INNOVATE (VATE) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Nov. 12, 2026

CALL PARTICIPANTS

• Investor Relations - Jenna Kozlowski
• Interim Chief Executive Officer - Paul Voigt
• Chief Financial Officer - Mike Sena

TAKEAWAYS

• Consolidated Revenue -- $495.5 million, representing a 42.8% increase compared to $347.1 million driven by the infrastructure segment.
• Diluted EPS -- $1.10, representing an improvement from a loss of $0.71 per diluted share primarily due to a $32.9 million gain on the sale of a controlling interest in the broadcasting business.
• Consolidated Adjusted EBITDA -- $40.5 million, more than doubling from $19.8 million due to performance in the infrastructure segment and lower corporate professional fees.
• Infrastructure Revenue -- $490.6 million, an increase of 45% resulting from higher volume in the commercial structural steel fabrication and erection business.
• Infrastructure Adjusted EBITDA -- $43.6 million, an increase of 85.5% compared to $23.5 million driven by increased activity and project execution efficiencies.
• Infrastructure Margins -- 15.3% gross margin and 8.9% adjusted EBITDA margin, reflecting year-over-year expansions of 170 basis points and 200 basis points respectively.
• Infrastructure Backlog -- $2.7 billion in adjusted backlog as of Sept. 30, 2026, an increase from $1.8 billion at the end of 2025.
• Infrastructure Debt -- $68.7 million in principal debt at DBM Global as of Sept. 30, 2026, a decrease of $19 million since Dec. 31, 2025.
• DBM Global Divestiture Proceeds -- $413 million in total cash at closing on Oct. 5, 2026, which included a $35 million payment for a joint tax election.
• Post-Transaction Indebtedness -- $238.3 million in total principal debt remaining after the company used divestiture proceeds to repay its corporate credit line and redeem $325 million in senior secured notes.
• Life Sciences Revenue -- $1.2 million, a 61.3% decrease compared to $3.1 million resulting from lower unit sales at R2 driven by liquidity constraints.
• R2 Customer Demand -- $3.1 million in worldwide demand during the third quarter, with 116 systems in backlog representing approximately $1.9 million of future revenue.
• MediBeacon China Orders -- 600 TGFR Monitors, with deliveries scheduled between the fourth quarter of 2026 and the second quarter of 2027.
• R2 Manufacturing Production -- 30 Glacial fx systems delivered and 60 systems currently in production through EIT LLC, with delivery anticipated by Nov. 30, 2026.
• Spectrum Segment Revenue -- $3.7 million, a decrease from $5.6 million because the current period included only two months of consolidated results following a partial divestiture.
• Broadcasting Ownership Stake -- 25% retained interest in the broadcasting business, with an option to acquire up to an additional 15% to reach 40% total ownership.
• Pansend Milestone Eligibility -- $500 million in potential development and commercial milestones due to INNOVATE through its interest in Pansend related to the sale of BeneVir Biopharm.
• Interest Expense -- $31.1 million, an increase from $23.4 million driven by higher principal balances and a new loan at the spectrum segment.
• Cash Equivalents -- $4.9 million in consolidated cash as of Sept. 30, 2026, which excluded restricted cash and held-for-sale assets.

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RISKS

• Sena stated, "The decrease at our Life Sciences segment was attributable to R2, reflecting decreases in unit sales across all product lines and regions, due to liquidity constraints," which impacted quarterly revenue.
• The company warned that if it fails to "consummate sufficient asset sales," it may be unable to satisfy debt obligations and "may be unable to continue as a going concern," as disclosed in regulatory filings.

SUMMARY

INNOVATE Corp. (NYSE:VATE) completed several strategic divestitures during the third quarter to simplify its portfolio and improve its liquidity profile. Management reported the sale of DBM Global and a controlling interest in the broadcasting segment, utilizing the cash proceeds to significantly reduce total principal indebtedness and redeem senior secured notes. The company stated it is now prioritizing its remaining life sciences assets, specifically targeting the commercialization of MediBeacon's kidney function monitoring system and the expansion of R2's skin treatment production capacity. These strategic actions were designed to stabilize the capital structure while focusing resources on subsidiaries with high growth potential in the medical technology market.

