Recap: Safeguard Scientifics Q3 2011 Financial Results
Posted by | October 26, 2011
As Peter J. Boni highlighted this morning, despite volatile capital markets and a wobbly economy, Safeguard Scientifics continues to fire on all cylinders by realizing value through well-timed exit transactions and deploying capital in new growth opportunities.
For the three months and nine months ended September 30, 2011, aggregate partner company revenue was $46 million and $131 million, respectively. Aggregate technology partner company revenue was $41 million, up 26%, and $115 million, up 46%, for the three months and nine months ended September 30, 2011, respectively. For our life sciences partner companies we do not expect significant revenue to be generated by these companies until they are further along in their development. Safeguard reiterated its previously announced guidance for 2011 aggregate partner company revenue of $175 million to $182 million. Aggregate revenue for the same partner companies for 2007, 2008, 2009 and 2010 was $31.5 million, $51.4 million, $78.3 million, and $140 million, respectively. Safeguard’s partner companies is reported on a one-quarter lag.
At September 30, Safeguard’s interests in its 13 partner companies represented an aggregate of $167 million in capital deployed, and our net cash, cash equivalents and marketable securities totaled $235 million, as of the same date. The sum of these components brings us to $402 million. Using shares outstanding, this total represents $19 per share. a base of approximately 21 million shares outstanding, that translates into $18 per share.
Though we cannot predict or guarantee that we will perform in the future as well as in the past, Safeguard’s aggregate cash-on-cash returns have averaged 2.4x for exit transactions and write-offs relating to partner company relationships created by our current management since January 2006. This track record in combination with the value of assets currently deployed suggests substantial value to our shareholders.
Partner company highlights include:
- New partner company Putney: Safeguard led a $21 million Series C financing in September 2011, deploying $10 million for a 30 percent primary ownership position. Putney has approximately 20 generic drugs in the development pipeline. While Americans fill 78% of their own prescriptions with generics, only 6% of the drugs approved by the FDA for dogs and cats have a generic equivalent, according to Putney’s analysis of FDA Center for Veterinary Medicine approvals. We believe Putney is strongly positioned to capitalize on this growing industry.
- MediaMath: The company continues to benefit from the ongoing seismic shift of advertising to digital media from print and broadcast platforms. Online U.S. ad spending is forecast to increase 20% to more than $31 billion in 2011.Winning 19 out of 20 head-to-head competitions for new clients against TURN and Invite Media in 2010, MediaMath increased revenues 150% from 2009 and launched its enhanced media buying platform, TerminalOne™, with a user interface that allows marketers to directly manage campaigns according to specific objectives.
- NuPathe: The company is scheduled to meet with the FDA to discuss questions the FDA raised in a Complete Response Letter the company received in August. While the FDA raised questions centered on the chemistry, manufacturing and safety aspects of the patch, the FDA did acknowledge the efficacy of the migraine patch in the overall migraine population. After that meeting, NuPathe plans to update the market with regards to its expectations around the timing of its resubmission of the NDA.
- PixelOptics: The company is changing the standard of care for eyeglass wearers. With U.S. regional launches, PixelOptics has begun commercializing the world’s first and only electronically-focusing prescription eyewear, called emPower!. The global vision care market is estimated at $84 billion with annual sales of 100 million pairs of multifocal lenses. The U.S. segment of that market is estimated at $27 billion with sales of 20.6 million pairs of progressive lenses and 16.2 million pairs of bifocals. Every 1% penetration by emPower! translates into $400 million in revenue for PixelOptics.
Platform expansion highlights include:
- Penn Mezzanine: Safeguard’s partnership with Penn Mezz represents our first initiative to augment our capabilities as a growth capital provider and to participate in the management of external sources of capital. This initiative is expected to produce current interest income and future management fee income and profit participation. In August 2011, Penn Mezzanine Fund I closed its fund-raising with an aggregate of $64 million available to it for lending and operations, including our $30 million. As of September 30, 2011, Penn Mezzanine had deployed $14.5 million in four companies.
Our mounting success and improved balance sheet strength are generating increased awareness of the Safeguard brand. We’re confident that our talented team will continue to build upon Safeguard’s positive momentum as the preferred catalyst to build great companies and to realize additional gains for our shareholders.
If you were unable to join us live this morning, check out our podcast, which will be available approximately 24 hours after the conclusion of the call. In addition, the webcast will be archived through November 9, 2011 at 11:59pm EST, as will the telephone replay at 855-859-2056 (International) +404-537-3406.
Click here for the complete press release that was issued earlier this morning.
