RAND - Earnings call transcript Q3 2024 | Rand Capital Corporation

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Operator

Greetings, and welcome to Rand Capital Corporation Third Quarter Fiscal Year 2024 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Craig Mychajluk, Investor Relations. Thank you, Mr. begin. may you Mychajluk,

Craig Mychajluk

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

at and Dan line the President Executive conversation Executive Officer. Chief with our President are A the available Margaret On slides Penberthy, copy that our Brechtel, accompany randcapital.com. of me and our Chief and Financial Vice Officer; release is and

where I'd please If X, you're turn the important some deck, along to following to like information. with slide out point Slide

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

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

During should for we be generally our as in substitute believe or evaluating non-GAAP accordance useful in presentation in today's these performance, financial measures, isolation discuss accepted we'll consider this additional accounting will the a of information call, with principles. results not some also

Dan? X, non-GAAP I'll in with today's Slide over measures please hand have accompany provided We the reconciliations of tables and Dan. the that, to to measures turn that comparable GAAP earnings With discussion release.

Daniel Penberthy

total success afternoon, which increasing year commitment everyone. building prior new instruments included year a We a fee disciplined period well-diversified the environment. and This was investment by delivered fueled complex Thank our by portfolio, the in in to enhanced execution of over robust XX% good X debt you, positioning driven income. income-generating and growth income, to achieved $X.X over strong strategic Craig, Rand another quarter and performance, market million.

an XX.X%. creating quarter. value economic This share through a overall focus today's portfolio XX% at XX% can driving debt concentrated management attractive careful yield end growth with and third while weather results of underscore value year-to-date, rose our the reflects headwinds assets from $XX returns. These asset investments of the net of reaching mix $XX.XX that per our a of the balanced Our X% million prior in quarter on now

Additionally, million of this key in successfully which we exited investments including quarter, notable several with us a $XX.X proceeds. sale provided SciAps

sold increases and further We final This sheet positions BDCs, X proceeds balance for strengthens have our in our public also realizing of $X.X our investments. capacity also future million.

capital with lowering to million outstanding it of end. leaving debt, outstanding $X.X at $XX.X We our initially reducing bank quarter this by us allocated a balance million

have performance. reduction and benefited expenses our financial recent and that improved are debt supports lower trend our from and rate overall seeing profitability, Fed interest positive downs a pay We

market we liquidity, will total our that capitalize in growth million strategically $XX as With positioned drive further value. they selective remain dynamics unfold, making long-term to investments high-return and

$X.XX dividends as Over our in Our translated X. we objectives has real the years This share. per from of share in XXXX $X.XX of to and year, in $X.XX few on benefits past success strategic Slide per XXXX. dividends $X.XX steadily have time, we rising for shareholders, payouts XXXX, our XXXX this over achieving with total paid QX highlighted into increased have as in

expected fourth Our early announcement quarter is dividend December. in

us future. gives returns the into optimized our shareholders delivering to balance sheet, a commitment for to portfolio confidence continue strategic ability in robust meaningful our and Our capital deployment well

Turning to Slide X.

changes. our along with will portfolio's the distribution recent and You debt between equity, see

SciAps, the stock portfolio value million approximately successful fair stands now with companies. other spread The businesses. across portfolio exit the repayments and which Our from of at along from loan sequentially, XX% fair down value sales XX reflects $XX was

as goal in noted, remaining we our equity close while are we investments portfolio. And XX% is structures, have companies. XX% our transaction, of of more the SciAps have the of towards already private progressed in the in debt-focused With investments a debt

activity in as ITA of manufacturer quarter Slide for our successful million quarter across blinds showcases this a $X.X our of ITA, past including follow-on The X at and a holdings investment. sale debt both total by $XXX,XXX debt a invest With highlights of reached the notable fair equity, the SciAps. exits quarter, to end. and follow-on shades. this Florida-based slide half additional of bottom the value did the We led a investment, small

and in in in a the fees for Rand. noted, did And exit This proceeds. of realized $XX.X include income $XX.X repayment, generated this million in interest return. million million gain $X.X equity As debt total $XXX,XXX $X.X a and a resulted from transaction million

proceeds the from of X FS we provided shares in traded and BDCs, of realized $X.X or million These publicly our in rather gains KKR. $XXX,XXX remaining sale Additionally, received combined. realized Barings

in realizing our valued Lastly, investment asset a loss at Mezmeriz we exited on X. an previously

Turning to Slide X.

and quarter. our services allocation portfolio while second our from decreased XX% shifts the Notably, portfolio, the the adjustments industry changes professional the portfolio see the discussed will reflect These increased You manufacturing to from fair XX% our we in since of of updates. value our to both allocation and XX%. diversity portfolio XX%

manage mix. by sale view diversity as our portfolio, the wide our highlights we with companies. and of challenges maintaining in X top the cornerstone our stocks, Additionally, the risk approach Slide a longer bolster portfolio. strategic range no of resilience end they within better X represented BDC this our in during industry a portfolio investment are economic We our quarter, of sectors At of this industry

remained million, of total resulting from has increased quarter. total Its value portfolio our in reduction Tilson assets share total sales $XX.X asset previously which with sequentially to previous a we remains primarily due Notably, largest our investment fair the value the mentioned. has consistent with a of

the of further With financials following review companies X XX% at overall it of top Additionally, represent in turn ITA over a to to depth. Margaret entered X greater that, portfolio Together, sale quarter our rankings. has the now SciAps, our these end. I'll much

