Q4 2023 Horizon Technology Finance Corp Earnings Call

Operator: Greetings and welcome to the Horizon Technology Finance Corporation fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode.

Greetings and welcome to the Horizon Technology Finance Corporation fourth quarter 2023 earnings call.

At this time all participants are in a listen only mode.

Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Megan Bacon, Director of IR. Thank you and welcome to Horizon Technology Finance Corporation's fourth quarter 2023 conference call. Representing the company today are Rob Pomeroy, Chairman and Chief Executive Officer, Gerald Michaud, President, Dan Devorsetz, Chief Operating Officer and Chief Investment Officer, and Dan Trolio, Chief Financial Officer. I would like to point out that the Q4 earnings press release and Form 10-K are available on the company's website at horizontechfinance.com. Before we begin our formal remarks, I need to remind everyone that during this conference call, the company will make certain forward-looking statements, including statements with regard to the future performance of the company. Words such as believe, expect, anticipate, intend, or similar expressions are used to identify forward-looking statements.

A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Megan Bacon director of IR.

Thank you and welcome to Horizon Technology Finance Corporation fourth quarter 2023.

Representing the company today are that boy, Chairman and Chief Executive Officer, Jerry Michaud, President and Dan divorced that Chief operating officer, and Chief Investment Officer, and Dan Shortly our Chief Financial Officer.

I should point out that the Q4 earnings press release and Form 10-K are available on the company's website at horizon to finance that.

We begin our formal remarks I need to remind everyone that during this conference call. The company will make certain forward looking statements, including statements with regard to the future performance of the company.

Words, such as believe expect anticipate intend or similar expressions are used to identify forward looking statements.

Megan N. Bacon: These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ on a material basis from those projected in these forward-looking statements. And some of these factors are detailed in the risk factor discussion in the company's filings with the Securities and Exchange Commission, including the company's Form 10-K for the year ended December 31st, 2023. However, the company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. At this time, I would like to turn the call over to Rob Pomeroy.

Forward looking statements are subject to the inherent uncertainties in predicting future results and conditions.

Certain factors could cause actual results to differ on a material basis from those.

As 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 2023.

The company undertakes no obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise.

At this time I would like to turn the call over to Bob for more.

Welcome everyone and thank you for your interest in horizon.

Robert D. Pomeroy: Welcome, everyone, and thank you for your interest in Horizon. Today, I will update you on our performance and our current overall operating environment. Dan Devorsetz, our Chief Operating Officer and Chief Investment Officer, will then take us through recent business and portfolio developments. We welcome Dan to the call, and he will now be a regular participant on our future calls. Jerry will then discuss the overall venture lending market, and Dan Trolio will detail our operating performance and financial condition. We will then take some questions.

Today I will update you on our performance and our current overall operating environment, Dan divorce, It's our chief operating officer, and Chief indefinitely Investment Officer will then take us through recent business and portfolio development, We welcome Dan to the call and he will now be a regular participant on our future calls.

He will then discuss the overall venture lending market and Dan Trulia will detail, our operating performance and financial condition. We will then take some questions.

Robert D. Pomeroy: 2023 was a challenging year for participants in the venture debt market, including Horizon. While we were able to finish the quarter and year with our net investment income again exceeding our quarterly and annual distributions, as well as achieving record NII for the year, our net asset value declined due to the underperformance of certain stressed investments in our portfolio. Stress in the venture capital ecosystem, including the collapse of Silicon Valley Bank, the tightening of capital availability, the closed IPO markets, and the decline in valuations contributed to the unfavorable performance by some of our portfolio companies, resulting in the reduction of the fair values of our investments in such portfolios.

2023 was a challenging year for participants in the venture debt market, including horizon.

While we were able to finish the quarter and year with our net investment income again exceeding our quarterly and annual distributions as well as achieving record NII for the year, our net asset value declined due to the underperformance of certain stressed investments in our portfolio.

The stress in the venture capital ecosystem, including the claps with Silicon Valley Bank.

The tightening of capital availability, the closed IPO markets and the decline in valuations contributed to the unfavorable performance by some of our portfolio companies, resulting in the reduction of the fair values of our investments in such portfolio companies.

Robert D. Pomeroy: You'll hear this theme throughout our call, but we continue to work diligently to maximize the value of all of our investments, including, where necessary, through the sale of our portfolio companies or our collaborations. Recapping our full year 2023 results. We generated net investment income of $1.98 per share, well in excess of our declared distribution level for the year, due largely to higher interest rates on our floating rate debt investment portfolio and lower incentive fees earned by our advisors. Based on our strong NII performance and the confidence in our outlook, in 2023, we paid regular distributions of $1.32 per share and a $0.05 per share special distribution. Our December special distribution marked the fourth consecutive year we paid such a distribution.

You will hear this theme throughout our call, but we continue to work diligently to maximize the value of all of our investments, including where necessary from the sale of our portfolio companies or our collateral.

Recapping, our full year 2023 results.

We generated net investment income of $1 98 per share well in excess of our declared distribution level for the year due largely to higher interest rates on our floating rate debt investment portfolio and lower incentive fees earned by our adviser.

Based on our strong NII performance and the confidence in our outlook in 2023, we paid regular distributions of $1 32 per share.

In a five cent per share special distribution our.

Our December special distribution marked the fourth consecutive year, we paid such a distribution.

Robert D. Pomeroy: We achieved a portfolio yield of more than 16% on our debt investments for the full year, once again at or near the top of the BDC industry. We finished the year with a committed and approved backlog of $218 million. We ended the year with a net asset value of $9.71 per share, primarily the result of fair value markdowns by our investors. We supported our balance sheet during the year, raising equity from an overnight equity offering in June and raising over $26 million of equity at a premium to NAV from our At The Market program. We also expanded the capacity of our credit facilities with New York Life and Keep. And importantly, our advisor, Horizon Technology Finance Management, completed its sale to Monroe Capital, now providing Horizon with access to Monroe's platform and resources, which we expect to benefit Horizon through increasing access and capability to originate quality venture debt investments. We were pleased to complete our first co-investment with Monroe in December with the origination of a loan to Vero Biotech.

We achieved a portfolio yield of more than 16% on our debt investments for the full year once again at or near the top of the BDC industry.

We finished the year with a committed unapproved backlog of $218 billion.

We ended the year with a net asset value of $9.71 per share primarily the result of fair value markdowns up our investments.

We supported our balance sheet during the year raising equity from an overnight equity offering in June and raising over $26 million of equity at a premium to NAV from our aftermarket program.

