Q1 2024 SuRo Capital Corp Earnings Call

Participants

Adam Bates; Investments; SuRo Capital Corp

Mark Klein; Chairman of the Board, President, Chief Executive Officer; SuRo Capital Corp

Allison Green; Chief Financial Officer, Treasurer, Corporate Secretary; SuRo Capital Corp

Presentation

Operator

Hello, and welcome to SuRo Capital's first quarter 2020 for earning. You know, my name is Melissa, and I will be your coordinator for today's event. Please note this conference is being recorded and for the duration of the call, your lines will be in a listen only mode. However, you will have the opportunity to ask questions at the end of the presentation can be done by pressing star one on your telephone keypad to register your query. If you require assistance at any point, please press star zero and you'll be connected to an operator, I'll now turn the call over to Adam Bates. Please go ahead.

Adam Bates

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

Mark Klein

Thank you, Adam. Good afternoon and thank you for joining us. We would like to share the results of SuRo Capital's first quarter 2024. As most of you know, for over 13 years, SuRo Capital has provided public equity investors access to late-stage venture capital backed private companies such as Facebook, Twitter, Snapchat lift, Dropbox, Spotify, volunteer and Coursera.
Just to name a few. We are excited to see the renewed and accelerating public investor interest in later-stage venture capital as an asset class. We believe our current portfolio, including recent investments year to date, will continue to drive shareholder value. We are pleased to share that we have deployed more capital more capital in the last four months than any period in the last two years. In addition to our previously announced $10 million investment in liquid debt, we are excited to share that subsequent to quarter end, we invested $10 million in Canada, a leading productivity and design software company and invested $15 million in core. We do an SPVNCW. opportunity. Prolieve is a cloud infrastructure provider for artificial intelligence and machine learning use cases hole we have is our single largest investment since 2020. I will go into more detail on each company later in the call.
As many of you know, from late 2020 through 2021, we liquidated a large portion of our portfolio and paid out approximately $9 per share in dividends. We consistently stated we will be patient in redeploying our capital in the belief that we will be able to deliver shareholders access to compelling opportunities. We began redeploying in the middle of last year with investments in service, Titan and for Cadence and continued into this year with liquid debt, Canada and Korea over the last four months, we deployed half of our cash that was available at year end, and we are actively engaged in potential additional investments given the strong performance in the public equity markets, coupled with the encouraging performance of recently minted IPOs such as ready Roubik, I bought it and sterile as we believe these are indicators of a renewed investor enthusiasm, a high-growth technology company.
Turning to our first quarter results, we ended the quarter with a net asset value of $181.7 million or $7.17 per share. This NAV compares to a net asset value of $7.99 a share a year end and $7.59 per share at the end of Q1 2023.
Please turn to Slide 4. Turning to our top five positions, or I first wanted to highlight our cash position. As of quarter end, our cash and short-term U.S. treasuries available for investment were approximately $80.4 million, representing 31% of our gross adds. So Capital's top five positions as of March 31st were learning of service time, link health, locus, robotics and storm when these positions accounted for approximately 51% of the investment portfolio at fair value. Additionally, as of March 31st, our top 10 positions accounted for approximately 78% of the investment portfolio. Subsequent to quarter end, we made a $10 million investment in Tampa on similar terms as the reported company tender.
According to Bloomberg, the valuation of that tender came at a significant distance discount to canvas last primary financing. Canada is an online productivity design, software and collaboration platform with a mission to empower everyone in the world design featuring a simple drag-and-drop user interface. The Company provided to cloud first browser tool to create presentations, social media posts, videos and more 2023 was a momentous year for Canada. The information reported Camber finished the year with $2 billion in annualized revenue.
Additionally, according to its annual report, camera surpassed 170 million users monthly users in 190 different countries. Kevin also surpassed 20 billion designs created and over 6 billion of these designs created in 2023 alone equivalent to 1 million designs per hour over the course of the year. Canada significantly scaled its enterprise segment at the end of 2023, more than 90% of the Fortune 500 companies were using Tampa and 135,000 teams and companies have more than 1,000 employees who are designing on the platform according to canvas annual report. These companies include Starbucks, static, Salesforce, Johnson & Johnson Pay Pal, and many more lastly can be greatly.
Both also did a high-powered product offerings in 2023 and October, October Canada launch Magic studio suite of design tools, including tax to image and text to video generation profile, reformatting instant animation and more according to Cameron's annual report. These air products have already been used more than 4 billion times. Canada has emerged as a leader in a high facilitated content creation. Having been selected as Apple's number two, general generated a high ASP for 2023. According to PitchBook handbook, Canada has raised over $580 million in equity financing from investors, including Bessemer Venture Partners, General Catalyst, iconic and what we believe can be uniquely positioned to dominate the amateur approach or tumor design market as it makes graphic design for success.
