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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Rand Capital Corporation | NASDAQ:RAND | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.445 | 2.79% | 16.40 | 14.30 | 23.42 | 16.4499 | 15.95 | 15.95 | 1,627 | 21:07:30 |
Rand Capital Corporation (Nasdaq: RAND) (“Rand” or the “Company”), a business development company providing alternative financing for lower middle market companies, announced its results for the second quarter ended June 30, 2023.
Daniel P. Penberthy, President and Chief Executive Officer of Rand, commented, “We delivered a strong quarter of total investment income growth, fueled by the addition of high-quality debt investments. Additionally, Rand recognized a sizable gain from the sale of our debt and equity investment in Dealer Solutions and Design (DSD) during the quarter, further strengthening our balance sheet and liquidity position. We believe we can continue to execute our strategy as we look to the second half of the year and beyond. With our strong cash position, we paid down some of our outstanding borrowings under our credit facility in July and expect to utilize additional cash on hand and our credit facility to further strengthen and solidify our portfolio in order to drive our earnings potential and support a growing dividend.”
Second Quarter Highlights (compared with the prior-year period unless otherwise noted)
Portfolio and Investment Activity
As of June 30, 2023, Rand’s portfolio included investments with a fair value of $66.8 million across 29 portfolio businesses. This was up $5.3 million, or 9%, from December 31, 2022, and reflected new and follow on investments and valuation adjustments in multiple portfolio companies. This was partially offset by equity sales and loan repayments. At June 30, 2023, the portfolio was comprised of approximately 60% in debt investments, 29% in equity investments in private companies, and 11% in publicly traded equities consisting of other BDCs and ACV Auctions. The annualized weighted average yield of debt investments was 13.5%.
Second quarter 2023:
Liquidity and Capital Resources
Cash at the end of the second quarter of 2023 was $8.4 million, up considerably from $1.4 million at year-end 2022, reflecting the proceeds received from the DSD and ACV Auctions share sales. As of June 30, 2023, the Company held shares valued at approximately $4.0 million in other publicly traded BDCs and $3.4 million in ACV Auctions, all of which are available for future liquidity needs including dividends and portfolio investments.
At June 30, 2023, Rand had outstanding borrowings of $10.7 million on its existing $25.0 million senior secured revolving credit facility. The outstanding borrowings carried an interest rate of 8.59% at quarter-end. Subsequent to quarter-end, in July, Rand used $3.0 million of its cash on hand to pay down its outstanding borrowings.
The Company did not repurchase any outstanding common stock during the second quarter of 2023.
Dividends
On July 25, 2023, Rand declared its regular quarterly cash dividend distribution of $0.25 per share. The cash dividend will be distributed on or about September 14, 2023, to shareholders of record as of August 31, 2023.
Webcast and Conference Call
Rand will host a conference call and webcast on Friday, August 4, 2023, at 11:00 a.m. Eastern Time, to review its financial results. The review will be accompanied by a slide presentation, which will be available on Rand’s website at www.randcapital.com in the “Investor Relations” section. Rand’s conference call can be accessed by calling (201) 689-8263. Alternatively, the webcast can be monitored on Rand’s website at www.randcapital.com under “Investor Relations” where the replay will also be available.
A telephonic replay will be available from 2:00 p.m. ET on the day of the call through Friday, August 18, 2023. To listen to the archived call, dial (412) 317-6671 and enter replay pin number 13739663. A transcript of the call will also be posted once available.
ABOUT RAND CAPITAL
Rand Capital (Nasdaq: RAND) is an externally managed business development company (BDC). The Company’s investment objective is to maximize total return to its shareholders with current income and capital appreciation by focusing its debt and related equity investments in privately-held, lower middle market companies with committed and experienced managements in a broad variety of industries. Rand invests in early to later stage businesses that have sustainable, differentiated and market-proven products, revenue of more than $2 million and a path to free cash flow or up to $5 million in EBITDA. The Company’s investment activities are managed by its external investment adviser, Rand Capital Management, LLC. Additional information can be found at the Company’s website where it regularly posts information: https://www.randcapital.com/.
Safe Harbor Statement
This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than historical facts, including but not limited to statements regarding the strategy of the Company and its outlook; statements regarding the implementation of the Company’s strategy; statements regarding increasing the Company’s dividend, and any assumptions underlying any of the foregoing, are forward-looking statements. Forward-looking statements concern future circumstances and results and other statements that are not historical facts and are sometimes identified by the words “may,” “will,” “should,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “overestimate,” “underestimate,” “believe,” “could,” “project,” “predict,” “continue,” “target” or other similar words or expressions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove to be incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. The inclusion of such statements should not be regarded as a representation that such plans, estimates or expectations will be achieved. Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among others, (1) evolving legal, regulatory and tax regimes; (2) changes in general economic and/or industry specific conditions; and (3) other risk factors as detailed from time to time in Rand ’s reports filed with the Securities and Exchange Commission (“SEC”), including Rand’s annual report on Form 10-K for the year ended December 31, 2022, quarterly reports on Form 10-Q, and other documents filed with the SEC. Consequently, such forward-looking statements should be regarded as Rand’s current plans, estimates and beliefs. Except as required by applicable law, Rand assumes no obligation to update the forward-looking information contained in this release.
