INNOVATE Q1 2025 Earnings Report

INNOVATE EPS Results

• Actual EPS: -$1.89
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

INNOVATE Revenue Results

• Actual Revenue: $274.20 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

INNOVATE Announcement Details

• Quarter: Q1 2025
• Date: 5/6/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, May 6, 2025
• Conference Call Time: 4:30PM ET

INNOVATE (NYSE:VATE), through its subsidiaries, operates in infrastructure, life sciences, and spectrum areas in the United States. The Infrastructure segment provides industrial construction, structural steel, and facility maintenance services, such as fabrication and erection of structural steel and heavy steel plate services, and large-diameter water pipes and water storage tanks; fabrication of trusses and girders; and 3-D building information modeling and detailing for commercial, industrial, and infrastructure construction projects, such as buildings and office complexes, hotels and casinos, convention centers, sports arenas and stadiums, shopping malls, hospitals, dams, bridges, mines, metal processing, refineries, pulp and paper mills, and power plants. This segment also offers solutions for digital engineering, modeling and detailing, construction, and heavy equipment installation and facility services including maintenance, repair, and installation; and manufactures pollution control scrubbers, tunnel liners, pressure vessels, strainers, filters, separators, and customized products. The Life Sciences segment develops products to treat early osteoarthritis of the knee; and aesthetic and medical technologies for the skin. The Spectrum segment operates over-the-air broadcasting stations across the United States; and Azteca America, a Spanish-language broadcast network. The company was formerly known as HC2 Holdings, Inc. and changed its name to INNOVATE Corp. in September 2021. The company was incorporated in 1994 and is headquartered in New York, New York.

INNOVATE Q1 2025 Earnings Call Transcript

Key Takeaways

• Innovate reported Q1 2025 consolidated revenues of $274.2 million and adjusted EBITDA of $7.2 million, down 13% and 44% year-over-year respectively, while emphasizing ongoing efforts to address near-term debt maturities and optimize its capital structure.
• The Infrastructure segment (DBM Global) achieved revenues of $264.9 million and adjusted EBITDA of $16.7 million, improved gross margins by 110 bps, and expanded reported and adjusted backlog to $1.4 billion, with management closely monitoring potential tariff impacts.
• In Life Sciences, MediBeacon secured FDA approval for its transdermal GFR system, initiated clinician engagements in hospital and outpatient settings, and plans commercial launch of a next-generation, cost-effective sensor in Q4 2025.
• R2 tripled Q1 revenue to $3.1 million driven by North American demand, grew global system unit sales by 163%, built a backlog of over 100 units, and entered distribution agreements across Europe and South America while seeing social media engagement outpace competitors by 774%.
• Spectrum maintained stable performance with Q1 revenues of $6.2 million and EBITDA of $1.4 million, signed with Marathon Ventures to distribute two new OTA networks, filed an FCC petition to enable low-power stations to convert to 5G broadcasting, and targets data-casting revenue by year-end.

Presentation

[Operator]

Good afternoon, and welcome to Innovate's First Quarter twenty twenty five Earnings Conference Call. All participants will be in a listen only mode. After the prepared remarks and presentation, there will be a question and answer session. Please note, this event is being recorded. I would now like to turn the conference call over to Anthony Rosmus with Investor Relations.

[Operator]

Please go ahead.

[Anthony Rozmus, Investor Relations Officer at INNOVATE]

Good afternoon. Thank you for being with us to review Innovate's first quarter twenty twenty five earnings results. We are joined today by Paul Voigt, Innovate's Interim CEO and Mike Senna, Innovate's CFO. We have posted our earnings release and our slide presentation on our website at innovatecorp.com. We will begin our call with prepared remarks to be followed by a Q and A session.

[Anthony Rozmus, Investor Relations Officer at INNOVATE]

This call is also being simulcast and will be archived on our website. During this call, management may make certain statements and assumptions which are not historical facts. Will be forward looking and are being made pursuant to the Safe Harbor provisions and Private Securities Litigation Reform Act of 1995. Any such forward looking statements involve risks, assumptions, and uncertainties and are subject to certain assumptions and risk factors that could cause Innovate's actual results to differ materially from these forward looking statements. The risk factors that could cause these differences are more fully discussed in the cautionary statement that is included in our earnings release and the slide presentation and further details in our 10 ks and other filings with the SEC.

