Horizon Technology Finance Corp (HRZN) 2017 Q4 法說會逐字稿

Good morning, and welcome to Horizon Technology Finance's Year-end 2017 Conference Call. Today's call is being recorded. (Operator Instructions)

I would now like to turn the call over to Megan Bacon of Horizon for introductions and the 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 in 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 8 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 moved 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, an earning of 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 coming quarters.

A major focus last year was to address underperforming loans. In 2017, we had one new loan that was placed on nonaccrual, which was Interleukin Genetics. This loan was resolved in November with Interleukin repaying $1.3 million on its venture loan related to its acquisition by Orig3n, Inc. At year-end, the only loan that was on nonaccrual was Digital Signal, which was itself resolved in February of 2018. In addition to resolving underperforming loans, we continued to aggressively manage the credit quality of our entire portfolio. Since year-end 2016, we have reduced the number and percentage of underperforming loans and enhanced our portfolio's overall credit profile.

For the quarter, we reported net investment income of $0.21 per share. NII was impacted by the following factors: the profitability of prepayments, higher interest expense related to our timely bond issuance in September and the timing of new loan closings. As most of our new loan originations occurred later in the fourth quarter, our NII did not reflect the earnings power of our larger investment portfolio.

Portfolio turnover is an integral part of the Horizon venture lending model. We experienced liquidity events from 8 portfolio companies during the fourth quarter. Liquidity events include loan prepayments, which can either be profitable with accelerated fee income; opportunistic, where we retain a quality customer by refinancing our existing loan; or defensive, allowing us to reduce the percentage of older loans in our portfolio. By realizing defensive and opportunistic prepayments early in the quarter, we were able to redeploy that capital into newer-loan opportunities by the end of the quarter. While defensive and opportunistic prepayments contributed to the future earnings power of our portfolio, they did not generate the high-income levels we have seen from strong prepayment activity in prior quarters.

The fee cap and deferral mechanism in our Investment Management Agreement with our adviser allows for the recapture of deferred incentive fees during the lookback period. During the fourth quarter, the adviser could have recouped a small amount of the previously deferred incentive fees. The adviser has agreed to waive this amount for the fourth quarter of 2017 and to further waive the recoupment of any deferred amounts that would otherwise be recoverable during the 4 calendar quarters of 2018. These waivers will not be subject to recoupment.

Our net investment -- our net asset value declined during the quarter to $11.72 per share, primarily due to our monthly distributions exceeding our net investment income. The change in unrealized and realized gains and losses was essentially flat for the quarter.

Turning to our distributions. It has always been our practice to set our distributions at a level that can be covered by NII over time. Based upon the positive steps we took in 2017, including growing our portfolio [Audio Gap] 22 notes and based upon the anticipated positive impact from rising rates and our recently announced waiver deferred incentive fees in '18, all supported by a $0.09 of spillover income, our board declared monthly distributions for April, May and June 2018 totaling $0.30 per share. We have now declared cumulative distributions of $10.52 per share since our IPO.

Looking ahead, we see steady demand for our venture lending products and a healthy pipeline of investment opportunities. We remain committed to growing our portfolio toward our target leverage ratio and to cover our distributions with net investment income over time. We will continue to actively source quality loans that provide appropriate risk-adjusted returns with strong onboarding yields as well as the potential for equity upside through warrants and success fees. In previous calls, I've outlined the investments we have made over the past 18 months in the adviser's lending platform to enhance our origination and portfolio management capabilities. This includes hiring new managing directors and credit professionals, redeploying existing experienced team members to maximize their value and providing improved retention programs to ensure stability to meet our strategic objectives in 2017 and '18. We're very proud of the dedication and commitment that our team demonstrated during 2017, which has placed Horizon in a strong position going into 2018.

I will now turn the call over to Jerry, who will update you on our business development efforts and market environment and then to Dan, who will detail our operating performance and financial condition. Jerry?

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, add to a record level of originations. We originated 8 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 a committed backlog of over $33 million. We remained disciplined with respect to pricing and achieved strong onboarding yields of 11.6% during the quarter while generating a 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 yields 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 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 quality of aspects of our portfolio as we begin 2018. In the fourth quarter, we added 3 new medical device companies totaling $30 million. All of these companies have revolutionary technology, have raised significant equity during 2017 and are backed by a high-quality life science investors. We also added 2 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 3 of our high-performing portfolio companies, Bridge2 Solutions, HealthEdge and Rocket Lawyer, by a combined $16 million. Importantly, all of the transactions we funded in Q4 added investments to our portfolio with new and higher prepayment penalty rates and new ETPs in place of aged investments we exited in Q4 of 2017 that had lower or no prepayment fees and ETPs that were significantly accretive. As a result, we entered 2018 with a larger portfolio with enhanced prepayments and ETP fee potential as well as a more predictable income -- interest income stream from newly originated transactions entering their interest-only period.

