Edited Transcript of HRZN.OQ earnings conference call or presentation 29-Jul-20 1:00pm GMT

We also further strengthened and diversified our balance sheet by amending our credit facilities with New York Life Insurance and KeyBank and ended the quarter with over $200 million of capacity to support our portfolio companies and to selectively make new investments. All in, we are weathering the storm well and remain confident in our ability to navigate the challenges presented by the pandemic. That said, we are well aware that there remains a considerable amount of ongoing uncertainty and macroeconomic risks outside of our control. Thus, we continue to take a measured and thoughtful approach with respect to our portfolio and new originations.

On our last call, we discussed at some length, our process for managing our investments and our consistent communication with our portfolio companies as they deal with the new normal. During the quarter, we continued to employ our 3-legged stool approach, which has worked for us in both good times and bad. The first leg of this stool consists of meaningful discussions with the management teams of our portfolio companies about employing a realistic and achievable outlook when making business plans, especially in light of the present environment. We ensure management teams remain focused on streamlining operating expenses and rightsizing their businesses in order to successfully navigate the real and potential challenges that lay ahead. The second leg is the investor’s willingness and ability to support their portfolio companies with additional new capital now and in the future. One of the key criteria of our underwriting process is the quality and resources of the potential borrowers investor group. When times are difficult, this is even more critical. The third leg of this tool is aligning Horizon’s interests with the other legs of the stool to provide a plan to help a portfolio company through difficult times while increasing the credit quality of the investment. To do so, we can defer principal payments, ease performance covenants or make additional loans, all of which we have utilized in the past. The 3-legged stool approach served us well in the quarter as we maintain strong relationships with our companies and many were able to raise capital despite the economic environment.

Turning to our investment activity. In the second quarter, we funded 6 new loans totaling $40 million and consolidated $15 million in loans from our former joint venture onto our balance sheet, which resulted in our ninth consecutive quarter of portfolio growth. We are also pleased to see $30 million in prepayment activity in the quarter, a testament to the success of our predictive pricing strategy even during challenging times.

Entering the third quarter, our committed backlog and overall pipeline continue to remain active despite the pandemic. We continue to see strong demand for venture debt within our target industries as companies seek additional liquidity and funding sources. We will continue to selectively pursue new investment opportunities in companies that meet our higher bar for liquidity. We also maintained our current monthly distribution level at $0.10 per share through December. It is our Board’s policy to set our distribution where it can be covered by NII over time. The distribution level reflects our outlook for the balance of 2020 and our spillover income at June 30. We have now covered our distributions with NII for the past 2.5 years.

While our overall outlook remains measured in light of the ongoing pandemic, our team has continued to perform quite well. We will continue to focus on closely managing our portfolio and supporting our portfolio companies, while we look to opportunistically fund new investments. By doing so, we look to continue to generate additional long-term value for our shareholders.

I will now turn the call over to Jerry.

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Gerald A. Michaud, Horizon Technology Finance Corporation – President & Director [4]

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Thanks, Rob, and good morning. I hope everyone has remained healthy and safe since our first quarter investor call. In the second quarter, we operated in a volatile and uncertain COVID-19 environment, which impacted both health care and economic conditions. This required horizon to carefully navigate the environment and execute on its venture lending strategy by relying on its experience and ingenuity. The good news is that the expectations about our markets that we shared on our first quarter investor call largely held true. First, the life science market remained healthy and strong with significant support from both equity and debt providers. The heightened awareness of our country’s need to focus on vaccines and treatments for unmet medical needs is as high as it has ever been in my 35 years of financing life science and related companies. Second, as we anticipated, later in the quarter, we saw a significant improvement in the health care market as health care facilities reopened and resumed providing nonessential health care treatment. Our confidence remains strong with respect to the life science market, while we are becoming more optimistic with respect to the health care technology market. However, while we continue to remain cautious on the consumer-related Internet technology markets, we are beginning to observe positive developments in certain sectors such as online education, which is experiencing significant demands for its products and services and what may well become the new normal post-pandemic learning market.

Due to our favorable outlook toward the life science market at the end of the first quarter and our strong brand, in the second quarter, we originated several quality investments to life science companies with unique technologies, top management, committed investors and ample liquidity. As Rob mentioned, in the quarter, we made a total of $40 million in investments to 4 new life science portfolio companies and 2 existing life science portfolio companies. This helped result in growth in our portfolio for the ninth consecutive quarter. The onboarding yield for the investments we made in the second quarter was 11.1{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. We also experienced 4 loan prepayments during the quarter totaling $30 million, which significantly contributed to our NII and further validated our predictive pricing strategy despite an adverse economic environment. The prepayment and accelerated income from these events helped drive a debt portfolio yield for the quarter of 16.9{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. Our debt portfolio yield leads the BDC industry and in the second quarter helped deliver income in excess of our distributions and helped increase our undistributed spillover income to $0.42 per share.

During the quarter, we also received proceeds of $500,000 from warrants in our portfolio company HealthEdge, which experienced in M&A transaction. As we’ve previously discussed, structuring investments with warrants and equity rights is a key aspect of our venture debt strategy and an additional value generator. To that end, one of our portfolio companies is in the process of closing a large round of equity priced at a significant increase in its pre-money valuation. As a result, we recorded a significant mark-to-market increase on the warrants we hold in the company. As of June 30, we held warrants and equity positions in 71 portfolio companies with a fair value of $13 million.

In the second quarter, we closed $100 million in new loan commitments and approvals and ended the quarter with a committed and approved backlog of $101 million compared to $44 million at the end of the first quarter of 2020. The increase in our committed backlog mostly resulted from new life science commitments with typical milestone driven and/or tranche funding patents. A pipeline of new opportunities as of today is $520 million. In addition to our origination and prepayment activity, we remain particularly focused on closely managing our venture debt portfolio by staying in close contact with all of our companies and helping them manage through the current environment. As a result, our credit profile remained stable during the quarter. As of June 30, we had 6 2-rated credits in our portfolio, which is the same number of 2-rated credits we had as of March 31. Further, the percentage of both the cost and fair value of our portfolio at June 30, it consisted of 1- and 2-rated credits declined from March 31.

I would now like to provide a brief update on the 2 credits that were on nonaccrual as of March 31. The Audacy acquisition was completed during the quarter, and we were very pleased to obtain a positive resolution receiving our entire outstanding principal balance of $4.3 million plus additional interest, end of term payment and prepayment fees. This was a great outcome for Horizon and a testament to our ability to work through challenging credits and achieve a positive recovery. In addition, we received proceeds of $600,000 in full settlement of our loan to SIGNiX. During the second quarter, we placed 2 investments on nonaccrual. We are working closely with both of these companies as we try to improve the outlook of these investments over the second half of 2020.

Turning now to the venture capital environment. According to PitchBook, despite COVID, approximately $34 billion was invested in VC-backed companies in the second quarter of 2020. This was still a strong number, although the number of deals has lagged from the past quarters, which is no surprise as investors become more selective. In terms of VC fundraising, $22 billion was raised in the second quarter, which is a surprisingly strong number given the environment and puts it on pace to eclipse last year’s total of $54 billion. As with deal activity though, the number of funds closed is well below last year’s pace, meaning that mostly large funds are able to raise funds in the current environment. In terms of VC-backed exit activity, there were 16 venture-backed IPOs in the second quarter, contributing to a total exit value of $21 billion. While this was well below last year’s pace, considering that the IPO market was shut down for all of April and where we believe the economy was trending at the end of March, this was actually a decent performance. We continue to expect 2020 IPO activity will decrease from 2019 levels, although we anticipate some health care life science sector IPOs later in the year, with others choosing to return to the private markets for additional fundraising.

Turning now to our core markets. As noted previously, given the pandemic, we focused our attention on our life sciences market, where we continue to see better investment opportunities. During the quarter, we provided funding to 4 new portfolio companies, a $10 million venture loan to Ceribell, a developer of an FDA-approved rapid response device to diagnose seizures; a $10 million venture loan to Magnolia Medical Technologies, a developer of an FDA-approved blood culture collection device; a $10 million venture loan to Provivi, which is developing cost-effective natural crop protection products; and a $5 million venture loan to Emalex Biosciences, which is focuses on treating central nervous system and fluency disorders. We also funded an additional $5 million to Kate Farms, one of our existing healthcare portfolio companies.

