RAND - Earnings call transcript Q2 2018 | Rand Capital Corporation

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Operator

Greetings, and welcome to Rand Capital Corporation Second Quarter 2018 Financial Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the conference over to your host Deborah Pawlowski, Investor Relations. you. Thank ahead. go Please

Deborah Pawlowski

good your We interest and time appreciate today and in afternoon, Rob, certainly everyone. your Thanks Rand Capital.

the Dan release. Vice were published on Executive will be Officer. me call morning results Grum, Dan Pete Joining that the our Pete Officer and and and in Penberthy, President Executive this reviewing our Chief Financial are Chief the new

www.randcapital.com. today’s on release don't the slide at accompany have our also found be that and discussion you can If will they website that

So, that our to Harbor if at Slide X, statement. turn you’re deck, and looking slide I’ll Safe review

make As well from forward-looking that in you well results are the by session. provided future documents are likely aware, where are actual the other uncertainties to as, during today. are during in we These the and as Commission. with as cause may Securities risks to presentation, well These that other other and apply as uncertainties we and risks to could Exchange the factors some events as Company this factors filed question-and-answer statements statements as, earnings release, subject differ and

you these can on either website at So, sec.gov. documents or our find

to So me let turn discussion. it to with begin his over Pete? that, Pete

Pete Grum

everyone. afternoon, Good

normal was asset to net second our value have you the an or At per operating X. net XXXX. which to share due end review operating From unrealized happy we to down $X.XX to start of Slide share, share. we’ve at our on the standpoint, certain Most based opportunity as certain quarter. the it update We’re happy this Rand’s performances on with going from of only NAV expenses, QX the the losses I’m the our quarter, of $X.XX call end investment a we performed base quarterly was of $X.XX NAV of recorded income companies. in nearly our all This from per amounted by covered the on $X.XX [ph]. to decline was short investments,

will quarter, to company During KnowledgeVision of technology. of on existing progression first be used invested we $XXX,XXX media one our instruments support smart portfolio the debt These KnowledgeVision. its

back Our registered initial they user KnowledgeVision Since investment then in have in increased XXXX. base was ten-fold. their

if As XX% later That in that. goes we the increase first in increase focused with an the on in years, investment been have the couple the been our when past of you the building he over know, quarter resulted highlight the year over Dan, year. financial investment listening a and you’ve can income. results half of XX% prior through discussion income

word This forward looked our long approached pleased I’m SBA been million from received to that process. the Credit we the has finalizing $X the has application leverage that SBA finally and process a verbally Finally, for additional Committee. of by been we

KnowledgeVision, leader we insight them. to smart is media hosting and want to quarter, in as in with Boston. way give turn If Since I creation you near X, providing Systems each feature this KnowledgeVision quarter in start do our based to you Lincoln, I’ll a technology. now the them take Mass of I the opportunity as companies a to more within some Slide to portfolio, invested

local The They they access startup a I’d for company raising employers The party called is plan Knovio at also healthcare multimedia talk or and high the and costs quality XXX,XXX headquartered measure Centivo to technology. a whereby to and by people third their around like in second New next webcasting York health trend cost partner health platform solution the enhance create, and this quality no they post, its business representing lower targets enhances sustainable for provide Live. launched cost organize, which For product won They Centivo companies. administrator healthcare the Knovio City. providing the video closely video offering. healthcare utilize our utilize and collaborate apologize to more deliver. both. a provide than a employers which to is cutting type Recently, a globe, live company [indiscernible] plans cost a at for for sustainable and platform, media X,XXX around they Because serves to longer share, the content. benefit a employees this to recently their for of benefits. to Centivo, ground-breaking with their online as are healthcare model, of able purchasing its have employers that

First, network innovative they on act care primary center an as focusing outcomes.

adherence. members and Secondly, they for rewards have that design value high dynamic care a benefit

have concierge experience. exceptional invest they $XX that enables we A million which in finding, $XXX,XXX digital and optimal a technology platform Series They recently raised and support service Lastly, state-of-the-art care of and their first technology converted build infrastructure, support They capital the to use help during convertible launch of solution. note to and quarter. intend partnerships this local XXX,XXX market develop their and

They Next two which fully are developer They of for testing is workstation. of Ithaca, products to in York. industries. talked molecular is innovative answer to automatic, application before, used on a Rheonix, variety in Optimum announced we’ve recently Encompass sample innovative New use solutions different based about in which their

the their SpoilerAlert that Beer Spoiler which the resulted simplest in and market. assay, expanded detects innovation Beer The may in Rheonix the organisms beer. becoming to provider test most they cause First, spoilage of comprehensive

for recall. reduce assay, industry PatternAlert food or breakthrough Secondly, the molecular identify message contamination rapid This possibility take rapidly the pattern to they allows strains. of action launched Listeria a their for Listeria to

the of to they’ve developments initiated clearance coming simultaneous STI clinical workstation, to In a MDx FDA market, sexually its Encompass to study detection assay Rheonix three infections. of two gain company and transmitted addition these triplex for

can some revenue of go categorized it a logo We interesting So, and shows solution. most of developing our of are to the now our testing in all X; stage. portfolio Slide broad really companies they by

the traction what You’ve then high the seen this call with left, initial right. expansion, on revenue, startups we before on and

are and in initial three the KnowledgeVision Centivo can see revenue can we their category Rheonix Regarding both companies a as stage. placed and you feature, is

last start X mentioned is to to as our I Slide they impossible our portfolio. an As companies investment companies. extra conditions. from plans your our corner. takes virtually period. arise, market on portfolio these on slowly the this on or in how It's quickly for edification added One before, perspective develop as predict interesting they based may believe progresses transaction dependent We We all are

Centivo, period companies last five years just As normally added five age portfolio then. year years. and is a portfolio in our haven't slightly since new The of our our under over companies and investment is to we any average currently

We it can of a our companies over we Slide typically of If change breakdown doesn't healthcare. diversified industry show a the increase are Consistent with are majority category As in a portfolio we comparisons June industries, and decrease exception strategy, fit Today slight and the estate, or the a and XX retail real time Year-over-year our software can shows with invest companies have all by almost horizon. and/or diversity you professional and industries to XX, there. turn to see services. in X, services our year of as five and to been time. added this in now company. financial slight

our value. always can as equity towards portfolio instruments. asset with two into turn choices, our strategy in opposed to grow been portfolio we has capital on been and have Accordingly, to dissect You X. equity, more If is our net major appreciation debt to doing debt heavily capital our characteristics now Slide weighted

objectives flow start, within of investment just as portfolio. depending our streams on However, the cash mix we

end June illustrates end generate nearly trended building debt. XXXX. at XXXX, were investments XX% in As XX, about of snapshot to XX% at more to in debt, June. Slide our We top to quarter, of the of value unchanged slide on now on our in We end based of flow to our this investment we go the cover the equity the and were have X, focus from our income portfolio Consequently the in of investments five cash expenses.

closed give million XX towards but five valued our That's our quick at last value about companies. portfolio. weighted unchanged you a consistently portfolio they’re as active quarter, of go $XX this could I'll investments either, Our from won't top into see over of again, you healthcare. detail The the was half summary. it I compromises And and

and XXXX. with top with based is Florida, and We've in Our patented been investment since produce distributed design they instrumentation. investing them GENICON Orlando, surgical

Second we’ve support investing for them is a wireless information providing started Dallas, clinical XXXX. We've proprietary have productive the follows, and job. companies in optics We’ve which is Rheonix been record tools York, right I referrals. to the ago. in Texas, Rochester, Based Portland, few Fourth them them Last them people out since in aggregates electronic fiber medical Maine. patient and systems. is that are right in cellular OutMatch, a images XXXX. since manage and partnering hiring be more described they they platform New with the minutes helping business XXXX. eHealth, They been in been since Tilson, based of investing of investing facilitate and with We’ve in to deploy XXXX. construct,

I'd it to Financial Officer Vice to Executive to President Now and our financial like Chief Dan turn cover Penberthy, results. the over

