Q3 2023 Horizon Technology Finance Corp Earnings Call
Greetings and welcome to Horizon Technology Finance Corporation third quarter, 2020th Street hunting Scott.
This time all participants are in a listen only mode. A brief question and answer session Bill followed the formal presentation if.
Anyone should be quiet operate assistance during the conference police fresh Don Cheadle on your telephone keypad. As a reminder, this conference is being able to contract. It is now my pleasure to introduce you host making bacon.
Investor Relations and marketing. Thank you Ms speaking human begin.
Thank you and welcome to Horizon Technology Finance Corporation third quarter 20, twenty-three conference call, representing the company today, a rod Pomeroy, Chairman and Chief Executive Officer, Jerry Me show, President and Dan Charlie O Chief Financial Officer, I would like to point out that the Q3 earn.
<unk> press release and Form 10-Q are available on the company's website at Horizon Tech Finance dotcom.
Before we begin our formal remarks, I remind everyone that during this conference called 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 and predicting future results and congestion.
Hurting 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 31st 2022.
The company undertakes no obligation to update or revised 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 Hi, Marie.
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.
Jerry well then to discuss our business development efforts are portfolio events in our markets and Dan will detail, our operating performance and financial condition.
We will then take some questions.
We had a strong quarter from the standpoint of net investment income with NII significantly exceeding our quarterly distributions.
However, our net asset value as of the end of the quarter was negatively impacted by adverse events in our portfolio, which resulted in markdowns and the fair values.
Our advisor Horizon Technology Finance management, and it's experienced an expert team remain focused on our portfolios credit quality as we navigate through the stress macro environment and maximize the value of our portfolio over the longer term.
Turning to our specific results for the quarter, we generated net investment income of 53 cents per share well in excess of our declared distribution level.
Largely the higher interest rates on our floating rate that investment portfolio as well as lower incentive fees earned by our advisor Danville further discuss the impact of incentive fees on NII in his remarks.
Based on our outlook and our undistributed spillover income of $1.23 per share as of September 30th.
Our board declared regular monthly distributions of 11 cents per share through March of 2024 as.
As well as an additional special distribution of five cents per share for the fourth consecutive year payable in December.
We achieved a portfolio yield of over 17% on our debt investments with a quarter once again at or near the top of the BDC industry.
We raised $14 billion of equity from our at the market program at a premium to N. A V further enhancing our investment capacity.
Our portfolio at quarter and stood at $729 million growing modestly from June 30th.
Finished the quarter with a committed and approved backlog of $202 million, providing us with a solid base of opportunities to thoughtfully grow our portfolio as.
As a reminder, most of our funding commitments are subject to our portfolio companies meeting certain key milestones.
Finally, we ended the quarter with a net asset value of $10.41 per share.
The largest impact on our N. A V was a result of our fair value Mark down of our dead investment and develop biosciences, which Jerry will provide more detail about.
We continue to work closely with and support not only a bellow, but all of our portfolio companies as we focus on improving our overall credit profile and maximizing recovery.
We continue to seek high quality, new investments to grow our portfolio, despite the challenging macro environment.
As we close out 2023, we are hopeful that the volatility in the macro environment will ease and the negative credit cycle will improve.
Team remains focused on credit quality and executing our vestments strategy in order to create additional value for our shareholders over the long term.
With that I will now turn the call over to Gerry and Dan to give you more details and color on our performance Jerry.
Thanks, Rob and good morning, everyone.
Our portfolio grew slightly from from the prior quarter to $729 million as of September 30th as a result of our careful approach to new originations invasive ongoing macroeconomic in D C headwinds.
Folio size was impacted partially due to our portfolio markdowns.
And the third corner refunded eight get investments totaling 88 million, including den investments do for new portfolio companies and for existing portfolio companies.
Maintaining healthy pipeline.
Specter remained selective in originating that investments during the main remainder of 2023.
Everyone boarding yield of 13.9% during the corner remain near our historic highs ketene, continuing to reflect a higher interest rate environment, and our markets as well as our pipe or discipline, and structuring and pricing transactions, which we expect to produce strong net investment income.
During the quarter, we experienced one long prepayment to refinance loans and one partial pay down totaling 38 million prepaid principle.
Prepayments to remain muted in the fourth quarter of 2023 compared to our historic levels, given the week IPO and M&A markets are.
Our guest portfolio yield a 17.1% continues to validate structuring our investments floating interest rates and a rising interest rate environment.
Getting generated one of the highest step portfolio yields and the BDC industry as of September 30th we held Martin equity positions 99 portfolio companies with a fair value of $42 million as a reminder, structuring investments with warrants an equity rights as a key component of our venture that strategy in it.
Potential generate a shareholder value.
And the third corner close to $178 million, a new loan commitments and approvals and ended the border with a committed an unapproved backlog of $202 million compared to $159 million at the end of the second quarter.
Believe are committed backlog with most of our funding commitments subject to our portfolio companies achieving certain key milestones provides a solid basis, we seek to prudently grow our portfolio.
We also continue to work closely with all of our current portfolio companies to navigate the choppy macro environment.
Unfortunately, our portfolio company double biosciences at two unfavorable trial outcomes during 2023, including a field phase two way trial threats psoriasis drug 29, 23 and October as a result, and a third one or we recorded a significant unrealized loss on our.
Oh that investment.
We creatively restructure not that investment in the prior corner and continued to diligently work towards achieving additional recoveries on our investment.
Subsequent to the end of Q3 horizon received an additional cash pay down of $11 million from Hello, with the 5 million pay down horizon received from a dull early in the third quarter Horizon has received a total of $16 million in principle repayments on it to.
Get investments in 2023 in.
In addition, we are working closely and collaboratively with the company as a Sikh strategic alternatives to maximize the value of its core technology platform.
Overall, we are closely monitoring all of our portfolio companies and are working with their management teams investors and other stakeholders to assist them in a challenging macro and venture capital environment.
As of September 30th 87% of our debt portfolio consisted of three and four rated that investments compared to 90% as of June 30th.
Our five to read it dead investments at September 30th or slightly higher than the fourth to rate a desk that investments and cute too.
We also have two one rated that investments at the end of Q3, which represent 2.3% of our total debt portfolio.
Turning now to the venture capital environment. According to Pitchbook approximately 37 billion was invested in V. C back companies in the third quarter of 2023 compared to 46 billion in Q3 of 2022 and $87 billion in the third quarter of 2021 D.
V C activity levels remain under considerable stress is V C investments in new portfolio companies made in 2021 and the first half of 2022 are significantly overvalued in the current economic market as a result.
Ability a V C back companies to raise new capital this challenging combined with a virtually closed I P O market and a muted M&A market B C back technology and life science companies are finding it increasingly difficult to reach to raise much needed capital to fund operations and growth on.
On a positive note judging from our healthy pipeline. We believe there is significant number of opportunities to invest in quality companies seeking capital, particularly that capital to fill their ongoing needs. We believe venture lenders, especially public b. He sees remain best positioned to fill this need but the opportunity is tempered by the <unk>.
<unk> overall market conditions in terms of D. C fund raising only 9 billion was raised in the third quarter and the market is now on page to record a nine year low while the Avenue to public exits is still largely close b CS committed capital from their L. PS remains elevated to the amounts.
Raised during the good times and a reluctance to invest in the current market, but we expect us to continue in the near term the amount of sideline capital does provide V c's with the ability to support their wealth of my portfolio companies until improved exit markets emerge.
D C back exit activity improved and the third corner is total exit value for the quarter was 36 billion.
Primarily by the inch to cart and Claire view Ipos. However, their stock prices have underperformed post I P. O P. OS have not provided the momentum that the market sought for new I P O issuances.
Yeah I'm in a market for venture backed companies also remained at historic lows journey Q3.
A potential positive indicator for M&A in a life science market with Big pharma companies sitting on historical high levels of cash and with blockbuster drugs coming off patent protection in the next four years big pharma needs to eat need for new drugs and potential blockbusters could lead to significant M&A.
Tiffany with big pharma companies buying smaller development companies with drugs in the clinical pipeline in order to restart the wrong drug pipelines.
In terms of market conditions for new venture an investment we expect a challenging environment to continue into at least the early portion of 2024, Accordingly horizon will maintain a pragmatic cautious approach to new investment opportunities by focusing on preserving the value and quality of its current portfolio when Nick.
Operator: Greetings and welcome to Horizon Technology Finance Corp. 3rd quarter 2023 earnings call. At this time, all participants are in a listen-only mode.
Operator: A brief question and answer session will follow the formal presentation. If anyone should require operate assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recalled.
Global economic and investment environment stabilizes and the venture capital ecosystem improves we believe horizons solid reputation in longterm market presence will allow us to read accelerate his portfolio growth to the new <unk> with new high quality venture that launch.
Megan Bacon: It is now my pleasure to introduce your host, Megan Bacon, Director in the Civilations and Marketing. Thank you, Ms. Bacon, you may begin. Thank you and welcome to Horizon Technology Finance Corp. 3rd quarter 2023 conference call.
Keep baseline for future prudent portfolio growth is are committed approved and awarded backlog, which as of today is 227 million and our advisers pipeline of new opportunities, which as of today stands at over $1 billion.
Megan Bacon: Representing the company today, a Rob Pomeroy, Chairman and Chief Executive Officer, Gary Michaud, President and Dan Trolio, 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.
To sum up we continue to sharply focused on credit quality and providing our portfolio companies with support and alternative solutions when necessary to ensure optimal outcomes for our portfolio, where there are attractive high quality companies looking for venture that solutions, we will look to thoughtfully had to our pipeline in backlog.
Megan Bacon: Before we begin, our formal remarks are 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 beliefs, 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 in conditions. Certain factors could cause actual results to differ on a material basis from those projected in these forward-looking statements.
With an eye toward prudently growing our portfolio based on current portfolio size and yield we believe we remain well positioned to generate solid NII for our shareholders and additional long term shareholder value.
That I will now turn the call over to Dan.
Thanks, Gary [noise].
Good morning, everyone. During the third quarter of Yale generated from our dad investments once again produced NII that more than covered our distribution and.
In addition, we continued to strengthen our balance sheet. There are ATM program successfully and accordingly, raising an additional $14 million capital, providing us with capacity to prudently make new investment.
Megan Bacon: 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 10K for the year ended December 31st, 2022. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
As of September 30th, we got 80 million in available liquidity, consisting of $47 million in cash and $33 million in funds available to be drawn on our existing credit facilities.
Robert Pomeroy: 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 in 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 condition. We will then take some questions.
Currently have 25 million outstanding.
Under 150 million Keybanc credit facility.
181 million outstanding on our 250 million, New York Life credit facility.
With ample capacity to grow the portfolio.
Alright, that's equity ratio that at 1.27 to one as of September 30th and netting up cash on our balance sheet or elaborate close at 1.1221, which was below our target leverage of 1.2 to one.
Robert Pomeroy: We had a strong quarter from the standpoint of net investment income, with NII significantly exceeding our quarterly distributions. However, our net asset value, as of the end of the quarter, was negatively impacted by adverse events in our portfolio, which resulted in markdowns in the fair values. Our advisor, Horizon Technology Finance Management, and its experience and expert team remained focused on our portfolio's credit quality as we navigate through the stressed macro environment and maximize the value of our portfolio over the longer term.
Based on our cash position and our borrowing capacity on our credit facilities are potential new investment capacity. That's September 30th was 241 million.
For the third quarter, we aren't total investment income of 29 million and.
An increase of 25% compared to the prior year period.
Interesting come on investments increased primarily as a result of the higher average size of art that investment portfolio for the quarter and increases in the variable interest rates on our dad investment.
Okay investment portfolio on a net cost basis, so that 717 million as of September 30th.
Robert Pomeroy: Turning to our specific results for the quarter, we generated net investment income of 53 cents per share, well in excess of our declared distribution level, due largely to higher interest rates on our floating rate debt investment portfolio, as well as lower incentive fees earned by our advisor.
Two per cent increase from June 30th 2023.
For the third quarter twenty-three, we achieved onboarding yield a 13.9% compared to 13.6% achieved in the second quarter.
Robert Pomeroy: Dan will further discuss the impact of incentive fees on NII, and his remarks. Based on our outlook and our undistributed spillover income of $1.23 per share, as of September 30th, our board declared regular monthly distributions of $0.11 per share through March of 2024, as well as an additional special distribution of $0.5 per share for the fourth consecutive year, payable in December. We achieved a portfolio yield of over 17% on our debt investments for the quarter, once again add or near the top of the BDC industry.
Our loan portfolio yield what 17.1% for the third quarter compared to 15.9% for last year's third quarter.
