RADNOR, PA — Safeguard Scientifics, Inc. (NASDAQ: SFE) recently announced financial results for the three months and year ended December 31, 2022.
- Exits & Deployments
- During the fourth quarter, Safeguard funded convertible loans of $0.5 million to meQuilibrium and $0.1 million from its subordinated line of credit to Trice Medical. Safeguard also funded an additional $0.25 million to Trice subsequent to the year-end pursuant to the same arrangement.
- Safeguard’s annual deployments totaled $5.7 million, as compared to the full year 2022 estimated deployments of $5 million to $9 million.
- Safeguard Company Performance
- The aggregate trailing twelve-month revenues ending September 30, 2022 for eight of Safeguard’s companies, which excludes Other Ownership Interests, was $141 million, an increase of 8.7% from the comparable prior period.
- Safeguard’s 1.3 million shares of Bright Health Group declined $0.5 million in value during the fourth quarter and $3.7 million for the 2022 annual period, resulting in a year-end value of $0.9 million.
- Capital Return
- During the fourth quarter, Safeguard repurchased 257,946 shares on the open market for $0.9 million at an average price of $3.41 per share.
- For the year ended December 31, 2022, Safeguard repurchased 711,481 shares on the open market for $2.9 million at an average price of $4.13 per share under a previously authorized $3 million share repurchase plan.
- In January 2023, the remaining amount authorized under the $3 million plan was purchased through open market transactions resulting in an aggregate of 736,577 shares being repurchased at an average price of $4.09 per share from March 2022 through January 2023.
- Financial Results
- Cash, cash equivalents, restricted cash and marketable securities totaled $19.3 million at December 31, 2022.
- The carrying value of the Company’s ownership interests totaled $15.4 million at December 31, 2022.
- Net loss for the three months ended December 31, 2022 was $4.9 million, or $0.30 per share, compared with a net loss of $8.6 million, or $0.51 per share, for the same period in 2021.
- Net loss for the year ended December 31, 2022 was $14.3 million, or $0.87 per share, compared with net income of $27.0 million, or $1.36 per share, for the same period of 2021.
- Operating Costs
- Safeguard continued to reduce its operating costs. General and administrative expenses totaled $1.0 million for the fourth quarter as compared to $1.1 million for the comparable quarter of 2021. General and administrative expenses totaled $4.8 million and $7.2 million for the years ended December 31, 2022 and 2021, respectively, a 33% annual decline.
- Safeguard also continued to lower its corporate expenses,1 which totaled $0.7 million for the fourth quarter of 2022, as compared to $0.8 million for the comparable period of 2021, a 12.5% decline. Corporate expenses totaled $3.2 million and $3.9 million for the years ended December 31, 2022 and 2021, respectively, a 17.9% annual decline.
- Safeguard expects follow-on deployments for its remaining ownership interests for 2023 to be in a range of $4 million to $6 million.
- Safeguard expects to continue to closely manage corporate expenses in 2023 and has established a target of $3.0 to $3.2 million for the year, which continue to be exclusive of severance or transaction related expenses.
“The deteriorating business and capital raising environment noted last quarter has continued to impact many of Safeguard’s companies, with some lagging their operating plans and others experiencing liquidity challenges. While we are continuing to support our companies, we are considering additional actions to either participate in financing transactions that we view as opportunistic and attractive or, to be significantly diluted by those transactions if completed without our participation. We also continue to work with our financial advisor Houlihan Lokey as we evaluate strategic transactions for Safeguard 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.
OWNERSHIP INTERESTS AT DECEMBER 31, 2022
|Companies||Category||Acquisition Year||Primary Ownership%||Fully Diluted Ownership%
|Revenue of $5 million to $10 million|
|Revenue of $10 million to $20 million|
|Clutch Holdings, Inc.||Digital Media||2013||41.7||%||33.3||%||3.0||18.3|
|Revenue of $20 million to $30 million|
|Prognos Health, Inc.||Healthcare||2011||28.4||%||24.3||%||1.5||14.6|
|Trice Medical +||Healthcare||2014||11.6||%||8.6||%||–||12.0|
|Other Ownership Interests|
|Bright Health Group||Healthcare||2021||0.9||–|
** 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, please visit www.safeguard.com.
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