Good morning, ladies and gentlemen, thank you for standing by. Welcome to the Horizon Technology Finance Corporation First Quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Should you require operator assistance during the conference, please press * zero to signal an operator. Please note this conference is being recorded. I will now turn the conference over to your host, Megan Bacon, Director of Investor Relations and Marketing. Thank you. You may begin.
Thank you. Welcome to Horizon Technology Finance Corporation's first quarter 2023 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 Q1 earnings press release and Form 10-Q 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 believe, expect, anticipate, intend, 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. 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 31st, 2022. 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.
Welcome, everyone. Thank you for your interest in Horizon. As we always do on our quarterly calls, I will update you on our performance and our current overall operating environment. Jerry will then discuss our business development efforts, our portfolio events in our markets, and Dan will detail our operating performance and financial condition. We will take some questions. With the increasingly challenging macroeconomic environment and fallout from the collapse of Silicon Valley Bank and Signature Bank in the first quarter, Horizon and our advisor, Horizon Technology Finance Management, took a measured approach to originations and redoubled efforts to focus on the credit quality of our portfolio companies. There is no question that the venture capital ecosystem has changed and will continue to evolve. While this creates challenges, this also creates opportunities in both the near and long term for those that can successfully navigate through the challenges.
With our experienced team, disciplined investment approach, and strong balance sheet, we believe we are positioned to emerge from these challenges as a stronger company. Jerry will provide some additional commentary on the fallout from the state of the macroeconomy and the banking crisis a little later in our presentation. Turning to our specific results for the quarter, we generated net investment income of $0.46 per share, well in excess of our distribution level, due largely to higher interest rates on our floating rate investment portfolio and the growth in our portfolio. Based on our outlook and our undistributed spillover income of $0.81 per share as of March 31st, we declared monthly distributions of $0.11 per share through September 2023.
We achieved a portfolio yield on our debt investments for the quarter of 16.3%, once again at or near the top of the BDC industry. We raised approximately $7 million of equity from our at-the-market program at a premium to NAV. While we have adequate liquidity and capacity to fund our current backlog, we will opportunistically and strategically seek new debt and equity capital as our portfolio and backlog grow. Our portfolio at quarter end stood at $715 million, a slight reduction from year-end 2022, but an increase of 39% from last year's first quarter. As I noted, we took a measured approach in the quarter toward originations and expect to continue to do so in the near term.
We finished the quarter with a committed and approved backlog of $187 million, providing us with a solid base of opportunities to thoughtfully grow our portfolio. As a reminder, most of our funding commitments are subject to our portfolio companies meeting certain key milestones. We ended the quarter with a net asset value of $11.34 per share. We did see some impact to our credit portfolio at the end of the quarter and remain in constant contact with all of our portfolio companies to help assist them in a difficult capital-raising environment. Jerry will provide more color on these efforts later. Given the current industry and overall macro environment, we will continue to closely manage our portfolio and remain more selective in originating new investments.
Despite the challenges ahead, we continue to believe our portfolio and backlog is positioned to generate strong NII in 2023, which may exceed our distributions. In summary, while we continue to expect a challenging environment for the foreseeable future, we firmly believe we have the right team in place to navigate through that current economic cycle. We have the talent and expertise to execute our investment strategy, to maintain a sharp focus on credit quality, and to seek to carefully grow the portfolio with high-quality investments. Before I turn it over to Jerry, a word on Horizon's annual meeting of stockholders coming up on May 25th. Last quarter, Horizon announced that HTFM, Horizon's investment advisor, had entered into a definitive agreement to be acquired by an affiliate of Monroe Capital LLC.
We continue to work on closing the transaction, including seeking approval of a new investment management agreement at the annual meeting. As we have previously said, we believe that the transaction will allow us to benefit from the ability to capture a broader range of investment opportunities designed to enhance shareholder value in both the near and long term as a result of access to Monroe Capital's fundraising capabilities and overall investment platform. With that, I will now turn the call over to Jerry and Dan to give you more details and color on our performance. Jerry?
