Safeguard Scientifics Inc (SFE) 2015 Q2 法說會逐字稿

Good morning, and welcome to the Safeguard Scientifics second-quarter 2015 financial results conference call. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to John Shave, Senior Vice President, Investor Relations, and Corporate Communications. Please go ahead.

Good morning, and thank you for joining us for Safeguard Scientifics' second-quarter 2015 conference call and webcast. Joining me on today's call are Steve Zarrilli, Safeguard's President and CEO, and Jeff McGroarty, Safeguard's Senior Vice President and CFO.

During today's call, Steve will review highlights for the second quarter and other developments at Safeguard and our partner companies, then Jeff will discuss Safeguard's financial results and strategies. After that, we will open the lines to take your questions.

As always, today's presentation includes forward-looking statements. Reliance on forward-looking statements involves certain risks and uncertainties including, but not limited to, the uncertainty of future performance of our partner companies, the risks associated with our acquisition or disposition of interest in partner companies, risks associated with our decisions about the deployment of capital and the effective regulatory and economic conditions generally, as well as the development of the healthcare and technology markets and other uncertainties that are described in our SEC 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 provide any assurance that future results will be as described in our forward-looking statements.

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 obligation to update any forward-looking statements made today.

And here's Safeguard's President and CEO, Steve Zarrilli.

Thank you, John, and thank you all for joining us today for an update on Safeguard and our partner companies. Through our disciplined strategic focus, Safeguard remains on track to achieve its goals and objectives for 2015, which include increasing the total number of our partner companies to approximately 30, deploying $35 million to $50 million in new partner companies, and $30 million to $50 million in follow-on funding for our current partner companies, generating continued growth in partner company aggregate revenue to a range of $430 million to $450 million, and realizing a minimum of two profitable assets with a minimum aggregate cash value of $50 million.

At the halfway point of this year, we have completed one profitable exit with the sale of DriveFactor in the second quarter for gross proceeds of approximately $10 million. In addition, our partner companies continue to grow revenue on an aggregate basis and have achieved significant development milestones. These milestones include product launches, customer wins, patent issuances, strategic partnerships, as well as profile-raising industry awards and media coverage. Long-term, our goal is to significantly increase Safeguard's assets under management, and we believe that we can achieve this goal by executing against our strategic objectives.

Jeff will provide more granularity around our activity to date against these goals. In the meantime, I want to discuss an important notion that influences all that we do here at Safeguard on a daily basis. Discipline, that is the key driver to execute our strategy. Simply stated, discipline is a virtue that is essential to accomplish goals and resolve conflict. We view discipline as the foundation of both our near-term execution as well as our sustainable, long-term success.

In 2014, Safeguard issued 18 term sheets to promising entrepreneurial businesses. We ultimately closed just 9 of those deals due to our disciplined assessment evaluation and potential to realize reasonable cash-on-cash returns upon exit. We did not succumb to the pressure to increase our valuation parameters regarding the other 9 opportunities.

Of course, discipline alone does not guarantee success. Neither should discipline be confused with inflexibility. Discipline is and will remain our guide as we work to identify high-potential, growth-stage businesses to deploy capital into within Safeguard's defined vertical markets in healthcare and technology. Discipline will also be used in assessing such opportunities in relation to valuation.

We are well on our way to developing a truly diverse asset base of innovative, market-leading companies while retaining discipline in deployment and exit decisions. Despite often volatile capital markets, we believe we can continue to grow shareholder value through consistent increases in deal volume and profitable exits. Our disciplined business model includes providing capital and expertise to emerging and growth-stage enterprises that are developing innovative products and services in defined segments of the technology and healthcare markets. Also supporting our partner companies' growth with strategic guidance and the range of financial and operational expertise. And finally, realizing gains on exit transaction.

This evergreen business model serves Safeguard well, providing the steady capital base to pursue attractive deals, talented asset managers, and patient shareholders. Our strategy is to build an organization that is recognized as an innovative capital provider capable of delivering consistent, superior returns.

That's why during the quarter, Safeguard joined with other major Philadelphia-area corporations and institutions to form the Healthcare Innovation Collaborative. Our partners in this initiative include Ben Franklin Partners of Southeastern Pennsylvania, the Children's Hospital of Philadelphia, Comcast, Drexel University, Independence Blue Cross, Thomas Jefferson University, and Jefferson Health System, along with the University of Pennsylvania Health System. Through our own efforts and our work with this group, we believe we can continue to bring disruptive innovation to market quickly and advance healthcare for all.

