Rand Capital Reports 27% Increase in Total Investment Income for 2023
- Total investment income increased by 11% to $1.9 million for the fourth quarter and by 27% to $7.3 million for the full year 2023.
- Portfolio comprised 64% interest yielding debt instruments at year-end, up from 56% in 2022, improving portfolio yield and net interest income.
- Paid total dividends of $1.33 per share in 2023, a 60% increase from 2022.
- Net asset value per share was $23.56 at December 31, 2023, up 5% from year-end 2022.
- Made $2.3 million in follow-on investments during the fourth quarter; Full year investments totaled $20.3 million.
- Total expenses increased to $1.0 million in the fourth quarter compared to $371,000 in the prior-year period.
- Net investment income per share was $0.37 for the fourth quarter, down from $0.48 in the same period of 2022.
- Net investment income per share for 2023 was $1.15, lower than $1.72 per share in the prior year.
Insights
The recent financial performance of Rand Capital Corporation, as indicated by the growth in total investment income and net asset value, suggests a strategic shift towards debt investments. The increase in interest yielding debt instruments from 56% to 64% of the portfolio has contributed to an improved portfolio yield and net interest income, which is a positive sign for investors seeking stability and consistent returns. The reported 11% growth in quarterly investment income and 27% annual growth highlight the company's successful deployment of capital in income-producing assets.
However, the rise in total expenses, particularly the substantial increase in interest expenses due to the new senior revolving credit facility and the change in accrued capital gains incentive fees, present a mixed picture. While the credit facility has enabled growth, it has also led to higher costs that have affected net investment income, as seen in the decrease from the previous year. The reported dividends, including a significant 60% increase in 2023, reflect a strong return to shareholders, but investors should consider the sustainability of such payouts in the context of the company's overall financial health.
Examining Rand's portfolio composition and its emphasis on debt investments reveals a broader industry trend where business development companies (BDCs) are seeking to balance risk and return. Debt instruments, particularly in the lower middle market segment, can offer attractive yields, as evidenced by Rand's reported annualized weighted average yield of 13.6%. This is especially relevant in a potentially rising interest rate environment where fixed income assets can provide a hedge against market volatility.
The strategic sale of investments, such as Dealer Solutions and Design (DSD) and ACV Auctions securities, indicates an active portfolio management approach. The resulting liquidity from these sales supports future investment opportunities and dividend distributions. Rand's ability to realize gains from these sales and reinvest in new opportunities is crucial for maintaining portfolio growth and shareholder value.
The financial results of Rand Capital Corporation must be contextualized within the broader economic landscape. The shift towards interest yielding debt investments is likely a response to the macroeconomic conditions, such as interest rate changes and economic uncertainty. The company's increased portfolio yield suggests a strategic positioning to capitalize on these conditions.
The increased dividend payouts signal confidence in the company's earnings and financial strategy, potentially attracting income-focused investors. However, the sustainability of such dividends amid economic fluctuations will be a key factor for long-term shareholder value. The reported increase in net assets is a positive indicator of the company's financial stability, but it should be weighed against the increased leverage from the new credit facility and the higher interest expenses that accompany it.
-
Portfolio expansion centered on debt investments drives total investment income growth of
11% to$1.9 million 27% to$7.3 million -
Rand’s portfolio was comprised of
64% interest yielding debt instruments at year-end compared with56% at the end of 2022, which improved the portfolio yield and net interest income -
Paid total dividends of
$1.33 60% from 2022 -
Net asset value per share (“NAV”) was
$23.56 5% from year-end 2022 -
$2.3 million $20.3 million
Daniel P. Penberthy, President and Chief Executive Officer of Rand, commented, “We delivered another strong year of results as we continued to scale the business through the successful execution of our strategy. We put more than
“We entered 2024 with a strong and flexible balance sheet that is supported by multiple sources of capital. We have a solid pipeline of investment opportunities and believe we can continue to execute our strategy by increasing our portfolio composition with new debt investments.”