Thanks, Rob. Good morning to everyone. In Q1, we saw a slight reduction in our portfolio size from year-end to $750 million as of March 31st. In the first quarter, we funded 8 transactions totaling $40 million, including a $20 million debt investment to a new tech portfolio company focused on education. We expect to remain selective in originating debt investments and have tightened our underwriting profile given the increased uncertainty related to the venture capital ecosystem. Our onboarding yield of 14.3% during the quarter was above our Q4's yield and continues to reflect our discipline in structuring and pricing transactions, which will produce strong net investment income. We experienced 4 loan prepayments and 1 partial paydown during the quarter, totaling $32 million.
We expect prepayments to be lower in the second quarter of 2023 compared to our historic levels, given the current volatility in the muted IPO and M&A markets. Our debt portfolio yield of 16.3% for the quarter is a further testament to the value of our floating interest rate structures in a rising rate environment, helping us generate one of the highest portfolio yields in the BDC industry. As of March 31st, we held warrant and equity positions in 99 portfolio companies with a fair value of $30 million. As we've consistently noted, structuring investments with warrants and equity rights is a key aspect of our venture debt strategy and our potential generator of additional value.
In the first quarter, we closed $52 million in new loan commitments and approvals, maintaining our selective approach to new opportunities, ended the quarter with a committed and approved backlog of $187 million, compared to $220 million at the end of the fourth quarter. We believe our committed backlog, with most of our funding commitments subject to our portfolio companies meeting certain key milestones, positions us to prudently grow our portfolio. Unlike in previous quarters, where portfolio credit issues were primarily due to portfolio company-specific events, our first quarter's portfolio quality was primarily impacted by macroeconomic issues that directly affected the venture capital and venture lending market as a whole, which made fundraising and exits more difficult for venture capital-backed technology and life science companies.
In the first quarter, we saw a significant reduction in venture capital investment, a closed IPO market, an anemic M&A market, a disappearing SPAC market, the ongoing potential for a recession in 2023, and finally, the banking crisis, which started with the collapse of Silicon Valley Bank. All of this contributed to a greater difficulty for venture-backed companies to raise debt or equity capital. On a positive note, we believe our portfolio companies and their investors understand the challenges of the current economic environment, and as a result, have significantly cut costs to preserve and extend their liquidity while seeking additional capital sooner. In addition, we are seeing portfolio companies employ more creative fundraising strategies. For example, one of our public biotech companies completed a public-to-private transaction, which was funded by its lead investor and large shareholder.
Another one of our public biotech companies also announced its consideration of a public-to-private transaction funded by its lead investor and large shareholder. A number of our portfolio companies have, in fact, raised equity or convertible debt as they continue to look at strategic options over the balance of 2023. All of that said, the fundraising environment for the venture-backed technology companies is as challenging as it has been in the past 20 years. Our expectation is that the difficult fundraising environment for VC-backed technology and life science companies will persist for the remainder of 2023. We are working very closely with our portfolio companies in collaboration with their investors and other stakeholders to provide support which we believe will help them survive this economic cycle.
We believe we have appropriately reflected the recent increased level of uncertainty in the ability of venture-backed technology companies to raise capital and the current macroeconomic environment in our credit ratings. As of March 31st, 86% of our debt portfolio consisted of 3 and 4 rated debt investments. The number of 2 rated debt investments increased to 7, and we had 3 one-rated debt investments at the end of Q1, which was unchanged from the last quarter. Our 1 rated credits represent less than 1% of our total debt portfolio. Turning now to the venture capital environment. According to PitchBook, approximately $37 billion was invested in VC-backed companies in the first quarter of 2023, compared to $82 billion in the first quarter of 2022. It seems clear that we are headed back toward pre-pandemic VC activity levels.
While there will continue to be investment opportunities as the competitive landscape shifts, we expect the investing environment to remain volatile. In the near term, we expect there will be opportunities for venture lenders to refinance bank debt and to hire venture lending talent. Longer term, we believe venture lenders, especially public BDCs, are best positioned to fill the void of the banks. We expect loan demand and pricing to increase for venture lenders as cheaper bank debt will be significantly less available. In terms of VC fundraising, $12 billion was raised for the second consecutive quarter, which portends considerably lower VC fundraising for 2023 than in the prior year. While VC dry powder appears high, it is expected to decline in the coming quarters as VCs provide ongoing support for portfolio companies until improved exit markets emerge.
