Safeguard Scientifics (NYSE:SFE) Corporate Presentation - November 2013
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Safeguard Scientifics (NYSE:SFE) Corporate Presentation - November 2013

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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......

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.

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  • 1. CORPORATE PRESENTATION  November 2013 1 Data as September 30, 2013
  • 2. Safeguard Scientifics (NYSE:SFE) • Substantial Track Record • Deep Domain Expertise • Focused Approach • Evergreen Funding Model • Strong Balance Sheet and Liquidity Data as September 30, 2013 2
  • 3. 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 Data as September 30, 2013 3
  • 4. Core Operating Model Data as September 30, 2013 4
  • 5. Core Capital Deployment Objectives Data as September 30, 2013 5
  • 6. Our Team Data as September 30, 2013 6
  • 7. Current Partner Companies Data as September 30, 2013 7
  • 8. Syndicate Partners Data as September 30, 2013 8
  • 9. Partner Companies by Revenue Stage Data as September 30, 2013 9
  • 10. Partner Company Update: • Rapidly growing specialty pharmaceutical company SEPT. 2011 28% Initial Capital Deployed SFE Primary Ownership • Developing high-quality, cost-effective generic medicines for pets $10.0M Specialty Pharma • 4 FDA-approved veterinary generic products $8.9B • 20+ products in various stages of development and CVM review Total Capital Deployed Sector Est. U.S. companion animal medicines and vaccines sector, estimated to grow CAGR 5% 2011-2016. Expansion Revenue Stage • 2012 revenue was $19.2M • Projecting revenue by YE’18 of $190M and $40M+ EBITDA Data as September 30, 2013 10
  • 11. Partner Company Update: • Leader in digital marketing technology JULY 2009 23% Initial Capital Deployed SFE Primary Ownership • TerminalOne Marketing Operating SystemTM $18.5M Digital Media Total Capital Deployed Sector $124B High Traction • Serves 3,500+ clients including top-tier agencies and holding companies Estimated worldwide Revenue Stage digital ad spend; Proj. 15.6% CAGR 2012-2016 • Major brands include Havas, Hill Holiday, 1-800-Flowers.com and Pitney Bowes • 300+ employees in 12 locations worldwide • Facebook Exchange (FBX) partner Data as September 30, 2013 11
  • 12. Partner Company Revenue Guidance Increased 2013 aggregate partner company revenue guidance. Up from initial revenue guidance of $250M - $270M. Represents increase of 44% to 49% YoY. 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. Data as September 30, 2013 12
  • 13. 2012 Actual vs. 2013 Guidance 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 *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. Data as September 30, 2013 13
  • 14. 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 Data as September 30, 2013 14
  • 15. 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 Data as September 30, 2013 15
  • 16. John E. Shave III VICE PRESIDENT, BUSINESS DEVELOPMENT & CORPORATE COMMUNICATIONS P 610.975.4952 E jshave@safeguard.com Data as September 30, 2013 16
  • 17. Forward Looking Statements 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. Data as September 30, 2013 17