Rand Capital Corporation

Ladies and gentlemen, greetings and welcome to the Rand Capital Corporation First Quarter FY2026 Financial Results Conference Call. At this time, all participants are in the listen-only mode. If anyone requires operator assistance during the conference call, please signal the operator by pressing star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host for today, Mr. Craig Maholick. Please go ahead.

Thank you, and good afternoon, everyone. We appreciate your interest in RAND Capital for joining us today for our first quarter, 2026 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 on 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 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 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, and I'll hand the discussion over to Dan. Dan?

Thank you, Craig, and good afternoon, everyone. We view Q1 as a transition quarter for RAND. Our results reflected the impact of non-accruals in a smaller income-producing portfolio due to the repayment of several debt investments during 2025. But we've also made progress on several fronts that we believe are important as we move through 2026. Investment income for the quarter was $1.2 million, and net investment income was 18 cents per share. Those figures were below the prior year period, primarily due to reduced amount of interest income from our current portfolio companies as compared with 2025. At the same time, we generated a realized gain of approximately $1.1 million from the exit of Syberts, or the RAC group as it's commonly known, and we also deployed $5.1 million into new and follow-on investments during the quarter. This includes our new investment in AME Holdco. From a capital position standpoint, we ended the quarter with net asset value of $17.16 per share, with approximately 80% of the portfolio invested in debt investments and more than $20 million available liquidity. with only $500,000 drawn on our line of credit at quarter end. So while the quarter's earnings reflect a lag from 2025 debt repayments and current portfolio non-accruals, we believe the quarter also showed continued execution through capital recycling, new investment activity, and balance sheet flexibility. With that overview, let's turn to slide four. Delivering consistent cash dividends remains central to RAND's strategy. During the first quarter, we paid our regular quarterly cash dividend of 29 cents per share. And in April, we declared another regular dividend of 29 cents per share for the second quarter of 2026. That consistency is important. Even in periods where repayments have reduced the size of the earning portfolio, and non-accruals have weighed on our current income, we have remained focused on supporting the regular dividend while rebuilding the portfolio. The nature of the GAAP versus tax or RIC-based accounting for our dividends has benefited us in 2026 as we work hard to rebuild the portfolio base supporting future dividends. Our dividend strategy remains disciplined and earnings-driven. We want to preserve balance sheet flexibility, continue to support the portfolio where appropriate, and deploy capital selectively into investments that can contribute to income and create long-term shareholder value. Please turn to slide five for a review of the portfolio. At March 31st, our portfolio had a fair value of $51.5 million across 20 portfolio companies. This compares with $48.5 million at year-end 2025. The portfolio remains positioned toward income generation with approximately 80% in debt investments, as I previously highlighted, and 20% in equity investments. That debt-orientated mix continues to reflect our emphasis on structures designed to generate current income while preserving some potential upside through equity participation. The annualized weighted average yield on debt investments, including PIK interest, was 9.43% at quarter end, down from 11.3% at December 31, 2025. That decline primarily reflects the impact of non-accruals, including such companies as FSS and MREs. both of which were placed on non-accrual status beginning in the fourth quarter of 2025. These non-accruals drag down the total yield on an aggregated basis. However, keep in mind our individual transactions are more typically currently being priced with interest in the 13% to 14% range. More broadly, our strategy remains focused on expanding income-producing investments over time, while preserving credit quality, with a disciplined approach to underwriting and valuation. Please turn to slide six. This slide summarizes our key portfolio actions in the quarter, both new deployment and follow-on capital, as well as the actions we took in a workout situation, and importantly, a strong full-cycle realization or exit for RAND. We closed a $4.0 million investment in AME Holdco during the quarter, consisting of a $3 million term loan at 13% and a $1 million equity investment alongside it. AME provides auto center design and installation services, and we believe it fits well within our lower middle market investment strategy. We also remained active with existing portfolio companies. During the quarter, We participated with a co-investor in the buyout of MRES' senior credit position with RAND's pro-rata investment totaling approximately $678,000. This positioned the investor group as the senior creditor in the situation. MRES is currently being restructured through a technical bankruptcy through the courts. We are optimistic that given our strong position in both the senior and subordinated debt tranches, we will play a key role in partnering with the company to execute a successful workout plan. We also funded a $400,000 follow-on debt investment in FSS, bringing our total investment there to a fair value of $4.3 million at quarter end. And lastly, we completed a smaller follow-on equity investment of $50,000 into Kitech. In addition to those investments, the quarter included the final monetization of Cyberts, doing business as the RAC Group, which we view as a strong investment outcome for RAND. We had previously received full repayment of our original $7.7 million debt investment, and during the first quarter, we sold our remaining equity holdings for approximately $1.3 million in proceeds. generating a realized gain of approximately $1.1 million. The RAC group is a good example of the way our model is intended to work, earning income through the life of the investment, providing follow-on capital to support growth, and participating in upside through equity components. More broadly, it also reflects the capital recycling dynamic that is core to our strategy and all BDCs. where repayments and realizations create capital for future deployment into new income-producing opportunities. Please turn to slide 7, which shows our balanced industry exposure across the portfolio. Professional and business services remains the largest area of exposure, followed by manufacturing and then distribution and consumer products. While individual weighting shifted during the quarter due to new investment, follow-on funding, and repayments and valuation changes, the broader portfolio continues to reflect a balanced mix across multiple industries aligned with our lower middle market focus. We believe maintaining this balanced industry exposure supports the portfolio resilience while preserving flexibility to pursue attractive sector-specific opportunities as they do emerge. Please turn to slide 8. Our top five portfolio investments represented approximately $22.9 million in fair value, or 44% of the total portfolio, at March 31, 2026. These holdings include International Electronic Alloys, or INEA, Kitech, Hyland All About People, BMP Food Service Supply, and AME Holdco. These investments form an important part of the portfolio, and we are focused on working with the companies to preserve creditworthiness and the value in the RAND portfolio, as well as to preserve and maintain their income-producing base. Some also include equity participation, or PIK interest income features that can contribute to additional return potential over time. Compared with prior periods, the top five also reflect the portfolio transition we have discussed. Syberts is no longer in the top five following the full monetization of that investment, and AME has now entered the group following our new investment in the quarter. With that, I'll turn it over to Margaret to walk through the financial results in more detail.