SFE - Earnings call transcript Q3 2021 | Safeguard Scientifics, Inc.

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Operator

Ladies and gentlemen hello and welcome to the Safeguard Scientifics Third Quarter 2021 Financial Results. My name is Maxine and I'll be coordinating the call today. [Operator Instructions]. I will now hand over to your host Matt Barnard Safeguard's General Counsel to begin. Matt please go ahead when you're ready.

Matt Barnard

you Quarter us XXXX thank Safeguard this and Third Sscientifics Financial afternoon, for for joining presentation Good Results.

Chief and Joining webcast me Herndon, Officer, are and Safeguard’s Mark Eric Salzman, on Safeguard’s Chief today’s Financial Officer. call Executive

our to questions. call open your remarks, will Following prepared the we

to decisions statements not of today's forward good uncertainties limited that the ongoing to market our are to described with uncertainty the in unilaterally future conditions performance looking to of of price companies and companies, fluctuations traded of always risks our economic our and make effect our Reliance on looking companies, the factors ability the the filings of control our our Many As certain statements. are uncertainties, our beyond publicly companies, regulatory predict SEC. ability companies, of presentation support forward other our of these includes monetization involve about control. and including in but of or inability the and any our generally,

result these indication should as or be factors not of other past on performance future financial relied performance. of a As

in detail would update introduce made assume uncertainties statements filings the doesn't encourage our the in like any that, of form results today's course such in risks with which SEC, words expect, the goals you believe as safeguards described assurance With be During will I looking read looking describe intent cannot used We with be our or forward call, anticipate, today. events forward to provide Management statements. the will future to Eric. business. future. to managing as including associated any of discussion that our in obligation any Company now our XX-K,

Eric Salzman

this for topics. the Thanks Today, for Thanks will review we for earnings cover call. QX. We'll our following us achievements afternoon for major QX joining our Matt.

exit activities portfolio. update an in We will the provide on

companies. on will raises We portfolio provide by capital our an update

highlights each QX We will for company. share

statistics allowed take safeguard to I'll September. to will financial million, $XX trading sale a for strategic on August, our achievements deployments through commentary listed million up upsize and these able to Mark on which us with we'll had on a in quarter provide $X publicly per strategy to hold the We've its it company stock maximize an expected We third that today. in approximately delivered to the we'll share back then buy capital notable viewed We comparable the which $X in follow completed we tender with provided you and outstanding as were XX% launch portfolio open start our continue XXXX. will We for to QX at Safeguard ourselves delivered shareholders. in of tender for to self and some quarter liquidity us Q&A. achievements. $XX review share. $XX price view our two a to our cash and return accretive a proceeds million with our to Flashtalking to repurchase of productive tender shares which value balance

and interests strategy. portfolio consistent remaining our about with excited are We our

This shareholders to with based on portfolio. a we continue We operating target the shareholders. exit next that the requirements, target it million capital developments I sheet exits, to our remind follow-on costs, our of expectations threshold Note and threshold to so up is To time in balance subject companies range to to deployment return based our buybacks could of will find down. horizons. cash adjustments $XX shareholders future our via $XX change as and million on have the exit move activities or with return is companies above and work established look we to our which to cash Safeguard's would dividends.

just has had call in varying update a earnings its QX to is was and company buyer. along process, strategic one an company from August, an launch launched third launched an degrees that The LoI positive signed we one September, process was The a our the disclosure M&A During in that M&A in discussions. of moves company now planning August, strategic August company This is process as with quickly in process follows. which sign. that shared

While should a now this we and result close. the we LoI in that purchase agreement, are are not transaction optimistic will certain that cautiously sign sale

are risks the be there would the return would its transaction. sale to harder October we and that launch involved predict. any September its Although range that of delayed until is specific the specific proceeds in And company If was time, The timing evaluate complete timing to in meaningful always completed, planning the course, to deals at a options order process capital to QX. shareholders. of of launch mid and