Fourth Quarter Highlights (compared with the prior-year period unless otherwise noted)
-
Total investment income grew
$197,000 11% , to$1.9 million 47% increase in interest from portfolio companies, partially offset by lower dividend income. The decrease in dividend income was largely due to a large prior-year dividend from a portfolio company, which did not occur, and the sale of the Company’s investment in Dealer Solutions and Design (DSD) during the second quarter of 2023. -
Total expenses were
$1.0 million $371,000 $293,000 $64,000 $168,000 -
Adjusted expenses, which exclude capital gains incentive fees and is a non-GAAP financial measure, were
$950,000 $539,000 -
Net investment income was
$962,000 $0.37 $1.2 million $0.48 $0.40 $0.41
2023 Highlights
-
Total investment income of
$7.3 million $1.6 million 27% , from the prior year. -
Total expenses were
$4.2 million $1.1 million $805,000 $1.0 million $975,000 -
Excluding the capital gains incentive fee accrual, adjusted expenses, which is a non-GAAP financial measure, increased
$1.2 million $3.4 million -
Net investment income per share was
$1.15 $1.72 $1.46 11% , from$1.31 -
Net assets at December 31, 2023 were
$60.8 million 5% from year-end 2022.
Portfolio and Investment Activity
As of December 31, 2023, Rand’s portfolio included investments with a fair value of
Fourth quarter 2023:
-
Funded a follow-on debt investment of
$2.2 million $0.6 million $7.4 million -
Follow-on equity investment of
$73,000
Full year 2023:
-
Invested a total of
$20.3 million -
Portfolio investment company DSD was sold during the second quarter of 2023, which resulted in the full repayment of Rand’s subordinated debt and sale of its preferred equity investments. In total, Rand received
$6.7 million $2.5 million -
Sold ACV Auctions public securities for
$1.7 million
Liquidity and Capital Resources
Cash at year-end was
At December 31, 2023, Rand had outstanding borrowings of
The Company did not repurchase any outstanding common stock during 2023.
Dividends
On December 5, 2023, the Board declared an aggregate of
During 2023, Rand paid a total of
On February 26, 2024, Rand declared its regular quarterly cash dividend distribution of
Webcast and Conference Call
Rand will host a conference call and webcast on Tuesday, March 5, 2024, 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 5:30 p.m. ET on the day of the call through Tuesday, March 19, 2024. To listen to the archived call, dial (412) 317-6671 and enter replay pin number 13743458. 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 businesses that have sustainable, differentiated and market-proven products, revenue of more than
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; statements regarding the implementation of the Company’s strategy, its ability to continue to increase the number and aggregate size of its debt investments and its growth trajectory; 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, 2023, 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) |
||||||||
|
|
2023 |
|
2022 |
||||
ASSETS |
|
|
|
|
|
|
||
Investments at fair value: |
|
|
|
|
|
|
||
Control investments (cost of |
