Rand Capital Reports 65% Increase in Total Investment Income for First Quarter 2023
-
Total investment income increased
65% to for the quarter compared with the first quarter last year driven by strong growth in interest, dividend and fee income$1.85 million -
First quarter net investment income per share was
compared with$0.28 in the prior-year first quarter; Non-GAAP adjusted net investment income per share increased$0.30 86% to compared with$0.39 in the first quarter of 2022$0.21 -
Net asset value per share (“NAV”) increased
3% to at March 31, 2023 from$23.00 at December 31, 2022$22.36 -
Invested
in new and follow on investments during the first quarter 2023 while receiving$5.6 million from portfolio investment sales and payments$0.5 million -
Increased regular quarterly dividend
25% to per share for second quarter 2023$0.25 -
Board of Directors renewed
share repurchase program$1.5 million
Daniel P. Penberthy, President and Chief Executive Officer of Rand, commented, “We have had a strong start to 2023 demonstrated by continued earnings momentum driven by the improvement of our portfolio composition as well as the overall favorable performance of portfolio companies amidst a challenging economic business climate. Importantly, we have a strong balance sheet and significant liquidity that positions us well in a volatile market as we expect to continue to grow our portfolio, expand earnings and deliver on our goal to consistently increase our dividend.”
First Quarter Highlights (compared with the prior-year period unless otherwise noted)
-
Total investment income grew
, or$727,000 65% , to driven by a$1.85 million 42% increase in interest from portfolio companies, dividend income that more than doubled, and higher fee income. -
Total expenses were
compared with$1.05 million in the prior-year first quarter. The increase includes a$345,000 increase in capital gains incentives fees payable to the Company’s external investment adviser, Rand Capital Management, LLC. The increase also reflects$531,000 in interest expense from the senior revolving credit facility entered into in June 2022 to fund growth. Offsetting these increases was a$158,000 decline in professional fees. Excluding capital gains incentive fees, adjusted expenses, which is a non-GAAP financial measure, were$60,000 compared with$757,000 in the first quarter of 2022. See the attached description of this non-GAAP financial measure and reconciliation table for adjusted expenses.$585,000 -
Net investment income was
, or$715,000 per share, compared with$0.28 , or$772,000 per share, in the first quarter of 2022. Adjusted net investment income per share, a non-GAAP financial measure, which excludes the capital gains incentive fee accrual, was$0.30 per share, up from$0.39 in last year’s first quarter. See the attached description of this non-GAAP financial measure and reconciliation table for adjusted net investment income per share.$0.21
Portfolio and Investment Activity
As of March 31, 2023, Rand’s portfolio included investments with a fair value of
First quarter 2023:
-
Provided
to PressurePro in subordinated debt at$3.0 million 15% interest rate and with a10% warrant. PressurePro is a family owned and operated company that has established itself as a market leader for branded tire pressure monitoring systems consisting of a suite of proprietary hardware and software. -
Funded a follow on debt investment of
in Food Service Supply (FSS) in combination with an equity sale of$2.3 million . Rand’s total debt and equity investment in FSS had a fair value of$210,000 as of March 31, 2023.$5.2 million -
Equity investment of
in Tilson Technologies’ asset ownership affiliate SQF, LLC, which supports Tilson’s expansion by both driving the continued growth of its nationwide network infrastructure design-build services and supporting SQF. SQF develops telecommunications assets in public rights-of-way throughout$250,000 the United States and is a leading pole owner and solutions provider for 5G.
Liquidity and Capital Resources
Cash at the end of the first quarter of 2023 was
At March 31, 2023, Rand had outstanding borrowings of
The Company did not repurchase any outstanding common stock during the first quarter of 2023.
Board Renewed Share Repurchase Authorization
Rand’s Board of Directors renewed the share repurchase program authorizing the purchase of up to
Dividends
On April 26, 2023, Rand declared its regular quarterly cash dividend distribution of
Webcast and Conference Call
Rand will host a conference call and webcast on Tuesday, May 9, 2023, 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 5:00 p.m. ET on the day of the call through Tuesday, May 16, 2023. To listen to the archived call, dial (412) 317-6671 and enter replay pin number 13737966. 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
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 increasing our dividend, 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.
