Innovate Corp (VATE) 2018 Q2 法說會逐字稿

Good afternoon, and welcome to the HC2 Holdings Second Quarter 2018 Earnings Call. (Operator Instructions) Please note that 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, Gigi. Good afternoon, everyone, and thank you for joining us to review HC2's second quarter 2018 results. With me today are Philip Falcone, Chairman, President and CEO of HC2; and Mike Sena, Chief Financial 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 our webcast presentation, which can also be accessed on the HC2 website as well, in the IR section. A replay of this call is available approximately 2 hours after the call. The dial-in for the replay is 1-855-859-2056, with a confirmation code of 4889247.

Before I turn the 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 actual results to differ materially from these forward-looking statements. The risk factors that could cause these differences are more fully discussed 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, 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 again, is on our website. And finally, as a reminder, the 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, Philip Falcone. Phil?

Thanks, Andy, and good afternoon, everyone. Thanks for joining us today. Once again, we're going to try to keep the remarks brief so we have more time for Q&A. I'll focus my comments on the solid performance across our portfolio during the quarter that also saw us complete the monetization of one of our life science investments, and I'll also mention some important milestones that took place just after the end of the quarter.

Turning to Slide 5. You'll see that we've again broken out a summary of our adjusted EBITDA by segment, along with pretax adjusted operating income for our insurance segment. Overall, it was a very, very strong quarter for us. In fact, it was our best-performing quarter for our core operating subs since the inception of HC2 and one of the best quarters on a total company basis since Q4 2016. So let me walk you quickly through it before opening it up to Q&A.

Turning to Slide 6. Our core operating subs, DBM Global and Global Marine Group, both delivered very strong results. These businesses continue to validate our level of confidence in them and we are once again reaffirming our full-year adjusted EBITDA guidance for both of these businesses.

First of all, DBM Global had another very good quarter, with adjusted EBITDA coming in at $15.5 million for the second quarter and $25.5 million on a year-to-date basis. Based on these results and our current view of the business, we remain comfortable with our full-year 2018 guidance. DBM continues -- and that 2018 guidance is $60 million to $65 million. DBM continues to diversify its offerings, maintaining a very robust backlog and execute on key projects underway. During the second quarter, the first deliveries arrived on site for the LA Rams Chargers' Stadium, and pre-assembly activities are moving forward as planned.

DBM ended the quarter with a very solid backlog of nearly $660 million, up 11% year-over-year, an adjusted backlog of $675 million, even after burning through $177 million of backlog in the quarter driven by work on some of the larger projects, including Loma Linda, Google Bayview, and the LA Rams Chargers' stadium. While, the opportunity pipeline remains very strong in commercial transportation, convention, and leisure markets, we would expect the backlog to trend down somewhat over the next few quarters, as DBM continues to work through the larger projects. And going forward, Russ and the team are focused on increasing the proportion of small- to medium-sized projects in the backlog, hence the expectation that the backlog overall will drift slightly lower.

The whole purpose of this is really selectively pursuing larger project opportunities while reducing the average project size, and that will give us faster execution, revenue recognition, higher margins, less working capital intensity, as well as the ability to limit fabrication capacity constraints. And as I've mentioned in the past, we have been running on all cylinders from a capacity perspective, even getting close to 200%. And this has been something that we've kept our eye on closely, and clearly, having that swing capacity, as we call it, and the ability to outsource some of the fabrication does protect us in the downturn. It does really prevent us from margin expansion. So as that capacity comes down, and with the focus on the smaller to middle-size projects, you should see some improvement and some expansion in gross margins.

Subsequent to quarter end, DBM's subsidiary of Schuff Steel completed the acquisition of a new fabrication plant in the Southeast region of the U.S. This new plant cements DBM's commitment to the Southeast, expands the capabilities and service offerings, and increases operating efficiencies in this market, while adding incremental—about an incremental 15% to DBM's fabrication capacity. Keep in mind this facility, coupled with the previous acquisition in Utah, will enhance our bridge business capabilities, and that's been one of our key focuses of expanding that business as we see continued infrastructure spend across the U.S. It's a very key acquisition for us, albeit quite small, but it does give us a foothold in that market. And clearly, there's a lot of activity in that market, so we're looking at capturing some of that market share in that region.