[Anthony Rozmus, Investor Relations Officer at INNOVATE]

In addition, the forward looking statements included in this conference call are only made as of the date of this call and as stated in our SEC reports. Innovate disclaims any intent or obligation to update or revise these forward looking statements except as expressly required by law. Management may also refer to certain non GAAP financial measures such as adjusted EBITDA. We believe these measures provide useful supplemental data that, while not a substitute for GAAP measures, allow for greater transparency in the review of our financial and operational performance. At this point, it is my pleasure to turn things over to Paul Voigt.

[Anthony Rozmus, Investor Relations Officer at INNOVATE]

Good afternoon.

[Paul Voigt, Interim Chief Executive Officer at INNOVATE]

We are pleased to report our first quarter twenty twenty five financial results and will provide you an update on our three operating segments. INNO2VATE delivered consolidated revenues of 2 and $74,200,000 and adjusted EBITDA of $7,200,000 in the first quarter of twenty twenty five. As we have discussed, we are actively working to address our capital structure and our near term maturities of our debt obligations. We continue to make progress on our strategic objectives and our businesses continue to execute and drive very good results. We continue to believe that we have very valuable assets that appreciate in value each day.

[Paul Voigt, Interim Chief Executive Officer at INNOVATE]

As a reminder, we are working to leverage one or more of these assets prior to reaching the debt maturities in order to achieve sustainable capital structure that allows us to realize the full value of the remaining businesses. We are keenly aware of the timeline in front of us and we are working diligently for a solution. As we turn our attention to our operating segments, starting with infrastructure, DBM Global achieved revenues of 264,900,000 and adjusted EBITDA of $16,700,000 During the quarter, DBM has seen gross margin improvement year over year of approximately 110 basis points to 15.6% and adjusted EBITDA margin improvement of approximately 40 basis points to 6.3% year over year. As expected, our results for DBM were in line with our expectations given the delay of awards in the back half of twenty twenty four. That said, the addition of over $500,000,000 of new awards to backlog by our world class management team, Rustin and Company, in the first quarter, as previously highlighted on our last call, has led to the growth in reported and adjusted backlog now reaching 1,400,000,000.0 DBM remains well positioned in 2025 with a strong backlog and robust pipeline.

[Paul Voigt, Interim Chief Executive Officer at INNOVATE]

We continue to monitor the ongoing tariff situation. At this point, DBM has not seen material impact to its business. Given policy is constantly evolving, there is uncertainty about the full impact of tariffs on the cost of materials and project delays. DBM continues to actively monitor its project backlog and new project pipeline to mitigate any impacts. Longer term, tariff economics could potentially spur additional economic investments in The United States.

[Paul Voigt, Interim Chief Executive Officer at INNOVATE]

Of note, President Trump expects 6 to 7,000,000,000,000 in investments to come into The United States after the tariffs take effect. Turning to life science, as we discussed on our last call, MediBeacon received FDA approval for its transdermal GFR system to assess kidney function. We are beginning to see traction with exploring the potential application for TGFR through our initial conversations with clinicians in hospital and outpatient settings. The transdermal GFR kidney function technology has been used in preclinical research for over a decade by some of the most influential academic medical center key opinion leaders and pharmaceutical companies in the world and has been utilized in over 600 peer reviewed publications and conference abstracts. Also, we previously announced that the National Medical Products Administration in China also approved the MediBeacon TGFR monitor and TGFR sensor to the assessment of kidney function in patients with normal or impaired renal function.

[Paul Voigt, Interim Chief Executive Officer at INNOVATE]

Finally, two peer reviewed publications in high impact medical journals were published. These publications underscore the urgent need for improved kidney function assessment tools. These articles include data from the TGFR including Ralimapiracin in a range of chronic kidney disease patients. MediBeacon's Director of Clinical Applications, Doctor. Stuart Goldstein presented results from MediBeacon's Next Generation TGFR sensor and monitored clinical trial at the Chronic Kidney Disease Drug Development Summit in Boston, March Seventeenth Through The Nineteenth.

[Paul Voigt, Interim Chief Executive Officer at INNOVATE]

MediBeacon's next generation transdermal sensor is under review with the FDA. This is a more user friendly and cost effective sensor. The TGFR system will be available for commercial sale in the fourth quarter of twenty twenty five. As previously mentioned, we are still currently engaged with Jefferies and we continue to explore strategic alternatives. R2 kicked off 2025 with a strong performance, tripling its year over year revenue to $3,100,000 in the first quarter twenty twenty five compared to $1,000,000 in the first quarter twenty twenty four.

[Paul Voigt, Interim Chief Executive Officer at INNOVATE]

This momentum was fueled by the increased demand in North America with $2,400,000 of revenue in the first quarter of twenty twenty five compared to $800,000 in the prior year quarter. Gross worldwide system unit sales surged to 163% over first quarter twenty twenty four led by 109% increase in North America. R2 system backlog has now surpassed 100 units globally, positioning the company for continued growth. The company continues to expand its global footprint. During 2025, we have entered into distribution agreements with Spain, France, UK, and several countries in South America.

[Paul Voigt, Interim Chief Executive Officer at INNOVATE]

We are now currently serving 28 countries and continue to expand. Glacial skin devices continue to deliver impressive clinical and business outcomes for providers. In the first quarter of twenty twenty five, patient treatments grew 136, while average monthly utilization per provider increased 42% compared to the same period last year. Facial Skin's rising brand awareness is proving to be a powerful sales driver with social media engagement growth outperforming industry competitors by 774%. Supporting this surge, R2 saw quarter over quarter increases of 347% in social media mentions, 561% in website users, and 158% in patient provider searches.

[Paul Voigt, Interim Chief Executive Officer at INNOVATE]

We are extremely pleased with the success at R2 and continue to believe the market opportunity for R2 is massive and remain pleased with the momentum the company has experienced year over year. Moving to Spectrum, first quarter revenues were $6,200,000 and adjusted EBITDA was $1,400,000 in line with expectations. As we spoke about on our last call, Broadcasting signed a contract with Marathon Ventures to distribute two new vibrant over the air networks, Nosy and Confess. As the year progresses, there will be additional new entrants into the OTA space, reflecting a growing trend in the broadcasting and streaming industries. This shift is largely driven by the increasing demand for diverse and accessible content delivery methods.

[Paul Voigt, Interim Chief Executive Officer at INNOVATE]

We are continuing to pursue commercial opportunities in data casting. Our team has been working diligently to develop and implement the necessary technology and partnerships to make this a reality. This opportunity should be revenue generating by the end of the year. In addition, preparations are underway for ATSC three point zero lighthousing to go live at KERA, the Dallas PBR station in the second quarter. In March, we took a significant step forward by filing a petition with the FCC to allow low power TV stations to voluntarily convert to five gs broadcast technology.

[Paul Voigt, Interim Chief Executive Officer at INNOVATE]

This petition seeks to modernize broadcasting capabilities, enhancing data rates, reducing latency, and improving overall connectivity for these stations. The FCC has put the petition out for public comment, which will allow for review of our proposal. This feedback is crucial as it will shape the final decision and ensure the transition to five gs broadcast is beneficial for all parties involved. As a reminder, our strategic vision for the business anchors upon maximizing the value of these assets. Given the recent success in our businesses, we are encouraged in our ability to execute on behalf of shareholders.

[Paul Voigt, Interim Chief Executive Officer at INNOVATE]

With that, I'll turn it over to Mike for review of our financials and our capital structure.

[Michael Sena, CFO, Treasurer & Corporate Secretary at INNOVATE]

Thanks, Paul. Consolidated total revenue for the first quarter of twenty twenty five was $274,200,000 a decrease of 13% compared to $315,200,000 in the prior year period. The decrease was primarily driven by our Infrastructure segment, which was partially offset by an increase at our Life Sciences segment. Net loss attributable to common stockholders and participating preferred stockholders for the first quarter of twenty twenty five was 24,800,000 or $1.89 per fully diluted share compared to a net loss of $17,700,000 or $2.21 per fully diluted share in the prior year period, which has been retroactively adjusted to reflect the one for-ten reverse stock split affected on 08/08/2024. Total adjusted EBITDA was $7,200,000 in the first quarter of twenty twenty five, a decrease from $12,800,000 in the prior year period.

[Michael Sena, CFO, Treasurer & Corporate Secretary at INNOVATE]

The decrease was primarily driven by our Life Sciences and Infrastructure segments, which was partially offset by our non operating corporate segment. At Infrastructure, revenue decreased 14% to $264,900,000 from $307,900,000 in the prior year quarter. This decrease was primarily driven by the timing and size of projects at Bankers Steel and the industrial maintenance and repair business, which had increased activity in the prior year on certain large commercial construction projects that have since been completed or nearing completion in the current period. This was partially offset by an increase of DBMG's commercial structural steel fabrication and erection business as a result of an increase in project work. Infrastructure adjusted EBITDA for the first quarter of twenty twenty five decreased to $16,700,000 from $18,300,000 in the prior year period.

