Q3 2023 INNOVATE Corp Earnings Call
Good afternoon, and welcome to innovate Corp, third quarter 2023 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 Rod Smith with Investor Relations. Please go ahead.
Good afternoon. Thank you for being with US to review innovation third quarter 2023 earnings results. We are joined today by Abbvie Glaser chairman of innovate globally and baked in term CEO and Mike <unk> CFO.
<unk> posted our earnings release, and our slide presentation on our website at MBIA 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 bookings and army.
Pursuant to the safe Harbor provisions of the.
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 actual results to differ materially from these forward looking statements. The risk factors that could cause these differences are more fully disk.
Closed in the cautionary statement that is included in our earnings release and the 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 the date of this call and as stated in our SEC reports.
<unk> disclaims any intent or obligation to update or revise these forward looking statements, except as expressly required by law.
<unk> will also refer to certain non-GAAP financial measures such as adjusted EBITDA.
Believe that 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 Avi Glaser.
Good afternoon, innovate delivered revenue of $375 3 million in the third quarter and grew adjusted EBITDA by 34, 8% to $22 1 million.
Our results this quarter highlight our keen focus on profitability.
Answer to the strategy.
All three of our operating segments.
We've executed on this initiative achieving year over year, adjusted EBITDA improvement and multiple operating segments in the third quarter.
Our infrastructure business continues to deliver strong results for innovate, especially on the bottom line.
Infrastructure experienced further growth in adjusted EBITDA margin expansion in the quarter.
Backlog, while somewhat contracting this quarter still provides strong visibility for future revenue.
Turning to life Sciences, <unk> and <unk> continue to make progress.
<unk> launched a new skin wellness device glacial FX, along with several new product enhancements for Glacier Rx, while <unk> remains unplanned down the path for FDA approval.
At spectrum, we have a strong foundation of assets in that business.
Exploring potential opportunities for strategic partnership to add to revenue and unlock the value in these assets, which should lead to further growth.
With that I'll turn the call over to Paul Boys.
Thanks Avi.
Our three operating segments continued to perform well in 2023.
In the third quarter DBM global delivered another strong quarter with revenues of $369 3 million and adjusted EBITDA of $30 8 million versus $27 6 million in the prior year.
DBM expanded gross margins by approximately 210 basis points and adjusted EBITDA margin by approximately 170 basis points to 15, 2% and eight 3% respectively.
<unk> and our DBM team done an outstanding job protecting margins, we continue to expect deliberate increase margins for the full year 2023 compared to the prior year.
We still see huge opportunity to bid on larger more complex projects.
Especially out west that should continue to aid further margin expansion.
GBM stays nimble with their unique expertise to capitalize on a multiple multitude of project opportunities across various markets.
Our total adjusted backlog was $1 3 billion at the end of the quarter.
We remain focused on converting the sizable complex projects into the backlog.
On our healthcare platform are two technology technologies experienced an exciting quarter across the board or to not only launched a new device in several product enhancements.
Unit sales outpaced all previous quarter results.
In addition, our two experienced a record number of patient treatments performed with results eclipsing over 15000 patient treatments worldwide and a 167% growth over the same period in 2022.
<unk> also expanded its global reach with approval to begin selling in Canada.
Our to commercially launch this new system glacial FX.
So FX is a skin wellness device and due to its classification has expanded <unk> total addressable addressable market to include aesthetic spas and other wellness channels additional product enhancements for <unk> include the launch of larger disposable.
Treatment tip for the body and colder FDA cleared advanced political protocol called glide or X <unk>.
These enhancements improved treatment utility for providers enhanced patient experience and outcomes, making glacial product portfolio of the emerging standard of care.
For meta Beacon, we explained last quarter. The FDA reviewed the full module submission package for completeness and is now conducting.
Substantive.
Review for the kidney monitoring program, which was previously granted FDA breakthrough device designation in the United States.
In addition, the FDA provided feedback on meta Beacon clinic.
Clinical plans for other applications of the fluorescent technology platform.
Gastro entered biology, ophthalmology and surgical visualization.
<unk> received FDA authorization to begin the first in human study to evaluate the use of <unk> priority agent ophthalmology.
This study is expected to begin in Q1 of 2024 in the United States.
We are pleased with the progress <unk> has made as they continue to work through the FDA approval process.
Innovative kidney monitoring technology.
The FDA approval process typically takes an average of six to 12 months submission to approval.
And lastly at spectrum, we are starting to see encouraging signs of growth in broadcast TV, which was soft over the last 18 months across the industry.
Our stations are picking up new network distribution as the advertising price step stabilize and our outlook for 2024 looks promising.
Earlier this week <unk>, a new startup backed by Warner Studios, and Lionsgate announced January 24th launch of two new nationwide networks, our broadcast platform together with Gray television will provide national coverage for the two networks.
Kate the TV executive who founded <unk> is responsible for designing and launching some of the most profitable over the air broadcast networks over the last 15 years, and we will continue to work with him on developing new revenue opportunities.
We are also working with a number of streaming and cable networks looking to broaden their distribution to over the air, particularly now that advertising revenues are picking up.
Also in the coming year, we are implementing the conversion of several of our stations to take advantage of commercial opportunities.
Such areas as data casting and software applications together with providing state of the art network broadcasting.
We are very excited about these and other revenue opportunities for spectrum in the years ahead.
Like I said on the last conference call, we have over $2 3 billion megahertz pop a very valuable UHF spectrum with our 251 television stations.
Lastly over the past quarter I've had the opportunity to work closely with each of the management teams across our three operating segments.
Some away from these discussions even more encouraged at the prospects and strengths of our assets and look forward to Q2 continuing to work with each.
CEO on ways, we can further unlock the value of each of these businesses.
As I mentioned on the last call.
Continue to explore strategic alternatives on our non cash flowing assets, we are starting to see or to build the right momentum in their market and met a beacon continues to go through FDA approval process with that I turn it over to Mike for a review of our financials and capital structure.
Thanks, Paul consolidated total revenue for the third quarter of 2023 was $375 3 billion.
Decrease of 11, 3% compared to $423 million in the prior year period. The decrease was primarily driven by our infrastructure segment and to a lesser extent our spectrum segment.
Net loss attributable to common stockholders for the third quarter of 2023 was $7 3 million or <unk> <unk> per share compared to a net loss of $6 6 million or <unk> <unk> per share in the prior year period.
Total adjusted EBITDA was $22 1 million in the third quarter of 2023, an increase from $16 4 million in the prior year period.
The increase was driven by the life Sciences infrastructure nonoperating corporate segments, which was partially offset by the elimination of equity method income from our investment in Mitcham men, which was sold in March of 2023 and.
<unk> spectrum segment.
And infrastructure revenue decreased 10, 5% to $369 3 million from $412 7 million in the prior year quarter.
As discussed earlier. This decrease was primarily driven by the timing and size of projects at Dpm's commercial steel fabrication and erection business and lower revenue at the industrial maintenance and repair business.
Which was partially offset by an increase in revenue at bankers deal and the construction modeling and detailing business due to timing and size of projects.
Infrastructure adjusted EBITDA for the third quarter of 2023 increased to $30 8 million from $27 6 million in the prior year period.
The increase was primarily driven by timing of higher margin projects at the steel fabrication and erection business increased contributions from the construction modeling and detailed business.
And a decrease in recurring SG&A expenses.
This was partially offset by lower contributions from bankers steel due to timing and size of projects.
As of September 32023 reported backlog in adjusted backlog, which takes into consideration awarded but not yet signed contracts was $1 3 billion compared to $1 8 billion at the end of 2022.
As <unk> explained earlier, we continue to see meaningful opportunities in the market and DBM remains focused on converting those opportunities into backlog.
<unk> ended the quarter with $232 8 million in principal outstanding debt, which is a decrease of $10 2 million from year end 2022.
Driven by normal debt amortization payments or partial note repayment and a partial loan repayment, resulting from an asset sale.
Offset impart by an increase in the credit facility.
At life Sciences, the decrease in adjusted EBITDA losses.
