NASDAQ:RAND Rand Capital Q2 2024 Earnings Report $19.66 +0.23 (+1.16%) Closing price 04/25/2025 03:58 PM EasternExtended Trading$19.08 -0.58 (-2.93%) As of 04/25/2025 04:05 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings History Rand Capital EPS ResultsActual EPS$0.44Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/ARand Capital Revenue ResultsActual Revenue$2.14 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/ARand Capital Announcement DetailsQuarterQ2 2024Date8/6/2024TimeN/AConference Call DateTuesday, August 6, 2024Conference Call Time1:30PM ETUpcoming EarningsRand Capital's Q1 2025 earnings is scheduled for Monday, May 5, 2025, with a conference call scheduled at 1:30 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Rand Capital Q2 2024 Earnings Call TranscriptProvided by QuartrAugust 6, 2024 ShareLink copied to clipboard.There are 4 speakers on the call. Operator00:00:00welcome to Rand Capital Corporation Second Quarter Fiscal Year 20 24 Financial Results. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Craig Mychajluk, Investor Relations. Operator00:00:24Thank you. You may begin. Speaker 100:00:29Thank you, and good afternoon, everyone. We appreciate your interest in Rand Capital and for joining us today for our Q2 2024 financial results conference call. On the line with me are Dan Pemberthy, our President and Chief Executive Officer and Margaret Brechtel, our Executive Vice President and Chief Financial Officer. A copy of the release and slides that accompany our conversation is available at randcapital.com. If you're following along in the slide deck, please turn to Slide 2, where I'd like to point out some important information. Speaker 100:00:57As you are likely aware, we may make some forward looking statements during this presentation. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ from where we are today. You can find a summary of these risks and uncertainties and other factors in the earnings release and other documents filed by the company with the Securities and Exchange Commission. These documents can be found on our website or atsec.gov. During today's call, we'll also discuss some non GAAP financial measures. Speaker 100:01:26We believe these will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results in accordance with generally accepted accounting principles. We have provided reconciliations of non GAAP measures with comparable GAAP measures in the tables that accompany today's earnings release. With that, please turn to Slide 3, and I'll hand the discussion over to Dan. Dan? Speaker 200:01:50Thank you, Craig, and good afternoon, everyone. We continue to execute our strategy, achieving significant growth in total investment income as a result of our growing portfolio and our capital deployment into debt instruments. This past quarter, our portfolio optimization efforts did include selective asset sales, which generated capital we used to enhance our balance sheet, which will position us rather favorably for future growth opportunities. I'm very excited to highlight and remind you all that last month we announced the acquisition of 1 of our portfolio investments, SCIAPS, which is one of our larger legacy equity and debt holdings by UK based Spectris Plc. The transaction, which is expected to be completed later this year, is valued at up to $260,000,000 This does include a deferred component of $60,000,000 earn out. Speaker 200:02:51Rand holds approximately 6% of Saeb's equity with our total investment costing $5,200,000 and does include a secured note from 2021. As of June 30, we have valued this total investment into SIOPS at $10,800,000 We are carefully evaluating the best options for the anticipated capital infusion from this acquisition. We recognize that we need to strategically redeploy these funds to the extent possible through new investments as well as reinvesting in existing portfolio companies, which show high potential. This approach aims to drive further value for our shareholders and may also include additional returns in the form of dividends down the road. The achievement of our strategic objectives over the last few years has translated into tangible benefits for our shareholders. Speaker 200:03:50This is highlighted on Slide 4. Year to date, we have declared total dividends of $0.83 per share. This includes a cash dividend of $0.29 per share rather for the Q2. More recently, on July 31, we announced that our Q3 2024 dividend will continue to be held at $0.29 per share. At quarter end, after deploying capital and distributing $748,000 in cash dividends to shareholders, we've maintained total available liquidity of over $11,000,000 This liquidity includes our line of credit availability, cash on hand and our remaining highly liquid publicly traded BDC securities. Speaker 200:04:39If you turn to Slide 5, you will see our portfolio mix between debt and equity and the changes during the recent quarter. Our portfolio had a fair value of $87,100,000 across 26 businesses. This is up 13% from year end 2023 