Innovate Corp (VATE) 2016 Q1 法說會逐字稿

Good afternoon, and welcome to the HC2 Holdings first quarter 2016 earnings call. (Operator Instructions) Please note this call is being recorded.

I would now like to turn the conference over to Mr. Andrew Backman, HC2's Managing Director of Investor Relations & Public Relations. Please, go ahead.

Thank you, Jody, and good afternoon, everyone. Thank you for joining us to review HC2's first quarter 2016 earnings. With me today are Philip Falcone, Chairman, President and CEO of HC2, Mike Sena, our Chief Financial Officer, and Keith Hladek, our Chief Operating Officer.

This call is being webcast on our website at hc2.com in the Investor Relations section. We also would like you to follow along our webcast presentation which can be accessed on the HC2 website, again, in the Investor Relations section.

A replay of this call will be available one hour after the call. The dial-in for the replay is 1-855-859-2056, with confirmation code of 5431300. Before I turn the call over to Phil, I'd like to remind everyone that certain statements and assumptions in this earnings call, 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.

These forward-looking statements are subject to certain assumptions and risk factors that could cause HC2's actual results to differ materially from these forward-looking statements. The risk factors that could cause these differences are more fully disclosed in our filings with the SEC. In addition, the forward-looking statements included in this conference call are only made as of the date of this call and as stated in our SEC reports. HC2 disclaims any intent or obligation to update or revise these forward-looking statements except as expressly required by law.

During the call, management will provide certain information that will constitute non-GAAP financial measures under the SEC rules, such as pro forma net revenue and adjusted EBITDA. Certain information required to be disclosed about the non-GAAP measures, including reconciliations with the most comparable GAAP measures, is available in the most recent earnings press release, which is available on the Company's website. And finally, as a reminder, this call cannot be taped or otherwise duplicated without the Company's prior consent.

Now, I'd like to turn the call over to HC2's Chairman, CEO and President, Phil Falcone. Phil?

Thank you, Andy, and good afternoon, everybody, and thank you for joining us today. On the agenda today, I'll start with a brief recap of the results for the quarter, provide a few operational highlights from our primary operating subs and then we can finish up with a Q&A.

So, if I could get everybody's attention and turn to slide 4, which is the discussion on first quarter highlights and recent developments. For the first quarter, total net revenues were $332 million, an increase of 64% when compared to the first quarter of 2015. The increase was driven primarily by our growth in our telecom business which was about $103 million higher, as well as the contribution from our newly acquired insurance business which was $29 million higher.

As you will see throughout the presentation, we've broken our core subsidiaries into two main groups, and that's the core operating subs which is comprised of our manufacturing, marine services, utilities and telecom, and then, of course, our core financial services sub, which is our insurance segment.

We've gone down the path of separating Continental Insurance from our core operating sub, as insurance businesses are not typically measured on the same metrics as the operating companies. As an example, they are not typically measured on an EBITDA basis but on an adjusted operating income and even more importantly, stat capital.

Adjusted EBITDA for the core operating subs totaled $12.7 million in the first quarter versus $14.1 million in the prior year quarter. The core operating subs' results benefited from the EBITDA growth in the manufacturing segment due largely to margin expansion, growth in scale and customer relationships in the telecommunications segment and an increase in the volume of the gasoline gallon equivalent delivered in the utilities segment. This was offset by a decrease in marine services due to a one-time charge of $5.5 million associated with one telecommunications installation project in Northeastern Russia.

Excluding this one-time charge, first quarter adjusted EBITDA for our core operating subs would have been $18.2 million, up significantly versus prior-year quarter. And just one comment on that one-time charge, I know Ian Douglas, who is the CEO, for as long as he has been at the operation, cannot remember when he has seen something like this before, just as an aside. So, this is not something we would expect to see and is typical for this business.

Consolidated cash, cash equivalents and investments were $1.5 billion at the end of the first quarter, which, of course, includes the addition of our insurance segment. And corporate cash was $41 million as of March 31, 2016, essentially flat quarter-over-quarter.

