Q3 2024 INNOVATE Corp Earnings Call
Good afternoon and welcome to Innovate Court 3rd, Quarter 2024, Irning's Conference Call. All participants will be in a listen-only mode. After prepare remarks and presentation, there will be a question and answer session. Please note this event is being recorded.
I would now like to join the conference call over to Anthony Rozmus with investor relations. Please go ahead.
Speaker Change: Good afternoon. Thank you for being with us to review Innovate 3rd Quarter 2021 earnings results.
Anthony Rozmus: We are joined today by Paul Voigt, Innovates in terms of CEO and Mike Sena, Innovates CEO. We have posted our earnings release and our slide presentation on our website at innovatecorb.com. We will begin our call with prepared remarks to be followed by Q&A session.
Anthony Rozmus: This call is also being Simon Cast and we'll be our cut on our website.
Anthony Rozmus: During the school, management may make certain statements and assumptions which are not historical facts, we'll be forward-looking and are being made pursuant to the safe harbor provisions of the private securities litigation reform at 1995.
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 detailed in our 10-K and other filings of the SEC.
Anthony Rozmus: Go to www.Flydreamers.com for more.
Anthony Rozmus: In addition, the forward-looking statements included in this conference call are only made as of this date.
Anthony Rozmus: 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.
Anthony Rozmus: Management will also refer to certain non-GAAP financial measures such as adjusted EBITDA. We 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.
Speaker Change: At this point, it is my pleasure to turn things over to Paul Voigt.
Paul Voigt: Good afternoon. We are pleased to report our strong third quarter financial results, and we'll update you on key milestones reached that exemplify the progress across each business segment.
Paul Voigt: Innovate delivered consolidated revenues to $242.2 million and adjusted EBITDA of $16.8 million in the third quarter of 2024.
Paul Voigt: DVM Global Achieved Revenues of $232.8 million and Adjusted EBITDA of $20.9 million.
Anthony Rozmus: During the quarter, DBM has seen gross margin improvement year-over-year of approximately 360 basis points to 18.8% and adjusted EBITDA year-over-year by approximately 70 basis points to 9%.
Anthony Rozmus: As we've discussed on previous calls, we are expecting results for the full year to come in slightly lower versus last year.
Anthony Rozmus: DBM delivered a very strong first half. However, as expected, and as we signaled on previous calls, the back half of 2024 will be lighter compared to the same period of 2023.
Anthony Rozmus: This year has been unusual, with the first half outperforming the second half, and the results for the first nine months have met our expectations, aligning with results from the previous year.
Anthony Rozmus: While third quarter sales were lighter than expectations, this was offset by higher margins in the quarter. We still expect adjusted EBITDA to be slightly lower than last year's results.
Anthony Rozmus: DBM's total adjusted backlog, which takes into consideration awarded but not yet signed contracts, increased to $1.1 billion at the end of the third quarter.
Anthony Rozmus: There continues to be a high volume of bidding opportunities in the commercial market today, although many projects have not yet been released to start construction.
Anthony Rozmus: Moving on to Life Sciences, R2 posted another strong financial quarter and made significant commercial progress.
Anthony Rozmus: Year-to-date, worldwide top-line sales reached $5.7 million, a record high.
Anthony Rozmus: R2's top-line sales grew 217% for the first nine months, and it's September 30th, 2024, compared to the same period last year, and also already 73% higher than top-line sales for the full year 2023.
Anthony Rozmus: System unit sales worldwide saw a massive increase of 416% growth from third quarter 23 to third quarter 24.
Anthony Rozmus: R2 has also secured a robust backlog of over 60 systems worldwide positioning the company well as it heads into the fourth quarter.
Anthony Rozmus: R2 is also pleased to announce the launch of a partnership with its very first national account chain.
Anthony Rozmus: Glacial brand awareness has a significant impact on sales and we have seen repeated and continued growth in this area throughout 2024.
Anthony Rozmus: exceeding industry competitor growth by 1,429 percent. R2 experienced year-over-year growth of 4,086 percent increase in social mentions.