Additionally, subsequent to quarter end, we made a $15 million investment in CDW opportunity to an SPV that will have vested colleagues preferred shares. Callwave is a specialized cloud provider, delivering access to a suite of video GPUs, coupled with its fast and flexible cloud computing infrastructure. Core lead is a critical foundation for AI and machine learning use cases from the initial stages of training, a model to ultimately producing models help with end users during the training phase of mild takes in large data sets to develop the ability to generate responses in sites. In other words, during the training phase and model learns how to address its end users' needs to serve the training phase Hall.
We've offers distributed clusters for connected computers using engineers, groundbreaking quantum, Finning and network solutions. During that inference Phase I model creates predictions and insights based on a user's life input. The inference phase occurs when, for example, a large language model of RLM. right to response based on a user's input with spin-up times. As short as five seconds hole, we've offers one of the most powerful improved solutions using video GPUs. In fact, according to a company blog post quarter, we've inference service performance 8
to 10 times faster than a major generalized cloud provider over the last few months. Core, we'd has cemented itself as a leader in AI infrastructure in March in bit invidious unveiled its Blackwell GPU architecture, which according to a Company press release, will enable organizations to build and run general AI is up to 25 times less costs in energy consumption than a video. His predecessor as a preferred cloud service provider, a bit of a video and as a company in which in video has made an investment quarterly was named as one of the first company to expect or we expect it to offer black well powered in some instances to the public with relationships with such companies as a video, visual AI and data to CallWave is a major building block through advancements.
In general, AI affiliate has seen monumental growth driven by general AI development and adoption according towards fourth quarter of fiscal 2024 results, datacenter platform reached a record of approximately $18.4 billion in Q4 revenue of over 400% year over year in his prepared remarks, Management described a tipping point of computing powered by data centers stating that the data center infrastructure is rapidly transitioning from general purpose to accelerated computing by offerings distributed access to video GPUs. Data centers are becoming a foundation element of generative AI.
As an infrastructure provider, Huawei is strongly positioned to continue to benefit from invidious acceleration and broader acceleration in AI. According to PitchBook, we've raised over $3.8 billion in debt and equity financing from investors such as CO2, detailed Fidelity, Magnetar and others with its best-in-class cloud infrastructure. We believe core, we will continue its exponential growth and capitalize on Accelerade LAI. adoption.
Please turn to Slide 7. One additional portfolio company. We'd like to highlight is our investment in all the sponsor LLC, the stack sponsored by Sam. On that yesterday, Alsea Acquisition Corp's shareholders approve the business combination with Anglo fast vision, Clean Power Company, backed by Sanlam. While we are always happy when our stack sponsor investments investments completed business combination, this one is particularly exciting for a few reasons or clearly is on the cutting edge of new fuel nuclear fuel recycling, which has many uses, including the potential day clean power to AI related datacenters with Sam Walton and his own Lewis Chairman, the company has been able to create significant partnerships to further its clean tech products. We most recently through a nonbinding LOI with Diamondback Energy, the largest independent energy producer in the Permian Basin. It's our investment thesis around AI. has been deliberate First, focusing specifically on the infrastructure of a I suppose product has many use cases.
However, its ability to power the hyper growth of AI gives us another entry point into AI infrastructure. Our new investment in core, we've plus the business combination between LC and of now gives us significant exposure to the picks and shovels of the AI. universe building this part of our portfolio was deliberately required a patient deployment of capital, but we are now seeing the results of this of that strategy play out, we cannot be more excited to have created a portfolio that allows SuRo Capital investors access to the AI infrastructure landscape in industry with limited opportunities for public investors to participate in today transitioning to our public investments.
As previously stated, it is our objective to sell public positions when lockup restrictions expire and there's relative stability in a given public positions trading in line with this approach, we continue to monetize several of our public unrestricted positions over the course of the quarter. During the first quarter, we fully exited our remaining position in a store and reduced reduced our position in public school warrants.
I would also like to further reiterate SuRo Capital's commitment to initiatives that enhance shareholders' value given the discount our stock is trading at compared to net asset value per share. We believe our recent modified Dutch auction tender offer was an efficient and accretive deployment of capital. Alison will discuss the results of the tender offer in her prepared remarks. Given these recent investments, coupled with our strong portfolio and the positive performances of high-profile technology IPOs, we believe our portfolio is well positioned to drive shareholder return.
Thank you for your attention. And with that, what I'd like to hand over to Alison Greene, our Chief Financial Officer.

