Safeguard Scientifics, Inc. (NYSE:SFE) (“Safeguard” or the
“Company”) today announced financial results for the three months
ended March 31, 2021.
HIGHLIGHTS
- Safeguard’s Board of Directors has authorized a new $6 million
share repurchase program using existing funds in accordance with
the requirements of Rule 10b5-1 and Rule 10b-18 of the Securities
Exchange Act of 1934, as amended. These repurchases
will be made in open market or privately negotiated transactions
and are expected to be completed within the 2021 calendar
year.
- Exits & Deployments
- Safeguard exited Zipnosis and received $3.3 million of initial
cash proceeds and a preferred equity interest valued using our
internal valuation methodology at $15.3 million in Bright Health
Group (Bright Health), a national integrated healthcare company. As
a result of this transaction, Safeguard reported a gain of $17.0
million. Additional cash proceeds may be received from the final
determinations of net working capital and the resolution of various
escrow contingencies.
- Safeguard exited WebLinc and T-REX Group in separate
transactions for an aggregate of $6.2 million of gross proceeds
and, in the case of WebLinc, additional performance based payments
could be received over the next 24 months.
- Safeguard funded a $1.0 million convertible loan to Trice
Medical as part of a financing in which other existing Trice
stockholders also participated.
- Subsequent to the quarter-end, Safeguard exited Velano Vascular
resulting in cash proceeds of $3.4 million.
- Safeguard Company Performance
- The aggregate trailing twelve-month revenues ending December
31, 2020 for Safeguard’s remaining eleven companies, which excludes
Other Ownership Interests, was $321 million, down 8% as compared to
the comparable 2019 period.
- Trice Medical acquired Tenex Health, a leader in minimally
invasive ultrasonic technology for the treatment of chronic pain in
soft tissue and bone.
- InfoBionic closed a $9 million loan facility to fund their
continued growth.
- Moxe entered into a strategic relationship with 3M Health
Information Systems to offer Moxe’s data platform to 3M’s customer
base of hospitals, physician groups, and health systems.
- As previously disclosed, Syapse raised $68 million in growth
capital from two venture capital funds. This
transaction brings Safeguard’s ownership percentage to
approximately 11% and resulted in a $7.3 million non-cash dilution
gain.
- Financial Results
- Cash, cash equivalents and restricted cash totaled $21.8
million at March 31, 2021.
- The carrying value of the Company’s ownership interests at year
end totaled $62.6 million, with a total cost of $175.2
million.
- Net income for the three months ended March 31, 2021 was $17.6
million, or $0.84 per share, as compared with a net loss of $16.0
million, or $0.77 per share, for the same period in 2020.
- The prior year quarterly results included non-cash impairment
charges of $11.3 million, while the current period included gains
resulting from the sales of Zipnosis and T-REX totaling $17.7
million.
- Operating Costs
- Safeguard continued to reduce its operating costs in
2021. General and administrative expenses totaled $2.5
million for the quarter as compared to $3.5 million for the 2020
quarter.
- Safeguard also continued to lower its corporate expenses,1
which totaled $1.2 million for the first quarter of 2021, as
compared to $1.5 million for the comparable period of 2020, an 18%
decline.
- Outlook
- Safeguard remains committed to returning value to shareholders
when we exceed our targeted liquidity threshold, subject to then
prevailing market conditions and expected liquidity needs. Based on
our evaluation of future liquidity needs, Safeguard has lowered its
targeted liquidity threshold from $20 million to $18 million.
- We will continue to consider additional share repurchases,
modifications to the program announced today and/or dividends in
the event of subsequent exit transactions during 2021.
“We are encouraged to see an increasing pace of activity in our
portfolio over the past few months, including monetizations of
WebLinc, T-Rex, Velano and the successful sale of Zipnosis to
Bright Health.” said Eric C. Salzman, Chief Executive Officer. “We
expect further positive developments during 2021 and, with the
stock buy back plan that we announced today, we will continue to
work to maximize value and return cash to our shareholders.”
