Good morning and welcome to Horizon Technology Finance's Year-End 2017 Conference Call. Today's call is being recorded. All lines have been placed on mute. We will conduct a question-and-answer session after the opening remarks, and instructions will follow at that time. I would now like to turn the call over to Megan Bacon of Horizon, for introductions and a reading of the Safe Harbor statement. Please go ahead.

Thank you, and welcome to the Horizon Technology Finance fourth quarter 2017 conference call. Representing the company today are Rob Pomeroy, Chairman and Chief Executive Officer; Jerry Michaud, President; and Dan Trolio, Chief Financial Officer. Before we begin, I would like to point out that the Q4 earnings press release and Form 10-K are available on the company's website at horizontechfinance.com. Now, I will read the following Safe Harbor statement. During this conference call, Horizon Technology Finance will make certain forward-looking statements including statements with regard to the future performance of the company. Words such as believes, expects, anticipates, intends, or similar expressions are used to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ on a material basis from those projected in these forward-looking statements. And some of these factors are detailed in the Risk Factor discussion in the company's filings with the Securities and Exchange Commission, including the company's Form 10-K for the year-ended December 31, 2017. The company undertakes no obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise. At this time, I would like to turn the call over to Rob Pomeroy.

Good morning from snowy Connecticut and thank you all for joining us. In 2017, we continued to enhance the Horizon platform in order to grow our portfolio and investment pipeline. During this time, we also focused on improving our credit quality and resolving underperforming loans. I'm pleased to report we made significant progress on all of these important initiatives in 2017. In the fourth quarter, we funded a record $73 million in new originations, resulting in a net 26% quarter-over-quarter growth in our portfolio. The size of the growth in our portfolio in 2017 was especially gratifying in light of our 45% portfolio turnover rate, which included the second highest level of prepayments in our history. As a result, we start 2018 with a portfolio that is larger, and comprised of over 60% 2017 vintage transactions. We expect a more predictable income stream, as most of these transactions will be on the interest-only period during the year. We also expect prepayment activity to normalize during 2018, as 80% of our portfolio is now made up of 2016-17 vintage transactions. As mentioned, during the fourth quarter, Horizon originated eight new floating rate loans totaling approximately $73 million. For the full-year, we funded 23 new loans totaling $140 million. This increased investment activity allowed us to grow our portfolio by $45 million for the quarter, and move toward our targeted leverage ratio of 75%. We ended the quarter with a leverage ratio of 71%. We were able to achieve this portfolio growth, while maintaining strong onboarding yields, and earning a 15.1% loan portfolio yield for the full-year, one of the highest portfolio yields in the BDC industry. As many of the originations occurred later in the fourth quarter, we expect to see the full impact of our larger earning portfolio over the…

Thanks, Rob. Good morning everybody. During the fourth quarter, our enhanced origination platform and marketing strategy, combined with continued demand for our venture loan product led to a record level of originations. We originated eight new floating rate loans in the quarter totaling $73 million. As a result, our portfolio grew by $45 million or 26% during Q4. We closed $77 million in new loan commitments during the quarter, ending the year with committed backlog of over $33 million. We remain disciplined with respect to pricing and achieved strong onboarding yields of 11.6% during the quarter, while generating loan portfolio yields of 14.1% for the quarter and 15.1% for the full-year. Our high portfolio yield reflects our ability to consistently maintain strong onboarding yield since our inception, combined with strategically pricing and structuring transactions to maximize returns from prepayment fees and ETPs as our portfolio companies exit our portfolio. As a result, Horizon has consistently had one of the highest yielding portfolios in the BDC industry with an average portfolio yield of 14.6% since our inception. Now I would like to take a minute to talk about the qualitative aspects of our portfolio as we begin 2018. In the fourth quarter, we added three new medical device companies totaling $30 million. All of these companies have revolutionary technology, have raised significant equity during 2017, and are backed by high quality life science investors. We also added two new investments to our technology portfolio totaling $27 million. These high growth technology companies have raised additional equity during 2016 and 2017, and are backed by experienced and knowledgeable technology venture capital firms. In addition, we upsized our investments in three of our high performing portfolio companies Bridge2 Solutions, HealthEdge, and Rocket Lawyer, by a combined $16 million. Importantly, all of the transactions…

