Rand Capital Reports 27% Increase in Total Investment Income for 2023
-
Portfolio expansion centered on debt investments drives total investment income growth of 11% to
$1.9 million for the fourth quarter and 27% to$7.3 million for full year 2023 - Rand’s portfolio was comprised of 64% interest yielding debt instruments at year-end compared with 56% at the end of 2022, which improved the portfolio yield and net interest income
-
Paid total dividends of
$1.33 per share in 2023, up 60% from 2022 -
Net asset value per share (“NAV”) was
$23.56 atDecember 31, 2023 , up 5% from year-end 2022 -
$2.3 million in follow on investments during the fourth quarter; Full year 2023 investments totaled$20.3 million
“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 , or 11%, to$1.9 million , which reflected a 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 compared with$371,000 in the prior-year fourth quarter. The change reflects a$293,000 increase in interest expense on borrowings under the senior revolving credit facility, along with a change in accrued capital gains incentive fees to the Company’s external investment adviser. The current period included an expense of$64,000 in capital gains incentive fees compared with a credit of$168,000 for the fourth quarter of 2022. -
Adjusted expenses, which exclude capital gains incentive fees and is a non-GAAP financial measure, were
$950,000 compared with$539,000 in the fourth quarter of 2022. See the attached description of this non-GAAP financial measure and reconciliation table for adjusted expenses. -
Net investment income was
$962,000 , or$0.37 per share, compared with$1.2 million , or$0.48 per share, in the fourth quarter of 2022. Adjusted net investment income per share, a non-GAAP financial measure, which excludes the capital gains incentive fee accrual expense, was$0.40 per share compared with$0.41 in last year’s fourth quarter. See the attached description of this non-GAAP financial measure and reconciliation table for adjusted net investment income per share.
2023 Highlights
-
Total investment income of
$7.3 million increased$1.6 million , or 27%, from the prior year. -
Total expenses were
$4.2 million compared with$1.1 million in the prior year. The increase reflected$805,000 of accrued capital gains incentive fees during 2023 compared with a$1.0 million reduction of accrued fees during 2022. Rand entered into a senior revolving credit facility inJune 2022 to drive growth. As a result, interest expense increased$975,000 in 2023 compared with the prior year. -
Excluding the capital gains incentive fee accrual, adjusted expenses, which is a non-GAAP financial measure, increased
$1.2 million to$3.4 million in 2023. See the attached description of this non-GAAP financial measure and reconciliation table for adjusted expenses. -
Net investment income per share was
$1.15 for 2023 compared with$1.72 per share in the prior year. Excluding the capital gains incentive fee accrual, adjusted net investment income per share for 2023 was$1.46 , up 11%, from$1.31 in 2022. 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, 2023 were$60.8 million , up 5% from year-end 2022.
Portfolio and Investment Activity
As of
Fourth quarter 2023:
-
Funded a follow-on debt investment of
$2.2 million toBMP Food Service Supply Holdco, LLC (FSS). Subsequently FSS made a loan principal payment of$0.6 million during the quarter. Rand’s total debt and equity investment in FSS had a fair value of$7.4 million at year-end. -
Follow-on equity investment of
$73,000 toCaitec, Inc.
Full year 2023:
-
Invested a total of
$20.3 million across nine transactions, which largely consisted of interest yielding assets. -
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 of proceeds, which included a net gain of$2.5 million . -
Sold ACV Auctions public securities for
$1.7 million in gains.
Liquidity and Capital Resources
Cash at year-end was
At
The Company did not repurchase any outstanding common stock during 2023.
Dividends
On
During 2023, Rand paid a total of
On
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ABOUT
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
FINANCIAL TABLES FOLLOW
|
||||||||
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 |
|
|
|
|
(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 |
|
|
||||||||||||||||
Consolidated Statements of Operations |
||||||||||||||||
(Unaudited) | (Audited) | |||||||||||||||
For the Quarter Ended |
|
For the Year Ended |
||||||||||||||
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 |
) |
|
||||||||
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 |
|
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:
President and CEO
716.853.0802
dpenberthy@randcapital.com
Investors:
716-843-3908 / 716-843-3832
dpawlowski@keiadvisors.com / cmychajluk@keiadvisors.com
Source: