SSSS - Earnings call transcript Q3 2019

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Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to Sutter Rock Capital's Third Quarter 2019 Earnings Conference Call. [Operator Instructions] This call is being recorded today Wednesday, November 6, 2019.

I will now turn the conference over to Claire Councill, Sutter Rock Capital. Please go ahead.

Claire Councill

us call. joining for you on today's Thank I'm Sutter Chief Rock by the Financial Officer of Chief Executive Capital, Allison joined Green. today Officer, Mark Klein; and remarks that Please at website Investor to slide that under is presentation Presentations. note today's on a www.sutterrock.com prepared by Relations our management available corresponds broadcast being website on www.sutterrock.com. call is live Today's recorded and our information is today. earlier included Replay in issued our press release prohibited. unauthorized of reproduction a call property Sutter form Rock is and any is strictly this of the call in This Capital

future like your in forward-looking may call customary call to in also SEC from including result website copies those website time in unless in future the to would regarding These I update future differ with number the law. and webcast financial described condition. does results release, performance undertake today's to please relate information. risks, disclosures guarantees company's involve not attention the constitute to to, but statements, of obtain and from statements a earnings time our not today's which number press filings to a do Capital's events those of of a sec.gov. filings, and forward-looking at of Management at or limited made SEC. our latest so may condition Statements conference performance Sutter results financial uncertainties. Actual statements to of or not or or estimates materially visit are our sutterrock.com future To or Rock SEC's by such forward-looking required statements as forward-looking factors, the

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

Mark Klein

Thank you, Claire.

XXXX. results the of to pleased third are We quarter Sutter share Rock's

call portfolio. Then Green for financial key executing the shareholder update and will to the Allison provide then will the an overview recent To I recent value. open review for present we conclude, I are a hand First, call to and will of will we in on over overview initiatives questions. developments enhance an the I quarter brief

Let's an value third At end share, totaled in Net in the compared million the start X. from value $XXX to of net per increase quarter. quarter, share second with per quarter. asset second million $XXX asset $XX.XX $XX.XX slide was the the

stated companies of been believe strong exhibiting recent growth As have will have in of the we as optimistic drive future of we we NAV been are portfolio continue our we before, to our have about the memory. portfolio as and

Please turn and X to slides X.

continue Rock's by to on additional shareholders. by share we We $X.XX offer, results declaring public initiatives to the Sutter year-end. activity tender per are minimis de to take declare and we monetizations anticipate private Today dividend in and securities. value. of driven an the is dividend drive a to portfolio Based shareholder pleased dividend This ongoing

million Furthermore, an price provide repurchased as our program the today. shares we update since details will offer Additionally program. expires on share up XX. on to additional repurchase $XX we on a on October share we well tender a offer have to $XX tender share common of the as Allison modified between at repurchase November million initiated purchase and $X per stock Auction XX, Dutch commenced in $X. This

come initiatives in shareholder our year. this internalization These addition to earlier

our to fund transitioned XX, managed Rock structure. As announced internally on during call an Sutter March

and BDC, statement. in notable Please As as income the two of to review developments for have internally operations portfolio our turn investment third the and in subsequent in quarters an X quarter's are we completed managed our X savings now reflected end. a cost quarter from slides

at September Palantir, XX% XX were of Course fair the top and These Rock's Coursera, five OZY positions Lyft. Hero of Media, approximately portfolio positions accounted Sutter as for investment value.

for the approximately XX our XX, portfolio. September positions of top accounted of XX% As

to XX to excess PitchBook. million of currently equity in $XX at $X.XX learners, top billion in a Reuters is valuation billion. currently at Palantir seeking largest position businesses serves an over pre-money X,XXX approximately million at XXXX funding We $XX second learning implied of Our our $XXX according hold billion. April and value position largest raised valuation universities. our a platform of reportedly XXX Coursera CNBC, and According Palantir Coursera's position

third is media on adults, Our in and focusing will recent serving entertainment Media business largest young the position OZY call. whose later we funding a highlight

students Grauer, led by on platform. offering its course-specific position for largest XX fourth XX million and over its Our execute to Course growth the continues Hero, CEO strategy Andrew million-plus resources against educators

Our at of quarter's portfolio of gain. Subsequent combined put end, investment quarter's sizable position into value we a our our perspective, Lyft. the top position fifth to end To fair for largest as Rock's this sold was entire capitalization was our believe investors. at million market quarter's $XXX September million XX% positions dynamic or risk/reward for Sutter We total a $XXX emphasizes approximately significant opportunity XX end. five our of

at of Segmented of allocation investment Technology, the portfolio representing top six by investment the general category portfolio. fair representing largest second was Marketplaces to approximately of value. our themes, the investment portfolio approximately XX% XX% the is Education

Our & accounted fair at Social Services approximately accounted value. -- Mobile for accounted our & Big & XX%, portfolio XX% our Data value. and of fair for at of for media approximately Financial Cloud Technology approximately portfolio category XX% while social

Please turn X. to slide

securities our position it our period call, period. the Accordingly, third intention remaining throughout As in quarter for Dropbox end, to a lockup our a the in our is entire to gain. stabilization sold a position and sizable public we for gain. Lyft quarter's stated through on previous ensuing Subsequent sold we earnings hold

area backed positions, is selectively team public portfolio exited our now operating drive order expand for portfolio. to a Dropbox investment names continues in network to this a institutionally range that sourcing of of key long-term have and two of We VC in companies in demonstrate new our to of our Accordingly, all the value focus adding to securities Lyft, continued strong exit year's shareholders. fundamentals. our evaluate our the of With top wide top and opportunities

to valuation provide scaled exit. or shown growth have before IPO that potential businesses targeting are a We strategic

food in GreenAcreage blockchain and and investment technology, On had financial include REIT had we second expected transportation announced to logistics. investments a industries to announced Rock consumer technology We an earnings trust. Sutter additional retail that Aspiration of quarter subsequent also that committed into our $X.X million invest quarter's end. cannabis to we and call, A few focus

pleased Real each We investments of to that $X.X these during are million quarter Investment Sutter closed new announce Rock's Treehouse Trust. including the expected, investment third into as Estate

the derivative as of Rock's during including third The protect quarter, convertible as equity known investment note while in otherwise amended a Sutter position its warrants Sutter Rock not Sutter in NestGSV Additionally, maintain amended structure outstanding as agreement its GSVlabs. amended intended restructured into downside, positions the its GSVlabs. will security. to affording warrant upside participation. is well The Sutter Rock's agreement Sutter Rock Rock its

to for In developments interview, XX, with date over Media. reached from in pleased five also IPO the that than Lime's We chips conjunction has Bao, spoke operations Brad future continents. more noteworthy Lime OZY the Bao are On XXX company. in cities with regarding and CEO, prospects to across now to report Lime XX October announced million CNBC XXX countries

$XXX the a unit Bao and it quarter. of be date, was last is profitable its profitable to company markets it reports Lime and the has vast expects in To million company the in raised as Lime in economic-positive majority funding XXXX. in that

because While that of greater brings noted have public company and go give Lime as discipline plans of part his to the it to wants to about users Lime. an of he Bao declined financials its specifics to to opportunity millions in the interview timing tens be

and Lasry by Media million Marc LionTree, as Series Additionally, with participation Collective. Emerson round C a announced raised Axel led last Springer Interlock Partners, Investment, including week, $XX from investors OZY Atinum

OZY million raised $XX has in funding to approximately now date.

CEO, the and event come majority by Watson, in from of Carlos and expects segments forward. CNBC, announced see OZY momentum continues its As revenue positive television its these business going on business its to to

and profitable calendar As four the for OZY's has growth expects be reported last by year Axios approximated the XX% year-over-year company in XXXX. to topline years

Looking believe well-positioned that is Rock value. ahead deliver to we long-term Sutter

strong tailwinds. We disciplined portfolio paths strategy The are with strong fundamentals our has investment environment growth believe companies for been profitability, of to a reward a continues the our strong. to are against IPO historically catalyst We stock. high which executing with growth

that, to Thank I you will Allison. your hand attention. And with for it over

Allison Green

to our XX, current to transition XXXX I financial an initiative. details as reduction September to of I will Mark. BDC our follow like on of addition update in our further a liquidity of update internally including shareholder expense with you, results detailed and providing more position. our also on Mark's an details review would managed Thank provide initiatives

up per is of increase financial share We quarter is quarter. which last consistent $XX.XX for $XX.XX, of is with reporting. X shown our the A ended on per quarter from the slide third breakdown in share an NAV the and with NAV third

per largely an of was net the increase driven gain share approximately stock in share realized unrealized per NAV investments, on In during quarter. the of on appreciation gain per the sum, during to in $X.XX and share investments, quarter third $X.XX accretive repurchase due net common effects share per in by $X.XX the

These annual net increases compensation of investment of loss decrease $X.XX effect share to offset stock-based and were capital. a NAV per paid-in net of by estimated the on

in largely increase share to per appreciation on Coursera OZY notably most value gain the investments of existing in $X.XX third quarter the Aspiration certain The investments to portfolio and attributable is due net Media. unrealized

shares sale to $X.XX realized of investments is on remaining in realized the increase traded gain the Dropbox third net on during the per quarter. attributable share due to the quarter publicly our The gains

Mark also As Lyft mentioned to end, we traded stock. liquidated our publicly of quarter subsequent shares

assets, Rock's XX, of XXXX. not with about marketable liquid of the I'd of $XX.X third lockup review including subject $XX.X and to at million liquidity Sutter like cash million $XX.X million to agreements. quarter September ended Next We securities

entire September million the balance of primarily X.XX% generated of the due quarter in quarter of consisted million securities The of proceeds the approximately million gains. by shares $XX.X end, portfolio as proceeds during XXXX of we of shares proceeds marketable XXX,XXX $XX in of various convertible Subsequent third first $XX.X approximately senior traded through positions of million $X monetization for the position XXXX cash represents quarter remaining our XXXX. publicly Lyft. and notes total to in from realizing million quarter $XX.X from issuance liquidated our XXXX of net Our the XXXX of of Lyft fourth total in XX,

we the management from saving of effects continued of to the cost quarter, the During see internalization third Sutter Rock. the

structure. BDC cost an as no we advisory is no longer reduced by agreement a the management incentive Upon As employed BDC, on have XX, each termination longer management internally an directly previously as significantly XXXX fees we fee. March investment discussed pay now and the of we month managed accrue

to management compensation of XXXX. the million $X.X elimination expenses, labor for months expense fees due incentive estimate operating fees under an of and of months first the of fees, approximately a first administration the of management the prior XX% decreased and total costs decrease and incentive of nine net from annual to Total stock-based was XXXX The primarily nine agreement.

managed we begun our we operating efforts savings already We meaningful as reduce internally base have will NAV. about and ongoing to expense managing continued forward. realize impacts to expenses positive diligent our remain an Together, BDC on believe the moving cost have

to details share up like initiative. current Please to with on I'd for update wrap repurchase slide program. back X additional our Finally, our refer an of shareholder

commencement Capital Rock During Rock stock common quarter stock, we quarter, Sutter approximately million Sutter of $XXX,XXX. XX,XXX shares the August third Subsequent end, at to million. repurchase approximately of for outstanding program XXXX, we accounting commencement over program. the repurchased repurchased $XX of Since stock the XX% the for $X.X in share approximately shares for repurchased of XXX,XXX has in common

X.XX% offer respectively on Rock at on XX, purchase and share X.XX million will unless commenced subscribed, up is between Mark tender $X or Dutch $X. to p.m. October our at of common to Sutter between price tender of Auction Rock shares purchase will offer $XX stock Eastern between million X.XX%, X:XX stated modified the a million tender per shares common a expire The As shares. outstanding November If Sutter offer X.XX extended. XXXX fully and and XXst,

company's record Board be Sutter dividend XX, on Finally, as common per of Directors XXXX. stockholders business the declared close XXXX as dividend the share on December earlier, Mark payable a of $X.XX to in December of November Rock's of paid cash. X, on The XXXX alluded of X, to will

your for That of concludes thank Rock. Sutter and my We comments. support you would like to interest

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

Operator

time, open this will take with Instructions] question from the for Hyler Capital. [Operator we'll And At WDH you. first Bill our questions. floor Thank we

Bill Hyler

for call with the fair companies do approach comparable the available levels the I a for hoping Yes, the the value different last hi. was process us afternoon. data round could generally Good of believe are the you Thanks with fair today. funding you value the to company? you depending using are for private valuations calculate on and I using assets, of portfolio review companies. the but approximate

Mark Klein

do to the And this is they and thanks is Bill valuation evaluate want to question. how for the our how trade what we to integral obviously -- NAV securities. people's ability

couple valuation e actually have goes numerous and firm that as begins have internally of quarter's and a very weeks iterations end before a an independent robust process both we straight the well. through

We with last private around we with our that have partially we with deals occurring transactions up rounds market valuation. deals also heuristics a and that come with of marketplaces series are then iterate comps may in that and deal

down who one contrast -- our back We back comments then Ultimately it the another. valuation. then audit us have committee their group independent comments of to value Directors. valuation management. push set up committee come who with try compare and We to it it an as We level up bring to goes ultimately with up with and has and Board to our

Bill Hyler

just Well, related. then a Okay. quick let me -- follow-up

So Palantir value obtaining if enough to for of carrying that for the fair? billion, Would $XX but be alone. was take be example that consideration not you you into successful would necessarily a that would valuation raise in

Mark Klein

rounds Obviously. of Yeah, great occur. in -- a are there specifically quarter, the what so Yeah, they a deal occurs well. but in fair weighted as Palantir do is the that primary trading in would yeah, be is statement secondary of case which heavily

a that heuristics right. So and of with a up we longstanding come have valuation, series of applications to

if and at we higher would round that impact -- it than our valuation a You correct. valuation a do then should that's significantly they that's just carry

Bill Hyler

Got you.

you. Thank it. Appreicate Okay.

Mark Klein

Thanks a lot, Bill

Operator

[Operator Instructions] [ph]. our And next Norman question we'll take Mains from

Mark Klein

Hi, Norman.

Unidentified Analyst

A couple okay? of questions. Can me you hear

Mark Klein

great. That's can. we Yeah

a little Go had problem. we a Sorry, of ahead. bit

Unidentified Analyst

Yeah.

between the want on Or is fair based the just question, the on latest X.XX blend Palantir and value latest on million be $XX the I your that follow-up to a $XX.X round? book So just value by the should to that round? last billion multiplied understand. gentleman's

Mark Klein

A things. couple of

Our $XX in as value. was about stated we valuation conference the at call equity billion

any subsequent our overlaid valuation financings We other in haven't line.

Unidentified Analyst

then is fair So $XX billion, the to just say? value using fair be that $XX.X million the would

Mark Klein

That's correct. That's correct.

Unidentified Analyst

Okay. it's I are I ask not guess is that valuation another press -- imagine I it also it's obvious The I'll mean to original $XX release, but $XX you obvious then using guys $XX.XX billion? that -- using would question, because the the not And right me. obviously in that billion

Mark Klein

approximately $XX $XX.XX NAV is No, includes value as -- $XX sir. it our equity million the in They -- Palantir are reflect using -- value. we the our billion presentation equity at

Operator

Ladies concludes and closing session. will remarks. question-and-answer for I gentlemen, back to speakers this it turn today's now

Mark Klein

the support. attending Thank you if for and you Thank very And all you as have very for the you available much. conversations call we're thank your to of call. want much outside conference always,

Operator

you and Ladies concludes may gentlemen, today's and this disconnect. teleconference now

SuRo Capital (SSSS) 8 Nov 192019 Q3 Earnings call transcript