Oh expenses for the quarter or $11.6 million compared to $12 million in the third quarter of 22.
Our interest expense increased to $7.1 million from 5.3 million and laugh their third quarter due to an increase in average borrowings and higher interest rates on our borrowings.
Based management fee with $3.2 million up from $2.8 million in last year's third quarter due to an increase in the average size of our portfolio.
He had no performance based incentive fee in the third quarter compared to an incentive fee at $2.8 million for last year third quarter.
Robert Pomeroy: We raised $14 million of equity from our at-the-market program at a premium to NAV, further enhancing our investment capacity. Our portfolio at quarter ends to at $729 million growing modestly from June 30th. We finished the quarter with a committed and approved backlog of $202 million, providing us with a solid base of opportunities to thoughtfully grow our portfolio. As a reminder, most of our funding commitments are subject to our portfolio company's meeting certain key milestones.
This was due to the deferral of incentive fees, otherwise earn by-road biser, and a quarter under our incentive feet tap into ferraro mechanism.
The Defar always driven by Unrealised unrealized losses on our portfolio.
That investment income for the third quarter twenty-three was 53 cents per share compared to 54 cents per share in the second quarter of 23, and 43 cents per share for the third quarter of 22.
The company's undistributed spillover income as of September 30th is one dollar and 23 cents per share.
Robert Pomeroy: Finally, we ended the quarter with a net asset value of $10.41 per share. The largest impact on our NAV was the result of our fair value markdown of our debt investment in available biosciences, which Jerry will provide more detail about. We continue to work closely with and support not only available, but all of our portfolio companies as we focus on improving our overall credit profile and maximizing recovery. We continue to seek high-quality new investments to grow our portfolio despite the challenging macro-environment.
We anticipate that the size of our portfolio the increase in our portfolios interest rates along with our predictive pricing strategy will enable us to continue generating NII that covers our distributions.
As we have said previously while we expect to experience for your payments through the end of the year, we still believe repayments will eat below our historical levels given the current environment.
To summarize our portfolio activities for the third quarter, new originations totaled $88 million, which were offset by 9 million is scheduled principal payments and 38 million and principal prepayments refinancing impartial pay down.
Robert Pomeroy: As we close out 2023, we are hopeful that the volatility in the macro-environment will ease and the negative credit cycle will improve. Our team remains focused on credit quality and executing on our investment strategy in order to create additional value for our shareholders over the long-term.
We ended the quarter with a total investment portfolio of 729 million.
Given the macro environment, we expect to remain selective in the near term with respect to origination.
At September 30th the Port call.
Robert Pomeroy: With that, I will now turn the call over to Jerry and Dan to give you more details and color on our performance.
[noise] consisted of that investments in 56 companies with a bag of fair value of $680 million.
Gerald Michaud: Jerry? Thanks Rob and good morning everyone. Our portfolio grew slightly from the prior quarter to $729 million as of September 30 as a result of our careful approach to new originations in the face of ongoing macroeconomic and VC headwinds.
In a portfolio of warrant equity and other investments and 102 companies with an accurate fair value of 49 million.
Based upon our portfolio outlook are bored declared monthly distributions of 11 cents per share for January February and March 2024.
And a special distribution of five per share payable in December of 2023.
Gerald Michaud: Our portfolio size was impacted partially due to our portfolio markdowns. In the third quarter, we funded eight debt investments, totaling 88 million, including debt investments, to four new portfolio companies and four existing portfolio companies. By we maintain a healthy pipeline, we expect to remain selective in originating debt investments during the remainder of 2023. Our onboarding yield of 13.9 percent during the quarter remain near our historic highs continuing to reflect the higher interest rate environment in our markets.
We remain committed to providing our shareholders for distributions that are covered by our net investment income over time.
R N a V as of September 30th at $10.41 per share compared to $11.07 as of June 30th 2023, and $11.66 as of September 30th 2022.
The 66 cent reduction in N. A V on a quarterly basis was primarily due to our pay distributions realized losses and adjustments to fair value, partially offset by net investment income.
Gerald Michaud: As well as our pipeline, our discipline and structuring and pricing transactions which we expect to produce strong net investment in Time. During the quarter, we experienced one loan prepayment, two refinance loans, and one partial paydown, totaling 38 million in prepaid principle. We expect prepayments to remain muted in the fourth quarter of 2023, compared to our historic levels given the week IPO in M&A markets. Our debt portfolio yield of 17.1% continues to validate structuring our investments with floating interest rates and arising interest rates.
Had we have consistently noted 99% of the outstanding principal amount a bar that investment bear interest rate at floating rates with coupons at a structure to increase as interest rates rise.
With interest rate floors.
As of today 95 per cent of our death portfolio will benefit from additional increases in the prime rate.
This concludes our opening remarks will be happy to take questions. You may have at this time.
Thank you.
We will now be conducting a question and answer session.
If you would like to ask a question. Please best Star one on your telephone keypad.
Gerald Michaud: We again generated one of the highest debt portfolio yields in the BDC industry. As of September 30, we held more neckly positions in 99 portfolio companies with a fair value of 42 million. As a reminder, 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 third quarter, we closed $178 million in new loan commitments and approvals and ended the quarter with a committed and approved backlog of $202 million, compared to $159 million at the end of the second quarter.
Ah the information thrown will indicate your line isn't the question queue.
You might start to if you would like to remove your questions from the queue for a buck.
Spence using speak of equipment it may be necessary to pick up your handset before pressing the stock east.
One moment, please pull for questions.
The first question comes from the line of price will.
B like calories preschool with.
Thanks, Good morning, good morning wiring.
Let's see what I wanted to start.
On just the level of spillover I mean, obviously, it's growing you've you've paid a special dividend here for.
Gerald Michaud: We believe our committed backlog with most of our funding commitments, subject to our portfolio companies achieving certain key milestones, provides a solid base as we seem to prudently grow our portfolio. We also continue to work closely with all of our current portfolio companies to navigate the choppy macro environment.
For several consecutive years in any any way to kind of think about kind of sizing sizing that's spillover up in how your you know how how you're thinking about managing it you know given given the the increase in spillover.
Yeah. Good morning writes it.
Gerald Michaud: Unfortunately, our portfolio company, double biosciences, had two unfavorable trial outcomes during 2023, including a failed phase two-way trial for its psoriasis drug, 29-23 in October. As a result, in the third quarter, we recorded a significant unrealized loss on our resolved debt investment. We creatively restructured our debt investment in the prior quarter and continued to diligently work toward achieving additional recoveries on our investment. Subsequent to the end of Q3, Horizon received an additional cash paydown of $11 million from a velo.
