RAND - Earnings call transcript Q3 2020 | Rand Capital Corporation

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Operator

Greetings, and welcome to the Rand Capital Corporation Third Quarter 2020 Financial Results Conference Call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to our host, Deborah Pawlowski, Investor Relations. Thank you.

You may begin.

Deborah Pawlowski

morning, good and Diego, everyone. Thanks, your We for conference Rand and in us certainly call. for results appreciate joining financial our Capital XXXX interest third quarter

On President and Grum, Financial Officer. are and the Penberthy, Chief me Executive Dan Vice Chief Officer; Pete Executive our line with our today

on You a today. find that slides will the our conversation copy website release wires can crossed the our the should morning well discussing both as not, randcapital.com. have If them you this our of that results at as accompany

If following turn important are point would along you deck, on some and to like the we’ll information. out I slide Slide X, to

As you today. actual that results to factors where risks the make during question-and- cause forward-looking are answer well from we that are and session. could uncertainties are statements subject as apply may as events some during These other to this future and aware, likely materially presentation statements differ we to

these You other of can by uncertainties the be and documents with other as the find website in Exchange release filed company and our documents at the or factors a as found can These in sec.gov. Securities well summary risks Commission. and on earnings

to to you’ll Slide will if discussion I over turn Now the Pete hand Pete? begin. to X,

Pete Grum

your everyone. Thank morning, today. Good you time for

As our remains you daily pandemic all of know, as lives. part the COVID

$XX.XX since that repurchase $XXX,XXX Capital safety stock we announced We times share. We plan during investment income this purchase continue trading in performance $X.X and securities But trading because per we laws. quarter. office the or repurchase September self-imposed shares during to our of Under Net of Rand XXbX-X established quarter, to solid when of The that to at of might a X,XXX even $X.XX blackout share. health work delivered average to us remotely the million stock personnel. shares at say and am to other repurchased alternate periods of XXbX-X third share repurchase otherwise not the everyone’s presence able was Rand this environment, had for our per an shares the be plan in the facilitate financial plan I allows we price program. pleased under and

shareholders a last compromised in million, on this as to liquidity, $XX cash Rand’s liquidity of the and changing. and we a changing, with million filed position significant With preliminary SEC million for intend I result investment of and provided investment agreements should leverage are Capital that investment SBA. to and The to not mention are have $XX The with proxy week, processes execute are Rand our adviser, a which meeting terms We a from new being – relatively are special Management. build strategy. to advisory change services continue I in of by strong the of renewed management of RCM $X approve portfolio the in available and is the a agreements. we our ownership in would not

can now the in to X. find the turn change can of If I You in details Slide ownership the filing.

and You grow is portfolio can to primarily at company in legacy total distribute to intentional, income be elect to of compromise of and investments intend our a investment the investments, regulated to remaining from now is The equity purposes, tax us of our increase portfolio shift investments investments. the for ago. see XX% debt The investment distribution. The requires to support of income least our our XX% XX% year XX% we that a a are to which intention our regular shareholders. qualified an

through reduce will over assets we various these strategies. time transformation, our exit continue we As

The and and Medicine note investment and is XX% clients’ note group help and portfolio company. a leverage care, side, digital million fixed life leading Medicine a marketing instrument, XXXX. health with diagnostics, a strategy industries. the rate grow research $X.X promissory in invested dental plans, help analytical Group advisory the during due business. The Science Science their and On new product, we is build quarter, to serving uses their science, and market their audience business firm then the radiology clients’ research intelligence to Group, and

they also that This investments. dividend our in and more provide total we three liquid instrument are invested Rand, to We that BDCs. much are we can our portfolio readily eight find them. $X.X larger traded companies that opportunities for investments million publicly in These brings than BDC and access other a

and X, this to turn diversity our If portfolio. demonstrates increasing of the Slide growth you

ourselves. With the and investments from of increased a we and increased four fund we believe the trailing investment our the points. investment diversity times find total BDC quarter, our of risk benefits percentage made sequential percentage points as this quarter, increased market the economic health reduces three challenging during We exposure care the to portfolio percentage us

of may nor we engage them portfolio pandemic frankly, encouraging, amazing. and economic duration our not be and monitor companies, actively we may portfolio and the liquidity the their status. is that our operational total of impact to resiliency in know the While downturn with continue resulting The

Turning now to Slide X.

