SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 8, 2020
SUTTER ROCK CAPITAL CORP.
(Exact name of registrant as specified in its charter)
|(State or other jurisdiction of incorporation)||(Commission File Number)||(I.R.S. Employer Identification No.)|
One Sansome Street
San Francisco, CA 94104
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (650) 235-4769
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
|¨||Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)|
|¨||Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)|
|¨||Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))|
|¨||Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))|
Securities registered pursuant to Section 12(b) of the Act:
|Title of each class:||Trading symbol:||Name of each exchange on which registered:|
|Common Stock, par value $0.01 per share||SSSS||Nasdaq Capital Market|
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
|Item 2.02.||Results of Operations and Financial Condition.|
On May 8, 2020, Sutter Rock Capital Corp. (the “Company”) issued a press release announcing its financial results for the fiscal quarter ended March 31, 2020. A copy of the press release is included as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated into this Item 2.02 by reference.
The information disclosed under this Item 2.02, including the information set forth in Exhibit 99.1 hereto, is being “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise. The information in this Item 2.02 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or into any filing or other document pursuant to the Exchange Act, except as otherwise expressly stated in any such filing.
|Item 8.01.||Other Events.|
On May 8, 2020, in connection with the Company’s conference call to announce its financial results for the fiscal quarter ended March 31, 2020, the Company provided a presentation to stockholders, analysts and any other parties participating on the call. A copy of the slides that the Company used during the presentation has been included as Exhibit 99.2 to this Current Report on Form 8-K and has been posted on the Company’s website.
|Item 9.01||Financial Statements and Exhibits.|
|Exhibit 99.1||Press Release dated May 8, 2020*|
|Exhibit 99.2||Earnings Presentation dated May 8, 2020|
*The press release attached hereto as Exhibit 99.1 is “furnished” and not “filed,” as described in Item 2.02 of this Current Report on Form 8-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|Date: May 8, 2020||SUTTER ROCK CAPITAL CORP.|
|By:||/s/ Allison Green|
Sutter Rock Capital Corp. Reports First Quarter 2020 Financial Results
Net Asset Value of $10.22 per Share as of March 31, 2020
SAN FRANCISCO, Calif., May 8, 2020 (GLOBE NEWSWIRE) – Sutter Rock Capital Corp. (“Sutter Rock” or the “Company”) (Nasdaq:SSSS) today announced financial results for the quarter ended March 31, 2020. Net assets totaled approximately $172.5 million, or $10.22 per share at March 31, 2020, as compared to $11.38 per share at December 31, 2019 and $10.75 per share at March 31, 2019.
“Despite the ongoing impact of the COVID-19 outbreak, we believe our portfolio is well-positioned to weather the uncertainty and ultimately capitalize on several drivers of economic recovery,” said Mark Klein, President and Chief Executive Officer of Sutter Rock. “While overall market conditions contributed to a decline in NAV during the quarter, our strategic focus on identifying and investing in dynamic, high-growth, institutionally-backed private companies remains unchanged. To that end, we continue to evaluate and have committed to several exciting investment opportunities we expect to announce by the end of the second quarter.”
Investment Portfolio as of March 31, 2020
At March 31, 2020, Sutter Rock held positions in 22 portfolio companies with an aggregate fair value of approximately $159.9 million. As a result of the Company’s continued strategy to increase the size of its investments in individual portfolio companies, Sutter Rock has consolidated its investment portfolio around its top positions. The Company’s top five portfolio company investments accounted for approximately 69% of the total portfolio at fair value as of March 31, 2020.
