FARMINGTON, Conn., March 7, 2017 /PRNewswire/ -- Horizon
Technology Finance Corporation (NASDAQ: HRZN) (the "Company" or
"Horizon"), 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 cleantech industries, today announced its
financial results for the fourth quarter and full year ended
December 31, 2016.
Fourth Quarter and Full Year 2016 Highlights
- Earned net investment income of $3.8
million, or $0.33 per share,
for the quarter and $17.1 million, or
$1.48 per share, for the year
- Achieved an annualized portfolio yield of 14.2% for the quarter
and 14.9% for the year
- Total liquidity of $41.7 million
at year end
- Ended the year with an investment portfolio of $194.0 million
- Net asset value equaled $139.2
million, or $12.09 per share,
at year end
- Asset coverage for borrowed amounts of 245% as of December 31, 2016
- Floating rate loans comprised 96% of the outstanding principal
of the loan portfolio at year end
- Funded $13.8 million in loans for
the quarter and $57.8 million for the
full year
- Experienced liquidity events from three portfolio companies in
the quarter and 13 companies for the year
- At year end, held a portfolio of warrant and equity positions
in 83 portfolio companies
- Declared distributions of $0.10
per share payable in each of April, May and June 2017, increasing cumulative declared
distributions to $9.32 per share
since going public in October
2010
- Repurchased 48,160 shares of Horizon's common stock during the
year at an average price of $10.66 on
the open market at a total cost of $0.5
million
"In 2016, Horizon maintained its disciplined approach to
sourcing growth capital loans with attractive on-boarding yields,
while it bolstered its investment platform's capabilities to
capitalize on opportunities in the life science and healthcare
technology markets," said Robert D.
Pomeroy, Jr., Chairman and Chief Executive Officer of
Horizon. "Our strategy allowed us to successfully cover our
distributions with net investment income for the year. In addition,
we realized profitable liquidity events from 13 portfolio
companies, which contributed to our portfolio yield."
Mr. Pomeroy continued, "As we enter 2017, we have the liquidity
to grow the portfolio by selectively originating new loans. With
the addition of two new members to our healthcare and life sciences
team, who will broaden and strengthen our existing capabilities, we
believe Horizon is well positioned over the coming quarters to
continue to take advantage of the opportunities to invest in
promising growth-stage companies in our targeted
industries." Mr. Pomeroy concluded, "Moving ahead, we remain
committed to creating long-term shareholder value by funding loans
with appropriate risk-adjusted returns."
Operating Results
Total investment income was $7.0
million for the three months ended December 31, 2016, as compared to $8.6 million for the three months ended
December 31, 2015. The year-over-year
decrease in total investment income is primarily due to lower
interest income on investments resulting from the smaller average
size of the loan portfolio. For the years ended December 31, 2016 and 2015, total investment
income was $33.0 million and
$31.1 million, respectively.
The Company's dollar-weighted annualized portfolio yield on
average loans for the three months ended December 31, 2016 and 2015 was 14.2%. Horizon's
dollar-weighted annualized portfolio yield on average loans for the
years ended December 31, 2016 and
2015 was 14.9% and 14.2%, respectively.
Total net expenses for the three months ended December 31, 2016 were $3.1 million, as compared to $4.5 million for the three months ended
December 31, 2015. Interest expense
decreased slightly year-over-year primarily due to a decrease in
average borrowings. Base management fee decreased year-over-year
primarily due to a decrease in the average size of our investment
portfolio. For the three months ended December 31, 2016, the Company did not incur an
incentive fee expense as the incentive fee on pre-incentive fee net
investment income was subject to the incentive fee cap and deferral
mechanism under the Company's Investment Management Agreement,
which resulted in $0.8 million of
reduced expense and additional net investment income. Total net
expenses for the year ended December 31,
2016 decreased by $1.1
million, to $16.0 million, as
compared to $17.1 million for the
year ended December 31, 2015.
Net investment income for the three months ended December 31, 2016 was $3.8
million, or $0.33 per share,
as compared to $4.1 million, or
$0.35 per share, for the three months
ended December 31, 2015. For the
years ended December 31, 2016 and
2015, net investment income was $17.1
million, or $1.48 per share,
and $14.0 million, or $1.25 per share, respectively.
For the three months ended December 31,
2016, the net realized loss on investments was $4.9 million, or $0.43 per share, as compared to net realized gain
on investments of $0.1 million, or
$0.01 per share, for the three months
ended December 31, 2015. For the
years ended December 31, 2016 and
2015, the net realized loss on investments was $7.8 million, or $0.67 per share, and $1.7
million, or $0.15 per share,
respectively.
