INNOVATE Corp

Previous wording

In 2024, including subsequent to the second quarter end, as part of our strategic process, we engaged in several transactions that had or will have an effect on the results of operations and financial condition of our business and individual segments.

Current wording

In 2024, including subsequent to the third quarter end, as part of our strategic process, we engaged in several transactions that had or will have an effect on the results of operations and financial condition of our business and individual segments.

Previous wording

On March 8, 2024, the Company commenced a $19.0 million rights offering ("Rights Offering") for its common stock. Pursuant to the Rights Offering, the Company distributed to each holder of the Company’s common stock, Series A-3 Convertible Participating Preferred Stock, Series A-4 Convertible Participating Preferred Stock and the 2026 Convertible Notes as of March 6, 2024 (the “rights offering record date”), transferable subscription rights to purchase 0.2858 shares of the Company’s common stock at a price of $0.70 per whole share.

Current wording

On March 8, 2024, the Company commenced a $19.0 million rights offering ("Rights Offering") for its common stock. Pursuant to the Rights Offering, the Company distributed to each holder of the Company’s common stock, Series A-3 Convertible Participating Preferred Stock, Series A-4 Convertible Participating Preferred Stock and the 2026 Convertible Notes as of March 6, 2024 (the “rights offering record date”), transferable subscription rights to purchase 0.2858 shares of the Company’s common stock at a price of $0.70 per whole share (on a pre Reverse Stock Split basis).

Previous wording

As the Rights Offering had not yet settled by March 28, 2024, in accordance with the Investment Agreement, Lancer Capital purchased $25.0 million of Series C Preferred Stock, referred to as the "equity advance." On April 24, 2024, the Company completed and closed on the Rights Offering and issued a total of 5,306,105 shares of common stock for $3.7 million. Based on the number of shares of common stock actually sold upon exercise of the rights to third party investors, there were no excess shares of Series C Preferred Stock purchased by Lancer Capital under the equity advance that the Company was required to redeem, and Lancer Capital purchased an additional approximately 6,286 Series C Preferred Stock for $6.3 million under the backstop commitment. In total, the Company received $35.0 million in aggregate gross proceeds related to the Rights Offering and Concurrent Private Placement and incurred $1.8 million in dealer manager fees and other related costs which have been capitalized into Additional paid in capital ("APIC"). INNOVATE expects to use the net proceeds from the Rights Offering for general corporate purposes, including debt service and for working capital. In addition, as a result of the closing of the Rights Offering and Concurrent Private Placement, a mandatory prepayment was required on the CGIC Unsecured Note, and consequently, on April 26, 2024, INNOVATE redeemed $4.1 million of the CGIC Unsecured Note.

Current wording

As the Rights Offering had not yet settled by March 28, 2024, in accordance with the Investment Agreement, Lancer Capital purchased $25.0 million of Series C Preferred Stock, referred to as the "equity advance." On April 24, 2024, the Company completed and closed on the Rights Offering and issued a total of 530,611 shares of common stock (5,306,105 shares of common stock on a pre Reverse Stock Split basis) for $3.7 million. Based on the number of shares of common stock actually sold upon exercise of the rights to third party investors, there were no excess shares of Series C Preferred Stock purchased by Lancer Capital under the equity advance that the Company was required to redeem, and Lancer Capital purchased an additional approximately 6,286 Series C Preferred Stock for $6.3 million under the backstop commitment. In total, the Company received $35.0 million in aggregate gross proceeds related to the Rights Offering and Concurrent Private Placement and incurred $1.8 million in dealer manager fees and other related costs which have been capitalized into Additional paid in capital ("APIC"). INNOVATE has been utilizing and expects to continue to use the net proceeds from the Rights Offering and Concurrent Private Placement for general corporate purposes, including debt service and working capital. In addition, as a result of the closing of the Rights Offering and Concurrent Private Placement, a mandatory prepayment was required on the CGIC Unsecured Note, and consequently, on April 26, 2024, INNOVATE redeemed $4.1 million of the CGIC Unsecured Note.

Previous wording

Under the rules of the NYSE, because the shares purchased by Lancer Capital were greater than 20% of the Company's common stock outstanding before the issuance of the Series C Preferred Stock, those shares of Series C Preferred Stock were not allowed to be converted until stockholder approval of such issuance was obtained. On June 18, 2024, the Company held its annual shareholder meeting where Company's shareholder's approved the conversion of the Series C Preferred stock into common stock. As a result, approximately 31,286 Series C Preferred Stock, held by Lancer Capital, were converted into 44,693,895 of INNOVATE's common stock. See Note 15. Equity and Temporary Equity for additional information.

