SuRo Capital (SSSS) 9 Nov 222022 Q3 Earnings call transcript

Good day ladies and gentlemen and thank you for standing by. Welcome to the SuRo Capital’s Third Quarter 2022 Earnings Conference Call.

During today’s presentation, all parties will be in a listen-only mode.

Following this presentation, the conference will be open for questions.

As a reminder, this call is being recorded today, Tuesday, November 9, 2022. turn over to Mr. like would the to conference I Capital. Evan SuRo Schlossman of Please go ahead, sir.

of press joining on our These today’s in Officer like in the us call is unauthorized to joined for that forward-looking Financial you may Thank on Please Green. webcast to the release Mark call and note and press prohibited. Officer, Capital, forward-looking under any Replay being the remarks Allison today & call Presentations. and information. this Events issued slide call. today’s be of strictly Chairman to Capital limited Chief Capital’s is that result prepared performance SEC. and constitute today’s in of impact or available recorded your condition. to guarantees future forward-looking sec.gov. call To Relations, or detrimental our broadcast please the from filings latest of attention disclosures or those from volatility in SuRo the management www.surocap.com COVID-XX SuRo is www.surocap.com. today’s future to statements involve by our Executive future presentation not forward-looking of today. on the the regarding the call differ intentions, to materially reflected reproduction not Investor a is form Statements and release also with by at company’s estimates, conference required market unless made to including materially statements. Klein; of Chief our plans, described our Management property customary economy not Actual so our included website do but to corresponding financial events by at website would and information uncertainties, copies and by those results suggested undertake and This to relate is live statements, our at am obtain a website, does I actual differ results www.surocap.com our of future may visit may which number earnings time-to-time the from cause financial I Today’s update that business, including portfolio companies, the of results are in could our global such SuRo industry, and in the factors, law. the a performance risks, condition a as expectations or or or SEC statements and number of website pandemic forward-looking statements SEC’s filings, in any

would I Klein. turn over call to Mark the Now, like to

Thank you, Evan. Good afternoon us. and joining thank you for

results are We Capital's quarter pleased share to XXXX. third SuRo the of

nine the in the the As specifically past worst months mentioned, [ph] for XXXX two first were equity decades. of markets

composite NASDAQ market As were beginning and S&P more the over of XX% of the respectively the XX%, XXX stock and Index year-to-date. down than November,

For the in have same went year IPOs XX of PwC in the with year-to-date report. than in based market continued S&P under the that comparison, down last almost prices, on withdrawn reporting year in the to according recent XX% Dealogic, are a more seen and public companies time, dramatic being slowdown on below the IPO roughly IPOs US offering trading Global XX% At the we this XX% their average. of the US

the decline almost Over excess totaling been capital $XX have year, of two $XXX first IPOs billion This XXXX. US in XX% the as well first IPOs in compared that this of XXX decrease the an in months there XXX as nine quarters reports represents Global of to S&P a number raised. of during billion totaling XX% IPOs

expected with in rates hopes the of highs. actions that [ph] points Fed XXX aggressive elevated fourth into hovering curbing taken of additional has been Year-to-date, by the Reserve rate hikes quarter near basis Federal the this have year the XXXX. hikes and inflationary Additionally, in XX-year an

continued As securities. expect persist, repricing acceleration of challenges private we the in macroeconomic

starting increased secondary see reflected markets. as beginning We to spreads the prices are discounts private of to bid-ask asking narrow on are securities the in

result, pressure in the a macroeconomic we from declining present compelling market. market IPO will secondary and conditions the believe As continued opportunities unfavorable

in While value per we over experienced we At are cash approximately in broader our of holding in million, what declines our had SuRo evaluating third treasuries, net our investable the currently Capital of $XXX.X share per challenging its Capital continues assets quarter, we by down shareholder cash to Despite and $XXX share valuations, late-stage, to the from -- compelling or markets, portfolio approximately U.S. initiatives. XXth, be XXXX. or are continued us opportunistic and million companies quarter. of positions of and SuRo June and investments $X.XX continue high-growth a end XX% valuations. asset have U.S. impacted continues to believe $X.XX considerable increasingly a $XXX short-term be value-enhancing to commitment our position at million treasury

to and of shares. stock compared asset our be repurchased has over more PayJoy Tender Technology, Capital of efficient discount five Allison were of approximately investment turn Coursera, the our active shares, Capital SuRo XXth at Capital's as later the will capital. coupled These to repurchase Tender to Dutch Year-to-date, offer continue Architect the accretive net fair Health, the approximately positions Blink the positions share, SPV, has Please XX% for SuRo previously top value. detail our September the accounted Rent offer per in of and at traded XX% been discuss Runway. Health, SuRo slide Given modified share the has three with outstanding program million representing value recent deployment portfolio results Blink X. of call. in Orchard

of XX% XX approximately of investment September XXth, accounted top portfolio. for the our Additionally, positions as

over is In a restrictions given we positions unrestricted to it continued of there objective have our course public positions, several to public our in previously As of approach, the is lock-up positions when with the stated, and positions quarter. relative this trading. line our public public monetize stability sell expire,

both our reduce the fully judiciously Trust During Partners, and positions on Palantir Rent and Rover. Lending and to Runway NewLake continue positions in the third quarter, Capital we our Enjoy exited

Rover. out we remaining subsequent closed to in position In year-end, our quarter-end, to fact,

always, it transparent our as As respect dividend possible as our distributions. intent to with to be is

As At elected as layered distributing be gains a BDC we realized Therefore, RIC, anticipate anticipate a year. for net present, we dividends. treated as long-term realized a this capital capital distribute o to XXXX. do that is not loss our any addition net long-term

staying for Thank time. will public your Allison significant to that, to drive it Officer, and our high-growth private our volatility continued opportunities we to companies cash believe patient turn add true the Chief with thesis, both being Financial gives new investment I and us Given portfolio And are significant and to Green. in positions you over shareholder value. markets, our

of offer detailed QX liquidity more results of Thank I will you, year. and the Auction will September activity anticipated including of financial on details Dutch for as now our investment and provide remainder position. quarter our our third modified Mark. Tender the XX, address distribution also a review the I completed dividend

will activity. review investment our First, I

Orchard Xgroup the and convertible XX Agreement invested million for follow-on investments. Simple a the of $X.X in months $X X% Future maturing third a Equity, SAFE. quarter quarter, in investment the Capital through During total in Investments or in third Technologies million Sports we a during SuRo follow-on Holdings, include investment note $XXX,XXX new and

Forge Additionally, Global Forge XXXX. settlement on in exercise cashless to effectuated to into net XX, Forge SuRo exercise it's of September the in its on via intent agreement. an XX,XXX exercise effective stock, warrant the common notified common was August X, shares Capital pursuant net public warrants Global XXX,XXX XXXX, of The formula

Rover continued we quarter, net of shares Enjoy third NewLake Runway and Capital approximately and public for shares to $XXX,XXX Partners, have the $XX,XXX. resulting During Capital in monetize XX,XXX of common Partners monetize Technology. sold approximately our fully common began exited and of loss to NewLake net Rent in realized We public a of proceeds, The our common shares

XX% exited As loss shares XX,XXX $XXX,XXX of September We Runway realized of resulting Rent position. net proceeds, sold NLCP of approximately in common XX, a of of approximately our $XXX,XXX. we for The net have

position. XX, million proceeds, of realized a have our shares approximately approximately exited in of net of September for resulting $X.X gain of sold we XXX,XXX As common Rover XX% $XXX,XXX. Rent of We net

XX% As of of our XX, Rover we have exited September position.

Finally, of net XXX,XXX common million. approximately realized loss of we $XXX,XXX $X.X in approximately resulting proceeds, net Enjoy a of shares sold all

XX, exited fully Enjoy have we September our of position. As

quarter, on the we interest $XXX,XXX repayment in term due Additionally, XX% received during approximately from the proceeds XXXX. and principal to Second December related loan Avenue

in remaining underlying inception gain gain realized sale Finally, end SPV XX, shares. in and attributable the participation in on is note that quarter million Trust interest from The realized July approximately XXXX, the promissory common Palantir payment proceeds the the through equity a Technologies received to XXX,XXX Trust comprised repaid the total Class The was we've positions. Capital's Lending on of Subsequent of collateral. generated Palantir to the monetized equity in collateralized to of Lending the loan collateralizing beneficial Trust is $XX.X since by following today, SPV the Palantir investment shares SuRo public from SPV shares underlying also for final the Palantir Lending XXXX. A

investment We in continue Rover. monetizing our

public a approximately October of gain we approximately XXX,XXX common XX, net remaining $XXX,XXX As of sold realized resulting our shares $XXX,XXX. proceeds, of in net in Rover for