As you recall, on the first quarter I again discussed the quarterly variability associated with Global Marine Group, as delays in the timing of large projects associated with the HMN JV impacted results. However, I also told you that we expected volume and profitability of these projects to ramp up, and in fact, Global Marine reported a very solid second quarter, with adjusted EBITDA coming in at just over $20 million, an increase of $23 million versus the previous quarter and $17 million higher than the year-ago second quarter. Sequential increase was driven by expected strong performance in the HMN JV, as well as solid performance in telecom installation and maintenance and offshore power and cable repair businesses. Global Marine's backlog remained very strong, coming in at $372 million at the end of the second quarter. Backlog at the Huawei JV was also very, very strong at $423 million.

A couple of key global milestones for the quarter included commencing installation activities for the sale project for Huawei Marine. Once completed, this cable will link Cameroon to Brazil and is the longest cable to be installed by HMN, at over 5,700 kilometers. In addition, Global completed inter-array installation and burial activities for a major German offshore wind farm, utilizing the vessel Global Symphony that was recently acquired as part of the Fugro acquisition. This was the first major inter-array installation project for the group since the [Wickinger] project in 2016, so we're very, very excited about that transaction and about that project.

Global was also recently awarded a 5-year contract from one of the top UK energy suppliers to provide CTVs, or crew transport vessels, across 3 U.K. wind farms, reinforcing their position as a leading provider of crew transport vessels to the major utility companies. As I've emphasized in the past and in the first quarter, we have very high expectations for this area. As the growth and the project backlog globally continues to expand, there is a tremendous amount of build in the offshore wind arena.

Finally, Global Marina secured 2 oil and gas projects with a major international energy provider, as industry improvements appear to be coming through. First time in a while that we've seen some activity in that space, and it's very, very nice to see. And again, as I mentioned, in the past we did see margin compression because of certain vessels coming into the telecom and offshore wind space that were previously involved in the energy space. And now that this area is picking up a bit, and with oil where it is, we see that as an opportunity to -- as some margin expansion opportunity in the telecom and offshore space. Based on our current view of the business, we continue to believe that Global will come in within the full-year guidance range of between $45 million and $50 million of adjusted EBITDA.

Moving on to Energy and ANG. You'll see that ANG reported adjusted EBITDA of $3 million versus $1 million in the year-ago quarter. This quarter's results included the impact of the alternative fuel energy tax credit, which was renewed by Congress in the first quarter of this year for the full year 2017. As a result of this renewal, ANG received approximately $2.6 million of net cash from the credit in the second quarter. Drew and team continue to focus on growing this business through business development and marketing efforts and recently secured a 5-year take-or-pay renewal of multiple contracts with a very large consumer company. Unfortunately, we can't divulge the name of that consumer company, but we're very excited about this contract, and we can say it's indicative of the types of agreements ANG and fleets are looking to lock in, given the strong role compressed nat gas will play in the coming years in the transportation sector. This is a market that is continuing to pick up steam, given the national focus on fleet sustainability and the expensive cost of diesel fuel. So again, with oil prices moving up in here, clearly, that trickles down to increases in diesel fuel costs, and it's a very nice thing to see on the CNG side, because the nat gas market has been pretty stable and pretty flat for quite some time now.

Just to touch briefly on PTGi, the focus there continues to be on expanding its sales reach and building relationships with smaller global accounts to seize on call termination opportunities and improving operational efficiencies. Second quarter and first half results of PTGi are in line with the expectations and more reflective of the nature of wholesale international long distance call termination. Again, we continue to extract dividends from them with the strong performance of PTGi.

As we flip to Slide 7, you'll see that this quarter, we are now showing pretax adjusted operating income for the Insurance segment. We believe this measure is more representative of the operations of the business, as it excludes residual transaction-related tax noise that gets included in tax-adjusted AOI. Pretax AOI is also widely used by the comps for this business, of course along with total adjusted capital. Both the quarter and year-to-date pretax AOI were driven mainly by an increase in policy benefit expense, which was partially offset by an increase in net investment income due to higher average invested fixed income assets and rotation into higher-yielding investments.

At quarter end, [stat] capital was $69 million with total adjusted capital of $85 million. As we noted in our earnings press release this afternoon, we expect to announce imminently the completion of Continental General's acquisition of the long-term care insurance business from Humana, as we've received all regulatory approvals. Post-close, CGI will have cash and invested assets of $3.8 billion, up from $1.5 billion prior to this transaction, and total adjusted capital of approximately $165 million and RBC north of 600. So it's an accretive transaction from that perspective. The team has worked phenomenally hard on this, and we are very, very excited about this transaction and very excited about the opportunity set, as we continue to look for opportunities to expand this portfolio.

This represents a true milestone event for our insurance business, significantly increasing the size of our insurance investment portfolio and signaling that we remain the counter-party of choice for future LTC transactions. Jim Corcoran, Justin Myers, and Mike (inaudible) and the entire team will be essentially 2 for 2 with respect to LTC acquisitions that we've pursued and ultimately closed. Clearly this is no small task, given the amount of regulatory approvals and the diligence needed to close these transactions. And I will remind everyone that, similar to the first LTC acquisition they completed with American Financial Group, there are no parent guarantees here associated with this transaction with Human. So it's very, very good transaction for all parties, will leave us in a very good position with regards to phenomenal improvement in our total asset base, and clearly, improvement in total adjusted capital.

I mentioned that the ballpark figure, and it could come in at higher than that, and I think I'm being relatively conservative, but we want to see, subject to closing adjustments that we may or may not see what that total adjusted capital could be, but it could be as high as $200 million. So we're -- again, I think this will be a phenomenal transaction for us, and again, we expect to close this imminently.

Moving on to Pansend. As we discussed on our last call, Janssen Biotech, one of the Janssen Pharmaceutical companies of Johnson & Johnson, acquired BeneVir, a Pansend portfolio company focused on developing oncolytic immunotherapies for the treatment of cancer, in a transaction valued at up to $1.04 billion. During the second quarter, the transaction closed. Janssen made an upfront cash payment of $140 million to BeneVir, of which HC2 received $73 million, with another approximately $12 million to $14 million being held in escrow for 15 months. In addition, there is another $900 million of contingent payments to BeneVir shareholders for achieving certain predetermined milestones, which we have no reason to believe that we will see this capital.

Without going into detail with regards to Johnson & Johnson's plans, and as I mentioned in the first quarter, we are big believers in their capability, and this was an important transaction for them in this area. And again, we have no reason to believe that these contingent payments will not be made. It's unfortunate that our equity price is not reflected, but again, in due time we feel that that will all flow to the bottom.

We believe that our existing NOLs will offset all its tax liability on the initial $85 million upfront cash payments, and we'll have to evaluate where we are at the time of the additional contingent payments. Again, that's a high-class problem, but this transaction was a phenomenal transaction for us, game changer as far as I'm concerned. And again, I'll note that our total investment in BeneVir was $8 million, so it's a clear example of the value inherent in the Pansend platform, a platform with several other companies. We hope to demonstrate value creation over the coming months and in the coming months, including MediBeacon and R2, both of which remain in discussions with strategic partners.

So the team there has done a fantastic job of circling up some very key investments early on, as evidenced by the BeneVir transaction, which was essentially a home run for us. And coming on the heels of that will be, we think, 2 more exciting transactions and 2 more exciting situations and companies that we've been working on for quite some time.

