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Operator
Good day and welcome to the Sewell Capital Second Quarter 2023 Earnings Call. Today's call is being recorded. Your lines will be on listen only. However, you will have the opportunity to ask questions at the end. This can be done by pressing star 1 on your telephone keypad to register your questions. If you require assistance at any point, please press star 0 and you'll be connected to an operator. I will now hand you over to your host, Adam Bates, to begin today's conference. Thank you.
Adam Bates
Thank you for joining us on today's call. I am joined today by the Chairman and Chief Executive Officer of Suro Capital, Mark Klein, and Chief Financial Officer, Allison Green. Please note that a slide presentation corresponding to today's prepared remarks by management is available on our website at www.surocap.com. under investor relations, events, and presentations. Today's call is being recorded and broadcast live on our website, www.surocap.com. Information is included in our press release issued today. This call is the property of Suro Capital and the unauthorized reproduction of this call in any form is strictly prohibited. I would also like to call your attention to customary disclosures in today's earnings press 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 future performance or financial condition. These statements are not guarantees of our future performance or future financial condition or results and involve a number of risks, estimates, and uncertainties, including the impact of any market volatility that may be detrimental to our business, our portfolio companies, our industry, in 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. 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 CERO Capital's latest SEC filings, please visit our website at www.cerocap.com or the SEC's website at sec.gov. Now I'd like to turn the call over to Mark Klein.
Mark Klein
Thank you, Adam. Good afternoon and thank you for joining us. We are pleased to share the results of CERO Capital's second quarter 2023. The last four months have been among the most active period Soro has had in the last couple of years. We made five investments, three in new portfolio companies and two in follow-on investments. Additionally, we have had one of our SPAC investments close its previously announced merger and two other SPACs announce agreements to merge. Additionally, on the shareholder initiative front, we completed our $13.5 million modified Dutch tender offer and today announced the extension and increase of our share repurchase program to $60 million. First of all, as to our new investments. In the private markets, we remain steadfast to our thesis that potential investments would become available in the secondary market. We believe this has begun to come to fruition in the second quarter and subsequent to quarter's end as we made investments in three new portfolio companies as well as follow-on investments and two others. During the quarter, we executed a $10 million investment in Service Titan, a software business home in commercial trades through a secondary transaction. Subsequent to quarter's end, we invested $5.8 million in Forkites, a supply chain visibility software company, again through secondary transactions. Also subsequent to quarter's end, we invested $1 million in StakeTrade, a sports betting exchange doing business as profit exchange through a primary transaction as part of the Sorrel Capital Sports Portfolio. We believe our remaining investable capital of over $100 million as of the quarter's end will enable us to continue to act on opportunities such as these. Please turn to slide four. I would now like to provide more detail on our investments starting with our $10 million secondary investment in Service Titan. Service Titan's cloud-based software platform is designed to empower trades, trade businesses in the residential and commercial HVAC, plumbing, electrical, and other sectors. Service Titan's comprehensive end-to-end solution equips contractors with essential tools to efficiently manage and expand their businesses while delivering exceptional customer experiences. Currently serving over 11,800 businesses that have previously been reported to employ 100,000 contractors, Service Titan has established a strong presence in the market. Today, technology remains a vital tool for contractors to stay ahead. According to a recent study conducted by Thrive Analytics on behalf of Service Titan, 66% of contractors see digital transformation as a critical component of their operations, and 59% of surveyed businesses reported using more than four distinct software solutions to manage their operations. As we look ahead, we believe ServiceTitan is well positioned to continue to provide to the trades market. Moving on to our $5.8 million secondary investment in Forkites. Forkites is a