Innovate Corp (VATE) 2016 Q3 法說會逐字稿

Good afternoon, and welcome to the HC2 Holdings Third 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 and Public Relations. Please, go ahead.

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

This afternoon's call is being webcast on our website at hc2.com in the Investor Relations section. We also invite you to follow along with 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 approximately one hour after the call. The dial in to the replay is 1 855-859-2056, with a confirmation code of 4088236.

Before I turn call over to Phil, I would 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 SEC filings. 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, adjusted EBITDA and adjusted operating income or AOI. Certain information required to be disclosed about these non-GAAP measures, including reconciliations with the most comparable GAAP measures, is available in the most recent earnings press release, which is available on our 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. Philip?

Great. Thanks, Andy, and good afternoon, everyone, 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 core operating subs and then finish up with Q&A.

So if we could turn to the Slide number 4 as a starting point today. It's the third quarter highlights and recent developments. The numbers are pretty self-explanatory here, very exciting first quarter. We continue to be very pleased with the performance on each of our operating subs as well as Insurance, and very excited about what's happening and the momentum that we have in each of these entities.

Adjusted EBITDA across all of our core operating subs was up in this third quarter both year-over-year and versus the prior quarter. During the quarter, we saw some very solid performance in our Manufacturing segment due largely to strength in the West Coast region. We saw increased performance in Marine Services with an uptick in Telecom and offshore power installations as well as in maintenance and continued strong performance from our JVs, which we are very pleased with. Continued growth in the scale and depth of customer relationships, and Telecommunications segment is driving that sub, and continued execution of expansion strategy and increased volumes of gasoline gallon equivalents delivered in the Utilities segment.

Adjusted EBITDA from our core operating subs, which include the Manufacturing, which is the DBM Global, Marine Services of course, which is Global Marine; the Utilities, which is ANG; and telecom, which is PTGi totaled $31.5 million in the third quarter versus $27.1 million in the second quarter and up 16.6% quarter-over-quarter and up 23% versus the year-ago quarter. So very, very strong performance in each of these operating entities.

Consolidated cash, cash equivalents and investments were $1.6 billion at the end of the third quarter, which includes our Insurance segment. Consolidated cash, excluding our Insurance segment, was $93 million as of September 30, 2016, with approximately 30 million at the corporate level. As we continue to focus on our capital structure during the third quarter and subsequent to the quarter end, we reduced our cumulative outstanding balance of Series A, A1 and A2 preferred to just under $30 million from approximately $53 million at the beginning of the third quarter, increasing our overall flexibility.

We got a lot of questions regarding the rationale behind trying to do that and trying to move forward to clean up that part of the capital structure. And quite frankly, we want to continue focusing on it. It is really important for increasing our overall flexibility not only at the holding company, but at the operating sub. So reducing that number by over $23 million was a, and continues to be a big plus for us. And we'll continue to focus on this going forward to try and improve our overall flexibility on the holding company and the operating subs.

So let's turn to Slide 5. Again, just a quick snapshot of our segment overview. I don't want to spend too much time on this. As hopefully most of you know, what we are all about and where we are focused. Of course, we continue to look at a number of different situations both tack-on acquisitions for each of our subs, and we were successful in both the Manufacturing and Marine Services so far, as well as ANG buying some stations.

We continue to look for opportunities to expand the platform to silo number five, if I may say, continuing to focus a lot on trying to find a good fit from a capital structure perspective and of course, focusing on companies that we believe will generate positive cash flow. And that's a continued focus of ours and a core focus for how we're thinking about the business going forward.

Turning to Slide 6. A quick snapshot of adjusted EBITDA for core operating subs. As I mentioned, the adjusted EBITDA from the core operating subs was $31.5 million for the third quarter versus $27 million in the second quarter, $12.7 million in the first quarter and $25.6 million in the prior year quarter. So nothing to be disappointed about here, solid performance. Hats off to the management teams at each of the subs for driving their businesses. And we continue to expect these numbers to continue to move higher going forward.

Every one of our core operating businesses was up versus the prior quarter 2016 and year-over-year, with our Life Sciences platform and non-operating corporate essentially unchanged to slightly better for the same period. Just to give you a little bit more granular numbers and discussion, our DBM Global, which is formerly known as Schuff, was up $1.3 million or approximately 10% from the second quarter and essentially in-line year-over-year. Global Marine was up $2.3 million or 18% quarter-over-quarter and $4 million or 38.9% year-over-year. ANG was up nearly 36% over the previous quarter and up about $400,000 or 175% year-over-year. And finally, PTGi continues to perform. That business was up $700,000 quarter-over-quarter and up $1.4 million year-over-year.

Focusing on DBM. Slide number 7. I want to turn your attention to our Manufacturing segment here. Another very solid quarter for [Russ] and the team at DBM Global, which as I mentioned was recently renamed from Schuff International. Adjusted EBITDA came in at $14.5 million for the quarter versus $13.2 million in the previous quarter, driven by the strong growth in the West Coast.

Gross profit margins were again strong as the company continues its strategy to focus on the more complex and sophisticated projects. That's what makes this entity unique in the industry. And as I continue to emphasize, unique in its approach and its abilities here. These are -- it is not a team that just builds the square box as there are very complicated projects, and we are seeing a tremendous opportunity for continued growth on the West Coast from stadiums to expansion in technology as well as healthcare.

And looking at where the sweet spot is. We couldn't be more well positioned for what is happening in that territory. And as a reminder, we continue to proactively select the profitable strategic and core competency jobs and not all jobs.

Backlog at the end of the third quarter was approximately $320 million. It's down slightly from the prior quarter of $344 million. But taking into consideration awarded but not yet signed contracts in what we call the adjusted backlog, which we focus a lot on, backlog -- this adjusted backlog would again be more than $500 million, very consistent with the last quarter. Again, very, very strong numbers.

As we said last quarter, we continue to see a number of large opportunities in the commercial sector, totaling over $400 million in new projects that could be awarded over the next two quarters, which are not in our backlog. So again, I think from a geographic perspective and from a operating perspective, where we have our facilities, we again are very well positioned. A lot of these new projects include new sporting arenas, stadiums, healthcare facilities and sizable commercial office buildings.

As I mentioned the last quarter, DBM Global will continue to expand its overall product offering by offering a higher-margin services, inclusive of planning design build, building integration, management services and detailing as well as other diverse value-added services. That is a key for us as we think about going forward, which we want to be able to offer additional products, which we think will be complementary to our overall business.

Supporting this objective, during the third quarter, DBM announced an agreement to acquire the detailing and building information modeling business of PDC Global, which is a highly-experienced global engineering design, detailing and 3D BIM management company. DBM Global also announced that it had entered into a sales purchase agreement to acquire BDS VirCon, which is a leading global steel and rebar detailing and BIM firm. Again, our objective here is to continue to scour the landscapes for complementary acquisitions both that we think will complement our business from a product offering perspective as well as continuing to look at businesses that are similar to what we have right now.

So we've -- however, emphasize that we want to be very disciplined, not overpay as we don't need to rush to do anything in here. Both of these accretive transaction have closed. And in addition to helping open up markets globally, we believe the positive impact may be seen over the next couple of quarters from a synergy perspective. Once again, fully integrated DBM Global will provide a uniquely comprehensive set of services to design, build and manage steel construction projects. All of these initiatives are part of our plan to grow DBM to $1 billion revenue over the next three to five years. We've got the right team in place and got the right platform in place to continue moving forward on this initiative. And this is a plan that is in our scope and something we're very keen to reach. And again, really no one better to do it than the existing team that we have on board today.

Turning to Slide 8, Marine Services. Global Marine's adjusted EBITDA came in at just over $14 million for the third quarter. Very, very solid quarter for us, up nearly 19% quarter-over-quarter and up 39% year-over-year. These increases were driven in part by increased telecom and offshore power installation revenues, continued strong performance from our maintenance business driven by higher utilization of vessels in this -- in the quarter, including incremental maintenance revenues from our CWind acquisition, as well as solid performance from our JVs.

One highlight as you may have seen, Huawei Marine, which we own 49% of, recently announced a number of significant wins. This is a JV. For those of you who are not aware that we have with Huawei Technologies, we have been in this JV for quite some time and own 49% of this JV. And these significant number of wins include helping Papua New Guinea construct the new national broadband transmission network as well as redesigning and constructing a portion of the Palapa Ring project in Indonesia, a broadband network project that is led by the Indonesian government for the purposes of increasing broadband penetration in the more remote areas in Indonesia.

The HMN backlog again increased very nicely, with revenues and bookings up year-over-year, again creating long-term opportunities for GMSL. But also, creating real value for GMSL. And as I mentioned the last quarter, this is not a business that we focused on when we acquired the company two years ago. It's been almost a two-year anniversary today. And needless to say, this JV has done phenomenally well and continues to perform. And not surprising, considering who's behind it, considering where they're located and the opportunity set in that part of the world. So again, we couldn't have a better JV partner there than Huawei and are very excited about it and very excited about continuing to provide value-added services to that entity. But we're expecting and continue to see some very, very strong results from that JV.

Just a quick note on CWind. Subsequent to quarter end, we acquired the remaining 40% in CWind and now currently own 100% of the business. This is a business that is focused on the offshore power, the offshore wind markets. And over the past several months, we've seen an increase in the number of awarded contracts at CWind with an emphasis on long-term operations and maintenance, reflecting the focus of management in remaining a partner to leading offshore wind farms. This is reflected in the CWind backlog, which is significantly higher now than when we had first acquired our 60% interest earlier this year.

