Safeguard Scientifics CEO Discusses Q3 2010 Results - Earnings Call Transcript
Safeguard Scientifics, Inc. (
)
Q3 2010 Earnings Call
November 03, 2010 09:00 am ET
Executives
John Shave - VP of Business Development and Corporate Communications
Peter Boni - President & CEO
Steve Zarrilli - CFO
Analysts
Bob Labick - CJS Securities
Troy Ward - Stifel Nicolaus
Matthew Pommer - ROTH Capital
Bill Sutherland - Boenning & Scattergood
Nick Halen - Sidoti & Company
Sam Rebotsky - SER Asset Management
Presentation
Operator
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Safeguard Scientifics, Inc. Q3 2009 Earnings Call Transcript
Good day ladies and gentlemen and welcome to the Safeguard third quarter 2010 conference call. This conference may be recorded, I’d like to introduce for today. Mr. John Shave, Vice President of Business Development and Corporate Communications. Sir, please go ahead.
John Shave
Good morning and thank you for joining us for Safeguard Scientifics conference call update. Joining me on today’s call are Peter Boni, Safeguard’s President and Chief Executive Officer; and Steve Zarrilli, Senior Vice President and Chief Financial Officer. During today’s call Peter will review highlights from the third quarter of 2010 and some subsequent events and Steve will discuss Safeguard’s financial results and strategies. After that we’ll open the line for your questions.
Before we begin, I must remind you that today’s presentation includes forward-looking statements. Reliance on forward-looking statements involve certain risks and uncertainties, including but not limited to the uncertainty of future performance of our partner companies, and the risks of acquisition or disposition of interests in partner companies, capital spending by customers, and the effect of the economic conditions generally, the development of the life sciences and technology markets and other uncertainties that are described in our SEC filings.
During the course of today’s call we would use words such as expect, anticipate, believe, and intend will be used in our discussion of goals or events in the future. Management cannot be certain that the financial outcomes will be as described today.
We encourage you to read Safeguard’s filings with the SEC including our Form 10-K which describe in detail the risks and uncertainties associated with managing our business. The company does not assume any obligations to update forward-looking statements made today.
These statements made herein that we are in discussion undertaken in connection with these materials regarding or relating to the proposed acquisition of Clarient by GE Healthcare are intended solely to describe the execution by Safeguard of its long-term strategy to build towards its achievement of successful exits from its partner company relationships as well as the potential impact of the transaction on or with respect to Safeguard and the potential benefits that maybe recognized by the shareholders of Safeguard. Not being included herein or said today should be deemed that we are construed as a recommendation or solicitation with respect to GE Healthcare’s tender offered for the shares in the Clarient.
Any statements made with respect to the Clarient transaction are being made on behalf of Safeguard solely in its capacity as a stockholder of Clarient and not behalf of Clarient.
Now, here is Safeguard’s President and CEO, Peter Boni.
Peter Boni
Thanks John. Good morning and thank you all for joining us today for this quarterly update on Safeguard Scientifics and our partner companies. Results for the quarter ending September 30 were distributed earlier today, and as you can see Safeguard continues to execute against this game plan at improving the strength of our balance sheet, increasing our financial flexibility and ultimately building value for our shareholders.
Our partner companies again have shown steady growth in that duration. During the third quarter, aggregate partner company revenue increased 73% year-over-year and we continue to be encouraged by their growth and their improved performance. We are, as a result, increasing our aggregate partner company revenue guidance to the range of $360 million to $285 million. This is the second time this year that we've revised our guidance upward. Our previous guidance was $325 million to $350 million while the initial guidance was $300 million to $325 million. This is evidence that we are building genuine value.
The transaction was announced subsequent to the third quarter and we're excited by the potential GE Healthcare acquisition of our partner company Clarient. Now Safeguard owns 30.2 million common shares of Clarient and 700,000 ones at various trade points. When the transaction closes, anticipate it will be late 2010, early 2011, net proceeds to Safeguard will be approximately $145 million.
Let me provide you with a brief case study on Clarient because it underscores our ability to identify and build value at companies with high growth potential and then drive shareholder value. Over the past five years we have enhanced Clarient's financial strength, we have developed alliances and syndication partnerships with the top-tier partners and which set a stage to realize value through this well-timed exit with GE Healthcare. Clarient was founded in 1996 as MicroVision Medical Systems, later renamed ChromaVision, to develop and manufacture digital microscopes under the leadership of our new CEO Ron Andrews and with direction from Safeguard’s current management team, the company was repositioned and rebranded as Clarient. To focus the business solely on cancer diagnostic services. Clarient sold its Instrument Systems business to Carl Zeiss MicroImaging in 2007 for $12 million, completing its evolution from an equipment-sales model to a diagnostic-services model. After its repositioning, Clarient grew revenues tenfold, achieved the profitability and grew its market cap by more than $430 million, based on progress proposed acquisition price.
Throughout Clarient’s transformation, Safeguard worked as an active partner to support Clarient’s growth including: initial and follow-on rounds of equity capital, mezzanine debt facilities, lines of credit guarantees, executive management recruitment, sales and marketing expansion, facilities project management and strategic communications and partnerships.
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