Suro Capital Corp. Q1 FY2026 Earnings Call

Welcome to the Suro Capital's first quarter 2026 earnings call. My name is Alan and I will be your coordinator for today's event. Please note this call is being recorded and for the duration, 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. If you require assistance at any time, please press star 0 and be connected to an operator. I will now hand you over to your host, Evan Schlossman, to begin today's conference queue.

Thank you for joining us on today's call. I am joined by the Chairman and Chief Executive Officer at Surro 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 at our website at www.surrocap.com under Investor Relations Events and Presentations. Today's call is being recorded and broadcast live on our website, www.surrocap.com. Replay information is included in our press release issue today. This call is the property of Cerro Capital, and the 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 our 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 risk estimates and uncertainties, including the impact of 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. 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 of the SEC. With respect to the externalization, these risks and uncertainties include but are not limited to the ability to obtain the required stockholder approval, the ability to retain key personnel, the ability to realize anticipated benefits of the externalization, and the impact of the externalization on the company's business, financial condition, and result of operations. Management does not undertake to update its forward-looking statements unless required to do so by law. To obtain copies of Surro Capital's latest SEC filings, please visit our website at www.surrocap.com or the SEC website at sec.gov. Now I would like to

turn the call over to Mark Klein. Thank you, Evan. Good afternoon, everyone, and thank you for joining us. This is a defining moment for Surro Capital. Our strong performance in 2025 carried directly into the first quarter of 2026. For the quarter, our net asset value increased from $8.09 per share to $14.24 per share. That is a $6.15 per share increase or approximately 76% quarter over quarter. This is the largest quarter-over-quarter NAB increase in our history. This increase reflects the strength of our portfolio and the quality of the companies we have invested in. It also reinforces the strategy we have followed for more than a decade, giving public market investors access to high-growth, venture-backed private companies that are otherwise difficult to access. We believe this access is especially valuable when it is paired with selectivity. Identifying important private companies before their strategic is broadly reflected in public market awareness. At the same time, NAV is a point-in-time measurement. It does not by itself capture the full opportunity we believe remains ahead. The larger story is what is in front of us as our portfolio companies continue to mature, rapidly, scale their businesses, and move toward potential liquidity events. Several recent financing illustrate the larger story. Woof recently announced a $575 million Series G financing at a $10.1 billion valuation. The company reported that 2.5 million members globally, 103% year-over-year bookings growth in 2025, a $1.1 billion exit run rate, and positive operating cash flow in 2025. For us, Whoop sits within a broader shift toward health, longevity, and actionable self-knowledge. As the category evolves, we believe Whoop can benefit from AI's ability to convert personal data into more useful, individualized guidance for users. OpenAI closed its latest financing round with $122 billion in committed capital at an $852 billion post-money valuation. This financing speaks to the scale of capital formation around artificial intelligence. AI is no longer a narrow software category. It is becoming a foundational technology layer across compute, data centers, enterprise software, developer tools, healthcare, education, and productivity. FastData was valued at $30 billion in its recent Series F Financing, more than tripling its prior $9.1 billion valuation from 2023. The round included approximately $1 billion of primary and secondary capital and reflects continued demand for infrastructure supporting artificial intelligence, including data centers and high-performance computing. Canva launched an employee stock sale at a reported $42 billion valuation led by existing shareholder Fidelity with JPMorgan Asset Management joining as a new investor. The transaction came as Canva continued investing in AI tools for its more than 265 million monthly active users. Taken together, these are not isolated events. They tell a consistent story. Private market capital is concentrating around scaled private companies with durable growth, strategic relevance, and credible paths to liquidity. These financings are significant not only for their scale, but for what they signal. Private market capital continues to validate the companies and infrastructure layers that we believe are becoming increasingly important to the next phase of technology. Our objective is to build exposure to those opportunities with discipline before they are broadly available. We are not simply observing this market. We continue to participate in it. Recent hyperscaler results continue to reinforce the scale of demand behind AI infrastructure. The next phase of AI growth depends not only on models and applications, but also on the compute capacity, power, data center infrastructure, and specialized systems required to support them. During the quarter, we funded $5 million to a Magnetar special purpose vehicle invested in TensorWave. This investment was part of a commitment of up to $20 million. The remaining commitment of up to $15 million is subject to the satisfaction of certain conditions, including company-level operational milestones. TensorWave fits within our broader investment strategy and further expands our exposure to AI infrastructure. We view it as the type of opportunity we seek to identify before it becomes more broadly familiar to the broad investor base. The company is positioned around a significant technology shift with meaningful room to scale in part of the market where demand for performance, capacity, and specialized infrastructure remains structurally important. That approach is consistent with the discipline we applied in building our exposure to CoreWeave, where we sought exposure to an important infrastructure company before its role in the AI ecosystem was more broadly recognized. We also believe the stage structure gave us a measured way to increase exposure to TensorFlow within a framework tied to execution. More broadly, we intend to remain disciplined in how we deploy capital, while being decisive when we see opportunities align with our strategy and with areas we believe long-term value is being created. This participation continued after year end. Following quarter's end, we made a new investment of approximately $10 million in ClickHouse, a company we believe is well-positioned at the intersection of data infrastructure, artificial intelligence, and real-time analytics. ClickHouse helps enterprises query, analyze, and act on massive volumes of data quickly and efficiently, a capability that is becoming increasingly important across observability, security analytics, product telemetry, cloud data warehousing, and AI-driven applications. This matters because as AI moves from experimentation to deployed enterprise use cases, the infrastructure required to store, analyze, and act on data and scale becomes increasingly critical. ClickHouse's relevance is already visible in demanding AI environments, including Anthropic, which ClickHouse has publicly described as using its technology to scale observability for all AI workloads. ClickHouse is another example of the kind of company we seek to invest in. It is already a scaled venture-backed technology leader, but we believe its strategic relevance is becoming greater as real-time data infrastructure becomes more important to enterprise AI deployment. For CERO, the opportunities to build exposure while companies like this remain private. Because this investment was made after the quarter's end, it is not part of our March 31 net asset value. It is, however, an important example of how we intend to build a future portfolio. Now, I want to turn to what we believe is one of the most important strategic steps in CERO Capital's history. Our Board of Directors approved a proposal to transition CERO from an internally managed BDC to an externally managed structure through Neostar Advisors, LLC, an advisor jointly owned by members of our current team and Magnetor. The proposal remains subject to stockholder approval. This is not the sale of the company. The company will continue to be a publicly traded BDC, and our investment focus will remain centered on high-growth, venture-backed private companies. While the core strategy will remain the same, we believe the proposed structure will enhance the platform, supporting the strategy, and better positioning us to pursue high-quality investment opportunities. Since 2019, our internally managed structure has served us well. Our team has built the portfolio, navigated vol to markets, returned significant capital to stockholders, and delivered meaningful value. The NAV increase this quarter is evidence of that work. At the same time, the market has evolved. Leading private companies have more choices today, and they increasingly look for investors who can bring more than capital, including scale, relationships, strategic support, capital markets experience, and a long-term partnership. We believe the proposed partnership with Magnetar positions us to compete more effectively in this environment. Magnetar brings significant scale with approximately $18 billion in asset under management, more than 20 years of investment experience, and a track record of of investing in differentiated technology, venture-backed companies across artificial intelligence and technology-enabled sectors. The strategic logic is straightforward. We are preserving the investment strategy and leadership continuity that brought us to this point while adding magnitude scale, sourcing reach, diligence capabilities, portfolio support, and institutional infrastructure. In addition, Magnetar's experience across the AI infrastructure ecosystem gives us additional depth in one of our core focus areas and in a market we believe will be increasingly important to broader technology growth. As many of these businesses become more capital intensive, Magnetar's experience with costs of capital, balance sheet management, and transaction structuring becomes even more relevant. We also expect the proposed structure to strengthen our origination and diligence capabilities while creating a broader platform to support portfolio companies. Put simply, we believe this gives us greater scale, broader capital solutions, and deeper institutional capabilities to support private companies as they grow. If approved by stockholders, we believe this combination would position us to be one of the largest platforms focused on publicly traded access to venture-backed private companies. Public venture capital has historically been a fragmented market, and we believe greater scale, stronger infrastructure, and deeper sourcing capability can matter in competing for high-quality private company investments. This would be a significant change and positive for us in our competitive position. For stockholders and portfolio companies, we believe the benefit would be a broader platform, deeper resources, and a stronger ability to support ambitious private companies building in large markets. I want to speak directly about shareholder alignment. Being shareholder friendly is not just a slogan for us. It is how we evaluate major decisions. The value created in the existing portfolio belongs to our shareholders. Under the proposed advisory agreement, pre-existing investments are not included in the incentive fee calculation. In plain English, the value already created in this portfolio is preserved for stockholders and is not subject to a new incentive fee simply because we are changing the management structure. We believe this is an important and stockholder-friendly feature. Additionally, subject to the conditions described in the proxy materials, an affiliate of Magnetar is also expected to invest $20 million in our company. We believe this is a meaningful signal of commitment and alignment. Magnetar and the board think like owners because we are owners. Our goal is not simply to report a higher NAV. Our goal is to convert portfolio value into long-term stockholder value. This means disciplined investing, thoughtful liquidity management, expense discipline, transparency, and continued focus on returning value to our stockholders. Let me close with this. This is one of the most important moments in Surro Capital's history. We delivered the largest quarter-over-quarter NAV increase we have ever reported. Our NAV increased approximately 76% quarter-over-quarter. This is not a routine result. It reflects the strength of our portfolio, the quality of companies we have backed, and the power of our strategy, giving public stockholders access to high-growth, venture-backed companies aligned with important technology change trends. We do not view the quarter as the finish line, but as the beginning of the new chapter. Our recent investment activity, including Tensorwave and ClickHouse, reflects the same discipline, identifying private companies where strategic relevance is emerging, building exposure selectively, and giving public stockholders access to opportunities that remain largely outside of the public markets. Our proposed partnership with Magnetar through Neostellar Advisors is designed to provide zero capital with greater scale, stronger infrastructure, broader sourcing reach, and deeper diligence capabilities as we seek to invest in and partner with the next generation of high-growth private companies. NAV captures the progress we have made. The opportunity is what comes next. Our focus now is straightforward. Build on this momentum, maintain our discipline, and translate portfolio progress into lasting shareholder value. To our stockholders, thank you for your continued trust and support. With that, I will turn the call over to Allison Green to review our financial results.

Thank you, Mark. I would like to follow Mark's update with a review of our investment activity and portfolio company realizations during the first quarter and subsequent to quarter end, a high-level review of our investment portfolio as of quarter end, including the investment-themed breakdown, and a more detailed review of our first quarter financial results, including our current liquidity as of March 31st. I'll also touch on notable items during the first quarter and subsequent to quarter end, including our announcement of the Board-Approved Externalization. On December 31st, Surro Capital committed $20 million to Magnetar Opportunity 2025-4LP, a special-purpose vehicle invested in TensorWave, Inc. During the quarter, on January 2nd, Thoreau Capital funded $5 million of the $20 million capital commitment. As of May 5th, $5 million of the $20 million capital commitment to Magnetar Opportunity 2025-4LP had been funded. The remaining commitment of up to $15 million is subject to the satisfaction of certain conditions.

Throughout the first quarter, we sold 440,246 common shares

of Grab-A-Gun Digital Holdings, Inc., following the removal of lock-up restrictions on January 15th. These sales resulted in net proceeds of approximately $1.4 million and a realized gain of approximately $891,000. As of March 31st, we hold 599,754 public common shares, or approximately 58% of our original position.

Additionally, during the quarter, we received a distribution

from our True Global Ventures 4 Plus Venture Capital Fund investment for approximately $246,000. Subsequent to quarter ends, on April 8th, Thoreau Capital completed a $225,000 investment in the common stock of Huntress Labs Inc. through a secondary transaction. Additionally, on April 22nd, we completed a $9.5 million investment, excluding fees, in the Series A preferred shares of Quickhouse Inc. through a secondary transaction. Subsequent to quarter ends, Thoreau Capital receive two distributions from CW Opportunity 2 LP totaling approximately $3 million in net proceeds. CW Opportunity 2 LP is an STD for which the Class A interest is solely invested in the Class A common shares of CoreWeave Inc. Thorough Capital is invested in the Class A common shares of CoreWeave Inc. through its investment in the Class A interest of CW Opportunity 2 LP. The distributions were categorized in aggregate as approximately 902 thousand dollars of return to capital and a 2.1 million dollar realized gain the realized gain is calculated based on the current reporting by the fund and confirmed through our accounting but may be subject to change or adjustment due to the impact of performance fees that may be charged by the fund i would now like to turn to our portfolio

as a quarter end our top five positions as of march 31st were whoop openai vast link health

and CW Opportunity 2LP. These positions accounted for approximately 72% of the investment portfolio at fair value. Additionally, as of March 31st, our top ten positions accounted for approximately 88% of the investment portfolio.

Segmented by seven general investment themes,

the top allocation of our investment portfolio at March 31st was to consumer goods and services, representing approximately 43% of the investment locations, and software as a service were the next largest categories with approximately 29% and 12% of our portfolio, respectively. Approximately 6% of our portfolio was invested in education technology companies, and the financial technology and services segment accounted for approximately 5% of the fair value of our portfolio. The logistics and supply chain cap accounted for approximately 4% of the fair value of our portfolio, and Surveysports accounted for 2% as of March 31st. We ended the first quarter of 2026 with a net asset value of approximately $361.6 million, or $14.24 per share, which is consistent with our financial reporting. The increase in NAV per share from $8.09 at the end of Q4 2025 was primarily driven by a $6.25 per share increase from the net change and unrealized appreciation of our investments, a 4-cent-per-share increase resulting from net realized gain on our portfolio investments during the quarter, and a 2-cent-per-share related to stock-based compensation. The increase in NAB per share was partially offset by a 16-cent-per-share decrease due to net investment loss during the quarter. At March 31st, there were 25,387,393 shares of the company's common stock outstanding.

Finally, regarding our liquidity at the quarter end,

We ended the quarter with approximately $46 million of liquid assets, including approximately $43.3 million in cash and approximately $2.7 million in unrestricted public securities.

Not included in our unrestricted public securities are approximately $15.9 million of public

securities subject to lockups or other sales restrictions as of quarter ends. This represents our remaining investment in CORWEs via our Class A interest of CW Opportunity 2LP. Subsequent to quarter end, the purchaser of 6.5% convertible notes due 2029 elected to exercise their conversion option on multiple occasions and convert a total of $5 million of principal into 682,815 shares of thorough capital of common stock and $19.56 in cash in lieu of fractional shares. Upon completion of these conversions, the remaining principal balance of the six and a half percent convertible notes due 2029 was approximately 30 million dollars

as mark mentioned subsequent to quarter ends on april 2nd thorough capital's board of directors

including all of its independent directors unanimously approved a proposal to transition from an internally managed vdc to an externally managed structure through a new investment advisory agreement with neo-stellar advisors llc an entity jointly owned by certain current Stereo Capital Employees, and Magnetar Holdings LLC, which is affiliated with Magnetar's multi-strategy alternative investment platform. The externalization is expected to persist to enhance investment sourcing and due diligence capabilities through Magnetar's fully integrated platform, preserve all realized gains on the company's existing portfolio for the benefit of stockholders through the exclusion of pre-existing investments from any incentive fee calculations, and result in an annual expense savings. In connection with the externalization, an affiliate of Magnetar will make a $20 million investment in the company, and the company's current management team, including Mark, Klein, and myself, will continue in our current capacities. The externalization is subject to stockholder approval, and additional details are set forth in the company's current report on Form 8K filed with the Securities and Exchange Commission on April 7th. That concludes my comments. We would like to thank you for your interest in support of Thoreau Capital. Now I will turn the call over to the operator for the start of the Q&A session.

