Horizon Technology Finance NASDAQ: HRZN outlined a year-end return to portfolio growth and provided an update on its pending merger with Monroe Capital Corporation (MRCC) during its fourth-quarter 2025 earnings call. Management said a U.S. government shutdown delayed the merger timeline into 2026, but the company expects to hold a special meeting “shortly” and, if approved, to close the transaction in the weeks ahead.
Chief Executive Officer Mike Balkin characterized 2025 as “a year of transformation,” citing both macro and company-specific challenges while emphasizing steps taken to position the business for longer-term growth. He said the merger would “significantly increase” equity capital available for investment and improve scale, while also deepening coordination with Monroe Capital, the parent of Horizon’s external manager. Balkin pointed to a first-quarter 2026 co-investment with Monroe in a venture loan to OSSIO as an early example of that collaboration.
Quarterly results and updated distribution
For the fourth quarter, Horizon reported net investment income (NII) of $0.18 per share and ended 2025 with net asset value (NAV) of $6.98 per share. Balkin said the board declared regular monthly distributions of $0.06 per share payable in April, May, and June 2026, citing the company’s outlook, undistributed spillover income, and the anticipated MRCC merger. He added that as the portfolio grows, the company’s goal is to deliver NII “at or above” declared distributions over time.
Chief Financial Officer Dan Trolio said full-year 2025 NII was $1.05 per share, and undistributed spillover income was $0.65 per share at year-end. Trolio also noted the quarter-to-quarter NAV decline of $0.14 (from $7.12 at September 30, 2025 to $6.98 at December 31, 2025) was “primarily due to our paid distributions exceeding our NII.”
On the call’s first analyst question, management said the dividend level is reviewed with the board each quarter and is set based on portfolio run-rate, spillover income, and pipeline and growth opportunities, with an eye toward a level the company believes is sustainable and can be covered over time.
Portfolio growth, backlog, and yields
Chief Investment Officer Paul Seitz said the investment portfolio stood at $647 million at year-end as Horizon “return[ed] to growth.” During the fourth quarter, the company funded nine debt investments totaling $103 million, including two refinancings of existing investments. Seitz added that the company’s committed and approved backlog increased to $154 million at December 31, 2025, up from $119 million at the end of the third quarter.
Management highlighted yields as a key feature of the platform. Seitz said the company’s debt portfolio produced a 14.3% yield for the quarter, and Balkin stated Horizon achieved a portfolio yield on debt investments of over 14% in the fourth quarter and nearly 16% for full-year 2025. Seitz also said onboarding debt investment yield was 12% in the quarter, which he described as consistent with historic levels.
Regarding portfolio credit metrics, Seitz said that as of year-end, 87% of the fair value of the debt portfolio was rated 3 or 4, while 13% was rated 2 or 1, consistent with the prior quarter.
On portfolio mix, Trolio said that at December 31, the portfolio consisted of debt investments in 38 companies with an aggregate fair value of $596 million, and warrant, equity, and other investments in 97 companies with an aggregate fair value of $51 million. Seitz emphasized that warrants and equity rights are “a key component” of Horizon’s venture debt strategy and a potential contributor to shareholder value; he noted the fair value of warrants, equity, and other holdings totaled $51 million at year-end.
Drivers of lower NII and prepayment dynamics
Investment income for the quarter was $21 million, down from $24 million in the year-ago period, which Trolio attributed primarily to lower interest income on the debt investment portfolio. Total expenses were $12.5 million compared with $12.8 million in the prior-year quarter. Interest expense was $8 million, slightly lower than the year-ago period, and the base management fee was $2.9 million, down year over year due to a smaller portfolio.
NII declined from $0.32 per share in the third quarter of 2025 and $0.27 per share in the fourth quarter of 2024 to $0.18 per share in the fourth quarter of 2025. In the Q&A, management pointed to the timing of fundings late in the quarter as well as lower prepayment-related income as the main drivers of the sequential decline. Executives said the third quarter included “significant prepayments” and refinancing activity, while the fourth quarter had one prepayment and “a couple of opportunistic refinancing” transactions that produced less income than typical prepayment events because refinancing does not generate prepayment fees. Trolio said the company expects prepayment activity to remain modest in the near term.
Balance sheet actions and liquidity
Management detailed several 2025 financing steps aimed at improving flexibility and reducing borrowing costs. Trolio said Horizon increased the commitment under its Nuveen senior secured credit facility to $200 million in May. In September, it issued $40 million of 5.5% unsecured convertible notes due 2030 and used proceeds to retire asset-backed notes with an interest rate “just over 7.5%.” In December, Horizon issued $57.5 million of 7% unsecured notes due 2028 and used proceeds in January 2026 to redeem its 2026 public notes. Management also said the company raised “over $14 million” through its ATM equity program during the year.
As of December 31, Horizon had $189 million of available liquidity, including $143 million in cash and $46 million available under credit facilities. Trolio said the company had no borrowings under its $150 million KeyBank facility, $181 million outstanding on its $250 million New York Life facility, and $90 million outstanding on its $200 million Nuveen facility. Debt-to-equity leverage was 1.5-to-1 at year-end, and net leverage (net of cash) was 1.05-to-1, which management said was below its target leverage. Trolio also cited potential new investment capacity of $472 million at December 31 based on cash and borrowing capacity.
Separately, in response to an analyst question, management confirmed the company redeemed the full amount of its 4.875% 2026 notes in January. On convertible note conversions, management said conversions occur at NAV and therefore do not create dilution; it cited $8.5 having been converted in the fourth quarter at the stated NAV at the time.
Market backdrop: venture capital, exits, and AI focus
Seitz described a more constructive venture capital investment environment in 2025. Citing PitchBook data, he said approximately $92 billion was invested in VC-backed companies in the fourth quarter, driven in significant part by AI, and total 2025 VC investment of $339 billion marked the largest year since 2021. Exit markets were “open, though slow” in the fourth quarter, with roughly $100 billion of exit value, primarily from tech IPOs. However, he said the performance of many second-half 2025 IPOs could make investors and bankers more cautious about new listings in 2026.
Seitz also said the life science IPO market remains limited, which he argued creates more venture lending opportunities, citing Horizon’s loans to Pelthos and OSSIO. On technology, he said Horizon continues deep due diligence in areas including AI and defense technology. He added that Monroe published an AI white paper in early February and said AI-related risk has become a central part of underwriting, with management aiming to balance views that either overstate or understate the impact of AI on enterprise software.
Looking ahead, Seitz said Horizon expects to grow the portfolio in the first quarter of 2026, supported by the pipeline and backlog. He said two pipeline opportunities—Pelthos and OSSIO—have already closed in 2026, and Horizon has been “awarded” two new venture loan transactions totaling $82.5 million in commitments, while emphasizing continued discipline in underwriting.
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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