|
$ |
4,148,960 |
|
|
$ |
3,536,207 |
|
Affiliate investments (cost of |
|
|
53,499,372 |
|
|
|
38,241,589 |
|
Non-Control/Non-Affiliate investments (cost of |
|
|
19,477,380 |
|
|
|
19,726,463 |
|
Total investments, at fair value (cost of |
|
|
77,125,712 |
|
|
|
61,504,259 |
|
Cash |
|
|
3,295,321 |
|
|
|
1,368,996 |
|
Interest receivable |
|
|
244,600 |
|
|
|
208,338 |
|
Prepaid income taxes |
|
|
127,869 |
|
|
|
76,396 |
|
Deferred tax asset, net |
|
|
39,179 |
|
|
|
28,160 |
|
Other assets |
|
|
189,301 |
|
|
|
295,043 |
|
Total assets |
|
$ |
81,021,982 |
|
|
$ |
63,481,192 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (NET ASSETS) |
|
|
|
|
|
|
||
Liabilities: |
|
|
|
|
|
|
||
Due to investment adviser |
|
$ |
979,297 |
|
|
$ |
562,221 |
|
Accounts payable and accrued expenses |
|
|
145,516 |
|
|
|
66,680 |
|
Line of credit |
|
|
16,250,000 |
|
|
|
2,550,000 |
|
Capital gains incentive fees |
|
|
2,279,700 |
|
|
|
2,167,000 |
|
Deferred revenue |
|
|
552,256 |
|
|
|
413,971 |
|
Total liabilities |
|
|
20,206,769 |
|
|
|
5,759,872 |
|
|
|
|
|
|
|
|
||
Stockholders’ equity (net assets): |
|
|
|
|
|
|
||
Common stock, |
|
|
264,892 |
|
|
|
264,892 |
|
Capital in excess of par value |
|
|
55,801,170 |
|
|
|
51,464,267 |
|
Treasury stock, at cost: 67,895 shares at 12/31/23 and 12/31/22 |
|
|
(1,566,605 |
) |
|
|
(1,566,605 |
) |
Total distributable earnings |
|
|
6,315,756 |
|
|
|
7,558,766 |
|
Total stockholders’ equity (net assets) (per share - 2023: |
|
|
60,815,213 |
|
|
|
57,721,320 |
|
Total liabilities and stockholders’ equity (net assets) |
|
$ |
81,021,982 |
|
|
$ |
63,481,192 |
|
Rand Capital Corporation and Subsidiaries |
||||||||||||||||
Consolidated Statements of Operations |
||||||||||||||||
| (Unaudited) | (Audited) | |||||||||||||||
For the Quarter Ended December 31, |
|
For the Year Ended December 31, |
||||||||||||||
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||||
| Investment income: | ||||||||||||||||
| Interest from portfolio companies: | ||||||||||||||||
| Control investments | $ |
192,072 |
|
$ |
154,647 |
|
$ |
698,872 |
|
$ |
279,055 |
|
||||
| Affiliate investments |
|
1,127,121 |
|
|
599,931 |
|
|
3,858,696 |
|
|
2,366,955 |
|
||||
| Non-Control/Non-Affiliate investments |
|
354,042 |
|
|
381,248 |
|
|
1,421,787 |
|
|
1,506,792 |
|
||||
| Total interest from portfolio companies |
|
1,673,235 |
|
|
1,135,826 |
|
|
5,979,355 |
|
|
4,152,802 |
|
||||
| Interest from other investments: | ||||||||||||||||
| Non-Control/Non-Affiliate investments |
|
241 |
|
|
82 |
|
|
933 |
|
|
131 |
|
||||
| Total interest from other investments |
|
241 |
|
|
82 |
|
|
933 |
|
|
131 |
|
||||
| Dividend and other investment income: | ||||||||||||||||
| Affiliate investments |
|
86,125 |
|
|
422,200 |
|
|
506,076 |
|
|
974,669 |
|
||||
| Non-Control/Non-Affiliate investments |
|
129,250 |
|
|
122,965 |
|
|
531,055 |
|
|
481,665 |
|
||||
| Total dividend and other investment income |
|
215,375 |
|
|
545,165 |
|
|
1,037,131 |
|
|
1,456,334 |
|
||||
| Fee income: | ||||||||||||||||
| Control investments |
|
4,516 |
|
|
3,900 |
|
|
17,242 |
|
|
7,800 |
