HC2 Holdings Reports Fourth Quarter and Full Year 2020 Results
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- Fourth Quarter 2020 Consolidated Net Revenue of
- 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.
| Financial Summary | |||||||||||||||||||||
| (in millions, except per share amounts) | Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||||||
| 2020 | 2019 | Increase / (Decrease) | 2020 | 2019 | Increase / (Decrease) | ||||||||||||||||
| Net revenue | $ | 251.8 | $ | 247.6 | 1.7 | % | $ | 1,005.8 | $ | 1,077.0 | (6.6 | )% | |||||||||
| Net loss attributable to common stock and participating preferred stockholders | $ | (7.1 | ) | $ | (31.4 | ) | (77.4 | )% | $ | (95.6 | ) | $ | (31.5 | ) | 203.5 | % | |||||
| Loss per share - Net loss attributable to common stock and participating preferred stockholders | $ | (0.11 | ) | $ | (0.70 | ) | (84.3 | )% | $ | (1.88 | ) | $ | (0.70 | ) | 168.6 | % | |||||
| Total Adjusted EBITDA | $ | 10.0 | $ | 16.0 | (37.5 | )% | $ | 25.5 | $ | 43.4 | (41.2 | )% | |||||||||
| (1) Reconciliation of GAAP to Non-GAAP measures follows. | |||||||||||||||||||||
| (2) Note that Total Adjusted EBITDA excludes results for HC2's Insurance segment. | |||||||||||||||||||||
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 owned61% 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 of8.5% senior secured notes due 2026, which was used to retire the existing11.5% 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 outstanding7.5% 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 of1.7% 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 REVENUE by OPERATING SEGMENT | ||||||||||||||||||||||||
| (in millions) | Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||||
| 2020 | 2019 | Increase / (Decrease) | 2020 | 2019 | Increase / (Decrease) | |||||||||||||||||||
| Infrastructure | $ | 167.0 | $ | 157.1 | $ | 9.9 | $ | 676.6 | $ | 713.3 | $ | (36.7 | ) | |||||||||||
| Insurance | 77.0 | 80.3 | (3.3 | ) | 300.2 | 331.6 | (31.4 | ) | ||||||||||||||||
| Spectrum | 11.0 | 12.0 | (1.0 | ) | 40.3 | 41.8 | (1.5 | ) | ||||||||||||||||
| Other | — | 0.5 | (0.5 | ) | — | 0.5 | (0.5 | ) | ||||||||||||||||
| Eliminations (1) | (3.2 | ) | (2.3 | ) | (0.9 | ) | (11.3 | ) | (10.2 | ) | (1.1 | ) | ||||||||||||
| Consolidated HC2 | $ | 251.8 | $ | 247.6 | $ | 4.2 | $ | 1,005.8 | $ | 1,077.0 | $ | (71.2 | ) | |||||||||||
| (1) The Insurance segment revenues are inclusive of realized and unrealized gains and net investment income for the three and twelve months ended December 31, 2020 and 2019, inclusive of transactions between entities under common control, which are eliminated or are reclassified in consolidation. | ||||||||||||||||||||||||
- 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.
| NET INCOME (LOSS) by OPERATING SEGMENT | ||||||||||||||||||||||||
| (in millions) | Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||||
| 2020 | 2019 | Increase / (Decrease) | 2020 | 2019 | Increase / (Decrease) | |||||||||||||||||||
| Infrastructure | $ | 2.8 | $ | 6.7 | $ | (3.9 | ) | $ | 6.8 | $ | 24.7 | $ | (17.9 | ) | ||||||||||
| Insurance | 16.1 | (15.2 | ) | 31.3 | 40.2 | 59.4 | (19.2 | ) | ||||||||||||||||
| Life Sciences | (5.7 | ) | (1.8 | ) | (3.9 | ) | (14.4 | ) | (0.2 | ) | (14.2 | ) | ||||||||||||
| Spectrum | 9.1 | (4.4 | ) | 13.5 | (17.5 | ) | (18.5 | ) | 1.0 | |||||||||||||||
| Other and Eliminations | (6.2 | ) | 2.4 | (8.6 | ) | (1.5 | ) | (0.6 | ) | (0.9 | ) | |||||||||||||
| Non-operating Corporate | (19.9 | ) | (17.6 | ) | (2.3 | ) | (99.6 | ) | (87.6 | ) | (12.0 | ) | ||||||||||||
| Consolidating Eliminations attributable to HC2 Holdings Insurance Segment(1) | (0.9 | ) | (1.1 | ) | 0.2 | (6.0 | ) | (8.7 | ) | 2.7 | ||||||||||||||
| Net loss attributable to HC2 Holdings, Inc. | $ | (4.7 | ) | $ | (31.0 | ) | $ | 26.3 | $ | (92.0 | ) | $ | (31.5 | ) | $ | (60.5 | ) | |||||||
| Less: Preferred dividends, deemed dividends, and repurchase gains | 2.4 | 0.4 | 2.0 | 3.6 | — | 3.6 | ||||||||||||||||||
| Net loss attributable to common stock and participating preferred stockholders | $ | (7.1 | ) | $ | (31.4 | ) | $ | 24.3 | $ | (95.6 | ) | $ | (31.5 | ) | $ | (64.1 | ) | |||||||
| (1) The Insurance segment results are inclusive of realized and unrealized gains and net investment income for the three and twelve months ended December 31, 2020 and 2019, inclusive of transactions between entities under common control, which are eliminated or are reclassified in consolidation. | ||||||||||||||||||||||||
- 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.
| ADJUSTED EBITDA by OPERATING SEGMENT | |||||||||||||||||||||||
| (in millions) | Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||||||||
| 2020 | 2019 | Increase / (Decrease) | 2020 | 2019 | Increase / (Decrease) | ||||||||||||||||||
| Infrastructure | $ | 17.4 | $ | 20.8 | $ | (3.4 | ) | $ | 63.2 | $ | 75.7 | $ | (12.5 | ) | |||||||||
| Life Sciences | (7.9 | ) | (3.1 | ) | (4.8 | ) | (22.5 | ) | (11.8 | ) | (10.7 | ) | |||||||||||
| Spectrum | 1.1 | (1.0 | ) | 2.1 | (1.2 | ) | (6.3 | ) | 5.1 | ||||||||||||||
| Other and Eliminations | 2.7 | 2.0 | 0.7 | 1.6 | 3.7 | (2.1 | ) | ||||||||||||||||
| Non-operating Corporate | (3.3 | ) | (2.7 | ) | (0.6 | ) | (15.6 | ) | (17.9 | ) | 2.3 | ||||||||||||
| Total Adjusted EBITDA | $ | 10.0 | $ | 16.0 | $ | (6.0 | ) | $ | 25.5 | $ | 43.4 | $ | (17.9 | ) | |||||||||
- 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
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HCHC
NYSE:HCHCHCHC RankingsHCHC Latest NewsHCHC Stock DataAbout HCHCHC2 Holdings, Inc.has a class-leading portfolio of assets primarily in Infrastructure, Life Sciences, Spectrum and Insurance. HC2 is headquartered in New York, New York and through its subsidiaries employs more than 2,800 people.
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