Q4 2021 Innovate Corp Earnings Call
Good afternoon, and welcome to innovate Corp's.
Corp's fourth quarter and full year 2021 earnings conference call all participants will be in a listen only mode.
After our prepared remarks and presentation there'll be a question and answer session and please note that this event is being recorded.
I would now like to turn the conference call over to Anthony Rasmus with Investor Relations. Thank you. Please go ahead.
Good afternoon, Thank you for being with US to review Innovates fourth quarter and full year 2021 earnings results. We are joined today by Avi Glaser Chairman of innovate Wayne Bar Junior CEO of innovate and Mike Sena <unk> Chief Financial Officer.
We have posted our earnings release and our slide presentation on our website at innovate Corp. Dotcom, we will begin our call with prepared remarks to be followed by Q&A session. 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 of the private Securities Litigation Reform Act of 1995 any.
Any such forward looking statements involve risks assumptions and uncertainties and are subject to certain assumptions and risk factors that could cause <unk> 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 <unk>.
<unk> in our earnings results and slide presentation, and further detailed in our 10-K and other filings with the SEC.
In addition, the forward looking statements included in this conference call are only made as of this date of the 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 will 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's my pleasure.
Her to turn things over to Avi Glaser.
Good afternoon, and I'd like to thank you all for joining us I'm incredibly proud of the progress innovate achieved in 2021.
Short period of time innovate successfully transformed into a business with three best in class companies that should benefit from growth trends in the new economy.
I spend a few minutes highlighting our accomplishments.
We sharpened our business focus by reducing our number of primary operating segment from five to three by completing the sale of beyond fixed clean energy and Continental insurance.
We both enhanced our capital structure and improved our financial flexibility by refinancing our senior notes and credit facility.
Branded and changed our name to innovate Corporation in order to align with our core principals, along with stakeholder capitalism and sustainable value generation.
Our infrastructure segment acquired bankers steel, which added an industry leader D. B M. It help expand D. B M Dias geographic footprint.
He was that transaction E. B M entered into a new credit agreement at more favorable terms.
Life Sciences are to launch its first product glacial Iraq and invested in our tools business to increase our ownership position. We are pleased with our tooth progress and continue to be excited by the opportunity in that business.
Additionally, our twos glacial Rx earned an important FDA indication and unique product code.
And with the network largely in place we saw great interest from both new and existing customers and achieved our first year of adjusted EBITDA profitability back from for 2021, while at the same time, expanding our nationwide broadcast footprint.
You can see 2021 was an eventful and exciting year for innovate. We believe we are still in the early stages of this transformation and we see much more value to be derived from infrastructure Lifesciences and spectrum.
We remain excited about the opportunities in front of us and look forward to operational excellence in each of our three best in class assets in 2022 with that I'm pleased turn the call over to Wade buyer Yo of innovate.
Thanks, Avi and thank you all for joining us today as Avi highlighted 2021 was a major stepping stone for innovate.
It's clear that the strategy, we put in place over a year ago was coming to fruition and our financial results.
We continued to execute that strategy in the fourth quarter, which drove consolidated revenue and adjusted EBITDA growth of 122% and 121% respectively.
Once again this quarter, we were able to extract more value from each of our three best in class assets.
Turning now to highlights for each of our operating segments.
DBM global delivered record fourth quarter revenue with increased demand in commercial industrial services and public sector projects as a part of the post Covid recovery.
Our total adjusted backlog of $1 9 billion showcases our strong pipeline and visibility into future potential revenue.
It would be remiss by not mentioning that bankers steel has been a great addition to the DBM family. The integration of bankers steel is going according to plan and we continue to benefit from their capabilities and presence in key geographic regions, helping build out our national footprint.
There's been significant new project activity in our markets. Following the Covid pandemic and this increase in demand is having a positive impact on the margins for our business as capacity begins to saturate the market.
There remains optimism in the construction industry and we continue to see significant pipeline as demonstrated in our backlog number despite rising steel prices.
We also acknowledge various challenges in both the supply chain as well as a tightening of the labor market for our business. However at this point in time, we believe the risk of being well managed by the strong team in place at DBM.
We will continue to monitor the potential impacts to our business in 2022.
Now turning to life Sciences, Tencent continues to make progress in the art you embed a beacon businesses.
Our two started shipping the glacial spot product in China in anticipation of the upcoming launch.
Impending Chinese launch of the glacial spa product coupled with the momentum of the glacial Rx product in the United States shows the progress that aren't too is making in multiple regions around the world.
Due to Covid related delay at the manufacturer of the material that will be used for the pivotal study met a beacon is now planning to submit an investigational device exemption application to the F D. A.
It's U S pivotal study in the second quarter.
This application is a 30 day review process and is the first step towards commencing the pivotal study.
