- Portfolio expansion focused on income producing assets drove
67% total investment income growth to $1.4 million for the
quarter
- Net asset value per share (“NAV”) was $22.34 at June 30,
2022, which reflected a decline in market value of portfolio
holdings in publicly traded securities
- Follow-on debt investment of $2.2 million to support
portfolio company growth
- Announced a quarterly dividend of $0.15 per share for third
quarter 2022
- Secured new $25 million senior secured revolving credit
facility to support future portfolio investments
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 second quarter ended June 30, 2022.
Daniel P. Penberthy, President, and Chief Executive Officer of
Rand, commented, “We delivered another solid quarter of total
investment income growth, which reflected our focused investment
strategy and significant debt portfolio expansion over the past
year. During the recent quarter, we took a number of steps to
position Rand for our next phase of growth. Most importantly, we
added a new source of capital to support this strategy by securing
a $25 million credit facility, which provides not only increased
liquidity, but also greater flexibility. We also exited some of our
publicly traded securities, which we in turn utilized to fund our
follow-on debt investment in Seybert’s Billiard Corporation, making
Seybert’s the largest Rand interest yielding debt holding with an
approximately $5.6 million cost basis.”
Second Quarter Highlights
- Total investment income grew $542,000, or 67%, to $1.4 million
primarily due to increased interest income from portfolio companies
and higher dividend income.
- Total expenses were a credit of $96,000 compared with an
expense of $1.6 million in the prior-year period. A reduction in
value of Rand’s publicly held securities impacted accrued capital
gain incentive fees to the external investment adviser, resulting
in a credit of $663,000 for the second quarter of 2022 compared
with $1.1 million of expense for the second quarter of 2021.
Excluding capital gains incentive fees, adjusted expenses, which is
a non-GAAP financial measure, were $567,000, up $7,000, or 1%, from
the prior-year period. Higher professional fees resulting from the
new debt financing were largely 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 $1.4 million, or $0.55 per share,
compared with a net investment loss of $811,000, or $0.31 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 $0.29 for the second quarter of
2022 compared with $0.10 in the second 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 June 30, 2022, Rand’s portfolio included investments with
a fair value of $59.0 million across
29 portfolio businesses. This was down $3.4 million, or 6%, from
March 31, 2022, due primarily to the change in ACV Auctions’ market
value and stock sales, net of the follow-on Seybert’s investment.
At
June 30, 2022, the portfolio was comprised of approximately 55%
in debt investments, 35% in equity investments in private
companies, and 10% in publicly traded equities consisting of other
BDCs and ACV Auctions. The annualized weighted average yield of
debt investments was 12.1%.
Second quarter 2022:
- Follow on debt investment of $2.2 million in Seybert’s Billiard
Corporation.
- Sold 86,000 shares of ACV Auctions at an average price of
$14.24 per share for a realized gain of $1.2 million. Rand held
319,934 shares at quarter-end, which represented approximately 4%
of the portfolio’s fair value.
- Sold holdings in two publicly traded BDCs – Golub Capital and
Owl Rock Capital – generating total proceeds of $922,000 and a gain
of $171,000.
- Sold remaining interest in Microcision, which netted a gain of
$190,000.
Liquidity and Capital Resources
Cash and cash equivalents at the end of the second quarter of
2022 were $1.2 million compared with $834,000 at 2021 year-end. As
of June 30, 2022, the Company held approximately $4.0 million in
public equities of other BDCs and $2.1 million of ACV Auctions
shares, all of which are available for future liquidity
requirements including both RIC dividends and new portfolio
investments.
On June 27, 2022, Rand closed on a $25 million senior secured
revolving credit facility with M&T Bank. The new facility
provides for a 5-year term through 2027, at an interest rate
calculated using SOFR plus 3.5%. There were no borrowings under the
facility at quarter-end.
The Company did not repurchase any outstanding common stock
during the second quarter of 2022.
Dividends
On July 28, 2022, Rand declared a quarterly cash dividend of
$0.15 per share. The cash dividend will be distributed on or about
September 15, 2022, to shareholders of record as of September 1,
2022.