and 5% sequentially. The increases reflect investments and valuation adjustments in multiple companies, including SIOPS, partially offset by stock sales and portfolio loan repayments. Our portfolio is comprised of approximately 66% debt investments with an annualized weighted average yield of 13.8 percent including PIK interest. Speaker 200:05:26The remaining mix includes 32 percent equity investments in private companies and does primarily consist of SIAPS and Tilson as well as 2% in publicly traded BDC investments. During the quarter, we Supply or FSS, who is a commercial kitchen supply and services company based in Utah. Following this investment, our total debt and equity holdings in FSS reflect a fair value of $7,500,000 at quarter end. The bottom half of the slide highlights notable exits and repayments for the quarter. We received $3,300,000 in total proceeds from liquidating our shareholdings in 3 BDC Investments. Speaker 200:06:21This resulted in realized gains of $598,000 from Carlyle, $485,000 from PennantPark and $177,000 from Ares. Additionally, we recognized a realized gain of $397,000 from a partial asset sale of a Tilson affiliated entity called SQF. We also received $740,000 principal loan repayments from our PressurePro debt investment. Lastly, we exited our equity investment in Noah, which had been previously valued at 0. Slide 7, if you kindly turn to that, visually illustrates the diversity within our portfolio and the changes in our industry allocation over the Q2. Speaker 200:07:10Recent investments and adjustments in fair value led to changes in our industry composition. Manufacturing increased from 20% to 25% of our portfolio, while the BDC stocks following their sales decreased from 5% to 2%. We place a high value on the diversity of our industry mix. The broad spectrum of sectors across the portfolio reflects our strategic approach, ensuring resilience in a difficult economy and mitigating risk in our investment efforts. Slide 8 lists our top 5 portfolio companies at quarter end. Speaker 200:07:51And consistent with my prior comments regarding our larger legacy equity holdings, Tilson remains our largest fair value investment at $12,300,000 marking a 17% increase from the prior quarter and representing 14% of our total portfolio. SIOPS moved up to the 2nd position with its value more than doubling to $10,800,000 following the announced definitive purchase agreement. Overall, the top 5 companies represent 50% of our total portfolio at quarter end. With that, I'll turn it over to Margaret to review our financials in greater depth. Speaker 300:08:31Thanks, Dan, and good afternoon, everyone. Operator00:08:34I will Speaker 300:08:34start on Slide 10, which provides an overview of our financial summary for the 2024 Q2. Total investment income for the quarter was $2,100,000 and that represents an 18% increase over last year's Q2. This growth was driven by a 35% increase in interest income, reflecting 7 new interest yielding investments made over the past year. Overall, 22 portfolio companies contributed to our investment income. Total expenses for the Q2 were approximately $2,700,000 compared with $1,300,000 in the same quarter last year. Speaker 300:09:13This increase included a 1,200,000 dollars rise in capital gain incentive fee to our external investment advisor. In accordance with GAAP, we must accrue a capital gains incentive fee on our realized and unrealized gains and losses. Due to recent portfolio performance and realized gains, we recognized a higher accrual this quarter. Adjusted expenses, which exclude accrued capital gains incentive fees and is a non GAAP financial measure, were $1,000,000 compared with $816,000 in the Q2 of 2023. The increase largely was due to interest expense given usage of the senior revolving credit facility. Speaker 300:09:572nd quarter net investment loss was $517,000 or $0.20 per share. That was compared with a net investment income of $493,000 or $0.19 per share in last year's period. On an adjusted basis, which is a non GAAP financial measure and excludes the capital gains incentive fee accrual expense, Net investment income was $0.44 per share, up 16% from $0.38 per share in last year's period. On Slide 11, you will see a waterfall graph for the change in net asset value for the quarter. Net assets at June 30, 2024 were $68,600,000 up 11%. Speaker 300:10:39The change largely reflects the unrealized appreciation and investments of $7,800,000 As a result, the net asset value per share at June 30, 2024 increased to $26.56 compared with $23.85 at March 31, 2024. As highlighted on Slide 12, we continue to have a strong and flexible balance sheet that positions us well for future investments. Total assets grew 8% to $90,800,000 which included cash at quarter end of approximately $2,300,000 We also held approximately $1,300,000 in liquid BDC shares, which are available for future liquidity needs. Based on our borrowing base formula, Rand had $7,800,000 of availability in its existing $25,000,000 senior secured revolving credit