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HC2 HOLDINGS, INC.
© HC2 Holdings, Inc. 2017
Fourth Quarter and Full Year 2016
Conference Call
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
Special Note Regarding Forward-Looking Statements. Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: This presentation contains, and certain oral statements
made by our representatives from time to time may contain, forward-looking statements. 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 presentation include without limitation statements regarding our expectation regarding building shareholder value. 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 reports on Forms 10-K, 10-Q and
8-K. Such important factors include, without limitation, issues related to the restatement of our financial statements; the fact that we have historically identified material weaknesses in our internal
control over financial reporting, and any inability to remediate future material weaknesses; capital market conditions; 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 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. 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 Securities and
Exchange Commission (“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
presentation .
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 HC2 undertakes no obligation to update or revise publicly any forward-looking statements,
whether as a result of new information, future events or otherwise.
Non-GAAP Financial Measures
In this presentation, HC2 refers to certain financial measures that are not presented in accordance with U.S. generally accepted accounting principles (“GAAP”), including Core Operating
Subsidiary Adjusted EBITDA, Total Adjusted EBITDA (excluding Insurance) and Insurance AOI.
Management believes that Adjusted EBITDA measures provide investors with meaningful information for gaining an understanding of certain 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, because interest, taxes, depreciation, amortization and the other
items for which adjustments are made as noted 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. In addition, management uses Adjusted EBITDA measures in evaluating certain of the Company’s
segments performance because they eliminate the effects of considerable amounts of noncash depreciation and amortization and items not within the control of the Company’s operations
managers. While management believes that these non-US GAAP measurements are useful as supplemental information, such adjusted results are not intended to replace our US GAAP financial
results and should be read together with HC2’s results reported under GAAP.
Management defines Adjusted EBITDA as Net income (loss) adjusted to exclude the impact of depreciation and amortization; amortization of equity method fair value adjustments at
acquisition; (gain) loss on sale or disposal of assets; lease termination costs; asset impairment expense; (gain) loss on early extinguishment or restructuring of debt; interest expense; net gain (loss)
on contingent consideration; other (income) expense, net; foreign currency transaction (gain) loss included in cost of revenue; income tax (benefit) expense; (gain) loss from discontinued
operations; noncontrolling interest; bonus to be settled in equity; share-based compensation expense; acquisition and nonrecurring items; and other costs. Adjusted EBITDA excludes results of
our Insurance segment. A reconciliation of Adjusted EBITDA to Net income (loss) is included in the financial tables at the end of this release.
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 U.S. GAAP financial
measures, as these non-GAAP measures exclude 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 do not purport to be alternatives to net income (loss) or other U.S. GAAP financial measures as a measure of our operating performance.
Management believes that Insurance AOI measures, used frequently in the insurance industry, provide investors with meaningful information for gaining an understanding of certain results and
provides insight into an organization’s operating trends and facilitates comparisons between peer companies.
Management defines Insurance AOI as Net income (loss) for the Insurance segment adjusted to exclude the impact of net investment gains (losses), including other-than-temporary impairment
losses recognized in operations; asset impairment; intercompany elimination and acquisition and non-recurring items. Management believes that Insurance AOI provides a meaningful financial
metric that helps 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.
By accepting this document, each recipient agrees to and acknowledges the foregoing terms and conditions.
Safe Harbor Disclaimers
1
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
Agenda
2
OVERVIEW AND
FINANCIAL HIGHLIGHTS
Philip Falcone Chairman, President and CEO
Q AND A
Philip Falcone
Michael Sena
Andrew Backman
Chairman, President and CEO
Chief Financial Officer
Managing Director – Investor & Public Relations
Quarterly and Full Year
Overview
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
4Q16 and FY16 Highlights and Recent Developments
4
Solid fourth quarter results again highlight the unique value HC2 brings
to the market with our diverse, uncorrelated industry holdings
– Construction: Continued margin improvement; Record backlog and deal pipeline
– Marine Services: Strong joint venture performance; Incremental off shore power installation;
Incremental CWind maintenance contribution; Awarded Atlantic Cable Maintenance
Agreement extension (“ACMA”)
– Telecommunications: Continued growth in wholesale volumes and customer expansion
– Energy: Continued executing footprint expansion strategy via acquisition of 18 CNG stations
from Questar Fueling Co. and Constellation CNG; Increased delivery of gasoline gallon
equivalents
Adjusted EBITDA for Core Operating Subsidiaries*
– $37.9 million in Fourth Quarter, up 20.3% from $31.5 million in Third Quarter 2016
– $109.1 million for Full Year 2016, up 12.4% from $97.1 million for Full Year 2015
Cash and Investments as of December 31, 2016:
– $1.5 billion of consolidated cash, cash equivalents and investments, which includes
the Insurance segment; essentially unchanged from prior quarter
– $90.9 million in Consolidated Cash (excluding Insurance segment)
Cumulative outstanding amount of Preferred Equity reduced to $30.0 million from $42.7
million at end of 3Q16, and from $55.0 million of total preferred issued
* Core Operating Subsidiaries include Construction, Marine Services,
Telecommunications and Energy. Construction formerly Manufacturing: Energy
formerly Utilities.
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
HC2 Segment Overview
5
Early Stage and Other Holdings
Core Operating Subsidiaries
FY16 Revenue: $502.7m
FY16 Adjusted EBITDA:
$59.9m
Record Backlog $503m
Solid long-term pipeline with
additional [~$300-$400]
million in potential project
value that could be
awarded over next several
quarters
Construction:
DBM GLOBAL (SCHUFF)
FY16 Revenue: $161.9m
FY16 Adjusted EBITDA:
$41.2m
Strong joint venture and
off shore power installation;
Solid maintenance
performance
Positive long-term telecom
installation opportunities
Marine Services:
GMSL
FY16 Revenue: $6.4m
FY16 Adjusted EBITDA: $2.5m
Delivered 1,349,000 Gasoline
Gallon Equivalents (GGEs) in
4Q16 vs. 646,000 GGEs in
4Q15
~40 stations currently owned
and / or operated vs. 17
stations in 3Q16 and two
stations at time of HC2’s
initial investment in 3Q14
Energy:
ANG
Telecom:
PTGI ICS
FY16 Revenue: $735.0m
FY16 Adjusted EBITDA:
$5.6m
Continued growth in
wholesale traffic volumes,
in part, delivered by the
changing regulatory
environment throughout
Europe, combined with
continued business growth
in the Middle East
Life Sciences: PANSEND
MediBeacon: Completed “Pilot Two” Clinical Study at Washington University in St. Louis (1Q/17)
R2 Dermatology: Received FDA Approval for R2 Dermal Cooling System (4Q/16)
BeneVir: Oncolytic viral immunotherapy for treatment of solid cancer tumors
Genovel: Novel, Patented, “Mini Knee” and “Anatomical Knee” replacements
Triple Ring Technologies: R&D engineering company specializing in medical devices,
homeland security , imaging, sensors, optics, fluidics, robotics & mobile healthcare
Nervve
Provider of video
and image search technology
for information extraction
and powerful analytics applications
Dusenberry Martin Racing
NASCAR® Heat Evolution
released 9/16; Recently announced
2017 Team Update available February 21, 2017
Other:
Core Financial
Services Subsidiaries
~$77m of statutory surplus
~$93m total adjusted capital
~$2.0b in total GAAP assets
Recently completed merging
CGI and UTA into one legal
entity; meaningful cost
savings, lower required
statutory capital
Platform for growth through
additional M&A
Insurance:
CIG
All data as of December 31, 2016.
Construction formerly Manufacturing; Energy formerly Utilities.
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
Segment Financial Summary
6
Adjusted EBITDA for Core Operating Subsidiaries $37.9m for Q4 2016
All data as of December 31, 2016
Construction formerly Manufacturing; Energy formerly Utilities.
($m) FY 2016 Q4 2016 Q3 2016 Q2 2016 Q1 2016
Adjusted
EBITDA
Core Operating Subsidiaries
Construction $59.9 $20.7 $14.5 $13.2 $11.5
Marine Services 41.2 14.8 14.1 11.8 0.5
Energy 2.5 0.9 0.7 0.5 0.4
Telecom 5.6 1.5 2.2 1.5 0.3
Total Core Operating $109.1 $37.9 $31.5 $27.1 $12.7
Early Stage and Other Holdings
Life Sciences ($12.0) ($3.8) ($2.9) ($2.7) ($2.6)
Other (11.2) 0.9 (4.8) (3.3) (4.0)
Total Early Stage and Other ($23.2) ($2.9) ($7.7) ($6.0) ($6.6)
Non-Operating Corporate ($25.7) ($8.6) ($5.5) ($5.9) ($5.7)
Total HC2 (excluding Insurance) $60.2 $26.5 $18.2 $15.2 $0.3
Adjusted
Operating
Income
Core Financial Services
Insurance ($15.9) ($6.9) ($1.7) ($4.7) ($2.6)
Note: Reconciliations of Adjusted EBITDA and Adjusted Operating Income to U.S. GAAP Net Income in appendix. Table may not foot due to rounding. Adjusted Operating Income for Q1 2016 has been
adjusted to exclude certain intercompany eliminations to better reflect the results of the Insurance segment, and remain consistent with internally reported metrics. Additional details in appendix. Q1 and Q3
2016 benefitted from the release of valuation allowance impacting the net tax provision for each quarter.
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
Construction: DBM Global Inc. (Schuff)
7
4Q16 Net Income: $7.3m; FY16 Net Income: $28.0m versus $24.5m in FY15
4Q16 Adjusted EBITDA: $20.7m; FY16 Adjusted EBITDA: $59.9m versus $52.0m in FY15
Continued strong gross margins due to better than bid performance – Pacific region remains strong
Record Backlog: $503m versus $318m in third quarter 2016
Continue to see large opportunities totaling ~$400 million that could be awarded over next several quarters including a
number of new sporting arenas or stadiums, healthcare facilities, commercial office buildings
Completed accretive acquisitions of PDC Global Detailing and Building Information Modeling Business and BDS VirCon
Fourth Quarter and Full Year Update
Proactively selecting profitable, strategic and “core competency” jobs, not all jobs
Solid long-term pipeline of prospective projects; No shortage of transactions to evaluate
Commercial / Stadium / Healthcare sectors remain strong
Opportunities to add higher margin, value added services to overall product offering
Strategic Initiatives
Mile High Stadium Loma Linda Hospital
$45.8
$52.0
$59.9
$526.1
$513.8
$502.7
2014PF 2015A 2016A
Recent Performance
Adjusted EBITDA Revenue
All data as of December 31, 2016
Construction formerly Manufacturing.
10.1%
11.9%
8.7%
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
Marine Services: GMSL
8
S. B. Submarine Systems (SBSS – China Telecom) – 49% ownership
Joint Venture established in 1995 with China Telecom
China’s leading provider of submarine cable installation
Located in Shanghai and possesses a fleet of advanced purpose-built cable ships
Source: Huawei Investment & Holding Co., Ltd – 2015 Annual Report Currency
Exchange: CNY:USD 1:0.15
All data as of September 30, 2016.
4Q16 Net Income: $8.7m; FY16 Net Income: $17.5m versus $20.9m in FY15
4Q16 Adjusted EBITDA: $14.8m; FY16 Adjusted EBITDA: $41.2m versus $42.1m in FY15
Very strong 4Q16 & FY16 performance from Joint Ventures, in particular Huawei Marine and SBSS
Off shore power install revenue contribution again in fourth quarter as a result of re-entry into market
Core telecom maintenance performance remained strong throughout the year
Awarded five-year contract extension for Atlantic Cable Maintenance Agreement (“ACMA”) in fourth quarter; building on
the successful renewal of North America Zone in Q116; Three quarters of maintenance fleet secured for at least five years
Recently entered into agreement to charter Maersk Recorder to support expected growth in Huawei Marine Joint Venture
Fourth Quarter and Full Year Update
Huawei Marine Networks – 49% Ownership
Strategic Initiatives
Total HMN* 2015 2014
Revenue ~$188m ~$73m
Profit ~$14m ~$1.2m
Cash / Equivalents ~$26m ~$16m
$50.0
$42.1 $41.2
$163.6
$134.9
$161.9
2014PF 2015A 2016A
Recent Performance
Adjusted EBITDA Revenue
Note: 2014 PF Adj. EBITDA inclusive of approx. $10m offshore power installation vs. minimal
contribution in 2015 & 1H16 as a result of Prysmian agreement which expired in 2Q16.
29.8%
31.2% 25.4%
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
-$0.4
$0.9
$2.5
$1.8
$6.8
$6.4
2014A 2015A 2016A
Recent Performance
Adjusted EBITDA
Revenue
Energy: ANG
9
All data as of December 31, 2016.
Energy formerly Utilities.
4Q16 Net Loss: ($0.06)m; FY16 Net Income: $0.01m versus ($0.27)m in FY15
4Q16 Adjusted EBITDA: $0.87m; FY16 Adjusted EBITDA: $2.54m versus $0.87m in FY15
Delivered 1,349,000 Gasoline Gallon Equivalents (GGEs) in the fourth quarter versus 937,000 GGEs in the third quarter of 2016
and 646,000 in the year-ago quarter
Recently acquired 18 CNG stations from Questar Fueling Co. and Constellation CNG
~40 stations currently owned and / or operated vs. 17 stations in 3Q16 vs. 2 stations at time of initial investments (3Q14)
Continue to expand fueling station footprint via organic and M&A opportunities
Fourth Quarter and Full Year Update
39.6%
12.8%
(14.1%)
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
Telecommunications: PTGi-ICS
10
$(1.2)
$2.0
$5.6
$162.0
$460.4
$735.0
2014A 2015A 2016A
Recent Performance
Adjusted EBITDA
Revenue
All data as of December 31, 2016.
Strong quarterly results again due to continued growth in wholesale traffic volumes, in part delivered by the
changing regulatory environment throughout the European market combined with growth in the Middle East
region, resulting in increased traffic and margin
– 4Q16 Net Loss: ($2.6)m; FY16 Net Income: $1.4m versus $2.8m in FY15
– Adjusted EBITDA continues positive trend as the overall business continues to mature post restructuring
– 4Q16 Adjusted EBITDA: $1.5m; FY16 Adjusted EBITDA: $5.6m versus $2.0m in FY15
– 7th consecutive quarter of positive Adjusted EBITDA
One of the key objectives: leverage the infrastructure and management expertise within PTGi-ICS
– Over 800+ wholesale interconnections globally provides HC2 the opportunity to leverage the existing cost effective
infrastructure by bolting on higher margin products and M&A opportunities
– A focused strategic initiative has been launched within PTGi-ICS to identify potential M&A opportunities
Fourth Quarter and Full Year Update
0.8%
0.4%
(0.1%)
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
Insurance: Continental Insurance Group
11
Note: Reconciliation of Adjusted Operating Income to U.S. GAAP Net Income in
appendix. All data as of December 31, 2016.
Continental Insurance, Inc. (CII) serves as a platform for run-off LTC books of business and for acquiring additional
run-off LTC businesses
– 4Q16 Net Loss: ($2.1)m; FY16 Net Loss: ($14.0)m
– 4Q16 Adjusted Operating Income: ($6.9)m; FY16 Adjusted Operating Income ($15.9)m
– ~$77m statutory surplus at end of fourth quarter
– ~$93m total adjusted capital at end of fourth quarter
– ~$2.0b in total GAAP assets at December 31, 2016
– Recently completed merging CGI and UTA into one legal entity; Beneficial to statutory capital
CII Strategy:
– A concentrated focus on LTC and acquisitions of additional books of run-off LTC business
– A platform to provide a vehicle for multi-line insurers who do not consider LTC a core business segment to exit the
market
– Enhancing efficiency and effectiveness through scale and a concentrated focus on LTC
Fourth Quarter and Full Year Update
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
Pansend Life Sciences
12
HC2’s Life Sciences Segment Is Focused on the
Development of Innovative Healthcare Technologies and Products
80% equity ownership of company focused on immunotherapy; Oncolytic virotherapy for treatment of solid cancer
tumors
Founded by Dr. Matthew Mulvey & Dr. Ian Mohr (who co-developed T-Vec); Biovex (owner of T-Vec) acquired by
Amgen for ~$1billion
Benevir’s T-Stealth is a second generation oncolytic virus with new features and new intellectual property
BeneVir holds exclusive worldwide license to develop BV-2711 (T-Stealth)
67% equity ownership of dermatology company focused on lightening and brightening skin
Founded by Pansend in partnership with Mass. General Hospital and inventors Dr. Rox Anderson, Dieter Manstein
and Dr. Henry Chan
Over $10 billion global market
77% equity ownership in company with unique knee replacements based on technology from Dr. Peter Walker,
NYU Dept. of Orthopedic Surgery and one of the pioneers of the original Total Knee.
“Mini-Knee” for early osteoarthritis of the knee
“Anatomical Knee” – A Novel Total Knee Replacement
Strong patent portfolio
42% equity ownership in company with unique technology and device for monitoring of real-time kidney function
Current standard diagnostic tests measure kidney function are often inaccurate and not real-time
MediBeacon’s Optical Renal Function Monitor will be first and only, non-invasive system to enable real-time, direct
monitoring of renal function at point-of-care
$3.5 billion potential market
Profitable technology and product development company
Areas of expertise include medical devices, homeland security, imaging systems, sensors, optics, fluidics, robotics
and mobile healthcare
Located in Silicon Valley and Boston area with over 90,000 square feet of working laboratory and incubator space
Contract R&D market growing rapidly
Customers include Fortune 500 companies and start-ups
All data as of March 7, 2017.
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
Notable Financial Updates
13
Collateral Coverage Ratio at quarter end exceeded 2.0x
$90.9 million in Consolidated Cash (excluding Insurance segment)
– $21.7 million Corporate Cash
$41.4 million in Tax Share and Dividends received in 2016
– Subsequent to year end, $9.2 million special dividend from DBM Global received 1/23
Cumulative outstanding amount of Preferred Equity reduced to $30.0 million from $42.7
million at end of 3Q16, and from $55.0 million of total preferred issued
$55 million 11% Senior Secured Notes Offering completed subsequent to quarter end
– Offering well oversubscribed – Upsized from $45 million – Priced at par
– Proceeds used to refinance Bridge Note for ANG acquisitions of Constellation CNG and
Questar Fueling
All data as of December 31, 2016 unless otherwise noted
(1) Market capitalization on a fully diluted basis, excluding preferred equity, using a common stock price per share of $5.40 and shares outstanding of 41.9 million on March 7, 2017
(2) Cash and cash equivalents
(3) Enterprise Value is calculated by adding market capitalization, total preferred equity and total debt amounts, less Corporate cash
Balance Sheet (at December 31, 2016)
Market Cap(1) $226.5
Preferred Equity $30.0
Total Debt $342.0
Corporate Cash(2) $21.7
Enterprise Value(3) $576.8
($m)
Questions and Answers
Appendix:
Reconciliations
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
Reconciliation of Adjusted EBITDA to U.S. GAAP Net Income (Loss)
Twelve Months Ended December 31, 2016
16
(in thousands)
Construction
Marine
Services
Telecom Energy
Life
Sciences
Other and
Eliminations
Net Income (loss) attributable to HC2 Holdings, Inc. $ (94,549)
Less: Net Income (loss) att ributable to HC2 Holdings Insurance
Segment
(14,028)
Net Income (loss) attributable to HC2 Holdings, Inc., excluding
Insurance Segment
28,002$ 17,447$ 1,435$ 7$ (7,646)$ (24,800)$ (94,966)$ (80,521)$
Adjustments to reconcile net income (loss) to Adjusted EBITDA:
Depreciation and amortization 1,892 22,007 504 2,248 124 1,480 9 28,264
Depreciation and amortization (included in cost of rev enue) 4,370 - - - - - - 4,370
Amortization of equity method fair v alue adjustment at acquisition - (1,371) - - - - - (1,371)
(Gain) loss on sale or disposal of assets 1,663 (9) 708 - - - - 2,362
Lease termination costs - - 179 - - - - 179
Interest expense 1,239 4,774 - 211 - 1,164 35,987 43,375
Net loss on contingent consideration - (2,482) - - - - 11,411 8,929
Other (income) expense, net (163) (2,424) (87) (8) (3,213) 9,987 (1,277) 2,815
Foreign currency (gain) loss (included in cost of rev enue) - (1,106) - - - - - (1,106)
Income tax (benefit) expense 18,727 1,394 2,803 (535) 1,558 3,250 11,245 38,442
Noncontrolling interest 1,834 974 - (4) (3,111) (2,575) - (2,882)
B nus to b settled in equity - - - - - - 2,503 2,503
Share-based payment expense - 1,682 - 597 251 273 5,545 8,348
Acquisition and nonrecurring items 2,296 290 18 27 - - 3,825 6,456
Adjusted EBITDA 59,860$ 41,176$ 5,560$ 2,543$ (12,037)$ (11,221)$ (25,718)$ 60,163$
Total Core Operating Subsidiaries 109,139$
Twelve Months Ended December 31, 2016
Core Operating Subsidiaries Early Stage & Other Non-
operating
Corporate
HC2
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
Reconciliation of Adjusted EBITDA to U.S. GAAP Net Income (Loss)
Twelve Months Ended December 31, 2015
17
(in thousands)
Construction
