Safeguard Scientifics Announces First Quarter 2023 Financial Results

RADNOR, PA — Safeguard Scientifics, Inc. (NASDAQ: SFE) recenlty announced financial results for the three months ended March 31, 2023.

FIRST QUARTER 2023 HIGHLIGHTS

• Financial Results
  • Cash, cash equivalents and restricted cash totaled $18.8 million at March 31, 2023.
  • The carrying value of the Company’s ownership interests totaled $12.0 million at March 31, 2023. The total cost of the Company’s ownership interests was $151.3 million.
  • Net loss for the three months ended March 31, 2023 was $3.5 million, or $0.22 per share, as compared with a net loss of $6.7 million, or $0.40 per share, for the same period in 2022.

• Capital Return
  • During the first quarter, Safeguard completed the remaining purchases under its $3 million 2022 share repurchase plan by acquiring 25,096 shares on the open market at an average price of $3.01 per share, totaling less than $0.1 million.

• Exits & Deployments
  • Safeguard sold the remainder of its Bright Health Group ownership interest during the first quarter for aggregate proceeds of $850,000.
  • As previously disclosed, Safeguard funded the remaining $0.25 million to Trice Medical pursuant to a previously established $0.38 million subordinated line of credit.
  • Subsequent to the quarter, Safeguard deployed $3.0 million to Prognos as part of a financing round consisting of existing and new investors.

• Safeguard Company Performance
  • The aggregate trailing twelve-month revenues ending December 31, 2022 for eight of Safeguard’s companies, which excludes the Other Ownership Interests, was $145 million, an increase of 8.9% from the comparable prior period.

• Operating Costs
  • Safeguard continued to reduce its operating costs.   General and administrative expenses totaled $1.2 million for each of the quarters ended March 31, 2023 and 2022, respectively, a decrease of 4.0%.
  • Safeguard also continued to lower its corporate expenses,¹ which totaled $0.8 million for each of the quarters ended March 31, 2023 and 2022, respectively, a decrease of 6.4%.

• Outlook
  • Safeguard continues to seek a strategic option that maximizes shareholder value and is currently in advanced discussions with a single counterparty. No definitive agreements have been reached and the parties continue to work towards a transaction.
  • As a result of the Company’s deployment to Prognos and certain developments at other companies, we have reduced the Company’s full year 2023 expectation of total follow-on deployments for its remaining ownership interests from a range of $4.0 million to $6.0 million to a range of $3.0 million to $4.5 million, inclusive of the $3.0 million deployed to Prognos.
  • Safeguard will continue to closely manage corporate expenses in 2023 with a target of $3.0 million to $3.2 million for the year, excluding strategic transaction-related expenses.

“The business, capital raising, and M&A environment that we highlighted last quarter continues to impact many of Safeguard’s companies, particularly those with high debt levels. We are acting prudently with our capital in situations where we can create high conviction opportunities to drive value for Safeguard and where the companies have the liquidity and flexibility to operate in a challenging environment. Prognos is an example of a situation where we used our capital to catalyze a transaction attractive to Safeguard. We continue to progress on a strategic alternative as part of the Houlihan Lokey process. We are in discussions on a transaction that could yield greater value to our shareholders than an orderly run-off of the portfolio. In all cases, we remain committed to seeking a path that maximizes shareholder value,” said Eric C. Salzman, Chief Executive Officer.

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^{1 Corporate expenses are general and administrative expenses excluding depreciation, severance, stock-based compensation and other non-recurring items. See full reconciliation in the financial section of this statement.}

OWNERSHIP INTERESTS AT MARCH 31, 2023

^{* Subsequent to the quarter, Prognos completed a financing transaction resulting in Safeguard’s primary and fully diluted ownership percentages being reduced to 19.0% and 17.2%, respectively.
** Based on information provided by each respective company. Assumes the conversion or exercise of all currently outstanding securities including the issuance of all shares available under authorized employee equity programs. Does not reflect liquidation preferences, priority payments, proceeds from option and/or warrant exercises or other company-specific transaction-related obligations in a liquidation or exit transaction.}

For more information, visit www.safeguard.com.

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