facility at June 30, 2024 and our outstanding borrowings of 17 $200,000 carrying an interest rate of 18.8 percent at quarter end. We expect that our strategy transforming the portfolio to include more income generating investments will enable us to sustain higher dividend levels over time. Speaker 300:11:54Recently, Rand announced its regular quarterly cash dividend of $0.29 per share. This dividend will be paid on or around September 13, 2024 to shareholders of record as of August 30, 2024. With that, I will turn the discussion back to Dan. Speaker 200:12:13Thanks, Margaret. Moving forward, our strategy is to expand our business by pursuing new investments and we will continue to reinvest in existing portfolio companies with high potential. Our objective is to participate in new smaller M and A transactions with other co investors, which will help to support robust steady income stream through these new debt instruments, while also sharing in the EBITDA growth of these new opportunities through our equity holdings. We expect that this will lead to future monetization for our shareholders. We also believe that this approach will enhance our capacity to increase dividends over the long term. Speaker 200:13:00While Rand is currently more focused on debt financing for lower to middle market businesses, the expected successful exit of SIAPS underscores our commitment to maintaining minority equity investments within our portfolio and how they accompany all of our new investments. These future investments, however, will now be part of a larger initial debt investment, as I noted. We believe these equity stakes can contribute to strong returns upon future exits. Thank you for joining us today and for your continued interest in Rand Capital. We look forward to updating you on our Q3 2024 results, which will be reported in November. Speaker 200:13:47Have a great day. Operator00:13:50This concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallRand Capital Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Rand Capital Earnings HeadlinesRand Capital Announces First Quarter 2025 Financial Results Conference Call and WebcastApril 23 at 11:29 PM | finance.yahoo.comStocks With Rising Relative Strength: Victory Capital Cl AApril 9, 2025 | msn.comTrump’s treachery Trump’s Final Reset Inside the shocking plot to re-engineer America’s financial system…and why you need to move your money now.April 26, 2025 | Porter & Company (Ad)Rand Capital to Present Investor Slides in March 2025March 18, 2025 | tipranks.comEarnings call transcript: Rand Capital Q4 2024 sees 11% income riseMarch 12, 2025 | investing.comRand Capital (NASDAQ:RAND) Stock Quotes, Forecast and News SummaryMarch 12, 2025 | benzinga.comSee More Rand Capital Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Rand Capital? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Rand Capital and other key companies, straight to your email. Email Address About Rand CapitalRand Capital (NASDAQ:RAND) is a business development company specializing in subordinated debt with warrants or preferred equity and venture capital investments. Within private equity, the firm specializing in capital growth and lower middle market investments. Within venture capital, it specializing in early to late-stage private businesses. It does not prefer to invest in real estate sector. It prefers to invest in software, professional services, manufacturing, consumer, healthcare, automotive and public d stocks. It prefers to invest in East or Midwest U.S. operations sectors. It typically invests between $0.75 million and $5 million with initial target size of $1.5 million. It seeks to invest in companies having more than $2 million in revenue or having excess of $1.5 million and up to $5 million in EBITDA. It prefers to be a minority stake and seeks to take a Board seat in its portfolio companies. 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There are 4 speakers on the call. Operator00:00:00welcome to Rand Capital Corporation Second Quarter Fiscal Year 20 24 Financial Results. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Craig Mychajluk, Investor Relations. Operator00:00:24Thank you. You may begin. Speaker 100:00:29Thank you, and good afternoon, everyone. We appreciate your interest in Rand Capital and for joining us today for our Q2 2024 financial results conference call. On the line with me are Dan Pemberthy, our President and Chief Executive Officer and Margaret Brechtel, our Executive Vice President and Chief Financial Officer. A copy of the release and slides that accompany our conversation is available at randcapital.com. If you're following along in the slide deck, please turn to Slide 2, where I'd like to point out some important information. Speaker 100:00:57As you are likely aware, we may make some forward looking statements during this presentation. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ from where we are today. You can find a summary of these risks and uncertainties and other factors in the earnings release and other documents filed by the company with the Securities and Exchange Commission. These documents can be found on our website or atsec.gov. During today's call, we'll also discuss some non GAAP financial measures. Speaker 100:01:26We believe these will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results in accordance with generally accepted accounting principles. We have provided reconciliations of non GAAP measures with comparable GAAP measures in the tables that accompany today's earnings release. With that, please turn to Slide 3, and I'll hand the discussion over to Dan. Dan? Speaker 200:01:50Thank you, Craig, and good afternoon, everyone. We continue to execute our strategy, achieving significant growth in total investment income as a result of our growing portfolio and our capital deployment into debt instruments. This past quarter, our portfolio optimization efforts did include selective asset sales, which generated capital we used to enhance our balance sheet, which will position us rather favorably for future growth opportunities. I'm very excited to highlight and remind you all that last month we announced the acquisition of 1 of our portfolio investments, SCIAPS, which is one of our larger legacy equity and debt holdings by UK based Spectris Plc. The transaction, which is expected to be completed later this year, is valued at up to $260,000,000 This does include a deferred component of $60,000,000 earn out. Speaker 200:02:51Rand holds approximately 6% of Saeb's equity with our total investment costing $5,200,000 and does include a secured note from 2021. As of June 30, we have valued this total investment into SIOPS at $10,800,000 We are carefully evaluating the best options for the anticipated capital infusion from this acquisition. We recognize that we need to strategically redeploy these funds to the extent possible through new investments as well as reinvesting in existing portfolio companies, which show high potential. This approach aims to drive further value for our shareholders and may also include additional returns in the form of dividends down the road. The achievement of our strategic objectives over the last few years has translated into tangible benefits for our shareholders. Speaker 200:03:50This is highlighted on Slide 4. Year to date, we have declared total dividends of $0.83 per share. This includes a cash dividend of $0.29 per share rather for the Q2. More recently, on July 31, we announced that our Q3 2024 dividend will continue to be held at $0.29 per share. At quarter end, after deploying capital and distributing $748,000 in cash dividends to shareholders, we've maintained total available liquidity of over $11,000,000 This liquidity includes our line of credit availability, cash on hand and our remaining highly liquid publicly traded BDC securities. Speaker 200:04:39If you turn to Slide 5, you will see our portfolio mix between debt and equity and the changes during the recent quarter. Our portfolio had a fair value of $87,100,000 across 26 businesses. This is up 13% from year end 2023 and 5% sequentially. The increases reflect investments and valuation adjustments in multiple companies, including SIOPS, partially offset by stock sales and portfolio loan repayments. Our portfolio is comprised of approximately 66% debt investments with an annualized weighted average yield of 13.8 percent including PIK interest. Speaker 200:05:26The remaining mix includes 32 percent equity investments in private companies and does primarily consist of SIAPS and Tilson as well as 2% in publicly traded BDC investments. During the quarter, we Supply or FSS, who is a commercial kitchen supply and services company based in Utah. Following this investment, our total debt and equity holdings in FSS reflect a fair value of $7,500,000 at quarter end. The bottom half of the slide highlights notable exits and repayments for the quarter. We received $3,300,000 in total proceeds from liquidating our shareholdings in 3 BDC Investments. Speaker 200:06:21This resulted in realized gains of $598,000 from Carlyle, $485,000 from PennantPark and $177,000 from Ares. Additionally, we recognized a realized gain of $397,000 from a partial asset sale of a Tilson affiliated entity called SQF. We also received $740,000 principal loan repayments from our PressurePro debt investment. Lastly, we exited our equity investment in Noah, which had been previously valued at 0. Slide 7, if you kindly turn to that, visually illustrates the diversity within our portfolio and the changes in our industry allocation over the Q2. Speaker 200:07:10Recent investments and adjustments in fair value led to changes in our industry composition. Manufacturing increased from 20% to 25% of our portfolio, while the BDC stocks following their sales decreased from 5% to 2%. We place a high value on the diversity of our industry mix. The broad spectrum of sectors across the portfolio reflects our strategic approach, ensuring resilience in a difficult economy and mitigating risk in our investment efforts. Slide 8 lists