Greetings. Welcome to the Horizon Technologies Finance 4th Quarter 2025 conference call. At this time, all participants will be in listen-only mode. The question and answer session will follow the formal presentation. If anyone should acquire operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I'll now turn the conference over to Megan Bacon, Director of Investor Relations and Marketing. Megan, you may begin.

Thank you, and welcome to Horizon Technology Finance Corporation's fourth quarter 2025 conference call. Representing the company today are Mike Balkin, Chief Executive Officer, Paul Seitz, Chief Investment Officer, and Dan Troleo, Chief Financial Officer. 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. Before we begin our formal remarks, I need to remind everyone that during this conference call, the company 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, 2025. 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 Horizon CEO, Mike Balkin.

Welcome, everyone, and thank you for your interest in Horizon. Today, we will update you on our quarterly performance in the current operating environment. Paul Seitz, our Chief Investment Officer, will take us through recent business and portfolio developments, as well as the current status of the venture lending market, and Dan Trollier, our Chief Financial Officer, will detail our operating performance financial condition. We will then take questions. 2025 was a year of transformation for Horizon in many respects. While we navigated a number of micro and macro challenges throughout the year, we believe we began to successfully lay the groundwork for Horizon to succeed over the longer term. While the government shutdown in the fourth quarter led to our merger with MRCC being delayed into 2026, we are excited to be holding our special meeting shortly and hopefully closing the merger in the weeks ahead. As a reminder, closing the merger will significantly increase Horizon's equity capital available for investment in earning assets and allow it to take advantage of greater economies of scale in the combined vehicle. Additionally, Monroe Capital, which is the parent company of Horizon Technology Finance Management, will be continuing to provide ongoing support to the post-merger company. As a result, we expect you will see an even more coordinated and synergistic effort between Monroe and Horizon in 2026, which is already evidenced by Horizon's first quarter co-investment with Monroe in a venture loan to Osceo. With Horizon's larger capital base and Monroe's ability to co-invest, we expect to originate larger venture loans to cutting-edge early and later stage venture capital and institutional-backed companies, as well as small-cap public companies. The merger, working with Monroe, and increasing our ability to fund larger transactions will allow us to bring the Horizon platform to the next level. I cannot be more excited for Horizon's future. Turning to our specific results for the quarter, we generated net investment income of $0.18 per share, while our NAV per share ended the year at $6.98. Based on our outlook, our undistributed spillover income and the anticipated completion of our merger with MRCC, our board declared regular monthly distributions of $0.06 per share payable in April, May, and June of 2026. As we grow our portfolio in future quarters, it remains our goal to deliver NII at or above our declared distributions over time. We achieved a portfolio yield on debt investments of over 14% for the fourth quarter and nearly 16% for the full year 2025, once again at or near the top of the BDC industry. We redeemed our notes due in 2026 with the proceeds of our issuance of 7% notes due in 2028. We finished the year with a committed and approved backlog of $154 million and our portfolio return to growth in the fourth quarter. And finally, we are closing attractive venture debt investments while our pipeline of venture debt opportunities continues to grow. As we begin 2026, we remain excited for our long-term future growth given our numerous strengths, including Our portfolio yield remains among the industry's highest, which we expect will lead to increased NII over time. Our liquidity and balance sheet are strong and will further strengthen post-merger. We maintain a strong committed backlog, a robust pipeline, and with the backing of Monroe Capital, we are able to compete for larger, higher quality opportunities to make debt investments to growing companies, which will grow our loan portfolio. And finally, the demand for venture debt capital remains high, and we expect to be a key supplier of such capital in the coming year and beyond. Again, we appreciate your continued interest and support in the Horizon Technology Finance platform. I will now turn the call over to our Chief Investment Officer, Paul Seitz, to give you the details of our fourth quarter results in progress. Paul?

