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    RAND
    Earnings call· Jun 2026(Q2 FY26)

    RAND CAPITAL Q2 FY26 earnings call RAND

    Aug 5, 2026 Source

    Executive summary

    Rand Capital Q2 FY26 — Portfolio Growth Amidst Non-Accrual Headwinds

    Rand Capital navigated Q2 FY26 with a dual focus on portfolio expansion and active management of challenged assets. The company successfully deployed $6.9 million into new income-producing investments and realized a gain from an exit, contributing to an increase in net asset value per share. However, earnings continued to be pressured by non-accruals and a significant write-down, impacting overall investment income and portfolio yield. Management emphasized a disciplined approach to capital allocation and portfolio rebuilding to support future earnings and shareholder returns.

    Highlights

    4

    • Accelerated deployment into new income-producing investments, totaling $6.9 million in Q2 FY26.

    • Realized a gain of $959,000 on the exit of Applied Image in Q2 FY26.

    • Net asset value increased to $17.33 per share at quarter-end, up from the prior quarter.

    • Maintained regular quarterly dividend of $0.29 per share for Q2 and declared for Q3 FY26.

    Concerns

    4

    • Total investment income declined to $1.4 million in Q2 FY26 from $1.6 million in prior year, primarily due to portfolio non-accruals.

    • Net investment income decreased to $0.24 per share in Q2 FY26 from $0.83 per share in Q2 FY25.

    • Full write-down of B&P Swanson resulted in a $2.5 million quarter-over-quarter fair value decline.

    • Annualized weighted average yield on debt investments decreased to 8.98% at Q2 FY26 from 11.3% at year-end 2025 due to non-accruals.

    Guidance & targets

    1
    CategoryTargetConfidence
    Quarterly Dividend
    $0.29 per share
    medium materiality
    High

    Operational metrics

    28
    Total investment income
    $1.4 milliondown from $1.6 million in Q2 FY25
    Q2 FY26

    Primarily reflected lower interest income from portfolio companies due to non-accruals.

    Net investment income
    $710,000down from $2.5 million in Q2 FY25
    Q2 FY26

    Reflected lower recurring interest income than a year ago.

    Net investment income per share
    $0.24down from $0.83 in Q2 FY25
    Q2 FY26

    GAAP net investment income per share.

    Adjusted net investment income per share
    $0.24down from $0.33 in Q2 FY25
    Q2 FY26

    Non-GAAP financial measure.

    Adjusted expenses
    $647,000up from $626,000 in Q2 FY25
    Q2 FY26

    Non-GAAP financial measure, excludes capital gains and incentive fees.

    Net asset value per share
    $17.33increase from prior quarter
    Q2 FY26

    Ending net asset value per share.

    Portfolio fair value
    $56.5 millionup from $48.5 million at year-end 2025
    June 30, 2026

    Fair value across 21 portfolio companies.

    Debt investment percentage
    79%
    Q2 FY26

    Percentage of portfolio invested in debt instruments at fair value.

    Equity investment percentage
    21%
    Q2 FY26

    Percentage of portfolio invested in equity at fair value.

    Remaining availability on credit facility
    $12.4 million
    Q2 FY26

    Available liquidity on the company's credit facility.

    Annualized weighted average yield on debt investments
    8.98%down from 11.3% at Dec 31, 2025
    Q2 FY26

    Reported yield dragged down by portfolio non-accruals.

    New investments underwriting yield
    low-to-mid teens
    Q2 FY26

    Representative sample of the earning power of newly deployed capital.

    Dividend and other investment income
    $153,000
    Q2 FY26

    Partially offset lower interest income from portfolio companies.

    Non-cash PIK interest
    $11610% of interest income from portfolio companies, compared with 40% in Q2 FY25
    Q2 FY26

    Decline reflects impact of investments being placed on non-accrual status.

    Total expenses (GAAP)
    $647,000compared with a benefit of $864,000 in Q2 FY25
    Q2 FY26

    Prior year period included a $1.5 million capital gain incentive fee benefit.

    Capital gain incentive fee benefit
    $1.5 million
    Q2 FY25

    Included in total expenses in the prior year period.

    Net assets (beginning of quarter)
    $51 million
    Q2 FY26

    Starting net assets for the quarter.

    Net unrealized depreciation
    $302,000
    Q2 FY26

    Net unrealized depreciation recognized during the quarter.

    Dividends declared (total)
    $861,000
    Q2 FY26

    Total dividends declared during the quarter.

    Net assets (ending of quarter)
    $51.5 million
    Q2 FY26

    Ending net assets for the quarter.

    Total assets
    $57.7 million
    June 30, 2026

    Total assets at quarter-end.

    Net portfolio per share
    $19.02
    June 30, 2026

    Net portfolio value per share.

    Consolidated cash
    $430,000
    June 30, 2026

    Consolidated cash balance at quarter-end.

    Consolidated cash per share
    $0.15
    June 30, 2026

    Consolidated cash balance per share.