As would be expected, VC-backed exit activity remained modest given the current environment and the closed IPO window. Total exit value for the quarter was just $6 billion. The IPO backlog continues to build, given the uncertainty environment, we would expect VC-backed exit activity to remain muted for the foreseeable future. In terms of market conditions for new venture loan investment, there is no question that the failures of SVB, Signature Bank, and now First Republic Bank will continue to have a significant impact on the venture debt market in the near term. Opportunities are abundant to replace senior bank debt with senior secured venture debt and at attractive pricing. Again, with a higher bar due to my previously mentioned macroeconomic winds, Horizon will take a pragmatic and cautious approach to new investment opportunities through at least the second and third quarters of 2023.
The ever-changing venture debt environment provides Horizon with lots of potential opportunities for our advisor to grow our portfolio through new high-quality venture debt loans, especially when the overall venture environment improves. For now, the focus is squarely on taking a cautious approach to the current market, maintaining the quality of our balance sheet, and prudently managing our committed backlog and pipeline. Our committed and approved and awarded backlog as of today stands at $267 million, while our advisor's pipeline of new opportunities today is $1 billion. Looking ahead, we are focused on credit quality to ensure optimal outcomes for our portfolio. As the market volatility begins to subside, we believe there will be attractive quality companies still looking for venture debt solutions. This will enable us to selectively grow our portfolio, our committed backlog, and our advisor's pipeline at the appropriate time.
In the meantime, based on the size of our portfolio and that 96% of our portfolio is priced at floating rates in a rising rate environment, we believe we remain well-positioned to generate solid NII for our shareholders and to continue delivering additional long-term shareholder value. With that, I will now turn the call over to Dan.
Thanks, Jerry, good morning, everyone. During the first quarter, the yield generated from our debt investments once again produced NII that more than covered our distributions. While maintaining a strong balance sheet and utilizing our ATM program successfully and increasingly raised an additional $7 million of capital, demonstrating our continued ability to opportunistically access the equity markets. We believe our focused balance sheet management keeps us well-positioned to thoughtfully grow the loan portfolio and create additional shareholder value in the current environment and beyond. As of March 31st, we had $112 million in available liquidity, consisting of $43 million in cash and $69 million in funds available to be drawn under our existing credit facilities.
We currently have $15 million outstanding under our $125 million KeyBank credit facility and $177 million outstanding under our $200 million New York Life credit facility, leaving us with ample capacity to grow the portfolio. Our debt-to-equity ratio stood at 1.38 to 1 as of March 31st. Netting out cash on our balance sheet, our leverage was 1.24 to 1, which was slightly above our target leverage of 1.2 to 1. Based on our cash position and our borrowing capacity on our credit facilities, our potential new investment capacity on March 31st was $177 million. For the first quarter, we earned total investment income of $28 million, an increase of 97% compared to the prior year period.
Interest income on investments increased primarily as a result of the higher average size of our debt investment portfolio for the quarter and increases in the variable interest rate on our debt investment. Our debt investment portfolio on a net cost basis stood at $704 million as of March 31st, a slight increase from December 31st, 2022. For the first quarter of 2023, we achieved onboarding yields of 14.3% compared to 13.3% achieved in the fourth quarter. Our loan portfolio yield was 16.3% for the first quarter compared to 12.4% for last year's first quarter.
Total expenses for the quarter were $14.8 million compared to $8.4 million in the first quarter of 2022. Our interest expense increased to $7.1 million from $3.4 million in last year's first quarter, due to an increase in the average borrowings and higher interest rates on our borrowings. Our base management fee was $3.2 million, up from $2.2 million in last year's first quarter, due to an increase in the average size of our portfolio. Our performance-based incentive fee was $3 million, up from $1.4 million for last year's first quarter. Net investment income for the first quarter of 2023 was a record $0.46 per share, compared to $0.40 per share in the fourth quarter of 2022 and $0.26 per share for the first quarter of 2022.
The company's undistributed spillover income as of March 31st was $0.81 per share. We anticipate that our larger portfolio, the increase in our portfolio's interest rates, along with our predictive pricing strategy, will enable us to continue generating NII that covers our distributions. As we have said previously, we will experience prepayments throughout the year. However, in today's environment, we expect prepayments to be below our historical levels. To summarize our portfolio activities for the first quarter, new originations totaled $40 million, which were offset by $7 million in scheduled principal payments and $33 million in principal prepayments and partial pay downs. We ended the quarter with a total investment portfolio of $715 million. Given the macro environment, we expect to remain selective in the near term with respect to origination.