Dan Penberthy

good Thanks, Pete, everyone. and afternoon,

share XX, the to If Slide NAV. please I'll turn with value asset could start or you net per

net mentioned, Pete quarter per with As the share. we value finished asset at $X.XX

per This As the you trailing factors. decrease NAV the declined $X.XX can over to attributable share quarter. two chart, on is see primarily

portfolio operating value. companies. of results on quarter. valuation review This appreciation performance or value in policy sometimes us each has unrealized our investments of based fair the This in trends fair First, the particular the our depreciation is

During recognized depreciation to unrealized we $X.XX per about quarter, the amounting value share. fair in

to pertains modestly The Please $X.XX our turn impact this exceeded was investment Slide per our second income expenses the that XX. about factor This to fact share. quarter.

and second I'll the Here, of are the first XXXX take on the quarters scheduled. here I’ve XXXX our line operating through summarized you for items noted that the performance and both key of periods. half also

have our we the few income income. previously been has years. we’ve investment instruments in over past This increased As investing more mentioned, producing

You can results. see the

over a basis Our up XX%. On income is up $XX,XXX last second of quarter XX% income year. investment or is investment $XXX,XXX year-to-date

of quarter by partially debt expenses prior expenses the XX% are was quarter services, The of professional lower same below expense. to in year. decrease second $XXX,XXX offset due bad Our the

$XX,XXX For are the expenses year, down X%. or

first certain the second an last of $XXX,XXX portfolio the net in decrease half in we about the a have valuation impact no assets XXXX The quarter $XXX,XXX quarter. To XXXX As on which losses I mentioned in XXXX prior than from with was summarize, the This quarter per first policy. of was we unrealized on resulted same Empire second more equivalent $X.XX the more exits and the GiveGab. were this of last half in decrease year. accordance quarter. of the net net and second There the the in in share, operations of included SOMS year XXXX recorded in our than slide, gain investments period Genomics recorded unrealized

turn please Now to XX. Slide

cash at quarter. of SBIC, strong. end share, Our $X.XX or continues is remain resides $X.XX the per which per On share basis, of includes share sheet the for we in the investing. at and $X.XX to per balance available our level a have corporate which parent This

valued at Our portfolio the $X.XX per investments the share are end at quarter. of

SBA from per $X.XX Our have we benefited of portfolio been growth end share due of quarter. SBA by and personally leverage as has the for which funded the the our has past to

We asset $X.XX net our share NAV Pete. net also all of of to share of assets, other liabilities. to have With turn it per per value that, This back I'll or $X.XX. adds up

Pete Grum

Thanks, Dan.

cash returns, If cash along investments and calls as our to on first high we reinvestment. to XX, as, our our deliver both priority you foremost Slide which could priority, is well for to reemphasized plans, turn business execute for when capital

As also to operating our cover structuring sufficient we're to our alternatives, financing flow we and deliver cash consider ongoing investments focused expenses. on our various

Now be an able work. we leverage to million from of to $X to SBA put the put to additional hope

capital also cash opportunistic shareholders returning may good when timing. and to dictates on we flow Finally, consider basis on an

question. a our Before with growth for see, hope our open With a portfolio team going driving of lines in companies. up of to by lot can want the our we’ll are next I it say and underlying of to level value management take as lot we open working you that, hard We excitement strategy. for I questions, brand to

Operator

a first Our proceed from question. comes Instructions] Thomas Private your with Investor. question Burns, [Operator Please

Thomas Burns

officers ask, salaries light received the anything. fact out like top in between in to two hadn’t Pete, the taken company bonuses years, at who own dollars shareholders have actually I'd XX-K, the way compensation the and of the I Yes, over last and of millions look five the the

just In about I don't looked it, what today, you’re asset if to is $X.XX you’ve know fact, be. price of be your net which share at half reporting

long a expenses? Given in earning large which the considered stock to big the to market other suffering doing you opinion holding management. some a give be is just interest in seem no finally to buyback my shareholders cover Have shown either or confidence than company liquidating enough income, relief you

