SSSS - Earnings call transcript Q1 2020

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Operator

Good day, ladies and gentleman and thank you, for standing by. Welcome to the Sutter Rock Capital First Quarter 2020 Earnings Call.

During today’s presentation all parties will be in a listen only mode [Operator Instructions]. This call is being recorded today.

And I will now turn the conference over to Claire Councill. ahead. go Please

Claire Councill

note joining available by for Presentations. Capital, today’s I’m www.sutterrock.com remarks Relations Green. call. Klein corresponds Investor presentation Thank today’s under our to Chief us Web Executive today prepared Please Allison Officer, the Chief management Rock & a Officer joined slide and that is you by Financial on that on of Events Mark at Sutter site

Replay information call is our www.sutterrock.com. in Today’s prohibited. Rock strictly being Web release unauthorized press call broadcast recorded the the form of reproduction Sutter call included on live is issued is and of Capital, This our and is any this in site, today. property

press statements release forward-looking made like performance, a call condition webcast guarantees today’s differ financial events not Statements also and of in conditions. or regarding conference call in future materially of our would from future constitute risks, future relate to number to to results, These or which earnings Actual forward-looking customary or estimates statements. statements, and may attention information. those I our results performance forward-looking today’s uncertainties. financial your may disclosures are in and future the or involve

Capital’s to Sutter Web www.sutterrock.com required forward-looking not SEC undertake at of site Rock of update of result Management unless filings to please statements such company’s latest sec.gov. copies visit law. do at by SEC’s a to As a Web time obtain the filings, so the or not those site our To factors, limited including number described but to, in time SEC. from with does the

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

Mark Klein

you, Thank Claire.

Sutter to others. obviously responders themselves and of announce the Sutter COVID-XX challenges. the pandemic first These throughout quarter Capital’s at We Rock facing tremendous living society who help through Capital are like at have thank we’re and risk frontline XXXX. times to the Rock We workers to unprecedented first is results pleased are put

are healthy, many employees our continue their and are remotely to We firms. like fortunate other companies families our function and report that to

Our indices, of up worst financial well portfolio to compared one the quarters experienced crisis. broader since market has their relatively held the which

valuations company was priced have as bottom most since indices March market that the levels. week the of you which XX, one of And within the XXXX, sell-off. all portfolio pre-COVID Our of recovered were know, as time to major

larger how portfolios will open of our discuss acceleration of the how during a highlight business degrees our will hand experienced for To will At onset call I this Allison and during conclusion I over our to overview. Green COVID-XX remarks, conclude, the questions. positions fared a call the few of for we pandemic, have of time. the the brief

Let's start with Slide X.

net XXXX, XXXX. at per asset XX, XX, March of per a December value share, decrease share $XX.XX was of As $XX.XX

Please turn of to-date. and to our developments in the Slides investment notable review X portfolio quarter and and to X first

Sutter five portfolio positions of Course XXst Hero, as and were Coursera, XX% Media. top at Rock Aussie approximately the positions These Nextdoor March accounted investment value. for Capital's fair of Palantir,

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

consumed learning. school COVID-XX and with to shift for as is a and in public portfolio. which largest now our through through online sparked it pandemic clear particular, in would and demand effects of media and fundamental governments shift closures We a how of few walk invested would earnings and I positions online I our learning will developments the surges recent to COVID-XX Coursera to related From in the learning our company as our institutions distance third positions. in like Course a online investments reports, spark in about highlight will notable like Hero, believe one of the and In evident education close. is major represent distance be

Maggioncalda XX X,XXX closed courses and cost. announced, previously to computer in last or schools humanity, Axios, learn XXXX X.X data have online a had million XXX April world's COVID-XX, globally, CEO, partnerships free students science, largest of $XXX allows with interview top XXXX the at valuation. social their arts learners Jeff world students science. pre-money the our with how and with Coursera And Coursera in like that on courses universities Coursera for disciplines raised $X.XX at million position highlighted billion April, offers science, billion and low to As around

to Coursera schools, created in high to their campus Coursera has Coursera product. Coursera educational expanded for response online content access to for provide colleges, campus COVID-XX, and students. Further for universities its allows

enrolled the a of for As courses million result in program have XXX,XXX free. X.X students

catalog Coursera governments states. content to state those unemployed to multiple Finally, is individuals in working Coursera’s offer with

largest led valuation. Grauer Our Hero reported Andrew Series raised recently billion Series round at and XXXX, B is $XX raised In third by Course round. that Hero Capital million led by position CEO, NewView $X.X EdSurge Course February B

program. contributed company's its XXXX. financing round Course tender also since led in capital financing Capital million This first Rock to the A Sutter $XX employee NewView Hero’s Series marks

