RAND

• Advanced portfolio transformation: Total investment income increased 40% to $1.7 million in the fourth quarter; Full year 2022 grew 41% to $5.8 million
• Fourth quarter net investment income per share increased to $0.48 from $0.12 in the prior-year period; Adjusted net investment income per share for the quarter increased $0.25 to $0.41
• Full year 2022 net investment income per share was $1.72 compared with a net investment loss per share of $1.01 in 2021
• 2022 non-GAAP adjusted net investment income per share more than doubled to $1.31 from $0.62 per share in 2021
• Net asset value per share (“NAV”) was $22.36 at year-end, compared with $22.62 at September 30, 2022 and $23.54 at December 31, 2021
• Declared total dividends of $0.83 per share in 2022, up nearly 90%
• $3.9 million in new and follow on investments during the fourth quarter; Full year 2022 investments totaled $7.0 million

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 fourth quarter ended December 31, 2022.

“2022 was a strong year and continued to demonstrate the execution of our strategy. We advanced our investment portfolio composition towards more debt instruments with the addition of four interest yielding investments over the past year. In total, our debt portfolio now makes up more than half of our total portfolio mix at 56% compared with 46% at the end of 2021,” commented Daniel P. Penberthy, President and Chief Executive Officer of Rand. “Equally important has been our focus on expense management, which translated into strong net investment income growth for the year and enabled us to increase our return to shareholders. During 2022, we paid total dividends of $0.83 per share, which represented an increase of nearly 90% over our 2021 distributions. This included raising our regular quarterly cash dividend by 33%, or $0.05 per share, to $0.20 per share in the fourth quarter.

“With the support of our strong liquidity position, we believe we can continue to execute our strategy to grow our portfolio, drive investment income and support a growing dividend.”

Fourth Quarter Highlights

• Total investment income grew $496,000, or 40%, to $1.7 million primarily due to increased interest income from portfolio companies and higher portfolio dividend income.
• Total expenses were $371,000 compared with $923,000 in the prior-year period. The decrease reflects lower interest expense and a credit of accrued capital gain incentive fees of $168,000 for the fourth quarter of 2022 compared with $86,000 of expense for the fourth quarter of 2021. Excluding capital gains incentive fees, adjusted expenses, which is a non-GAAP financial measure, were $539,000, down $298,000, or 36%, from the prior-year period. See the attached description of this non-GAAP financial measure and reconciliation table for adjusted expenses.
• Net investment income was $1.2 million, or $0.48 per share, compared with $320,000, or $0.12 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 $0.41 per share, up from $0.16 per share in the fourth quarter of 2021. See the attached description of this non-GAAP financial measure and reconciliation table for adjusted net investment income per share.

2022 Highlights

• Total investment income of $5.8 million increased $1.7 million or 41%.
• Total expenses were $1.1 million compared with $6.7 million in the prior year. The decrease was largely due to the accrual of $4.2 million of capital gains incentive fees during 2021 compared with a reversal of $1.0 million in accrual of fees during the current year. Also reflected was lower interest expense of $547,000 given the Company’s SBA indebtedness was paid off in full in November 2021.
• Excluding the capital gains incentive fee accrual, adjusted expenses, which is a non-GAAP financial measure, decreased $302,000, or 12%, to $2.2 million. See the attached description of this non-GAAP financial measure and reconciliation table for adjusted expenses.
• Net investment income per share was $1.72 for the year compared with net investment loss of $1.01 per share in the prior year. Excluding the capital gains incentive fee accrual, adjusted net investment income per share was $1.31 for 2022 compared with $0.62 for 2021. See the attached description of this non-GAAP financial measure and reconciliation table for adjusted net investment income per share.
• Net assets at December 31, 2022 were $57.7 million, down 5% from year-end 2021, which reflected new and follow on investments offset by fair market value changes across a number of portfolio companies during the year.

Portfolio and Investment Activity

As of December 31, 2022, Rand’s portfolio included investments with a fair value of $61.5 million across 29 portfolio businesses. This was up $1.8 million, or 3%, from September 30, 2022, which reflected new and follow on investments partially offset by valuation adjustments to several portfolio companies. At December 31, 2022, the portfolio was comprised of approximately 56% in debt investments, 34% 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 12.6%.

Fourth quarter 2022:

• Funded $3.1 million to Food Service Supply (FSS), consisting of $2.5 million of senior subordinated debt and $600,000 of preferred equity. FSS provides design, distribution and installation services for commercial kitchens, renovations and new builds.
• Follow on debt investment of $590,000 in SciAps, Inc., an instrumentation company specializing in portable analytical instruments to identify compounds, minerals and elements. Rand’s total debt and equity investment in SciAps had a fair value of $5.2 million at year-end.
• Follow on equity investment of $194,000 in Seybert’s Billiards Corporation, a billiard supply company. Rand’s total debt and equity investment in Seybert’s had a fair value of $5.9 million at year-end.

Full year 2022:

• Invested a total of $7.0 million across seven transactions, which largely consisted of interest yielding assets
• Sold BDC and ACV Auctions public securities for $2.0 million in gains
• Received $1.6 million from repaid loans

Liquidity and Capital Resources

Cash at year-end was $1.4 million compared with $834,000 at the end of 2021. The Company held approximately $3.9 million in publicly traded equities of other BDCs and $2.5 million of ACV Auctions shares, all of which are available for future liquidity requirements including dividends and portfolio investments.

At December 31, 2022, Rand had outstanding borrowings of $2.6 million on its existing $25.0 million senior secured revolving credit facility.

The Company did not repurchase any outstanding common stock during 2022.

Dividends

On December 6, 2022, the Board declared an aggregate of $0.38 per share cash dividend distribution, which was paid during the fourth quarter, to shareholders of record as of December 19, 2022. The dividends consisted of a regular quarterly dividend of $0.20 per share, which was an increase of $0.05, or 33%, and a supplemental dividend of $0.18 per share.

During 2022, Rand paid a total of $2.1 million in dividends, which included the four regular quarterly dividends, and the year-end 2022 supplemental dividend.

On February 28, 2023, Rand declared its regular quarterly cash dividend distribution of $0.20 per share. The cash dividend will be distributed on or about March 27, 2023, to shareholders of record as of March 13, 2023.

Webcast and Conference Call

Rand will host a conference call and webcast on Friday, March 10, 2023, at 11:00 a.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 2:00 p.m. ET on the day of the call through Friday, March 17, 2023. To listen to the archived call, dial (412) 317-6671 and enter replay pin number 13735032. 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, 2022, 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 (Audited)

   

 

 

December 31,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

Investments at fair value:

 

 

 

Control investments (cost of $4,660,017 and $0, respectively)

 

$

3,536,207

 

$

-

 

Affiliate investments (cost of $30,204,160 and $27,357,797, respectively)

 

 

38,241,589

 

 

30,279,873

 

Non-Control/Non-Affiliate investments (cost of $20,852,060 and $25,012,871, respectively)

 

 

19,726,463

 

 

33,788,589

 

Total investments, at fair value (cost of $55,716,237 and $52,370,668, respectively)

 

 

61,504,259

 

 

64,068,462

 

Cash

 

 

1,368,996

 

 

833,875

 

Interest receivable

 

 

208,338

 

 

128,047

 

Prepaid income taxes

 

 

76,396

 

 

252,010

 

Deferred tax asset

 

 

28,160

 

 

181,003

 

Other assets

 

 

295,043

 

 

181,457

 

Total assets

 

$

63,481,192

$

65,644,854

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (NET ASSETS)

 

Liabilities:

 

 

 

Due to investment adviser

 

$

562,221

 

$

891,102

 

Accounts payable and accrued expenses

 

 

66,680

 

 

51,689

 

Line of credit

 

 

2,550,000

 

 

-

 

Capital gains incentive fees

 

 

2,167,000

 

 

3,547,760

 

Deferred revenue

 

 

413,971

 

 

408,887

 

Total liabilities

 

 

5,759,872

 

 

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

 

264,892

 

 

264,892

 

Capital in excess of par value

 

 

51,464,267

 

 

51,679,809

 

Treasury stock, at cost: 67,895 shares

 

 

(1,566,605

)

 

(1,566,605

)

Total distributable earnings

 

 

7,558,766

 

 

10,367,320

 

Total stockholders’ equity (net assets) (per share - 2022: $22.36, 2021: $23.54)

 

57,721,320

 

 

60,745,416

 

Total liabilities and stockholders’ equity (net assets)

$

63,481,192

  

$

65,644,854

 

 

 

 

 

   

Rand Capital Corporation and Subsidiaries

Consolidated Statements of Operations

      (Unaudited) (Audited)

 

  For the Quarter EndedDecember 31, For the Year EndedDecember 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Investment income:

 

Interest from portfolio companies:

 

Control investments

 

$

154,647

 

$

11,303

 

$

279,055

 

$

23,068

 

Affiliate investments

 

 

599,931

 

 

517,539

 

 

2,366,955

 

 

1,541,507

 

Non-Control/Non-Affiliate investments

 

 

381,248

 

 

378,043

 

 

1,506,792

 

 

1,453,059

 

Total interest from portfolio companies

 

 

1,135,826

 

 

906,885

 

 

4,152,802

 

 

3,017,634

 

   

Interest from other investments:

 

Non-Control/Non-Affiliate investments

 

 

82

 

 

533

 

 

131

 

 

13,876

 

Total interest from other investments

 

 

82

 

 

533

 

 

131

 

 

13,876

 

   

Dividend and other investment income:

 

Affiliate investments

 

 

422,200

 

 

145,589

 

 

974,669

 

 

354,536

 

Non-Control/Non-Affiliate investments

 

 

122,965

 

 

128,965

 

 

481,665

 

 

533,643

 

Total dividend and other investment income

 

 

545,165

 

 

274,554

 

 

1,456,334

 

 

888,179

 

   

Fee income:

 

Control investments

 

 

3,900

 

 

-

 

 

7,800

 

 

-

 

Affiliate investments

 

 

20,371

 

 

36,912

 

 

92,531

 

 

114,697

 

Non-Control/Non-Affiliate investments

 

 

27,642

 

 

17,647

 

 

55,583

 

 

41,917

 

Total fee income

 

 

51,913

 

 

54,559

 

 

155,914

 

 

156,614

 

Total investment income

 

 

1,732,986

 

 

1,236,531

 

 

5,765,181

 

 

4,076,303

 

   

Expenses:

 

Base management fee

 

 

230,454

 

 

238,904

 

 

927,226

 

 

858,144

 

Capital gains incentive fees

 

 

(168,000

)

 

86,000

 

 

(1,048,760

)

 

4,200,000

 

Professional fees

 

 

160,657

 

 

200,195

 

 

729,967

 

 

578,577

 

Shareholders and office operating

 

 

41,756

 

 

38,878

 

 

205,083

 

 

223,381

 

Directors' fees

 

 

50,050

 

 

39,050

 

 

187,833

 

 

153,500

 

Interest expense

 

 

43,918

 

 

304,700

 

 

69,960

 

 

617,270

 

Insurance

 

 

11,238

 

 

9,698

 

 

43,026

 

 

38,635

 

Corporate development

 

 

-

 

 

4,372

 

 

3,753

 

 

14,702

 

Other operating

 

 

1,017

 

 

998

 

 

1,141

 

 

1,106

 

Bad debt recovery

 

 

-

 

 

-

 

 

-

 

 

(15,000

)

Total expenses

 

 

371,090

 

 

922,795

 

 

1,119,229

 

 

6,670,315

 

Net investment income (loss) before income taxes

 

 

1,361,896

 

 

313,736

 

 

4,645,952

 

 

(2,594,012

)

Income tax expense (benefit)

 

 

131,792

 

 

(6,119

)

 

215,542

 

 

10,896

 

Net investment income (loss)

 

 

1,230,104

 

 

319,855

 

 

4,430,410

 

 

(2,604,908

)

   

Net realized gain (loss) on sales and dispositions of investments:

 

Control investments

 

 

-

 

 

(308,676

)

 

-

 

 

(308,676

)

Affiliate investments

 

 

-

 

 

57,215

 

 

167,159

 