Marine
Services
Telecom Energy
Life
Sciences
Other and
Eliminations
Net Income (loss) attributable to HC2 Holdings, Inc. $ (35,565)
Less: Net Income (loss) att ributable to HC2 Holdings Insurance
Segment
1,327
Net Income (loss) attributable to HC2 Holdings, Inc., excluding
Insurance Segment
24,451$ 20,855$ 2,779$ (274)$ (4,575)$ (18,276)$ (61,852)$ (36,892)$
Adjustments to reconcile net income (loss) to Adjusted EBITDA:
Depreciation and amortization 2,016 18,772 417 1,635 20 1,934 - 24,794
Depreciation and amortization (included in cost of rev enue) 7,659 - - - - - - 7,659
Amortization of equity method fair v alue adjustment at acquisition - (1,516) - - - - - (1,516)
Asset impairment expense - 547 - - - - - 547
(Gain) loss on sale or disposal of assets 257 (138) 50 - - 1 - 170
Lease termination costs - - 1,184 - - 1 - 1,185
Interest expense 1,379 3,803 - 42 - - 33,793 39,017
Other (income) expense, net (443) (1,340) (2,304) (42) (1) 5,764 5,242 6,876
Foreign currency (gain) loss (included in cost of rev enue) - (2,039) - - - - - (2,039)
Income tax (benefit) expense 15,572 400 (237) (347) (1,037) (7,733) (16,052) (9,434)
Loss from discontinued operations 20 - - - - 1 - 21
N nc ntrolling interest 1,136 616 - (267) (1,681) (1) - (197)
Share-based payment expense - - - 49 71 - 10,982 11,102
Acquisition and nonrecurring items - 2,181 121 70 23 - 8,362 10,757
Adjusted EBITDA 52,047$ 42,141$ 2,010$ 866$ (7,180)$ (18,309)$ (19,525)$ 52,050$
Total Core Operating Subsidiaries 97,064$
Twelve Months Ended December 31, 2015
Core Operating Subsidiaries Early Stage & Other Non-
operating
Corporate
HC2
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
Reconciliation of Adjusted EBITDA to U.S. GAAP Net Income (Loss)
Twelve Months Ended December 31, 2014
18
(in thousands)
Construction
Marine
Services
Telecom Energy Total
Life
Sciences
Other Total
As Reported
Net income (loss) (14,391)$ 19,278$ 17,718$ (1,068)$ 236$ 36,164$ (3,759)$ 29,219$ 25,460$ (51,410)$ 10,214$
Adjustments to reconcile net income (loss) to Adjusted EBITDA:
Depreciation and amortization 6,719 4,139 15,161 528 484 20,312 1 - 1 - 20,313
Depreciation and amortization (included in cost of rev enue) 4,350 4,350 - - - 4,350 - - - - 4,350
Amortization of equity method fair v alue adjustment at acquisition (385) - (385) - - (385) - - - - (385)
Asset impairment expense 291 - - 291 - 291 - - - - 291
(Gain) loss on sale or disposal of assets (162) (2) 104 (160) - (58) - - - - (58)
Lease termination costs - - - - - - - - - - -
Interest expense 12,347 1,627 4,708 1 20 6,356 - - - 10,700 17,056
Loss on early extinguishment of debt 11,969 - - - - - - - 11,969 11,969
Other (income) expense, net (702) (476) (2,410) (831) (1,431) (5,148) - 1,610 1,610 217 (3,321)
I come tax (benefit) expense (22,869) 13,318 1,069 58 103 14,548 - (31,828) (31,828) (963) (18,243)
Loss from discontinued operations 146 35 3,007 - - 3,042 - 157 157 3,199
Noncontrolling interest 2,559 3,569 3,059 - 229 6,857 (1,038) 1 (1,037) - 5,820
Share-based payment expense 11,028 - - - - - - - - 11,028 11,028
Acquisition related costs 13,044 - 7,966 - - 7,966 - - - 5,078 13,044
Other costs - - - - - - - - - - -
Adjusted EBITDA 23,944$ 45,838$ 49,997$ (1,181)$ (359)$ 94,295$ (4,796)$ (841)$ (5,637)$ (13,381)$ 75,277$
Pro Forma
Twelve Months Ended December 31, 2014
HC2
Holdings, Inc.
Core Operating Early Stage and Other Non-
operating
Corporate
HC2
Holdings,
Inc.
