HC2 Holdings Reports Second Quarter 2020 Results

8/11/20

NEW YORK, Aug. 10, 2020 (GLOBE NEWSWIRE) -- HC2 Holdings, Inc. (NYSE: HCHC), a diversified holding company, announced today its consolidated results for the second quarter ended June 30, 2020.

Second Quarter 2020 Highlights

  • Redeemed approximately $50.6 million of HC2’s 11.5% Senior Secured Notes.
  • Net Income attributable to common and participating preferred stockholders of $12.7 million, or $0.26 per share, compared to $9.0 million, or $0.12 per fully diluted share, in the year-ago quarter. Net Income for the second quarter 2019 includes a $0.12 per share loss from discontinued operations.
  • Adjusted EBITDA for Core Operating Subsidiaries* of $23.5 million, compared to $25.2 million in the year-ago quarter.
  • Total Adjusted EBITDA, excluding Insurance, of $15.2 million, compared to $25.5 million in the year-ago quarter.

* “Core Operating Subsidiaries” consists of HC2’s Construction, Energy and Telecommunications segments.

Subsequent Event

  • Announced pursuit of strategic options for Telecommunications subsidiary, PTGi-International Carrier Services, Inc.

“We continued to navigate through the challenging environment caused by the COVID-19 pandemic, and I am proud of our team’s ongoing efforts to ensure our businesses run as smoothly as possible while adhering to the highest standards in providing quality service to all of our customers,” stated Wayne Barr, Jr., HC2’s interim Chief Executive Officer. “During the second quarter, we were pleased to complete the sale of a significant portion of our stake in HMN, which contributed to reduce debt at the holding company level by 27% since the beginning of the year, executing on our top priority of debt reduction and strengthening the balance sheet.”

“We were pleased our Energy subsidiary tripled its Adjusted EBITDA compared to the prior-year period, and we are excited for the impending commercial launch of R2’s CryoAesthetic technology within the next few months,” added Mr. Barr. “We are focused on the successful refinancing of our 11.5% Notes, as well as significantly reducing corporate expenditures as we evaluate all strategic options across our portfolio to enhance our capital structure and unlock value for our stockholders.”

Avie Glazer, Chairman of HC2, added, “The last few months have been a period of transition for HC2. During this time, the Board has taken a fresh and thorough look at the company and its investments. Everyone at HC2 is excited, and we believe that there are a lot of opportunities to create and enhance value in the future and reward all stockholders.”

Second Quarter Financial Highlights

  • Net Revenue: For the second quarter of 2020, HC2 consolidated net revenue was $377.0 million, compared to $479.2 million for the year-ago quarter. Lower revenues from the Telecommunications, Construction and Broadcasting segments, as well as the Insurance segment, net of eliminations, were partially offset by an increase in revenue from the Energy segment.
  • Balance Sheet: As of June 30, 2020, HC2 had consolidated cash, cash equivalents and investments of $4.6 billion, which includes cash and investments associated with HC2’s Insurance segment. Excluding the Insurance segment, consolidated cash was $64.3 million, of which $0.9 million was at the HC2 corporate level.

Second Quarter 2020 Segment Highlights

  • Construction
    • The Company continues to review strategic alternatives for DBM, including a potential sale or a subsidiary refinancing.
    • For the second quarter of 2020, DBM reported Net Income of $1.6 million, compared to $8.9 million for the year-ago quarter. Adjusted EBITDA was $19.1 million, compared to $23.1 million in the year-ago quarter. DBM’s results for the quarter were impacted by the timing and mix of project backlog, as well as from the COVID-19 pandemic, which has resulted in delays in new project awards for both its commercial construction and industrial services businesses. DBM was further impacted by certain industrial services customers electing to defer on routine maintenance and repair until a future date, and in some cases indefinitely defer or cancel new capital projects, in response to the lower demand in oil and gas markets.
    • DBM's total backlog was approximately $410.3 million as of June 30, 2020, compared to $468.5 million for the year-ago quarter. Taking into consideration awarded, but not yet signed contracts, backlog would have been approximately $714 million at the end of the second quarter of 2020, compared to $662 million at the end of the second quarter of 2019.
  • Energy
    • For the second quarter of 2020, ANG reported Net Income of $0.4 million, compared to a Net Loss of $0.7 million for the year-ago quarter. Adjusted EBITDA increased to $4.2 million compared to $1.3 million for the year-ago quarter, driven by contributions from ANG’s June 2019 acquisition of 20 ampCNG fueling stations, as well as from the Alternative Fuel Tax Credit, which was not yet approved for 2019 in the year-ago quarter.
  • Broadcasting
    • During 2020, HC2 Broadcasting has entered into agreements with a number of recognizable name brand content providers, including DABL, a CBS Diginet, Cheddar News, and LX Network, an NBC Universal Diginet.
    • As of early August 2020, HC2’s Broadcasting segment has 233 operational stations, of which approximately 190 are currently connected to the Company’s CentralCast system, in 95 Designated Market Areas (“DMAs”) across the United States and Puerto Rico, including active operating stations in 34 of the top 35 DMAs. The remaining silent license builds are expected to be completed during the third quarter, and the Company's stations will be approximately 98 DMAs once complete.
  • Life Sciences
    • In April 2020, R2 Technologies (“R2”) received an additional $10 million equity investment from Huadong Medicine Company Limited (“Huadong”), R2’s exclusive distributor in the China/Asia-Pacific market. This represents the second tranche of Huadong’s investment in R2 at an approximate post-money valuation of $90 million. Proceeds from the new equity investment in R2 are being utilized to commercialize R2’s FDA-approved revolutionary CryoAesthetic technology, which promises physicians a new way to treat aesthetic and medical skin conditions.
    • R2 plans to commence its pre-order process in the third quarter, barring any COVID-related delays, in advance of a fourth quarter or early 2021 launch. As a reminder, both R2 and MediBeacon are fully funded for ongoing activities, and as a result, the Company currently does not anticipate a need for further capital investment from HC2.
  • Insurance
    • The Company continues to review strategic alternatives for Continental, including a potential sale.
    • As of June 30, 2020, Continental had $4.5 billion of cash and invested assets, $5.7 billion in total GAAP assets, and an estimated $360 million of total adjusted capital.
    • For the second quarter of 2020, Continental reported Net Income of $11.4 million, compared to $30.3 million for the year-ago quarter.
    • Pre-Tax Insurance AOI was $14.6 million for the second quarter of 2020, compared to Pre-Tax Insurance AOI of $33.0 million for the year-ago quarter. The decrease was primarily driven by non-recurring favorable claims activity recognized in the year-ago quarter driven by an increase in contingent non-forfeiture option activity as a result of in-force rate actions approved and implemented, and additional unfavorable claims activity and reserve developments in the current year. Additionally, the Insurance segment incurred larger expenses due to additional premium taxes, miscellaneous software expenses, third party management fees, and legal expenses.

About HC2

HC2 Holdings, Inc. is a publicly traded (NYSE:HCHC) diversified holding company, which seeks opportunities to acquire and grow businesses that can generate long-term sustainable free cash flow and attractive returns in order to maximize value for all stakeholders. HC2 has a diverse array of operating subsidiaries across multiple reportable segments, including Construction, Energy, Telecommunications, Life Sciences, Broadcasting, Insurance and Other. HC2's largest operating subsidiary is DBM Global Inc., a family of companies providing fully integrated structural and steel construction services. Founded in 1994, HC2 is headquartered in New York, New York. Learn more about HC2 and its portfolio companies at www.hc2.com.

Recent Deals

Interested in advertising your deals? Contact Edwin Warfield.