• MediBeacon's TGFR System was nominated for the 2026 Prix Galien USA Best Medical Technology Award, which recognizes healthcare innovations.
• Voigt reported that manufacturing for the Glacial fx system is underway at EIT LLC, with delivery of approximately 60 systems anticipated by Nov. 30, 2026.
• Management noted that MediBeacon has expanded institutional engagement to more than 120 medical institutions within the United States.
• The company retains a 25% ownership stake in its broadcasting business with an option to increase that stake to 40% in the future.
• Broadcasting currently manages 287 operating stations and is pursuing additional station acquisition opportunities through FCC license windows.

INDUSTRY GLOSSARY

• DBM Global (DBMG): A subsidiary specializing in structural steel fabrication, erection, and industrial maintenance services.
• TGFR System: The Transdermal Glomerular Filtration Rate system, a non-invasive medical technology used to monitor kidney function.
• Adjusted EBITDA: A non-GAAP financial measure used to evaluate operating performance by excluding interest, taxes, depreciation, and other specific costs.
• PIK Interest: Payment-in-kind interest, a type of interest that is paid with additional debt rather than cash.
• Prix Galien: A prestigious award in the medical technology industry that recognizes breakthrough innovations.
• Investigational Device Exemption (IDE): An FDA regulatory status that allows an unapproved medical device to be used in a clinical study.
• R2 Technologies: A life sciences company focused on medical and aesthetic technologies, including the Glacial skin treatment platform.
• Backlog: The total value of contracted or awarded work that has not yet been completed.
• BIM (Building Information Modeling): A digital engineering process for creating and managing information on a construction project.

Full Conference Call Transcript

Operator: Good afternoon, everyone. Welcome to INNOVATE's third quarter 2026 earnings conference call. All participants will be in a listen-only mode. After prepared remarks and presentation, there will be a question and answer session. To register to ask a question at any time, please press star one. Please note, today's call is being recorded. I would now like to turn the conference over to Ms. Jenna Kozlowski with Investor Relations. Please go ahead, ma'am.

Jenna Kozlowski: Good afternoon. Thank you for being with us to review INNOVATE's third 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 this 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 discussed in the cautionary statement that is included in our earnings release and the slide presentation, and further detailed in our 10-Q, 10-K, and other filings with the SEC. In addition, the forward-looking statements, including the 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. Reconciliation of these measures to the most comparable GAAP measures are included in our earnings release and presentation. At this point, it is my pleasure to turn things over to Paul Voigt.

Paul Voigt: Good afternoon. We are pleased to report our third quarter 2026 financial results and provide an update on our operating segments. For the third quarter, INNOVATE delivered consolidated revenues of $495.5 million and adjusted EBITDA of $40.5 million. INNOVATE delivered a strong third quarter, highlighted by exceptional performance at DBM Global and continued progress across our portfolio. DBMG delivered another significant quarter ahead of the completion of its sale in October, while MediBeacon continued to advance commercial adoption and key reimbursement initiatives. At Spectrum, we completed the sale of a controlling interest in broadcasting while retaining meaningful participation in the business, and R2 continued to generate healthy underlying demand.

Before we turn to operating highlights, I would like to provide an update on the significant progress we have made simplifying INNOVATE's portfolio and unlocking value for shareholders. Subsequent to quarter end, on October 5th, we completed the sale of DBM Global, marking a significant milestone for INNOVATE. The transaction crystallized the value created at DBMG while providing INNOVATE with substantial liquidity and an ownership interest in IES Holdings. We are extremely proud of what the DBMG team accomplished and believe the business is well-positioned for its next chapter.

During the quarter, we also completed the sale of a controlling interest in broadcasting to CONX Corp., with INNOVATE retaining a 25% ownership interest and the ability to increase our ownership through an option to acquire up to an additional 15% to reach a potential 40% ownership stake and continue participation in the future potential of the business. Broadcasting remains focused on expanding the utility of its spectrum assets and pursuing opportunities beyond traditional linear broadcasting. As of today, broadcasting has 287 operating stations, and the company continues to pursue additional station acquisition opportunities and takes advantage of FCC windows to gain additional licenses.

Additionally, broadcasting is the largest owner of Class A stations and is well-positioned for a second broadcast auction should it come to pass. These transactions represent important steps in simplifying our portfolio and sharpening our focus on maximizing the value of INNOVATE's remaining assets and investments while addressing our capital structure. To start the review of the businesses, at infrastructure, DBM Global delivered another strong quarter with revenue of $490.6 million and adjusted EBITDA of $43.6 million. During the quarter, DBMG has seen gross margin improvement year-over-year of approximately 170 basis points to 15.3%, and adjusted EBITDA margin improvement year-over-year of approximately 200 basis points to 8.9%.

DBMG generated approximately $500 million of revenue from its existing backlog while maintaining adjusted backlog at approximately $2.7 billion. We believe the ability to replenish backlog at this level while executing against the significant volume of existing work demonstrates the strength of DBMG's customer relationships, opportunity pipeline, and underlying demand environment. Sales activity remained healthy across the platform, supported by contracted awards, negotiated work, and project scope expansion. Technology, healthcare, and New York City remain key areas of activity, with continued investment in infrastructure supporting computing, artificial intelligence, advanced manufacturing, semiconductor production, energy systems, and digital connectivity. Importantly, DBMG's third quarter performance closed out an exceptional period for the business under INNOVATE's ownership.

As discussed earlier, subsequent to the quarter end, we completed the sale of DBMG to IES Holdings. We are extremely proud of what DBMG management team and employees accomplished during our ownership and believe the strength of the business at the time of the transaction reflects the significant value created over that period. DBMG closes out the last chapter with a strong quarter and September 30th, 2026, LTM adjusted EBITDA of $143.3 million, and it enters its next chapter with strong operating momentum, substantial backlog, and a healthy pipeline of opportunities extending into 2027 and 2028.

We are excited about the business's future as part of IES, and through our ownership interest in IES, retain the opportunity to participate in its continued success. Turning to life sciences, MediBeacon continued to build momentum during the quarter as it advanced commercialization of the TGFR System and laid the groundwork for broader adoption into the United States and internationally. MediBeacon's TGFR System was nominated for the 2026 Prix Galien USA Best Medical Technology Award, recognizing its innovation and potential to transform kidney function assessment and patient care.

Often referred to as the Nobel Peace Prize of the life science industry, the Prix Galien is among the most prestigious honors in healthcare innovation, recognizing breakthrough technologies that have the potential to significantly improve human health. The company continued to advance commercial adoption and key reimbursement initiatives for early utilization in kidney transplant donors, heart failure, and oncology. Commercial momentum is building with product shipments, research activities, and clinical utilization that is underway at leading medical centers. This is supported by expanding engagement with key opinion leaders and hospital value analysis committees. Importantly, MediBeacon continues to advance reimbursement initiatives, an important component for broader TGFR System adoption.

During the third quarter, the company continues its engagement with Centers for Medicare & Medicaid Services and key private payers for additional reimbursement coding. The opportunity for MediBeacon's technology is expanding. The company continues to advance clinical development activities around its third-generation wireless TGFR Sensor targeting a broader addressable market for kidney function assessment. This new wireless system has an investigational device exemption approval from the FDA, authorizing the start of validation studies in the United States. At the same time, interest from pharmaceutical and biotechnology customers continues to grow. Transdermal GFR technology has been used in preclinical research for over a decade by big pharma.