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
Reconciliation of Adjusted EBITDA to U.S. GAAP Net Income (Loss)
Three Months Ended December 31, 2016
19
(in thousands)
Construction
Marine
Services
Telecom Energy
Life
Sciences
Other and
Eliminations
Net Income (loss) attributable to HC2 Holdings, Inc. $ (61,464)
Less: Net Income (loss) att ributable to HC2 Holdings Insurance
Segment
(2,050)
Net Income (loss) attributable to HC2 Holdings, Inc., excluding
Insurance Segment
7,292$ 8,667$ (2,572)$ (61)$ (4,655)$ (3,536)$ (64,549)$ (59,414)$
Adjustments to reconcile net income (loss) to Adjusted EBITDA:
Depreciation and amortization 629 5,214 115 769 37 430 5 7,199
Depreciation and amortization (included in cost of rev enue) 1,322 - - - - - - 1,322
Amortization of equity method fair v alue adjustment at acquisition - (325) - - - - - (325)
(Gain) loss on sale or disposal of assets 2,626 1 708 - - - - 3,335
Lease termination costs - - - - - - - -
Interest expense 322 1,091 - 69 - 1,163 9,116 11,761
Net loss on contingent consideration - (2,482) - - - - 11,411 8,929
Other (income) expense, net (75) (1,234) 487 391 10 99 (966) (1,288)
Foreign currency (gain) loss (included in cost of rev enue) - 864 - - - - - 864
Income tax (benefit) expense 6,086 2,150 2,803 (535) 1,558 3,250 32,726 48,038
Noncontrolling interest 594 464 - (253) (809) (513) - (517)
B nus to b settled in equity - - - - - - 2,503 2,503
Share-based payment expense - 375 - 490 67 35 712 1,679
Acquisition and nonrecurring items 1,868 24 - - - - 490 2,382
Adjusted EBITDA 20,664$ 14,809$ 1,541$ 870$ (3,792)$ 928$ (8,552)$ 26,468$
Total Core Operating Subsidiaries 37,884$
Three Months Ended December 31, 2016
Core Operating Subsidiaries Early Stage & Other Non-
operating
Corporate
HC2
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
Reconciliation of Adjusted EBITDA to U.S. GAAP Net Income (Loss)
Three Months Ended September 30, 2016
20
(in thousands)
Construction
Marine
Services
Telecom Energy
Life
Sciences
Other and
Eliminations
Net Income (loss) attributable to HC2 Holdings, Inc. $ (4,558)
Less: Net Income (loss) att ributable to HC2 Holdings Insurance
Segment
(2,189)
Net Income (loss) attributable to HC2 Holdings, Inc., excluding
Insurance Segment
6,962$ 8,696$ 1,796$ 27$ (2,285)$ (8,160)$ (9,404)$ (2,368)$
Adjustments to reconcile net income (loss) to Adjusted EBITDA:
Depreciation and amortization 431 5,554 144 582 32 380 4 7,127
Depreciation and amortization (included in cost of rev enue) 1,321 - - - - - - 1,321
Amortization of equity method fair v alue adjustment at acquisition - (329) - - - - - (329)
(Gain) loss on sale or disposal of assets (23) - - - - - - (23)
Lease termination costs - - (159) - - - - (159)
Interest expense 304 1,328 - 119 - - 8,969 10,720
Other (income) expense, net (12) (2,013) 422 (24) (2) 3,892 835 3,098
Foreign currency (gain) loss (included in cost of rev enue) - (283) - - - - - (283)
Income tax (benefit) expense 4,672 96 - - - - (7,851) (3,083)
N nc ntrolling interest 411 465 - 27 (770) (974) - (841)
Share-based payment expense - 546 - 3 128 37 1,088 1,802
Acquisition and nonrecurring items 429 - - - - - 821 1,250
Adjusted EBITDA 14,495$ 14,060$ 2,203$ 734$ (2,897)$ (4,825)$ (5,538)$ 18,232$
Total Core Operating Subsidiaries 31,492$
Three Months Ended September 30, 2016
Core Operating Subsidiaries Early Stage & Other Non-
operating
Corporate
HC2
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
Reconciliation of Adjusted EBITDA to U.S. GAAP Net Income (Loss)
Three Months Ended June 30, 2016
21
(in thousands)
Construction
Marine
Services
Telecom Energy
Life
Sciences
Other and
Eliminations
Net Income (loss) attributable to HC2 Holdings, Inc. $ 1,935
Less: Net Income (loss) att ributable to HC2 Holdings Insurance
Segment
(2,293)
Net Income (loss) attributable to HC2 Holdings, Inc., excluding
Insurance Segment
9,364$ 6,002$ 1,009$ 68$ (2,004)$ (2,608)$ (7,603)$ 4,228$
Adjustments to reconcile net income (loss) to Adjusted EBITDA:
Depreciation and amortization 303 6,084 140 468 36 336 - 7,367
Depreciation and amortization (included in cost of rev enue) (206) - - - - - - (206)
