INNOVATE Corp. Announces Third Quarter 2024 Results

- Infrastructure: DBM Global third quarter revenue of $232.8 million -

- Life Sciences: R2 reports record worldwide system unit sales growth in the third quarter -

- Spectrum: Broadcasting's delivered another quarter of strong growth driven by network launches -

NEW YORK, Nov. 06, 2024 (GLOBE NEWSWIRE) -- INNOVATE Corp. ("INNOVATE” or the "Company”) (NYSE: VATE) announced today its consolidated results for the third quarter.

Financial Summary

(2) Reconciliation of GAAP to Non-GAAP measures follows

Commentary

"INNOVATE continued its momentum in the third quarter, delivering solid third quarter financial results while achieving key milestones across our business segments,” said Avie Glazer, Chairman of INNOVATE. "Despite lower-than-expected sales at the Infrastructure segment, DBMG experienced a strong booking quarter, indicating they are well positioned to execute given the current market backdrop. At Life Sciences, R2 once again achieved record high Glacial system unit sales in North America in the third quarter, a 247% increase in units sold over the same period last year, while MediBeacon remains focused on working with the U.S. Food and Drug Administration ("FDA") as they conduct their substantive review of the kidney monitoring system. At Spectrum, we continue to see significant growth in both sales and profitability during the third quarter, as well as year-to-date.”

"The performance within our three operating segments drove our third quarter financial results,” said Paul Voigt, INNOVATE's Interim CEO. "At DBM, while sales were lower in the quarter due to project timing, the Company delivered strong margin performance and a strong bookings performance. At Pansend, R2 unit sales in North America maintained their strong momentum, achieving significant growth again this quarter. Broadcasting continues to expand its platform by adding new networks, which drove top and bottom line results in that business.”

Third Quarter 2024 and Recent Highlights

Infrastructure

• DBM Global reported third quarter 2024 revenue of $232.8 million, a decrease of 37.0%, compared to $369.3 million in the prior year quarter. Net Income attributable to INNOVATE was $6.2 million, compared to $10.8 million for the prior year quarter. Adjusted EBITDA decreased to $20.9 million from $30.8 million in the prior year quarter.
• Despite the fact that projects have not yet been released, bidding activity in the commercial market remains strong. Meanwhile, the industrial markets have shown robust performance, with projects progressing into 2024, a trend we anticipate will persist into 2025.
• DBM Global grew gross margin to 18.8% in the third quarter, an expansion of approximately 360 basis points year-over-year and Adjusted EBITDA margin to 9.0% in the third quarter, an expansion of approximately 70 basis points year-over-year.
• DBM Global's reported backlog and adjusted backlog, which takes into consideration awarded but not yet signed contracts, was $0.9 billion and $1.1 billion, respectively, as of September 30, 2024, compared to reported and adjusted backlog of $1.1 billion and $1.2 billion, respectively, as of December 31, 2023.

• R2 Technologies, Inc. ("R2") once again broke sales records in North America.
• R2 experienced record worldwide system unit sales growth in the third quarter of 416% over same period in the prior year, and year-to-date growth of 294% year-over-year.
• Both patient treatment counts and average usage per account continue to increase, closing out Q3 with another record high for both metrics.
• MediBeacon continues to work through their substantive review of the kidney monitoring program with the FDA.

• Broadcasting reported third quarter 2024 revenue of $6.4 million, compared to $5.4 million in the prior year quarter. Net Loss attributable to INNOVATE was $5.6 million compared to $6.5 million in the prior year quarter. Adjusted EBITDA was $1.7 million, compared to an Adjusted EBITDA loss of $0.3 million in the prior year quarter. The improvement in financial results was once again a result of revenue growth driven by the launch of new networks and expanded coverage with existing customers.
• New launches in 2024 are driving higher revenue growth. Of note, FreeTV's network, Defy, launched in the third quarter. Broadcasting continues to see many OTA network opportunities on the horizon for 2025 as streaming networks explore "over-the-air" coverage.
• Progress on discussions with prospective strategic partners in pursuit of new spectrum-related revenue opportunities in ATSC 3.0 light housing, datacasting and 5G Broadcasting.

• Revenue: For the third quarter of 2024, INNOVATE's consolidated revenue was $242.2 million, a decrease of 35.5%, compared to $375.3 million for the prior year quarter. The decrease was driven by our Infrastructure segment, which was partially offset by increases at our Life Sciences and Spectrum segments. The decrease at our Infrastructure segment was primarily driven by the timing and size of projects, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business, at Banker Steel and DBMG's commercial structural steel fabrication and erection business, both of which had increased activity in the comparable period on certain large commercial construction projects that are now at or near completion in the current period. This was partially offset by an increase at the industrial maintenance and repair business as a result of an increase in project work. The increase at our Life Sciences segment was attributable to R2, primarily driven by an increase in sales in North America and worldwide of all R2's products, including Glacial fx systems, consumables, Glacial Spa systems and Glacial Rx systems. The increase at our Spectrum segment was primarily driven by network launches and expanded coverage with existing customers.
  Advertisement

• Net Loss: For the third quarter of 2024, INNOVATE reported a Net Loss attributable to common stockholders and participating preferred stockholders of $15.3 million, or $1.18 per fully diluted share, compared to $7.3 million, or $0.93 per fully diluted share, for the prior year quarter, which has been retroactively adjusted to reflect the 1-for-10 reverse stock split effected on August 8, 2024. The increase in Net Loss was primarily due to a net decrease in gross profit of $10.5 million, a $4.1 million increase in interest expense and a $2.0 million increase in tax expense, which was partially offset by a decrease in selling, general and administrative ("SG&A") expenses of $6.4 million, a $1.8 million increase in other income, net and a decrease of $1.5 million in the loss from equity investees. The decrease in gross profit was primarily driven by our Infrastructure segment due to timing and size of projects that are now at or near completion in the current period, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business, partially offset by increases at our Spectrum segment driven by network launches and expanded coverage with existing customers and at our Life Sciences segment due to an increase in systems and consumables sales at R2. The overall increase in interest expense was primarily attributable to increases in exit fees and a higher outstanding principal balance at our Life Sciences segment as a result of new debt issued and capitalization of unpaid interest into principal balances subsequent to the comparable period. The overall increase in tax expense was driven by the tax expense of INNOVATE Corp's U.S. consolidated group utilizing its remaining unlimited NOLs in 2024 and due to the Tax Cut and Jobs Act's 80 percent limitation on net operating losses incurred after 2017, resulting in the annual effective tax rate for the current period being applied to the U.S. consolidated group's 2024 year-to-date income as calculated under ASC 740. The overall decrease in SG&A expenses was primarily driven by an unrepeated accounts receivable write-off of $2.2 million related to a customer bankruptcy in the comparable period and reductions in compensation-related expenses at our Infrastructure segment, unrepeated severance and reductions in compensation-related expenses at both our Non-Operating Corporate and our Spectrum segments. The overall increase in other income, net was primarily driven by a $1.9 million gain on debt repurchase at our Non-Operating Corporate segment related to the partial repurchase of the 2026 Convertible Notes. The overall decrease in loss from equity investees was primarily due to a decrease in losses recognized from MediBeacon, as Pansend had no basis in MediBeacon against which to recognize any losses, and Pansend's carrying amount of its MediBeacon investment remained at zero. During the comparable period, Pansend made a $1.0 million convertible note investment in MediBeacon, allowing Pansend to recognize previously unrecognized unrealized equity method losses due to an increase in basis in the investment.
  Advertisement