INNOVATE Corp. (VATE) Q4 2024 Earnings Conference Call March 31, 2025 04:30 PM ET Company Participants Conference Call Operator - OperatorNeil Sika - Investor RelationsPaul Voigt - Interim CEOMike Sena - CFOQ&A Coordinator - Call ModeratorConference Call Operator - Operator/Host Conference Call Participants Brian Charles - Analyst, RW Press Conference Call Operator Good afternoon, and welcome to Innovate Corp's fourth quarter and full year 2024 earnings conference call. All participants will be in listen-on ...

Revenue and Financial Performance - For the year ended December 31, 2024, total revenues reached $1,071.6 million, with the largest revenue contributions from SSC at $404.6 million (37.8%), Banker Steel at $312.7 million (29.2%), and GrayWolf at $314.1 million (29.3%) [34] - DBMG's sales pipeline includes approximately $6.6 billion in potential revenue generation, indicating strong future growth prospects [35] - As of December 31, 2024, DBMG's total backlog was $957.2 million, with minimal bonding requirements at 19.2% of the backlog [37] - DBMG's two largest customers represented approximately 25.5% of its revenues in 2024, a decrease from 41.3% in 2023, suggesting improved customer diversification [34] Operational Efficiency - The company operates with a typical facility utilization rate ranging from 84% to 94%, showcasing efficient resource management [35] - DBMG aims to diversify its revenue base by targeting projects with higher margins and less risk of large margin fluctuations [32] - The company employs 3,135 full-time and 26 part-time employees, indicating a robust workforce to support its operations [27] Market and Competitive Position - The company is focused on expanding its operations in Infrastructure, Life Sciences, and Spectrum, which are well-positioned to capitalize on current economic trends [21] - DBMG's operations are affected by various federal, state, and local environmental protection laws, which have become increasingly stringent [54] - The company faces significant competition in the medical technology and aesthetic product markets, with many competitors offering a broader range of products [67][69] Technology and Innovation - DBMG utilizes advanced technologies such as BIM and digital engineering to enhance project delivery and reduce costs [39] - R2 Technologies' Glacial® platform is a leader in CryoAesthetics™ medical devices, aimed at reducing inflammation and brightening dark spots [58] - R2 Technologies has received 510(k) clearance from the FDA for Glacial Rx, allowing it to market the product for various dermatologic procedures [71] - The company holds a patent portfolio of 128 issued patents and 11 pending applications as of December 31, 2024, primarily related to its CryoModulation technology [77] Workforce and Employment - DBMG's workforce comprised 3,065 full-time and 23 part-time employees as of December 31, 2024 [51] - As of December 31, 2024, R2 Technologies employed 28 sales force members in the U.S. and Canada, with a total of 42 full-time employees [64] - The company has established quality management certifications, including EN ISO 13485:2016, to comply with international regulatory requirements [75] Broadcasting Operations - Broadcasting operated 256 stations as of December 31, 2024, including 3 Full-Power stations, 53 Class A stations, and 200 Low Power Television (LPTV) stations [91] - Broadcasting's stations can collectively broadcast approximately 1,700 sub-channels and reach 113 markets in the U.S. and Puerto Rico, including 34 of the top 35 markets [91] - Broadcasting's strategy focuses on attracting high-quality content providers for nationwide distribution, leveraging its national footprint and cloud infrastructure for premium pricing [105] Future Growth and Strategic Initiatives - DBMG is open to pursuing acquisitions outside its current operating segments to identify undervalued or fairly valued businesses [22] - Broadcasting is exploring the use of fifth-generation mobile network (5G) channels to deliver high-end content over-the-air to more homes and mobile devices [90] - Broadcasting is exploring commercial opportunities in datacasting, which may provide incremental revenue over the next year [110] Risk Management and Compliance - DBMG maintains commercial general liability insurance of $2.0 million per occurrence and $4.0 million in the aggregate [55] - The company does not anticipate material adverse effects from compliance with environmental regulations, although future changes may require additional expenditures [113] - The FCC regulates all local television broadcasters, and the company must renew its licenses every eight years, with a weighted-average renewal period of 5.4 years as of December 31, 2024 [107]

