- Total investment income grew 20% to $811,000 compared with
the prior-year period
- Net asset value per share (“NAV”) increased 8% to $22.51 per
share from $20.87 per share at March 31, 2021; NAV increased 26%
compared with $17.86 at December 31, 2020
- Total investments in the quarter were $4.6 million,
including a new portfolio investment of $3.9 million
- Exits and loan repayments totaled $2.4 million in the
quarter
- The third quarter cash distribution of $0.10 per share was
announced on July 29, 2021
- Cash and cash equivalents was $12.9 million with an
additional $3 million of capacity available under the SBIC
debenture program for total liquidity of $15.9 million
Rand Capital Corporation (Nasdaq: RAND) (“Rand” or the
“Company”), a business development company (“BDC”), announced its
results for the quarter ended June 30, 2021.
Allen F. (“Pete”) Grum, President and Chief Executive Officer of
Rand, commented, “We are executing on our strategy to position our
portfolio to grow investment income. The portfolio continues to
perform well supported by improving economic activity which is
driving growth in total investment income. We believe our strong
liquidity and pipeline of potential investments present further
growth opportunities. We expect this to ultimately deliver
sustained growth in net investment income and subsequently our
quarterly cash distributions.”
Second Quarter Highlights
- Total investment income in the quarter grew 20% to $811,000 due
to increased interest income from portfolio companies and increased
dividend and other investment income.
- Total expenses in the quarter were $1.6 million, up $1.1
million from prior-year period, which was the result of $1.1
million in capital gains incentive fees during the quarter compared
with no similar fees in the prior-year period. The fee was
primarily the result of realized gains from the sale of GiveGab and
the increase in unrealized appreciation mostly related to Open
Exchange, Inc. Operating expenses in the quarter, a non-GAAP
financial measure which excludes the capital gains incentive fee
accrual, increased $84,000, or 18%, mostly because of an increase
in the base management fee payable to Rand’s investment adviser
resulting from increased asset values. See the attached description
of this non-GAAP financial measure and reconciliation table for
operating expenses.
- Net investment loss was $811,000, or $0.31 per share, compared
with net investment income of $199,000, or $0.08 per share, in the
prior-year period.
- Adjusted net investment income per share, which excludes
capital gains incentive fees, was $0.10 for the second quarter of
2021. See the attached description of this non-GAAP financial
measure and reconciliation table for adjusted net investment income
per share.
- Net assets at June 30, 2021 were $58.1 million, up 8% from
March 31, 2021. The increase largely reflects unrealized
appreciation on Rand’s investment in Open Exchange following its
new financing. Net assets were up 26% from December 31, 2020,
mostly due to the increase in unrealized appreciation on Rand’s
investment in ACV Auctions resulting from ACV Auctions’ initial
public offering completed in March 2021.
Portfolio and Investment Activity
As of June 30, 2021, Rand’s portfolio consisted of 35 companies.
At that date, the dollar value of the portfolio was comprised of
approximately 55% in equity investments, 36% in fixed-rate debt
investments and 9% in dividend paying, publicly traded BDCs. The
annualized weighted average yield of debt investments was
11.9%.
- At June 30, 2021, portfolio fair value increased $7.5 million,
or 14%, to $59.8 million compared with March 31, 2021, due
primarily to valuation adjustments and new investments offset by
sales and payoffs.
- There was one exit in the quarter and a partial repayment of
$15,000:
- The Company sold its investment in GiveGab Inc. and recognized
a gain of $1.8 million.
- Rand made $4.6 million in new and follow-on investments in the
quarter:
- Funded $3.9 million to ITA Acquisition, LLC with both loan and
equity components. ITA manufactures a broad variety of window
covering components and finished window treatments including wood,
faux wood and fabric shades, shutters and blinds for residential
and commercial applications.
- Follow-on debt financing of $667,000 was provided to Mattison
Avenue Holdings, LLC, a high-end salon suite business that provides
customized, fully furnished salon and spa studio space for lease in
prime locations for individual stylists, barbers, massage
therapists, nail technicians and estheticians.
Liquidity and Capital Resources
Cash and cash equivalents at the end of the quarter was $12.9
million and represented 22.3% of net assets. Outstanding SBA
leverage was $11 million at the end of the quarter and there was $3
million remaining available to draw on the SBIC debenture program.
The earliest debenture maturity is in September 2022 when $3
million in borrowings are due.
Dividend Distributions
On July 29, 2021, the Board declared a regular quarterly cash
dividend distribution of $0.10 per share to be paid on or about
September 16, 2021, to shareholders of record as of September 2,
2021.
Webcast and Conference Call
Rand will host a conference call and live webcast today, August
9, 2021, at 1:30 p.m. Eastern Time to review its financial
condition and results as well as its strategy and outlook. The
review will be accompanied by a slide presentation, which will be
available on Rand’s website at www.randcapital.com under the
“Investor Relations” heading. A question-and-answer session will
follow the formal presentation.
