Sutter Rock Capital Corp. (“Sutter Rock” or the “Company”) (Nasdaq:SSSS) today announced financial results for the quarter ended September 30, 2019.  Net assets totaled approximately $213.9 million, or $11.24 per share, at September 30, 2019, as compared to $9.89 per share at December 31, 2018 and $10.58 per share at September 30, 2018.  On November 5, 2019, Sutter Rock’s Board of Directors declared a dividend in the amount of $0.20 per share payable on December 12, 2019 to the Company’s common stockholders of record as of the close of business on December 2, 2019.

“We are pleased to announce that our Board of Directors has declared a dividend in the amount of $0.20 per share,” said Mark Klein, President and Chief Executive Officer of Sutter Rock.  “This dividend is driven by monetizations in Sutter Rock’s public and private securities.  Based on ongoing portfolio activity and the results of the recently announced tender offer, we anticipate declaring an additional de minimis dividend by year end.”

“Additionally, our portfolio companies continue to demonstrate strong operating fundamentals and we are excited about their positioning in their respective markets,” Klein continued.  “We believe that our portfolio is undervalued and as such we continue to take initiatives to drive shareholder value, including the $10.0 million Modified Dutch Auction Tender.”

Investment Portfolio as of September 30, 2019

At September 30, 2019, Sutter Rock held positions in 25 portfolio companies with an aggregate fair value of approximately $199.8 million.  In line with 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 55% of the total portfolio at fair value as of September 30, 2019 and for approximately 87% of Sutter Rock’s market capitalization as of November 5, 2019.

Top Five Investments as of September 30, 2019

$ in millions Fair Value   % of Total Portfolio
Coursera, Inc. $ 34.8   17.4 %
Palantir Technologies, Inc.   30.4   15.2  
Ozy Media, Inc.   16.9   8.4  
Course Hero, Inc.   16.0   8.0  
Lyft, Inc.   12.4   6.2  
Total (rounded) $ 110.4   55.3 %
           

Third Quarter 2019 Investment Portfolio Activity

During the three months ended September 30, 2019, Sutter Rock exited its remaining investment in Dropbox, Inc.:

Portfolio Company Shares Sold Average Net Share Price (1) Net Proceeds (in millions) Realized Gain(in millions)
Dropbox, Inc. 437,530 $ 21.03 $ 9.2 $ 1.7
               

__________________

  1. The average net share price is the net share price realized after deducting all commissions and fees on the sale(s), if applicable.

Subsequent to quarter-end, through November 6, 2019, Sutter Rock exited its entire investment in Lyft, Inc.:

Portfolio Company Shares Sold Average NetShare Price (1) Net Proceeds(in millions) Realized Gain(in millions)
Lyft, Inc. 304,829 $ 43.57 $ 13.3 $ 9.0
               

__________________

  1. The average net share price is the net share price realized after deducting all commissions and fees on the sale(s), if applicable.

During the three months ended September 30, 2019, Sutter Rock funded the following new and follow-on investments:

Portfolio Company Investment Transaction Date Amount Invested
Aspiration, Inc. Convertible Note 8/9/2019 $0.3 million
GreenAcreage Real Estate Corp. Common Stock 8/13/2019 $7.5 million
Treehouse Real Estate Investment Trust, Inc. Common Stock 9/11/2019 $7.5 million
       

During the three months ended September 30, 2019, Sutter Rock amended the structure of its investment in NestGSV, Inc.  The amended agreement restructured Sutter Rock’s equity positions, not including warrants, into a derivative security.  The agreement is intended to protect Sutter Rock’s downside while affording Sutter Rock upside participation.  Sutter Rock will maintain its outstanding convertible note with amended terms and warrant positions in NestGSV, Inc.

Third Quarter 2019 Financial Results

  Quarter EndedSeptember 30, 2019 Quarter EndedSeptember 30, 2018
   $ in millions  per share  $ in millions  per share
         
Net investment loss $ (4.7 ) $ (0.24 ) $ (3.9 ) $ (0.19 )
         
Net realized gain/(loss) on investments   1.8     0.09     (10.1 )   (0.49 )
         
Net change in unrealized appreciation of investments, net of tax benefit(1)   8.2     0.42     14.4     0.70  
         
Net change in net assets resulting from operations $ 5.3   $ 0.27   $ 0.3   $ 0.02  
         
Stock-based compensation(2)   1.4     0.08     -     -  
         
Repurchase of common stock(3)   (3.9 )   0.14     (4.1 )   0.10  
         
Increase/(decrease) in net asset value(4) $ 2.8   $ 0.49   $ (3.7 ) $ 0.12  
                         

__________________

  1. Includes related net tax benefit of $0.2 million for the quarter ended September 30, 2018.
  2. On June 5, 2019, our Board of Directors adopted, and our stockholders approved, an equity-based incentive plan (“the 2019 Plan”), which authorizes equity awards to be granted for up to 1,976,264 shares of our common stock.  On July 17, 2019, stock options providing the right to purchase up to 1,125,000 shares were granted under the 2019 Plan.  During the quarter ended September 30, 2019, the Company recognized a stock-based compensation expense of $1.4 million; the amount of cash received from the exercise of stock options was $0. This amount represents the estimated annual expense.
  3. During the quarters ended September 30, 2019 and 2018, the Company repurchased 605,327 and 575,958 shares of Sutter Rock Capital Corp. common stock for approximately $3.9 million and $4.1 million in cash, respectively.  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.
  4. Total may not sum due to rounding.

Weighted-average common basic shares outstanding were approximately 19.5 million and 20.5 million for the quarters ended September 30, 2019 and 2018, respectively.

Sutter Rock’s liquid assets were approximately $57.6 million as of September 30, 2019, consisting of approximately $45.2 million of cash and $12.4 million of public securities.

Dividend Declaration for Third Quarter 2019

On November 5, 2019, Sutter Rock’s Board of Directors declared a dividend of $0.20 per share payable on December 12, 2019 to the Company’s common stockholders of record as of the close of business on December 2, 2019. The dividend will be paid in cash.

Modified Dutch Auction Tender Offer

On October 21, 2019, the Company commenced a modified “Dutch Auction” tender offer (the “Tender Offer”) to purchase for cash up to $10.0 million in shares of its common stock from its stockholders.  In accordance with the terms of the Tender Offer, the Company intends to select the lowest price per share, not less than $6.00 per share and not greater than $8.00 per share, less any applicable withholding taxes and without interest, that will allow the Company to purchase that number of shares having an aggregate purchase price of $10.0 million. Upon the terms and subject to the conditions of the Tender Offer, if shares having an aggregate purchase price of less than $10.0 million are properly tendered and not properly withdrawn, the Company will purchase all shares properly tendered and not properly withdrawn.  The Company expects to use available cash to fund any purchases of its shares of common stock in the Tender Offer and to pay for all related fees and expenses.  The Tender Offer will expire at 5:00 P.M. ET, on November 20, 2019, unless extended by the Company.

Share Repurchase Program

During the three months ended September 30, 2019, the Company repurchased an additional 605,327 shares of its common stock for an aggregate purchase price of $3.9 million.  Subsequent to quarter-end, through November 6, 2019, the Company repurchased an additional 28,000 shares under the Share Repurchase Program for an aggregate purchase price of $0.2 million.

Under the publicly announced Share Repurchase Program, as of November 6, 2019, the Company has repurchased 3,167,484 shares of its common stock for approximately $20.0 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 today at 2:00 p.m. PT (5:00 p.m. ET).  The conference call access number for U.S. participants is 334-777-6978, and the conference call access number for participants outside the U.S. is +1 800-367-2403.  The conference ID number for both access numbers is 9176331.  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 5:00 p.m. PT (8:00 p.m. ET) on November 13, 2019 by dialing 888-203-1112 (U.S.) or +1 719-457-0820 (International) and using conference ID number 9176331.

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. www.sutterrock.com

Forward-Looking Statements

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 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.

Contact Sutter Rock Capital Corp. (650) 235-4769 IR@sutterrock.com

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

SUTTER ROCK CAPITAL CORP. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)