Financial Performance - INNOVATE Corp. reported consolidated revenue of $236.6 million for Q4 2024, a decrease of 34.5% compared to $361.0 million in Q4 2023[9]. - Net loss attributable to common stockholders for Q4 2024 was $16.9 million, or $1.29 per share, compared to a net loss of $9.6 million, or $1.22 per share, in Q4 2023[11]. - Total Adjusted EBITDA for Q4 2024 was $15.0 million, a decrease of 30.2% from $21.5 million in Q4 2023[2]. - Total revenue for Q4 2024 was $236.6 million, a decrease of 34.5% compared to $361.0 million in Q4 2023[32]. - Adjusted EBITDA for Q4 2024 was $15.0 million, down 30.2% from $21.5 million in Q4 2023[15]. - Net loss attributable to INNOVATE Corp. for Q4 2024 was $16.6 million, compared to a net loss of $9.3 million in Q4 2023[32]. - The total Adjusted EBITDA for the year ended December 31, 2024, was $71.3 million, an increase of 9.8% from $65.0 million in 2023[15]. - For the year ended December 31, 2024, net income attributable to INNOVATE Corp. was $40.3 million, compared to $28.7 million in 2023, an increase of 40.0%[39]. - Adjusted EBITDA for the year ended December 31, 2024, was $71.3 million, compared to $65.0 million in 2023, an increase of 9.6%[39]. Segment Performance - The Infrastructure segment generated revenue of $225.7 million in Q4 2024, down 36.2% from $353.8 million in the prior year quarter[7]. - The Infrastructure segment reported an Adjusted EBITDA of $17.4 million in Q4 2024, a decrease of 42.0% from $30.0 million in Q4 2023[15]. - Life Sciences segment had an Adjusted EBITDA of $(2.5) million in Q4 2024, an improvement of 64.8% from $(7.1) million in Q4 2023[15]. - Broadcasting segment achieved revenue of $6.8 million in Q4 2024, up from $5.7 million in the prior year quarter, with an adjusted EBITDA of $2.3 million[6]. - R2 Technologies reported a 113% increase in worldwide system unit sales in Q4 2024 compared to Q4 2023[7]. Financial Health - INNOVATE Corp. reduced total debt by $54.5 million year-over-year, indicating improved financial health[4]. - Cash and cash equivalents as of December 31, 2024, were $48.8 million, down from $80.8 million as of December 31, 2023[16]. - Total assets decreased from $1,043.6 million in 2023 to $891.1 million in 2024, a decline of approximately 14.6%[35]. - Cash and cash equivalents dropped significantly from $80.8 million in 2023 to $48.8 million in 2024, a decrease of 39.6%[35]. - Total liabilities decreased from $1,179.9 million in 2023 to $1,034.8 million in 2024, a reduction of approximately 12.3%[35]. - The current portion of debt obligations increased significantly from $30.5 million in 2023 to $162.2 million in 2024, an increase of 431.1%[35]. - The company reported a significant increase in interest expense, rising from $68.2 million in 2023 to $74.5 million in 2024, an increase of 9.2%[39]. - The accumulated deficit increased from $487.3 million in 2023 to $521.9 million in 2024, reflecting a decline of 7.1%[35]. Future Outlook - The company anticipates strong project execution in 2025, supported by a robust backlog and new product approvals[3]. - The company plans to continue focusing on new product sales in the Life Sciences segment and expanding its market presence[25]. - The adjusted backlog for the Infrastructure segment was $1.1 billion as of December 31, 2024, compared to $1.2 billion a year earlier[3]. Employment - The company employed approximately 3,100 people across its subsidiaries[19]. Operating Expenses - Operating expenses for Q4 2024 were $45.8 million, slightly down from $45.7 million in Q4 2023[32].

- Life Sciences: MediBeacon Transdermal GFR ("TGFR") system received FDA approval to assess kidney - Infrastructure: DBM Global fourth quarter revenue of $225.7 million - function - - Spectrum: Broadcasting achieved double-digit revenue growth in the fourth quarter and full year 2024 - NEW YORK, March 31, 2025 (GLOBE NEWSWIRE) -- INNOVATE Corp. ("INNOVATE" or the "Company") (NYSE: VATE) announced today its consolidated results for the fourth quarter. Financial Summary | (in millions, except per share amount ...