As of March 31st, the portfolio consisted of debt investments in 57 companies with an aggregate fair value of $685 million, and a portfolio of warrant, equity, and other investments in 101 companies with an aggregate fair value of $30 million. Based upon our outlook for 2023, our board declared monthly distributions of $0.11 per share for July, August, and September 2023. We remain committed to providing our shareholders with distributions that are covered by our net investment income over time. Our NAV as of March 31st was $11.34 per share compared to $11.47 as of December 31st, 2022, and $11.68 as of March 31st, 2022.
The $0.13 reduction in NAV on a quarterly basis was primarily due to our paid distributions and adjustments to fair value, partially offset by net investment income. As we've consistently noted, 100% of our outstanding principal balance of our debt investments bear interest at floating rates with coupons that are structured to increase as interest rates rise with interest rate floors. As of March 31st, 96% of our debt portfolio will benefit from additional increases in their applicable base rate. This concludes our opening remarks. We'll be happy to take questions you may have at this time.
Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press * one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. If at any time you wish to remove your question from the queue, please press * two. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the * keys. One moment while we poll for questions. Our first question is from Christopher Nolan with Ladenburg Thalmann.
Hi, thanks for taking my question. I guess my real question is, how's the portfolio holding up given following the implosion of Silicon Valley Bank and Signature Bank? Are you seeing a change in terms of cash burns and headcount levels and things like that?
Yeah. Hi, Chris. This is Jerry. Yeah, that is definitely true. Actually, I think some of that was going on before the bank crisis. We are seeing across the board lower liquidity levels at all level of the VC ecosystem, meaning that portfolio companies have less liquidity to work with. Venture capital firms have either less liquidity in their funds or they're highly restricted to certain investments that they can make. They're obviously having to support their portfolio companies longer, given exit markets are as muted as they've been. That's the environment in which we are all living in today, and I think that will continue for some period of time.
On a little bit more positive note on that, we've also seen, at least in our portfolio, our portfolio companies have gotten quite religious about their cash burn, about operating significantly more efficiently, as well as being more creative actually in ways to raise liquidity to continue to support their operations and try to continue to create value in a very, you know, difficult, or I should say more, not necessarily difficult, but volatile market. We expect that to continue. We are working very closely with our portfolio companies, along with their investors who are also, I would say, very engaged in wanting to see these companies continue, you know, their operating performance.
another bit of positive news, I'm not ready to say it's a trend yet, we are beginning to see strategics starting to engage more, more consistently and starting to look at some of these opportunities, certainly on the life science side and the public biotech sector, where valuations have gotten so low that it's difficult for those companies to raise money on one hand. On the other hand, their valuations are getting very attractive, so they're attracting both strategic pharmaceutical type companies, as well as, you know, knowledgeable, biotech, investors.
I'm not ready to say that's a trend, but we've had a couple of transactions in our portfolio that have gone from being public to private because the investors just felt that the valuations were so attractive that they took them private and put in substantial amount of money to continue on with clinical development. All of that is happening in the marketplace, but it's a very different market than we were in a year ago, and that has created a lot of volatility. Companies are raising money, they're raising less money, so their runway extension isn't as long. The velocity at which they have to raise money has increased. There's, you know, a lot of focus on that. You know, that's where we're gonna be for a while.
I have to say that, compared to, say, 2008, I have to say that the engagement of the whole venture ecosystem and seeing these portfolio companies through, this kind of really, you know, very difficult and uncertain market. We've never had something like what's happened to the banks, as you point out. That's the other thing. There is less bank debt, you know, kind of revolving credit available in the marketplace today. We don't know how these other banks that have taken over these companies or, you know, have announced they're gonna make a, some sort of splash, and we don't know how what their products are gonna look like and things like that. There's uncertainty there.
you know, it's gonna be, it's gonna be a volatile market for 2023. I would just final comment on that is, you know, we are, we are well-staffed with a lot of experienced people who have been through numerous credit cycles. you know, they're doing a great job working with our portfolio companies and their other stakeholders, investors and such, and trying to help these companies move forward.
As a follow-up, given everything you said about the environment and given the pending acquisition of the manager by Monroe Capital, should we expect Horizon to start doing more off-balance sheet type of vehicles?