You companies, has last top now portfolio this our can not see changed and five quarter. since

value companies with mentioned end. four million, the companies of addition earlier, quarter $XX.X XX portfolio I was the at With our

give portfolio you turn our to of to like on an would companies. some update you X, If Slide I

have environment. well We are companies several benefiting and actually perhaps from COVID-XX that the quite even performing

there been few challenged companies as that Of have well. a course, are

them, about to the doing directly companies two and share As to expect, pandemic, of of tied are you well Rheonix. would fighting and the some that might more SciAps are I like

present based that virus the coating that against of with in manufacturer analysis instant have amount which fully Rheonix, molecular about last coating handheld automatic systems in Ithaca-based company, we’ve testing developed company and can Encompass the is an including of a coating research whether on examine materials. call leading an to for present individual clinical of have elemental laboratories. the and provide Allied Massachusetts- on developed chosen is quarter, EPA-approved viruses active. determine They and that and talked past analyzers been has providing as who applied surface, in workstations are SciAps use provides SciAps Boston, surface COVID-XX. it’s a that is that surfaces causes many BioScience, the protection discussed testing I and bacterias partnered As still the the

is keep accomplishments. is from of has directly because recent that Others COVID a a encourage MDx laboratories. One assay contain samples. the same- automated operate designed Encompass environment. the global of day work-from-home for have detect facilitate their with would I all to efforts their causes The way workstation that to to develops you that up-to-date the the test SARS-CoV-X, on their benefited virus test the to small COVID-XX, medium access the Rheonix’ and respiratory test of website results to as fully

video investor example, their with and OpenExchange held companies, largest banks conferences. solutions flowing used the virtual banks been solutions. investor for For and has the have public videoconferencing Carolina Demand many platform has in challenge managing of price addressing outboard vital staff, with the investment staggered information has They demand investors Skiff of supply by been professional up consumer through driven and been Their manufacturing surge investment The keep streaming has and health challenges been offer by and lower interest with the some in keeping motors. safety range reduced fiberglass their activities. with chain. for outboard and the

to advancing we over to will our including as equity-only I yield- determining As With a dividend-paying take Dan the that, review financials depth. and also our producing of are in portfolio we it closing turn on here our thought investments on pursue competition, portfolio, investments. investments actions equity to greater

Dan Penberthy

everyone. morning, Pete, good Thanks, and

or could turn This to interest was was third can our income. you in resulted XX% income profile change largely that total $XXX,XXX a in increase third in the portfolio from a last increase more see of due XXX to quarter. the that to investments in portfolio X, please If debt investment you Slide year’s quarter the $XXX,XXX, XX%

intended As the portfolio quarter. by administration the of the our the cost $XX,XXX reduced transformation, management our in and Rand with of externalization

element per $X.X growing $XXX,XXX investment per or in net million on waterfall in NAV this by from visually shares As basis, and income, The with second from $X.XX repurchased a in increase a assets which drove offset was share. expenses, Slide in the benefited Slide This is operations a impact the a On coupled On dividend, The gain share $X.X net by of of the million, result, portion shows net XX was in of driving offset we reduced graph due $X $X.XX per unrealized this in the and primarily partially the the by the affecting income. of trailing cash share exit portfolio was was growth quarter. these from depict several the largest the income, decline. This $XXX,XXX X,XXX the investment investment realized net million investments, net on special increase items increase depreciation XX, the $XXX,XXX quarter. NAV year-to-date. to NAV during approximately share repurchases. waterfall change from

we shares stock $XX,XXX from did repurchased which the reduce Additionally, NAV year-to-date, have by during X,XXX repurchases. the of

are However, on the shares NAV. as to basis, contributed we discount per able a positively a share share to purchase per at this

turn quarter, corporate of directly. million is for me review $XX.X for us, Slide sheet. SBIC by reserved to $X.X strength will for liquidity we the providing At the you If XX, had $X.X the of and let was cash of that, hand. million Of third on end significant the purposes, our balance available million investments

which leverage, $XX a Our that matures $X commitment a includes I’m The is period SBA. multiyear currently from of is in million $X available over remaining to XXXX, XXXX an – million sorry, total liquidity when owed due. the the SBA also million begins

in status, an income shareholders a and of cash income. part drive dividends. As plan grow excellent the large to distribute part our portfolio Pete to as RIC position of are we our And to noted, in investment that further, of we form investments

to year-end. expect for provide regarding XXXX details distribution before dividend the We

The to but interest Operator, do also XXXX, calculations plans include However exits questions. initial these tax and lines conversion dividend had the a open of the our XXXX RIC We look remind recent year. be – portion and our should distribution also prepared the shortly. a the to our will take given those in for related this being C-corp completes that both however, please we This status at more related our complex plan released we’ll year gain to for our remarks. net testing. are from you, capital element income,

Operator

Brad from comes question Davidson. first our And Instruction] [Operator

Unidentified Analyst

first guys the missed couple add I on slides. your if going what end hasn’t you addressed, could ACV the was the ACV impacts for been funding this recent how valuation that, color case in forward. that any on round of to accounts the you But company’s know Auctions, wondering I of and

Pete Grum

think some added and a who of million that’s They’ve and but $XX And about all is into share can want. able this I know, raising have in a They’ve what had they know new – you are read had their investment professionals Board. point, I public. some to press companies employees investor. strength release I as a you what added history taking at

that I so about can And really you. that’s share all with

Unidentified Analyst

So idea do sort impacts mean of information Rand’s some in do you detail they of how provide I you that some information? would guys there? that that have investment

Pete Grum

received We anything have them. formally from not

Unidentified Analyst

Informally?

