RAND CAPITAL CORP (RAND)·Q1 2025 Earnings Summary

Executive Summary

• Net investment income rose 45% year over year to $1.2M ($0.42 per share) on materially lower expenses (down 36%), despite a modest 3% decline in total investment income to $2.01M; NAV per share decreased to $21.99 largely due to share issuance tied to the outsized Q4 2024 stock dividend .
• Liquidity strengthened: cash increased to $4.9M and revolver was fully repaid (zero outstanding); borrowing capacity stood at ~$22.4M, positioning the company to redeploy capital as opportunities emerge .
• Portfolio mix remains income-focused (72% debt; weighted average debt yield 12.2%), though yield dipped versus 13.8% in late 2024; realized gains of $0.93M in Q1 came from exits and warrant sale (Pressure Pro) .
• Board renewed a $1.5M share repurchase authorization through April 2026 and maintained the regular $0.29 quarterly dividend (Q2 2025), supporting return-of-capital and potential stock support as catalysts .
• Management tone: disciplined and cautious given macro/tariff/regulatory uncertainties; actively recycling capital and prioritizing income-generating assets to sustain dividends and NAV over time .

What Went Well and What Went Wrong

What Went Well

• Expenses fell 36% year over year to $0.79M, driven by lower interest expense (-$354k) and a capital gains incentive fee credit; NII rose 45% to $1.2M ($0.42 per share) and adjusted NII was $0.40 per share .
• Liquidity and balance sheet improved: cash increased to $4.9M; revolver fully repaid; available credit capacity >$22M, enabling flexibility for future originations and dividend support .
• Capital recycling success: full repayments from Mattison Avenue, Pressure Pro and HDI; realized gain of $870k from Pressure Pro warrant sale; nonrecurring fee income rose to 15% of total investment income .

What Went Wrong

• Total investment income declined 3% year over year to $2.01M, reflecting fewer contributors (18 vs. 24 last year) and lower dividend and interest income after debt instrument repayments .
• Yield pressure: annualized weighted average yield on debt decreased to 12.2% from 13.8% at year-end, partly due to one debt investment on nonaccrual (~3% of portfolio FV) .
• Unrealized marks: net decrease in unrealized depreciation of $1.30M, including down marks to ITA and FSS, offsetting strong realized gains and NII in the quarter .

Financial Results

Segment/Portfolio Composition (Industry Mix)

Key Performance Indicators

Guidance Changes

Note: The company did not issue revenue, margin, OpEx, OI&E, or tax-rate guidance. Dividend policy and buyback authorization were affirmed .

Earnings Call Themes & Trends

Management Commentary

• “Our first quarter results underscore the resilience of our business model… we have delivered a 45% year-over-year increase in net investment income, reaching $1.2 million or $0.42 per share.” – Daniel P. Penberthy .
• “Total investment income for the quarter was $2 million… offsetting this was an increase in nonrecurring fee income… 15% of total investment income vs 5% in Q1 2024.” – Margaret Brechtel .
• “We have repaid $600,000 of our revolver debt, finishing the quarter with nearly $5 million in cash and over $22 million in available credit capacity.” – Daniel P. Penberthy .
• “We remain challenged with macroeconomic and political uncertainty… tariffs, consumer spending, changes in government regulation, weaknesses in the M&A markets… however, I do believe we are well positioned to navigate this cycle.” – Daniel P. Penberthy .
• Dividend actions: Q1 payout $0.29; Q2 declared $0.29; share repurchase program renewed up to $1.5M through April 2026 – management framing as sustained shareholder return strategy .

Q&A Highlights

• The posted transcript contains prepared remarks and did not include a Q&A section; no analyst question themes were captured in the transcript .
• Management clarifications within prepared remarks: incentive fee mechanics (income-based hurdle 1.75% per quarter), adjusted expense and adjusted NII definitions were discussed by CFO .

Estimates Context

• S&P Global consensus estimates for RAND’s quarterly EPS and revenue were unavailable; as a result, no beat/miss comparison to Wall Street consensus can be made for Q1 2025. Actual total investment income was $2.008M, but consensus data was not provided by S&P Global for RAND’s Q1 .
• Given the absence of consensus, estimate revisions are unlikely to be a catalyst; focus shifts to income sustainability, fee accruals, and portfolio valuation dynamics.

Key Takeaways for Investors

• Earnings quality improved: expenses down 36% and NII up 45% YoY; adjusted NII per share $0.40 indicates underlying performance excluding capital gains fee effects .
• Balance sheet de-risking: revolver fully repaid; cash up to $4.9M; ~$22.4M borrowing availability supports selective originations and dividend stability .
• Income engine intact but yields eased: debt mix 72% with 12.2% weighted average yield; monitoring nonaccrual exposure and any further valuation marks is prudent .
• Capital recycling continues: realized gains ($0.93M) and exits free up capital; watch redeployment pace and fee income durability (15% of investment income this quarter) .
• Dividend/buyback support: regular $0.29 dividend maintained; $1.5M buyback authorization renewed through April 2026 – potential stock support in thinly traded name .
• Macro sensitivity: management remains cautious on tariffs, consumer, regulation and M&A; expect disciplined origination cadence and conservative valuation approach .
• Monitoring points into Q2: trajectory of investment income as portfolio resets after repayments, incentive fee accruals (income-based), and any changes in nonaccrual status or unrealized marks .