Rand Capital signals strength in dividend stability and $28M liquidity amid muted deal flow

Earnings Call Insights: Rand Capital (RAND) Q3 2025

MANAGEMENT VIEW

* President & CEO Daniel Penberthy emphasized navigating a challenging market with "new deal origination across the BDC landscape does remain sluggish and borrowers are still contending with tighter senior credit conditions and higher financing costs." Penberthy stated that Rand deployed $2.9 million in new and follow-on investments and is "seeing... a greater use of PIK or PIK interest by borrowers as they adapt to today's financing environment," noting that this will need to be reduced over time but reflects flexibility.
* Penberthy highlighted "nearly $28 million in liquidity and no debt outstanding under our senior credit facilities," framing balance sheet strength as a differentiator enabling Rand to support its dividend, remain patient during muted deal flow, and act quickly on new opportunities.
* The company "declared and paid our regularly quarterly distribution of $0.29 per share, marking the third consecutive quarter at this level," demonstrating dividend consistency despite lower new investment activity.
* At quarter-end, investments had a fair value of $44.3 million across 19 companies, with a portfolio mix of 83% debt and 17% equity and a weighted average yield of 12.2%.
* Penberthy detailed a new investment of $2.5 million in BlackJet Direct Marketing and a $400,000 follow-on in Food Service Supply, while also noting a $7.6 million repayment from Seybert's (The Rack Group) and a $2.9 million realized loss on Tilson Technology Management after its Chapter 11 process.
* Penberthy concluded, "We are confident in our ability to continue creating long-term value for our shareholders."
* Executive VP, Treasurer, CFO & Secretary Margaret Brechtel stated, "Total investment income was $1.6 million, down from $2.2 million in last year's third quarter. The change reflects both debt repayments and a slowdown in originations... while income came in lower, we were able to offset that decrease on the expense side. Total expenses decreased to $596,000 from $1.3 million in the prior year period."

OUTLOOK

* Penberthy described "early signs that anticipated interest rate reductions could also help stimulate deal origination in the quarters ahead. If that momentum builds, Rand is well positioned to deploy capital into yield-focused debt investments that can support earnings growth, NAV stability and ongoing dividend coverage."
* Dividend guidance remains steady as Penberthy affirmed the ability "to preserve the dividend even in these interim periods, which are slower investment cycles."
* Brechtel confirmed, "We will announce our fourth quarter dividend in early December."

FINANCIAL RESULTS

* Brechtel reported, "Total investment income was $1.6 million, down from $2.2 million in last year's third quarter."
* Expenses decreased to $596,000 from $1.3 million in the prior year period, driven by lower incentive fees, reduced interest expense, and a decline in base management fees.
* Net investment income was $993,000, up from $887,000 in the same quarter last year. On a per-share basis, net investment income was down $0.01 due to increased shares outstanding.
* Net asset value at September 30, 2025, stood at $53.6 million or $18.06 per share, compared with $19.10 at the end of the sequential second quarter. The decline was attributed to valuation adjustments and the dividend paid in the quarter.
* The company exited the quarter with $9.5 million in cash and $18.3 million available on its senior secured credit facility.

Q&A

* NOT_APPLICABLE: The current transcript does not contain any analyst questions or management responses in a Q&A format.

SENTIMENT ANALYSIS

* Analysts' sentiment cannot be assessed due to the absence of analyst questions in the current transcript.
* Management maintained a confident and disciplined tone, emphasizing flexibility and balance sheet strength. Penberthy stated, "What stands out to me is our ability to remain both disciplined and flexible."
* Compared to the previous quarter, the management tone remains cautiously optimistic, highlighting resilience and patience in capital deployment.

QUARTER-OVER-QUARTER COMPARISON

* Dividend consistency was maintained at $0.29 per share for the third consecutive quarter.
* Net investment income increased to $993,000 from $887,000 year-over-year, but was down from $2.5 million in the previous quarter, which had benefited from a capital gains incentive fee reversal.
* Portfolio fair value declined to $44.3 million from $52.4 million in the prior quarter, influenced by repayments and realized losses.
* Net asset value per share decreased from $19.10 in Q2 to $18.06 in Q3.
* Management's confidence and focus on liquidity position and expense control were consistent with the prior quarter, while continuing to cite the challenging origination environment.

RISKS AND CONCERNS

* Penberthy pointed out "new deal origination across the BDC landscape does remain sluggish" and ongoing "tighter senior credit conditions and higher financing costs."
* Increased reliance on PIK interest was noted, which management "will need to reduce over time."
* Realized losses on investments, including the $2.9 million loss on Tilson Technology Management, were acknowledged as setbacks.
* Valuation adjustments and repayments led to declines in net asset value and portfolio fair value.
* Management emphasized ongoing expense discipline and liquidity as mitigation strategies.

FINAL TAKEAWAY

Rand Capital presented a quarter marked by disciplined expense management, strong liquidity, and unwavering dividend stability despite muted deal flow and realized portfolio losses. Management underscored the company's capacity to navigate current market headwinds and actively position for improved origination conditions, maintaining confidence in long-term value creation for shareholders.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/rand/earnings/transcripts]

MORE ON RAND CAPITAL

* Rand Capital (RAND) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4840343-rand-capital-rand-q3-2025-earnings-call-transcript]
* Rand Capital 2025 Q3 - Results - Earnings Call Presentation [https://seekingalpha.com/article/4840316-rand-capital-2025-q3-results-earnings-call-presentation]
* Seeking Alpha’s Quant Rating on Rand Capital [https://seekingalpha.com/symbol/RAND/ratings/quant-ratings]
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