Core Viewpoint - INNOVATE Corp. will release its financial results for Q4 and full year 2024 on March 31, 2025, after market close, followed by a conference call to discuss these results and the company's strategy [1]. Group 1: Financial Results Announcement - The financial results for the fourth quarter and full year 2024 will be announced on March 31, 2025 [1]. - An earnings conference call will take place on the same day at 4:30 p.m. ET to review the results and operations [1]. Group 2: Conference Call Details - The conference call will be accessible via a domestic dial-in number (1-877-704-4453) and an international number (1-201-389-0920) [3]. - A replay of the conference call will be available approximately three hours after the call and can be accessed until April 14, 2025 [3]. Group 3: Company Overview - INNOVATE Corp. operates in three key areas: Infrastructure, Life Sciences, and Spectrum, employing around 4,000 people [4]. - The company is committed to stakeholder capitalism and focuses on best-in-class assets [4].

FDA Approval and Product Overview - The FDA has approved INNOVATE Corp's MediBeacon TGFR for assessing kidney function in patients with normal or impaired renal function [1] - The TGFR system includes a sensor, monitor, and Lumitrace injection, which measures kidney function by tracking the clearance rate of a fluorescent agent [2] - The system records fluorescence intensity transdermally at 2.5 readings per second and displays average session tGFR readings at the patient's bedside [2] Clinical Advantages and Validation - The TGFR eliminates the need for blood draws or urine analysis, unlike current GFR assessment methods [3] - It has been validated for use in patients with stable kidney function at the point of care [3] - The TGFR met its primary efficacy endpoint with a P30 value of 94%, indicating high accuracy in GFR estimation [5] - Clinical studies showed no serious or severe adverse events [6] Industry Impact and Expert Opinions - The TGFR represents a significant milestone for nephrology, offering a non-invasive method to assess kidney function [4] - Experts highlight its potential to improve clinical practice, particularly in cases where current methods are suboptimal [4] - Chronic Kidney Disease (CKD) affects over 800 million people globally and is a leading cause of mortality [7] Company and Product Background - INNOVATE Corp operates in Infrastructure, Life Sciences, and Spectrum, employing approximately 4,000 people [8] - MediBeacon, a subsidiary, specializes in fluorescent tracer agents and transdermal detection technology, holding over 55 U.S. patents and 215 worldwide [9] - Lumitrace injection, a key component of the TGFR, has been administered to over 850 subjects and is designed for non-invasive GFR measurement [10] Technical and Safety Information - The TGFR is not approved for patients with GFR <15ml/min/1.73m2 or >120ml/min/1.73m2, or for those on dialysis [13] - Lumitrace injection may interfere with clinical laboratory tests, and its use is contraindicated in patients requiring such tests within 72 hours [17]

Core Insights - R2 Technologies has achieved significant milestones in 2024, positioning itself for substantial growth in the aesthetics and wellness sectors through key partnerships and brand momentum [1][6] Sales Performance - The company recorded a 294% increase in worldwide Glacial Skin system unit sales compared to the previous year, celebrating the one-year anniversary of the Glacial fx platform launch [2] - Providers using Glacial Skin systems experienced a 168% increase in patients treated and a 58% increase in average monthly utilization per provider compared to the previous year [4] Partnerships and Collaborations - R2 Technologies has established partnerships with leading skincare brands such as Epicutis, iS CLINICAL, BABOR, and BioSkin Aesthetics, enhancing the personalization of Glacial Skin offerings [3] - A notable partnership with Woodhouse Spas, a leading luxury spa brand with nearly 100 locations, has expanded the company's reach into wellness and skincare clinics [2][4] Product Innovation - The introduction of the Glacialist Ambassador Program aims to advance CryoAesthetics® technology and best practices through a community of expert professionals [5] - The company launched a colder version of the Glacial Glide Rx protocol, broadening the treatment capabilities of the Glacial Rx system for skin inflammation cases [4] Brand Awareness and Social Media Impact - R2 Technologies experienced a 4,086% increase in social media mentions in Q3, achieving record highs in impressions across platforms like Instagram, TikTok, Facebook, and LinkedIn [5]

Financial Data and Key Metrics Changes - Consolidated revenues for Q3 2024 were $242.2 million, a decrease of 35.5% compared to $375.3 million in the prior year period [21] - Adjusted EBITDA for Q3 2024 was $16.8 million, down from $22.1 million in the prior year period [22] - Net loss attributable to common stockholders for Q3 2024 was $15.3 million or $1.18 per fully diluted share, compared to a net loss of $7.3 million or $0.93 per fully diluted share in the prior year [21] Business Line Data and Key Metrics Changes - DBM Global achieved revenues of $232.8 million, a decrease of 37% from $369.3 million in the prior year quarter [23] - Life Sciences revenue increased 400% to $3 million from $600,000 in the prior year quarter, primarily driven by R2's sales [27] - Spectrum reported revenue of $6.4 million, an increase of $1 million compared to the third quarter of 2023 [29] Market Data and Key Metrics Changes - DBM's total adjusted backlog increased to $1.1 billion at the end of Q3 2024, with a high volume of bidding opportunities in the commercial market [10] - R2's worldwide top line sales reached $5.7 million year-to-date, a record high, with system unit sales growing 416% from Q3 2023 to Q3 2024 [11][12] - Spectrum's adjusted EBITDA improved to $1.7 million in Q3 2024, a significant increase from a loss of $300,000 in the prior year quarter [29] Company Strategy and Development Direction - The company is focused on addressing its capital structure and exploring strategic alternatives with non-cash flowing businesses [19] - Management expressed confidence in DBM's ability to win projects with good profit margins despite some delays in project releases [36] - R2 plans to expand its international footprint and has secured a robust backlog of over 60 systems worldwide [12] Management Comments on Operating Environment and Future Outlook - Management expects full-year results to be slightly lower than last year, with the first half outperforming the second half of 2024 [9] - The company remains optimistic about the overall M&A market and is encouraged by positive market indicators [19] - Management highlighted the strong operational results across all segments, with R2 showing significant growth and Spectrum improving profitability [18] Other Important Information - The company regained compliance with NYSE listing requirements following a reverse stock split [31] - As of September 30, 2024, total principal outstanding indebtedness was $699.2 million, down from $722.8 million at the end of 2023 [32] Q&A Session Summary Question: Update on FDA communication regarding MediBeacon - Management confirmed ongoing communication with the FDA and is working towards approval [34][35] Question: Insights on DBM Global's year-end guidance and 2025 outlook - Management indicated it is too soon to discuss 2025 revenue and EBITDA profiles but expressed confidence in DBM's backlog and market activity [36] Question: Exploration of avenues for refinancing and capital structure - Management is exploring strategic alternatives for non-cash flowing assets and is satisfied with the performance of operating subsidiaries [38]

Financial Restructuring and Capital Management - The company conducted a 1-for-10 reverse stock split, reducing outstanding common shares from 130,529,931 to 13,166,057[205]. - A $19.0 million rights offering was initiated, allowing shareholders to purchase shares at $0.70 each, resulting in total gross proceeds of $35.0 million from the rights offering and concurrent private placement[206][208]. - The company engaged in a strategic process that included evaluating acquisitions and divestitures to optimize its capital structure[202]. - A new 20% note with an aggregate principal amount of $20.0 million was issued, with an exit fee structure that could result in total exit fees of $7.9 million if unpaid by maturity[218][219]. - The company made $5.0 million in scheduled payments on a 4.0% note, which was fully redeemed on April 2, 2024[217]. - The company amended its Second Amended and Restated 2014 Omnibus Equity Award Plan to increase the number of shares available for issuance to 1,300,000[213]. - The company received $25.0 million from Lancer Capital as an equity advance prior to the rights offering settlement[208]. - The company expects to use proceeds from the rights offering and private placement for general corporate purposes, including debt service and working capital[211]. - The company has substantial doubt about its ability to continue as a going concern due to upcoming debt maturities and cross-default provisions[298][299]. - Management is exploring refinancing, asset sales, and raising additional capital to alleviate financial conditions[301]. Revenue and Operational Performance - Pansend's total revenue for the three months ended September 30, 2024, decreased by $133.1 million to $242.2 million from $375.3 million for the same period in 2023[227]. - Revenue for the nine months ended September 30, 2024, decreased by $191.5 million to $870.5 million from $1,062.0 million for the same period in 2023[227]. - The decrease in revenue was primarily driven by the