September 30,  2019   December 31,  2018
ASSETS  
Investments at fair value:  
Non-controlled/non-affiliate investments (cost of $94,863,935 and $105,869,607, respectively) $ 161,350,359     $ 170,067,233  
Non-controlled/affiliate investments (cost of $47,576,383 and $42,333,854, respectively) 30,241,445     5,931,863  
Controlled investments (cost of $13,291,886 and $22,960,942, respectively) 8,251,634     22,816,733  
Total Portfolio Investments 199,843,438     198,815,829  
Investments in U.S. Treasury bills (cost of $49,993,250 and $99,982,067, respectively) 49,995,500     99,994,000  
Total Investments (cost of $205,725,454 and $271,146,470, respectively) 249,838,938     298,809,829  
Cash 45,155,784     28,184,163  
Escrow proceeds receivable 2,086,145     2,494,582  
Interest and dividends receivable 125,348     255,670  
Deferred financing costs 5,502     267,541  
Prepaid expenses and other assets(3) 2,332,410     207,769  
Total Assets 299,544,127     330,219,554  
LIABILITIES  
Accounts payable and accrued expenses(3) 2,142,052     490,687  
Accrued incentive fees, net of waiver of incentive fees(1)     4,660,472  
Accrued management fees, net of waiver of management fees(1)     415,056  
Accrued interest payable     475,000  
Payable for securities purchased 44,742,449     89,480,103  
Deferred tax liability     885,566  
4.75% Convertible Senior Notes due March 28, 2023(2) 38,710,596     38,434,511  
Total Liabilities 85,595,097     134,841,395  
   
Net Assets $ 213,949,030     $ 195,378,159  
NET ASSETS  
Common stock, par value $0.01 per share (100,000,000 authorized; 19,041,519 and 19,762,647 issued and outstanding, respectively) $ 190,415     $ 197,626  
Paid-in capital in excess of par 189,155,021     192,322,399  
Accumulated net investment loss (23,116,027 )   (16,228,294 )
Accumulated net realized gain/(loss) on investments 3,606,136     (7,691,365 )
Accumulated net unrealized appreciation of investments 44,113,485     26,777,793  
Net Assets $ 213,949,030     $ 195,378,159  
Net Asset Value Per Share $ 11.24     $ 9.89  
               

__________________________________________________(1) This balance references a related-party transaction. (2) As of September 30, 2019 and December 31, 2018, the 4.75% Convertible Senior Notes due March 28, 2023 had a face value of $40,000,000. (3) This balance includes a right of use asset and corresponding operating lease liability, respectively.

SUTTER ROCK CAPITAL CORP. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended September 30,   Nine Months Ended September 30,
  2019   2018   2019   2018
INVESTMENT INCOME          
Non-controlled/non-affiliate investments:          
Interest income $ 298,515     $ 164,310     $ 635,187     $ 174,922  
Non-controlled/affiliate investments:          
Interest income 81,711     65,790     201,304     521,685  
Controlled investments:          
Interest income     16,252     58,937     41,153  
Dividend income         200,000     350,000  
Total Investment Income 380,226     246,352     1,095,428     1,087,760  
OPERATING EXPENSES          
Management fees(1)     1,345,090     848,723     3,954,732  
Incentive fees/(Reversal of incentive fee accrual)(1)     804,520     (4,660,472 )   4,863,939  
Costs incurred under Administration Agreement(1)     355,599     306,084     1,176,857  
Directors’ fees 99,620     86,250     272,120     258,750  
Professional fees 807,143     552,179     4,179,093     1,218,875  
Compensation expense 3,070,409         3,702,517      
Interest expense 591,512     1,311,534     1,795,885     3,925,292  
Income tax expense 954     (6,235 )   34,666     142,264  
Other expenses 512,792     107,688     1,504,545     756,994  
Total Operating Expenses 5,082,430     4,556,625     7,983,161     16,297,703  
Management fee waiver(1)     (402,074 )       (892,421 )
Incentive fee waiver(1)             (5,000,000 )
Total operating expenses, net of waiver of management and incentive fees 5,082,430     4,154,551     7,983,161     10,405,282  
Net Investment Loss (4,702,204 )   (3,908,199 )   (6,887,733 )   (9,317,522 )
Realized Gains/(Losses) on Investments:      
Non-controlled/non-affiliated investments 1,772,961     (10,119,771 )   23,632,332     (7,532,483 )
Non-controlled/affiliate investments         (12,334,831 )    
Controlled investments             (680 )
Net Realized Gain/(Loss) on Investments 1,772,961     (10,119,771 )   11,297,501     (7,533,163 )
Realized loss on partial repurchase of 5.25% Convertible Senior Notes due 2018             (397,846 )
Change in Unrealized Appreciation/(Depreciation) of Investments:            
Non-controlled/non-affiliated investments (7,998,030 )   16,245,474     2,279,117     36,655,159  
Non-controlled/affiliate investments 11,264,416     (2,350,413 )   19,067,052     (10,979,378 )
Controlled investments 4,924,309     247,314     (4,896,043 )   6,472,584  
Net Change in Unrealized Appreciation/(Depreciation) of Investments 8,190,695     14,142,375     16,450,126     32,148,365  
Benefit from taxes on unrealized depreciation of investments     214,404     885,566     1,225,275  
Net Change in Net Assets Resulting from Operations $ 5,261,452     $ 328,810     $ 21,745,460     $ 16,125,108  
Net Change in Net Assets Resulting from Operations per Common Share:            
Basic $ 0.27     $ 0.02     $ 1.11     $ 0.77  
Diluted(2) $ 0.25     $ 0.02     $ 1.00     $ 0.72  
Weighted-Average Common Shares Outstanding      
Basic 19,472,785     20,462,626     19,650,651     20,858,192  
Diluted(2) 23,204,129     20,462,626     23,381,995     27,728,434  
                       

__________________________________________________(1) This balance references a related-party transaction. (2) For the three months ended September 30, 2018, 7,173,218 potentially dilutive common shares were excluded from the weighted-average common shares outstanding for diluted net change in net assets resulting from operations per common share because the effect of these shares would have been anti-dilutive. For three and nine months ended September 30, 2019 and the nine months ended September 30, 2018, 0 potentially dilutive common shares were excluded from the weighted-average common shares outstanding for diluted net change in net assets resulting from operations per common share.

SUTTER ROCK CAPITAL CORP. AND SUBSIDIARIESFINANCIAL HIGHLIGHTS (UNAUDITED)

  Three Months Ended September 30,   Nine Months Ended September 30,
    2019   2018   2019   2018
Per Basic Share Data                
Net asset value at beginning of the period   $ 10.75     $ 10.46     $ 9.89     $ 9.64  
Net investment loss(1)   (0.24 )   (0.19 )   (0.35 )   (0.45 )
Net realized gain/(loss) on investments(1)   0.09     (0.49 )   0.57     (0.36 )
Realized loss on partial repurchase of 5.25% Convertible Senior Notes due 2018(1)               (0.02 )
Net change in unrealized appreciation of investments(1)   0.42     0.69     0.84     1.54  
Benefits from taxes on unrealized depreciation of investments(1)       0.01     0.05     0.06  
Repurchase of common stock   0.14     0.10     0.17     0.17  
Stock-based compensation   0.08         0.07      
Net asset value at end of period   $ 11.24     $ 10.58     $ 11.24     $ 10.58  
Per share market value at end of period   $ 6.24     $ 6.91     $ 6.24     $ 6.91  
Total return based on market value(2)   (2.50 )%   0.73 %   19.54 %   26.79 %
Total return based on net asset value(2)   4.56 %   1.15 %   13.65 %   9.75 %
Shares outstanding at end of period   19,041,519     20,174,955     19,041,519     20,174,955  
Ratios/Supplemental Data:          
Net assets at end of period   $ 213,949,030     $ 213,403,364     $ 213,949,030     $ 213,403,364  
Average net assets   $ 215,020,159     $ 214,704,044     $ 207,111,511     $ 210,108,076  
Ratio of gross operating expenses to average net assets(3)   7.45 %   8.51 %   6.08 %   10.18 %
Ratio of incentive fee waiver to average net assets   %   %   %   (2.38 )%
Ratio of management fee waiver to average net assets   %   (0.19 )%   %   (0.42 )%
Ratio of income tax provision to average net assets   %   %   (0.43 )%   %
Ratio of net operating expenses to average net assets(3)   7.45 %   8.32 %   5.65 %   7.38 %
Ratio of net investment loss to average net assets(3)   (8.77 )%   (7.30 )%   (4.46 )%   (5.95 )%
Portfolio Turnover Ratio   4.80 %   2.98 %   12.72 %   3.08 %
                         

__________________________________________________(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, including the $5.0 million accrued incentive fee forfeiture pursuant to the Waiver Agreement, are not annualized. For the three and nine months ended September 30, 2019, the Company excluded $0 and $(1,769,820) of non-recurring expenses and did not annualize the income tax provision.  For three and nine months ended September 30, 2018, the Company excluded $0 and $352,667 of non-recurring expenses and did not annualize the incentive fee waiver. 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.

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