Rand Capital Corporation Q3 FY2025 earnings call

• Navigated a challenging market with sluggish deal origination and tighter credit conditions, being patient and selective in deal origination.
• Deployed $2.9 million in new and follow-on investments. Saw greater use of PIK interest by borrowers.
• Finished the quarter with nearly $28 million in liquidity and no debt outstanding under senior credit facilities.
• Controlled expenses to grow net investment income despite a year-over-year decline in total investment income.
• Declared and paid a regular quarterly distribution of $0.29 per share for the third consecutive quarter.
• Portfolio had a fair value of $44.3 million across 19 companies, with 83% debt and 17% equity and a weighted average yield of 12.2%.
• Added a $2.5 million investment in BlackJet Direct Marketing (structured as a $2.25 million term loan at 14% plus 1% PIK interest and a $250,000 equity investment) and funded a $400,000 follow-on investment in Food Service Supply.
• Had repayments from Seybert's/Rack Group ($7.6 million principal), exited Lumious (received $713,000 in loan and principal with a $77,000 realized loss), and realized a $2.9 million loss on Tilson Technology Management.
• Portfolio industry mix shifted modestly, with consumer products exposure decreasing after Seybert's/Rack Group repayment. The 5 largest portfolio companies represent about half of the total portfolio value.

The investments had a fair value of $44.3 million across 19 companies at September 30, with a mix of 83% debt and 17% equity and a weighted average yield of 12.2%. Total investment income was $1.6 million, down from $2.2 million in the prior year's third quarter. Noncash PIK interest accounted for 39% of investment income compared to 24% in the same period last year. Total expenses decreased to $596,000 from $1.3 million in the prior year period, resulting in net investment income of $993,000, which was favorable compared to $887,000 in the same quarter last year. Net asset value at September 30, 2025, was $53.6 million or $18.06 per share. The balance sheet was healthy with $9.5 million in cash and $18.3 million available under the senior secured credit facility.

• Anticipated interest rate reductions could stimulate deal origination in the quarters ahead. If momentum builds, Rand is well positioned to deploy capital into yield-focused debt investments to support earnings growth, NAV stability, and ongoing dividend coverage.
• Confident in continuing to create long-term value for shareholders despite Q3 headwinds like portfolio repayments, valuation adjustments, and muted origination, viewing these as transitional dynamics.

• Sluggish new deal origination across the BDC landscape.
• Tighter senior credit conditions and higher financing costs for borrowers.
• Valuation adjustments impacting net asset value.
• Realized losses on certain investments such as Tilson Technology Management.