I think what's really important here to understand is that the -- with the GMSL team now behind this and our -- and the infrastructure of GMSL, I think this is going to create a lot of value within -- the CWind is going to create a lot of value within GMSL, just having -- versus CWind as a standalone. When we acquired it, we looked at the growth opportunity there. And we're very keen to get in the market that we had been subject to a non-compete in the offshore wind farms space for the last couple of years. And that, quite frankly, did contribute to some of the downtick that people saw over the last 18 to 24 months in global overall. But we were confident that we could build that back up. And now with this acquisition, I think we are back in the mix of focusing and building our offshore wind farm business.

Looking at total revenues for GMSL. They were up nearly 52% versus second quarter to $51 million and up over 44% year-over-year. Main drivers of the quarter-over-quarter revenue growth included higher telecom and offshore power installation revenues as well as higher maintenance revenues. Telecom install revenues were up 32% quarter-over-quarter due to an increased number of install projects in the quarter as vessels were almost fully utilized in the quarter and up 16% year-over-year. Offshore power installation revenues were also up significantly quarter-over-quarter and year-over-year as GMSL reentered the power market with the new inter-array install project that began in the third quarter.

We again, had no exposure during the quarter, to oil and gas installations. And while we mentioned that, that marketplace and what was happening there had put a little bit of pressure early on in the -- on GMSL, we are starting to see that subside and are now looking at trying to be opportunistic in increasing our capacity by looking at some of the vessels that are now available at substantially devalued prices.

So we think that, that marketplace has put the pressure on the entire industry and fortunately, again, we did not have a lot of exposure in that space and are now trying to be opportunistic in looking at expanding our capacity by virtue of some of the vessels in that space being put on the market.

Turning to maintenance. Maintenance performance was again, very solid in the third quarter with maintenance revenues coming in at nearly $31 million or up 50% year-over-year and approximately 5% sequentially. The year-over-year increase in maintenance revenues was driven mainly by the inclusion of CWind revenues, which was approximately $8 million as well as incremental revenues as a result of the higher repair activity associated with one of our maintenance zones.

Finally, as an aside, we believe the overall install market has and will continue to see some margin pressure in the oil -- from the oil and gas market. But again, I think we've -- we feel like the worst of that is done at this point. And for the most part, this is a market again that we traditionally have had limited exposure. So if anything, we want to be opportunistic here. Within this market, we continue to be pleased with not only the performance of Global Marine over the last year and while we will not be immune to market pressures, we continue to believe that we are very well positioned to take advantage of market opportunities through competitive positions we hold within each of our market sectors. And we continue to look at opportunities again from an acquisition perspective across the board and looking at where we can not only increase capacity, but provide value-added services to our clients in this space.

Turning to Slide 9 -- little focus on our Utility segment, which is American Natural Gas and just a reminder, this is a design, build and operate commercial filling stations -- compressed Nat gas fueling stations. This is not for the retail markets. This is a business that's really focused on the commercial space, the Class 8 trucks, the trucks that are out in the morning, back at night. And the importance here is the proximity to where some of these big distribution or industrial parks are. And we've done, and I should say, Drew and team have done an excellent job of not only growing this business, but maintaining a positive EBITDA. ANG currently owns and operates 17 compressed Nat gas fueling stations. We continue to focus on expanding the station footprint through both internal -- internal organic transactions as well as various M&A opportunities.

As we discussed on the last earnings call during the third quarter, ANG commissioned fueling stations in Saratoga Springs and Rochester. In addition, ANG announced that it acquired Krug energy's public compressed Nat gas station in Arkansas. With the acquisition of this station, ANG also signed a long-term fueling agreement with Triple Transport Inc., an established Arkansas-based hauling and transportation company. We continue to be very, very pleased with the progress Drew and the team are making at ANG. And believe that we will be up north of 20 stations by the end of the fourth quarter into the first quarter of next year and further expanding that footprint through 2017, '18.

Again, we have had -- what we first put the capital into this, we believed in the industry overall, believed in Drew and the team's operating capabilities. And keep in mind, we had low single digits number of stations here. So the stations have really -- the growth in the stations have been very, very strong. And our objective is to continue focusing on this. There's a phenomenal opportunity to build out this footprint. And if you look at the economics, as I kind of have talked about briefly in the past, if you look at the economics for these Class 8 trucks, I don't want to say it's a no-brainer, but it makes all the sense in the world for these companies to be driving CNG trucks versus diesel, even with diesel down at these prices. So we were a little bit concerned that the marketplace would slow down for a bit with the drop in oil.

But quite frankly, turning out that there's as much focus on this space as ever. And as people are looking at this, there's a real long-term solution towards cutting their -- one of the key components of their expenses from a distribution perspective. So very exciting part of our portfolio and continue to expect to see some very good things there. We are looking at some different acquisitions and the -- one of the problems you have again is that people are really paying for growth. And we passed on some of paying the big multiples for it. But as we had some really good success from an organic perspective. So we've really created value here if you look at what's happening in the M&A space and what a 20 stations -- what a 20 station -- 20-plus station entity could be worth. But the objective is to continue pounding away on this marketplace as the opportunity set is really sitting right in front of us.

