Q4 2024 INNOVATE Corp Earnings Call
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Speaker Change: Good afternoon and welcome to Innovate Corps 4th quarter in a full year 2024 earnings conference call. All participants will be enlisted only in mode. After prepared remarks and presentations, there will be a question and answer session.
Speaker Change: Please note, this event is being recorded. I would now like to turn the call over to Neel Sikka with the best relations. Please go ahead, Neel.
Speaker Change: Good afternoon. Thank you for being with us to review Innovate's fourth quarter and full-year 2024 earnings results.
Speaker Change: We are joined today by Paul Voigt, Innovates Interim CEO and Mike Sena, Innovates CFO . We have posted our earnings release and our side presentation on our website at InnovateCorp.com.
Speaker Change: We will begin our call with preferred remarks to be followed by a Q&A session. This call is also being signed will cast and will be archived on our website.
Speaker Change: 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 provision of the private securities litigation reform act of 1995.
Speaker Change: 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.
Speaker Change: 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 detailed in our 10K and other filings for the SEC.
Speaker Change: In addition, the forward-looking statements included in this conference call are only made as of the date of this call and are stated in our SEC reports. Innovate disclaims any intend or obligation to update or revise this forward-looking statements except as expressly required by law.
Speaker Change: Our main objective for 2025 is to address our capital structure and the near term maturity of our debt obligations.
Speaker Change: We're making progress on our strategic objectives, and our businesses continue to hit important milestones. We continue to believe that we have valuable assets did appreciate in value each day.
Speaker Change: Our focus is 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 business.
Speaker Change: As we turn our attention to our operating segments, starting with life Sciences.
Speaker Change: Beacon is thrilled to have received FDA approval for its transdermal G F. Our systems to assess kidney function.
Speaker Change: As many of you know this has been something that team has been working towards for quite some time and we are very excited to have achieved this milestone.
Speaker Change: The fda's approval of the T. G. F. R indicates that meta beacons unique system offers an effective solution for evaluating kidney function in patients with normal or impaired renal function the.
Speaker Change: The potential applications for T. G F. R. Our numerous admittedly can look forward to exploring them with clinicians both in the hospital and outpatient settings.
Speaker Change: Additionally in February the National Medical products administration in China also approved the meta Beacon T. G F. Our monitor and TGF, our sensor for the assessment of kidney function in patients with normal or impaired renal function.
Speaker Change: With FDA approval and in order to maximize shareholder value.
Speaker Change: Beacon has engaged Jefferies financial group as their investment banker.
Speaker Change: Company is currently in discussions with medical device and pharmaceutical companies.
Speaker Change: Turning to our two are two broke sales records in both North America and worldwide delivering record topline revenues of almost $10 million for the full year of 2024, which is a 197% increase over 2023 of $3 3 million.
Speaker Change: Led by system unit sales in North America, which experienced 238% growth for the full year year over year versus 2023 or two.
Speaker Change: <unk> its global expansion into new markets with new distributor partnership signed into Australia, and several companies in South America.
Speaker Change: Combined worldwide system unit sales grew 113% in the fourth quarter of 2024 compared to fourth quarter of 2023 and grew 182% for the full year in 2024 year over year versus 2023.
Speaker Change: We believe achieving almost $10 million of revenue is a significant milestone as we explore strategic alternatives for this business.
Speaker Change: In addition to its massive success during 2024.
Speaker Change: <unk> has also secured a robust order backlog of over 75 systems worldwide at the end of the year.
Speaker Change: Glacial providers continue to see incredible results using glacial skin devices evidenced by the growth in patients treated by 170%.
An increase in average monthly utilization of 49% percolation provider over the same period last year.
Speaker Change: Glacial brand awareness has a significant impact on sales and has exceeded industry competitor growth by 1694% or two experienced year over year growth of 1659% increase in social mentions.
Speaker Change: 618% and website users and 132% and patient provider searches.
Speaker Change: With new distributor relationships secured in the UK and in France in 2025, or two continues to expand its global reach.
Speaker Change: <unk> increasing results of 2024 highlight our strong momentum in a market with vast potential having surpassed 700 shipments worldwide. We are extremely pleased with both our success and strong foundation built in 2024.
Speaker Change: While our two has enjoyed recent success in 2024, the company has yet to really scratched the surface in terms of market penetration.
We believe the opportunity for <unk> is massive and we believe the momentum and the runway is big ahead.
Speaker Change: We're encouraged by recent milestones that these businesses and work to execute on our strategy to address the company's capital structure.
Speaker Change: Moving to infrastructure DBM global achieved revenues of $225 7 million and adjusted EBITDA of $17 4 million in the fourth quarter.
During the quarter D. B M has seen gross margin improvement year over year of approximately 180 basis points to 18, 2%, while fourth quarter adjusted EBITDA margins compressed by 80 basis points to seven 7% year over year.
Speaker Change: D be EMS results came in slightly lower than our expectations as projects were pushed out in the second half of the year, which impacted our overall results. The delay of awards in the back half of 2024 has posed a challenge to start to 2025 potentially leading to a year comparable.
Speaker Change: So 2024, however, the surge of recent awards to begin 2025.
Speaker Change: Has provided D b M with the opportunity to outperform 2024.
Speaker Change: Our backlog levels held steady and we ended the year with adjusted backlog of $1 1 billion. In fact, the first quarter of 2025 D. B M has added a few sizable projects that total over 500 million to adjusted backlog across our companies and we remain very optimistic.
Speaker Change: Domestic on the pipeline. Additionally, we are increasingly excited about our ability to capitalize in opportunities driven by growth in cloud computing and AI requiring substantial investments in data centers and power infrastructure with a strong track record and strategic vision and with the.
Speaker Change: <unk> management team and the business. We are confident the <unk> management team is well equipped to capitalize on these opportunities and drive continued success.
Speaker Change: Given the continuing unpredictability in the political landscape there remains a cautious stance towards the cost of construction materials, especially concerning tariffs and inflation. We are closely following tariff announcements and have developed strategies to lessen the impact at this juncture, we did not.
Speaker Change: His paid any material impact on our financials, and we will continue to assess and look for ways to minimize potential impacts D.
Speaker Change: <unk> is well positioned in 2025 with a strong backlog and robust pipeline.
Speaker Change: And finally spectrum.
Speaker Change: Spectrum delivered a strong year, both financially and operationally fourth quarter and full year 2020 for topline grew 19, 3% and 14, 2% respectively year over year.
Speaker Change: Fourth quarter, adjusted EBITDA of $2 3 million more than doubled compared to last year and full year 2024, adjusted EBITDA of $7 1 million, so a significant improvement compared to $2 million in 2023.
Speaker Change: Spectrum made significant strides in right sizing the business over the last 12 to 18 months, which has directly benefited our financial performance the improvement and better quality network launches has helped drive gaining improvement in financial performance of note.
Seth: Seth full new network launches and free Tvs, New networks and pool, both sports underscore the network's debuts in 2020 for the launch of pool, both sports a marquee network in the fourth quarter is another example of the continued improvement in the quality of the networks. Additionally.
Seth: <unk> broadcast is witnessing numerous over the air network opportunities for 2025 and signed a contract with marathon ventures to distribute new vibrant over the air networks, Nosy and contests, which we placed on the air the week of March 17th.
Seth: We are likely to see new entrants into the O T. A market throughout the rest of the year as more streaming networks are considering expanding to over the air coverage.
Seth: Broadcast also continues to make progress with strategic partnerships in pursuit of new spectrum related revenue opportunities with our Ats C. Three dot O converted stations, we are actively pursuing commercial opportunities together with a major mobile network operator.
Seth: Our efforts have been gaining traction and we are expecting to see revenues from this exciting new technology. Later this year, we will have more information in the next few months on this.
Seth: We are making excellent progress as it relates to Ats C. Three data light housing.
Seth: In fact, we commenced installation of the Dallas Lighthouse station for PBS station K E. R. A.
Seth: As we think about longer term opportunities with the change in administration, the new chair of the FTC has talked about value creating opportunities for otas spectrum that include a new incentive auction considerable deregulation in the broadcast TV industry and opportunities to repurpose our value.
Seth: Your Bowl UHF spectrum.
Seth: Given our favorable view of <unk> broadcasting technology, and its potential to transform low power broadcasting last Friday, we filed a petition with the FCC proposing that low power television stations to be allowed to use the baiji broadcast transmission standard not voluntary basis.
Seth: We are simply asking the FCC to approve the technology as an alternative for low powers alongside the already approved standard like a T. S. C. Three dot O as we have already seen with our experimental <unk> broadcast license. The technology allows the low power <unk>.
Seth: <unk> station to transmit a single five G signal to its entire service area, which could be received by compatible mobile phone.
Seth: Low power stations utilizing five G broadcast would be well positioned to deliver numerous benefits across multiple services, including enhanced programming data casting internet connectivity and public safety.
Seth: Lastly, our total consolidated debt decreased by $54 5 million compared to last year, which was mostly a function of improved working capital returning to the business that D. B M G.
Seth: 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 very encouraged in our ability to execute on behalf of shareholders with that I'll turn it over to Mike for a review of our financials and our capital structure.
Mike Sena: Thanks, Paul consolidated total revenue for the fourth quarter of 2024 was $236 6 million a decrease of 34, 5% compared to 361 million in the prior year period.
Mike Sena: The decrease was primarily driven by our infrastructure segment, which was partially offset by increases at our life Sciences and spectrum segments.
Mike Sena: Net loss attributable to common stockholders and participating preferred stockholders for the fourth quarter of 2024, or $16 9 million or $1 29 per fully diluted share.
Mike Sena: <unk> to a net loss of $9 6 million or $1 22 per fully diluted share in the prior year period, which has been retroactively adjusted.
Mike Sena: To reflect the one for 10 reverse stock split effected on August eight 2024.
Mike Sena: Total adjusted EBITDA was 15 million for the fourth quarter of 2024, a decrease from $21 5 million in the prior year period.
Mike Sena: The decrease was driven by the infrastructure segment, which was partially offset by our life Sciences spectrum of non operating corporate segments.
Mike Sena: Other infrastructure revenue decreased 36, 2% to $225 7 million from 353.8 million in the prior year quarter.
Mike Sena: The decrease was primarily driven by the timing and size of projects that paper steel and <unk> commercial structural steel fabrication and erection business.
Mike Sena: Both of which have increased activity in the comparable period on certain large commercial construction projects that have since been completed.
Mike Sena: This was partially offset by an increase at the industrial maintenance and repair business as a result of an increase in project work.
Mike Sena: Infrastructure adjusted EBITDA for the fourth quarter of 2024 decreased to $17 4 million from 30 million in the prior year period. The decrease was driven by lower revenue and gross margins of banker steel and lower revenue, partially offset by an increase in gross margins with <unk> commercial structural steel.
Mike Sena: Fabrication and erection business.
Mike Sena: Due to the timing of projects as well as the lower revenue and gross margins of the construction modeling and detailed business.
Mike Sena: This was partially offset by an increase in revenue and gross margins are being industrial maintenance and repair business and a decrease in recurring SG&A expenses, primarily as a result of the timing of compensation related expenses.
Mike Sena: As of December 31, 2024 reported backlog was 1 billion and adjusted backlog, which takes into consideration awarded but not yet signed contracts with $1 1 billion.
Mike Sena: Third to reported backlog of $1 1 billion and adjusted backlog of $1 2 billion at the end of 2023.
Mike Sena: <unk> ended the quarter with $144 7 million in principal amount of debt, which is a decrease of $32 1 million from the third quarter, primarily driven by a decrease in the credit line a normal debt amortization payments.
Mike Sena: Since this time a year ago D V. M. J has been able to reduce its debt obligations through line reduction as invest in working capital has continued to return to the business trends that began at the end of 2023.
Mike Sena: As a reminder, the B M. J has reduced its outstanding debt by approximately $54 1 million during 2024.
Mike Sena: At life Sciences revenue increased 173.3% to $4 1 million from $1 5 million than the prior year quarter. The increase in revenue was attributable to our two primarily due to an increase in commercial FX systems and consumable sales in North America and worldwide.
Mike Sena: As well as an increase in <unk> systems in North America, which was partially offset by a decrease in English or Rx systems outside of the U S.
Mike Sena: Life Sciences, adjusted EBITDA losses decreased for the quarter, which was primarily due to fewer equity method losses recognized from our investment and met or beat them.
Mike Sena: And an increase in gross profit at our two driven by the increase in revenue, which was partially offset by a slight increase in selling costs start to.
Mike Sena: At spectrum revenue was $6 8 million, an increase of $1 1 million compared to the fourth quarter of 2023.
Mike Sena: Similarly, driven by network launches and expanded coverage with existing customers, which was partially offset by the termination of a number of smaller networks and individual market subsequent to the comparable period.
Mike Sena: Spectrum reported adjusted EBITDA for the fourth quarter increased $2 3 million from $1 1 million in the prior year quarter.
Mike Sena: The increase was primarily due to an increase in revenue.
Mike Sena: It's worth noting spectrum fourth quarter results on the top line and adjusted EBITDA are generally higher than the previous three quarters due to seasonal advertising and revenue shares in the fourth quarter.
Mike Sena: Trend that is expected to continue in 2025.
Mike Sena: Non operating corporate adjusted EBITDA losses were $2 2 million for the fourth quarter of 2024 or 300000 dollar improvement from the fourth quarter of 2023.
Mike Sena: For the full year 2024, adjusted EBITDA losses were $10 4 million an improvement of $3 1 million from 2023.
Mike Sena: The decrease in losses was driven by the non repeat of severance expense in the prior year, a decrease in salaries and benefits from a reduced head count.
Mike Sena: Decreases in accounting and consulting fees and a decrease in rent expense, primarily as a result of the termination of leases in the current year.
Mike Sena: At the end of the fourth quarter. The company had $48 8 million of cash and cash equivalents, excluding restricted cash compared to 88 million as of December 31 2023.
Mike Sena: On a standalone basis as of December 31, 2024, our nonoperating corporate segment had cash and cash equivalents of $13 8 million compared to cash and cash equivalents of $2 5 million at the end of 'twenty three.
Mike Sena: As of December 31, 2024.
Mike Sena: Total principal outstanding indebtedness of $668 3 million down $54 5 million from $722 8 million at the end of 2023.
Mike Sena: Driven by the decrease in infrastructures outstanding debt.
Mike Sena: A decrease in corporate debt as a result of the partial redemption of the unsecured notes and a partial convertible note repurchase.
Mike Sena: This was partially offset by our choose extension wetlands for capital, which capitalized interest into the principal balance.
Mike Sena: With that operator, we'd now like to open up the call for questions.
Mike Sena: Thank you at.
Mike Sena: At this time, we'll now be conducting a question and answer session.
Mike Sena: If you'd like to ask a question you May press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.
Mike Sena: You May press Star two if you like to withdraw your question from the queue.
Mike Sena: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the sarkies.
Mike Sena: One moment, please while we poll for questions.
Speaker Change: Thank you and our first question is from the line of Brian Charles with RW Kras parent. Please proceed with your questions.
Speaker Change: Alright, Thanks for taking my questions I got a couple first off congratulations on the FDA approval of <unk> and you did mention you engaged Jefferies to help you explore options on maybe monetizing part or all of that business can I ask like how.
Speaker Change: How deep into discussions or is Jefferies right now, which is a relatively recent development or is this something they've been retained sensei.
Speaker Change: Right after the FDA approval.
Speaker Change: Alright can you all hear me.
Speaker Change: Hi.
Speaker Change: Ryan Thanks for the question.
Speaker Change:
Speaker Change: So you know back in the end of 'twenty three we had indicated that we had hired bankers we've been working on.
Speaker Change: This process for some time FDA approval was pretty critical you know and were happy to finally received a long awaited FDA approval you know it's been a lot of time and effort since our original investment back in 2015.
Speaker Change: And.
Speaker Change: Discussions with medical device and pharmaceutical companies at this point.
Speaker Change: Okay fair enough.
Speaker Change: I imagine you can't go into too much detail, but just to round. It out there I know in Guangdong injected equity it was at a $400 million valuation.
Speaker Change: Fair to say that is still the context of discussions youre holding with people.
Speaker Change: Well as you know you know that deal was done back in 2019 as the milestone. So you know that was a commitment that was made back in 2019, and so what I'd say is.
Speaker Change: You know what.
Speaker Change: We're gonna have to see how the process pans out, but you know what.
Speaker Change: Happy that we had had that arrangement in the first place, but it was some evaluation point that was set back in 2019.
Speaker Change: Yes fair enough. Thanks.
Speaker Change: And just one follow up in general I guess across the DBM global too.
Speaker Change: To what extent.
Speaker Change: Should I think about the tariffs.
Speaker Change: Or potential kind of clouding as coming from uncertainty around tariffs.
Speaker Change: Would that impair.
Speaker Change: Impacting your discussions or delay any kind of resolution about meta beacon because I'm not sure exactly.
Speaker Change: The extent to which.
Speaker Change: Tariffs could impact <unk> business model or at least uncertainty around tariffs.
Speaker Change:
Speaker Change: Well, it's still you know.
Speaker Change: The initial rollout and the approval today is in the.
Speaker Change: The U S and so you know I know, we're working on a subsequent stream in China.
Speaker Change: But you know we don't think that that you know I guess at this time.
Speaker Change: We don't think that there is that big of an impact from it.
Speaker Change: Yeah Fair enough. Thank you and then.
Speaker Change: A little early it's just it's just early in the process. That's all for me.
Speaker Change: So I understand I guess I'd just add as.
Speaker Change: But I can leave any.
Speaker Change: Any thoughts on to what extent.
Speaker Change: Yes, it is uncertainty might impact the adjusted backlog at DBM global would it impact margins or could it impact volume.
Speaker Change: Well you know what I'd say is that.
Speaker Change: Typically when DBM goes out and bids their projects they are locking in prices with the mills and so you know.
Speaker Change: We tend to not take risk on that.
Speaker Change: Steel prices and that ends up getting passed along so.
Speaker Change: You know I don't I don't see it as a as an issue from a backlog perspective at this point and right now you know rustin and the team are kind of saying they don't see a big impact, but you know their concern continuing to assess it.
Speaker Change: Okay Fair enough excellent. Thank you will get back in queue.
Speaker Change: Great. Thanks, Brian.
Speaker Change: Thank you. That's a reminder, if you like to ask a question you May Press Star one for your telephone keypad at this time.
Speaker Change: Right.
Speaker Change: Thank you.
Speaker Change: At this time I'll turn the floor back to management for further remarks.
Speaker Change: Yes, I want to thank everybody for their time effort and support them hopefully.
Speaker Change: One of these assets the potential sales will hit here very soon.
Speaker Change: Look forward to updating you the minute that happens.
Speaker Change: Appreciate again all your support thank you.
Speaker Change: This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.