Margaret Brechtel

compared quarter Slide afternoon, of good overview million, on for investment was $X.X everybody. third start XX, Thanks, reflecting growth quarter This to will a with past driven the attributed Total XX% an new over income a increase quarter rise year. provides last XXXX. by interest-yielding financial same which the Dan, year. was X the investments of our for the in primarily interest summary XX% income I and made

the experienced to in to fee income, contributed portfolio Additionally, $XXX,XXX investment that we quarter. XX sale a income SciAps increase largely Dan In companies the total, mentioned. our during due

during the side, benefit to incentive from in $X.X a On however, total quarter. We did, debt the a included expenses $XXX,XXX quarter. quarter. increase due expense decrease up expense increase interest $XX,XXX expenses during This from quarter approximately third prior million, in $XXX,XXX the amounted in paydowns for to the fees the

income-based based a pre-incentive income fee net are capital Incentive comprised gains on annualized. calculated hurdle contingent of per meeting fee benchmarks. specified is X% which are components: both investment of with fee, the X.XX% fees fee an quarterly The on of or rate and X a income-based quarter

September For this X in $XXX,XXX period. at expense months the accrued similar incurred with XXXX, fee the ending no XX, year prior

is gains and are accrue all unrealized The to realized second on the component fee losses. fee capital incentive gains of GAAP, the we capital and our gains based a required to According fees. incentive

this recognized Given the realized we gains, accrual recent higher portfolio performance a quarter. our and of

financial capital $XXX,XXX quarter quarter $X in compared a When for measure, XXXX. our million were we of to adjusted accrued incentive expenses, the third fees, adjust gains this non-GAAP which is

$X.XX for in investment net share the income our or per $X.XX year. to investment gains per quarter or from Finally, incentive the a net share capital quarter. also same excludes representing measure share period third per $X.XX increased share, adjusted last last per income $XXX,XXX $XXX,XXX $X.XX fee increase the that the from non-GAAP The year's share, XX% in per was expense accrual third a

will waterfall graph change illustrating value On Slide for in net quarter. the asset XX, the a you see

of September by depreciation XXXX, net XXXX. investments. of of partially increase by dispositions change As which was the the $XX.X $X.X unrealized million of of of offset driven sales a primarily a second assets a totaled in million $X.X This net million, was gain change from end investments, and XX, realized representing from net X% quarter

$XX.XX $XXX,XXX distributed asset shareholders. dividends last cash the quarter. September share net in $XX.XX to to per share, from as quarter, the rose Consequently, per During of XX, XXXX, Rand value up

that we included approximately a Total highlighted primarily decreased us to As by Slide in SciAps $XX.X the maintain XX% balance million on well and investments. quarter. assets million the positions future at strong of for of sheet flexible $X.X and sale due XX, cash the to end

base secured revolving borrowing formula, $XX million of our facility. to had credit According available senior Rand XX, its XXXX, under $XX.X million as existing September

more dividend end. time. stood borrowings of strategy at X.XX% to outstanding million in over portfolio the enable quarter us We income-generating believe interest to rate at investments will levels Our higher an shifting with our incorporate maintain $X.X

of of the back which share, per XXXX, Rand its or August previously With of September shareholders I on $X.XX discussion that, Dan. third as around XX, to turn will XX, dividend quarter XXXX. paid announced was to record

Daniel Penberthy

Thanks, Margaret.

Moving on to XX. Slide

ahead, we to strategy As the are income we and both look remains we have energized enhance clear, pathways value by and multiple creation. our our

always provide in which potential. debt significant will equity First, potential the to further see our we although continue expanding have we portfolio, will gain future exposure, long-term

are through building drive of income our long-term targeted debt our investments, we By to align originations positioned objectives. growth with successful on strategic history that

capital also available are fuel efficiently our deploying We committed to growth. to

borrowing with some provides Fed Our reductions hopefully recent and flexibility and road, lowering the essential our debt facility are costs. combined in revolving already paydowns, rates credit interest down more

set market our priority pillars and strengthened which These important is factors rather our we are dividend assess for another are conditions the our stage to potential commitment profitability of shareholders. current Optimizing and future refine together both hope positions holdings portfolio what maximize we of returns. as increased to

complex that pressures, face rates a and inflationary interest recognize portfolio challenges. our M&A we with companies Additionally, fluctuating landscape

navigate support these stronger. helping so the is can resilience, role even Our emerge them they to headwinds

to for of shareholder we aim our growing we is at long-term Finally, investors. income, every support driving dividends, make. sustainable to to our our investment contributing decision returns the value core By commitment increased

our about are direction excited in strategic achieve opportunities the goals. and these to confident We ahead

Capital. our quarter updating will forward in you interest day. and December matters, for you expected be joining reported We which us results, full year to XXXX fourth dividend quarter is Rand a the on also your X Thank March. announcement great and look ongoing Have our and today in in first

Operator

today's concludes Thank you. teleconference. This

this lines for may participation. you your time. Thank You disconnect your at

Rand Capital (RAND) 6 Nov 242024 Q3 Earnings call transcript