FINANCIAL TABLES FOLLOW
Rand Capital Corporation and Subsidiaries
Consolidated Statements of Financial Position
June 30, 2023 (Unaudited)
December 31, 2022
ASSETS
Investments at fair value:
Control investments (cost of $5,155,545 and $4,660,017, respectively)
$
4,031,735
$
3,536,207
Affiliate investments (cost of $35,940,068 and $30,204,160, respectively)
43,090,799
38,241,589
Non-Control/Non-Affiliate investments (cost of $19,873,405 and $20,852,060, respectively)
19,669,209
19,726,463
Total investments, at fair value (cost of $60,969,018 and $55,716,237, respectively)
66,791,743
61,504,259
Cash
8,356,401
1,368,996
Interest receivable
199,587
208,338
Prepaid income taxes
—
76,396
Deferred tax asset
174,826
28,160
Other assets
532,280
295,043
Total assets
$
76,054,837
$
63,481,192
LIABILITIES AND STOCKHOLDERS’ EQUITY (NET ASSETS)
Liabilities:
Due to investment adviser
$
255,867
$
562,221
Accounts payable and accrued expenses
79,983
66,680
Income taxes payable
253,870
—
Line of credit
10,650,000
2,550,000
Capital gains incentive fees
2,949,000
2,167,000
Deferred revenue
464,089
413,971
Total liabilities
14,652,809
5,759,872
Stockholders’ equity (net assets):
Common stock, $0.10 par; shares authorized 100,000,000; shares issued: 2,648,916; shares outstanding: 2,581,021 at 6/30/23 and 12/31/22
264,892
264,892
Capital in excess of par value
51,464,267
51,464,267
Treasury stock, at cost: 67,895 shares at 6/30/23 and 12/31/22
(1,566,605
)
(1,566,605
)
Total distributable earnings
11,239,474
7,558,766
Total stockholders’ equity (net assets) (per share –6/30/23: $23.79; 12/31/22: $22.36)
61,402,028
57,721,320
Total liabilities and stockholders’ equity (net assets)
$
76,054,837
$
63,481,192
Rand Capital Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three months ended June 30, 2023
Three months ended June 30, 2022
Six months ended June 30, 2023
Six months ended June 30, 2022
Investment income:
Interest from portfolio companies:
Control investments
$
179,922
$
—
$
330,838
$
—
Affiliate investments
941,201
614,997
1,729,022
1,185,113
Non-Control/Non-Affiliate investments
352,417
389,835
710,583
731,858
Total interest from portfolio companies
1,473,540
1,004,832
2,770,443
1,916,971
Interest from other investments:
Non-Control/Non-Affiliate investments
104
1
236
1
Total interest from other investments
104
1
236
1
Dividend and other investment income:
Affiliate investments
59,677
202,785
406,825
246,510
Non-Control/Non-Affiliate investments
132,920
113,735
260,515
243,000
Total dividend and other investment income
192,597
316,520
667,340
489,510
Fee income:
Control investments
4,311
—
8,211
—
Affiliate investments
138,902
22,515
206,744
52,820
Non-Control/Non-Affiliate investments
5,978
9,314
13,956
18,628
Total fee income
149,191
31,829
228,911
71,448
Total investment income
1,815,432
1,353,182
3,666,930
2,477,930
Expenses:
Base management fee
255,867
230,767
501,260
471,042
Capital gains incentive fees
491,000
(663,000
)
782,000
(902,760
)
Interest expense
258,912
—
417,312
—
Professional fees
100,307
212,138
271,282
443,221
Stockholders and office operating
85,080
64,890
149,384
121,588
Directors' fees
67,391
44,883
131,241
89,983
Administrative fees
37,250
—
74,500
—
Insurance
10,380
13,353
23,340
22,263
Corporate development
554
726
4,267
3,753
Other operating
—
45
—
90
Total expenses
1,306,741
(96,198
)
2,354,586
249,180
Net investment income before income taxes:
508,691
1,449,380
1,312,344
2,228,750
Income taxes, including excise tax expense
16,061
31,243
104,798
38,610
Net investment income
492,630
1,418,137
1,207,546
2,190,140
Net realized gain on sales and dispositions of investments:
Affiliate investments
2,537,765
167,159
2,596,094
167,159
Non-Control/Non-Affiliate investments
1,280,482
1,372,984
1,275,541
521,513
Net realized gain on sales and dispositions of investments, before income taxes
3,818,247
1,540,143
3,871,635
688,672
Income tax expense
338,158
—
338,158
—
Net realized gain on sales and dispositions of investments
3,480,089
1,540,143
3,533,477
688,672
Net change in unrealized appreciation/depreciation on investments:
Affiliate investments
(886,698
)
47,841
(886,698
)
47,841
Non-Control/Non-Affiliate investments
