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INNOVATE (VATE) - 2020 Q3 - Earnings Call Transcript
VATEINNOVATE (VATE)2020-11-11 06:02
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Financial Data and Key Metrics Changes - Consolidated total net revenue for Q3 2020 was 393.3million,downfrom393.3 million, down from 427.5 million in the prior-year period, attributed to lower revenues from telecommunications, Infrastructure, Spectrum, and Insurance segments, partially offset by an increase in Clean Energy segment revenue [19] - Net loss attributable to common and participating preferred stockholders for Q3 2020 was 17.7millionor17.7 million or 0.38 per share, compared to a net loss of 7.5millionor7.5 million or 0.16 per share in the prior-year period [20] - Total adjusted EBITDA, excluding the Insurance segment, was 11.9millioninQ32020,comparabletotheprior−yearperiod[20]BusinessLineDataandKeyMetricsChanges−InfrastructuresegmentgeneratedadjustedEBITDAof11.9 million in Q3 2020, comparable to the prior-year period [20] Business Line Data and Key Metrics Changes - Infrastructure segment generated adjusted EBITDA of 17.7 million in Q3 2020, down from 19.4millionintheprior−yearperiod,impactedbyprojecttimingandCOVID−relatedcosts[21]−CleanEnergysegmentrecordedadjustedEBITDAof19.4 million in the prior-year period, impacted by project timing and COVID-related costs [21] - Clean Energy segment recorded adjusted EBITDA of 3.7 million in Q3 2020, up from 2.3millionintheprior−yearperiod,benefitingfromtherenewaloftheAlternativeFuelsTaxCredit[24]−Insurancesegmentgeneratedpretaxadjustedoperatingincomeof2.3 million in the prior-year period, benefiting from the renewal of the Alternative Fuels Tax Credit [24] - Insurance segment generated pretax adjusted operating income of 14.3 million in Q3 2020, compared to 13.5millionintheprior−yearperiod,drivenbyfavorableclaimsactivity[25]MarketDataandKeyMetricsChanges−Infrastructuresegment′sreportedbacklogincreasedto13.5 million in the prior-year period, driven by favorable claims activity [25] Market Data and Key Metrics Changes - Infrastructure segment's reported backlog increased to 436 million, up from 410millionattheendofthesecondquarter,withadjustedbacklogat410 million at the end of the second quarter, with adjusted backlog at 640 million [22] - Clean Energy revenue and adjusted EBITDA for Q4 2020 are expected to be well below Q4 2019 totals due to the retroactive nature of the Alternative Fuels Tax Credit renewal [24] Company Strategy and Development Direction - The company is focused on simplifying its portfolio, identifying businesses that can capitalize on market trends, and reducing debt through asset sales [7] - The rights offering of 65millionisakeystepinimprovingthecapitalstructureandispartiallybackstoppedbymajorstockholders[15]−Thecompanyaimstobuildlong−termvaluewithitsremainingassetsafteraddressingcapitalstructureissues[16]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedtheresilienceofthebusinessdespitepandemicimpactsandexpressedoptimismaboutthegradualeconomicrebound[6]−ThecompanyisactivelyexploringstrategicalternativesforitsInsurancesegmentandhascompletedthesaleofitstelecomsubsidiary[12]−Managementemphasizedtheimportanceofrefinancingeffortstostrengthenthebalancesheetandmaximizebusinessvalue[17]OtherImportantInformation−Thecompanyhasreducedoutstandingprincipalonits11.565 million is a key step in improving the capital structure and is partially backstopped by major stockholders [15] - The company aims to build long-term value with its remaining assets after addressing capital structure issues [16] Management's Comments on Operating Environment and Future Outlook - Management noted the resilience of the business despite pandemic impacts and expressed optimism about the gradual economic rebound [6] - The company is actively exploring strategic alternatives for its Insurance segment and has completed the sale of its telecom subsidiary [12] - Management emphasized the importance of refinancing efforts to strengthen the balance sheet and maximize business value [17] Other Important Information - The company has reduced outstanding principal on its 11.5% notes by 27% since the beginning of 2020, resulting in annualized interest savings of 15 million [26] - Consolidated cash, cash equivalents, and investments totaled 4.7billion,including4.7 billion, including 49 million in cash without the Insurance segment [25] Q&A Session All Questions and Answers Question: What are the likely pathways the board and management are considering for refinancing? - Management indicated that improving the overall capital structure is a priority, with the rights offering being a significant step, and they are exploring various refinancing options [33] Question: What are the explicit holding company-level cash requirements for the balance of the year? - The company expects about 22millionininterestcostsand22 million in interest costs and 3.5 million to 4 million in corporate SG&A expenses for the remaining months [35] Question: Can you provide more details on the backlog composition in the Infrastructure segment? - The backlog is primarily composed of small to medium-sized projects, with no significant customer or project concentration noted [41] Question: Can you provide any guidance on the outlook for Q4 and calendar year 2021? - Management does not provide specific guidance but expects some recovery in delayed maintenance and CapEx projects in 2021 [47] Question: What is the status of the rights offering? - The rights offering commenced at a market price of 2.27 and is open until November 20, with partial backstop support from major shareholders [51] Question: Were any dividends or management fees taken from the Insurance segment this quarter? - The company is pulling 1millionto1 million to 1.5 million a quarter in management fees from the Insurance segment [71] Question: What is the opportunity for the R2 device in Life Sciences? - Initial preorders for the R2 device are strong, indicating positive market reception, although specific quantitative guidance was not provided [72]