Current wording

Under the rules of the NYSE, because the shares purchased by Lancer Capital were greater than 20% of the Company's common stock outstanding before the issuance of the Series C Preferred Stock, those shares of Series C Preferred Stock were not allowed to be converted until stockholder approval of such issuance was obtained. On June 18, 2024, the Company held its annual shareholder meeting where Company's shareholder's approved the conversion of the Series C Preferred Stock into common stock. As a result, approximately 31,286 shares of Series C Preferred Stock, which were held by Lancer Capital, were converted into 4,469,390 shares of common stock (44,693,895 shares of common stock on a pre Reverse Stock Split basis).

Previous wording

INNOVATE expects to use the net proceeds from the Rights Offering for general corporate purposes, including debt service and for working capital. As a result of the closing of the Rights Offering and Concurrent Private Placement, a mandatory prepayment was required on the CGIC Unsecured Note, in the amount of the greater of $3.0 million or 12.5% of the net proceeds. On April 26, 2024, INNOVATE redeemed $4.1 million of the CGIC Unsecured Note.

Current wording

INNOVATE has used and expects to continue to use the net proceeds from the Rights Offering and Concurrent Private Placement for general corporate purposes, including debt service and for working capital. As a result of the closing of the Rights Offering and Concurrent Private Placement, a mandatory prepayment was required on the CGIC Unsecured Note, in the amount of the greater of $3.0 million or 12.5% of the net proceeds. On April 26, 2024, INNOVATE redeemed $4.1 million of the CGIC Unsecured Note.

Previous wording

On May 6, 2024, the Company terminated its Tax Benefits Preservation Plan entered into on April 1, 2023 (the “2023 Preservation Plan”) because the Company’s Board of Directors determined that the 2023 Preservation Plan was no longer necessary or desirable for the preservation of the Company’s ability to use its tax net operating losses and other certain tax assets. In connection with the termination of the 2023 Preservation Plan, the Company took routine actions to deregister the related preferred stock purchase rights under the Securities Exchange Act of 1934, and to delist the preferred stock purchase rights from the NYSE. These actions are administrative in nature and will have no effect on the Company’s common stock, which will continue to be listed on the NYSE.

Current wording

On May 6, 2024, the Company terminated its Tax Benefits Preservation Plan entered into on April 1, 2023 (the “2023 Preservation Plan”) because the Company’s Board of Directors determined that the 2023 Preservation Plan was no longer necessary or desirable for the preservation of the Company’s ability to use its tax net operating losses and other certain tax assets. In connection with the termination of the 2023 Preservation Plan, the Company has taken routine actions to deregister the related preferred stock purchase rights under the Securities Exchange Act of 1934, and to delist the preferred stock purchase rights from the NYSE. These actions were administrative in nature and had no effect on the Company’s common stock, which will continue to be listed on the NYSE.

Previous wording

On June 28, 2024, DBM and UMB entered into the Third Amendment to the UMB Credit Agreement. The amendment adds an incremental separate term loan of $25.0 million to the existing credit facility, with the same interest rate as the Revolving Line with UMB and the same maturity date as the initial $78.0 million UMB term loan.

Current wording

On June 28, 2024, DBM and UMB entered into the Third Amendment to the UMB Credit Agreement. The amendment adds an incremental separate term loan of $25.0 million to the existing credit facility, with the same interest rate as the Revolving Line with UMB and the same maturity date as the initial $76.3 million UMB term loan.

Previous wording

DBMG and Banker Steel, jointly and severally, had a subordinated 4.0% note payable to Banker Steel's former owner, in which Donald Banker's family trust has a 25% interest, and jointly and severally also had a subordinated 8.0% note payable to Donald Banker's family trust, the latter of which was fully paid off in December 2023. During the six months ended June 30, 2024, DBMG made $5.0 million in scheduled payments on the 4.0% note. The 4.0% note matured on March 31, 2024 and was fully redeemed on April 2, 2024.

Current wording

During the nine months ended September 30, 2024, DBMG made $5.0 million in scheduled payments on the 4.0% note that was payable to Banker Steel's former owner. The 4.0% note matured on March 31, 2024, and was fully redeemed on April 2, 2024.

Previous wording

R2 Technologies had various short-term notes with Lancer Capital, which expired on January 31, 2024, and effective January 31, 2024, a new 20% note with an aggregate original principal amount of $20.0 million was issued, which was comprised of all prior outstanding principal amounts and unpaid accrued interest of $2.6 million which was capitalized into the new principal balance.

Current wording

R2 Technologies had various short-term notes with Lancer Capital, which expired on January 31, 2024, and, effective January 31, 2024, a new 20% note with an aggregate original principal amount of $20.0 million was issued, which was comprised of all prior outstanding principal amounts and unpaid accrued interest of $2.6 million which was capitalized into the new principal balance. Interest on the note accrued at 20% per annum and was payable monthly in arrears, in cash or, if not paid in cash, accrued and unpaid interest was capitalized monthly into the principal balance. The 20% $20.0 million note also included an exit fee of 10.5% of the principal amount being repaid if repaid anytime from April 1, 2024 through April 30, 2024. The original maturity date of the 20% $20.0 million note was April 30, 2024, or within five business days of the date on which R2 Technologies receives an aggregate $20.0 million from the consummation of a debt or equity financing or has a change in control, as defined in the agreement, with an optional prepayment of the entire then-outstanding and unpaid principal and accrued interest upon five-days written notice to Lancer Capital. Effective May 17, 2024, the maturity date of the note was extended to December 31, 2024, and the exit fees were amended.