Turning to Slide 10. PTGi-ICS. PTGi again delivered a very solid quarter marking its sixth consecutive quarter of positive adjusted EBITDA. Adjusted EBITDA came in at $2.2 million for the quarter, up $1.5 million from the prior quarter and up $0.8 million year-over-year. The continued success of the business is being driven by PTGi's ability to take advantage of opportunities in the global market space. Regulatory changes in the European marketplace and holidays in the Middle East were the main drivers of wholesale traffic in the third quarter. With this third quarter's strong performance, PTGi has now achieved in the first nine months their full year 2016 plan. Going forward, we expect Craig and the PTGi team to continue their profitable quarter-over-quarter performance in wholesale while also exploring potential M&A activities in the greater telecom and technology sectors.

Again, when we acquired control of the entity, this unit was a discontinued operation losing money. And the group that was here prior couldn't sell it. And I look now at what focus -- what a little bit of focus -- I shouldn't say a little bit, to underscore the effort that Craig and his team had put on this thing. But getting a management team, and the right management team and the right group to really focus on the same business that was there two years ago, is really indicative, I think, of paying attention to what -- to your operations and what you can do. And quite frankly, the growth here is not done. It's not exactly a -- the sexiest business. But guess what, we don't need the sexiest business. If we can continue making money from this in this space, that's fine with us. And we took out our first dividend, albeit small, but that's pretty exciting coming from a business that was losing cash hand-over-fist. Now with a bit of TLC is positive EBITDA and the company that we're attracting dividends from. So hats off to Craig and his team for the effort of the -- and the turnaround there. And again, it's not over by any stretch.

Continental -- I'm sorry, turning to Slide 11. Continental Insurance. Looking at the platform as of September 30, 2016, CIG had approximately $2.1 billion in total GAAP assets and approximately $76 million of stat surplus. On a reported basis, adjusted operating income for Insurance business was a loss of $1.7 million. One thing I want to emphasize here is how from an accounting perspective, we've had to look at this business and how we've delivered the numbers. And on a life -- from a life perspective, you have to kind of look at when you think about capital, you have to kind of look at the stat surplus number as well as the AVR number. And I think it's important to just focus to everybody's attention on that for one second.

The AVR is a moniker used for asset valuation reserve to essentially -- and it's used in the life space, to essentially temper volatility that one would see in one's portfolio. And if you look at our total capital, gross capital, which is the stat surplus plus the AVR when we acquired the business, it was around $86 million. Of course, we contributed some capital to get to that number. But now the -- I think it's just important to note that the stat surplus, plus the AVR is over $93 million.

And I wanted to emphasize that. Because when you look at the stat surplus as kind of being at $76 million, $77 million, you may say, well, your capital number's not increasing so you must be losing money on your portfolio and your operations. And the fact that our stat surplus number plus the AVR is higher by $7 million, I think is indicative that, that is not the case and which is very important to point out for the people that are zeroed in on what's happening in Insurance.

So again, very pleased with the ongoing performance there. We continue to bang away and look for additional books to add to our platform. And the evaluations have changed a little bit. And again, we just did -- we want to make sure that we're crossing the Ts and dotting the Is. I think we were fortunate to buy and to close on this deal when we did, but it's of utmost importance to continue building on this and adding to the $1.4 billion, $1.5 billion of assets that we currently have under this umbrella.

So turning quickly to Slide 12, Pansend Life Sciences. On Slide 12, we again outlined the diverse companies within our early-stage holdings. And as we mentioned on prior calls, we had expected to achieve several significant milestones this year from Pansend Life Sciences platform and have done exactly that.

On October 5, and if you look at the number of investments that we have in the space, BeneVir, R2, Genovel, MediBeacon and Triple Ring, I want to have you zero in on R2 Dermatology for one second. On October 5, R2 Dermatology achieved one of those milestones having received FDA approval for the R2 Dermal Cooling System. This R2 device, which is used to lighten and brighten the skin has successfully treated and been studied on over 100 patients and over 1,500 areas of the skin. The system is now scheduled for release to nearly 50 key opinion leader dermatologists, beginning in January 2017, with commercial availability expected beginning in the third quarter of 2017.

So big breakthrough here. And I don't know if it kind of was passed over in the marketplace. But a key focus for us was getting the FDA approval. And as we go into these things, you always remain cautiously optimistic, I think we heard that one last night. And our cautiously optimistic approach when looking at the timing on FDA approval has clearly surpassed our belief in the efforts on behalf of the Pansend team who have done a great job of getting this unit to this stage is -- it has been a big plus. To now be on the cusp of commercial availability. And again, these are not small machines. This is not a small procedure. And the people behind this from a technology perspective are extremely regarded -- highly regarded in the industry.

So I think there's a number of people watching this. There's a number of people focused on this. And the fact that we got the FDA approval on this was a huge milestone. It is estimated that approximately $14 billion is spent worldwide, $6 billion in Japan alone on a variety of skin lightening procedures or processes with little clinical benefits.

We believe that this machine, the R2 Derm Cooling System, is well positioned to capture part of that total addressable market. This is a machine that will hopefully be positioned in a number of dermatology spaces or offices, and will replace some of the products and machines, including lasers that are used now for skin lightening. I think the process and the results have proven themselves to a point where, one, we were able to get FDA approval; and two, I think the results are very exciting on our end of how this machine has developed and the potential is quite astounding. So we're pretty excited about this. And this is a situation where we own 61% of the company.

In addition to R2, another Pansend portfolio company, MediBeacon, which is a real-time kidney function monitoring made significant progress since our last earnings call. And MediBeacon is more specifically, is more than halfway through its FDA pilot study, too, of 60 patients at Washington University School of Medicine. We believe the trial is progressing very well with anticipated completion of the study by the end of the fourth quarter this year.

And I think just a tidbit on this, when you think about kidney function and the test today and how you -- how doctors and surgeons and whomever measure kidney function, the only real way to do it is to take your blood and take it to the lab. Well, this MediBeacon optical renal function monitor will be the first and only noninvasive system to enable real-time direct monitoring of renal function at point of care from a kidney perspective. And you think of health care development and how technology has really advanced many of the processes taking place today. One of the areas that has not moved forward is, quite frankly, this and being involved in this product and being in this position, I think, is phenomenally exciting. We own 35% of this company. We do have the option to increase our exposure here. And I think that with everything moving forward the way it has been and as the results continue to come in, we continue to be extremely excited about the endgame here in this business.

In addition, as we announced on October 18, MediBeacon, in collaboration with Washington University School of Medicine, received a $1.1 million grant from the Gates Foundation to study MediBeacon's platform technology in monitoring gut permeability and gastrointestinal diseases, including Crohn's disease, ulcerative colitis amongst others. And what does this mean is that this process and this technology can be potentially used for other monitoring other diseases and other issues in your system other than kidney and -- other than kidney function. And the versatility and the potential versatility of MediBeacon's platform technology here is very exciting in addition to the significant progress and recognition they have achieved, and it's not easy getting a grant. And the fact that this entity and this team did receive the grant, I think really, again, speaks for itself and the value creation of having and focusing on these things under our umbrella.

We look forward to continue reporting additional successes from R2 and MediBeacon and other Pansend portfolio companies as we continue to believe they offer not only a very significant upside potential but real optionality within each of these businesses. And the milestones that both R2 and MediBeacon have reached are really playing out, quite frankly, like we expected and like we have hoped.

Just a final point on -- in Slide 13, quick note of non-core investments. We continue to spend some time developing the NerVve technology and as well as the Dusenberry Martin Racing, which owns the licensing rights to NASCAR. Just one tidbit to mention on that is that the company did successfully release their new game, the NASCAR Heat Evolution on September 13. So we were very pleased with getting that first game out from under our belt, and we'll see -- obviously, the key is sell-through and what happens in the next 90 days. Again, these are, I want to say not core, but they're non-core investments for us. But we continue to believe that they will be value providers for us.

Just Slide 14 now. I'll continue to move on -- try to move on as quickly as possible here, just some quick financial updates. Given the value of HC2 portfolio, we continue to exceed the 2.0 times collateral coverage under our 11% secured notes at the end of the third quarter. Excluding our Insurance segment, again, consolidated cash was over $90 million at quarter end, with nearly $30 million at the corporate level. And as I mentioned earlier, during the third quarter and subsequent to the quarter end, we reduced the cumulative outstanding balance of pref-eds to $30 million from $53 million.

And I think one important thing to note in addition to this reduction in the preferred from $53 million to $30 million, the debt and pension pay-down that we've seen at Global Marine has been -- from internal operations has been fantastic. We, at the global operating -- Global Marine operating sub, we have paid down approximately $50 million from the close. So just indicative of the cash flow potential of that underlying sub, I think, goes a long way in an environment where we were under a little bit of margin pressure, which, again, as I said, we -- just by virtue of the results, has subsided.

So there's been a lot of focus on our cap structure, something I think about every day. Getting that cost of capital down, that is our goal. We will get there come hell or high water. And I think the reality of it is our performance of our underlying subs will and should go a long way towards getting us there. The stock price that we've seen is not exactly pleasing, but as I like to tell people, it's a marathon. It's not a sprint, but it doesn't go a day without me focusing on it because I know people are expecting a lot.

