THIRD QUARTER 2023 HIGHLIGHTS
- Financial Results
- Cash, cash equivalents and restricted cash totaled
$15.7 million atSeptember 30, 2023 . - The carrying value of the Company’s ownership interests totaled
$14.8 million atSeptember 30, 2023 . The total cost of the Company’s ownership interests was$122.8 million . - Net income for the three months ended
September 30, 2023 was$0.9 million , or$0.06 per basic and fully diluted share, as compared with a net loss of$3.2 million , or$0.19 per basic and fully diluted share, for the same period in 2022. - Net loss for the nine months ended
September 30, 2023 was$5.4 million , or$0.33 per basic and fully diluted share, as compared with a net loss of$9.4 million , or$0.57 per basic and fully diluted share, for the same period in 2022.
- Cash, cash equivalents and restricted cash totaled
- Exits & Deployments
- Safeguard received
$1.0 million of cash proceeds related to various escrow amounts from prior transactions, primarily from theLumesis exit which occurred during the third quarter of 2022. - There were no deployments during the three months ended
September 30, 2023 . Safeguard’s year-to-date deployments totaled$3.3 million , consisting primarily of the$3.0 million deployment toPrognos as part of a financing round which included existing and new investors during the second quarter of 2023. - As previously disclosed,
Trice Medical completed a recapitalization transaction and capital raise in which Safeguard declined to participate that resulted in Safeguard retaining a small, subordinated debt position and a de minimis ownership interest. InfoBionic completed a recapitalization transaction and capital raise, in which Safeguard declined to participate, that reduced our ownership position to approximately 5% and resulted in recording a$1.7 million non-cash observable price change gain to reflect the fair value of the ownership interest.
- Safeguard received
- Safeguard Company Performance
- The aggregate trailing twelve-month revenues ending
June 30, 2023 for six of Safeguard’s companies, which excludes the Other Ownership Interests, was$96 million , an increase of 10.3% from the comparable prior period.
- The aggregate trailing twelve-month revenues ending
- Operating Costs
- General and administrative expenses totaled
$1.3 million for the quarter endedSeptember 30, 2023 as compared to$1.4 million for the comparable period of 2022, a 3.5% decrease. General and administrative expenses were$3.7 million for the nine-month periods endedSeptember 30, 2023 and 2022. - Safeguard’s corporate expenses1 totaled
$0.9 million and$0.8 million for the quarters endedSeptember 30, 2023 and 2022, respectively, which represented an increase of 9.8% due to certain professional and legal expenses. Corporate expenses were$2.4 million for the nine months endedSeptember 30, 2023 as compared to$2.5 million for the comparable period of 2022, a 3.2% decrease.
- General and administrative expenses totaled
- Outlook
- Safeguard filed a proxy statement related to a special meeting of shareholders to consider approving a series of transactions which would allow the Company to cease the registration of its common stock with the
SEC and delist its shares of common stock from trading onThe Nasdaq Stock Market LLC . - Safeguard has determined that the costs of being a public reporting company outweigh the benefits, and these steps are designed to allow the Company to implement a variety of cost-cutting measures in order to maximize the value to be returned to shareholders upon any additional monetizations from the remaining portfolio. Other strategic transactions could still be considered by the Safeguard Board if and when they became available.
- Consistent with its strategy to return value to shareholders, Safeguard is considering declaring a dividend during the quarter ended
December 31, 2023 , subject to Board approval. - Safeguard does not expect to make additional deployments to the portfolio during 2023.
- Safeguard continues to estimate that the exit values from the remaining portfolio companies, assuming normal conditions and ordinary course exits, would range between
$25 million and$45 million over the next two years. - Safeguard will continue to closely manage corporate expenses for the remainder of 2023. We expect corporate expenses for the annual period of 2023 to be between
$3.1 to$3.2 million , higher than our estimate last quarter but within the range of what was previously estimated for the year.