As an aside, I want to also mention two new additions to the Company that we believe significantly strengthens our executive management team. Paul Robinson recently joined us as Chief Legal Officer and Corporate Secretary, and Andy Backman has joined us to lead our investor and public relations efforts. Both Paul and Andy bring significant experience to HC2 and are already making a noticeable impact.

Turning to slide 5, the segment overview. You'll see, as I mentioned before, how we've separated our core businesses into the two segments. The core operating subs of Schuff, Global Marine, American Natural Gas and PTGi, and of course, the core financial services sub of insurance.

I think it's important to take a quick look at insurance here. This was a very exciting transaction for us, took a little bit longer than we expected. We now are looking at a company with $80 million of stat capital, $2 billion in total GAAP assets and the portfolio right now is about $1.3 billion. And some of the early stage and other holdings we can discuss and I will discuss a little bit more in detail going forward in the presentation as we move forward.

Slide 6, the adjusted EBITDA. As I mentioned, adjusted EBITDA from core operating subs was $12.7 million for the first quarter, or $18.2 million if you exclude the one-time in our marine services segment. Adjusted EBITDA growth of nearly 30% at Schuff was driven by gross profit margin expansion of approximately 400 basis points over the same period last year.

Adjusted EBITDA at Global was impacted by the Russian telecom installation project that was negatively impacted by project delays resulting from, among other things, unfavorable weather and seabed conditions. And this resulted in a one-time charge of $5.5 million. Despite this charge, we expect to make our internal budget for the full year, which I think is very promising for our ongoing businesses here and especially at Global Marine.

Turning to our early-stage portfolio, life sciences had an adjusted EBITDA loss of $2.6 million. This represents continued development expenses for a diverse portfolio of novel treatments and healthcare products.

You also have to take into consideration that we are consolidating certain of the subsidiaries in the life sciences segment as well which, again, affects that number. So, that's not necessarily the cash burn that we're looking at from an operating perspective from the two executives that we have there. How we're looking at that and how we've accounted for it is on the consolidation side.

And also, going down the list of looking at the other, this includes early-stage investments in the DMR Racing entity and Nervve as well as a consolidation of the MiFi business. So again, we're not looking at this as operating cash burn. However, how we've accounted for our EBITDA and adjusted EBITDA we've taken into consideration the impact of some of these subsidiaries and the consolidation of those subsidiaries in each of those line items.

I want to emphasize that while those are -- especially the life sciences is extremely critical, you have to really focus on the core operating subs and what we're doing there and the developments at those operating subs as you look at our underlying business.

The life sciences sub was affected -- the increase in that number was affected by the -- this quarter consolidation of BeneVir. So, hence, you're looking at an increase in that line item as a result of the consolidation aspect of how we're looking at those individual subsidiaries.

Finally, our non-operating corporate segment generated -- was a negative of $5.7 million for the quarter. This is the expense at the holding company. And if you look at the details, however, of those expenses, inclusive in that $5.7 million of SG&A, that's really the SG&A line item, there was a $900,000 line in there, $900,000 expense which was made up of sign-on bonuses and first quarter accruals of bonuses.

So, I would -- if you net that out, you're going to see that the number was lower for the quarter, which is what I mentioned last -- in the year-end financials or our year-end call that what we're really pushing on and what we're really focusing on is getting that number down. Now, the $5.7 million inclusive of the $900,000 does show some improvement; we've got some room to grow there or some room to keep cutting.

I would say, for the most part, the accounting, consulting and legal are probably three line items out of that $5.7 million that we would, over time, expect to see lowered which will, again, lower our cash cost at the holding company, which is, again, a very important metric for us and a metric that we are continuing to monitor and continuing to make sure that we focus on and focus on lowering.

Also inclusive in that $5.7 million was $300,000 of legacy SG&A. So, between the bonus number and the legacy SG&A, that -- those two line items in total, total $1.2 million, so you could be looking at a $4.5 million number. Again, lower than what we've experienced in the past, but I'm not happy with it and we got our -- some work to do there to keep those costs coming down.

Turning to the next page, let's do a quick recap of each of the individual entities, starting at slide 7 with Scuff International. Schuff experienced strong continued growth in year-over-year adjusted EBITDA as several major commercial products in the Pacific Regions of the US continued to deliver. As mentioned, adjusted EBITDA grew by nearly 30% from the prior year quarter to $11.5 million in the first quarter. This growth in adjusted EBITDA was driven primarily by increasing gross profit margins as Schuff continues its strategic focus on higher margin projects.

Specifically, gross margins increased 440 basis points to 18.3% and it's a function of really, what these guys are doing on the ground, and it's better than bid performance at two of the projects, as well as just margin expansion coupled with the projects that they have on the pad right now. As we've noted in the past, Schuff remains focused on winning and executing the right jobs, not all jobs.

They continue to really drive growth and maintaining -- while also at the same time maintaining an impressive backlog. Backlog at the end of first quarter was $415 million, up approximately 36% from the first quarter of 2015. And this backlog number does not include a number of near-term contracts we hope to be able to announce shortly.

And I think that's, quite frankly, indicative of why we are so excited about this business and why some people think from a cyclicality perspective that we should looking at it that much more closely. However, from a vision perspective and from a timing perspective, we don't see signs of slowdown in the marketplace where Schuff is focused, and we're very excited about that, very happy to see that.

I think if you talk to Rustin and team, they continue to be very busy and quite frankly, turning down a number of kind of typical projects that they would have otherwise focused on in previous years. They have a pretty good command of the West Coast and Southwest and fortunately, there is a tremendous amount of building out there.

One of the things where we thought we would and continue to see some growth is in the Midwest, and we are seeing some of that take place. And quite frankly, some of the recent -- one of the recent wins not included in our reportable backlog includes the ProMedica Building in Cleveland, which is a $15 million win.

So, that's a very promising thing for Schuff as we continue to look from a geographic perspective to expand the business and to expand the business especially in the Midwest. It was very nice to see us solidify that strategy with this win in Cleveland.

Looking ahead, the company continues to increase and diversify its sales pipeline. We anticipate the ongoing growth being driven by commercial, healthcare, gaming and industrial market sectors in particular. And very pleased with the long-term sales pipeline and look forward to sharing these updates and these wins with you as we move forward in the year.

But I think we can comfortably say that we're very pleased with what we've seen, with what we have and with the prospects that are really on the table right now. So, without projecting anything, I think you could be comfortable to see that backlog number continue to increase in the short term here.

Moving on to slide 8, the Global Marine business. Now, despite the one-time charge we recorded in the quarter, we expect to make our original full-year budget at Global. We're very pleased to have signed two new telecom installation contracts during the first quarter, with scheduled delivery during the second half of the year.

In addition, during the quarter, we recognized approximately eight weeks of revenue from our acquisition of CWind, which is a leading offshore renewables specialist which we discussed last quarter, and just to remind you, that's a new business for us. However, it was a business that we were unable to target previously because of the non-compete. So, we are looking for nice gains in that arena as that non-complete, which, I believe, ended in the late fourth quarter, expired.

Oil and gas exposure is obviously affecting the market overall. Fortunately, we didn't have a tremendous amount of exposure there, but it still affects the industry in general as a result of capacity. We're still seeing, however, some good activity in offshore power and I think it is important to note that the contracts that we've seen and the contracts we have are not being canceled and have no reason to believe they will be canceled.

Backlog in telecom remains not surprisingly strong. We believe that the telecom market has two strong years ahead of us with very robust fundamentals. As the data market continues to explode and the need for additional capacity, especially in certain countries, in certain geographic areas, I think that's very important. It's not one thing that you hear about in the United States or thereabouts of under-capacity in that space. However, in some of the more -- in the growth areas, in the growth markets, that's where we see some of the opportunities and fortunately, we believe we will be able to capitalize on that and have capitalized on that in the past.

As we mentioned, last quarter, Global Marine secured a major maintenance contract renewal with NAZ, which was extended through 2024. This was a very important milestone for us, and one we will work to replicate with our other partners. Granted that this is a long-term contact with people -- which people should look at as very favorable, it's also the maintenance business continues to be very strong for us. And is a very -- continues to be a very important part of the Global Marine business, obviously, very stable business. And getting contracts like this, I think, is indicative of Global Marine's capabilities, but also it's also important to understand that with these contracts, understanding Global Marine's earnings potential and earnings power by virtue of these maintenance contracts.

I'd like to spend a couple of minutes discussing our JVs at Global Marine as we believe they are an extremely important part of the overall business. And this is, again, I want to note that it's outlined in the 2015 annual report of Huawei Marine Networks. I want to talk briefly about our 49% JV with Huawei Technologies which had an exceptional year last year with nearly $190 million of revenue. This is up more than 150% versus the prior year. As the business achieves scale, they achieved meaningful profitability growth with approximately $14 million in profit in 2015 and up 10-fold for the $1.2 million reported in 2014.

In addition, at the end of December, Huawei Marine Networks, the JV had approximately $26 million in cash on the balance sheet. And as we discussed last quarter, Huawei Marine secured a contract to build the Cameroon-Brazil network which is connecting Africa to Latin America. We expect a lot from this JV with Huawei Marine. And quite frankly, when we acquired it -- when we acquired Global Marine, we didn't put a lot of emphasis on the value of this thing.

And I think it's been a real crown jewel, a hidden crown jewel in the Global Marine -- under the Global marine umbrella which we think, in looking at what they've done and the increases over the last year, that there is tremendous profitability -- not only profitability potential for this JV, but also from a pure valuation perspective that this is an asset that Global Marine owns 49% of. We believe that this asset could be worth a decent amount of money if not now, at some point down the road. And again, we didn't ascribe a lot of value to it when we bought the company.

That JV as well as our relationship with SBSS, which is our 49% JV with China Telecom, which is China's leading provider of submarine cable installation, can prove out and will prove out to be significant investments for us that are not necessarily apparent when you kind of take a step back and look at Global Marine.

So, I want to emphasize that -- not emphasize that -- I want to emphasize that because of what's happening at the underlying subs. It's not like they've been status quo. There's been a phenomenal turn of events there especially at HMN which is important to understand and important to us to highlight and especially important to investors as they see the value of not only the Global Marine business, but the underlying JV.

Turning to slide 9 quickly, the American Natural Gas, this company, I think, is one of the sleepers in our portfolio, continues to make progress in the quarter. During the first quarter, ANG delivered 800,000 gasoline gallon equivalents versus 659,000 in the prior quarter, and 358,000 in the year ago quarter.

We currently own and operate 11 natural gas fueling stations and rising. Three additional facilities are under construction in Rochester, New York, Saratoga and Georgetown and are on schedule to be commissioned in second quarter of 2016.

ANG is also currently under contract to acquire two new stations and continues to expect to own and operate to get to the 20-station number by the end of 2016, which, I think, is a huge improvement. And if you look at one of the recent transactions in the marketplace, where the company was recently sold, I think you'll look at and extrapolate and say that if we get to the 20 stations, and have no reason to believe we will not be there, this is a subsidiary that's really come from almost nothing to something that could be of real substance.

And that again, people can kind of look at from a valuation perspective and say: yes, this is a meaningful piece and it's meaningful growth. And we're seeing meaningful growth despite oil prices where they are and diesel prices where they are. There's an ongoing movement by corporate America to continue to move their fleets into compressed natural gas, not only from the cost savings, and oh, by the way, you will -- you are seeing cost savings with diesel down here and still substantial cost savings, but also the green effect and the tax credits accordingly. So, we're pretty excited about this sub and the growth that we're seeing here.

Slide 10, the PTGi telecommunications business delivered another solid quarter one and overall vastly improved year-over-year results. The company reported $150 million in sales in quarter one and up $103 million year-over-year. The significant increase was due to growth in the wholesale traffic volumes resulting from our focus and expansion in the scale and number of customer relationships.

Wholesale telecom division continues to improve. This division continues to improve, delivering $300,000 in adjusted EBITDA in the first quarter. This was the fourth consecutive quarter of positive adjusted EBITDA for the segment following the overall restructuring plan which was completed in early 2001.

And I think that one of the things here to note is that I think people kind of look at this business and say: wow, not exciting, not sexy. That's fine; there's still an opportunity to make money here and there's still an opportunity to increase EBITDA and increase margins.

And the fact that these guys have really turned the business around, this was a money loser for the previous entity to the tune of a number of -- maybe mid, low to mid-single-digit millions. And focusing on it and tweaking it where we can, you've seen a turnaround in the cash use, and now it's generating positive EBITDA.

And we're going to continue to push on this and continue to see opportunities in the market too, now that we have the platform. So, while it may never be the sexiest business in the world, we're going to continue pounding away on it and hopefully get to what we think will be decent single-digit margins on this business and throw off some cash in the future.

Now, moving on to slide 11, the insurance segment. A couple of things that I want to mention here is that we did -- as most of you know, we completed the acquisition of the UTA Insurance Company and Continental General Insurance Company in December. I think this was a big milestone for us and a big milestone for the Company. It was a great acquisition for us. And I think it was one of those unique acquisitions that, quite frankly, worked out well for us and worked out well for the seller by virtue of the tax aspect that they benefited from.

And I think the beauty of it, for us, is that now this business is a platform for us and a business that we think we can improve on and a business that we think we can grow. And as I mentioned on our last call, our objective here is to acquire blocks of business at the appropriate premium or hopefully, discount, and run them off in a more efficient manner as a monoline company.

I think the way a lot of these businesses are run, they're ancillary to most of the insurance companies' other businesses and as a result are not run efficiently. And again, no offense to the entity we acquired it from, which is a high-class operation, I think it was just a business that wasn't focused -- that they didn't necessarily focus on. And now, it is our core business and a business that we believe we can improve on from an operations perspective.

I think, just in general, as an aside on that, most of the portfolio that we have that we inherit through the acquisition was in short-term denomination of kind of 5 to 7 years. And if you look at the liabilities on this business, it's typically 20-plus year duration capital. Well, in order to effectively manage your return on this, you could, without taking any additional risk, move out on the curve, stay in the same names, move out on the curve and pick up a decent amount of yield by matching more effectively assets and liabilities. So, that's one of the things that we've been very zeroed in on and one of the things that the guys have been very focused on.

And when you pick up 50 to 100 basis points, or maybe even more by just extending in the curve going out to the 20-year area, you can generate a -- drop a pretty decent amount to the bottom line. So, that's going to be in the short term one of the areas where the guys are really focused.

Obviously, we have the platform in Austin, Texas, that was one of the attractive aspects of this. It wasn't just buying a run-off book that we were sending out for servicing and had to pay a fee on. We've got that platform now that we can hopefully participate when insurance companies who want to shed their liabilities and really drop books of business right on top of the existing portfolio without experiencing any increase in cost.

So, we're pretty excited about this. Again, Jim Corcoran, who is a long-time insurance exec, is running this and is managing it. We're looking at exciting things from this area.

We believe that the long-term care product is an essential product and I think our timing is great, though, that being said, you're looking at rate increases which are necessary in the industry. And we're seeing positive developments on that end. And I don't want to go into too much detail on this, but how you look at the long-term care business, and how morbidity has become a more important factor than mortality.

And what I mean by that is the 85-year-old today is essentially more healthy than the 85-year-old yesterday and five years ago. And the fact pattern shows that there is more -- because they're healthier, they're less likely to potentially have to pay a claim, and oh, by the way, are looking at continuing with their premiums. And that's the -- and they're not necessarily living that many years longer, hence, why morbidity has become a more important factor than mortality, and that's a actuarial fact.

So, I don't want to go into too much detail there, but that's one of the other positive trends in the business that you could look at and that actuaries are actually looking at. Now, granted it has a lot to do with the underlying book, but considering the book that we bought from American Financial, which we're very, very happy with, and as it relates to capped versus uncapped, I don't think we could have -- couldn't have acquired a better beginning platform.

And although we have only one quarter in our belt we think that this business is uniquely positioned and that we actually will be a solution to some of the things in the marketplace. That might be thinking big, but that's how we want to think about that business.

Just turning the slide quickly and moving on here, Pansend Life Sciences, I've mentioned this company and this entity in the past. I want to emphasize it again, I think there are some very exciting things happening here.

If you look at the underlying businesses -- or I should say, the underlying investments, I think if you really turn back -- peel back the onion, not that we would call it an onion, but if you kind of peel back some of the pages here, we believe that many of these investments are going to offer some real significant upside potential and real optionality within each of these businesses.

And for what we believe are minimal investments compared to our core other subs, I think you would be very pleasantly surprised as to what we think -- what is happening at some of these entities: the developments here and the potential upside on a few of them, if not, quite frankly, all of them. So, we're very excited about this area.

One of the things that I mentioned in the past was a focus on cash generation businesses. And not focusing on some of these kind of smaller one-off investments. We absolutely are continuing down that path. That being said, I think Pansend is one of those entities that we believe in, that we think there are a number of opportunities out there that we are assessing. Not jumping at anything as it comes across our table, but you -- hopefully, under the right circumstance, we will continue to put some money to work there. But I think, overall, we're very, very excited about the opportunity set here.

And just briefly, on page or slide 13, we've got two small investments and one is in a company by the name of Nervve Technologies, which is a provider of video and image search technology for information extraction and analytical applications. I think that the technology here is second to none. I think the company needs to focus on the ability to generate revenue, but again, it's a small investment for us. I just wanted to bring it up and mention it.

Dusenberry Martin Racing is the NASCAR video games and mobile and desktop video games that we control. We have a 51% ownership in this company. It's coming out with its first game. Again, while it's a small investment for us, I think it's an investment that's going to be a profitable investment and hence, I wanted to bring that up and to make people aware.

But again, this is not -- that category of other holdings you're not going to see expand. We continue to focus on situations where we think will be platforms for us and value-added platforms.

Just lastly, I want to turn to slide 14, the financial summary. This will give you another snapshot of our financials across our key segments. We're focusing on this slide on the trailing 12 months performance as we believe it is necessary to evaluate how these businesses are looked at, and I think it's how people are looking at our -- into the overall. And a trailing 12-month adjusted EBITDA from the core operating subs is $96 million, which is a very solid number for us, a very good number.

As you can see, by our capital structure laid out below, current market cap combined with net debt results in an enterprise value of approximately $500 million. And there's a number of different ways that you could look at our business, but I think if you just kind of take a quick look at the back of the envelope and what our cap structure is, what the underlying core businesses are, I think you should feel pretty comfortable wherever you are in the capital structure.

And we're continuing to find and continuing to focus on attractive opportunities and businesses and both turnarounds and non-turnarounds, but the key for us is platforms and tack-on acquisitions. I'd say, if we -- I don't want to say "disappointed," but if we needed to do something better, I would probably say building out our platforms and do more acquisitions from each of our platforms. I think one of the things is, is we did this quite fast and putting these things together fast.

I think I don't want to put pressure on the subs as both -- all three, all four of the entities have been exceedingly business -- busy with their underlying operations and I've emphasized inorganic growth as well as organic but not to the extent that they're taking their eye off the ball.

So, I think the fact that we're seeing such stability and strength in our underlying businesses is akin to the strong management and akin to the companies that we have. And I'm cautiously optimistic that you will see some organic -- or inorganic growth as we go forward here.

There is a little lumpiness in the business in nature as you saw in the first quarter of last year, not surprising. But we continue to be very happy with where we are and very happy with the next 8 to 12 months and beyond with what we're seeing and what we're seeing really from even a backlog of both of the bigger businesses. I didn't mentioned the backlog of Global Marine, but that's pretty substantial right now and I think it's north of $270 million, if I'm not mistaken. So, again, a very big number.

So, you're looking at two of our core businesses with very strong backlogs, very solid numbers and they're clearly driving the EBITDA, but don't underestimate some of the power of what you will see going forward with American Natural Gas and some of the developments in Pansend.

So, with that, I guess we will now begin our question-and-answer segment. If people have any questions, I will pass it over to the operator.

(Operator Instructions) Kurt Hoffman from Imperial Capital.

Hi, Phil; nice quarter. It was encouraging to hear the commentary around Global Marine still meeting budget for the year despite that write-down. But, are you able to share the revenue and EBITDA in the quarter derived from Global Marine's maintenance contracts?

Mike, do you have that breakdown on -- or are we disclosing that?

It's something we've previously haven't disclosed, but generally, revenues are well between 50% and 60% on the maintenance side, the opposite being installation.

Okay. And you mentioned the one contract extension that was -- had been previously disclosed. How many material maintenance contracts does Global Marine currently have? And where do they stand in terms of expiration or negotiations to extend those?

The way we're looking at kind of material contracts is right now, there are three material contracts inclusive of the NAZ contract. The exact timing on termination of those contracts we will probably have to dig up, I don't have those off-hand. Let me see if Mike or Keith are --

Yes, Kurt; this is Keith. One of them rolls off at the end of this year, and the second one rolls off the end of next year.

And what's the historical renewal rate around those type of contracts?

Very strong. I wouldn't say it's 100%, but we have no reason to believe that they will not be re-signed. But it's typically very strong and clearly north of 50%, 60%, 70%.

Okay. Now, my understanding is the counterparties on those aren't just one company, they're kind of consortiums with many different counterparties, so, hopefully that makes it something that's a little more sticky. Is that the right way to think about it?

Correct. Yes. That is the exact way to look at that.

All right. In terms of liquidity at the holding company, the press release references $40 million, $41 million of cash there. How do you think about liquidity at the hold co and ability to comply with the bond covenants pertaining to cash balances?

We have no reason to believe that we are -- no reason to believe that we will have any issue with that covenant. It's not something I'm losing sleep about.

Okay.

I'm very confident. And I think you -- as part and parcels to that, you've got to think about the cash at the subsidiaries. Global ended up the quarter with like $24 million, $25 million of cash and I think Schuff's off-hand had $20 million of cash. So, we are obviously well aware of that and it's managed daily here but it's not something we're concerned about.

Okay, all right. One more, if you don't mind? Hearing you and talking to your team, definitely can sense the excitement around these life sciences businesses, the NASCAR racing game, Nervve. When do you think we might see a monetization of one of these at a level that kind of wakes us all up to the value of this portfolio?

I got to tell you, I think that in focusing on the monetization or the valuation change on one of these, keep in mind we have four investments -- maybe five investments in Pansend right now, of which total $25 million or thereabouts. And pretty diverse across those four or five different companies.

I would suspect that you will see something in 2016 where there will be valuation change event. In one, in particular, we are probably ahead of the curve and ahead of where we expected to be. In fact, I would say there's possibilities of two. At least two we're ahead of the curve.

I think that to be conservative, I would be shocked if we didn't see something develop on at least one of them. And it could be as high as two.

This year?

This year.

That would be terrific. Okay, good. Well, keep up the great work and thanks for everything that everyone's doing over there for us.

Thanks. I think it's important to understand on those Pansend -- the Pansend businesses is that we will -- how I'm looking at that is developments where you will see a real valuation change. I don't think we are looking at selling any of them, but based on what we see internally and what we see happening internally, I'm cautiously optimistic it might -- optimistic, if I may say, that you see something -- hopefully see something pretty exciting with one, if not, two of those.

Okay. Thanks.

(Operator Instructions) Mr. Backman, we have no further questions, so I'll turn the call back over to Mr. Falcone for closing remarks.

Well, thank you again, everybody, for participating in today's call. I hope we shed some light on what we're doing here and what's happening here. We've been extremely busy. We are both building up the team and doing a number of other things to hopefully make it easier for our investor base going forward, but we're really excited about what we've done operationally, where we are and the prospects that we have on the table.

With that, I will hand it over to Andy. If he has any last-minute comments he can mention them. And again, thanks a bunch for participating today.

Thank you, Phil, and thank you, Mike and Keith as well, and thank you all for joining us this afternoon. As always, our management team is available to speak with you. Should you have any follow-up questions, please do not hesitate to contact me here in New York directly at 212-339-5836. Jody, would you please go ahead and provide the conference call replay instructions once again? Have a great day.

Thank you.

Thank you. As a reminder, this conference call will be available for reply beginning one hour after this call. Dial-in for the replay is 1-855-859-2056, with a confirmation code of 5431300.

Again, dial-in for replay is 1-855-859-2056, with a confirmation code of 5431300. This concludes our call. You may now disconnect.