Executive Summary

Net investment income rose sharply to $2.48M ($0.83/share) aided by a $1.49M non-cash capital gains incentive fee reversal; adjusted NII was $0.33/share, down vs both Q1 and prior year, highlighting weaker underlying earnings power .
Total investment income declined to $1.60M, down 20% sequentially and 25% YoY, driven by continued portfolio loan repayments and a slower origination environment; 34% of investment income was PIK, underscoring cash yield pressure .
NAV per share fell to $19.10 from $21.99 in Q1, primarily due to a $9.5M write-down of Tilson Technologies following its Chapter 11 filing; net unrealized depreciation drove a $7.74M decrease in net assets from operations for the quarter .
Liquidity remains solid with $4.4M cash, no debt outstanding, and ~$20M unused revolver availability (expandable to $25M); the regular $0.29/share dividend was maintained and re-declared for Q3 2025 .
Management sees “early signs of market improvement” that could shift PIK payers back to cash-pay and re-accelerate originations, a potential catalyst if realized .

What Went Well and What Went Wrong

What Went Well
- Non-cash incentive fee reversal boosted GAAP NII, delivering $0.83/share NII despite lower investment income; adjusted NII was $0.33/share after excluding the fee benefit .
- Balance sheet flexibility: $4.4M cash, zero revolver balance, and ~$20M available borrowing capacity (up to $25M) position RAND to act on new opportunities and support the dividend .
- Management tone: “We are starting to see early signs of market improvement… which could return portions of our portfolio to current pay status and lead to stronger deal origination and execution.” — CEO Daniel Penberthy .
What Went Wrong
- Total investment income contracted to $1.60M (−$0.40M vs Q1; −$0.53M YoY) as repayments outpaced originations, also reducing fee/dividend income .
- PIK income elevated (~$1.2M added to principal, ~34% of total investment income), signaling cash flow pressure at borrowers amid macro uncertainty .
- NAV declined materially on a $9.5M Tilson valuation reduction following its Chapter 11 filing; net unrealized depreciation on affiliate investments was −$10.12M for the quarter .

Financial Results

Three-quarter trend (oldest → newest)

Metric	Q4 2024	Q1 2025	Q2 2025
Total Investment Income ($)	$2,137,463	$2,007,904	$1,602,297
Net Investment Income ($)	$2,215,652	$1,218,115	$2,478,234
NII per Share ($)	$0.86	$0.42	$0.83
Adjusted NII per Share ($)	$0.45	$0.40	$0.33
Net (Decrease)/Increase in Net Assets from Operations per Share ($)	$(1.14)	$0.29	$(2.60)
NAV per Share ($)	$25.31	$21.99	$19.10
Weighted Avg Shares	2,581,021	2,869,339	2,969,814

Q2 YoY comparison

Metric	Q2 2024	Q2 2025
Total Investment Income ($)	$2,136,149	$1,602,297
Net Investment Income (Loss) ($)	$(517,195)	$2,478,234
NII per Share ($)	$(0.20)	$0.83
Adjusted NII per Share ($)	$0.44	$0.33
Net Increase/(Decrease) in Net Assets from Operations per Share ($)	$3.00	$(2.60)

Q2 2025 vs Estimates

Metric	Actual	Consensus	Surprise
Total Investment Income ($)	$1,602,297	N/A*	N/A*
NII per Share ($)	$0.83	N/A*	N/A*
Adjusted NII per Share ($)	$0.33	N/A*	N/A*

Estimates note: S&P Global consensus for RAND Q2 2025 EPS/Revenue was unavailable at the time of analysis. Values retrieved from S&P Global.*

KPIs and balance sheet

KPI	Q4 2024	Q1 2025	Q2 2025
Portfolio Fair Value ($M)	$70.8	$62.2	$52.4
Portfolio Companies (#)	22	19	19
Mix (Debt/Equity)	75% / 25%	72% / 28%	86% / 14%
Weighted Avg Debt Yield	13.8% (12/31/24)	12.2% (3/31/25)	12.2% (6/30/25)
Cash ($M)	$0.835	$4.9	$4.4
Revolver Outstanding ($M)	$0.6	$0.0	$0.0
Unused Availability ($M)	$24+ (at 12/31)	$22+ (narrative)	~$20 (capacity to $25)
PIK (% of TII)	N/A	N/A	~34%

Segment breakdown: Not applicable (externally managed BDC with a single portfolio strategy) .

Non-GAAP reconciliation highlights

Capital gains incentive fee benefit of $1.49M in Q2 2025; adjusted expenses $0.626M .
NII/share $0.83 includes a $0.50/share incentive fee credit; adjusted NII/share $0.33 .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per Share	Q3 2025	Regular $0.29/share cadence	Declared $0.29/share, payable ~Sep 12, 2025	Maintained
Liquidity/Capacity	As of 6/30/25	~$22M availability at 3/31/25	~$20M availability; expandable to $25M through 2027 maturity	Slightly lower availability; capacity reiterated
Financial Outlook	2025	None provided	No formal revenue/EPS guidance; management sees early signs of market improvement	N/A

No formal quantitative guidance (revenue, margins, OpEx, etc.) was provided in company communications for Q2 2025 .

Earnings Call Themes & Trends

Note: We attempted to retrieve the Q2 2025 earnings call transcript but encountered a retrieval error; the company noted a transcript would be posted when available .

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Origination pace & repayments	2024: debt portfolio expansion; reduced debt by year-end; Q1: origination slowdown, repayments of multiple instruments	Investment activity “slower than desired” amid macro uncertainty; repayments continue to weigh on TII	Negative near term; potential improvement if markets recover
Portfolio mix shift	2024 YE: 75% debt; Q1: 72% debt	86% debt / 14% equity at 6/30/25	More income-oriented mix; should support NII over time
Cash vs PIK	Not emphasized	Not emphasized	Elevated PIK (~34% of TII); signals borrower cash constraints
Credit events	2024 realized gains (SciAps); Q1 realized $0.93M gain	Tilson valuation −$9.5M; drove unrealized depreciation and NAV decline	One-off credit hit; watch for further marks
Liquidity/capital	YE cash low but high revolver availability; Q1 cash ~$4.9M and no debt	Cash $4.4M; no debt; ~$20M availability, capacity to $25M	Strong flexibility preserved
Dividend policy	Raised in 2024; regular $0.29/share ongoing	$0.29/share declared again for Q3 2025	Maintained, supported by adj NII

Management Commentary

“We delivered net investment income growth in the second quarter, primarily benefiting from a non-cash capital gains incentive fee reversal tied to the write-down of our investment in Tilson.” — CEO Daniel P. Penberthy .
“Investment activity remains slower than desired amid ongoing economic uncertainty, which has led more borrowers to pay interest ‘in kind’ (PIK)… over $1.2 million of interest was added to the principal… ~34% of our total investment income.” — CEO .
“We are starting to see early signs of market improvement, which could return portions of our portfolio to current pay status and lead to stronger deal origination and execution.” — CEO .
Liquidity positioning: “Approximately $25 million in total liquidity and no debt outstanding… borrowing base provided ~$20 million of unused availability… capacity to increase to a total of $25 million” — Company .

Q&A Highlights

The company indicated a transcript would be posted when available; we were unable to retrieve the Q2 2025 call transcript due to a retrieval error. We will update Q&A themes upon transcript availability .

Estimates Context

We queried S&P Global for Q2 2025 consensus EPS and revenue; consensus was unavailable for RAND at this time. Values retrieved from S&P Global.*
Implication: With limited sell-side coverage, estimate-driven beats/misses are not a catalyst; instead, investor focus likely centers on underlying adjusted NII, cash vs PIK mix, origination pipeline, credit marks, and dividend sustainability .

Key Takeaways for Investors

Underlying earnings weaker: Adjusted NII/share of $0.33 fell from $0.40 in Q1 and $0.44 YoY as repayments and slower originations reduced cash income despite a higher debt mix .
Reported NII flattered by non-cash fee reversal: $0.83/share includes a $0.50/share capital gains incentive fee credit tied to portfolio marks; underlying run-rate closer to adjusted levels .
Credit mark drove NAV reset: Tilson’s bankruptcy and consequent $9.5M valuation reduction led to significant unrealized depreciation and a NAV/share drop to $19.10 (from $21.99 in Q1) .
Liquidity is a backstop and optionality: $4.4M cash, no debt, and ~$20M unused availability (expandable to $25M) give capacity to restart originations when conditions permit and help support the dividend .
Elevated PIK is a watch item: ~34% of total investment income in Q2 came via PIK; a reversion to cash pay would be a positive catalyst for cash earnings and dividend coverage .
Dividend maintained: $0.29/share declared again for Q3; covered by Q2 adjusted NII/share ($0.33), but sustained coverage depends on origination pickup and reduced PIK .
Near-term setup: Stock likely trades on credit risk resolution (Tilson and any read-through), origination trends into H2, and signals that PIK payers revert to cash; management cites “early signs” of improvement .

Appendix: Sources

Q2 2025 Press Release and 8-K (Item 2.02 with Exhibit 99.1): financials, liquidity, portfolio metrics, dividends, and management commentary .
Q1 2025 Press Release: prior quarter financials, portfolio mix, liquidity .
Q4/FY 2024 Press Release: trend context, portfolio mix, liquidity .
Q2 2025 call logistics/availability: press notices .

Estimates note: Values retrieved from S&P Global.*

RAND CAPITAL CORP (RAND)·Q2 2025 Earnings Summary