For the three months ended December 31,
2016, the net unrealized appreciation on investments was
$0.5 million, or $0.05 per share, as compared to net unrealized
depreciation on investments of $1.4
million, or $0.12 per share,
for the three months ended December 31,
2015. For the year ended December 31,
2016, the net unrealized depreciation on investments was
$14.2 million, or $1.24 per share, as compared to net unrealized
depreciation on investments of $0.5
million, or $0.04 per share,
for the year ended December 31,
2015.
Portfolio Summary and Investment Activity
As of
December 31, 2016, the Company's debt
portfolio consisted of 44 secured loans with an aggregate fair
value of $186.2 million. In addition,
the Company's total warrant, equity and other investments in 85
portfolio companies had an aggregate fair value of $7.8 million as of December 31, 2016. Total portfolio investment
activity as of and for the three months and years ended
December 31, 2016 and 2015 was as
follows:
($ in
thousands)
|
For the Three
Months Ended
December 31,
|
|
For the Years
Ended
December 31,
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
Beginning
portfolio
|
$
208,177
|
|
$
249,033
|
|
|
$
250,267
|
|
$
205,101
|
|
New debt
investments
|
14,635
|
|
18,500
|
|
|
59,858
|
|
123,281
|
|
Principal payments
received on investments
|
(13,778)
|
|
(8,041)
|
|
|
(49,403)
|
|
(27,016)
|
|
Early
pay-offs
|
(12,667)
|
|
(8,006)
|
|
|
(46,357)
|
|
(47,624)
|
|
Accretion of debt
investment fees
|
439
|
|
335
|
|
|
1,562
|
|
1,350
|
|
New debt investment
fees
|
(217)
|
|
(188)
|
|
|
(931)
|
|
(1,147)
|
|
New equity
|
17
|
|
101
|
|
|
84
|
|
101
|
|
Sale of
investments
|
(45)
|
|
(91)
|
|
|
(984)
|
|
(1,669)
|
|
Net realized (loss)
gain on investments
|
(4,913)
|
|
72
|
|
|
(7,696)
|
|
(1,620)
|
|
Net unrealized
appreciation (depreciation) on investments
|
2,355
|
|
(1,448)
|
|
|
(12,397)
|
|
(490)
|
|
Ending
portfolio
|
$
194,003
|
|
$
250,267
|
|
|
$
194,003
|
|
$
250,267
|
|
Net Asset Value
At December 31,
2016, the Company's net assets were $139.2 million, or $12.09 per share, as compared to $159.8 million, or $13.85 per share, as of December 31, 2015, and $143.7 million, or $12.44 per share, as of September 30, 2016.
For the three months ended December 31,
2016, the net decrease in net assets resulting from
operations was $0.6 million, or
$0.05 per share, compared with a net
increase in net assets of $2.7
million, or $0.22 per share,
for the three months ended December 31,
2015. For the year ended December 31,
2016, the net decrease in net assets resulting from
operations was $4.9 million, or
$0.43 per share, as compared to a net
increase in net assets of $11.9
million, or $1.06 per share,
for the year ended December 31,
2015.
Portfolio Asset Quality
The following table shows the
classification of Horizon's loan portfolio at fair value by
internal credit rating as of December 31,
2016 and December 31,
2015:
($ in
thousands)
|
December 31,
2016
|
|
December 31,
2015
|
|
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
|
6
|
|
$
29,721
|
|
16.0%
|
|
7
|
|
$
23,603
|
|
9.8%
|
3
|
28
|
|
131,605
|
|
70.6
|
|
37
|
|
199,185
|
|
82.2
|
2
|
6
|
|
13,360
|
|
7.2
|
|
7
|
|
18,879
|
|
7.8
|
1
|
4
|
|
11,500
|
|
6.2
|
|
1
|
|
500
|
|
0.2
|
Total
|
44
|
|
$
186,186
|
|
100.0%
|
|
52
|
|
$
242,167
|
|
100.0%
|
As of December 31, 2016 and
December 31, 2015, Horizon's loan
portfolio had a weighted average credit rating of 3.0, 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 a deteriorating credit quality and high degree of risk
of loss of principal. As of December 31,
2016, there were four debt investments with an internal
credit rating of 1, with a cost of $26.2
million and a fair value of $11.5
million. As of December 31,
2015, there was one debt investment with an internal credit
rating of 1, with a cost of $2.7
million and a fair value of $0.5
million.
Liquidity Events
Horizon experienced liquidity events
from three portfolio companies in the quarter ended December 31, 2016, increasing the total number of
portfolio company liquidity events to 13 for the full year.
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, Additech, Inc. ("Additech") prepaid the outstanding
principal balance of $3.8 million on
its venture loan, plus interest and end-of-term payment. Horizon
continues to hold warrants in Additech.
