Q4 2022 Safeguard Scientifics Inc Earnings Call
Greetings and welcome to safeguard year end financial results.
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<unk> and answer session will follow the formal presentation.
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It is now my pleasure to introduce your host Matthew Barnard General Counsel. Thank you you may begin.
Good afternoon, and thank you for joining us for this presentation safeguard scientifics fourth quarter and full year 2022 financial results joining me on today's call and webcast for Eric Salzman Safeguards, Chief Executive Officer, Mark Carney Chief Financial Officer. Following our prepared remarks people want to call to your questions. As always this presentation includes forward looking statements.
Forward looking statements involve certain risks and uncertainties, including but not limited to uncertainties outcomes of corporate strategic transactions, if any uncertainty of the future performance of our company's ability to make good decisions about the monetization of the company's ongoing support of our company our inability to lottery control our company's fluctuations in the market places with any of our companies are publicly traded.
And the effect of regulatory and economic conditions.
Other uncertainties described in our filings with the SEC.
These factors are beyond our ability to predict or control as a result of these and other factors our past performance cannot be relied on as an indication of future performance. During the course of todays call were ticked as expect anticipate believe and time will be in our discussion of goals or events in the future management cannot provide any assurance that future results will be as described on forward looking statements. We encourage you repaid.
<unk> filings with the SEC, including our Form 10-K, which describe in detail the risks and uncertainties associated with managing our business.
<unk> does not assume any obligation to update any forward looking statements made today.
I would now like to introduce Eric.
Thanks, Matt.
Thank you for joining our call. This afternoon to discuss safeguards Q4, and full year 2022 results.
The last three quarters have presented a number of challenges to safeguards portfolio companies.
We've seen a broad decline in public company valuations, a sharp drop off in investments to V. C stage companies and a pullback in M&A by both strategic and financial buyers.
Urban park by rising interest rates recessionary shares and a shift away from a growth at all cost mindset public and private valuations have declined meaningfully during this period and investor sentiment has shifted from prioritizing revenue growth to prioritizing profitability.
This is further evidenced by many of the recently announced.
Leading tech companies.
Naturally this change.
These cards portfolio companies are leaders in their respective fields and over the past few years, they've been investing in products sales marketing and operations to capture market share and scale their businesses.
Yeah.
These companies are all by and large sub $30 million in revenues and have not yet reached the revenue levels to be profitable.
Historically the path for most venture back companies to maximize equity value was.
The focus on growth and market share rather than finding the fastest path to profitability.
The objective was to achieve attractive growth rates or other value creation milestones.
As new capital every two or three years and building market dominant company.
Under this playbook companies do not usually raise enough capital to fully fund their business plans to cash flow breakeven and a single capital raise but rather rely on raising enough capital to fund themselves until the next value creation of that.
Where they can raise more money ideally at higher valuations.
Profitability becomes a focus once these companies have achieved remedied scale or market dominance.
Over the past nine months, we've seen dramatic changes in both investor and M&A buyer sentiment, which has made it much harder for companies to raise additional capital or sell themselves.
These circumstances are exacerbated for companies that are carrying significant venture debt.
As it relates to safeguards companies. These macro factors have negatively impacted us.
Some of our companies have not posted consistent revenue growth are not yet profitable and in several cases carry significant debt.
We continue to work closely with every one of our companies to implement operating cost reductions extend their cash flow run wage increase faster path to profitability.
We are looking at a range of options to support these companies, including operational and management changes capital structure modifications, deciding which companies we will support with additional capital and which we will not support because the risk return does not justify it and therefore, we would face substantial dilution in our ownership.
Interest.
To get more granular.
Of our eight remaining companies, we believe to have sufficient liquidity to reach cash flow breakeven.
The other six companies need to raise additional capital to execute their business plans or sell themselves. This is not easy to do in a tough market environment, where EBITA negative companies are generally out of favor.
Of these six companies too.
Two have been pursuing dual path capital raises and M&A.
Two are pursuing capital raises only following M&A discussions in 2022 but that did not result in actionable deals.
One of our companies is currently pursuing M&A only and.
In one company is about to launch an M&A process. This month.
Three of the six companies carry significant debt, which negatively impacts your ability to raise capital or sell themselves in the current environment.
These three companies that carry large debt loads, if they cannot secure capital and to restructure their debt <unk> equity positions in these companies aren't risks as lenders could force the sale of the company to satisfy the loans were foreclosed on its collateral.
We may also be asked to contribute capital in these situations tender position or face substantial dilution if we don't.
We will make these decisions on a case by case basis with safeguard shareholder value is our top priority.
Note that capital is still available for companies with compelling business models operating in large markets and posting consistent and robust revenue growth.
For example, moxie was able to complete a growth equity round in June of 2022 due in large part to strong revenue growth large addressable market.
High barriers to entry and the strength of its business model.
Now I would like to provide more teachers more detail on the status of these six companies.
Obviously cannot share the names of the companies, but we'll try to provide you with enough detail to habit.
And understanding of where each of them stance.
One company is in discussions to merge in a stock for stock deal with another private company that operates in an adjacent space.
Theres, a nonbinding term sheet signed between the companies and we just kicked off the diligence and documentation phase.
While there is a strong business case to be made for the merger. It is too early to assess whether a final transaction will be completed.
While the deal would be a stock for stock merger and would not generate cash to safeguard at close we view the potential merger as beneficial to our position because together the companies would have greater scale.
More resources the opportunity for substantial cost savings and a more comprehensive product offering.
Okay.
One company has been in the market trying to raise capital after exploring an M&A process last year that did not that did not yield an actionable herself.
We believe that the difficulty. This company has had raising capital is due to its high debt loads and cash flow burn.
While this company recently received two equity financing term sheets from outside parties. The term sheets require substantial modifications to the loan which may or may not be acceptable to the lender.
We are working with the company the other investors and the senior lender on a range of options, but we expect safeguards interest in this company to be negatively impacted in any restructuring.
One other company has been in the market pursuing a dual path capital raised in M&A.
The M&A track has not resulted in any term sheets.
While our capital raised track has resulted in one financing terms.
While this company does not have excessive cash flow burn its debt load is high and its capital structure. It's complicated due to several prior rounds of preferred fundings.
We are working with the company the other investors in the senior lender on a range of options, but would expect safeguards ownership position to be negatively impacted in any restructuring.
Another company has been in the market pursuing a dual path capital raising and M&A.
The M&A track has resulted in one term sheet for a stock for stock merger with a similar sized private company.
Those discussions are at an early stage on the financing track there is interest from a strategic investor.
Who would want to invest alongside a lead investor. This is another company with a complicated capital structure, which would likely have to be restructured for either the merger or the capital range to occur.
One company has been pursuing a capital raise process. Following M&A discussions last year that did not result.
And an actionable outcome.
The company is in the middle of a business model transition and safeguard is considering using its capital to support this company through the transition.
And finally, the last company will soon be launching a namely an M&A process. It is too soon for us to assess the likelihood that outcome with that process, but the company had received inbound interest from a strategic party in the past.
Given this macro environment and the fact that we may decide to use safeguards capital to support our companies and defense certain of our positions. We have set our 2023 guidance for follow on deployments at $4 million to $6 million.
Note that during 2021 and 2022.
We provided a total of $8 $4 million of capital to twice Attardo prognosis.
<unk> Nikko Librium and clutch in the aggregate, we expect to get a positive return on those deployments well in excess of our cost of capital.
Taking a step back there are two key questions we asked ourselves.
Number one what else can we be doing to support our companies in and address the current market conditions and number two are these temporary or permanent setbacks for our companies.
On the first question, we continue to be active with every company on strategy operations strategic positions positioning.
And in banker discussions we in all of our co investors you are taking a very hands on approach with our companies.
In situations, where companies face liquidity crises, we will use safeguards capital judiciously, but also aggressively when the opportunity to drive a better risk reward outcome for safeguard is available.
This can take the form of leading what's called pay to play rounds, partnering with lenders and are making operational and management changes as needed. However, we don't see the chance to make substantial gains on our new deployment of capital we will choose to not participate in the transaction.
I will address the next question of temporary versus permanent in two ways.
First one on valuation standpoint, we view the current market environment as more temporary then permit it.
Sentiment and market swing from growth to profitability over different multiyear business cycles.
When the interest rates are effectively zero physical policies loose and the economy's growing investors have an economic incentive to invest for growth basically that's been the situation for the past 10 years.
