safeguard scientifics (nyse:sfe) corporate presentation - december 2013
DESCRIPTION
For 60 years, Safeguard Scientifics (NYSE:SFE) has been synonymous with entrepreneurship and innovation. Safeguard’s distinguished track record includes market leaders such as QVC, Novell, Cambridge Technology Partners, CompuCom, ICG, Traffic.com, Avid Radiopharmaceuticals, Portico Systems and more! Today, Safeguard provides capital and operational support to early- and growth-stage healthcare and technology companies specifically in medtech, healthtech, specialty pharma, fintech, digital media and enterprise 3.0. As of September 30, 2013, Safeguard's portfolio consists of 22 companies which are projected to generate aggregate revenue of $285M-$295M in 2013, a 44% to 49% increase YoY. Safeguard targets to increase its stable of partner companies to 25 by YE'13, deploy capital with greater consistency, and achieve monetizations with aggregate cash-on-cash returns at a minimum of 2x cost. Through keen focus and consistent execution, Safeguard believes that it can drive its capital under management to a range of $550M-$700M by YE'15. Statements contained in this presentation that are not historical facts are forward looking statements which involve certain risks and uncertainties including, but not limited to, risks associated with our ability to make good decisions about the deployment of capital, the fact that our partner companies may vary from period to period, our substantial capital requirements and absence of liquidity from our partner company holdings, fluctuations in the market prices of our publicly traded partner company holdings, competition, our inability to obtain maximum value for our partner company holdings, our ability to attract and retain qualified employees, market valuations in sectors in which our partner companies operate may decline, our inability to control our partner companies, our need to manage our assets to avoid registration under the Investment Company Act of 1940, and risks associated with our partner companies, including the fact that most of our partner companies have a limited history and a history of operating losses, face intense competition and may never be profitable, the effect of economic conditions in the business sectors in which our partner companies operate, and other uncertainties as described in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K. Safeguard does not assume any obligation to update any forward looking statements or other information contained in this presentation.TRANSCRIPT
Data as September 30, 2013
December 2013
CORPORATE PRESENTATION
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Data as September 30, 2013
Safeguard Scientifics (NYSE:SFE)
• Substantial Track Record
• Deep Domain Expertise
• Focused Approach
• Evergreen Funding Model
• Strong Balance Sheet and Liquidity
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Data as September 30, 2013
Why Own Safeguard (NYSE:SFE)?
• Full Value Yet to be Realized or Recognized
• Ownership Stakes in Exciting Partner Companies
• Top Performance of Proven Team
• Financial Strength, Flexibility and Liquidity
• Strong Alignment of Interests
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Data as September 30, 2013
Goals and Objectives
Pathway to Goal?• Focus on core business as engine to value growth
• Greater consistency in the amount of deployed capital and capital realized through monetizations
• Target aggregate cash on cash returns at a minimum ‐ ‐of 2x cost
• Larger stable of partner companies to provide for greater opportunities
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Data as September 30, 2013
Core Operating Model
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Data as September 30, 2013
Core Capital Deployment Objectives
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Data as September 30, 2013
Our Team
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Data as September 30, 2013
Current Partner Companies
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Data as September 30, 2013
Syndicate Partners
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Data as September 30, 2013
Partner Companies by Revenue Stage
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Data as September 30, 2013
• Molecular diagnostic company
• Developing, commercializing blood test for rheumatoid arthritis (RA) and other auto-immune diseases
• VectraTM DA ― Multi-biomarker blood test enables physicians to make more informed treatment decisions
• Available in all 50 states in the U.S.
• Received favorable Medicare coverage and pricing decision
Partner Company Update:
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DEC 2012Initial CapitalDeployed
$11.0MTotal Capital Deployed
1.5MPeople in U.S. with Rheumatoid Arthritis
13%SFE PrimaryOwnership
MedTechSector
ExpansionRevenue Stage
Data as September 30, 2013
• Rapidly growing specialty pharmaceutical company
• Developing high-quality, cost-effective generic medicines for pets
• 4 FDA-approved veterinary generic products
• 20+ products in various stages of development and CVM review
• 2012 revenue was $19.2M
• Projecting revenue by YE’18 of $190M and $40M+ EBITDA
Partner Company Update:
SEPT. 2011Initial CapitalDeployed
$10.0MTotal Capital Deployed
$8.9BEst. U.S. companion animal medicines and vaccines sector, estimated to grow CAGR 5% 2011-2016.