Webcast and Conference Call
Rand will host a conference call and webcast on Monday, August
8, 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, August 15, 2022. To listen to the archived
call, dial (412) 317-6671 and enter replay pin number 13731266. 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 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
June 30, 2022
(Unaudited)
December 31, 2021
ASSETS
Investments at fair value:
Affiliate investments (cost of
$30,195,392 and $27,357,797, respectively)
$33,165,309
$30,279,873
Non-Control/Non-Affiliate
investments (cost of $22,291,325 and $25,012,871, respectively)
25,833,464
33,788,589
Total investments, at fair value
(cost of $52,486,717 and $52,370,668, respectively)
58,998,773
64,068,462
Cash
1,189,146
833,875
Interest receivable
193,807
128,047
Prepaid income taxes
6,360
252,010
Deferred tax asset
239,158
181,003
Other assets
360,091
181,457
Total assets
$60,987,335
$65,644,854
LIABILITIES AND STOCKHOLDERS’ EQUITY (NET
ASSETS)
Liabilities:
Due to investment adviser
$230,781
$891,102
Accounts payable and accrued
expenses
55,933
51,689
Capital gains incentive fees
2,645,000
3,547,760
Deferred revenue
391,437
408,887
Total liabilities
3,323,151
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 6/30/22 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 6/30/22 and 12/31/21
(1,566,605)
(1,566,605)
Total distributable earnings
7,286,088
10,367,320
Total stockholders’ equity (net
assets) (per share – 6/30/22: $22.34; 12/31/21: $23.54)
57,664,184
60,745,416
Total liabilities and
stockholders’ equity (net assets)
$60,987,335
$65,644,854
Rand Capital Corporation and
Subsidiaries
Consolidated Statements of
Operations
(Unaudited)
Three months ended June
30, 2022
Three months ended June
30, 2021
Six months ended June
30, 2022
Six months ended June
30, 2021
Investment income:
Interest from portfolio
companies:
Control investment
$-
$2,867
$-
$2,867
Affiliate investments
614,997
295,085
1,185,113
614,501
Non-Control/Non-Affiliate
investments
389,835
344,254
731,858
735,600
Total interest from portfolio
companies
1,004,832
642,206
1,916,971
1,352,968
Interest from other
investments:
Non-Control/Non-Affiliate
investments
1
243
1
12,870
Total interest from other
investments
1
243
1
12,870
Dividend and other investment
income:
Affiliate investments
202,785
13,125
246,510
108,051
Non-Control/Non-Affiliate
investments
113,735
123,922
243,000
275,665
Total dividend and other
investment income
316,520
137,047
489,510
383,716
Fee income:
Affiliate investments
22,515
24,562
52,820
63,918
Non-Control/Non-Affiliate
investments
9,314
6,979
18,628
13,957
Total fee income
31,829
31,541
71,448
77,875
Total investment
income
1,353,182
811,037
2,477,930
1,827,429
Expenses:
Base management fee
230,767
212,907
471,042
388,516
Capital gains incentive fees
(663,000)
1,060,000
(902,760)
3,660,000
Interest on SBA obligations
-
104,190
-
208,380
Professional fees
212,138
123,991
443,221
284,124
Stockholders and office
operating
64,890
69,661
121,588
141,083
Directors' fees
44,883
38,900
89,983
75,400
Insurance
13,353
9,380
22,263
19,707
Corporate development
726
821
3,753
8,303
Other operating
45
108
90
108
Total expenses
(96,198)
1,619,958
249,180
4,785,621
Net investment income (loss)
before income taxes
1,449,380
(808,921)
2,228,750
(2,958,192)
Income tax expense
31,243
1,966
38,610
19,723
Net investment income
(loss)
1,418,137
(810,887)
2,190,140
(2,977,915)
Net realized gain on sales and
dispositions of investments:
Affiliate investments
167,159
-
167,159
135,430
Non-Control/Non-Affiliate
investments
1,372,984
1,817,350
521,513
1,992,675
Net realized gain on sales and
dispositions of investments
1,540,143
1,817,350
688,672
2,128,105
Net change in unrealized
appreciation/ depreciation on investments:
Affiliate investments
47,841
-
47,841
-
Non-Control/Non-Affiliate
investments
(4,902,510)
3,495,322
(5,233,579)
13,382,354
Change in unrealized
appreciation/ depreciation before income taxes
(4,854,669)
3,495,322
(5,185,738)
13,382,354
Deferred income tax expense
-
951
-
951
Net change in unrealized
appreciation/ depreciation on investments
(4,854,669)
3,494,371
(5,185,738)
13,381,403
Net realized and unrealized
(loss) gain on investments
(3,314,526)
5,311,721
(4,497,066)
15,509,508
Net (decrease) increase in net
assets from operations
($1,896,389)
$4,500,834
($2,306,926)
$12,531,593
Weighted average shares
outstanding
2,581,021
2,582,169
2,581,021
2,582,169
Basic and diluted net
(decrease) increase in net assets from operations per share
($0.73)
$1.74
($0.89)
$4.85
Rand Capital Corporation and
Subsidiaries
Consolidated Statements of
Changes in Net Assets
(Unaudited)
Three months ended June
30, 2022
Three months ended June
30, 2021
Six months ended June
30, 2022
Six months ended June
30, 2021
Net assets at beginning of period
$59,947,726
$53,877,204
$60,745,416
$46,104,830
Net investment income (loss)
1,418,137
(810,887)
2,190,140
(2,977,915)
Net realized gain on sales and
dispositions of investments
1,540,143
1,817,350
688,672
2,128,105
Net change in unrealized appreciation/
depreciation on investments
(4,854,669)
3,494,371
(5,185,738)
13,381,403
Net (decrease) increase in net assets from
operations
(1,896,389)
4,500,834
(2,306,926)
12,531,593
Declaration of dividend
(387,153)
(258,217)
(774,306)
(516,602)
Net assets at end of period
$57,664,184
$58,119,821
$57,664,184
$58,119,821
Rand Capital Corporation and
Subsidiaries Reconciliation of Non-GAAP Adjusted Expenses
to GAAP Total (Credits)/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
(credits)/expenses removing the effect of any expenses/(credits)
for capital gains incentive fees. GAAP total (credits)/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 June
30, 2022
Three months ended June 30,
2021
Total (credits)/expenses
$
(96,198
)
$
1,619,958
Exclude (credits)/expenses for capital
gains incentive fees
(663,000
)
1,060,000
Adjusted expenses
$
566,802
$
559,958
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 June
30, 2022
Three months ended June
30, 2021
Net investment income (loss) per share
$
0.55
$
(0.31
)
Exclude (credits)/expenses for capital
gains incentive fees per share
(0.26
)
0.41
Adjusted net investment income per
share
$
0.29
$
0.10
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220808005074/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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