Infrastructure segment, which was partially offset by increases in the Life Sciences and Spectrum segments[227]. - Income from operations for the three months ended September 30, 2024, decreased by $4.8 million to $5.9 million from $10.7 million for the same period in 2023[229]. - Income from operations for the nine months ended September 30, 2024, increased by $25.0 million to $37.5 million from $12.5 million for the same period in 2023[230]. - Interest expense for the three months ended September 30, 2024, increased by $4.1 million to $21.2 million from $17.1 million for the same period in 2023[231]. - Interest expense for the nine months ended September 30, 2024, increased by $5.9 million to $54.9 million from $49.0 million for the same period in 2023[232]. - Other income, net for the three months ended September 30, 2024, increased by $1.8 million to $2.2 million from $0.4 million for the same period in 2023[236]. - Other income, net for the nine months ended September 30, 2024, decreased by $16.0 million to $1.2 million from $17.2 million for the same period in 2023[237]. Segment Performance - Revenue for the Infrastructure Segment for the three months ended September 30, 2024, decreased by $136.5 million to $232.8 million from $369.3 million for the same period in 2023[242]. - Cost of revenue for the Infrastructure Segment for the three months ended September 30, 2024, decreased by $124.0 million to $189.1 million from $313.1 million for the same period in 2023[243]. - Revenue for the Life Sciences Segment for the three months ended September 30, 2024, increased by $2.4 million to $3.0 million from $0.6 million for the same period in 2023[249]. - Revenue for the nine months ended September 30, 2024, for the Life Sciences Segment increased by $3.9 million to $5.7 million from $1.8 million for the same period in 2023[250]. - Cost of revenue for the Life Sciences Segment for the three months ended September 30, 2024, increased by $1.5 million to $2.0 million from $0.5 million for the same period in 2023[251]. - Net income from the Infrastructure segment increased by $11.8 million to $31.6 million for the nine months ended September 30, 2024, compared to $19.8 million for the same period in 2023[277]. - Net loss from the Life Sciences segment increased by $5.0 million to $14.3 million for the nine months ended September 30, 2024, compared to a loss of $9.3 million for the same period in 2023[278]. - Net loss from the Spectrum segment decreased by $1.4 million to $15.4 million for the nine months ended September 30, 2024, compared to a loss of $16.8 million for the same period in 2023[279]. Cash Flow and Liquidity - Cash and cash equivalents on a consolidated basis decreased to $51.0 million as of September 30, 2024, from $80.8 million as of December 31, 2023[285]. - Total principal indebtedness decreased by $23.6 million to $699.2 million as of September 30, 2024, compared to $722.8 million as of December 31, 2023[287]. - Cash used in operating activities was $32.3 million for the nine months ended September 30, 2024, an improvement of $2.4 million compared to $34.7 million for the same period in 2023[328]. - Cash used in investing activities was $4.0 million for the nine months ended September 30, 2024, a decrease of $45.2 million compared to cash provided by investing activities of $41.2 million for the same period in 2023[329]. - Cash provided by financing activities was $6.4 million for the nine months ended September 30, 2024, an improvement of $37.0 million compared to cash used in financing activities of $30.6 million for the same period in 2023[331]. Risks and Challenges - The company reported significant risks related to its subsidiaries' ability to generate sufficient net income and cash flows for upstream distributions[339]. - The company highlighted the impact of substantial indebtedness and potential future financing obligations on its operations[342]. - The company faces challenges in hiring and retaining qualified personnel, which could affect its operational efficiency[342]. - Supply chain disruptions and labor shortages have led to increased costs and could impact project timelines[344]. - The company is dependent on distributions from subsidiaries to fund operations and meet obligations[342]. - The company anticipates potential impacts from geopolitical events, including military actions in the Middle East and Ukraine, on financial markets[343]. Strategic Initiatives - The company is focused on identifying strategic acquisition opportunities to enhance growth and market position[343]. - The company is implementing cost reduction initiatives to improve margins and cash flow[343]. - The company is navigating a higher interest rate environment, which may affect its financing costs[342]. - The company is committed to maintaining compliance with New York Stock Exchange listing standards amid ongoing operational challenges[343].

