Attached files
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| EX-99.1 - EXHIBIT 99.1 - INNOVATE Corp. | exh991-10k17pressrelease.htm |
| 8-K - 8-K - INNOVATE Corp. | a10k17pressrelease8-k.htm |
HC2 HOLDINGS, INC.
© HC2 Holdings, Inc. 2018
Fourth Quarter & Year End 2017
Conference Call
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Special Note 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
expectations and are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans,” “seeks,” “estimates,” “projects,” “may,” “will,”
“could,” “might,” or “continues” or similar expressions. The forward-looking statements in this press release include without limitation our 2018 guidance for the
Construction and Marine Services segments and statements regarding our expectation regarding building shareholder value and future cash and invested assets. Such
statements are based on the beliefs and assumptions of HC2's management and the management of HC2's subsidiaries and portfolio companies. The Company
believes these judgments are reasonable, but you should understand that these statements are not guarantees of performance or results, and the Company’s actual
results could differ materially from those expressed or implied in the forward-looking statements due to a variety of important factors, both positive and negative, that
may be revised or supplemented in subsequent reports on Forms 10-K, 10-Q and 8-K. Such important factors include, without limitation, issues related to the restatement
of our financial statements; the fact that we have historically identified material weaknesses in our internal control over financial reporting, and any inability to
remediate future material weaknesses; capital market conditions; the ability of HC2's subsidiaries and portfolio companies to generate sufficient net income and cash
flows to make upstream cash distributions; volatility in the trading price of HC2 common stock; the ability of HC2 and its subsidiaries and portfolio companies to identify
any suitable future acquisition opportunities; our ability to realize efficiencies, cost savings, income and margin improvements, growth, economies of scale and other
anticipated benefits of strategic transactions; difficulties related to the integration of financial reporting of acquired or target businesses; difficulties completing pending
and future acquisitions and dispositions; effects of litigation, indemnification claims, and other contingent liabilities; changes in regulations and tax laws; and risks that
may affect the performance of the operating subsidiaries and portfolio companies of HC2. Although HC2 believes its expectations and assumptions regarding its future
operating performance are reasonable, there can be no assurance that the expectations reflected herein will be achieved. These risks and other important factors
discussed under the caption “Risk Factors” in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), and our other
reports filed with the SEC could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release.
You should not place undue reliance on forward-looking statements. All forward-looking statements attributable to HC2 or persons acting on its behalf are expressly
qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made, and unless legally required, HC2 undertakes no
obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Safe Harbor Disclaimers
1
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Non-GAAP Financial Measures
Adjusted EBITDA
In this presentation, HC2 refers to certain financial measures that are not presented in accordance with U.S. generally accepted accounting principles (“GAAP”),
including Core Operating Subsidiary Adjusted EBITDA, Total Adjusted EBITDA (excluding the Insurance segment) and Adjusted EBITDA for its operating segments.
Management believes that Adjusted EBITDA measures provide investors with meaningful information for gaining an understanding of the Company’s results as it is
frequently used by the financial community to provide insight into an organization’s operating trends and facilitates comparisons between peer companies, because
interest, taxes, depreciation, amortization and the other items for which adjustments are made as noted in the definition of Adjusted EBITDA below can differ greatly
between organizations as a result of differing capital structures and tax strategies. In addition, management uses Adjusted EBITDA measures in evaluating certain of the
Company’s segments performance because they eliminate the effects of considerable amounts of non-cash depreciation and amortization and items not within the
control of the Company’s operations managers. While management believes that these non-GAAP measurements are useful as supplemental information, such
adjusted results are not intended to replace our GAAP financial results and should be read together with HC2’s results reported under GAAP.
Management defines Adjusted EBITDA as net income (loss) adjusted to exclude the impact of depreciation and amortization; amortization of equity method fair value
adjustments at acquisition; (gain) loss on sale or disposal of assets; lease termination costs; asset impairment expense; interest expense; net gain (loss) on contingent
consideration; loss on early extinguishment or restructuring of debt; other (income) expense, net; foreign currency transaction (gain) loss included in cost of revenue;
income tax (benefit) expense; (gain) loss from discontinued operations; noncontrolling interest; bonus to be settled in equity; share-based compensation expense; non-
recurring items; and acquisition costs. A reconciliation of Adjusted EBITDA to Net Income (Loss) is included in the financial tables at the end of this presentation.
Management recognizes that using Adjusted EBITDA as a performance measure has inherent limitations as an analytical tool as compared to net income (loss) or other
GAAP financial measures, as these non-GAAP measures exclude certain items, including items that are recurring in nature, which may be meaningful to investors. As a
result of the exclusions, Adjusted EBITDA should not be considered in isolation and do not purport to be alternatives to net income (loss) or other GAAP financial
measures or a measure of our operating performance.
Adjusted Operating Income
Insurance Adjusted Operating Income for the Insurance segment ("Insurance AOI") is a non-U.S. GAAP financial measure frequently used throughout the insurance
industry and is an economic measure the Insurance segment uses to evaluate its financial performance. Management believes that Insurance AOI measures provide
investors with meaningful information for gaining an understanding of certain results and provides insight into an organization’s operating trends and facilitates
comparisons between peer companies. However, Insurance AOI has certain limitations and we may not calculate it the same as other companies in our industry. It
should therefore be read together with the Company's results calculated in accordance with U.S. GAAP. Similarly to Adjusted EBITDA, using Insurance AOI as a
performance measure has inherent limitations as an analytical tool as compared to income (loss) from operations or other U.S. GAAP financial measures, as this non-U.S.
GAAP measure excludes certain items, including items that are recurring in nature, which may be meaningful to investors. As a result of the exclusions, Insurance AOI
should not be considered in isolation and does not purport to be an alternative to income (loss) from operations or other U.S. GAAP financial measures as a measure of
our operating performance. Management defines Insurance AOI as Net income (loss) for the Insurance segment adjusted to exclude the impact of net investment
gains (losses), including OTTI losses recognized in operations; asset impairment; intercompany elimination; non-recurring items; and acquisition costs. Management
believes that Insurance AOI provides a meaningful financial metric that helps investors understand certain results and profitability. While these adjustments are an
integral part of the overall performance of the Insurance segment, market conditions impacting these items can overshadow the underlying performance of the
business. Accordingly, we believe using a measure which excludes their impact is effective in analyzing the trends of our operations.
By accepting this document, each recipient agrees to and acknowledges the foregoing terms and conditions.
Safe Harbor Disclaimers
2
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Agenda
3
OVERVIEW AND
FINANCIAL HIGHLIGHTS
Philip Falcone Chairman, President and CEO
Q AND A
Philip A. Falcone
Michael J. Sena
Andrew G. Backman
Chairman, President and CEO
Chief Financial Officer
Managing Director
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
($m) FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 FY 2016
Adjusted
EBITDA
Core Operating Subsidiaries
Construction $51.6 $15.1 $16.8 $11.1 $8.6 $59.9
Marine Services 44.0 15.3 8.8 3.6 16.3 41.2
Energy 2.9 0.4 0.3 1.0 1.2 2.5
Telecom 6.9 1.6 1.5 2.2 1.7 5.6
Total Core Operating $105.5 $32.4 $27.3 $17.9 $27.8 $109.1
Early Stage and Other Holdings
Life Sciences ($22.4) ($5.2) ($8.2) ($4.9) ($4.1) ($12.0)
Other (3.1) 1.3 (1.1) (2.2) (1.2) (11.2)
Total Early Stage and Other ($25.5) ($3.9) ($9.3) ($7.1) ($5.2) ($23.2)
Non-Operating Corporate ($29.2) ($8.7) ($8.3) ($6.3) ($5.9) ($25.7)
Total HC2 (excluding Insurance) $50.8 $19.7 $9.8 $4.6 $16.7 $60.2
Adjusted
Operating
Income
Core Financial Services
Insurance $8.0 $2.6 $3.7 $2.6 ($1.0) ($15.9)
Segment Financial Summary
4
All data as of December 31, 2017
Construction formerly Manufacturing; Energy formerly Utilities.
Note: Reconciliations of Adjusted EBITDA and Adjusted Operating Income to U.S. GAAP Net Income in appendix. Table may not foot due to rounding. Adjusted Operating Income for Q1 2016 was adjusted to
exclude certain intercompany eliminations to better reflect the results of the Insurance segment, and remain consistent with internally reported metrics. Additional details in appendix.
Adjusted EBITDA for “Core Operating Subsidiaries” $105.5m for FY 2017
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Fourth Quarter and Full Year 2017 Highlights
5
Construction
$723 million record backlog provides significant visibility [~18 – 24 months]
$772 million backlog taking into consideration awarded, but not yet signed contracts
Continue to see opportunities in commercial sector totaling approximately $300m
Completed acquisitions of CanDraft VSI and Mountain States Steel to address compelling bridge market
Recently awarded first bridge infrastructure project following Mountain States acquisition
Distributed $9.5 million of dividend and tax share to HC2 in 4Q17; $28 million for FY17
Marine
Services
$445 million near record backlog
Strong FY17 joint venture and telecom maintenance
Completed acquisition of Fugro’s trenching and cable-laying business
Positioned well for tremendous long-term opportunities in rapidly growing global offshore power market
Continued to maintain three of six global contracted maintenance zone agreements (ACMA / SEAIOCMA / NAZ)
Upgraded fleet - C.S. Recorder (Telecom Install & Oil & Gas); C.S. Symphony (Offshore Power & Oil & Gas)
Energy
Signed first renewable natural gas supply agreement in 4Q17
Alternative Fuel Energy Tax Credit (“AFETC”) credit renewed for 2017; $3.0 million credit for FY17 to be
received in 2Q18
Completed integration & upgrade of 18 fueling stations; 44 stations owned or operated nationwide
HC2 equity ownership in ANG increased to 68% following conversion of a promissory note
Telecom
Continue focus on increasing margin, diversifying global customer base, delivering consistent EBITDA
New account representatives in Latin America, Eastern Europe and Russia
Distributed $2.0 million of dividend to HC2 in 4Q17; $8 million for FY17
Insurance
$7.1 million Net Income for FY17; $8.0 million Adjusted Operating Income for FY17
Announced acquisition of Humana’s ~$2.3 billion long-term care insurance business; Will increase
insurance investment platform to ~$3.5 billion of cash / invested assets once completed (~3Q18)
Pansend Very active discussions continue with strategic parties for multiple Pansend companies
Other
Primarily includes over-the-air broadcast television assets (HC2 Broadcasting Holdings), a console and
mobile video game publisher and other investments
HC2 Broadcasting Holdings Inc., entered into a $75 million bridge loan to primarily finance acquisitions in
the low power broadcast television distribution market; Subsequent to quarter end, increased bridge
loan by $27 million
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
HC2 Broadcasting Holdings Inc.
6
Operational Stations: 135
– Full-Power Stations: 4
– Class A Stations: 34
– LPTV Stations: 97
Silent Licenses & Construction Permits: 476
U.S. Markets: >110
Total Footprint, Excluding Construction
Permits, Covers Approximately 60% of the
U.S. Population**
Broadcast Television Stations: Key Metrics*
HC2 Broadcasting Holdings Inc., a subsidiary of HC2 Holdings, has
strategically acquired broadcast assets across the United States
HC2’s broadcast vision is to capitalize on the opportunities to bring
valuable content to more viewers over-the-air and position the company
for a changing media landscape
Business Description:
Select Management:
Kurt Hanson – Chief Technology Officer,
HC2 Broadcasting Holdings
Louis Libin – Managing Director, Strategy,
HC2 Broadcasting Holdings
Les Levi – Business Development,
HC2 Broadcasting Holdings
Manuel Abud – President and CEO,
Azteca America
*As of 2/23/2018 (includes transactions pending approval at the US FCC)
** Based on 2010 population data
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Looking Ahead - 2018 Focus and Priorities
7
Optimization of HC2 Capital Structure
– Global refinancing of 11% Secured Notes to reduce cost of debt capital
– Continue to reduce cumulative outstanding of preferred equity
– Explore alternative financing structures at subsidiary level
– Explore alternative financing structures for broadcasting assets
Monetization / Value Creation Within Diverse HC2 Portfolio
Continued Focused Expansion of Over-The-Air Broadcast Television Strategy
– Expand market reach of nationwide network
– Valuable alternative distribution channel for content providers
– Improve and add content across acquired assets through strategic relationships
with content providers
Initiated 2018 Guidance for Construction & Marine Services
– DBM Global: Currently expect $60 million - $65 million of FY18 Adjusted EBITDA
– Global Marine: Currently expect $45 million - $50 million of FY18 Adjusted EBITDA
HC2 does not guarantee future results of any kind. Guidance is subject to risks and uncertainties, including, without limitation, those factors outlined in the “Forward Looking
Statements” of this presentation and the “Risk Factors” section of the company’s annual and quarterly reports filed with the Securities and Exchange Commission (SEC).
Questions and Answers
Appendix:
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
HC2’s Diversified Portfolio
10
Early Stage and Other Holdings
Life Sciences: PANSEND
MediBeacon: Completed “Pilot Two” Clinical Study at Washington University in St. Louis (1Q17)
R2 Dermatology: Received FDA Approval for second generation R2 Dermal Cooling System (2Q17)
BeneVir: Granted additional patent protecting oncolytic immunotherapy Stealth-1H & other assets (2Q17)
Genovel: Novel, Patented, “Mini Knee” and “Anatomical Knee” replacements
Triple Ring Technologies: R&D engineering company specializing in medical devices,
homeland security , imaging, sensors, optics, fluidics, robotics & mobile healthcare
All data as of December 31, 2017 unless otherwise noted
Construction formerly Manufacturing; Energy formerly Utilities
HC2 Broadcasting Holdings
Capitalizing on Over-The-Air
broadcast opportunities
704Games (Formerly DMR)
released NASCAR® Heat 2
September 12, 2017
Other:
Core Financial
Services Subsidiaries
~$74.7m of statutory surplus
~$86.4m total adjusted
capital
~$2.1b total GAAP assets
~$1.5b cash & invested
assets
Platform for growth through
additional M&A including
pending acquisition of
Humana’s
~$2.3b long-term care
portfolio
Insurance:
CIG
Core Operating Subsidiaries
FY17 Revenue: $579.0m
FY17 Adj. EBITDA: $51.6m
Backlog $723m; ~$772m
with contracts awarded,
but not yet signed; ~$300m
additional opportunities
Solid long-term pipeline
Awarded major contract for
new Los Angeles Rams and
Los Angeles Chargers
stadium
Construction:
DBM GLOBAL (SCHUFF)
FY17 Revenue: $169.5m
FY17 Adj. EBITDA: $44.0m
Strong full-year joint venture
performance, in particular
Huawei Marine
Solid long term telecom and
offshore power
maintenance & install
opportunities
Awarded 5-year SEAIOCMA
maintenance renewal
Marine Services:
GMSL
FY17 Revenue: $16.4m
FY17 Adj. EBITDA: $2.9m
Delivered 11,095,000
Gasoline Gallon Equivalents
(GGEs) in FY17 vs. 3,912,000
GGEs in FY16
44 stations currently owned
or operated vs. two stations
at time of HC2’s initial
investment in 3Q14
Energy:
ANG
Telecom:
PTGI ICS
FY17 Revenue: $701.9m
FY17Adj. EBITDA: $6.9m
Continued focus on higher
margin wholesale traffic mix
and improved operating
efficiencies
Sixth consecutive cash
dividend paid to HC2 in
4Q17; $8m paid for FY17
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Consolidated Financial Summary
11
($m) Q4 2017 Q4 2016 FY 2017 FY 2016
Statement of
Operations
(Selected Financial Data)
Total Net Revenue $458.5 $454.0 $1,634.1 $1,558.1
Total Operating Expenses $460.0 $449.0 $1,635.3 $1,559.5
Income Loss From Operations ($1.5) $5.0 ($1.1) ($1.4)
Interest Expense ($15.7) ($11.8) ($55.1) ($43.4)
Income From Equity Investees $5.2 $7.6 $17.8 $10.8
Income (loss) Before Taxes ($11.2) ($6.7) ($39.8) ($45.8)
Net Loss attributable to common
and participating preferred
($9.2) ($67.3) ($49.7) ($105.4)
Non-GAAP
Measures
Core Operating Adjusted EBITDA $32.4 $37.9 $105.5 $109.1
Total Adjusted EBITDA $19.7 $26.5 $50.8 $60.2
Insurance AOI $2.6 ($6.9) $8.0 ($15.9)
All data as of December 31, 2017 unless otherwise noted
Construction formerly Manufacturing; Energy formerly Utilities
Note: Reconciliations of Adjusted EBITDA and Adjusted Operating Income to U.S. GAAP Net Income in appendix. Table may not foot due to rounding. Adjusted Operating Income for Q1 2016 was adjusted to
exclude certain intercompany eliminations to better reflect the results of the Insurance segment, and remain consistent with internally reported metrics. Additional details in appendix.
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Construction: DBM Global Inc.
12
4Q17 Net Income: $9.2m; FY17 Net Income: $23.6m versus $28.0m in FY16
4Q17 Adjusted EBITDA: $15.1m; FY17 Adjusted EBITDA: $51.6m versus $59.9m in FY16
Record backlog of $723m at end of 4Q17, an increase of over 44% vs. $503m in year-ago quarter
– ~$772m taking into consideration awarded, but not yet signed contracts
– ~$300m incremental opportunities that could be awarded over next several quarters
Awarded major stadium construction contract for new Los Angeles Sports and Entertainment District – New home of the Los
Angeles Rams and Los Angeles Chargers
Recently completed “tuck-in” acquisitions of North American Operations of Candraft VSI and Mountain States Steel
to address compelling bridge market
Recently awarded first bridge infrastructure project post Mountain States acquisition
Distributed $9.5m and $28.0m of dividend and tax share to HC2 in 4Q17 and full year 2017, respectively
Fourth Quarter and Full Year Update
Continue to select profitable, strategic and “core competency” jobs, not all jobs
Solid long-term pipeline of prospective projects; No shortage of transactions to evaluate
Commercial / Stadium / Healthcare sectors remain strong, primarily in West region
Opportunities to add higher margin, value added services to overall product offering (e.g. BDS VirCon/PDC/Candraft)
Strategic Initiatives
Loma Linda Hospital
$45.8
$52.0
$59.9
$51.6
$526.1 $513.8 $502.7
$579.0
2014PF 2015A 2016A 2017A
Historical Performance
Adjusted EBITDA Revenue
All data as of December 31, 2017 unless otherwise noted
Construction formerly Manufacturing
10.1%
11.9%
8.7%
Los Angeles Rams Stadium
8.9%
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Marine Services: Global Marine Group
13
Joint Venture established in 1995 with China Telecom
China’s leading provider of submarine cable installation
Located in Shanghai and possesses a fleet of advanced purpose-built
cable ships
Currency Exchange: CNY:USD 1:0.129
All data as of December 31, 2017 unless otherwise noted
4Q17 Net Income: $6.2m; FY17 Net Income: $15.2m versus $17.4m in FY16
4Q17 Adjusted EBITDA: $15.3m; FY17 Adjusted EBITDA: $44.0m versus $41.2m in FY16
Near record Global Marine backlog of $445m at year-end 2017
Completed acquisition of Fugro’s trenching and cable laying business; Positioned well for tremendous long-term
opportunities in rapidly growing global offshore power market
Secured renewal of remaining two of its three long-term cable maintenance contracts; Continue to have three of six
global contracted maintenance zone agreements (ACMA / SEAIOCMA / NAZ)
Upgraded and revitalized fleet:
– C.S. Recorder (Telecom Installation for HMN and O&G); C.S. Symphony (Offshore Power and O&G)
Fourth Quarter and Full Year Update
Strategic Initiatives
Total HMN* 2017 2016 2015 2014
Revenue NA ~$207m ~$203m ~$88m
Profit NA ~$25m ~$14m ~$2m
Cash / Equivalents NA ~$48m ~$27m ~$16m
$50.0
$42.1 $41.2
$44.0
$163.6
$134.9
$161.9 $169.5
2014PF 2015A 2016A 2017A
Historical Performance
Adjusted EBITDA Revenue
Note: 2014 PF Adj. EBITDA inclusive of approx. $10m offshore power installation vs. minimal contribution in 2015 & 1H16 as a result of Prysmian agreement which expired in 4Q15
29.8%
31.2% 25.4%
49% ownership 49% ownership
26.0 %
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
4Q17 Net Income: $1.5m; FY17 Net (Loss): ($0.5)m versus Net Income $0.01m in FY16
4Q17 Adjusted EBITDA: $0.4m; FY17 Adjusted EBITDA: $2.9m versus $2.5m in FY16
Signed first renewable natural gas supply agreement in 4Q17
Alternative Fuel Energy Tax Credit (“AFETC”) credit renewed for 2017 - ~$3.0m credit for FY2017 to be recognized in 2Q18
Completed the integration & upgrade of 18 fueling stations throughout the U.S.
Delivered 11,095,000 Gasoline Gallon Equivalents (GGEs) for full year 2017 vs. 3,912,000 GGEs in 2016
44 stations currently owned or operated or under development vs. two stations at time of initial investments (3Q14)
HC2 equity ownership in ANG increased to 68% following conversion of a promissory note
Fourth Quarter and Full Year Update
-$0.4
$0.9
$2.5
$2.9
$1.8
$6.8 $6.4
$16.4
2014A 2015A 2016A 2017A
Historical Performance
Adjusted EBITDA
Revenue
Energy: American Natural Gas (ANG)
14
All data as of December 31, 2017 unless otherwise noted
Energy formerly Utilities
39.6%
12.8%
(14.1%)
17.7%
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Steady quarterly results again due to continued focus on higher margin wholesale traffic mix, smaller global
accounts, and improved operational efficiencies
– 4Q17 Net Income: $1.3m; FY17 Net Income: $6.2m versus $1.4m in FY16
– 4Q17 Adjusted EBITDA: $1.6m; FY17 Adjusted EBITDA: $6.9m versus $5.6m in FY16
– Sixth consecutive quarter of cash dividend to HC2
– $8.0m dividends distributed for the year-ended 2017
– New account representatives in Latin America, Eastern Europe and Russia
– Continued focus on increasing margin, diversifying global customer base, delivering consistent EBITDA
One of the key objectives: leverage the infrastructure and management expertise within PTGi-ICS
– Over 800+ wholesale interconnections globally provides HC2 the opportunity to leverage the existing cost effective
infrastructure by bolting on higher margin products and M&A opportunities
– A focused strategic initiative has been launched within PTGi-ICS to identify potential M&A opportunities
Fourth Quarter and Full Year Update
Telecommunications: PTGi-ICS
15
$(1.2)
$2.0
$5.6
$6.9
$162.0
$460.4
$735.0 $701.9
2014A 2015A 2016A 2017A
Historical Performance
Adjusted EBITDA
Revenue
All data as of December 31, 2017 unless otherwise noted
0.8%
0.4%
(0.1%)
1.0%
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Insurance: Continental Insurance Group
16
Note: Reconciliation of Adjusted Operating Income to U.S. GAAP Net Income in
appendix. All data as of December 31, 2017 unless otherwise noted
Continental Insurance Group serves as a platform for run-off Long Term Care (“LTC”) books of business
and for acquiring additional run-off LTC businesses
– 4Q17 Net Income: $3.4m; FY17 Net Income: $7.1m versus Net (Loss) $14.0m in FY16
– 4Q17 Adjusted Operating Income: $2.6m; FY17 Adjusted Operating Income $8.0m versus ($15.9m) in FY16
– ~$74.7m statutory surplus at end of fourth quarter
– ~$86.4m total adjusted capital at end of fourth quarter
– ~$2.1b in total GAAP assets at December 31, 2017
– ~$1.5b in cash and invested assets at December 31, 2017
Signed Definitive Agreement to Acquire Humana’s ~$2.3 Billion Long-Term Care Insurance Business
– Will significantly expand and leverage Continental’s insurance platform in Austin, Texas
– Once completed, Continental will have approximately $3.5 billion portfolio of cash and investable assets
– Immediately accretive to Continental’s RBC Ratio and Statutory Capital
– Opportunity to meaningfully increase investment portfolio yield
– Validates and endorses HC2’s insurance platform and strategy
– Expected to close by third quarter 2018
Fourth Quarter and Full Year Update
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Pansend
17
All data as of December 31, 2017 unless otherwise noted
HC2’s Pansend Life Sciences Segment Is Focused on the
Development of Innovative Healthcare Technologies and Products
80% equity ownership of company focused on immunotherapy; Oncolytic virotherapy for treatment of solid
cancer tumors
Founded by Dr. Matthew Mulvey & Dr. Ian Mohr (who co-developed T-Vec); Biovex (owner of T-Vec) acquired
by Amgen for ~$1billion
Benevir’s T-Stealth is a second generation oncolytic virus with new features and new intellectual property
BeneVir holds exclusive worldwide license to develop BV-2711 (T-Stealth)
Granted new patent entitled “Oncolytic Herpes Simplex Virus and Therapeutic Uses Thereof”, covering the composition of
matter for Stealth-1H, BeneVir’s lead oncolytic immunotherapy, as well as other platform assets (2Q17)
74% equity ownership of dermatology company focused on lightening and brightening skin
Founded by Pansend in partnership with Mass. General Hospital and inventors Dr. Rox Anderson,
Dieter Manstein and Dr. Henry Chan
Over $20 billion global market
Received Food and Drug Administration approval for the R2 Dermal Cooling System (4Q16)
Received Food and Drug Administration approval for second generation R2 Dermal Cooling System (2Q17)
80% equity ownership in company with unique knee replacements based on technology from Dr. Peter Walker, NYU Dept.
of Orthopedic Surgery and one of the pioneers of the original Total Knee.
“Mini-Knee” for early osteoarthritis of the knee; “Anatomical Knee” – A Novel Total Knee Replacement
Strong patent portfolio
50% equity ownership in company with unique technology and device for monitoring of real-time kidney function
Current standard diagnostic tests measure kidney function are often inaccurate and not real-time
MediBeacon’s Optical Renal Function Monitor will be first and only, non-invasive system to enable real-time, direct monitoring
of renal function at point-of-care
$3.5 billion potential market
Successfully completed a key clinical study of its unique, real-time kidney monitoring system on subjects with impaired kidney
function at Washington University in St. Louis. (1Q17)
Profitable technology and product development company
Areas of expertise include medical devices, homeland security, imaging systems, sensors, optics, fluidics, robotics and mobile
healthcare
Located in Silicon Valley and Boston area with over 90,000 square feet of working laboratory and incubator space
Contract R&D market growing rapidly
Customers include Fortune 500 companies and start-ups
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Notable Financial and Other Updates
18
Collateral Coverage Ratio Exceeded 2.0x at Quarter End (4Q17)
$72.7 million in Consolidated Cash (excluding Insurance segment)
– $29.4 million Corporate Cash
$11.5 million Received in Dividends and Tax Share from DBM Global and PTGi ICS in 4Q17
$36.0 million Received in Dividends and Tax Share from DBM Global and PTGi ICS Full Year 2017
HC2 Broadcasting Holdings Inc., Entered into a $75 million Bridge Loan to Primarily Finance Acquisitions
Broadcast Television Distribution Market
Subsequent to quarter end, increased bridge loan by $27 million
2018 Key Priorities:
– Optimize HC2 capital structure
– Monetization / value creation within diverse HC2 portfolio
– Continued focused expansion of over-the-air television broadcast strategy
Initiated 2018 Guidance for Construction & Marine Services
– DBM Global: Currently expect $60 million - $65 million of FY18 Adjusted EBITDA
– Global Marine: Currently expect $45 million - $50 million of FY18 Adjusted EBITDA
All data as of December 31, 2017 unless otherwise noted
(1) Market capitalization on a fully diluted basis, excluding preferred equity, using a common stock price per share of $5.16 on March 13, 2018
(2) Cash and cash equivalents
(3) Enterprise Value is calculated by adding market capitalization, total preferred equity and total debt amounts, less Corporate cash
($m) Balance Sheet (at December 31, 2017)
Market Cap(1) $228.0
Preferred Equity $26.7
Total Debt $400.0
Corporate Cash(2) $29.4
Enterprise Value(3) $625.3
HC2 does not guarantee future results of any kind. Guidance is subject to risks and uncertainties, including, without limitation, those factors outlined in the “Forward Looking
Statements” of this presentation and the “Risk Factors” section of the company’s annual and quarterly reports filed with the Securities and Exchange Commission (SEC).