Moving on to broadcasting. I had mentioned on the last call that our goal of our over-the-air strategy is to build the largest OTA distribution platform in the U.S. We believe that this platform will create an avenue for high-end content providers to deliver their product to more viewers over the air, while positioning us on the cutting edge of a rapidly evolving media and technology distribution landscape. We consider ourselves and our focus as building out the distribution platform. We are not necessarily involved in content production. We will leave that to certain entities out there with the sizeable balance sheets. And again, you could have the best content in the world, but if you don't have the ability to distribute it to the right consumer, you are kind of stuck. And hence, our focus has been on building out this distribution platform, and with what we're doing and with the technology changes and changing marketplace, we think we will be very, very well positioned here.

Over the past you're -- we've acquired Spectrum and licenses to cover a significant part of the U.S. Including closed and pending transactions, we currently have 164 operational television stations and an additional 400 silent licenses and construction permits, reaching over 60% of the U.S. population. These 164 stations include 13 full power and over 54 Class A stations, a very, very valuable portfolio in a very short period of time. We're now fully focused on integrating these assets to make a cohesive technologically advanced distribution platform, one that we believe we'll ultimately reach in our goal of more than 80% of the U.S. markets. This will be a very valuable content distribution platform for those providers currently losing eyeballs, as more and more consumers cut the cord and move away from cable and satellite.

We are obviously in the early stages, as we structure portions of the existing business and build out the infrastructure needed to support future business, but we see significant opportunities to increase efficiencies and will nonetheless continue to focus on cost reductions here. We have a number of initiatives underway to achieve that, including the building out of a new IP transport solution that will reduce operating costs in transporting data. Based on the identified initiatives, we believe we can reduce targeted costs within the broadcasting business by 10 to 12 on an annual basis. And once all of our integration and cost-cuttings are complete over the next several quarters, we feel very confident that we will get there. And as such, we do not see our year-to-date adjusted EBITDA as a run rate for this business, by no means, and our goal, and we have no reason to believe we won't hit that goal, is to be at break-even or close to break-even on a worst-case basis.

And that is, again, before we are going out and really building the business. Integrating these stations, we've made a number of acquisitions, and I think a number of acquisitions at very attractive levels that we quite frankly couldn't reproduce this portfolio today at where we acquired it over the last number of months.

Of course, all this takes a bit of time to build, to integrate, and eliminate costs and see revenues catch up. But once this platform is built out and fully integrated, it's going to be pretty robust. We have the right technology and have the right people in place with an experienced management team that we just enhanced through the addition of well-respected industry veteran Rebecca Hanson as EVP, executive vice president and general counsel. Rebecca has joined us from Sinclair, where she was formerly SVP of strategy and policy. I'm very, very excited about having her on board. She of course joins industry veterans Kurt Hanson and Louis Libin. Louis came on board from Sinclair as well, and Kurt joined us from ABC, where he was formerly vice president of engineering and services and system support. And of course, as most of you know, we have industry veteran Les Levi on board as well, so we're building this team out, and building it out with the right people, very quality people. But we feel very comfortable and confident in the progress that we have been making.

Finally, as we noted in our earnings press release this afternoon, HC2 Broadcasting—and keep in mind, we are working on a name for this -- and 2 of its subsidiaries, HC2 Station Group and HC2 LPTV Holdings, obtained a $38 million of debt and equity financing from certain institutional investors. This net proceeds from the financing will be used for pending and future broadcasting acquisitions and some distribution to HC2 and working capital purposes. It's important to note that a small piece of the equity was sold, of HC2 Broadcasting, at a pre-money equity value of $150 million. So clearly, again, building value here that third parties are believing in after looking under the hood.

So we're off to a very good start. We have a very good partner in this investor, and we're not able to -- even though we closed it, choose not to mention it at this point in time. But very excited. They are industry veterans and are very astute investors, so we're very excited to have them on board and excited about some capital coming in, some third-party capital coming in to allow us to continue doing what we're doing.

