Safeguard Scientifics, Inc.
Q1 2015 Earnings Call Transcript
Published:
- Operator:
- Good morning and welcome to the Safeguard Scientifics' First Quarter 2015 Financial Results Conference Call. All participants will be in a listen-only mode. After the presentation, we will conduct a question-and-answer session. [Operator Instructions] I would not like to turn the conference over to John Shave, Senior Vice President, Investor Relations and Corporate Communications. Please go ahead sir.
- John Shave:
- Good morning and thank you for joining us for Safeguard Scientifics' first 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 from the first 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 effect of regulatory and economic conditions generally, as well as the development of the healthcare and technology markets and other uncertainties that are described in our filings. During the course of today's call, words such as expect, anticipate, believe and intend will be used in our discussions 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. Now, here is Safeguard's President and CEO, Steve Zarrilli.
- Steve Zarrilli:
- Thank you, John, and thank you all for joining us today for an update on Safeguard and our partner companies. Safeguard is on-track to achieve our 2015 goals and objectives. These goals and objectives include, increasing the total number of our partner companies to approximately 30, deploying $35 million to $50 million in new partner companies, deploying $30 million to $50 million in follow-on funding for current partner companies, realizing continued growth in partner company aggregate revenue to $430 million to $450 million in that range and realizing a minimum of two profitable exits. Jeff will provide shortly a specific summary of achievements to-date against these goals. Our partner companies’ momentum continues to build and our pipeline remains very robust. Safeguard is rapidly becoming nationally recognized as a leader with respect to entrepreneurship and innovation. Further, Safeguard's latest deployments continue to sharpen our keen strategic focus on defined vertical markets within Healthcare and Technology. Our strategy is to build an organization that is recognized as an innovative capital provider capable of delivering consistent superior returns. We are developing a truly diverse asset base of companies, while retaining discipline in deployment decisions. Our goal is to significantly increase Safeguard's assets under management and we believe we can achieve that goal by executing against our strategic objectives. First, we intend to do more of what has distinguished Safeguard as an outstanding partner for fostering innovation and building market leaders. We want to grow Safeguard shareholder value primarily through consistent increases in deal volume and profitable exits. Our disciplined business approach is to provide capital and expertise to emerging and growth stage enterprises that are developing innovative products and services and define segments of the Technology and Healthcare markets. Secondly, to support our partner companies growth with a range of financial and operational expertise, and third to realize gains on exit transactions. This evergreen business model serves Safeguard well, providing a steady capital base to pursue attractive deals, talented asset managers and patient shareholders. Over the next couple of quarters I plan to highlight our deal team leaders and provide additional details with respect to the verticals in which we are deploying capital. This quarter I want to highlight Eric Rasmussen and Phil Moyer both managing directors of our Safeguard's technology deal team, which is rapidly becoming a market leader in advertising, tech and digital media, enterprise software and financial technology. Together Phil and Eric with their very talented team are Safeguard's boots on the ground in the Technology sector, responsible for providing support, analysis and insight to accelerate Safeguard's growth and to achieve the strategic imperatives that I outlined. Eric joined Safeguard in 2006 and has two decades of experience in venture investing and operation. Eric serves on the Boards of Safeguard partner companies, Beyond, Clutch, Full Measure, MediaMath, Spongecell and WebLinc. Eric and the technology team sourced MediaMath in 2009. We are extremely optimistic about MediaMath's potential to create significant value for Safeguard and its shareholders. MediaMath's revenue growth is robust and its international and products expansion are on-track. Approximately one year ago, the Company completed a financing with an attractive valuation led by a third-party. Previously, Eric and the team identified ThingWorx as high potential partner company in 2011, which less than three years later was acquired for a 4x cash-on-cash return for Safeguard. Proceeds to Safeguard were 40.5 million including 4.1 million held in escrow and with the opportunity to receive up to an additional 6.5 million based on certain milestones achieved in future periods. Phil Moyer joined Safeguard in 2011 bringing real world perspective for more than 25 years as a technology CEO, entrepreneur, Angel investor, software developer and manager of $100 million enterprises. Phil serves on the Boards of Safeguard’s partner companies AppFirst, Apprenda, Bridgevine, Lumesis, Pneuron, and Transactis. Phil's first deployment of capital after he joined Safeguard was in DriveFactor during 2001. So as subsequent to the first quarter DriveFactor was sold to a strategic buyer. Safeguard expects to receive cash proceeds of approximately $10 million including amounts held in escrow, representing a 2x cash-on-cash return. Congratulations to DriveFactor and Phil and his team. Within the Technology sector we've identified four prominent themes that are influencing our capital deployment decisions. Each of these themes presents Safeguard with opportunities for growth. The first thing is the ubiquitous cloud. The economics of computing has been forever changed by the emergence of the cloud with a practice of using a network of remote servers hosted on the Internet to store, manage and process data versus using a local server or a PC. The transition to cloud computing is still on progress. For the time being enterprises must operate in both local and remote environments. The global march to the cloud is unstoppable and new software service operating systems are proliferating. Safeguard's opportunity can be found and identified in supporting the