Rand Capital Q2 2026 Earnings Report

Rand Capital EPS Results

• Actual EPS: $0.24
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Rand Capital Revenue Results

• Actual Revenue: $1.39 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Rand Capital Announcement Details

• Quarter: Q2 2026
• Date: 8/5/2026
• Time: Before Market Opens
• Conference Call Date: Wednesday, August 5, 2026
• Conference Call Time: 1:30PM ET

Rand Capital (NASDAQ:RAND) is a publicly traded business development company (BDC) focused on providing financing solutions to growing businesses. Established in 1999 and headquartered near Buffalo, New York, Rand Capital seeks to partner with small to mid-size companies across a variety of industries. By leveraging its balance sheet, the firm aims to deliver flexible debt and equity investments designed to support expansion, acquisitions, working capital needs and other strategic initiatives.

The company’s financing activities span senior secured loans, subordinated debt, equity co-investments and royalty or revenue-based financing. Rand Capital typically invests in growth-stage enterprises that demonstrate established cash flow, experienced management teams and scalable business models. Its portfolio companies operate in sectors such as business services, specialty manufacturing, healthcare and technology, reflecting the BDC’s diversified approach to risk and return.

With a primary geographic focus on Upstate New York and the Northeastern United States, Rand Capital also evaluates opportunities in selected markets nationwide where it can leverage local relationships and sector expertise. Over its history, the firm has backed more than 80 businesses and completed in excess of $500 million in net investments. This track record underscores Rand Capital’s commitment to fostering regional economic development while seeking attractive risk-adjusted returns for its shareholders.

Guided by an experienced board and management team, Rand Capital emphasizes hands-on partnership, governance oversight and alignment of interests with company founders and management. The firm’s disciplined underwriting process and active portfolio management are designed to preserve capital and generate income, making Rand Capital a specialist provider of capital and strategic support to growing enterprises.

Rand Capital Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Portfolio deployment accelerated: Rand invested $6.9 million in two new companies during the quarter, including a $4.5 million loan to Feature Healthcare and a $2.4 million debt-and-equity investment in Termite Guy Corporation. Management said new investments are generally being priced in the low-to-mid teens.
• Positive Sentiment: Rand fully exited Applied Image, receiving repayment of its $1.7 million debt investment and recording a $959,000 realized gain on warrants. Portfolio fair value increased to $56.5 million at June 30 from $48.5 million at year-end 2025.
• Neutral Sentiment: The company maintained its regular $0.29 per-share quarterly dividend and declared the same dividend for the third quarter, while emphasizing liquidity management and rebuilding recurring income to support future shareholder returns.
• Negative Sentiment: Second-quarter net investment income fell to $710,000, or $0.24 per share, from $2.5 million, or $0.83 per share, a year earlier as portfolio non-accruals reduced interest income. The weighted-average debt yield also declined to 8.98% from 11.3% at year-end.
• Negative Sentiment: BMP Swanson ceased operations, resulting in a full write-down and a $2.5 million quarter-over-quarter fair-value decline. Management acknowledged that isolated portfolio stress and non-accruals remain significant challenges despite continued deployment and available credit-facility capacity.

Presentation

[Operator]

Please note this conference is being recorded. I'll now turn the conference over to Craig Mychajluk with Investor Relations. Thank you, Craig. You may begin.

[Craig Mychajluk, Investor Relations Contact at Rand Capital]

Thank you. Good afternoon, everyone. We appreciate your interest in Rand Capital and joining us today for our second quarter 2026 financial results conference call. On the line with me are Dan Penberthy, our President and Chief Executive Officer, and Margaret Brechtel, our Executive Vice President and Chief Financial Officer. A copy of the release and slides that accompany our conversation is available at randcapital.com. If you're following along with the slide deck, please turn to Slide two where I'd like to point out some important information. As you are likely aware, we may make some forward-looking statements during this presentation. These statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause actual results to differ from where we are today.