Rand Capital Corporation and Subsidiaries
Consolidated Statements of Financial Position
|
|
March 31, 2023 (Unaudited) |
|
|
December 31, 2022 |
|
||
ASSETS |
|
|
|
|
|
|
||
Investments at fair value: |
|
|
|
|
|
|
||
Control investments (cost of |
|
$ |
3,580,594 |
|
|
$ |
3,536,207 |
|
Affiliate investments (cost of |
|
|
43,743,479 |
|
|
|
38,241,589 |
|
Non-Control/Non-Affiliate investments (cost of |
|
|
20,866,197 |
|
|
|
19,726,463 |
|
Total investments, at fair value (cost of |
|
|
68,190,270 |
|
|
|
61,504,259 |
|
Cash |
|
|
1,841,162 |
|
|
|
1,368,996 |
|
Interest receivable |
|
|
209,492 |
|
|
|
208,338 |
|
Prepaid income taxes |
|
|
43,939 |
|
|
|
76,396 |
|
Deferred tax asset |
|
|
33,695 |
|
|
|
28,160 |
|
Other assets |
|
|
286,715 |
|
|
|
295,043 |
|
Total assets |
|
$ |
70,605,273 |
|
|
$ |
63,481,192 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (NET ASSETS) |
|
|
|
|
|
|
||
Liabilities: |
|
|
|
|
|
|
||
Due to investment adviser |
|
$ |
245,768 |
|
|
$ |
562,221 |
|
Accounts payable and accrued expenses |
|
|
97,660 |
|
|
|
66,680 |
|
Line of credit |
|
|
7,950,000 |
|
|
|
2,550,000 |
|
Capital gains incentive fees |
|
|
2,458,000 |
|
|
|
2,167,000 |
|
Deferred revenue |
|
|
478,452 |
|
|
|
413,971 |
|
Total liabilities |
|
|
11,229,880 |
|
|
|
5,759,872 |
|
Stockholders’ equity (net assets): |
|
|
|
|
|
|
||
Common stock, |
|
|
264,892 |
|
|
|
264,892 |
|
Capital in excess of par value |
|
|
51,464,267 |
|
|
|
51,464,267 |
|
Treasury stock, at cost: 67,895 shares at 3/31/23 and 12/31/22 |
|
|
(1,566,605 |
) |
|
|
(1,566,605 |
) |
Total distributable earnings |
|
|
9,212,839 |
|
|
|
7,558,766 |
|
Total stockholders’ equity (net assets) (per share – 3/31/23: |
|
|
59,375,393 |
|
|
|
57,721,320 |
|
Total liabilities and stockholders’ equity (net assets) |
|
$ |
70,605,273 |
|
|
$ |
63,481,192 |
|
Rand Capital Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
|
|
Three months ended March 31, 2023 |
|
|
Three months ended March 31, 2022 |
|
||
Investment income: |
|
|
|
|
|
|
||
Interest from portfolio companies: |
|
|
|
|
|
|
||
Control investments |
|
$ |
150,916 |
|
|
$ |
— |
|
Affiliate investments |
|
|
787,821 |
|
|
|
570,116 |
|
Non-Control/Non-Affiliate investments |
|
|
358,166 |
|
|
|
342,023 |
|
Total interest from portfolio companies |
|
|
1,296,903 |
|
|
|
912,139 |
|
Interest from other investments: |
|
|
|
|
|
|
||
Non-Control/Non-Affiliate investments |
|
|
132 |
|
|
|
— |
|
Total interest from other investments |
|
|
132 |
|
|
|
— |
|
Dividend and other investment income: |
|
|
|
|
|
|
||
Affiliate investments |
|
|
347,148 |
|
|
|
43,725 |
|
Non-Control/Non-Affiliate investments |
|
|
127,595 |
|
|
|
129,265 |
|
Total dividend and other investment income |
|
|
474,743 |
|
|
|
172,990 |
|
Fee income: |
|
|
|
|
|
|
||
Control investments |
|
|
3,900 |
|
|
|
— |
|
Affiliate investments |
|
|
67,842 |
|
|
|
30,305 |
|
Non-Control/Non-Affiliate investments |
|
|
7,978 |
|
|
|
9,314 |
|
Total fee income |
|
|
79,720 |
|
|
|
39,619 |
|
Total investment income |
|
|
1,851,498 |
|
|
|
1,124,748 |
|
Expenses: |
|
|
|
|
|
|
||
Base management fee |
|
|
245,393 |
|
|
|
240,275 |
|
Capital gains incentive fees |
