Q1 2020 Earnings Call
Greetings and welcome to the ran capital Corporation first quarter 2020 financial results at this time, all participants are they listen only mode.
Next question answer session will follow the formal presentation.
And you want should require operator technical assistance during the call. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded this now my pleasure to introduce your host Deborah Pawlowski Investor Relations for rent like you must polaski you may begin.
Thank you Victor and good afternoon, everyone. We appreciate your interest and ran capital and for joining US today for ran first quarter 2020 financial results Conference call.
With me today or peak Brown, our Chief Executive Officer, and Dan Earthy, our executive Vice President Chief Financial Officer.
You should have a copy of the release it crossed the wires. This morning as well in the slides it will accompany our conversation today. If you don't have the slides they are available on our website at www Dot ran capital Dot com.
If you would now turn to slide deck and look at slide two I want to point out true important information.
You are likely where we may make forward looking statements. During this presentation and during the question answer session. 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 earnings release as long as an other documents filed by the company with Securities and Exchange Commission.
These documents can be found on our website, where it FCC dot Gov.
With that let me now turned it over to Pete to begin Pete.
Thanks very much.
Good afternoon, everyone and thank you for your time in interest today.
At times, given the cold in 19 pandemic.
Thank you and your families.
Well one thing [noise].
Even during his remarks working situation.
Slide three.
We can play doesn't work required to Vasopressor right.
Oh ran into a regulated investment company or our I'd say.
We added outside March so special dividend of 23.7 million.
Or dollarssixty two per share.
Uh huh.
Yeah.
Okay related earnings a profit.
That is required in order for us to alike.
I mean.
Alright, Thank you for 2020.
The debit is being distributed today and the stock was trading extender tomorrow.
Approximately 70% of the shares outstanding.
I like that to receive a definite soc.
The remaining 30% is there a lot to cash or did not provide an election.
For that 30% this sort of approximately one dollar insects that some cash.
About 36 cents on stock.
Sorry.
Determine the number of shares for the stock dividend.
Well, it's based on the volume weighted.
Average price.
The three days afraid that ended on April 29.
Hi price was $2.20 per share.
Other news today, the board approved a one for nine reverse stock split.
So first of all the effect of on May 21st at five pm.
Finally began trading on May 20.
[laughter] reduced reflecting the reduced share count.
The bar and also from the no share buyback authorization.
Are they have authorization, we can repurchase up to $1.5 million that chairs.
Please turn to slide four and we show their stock share count impact of the dividend and what it should look like following the reverse split.
Shareholder aside approved at our shareholder meeting in December.
2019, a reverse split within the range of one to seven to one Tonight one to 10.
Let's look at slide five and let's talk about the activity at our portfolio in the first corridor.
Well I had a major accent, what's the sale of our investment.
Match for a 2.3 million dollar gain.
There were a couple other additional earn outs from previous access that amounted to just under $100000.
During the quarter, we invested 1.7 man and the public equity of five public.
Which I will discuss on the next slide.
That asset value up they ended the quarter increased three seven to $3.69 per share over the $3 a protective sex.
And at Avi pressure at the end of year.
The benefits of our expenses from the Externalization a management.
Tax benefit and games from they accept Ross said by the negative impact of unrealized appreciation.
And the elimination of a deferred tax assets.
I tried to relate it to our intention to elect REIT status.
Hi, techs highlights I'd be bdcs, we in fact that which we invested 1.7 million turned the corner.
Representing about five for side of our portfolio. These I've asked sort of per night dividend income and greater liquidity as public equity that are either in past five and our portfolio.
These companies are much larger than we are in a range of market capitalization of 600 million to nearly 6 billion.
Let's turn to slide seven.
These charts demonstrate the diversity of our portfolio, which we believe is an important factor on these challenging economic times.
Hey portfolios, we came from they have passing by used to ask that contributed to our diversity.
Let's talk a talk a lot about about how we are addressing the call it nine team.
Dynamic within our portfolio.
As you imagine everyone is working to out the containment out of the virus as we are at rant capital.
We believe our companies are doing what they can do to work remotely.
Oh, sorry, that's something.
An increase personal hygiene and sanitation protocols.
As you might expect apart poly the current name economics as trust caused by.
Covert 19, well have an impact on our portfolio companies.
We have been actively communicating with our portfolio during the situation.
The 36 companies on the portfolio 30 qualified for the payroll production program loves apart it I know the care that.
26 of these companies applied for the program.
The company's having a consumer focus.
My mother negatively impacted by the stay at home condition throughout the country.
Countering that are those that have products or services.
That are necessary during the crisis.
It's just health care and software technology.
For example, one of our company's applied and received approval for the emergency you.
Third station for assay testing of call that 19 throughout there.
Although the Riyadh I.
Oh that 19, Mdx pathway has not been F. tag cleared or pro.
In addition to another company Tivo technology enable out plan to provide a lower cost option herself pot that health care flat.
Providing balsam floors and their people better lower costs health care experience recently launched into several new state.
Well, we believe our portfolio diversification for quite a good to read they get the fat.
That's a disruption of the economy were not immune to the condition.
Slide eight less the top five investments in our portfolio a compromise 54% of our total portfolio assets.
Among them tell somebody that's fairly strong demand in this environment.
Well, others are placing ads needed.
Please turn to slide nine.
The mix of equity investments first that the that that investments was 59%.
Looking at 41%.
That at the end of the March quarter.
Equity interests to climb from a level of 65% Diablo 2019, but they accent.
Match, which has been about 6% of our product portfolio.
Our investment thesis has changed with the transformation of Rand.
Our focus now growing investment income that well find our plan ongoing cash dividend.
As there is always says I expect our portfolio.
Continue that ship.
<unk>, Tetrasun, Devon and paying about.
I show no set during this data.
Home environment.
The pipeline and prior investments remain robust.
Our ability for due diligence has been impeded.
That makes it difficult to be active at our funding process.
We'll continue to do the groundwork.
Although we can't complain our site that has a local government and reduction rates trucks.
Let me start or they have to review our financials in greater SAP.
Sam.
Thanks, Pete and good afternoon, everyone.
Please turn to slide 11.
What the net asset value per share or anything.
It's Pete mentioned, we finished the quarter, what's there may be a $3.69 per share.
This was up three cents from the end of December.
Robert This more on the next slide.
Let me point out the significant change in Navy compared with the first quarter of 29 King period, but dollarsthirty seven per share was primarily attributable to the 83 cents per share dilutive effect of issuing $8.3 million 8.3 million shares rather to east in November.
At the end of 2019, we also had a number of breakdowns in certain portfolio companies.
Slide 12 has a summary of our operating performance for the first quarter's a 2020 and 29 soon.
Total investment income in the first quarter Twentytwenty was $636000.
I was $83000 from last years first quarter.
The prior year period benefited from an atypical level look see income of $225000.
In conjunction with the repayment of the 3.5 no.
Dollar loan instrument about former portfolio company you help.
Excluding that payment investment income was up approximately $140000 demonstrating the success, we have been happening with shifting our portfolio into one that delivers more interest income.
This will enable us.
Two and anticipated regular cash dividend in the future.
Another important element of our transformation, what's the externalization of the management of the Rand portfolio to raise capital management, which is the registered investment adviser for Rand.
Our first quarter expenses were down about $173000, mostly from the benefit of this externalization.
Strong investment income.
Our work expenses and the tax benefit from the cares acts and other tax adjustments, resulting in the net investment gains of $538000 for the quarter.
Results this quarter Didnt get more complexity is going it's typical as I'm sure you've realized.
We had the benefit of the out met sale, which resulted in a 2.4 million dollar game.
However, another impact in the quarter related to our intention to convert to a regulated investment company or Rick and this was the elimination of a 1.4 million dollar deferred tax asset.
Because we plan to elect Ric status for 2020 and pass through earnings to shareholders.
The tax asset is no longer abuse, and we were required to write it off.
The net result, with a net realized and unrealized loss of 108000 in the quarter.
Compared with the gain in the prior year period a 433000.
The us net net we had an increase in net asset value, a 430000 or three cents.
So.
If you were turning to slide 13. Please we can discuss the uniquely strong position. We are entering this disruption to the economy caused by the corner virus.
Efforts to curb its Fred.
What do you investment for me.
We haven't historically high level of cash of 29.1 million.
Oh that 13.5 million is that yes, b. I see for making investments.
And 15.6 million is at the parent and provides a significant amount of liquidity for us as well as additional investment opportunities.
Total liquidity liquidity also includes 3 million of availability up leverage commitment from the FDA.
The $11 million owed to the S.P.A. matures over multiyear period. It doesn't begin until the $3 million first tranche, which is due went 2022.
We distributed today $4.7 million in cash.
Along with <unk> as part of the special dividends.
However, even after that distribution, we remain highly liquid.
The table on this slide shows the composition of our and maybe as well.
That completes my formal comments Pete.
He would you like to open it up the wine for questions.
Please.
Thank you.
At this time will now be conducting a question answer session if you'd like to ask a question. Please press star one on your telephone keypad.
Confirmation from will indicate your line is and the question Q.
You May also press star to if you'd like to remove your question from the Q.
For participants using speaker equipment, maybe necessary for you to pick up your handset before pressing the star keys, one moment, please probably now poll for questions.
Our first question comes from Sam Rebotsky, what I see our asset management. Please proceed with your question.
Yes.
Hey, Dan.
Hi.
When do we haven't 29 million in cash approximately net.
And we'll we use 4.7.
For a distribution what is your plans as far as keeping the number a cash and it would appear the type of investment that produce capital gain would not be made in the future is that accurate.
We will.
Tend to look for instruments and provider.
Current income so the weekend.
Hey, a dividend however, within the asked me I see.
And that's what's the sales tend to have an equity component of them.
So what is our expectation to 25 million more or less that we have now of investing that what im sorry I presume.
So there's all these transactions are complete you may have not been sure how much cash was good to be requested and are now that you is there a number that you want to keep.
Or or are there opportunities to create greater income.
That you'd like to do presently.
Oh wait wed like to be fully invested.
And are looking for opportunities as we alluded to it a little bit tougher than you can go and meet with companies.
We are working with investment bankers on there maybe opportunities to buy portfolios going forward.
It's in our interest in the shareholders interest for us to deploy the money.
Within a prudent manner as soon as possible.
Lot of the fair amount of liquidity as come from.
Sets, which for the past not able to.
Forecast, but we've had.
We ended the year, we we sold our equity and micro sooner than we had hoped match.
We are looking for opportunities and.
Well continue down that path.
Okay and didn't dividend will be paid once a year or quarterly or what when do you expect that to happen.
Believe it will pay more and more they paid quarterly.
But to the board.
But we will certainly and I addressed it in the second corridor.
Right good luck.
Thanks Sam.
Thank you.
As a reminder, if he would like to ask a question. Please press star one on your telephone keypad.
It looks like we have no further questions at this time I would like to turn the flex the floor back over to Mr. grown for closing remarks.
Thank you for your interest then ran capital and we're excited about the future whenever they want to stay safe has always Oh, we are available by phone so give us a call. If we didn't answer your question.
Thank you.
[noise], ladies and gentlemen. This has concluded today's teleconference. You may now disconnect. Your lines at this time. Thank you for your participation.
[noise].