Thanks, Mike, and good morning to everyone. As Mike noted, we are preparing for next week's special meeting, which, if shareholders approve the proposal to issue more shares, will allow us to close the merger with MRCC. If approved and closed, Horizon will have the additional size and scale to originate larger venture loans to growing public and private small companies, which will enable us to grow our portfolio and NII over time. We remain very excited to do so. At the end of the year, our current portfolio stood at $647 million as we returned to growth. In the fourth quarter, we funded nine debt investments totaling $103 million, including two refinancings of our existing investments. We also continued to make progress in building our pipeline, including larger venture loan opportunities in our target sectors. Two of our pipeline opportunities, Palthus and Osseo, have already closed in 2026. In Q4, we increased our committed backlog by $35 million from the end of Q3, which positions us well to further grow our portfolio in the quarters ahead. In Q1, we expect to further grow our portfolio, driven by our current pipeline. Along with the venture loans which have already closed since the end of the year, we have been awarded two new venture loans transactions representing $82.5 million in total commitments. It goes without saying that we will always be disciplined in originating and underwriting new loans. During the fourth quarter, we experienced one loan prepayment and two refinancings, totaling $43 million in prepaid principal and collected approximately $1 million in warrant proceeds. Our onboarding debt investment yield of 12% during the fourth quarter remained consistent with our historic levels. We expect to continue to generate strong onboarding yields with our current pipeline of opportunities, which we believe will generate strong net investment income over time. Our debt portfolio yield of 14.3% for the quarter was, once again, among the highest yielding debt portfolios in the BDC industry, despite the lower level of prepayments in Our ability to generate industry-leading yields continues to be a testament to our venture lending strategy and our execution of such strategy across various market cycles and interest rate environments. As of December 31st, we held warrants, equity, and other investments in 97 portfolio companies with a fair value of $51 million. Structuring investments with warrants and equity rights is a key component of our venture debt strategy and potential generator of shareholder value. As mentioned, we ended the year with a committed and approved backlog of $154 million compared to $119 million at the end of the third quarter. We believe our pipeline of investment opportunities, combined with our committed backlog, with most of our funding commitments subject to companies achieving certain key milestones, provides a solid base to prudently grow our portfolio over time. As of year end, 87% of the fair value of our debt portfolio consisted of three and four rated debt investments, while 13% of the fair value of our portfolio was rated 2 or 1, consistent with our levels at the end of the third quarter. We continue to collaborate with all of our portfolio companies in utilizing a variety of strategies to optimize returns and create future value. Turning to the venture capital environment, according to PitchBook, approximately $92 billion was invested in VC-backed companies in the fourth quarter, driven again in significant part by continued large investments in AI. At $339 billion of investment, 2025 was the largest year of investment since the record year of 2021, and a positive sign that investment activity has sufficiently recovered from 2033 and 2024. Exit markets remained open, though slow, in the fourth quarter with approximately $100 billion of exit value, driven primarily by tech IPOs. While the M&A market appears to be healthy and the IPO market is open, given the performance of many second half 2025 IPOs, investors and bankers may be more circumspect in bringing companies public in 2026. The life science IPO market remains limited, creating more opportunities for venture loan originations, as evidenced by our loans to Peltos and Osseo. In terms of tech, there remains considerable optimism, and we continue to be doing deep due diligence, particularly in AI and defense technology, to determine the best types of opportunities for future investments. We want to take a moment to make a few comments about AI. First, note Monroe Capital published a white paper on AI on February 6th of this year, which we believe summarizes our current view on AI and the tech sector. It's obvious to us that AI is changing the game, and AI-related risk has been a central focus in our underwriting process. We believe the claim that the days of enterprise software are over are inflating the risk, and at the same time, those who claim it's business as usual, are underestimating the risk. Given Horizon and Monroe's track record in software investing, we are confident we can navigate this changing environment. As we progress through 2026, we believe venture debt remains a compelling option for companies to access capital with lower dilution to their investors as companies continue to grow and prepare for exits. This compelling option provides significant opportunities for Horizon to seek high-quality, well-sponsored tech and life science companies to add to its portfolio. To sum up, while 2025 was a challenging year, we have made significant strides to succeed in both 2026 and for the long term. If and when we close the merger, we will have an even greater capacity to target larger venture loan opportunities for both private and small cap public companies. Additionally, we will continue to work diligently on optimizing outcomes with respect to our current portfolio. We are confident that we are in the right path to expand our portfolio over the longer term and remain a leader in the venture lending space. We expect this will lead to increased NII over time and ultimately additional value for shareholders. With that, I will now turn the call over to our Chief Financial Officer, Dan Trollio.

