- Total investment income grew 59.9% to $1.0 million compared
with the prior-year period
- Net asset value per share increased 16.9% to $20.87 per
share from $17.86 per share at December 31, 2020
- Total investments made in quarter were $6.7 million, of
which $4.6 million was for new portfolio companies
- Received $4.5 million in exits and loan repayments during
the quarter
- Paid first quarterly dividend of $0.10 per share on March
29, 2021; Announced second quarter dividend of $0.10 per share on
April 29, 2021
- Board of Directors renews $1.5 million share repurchase
program
Rand Capital Corporation (Nasdaq: RAND) (“Rand” or the
“Company”), a business development company (“BDC”), announced its
results for the quarter ended March 31, 2021.
Allen F. (“Pete”) Grum, President and Chief Executive Officer of
Rand, commented, “We had a very active quarter with our portfolio,
making $6.7 million in investments and receiving $4.5 million in
exits and loan repayments. We are executing well on our strategy to
build a portfolio that contributes to growth in net investment
income. Interest from portfolio companies was approximately 33%
higher in the quarter compared with last year’s first quarter and
the number of companies contributing to investment income nearly
doubled. Net asset value also grew nearly 17% in the quarter. This
growth was driven largely by the increase in fair value of our
largest position, ACV Auctions Inc. (Nasdaq: ACVA) (“ACV”),
resulting from ACV’s initial public offering (“IPO”). During the
quarter, we recorded $2.6 million in non-cash expenses related to
capital gains incentive fees, primarily attributed to ACV’s
unrealized appreciation. This reflects fees that would be payable
if our entire investment portfolio was liquidated at its current
value. Absent this expense, adjusted net investment income was
$0.16 per share, demonstrating the success of our transformation
into an income producing, dividend paying BDC.”
He concluded, “We believe we have a strong income producing
portfolio enhanced with equity investments that can provide
potential capital gains. We also have excellent liquidity to
continue to build our portfolio with almost $18 million available
in cash and our outstanding SBA leverage commitment. We expect to
use our liquidity to continue to transform our portfolio from
equity investments to income producing investments.”
First Quarter Highlights
- Total investment income in the quarter grew 59.9% as a result
of increased interest income from portfolio companies and increased
dividend and other investment income.
- Total expenses in the quarter were $3.2 million up $2.6
million, which reflected the addition of accrued capital gains
incentive fees during the quarter, primarily attributed to ACV’s
unrealized appreciation. A capital gains incentive fee accrual
under GAAP is calculated using the cumulative aggregate realized
capital gains and losses and the aggregate net change in unrealized
capital appreciation/depreciation at the close of the period.
- Net investment loss was $2.2 million, or 0.84 per share,
compared with income of $538,000, or $0.33 per share, in the
prior-year period. Last year’s first quarter included a $419,000
income tax benefit due to Rand’s conversion to a regulated
investment company and a tax benefit received in the Coronavirus
Aid, Relief, and Economic Security (CARES) Act.
- Excluding the accrued capital gains incentive fees, adjusted
net investment income per share was $0.16 for the first 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 March 31, 2021 were $53.9 million, a 16.9%
increase compared with $46.1 million at December 31, 2020, mostly
due to the increase in unrealized appreciation on Rand’s investment
in ACV resulting from ACV’s completed IPO in March 2021.
Portfolio and Investment Activity
As of March 31, 2021, Rand’s portfolio consisted of 35
companies. At that date, the dollar value of the portfolio was
comprised of approximately 56% in equity investments, 34% in
fixed-rate debt investments and 10% in dividend paying, publicly
traded BDCs. The annualized weighted average yield of debt
investments was 10.9%.
- At March 31, 2021, portfolio fair value increased $12.3
million, or 31%, to $52.3 million compared with December 31, 2020,
due primarily to valuation adjustments and new investments offset
by sales and payoffs.
- Rand made $6.7 million in new and follow-on investment in the
quarter, including two new portfolio companies with both loan and
equity components.
Liquidity and Capital Resources
Cash and cash equivalents at the end of the quarter was $14.9
million and represented 28% 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 SBA loan program. The earliest
debenture maturity is in 2022 when $3 million in borrowings are
due.
Board Renews Share Repurchase Authorization
Rand’s Board of Directors renewed the share repurchase program
authorizing the purchase of up to $1.5 million in Rand common
stock. The shares may be repurchased from time to time in the open
market and in accordance with applicable regulations of the SEC.
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 April 22, 2022 and may
be suspended, terminated or amended by the Board at any time prior
to the expiration date.
Webcast and Conference Call
Rand will host a conference call and live webcast today, May 10,
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, May 17, 2021. To listen to the
archived call, dial (412) 317-6671 and enter replay pin number
13718353. 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 Rand’s
investment strategy, the success of increasing interest income with
new investments, the capital return potential of Rand’s equity
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
March 31, 2021
(Unaudited)
December 31, 2020
ASSETS
Investments at fair value:
Affiliate investments (cost of $17,883,764
and $14,835,885 respectively)
$16,939,078
$13,891,199
Non- Control/Non-Affiliate investments
(cost of $25,209,001 and $25,884,428, respectively)
35,368,907
26,157,302
Total investments, at fair value (cost of
$43,092,765 and $40,720,313, respectively)
52,307,985
40,048,501
Cash and cash equivalents
14,912,362
20,365,415
Interest receivable (net of allowance of
$15,000)
314,036
258,186
Prepaid income taxes
225,101
220,740
Other assets
209,672
74,100
Total assets
$67,969,156
$60,966,942
LIABILITIES AND
STOCKHOLDERS’ EQUITY (NET ASSETS)
Liabilities:
Debentures guaranteed by the SBA (net of
debt issuance costs)
$10,834,007
$10,824,587
Dividend payable
-
3,434,117
Accounts payable and accrued expenses
99,476
171,373
Due to investment adviser
175,609
156,999
Capital gains incentive fees payable
2,600,000
-
Deferred revenue
258,227
153,895
Deferred tax payable
124,633
121,141
Total liabilities
14,091,952
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
3/31/21 and 12/31/20
(1,545,834)
(1,545,834)
Total distributable earnings
3,154,601
(4,617,773)
Total stockholders’ equity (net assets)
(per share – 3/31/21: $20.87, 12/31/20: $17.86)
53,877,204
46,104,830
Total liabilities and stockholders’
equity (net assets)
$67,969,156
$60,966,942
Rand Capital Corporation and Subsidiaries
Consolidated Statements of Operations (Unaudited)
Three months ended
March 31, 2021
Three months ended
March 31, 2020
Investment income:
Interest from portfolio companies:
Affiliate investments
$319,416
$138,846
Non-Control/Non-Affiliate investments
391,346
396,855
Total interest from portfolio
companies
710,762
535,701
Interest from other investments:
Non-Control/Non-Affiliate investments
12,627
83,250
Total interest from other investments
12,627
83,250
Dividend and other investment income:
Affiliate investments
94,926
13,125
Non-Control/Non-Affiliate investments
151,743
-
Total dividend and other investment
income
246,669
13,125
Fee income:
Affiliate investments
39,356
1,250
Non-Control/Non-Affiliate investments
6,978
2,500
Total fee income
46,334
3,750
Total investment income
1,016,392
635,826
Expenses:
Base management fee
175,609
140,377
Capital gains incentive fees
2,600,000
-
Interest on SBA obligations
104,190
104,190
Professional fees
160,133
179,119
Stockholders and office operating
71,422
51,545
Directors' fees
36,500
28,375
Insurance
10,327
10,668
Corporate development
7,482
1,874
Other operating
-
358
Total expenses
3,165,663
516,506
Net investment (loss) income before
income taxes
(2,149,271)
119,320
Income tax expense (benefit)
17,757
(419,101)
Net investment (loss) income
(2,167,028)
538,421
Rand Capital Corporation and Subsidiaries
Consolidated Statements of Operations (continued,
unaudited)
Three months ended
March 31, 2021
Three months ended
March 31, 2020
Net realized gain on sales and
dispositions of investments:
Affiliate investments
135,430
-
Non-Control/Non-Affiliate investments
175,325
2,393,451
Net realized gain on sales and
dispositions of investments
310,755
2,393,451
Net change in unrealized depreciation
on investments:
Affiliate investments
-
(510,191)
Non-Control/Non-Affiliate
investments
9,887,032
(218,132)
Change in unrealized depreciation
before income taxes
9,887,032
(728,323)
Deferred income tax expense
-
1,773,412
Net change in unrealized appreciation
(depreciation) on investments
9,887,032
(2,501,735)
Net realized and unrealized gain (loss)
on investments
10,197,787
(108,284)
Net increase in net assets from
operations
$8,030,759
$430,137
Weighted average shares
outstanding
2,582,169
1,628,369
Basic and diluted net increase in net
assets from operations per share
$3.11
$0.26
Rand Capital Corporation and Subsidiaries
Consolidated Statements of Changes in Net Assets
(unaudited)
Three months ended
March 31, 2021
Three months ended
March 31, 2020
Net assets at beginning of period
$46,104,830
$53,628,516
Net investment (loss) income
(2,167,028)
538,421
Net realized gain on sales and
dispositions of investments
310,755
2,393,451
Net change in unrealized appreciation
(depreciation) on investments
9,887,032
(2,501,735)
Net increase in net assets from
operations
8,030,759
430,137
Declaration of dividends
(258,385)
-
Net assets at end of period
$53,877,204
$54,058,653
Rand Capital Corporation and Subsidiaries
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”)
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 one method
Rand uses to measure its financial condition and 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, 2021
Three months ended
March 31, 2020
Net Investment (Loss) Income per Share
$ (0.84)
$ 0.33
Capital gains incentive fees attributable
to net change in unrealized appreciation (depreciation) on
investments per share
1.00
-
Adjusted Net Investment Income per
Share
$ 0.16
$ 0.33
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210510005260/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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