In November, Crowdstar, Inc. ("Crowdstar") prepaid the
outstanding principal balance of $1.3
million on its venture loan, plus interest, end-of-term
payment and prepayment fee. Horizon also received proceeds from the
exercise and sale of warrants in Crowdstar.
In December, Medsphere Systems Corporation ("Medsphere") prepaid
the outstanding principal balance of $7.5
million on its venture loan, plus interest, end-of-term
payment and prepayment fee. Horizon continues to hold warrants in
Medsphere.
Liquidity and Capital Resources
As of December 31, 2016, the Company had $41.7 million in available liquidity, including
$37.1 million in cash and
$4.6 million in funds available under
existing credit facility commitments.
At December 31, 2016, there was
$63.0 million outstanding under the
$95 million revolving credit
facility. The facility allows for an increase in the total loan
commitment up to an aggregate commitment of $150 million. There can be no assurance that any
additional lenders will make any commitments under the
facility.
As of December 31, 2016, the
Company's debt to equity leverage ratio was 69%, and the asset
coverage ratio for borrowed amounts was 245%.
Stock Repurchase Program
On July 29, 2016, the Company's board of directors
extended the Company's previously authorized stock repurchase
program until the earlier of June 30,
2017 or the repurchase of $5.0
million of the Company's common stock. During the year ended
December 31, 2016, the Company
repurchased 48,160 shares of its common stock at an average price
of $10.66 on the open market at a
total cost of $0.5 million. From the
inception of the stock repurchase program through December 31, 2016, the Company has repurchased
161,542 shares of its common stock at an average price of
$11.27 on the open market at a total
cost of $1.8 million.
Monthly Distributions Declared in First Quarter
2017
On March 3, 2017, the
Company's board of directors declared monthly distributions of
$0.10 per share payable in each of
April, May and June 2017. The
following table shows these monthly distributions, which total
$0.30 per share:
Ex-Dividend
Date
|
Record
Date
|
Payment
Date
|
Amount Per
Share
|
March 16,
2017
|
March 20,
2017
|
April 18,
2017
|
$0.10
|
April 19,
2017
|
April 21,
2017
|
May 16,
2017
|
$0.10
|
May 17,
2017
|
May 19,
2017
|
June 15,
2017
|
$0.10
|
|
|
Total:
|
$0.30
|
After paying distributions of $1.26 per share deemed paid for tax purposes in
2016, declaring on October 28, 2016 a
distribution of $0.10 per share
payable January 13, 2017, and taxable
earnings of $1.41 per share for the
quarter, the Company's undistributed spillover income as of
December 31, 2016 was $0.15 per share. Spillover income includes any
ordinary income and net capital gains from the preceding tax years
that were not distributed during such tax years.
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 8, 2017 at
9:00 a.m. ET to discuss its latest
corporate developments and financial results. The dial-in number
for callers in the U.S. is (877) 677-9112, and the dial-in number
for international callers is (708) 290-1396. The access code for
all callers is 54511994.
A live webcast will be available on the Company's website at
www.horizontechfinance.com.
A replay of the call will be available through March 10, 2017. To access the replay, please dial
(855) 859-2056 in the United
States and (404) 537-3406 outside the United States, and then enter the access
code 54511994. An online archive of the webcast will be available
on the Company's website for 30 days following the call.
About Horizon Technology Finance
Horizon Technology
Finance Corporation 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 cleantech 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 has regional
offices in Pleasanton, California,
Reston, Virginia and Boston, Massachusetts. Horizon's common stock
trades on the NASDAQ Global Select Market under the ticker symbol
"HRZN". 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 our 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:
|
|
|
|
Horizon Technology
Finance
|
Investor Relations
and Media Contact:
|
Daniel R.