OWNERSHIP INTERESTS AT MARCH 31, 2021
Companies |
Category |
Acquisition Year |
Primary Ownership% |
Carrying Value (in millions) |
|
Cost (in millions) |
|
|
|
|
|
|
|
Initial
Revenue Stage: Up to $1 million |
|
|
None |
|
|
|
|
|
|
Revenue
of $1 million to $5 million |
Moxe Health Corporation |
Healthcare |
2016 |
27.6 |
% |
$ |
4.8 |
|
$ |
7.5 |
Revenue
of $5 million to $10 million |
|
Trice Medical, Inc. |
Healthcare |
2014 |
16.6 |
% |
|
1.9 |
|
|
11.8 |
Lumesis, Inc. |
Financial Services |
2012 |
43.4 |
% |
|
0.9 |
|
|
5.6 |
Clutch Holdings, Inc. |
Digital Media |
2013 |
42.3 |
% |
|
4.7 |
|
|
16.9 |
Revenue
of $10 million to $20 million |
|
InfoBionic, Inc. |
Healthcare |
2014 |
25.2 |
% |
|
- |
|
|
22.0 |
meQuilibrium + |
Healthcare |
2015 |
32.0 |
% |
|
3.0 |
|
|
14.0 |
Syapse, Inc.++ |
Healthcare |
2014 |
11.1 |
% |
|
8.3 |
|
|
25.0 |
Revenue
of $20 million to $50 million |
|
Aktana, Inc. |
Healthcare |
2016 |
15.0 |
% |
|
1.7 |
|
|
14.2 |
Prognos Health, Inc. |
Healthcare |
2011 |
28.5 |
% |
|
3.8 |
|
|
12.6 |
Greater
than $50 million in revenue |
|
Flashtalking |
Digital Media |
2018 |
13.2 |
% |
|
12.5 |
|
|
19.2 |
MediaMath, Inc. |
Digital Media |
2009 |
13.3 |
% |
|
- |
|
|
15.5 |
Other
Ownership Interests |
|
Bright Health Group |
Healthcare |
2021 |
|
|
15.3 |
|
|
- |
Velano Vascular * |
Healthcare |
2013 |
|
|
2.0 |
|
|
1.7 |
All others |
Various |
|
|
|
3.7 |
|
|
9.2 |
|
|
|
TOTAL: |
$ |
62.6 |
|
$ |
175.2 |
+ Company progressed into higher revenue stage this quarter.++
Company dropped into a lower revenue stage this quarter.* Company
was exited during the second quarter of 2021.
CONFERENCE CALL AND WEBCAST DETAILS
Please call 10-15 minutes prior to the call to register.
Date: May 6, 2021
Time: 5 pm ET
Webcast:
http://www.safeguard.com/events
Live Number: 844-200-6205
Replay Number: 929-458-6194
Access Code: 840410
Speakers: Chief Executive Officer,
Eric C. Salzman; and Senior Vice President and Chief Financial
Officer, Mark A. Herndon
Format: Discussion of the quarter’s
financial results followed by Q&A
Replay will be available through June 7, 2021 at 11:59 pm ET.
For more information please contact IR@safeguard.com.
About Safeguard Scientifics Historically,
Safeguard Scientifics has provided capital and relevant expertise
to fuel the growth of technology-driven businesses. Safeguard has a
distinguished track record of fostering innovation and building
market leaders that spans more than six decades. Safeguard is
currently pursuing a focused strategy to value-maximize and
monetize its ownership interests over a multi-year time frame to
drive shareholder value. For more information, please visit
www.safeguard.com.
Forward-looking StatementsExcept for the
historical information and discussions contained herein, statements
contained in this release may constitute “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. Our forward-looking statements are subject to
risks and uncertainties. Forward-looking statements include, but
are not limited to, statements regarding Safeguard’s ability to
maximize the value of monetization opportunities of its ownership
interests and drive total shareholder returns. Safeguard’s
initiatives taken or contemplated to enhance and unlock value for
all of its shareholders, Safeguard’s efforts to execute on and
implement its strategy to streamline its organizational structure,
reduce its operating costs, pursue monetization opportunities for
ownership interests and maximize the return of value to its
shareholders, Safeguard’s ability to create, unlock, enhance and
maximize shareholder value, the effect of Safeguard’s management
succession plan on driving increased organizational effectiveness
and efficiencies, the ability of the management team to execute
Safeguard’s strategy, the availability of, the timing of, and the
proceeds that may ultimately be derived from the monetization of
ownership interests, Safeguard’s projections regarding the
reduction in its ongoing operating expenses, Safeguard’s
projections regarding annualized operating expenses and expected
severance expenses, monetization opportunities for ownership
interests, and the amount of net proceeds from the monetization of
ownership interests that will enable the return of value to
Safeguard shareholders after satisfying working capital needs and
the timing of such return of value. Such forward-looking statements
are not guarantees of future operational or financial performance
and are based on current expectations that involve a number of
uncertainties, risks and assumptions that are difficult to predict.
Therefore, actual outcomes and/or results may differ materially
from those expressed or implied by such forward-looking statements.
The risks and uncertainties that could cause actual results to
differ materially include, among others, our ability to make good
decisions about the monetization of our ownership interests for
maximum value or at all and the return of value to our
shareholders, our ability to successfully execute on our strategy
to streamline our organizational structure and align our cost
structure to increase shareholder value, whether our strategy will
better position us to focus our resources on the highest-return
opportunities and deliver enhanced shareholder value, the ongoing
support of our existing ownership interests, the fact that our
companies may vary from period to period, challenges to achieving
liquidity from our ownership interests, fluctuations in the market
prices of our publicly traded holdings, if any, competition, our
inability to obtain maximum value for our ownership interests, our
ability to attract and retain qualified employees, market
valuations in sectors in which our ownership interests operate, our
inability to control our ownership interests, our need to manage
our assets to avoid registration under the Investment Company Act
of 1940, risks, disruption, costs and uncertainty caused by or
related to the actions of activist shareholders, including that if
individuals are elected to our Board with a specific agenda, it may
adversely affect our ability to effectively implement our business
strategy and create value for our shareholders and perceived
uncertainties as to our future direction as a result of potential
changes to the composition of our Board may lead to the perception
of a change in the direction of our business, instability or a lack
of continuity that may adversely affect our business, and risks
associated with our ownership interests, including the fact that
most of our ownership interests have a limited operating history
and a history of operating losses, face intense competition and may
never be profitable, the effect of economic conditions in the
business sectors in which Safeguard’s companies operate, and other
uncertainties described in our filings with the Securities and
Exchange Commission. Many of these factors are beyond the Company’s
ability to predict or control. As a result of these and other
factors, the Company’s past operational and financial performance
should not be relied on as an indication of future performance. The
Company does not assume any obligation to update any
forward-looking statements or other information contained in this
press release.
