News Release Details

- Fourth Quarter 2020 Consolidated Net Revenue of $251.8 Million -
- Strategic Focus Sharpened on Growth in Infrastructure, Life Sciences and Spectrum -
- Capital Structure Enhanced Through Rights Offering and Debt Refinancing -

NEW YORK, March 10, 2021 (GLOBE NEWSWIRE) -- HC2 Holdings, Inc. (“HC2” or the “Company”) (NYSE: HCHC), a diversified holding company, announced today its consolidated results for the fourth quarter and fiscal year ended December 31, 2020.

Commentary
"The new HC2 has a sharpened strategic focus on the three key business areas which we believe will drive growth and increased stakeholder value: Infrastructure, Life Sciences and Spectrum,” stated Avie Glazer, Chairman of HC2. “Each of these operating segments contains best in class assets: Infrastructure is one of the largest steel fabrication and erection companies in the U.S., Life Sciences currently includes two breakthrough healthcare technologies, and Spectrum owns and operates the largest broadcast station group in the U.S. HC2 leadership is committed to supporting their success by fueling their organic and inorganic ambitions, and if and when appropriate, looking for alternative approaches to unlock value."

"We have also reached a milestone in terms of the financial position of HC2," added Wayne Barr, Jr., HC2's Chief Executive Officer. "As we continue on a path towards our optimal capital structure, the actions we have taken to monetize certain assets, refinance holding company debt and reduce corporate expenses have significantly increased our liquidity, flexibility, and optionality. There is clear alignment in this endeavor among management, our board and our stakeholders."

• Sharpened strategic focus. HC2 sharpened its focus on three key business areas that the Company believes will drive growth and generate stakeholder value in 2021 and beyond: Infrastructure, Life Sciences and Spectrum. The Company accomplished this through the disposition of the Marine and Telecommunications businesses and the sale of several non-core broadcast stations within our Spectrum segment during 2020, and the sale of the Clean Energy business in early 2021 (see below). In aggregate, HC2 has reduced its number of operating segments from seven to four through these portfolio optimization initiatives. Additionally, the Board of Directors continues to evaluate the Insurance segment and the previously disclosed non-binding indication of interest for the Insurance business (see below).
• Enhanced capital structure. HC2 took several additional steps to enhance the Company's capital structure, including a rights offering in November 2020 and the refinancing of holding company debt in February 2021. Combined with the completed asset sales, HC2 reduced overall indebtedness, lowered its cost of capital, obtained additional liquidity and flexibility, and maintains no near-term holding company debt maturities.
• Lowered corporate costs. HC2 management reduced recurring corporate expenses by approximately 13% for the year through decreased compensation and occupancy costs.
• Business execution. Throughout an uncertain period, each of HC2's three focus businesses is executing well in different ways, showing resiliency in the case of Infrastructure, making measurable progress toward product commercialization in the case of Life Sciences, and completing the station build-out and reducing costs in the case of Spectrum.

Fourth Quarter 2020 Highlights

• HC2 completed the previously-announced common stock rights offering, generating $65 million in gross proceeds ($61.5 million, net of dealer management fees and other offering expenses) consisting of the issuance of 28.7 million shares of common stock at a price of $2.27 per share.
• HC2 completed the previously-announced sale of its Telecommunications subsidiary, PTGi International Carrier Services, Inc., generating a net gain of $0.9 million. The segment's operating results are presented as discontinued operations in the attached tables and are excluded from the discussion of results from continuing operations for the comparable periods.
• HC2 received a non-binding indication of interest for the potential acquisition of its Insurance segment from Continental General Holdings LLC, an entity controlled by Michael Gorzynski, a director of the Company and beneficial owner of approximately 6.6% of the Company's outstanding stock, for a potential transaction value of approximately $90 million, subject to certain adjustments, consisting of, among other things, a combination of $65 million in cash and the transfer to HC2 (or the cancellation) and/or modification of the terms of certain HC2 and HC2-affiliate securities owned by the Insurance company.

Subsequent Events

• In January 2021, HC2 completed the sale of majority-owned Clean Energy subsidiary Beyond6, Inc. to Mercuria Investments US, Inc. for approximately $169 million. HC2, which owned 61% of Beyond6 on a fully diluted basis, received $70 million in net proceeds. The Clean Energy segment's operating results are presented as discontinued operations in the attached tables, and are excluded from the discussion of the Company's results from continuing operations for the comparable periods.
• In February 2021, HC2 completed a $330.0 million offering of 8.5% senior secured notes due 2026, which was used to retire the existing 11.5% senior secured notes due 2021 and repay the outstanding indebtedness under its revolving credit agreement. As part of the refinancing of the senior secured notes, HC2 entered into exchange agreements with certain holders of $51.8 million of the outstanding 7.5% convertible senior notes, extending the maturity date to August 1, 2026.
• In February 2021, HC2 amended its revolving credit facility, extending the maturity from September 2021 to February 2024, increasing the maximum credit commitment from $15 million to $20 million, lowering the current borrowing rate under the agreement by 100 basis points, and updating certain affirmative and negative covenants. The Company applied part of the proceeds of the senior secured notes offering to repay all outstanding indebtedness under the credit facility, and currently has no borrowings under the credit facility.

Fourth Quarter and Full Year Financial Highlights

• Net Revenue: For the fourth quarter of 2020, HC2 consolidated net revenue was $251.8 million, an increase of 1.7% compared to $247.6 million for the prior year quarter. Higher revenue from Infrastructure was partially offset by lower revenues from Insurance and Spectrum, net of eliminations. For the full year 2020, consolidated net revenue was $1,005.8 million compared to $1,077.0 million in 2019.

• Net Income (Loss): For the fourth quarter of 2020, HC2 reported a Net Loss attributable to common stock and participating preferred stockholders of $7.1 million, or $(0.11) per share, compared to a Net Loss of $31.4 million, or $(0.70) per share, for the prior year quarter. For the full year 2020, Net Loss attributable to common and participating preferred stockholders was $95.6 million, or $(1.88) per fully diluted share, compared to a Net Loss of $31.5 million, or $(0.70) per fully diluted share, in the full year 2019.
  

• Adjusted EBITDA: For the fourth quarter of 2020, Total Adjusted EBITDA, which excludes the Insurance segment, totaled $10.0 million, compared to $16.0 million for the prior year quarter. Improvement at Spectrum was more than offset by decreased contribution from Infrastructure, increased losses at Life Sciences, and higher Non-operating Corporate expenses. For the full year 2020, Total Adjusted EBITDA, excluding Insurance, was $25.5 million, compared to $43.4 million in 2019.
  

• Balance Sheet: As of December 31, 2020, HC2 had consolidated cash, cash equivalents and investments of $4.9 billion, which includes cash and investments associated with HC2’s Insurance segment. Excluding the Insurance segment, consolidated cash was $43.8 million, of which $27.5 million was at the HC2 corporate level.

Fourth Quarter and Full Year 2020 Segment Highlights

• Infrastructure

• Life Sciences
  

• Spectrum
  

• Insurance
  

Conference Call

HC2 will host a live conference call to discuss its fourth quarter and full year 2020 financial results and operations today at 5:00 p.m. ET. The Company will post an earnings supplemental presentation in the Investor Relations section of the HC2 website at ir.hc2.com, to accompany the conference call. Dial-in instructions for the conference call and the replay follows.

• Live Webcast and Call. A live webcast of the conference call can be accessed by interested parties through the Investor Relations section of the HC2 website at ir.hc2.com.
  – Dial-in: 1-877-705-6003 (Domestic Toll Free) / 1-201-493-6725 (International)
  – Participant Entry Number: 13717091
  

• Conference Replay*
  
  – Dial-in: 1-844-512-2921 (Domestic Toll Free) / 1-412-317-6671 (International)
  – Conference Number: 13717091

*Available approximately two hours after the end of the conference call through March 24, 2021.

About HC2

HC2 Holdings, Inc. (NYSE: HCHC) has a class-leading portfolio of assets in Infrastructure, Life Sciences, Spectrum and Insurance. HC2 is headquartered in New York, NY, and through its subsidiaries employs over 2,800 people.