Previous wording

The original maturity date of the new $20.0 million note was April 30, 2024, or within five business days of the date on which R2 Technologies receives an aggregate $20.0 million from the consummation of a debt or equity financing or has a change in control, as defined in the agreement, with an optional prepayment of the entire then-outstanding and unpaid principal and accrued interest upon five-days written notice to Lancer Capital. The note has subsequently been further extended to December 31, 2024. The exit fee as of June 30, 2024, as amended, is equal to 10.88% of the principal amount being repaid and increases by 0.17% each month thereafter until maturity. Beginning July 31, 2024, if all outstanding amounts pursuant to the note are not prepaid in full, an additional exit fee of $1.0 million will be payable, increasing by $1.0 million each month until maturity. The Company shall pay the additional exit fee on the earliest of the maturity date, the date of the acceleration of the principal amount of the note for any reason or, if any portion of the note is prepaid at any time, the date of such prepayment of the note. Refer to Note 16. Related Parties in the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, which is incorporated herein by reference for additional information on R2 Technologies' related party debt transactions.

Current wording

The initial exit fee, as amended, as of September 30, 2024 was equal to 11.39% of the principal amount being repaid and continues to increase by 0.17% each month thereafter until maturity. Effective July 31, 2024, an additional exit fee of $1.0 million was incurred under the amendment, which increases by $1.0 million each month until the end of November 2024. If unpaid prior to maturity, the total exit fees payable will be $7.9 million. The exit fees are being amortized over the term of the note using the effective interest rate method and are included in interest expense. The exit fees are payable on the earliest of the maturity date, the date of the acceleration of the principal amount of the note for any reason or, if any portion of the note is prepaid at any time, the date of such prepayment of the note. As of September 30, 2024, total accrued exit fees were $5.6 million and were included within Accrued liabilities on the Condensed Consolidated Balance Sheet.

Previous wording

Subsequent to quarter end, in July 2024, we repurchased $2.9 million principal amount of our 2026 Convertible Notes at a market discount for $1.1 million, which is inclusive of accrued interest of $0.1 million.

Current wording

During the three and nine months ended September 30, 2024, we repurchased $2.9 million principal amount of its 2026 Convertible Notes at a market discount for $1.1 million, which is inclusive of accrued interest of $0.1 million, and recognized a $1.9 million gain on debt repurchase within Other income, net in the Condensed Consolidated Statement of Operations.

Previous wording

During the first quarter of 2024, MediBeacon issued to Pansend an aggregate $1.2 million of 12% convertible notes payable, increasing Pansend's total outstanding principal receivable to $10.9 million. During the second quarter of 2024, MediBeacon issued an aggregate $1.1 million of 12% convertible notes to Pansend, increasing the total outstanding principal due to Pansend to $12.0 million.

Current wording

During the nine months ended September 30, 2024, MediBeacon issued an aggregate $2.3 million of 12% convertible notes payable to Pansend, increasing the total outstanding principal due Pansend to $12.0 million.

Previous wording

As a result of these note issuances by MediBeacon during the three and six months ended June 30, 2024, Pansend recognized $1.1 million and $2.3 million, respectively, of equity method losses which were previously unrecognized because Pansend's carrying amount of its investment in MediBeacon had been previously reduced to zero.

Current wording

As a result of these note issuances by MediBeacon during the nine months ended September 30, 2024, Pansend recognized $2.3 million of equity method losses which were previously unrecognized because Pansend's carrying amount of its investment in MediBeacon had been previously reduced to zero. As of September 30, 2024, Pansend's carrying amount of its investment in MediBeacon remains at zero, inclusive of the $12.0 million in outstanding notes which have been offset against recognized losses, and has cumulative unrecognized equity method losses relating to MediBeacon of $10.9 million.

Previous wording

In the below section within this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we compare, pursuant to U.S. GAAP and SEC disclosure rules, the Company’s results of operations for the three and six months ended June 30, 2024 as compared to the three and six months ended June 30, 2023.

Current wording

In the below section within this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we compare, pursuant to U.S. GAAP and SEC disclosure rules, the Company’s results of operations for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023.

