- Improved mix of interest yielding debt instruments drove 11%
total investment income growth to $1.1 million for the quarter
compared with the prior-year period
- Net asset value per share (“NAV”) of $23.23 at March 31,
2022, declined 1% from December 31, 2021 primarily due to changes
in market value of portfolio holdings in publicly traded
securities
- Total follow-on investments of $542,000 to support portfolio
companies’ growth
- Announced regular quarterly dividend of $0.15 per share for
second quarter 2022
- Board of Directors renews $1.5 million share repurchase
program
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, 2022.
Daniel P. Penberthy, President and Chief Executive Officer of
Rand, commented, “The strong pace of investments made in 2021,
which was comprised of over $20 million in portfolio additions,
drove a strong start to 2022. We delivered 11% growth in total
investment income, paid a regular quarterly cash dividend of $0.15
per share, which represented an increase over the quarterly
dividends in 2021, and demonstrated solid operating leverage. We
sold our investment in Social Flow, a non-strategic, long-held
equity investment, and benefited from an exit value in excess of
our fair value. Also, during the quarter we sold liquid public
equity investments, including ACVA and BDC stock holdings, to
generate cash and continue to fund new debt instrument
investments.”
First Quarter Highlights
- Total investment income grew 11% to $1.1 million primarily due
to increased interest income from portfolio companies.
- Total expenses were $345,000 compared with $3.2 million in the
prior-year period. Capital gain incentive fees for the external
investment adviser was a credit of $240,000 compared with a $2.6
million expense in the prior-year period. Excluding capital gains
incentive fees, adjusted expenses, which is a non-GAAP financial
measure, were $585,000, up $19,500, or 3%. Higher expenses included
a $65,000, or 37%, increase in the base management fee payable to
Rand’s investment adviser due to the increase in asset values, as
well as higher professional fees and directors’ fees. These
increases were partially offset with the elimination of interest
expense payments for the SBA obligations that were paid off in full
in December 2021. See the attached description of this non-GAAP
financial measure and reconciliation table for adjusted
expenses.
- Net investment income was $772,000, or $0.30 per share,
compared with a loss of $2.2 million, or $0.84 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 $0.21 for the first quarter of 2022
compared with $0.17 in 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.
Portfolio and Investment Activity
As of March 31, 2022, Rand’s portfolio included investments with
a fair value of $62.4 million across
33 portfolio businesses. This was down $1.7 million, or 3%, from
December 31, 2021, due primarily to the change in ACV Auctions’
market value, net new investments and payoffs. At March 31, 2022,
the portfolio was comprised of approximately 48% in debt
investments, 33% in equity investments in private companies, and
19% in publicly traded equities consisting of other BDCs and ACV
Auctions. The annualized weighted average yield of debt investments
was 12.3%.
First quarter 2022:
- Follow on debt investment of $318,000 in DSD Operating,
LLC.
- Follow on equity investment of $224,000 in ITA Acquisitions
LLC.
- Received $268,000 in proceeds for sale of Social Flow in
February 2022.
- Sold 37,000 shares of ACV Auctions at an average price of
$13.82 per share. Rand held 405,934 shares at quarter-end, which
represented approximately 10% of the portfolio’s fair value.
Liquidity and Capital Resources
Cash and cash equivalents at the end of the first quarter of
2022 were $597,000 versus $834,000 at the end of 2021. As of March
31, 2022, the Company held approximately $5.6 million in public
equities of other BDCs and $6.1 million of ACV Auctions shares, all
of which are available for future liquidity requirements including
both RIC dividends and new portfolio investments.
The Company did not repurchase any outstanding common stock
during the first quarter of 2022.
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 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 April 21, 2023, and may be suspended, terminated
or amended by the Board at any time prior to the expiration
date.
Dividends
On April 28, 2022, Rand declared its regular quarterly cash
dividend distribution of $0.15 per share. The cash dividend will be
distributed on or about June 15, 2022, to shareholders of record as
of June 1, 2022.