Revenue Performance - INNOVATE Corp. reported consolidated revenue of $242.2 million for Q3 2024, a decrease of 35.5% compared to $375.3 million in Q3 2023[11] - The Infrastructure segment generated revenue of $232.8 million, down 37.0% from $369.3 million in the prior year quarter, with a net income of $6.2 million compared to $10.8 million[4] - Broadcasting revenue increased to $6.4 million in Q3 2024 from $5.4 million in the prior year quarter, with adjusted EBITDA improving to $1.7 million from a loss of $0.3 million[8] - Total revenue for Q3 2024 was $242.2 million, a decrease of 35.5% from $375.3 million in Q3 2023[35] Net Income and Loss - INNOVATE reported a net loss attributable to common stockholders of $15.3 million, or $1.18 per share, compared to a net loss of $7.3 million, or $0.93 per share, in Q3 2023[11] - Net loss attributable to INNOVATE Corp. for Q3 2024 was $15.0 million, compared to a net loss of $7.0 million in Q3 2023[35] - The company reported a net income loss of $25.9 million for the nine months ended September 30, 2023[42] Adjusted EBITDA - Total adjusted EBITDA for Q3 2024 was $16.8 million, down from $22.1 million in the prior year quarter, primarily due to lower revenue in the Infrastructure segment[16] - Adjusted EBITDA for Q3 2024 was $16.8 million, down 24% from $22.1 million in Q3 2023[17] - Adjusted EBITDA for INNOVATE Corp. was $43.5 million, with significant contributions from the Infrastructure segment at $70.6 million, while the Life Sciences segment reported a loss of $16.0 million[42] Cash and Assets - Cash and cash equivalents as of September 30, 2024, were $51.0 million, down from $80.8 million as of December 31, 2023[17] - Total assets decreased from $1,043.6 million on December 31, 2023, to $897.2 million on September 30, 2024, representing a decline of approximately 14%[37] - Total current assets decreased from $517.9 million to $399.9 million, a decline of about 23%[37] - Accounts receivable, net, decreased from $278.4 million to $190.8 million, a reduction of about 31%[37] - Cash and cash equivalents decreased from $80.8 million to $51.0 million, a decline of approximately 37%[37] Liabilities and Financial Burden - Current liabilities increased from $413.8 million to $468.0 million, an increase of about 13%[37] - Debt obligations decreased significantly from $679.3 million to $502.4 million, a reduction of approximately 26%[37] - Interest expense totaled $49.0 million, indicating a substantial financial burden on the company[42] Operational Performance - Operating expenses for Q3 2024 were $42.3 million, down from $48.0 million in Q3 2023[35] - The Life Sciences segment reported an Adjusted EBITDA decrease of $3.0 million in Q3 2024 compared to a loss of $4.3 million in Q3 2023[17] - The Infrastructure segment's Adjusted EBITDA decreased by $9.9 million, from $30.8 million in Q3 2023 to $20.9 million in Q3 2024[17] Strategic Initiatives - The company anticipates continued growth in the Life Sciences segment with new product sales and FDA approval processes[29] - The company plans to explore strategic acquisitions and business opportunities to enhance growth and market presence[30] - New network launches in Broadcasting are expected to drive higher revenue growth, with FreeTV's network, Defy, launching in Q3 2024[9] Other Financial Metrics - Non-controlling interest increased from $13.8 million to $22.0 million, reflecting a growth of approximately 59%[37] - The accumulated deficit increased from $487.3 million to $505.3 million, indicating a worsening financial position[37] - The company incurred restructuring and exit costs amounting to $2.2 million, reflecting ongoing operational adjustments[42] - Non-controlling interest losses were recorded at $2.4 million, impacting overall profitability[42] - Depreciation and amortization expenses were $15.9 million, contributing to the overall cost structure[42] - The company faced acquisition and disposition costs of $2.8 million, indicating ongoing strategic activities[42] - Other income expenses netted a loss of $17.2 million, highlighting challenges in financial management[42] - Legacy accounts receivable write-offs amounted to $2.2 million, affecting asset quality[42] - The company reported a tax benefit of $3.2 million, providing some relief to the overall financial performance[42]