Safeguard Scientifics Announces Second Quarter 2020 Financial Results
RADNOR, Pa., Aug. 11, 2020 /PRNewswire/ -- Safeguard Scientifics, Inc. (NYSE:SFE) ("Safeguard" or the "Company") today announced financial results for the three months and six months ended June 30, 2020.
Highlights
-- Safeguard remains committed to its stated strategy to monetize ownership
interests in a timely manner and maximize the value for Safeguard
shareholders.
-- Safeguard's companies continue to respond to COVID-19 by managing cost
structures, securing capital and adjusting operations to take advantage
of opportunities in post COVID-19 environment.
-- Safeguard completed follow-on funding to three companies totaling $4.4
million in the second quarter, including $3.8 million to Syapse as part
of an existing investor round that also expanded and restructured its
debt facilities, bringing the year-to-date total deployed to $6.6
million.
-- At June 30, 2020, the carrying value of the Company's ownership
interests totaled $61.4 million, and cash, cash equivalents and
restricted cash totaled $13.6 million.
-- Reduced General and Administrative expenses 30% year over year to $2.0
million for the quarter ended June 30, 2020, including a reduction in
Corporate expenses(1) of $1.2 million, a 36% year over year decline.
-- Safeguard's net loss for the three months ended June 30, 2020 was $9.9
million, or $0.48 per share, compared with net income of $36.1 million,
or $1.75 per share, for the same period in 2019. Safeguard's results
for the quarter included additional non-cash impairment charges of $5.7
million resulting from reduced expectations for certain ownership
interests, while the prior period quarter included a gain from the sale
of Transactis of $50 million.
-- Safeguard's net loss for the six months ended June 30, 2020 was $25.9
million, or $1.25 per share, compared with net income of $57.8 million,
or $2.80 per share, for the same period in 2019. Safeguard's results
for the year-to-date period included non-cash impairment charges of
$17.0 million, while the prior period included gains from the sales of
Propeller and Transactis totaling $86 million.
"We are pleased by how the management teams of our companies have responded to the challenges posed by COVID-19," said Eric C. Salzman, Safeguard's Chief Restructuring Officer. "By and large, our companies are tracking ahead of their COVID-19 budgets, actively adapting to the current environment and in some cases finding new pockets of strength. Our team is fully engaged in the support of our companies and the actions they are taking. While the current environment may impact the time frame of expected exits for some of our companies, we are encouraged by an increase in demand in certain markets and cautiously optimistic that the activity we are seeing with strategic partners and capital providers will translate into continued recovery and increased opportunities going forward."
"We have taken action to reduce expenses while continuing to prudently evaluate deployments," said Mark A. Herndon, Safeguard's Senior Vice President and Chief Financial Officer. "Our expectation for follow-on funding requirements during the full year 2020 remains between $8 and $12 million. Corporate expenses for the year ended December 31, 2020 are expected to be at the low end, or below, 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 JUNE 30, 2020
Companies
Category
Acquisition
Primary
Carrying Cost
Year Ownership% Value
(in
millions)
(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% $4.9 $7.5
Traction Stage: $5 million to $10 million in revenue
meQuilibrium
Healthcare 2015 32.0% 4.1 14.0
Trice Medical, Inc.
Healthcare 2014 16.6% 1.8 10.8
Zipnosis, Inc.
Healthcare 2015 37.7% 2.7 10.0
QuanticMind, Inc.
Digital Media 2015 24.2% 2.1 13.7
WebLinc, Inc.
Digital Media 2014 39.9% 1.9 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% 5.2 16.8
Sonobi, Inc.
Digital Media 2015 21.6% 5.5 13.4
Between $15 to $20 million in revenue
Prognos Health,
Inc.
Healthcare 2011 28.7% 4.4 12.6
Greater than $20 million in revenue
Aktana, Inc. +
Healthcare 2016 17.5% 0.9 11.7
Syapse, Inc.
Healthcare 2014 19.6% 5.6 25.0
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 2.5 6.0
Velano Vascular
Healthcare 2013 2.0 1.7
All others
Various 4.6 14.4
TOTAL: $61.4 $236.1
+ 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: Tuesday, August 11, 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: 2779780
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 second quarter 2020 financial results followed by Q&A
Replay will be available through September 5, 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 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)
June 30, 2020 December 31, 2019
Assets
Cash, cash equivalents
and restricted cash $
13,632 $
25,053
Other current assets 544 1,297
Total current assets 14,176 26,350
Ownership interests in
and advances 61,405 77,129
Other assets 3,945 4,098
Total Assets $
79,526 $
107,577
Liabilities and Equity
Other current
liabilities $
2,072 $
2,429
Total current
liabilities 2,072 2,429
Lease liability -
non-current 2,222 2,380
Other long-term
liabilities 918 1,027
Total equity 74,314 101,741
Total Liabilities and
Equity $
79,526 $
107,577
Safeguard Scientifics, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020 2019 2020 2019
Operating expenses $
2,028 $
2,603 $
5,560 $
5,660
Operating loss (2,028) (2,603) (5,560) (5,660)
Other income (loss),
net (2,658) 3,118 (6,225) 1,233
Interest, net 52 (4,919) 157 (6,581)
Equity income (loss),
net (5,277) 40,497 (14,291) 68,764
Net income (loss)
before income taxes (9,911) 36,093 (25,919) 57,756
Income tax benefit
(expense)
Net income (loss) $
(9,911) $
36,093 $
(25,919) $
57,756
Net income (loss) per
share:
Basic $
(0.48) $
1.75 $
(1.25) $
2.80
Diluted $
(0.48) $
1.75 $
(1.25) $
2.80
Weighted average
shares used in
computing income
(loss) per share:
Basic 20,720 20,628 20,703 20,606
Diluted 20,720 20,658 20,703 20,606
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
Six Months Ended
June 30,
June 30,
2020 2019 2020 2019
Corporate expenses $
1,242 $
1,910 $
2,695 $
4,041
Depreciation 323 808
Stock based compensation 441 269 527 686
Severance and retirement
costs 22 101 1,765 125
Non-recurring items and
other 323 573
General and administrative
expenses $
2,028 $
2,603 $
5,560 $
5,660
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SOURCE Safeguard Scientifics, Inc.
