RADNOR, Pa., Nov. 4, 2020 /PRNewswire/ -- Safeguard
Scientifics, Inc. (NYSE: SFE) ("Safeguard" or the "Company")
today announced financial results for the three months and nine
months ended September 30, 2020.
HIGHLIGHTS
- Exits & Deployments
-
- Portfolio company Sonobi was acquired resulting in $6.6 million of cash proceeds to Safeguard.
- Safeguard remains committed to monetizing its ownership
interests in a timely manner and maximizing the value for its
shareholders. Since January
2018, Safeguard has realized approximately $195 million in cash proceeds from monetizing its
holdings.
- Safeguard deployed $2.5 million
of funding to Aktana, Inc. during the quarter as part of a
$30 million preferred equity round
led by a new investor, bringing our total year-to-date deployments
for all of our companies to $9.1
million.
- Safeguard Company Performance
-
- Safeguard's companies continue to respond to COVID-19 by
managing cost structures, securing capital and adjusting operations
to take advantage of opportunities in the current and post pandemic
environment.
- The aggregate revenue for Safeguard's 14 companies (which
excludes Other Ownership Interests) for the trailing twelve months
ended June 30, 2020 (one quarter lag
from Safeguard's reporting quarter) was $372
million, up 12% as compared to the comparable 2019 period.
- Financial Results
-
- Cash and cash equivalents totaled $16.4
million at September 30,
2020.
- The carrying value of the Company's ownership interests totaled
$55.8 million at September 30, 2020, and the cost of these
interests totaled $225.2
million.
- Safeguard's net loss for the three months ended September 30, 2020 was $4.3 million, or $0.21 per share, compared with net loss of
$2.5 million, or $0.12 per share, for the same period in
2019.
- Safeguard's net loss for the nine months ended September 30, 2020 was $30.3 million, or $1.46 per share, compared with net income of
$55.3 million, or $2.68 per share, for the same period in
2019.
- Safeguard's results for the year-to-date period included
non-cash impairment charges of $17.3
million, while the prior period included gains from the
sales of Propeller and Transactis totaling $86 million.
- Operating costs
-
- Safeguard continued to reduce its General and Administrative
expenses which totaled $2.3 million
for the third quarter, including a continued lower level of
corporate expenses[1] which totaled $1.3
million, a 22% year over year decline.
- Outlook
-
- Safeguard expects minimal follow-on deployments remaining in
2020 and has narrowed the full year range for 2020 to $9 to $10
million.
- Safeguard has reduced its expectation for 2020 corporate
expenses to below $5.6 million.
- Safeguard remains committed to returning value to shareholders
and at the current time has reduced our targeted minimum liquidity
threshold from $25 million to
$20 million, subject to then
prevailing market conditions and expected liquidity needs. We
will consider share repurchases and/or dividends at that
time.
- Shareholder Engagement
-
- Next virtual discussion with CEO of Aktana to be held on
November 10th at
10 a.m.
"We are pleased with the responses by our companies' management
teams to the challenges posed by COVID-19 as our companies continue
to generally track ahead of their COVID-19 budgets," said
Eric C. Salzman, Safeguard's Chief
Restructuring Officer. "We are also encouraged by the sale of
Sonobi which was completed in a challenging M&A environment. We
continue to believe that active engagement with our companies will
result in attractive outcomes for our shareholders. While we cannot
control the macro environment, we remain cautiously optimistic that
the activity we are seeing with mergers and acquisitions, strategic
partners and capital providers will translate into increased
opportunities going forward."
"Our expectation is for minimal, if any, follow-on funding
requirements for the remainder of the year and we have narrowed our
full year 2020 range to between $9
and $10 million and expect these
requirements to continue to decrease as our portfolio matures and
we achieve exits," said Mark A.
Herndon, Safeguard's Senior Vice President and Chief
Financial Officer. "Corporate expense expectations for the
year ended December 31, 2020 have
also improved and are expected to be below the bottom of our
previously disclosed range of $5.6 to
$6.0 million as compared to
$7.1 million reported for the year
ended December 31, 2019."
OWNERSHIP INTERESTS AT SEPTEMBER 30,
2020
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%
|
$
4.8
|
|
$
7.5
|
Traction
Stage: $5 million to $10 million in revenue
|
|
meQuilibrium
|
Healthcare
|
2015
|
32.0%
|
3.6
|
|
14.0
|
Trice Medical,
Inc.
|
Healthcare
|
2014
|
16.6%
|
1.6
|
|
10.8
|
Zipnosis,
Inc.
|
Healthcare
|
2015
|
37.7%
|
2.4
|
|
10.0
|
QuanticMind,
Inc.
|
Digital
Media
|
2015
|
24.2%
|
2.1
|
|
13.7
|
WebLinc,
Inc.
|
Digital
Media
|
2014
|
39.9%
|
3.3
|
|
16.2
|
Lumesis,
Inc.
|
Financial
Services
|
2012
|
43.5%
|
0.7
|
|
5.6
|
High Traction
Stage: $10 million to $15 million in revenue
|
|
InfoBionic,
Inc.
|
Healthcare
|
2014
|
25.2%
|
-
|
|
22.0
|
Clutch Holdings,
Inc.
|
Digital
Media
|
2013
|
41.2%
|
5.1
|
|
16.8
|
Greater than $20
million in revenue
|
|
Aktana, Inc.
|
Healthcare
|
2016
|
15.2%
|
4.4
|
|
14.2
|
Prognos Health, Inc.
