Horizon Technology Finance NASDAQ: HRZN executives highlighted recent strategic moves and portfolio growth during the company’s first-quarter 2026 earnings call, including the completion of its merger with Monroe Capital Corp. (MRCC) and the formation of a new joint venture with ROTH Capital.
Strategic developments: MRCC merger and new RoHo joint venture
Chief Executive Officer Mike Balkin said the company has had “a very newsworthy and exciting couple of months,” pointing to two major developments. In March, Horizon formed RoHo, a joint venture with ROTH Capital intended to “provide growth financing solutions to small and micro-cap public companies.” In April, the company completed its merger with MRCC, which Balkin said increases equity capital available for investment and provides “greater economies of scale to compete for larger” venture capital-backed transactions.
“Aided by the full support and backing of Monroe, we are taking the Horizon platform to the next level,” Balkin said.
Chief Financial Officer Dan Trolio said the merger “significantly strengthened our balance sheet upon closing with $141 million of additional capital.” With the blackout period ended, Trolio said the company expects to begin using its $10 million stock repurchase program due to what management described as a dislocation between the current valuation and net asset value.
Quarterly performance: portfolio growth, income, and NAV
Management reported a second consecutive quarter of portfolio growth. Paul Seitz, Horizon’s Chief Investment Officer, said the portfolio stood at $696 million at quarter-end. During the first quarter, the company funded five life science debt investments, including one refinancing, totaling $120 million, Seitz said.
Balkin said Horizon generated net investment income (NII) of $0.19 per share, which exceeded its distributions, and ended the quarter with net asset value (NAV) per share of $6.98. Trolio said NAV was comparable to where it stood at Dec. 31, while also noting it was down from $7.57 at March 31, 2025.
Trolio attributed the stable quarter-over-quarter NAV primarily to “NII exceeding our distributions” and a change in the timing of how the company accounts for monthly distributions. He said Horizon is moving to recording distributions on the ex-dividend date, aligning with how most BDCs record distributions. In response to an analyst question, Trolio explained that only one of the three monthly distributions declared was accrued in the quarter under the updated approach, “the impact is $0.06 instead of the $0.18.”
Dividend declarations and spillover income
Based on the company’s outlook and spillover income, Balkin said the board declared regular monthly distributions of $0.06 per share payable in July, August, and September 2026. He added the board also declared special monthly distributions of $0.03 per share payable in July, August, and September 2026, consistent with the company’s prior announcement ahead of the merger closing.
Trolio said undistributed spillover income as of March 31 was $0.52 per share. He also reiterated management’s goal to generate NII that covers distributions over time as the company deploys incremental capital and moves toward its target leverage.
Yields, originations, and backlog
Horizon reported continued high portfolio yields. Balkin said the company achieved a portfolio yield on debt investments of “over 15%” for the quarter. Seitz put the debt portfolio yield at 15.2% and described it as “among the highest-yielding debt portfolios in the BDC industry.”
Trolio said onboarding yields were 12% in the first quarter, in line with the fourth quarter of 2025. He said the loan portfolio yield of 15.2% compared to 15% in the first quarter of 2025.
On portfolio activity, Trolio said first-quarter originations of $120 million were offset by $5 million in scheduled principal payments and $63 million in principal prepayments, refinancings, and partial paydowns. Seitz said Horizon experienced one loan prepayment and one refinancing totaling $63 million in prepaid principal.
The company also ended the quarter with a larger committed and approved backlog. Balkin cited a backlog of $180 million, while Seitz said the backlog increased to $180 million from $154 million at the end of the fourth quarter. Seitz said Horizon expects further portfolio growth in the second quarter, driven by its pipeline, and noted that one pipeline opportunity, Stellar Cyber, closed in April. He added that since quarter-end the company has been awarded five new venture loan transactions representing $90 million in total commitments, while stressing discipline in underwriting.
Balance sheet, leverage, and credit quality
Trolio said that as of March 31 the company had $105 million of available liquidity, consisting of $73 million in cash and $32 million available under credit facilities. He detailed borrowings at quarter-end of $45 million outstanding under a $150 million KeyBank facility, $181 million outstanding on a $250 million New York Life facility, and $90 million outstanding on a $200 million Nuveen facility. He added that post-merger, Horizon paid down the full amount outstanding under the KeyBank facility.
Debt-to-equity was 1.35-to-1 as of March 31, according to Trolio. He said net leverage, after netting out cash, was 1.13-to-1, “below our target leverage.” Based on cash and borrowing capacity, he said potential new investment capacity as of March 31 was $357 million, and that post-merger capacity increases with the additional $141 million of capital.
On operating results, Trolio said investment income totaled $24 million for the quarter compared to $25 million in the prior-year period, “primarily due to lower fee-related income on our debt investment portfolio.” Total expenses were $14.8 million compared with $13.4 million in the first quarter of 2025. He said interest expense was $8.2 million, $0.5 million lower than the year-ago quarter; base management fee was $3.1 million; and the company received $1.8 million of performance-based incentive fees.
Trolio also noted that the advisor agreed to waive up to $4 million of fees—$1 million per quarter—post-merger starting in the third quarter of 2026. Looking ahead, he said the company expects to record a “non-recurring one-time transaction expense of $4.3 million” in the second quarter related to completion of the merger.
Regarding portfolio composition, Trolio said that on March 31 the portfolio consisted of debt investments in 41 companies with a fair value of $646 million, and warrant, equity, and other investments in 99 companies with a fair value of $50 million. Seitz said the firm held warrants, equity, and other investments in 99 portfolio companies with a fair value of $50 million, calling equity rights a key component of its venture debt strategy.
Seitz said 88% of the fair value of the debt portfolio was rated three or four at quarter-end, with 12% rated two or one, which he described as a modest improvement from the end of the fourth quarter.
In the Q&A, Trolio addressed questions on non-accruals, saying the company had the same three names on non-accrual in both the prior quarter and the current quarter—Vesta, Provivi, and Nexar. He said that in the prior quarter the company was able to reduce non-accruals by working through transactions to maximize returns. On Provivi, he said Horizon received a paydown “as we continue to work through that account.”
Trolio also said that nearly 100% of the outstanding principal amount of Horizon’s debt investments bear interest at floating rates and that about 71% of those investments are already at their interest rate floors, which he said should mitigate the impact of decreasing interest rates.
Venture market commentary: AI-driven funding, muted IPOs
Seitz provided an update on the venture environment, citing PitchBook data showing approximately $267 billion invested in VC-backed companies in the first quarter, which he said exceeded all full-year totals for investment except 2021 and 2025. He said the performance was driven by large AI investments, noting that the top five investments accounted for $196 billion. Seitz also described a “significant bifurcation” in venture markets, with the top companies receiving the majority of capital.
On exits, Seitz said nearly $350 billion of exit value put 2026 “on pace to smash records by June,” while adding that 72% of that value was due to SpaceX’s acquisition of xAI. Excluding that acquisition, he said exit value was $97 billion, the largest quarter since the fourth quarter of 2021, driven primarily by AI acquisitions.
However, Seitz said the IPO market “remains muted,” with 15 VC-backed IPOs during the quarter, and he expects it to remain muted near term given geopolitical and macro uncertainty. He added that a limited life science IPO market can create venture lending opportunities, while in technology he sees “considerable optimism for tech IPOs” alongside continued due diligence in areas such as AI and defense technology.
Asked about the environment for deploying new capital, Seitz said activity is picking up and that larger funds are moving down-market, but emphasized Horizon’s focus on credit quality and deal structuring.
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.
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