XX% restricted We Kahoot!, of XX,XXX also currently resulting original XX,XXX proceeds, for of $XXX,XXX approximately a loss position. currently We approximately of sold $XXX,XXX. net remaining stock unrestricted Kahoot! realized common net our of shares in of or hold shares

top we received approximately the our technology, investment approximately $XXX,XXX by XXXX. related investment XX.X% net I Second the quarter for our portfolio fair portfolio loan to XX% and December to slide proceeds due end, Finally, Avenue at review five. investment the allocation term interest in Segmented subsequent quarter principal investment of turn is by the investment on of to portfolio allocation value. from accounting general repayment will themes, at theme. education end Please

and companies of represented investment sustainability social less contributed portfolio. and portfolio category category big slide value and second six. and XX% of Please data places approximately value approximately to our services, approximately than September Cloud portfolio XX% largest for technology XX.X% the accounted comprise our The the and mobile our fair approximately of of was fair The of portfolio. of XX. turn financial of market representing the X% portfolio X.X% to as of our

cash The of shareholders, of discussed rata share authorized repurchase shares modified on price comes a than $XX.X approximate net and to expired terms of as the Available share As discount offer per was approximately X, the the basis for of from to outstanding price related August or determined per June tender to purchase to commenced we net X Capital shares fees to XXXX. and used shares. Dutch of greater price tender tender offer September mentioned for additional share be which before million XXXX. expenses. our its share was not million of we on The value lowest asset per in on auction tender XX, X addition common shares tender expenses to offer, of program of The of fund by share per was Directors common at a less and per share XX.X% share on purchase to $X originally million of Pursuant used in $X.XX to of XX, the pro X.X% than $X September an repurchased share. tender by per and all offer represents the not per offer pay representing Board NAV XXXX. the selected factor shares tender offer In Mark previously the X, XX.X% up purchase or earlier, stock with XX%. accordance offer, cash XXXX, SuRo a tendered properly stock of proration additional August the the

seven. or Approximately remains approximately Board we expansion an program recent approximately March repurchase shares share have share the the mentioned, of of until program. On authorized XXX,XXX XX% primarily an Capital million the turn XX, approximately year-to-date, of tender approximately We XX, approximately XXXX have stock repurchase SuRo shares slide $XX.X for and million the Under consistent an share repurchased of from $X.XX per end stock million. to under the Year-to-date, our was on September as which unrealized Board million. in resulting quarter of of the previously XXXX for of over quarter October program, program. share A to NAV million common repurchase with In The XX, our of million price million. by tender decrease, of during the the Directors shares at October XXXX. of previously a the has common approved a the of investments third program NAV common the our as per the shares Directors $XX X.X with per XXXX its quarter aggregate $XX.X per As with of $X.XX a quarter. of breakdown outstanding $XX purchase XX we Please repurchased with is share share second extension from per $X.XX, of decrease authorized million repurchased our under repurchase for of $X.X reporting. ended NAV driven total of shown. $X.XX portfolio share stock depreciation financial in to X combination share is offer, combination the share end $XX.X offers,

Additionally, an $X.XX of by stock a loss to to share attributable realized The the offset in share of use per tender the decreases due including share net the net share decrease transactions, repurchases investments decline. partially cash an decrease via to loss, These decreased were a in investment $X.XX aggregate compensation. increase repurchase per also common NAV $X.XX offer share stock-based due asset of to per and share the and $X.XX net on value contributed per connection quarter as due to related with end. increase offer tender capital per

in resulted the of in asset an increase share. However, quarter shares in value the outstanding per reduction net as end