XXXX prospective events. soon deal, Our a should of assess is reach currently to buyers a but be It is would come underway. probability too the together, we it to believe one

value. the to were to the to did aggregate company if varying amount this and signed an meaningful On and to close, be discussions, a of closing. diligence. is chances deal fair in degrees through a proceeds it third recently difficult of our deal working Safeguard is in that complexity would There was relative this handicap terms its strategic The fair portfolio is transaction, of LoI not current market

cannot said with upside to this company as August, the a in addition merger to we be this If be and deal Having early finish said deal. In of it we deal believe a fourth this there that cash company, probability to close, an Safeguard not The would interest plan. line. that, part and stock equity at of a to stage the merger discussions is we be preferred companies standalone private combined company. for of retain in to handicap are another our the were combined engaged could getting the company's early meaning in what discussions stock the would Safeguard superior would

develop. they updates as you further We will provide

on Safeguard and deployed the capital notes and of growth transaction, in operations raise million equity shareholders that round other Trice this fund into converted existing the an choice investor Bioventus round. the closed touch part and X.X raises. strategic of capital as Safeguard its ton quarter transaction. A their and now equity with to portfolio Let's past

was which Three to was led $X we in be would portfolio be Also, into transactions. their growth as these companies For have XXXX. support of other raises. in raises primary is that the million, expect whether this Bioventus to Safeguard, capital participating we determine the capital these converted now, to deployed It to round. QX begun Safeguard in too soon explore

financings. expect exit partial an or we for part safeguard not So opportunity as exit of would these

of capital raises that occur. any course, will assurance Of these there's no

one publicly Bright to as in of of of QX these a one will Safeguard's Health healthcare exit companies, a we one apply this on comprehensive is the ad million highlights MediaMath, specific recap one position Note quick bullet portfolio traded private in portfolio we've company done with seven Moving on share Lumesis X.X Clutch consists Flashtalking quarters, highlights name. minority each to in each company, tech of and group, assessment marketing stakes tech and not provide our risks past company company fintech of portfolio companies. that each

its mentioned, double a growth with them NCR and as collaboration and closed sites Pfizer data meet significant led to Mayo digit on XXXX. sign on revenue in patients. by its on booking QX was for strategic is to is with was quarter its Trice Moxe up to had is meQuilibrium executing into track largest and which world up round distribution Clutch agreement exceed equity EBITDA traction goals. revenue its a positive provider on early a international Bioventus new largest million experiencing experiencing is InfoBionic publicly record is traded growth is is we products. and over XX% or robust QX, accelerated growth. an year-on-year. which continued and XXXX Trice's support Clinic saw of health with expand real the deployments. agreement Aktana, ever. continues XXX on data rollouts steady research hospitality represented anonymized plan to For with Lumesis XXXX a in marketplace, entered data Merck. with Prognose for QX Syapse saw number early marketplace integrations partnering

For their December. they hear a its progress XX Note all forward to expires Health enabled clients insurer. lockup health looking November and earnings their to platform on new its expanding out tech in about identity MediaMath IPO as QX released in late momentum continue we're integrated Bright our to group, vertically to that package. build solutions their strong more product experience

our market expect represent total assessment our value nor stock and note the of calculation values. part However, determination total our to and was material value we we be price a that it want has exit fair portfolio MediaMath material does meaningful tender to impact the no portfolio. that on was Safeguard ourselves upside this that do of note factored buy an components $X not a increase Also into of potential of the to or exit of our back

So our their are on plans on meaningful excited toward to companies good making executing about shareholders. their prospects progress we're to and value business Safeguard balance, return

relevant to statistics. publicly trading comparable listed share Next, we'd like

valuation As metrics part we our traded we've done quantitatively We we methodology I'll as track to in start and revenue on track stats companies qualitatively enterprise we that as publicly both as internal certain to as follow. of portfolio. well against growth company quarters, prior of revenue metrics the industry these forward provide use two important look comparable with as revenue end projected following as multiples. at of and the multiples We are October. developments. value most our The

to and and X.X August the turns For X.X healthcare publicly median comps call. traded and XXXX turns respectively multiples times XXXX down on enterprise from were our times X.XX respectively earnings X.X revenue value

