- Continuing strategic shift to income producing portfolio
drives total investment income of $1.0 million in the quarter, up
37% over the prior-year period
- Net asset value per share (“NAV”) increased 4% to $23.31 per
share from $22.51 per share at June 30, 2021; NAV increased 31%
compared with $17.86 per share at December 31, 2020
- Total investments in the quarter were $3.8 million in a new
portfolio company
- Exits and loan repayments totaled $3.8 million in the
quarter
- 1,148 shares repurchased in the third quarter
- Subsequent to quarter-end, Rand paid off $11 million of SBA
obligations
Rand Capital Corporation (Nasdaq: RAND) (“Rand” or the
“Company”), a business development company (“BDC”), announced its
results for the quarter ended September 30, 2021.
Allen F. (“Pete”) Grum, President and Chief Executive Officer of
Rand, commented, “Our results continue to validate the success of
our strategy to transform Rand into an income producing business
development company that provides a dividend for its shareholders.
We continue to liquidate our equity positions and reinvest in
income producing vehicles.”
He added, “As we transform Rand, we are also transitioning our
leadership team. I have been honored over these last 25 years to
serve as CEO and am excited to support Dan Penberthy and Margaret
Brechtel as they take Rand to the next level.”
Third Quarter Highlights
- Total investment income in the quarter grew 37% to $1.0 million
due to increased interest income from portfolio companies,
increased dividend and other investment income, and higher fee
income.
- Total expenses were $962,000 compared with $456,000 in the
third quarter of 2020. The change was largely due to the accrual of
$454,000 of capital gains incentive fees during the quarter
compared with no similar accrual of fees in the prior-year period.
The capital gains incentive fee accrual reflects realized gains
from the sale of Rand’s investment in Centivo Corporation and the
increase in unrealized appreciation mostly related to Tilson
Technologies. Operating expenses in the quarter, a non-GAAP
financial measure which excludes the capital gains incentive fee
accrual, increased $52,000, or 11%, 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 income was $53,000, or $0.02 per share, compared
with $280,000, or $0.11 per share, in the prior-year period.
- Adjusted net investment income per share, a non-GAAP financial
measure, which excludes the capital gains incentive fee accrual,
was $0.20 for the third quarter of 2021, compared with $0.11 per
share in the prior-year period. See the attached description of
this non-GAAP financial measure and reconciliation table for
adjusted net investment income per share.
- Net assets at September 30, 2021 were $60.2 million, up 4% from
June 30, 2021. The increase largely reflects the realized gains
from the sale of Rand’s investment in Centivo Corporation and
increase in unrealized appreciation of Tilson Technologies, offset
by a reduction in value of ACV Auctions from the prior quarter. Net
assets were up 30% from December 31, 2020, mostly due to the
increase in the fair market values of Rand’s investment in Open
Exchange, Tilson Technologies and ACV Auctions.
Portfolio and Investment Activity
As of September 30, 2021, Rand’s portfolio consisted of 34
companies. At that date, the dollar value of the portfolio was
comprised of approximately 51% in equity investments, 40% 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 September 30, 2021, portfolio fair value increased $2.3
million, or 4%, to $62.1 million compared with June 30, 2021, due
primarily to a new investment partially offset by sales, debt
repayments and valuation changes.
- There was one exit in the quarter, as well as debt repayments
and one stock sale:
- Sold the investment in Centivo Corporation for $2.4 million,
which resulted in recognized gain of $1.6 million.
- Sold 50,000 shares of ACV Auctions at an average price of
$19.44 per share. Rand still held 540,580 shares at
quarter-end.
- Received $418,000 partial debt repayment from Mercantile
Adjustment Bureau.
- Advantage 24/7 made a final loan repayment of $40,000.
- Rand made one new investment in the quarter:
- Funded $3.8 million to DSD Operating, LLC, which consisted of a
$2.7 million loan and $1.1 million equity investment. DSD is
headquartered in Georgia and outfits fixed operations facilities
with shop equipment for auto dealers.
Liquidity and Capital Resources
Cash and cash equivalents at the end of the quarter was $13.3
million and represented 22.1% of net assets. On November 2, 2021,
Rand repaid its $11 million of outstanding SBA leverage using cash
on hand and submitted a request to surrender its SBIC license to
the SBA.
