Horizon Technology Finance (NASDAQ:HRZN) said its second-quarter net asset value declined primarily because of write-downs tied to one portfolio company, even as the business development company expanded its debt investment portfolio for a third consecutive quarter and reported a larger committed backlog following its April merger with Monroe Capital Corporation.
Chief Executive Officer Mike Balkin said the merger increased the company’s available investment capital and marked the beginning of a new growth phase. He said Horizon has been investing in underwriting, credit capabilities, technology, personnel and its origination platform as it seeks to grow its portfolio, increase net investment income, and build shareholder value over time.
Portfolio Growth Offset by Soli Write-Downs
However, Chief Investment Officer Paul Seitz said portfolio growth was offset by valuation reductions associated with Soli. Horizon learned in June that Soli’s equity-raising plan had been significantly affected by cash burn above its projections following a $32.5 million equity raise completed in two phases during late March and the first half of April.
As a result, Horizon wrote down its entire $20 million equity holding in Soli, which it received in August 2025 after converting a portion of its debt investment in connection with the company’s strategic merger and equity investment. Horizon also wrote down $19 million of its debt investment in Soli. Seitz said the company is focused on recovering as much value as possible from the investments.
The write-downs contributed to a decline in net asset value per share to $6.23 as of June 30, from $6.98 at the end of the first quarter and $6.75 a year earlier. Trolio said the quarterly NAV decline was primarily driven by the Soli-related reductions.
Income, Yield and Distributions
Second-quarter investment income was $25 million, compared with $24.5 million in the year-earlier period, driven primarily by higher interest income from the debt investment portfolio. Total expenses rose to $17.4 million from $12.7 million a year earlier, largely because of $4.4 million in non-recurring expenses related to the Monroe merger.
Net investment income was $0.11 per share, compared with $0.19 in the first quarter and $0.28 in the second quarter of 2025. Excluding the merger-related expenses, net investment income would have been $0.18 per share, which management said covered the company’s regular distributions.
Horizon reported a 14.9% debt portfolio yield in the quarter, down from 15.8% a year earlier. Its onboarding yield was 12%, consistent with the first quarter and historic levels, management said. The company also reported $0.33 per share of undistributed spillover income as of June 30.
The board declared regular monthly distributions of $0.06 per share for October, November and December 2026, along with special monthly distributions of $0.03 per share for each of those months. Trolio said the company expects its expanded capital base, leverage capacity, anticipated growth and pricing strategy to enable net investment income to cover distributions over time.
Liquidity, Backlog and Share Repurchases
As of June 30, Horizon had $229 million of available liquidity, including $135 million of cash and $94 million available under credit facilities. Net leverage was 0.65-to-1 after netting cash, below the company’s target leverage, while potential new investment capacity stood at $459 million.
The company’s committed and approved backlog increased to $228 million at quarter-end from $180 million at the end of the first quarter. Seitz said Horizon expects another quarter of debt investment portfolio growth in the third quarter, supported by its pipeline. The company had also been awarded four new venture loan transactions representing $87 million in total commitments, while StarCompliance, a pipeline opportunity, closed in July.
During the second quarter, Horizon experienced three loan prepayments totaling $39 million in prepaid principal. It also reported $2.3 million in proceeds from the redemption of warrants and equity interests in two investments.
Horizon repurchased about 1.4 million shares during the quarter at an average price of $4.54. On Aug. 3, the board authorized an additional $20 million for the company’s stock repurchase program. Trolio said management expects to remain opportunistic on buybacks given the difference between Horizon’s valuation and management’s confidence in the company’s outlook.
Post-Merger Strategy
Seitz said the Monroe relationship gives Horizon the ability to partner on certain investments, potentially allowing it to take larger positions, pursue larger transactions and participate more in growth-stage opportunities. He added that management intends to balance larger ticket sizes with portfolio diversification.
Horizon also revised its internal credit-rating scale effective June 30 to align with Monroe Capital’s system. Under the new one-to-five scale, with one representing the highest rating, 88% of the fair value of Horizon’s debt portfolio was rated one, two or three, while 12% was rated four or five.
Management said it continues to see venture lending opportunities in technology and life sciences despite a venture capital environment that it described as concentrated in large artificial intelligence investments. Seitz said venture debt remains an attractive capital option for high-quality companies and that Horizon plans to maintain underwriting discipline as it deploys capital.
About Horizon Technology Finance (NASDAQ:HRZN)
Horizon Technology Finance Corporation is a specialty finance company organized as a business development company (BDC) that provides private credit solutions to venture capital and private equity-backed technology, life science and healthcare companies. The firm targets companies at various stages of development, offering secured debt financing structures such as first‐lien and second‐lien loans, as well as equity co‐investment opportunities in select portfolio companies.
Horizon Technology Finance’s investment strategy emphasizes deployment of capital in U.S.‐based enterprises with proven technology, strong management teams and clear paths to growth.
