RAND - Earnings call transcript Q2 2021 | Rand Capital Corporation

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Operator

Greetings. Welcome to the Rand Capital Corporation Second Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. is conference this note, being recorded. Please turn Pawlowski, Investor now the conference Deborah host, your to Relations over I'll for Capital. Rand

begin. may You

Deborah Pawlowski

Thank for afternoon, in good financial results our you, appreciate XXXX [Shamali], interest call. your second everyone. quarter Rand us joining We and conference today for Capital and

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

release that that well You accompany crossed wire should of have If as slides a this available website today. as conversation the the are on will copy our morning they at the not, our randcapital.com.

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

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

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

During financial in these will discuss evaluating today's be our some we also measures. call, useful will non-GAAP We believe performance.

or You should not substitute a as isolation results additional presentation for accordance of in consider GAAP. the information in with this

comparable of with release tables non-GAAP GAAP reconciliations in accompany provided measures and in have slide. measures today’s We that the the

to begin. hand to X, will Pete discussion would the over turn you if to that, Slide with So Pete? I

Pete Grum

Good afternoon, Thank everyone. you, Deb.

strategy driving distributions. investments income-producing our and delivering investment our investments, execute with cash we as to evolving equity of focus to higher portfolio income ultimately goal from continue on We

first appreciation Exchange in value following The For the which sequential income up reflects Open XX% a unrealized of in respectively. increase increase X% Net nonstrategic quarter, investments and investment outside total financing XX% from at their value share completed of from by end asset in grew Auctions, fair the new the and our The investment their our sequential quarter the equity year-end March. change of largely reflects $XX.XX $XXX,XXX. of IPO investors. per year-end was period, to our ACV

investment the we owned software GiveGab, a quarter, During sold since our that in we've company XXXX.

netted is Our strategy consistent This of of equity equity of our from investment million. $XXX,XXX portfolio recognized a with us our $X.X debt. transforming into gain

million of gains fees, unrealized basis. primarily in During gains be Exchange. a the GiveGab related accrual sale incentive will related were noncash to to $X.X the from which the increase and quarter, The realized Open quarterly adjusted of on result we capital mostly in accrued expenses a appreciation

loss our a was per paid distribution share. share share. during per investment investment quarter we third the we per reported second $X.XX adjusted our per As dividend a of $X.XX result, of expense, income this also And quarterly end July, regular dividend net of announced net at Absent $X.XX the and announced We distribution share. GAAP quarter. $X.XX

$X.XX the have was this year per end last share per share declared in of paid including far is in year, we the $X.XX dividends, at XXXX. So declared that but

and our At Open support you traded here reflects progress X% publicly increase quarter all regarding fair fair has by end, shown our impact a value of dividend-paying If the $X.X Exchange, debt an portfolio The $X.X million. our the of in value of year. of made in million, the Slide approximately fair XX% $X.X fixed-rate now comprised investments, discuss BDCs. was our investments during X, in equity evolution portfolio increased The have XX% million value investments can of which increase to we investment turn of XX% to the we of strategy.

received finished including that shutters $X.X suite transactions high-end and the and are The X. and fabric $X.X made Holdings, largest we customized wood, residential to and provides and investment X commercial blinds other quarter, wood repayments. for we treatment, discussed and exit LLC, the applications. Slide faux a During million in wood The on the These follow-on follow-on Avenue provided was salon shades, Mattison business locations from investments highlighted estheticians, was fully individual million and furnished investment for in loan therapists, nail totaled equity. -- covering lease $X.X studio and such wide for massage as and individualized space components spa as broad manufactures variety during and a acupuncture. ITA the notes of ITA as barbers, for was $X.X services well of for Inc quarter either $XXX,XXX million, in XX% million these term window prime salon consisted and new works stylists, technicians

consisted investors year-end. total, the Mattison diversity XX% of we quarter. Our our XXXX $X.X mix in million now end In illustrate of note. on have a of the and charts follow-on $XXX,XXX industry the at promissory Slide The in since the change investment X portfolio

at ACV's given and the a fair the we of assets. X the new within value Their are during Open point portfolio at value it believe which reduces changes, measurable X on Exchange, and investments of represents significant portfolio million the quarter followed our $X.X investment our notable value X to down list. saw period. new so IPO. valuation of were with companies the increase saw during most ITA There investment. portfolio first or about net fair in made, quarter, that fair the the their during risk. came jump like and Slide quarter on our companies care its which end. while We the of impact industries diversity changes, recently lists the our With health top X exposure market other software the XX%

consist of September B freely and Class A Class non-tradeable common and through are B Class stock. Class A restricted holdings XXXX. XXX,XXX XXX,XXX the common The of still tradable, ACV stock Our the XX, are while shares

our current discounted restrictions. have to We due valuation these

or I'm it going capital a as and distribution. investment as depth. greater reminder, be a it above our over traded dividend for that, As turn review our to gain will such, any us With any to in to to Dan proceed initial financials XXX,XXX relates

Dan Penberthy

summary provides Total quarter to in companies X investment and last $XXX,XXX, good our portfolio in overview over and year shift Thanks, interest-yielding profile year generated assets. afternoon compared does prior was the financial highlights. increase our an of income Slide the period. total, XX reflect portfolio a for income with more XX% operational Pete, all. XX our In and the

This up from fee million, value. change in the of benefited on $XXX,XXX Open of accrual during to of Total quarter the the a last investment approximately expenses investment The due total Exchange's primarily result of over portfolio. Pete largely sale dividends dividend of which our XX% already quarter's year's $X.X incentive second fees also income, quarter. BDC year's was This This in last gains quarter. comprised the was from from income second received incentive was has which up unrealized million were $X.X addition accrued discussed. of was GiveGab portfolio capital and appreciation quarter, the $XXX,XXX

under a depreciation Net resulting the and the mostly a is in gains incentive realized asset share. $XXX,XXX cumulative base fee and of the $XX,XXX aggregate excludes payable the in which measure investment of Operating using net the or capital gains in the values. accrual capital loss the As calculated expenses appreciation increase of per GAAP because or accrual, the reminder, unrealized change at losses the from close investment gains capital capital period. XX%, aggregate quarter, fee increased financial to $X.XX non-GAAP incentive portfolio management was advisor a fee increased Rand's and

net per change increase for in per $X.XX the which was share The in Pete $X.XX share. discussed. fair the Also Excluding investment to year change investments. the net in Exchange, realized $X.XX from compared the the assets NAV prior investment of to in $X.X NAV was $X.X gain GiveGab, capital has net in gains per was due Rand's million was with in with primarily quarter. unrealized for which increased on provides income depreciation sale a increase graph accrued expenses, the million contributing a share of Slide incentive reflected XX on value period. operations Even portfolio fees, in waterfall the change increase adjusted the Open the or the net the

cash sheet. our strength We dividends. also Slide of out XX balance approximately $XXX,XXX of paid highlights the

include million liquidity period. under We owed a SBIC million long $XX.X have debentures. million our matures The in approximately multiyear This of $X borrowing currently for for availability does investments. new over to $XX the SBA

However, next when is year million that begins September due. in $X

As dividends. required the least to shareholders maintain at to of our qualified RIC in of our income status, we year distribute will continue form calendar our to XX%

additional to The and off rate we in dividend tax long-term review of is estimated capital and distributions gains is This is distributable those XXXX corporate GAAP in and result filings. of estimates distributed estimates. tax then regular dividend. sources GAAP all a commonly and income of of our including final year-to-date and XXXX conjunction our determination tax-based actual return as on the September reviewed of previously finalized calculation over following quarterly annualized year quarterly for based tax from the which short- each our in initial based Later will our in year quarter, net with $X.XX results. the based our cash may dividend income spillback is referred investment income, Our fourth conservative

second not Our expires during We in up repurchase $X.X quarter. of next program did and purchase of million repurchase in current stock April share stock year authorizes the the to XXXX. any

position, liquidity strategy believe forward, dividend. income As can support the remarks. our we growing execute a grow continue of for completes lines the strong and we portfolio, please our our prepared to Operator, we with open our questions. to drive investment look support That

Operator

[Operator Instructions].

Asset Sam is SER Rebotsky Our Management. first from question with

Sam Rebotsky

The June was value ACVA, we XX which $XX.XX, used? the valued that at is currently on what

Pete Grum

market it in was It was changes due at down discounts the because that was time. -- that of value the well, we that to of and and wrote changes used million, some of in $X.X some lack the salability we of

Deborah Pawlowski

at Class the Class A was and $XX.XX was B the $XX.XX. Sam, June XX

Sam Rebotsky

million. gains in million much the How paid ACVA? -- $X.X that X.XX the of to that we attributable is the were capital So

Pete Grum

anything. Well, we've I paid don't think

We have accrued.

Sam Rebotsky

amount would Accrued, to the is that ACVA? you accrued say we attributable right, What Okay.

Pete Grum

get that you. do but can't I'll my head, I out certainly to of back

Dan Penberthy

maybe think of the of There I offset Pete numbers Open to valued gains at the had ACV remember, I'm the $XX.XX at closing attributable mentioned. on ACV on The some XX also off realized the up March we are driven -- depreciation based the was a of the $X.XX during unrealized stock appreciation of price of gains, end here. incentive to XX most the because the was $XX and capital a which you're downward sorry. if quarter, primarily quarter couple which is that that those is GiveGab, that was Exchange at items during you in adjusted actually June by had and the $X.X fee, million, Sam, gains, million accrued mixing so quarter,

Sam Rebotsky

$X.X the And million? Okay.

Pete Grum

the realized includes -- losses, the in unrealized at That total theory, values and activity. at June fee if, gains gains the portfolio is incentive on net closing to that XX were liquidate capital its the based

Sam Rebotsky

Okay.

do are we have happy ACVA portfolio? -- So we in where another our

Pete Grum

Sure.

Of course, Sam. do, we

We have a...

Dan Penberthy

of mark-to-market much less that at Sam, is value will is they're where and that going up, And down to the ball time period. be X the you get the quarterly end those or in X what out road. the portfolio September where crystal the fair are tell can't things XXXX, corporation's -- years estimates We XX,

Sam Rebotsky

stock attributable ran was what the When up XX, to? Okay. XX, that

Pete Grum

responsible It's in life that. news there. periodically not have during We here. for were any didn't my We happened

talk There it, no is a idea. market. have have that talking the put NASDAQ start certainly people surveillance. to about don't There and thinly was we information stock into but You any we traded -- we

know, So prior calls any and that. or to I get Sam, didn't after I don't that

Sam Rebotsky

Yes, yes. yes,

has hear -- you heard share wait. another Okay. to I another But you those Did be to Buffett attributed Warren rumors? somebody stock.

Pete Grum

No.

Operator

is And investor. [Brett Davidson], our next is question from who a private

Unidentified Analyst

heard And the forget they whether are true? about you rumors,

Pete Grum

that next You the the Buffett? I'm next mean Warren we're --

Unidentified Analyst

Is I hear. answer go. couple got a true? I it you questions. important the of There That's want to

adjusting So far into I presentation and the all as the in account dividend. tried heard taking as

into dividend? so adjustment but to how And Or adjusting the year? sometime done these done would play the going will of on it's later most Any of later going it looks close special, adjustments the be after year, quarterly year. to be done subsequent a in the onetime like be yearly, are that subsequent

Pete Grum

I and income the And future. on be what the in on net match company basis as that Quarterly it. And sustainable through we the talk believe this dividend about a is it in most investment time. the make to grow I'm look work and so sure to management designed see heard on out gains over because -- and Dan some a and analyze it's to I'll turn at to differences forecast basis answer is dividend, hope a that's there is going will Board conservative that. can also capital the over of of we goes our I we that thought as that timing. tax because to it -- the differences

Dan Penberthy

Yes.