Once the IDE application is approved meadow beacon can initiate its U S pivotal study.
We are excited about the developments on this front and remain equally as excited about the opportunity in meta beacons business.
We are happy with the continued momentum we see at Penn sand and are optimistic about our ability to capitalize on the young growing growth opportunities in this business.
Spectrum.
We have now achieved a full year profitability, establishing a track record of consistent performance.
Adjusted EBITDA grew $8 1 million year over year to $6 $9 million.
We continue to focus on optimizing operations, eliminating cost and improving revenue.
In the fourth quarter, specifically growth in our station group O T. A revenues helped drive profitability.
Also on the station group side, we renewed carriage agreements with long standing clients, such as Sony Media's get T V and L. A T V among others.
We increased distribution by more than a dozen new markets for the English and Spanish versions of Bein sports extra.
Today, the English extra network is carried on 157 of our stations and Spanish Xtra, which launched on September one 2021 is now on 135 stations.
In sports extra in Spanish extra or 24, seven networks that offer the most comprehensive free AD supported live sports programming over the air.
Altogether, there are more than 17 networks using our distribution platform today sponsored by a wide range of media companies that includes C. B S N B C.
Scripps Weigel Fremantle curate Cisneros media.
And be in sports.
As of December 31, 2021 broadcasting operated 238 stations 224 of which are currently connected to our central cast system.
In January we completed the construction of 21, new broadcast stations, adding 12, new designated market areas to our already extensive coverage area.
Overall, we saw the benefits of innovate sharpened focus across all three of our operating segments. As we finished 2021 strong and delivered record financial results for the year.
For the full year 2021, consolidated net revenue was $1 $2 billion compared to $716 9 million in 2020.
Total adjusted EBITDA for 2021 was $43 $9 million compared to $25 5 million for the prior year.
We continue to make significant progress in all three of our businesses and enter 2022 with excellent momentum we.
We believe that our businesses are exceptionally well positioned to benefit from the growth catalysts that are emerging as part of the new economy.
With that I'll turn it over to Mike for a review of our financials and capital structure.
Thanks Wayne.
I will first review our financial performance and then I'll walk you through key changes to our capital structure to help you bridge the quarter and the key transactions that have taken place in 'twenty or 'twenty one.
Consolidated total revenue for the fourth quarter of 2021 was $394 8 million, an increase of 121, 8% compared to 178 million in the prior year period.
The increase was driven by our infrastructure segment led.
Led by the contribution from bankers Neal as well as higher revenues across the B M service offerings attributable to timing of project work under execution and backlog mix.
Net loss attributable to common and participating preferred stockholders for the fourth quarter of 2020 , one was $5 2 million or seven cents per share compared to a net loss of $7 1 million or 11 cents per share in the prior year period.
Total adjusted EBITDA, which excludes discontinued operations was $22 1 million in the fourth quarter of 2021, an increase from an adjusted EBITDA of $10 million.
In the prior year period.
The increase was primarily driven by the contribution from bankers steel at the infrastructure segment.
Now onto some color for each of our three operating segments and infrastructure revenue increased 129, 6% to three.
$383 4 million from $167 million in the prior year quarter.
As discussed earlier this increase was due to the acquisition of bankers deal, resulting in an additional $112 million of revenue as well as higher revenues across the B M service offerings.
Infrastructure adjusted EBITDA for the fourth quarter of 2021 increased to $28 8 million from $17 4 million in the prior year period.
The increase was largely driven by the contribution from bankers steel and offset in part by continued pressure on the industrials business and infrastructure. The completion in Q3 up a highly profitable project at the design business as well as modest SG&A expense increases.
D. B M. G has begun to see improved margins in our legacy fabrication and erection business during the quarter as the backlog sold during the pandemic continues to burn off however, the industrial business has continued to lag and it's just now starting to see improved sales into backlog.
Overall EBITDA margins in the fourth quarter was seven 5% as compared to close to 6% in the second and third quarter.
As of December 2021 reported backlog was $1 6 billion up from 395 million at the end of the fourth quarter of 2020, adjusted backlog, which takes into consideration awarded but not yet signed contracts was $1 9 billion.
Up from $608 million at the end of last year.
E. P. M is largely maintained backlog levels why recognizing revenue of $383 4 million in the fourth quarter. The backlog at the end of December provides strong visibility for 2022 and beyond.
E. B M. G ended the quarter with $188 6 million of debt with a significant temporary reduction in their line of credit.
However, we expect the line to increase as they ramp up working capital and some of their larger projects in backlog in 2022.
At life Sciences, the slight increase in adjusted EBITDA losses were primarily driven by the continued scaling of operations at our two technologies, including an increase in sales and marketing expense to support the sales revenue growth and further commercialization efforts.