With the 10 year Treasury rate currently at 4% and recessionary concerns heightened investor sentiment sentiment has shifted from growth profitability and value.
So we view the valuation environment is temporary as long as our companies can secure the capital to fund their business plans to cash flow breakeven and get through the difficult cycle.
In situations, where companies can't secure the liquidity to reach cash flow breakeven survived.
Survive the current cycle, where achieve its next meaningful value creation point. It will likely result in a negative outcome for our ownership interest.
What does that mean for 2023.
Given the current environment it is difficult to forecast meaningful exits that generate cash to safeguard this year.
Of course, the environment could change and we are working with our co investor to improve all outcomes.
Furthermore, with eight positions left we are subject to the concentration risk of a small portfolio and exposed to single company outcomes.
In the current environment could lead to near term volatility or suboptimal results for some of our positions.
We continue booked we continue to believe that there is value in our companies and we're working a number of different strategies to maximize value and achieve exit for safeguard.
Now, let me comment on public comps and trading multiples.
We regularly track the public trading comps of our peers and their revenue growth rates to help our investors triangulate on what our portfolio could be worth using the same metrics.
As of March seven.
The tech enabled health care peers to our portfolio were trading at three and a half times 2023 consensus revenues.
In 2023 consensus revenue growth for these tech enabled health care peers was 11%.
As of March seven.
The Martech marketing technology peers, which is relevant for clutch, we're trading at 2.9 times 2023 consensus revenues in.
In 2023 consensus revenue growth for these martech peers was 10%.
I'd now like to make a few comments on the Houlihan lokey process.
We continue to work with Houlihan lokey on different strategic alternatives to maximize shareholder value.
We are in discussions with a couple of parties that could achieve many of our goals, including allowing the portfolio portfolio to run off in the ordinary course and significantly lowering the cost of managing and monetizing our remaining portfolio of companies.
However, these discussions are still preliminary and there are no assurances that a transaction will occur.
At this time I'll hand, the call over to our CFO Mark Herndon.
Thanks Derek.
Net loss for the year ended December 31, 2022 was $14 3 million or <unk> 87 per share as compared to a net income for the year ended December 31, 2021, $27 million or $1 36 per share.
<unk> fourth quarter of 2020 resulted in a net loss of $4 9 million or <unk> 30 per share as compared to the net loss of $8 6 million or 51 per share for the comparable period of 2021.
This year's results were primarily impacted by a $4 $9 million gain resulting from Louis' exit during the third quarter.
Our results for this year reflected generally decreasing operating expenses throughout the year as corporate expenses decreased sequentially each quarter. However.
However, we also experienced declines in the fair value of Brighthouse stock that totaled $3 $7 million.
Those one 3 million shares were valued at.
$8 million at the end of 2022, and we have since liquidated substantially all of that position.
We continued with our open market stock repurchases during the fourth quarter, resulting in the repurchase of approximately 258000 shares for 0.9 million at an average price of $3 41 per share.
As we disclosed previously the $3 million authorization of this program was completed in January .
In total this program and repurchased 736000 570000 shares at an average price of $4.09 per share.
Hey, Curt ended the 2022 year with $19 $3 million of cash cash equivalents and restricted cash and we continue to have no debt obligations.
Our general and administrative expenses were $1 million from the fourth quarter of 2022, which was 9% lower than the $1 1 million reported in the comparable quarter of 2021.
For the full year of 2022, our general and administrative expenses were $4 8 million as compared to $7 2 million for the full year 'twenty, one a 33% decline.
This annual decline was largely attributable to the absence of severance charges of $8 million and L. Tip expenses of <unk> 7 million that occurred in 2021, but did not recur in 2022.
Corporate expenses for the quarter, which represent general and administrative expenses, excluding stock based compensation severance expenses and nonrecurring and other items were <unk> 7 million as compared to <unk> 8 million in the comparable quarter of 2021, a 13% declining.
For the full year of 2022, these corporate expenses were $314 million as compared to $3 9 million for the full year of 2021, an 18% decline.
On a sequential basis this quarter represents a six 7% decline in our corporate expenses.
We generally expect that the court quarterly level of corporate expenses has stabilized at this approximate value.
As a result, we have established an expectation for corporate expenses in 2023.
Three to $3 2 million.
These declines.
The declines we have experienced this year with respect to both general administrative costs and corporate expenses.