Turning to Slide 8. As I've discussed throughout today's call, we made meaningful progress on a number of our 2018 priorities, including a monetization within the portfolio, BeneVir, and several broadcasting subsidiary initiatives including this most recently closed short-term financing I just discussed. We absolutely remain focused on a global refi of our 11% notes and are actively engaged on a number of fronts regarding a transaction, as we certainly view this as one of our top priorities, getting this cost of debt capital lower, and look forward to sharing additional updates on this and other key initiatives in short order over the next couple of months.

So with that, thank you again for joining the call. Very, very good quarter for us. A lot of good developments from Pansend to the broadcasting financing. And keep in mind, that broadcasting financing again is down at the operating level. There are no parent guarantees there, and that was our objective with that entity, to finance it down at the opco level and to get somebody in to give us both debt and equity, and equity at $150 million is a very good step for us, as they are very good partners and want to see this thing continue to grow.

So with that, let's open it up for some Q&A.

Yes, we will now begin the question-and-answer session. (Operator Instructions) And the first question comes from Sarkis Sherbetchyan from B. Riley FBR. Your line is now open.

Just want to focus first on the capital structure comments. Phil, maybe if we can pick your brain here on some of the thoughts and timing. I think what's maybe holding back the equity is the level of the debt, and perhaps when we can see the refi on the 11s, that'll probably help the equity side. So maybe if you can share some additional color on potential structure, or just kind of thoughts on the level of both the interest rate that you'd aspire to and/or the absolute dollar value of the debt.

Well, I think based on the performance, I'd like to think that we should get 5% to 6%, though I don't think we will. But knowing the asset base that we have, there's no reason to believe that it will be a material amount less than 11%. Again, not to sound like a broken record, but we fully expected to look to refi these 11s at some point in 2018. Doing it early in the year was a little bit challenging to think about that 5.5 point premium of call protection. There's different things that we could do, now that we are so close to that call date, so we don't have to wait until that call date. We'll see what the markets look like, quite frankly, come the first of September and shortly thereafter, but I think we're clearly well positioned. I'd rather have it done sooner rather than later, but I don't want to be hasty and print something with a rate that I'm not comfortable with, because it should be materially lower than 11%.

Phil, just moving to the monetization for the portfolio, clearly, BeneVir was a big one, and it sounded like there are some other potential developments maybe on R2 or MediBeacon. Can you maybe give us some more color on developments there?

Yes, we've been -- I think with MediBeacon, there has been discussions with [Strategix]. We are really kind of crossing the Ts and dotting the Is, again, trying to determine who the best partner is and what their end game is on this. Because clearly, it's—the product is—the product works. It's a breakthrough technology. There are a number of entities that are interested in this, both from a strategic investment and possible acquisition. Clearly, if it's an outright acquisition, we want to make sure, again, we don't make a hasty decision. We want the right number, because this is a—this business tracks both of the remaining businesses, where the remaining businesses in terms of R2 and MediBeacon are the real deal. They both are very effective in terms of what their objectives are, and they're both devices that work. They're both breakthrough, so we think we're very well positioned. It depends on, at the end of the day, what type of monetary situation the potential buyers or investors would be looking at. So we're kind of open to both, but they have to be the right number. There's no rush to it, but there are definitely suitors. There's no question about it. And I think, the fact that we did get through I believe it's the second pilot testing or third pilot testing with flying colors is evidence of a very premier technology, and one that we believe and the management believes will be distributed in many, many, many hospital operating rooms and intensive care units, and that's how critical this technology is as it relates to real-time kidney monitoring. So the suitors are there, and we hope that we will see something develop. Again, I can't give you the timeline; I don't want to give you the timeline. I think it's unfair for the potential buyers or investors on this. But, they're there.

No, that's very helpful. Just kind of switching gears here on broadcasting, clearly made some new adds from the management side. You're kind of giving us some more as it relates to the asset strategy and some incremental financing here. You did mention some of the run rates on cost savings that the program of—I think it was saving $10 million—if I'm not mistaken, $10 million to $12 million annually over the next few quarters. Is it safe to say that you can get to break-even on a run rate basis perhaps by the end of 2019?