development of this middleware and related infrastructure. The second theme is big data and analytics to produce better outcomes. Entrepreneurs are responding in creative ways to the need to handle enormous data volumes. Knowledge is the next frontier. The next theme is compute at the edge. Here, we see data applications and devices that are increasing enterprise awareness. A good example would be a social media platform that is distributed on a massive scale involving previously unimagined data volumes. Safeguard is finding opportunities in this space as infrastructure is developed and vertical applications are rewritten to consume and react to edge computing. The last of our themes is security and privacy. There is an unprecedented demand among companies and individuals for improved control of data. We are searching for opportunities in two niches. First, security software focused on privacy and second SaaS platforms that offer enterprise on-premise solutions. These technology themes are manifested in the vertical markets in which our partner companies operate. These themes also inform our decisions about growth and value opportunities as we deploy capital. We have exposure to the enterprise infrastructure vertical with our holdings in Apprenda, AppFirst, CloudMine, and Pneuron. We are well-positioned within the digital media vertical with our holdings in Beyond, MediaMath and Spongecell. Clutch and WebLinc complete the e-commerce space, Lumesis and Transactis are in the FinTech space. We have exposure to the enterprise applications vertical with our positions in Bridgevine, Full Measure, and Hoopla and finally we continue to seek opportunities and business models related to the Internet of things. Our prior interest in DriveFactor and ThingWorx were strong examples of profitable opportunities in this category. The global software and digital marketing industries are strong and we expect them to remain strong for the foreseeable future. Growth is accelerating in global IT spending. Merger and acquisition activity also is ramping up, especially in digital advertising and e-commerce while some valuations softened in 2014, companies that demonstrated growth commanded premium valuations. Safeguard is well-positioned in these niche verticals. So with that here is Jeff our CFO for an update on our financial performance in Q1.
- Jeff McGroarty:
- Thanks, Steve. As Steve mentioned earlier, we are off to a strong start towards our goals for 2015. As of March 31st, we had 27 partner companies. The cost of our interest in those companies was 260.6 million. The carrying value of those partner companies was 160.9 million. Subsequently to the quarter end DriveFactor was sold and Dabo Health began the process of shutting down its operations. We recognized a $2.3 million impairment charge related to our holdings in Dabo Health in the first quarter results. We currently have a very strong pipeline and expect to meet our year-end goal of 30 partner companies. Relative to our other goals for 2015, we deployed 12.8 million of initial capital in three new partner companies in the first quarter. We have deployed 9.4 million in follow-on funding to seven existing partner companies. With the sale of DriveFactor we have completed one of two targeted profitable exits for 2015. We expect continued growth in aggregate revenue for our partner companies. Due to the sale of DriveFactor we have adjusted our aggregate revenue guidance for 2015 to a range of 430 million to 450 million. Adjusted aggregate revenue for prior periods also excluding DriveFactor was 365 million for 2014 and 298 million for 2013. At March 31st Safeguard's cash, cash equivalents and marketable securities totaled 130.2 million. The carrying value of outstanding debt was 50.8 million resulting in net cash, cash equivalents and marketable securities of approximately 79.4 million. Safeguard's financial strength, flexibility and liquidity are evident on this slide showing the Company's balance sheet at March 31st. As I previously mentioned, we deployed 12.8 million of initial capital during the first quarter, into three new partner companies. First, we deployed 6 million in Aventura an initial revenue stage healthcare company and have a 20% primary ownership position. Aventura is a leading provider of awareness computing for the healthcare industry, capitalizing on the estimated 1.3 billion spending by U.S. hospitals on workflow optimization for patient data access. Aventura's platform delivers awareness of a user's identity and role, their location within a facility, the device being used and which patient is being treated. Then it immediately delivers a virtual desktop and dynamically provisions applications in the exact screens a user needs to care for that particular patient, eliminating wasteful clicks and keystrokes. As a result, Aventura helps customers achieve their important initiatives in the areas of electronic medical record adoption and Meaningful Use requirements, protected health insurance security, mobility, and cost containment. Next we deployed 2.9 million in CloudMine leading the Series A round and have a 30% primary ownership position. CloudMine is an initial revenue stage technology company which is in the fast growing mobile enterprise business applications market. The company's solution accelerates development, eliminates maintenance and standardizes enterprise mobile IT. This offering is HIPAA compliant and is being used by world-class enterprises, including Mylan Specialty, Endo Pharmaceuticals, Barnes & Noble College and Digitized Health to drive mobile first solutions. Lastly we deployed 4 million in Full Measure Education leading a Series B round and we have a 25% primary ownership position. Full Measure Education is an initial revenue stage technology company which offers colleges and universities a cost effective fast student engagement platform to maximize student success. The company is targeting the $2.5 billion market for student services by community and junior colleges. Full Measure's system-wide infrastructure increases student persistence, engagement and goal accomplishments, delivering information to students when they want it and how they have come to expect it. By delivering personalized, relevant and timely communications to students across the entire student lifecycle, students are inspired to achieve their academic goals and institutions can intervene when students exhibit at-risk behavior. Now here is Steve to lead us through the Q&A segment of the call.