Top Five Investments as of March 31, 2020
|$ in millions||Fair Value||% of Total|
|Palantir Technologies, Inc.||30.5||19.1|
|Course Hero, Inc.||24.6||15.4|
|Ozy Media, Inc.||9.3||5.8|
First Quarter 2020 Investment Portfolio Activity
During the three months ended March 31, 2020, Sutter Rock exited its position in Parchment, Inc.:
|Portfolio Company||Shares Sold||Net Proceeds||Realized Gain|
|Parchment, Inc.||3,200,512||$10.9 million||$6.9 million|
Subsequent to quarter-end, through May 8, 2020, Sutter Rock has committed to make the following investment:
|Neutron Holdings, Inc. (d/b/a Lime)||Convertible Promissory Note||May 2020||$0.5|
First Quarter 2020 Financial Results
March 31, 2020
March 31, 2019
|$ in millions||per share|
$ in millions
|Net investment income/(loss)||$||(3.0||)||$||(0.17||)||$||0.6||$||0.03|
|Net realized gain/(loss) on investments||7.0||0.40||(4.1||)||(0.21||)|
change in unrealized appreciation/(depreciation) of investments, |
net of tax effects
|Net increase/(decrease) in net assets resulting from operations – basic(1)||$||(23.7||)||$||(1.36||)||$||17.2||$||0.86|
|Repurchase of common stock(2)||(3.7||)||0.20||-||-|
|Increase/(decrease) in net asset value||$||(27.4||)||$||(1.16||)||$||17.2||$||0.86|
|(1)||Total may not sum, due to rounding.|
|(2)||During the quarter ended March 31, 2020, the Company repurchased 689,928 shares of Sutter Rock common stock, for approximately $3.7 million in cash 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 17.4 million and 19.8 million for the quarters ended March 31, 2020 and 2019, respectively.
Sutter Rock’s liquid assets were approximately $51.3 million as of March 31, 2020, consisting of cash and cash equivalents.
Share Repurchase Program
During the quarter ended March 31, 2020, Sutter Rock repurchased 689,928 shares under the Share Repurchase Program for an aggregate purchase price of $3.7 million. From April 1, 2020 through May 8, 2020, the Company repurchased an additional 594,637 shares of its common stock 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 completed during the fourth quarter of 2019, as of May 8, 2020, the Company has repurchased 5,901,324 shares of its common stock for approximately $37.3 million since the Share Repurchase Program commenced in August 2017.
Conference Call and Webcast
Management will hold a conference call and webcast for investors on May 8, 2020 at 7:00 a.m. PT (10:00 a.m. ET). The conference call access number for U.S. participants is 323-701-0225, and the conference call access number for participants outside the U.S. is +1 888-394-8218. The conference ID number for both access numbers is 3327871. Additionally, interested parties can listen to a live webcast of the call from the "Investor Relations" section of Sutter Rock’s website at www.sutterrock.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 7:00 a.m. PT (10:00 a.m. ET) on May 15, 2020 by dialing 888-203-1112 (U.S.) or +1 719-457-0820 (International) and using conference ID number 3327871.
About Sutter Rock Capital Corp.
Sutter Rock 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. Sutter Rock is headquartered in San Francisco, CA. Connect with the company on Twitter, LinkedIn, and at www.sutterrock.com.
Statements included herein, including statements regarding Sutter Rock's beliefs, expectations, intentions or strategies for the future, may constitute "forward-looking statements". Sutter Rock 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 COVID-19 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 Sutter Rock's actual results to differ from management's current expectations are contained in Sutter Rock's filings with the Securities and Exchange Commission. Sutter Rock undertakes no obligation to update any forward-looking statement to reflect events or circumstances that may arise after the date of this press release.
Sutter Rock Capital Corp.