Looking ahead, we continue to closely monitor the economic landscape, prudently originate new loans that meet our current underwriting criteria and keep a sharp focus on our current and diverse portfolio of senior secured loans. We expect continued demand for venture debt from life science companies, while we also expect the health care tech market to pick up steam in the second half of 2020.

While we have strengthened our balance sheet, including this past quarter’s amended credit facilities and raising $5 million of equity under our ATM facility, Horizon’s leverage is still below our target. Thus, we believe our leverage and liquidity position will allow us to navigate through the current environment while growing our portfolio and delivering additional long-term shareholder value. With that, I will now turn the call over to Dan.

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Daniel R. Trolio, Horizon Technology Finance Corporation – Senior VP, Treasurer & CFO [5]

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Thanks, Jerry, and good morning, everyone. I’ll start by reviewing the steps we took to strengthen our balance sheet during the quarter, and then I’ll provide a quick review of our second quarter 2020 results before opening up for questions.

After consolidating the joint venture portfolio onto our balance sheet by making a joint venture a wholly owned subsidiary of Horizon, we worked closely with New York Life to amend the $100 million senior secured debt facility that was initially available to the former joint venture and is now available to Horizon. We were successful. And in June, we extended the investment period of the facility to June 2022, which allows us the ability to borrow up to $100 million. The interest rate on the facility is based on a 3-year swap rate plus a margin of between 3.5{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} and 5.1{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} determined by its rating. The facility provides us with increased lending capacity and low-cost capital to fund new originations. Additionally, it further diversifies our sources of debt and enhance our balance sheet to maximize our capital efficiency. We are very pleased with the outcome and with the additional balance sheet flexibility the facility provides us. As discussed earlier, we amended our KeyBank facility to extend the period by which we could request advances until September 2021. The LIBOR floor was also amended from 75 to 100 basis points. In short, in the quarter, we continued to proactively manage our balance sheet. And as a result, we increased our overall capacity at a low cost of capital as well as our overall financial flexibility. Further, our strength in balance sheet enables us to play an integral role with our current portfolio investments to help them navigate successfully through the pandemic. On the balance sheet, as of June 30, Horizon had $60 million in available liquidity, consisting of $37 million in cash and $23 million in funds available to be drawn under our existing credit facilities. As of June 30, there was $45 million outstanding under our $125 million KeyBank credit facility and $13 million outstanding under our New York Life credit facility. Our debt-to-equity ratio stood at 0.97:1 as of June 30, which is lower than our target leverage ratio of 1.2:1. Based on our cash position and our borrowing capacity on our revolving credit facilities, our potential debt capacity is $204 million at June 30.

For the second quarter of 2020, Horizon earned total investment income of $13.5 million, a 29{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} increase compared to $10.5 million in the prior year period. This increase was primarily due to higher interest income on investments given the larger average size of our loan portfolio. Our debt investment portfolio grew on a net cost basis to $352 million, an 11{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} increase from March 31, 2020. For the second quarter of 2020, we achieved onboarding yields of 11.1{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} compared to 11.2{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} achieved in the first quarter. Our loan portfolio yield was 16.9{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} for the second quarter versus 16.8{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} for last year’s second quarter.

Turning to our expenses. For the second quarter, total net expenses were $6.8 million compared to $5.5 million in the second quarter of ’19. Our interest expense was up $446,000 compared to the prior year period, primarily due to an increase in average borrowings, partially offset by a reduction in our effective cost of debt. Our net incentive fee expense increased $423,000 due primarily to higher pre incentive fee net investment income, while the base management fee rose $300,000, driven by an increase in the average size of our portfolio.

Net investment income for the second quarter was $0.40 per share compared to $0.26 per share in the first quarter of 2020 and $0.37 per share for the second quarter of ’19. The company’s undistributed spillover income as of June 30 was $0.42, an increase from $0.38 as of March 31. Given the ongoing pandemic, prepayment activity may be muted in the second half of 2020.