[Craig Mychajluk, Investor Relations Contact at Rand Capital]

You can find a summary of these risks, uncertainties, and other factors in the earnings release and other documents filed by the company with the Securities and Exchange Commission. These documents can be found on our website or at sec.gov. During today's call, we'll also discuss some non-GAAP financial measures. We believe these will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results in accordance with generally accepted accounting principles. We have provided reconciliations of non-GAAP measures with comparable GAAP measures in the tables that accompany today's earnings release. With that, please turn to Slide three. I'll hand the discussion over to Dan. Dan?

[Dan Penberthy, President and CEO at Rand Capital]

Thank you, Craig. Good afternoon, everyone. We view the second quarter as a period of meaningful portfolio activity for Rand. During the quarter, we accelerated deployment into new income-producing investments, realized a gain on one exit, and maintained our regular dividend while continuing to work through the income and valuation impact of non-accruals and the full write-down of BMP Swanson. Total investment income for the quarter was $1.4 million, and net investment income was $0.24 per share. Those results were below the prior year period, primarily because portfolio investment non-accruals continued to weigh on interest income and on the portfolio's reported yield. At the same time, we invested $6.9 million into two new portfolio companies during the quarter. The first, Feature Healthcare, also known as 4 Seasons Home Care, and Termite Guy Corporation.

[Dan Penberthy, President and CEO at Rand Capital]

We also completed the exit of Applied Image, which did generate a realized gain of $959,000. From a capital position standpoint, we ended the quarter with net asset value of $17.33 per share, which was an increase from the prior quarter. A portfolio that remained overall approximately 79% invested in debt instruments and about $12.4 million of remaining availability on our credit facility. While current earnings still reflect pressure from portfolio investments, the quarter also showed progress by recycling capital through realizations and continuing to shape the portfolio around performing income-producing lower middle-market investments. Importantly, we think the quarter reflected progress on both sides of the portfolio equation. We continued to address challenged positions directly while also adding new investments. With that as the quarter's backdrop, let me turn to shareholder returns and our dividend strategy on Slide four.

[Dan Penberthy, President and CEO at Rand Capital]

Our regular cash dividend remains an important part of our strategy and our value proposition to shareholders. During the quarter, we paid our regular quarterly dividend of $0.29 per share for the second quarter of 2026, and we also declared a $0.29 per share dividend for the third quarter of 2026. While earnings remain affected by portfolio non-accruals and portfolio turnover, we continue to manage the business with a focus on supporting the dividend through recurring income, liquidity management, and steady portfolio rebuilding over time. Our approach is to balance current shareholder returns with long-term portfolio development by identifying new investments and supporting the current portfolio where appropriate. We believe preserving flexibility and maintaining discipline today does give us a better foundation for supporting both earnings and shareholder returns over time. From there, it's helpful to look at how the portfolio itself has changed.

[Dan Penberthy, President and CEO at Rand Capital]

Please turn to Slide five. At June 30, our portfolio had a fair value of $56.5 million across 21 portfolio companies, up from $48.5 million at year-end 2025. The portfolio remains primarily debt-oriented with, as I mentioned, 79% invested in debt and 21% in equity at fair value. That mix continues to reflect our emphasis on current income while preserving selective upside through equity participation. We continue to believe that a predominantly debt-orientated portfolio is the right positioning for Rand as we rebuild in earnings assets and manage through a mixed market backdrop. The annualized weighted average yield on debt investments, including PIK interest, was 8.98% at quarter end. This compares with 11.3% at December 31, 2025. As we noted in last quarter, this reported yield continues to be dragged down and affected by those portfolio non-accruals.

[Dan Penberthy, President and CEO at Rand Capital]

We think it is important to distinguish between the reported portfolio yield and the return profile, rather, on newly deployed capital because the new investments we are underwriting are generally priced in the low to mid teens, which we believe is a more representative sample of the earning power of capital that we are putting to work today. Importantly, the overall portfolio is larger than it was at the end of 2025, that reflects the investment activity we've executed in the first half of this year. We need to continue to build a portfolio of income-producing assets while staying disciplined on credit quality, structure, and overall portfolio construction. That broader portfolio backdrop sets up the specific investment actions we took during the quarter, including new investments, an exit, a repayment, and the write-down of a challenged position. Please turn to Slide six.

