INNOVATE Corp. (NYSE: VATE), a diversified holding company, has reported its financial results for the first quarter of 2024, showcasing a strong operational performance across its three key segments - Infrastructure, Life Sciences, and Spectrum.

Financials

For the full year 2023, INNOVATE reported specific annual revenue and net income figures, which are not provided in this summary. The company generated annual operating cash flow of $26.5 million and annual free cash flow of $8.1 million.

In the first quarter of 2024, INNOVATE delivered consolidated revenue of $315.2 million, a slight decrease of 0.8% compared to the prior year period. However, the company reported a significant improvement in adjusted EBITDA, which increased to $12.8 million from $4.9 million in the same quarter of 2023.

Infrastructure Segment

The Infrastructure segment, led by DBM Global Inc. (DBMG), continued to be the primary driver of INNOVATE's performance. DBMG generated revenue of $307.9 million in Q1 2024, a 1.2% decrease from the prior year period. Despite the slight top-line decline, the segment's adjusted EBITDA increased to $18.3 million, up from $16.3 million in Q1 2023. This improvement was driven by higher margins in DBMG's commercial structural steel fabrication and erection, as well as its industrial maintenance and repair businesses, partially offset by an increase in recurring SG&A expenses.

DBMG's backlog remains healthy, with a reported backlog of $939.1 million and an adjusted backlog, which includes awarded but not yet signed contracts, of $1.2 billion as of March 31, 2024. The company has been able to reduce its debt obligations through line reductions, as investor working capital has continued to return to the business, a trend that began at the end of 2023. DBMG has reduced its outstanding debt by approximately $73 million in the last 6 months.

Life Sciences Segment

The Life Sciences segment, comprising Pansend Life Sciences, LLC, reported revenue of $1.0 million in Q1 2024, a 100% increase from the prior year period. This growth was primarily driven by R2 Technologies, which experienced a 183% increase in North American system sales compared to the same quarter last year. R2 also continued to expand its international presence by launching its products in the Middle East during the quarter. Adjusted EBITDA losses in the Life Sciences segment decreased, primarily due to lower equity method losses recognized from the company's investment in MediBeacon, as well as a decrease in SG&A expenses at R2.

MediBeacon, one of Pansend's portfolio companies, continues to work closely with the FDA on its kidney monitoring program. The company met with the FDA in the first and second quarters of 2024 and is working to resolve outstanding questions to move towards approval status. MediBeacon's pivotal study results were recently posted on the clinicaltrials.gov website, indicating that the company's transdermal GFR measurement system met the predetermined primary and secondary endpoints established with the FDA.

Spectrum Segment

The Spectrum segment, which includes HC2 Broadcasting Holdings Inc., reported revenue of $6.3 million in Q1 2024, a 10.5% increase from the prior year period. This growth was driven by the launch of new networks and expanded coverage with existing customers, partially offset by the termination of smaller networks and individual markets. Spectrum's adjusted EBITDA increased to $1.6 million, up from $0.4 million in the same quarter of 2023, primarily due to the revenue growth and the impact of the personnel realignment implemented in the second half of 2023.

Corporate Level

At the corporate level, INNOVATE's non-operating segment reported adjusted EBITDA losses of $2.9 million, an improvement of $0.6 million compared to the first quarter of 2023. This was driven by decreases in compensation-related expenses, consulting fees, and insurance expense, partially offset by an increase in legal fees.

Liquidity

As of March 31, 2024, INNOVATE had $38.4 million in cash and cash equivalents, excluding restricted cash, compared to $80.8 million as of December 31, 2023. On a stand-alone basis, the company's non-operating corporate segment had $9.2 million in cash and cash equivalents as of March 31, 2024, compared to $2.5 million at the end of 2023.

INNOVATE's total principal outstanding indebtedness stood at $687 million as of March 31, 2024, down $35.8 million from $722.8 million at the end of 2023. This decrease was primarily driven by a reduction in debt at the Infrastructure segment, partially offset by an increase in debt at the Life Sciences segment.

Outlook

The company continues to focus on addressing its capital structure, which it believes is the key driver in the underperformance of its stock price. INNOVATE recently closed on a rights offering and expects to receive upstream cash payments from its subsidiaries, which it believes will provide sufficient runway to execute a strategy to utilize its non-cash flowing assets to address its capital structure and set the company up to refinance its debt in 2024.

INNOVATE's management remains optimistic about the overall M&A market and is working to reach a resolution on its non-cash flowing businesses in 2024, as it continues to see positive indicators in the market and progress surrounding these assets.

Conclusion

INNOVATE Corp. delivered a solid operational performance in the first quarter of 2024, with strong results in its Infrastructure and Spectrum segments, as well as continued momentum in its Life Sciences business. The company's focus on optimizing its capital structure and exploring strategic alternatives for its non-cash flowing assets is a key priority as it looks to unlock value for its shareholders.