Rand Capital Corporation Q2 FY2025 earnings call

Investment Environment

• Overall investment environment was muted with limited new deal flow, stalled M&A, and borrowers facing higher financing costs and selective underwriting.

Portfolio Performance

• Rand delivered positive second quarter results; net investment income was $2.5 million or $0.83 per share, driven by noncash reversal of capital gains incentive fee.
• Portfolio valued at $52.4 million, down sequentially and from year-end, due to Tilson bankruptcy and broader valuation pressure; debt investments 86%, equity 14%.
• Made one follow-on equity investment of $35,000 into Carolina Skiff, valued at $800,000 at quarter end.

Dividend

• Declared 3 quarterly dividends of $0.29 per share in 2025; total dollar amount paid increased due to higher shares outstanding from prior dividend paid in part using common stock.

At June 30, 2025, Rand Capital's portfolio was valued at $52.4 million. The portfolio mix was tilted towards income-generating debt investments, accounting for 86% of the portfolio by fair value, while equity investments made up 14%. The annualized weighted average yield on debt investments inclusive of PIK was 12.2% at quarter end. Total investment income was $1.6 million, a 25% decrease compared with the prior year period, driven by reduction in interest income due to repayments and lower dividend income. Net investment income totaled $2.5 million or $0.83 per share in the second quarter of 2025, compared with a loss of $517,000 or $0.20 per share in the second quarter of 2024.

Forward Look

• Market conditions beginning to stabilize with early signs of stronger deal activity in the second half of the year.
• Prioritizing yield-focused debt investments and maintaining disciplined underwriting standards.
• Well-positioned with balance sheet strength, access to capital, and organizational flexibility to move quickly as quality transactions emerge.

Risks

• Volatile investment environment with limited deal flow and stalled M&A.
• Tilson Technologies filed for bankruptcy, leading to $9.5 million reduction in fair value of that investment; also, separate Tilson SQF entity has positive cash flows but broader portfolio valuation pressure exists.