Summarized our portfolio activity for the second quarter, new originations totaled $40 million, which were partially offset by $5 million in principal payments and $30 million in principal prepayments. We also consolidated $15 million of former joint venture investment onto our balance sheet and ended the quarter with an investment portfolio of $356 million. The portfolio consisted of debt investments in 35 companies with an aggregate fair value of just under $343 million and a portfolio of warrant, equity and other investments in 72 companies with an aggregate fair value of $13 million.

Based upon our outlook for NII, our liquidity forecast and our spillover income levels, our Board declared monthly distributions of $0.10 per share for October, November and December 2020. We have now declared monthly distributions of $0.10 per share for 48 consecutive months. We remain committed to providing our shareholders with distributions that are covered by our net investment income over time.

Our NAV as of June 30 was $11.64 per share compared to $11.48 as of March 31, 2020, and $11.6 as of June 30, 2019. $0.16 increase in NAV on a quarterly basis was primarily due to our net investment income and net unrealized gains exceeding our paid distributions and the net realized losses on investments. As we’ve consistently noted, 100{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of our outstanding principal amount of our debt investments bear interest at floating rates with coupons that are structured to increase as interest rates rise with LIBOR interest rate floors. As of June 30, the average LIBOR floor on the entire portfolio is 211 basis points, and 100{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of our portfolio is at their specific floors. This concludes our opening remarks. We’ll be happy to take questions you may have at this time.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Tim Hayes with B. Riley FBR.

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Timothy Paul Hayes, B. Riley FBR, Inc., Research Division – Analyst [2]

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My first question here, just in terms of cash runway for your portfolio companies, can you maybe just give us a little bit of information here, just how many of your companies have enough cash to get them through the end of the year? Or maybe if you can tier it for us in terms of 6 months or 12 months? I don’t know if you have that information in front of you, but I know it’s a big — one of the bigger credit metrics you guys look at. So if you could just give us a little bit more color on that, I’d appreciate it.

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Robert D. Pomeroy, Horizon Technology Finance Corporation – Chairman & CEO [3]

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So yes, thanks, Tim. This is Rob. We do tier our portfolio the way you suggest. And the great majority of the portfolio companies have cash into 2021. Maybe I’d ask Dan Devorsetz, our Chief Investment Officer, just to give you a rundown on the percentages.

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Daniel S. Devorsetz, Horizon Technology Finance Corporation – Senior VP & CIO [4]

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So I don’t have it by dollar, but I can tell you that all but 6 or 7 have cash well into 2021. And the ones that are in the process of raising capital you can look at the Q.

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Timothy Paul Hayes, B. Riley FBR, Inc., Research Division – Analyst [5]

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Okay. And when you say well into 2021, does that mean that they have more than a year’s worth of cash runway? Do you know what percent of the portfolio or how many companies might be — have enough to get them through 12 months or versus, I guess, we’re only really 4 or 5 months away from the end of the year?

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Daniel R. Trolio, Horizon Technology Finance Corporation – Senior VP, Treasurer & CFO [6]

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Yes. It is Dan Trolio. So the actual percentage is it’s up north of 75{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, 80{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} to have cash greater than 12 months on the balance sheet today.

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Timothy Paul Hayes, B. Riley FBR, Inc., Research Division – Analyst [7]

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Got it. Got it. That’s helpful. And then you mentioned you added 2 companies to nonaccrual status this quarter. I believe it was Espero BioPharma and Lantos Technologies. What drove you to place these credits on nonaccrual status? And can you give us an update on your outlook going forward and how conversations with sponsors have been around these companies?

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Robert D. Pomeroy, Horizon Technology Finance Corporation – Chairman & CEO [8]

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Yes. So in both cases, actually, our outlook and the scenario analysis that we do for companies that are trying to either raise money or sell their businesses changed from where we were at the end of March, Tim. In both cases, they have moved to date certain auctions. And so those auctions, our confidence that they will return all of our capital is less than it was at March. And so as a result, we placed the business — placed these loans on nonaccrual, and we value them based on our scenario analysis of the outcome of those auctions. We think that both of those auctions should come to a head in the third quarter or maybe get stretched into the fourth quarter.