XXXX turns the August traded from revenue publicly X.XX turns X.X to XXXX, respectively on call. value enterprise were times adtech down and comps our X.X in respectively X.XX For times median adtech and multiples

times times down traded revenue median publicly comps enterprise August. X.X marketing XXXX the value were turns from X.X multiples and X.XX For and tech XXXX on respectively,

expectations. to revenue Now I will growth turn

growth For consensus XX% for was publicly XXXX. healthcare XXXX the comps analyst XX% for and for revenue median traded

median analysts’ For comps, XXXX revenue publicly XX% for was for for the and growth XXXX. XX% traded adtech consensus

revenue For XX% publicly for XXXX. consensus traded for and for marketing XXXX, analysts’ tech comps, median was the XX% growth

that the and revenue aggregate XX% comparison growth some Bright Safeguard's lower. higher is For Health some experiencing projected is although over excluding rate rate, growth for portfolio XXXX, every not company purposes, for

balance comment I Lastly, for the want on follow year. on to the deployments of

deployed don't year-to-date $X.X including the $X.X release, in our the expect in to $X and million read balance in we've QX. in further you year. QX in million Trice portfolio, the Aktana portfolio million the for press in deployments of As We

We $X a will better As guidance than $X come meaningfully million to million million, over in to point to budgeted in the or deployments companies planned. XXXX which $X of XXXX. will these compares million to if million in $X.X our had CFO so reference, two I we QX, it Herndon. our $X At occur additional in time of would were Mark hand this happen to

Mark Herndon

Thanks Eric.

ended For compared of the XXXX. per per $X.XX net quarter September with Safeguard million period $X.X net $XX.X million of reported a share XX, or income of in loss same the share $X.XX XXXX or

traded restricted totaled quarter's $XX.X from debt the in results changes equivalents have $XX gain XX, we cash publicly impacted cash, a company's non-cash reported XXXX or market This positively and stock proceeds and that cash loss and the transactions other stock. were Both obligations. quarter's are resulted were The acquisitions on of by results value million $XX.X negatively of by component million September of in breakout no net. as unrealized the Safeguard's income Flashtalking impacted a at resulting of loss of $XX.X that million. cash million

repurchase shares However, options X.X and we self end the tender. subsequent to to $XX.X approximately used Dutch million this quarter's million

Our were purchases prior under plan during quarter. the the of market insignificant stock

severance compensation, and basis, of were three also to quarter which as in based XXXX, general items expenses XXXX On administrative the sequential months quarter quarterly expenses which ended and $X.X decline. stock million than and September $X.X lower our reported comparable of administrative general for XXXX. expenses the was XX, and for were non-recurring the point compared other a represent $X.X comparable expenses, million excluding decline. Corporate the $X.X continue Our corporate in quarter XX% the a million to XX% expenses, million

about X%. quarter was This

expenses The this director a continued to from costs, amounts, compensation respect both to management's to expenses calendar based cash corporate corporate insurance expect professional fees costs, and paid have $X administrative be and of expenses. fees, compensation expense we measure employee being total level reduce continues approximate significant the the million. office continue costs quarter likely XXXX for that which paid corporate we equity. below expense We With portion indicated will and the being in for and corporate in general the remainder of to equity, year last benefit of so our

in being Flashtalking LTP $X.X made quarter's which the million being quarter. payments fourth met, resulted This during in of thresholds certain resulted transaction