Thanks, Jerry, and good morning everyone. I will now briefly discuss our financial results for the fourth quarter and full-year 2017. Horizon earned total investment income of $6.2 million for the fourth quarter of 2017 as compared to $7 million for the fourth quarter of 2016. The decrease was due to lower interest income on investments given the smaller average size of our loan portfolio. For the year-ended 2017 total investment income was $25.8 million compared to $33 million in the prior year. With the strong momentum from our fourth quarter investment activity, we were able to increase our earning debt portfolio by 15% year-over-year. This provides us with a good base going into 2018. For the fourth quarter, we achieved onboarding yields of 11.6% compared to 11.9% in the third quarter, and consistent with our historical performance. Our loan portfolio yield was 14.1% for the fourth quarter of 2017 compared to 16.5% in the third quarter, and 14.2% for the last year's fourth quarter. For the full-year, we achieved a loan portfolio yield of 15.1% and onboarding yields of 11.8%. This compares to a yield of 14.9% and onboarding yields of 12.3% for 2016. Turning to our expenses, total net expenses for the fourth quarter were $3.8 million compared to $3.1 million in the fourth quarter of 2016. The increase was mainly driven by higher interest expense due to increase in average borrowings and a one-time expense related to the redemption of our 2019 notes. Interest expense increased by 15% compared with prior year, while base management fee was essentially flat compared to last year's fourth quarter. Professional fees and general and administrative expenses were also flat for the fourth quarter of 2017 as compared with previous years. We recorded $500,000 of incentive fee expense in the fourth quarter…

Thank you. [Operator Instructions]. Our first question comes from the line of Paul Johnson of KBW. Your line is now open.

Good morning guys. Thanks for taking my questions. My first question just has to do with really just your earnings level in fourth quarter 2017, sort of how that relates to the first quarter this year. We just -- we’re sort of looking to get a better sense of maybe what the earnings run rate is because when we look at it even when we exclude the non-cash interest charges, we still have about $0.06 or so to go to get to around that $0.30 dividend level.

Yes, Paul, this is Rob. I appreciate the call -- the question. Focus back on my comments relative to liquidity events and prepayments, that's the sort of where the gap for the income comes, we have to have some level of prepayments during the quarter with the accelerated incomes that comes from that other than just the pure portfolio. But our history has demonstrated a high level of prepayments over time, but not necessarily predictable in their amount quarter-to-quarter.

Okay.

And you have to take into account of course the larger portfolio we will be earning from basically January 1st going forward, so.

Sure, sure, you'll have the whole benefit. My next question I guess has to do I know you mentioned Interleukin they repaid during the quarter but the other non-accrual ScoreBIG, was that exited, was that written off during the quarter, any color there on what was resolved around that non-accrual?

Sure. Yes, if you remember ScoreBIG in 2016 assigned all of its assets to an ABC process. And the entity that was created during that process entered into a license agreement with a third-party and Horizon would receive royalties from that license agreement. So our loans were still in place and so that's why you had seen the loan on the scheduled investments throughout 2017. And then, in December of 2017, the Royalty agreement has been directly assigned to us and therefore we have a new asset on the books. We triple double that you'll see, our license agreement on the scheduled investments and the loan has now been terminating.

Okay, great. Yes, thanks for that, that's great color. And then another investment Digital Signal and so that was marked up to pretty close to par, and then, just like the same color there I mean did you get you mentioned like -- that was repaid in February. I mean did you get full repayment on that loan or was that excited pretty close to the mark?

