RADNOR, Pa., Feb. 27, 2020 /PRNewswire/ -- Safeguard
Scientifics, Inc. (NYSE:SFE) ("Safeguard" or the "Company")
today announced financial results for the three months and 12
months ended December 31, 2019.
Highlights
- Safeguard has returned over $187
million to our balance sheet since we began our new
strategic direction in 2018 (including over $104 million in 2019) and we continue the pursuit
of additional exits from our various company interests in an
aggressive, but patient and rational manner.
- During 2019 the Company fully repaid its outstanding debt and
paid a $1.00 per share return of
capital dividend.
- At December 31, 2019, the
Company's balance of cash, cash equivalents and restricted cash
totaled $25.0 million.
- We committed to return value to our shareholders whenever we
have in excess of a prudent minimum of liquidity. Presently,
our Board has determined that minimum to be $25 million. When we exceed that level we
intend to return value to shareholders in the form of either share
repurchases and/or dividends.
- Safeguard continues to prudently manage follow-on deployments
to its ownership interests. Follow-on fundings totaled
$2.2 million and $16.7 million for the three months and year ended
December 31, 2019, respectively, in
line with the expectations we established at the beginning of the
year.
- General and administrative expenses continued to decrease,
totaling $2.1 million for the three
months ended December 31, 2019 as
compared to $2.6 million for the
comparable prior year quarter, and totaling $10.0 million for the year ended December 31, 2019 as compared to $16.9 million for 2018.
- Corporate expenses totaled $1.4
million and $7.1 million for
the three months and year ended December 31,
2019, respectively, a substantial decline from $1.9 million and $9.9
million for the comparable prior year periods and well below
the less than $8 million expectation
established at the beginning of the year. Corporate expenses
are general and administrative expenses excluding depreciation,
severance, stock based compensation and other non-recurring
items.
- Our Board of Directors is now compensated solely with Safeguard
equity and the size of the Board will be reduced to four from six
directors at the Company's upcoming annual meeting.
"We are pleased with what we accomplished in 2019. The
most significant milestone we accomplished in 2019 was the
$1.00 per share return of capital
dividend we paid in December," said Brian
J. Sisko, Safeguard's President and CEO. "Most
importantly, we continue to hold a valuable portfolio of ownership
interests representing $230 million
of deployed capital in 15 tech-enabled companies and all other
ownership interests. The companies continue to mature and we
are well-positioned to capitalize on exit opportunities that will
create value for our shareholders. We remain on course with
the timetable we outlined at the outset of our current
strategy."
For the year ended December 31,
2019, the Company's net income was $54.6 million, or $2.64 per share, compared with a net loss of
$15.6 million, or $0.76 per share, in 2018. For the three
months ended December 31, 2019,
Safeguard's net loss was $0.7
million, or $0.03 per share,
compared with a net loss of $16.6
million, or $0.81 per share,
for the same period in 2018.
OUTLOOK
"Now that all of our debt has been repaid, and
given our current liquidity position, virtually all proceeds from
monetization events will be available for return of value to our
shareholders" said Mark A. Herndon,
Safeguard's Senior Vice President and Chief Financial
Officer. "We will judiciously make deployments to protect our
existing ownership interests as and where appropriate."
Corporate expenses for the year ended December 31, 2020 are forecasted to continue to
decline and are expected to range from $6.4 to $6.8
million as compared to $7.1
million for the year ended December
31, 2019. Follow-on funding requirements for the full
year of 2020 are forecasted to be between $5 and $10
million.
AGGREGATE COMPANY REVENUE
Aggregate annual revenue for
2019 for Safeguard's 15 remaining ownership interests, which were
formerly referred to as partner companies, was $357 million. Aggregate revenue for the
same companies was $330 million for 2018, representing revenue
growth of 8% for the entire portfolio. Excluding our digital
media companies, the aggregate year-over-year revenue of
Safeguard's remaining portfolio of ownership interests grew at
41%. Note that revenue from "Other Ownership Interests" in
the table below are excluded from this total.
OWNERSHIP INTERESTS AT DECEMBER 31,
2019
Companies
|
Category
|
Acquisition
Year
|
Primary
Ownership%
|
Carrying
Value
(in
millions)
|
|
Cost
(in
millions)
|
|
|
|
Initial Revenue
Stage: Up to $1 million in revenue
|
None
|
Expansion
Stage: $1 million to $5 million in revenue
|
Moxe Health
Corporation *
|
Healthcare
|
2016
|
29.9%
|
$
5.4
|
|
$
7.5
|
Traction
Stage: $5 million to $10 million in revenue
|
|
InfoBionic, Inc.