Reconciliations
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA
Full Year Ended December 31, 2017
20
(in thousands)
Construction Marine Energy Telecom
Life
Sciences
Other &
Elimination
Net loss attributable to HC2 Holdings, Inc. (46,911)$
Less: Net Incom e attributable to HC2 Holdings Insurance segm ent 7,066
Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance
Segment
23,624$ 15,173$ (516)$ 6,163$ (18,098)$ (18,005)$ (62,318)$ (53,977)$
Adjustments to reconcile net income (loss) to Adjusted EBITDA:
Depreciation and amortization 5,583 22,898 5,071 371 186 1,508 71 35,688
Depreciation and amortization (included in cost of revenue) 5,254 - - - - - - 5,254
Amortization of equity method fair value adjustment at acquisition - (1,594) - - - - - (1,594)
Asset impairment expense - - - - - 1,810 - 1,810
(Gain) loss on sale or disposal of assets 292 (3,500) 247 181 - - - (2,780)
Lease termination costs - 249 - 17 - - - 266
Interest expense 976 4,392 1,181 41 - 4,373 44,135 55,098
Net loss (gain) on contingent consideration - - - - - - (11,411) (11,411)
Other (income) expense, net (41) 2,683 1,488 149 (17) 6,541 (92) 10,711
Foreign currency (gain) loss (included in cost of revenue) - (79) - - - - - (79)
Income tax (benefit) expense 10,679 203 (4,243) 7 (820) (1,129) (10,185) (5,488)
Noncontrolling interest 1,941 260 (681) - (3,936) (1,164) - (3,580)
Bonus to be settled in equity - - - - - - 4,130 4,130
Share-base compensation expense - 1,527 364 - 319 279 2,754 5,243
Non-recurring items - - - - - - - -
Acquisition costs 3,280 1,815 - - - 2,648 3,764 11,507
Adjusted EBITDA 51,588$ 44,027$ 2,911$ 6,929$ (22,366)$ (3,139)$ (29,152)$ 50,798$
Total Core Operating Subsidiaries 105,455$
Non-
operating
Corporate
Total HC2
Year Ended December 31, 2017
Core Operating Subsidiaries Early Stage & Other
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA
Full Year Ended December 31, 2016
21
(in thousands)
Year Ended December 31, 2016
Construction Marine Energy Telecom
Life
Sciences
Other &
Elimination
Net loss attributable to HC2 Holdings, Inc. (94,549)$
Less: Net loss attributable to HC2 Holdings Insurance segm ent (14,028)
Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance
Segment
28,002$ 17,447$ 7$ 1,435$ (7,646)$ (24,800)$ (94,966)$ (80,521)$
Adjustments to reconcile net income (loss) to Adjusted EBITDA:
Depreciation and amortization 1,892 22,007 2,248 504 124 1,480 9 28,264
Depreciation and amortization (included in cost of revenue) 4,370 - - - - - - 4,370
Amortization of equity method fair value adjustment at acquisition - (1,371) - - - - - (1,371)
(Gain) loss on sale or disposal of assets 1,663 (9) - 708 - - - 2,362
Lease termination costs - - - 179 - - - 179
Interest expense 1,239 4,774 211 - - 1,164 35,987 43,375
Net loss (gain) on contingent consideration - (2,482) - - - - 11,411 8,929
Other (income) expense, net (163) (2,424) (8) (87) (3,213) 9,987 (1,277) 2,815
Foreign currency (gain) loss (included in cost of revenue) - (1,106) - - - - - (1,106)
Income tax (benefit) expense 18,727 1,394 (535) 2,803 1,558 3,250 11,245 38,442
Noncontrolling interest 1,834 974 (4) - (3,111) (2,575) - (2,882)
Bonus to be settled in equity - - - - - - 2,503 2,503
Share-base compensation expense - 1,682 597 - 251 273 5,545 8,348
Non-recurring items - - - - - - 1,513 1,513
Acquisition Costs 2,296 290 27 18 - - 2,312 4,943
Adjusted EBITDA 59,860$ 41,176$ 2,543$ 5,560$ (12,037)$ (11,221)$ (25,718)$ 60,163$
Total Core Operating Subsidiaries 109,139$
Core Operating Subsidiaries Early Stage & Other Non-
operating
Corporate
Total HC2
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA
Three Months Ended December 31, 2017
22
(in thousands)
Construction Marine Energy Telecom
Life
Sciences
Other &
Elimination
Net loss attributable to HC2 Holdings, Inc. (8,537)$
Less: Net Incom e attributable to HC2 Holdings Insurance segm ent 3,383
Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance
Segment
9,160$ 6,230$ 1,485$ 1,253$ (3,822)$ (8,218)$ (18,008)$ (11,920)$
Adjustments to reconcile net income (loss) to Adjusted EBITDA:
Depreciation and amortization 1,389 6,337 1,195 86 57 575 21 9,660
Depreciation and amortization (included in cost of revenue) 1,419 - - - - - - 1,419
Amortization of equity method fair value adjustment at acquisition - (371) - - - - - (371)
Asset impairment expense - - - - - - - -
(Gain) loss on sale or disposal of assets 199 - 208 181 - - - 588
Lease termination costs - - - 2 - - - 2
Interest expense 357 1,029 629 4 - 1,965 11,704 15,688
Net loss (gain) on contingent consideration - - - - - - (5,410) (5,410)
Other (income) expense, net 117 240 (164) 72 8 3,741 368 4,382
Foreign currency (gain) loss (included in cost of revenue) - 52 - - - - - 52
Income tax (benefit) expense 887 (36) (4,255) 7 (820) (1,129) (1,073) (6,419)
Noncontrolling interest 751 (121) 1,321 - (728) 1,502 - 2,725
Bonus to be settled in equity - - - - - - 2,780 2,780
Share-base compensation expense - 394 3 - 80 213 547 1,237
Non-recurring items - - - - - - - -
Acquisition costs 833 1,515 - - - 2,648 339 5,335
Adjusted EBITDA 15,112$ 15,269$ 422$ 1,605$ (5,225)$ 1,297$ (8,732)$ 19,748$
Total Core Operating Subsidiaries 32,408$
Three Months Ended December 31, 2017
Core Operating Subsidiaries Early Stage & Other Non-
operating
Corporate
Total HC2
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA
Three Months Ended September 30, 2017
23
(in thousands)
Construction Marine Energy Telecom
Life
Sciences
Other &
Elimination
Net loss attributable to HC2 Holdings, Inc. (5,967)$
Less: Net Incom e attributable to HC2 Holdings Insurance segm ent 4,280
Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance
Segment
7,082$ 844$ (939)$ 1,348$ (6,760)$ (600)$ (11,222)$ (10,247)$
Adjustments to reconcile net income (loss) to Adjusted EBITDA:
Depreciation and amortization 1,314 6,221 1,247 94 50 272 17 9,215
Depreciation and amortization (included in cost of revenue) 1,293 - - - - - - 1,293
Amortization of equity method fair value adjustment at acquisition - (573) - - - - - (573)
Asset impairment expense - - - - - - - -
(Gain) loss on sale or disposal of assets 486 - 25 - - - - 511
Lease termination costs - - - 15 - - - 15
Interest expense 238 1,021 262 14 - 1 11,686 13,222
Net loss (gain) on contingent consideration - - - - - - (6,320) (6,320)
Other (income) expense, net (165) 888 277 12 (10) (118) (718) 166
Foreign currency (gain) loss (included in cost of revenue) - (238) - - - - - (238)
Income tax (benefit) expense 4,481 (137) - - - - (4,746) (402)
Noncontrolling interest 558 43 (763) - (1,506) (689) - (2,357)
Bonus to be settled in equity - - - - - - 765 765
Share-base compensation expense - 394 179 - 71 19 718 1,381
Non-recurring items - - - - - - - -
Acquisition costs 1,501 300 - - - - 1,564 3,365
Adjusted EBITDA 16,788$ 8,763$ 288$ 1,483$ (8,155)$ (1,115)$ (8,256)$ 9,796$
Total Core Operating Subsidiaries 27,322$
Three Months Ended September 30, 2017
Core Operating Subsidiaries Early Stage & Other Non-
operating
Corporate
Total HC2
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA
Three Months Ended June 30, 2017
24
(in thousands)
Construction Marine Energy Telecom
Life
Sciences
Other &
Elimination
Net loss attributable to HC2 Holdings, Inc. (17,911)$
Less: Net Incom e attributable to HC2 Holdings Insurance segm ent 164
Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance
Segment
4,179$ (3,053)$ (365)$ 2,060$ (4,106)$ (3,757)$ (13,033)$ (18,075)$
Adjustments to reconcile net income (loss) to Adjusted EBITDA:
Depreciation and amortization 1,240 5,255 1,381 94 41 331 16 8,358
Depreciation and amortization (included in cost of revenue) 1,302 - - - - - - 1,302
Amortization of equity method fair value adjustment at acquisition - (325) - - - - - (325)
Asset impairment expense - - - - - 1,810 - 1,810
(Gain) loss on sale or disposal of assets (145) - 18 - - - - (127)
Lease termination costs - 55 - - - - - 55
Interest expense 174 1,040 154 14 - 16 10,675 12,073
Net loss (gain) on contingent consideration - - - - - - 88 88
Other (income) expense, net 28 490 255 (9) (11) 803 214 1,770
Foreign currency (gain) loss (included in cost of revenue) - 83 - - - - - 83
Income tax (benefit) expense 3,232 (134) (1) - - - (6,543) (3,446)
Noncontrolling interest 369 (156) (492) - (911) (1,372) - (2,562)
Bonus to be settled in equity - - - - - - 585 585
Share-base compensation expense - 394 91 - 76 18 527 1,106
Non-recurring items - - - - - - - -
Acquisition costs 701 - - - - - 1,168 1,869
Adjusted EBITDA 11,080$ 3,649$ 1,041$ 2,159$ (4,911)$ (2,151)$ (6,303)$ 4,564$
Total Core Operating Subsidiaries 17,929$
Three Months Ended June 30, 2017