28%SFE PrimaryOwnership
Specialty PharmaSector
ExpansionRevenue Stage
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Data as September 30, 2013
Partner Company Update:
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SEPT 2010Initial CapitalDeployed
$12.0MTotal Capital Deployed
1/280Babies born each year with an inherited disease
30%SFE PrimaryOwnership
Med TechSector
High TractionRevenue Stage
• Molecular diagnostic company
• Next-generation DNA sequencing
• GoodStart SelectTM ― Sequencing carrier screening test that screens all 23 disorders recommended by major medical societies
• First laboratory to offer extensively validated next-generation DNA sequencing-based carrier screen in New York
Data as September 30, 2013
Partner Company Update:
JULY 2009Initial CapitalDeployed
$18.5MTotal Capital Deployed
$124BEstimated worldwidedigital ad spend; Proj. 15.6% CAGR 2012-2016
23%SFE PrimaryOwnership
Digital MediaSector
High TractionRevenue Stage
• Leader in digital marketing technology
• TerminalOne Marketing Operating SystemTM
• Serves 3,500+ clients including top-tier agencies and holding companies
• Major brands include Havas, Hill Holiday, 1-800-Flowers.com and Pitney Bowes
• 300+ employees in 12 locations worldwide
• Facebook Exchange (FBX) partner
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Data as September 30, 2013
Partner Company Revenue Guidance
Aggregate revenue guidance for 2013 and prior years, presented above, reflects revenue on a net basis. Revenue figures utilized for certain companies pertain to periods prior to Safeguard’s involvement with said companies and based solely on information provided to Safeguard by such companies. Revenue figures do not include revenue for new partner companies Clutch and Quantia. Safeguard reports the revenue of its equity and cost method partner companies on a one-quarter lag basis.
Increased 2013 aggregate partner company revenue guidance.
Up from initial revenue guidance of $250M - $270M.
Represents increase of 44% to 49% YoY.
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Data as September 30, 2013
2012 Actual 2013 Guidance
Total # of Partner Companies 18 ~25
Partner Company Aggregate Revenue* $197.3M $285M-$295M
Capital Deployments in New Partner Companies $ 28.7M $50M-$60M
Follow-on Funding for Current Partner Companies $ 26.4M $25M-$40M
Penn Mezzanine Participations $ 4.2M $2M-$5M
Corporate Expenses** $ 15.3M $15.5M - $16M
2012 Actual vs. 2013 Guidance
*Partner Company Aggregate Revenue includes Safeguard’s existing partner companies as of September 30, 2013, with the exception of Clutch, Inc. and Quantia, Inc., which were funded during the third quarter 2013.
**Excludes severance and compensation for CEO Emeritus and is net of interest income from Penn Mezzanine loan participations.
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Data as September 30, 2013
Equity Incentive Compensation
• Key Goals– Structured to align with shareholder interest– Consistent with carried interest methodology– 75% of vesting based on performance criteria
• Performance Vesting Elements– Upon achievement of certain market capitalization thresholds– Upon achievement of cash-on-cash return thresholds on pools of capital
deployed
• Insider Ownership– Equity pool approximates 20% of common stock equivalents– 44% of outstanding grants are vested
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Data as September 30, 2013
Why Own Safeguard (NYSE:SFE)?
• Full Value Yet to be Realized or Recognized
• Ownership Stakes in Exciting Partner Companies
• Top Performance of Proven Team
• Financial Strength, Flexibility and Liquidity
• Strong Alignment of Interests
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Data as September 30, 2013
John E. Shave III
VICE PRESIDENT,BUSINESS DEVELOPMENT &CORPORATE COMMUNICATIONS
P 610.975.4952E [email protected]
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Data as September 30, 2013
Statements contained in this presentation that are not historical facts are forward looking statements which involve certain risks and uncertainties including, but not limited to, risks associated with our ability to make good decisions about the deployment of capital, the fact that our partner companies may vary from period to period, our substantial capital requirements and absence of liquidity from our partner company holdings, fluctuations in the market prices of our publicly traded partner company holdings, competition, our inability to obtain maximum value for our partner company holdings, our ability to attract and retain qualified employees, market valuations in sectors in which our partner companies operate may decline, our inability to control our partner companies, our need to manage our assets to avoid registration under the Investment Company Act of 1940, and risks associated with our partner companies, including the fact that most of our partner companies have a limited history and a history of operating losses, face intense competition and may never be profitable, the effect of economic conditions in the business sectors in which our partner companies operate, and other uncertainties as described in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K.
Safeguard does not assume any obligation to update any forward looking statements or other information contained in this presentation.
Forward Looking Statements
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