INNOVATE Corp.

Good afternoon and welcome to InnovateCorp first quarter 2026 earnings conference call. All participants will be in a listen-only mode. After the 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 over to your host, Anthony Rosmus with Investor Relations. Please go ahead.

Good afternoon. Thank you for being with us to review Innovate's first quarter 2026 earnings results. We are joined today by Paul Voigt, Innovate's interim CEO, and Mike Sena, Innovate's CFO. We have posted our earnings release and our 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 the call, management may make certain statements and 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, and 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 disclosed 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 this date of the 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 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 Paul Boyd.

Good afternoon. We are pleased to report our first quarter 2026 financial results and we'll provide you with an update on our three operating segments. For the first quarter, Innovate delivered consolidated revenues of $364.8 million and adjusted EBITDA of $19.7 million. Innovate delivered a strong start to the year with solid execution across the portfolio and improving visibility into 2026. Infrastructure exited the quarter with strong momentum and a healthy backlog, while life science advanced key regulatory and commercial milestones. At Spectrum, we continue to make progress on strategic initiatives that position the business for improved performance ahead. To start the review of the subs at infrastructure, DBM Global achieved the first quarter revenue of $357.9 million and adjusted EBITDA of $23 million. During the quarter, DBM has seen gross margin compression year over year of approximately 140 basis points to 14.2%, while adjusted EBITDA margin of 6.4% was largely consistent with the prior year quarter. Despite the year-over-year decrease in gross margin, we remain impressed by the world-class management team at DBMG, evidenced through maintaining our adjusted backlog of $1.8 billion from the end of the year of 2025, while increasing revenue as compared to the prior year quarter. DBMG started the year delivering a very strong first quarter, reflecting consistent execution and continued strength. Sales activity remained healthy with disciplined pursuit selection and strong conversion rates translating into meaningful backlog generation. DBM exited the quarter with clear momentum underpinned by a robust improving pipeline and early success in building backlog for 2027. This progress reinforces our confidence in the durability of the revenue base and highlights the potential for incremental upsides as project timing scope continued to firm up. Importantly, as visibility extends further out, the focus of organization is evolving from near-term execution toward disciplined, capacity-aligned growth, ensuring we deploy resources thoughtfully while maintaining margins, operational flexibility, and long-term value creation. Technology, healthcare, And opportunities in New York City are driving our backlog to near record levels. And we have seen great results and positive outcomes as we ramp up these projects. We see a lot of capital is moving into physical infrastructure for computing in the United States. We are specifically seeing opportunities in technology related construction markets and are concentrated around AI infrastructure, energy systems, advanced manufacturing, and digital connectivity. Technology companies are expected to continue spending at historic levels on computing infrastructure, and we continue to see robust sales opportunities in the markets and DBMC's significant opportunities in the technology markets, specifically data centers, chip makers, and other specialty technology projects. Turning to life sciences, MetaBeacon continues to make meaningful progress across regulatory, clinical, and commercial fronts. In the United States, there is growing momentum with focus on specific use cases in cardiology, oncology, and in kidney transplant donor assessment. From a regulatory standpoint, we successfully completed a week-long notified body quality systems audit with no observations consistent with the medical device single audit program. MetaBeacon now has access to a streamlined approach for existing and eventual approvals in the United States, Europe, Japan, Australia, Canada, and Brazil. Under the European medical device regulation, MetaBeacon received the CE mark for the TGFR monitor and TGFR reusable sensor. Looking ahead, MetaBeacon is in collaboration with its partner and targeting approval in additional Asia-Pacific markets this year. Clinically, progress continues across multiple programs. In the Surgical Vigilation Clinical Study, several patients have been enrolled. There is ongoing optimization of agent dose and administration timing ahead of additional patient enrollment. and geography clinical study, MetaBeacon received FDA investigational device exemption, IDE, approval, along with hospital board approval. Patient recruitment is now underway. MetaBeacon also received IDE approval for the TGFR wireless sensor. The wearable prototype is ready to be used in the clinical study with planned enrollment this year. Finally, IDE approval has also been secured for a study focused on evaluation of renal functional reserve. Renal functional reserve has potential clinical value in cardiac risk assessment and kidney donor evaluation. R2 continued to demonstrate strong global demand and commercial execution in the first quarter of 2026. For Q1, 2026, R2 reported worldwide revenue of 1.6 million, while total demand reached 2.2 million. Combined with additional orders received early in Q2, R2 currently maintains a backlog of approximately 160 systems globally, representing nearly 2 million in revenue and reinforcing continued momentum into the second quarter. International demand remained a key driver of growth during the quarter, with gross system sales outside North America increasing 58.6% compared to Q1 2025. R2 continued expanding its global footprint through appointment of a new distributor in South Korea representing an estimated 2 million opportunity. With sustained demand increasing backlog and continued global expansion, R2 begins the second quarter with strong underlying momentum. While R2 continues to execute a strategy, the business is looking to raise external capital to continue its progress through the year. Moving to Spectrum, first quarter revenues was $5.3 million and adjusted EBITDA was $700,000. During the quarter, Spectrum continue to experience softness in advertising demand and network cancellations. Despite these near-term headwinds, we are encouraged by the progress on several strategic fronts. The recent NAB conference in Las Vegas generated a meaningful number of strategic and commercial opportunities, and we are actively following up on these discussions in the coming months. In addition, favorable FCC rulings over the past year related to low-power television and Class A stations has created opportunities to expand and optimize our U.S. spectrum footprint as marginal costs over the next six to 12 months. During the LPT license window that opened in March 19th, we filed applications for more than 60 new licenses to expand our national footprint and increase population coverage. These construction permits are expected to be granted over the coming months with up to three years to complete the station build-outs. In addition, that same filing window enabled us to upgrade stations in larger markets by relocating more than 25 Class A licenses from smaller markets, providing greater spectrum protection and improving strategic positioning for any future spectrum auctions. Our collaborative project with a mobile wireless carrier continues to advance with successful trials completed and discussions are underway regarding new market launches in the second half of 2026. Finally, the petition we filed with the FCC in March proposing 5G broadcast conversions to low-powered television continues to gain support across the industry, although no formal action has been taken to date by the FCC. Overall, while near-term performance remains challenged, we believe the combination of stabilizing fundamentals, regulatory tailwinds, and disciplined strategic investment positions spectrum for improved performance as conditions normalize. To conclude, we continue work with our lenders on strategic alternatives, as we focus on fixing our capital structure, and we'll provide additional information as we work to execute our strategy. With that, I'll turn it over to Mike for a review of our financials and capital structure.

Thanks, Paul. Consolidated total revenue for the first quarter of 2026 was $364.8 million, an increase of 33% compared to $274.2 million in the prior year period. The increase is primarily driven by our infrastructure segment, which was partially offset by decreases at our life sciences and spectrum segments. Net loss attributable to common stockholders and participating preferred stockholders for the first quarter of 2026 decreased to $17.2 million or $1.29 per fully diluted share, compared to $24.8 million or $1.89 per fully diluted share in the prior year period. Total adjusted EBITDA was $19.7 million in the first quarter of 2026, an increase from $7.2 million in the prior year period. The increase was primarily driven by our life sciences and infrastructure segments, which was partially offset by our spectrum segment. At infrastructure, revenue increased 35.1% to $357.9 million from $264.9 million in the prior year quarter. This increase was primarily driven by the timing and size of projects at DBMG's commercial structural steel fabrication and erection business, which had increased activity subsequent to the comparable period on certain large construction projects. This was partially offset by a decrease at the industrial maintenance and repair business due to the timing and size of projects, which had increased activity in the comparable period on certain large construction projects that have since been completed. Infrastructure adjusted EBITDA for the first quarter of 2026 increased to $23 million from $16.7 million in the prior year period. The increase was primarily driven by an increase in gross profit at DBMG's commercial structural steel fabrication and erection business, which had increased activity subsequent to the comparable period on certain large construction projects. The increase was partially offset by a decrease in revenue and gross profit at our industrial maintenance and repair business due to timing of certain large construction projects in the comparable period that have since been completed and an increase in recurring SG&A expenses, primarily driven by an increase in compensation-related expenses due to timing. As of March 31, 2026, reported backlog was $1.6 billion and adjusted backlog, which takes into consideration awarded but not yet signed contracts, was $1.8 billion, compared to reported backlog of $1.7 billion and adjusted backlog of $1.8 billion at the end of 2025. CBMG ended the year with $76.6 million in principal amount of debt, which is a decrease of $11.1 million from the year end of 2025, primarily driven by a decrease in their credit line. At Life Sciences, revenue decreased 48.4% to $1.6 million from $3.1 million in the prior year quarter. The decrease in revenue was attributable to R2, primarily driven by decreases in glacial FX and glacial RX unit sales in North America, which were partially offset by an increase in glacial SPA unit sales outside of North America. Life Sciences adjusted EBITDA losses decreased for the quarter, primarily driven by fewer equity method losses recognized from MetaBeacon and a decrease in recurring SG&A due to reduction in compensation-related expenses at R2 and PANSEND, which was partially offset by a decrease in gross profit at R2 due to the decrease in revenue. At Spectrum, year-over-year revenue for the first quarter decreased 900,000 to 5.3 million, and adjusted EBITDA decreased 700,000 to 0.7 million. The decreases were primarily driven by the termination of a few networks and individual markets subsequent to the comparable period. Non-operating corporate adjusted EBITDA losses were 2 million in the first quarter of 2026. slightly down from 2.2 million in the first quarter of 2025. As of March 31st, 2026, the company had 134.6 million of cash and cash equivalents, excluding restricted cash, compared to 112.1 million as of December 31, 2025. On a standalone basis, as of March 31, 2026, our non-operating corporate segment had cash and cash equivalents of 2.5 million compared to cash and cash equivalents of 4.2 million at the end of 2025. As of March 31, 2026, Innovate had total principal outstanding indebtedness of 699 million, up 11.8 million from 687.2 million at the end of 2025. The increase was primarily driven by the PIC interests that are non-operating and life sciences segments, which is partially offset by the decrease in infrastructure's outstanding debt. With that, operator, we'd now like to open up the call for questions.

Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please, while we poll for questions.

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One moment, please, while we poll for questions. We have reached the end of the question and answer session.

I would now like to turn the call back over to Paul Voigt for closing comments.

Yes, thank you. I want to thank everybody for their time and patience and support. Hopefully, we'll come back to you very soon with some positive dues. We look forward to keeping in touch. Thank you. Bye-bye.

This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.