Safeguard Scientifics Inc (SFE) 2005 Q4 法說會逐字稿

Good morning. My name is Summer and I will be your conference operator. At this time, I would like to welcome everyone to the fourth quarter 2005 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (OPERATOR INSTRUCTIONS). Thank you. Mr. Boni, you may begin your conference.

Thanks, Summer, and good morning. Thanks for joining Safeguard's fourth quarter and end of year 2005 conference call. Joining me is Chris Davis, Executive VP and Chief Financial and Administrative Officer, and I am Peter Boni, President and CEO of Safeguard.

Following our remarks, we will answer your questions and I would like to caution you concerning reliance on forward-looking statements. During the course of today's conference call, we will use words such as expect, anticipate, believe and intend when referring to our goals and events of the future. We cannot be certain that the final outcome will be as we describe today. In Safeguard's filings with the SEC, we describe in detail and risks and uncertainties associated with managing our businesses and we encourage you to read the language in our filings.

Now with that of the way, I'm really pleased to report our fourth quarter 2005 results. A combination of strong operating performance from our partner companies and some well-timed exits produced a 29% increase in our revenues and positive net income of $2.3 million, or $0.02 a share, for the fourth quarter 2005.

Equally important, we also acquired Acsis, an enterprise software company with exciting growth opportunity in the RFID sector. This was our first major acquisition since I joined Safeguard and we believe it has significant upside potential. Our actions and our results demonstrate the successful execution of our strategy. We've shared with you our strategic game plan -- reposition, time, ignite, augment, and execute. Our game plan guides our use of time, talent and financial resources as we work to accelerate the use of cash to provide a superior return to our investors. We have shared our targeted go-to-market strategy. We have the elements in place to bring value to our partner companies and create value for our shareholders. By positioning ourselves as a holding company, we're able to build and realize value in a risk-adjusted way.

Our businesses is to locate attractive entrepreneurial activity and provide growth capital along with strategic and operational guidance to build great companies. We have identified five key strategic themes that reach across information technology and life sciences, our chosen industries. These themes are maturity, migration convergence, compliance and cost containment. We've developed a methodology to aggressively identify and partner with companies that are capitalizing on these trends. We have ignited our deal sourcing teams with talented leadership to identify promising information technology and life sciences companies.

Now the deal climate has shown real improvement for the third year in a row. Since my arrival in August 2005, we have been able to -- we have seen a solid pickup in the quantity and the quality of potential targets which validates our go-to-market strategy. We believe we are well-positioned to attract dynamic partner companies looking for our capital and our strategic guidance. Indeed, our acquisition this quarter is evidence that we are well-positioned to put available capital to use in exciting companies.

We believe that our updated vision and charter truly reflect our focus and our aspirations. The vision? Be the preferred catalyst for creating great information technology in life sciences companies. Our charter states that Safeguard Scientifics builds value in high-growth revenue stage information technology and life science businesses. We provide growth capital, as well as a range of strategic, operational and management resources to our partner companies. Safeguard participates in expansion financings, corporate carveouts, management buyouts, recapitalizations, industry consolidations and early-stage financing. We believe we can achieve a preferred position through being differentiated by the fact that we offer significant operational support through a [C-level] staff that have been in the entrepreneur's seat before. They understand the challenges companies face at this stage. This support is a value-add for our partner companies and a significant differentiator for Safeguard.

And we are pleased with the operating performance of our partner companies during the fourth quarter. Overall, revenues in Q4 were up year-over-year for every one of our partner companies with notable Q4 profitability achieved by the Information Technology group. In our Life Sciences Group, Clarient more than doubled its Q4 revenue and significantly reduced its losses compared to the prior year. I will call that significant progress and encouraging for the long-term.

In addition to solid operating results for our existing partner companies, we also deployed new capital for the quarter. Our newest partner companies Acsis was acquired for approximately $26 million in December. Acsis is an enterprise software company that enables global manufacturers to automate plant floor and warehouse operations and take advantage of emerging technologies, including radiofrequency identification, or RFID.

