Safeguard Scientifics Announces Third Quarter 2020 Financial Results

RADNOR, Pa., Nov. 4, 2020

HIGHLIGHTS

• Exits & Deployments
• Portfolio company Sonobi was acquired resulting in $6.6 million of cash proceeds to Safeguard.
• Safeguard remains committed to monetizing its ownership interests in a timely manner and maximizing the value for its shareholders. Since January 2018, Safeguard has realized approximately $195 million in cash proceeds from monetizing its holdings.
• Safeguard deployed $2.5 million of funding to Aktana, Inc. during the quarter as part of a $30 million preferred equity round led by a new investor, bringing our total year-to-date deployments for all of our companies to $9.1 million.

• Safeguard Company Performance
• Safeguard's companies continue to respond to COVID-19 by managing cost structures, securing capital and adjusting operations to take advantage of opportunities in the current and post pandemic environment.
• The aggregate revenue for Safeguard's 14 companies (which excludes Other Ownership Interests) for the trailing twelve months ended June 30, 2020 (one quarter lag from Safeguard's reporting quarter) was $372 million, up 12% as compared to the comparable 2019 period.    

• Financial Results
• Cash and cash equivalents totaled $16.4 million at September 30, 2020.
• The carrying value of the Company's ownership interests totaled $55.8 million at September 30, 2020, and the cost of these interests totaled $225.2 million.
• Safeguard's net loss for the three months ended September 30, 2020 was $4.3 million, or $0.21 per share, compared with net loss of $2.5 million, or $0.12 per share, for the same period in 2019.
• Safeguard's net loss for the nine months ended September 30, 2020 was $30.3 million, or $1.46 per share, compared with net income of $55.3 million, or $2.68 per share, for the same period in 2019. 
• Safeguard's results for the year-to-date period included non-cash impairment charges of $17.3 million, while the prior period included gains from the sales of Propeller and Transactis totaling $86 million.

• Operating costs
• Safeguard continued to reduce its General and Administrative expenses which totaled $2.3 million for the third quarter, including a continued lower level of corporate expenses[1] which totaled $1.3 million, a 22% year over year decline.

• Outlook
• Safeguard expects minimal follow-on deployments remaining in 2020 and has narrowed the full year range for 2020 to $9 to $10 million.
• Safeguard has reduced its expectation for 2020 corporate expenses to below $5.6 million.
• Safeguard remains committed to returning value to shareholders and at the current time has reduced our targeted minimum liquidity threshold from $25 million to $20 million, subject to then prevailing market conditions and expected liquidity needs.  We will consider share repurchases and/or dividends at that time.  

• Shareholder Engagement
• Next virtual discussion with CEO of Aktana to be held on November 10^th at 10 a.m.

"We are pleased with the responses by our companies' management teams to the challenges posed by COVID-19 as our companies continue to generally track ahead of their COVID-19 budgets," said Eric C. Salzman, Safeguard's Chief Restructuring Officer.  "We are also encouraged by the sale of Sonobi which was completed in a challenging M&A environment. We continue to believe that active engagement with our companies will result in attractive outcomes for our shareholders. While we cannot control the macro environment, we remain cautiously optimistic that the activity we are seeing with mergers and acquisitions, strategic partners and capital providers will translate into increased opportunities going forward."

"Our expectation is for minimal, if any, follow-on funding requirements for the remainder of the year and we have narrowed our full year 2020 range to between $9 and $10 million and expect these requirements to continue to decrease as our portfolio matures and we achieve exits," said Mark A. Herndon, Safeguard's Senior Vice President and Chief Financial Officer.  "Corporate expense expectations for the year ended December 31, 2020 have also improved and are expected to be below the bottom of our previously disclosed range of $5.6 to $6.0 million as compared to $7.1 million reported for the year ended December 31, 2019."  

OWNERSHIP INTERESTS AT SEPTEMBER 30, 2020