Chris, yeah.
Go ahead.
This is Dan. You know, in the past, you can see we've had off-balance-sheet vehicles that we use to co-invest with a public company. It has been a strategy we've looked at before and one we're going to continue to look at. As Rob mentioned, you know, it is part of one of the value drivers of the transaction for the advisor and for the shareholders at Horizon to allow additional vehicles and allow us to co-invest with Horizon. It is a strategic initiative of ours. We'll continue to do that going forward.
That's it for me. Thank you.
Our next question is from Bryce Rowe with B. Riley.
Thanks. Good morning. Wanted to maybe follow up on Chris's line of questioning there. You guys talked about the change in the internal risk rating, certainly understandable to see some credits move into the two category, or seven credits move into or five credits move into the two category quarter-over-quarter. Can you maybe just help us think about perhaps why those moved in, and then help us try to understand, you know, what's happening within the threes and fours to keep them there, so to speak. Thanks.
Hi, this is Jerry. You know, given the volatility of fundraising and, you know, the ways in which companies today have to, one, manage their liquidity, but also try to use as much value as they have in the company to raise capital from different sources, we're taking a much more conservative approach to companies' ability to do that, given the uncertainty. You know, as an example, some of those companies that are in our that we've moved to our two-rated bucket actually have term sheets. Will they get to a close? It's not as certain as it would have been a year ago. You know, they will need that liquidity.
You know, that has, as we have looked at, you know, across our portfolio and looked across how companies are raising money and where the real risks are associated with that, any company that we felt, you know, there was greater uncertainty, whether it was them having to raise money or them in the process of raising money and getting to a close, we, you know, we moved those companies into the 2-rated bucket. I suspect what we're gonna see during the course of this year is we're gonna see companies moving in and out of the 2 and 3-rated bucket because they're starting with lower liquidity across the board, the whole industry.
You know, as they get to a point where there's a, you know, gonna be an inflection point relative to raising capital, we may move them into the 2-rate rated category. They may get that deal done, and then we move them back into a 3. We'll probably see more of that kind of activity during the course of the year.
Okay.
Oh, I'm sorry. You had also, you also asked. As it relates to three and four-rated credits, there are deals getting done in the marketplace, especially on the strategic side. We are seeing, you know, a lot of liquidity coming into companies that have really strong IP positions in certain industries, and that would include sustainability, it would include technology, and we're starting to see more on the life science side too. There is interest and, you know, one thing that might spark actually an IPO market opening is if there is more knowledge-based financing getting done, meaning strategics coming in, meaning private venture capital firms that, you know, have a great deal of life science experience coming in and start investing given the low valuations on these kinds of companies.
I'm not gonna say that's a trend yet. I don't see that, but we are seeing some transactions get done. Companies with really strong IP positions, are actually able to, you know, able to continue to raise money either through new venture capital investment or through strategic transactions.
Great. Jerry, that's good color. Appreciate the, appreciate the time this morning.
Yeah, Brian.
Ladies and gentlemen, as a reminder, it's * one to ask a question. Our next question is from Ryan Lynch with KBW.
Hey, good morning. I wanted to first start on a portfolio company-specific question and the valuation process behind it. You mentioned in your press release, IMV looks like it's filing for bankruptcy in Canada or bankruptcy protection in Canada. From an outsider looking in, when I look at their most recent financials, it looks like they have around, and this is as of December 31st, you know, $21 million of cash on the balance sheet and $27 million of debt. I would assume, you know, over the last 4 months that cash balance is now somewhat less than that $21 million of cash.
I was just curious, given its much higher debt balance versus cash balance and the announcement of them, you know, filing for bankruptcy protection, your mark is pretty close to par. I would just love to hear kinda what was the thought behind that valuation process and how you guys arrived at your final number?
Sure. Let me just talk a little bit about the company, and maybe I'll let Dan get into the valuation a little bit.
Sure.
Ryan, appreciate the question. Just to bring everybody up to speed, IMV is a publicly traded biotechnology company. They're traded on Nasdaq. They're located in Canada. They filed for what is essentially bank, kind of a chapter 11 bankruptcy in the U.S. It's called Companies' Creditors Arrangement Act, CCAA. That gives them some protections relative to their ongoing operations. They did not inform us ahead of the filing. We have been in, obviously, discussions with them. They have announced in even in their filing that they are looking at strategic alternatives, and they were doing that well before their filing. This is a company that we've been working pretty closely with.