We believe Acsis is integral to the migration of mature supply chain management systems to newer, more advanced technologies. With Fortune 1000 clients already leveraging Acsis solutions, we believe that the industry trends, notably customer mandates on RFID deployment; regulatory compliance, like FDA mandated tagging and tracking of business process automation initiatives provide excellent growth opportunities for Acsis. Acsis competes in a large and growing market. Spending on enterprise data collection software and services has been growing significantly. Analysts have reported spending currently exceeding $700 million in the US alone. Acsis has a strong, experienced management team and serves a large and growing market segment addressing several strategic themes, including compliance and cost containment. It's revenue stage, it's growing and it will benefit from the kind of value and support Safeguard can bring. So Acsis is a great fit with our strategy and the type of deal Safeguard is looking for. We will continue to carefully screen our robust pipeline to identify companies which we believe can generate significant long-term value to our shareholders.

Safeguard also deployed $9 million in funding to enable Clarient, a comprehensive cancer diagnostic company, to execute its growth plans. And leading this transaction, which provided a total of $15 million to Clarient, we maintained a 57% ownership interest. We saw this as a great opportunity to buy additional shares at an attractive price as Clarient tries to increase its share of this dynamic market expected to grow 200% to $2.5 billion by 2010. Clarient trades on the NASDAQ under the simple CLRT.

We also continued to support Ventaira Pharmaceuticals by providing $1 million to Ventaira's most recent equity financing. Ventaira is a specialty pharma company using novel device technology to deliver inhaled therapeutics. Safeguard owns 12% of Ventaira.

We also provide a Traffic.com, a provider of real-time traffic content and distribution with approximately $750,000 to support its capital needs in advance of its IPO. Safeguard owns 430,000 shares, or 2%, representing a total of 2.8 million in funding. Traffic.com's IPO was completed in January.

In addition to putting new capital to work, we also sold the majority of our interest in eight private equity funds dating back to the '90s for approximately $24 million. The buyer assumed approximately $9 million of Safeguard's remaining unfunded capital commitments to these funds. We realized a gain of $6 million from this well-timed exit.

We also assisted Laureate Pharma, a bioprocessing manufacturing outsource company, in selling an underutilized operation in Totowa, New Jersey for $16 million in cash. We realized a gain of $7.7 million from this well-timed exit.

With that, let me turn it over to Chris Davis to provide a more detailed review of the Q4 results. Chris?

Thank you, Peter, good morning. Let's take the look at Safeguard's consolidated financial results. We reported $2.3 million in net income for the fourth quarter of 2005, a dramatic improvement from the net loss of 18.6 million in 2004. Safeguard's consolidated revenues increased to $53.9 million in the fourth quarter of 2005 from 41.8 million in the fourth quarter of last year with strong improvements across all of our partner companies. This year's fourth quarter includes $2 million of revenue from Acsis, which we acquired in December of '05. This is the fourth consecutive quarter of strong year-over-year growth in quarterly consolidated revenues -- 10% in Q1, 20% in Q2, 28% in Q3 and 29% in Q4.

Our consolidated net loss from continuing operations decreased to 5.2 million from 20.7 million in the fourth quarter of last year. The sale of some private equity fund holdings in December, coupled with improved partner company operating performance, fueled the reductions. A significant decline in impairment charges and equity losses contributed as well.

Our improvement would have been even better if not for a $2.2 million in-process R&D charge associated with Acsis and Clarient. Safeguard's consolidated revenues for the full year 2005, including Acsis and a full year for Laureate Pharma, increased 22% compared to prior year. Our net loss from continuing operations for the full year 2005 increased by $2 million over the prior year.

Turning to our partner companies, Alliance Consulting's revenues were 27.2 million, up 13% from Q4 '04. They've also produced an impressive turnaround from an operating loss in Q4 '04 to operating income of $1.1 million in Q4 of '05.

Alliance credits the strong performance to increased revenue from all regions and practices. Higher-margin offerings, including new services such as master data management and global delivery, drove these improvements. Alliance also certain significantly reduced its SG&A cost. With its targeted sales efforts in the business intelligence market, Alliance anticipates continued increases in revenue in 2006.

At Mantas, the fourth quarter of 2005 reflected excellent progress. Revenues were up by $10 million, 29% higher than Q4 '04. They also produced a significant turnaround from an operating loss in Q4 of '04 to operating income of $2 million in Q4 of '05. The improvement was due to increased client license acceptances and cost savings initiatives. Mantas expects revenue to continue to improve in 2006 as they continue to introduce new product offerings.

At Pacific Title, revenues of $7.1 million in the fourth quarter of 2005 were a 15% increase over last year. This strong performance was led by increases in their traditional trailer production and scan and record businesses, as well as revenue from two new business lines -- digital intermediate and archival services.

Next is Clarient, a public company in which Safeguard holds a 57% interest. They announced their fourth quarter results on February 21. Compared to the prior year, Clarient achieved a 109% increase in revenues in the fourth quarter. Strong growth in diagnostic lab services as well as increased automated cellular imaging system sales drove this dramatic improvement. They also reduced their fourth quarter operating loss by 33% from the prior year, led by their success of their diagnostic lab services. Clarient expects continued increases in revenues from diagnostic services in 2006 as they now offer a more comprehensive suite of advanced cancer diagnostic tests. Clarient also expects increases in systems sales from the distribution efforts of its new global distribution partner, Dako.

Safeguard acquired Laureate Pharma in December of 2004, so we don't have full-year or full-quarter comparative results to review. Still, Laureate showed strong growth compared to its third quarter of 2005 with revenues increasing by 37%. Revenue from new clients fueled their performance. Importantly, we're also encouraged by their growing pipeline of new business.

Also, we acquired 94% of Acsis in December of 2005. Acsis will be reported as a separate segment beginning in the first quarter of 2006. For the fourth quarter of 2005, it was included in the other companies segment.

To summarize, we're very pleased with the progress of the consolidated partner companies during the quarter and we will work with them to continue help them continue to grow. We are particularly pleased that all of the IT partner companies were profitable in the fourth quarter for the second year in a row.

While the life sciences companies have not yet reached profitability, it's important to realize that this is normal for young companies that are investing for their growth. What is most important is they continue to make progress and position themselves to achieve their potential, which is the key to realizing long-term growth for our shareholders.

Touching on a few other items in our P&L, other income in 2005 primarily included in the $6 million gain from the sale of the private equity holdings. In 2004, other income included gains of $38.8 million from the sales of companies. Our business model involves quarterly variances like this as we realize the value of companies from time to time. These gains should be much more meaningful to Safeguard's shareholders than a traditional operating company's occasional gain on asset sales. We believe our ability to consistently generate gains over the long-term will drive value for our shareholders.

The decrease in other income was partially offset by improved partner company operating results, a reduction in impairment charges, a reduction in equity loss associated with our holdings in certain private equity funds and a decline in interest expense. Discontinued operations in the fourth quarter of 2005 included a $7.7 million gain from the sale of Laureate Pharma's Totowa, New Jersey operations. The 2005 and 2004 operating results for the total operations, which were sold in the fourth quarter of 2005, and Mantas' telecommunications business, which was sold last week, are all reported as discontinued operations. In 2004, discontinued operations also included the operations of [CompuCom] and the $1.8 million gain on the sale of CompuCom.

I'm now going to move to our parent company balance sheet. This shows the financial position of Safeguard as if all of its consolidated partner companies were accounted for on the equity method. The carrying value of our holdings at December 31, 2005 was $175 million with 18 million from our public companies and 149 million from our private companies. Our carrying values represent the original acquisition costs plus any follow-on fundings, plus our share of the earnings or losses of each company reduced by any impairment charges. Carrying value does not reflect actual market value since under Generally Accepted Accounting Principles we cannot mark to market the value of our companies.

In evaluating Safeguard, we think you should look beyond the carrying value or book value of the companies. Since there are no market values readily available for our private companies, we will continue to discuss operating and business milestones in our news releases, quarterly reports and conference calls so that you can track the progress as they grow. This is that we evaluate their growth and the value of the private companies and will help you to measure our net asset value, or NAV. Lastly, at December 31, the carrying value of the remaining private equity fund interest was $8 million.

Also, I want to update the market values of Safeguard's ownership of public companies. We currently have ownership interests in three public companies -- Clarient, Traffic.com and EMerge -- with an aggregate market value of $46 million as of March 7.

At the end of 2004, we reported $162 million in parent company cash. We used $26 million to acquire Acsis in December of '05, $15 million for follow-on funding to partner companies during the year, $7 million to fund prior commitments to private equity funds, and $18 million for corporate operations. We received $10 million of cash net of debt repayments from the sale of Laureate Pharma's total operations and we received $28 million in distributions from and sales of private equity funds. The result is parent company cash at the end of 2005 of $141 million.

Let me also note that parent company cash at December 31 does not include $20 million of cash balances at the consolidated partner companies, nor does it includes $13 million held in escrow for interest payments on our convertible debentures. Parent company cash as of March 7 was $132 million. So far in 2006, we have purchased $5 million of face value of our convertible senior debentures for $3.8 million in cash. We anticipate going forward that Safeguard will use its available cash to fund the growth of our current partner companies to acquire new businesses and up to $16 million to purchase additional debentures from time to time. In addition, we expect that corporate SG&A expenses will be about $17.5 million in 2006.

Peter will now present our partner company highlights. Peter?

Thanks, Chris. The performance of our partner companies dramatically improved in 2005. During the fourth quarter, we also completed several significant transactions to facilitate their growth and value creation. Alliance Consulting has successfully repositioned to a business intelligence consultancy, leveraging global delivery to Fortune 2000 clients. They possess deep domain expertise in pharmaceuticals, health care, financial services and manufacturing and distribution. We believe that Alliance can continue to achieve meaningful growth and profitability by capitalizing on domain expertise, high-quality resources and strong customer relationships.

Last November, Alliance was named Best of Breed by Data Management Review, a Data Management publication. Safeguard presently holds 100% of Alliance Consulting. Alliance finished 2005 with a very strong fourth quarter and it's building a backlog of recurring revenue positioned for improved incremental economics in 2006.

Mantas is a leading provider of comprehensive behavioral detection software solutions for financial services companies. They leverage significant domain expertise and proprietary behavioral detection technology to improve software solutions to meet increased regulatory and compliance demands. With applications that address risk management, fraud detection and anti-money laundering, they are now expanding their product offering and penetrating Tier 2 customers. The readers of Waters Magazine voted Mantas as best anti-money laundering solution for the second year in a row. Safeguard owns 88% of Mantas. With major new contract signed for 2005 and already in 2006, Mantas is poised for continued growth.

With a strong our reputation and in Hollywood, Pacific Title and Arts Studio provides a digital postproduction and archival services to the motion picture industry. Acquired in 1997, Safeguard increased its ownership to 100% during 2005. Leveraging state-of-the-art equipment and significant domain expertise, Pac Title has increased its emphasis on special effects, digital color correction, 3-D animation and many other sophisticated elements. Safeguard believes that Pac Title is uniquely positioned to lead the continued migration to digital technologies from analog. Pacific Title's two advanced digital intermediate suites and two news service offerings -- film restoration and digital archiving -- have generated incremental revenues for Pac Title.

Our newest IT company, Acsis, is enhancing its management team, focusing its product expansion strategy and adding new customers. Safeguard's actively guiding Acsis through these building blocks for continued growth.

Now for the life sciences companies. Clarient provides comprehensive cancer diagnostics for pathologists, oncologists and the biopharmaceutical industry. The continued aging of the population, coupled with higher incidences of cancer among geriatrics, Clarient is leveraging its technical expertise, its proprietary systems and its capital investment to provide diagnostic products and services to a much larger client base. Their diagnostic and bioanalytical capabilities support the drug discovery process as oncology migrates towards more targeted treatment for better response and fewer side effects. In addition, these diagnostics are helping several large pharma companies, like Pfizer and Eli Lilly, identify patients and demographic groups that are most likely to benefit from new drug therapies for cancer.

Safeguard's strategic guidance enables Clarient to expand from being solely an instrumental provider to becoming a comprehensive cancer diagnostics company. Clarient has since obtained a key distribution and development agreement with Dako, a leading global provider of systems solutions for cancer diagnostics and cell analysis. We felt that providing Clarient with an additional $9 million for their funding effort in the fourth quarter was an excellent decision based upon our extensive knowledge of the company, knowledge of its market and with this additional funding, Clarient is well-positioned to achieve their strategic plans and we believe we will create value for our shareholders with Clarient.

In December 2004, Safeguard acquired 100% ownership of Laureate Pharma. Substantial growth in the development of biotechnology products has increased the need for biopharmaceutical companies to find cost-effective alternatives to improve the quality of products and processes and ultimately reduce the time to market. Laureate Pharma offers bioprocessing services that support the development, manufacture and commercialization of protein-based biopharma products. They focus on products in clinical trials or commercial production for targeted markets. The combination of their FDA license facility and their expertise in working with complex processes provide Laureate Pharma competitive differentiation in a growing segment of the bioprocessing outsourcing market.

Laureate is using some of the proceeds from the sale of the underutilized operations in Totowa to expand its primary facility located in Princeton, New Jersey and enhance its services to meet the demands of the growing biopharmaceutical industry. Increased focus on Laureate Pharma's sales and marketing programs produced new clients in the fourth quarter revenue growth, giving Laureate a great start for 2006.