*
|
Healthcare
|
2014
|
25.2%
|
-
|
|
22.0
|
meQuilibrium
*
|
Healthcare
|
2015
|
32.7%
|
3.8
|
|
13.0
|
Trice Medical, Inc.+
*
|
Healthcare
|
2014
|
16.6%
|
2.0
|
|
10.2
|
Zipnosis, Inc.+
*
|
Healthcare
|
2015
|
37.7%
|
3.1
|
|
10.0
|
Sonobi,
Inc.
|
Digital
Media
|
2015
|
21.6%
|
8.0
|
|
13.4
|
QuanticMind,
Inc.
|
Digital
Media
|
2015
|
24.2%
|
5.1
|
|
13.5
|
WebLinc,
Inc.
|
Digital
Media
|
2014
|
38.5%
|
5.9
|
|
16.1
|
Lumesis,
Inc.
|
Financial
Services
|
2012
|
43.5%
|
0.6
|
|
6.3
|
High Traction
Stage: $10 million to $15 million in revenue
|
|
Clutch Holdings,
Inc.
|
Digital
Media
|
2013
|
41.2%
|
5.5
|
|
16.6
|
Prognos Health,
Inc.
|
Healthcare
|
2011
|
28.7%
|
4.8
|
|
12.6
|
Greater than $15
million in revenue
|
|
Aktana, Inc.+
*
|
Healthcare
|
2016
|
17.8%
|
3.5
|
|
11.7
|
Syapse,
Inc.*
|
Healthcare
|
2014
|
20.0%
|
1.6
|
|
20.6
|
Flashtalking
|
Digital
Media
|
2018
|
10.1%
|
11.0
|
|
19.2
|
MediaMath,
Inc.
|
Digital
Media
|
2009
|
13.3%
|
-
|
|
15.5
|
Other Ownership
Interests
|
|
T-REX Group
|
Financial
Services
|
2016
|
|
6.0
|
|
6.0
|
Velano
Vascular
|
Healthcare
|
2013
|
|
3.1
|
|
1.7
|
All others
|
Various
|
|
|
7.7
|
|
14.3
|
|
|
|
TOTAL:
|
$
77.1
|
|
$230.2
|
+ Company progressed into higher revenue stage
this quarter.
* Company progressed into higher revenue stage this year.
CONFERENCE CALL AND WEBCAST DETAILS
Please call 10-15 minutes prior to the call to
register.
Date: Thursday, February 27, 2020
Time: 9:00 am ET
Webcast:
www.safeguard.com/events
Live Number:
833-236-5756 // (International) 647-689-4184
Replay Number:
800-585-8367 // (International) 416-621-4642
Access Code:
1495918
Speakers: President
and Chief Executive Officer, Brian J. Sisko; and Senior Vice
President and Chief Financial Officer, Mark A. Herndon
Format: Discussion of
fourth quarter and full-year 2019 financial results followed by
Q&A
Replay will be available through March
27, 2020 at 11:59 pm ET.
For more information please contact IR@safeguard.com.
About Safeguard Scientifics
Historically, Safeguard
Scientifics (NYSE:SFE) 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. For
more information, please visit www.safeguard.com.
Forward-looking Statements
Except 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 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 ownership interests may vary from period to period,
challenges to achieving liquidity from our ownership interests,
fluctuations in the market prices of any 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 ownership interests 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:
John E.
Shave III, IRC
Safeguard Investor Relations
(610) 975-4952
jshave@safeguard.com
Safeguard
Scientifics, Inc.
