INNOVATE Corp.

Good afternoon and welcome to InnovateCorps' second quarter 2023 earnings conference call. All participants will be in the listen-only mode. After prepared remarks and presentation, there will be a question-and-answer session. Please note, this event is being recorded. I would now like to turn the conference call over to Anthony Rasmus with Investor Relations. Please go ahead.

Good afternoon. thank you for being with us to review Innovate's second quarter 2023 earnings results. We are joined today by Avi Glazer, chairman of Innovate, Paul Voigt, Innovate's interim CEO, and Mike Sena, Innovate's chief financial officer. We have posted our earnings release and slide presentation on our website at innovatecorp.com. We will begin our call with prepared remarks to be followed by a Q&A session. This call is also being simulcast and will be archived on our website. During this call, management may make certain Statements, assumptions, which are not historical facts, will be forward-looking and are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements involve risks, assumptions, uncertainties, and are subject to certain assumptions and risk factors that could cause Innovate's actual results to differ materially from these forward-looking statements. The risk factors that could cause these differences are more fully discussed in the cautionary statement that is included in our earnings release and the slide presentation and further details in our 10-K and other filings with the SEC. In addition, the forward-looking statements included in this conference call are only made as of the date of this call and as stated in our SEC reports. Innovate disclaims any intent or obligation to update or revise these forward-looking statements except as expressly required by law. Management will also refer to certain non-GAAP financial measures, such as adjusted EBITDA. We believe that these measures provide useful supplemental data that, while not a substitute for GAAP measures, allow for greater transparency in the review of our financial and operational performance. At this point, it is my pleasure to turn things over to Avi Glazer.

Good afternoon. Innovate achieved strong second quarter results with revenue of $368.8 million and adjusted EBITDA of $16.5 million. We remain focused on increasing profitability by driving growth across all of our operating segments. Our infrastructure business, DBM Global, delivered second quarter revenue of $362.4 million and DBM expanded gross margin by approximately 160 basis points and adjusted EBITDA margin by approximately 100 basis points to 13.7% and 6.5% respectively. As anticipated, gross margins for the business have come in above the lows we saw in 2022. However, we have seen lower revenues so far in 2023. This is driven in part by project delays in the commercial sector due to the tightening of the credit markets, which have primarily impacted office buildings in the western half of the country. DBM's top line in the quarter was also impacted by delays with the start of a new project in the industrials business as it expands into new markets. While it took longer to work out the details of this first project, we are excited about this project and future opportunities in this space. We continue to utilize DBM's capabilities to capitalize on its expertise to pivot into different market opportunities. When looking at earned gross margins, DBM delivered better margins versus last year's which we expect to continue as we work our way through the balance of 2023. As a reminder, DBM does not always control the timing of when projects are awarded or whether a project may experience delays that ultimately push out revenue recognition to the right from one quarter to another. That said, total adjusted backlog remains strong at $1.5 billion at the end of the second quarter, providing visibility into future periods. BBM continues to see some sizable opportunities in the market, and we are focused on converting these opportunities into backlogs. Turning to life sciences, R2 Technologies continues to make progress. In addition to an increase in worldwide unit shift, R2's utilization and social media presence have experienced notable increases throughout 2023, indicating growth in market awareness and penetration. In the second quarter, R2 also showcased Glacial RX at five major trade shows, the American Society of Aesthetic Plastic Surgery, the American Society for Laser Medicine and Surgery, the Vegas Cosmetic Surgery, the International Aesthetics, Cosmetics, and Spa Conference, and the Aesthetic Show. For MetaBeacon, subsequent to completion of the Phase III Transdermal GFR Pivotal Study, The Phase III clinical study report and other related information was included in the final FDA module submission. FDA reviewed the full module submission package for completeness and is now conducting the substantive review. In addition, the FDA provided formal feedback on MetaBeacon clinical program plans for other applications of the fluorescent technology platform in gastroenterology, ophthalmology, and surgical visualizations. company expanded their management team in May by appointing Dr. Steve Miller as chief medical officer. We are excited to have him on board to drive a range of clinical and strategic initiatives at MetaBeacon. We are pleased with the progress of our life sciences portfolio. We believe we are well positioned to generate long-term value by executing our strategy and further leveraging these innovative solutions to meet key needs in the market. At Spectrum, linear broadcast TV networks, particularly DigiNets, have been experiencing falling ad dollars in the face of a softer economy and increased competition from streaming networks and fast channels, including mounting pressure from smart TVs. We are now seeing indications of market stabilization in the second quarter. Most DigiNets are looking ahead and anticipating a stronger 2024. New business opportunities are emerging in other areas. including from religious networks and fast channels looking for over-the-air distribution. We are also in the midst of discussions for new revenue opportunities in light housing and data casting, which are moving forward. We expect to start realizing revenues in those in 2024 and believe this is the beginning of expanded utilization of the spectrum beyond current use. Lastly, we were pleased to appoint Matt Kastroser is CEO of our Spectrum business in July. Matt joins us from Paramount Global, where he was Vice President of Sales, leading the streaming and programmatic sales functions. We are excited for him to help our Spectrum business continue to execute on the numerous opportunities in the market. From a corporate perspective, we recently announced the appointment of our interim CEO, Paul Voigt. Paul previously served as senior managing director of investments at Innovate for four years until 2018. Given Paul's prior experience and his knowledge of our three business segments, we are confident in our ability to execute on near-term opportunities. Before I turn the call over to Paul, I'd like to pay tribute to Wayne Barr. We are deeply saddened by Wayne's passing, and we will forever be grateful for his leadership. His contributions to Innovate over the last three-plus years have been instrumental in guiding our transformation, helping to tighten our focus on our three segments, and setting up the company for future success. Wayne was an outstanding colleague and an incredible person. He will be greatly missed by all at Innovate. With that, I turn the call over to Paul Boyd.