(480,572
)
(4,902,510
)
921,401
(5,233,579
)
Change in unrealized appreciation/depreciation before income taxes
(1,367,270
)
(4,854,669
)
34,703
(5,185,738
)
Deferred income tax benefit
(66,441
)
—
(66,441
)
—
Net change in unrealized appreciation/depreciation on investments
(1,300,829
)
(4,854,669
)
101,144
(5,185,738
)
Net realized and unrealized gain (loss) on investments
2,179,260
(3,314,526
)
3,634,621
(4,497,066
)
Net increase (decrease) in net assets from operations
$
2,671,890
$
(1,896,389
)
$
4,842,167
$
(2,306,926
)
Weighted average shares outstanding
2,581,021
2,581,021
2,581,021
2,581,021
Basic and diluted net increase (decrease) in net assets from operations per share
$
1.04
$
(0.73
)
$
1.88
$
(0.89
)
Rand Capital Corporation and Subsidiaries
Consolidated Statements of Changes in Net Assets
(Unaudited)
Three months ended June 30, 2023
Three months ended June 30, 2022
Six months ended June 30, 2023
Six months ended June 30, 2022
Net assets at beginning of period
$
59,375,393
$
59,947,726
$
57,721,320
$
60,745,416
Net investment income
492,630
1,418,137
1,207,546
2,190,140
Net realized gain on sales and dispositions of investments
3,480,089
1,540,143
3,533,477
688,672
Net change in unrealized appreciation/depreciation on investments
(1,300,829
)
(4,854,669
)
101,144
(5,185,738
)
Net increase (decrease) in net assets from operations
2,671,890
(1,896,389
)
4,842,167
(2,306,926
)
Declaration of dividend
(645,255
)
(387,153
)
(1,161,459
)
(774,306
)
Net assets at end of period
$
61,402,028
$
57,664,184
$
61,402,028
$
57,664,184
Rand Capital Corporation and Subsidiaries Reconciliation of GAAP Total Expense/(Credits) to Non-GAAP Adjusted Expenses (Unaudited)
In addition to reporting total expenses, which is a U.S. generally accepted accounting principle (“GAAP”) financial measure, Rand presents adjusted expenses, which is a non-GAAP financial measure. Adjusted expenses is defined as GAAP total expenses/(credits) removing the effect of any expenses/(credits) for capital gains incentive fees. GAAP total expenses is the most directly comparable GAAP financial measure. Rand believes that adjusted expenses provides useful information to investors regarding financial performance because it is a method the Company uses to measure its financial and business trends related to its results of operations. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP.
Three months ended
June 30, 2023
Three months ended
June 30, 2022
Total expenses/(credits)
$
1,306,741
$
(96,198
)
Exclude expenses/(credits) for capital gains incentive fees
491,000
(663,000
)
Adjusted expenses
$
815,741
$
566,802
Reconciliation of Adjusted Net Investment Income per Share to GAAP Net Investment Income per Share (Unaudited)
In addition to reporting Net Investment Income per Share, which is a U.S. generally accepted accounting principle (“GAAP”) financial measure, the Company presents Adjusted Net Investment Income per Share, which is a non-GAAP financial measure. Adjusted Net Investment Income per Share is defined as GAAP Net Investment Income per Share removing the effect of any expenses/(credits) for capital gains incentive fees. GAAP Net Investment Income per Share is the most directly comparable GAAP financial measure. Rand believes that Adjusted Net Investment Income per Share provides useful information to investors regarding financial performance because it is a method the Company uses to measure its financial and business trends related to its results of operations. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP.
Three months ended
June 30, 2023
Three months ended
June 30, 2022
Net investment income per share
$
0.19
$
0.55
Exclude expenses/(credits) for capital gains incentive fees
0.19
(0.26
)
Adjusted net investment income per share
$
0.38
$
0.29
View source version on businesswire.com: https://www.businesswire.com/news/home/20230804047799/en/
Company: Daniel P. Penberthy President and CEO 716.853.0802 dpenberthy@randcapital.com
Investors: Deborah K. Pawlowski / Craig P. Mychajluk Kei Advisors LLC 716-843-3908 / 716-843-3832 dpawlowski@keiadvisors.com / cmychajluk@keiadvisors.com
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