Allison Green

Alex Pathmark update with a more detailed review of our first quarter investment activity and financial results as of March 31st, including about Magnolia subsequent to quarter end results of the modified Dutch auction tender offer announced during Q1 and executed subsequent to quarter end and our current liquidity.
First, I will review our investment activity. During the first quarter, we made a $10 million investment in liquid debt Series one preferred shares over the course of the first quarter. We sold our remaining public common shares and next door and continue to monetize our warrants and public square. So we will build [100,000] warrants and public square for approximately $1,300 in net proceeds, resulting in a realized gain of approximately $60,000 as Mark mentioned, subsequent to quarter end through today, we completed a $10 million investment in Camden common shares and a $50 million investment in the Class A. interest that PW opportunity to LTSTV. that we'll invest in Corey's preferred shares.
Please turn to slide 18, Segmented by six general investment themes, the top allocation of our investment portfolio at quarter end with the education technology representing approximately 31% of the investment portfolio at fair value and big data and marketplaces category accounted for approximately 19% of our portfolio approximately 17% of our portfolio was invested in the financial technology and services company in the social, mobile and consumer category accounted for approximately 13% of the fair value of our portfolio and sustainability accounted for less than 1% of the fair value of our portfolio as of March 31st.
Please turn to Slide 9. We ended the first quarter of 2024 with an NAV per share of $7.17, which is consistent with our financial reporting. The decrease in NAV per share from $7.99 to 2023 year end to $7.17 as of March 31st was primarily driven by a $0.73 per share decrease resulting from unrealized depreciation of our portfolio investments during the quarter, in addition to the $0.13 per share decrease due to net investment loss and a $0.02 per share decrease due to net realized losses on RMBS.
The decrease in NAV per share was partially offset by $0.06 per share increase due to stock-based compensation during the quarter. And as Mark mentioned earlier, SuRo Capital committed to initiatives that enhance shareholder value. Accordingly, on February 14th, our Board of Directors approved a modified Dutch auction tender offer, which commenced on February 20th to purchase up to 2 million shares of our common stock at a 5%, not less than $4 per share and not greater than $5 per share and increment using available cash.
The tender offer expired on April first, pursuant to the terms of the tender offer and following its expiration, we repurchased 2 million shares at a price of $4.70 per share representing 7.9% of outstanding shares if our share purchase price and properly tendered shares represented 65.6% and 58.8% of net asset value per share as of March 31st, 2024 and December 31st, 2023, respectively. We use available cash to fund the purchase of shares of common stock in a tender offer and the payroll related fees and expenses because of our close subsequent to quarter-end is not reflected in our financial statements for the three months ended March 31st and will be reflected in next quarter's financials.
I'd also like to note that the dollar value of shares that may be purchased by zero capital under the share repurchase program is approximately $20.7 million. The share repurchase program authorized through October 31st, 2024.
And finally, I would like to take a moment to review SuRo Capital's liquidity position as of March 31st. We ended the quarter with approximately $84.6 million of liquid assets, including $50.8 million in cash, $29.6 million in short-term US Treasury and roughly $4.1 million in unrestricted public securities. At March 31st, 2024, there were 25,353,284 shares of the company's common stock outstanding.
Finally, following execution of the tender offer, subsequent to quarter end, there are 23,353,284 shares of the company's common stock outstanding.
That concludes my comments, and we'd like to thank you for your interest and support zero capital.
Now I will turn the call over to the operator to start the Q and A.

Question and Answer Session

Operator

Thank you. As a reminder, if you would like to ask a question please press star one on your telephone keypad to register your To withdraw your question for any reason, you may press star two. You will be advised as we have no questions coming through, I'd like to turn to Mark Klien for any closing remarks.

Mark Klein

Thank you all very much for joining us this afternoon. We are truly excited of how we have positioned the portfolio and our ongoing access to on really great opportunities. Thank you again very much.

Operator

Thank you very much. That concludes today's conference.