Greetings, and welcome to Horizon Technology Finance Corporation Third Quarter 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the conference over to your host, Megan Bacon. Thank you. You may begin.

Thank you, and welcome to the Horizon Technology Finance third quarter 2019 conference call. Representing the company today, are Rob Pomeroy, Chairman and Chief Executive Officer; Jerry Michaud, President; and Dan Trolio, Chief Financial Officer. I would like to point out that the Q3 earnings press release and Form 10-Q are available on the Company’s website at horizontechfinance.com. Before we begin our formal remarks, I remind everyone that during this conference call, Horizon Technology Finance will make certain forward-looking statements, including statements with regards to 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, 2018. 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, and thank you all for joining us. We are proud of our third quarter results across every facet of our business. As we continue to position ourselves for further growth and strong performance in 2020 and beyond. In the quarter, we recorded net investment income per share of $0.42, notably our NII through September 30 is approximately 20% higher than the distributions we have paid for the same period. Our NII included income from liquidity events as anticipated by our predictive pricing strategy. Just to reminder that our predictive pricing strategy is based on our historical experience that are dynamic borrowers will experience an event, which results in the prepayment of our loans and additional income to Horizon. Events may include a sale of the borrower, refinancing of debt, achieving development milestones or raising additional capital. Our receipt of this event driven income on a regular basis validates our loan structuring expertise and the overall earning power of our portfolio. As we’ve consistently noted, liquidity events such as these and the structure of our venture loans are a feature and integral part of the design of our predictive pricing strategy. Importantly, even as we were experiencing liquidity events from our existing portfolio, we were still able to grow our portfolio for the sixth consecutive quarter to a total of $282 million as of September 30. We experienced a record debt investment yield of 17.7% for the quarter, which takes into account regularly scheduled interest and fee income, as well as income from liquidity events. During the quarter, we updated the outlook on two of our non-earning royalty agreements. The fair value of one royalty agreement was reduced to a small balance after we received new information in the quarter, which no longer supported our previous fair value. The…

Thanks, Rob. Good morning, everyone. Our third quarter is successfully built upon the momentum of the first half of the year. As we continue to grow our portfolio in a discipline, quality and profitable manner. We added six new floating rate transactions to our portfolio totaling $47 million and we achieved an onboarding yield in the third quarter of 11.9%, while maintaining our disciplined underwriting approach. We experienced three loan portfolio exits during the quarter totaling $28.5 million, which again, contributed to our newer record NII of $0.42 per share. In addition, the prepayment and accelerated income from these events helped drive record loan portfolio yield for the quarter of 17.7%. We continue to add transactions to our joint venture during the quarter, as we funded $4 million of one portfolio investment through the JV. We continue to maintain a premium yielding debt portfolio reflected by our leading yield position in the BDC industry, which generates a predictable income stream, as we continue to grow our portfolio and add investments with new ETPs, prepayment opportunities and warrants. We closed $49 million in new loan commitments and approvals and ended the third quarter with a committed backlog of $63 million, an increase from $58 million at the end of the second quarter of 2019. Our committed, approved and awarded backlog as of September 30 was $97.8 million to 12 companies and our pipeline of new opportunities was $644 million. As these numbers show, we are well positioned with our committed backlog and pipeline to continue growing our portfolio and income stream, while enhancing NII with prepayment and accelerated income, it is characteristic of our predictive pricing strategy. As of September 30, we held warrant and equity positions in 75 portfolio companies with a fair value of $13.1 million. In Q3, we…

Thanks, Jerry and good morning everyone. Let’s turn to our financial results for the third quarter of 2019. Horizon earned total investment income of $11.4 million for the third quarter, a 46% increase compared to $7.8 million in the prior-year period. This increase is primarily due to higher interest income on investments given the larger average size of our loan portfolio as well as the income generated from prepayment activity. As of September 30, our debt investment portfolio had grown to $253 million, 19% year-over-year increase. Since third quarter of 2019, we achieved onboarding yield of 11.9%, essentially in line with the 12% achieved in the second quarter. Our loan portfolio yield was a record 17.7% for the third quarter compared to 16.8% in the second quarter and 15% for last year’s third quarter. Turning to our expenses, the third quarter total net expenses were $5.6 million compared to $4.4 million in the third quarter of 2018. Our interest expense was up $365,000 compared to the prior year period, primarily due to the increase in average borrowings. Our net incentive fee increased $592,000 due primarily to higher pre-incentive fee net investment income, while our base management fee rose $200,000 driven by an increase in the average size of our portfolio. As a reminder under our new Investment Management Agreement, Horizon paid a 2-tier management fee which includes the management fee of 1.6% on non-cash assets above $250 million. With non-cash assets over $250 million, our shareholders are now benefiting from the lower management fee rate and will increasingly benefit as we grow our assets. Net investment income for the third quarter was $0.42 per share compared to $0.37 share in the second quarter of 2019 and $0.30 per share for the third quarter of 2018. The company’s undistributed spillover income…

At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] My first question comes from Paul Johnson with KBW. Please proceed with your question.

Good morning, guys. Thanks for taking my questions. I was just hoping you could talk a little bit further on any potential impacts that you’ve seen from your sponsors or on your portfolio companies from, I guess any sort of the hesitation in the IPO market, just following the WeWork fallout since, I think you also mentioned this is something a little more pertinent maybe to the tech sector of the DC market. Maybe speak a little bit more to that, how that affected the tech sector as well as maybe your approach to origination in that sector?

Sure. Hi, Paul, this is Jerry. Yes, we have absolutely been paying pretty close attention overall to kind of the funding ecosystem for the technology and life science sectors. We actually think the life science sector is still pretty strong even though there has been a lot of noise on the IPO side. It’s been more about a lot of the tech – a large technology offerings for Unicorn type companies and some issues that quite frankly we expected them to have when they finally decided to go public and we’ve seen that play out here in the last few quarters. We are still seeing pretty strong demand in the IPO sector for life science IPOs. I would just mention relative to that point that more often than not, the private investors in the life science companies are continuing to stay in these transactions when they go public and represent generally between 15% and 30% of the IPO offering proceeds, they are continuing to invest. So that’s something we like to see relative to certainly our portfolio companies. And we’re also still seeing plenty of private investment on the life science side in both drug development and medical device. And we’re also seeing plenty of dry powder for investment in healthcare technology companies on the private side, not so much on the public side. Does it relates to the tech sector, your question is right on the mark. We are very cautious about looking at particularly internet-related companies that have high valuations with an anticipation of an IPO. I think that the market is becoming somewhat conservative relative to looking at those companies and I’m more interested in companies that are moving toward profitability than just growth. And so that’s something that as we underwrite our transactions we are watching quite carefully.

Great. That’s really a good insight color. Thanks for that. Those were all my questions.

[Operator Instructions] There are no questions at this time. I’d like to turn the call back to Rob Pomeroy for closing comments.

Thank you all for joining us this morning. We appreciate your continued interest and support in Horizon. And we look forward to speaking with you again soon.

This concludes today’s conference. You may disconnect your lines at this time and we thank you for your participation.