beginning the the experience of unexpectedly, to think based happen year, a are which we repayment, do often our deterioration of Since we investment debt more our to going on have portfolio. happens obviously. at a we're effect for project debt negative So we which out the what we portfolio, does year income, in

on the determine And and as we is each done And will so where quarterly numbers year those we and And And projected to we our think year then monitor fourth that those have end will an the tighten get that up. prepare quarter. then components. estimate prepare analysis we mentioned, so then Pete the quarter, full calendar down X initial an we based as for results XXXX. actual as we'll tax

calculations. first will would well there's will offset to the Then had. want being model out the immediately done, year advisors will because done tax income conclusion with And gains third-party of be least I is is hopefully, work is And final because the precise that's as onetime tax -- dividend our losses, is be we this more to make to the tax our tax the the basis. returns and in an onetime being capital get our first referred may we your year, and January a of obviously, we're to operating on adjustment trying think we spill capital done sure, be that's by be know with typically I referred enough we as on on happens spillback income is as returns as tax XXXX to initial don't the time these kind of the when sure through for minimal And a to RIC on that just a a that calendar minor look tax make income that we This XX% and on on tax with XXXX. what to do final following would dividends. all be advisors, tax our then for that that the I until of all that attributable return we but we based to The returns And which in can calculation numbers. year during you job we've what a outside our September. would needed basis included -- capital a amount, gains, calculation currently net or our strive annually done tax quarter's that also a component, at now distribute adjustment are process conclusion tax gains, at an that upcoming have expectation filed type based of a

is we to numbers quarterly, tax year at is tighten Well, to it December look change, but So see plus go we the some for and happen subject then down proof it to the calendar August needs there's fundamental September still that thesis. and that in or purposes. if a adjustment for in minus of we and back our this

Unidentified Analyst

is interest how My paid. particular be to that's going in

thing. dime. estimate quarterly base onetime say to is the so to that for was dividend a income used a So gains, that's by $X.XX going capital be that wrong the that

over to in years quarterly. that So to going onetime Or going subsequent is $X.XX a be dividend? spread that the result is

Pete Grum

you I to year. mean paid the -- You has RIC lose your it status. be believe Also that during

the be it's next and not spread years. over it So paid would

Dan Penberthy

don't will I believe be spread. Yes. it

is will with However, stress this RIC that third-party advisors. tax in again consultation our I

the take And other so of Board we can would to that a consideration. And need believe stock election also cash form whether be that it to determine or a into But I the at adjustment distribution. onetime its be dividend.

Unidentified Analyst

cash, if would it requires of the distribution think would a I to wouldn't earnings? Well, be the need it it,

Pete Grum

cash combination cash stock you some do can and do of or you You can a with limitations. can the

Dan Penberthy

go requirements quarterly that also but that to out, and cash a have discussed level is the to There's annual be on Board basis. at minimum

Unidentified Analyst

All right.

if me I'm correct So wrong here.

for in So in be that the for adjustment or then it the and year will spillback dividend. will set result up then ordinarily capital dividend prior subsequent the the onetime And and any year, would down to those quarterly result in gains, dividends.

Dan Penberthy

likely. be Yes, an it would most dividend, third the to quarter adjustment

Unidentified Analyst

Okay.

then? be will dividend quarter's adjustment it So to X

Deborah Pawlowski

when But we... we'll differentiate

Dan Penberthy

That's right.

Deborah Pawlowski

is This quarterly clear. very it make regular dividend. We'll the Yes.

Dan Penberthy

$X.XX in issued Here's plus the this our the $X.XX is just -- whatever July. adjustment a just we is

because to know $X.XX up, is the if extra number net have was offset final the any. year number for or number subtract make Here's what we don't are the the plus occurred. tax amount We until real calculations last the

Unidentified Analyst

Understood. Yes.

Is Next ACV. kind question in. strategy exit any there I'm for of interested

Pete Grum

that -- needs where yes, public we price time, as Yes, owning think we are highlight go, I have the we not historically have. -- done, that But of own and with upcoming at our we think we little we And will look algorithm of we over in kind the we our exit. shares. will business liquidity,

Unidentified Analyst

here? So or like all that means over isn't this you said none time, operation an

Pete Grum

give you Of you? course, you information. want insight us Would or wouldn't to

Unidentified Analyst

looking about or transaction no, the as not any the character no. just I'm I'm for No, of talking specifics timing.

Pete Grum

Yes.

that changing to and goal is variety take a So debt. our here's or we is other into increase increase liquefy our to can interest paying like what loans that is or equity so cash dividend into convert our part of them, equity investments that, -- of goal debentures that things ongoing

Unidentified Analyst

Yes.

to a we're -- over going going of so period isn't couple or a or ACV to to fair end from of I all of decide, a none be mean the from perspective, this of happen it's year going be to the X runs that and we're I exit could that course going And beginning next. Is day to the days. characterization? the This mean,

Pete Grum

I'm either on think characterizing a $X way. billion where the the alternatives price it company. will it It where own money to put should think I -- uncomfortable compared we We our based wouldn't be. be shares. It's XXX,XXX to we out, is,

Unidentified Analyst

All right.

a occur has it. over? this that there time to to end that period date rephrase has occur me an this Is Let by? there Is certain

Pete Grum

No.

Unidentified Analyst

Okay.

a to So over decide a it period has this you necessarily, to time of within place could take and or sell, not completed whatever. conceivably be once week

Pete Grum

Right.

Unidentified Analyst

Okay. take atmosphere in looking investments that that equity Are to anybody public IPO? the the any Is feedback to you advantage other maybe got to? guys you are an that's previewed wouldn't ordinarily do is something of you've of currently looking aware markets? there be from Or

Pete Grum

We disclose the we -- it wouldn't call. in well, wouldn't conference

Unidentified Analyst

they my looking was Got a buyer find -- -- precipitated it. give some as GiveGab I'm the And did or that there is of the last Was you something position? to your clarity -- for that one able just were to what it transaction is guys you can sale the investment?

Pete Grum

in sold received. we that's company and proportion that so that -- the totality, our was proportional Well, our

As fundraising they of the nice provide we're at online in imagine, a whole and you little they and say business company trajectory They nice X of number opportunities in of and sold. company different. having a the until this to hits were spot growing liquidity picked a -- was each and anyway. can I'd COVID bit have a been

Unidentified Analyst

Was transaction give Is what it Or involved? available that Or... equity? information some you can online? that private idea

Dan Penberthy

It -- it available was acquired by online. all is

lot. GiveGab. you every Google a is if phone. and continued action, exit, acquirers, do find afloat, this disclosed. the No was transaction just GiveGab nonprofit But shopping, search, out in time, can you're you the on XX I'm Every just price from acquirers you're as April sure If a Google

Unidentified Analyst

Yes. Yes.

one think can probably out. I figure that I

had. all I appreciate and it, thanks much pretty And much. So that’s Thanks, so guys. I

Operator

from is with next Our Haberman RLH question Investments. Ross

Ross Haberman

the I had just got ACV. of If understand right, about have B questions late. little currently? I follow-up X on you I about shares a XXX,XXX

Pete Grum

exactly. I'm to not you I'm going to going you, tell approximately tell

and Class the shares of We Class the of have XXX,XXX A B. XXX,XXX

Ross Haberman

When can B to you register sale? the

Pete Grum

sales become B that XX. September the will believe tradable freely I after

Ross Haberman

don't of correct? And Or right, the $XX.X the position to quarter. of $XX know, that of roughly, understood as I it the Is was if end I marked whole you this...

Pete Grum

of tradable. trading using to X the marked have A, X% Class Class because the the reflect B, discount of We last any we quarter. its it's discount days reflect don't The a -- The lack we freely restrictions. to have a

Ross Haberman

-- quarter. I carrying at both million and see your And $XX of those total what you're are the marks the saying. all end value the

Pete Grum

sir. Yes,

Deborah Pawlowski

Operator?

Operator

We the for of have I'll turn the call closing now Grum reached end remarks. over session. question-and-answer Pete the to

Pete Grum

us our in look in much, third Thank thank on of you a quarter for November, all updating and to results We joining for and you forward XXXX very Rand interest day. your Capital. you and have great today

Operator

and your lines conference, you today's you for Thank this at concludes your time. may disconnect This participation.`

Rand Capital (RAND) 9 Aug 212021 Q2 Earnings call transcript