events from 20 portfolio companies

“The fourth quarter capped off a landmark year for Horizon and the Horizon Platform, including a record investment portfolio at year-end of over $450 million, and we are proud of our entire team’s efforts,” said Robert D. Pomeroy, Jr., Chairman and Chief Executive Officer of Horizon.  “We generated NII of $0.39 per share, above our distribution level, while we continued growing our portfolio.  Once again, we successfully harnessed the increasing power of the ‘Horizon’ brand to drive strong loan originations in the quarter, while maintaining an impressive committed backlog and pipeline of venture debt opportunities.  In addition, HTFM’s predictive pricing strategy continued to prosper, as we completed seven portfolio exits, once again leading to a debt portfolio yield of over 16%, among the top of the industry.”

“Along with HRZN’s excellent growth, we finished the year with nearly 98% of its portfolio 3-rated or better,” continued Mr. Pomeroy.  “We also recently further strengthened HRZN’s balance sheet and expanded its lending capacity, which should enable us to further grow the portfolio in 2022.  With demand for venture debt remaining at near-peak levels, and with an extensive committed backlog and pipeline, we believe HRZN is well situated in 2022 to continue to grow its portfolio and deliver compelling returns to its shareholders.”

Fourth Quarter 2021 Operating Results

Total investment income for the quarter ended December 31, 2021 grew 68% to $16.9 million, compared to $10.1 million for the quarter ended December 31, 2020, primarily due to growth in interest income on investments resulting from an increase in the average size of the debt investment portfolio, as well as higher fee income.

The Company’s dollar-weighted annualized yield on average debt investments for the quarter ended December 31, 2021 and 2020 was 16.2% and 13.0%, respectively.  The Company calculates the dollar-weighted annualized yield on average debt investments for any period measured as (1) total investment income (excluding dividend income) during the period divided by (2) the average of the fair value of debt investments outstanding on (a) the last day of the calendar month immediately preceding the first day of the period and (b) the last day of each calendar month during the period. The dollar-weighted annualized yield on average debt investments is higher than what investors will realize because it does not reflect expenses or any sales load paid by investors.

Total expenses for the quarter ended December 31, 2021 were $8.7 million, compared to $5.9 million for the quarter ended December 31, 2020.  The increase was primarily due to a $0.9 million increase in interest expense, a $0.4 million increase in the base management fee and a $1.0 million increase in the performance-based incentive fee.

Net investment income for the quarter ended December 31, 2021 was $8.1 million, or $0.39 per share, compared to $3.9 million, or $0.21 per share, for the quarter ended December 31, 2020.

For the quarter ended December 31, 2021, net realized loss on investments was $0.9 million, or $0.04 per share, compared to net realized loss on investments of $18.6 million, or $0.99 per share, for the quarter ended December 31, 2020.

For the quarter ended December 31, 2021, net unrealized depreciation on investments was $4.9 million, or $0.24 per share, compared to net unrealized appreciation on investments of $17.1 million, or $0.91 per share, for the prior-year period.

Full Year 2021 Operating Results

Total investment income for the year ended December 31, 2021 was $60.0 million, an increase of 30% compared to $46.0 million for the year ended December 31, 2020.

Horizon’s dollar-weighted annualized yield on average debt investments for the year ended December 31, 2021 and 2020 was 15.7% and 14.6%, respectively.

For the full year ended December 31, 2021, net investment income was $28.2 million, or $1.41 per share, compared to net investment income of $20.7 million, or $1.18 per share, in the prior year.

For the full year ended December 31, 2021, net realized loss on investments was $3.2 million, or $0.16 per share, compared to net realized loss on investments of $14.7 million, or $0.84 per share, for the full year ended December 31, 2020.

For the full year ended December 31, 2021, net unrealized appreciation on investments was $3.2 million, or $0.16 per share, compared to net unrealized appreciation on investments of $0.3 million, or $0.02 per share, for the full year ended December 31, 2020.

Portfolio Summary and Investment Activity

As of December 31, 2021, the Company’s debt portfolio consisted of 45 secured loans with an aggregate fair value of $437.3 million. In addition, the Company’s total warrant, equity and other investments in 78 portfolio companies had an aggregate fair value of $20.8 million.  Total portfolio investment activity for the three months and full year ended December 31, 2021 and 2020 was as follows:

($ in thousands)

For the Three Months Ended 
December 31,

For the Full Year Ended
December 31,


2021

2020

2021

2020

Beginning portfolio

$              452,346

$              311,750

$        352,545

$        319,551






New debt investments

88,693

76,913

344,445

198,561






Principal payments received on investments

(2,171)

(4,485)

(13,474)

(24,829)






Early pay-offs

(66,579)

(30,644)

(174,536)

(121,429)






Accretion of debt investment fees

1,370

815

4,556

3,895






New debt investment fees

(930)

(938)

(3,261)

(2,353)






Warrants received in settlement of fee income

978






Proceeds from sale of investments

(9,169)

(134)

(52,954)

(8,335)






Dividend income from controlled affiliate investment

118






Net realized loss on investments

(568)

(17,672)

(2,451)

(13,727)






Net unrealized (depreciation) appreciation on investments

(4,917)

17,139

3,205

313






Other

(199)

(198)






Ending portfolio

$              458,075

$              352,545

$       458,075

$       352,545

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, 2021, September 30, 2021 and December 31, 2020:

($ in thousands)

December 31, 2021


 

September 30, 2021


 

December 31, 2020


Number of Investments

Debt Investments at Fair Value

Percentage of Debt Investments


Number of Investments

Debt Investments at Fair Value

Percentage of Debt Investments


Number of Investments

Debt Investments at Fair Value

Percentage of Debt Investments

Credit Rating












4

9

$      104,863

24.0%


5

$       56,337

13.1%


6

$       77,950

23.4%

3

34

322,084

73.6%


35

359,658

83.7%


24

240,933

72.2%

2

1

3,470

0.8%


2

11,141

2.6%


3

12,875

3.9%

1

1

6,900

1.6%


1

2,800

0.6%


1

1,737

0.5%

Total

45

$     437,317

100.0%


43

$     429,936

100.0%


34

$     333,495

100.0%

As of December 31, 2021, Horizon’s loan portfolio had a weighted average credit rating of 3.2, compared to 3.1 as of September 30, 2021 and 3.2 as of December 31, 2020, 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, 2021, there was one debt investment with an internal credit rating of 1, with a cost of $11.5 million and a fair value of $6.9 million.  As of September 30, 2021, there was one debt investment with an internal credit rating of 1, with a cost of $3.0 million and a fair value of $2.8 million.  As of December 31, 2020, there was one debt investment with an internal credit rating of 1, with a cost of $6.8 million and a fair value of $1.7 million.

Liquidity and Capital Resources

As of December 31, 2021, the Company had $71.4 million in available liquidity, consisting of $45.9 million in cash and money market funds, and $25.5 million in funds available under existing credit facility commitments.

As of December 31, 2021, there was $53.5 million in outstanding principal balance under our $125.0 million revolving credit facility (“Key Facility”).  The Key Facility allows for an increase in the total loan commitment up to an aggregate commitment of $150.0 million. There can be no assurance that any additional lenders will make any commitments under the Key Facility.

Additionally, as of December 31, 2021, there was $78.8 million in outstanding principal balance under our $100 million senior secured debt facility with a large U.S.-based insurance company at an interest rate of 4.62%.  Subsequent to…



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