Pete Grum

think make did happen. the And that as was and continues board the to make alternatives. company at to to the thing or analysis to take happy was we alternatives dark, analysis discuss liquidating traditional it at Let make the from the pieces, I our board’s The We company two those time, it needed time, to happen, sense. using years everything Meeting, look becoming that could our thing, grow ago in and with Annual I’d going cash you online can and any continue me those control be It SBA looked company, send to at the to our was BDC to stay company, partner. the liquidating to merging it. another you a at the to at needed not the the

discussions run execute control we the We have found ways any could have the as other SBA. company But for time growing the with not had look to to through the years we other a will board. continue throughout we alternatives can company; at that the

sound and the specifically, read sure not over and all follow place to you you’ll parts have we’re Ks smaller the ones, the both the you’ve you the If the of stock I'm net see company, to the and you be. referred our used of stock. very do like BDCs Dan what’s has good Qs also price are buy to our them you’re that so industry, price those know bonuses aware happened in and of a and the you’ve time, to because been following, that stock worth of I taken the substantial of

Thomas Burns

a have I follow-up? Can

Pete Grum

absolutely. yeah, Yeah,

Thomas Burns

a industry Okay, I at they’re other I To I many words, normally still honestly, appreciate am that I’m in it whole but given me, can fact value to $X.XX invest, buy to that Well, back of in I it’s and to either like BDCs warrants had it with appreciate bit on if the like that discounts million the no decision, familiar the the $X maybe it understand the XX% market seems I a to X% answer, at don't XX% reticence, I more not management’s I quite be my range, temporarily can seems based the would some that. or and and at invest it's still somebody $X, XX%. that management, brainer if gift be it fee the I of still and seems than company management the would the don't size upon to mean understand other and with stock the decrease in company. making loan own

generate business like company generating shareholder one respect, to seems to the maximizing and income, that shareholders be hear I to administration is answer obviously, and by the value. of your really So, I'd than reasons the small that more growing rather fee to returns

Just my thought.

Pete Grum

thoughts. appreciate I your

as that. really maybe Or management We no misunderstood implying you’re referred There have with what if no There you like. offline fees. are fees I management to take on you are it it. to

Thomas Burns

would size get the or paid company was whether size? double the Okay, the management the so same half

Pete Grum

Yes. Exactly.

Thomas Burns

Okay.

Pete Grum

referred our we the is what's BDCs In called most do the are is on externally have as managed, business, managed a are, and fee of the size of to based that they company. what internally other

Thomas Burns

much very Okay. answer. your Thank you for

Pete Grum

Thank you.

Operator

Please Montgomery. question. proceed question Our with Instructions] with next from Reiss Janney is Brett [Operator your

Brett Reiss

apologize if of to off triggers that in because you sharing briefly. us give have happen? hi see you I’ve and stuff And going be would what little in had your prepared and see, this color milestones have opportunistically Yeah, you're to Can we was more to that mentioned bit shareholders. answered, Pete, hop some and to asked or remarks capital I a mind? a with open what you

Pete Grum

from If have you board and cash the that point million expenses that operations, that would a the flow And that, have have X.X mean in shares done about the we by we use the over to opportunistically situations exceeding in buying shares, years. as where of I back again. past think trigger we done

Brett Reiss

out major now there one came a and company a years two and the you percentage the net I’d of worth ago, in that huge, your Okay, was say of of investments monetized had about the as at that in that something forward? going and What if shareholders. with that like do that or time prevented you different time did you future, not something be dividend at happens would

Pete Grum

not company realized us the to because sense The I have is we NAV But a that always from when we transaction basis. hear with did shrink hear not like tax makes whether an something you to And some dividend do are you we really people we're taxpaying about, any they BDC And decided talking we the they GEMCORE which dividend because too and other believe monetize to would sure – from board has is went our and [ph] and of frankly, do unrealized. small and do it’s a frankly, of I structure and would not not with change has didn’t beneficial are on problem I’m it to dividend that a atypical because not that pay didn't we an struggle kind the it. from vehicle. we

tax out and the fixed a a that And same up we with advantage smaller so company costs. has end with frankly, paying no dividend

has not we’ve when we board adopted do discuss every discussed the So, and that it at meaning strategy.

