Rand Capital Corp (RAND) 2024 Q3 法說會逐字稿

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.

歡迎參加蘭德資本公司 2024 財年第三季財務業績電話會議。（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 your host, Mr. Craig Mychajluk, Investor Relations. Thank you, Mr. Mychajluk, you may begin.

現在我很高興向您介紹主持人，投資者關係部 Craig Mychajluk 先生。謝謝你，Mychajluk 先生，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 2024 financial results conference call. 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.

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 2024 年第三季財務業績電話會議。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're following along with 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.

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。

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.

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, should not consider the presentation of this additional information in isolation or as a substitute for results in accordance with generally accepted accounting principles.

在今天的電話會議中，我們還將討論一些非 GAAP 財務指標，我們相信這些指標將有助於評估我們的業績，不應考慮單獨呈現這些附加資訊或作為根據公認會計準則的結果的替代品原則。

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

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. Rand delivered another strong quarter of performance, driven by disciplined execution and strategic positioning in a complex market environment. We achieved robust growth in total investment income, increasing 27% over the prior year period to $2.2 million. This success was fueled by our commitment to building a well-diversified income-generating portfolio, which included five new debt instruments over the year and enhanced fee income.

謝謝你，克雷格，大家下午好。在複雜的市場環境中嚴格的執行和策略定位的推動下，蘭德再次實現了強勁的季度業績。我們的總投資收入實現了強勁成長，比上年同期成長 27%，達到 220 萬美元。這項成功得益於我們致力於建立多元化的創收投資組合，其中包括今年五種新的債務工具和增加的費用收入。

Our net asset value per share rose 3% from the prior quarter and 16% year-to-date, reaching $27.29 at the end of the third quarter. This growth reflects our careful management of a $75 million portfolio now concentrated 74% in debt investments with an overall yield of 13.8%. These results underscore our focus on creating value through a balanced mix of assets that can weather today's economic headwinds while driving attractive returns.

我們的每股資產淨值比上一季成長 3%，今年迄今成長 16%，第三季末達到 27.29 美元。這一成長反映了我們對 7,500 萬美元投資組合的精心管理，目前 74% 集中在債務投資中，整體收益率為 13.8%。這些結果凸顯了我們致力於透過平衡的資產組合創造價值，這些資產可以抵禦當今的經濟逆風，同時帶來有吸引力的回報。

Additionally, we successfully exited several key investments this quarter, including a notable sale of SciAps which provided us with $13.1 million in proceeds. We have also sold our final positions in 2 public BDCs, realizing proceeds of $1.3 million. This further strengthens our balance sheet and also increases our capacity for future investments.

此外，本季我們成功退出了幾項關鍵投資，其中包括 SciAps 的重大出售，這為我們帶來了 1,310 萬美元的收益。我們還出售了 2 個公共 BDC 的最終頭寸，實現收益 130 萬美元。這進一步增強了我們的資產負債表，也提高了我們未來投資的能力。

We initially allocated this capital to reducing our outstanding bank debt, lowering it by $13.3 million leaving us with a balance of $3.9 million outstanding at quarter end. We have benefited from recent Fed rate reduction and our debt pay downs and are seeing lower interest expenses and improved profitability, a positive trend that supports our overall financial performance.

我們最初將這筆資金分配用於減少未償銀行債務，減少了 1,330 萬美元，季末未償餘額為 390 萬美元。我們受益於聯準會最近的降息和債務償還，利息支出降低，獲利能力提高，這是支持我們整體財務表現的正面趨勢。

With $24 million in total liquidity, we remain strategically positioned to capitalize our market dynamics as they unfold, making selective high-return investments that will further drive growth and long-term value.

憑藉 2,400 萬美元的總流動性，我們仍然處於戰略地位，可以在市場動態發生時充分利用我們的市場動態，進行選擇性的高回報投資，以進一步推動成長和長期價值。

Our success in achieving strategic objectives over the past few years has translated into real benefits for our shareholders, as highlighted on slide 4. Over this time, we have steadily increased our dividends with payouts rising from $0.44 per share in 2021 to $0.83 in 2022 and $1.33 in 2023. This year, as of Q3 2024, we have paid total dividends of $0.83 per share.

正如幻燈片 4 所強調的那樣，過去幾年我們在實現策略目標方面所取得的成功已轉化為股東的實際利益。在此期間，我們穩定增加股息，股息從 2021 年的每股 0.44 美元增至 2022 年的 0.83 美元，以及 2023 年的 1.33 美元。今年，截至 2024 年第三季度，我們支付的股利總額為每股 0.83 美元。

Our fourth-quarter dividend announcement is expected in early December. Our commitment to a robust balance sheet, optimized portfolio and strategic capital deployment gives us confidence in our ability to continue delivering meaningful returns for our shareholders well into the future.

我們預計將於 12 月初發布第四季股利公告。我們對穩健的資產負債表、優化的投資組合和策略資本部署的承諾使我們相信我們有能力在未來繼續為股東帶來有意義的回報。

Turning to slide 5. You will see our portfolio's distribution between debt and equity, along with the recent changes. Our portfolio now stands at fair value of $75 million spread across 22 businesses. The fair value was down approximately 14% sequentially, which reflects the successful exit from SciAps, along with the stock sales and loan repayments from other portfolio companies.

轉到投影片 5。您將看到我們的投資組合在債務和股權之間的分佈，以及最近的變化。我們的投資組合目前公允價值為 7,500 萬美元，分佈於 22 家企業。公允價值環比下跌約 14%，反映了 SciAps 的成功退出，以及其他投資組合公司的股票出售和貸款償還。

With the close of the SciAps transaction, we have progressed towards our goal of a more debt-focused portfolio. And as we have already noted, 74% of our investments are in debt structures, while the remaining 26% is in equity investments in private companies.

隨著 SciAps 交易的完成，我們已經朝著更以債務為重點的投資組合的目標取得了進展。正如我們已經指出的，我們 74% 的投資是債務結構，其餘 26% 是對私人公司的股權投資。

Slide 6 highlights our activity this past quarter, including a small follow-on debt investment. We did invest $125,000 as a follow-on to ITA, a Florida-based manufacturer of blinds and shades. With this additional investment, our total holdings in ITA across both debt and equity, reached a fair value of $4.9 million at the quarter end. The bottom half of the slide showcases notable exits for the quarter led by the successful sale of SciAps.

投影片 6 重點介紹了我們上個季度的活動，包括小型後續債務投資。我們確實投資了 125,000 美元，作為 IT​​A（位於佛羅裡達州的百葉窗和遮陽簾製造商）的後續公司。透過這筆額外投資，我們在 ITA 的債務和股權總持有量在季度末達到了 490 萬美元的公允價值。幻燈片的下半部分展示了以 SciAps 成功出售為主導的本季度顯著的退出。

As noted, the exit generated $13.1 million in total proceeds. And this did include $2.1 million from a debt repayment, $165,000 in interest income and fees and a $10.8 million in equity return. This transaction resulted in a realized gain of $7.7 million for Rand. Additionally, we received $1.3 million in proceeds from the sale of our remaining shares in 2 publicly traded BDCs, Barings and FS KKR. These realized or rather provided realized gains of $249,000 combined.

如前所述，此次退出產生了 1,310 萬美元的總收益。這確實包括 210 萬美元的債務償還、165,000 美元的利息收入和費用以及 1,080 萬美元的股本回報。此次交易為 Rand 帶來了 770 萬美元的實際收益。此外，我們還透過出售兩家公開交易的 BDC（巴林銀行和 FS KKR）的剩餘股份獲得了 130 萬美元的收益。這些已實現或更確切地說提供了已實現收益總計 249,000 美元。

Lastly, we exited our investment in Mezmeriz realizing a loss on an asset previously valued at 0.

最後，我們退出了對 Mezmeriz 的投資，導致先前價值為 0 的資產虧損。

Turning to slide 7. You will see the diversity of our portfolio and the shifts in our industry allocation since the second quarter. These changes reflect both the portfolio adjustments we discussed and the portfolio fair value updates. Notably, our professional services allocation increased from 43% to 50% of our portfolio, while manufacturing decreased from 25% to 16%.

轉到投影片 7。您將看到我們的投資組合的多樣性以及自第二季以來我們的行業配置的變化。這些變化反映了我們討論的投資組合調整和投資組合公允價值更新。值得注意的是，我們的專業服務配置從我們投資組合的 43% 增加到 50%，而製造業從 25% 下降到 16%。

Additionally, with the sale of our BDC stocks, they are no longer represented in this industry mix. We view this industry diversity as a cornerstone of our strategic approach by maintaining a wide range of sectors within our portfolio, we bolster resilience during economic challenges and better manage risk in our investment portfolio. At the end of the quarter, slide 8 highlights our top five portfolio companies.

此外，隨著我們 BDC 股票的出售，它們不再出現在這個行業組合中。我們將這種行業多樣性視為我們策略方針的基石，透過在我們的投資組合中維持廣泛的行業，我們增強了經濟挑戰期間的抵禦能力，並更好地管理了我們投資組合的風險。在季度末，幻燈片 8 重點介紹了我們排名前五的投資組合公司。

Notably, Tilson remains our largest fair value investment with a total value of $12.3 million, which has remained consistent with the previous quarter. Its share of our total portfolio has increased sequentially primarily due to a reduction in total assets resulting from the asset sales we previously mentioned.

值得注意的是，Tilson 仍然是我們最大的公允價值投資，總價值為 1,230 萬美元，與上一季保持一致。它在我們總投資組合中的份額連續增加，主要是由於我們之前提到的資產出售導致總資產減少。

Additionally, following the sale of SciAps, ITA has entered the top five rankings. Together, these five companies now represent 50% of our overall portfolio at quarter end.

此外，隨著 SciAps 的出售，ITA 已進入前五名。截至季末，這五家公司合計占我們整體投資組合的 50%。

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

這樣，我將把它交給瑪格麗特，以進一步更深入地審查我們的財務狀況。

Thanks, Dan, and good afternoon, everybody. I will start on slide 10, which provides an overview of our financial summary for the third quarter of 2024. Total investment income for the quarter was $2.2 million, reflecting a 27% increase compared with the same quarter last year. This growth was primarily driven by a 27% rise in interest income attributed to five new interest-yielding investments made over the past year.

謝謝丹，大家下午好。我將從幻燈片 10 開始，其中概述了我們 2024 年第三季的財務摘要。該季度總投資收益為220萬美元，較去年同期成長27%。這一增長主要是由於去年五項新的生息投資帶來的利息收入增加了 27%。

Additionally, we experienced a $165,000 increase in fee income, largely due to the SciAps sale that Dan mentioned. In total, 21 portfolio companies contributed to our investment income during the quarter. On the expense side, total expenses for the third quarter amounted to approximately $1.3 million, up from $810,000 in the prior quarter. This increase included a $533,000 increase in incentive fees expense during the quarter. We did, however, benefit from a $46,000 decrease in interest expenses due to debt paydowns during the quarter.

此外，我們的費用收入增加了 165,000 美元，這主要歸功於 Dan 提到的 SciAps 銷售。本季共有 21 家投資組合公司為我們貢獻了投資收入。在費用方面，第三季的總費用約為 130 萬美元，高於上一季的 81 萬美元。這一增長包括本季獎勵費用支出增加 533,000 美元。然而，由於本季債務償還，我們確實受益於利息支出減少了 46,000 美元。

Incentive fees are comprised of two components: an income-based fee and a capital gains fee, both of which are contingent on meeting specified benchmarks. The income-based fee is calculated quarterly based on the pre-incentive fee net investment income with a hurdle rate of 1.75% per quarter or 7% annualized.

獎勵費用由兩部分組成：基於收入的費用和資本利得費用，兩者都取決於是否符合指定的基準。收益型費用根據激勵前淨投資收益按季度計算，門檻率為每季 1.75% 或年化 7%。

For the three months ending September 30, 2024, this fee accrued at $178,000 with no similar expense incurred in the prior year period. The second component of the incentive fee is the capital gains fees. According to GAAP, we are required to accrue a capital gains incentive fee based on all our realized and unrealized gains and losses. Given the recent performance of our portfolio and realized gains, we recognized a higher accrual this quarter.

截至 2024 年 9 月 30 日的三個月，該費用累計為 178,000 美元，上一年期間沒有發生類似費用。激勵費的第二個組成部分是資本利得費。根據公認會計準則，我們需要根據所有已實現和未實現的損益來提列資本利得激勵費。鑑於我們投資組合的近期表現和已實現的收益，我們確認本季的應計收益較高。

When we adjust for accrued capital gains incentive fees, our adjusted expenses, which is a non-GAAP financial measure, were $1 million this quarter compared to $851,000 in the third quarter of 2023.

當我們調整應計資本利得激勵費用時，本季調整後的費用（非公認會計準則財務指標）為 100 萬美元，而 2023 年第三季為 851,000 美元。

Finally, our net investment income for the third quarter increased to $887,000 or $0.34 per share from $799,000 or $0.31 per share in the same period last year. The adjusted net investment income per share, also a non-GAAP measure that excludes the capital gains incentive fee accrual expense was $0.46 per share, representing a 59% increase from $0.29 per share in the last year's third quarter.

最後，我們第三季的淨投資收益從去年同期的 799,000 美元或每股 0.31 美元增至 887,000 美元或每股 0.34 美元。調整後每股淨投資收益（也是非公認會計準則衡量標準，不包括資本利得激勵費應計費用）為每股 0.46 美元，較去年第三季的每股 0.29 美元增長 59%。

On slide 11, you will see a waterfall graph illustrating the change in net asset value for the quarter. As of September 30, 2024, net assets totaled $70.4 million, representing a 3% increase from the end of the second quarter of 2024. This change was primarily driven by a net realized gain of $7.2 million from sales and dispositions of investments, which was partially offset by a $5.5 million net change in unrealized depreciation of investments.

在投影片 11 上，您將看到一個瀑布圖，說明該季度資產淨值的變化。截至2024年9月30日，淨資產總計7,040萬美元，較2024年第二季末成長3%。這項變更主要是由投資銷售和處置實現的 720 萬美元淨收益所推動的，該收益被未實現投資折舊 550 萬美元的淨變動部分抵銷。

During the quarter, Rand distributed $748,000 in cash dividends to shareholders. Consequently, the net asset value per share as of September 30, 2024, rose to $27.29 per share, up from $26.56 last quarter. As highlighted on slide 12, we maintain a strong and flexible balance sheet that positions us well for future investments. Total assets decreased by 12% to $79.8 million primarily due to the sale of SciAps and included approximately $3.4 million in cash at the end of the quarter.

本季度，蘭德向股東派發了 748,000 美元的現金股息。因此，截至 2024 年 9 月 30 日的每股資產淨值從上季的 26.56 美元升至每股 27.29 美元。正如幻燈片 12 所強調的那樣，我們保持著強大而靈活的資產負債表，這為我們未來的投資奠定了良好的基礎。總資產下降 12% 至 7,980 萬美元，主要是由於出售 SciAps，其中包括截至季末約 340 萬美元的現金。

According to our borrowing base formula, as of September 30, 2024, Rand had $21.1 million available under its existing $25 million senior secured revolving credit facility. Our outstanding borrowings stood at $3.9 million with an interest rate of 8.46% at quarter end. We believe our strategy in shifting the portfolio to incorporate more income-generating investments will enable us to maintain higher dividend levels over time.

根據我們的借款基礎公式，截至 2024 年 9 月 30 日，蘭德在其現有的 2,500 萬美元優先擔保循環信貸額度下擁有 2,110 萬美元的可用資金。截至季末，我們的未償還借款為 390 萬美元，利率為 8.46%。我們相信，我們轉變投資組合以納入更多創收投資的策略將使我們能夠隨著時間的推移保持更高的股息水準。

Rand previously announced its third quarter dividend of $0.29 per share, which was paid on or around September 13, 2024, to shareholders of record as of August 30, 2024. With that, I will turn the discussion back to Dan.

蘭德先前宣布，第三季股息為每股 0.29 美元，該股息於 2024 年 9 月 13 日左右支付給截至 2024 年 8 月 30 日在冊的股東。說到這裡，我將把討論轉回丹身上。

Thanks, Margaret. Moving on to slide 13. As we look ahead, our strategy remains clear, and we are energized by the multiple pathways we have to enhance both our income and value creation. First, we continue to see significant potential in further expanding our debt portfolio, although we will always have the equity exposure, which will provide future long-term gain potential.

謝謝，瑪格麗特。繼續看投影片 13。展望未來，我們的策略仍然清晰，我們對提高收入和價值創造的多種途徑感到充滿活力。首先，我們繼續看到進一步擴大債務投資組合的巨大潛力，儘管我們將始終擁有股票敞口，這將提供未來的長期收益潛力。

By building on our history of successful debt investments, we are positioned to drive income growth through targeted strategic originations that align with our long-term objectives. We are also committed to deploying available capital efficiently to fuel our growth.

透過建立我們成功債務投資的歷史，我們能夠透過符合我們長期目標的有針對性的策略發起來推動收入成長。我們也致力於有效地部署可用資本來推動我們的成長。

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

我們的循環信貸安排提供了必要的彈性，最近聯準會降息，希望未來能進一步降息，再加上債務償還，已經降低了我們的借貸成本。

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

這些因素共同為我們希望增強的獲利能力和增加的股利潛力奠定了基礎，這兩者都是我們對股東承諾的重要支柱。優化我們的投資組合持有量是另一個優先事項，因為我們評估當前的市場狀況，而不是完善頭寸並最大化未來回報。

Additionally, we recognize that our portfolio companies face a complex landscape with inflationary pressures, fluctuating interest rates and M&A challenges. Our role is to support the resilience, helping them navigate these headwinds so they can emerge even stronger.

此外，我們認識到我們的投資組合公司面臨通膨壓力、利率波動和併購挑戰等複雜情況。我們的作用是支持復原力，幫助他們克服這些逆風，使他們變得更強大。

Finally, our commitment to driving shareholder returns is at the core of every decision we make. By growing our investment income, we aim to support increased dividends, contributing to sustainable long-term value for our investors. We are excited about the opportunities ahead and confident in our strategic direction to achieve these goals.

最後，我們對推動股東回報的承諾是我們所做的每項決策的核心。透過增加投資收入，我們的目標是支持增加股息，為投資者帶來可持續的長期價值。我們對未來的機會感到興奮，並對實現這些目標的策略方向充滿信心。

Thank you for joining us today and your ongoing interest in Rand Capital. We look forward to updating you on two matters, the first is our fourth quarter dividend announcement expected in December and also our quarter and full-year 2024 results, which will be reported in March. Have a great day.

感謝您今天加入我們以及您對蘭德資本的持續關注。我們期待向您通報兩件事的最新情況，第一是我們預計在 12 月發布的第四季度股息公告，以及我們將於 3 月份公佈的 2024 年季度和全年業績。祝你有美好的一天。

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

謝謝。今天的電話會議到此結束。此時您可以斷開線路。感謝您的參與。