Previous wording

Revenue: Revenue for the three months ended June 30, 2024 decreased $55.7 million to $313.1 million from $368.8 million for the three months ended June 30, 2023. Revenue for the six months ended June 30, 2024 decreased $58.4 million to $628.3 million from $686.7 million for the six months ended June 30, 2023. The decreases were driven by our Infrastructure segment, which was partially offset by increases at our Life Sciences and Spectrum segments. The decrease at our Infrastructure segment was primarily driven by the timing and size of projects at Banker Steel and DBMG's commercial structural steel fabrication and erection business, both of which had increased activity in the comparable period on certain large commercial construction projects that are now at or near completion in the current period. This was partially offset by an increase at the industrial maintenance and repair business as a result of an increase in project work. The increase at our Life Sciences segment was primarily due to incremental unit sales from the launch of the Glacial fx system in the second half of 2023 and an increase in Glacial Rx units sold compared to the prior year period. The increase at our Spectrum segment was primarily driven by network launches and expanded coverage with existing customers.

Current wording

Revenue: Revenue for the three months ended September 30, 2024 decreased $133.1 million to $242.2 million from $375.3 million for the three months ended September 30, 2023. Revenue for the nine months ended September 30, 2024 decreased $191.5 million to $870.5 million from $1,062.0 million for the nine months ended September 30, 2023. The decreases were driven by our Infrastructure segment, which was partially offset by increases at our Life Sciences and Spectrum segments. The decrease at our Infrastructure segment was primarily driven by the timing and size of projects, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business, at Banker Steel and DBMG's commercial structural steel fabrication and erection business, both of which had increased activity in the comparable period on certain large commercial construction projects that are now at or near completion in the current period. This was partially offset by an increase at the industrial maintenance and repair business as a result of an increase in project work. The increase at our Life Sciences segment was attributable to R2 Technologies, primarily driven by an increase in sales in North America and worldwide of all R2's products, including Glacial fx systems, consumables, Glacial Spa systems and Glacial Rx systems. The increase at our Spectrum segment was primarily driven by network launches and expanded coverage with existing customers.

Previous wording

Income from operations: Income from operations for the three months ended June 30, 2024 increased $23.0 million to $28.8 million from $5.8 million for the three months ended June 30, 2023. The increase was due to a net increase in gross profit of $13.0 million, an increase in other operating income of $10.6 million and a decrease in depreciation and amortization of $1.2 million, which was partially offset by an increase in selling, general and administrative ("SG&A") expenses of $1.8 million. The increase in gross profit was primarily driven by our Infrastructure segment due to timing and size of projects that are now at or near completion in the current period, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business, and, to a lesser extent, our Spectrum and Life Sciences segments. The overall increase in other operating income was driven by our Infrastructure segment primarily as a result of a gain on lease modification and a gain on the sale of various properties in the current period. The overall decrease in depreciation and amortization was primarily driven by our Infrastructure segment, as certain customer contract intangibles became fully amortized in the second quarter of 2023. The overall increase in SG&A expenses was primarily driven by our Infrastructure segment which saw increases in compensation-related expenses and accounting-related costs, which were partially offset by a decrease in legal and consulting fees, and facility-related expenses at our Infrastructure segment and a decrease in SG&A expenses at our Non-Operating Corporate segment primarily driven by decreases in compensation-related expenses, including reductions in bonus and stock compensation expense due to headcount changes, and a decrease in legal fees.

Current wording

Income from operations: Income from operations for the three months ended September 30, 2024, decreased $4.8 million to $5.9 million from $10.7 million for the three months ended September 30, 2023. The decrease was primarily due to a net decrease in gross profit of $10.5 million, which was partially offset by a decrease in selling, general and administrative ("SG&A") expenses of $6.4 million. The decrease in gross profit was primarily driven by our Infrastructure segment due to timing and size of projects that are now at or near completion in the current period, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business, partially offset by increases at our Spectrum segment driven by network launches and expanded coverage with existing customers and at our Life Sciences segment due to an increase in systems and consumables sales at R2 Technologies. The overall decrease in SG&A expenses was primarily driven by an unrepeated accounts receivable write-off of $2.2 million related to a customer bankruptcy in the comparable period and reductions in compensation-related expenses at our Infrastructure segment, unrepeated severance and reductions in compensation-related expenses at both our Non-Operating Corporate and our Spectrum segments. These decreases in SG&A expenses were partially offset by an increase in SG&A expenses at our Life Sciences segment, resulting from increases in selling fees paid by R2 Technologies, increased professional fees and higher sales commissions.

Previous wording

Income from operations for the six months ended June 30, 2024 increased $29.8 million to $31.6 million from $1.8 million for the six months ended June 30, 2023. The increase was due to a net increase in gross profit of $18.0 million, an increase in other operating income of $8.3 million, a decrease in depreciation and amortization of $3.1 million and a decrease in SG&A expenses of $0.4 million. The increase in gross profit was primarily driven by our Infrastructure segment due to timing and size of projects that are now at or near completion in the current period, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business, and, to a lesser extent, our Spectrum and Life Sciences segments. The overall increase in other operating income was driven by our Infrastructure segment primarily as a result of a gain on lease modification and a gain on the sale of various properties in the current period, which was partially offset by a loss on disposal related to a plant closure in the first quarter of 2024. The overall decrease in depreciation and amortization was primarily driven by our Infrastructure segment, as certain customer contract intangibles became fully amortized in the second quarter of 2023. The overall decrease in SG&A was driven by unrepeated transaction expenses related to the sale of New Saxon's 19% investment in HMN in the comparable period, a decrease in compensation-related expenses at our Non-Operating Corporate and Spectrum segments, a decrease in consulting fees at our Non-Operating Corporate segment, a decrease in legal fees and facility-related expenses at our Infrastructure segment, and cost reduction initiatives at R2 Technologies, which was partially offset by an increase in compensation-related expenses at our Infrastructure segment.