- Steve Zarrilli:
- Thanks Jeff. Operator if you might let’s open the phones for any questions.
- Operator:
- Thank you. [Operator Instructions] Your first question comes from the line of Bob Labick. Your line is open.
- Bob Labick:
- A couple questions, first, I just wanted to start with Dabo. You mentioned that you had it in the release. They're in the process of shutting down now. Could you walk us through, as much as you can, maybe what happened? But more importantly, the decision that was made to shut down versus potentially reinvesting more in that and how you come to those decisions?
- Steve Zarrilli:
- Sure, and good question Bob. So, as you know and as we have shared with others on this call and in meetings in the past, we have taken a very deliberate approach in certain situations to tranche capital especially in earlier stage ventures, so that we can kind of manage our risk as they continue to develop their go-to-market capabilities. And Dabo was clearly one of those in which we were tranching our way into the relationship. We actually had started with an initial deployment of 750,000. There were a couple of factors that came into play in determining whether or not we were going to ultimately move forward with Dabo. Not the least of which was looking at the solution that had been provided initially for the Mayo Clinic, recognizing the success that they had there, but also recognizing that the success that they had at Mayo may not necessarily scale in a broader market rollout. So we were faced with a basic question of how much capital would it require to further develop capabilities to have a product that was or a service that was saleable in the marketplace? When we did that analysis, we have ultimately came to the conclusion that the capital required was going to be substantial, not something that we wouldn't necessarily do but it was substantial. We did have a capable leader and a new CEO that we have brought to the table Bob Stanek but we also realized that Bob wasn’t a start-up CEO, he was someone who was capable of taking something that was already in existence and bringing it to market. So those two factors while it wasn't an easy decision because we think we could have potentially migrated our way through even those two gating factors. We ultimately thought that we could use our capital elsewhere for a more profitable endeavors for the Safeguard shareholders.
- Bob Labick:
- And then shifting gears, you also mentioned in the release, Putney received a fifth approval. Can you just remind us kind of where they stand at the time, if they are still on pace. I know maybe a little over a year ago, they gave a goal for 2018 and if they're on pace to still reach that and how they are progressing?
- Steve Zarrilli:
- Yes Putney continues to really impress us with their ability to not only bring new products to market but execute on the sales and marketing of those products. So as you mentioned within the last five months Putney has been able to get five FDA approvals. They have 11 products in the market today, in a January 2015 article in Veterinarian Practice News, Jean Hoffman confirmed that in 2014 they had a 45% jump in revenue and that she expects that the revenue growth in 2015 will surpass that rate. So you can see that they are starting to ramp the revenue at a very nice pace. So we're very excited about Putney, there has been a lot of discussion in the market in general around animal health and companion animal health and we think Putney is very well-positioned to take advantage of some of the trends that we're seeing both from a valuation perspective as well as a growth perspective. Any valuation of Putney will really always depend on two things. One, revenue and revenue growth, and two, strength of pipeline of new product capability and we think for Putney both of those things are very strong and continuing to grow and I think the team has demonstrated that in a very significant way.
- Operator:
- Your next question comes from the line of Paul Knight from Janney Montgomery Scott. Your line is open.
- Paul Knight:
- It seems like the time from investment to liquidity windows is at least shortening in healthcare. Is that your view and is it changing your thought about deploying capital?