Pete Grum

There’s you share nothing I point. can with this that at

We no, will But year. we don’t it look when numbers the any the a again at take hit that than went have I the certainly in. amounts actually other end of

Deborah Pawlowski

X% hold me in in we also our want point very our stab. and while much position, ACV. XX.X% Brad have less just nice may portfolio, – Brad, , I put out is I let our than if that a of portfolio, of context to

Unidentified Analyst

Well, sizable. that’s pretty

Deborah Pawlowski

Well, – in it I have want though. to context just we

Unidentified Analyst

this to mean valuation? brought think provide to almost was on. are entirely inevitable as it’s it when, you a as even point, far is the market they they not it’s to I’m required greater. but – anything I And sure the I’ve I CFO guys prior unless at believe rumblings. the heard IPO – I But

Pete Grum

I don’t believe so.

relationship a they’re look well. It’s first. to a the great business I to company. a the for fabulous with It’s at very, be We doing and would Buffalo, company. good you Buffalo very take have going encourage

Unidentified Analyst

Yes, of. aware I’m all

Pete Grum

$X.XX million cash went and has through $XX at ACV a on today’s billion reported injection paper, valuation. closed that Dan he’s a

Unidentified Analyst

Oh, wasn’t that I aware.

Pete Grum

prior a previously valuation. at rounds done also the billion were that reported He $X.X

Of Buffalo. course, these but don’t we being insight reported are in what’s by have our business paper that, into major

Unidentified Analyst

Yes, to. yes, Buffalo normal guided

and placed I billion. little wasn’t yes, to color so the had was aware that. a – $X.XX aware they of certainly So that billion, $X.X adds that a I

Operator

question D’Angelo. next Carlo from comes Our

Unidentified Analyst

like a that. that in $X.XX I’m is friend share just expect we great payout he something shares what talking mine Rand, also has I of to every to Is telling who had, we – and was curious me like know, was that that a for some of dividend could true?

Deborah Pawlowski

didn’t If figured that from friend come out, your it us.

status, the anywhere and $X when minimum a our is filing RIC intention, are To of investment XX% distribute date, that’s share. we net We close at income. tax our that to to equal required for which doesn’t filed a

Unidentified Analyst

All have Would question. be Okay. I then reinvest right. follow-up those we another Rand? into able And to

Pete Grum

We a do plan. That’s dividend not, reinvestment at a point, plan. have this formal

anything Of the take course, market. can in you purchase want you open and

Unidentified Analyst

alright. Okay

Pete Grum

Thank you.

Operator

Management. SER [Operator Instructions] Our from comes Sam next Asset Rebotsky question with

Sam Rebotsky

Yes. on would the quarter, dividend available? Based this be third what

Pete Grum

that. to We at that not of $X.XX done but as income. Dan simplistic every there’s two going gains a that net There’s complex started there’s In and as we would but as distribute earned have it. $X.XX, have have said, computation, part to quarter, and us, a and be, it’s there’s be – we far minimum investment it’s a if what capital a XX% new and And would for fairly a way, parts. we

know don’t that. is. I XX, somewhere what along So that

Sam Rebotsky

Okay.

Now with type success as the amount we a investments we’ve and investments? relative various that of income allocate investments, investments, ACV as to to far future do dollar made to we these have expect other

Pete Grum

formal We thing. don’t have a

more portfolio income our transitioning are to We investments.

and is We on it’s at investment the some we and formal equity-only kind early-stage strategy we’ll looking that. have this point, don’t do we but really are a not some, although – always which have of have

find will will to that, we’re general, looking be, also equity a the most in cases, when portion debentures, and You there piece. allocated in at

Sam Rebotsky

in a the amount investing, investments into to the to into some and what what And East dollar same we’re allocate created as far future we come investing have come we they investments? as West of

Pete Grum

No, we have not, Sam.

Sam Rebotsky

Okay.

what only jointly, come we into I or will they So into come guess?

Pete Grum

I you’re – Management? not East think I’m talking about Asset

Sam Rebotsky

Yes.

Pete Grum

other oil privy it’s they but we teams, sure not we to robust own what in, I’m And and aware they and and are and large, they participate. hotels, Okay. gas. that sports a of investments own do invest they they organization, do not I’m nor own

Sam Rebotsky

into – us Is you there to and went investments getting plan a Is any of this there now Rand. you increase size larger before for approach, income I right to more think spoke Because approaches although plans the the working? to stock How of the wanted at is size investments. investments, asset that discount your this selling value? to the net you one increase is a from that take was of of having

Pete Grum

larger think that least us hear place, in week in are we’ve made next we are so, – And investments. or and pursue at Yes. investment continuing one and looking. That the I you’ll is announce larger larger some to

Sam Rebotsky

you trading discount Hopefully, this now comes credibility into the stock is valuation and stock asset because a significant from net people more at give your your value.

So good luck.

Pete Grum

Sam. Thanks,

Operator

are closing no back it time. I’ll management questions at to turn remarks. further There for this

Pete Grum

in and joining Rand. stay updating for results all to interest a and you morning of this year full your you our in forward and Thank look for day fourth quarter us on March. great Have We healthy.

Operator

day. This a you. good Have conference. today’s Thank concludes

Rand Capital (RAND) 7 Nov 202020 Q3 Earnings call transcript