Safeguard Scientifics Announces First Quarter 2020 Financial Results

RADNOR, Pa., April 30, 2020

Highlights

• Safeguard announced certain organizational changes to drive shareholder returns, including the addition of Mr. Eric C. Salzman to the newly created role of Chief Restructuring Officer, and Dr. Robert J. Rosenthal expanding his role to Executive Chairman.
• Board and management remain committed to maximizing the value of the portfolio company interests in a timely manner and returning proceeds to shareholders subject to maintaining a prudent minimum level of liquidity.
• At March 31, 2020, the Company's carrying value of its ownership interests totaled $66.8 million and its cash, cash equivalents and restricted cash totaled $21.0 million.
• Safeguard continues to manage follow-on deployments to support its ownership interests in its portfolio.  The first quarter's follow-on fundings of $2.2 million included $1 million to meQuilibrium as part of an existing investor round that also expanded and restructured its debt facilities.
• Safeguard's portfolio companies have been significantly impacted by COVID-19 and we are working with these companies to support a range of actions to address the economic impacts.
• While General and Administrative expenses increased from $3.1 million in the comparable period in 2019 to $3.5 million for the three months ended March 31, 2020, this was due to the inclusion of a $1.7 million one-time severance charge.  Excluding the one-time severance charge, general and administrative expenses decreased 41% as compared to the comparable prior year quarter.
• Corporate expenses totaled $1.5 million for the three months ended March 31, 2020, a 32% decline from $2.1 million for the comparable prior year period.
• For the three months ended March 31, 2020, Safeguard's net loss was $16.0 million, or $0.77 per share, compared with net income of $21.7 million, or $1.05 per share, for the same period in 2019.  Safeguard's results for the quarter included non-cash impairment charges aggregating to $11.3 million and a severance charge of $1.7 million.

Dr. Rosenthal said, "We hold a valuable portfolio of ownership interests and are committed to identifying and executing a range of actions to capitalize on exit opportunities and maximize shareholder value.  Earlier this month we announced the addition of Eric Salzman in a newly created role of Chief Restructuring Officer.  Eric will be responsible for our value maximization strategy and his prior experience and familiarity with the portfolio make him an excellent choice, especially in light of the current situation.  I am excited to partner with Eric to pursue this opportunity."

"Since joining the Safeguard team a month ago, I have been working with our team to respond to COVID-19 related needs of our portfolio companies, meeting the CEOs of our portfolio companies, meeting our shareholders, reviewing the fair market value and exit values of our positions and exploring a range of options to more actively seek exits of our interests," said Mr. Salzman.  "Based on my experience, I believe I can effectively contribute to the execution of our strategy to drive results for all stakeholders, notwithstanding the volatile macro environment."

"The more challenging economic environment and less active mergers and acquisition  market means that we may have greater need for follow-on fundings to protect our positions and capitalize on opportunities that may have accelerated. As a result, Safeguard's full year 2020 estimate of its liquidity needs increased during the first quarter." said Mark A. Herndon, Safeguard's Senior Vice President and Chief Financial Officer.  Our higher expectations for follow-on funding requirements result in a full year 2020 forecast range of between $8 and $12 million, which also includes some acceleration from deployments previously planned for 2021. Corporate expenses for the year ended December 31, 2020 are expected to continue to decline throughout the year.  Our new range is forecasted to be $5.6 to $6.0 million as compared to $7.1 million for the year ended December 31, 2019.  

During the first quarter of 2020, Safeguard's portfolio companies have been impacted by COVID-19 in a variety of operational ways.  Our companies have also been impacted by a greater difficulty securing access to debt or equity capital.  We are working with the management teams of the entities in which the Company holds such ownership interests to take actions to respond to the rapidly changing environment, including implementing cost reduction efforts, securing additional capital or other actions, which could mitigate some of the expected impacts.  Safeguard management will continue to work with each management team to respond to the rapidly changing environment.