[Dan Penberthy, President and CEO at Rand Capital]

We closed on a new $4.5 million investment in Feature Healthcare, which does business as 4 Seasons Home Care. You may see it referenced under both names on the web or in certain public filings. That investment consisted of a term loan carrying 12% cash interest plus 2% PIK, and we believe it fits well within our strategy of financing lower middle market companies in sectors where we see attractive risk-adjusted return potential. We also completed a new $2.4 million investment in Termite Guy Corporation consisting of a $2.1 million term loan at 13% plus 1% PIK and a $300,000 equity investment. For this investment, we again partnered with the past deal sponsor of a prior successful Rand investment, that being The RAC Group or Cybert, as we are comfortable with their underwriting and how they assisted companies once they invested into them.

[Dan Penberthy, President and CEO at Rand Capital]

We believe that the structure of this investment is consistent with the way Rand seeks to combine current income with selective participation in the long-term equity upside. On a realization side, Rand received full repayment of its $1.7 million debt investment in Applied Image, and we also recognized a $959,000 realized gain on our warrants. We also received $250,000 repayment on another debt investment, which further reflects the capital recycling dynamic embedded in our model. At the same time, BMP Swanson ceased operations. This resulted in a full write-down and a $2.5 million quarter-over-quarter fair value decline. While that clearly was both an unexpected and disappointing outcome, we think it is important to address it directly and to note that it was a specific portfolio event recognized through the valuation during the quarter rather than a change in our broader investment approach.

[Dan Penberthy, President and CEO at Rand Capital]

Unfortunately, this does demonstrate the ongoing challenging economic and business environment in which our companies operate. One in which just a supplier interruption or a senior lender's action can quickly disrupt and cause chaos to a business. We're hopeful that things will continue to improve in the overall portfolio, but these portfolio businesses can still experience volatility along the way. More broadly, this slide shows how we are managing the portfolio in real time, adding new performing assets, monetizing successful realization, and confronting challenged situations directly when they arise. That is a core part of a disciplined portfolio management for a company like Rand. Stepping back from individual transactions, slide seven shows how those actions are reflected in the portfolio's overall industry exposure. Professional and business services remains the largest area, followed by health and wellness, distribution, manufacturing, and consumer-related investments.

[Dan Penberthy, President and CEO at Rand Capital]

While weighting shifted as a result of new investments and valuation changes, the broader portfolio continues to reflect balance across multiple end markets within our lower middle market focus. We believe this balance remains an important part of supporting portfolio resilience and more consistent income generation over time. We are not trying to build a portfolio around any single sector theme. Instead, we are focused on identifying companies with sound structure, cash yield, management quality, and a strong deal sponsor. Within that base, slide eight highlights the investments that currently have the greatest impact on our portfolio value. Our top five investments represented $24.1 million of fair value or 43% of the portfolio at June 30th. These holdings, rather, include INEA, that is International Electronic Allies, Chi Tech, Feature Healthcare or 4 Seasons as I mentioned, Hyland's All About People, and BMP Foodservice Supply Holdco.

[Dan Penberthy, President and CEO at Rand Capital]

The top five reflect both continuity and change in the portfolio. Feature Healthcare entered the group following our new investment in the quarter, while the remaining names continue to represent a meaningful portion of portfolio fair value at quarter end. Our objective is to preserve value in these larger positions while continuing to build additional portfolio investments around them. Over time, that should support a broader and more balanced base of income-producing assets. With that portfolio context in mind, I'll turn the call over to Margaret to review the quarter's financial results in more detail.

[Margaret Brechtel, EVP and CFO at Rand Capital]

Thanks, Dan. Good afternoon, everyone. I will start on slide 10, which summarizes our financial results for the second quarter of 2026. Total investment income was $1.4 million, compared with $1.6 million in the prior year period. The decline primarily reflected lower interest income from portfolio companies due to non-accruals, partially offset by $153,000 of dividend and other investment income recognized during the quarter. Non-cash PIK interest totaled $116 for the quarter, representing 10% of interest income from portfolio companies, compared with 40% in the prior year period. That decline in PIK as a percentage of interest income largely reflects the impact of investments being placed on non-accrual status, which reduced the amount of PIK recognized in the period. Total expenses were $647,000, compared with a benefit of $864,000 in the second quarter of 2025.