We look at the distribution every quarter with our board members and taking consideration the activity in the portfolio and the income that is generating and obviously the spillover [noise].
At these levels you know will continue to do that and look at it through the regulatory requirements of distributing that.
So nothing nothing certain today.
Okay. Yeah. That's that's helpful. Thanks, I guess, you've got time to kind of figure that out but I was just curious if there was an update their next question just wanted to ask about a couple of portfolio companies.
Gerald Michaud: With the $5 million paydown Horizon received from a velo early in the third quarter, Horizon has received a total of $16 million in principal repayments on its envelope debt investments in 2020. In addition, we are working closely and collaboratively with the company as it seeks strategic alternatives to maximize the value of its core technology platform. Overall, we are closely monitoring all of our portfolio companies and are working with their management teams, investors, and other stakeholders to assist them in the challenging macro and venture capital environment.
That I guess, you you've seen a change in in some of the maturity day. One one the next car you've gotta maturity date actually it was yesterday you know and that was that was that was moved up any any update you can provide their kind of given the size of that.
That investment and then also wanted to ask about next the next building any any update on that particular investment. Thanks.
Yeah. So this is Jerry so [noise] as it relates to the next car.
You know that the company does continue to raise capital in the marketplace and you know they they are they would be in an interesting position. If if they were better at exit markets and you know that was their expectation along with a lot of other.
Gerald Michaud: As of September 30, 87% of our debt portfolio consisted of three and four rated debt investments compared to 90% as of June 30. Our five two rated debt investments at September 30 are slightly higher than the four two rated debt investments in Q2. We also have two one rated debt investments at the end of Q3, which represent 2.3% of our total debt portfolio.
Company had P C back companies.
Where the exit markets just aren't there for them. So they continue to raise capital.
Continue to get inside support from from investors and they're in a very dynamic market there in the car kind of.
Gerald Michaud: Turning out of the venture capital environment, according to Pagebook, approximately $37 billion was invested in VC back companies in the third quarter of 2023, compared to $46 billion in Q3 of 2022 and $87 billion in the third quarter of 2021. VC activity levels remain under considerable stress as VC investments in new portfolio companies made in 2021 and the first half of 2022 are significantly overvalued in the current economic market. As a result, the ability of VC back companies to raise new capital is challenging.
[noise] decryption rental business and it is a growing platform, but until the until the exit markets kind of open up they're going to continue to be internally funded and we're going to continue to work with them to help them.
Get a better exit opportunity and that's that's kind of where we are.
And then Jerry if you could just touch on next the building as well.
Yeah, and next thing you kind of a similar situation very interesting product good demand for their product.
Gerald Michaud: Combined with a virtually closed IPO market and a muted M&A market, VC back technology and life science companies are finding it increasingly difficult to raise much needed capital to fund operations and grow. On a positive note, judging from our healthy pipeline, we believe there is a significant number of opportunities to invest in quality company seeking capital, particularly debt capital, to fill their ongoing needs. We believe venture lenders, especially public BDCs, remain best positioned to fill this need, but the opportunity is tempered by the existing overall market conditions.
Ah difficult markets and the kind of construction area right now they do have overseas contracts that they are plugged into and so again, you know and I think I'm better exit markets there would be opportunities for this company to do something.
More exciting, but right now they're just continued to be internally funded they actually did get a an outside investment I think in the third quarter from from our institutional investors. So we continue to work closely with them and you know again, hopefully to get to a better market where.
Gerald Michaud: In terms of VC fundraising, only 9 billion was raised in the third quarter, and the market is now on base to record a nine year low, while the avenue to public exits is still largely closed. VCs committed capital from their LPs remains elevated to the amounts raised during the good times and the reluctance to invest in the current market. While we expect this to continue in the near term, the amount of sideline capital does provide VCs with the ability to support their well-performing portfolio companies until improved exit markets emerge.
It can be more opportunistic and how they're thinking about financing your business.
Ah excellent. Thank you for the call.
Commentary I'll I'll hop back in queue for for some others to take a chance.
Thank you next.
Next question comes from the line of Christopher Nolan with late in the book. Please go ahead.
[noise], Hi, four abelow worth or any incremental investments made in the fourth quarter.
No no.
Gerald Michaud: VC backed exit activity, improved in the third quarter as total exit value for the quarter was 36 billion, driven primarily by the Instacard and PlayVO IPOs. However, their stock prices have underperformed post IPO, and their IPOs have not provided the momentum that the market saw for new IPO issuances.
Okay, and I I am a call. He said there was $16 million or repayments in.
And the third party.
Yeah, so in the in the third quarter.
Company completed a pipe transaction, they raised $25 million, mostly from inside investors led by flagship who has about $140 million or heard about it I think it's more than that now invested in the company and when that transaction closed we received a 5 million dollar pay down.
Gerald Michaud: The M&A market for venture backed companies also remained at historic lows during Q3. There is a potential positive indicator for M&A in the life science market with Big Pharma companies sitting on historical high levels of cash, and with Blockbuster drugs coming off patent protection in the next four years. Big Pharma needs to need for new drugs and potential Blockbusters could leave to significant M&A activity with Big Pharma companies buying smaller development companies with drugs in the clinical pipeline in order to restock their own drug pipelines.
And we converted $5 million of our debt to equity.
Which at the time gave us a button and 11 per cent ownership position and and the public company.
And you know the expectation or the hope was certainly that.
The clinical trial for.
Psoriasis would've would have turned out better we were very disappointed obviously the company was very disappointed in the results of that but once once they announced that the results of that trial that it didn't mean to 10 points. The company paid down an additional $11 million, which we actually just read.
Gerald Michaud: In terms of market conditions for a new venture loan investment, we expect the challenging environment to continue into at least the early portion of 2024. Accordingly, Verizon will maintain a pragmatic and cautious approach to new investment opportunities while focusing on preserving the value and quality of its current portfolio. When the global economic and investment environment stabilizes and the venture capital ecosystem improves, we believe Verizon's solid reputation and long-term market presence will allow us to accelerate its portfolio growth through the new high quality venture debt loans.
<unk> last week, so, we got $16 million and pay down since the third quarter.
And combined with what we received here in in the early in the fourth quarter.