closures, less XX COVID-XX Hero turning and As with access of online In response Hero supplements, more learning online on document to educators a this reliance free Course increased teachers document at teaching of and had learning increasingly access learning result Course school has to students are Course the platform distance its library including resources. library million than offered related studies. to and have their months groups the to for three time, of Hero’s study

between is Hero like resources. who on teaching Additionally, Course peer facilitating educators remote their would review feedback

pandemic. of Sarah On and an to neighbors indicated networking platform CNBC In increase based over in since during global need. social opportunity Nextdoor neighborhood Our XXXX, Nextdoor Nextdoor COVID-XX. the Friar, fourth month experience individuals uses support largest Map an active in daily XX% position, the gained CEO, the traction Nextdoor, spread interview to with month Help March Groups has COVID-XX provide healthy response, launched Nextdoor noticeable

further upon extended With will XX able tool serves. Ultimately, mandates the monetize countries. it internationally as neighborhoods to we has Nextdoor for expands it localized for neighborhoods its Nextdoor communities and relied across social base. hyper an user serves believe tremendous and upside Nextdoor increasingly distancing, over XXX,XXX is become

reported Palantir, Our April others. second Wall numerous and the models that media the In Palantir United Journal United surrounding We be outbreak timing reports entities, the generating XXXX, Palentir show provided Kingdom, is market that in hold although, critical government largest will to history. for equity and to an continues to Palantir CNBC in subject billion Street Recent imply currently allowing the analysis billion. in IPO, company an XXXX implied have even leading $X and a conditions. its and including of to COVID-XX approximately Bloomberg $XX Palantir April, first for analytics at data reported is positive time States, break revenue, company Also, anticipates our the in the position, those information Greece preparing value investment data momentum.

continuing in investment activity To the would Within to are to ongoing we meaningful a these our a portfolio our are see our consummated net at likely portfolio, few they of put quarter. capitalization our opportunity a value XXst approximately second the of as current our asset Rock’s or We If our in at increase result M&A reward emphasizes transactions investment market quarter’s companies. $XXX significant of dynamic was top portfolio positions this five XXX% end. believe million risk perspective for March Sutter of value investors. combined into

XX% by of top second the Segmented investment to to general portfolio. fair XX% of Slide the approximately portfolio our value. six representing approximately investment education turn X. investment allocation cloud category, of portfolio representing Please Big largest data the themes, the and is at technology, was

our Our at our financial technology accounted fair of and accounted value. portfolio and of fair approximately accounted category our X% of for approximately value, portfolio for category approximately XX% services for social at portfolio and XX% investment marketplaces media our

has network our equity in Investment demonstrate backed that announced team our investments expansion order VC Committee. Managing Keri evaluate senior include sourcing private member investment and In Findley an and to strong of as array a operating we of Since and institutionally then, investment in our companies wide February, to Director spearheaded of continued by credit Senior expand top strategy credit fundamentals. opportunities private to the

as ongoing equity presenting attractive market in and credit. in both This dislocation, dislocation quality ago. we to significantly at month tremendous are to a investment low opportunities in private opportunities is compared Due high valuations seeing companies just

growth include e-commerce focus target shown have prove to that continue of IPO technology to technology, retail, potential valuation a or industries financial businesses before scaled and food We A and few exit. logistics. transportation strategic and

Page to turn X. Please

$XXX We have follow it in committed in in Lime. round on a financing Lime. to million Uber invest investment Yesterday, closed has approximately announced $XXX,XXX

As part to Lime. business Uber's JUMP, of transfer will bike and transaction, scooter Uber the

financing to into We round. our have $XXX,XXX rata approximately committed share of pro this invest

will levels confident investment. are investment Given generate being improvement our valuation of on Lime which follow profit we the from attractive on business present is at a modest a total the made,

mobility and believe distancing of With strategically particularly establish stronghold positioned to the or financially the we further support reduced micro after requirements a market, limited. are Uber, social is Lime in

As prior experienced spread And the natural to ride COVID-XX. the sharing partnership success Lime Lime’s believe Uber global business. a we fit for accelerate is can leader, the of this

positioned investment long determine Rock we disciplined shareholder is Although, at as believe of investment execute large, to ahead, attractive have a it pandemic growth long the talent term Sutter looking with impact well is term us. ahead strategy to value impossible COVID-XX will on and Capital strong we to world that continue deliver against the opportunities

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

Allison Green

I and our other XXXX, of you, follow XX, BDC Mark. current an more financial like reduction review and March detailed our share as would liquidity to repurchase a transition our initiatives to Thank positions. our with update managed internally Mark’s expense results ongoing of program,