[Margaret Brechtel, EVP and CFO at Rand Capital]

The prior year period included a $1.5 million capital gain incentive fee benefit, while the current quarter had no comparable benefit or expense. Adjusted expenses, which exclude capital gains incentive fees and as a non-GAAP financial measure, were $647,000, compared with $626,000 in the prior year period. Net investment income was $710,000, or $0.24 per share, compared with $2.5 million, or $0.83 per share, in the second quarter of 2025. Adjusted net investment income, which is a non-GAAP financial measure per share, was also $0.24, compared with $0.33 a year ago. Taken together, the quarter's earnings reflected lower recurring interest income than a year ago, but also a relatively stable core expense base and a contribution from dividend and other investment income that partially offset the effects of non-accruals. Please turn to slide 11.

[Margaret Brechtel, EVP and CFO at Rand Capital]

The waterfall chart on this slide summarizes the change in net asset value during the quarter. We began the quarter with net assets of approximately $51 million. During the period, Rand generated $710,000 of net investment income and a $959,000 realized gain on the exit of Applied Image. Those positive items were partially offset by $302,000 of net unrealized depreciation and $861,000 of dividends declared during the quarter, resulting in ending net assets of approximately $51.5 million and a net asset value per share of $17.33. From a quarter-over-quarter standpoint, the change in net asset value was modestly positive, which reflects the fact that current period earnings and realized gains more than offset the dividend and the remaining unrealized markdowns recognized during this quarter. Now turning to slide 12.

[Margaret Brechtel, EVP and CFO at Rand Capital]

At June thirtieth, total assets were $57.7 million. The net portfolio accounted for $56.5 million of total assets, or $19.02 per share. While consolidated cash was approximately $430,000 or $0.15 per share. Other assets and liabilities net reduced net asset value by approximately $5.5 million or $1.84 per share. We ended the quarter with $5.1 million outstanding on our senior credit facility and approximately $12.4 million in remaining availability. Taken together, we believe the balance sheet remains in a sound position to support follow-on funding where warranted and continued flexibility in capital allocation. With the financial review covered, I'll turn the call back to Dan for our closing priorities and outlook.

[Dan Penberthy, President and CEO at Rand Capital]

Thanks, Margaret. If you would please turn to slide 13. As we look at RAND today, the second quarter reinforced two things at once. First, we are gaining traction on the deployment side of the business, that's new investment origination, as shown by the new investments completed during the quarter and the growth in the portfolio's fair value in the first half of 2026. Second, we are still managing through the effects of portfolio non-accruals and isolated portfolio stress. Against that backdrop, our priorities for the balance of 2026 are straightforward. We want to continue building the portfolio. We are seeing origination opportunities in the lower middle market, and we intend to pursue them with a measured approach that keeps underwriting, structure, and risk-adjusted return both front and center. In addition, we remain focused on active portfolio oversight.

[Dan Penberthy, President and CEO at Rand Capital]

This is a practical approach to protecting value where challenges arise and a continued focus on portfolio quality as we grow. Lastly, we are committed to balancing portfolio growth with overall shareholder returns. The broader private credit market remains competitive and, at times, uneven. In that environment, both experience, selectivity, and portfolio discipline matter. We believe the actions we took in the second quarter reflect that mindset. Put capital to work where returns are attractive, stay engaged with challenged credits, and keep the balance sheet in a position to support the next stage of portfolio growth. We believe RAND remains well-positioned with a predominantly debt-orientated portfolio, available liquidity, and a disciplined approach to capital allocation as attractive opportunities emerge. Thank you for your time today and your continued interest in Rand Capital. We appreciate your support and do look forward to updating you again next quarter. Have a great day.

[Operator]

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may now disconnect your lines and have a wonderful day.

Participants

Executives

• Craig Mychajluk, Investor Relations Contact
• Dan Penberthy, President and CEO
• Margaret Brechtel, EVP and CFO