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”.
A telephonic replay will be available from 4:30 p.m. ET on the
day of the call through Monday, August 16, 2021. To listen to the
archived call, dial (412) 317-6671 and enter replay pin number
13721240. The webcast replay will be available in the Investors
section at www.randcapital.com, where a transcript will also be
posted once available.
ABOUT RAND CAPITAL
Rand Capital (Nasdaq: RAND) is an externally managed Business
Development Company (BDC) with a wholly owned subsidiary licensed
by the U.S. Small Business Administration (SBA) as a Small Business
Investment Company (SBIC). 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 effectiveness of, and
execution on, Rand’s investment strategy, the success of increasing
interest income with new investments, the capital return potential
of Rand’s equity investments, the strength of the pipeline of
potential investments, the competitive ability and position of
Rand, 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) the risk that Rand and/or
Rand SBIC may be unable to fulfill the conditions required in order
to elect to be treated as a regulated investment company (RIC) for
U.S. tax purposes; (2) evolving legal, regulatory and tax regimes;
(3) changes in general economic and/or industry specific
conditions; and (4) 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, 2020, quarterly reports on Form 10-Q,
the definitive proxy statement 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, 2021
(Unaudited)
December 31, 2020
ASSETS
Investments at fair value:
Control investments (cost of
$1,753,590 and $0, respectively)
$
602,569
$
-
Affiliate investments (cost of
$21,817,833 and $14,835,885, respectively)
20,873,147
13,891,199
Non-Control/Non-Affiliate
investments (cost of $23,525,430 and $25,884,428, respectively)
38,331,679
26,157,302
Total investments, at fair value
(cost of $47,096,853 and $40,720,313, respectively)
59,807,395
40,048,501
Cash and cash equivalents
12,944,885
20,365,415
Interest receivable (net of
allowance of $15,000)
287,702
258,186
Prepaid income taxes
215,883
220,740
Other assets
182,563
74,100
Total assets
$
73,438,428
$
60,966,942
LIABILITIES AND
STOCKHOLDERS’ EQUITY (NET ASSETS)
Liabilities:
Debentures guaranteed by the SBA
(net of debt issuance costs)
$
10,843,425
$
10,824,587
Dividend payable
-
3,434,117
Accounts payable and accrued
expenses
161,093
171,373
Due to investment adviser
212,907
156,999
Capital gains incentive fees
3,660,000
-
Deferred revenue
332,126
153,895
Deferred taxes
109,056
121,141
Total liabilities
15,318,607
14,862,112
Stockholders’ equity (net
assets):
Common stock, $0.10 par; shares
authorized 100,000,000; shares issued: 2,648,916; shares
outstanding: 2,582,169
264,892
264,892
Capital in excess of par
value
52,003,545
52,003,545
Treasury stock, at cost: 66,747
shares at 6/30/21 and 12/31/20
(1,545,834
)
(1,545,834
)
Total distributable earnings
7,397,218
(4,617,773
)
Total stockholders’ equity (net
assets) (per share – 6/30/21: $22.51, 12/31/20: $17.86)
58,119,821
46,104,830
Total liabilities and stockholders’
equity (net assets)
$
73,438,428
$
60,966,942
Rand Capital Corporation and
Subsidiaries
Consolidated Statements of
Operations
(Unaudited)
Three months ended June 30,
2021
Three months ended June 30,
2020
Six months ended June 30,
2021
Six months ended June 30,
2020
Investment income:
Interest from portfolio
companies:
Control investment
$
2,867
$
-
$
2,867
$
-
Affiliate investments
295,085
170,262
614,501
309,108
Non-Control/Non-Affiliate
investments
344,254
400,424
735,600
797,279
Total interest from portfolio
companies
642,206
570,686
1,352,968
1,106,387
Interest from other
investments:
Non-Control/Non-Affiliate
investments
243
2,754
12,870
86,004
Total interest from other
investments
243
2,754
12,870
86,004
Dividend and other investment
income:
Affiliate investments
13,125
13,125
108,051
26,250
Non-Control/Non-Affiliate
investments
123,922
81,313
275,665
81,313
Total dividend and other
investment income
137,047
94,438
383,716
107,563
Fee income:
Affiliate investments
24,562
4,167
63,918
5,417
Non-Control/Non-Affiliate
investments
6,979
2,500
13,957
5,000
Total fee income
31,541
6,667
77,875
10,417
Total investment
income
811,037
674,545
1,827,429
1,310,371
Expenses:
Base management fee (see Note
8)
212,907
141,386
388,516
281,763
Capital gains incentive fees (see
Note 8)
1,060,000
-
3,660,000
-
Interest on SBA obligations
104,190
104,190
208,380
208,380
Professional fees
123,991
77,917
284,124
257,036
Stockholders and office
operating
69,661
116,299
141,083
167,844
Directors' fees
38,900
28,375
75,400
56,750
Insurance
9,380
7,400
19,707
18,068
Corporate development
821
132
8,303
2,006
Other operating
108
107
108
465
Total expenses
1,619,958
475,806
4,785,621
992,312
Net investment (loss) income
before income taxes
(808,921
)
198,739
(2,958,192
)
318,059
Income tax expense (benefit)
1,966
-
19,723
(419,101
)
Net investment (loss)
income
(810,887
)
198,739
(2,977,915
)
737,160
Rand Capital Corporation and
Subsidiaries
Consolidated Statements of
Operations
(continued, unaudited)
Three months ended June 30,
2021
Three months ended June 30,
2020
Six months ended June 30,
2021
Six months ended June 30,
2020
Net realized gain on sales and
dispositions of investments:
Control investments
-
-
-
-
Affiliate investments
-
-
135,430
-
Non-Control/Non-Affiliate investments
1,817,350
18,595
1,992,675
2,412,046
Income tax benefit
-
-
-
-
Net realized gain on sales and
dispositions of investments
1,817,350
18,595
2,128,105
2,412,046
Net change in unrealized appreciation/
depreciation on investments:
Affiliate investments
-
(5,613
)
-
(515,804
)
Non-Control/Non-Affiliate
investments
3,495,322
211,850
13,382,354
(6,282
)
Change in unrealized
appreciation/ depreciation before income taxes
3,495,322
206,237
13,382,354
(522,086
)
Deferred income tax expense
951
-
951
1,773,412
Net change in unrealized
appreciation/ depreciation on investments
3,494,371
206,237
13,381,403
(2,295,498
)
Net realized and unrealized
gain on investments
5,311,721
224,832
15,509,508
116,548
Net increase in net assets
from operations
$
4,500,834
$
423,571
$
12,531,593
$
853,708
Weighted average shares
outstanding
2,582,169
2,103,093
2,582,169
1,950,058
Basic and diluted net increase in net
assets from operations per share
$
1.74
$
0.20
$
4.85
$
0.44
Rand Capital Corporation and
Subsidiaries
Consolidated Statements of
Changes in Net Assets
(unaudited)
Three months ended June 30,
2021
Three months ended June 30,
2020
Six months ended June 30,
2021
Six months ended June 30,
2020
Net assets at beginning of period
$
53,877,204
$
54,058,653
$
46,104,830
$
53,628,516
Net investment (loss) income
(810,887
)
198,739
(2,977,915
)
737,160
Net realized gain on sales and
dispositions of investments
1,817,350
18,595
2,128,105
2,412,046
Net change in unrealized appreciation/
depreciation on investments
3,494,371
206,237
13,381,403
(2,295,498
)
Net increase in net assets from
operations
4,500,834
423,571
12,531,593
853,708
Purchase of treasury shares
-
(14,304
)
-
(14,304
)
Declaration of dividend
(258,217
)
(4,756,606
)
(516,602
)
(4,756,606
)
Net assets at end of period
$
58,119,821
$
49,711,314
$
58,119,821
$
49,711,314
Rand Capital Corporation and Subsidiaries
Reconciliation of Operating Expenses to GAAP Total Expense
(unaudited)
In addition to reporting Total Expenses, which is a U.S.
generally accepted accounting principle (“GAAP”) financial measure,
Rand presents Operating Expenses, which is a non-GAAP financial
measure. Operating expenses are defined as GAAP Total expenses less
any expenses for capital gains incentive fees attributable to net
change in unrealized appreciation (depreciation) on investments.
GAAP Total expenses is the most directly comparable GAAP financial
measure. Rand believes that Operating 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,
2021
Three months ended June 30,
2020
Total expenses
$
1,619,958
$
475,806
Exclude capital gains incentive fees
1,060,000
-
Operating expenses
$
559,958
$
475,806
Reconciliation of Adjusted Net Investment
Income per Share to GAAP Net Investment (Loss) Income per Share
(unaudited)
In addition to reporting Net Investment (Loss) Income per Share,
which is a U.S. generally accepted accounting principle (“GAAP”)
financial measure, Rand 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
(Loss) Income per Share less any capital gains incentive fees
attributable to net change in unrealized appreciation
(depreciation) on investments. GAAP Net Investment (Loss) 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,
2021
Three months ended June 30,
2020
Net Investment (Loss) Income per Share
$
(0.31
)
$
0.08
Capital gains incentive fees per share
0.41
-
Adjusted Net Investment Income per
Share
$
0.10
$
0.08
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210809005064/en/
Company: Allen F. ("Pete") Grum President and CEO Phone:
716.853.0802 Email: pgrum@randcapital.com
Investors: Deborah K. Pawlowski Kei Advisors LLC Phone:
716.843.3908 Email: dpawlowski@keiadvisors.com
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