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Horizon Technology (HRZN) Q4 Earnings Miss, Stock Down 9.7%

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Shares of Horizon Technology Finance Corporation (HRZN - Free Report) lost 9.7%, following the release of its fourth-quarter and 2020 results. Quarterly net investment income of 21 cents per share lagged the Zacks Consensus Estimate of 28 cents. Also, the bottom line declined 51.2% from the year-ago quarter.

Results were primarily hurt due to a decline in total investment income. However, the balance sheet position remained strong during the quarter. Also, a fall in expenses was a tailwind.

Net investment income was $3.9 million, down 39.5% year over year.

For 2020, net investment income was $20.7 million or $1.18 per share compared with $20.5 million or $1.52 per share recorded in 2019.

Total Investment Income & Expenses Decline

Total investment income for the quarter amounted to $10.1 million, down 22.4% year over year, reflecting a decline in all three components. Moreover, the figure lagged the Zacks Consensus Estimate of $11.2 million.

For the year, total investment income was $46 million, up 6.7% from 2019.

Total quarterly expenses were $5.9 million, down 5.4% year over year. The decline was due to a fall in costs related to performance-based incentive fee and professional fee.

Balance Sheet Strong

As of Dec 31, 2020, Horizon Technology’s net asset value was $11.02 per share compared with $11.83 on Dec 31, 2019.

The company had $72.4 million in available liquidity as of Dec 31, 2020, which consisted of cash and money market funds worth $46.7 million, and $25.7 million in funds available under existing credit facility commitments.

As of Dec 31, 2020, total assets amounted to $407.2 million, up from $344 million on Dec 31, 2019.

Portfolio Activity Decent

The fair value of the company’s total investment portfolio was $352.5 million as of Dec 31, 2020, up from $319.6 million as of Dec 31, 2019.

In the reported quarter, the company made net new debt investments worth $76.9 million compared with $65.5 million in the prior-year quarter.

As of Dec 31, 2020, Horizon Technology’s debt portfolio consisted of 34 secured loans, having a fair value of $333.5 million. Its total warrant, equity and other investments made in 70 portfolio companies had a fair value of $19.1 million.

Our View

Horizon Technology is expected to witness a rise in investment income on the back of an increase in the demand for customized financing. However, due to a persistent rise in general and administrative costs, overall costs might increase in the near term, thus, hurting the bottom line to an extent.

Currently, Horizon Technology carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance & Earnings Schedule of Other Finance Stocks

Hercules Capital Inc.’s (HTGC - Free Report) fourth-quarter 2020 net investment income of 37 cents per share surpassed the Zacks Consensus Estimate of 33 cents. However, the bottom line declined 2.6% from the year-ago reported figure.

Ares Capital Corporation’s (ARCC - Free Report) fourth-quarter 2020 core earnings of 54 cents per share surpassed the Zacks Consensus Estimate of 40 cents. Moreover, the bottom line reflects a rise of 20% year over year.

Barings BDC, Inc. (BBDC - Free Report) is slated to announce quarterly results on Mar 24.

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