Webcast and Conference Call
Rand will host a conference call and webcast on Monday, May 9,
2022, 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 4:30 p.m. ET on the day of
the call through Monday, May 16, 2022. To listen to the archived
call, dial (412) 317-6671 and enter replay pin number 13729045. A
transcript of the 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; 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, 2021, 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, 2022
(Unaudited)
December 31, 2021
ASSETS
Investments at fair value:
Affiliate investments (cost of
$28,016,127 and $27,357,797, respectively)
$30,938,203
$30,279,873
Non-Control/Non-Affiliate
investments (cost of $23,028,790 and $25,012,871, respectively)
31,473,439
33,788,589
Total investments, at fair value
(cost of $51,044,917 and $52,370,668, respectively)
62,411,642
64,068,462
Cash
596,793
833,875
Interest receivable
195,797
128,047
Prepaid income taxes
234,567
252,010
Deferred tax asset
191,319
181,003
Other assets
295,103
181,457
Total assets
$63,925,221
$65,644,854
LIABILITIES AND
STOCKHOLDERS’ EQUITY (NET ASSETS)
Liabilities:
Due to investment adviser
$240,275
$891,102
Accounts payable and accrued
expenses
49,952
51,689
Capital gains incentive fees
3,308,000
3,547,760
Deferred revenue
379,268
408,887
Total liabilities
3,977,495
4,899,438
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 3/31/22 and 12/31/21
264,892
264,892
Capital in excess of par
value
51,679,809
51,679,809
Treasury stock, at cost: 67,895
shares at 3/31/22 and 12/31/21
(1,566,605)
(1,566,605)
Total distributable earnings
9,569,630
10,367,320
Total stockholders’ equity (net
assets) (per share – 3/31/22: $23.23; 12/31/21: $23.54)
59,947,726
60,745,416
Total liabilities and stockholders’
equity (net assets)
$63,925,221
$65,644,854
Rand Capital Corporation and
Subsidiaries
Consolidated Statements of
Operations
(Unaudited)
Three months ended March 31,
2022
Three months ended March 31,
2021
Investment income:
Interest from portfolio companies:
Affiliate investments
$570,116
$319,416
Non-Control/Non-Affiliate investments
342,023
391,346
Total interest from portfolio
companies
912,139
710,762
Interest from other investments:
Non-Control/Non-Affiliate investments
-
12,627
Total interest from other investments
-
12,627
Dividend and other investment income:
Affiliate investments
43,725
94,926
Non-Control/Non-Affiliate investments
129,265
151,743
Total dividend and other investment
income
172,990
246,669
Fee income:
Affiliate investments
30,305
39,356
Non-Control/Non-Affiliate investments
9,314
6,978
Total fee income
39,619
46,334
Total investment income
1,124,748
1,016,392
Expenses:
Base management fee
240,275
175,609
Capital gains incentive fees
(239,760)
2,600,000
Interest on SBA obligations
-
104,190
Professional fees
231,083
160,133
Stockholders and office
operating
56,698
71,422
Directors' fees
45,100
36,500
Insurance
8,910
10,327
Corporate development
3,027
7,482
Other operating
45
-
Total expenses
345,378
3,165,663
Net investment income (loss)
before income taxes
779,370
(2,149,271)
Income tax expense
7,367
17,757
Net investment income (loss)
772,003
(2,167,028)
Net realized (loss) gain on sales and
dispositions of investments:
Affiliate investments
-
135,430
Non-Control/Non-Affiliate investments
(851,471)
175,325
Net realized (loss) gain on sales and
dispositions of investments
(851,471)
310,755
Net change in unrealized appreciation
(depreciation) on investments:
Non-Control/Non-Affiliate
investments
(331,069)
9,887,032
Net change in unrealized appreciation
(depreciation) on investments
(331,069)
9,887,032
Net realized and unrealized (loss) gain
on investments
(1,182,540)
10,197,787
Net (decrease) increase in net assets
from operations
($410,537)
$8,030,759
Weighted average shares
outstanding
2,581,021
2,582,169
Basic and diluted net (decrease)
increase in net assets from operations per share
($0.16)
$3.11
Rand Capital Corporation and
Subsidiaries
Consolidated Statements of
Changes in Net Assets
(Unaudited)
Three months ended
March 31, 2022
Three months ended
March 31, 2021
Net assets at beginning of period
$60,745,416
$46,104,830
Net investment income (loss)
772,003
(2,167,028)
Net realized (loss) gain on sales and
dispositions of investments
(851,471)
310,755
Net change in unrealized appreciation
(depreciation) on investments
(331,069)
9,887,032
Net (decrease) increase in net assets from
operations
(410,537)
8,030,759
Declaration of dividends
(387,153)
(258,385)
Net assets at end of period
$59,947,726
$53,877,204
Rand Capital Corporation and
Subsidiaries Reconciliation of Non-GAAP Adjusted 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 adjusted expenses, which is a non-GAAP financial
measure. Adjusted expenses is defined as GAAP total expenses
removing the effect of any expenses/(credits) for capital gains
incentive fees. 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, 2022
Three months ended March 31,
2021
Total expenses
$
345,378
$
3,165,663
Exclude capital gains incentive fees
(239,760
)
2,600,000
Adjusted expenses
$
585,138
$
565,663
Reconciliation of Adjusted Net Investment
Income per Share to GAAP Net Investment Income (Loss) per
Share (unaudited)
In addition to reporting Net Investment Income (Loss) per Share,
which is a U.S. generally accepted accounting principle (“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 (Loss) per Share removing the effect of any
expenses/(credits) for capital gains incentive fees. GAAP Net
Investment Income (Loss) 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, 2022
Three months ended
March 31, 2021
Net investment income (loss) per share
$
0.30
$
(0.84
)
Capital gains incentive fees per share
(0.09
)
1.01
Adjusted net investment income per
share
$
0.21
$
0.17
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220509005087/en/
Company: Daniel P. Penberthy President and CEO Phone:
716.853.0802 Email: dpenberthy@randcapital.com Investors:
Deborah K. Pawlowski Kei Advisors LLC Phone: 716.843.3908 Email:
dpawlowski@keiadvisors.com
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