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Timothy Paul Hayes, B. Riley FBR, Inc., Research Division – Analyst [9]

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Okay. Got it. And then could you touch on maybe what encouraging signs, if any, that you’re currently seeing in your portfolio? Do your companies seem less desperate for cash these days and have forbearance requests declined? Or is there anything else that you could pass along, whether it’s just kind of the tone of management teams as you’re catching up?

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Gerald A. Michaud, Horizon Technology Finance Corporation – President & Director [10]

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Tim, this is Jerry. Yes, we — obviously, we’re sticking very close to our portfolio companies and their investors. And I got to say that given where we felt things were going in March and even April, we had heightened concern over not just our own portfolio but the economy in general and the impact of COVID-19. I will say the response both from our management — the management teams of the companies and their investors has been extremely positive, and along with our help, I might add. So we’re feeling very good about where our portfolio companies are now. As Dan Trolio just mentioned, most of them have cash flow into 2021. So we think we have navigated up to this point pretty well. And we think our portfolio companies and their investors have done a great job up to now. Obviously, given what we’re seeing related to the pandemic, we still think there are some significant headwinds going forward. So we are going to continue to be closely monitoring the portfolio and the companies and continuing to stay in touch with their investors. The good news is investors have a lot of dry powder going into this. So that has been very helpful, and they are very focused on making sure that their portfolio companies kind of get through this period. Now the question is how long is this period. And that’s something that we still have concerns about. And as I think we mentioned in our script. So that’s where we are today.

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Timothy Paul Hayes, B. Riley FBR, Inc., Research Division – Analyst [11]

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Got it. Appreciate the color there. And then just one more for me, and I’ll hop back in the queue. How much of the $76 million in unfunded commitments would you say is readily accessible at this point?

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Daniel R. Trolio, Horizon Technology Finance Corporation – Senior VP, Treasurer & CFO [12]

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So with most of our tranche commitments and unfunded commitments, they are milestone based. And so there’s, I would say, about 95{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of it, and there needs to be a milestone to be hit. And so that’s not a concept of where there could be a run on the bank to call some liquidity on a revolver or anything like that. So we’re able to plan out and see throughout the year where those commitments will come in and when they’ll draw those possible unfunded commitments.

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Timothy Paul Hayes, B. Riley FBR, Inc., Research Division – Analyst [13]

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Got it. Got it. I figured as much, but I just wanted to double check there.

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Operator [14]

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(Operator Instructions) Our next question comes from the line of Ryan Lynch with KBW.

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Ryan Patrick Lynch, Keefe, Bruyette, & Woods, Inc., Research Division – MD [15]

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In your prepared remarks, you gave some statistics. I think you mentioned about $34 billion invested in the VC markets in Q2 and $22 billion of VC capital raised. That feels like a very robust environment. It doesn’t really feel like where we’re operating in a pandemic with those sort of numbers. We’ve also seen your portfolio companies had $30 million of prepayment activities. So they are giving money back to you early repaying capital back to you early. So just — it doesn’t feel like the kind of statistics you would see in a pandemic. And so my question is — a little bit more of a higher-level question is, from the VC market standpoint, there seems to be plenty of liquidity moving around that market for borrowers to have plenty of access to capital. Do you feel that really borrowers’ portfolio of companies’ access to the capital has really changed significantly during this pandemic versus pre pandemic?

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Gerald A. Michaud, Horizon Technology Finance Corporation – President & Director [16]