leading real-time supply chain visibility solution. While the concept of supply chain visibility has been around for some time, the ability to track freight trucks and shipments in real time has only been available more recently. Fork Heights has been a pioneering force behind the idea that companies should know where their goods are at all time, from the initial onset of being loaded onto a truck when they reach a final delivery destination. Executing against the idea of real-time visibility, Four Kites now tracks more than 3 million shipments daily over 200 countries and territories. The impact of Four Kites technology is evident in its impressive clientele, which includes recognized brands such as nine of the top 10 consumer packaged good companies and 18 of the top 20 food and beverage companies. Today, Four Kites helps over 1,200 of the world's most recognized brands leverage real-time visibility and unlock efficiencies that saved them millions of dollars a year. They also have been named a leader in the Gartner Magic Quadrant for real-time transportation visibility platforms for three years in a row. Since 2021, Forkites has announced strategic investments from Qualcomm Ventures, Volvo Group Venture Capital, Zebra Technologies, FedEx, and Mitsui. We believe these collaborations and potential alliances help drive forward Forkites' position as a leader in automated, interconnected, and collaborative global supply chains. We believe that Fork Heights is in a unique position to capture additional market share as they continue expanding their business and target customers with some of the most complex supply chain needs. Moving on to our $1 million investment in profit exchange through a primary transaction as part of the Suro Capital Sports portfolio. Profit Exchange is a peer-to-peer sports betting exchange focused on providing bettors the best pricing and seamless experience that is different from the incumbent operators. Bettors on the platform have the ability to request their own wagers or pick from outstanding options that are driven by other users and market makers. The company has gone through extensive licensing and regulatory steps and is now live in New Jersey with plans to expand to other legal betting states in the future. We are excited about the exchange wagering opportunity in the US, given the success of Betfair has had in the United Kingdom. And we believe Profit Exchange has both the team and the technology to execute on the large market opportunity. Next, I would like to speak to our follow-on investments. During the quarter, we made a $500,000 follow-on investment in Shogun Enterprise, which is doing business as Hearth. Hearth is a financial technology company that provides over 20,000 home improvement professionals with the tools they need to win more jobs and provide excellent customer experience, according to the company's website. We're excited to continue to support Harth's goal of bringing the market of home improvement into the digital economy. Additionally, during the quarter, we made a $500,000 follow-on investment in Payjoy. Payjoy is a provider of smartphone locking technology that has raised over $213 million of equity and debt funding to date, according to PitchBook. We're pleased to continue to invest in Payjoy's goal of expanding smartphone access to emerging markets through this technology. Please turn to slide five. Subsequent to Cordura and Combier Acquisition Corp, a SPAC in which we own both stock and warrants, successfully closed its business combination with PSQ Holdings, also known as Public Square. Public Square is a leading marketplace of patriotic businesses and consumers. According to the company's merger closing announcement, the company has seen quick adoption of its platform, with more than 1 million users and 55,000 businesses signing up in less than a year. Public Square began trading on the New York Stock Exchange under the symbol PSQH on July 20th. At quarter end, we valued our investment at approximately $1,700. Our cost basis in Columbia is approximately $2.7 million. As of the business combinations closing on July 19th, our warrants are subject to a lockup period equal to the later of 30 days or the registration statement's effectiveness. The registration statement was filed this afternoon. Our common shares are subject to a one-year lockup period with a pricing condition that would unlock our shares earlier. Allison will provide additional details on our Columbia investment later in the call. In addition, on July 11th, 2023, Altsea Acquisition Corp, a SPAC whose chief executive officer is Sam Altman, and in which we own share units, announced it signed a definitive agreement to merge with Oklo, an advanced fission technology and nuclear fuel recycling company. According to the merger announcement press release, the company has achieved significant deployment and regulatory milestones, including