Current wording

Income from operations for the nine months ended September 30, 2024, increased $25.0 million to $37.5 million from $12.5 million for the nine months ended September 30, 2023. The increase was due to a net increase in gross profit of $7.5 million, an increase in other operating income of $8.0 million, a decrease in SG&A expenses of $6.8 million and a decrease in depreciation and amortization of $2.7 million. The increase in gross profit was primarily driven by our Infrastructure segment, and, to a lesser extent, by our Spectrum and Life Sciences segments. The increase in gross profit at our Infrastructure segment was due to timing and size of projects that are now at or near completion in the current period, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business. The net increase in other operating income was driven by our Infrastructure segment primarily as a result of a gain on a lease modification and a gain on the sale of various properties in the current period, which was partially offset by a loss on disposal related to a plant closure in the first quarter of 2024. The overall decrease in SG&A was driven by unrepeated transaction expenses related to the sale of New Saxon's 19.0% investment in HMN in the comparable period, unrepeated severance and reductions in compensation-related expenses at both our Non-Operating Corporate and Spectrum segments, a decrease in consulting fees at our Non-Operating Corporate segment, a decrease in legal fees and facility-related expenses at our Infrastructure segment and decreases at our Life Sciences segment due to cost-reduction initiatives implemented in the second half of 2023 at R2 Technologies. The decreases in SG&A were partially offset by an increase in compensation-related expenses at our Infrastructure segment and, at our Life Sciences segment, increases in sales commissions and selling fees paid by R2 Technologies. The overall decrease in depreciation and amortization was primarily driven by our Infrastructure segment, as certain customer contract intangibles became fully amortized in the second quarter of 2023.

Previous wording

Interest expense: Interest expense for the three months ended June 30, 2024 increased $0.2 million to $16.5 million from $16.3 million for the three months ended June 30, 2023. Interest expense for the six months ended June 30, 2024, increased $1.8 million to $33.7 million from $31.9 million for the six months ended June 30, 2023. The increases were primarily attributable to higher outstanding principal balances at our Non-Operating Corporate and Life Sciences segments as a result of new debt issued subsequent to the comparable period. This was partially offset by our Infrastructure segment due to a net decrease in outstanding principal balances.

Current wording

Interest expense: Interest expense for the three months ended September 30, 2024, increased $4.1 million to $21.2 million from $17.1 million for the three months ended September 30, 2023. The increase was primarily attributable to increases in exit fees and a higher outstanding principal balance at our Life Sciences segment as a result of new debt issued and capitalization of unpaid interest into principal balances subsequent to the comparable period, and, to a lesser extent, an increase at our Non-Operating Corporate segment, as well as an increase at our Spectrum segment due to additional exit fees incurred from a refinancing subsequent to the comparable period. This was partially offset by our Infrastructure segment due to a net decrease in outstanding principal balances.

Previous wording

Loss from equity investees: Loss from equity investees for the three months ended June 30, 2024 increased $0.8 million to $1.1 million from $0.3 million for the three months ended June 30, 2023. The increase in loss was due to an increase in losses from MediBeacon as a result of additional convertible note investments in MediBeacon by Pansend during the three months ended June 30, 2024, which increased Pansend's basis in MediBeacon by $1.1 million and Pansend recognized $1.1 million of equity method losses which were previously unrecognized. Pansend made no convertible note investments during the comparable period. The increase in loss from equity investees was partially offset by decrease in loss as a result of the partial sale of Triple Ring subsequent to the comparable period, which resulted in our investment in Triple Ring no longer being accounted for under the equity method of accounting. Thus, no equity method losses were recognized in the current period.

Current wording

Loss from equity investees: Loss from equity investees for the three months ended September 30, 2024, decreased $1.5 million to zero from a loss of $1.5 million for the three months ended September 30, 2023. The decrease in loss from equity investees was primarily due to a decrease in losses recognized from MediBeacon, as Pansend had no basis in MediBeacon against which to recognize any losses, and Pansend's carrying amount of its MediBeacon investment remained at zero. During the comparable period, Pansend made a $1.0 million convertible note investment in MediBeacon, allowing Pansend to recognize previously unrecognized unrealized equity method losses due to an increase in basis in the investment. Also contributing to the decrease in loss from equity investees was the partial sale of Triple Ring which was completed subsequent to the comparable period, and resulted in Pansend's investment in Triple Ring no longer being accounted for under the equity method of accounting. Thus, no equity method losses were recognized in the current period.