It was close -- it was exited pretty close to the mark. We were able to enter into an agreement with a buyer and provide financing to that buyer, all of which were first quarter events. So we -- the fair value the DSC asset at 12/31 reflects the vision we had on that exit transaction which occurs in the first quarter.

Okay. And then my last question is just it sounds like you expect prepayments to ease up a little bit in 2018. We sort of heard the opposite from a competitor not too long ago, is this something that's more specific to your portfolio because of the large concentration of the newer vintage investments or is it just more in your outlook for the year. And then --

Yes, I think has to primarily with us and the age of our portfolio. Prepayments are a normal part of our market and Horizon venture lending model. We do expect prepayments during 2018, it's just that our -- the average vintage of our portfolio was younger.

Okay, thanks. Those are all my questions.

Thank you. Our next question comes from Jonathan Bock of Wells Fargo. Your line is now open. Fin O’Shea: Hi guys Fin O'Shea in for Jonathan Bock this morning. Congratulations on a strong quarter of deployment it looks like one of the best, if not the best on record. Kind of considering that and where we are in the cycle, can you kind of give us some color on how deployment activity was so strong can you kind give us some color on the competition and such?

Yes, hi, this is Jerry Michaud. Yes, so actually if I kind of alluded to this a little bit in our third quarter presentation as well. We started to see a backlog building. We actually had expected honestly the third quarter to have a higher fundings. Two of the transactions we expected to fund actually closed I think before we even had our third quarter call. So I think we funded $22 million in October and which we thought was going to fund in the third quarter. So this has been building from the second half, a lot of this actually has to do with things we've discussed over the last four quarters relative to kind of additions to our managing director staff and underwriting staff that did start to create new opportunities, earlier in the year. And I think we basically saw the fortune of that in the third and particularly obviously in the fourth quarter. And so that's primarily would drove the accelerated ramp-up in our committed backlog which drove fundings in the fourth quarter. We were actually very pleased in the fourth quarter how kind of smoothly the -- our committed backlog grew, but also that we were able to get those transactions funded in the fourth quarter. Usually we do have higher levels of funding in December and we obviously did this year, but actually by kind of mid-month, we had most of them funded or basically set up to be funded. So I understand that it looks like, Q4 when you go back and compare the last four or five quarters it was very significant, but actually it was kind of built up over the course of the year and some of the findings we thought would happen in Q3 happened in Q4 so it was kind of a convergence of those. Fin O’Shea: No, of course thanks for the color. And of course originations are a function of staff issuing capital et cetera. To that line, and the sort of limited capacity now at the BDC or is there a broader platform out for you? Are you out raising private capital?

We are always looking to expand our capabilities. We have a very experienced team. As we approach our target leverage, we still have the cash flow from normal amortization and any prepays during the quarter and top of the liquidity that Dan mentioned. So we expect to be still active in the market on the Horizon platform, but we are also always looking for ways to expand Horizon franchise.

Thank you. Our next question comes from Chris Kotowski with Oppenheimer. Your line is now open.

I guess Fin just asked my question, so I think I'm good. Thank you. It looks like a good solid quarter. Thanks.

Thanks, Chris.

Thank you.

Thanks you. Our next question comes from Christopher Testa of National Securities. Your line is now open.

Hey good morning guys. Thanks for taking my questions. I just wanted to confirm, make sure I got the figure right, Dan, did you say that $26 million of the originations closed in December?

$46 million.

Oh, $46 million, okay some more, got it. And so obviously there is going to be a big pull through into the next quarter, but I guess with just going back to one of the earlier questions in the call, but even with that pulling through to the next quarter, we have to expect obviously the prepayment incomes coming down and you're kind of near your target leverage. So I mean I'm just trying to see how you get from $0.21 to $0.30 even with lower incentive fees earned.