Contacts

Investor Contact:
FNK IR
Matt Chesler, CFA
ir@hc2.com 
(212) 235-2691

Media Contact:
Reevemark
Paul Caminiti/Pam Greene/Luc Herbowy
HC2@reevemark.com 
(212) 433-4600

Non-GAAP Financial Measures

In this press release, HC2 refers to certain financial measures that are not presented in accordance with U.S. generally accepted accounting principles (“GAAP”), including Total Adjusted EBITDA (excluding the Insurance segment), Adjusted EBITDA for its operating segments, Adjusted Operating Income for the Insurance segment and Pre-Tax Adjusted Operating Income for the Insurance segment.

Adjusted EBITDA

Management believes that Adjusted EBITDA provides investors with meaningful information for gaining an understanding of our results as it is frequently used by the financial community to provide insight into an organization’s operating trends and facilitates comparisons between peer companies, since interest, taxes, depreciation, amortization and the other items listed in the definition of Adjusted EBITDA below can differ greatly between organizations as a result of differing capital structures and tax strategies. Adjusted EBITDA can also be a useful measure of a company’s ability to service debt. While management believes that non-U.S. GAAP measurements are useful supplemental information, such adjusted results are not intended to replace our U.S. GAAP financial results. Using Adjusted EBITDA as a performance measure has inherent limitations as an analytical tool as compared to net income (loss) or other U.S. GAAP financial measures, as this non-GAAP measure excludes certain items, including items that are recurring in nature, which may be meaningful to investors. As a result of the exclusions, Adjusted EBITDA should not be considered in isolation and does not purport to be an alternative to net income (loss) or other U.S. GAAP financial measures as a measure of our operating performance. Adjusted EBITDA excludes the results of operations and any consolidating eliminations of our Insurance segment.

The calculation of Adjusted EBITDA, as defined by us, consists of Net income (loss) as adjusted for depreciation and amortization; Other operating (income) expense, which is inclusive of (gain) loss on sale or disposal of assets, lease termination costs, and FCC reimbursements; asset impairment expense; interest expense; net gain (loss) on contingent consideration; loss on early extinguishment or restructuring of debt; gain (loss) on sale of subsidiaries; other (income) expense, net; foreign currency transaction (gain) loss included in cost of revenue; income tax (benefit) expense; noncontrolling interest; bonus to be settled in equity; share-based compensation expense; discontinued operations; non-recurring items; costs associated with the COVID-19 pandemic, and acquisition and disposition costs.

Management recognizes that using Adjusted EBITDA as a performance measure has inherent limitations as an analytical tool as compared to net income (loss) or other GAAP financial measures, as these non-GAAP measures exclude certain items, including items that are recurring in nature, which may be meaningful to investors.

Adjusted Operating Income - Insurance

Adjusted Operating Income (“Insurance AOI”) and Pre-tax Adjusted Operating Income (“Pre-tax Insurance AOI”) for the Insurance segment are non-U.S. GAAP financial measures frequently used throughout the insurance industry and are economic measures the Insurance segment uses to evaluate its financial performance. Management believes that Insurance AOI and Pretax Insurance AOI measures provide investors with meaningful information for gaining an understanding of certain results and provide insight into an organization’s operating trends and facilitates comparisons between peer companies. However, Insurance AOI and Pre-tax Insurance AOI have certain limitations, and we may not calculate it the same as other companies in our industry. It should, therefore, be read together with the Company's results calculated in accordance with U.S. GAAP.

Similarly to Adjusted EBITDA, using Insurance AOI and Pre-tax Insurance AOI as performance measures have inherent limitations as an analytical tool as compared to income (loss) from operations or other U.S. GAAP financial measures, as these non-U.S. GAAP measures excludes certain items, including items that are recurring in nature, which may be meaningful to investors. As a result of the exclusions, Insurance AOI and Pre-tax Insurance AOI should not be considered in isolation and do not purport to be an alternative to income (loss) from operations or other U.S. GAAP financial measures as a measure of our operating performance.