securing a site use permit from the United's Department of Energy and receiving a fuel award from the Idaho National Laboratory for a commercial scale advanced vision power plant in Idaho targeted to go online in either 2026 or 2027. The combined company will be named Oklo and intends to list on the New York Stock Exchange with the ticker symbol OKLO. The merger is expected to provide Oklo with up to $500 million of gross capital from Alt-C's trust account. This assumes no redemptions by Alt-C shareholders. The transaction, which has been approved by the board of directors of Oklo and Alt-C, is expected to close in late 2023 or early 2024. subject to approval by ALTSI shareholders, Oklahoma shareholders, ALTSI having available cash of closing of at least $250 million and other customary closing conditions. And on August 1st, 2023, Churchill Capital 7, a SPAC in which we own and direct shares of our units to the sponsor vehicle, announced it signed a definitive agreement to merge with CORPAC. a corporate compounder specializing in acquiring small and medium-sized enterprises, also known as SMEs, in the United Kingdom. According to the merger announcement press release, Corpac has delivered meaningful financial returns and sustained value over multiple economic cycles. It has achieved a compound annual growth rate for revenue of 16% from 2018 to 2022, with average organic growth outpacing the UK GDP's growth during the same period. Corpac's portfolio consists of 41 businesses in various industries, providing diversification and contributing to the resilience through economic cycles. Upon closing of the transaction, the combined company will be named Corpac, and it tends to be listed on the New York Stock Exchange. The transaction is expected to deliver up to $592 million in gross proceeds from Churchill Seven's trusted account, assuming no redemptions. The transaction has been approved by the Board of Directors of CORPAC and Churchill 7 and is expected to close in late 2023 or early 2024, subject to various approvals. And at least $350 million of dollars delivered net of transaction fees. At quarter end, the value of our investments in ALTSI and Churchill 7 were marked equal to our cost basis of approximately $250,000 and $300,000 respectively. Turning to the second quarter, we ended the quarter with a net asset value of $186.7 million or $7.35 per share. This NAV compares to a net asset of $7.59 per share in Q1 2023 and $9.24 in Q2 2022. Please turn to slide six. Turning to our top five positions, I first want to highlight our cash position. As of quarter end, our cash and short-term U.S. Treasury's available investment were approximately $100 million, representing 38% of our gross assets. As we have previously discussed, we believe having cash in this environment advantageously positions us to continue seeking out new opportunities emerging from current market conditions. Zero Capital's top five positions as of June 30th were Lernio, Columbia, now PSQ Holdings, Blink Health, Stormwind, and Locust Robotics. These positions accounted for approximately 51% of the investment portfolio at fair value. Additionally, as of June 30th, our top 10 positions accounted for 78% of the investment portfolio. Transitioning to our public investments, as previously stated, it is our objective to sell our public positions when restrictions expire and is relative with stability in a given public position's trading. In line with this approach, we've continued to monetize our public unrestricted positions. During this quarter and throughout the last month, we monetized a sizable portion of our position in Nextdoor and plan to continue optimistically monetizing our public positions as market conditions improve. As previously discussed, we continue to focus on shareholder-friendly initiatives. To that end, we completed our modified Dutch tender auction, which resulted in a purchase of 3 million shares of common stock at $4.50 per share. Alison will discuss the results of the tender offer in more detail shortly. In addition to the tender offer, on August 7th, our Board of Directors authorized an additional $5 million share repurchases and an extension of the share repurchase program through October 31, 2024. The expansion brings the total authorized under the share repurchase program to $60 million. Given the significant discount at which our stock is trading compared to net asset value, we determine the current continuation of the share repurchase program to be an efficient and accretive deployment of capital. As public and private market volatility persists, we remain patient and selective as we evaluate new opportunities. We believe our considerable investable capital affords us an opportunity to continue to add high-quality companies to our portfolio. Thank you for your attention, and with that, I will hand it over to Alison Green, our Chief Financial Officer.
