- Strategy focused on expanding portfolio composition with new
debt investments drives total investment income growth of 12% to
$2.1 million for the first quarter of 2024
- Investment portfolio comprised of 70% interest yielding debt
instruments at quarter-end compared with 64% at the end of 2023,
improving portfolio yield and net interest income
- Net asset value per share (“NAV”) was $23.85 at March 31,
2024, up 1% from year-end 2023
- Sold remaining ACV Auctions stock, netting a realized gain
of $3.5 million
- Invested $10.8 million in new and follow on investments
during the first quarter
- Increased regular quarterly dividend 16% to $0.29 per share
for second quarter 2024
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 first quarter ended March 31, 2024.
Daniel P. Penberthy, President and Chief Executive Officer of
Rand, commented, “Our continued deployment of capital, primarily
directed towards debt investments, has proven to be a successful
strategy that yielded strong results in the first quarter of 2024.
The first quarter was a busy period in our portfolio, marked by new
and follow-on investments and portfolio repayments, underscoring
the strength and agility of our investment approach. Furthermore,
we capitalized on market opportunities by realizing $3.5 million on
the sale of our ACV Auctions stock. This exit, coupled with the
utilization of our credit facility, enabled us to deploy over $10
million during the quarter, further strengthening our interest
yielding portfolio.
“Looking ahead, we remain committed to our strategy and are
focused on driving investment income growth, which is a vital
catalyst in supporting our ability to generate sustainable
dividends for our shareholders in the future.”
First Quarter Highlights (compared with the prior-year
period unless otherwise noted)
- Total investment income grew $216,000, or 12%, to $2.1 million,
which reflected a 40% increase in interest from portfolio
companies, partially offset by lower dividend income.
- Total expenses were $1.2 million compared with $1.0 million in
last year’s first quarter. The change reflects a $232,000 increase
in interest expense on borrowings under the senior revolving credit
facility, partially offset by a decrease in capital gains incentive
fees to the Company’s external investment adviser. The first
quarter of 2024 included an expense of $112,000 in capital gains
incentive fees compared with $291,000 for the first quarter of
2023.
- Adjusted expenses, which exclude capital gains incentive fees
and is a non-GAAP financial measure, were $1.1 million compared
with $757,000 in the first quarter of 2023. See the attached
description of this non-GAAP financial measure and reconciliation
table for adjusted expenses.
- Net investment income grew 17% to $840,000, or $0.33 per share,
from $715,000, or $0.28 per share, in the first quarter of 2023.
Adjusted net investment income per share, a non-GAAP financial
measure, which excludes the capital gains incentive fee accrual
expense, was $0.37 per share compared with $0.39 in last year’s
first quarter. See the attached description of this non-GAAP
financial measure and reconciliation table for adjusted net
investment income per share.
Portfolio and Investment Activity
As of March 31, 2024, Rand’s portfolio included investments with
a fair value of $82.8 million across 30 portfolio businesses. This
was an increase of $5.6 million, or 7%, from December 31, 2023, and
reflected new and follow on investments and valuation adjustments
in multiple portfolio companies, partially offset by the ACV
Auctions stock sale and other portfolio company loan repayments. At
March 31, 2024, Rand’s portfolio was comprised of approximately 70%
in debt investments, 25% in equity investments in private
companies, and 5% in publicly traded equities consisting of other
BDCs. The annualized weighted average yield of debt investments,
which includes PIK interest, was 13.7% at March 31, 2024, compared
with 13.6% at the end of 2023.
First quarter 2024:
- Funded a new investment of $3.2 million in Mountain Regional
Equipment Solutions (MRES), which consisted of a $3.0 million term
loan at 14% and a $205,000 equity investment. MRES supplies
automated lubrication systems, active and passive safety systems
and maintenance products for mobile heavy equipment, on-highway and
vocational transport equipment, stationary and mobile industrial
equipment, and cranes.
- Mattison Avenue Holdings repaid its existing $1.9 million loan
during the quarter. Subsequently, Rand funded a new debt investment
of $5.5 million in Mattison Avenue Holdings, which will carry a
rate of 14%, including PIK interest.
- Funded a follow-on debt investment of $1.8 million in Seybert’s
Billiards Corporation. Rand’s total debt and equity investment in
Seybert’s had a fair value of $7.8 million at quarter-end.
- Sold remaining 194,934 shares of ACV Auctions at an average
price of $18.02 per share, realizing $3.5 million. The ACV shares
had been previously valued at $2.95 million on December 31,
2023.
- Received $687,000 principal loan repayment from Pressure Pro,
Inc. At quarter-end, Rand’s total debt and equity investment in
Pressure Pro had a fair value of $2.4 million.
Liquidity and Capital Resources
Cash was $759,000 at March 31, 2024. The Company also held
shares valued at approximately $4.5 million in other publicly
traded BDCs, which are available for future liquidity needs
including dividends and portfolio investments.
At March 31, 2024, Rand had outstanding borrowings of $19.2
million on its existing $25.0 million senior secured revolving
credit facility. The outstanding borrowings carried an interest
rate of 8.8% at quarter-end.
The Company did not repurchase any outstanding common stock
during the first quarter of 2024. Rand’s Board of Directors renewed
the share repurchase program authorizing the purchase of up to $1.5
million in additional Rand common stock. The shares may be
repurchased from time to time in the open market and in accordance
with applicable regulations of the Securities and Exchange
Commission. The stock repurchase program does not obligate the
Company to purchase any shares, and the timing and exact amount of
any repurchases will depend on various factors, including the
performance of the Company’s stock price, general market and other
conditions, applicable legal requirements and other factors. The
renewed stock repurchase program expires on May 7, 2025, and may be
suspended, terminated or amended by the Board at any time prior to
the expiration date.
Dividends
On February 26, 2024, Rand declared its regular quarterly cash
dividend distribution of $0.25 per share, which was paid during the
first quarter to shareholders of record as of March 13, 2024.
On May 8, 2024, Rand declared its regular quarterly cash
dividend distribution of $0.29 per share, which was increased by
$0.04 per share or 16%. The cash dividend will be distributed on or
about June 14, 2024, to shareholders of record as of May 31,
2024.
Webcast and Conference Call
Rand will host a conference call and webcast on Monday, May 13,
2024, at 1:30 p.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 5:00 p.m. ET on the
day of the call through Monday, May 27, 2024. To listen to the
archived call, dial (412) 317-6671 and enter replay pin number
13745657. 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 businesses that have sustainable,
differentiated and market-proven products, revenue of more than $10
million and EBITDA in excess of $1.5 million. 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 and the growth of its 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, 2023,
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
March 31, 2024
(Unaudited)
December 31, 2023
ASSETS
Investments at fair value:
Control investments (cost of $5,661,245
and $5,272,770, respectively)
$
4,537,435
$
4,148,960
Affiliate investments (cost of $46,960,202
and $45,720,974, respectively)
54,638,600
53,499,372
Non-Control/Non-Affiliate investments
(cost of $24,282,868 and $17,371,862, respectively)
23,598,090
19,477,380
Total investments, at fair value (cost of
$76,904,315 and $68,365,606, respectively)
82,774,125
77,125,712
Cash
759,183
3,295,321
Interest receivable
347,755
244,600
Prepaid income taxes
154,404
127,869
Deferred tax asset, net
65,815
39,179
Other assets
253,848
189,301
Total assets
$
84,355,130
$
81,021,982
LIABILITIES AND
STOCKHOLDERS’ EQUITY (NET ASSETS)
Liabilities:
Due to investment adviser
$
302,480
$
979,297
Accounts payable and accrued expenses
272,086
145,516
Line of credit
19,200,000
16,250,000
Capital gains incentive fees
2,392,000
2,279,700
Deferred revenue
619,225
552,256
Total liabilities
22,785,791
20,206,769
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 3/31/24 and 12/31/23
264,892
264,892
Capital in excess of par value
55,801,170
55,801,170
Treasury stock, at cost: 67,895 shares at
