- Total investment income grew 15.7%
- Excellent liquidity available to drive portfolio growth,
repurchase shares and weather economic cycle
- Deployed $2.3 million into 3 portfolio companies during the
quarter
- Repurchased 1,300 shares in June 2020
- Net asset value at June 30, 2020 was $19.21 per
share
Rand Capital Corporation (Nasdaq: RAND) (“Rand”), a business
development company (“BDC”), announced its results for the quarter
ended June 30, 2020. All per share values for prior periods are
adjusted for the 1 for 9 reverse stock split that was effective May
21, 2020.
Allen F. (“Pete”) Grum, President and Chief Executive Officer of
Rand, commented, “Our second quarter results demonstrate the
effectiveness of our strategy to transform Rand. To accomplish
this, we externalized our management, distributed a $23.7 million
dividend and have redirected our investment priorities to yielding
instruments. With $22 million of cash available to invest, of which
the majority will be for lending to lower middle market companies,
we believe we have the resources to continue to grow net investment
income. Our objective is to elect regulated investment company tax
status for 2020, which will require us to distribute 90% of our
qualified net investment income in the form of a dividend. During
the third quarter, we will evaluate the appropriate level of a
dividend and the timing of a regular distribution to our
shareholders.”
Second Quarter 2020 Highlights
- Net asset value (“NAV”) at June 30, 2020 was $49.7 million,
down $4.4 million compared with $54.1 million at March 31, 2020.
The decline in NAV was primarily the result of the $4.75 million
cash dividend issued on May 11, 2020, which was somewhat offset by
the $0.4 million increase in net assets from operations.
- On a per share basis, NAV declined to $19.21 per share compared
with $33.20 at March 31, 2020. The per share decline was primarily
the result of the approximately 960,000 additional shares
distributed as part of the dividend.
- At June 30, 2020, portfolio fair value increased $2.6 million,
or 7%, to $38.6 million from $36.0 million on March 31, 2020
- Net investment income grew to $0.08 per share in the second
quarter compared with a loss of $0.20 per share in the prior-year
period.
Second Quarter 2020 Operating Results
Total investment income of $675,000 for the second quarter of
2020 increased 16%, or $91,000, over the prior-year period. The
increase was primarily attributable to an 81%, or $255,000,
increase in total interest from portfolio companies reflecting the
changed portfolio profile to include more debt investments.
Total expenses declined 42% to $476,000 primarily because of
$237,000 lower professional fees and stockholder costs and $80,000
in savings realized with the externalization of investment
management and administration. Last year’s second quarter included
higher professional fees and stockholder costs to address a proxy
contest. Stockholders and office operating costs were still
elevated in the 2020 second quarter at $116,000 as a result of the
special dividend and reverse split activities.
Higher investment income and lower operating expenses drove net
investment income growth to $199,000 compared with a loss of
$143,000 in the prior-year period.
Portfolio and Investment Activity
As of June 30, 2020, Rand’s portfolio consisted of 38 companies.
At that date, the portfolio was comprised of approximately 58% in
equity investments and 42% in fixed-rate debt investments. The
weighted average yield of debt investments was 8.79%.
During the quarter, Rand invested $2.3 million in three current
portfolio companies.
- SciAps, Inc.: $1.5 million invested in a fixed rate senior
promissory note
- Tilson Technology Management, Inc.: $750,000 invested in Series
F preferred stock
- Golub Capital BDC, Inc.: $57,000 invested through a rights
offering
Shareholder Actions, Liquidity and Capital Resources
There were several major events during the quarter that impacted
shareholders.
- On May 11, 2020, Rand provided shareholders a $23.7 million
dividend that was distributed in 20% cash and 80% stock. As a
result, the Company distributed $4.75 million of cash and issued
960,000 shares of stock (adjusted for the following 1:9 reverse
split) to shareholders.
- The Company authorized a 1-for-9 reverse stock split that was
effective after the market closed on May 21, 2020. As a result, at
June 30, 2020, Rand had 2,587,500 shares outstanding.
- During the quarter, the Company repurchased 1,300 shares of
outstanding common stock under its $1.5 million share repurchase
authorization at an average price of $10.99 per share.
- Subsequent to the end of the quarter, the Board authorized
management to enter into a trading plan in accordance with Rule
10b5-1 of the Exchange Act to facilitate repurchases of its common
stock pursuant to its previously approved stock repurchase program
(the "Rule 10b5-1 plan"). The Rule 10b5-1 plan will allow the
Company to repurchase shares at times when they might otherwise be
prevented from doing so by securities laws or because of
self-imposed trading blackout periods. Any such repurchases would
be made under the Company’s previously announced share repurchase
authorization.