Initial Transdermal GFR use by big pharma in clinical trials is now anticipated in 2027. Internationally, MediBeacon continues advanced commercialization initiatives, particularly in China, where orders for 600 TGFR Monitors have been secured. Shipments are planned from the fourth quarter of 2026 through the second quarter of 2027. Looking ahead, MediBeacon remains focused on converting its growing commercial pipeline into broader utilization, advancing reimbursement and clinical development initiatives, and expanding the global opportunity for the TGFR System. Though conversion timing for new technology can take six to 12 months, commercial engagement around the platform is encouraging. MediBeacon is building an increasingly strong foundation for broader adoption.

Turning to R2, the business continues to demonstrate strong underlying global demand during the third quarter. Worldwide demand reached 3.1 million, while revenues recognized during the quarter was $1.2 million. R2 exited the quarter with 116 systems carrying into the fourth quarter, representing roughly $1.9 million of future revenue, providing a meaningful pipeline as we close out the year. Importantly, R2 continued to make progress strengthening its manufacturing capabilities to better support this demand. Production of Glacial fx at EIT LLC (Electronic Instrumentation & Technology, EIT, is now underway with 30 systems delivered and approximately 60 currently in production, with delivery anticipated by November 30th. This represents an important step in expanding production capacity and supporting the company's commercial pipeline.

Looking ahead, R2 remains focused on converting its strong underlying demand into revenue, scaling manufacturing, and expanding its international presence. With expanding production now underway and a substantial pipeline entering the fourth quarter, we believe R2 is increasingly well-positioned to capitalize on the commercial demand for its technology. With the sale of DBMG now complete, we are entering an important next phase for INNOVATE. Our focus is on building upon momentum at MediBeacon and R2, maintaining a disciplined approach to capital allocation, and evaluating opportunities to unlock value across our remaining businesses.

We are encouraged by the progress we are seeing across the portfolio, and we believe the strategic actions we have taken have positioned INNOVATE with greater flexibility as we continue to execute against our priorities and drive long-term value for shareholders. Before we move on, I want to remind shareholders that our life science portfolio includes value that isn't reflected in our segment results. Through Pansend, in which we hold a 75% economic interest, we remain eligible for potential milestone payments in connection with the 2018 sale of BeneVir Biopharm to Johnson & Johnson, of which Pansend owns approximately 76% on a fully diluted basis at the time of sale.

Those payments total up to $900 million in aggregate, of which $500 million would be due to INNOVATE, which is made up of three development milestones totaling $250 million and four commercial milestones totaling $650 million, each tied to specific regulatory approvals and net sales thresholds. Pansend also owns 80% of Genovel Orthopedics, a medical device company developing partial and total knee replacements for osteoarthritis based on patented technologies developed at NYU School of Medicine. We appreciate the continued support of our shareholders, employees, customers, and partners. With that, I will turn it over to Mike for a review of our financial and capital structure.

Mike Sena: Thanks, Paul. Consolidated total revenue for the third quarter of 2026 was $495.5 million, an increase of 42.8% compared to $347.1 million in the prior year period. The increase is primarily driven by our infrastructure segment, partially offset by decreases at our Spectrum and life sciences segments. Net income attributable to common stockholders and participating preferred stockholders for the third quarter of 2026 was $15.8 million, or $1.10 per fully diluted share, compared to a net loss of $9.4 million, or $0.71 per fully diluted share in the prior year period. Total adjusted EBITDA for the third quarter of 2026 was $40.5 million, an increase from $19.8 million in the prior year period.

The increase was primarily driven by our infrastructure segment, life sciences, and non-operating corporate segments, partially offset by our Spectrum segment. At infrastructure, revenue increased 45% to $490.6 million from $338.4 million in the prior year quarter. The increase was driven primarily by DBMG's commercial structural steel fabrication and erection business, which saw higher activity on several large construction projects compared to last year. Results also benefited from favorable changes in estimated cost to complete on those projects, reflecting efficiencies the team achieved in execution. We also saw growth in our industrial maintenance and repair business, driven by the timing and size of projects, and to a lesser extent, in our construction modeling and detailing business.

