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SuRo Capital Corp. Reports Second Quarter 2020 Financial Results

Sutter Rock Capital Corp.
·15 mins read

Net Asset Value of $11.84 per Share as of June 30, 2020

SAN FRANCISCO, Aug. 05, 2020 (GLOBE NEWSWIRE) -- SuRo Capital Corp. (“SuRo Capital” or the “Company”) (Nasdaq:SSSS) today announced its financial results for the quarter ended June 30, 2020. Net assets totaled approximately $192.7 million, or $11.84 per share, at June 30, 2020, compared to $10.22 per share at March 31, 2020 and $10.75 per share at June 30, 2019.

“This quarter, SuRo Capital reported the highest dividend-adjusted net asset value per share in five years. On July 29, 2020, we were pleased to declare a $0.15 per share dividend. The quarter was highlighted by several significant financings for existing portfolio companies and investments in new opportunities,” said Mark Klein, President and Chief Executive Officer of SuRo Capital. “The companies in our portfolio demonstrated strong growth and resilience this quarter despite the ongoing impact of the COVID-19 outbreak. We believe our portfolio is well-positioned given the current market conditions.”

“We are also excited to announce the closing of two new investments during the second quarter: a $5.0 million equity investment in Rent the Runway, Inc. and a $6.9 million collateralized loan to Palantir Lending Trust. SuRo Capital also made follow-on, pro rata investments in Lime during the second quarter and Coursera subsequent to quarter-end. We continue to see more opportunities to deploy capital in credit investments. We have also been exploring opportunities in pre-business combination private investments in public equity (“PIPEs”) associated with the special-purpose acquisition company (“SPAC”) asset class.”

Investment Portfolio as of June 30, 2020

At June 30, 2020, SuRo Capital held positions in 24 portfolio companies with an aggregate fair value of approximately $199.0 million. As a result of the Company’s continued strategy to increase the size of its investments in individual portfolio companies, SuRo Capital has consolidated its investment portfolio around its top positions. The Company’s top five portfolio company investments accounted for approximately 68% of the total portfolio at fair value as of June 30, 2020.

Top Five Investments as of June 30, 2020

$ in millions

Cost Basis

Fair Value

% of Total Portfolio

Coursera, Inc.

$

14.5

$

49.9

25.1

%

Course Hero, Inc.

5.0

33.2

16.7

Palantir Technologies, Inc.

16.2

30.5

15.3

Ozy Media, Inc.

10.9

11.3

5.7

Nextdoor.com, Inc.

10.0

10.5

5.3

Total (rounded)

$

56.6

$

135.4

68.1

%

Second Quarter 2020 Investment Portfolio Activity

During the three months ended June 30, 2020, SuRo Capital funded the following new and follow-on investments, excluding capitalized transaction costs:

Portfolio Company

Investment

Transaction Date

Investment

Neutron Holdings, Inc. (d/b/a Lime)

Junior Preferred Convertible Note

5/11/2020

$0.5 million

Rent the Runway, Inc.

Preferred Stock

6/17/2020

$5.0 million

Palantir Lending Trust

Collateralized Loan

6/19/2020

$6.9 million

Subsequent to quarter-end, through August 5, 2020, SuRo Capital funded the following follow-on investment:

Portfolio Company

Investment

Transaction Date

Investment

Coursera, Inc.

Preferred Shares, Series F

7/15/2020

$2.8 million

Second Quarter 2020 Financial Results

Quarter Ended
June 30, 2020

Quarter Ended
June 30, 2019

$ in millions

per share(1)

$ in millions

per share(1)

Net investment loss (2)

$

(4.7

)

$

(0.28

)

$

(2.8

)

$

(0.14

)

Net realized gain/(loss) on investments

(0.0

)

-

13.6

0.69

Net change in unrealized appreciation/(depreciation) of investments, net of tax effects

26.5

1.62

(11.4

)

(0.58

)

Net increase/(decrease) in net assets resulting from operations – basic(3)

$

21.8

$

1.34

$

(0.7

)

$

(0.03

)

Repurchase of common stock(4)

(3.6

)

0.16

(0.7

)

0.03

Stock-based compensation(2)

2.0

0.12

-

-

Increase/(decrease) in net asset value

$

20.2

$

1.62

$

(1.4

)

$

0.00

__________________

  1. Based on weighted-average number of shares outstanding for the relevant period

  2. For the quarter ended June 30, 2020, this balance includes $2.0 million of accelerated recognition of compensation cost related to the cancellation of all vested and unvested options on April 28, 2020.

  3. Total may not sum, due to rounding.

  4. During the quarters ended June 30, 2020 and 2019, the Company repurchased 594,637 and 115,801 shares of SuRo Capital common stock, for approximately $3.6 million and $0.7 million in cash, respectively, under its Share Repurchase Program. The use of cash in connection with the repurchases decreased net asset value as of period end; however, the reduction in shares outstanding as of period end resulted in an increase in the net asset value per share.

Weighted-average common basic shares outstanding were approximately 16.4 million and 19.7 million for the quarters ended June 30, 2020 and 2019, respectively.

SuRo Capital’s liquid assets were approximately $23.3 million as of June 30, 2020, consisting of cash and restricted cash.

Dividend Declaration for Second Quarter 2020

On July 29, 2020, SuRo Capital’s Board of Directors declared a dividend of $0.15 per share payable on August 25, 2020 to the Company’s common stockholders of record as of the close of business on August 11, 2020. The dividend will be paid in cash.

Share Repurchase Program

During the quarter ended June 30, 2020, SuRo Capital repurchased 594,637 shares under its Share Repurchase Program for an aggregate purchase price of $3.6 million. The dollar value of shares that may yet be purchased by the Company under the Share Repurchase Program is approximately $2.7 million.

Under the publicly announced Share Repurchase Program and the Modified Dutch Auction Tender Offer, as of August 5, 2020, the Company has repurchased 5,901,324 shares of its common stock for approximately $37.3 million since the Share Repurchase Program was announced in August 2017.

Conference Call and Webcast

Management will hold a conference call and webcast for investors on August 5, 2020 at 2:00 p.m. PT (5:00 p.m. ET). The conference call access number for U.S. participants is 323-794-2093, and the conference call access number for participants outside the U.S. is 866-548-4713. The conference ID number for both access numbers is 3811592. Additionally, interested parties can listen to a live webcast of the call from the "Investor Relations" section of SuRo Capital’s website at www.surocap.com. An archived replay of the webcast will also be available for 12 months following the live presentation.

A replay of the conference call may be accessed until 5:00 p.m. PT (8:00 p.m. ET) on August 12, 2020 by dialing 888-203-1112 (U.S.) or +1 719-457-0820 (International) and using conference ID number 3811592.

Certain Information Regarding the Dividend

The date of declaration and amount of the dividend are subject to the sole discretion of SuRo Capital’s Board of Directors. The aggregate amount of the dividend declared and paid by SuRo Capital will be fully taxable to stockholders. The tax character of SuRo Capital’s dividends cannot be finally determined until the close of SuRo Capital’s taxable year (December 31). SuRo Capital will report the actual tax characteristics of each year’s dividends annually to stockholders and the IRS on Form 1099-DIV subsequent to year-end.

Registered stockholders with questions regarding declared dividends may call American Stock Transfer at 800-937-5449.

Forward-Looking Statements

Statements included herein, including statements regarding SuRo Capital's beliefs, expectations, intentions or strategies for the future, may constitute "forward-looking statements". SuRo Capital cautions you that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected or implied in these statements. All forward-looking statements involve a number of risks and uncertainties, including the impact of the COVID-19 pandemic and any market volatility that may be detrimental to our business, our portfolio companies, our industry, and 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. Risk factors, cautionary statements and other conditions which could cause SuRo Capital's actual results to differ from management's current expectations are contained in SuRo Capital's filings with the Securities and Exchange Commission. SuRo Capital undertakes no obligation to update any forward-looking statement to reflect events or circumstances that may arise after the date of this press release.

About SuRo Capital Corp.

SuRo Capital Corp. (Nasdaq:SSSS) is a publicly traded investment fund that seeks to invest in high-growth, venture-backed private companies. The fund seeks to create a portfolio of high-growth emerging private companies via a repeatable and disciplined investment approach, as well as to provide investors with access to such companies through its publicly traded common stock. SuRo Capital is headquartered in San Francisco, CA. Connect with the company on Twitter, LinkedIn, and at www.surocap.com

Contact
SuRo Capital Corp.
(650) 235-4769
IR@surocap.com

Media Contact
Bill Douglass
Gotham Communications, LLC
Communications@surocap.com

SURO CAPITAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)

June 30, 2020

December 31, 2019

ASSETS

Investments at fair value:

Non-controlled/non-affiliate investments (cost of $99,121,577 and $90,567,041, respectively)

$

168,700,422

$

152,866,112

Non-controlled/affiliate investments (cost of $52,857,243 and $52,857,243, respectively)

29,438,698

37,944,268

Controlled investments (cost of $7,161,412 and $7,161,412, respectively)

860,198

775,198

Total Portfolio Investments

198,999,318

191,585,578

Investments in U.S. Treasury bills (cost of $99,999,611 and $49,996,667, respectively)

100,000,000

50,000,000

Total Investments (cost of $259,139,843 and $200,582,363, respectively)

298,999,318

241,585,578

Cash

22,385,073

44,861,263

Restricted cash

900,000

Escrow proceeds receivable

67,135

265,303

Interest and dividends receivable

70,274

84,630

Deferred financing costs

11,382

11,382

Prepaid expenses and other assets(1)

1,197,711

1,755,933

Total Assets

323,630,893

288,564,089

LIABILITIES

Accounts payable and accrued expenses(1)

1,933,219

1,143,923

Payable to executive officers

1,369,873

Accrued interest payable

475,000

475,000

Dividends payable

2,107,709

Payable for securities purchased

89,499,611

44,746,660

Income tax payable

38,965

4.75% Convertible Senior Notes due March 28, 2023(2)

38,991,657

38,803,635

Total Liabilities

130,938,452

88,646,800

Net Assets

$

192,692,441

$

199,917,289

NET ASSETS

Common stock, par value $0.01 per share (100,000,000 authorized; 16,279,679 and 17,564,244 issued and outstanding, respectively)

$

162,797

$

175,642

Paid-in capital in excess of par

173,199,798

178,550,374

Accumulated net investment loss

(33,351,303

)

(25,679,362

)

Accumulated net realized gain on investments

12,821,670

5,867,417

Accumulated net unrealized appreciation/(depreciation) of investments

39,859,479

41,003,218

Net Assets

$

192,692,441

$

199,917,289

Net Asset Value Per Share

$

11.84

$

11.38

__________________________________________________

  1. This balance includes a right of use asset and corresponding operating lease liability, respectively.

  2. As of June 30, 2020 and December 31, 2019, the 4.75% Convertible Senior Notes due March 28, 2023 had a face value of $40,000,000.

SURO CAPITAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

INVESTMENT INCOME

Non-controlled/non-affiliate investments:

Interest income

$

61,126

$

198,175

$

216,211

$

336,672

Dividend income

50,000

Non-controlled/affiliate investments:

Interest income/(reversal of interest income accrual)

(49,612

)

60,127

(29,184

)

119,593

Dividend income

30,000

56,250

Controlled investments:

Interest income

29,650

58,937

Dividend income

200,000

200,000

200,000

200,000

Total Investment Income

241,514

487,952

493,277

715,202

OPERATING EXPENSES

Management fees(1)

848,723

Reversal of incentive fee accrual(1)

(4,660,472

)

Costs incurred under Administration Agreement(1)

306,084

Compensation expense(2)

3,005,524

469,944

3,930,440

632,108

Directors’ fees

111,250

86,250

222,500

172,500

Professional fees

678,472

1,310,028

1,817,838

3,371,950

Interest expense

568,627

600,205

1,142,027

1,204,373

Income tax expense

39,590

29,949

48,255

33,712

Other expenses

505,439

796,807

1,004,158

991,753

Total Operating Expenses

4,908,902

3,293,183

8,165,218

2,900,731

Net Investment Loss

(4,667,388

)

(2,805,231

)

(7,671,941

)

(2,185,529

)

Realized Gains/(Losses) on Investments:

Non-controlled/non-affiliated investments

(23,987

)

13,590,233

6,954,253

21,859,371

Non-controlled/affiliate investments

(12,334,831

)

Net Realized Gain/(Loss) on Investments

(23,987

)

13,590,233

6,954,253

9,524,540

Change in Unrealized Appreciation/(Depreciation) of Investments:

Non-controlled/non-affiliated investments

24,821,654

(6,751,196

)

7,276,832

10,277,147

Non-controlled/affiliate investments

1,569,843

(1,220,012

)

(8,505,571

)

7,802,636

Controlled investments

130,698

(4,469,112

)

85,000

(9,820,352

)

Net Change in Unrealized Appreciation/(Depreciation) of Investments

26,522,195

(12,440,320

)

(1,143,739

)

8,259,431

Provision for taxes on unrealized appreciation of investments

979,713

885,566

Net Change in Net Assets Resulting from Operations

$

21,830,820

$

(675,605

)

$

(1,861,427

)

$

16,484,008

Net Change in Net Assets Resulting from Operations per Common Share:

Basic

$

1.33

$

(0.03

)

$

(0.11

)

$

0.84

Diluted(3)

$

1.10

$

(0.03

)

$

(0.11

)

$

0.70

Weighted-Average Common Shares Outstanding

Basic

16,383,188

19,719,706

16,912,091

19,741,058

Diluted(3)

20,300,980

19,719,706

16,912,091

23,472,402

____________________________________________________________________________________________________________________________

  1. This balance references a related-party transaction.

  2. For the three and six months ended June 30, 2020, this balance includes $1,962,431 of accelerated recognition of compensation cost related to the cancellation of unvested options on April 28, 2020.

  3. For the six months ended June 30, 2020 and the three months ended June 30, 2019, 3,917,792 and 3,731,344 potentially dilutive common shares, respectively, were excluded from the weighted-average common shares outstanding for diluted net increase in net assets resulting from operations per common share because the effect of these shares would have been anti-dilutive.

SURO CAPITAL CORP. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (UNAUDITED)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Per Basic Share Data

Net asset value at beginning of the period

$

10.22

$

10.75

$

11.38

$

9.89

Net investment income/(loss)(1)

(0.28

)

(0.14

)

(0.45

)

(0.11

)

Net realized gain/(loss) on investments(1)

0.69

0.41

0.48

Net change in unrealized appreciation/(depreciation) of investments(1)

1.62

(0.63

)

(0.07

)

0.42

Provision for taxes on unrealized appreciation of investments(1)

0.05

0.05

Repurchases of common stock(1)

0.16

0.03

0.45

0.02

Stock-based compensation(1)

0.12

0.12

Net asset value at end of period

$

11.84

$

10.75

$

11.84

$

10.75

Per share market value at end of period

$

8.47

$

6.40

$

8.47

$

6.40

Total return based on market value(2)

44.54

%

(15.57

)%

29.31

%

22.61

%

Total return based on net asset value(2)

15.85

%

%

4.04

%

8.70

%

Shares outstanding at end of period

16,279,679

19,646,846

16,279,679

19,646,846

Ratios/Supplemental Data:

Net assets at end of period

$

192,692,441

$

211,125,048

$

192,692,441

$

211,125,048

Average net assets

$

169,877,812

$

211,244,233

$

184,435,968

$

203,070,126

Ratio of gross operating expenses to average net assets(3)

8.19

%

5.14

%

7.83

%

4.66

%

Ratio of income tax provision to average net assets

%

(0.46

)%

%

(0.44

)%

Ratio of net operating expenses to average net assets(3)

8.19

%

4.68

%

7.83

%

4.22

%

Ratio of net investment income/(loss) to average net assets(3)

(7.61

)%

(5.39

)%

(7.29

)%

(2.18

)%

Portfolio Turnover Ratio

%

%

5.88

%

5.04

%

___________________________________________________

  1. Based on weighted-average number of shares outstanding for the relevant period.

  2. Total return based on market value is based on the change in market price per share between the opening and ending market values per share in the year. Total return based on net asset value is based upon the change in net asset value per share between the opening and ending net asset values per share.

  3. Financial Highlights for periods of less than one year are annualized and the ratios of operating expenses to average net assets and net investment loss to average net assets are adjusted accordingly. Significant and material non-recurring expenses are not annualized. For the three and six months ended June 30, 2020, the Company excluded $1,962,431 and $1,962,431, respectively of non-recurring expenses. For the three and six months ended June 30, 2019, the Company excluded $617,536 and $(1,769,820), respectively, of non-recurring expenses and did not annualize the income tax provision. Because the ratios are calculated for the Company’s common stock taken as a whole, an individual investor’s ratios may vary from these ratios.