I have been the result of reductions in cash based employee compensation costs professional fees and insurance expenses.
<unk> expense measure also continues to benefit from director fees being paid entirely in equity as well as a significant portion of management's compensation being paid in equity.
With respect to our ownership interest we have an aggregate carrying value at December 31, 2020 to $15 $4 million as compared to $26 5 million.
At 2020 one's yearend.
This annual decrease was primarily the result of the application of the equity method of accounting as we recording our share of the losses from our remaining companies.
As well as the $3 $7 million decline in the fair value of Brighthouse shares and the exit of lenses.
Those decreases were partially offset by increases due to our $5 7 million dollar.
Aggregate deployments to progress <unk> clutch, Nickelodeon and twice during the year.
And the dilution gain of $5 3 million for moxie that occurred in the second quarter.
Our equity method loss for the 2022 year also included approximately $8 million of gain resulting from the collection of S grows and the resolution of contingencies related to a variety of prior transactions.
I would also like to remind everyone that we report our share of the losses from the equity method companies on a one quarter lag. So this quarter's share of losses reflects the third quarter of 2022.
Our share of the losses of our equity method interests for the three months ended December 31, 2020, with corporate $1 million as compared to $3 6 million for the comparable period in 2021.
And we now have four companies, where our equity method losses are limited due to the carrying value being reduced to zero previously or as of this yearend.
Also with respect to our ownership interest the third party debt in this group of eight companies was approximately $209 million versus 206 million at September 32022.
Cash at the same group of eight companies has decreased to about $71 million from the $90 million last quarter. This decrease was primarily related to the quarterly burn at about three companies.
In terms of revenue performance, we reported an eight 7% increase in our group companies.
Companies to $141 million for the trailing 12 months period ended September 32022, which reflects the one quarter lag.
We continue to see our fastest organic growth from moxie in equilibrium.
Now at this point, we'd like to begin the Q&A.
Q&A segment of the call. So I'll ask the operator to open.
Open the phones for a few questions and provide the instructions.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the Q.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Our first question comes from the line of Matt Burmeister, a private Investor. Please proceed with your question.
Hi, Thanks for taking my question.
Can you buy back shares under the 2015 repurchase program that has approximately $15 million left.
[laughter].
Hum.
I'll start and Matt if you want to.
Do you want to add to it so.
The plan is authorized we'd need board approval.
For a specific amount and then.
If this were done on a <unk> one plan. We would then have a pricing grid that we would establish and provide to our.
Our broker to execute so.
Slightly longer answer to a short question is yeah.
Yes, with board approvals and other steps to put in place.
Considering where the stock price is that how come that hasn't been done yet.
It's a good question.
So if you if you know what you probably do so it took us roughly.
Two years to complete the $3 million stock repurchase plan.
Which was started in I believe March.
Hmm.
Just wondering maybe it was as much 22, yes.
Yes about a year to finish that $3 million. So the volume of our stock it's quite limited.
But in that plan we bought.
Under the maximum average daily trading volume that was a lot. So the reason why we have not at this point.
Gone to the board and announced a follow on or additional stock plan as you could tell from the vast majority of the time. We spent on the prepared remarks talked about the macro environment the liquidity needs of the portfolio and some of the decisions, we'll be making regarding follow ons versus buybacks versus other uses of capital.
So it is a topic that we discuss it.
Among the management team and at every board meeting at this point in the given the macroeconomic situation.
We felt it would be prudent for us to not look to authorize an additional plan at this moment.
Yeah 20 million cash.
Approximately two we're estimating.
On the high level six distributed to the portfolio and then you've got roughly for corporate expense.
$10 million Delta.
It seems like way too much cash just sitting on the sidelines.
That's unfortunate to hear next question is.
Is there anything preventing safeguard from executing another Dutch auction to repurchase shares.
So there's the.
Well I should say two things first of all and Matt can weigh in in order to do a stock.
Authorized the stock buyback, whether that's in a <unk> one plan or a Dutch auction. When you didn't open window. So we can have a material nonpublic information. So that's a criteria that has to be to be met.
But but just to go back to your first question. If you just do the simple math that you did.
Yeah. If you take a couple of years of operating expenses and as you said the follow on investments and you deduct that from the cash again, the cash number that was mark sure Bush as of Q4 'twenty two.