So in summary, we're very pleased to the performance and the progress of our partner companies. We're continuing to work closely with the management teams to help them define and execute their growth strategies. In addition, we just closed the first significant transaction in my tenure as CEO. We have a unique value-add capability and our 50-plus year history, we are working with a robust pipeline, our business model is long-term focus by nature and we believe will position to deliver long-term value to our shareholders.

This concludes my remarks. Joining us for questions and answers are John Loftus, Executive VP and Managing Director of the Information Technology Group and Jim Datin, Executive VP and Managing Director of our Life Sciences group. Summer, you can begin a Q&A session now.

(OPERATOR INSTRUCTIONS). Eric Swergold, Gruber & McBain.

What a difference a year makes. I don't think I will harass you about a stock buyback today.

Hey, thanks.

Although I would still like to see one, but it seems like you're putting capital to good use now. So, seems like less urgent to be in there buying back your stock, and certainly like the restructuring with paying off the converts early at a discount.

Looking at the deal pipeline, how many bankers, less venture guys, do now have actually working on processing deals coming in, versus helping manage the companies once you have invested?

Eric, we have both an outbound and an inbound sourcing operation. Outbound, obviously, is under both John and Jim in the IT and life sciences areas. They each have varying relationships with a variety of -- we'll call them third parties -- for -- to stimulate inbound deal sourcing. And I honestly can't tell you the exact number. I would say it's two figures as opposed to one, but I would be surprised if it exceeded 20.

How about a ratio as people processing deals versus helping the operating companies?

2 to 1, and that's firms as opposed people inside of their firms.

Okay. In terms of deal flow, obviously with the deal machine being turned off for a number of years, it takes awhile to get it restarted. What would you say the current awareness of the marketplace is of your deal machine at this point?

I'll ask both John and Jim to give some anecdotal commentary on that; John first and then Jim.

Good morning. We've seen the market place, it's much more active. We have seen dramatic increase in the last six months over the previous prior six months in activity both inbound and from the activities that we have initiated. So I would say it's a significant increase in the activity level in the IT sector, both from just the general economy, from us reaching out and from our proactive sourcing efforts.

Thanks John, Jim?

Similar comments for the life science arena. Six months ago, we had been in a static or holding pattern. Now the deal flow is robust and we're actually looking to hire additional resources to help us with that. There's a tremendous amount of activity and interest from consultants and entrepreneurs of companies that value the Safeguard difference. We've heard that from numerous CEOs of recent companies who are looking to partner with us and are calling us proactively. We do have a combination of outgoing outbound sourcing, strategic sourcing activities that are much more focused that used to be more opportunistic. And now, we have the good fortune of having a number of CEOs and companies wanting to speak with us and work with us. So it puts us in a much better position.

Bill Sutherland, Boenning and Scattergood.

Good morning, nice quarter guys. A couple of things for Chris on the financial side. The gain from the private equities sale, Chris, is that taking into account the assumption of the unfunded commitments to realize the gain?

No. Actually, the way we account for the unfunded commitments is that we really don't recognize them until they are funded. So in this case, the assumption of the unfunded liabilities did not impact the gain calculation.

So it was simply an $18 million carrying valuation on that -- on the funds sold? Is that --?

Yes, the math would be, we received about $24 million in proceeds. We had about $18 million in carrying value and recognized the $6 million gain. That is correct.

The purchased or the in-process -- the purchased in-process R&D, I didn't quite understand how that occurred in the quarter.

It's one of the hypertechnical accounting requirements that we have to deal with. It really relates to the acquisition of Acsis in December, and we had to go through a process of allocating the purchase price. One of the intangible assets that we allocate value to is the in process R&D and the accounting rules require you to expense that immediately. So that's what we did in December and $2 million of that in-process R&D charge related to Acsis.

We had to do a similar process for the financing for Clarient and went through a purchase price allocation for that $9 million pipe that we did, and that resulted in about $200,000 of in-process R&D being expensed in the fourth quarter.

Okay. And that is what is reflected more or less in the segment presentation on their other companies, the 2.6?

Yes, so 2 million relating to Acsis is in other companies segment, and 200,000 related to Clarient is in the Clarient segment.

What I was trying to understand, because you had revenue in other companies of 2 million, should that be -- is that essentially the partial month impact of Acsis, or is there other --?