In our last conference call, we highlighted the leaders of our technology deal team and details about how we deploy capital in select technology vertical markets. This quarter, we're going to focus on our healthcare deal teams' managing directors, Dr. Gary Kurtzman and Al Wiegman, and their strategic framework for growing Safeguard's assets under management in healthcare verticals.

Al Wiegman joined Safeguard in 2013, bringing two decades of venture capital experience and deep domain expertise in healthcare services and technology. Previously, Al was a general partner at HLM Venture Partners, where he participated in 30 early and growth-stage transactions and notable exits involving some of the largest VC investors in the country. Al serves on the boards of Safeguard partner companies Aventura and InfoBionic.

Gary Kurtzman joined Safeguard in 2006 and has more than 30 years of experience in healthcare operations and finance. He was responsible for three of Safeguard's most successful exit transactions since that time, including Advanced BioHealing, which was acquired by Shire Pharmaceuticals in 2011 for a 13X cash-on-cash return, and Crescendo Bioscience, which was acquired by Myriad Genetics in 2014 for a 4X cash-on-cash return.

Gary's health experience -- healthcare experience is both broad and deep. He is a board-certified internist with a hematology subspecialty who has written more than 40 research articles, book chapters, and reviews, and is the credited inventor on 12 US patents. Gary has also been the CEO and COO of start-up life science companies. Gary serves on the board of six of Safeguard's healthcare partner companies, including Good Start Genetics, Medivo, meQuilibrium, Propeller Health, Syapse, and Trice Medical. Al, Gary, and the rest of the healthcare team target emerging businesses in vertical markets that are focused on the broad challenges of improving access to healthcare, enhancing healthcare quality, and reducing cost in waste. Both healthcare enterprises and consumers have strong interest in all of these themes.

Recent US Supreme Court rulings that support the Affordable Care Act underscore the fundamental importance of access to high-quality, cost-effective healthcare. Each of these broad challenges also present Safeguard with opportunities for growth. The first challenge, access, includes businesses involved in insurance exchanges, Medicaid expansion, and consumer protection. The next challenge, quality, addresses performance enhancements or penalties, care innovation, and wellness promotion. The last challenge, cost, is focused on improving cost-effectiveness, reducing overpayments, and ensuring meaningful use of treatment in the healthcare system.

Safeguard is finding multiple deployment opportunities across healthcare. In fact, many of our partner companies are growing in a vertical market that addresses those core challenges. Today, we would like to feature two of these promising partners.

Partner company Good Start Genetics addresses several facets of healthcare quality and cost challenges of our healthcare strategic framework. Safeguard has deployed $12 million in Good Start Genetics since 2010 and has a 30% primary ownership position. This commercial-stage molecular and genetic information company focuses on fundamentally transforming the standard of care in reproductive medicine. The Company provides physicians and their patients with actionable information concerning inherited genetic disorders through proprietary next-generation DNA-sequencing capabilities.

According to the CDC, approximately 1.2 million women seek fertility treatment annually in the US. This presents a total addressable US market opportunity of $1.25 billion to $1.5 billion for carrier screening in reproductive health. While Good Start Genetics has made tremendous strides in developing its market-leading screening technology, the company faces headwinds on reimbursement from healthcare insurance providers. Revenue growth has slowed because payers often regard Good Start Genetics as an out-of-network laboratory. The company is making progress with its contract negotiations with healthcare payers, and we expect to report success on this front in the coming months. In the meantime, Good Start Genetics continues to expand access to its genetic carrier screening tests for in vitro fertilization as well as for the broader women's health community including obstetrics, gynecology, and maternal fetal medicine physicians.

One of Safeguard's newest partner companies, meQuilibrium, addresses the wellness promotion aspect of quality -- of the quality challenge. The scientifically validated and clinically proven approach is based on 15 years of research showing the link between stress and resilience and grew out of research on resilience at the University of Pennsylvania. Its clinically validated, HIPAA-compliant, software-as-a-service platform is scalable and is designed for a mobile or desktop use. It guides users through personalized assessments to develop long-term roadmaps focused on critical skills to boost resilience.