There is some additional cash but it is not double digit additional cash and we will evaluate it.
And make a decision because.
As you know we've since since joining.
I believe we returned roughly.
$45 million or so to shareholders in the last 18 months yourself. So that is something that's kind of high priority for us we have to obviously balance that against the liquidity needs of the portfolio.
Yes.
Okay.
On the Q1 'twenty.
2022 earnings call you mentioned, a large strategic buyer wanting to wait to perform due diligence until 2023 has that process started.
So the process as you heard in probably more detail than anybody wanted for our M&A, yes. It has started.
We've shared a fair amount of detail with each situation on the call today. The six companies that are in active in either M&A and or.
Or capital raise so.
So yes diligence has started and the update is what we provided this afternoon.
Okay.
Med crypt.
<unk> $25 million in the series B at the end of 2022, I know safeguard invested 750000 in the initial seed round in 2016.
What is our diluted ownership percent interest in the company and do you expect to receive any proceeds from our ownership interest.
Yes, so as a result of that Oh.
And definitely we recorded an observable price change or again are included within the other line item in our results this year.
But we have a.
Fairly small ownership percentage I don't think we've disclosed it in total, but it's not nearly to the extent that our of our other companies.
So it's a.
Very small percentage of it is included in that other category.
Within our press release table.
We do we have seen the positive updates from the grip we saw the.
The round and we're pleased with that but it's just not an overly large position for us and we do not have a timetable.
For when that could be monetized at this point.
Okay, Yeah just.
Very disappointed and M&A deal hasn't gotten done.
Recently.
And you know.
You guys mentioned this being a bad timing for the M&A market. However, I do want to give an example.
And I, just and Alex and M&A deal to acquire Kimball both of these are office furniture companies.
The M&A market is as bad as you suggested how can M&A deals occur in a boring industry such as furniture, while we can't get deals done and are much more interesting health tech companies.
I think you answered the question with your question the boring furniture companies I would guess that I'm not familiar specifically with our P&L are probably generating EBITDA.
And.
As we indicated in our remarks, it's a very difficult environment shell companies that are not generating EBITDA.
And that has been borne out through the M&A experience that we've been having.
The vast majority of our companies, which are in M&A processes.
So we continue to work with the companies and push these companies and position them in the best light to sell themselves.
But you can't force the buyer if there's no transaction and we do have a number of conversations going on and discussions going on which are encouraging.
But at this point in time.
There is not an LOI signed per se that we could share we shared information about one term sheet being signed and will continue to share that information each quarter.
But.
The facts and circumstances of every company and its status is really driven by what's happening at that company.
Yeah and on the <unk>.
Longtime shareholder so I.
<unk> seen and heard that they can get kicked down the road as far as timeline for monetizing the entire portfolio.
The process started back in 2018.
Shortly after that it was.
Thought it would only be a two year time span I'm curious as to what your current estimated timeline is for portfolio run off.
Sure.
So I wanted to I wanted to just clarify one.
Point in your question.
That I just wanted to make sure that it's clear to you into are there other investors.
As we indicated there are six companies.
That are in one form or another of sale process your capital raise processes.
And bankers are such like RBC Piper known investment banks.
It is not for a lack of.
Working with these companies taking them to market.
That hasnt resulted in the dearth of exits in the last 12 months or so.
So just to clarify that it isn't that.
We as investors and board members and management teams arent looking or working to sell these companies. There is alignment to do that the market is quite difficult.
And the results are what we've reported so that is on just.
On that.
I wanted.
To clarify.
That that piece.
So there's no timeline you can share for estimated.
Yes, no the timeline I would say based on our latest runoff model.
So what we do is repair a runoff model of the company in the order of all of our companies in the ordinary course, what our follow on expectations are what our operating costs are et cetera. So as of this point in time, we are looking that will take.
Into.
2020.
I'm sorry into 2025 and also just to put it in perspective, we've gone from 24 positions in 2018, I think when the when around that when the board launched a strategy.
Two eight positions currently.
So while the last 12 months.
Have been limited to Loomis just exit there has been <unk>.
Significant reduction in the number of companies in the portfolio.
And the return of cash either through deleveraging back in <unk> to the self tender in the stock buybacks. So so we have gone from 24 to 18, when I joined I believe we had 16 or 17, and we're down to eight during that tenure.
Okay. Thank you best of luck.
Yeah.
Our next question comes from the line of Jason Stankowski with Clayton. Please proceed with your question.
Hi, guys how are you.
Hey, Jay.
Okay.
Curious if.
Obviously I'm sure you're disappointed us as all the shareholders are that that we have bought back a lot of stock, but then when the stock is now three box.
Decision is to.
It has been cash.
Bummer that that that's done.
The message.
Yeah.
Are you.
Notwithstanding the Doom and gloom out there and the difficulties.
You have put a decent amount of money to work over the last few years, which hopefully is in.
A bit of a senior position in the stack and a few of the investments.
Are you hopeful that $3 is still realizable through 2025 run off or are you somewhat regretting the decision to have even bought back.
The shares we bought back earlier this year in the force.
[noise].
Hello.
I mean I think.
Anyone who is looking at the market, peaking in November of 2021 ish to where we are today would have said Gee, we should've liquidated.
You have that was liquid and kind of being a seller than a buyer.
So I'm talking about going forward is very helpful. Right. So on a go forward basis as you rightly pointed out we paid roughly four bucks a share.
On the 3 million on average the average price for the $3 million plan.
Stock stream three ish or so is down it's.
It's been down the last couple of days.
Our runoff value.
When we do which will be then present value net present value of those cash flows to today exceeds the stock price.
Yes.
Okay.
Okay.
And then in terms of looking at any buyback or other capital allocation is is the M&A.
Materially impacted if you were to even if it was a $5 million.
Reauthorization to be nibbling on the stock sort of as we go along this process.
Does that impact the options that you're looking at an M&A process or is that not a material.
Sort of factor in the in the discussions that you've kind of gotten to the short strokes on.
What youre, referring to the Houlihan Lokey M&A process, Yeah, yes, yes, okay. Yeah, just wanted to understand yes.
Wanted to so so first of all as we indicated with three companies.
During relatively large debt loads and us being incredibly active in working with the companies and the lenders on what the restructuring would look like or husband Ning of cash just to use the phrase.
Is.
And in the best case scenario is a temporary move to see how the situation is resolved.
And then we can make a capital allocation decision.
A decision at that point in time, so I don't want you or other investors to think that this is somehow we're looking to just sort of sit on extra cash for the for the sake of sitting on extra cash we're balancing it obviously against.
Kind of alternatives that we know and then certain situations or risks that were just that we don't know when campuses. So that is on the.
That's on just on the on the <unk> of cash or the short term capital allocation decisions on the Houlihan lokey process.
What we're trying to do.
In that process as were trying to optimize for a handful of things, we're trying to reduce our public company costs.
We want to reduce the portfolio management costs.
We want to allow the portfolio to run off in the ordinary course, and we want to see if there's any value for the listing the shell or for the Nols and what happens to the Nols and different types of transactions.
The two discussions that are underway address some of these.
Goals.
And obviously.
Obviously, the cash that we have on balance sheet would impact anything whether we would use it to return to shareholders use it in the portfolio. If there were to be a transaction whether that cash survives. The transaction. So those are all factors that we have to consider when we're thinking about that.
Okay I guess my question.
I appreciate that laying out of the of the.
The goal. That's that's helpful. I was just more direct question was.
If you if you get to the conclusion on.
Well, if you get to a conclusion.
Does does does the net cash in the company like sort of drive.
A potential if you have two people you're talking to if you. If you were able to this dividend out $10 million tomorrow.
Did that drive those discussions.
Those parties off the table, that's what I'll show how critical is the is the cash level at the company to the negotiations on the strategic transactions of Houlihan Lokey.
Not at all just that was my question Leslie.
Okay I got it.
In one conversation.
Cash is a factor it's not the driving factor in another of the conversations we mentioned, we're having two discussions it's not it's not much of a comp it's not as much of a factor, but cash as an asset.
And we're looking at what's the best use of that is as I said, whether there is a transaction and there is no assurance that there would be a transaction as you know we've been working on this for several for several quarters.
Okay and then the last one is when you when you mentioned the four to 6 million dollar.
Our range of deployment for 2023.
And the other caller asked about.
A buyback or other uses of capital.
Is the four and then you then you go out you go sort of onto this conversation about.
Sort of rescue financing and other opportunistic.
Situations with our over Levered companies et cetera.
Is that are those transactions those kind of rescue help.
Aimed at whatever you want to call those those transactions are those whats contemplated in the four to six number or is the four to six number sort of a baseline of things you know are already kind of in the works.
And then the other capital is set aside for maybe more of more of an extraordinary transaction.
How should we think about the follow on deployments are there are two buckets for you or is there just one where do you think can follow on as follow on and that's kind of a $4 million to $6 million range.
Yeah, it's the latter follow ons fall into line okay.
Capital.
Yeah, and the form is definition really in this environment, you're going to tilt more towards.
Aggressive pay to play top of cap stack.
Liquidation preferences et cetera.
But Jason just one thing I just wanted to just go through the math again, because I think again, just simple math, we have $19 million cash and we spent $6 million just take that like if you're in this situation you were in our seat and you'd say, okay. Let's assume the high end just to see what our liquidity looks like that's 13 two.
Here's a burn that seven.
Without any assumption for any follow ons beyond that so as I indicated to you.
Answer to the last question there is single digit millions of quote excess cash.
From what we see and the decision on what to do with it is not a decision that we're going to make 2012 months from now.
That's the main point I want I want you and other investors to understand.
Right.
I appreciate that.
I guess clearly your last time you were in a window you felt it was appropriate to put a <unk> five in place with the grid and.
$3 million of a buyback.
And if you know if you feel that the situation is.
Not going to deteriorate massively from here that it's pretty bad.
Not hurt to put some amount back out it's probably not very costly and it's all set up and it would.
Signal your continued.
At least at these levels.
The board healing that the.
Return of capital through a buyback was still a good allocation.
Of capital, but but I get the math.
That's helpful.
Yes, I mean listen.
We understand the point, we take that point to heart, but we also need an open window.
Yes, correct and understood and one in one hand, so if we say we're in conversations preliminary conversations with two parties.
Or discussions then the question is you know we don't need to get into the legal whether we have an open window, where you don't have an open window, but the window is another factor that matters, obviously in order to launch a program.
That's right.
Maybe in MRO, you is not a big deal at your portfolio companies or versus an LOI et cetera that balancing but discussions might be material enough to make you not being a window for your own company versus portfolio et cetera, I get it.
And then I think I asked you a quarter or two ago.
Youre kind of in the involved into discussions I think.
You know one of the things that would be helpful to understand and just get a revised sort of commitment on is.
Is the timeline and I think the other call I mentioned that a little bit and you've made a good point, we've gone from whatever 20 companies to the eight and the environment has changed pretty much pretty materially.
But with regard to the houlihan lokey process and sort of.
Really ratcheting down our expenses and maximizing our shareholder value.
And a real strategic way and taken some tough steps in that lane versus seeing whether one of these things work.
Is there something that you can say that you hope that that will be done by June is it by September or is it by year end I mean, how long should investors.
Logically wait for picking that one of the other lanes.
Order to in order to start optimizing what we can control at some point.
Yeah, no that's it.
A good question.
I would say somewhere between you know one somewhere between the inside and the outside of what you've provided some where between June and an end of year.
Okay.
And we've had a.
I mean, as a board and as management team we've spent several.
Several sessions on strategic alternatives and exploring what it looks like under different scenarios. So that is something that.
We have.
<unk> done a lot of work on.
Okay, Yeah, no I appreciate all the work and I know.
There's only so many scenarios that makes sense and there is only so long you can shake the trees until until at some point you got to say, okay well.
That's not going to happen and we can't waste time and resources and be staffed up to do this type of stuff. So I appreciate all the hard work and.
And hopefully we can make some hay out of the unfortunate leverage that some of these portfolio companies.
But on themselves and help them with their liquidity needs as they say.
Thanks, Chris.
There are no further questions in the audio queue do you have any questions that came in over the web.
No no to ask questions at this time.
Would you like okay, well Martin.
Yeah, well thanks, Thanks, Doug.
Thank you for joining our call today and for your continued interest in safeguard please feel free to follow up with us with any additional questions. We are happy to engage with shareholders.
Discussed with shareholders subject mmpi.
And try to provide as clear and.
Transparent insight into both the portfolio and the actions that we're taking so thanks, a lot and have a good evening.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
Yeah.