• 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

 

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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