to our that [indiscernible] partially of in QX year-to-date deployment view to impairment to in as method transactions. XXXX, were the under approximately removed position We are compared by aggregate With is interest of has $X.X plan Health value exits paid million and reported LTP income continue of this $XX.X of million XXXX, this plan. XXXX well value. respect of funded aggregate and offset Trice quarter, end. to and XX, as at in carrying Zipnosis gains decreases by fully million the these exit line of dilution item. ownership and this an XX, were component our the all carrying million we a third million Since quarter. from dilution Flashtalking, these Safeguard quarter. collected of the application a $XX.X $X that proceeds million payments of gross addition million $X.X and to an proceeds the loss Trice due million accounting, as as LTP have the $XXX last $X.X Aktana asset QX Bright the at The aggregate Syapse equity This decrease the million aggregating was September the increases equity was of from of result These as enacted of gains and the quarter last year Note of December $X.X sales of $X.X

a our we share our value, we carrying value value value generally declines value value underlying reduce represent companies, the is method fair interest a reminder, the below apply by would the GAAP the equity of same and accounting term, downward ownership our not carrying recording adjustment losses the typically impairment. ownership an As of where interest then the a where fair carrying an carrying the consider ownership expected value interest. does the we making for or If of exit of the to of

if or income from few also time in in to a have not We and do time recorded or loss observable transactions These are resulting accounted the Those readily changes have can determinable fair upward changes from observable price gains this for downward are interests price other are ownership a there under losses have equity adjustments in security. net. or value. not method interests that

quarter a consistent. everyone companies results the of lower also lag. And method were from and share $X.X the equity of million our method losses XXXX. in several for for to less interest method companies included four of of primarily the period were three for XX, our relatively remainder result the losses having one of ended also the the the is ownership we of share decrease equity September companies. equity report XXXX level was method the under entities our at The months in Our XXXX in $X.X million as accounted loss compared quarter's comparable the on I losses equity remind would like to that

quarter We've share and of the to benefits of of the are stages our and interest, income their respect environment. reflected debt our another officially The we expect PPP excluding quarters the basis. are exit you quarter XXXX. companies third XXXX. as that losses that quarters nine to debt loan the companies. of Trice this update our relates COVID-XX company With $XXX comparative quarter ownership during saw large in see statement initial with we a capital of was mind total year unchanged was impact when is the results $XX nine full interest unchanged equity these companies Flashtalking’s this Within to Also also essentially on its those MediaMath those group programs this cash at compared of the can of quarter Health. now to same of loans raise. from the from Bright continue other quarter the as disclosure. group, equity we changes ownership Also later exclude resulting this also third that which disclose billion. most in also conversion part recent about of second party last approximately XXXX of forgiven. incentives, this So also remainder that group the at for as Many to party seen during later quarter to to at companies million in first of Cash notable notes Their operating reflects companies of

So debt overall, prior at group did sourced those this their companies was capital the The companies. cash that net in nine not of companies. from burn change position did certain across ratings substantially

terms XX different related customer in aspects. one recurring months also Flashtalking the their events previously. trailing just an Health, the as rest XX% a quarter decrease ownership ownership reported we was impacted to And due note lag. the quarter The in increase ownership as This grew ended XXXX XX companies interest exit that period that June fourth of our revenue few approximately by of well The growth most performance, was The of the to group a at of XXXX, XXXX. revenue interests. that decline digital other we've non at excludes to In and again, XX%. media transaction as significant talked characteristics a since late our interest single attributable to XX, for the a group Bright resulted this about due

Q&A turn Now it the segment. us call the is to to back for time

if the for can So line open I'm going to pause the ask here few you questions. and operator

Eric Salzman

Thanks for you, the continued today. in call joining thank Okay, us for interest. your Charlie. you Thank

you if free on to to a And up up calls. a evening. a about have our one for time out on one for one up sign call. and reach quarter have or on for following one any feel us Thanks and the be good we'll questions strategy always, follow As

Operator

This concludes call. you joining. Thank today's for

now may disconnect your lines. You

Safeguard Scientifics (SFES) 7 Nov 212021 Q3 Earnings call transcript