Adam
Thank you, Mark. I would like to follow Mark's update with a more detailed review of our recent shareholder initiatives, our investment portfolio activity, our financial results as of June 30th, 2023, and our liquidity position as of quarter end. First, I will provide detail on the recent increase in extension of the share or purchase program. Please turn to slide seven. As Mark mentioned earlier, Cerro Capital is committed to initiatives that enhance shareholder value. As such, on August 7th, our board of directors authorized a $5 million expansion to the share or purchase program to $60 million and an extension of the share or purchase program through October 31st, 2024. Since the inception of the Share of Purchase Program in August 2017, we have repurchased a total of 5,832,008 shares of our common stock for a total deployment of approximately $38.6 million of the $60 million authorized by the Board. Approximately $21.4 million remain authorized under the Share of Purchase Program, currently set to expire on October 31, 2024. In addition to the Share of Purchase Program, as previously reported, On March 17, 2023, our Board of Directors approved a modified Dutch auction tender offer, which commenced on March 21, 2023, to purchase up to 3 million shares of our common stock at a price per share not less than $3 and not greater than $4.50 per share, using available cash. The tender offer expired on April 17, 2023. Pursuant to the terms of the tender offer, on April 21, 2023, we repurchased 3 million shares at a price per share of $4.50. This represents 10.6 of then outstanding shares. The per share purchase price of properly tendered shares represented 60.9% of net asset value per share as of December 31st, 2022. The company used available cash to fund the purchase of shares of its common stock and the tender offer and to pay for all related fees and expenses. The purchase price of $4.50 per share represents a 39.1% discount the December 31st, 2022 NAV per share and a 40.7% discount March 31st, 2023 NAV per share. Again, the tender offer comes in addition to the previously discussed share repurchase program originally authorized by our Board of Directors in August 2017. Next, I'd like to provide a more detailed update on our investment portfolio activity for the second quarter and subsequent to quarter end. This does not include investing in short-term U.S. Treasuries. During the second quarter, we invested a total of $10.5 million in new and follow-on investments, New investments during the second quarter include a $10 million investment in Service Titan's common shares via secondary transaction, a $500,000 fall-on investment in Pageway's Simple Agreement for Future Equity, or SAFE. Over the course of the second quarter, we began to monetize our Nextdoor common shares. We sold 950,000 common shares of Nextdoor for approximately $2.9 million of net proceeds, resulting in a net realized loss of approximately $2.4 million. In addition to sales of next-door public stocks, we received approximately $300,000 in proceeds from 2nd Avenue related to principal repayment and interest on the 15% term loan due December 2023, as well as other investment dividend and interest income. During the quarter, we received an addition of approximately $253,000 from our limited partner fund investment and True Global Ventures 4+. Finally, as of May 4th, we abandoned our investment in Aussie Media Inc. Next, I would like to provide additional details on our investments in Columbia. In connection with this investment, as of the business combinations closing on July 19th, we held 1,976,032 Class A common shares and 2.7 million warrants. Our Class A common shares are not transferable until the earlier of one year after the business combinations closing date, or if the closing price of the Class A common stock equals or exceeds $12 per share for any 20 trading days within any 30 trading day period, commencing at least 150 days after the business combinations closing. Our warrants are subject to a 30-day lockup period after the business combinations closing. Subsequent to quarter end, we invested a total of $7.3 million in new and fall-on investments. These include a $5.8 million investment in four types of common shares via secondary transactions, a $1 million new investment through Cerro Capital Sports LLC into Stake Trade Simple Agreement for Future Equity, again called a SACE, and a $500,000 follow-on investment in Hearth Series B4 Preferred Shares. Subsequent to quarter end, we sold 589,996 shares of Nextdoor for approximately $1.8 million of net proceeds, resulting in a net realized loss of approximately $1.4 million. We also received approximately $100,000 in net proceeds from Second Avenue, related to principal repayment and interest on the 15% term loan due December 2023, as well as other investment dividends. Please turn to slide eight. Segmented by six general investment themes, the top allocation of our investment portfolio at quarter end was to financial technology and services, representing approximately 35% of the investment portfolio at fair value. Education technology was the second