3/31/24 and 12/31/23
(1,566,605
)
(1,566,605
)
Total distributable earnings
7,069,882
6,315,756
Total stockholders’ equity (net assets)
(per share – 3/31/24: $23.85; 12/31/23: $23.56)
61,569,339
60,815,213
Total liabilities and stockholders’
equity (net assets)
$
84,355,130
$
81,021,982
Rand Capital Corporation and
Subsidiaries
Consolidated Statements of
Operations
(Unaudited)
Three months ended March 31,
2024
Three months ended March 31,
2023
Investment income:
Interest from portfolio companies:
Control investments
$
187,483
$
150,916
Affiliate investments
1,166,085
787,821
Non-Control/Non-Affiliate investments
460,080
358,166
Total interest from portfolio
companies
1,813,648
1,296,903
Interest from other investments:
Non-Control/Non-Affiliate investments
1,914
132
Total interest from other investments
1,914
132
Dividend and other investment income:
Affiliate investments
13,125
347,148
Non-Control/Non-Affiliate investments
138,710
127,595
Total dividend and other investment
income
151,835
474,743
Fee income:
Control investments
4,516
3,900
Affiliate investments
73,720
67,842
Non-Control/Non-Affiliate investments
21,586
7,978
Total fee income
99,822
79,720
Total investment income
2,067,219
1,851,498
Expenses:
Base management fee
302,595
245,393
Capital gains incentive fees
112,300
291,000
Interest expense
390,020
158,400
Professional fees
232,307
170,975
Stockholders and office operating
69,028
64,304
Directors' fees
63,850
63,850
Administrative fees
38,167
37,250
Insurance
13,044
12,960
Corporate development
5,545
3,713
Total expenses
1,226,856
1,047,845
Net investment income before income
taxes:
840,363
803,653
Income taxes, including excise tax
expense
778
88,737
Net investment income
839,585
714,916
Net realized gain on sales and
dispositions of investments:
Affiliate investments
—
58,329
Non-Control/Non-Affiliate investments
3,450,092
(4,941
)
Net realized gain on sales and
dispositions of investments
3,450,092
53,388
Net change in unrealized
appreciation/depreciation on investments:
Affiliate investments
(100,000
)
—
Non-Control/Non-Affiliate investments
(2,790,296
)
1,401,973
Net change in unrealized
appreciation/depreciation on investments
(2,890,296
)
1,401,973
Net realized and unrealized gain on
investments
559,796
1,455,361
Net increase in net assets from
operations
$
1,399,381
$
2,170,277
Weighted average shares
outstanding
2,581,021
2,581,021
Basic and diluted net increase in net
assets from operations per share
$
0.54
$
0.84
Rand Capital Corporation and
Subsidiaries
Consolidated Statements of
Changes in Net Assets
(Unaudited)
Three months ended March 31,
2024
Three months ended March 31,
2023
Net assets at beginning of
period
$
60,815,213
$
57,721,320
Net investment income
839,585
714,916
Net realized gain on sales and
dispositions of investments
3,450,092
53,388
Net change in unrealized
appreciation/depreciation on investments
(2,890,296
)
1,401,973
Net increase in net assets from
operations
1,399,381
2,170,277
Declaration of dividend
(645,255
)
(516,204
)
Net assets at end of period
$
61,569,339
$
59,375,393
Rand Capital Corporation and
Subsidiaries Reconciliation of GAAP Total Expense 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
removing the effect of any expenses for capital gains incentive
fees accrual. 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
March 31, 2024
Three months ended
March 31, 2023
Total expenses
$
1,226,856
$
1,047,845
Exclude expenses for capital gains
incentive fees
112,300
291,000
Adjusted total expenses
$
1,114,556
$
756,845
Reconciliation of GAAP Net Investment Income
per Share to Adjusted Net Investment Income per Share
(Unaudited)
In addition to reporting Net Investment Income per Share, which
is a 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 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
March 31, 2024
Three months ended
March 31, 2023
Net investment income per share
$
0.33
$
0.28
Exclude expenses for capital gains
incentive fees per share
0.04
0.11
Adjusted net investment income per
share
$
0.37
$
0.39
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240513223274/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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