Thank you, and good afternoon, everyone. We appreciate your interest in RAND Capital and joining us today for our second 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 with 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 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.
Thank you, Craig, and good afternoon, everyone. We view the second quarter as a period of meaningful portfolio activity for RAND. During the quarter, we accelerated deployment into new income-producing investments, realized a gain on one exit, and maintain our regular dividends, while continuing to work through the income and valuation impact of non-accruals and the full write-down of BMP Swanson. Total investment income for the quarter was $1.4 million, and net investment income was $0.24 per share. Those results were below the prior year period, primarily because portfolio investment non-accruals continued to weigh on interest income and on the portfolio's reported yield. At the same time, we invested $6.9 million into two new portfolio companies during the The first feature health care, also known as Four Seasons Home Care, and Termite Guide Corporation. And we also completed the exit of Applied Image, which did generate a realized gain of $959,000. From a capital position standpoint, we ended the quarter with net asset value of $17.33 per share, which was an increase from the prior quarter. A portfolio that remained overall approximately 79% invested in debt instruments and about $12.4 million of remaining availability on our credit facility. So while current earnings still reflect pressure from portfolio investments, the quarter also showed progress by recycling capital through realizations and continuing to shape the portfolio around performing, income-producing, lower-middle market investments. Importantly, we think the quarter reflected progress on both sides of the portfolio equation. We continued to address challenge positions directly while also adding new investments. With that as the quarter's backdrop, let me turn to shareholder returns and our dividend strategy on slide four. Our regular cash dividend remains an important part of our strategy and our value proposition to shareholders. During the quarter, we paid our regular quarterly dividend of $0.29 per share for the second quarter of 2026, and we also declared a $0.29 per share dividend for the third quarter of 2026. While earnings remain affected by portfolio non-accruals and portfolio turnover, we continue to manage the business with a focus on supporting the dividend through recurring income, liquidity management, and steady portfolio rebuilding over time. Our approach is to balance current shareholder returns with long-term portfolio development by identifying new investments and supporting the current portfolio where appropriate. We believe preserving flexibility and maintaining discipline today does give us a better foundation for supporting both earnings and shareholder returns over time. From there, it's helpful to look at how the portfolio itself has changed. Please turn to slide five. At June 30, our portfolio had a fair value of $56.5 million across 21 portfolio companies, up from $48.5 million at year-end 2025. The portfolio remains primarily debt-oriented with, as I mentioned, 79% invested in debt and 21% in equity at fair value. That mix continues to reflect our emphasis on current income while preserving selective upside through equity participation. We continue to believe that a predominantly debt-orientated portfolio is the right positioning for RAND as we rebuild in earning assets and manage through a mixed market backdrop. The annualized weighted average yield on debt investments, including PIK interest, was 8.98% at quarter ends. This compares with 11.3% at December 31, 2025. As we noted in the last quarter, this reported yield continues to be dragged down and affected by those portfolio non-accruals. We think it is important to distinguish between the reported portfolio yield and the return profile, rather, on newly deployed capital because the new investments we are underwriting are generally priced in the low to mid-teens, which we believe is a more representative sample of the earning power of capital that we are putting to work today. Importantly, the overall portfolio is larger than it was at the end of 2025, and that reflects the investment activity we've executed in the first half of this year. We need to continue to build a portfolio of income-producing assets while staying disciplined on credit quality, structure, and overall portfolio construction. That broader portfolio backdrop sets up the specific investment actions we took during the quarter, including new investments, an exit, a repayment, and the write-down of a challenged position. Please turn to slide six. We closed on a new $4.5 million investment in future health care, which does business as four-seasons health care. So you may see it referenced under both names on the web or in certain public filings. That investment consisted of a term loan carrying 12% cash interest plus 2% PIK, and we believe it fits well within our strategy of financing lower middle market companies in sectors where we see attractive risk-adjusted return potential. We also completed a new $2.4 million investment in Termite Guy Corporation, consisting of a $2.1 million term loan at 13% plus 1% PIC and a $300,000 equity investment. For this investment, we again partnered with the past deal sponsor of a prior successful RAND investment, that being the RAC Group or CyBirds, as we are comfortable with their underwriting and how they assisted companies once they invested into them. We believe that the structure of this investment is consistent with the way RAND seeks to combine current income with selective participation in the long-term equity upside. On a realization side, RAND received full repayment of its $1.7 million debt investment in Applied Image, and we also recognized a $959,000 realized gain on our warrants. We also received $250,000 repayment on another debt investment, which further reflects the capital recycling dynamic embedded in our model. At the same time, BNP Swanson ceased operations. This resulted in a full write-down and a $2.5 million quarter-over-quarter fair value decline. While that clearly was both an unexpected and disappointing outcome, we think it is important to address it directly and to note that it was a specific portfolio event recognized through the valuation during the quarter, rather than a change in our broader investment approach. Unfortunately, this does demonstrate the ongoing challenging economic and business environment in which our companies operate, one in which just a supplier interruption or a senior lender's action can quickly disrupt and cause chaos to a business. We're hopeful that things will continue to improve in the overall portfolio, but these portfolio businesses can still experience volatility along the way. More broadly, this slide shows how we are managing the portfolio in real time, adding new performing assets, monetizing successful realization, and confronting challenge situations directly when they arise. That is a core part of a disciplined portfolio management for a company like RAND. Stepping back from individual transactions, slide seven shows how those actions are reflected in the portfolio's overall industry exposure. Professional and business services remains the largest area, followed by health and wellness, distribution, manufacturing, and consumer-related investments. While weighting shifted as a result of new investments and valuation changes, the broader portfolio continues to reflect balance across multiple end markets within our lower middle market focus. We believe this balance remains an important part of supporting portfolio resilience and more consistent income generation over time. We are not trying to build a portfolio around any single sector theme. Instead, we are focused on identifying companies with sound structure, cash yield, management quality, and a strong deal sponsor. And within that base, slide eight highlights the investments that currently have the greatest impact on our portfolio value. Our top five investments represented $24.1 million of fair value, or 43% of the portfolio at June 30th. These holdings, rather, include INEA, that is International Electronic Allies, high tech, future health care, or four seasons, as I mentioned, Highland All About People, and BNP Food Service Supply, Holco. The top five reflect both continuity and change in the portfolio. Future health care entered the group following our new investment in the quarter, while the remaining names continue to represent a meaningful portion of portfolio fair value at quarter Our objective is to preserve value in these larger positions while continuing to build additional portfolio investments around them. Over time, that should support a broader and more balanced space of income-producing assets. With that portfolio context in mind, I'll turn the call over to Margaret to review the quarter's financial results in more detail.
Thanks, Dan, and good afternoon, everyone. I will start on slide 10, which summarizes our financial results for the second quarter of 2026. Total investment income was $1.4 million compared with $1.6 million in the prior year period. The decline primarily reflected lower interest income from portfolio companies due to non-accruals partially offset by $153,000 of dividend and other investment income recognized during the quarter. non-cash PIC interest totaled 116 for the quarter representing 10 percent of interest income from portfolio companies compared with 40 percent in the prior year period that decline in PIC as a percentage of interest income largely reflects the impact of investments being placed on non-accrual status which reduced the amount of PIC recognized in the period total expenses were 647,000 compared with a benefit of $864,000 in the second quarter of 2025. The prior year period included a $1.5 million capital gain incentive fee benefit, while the current quarter had no comparable benefit or expense. Adjusted expenses, which exclude capital gains incentive fees and as a non-GAAP financial measure were $647,000 compared with $626,000 in the prior year period. Net investment income was $710,000 or $0.24 per share compared with $2.5 million or $0.83 per share in the second quarter of 2025. Adjusted net investment income, which is a non-GAAP financial measure per share, was also $0.24 compared with $0.33 a year ago. Taken together, the quarter's earnings reflected lower recurring interest income than a year ago, but also a relatively stable core expense base and a contribution from dividend and other investment income that partially offset the effects of non-accruals. Please turn to slide 11. The waterfall chart on this slide summarizes the change in net asset value during the quarter. We began the quarter with net assets of approximately $51 million. During the period, RAND generated $710,000 of net investment income and a $959,000 realized gain on the exit of applied image. Those positive items were partially offset by $302,000 of net unrealized depreciation and $861,000 of dividends declared during the quarter, resulting in ending net assets of approximately $51.5 million and a net asset value per share of $17.33. From a quarter-over-quarter standpoint, the change in net asset value was modestly positive, which reflects the fact that current period earnings and realized gains more than offset the dividend and the remaining unrealized markdowns recognized during this quarter. Now, turning to slide 12, on June 30th, total assets were $57.7 million. The net portfolio accounted for $56.5 million of total assets, or $19.02 per share, while consolidated cash was approximately $430,000, or $0.15 per share. Other assets and liabilities net reduced net asset value by approximately $5.5 million, or $1.84 per share. We ended the quarter with $5.1 million outstanding on our senior credit facility and approximately $12.4 million in remaining availability. Taken together, we believe the balance sheet remains in the sound position to support follow-on funding where warranted and continued flexibility in capital allocation. With the financial review covered, I'll turn the call back to Dan for our closing priorities and outlook.
Thanks, Margaret. If you would please turn to slide 13. As we look at RAN today, the second quarter reinforced two things at once. First, we are gaining traction on the deployment side of the business, that's new investment origination, as shown by the new investments completed during the quarter, and the growth in the portfolio's fair value in the first half of 2026. Second, we are still managing through the effects of portfolio non-accruals and isolated portfolio stress. Against that backdrop, our priorities for the balance of 2026 are straightforward. 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. In addition, we remain focused on active portfolio oversight. This is a practical approach to protecting value where challenges arise and a continued focus on portfolio quality as we grow. Lastly, we are committed to balancing portfolio growth with overall shareholder returns. The broader private credit market remains competitive and at times uneven. In that environment, both experience, selectivity, and portfolio discipline matter. We believe the actions we took in the second quarter reflect that mindset, put capital to work where returns are attractive, stay engaged with challenge credits, and keep the balance sheet in a position to support the next stage of portfolio growth. We believe RAND remains well positioned with a predominantly debt-orientated portfolio, available liquidity, and a disciplined approach to capital allocation as attractive opportunities emerge. Thank you for your time today and your continued interest in RAND Capital. We appreciate your support and do look forward to updating you again next quarter. Have a great day.