largest category, representing approximately 28% of the portfolio. The marketplaces category accounted for approximately 16% of our investment portfolio, and approximately 14% of our portfolio was invested in cloud and big data companies. Social and mobile accounted for approximately 7% of the fair value of our portfolio, and sustainability accounted for less than 1% of the fair value of our portfolio as of June 30th. Please turn to slide nine. We are pleased to report we ended the second quarter of 2023 with an NAV per share of $7.35, which is consistent with our financial reporting. The decrease in NAV per share from $7.59 at the end of Q1 2023 to $7.35 as of June 30th was primarily driven by a 52 cent per share decrease resulting from net realized losses on investments during the quarter. Also contributing to the decrease was a 15 cent per share decrease due to net investment loss. The decrease in NAV per share was primarily and partially offset by a 34 cent per share increase related to the repurchase of common stock as a result of the tender offer and a sixth per share increase related to quarterly adjustments to unrealized investment value in our portfolio. Finally, I would like to take a moment to review Serocapital's liquidity position as of June 30th. We ended the quarter with approximately $112 million of liquid assets, including approximately $24.5 million in cash, $75.9 million in short-term U.S. treasuries, and approximately $11.6 million in unrestricted public securities. The approximately $11.6 million of unrestricted public securities held as of quarter end represent our remaining shares in Forge Global, Nextdoor, New Lake Capital Partners, and Skillsoft. At June 30th, 2023, there were 25,398,640 shares of the company's common stock outstanding. That concludes my comments. We would like to thank you for your interest and support of Thorough Capital. Now I will turn the call over to the operator to start the Q&A session. Operator?
Operator
Thank you. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Please leave me your question to only one. Thank you. We have our first question from John Hickman from Leidenbach. Please go ahead.
John Hickman
Hello.
Mark Klein
Hey, John.
John Hickman
Hi. Can you just clarify for me? I'm sure Allison mentioned this, but I think I missed it and all the other numbers. So apart from the tender offer, how much is remaining? How many dollars is remaining on the authorized share buyback program?
Mark Klein
Slightly in excess of $21 million.
John Hickman
$21 million. And that's like totally up to... whatever happens day-to-day with the stock price and whatever management wants to do.
Mark Klein
So, John, as you know, we've discussed and we've discussed on these calls many times before, we're highly focused on shareholder initiatives, whether it's cost reductions or it's accretive purchases of our own securities. We've been doing it for years, and we've done two Dutch tender offers within almost a 12-month period of time. So we recognize the discount that the stock is trading at, and the board authorized more to have at our disposal to deploy when we see that that's the most efficient use of our capital. And thanks again for your support. Really appreciate it. Thank you.
John
Thank you.
Operator
Our second question comes from Jason Monkpang from Private Investor. Please go ahead.
Jason Monkpang
Hi, thanks for taking my question. I was hoping you could elaborate a little bit further on the Columbia Holdings in the fund. If I'm looking at the 10Q, obviously it was showing Class B units and Class W units, but you know, a lot of the action has happened subsequent to quarter end. And just, just curious if you could, you know, guide us a little bit on how to think about those holdings going forward, or if they were marked today. Thank you.
Mark Klein
And for your question, and we, we, we, I think Alison did address it in her prepared remarks, but we own approximately slightly under 2 million common shares. We own 2.7 million warrants. The warrants have a lockup period that ends 30 days after the deal closed, which was July 19th, so approximately August 19th. Assuming that there's a valid registration statement, they did file the registration statement today. So when that registration statement becomes effective, or August 19th, whatever is the latest, those warrants will become unlocked up. The stock is locked up for a year. unless the stock trades above $12 for 20 out of 30 days from the middle of December on. So at the present time, we own just 1.9 million shares and 2.7 million warrants. And, again, the action did occur subsequent to quarter's end. So thank you.
Operator
Thank you. There are no further questions. I would like to hand the call over to your host, Mark Klein, to conclude today's conference. Thank you.
Mark Klein
Thank you, everybody, for attending our call. Thank you for your support. If you have any other further questions, please reach out to us directly. Thank you very much.
Operator
Thank you for joining today's call. Thank you for your participation. You may now disconnect.
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