Thanks, Paul, and good morning, everyone. There were a significant number of positive developments in 2025 for Verizon, namely our impending merger with Monroe Capital Corp. and our continued ability to strengthen our balance sheet despite the challenging environment. Our actions demonstrate our continued ability to opportunistically access the debt and equity markets. In addition, we continue to diligently work with all of our portfolio companies to optimize outcomes for our investments and improve our credit quality. As such, we believe we remain well positioned to grow our portfolio in the coming quarters and create additional value for our shareholders moving forward. To recap 2025, we further strengthened our capacity in May by increasing the commitment under our Senior Secured Credit Facility with Nuveen to $200 million. In September, we raised $40 million of debt capital through the issuance of our 5.5% unsecured convertible notes due 2030 and used the proceeds to retire our Verizon Funding Trust Asset Pack notes, which had an interest rate of just over 7.5%. In December, we raised $57.5 million of debt capital through the issuance of our 7% unsecured notes due 2028 and used the proceeds in January 2026 to redeem our 26 public notes. Finally, we successfully and accretively raised over $14 million through our ATM program during the year, further demonstrating our continued ability to opportunistically access the equity markets. As of December 31st, we had $189 million in available liquidity, consisting of $143 million in cash and $46 million in funds available to be drawn under our existing credit facilities. We currently have no borrowings outstanding under our $150 million key bank credit facility, $181 million outstanding on our $250 million New York Life credit facility, and $90 million outstanding on our $200 million new-being credit facility, leaving us with ample capacity to grow our portfolio of debt investments. Our debt-to-equity ratio stood at 1.5 to 1 as of December 31st. And netting out cash on our balance sheet, our net leverage was 1.05 to 1 below our target leverage. Based on our cash position and our borrowing capacity on our credit facilities, our potential new investment capacity as of December 31st was $472 million. Turning to our operating results, for the fourth quarter, we earned investment income of $21 million compared to $24 million in the prior year period, primarily due to lower interest income on our debt investment portfolio. Our debt investment portfolio on a net cost basis stood at $602 million as of December 31st, up 3% compared to $585 million as of September 30th, 2025. For the fourth quarter of 2025, we achieved onboarding yields of 12% compared to 12.2% achieved in the third quarter of 2025. Our loan portfolio yield was 14.3% for the fourth quarter compared to 14.9% for last year's fourth quarter. Total expenses for the quarter were $12.5 million compared to $12.8 million in the fourth quarter of 2024. Our interest expense of $8 million was $0.2 million lower than last year's fourth quarter, while our base management fee was $2.9 million, $0.2 million lower than the prior year period due to our smaller portfolio. We received no performance-based incentive fees in the fourth quarter as we continue to defer incentive fees otherwise earned by our advisor under our incentive fee cap deferral mechanism. While we expect that the advisor will return to earning incentive fees, as a reminder, Our advisor has agreed to waive up to $4 million of fees or $1 million a quarter if the merger is completed. Net investment income for the fourth quarter of 25 was $0.18 per share compared to $0.32 per share in the third quarter of 25 and $0.27 per share for the fourth quarter of 24. Prepayment activity and the income that is typically associated with prepayments was lower than our historical experience. We continue to expect repayment activity will remain modest in the near term. For the full year of 25, we generated NII of $1.05 per share. The company's undistributed spillover income as of December 31st was $0.65 per share. Based upon our outlook, undistributed spillover income, and the anticipated completion of our merger with MRCC, our board declared monthly distributions of $0.06 per share for April, May and June 2026. We anticipate that the size of our portfolio, our expectations for growth, and our predictive pricing strategy will enable us to generate NII that covers our distribution over time. To summarize our portfolio activities for the fourth quarter, new originations totaled $103 million, which were offset by $13 million in scheduled principal payments and $15 million in principal prepayments, refinancings, and partial paydowns. We ended the year with a total investment portfolio of $647 million. At December 31st, the portfolio consisted of debt investments in 38 companies with an agri-fair value of $596 million and a portfolio of warrant, equity, and other investments in 97 companies with an agri-fair value of $51 million. Our NAB as of December 31st with $6.98 per share, compared to $7.12 as of September 30th, 2025, and $8.43 as of December 31st, 2024. The $0.14 reduction in NAV on a quarterly basis was primarily due to our paid distributions exceeding our NII. As we've consistently noted, nearly 100% of the outstanding principal amount of our debt investments bear interest at floating rates. Of those investments, approximately 71% are already at their interest rate floors, which should mitigate the impact of decreasing interest rates. This concludes our opening remarks. We'll be happy to take questions you may have at this time.

