RADNOR, Pa., Aug. 8, 2019 /PRNewswire/ -- Safeguard
Scientifics, Inc. (NYSE: SFE) ("Safeguard" or the "Company")
today announced financial results. For the three months ended
June 30, 2019, Safeguard's net income
was $36.1 million, or $1.75 per share on a basic and fully diluted
basis, as compared with a net loss of $24.9
million or $1.21 per share,
for the same period in 2018. For the six months ended
June 30, 2019, Safeguard's net income
was $57.8 million, or $2.80 per share on a basic and fully diluted
basis, as compared with a net loss of $31.1
million or $1.51 per share for
the same period in 2018.
"Since we announced our strategy to monetize our portfolio of
partner company interests in a fashion which maximizes the return
of capital and shareholder value, Safeguard has realized over
$180 million in cash proceeds related
to monetizations of our partner company interests," said
Brian J. Sisko, Safeguard's
President and CEO. "We believe that our success in returning
cash back to our balance sheet in the 18 months since announcing
our strategy confirms the appropriateness of the approach we have
taken in exiting from certain of our partner company
positions. We have been patient and opportunistic and it has
produced significant returns of cash and we anticipate continuing
to return value for shareholders by following the same basic
approach. As a result of our recent repayment of our debt on
July 15th we are no longer
restricted by that facility with regards to when and how we
repurchase shares and/or issue dividends. Whenever we have
cash and cash equivalents on our balance sheet that exceed the
amount we believe is needed to operate the business and continue to
support our partner companies, our Board of Directors intends to
authorize share repurchases and/or dividends to return value to
shareholders. Of course, we may be limited at times due to
securities laws, but we will endeavor to return excess capital to
shareholders in the quickest and most tax efficient manner."
"We continue to believe that the current value of our portfolio
interests and cash and equivalents on our balance sheet exceed our
current share price," said Sisko. "The message we are
delivering is clear – the Safeguard team remains committed to
rewarding our shareholders by maximizing the overall value of our
partner company holdings and by returning that value to our
shareholders as quickly and tax efficiently as possible."
HIGHLIGHTS
- Safeguard continues the pursuit of exits from our various
partner company positions and, in collaboration with Evercore, is
developing strategies regarding the return of value to our
shareholders.
- At June 30, 2019, the Company's
balance of cash, cash equivalents, restricted cash and marketable
securities totaled $98.4
million.
- During July 2019, the Company
made a principal and interest payment of $49.5 million on its credit facility, which
retired the facility.
- Safeguard continues to prudently manage follow-on deployments
to its partner companies. Follow-on fundings totaled
$6.7 million for the quarter and
$10.6 million year to date.
- In June Safeguard relocated its offices to a smaller facility
and sublet our previous space, which will reduce our net lease
payments from the original term of the previous office lease.
- Corporate expenses totaled $1.9
million for the quarter ended June
30, 2019 reflecting the Company's reduced cost
structure.
OUTLOOK
"We are pleased with the completion of the first step in our
process to return value to shareholders by the repayment of the
Company's debt," said Mark A.
Herndon, Safeguard's Senior Vice President and Chief
Financial Officer. In connection with the Evercore process we have
undertaken an extensive review of the portfolio and have been
working closely with our Board to determine the best path forward
as we keep shareholders' best interests paramount. "We continue to
be optimistic about the overall health of our partner companies as
revenues continue to increase in the aggregate and several are
nearing breakeven." Corporate costs for the year ended
December 31, 2019 are forecasted to
be less than $8.0 million and
follow-on funding requirements for the full year are forecasted to
be less than in 2018. Both our expenses and follow-on funding
requirements are anticipated to decline as we have additional
monetizations from our portfolio.
AGGREGATE PARTNER COMPANY REVENUE
Aggregate partner company revenue for Safeguard's 15
remaining companies is projected to be between $365 million
and $390 million for 2019.
Aggregate revenue for the same partner companies was $330
million for 2018, which indicates revenue growth between 10% and
18% for the group.
PARTNER COMPANY HOLDINGS AT JUNE 30,
2019*
Partner Company
Revenue Stages
|
Initial Revenue
Stage
• Up to $1M in revenue
|
Expansion Stage
• $1M to $5M in revenue
|
Traction Stage
• $5M to $10M in revenue
|
High Traction
Stage
• $10M+ in revenue
|
Partner
Companies
|
Stage
|
Category
|
Acquisition
Year
|
Primary
Ownership%
|
Carrying
Value
(in
millions)
|
|
Cost
(in
millions)
|
|
|
|
|
|
|
|
|
Aktana,
Inc.
|
High
Traction
|
Healthcare
|
2016
|
18.8%
|
$
3.4
|
|
$
10.2
|
Clutch Holdings,
Inc.
|
High
Traction
|
Digital
Media
|
2013
|
41.2%
|
6.4
|
|
16.6
|
Flashtalking
|
High
Traction
|
Digital
Media
|
2018
|
10.1%
|
11.0
|
|
19.2
|
InfoBionic, Inc.
+
|
Traction
|
Healthcare
|
2014
|
25.4%
|
-
|
|
22.0
|
Lumesis,
Inc.
|
Traction
|
Financial
Services
|
2012
|
43.6%
|
1.2
|
|
6.3
|
MediaMath,
Inc.
|
High
Traction
|
Digital
Media
|
2009
|
13.4%
|
-
|
|
15.5
|
meQuilibrium+
|
Traction
|
Healthcare
|
2015
|
32.7%
|
4.9
|
|
13.0
|
Moxe Health
Corporation
|
Initial
Revenue
|
Healthcare
|
2016
|
32.4%
|
3.3
|
|
5.5
|
Prognos Health,
Inc.
|
High
Traction
|
Healthcare
|
2011
|
28.7%
|
5.5
|
|
12.6
|
QuanticMind,
Inc.
|
Traction
|
Digital
Media
|
2015
|
24.2%
|
5.2
|
|
13.2
|
Sonobi,
Inc.
|
Traction
|
Digital
Media
|
2015
|
21.6%
|
8.3
|
|
13.4
|
Syapse,
Inc.
|
High
Traction
|
Healthcare
|
2014
|
19.4%
|
2.9
|
|
18.6
|
Trice Medical,
Inc.
|
Expansion
|
Healthcare
|
2014
|
16.7%
|
2.8
|
|
10.2
|
WebLinc,
Inc.
|
Traction
|
Digital
Media
|
2014
|
38.5%
|
5.5
|
|
15.9
|
Zipnosis,
Inc.
|
Expansion
|
Healthcare
|
2015
|
37.7%
|
3.7
|
|
10.0
|
|
|
|
|
TOTAL:
|
$
64.1
|
|
$202.2
|
* The listing excludes NovaSom, Inc. as a result of
its August 2019 bankruptcy
filing. This listing also excludes previously presented T-Rex
Group, Inc. and Hoopla Software where other new investors have
diluted our interests. See reconciliation below.
+ Partner company progressed into higher revenue
stage
CONFERENCE CALL AND WEBCAST DETAILS
Please call 10-15 minutes prior to the call to
register.
Date: Thursday, August
8, 2019
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: 2384548
Speakers: President
and Chief Executive Officer, Brian J. Sisko; and Senior Vice
President and Chief Financial Officer, Mark A. Herndon
Format: Discussion of
second quarter 2019 financial results followed by Q&A
Replay will be available through September 9, 2019 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 stockholders, Safeguard's efforts to execute
on and implement its strategy to streamline its organizational
structure, reduce its operating costs, pursue monetization
opportunities for partner companies and maximize the return of
value to its shareholders, Safeguard's ability to create, unlock,
enhance and maximize shareholder value, Safeguard's ability to have
a smooth transition to a new management team, the timing of
Safeguard's management succession plan and its effect on driving
increased organizational effectiveness and efficiencies, the
ability of the new 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 partner companies,
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 partner company interests, and the amount of net
proceeds from the monetization of partner company 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 partner companies 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 partner companies, the fact that our
partner companies may vary from period to period, challenges to
achieving liquidity from our partner company holdings, fluctuations
in the market prices of our publicly traded partner company
holdings, if any, competition, our inability to obtain maximum
value for our partner company holdings, our ability to attract and
retain qualified employees, market valuations in sectors in which
our partner companies operate, our inability to control our partner
companies, 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
partner companies, including the fact that most of our partner
companies 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 partner 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:
John E.
Shave III, IRC
Safeguard Investor Relations
(610) 975-4952
jshave@safeguard.com
Safeguard
Scientifics, Inc.
|
Condensed
Consolidated Balance Sheets
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
June 30,
2019
|
|
December 31,
2018
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
Cash, cash
equivalents, restricted cash and marketable securities
|
|
$
|
98,449
|
|
|
$
|
46,158
|
|
Other current
assets
|
|
3,117
|
|
|
2,669
|
|
|
Total current
assets
|
|
101,566
|
|
|
48,827
|
|
Ownership interests
in and advances to partner companies
|
|
76,750
|
|
|
95,585
|
|
Other
assets
|
|
2,954
|
|
|
1,325
|
|
Total
Assets
|
|
$
|
181,270
|
|
|
$
|
145,737
|
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
|
Other current
liabilities
|
|
$
|
4,393
|
|
|
$
|
5,780
|
|
Credit facility -
current
|
|
43,064
|
|
|
22,100
|
|
Credit facility
repayment feature
|
|
4,100
|
|
|
5,060
|
|
|
Total current
liabilities
|
|
51,557
|
|
|
32,940
|
|
Credit facility -
non-current
|
|
—
|
|
|
43,014
|
|
Lease liability -
non-current
|
|
2,582
|
|
|
—
|
|
Other long-term
liabilities
|
|
1,915
|
|
|
2,804
|
|
Total
equity
|
|
125,216
|
|
|
66,979
|
|
Total Liabilities
and Equity
|
|
$
|
181,270
|
|
|
$
|
145,737
|
|
|
|
|
|
|
|
Safeguard
Scientifics, Inc.
|
Condensed
Consolidated Statements of Operations
|
(in thousands,
except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
Operating
expenses
|
|
$
|
2,603
|
|
|
$
|
5,148
|
|
|
$
|
5,660
|
|
|
$
|
10,738
|
|
Operating
loss
|
|
(2,603)
|
|
|
(5,148)
|
|
|
(5,660)
|
|
|
(10,738)
|
|
|
|
|
|
|
|
|
|
|
Other income (loss),
net
|
|
3,118
|
|
|
(2,452)
|
|
|
1,233
|
|
|
(3,887)
|
|
Interest,
net
|
|
(4,919)
|
|
|
(2,756)
|
|
|
(6,581)
|
|
|
(4,647)
|
|
Equity income (loss),
net
|
|
40,497
|
|
|
(14,540)
|
|
|
68,764
|
|
|
(11,794)
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
before income taxes
|
|
36,093
|
|
|
(24,896)
|
|
|
57,756
|
|
|
(31,066)
|
|
Income tax benefit
(expense)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net income
(loss)
|
|
$
|
36,093
|
|
|
$
|
(24,896)
|
|
|
$
|
57,756
|
|
|
$
|
(31,066)
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.75
|
|
|
$
|
(1.21)
|
|
|
$
|
2.80
|
|
|
$
|
(1.51)
|
|
Diluted
|
|
$
|
1.75
|
|
|
$
|
(1.21)
|
|
|
$
|
2.80
|
|
|
$
|
(1.51)
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares used in computing income (loss)
per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
20,628
|
|
|
20,539
|
|
|
20,606
|
|
|
20,523
|
|
Diluted
|
|
20,658
|
|
|
20,539
|
|
|
20,606
|
|
|
20,523
|
|
Safeguard
Scientifics, Inc.
|
Partner Company
Financial Data
|
(in
thousands)
|
|
|
Additional
Financial Information
|
To assist investors
in understanding Safeguard and our 15 remaining partner companies
as of June 30, 2019, we are providing additional financial
information on our partner companies, including the aggregate cost
and carrying value for all of our partner companies and other
holdings. Carrying value of an equity method partner company
represents the original acquisition cost and any follow-on funding,
plus or minus our share of the earnings or losses of each company,
reduced by any impairment charges. The carrying value and
cost data reflect our percentage holdings in the partner companies
and reflect both equity ownership interests in and advances to
those partner companies.
|
|
|
|
|
|
|
|
|
June 30,
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
Value
|
|
Cost
(including
transaction
costs)
|
Safeguard Carrying
Value and Cost
|
|
|
|
|
Equity method partner
companies
|
|
|
|
|
|
|
|
$
|
53,142
|
|
|
$
|
167,486
|
|
Other partner
companies
|
|
|
|
|
|
|
|
10,956
|
|
|
34,703
|
|
Other
holdings
|
|
|
|
|
|
|
|
12,652
|
|
|
53,173
|
|
|
|
|
|
|
|
|
|
$
|
76,750
|
|
|
$
|
255,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate cost
reconciliation:
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
|
|
Six Months Ended
June 30,
|
|
|
2019
|
|
2018
|
|
|
|
2019
|
|
2018
|
Corporate
costs
|
|
$
|
1,910
|
|
|
$
|
2,387
|
|
|
|
|
$
|
4,041
|
|
|
$
|
5,756
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
323
|
|
|
78
|
|
|
|
|
808
|
|
|
156
|
|
Stock based
compensation
|
|
269
|
|
|
333
|
|
|
|
|
686
|
|
|
610
|
|
Severance
|
|
101
|
|
|
1,695
|
|
|
|
|
125
|
|
|
2,799
|
|
Non-recurring
items, principally professional fees
|
|
—
|
|
|
655
|
|
|
|
|
—
|
|
|
1,417
|
|
General and
administrative costs
|
|
$
|
2,603
|
|
|
$
|
5,148
|
|
|
|
|
$
|
5,660
|
|
|
$
|
10,738
|
|
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 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.
|
View original
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SOURCE Safeguard Scientifics, Inc.