Yes. Yes, no question. If we're not, I mean, I don't even want to think about being cash flow positive or break even by then. We kind of knew that there would be certain expenses incurred, and any time you make the number of acquisitions that we did, and just the integration aspect, putting it all on paper and then taking it to -- putting the action plan on paper and then executing on that action plan takes time. But there's no question we will get there, and that’s the first order of business for us. Integration, as well as cost-cutting -- and cost cutting is not a strategy, but it's -- from a integration and acquisition perspective, it's just part and parcel to reducing the overhead and consolidating the acquisitions that we made. If you buy 3 different companies or 4 different companies, you're looking at 3 or 4 different overhead expenses. You can't reduce that overnight, but I fully expect that these will be reduced. But we are -- the first and foremost is doing this right the first time around. Because of who we believe will be potential content providers over this platform, it has to be a [five nines] platform where we know where we will be distributing -- or I'm sorry, broadcasting, we know who we will reach, we know -- we have to know who we can't reach. And we've got the right team in place with that -- that Kurt is spearheading on that integration side. There is a phenomenal opportunity from a technology side that, we have I think one of the brighter minds on that side with Louis Libin. And some of the different things that we're looking at and doing and working on executing there that I hope to be able to announce over the next quarter or 2, really, really, really exciting. So this is going to be a real platform. You've got 164 stations right now and 13 full-power stations. Those stations we bought at we believe very attractive levels, and you see some of the transactions out in the marketplace today. Now, granted, they're affiliate transactions, but if I can buy a station in the same marketplace that somebody's buying and making an affiliate transaction at a 10x cash flow multiple, and I can buy it at a substantial discount, I like that delta where we can put the right content on it and deliver positive cash flow and ultimately create value and collapse that discrepancy between a full-power affiliate station and a full-power or a Class A or an LPTV affiliate station and what somebody would pay for that versus a station that we're acquiring with no content today. There's massive content out there. Every time you turn around, somebody's producing and planning on doing this, that, the other. So that, I believe, is something that we'll be able to marry with a very short period of time, and we believe that there will be phenomenal value creation as a result.

That's super helpful. And I think the number of stations closed pending sounded to be 164. It sounds up from 150 or so from the last time around. Is that the right number there?

Yes.

Are you acquiring some additional ones there?

Yes, we are acquiring and we have (inaudible) and (inaudible) and purchase agreements, and we did close on this New York-related full-power station where we essentially bought a half of a -- half of the channel, which covers actually 16 million [pops], full-power station in New York City. Very, very excited about that transaction and that reach where we are now going to be able to utilize that station and be a key part of our portfolio. When you think about New York, it's the biggest media market in the country. And when you think about the ability to cover 17 million people, or 16 million people, and we're working on expanding that coverage with this channel alone with a move of the transmitter, which could expand the coverage to 20 million, very, very valuable when you can reach that number of people in one market with a full-power station. So we're doing things like that, but yes, the 164 stations is right. And I think people are, when we tell them how many stations we have under our umbrella now, they're quite surprised. And I think if you talk to the quality people that we've hired, you'd see the excitement around it. Getting people like Rebecca, Kurt, and Louis and Les, I mean, Rebecca, Kurt, and Louis came from super-quality organizations, and they didn't do that thinking that our asset or our portfolio is weak. They clearly did their homework and I believe are very excited about what we're doing, and about the portfolio, and about the prospects.

That sounds great. Just kind of switching gears here to the meat and potatoes of the business, obviously for DBM and Global Marine, you reaffirmed the guide for both of those segments. Can you maybe help us through the backlog health of those businesses and just kind of what you're seeing real time?