- Safeguard filed a proxy statement related to a special meeting of shareholders to consider approving a series of transactions which would allow the Company to cease the registration of its common stock with the
“We have made substantial progress preparing for the transaction described in our proxy. As a result, we expect to achieve substantially lower operating costs beginning in 2024 as we work to monetize the remaining positions in our portfolio”, said
_____________________
1 Corporate expenses is a non-GAAP financial measure, which we defined as 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
Companies | Category | Acquisition Year | Primary Ownership% | Fully Diluted Ownership% ** | Carrying Value (in millions) | Cost (in millions) | |||
Revenue of | |||||||||
Moxe | Healthcare | 2016 | 19.3% | 17.9% | 5.3 | 7.5 | |||
Revenue of | |||||||||
Digital Media | 2013 | 41.7% | 33.4% | 1.4 | 18.3 | ||||
Healthcare | 2014 | 5.5% | 5.2% | 1.7 | 22.0 | ||||
Healthcare | 2014 | 11.0% | 9.1% | - | 26.6 | ||||
Healthcare | 2011 | 19.4% | 17.8% | 5.3 | 17.6 | ||||
Revenue of | |||||||||
Healthcare | 2015 | 30.2% | 21.1% | - | 14.5 | ||||
Other Ownership Interests | |||||||||
All others | Various | 1.1 | 16.3 | ||||||
TOTAL: | $ | 14.8 | $ | 122.8 |
** 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:
Time:
Webcast: https://www.webcast-eqs.com/register/safeguard110223/en
Live Number: 877-407-0989
Speakers: Chief Executive Officer,
Format: Discussion of the third 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
Historically,
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 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 efforts to execute on and implement reverse and forward splits of its common stock so that Safeguard can cease the registration of its common stock under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and delist its shares of common stock from trading on
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Condensed Consolidated Balance Sheets (in thousands) | ||||||||
2023 | 2022 | |||||||
Assets | ||||||||
Cash, cash equivalents, restricted cash and marketable securities | $ | 15,685 | $ | 19,312 | ||||
Ownership interests | — | 860 | ||||||
Other current assets | 593 | 1,251 | ||||||
Total current assets | 16,278 | 21,423 | ||||||
Ownership interests in and advances | 14,839 | 14,545 | ||||||
Other assets | 1,310 | 1,724 | ||||||
Total Assets | $ | 32,427 | $ | 37,692 | ||||
Liabilities and Equity | ||||||||
Other current liabilities | $ | 1,563 | $ | 1,817 | ||||
Total current liabilities | 1,563 | 1,817 | ||||||
Lease liability - non-current | 888 | 1,249 | ||||||
Other long-term liabilities | 50 | 50 | ||||||
Total equity | 29,926 | 34,576 | ||||||
Total Liabilities and Equity | $ | 32,427 | $ | 37,692 |
Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Operating expenses | $ | 1,313 | $ | 1,360 | $ | 3,684 | $ | 3,740 | ||||||||
Operating loss | (1,313 | ) | (1,360 | ) | (3,684 | ) | (3,740 | ) | ||||||||
Other income (loss), net | 1,661 | (1,012 | ) | 1,486 | (2,979 | ) | ||||||||||
Interest, net | 198 | 230 | 721 | 476 | ||||||||||||
Equity income (loss), net | 386 | (1,022 | ) | (3,937 | ) | (3,147 | ) | |||||||||
Net income (loss) before income taxes | 932 | (3,164 | ) | (5,414 | ) | (9,390 | ) | |||||||||
Income tax benefit (expense) | — | — | — | — | ||||||||||||
Net income (loss) | $ | 932 | $ | (3,164 | ) | $ | (5,414 | ) | $ | (9,390 | ) | |||||
Net income (loss) per share: | ||||||||||||||||
Basic | $ | 0.06 | $ | (0.19 | ) | $ | (0.33 | ) | $ | (0.57 | ) | |||||
Diluted | $ | 0.06 | $ | (0.19 | ) | $ | (0.33 | ) | $ | (0.57 | ) | |||||
Weighted average shares used in computing income (loss) per share: | ||||||||||||||||
Basic | 16,285 | 16,281 | 16,167 | 16,405 | ||||||||||||
Diluted | 16,285 | 16,281 | 16,167 | 16,405 | ||||||||||||
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 | Nine Months Ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Corporate expenses | $ | 850 | $ | 774 | $ | 2,371 | $ | 2,450 | ||||||||
Stock based compensation | 238 | 560 | 808 | 1,136 | ||||||||||||
Non-recurring items and other | 225 | 26 | 505 | 154 | ||||||||||||
General and administrative expenses | $ | 1,313 | $ | 1,360 | $ | 3,684 | $ | 3,740 |
SAFEGUARD CONTACT:
Chief Financial Officer
(610) 975-4913
mherndon@safeguard.com
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