Safeguard Scientifics Announces First Quarter 2023 Financial Results
04 Maio 2023 - 5:10PM
Safeguard Scientifics, Inc. (NASDAQ:SFE) (“Safeguard” or the
“Company”) today announced financial results for the three months
ended March 31, 2023.
FIRST QUARTER 2023 HIGHLIGHTS
- Financial Results
- Cash, cash equivalents and restricted cash totaled $18.8
million at March 31, 2023.
- The carrying value of the Company’s ownership interests totaled
$12.0 million at March 31, 2023. The total cost of the Company’s
ownership interests was $151.3 million.
- Net loss for the three months ended March 31, 2023 was $3.5
million, or $0.22 per share, as compared with a net loss of $6.7
million, or $0.40 per share, for the same period in 2022.
- Capital Return
- During the first quarter, Safeguard completed the remaining
purchases under its $3 million 2022 share repurchase plan by
acquiring 25,096 shares on the open market at an average price of
$3.01 per share, totaling less than $0.1 million.
- Exits & Deployments
- Safeguard sold the remainder of its Bright Health Group
ownership interest during the first quarter for aggregate proceeds
of $850,000.
- As previously disclosed, Safeguard funded the remaining $0.25
million to Trice Medical pursuant to a previously established $0.38
million subordinated line of credit.
- Subsequent to the quarter, Safeguard deployed $3.0 million to
Prognos as part of a financing round consisting of existing and new
investors.
- Safeguard Company Performance
- The aggregate trailing twelve-month revenues ending December
31, 2022 for eight of Safeguard’s companies, which excludes the
Other Ownership Interests, was $145 million, an increase of 8.9%
from the comparable prior period.
- Operating Costs
- Safeguard continued to reduce its operating costs.
General and administrative expenses totaled $1.2 million for each
of the quarters ended March 31, 2023 and 2022, respectively, a
decrease of 4.0%.
- Safeguard also continued to lower its corporate expenses,1
which totaled $0.8 million for each of the quarters ended March 31,
2023 and 2022, respectively, a decrease of 6.4%.
- Outlook
- Safeguard continues to seek a strategic option that maximizes
shareholder value and is currently in advanced discussions with a
single counterparty. No definitive agreements have been reached and
the parties continue to work towards a transaction.
- As a result of our deployment to Prognos and certain
developments at other companies, we have reduced our full year 2023
expectation of total follow-on deployments for our remaining
ownership interests from a range of $4.0 million to $6.0 million to
a range of $3.0 million to $4.5 million, inclusive of the $3.0
million deployed to Prognos.
- Safeguard will continue to closely manage corporate expenses in
2023 with a target of $3.0 million to $3.2 million for the year,
excluding strategic transaction-related
expenses.
“The business, capital raising, and M&A environment that we
highlighted last quarter continues to impact many of Safeguard’s
companies, particularly those with high debt levels. We are acting
prudently with our capital in situations where we can create high
conviction opportunities to drive value for Safeguard and where the
companies have the liquidity and flexibility to operate in a
challenging environment. Prognos is an example of a situation where
we used our capital to catalyze a transaction attractive to
Safeguard. We continue to progress on a strategic alternative as
part of the Houlihan Lokey process. We are in discussions on a
transaction that could yield greater value to our shareholders than
an orderly run-off of the portfolio. In all cases, we remain
committed to seeking a path that maximizes shareholder value,” said
Eric C. Salzman, Chief Executive Officer.
————————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.
OWNERSHIP INTERESTS AT MARCH 31, 2023
Companies |
Category |
Acquisition Year |
Primary Ownership% |
Fully Diluted Ownership%** |
Carrying Value(in millions) |
|
Cost(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
of $5 million to $10 million |
|
Moxe |
Healthcare |
2016 |
19.3 |
% |
18.1 |
% |
|
6.5 |
|
|
7.5 |
|
Revenue
of $10 million to $20 million |
|
Clutch Holdings, Inc. |
Digital Media |
2013 |
41.7 |
% |
33.3 |
% |
|
2.0 |
|
|
18.3 |
InfoBionic, Inc. |
Healthcare |
2014 |
25.2 |
% |
22.1 |
% |
|
- |
|
|
22.0 |
meQuilibrium |
Healthcare |
2015 |
31.3 |
% |
21.0 |
% |
|
- |
|
|
14.5 |
Syapse, Inc. |
Healthcare |
2014 |
11.0 |
% |
8.6 |
% |
|
0.6 |
|
|
26.6 |
|
Revenue
of $20 million to $30 million |
|
Aktana, Inc. |
Healthcare |
2016 |
13.6 |
% |
11.5 |
% |
|
- |
|
|
15.9 |
Prognos Health, Inc. * |
Healthcare |
2011 |
28.4 |
% |
24.6 |
% |
|
1.5 |
|
|
14.6 |
Trice Medical, Inc. |
Healthcare |
2014 |
11.6 |
% |
8.7 |
% |
|
- |
|
|
12.2 |
|
Other
Ownership Interests |
|
All others |
Various |
|
|
|
|
1.4 |
|
|
19.7 |
|
|
|
|
TOTAL: |
$ |
12.0 |
|
$ |
151.3 |
* Subsequent to the quarter, Prognos completed a financing
transaction resulting in Safeguard’s primary and fully diluted
ownership percentages being reduced to 19.0% and 17.2%,
respectively.
** 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.
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Date: May 4, 2023 |
|
|
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Time: 5:00 p.m. ET |
|
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Webcast: https://www.webcast-eqs.com/safeguardscientific050423 |
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Live
Number: 877-407-0989 |
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Speakers: Chief Executive Officer, Eric C.
Salzman; and Senior Vice President and Chief Financial
Officer, Mark A. Herndon |
|
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Format: Discussion of the first quarter’s
financial results followed by Q&A |
The replay will be available at Safeguard.com’s investor
relations site under “Past events”. 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 federal securities laws. 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, including,
without limitation, 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 our companies operate, and other uncertainties
described in our filings with the Securities and Exchange
Commission. Many of these factors are beyond our 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. Further information on the
above risk factors and other potential factors that could affect
our future business, operating results and financial condition is
included in our Annual Report on Form 10-K for the year ended
December 31, 2022 and other periodic filings with the
Securities and Exchange Commission, including risks under the
heading “Risk Factors.” 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) |
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
Assets |
|
|
|
|
|
|
|
|
Cash, cash equivalents,
restricted cash and marketable securities |
|
$ |
18,793 |
|
|
$ |
19,312 |
|
Ownership interests |
|
|
— |
|
|
|
860 |
|
Other current assets |
|
|
1,345 |
|
|
|
1,251 |
|
Total current assets |
|
|
20,138 |
|
|
|
21,423 |
|
Ownership interests in and
advances |
|
|
11,991 |
|
|
|
14,545 |
|
Other assets |
|
|
1,598 |
|
|
|
1,724 |
|
Total
Assets |
|
$ |
33,727 |
|
|
$ |
37,692 |
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity |
|
|
|
|
|
|
|
|
Other current liabilities |
|
$ |
1,152 |
|
|
$ |
1,817 |
|
Total current liabilities |
|
|
1,152 |
|
|
|
1,817 |
|
Lease liability -
non-current |
|
|
1,133 |
|
|
|
1,249 |
|
Other long-term
liabilities |
|
|
50 |
|
|
|
50 |
|
Total equity |
|
|
31,392 |
|
|
|
34,576 |
|
Total Liabilities and
Equity |
|
$ |
33,727 |
|
|
$ |
37,692 |
|
Safeguard Scientifics, Inc.Condensed Consolidated
Statements of Operations(in thousands, except per share
amounts) |
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2023 |
|
|
2022 |
|
Operating expenses |
|
$ |
1,185 |
|
|
$ |
1,234 |
|
Operating loss |
|
|
(1,185 |
) |
|
|
(1,234 |
) |
Other income (loss), net |
|
|
(9 |
) |
|
|
(1,997 |
) |
Interest, net |
|
|
274 |
|
|
|
101 |
|
Equity income (loss), net |
|
|
(2,564 |
) |
|
|
(3,579 |
) |
Net income (loss) before
income taxes |
|
|
(3,484 |
) |
|
|
(6,709 |
) |
Income tax benefit
(expense) |
|
|
— |
|
|
|
— |
|
Net income (loss) |
|
$ |
(3,484 |
) |
|
$ |
(6,709 |
) |
Net income (loss) per
share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.22 |
) |
|
$ |
(0.40 |
) |
Diluted |
|
$ |
(0.22 |
) |
|
$ |
(0.40 |
) |
Weighted average shares used
in computing income (loss) per share: |
|
|
|
|
|
|
|
|
Basic |
|
|
16,072 |
|
|
|
16,587 |
|
Diluted |
|
|
16,072 |
|
|
|
16,587 |
|
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 as well as costs incurred for exploring strategic
alternatives. 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 |
|
|
|
March 31, |
|
|
|
2023 |
|
|
2022 |
|
Corporate expenses |
|
$ |
791 |
|
|
$ |
845 |
|
Stock based compensation |
|
|
292 |
|
|
|
314 |
|
Non-recurring items and
other |
|
|
102 |
|
|
|
75 |
|
General and administrative
expenses |
|
$ |
1,185 |
|
|
$ |
1,234 |
|
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