Rock financial to Before the March quarter, has the Sutter echo I confirm ordered XXXX social and distancing future, do release XX, foreseeable that for been adhering the stay state to and review today working press and our mandates. want results and home at I remotely for

during anticipate We first disruptions $XX.XX. NAV per have and of quarter with the We do not any operational share experienced an time. not ended this

of in to of $X.XX largely by In were on due stock quarter per of share of repurchase share the decrease of of depreciation quarter NAV in per $X.XX share a and investment share offset breakdown program. NAV approximately as repurchase increase i investments per share Slide $X.XX $X.XX of decreases accretive net common net sum, reporting. first realized decrease share end the financial portfolio the quarter loss. unrealized our by during A per per effects and X, with per net during share a through is per shown to consistent These NAV investment on was and driven our net share the gain the

second On was of paid subsequently During paid on dividend December dividends XXXX. two XX, first in of shareholders to declared we our share XX, Directors the January Board XXXX, declared that as of a quarter, of late per the XXXX. December $X.XX record XX, XXXX

declared was by our December November paid share XX, per $X.XX on December of of dividend on X, to XXXX Directors and as first shareholders The XXXX X, Board of XXXX record of XXXX.

realized declared XXXX. held been Slide gains successful dividends refer attributable monetization realized categorized exits tax The public our of current have share X portfolio our in paid companies went These as net I other capital purposes. for state of to that gains as shares review the repurchase are and and generally to in Please the program.

repurchased the shares During million. company approximately XXX,XXX the $X.X first for quarter,

in This announced by to on million Directors repurchase August authorized total since share the inception Board March program to the allocation Xth, Directors the program's our of As $X Board our calls, earnings million brought additional XXXX. $XX allocation program. an previous on to of repurchase our share the

pursuant to end a repurchased to the $X.X we $XX.X to quarter excluding program. an X,XXX,XXX through shares shares for purchased further of X, of our XXXX, Auction have the for sharer we Tender Subsequent in date, approximately fourth share have Since under approximately and XXX,XXX plan this program approximately Dutch of Considering August $X.X inception in total million. the XXXX, XXbX-X additional offer May quarter modified repurchases for purchases million, leaves the effectuated common stock million XXXX. repurchase

represents Sutter the approximately nearly XXXX QX XX% since that inception at repurchase the Tender modified of the shares XXXX. of August $XX.X outstanding the for Auction Dutch program time. shares of stock in Capital and X,XXX,XXX offer, Rock Including This share million common has repurchased

cost reached quarter, of from anniversary the the one see we the effects management and saving first continue of Sutter internalization internalization. Rock During the of year the Capital, the we to

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

million incentive of XXXX. operating the decrease the reversal administration structure. the in primarily expense incentive the ongoing from to XXXX. costs and and first decreased fees, The was under $X.X elimination in savings initiatives the Total expenses reduction fee supported accrual of prior due from over the million the $X.X quarter by inherent agreement separate the further management to of XX% first management Exclusive of fees internalized of quarter of

saving remain for a moving forward. base NAV. are the meaningful Together, about savings This meticulous overall first internally plus continues in anticipate some reduction. the perspective, years cost operating XX% before expense XXXX managed reduce the our expenses waivers. We efforts were ongoing long of operating XXXX. realizing effects quarter quarter add first full an XXXX We our than To operating rigorous of cost for seeing on believe focus our as expenses continued we and expense on approximately we BDC expenses cost managing positive the internalization for lower savings diligent to

Capital’s I cash equivalents. the Finally, and with hold $XX.X million the ended securities liquidity. not quarter end. review current Rock We like quarter at cash any during We quarter Sutter of or would approximately public did to

balance XXXX. cash and XXXX $XX.X the convertible fourth XXXX Our end, from by quarter quarter during issuance monetization proceeds of of X.XX% million from due remaining XX, proceeds of the of consisted quarter primarily positions of $XX of million generated portfolio in the as various the first of through XXXX notes senior or March

cash of payment due $X.X quarter first exit net Credential of outflows XXXX continuation during upon XX, of notes Our cash Solutions the resulted quarter. purchase in Inc. upon our a gain the an our semi-annual increase realized $XX.X convertible the to proceeds senior approximately licensing of and allocation agreed internalization. Major consulting January during their of of final interest closing share with agreement program; million to the and on include X.XX% million merger Parchment the XXXX; payment in and

you to Capital, and That would to comments. thank we Sutter like of We COVID-XX. important safety health and like and would support interest to you globally concludes families most together your wish my time as for and work your Rock the at overcome

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

Operator

question, [Operator go first Instructions] you Alex Thank our Paris. to we'll For

Alex Paris

hope quarter. Congratulations and Hi, the are your and Mark I Allison, families on well. you

was talent talk, I'm an companies IPO you to environment. Thank a you what going comments, of subject stable your hope less quarter. had think related You by in that exciting NAV, obviously is portfolio decline is of about market wondering your to comment your potential your the people maybe prepared decline require investments press you bit I the in talked In other but mentioned more second to In than question My on investment portfolio likely are the to the here pursue feared. that's the most a of companies. IPO track, close end release, a pipeline? you. and some new although,

Mark Klein

thank, you. doing and organization. I firm It's your to And hope And firm's ongoing us are all thank thanks. of again and well. the support family difficult Alex, the you for you and obviously times for your you and

do respect is, order, got where to particular we're information the the reading. that in what line Palantir, reading, April same a is. of in you no everybody's lot was around the thing in There The So revenue company out so. preparing they go whether going they and of implications even fact year, that they're that next appear this public to public does put that year it go public and the or them they

one. that So is

something you education did highlight doing know I We is Clearly, well. our actually that and are this extraordinarily companies online on. focus

learning. how what look to you could pandemic portfolio, go at performances, can the our size When look and has student at sort extremely the their markets a impacted that it's our public, we Chegg, like scale. are of you public, of ones the reacted If some see strong

of size come But company more to is and not that them. a be a -- scale size is on from is any perspective, and mind a speaking So this and out and up about like pop perspective, company that one a directly. school of would would Coursera, scale

cannabis I some our that stated intended and have their on publicly initial to two raise in cannabis at stated, go XXXX. companies REITs think point capital public have they

think for IIPR. be only a that's gotten really But has those are as complex world bit goals one the the think for is to them. I listed companies I the listed

know, go on the perspective, those the you two. I public, public So think

do mention right that we did now. will of Those is gains those that close. across not, amount to fair our stage activity there's at I and around represent spaces an in a portfolio. we do those that for from anticipate So will anticipation are from there's come M&A shortly and where but they're that where transactions markups fruition that

working current. fact So remotely given the are and that virtually backdrop that's pretty of everybody's especially exciting, the those

So I think that's great.

say, closed part of longer, on this names a XX pipeline, have extremely our shortly. do we about on anybody. better have come work the because to as it thought that on, investing names on haven't now, or we side right that the passed secondary both a able again, close in There been but is will primary lot that we've we is would of valuation. that name since a names sale to should surprise deal great done in anticipate months earlier we have I will we for I and monitoring be and for no the side, that of

We those do simply in we're in In have of as looking one primary at stages of transactions secondary advanced in the fact, we're period a ROFR the are and transactions. that debt couple well.

we days the amount we've be of top such have deploy of in to the side. got fortunate fortunate which was awful and two we're in fair leaked are that primary Uber’s we sense as opportunity in as is the that it a a -- getting could an was it the ago capital you And lot attention this I’ll had, of environment -- if Lime So of and this side with, secondary announcement. transaction, and lot the although both Lime starting from close an

that nine achieved, on gives to eight, investment. basis, truly near the Lime rata pro months do ago. transaction The construct the ability a made level, us opportunity for levels valuation if from this in to which reduction we Although, but well initial an our this and significant participate the six, nowhere to moves us the they valuation in investment of quite

And again, extremely do and it want So of we everything corporate at judiciously amount limited perspective can as against the presented imagine, looking we couldn't decisions opportunity busier go fair a from although set, to to we a it broad. are to as have we that capital you are be the and making us. and is is to opportunities utilize best deploy,

you, So Alex. thank

Operator

take from will next Hart]. we our And [Andrew question

Unidentified Analyst

nice private under your Are of could pandemic the credit, targeting credit for changed around what still as and hear private to result be It'd has how you outlook of the pandemic? environment XX% new and the assets opportunities maybe a arise investments.

Mark Klein

while the March focused market is opposed market And on is hard those equity equity and markets, fathom equity are week to than then the understand market as the or which March. since far the plummet third in given the who through sort more the in disarray fourth credit to market of credit rebound

will. credit hadn't billions to interesting really out I broadly And deploy anticipated participating that. the that are part think we really is of the we So it's in. raised billions been market and credit defined think I situation. of still private There's be don't a that in to there against market, dollars an

private more side balance word, would for side view is at of look credit off base that, be a on on better need Again, sheet. financing lack an that venture asset backed the companies of to our

backed some organization. BDC against, in to a we Keri asset your executing opportunity is but bit that the an a lend we company, a of had and the prior venture that are it side, of is private a equity company. niche, And it have not one which joining identified get So traditional then credit participation of of to it's niche against sort

imagine, awful an So seeing right as that you can we're we’re lot seeing, now. of

progressing. are We

anticipate the against fairly progressing prepared end our a now. of certainly deeply we in We’re couple right remarks, as as actually we of announcing we into suggested something QX. get And them are

you. firm. the support appreciate and So call your I of thank the

Operator

We There questions are this participation no conclude time. today. and appreciate further conference. at that your does the queue in today's Ladies gentlemen,

Mark Klein

remain you Again, you everybody. thank attending all continue this safe. very I hope healthy, you finds call. and Thank that our all Thank your and much. we you call for families all to

SuRo Capital (SSSS) 8 May 202020 Q1 Earnings call transcript