INNOVATE Corp. Q3 FY2024 earnings call

• DBM Global: Gross margin improved year-over-year, full year results expected slightly lower than last year, adjusted EBITDA expected slightly lower than last year, total adjusted backlog at end of third quarter was $1.1 billion.
• Life Sciences: R2 had strong financial quarter with high growth in top line sales and system unit sales, plans to expand international footprint, Glacial providers had strong results. MediBeacon collaborating with FDA on kidney monitoring program.
• Spectrum: Profitability improved in third quarter, new networks launched, broadcasting has OTA network opportunities and discussions with strategic partners for new revenue opportunities.

DBM Global: Delivered revenues of $232.8 million and adjusted EBITDA of $20.9 million in the third quarter. Gross margin improved year-over-year by approximately 360 basis points to 18.8%, and adjusted EBITDA improved by approximately 70 basis points to 9%. Life Sciences: R2 posted strong financials with year-to-date worldwide top line sales reaching 5.7 million, a record high. Top line sales grew 217% for the first nine months ended September 30, 2024 compared to the same period last year, and system unit sales grew 416% from third quarter '23 to '24. R2 has a backlog of over 60 systems. Glacial providers saw 168% growth in patients treated and 58% increase in average monthly utilization. Spectrum: Achieved adjusted EBITDA of $1.7 million in the third quarter, a $2 million improvement year-over-year. Year-to-date, Spectrum has delivered $4.8 million in adjusted EBITDA, a significant increase from $900,000 in the first nine months of 2023. New launches drove higher revenue growth, and Defy network launched in the third quarter.

• Expect full year results to come in slightly lower versus last year. - Third quarter sales lighter than expectations but offset by higher margins. - Still expect adjusted EBITDA to be slightly lower than last year results. - DBM's total adjusted backlog increased to $1.1 billion at end of third quarter.

• Non-cash flowing businesses' strategic alternatives require patience within established timeframe to maximize asset value. - Uncertainties related to market indicators affecting the overall M&A market.

Q: Could you provide color on the communication with the FDA regarding MediBeacon?

A: We continue to work with the FDA. We can't get too far into details, but we continue working with the FDA as we work towards hopefully getting approval.

Q: Is it too soon to talk about 2025 profile for DBM Global in terms of revenue and EBITDA?

A: It is. We expect backlog to settle in around this area, continue to see a lot of activity in the market with some hold back in releasing jobs but expect projects to get released eventually and have confidence in the DBM team's ability to win projects with good profit.

Q: Are there other avenues being explored for monetization of Life Sciences to refinance notes?

A: Yes, we continue to explore strategic alternatives with the non-cash flowing assets and are looking at a host of other ways to address the capital structure.