At the end of the year, we held warrant and equity positions in 78 portfolio companies with a fair value of $10.6 million. In addition to our record originations, we experienced liquidity events during the quarter from 8 portfolio companies totaling $23.4 million. We continue to hold warrant positions in 5 of the exited companies. Subsequent to year-end, we funded an additional loan totaling $3.2 million and were awarded 3 new transactions totaling $18 million. As of today, we have a committed backlog of more than $34 million to 9 companies in a pipeline of new opportunities of over $400 million.

Looking at the venture capital environment. U.S. venture capital investment remained strong in the fourth quarter and on par with Q2 and Q3 of 2017. For the full year 2017, we saw our investments topped $70 billion for the second time with $72 billion invested across 5,500 deals as reported by MoneyTree. Seed stage and early-stage funding continue to trail expansion in late-stage funding as we seek larger investment opportunities to make an impact on their larger funds. U.S. and VC fundraising slowed during the second half of 2017 ending the year with over $32 billion raised according to Fitch book.

VC-backed exit activity trended down once again in the fourth quarter. While exit activity had been improving early in the year, by the end of 2017, values were down 3.6% from 2016. Fourth quarter exit values of $9.8 billion on 167 transactions were the lowest we've seen since the second quarter of 2011. Biopharma IPOs increased slightly in 2017 from 2016. However, both the U.S. fell well short of the 66 completed biotech IPOs in 2014.

Turning to our core markets. In the fourth quarter, the life science market produced our best-funding quarter for medical device transactions in our history, including venture loans by Aerin Medical, Conventus Orthopaedics and VERO Biotech. This was driven by renewed VC investment in medical device companies combined with revolutionary technology improvements that we're seeing from these dynamic and innovative companies. Though venture lending competition remain strong, we continue to demonstrate our solid position in this market due to our various experienced origination team resulting in a growing number of financing opportunities for life science borrowers. This includes first-time borrowers as well as those seeking to refinance existing debt.

Health care technology continues to be a growing market sector for both debt and equity, so notable consolidation transactions were announced in Q4 led by CVS acquiring Aetna, which impacts the prescription drug delivery market and health care insurance market. In the fourth quarter, we continued to see considerable investment activity in the areas such as disease diagnostics, personal health and telehealth. In our own health care portfolio, as we noted, we upsized our investment in HealthEdge as it continues to exceed expectations.

Looking at the broader technology sector, the overall market remains strong. This was led by strong VC investing in Internet, software, artificial intelligence and cybersecurity companies. Internet companies represented the largest VC funding sector during the quarter. In Q4, Horizon added GroundTruth, a global location-based ad targeting Internet company to our portfolio and upsized our investment in Rocket Lawyer, a legal advisory Internet company. Venture capital investing has remained limited in the overall cleantech market. While we continue to see greater emphasis on technologies that support healthy living, we remain cautious here. A VC area that continues to gain prominence is the autotech market as nearly all of the major auto companies and tech giants are investing in AI-driven smartcard technologies. We see autotech as an interesting growth area and continue to explore opportunities here.

Looking at the venture debt competitive landscape, the environment in Q4 was very similar to what we experienced in the third quarter. We continued to see competition from technology banks in our targeted markets, particularly in life sciences. This has created some pricing pressure, but we continued to see and win quality investment opportunities with attractive onboarding yields in Q4. We are seeing more opportunities for later-stage life science and technology transactions, which is partially a result of VCs looking for exits and not for their equity investments in mature portfolio companies. We continue to see rational competition from other venture lending competitors with somewhat -- lender's reporting healthy origination as well as high levels of prepayment activity. There was also some notable activity in the fourth quarter that should affect the competition going forward. As previously announced, Aerin sold their $100 million venture debt portfolio and they have exited the venture lending market.