Researchers found that guidance or coaching can improve resilience, providing a lifetime of benefit, including reducing the effects of stress. Studies show that up to 95% of the US workers -- of US workers experience moderate to severe stress, propelling absenteeism, productivity, injury, and turnover costs. These factors cost US businesses an estimated $300 billion annually, and healthcare expenditures are estimated to be 50% more for high-stress workers.

meQuilibrium serves two key markets. Large enterprise companies eager to mitigate employee absenteeism and lost productivity due to stress. And secondly, payors and health plans seeking to drive differentiation and innovation in an era of consumer-driven healthcare. MeQuilibrium also serves individuals looking to improve the quality of their lives. Enterprise clients include Comcast and Hewlett-Packard. Data from the aggregated meQuilibrium user base provide metrics and insights on workforce well-being that in turn informed human capital strategies and decision-making. Safeguard deployed $6.5 million in meQuilibrium in April for a 32% primary ownership position. Proceeds from the $9 million series B financing will be used to accelerate sales and marketing and expand product development.

So with that, here's Jeff McGroarty for an update on our financial performance for the second quarter of 2015.

Thank you, Steve. As Steve mentioned earlier, we remain on track to realize our goals for 2015. As of June 30, we had 28 partner companies, compared with our goal of 30 by year end. The cost of our interests in those companies was $282.7 million. The carrying value of those partner companies at June 30 was $167 million.

Safeguard's reputation for building successful businesses in targeted vertical markets of technology and healthcare means our pipeline is always full with prospects. We expect to meet our year-end goal for new partner company deployments.

During the second quarter, we deployed $18.9 million of capital in three new partner companies: InsideVault, meQuilibrium, and Sonobi. For the six months ended June 30, capital deployments in new partner companies totaled $31.6 million for 6 new partner companies.

Steve addressed the opportunity with meQuilibrium earlier. Our deployment in InsideVault and Sonobi, described in more detail in our news release that was distributed earlier this morning, expands Safeguard's holdings in the digital media and tech vertical. Follow-on funding during the second quarter totaled $10.1 million for 5 existing partner companies: AdvantEdge Healthcare Solutions, AppFirst, Clutch, Pneuron, and Quantia. for the six months ended June 30, follow-on funding totaled $19.5 million for 8 companies.

In the second quarter, we sold DriveFactor for initial proceeds of $9.1 million, excluding $1.1 million held in escrow. Second-quarter results reflected $3.2 million impairment charge related to our position in InfoBionic due to the discontinuation of its first-generation product. We believe InfoBionic remains an attractive growth opportunity because of the size of the cardiac arrhythmia market its device serves and its disruptive business model. Safeguard intends to provide $3.5 million in follow-on funding as part of a $7 million series B1 financing to be utilized for development and commercialization of its second-generation product.

We also recognized in impairment charge of $2.9 million in the second quarter related to Quantia. Quantia was acquired by Physicians Interactive in July. Net initial proceeds to Safeguard were $7.8 million, excluding $1.2 million which will be held in escrow until July 2016.

We expect continued growth in aggregate revenue of our partner companies. Aggregate revenue for 2015 is projected to be between $350 million and $450 million, excluding DriveFactor and Quantia which were recently sold. Aggregate revenue for the same partner companies was $359 million for 2014 and $290 million for 2013. Corporate expenses for the six months ended June 30 were $8.3 million and are tracking slightly lower than our previous annual guidance of $17.5 million to $18 million.

Safeguard's financial strength, flexibility, and liquidity are evident on this slide showing the Company's balance sheet at June 30. Safeguard's cash, cash equivalents, and marketable securities totaled $105.5 million. The carrying value of outstanding debt was $51.1 million, resulting in net cash, cash equivalents, and marketable securities of approximately $54.4 million.

Now, here's Steve to lead us through the Q&A segment of the call.

Thanks, Jeff. Operator, let's open the phone lines for any questions.

(Operator Instructions) Joe Janssen, Barrington Research.

The $18.9 million deployed on new -- the 3 new companies, can you just quickly break that out and then maybe just comment on the decision to exit Quantia during the quarter or that was (inaudible) end of the quarter?

Sure. I will speak to Quantia, but I will let Jeff speak to the deployment. So with regard to Quantia, we actually determined within the last year that the business was probably not growing as rapidly as we would have liked, that the capital required might be substantially more than what we would have originally expected. And for those reasons, we felt that Quantia might survive and thrive better in a different environment and that the use of capital associated with Quantia from our perspective could probably put to better use elsewhere in the opportunities that we are seeing. As we pointed out, we've seen a number of opportunities, so the pipeline is full of ideas. So for those reasons we figured we would minimize our losses and move on.

And we've been pretty specific in the past in explaining that we realize that we are never going to be 100% perfect in the opportunities that we choose, and that part of the strength of this management team is its ability to recognize when something isn't necessarily going as planned and to exit sooner sometimes -- faster than we would have originally anticipated. In many cases, it will result in a complete return of capital. In this particular situation, we did have a small write-off associated with the exit.

And with that, I will let Jeff speak to the 3 deployments.

Sure. The $18.9 million is broken out -- $7 million went into InsideVault, and that got us a 25% primary ownership interest. $6.5 million into meQuilibrium, and that was for a 32% ownership interest. And $5.4 million went into Sonobi for a 23% ownership interest.

Okay, great. And one follow-up. Maybe just comment on the current pipeline. I think you put numbers out there before in terms of what you have looked at. You look at $800 million last year. I think you put a number out of $300 million in Q1. I'm just curious what that looked like in Q2; and maybe just some general comments on the second half of the year.

We are close to looking at almost 600 opportunities through the second quarter. So we are actually on a pace that would suggest something between 1,100 and 1,200 opportunities if that pace continues in Q3 and Q4. We don't expect it to actually slow.

So, interestingly, we spent some time in today's call talking about discipline because we really do believe that that's a key thing that our shareholders should stay focused on as it relates to Safeguard. We are doing a lot of work to make sure that this team stays focused and disciplined on opportunities that we think we can actually provide the returns that you all are expecting in the future. So 18 last year resulted in 9 closed deals. We are actually on a similar pathway this year. I reported to our Board earlier this week that we issued 7 term sheets and actually ultimately walked away from 4 this year thus far because we couldn't get comfortable with the negotiated valuation parameters of the deal.

Bob Labick, CJS Securities.

Wanted to start with your July investment in Apprenda. Could you tell us your current ownership stake?

I'm sorry, Bob; you cut out there for a second.

I guess in the release you mentioned you invested further in Apprenda in July, and I was just wondering what percentage ownership you have now after that new investment.

Sure. I will let Jeff answer that.

Hey, Bob. Yes, we invested another $10 million in Apprenda. And our primary ownership is going to go up from about 21% to roughly 29% following that round. We were 10 of 24.

Got it. Okay. And then with that investment, Apprenda is now your second-largest investment at cost behind MediaMath. Could you just discuss your comfort level there? Obviously, you've upped your stake and your dollars. So talk about the thought process behind having such a large investment in one company there.

Sure. Point well made. We have a fair amount of capital exposed to Apprenda, and we see great opportunity for the company. In fact, over the last 12 to 18 months, there's been a number of large enterprises that have taken a look at Apprenda and have shown real interest in figuring out how they're partners with the company in the future.

We had a unique opportunity to get ahead of what we think is a big curve for Apprenda: to put capital in at a reasonable valuation, getting an increased ownership percentage in that business under the dynamics that we think that exists. It was pretty valuable for us.

So Apprenda now is moving into the spotlight of becoming a pretty substantial Safeguard partner company. It's interesting; I've been asked in the past, and it's a constant theme whenever we have a couple of companies like a Good Start or a Putney or a MediaMath that start to show real promise. The next question becomes, so what's next? We had the same questions asked of us when we were building value in Advanced BioHealing. Apprenda represents that next generation of partner companies here at Safeguard that I think we are excited about -- I know we are excited about, and hopefully our shareholders will be as they learn more about companies like Apprenda.

Great. Thank you very much.

Jim Macdonald, First Analysis Securities.

On -- thanks for giving out quarterly revenue now. So that's good. I noticed that there is some seasonality there. Could you talk to that? I assume that some of that is a December seasonality for MediaMath. But is there -- that's reported in the March quarter, is there other seasonality?

That's really the big driver, Jim. You're right. It's the quarter lag that we apply at MediaMath, and some of our other ad tech companies really have a large Q4. So they flow into our Q1 recorded results.

And maybe you could give us a couple of words about the two new ad tech companies. Do they have MediaMath potential, do you think?

They do, and you're referring to InsideVault and Sonobi. We continue to build on the theme around ad technology that we believe is going to be pretty substantial for us. Inside of all this is a fast-paced, next-generation search platform that leverages data science and algorithms. So it still represents the lion's share of overall digital spending, so we think that it's an important place to be. And this California-based company is already in the initial revenue space, and we think it's going to grow pretty rapidly, and we are thrilled to be a part of it.

Sonobi is actually a fully enabled solution for accessing premium online ad inventory, and it's really a publisher-focused solution, which there are very few of those out there in the market today in the way that Sonobi has created its business. It runs its business out of both New York and Florida.

So we think that these are two opportunities that present a continuation of the opportunities that we are seeing build out in ad tech.

Just one more, if I could, just all around ad tech. Just any further thoughts on MediaMath and a potential exit there?

Well, MediaMath, like many successful technology companies, has a lot of alternatives that they can pursue. And we similarly are looking at a variety of alternatives that would make sense for our shareholders. MediaMath understands that the timing of our potential exit for MediaMath may not necessarily coincide with whatever they are considering in the broader market. So we're going to continue to work through a variety of different alternatives over the next three to six months. And as they become more fully formed, we will be happy to share this with our shareholders.

Greg Mason, KBW.

First, Steve, on your comments on two profitable exits, it seems like you've added a minimum aggregate cash value of $50 million. I don't remember that from last quarter. Just in that $50 million so far, is that just DriveFactor? Or are you putting DriveFactor and Quantia in that $50 million for this year so far?

Yes, good morning, Greg. It's just DriveFactor at this point.

So if we think about one more profitable exit with an aggregate of $50 million, that's $40 million of additional value. Is that what you are implying there? And if we look through your portfolio excluding MediaMath, almost no one has a cost -- a carrying value north of $10 million. So should we be thinking kind of a $30 million type of profit?

I think that where we -- I'm going to leave this, Greg, is that we are expecting proceeds of at least another $40 million from at least one profitable exit over the next six months.

And any gain on that would be the difference of your cash received in the carrying value, correct?

The way we describe this is that's cash in the door. That's proceeds coming back to Safeguard. That doesn't necessarily imply profit of $40 million.

Right. The profit would be the difference of that cash and the carrying value, correct?

Correct.

Yes, okay. One final question on the equity income line, last quarter it was a negative $8.7 million. This quarter was a negative $13.7 million. As we walked through the impairments -- or about a $6 million impairment, but you have the $6 million gain. So we were kind of thinking those would offset each other. What's the driver of the $5 million increase and equity income loss in the quarter -- quarter over quarter?

You are looking Q2 versus Q2 of prior year, Greg?

I was looking first quarter of this year versus second quarter of this year.

Okay. And you're looking at the total in aggregate healthcare and technology?

Yes, just on your income statement, the consolidated statement of operations, the equity income line.

Yes, the --

(multiple speakers) in acceleration of recorded loss from your portfolio of companies, or if they are one-time items this quarter.

The one-time items, as you said, more or less offset. We had a $3.2 million impairment and a $2.9 million impairment offset by a $6.1 million book gain on the sale of DriveFactor. So really, the main driver of the last quarter -- you've got a quarter lag, so you have got some -- as we talked about earlier on the call, you've got some big quarterly results in our media tech space, which tends to drive a lower net loss in Q4 and, on a quarter lag, our Q1. And also what you're seeing is the impact of an increasing number of partner companies and capital deployed in those partner companies, which are primarily in the initial revenue stage and are therefore generating losses at a net income level.

Okay, great. Thank you.

Paul Knight, Janney Montgomery.

If you look at the overall portfolio, it's been a little choppy over the last two years on exits. Do you think that regularity is going to come back closer to your goal in 2016?

Yes, if we clear and exit with another one or two companies this year, we will have been relatively consistent year over year between 2015 and 2014. Although 2014, three exits came at the beginning of the year, and here you might see them back-loaded to the end of 2015. So that period of time from January -- Q1 of 2014 to Q3 or Q4 of 2015 tends to make it look longer than it probably is when you're looking at it on a year-to-year basis.

So that's near-term how we're thinking about it, so I don't think we are that far off of the pace that -- I don't think we're off pace in any extent from where we thought we would be. I can't calibrate this so finally that I have something happening in each quarter within each year. They tend to get bunched up a little at times. So that's what you're seeing here.

As I look forward to 2016, 2017, and 2018, there is an interesting build that's going on now. It looks like we're going to be able to potentially get to a point where you're going to see that same level of consistency, three, four, five exits. And that's what we're looking at; that's how we are projecting forward.

So I think the underpinnings of the strategy that we put into place just a little over two years ago when I became CEO have started to take real root. And we got not only those that are high-profile companies that our shareholders are looking at. We've talked about some of the companies that have had a little bit of a longer life with Safeguard and how we are potentially positioning those for some potential exits in the near future. And then you have got this next generation of companies, and I think we mentioned Apprenda this morning. There's a number of others, and they are going to start to lead into the exit opportunities in 2016, 2017, and 2018.

And then last, Steve, is that you have a lot of experience in the diagnostics ecosystems with your Good Start Genetics investment and your Crescendo exit. But that's -- your portfolio adds -- you're not having many diagnostic portfolio adds. How does the pipeline look? What are your thoughts on the diagnostic space and healthcare in general?

Yes, you know, it's interesting, Paul. It's not for the lack of desire to do a couple more diagnostic deals. We just have not found anything that's been really compelling to us. We do recognize and started experiencing a little bit of this in the near term with regard to reimbursement as a risk. We are finding that there is an accelerating pace around healthcare tech or healthcare information technology. And interestingly enough, we're trying to take advantage of it not only because the market provides interesting opportunity, but we are actually able to leverage the other side of our skill sets in the technology group to help us evaluate these deals as well. So you are seeing a little bit of a number of things playing in to how the portfolio is shaping up.

But we're not out of diagnostics; we are looking for opportunity. We're still looking for interesting device opportunities. We talked a little bit about doubling down on InfoBionic, and the rationale there is we still see great market opportunity for InfoBionic. We did have to take a step back because of some challenges with the first generation of their product. But we did a bottoms-up analysis and said, this is a device play that we wanted to be a part of.

So we are looking hard for a device. Diagnostic and healthcare information technology -- I think in the last six months, you probably saw us more heavily oriented to healthcare IT.

I wouldn't read too much into that as a particular trend. We are also looking at the potential of some other resources coming to Safeguard. Personnel resources that may actually bring some other depth of capability that would play into some of those other market areas that I just described.

Thank you.

(Operator Instructions) Bob Labick, CJS Securities.

You've touched on a number of your high-profile (technical difficulty). Certainly at least one that you haven't given us an update on; I was hoping you could tell us what's going on with Putney.

Putney continues to demonstrate substantial growth. We really think the world of the team there. They know that they are in a market dynamic today where animal health, and specifically companion animal health, is getting a lot of attention. Jean Hoffman and her team are pretty savvy, and they are going to look at opportunities as they get presented to them and leverage the growth rate that they are enjoying.

Putney actually had -- I think my -- they had 7 new product approvals within the last 10 months, so they are demonstrating that they can take an existing compound or compounds and reformulate, get the bioequivalency and then get them into the market. And I think it's those types of attributes along with solid revenue growth that is going to position Putney interestingly in the marketplace.

And I think outside parties are taking notice. And I think the management team will prudently assess what those opportunities present. And the good news is management and the investors are aligned in their perspective on Putney, and we're just wanting to make sure that we maximize value for our shareholders.

Okay, great. And then maybe a tough but more conceptual question -- can you talk about Safeguard taking profitable exits at 2 times, 3 times, 4 times -- whatever the number is -- versus holding on another quarter or year to try to maximize every dollar in your investments? How do you weigh those decisions internally, and what leads to an exit in that regard?

One of the things that we always remind ourselves of and we try to remind our shareholders of is we believe in the concept of well-timed, risk-adjusted exits. And what that means to us is that we are not necessarily looking for every dollar of profit. We want to maximize what we think the return on that asset could look like for our shareholders without taking further undue risk to try to attain another turn of profit.

Every time we get to a certain stage in a company's evolution and when we are presented with potential opportunities for exit, one of the first questions we ask ourselves is, if we don't exit now, what's the timeline to a future exit opportunity? What additional costs may we incur getting to that opportunity? And what's the actual value increase that's going to occur?

And a lot of it is educated guessing. But they're some of the questions that we ask ourselves as we decide whether or not it's a good time to have a partial or a full exit opportunity for many one of these assets. And obviously, as the asset gets more mature and the industry in which it plays becomes more mature, those questions take on another level of dynamic that has to be evaluated. Much like -- and that paradigm actually exists at the earlier stage, too.

So as we are considering what to do with a company like MediaMath or Putney or any of those that are out there in that high traction category, we are also looking to say, so what happens when you have a pickup like with an InfoBionic where you have to reassess the landscape, reassess the company's capability, and determine what you want to do from the standpoint of do you stop and try to find an early exit? Or do you continue to go and look for the bigger opportunity?

And Bob, that's the way we look at each and every situation. Obviously, as you would expect, each and every situation has its own dynamic that we have to assess. But we are constantly thinking about those types of questions because we realize that you can overplay your hand, and it may not work to your benefit.

But more importantly, you have to also look at where we are expert in the market. And we are actually really good, I think, as a team in the early stages of the Company's development. And when they get to a certain stage of growth, we probably need to ask ourselves the question, are we the best owner of this asset? Or should we take the profits that are embedded, use them for what we do really well and let somebody else take them to the next evolution?

Bill Sutherland, Emerging Growth Markets.

Steve, can we think about 2016 maybe being the year where proceeds will exceed your plans for new and follow-on investing in terms of dollars?

Yes, that's the goal so that the proceeds from the sale of -- or the divestiture of interesting companies exceeds the capital that's being put into the market. That would be the -- that's the goal, and 2016 has real hope and possibility for that to occur.

I mean, with a bluebird or two, could it even happen as early as later this year?

We always remind our shareholders that there's always a bluebird opportunity that potentially could be out there. We have demonstrated in the past that those bluebird opportunities exist. I think the last one that probably is on people's minds is ThingWorx, which was just about 18 months ago.

So, yes, there are -- I'm trying to make sure that our shareholders recognize that there are some other interesting things that are occurring with companies that are outside of that expansion-stage revenue category that we have, and that could provide real opportunity for acceleration of profit creation if things go our way.

Okay. And then in the ad tech investments, I guess there's 4 now. And that's clearly become more of a buyer's market, particularly in the private side. And I'm not sure if it's -- how it's going to play out in terms of the competitive issues and all the entrants and so forth. But obviously this has worked to your favor being able to make initial stakes -- Sonobi and InsideVault. But how do you think this plays out potentially as you get to the profit realization phase of this --

Well, you know -- so the question kind of drives on -- we do have a fair amount of exposure to ad tech. We think it's fairly well diverse given the types of deployments we have. And MediaMath and Spongecell and Clutch falls into that category in a large degree, and Sonobi and InsideVault. They all represent a different part of the puzzle.

Interestingly enough, as an aside, and probably more than just saying it in a half-joking way, I think Joe Zawadzki of MediaMath looks at our ad tech portfolio and says each one of those companies, he'd love to have an opportunity to own under his platform because he sees how they all tie together.

So we look at these opportunities much like we looked at MediaMath. And I think people tend to forget about how we ultimately got ourselves to where we are with MediaMath. That was 5 1/2 years ago. We were just reminiscing this week where MediaMath, when we first put money into them 5 1/2 years ago or six years ago, they were doing about $7 million of gross revenue. And we've stair-stepped to our way into $25 million of capital into a company that I think arguably is worth a lot more than that, and I think we have tried to express what we think the valuation range looks like for MediaMath.

We think that the same type of dynamics exist for the rest of this ad tech portfolio. And we are really happy to have this opportunity, and we will work -- and the thing that's really interesting for us is we are getting presented with some inside opportunity here with some of these companies. And they're coming to us because they know we have such a great track record in this category. And we're getting some inside opportunities that maybe others aren't seeing as early as we are, and that gives us a bit of a leg up.

Okay. Thanks, Steve.

There are no further questions at this time.

Great. Thank you for your continued interest, confidence, and support in Safeguard. Before we conclude our call, I would like to inform you that we are hosting our ninth annual Safeguard Scientifics investor day on October 8 at the Le Parker Meridien in New York City. Please stay tuned for more details in the coming months. In the meantime, enjoy the rest of your summer. Thank you.

Thank you. This concludes today's conference call. You may now disconnect.