|
||||
| Affiliate investments |
|
31,245 |
|
|
20,371 |
|
|
278,061 |
|
|
92,531 |
|
||||
| Non-Control/Non-Affiliate investments |
|
5,507 |
|
|
27,642 |
|
|
25,441 |
|
|
55,583 |
|
||||
| Total fee income |
|
41,268 |
|
|
51,913 |
|
|
320,744 |
|
|
155,914 |
|
||||
| Total investment income |
|
1,930,119 |
|
|
1,732,986 |
|
|
7,338,163 |
|
|
5,765,181 |
|
||||
| Expenses: | ||||||||||||||||
| Base management fee |
|
287,297 |
|
|
230,454 |
|
|
1,057,166 |
|
|
927,226 |
|
||||
| Capital gains incentive fees |
|
64,000 |
|
|
(168,000 |
) |
|
804,700 |
|
|
(1,048,760 |
) |
||||
| Interest expense |
|
336,997 |
|
|
43,918 |
|
|
1,044,831 |
|
|
69,960 |
|
||||
| Professional fees |
|
155,346 |
|
|
160,657 |
|
|
547,456 |
|
|
729,967 |
|
||||
| Directors' fees |
|
65,709 |
|
|
50,050 |
|
|
263,500 |
|
|
187,833 |
|
||||
| Stockholders and office operating |
|
55,158 |
|
|
41,756 |
|
|
261,639 |
|
|
205,083 |
|
||||
| Administrative fees |
|
37,250 |
|
|
- |
|
|
149,000 |
|
|
- |
|
||||
| Insurance |
|
10,380 |
|
|
11,238 |
|
|
44,100 |
|
|
43,026 |
|
||||
| Corporate development |
|
1,660 |
|
|
- |
|
|
5,927 |
|
|
3,753 |
|
||||
| Other operating |
|
- |
|
|
1,017 |
|
|
- |
|
|
1,141 |
|
||||
| Total expenses |
|
1,013,797 |
|
|
371,090 |
|
|
4,178,319 |
|
|
1,119,229 |
|
||||
| Net investment income before income taxes |
|
916,322 |
|
|
1,361,896 |
|
|
3,159,844 |
|
|
4,645,952 |
|
||||
| Income tax (benefit) expense, including excise tax expense |
|
(45,282 |
) |
|
131,792 |
|
|
192,111 |
|
|
215,542 |
|
||||
| Net investment income |
|
961,604 |
|
|
1,230,104 |
|
|
2,967,733 |
|
|
4,430,410 |
|
||||
| Net realized (loss) gain on sales and dispositions of investments: | ||||||||||||||||
| Affiliate investments |
|
(21,265 |
) |
|
- |
|
|
2,574,829 |
|
|
167,159 |
|
||||
| Non-Control/Non-Affiliate investments |
|
3,440 |
|
|
14,902 |
|
|
(1,523,750 |
) |
|
538,334 |
|
||||
| Net realized (loss) gain on sales and dispositions, before income taxes |
|
(17,825 |
) |
|
14,902 |
|
|
1,051,079 |
|
|
705,493 |
|
||||
| Income tax expense |
|
21,524 |
|
|
- |
|
|
359,682 |
|
|
- |
|
||||
| Net realized (loss) gain on sales and dispositions of investments |
|
(39,349 |
) |
|
14,902 |
|
|
691,397 |
|
|
705,493 |
|
||||
| Net change in unrealized appreciation/depreciation on investments: | ||||||||||||||||
| Control investments |
|
- |
|
|
(748,810 |
) |
|
- |
|
|
(748,810 |
) |
||||
| Affiliate investments |
|
627,667 |
|
|
4,692,512 |
|
|
(259,031 |
) |
|
4,740,353 |
|
||||
| Non-Control/Non-Affiliate investments |
|
(289,938 |
) |
|
(4,760,553 |
) |
|
3,231,115 |
|
|
(9,901,315 |
) |
||||
| Change in unrealized appreciation/depreciation before income taxes |
|
337,729 |
|
|
(816,851 |
) |
|
2,972,084 |
|
|
(5,909,772 |
) |
||||
| Deferred income tax expense |
|
171,005 |
|
|
107,980 |
|
|
104,564 |
|
|
107,980 |
|
||||
| Net change in unrealized appreciation/depreciation on investments |
|
166,724 |
|
|
(924,831 |
) |
|
2,867,520 |
|
|
(6,017,752 |
) |
||||
| Net realized and unrealized gain (loss) on investments |
|
127,375 |
|
|
(909,929 |
) |
|
3,558,917 |
|
|
(5,312,259 |
) |
||||