Anthony Rozmus: 498% increase in web users.
Anthony Rozmus: and 104% increase in patient provider searches.
Anthony Rozmus: We are extremely pleased with the progress and momentum of R2.
Anthony Rozmus: They are well positioned in the market and have enough product capabilities to meet the current demand.
Anthony Rozmus: MetaBeacon remains dedicated to collaborating with the FDA as they conduct substantive review of the Kidney Monitoring Program.
Anthony Rozmus: MetaBeacon continues to see great opportunities in the market for real-time monitoring of kidney functions.
Anthony Rozmus: The Transdermal GFR and the first in-kind product for real-time assessment of kidney function, which is unlike any current methodologies in the market.
Anthony Rozmus: And finally, Spectrum continues to achieve strong financial results.
Anthony Rozmus: with the launch of new networks and expanded coverage with existing customers.
Anthony Rozmus: The quarter was highlighted by an improvement in profitability once again with adjusted EBITDA of $1.7 million in the third quarter, a $2 million improvement year-over-year.
Anthony Rozmus: Year-to-date, Spectrum has delivered $4.8 million in adjusted EBITDA, a significant increase compared to $900,000 through the first nine months of 2023.
Anthony Rozmus: New launches once again drove higher revenue growth in the quarter. Of note, Free TV's network, Defy, launched in the third quarter.
Anthony Rozmus: Broadcasting continues to see many OTA network opportunities on the horizon for 2025 as streaming networks explore over-the-air coverage.
Anthony Rozmus: Broadcasting also continues to make progress on discussions with prospective strategic partners in pursuit of new spectrum-related revenue opportunities in ATSC 3.0 Light Housing, Data Casting, and 5G Broadcasting.
Anthony Rozmus: We are very happy with the operational results of all three of our segments.
Anthony Rozmus: DBM's margin continues to be strong and business has a robust pipeline well positioned for 2025. At Pan's end, R2 made significant progress in way of growth and we continue to make progress at MetaBeacon.
Anthony Rozmus: and Spectrum's profitability has improved dramatically in the quarter and year to date.
Anthony Rozmus: We continue to see the benefits firsthand of the strong management teams in place at each of our business segments with the right path forward as evidenced by key milestones achieved so far in 2024.
Anthony Rozmus: Addressing our capital structure remains a primary focus. We are consistently making headway in exploring strategic alternatives with non-cash flowing businesses.
Anthony Rozmus: We are encouraged by 2024 milestones we have seen at our non-cash flowing businesses as we work to execute on a strategy to address the capital structure.
Anthony Rozmus: Our strategy requires patience within our established time frame to ensure we maximize the value of these assets.
Anthony Rozmus: We maintain optimism about the overall M&A market and remain encouraged by the positive market indicators along with ongoing progress and momentum around these assets.
Speaker Change: With that, I'll turn it over to Mike Sena, our CFO, for a review of financials and capital structure.
Anthony Rozmus: and many more. Thank you. Thank you.
Mike Sena: Thanks, Paul. Consolidated total revenue for the third quarter of 2024 was $242.2 million, a decrease of 35.5 percent compared to $375.3 million in the prior year period.
Anthony Rozmus: The decrease is primarily driven by our infrastructure segment, which is partially offset by increases at our life sciences and spectrum segments.
Speaker Change: Net loss attributable to common stockholders and participating preferred stockholders for the third quarter of 2024
Speaker Change: was $15.3 million, or $1.18 per fully diluted share, compared to a net loss of $7.3 million, or $0.93 per fully diluted share in the prior year period.
Speaker Change: which has been retroactively adjusted to reflect the 1 for 10 reverse stock split affected on August 8, 2024.
Speaker Change: Total adjusted EBITDA was $16.8 million in the third quarter of 2024, a decrease from $22.1 million in the prior year period.
Speaker Change: The decrease is driven by the infrastructure segment, which is partially offset by our spectrum, life sciences, and non-operating corporate segments.
Speaker Change: Thank you. Thank you. Thank you.