- Steve Zarrilli:
- Shortening in healthcare, we're still seeing that window being three to five years on average Paul. And you know some are taking a little bit longer, some may go out a little bit sooner. And I know that DriveFactor is not healthcare but DriveFactor as an example is 3.5 years, a 2 plus x return, a 30% IRR. That tends to be very prototypical of what we think we're seeing in the marketplace. There might be a few healthcare IT place that could go sooner rather than later if they get their positioning in the market. The diagnostic space seems to take we think probably within that three to five year period maybe even a little bit longer just to prove out market opportunity. So I am not necessarily convinced that the timeline has shrunk from the standpoint of start to finish.
- Paul Knight:
- And then I understand that the venture capital numbers raised last year increased a lot. I can't remember exactly overall. I know healthcare was up 38% or so. Are you seeing tougher pricing terms or how is that pricing environment looking to you right now with more capital in the market?
- Steve Zarrilli:
- Yes, it's interesting you brought up an interesting statistic, I think yes the specific numbers were in 2014 it was about $34 billion of assets raised for venture capital compared to 19 billion the year before, and that 34 billion compares to I think the high watermark of about 100 billion back in 2000. So you would first have to come to the conclusion that there is a lot of capital out there chasing a lot of opportunities and we spend a lot of time trying to figure out how to manage our pipeline of opportunity to make sure that we're looking at the ones that makes sense for us. I'll give you a couple of quick statistics in trying to answer your question about valuation and how we see it's impacting our ability to close deals. In 2014 we looked at just over 900 deals and ultimately issued 18 term sheets. We closed on six of those in 2014 three of those deals identified in '14 were carryovers into '15 where we ultimately closed. But that still said that there were some competition nine of 18 of the closed nine were lost, most were lost either because we didn't want to step up into a valuation, that the company wanted or there was a strategic partner that was just better positioned to participate in the opportunity. As we begin 2015 some interesting trends thus far, we have looked at over 300 opportunities just in the first three months of 2015, that would suggest the pace of somewhere between 1,000 to 1,200, that number is important to us because if you look at it historically we generally do about 1% of those opportunities ultimately result in close and we have about 10 targeted for this year. That quickly got down to 35 qualified prospects, we issued five term sheets and of those five we expect that, well one has already closed that we announced in April, meQuilibrium. And we have a couple of others that we think will have opportunity and three were rejected, all three were competitive and they were competitive around valuation. So to drive home the point, it's a competitive environment we've got cross our Ts and dot our Is as to how we ultimately look at valuations and as I've been very clear in saying in the past, it's very important that we get it right going in because if we don't it's going to be very difficult for us to produce the returns that you all are expecting of us.
- Operator:
- Your next question comes from the line from Jim Macdonald from First Analysis. Your line is open.
- Jim Macdonald:
- Congratulations on the DriveFactor exit. Can you talk about other exit potential and whether you expect larger returns of capital than that this year?
- Steve Zarrilli:
- Yes, Jim, so thank you, and DriveFactor is one of the two that we were at least very confident about for 2015, so we have some guidance out there that says that we'll do it at least two and just to drive home the point, I don't want the thought to be lost that is the fifth exit in the last 15 months for Safeguard. So we think we're getting into somewhat of a rhythm. To answer your question more specifically, there are some opportunities for some bigger potential exits as we get through the year. I think some of those are top of mind for some. And we continue to try to make sure that we're positioning these companies for the right type of exit. But as I've also said in the past, there is a number of companies within our family that will exit and people are paying attention, I think DriveFactor was one of those examples. I think ThingWorx was another example. We have others that are growing nicely and that we're trying to make sure people are mindful of. But we're hoping for bigger returns of capital as you have pointed out and that is the goal to ensure that we've got a steady flow and ultimately a bigger flow of capital inflow.
- Jim Macdonald:
- I guess following up and thinking about one of maybe a potential bigger one. Can you give us your thoughts on MediaMath at this point?
- Steve Zarrilli:
- Sure, so MediaMath continues to grow. They have continued to focus on a strategy of putting their capital to work in both organic as well as some acquired growth. They have opened offices now. They are operating in 10 cities around the world. As you know that they are on pace to continue to show substantial growth in 2015. Market multiples for companies that are considered comparable to MediaMath would suggest that their valuation would be somewhere in that 3x to 5x of net revenue. They are continuing to build their management team and I think that they're just doing the things that are necessary to build a long-term sustainable profitable growth-oriented business model and we're very bullish about MediaMath's future. And they're operating in a very larger industry. There is some consolidation going on. Some of the weaker players are being called out of that marketplace and I think Joe and his team should be -- they get a lot of credit for staying the course with regard to their strategy of making sure that they've got the proper underpinnings for a long-term growth-oriented business model.
- Operator:
- Your next question comes from the line of Troy Ward of KBW. Your line is open.
- Troy Ward:
- Steve, you just gave really good color on Putney and MediaMath. Can you give us some operating highlights kind of where Good Start Genetics kind of finished up last year and maybe kind of what you're looking for that individual company?
- Steve Zarrilli:
- Yes, so Good Start is growing probably not growing at the pace that they would have originally hoped just given some headwinds not with regard to the acceptance of their product, the testing in the marketplace, but it's more the reimbursement environment that they operate in. But we're still -- no predictions yet on Good Start, first of all we're still very bullish on its future. If they do need additional capital, we're going to be there to support them for sure. Their diagnostic peers are currently trading kind of in that 3.5x to 4x range of current revenues, so that still puts a very nice current valuation we think on Good Start. They have announced a couple of new partnerships recently most notably in April earlier this month with John Hopkins. They announced a relationship in December of last year that's going to give them even greater market opportunity both here in the U.S. and in Canada. We believe very strongly in the management team Don Hardison and his team have demonstrated an ability to grow a business very methodically. They are looking at as you would hope and expect other test opportunities to bring to the market. So we think that all the ingredients are there for very successful exit in the future, but we also recognize that it's probably taking a little bit more time than people would have desired. But we're very much convinced that they're going to continue to meet or exceed our expectations.
- Troy Ward:
- You mentioned their reimbursement path was a little more difficult. Has something -- I'm assuming that's insurance. Has something changed in that industry, where the sequencing isn't reimbursed? Is it reimbursed through a different rate or has something changed?
- Steve Zarrilli:
- No it's not getting reimbursed, it's just that the sources of reimbursement are just slow in paying, especially given the fact that Good Start is smaller than some of its competitors and doesn’t have the muscle to deal with the reimbursement authorities as well as some other parties. If you remember one of the reasons -- not reasons but one of the benefits of the Perkin-Elmer relationship was that their ability to better position themselves in the reimbursement cycle. Believe it or not it's not unlike what we saw years ago with Clarient. And ultimately we were able to migrate through that processing and better position the company in that reimbursement cycle. And I don't think that this is too dissimilar to that as well.
- Operator:
- Your next question comes from the line of Ross Taylor from Somerset Capital. Your line is open.
- Ross Taylor:
- In the past, you and I have had conversations about better linking the performance of the stock to the performance of the underlying investment partners that Safeguard has. And as a response to that in part, the Company put in place the share buyback program last year. But since the end of the second quarter, the stock is actually down about 11%, while I think you've had some notable successes in your partner companies. And I'm curious if the Company is giving greater thought to how it accomplishes that linkage so that as investors, we actually benefit from the performance of the partner companies and the growth in the partner companies and the successful exits the Company has in a more direct and tangible fashion than the buyback program, which to date hasn't been able to create that linkage?
- Steve Zarrilli:
- Yes so Ross it all revolves around the broad topic of capital allocation in my mind. And capital allocation as discussed with you and others in the past always involves both the debate of dividends and repurchases. We as a management team take those messages back to our Board to make sure that we are dialoging about capital allocation, so both that which we could return to our shareholders and that which we could use in the business. When we got the repurchase a little over a year ago at an average price that was a little north of $20 a share, we did that in a fairly quick order one because we wanted to demonstrate our conviction to a share repurchase that had not been done in any meaningful way over the past 40 years. We also established some very specific guidelines as to how we were going to think about return of capital to our shareholders in the future those guidelines were predicated upon two core principles intrinsic value per share and where we saw the share value trading their relationship to that and whether or not we had excess cash on-hand as we define it. So we're still committed to looking at capital allocation as it relates to returning capital to shareholders when those two factors are in play where we do have excess cash and where we think that the intrinsic value of the shares trade above where the stock is trading. To more specifically address what I think is your underlying question, since you and I have had a chance to speak in the past, we aren’t in a position today to suggest that buyback versus dividend is going to be the preferred method. And I won't be in a position to determine that until we get closer to being back in that position of being able to determine whether or not we actually have capital to return to our shareholders. I don’t think your position is unrealistic or unfounded as it relates to bias towards dividends, and there might be ways in which we can construct that in the future, but that's still to be determined, the things that we've been most focused on recently have been trying to ensure that we've got consistency of deployment, consistency of return back to the Company, and trying to better increase the transparency or related to these assets. In 2014 we were basically breakeven start to finish from a share value perspective our peer group actually was down 8%. And the year before we were up 36%, this year is still in play to be determined but we think what we're doing is over the long-term adding value to our shareholders and increasing the underlying value of the stock. But we have not lost sight as to the other element to that which is, so what’s the capital allocation tendencies of the Company and how will we respond to the shareholders’ desires in that form when the time is right for that debate.
- Operator:
- [Operator Instructions] Your next question comes from the line of Jim Macdonald from First Analysis. Your line is open.
- Jim Macdonald:
- Just a couple quick follow-ups, you haven't put money into AdvantEdge in a long time, because I think the company had been profitable. Did the money you put in this quarter, which wasn't a lot, support an acquisition or maybe talk about that a little bit?
- Steve Zarrilli:
- So Jim with regard to AdvantEdge, as you know AdvantEdge has been with us for quite some time, I think it's actually in year seven or eight of our relationship. So we continued to want to support AdvantEdge as it continues to demonstrate its ability to grow, one of the things as I have mentioned in the past is its ability to demonstrate that it can growth through organic growth not just acquired growth because I think that that's what is ultimately going to allow David Langsam and his team to find a strategic acquirer that might find real value in the platform. The capital that we provided this year was to augment very modestly some of the capital that they needed in connection with some operating activities that they had, but we don't expect that there is going to be a substantial amount of capital need in the future as it relates to AdvantEdge. And we're continuing to help them find ways to better grow their business organically. The good news is we did see some very strong signs of that in the second half of 2014 and those trends are still very strong as we move into 2015. So I think the team has found its mojo. They had struggled for a couple of year in getting the right ingredients in place with regard to their internal sales force and I think that they've honored out a lot of these challenges and we expect that there might be some better growth rates for AdvantEdge as they move into next year.
- Jim Macdonald:
- Just on another topic, you have a lot of companies in the initial revenue stage. Can you make any predictions or comments on which ones or how many you expect to go into the expansion stage in the near future?
- Steve Zarrilli:
- Yes, so right now we have 11 because Trice actually has moved from pre-revenue into initial revenues, so of the 26 companies that currency exit if you take into account the shutdown of Dabo, 11 of those are in initial revenue. There could be two or three that are going to move from initial revenue to expansion during the course of the year most notably Clutch and Spongecell. I'm sorry Clutch should move into expansion and Spongecell has a chance to move into high traction. When I look at the other initial revenue staged companies, I am not necessarily convinced that in the next 6 to 9 months we're going to see substantial movement from initial revenue into expansion at this point in time.
- Operator:
- Your next question comes from the line of Troy Ward from KBW. Your line is open.
- Troy Ward:
- Just kind of building on that last question, I noted that the three new companies in the release you had one in healthcare, two technologies. All of those were in the initial revenue stage as well. And as well as the cloud company looked like maybe closer to even Angel, with a Series A. Can you just speak to what you're seeing as the -- what opportunities are you seeing to get into companies at different levels of stages?
- Steve Zarrilli:
- Yes, Troy, we've actually purposely have gone a little earlier because we can transfer capital more effectively, we can get in with better valuations, we have the balance sheet and the ability to stay with those companies as they go through subsequent rounds of capital even potentially bringing in other capital providers. We did that actually with Hoopla about a year ago where we were -- we saw a substantial increase in value. We were able to do our pro rata but we're still in a company that is growing but still in the initial revenue stage. So it's somewhat deliberate because it actually gives us a chance to being even more involved in some of these companies. And it also is representative of how we're viewing the competitive landscape out there, some of the more -- the larger businesses those that might already be in expansion stage where we might also target our activities to enter. Those valuations at times get pretty nutty and we just don't want to buy into a valuation paradigm that we don't think makes a whole lot of sense for us. And I will point and I don't have all of the data with me but we'd be happy to take it through at some point in the future. If you look at some of these companies that we're doing initial deployments in initial revenue stage companies or even follow-ons, we're in some pretty company with other capital providers as well and that's just as important to us as we look to build these relationships.
- Steve Zarrilli:
- It appears that there may not be any addition questions, so with that we appreciate the time that you've shared with us today. We look forward to keeping you apprised of our success going forward and thank you and we'll see you or talk with you at the end of the next quarter.
- Operator:
- This concludes today's conference call. You may now discontent.
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