Horizon Technology Finance Reports Solid Third Quarter 2025 Results as Company Advances Planned Merger with Monroe Capital Corporation
Horizon Technology Finance Corporation a specialty finance company focused on providing secured loans to high-growth companies in technology, life sciences, healthcare services, and sustainability sectors, announced its financial results for the third quarter ended September 30, 2025. The Company, which operates as an affiliate of Monroe Capital, continued to demonstrate portfolio strength and stable income generation while progressing toward its proposed merger with Monroe Capital Corporation (MRCC).
Strong Performance and Strategic Progress
During the third quarter of 2025, Horizon reported net investment income (NII) of $14.0 million, or $0.32 per basic share, representing growth from $11.8 million, or $0.32 per basic share, in the same period last year. The Company’s total investment portfolio at quarter-end stood at $603.5 million, reflecting disciplined lending, selective originations, and balance sheet management.
Horizon also reported a net asset value (NAV) of $315.7 million, or $7.12 per share, as of September 30, 2025. The Company achieved an annualized portfolio yield of 18.6%, supported by fee income and income recognition from previously non-accrual loans that achieved favorable outcomes during the quarter.
Liquidity remained strong at quarter-end, with $130.9 million in cash and additional borrowing capacity of approximately $329.0 million, positioning the Company to support future investment opportunities and fund new transactions.
Chief Executive Officer Mike Balkin highlighted the Company’s positive momentum, noting that Horizon successfully increased NAV and generated strong NII while executing on portfolio management initiatives. “In the quarter, we originated a modest number of new loans and acquired the portfolio of a co-lender, which was accretive to our net asset value per share,” Balkin stated. He emphasized that successful resolutions involving stressed investments reaffirm the Company’s ability to work constructively with clients under challenging circumstances.
Balkin also noted that Horizon strengthened its capital structure by completing a $40 million convertible notes offering and raising proceeds through its at-the-market (ATM) equity issuance program. These actions, coupled with the anticipated merger with MRCC, are expected to enhance Horizon’s future scale and competitiveness in the venture lending market.
Quarterly Operating Results
Horizon generated total investment income of $26.3 million for the third quarter of 2025, compared to $24.6 million in the same quarter of 2024. The improvement was primarily driven by higher interest and fee income tied to active lending and liquidity events within the portfolio.
Total expenses decreased slightly to $12.0 million from $12.4 million in the prior-year period, largely due to lower base management fees resulting from the portfolio’s average size during the quarter. After expenses, Horizon’s NII reflected improved performance across core revenue streams.
The Company recorded a net realized loss on investments of $22.5 million, an improvement from the $33.9 million loss recognized in the third quarter of last year. Meanwhile, net unrealized appreciation on investments increased to $40.5 million, compared to $29.3 million in the year-ago period, driven in part by recovery and resolution of previously impaired loans.
Portfolio Composition and Credit Quality
As of September 30, 2025, the Company’s portfolio consisted of 39 secured loans valued at $560.2 million, along with warrant, equity, and other investments totaling $43.3 million across 102 portfolio companies. Horizon continues to provide growth capital to venture-backed companies, with exposure diversified across multiple innovation-driven sectors.
The Company uses an internal rating scale to evaluate credit quality. As of quarter-end:
- 26 investments were rated 3, indicating normal performance and standard risk levels.
- 5 investments were rated 4, reflecting strong credit performance.
- 4 investments were rated 2, representing elevated risk but no expected loss at the time.
- 4 investments were rated 1, indicating higher risk where principal recovery is uncertain.
Despite a small number of challenged credits, the overall weighted-average credit rating of 2.9 remained consistent with prior periods, suggesting stable underlying portfolio health.
Active Investment and Liquidity Events
During the quarter, Horizon funded three loans totaling $15 million and completed the purchase of a co-lender’s remaining assets for $22.5 million. These acquired assets held a fair value of $36.5 million at closing, immediately contributing to NAV accretion.
The Company also experienced multiple liquidity events, including loan prepayments and warrant exercises across eight portfolio companies, delivering proceeds and strengthening balance sheet flexibility. Several prepayments also resulted in additional income from end-of-term fees and prepayment penalties.
Capital Management and Leverage Position
Horizon continues to strategically manage its capital structure. During the quarter, the Company issued $40 million in 5.50% convertible notes due 2030, raising approximately $36.6 million in net proceeds. Additionally, the Company recorded conversions of previously issued notes into common shares, reducing interest expense and increasing equity capital.
The ATM program contributed approximately $10.6 million in net proceeds, reflecting favorable market demand for the Company’s stock.
Horizon ended the quarter with a net debt-to-equity leverage ratio of 94%, below its target maximum leverage of 120%, providing flexibility to expand its lending portfolio.
Merger With Monroe Capital Corporation
One of the most significant developments in the quarter was the announcement that Monroe Capital Corporation (MRCC) will merge into Horizon, subject to shareholder approval and regulatory clearance. Management anticipates that the combined platform will create a stronger, more competitive entity with broader origination capabilities and greater reach in the venture lending market.
This merger is expected to enhance Horizon’s scale, increase transaction capacity, and strengthen synergies with Monroe Capital’s established market presence and financing network.
Dividend and Spillover Income
Horizon declared monthly distributions of $0.11 per share payable in January, February, and March 2026, reflecting confidence in earnings stability and available distributable income. The Company reported undistributed spillover income of $0.93 per share, which can support future dividends even if near-term market conditions fluctuate.
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