Okay, and then I saw in Cuba Forever, though you also mark down your equity positions do.
Do these transactions should we usually expect further right down some equity from Ya.
Gerald Michaud: A key baseline for future portfolio growth is our committed approved and awarded backlog, which as of today stands at 227 million, and our advisor's pipeline of new opportunities, which as of today stands at over $1 billion. To sum up, we continue to sharply focus on credit quality and providing our portfolio companies with support and alternative solutions when necessary to ensure optimal outcomes for our portfolio. Whether our attractive high quality companies looking for venture debt solutions, we will look to thoughtfully add to our pipeline and backlog with an eye toward brutally growing our portfolio. Based on current portfolio size and yield, we believe we remain well positioned to generate solid NII for our shareholders in additional long-term shareholder value.
Respective or do you think.
Insiders stepping up mostly yeah sure that would be both of them.
Yeah, I think we we actually have a note in our in our queue that we filed the subsequent event that we believe that we will be marking down the equity.
In the in the fourth quarter as well.
Okay I guess the final question.
Were there any new nonaccrual investments in the fourth quarter.
So from the third quarter, there were a couple of different names and you can see them on the schedule investments ER. The names that are on non accrual and they.
They were new names one named dropped off in a couple of names did yet tagged nonaccrual for the quarter Avila being one of them and Robin being another.
Gerald Michaud: With that, I will now turn the call over.
Yeah, I'm asking for the fourth quarter to date.
Daniel Trolio: of the Dan. Thanks, Jerry.
Oh fourth part of day not.
Daniel Trolio: Good morning, everyone. During the third quarter, the yield generated from our debt investments once again produced, and II, that more than covered our distribution. In addition, we continue to strengthen our balance sheet through our ATM program, successfully and creatively raising an additional 14 million of capital, providing us with capacity to prudently make new investments. As of September 30, we had 80 million inavailable liquidity, consisting of 47 million in cash, and 33 million in funds available to redraw on our existing credit facilities.
Okay. That's it for me thank you.
Thank you.
A reminder to all the participants that'd be my breasts started from one to ask a question.
Next question comes on the line off Ryan Lynch escape Uwp's go ahead.
[noise] Hey, good morning, following up on price of questions on next car and neck see I don't want to necessarily lump. These investments together because they're two different situations, but I had kind of similar questions on both of those number one I think you believe you I believe you said, they're both continued to be funded.
Daniel Trolio: Currently, we have 25 million outstanding under our 150 million key bank credit facility, and an 181 million outstanding on our 250 million New York live credit facility, leaving us with ample capacity to grow the portfolio. Our debt equity ratio, so that at 1.27 to 1, has a September 30, and netting out cash on our balance sheet, our leverage was 1.12 to 1, which was below our target leverage of 1.2 to 1.
Internally funded I guess, what does that mean, because I would assume that both of these are still negative cash flowing businesses. So so I just want to hear what what what exactly that means and then also what drove the decline in fair values for these businesses cause it sounds like the way you just.
Scribe them, both and again I know, there's different companies, but but kind of the way you described the bugs that the fundamentals of a business seemed to be doing a.
Daniel Trolio: Based on our cash position and our borrowing capacity on our credit facilities, our potential new investment capacity at September 30, was 241 million. For the third quarter, we earned total investment income of 29 million, an increase of 25 percent compared to the prior period. Interesting income on investments increased primarily as a result of the higher average size of our debt investment portfolio for the quarter, and increases in the variable interest rates on our debt investment.
Fine or maybe as expected, but the exit opportunities have had certainly deteriorate just given market dynamics. So was the weakness in the potential of of kind of overall exit markets. The driver of the the the declining valuation was something else moving out lower this quarter.
Yeah honestly it it it is a little bit Ah exit markets and opportunities to fund Ah Ah growth it would what otherwise might be available to them. So in other words. They they are operating okay. They are again the investors continue to support the company.
Daniel Trolio: Our debt investment portfolio on a net cost basis, so that at $717 million as of September 30, a 2 percent increase from June 30, 2023. For the third quarter, 23, we achieved onboarding yields of 13.9 percent compared to 13.6 percent achieved in the second quarter. Our loan portfolio yield was 17.1 percent for the third quarter compared to 15.9 percent for last year's third quarter. Our expenses for the quarter were 11.6 million compared to 12 million in the third quarter of 22.
<unk> to a degree, but really you know outside capital is needed in some form or shape, meaning you know a public offering in M&A or you know a large venture capital Ah or crossover funds I think probably both of these cases and so you know the the.
Working that's where they're spending a lot of their time right now. It's it's it's on trying to find Ah that right exit opportunity in a market where exit opportunities are really difficult and so they're getting they're getting funded because the investors see that there is value in the company and you know the potential for a positive.
Daniel Trolio: Our interest expense increased to 7.1 million from 5.3 million in last year's third quarter due to an increase in average borrowing and higher interest rates on our borrowings. Our base management fee was 3.2 million up from 2.8 million in last year's third quarter due to an increase in the average size of our portfolio. We had no performance base in the third quarter compared to an incentive fee of 2.8 million for last year's third quarter.
Exit still certainly exists but.
The you know I I think this isn't just these two companies I think across the venture capital community.
Most companies really are spending an.
Daniel Trolio: This was due to the deferral of incentives otherwise earned by advisor in the quarter under our incentive fee cap and deferral mechanism. The deferral was driven by unrealized and realized losses on our portfolio. Then investment income for the third quarter of 23 was 53 cents per share compared to 54 cents per share in the second quarter of 23 and 43 cents per share for the third quarter of 22. The company's fund distributed fill over income as of September 30 was $1.23 We anticipate that the size of our portfolio, the increase in our portfolio's interest rates, along with our predictive pricing strategy, will enable us to continue generating NII that covers our distributions.
Inordinate amount of time figuring.
Figuring out fundraising strategies.
Yeah, I think we provided some data on a venture capital fund raising in the third quarter again, it was down's fairly significantly part of the issue is that many of the companies that were funded in 2020 2021, certainly the first half of 2022.
The the the valuation of those companies is in this market significantly overvalued and so it's hard to bring in new investment or attract new investment and that kind of scenario. So you.
You know, where where there may be operationally growth opportunities, it's difficult to take advantage of those when capitalist so constrained.