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question at this time, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. Let me press star 2 if you'd like to remove your question from the queue. For participants who are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you. And our first question is from the line of Michael Brown with UBS. Please receive your questions.

Hi, this is Corey Johnson on for Mike. I was just wondering, can you maybe go into a little bit more about, like, how you decided on the new dividend level, you know, kind of what was the decision-making around that?

Yeah. Good morning, Corey. You know, as we say, every quarter we review our distribution level with the board. We look at the current portfolio and the run rate. We look at the spillover. We look at our pipeline and our growth opportunities and determine based on that a level that we think is sustainable and one we can cover over time.

Thanks. And then also just a quick follow-up, see if I heard this correctly. Did you say the percent at the contractual floor is 71%?

That is correct, yeah. Okay, all right.

As a reminder, to ask a question, you may press star 1 on your telephone keypad. At this time, the next question is in the line of Paul Johnson with KBW. Please receive your questions.

Yes, good morning. Thank you for taking my questions. I was just wondering if you could just kind of help me understand here a little bit more just the earnings slide here, quarter over quarter, because, you know, the portfolio yield of 14% with a, you know, roughly 10% ROE, just something doesn't really foot there. And I'm just wondering, you know, aside from, I guess, the prepayment, lower prepayment income, I mean, what kind of drove, I guess, the lower interest income. I guess that was the driver during the quarter because you're not earning incentive fees. There was net portfolio growth in the quarter. The portfolio was roughly flat in terms of losses, so it doesn't seem like there was much depreciation in there. I was just wondering if we could just kind of understand maybe the earnings bridge a little

bit and if maybe we could expect that kind of a trough. Yeah. So, Paul, all those things you stated were correct. Quarter over quarter, we grew the portfolio. You're right. The net realized, unrealized for the quarter was flat. And so, there's positive movement in the quarter. Most of the fundings were towards the end of the quarter. So, that had some impact. And really, the major impact when you're looking quarter over quarter was the prepayment and the activity that occurred each quarter. We had some significant prepayments refinancing on a couple of names in Q3. And then in Q4, we really had one prepayment, a couple of opportunistic refinancing that we did with our own portfolio companies that had a lower income level than we typically receive on prepayments. And so when you add up the timing and the lower prepayment rates and the income related to that, that kind of connects the difference between the NII.

Okay, got it. So, if I'm just thinking about the $102 million of originations this quarter, that includes a number of refinancing within the portfolio where I guess the return is

structurally lower? Yes, it included a couple refinancing. They're positive in the event where we accelerate fee income on the previous already outstanding debt investments, and we're able to re-up with a full new, fully loaded fee, new debt investment. It's just lower income related to a prepayment where we'll receive a prepayment fee, but with refinancing, that's one of the

fees that we don't get. Thank you for that. And then my other question was just on the opportunity for public company financing, are those opportunities where you're refinancing or taking out existing debt, or is this more of an opportunity we're providing new capital to those companies?