Again, they did not inform us of their filing. On Monday, we found out with the rest of the world. If you happen to go to their website and look at their technology, they've actually had some very positive data on their clinical trials. They're just at this inflection point where there is interest in their technology, but they believe that, and this was, again, not discussed with us, but they believe the best way to get a strategic deal probably done over time was through this process. That is as we understand it, why they decided to go this route. I'll let Dan talk a little bit about the valuation.
Yeah. You know, not much more to add as far as the public information. You know, I do appreciate the digging you're doing in. You know, as Jerry mentioned, we have been working with them over a number of quarters, and there's a, you know, a number of discussions and opportunities that they're looking at. Just like all of our companies, we look to work with them and get to a soft landing. You know, there's a number of private discussions that are going on that the public's obviously not privy to. Based on that information, the public information and additional conversations, we use all of that to fair value the position based on the knowledge we have at the time of our filing, and basically how we get to our number.
Okay. It sounds like there would have to be some sort of strategic deal done in order for you to achieve the recovery where you guys have it marked. It sounds like if it's just, I don't know, liquidated or, you know, based on the financials, it sounds like, you know, there's gonna be a much greater loss unless if there's a strategic deal done. Is that fair to assume?
Well, you know, they announce in their filing, in their public release that they are working on strategic deals.
Okay. The other question I had was, this is not uncommon for a lot of venture lenders, I would just love to hear. You guys have an unfunded commitment balance of about $166 million. You guys have total liquidity of $112 million. You know, it's not uncommon for a lot of those unfunded commitments to never be committed to over time for various reasons. I'm just wondering, in this current environment, where capital is so scarce and so important for these venture borrowers. I'm just wondering if you expect to see a higher level of these unfunded commitments being drawn down and funded by your borrowers, number one.
Number two, out of the $166 million of unfunded commitments that you all have on that you all have today, what number of those are subject to, whether it's like a milestone or your approval, and what are sort of like maybe unencumbered commitments where guys or borrowers can draw down, you know, at their will?
Yep. Good question. Something we're obviously paying pretty close attention to. The bottom line is a very small portion of our committed backlog is on some kind of open draw. Almost, I think it's over 90% requires certain milestones to be met. Many of those milestones, Ryan, are actually pretty far out. It might be, as an example, meeting 2024 revenue number or you know, at the end of 2024. There are a number of tranches that could be available based on, you know, continually meeting milestones. You know, again, it's pretty much driven by that.
We've seen companies meet milestones and some of the fundings we did in the last quarter, in fact, were companies that actually met significant milestones and, you know, we're happy to fund those transactions. We did have some expired draws where they had to meet a milestone by a certain date, and they didn't meet those. So the milestones expired. So it's, you know, that's kind of how the backlog sits right now. You'll have to see how those milestones do or do not get met and how much of them. But, you know, a number of them are, in fact, with, you know, certainly three and four rated credits in our portfolio that are doing, you know, reasonably well.
Our hope is that they meet those milestones because those are value drivers.
Okay. That's helpful. I just had one more. You guys are slightly above the upper end of your leverage target range. I know you said you're going to be, you know, pretty cautious and selective in the new deals that you guys are funding today, just given the uncertain environment. Obviously, the deals that you're doing today, I think are probably going to be extremely, you know, high quality, very good risk-adjusted return deals. I'm just wondering, though, slightly above your target leverage range, where do you guys foresee you operating at, you know, kind of if we look to the back half of 2023?
Do you guys intend to kind of still be up at this, you know, the upper end of the leverage range, or are you actually looking to bring leverage down to more of the middle or lower end? What are you thinking there?
Ryan, I think it's fair to say that we'll probably be around this range for the remainder of 2023. We're comfortable at this range. There's plenty of regulatory cushion, you know, between where net 1.24 to the 2 to 1 regulatory cap.
Got it. All right. I appreciate the time today.
Thank you.
Thank you. There are no further questions. I will now turn the call back to Robert Pomeroy, Chairman and CEO, for closing remarks.
Thank you all for joining us this morning. We appreciate your continued interest and support in Horizon. We look forward to speaking with you again soon. This will conclude our call.
This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.