Speaker Change: At infrastructure, revenue decreased 37% to $232.8 million from $369.3 million in the prior year quarter.
Speaker Change: The decrease is primarily driven by the timing and size of projects at Banker Steel and DBMG's commercial structural steel fabrication and erection business.
Speaker Change: both of which had increased activity in the comparable period on certain large commercial construction projects that are at that are now at or near completion in the current period.
Speaker Change: This is partially offset by an increase in the industrial maintenance and repair business as a result of an increase in project work.
Anthony Rozmus: Infrastructure adjusted EBITDA for the third quarter of 2024 decreased to $20.9 million from $30.8 million in the prior year period.
Anthony Rozmus: This was partially offset by an increase in revenue and margins at the industrial maintenance and repair business and a decrease in recurring SG&A expenses, primarily as a result of a decrease due to timing of compensation-related expenses in the current year period.
Speaker Change: Thank you. Thank you.
Speaker Change: As of September 30, 2024, and in line with our expectation, reported backlog was $916.1 million and adjusted backlog, which takes into consideration awarded.
Speaker Change: But not yet signed contracts was $1.1 billion, compared to reported backlog of $1.1 billion and adjusted backlog of $1.2 billion at the end of 2023.
Speaker Change: PBMG ended the quarter with $176.8 million in principal amount of debt, which is an increase of $3 million from the second quarter, primarily driven by an increase in the credit line due to normal working capital fluctuations.
Speaker Change: which was partially offset by normal debt amortization payments.
Speaker Change: DBMG has been able to reduce its debt obligations since this time a year ago through line reduction as invested working capital has continued to return to the business.
Speaker Change: a trend that began at the end of 2023.
Speaker Change: As backlog stabilizes, working capital needs have flattened throughout 2024 and expect to continue as such. As a reminder, DBMG has reduced its outstanding debt by approximately $56 million in the last 12 months.
Speaker Change: At Life Sciences, revenue increased 400% to $3 million, from $600,000 in the prior year quarter. The increase in revenue was attributable to R2, primarily due to an increase in GlacialFX system sales in North America, which launched during the third quarter of 2023.
Speaker Change: An increase in consumable sales, incremental Glacial SPA unit sales outside of North America, and the launch of the Glacial FX system outside North America subsequent to the prior period.
Speaker Change: Life Sciences suggested EBITDA losses decreased for the quarter, which is primarily due to fewer equity method losses recognized from our investment in MetaBeacon and Triple Ring, and an increase in gross profit at RQ driven by the increase in revenue.
Speaker Change: which is partially offset by a slight increase in recurring SG&A expenses.
Speaker Change: At spectrum, revenue was $6.4 million, an increase of $1 million compared to the third quarter of 2023, primarily driven by network launches and expanded coverage with existing customers.
Anthony Rozmus: which is partially offset by the termination of a small number of smaller networks in individual markets subsequent to the comparable period.
Anthony Rozmus: Spectrum reported adjusted EBITDA in the third quarter increased to 1.7 million from a loss of 300,000 in the prior quarter.
Anthony Rozmus: The increase is primarily due to the increase in revenue and unrepeated severance in the prior year period.
Anthony Rozmus: Non-operating corporate adjusted EBITDA losses were $2.8 million for the third quarter of 2024, a $1.3 million improvement from the third quarter of 2023. The improvement was primarily driven by unrepeated severance in the prior year period.
Anthony Rozmus: At the end of the third quarter, the company had $51 million of cash and cash equivalents, excluding restricted cash, compared to $80.8 million as of December 31, 2023.
Anthony Rozmus: On a stand-alone basis, as of September 30, 2024, our non-operating corporate segment had cash and cash equivalents of $20.2 million compared to $2.5 million at the end of 2023.
Anthony Rozmus: As announced earlier in the year, we received notice that we were not in compliance with NYSC listing requirements as our stock price had fallen below $1 per share.
Anthony Rozmus: As a result of the reverse stock split, we were notified by the NYSC that, as of August 26th, we have regained our compliance.
Anthony Rozmus: As of September 30, 2024, Innovate had total principal outstanding indebtedness of $699.2 million, down $23.6 million from $722.8 million at the end of 2003.
Anthony Rozmus: driven by the decrease in infrastructure's outstanding debt, a decrease in corporate debt as a result of the partial redemption of the CGIC note and partial convertible note repurchases.
Anthony Rozmus: which was partially offset by R2's extension with Lancer Capital which capitalized interest payments into the principal balance.
Anthony Rozmus: With that, operator, we'd now like to open the call up for questions.
Anthony Rozmus: Voigt, Michael Sena, Neel Sikka, Avram Glazer, Anthony Rozmus, Neel Sikka, Avram Glazer, Anthony Rozmus, Neel Sikka, Avram Glaser, Avram Glazer, Neel Sikka, Avram Glazer,
Speaker Change: Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question.
Speaker Change: Your first question comes from the line of Brian Trous from RW Press-Rich. Your line is now open. Please go ahead.
Brian Trous: Thanks for taking my question. A couple of questions. I'm just wondering, I know you're waiting for approval from the FDA and MediVegan.
Brian Trous: Do you have any color on the communication that you've had with the FDA? Is it ongoing? Are they asking for more material or are you just sort of in waiting mode until they come back with an approval?
Speaker Change: You know, we continue to work with the FDA. I mean, you know, we can't really get too far into the details, but we continue working with the FDA as we work towards hopefully getting approval.
Speaker Change: Okay, so have there been any developments that you were not expecting or things just sort of progressing as expected? As soon as we have something to update the market.
Speaker Change: with, we certainly will. You know, we need to, you know, we need to just continue through the process and as the FDA gets comfortable, you know, that time will come and we'll obviously update the market when we can.
Speaker Change: Okay, good enough. Then over to DPM Global. It looks like the, you know, your year-end guidance or four-year guidance is coming in.
Speaker Change: much as expected. Is it, with the bump in the backlog, is it...
Speaker Change: Too soon to talk about 2025 and what that profile might look like in terms of revenue, anybody?
Speaker Change: Dr. Michael Sena, Avram Glazer, Amilja Regan,
Speaker Change: It is. I mean, look, we...
Speaker Change: As we kind of said in the beginning of the year, we expect the backlog to kind of settle in around this area. It's continued to do that throughout the year. We continue to see a lot of activity in the market. There has been some holdback in the leasing jobs.
Speaker Change: But, you know, we're expecting at some point those to get released. And I think, you know, we have great confidence in the DBM team and, you know, their ability to win projects with a good profit.
Speaker Change: And then finally, I know sort of a monetization of life sciences could help refinance the
Speaker Change: the Holcote notes that are coming up.
Speaker Change: Yeah, I mean we continue to explore strategic alternatives with the non-cash borrowing assets And we are looking at a host of other other ways to address the capital structure
Speaker Change: But, you know, I think as we
Speaker Change: continue to make progress on these initiatives. We're very happy with the way everything is, our operating subs are performing as you, you know, kind of noted R2 had a great quarter. Spectrum continues to, continues to improve.
Speaker Change: and infrastructure is coming in as we kind of expected.
Speaker Change: Okay, fair enough. Thanks. I'll get back in the queue.
Speaker Change: Thank you.
Speaker Change: https://www.youtube.com.au
Speaker Change: Again, should you have a question, please press the star followed by the number 1 on your touchtone phone. You will hear a prompt that your hand has been raised.
Speaker Change: Once again, for questions, please press the star followed by the number one on your touchtone phone.
Speaker Change: Thank you. Bye-bye.
Speaker Change: There are no further questions at this time. Please continue, Mr. Paul Voigt.
Paul Voigt: Yeah, we appreciate everybody's support, time, and patience.
Speaker Change: Again, all of our platforms are performing very well, and hopefully, we'll have some very, very positive news in the very near future for everyone. Thanks again.
Speaker Change: Thank you for watching. I'll see you next time.
Speaker Change: Thank you for watching!