Brett Reiss

right. Right,

to What not are You market new What have large, pocketed, they table? brings think the do seeing a them you is deep that sophisticated the shareholder. here seeing?

Pete Grum

and from available met them. with talk we that’s all portfolio. and yourself talk where and ask Show the and meet them and call information we them as view with can it have we’ll to what the goes shareholders publicly You see; through them and we them will them them and

ongoing rather and and mouth. a they than, I cordial We very into and saw them their explain in have think rather put them I would have the company relationship what nice words me with

Brett Reiss

take I if hope my they'll them, Well, I call. call

Pete Grum

me, that in weren't say on have previous they they they wouldn't this it surprise Okay, if been ones. call because

Brett Reiss

Right, rest summer. right. All the you. right. of the Thank Enjoy

Pete Grum

Brett. Thank you,

Operator

a is Our next your proceed Private Norman question. with from question Investor. Kadezja, Please

Norman Kadezja

Pete cash Dan. and the we a okays Hi, We’ve do the when verbal have from or will actually guess? arise received credit, SBA

Pete Grum

and to new have And and happen way process next What it’s through. under I will believe gone that receive they're happens a million reserve within to will take the a deals a not $X match then down believe weeks, you historically I the that in have what we time that and you fee it of has letter a we then effect. you couple pay essence it. happened Well, up and over process with as

deal. over it's is So, fund you time down one part, There a deals. and believe, X% take I you upfront not it shot reserve a then pay to

Norman Kadezja

Congratulations.

traction your at stage OutMatch net companies any into the of companies; eHealth those three guess? if to had Looking you of portfolio and holdings. your share are high larger GENICON, three Will of move

Pete Grum

he more but but probably I’ll if able heard it, is he the Dan. believe to I off involved, Dan as do let that cuff, the revenues, Dan held it answer highest

DanPenberthy

issues, to optimistic confidentiality into trends certainly, respective their we continue. I'm expertise, prepared make fields business each their that remain that one companies their segments. to guess, revenue I answer but are will not And penetrations Yeah, given beginning deeper those of of

that their safe a enough have growth in continue as think enough to answer. those our the I portfolios generic companies trajectories, ones potential that's high a as any and yeah, of other So,

Norman Kadezja

letter put $X guess, clients they stocks, this or was I or of the low new type they last [ph], at specifically stocks a enough Okay. it’s got And a category. think before, not the share. the last to Lynch And, that because sure penny I or a that same are allow two. same within about will below until affects purchase Merrill rule, $X it priced and it And call stocks have policy stocks cases of month in on whether that $X a it trading know I share. week calls One me, exactly in trading Bill most from didn't that I’m couple not UBS over-the-counter Nixon really other stocks in actually or I saying attention was below talked a pay customers remark, I

toughening from prices. a like So community, over-the-counter these looks especially of on to companies stocks, like the me account which over one prevents Rand $X low aware [ph], using my the I’d the to those share, of brokerage buy it's knowledge up be trading anymore that

So, again, so once you aware be something not you Thank much. might of.

Pete Grum

did, Thank we and with you. trading Bill it We That is actually from on talk was for things did because not covered; with there stay over-the-counter, just a maybe weren’t through after not variety Merrill and the last follow-up a NASDAQ we we Rand we call, will was then work the -- Lynch, cap definitely other A, is stock. helpful the of but trend aware. that either but indexing smaller Bill

Operator

of Ladies for we’ve question-and-answer I'd Grum Pete to to closing end turn this time, the and gentlemen, At call session. reached the the like back comments.

Pete Grum

Thank you.

to As we’re I’ve said enlighten always doing before, of to talked any in up can and look you learn we to you talking to concerns willing feel another forward between to you and things to in we're some calls, about here call and between free I quarter. we and what your

Operator

This concludes conference. today's

your your disconnect may time, and for we this lines you You thank at participation.

Rand Capital (RAND) 11 Aug 182018 Q2 Earnings call transcript