We also expanded the capacity of our credit facilities with New York Life and Keybanc.

And importantly, our advisor Horizon Technology Finance management completed its sale to Monroe capital now, providing our advisor with access to them and rose platform and resources, which we expect to benefit horizon through increasing access and capability to originate quality venture debt investments we were.

Pleased to complete our first co investment with Monroe in December with the origination of a loan to barrel biotech.

Robert D. Pomeroy: Finally, based on our outlook and our undistributed spillover income of $1.25 per share as of year-end, Last week, our board declared monthly distributions of $0.11 per share payable through June of 2024, together with a special distribution of $0.05 per share payable in April. Entering 2024, we continue to actively manage all of our investments, while we support our borrowers and seek to maximize capital recovery in a difficult venture market. Looking ahead, we will remain prudent with respect to growing Horizon's portfolio of debt investors while we work to maximize our NAB. With that, I will now turn the call over to Dan Devorsetz to give you more details and color on our portfolio. Dan

Finally, based on our outlook and our undistributed spillover income of $1 25 per share as of year end.

Last week, our board declared monthly distributions of 11 cents per share payable through June of 2024, together with a special distribution of five cents per share payable in April.

Entering 2024, we continue to actively manage all of our investments, while we support our borrowers and seek to maximize capital recovery and a difficult venture market. Looking ahead, we will remain prudent with respect to growing horizon's portfolio debt investments, while we work to maximize.

Our N a b.

With that I will now turn the call over to Dan divorced it's to give you more details and color on our performance Dan.

Daniel Scott Devorsetz: Thanks, Rob, and good morning to everyone. I'm happy to join today's call and look forward to speaking to you all in the quarters to come. Our portfolio size was slightly down in the fourth quarter from the prior quarter at $709 million as new originations in the quarter were offset by prepayments and normal portfolio amortization, as well as portfolio markup. In the fourth quarter, we funded six investments totaling $63 million, including debt investments to three new portfolio companies and three existing portfolio companies. This combination is a reflection of our long-term portfolio strategy of lending high-quality venture loans to new borrowers and additional financing to existing borrowers that achieve important operational and financial milestones. While we maintain a healthy pipeline of new opportunities, we expect to remain selective in new originations for the near term, and we expect potential growth in the portfolio to occur towards the middle and back half of the year. During the quarter, we experienced three loan prepayments and one partial paydown, totaling $48 million in prepaid principal.

Thanks, Rob and good morning to everyone I'm happy to join today's call and look forward to speaking to you all in the quarters to come.

Our portfolio of size, it's slightly down in the fourth quarter and the prior quarter at $709 million as new originations in the quarter were offset by prepayments and normal portfolio amortization as well as portfolio markdowns.

In the fourth quarter, we funded six investments totaling $63 million, including getting best in state renewable portfolio companies and three existing portfolio companies. This combination is a reflection of our long term portfolio strategy, a blending high quality venture loans to new borrowers with additional financing to existing borrowers.

To achieve important operational and financial milestones.

While we maintain a healthy pipeline of new opportunities, we expect to remain selective in new originations for the near term and we expect the potential broken the portfolio took to occur towards the middle and back half of the year.

During the quarter, we experienced three loan prepayments and one partial pay downs totaling $48 million in prepaid principle.

Daniel Scott Devorsetz: Similar to past years, we expect modest prepayments in the first quarter of 2024, with this normal seasonal trend compounded by the weak IPO and M&A markets at the end of 2023 continuing in the first month of 2024. Our onboarding yield of 13.8% during the fourth quarter remained near our historic highs, reflecting the ability of our team to source and structure new quality venture loans, even in this challenging environment. We expect our discipline in structuring and pricing transactions to continue to produce strong net investment returns.

Similar to past years, we expect modest repayments in the first quarter of 'twenty 'twenty, four which is normal seasonal trend compounded by the weak IPO and M&A markets at the end of 2023 continuing in the first months of 'twenty 'twenty four.

Our onboarding yield of 13, 8% during the fourth quarter remain near our historic highs, reflecting the ability of our team to source and structure new quality venture loans, even in this challenging environment.

We expect our disciplined in structuring and pricing transactions to continue to produce strong net investment income.

Our debt portfolio yield of 16, 8% for the quarter 16, 6% for the full year was again, one of the highest yielding portfolios in the BDC industry.

Daniel Scott Devorsetz: Our debt portfolio yielded 16.8% for the quarter and 16.6% for the full year, and was again one of the highest yielding debt portfolios in the BDC industry. This further validates the profitability of our venture lending strategy and our execution of that strategy in an elevated interest rate environment. As of December 31st, we held warrant and equity positions in 99 portfolio companies with a fair value of $32 million.

This further validates the profitability of our venture lending strategy and our execution of that strategy and an elevated interest rate environment.

As of December 31st we held warrant and equity positions in 99 portfolio companies with a fair value of $32 million.

Daniel Scott Devorsetz: As a reminder, in addition to the high debt investment yield I just spoke about, 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 fourth quarter, we closed $124 million in new loan commitments and approvals and ended the quarter with a committed and approved backlog of $218 million, compared to $202 million at the end of the third quarter. 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 look forward to prudently growing our portfolio during the course of the year. As of year end, 90% of the fair value of our debt portfolio consisted of three and four-rated debt investments, compared to 87% as of September 30th, and 10% of the fair value of our portfolio was rated two or one, compared to 13% as of September 30th. For our stress investments, we are continuing to diligently work on innovative solutions that can enable us to achieve additional recovery.

As a reminder, in addition to the high debt investment yield there just spoke about structuring investments with warrants and equity rights. The key component of our venture debt strategy and a potential generator of shareholder value.

In the fourth quarter, we closed $124 million in new loan commitments and approvals and ended the quarter with a committed unapproved backlog of $218 million compared to $202 million at the end of the third quarter.

I believe our committed backlog with most of our funding commitment subject to our portfolio companies achieving certain key milestones.

Good solid base as we look forward to prudently grow our portfolio during the course of the year.

As of year end, 90% of the fair value of our debt portfolio consisted of three and four rated debt investments compared to 87% as of September 30.

10% of the fair value of our portfolio is rated two or one compared to 13% as of September 30.

For a stress investments we are continuing to diligently work for innovative solutions that could enable us to achieve additional recoveries.

Gerald A. Michaud: As Rob noted earlier, we continue to work closely and collaboratively with all of our current portfolio companies, their management teams, investors, and stakeholders to navigate the continued uncertain venture macro environment. While doing so, we remain just as focused on sourcing and originating new debt investments in order to take advantage of market opportunities to make venture loans to companies whose investors have increased their support at attractive valuations, while we also benefit from the current interest rate environment. With that, I'll turn it over to Jerry for a look at the overall venture industry and current environment. Thank you very much, Dan.

As Rob noted earlier, we continue to work closely and collaboratively with all of our current portfolio companies their management teams investors and stakeholders to navigate the continued uncertain venture macro environment.

While doing so we remain just as focused on sourcing and originating new debt investments in order to take advantage of market opportunities to make venture loans to companies, whose investors have increased their support at attractive valuations. While we also benefit from the current interest rate environment.

With that I'll turn it over to Jerry for a look at that overall venture industry in current environment.

Thank you very much Dan.

Gerald A. Michaud: Turning now to the venture capital environment, according to PitchBook, approximately $171 billion was invested in VC-backed companies in 2023, the lowest total in four years, reflecting the ongoing market issues related to valuations and investors being inwardly focused on managing their existing portfolio investments. VC investment activity levels remain depressed in Q4 as venture capital investments from 2021 and the first half of 2022 continued to face devaluation issues and stress liquidity levels during 2023. VC funds that did raise capital during that time have maintained significant driving power to commitments, and we expect there will be pressure and opportunities in 2024 for VC funds to invest their LPCAP committed capital. We have witnessed many private company valuations drop steadily over the last six quarters, and there is some evidence that private company valuations are becoming more attractive again to both VC investors as well as strategic buyers.

Turning now to the venture capital environment. According to pitch book approximately 171 billion was invested in VC backed companies in 2023 lowest total in four years, reflecting the ongoing market issues related to valuations and investors being inwardly focused on managing our existing portfolio investments.

S.

VC investment activity levels remain depressed in Q4, it's an extra capital investments from 2021 in the first half of 2022 continued to face devaluation issues and stress liquidity levels during 2023.

<unk> raised capital during that time at making significant dry powder of commitments and we expect there will be pressure and opportunities in 2024, well see some funds to investor Lp's Cat committed capital.

We have witnessed many private company valuations dropped steadily over the last six quarters and there is some evidence that private company valuations are becoming more attractive again to both VC investors as well as strategic buyers.

Gerald A. Michaud: While we expect VC activity to gradually and steadily improve in 2024, certain market segments, such as AI-driven companies and life science companies, should see significant investor interest in 2024. Of course, any improvement in the venture capital environment in 2024 will require the macroeconomic environment to continue to improve, including a reduction in overall inflation and interest rates during 2024. In terms of VC fundraising, only $67 billion was raised in 2023, the lowest in six years, as the avenue to public exits remained largely closed in 2023. However, BC's committed capital from their LPs remained at record highs as a result of amounts raised during 2021 and 2022.

While we expect VC activity to gradually and steadily improve in 2020 for certain market segments, such as AI solutions, driven companies and life science companies should see significant investor interest in 2024 of course any improvement in the venture capital environment in 2024, well required macroeconomic.

Environment to continue to improve including a reduction in overall inflation and interest rates during 2024.

In terms of VC fundraising only 67 billion was raised in 2023, the lowest in six years as the Avenue to public exits remains largely closed in 2023 Bcf committed capital from their Lps remained at record highs as a result of a mountain trace during 2021.

In 2022.

Gerald A. Michaud: VCs will remain reluctant to make new investments in the current market until exit markets improve and the significant correction in private company valuations subsides. We expect VC fundraising to lag VC investment in 2024 as the LP community remains largely on the sidelines until they begin to see attractive VC portfolio exits become more frequent. VCs will have high hurdles for raising new funds based on recent returns, the quality of portfolios, organization size, and investment strategy. Meanwhile, VC-backed exit activity hit a decade low in 2023, as a modest market rally in the fourth quarter was not enough to fully open up the IPO market. The M&A market for venture-backed companies remained at historic lows as a combination of unrealistic valuations and higher interest rates, combined with regulatory scrutiny, continued to keep acquirers on the sidelines.

These will remain reluctant to make new investments in the current market until exit markets improve and a significant correction in private company valuations subsides.

We expect VC fundraising to lag VC investment in 2024 as he L. P community remains largely on the sidelines until they begin to see attractive VC portfolio exits become more frequent.

He sees will have high hurdles from raising new funds based on recent returns quality portfolios organization size and investment strategy.

Meanwhile, VC backed exit activity at a decade low in 2023 is a modest market rally in the fourth quarter was not enough to fully open up the IPO market.

Yeah. My name markets I think are bad companies remained at historic lows as a combination of unrealistic valuations and higher interest rates combined with regulatory scrutiny continued to keep acquirers on the sidelines.

We believe 2020 for valuations will begin to become more attractive at six quarters because of six quarters of declining values. We believe industries, such as energy technology and health care are best positioned to resume M&A activity given your historically high earning results public stock prices posting strong.

Gerald A. Michaud: We believe 2024 valuations will begin to become more attractive because of six quarters of declining values. We believe industries such as energy, technology, and health care are best positioned to resume M&A activity given their historically high earning rates, Public Star Prices posting strong gains, and the elevated level of cash and liquidity on the balance sheets of technology, Big Pharma, and energy companies.

Games, and the elevated level of cash and liquidity on the balance sheets of technology Big farmer and energy companies.

In terms of market conditions for new venture loan investments, we expect the challenging environment in 2023 tomorrow right in the first half of 2024. So we should see a gradual increase in demand for venture debt during 2024, and we hope to see as Dan indicated an increase in our originations as the year progressed.

Gerald A. Michaud: In terms of market conditions for new venture loan investments, we expect the challenging environment of 2023 to mark a rate in the first half of 2024, so we should see a gradual increase in demand for venture debt during 2024, and we hope to see, as Dan indicated, an increase in our originations as the year progresses. Accordingly, we will stay on our current course, thoughtfully adding select, top-quality investment opportunities to our portfolio during this period, while focusing on preserving and improving our current portfolio's value and credit quality. As market conditions improve over time, we continue to believe Horizon's solid reputation and long-term market presence will allow it to prudently accelerate its portfolio growth.

Yes.

Accordingly, we will stay on current course of thoughtfully, adding select top quality investment opportunities to our portfolio. During this period, while focusing on preserving and improving our current portfolio value and credit quality as market conditions improve over time, we continue to believe horizon solid reputation.

And long term market presence, well I went to prudently accelerate with portfolio growth.

A key baseline for future proof portfolio growth is our committed approved and awarded backlog, but Jackson as of today stands at $188 million and our advisors pipeline of new opportunities, which as of today stands at $743 million.

Gerald A. Michaud: The key baseline for future prudent portfolio growth is our committed, approved, and awarded backlog, which as of today stands at $188 million, and our advisors' pipeline of new opportunities, which as of today stands at $743 million. To sum up, 2023 was a challenging year for venture lending and venture investing, and we look forward to improving conditions for both our industry and our portfolio as we move through 2024. We will remain laser-focused on credit quality and provide all of our portfolio companies with support to ensure optimal outcomes.

To sum it up it was a challenging 2023 for venture lending and venture investing and we look forward to improving conditions for both our industry and our portfolio as we move through 2024, we will remain laser focused on credit quality and providing all of our portfolio companies with sport to ensure opt.

Similar outcomes, where we find attractive companies seeking countries that solutions will add to our pipeline and backlog as we look to begin to prudently accelerate portfolio growth. During 2024 based on our current portfolio size and attractive yield. We believe we remain well positioned to continue to generate solid.

Daniel R. Trolio: Will we find attractive companies seeking venture-desk solutions? We will add to our pipeline and backlog as we look to begin to prudently accelerate portfolio growth during 2024. Based on our current portfolio size and attractive yield, we believe we remain well-positioned to continue to generate solid NII for our shareholders and build additional long-term shareholder value. With that, I will now turn the call over to Daniel Trolio. Thanks, Jerry. And good morning, everyone.

For our shareholders and build additional long term shareholder value.

With that I will now turn the call over to Dan Trolling up.

Thanks, Gerry and good morning, everyone. We had a strong year from an NII standpoint, once again generating NII I'm more than covered our distributions well.

Oh actively preparing our balance sheet throughout the year.

And we continue to diligently work with all of our companies in order to optimize outcomes for our portfolio and further enhance our credit quality.

To recap 2023, our portfolio stood at $790 million in May we expanded the capacity of our New York life credit facility 15 million.

Daniel R. Trolio: We had a strong year from an NII stand point, once again generating NII to more than cover our distribution, while actively strengthening our balance sheet throughout the year. In addition, we continue to diligently work with all of our companies in order to optimize outcomes for our portfolio and further enhance our credit quality. To recap, in 2023, our portfolio stood at $709 million. In May, we expanded the capacity of our New York Life credit facility by $50 million to $250 million.

The $250 million.

In June we successfully raised nearly three 9 million in net proceeds from our common stock offering.

Further strengthen our balance sheet and Joan I, increasing the commitment amount on our keybank facility to 150 million.

To expand thing as accordion feature of $300 million.

But at the end of the year, we fully paid off our 2019 and securitization.

Finally, we successfully integrated we sold over 2.2 million shares through our ATM program during the year.

All of our $26 million.

Daniel R. Trolio: In June, we successfully raised nearly $39 million in net proceeds from our common stock offer, and further strengthened our balance sheet in June by increasing the commitment amount on our key bank facility to $150 million and by expanding its corresponding feature to $300 million. So, at the end of the year, we fully paid off our 2019 securitization. Finally, we successfully and fairly sold over 2.2 million shares of our ATM program during the year, raising over $26 million, further demonstrating our continued ability to opportunistically access the S&P market. As a result, we believe we remain well-positioned to add quality investments to our portfolio and create additional value for shareholders in 2024. As of December 31st, we had $104 million in available liquidity, consisting of $73 million in cash and $31 million in funds available to be drawn on under our existing credit card.

Further demonstrating our continued ability to opportunistically access the market.

As a result, we.

Believe we remain well positioned to add quality investments to our portfolio and create additional value for shareholders in 2024.

As of December 31st we had 104 million in available liquidity.

This thing of $73 million in cash and 31 million and funds available to be drawn under our existing credit facility.

We currently have 70 million outstanding under 159, Keybank facility and 181 million outstanding on our 250 million New York Life credit facility.

Thank god with ample capacity to grow the portfolio.

Our debt to equity and equity ratio stood at one point in Florida, one as of December 31st and netting out cash in our balance sheet. Our livelihood, one two to one which was within our target leverage.

Based on our cash position.

Borrowing capacity on our credit facility.

Cancel new investment capacity at December 31 was $222 million.

Daniel R. Trolio: We currently have $70 million outstanding under our $150 million KeyBank credit facility and $181 million outstanding on our $250 million New York Life credit facility, leaving us with ample capacity to grow the portfolio. Our debt-to-equity ratio stood at 1.4 to 1 as of December 31st, and netting out cash in our balance sheet, our leverage was 1.2 to 1, which was within our target leverage, based on our cash position and our borrowing capacity on our credit facilities. Our potential new investment capacity as of December 31st was $222 million. For the fourth quarter, we earned an investment income of $28 million, an increase of 22% compared to the prior period. Interest income on investments increased primarily as a result of the higher average size of our debt investment portfolio and increases in the variable interest rates on our debt investment portfolio.

For the fourth quarter, we earned investment income of $28 million, an increase of 22% compared to the prior year period.

Interest income on investments increased primarily as a result of the higher average size of our debt investment portfolio and increases in the variable interest rate on our debt investments.

Our portfolio investment.

That cost basis $721 million.

31, one.

A 1% increase for September 30th 2023.

For the fourth quarter of 'twenty, three we achieved onboarding yields of 13, 8% compared to 13, 9% achieved in the third quarter.

Loan portfolio yield was 16, 8% for the fourth quarter compared to 14, 5% for last year's fourth quarter.

Total expenses for the quarter were $12 2 million compared to $12 million in the fourth quarter of 'twenty two.

Our interest expense increased to $7 6 million from $6 2 million in last year's fourth quarter due to an increase in the average borrowings and higher interest rates on our borrowings.

Daniel R. Trolio: Our portfolio investment on a net cost basis of $721 million as of December 31st, a 1% increase for September 30th, 2023. For the fourth quarter of this year, we achieved onboarding yields of 13.8% compared to 13.9% achieved in the third quarter. Our loan portfolio yield was 16.8% for the fourth quarter compared to 14.5% for last year's fourth quarter. Total expenses for the quarter were $12.2 million, compared to $12 million in the fourth quarter of last year. Our interest expense increased to $7.6 million from $6.2 million in last year's fourth quarter due to an increase in the average borrowings and higher interest rates on our borrowing. The base management fee was $3.2 million, up from $3 million in last year's fourth quarter due to an increase in the average size of our portfolio. We had no performance-based incentive fee in the fourth quarter compared to an incentive fee of $1.4 million for last year's fourth quarter.

Base management fees were $3 2 million up from 3 million in last year's fourth quarter due.

Two an increase in the average size of our portfolio.

We had no performance based incentive fee in the fourth quarter compared to an incentive fee of $1 4 million for last year's fourth quarter.

This is due to the deferral of incentive fees otherwise earned by our adviser in the quarter under our incentive fee cap and deferral mechanism.

The deferral was driven by unrealized and realized losses on the portfolio.

At 2024 progresses, we would expect deferrals and once again powered by the incentive fee.

Net investment income for the fourth quarter 2023 was 45 cents per share compared to 53 cents per share in the third quarter of 2023 40 cents per share for the fourth quarter of 'twenty two.

Full year 2023, we generated NII of $1 98 per share more than covering our total distributions during 2023 $1 37 per share.

Company's undistributed spillover income as of December 31st with a $1 25 per share.

We anticipate that the size of our portfolio along with the portfolio as elevated interest rates and our predictive pricing strategy will enable us to continue generating NII that covers our distributions over time.

Daniel R. Trolio: This was due to the deferral of incentives otherwise earned by our advisor in the quarter under our incentive fee cap and deferral mechanism. The deferral was driven by unrealized and realized losses on the portfolio. As 2024 progresses, we would expect deferral to end and once again pay our advisor incentives. Net investment income for the fourth quarter of 2023 was $0.45 per share compared to $0.53 per share in the third quarter of 2023 and $0.40 per share for the fourth quarter of 2022. For the full year 2023, we generated NII of $1.98 per share, more than covering our total distributions during 2023 of $1.37 per share. The company's undistributed spillover income as of December 31st was $1.25.

As a reminder, the first quarter is typically the lightest in terms of prepayment activity. We expect the first quarter of 'twenty 'twenty four to be in line with the lower historic norm.

Summarize our portfolio activities for the fourth quarter resignations totaled $63 million, which were offset by $13 million in scheduled principal payments and 48 million principal prepayments and partial pay down.

We ended the year with a total portfolio of $709 million.

The macro environment, we expect to remain selective in the near term with respect to originations.

At December 31st the portfolio consisted of debt investments in 56 companies, whether it has a fair value of $670 million.

Portfolio of warrant and equity and other investments I'm wondering two companies with an aggregate fair value of $39 million.

Based upon our outlook our board declared monthly distributions of 11 cents per share for April may and June 'twenty 'twenty four given our amount of spillover income. Our board also declared a special distribution of five cents per share payable in April.

Daniel R. Trolio: We anticipate that the size of our portfolio, along with the portfolio's elevated interest rates and our predictive pricing strategy, will enable us to continue generating NII that covers our distribution over time. As a reminder, the first quarter is typically the lightest in terms of prepayment activity, and we expect the first quarter of 2024 to be in line with the lower historic norm. I summarize our portfolio activities for the fourth quarter. New originations totaled $63 million, which were offset by $13 million in scheduled principal payments and $48 million in principal prepayments and partial paydowns.

We remain committed to providing our shareholders with distributions that are covered by our net investment income overtime.

Our NAV as of December 31st with $9 71 per share compared to $10.41 as of September 30th 2023, and $11.47 as of December 31 2022.

70, sorry, Ken on any would be on a quarterly basis was primarily due to pay distributions.

The five cents per share special distributions realized losses and adjustments to fair value.

Offset by net investment income.

Daniel R. Trolio: We ended the year with a total investment portfolio of $709 million. Given the macro environment, we expect to remain selective and on their terms with respect to origination. On December 31st, the portfolio consisted of debt investments in 56 companies with an aggregate fair value of $670 million, and a portfolio of warrants, equity, and other investments in 102 companies with an aggregate fair value of $39 million. Based upon our outlook, our board declared monthly distributions of $0.11 per share for April, May, and June 2024, and given our amount of spillover income, our board also declared a special distribution of $0.05 per We remain committed to providing our shareholders with distributions that are covered by our net investment income over time. Our NAV as of December 31st was $9.71 per share, compared to $10.41 as of September 30th, 2023, and $11.47 as of December 31st, 2022. The $0.70 reduction in NAV on a quarterly basis was primarily due to paid distributions, including the $0.05 per share special distribution, realized losses, and adjustments to fair value, partially offset by net investment.

As we've consistently noted nearly 100% of our outstanding principal amount of our debt investments bear interest at floating rates with coupons.

To increase if interest rates rise with interest rate floors.

This concludes our opening remarks, we'll be happy to take questions. You may have at this time.

Ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad and a confirmation tone will indicate your line for the question queue.

You May press star two if he would like to remove your question from the queue.

Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

And our first question comes from the line of Bryce Rowe with B Riley Securities. Please proceed.

Thanks, a lot good morning.

Good morning, Dan Thanks, a lot.

One wanted to maybe start with yeah, getting getting some updates on a couple of portfolio companies.

Did you say you've kind of mentioned in recent releases here. The the next he building what looks like the maturity on that one was shifted a little bit early.

Earlier today to the end of March and.

And then also wanted to understand kind of the the.

The dynamics of the they're the recent sale of H I N V and kind of what that means relative to where you were you had that mark on the schedule of investments right now thanks.

Yeah.

Sure Hey, Bryce this is Dan divorced that's thanks so.

Good to talk to you. So so yeah next C. O is during the during the quarter. It became inevitable that the company needed to find a new home and so the best way to do that was to run it through a process. So it's been publicly announced so this is not news that it's in the C. C double a process to the equivalent.

Operator: As we've consistently noted, nearly 100% of the outstanding principal amount of our debt investments, their interest, and floating rates with coupons are structured to increase if interest rates rise with interest rate floors. This concludes our opening remarks. We'll be happy to take questions you may have at this time. Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the start button.

Chapter 11 here in the states.

So we did adjust our our maturity and in some of the terms of our deal too.

Aligned with what's going on in that process. The company continues to operate and deliver on its contracts in fact, it's doing pretty well. It's a it's signed some new contracts in and is doing well. So we expect it to find a home.

Bryce Wells Rowe: And our first question comes from the line of Bryce Rowe with B. Riley Securities. Please proceed. Thanks a lot. Good morning. Good morning, Dan. Thanks a lot.

And the next couple of quarters and we adjusted our our terms as you suggested to to accommodate that.

In terms of Ah I M. V. Also this is public news so not not not.

Bryce Wells Rowe: I wanted to maybe start with getting some updates on a couple portfolio companies and those that you've kind of mentioned in recent releases here. The Nexi building looks like the maturity on that one was shifted a little bit early or earlier to the end of March. [inaudible] Sure. Hey, Bryce, this is Dan Devorsetz.

Breaking anything, but biomass axis, which is a small cap company and also in Canada acquired the assets of eye and be out of the H I N V O N E.

Daniel Scott Devorsetz: Thanks. So, good to talk to you. So, yeah, Nexi, during the quarter, it became inevitable that the company needed to find a new home. And so the best way to do that was to run it through a process.

We created two to acquire the IP.

The plan is to develop those assets internally as well as find partners in the market to two to.

Daniel Scott Devorsetz: So it's been publicly announced, but this is not news that it's in the CCAA process, the equivalent of Chapter 11 here in the States. So we did adjust our maturity and some of the terms of our deal to align with what's going on in that process. The company continues to operate and deliver on its contracts. In fact, it's doing pretty well.

To develop.

I'm really a strong platform of biotech IP.

And so we received cash and stock as part of that as part of that transaction as well as future payment schedules based upon performance and milestones that could potentially.

Daniel Scott Devorsetz: It's signed some new contracts and is doing well, so we expect it to find a home in the next couple of quarters. And we adjusted our terms, as you suggested, to accommodate that. In terms of IMV, also this is public news, so not breaking anything, but Biovaxxis, which is a small cap company also in Canada, acquired the assets of IMV out of the HIMV entity that we created to acquire the IP.

Repay all of our initial investment in that and in the original A&D asset so our mark values that entire contract and the potential we see in the India.

And the future payments as well as what we received upfront.

Okay. Okay. That's.

That's helpful. Dan good color.

And let's say just maybe a couple of questions from Oh I guess.

Daniel Scott Devorsetz: The plan is to develop those assets internally as well as find partners in the market to develop a really strong platform of biotech IP. And so we received cash in stock as part of that transaction, as well as future payment schedules based upon performance and milestones that could potentially repay all of our initial investment in the original IMV asset. So our mark values that entire contract and the potential we see in the future payments as well as what we received up front. Okay, okay. That's helpful, Dan. Good color, too.

Balance sheet perspective, I'm kind of surprised to see kind of a lack of a T. M use in the quarter just given the track record of attach.

Tapping that ATM quite actively.

Curious, maybe maybe a question for Dan truly Oh, you know what what why why are why the does the lack of ATM use in the quarter.

Yeah. So every quarter when we go into that what do we look at our capital needs and look at different levers to pull and each one each quarter and determine the best use to raise whatever equity or debt capital and in addition to that we looked at the portfolio and we look at the act.

Daniel R. Trolio: Let's see, just maybe a couple questions from a, I guess, balance sheet perspective. Kind of surprised to see, you know, a kind of lack of ATM use in the quarter just given the track record of tapping that ATM quite actively. Just kind of curious, maybe a question for Dan Trolio, you know, why the lack of ATM use in the quarter? Yeah, so every quarter when we go into the quarter, we look at our capital needs and look at our different levers to pull in each quarter and determine the best use to raise whatever equity or debt capital we have. In addition to that, we look at the portfolio, we look at the activity that's going into the quarter, and we look at the amount of information that we may know at the time.

Typically that's going into the Florida and the amount of information that we may know at the time and so we felt it was prudent to be out of the market in the quarter.

Okay. That's helpful. And then in terms of you know cash on the balance sheet balance sheet levers you mean, it sounds like.

The first half of the year will be slower than in the back half.

Are you thinking you'll you'll continue to maybe be less active on the ATM and use you know use cash and available availability within our credit facilities to fund or you know it just really just dependent on how the how the pipeline and the activity.

Daniel R. Trolio: And so we felt it was prudent to be out of the market in the quarter. Okay, that's helpful. And then in terms of, you know, cash on the balance sheet, balance sheet leverage, I mean, it sounds like, you know, the first half of the year will be slower than the back half. You know, are you thinking you'll, you know, continue to maybe be less active at the ATM and use, you know, cash and availability within the credit facilities to fund? Or, you know, is it just really dependent on how the pipeline and the activity level start to shape up as we get into the year? Yeah, it'll definitely be dependent on how the activity shapes up for the year we did and in 2023 with a large cash balance. And that's because we received a very late prepayment.

The level of starts to shape up as we get into the year.

Yeah, it'll definitely be dependent on how the the activity shapes up for the year, we did and.

2023, with a large cash balance and that's because we see that very late prepayment.

And you can see in the first Florida from our recent developments there hasn't been a lot of activity in the quarter to date, but as we look forward. We'll do the same thing that I mentioned earlier and looked at what we see coming down the pipeline our capital needs. We will definitely lots of acute sit or any equity raise that may make sense.

Daniel R. Trolio: And you can see from our recent developments that there hasn't been a lot of activity in the quarter to date. But as we look forward, we'll do the same thing that I mentioned earlier and look at what we see coming down the pipeline, our capital needs. We will definitely look to consider any equity raise that may make sense or borrow, like you said, on the facilities.

Or you know borrow like you said on the facilities.

So it'll definitely be dependent on what we see.

Okay, All right last one for me another one for you Dan.

Just thinking about the the the mechanics of the deferred income incentive fee.

Let's assume.

Daniel R. Trolio: So it will definitely be dependent on what we see. Okay. All right. Last one for me.

That kind of comes back into play.

How how does the deferred portion work because it does it run through the other.

Daniel R. Trolio: Another one for you, Dan. Just thinking about the mechanics of the deferred income incentive fee. Let's assume that kind of comes back into play. How does the deferred portion work?

The income statement in future quarters or would it just what it was just reduced the I guess the liability to tell that on the <unk>.

Daniel R. Trolio: Does it run through the income statement in future quarters, or would it just reduce the liability that's held on the balance sheet? Thanks. Transcription by CastingWords Yeah, so you'll have to, you know, work through the calculation that looks back three years and, you know, with the amount that's deferred right now, we do not have it on the balance sheet as a liability per se. If it is earned going forward, it would run through the income statement.

Balance sheet. Thanks.

Yeah. So you you'll have to work through that and you know the calculation that looks back three years and you know with the amount that's deferred right now we do not have it on the balance sheet as a liability per se.

If it is earnings going forward and well it would run through the income statement.

Okay.

Paul Conrad Johnson: Okay, that's it for me. Appreciate it. As a reminder, ladies and gentlemen, if you would like to ask a question, please press star 1 on your cell phone keypad. And our next question comes from the line of Paul Johnson with KDW. Please proceed. Yeah, good morning.

That's it for me I appreciate it.

Yeah.

As a reminder, ladies and gentlemen would you like to answer your question. Please press star one on your telephone keypad.

And our next question comes from line of Paul Johnson with Katie W. Please proceed.

