INNOVATE Corp. Announces Second Quarter 2023 Results

- Infrastructure: DBM Global achieved second quarter revenue of $362.4 million and delivered gross margin expansion versus prior year -
- Life Sciences: MediBeacon filed Clinical Study Report with FDA -
- Spectrum: Broadcasting sees indications of stabilization in linear TV networks; new OTA distribution opportunities emerging -

WEST PALM BEACH, Fla., Aug. 09, 2023 (GLOBE NEWSWIRE) -- INNOVATE Corp. (“INNOVATE” or the “Company”) (: VATE) announced today its consolidated results for the second quarter.

Financial Summary

(1) Reconciliation of GAAP to Non-GAAP measures follows

Commentary
“INNOVATE reported strong second quarter results with revenue of $368.8 million and adjusted EBITDA of $16.5 million, as our operating segments are capitalizing on attractive market opportunities," said Avie Glazer, Chairman of INNOVATE. “The strength in the second quarter was driven by INNOVATE's Infrastructure segment which expanded adjusted EBITDA margin by approximately 100 basis points. We also remain excited by developments and opportunities in the Life Sciences segment as MediBeacon completed the Phase 3 Transdermal GFR Pivotal Study and filed the Clinical Study Report with FDA. At Spectrum, adjusted EBITDA grew both sequentially and year-over-year."

"We are deeply saddened by Wayne Barr's passing and greatly appreciate his leadership and many significant contributions to INNOVATE. Wayne's strategic vision and operating expertise were instrumental in setting INNOVATE on a path toward future success, and we were fortunate to have him as our CEO," Glazer added. "We are confident that Paul Voigt, building on his prior experience with the Company and each of our three operating segments, will help INNOVATE capitalize on opportunities to unlock value and deliver returns for shareholders."

Second Quarter 2023 Highlights

• On May 9, 2023, the Company consummated the purchase of all of the Series A Fixed-to-Floating Rate Perpetual Preferred Stock (the “Series A Preferred”) issued by DBM Global Intermediate Holdco Inc. held by Continental General Insurance Company (“CGIC”) for $42.2 million, including $0.4 million of accrued dividends, consisting of $7.1 million of cash and a $35.1 million unsecured note that is due in 2026. The purchase was precipitated by a redemption notice received from CGIC, which notice was permitted to be delivered by CGIC under the terms of the Series A Preferred.
  

Infrastructure

• DBM Global Inc. ("DBMG") reported second quarter 2023 revenue of $362.4 million, a decrease of 5.2%, compared to $382.1 million in the prior year quarter. Net Income was $7.0 million, compared to $6.8 million for the prior year quarter. Adjusted EBITDA increased to $23.5 million from $20.9 million in the prior year quarter.
• DBM Global grew Adjusted EBITDA margin to 6.5% in the second quarter, an expansion of approximately 100 basis points year-over-year.
• DBM Global’s reported backlog and adjusted backlog, which takes into consideration awarded but not yet signed contracts, was $1.5 billion as of June 30, 2023, compared to $1.8 billion as of December 31, 2022.
  

Life Sciences

• R2 Technologies, Inc. ("R2") has now shipped 284 GLACIAL^® devices globally.
• MediBeacon completed the Phase 3 Transdermal GFR Pivotal Study and filed the Clinical Study Report with FDA.
• MediBeacon submitted the Transdermal GFR Medical Device Regulation application in Europe.
• MediBeacon research related to Transdermal GFR use in monitoring acute kidney function changes was published in the peer reviewed journal of American Society for Artificial Internal Organs.
• MediBeacon received formal feedback from FDA on future clinical study plans related to Gastroenterology, Ophthalmology and Surgical Visualization.
  

Spectrum

• Broadcasting appointed Matt Katrosar as Chief Executive Officer in July. Most recently, Mr. Katrosar served as Vice President of Sales for Paramount Global where he led the company’s streaming and programmatic sales functions.
• Linear broadcast TV networks are seeing indications of stabilization in the second quarter and are looking ahead to a stronger 2024.
• New business opportunities are emerging in other areas, including religious networks and FAST channels looking for "over-the-air" distribution.
• For the second quarter of 2023, Broadcasting reported revenue of $5.7 million, compared to $9.1 million in the prior year quarter. The decrease was primarily driven by the elimination of advertising revenues at Azteca, which ceased operations on December 31, 2022. This was partially offset by an increase in station revenues, which launched new markets and networks with its customers in the current period.
• For the second quarter of 2023, Broadcasting reported Net Loss of $5.3 million compared to $5.7 million in the prior year quarter. Adjusted EBITDA was $0.8 million, compared to Adjusted EBITDA of $0.4 million in the prior year quarter.

Second Quarter 2023 Financial Highlights

• Revenue: For the second quarter of 2023, INNOVATE's consolidated revenue was $368.8 million, a decrease of 6.0%, compared to $392.2 million for the prior year quarter. The decrease was primarily driven by our Infrastructure segment, and, to a lesser extent, our Spectrum segment. The decline at the Infrastructure segment was driven by lower revenue at DBMG's industrial maintenance and repair business and the timing of projects at the commercial structural steel fabrication business. Revenues at our Spectrum segment decreased primarily as a result of the termination of HC2 Network, Inc. ("Network") and its associated Azteca America network ("Azteca") content on December 31, 2022.
  

• Net Loss: For the second quarter of 2023, INNOVATE reported a Net Loss attributable to common stockholders of $10.5 million, or $0.13 per fully diluted share, compared to a Net Loss of $13.6 million, or $0.18 per fully diluted share, for the prior year quarter. The decrease in Net Loss was due to a net increase in gross profit, and reductions in other operating expenses, depreciation and amortization and selling, general and administrative expenses ("SG&A"). The increase in gross profit was primarily due to the increase in our Infrastructure segment due to timing of higher margin projects at the commercial structural steel fabrication business, which was partially offset by lower contribution at the industrial maintenance and repair business. The decrease in Net Loss was partially offset by an increase in interest expense attributable to higher interest rates, increased amortization of debt issuance costs on the debt, and higher outstanding principal balances.
  

• Adjusted EBITDA: For the second quarter of 2023, Total Adjusted EBITDA, was $16.5 million, compared to Total Adjusted EBITDA of $12.1 million for the prior year quarter. The increase in Adjusted EBITDA was primarily driven by timing of higher margin projects at the commercial structural steel and fabrication business at our Infrastructure segment and our Life Science segment primarily due to Pansend's net carrying amount of its investment in MediBeacon being zero, which resulted in no additional losses being recognized in our equity investment in MediBeacon in the current period, and a decrease in SG&A expenses at R2. Additionally contributing to the increase in Adjusted EBITDA was the Spectrum segment due to the elimination of Network's EBITDA losses in the comparable period as a result the termination of Network. The increase was partially offset by the Infrastructure segment driven by lower contributions at the industrial maintenance and repair business and Banker Steel due to timing and size of projects, as well as an increase in SG&A. The increase was also partially offset by the elimination of equity method income from our investment in HMN, which was sold on March 6, 2023.