Previous wording

Loss from equity investees for the six months ended June 30, 2024 decreased $2.0 million to $2.3 million from $4.3 million for the six months ended June 30, 2023. The decrease in loss was primarily due to a reduction in losses from MediBeacon, primarily due to an unrepeated equity transaction with Huadong in the comparable period, which resulted in a $3.8 million increase in Pansend's basis in MediBeacon and a corresponding $3.8 million of additional equity method losses that were previously unrecognized. However, during the six months ended June 30, 2024, as a result of additional convertible note investments in MediBeacon by Pansend, Pansend's basis in MediBeacon increased by $2.3 million and Pansend recognized $2.3 million of equity method losses which were previously unrecognized. As of both June 30, 2024 and 2023, Pansend's net carrying amount of its investment in MediBeacon was zero, and Pansend had unrecognized losses from this investment. Additionally contributing to the decrease in equity loss was our previous investment in HMN, which was sold on March 6, 2023 and had losses for the approximately two months of ownership in 2023. Also contributing to the decrease in loss from equity investees was the partial sale of Triple Ring subsequent to the comparable period, which resulted in our investment in Triple Ring no longer being accounted for under the equity method of accounting. Thus, no equity method losses were recognized in the current period. Refer to Note 6. Investments of the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information on our equity investments.

Current wording

Loss from equity investees for the nine months ended September 30, 2024, decreased $3.5 million to $2.3 million from $5.8 million for the nine months ended September 30, 2023. The decrease in loss was due to a decrease in losses recognized from MediBeacon, Triple Ring and HMN. During the nine months ended September 30, 2024, as a result of additional convertible note investments in MediBeacon by Pansend, Pansend's basis in MediBeacon increased by $2.3 million and Pansend recognized $2.3 million of equity method losses that were previously unrecognized, whereas during the nine months ended September 30, 2023, as a result of an equity transaction with Huadong, Pansend's basis in MediBeacon had increased by $3.8 million and Pansend had recognized $3.8 million of equity method losses that were previously unrecognized, in addition to other equity method losses recognized for the period. As of both September 30, 2024 and 2023, Pansend's net carrying amount of its investment in MediBeacon was zero, and Pansend had unrecognized losses from this investment. The partial sale of Triple Ring was completed subsequent to the comparable period and resulted in Pansend's investment in Triple Ring no longer being accounted for under the equity method of accounting. Our previous investment in HMN was sold on March 6, 2023 and had losses for the approximately two months of ownership in 2023. Thus, no equity method losses from Triple Ring or HMN were recognized in the current period. Refer to Note 6. Investments of the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information on our equity investments.

Previous wording

Other income (expense), net: Other (expense) income, net for the six months ended June 30, 2024 decreased $17.8 million to an expense of $1.0 million from income of $16.8 million for the six months ended June 30, 2023. The decrease was primarily driven by the unrepeated gain on the sale of the equity investment in HMN of $12.2 million in the comparable period, an unrepeated $3.8 million equity investment step-up gain from an increase in Pansend's basis as a result of MediBeacon issuing $7.5 million of its preferred stock to Huadong in the comparable period as well as a $2.2 million loss on debt extinguishment at R2 Technologies in the current period. The decrease was partially offset by additional interest income earned at our Life Sciences segment as a result of additional investments in MediBeacon subsequent to the comparable period.

Current wording

Other income, net for the nine months ended September 30, 2024, decreased $16.0 million to $1.2 million from $17.2 million for the nine months ended September 30, 2023. The decrease was primarily driven by the unrepeated gain on the sale of the equity investment in HMN of $12.2 million in the comparable period, an unrepeated $3.8 million equity investment step-up gain from an increase in Pansend's basis as a result of MediBeacon issuing $7.5 million of its preferred stock to Huadong in the comparable period, a $2.2 million loss on debt extinguishment at R2 Technologies in the current period and an increase in foreign currency translation losses at our Infrastructure segment. The decrease was partially offset by a $1.9 million gain on debt repurchase at our Non-Operating Corporate segment related to the partial repurchase of the 2026 Convertible Note, an increase in interest income earned at our Life Sciences segment resulting from an increase in Pansend's convertible note receivable balance from MediBeacon subsequent to the comparable period, and our Non-Operating Corporate segment which earned additional interest income on its money market accounts due to an increase in outstanding deposited balances over the comparable period.