Core Operating Subsidiaries Early Stage & Other Non-
operating
Corporate
Total HC2
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA
Three Months Ended March 31, 2017
25
(in thousands)
Construction Marine Energy Telecom
Life
Sciences
Other &
Elimination
Net loss attributable to HC2 Holdings, Inc. (14,496)$
Less: Net loss attributable to HC2 Holdings Insurance segm ent (761)
Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance
Segment
3,203$ 11,152$ (697)$ 1,502$ (3,410)$ (5,430)$ (20,055)$ (13,735)$
Adjustments to reconcile net income (loss) to Adjusted EBITDA:
Depreciation and amortization 1,640 5,085 1,248 97 38 330 16 8,454
Depreciation and amortization (included in cost of revenue) 1,240 - - - - - - 1,240
Amortization of equity method fair value adjustment at acquisition - (325) - - - - - (325)
Asset impairment expense - - - - - - - -
(Gain) loss on sale or disposal of assets (248) (3,500) (4) - - - - (3,752)
Lease termination costs - 194 - - - - - 194
Interest expense 207 1,302 136 9 - 2,391 10,070 14,115
Net loss (gain) on contingent consideration - - - - - - 231 231
Other (income) expense, net (21) 1,065 1,120 74 (4) 2,115 44 4,393
Foreign currency (gain) loss (included in cost of revenue) - 24 - - - - - 24
Income tax (benefit) expense 2,079 510 13 - - - 2,177 4,779
Noncontrolling interest 263 494 (747) - (791) (605) - (1,386)
Bonus to be settled in equity - - - - - - - -
Share-base compensation expense - 345 91 - 92 29 962 1,519
Non-recurring items - - - - - - - -
Acquisition costs 245 - - - - - 693 938
Adjusted EBITDA 8,608$ 16,346$ 1,160$ 1,682$ (4,075)$ (1,170)$ (5,862)$ 16,689$
Total Core Operating Subsidiaries 27,796$
Three Months Ended March 31, 2017
Core Operating Subsidiaries Early Stage & Other Non-
operating
Corporate
Total HC2
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA
Three Months Ended December 31, 2016
26
(in thousands)
Construction Marine Energy Telecom
Life
Sciences
Other &
Elimination
Net loss attributable to HC2 Holdings, Inc. (61,464)$
Less: Net loss attributable to HC2 Holdings Insurance segm ent (2,050)
Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance
Segment
7,292$ 8,667$ (61)$ (2,572)$ (4,655)$ (3,536)$ (64,549)$ (59,414)$
Adjustments to reconcile net income (loss) to Adjusted EBITDA:
Depreciation and amortization 629 5,214 769 115 37 430 5 7,199
Depreciation and amortization (included in cost of revenue) 1,322 - - - - - - 1,322
Amortization of equity method fair value adjustment at acquisition - (325) - - - - - (325)
(Gain) loss on sale or disposal of assets 2,626 1 - 708 - - - 3,335
Lease termination costs - - - - - - - -
Interest expense 322 1,091 69 - - 1,163 9,116 11,761
Net loss (gain) on contingent consideration - (2,482) - - - - 11,411 8,929
Other (income) expense, net (75) (1,234) 391 487 10 99 (966) (1,288)
Foreign currency (gain) loss (included in cost of revenue) - 864 - - - - - 864
Income tax (benefit) expense 6,086 2,150 (535) 2,803 1,558 3,250 32,726 48,038
Noncontrolling interest 594 464 (253) - (809) (513) - (517)
Bonus to be settled in equity - - - - - - 2,503 2,503
Share-base compensation expense - 375 490 - 67 35 712 1,679
Non-recurring items - - - - - - - -
Acquisition Costs 1,868 24 - - - - 490 2,382
Adjusted EBITDA 20,664$ 14,809$ 870$ 1,541$ (3,792)$ 928$ (8,552)$ 26,468$
Total Core Operating Subsidiaries 37,884$
Core Operating Subsidiaries Non-
operating
Corporate
Total HC2
Three Months Ended December 31, 2016
Early Stage & Other
© 2 0 1 8 H C 2 H O L D I N G S , I N C .
Reconciliation of U.S. GAAP Net Income (Loss) to Insurance
Adjusted Operating Income
27
(in thousands)
Adjusted Op rating Income - Insurance ("Insurance AOI")
FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 FY 2016 Q4 2016
Net Income (loss) - Insurance segment 7,066 3,381 4,282 164$ (761)$ (14,028)$ (2,050)$
Net realized and unrealized gains on inv estments (4,983) (2,129) (978) (1,095) (781) (5,019) (7,696)
Asset impairment 3,364 - - 2,842 522 2,400 2,400
Acquisition costs 2,535 1,377 422 736 - 714 445
Insurance AOI 7,982$ 2,629$ 3,726$ 2,647$ (1,020)$ (15,933)$ (6,901)$
HC2 HOLDINGS, INC.
© HC2 Holdings, Inc. 2018
A n d r e w G . B a c k m a n • i r @ h c 2 . c o m • 2 1 2 . 2 3 5 . 2 6 9 1 • 4 5 0 P a r k A v e n u e , 3 0 t h F l o o r , N e w Y o r k ,
N Y 1 0 0 2 2 March 2018