Cash and cash equivalents at the end of the quarter was $22.1
million and represented 44% of net assets. Approximately $10.6
million of cash was available for corporate purposes and $11.4
million is restricted to investments by the SBIC. Outstanding debt
was $11.0 million, and there was $3 million available to draw on
the SBA loan program.
Debt to equity at June 30, 2020 was 23% and cost of debt was
3.45% at June 30, 2020.
Webcast and Conference Call
Rand will host a conference call and live webcast today, August
7, 2020, at 10:30 a.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 the “Investor Relations”
heading.
A telephonic replay will be available from 1:30 p.m. ET on the
day of the call through Friday,
August 14, 2020. To listen to the archived call, dial (412)
317-6671 and enter replay pin number 13705874. 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 intention of Rand and Rand
Capital SBIC, Inc. (“Rand SBIC”) to elect to be taxed as a RIC for
U.S. federal tax purposes; 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 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, 2019, 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.
Rand Capital Corporation and
Subsidiaries Consolidated Statements of Financial
Position
June 30, 2020(Unaudited) December 31,2019
ASSETS
Investments at fair value:
Affiliate investments (cost of
$22,838,093 and $19,035,446,
respectively).................................................................................
15,438,278
12,151,435
Non- Control/Non-Affiliate investments (cost of
$23,888,277 and $25,584,017,
respectively)....................................................
23,167,335
24,869,357
Total investments, at fair value (cost of $46,726,370 and
$44,619,463,
respectively).........................................................................
38,605,613
37,020,792
Cash and cash
equivalents...................................................................................................................................................................
22,057,464
25,815,720
Interest receivable (net of allowance of
$166,413)...............................................................................................................................
370,303
142,265
Deferred tax
asset................................................................................................................................................................................
-
1,204,198
Prepaid income
taxes...........................................................................................................................................................................
35,071
343,096
Other
assets..........................................................................................................................................................................................
59,409
265,378
Total
assets..........................................................................................................................................................................
$
61,127,860
$
64,791,449
LIABILITIES AND STOCKHOLDERS’ EQUITY (NET
ASSETS) Liabilities:
Debentures guaranteed by the SBA (net of debt
issuance costs)
.......................................................................................................
$
10,805,749
$ 10,786,913
Accounts payable and accrued
expenses.............................................................................................................................................
300,654
258,437
Deferred tax
payable.............................................................................................................................................................................
222,977
-
Profit sharing and bonus
payable.........................................................................................................................................................
-
80,000
Deferred
revenue.................................................................................................................................................................................
87,166
37,583
Total
liabilities........................................................................................................................................................................
11,416,546
11,162,933
Stockholders’
equity (net assets): Common
stock, $0.10 par; shares authorized 100,000,000; shares issued:
2,648,916 at 6/30/20and 1,688,485 at 12/31/19; shares outstanding:
2,587,500 at 6/30/20 and 1,628,369 at
12/31/19..............................................
2,384,547
1,519,637
Capital in excess of par
value...............................................................................................................................................................
34,142,455
34,142,455
Treasury stock, at cost: shares: 61,416 at 6/30/20
and 60,116 at
12/31/19.........................................................................................
(1,483,409)
(1,469,105)
Total distributable (losses) earnings
....................................................................................................................................................
14,667,721
19,435,529
Total stockholders’ equity (net assets) (per share –
6/30/20: $19.21, 12/31/19:
$32.93)......................................................
49,711,314
53,628,516
Total liabilities and stockholders’ equity (net
assets).....................................................................................................
$
61,127,860
$
64,791,449
Rand Capital Corporation and
Subsidiaries Consolidated Statements of Operations
(Unaudited)
For the Quarter Ended June 30, For
the Six Months Ended June 30,
2020
2019
2020
2019
Investment income:
Interest from
portfolio companies:
Affiliate
investments..................................................................................................................
$ 170,262
$
206,036
$ 309,108
$
414,751
Non-Control/Non-Affiliate
investments.........................................................................................
400,424
109,453
797,279
306,703
Total interest from portfolio
companies.................................................................................
570,686
315,489
1,106,387
721,454
Interest from other investments:
Non-Control/Non-Affiliate
investments.........................................................................................
2,754
53,538
86,004
71,349
Total interest from other
investments...................................................................................
2,754
53,538
86,004
71,349
Dividend and other investment
income:
Affiliate
investments..................................................................................................................
13,125
207,060
26,250
241,685
Non-Control/Non-Affiliate
investments.........................................................................................
81,313
-
81,313
-
Total dividend and other investment
income..........................................................................
