Rand Capital Reports 12% Increase in Total Investment Income for First Quarter 2024
-
Strategy focused on expanding portfolio composition with new debt investments drives total investment income growth of 12% to
$2.1 million for the first quarter of 2024 - Investment portfolio comprised of 70% interest yielding debt instruments at quarter-end compared with 64% at the end of 2023, improving portfolio yield and net interest income
-
Net asset value per share (“NAV”) was
$23.85 atMarch 31, 2024 , up 1% from year-end 2023 -
Sold remaining ACV Auctions stock, netting a realized gain of
$3.5 million -
Invested
$10.8 million in new and follow on investments during the first quarter -
Increased regular quarterly dividend 16% to
$0.29 per share for second quarter 2024
“Looking ahead, we remain committed to our strategy and are focused on driving investment income growth, which is a vital catalyst in supporting our ability to generate sustainable dividends for our shareholders in the future.”
First Quarter Highlights (compared with the prior-year period unless otherwise noted)
-
Total investment income grew
$216,000 , or 12%, to$2.1 million , which reflected a 40% increase in interest from portfolio companies, partially offset by lower dividend income. -
Total expenses were
$1.2 million compared with$1.0 million in last year’s first quarter. The change reflects a$232,000 increase in interest expense on borrowings under the senior revolving credit facility, partially offset by a decrease in capital gains incentive fees to the Company’s external investment adviser. The first quarter of 2024 included an expense of$112,000 in capital gains incentive fees compared with$291,000 for the first quarter of 2023. -
Adjusted expenses, which exclude capital gains incentive fees and is a non-GAAP financial measure, were
$1.1 million compared with$757,000 in the first quarter of 2023. See the attached description of this non-GAAP financial measure and reconciliation table for adjusted expenses. -
Net investment income grew 17% to
$840,000 , or$0.33 per share, from$715,000 , or$0.28 per share, in the first quarter of 2023. Adjusted net investment income per share, a non-GAAP financial measure, which excludes the capital gains incentive fee accrual expense, was$0.37 per share compared with$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.
Portfolio and Investment Activity
As of
First quarter 2024:
-
Funded a new investment of
$3.2 million in Mountain Regional Equipment Solutions (MRES), which consisted of a$3.0 million term loan at 14% and a$205,000 equity investment. MRES supplies automated lubrication systems, active and passive safety systems and maintenance products for mobile heavy equipment, on-highway and vocational transport equipment, stationary and mobile industrial equipment, and cranes. -
Mattison Avenue Holdings repaid its existing$1.9 million loan during the quarter. Subsequently, Rand funded a new debt investment of$5.5 million inMattison Avenue Holdings , which will carry a rate of 14%, including PIK interest. -
Funded a follow-on debt investment of
$1.8 million in Seybert’sBilliards Corporation . Rand’s total debt and equity investment in Seybert’s had a fair value of$7.8 million at quarter-end. -
Sold remaining 194,934 shares of ACV Auctions at an average price of
$18.02 per share, realizing$3.5 million . The ACV shares had been previously valued at$2.95 million onDecember 31, 2023 . -
Received
$687,000 principal loan repayment fromPressure Pro, Inc. At quarter-end, Rand’s total debt and equity investment in Pressure Pro had a fair value of$2.4 million .
Liquidity and Capital Resources
Cash was
At
The Company did not repurchase any outstanding common stock during the first quarter of 2024. Rand’s Board of Directors renewed the share repurchase program authorizing the purchase of up to
Dividends
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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 and the growth of its 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
FINANCIAL TABLES FOLLOW
Consolidated Statements of Financial Position |
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ASSETS |
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Investments at fair value: |
|
|
|
|
|
|
||
Control investments (cost of |
|
$ |
4,537,435 |
|
|
$ |
4,148,960 |
|
Affiliate investments (cost of |
|
|
54,638,600 |
|
|
|
53,499,372 |
|
Non-Control/Non-Affiliate investments (cost of |
|
|
23,598,090 |
|
|
|
19,477,380 |
|
Total investments, at fair value (cost of |
|
|
82,774,125 |
|
|
|
77,125,712 |
|
Cash |
|
|
759,183 |
|
|
|
3,295,321 |
|
Interest receivable |
|
|
347,755 |
|
|
|
244,600 |
|
Prepaid income taxes |
|
|
154,404 |
|
|
|
127,869 |
|
Deferred tax asset, net |
|
|
65,815 |
|
|
|
39,179 |
|
Other assets |
|
|
253,848 |
|
|
|
189,301 |
|
Total assets |
|
$ |
84,355,130 |
|
|
$ |
81,021,982 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (NET ASSETS) |
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Liabilities: |
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Due to investment adviser |
|
$ |
302,480 |
|
|
$ |
979,297 |
|
Accounts payable and accrued expenses |
|
|
272,086 |
|
|
|
145,516 |
|
Line of credit |
|
|
19,200,000 |
|
|
|
16,250,000 |
|
Capital gains incentive fees |
|
|
2,392,000 |
|
|
|
2,279,700 |
|
Deferred revenue |
|
|
619,225 |
|
|
|
552,256 |
|
Total liabilities |
|
|
22,785,791 |
|
|
|
20,206,769 |
|
|
|
|
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|
|
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Stockholders’ equity (net assets): |
|
|
|
|
|
|
||
Common stock, |
|
|
264,892 |
|
|
|
264,892 |
|
Capital in excess of par value |
|
|
55,801,170 |
|
|
|
55,801,170 |
|
