Safeguard Scientifics First Quarter 2011 Financial Results Recap

Posted by | April 27, 2011

This morning, we announced our first quarter 2011 financial results and reported on the exciting progress achieved along three key facets of our strategic game plan.

Since the beginning of 2011, we deployed $30 million of capital for equity positions in promising new partner companies ThingWorx and PixelOptics. During the quarter we also provided $9 million of follow-on funding, in part, to expand partner company MediaMath’s global sales and marketing initiatives, and to fuel its technology development.

To further strengthen our financial condition, we repurchased $30.8 million of our 1.514$ convertible senior subordinated notes due 2024. The repurchase reduced our debt-to-equity ratio to 1:5 from 1:2 at December 31, 2009. The ability to aggressively deploy capital and reduce borrowings in the quarter is due to the significant cash proceeds available from the Avid Radiopharmaceuticals and Clarient sales that occurred late in December 2010.

In addition, as part of our report this morning, we announced that we have reached an agreement in principle to acquire a significant equity interest in, and become a strategy partner in, a mezzanine lending venture that will initially have in excess of $60 million of capital available for its lending activities and operations. This strategic partnership is expected to generate income for Safeguard, diversify our business and expand capital and market opportunities.

Safeguard also reiterated its 2011 aggregate partner company revenue projections. For the technology group, revenue is forecasted in the range of $180 million to $190 million. Given the performance of our technology partner companies in Q1, they are on track to meet this target guidance. Revenue guidance for the life sciences group has been deferred due to partner company Advanced BioHealing’s February filing with the U.S. Securities and Exchange Commission of a registration statement on Form S-1 for an initial public offering. Safeguard reported aggregate partner company revenue, inclusive of Clarient and Quinnova Pharmaceuticals (each of which was sold in December 2010), of $403 million for 2010, $262 million for 2009, $179 million for 2008 and $100 million for 2007.

Although our first quarter consolidated loss from operations was $9.0 million, or $0.44 per share, this was principally due to operating expenses, equity loss and net interest expense and was less than half of our net loss of $21.9 million, or $1.07 per share, in the like quarter a year ago.

Some highlights from our partner companies:

  • MediaMath: MediaMath has been aggressively growing its domestic and international operations, opening offices in Los Angeles, Chicago, Boston, Washington, D.C., Ontario, Canada and London. Additional offices are slated to launch in 2011 in Latin America and Asia. As a result of this momentum, MediaMath was recognized by AlwaysOn — for the 3rd consecutive year — as one of the hottest companies in the digital advertising space and is now ranked among the world’s top 100 privately held firms. In February 2011, Safeguard provided $9 million in follow-on funding, in part, to expand MediaMath global sales and marketing initiatives, and to fuel technology development. Today, Safeguard has a 22% primary ownership position in MediaMath.
  • ThingWorx: Safeguard deployed $5 million in ThingWorx in February 2011 for a 31% primary ownership position. ThingWorx extends the key functionality of Web 2.0, social media and the semantic web to the “world of things,” creating a platform that amplifies the productivity of people through collective intelligence and user-driven information.
  • PixelOptics: Subsequent to the first quarter of 2011, Safeguard led a $45 million financing round, which included $35 million in equity and $10 million in debt. Specifically, Safeguard provided $25 million of equity for a 25% primary ownership position. The company’s product — emPower! — represents the most significant technological advance in prescription eyewear in the last 50 years. These eyeglasses feature the most advanced electronic innovations and substantially reducing or eliminating the perceived distortion and other limitations associated with multifocal lenses.

Our pipeline is flush with interesting opportunities.  We continue to focus on specific life sciences opportunities in the areas of lower relative technological and regulatory risk, namely in molecular and point-of-care diagnostics, medical devices, regenerative medicine, specialty pharmaceuticals and selected healthcare services.  In technology, we still pursue transaction enabling applications with a recurring revenue business model in Internet and New Media, financial technology, healthcare IT and other selected business services.  Our deal teams are actively evaluating the potential for several new capital deployments over the near term.

If you missed this morning’s call, we’ll be posting the full transcript on our Investor Relations website within the next few days.

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