But again, it's something that, I think, time we will prove that we are building value. And with the building of value and as we get out and tell our story, we fully expect that the positive effects of the lowering of our cost of capital and improving stock performance will and should follow in tandem.

There's been a lot of noise around the preferreds and the hedging and the shorting, which didn't help. But -- and again, it's another one of those reasons why it's important for us to continue focusing on cleaning that part of the capital structure up because I don't like to see the stock at $4. And while I can't discuss what I think it's worth, I'm not happy with it, where it is. But again, the good news is that over the long term, fundamentals will win in the end. And with this quarter that we've had, there's no reason to believe that, that will drive the two points that I mentioned.

So with that, let's move it on to the Q&A. I know people -- this has probably gone on a lot longer than what everybody has hoped. So hopefully, we can get through this quick. Great quarter and very excited about what we've seen and the strength of the underlying subs from a fundamental perspective. The team is really hitting on all cylinders and no reason to believe that we -- that, that won't continue.

So with that, let's turn it over to the operator and shoot to Q&A.

(Operator Instructions) Our first question comes from the line of Kurt Hoffman with Imperial Capital. Your line is now open.

Philip, congratulations on these results, really encouraging across the board. Just want to start on DBM. Trump gave a nice speech last night, emphasizing his plans to significantly increase infrastructure spending. We saw a lot of very big moves in stocks that could benefit from that today. I think a lot of people look at DBM. They see the stadiums. They see these great one-off projects for private companies. Can you talk about how DBM could benefit from publicly funded infrastructures that could proliferate under Trump?

Yes. Listen, it's something that we kind of talked about today in relation to what was happening in that -- what was happening last night. And DBM is focused a lot and has focused a lot on the stadiums and the infrastructure and -- or I'm sorry, stadiums and health care and technology building, quite frankly, because that's where the opportunity is.

Steelwork -- and I don't want to make it that simple, but this company has the flexibility to move into different markets. I think the one area where we don't have the expertise is in the bridge area. And it continues to be, and it has been something that we have thought about and have been interested in. But that's only one part of the infrastructure. There are many more parts where -- if desired, where this team and with their facilities could turn their attention.

So I think it's really across that -- the entire space other than the bridge side where the flexibility of the team and the facilities and the capabilities could go a long way towards ultimately focusing on some of the infrastructure projects, depending on what the government is talking about. But it's clearly something that we talked about today. It's clearly something that Schuff -- or I should say, DBM could benefit from going forward. And there's no reason to believe that we shouldn't benefit from that, again, because of the flexibility and you focus where the opportunity is. Today, it's on stadiums. They built -- keep in mind, they built their business, not in the stadium business, but in Las Vegas building, starting in the casino space.

And when you're doing -- building projects like that, the infrastructure associated with that from sewage, drainage, water, etc., is kind of part and parcel. So we were very excited about that point and have no reason to believe that we shouldn't be able to participate going forward.

Great. And I think on Global Marine, a lot of investors are going to be very pleasantly surprised to see the EBITDA growth there. It's nice to have the backlog disclosure on DBM that kind of gives us the context for what future results might be like. Is there any sort of metric you can provide or other way to set expectations for Global Marine's initial performance just even over the next several quarters?

Yes. In just checking with the guys here, I think we did -- last quarter, if I'm not mistaken, we talked about the backlog being about 270. Obviously, that portion of that burns off over time. But in that -- that number is still well over 200. And the fact that we can now participate in the offshore wind farm market globally means -- I think it's going to mean a lot to the business from a growth perspective. And one of the reasons, as I mentioned, that the numbers kind of tailed off a little bit is that the non-compete aspect and the focus -- and the business of wind farms and the focus that we had on wind farms, we couldn't compete in that space over the last few years.

And over the last few years, the wind farm market of our exposure, I believe, has gone from mid-teens to single digits to 0 because we couldn't compete. Now it's starting -- that uptick is starting. So when you think about the uptick in EBITDA, that was one of the reasons for it; that, coupled with the margin pressure. So it wasn't just margin pressure.

So I think this is a very, very, very good sign that now, competing in this -- being able to compete in this space, the fact that we own 100% of CWind and the backlog has almost quadrupled in CWind since we acquired the business, I think, is indicative of how people are looking -- or how people in that industry that are building these wind farms are looking at Global having -- owning and controlling this business versus it being a standalone and the other now kind of -- what other bolt-on services can we provide in the offshore wind space that could be value-added.

So I think this is opening up something, I don't want to say something new, but something new over the last few years because we couldn't focus on it. And it was a core part of the business prior to our acquiring it. So we continue to expect big things there. But I think in general, the backlog is just from standard burn-off is down a little bit but still well over 200.

Okay. Okay. Great. And then I'll just squeeze in one more. This is on ANG. I saw where this Love's Travel Stops bought something like 35 CNG stations in a private deal for something like $120 million to $150 million range. The earnings release today indicates you plan to have 20 of these stations. Are you familiar with that Love's Travel Stops deal? And is it appropriate to use that type of per-station valuation as a read-through to the potential value of ANG?