[Michael Sena, CFO, Treasurer & Corporate Secretary at INNOVATE]

The decrease was primarily driven by a decrease in revenue of both Banker Steel and the Industrial Maintenance and Repair businesses due to timing of certain large commercial construction projects that have since been completed or nearing completion in the current period. The decrease was partially offset by an increase in gross margins at maintenance and repair businesses and an increase in gross profit of DBMG's commercial structural steel fabrication and erection business due to an increase in project work as well as decrease in recurring SG and A, primarily as a result of decreases in professional and consulting fees and compensation related and travel expenses, which was partially offset by an increase in computer and software related costs in the current period. As of 03/31/2025, reported backlog and adjusted backlog, which takes into consideration awarded but not yet signed contracts, was $1,400,000,000 compared to reported backlog of $1,000,000,000 and adjusted backlog of $1,100,000,000 at the end of twenty twenty four. DBMG ended the quarter with $147,200,000 in principal amount of debt, which is an increase of $2,500,000 from the year ended 2024, primarily driven by an increase in the credit line, which was partially offset by normal debt amortization payments.

[Michael Sena, CFO, Treasurer & Corporate Secretary at INNOVATE]

At Life Sciences, revenue increased 210% to $3,100,000 from $1,000,000 in the prior year quarter. The increase in revenue was attributable to R2, driven by an increase in unit sales of both Glacial FX and Glacial Rx systems and an increase in consumable sales in North America as well as an increase in Glacial Spa unit sales, consumable sales and Glacial FX unit sales outside of North America. Life Sciences adjusted EBITDA losses increased for the quarter, which was primarily due to higher equity method losses recognized from our investment in MediBeacon as a result of equity changes that resulted from the milestone payments received from Huadong following the FDA approval and an increase in selling costs at R2 due to the increase in unit sales, which was partially offset by an increase in gross profit at R2 driven by the increase in revenue. At Spectrum, results remained relatively stable year over year with revenues of $6,200,000 down $100,000 compared to the first quarter of twenty twenty four and adjusted EBITDA of $1,400,000 a decrease of $200,000 from the prior year quarter. As a reminder, Spectrum fourth quarter results on the top line and adjusted EBITDA are generally higher than the first three quarters due to seasonal advertising and revenue shares.

[Michael Sena, CFO, Treasurer & Corporate Secretary at INNOVATE]

The sequential decline in revenue and adjusted EBITDA from the fourth quarter of twenty twenty four reflects this pattern. Non operating corporate adjusted EBITDA losses were $2,200,000 for the first quarter of twenty twenty five, a $700,000 improvement from the first quarter of twenty twenty four. The decrease in losses was primarily driven by a decrease in legal fees due to legal matters settled subsequent to the comparable period. At the end of the first quarter, the company had $33,300,000 of cash and cash equivalents, excluding restricted cash, compared to $48,800,000 as of 12/31/2024. On a stand alone basis, as of 03/31/2025, our non operating corporate segment had cash and cash equivalents of $3,000,000 compared to cash and cash equivalents of $13,800,000 at the end of twenty twenty four.

[Michael Sena, CFO, Treasurer & Corporate Secretary at INNOVATE]

As of 03/31/2025, Innovate had total principal outstanding indebtedness of $672,000,000 up $3,700,000 from $668,300,000 at the end of twenty twenty four, driven by the increase in Infrastructure's outstanding debt and R2's debt with Lancer Capital, which capitalizes unpaid interest into the principal balance. With that, operator, we'd now like to open up the call for questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Session. Since there are no questions in the queue, I would now hand the conference over to Mike Sena for his closing comments. Mike?

[Michael Sena, CFO, Treasurer & Corporate Secretary at INNOVATE]

Thank you for joining the call today to discuss our first quarter results. We are pleased with the momentum to start our year and look forward to providing you with updates on our business, businesses and strategic alternatives in the future. Thank you.

[Operator]

Thank you. Ladies and gentlemen, the conference of Innovate Corp. Has now concluded. Thank you for your participation. You may now disconnect your lines.

Participants

Executives

• Anthony Rozmus, Investor Relations Officer
• Paul Voigt, Interim Chief Executive Officer
• Michael Sena, CFO, Treasurer & Corporate Secretary