That's right. It's $2 million of revenue from the closing date on December 2 through the end of the month, and then you have both their operating expenses for that same period, and then you add to that the in=process R&D charge (multiple speakers).

That's helpful, Chris, because I didn't know is that was basically all Acsis in the other company line.

It's not literally all Acsis, but it certainly (multiple speakers).

And I maybe missed this when you were going through the Pac Title summary. Did you -- is their fourth quarter typically breakeven, or give or take a few bucks?

Their fourth quarter is typically a slow quarter for them because they follow the Hollywood schedule for when films are being readied for release. So the fourth quarter is typically a bad quarter relatively speaking for them, and that same pattern held true this year in the fourth quarter. And close to breakeven is about right for them for the fourth quarter.

Great turnaround in Alliance and nice acceleration. And you all have spoken a little bit to how '06 is lining up. Could we have any more color as to -- I mean, is there a level of profitability here that isn't just particular to Q4? Can we kind of look to this?

I ask John Loftus to speak to the Alliance Consulting Group.

This is John. I think [Tony] (indiscernible) and crew had a great year reaping the benefits of the strategy they implemented and the team they put in place. I think that benefit will continue and the profitability will increase proportionately as they continue to have success with their vertical go-to-market strategy and their focus on business intelligence in information management.

They did 1.492 million of EBITDA in Q4, so we call that the Christopher Columbus quarter for Alliance Consulting Group.

At long last.

Bill, I guess the last part of the answer to your question is, we think that Alliance can continue to improve their bottom-line performance in '06. So the trend we saw during '05 we would expect to continue into '06.

That's great. One thing that John might be able to speak to regarding Mantas that would be helpful for some listeners is, kind of a group of companies, or at least a couple of companies that would be helpful for us to compare it to stand-alone public companies that would service peers.

Bill, obviously, comps are tricky, but I think aspirationally, we look at companies like Fair Isaacs and some of the public BI firms as the best match for both through the value that Mantas brings to their customer and sort of the propensity of customers to use them in strategic situations. So I would say the business objects, the Fair Isaacs, are sort of the ones that I would point to.

Would it be also something like Hyperion, or is that not really the same kind of business?

Hyperion would fit in that general class of being able to adjust the data and deliver a lot of value for the senior level folks in the firm, like Mantas does.

Last thing I was going to ask operationally is Laureate, which I know is simply a matter of getting utilization up. Can you speak to where you are or where you -- kind of where you need to move the needle?

Sure, Bill, this is Jim. First of all, we're pleased at Laureate's growth opportunities. They've recently won several contracts. The pipeline is the strongest than it's been in their history and the timing was great with the divestiture of the Totowa facility, a nonstrategic underutilized asset. We're looking to reinvest a lot of those proceeds back into the Princeton facility which would enable us to have much greater capacity. The marketplace's supply is tight right now. We have great confidence in what we see for Laureate for this year and the future.

Bill, this is Peter, can I just back up by Mantas for a bit? I made mention of Mantas recently completing the sale of its telecom operation. Very positive thing for Mantas. It was a well-timed opportunistic exit. It gets the Company tightly focused around its financial services core base and potentially could augment its own profitability.

I saw that press release too. The last question for Chris is, the change in cash since the end of the quarter -- you said that you had purchased converts -- that were 3.8 million of it?

That's correct.

Is the rest of it just operational?

Most of the rest of it is operational, and as we have talked about before from a cash point of view, it's not level throughout the year. We also had a couple of small follow-on fundings for some of the companies and a pretty modest capital call for one of the private equity funds. But certainly, the two big items for the quarter so far are just the regular operating expenses at Safeguard and the bond buyback.

Well, in addition to strong operating performance by our partner companies, you saw the driver of economic engine at work too, and that is well-timed exits to maximize risk-adjusted value.

Safeguard, actually Chris and I will be at Montgomery Securities in California next week presenting at the Montgomery Securities high-tech conference on Tuesday afternoon. You should see a press release on that coming out later.

So in conclusion, I see in Safeguard a history of innovation, a unique business model and most importantly, a great opportunity for growth. We have a strong balance sheet, we have a thoughtful plan. Thoughtful plans, well executed by talented people generally produce results that are rewarding for everyone involved. I'm confident in our ability to build value to both for our partner companies as well as our shareholders and I look forward to keeping your abreast to the progress as we execute on our game plan. Thanks very much folks.

That concludes today's conference call you. May now disconnect.