Amortization of equity method fair v alue adjustment at acquisition - (359) - - - - - (359)
(Gain) loss on sale or disposal of assets (1,845) 7 - - - 1 - (1,837)
Lease termination costs - - 338 - - - - 338
Interest expense 303 1,285 - 14 - 1 8,966 10,569
Other (income) expense, net (32) 211 29 (344) - (10) 465 319
Foreign currency (gain) loss (included in cost of rev enue) - (1,540) - - - - - (1,540)
Income tax (benefit) expense 4,524 (212) - - - 1 (9,404) (5,091)
N nc ntrolling interest 768 200 - 244 (812) (1,044) - (644)
Share-based payment expense - 152 - 90 34 40 1,359 1,675
Acquisition and nonrecurring items - - 18 - - - 313 331
Adjusted EBITDA 13,179$ 11,830$ 1,534$ 540$ (2,746)$ (3,283)$ (5,904)$ 15,150$
Total Core Operating Subsidiaries 27,083$
Three Months Ended June 30, 2016
Core Operating Subsidiaries Early Stage & Other Non-
operating
Corporate
HC2
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
Reconciliation of Adjusted EBITDA to U.S. GAAP Net Income (Loss)
Three Months Ended March 31, 2016
22
(in thousands)
Construction
Marine
Services
Telecom Energy
Life
Sciences
Other and
Eliminations
Net Income (loss) attributable to HC2 Holdings, Inc. $ (30,462)
Less: Net Income (loss) att ributable to HC2 Holdings Insurance
Segment
(7,496)
Net Income (loss) attributable to HC2 Holdings, Inc., excluding
Insurance Segment
4,384$ (5,918)$ 1,202$ (27)$ 1,298$ (10,494)$ (13,409)$ (22,966)$
Adjustments to reconcile net income (loss) to Adjusted EBITDA:
Depreciation and amortization 529 5,155 106 429 19 336 - 6,574
Depreciation and amortization (included in cost of rev enue) 1,933 - - - - - - 1,933
Amortization of equity method fair v alue adjustment at acquisition - (358) - - - - - (358)
(Gain) loss on sale or disposal of assets 904 (17) - - - - - 887
Lease termination costs - - - - - - - -
Interest expense 310 1,070 - 9 - - 8,937 10,326
Other (income) expense, net (44) 612 (1,025) (31) (3,221) 6,005 (1,611) 686
Foreign currency (gain) loss (included in cost of rev enue) - (147) - - - - - (147)
Income tax (benefit) expense 3,445 (640) - - - (1) (4,226) (1,422)
N nc ntrolling interest 61 (155) - (22) (720) (44) - (880)
Share-based payment expense - 609 - 14 22 160 2,386 3,191
Acquisition and nonrecurring items - 266 - 27 - 1 2,201 2,495
Adjusted EBITDA 11,522$ 477$ 283$ 399$ (2,602)$ (4,038)$ (5,722)$ 319$
Total Core Operating Subsidiaries 12,681$
Three Months Ended March 31, 2016
Core Operating Subsidiaries Early Stage & Other Non-
operating
Corporate
HC2
© 2 0 1 7 H C 2 H O L D I N G S , I N C .
Reconciliation of Insurance AOI to U.S. GAAP Net Income (Loss)
Quarterly and Full Year 2016
23
The calculation of Insurance Net Loss has been revised to exclude adjustments for intercompany eliminations as they are not considered relevant in evaluating the performance of our
Insurance segment. For first quarter 2016, this resulted in a change to the previously reported Insurance loss of ($12.3) mil lion for the quarter to a loss of ($7.5) million.
The calculation of Insurance AOI has been revised to exclude adjustments for intercompany eliminations as they are not considered relevant in evaluating the performance of our
Insurance segment. For first quarter 2016, this resulted in a change to the previously reported Insurance AOI loss of ($3.6) million for the quarter to a loss of ($2.6) million.
(in thousands)
Three Months Ended
December 31,
Three Months Ended
September 30,
Three Months Ended
June 30,
Three Months Ended
March 31,
Year Ended
December 31,
2016 2016 2016 2016 2016
Net loss - Insurance segment (2,051)$ (2,189)$ (2,293)$ (7,496)$ (14,028)$
Effect of inv estment (gains) losses (7,696) 220 (2,418) 4,875 (5,019)
Asset impairment expense 2,400 - - - 2,400
Acquisition and non-recurring items 445 269 - - 714
Insurance AOI (6,901)$ (1,701)$ (4,710)$ (2,621)$ (15,933)$
Adjusted Operating Income - Insurance ("Insurance AOI")
HC2 HOLDINGS, INC.
© HC2 Holdings, Inc. 2017
A n d r e w G . B a c k m a n • i r @ h c 2 . c om • 2 1 2 . 2 3 5 . 2 6 9 1 • 4 5 0 P a r k A v e n u e , 3 0 t h F l o o r , N e w Y o r k , N Y 1 0 0 2 2
March 2017