+
|
Healthcare
|
2011
|
28.5%
|
4.1
|
|
12.6
|
Syapse, Inc.
|
Healthcare
|
2014
|
19.6%
|
3.1
|
|
25.0
|
Greater than $50
million in revenue
|
|
Flashtalking
|
Digital
Media
|
2018
|
13.4%
|
12.5
|
|
19.2
|
MediaMath,
Inc.
|
Digital
Media
|
2009
|
13.3%
|
-
|
|
15.5
|
Other Ownership
Interests
|
|
T-REX Group
|
Financial
Services
|
2016
|
|
2.1
|
|
6.0
|
Velano
Vascular
|
Healthcare
|
2013
|
|
2.0
|
|
1.7
|
All others
|
Various
|
|
|
4.0
|
|
14.4
|
|
|
|
TOTAL:
|
$
55.8
|
|
$225.2
|
|
|
|
|
|
|
|
|
|
|
+ Company progressed into higher
revenue stage this quarter.
|
CONFERENCE CALL AND WEBCAST DETAILS
Please call 10-15 minutes prior to the call to
register.
Date: November 5, 2020
Time: 9 am ET
Webcast:
http://www.safeguard.com/events
Live Number:
833-968-2224 // (International) 825-312-2064
Replay Number:
800-585-8367 // (International) 416-621-4642
Access Code:
9581004
Speakers: Executive
Chairman of the Board, Dr. Robert J.
Rosenthal; Chief Restructuring 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 January
5, 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 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 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
Herndon
Chief Financial Officer
(610) 975-4913
mherndon@safeguard.com
______________________
|
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.
|
Safeguard
Scientifics, Inc.
|
Condensed
Consolidated Balance Sheets
|
(in
thousands)
|
|
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash, cash
equivalents and restricted cash
|
|
$
|
16,437
|
|
|
$
|
25,053
|
|
Other current
assets
|
|
|
570
|
|
|
|
1,297
|
|
Total current
assets
|
|
|
17,007
|
|
|
|
26,350
|
|
Ownership interests
in and advances
|
|
|
55,844
|
|
|
|
77,129
|
|
Other
assets
|
|
|
3,237
|
|
|
|
4,098
|
|
Total
Assets
|
|
$
|
76,088
|
|
|
$
|
107,577
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
|
|
|
|
|
Other current
liabilities
|
|
$
|
2,611
|
|
|
$
|
2,429
|
|
Total current
liabilities
|
|
|
2,611
|
|
|
|
2,429
|
|
Lease liability -
non-current
|
|
|
2,139
|
|
|
|
2,380
|
|
Other long-term
liabilities
|
|
|
1,109
|
|
|
|
1,027
|
|
Total
equity
|
|
|
70,229
|
|
|
|
101,741
|
|
Total Liabilities
and Equity
|
|
$
|
76,088
|
|
|
$
|
107,577
|
|
Safeguard
Scientifics, Inc.
|
Condensed
Consolidated Statements of Operations
|
(in thousands,
except per share amounts)
|
|
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Operating
expenses
|
|
$
|
2,275
|
|
|
$
|
2,262
|
|
|
$
|
7,835
|
|
|
$
|
7,922
|
|
Operating
loss
|
|
|
(2,275)
|
|
|
|
(2,262)
|
|
|
|
(7,835)
|
|
|
|
(7,922)
|
|
Other income (loss),
net
|
|
|
(820)
|
|
|
|
8,777
|
|
|
|
(7,045)
|
|
|
|
10,010
|
|
Interest,
net
|
|
|
52
|
|
|
|
(5,572)
|
|
|
|
209
|
|
|
|
(12,153)
|
|
Equity income (loss),
net
|
|
|
(1,300)
|
|
|
|
(3,440)
|
|
|
|
(15,591)
|
|
|
|
65,324
|
|
Net income (loss)
before income taxes
|
|
|
(4,343)
|
|
|
|
(2,497)
|
|
|
|
(30,262)
|
|
|
|
55,259
|
|
Income tax benefit
(expense)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net income
(loss)
|
|
$
|
(4,343)
|
|
|
$
|
(2,497)
|
|
|
$
|
(30,262)
|
|
|
$
|
55,259
|
|
Net income (loss) per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.21)
|
|
|
$
|
(0.12)
|
|
|
$
|
(1.46)
|
|
|
$
|
2.68
|
|
Diluted
|
|
$
|
(0.21)
|
|
|
$
|
(0.12)
|
|
|
$
|
(1.46)
|
|
|
$
|
2.68
|
|
Weighted average
shares used in computing income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
20,786
|
|
|
|
20,657
|
|
|
|
20,731
|
|
|
|
20,623
|
|
Diluted
|
|
|
20,786
|
|
|
|
20,657
|
|
|
|
20,731
|
|
|
|
20,623
|
|
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 Depreciation, Stock based compensation, severance
and retirement 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
|
|
|
Nine Months
Ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Corporate
expenses
|
|
$
|
1,302
|
|
|
$
|
1,673
|
|
|
$
|
3,997
|
|
|
$
|
5,714
|
|
Depreciation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
808
|
|
Stock based
compensation
|
|
|
452
|
|
|
|
248
|
|
|
|
979
|
|
|
|
934
|
|
Severance and
retirement costs
|
|
|
108
|
|
|
|
91
|
|
|
|
1,873
|
|
|
|
216
|
|
Non-recurring items
and other
|
|
|
413
|
|
|
|
250
|
|
|
|
986
|
|
|
|
250
|
|
General and
administrative expenses
|
|
$
|
2,275
|
|
|
$
|
2,262
|
|
|
$
|
7,835
|
|
|
$
|
7,922
|
|
View original content to download
multimedia:http://www.prnewswire.com/news-releases/safeguard-scientifics-announces-third-quarter-2020-financial-results-301166760.html
SOURCE Safeguard Scientifics, Inc.