Safeguard Scientifics, Inc. (NYSE:SFE) (“Safeguard” or the
“Company”) today announced financial results for the three and six
months ended June 30, 2021.
HIGHLIGHTS
- Exits & Deployments
- As part of the sale of Velano Vascular, Safeguard received $3.4
million in cash proceeds resulting in a $1.8 million gain.
- Safeguard did not provide any additional funding to its
companies or make acquisitions of additional ownership interests
during the quarter.
- Subsequent to the quarter end, Flashtalking signed a definitive
agreement to be acquired by Mediaocean. The transaction is expected
to close in the third quarter of 2021 and Safeguard expects to
receive approximately $43 million of cash proceeds upon the
closing.
- Safeguard Company Performance
- On June 23, 2021, Bright Health Group (“Bright Health”)
completed its initial public offering on the NYSE. The offering
resulted in Safeguard converting its preferred equity interest in
Bright Health, which Safeguard received as part of Bright Health’s
acquisition of Zipnosis, into 1,322,484 shares of Bright Health’s
common stock. As of June 30, 2021, these common shares were valued
at $22.7 million based on the closing price on that date. As a
result of this updated valuation, Safeguard reported an additional
$7.4 million unrealized gain during the second quarter.
Subsequent to the second quarter, the fair value of the Bright
Health common stock has declined to approximately $11 million as of
August 10, 2021.
- The aggregate trailing twelve-month revenues ending March 31,
2021 for Safeguard’s remaining eleven companies, which excludes
Other Ownership Interests, was $320 million, down 10% from the
comparable prior period.
- Financial Results
- Cash, cash equivalents and restricted cash totaled $21.3
million at June 30, 2021.
- The carrying value of the Company’s ownership interests totaled
$60.1 million at June 30, 2021, which includes the Bright Health
common stock noted above. The total cost of the ownership interests
was $173.5 million.
- The Company recorded an impairment of $2.5 million related to
reduced expectations for certain Other ownership interests.
- Net loss for the three months ended June 30, 2021 was $0.3
million, or $0.02 per share, as compared with a net loss of $9.9
million, or $0.48 per share, for the same period in 2020.
- The prior year quarterly results included non-cash impairment
charges of $5.7 million, while the current period included gains
resulting from the sale of Velano and the observable price change
in the Bright Health common shares totaling $9.2 million.
- During the quarter, Safeguard repurchased 229,286 shares of its
common stock at an average cost of $6.93 per share in open market
transactions spending $1.6 million of the $6 million authorized
under the program established in May 2021.
- Operating Costs
- Safeguard continued to reduce its operating costs in 2021.
General and administrative expenses totaled $2.0 million for the
second quarter of 2021 and 2020.
- Safeguard also continued to lower its corporate expenses,1
which totaled $1.0 million for the second quarter of 2021, as
compared to $1.2 million for the comparable period of 2020, a 23%
decline.
- Outlook
- Safeguard continues to focus on reducing corporate expenses and
expects to be below the previously disclosed target of $4.4 to $4.9
million for the year.
- Year to date we have deployed $1 million to our companies and
continue to expect total deployments to be at the $5 to $7 million
range previously disclosed for 2021.
- Safeguard remains committed to returning value to shareholders
when we exceed our targeted liquidity threshold, subject to market
conditions and liquidity needs.
- We will continue to consider additional share repurchases,
modifications to the existing share repurchase program and/or
dividends.
“We are excited about Flashtalking’s pending acquisition by
Mediaocean. The closing of this transaction generates substantial
capital to enable a return of value to Safeguard’s shareholders,”
said Eric C. Salzman, Chief Executive Officer. “We continue to work
with the management teams of our other companies to create value
and work towards monetization opportunities.”
OWNERSHIP INTERESTS AT JUNE 30, 2021
Companies |
Category |
Acquisition Year |
Primary Ownership% |
Fully Diluted 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 |
% |
26.0 |
% |
$ |
4.5 |
|
$ |
7.5 |
|
Revenue
of $5 million to $10 million |
|
Trice Medical, Inc. |
Healthcare |
2014 |
16.6 |
% |
14.2 |
% |
|
0.8 |
|
|
11.8 |
Lumesis, Inc. |
Financial Services |
2012 |
43.4 |
% |
43.4 |
% |
|
1.0 |
|
|
5.6 |
Clutch Holdings, Inc. |
Digital Media |
2013 |
41.8 |
% |
33.0 |
% |
|
4.5 |
|
|
16.9 |
|
Revenue
of $10 million to $20 million |
|
InfoBionic, Inc. |
Healthcare |
2014 |
25.2 |
% |
22.1 |
% |
|
- |
|
|
22.0 |
meQuilibrium |
Healthcare |
2015 |
32.0 |
% |
23.2 |
% |
|
2.6 |
|
|
14.0 |
|
Revenue
of $20 million to $50 million |
|
Aktana, Inc. |
Healthcare |
2016 |
15.0 |
% |
12.7 |
% |
|
0.2 |
|
|
14.2 |
Prognos Health, Inc. |
Healthcare |
2011 |
28.5 |
% |
24.9 |
% |
|
3.4 |
|
|
12.6 |
Syapse, Inc.+ |
Healthcare |
2014 |
11.1 |
% |
8.9 |
% |
|
6.8 |
|
|
25.0 |
|
Greater
than $50 million in revenue |
|
Flashtalking * |
Digital Media |
2018 |
13.2 |
% |
10.9 |
% |
|
12.5 |
|
|
19.2 |
MediaMath, Inc. |
Digital Media |
2009 |
13.3 |
% |
10.2 |
% |
|
- |
|
|
15.5 |
|
Other
Ownership Interests |
|
Bright Health Group |
Healthcare |
2021 |
|
|
|
22.7 |
|
|
- |
All others |
Various |
|
|
|
|
1.1 |
|
|
9.2 |
|
|
|
|
TOTAL: |
$ |
60.1 |
|
$ |
173.5 |
|
|
|
|
|
|
|
|
|
|
+ Company progressed into higher revenue stage this quarter.*
Company signed a definitive agreement to be acquired in the third
quarter of 2021.** Based on information provided by each respective
company. Assumes the conversion or exercise of all currently
outstanding securities including the issuance of all shares
available under authorized employee equity programs. Does not
reflect liquidation preferences, priority payments, proceeds from
option and/or warrant exercises or other company-specific
transaction-related obligations in a liquidation or exit
transaction.
CONFERENCE CALL AND WEBCAST DETAILS
Please call 10-15 minutes prior to the call to register.
Date: August 12, 2021
Time: 5 pm ET
Webcast:
http://www.safeguard.com/events
Live Number: 844-200-6205
Replay Number: 929-458-6194
Access Code: 049749
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 October 12, 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)
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
Assets |
|
|
|
|
|
|
|
|
Cash, cash equivalents and
restricted cash |
|
$ |
21,330 |
|
|
$ |
15,601 |
|
Ownership interests |
|
|
22,694 |
|
|
|
— |
|
Other current assets |
|
|
1,221 |
|
|
|
462 |
|
Total current assets |
|
|
45,245 |
|
|
|
16,063 |
|
Ownership interests in and
advances |
|
|
37,391 |
|
|
|
50,398 |
|
Other assets |
|
|
2,000 |
|
|
|
2,574 |
|
Total
Assets |
|
$ |
84,636 |
|
|
$ |
69,035 |
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity |
|
|
|
|
|
|
|
|
Other current liabilities |
|
$ |
3,318 |
|
|
$ |
3,470 |
|
Total current liabilities |
|
|
3,318 |
|
|
|
3,470 |
|
Lease liability -
non-current |
|
|
1,872 |
|
|
|
2,053 |
|
Other long-term
liabilities |
|
|
50 |
|
|
|
637 |
|
Total equity |
|
|
79,396 |
|
|
|
62,875 |
|
Total Liabilities and
Equity |
|
$ |
84,636 |
|
|
$ |
69,035 |
|
|
|
|
|
|
|
|
|
|
Safeguard Scientifics,
Inc.Condensed Consolidated Statements of
Operations(in thousands, except per share
amounts)
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Operating expenses |
|
$ |
1,991 |
|
|
$ |
2,028 |
|
|
$ |
4,454 |
|
|
$ |
5,560 |
|
Operating loss |
|
|
(1,991 |
) |
|
|
(2,028 |
) |
|
|
(4,454 |
) |
|
|
(5,560 |
) |
Other income (loss), net |
|
|
6,733 |
|
|
|
(2,658 |
) |
|
|
7,439 |
|
|
|
(6,225 |
) |
Interest, net |
|
|
74 |
|
|
|
52 |
|
|
|
127 |
|
|
|
157 |
|
Equity income (loss), net |
|
|
(5,136 |
) |
|
|
(5,277 |
) |
|
|
14,193 |
|
|
|
(14,291 |
) |
Net income (loss) before
income taxes |
|
|
(320 |
) |
|
|
(9,911 |
) |
|
|
17,305 |
|
|
|
(25,919 |
) |
Income tax benefit
(expense) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net income (loss) |
|
$ |
(320 |
) |
|
$ |
(9,911 |
) |
|
$ |
17,305 |
|
|
$ |
(25,919 |
) |
Net income (loss) per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.02 |
) |
|
$ |
(0.48 |
) |
|
$ |
0.83 |
|
|
$ |
(1.25 |
) |
Diluted |
|
$ |
(0.02 |
) |
|
$ |
(0.48 |
) |
|
$ |
0.83 |
|
|
$ |
(1.25 |
) |
Weighted average shares used
in computing income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
20,856 |
|
|
|
20,720 |
|
|
|
20,879 |
|
|
|
20,703 |
|
Diluted |
|
|
20,856 |
|
|
|
20,720 |
|
|
|
20,879 |
|
|
|
20,703 |
|
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 |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Corporate expenses |
|
$ |
958 |
|
|
$ |
1,242 |
|
|
$ |
2,155 |
|
|
$ |
2,695 |
|
Stock based compensation |
|
|
740 |
|
|
|
441 |
|
|
|
985 |
|
|
|
527 |
|
Severance costs |
|
|
— |
|
|
|
22 |
|
|
|
774 |
|
|
|
1,765 |
|
Non-recurring items and
other |
|
|
293 |
|
|
|
323 |
|
|
|
540 |
|
|
|
573 |
|
General and administrative
expenses |
|
$ |
1,991 |
|
|
$ |
2,028 |
|
|
$ |
4,454 |
|
|
$ |
5,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 (NASDAQ:SFE)
Historical Stock Chart
From Mar 2024 to Apr 2024
Safeguard Scientifics (NASDAQ:SFE)
Historical Stock Chart
From Apr 2023 to Apr 2024