Rand Capital Corporation

Greetings. Welcome to RAND Capital Corporation fourth quarter 2022 financial results. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Craig Mihalik, Investor Relations. Thank you. You may begin.

Yeah, thank you. And good morning, everyone. We appreciate your interest in RAND Capital. and for joining us today for our fourth quarter and full year 2022 financial results conference call. On the line with me are Dan Pemberthy, 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 in 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. You can find a summary of these risks and 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 FCC.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, and I'll hand the discussion over to Dan. Dan?

Thank you, Craig, and good morning, everyone. The fourth quarter capped off a strong year for Rand as we continue to execute our strategy by focusing on current cash yields in order to achieve our income-producing goals. We advanced our investment portfolio composition towards more debt instruments with the addition of four interest-yielding investments over the past year. In total, our debt portfolio now makes up more than half of our total portfolio mix, sitting at 56%, compared with 46% at the end of 2021. We delivered total investment growth of 40% for the quarter and over 41% for the full year period, which reflected increase in interest income from portfolio companies and higher portfolio dividends. While we have made great strides building out our portfolio that is delivering strong total investment income growth, we are equally focused on prudent expense management which was demonstrated in the measurable improvement of our net investment income per share of 48 cents for the quarter, up four times from last year's fourth quarter. For the full year, net investment income per share was $1.72, compared with the loss of $1.01 per share in 2021. These improved results enabled us to increase our return to shareholders. During 2022, we paid out total dividends of 83 cents per share, which represents an increase of nearly 90% over 2021 distributions. This included raising our quarterly dividend cash by 33% or 5 cents per share, bringing it to 20 cents per share for the fourth quarter of 2022. And at the same time, paying a supplemental dividend of 18 cents per share. During the year, We invested over $7 million across seven transactions, which largely consisted of interest yielding assets. I will highlight our fourth quarter investments in a moment. If you turn to slide four, you can see our portfolio mix between debt and equity and the changes during the past year. Fixed rate debt investments made up 56% as we made progress in shifting our investment portfolio composition towards more debt instruments, and we do expect that trend to continue as we further execute upon our strategy. The rest of the portfolio comprised of 34% in equity investments in private companies and 10% in dividend paying publicly traded BDCs and our ACV auction securities. The fair value of our investments totaled approximately $61.5 million, expanding 3% from the sequential 2022 third quarter. We saw some contraction of the fair value when compared with 2021's year end, which was primarily due to the BDC stock sales made during the year and lower valuations for ACB auctions and open exchange. Helping partially offset this decrease was our new and follow-on investments. As of December 31st, 2022, Our portfolio consisted of investments in 29 companies, down five since 2021. We exited two BDC investments along with Social Flow, Empire, Microcision, and New Monarch during the course of the year. The one new addition was food service supply, which was done during the fourth quarter and is highlighted on slide five. We utilize existing cash and our senior secured revolving credit facility to fund these investments. The $3.1 million investment in food service supply consisted of a $2.5 million of senior subordinated debt at 12% interest and $600,000 of preferred equity. FSS is out of Utah and provides design, distribution, and installation services for commercial kitchens as well as renovations and new commercial builds. We also made a follow-on debt investment of $590,000 in SIAPS, an instrumentation company, that is, specializing in portable analytical instruments, which have the ability to identify chemical compounds, minerals, and elements. We have been an investor in SIAPS for nearly 10 years, consisting of both debt and equity investments along the way. Our total fair value of these investments with $5.2 million at year end. We have also made $194,000 follow-on equity investment into Siebert's Billiards Corporation, raising the total fair value of this investment to $5.9 million, which was largely comprised of 5.6 in debt that does accrue at 14%. That 14% includes a 12% current pay and a 2% pick accrual. Cybert is a retail company that specializes in billiards equipment and accessories and is fairly typical of the types of investments which we are making these days. We had one exit during the quarter, this was Empire Genomics, which repaid their $1.4 million loan. The charts on slide six illustrate the diversity in our portfolio and the change in industry mix year over year. Given the impact of investments, sales, and fair value changes, we saw the largest changes in the software sector, which decreased 10%, while professional services increased to 31%, and manufacturing also increased to 23%. We continue to value this diversity of our portfolio as we do feel that this mitigates the ultimate market risk impact. Slide 7 does list out our top five portfolio companies at your end. which represents almost half of our total portfolio. Since last quarter, CyS has moved into the top five ranking at the number three spot, given our fourth quarter investment into the company. Tilson remains the largest fair value investment, and both Open Exchange and ITA have moved out of this top five, given our valuation changes during the quarter. And also, we had shifts in DSD to the four spots and also moved KTEC into the top five portfolio mix. At year-end, we still held nearly 320,000 shares of ATV and represents about 4% of the total portfolio fair value. With that, I'll turn it over to Margaret for a review of our financials in greater depth.