Previous wording

Income tax benefit (expense): Income tax expense for the three months ended June 30, 2024 decreased $3.7 million to a benefit of $2.5 million from an expense of $1.2 million for the three months ended June 30, 2023. Income tax expense for the six months ended June 30, 2024 decreased $1.3 million to $0.8 million from an expense of $2.1 million for the six months ended June 30, 2023. The decreases were primarily driven by the tax expense of INNOVATE Corp's U.S. consolidated group utilizing its remaining unlimited NOLs in 2024 and due to the Tax Cut and Jobs Act's 80 percent limitation on net operating losses incurred after 2017, resulting in the annual effective tax rate for the current period being applied to the U.S. consolidated group's 2024 year-to-date income as calculated under ASC 740. The annual effective tax rate calculated for the comparable period interim tax provision included an unrepeated $1.1 million tax benefit, consisting of a current tax expense of $4.4 million related to a foreign tax payment and a deferred tax benefit of $5.5 million related to the reversal of the deferred tax liability associated with the $11.3 million put option, both of which were related to the sale of New Saxon's 19% investment in HMN on March 6, 2023.

Current wording

Income tax expense: Income tax expense for the three months ended September 30, 2024, increased $2.0 million to $3.1 million from $1.1 million for the three months ended September 30, 2023. Income tax expense for the nine months ended September 30, 2024, increased $0.7 million to $3.9 million from $3.2 million for the nine months ended September 30, 2023. The increases were primarily driven by the tax expense of INNOVATE's U.S. consolidated group utilizing its remaining unlimited NOLs in 2024 and due to the Tax Cut and Jobs Act's 80% limitation on net operating losses incurred after 2017, resulting in the annual effective tax rate for the current period being applied to the U.S. consolidated group's 2024 year-to-date income as calculated under ASC 740. The annual effective tax rate calculated for the comparable period interim tax provision included an unrepeated $1.1 million tax benefit, consisting of a current tax expense of $4.4 million related to a foreign tax payment and a deferred tax benefit of $5.5 million related to the reversal of the deferred tax liability associated with the $11.3 million put option, both of which were related to the sale of New Saxon's 19.0% investment in HMN on March 6, 2023.

Previous wording

The Organization for Economic Cooperation and Development ("OECD") has announced an Inclusive Framework on Base Erosion and Profit Shifting including a Pillar Two Model to provide for a 15% global minimum tax on the earnings of multinational corporations with consolidated revenue over €750 million. Many jurisdictions have enacted Pillar Two legislation that will start to become effective in 2024. The OECD, and its member countries, continue to release new guidance and legislation on Pillar Two. Based on current enacted laws, Pillar Two is not expected to materially impact our effective tax rate or cash flows in the next year. We will continue to evaluate the impact on our financial position as new legislation or guidance is introduced which could change our current assessment.

Current wording

The Organization for Economic Cooperation and Development ("OECD") has announced an Inclusive Framework on Base Erosion and Profit Shifting including a Pillar Two Model to provide for a 15% global minimum tax on the earnings of multinational corporations with consolidated revenue over €750 million. Many jurisdictions have enacted Pillar Two legislation that starts to become effective in 2024. The OECD, and its member countries, continue to release new guidance and legislation on Pillar Two. Based on current enacted laws, Pillar Two is not expected to materially impact our effective tax rate or cash flows in the next year. We will continue to evaluate the impact on our financial position as new legislation or guidance is introduced which could change our current assessment.

Previous wording

Revenue: Revenue for the three months ended June 30, 2024 decreased $57.2 million to $305.2 million from $362.4 million for the three months ended June 30, 2023. Revenue for the six months ended June 30, 2024 decreased $61.0 million to $613.1 million from $674.1 million for the six months ended June 30, 2023. The decreases were primarily driven by the timing and size of projects at Banker Steel and DBMG's commercial structural steel fabrication and erection business, both of which had increased activity in the comparable period on certain large commercial construction projects that are now at or near completion in the current period. This was partially offset by an increase at the industrial maintenance and repair business as a result of an increase in project work.

Current wording

Revenue: Revenue for the three months ended September 30, 2024, decreased $136.5 million to $232.8 million from $369.3 million for the three months ended September 30, 2023. Revenue for the nine months ended September 30, 2024, decreased $197.5 million to $845.9 million from $1,043.4 million for the nine months ended September 30, 2023. The decreases were primarily driven by the timing and size of projects, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business, at Banker Steel and DBMG's commercial structural steel fabrication and erection business, both of which had increased activity in the comparable period on certain large commercial construction projects that are now at or near completion in the current period. This was partially offset by an increase at the industrial maintenance and repair business as a result of an increase in project work.

Previous wording

Cost of revenue: Cost of revenue for the three months ended June 30, 2024 decreased $69.3 million to $243.5 million from $312.8 million for the three months ended June 30, 2023. Cost of revenue for the six months ended June 30, 2024 decreased $77.1 million to $506.6 million from $583.7 million for the six months ended June 30, 2023. The decreases were primarily driven by the decrease in revenues from the timing of project activity on certain large commercial construction projects and decreases in costs as they wind down and near completion in the current period at Banker Steel and DBMG's commercial structural steel fabrication and erection business, which was partially offset by an increase in costs associated with the industrial maintenance and repair business as a result of an increase in project work.