Yeah. Good morning, Thanks for taking my questions and part of this was answered kind of and your commentary on next see but I'm just kind of wondering get your thoughts you know in general for the stressed assets, you know and and really the D C market in general.

Gerald A. Michaud: Thanks for taking my question. Part of this was answered, kind of, you know, in your commentary on NEXE, but I'm just kind of wondering your thoughts, you know, in general for the stressed assets, you know, and really the DC market in general. What is the kind of like the overlying stress, been the issue for the last several quarters? I mean, has it just been? simply that sponsor held off for potentially too long, you know, trying to avoid kind of, Lower Valuation, you know, rounds, or..., more idiosyncratic issues, portfolio, but any comments? Hi Paul, this is Jerry.

What is kind of like the overlying stress that's been the issue for the last several quarters I mean is it just been <unk>.

Simply that sponsors have held off for potentially too long you know trying to avoid kind of the pain of obviously lower lower valuation.

Rounds or are these more idiosyncratic issues you sorted.

Kind of saying you know within our portfolio.

But any any common therapy.

Sure.

Gerald A. Michaud: You kind of hit on both sides of that. I mean, the fact of the matter is that through the whole of 2023, even companies in our portfolio that have been performing well and have been able to raise capital, the amount of capital they've been able to raise and the valuations at which they've been able to raise it have been really painful for the companies and for the VCs based on the carrying value of those companies. And so that has led to literally every time a portfolio company gets to a point where they're getting low on liquidity and they have to raise money, it's not just a matter of looking at the valuation and figuring out what's appropriate, whether you do a down round or bridge financing or whatever. Venture capital firms are struggling with their own portfolio valuations, and it's difficult for a lot of VCs to put money into companies or put new capital into companies when the capital they already have is way underwater.

Yeah. Paul This is Jerry you.

You kind of hit on both sides of that I mean, the fact of the matter is that to the whole 2023.

Even even companies on a portfolio that had been performing well and.

Have been able to raise capital the amount of capital they've been able to raise and evaluations, which they've been able to raise it has been really painful for the companies for.

The Vcs based on your carrying value of those companies and so that has that has led to literally every time a portfolio company gets to a point where they're.

They're getting a little one liquidity and they have to raise money. It's it's not just a matter of you know are.

Looking at the valuation.

And and figuring out what's appropriate whether.

You do a down round.

Or bridge financing or whatever it's you know.

Venture capital firms are struggling with their own portfolio valuations and it's difficult for.

A lot of Vcs to put money into companies put new capital into companies when the capital they already have it and it.

Is way under water.

Gerald A. Michaud: And the LPs are basically saying, don't continue to throw good money after bad. And that's kind of a common theme we have seen throughout the year. And obviously, valuations have taken a huge hit over the last six quarters. I think Nexi was valued at $2 billion at one point in 2022, just to give you an idea. So that's definitely been a big part of the problem, but I would like to say that it's the only problem. The fact of the matter is that in some of these instances, there are some idiosyncratic issues relative to how these companies have been managed, who their investors are, and the ability of those investors, under any circumstances, to put in more capital.

And you know they are the Lps are basically saying don't continue to throw good money after bad and that that's kind of a common theme we have seen throughout the year and obviously valuations have taken you know a huge hit over the last six quarters.

Next he was valued at $2 billion at one point in 2022, just to give you an idea. So that that's been you know definitely a big part of the problem.

I would like to say that's the only problem. The fact of the matter is it in some of these instances there are some idiosyncratic issues rollout relative to how these companies have been managed.

Who they are investors or are the ability of those investors under any circumstances to put in more capital and so you know we really have really for the whole year had to roll up our sleeves and get them really heavily more heavily involved in and kind.

Gerald A. Michaud: And so we really have, really for the whole year, had to roll up our sleeves and get really more heavily involved in kind of figuring out what the best strategy is to exit some of these transactions. And we've touched on some of them. Nexi is one, obviously.

Kind of figuring out what the what the best strategy is to exit some of these transactions and you know.

We've touched on some of them you know next he was nexium obviously.

What we saw what we did with I M D.

Gerald A. Michaud: You saw what we did with IMV. And so, you know, those are real issues that are more idiosyncratic, I would say, as they are just the overall markets. So it's been difficult. You know, I would say, and I don't want to sound too confident here at all, but we are seeing some, what I call, "green shoots" relative to overall market conditions. For instance, there were seven public life science IPOs in the first two months of this year. Last year, during the same period, there were only two.

And so those are those are real issues that are more.

As much idiosyncratic I would say is they are just the overall market. So it's been it's been difficult I, you know I would say and I don't want to sound too confident in here at all but we are seeing some what I call green shoots relative to overall market conditions.

For instance, there were seven public life science Ipos in the first two months of this year last year. During the same period there were only two.

Gerald A. Michaud: So we are starting to see, and there's been some M&A activity in the marketplace as well. Again, I wouldn't say we're out of the woods by any stretch. I think this is going to be a really interesting year, especially the first half of it.

So we are seeing starting to see and then there's been some M&A activity in the marketplace as well again I wouldn't say you know we're out of the woods by any stretch I think this is going to be a really interesting year, especially the first half of it but I do think that valuations have gotten to a point now where they are becoming a little bit more attractive to do M&A.

Gerald A. Michaud: But I do think that valuations have gotten to a point now where they are becoming a little bit more attractive to M&A buyers. And, you know, as I mentioned, even the IPO market seems to be showing some signs of life anyway. So that's where we are. Thanks for that. That's very helpful. A lot of color in there.

There is a.

And as you know as I mentioned.

Even the IPO market seems to be showing some signs of life anyway. So that's where we are.

Thanks for that that's very helpful lot of a lot of color in there.

Gerald A. Michaud: It sounds like, you know, there may be some testing of the waters again, but, I mean, has the more recent kind of, I mean, the prime rates, does, you know, the hire for longer, Commentary I guess that's out there. I mean just that's pushing that out any further this year, do you think you know more? I guess the recovery in that market.

I mean, it sounds like there may be some testing of the waters again, but I mean has the more recent kind of I mean, the prime rates at eight and a half or so I believe I mean.

Does the higher for longer you know.

Commentary I guess that's out there I mean, just that's pushed that out any further this year do you think you know more recently.

The recovery in that market.

Gerald A. Michaud: You know, I wish I, you know, I read probably the same things that you read. And I wish I had, so all I can, all we can do really is, at the ground level at this point, just look at how all of this impacts our portfolio companies, as well as the new transactions we're looking at. And, you know, it's definitely going to be interesting. Like I said, the first half of 2024 is going to be very interesting. It could go, it could go either way because, you know, I mentioned higher interest rates and lowering inflation as being, you know, macroeconomic issues, but there are also two wars and an election coming up. So, you know, anyone who's trying to predict through all that relative to, you know, looking out to the future in 2024, it's really, it's really difficult.

You know [laughter] I wish I I, you know I read I read probably the same things you do you read and I wish I had so all I can all we can do really is you know with the <unk>.

Ground level at this point just look at how all of this impacts our portfolio companies as well as the new transactions, we're looking at.

And you know.

It's it's definitely going to be an interesting like I said, the first half of 'twenty 'twenty four is going to be very interesting. It could go it could go either way because you know I mentioned higher interest rates as as in and lowering lowering inflation has been macroeconomic issues, but there's also two wars in a in an election coming up.

So you know anyone who is trying to predict through all of that relative to you know you know looking out to the future in 2024, it's it's really it's really difficult, but so you know we we we've got our head down we're looking at every one of our portfolio companies were staying extremely close to the management teams to their investors are really all their stakeholders.

Gerald A. Michaud: But, you know, we've got our head down, we're looking at every one of our portfolio companies, we're staying extremely close to the management teams, to their investors, really all their stakeholders. And, you know, we're going to manage our way through this, trying to maximize the value of all of our assets, including those that are a bit stressed right now. Great, I appreciate it. Thanks for that. And last one. I'd just ask, I mean, you know, do you think that there's any kind of potential?

And you know, we're going to manage our way through this I'm not trying to maximize the value of all of our assets, including those that are a bit stressed right now.

Great I appreciate it thanks for that and the last one.

I just ask I mean, do you think that theres any kind of potential for just sort of incremental G&A.

Robert D. Pomeroy: and Environmental. And that concludes our briefing. And we'll see you next time. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye

G&A cost savings from the acquisition of <unk>.

The Monroe platform.

I'll take that one Paul it's Rob.

Robert D. Pomeroy: You know, I think on the margin, absolutely. But the investment management agreement between HTFM and the public company established, you know, admin fees and costs that are important, but we have already seen some as it relates to things that are costs borne by the public company, you know, insurance and other things that are helpful. So we have already seen a few. Not big numbers, but helpful.

I think on the margin absolutely.

But the investment management agreement between CFM in public.

Public company.

Established.

Admin fees and costs that are important but we have we have seen some and as it relates to.

Things costs borne by the public company D&O insurance and other things that are.

They are is helpful. So we have already seen a few of those.

Not big now but helpful.

Okay. Thanks, great.

Daniel R. Trolio: Okay, thanks, great. Our next question comes from Lauren on behalf of Christopher Nolan with Leidenberg-Fowlman. Please proceed. Hi. Apologies, I joined the conference late. Back to the ATM use question, what's the outlook for the leverage ratio going forward? So, as you know, as we mentioned, our target leverage is net of cash 1.2 times. And so with that at that level, again, it's a target. What we report is always a point in time. So if we're a little above that, then, you know, we feel comfortable because there's a significant amount of cushion between the 1.2 and the two times regulatory cap. So I would say the outlook is likely to be within that range.

Great that's all for me.

Our next question comes from the line of Christopher Nolan with Ladenburg Thalmann. Please proceed.

Oh I apologize I joined the conference late.

Back to the ATM use question, what's your outlook for the leverage ratio going forward.

So as you know as we mentioned our target leverage is net of cash 1.2.

Times, and so with that at that level and again, it's a target. What we report is always a point in time. So if we're a little above that then you know we feel comfortable because there is significant amount of friction between the one to two times.

Yeah. So I would say the outlook is to be within that range.

Gotcha.

Daniel R. Trolio: Gotcha. And on the dividend, I know that you guys announced a supplemental dividend for the first quarter, given the rise in non-accruals, and also given your high level of spillover income was a thought for their dividend supplements through the year. Yeah, so each quarter, we have a distribution discussion with our board and determine the level of not only the quarterly and monthly distributions each quarter but also the need for a supplemental distribution. And, you know, based on exactly what you said, the elevated spillover that we have coming out of 2023, and our outlook for 2024, we felt it was prudent, along with the board, to provide a special distribution at this time, and then we'll continue to do the same each quarter.

On the dividend I know that it goes mostly in supplemental dividends for the first quarter given the rise in non cool.

And also given your high level of spillover income, what's the thoughts on that.

There dividends, helping us here.

Yeah, so each quarter, we have a distribution discussion with our board and determining the level of not only the quarterly distribution the monthly distributions each quarter, but also the need for supplemental distribution and you know based on exactly what you said the elevator.

Good spillover that we have coming out of 2023, our outlook for 2024 Ah We felt it was prudent and along with the board to provide a special distribution at this time and then we'll continue to do the same each quarter.

And I guess final question related to the spillover do you guys compare what the excise tax would be not distributing in terms or I mean, how does the excise tax consideration fall into your spillover consideration.

Daniel R. Trolio: And I guess the final question and related to the spillover, do you guys compare what the excise tax would be not distributing in terms of terms or, I mean, how does the excise tax consideration fall into your spillover consideration? It is part of the consideration, but at 4%, it isn't a significant expense to the balance sheet. Some would say it's a lower cost way to keep capital on the balance sheet.

It's mark.

Yes, it's part of the consideration, but at 4% it isn't a significant expense to the balance sheet.

Some would say, it's a lower cost way to seed capital on the balance sheet and sell.

Daniel R. Trolio: With the spillover, we look at the level of where it is at the current point in time and are able to distribute the spillover in the required period to stay within the RIC and BDC requirements. That's it for me. Thank you very much. Thank you. Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I'd like to send a call back to Rob Pomeroy for his closing remarks. Thank you all for joining us this morning. We appreciate your continued interest and support in Horizon, and we look forward to speaking with you again soon. This will conclude our call. This concludes today's conference; you may now disconnect. Have a great day! The Ultimate Parody Site!

What's the spillover or we look at the the level of where it is at the current point in time and be able to distribute that spillover in the required period to stay within the BDC requirements.

Alright, that's it for me thank you very much.

Thank you.

Thank you.

Ladies and gentlemen, we have reached the end of the question and answer session I would like to turn the call back to Rob Pomeroy for closing remarks.

Thank you all for joining us. This morning, we appreciate your continued interest and support in Horizon, and we look forward to speaking with you again soon this will conclude our call.

Okay.

This concludes today's conference you may now disconnect.

Have a great day.

Yeah.

Mhm.

Hum.

[music] mhm.