Daniel P. Penberthy, Executive Vice President and CFO, noted,
“We are using our excess liquidity to repay our SBA obligations and
believe we can measurably simplify our lending processes by
eliminating the requirements of an SBIC.”
During the quarter, the Company repurchased 1,148 shares of
outstanding common stock for $20,770 under a $1.5 million share
repurchase authorization. The average purchase price was $18.09 per
share.
Dividend Distributions
On July 29, 2021, the Board declared a regular quarterly cash
dividend distribution of $0.10 per share, which was paid during the
quarter, to shareholders of record as of September 2, 2021.
Webcast and Conference Call
Rand will host a conference call and live webcast today,
November 5, 2021, at 12:30 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 3:30 p.m. ET on the
day of the call through Friday, November 12, 2021. To listen to the
archived call, dial (412) 317-6671 and enter replay pin number
13723741. 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). 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, the effectiveness of changes in leadership; 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, 2020,
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
September
30, 2021 (Unaudited)
December 31, 2020
ASSETS
Investments at fair value:
Control investments (cost of $1,753,591
and $0, respectively)
$602,570
$ -
Affiliate investments (cost of $24,929,546
and $14,835,885, respectively)
28,084,871
13,891,199
Non-Control/Non-Affiliate investments
(cost of $23,042,003 and $25,884,428, respectively)
33,414,928
26,157,302
Total investments, at fair value (cost of
$49,725,140 and $40,720,313, respectively)
62,102,369
40,048,501
Cash and cash equivalents
13,299,834
20,365,415
Interest receivable (net of allowance of
$0 and $15,000, respectively)
111,213
258,186
Prepaid income taxes
200,281
220,740
Other assets
167,961
74,100
Total assets
$75,881,658
$60,966,942
LIABILITIES AND
STOCKHOLDERS’ EQUITY (NET ASSETS)
Liabilities:
Debentures guaranteed by the SBA (net of
debt issuance costs)
$10,852,844
$10,824,587
Dividend payable
-
3,434,117
Accounts payable and accrued expenses
82,309
171,373
Due to investment adviser
233,438
156,999
Capital gains incentive fees
4,114,000
-
Deferred revenue
384,196
153,895
Deferred taxes
52,746
121,141
Total liabilities
15,719,533
14,862,112
Stockholders’ equity (net
assets):
Common stock, $0.10 par; shares authorized
100,000,000; shares issued: 2,648,916; shares outstanding:
2,581,021
264,892
264,892
Capital in excess of par value
52,003,545
52,003,545
Treasury stock, at cost: 67,895 shares and
66,747 shares, respectively
(1,566,605)
(1,545,834)
Total distributable earnings
9,460,293
(4,617,773)
Total stockholders’ equity (net assets) (per share – $23.31 and
$17.86, respectively)
60,162,125
46,104,830
Total liabilities and stockholders’
equity (net assets)
$75,881,658
$60,966,942
Rand Capital Corporation and
Subsidiaries Consolidated Statements of Operations
(Unaudited)
Three months ended September
30,
2021
Three months ended September
30, 2020
Nine months ended September
30, 2021
Nine months ended September
30, 2020
Investment income:
Interest from portfolio companies:
Control investment
$8,898
$ -
$11,765
$ -
Affiliate investments
409,467
178,714
1,023,968
487,822
Non-Control/Non-Affiliate investments
339,416
456,160
1,075,016
1,253,439
Total interest from portfolio
companies
757,781
634,874
2,110,749
1,741,261
Interest from other investments:
Non-Control/Non-Affiliate investments
473
1,157
13,343
87,161
Total interest from other investments
473
1,157
13,343
87,161
Dividend and other investment income:
Affiliate investments
100,896
13,125
208,947
39,375
Non-Control/Non-Affiliate investments
129,013
80,212
404,678
161,525
Total dividend and other investment
income
229,909
93,337
613,625
200,900
Fee income:
Affiliate investments
13,867
5,000
77,785
10,417
Non-Control/Non-Affiliate investments
10,313
2,500
24,270
7,500
Total fee income
24,180
7,500
102,055
