SuRo Capital Corp (SSSS) 2017 Q1 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the GSV Capital's First Quarter 2017 Earnings Conference Call. (Operator Instructions) This call is being recorded today, Tuesday, May 9, 2017

I will now turn the conference over to Mr. Nicholas Franco, Vice President of GSV Capital. Please go ahead.

Thank you for joining us on today's call. I'm joined today by GSV Chairman and CEO, Michael Moe; and Chief Financial Officer, William Tanona.

Please note that a slide presentation that corresponds to today's prepared remarks by management is available on our website at www.gsvcap.com, under Investor Relations, Presentations. Today's call is being recorded and broadcast live on our website, gsvcap.com. Replay information is included in our press release issued earlier today. This call is the property of GSV Capital Corporation and the unauthorized reproduction of this call in any form is strictly prohibited.

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

Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including, but not limited to, those described from time to time in the company's filings with the SEC. Management does not undertake to update such forward-looking statements unless required to do so by law.

To obtain copies of GSV Capital's latest SEC filings, please visit our website at gsvcap.com or the SEC's website at sec.gov.

Now I'd like to turn the call over to Michael Moe.

Thank you, Nick. We're pleased to share the results of GSV Capital's first quarter 2017. First, I'll review the recent quarter and share an update on our top positions as well as notable developments in the portfolio. Then I'll comment briefly on the market fundamentals and define GSV Capital's opportunity moving forward. I will then turn the call over to Chief Financial Officer, Bill Tanona, who will provide a brief financial overview. And the end, we will open up the call for questions.

Let's start with a Slides 3 through 5. Net assets totaled approximately $196 million or $8.83 per share as of March 31, 2017, as compared to approximately $192 million or $8.66 per share as of December 31, 2016.

Of our key 5 themes, Education Technology is the largest commitment representing 36.6% of total portfolio at fair value excluding treasuries. And in fact, I'm making the call today from Salt Lake City, where we're holding our 8th Annual ASU + GSV Education Technology Summit, where all our portfolio companies are at and presenting. And just 30 minutes ago, Secretary of Education, Betsy DeVos, gave a keynote speech.

In addition to the Education Technology, Cloud Computing and Big Data is 34.2% of the portfolio, Social Mobile is 17.6%, Marketplaces represents 10.1% and Sustainability is 1.5%. As of March 31, 2017, GSV's top 10 positions account for approximately 60% of our total portfolio at fair value.

Our 3 largest investments, Palantir, Spotify and Dropbox, represented approximately 28% of the total portfolio at fair value, excluding treasuries.

While there may be fluctuations from quarter-to-quarter, we expect that GSV Capital's portfolio will continue to consolidate around top positions and leading names moving forward. And I'm also very pleased at the overall performance and fundamentals of the companies within our portfolio.

I'm going to start with some of our top positions. Palantir, a disruptive Big Data analytics and security company remains the largest position in our portfolio. Palantir's platform is transforming the way organizations use their data and is deployed at leading government, commercial and not-for-profit institutions around the world.

In January, Palantir announced that it closed 2 major new corporate deals in Europe with German healthcare giant, Merck, and the French aerospace leader, Airbus. This adds to the list of blue chip international clients that includes AXA, BP, Crédit Suisse, Deutsche Bank, GlaxoSmithKline, Standard Chartered and Zurich Insurance Group.

In February, CEO, Alex Karp, indicated that the company would break even by the end of 2017, noting that Palantir's cash burn rate has increased by approximately 60% versus 2016. Palantir's operations in the U.K. are profitable today, and Europe revenue has roughly tripled over the past 3 years.

The combination of strong operating growth fundamentals are consistent with Palantir's IPO opportunity which Karp previewed at The Wall Street Journal's Global Technology Conference in October 2016. At the time, he stated that Palantir has positioned itself to go public which will create liquidity opportunities for employees. This is a significant milestone as previously, Palantir had denied any interest in an IPO.

To date, Palantir has raised $1.9 billion of equity funding from a syndicate of investors that includes Founders Fund, In-Q-Tel and Tiger Global.

Our second largest position is Spotify, a leading global music streaming platform that now reaches well over 100 million users with 30 million songs across 60 international markets. In early March 2017, Spotify announced that it surpassed 50 million paying subscribers, up from 40 million in September 2016 and 30 million in March of 2016. Remarkably, over 72% of its users are millennials according to Adweek. It's hard not to think of Spotify as the future of music. Spotify has over twice as many paying subscribers as one of its key competitors, Apple Music, which reported 20 million as of December 2016. In other words, the company isn't just holding its own against Apple. It's actually building a wider lead.

Earlier this week, Spotify unveiled a social feature called Spotify Codes, which allows users to quickly share tracks, artists, albums and playlists with their contacts and others on social media. Not only does this add another layer of engagement to the platform, but we believe that it will open up new marketing and revenue opportunities as brands will be able to share Spotify Codes on social media as a new way to engage their followers.

In April, The Wall Street Journal reported that Spotify was considering a direct listing instead of a traditional IPO, a process that forgoes underwriters' lockups and the typical fusion of capital associated with a traditional public offering. We'll continue to monitor the development to optimize returns for GSV Capital stockholders.

To date, Spotify has raised $1.6 billion from a Syndicate of investors including Accel Partners, Founders Fund, Technology Crossover Ventures and Goldman Sachs.

Our third largest position is Dropbox, a leading cloud-based, file-sharing, storage and collaboration platform. In January, Dropbox became the fastest Software-as-a-Service business to reach $1 billion in revenue run-rate milestone according to a report by IDC. It hit that mark in 8 years beating SaaS leaders like Salesforce and Workday.