    Other assets and liabilities impact on NAV
    $5.5 million
    June 30, 2026

    Amount by which other assets and liabilities reduce net asset value.

    Other assets and liabilities impact on NAV per share
    $1.84
    June 30, 2026

    Amount per share by which other assets and liabilities reduce net asset value.

    Outstanding on senior credit facility
    $5.1 million
    June 30, 2026

    Amount outstanding on the company's senior credit facility.

    Top five investments fair value
    $24.1 million43% of portfolio
    June 30, 2026

    Fair value of the top five investments, reflecting portfolio concentration.

    Industry KPIs

    1
    MetricValueDetails
    Deployment realizations$6.9 million invested; $1.7 million debt repayment; $959,000 realized gainUSD

    Deals & partnerships

    5
    Feature Healthcare (Four Seasons Home Care)New investment consisting of a term loan$4.5 million

    Investment fits within strategy of financing lower middle market companies in attractive sectors.

    Termite Guy CorporationNew investment consisting of a term loan and equity$2.4 million

    Partnered with a past deal sponsor (RAC Group/Cybirds) for this investment, combining current income with long-term equity upside.

    Applied ImageFull repayment of debt investment and realized gain on warrants$1.7 million debt repayment; $959,000 realized gain

    Received full repayment of its debt investment.

    Another debt investmentDebt repayment$250,000

    Further reflects the capital recycling dynamic embedded in the model.

    B&P SwansonFull write-down due to cessation of operations

    An unexpected and disappointing outcome, demonstrating the challenging economic environment.

    Risks & headwinds

    3
    Portfolio non-accrualsOngoing

    Weighing on interest income and reported yield; annualized weighted average yield on debt investments decreased to 8.98% from 11.3%.

    Mitigation: Actively managing challenged positions and adding new performing assets.

    Challenging economic and business environmentOngoing

    Full write-down of B&P Swanson resulted in a $2.5 million quarter-over-quarter fair value decline.

    Mitigation: Disciplined portfolio management, focusing on credit quality, structure, and overall portfolio construction.

    Competitive private credit marketOngoing

    Market remains competitive and at times uneven.

    Mitigation: Emphasizing experience, selectivity, and portfolio discipline in capital allocation.

    What to watch in Q3 FY26

    4

    Portfolio Building Pace

    Balance of 2026
    Current$6.9 million invested in Q2 FY26
    TargetContinued deployment into new income-producing investments

    Why it matters

    Demonstrates execution on growth strategy and ability to offset non-accruals.

    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.

    2 min read5 chapters

    Detailed Narrative

    01

    Portfolio Strategy and Mix

    The portfolio at June 30 had a fair value of $56.5 million across 21 companies, up from $48.5 million at year-end 2025. It remains primarily debt-oriented with 79% invested in debt and 21% in equity at fair value, reflecting an emphasis on current income while preserving selective upside. Management believes this predominantly debt-orientated portfolio is the right positioning for rebuilding earning assets and managing through a mixed market backdrop.

    02

    Investment Activity Highlights

    During Q2 FY26, Rand Capital invested $6.9 million into two new portfolio companies: Feature Healthcare (doing business as Four Seasons Home Care) with a $4.5 million term loan carrying 12% cash interest plus 2% PIK, and Termite Guy Corporation with a $2.4 million investment consisting of a $2.1 million term loan at 13% plus 1% PIK and a $300,000 equity investment. The company also received full repayment of its $1.7 million debt investment in Applied Image, recognizing a $959,000 realized gain on warrants, and a $250,000 repayment on another debt investment.

    03

    Impact of Non-Accruals and Write-downs

    The annualized weighted average yield on debt investments, including PIK interest, was 8.98% at quarter-end, a decline from 11.3% at December 31, 2025, primarily due to portfolio non-accruals. The full write-down of B&P Swanson, which ceased operations, resulted in a $2.5 million quarter-over-quarter fair value decline. This event demonstrates the ongoing challenging economic and business environment and the potential for volatility in portfolio businesses.

    04

    Shareholder Returns and Dividend Policy

    Rand Capital paid its regular quarterly dividend of $0.29 per share for Q2 FY26 and declared the same for Q3 FY26. Management is focused on supporting the dividend through recurring income, liquidity management, and steady portfolio rebuilding over time⏳. The approach balances current shareholder returns with long-term portfolio development, identifying new investments, and supporting the current portfolio where appropriate.

    05

    Portfolio Composition and Concentration

    The portfolio's industry exposure remains balanced, with professional and business services as the largest area, followed by health and wellness, distribution, manufacturing, and consumer-related investments. The top five investments represented $24.1 million of fair value, or 43% of the portfolio at June 30, including IMEA, Kitech, Future Healthcare, Highlands All About People, and BNP Food Service Supply. The objective is to preserve value in these larger positions while building additional income-producing assets.

    AI-generated summary of the company’s earnings call. Not investment advice.