Rand Capital Corp (RAND) 2023 Q3 法說會逐字稿

Greetings, and welcome to Rand Capital Corporation's third quarter fiscal year 2023 financial results. At this time, all participants are in a listen-only mode. (Operator Instructions) As a reminder, this conference is being recorded.

您好，歡迎閱讀蘭德資本公司 2023 財年第三季財務業績。此時，所有參與者都處於只聽模式。 （操作員指示）謹此提醒，本次會議正在錄製中。

It is now my pleasure to introduce Craig Mahalik, Investor Relations. Thank you. You may begin.

現在我很高興向您介紹投資者關係部門的克雷格·馬哈利克 (Craig Mahalik)。謝謝。你可以開始了。

Thank you, and good afternoon, everyone. We appreciate your interest in Rand Capital and for joining us today for our third quarter 2023 financial results conference call.

謝謝大家，大家下午好。我們感謝您對蘭德資本的興趣，並感謝您今天參加我們的 2023 年第三季財務業績電話會議。

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

和我一起在線上的是我們的總裁兼執行長 Dan Penberthy；以及我們的執行副總裁兼財務長瑪格麗特·布雷希特爾 (Margaret Brechtel)。我們的談話中附帶的新聞稿和幻燈片的副本可在 randcapital.com 上取得。

If you are following along in the slide deck, please turn to slide 2, where I'd like to point out some important information. As you are likely aware, we may make some forward-looking statements during this presentation. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ from where we are today. You can find a summary of these risks and uncertainties and other factors in the earnings release and other documents filed by the company with the Securities and Exchange Commission. These documents can be found on our website or at sec.gov.

如果您正在閱讀投影片，請轉到投影片 2，我想在其中指出一些重要資訊。您可能知道，我們可能會在本次演示中做出一些前瞻性陳述。這些陳述適用於受風險和不確定性以及其他可能導致實際結果與今天不同的因素影響的未來事件。您可以在公司向美國證券交易委員會提交的收益報告和其他文件中找到這些風險和不確定性以及其他因素的摘要。這些文件可以在我們的網站或 sec.gov 上找到。

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

在今天的電話會議中，我們還將討論一些非公認會計準則財務指標。我們相信這些將有助於評估我們的績效。您不應孤立地考慮此附加資訊的呈現，也不應將其視為根據公認會計原則的結果的替代品。我們在今天的收益發布隨附的表格中提供了非公認會計準則衡量指標與可比較公認會計準則衡量指標的調節表。

With that, please turn to slide 3, and I'll hand the discussion over to Dan. Dan?

接下來，請翻到投影片 3，我將把討論交給 Dan。擔？

Thank you, Craig, and good afternoon, everyone. There was a recurring theme as our results once again reflected the strength and execution of our strategy as we continued to deploy capital, largely centered on high-quality debt investments.

謝謝你，克雷格，大家下午好。有一個反覆出現的主題，因為我們的業績再次反映了我們策略的實力和執行力，因為我們繼續部署資本，主要集中在高品質債務投資上。

Total investment income grew 12% for the quarter and was driven by the sustained growth in interest income from our portfolio companies. For the quarter, net investment income per share was $0.31, which was down year over year. The contributing factor of which affecting this decline were higher expenses tied to our debt financing, which has been put to work to fund future growth. Our net asset value per share of $23.77 was relatively flat for the quarter, but up 6% since year-end 2022.

本季總投資收入成長 12%，這得益於我們投資組合公司利息收入的持續成長。本季每股淨投資收益為 0.31 美元，年減。影響這種下降的因素是與我們的債務融資相關的費用增加，這些費用已用於為未來的成長提供資金。本季我們的每股淨資產值為 23.77 美元，相對持平，但自 2022 年底以來成長了 6%。

We've completed two new investments during the quarter that totaled $7.8 million, which I will highlight in a few slides. And even after those investments, we continue to end the quarter with significant liquidity to put to work for future investments.

我們在本季完成了兩項新投資，總計 780 萬美元，我將在幾張投影片中重點介紹這一點。即使在這些投資之後，我們仍將在本季結束時繼續擁有大量流動資金，以用於未來的投資。

The company paid a quarterly cash dividend of $0.25 per share during the third quarter. We believe that our deal flow and unique position in the market will continue to support future dividends, and following past practice, we expect to announce our fourth quarter dividend in early December.

該公司第三季支付了每股0.25美元的季度現金股利。我們相信，我們的交易流和在市場中的獨特地位將繼續支持未來的股息，按照過去的慣例，我們預計將在 12 月初宣布第四季度股息。

If you turn to slide 4, you can see our portfolio mix between debt and equity, and it changes during the past quarter. At quarter end, our portfolio consisted of investments with a fair value of nearly $75 million across 30 portfolio businesses. This is up, one, given the two new investments, and was offset by one exit of a former equity investment that was previously listed at no fair value and which provided a tax loss.

如果您翻到投影片 4，您可以看到我們的債務和股權投資組合，並且它在過去一個季度發生了變化。截至季末，我們的投資組合由 30 個投資組合業務的公允價值近 7,500 萬美元的投資組成。考慮到這兩項新投資，這一數字上升了，並被一項先前股權投資的退出所抵消，該股權投資之前沒有以公允價值上市，並帶來了稅收損失。

The portfolio comprised approximately 63% in fixed rate debt investments, which has continued to increase since the past quarter and the year ended 2022. The annualized weighted average yield of those debt investments was 13.45%. The remaining mix at the end of the quarter comprised 27% in equity investments in private companies and 10% held in publicly traded equities, primarily consisting of our other BDC investments and our ACV Auction stock.

該投資組合約63%為固定利率債務投資，自上一季及截至2022年全年以來，固定利率債務投資持續增加。這些債務投資的年化加權平均收益率為13.45%。截至本季末，剩餘的投資組合包括 27% 的私人公司股權投資和 10% 的公開交易股票，主要包括我們的其他 BDC 投資和 ACV Auction 股票。

At quarter end, we still held almost 195,000 shares of ACV which does represent approximately 4% of our portfolio's total fair value. We had our ACV shares valued at $15.18 at quarter end, and we will continue to evaluate these holdings as we consider our future liquidity needs.

截至季末，我們仍持有近 195,000 股 ACV 股票，約占我們投資組合公允價值總額的 4%。截至季末，我們的 ACV 股票價值為 15.18 美元，我們將在考慮未來的流動性需求時繼續評估這些持股。

As I mentioned, during the quarter we completed two new investments that fit well within our investment objectives and demonstrate our ability to attract opportunities in the current market environment. These transactions are highlighted on slide 5.

正如我所提到的，本季我們完成了兩項新投資，這些投資非常符合我們的投資目標，並展示了我們在當前市場環境中吸引機會的能力。這些交易在幻燈片 5 中突出顯示。

The largest investment totaled $4.0 million to all of our people. This included $3 million of senior debt at a 16% interest rate, which also includes a PIK, or payment in kind interest, and a $1 million preferred equity investment that also carries a 12% dividend. All About People is a full service staffing and executive search firm with a growing focus on the healthcare industry.

最大的投資總額為 400 萬美元，涉及我們全體員工。其中包括 300 萬美元的優先債務，利率為 16%，其中還包括 PIK（即實物利息支付），以及 100 萬美元的優先股權投資，股息率為 12%。 All About People 是一家提供全方位服務的人才配置和獵人頭公司，越來越關注醫療保健行業。

The other investment was $3.8 million in First Coast Mulch. This consists of a $3.4 million subordinated note at 13% and also an interest earning convertible note of $420,000 convertible to future equity. First Coast Mulch is a commercial mulch installation company that covers Northern and Central Florida markets.

另一項投資是 First Coast Mulch 的 380 萬美元。其中包括 340 萬美元的次級票據（利率為 13%）以及可轉換為未來股權的 42 萬美元的生息可轉換票據。 First Coast Mulch 是一家商業覆蓋物安裝公司，涵蓋佛羅裡達州北部和中部市場。

The charts on slide 6 illustrate the diversity in our portfolio and the change in industry mix during the third quarter. Given the impact of the new investments in All About People and First Coast Mulch along with other fair value changes, we saw notable changes in this industry mix.

第 6 張投影片上的圖表說明了我們投資組合的多樣性以及第三季產業組合的變化。考慮到 All About People 和 First Coast Mulch 新投資的影響以及其他公平價值變化，我們看到該行業組合發生了顯著變化。

Professional services, which has been our largest industry mix, increased eight percentage points to now 40% of the total. Manufacturing went down three points, consumer products down two points, and there were a few other smaller industries that were adjusted by a percentage point. Overall, we continue to value the diversity of our industry represented across the total portfolio.

專業服務一直是我們最大的產業組合，增加了 8 個百分點，目前佔總數的 40%。製造業下降了三個百分點，消費品下降了兩個百分點，還有其他一些較小的行業也調整了一個百分點。總體而言，我們繼續重視整個投資組合中所代表的產業的多樣性。

Slide 7 lists our top five portfolio companies at quarter end. There was no change in the ranking since last quarter. Tilson continues to remain the largest fair value investment at $10.6 million or 14% of our total portfolio. The one change you may notice is that our top five now represent 42% of our total portfolio versus 47% last quarter. This reflects the overall fair value growth of the total portfolio.

投影片 7 列出了季度末我們排名前五名的投資組合公司。自上季度以來排名沒有變化。 Tilson 仍然是最大的公允價值投資，達到 1,060 萬美元，占我們投資組合總額的 14%。您可能會注意到的一個變化是，我們的前五名現在占我們總投資組合的 42%，而上一季為 47%。這反映了整個投資組合的整體公允價值成長。

With that, I'll turn it over to Margaret to review our financials in greater depth.

這樣，我會將其交給瑪格麗特，以更深入地審查我們的財務狀況。

Thanks, Dan, and good afternoon, everyone. I will start on slide 9, which provides an overview of our financial summary and operational highlights for the third quarter of 2023.

謝謝丹，大家下午好。我將從幻燈片 9 開始，其中概述了我們 2023 年第三季的財務摘要和營運亮點。

Total investment income was $1.7 million, which is up 12% over last year, driven by a 40% increase in interest income from portfolio companies. The higher interest from portfolio company reflects seven new debt instruments that we originated over the last year.

總投資收入為 170 萬美元，比去年增長 12%，主要得益於投資組合公司利息收入增長 40%。投資組合公司的較高利息反映了我們去年推出的七種新債務工具。

Of our 30 total portfolio investments, 23 contributed to our total investment income during the third quarter. We did see lower dividend income during the quarter, which was largely due to a large prior year dividend from Carolina Skiff, which did not repeat in the third quarter of 2023. Also contributing to the decline was the sale of the company's investment in Dealer Solutions and Design during the second quarter of 2023.

在我們的 30 項投資組合中，有 23 項為我們第三季的總投資收入做出了貢獻。我們確實看到本季股息收入較低，這主要是由於Carolina Skiff 上一年派發了大量股息，但在2023 年第三季度沒有重複發放股息。該公司出售對Dealer Solutions 的投資也是造成股息收入下降的原因2023 年第二季的設計。

Total expenses were approximately $810,000 during the third quarter compared with $499,000 in the prior year third quarter. This increase largely reflects a $264,000 increase in interest expense on borrowings under the senior revolving credit facility entered into in June of 2022 to fund growth. Also contributing to the total expense increase was a $43,000 increase in base management fees, which is calculated on our total assets, less cash. So as we deploy more capital into investments, that fee increases accordingly.

第三季的總費用約為 81 萬美元，而去年第三季的總費用為 49.9 萬美元。這一增長主要反映了 2022 年 6 月為資助增長而簽訂的高級循環信貸安排下的借款利息支出增加了 264,000 美元。總費用增加的另一個原因是基本管理費增加了 43,000 美元，這是根據我們的總資產減去現金計算的。因此，當我們將更多資金投入投資時，費用也會隨之增加。

Partially offsetting was the change in accrued capital gains incentive fees to the company's external investment advisor. The current period did include a credit of $41,000 of capital gains incentive fees compared with an expense of $22,000 for the third quarter of 2022.

部分抵銷的是公司外部投資顧問應計資本利得激勵費的變動。本期確實包括 41,000 美元的資本利得激勵費抵免，而 2022 年第三季的費用為 22,000 美元。

As a reminder, we are required to accrue capital gain incentive fees on the basis of net realized capital gains and losses and net unrealized capital gains and losses at the close of the period. Excluding the capital gains incentive fees, adjusted expenses, a non-GAAP financial measure, were $851,000 compared with $477,000 in the third quarter of 2022.

提醒一下，我們需要根據期末已實現的淨資本利得和損失以及未實現的淨資本利得和損失來提列資本利得激勵費用。不包括資本利得獎勵費用，調整後的費用（一項非公認會計準則財務指標）為 851,000 美元，而 2022 年第三季為 477,000 美元。

Third quarter net investment income was $799,000 or $0.31 per share, compared with $1 million or $0.39 per share in last year's period. On an adjusted basis, which is a non-GAAP financial measure and excludes the capital gains incentive fee accrual expense, net investment income was $0.29 per share compared with $0.40 per share in last year's period. Again, this change reflects the expense changes I highlighted largely due to the use of the senior revolving credit facility.

第三季淨投資收益為 79.9 萬美元，即每股 0.31 美元，去年同期為 100 萬美元，即每股 0.39 美元。調整後的基礎上（這是一種非公認會計準則財務指標，不包括資本利得激勵費應計費用），淨投資收益為每股 0.29 美元，而去年同期為每股 0.40 美元。同樣，這一變化反映了我強調的費用變化，這主要是由於高級循環信貸便利的使用。

I'm going to move on to slide 10, and slide 10 provides a waterfall graph for the change in net asset value for the quarter. Net assets at September 30, 2023, were $61.4 million comparable with the end of the second quarter.

我將轉到投影片 10，投影片 10 提供了該季度淨資產值變化的瀑布圖。截至 2023 年 9 月 30 日的淨資產為 6,140 萬美元，與第二季末相當。

Net investment income and the net change in unrealized depreciation offset the net realized loss on sales along with the $645,000 in dividend distributions to shareholders during the quarter. As a result, the net asset value per share at September 30, 2023, was $23.77, compared with $23.79 at June 30, 2023.

淨投資收入和未實現折舊的淨變化抵消了已實現的淨銷售損失以及本季度向股東分配的 645,000 美元股息。因此，截至 2023 年 9 月 30 日的每股資產淨值為 23.77 美元，而 2023 年 6 月 30 日為 23.79 美元。

As highlighted on slide 11, we continue to have a strong balance sheet and significant liquidity that positions us well for future investments. Cash at quarter end was approximately $3.5 million. We held approximately $7.2 million in the liquid BDC and ACV Auction shares which can provide near term funding capital for investments as we have demonstrated in past periods.

正如幻燈片 11 所強調的那樣，我們繼續擁有強勁的資產負債表和大量的流動性，這為我們未來的投資奠定了良好的基礎。季度末現金約 350 萬美元。我們持有約 720 萬美元的流動 BDC 和 ACV Auction 股票，正如我們在過去時期所證明的那樣，這些股票可以為投資提供短期融資資本。

In addition, based on our borrowing base formula, Rand had $11.3 million in availability under the senior secured revolving credit facility at September 30, 2023. So in total, our liquidity counting these three sources is approximately $22 million. Our outstanding borrowings of $13.8 million at quarter end carry an interest rate of 8.8%.

此外，根據我們的借款基礎公式，截至2023 年9 月30 日，蘭德在優先擔保循環信貸安排下擁有1,130 萬美元的可用資金。因此，算上這三個來源，我們的流動性總計約為2200 萬美元。截至季末，我們的未償還借款為 1,380 萬美元，利率為 8.8%。

With that, I will turn the discussion back to Dan.

說到這裡，我將把討論轉回丹身上。

Thanks, Margaret. We have delivered another quarter of strong performance. Looking forward, we believe we can continue to execute on the strategy and do remain focused on generating strong and consistent returns for our shareholders.

謝謝，瑪格麗特。我們又一個季度表現強勁。展望未來，我們相信我們可以繼續執行該策略，並繼續專注於為股東創造強勁且持續的回報。

The expansion of the portion of our portfolio investment into these debt instruments has proven to be a cornerstone of our success, and we do expect to continue this trajectory of this growth in order to drive our earnings potential and support a growing dividend well into the future.

事實證明，將我們的投資組合投資部分擴大到這些債務工具是我們成功的基石，我們確實希望繼續這種成長軌跡，以推動我們的獲利潛力並支持未來不斷增長的股息。

Thank you for joining us today and for your continued interest in Rand Capital. We look forward to updating all of you on our fourth quarter 2023 results which will be reported in March. We hope you have a great day.

感謝您今天加入我們，並感謝您對蘭德資本的持續關注。我們期待向大家通報我們將於 3 月公佈的 2023 年第四季業績的最新情況。我們希望您度過愉快的一天。

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

女士們、先生們，今天的電話會議到此結束。感謝您的參與。此時您可以斷開線路並度過美好的一天。