Daniel Trolio: As we have said previously, while we expect to experience repayments through the end of the year, we still believe repayments will equal low-offer historical levels given the current environment. To summarize our portfolio activities for the third quarter, new origination total of 88 million, which were offset by 9 million scheduled principal payments, and 38 million in principal prepayments, refinancing and partial paydowns. We ended the quarter with a total investment portfolio of 729 million.
Right and so so to get maybe to get to the the last part of your question. So you know not knowing when those markets are gonna turn you know we have to be as we're looking at our investment we have to be a very sober about you know what happens if those markets continued to be as tight as they are meeting exit markets.
And ER V seem I suppose we have to be very sober about you know how we value these assets.
Okay. So it it's it's primarily related to the the exit markets and just the ability for these these companies and the specific industries that they're in to to fund operations, but not necessarily anything going on specific with these businesses deterioration is that a kind of a simplified version of.
Daniel Trolio: Given the macro environment, we expect to remain selective in the near term with respect to origination. At September 30th, the portfolio consisted of debt investments in 56 companies with an aggregate fair value of 680 million, and a portfolio of warrant, equity, and other investments in 102 companies with an aggregate fair value of 49 million.
Of what we're talking about.
Yeah, very simple because the fact of the matter is when it is difficult to raise capital. It is difficult for companies to make operational decisions. You know based on the need for additional capital that may not be there. So that does impact your ability to make which in a good market would be pretty.
Daniel Trolio: Based upon our portfolio outlook, our board declared monthly distributions of 11 cents per share for January, February, and March 2024, in a special distribution of 5 cents per share, payable in December of 2023. We remain committed to providing our shareholders with distributions that are covered by our net investment income over time. Our NAV as of September 30th, but $10.41 per share, compared to $11.7 as of June 30th, 2023, and $11.66 as of September 30th, 2022.
Pretty straightforward operational decisions. It makes it more difficult to do that and that again, that's just not just about these two companies that's across the board.
Okay.
And then the other question I had was on a fellow you know obviously, you know disappointing outcome with that.
Daniel Trolio: The 66th send reduction in NAV on a quarterly basis was primarily due to our paid distributions, realized losses, and adjustments to fair value, partially offset by net investment income. As we consistently noted, 99% of the outstanding principal amount of our debt investments were at floating rates with coupon that are structured to increase as interest rates rise with interest rate floors. As of today, 95% of our debt portfolio will benefit from additional increases in the primary.
Thus far.
Just curious you know as you kind of look back on that investment I understand it's still kind of an ongoing investment, but but as you know a lot of the you know the a lot of the results have already taken place at this point.
What lessons have you learned from from bad investments, specifically that will inform your decisions going forward on how you invest and and then kind of a second part on that.
That was an investment that was a pre revenue Ah position and in the life Sciences area that was reliant on these clinical trials.
Daniel Trolio: This concludes our opening remarks.
Operator: We'll be happy to take questions you may have at this time. Thank you.
<unk> as well as I know you guys had a I had a big you know a majority support or.
Operator: We will now be conducting a question-among 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 the question queue. You may press star 2 if you would like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions.
Best friend, but.
What what percentage would you say all of your life Sciences investments how are pre revenues reliant on on clinical trials.
I don't have those exact numbers in front of me, but to to get to the kind of core review question whenever we underwrite Ah life Science company. That's it's a drug development company you know, obviously burn cash with ongoing clinical trials, what you'll look.
Bryce Rowe: The first question comes on the line of price roll with P. Riley's security. Please go ahead. Thanks. Good morning.
Four is a broad based technology platforms, you look for a pipeline that has not just one drug candidate dressing one indication you look for multiple drug candidates are dressing multiple indications those were all there when we under what the deal and you also look for strong investor base, which.
Bryce Rowe: Let's see, wanted to start on just a level of spillover. Obviously, it's growing. You've paid a special dividend here for several consecutive years. Any way to think about sizing that spillover up and how you're thinking about managing it, given the increase in spillover.
The company had and I'm not I'm, just you know I'm not trying to justify anything one way or the other but historically that's that's how we have always under written.
Life Science drug companies and and generally what happens is as as these these drug candidates move through clinical trials. The companies are able to raise more money, especially the public ones in the public market.
Robert Pomeroy: Yeah, good morning, Bryce. Just, we look at the distribution every quarter with our board members and taking consideration the activity in the portfolio and the income that it's generating and obviously the spillover. At these levels, we'll continue to do that and look at it through the regulatory requirements of distributing that.
And continue moving other drugs through the clinic, so even if one of them fails. There was still a broad pipeline. There is still you know numerous potential value and the assets and you know to simplify this and I really am simplifying it you know the acceleration of of how quickly each one of these.
Bryce Rowe: So nothing's certain today. Okay, yeah, that's helpful. Thanks. I guess you've got time to kind of figure that out, but I was just curious if there was an update there.
Clinical trials came to fruition you know I I think that was probably one of the things that we we would look at it is not just do you have a great pipeline, but you know.
Bryce Rowe: Next question. Just wanted to ask about a couple portfolio companies that, you know, I guess you've seen a change in some of the maturity date. One, one, the next car. You've got a maturity date. Actually, it was yesterday. You know, and that was that was, that was moved up any, any update you can provide there, kind of given the, the size of that, of that investment.
Where where are those drugs in the clinical trial, it's not that we didn't look at that maybe that should have been a greater focus and it certainly should have been a greater focus given what happened in the overall life science market over the last four quarters, where funding is literally you know dry it up and I that that includes.
Bryce Rowe: And then also wanted to ask about next year, next year building any, any update on that particular investment. Thanks.
P O as it includes follow on equity for public companies. It includes V C investment.
And a lack of big farmer buying up these companies, which is usually you know a primary way did they end up Ah exiting Ah the market so yeah.
Gerald Michaud: Yeah, so this is Jerry. So it relates to next car. You know, that company does continue to raise capital in the marketplace and, you know, they, they are, they would be in an interesting position if, if there were better exit markets and, you know, that was their expectation along with a lot of other company PC back companies with the exit markets just out there for them. So they continue to raise capital, continue to get insight support from, from investors and, you know, they're in a very dynamic market there in the car, kind of subscription rental business and is a growing platform.
Gerald Michaud: But until a, until exit markets kind of open up, they're going to continue to be internally funded and we're going to continue to work with them to help them, you know, get to a, a, a better exit opportunity and that's, that's kind of where we are.