94,438
207,060
107,563
241,685
Fee income:
Affiliate
investments..................................................................................................................
4,167
3,606
5,417
7,853
Non-Control/Non-Affiliate
investments.........................................................................................
2,500
3,353
5,000
260,075
Total fee
income.................................................................................................................
6,667
6,959
10,417
267,928
Total investment
income.......................................................................................................................
674,545
583,046
1,310,371
1,302,416
Expenses:
Base
management
fee....................................................................................................................
141,386
-
281,763
-
Interest on SBA
obligations.............................................................................................................
104,190
110,534
208,380
209,658
Professional
fees...........................................................................................................................
77,917
111,273
257,036
337,928
Stockholders and office operating
...................................................................................................
116,299
319,506
167,844
380,761
Directors'
fees...............................................................................................................................
28,375
28,624
56,750
57,248
Insurance......................................................................................................................................
7,400
10,969
18,068
20,570
Corporate
development..................................................................................................................
132
14,866
2,006
33,326
Other operating
.............................................................................................................................
107
1,225
465
2,809
Salaries.........................................................................................................................................
-
181,500
-
363,000
Employee
benefits..........................................................................................................................
-
40,167
-
103,099
Bad Debt
Expense.........................................................................................................................
-
5,413
-
5,413
Total
expenses..............................................................................................................................
475,806
824,077
992,312
1,513,812
Net investment income (loss) before income
taxes...............................................................................
198,739
(241,031)
318,059
(211,396)
Income tax benefit
.........................................................................................................................
-
(97,731)
(419,101)
(90,863)
Net investment income
(loss)................................................................................................................
198,739
(143,300)
737,160
(120,533)
Net realized gain (loss) on sales and dispositions of
investments:
Control
investments........................................................................................................................
-
39,893
-
80,393
Affiliate
investments........................................................................................................................
-
-
-
(472,632)
Non-Control/Non-Affiliate
investments..............................................................................................
18,595
(472,632)
2,412,046
-
Income tax
benefit..........................................................................................................................
-
(100,230)
-
(90,861)
Net realized gain (loss) on sales and dispositions of
investments........................................................
18,595
(332,509)
2,412,046
(301,378)
Net change in unrealized
depreciation on investments:
Affiliate
investments........................................................................................................................
(5,613)
(372,448)
(515,804)
671,148
Non-Control/Non-Affiliate
investments..............................................................................................
211,850
(750,000)
(6,282)
(1,271,300)
Change in unrealized depreciation before income
taxes.....................................................................
206,237
(1,122,448)
(522,086)
(600,152)
Deferred income tax (benefit) expense
............................................................................................
-
(250,708)
1,773,412
(129,929)
Net change in unrealized depreciation on
investments........................................................................
206,237
(871,740)
(2,295,498)
(470,223)
Net realized and unrealized gain (loss) on
investments.........................................................................
224,832
(1,204,249)
116,548
(771,601)
Net increase (decrease) in net assets from
operations.........................................................................
$ 423,571
$(1,347,549)
$ 853,708
$ (892,134)
Weighted average shares
outstanding..................................................................................................
2,103,093
702,443
1,950,058
702,443
Basic and diluted net increase (decrease) in net assets from
operations per share ...........................
$
0.20
$ (1.92)
$
0.44
$ (1.27)
Rand Capital Corporation and
Subsidiaries Consolidated Statements of Changes in Net
Assets (Unaudited)
For the Quarter Ended June 30, For the Six Months
EndedJune 30,
2020
2019
2020
2019
Net assets at beginning of period
$54,058,653
$31,979,602
$53,628,516
$31,524,187
Net investment income (loss)
198,739
(143,300)
737,160
(120,533)
Net realized gain (loss) on sales and dispositions of investments
18,595
(332,509)
2,412,046
(301,378)
Net change in unrealized depreciation on investments
206,237
(871,740)
(2,295,498)
(470,223)
Net increase (decrease) in net assets from operations
423,571
(1,347,549)
853,708
(892,134)
Purchase of treasury shares
(14,304)
-
(14,304)
-
Payment of cash dividend
(4,756,606)
-
(4,756,606)
-
Net assets at end of period
$49,711,314
$30,632,053
$49,711,314
$30,632,053
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200807005065/en/
Company: Allen F. ("Pete") Grum President and CEO
Phone: 716.853.0802 Email: pgrum@randcapital.com
Investors: Deborah K. Pawlowski / Christopher M. Gordon
Kei Advisors LLC Phone: 716.843.3908 / 716.843.3942
Email: dpawlowski@keiadvisors.com /
cgordon@keiadvisors.com
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