Safeguard Scientifics, Inc. (



Q3 2011 Earnings Conference Call

October 26, 2011 9:00 AM ET


John Shave – VP, Business Development and Corporate Communications

Peter Boni – President and CEO

Steve Zarrilli – SVP and CFO


Nick Halen – Sidoti & Company

Matt Dolan – Roth Capital Partners

Troy Ward – Stifel Nicolaus

Reggie Miller – CSLA

Allen Zwickler – First Manhattan



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Thank you for standing by and welcome to the Safeguard Scientifics Third Quarter 2011 Results Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session.

(Operator instructions)

Please be advised that the conference is being recorded today October 26, 2011. I would now like to hand the conference over to your speaker, Mr. John Shave, Vice President of Business Development and Corporate Communications. Thank you. Please go ahead.

John Shave

Good morning, and thank you for joining us for our third quarter conference call and update. Joining me on today’s call are Peter Boni, Safeguard’s Chief Executive Officer and President; and Steve Zarrilli, Senior Vice President and Chief Financial Officer.

During today’s call, Peter will review third quarter 2011 highlights and other developments and Steve will discuss Safeguard’s financial results and strategies. After that, we will open up the lines 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, the risks of acquisition or disposition of interest in partner companies, capital spending by customers and the effect of regulatory and economic conditions generally, as well as the development of the life sciences and technology markets and other uncertainties that are described in our filings.

During the course of today’s call, 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 final outcomes will be as described today. We encourage you to read our filings with the SEC, including our 10-K, which describe in detail the risks and uncertainties associated with managing our businesses. The company does not assume any obligation to update any forward-looking statements made today.

Now here is Safeguard’s President and CEO, Peter Boni.

Peter Boni

Thanks, John. And thank you all for joining us today for updates on Safeguard Scientifics and our partner companies. Before we get into the discussion about our third quarter results, I am pleased to announce that effective immediately, Jim Datin, our executive VP and managing director will assume responsibility for leading the deal professionals. The capital deployment strategy remains unchanged, and we look to leverage our domain expertise in life sciences and technology.

We believe the combined management of the life sciences and technology deal team is under the leadership of a proven executive will better organizationally align and streamline Safeguard, and the integration will also better focus and leverage Safeguard’s sourcing and capital deployment process, while capitalizing on the accelerated trend for the convergence of technology and life sciences.

Additionally, Jim’s background uniquely combines executive experience in devices, diagnostics, and drug delivery along with sea level experience in information technology. Jim has also been the CEO of a company in the initial revenue and expansion stages. Jim was CEO of TouchPoint solutions, group president of Dendrite International, and held executive positions and operations in corporate development in Glaxo SmithKline, Isuta Holdings, and then Baxter/Merck. So success breeds success.

Now back to the results of the third quarter ended September 30, which we distributed earlier today. We are pleased by the continuous growth of Safeguard’s partner companies, and we remain optimistic about our prospects going forward. Focus, discipline on execution characterize Safeguard’s performance in the period, and year-to-date. Despite volatile capital markets and a wobbly economy, the company continues to fire on all cylinders, realizing value through well timed exit transactions and deploying capital in new growth opportunities.

Safeguard is financially strong, enjoys excellent financial flexibility and liquidity, and remains positioned for continued growth. Our growing success and radically improved balance sheet strengths are among other things generating increased awareness of the Safeguard brand. We are confident that the talented team is up to the challenge of building on Safeguard’s positive momentum as the preferred catalyst for growth stage companies.

Focus is the first pillar of Safeguard strategic foundation. We deploy capital in high technology businesses within specific segments of life sciences and technology industries that exploit five strategic growth driving themes, maturity, migration, conversions, compliance, and cost containment.

In life sciences, we target opportunities in the areas of lower relative technological and regulatory risk, namely in molecular and point of care diagnostics, medical devices, regenerative medicine, specialty pharmaceuticals, and selected health care services. In technology, we pursue transaction enabling applications with the recurring revenue business model in internet media, financial technology, IT healthcare and some selected business services.

Safeguard’s discipline complements our focus. We will not deploy capital or pursue exits simply for activities sake. If an opportunity clears our strategic growth and return hurdles, we will respond appropriately. So that discipline is applied to the outset of our capital deployment process. Safeguard’s deal teams evaluate thousands of proposals annually. By contrast our partner Roster [ph] total 13 companies today. We typically deploy up to $25 million in growth capital per company, and then time our exits from ownership positions in these companies to achieve aggregate targeted risk adjusted returns on capital of 3 to 5 times over a 3 to five-year time period.

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