our top 5 portfolio companies at quarter end. Speaker 200:07:51And consistent with my prior comments regarding our larger legacy equity holdings, Tilson remains our largest fair value investment at $12,300,000 marking a 17% increase from the prior quarter and representing 14% of our total portfolio. SIOPS moved up to the 2nd position with its value more than doubling to $10,800,000 following the announced definitive purchase agreement. Overall, the top 5 companies represent 50% of our total portfolio at quarter end. With that, I'll turn it over to Margaret to review our financials in greater depth. Speaker 300:08:31Thanks, Dan, and good afternoon, everyone. Operator00:08:34I will Speaker 300:08:34start on Slide 10, which provides an overview of our financial summary for the 2024 Q2. Total investment income for the quarter was $2,100,000 and that represents an 18% increase over last year's Q2. This growth was driven by a 35% increase in interest income, reflecting 7 new interest yielding investments made over the past year. Overall, 22 portfolio companies contributed to our investment income. Total expenses for the Q2 were approximately $2,700,000 compared with $1,300,000 in the same quarter last year. Speaker 300:09:13This increase included a 1,200,000 dollars rise in capital gain incentive fee to our external investment advisor. In accordance with GAAP, we must accrue a capital gains incentive fee on our realized and unrealized gains and losses. Due to recent portfolio performance and realized gains, we recognized a higher accrual this quarter. Adjusted expenses, which exclude accrued capital gains incentive fees and is a non GAAP financial measure, were $1,000,000 compared with $816,000 in the Q2 of 2023. The increase largely was due to interest expense given usage of the senior revolving credit facility. Speaker 300:09:572nd quarter net investment loss was $517,000 or $0.20 per share. That was compared with a net investment income of $493,000 or $0.19 per share in last year's period. On an adjusted basis, which is a non GAAP financial measure and excludes the capital gains incentive fee accrual expense, Net investment income was $0.44 per share, up 16% from $0.38 per share in last year's period. On Slide 11, you will see a waterfall graph for the change in net asset value for the quarter. Net assets at June 30, 2024 were $68,600,000 up 11%. Speaker 300:10:39The change largely reflects the unrealized appreciation and investments of $7,800,000 As a result, the net asset value per share at June 30, 2024 increased to $26.56 compared with $23.85 at March 31, 2024. As highlighted on Slide 12, we continue to have a strong and flexible balance sheet that positions us well for future investments. Total assets grew 8% to $90,800,000 which included cash at quarter end of approximately $2,300,000 We also held approximately $1,300,000 in liquid BDC shares, which are available for future liquidity needs. Based on our borrowing base formula, Rand had $7,800,000 of availability in its existing $25,000,000 senior secured revolving credit facility at June 30, 2024 and our outstanding borrowings of 17 $200,000 carrying an interest rate of 18.8 percent at quarter end. We expect that our strategy transforming the portfolio to include more income generating investments will enable us to sustain higher dividend levels over time. Speaker 300:11:54Recently, Rand announced its regular quarterly cash dividend of $0.29 per share. This dividend will be paid on or around September 13, 2024 to shareholders of record as of August 30, 2024. With that, I will turn the discussion back to Dan. Speaker 200:12:13Thanks, Margaret. Moving forward, our strategy is to expand our business by pursuing new investments and we will continue to reinvest in existing portfolio companies with high potential. Our objective is to participate in new smaller M and A transactions with other co investors, which will help to support robust steady income stream through these new debt instruments, while also sharing in the EBITDA growth of these new opportunities through our equity holdings. We expect that this will lead to future monetization for our shareholders. We also believe that this approach will enhance our capacity to increase dividends over the long term. Speaker 200:13:00While Rand is currently more focused on debt financing for lower to middle market businesses, the expected successful exit of SIAPS underscores our commitment to maintaining minority equity investments within our portfolio and how they accompany all of our new investments. These future investments, however, will now be part of a larger initial debt investment, as I noted. We believe these equity stakes can contribute to strong returns upon future exits. Thank you for joining us today and for your continued interest in Rand Capital. We look forward to updating you on our Q3 2024 results, which will be reported in November. Speaker 200:13:47Have a great day. Operator00:13:50This concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.Read morePowered by