Trolio
|
The IGB
Group
|
Chief Financial
Officer
|
Scott Eckstein / Leon
Berman
|
(860)
674-9977
|
(212) 477-8261 /
(212) 477-8438
|
dtrolio@horizontechfinance.com
|
seckstein@igbir.com /
lberman@igbir.com
|
Horizon Technology
Finance Corporation and Subsidiaries
|
|
Consolidated
Statements of Assets and Liabilities
|
(Dollars in
thousands, except share and per share data)
|
|
|
|
December
31,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
Assets
|
|
|
|
|
Non-affiliate
investments at fair value (cost of $211,627 and $255,494, respectively)
|
$
194,003
|
|
$
250,267
|
|
Investments in money
market funds
|
—
|
|
285
|
|
Cash
|
37,135
|
|
20,765
|
|
Restricted investments
in money market funds
|
—
|
|
1,091
|
|
Interest
receivable
|
6,036
|
|
6,258
|
|
Other assets
|
2,078
|
|
2,230
|
|
Total
assets
|
$
239,252
|
|
$
280,896
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Borrowings
|
$
95,597
|
|
$
114,954
|
|
Distributions
payable
|
3,453
|
|
3,980
|
|
Base management fee
payable
|
337
|
|
385
|
|
Incentive fee
payable
|
—
|
|
1,028
|
|
Other accrued
expenses
|
673
|
|
798
|
|
Total
liabilities
|
100,060
|
|
121,145
|
|
|
|
|
|
|
Net
assets
|
|
|
|
|
Preferred stock, par
value $0.001 per share, 1,000,000 shares authorized, zero
shares issued and outstanding as of
December 31, 2016 and 2015
|
—
|
|
—
|
|
Common stock, par value
$0.001 per share, 100,000,000 shares authorized,
11,671,966 and 11,648,594 shares issued
and 11,510,424 and 11,535,212 shares outstanding as of December 31,
2016 and 2015, respectively
|
12
|
|
12
|
|
Paid-in capital in
excess of par
|
179,551
|
|
179,707
|
|
Distributions in excess
of net investment income
|
(397)
|
|
(2,006)
|
|
Net unrealized
depreciation on investments
|
(19,463)
|
|
(5,227)
|
|
Net realized loss on
investments
|
(20,511)
|
|
(12,735)
|
|
Total net
assets
|
139,192
|
|
159,751
|
|
Total liabilities
and net assets
|
$
239,252
|
|
$
280,896
|
|
Net asset value per
common share
|
$
12.09
|
|
$
13.85
|
|
Horizon Technology
Finance Corporation and Subsidiaries
|
|
Consolidated
Statements of Operations
|
(Dollars in
thousands, except share and per share data)
|
|
|
|
For the Three
Months Ended
|
|
For the Years
Ended
|
|
|
December
31,
|
|
December
31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Investment
income
|
|
|
|
|
|
|
|
|
Interest income on
non-affiliate investments
|
$
6,787
|
|
$
7,784
|
|
$
31,397
|
|
$
28,650
|
|
Fee income on
non-affiliate investments
|
200
|
|
776
|
|
1,587
|
|
2,460
|
|
Total investment
income
|
6,987
|
|
8,560
|
|
32,984
|
|
31,110
|
|
Expenses
|
|
|
|
|
|
|
|
|
Interest
expense
|
1,412
|
|
1,466
|
|
5,878
|
|
5,757
|
|
Base management
fee
|
1,061
|
|
1,291
|
|
4,727
|
|
4,747
|
|
Performance based
incentive fee
|
—
|
|
1,028
|
|
2,126
|
|
3,501
|
|
Administrative
fee
|
116
|
|
247
|
|
869
|
|
1,124
|
|
Professional
fees
|
327
|
|
317
|
|
1,486
|
|
1,308
|
|
General and
administrative
|
205
|
|
246
|
|
886
|
|
1,023
|
|
Total
expenses
|
3,121
|
|
4,595
|
|
15,972
|
|
17,460
|
|
Management and
performance based incentive fees waived
|
—
|
|
(139)
|
|
—
|
|
(346)
|
|
Net
expenses
|
3,121
|
|
4,456
|
|
15,972
|
|
17,114
|
|
Net investment
income before excise tax
|
3,866
|
|
4,104
|
|
17,012
|
|
13,996
|
|
Provision (credit) for
excise tax
|
51
|
|
—
|
|
(87)
|
|
—
|
|
Net investment
income
|
3,815
|
|
4,104
|
|
17,099
|
|
13,996
|
|
Net realized and
unrealized loss on investments
|
|
|
|
|
|
|
|
|
Net realized (loss)
gain on investments
|
(4,919)
|
|
73
|
|
(7,776)
|
|
(1,650)
|
|
Net unrealized
appreciation (depreciation) on investments
|
516
|
|
(1,449)
|
|
(14,236)
|
|
(490)
|
|
Net realized and
unrealized loss on investments
|
(4,403)
|
|
(1,376)
|
|
(22,012)
|
|
(2,140)
|
|
Net (decrease)
increase in net assets resulting from operations
|
$
(588)
|
|
$
2,728
|
|
$
(4,913)
|
|
$
11,856
|
|
Net investment income
per common share
|
$
0.33
|
|
$
0.35
|
|
$
1.48
|
|
$
1.25
|
|
Net (decrease) increase
in net assets per common share
|
$
(0.05)
|
|
$
0.22
|
|
$
(0.43)
|
|
$
1.06
|
|
Distributions declared
per share
|
$
0.30
|
|
$
0.345
|
|
$
1.335
|
|
$
1.38
|
|
Weighted average shares
outstanding
|
11,542,855
|
|
11,628,580
|
|
11,543,708
|
|
11,180,864
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/horizon-technology-finance-announces-fourth-quarter-and-full-year-2016-financial-results-300419581.html
SOURCE Horizon Technology Finance Corporation