Primarily due to a decrease in SG&A expense that are driven by a decrease in compensation related expenses research and development and marketing costs as a result of cost reduction initiatives as well as lower while we're equity method losses recognized from <unk> investment in <unk> as a result of suspended loss.
<unk> jewelry investments carrying amounts being reduced to zero.
At spectrum revenue was $5 4 million, a decrease of $3 7 million compared to the third quarter of 2022.
Primarily driven by the elimination of advertising revenues. It is tech which ceased operations at the end of 2022.
This was partially offset by an increase in station revenues, which launched new markets and networks with its customers in the current period.
Spectrum reported adjusted EBITDA losses of <unk> 3 million in the third quarter compared to adjusted EBITDA income of <unk> 3 million in the prior year quarter.
The decrease was primarily due to an increase in SG&A expenses at the station group driven by an increase in severance and salary and benefit related expenses.
Non operating corporate adjusted EBITDA losses were $4 1 million for the third quarter of 2023, an improvement from the third quarter of 2022 by <unk> 9 million.
The improvement was primarily driven by a decrease in legal expenses and decreases in employee related expenses from reduced head count.
As well as a net decrease in severance expense.
At the end of the third quarter, the company had $55 7 million of cash and cash equivalents, excluding restricted cash.
Excluding restricted cash compared to $80 4 million as of December 31, 2022.
On a standalone basis as of September 32023, our nonoperating corporate segment cash and cash equivalents of $1 5 million compared to $9 1 million at the end of 2022.
As mentioned in previous calls the cash balances change as a result of working capital movements related to receivables collected prior to the end, but the reporting periods.
As of September 32023, innovate at total principal outstanding indebtedness of $756 8 million up $31 5 million from $725 3 million at the end of 2022, driven primarily by corporates, new unsecured note, which did you guys see.
Infrastructure has drawn their respective credit line.
Our tears additional borrowing from the answer capital, which was partially offset by infrastructure as principal payments.
Lastly, <unk> broadcasting entered into an amendment to its secured notes today, which extended the maturity date of its principal about $69 7 million from August 15, 2024 to August 15 2025.
With that operator, we'd now like to open up the call for questions.
Thank you, ladies and gentlemen, we will now conduct the question and answer session.
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One moment. Please for your first question.
Your first question comes from the line of Brian Charles from RW Breasts and bridge. Your line is now open.
Hi, Thanks for taking my question.
It's good to see the continued progress in the infrastructure business and the growth in EBITDA. This year after kind of bottoming out a little earlier, but it does looking at the presentation you see the backlog has been kind of consistently decline again I guess.
That dovetails with your you talk about being more selective about the projects that you take on <unk>.
Is it fair to say that the backlog as it stands now.
Likely reflects higher margins coming.
Remaining in the business and continuing to improving the business in 2024.
Yes. Thanks.
What I'd say is that.
We have seen continued margin improvement have you seen as you've seen throughout the year, we've seen started to see margin somewhat stabilize.
But.
So we expect to see come in exactly where we had discussed earlier, which was improved.
Improved margins.
For 2023 over 2022, and I think we'll continue to see.
Margins.
Where they are at over.
And what we have in backlog.
Okay fair enough and just one follow up there some of the commentary in the earnings release talks about tightening in the credit markets that is continuing to impact the commercial space is that more of an impact on your customer base and making them selective about which projects to go forward with or is that.
Is that influencing your.
Your evaluation of certain projects.
Well I think I think what we've seen with the management team, what rustin and the management team at DBM is them to be able to pivot into the markets that.
At the right work and the commercial sector as we've as we've mentioned.
Has tightened mainly related to.
The credit markets, but we still see pretty sizable opportunities in the market and dbms has been working on converting them.
Okay.
Okay. If I if I had to ask do you think the backlog will be growing into 2020 for stabilizing of water.
We are continuing to decline if your if you can still beach selective about higher margin projects.
I would say, it's going to be flat year over year.
But that being said there are some big projects out west, especially in Vegas.
That.
Theres four or five big projects that if we get our hands on one or two we could be a big.
Okay.
Okay, great. Thanks, I'll get back into queue.
Thank you very much for your questions.
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There are no further questions at this time, ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect.