[PART I: FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%3A%20FINANCIAL%20INFORMATION) This section presents the company's financial statements, management's analysis, and disclosures on market risk and internal controls [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company reported significant revenue growth for Q2 and H1 2022, primarily from Infrastructure, but continued to post net losses and a stockholders' deficit, with negative operating cash flow [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2022 vs Q2 2021 Performance (in millions) | Metric | Q2 2022 | Q2 2021 | | :--- | :--- | :--- | | **Revenue** | $392.2 | $243.8 | | **Gross Profit** | $50.3 | $36.4 | | **(Loss) from Operations** | $(0.4) | $(7.7) | | **Loss from Continuing Operations** | $(13.9) | $(23.7) | | **Net Loss** | $(13.9) | $(25.2) | | **Net Loss Attributable to INNOVATE Corp.** | $(12.4) | $(23.5) | | **Basic & Diluted Loss Per Share** | $(0.18) | $(0.31) | H1 2022 vs H1 2021 Performance (in millions) | Metric | H1 2022 | H1 2021 | | :--- | :--- | :--- | | **Revenue** | $805.0 | $415.6 | | **Gross Profit** | $100.1 | $66.9 | | **Income (Loss) from Operations** | $0.3 | $(18.6) | | **Loss from Continuing Operations** | $(28.0) | $(66.6) | | **Net Loss** | $(28.0) | $(16.2) | | **Net Loss Attributable to INNOVATE Corp.** | $(24.8) | $(10.9) | | **Basic & Diluted Loss Per Share** | $(0.35) | $(0.15) | - The significant increase in revenue for both the three and six-month periods ended June 30, 2022, was primarily driven by the Infrastructure segment[212](index=212&type=chunk) [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Summary (in millions) | Account | June 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $482.3 | $442.6 | | **Total Assets** | $1,106.4 | $1,080.6 | | **Total Current Liabilities** | $461.7 | $439.5 | | **Total Liabilities** | $1,125.5 | $1,068.7 | | **Total Stockholders' Deficit** | $(84.1) | $(56.2) | - The company's total liabilities of **$1.126 billion** exceeded its total assets of **$1.106 billion**, resulting in a total stockholders' deficit of **$84.1 million** as of June 30, 2022[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for Six Months Ended June 30 (in millions) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | **Net cash used in operating activities** | $(42.7) | $(0.4) | | **Net cash used in investing activities** | $(11.5) | $(31.2) | | **Net cash provided by financing activities** | $34.8 | $66.0 | - Cash used in operating activities increased significantly in H1 2022 compared to H1 2021, primarily due to changes in working capital components like accounts receivable and contract assets[19](index=19&type=chunk) - Cash used in investing activities decreased in H1 2022, mainly because the prior year period included **$128.5 million** paid for acquisitions, net of cash acquired[19](index=19&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - The company operates through three reportable segments: Infrastructure (DBMG), Life Sciences (Pansend), and Spectrum (Broadcasting)[23](index=23&type=chunk) - The company believes it can meet its liquidity requirements for the next twelve months through available cash and distributions from subsidiaries, but acknowledges risks and potential needs for additional capital or asset sales[33](index=33&type=chunk) - The company is involved in several legal proceedings, including a VAT assessment, a stockholder class action against DBMG (FVI Action), and a stockholder derivative litigation against DTV (Bocock, et al), with management believing the ultimate outcome will not have a material effect on its financial position[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)[140](index=140&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=45&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes significant revenue growth to the Infrastructure segment, with narrowed operating losses, while managing liquidity through subsidiary distributions and addressing debt covenant compliance - Revenue for Q2 2022 increased by **$148.4 million** year-over-year, primarily due to the Infrastructure segment's acquisition of Banker Steel on May 27, 2021, and increased market demand[212](index=212&type=chunk) - The loss from operations for Q2 2022 decreased to **$0.4 million** from **$7.7 million** in Q2 2021, driven by improved profitability in the Infrastructure segment and reduced corporate expenses, partially offset by an asset impairment in the Spectrum segment[213](index=213&type=chunk) - As of June 30, 2022, the company had **$24.9 million** in consolidated cash and cash equivalents, with the Non-Operating Corporate segment holding **$3.6 million** of this total[262](index=262&type=chunk) [Results of Operations](index=47&type=section&id=Results%20of%20Operations) Consolidated Results of Operations (in millions) | Line Item | Q2 2022 | Q2 2021 | Change | H1 2022 | H1 2021 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | $392.2 | $243.8 | $148.4 | $805.0 | $415.6 | $389.4 | | **Total (loss) income from operations** | $(0.4) | $(7.7) | $7.3 | $0.3 | $(18.6) | $18.9 | | **Loss from continuing operations** | $(11.9) | $(21.1) | $9.2 | $(24.4) | $(62.9) | $38.5 | | **Net loss attributable to INNOVATE Corp.** | $(12.4) | $(23.5) | $11.1 | $(24.8) | $(10.9) | $(13.9) | [Segment Results of Operations](index=48&type=section&id=Segment%20Results%20of%20Operations) - **Infrastructure:** Revenue for Q2 2022 increased by **$150.1 million** YoY, primarily driven by the Banker Steel acquisition, which contributed an incremental **$105.4 million**[222](index=222&type=chunk) - **Life Sciences:** Revenue for Q2 2022 decreased slightly by **$0.2 million** YoY, and the segment's operating loss widened to **$5.2 million** from **$4.5 million**, driven by higher SG&A expenses at R2 Technologies[229](index=229&type=chunk) - **Spectrum:** Revenue for Q2 2022 decreased by **$1.5 million** YoY due to lower advertising revenues at the Azteca network, and the segment swung to an operating loss of **$3.1 million** from a **$1.4 million** income, partly due to a **$1.7 million** asset impairment[233](index=233&type=chunk)[237](index=237&type=chunk) - **Non-operating Corporate:** The operating loss for Q2 2022 narrowed to **$3.9 million** from **$6.6 million** YoY, mainly due to a settlement expense for the company's former CEO accrued in the prior period and lower legal fees[239](index=239&type=chunk) [Non-GAAP Financial Measures and Other Information](index=53&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Other%20Information) Adjusted EBITDA by Segment (in millions) | Segment | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | **Infrastructure** | $20.9 | $13.9 | $41.4 | $25.2 | | **Life Sciences** | $(7.5) | $(6.1) | $(13.3) | $(12.3) | | **Spectrum** | $0.4 | $2.7 | $1.7 | $3.5 | | **Non-Operating Corporate** | $(3.4) | $(5.7) | $(8.0) | $(9.7) | | **Other and Eliminations** | $1.7 | $1.7 | $1.8 | $0.8 | | **Total Adjusted EBITDA** | **$12.1** | **$6.5** | **$23.6** | **$7.5** | - The Infrastructure segment's backlog was **$1.485 billion** at June 30, 2022[260](index=260&type=chunk) [Liquidity and Capital Resources](index=57&type=section&id=Liquidity%20and%20Capital%20Resources) - Consolidated cash and cash equivalents decreased to **$24.9 million** at June 30, 2022, from **$45.5 million** at December 31, 2021[262](index=262&type=chunk) - Consolidated principal indebtedness increased by **$39.1 million** to **$669.9 million** during the first half of 2022, mainly due to a **$57.3 million** increase in DBMG's line of credit to fund working capital[264](index=264&type=chunk) - The company was out of compliance with the Fixed Coverage Ratio covenant for its Infrastructure segment's UMB Revolving Line as of June 30, 2022, but finalized an amended agreement on August 2, 2022, which included a retrospective change that brought it back into compliance[91](index=91&type=chunk)[285](index=285&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=54&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reported no quantitative and qualitative disclosures about market risk for the period - The report states there are no quantitative and qualitative disclosures about market risk[318](index=318&type=chunk) [Controls and Procedures](index=54&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective[319](index=319&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[320](index=320&type=chunk) [PART II. OTHER INFORMATION](index=54&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings and exhibits filed with the financial report [Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various claims and legal proceedings arising in the ordinary course of business, which management believes will not materially affect its financial statements - The company is subject to claims and legal proceedings that arise in the ordinary course of business but does not believe they will have a material adverse effect on its financial statements, with more details available in Note 13[321](index=321&type=chunk) [Exhibits](index=55&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The exhibits filed with the report include certifications from the CEO and CFO under Rule 13a-14(a)/15d-14(a) and Section 1350, as well as XBRL financial data[323](index=323&type=chunk)

INNOVATE Corp. (NYSE:VATE) Q1 2022 Earnings Conference Call May 4, 2022 4:30 PM ET Company Participants Wayne Barr Jr. - CEO Michael Sena - CFO Anthony Rozmus - Investor Relations Avie Glazer - Chairman Conference Call Participants Brian Charles - R.W. Pressprich Operator Good afternoon and welcome to INNOVATE Corp's First Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. After prepared remarks and presentation, there will be a question-and-answer session. Please note th ...

INNOVATE Corp. INNOVATE Q1 2022 Earnings Release Supplement May 4, 2022 © INNOVATE Corp. 2022 Safe Harbor Disclaimers Cautionary Statement Regarding Forward-Looking Statements Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This presentation contains, and certain oral statements made by our representatives from time to time may contain, "forward-looking statements." Generally, forward-looking statements include information describing actions, events, results, strategies and ...

PART I [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's Q1 2022 financial statements reflect significant revenue growth to **$412.8 million**, a net loss of **$14.1 million**, and increased total assets and liabilities Condensed Consolidated Statements of Operations | Financial Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :--- | :--- | :--- | | **Revenue** | $412.8 | $171.8 | | **Gross Profit** | $49.8 | $30.5 | | **Income (Loss) from Operations** | $0.7 | $(10.9) | | **Loss from Continuing Operations** | $(14.1) | $(42.9) | | **Net (Loss) Income** | $(14.1) | $9.0 | | **Diluted (Loss) Per Share - Continuing Operations** | $(0.18) | $(0.51) | - The significant increase in revenue was primarily driven by the Infrastructure segment. The net loss in Q1 2022 contrasts with net income in Q1 2021, which was bolstered by **$51.9 million** in income from discontinued operations, including a **$40.4 million** gain on disposal[10](index=10&type=chunk) Condensed Consolidated Balance Sheets | Balance Sheet Item | March 31, 2022 (in millions) | December 31, 2021 (in millions) | | :--- | :--- | :--- | | **Cash and cash equivalents** | $26.4 | $45.5 | | **Total current assets** | $476.6 | $442.6 | | **Total assets** | $1,112.2 | $1,080.6 | | **Total current liabilities** | $441.5 | $439.5 | | **Debt obligations (Current + Long-term)** | $681.1 | $626.3 | | **Total liabilities** | $1,115.3 | $1,068.7 | | **Total stockholders' deficit** | $(69.3) | $(56.2) | Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :--- | :--- | :--- | | **Cash used in operating activities** | $(63.4) | $(2.5) | | **Cash (used in) provided by investing activities** | $(7.4) | $67.9 | | **Cash provided by (used in) financing activities** | $51.2 | $(35.9) | | **Net change in cash, cash equivalents and restricted cash** | $(19.1) | $10.9 | - The increase in cash used in operating activities was primarily due to changes in working capital. The significant shift in investing activities from providing cash to using cash was mainly because the prior year period included **$71.2 million** in proceeds from dispositions[19](index=19&type=chunk) Notes to Condensed Consolidated Financial Statements - The company operates as a diversified holding company with three reportable segments: Infrastructure (DBMG), Life Sciences (Pansend), and Spectrum (Broadcasting)[22](index=22&type=chunk)[23](index=23&type=chunk) - The results of Beyond6, Inc. ("Beyond6") and Continental Insurance Group ("CIG") are reported as discontinued operations following their sales[42](index=42&type=chunk) - On March 15, 2021, the company's subsidiary DBMG entered into an agreement to acquire 100% of Banker Steel Holdco LLC for **$145.0 million**, which closed on May 27, 2021[63](index=63&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=42&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes **140% revenue growth** to the Infrastructure segment, with operating income turning positive and Adjusted EBITDA significantly increasing, despite decreased corporate liquidity and increased consolidated debt for working capital Results of Operations - Revenue for Q1 2022 increased by **$241.0 million (140%)** to **$412.8 million**, primarily due to the Infrastructure segment's acquisition of Banker Steel in Q2 2021 and increased market demand[203](index=203&type=chunk) - Income from operations improved by **$11.6 million** to **$0.7 million** in Q1 2022 from a loss of **$10.9 million** in Q1 2021, largely driven by the contribution from Banker Steel and reduced corporate legal expenses[204](index=204&type=chunk) - Interest expense decreased by **$8.8 million** to **$12.6 million**, mainly due to the refinancing of Non-Operating Corporate's senior secured notes in Q1 2021[205](index=205&type=chunk) Segment Results of Operations | Segment | Q1 2022 Revenue (in millions) | Q1 2021 Revenue (in millions) | Q1 2022 Operating Income (Loss) (in millions) | Q1 2021 Operating Income (Loss) (in millions) | | :--- | :--- | :--- | :--- | :--- | | **Infrastructure** | $402.2 | $161.3 | $11.9 | $2.2 | | **Life Sciences** | $0.8 | $0.0 | $(5.0) | $(4.8) | | **Spectrum** | $9.8 | $10.5 | $(0.4) | $(1.2) | | **Non-operating Corporate** | N/A | N/A | $(5.7) | $(6.7) | - The Infrastructure segment's revenue growth was driven by the Banker Steel acquisition, which contributed an incremental **$136.1 million**[211](index=211&type=chunk) - The Spectrum segment's operating loss narrowed due to a decrease in salaries and severance expense, despite a slight revenue decline from lower advertising at the Azteca network[220](index=220&type=chunk)[222](index=222&type=chunk) Non-GAAP Financial Measures and Other Information | Segment | Q1 2022 Adjusted EBITDA (in millions) | Q1 2021 Adjusted EBITDA (in millions) | | :--- | :--- | :--- | | **Infrastructure** | $20.5 | $11.3 | | **Life Sciences** | $(5.8) | $(6.2) | | **Spectrum** | $1.3 | $0.8 | | **Non-Operating Corporate** | $(4.6) | $(4.0) | | **Total Adjusted EBITDA** | **$11.5** | **$1.0** | - The significant increase in total Adjusted EBITDA was primarily driven by the Infrastructure segment, which benefited from the Banker Steel acquisition and higher sales at its fabrication and erection business[230](index=230&type=chunk) Liquidity and Capital Resources - As of March 31, 2022, the company had **$26.4 million** in consolidated cash and cash equivalents, down from **$45.5 million** at year-end 2021. The Non-Operating Corporate segment held **$5.3 million** of this cash[239](index=239&type=chunk) - Consolidated indebtedness increased by **$53.8 million** during the quarter to **$684.6 million**, mainly due to a **$60.0 million** draw on DBMG's line of credit to fund working capital[242](index=242&type=chunk) - Management believes it can meet liquidity needs for at least the next twelve months through available cash and distributions from subsidiaries, but notes that such distributions are subject to various factors and restrictions[245](index=245&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=61&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company did not provide any quantitative or qualitative disclosures about market risk in this report - The report states "None" for this item, indicating no new or updated disclosures regarding market risk for the period[298](index=298&type=chunk) [Controls and Procedures](index=61&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal controls - Based on an evaluation as of the end of the period, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[299](index=299&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[300](index=300&type=chunk) PART II: OTHER INFORMATION [Legal Proceedings](index=61&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, but management does not anticipate any material adverse effect on its financial statements - The company is subject to ordinary course claims and legal proceedings but does not believe any pending matters will have a material adverse effect on its Condensed Consolidated Financial Statements[301](index=301&type=chunk) - A liability is recorded when a loss is considered probable and can be reasonably estimated. For more detailed information, the report refers to Note 13, "Commitments and Contingencies"[301](index=301&type=chunk) [Exhibits](index=63&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, which include CEO and CFO certifications as required by the Sarbanes-Oxley Act and financial data formatted in XBRL - The exhibits filed with this report include certifications from the Chief Executive Officer and Chief Financial Officer under Rule 13a-14(a)/15d-14(a) and Section 1350[304](index=304&type=chunk) - Financial statements and notes are also provided in extensible business reporting language (XBRL) format as an exhibit[304](index=304&type=chunk)

INNOVATE Corp. INNOVATE Q4 2021 Earnings Release Supplement March 9, 2022 © INNOVATE Corp. 2022 Safe Harbor Disclaimers Cautionary Statement Regarding Forward-Looking Statements Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This presentation contains, and certain oral statements made by our representatives from time to time may contain, "forward-looking statements." Generally, forward-looking statements include information describing actions, events, results, strategies a ...

INNOVATE Corp. (NYSE:VATE) Q4 2021 Earnings Conference Call March 9, 2022 4:30 PM ET Company Participants Wayne Barr Jr. – President and Chief Executive Officer Michael Sena – Chief Finance Officer Anthony Rozmus – Investor Relations Avie Glazer – Chairman Conference Call Participants Brian Charles – R.W. Pressprich Operator Good afternoon and welcome to INNOVATE Corp's Fourth Quarter and Full Year 2021 Earnings conference call. All participants will be in a listen-only mode. After prepared remarks and pres ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. Commission File No. 001-35210 INNOVATE CORP. (Exact name of registrant as specified in its charter) Delaware 54-1708481 (State or other jurisdiction of incorporation or organization) 295 Madison Avenue, ...

INNOVATE Corp. (NYSE:VATE) Q3 2021 Earnings Conference Call November 4, 2021 4:30 PM ET Company Participants Anthony Rozmus - Investor Relations Avie Glazer - Chairman Wayne Barr, Jr. - President and Chief Executive Officer Michael Sena - Chief Finance Officer Rustin Roach - President and Chief Executive Officer, DBM Global Conference Call Participants Nitin Sacheti - Papyrus Operator Good morning, and welcome to INNOVATE Corporation Third Quarter 2021 Earnings Call. During the presentation, all participant ...

[PART I - FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents INNOVATE Corp.'s unaudited condensed consolidated financial statements and management's discussion for the period [Item 1. Financial Statements (Unaudited)](index=2&type=section&id=Item%201.%20Financial%20Statements%20%28unaudited%29) This section presents INNOVATE Corp.'s unaudited condensed consolidated financial statements and detailed notes for the specified reporting periods [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement details the company's revenues, expenses, and net loss for the three and nine months ended September 30, 2021 and 2020 Three Months Ended September 30, 2021 vs. 2020 (in millions): | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Revenue | $394.8 | $170.5 | +$224.3 | | Gross profit | $55.1 | $31.7 | +$23.4 | | Income (loss) from operations | $1.1 | $(16.1) | +$17.2 | | Loss from continuing operations before income taxes | $(14.1) | $(28.4) | +$14.3 | | Net loss | $(214.5) | $(21.6) | $(192.9) | | Net loss attributable to INNOVATE Corp. | $(211.9) | $(17.3) | $(194.6) | | Loss per common share - Basic | $(2.75) | $(0.37) | $(2.38) | Nine Months Ended September 30, 2021 vs. 2020 (in millions): | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Revenue | $810.4 | $538.9 | +$271.5 | | Gross profit | $122.0 | $91.2 | +$30.8 | | Income (loss) from operations | $(17.5) | $(38.6) | +$21.1 | | Loss from continuing operations before income taxes | $(77.0) | $(35.0) | $(42.0) | | Net loss | $(230.7) | $(94.1) | $(136.6) | | Net loss attributable to INNOVATE Corp. | $(222.8) | $(87.3) | $(135.5) | | Loss per common share - Basic | $(2.92) | $(1.89) | $(1.03) | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) This statement presents the net loss and other comprehensive income (loss) components for the reporting periods Three Months Ended September 30, 2021 vs. 2020 (in millions): | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Net loss | $(214.5) | $(21.6) | $(192.9) | | Other comprehensive (loss) income | $(335.2) | $64.5 | $(399.7) | | Comprehensive (loss) income | $(549.7) | $42.9 | $(592.6) | | Comprehensive (loss) income attributable to INNOVATE Corp. | $(552.3) | $38.3 | $(590.6) | Nine Months Ended September 30, 2021 vs. 2020 (in millions): | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Net loss | $(230.7) | $(94.1) | $(136.6) | | Other comprehensive (loss) income | $(394.1) | $98.4 | $(492.5) | | Comprehensive (loss) income | $(624.8) | $4.3 | $(629.1) | | Comprehensive (loss) income attributable to INNOVATE Corp. | $(632.8) | $7.0 | $(639.8) | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and equity as of September 30, 2021, and December 31, 2020 As of September 30, 2021 vs. December 31, 2020 (in millions): | Metric | Sep 30, 2021 | Dec 31, 2020 | Change | | :--- | :--- | :--- | :--- | | Total current assets | $592.2 | $6,246.3 | $(5,654.1) | | Total assets | $1,221.5 | $6,742.8 | $(5,521.3) | | Total current liabilities | $533.4 | $5,952.2 | $(5,418.8) | | Total liabilities | $1,205.9 | $6,126.9 | $(4,921.0) | | Total stockholders' (deficit) equity | $(54.7) | $600.2 | $(654.9) | [Condensed Consolidated Statements of Stockholders' (Deficit) Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20%28Deficit%29%20Equity) This statement tracks changes in stockholders' equity, including net loss and other comprehensive loss, for the reporting period - Total INNOVATE Corp. stockholders' (deficit) equity decreased from **$559.8 million** as of December 31, 2020, to **$(82.2) million** as of September 30, 2021, primarily due to a net loss of **$(222.8) million** and other comprehensive loss of **$(393.7) million** for the nine months ended September 30, 2021[16](index=16&type=chunk) - Accumulated deficit increased significantly from **$(188.7) million** at December 31, 2020, to **$(411.5) million** at September 30, 2021, reflecting the net losses incurred[16](index=16&type=chunk) - Accumulated other comprehensive income decreased from **$396.9 million** at December 31, 2020, to **$3.2 million** at September 30, 2021, largely due to other comprehensive losses[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash flows from operating, investing, and financing activities for the nine months ended September 30, 2021 and 2020 Nine Months Ended September 30, 2021 vs. 2020 (in millions): | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Cash (used in) provided by continuing operating activities | $(14.6) | $77.4 | $(92.0) | | Cash (used in) provided by continuing investing activities | $(214.9) | $70.4 | $(285.3) | | Cash provided by (used in) continuing financing activities | $54.6 | $(223.8) | +$278.4 | | Net change in cash, cash equivalents and restricted cash | $18.8 | $5.1 | +$13.7 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Organization and Business](index=11&type=section&id=1.%20Organization%20and%20Business) This note describes INNOVATE Corp.'s structure as a diversified holding company and its operating segments - INNOVATE Corp. is a diversified holding company with three reportable segments: Infrastructure (DBM Global Inc.), Life Sciences (Pansend Life Sciences, LLC), and Spectrum (HC2 Broadcasting Holdings Inc.), plus an 'Other' segment for businesses not meeting separate reporting thresholds[22](index=22&type=chunk)[23](index=23&type=chunk) - The company aims to acquire controlling equity interests in its operating subsidiaries to generate long-term sustainable free cash flow and attractive returns[22](index=22&type=chunk) [2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and policies applied in preparing the financial statements - The company consolidates all wholly-owned subsidiaries and others over which it exerts control, eliminating intercompany transactions[28](index=28&type=chunk) - Management believes it can meet liquidity requirements for the next **twelve months** through available cash and subsidiary distributions, though no assurance exists for additional equity or debt financing on favorable terms[32](index=32&type=chunk) - The COVID-19 pandemic's impact on financial position and operating results remains uncertain but could be adverse, with ongoing assessment of its evolving effects[33](index=33&type=chunk) - The company reclassified results of Beyond6, ICS, and CIG to discontinued operations and recast prior period EPS accordingly[36](index=36&type=chunk) - ASU 2020-06, simplifying accounting for convertible debt and preferred stock, was early adopted as of January 1, 2021, with no impact on the company[38](index=38&type=chunk) [3. Discontinued Operations](index=15&type=section&id=3.%20Discontinued%20Operations) This note details the financial results and impact of businesses reclassified as discontinued operations - The results of GMSL, ICS, Beyond6, and CIG were reported as discontinued operations[41](index=41&type=chunk) (Loss) income from discontinued operations (in millions): | Period | 2021 | 2020 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | $(200.3) | $8.2 | | Nine Months Ended Sep 30 | $(149.9) | $(55.4) | - The sale of CIG closed on July 1, 2021, resulting in a **$200.8 million** loss on sale, driven by risks in the long-term care insurance industry and prior goodwill impairment[43](index=43&type=chunk)[45](index=45&type=chunk) - The sale of Beyond6 closed on January 15, 2021, generating a **$39.2 million** gain in Q1 2021, with an additional **$0.5 million** gain in Q3 2021 from escrow releases[51](index=51&type=chunk) [4. Revenue](index=19&type=section&id=4.%20Revenue) This note breaks down total revenue by segment and explains the drivers of revenue changes Total Revenue by Segment (in millions): | Segment | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Infrastructure | $383.0 | $160.8 | $776.3 | $509.6 | | Spectrum | $10.2 | $9.7 | $31.3 | $29.3 | | Life Sciences | $1.6 | $— | $2.8 | $— | | **Total Revenue** | **$394.8** | **$170.5** | **$810.4** | **$538.9** | - Infrastructure segment revenue significantly increased, primarily due to the acquisition of Banker Steel and growth in commercial, industrial, and convention markets[57](index=57&type=chunk) - Life Sciences segment revenue increased from zero to **$1.6 million** (three months) and **$2.8 million** (nine months) due to the sale of Glacial Rx products by R2[59](index=59&type=chunk) - Spectrum segment revenue saw a modest increase, driven by higher station revenues from expanded coverage and more OTA stations in operation[60](index=60&type=chunk) [5. Acquisitions, Dispositions, and Deconsolidations](index=22&type=section&id=5.%20Acquisitions%2C%20Dispositions%2C%20and%20Deconsolidations) This note provides details on significant business acquisitions, sales, and changes in control during the period - DBM Global Inc. (DBMG) acquired **100%** of Banker Steel Holdco LLC for **$145.0 million** on May 27, 2021, financed by a revolving credit facility, sellers' notes, assumed debt, and cash from INNOVATE[61](index=61&type=chunk) - The Banker Steel acquisition added **$12.1 million** in goodwill and **$61.4 million** in intangibles, including customer relationships and trade names[65](index=65&type=chunk) - The company increased its controlling interest in DTV from approximately **60%** to **76%** during the nine months ended September 30, 2021[69](index=69&type=chunk) - Sales of GMSL, HMN (partial), ICS, Beyond6, and CIG were completed, with CIG's sale resulting in a **$200.8 million** loss and Beyond6's sale yielding a **$39.7 million** gain[73](index=73&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk)[81](index=81&type=chunk) [6. Accounts Receivable, net](index=26&type=section&id=6.%20Accounts%20Receivable%2C%20net) This note presents the composition of accounts receivable, including contracts in progress and trade receivables Accounts Receivable, net (in millions): | Category | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Contracts in progress | $306.0 | $118.6 | | Unbilled retentions | $99.8 | $50.3 | | Trade receivables | $9.3 | $7.5 | | Other receivables | $10.5 | $8.9 | | Allowance for doubtful accounts | $(0.6) | $(0.6) | | **Total** | **$425.0** | **$184.7** | [7. Property, Plant and Equipment, net](index=26&type=section&id=7.%20Property%2C%20Plant%20and%20Equipment%2C%20net) This note details the company's property, plant, and equipment, along with depreciation expense Property, Plant and Equipment, net (in millions): | Category | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Equipment, furniture and fixtures, and software | $169.2 | $113.7 | | Building and leasehold improvements | $43.3 | $41.0 | | Land | $24.1 | $24.1 | | Construction in progress | $13.4 | $3.1 | | Plant and transportation equipment | $8.3 | $4.4 | | Less: Accumulated depreciation | $(90.1) | $(73.5) | | **Total** | **$168.2** | **$112.8** | - Depreciation expense for the three months ended September 30, 2021, was **$7.8 million**, up from **$5.3 million** in the prior year, with **$3.4 million** recognized in cost of revenue[85](index=85&type=chunk) - For the nine months ended September 30, 2021, depreciation expense was **$17.7 million**, up from **$15.6 million** in the prior year, with **$8.4 million** in cost of revenue[86](index=86&type=chunk) [8. Goodwill and Intangibles, net](index=26&type=section&id=8.%20Goodwill%20and%20Intangibles%2C%20net) This note provides a breakdown of goodwill and intangible assets by segment and asset class Goodwill by Segment (in millions): | Segment | Dec 31, 2020 | Acquisitions | Translation | Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Infrastructure | $89.6 | $12.1 | $(0.3) | $101.4 | | Spectrum | $21.4 | $— | $— | $21.4 | | **Total** | **$111.0** | **$12.1** | **$(0.3)** | **$122.8** | Indefinite-lived Intangible Assets (in millions): | Asset | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | FCC licenses | $106.5 | $113.0 | | **Total** | **$106.5** | **$113.0** | - FCC licenses decreased by **$6.5 million** for the nine months ended September 30, 2021, primarily due to the Spectrum segment selling non-core FCC licenses[88](index=88&type=chunk) Definite Lived Intangible Assets, Net (in millions): | Asset Class | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Trade names | $19.6 | $13.4 | | Customer relationships and contracts | $70.2 | $24.3 | | Channel sharing arrangements | $11.6 | $18.6 | | Other | $5.2 | $2.8 | | **Total Net** | **$106.6** | **$59.1** | - Amortization expense for definite-lived intangible assets was **$4.5 million** for Q3 2021 (vs. **$1.5 million** in Q3 2020) and **$8.3 million** for the nine months ended September 30, 2021 (vs. **$4.6 million** in 2020)[90](index=90&type=chunk)[91](index=91&type=chunk) [9. Debt Obligations](index=29&type=section&id=9.%20Debt%20Obligations) This note outlines the company's various debt instruments, refinancing activities, and associated terms Debt Obligations (in millions): | Segment/Type | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Infrastructure | $181.5 | $110.5 | | Spectrum | $54.4 | $52.8 | | Non-Operating Corporate | $390.0 | $410.4 | | Unamortized discount/costs | $(2.1) | $(15.1) | | Less: current portion | $(71.1) | $(433.6) | | **Total Debt Obligations** | **$602.8** | **$127.9** | - In May 2021, DBMG repaid existing debt and entered a new credit facility with UMB Bank, including a **$110.0 million** term loan (**3.25% interest**, due 2026) and a **$110.0 million** revolving credit agreement (Prime Rate minus **1.10%**, due 2024)[94](index=94&type=chunk) - On February 1, 2021, INNOVATE repaid its 2021 Senior Secured Notes and issued **$330.0 million** of **8.5% senior secured notes** due 2026. It also exchanged **$51.8 million** of 2022 Convertible Notes for new **7.5% convertible notes** due 2026[98](index=98&type=chunk) - The company recorded a **$12.5 million** loss on early extinguishment or restructuring of debt for the nine months ended September 30, 2021, primarily due to these refinancing activities[10](index=10&type=chunk) [10. Supplementary Financial Information](index=33&type=section&id=10.%20Supplementary%20Financial%20Information) This note provides additional financial details, including contracts in progress, investments, and fair value disclosures Contracts in Progress (in millions): | Category | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Costs incurred on contracts in progress | $1,830.8 | $752.9 | | Estimated earnings | $287.8 | $139.0 | | Less: progress billings | $(2,207.5) | $(888.5) | | **Net** | **$(88.9)** | **$3.4** | Investments (in millions): | Category | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Common stock | $2.4 | $2.5 | | Preferred stock | $10.0 | $15.4 | | Fixed maturities | $0.5 | $0.5 | | Put option | $11.3 | $11.3 | | Equity method securities | $25.7 | $25.7 | | **Total** | **$49.9** | **$55.4** | - The fair value of debt obligations not measured at fair value was **$689.4 million** at September 30, 2021, compared to a carrying value of **$673.9 million**, classified as Level 2[113](index=113&type=chunk)[114](index=114&type=chunk) [11. Leases](index=35&type=section&id=11.%20Leases) This note details the company's lease assets, liabilities, and associated lease costs and terms Lease Assets and Liabilities (in millions): | Category | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Operating lease ROU assets | $68.1 | $39.8 | | Finance lease ROU assets | $0.1 | $0.9 | | Current operating lease liability | $15.6 | $11.2 | | Non-current operating lease liability | $56.7 | $31.6 | | Finance lease liability | $0.1 | $0.8 | | **Total Lease Liabilities** | **$72.4** | **$43.6** | - Total lease cost for the three months ended September 30, 2021, was **$8.2 million** (vs. **$7.1 million** in 2020), and **$16.8 million** for the nine months ended September 30, 2021 (vs. **$15.2 million** in 2020)[119](index=119&type=chunk) - The weighted-average remaining lease term for operating leases was **7.5 years** (vs. **4.0 years** in 2020), and for finance leases was **1.3 years** (vs. **1.1 years** in 2020)[120](index=120&type=chunk) [12. Income Taxes](index=36&type=section&id=12.%20Income%20Taxes) This note explains the company's income tax expense, deferred taxes, and net operating loss carryforwards - Income tax expense was **$0.1 million** for Q3 2021 (vs. **$1.4 million** in Q3 2020) and **$3.8 million** for the nine months ended September 30, 2021 (vs. **$3.7 million** in 2020), primarily related to tax-paying entities[122](index=122&type=chunk)[123](index=123&type=chunk) - Tax benefits from U.S. consolidated income tax return losses are reduced by a full valuation allowance due to uncertainty of utilization[122](index=122&type=chunk)[123](index=123&type=chunk) - At December 31, 2020, the company had **$170.3 million** in gross U.S. net operating loss carryforwards, with an estimated **$101.5 million** available for 2021[124](index=124&type=chunk) - The company deferred approximately **$11.0 million** of employer payroll tax obligations under the CARES Act, with **50%** due by December 31, 2021, and the remainder by December 31, 2022[129](index=129&type=chunk) [13. Commitments and Contingencies](index=38&type=section&id=13.%20Commitments%20and%20Contingencies) This note describes the company's legal proceedings, claims, and other contingent liabilities - The company is involved in various claims and legal proceedings in the ordinary course of business, but management does not believe they will have a material adverse effect on its financial statements[130](index=130&type=chunk)[131](index=131&type=chunk) - Ongoing litigation includes a stockholder class action and derivative complaint (FVI Action) against INNOVATE and DBMG officers/directors, and a DTV derivative litigation, both of which the company intends to vigorously defend[134](index=134&type=chunk)[135](index=135&type=chunk) - The company reached a settlement proposal with former CEO Philip A. Falcone regarding his separation and arbitration demand[136](index=136&type=chunk) [14. Share-based Compensation](index=40&type=section&id=14.%20Share-based%20Compensation) This note details the company's share-based compensation plans, expense, and equity activity - Total share-based compensation expense was **$1.7 million** for the nine months ended September 30, 2021, down from **$2.5 million** in 2020[139](index=139&type=chunk) Restricted Stock Activity: | Metric | Unvested - Dec 31, 2020 | Granted (9M 2021) | Vested (9M 2021) | Forfeited (9M 2021) | Unvested - Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | | Shares | 628,433 | 593,458 | (445,911) | (151,469) | 624,511 | | Weighted Average Grant Date Fair Value | $3.93 | $3.81 | $3.70 | $4.13 | $3.94 | - Unrecognized stock-based compensation expense for restricted stock was **$1.5 million** at September 30, 2021, expected to be recognized over **2.0 years**[141](index=141&type=chunk) Stock Option Activity: | Metric | Outstanding - Dec 31, 2020 | Granted (9M 2021) | Expired (9M 2021) | Outstanding - Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Shares | 4,739,858 | — | (23,999) | 4,715,859 | | Weighted Average Exercise Price | $5.13 | $— | $5.31 | $5.13 | - Unrecognized stock-based compensation expense for stock options was **$0.1 million** at September 30, 2021, expected to be recognized over **0.5 years**[143](index=143&type=chunk) [15. Equity](index=41&type=section&id=15.%20Equity) This note provides information on the company's preferred stock, common stock, and equity-related transactions Preferred Shares Outstanding: | Series | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Series A | — | 6,375 | | Series A-2 | — | 4,000 | | Series A-3 | 6,125 | — | | Series A-4 | 10,000 | — | - On May 29, 2021, Series A and A-2 Preferred Stock were redeemed for **$10.4 million** cash or converted into **50,410** common shares[150](index=150&type=chunk) - On July 1, 2021, the remaining Series A and A-2 shares held by CGIC were exchanged for new Series A-3 and A-4 Convertible Participating Preferred Stock, maturing July 1, 2026, with substantially similar terms[151](index=151&type=chunk) - The Series A-3 and A-4 Preferred Stock accrue a cumulative quarterly cash dividend at an annualized rate of **7.50%** and accrete at **4.00%** (reducible to **2.00%** or **0.0%** based on net asset value growth)[153](index=153&type=chunk) - On August 30, 2021, the company adopted a Tax Benefits Preservation Plan to deter ownership changes (**4.9%** or more beneficial ownership) and protect its net operating losses and other tax assets[170](index=170&type=chunk)[171](index=171&type=chunk) [16. Related Parties](index=46&type=section&id=16.%20Related%20Parties) This note discloses transactions and balances with related parties, including leases and debt - Banker Steel, a DBMG subsidiary, leases two office spaces and two planes from related parties owned by Donald Banker, CEO of Banker Steel, incurring lease expenses of **$23 thousand** and **$0.4 million**, respectively, for Q3 2021[177](index=177&type=chunk)[178](index=178&type=chunk) - Banker Steel also has a **$6.3 million** subordinated note payable to Donald Banker, with an **11% interest rate** and maturity date of June 30, 2024[179](index=179&type=chunk) [17. Operating Segment and Related Information](index=46&type=section&id=17.%20Operating%20Segment%20and%20Related%20Information) This note presents financial performance and asset information segmented by the company's operating businesses - The company operates in three reportable segments: Infrastructure, Life Sciences, and Spectrum, plus an 'Other' segment and a 'Non-operating Corporate' segment[180](index=180&type=chunk) Income (Loss) from Operations by Segment (in millions): | Segment | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Infrastructure | $12.6 | $6.0 | $17.0 | $13.1 | | Life Sciences | $(4.9) | $(4.7) | $(14.2) | $(11.4) | | Spectrum | $(1.2) | $(11.7) | $(1.0) | $(15.8) | | Other | $(1.0) | $(0.4) | $(1.6) | $(2.1) | | Non-operating Corporate | $(4.4) | $(5.3) | $(17.7) | $(22.4) | | **Total** | **$1.1** | **$(16.1)** | **$(17.5)** | **$(38.6)** | Total Assets by Segment (in millions): | Segment | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Infrastructure | $917.7 | $494.8 | | Life Sciences | $29.3 | $21.4 | | Spectrum | $199.8 | $213.6 | | Other | $38.9 | $6,021.3 | | Non-operating Corporate | $35.8 | $30.1 | | Eliminations | $— | $(38.4) | | **Total** | **$1,221.5** | **$6,742.8** | [18. Basic and Diluted Income (Loss) Per Common Share](index=48&type=section&id=18.%20Basic%20and%20Diluted%20Income%20%28Loss%29%20Per%20Common%20Share) This note details the calculation of basic and diluted earnings per share, considering participating securities - EPS is calculated using the two-class method, considering unvested share-based payment awards as participating securities[184](index=184&type=chunk) - No dilutive common share equivalents existed for the nine months ended September 30, 2021 and 2020, due to losses from continuing operations[185](index=185&type=chunk) Loss Per Common Share (in millions, except per share amounts): | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Loss per common share - continuing operations (Basic/Diluted) | $(0.16) | $(0.57) | $(0.98) | $(1.06) | | (Loss) income per share - discontinued operations (Basic/Diluted) | $(2.59) | $0.20 | $(1.94) | $(0.83) | | Loss per share - Net loss attributable to common stock and participating preferred stockholders (Basic/Diluted) | $(2.75) | $(0.37) | $(2.92) | $(1.89) | [19. Subsequent Events](index=51&type=section&id=19.%20Subsequent%20Events) This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On October 21, 2021, HC2 Broadcasting extended **$52.2 million** of its Senior Secured Notes through November 30, 2022, and repurchased all outstanding DTV notes[189](index=189&type=chunk) - On November 1, 2021, the company entered a **10-year lease** for **20,950 square feet** of special purpose space, with annual payments of **$2.1 million**, commencing November 2023 or later[190](index=190&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=52&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses INNOVATE Corp.'s financial condition, results of operations, segment performance, liquidity, and non-GAAP measures [Our Business](index=52&type=section&id=Our%20Business) This section describes INNOVATE's diversified holding company structure and its primary operating segments - INNOVATE is a diversified holding company with three primary operating segments: Infrastructure (DBMG), Life Sciences (Pansend), and Spectrum, along with an 'Other' segment[194](index=194&type=chunk) - Certain prior year amounts have been reclassified to conform with current year presentations, including the recast of Beyond6, ICS, and CIG's results to discontinued operations[199](index=199&type=chunk) [Cyclical Patterns](index=52&type=section&id=Cyclical%20Patterns) This section discusses the cyclical nature of the company's business segments and factors influencing operating results - The company's segments, particularly Infrastructure, are highly cyclical, with business volume affected by project delays, geographic variations, and timing of permits for large projects[196](index=196&type=chunk)[197](index=197&type=chunk) - Operating results can fluctuate due to weather, customer financial conditions, project margins, and economic/political factors, making any single period's results not indicative of future performance[198](index=198&type=chunk) [Recent Developments](index=53&type=section&id=Recent%20Developments) This section highlights significant events and transactions impacting the company's financial position and operations - COVID-19 has caused supply chain challenges, labor shortages, and increased transportation costs, potentially delaying projects and impacting margins, though the Infrastructure segment has seen increased backlog as vaccination progresses[203](index=203&type=chunk)[205](index=205&type=chunk) - The Spectrum segment experienced adverse effects on its advertising business due to COVID-19 but has begun to stabilize, though future impacts remain uncertain[206](index=206&type=chunk)[207](index=207&type=chunk) - DBMG acquired Banker Steel for **$145.0 million** on May 27, 2021, expanding its structural steel and erection services[208](index=208&type=chunk) - The sale of CIG closed on July 1, 2021, resulting in a **$200.8 million** loss, and Beyond6 was sold on January 15, 2021, for a **$39.7 million** gain[212](index=212&type=chunk)[213](index=213&type=chunk) - INNOVATE refinanced its 2021 Senior Secured Notes with **$330.0 million** of **8.5% notes** due 2026 and exchanged 2022 Convertible Notes for 2026 Convertible Notes[214](index=214&type=chunk) - R2 Technologies received **$10.0 million** in funding from Huadong Medicine Company Limited and an additional **$15.0 million** in Series C funding from INNOVATE, supporting commercialization efforts[219](index=219&type=chunk)[220](index=220&type=chunk) - A Tax Benefits Preservation Plan was adopted on August 30, 2021, to protect the company's net operating losses by deterring ownership changes[221](index=221&type=chunk) [Financial Presentation Background](index=56&type=section&id=Financial%20Presentation%20Background) This section provides context for the financial statements, including the basis of presentation and comparative periods - The discussion compares results for the three and nine months ended September 30, 2021, against the same periods in 2020, prepared under U.S. GAAP[222](index=222&type=chunk) [Results of Operations](index=56&type=section&id=Results%20of%20Operations) This section analyzes the consolidated financial performance, including revenue, operating income, and net loss Consolidated Results of Operations (in millions): | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total revenue | $394.8 | $170.5 | +$224.3 | $810.4 | $538.9 | +$271.5 | | Total income (loss) from operations | $1.1 | $(16.1) | +$17.2 | $(17.5) | $(38.6) | +$21.1 | | Interest expense | $(12.8) | $(17.9) | +$5.1 | $(46.6) | $(56.2) | +$9.6 | | Loss from continuing operations | $(14.2) | $(29.8) | +$15.6 | $(80.8) | $(38.7) | $(42.1) | | (Loss) income from discontinued operations | $(200.3) | $8.2 | $(208.5) | $(149.9) | $(55.4) | $(94.5) | | Net loss | $(214.5) | $(21.6) | $(192.9) | $(230.7) | $(94.1) | $(136.6) | | Net loss attributable to INNOVATE Corp. | $(211.9) | $(17.3) | $(194.6) | $(222.8) | $(87.3) | $(135.5) | - Revenue increased significantly due to the Infrastructure segment's acquisition of Banker Steel and overall project growth[224](index=224&type=chunk) - Income from operations improved due to reduced asset impairments in Spectrum, operational improvements, and the contribution from Banker Steel, partially offset by increased spending in Life Sciences[225](index=225&type=chunk)[226](index=226&type=chunk) - Interest expense decreased due to the refinancing of 2021 Senior Secured Notes[227](index=227&type=chunk) - Loss on early extinguishment of debt increased due to refinancing activities for Senior Secured Notes, Convertible Notes, and Infrastructure debt[228](index=228&type=chunk) - Other income decreased significantly, primarily due to the gain on the partial sale of HMN in the prior year period[231](index=231&type=chunk)[232](index=232&type=chunk) [Segment Results of Operations](index=58&type=section&id=Segment%20Results%20of%20Operations) This section provides a detailed analysis of the financial performance for each of the company's operating segments - Infrastructure segment revenue increased by **$222.2 million** (Q3) and **$266.7 million** (9M) primarily due to the Banker Steel acquisition (**$114.3 million** in Q3, **$153.8 million** in 9M) and increased project work[236](index=236&type=chunk)[237](index=237&type=chunk) - Life Sciences segment revenue increased by **$1.6 million** (Q3) and **$2.8 million** (9M) as R2 began selling its Glacial Rx products[241](index=241&type=chunk) - Spectrum segment revenue increased by **$0.5 million** (Q3) and **$2.0 million** (9M) due to higher station revenues from expanded coverage and more OTA stations, and increased advertising at Azteca network[245](index=245&type=chunk)[246](index=246&type=chunk) - Non-operating Corporate selling, general and administrative expenses decreased by **$0.9 million** (Q3) and **$4.7 million** (9M) due to reduced non-recurring proxy contest costs and other cost-saving measures[252](index=252&type=chunk) - Loss from equity investees in Life Sciences increased due to higher equity method losses from MediBeacon, driven by clinical trial timing[253](index=253&type=chunk) [Non-GAAP Financial Measures and Other Information](index=61&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Other%20Information) This section presents non-GAAP financial measures, such as Adjusted EBITDA, and their reconciliation to GAAP measures - Adjusted EBITDA is a non-GAAP measure used by management to provide insight into operating trends and facilitate peer comparisons, excluding items like interest, taxes, depreciation, amortization, and non-recurring costs[257](index=257&type=chunk)[258](index=258&type=chunk) Adjusted EBITDA by Segment (in millions): | Segment | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Infrastructure | $24.4 | $17.7 | +$6.7 | $49.6 | $45.8 | +$3.8 | | Life Sciences | $(7.1) | $(5.9) | $(1.2) | $(19.4) | $(14.6) | $(4.8) | | Spectrum | $1.8 | $(0.2) | +$2.0 | $5.3 | $(2.4) | +$7.7 | | Non-Operating Corporate | $(3.8) | $(3.7) | $(0.1) | $(13.5) | $(12.3) | $(1.2) | | Other and Eliminations | $(1.0) | $(0.1) | $(0.9) | $(0.2) | $(1.0) | +$0.8 | | **Total Adjusted EBITDA** | **$14.3** | **$7.8** | **+$6.5** | **$21.8** | **$15.5** | **+$6.3** | - Infrastructure Adjusted EBITDA increased due to the Banker Steel acquisition, partially offset by project timing and market pressure on margins[259](index=259&type=chunk)[265](index=265&type=chunk) - Life Sciences Adjusted EBITDA loss increased due to R2's ramp-up for Glacial Rx launch and higher equity method losses from MediBeacon[260](index=260&type=chunk)[266](index=266&type=chunk) - Spectrum Adjusted EBITDA improved to a positive figure due to Azteca cost reductions, increased gross profit, and higher station revenues[261](index=261&type=chunk)[267](index=267&type=chunk) [Backlog](index=65&type=section&id=Backlog) This section details the company's project backlog, including contracted amounts and letters of intent - At September 30, 2021, DBMG's backlog was **$1,605.9 million**, with **$1,326.7 million** under contracts/purchase orders and **$279.2 million** under letters of intent/notices to proceed[272](index=272&type=chunk) - Approximately **62.5%** of DBMG's backlog (**$1,004.4 million**) was attributable to five contracts, indicating concentration risk[272](index=272&type=chunk) [Liquidity and Capital Resources](index=66&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, debt, and ability to meet its short-term and long-term financial obligations - Consolidated cash and cash equivalents increased to **$55.5 million** at September 30, 2021, from **$43.8 million** at December 31, 2020[274](index=274&type=chunk) - Consolidated indebtedness increased to **$676.0 million** at September 30, 2021, from **$576.6 million** at December 31, 2020[276](index=276&type=chunk) - INNOVATE's stand-alone debt includes **$330.0 million** of 2026 Senior Secured Notes, **$3.2 million** of 2022 Convertible Notes, and **$51.8 million** of 2026 Convertible Notes[277](index=277&type=chunk) - The company believes it can meet liquidity requirements for the next **twelve months** through available cash and subsidiary distributions, but future financing may be needed[283](index=283&type=chunk) - Capital expenditures for the nine months ended September 30, 2021, were **$15.0 million**, up from **$14.6 million** in 2020, with Infrastructure accounting for **$11.6 million**[285](index=285&type=chunk) - The 2026 Senior Secured Notes mature on February 1, 2026, accrue interest at **8.50% annually**, and are secured by substantially all company assets[286](index=286&type=chunk)[288](index=288&type=chunk) - The 2026 Convertible Notes mature on August 1, 2026, accrue interest at **7.5% annually**, and are convertible into common stock at an initial rate of **234.2971 shares per $1,000 principal amount**[297](index=297&type=chunk)[301](index=301&type=chunk) - The company is in compliance with its debt covenants, including liquidity and collateral coverage ratios, as of September 30, 2021[308](index=308&type=chunk)[309](index=309&type=chunk) Summary of Consolidated Cash Flows (in millions): | Activity | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change | | :--- | :--- | :--- | :--- | | Operating activities from Continuing Operations | $(48.1) | $(6.8) | $(41.3) | | Investing activities from Continuing Operations | $6.4 | $221.4 | $(215.0) | | Financing activities from Continuing Operations | $62.2 | $(205.7) | +$267.9 | | Cash flows from discontinued operations | $(195.4) | $(84.9) | $(110.5) | | **Net change in cash, cash equivalents and restricted cash** | **$18.8** | **$5.1** | **+$13.7** | - Cash used in operating activities increased due to working capital uses in Infrastructure, R2 product launch, and increases in accounts receivable[313](index=313&type=chunk) - Cash provided by investing activities decreased significantly due to the Banker Steel acquisition and reduced proceeds from subsidiary sales (Beyond6, Insurance segment) compared to prior year sales (GMSL, HMN)[314](index=314&type=chunk) - Cash provided by financing activities increased due to debt refinancing proceeds in Infrastructure and Non-Operating Corporate, and reduced dividend payments[315](index=315&type=chunk) [Discontinued Operations (MD&A)](index=72&type=section&id=Discontinued%20Operations%20%28MD%26A%29) This section provides management's discussion and analysis of the financial impact of discontinued operations - GMSL, ICS, Beyond6, and CIG have been reclassified as discontinued operations, with their revenues, costs, and expenses excluded from continuing operations[321](index=321&type=chunk) - Cash flows from discontinued operations are reported separately and are not expected to impact the company's liquidity[322](index=322&type=chunk)[323](index=323&type=chunk) [Off-Balance Sheet Arrangements](index=74&type=section&id=Off-Balance%20Sheet%20Arrangements) This section describes the company's off-balance sheet commitments, such as letters of credit and performance bonds - DBMG's off-balance sheet arrangements at September 30, 2021, included **$13.4 million** in letters of credit and **$860.4 million** in performance bonds[325](index=325&type=chunk) [New Accounting Pronouncements](index=74&type=section&id=New%20Accounting%20Pronouncements) This section outlines the impact of recently adopted or pending accounting standards on the company's financial statements - Refer to Note 2 for details on new accounting pronouncements, including the early adoption of ASU 2020-06 and the delayed adoption of ASU 2016-13 (Credit Loss Standard) until January 1, 2023[326](index=326&type=chunk) [Critical Accounting Policies](index=74&type=section&id=Critical%20Accounting%20Policies) This section discusses the accounting policies that require significant judgment and estimation by management - There were no material changes in the company's critical accounting policies during the quarter ended September 30, 2021[327](index=327&type=chunk) [Related Party Transactions (MD&A)](index=74&type=section&id=Related%20Party%20Transactions%20%28MD%26A%29) This section provides management's discussion of transactions with related parties - Refer to Note 16 for details on related party transactions, including leases and debt with Donald Banker, CEO of Banker Steel[328](index=328&type=chunk) [Corporate Information](index=74&type=section&id=Corporate%20Information) This section provides basic corporate details about INNOVATE Corp., including its incorporation and executive offices - INNOVATE Corp. is a Delaware corporation, incorporated in 1994, with executive offices in New York, NY[329](index=329&type=chunk) [Special Note Regarding Forward-Looking Statements](index=75&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) This section cautions readers about forward-looking statements and the inherent risks and uncertainties - The report contains forward-looking statements subject to risks and uncertainties, including the impact of COVID-19, supply chain disruptions, ability to generate cash flows, substantial indebtedness, and regulatory changes[331](index=331&type=chunk)[332](index=332&type=chunk)[335](index=335&type=chunk) - Specific risk factors are outlined for INNOVATE Corp. and its subsidiaries (Infrastructure, Life Sciences, Spectrum, and Other segments), emphasizing their unique operational and market challenges[335](index=335&type=chunk)[336](index=336&type=chunk)[337](index=337&type=chunk)[338](index=338&type=chunk) [Item 4. Controls and Procedures](index=77&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated disclosure controls and procedures as effective, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of September 30, 2021[339](index=339&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended September 30, 2021[340](index=340&type=chunk) [PART II. OTHER INFORMATION](index=78&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, and other required disclosures for the reporting period [Item 1. Legal Proceedings](index=78&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, with no anticipated material adverse effect on financial statements, and liabilities recorded when probable and estimable - The company is involved in ordinary course legal proceedings, but management does not anticipate a material adverse effect on financial statements[343](index=343&type=chunk) - Liabilities for legal matters are recorded when a loss is probable and the amount can be reasonably estimated[343](index=343&type=chunk) [Item 1A. Risk Factors](index=78&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, including COVID-19 transportation challenges impacting DBMG and potential limitations on tax loss utilization due to ownership changes - Transportation challenges from COVID-19, including labor shortages, supply chain disruptions, and increased freight/trucking costs, could significantly delay DBMG's projects and adversely impact its results and financial condition[345](index=345&type=chunk) - The company's ability to use its **$170.3 million** federal net operating loss carryforwards may be substantially limited by an 'ownership change' under Code Sections 382 and 383[346](index=346&type=chunk) - The Tax Benefits Preservation Plan, adopted on August 30, 2021, aims to deter ownership changes but does not guarantee prevention of all transfers that could limit NOL utilization[347](index=347&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=78&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item reports on any unregistered sales of equity securities and the application of their proceeds [Item 3. Defaults Upon Senior Securities](index=78&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item discloses any defaults on senior securities during the reporting period [Item 4. Mine Safety Disclosures](index=79&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item provides disclosures related to mine safety, if applicable to the company's operations [Item 5. Other Information](index=79&type=section&id=Item%205.%20Other%20Information) This item includes any other material information not otherwise disclosed in the report [Item 6. Exhibits](index=79&type=section&id=Item%206.%20Exhibits) This item lists all documents filed as exhibits to the quarterly report - Exhibits include corporate governance documents (Certificate of Amendment, By-Laws), preferred stock designations (Series B, A-3, A-4), and the Tax Benefits Preservation Plan[354](index=354&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer (Rule 13a-14(a)/15d-14(a) and Section 1350) are filed herewith[354](index=354&type=chunk)[356](index=356&type=chunk) [SIGNATURES](index=81&type=section&id=SIGNATURES) This section contains the required certifications and signatures for the quarterly report

HC2 Holdings, Inc. Q2 2021 Earnings Release Supplement August 6, 2021 © HC2 HOLDINGS, INC. 2021 Safe Harbor Disclaimers Cautionary Statement Regarding Forward-Looking Statements Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This presentation contains, and certain oral statements made by our representatives from time to time may contain, "forward-looking statements." Generally, forward-looking statements include information describing actions, events, results, strategies a ...