Impressively, CEO, Drew Houston, announced this April that the company had become profitable on an EBITDA basis. This follows the June 2016 announcement that Dropbox has achieved positive free cash flow. Today, Dropbox counts over 500 million users and 200,000 business customers including the majority of Fortune 500 companies.

Rarely have we seen a business operate with this combination of growth, profitability and scale. In March, Bloomberg reported that Dropbox had opened a $600 million credit facility from 6 banks led by JP Morgan Chase ahead of a potential IPO that could come in 2017.

Beyond our top 3 positions, the ride-sharing platform, Lyft, announced in April that it had completed a $500 million financing valuing the company at $7.5 billion. To date, Lyft has raised over $2.6 million from investors including Andreessen Horowitz, General Motors, Founders Fund, KKR, Alibaba, Alliance Bernstein, Coatue and others.

In January, Lyft announced they delivered 163 million rides in 2016, more than tripling its 2015 total. It's launched in over 100 new cities in 2017 to date, and in March, the company reported that the growth was accelerating in every market across the country.

Uber's recent series of public missteps has created further opportunities for Lyft, and in a recent report published by Quartz, the number of U.S. consumers who said they would consider taking Lyft jumped to 9.6% in the first quarter, up from 5.6% in the fourth quarter. Uber, in contrast, fell to 14% from 18% in the same period.

Please turn to Slide 6. Beyond GSV's portfolio, we are encouraged by a 2017 IPO market that continues to signal investor demand for premiere VC-backed growth companies. According to Renaissance Capital, just 102 U.S. companies went public in 2016, and only 40 were venture backed. In fact, IPO proceeds from venture-backed companies dropped 90% from 2014 to 2016. With the performance of NASDAQ and the receptivity of new IPOs, we expect that this backlog is going to be starting to work through, which should be very beneficial for GSV Capital shareholders.

In 2017, so far, there have been 50 U.S. IPOs representing a 178% increase over the same period last year. IPO proceeds to date have surpassed $15 billion which compares to $18.8 billion for the entire year in 2016. 20 VC-backed IPOs have generated more than $4.6 billion of proceeds already exceeding the 2016 total.

GSV Capital portfolio company, Snap, the parent company of Snapchat, was a starting gun in 2017 pricing above the range and topping at 44%. According to NASDAQ, it's $3.4 billion IPO was the largest public offering for a U.S. technology company since Facebook's IPO in 2016. So our gain to date is approximately 50% from our Snapchat investment.

Historically, leading portfolio positions with runaway to IPO have positive -- been a positive catalyst for our stock. GSV Capital has traded a premium to innovative advance of highly anticipated IPOs from Facebook and Twitter. With our common stock currently trading approximately 50% of NAV, we think there continues to be great risk/reward opportunity for investors based on a strong momentum by GSV's top gains in an improving IPO market that is showing signs of acceleration.

Before I turn it over to Bill Tanona, our CFO, I also want to remind investors that we'll be having our Investor Day June 7 at GSVlabs, and we hope that you all can participate. Thanks for your attention.

And with that, I'll turn it over to our CFO, Bill Tanona.

Thanks, Michael. Today, I will have a very brief comment providing a financial overview of our results followed by an update on our current liquidity position.

Please turn to Slide 7. We ended the quarter with an NAV per share of $8.83. A breakdown in the change of NAV during the quarter is shown on Slide 7 that is consistent with our financial reporting. In sum, the $0.17 per share increase in NAV during the first quarter was driven by $1.50 per share of net changes in unrealized appreciation of investments followed by -- partially offset by $1.11 of net realized losses and $0.22 per share of net investment losses.

Our liquid assets ended the quarter at approximately $17.2 million consisting of approximately $1.4 million of cash, $10 million of public securities not subject to lockup agreements and $5.9 million of public securities subject to a lockup agreement. Our shares in Snap Incorporated become freely tradable on July 31st of this year.

That's it for my comments. We appreciate our stockholder support in GSV Capital and we will continue to strive to add value for our stockholders.

That concludes my comments, and we'd like to thank you for your interest. Now I'll turn it over to the operator to start the Q&A session.

(Operator Instructions) From Wells Fargo, we'll hear from Cynthia Boyle.

Specifically at one point, your Board had approved stock buyback. There's actually 2 questions. This is part of the same question. I notice you have a filing that would allow you to potentially issue additional shares below NAV with the express approval of the majority of shareholders. Can you address this issue, please?

Two different questions but thanks for them, Cynthia. So as it relates to the stock buyback, we are looking at ways to enhance shareholder value clearly with our stocks selling at a persistent -- significant discount to NAV. Finding -- one of the things when we have more liquidity than we currently have, we'd love to be doing that. It's obviously immediately accretive and a smart thing for us to do. But we have to get some liquidity before that can be achieved realistically. On the filing, I think, again, we're trying to create the maximum flexibility for things that allow us to take advantage of opportunities for GSV shareholders. Issuing stock at below NAV is technically something that we can't do without approval. And so just I don't think that's something that we anticipate doing, and it's certainly not something that we're contemplating today. But just in terms of just things that we wanted to have maximum flexibility and multiple options as we continue to evolve our business. And what I will say, just from that standpoint, we're very, very encouraged, first of all, by those -- by the companies that are in our portfolio today. If you look at our top positions, they're doing extremely well. We're also encouraged, as I mentioned, by the fact that a number of them look like they can go public in an environment that we're in and with their own business. So we think that could be helpful from a liquidity standpoint. We also think that's going to be helpful from a stock standpoint. But the filing is just something that is there to, again, provide optionality for us. But there's no intent today to ask shareholders for -- to get the majority to allow us to do that. We're just good at good housekeeping.

(Operator Instructions) Ladies and gentleman, that does conclude today's presentation. We do appreciate everyone for your participation.

Thank you.