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.
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
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3. 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
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4. 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
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11. Partner Company Update:
• 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
DEC 2012
13%
Initial Capital
Deployed
SFE Primary
Ownership
$11.0M
MedTech
Total Capital Deployed
Sector
1.5M
Expansion
People in U.S. with
Rheumatoid Arthritis
Revenue Stage
• Available in all 50 states in the U.S.
• Received favorable Medicare coverage
and pricing decision
Data as September 30, 2013
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12. 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
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13. Partner Company Update:
• Molecular diagnostic company
• GoodStart SelectTM ― Sequencing
carrier screening test that screens all
23 disorders recommended by major
medical societies
30%
Initial Capital
Deployed
SFE Primary
Ownership
$12.0M
• Next-generation DNA sequencing
SEPT 2010
Med Tech
Total Capital Deployed
Sector
1/280
High Traction
Revenue Stage
Babies born each year
with an inherited disease
• First laboratory to offer extensively
validated next-generation DNA
sequencing-based carrier screen in
New York
Data as September 30, 2013
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14. 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
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15. 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
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16. 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
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17. 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
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18. 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
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19. John E. Shave III
VICE PRESIDENT,
BUSINESS DEVELOPMENT &
CORPORATE COMMUNICATIONS
P 610.975.4952
E jshave@safeguard.com
Data as September 30, 2013
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20. 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
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