SAFEGUARD CONTACT: Mark HerndonChief Financial
Officer(610) 975-4913mherndon@safeguard.com
Safeguard Scientifics,
Inc.Condensed Consolidated Balance
Sheets(in thousands)
|
|
March 31, 2021 |
|
|
December 31, 2020 |
|
Assets |
|
|
|
|
|
|
|
|
Cash, cash equivalents and
restricted cash |
|
$ |
21,775 |
|
|
$ |
15,601 |
|
Other current assets |
|
|
588 |
|
|
|
462 |
|
Total current assets |
|
|
22,363 |
|
|
|
16,063 |
|
Ownership interests in and
advances |
|
|
62,593 |
|
|
|
50,398 |
|
Other assets |
|
|
2,028 |
|
|
|
2,574 |
|
Total
Assets |
|
$ |
86,984 |
|
|
$ |
69,035 |
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity |
|
|
|
|
|
|
|
|
Other current liabilities |
|
$ |
3,978 |
|
|
$ |
3,470 |
|
Total current liabilities |
|
|
3,978 |
|
|
|
3,470 |
|
Lease liability -
non-current |
|
|
1,964 |
|
|
|
2,053 |
|
Other long-term
liabilities |
|
|
50 |
|
|
|
637 |
|
Total equity |
|
|
80,992 |
|
|
|
62,875 |
|
Total Liabilities and
Equity |
|
$ |
86,984 |
|
|
$ |
69,035 |
|
|
|
Safeguard Scientifics,
Inc.Condensed Consolidated Statements of
Operations(in thousands, except per share
amounts)
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2021 |
|
|
2020 |
|
Operating expenses |
|
$ |
2,463 |
|
|
$ |
3,532 |
|
Operating loss |
|
|
(2,463 |
) |
|
|
(3,532 |
) |
Other income (loss), net |
|
|
706 |
|
|
|
(3,567 |
) |
Interest, net |
|
|
53 |
|
|
|
105 |
|
Equity income (loss), net |
|
|
19,329 |
|
|
|
(9,014 |
) |
Net income (loss) before
income taxes |
|
|
17,625 |
|
|
|
(16,008 |
) |
Income tax benefit
(expense) |
|
|
— |
|
|
|
— |
|
Net income (loss) |
|
$ |
17,625 |
|
|
$ |
(16,008 |
) |
Net income (loss) per
share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.84 |
|
|
$ |
(0.77 |
) |
Diluted |
|
$ |
0.84 |
|
|
$ |
(0.77 |
) |
Weighted average shares used
in computing income (loss) per share: |
|
|
|
|
|
|
|
|
Basic |
|
|
20,902 |
|
|
|
20,686 |
|
Diluted |
|
|
20,930 |
|
|
|
20,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Safeguard Scientifics,
Inc.Financial Data(in
thousands)
Additional Financial Information
Non-GAAP Measures
In discussing financial results and guidance,
the Company refers to the measure "corporate expenses" which is not
in accordance with Generally Accepted Accounting Principles (GAAP).
We use this non-GAAP financial measure internally to make operating
and strategic decisions, including evaluating our overall
performance and as a factor in determining compensation for certain
employees. We have defined corporate expenses as general and
administrative costs excluding stock based compensation, severance
costs, and non-recurring items and other. Non-recurring items
and other includes accruals related to the Company's LTIP plan that
will not be paid until reaching a specified threshold within that
plan. We believe presenting this non-GAAP financial measure
provides additional information to facilitate comparison of our
historical operating costs and their trends, and provides
additional transparency on how we evaluate our cost structure. We
also believe presenting this measure allows investors to view our
performance using the same measure that we use in evaluating our
performance and trends.
Corporate expenses reconciliation:
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2021 |
|
|
2020 |
|
Corporate expenses |
|
$ |
1,197 |
|
|
$ |
1,453 |
|
Stock based compensation |
|
|
245 |
|
|
|
86 |
|
Severance costs |
|
|
774 |
|
|
|
1,743 |
|
Non-recurring items and
other |
|
|
247 |
|
|
|
250 |
|
General and administrative
expenses |
|
$ |
2,463 |
|
|
$ |
3,532 |
|
|
|
|
|
___________________________________1 Corporate expenses are
general and administrative expenses excluding depreciation,
severance, stock-based compensation and other non-recurring items.
See full reconciliation in the financial section of this
statement.
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