Yes. And it's one of the things that we kind of focus on. We were very aware of that business. And I think I mentioned a couple of quarters ago that we had bid and missed on a transaction. And quite frankly, that was the transaction. But the fact that, that 30-plus station enterprise went for the number that it did is indicative of the value that we're creating. And to be up over now 20 is, I think, a testament to the dedication and the growth opportunities, quite frankly, that this company has.

So there's a lot of different dynamics associated with station by station, but it's probably a good back of the envelope. And in looking at -- you have to look at the contracts and how well run the businesses are, but in -- there's no reason to believe that we're dramatically different than the -- that transaction and the value that -- the value that people place on the 33 stations that went for north of $120 million.

Our next question comes from the line of Sarkis Sherbetchyan with B. Riley. Your line is now open.

So first on Manufacturing, do you have any updates on bids submitted to secure work on the new L.A. Rams stadium?

There's not a lot we can say on that other than the contract for this deal has not been awarded yet. We've had continued ongoing dialogue with Turner-Hunt who is managing the construction of that stadium. We've done a lot of business with these people in the past. And of course, you have to have dialogue with the league as well. And we believe that we are in the final stages and that it should be awarded in the coming weeks. And keeping our fingers crossed there but continue to believe we're well positioned and, of course, very capable based on where and what we've done in the past. But as of yet, it has not been awarded, and we're kind of just waiting to hear what the status is.

Very good, and so the $400 million in potential new projects that you'd outlined, that could be awarded in the next two quarters. Is that inclusive of that stadium deal? Or is that -- does that not include it?

Yes. There's obviously a couple of parts to the stadium deal, and that is included. And that $400 million is inclusive of some of that, obviously not all because that's a very, very complicated and big project. But that's something that we are keeping a close eye on, and it's part of that -- a piece of that is part of that $400 million.

Great. Moving over to Marine Services. Are there any sizable contracts in the near term that are up for renewal on the business? And then separately, can you speak to the trends that you're seeing in new install projects and also your confidence in being able to secure new business there?

Yes, the business -- we have no reason to believe that we will not win new business there because our performance and the recent contracts we've had is indicative, especially the recent NAZ contract that we've -- that we signed, which was a very big contract for us and is, I believe, a seven-year contract. Your capacity in this space is limited to your vessels. And we have a very sophisticated engineering team, very sophisticated vessel portfolio, which is -- has a phenomenal reputation and has a 100-year history in this space.

So we are at or close to full capacity in some aspects here. We do have flexibility to move vessels around and sign new contracts. Of course, you don't have to have every vessel out at every point in time. So we have no reason to believe that we're going to continue winning business. I think we -- with the performance in the last three to six months, we definitely have proven that we can win new business.

We'd like to expand our capacity. I think the fact that Huawei continues to explode from a backlog perspective -- and keep in mind how you have to think of that is they put their projects out for bid or need to sign up contracts for vessels to build out every job that they have. Some we do, some we don't. The more vessels we have, the more we could build our business and do an increasing number, increasing higher percentage of jobs for Huawei Marine Network. And that's what we'd like.

Now regardless, we'll still see 49% of the profit. But if we can see 49% of the profit and also do direct business and bid on jobs in the Huawei Marine space, that's a kind of a double bang for the buck for us, which is extremely attractive. And from a growth perspective, I think you'd be hard-pressed to find anybody in that space that's growing as much as they are.

So yes, we're getting the benefit, which is creating phenomenal value from a 49% perspective. But we could also improve and increase our top line and, obviously, bottom line by doing more jobs for them. And I think that's a very key focus for us and key area of expansion for us. And we are very, very zeroed in on trying to find and looking for and we do have our eyes on some different vessels that are available, which I think will benefit us on -- in both ways. So just without doing anything else, we should have a leg up on that space.

Yes. It does sound like you have a nice pipeline there.

Yes.

And then, I guess, a final one for me here. If we look at the portfolio of your holding company's assets, how do you think about the opportunities maybe to monetize or realize value from one or more of the assets? If you can maybe walk through that kind of as it stands today and perhaps what it could look like down the road. I think your commentary mentioned silo number five, so maybe some flavor there.

We have and continue to look at a number of opportunities. We don't need to reinvent the wheel. We have a very solid platform that continues to perform to all of our -- and really exceed our expectations. I think it's important that the business, if we do add another platform that kind of fits into our model of strong cash flow, stable, not binary. And we just want to -- we're looking at kind of a handful of companies right now and continue to try to find the right situation, and they're out there. And we're just taking our time and kicking a lot of tires.

