Rand Capital (RAND) Q2 Net Income Jumps
Rand Capital (NASDAQ:RAND), a business development company that invests in privately held lower middle-market businesses, saw a surge in net investment income to $2.5 million, or $0.83 per share (GAAP), driven almost entirely by a one-time, non-cash capital gains incentive fee reversal related to a major portfolio write-down. At the same time, total investment income (GAAP) fell to $1.6 million, down 25%, as repayments and a lack of new investment originations weighed on earnings. The company maintained its quarterly dividend at $0.29 per share. There were no analyst estimates for this quarter. Overall, the period reflected short-term accounting gains but continued pressure on core income and portfolio size.
Rand Capital is a business development company that provides higher-yielding debt and equity investments to small, privately held businesses. It operates as an externally managed fund, with Rand Capital Management, LLC acting as its investment adviser. The company seeks to invest in companies with revenues over $10 million and EBITDA (earnings before interest, taxes, depreciation, and amortization) above $1.5 million, focusing on income-generating, below-investment-grade debt instruments. It uses board observation rights and detailed due diligence to help manage investment risk.
In recent years, Rand Capital has centered its strategy on building a portfolio of predominantly debt investments that offer consistent returns, while retaining some upside through equity participation such as direct investments and warrants. The company is required to comply with the 1940 Act, which sets asset coverage and qualifying asset requirements for business development companies. Key themes for success at Rand have been careful deal selection, keeping its regulatory status, cost discipline with its external management agreement, and ensuring strong liquidity and balance sheet stability to support its dividend “RIC” (Regulated Investment Company) tax status.
Source Fool.com