|
|
|
(1,566,605 |
) |
|
|
(1,566,605 |
) |
Total distributable earnings |
|
|
7,069,882 |
|
|
|
6,315,756 |
|
Total stockholders’ equity (net assets) (per share – 3/31/24: |
|
|
61,569,339 |
|
|
|
60,815,213 |
|
Total liabilities and stockholders’ equity (net assets) |
|
$ |
84,355,130 |
|
|
$ |
81,021,982 |
|
Consolidated Statements of Operations (Unaudited) |
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Three months ended
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Three months ended
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Investment income: |
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Interest from portfolio companies: |
|
|
|
|
|
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Control investments |
|
$ |
187,483 |
|
|
$ |
150,916 |
|
Affiliate investments |
|
|
1,166,085 |
|
|
|
787,821 |
|
Non-Control/Non-Affiliate investments |
|
|
460,080 |
|
|
|
358,166 |
|
Total interest from portfolio companies |
|
|
1,813,648 |
|
|
|
1,296,903 |
|
Interest from other investments: |
|
|
|
|
|
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Non-Control/Non-Affiliate investments |
|
|
1,914 |
|
|
|
132 |
|
Total interest from other investments |
|
|
1,914 |
|
|
|
132 |
|
Dividend and other investment income: |
|
|
|
|
|
|
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Affiliate investments |
|
|
13,125 |
|
|
|
347,148 |
|
Non-Control/Non-Affiliate investments |
|
|
138,710 |
|
|
|
127,595 |
|
Total dividend and other investment income |
|
|
151,835 |
|
|
|
474,743 |
|
Fee income: |
|
|
|
|
|
|
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Control investments |
|
|
4,516 |
|
|
|
3,900 |
|
Affiliate investments |
|
|
73,720 |
|
|
|
67,842 |
|
Non-Control/Non-Affiliate investments |
|
|
21,586 |
|
|
|
7,978 |
|
Total fee income |
|
|
99,822 |
|
|
|
79,720 |
|
Total investment income |
|
|
2,067,219 |
|
|
|
1,851,498 |
|
Expenses: |
|
|
|
|
|
|
||
Base management fee |
|
|
302,595 |
|
|
|
245,393 |
|
Capital gains incentive fees |
|
|
112,300 |
|
|
|
291,000 |
|
Interest expense |
|
|
390,020 |
|
|
|
158,400 |
|
Professional fees |
|
|
232,307 |
|
|
|
170,975 |
|
Stockholders and office operating |
|
|
69,028 |
|
|
|
64,304 |
|
Directors' fees |
|
|
63,850 |
|
|
|
63,850 |
|
Administrative fees |
|
|
38,167 |
|
|
|
37,250 |
|
Insurance |
|
|
13,044 |
|
|
|
12,960 |
|
Corporate development |
|
|
5,545 |
|
|
|
3,713 |
|
Total expenses |
|
|
1,226,856 |
|
|
|
1,047,845 |
|
Net investment income before income taxes: |
|
|
840,363 |
|
|
|
803,653 |
|
Income taxes, including excise tax expense |
|
|
778 |
|
|
|
88,737 |
|
Net investment income |
|
|
839,585 |
|
|
|
714,916 |
|
Net realized gain on sales and dispositions of investments: |
|
|
|
|
|
|
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Affiliate investments |
|
|
— |
|
|
|
58,329 |
|
Non-Control/Non-Affiliate investments |
|
|
3,450,092 |
|
|
|
(4,941 |
) |
Net realized gain on sales and dispositions of investments |
|
|
3,450,092 |
|
|
|
53,388 |
|
Net change in unrealized appreciation/depreciation on investments: |
|
|
|
|
|
|
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Affiliate investments |
|
|
(100,000 |
) |
|
|
— |
|
Non-Control/Non-Affiliate investments |
|
|
(2,790,296 |
) |
|
|
1,401,973 |
|
Net change in unrealized appreciation/depreciation on investments |
|
|
(2,890,296 |
) |
|
|
1,401,973 |
|
Net realized and unrealized gain on investments |
|
|
559,796 |
|
|
|
1,455,361 |
|
Net increase in net assets from operations |
|
$ |
1,399,381 |
|
|
$ |
2,170,277 |
|
Weighted average shares outstanding |
|
|
2,581,021 |
|
|
|
2,581,021 |
|
Basic and diluted net increase in net assets from operations per share |
|
$ |
0.54 |
|
|
$ |
0.84 |
|
Consolidated Statements of Changes in Net Assets (Unaudited) |
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Three months ended
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Three months ended
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Net assets at beginning of period |
|
$ |
60,815,213 |
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$ |
57,721,320 |
|
Net investment income |
|
|
839,585 |
|
|
|
714,916 |
|
Net realized gain on sales and dispositions of investments |
|
|
3,450,092 |
|
|
|
53,388 |
|
Net change in unrealized appreciation/depreciation on investments |
|
|
(2,890,296 |
) |
|
|
1,401,973 |
|
Net increase in net assets from operations |
|
|
1,399,381 |
|
|
|
2,170,277 |
|
Declaration of dividend |
|
|
(645,255 |
) |
|
|
(516,204 |
) |
Net assets at end of period |
|
$ |
61,569,339 |
|
|
$ |
59,375,393 |
|
Reconciliation of GAAP Total Expense to Non-GAAP Adjusted Expenses
(Unaudited)
In addition to reporting total expenses, which is a
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Three months ended
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Three months ended
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Total expenses |
$ |
1,226,856 |
$ |
1,047,845 |
|
Exclude expenses for capital gains incentive fees |
|
112,300 |
|
291,000 |
|
Adjusted total expenses |
$ |
1,114,556 |
$ |
756,845 |
|
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 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.
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Three months ended
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Three months ended
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Net investment income per share |
$ |
0.33 |
$ |
0.28 |
|
Exclude expenses for capital gains incentive fees per share |
|
0.04 |
|
0.11 |
|
Adjusted net investment income per share |
$ |
0.37 |
$ |
0.39 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240513223274/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: