SuRo Capital Corp. Q1 FY2025 earnings call

Market Environment

• First quarter of 2025 was challenging for public markets with NASDAQ, Russell 2000, and Dow Jones Industrial Average seeing significant declines. Ongoing global trade tensions and new tariffs weighed on investor sentiment, impacting private market valuations.
• Second quarter had volatility in S&P 500, VIX spiked, but major tech companies reaffirmed capital spending commitment.

Portfolio Highlights

• OpenAI: Announced $40 billion funding round at $300 billion post-money valuation, had 500 million weekly active users, systems used by ~10% of global population, forecast revenue to triple in 2025 and grow significantly thereafter.
• CoreWeave: Completed largest tech company IPO since 2021, raised $1.5 billion at $23 billion valuation, has $11.9 billion contract with OpenAI, stock up over 35% since IPO, potential deal with Google underscores strategic advantages.
• Canva: Unveiled Visual Suite 2.0, had over 145 million users since 2022 launch, over 375 designs created per second, ~36 billion designs created, over 95% of Fortune 500 using it, annualized revenue over $3 billion.
• Plaid: Received $5 billion investment, part of $575 million financing, post-money valuation $6.1 billion, supports over 100 million users globally, trusted by over 12,000 financial institutions.
• WHOOP: Initial $10 million investment in 2022, $1 million follow-on in January 2025, expanded into international markets like Middle East, worn by Rory McIlroy at Masters, CEO and Cristiano Ronaldo hinting at major announcement.

Investment Activity

• Follow-on investments in Orchard and WHOOP, $5 million investment in Plaid subsequent to quarter-end.

Valuation

• Marked CoreWeave investment at $31.52 per share in first quarter, stock closed over $54 per share; marked ServiceTitan at $88.45 per share at quarter-end, stock closed at ~$113 per share; applied discounts to unregistered public securities based on lockup periods.

Segmented by 7 general investment themes, the top allocation of SuRo Capital's investment portfolio at quarter-end was to Artificial Intelligence Infrastructure & Applications representing approximately 28% of the investment portfolio at fair value. Software-as-a-Service and Consumer Goods & Services were the next two largest categories of approximately 22% and 17% of the portfolio, respectively. 12% of the portfolio was invested in Financial Technology & Services and Education Technology companies accounted for approximately 12% of the fair value of the portfolio. The Logistics & Supply Chain category accounted for approximately 8% of the fair value of the portfolio and SuRo Sports accounted for 2% as of March 31st.

Lockup Expiration

• Viewed as not holders of public securities, would exit positions when lockups expire in normalized market conditions.

Dividend Strategy

• Will be transparent and communicative about dividend strategy, plans to distribute net realized gains, with distribution expected by end of year if net realized gains by then, otherwise early in Q1.

Risks

• Impact of market volatility that may be detrimental to business, portfolio companies, industry, and global economy, causing actual results to differ from forward-looking statements.
• Uncertainties around global trade tensions, new tariffs, and valuation compression affecting private market valuations.

Q: Thanks. Good evening, everyone. So we’re not too far off from the 6-month lockup expiration for ServiceTitan. Can you just remind us what your plan is here with this position? I’m assuming you’ll sell this down in relatively short order as you typically do, assuming no material change in the stock price from here. And then in terms of redeploying that capital, I mean, where are you seeing the best opportunities to invest right now? Is it still in and around the AI theme? Or are there some other emerging themes that are a little bit more compelling today, similar to the flat investment? So any color there would be helpful.

A: Thanks, Brian. First of all, as we’ve been really consistent about that we don’t view ourselves as holders of public securities. And when a lockup expires, pretty much as you described it, in normalized market conditions, we would exit the position. And from there, where we would deploy it, I’d say we’re seeing a whole host of opportunities, Brian. As you and I’ve discussed on these calls, we are probably seeing more opportunities now than ever before. Clearly, AI and AI adjacent companies are in an immense opportunity set that we are looking at. We continue to look in the fintech areas and some of the other and some of the consumer areas. But AI, AI adjacent, which covers a wide swath, is a lot of what we’re seeing right now.

Q: Great. Good evening. Thanks for taking my questions. Just like a little more color on the discount for the shares that weren’t registered. Just out of from my own edification, is this something that’s kind of standard, the percentage discount, or is this something that, that is subjective in case by case? I just kind of love to understand that process. And then, the second question, we’d just love if you have any thoughts on the nonprofit situation at OpenAI that, the news in the like, say, the last 24 hours, it sounds like the nonprofit will continue to be involved in the management and ownership. So any thoughts you’d have there, we’d love to hear it. Thanks.

A: Thanks, Marvin, and thanks for your support. I’ll let Allison answer the discount question. And then, what I would say in respect to the OpenAI, we’re all reading the news at the same time. I don’t think that the nonprofit being involved is going to impact the value of the company for the public – as it goes to become a for-profit organization. I certainly don’t think it was read as particularly negative or particularly impactful. And, clearly, we discussed in our prepared remarks, with the OpenAI story is unfolding extremely rapidly and very exciting, the traction they get in the ongoing progress that they’re making. In respect to the discount, I’ll let Allison to respond.

Q: Hi, guys. Thanks for taking my question. I guess, I’ll ask my question about rules and process regarding return of capital to shareholders under your corporate structure. Obviously, ServiceTitan and CoreWeave and those shares are registered and will be sold presumably at a profit. At some point, you’ll need to return that cash to shareholders one way or another in the form of a dividend, cash or stock, things like that. If you sold those shares in the third or fourth quarters of this year, when would that dividend be approved and paid? Would it be 3 months later, 6 months later, that kind of thing?

A: Perfect. Thanks, Alex. And thank you for your ongoing interest and support in our company. As we’ve done in the past, and you’re well aware, we try to be extremely communicative in respect to our dividend strategy or dividend policy. And as we get clarity to net realized gains, we try to communicate that as expeditiously as possible to the public, because it’s important for investors to understand that. We would – if we were in the position to have net realized gains by the end of the year, we would make a distribution by the end of the year. If there was some residual distribution that we’d have to make, we’d make it early in Q1. But, as you’ve seen in the past, we usually get way out in front of it for investors and tell everybody how we view it and how we plan to distribute that, how and when we plan to distribute those distributions.