Yeah, hey, Paul, thanks for the question. It can be a combination of all of the above, but I think the opportunities we're seeing in the market, and they're a significant number, is that many of these companies don't even realize there's an opportunity to use debt capital like ours, where they can't go to a bank because maybe they're not profitable today or what have you. So in many cases, they will issue equity, which is much more dilutive. So what we are offering out to these companies is a more flexible capital structure that's less dilutive and gives the company an opportunity to have some growth capital here. So we believe this is a very fertile market for us. And again, the opportunity set is fairly

wide. Great. Thank you very much. That's all. You bet. Our next question is in the line of

Sean Paul Adams with B. Riley. Please see with your questions. Hey, guys. Good morning. It looks

like you guys had an aggregate decline in non-accruals quarter over quarter. Can you just provide a little bit more color on the status of those three remaining three portfolio companies

on non-accrual? Yeah, you know, what we say each quarter, we're working each one of those non-accruals and they're all at various levels. We're trying to maximize the recoveries with each one of them. And as you pointed out, we were able to improve the percentage of non-approvals quarter over quarter. But besides that, we can't really get into too much detail as these are

private companies. Got it. I appreciate it. Well, on the actual decline from the four to the three, can you provide a little bit more detail on that one that came off? Again, it's a private company

where we can't, you know, not precise given names. It was just a deal that we were working on a acquisition last quarter that was completed this quarter and we received the amount of our fair value. And so there's no NAB impact.

Got it. Appreciate it.

Thank you. The next question is in the line of Christopher Nolan with Landenberg Salman. Pleases you with your questions.

Hi. Was the driver of the realized loss, Netflix, from Metallic Therapeutics?

Metallic was a percentage of that, but Metallic was a small position. And again, the realized loss were realized this quarter at the fair value that we had them going into the quarter. As you can see, Q4 net realized, unrealized was slightly positive.

No, totally understand that. I'm just trying to understand what was the drivers of the realized loss.

Yeah, no talent was a small piece of that.

And we usually don't give detail on these private companies and how we've worked out each one of them.

Okay. In the earnings release, it highlighted in subsequent events, you guys are redeeming some of your 4.875% 2026 notes. How much of that has been redeemed, please?

The full amount was redeemed in January.

And then I guess on the new dividend, am I correct that when the deal is announced, management is indicating that they're going to try to support the $0.33 dividend through 2026, or am I mistaken there?

Support it in which way? We've agreed to have – they've either agreed to waive $4 million of fees for the four quarters following the close at $1 million a quarter. Outside of that, and then we have the repurchase program that we have in place that will support the shares.

Great. Final question. Should we look at the new dividend as a reasonable earnings run rate for the company? And does that assume elevated non-accruals?

So, as we say, we review the distribution level with our board. We set it at a level that we believe we're going to cover over time. And so, that's what we did.

Okay. Thank you.

Thank you. The next question is a follow-up from the line of Paul Johnson of KBW.

Yeah, thanks. Just one more. Can I just clarify, so on the convertible conversion this quarter, what was the conversion rate there? And I guess is there any kind of diluted impact in the first quarter?

The conversions for the converts that we have done are all at NAV. They're required to be converted at NAV. And so in the fourth quarter, the eight-and-a-half that has been converted, and any time it does convert, it will be at the stated NAB at that time. So there's no dilution.

Thank you very much.

Thank you. At this time, we've reached the end of our question-and-answer session, and I'll hand the floor back to Mike for closing remarks.

Thank you. 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 will conclude our call.

Thank you. Ladies and gentlemen, thank you for your participation. You may now disconnect your lines at this time and have a wonderful day.