Operator? Now Gleason Land.

Thank you. If you'd like to ask a question or make a contribution on today's call, please press star 1 on your telephone keypad. To withdraw your question, please press star 2. Please limit yourself to one question per person. You will be advised when to ask your question. We will take our first question from Alex Paris,

Barrington Research your line is open please go ahead hi guys thanks for taking my question and congrats on the superb Q1 and the plan for externalization so that's going to be my question the externalization as I recall prior to 2019 the portfolio was it was externally managed. You took it in, and now you're externalizing it again. So point number one. Point number two, I had a quick review of the NIC. Not only are you creating a joint venture with Magnetar under the name Neostellar Advisors, LLC, but actually Sue Rowe's name will be changed to Neostellar Capital Corp under the symbol NSLR. I guess it's a two-part question. Number one, I think the special shareholder meeting is scheduled for June 10th. When do you hope to close this transaction? And then the related question is both you and Allison noted that this is expected to result in cost savings. So I'm wondering if you could just provide a little additional color on how that's done. You're obviously going to pay the external manager a management fee plus an incentive fee. What costs are we eliminating? from the internal management of the fund?

Thanks, Alex.

That's the longest one question ever, but I appreciate it. So let's start with we were externally managed. We made a determination to be internally managed as we took the management, the group that managed the portfolio and brought it in-house. As I noted in my pair of remarks, I think a lot has changed in the public venture capital markets. And we came to the conclusion that in order for us to be at the top of the pyramid of all, have the largest asset management platform available to invest in public markets, having greater depth from both investment, sourcing, diligence, support, infrastructure, etc., to partner with a firm like Magnetar, which we have done an awful lot of investing with over the years, just simply made sense. It makes us the largest platform to invest as a public investor in venture-backed securities. I think that matters right now. I think size matters. I think scale matters. I think the ability to bring other aspects to portfolio companies as opposed to just writing a check matters. And if you look at the success Magnetar has enjoyed and the fact that we invested with them in CoreWeave. We're investing with them in TensorWave. They are really on top of the game in the venture space. And as capital becomes more important and different capital solutions become more important to private companies, they are a great partner and significantly enhance what we are doing. And again, we're the first ones ever to do it. And we started 15 years ago and we continue to pioneer as having a terrific partner as far as as far as cost savings it's in the proxy this will be less expensive for our investors certainly to start in respect to expenses related to the management of the portfolio as far as incentive fees we made a point of saying that the entire portfolio and all the unrealized gains, all the success that has occurred to date and will occur and occurs up until the externalization. There's no incentive fee being charged at all. That is for all of our shareholders in the future. If as we invest money and we realize profits on those new investments, there may be an incentive fee on that at that point in time, which can only be quite some time away from now. So we are really excited about this. This is really differentiated. This makes us as significant as we are now, much more significant. And it was a decision our board took and we took as management. And we're really excited about that. The vote is on June 10th. This, upon approval by our shareholders, we'll enter into a management agreement with NeoStella. We will rebrand to NeoStellar, and that will be effective on July 1st.

We will take our next question from Marvin Fong, BTIG. Your line is open. Please go ahead.

Thanks for taking my questions. Again, congratulations as well. And looking forward to the externalization. I just have a big picture question. And after all of this success, we can all see that the private and public markets around AI are quite excited here. Can you just kind of talk about what you're seeing now in terms of investment opportunities? And Quickhouse is another thing you were able to get in on. But are you seeing opportunities like you're doing with TensorWave that are milestone-based and can, you know, offer some protection, you know, and that these companies actually have to succeed in order to, you know, gain access to further capital? Can you expect kind of more structures like that or just kind of describe in general what you're seeing out there?