So there is just a couple of things that were details in the script, first of all the $0.21 was net of $0.03 for higher interest expense from the bond offering. So $0.21 -- $0.24, we expect the savings from the bond offering during all of last -- all of this year to be on the order of magnitude of $0.03 a share from -- just from the lower coupon on the 2022 notes replaces it. We do also expect the impact of rising interest rates on that portfolio to be on the same sort of order of magnitude depending on how far rates go, but because our rates our portfolio was entirely floating up or down of course but and our debt is partially fixed and partially floating, we expect there to be increased top-line income as well as increased interest spread. So that coupled with a normal level of prepayments is what we look forward to and our board considered as we set our distribution level for April, May, and June.

Okay, got it. That makes sense. Thank you. And you mentioned Rob that you guys resolved Digital Signal in February is that also going to be on the next quarters SLI as a license agreement where you're going to receive royalties from?

No. In this case, the DSC assets were actually sold to a new company and you will see new investment there.

Got it. And will be the -- any royalty revenue that you get from ScoreBIG is that going to show-up on a separate line item or is that just going to be other income, just curious on how we should look at that?

Going forward, yes, it will be other income; it'll be on a different line item.

Other income, okay got it. That's all from me. The rest of mine were asked and answered. Thank you.

Thank you.

Thank you, Chris.

Thank you. Our next question comes from Robert Dodd of Raymond James. Your line is now open.

Hey guys. This is Mike Koban on for Robert Dodd. Thanks for taking our questions and honestly I think most of mine have been answered as well. I guess just for clarification could you talk about what the outlook for 1Q of 2018 how you think about the timing of originations versus repayments for that quarter?

So we're looking it's really too early to say where we'll end up. I think Jerry mentioned we've already had one loan closed, but we have some other loans in play whether they'll be done funded or not. Prepayments also are really some -- can often come out of the blue for us as well. So we expect the portfolio to be essentially flat within a reasonable range for the end of the quarter.

Thank you. [Operator Instructions]. Our next question comes from the line of Casey Alexander of Compass Point. Your line is now open.

Hi. I have a few questions first of all when you say you had one loan closed in so far in 1Q, 2018 is that the loan that replaced Digital Signal.

We had one loan.

Yes, I believe that is the one loan, yes.

Okay. And was that a loan actually for more than what the balance of the Digital Signal loan was or was it an equivalent amount?

The loan is actually for more than the amount.

Okay. Secondly the ScoreBIG which is now triple double have you as of yet received any royalty income from either the prior ScoreBIG structure or the current triple double structure?

We currently have not yet.

Okay. It appears as though I mean if I'm looking at your income statement, right you realized the previous unrealized loss on ScoreBIG but the triple double is marked below where ScoreBIG was marked at the end of the third quarter, so is that another unrealized or realized loss.

So you're correct. We did a take a realized loss on the loan itself and that is a realized loss. So the new asset is placed on the book at the fair value of $2.2 million. So you'll see the cost and the fair value at $2.2 million.

Okay but as of yet you guys have no received no royalty income from either ScoreBIG or triple double. I also noticed that as Sparrow Pharmaceuticals which is another royalty interest was marketed down $600,000 quarter-to-quarter, do you have any color on what's happening with Sparrow and I guess the underlying drug which is DURLAZA?

Correct, yes so the markdown was related to timing issues relative to when we think the commercial launch Casey of that drug will be. I can't be too much to it but I can say that they had to go through a refilling with the FDA, primarily around the manufacturing of the drug to make sure the formula for the drug was consistent with what it had been, when it was previously proved, so they had to get the manufacturing process approved again and that has taken a little longer. As a result, when we looked at -- when we look at the cash flows that we expect to come from that when it is launched, which were pushed out a little bit and that impacted the valuation.

Are you aware of any scheduled launch date currently?

We basically they're a private company we can't really get into that.

All right. Okay, that's all I have. Thank you.

Thank you. There are no further questions. I would now like to turn the call back to Robert Pomeroy, Chairman and CEO for closing comments.