| Net increase (decrease) in net assets from operations | $ |
1,088,979 |
|
$ |
320,175 |
|
$ |
6,526,650 |
|
$ |
(881,849 |
) |
||||
| Weighted average shares outstanding |
|
2,581,021 |
|
|
2,581,021 |
|
|
2,581,021 |
|
|
2,581,021 |
|
||||
| Basic and diluted net increase (decrease) in net assets from operations per share | $ |
0.42 |
|
$ |
0.12 |
|
$ |
2.53 |
|
$ |
(0.34 |
) |
||||
Rand Capital Corporation and Subsidiaries |
||||||||
Consolidated Statements of Changes in Net Assets |
||||||||
(Audited) |
||||||||
|
|
2023 |
|
2022 |
||||
Net assets at beginning of year |
|
$ |
57,721,320 |
|
|
$ |
60,745,416 |
|
Net investment income |
|
|
2,967,733 |
|
|
|
4,430,410 |
|
Net realized gain on sales and dispositions of investments |
|
|
691,397 |
|
|
|
705,493 |
|
Net change in unrealized appreciation/depreciation on investments |
|
|
2,867,520 |
|
|
|
(6,017,752 |
) |
Net increase (decrease) in net assets from operations |
|
|
6,526,650 |
|
|
|
(881,849 |
) |
Declaration of dividends |
|
|
(3,432,757 |
) |
|
|
(2,142,247 |
) |
Net assets at end of year |
|
$ |
60,815,213 |
|
|
$ |
57,721,320 |
|
Rand Capital Corporation and Subsidiaries
Reconciliation of GAAP Total Expense to Non-GAAP Adjusted Expenses
(Unaudited)
In addition to reporting total expenses, which is a
|
Three months ended
|
Three months ended
|
Year ended
|
Year ended
|
||||||||||
|
|
|
|
|
||||||||||
Total expenses |
$ |
1,013,797 |
$ |
371,090 |
|
$ |
4,178,319 |
$ |
1,119,229 |
|
||||
Exclude expenses/(credits) for capital gains incentive fees |
|
64,000 |
|
(168,000 |
) |
|
804,700 |
|
(1,048,760 |
) |
||||
Adjusted total expenses |
$ |
949,797 |
$ |
539,090 |
|
$ |
3,373,619 |
$ |
2,167,989 |
|
||||
Reconciliation of GAAP Net Investment Income per Share to
Adjusted Net Investment Income per Share
(Unaudited)
In addition to reporting Net Investment Income per Share, which is a 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 per Share removing the effect of any expenses/(credits) for capital gains incentive fees. GAAP Net Investment 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 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
|
Three months ended
|
Year ended
|
Year ended
|
||||||||||
|
|
|
|
|
||||||||||
Net investment income per share |
$ |
0.37 |
$ |
0.48 |
|
$ |
1.15 |
$ |
1.72 |
|
||||
Exclude expenses/(credits) for capital gains incentive fees per share |
|
0.02 |
|
(0.07 |
) |
|
0.31 |
|
(0.41 |
) |
||||
Adjusted net investment income per share |
$ |
0.40 |
$ |
0.41 |
|
$ |
1.46 |
$ |
1.31 |
|
||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20240305723250/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
Source: Rand Capital Corporation
FAQ
What was the total investment income growth for the fourth quarter and full year 2023 for Rand (RAND)?
What was the percentage increase in dividends per share in 2023 compared to 2022 for Rand (RAND)?
What was the net asset value per share at December 31, 2023, for Rand (RAND)?
How much did Rand (RAND) invest in follow-on investments during the fourth quarter of 2023?
What was the total amount of investments made by Rand (RAND) in full year 2023?