|
|
291,000 |
|
|
|
(239,760 |
) |
Professional fees |
|
|
170,975 |
|
|
|
231,083 |
|
Interest expense |
|
|
158,400 |
|
|
|
— |
|
Stockholders and office operating |
|
|
64,304 |
|
|
|
56,698 |
|
Directors' fees |
|
|
63,850 |
|
|
|
45,100 |
|
Administrative fees |
|
|
37,250 |
|
|
|
— |
|
Insurance |
|
|
12,960 |
|
|
|
8,910 |
|
Corporate development |
|
|
3,713 |
|
|
|
3,027 |
|
Other operating |
|
|
— |
|
|
|
45 |
|
Total expenses |
|
|
1,047,845 |
|
|
|
345,378 |
|
Net investment income before income taxes: |
|
|
803,653 |
|
|
|
779,370 |
|
Income tax expense |
|
|
88,737 |
|
|
|
7,367 |
|
Net investment income |
|
|
714,916 |
|
|
|
772,003 |
|
Net realized gain (loss) on sales and dispositions of investments: |
|
|
|
|
|
|
||
Affiliate investments |
|
|
58,329 |
|
|
|
— |
|
Non-Control/Non-Affiliate investments |
|
|
(4,941 |
) |
|
|
(851,471 |
) |
Net realized gain (loss) on sales and dispositions of investments |
|
|
53,388 |
|
|
|
(851,471 |
) |
Net change in unrealized appreciation/depreciation on investments: |
|
|
|
|
|
|
||
Non-Control/Non-Affiliate investments |
|
|
1,401,973 |
|
|
|
(331,069 |
) |
Net change in unrealized appreciation/depreciation on investments |
|
|
1,401,973 |
|
|
|
(331,069 |
) |
Net realized and unrealized gain (loss) on investments |
|
|
1,455,361 |
|
|
|
(1,182,540 |
) |
Net increase (decrease) in net assets from operations |
|
$ |
2,170,277 |
|
|
$ |
(410,537 |
) |
Weighted average shares outstanding |
|
|
2,581,021 |
|
|
|
2,581,021 |
|
Basic and diluted net increase (decrease) in net assets from operations per share |
|
$ |
0.84 |
|
|
$ |
(0.16 |
) |
Rand Capital Corporation and Subsidiaries
Consolidated Statements of Changes in Net Assets
(Unaudited)
|
|
Three months ended March 31, 2023 |
|
|
Three months ended March 31, 2022 |
|
||
Net assets at beginning of period |
|
$ |
57,721,320 |
|
|
$ |
60,745,416 |
|
Net investment income |
|
|
714,916 |
|
|
|
772,003 |
|
Net realized gain (loss) on sales and dispositions of investments |
|
|
53,388 |
|
|
|
(851,471 |
) |
Net change in unrealized appreciation/depreciation on investments |
|
|
1,401,973 |
|
|
|
(331,069 |
) |
Net increase (decrease) in net assets from operations |
|
|
2,170,277 |
|
|
|
(410,537 |
) |
Declaration of dividend |
|
|
(516,204 |
) |
|
|
(387,153 |
) |
Net assets at end of period |
|
$ |
59,375,393 |
|
|
$ |
59,947,726 |
|
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
|
Three months ended March 31, 2023 |
Three months ended March 31, 2022 |
||||
Total expenses |
$ |
1,047,845 |
$ |
345,378 |
|
|
Exclude expenses/(credits) for capital gains incentive fees |
|
291,000 |
|
|
(239,760 |
) |
Adjusted expenses |
$ |
756,845 |
|
$ |
585,138 |
|
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
|
Three months ended March 31, 2023 |
Three months ended March 31, 2022 |
||||
Net investment income per share |
$ |
0.28 |
$ |
0.30 |
|
|
Exclude expenses/(credits) for capital gains incentive fees |
|
0.11 |
|
|
(0.09 |
) |
Adjusted net investment income per share |
$ |
0.39 |
|
$ |
0.21 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20230509005173/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