Heading into 2018 after a less robust IPO and M&A market in 2017, many biotech companies will likely be coming back to the market over the next 24 months to refinance existing debt or add new debt to support drug development or a market launch. Based on this, we expect to see solid deal flow from late-stage VC-backed life science companies in 2018 as they continue to wait for overall exit markets to improve. Given these drivers, we believe Horizon is well positioned to benefit from a solid and rational venture lending environment with our enhanced lending platform and robust pipeline of investment opportunities. We remain focused on continuing to grow our investment portfolio sourcing high-quality loans in specific sectors on the life science and technology markets that we believe will provide appropriate risk-adjusted returns and greater potential for warrant upside.

With that update, I will now turn the call over to Dan.

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 '17 as compared to $7 million for the fourth quarter of '16. 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 yield 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 '17 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 yield 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 '16. The increase was mainly driven by higher interest expense due to increase in average borrowings and a onetime 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 '17 as compared with previous year. We recorded $500,000 of incentive fee expense in the fourth quarter of '17. There was no incentive fee expense in the fourth quarter of '16.

Total net expenses for the full year of 2017 decreased by $2.5 million to $13.5 million as compared to $16 million for 2016. Interest expense for the full year 2017 decreased by $700,000 to $5.2 million compared to $5.9 million from the prior year period due to a decrease in the average outstanding borrowings of $26.9 million. As we've mentioned earlier, we experienced a onetime expense related to the redemption of our 2019 notes totaling $0.03 per share for the quarter. Specifically, $200,000 of unamortized debt issuance costs and $100,000 of additional interest paid due to the 30-day notification period required to pay off our 2019 notes.

Base management fee expense decreased by $900,000 to $3.8 million for the year due to the decrease in our average assets for the year. Net investment income was $0.21 per share for the fourth quarter compared with $0.33 per share in each of the third quarter of '17 and the fourth quarter of '16. Considering that $46 million of our new loan originations for the quarter occurred in December, our NII did not reflect the earnings power of our larger investment portfolio. For the year, we earned net investment income of $1.07 per share as compared to $1.48 per share in the prior year period. After paying our distributions of $1.20 per share and taxable earnings of $1.14 per share, our undistributed spillover income at year-end was $0.09 per share compared with $0.15 per share at the end of '16. As of December 31, our NAV was $11.72 per share as compared to $11.81 in the prior quarter. As Rob discussed earlier, this decrease was primarily due to our monthly distributions exceeding our net investment income for the quarter.

To summarize our portfolio activity for the fourth quarter. New originations totaled $73 million, which were offset by $3 million in scheduled principal payments and $24 million in principal prepayments. We ended 2017 with an investment portfolio of $222 million, which includes earning debt investments in 32 companies with an aggregate fair value of $201 million, a portfolio of warrants and equity positions in 78 companies with an aggregate fair value of $10.6 million and other investments in 4 companies with an aggregate fair value of $7.7 million. New loan originations for the full year totaled $140 million to 19 portfolio companies, which were offset by a $31 million in scheduled principal payments and $76 million in principal prepayments. This compares to new loan originations for 2016 of $60 million to 13 portfolio companies, which were offset by $49 million in scheduled principal payments and $46 million in principal prepayments.

Looking at our liquidity, Horizon has $30 million available to deploy at year-end. This includes cash as well as funds available under our $95 million credit facility with KeyBank. As of December 31, we had $58 million outstanding under our KeyBank facility.

On a capital markets front. During 2017, we took advantage of favorable market conditions to complete an upside notes offering. Horizon issued and sold $37 million of 6.25 notes due in 2022. Using the proceeds from this offering, we redeemed 100% of the outstanding balance of our 7.375 notes, which were set to mature in 2019. We expect this will result in net interest savings of $0.03 per share on an annualized basis. Our goal remains to grow our portfolio and increase our leverage ratio in our overall target of 0.7 to 1. At December 31, our leverage ratio was 0.71 to 1. Based upon our cash position, the room we still have within our target leverage ratio and the cash flow from normal portfolio amortization and prepayments, we expect to maintain or slightly increase the current size of our portfolio in 2018.

One last topic before we go to questions. As we've discussed in the past, almost 100% of the outstanding principal amount of our debt investments, their interests at floating rates with coupons, are structured to increase when interest rates rise. Accordingly, Horizon will continue to benefit from a rising rate environment and experience both increasing income and expanding net interest margin. Lastly, I'd like to note that we plan to hold our next conference call to report our first quarter 2018 results during the week of April 30.

This concludes our opening remarks. We'd be happy to take questions you may have at this time.

(Operator Instructions) Our first question comes from the line of Paul Johnson of KBW.

My first question just has to do with really just your earnings level in fourth quarter '17 and sort of how that relates to the first quarter of 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 noncash interest charges, we still have about $0.06 or so to go to get to or 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 -- you have to have a -- 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, that the larger portfolio will be earning from basically January 1 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 nonaccrual, ScoreBig, was that exited? Was that written off during the quarter? Any color there on what was resolved around that nonaccrual?

Sure. Yes. But 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 would -- had seen the loan on the schedule investments throughout 2017. And then in December of '17, the royalty agreement has been directly assigned to us. And therefore, we have a new asset on the books, the triple-double that you'll see, our license agreement on the schedule investments and the loan has now been terminated.

Okay. Great. Yes, that's great color. And then another investment, Digital Signal. And so that was marked up to -- pretty close to par. And then just -- is there any 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 it exited pretty close to the mark?

It was closed -- 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 are first quarter events. So we -- the fair value of the DSC as 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 a -- 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 this just more in your outlook for the year? And...

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

Our next question comes from Jonathan Bock of Wells Fargo.

Finian O'Shea on 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 of give us some color on the competition and such?

Yes. I -- and this is Jerry Michaud. Yes. So it 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 higher fundings to the transactions. We expected the fundings to actually close, 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 a -- 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 4 quarters relative to kind of additions to our Managing Director staff and our underwriting staff that did start to create new opportunities earlier in the year. And I think we basically saw the fruition of that in the third and particularly, obviously, in the fourth quarter. And so that's primarily what drove the accelerated -- or 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. You don't usually -- we don't usually 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 to last 4 or 5 quarters, it was very significant. But actually, it was -- kind of built up over the course of the year. And some of the fundings we thought were going to happen in Q3 happened in Q4. So it was kind of a convergence of those.

No, no, of course. And of course, originations are a function of staff issuing capital, et cetera. And then to that line, in the sort of limited capacity now at the BDC, 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 on 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 the Horizon franchise.

Our next question comes from Chris Kotowski with Oppenheimer.

Well, I guess Fin just asked my question. So I think I'm good. It looked like a good solid quarter.

Our next question comes from Christopher Testa of National Securities.

I just wanted to confirm, make sure I got the figure right. Dan, did you say that the $26 million of the originations closed in December?

$46 million.

$46 million.

Oh, $46 million. Okay, some more. Got it. And so obviously, there's going to be a big pull through into the next quarter. But I guess with -- this is going back to one of the early, earlier questions in the call, but even with that pulling through to the next quarter, we have to expect obviously that prepayment income is 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 -- 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 to $0.24. We expect the savings from the bond offering during all of last -- all of this year to be, on their order of magnitude, to $0.03 a share from -- just from the lower coupon on the 2022 notes that 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 are -- 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 the 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. Now that make sense. And you mentioned, Rob, that you guys resolved Digital Signal in February. Is that also going to be on the next quarter's 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 what you'll -- we'll see new investment there, okay?

Got it. And will 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 as curious how that -- how we should look at that.

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

Other income. Okay. Got it.

Our next question comes from Robert Dodd of Raymond James.

This is Mike Koban on for Robert Dodd. 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 '18? How you think about the timing of originations versus repayments for that quarter?

So we're looking -- I mean, 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 -- often cannot be -- come out of the blue for us as well. So we expect our portfolio to be essentially flat within a reasonable range for the end of the quarter.

(Operator Instructions) Our next question comes from the line of Casey Alexander of Compass Point.

I have a few questions. First of all, when you say you had one loan closed in -- so far in 1Q '18, is that the loan that replaced Digital Signal?

We had one on...

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 was -- 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 and -- 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?

You are correct. We did take a realized loss on the loan itself. And that is a realized loss. So the new asset is placed on the books 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 not received no royalty income from either ScoreBig or triple-double. I also noticed that Espero Pharmaceuticals, which is another royalty interest, was marked down $600,000 quarter-to-quarter. Do you have any color on what's happening with Espero, 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 speak too much to it, but I can say that they had to go through a refiling 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 approved. So they had to get the manufacturing process approved again, and that has taken a little longer. As a result, when we looked at -- we've looked at the cash flows that we expect to come from that when it is launched, which put -- were pushed out a little bit and that impacted the valuation.

Are you aware of any schedule for a launch date currently?

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

There are no further questions. I would now like to turn the call back to Robert Pomeroy, Chairman and CEO, 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 in May. This will end the call.