17,917
Total investment income
1,012,343
736,868
2,839,772
2,047,239
Expenses:
Base management fee
230,724
152,438
619,240
434,201
Capital gains incentive fees
454,000
-
4,114,000
-
Interest on SBA obligations
104,190
104,190
312,570
312,570
Professional fees
94,258
126,759
378,382
383,795
Stockholders and office operating
43,420
50,022
184,503
217,866
Directors' fees
39,050
28,375
114,450
85,125
Insurance
9,230
8,033
28,937
26,101
Corporate development
2,027
10,474
10,330
12,480
Bad debt recovery
(15,000)
(24,000)
(15,000)
(24,000)
Other operating
-
107
108
572
Total expenses
961,899
456,398
5,747,520
1,448,710
Net investment income (loss) before
income taxes
50,444
280,470
(2,907,748)
598,529
Income tax (benefit) expense
(2,708)
-
17,015
(419,101)
Net investment income (loss)
53,152
280,470
(2,924,763)
1,017,630
Rand Capital Corporation and
Subsidiaries Consolidated Statements of Operations (continued,
unaudited)
Three months ended September
30, 2021
Three months ended September
30, 2020
Nine months ended September
30, 2021
Nine months ended September
30, 2020
Net realized gain on sales and
dispositions of investments:
Affiliate investments
-
-
135,430
56,916
Non-Control/Non-Affiliate investments
2,601,361
-
4,594,036
2,355,130
Net realized gain on sales and
dispositions of investments
2,601,361
-
4,729,466
2,412,046
Net change in unrealized appreciation/
depreciation on investments:
Affiliate investments
3,647,299
-
3,647,299
(515,804)
Non-Control/Non-Affiliate investments
(3,980,612)
(17,947)
9,401,742
(24,229)
Change in unrealized appreciation/
depreciation before income taxes
(333,313)
(17,947)
13,049,041
(540,033)
Deferred income tax expense
-
-
951
1,773,412
Net change in unrealized appreciation/
depreciation on investments
(333,313)
(17,947)
13,048,090
(2,313,445)
Net realized and unrealized gains
(losses) on investments
2,268,048
(17,947)
17,777,556
98,601
Net increase in net assets from
operations
$2,321,200
$262,523
$14,852,793
$1,116,231
Weighted average shares
outstanding
2,581,679
2,587,155
2,581,942
2,162,308
Basic and diluted net increase in net
assets from operations per share
$0.90
$0.10
$5.75
$0.52
Rand Capital Corporation and
Subsidiaries Consolidated Statements of Changes in Net Assets
(unaudited)
Three months ended September
30, 2021
Three months ended September
30, 2020
Nine months ended September
30, 2021
Nine months ended September
30, 2020
Net assets at beginning of period
$58,119,821
$49,711,314
$46,104,830
$53,628,516
Net investment income (loss)
53,152
280,470
(2,924,763)
1,017,630
Net realized gain on sales and
dispositions of investments
2,601,361
-
4,729,466
2,412,046
Net change in unrealized appreciation/
depreciation on investments
(333,313)
(17,947)
13,048,090
(2,313,445)
Net increase in net assets from
operations
2,321,200
262,523
14,852,793
1,116,231
Purchase of treasury shares
(20,771)
(23,684)
(20,771)
(37,988)
Declaration of dividend
(258,125)
-
(774,727)
(4,756,606)
Net assets at end of period
$60,162,125
$49,950,153
$60,162,125
$49,950,153
Rand Capital Corporation and Subsidiaries
Reconciliation of Non-GAAP 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. 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 September
30, 2021
Three months ended September
30, 2020
Total expenses
$
961,899
$
456,398
Exclude capital gains incentive fees
454,000
-
Operating expenses
$
507,899
$
456,398
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 plus any capital gains incentive fees. 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 September
30, 2021
Three months ended September
30, 2020
Net Investment Income per Share
$
0.02
$
0.11
Capital gains incentive fees per share
0.18
-
Adjusted Net Investment Income per
Share
$
0.20
$
0.11
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211105005223/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
Rand Capital (NASDAQ:RAND)
Historical Stock Chart
From Mar 2024 to Apr 2024
Rand Capital (NASDAQ:RAND)
Historical Stock Chart
From Apr 2023 to Apr 2024