|
Condensed
Consolidated Balance Sheets
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
December 31,
2019
|
|
December 31,
2018
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
Cash, cash
equivalents, restricted cash and marketable securities
|
|
$
|
25,053
|
|
|
$
|
46,158
|
|
Other current
assets
|
|
1,297
|
|
|
577
|
|
Total current
assets
|
|
26,350
|
|
|
46,735
|
|
Ownership interests
in and advances
|
|
77,129
|
|
|
95,585
|
|
Other
assets
|
|
4,098
|
|
|
3,417
|
|
Total
Assets
|
|
$
|
107,577
|
|
|
$
|
145,737
|
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
|
Other current
liabilities
|
|
$
|
2,429
|
|
|
5,780
|
|
Credit facility -
current
|
|
—
|
|
|
22,100
|
|
Credit facility
repayment feature
|
|
—
|
|
|
5,060
|
|
Total current
liabilities
|
|
2,429
|
|
|
32,940
|
|
Credit facility -
non-current
|
|
—
|
|
|
43,014
|
|
Lease liability -
non-current
|
|
2,380
|
|
|
—
|
|
Other long-term
liabilities
|
|
1,027
|
|
|
2,804
|
|
Total
equity
|
|
101,741
|
|
|
66,979
|
|
Total Liabilities
and Equity
|
|
$
|
107,577
|
|
|
$
|
145,737
|
|
Safeguard
Scientifics, Inc.
|
Condensed
Consolidated Statements of Operations
|
(in thousands,
except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
Operating
expenses
|
|
$
|
2,060
|
|
|
$
|
2,618
|
|
|
$
|
9,982
|
|
|
$
|
16,871
|
|
Operating
loss
|
|
(2,060)
|
|
|
(2,618)
|
|
|
(9,982)
|
|
|
(16,871)
|
|
|
|
|
|
|
|
|
|
|
Other income (loss),
net
|
|
2,245
|
|
|
(193)
|
|
|
12,255
|
|
|
(5,158)
|
|
Interest,
net
|
|
174
|
|
|
(6,021)
|
|
|
(11,979)
|
|
|
(13,261)
|
|
Equity income (loss),
net
|
|
(1,057)
|
|
|
(7,791)
|
|
|
64,267
|
|
|
19,661
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
before income taxes
|
|
(698)
|
|
|
(16,623)
|
|
|
54,561
|
|
|
(15,629)
|
|
Income tax benefit
(expense)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net income
(loss)
|
|
$
|
(698)
|
|
|
$
|
(16,623)
|
|
|
$
|
54,561
|
|
|
$
|
(15,629)
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.03)
|
|
|
$
|
(0.81)
|
|
|
$
|
2.64
|
|
|
$
|
(0.76)
|
|
Diluted
|
|
$
|
(0.03)
|
|
|
$
|
(0.81)
|
|
|
$
|
2.64
|
|
|
$
|
(0.76)
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares used in computing
income (loss) per
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
20,674
|
|
|
20,568
|
|
|
20,636
|
|
|
20,544
|
|
Diluted
|
|
20,674
|
|
|
20,568
|
|
|
20,636
|
|
|
20,544
|
|
Safeguard
Scientifics, Inc.
|
Partner Company
Financial Data
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
Financial Information
|
Non-GAAP
Measures
|
|
|
|
|
|
|
|
|
|
In discussing
financial results and guidance, the Company refers to the measure
"corporate costs" 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 Depreciation, Stock based compensation, severance and
retirement costs, and non-recurring items and other.
Non-recurring items and other in 2019 includes accruals related to
the Company's LTIP plan that will not be paid until reaching a
specified threshold within that plan and dividend payments treated
as compensation related to unvested restricted shares pursuant to
the terms of those arrangements. Non-recurring items and
other in 2018 include certain professional fees related to
shareholder activist matters. 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
December 31,
|
|
|
|
Twelve Months
Ended
December 31,
|
|
|
|
2019
|
|
2018
|
|
|
|
2019
|
|
2018
|
|
Corporate
expenses
|
|
$
|
1,404
|
|
|
$
|
1,894
|
|
|
|
|
$
|
7,118
|
|
|
$
|
9,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
—
|
|
|
485
|
|
|
|
|
808
|
|
|
692
|
|
|
Stock based
compensation
|
|
303
|
|
|
113
|
|
|
|
|
1,237
|
|
|
966
|
|
|
Severance and
retirement costs
|
|
32
|
|
|
126
|
|
|
|
|
248
|
|
|
3,942
|
|
|
Non-recurring
items and other
|
|
321
|
|
|
—
|
|
|
|
|
571
|
|
|
1,417
|
|
|
General and
administrative costs
|
|
$
|
2,060
|
|
|
$
|
2,618
|
|
|
|
|
$
|
9,982
|
|
|
$
|
16,871
|
|
|
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SOURCE Safeguard Scientifics, Inc.