As it relates to monetization, listen, I don't want to -- I think the big plus for us is that we don't have to sell. At the same time, we have to be opportunistic. We have to be sensitive to the marketplace. We have to be sensitive to the overall global cycle, albeit that's not ever easy to pinpoint. But we don't want to be traders. We're not. We're building a -- I think a, I think, a very stable corporate base. But we will be opportunistic if we get the right price on something. I don't want to make it seem like we're out shopping because people do kick the tires and call us up, "Are you interested in this?" or "Are you trying to do this? Are you trying to do that?"

Listen, we have to be opportunistic. We have to keep thinking along those lines. We, however, are in no rush to do anything. And it's something a buy or a sell comes along, that's the right thing to do for the view we have and from a valuation perspective and from a capital structure perspective. Yes, I mean, we have that duty to peel back the onion on everything both buying and selling. I think we'd be doing a disservice if we didn't do that.

So we are wide open to both, provided that they fit with how we think about valuation cycle, vision, etc.

And so we have time for one more question, please.

Our last question comes from the line of Umesh Bhandary with Jefferies.

Maybe the first one, Phil, you talked about lowering your cost of capital, hell or high water. So what do you think you need to achieve in order to sort of get that result? Just from a -- either from a leverage perspective or free cash flow perspective, what do you think you need to get to get -- to achieve lower cost of capital?

Well, I think we've proven from a value-add and a performance perspective, which is the most critical thing that you have to do because you can have an asset, but you can have an asset that doesn't perform. We've got, I think, a number of assets here that are performing. And just by virtue of -- I believe just by virtue of how the strength that we have in the underlying subs, not inclusive of some of the developments of -- in Pansend and the opportunity set there and the value creation there, we should be able to reduce our capital structure or our cost of capital.

One would think that the market would be somewhat rational, but sometimes people maybe don't understand what we're trying to do or how we're trying to do it. And you have to think about maybe do you refinance -- do you finance maybe something at the -- an operating sub, do you take in a JV partner at a higher valuation, so kind of all those things. Or do you completely monetize something?

So I think those -- between the fundamental performance, between maybe tweaking how we're thinking about financing to maybe looking at a JV partner who wants exposure in some way, shape or form at a -- an attractive valuation to us, I think those are kind of things that you have to do -- and then monetizing something, I think those are things that you have to think about in terms of proving out the model.

And I have no reason to believe that just by virtue of the fundamental performance that we're not on the right path. We absolutely are. And again, I think that if I had a choice, I'd rather be in a position where we are, where we have the positive fundamentals because that, at the end of the day, will win. And we do have, I think, a number of levers that will benefit the entire cap structure. And the question is what [do] we pull.

Got it.

And two, we're thinking about the timing on some of the Pansend situations and really realizing the value there because when you think about our portfolio, we put $35 million, $40 million, plus or minus, into that sub. I think we've created phenomenal value, and we can't yet discuss in detail what's specifically happening. But I have no reason to believe that you won't see something develop there based on the milestones that I talked about earlier.

So we've got, again, a number of things kind of in the hopper that we're thinking about and that we're being methodical -- thinking methodically about to make sure that we get it right.

Got it. That's very helpful. And then, obviously, as you continue to introduce some of these tuck-in acquisitions, maybe can you discuss a little bit about some of your pipeline for us, some of these transformative acquisitions and just your thoughts on the valuation that you're seeing for some of the transformative opportunities that you're looking at?

I think one of the acquisitions that we looked at was, as I think Kurt mentioned, was the 30-plus station asset sale that was put up for sale. We bid on that. Somebody was obviously willing to pay a much bigger multiple. I don't like to pay big multiples for things. That being said, if I think it's accretive and we can be -- it can be value-added to our portfolio, clearly, we have to keep an open mind.

But it's really tough to say from a multiple perspective of how we're thinking about things. It just kind of varies from industry to industry to industry. And we'd like to think that we should be able to buy something between five times and seven times and something that's accretive from a cash flow perspective. I think that's how we're thinking about it. If there's an opportunity to pick something up via the distressed market and control, that's also something -- things that we're looking at.

But we turned down a lot of things. We are kicking a whole heck of a lot of tires. There have been things that have been very interesting, but we didn't like one piece of it. But we're being very diligent. We are not rushing to anything. The quick solution would be to make an acquisition and refinance the whole balance sheet. We don't need to do that. We don't need to do something for the sake of doing it. It's got to fit within our plan, with our strategy.

And so there will be something. I don't know if it will be tomorrow or next week or in three months, but there's enough out there. There's still dislocation in the market, but it's got to fit.

This does conclude our Q&A session. I would like to turn the conference back over to Mr. Backman for any closing remarks.

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

Thank you, everyone.

Thank you. As a reminder, this conference call will be available for replay beginning approximately one hour after this call. Dial-in for the replay is 1-855-859-2056 with a confirmation code of 4088236. Again, dial-in for the replay is 1-855-859-2056 with a confirmation code of 4088236

This concludes our call. You may disconnect. Everyone, have a wonderful day.