Thanks, Marvin. Great question. And I'll answer it in two parts. First of all, we are really excited about ClickHouse. You know, ClickHouse has quickly become the de facto real-time analytics platform. They position themselves to benefit from AI applications, which demand real-time data. This company is growing at 250% year over year. It is phenomenal. It provides their certain times the rate, the speed of their competitors at approximately a tenth of the cost. It is truly an amazing company. I suspect most people on this call probably haven't heard about it we view this as we're in front in the same way we were in front with vast when no one heard of it or even core wheat when no one heard of it that's how we view click house and i suspect as we move towards the end of the year uh there they will become more notable that's one two i i think and you and i've talked about i've talked about it publicly the markets are robust or or perhaps frothy in the AI space, specifically in the private market side. We see an awful lot. We are seeing more deals now than we've ever seen before. And as we talked about it, you have to start as, are you in the right, are the tailwinds still there? Are you in the right sector, subsector? Are you one of many in a space or one of a few? Do you have the right to win? Once you get to all that, can we actually invest investment, whether it's like TensorFlow, which I think is extremely well-structured, or can we simply price it in a way that there's an opportunity to invest and see returns? And that leaves an awful lot of companies that, candidly, at this point in time, are tough to invest in. But we have found opportunities, whether it was ClickHouse. And TensorWave, as we've discussed before, we are really set up to win. They are to AMD what CoreWeave was to NVIDIA. As most of you probably see, AMD just reported a blowout quarter. TensorWave is going to be where they're housing their AMD chips. It's an extremely exciting investment. The investment is structured in a way that we put $5 million in, $15 million will be following on, assuming certain conditions are met. And we think that's going to be an absolute raging success. We're really looking forward to Tensorway's future.

Thank you. We will take our next question from John Hickman, Leidenberg.

Your line is open. Please go ahead.

Hey, thanks for reporting early. I was able to get on.

I have a question about, in the past, the top five positions have generally been around 50% of your portfolio.

And currently, the top five... John, you still there?

Pardon for the interruption. Participant line disconnected. We will take our next question from Ryan McKenna. Citizens, your line is open. Please go ahead.

yeah hey guys this is Nate Sauer on for Brian McKenna so first of all congrats on the you know the great moves this quarter and the especially impressive results so far this year maybe just

extending the discussion on externalization real quick I was wondering if you guys could provide

a little or get a little bit more specific on the timing like wise right now the ID I think we lost

him as well operator pardon for the interruption yes we lost Brian line we'll take our next question from alex firm lucid capital market your line is open please go ahead all right thanks guys i'll

try to ask it real quick here and sneak it in but congratulations guys on the really strong start to the year uh wanted to ask about you know your portfolio composition here uh in terms of your sector allocations obviously uh your investment in whoop has been tremendously successful here. When you think about that, as well as the wind down in your position, you're kind of at a unique moment here where health and wellness is actually a really large percentage of the portfolio right now. Should we expect to see incremental investments kind of back in that AI area to get that part of the portfolio back up? I guess you already did that subsequent into the quarter here with ClickHouse, but just any kind of high-level thoughts on sort of the composition of your portfolio by sectors and what we should expect to see going forward.

Sure. Thanks, Alex. Yes, in some ways, I guess we're victims of our own success with WHOOP, as WHOOP just completed a $575 million funding and over a $10 million valuation. It's obviously been uh sort of knocked it out of the park with that um clearly that that was that is a unique situation for us it's a great situation but unique as you can see we did just put 10 million dollars into click house we're finding another 15 million dollars into tensorwave and and the you you will see the concentration more into the technology, AI, AI infrastructure, et cetera, again, be the largest focus of our fund. But as you did note, right now with the success of WU, that has caused a bit of concentration in that space. Thank you. There are no further questions on the line,

so I will now hand you back to your host for closing remarks. Thank you all for joining this

call greatly we greatly appreciate it sorry for a couple of the problems apparently with the questions but we're very excited here we we had obviously the best quarter we've had on a quarter over quarter base basis ever we're extremely excited about our partnership with magnetar and the rebranding to neo stellar we're always available for your questions or comments feel free to reach out to us. And thank you again for attending the call. We greatly appreciate it.