Yes, I think both DBM and Global are doing exceedingly well, and really, I think you're going to see great things. DBM is [basic] blocking and tackling. Russ and the team are -- they have more business than you can kind of shake a stick at. And they're looking at -- the business in the past has been a little bit lumpy by virtue of the size of some of the different projects that they'd gone after. I think they've -- these are great projects to have, great projects to have as part of the backlog, but they do create some lumpiness. I think conceptually, we've talked about it in the past of focusing a bit more on more the middle-size projects to smaller projects, which could result in a more turnover and potentially higher margins, but a lower backlog. So the drifting down in backlog is not indicative of what's happening in the business by any stretch, at all. It is a just a kind of a tweak in the focus of some of the different things that we're looking at and we're trying to get on the path. You turn some of the more small or midsize projects around quicker, but as a result, your backlog doesn't look as high. Keep in mind, when we—this backlog that we got up to 700 was up from the 300s, so we've got a tremendous amount of cushion here. But it's just a function of okay, where can we get a little bit smoother number or operating performance, and even potentially higher margins. And I think Russ and the team will -- could assure you that that's the dynamic that we're looking at right now. And I think with looking at the opportunity set and the infrastructure, we weren't able to do bridge business in the past. But the 2 most recent facility acquisitions will allow us to get into that space, and we think that there is a continued opportunity set in again, diversifying our overall business, which is our goal. On the Global Marine side, we think they're coming into their own right now. We did see, as I mentioned, a bit of margin compression in late '16, early '17 by virtue of what was happening in the energy space. And as we mentioned today, just the contracts that we saw in energy kind of coming back and participating in that market are, again, indicative of some of the positive things that we believe we will continue to see overall in Global. We are very, very, very excited about the offshore power market, which is the wind farms, and the massive amount of projects that are being built globally there. The Fugro transaction and our ability to help access that market with the vessel that we acquired as part of that transaction has been a big plus, so the fruits are already paying off in that area. But we're very excited about Global and what we're seeing there. And clearly, this second quarter was a good quarter, but no reason to believe that this cannot continue.

Great. And just want to touch upon the insurance side of the business. It seems like the Humana book of business that’s expected to close soon is going to really kind of game change and step function up that side of the portfolio. Can you maybe give us some more color or some comments on your expectations for that going forward and what that means to your platform strategy?

Sure. I think this was a very, very critical transaction for us, and the team worked extremely hard on this. This was a complicated transaction, and it's a complicated business to begin with. Outside of the diligence aspect to the thousands of LTC policies that you're analyzing, there's a whole other regulatory aspect and hurdle that you have to overcome. And this is—I think clearly puts us as one of the lead participants in this market with this transaction. I think getting regulatory approval from the number of states we had to was a big, big step for us, gives us a lot of credibility. And quite frankly, there were a number of guys that we've talked to and continue to talk to that wanted to see a transaction like this close. So we believe -- I don't want to say it's going to open up the floodgates for us, because we want to take our time. But this is a game changer for us in terms of our ability to now get a quality transaction like this under our belt with the size of the transaction and the asset base I think will catapult us and will, quite frankly, open the floodgates and allow us to probably grow this a bit faster than it took us for closing this transaction. And there was a massive amount of heavy lifting here, on both Humana and CIG's part. So we're extremely excited about the prospects now, getting the portfolio up to almost $4 billion, and we're going to look to expand this and continue to expand it, because there will be a lot to drop to the bottom line as a result of doing transactions like this. We will clearly go into more detail over the next few months as it relates to how we're thinking about it and what we're doing with it, but it's very value-added to our overall strategy. And just the fact of getting total adjusted capital now north of 160 without any additional capital infusion on our part is a big plus for us. So hats off to the team for getting this done on all levels, but it was extremely critical. But getting the regulatory approvals, which we said in our press release that came through, was a nice breath of fresh air for us and I think will speed up the process here going forward.

Great. Thanks, Sarkis. We're coming up on 6-0. I want to thank everybody for joining us today. 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 directly at 212-339-5836. Gigi, could you please go ahead and provide the conference call replay instructions once again? Have a great evening, everybody.

thank you, everyone.

Thank you, Mr. Backman. As a reminder, this conference call will be available for replay beginning approximately 2 hours after this call. Dial-in for the replay is 1-855-859-2056 with a confirmation code of 4889247. This concludes our call. You may disconnect.