INNOVATE (US:VATE)2019-11-05 21:58Financial Performance - HC2 Holdings reported a loss of $0.2 million and income of $2.4 million in equity method income for its stake in Huawei Marine Networks for the three and nine months ended September 30, 2019, respectively [193]. - The company reported a net loss of $8.3 million for the three months ended September 30, 2019, compared to a net income of $151.5 million for the same period in 2018, reflecting a significant decline [209]. - Net income for the three months ended September 30, 2019, decreased by $130.6 million to $10.5 million from $141.1 million for the same period in 2018 [291]. - Net income attributable to HC2 Holdings, Inc. for the nine months ended September 30, 2019 was $173.8 million, with a net income excluding the Insurance segment of $20.1 million [279]. - The company reported a total core operating subsidiaries income of $34.2 million for the three months ended September 30, 2019 [270]. Revenue and Segment Performance - Net revenue for the three months ended September 30, 2019 decreased by $25.7 million to $475.7 million from $501.4 million for the same period in 2018, primarily due to a decline in the Construction segment [209]. - The Insurance segment's revenue increased due to the KIC acquisition, contributing additional net investment income and premiums, which helped offset declines in the Telecommunications and Marine Services segments [211]. - Net revenue from the Construction segment for the three months ended September 30, 2019 decreased by $26.9 million to $168.4 million from $195.3 million in the same period of 2018 [227]. - Telecommunications segment net revenue decreased by $25.6 million to $162.2 million for the three months ended September 30, 2019, attributed to changes in customer mix and market pressures [245]. - Marine Services segment net income increased to $2.6 million for Q3 2019, up from a loss of $0.5 million in Q3 2018, with Adjusted EBITDA rising to $11.7 million from $7.9 million [272]. Expenses and Costs - Interest expense for the three months ended September 30, 2019 increased by $6.5 million to $24.0 million from $17.5 million for the same period in 2018, largely due to increased debt levels [214]. - Selling, general and administrative expenses for the Broadcasting segment decreased by $1.7 million to $7.4 million for the three months ended September 30, 2019, and by $11.9 million to $19.4 million for the nine months compared to the same periods in 2018 [260]. - Cost of revenue from the Construction segment for the three months ended September 30, 2019 decreased by $35.7 million to $130.8 million from $166.5 million in the same period of 2018 [229]. - Energy segment selling, general and administrative expenses increased by $0.4 million to $1.3 million for the three months ended September 30, 2019, primarily due to headcount-driven increases from the acquisition of ampCNG stations [242]. Investments and Acquisitions - ANG acquired 20 natural gas fueling stations for cash consideration of $41.2 million, expanding its network to over 60 stations [194]. - MediBeacon received an initial equity payment of $15.0 million at a pre-money valuation of $300.0 million from Huadong Medicine for exclusive rights to its assets in Greater China [197]. - Pansend received a cash payment of $13.3 million from the sale of its approximately 75.9% ownership in BeneVir to Janssen Biotech, Inc. [196]. - HC2 Broadcasting acquired licenses for a total cash consideration of $16.1 million during the nine months ended September 30, 2019 [195]. Cash Flow and Liquidity - As of September 30, 2019, the Company had $276.9 million in cash and cash equivalents, down from $325.0 million as of December 31, 2018 [297]. - Operating activities generated cash of $95.5 million for the nine months ended September 30, 2019, a decrease of $41.2 million compared to $136.7 million in the same period of 2018 [316]. - Cash used in investing activities was $201.5 million for the nine months ended September 30, 2019, a significant decrease of $726.9 million from cash provided of $525.4 million in 2018 [317]. - The company anticipates quarterly interest payments of approximately $1.7 million based on the debt balance as of September 30, 2019 [322]. Debt and Indebtedness - Total indebtedness on a consolidated basis as of September 30, 2019, was $851.0 million, compared to $781.0 million as of December 31, 2018 [299]. - HC2's liquidity needs are primarily for interest payments on its Senior Secured Notes, Convertible Notes, and its Revolving Credit Agreement [296]. Backlog and Future Prospects - DBMG's backlog was $475.3 million as of September 30, 2019, with $354.0 million under contracts and $121.3 million under letters of intent [294]. - GMSL's backlog stood at $398.7 million as of September 30, 2019, with 74.1% attributable to three multi-year telecom maintenance contracts [295]. - The company is focusing on market expansion and new product development, particularly in the construction sector [270]. Risks and Uncertainties - The company emphasizes the importance of forward-looking statements, which are subject to various risks and uncertainties [346]. - Factors affecting future results include the ability to generate sufficient liquidity and margins, competition for acquisition opportunities, and economic conditions [352]. - The company faces risks related to labor productivity, project cancellations, and cost overruns, which could impact financial performance [353]. - Changes in foreign currency exchange rates could significantly impact future results of operations, particularly with respect to the USD/GBP exchange rate [365].