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I think it’s a great observation, by the way. I think we went into the pandemic, really kind of from a very strong market position. And so I think that helped a lot with companies, investors and even the LPs who invest in VC funds, feeling like this was something that was temporary, if you will, the pandemic, they would be in it at some point. And so I think the people were basically optimistic still also quite aware of the pandemic, obviously, and its impact on the economy with great double-digit unemployment to continue, to get through this, committed to getting through this just as we are. My concern is going forward. So how long can they continue to be optimistic about the circumstances? And when do you get to the point where they start looking from a idiosyncratic standpoint at each one of their portfolio companies and saying, you know, in this environment as it continues, this great strategy they have when we made the investment, maybe isn’t going to be successful going forward. And so that is what we’re watching very closely as we go forward. So we feel good about what has been done relative to the company’s cutting costs, relative to investors investing capital and even finding some really good opportunities in the marketplace. But we are quite cautious about how long this is going to last. And as it does, what is the investment mentality going to be going forward? So you’re correct. Feel good about how we’ve navigated so far. But I don’t — we’re not taking the approach that everything is fine. And look what happened over the last 3 months, we’re sure that, that’s going to continue. We think at some point, if this continues unmitigated and the pandemic continues to grow, that this will become an issue for the country, let alone Horizon. So we are paying very close attention to the small signs we see in our market and within our own portfolio.

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Ryan Patrick Lynch, Keefe, Bruyette, & Woods, Inc., Research Division – MD [17]

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Okay. That’s helpful color. And then kind of on that, with the $30 million of prepayments this quarter, is there any way you guys — you can kind of help characterize what was the nature of those companies prepaid? Where they — were there acquisitions? Or what was kind of just driving those individual prepayments, guys wanting to give capital back and prepay loans in this environment?

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Daniel R. Trolio, Horizon Technology Finance Corporation – Senior VP, Treasurer & CFO [18]

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Yes. Sure, Ryan. There was 4 prepayments that make up that $30 million. One of the companies, I think we mentioned on our last call, where they had — there was an M&A, and it was a very positive event, and we actually had warrant proceeds and warrant gains from that activity. Then we worked out 2 of our nonaccruals that were on the books as of March and settled one of them very favorably that we’ve been working on for a number of years. And then the last one, a company we’ve been working with for a while now, based on significant capital and made sense for them to pay us off. So it kind of ran the gamut.

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Ryan Patrick Lynch, Keefe, Bruyette, & Woods, Inc., Research Division – MD [19]

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Okay. And then, I think you mentioned your onboarding yield was 11.1{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} in the quarter versus prior quarters of 11.2{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. So basically, unchanged. I know there are other fees that are associated that you guys add on end of term payments, warrants, things like that, when you guys are structuring new deals. But given quarter-over-quarter, just the onboarding yields didn’t change, how would you classify the quality of deal terms that you can strike in this environment? I would have thought that the onboarding yields would have been pretty meaningfully higher this quarter, although, as I mentioned, there’s other negotiation terms like end of term payments and warranty you can get?

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Gerald A. Michaud, Horizon Technology Finance Corporation – President & Director [20]

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Yes. So the reality is it’s still a very competitive market. I know this doesn’t — it doesn’t feel like that should be the case. But particularly on the life science side, there is — companies have lots of different financing options even up until today, whether it be additional equity from investors, both new and existing investors who have a lot of dry powder and want to make sure that the companies that are doing quite well get full support. We see this even an IPO market for life science companies, as you’ve probably noticed. We expect that actually to continue into the third quarter as well. And then there are — in the debt market, there is still relatively good competition for high-quality transactions. And so that has mitigated some of what you would expect. And even I have to say that we expected maybe in March and April when things looked a little different, that would allow us to get better terms and conditions. I think where we have been able to get better terms and conditions is on the downside. Given what we know about where we are in the pandemic and the uncertainty going forward, we have been able to structure transactions with a little more protection against those — the uncertainty of the market going forward. So that’s really where we have been focused. We are — given the yields we get in our markets and the spreads that we have, we’re pretty comfortable where we are today, especially with our predictive pricing strategy, really, over the last couple of years, demonstrating that we incrementally get significantly higher portfolio yields. So we’re comfortable where we are relative to that. We’re really looking for high-quality deals with good investor support and lots of liquidity. Those are the important things for us right now.

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Operator [21]

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That is all the time we have for questions. I’d like to hand it back to Rob Pomeroy for closing remarks.

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Robert D. Pomeroy, Horizon Technology Finance Corporation – Chairman & CEO [22]

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So thank you all for joining us this morning. We appreciate your continued interest and support in Horizon. We hope you and your families continue to remain safe and healthy, and we look forward to speaking with you again in the fall. This will conclude our call. Thank you.

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Operator [23]

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Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.