 

192,645

 

Non-Control/Non-Affiliate investments

 

 

14,902

 

 

1,342,349

 

 

538,334

 

 

5,936,385

 

Net realized gain (loss) on sales and dispositions of investments

 

 

14,902

 

 

1,090,888

 

 

705,493

 

 

5,820,354

 

   

Net change in unrealized appreciation/depreciation on investments:

 

Control investments

 

 

(748,810

)

 

1,151,021

 

 

(748,810

)

 

1,151,021

 

Affiliate investments

 

 

4,692,512

 

 

(233,249

)

 

4,740,353

 

 

3,414,050

 

Non-Control/Non-Affiliate investments

 

 

(4,760,553

)

 

(1,597,207

)

 

(9,901,315

)

 

7,804,535

 

Change in unrealized appreciation/depreciation before income taxes

 

 

(816,851

)

 

(679,435

)

 

(5,909,772

)

 

12,369,606

 

Deferred income tax expense (benefit)

 

 

107,980

 

 

(213,327

)

 

107,980

 

 

(212,376

)

Net change in unrealized appreciation/depreciation on investments

 

 

(924,831

)

 

(466,108

)

 

(6,017,752

)

 

12,581,982

 

   

Net realized and unrealized (losses) gains on investments

 

 

(909,929

)

 

624,780

 

 

(5,312,259

)

 

18,402,336

 

Net increase (decrease) in net assets from operations

 

$

320,175

 

$

944,635

 

$

(881,849

)

$

15,797,428

 

Weighted average shares outstanding

 

 

2,581,021

 

 

2,581,021

 

 

2,581,021

 

 

2,581,707

 

Basic and diluted net increase (decrease) in net assets from operations per share

 

$

0.12

 

$

0.37

 

$

(0.34

)

$

6.12

 

       

Rand Capital Corporation and Subsidiaries

Consolidated Statements of Changes in Net Assets

For The Years Ended December 31, 2022 and 2021 (Audited)

   

 

 

 

2022

 

 

2021

 

Net assets at beginning of year

 

$

60,745,416

 

$

46,104,830

 

 

 

 

 

Net investment income (loss)

 

 

4,430,410

 

 

(2,604,908

)

Net realized gain on sales and dispositions of investments

 

 

705,493

 

 

5,820,354

 

Net change in unrealized appreciation/depreciation on investments

 

 

(6,017,752

)

 

12,581,982

 

Net (decrease) increase in net assets from operations

 

 

(881,849

)

 

15,797,428

 

 

 

 

 

Declaration of dividends

 

 

(2,142,247

)

 

(1,136,071

)

Purchase of treasury shares

 

 

-

 

 

(20,771

)

Net assets at end of year

 

$

57,721,320

 

$

60,745,416

 

Rand Capital Corporation and Subsidiaries Reconciliation of GAAP Total Expenses 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 (credits)/expenses 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 December 31, 2022

Three months ended December 31, 2021

Year ended

December 31, 2022

Year ended

December 31, 2021

 

 

 

 

 

 

Total expenses

 

$

371,090

 

$

922,795

$

1,119,229

 

$

6,670,315

Exclude (credits)/expenses for capital gains incentive fees

 

 

(168,000

)

 

86,000

 

(1,048,760

)

 

4,200,000

Adjusted expenses

 

$

539,090

 

$

836,795

$

2,167,989

 

$

2,470,315

Reconciliation of GAAP Net Investment Income (Loss) per Share to Adjusted Net Investment Income per Share (Unaudited)

In addition to reporting Net Investment Income 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 (credits)/expenses 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 December 31, 2022

Three months ended December 31, 2021

Year ended December 31, 2022

Year ended December 31, 2021

 

 

 

 

 

 

Net Investment Income (Loss) per Share

 

$

0.48

 

$

0.12

$

1.72

 

$

(1.01

)

Exclude (credits)/expenses for capital gains incentive fees per share

 

 

(0.07

)

 

0.04

 

(0.41

)

 

1.63

 

Adjusted Net Investment Income per Share

 

$

0.41

 

$

0.16

$

1.31

 

$

0.62

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230310005053/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