at approximately liquidity Next, both treasuries unrestricted end. include our and valued public as of public quarter held our public million subject with US XX. million as or approximately Partners, $XX.X XXXX, approximately lockup unrestricted, securities positions, position our short-term shares liquid review in quarter end. $XXX.X customary lack $XX.X valued price total, SuRo securities. for ended September The subject quarter of XX, position lack million end, securities of other in at provisions in Rent including discount in the and million the I to of securities $XX.X at quarter and end, lockup to Skillsoft of million the related Rover of We totaled public as Forge, Runway, at $XX.X of public XX, September to restrictions cash, share closing XXXX. in Capital's million This certain restricted marketability assets, unrestricted the public in provisions Capital a will Chu $XXX.X sales Nextdoor, represent NewLake does and comprised treasuries US approximately of short-term $XX,XXX The not $XX,XXX is end September approximately cash, quarter of In less provision. quarter

common shares and stock XX,XXX,XXX September of As XXXX, are XX, currently, there outstanding. of the company's

to Finally, the treatment tax I'd a currently Mark's as follow RIC our up and commentary dividends regarding BDC like anticipated for remainder of XXXX.

actual Subchapter a as is has XX% Capital and is taxes be distribution under requirements in taxable as or requirements at to certain taxable to of To Directors and a as company to qualified for quarter be the treated the the meet be investment generally an SuRo out mentioned, previously elected RIC distribution Internal As the Board amount on be income tax each to of report The treated as equal of Revenue each qualify dividends estimated of to Board least Form of years. until of and based the tax to the company. the in year-end. risks, addition Capital’s amount The declared character have finally a year’s upon the amount by M company beginning required subsequent Capital’s to will Code December are year cannot dividends declaration of defined paid annual stockholders. The determined its SuRo and RIC of of to aggregate is by code. by determined dividends, to to subject annually the including XXXX sole Capital date taxable will taxable by of paid stockholders IRS of subsequent the any fully be amount The XXXX-DIV XXst. management characteristics dividends Capital earnings of to SuRo the of future Capital’s any and SuRo subject dividends, Directors. discretion the SuRo SuRo and be close the

thank investments realized and concludes do the of Given a dividends That interest loss paying of loss our We additional Capital. you net for my SuRo we for XXXX. not of comments. on any like currently remainder would investment of current year approximately support your and $XX.X to million anticipate $X million, net

the turn session. Q&A over I to the start Now, to operator will call the Operator?

first Instructions] will the Thank from take We Mark you, ma'am. Palmer. question [Operator

Your line is open. ahead. go Please

And Yes. thanks question. my for taking you. Thank

market players extent nature. seeing other you situation that sense which the looking things extent that to of to has markets how And a and out the First, of what become has potentially are in in of since particular, what private to are I'm the about, their end funding last some seeing dispose talking quarter. the which that unavailable, evolved of of the positions, we're in the

thanks Mark appreciate really We And Sure. your and support. it. efforts for again

sellers we've our beginning we positions is that are and realization realize pricing prepared and to change. in to were apart. there that As there's to some what significant -- a a year seeing rounds, now, remarks, discounts, In they markets, pretty was QX where started can we're the point were QX, there the trades liquidate on was that started different of wide buying easing is not the the mentioned prior seeing that be to was in was this going that trying folks public we in effectuated price that starting and -- And in at quarter. -- in for only second see but a between they selling. Right

the move of of lower of a more think IPO pretty more sellers I gotten valuations. into year-end, sense are and or and market is, desire as take really There markets hasn't we the that a to better volatile. willingness much from urgency

it year. than in less the in and is been the the bid spread clearly, secondary had market, much ask So between earlier

as of right you doing well, companies read that or think the at done financing, ultimately to are round be But next look need hoping -- extension are we there lies as financing pause the participating above will last are be to challenge the a as discounted seeing environment There sort now. going them. or that vast us and that to they're next just financings to raise deciding I the are companies at and are what trying that far And about in should extraordinarily that companies be those markets, valuations, are think we of available it's and to be rounds. I is that those some we in going for that are where where certainly will financing majority, money as companies or that that QX raise rounds, QX they're going at really to prior looking to challenging at primary all unpriced round better are are if future. happen to the capital what for secondary there to

you. Thank

you. session. I'd Thank does additional to the turn over today's back conclude for closing to question-and-answer that like or remarks. And management conference

all participating. answer your much. you directly. to have, We always, Thank you appreciate either that in available going And Thank very Thank by our Gugino through as you. we're for questions interest may company. you

conference. thank participation, you. you may now and That you today's Thank conclude your disconnect. for does We