Management defines Insurance AOI as Net income (loss) for the Insurance segment adjusted to exclude the impact of net investment gains (losses), including OTTI losses recognized in operations; asset impairment; intercompany elimination; bargain purchase gains; reinsurance gains; and acquisition costs. Management defines Pre-tax Insurance AOI as Insurance AOI adjusted to exclude the impact of income tax (benefit) expense recognized during the current period. Management believes that Insurance AOI and Pre-tax Insurance AOI provide meaningful financial metrics that help investors understand certain results and profitability. While these adjustments are an integral part of the overall performance of the Insurance segment, market conditions impacting these items can overshadow the underlying performance of the business. Accordingly, we believe using a measure which excludes their impact is effective in analyzing the trends of our operations.

Cautionary Statement Regarding Forward-Looking Statements
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This press release contains, and certain oral statements made by our representatives from time to time may contain, forward-looking statements, including, among others, statements related to the expected or potential impact of the novel coronavirus (COVID-19) pandemic, and the related responses of the government and HC2 on our business, financial condition and results of operations, and any such forward-looking statements, whether concerning the COVID-19 pandemic or otherwise, involve risks, assumptions and uncertainties. Generally, forward-looking statements include information describing actions, events, results, strategies and expectations and are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans,” “seeks,” “estimates,” “projects,” “may,” “will,” “could,” “might,” or “continues” or similar expressions. The forward-looking statements in this press release include, without limitation, any statements regarding our expectations regarding entering definitive agreements in respect of and consummating potential divestitures of any of our subsidiaries, reducing debt and related interest expense at the holding company level with the net proceeds of such divestitures, building shareholder value, future cash flow, longer-term growth and invested assets, the severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of businesses’ and governments’ responses to the pandemic on HC2’s operations and personnel, and on commercial activity and demand across our businesses, HC2’s inability to predict the extent to which the COVID-19 pandemic and related impacts will continue to adversely impact HC2’s business operations, financial performance, results of operations, financial position, the prices of HC2’s securities and the achievement of HC2’s strategic objectives, and changes in macroeconomic and market conditions and market volatility (including developments and volatility arising from the COVID-19 pandemic), including interest rates, the value of securities and other financial assets, and the impact of such changes and volatility on HC2’s financial position. Such statements are based on the beliefs and assumptions of HC2’s management and the management of HC2’s subsidiaries and portfolio companies.

The Company believes these judgments are reasonable, but you should understand that these statements are not guarantees of performance or results, and the Company’s actual results could differ materially from those expressed or implied in the forward-looking statements due to a variety of important factors, both positive and negative, that may be revised or supplemented in subsequent statements and reports filed with the Securities and Exchange Commission (“SEC”), including in our reports on Forms 10-K, 10-Q, and 8-K. Such important factors include, without limitation: capital market conditions, including the ability of HC2 and HC2’s subsidiaries to raise capital; the ability of HC2’s subsidiaries and portfolio companies to generate sufficient net income and cash flows to make upstream cash distributions; volatility in the trading price of HC2 common stock; the ability of HC2 and its subsidiaries and portfolio companies to identify any suitable future acquisition or disposition opportunities; our ability to realize efficiencies, cost savings, income and margin improvements, growth, economies of scale and other anticipated benefits of strategic transactions; difficulties related to the integration of financial reporting of acquired or target businesses; difficulties completing pending and future acquisitions and dispositions; effects of litigation, indemnification claims, and other contingent liabilities; changes in regulations and tax laws; and risks that may affect the performance of the operating subsidiaries and portfolio companies of HC2.

Although HC2 believes its expectations and assumptions regarding its future operating performance are reasonable, there can be no assurance that the expectations reflected herein will be achieved. There can be no assurance that definitive agreements for potential divestitures or other strategic transactions will be entered into with respect to any of our subsidiaries, that any such transactions will be consummated, or the timing, terms, conditions or net proceeds thereof. These risks and other important factors discussed under the caption “Risk Factors” in our most recent Annual Report on Form 10-K filed with the SEC, and our other reports filed with the SEC could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release.

You should not place undue reliance on forward-looking statements. All forward-looking statements attributable to HC2 or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made, and unless legally required, HC2 undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Source: HC2 Holdings, Inc.