There there is some things we're certainly going to look at here. We we do have other life science companies in our portfolio there in drug the road in stages, none of them as as as I sit here today, they all seem to be fairly well funded.
Going forward other than I am V, which.
We've already.
Focused on so you know that.
That is something we will look at right now where where I I Gotta tell you, where we are laser focused on.
Helping the company tried to create as much value as they can ah with their underwriting blinding.
[noise] platform technology going forward and I think hopefully by the end of the fourth quarter, we might have something you know more to report on that but right now it's very early in that process. They just announced 10 days ago that the.
They had a you know there there are 29 39 drug for psoriasis failed and they were gonna look for strategic alternatives. So.
Gerald Michaud: And then Jerry, if you could just touch on, on next year building as well. Yeah, next the kind of similar situation, very interesting product, good demand for their product, difficult markets in the kind of construction area right now. They do have overseas contracts that, that they are plugged into. And so, again, you know, I think in better exit markets, it would be opportunities for this company to do something a lot more exciting.
Early in that process.
One last one that I had I think both and you prepare.
Prepare comments and your press release, you sort of talked about remaining selective and enrich and a new in restaurants and never major of 2023.
I I would assume that they're still really good deal opportunities out there, but I would assume that the remains the kind of a comment on remaining selective as to reduce leverage levels at.
Gerald Michaud: But right now, they're just continued to be internally funded. They actually did get an outside investment, I think, in the third quarter from, from an institutional investor. So we continue to work closely with them and, you know, again, hopefully to get to a better market where they can be more opportunistic and how they're thinking about financing their business.
At the at the BDC is is that kind of what I. You know is that kind of the the driver behind Romanian selective is that you can kind of get leverage levels down to a to a lower level and if that is the case, where would you like to see leveraged levels ultimately ended.
Ended up at.
Let me just address it from the marketing side and then you know being may have some comments.
Bryce Rowe: Excellent, thank you for the commentary. I'll hop back in queue for some others to take a chance. Thanks. Thank you.
From from the marketing side really we have to do it.
You have to be really.
Where of.
Christopher Nolan: Next question comes on the line of Christopher Nolan with the latest book, The company completed a pipe transaction. They raised $25 million, mostly from inside investors, led by Flagship who has about $140 million or had about, I think it's more than that now, invested in the company and when that transaction closed, we received the $5 million pay down and we converted $5 million of our debt to equity, which at the time gave us about an 11% ownership position in the public company and the expectation or the hope was certainly that the clinical trial for psoriasis would have turned out better.
Where market conditions are right now.
Particularly relative to venture capital investment the kinds of companies that they venture capitalist still investing and they're still leaning forward on where where are those companies wherever those markets. So you got on the marketing side you got that in there are really good opportunities there because there aren't really good exit marches for those kinds of companies. So.
And he's that are performing really well continuing to get you know attract capital.
That's fine, but you know when you.
When it comes to comes into the market and says you know we expect to be public next year, that's probably not if that's if that's their goal and that's their exit strategy, that's probably not something did in today's market. We would we would consider being interested in and I went and speak to the the the leverage side of this but yeah I agree as we mentioned.
We are at net of cash at 1.1, too. So that's below our target leveraged. So we're comfortable where we are today being selective I would agree with Jerry it's more just on the market dynamics and it deals were looking at.
Okay.
Christopher Nolan: We were very disappointed. Obviously the company was very disappointed in the results of that, but once they announced that the results of that trial have didn't meet at 10 points, the company paid down an additional $11 million. $11 million, which we actually just received last week, so we got $16 million in pay down since the third quarter and combined with what we received here early in the fourth quarter. Okay, and then I saw on the queue that for Evalue, you also marked down your equity positions.
Alright, that's all from me I appreciate your time today.
Thank you.
There are no further questions at this time I would like for them to call back to drop it Pomeroy Chapman and see your throat closing comments.
Thank you all for joining us. This morning. We appreciate your continued interest in supporting Horizon, We look forward to speaking with you again soon.
Conclude our call.
Thank you. This concludes today's teleconference. Humid disconnect your lines at this time. Thank you for your participation.
Christopher Nolan: Do these pipe transactions, should we expect further write down some equity from your perspective or do you think insiders stepping up will save you as your equity investment? Yeah, I think we actually have a note in our queue that we filed, the subsequent event that we believe that we will be marking down the equity in the fourth quarter as well.
[noise] [music].
Christopher Nolan: Okay, and I guess a follow-up question. And would there any new non-accrual investments in the fourth quarter? So from the third quarter, there were a couple of different names, and you can see them on the schedule investments, the names that are on non-accrual. And they were new names, one name dropped off, and a couple of names did get tagged as non-accrual for the quarter, available being one of them and Robin being another. Yeah, I'm asking for the fourth quarter to date. Oh, fourth quarter to date? No.
Mmm.
Christopher Nolan: Okay, that's it for me. Thank you.
[music].
Operator: A reminder to all the participants that you might best start with one to ask a question.
Ryan Lynch: Next question comes on the line of Ryan Lynch with KBW Peace Go ahead. Hey, good morning. Found one upon Bryce's questions on next car and next V. I don't want to necessarily want these investments together because they're two different situations. But I had kind of similar questions on both of those. Number one, I believe you said they're both continued to be funded internally funded. I guess what does that mean? Because I would assume that both of these are still negative cash flowing businesses.
Ryan Lynch: So I would just look to hear what exactly that means. And then also what drove the decline in fair values for these businesses? Because it sounds like the way you describe them both. And again, I know there are different companies, but kind of the way you describe them both is that the fundamentals of the business seem to be doing fine or maybe as expected. But the exit opportunities have certainly deteriorated, just given market dynamics.
Ryan Lynch: So was the weakness in the potential of kind of overall exit markets, the driver of the decline in valuation was something else. Moving out lower this quarter. Yeah, honestly, it is a little bit exit markets and opportunities to fund the growth that would otherwise might be available to them. So in other words, they are operating okay. They are, again, the investors continue to support the companies to a degree, but really, you know, outside capital is needed in some form or shape, meaning, you know, public offering and M&A or, you know, a large venture capital or crossover fund, I think, and probably both of these cases.
Ryan Lynch: And so, you know, they're working, that's where they're spending a lot of their time right now. It's on trying to find that right exit opportunity in a market where exit opportunities are really difficult. And so, they're getting funded because the investors see that there is value in the company and, you know, the potential for a positive exit still certainly exists, but they, you know, I think this is just these two companies, I think, across the venture capital community, most companies really are spending an in-norm, in an ordinary amount of time figuring out fundraising strategies.