As well as the continued development of its product platform and an increase in spend that met or beat them as they prepare for their final pivotal study.
At spectrum revenue decreased two 7% to $10 7 million as a result of lower advertising revenue at the network business.
This was partially offset by an expansion and coverage market with new and existing customers as the broadcasting business continues to sell capacity on the network.
Spectrum delivered adjusted EBITDA of 1.6 million in the fourth quarter compared to adjusted EBITDA of $1 2 million in the prior year quarter.
For the 12 months ended December 31 in 2020 one.
Spectrum recorded adjusted EBITDA of $6 9 million compared to EBIT of losses in the prior year.
Results reflect improved operations and cost reductions across the platform the sale of unprofitable noncore stations and revenue improvements described by Wayne earlier.
Our station sales grew revenues by approximately 19, 4% for the 12 months ended December 31, 2021 .
Nonoperating corporate adjusted EBITDA losses were $4 5 million for the fourth quarter of 2021 up from the fourth quarter of 2020 by $1 2 million driven mostly by an increase in bonus expense during the period.
At the end of the fourth quarter. The company had 45 5 million of cash and cash equivalents compared to $43 8 billion as of December 31, 2020.
On a standalone basis as of December 31, 2021, the corporate segment had cash and cash equivalents of $22 million compared to $27 5 million at the end of 2020.
As a reminder, in the fourth quarter, we extended the maturity on the 52 million of outstanding debt at broadcasting to November of 2022, and repurchased approximately $2 million of debt outstanding at the T V.
Using proceeds from noncore station sales.
As of December 31, 2021, innovate had principal outstanding indebtedness of 638 billion up $54 2 million from <unk>.
$576 6 million at the end of 'twenty 'twenty driven.
Driven primarily by infrastructures financing related to the banker acquisition.
Our fourth quarter results contributed to a strong 2021 for innovate, which showed a clear improvement in the overall business compared to 2020.
Our long term strategy is underway as we look to further unlock the value in each of our best in class assets. We look forward to reporting more success across infrastructure life Sciences and spectrum.
At this time next year.
With that.
Operator, we'd now like to open up the call for questions.
Thank you at this time, we will be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue you.
You May press star two if he would like to remove your question from the queue and.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Our first question comes from the line of Brian Charles with Art with RW Press Bridge. You May proceed with your question.
Hi, good afternoon.
Certainly congratulations on the quarter.
I Wonder if maybe I could get a little bit of color since it's.
Nice to see the progress in the life Sciences business is to and I know you you put it in another $15 million of incremental financing I'm wondering if at this point.
Is this largely self funding from innovate perspective, or do you expect more investments in the next couple of years or so.
Yeah, Hey, Brian , It's Wayne and Mike Hope you're doing well.
Alright, okay.
Okay.
So from in our two perspective as we've announced.
We did launch in the United States.
Shall Rx product and.
As we indicated that we're getting ready to and have shipped product over to China for the glacial spa, we did invest the $15 million in 2021, and we're very happy to do that to really support all of the progress that they've made at.
At this point there are no further.
<unk>.
Two are two that innovate has made.
Yes, I would just say that you know these businesses will likely need funding.
At the point when they do.
It would be a decision as to whether it would be something that we would want to invest in at the time.
And you know, we obviously are very pleased with the progress of the businesses.
So you know it's going to just depend on.
The timing and what else is in the works.
Okay. So it sounds like any incremental investment would be based on.
So what's the opportunity not capital needs.
Is that.
Sure.
[laughter] much Maher thank you.
Yeah.
Okay, that's great fair enough.
Secondly, I wonder if.
Do you have any color on the scale of incremental financing might draw down at the infrastructure business you were talking about ramping up their line of credit a bit.
Well I mean, if you look at what happened during the quarter during the fourth quarter.
They reduced their credit line by approximately $40 million.
Oh that was all I wanted to point out that that was really a dip in our working capital and as they ramp up.
Okay don't go back into that line, so I would say.
You know.
We obviously don't give guidance, but I don't want people to think that's a permanent reduction of capital.
That's why I kind of imagine that theyre going to need to.
Invest in some of these bigger projects as they were yesterday.
Run off that backlog and that's what I was just getting back because there was $40 million higher just three months ago.
Yeah Okay.
Okay. That's fair enough alright, thanks, that's all I've got for now.
Great.
Thank you.
As a reminder, if you would like to ask a question. Please press star one on the telephone keypad, a confirmation tone will indicate that your line is in the question queue you.
You May press Star two if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
These hold again, while we pull for questions.
At this time there are no further questions and I will now turn the call back over to Wayne for any closing remarks.
Thanks, Sean and thank you all for joining us today as always we are available for any follow up and hope you all have a very nice evening.
This does conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.
Okay.
Okay.
Yes.
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