Gotham Communications, LLC
SUTTER ROCK CAPITAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
|Investments at fair value:|
|Non-controlled/non-affiliate investments (cost of $86,566,059 and $90,567,041, respectively)||$||131,324,194||$||152,866,112|
|Non-controlled/affiliate investments (cost of $52,857,243 and $52,857,243, respectively)||27,868,854||37,944,268|
|Controlled investments (cost of $7,161,412 and $7,161,412, respectively)||729,500||775,198|
|Total Portfolio Investments||159,922,548||191,585,578|
|Investments in U.S. Treasury bills (cost of $50,000,556 and $49,996,667, respectively)||50,000,000||50,000,000|
|Total Investments (cost of $196,585,270 and $200,582,363, respectively)||209,922,548||241,585,578|
|Escrow proceeds receivable||207,375||265,303|
|Interest and dividends receivable||84,799||84,630|
|Deferred financing costs||11,382||11,382|
|Prepaid expenses and other assets(1)||1,721,265||1,755,933|
|Accounts payable and accrued expenses(1)||1,526,212||1,143,923|
|Payable to executive officers||1,557||1,369,873|
|Accrued interest payable||—||475,000|
|Payable for securities purchased||45,101,259||44,746,660|
|4.75% Convertible Senior Notes due March 28, 2023(2)||38,897,646||38,803,635|
|Common stock, par value $0.01 per share (100,000,000 authorized; 16,874,316 and 17,564,244 issued and outstanding, respectively)||$||168,743||$||175,642|
|Paid-in capital in excess of par||174,848,029||178,550,374|
|Accumulated net investment loss||(28,683,915||)||(25,679,362||)|
|Accumulated net realized gain/(loss) on investments||12,845,657||5,867,417|
|Accumulated net unrealized appreciation/(depreciation) of investments||13,337,284||41,003,218|
|Net Asset Value Per Share||$||10.22||$||11.38|
|(1)||This balance includes a right of use asset and corresponding operating lease liability, respectively.|
|(2)||As of March 31, 2020 and December 31, 2019, the 4.75% Convertible Senior Notes due March 28, 2023 had a face value of $40,000,000.|
SUTTER ROCK CAPITAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
|Three Months Ended March 31,|
|Total Investment Income||251,763||227,250|
|Incentive fees/(Reversal of incentive fee accrual)(1)||—||(4,660,472||)|
|Costs incurred under Administration Agreement(1)||—||306,084|
|Income tax expense||8,665||3,763|
|Total Operating Expenses||3,256,316||(392,452||)|
|Net Investment Income/(Loss)||(3,004,553||)||619,702|
|Realized Gains/(Losses) on Investments:|
|Net Realized Gain/(Loss) on Investments||6,978,240||(4,065,693||)|
|Change in Unrealized Appreciation/(Depreciation) of Investments:|
|Net Change in Unrealized Appreciation/(Depreciation) of Investments||(27,665,934||)||20,699,751|
|Provision for taxes on unrealized appreciation of investments||—||(94,147||)|
|Net Change in Net Assets Resulting from Operations||$||(23,692,247||)||$||17,159,613|
|Net Change in Net Assets Resulting from Operations per Common Share:|
|Weighted-Average Common Shares Outstanding|
|(1)||This balance references a related-party transaction.|
|(2)||For the three months ended March 31, 2020 and 2019, 3,917,792
and 0 potentially dilutive common shares, respectively, were excluded from the weighted-average common shares outstanding for
diluted net increase in net assets resulting from operations per common share because the effect of these shares would have been
SUTTER ROCK CAPITAL CORP. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (UNAUDITED)
|Three Months Ended March 31,|
|Per Basic Share Data||(Unaudited)||(Unaudited)|
|Net asset value at beginning of the year||$||11.38||$||9.89|
|Net investment income/(loss)(1)||(0.17||)||0.03|
|Net realized gain/(loss) on investments(1)||0.40||(0.21||)|
|Net change in unrealized appreciation/(depreciation) of investments(1)||(1.59||)||1.05|
|Provision for taxes on unrealized appreciation of investments(1)||—||(0.01||)|
|Repurchases of common stock(1)||0.20||—|
|Net asset value at end of period||$||10.22||$||10.75|
|Per share market value at end of period||$||5.86||$||7.58|
|Total return based on market value(2)||(10.53||)%||45.21||%|
|Total return based on net asset value(2)||(10.19||)%||8.70||%|
|Shares outstanding at end of period||16,874,316||19,762,647|
|Net assets at end of period||$||172,515,798||$||212,537,772|
|Average net assets||$||198,994,124||$||194,819,568|
|Ratio of gross operating expenses to average net assets(3)||6.65||%||4.15||%|
|Ratio of income tax provision to average net assets||—||%||0.05||%|
|Ratio of net operating expenses to average net assets(3)||6.65||%||4.20||%|
|Ratio of net investment income/(loss) to average net assets(3)||(6.07||)%||1.29||%|
|Portfolio Turnover Ratio||—||%||4.85||%|
|(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. Non-recurring expenses are not annualized. For the three months ended March 31, 2020, the Company excluded $0 of non-recurring exepenses. For the three months ended March 31, 2019, the Company excluded $2,387,356 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.|
Q1 2020 Earnings Call May 8, 2020
2 Forward Looking Statements Statements included herein, including statements regarding Sutter Rock Capital's beliefs, expectations, intentions or strategies for the future, may constitute "forward - looking statements" . Sutter Rock 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 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 Sutter Rock Capital's actual results to differ from management's current expectations are contained in Sutter Rock Capital's filings with the Securities and Exchange Commission . Sutter Rock 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 . Certain information discussed in this presentation (including information relating to portfolio companies) was derived from third - party sources and has not been independently verified . Sutter Rock Capital makes no representation or warranty with respect to this information . The following slides contain summaries of certain financial and statistical information about Sutter Rock Capital . The information contained in this presentation is summary information intended to be considered in connection with review of our SEC filings and other public announcements we may make, by press release or otherwise, from time to time . We undertake no duty or obligation to publicly update or revise the information contained in this presentation unless required to do so by law . In addition, information related to past performance, while it may be helpful as an evaluative tool, is not indicative of future results, the achievement of which cannot be assured . You should not view the past performance of Sutter Rock Capital or any of its portfolio companies, or information about the market, as indicative of Sutter Rock Capital’s or any of its portfolio companies’ future results . The performance data stated herein may have been due to extraordinary market or other conditions, which may not be duplicated in the future . Current performance may be lower or higher than the performance data quoted . This presentation does not constitute an offer to sell or the solicitation of an offer to buy any securities of Sutter Rock Capital . First Quarter 2020
Overview and Impact of COVID - 19 Pandemic 3 First Quarter 2020 Sutter Rock Capital’s Net Asset Value per share is $ 10 . 22 as of March 31 , 2020 At March 31 , 2020 , Sutter Rock Capital’s Net Asset Value is $ 10 . 22 per share, a decrease from $ 11 . 38 per share at December 31 , 2019 Net Asset Value totaled approximately $ 172 . 5 million dollars at quarter - end We continue to be optimistic about the future of our portfolio and believe our portfolio companies’ strong operating fundamentals and market opportunities will drive Net Asset Value growth as the economy recovers from the COVID - 19 pandemic The COVID - 19 pandemic has had a severe negative impact on many families and on the financial markets, but we believe our portfolio is well positioned to manage the effects of the economic dislocation caused by the pandemic 1 2
Top 5 Positions = 69 % of Total Investment Portfolio at Fair Value Based on Total Investment P ortfolio Fair V alue of $159.9 million 4 First Quarter 2020 Fair Value ($ in millions) % of Investment Portfolio 1 $34.7 21.7% 2 $30.5 19.1% 3 $24.6 15.4% 4 $10.8 6.7% 5 $9.3 5.8% $110.0 68.7% • Sutter Rock Capital’s Top 5 positions account for approximately 69% of the investment portfolio at fair value, excluding treasuries, as of 3/31/20 • The Top 5 positions accounted for roughly 111% of Sutter Rock Capital’s market capitalization as of 3/31/20 Note: Total may not sum due to rounding. $98.9 Market Capitalization (3/31/2020)
Portfolio Company COVID - 19 & Business Updates • In an April 2020 interview with Axios , Coursera CEO Jeff Maggioncalda highlighted how 1 . 6 billion students around the world have had their schools closed due to COVID - 19 . • With 56 million learners globally, partnerships with 165 of the world’s top universities, and 4 , 200 courses on disciplines like data science, computer science, arts and humanity, and social science, Coursera offers online courses that allow students to learn for free or at low cost . • In response to COVID - 19 , Coursera has expanded access for its Coursera for Campus product . Coursera for Campus allows colleges, universities, and high schools to provide online Coursera - created educational content to their students . As a result of the program, 400 , 000 students have enrolled in 1 . 4 million courses for free . • Coursera is working with multiple state governments to offer Coursera’s content catalogue to unemployed individuals in those states . • As a result of COVID - 19 - related school closures, students have less direct access to teachers and study groups, and are increasingly turning to online learning supplements, including Course Hero’s online document library, for their studies . • In response to the increased reliance on distance learning at this time, Course Hero has offered educators on its platform three months of free access to the Course Hero document library of more than 40 million teaching and learning resources . • Course Hero is facilitating peer review between educators who would like feedback on their remote - teaching resources . • A March 2020 CNBC interview with Nextdoor CEO Sarah Friar indicated the neighborhood - based social networking platform experienced an 80 % month - over - month increase in daily active users since the global spread of COVID - 19 . • Nextdoor launched Nextdoor Groups and Nextdoor Help Map to provide healthy individuals an opportunity to support neighbors in need . • In April 2020 , The Wall Street Journal reported that Palantir’s models and analysis surrounding the COVID - 19 outbreak have provided critical data and information to numerous government entities including those in the United States, the United Kingdom, Greece, and others . • Bloomberg and CNBC also reported in April, that Palantir anticipates generating $ 1 . 0 billion in 2020 revenue allowing the company to break even for the first time in its history . • Recent media reports imply Palantir is preparing for an IPO ; although, timing will be subject to market conditions . Notable Portfolio Company Developments 5 First Quarter 2020
44.6% 8.7% 19.1% 14.6% 12.6% Key Investment Themes As a Percentage of Total Investment Portfolio at Fair Value as of 3/31/20 First Quarter 2020 Note: Sustainability investment theme accounted for 0.4% of Total Investment Portfolio in the first quarter. 6 ($ in millions) (1) Sustainability investment theme accounted for 0.4%, or $0.7 million, of Total Investment Portfolio in the first quarter. (2) Total may not sum due to rounding. Legend Industry Theme (1) Fair Value % of Portfolio Education Technology $71.3 44.6% Big Data & Cloud $30.5 19.1% Financial Technology $23.4 14.6% Social & Mobile $20.1 12.6% Marketplaces $13.9 8.7% Total (2) $159.9 100.0%
7 Investment Activity - Neutron Holdings, Inc. (d/b/a Lime) First Quarter 2020 • Founded in 2017 and headquartered in San Francisco, Lime operates a scooter - sharing platform designed to create an efficient micro - mobility infrastructure in over 100 countries. Description • COVID - 19 is affecting transportation utilization as people worldwide limit travel and governments enforce or encourage shelter in place measures. • Sutter Rock believes Lime, particularly with new investment from Uber, is well - positioned to benefit from the re - opening of cities. Opportunity • Lime is currently raising $170 million in a transaction led by Uber. • Sutter Rock has committed to invest its “pro rata” of approximately $0.5 million. • Given the attractive valuation at which Sutter Rock is making this follow - on investment, Sutter Rock is comfortable that a modest improvement in Lime’s business will generate a profit on its investment. Sutter Rock Investment Activity Select Investors Subsequent to Quarter End
Dollars ($ in millions) Per Share Net Assets at Beginning of Period $199.9 $11.38 Net Investment Loss ($3.0) ($0.17) Net Realized Gain on Investments $7.0 $0.40 Net Change in Unrealized Appreciation/(Depreciation) of Investments ($27.7) ($1.59) Repurchase of Common Stock (1) ($3.7) $0.20 Net Assets at March 31, 2020 (2) $172.5 $10.22 8 Financial Highlights For the Quarter Ended March 31, 2020 First Quarter 2020 (1) During the quarter ended March 31, 2020, the Company repurchased 689,928 shares of Sutter Rock common stock, for approximatel y $ 3.7 million in cash 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 o uts tanding as of period end resulted in an increase in the net asset value per share. (2) Total may not sum due to rounding. First Quarter 2020
9 Share Repurchase Program First Quarter 2020 Since commencement of the Share Repurchase Program in August 2017, Sutter Rock Capital has repurchased approximately 20.1% of its then - outstanding shares (2) Period Shares Repurchased Cash Used ($ in millions) Allocation Remaining ($ in millions) 2017 Total Repurchases 934,658 $4.9 $5.1 2018 Total Repurchases 1,483,698 $10.3 $4.8 2019 Total Repurchases 749,128 $4.8 $5.0 Q1 2020 689,928 $3.7 $6.3 Q2 2020 to Date 594,637 $3.6 $2.7 (1) Total To Date 4,452,049 $27.3 $2.7 (1) (1) The remaining allocation includes the authorization of an additional $5.0 million to the S hare Repurchase Program on March 9, 2020, bringing the Share Repurchase Program total to $30.0 million. (2) This calculation does not include shares repurchased through Sutter Rock Capital’s Modified Dutch Auction T ender Offer, announced on October 21, 2019 and expired on November 22, 2019. The Tender Offer resulted in the repurchase of 1,449,275 shares for approximately $10.0 million.