INNOVATE Corp. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Life Sciences: MediBeacon received FDA approval for transdermal GFR systems and NMPA approval in China. Engaged Jefferies Financial Group to explore monetization options.
• R2: Achieved record revenues in 2024, secured over 75 systems in order backlog, saw significant growth in patient treatment and brand awareness, and expanded globally with new distributor partnerships in 2025.
• Infrastructure: DBM Global had revenue and adjusted EBITDA in Q4, faced project delays in 2024 but saw surge in awards at start of 2025, optimistic on pipeline, and cautious on construction material costs due to political uncertainty.
• Spectrum: Had strong financial and operational year, rightsized business, saw improved network launches, and pursued OTA opportunities and strategic partnerships in 2025.

Segment Performance

• Life Sciences: Fourth quarter revenue increased 173.3% to $4.1 million from $1.5 million in the prior year quarter. The increase was attributable to R2, primarily due to growth in glacial FX systems and consumable sales. Life Sciences adjusted EBITDA losses decreased for the quarter due to fewer equity method losses and increased gross profit at R2. Revenue contribution from Life Sciences in Q4 2024 was $4.1 million, though exact percentage isn't specified but it's a significant increase from prior year.
• R2: Broke sales records in 2024 with full year revenue of almost $10 million (197% increase over 2023's $3.3 million). Worldwide system unit sales grew 113% in Q4 2024 and 182% for full year 2024. Secured over 75 systems in order backlog at year end. Glacial providers saw 170% growth in patients treated and 49% increase in average monthly utilization. Brand awareness exceeded industry competitor growth by 1,694%.
• Infrastructure: DBM Global had Q4 2024 revenue of $225.7 million and adjusted EBITDA of $17.4 million. Gross margin improved year-over-year by ~180 basis points to 18.2%, but adjusted EBITDA margins compressed by 80 basis points to 7.7%. Backlog ended 2024 at $1.1 billion. Debt decreased by $32.1 million to $144.7 million principal amount as of Dec 31, 2024.
• Spectrum: Fourth quarter and full year 2024 top line grew 19.3% and 14.2% respectively year-over-year. Fourth quarter adjusted EBITDA was $2.3 million (more than doubled from prior year) and full year adjusted EBITDA was $7.1 million (significant improvement from $2 million in 2023). Successful network launches and strategic partnerships were highlighted.

Guidance

• Main objective for 2025 is to address capital structure and near-term debt maturities.
• DBM Global saw surge in awards at start of 2025 providing opportunity to outperform 2024, and optimistic on pipeline.
• Spectrum expects new entrants in OTA market in 2025 and awaits revenues from ATSC 3.0 technology efforts.

Risks

• Continuing unpredictability in political landscape poses a cautious stance towards cost of construction materials, especially tariffs and inflation. Closely following tariff announcements and developing strategies to lessen impact, but currently no material impact anticipated on financials.

Q: Congratulations on the FDA approval of MediBeacon and on engaging Jefferies to explore monetizing part or all of that business. How deep are discussions with Jefferies and when did they get engaged?

A: Back in the end of '23, we had indicated we hired Bankers. We've been working on this process for some time, FDA approval was critical. We're in discussions with medical device and pharmaceutical companies at this point.

Q: Regarding tariffs and their impact on MediBeacon and DBM Global's adjusted backlog. How might tariffs impact these?

A: At this time, we don't think tariffs have a big impact on MediBeacon's current situation. For DBM Global, typically when bidding projects, they lock in prices with mills and don't take risk on steel prices, so no big impact seen from backlog perspective at this point, but continuing to assess.