Infrastructure adjusted EBITDA for the third quarter of 2026 increased to $43.6 million from $23.5 million in the prior year period. The increase was primarily driven by higher activity and project efficiencies at DBMG's commercial structural steel business, partially offset by higher SG&A and lower margins at our industrial maintenance and repair business due to fluctuations in material costs. As of September 30, 2026, reported backlog was $2.6 billion, and adjusted backlog, which takes into consideration awarded but not yet signed contracts, was $2.7 billion, compared to reported backlog of $1.7 billion and adjusted backlog of $1.8 billion at the end of 2025.

DBMG finished the quarter with $68.7 million in principal amount of debt, a decrease of $19 million from the end of 2025, primarily driven by paying down its credit line in full and scheduled debt amortization payments. Subsequent to the quarter end, DBMG's debt was repaid in full in connection with the closing of the sale on October 5th. At Life Sciences, revenue decreased 61.3% to $1.2 million from $3.1 million in the prior year quarter. The decrease in revenue was attributable to R2, which realized lower unit sales across all product lines and regions.

Life Sciences adjusted EBITDA loss improved year-over-year, driven primarily by lower compensation-related expenses at R2, partially offset by lower gross profit at R2 due to the revenue decline and higher equity method losses from MediBeacon. At Spectrum, third quarter revenue was $3.7 million compared to $5.6 million in the prior year quarter, and adjusted EBITDA was $300,000 compared to $1 million. As Paul discussed, the decreases reflect the disposition of our controlling interest in Spectrum, so this quarter only includes two months of consolidated results compared to a full three months last year. We now account for our remaining 25% interest under the equity method.

Non-operating corporate adjusted EBITDA loss improved slightly by $400,000 year-over-year for the quarter, primarily driven by a decrease in professional fees. As of September 30, 2026, the company had $4.9 million of cash and cash equivalents, excluding held-for-sale assets and restricted cash, compared to $5.1 million as of December 31, 2025. On a standalone basis, our non-operating corporate segment had cash and cash equivalents of $4.2 million, consistent with the end of 2025. As of September 30, 2026, INNOVATE had total principal outstanding and indebtedness of $583.3 million, excluding held-for-sale liabilities, up $53.5 million from $529.8 million at the end of 2025. The increase was primarily driven by PIK interest at our non-operating corporate and life sciences segments.

As Paul discussed, subsequent to the quarter, we received approximately $413 million in cash at closing of the DBMG sale and have used net proceeds to repay our corporate credit line and redeem $325 million of our senior secured notes. Following the debt repayments in connection with the closing of the DBMG sale, our total principal indebtedness is now $238.3 million, which we expect to further reduce as we monetize assets. With that, operator, we would now like to open up the call for questions.

Operator: Thank you, Mr. Sena. Ladies and gentlemen, at this time, if you do have a question, please press star one. You can always remove yourself from the queue by pressing star two. Again, star one for questions, and we will pause for just one moment. Gentlemen, it appears we have no questions this afternoon. Mr. Voigt, I will turn things back to you for closing comments.

Paul Voigt: Yep. Thank you. INNOVATE made significant strategic progress during the third quarter, highlighted by the completion of DBMG sale and continued momentum at MediBeacon and R2. With a more focused portfolio, we remain encouraged by the opportunities ahead and focus on supporting the continued growth of our business, maintaining financial discipline, and driving long-term value for our shareholders. Thank you to everyone for joining the call, and thank you again for all your support.

Operator: Thank you, Mr. Voigt. Again, ladies and gentlemen, that will conclude INNOVATE's third quarter 2026 earnings conference call. We would like to thank you all so much for joining us today and wish you all a great remainder of your day. Goodbye.

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