Ryan Lynch: You know, I think we provided some data on venture capital fundraising in the third quarter. Again, it was down fairly significantly. Part of the issue is that, you know, many of the companies that were funded in 2020, 2021, certainly the first half of 2022, you know, the valuation of those companies is, in this market, they're significantly overvalued. And so, it's hard to bring in new investment or attract new investment in that kind of scenario.
Ryan Lynch: So, you know, where there may be operationally growth opportunities, it's difficult to take advantage of those when capital is so constrained. Right. And so, to get maybe to get to the last part of your question. So, you know, not knowing when those markets are going to turn, you know, we have to be, as we're looking at our debt investment, we have to be very sober about, you know, what happens if those markets continue to be as tight as they are, meaning exit markets and V-Theme flows.
Ryan Lynch: We have to be very sober about, you know, how we value these assets. Okay. So, it's primarily related to the exit markets and just the ability for these companies in the specific industries that they're in to fund operations, but not necessarily anything going on specific with these businesses. Deteration is that a kind of simplified version of what we're talking about. Yeah, very simple because the fact of the matter is when it is difficult to raise capital, it is difficult for companies to make operational decisions, you know, based on the need for additional capital, it may not be there.
Ryan Lynch: So, that does impact your ability to make which in a good market would be pretty straightforward operational decisions. It makes it more difficult to do that. And that's, again, that's just not just about these two companies. That's across the board. Okay. And then the other question I had was on Avalo, obviously, disappointing outcome with that, thus far. I'm just curious, as you look back on investment, I understand it's still an ongoing investment, but as a lot of the results have already taken place at this point, what lessons have you learned from that investment specifically that will inform your decisions going forward on how you invest, and then kind of a second part on that, that was an investment that was a pre-revenue position in the life sciences area that was reliant on these clinical trials, they approval, as well as I know you guys had a big majority supporter in that investment.
Ryan Lynch: But what percentage would you say of your life sciences investments are pre-revenue in a reliant on clinical trials? I don't have those exact numbers in front of me, but to get to the kind of core of your question, whenever we underwrite a life science company that's a drug development company, obviously burn cash with ongoing clinical trials, what you look for is a broad-based technology platform. You look for a pipeline that has not just one drug candidate addressing one indication, you look for multiple drug candidates addressing multiple indications.
Ryan Lynch: Those are all there when we underwrite the deal and you also look for a strong investor base, which the company had, and I'm not trying to justify anything one way or the other, but historically that's how we have always underwritten life science drug companies. And generally what happens is, as these drug candidates move through clinical trials, the companies are able to raise more money, especially the public ones and the public market, and continue moving other drugs through the clinic.
Ryan Lynch: So even if one of them fails, there is still a broad pipeline, there is still numerous potential value in the assets, and to simplify this, and I'm really simplifying it. The acceleration of how quickly each one of these clinical trials came to fruition, I think that was probably one of the things that we would look at. It's not just, do you have a great pipeline, but where are those drugs in the clinical trials?
Ryan Lynch: It's not that we didn't look at that, maybe that should have been a greater focus, and it certainly should have been a greater focus, given what happened in the overall life science market over the last four quarters where funding is literally dried up. And that includes IPOs, it includes follow-on equity for public companies, it includes VC investment, and a lack of big farmer buying up these companies, which is usually a primary way that they end up exiting the market.
Ryan Lynch: So yeah, there are some things we're certainly going to look at here. We do have other life science companies in our portfolio that are in drug development stages, none of them, as I said here today, they all seem to be fairly well funded, going forward, other than IMV, which we've already.., on. So, you know, that is something we'll look at right now, where I got to tell you where we are, laser focused on helping the company try to create as much value as they can with their underlying planning platform technology going forward.
Ryan Lynch: And I think, hopefully, by the end of the fourth quarter, we might have something, you know, more to report on that. But right now, it's very early in that process. They just announced 10 days ago that the, they had, you know, their 29, 39 drug for psoriasis failed and they were going to look for strategic alternatives. So, we're really early in that process.
Ryan Lynch: Got one last one that I had. I think both in your, you know, in your prepare comments and your press release, you sort of talked about remaining selective and in, in originate new investments in the remainder of 2023. I would assume that there's still really good deal opportunities out there, but I would assume that the remain, the kind of the comment on remaining selective is to reduce leverage levels at the, at the BDC is that kind of what, you know, is that kind of the driver behind remaining selective is that you can kind of leverage levels down to a lower level.
Gerald Michaud: And if that is the case, where would you like to see leverage levels ultimately end up that? Well, let me just address it from the marketing side. And then, you know, Dan may have some comments. From, from the marketing side, really, we have to, you have to be really aware of where market conditions are right now, particularly relative to venture capital investment, you know, the kinds of companies that they, venture capitalists are still investing and they're still leaning forward on, where are those companies?
Gerald Michaud: Where are those markets? So, you got, on the marketing side, you got that. And there are really good opportunities there because there are an exit, really good exit markets for those kinds of companies. So, companies that are performing really well, continuing to get, you know, attract capital, you know, that's fine, but where, you know, anyone who comes, who comes into the market and says, you know, we expect to be public next year, that's probably not, if that's their goal and that's their exit strategy, that's probably not something that in today's market, we would consider being interested in.
Gerald Michaud: And I'll at the end speak to the leverage side of this, but yeah, now as we, as we mentioned, we are at Netacash at 1.12, so that's below our target leverage, so we're comfortable where we are today. Being selective, I would agree with Jerry, it's more just on the market dynamics and the deals we're looking at.
Ryan Lynch: All right, that's all from me. I appreciate the time today.
Ryan Lynch: Thank you.
Operator: There are no further questions at this time.
Robert Pomeroy: I would like to turn the call back to Robert Pomeroy Chairman and see you through closing comments. Thank you all for joining us this morning. We appreciate your continued interest and support and horizon. We look forward to speaking with you again soon.
Operator: This will conclude our call. Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Paul Johnson: Paul Johnson, Christopher Nolan, Ryan Lynch, Megan Bacon, Daniel Devorsetz Paul Johnson, Christopher Nolan, Ryan Lynch, Megan Bacon, Daniel Devorsetz Paul Johnson, Christopher Nolan, Ryan Lynch, Megan Bacon, Daniel Devorsetz