Current wording

Cost of revenue: Cost of revenue for the three months ended September 30, 2024, decreased $124.0 million to $189.1 million from $313.1 million for the three months ended September 30, 2023. Cost of revenue for the nine months ended September 30, 2024, decreased $201.1 million to $695.7 million from $896.8 million for the nine months ended September 30, 2023. The decreases were primarily driven by the decrease in revenues at Banker Steel and DBMG's commercial structural steel fabrication and erection business from the timing of project activity on certain large commercial construction projects and decreases in costs as they wind down and near completion in the current period, which was partially offset by an increase in costs associated with the industrial maintenance and repair business as a result of an increase in project work.

Previous wording

Depreciation and amortization: Depreciation and amortization for the three months ended June 30, 2024 decreased $1.2 million to $2.9 million from $4.1 million for the three months ended June 30, 2023. Depreciation and amortization for the six months ended June 30, 2024 decreased $3.1 million to $5.9 million from $9.0 million for the six months ended June 30, 2023. The decreases were primarily driven by Banker Steel, as certain customer contract intangibles became fully amortized in the second quarter of 2023.

Current wording

Depreciation and amortization: Depreciation and amortization for the three months ended September 30, 2024, increased $0.4 million to $3.0 million from $2.6 million for the three months ended September 30, 2023. Depreciation and amortization for the nine months ended September 30, 2024 decreased $2.7 million to $8.9 million from $11.6 million for the nine months ended September 30, 2023. The decrease for the nine months ended September 30, 2024 as compared to the comparable period was primarily driven by Banker Steel, as certain customer contract intangibles became fully amortized in the second quarter of 2023.

Previous wording

Other operating (income) loss: Other operating (income) loss for the three months ended June 30, 2024 increased $10.6 million to income of $10.5 million from a loss of $0.1 million for the three months ended June 30, 2023. Other operating income in three months ended June 30, 2024 related to a gain on lease modification and a gain on the sale of various properties in the current period.

Current wording

Other operating loss (income): Other operating loss (income) was a loss of $0.1 million for the three months ended September 30, 2024, which decreased $0.3 million from income of $0.2 million for the three months ended September 30, 2023. Other operating (income) loss for the nine months ended September 30, 2024, increased $8.6 million to income of $8.8 million from $0.2 million for the nine months ended September 30, 2023. Other operating income for the nine months ended September 30, 2024, related to a gain on a lease modification and a gain on the sale of various properties in the current period, which was partially offset by a loss related to a plant closure in the first quarter of 2024.

Previous wording

Cost of revenue: Cost of revenue for the three months ended June 30, 2024 increased $0.7 million to $1.1 million from $0.4 million for the three months ended June 30, 2023. Cost of revenue for the six months ended June 30, 2024 increased $0.8 million to $1.7 million from $0.9 million for the six months ended June 30, 2023. The increases in cost of revenue were attributable to R2 Technologies, primarily driven by the increases in revenue and changes in product mix.

Current wording

Cost of revenue: Cost of revenue for the three months ended September 30, 2024 increased $1.5 million to $2.0 million from $0.5 million for the three months ended September 30, 2023. Cost of revenue for the nine months ended September 30, 2024 increased $2.3 million to $3.7 million from $1.4 million for the nine months ended September 30, 2023. The increases in cost of revenue were attributable to R2 Technologies, primarily driven by the increases in revenue from the additional system sales noted above, changes in product mix sold as the Glacial fx and Glacial Spa systems have a lower production cost per system compared to the Glacial Rx, and, to a lesser extent, increases in royalty expenses, warranty expenses and freight costs driven by the additional systems sold.

Previous wording

Selling, general and administrative expense for the six months ended June 30, 2024 decreased $0.4 million to $8.0 million from $8.4 million for the six months ended June 30, 2023. The decrease was primarily driven by decreases in R2 Technologies general and administrative expenses as a result of continued cost reduction initiatives, which went into effect the second half of 2023, partially offset by increases in sales commissions at R2 Technologies due to an increase in system sales.

Current wording

Selling, general and administrative expense for the nine months ended September 30, 2024 increased $0.5 million to $12.2 million from $11.7 million for the nine months ended September 30, 2023. The increase was primarily driven by increases in sales commissions at R2 Technologies due to an increase in system sales, an increase in selling fees paid by R2 Technologies, as well as an increase in professional fees, and an increase in research and development costs at Genovel. This was partially offset by other decreases in R2 Technologies general and administrative expenses including compensation-related expenses, travel and entertainment, and advertising and marketing expenses, as a result of continued cost reduction initiatives, which went into effect the second half of 2023.

Previous wording

Selling, general and administrative: Selling, general and administrative expense for the three months ended June 30, 2024 decreased $0.2 million to $1.8 million from $2.0 million for the three months ended June 30, 2023. Selling, general and administrative expense for the six months ended June 30, 2024 decreased $0.6 million to $3.7 million from $4.3 million for the six months ended June 30, 2023. The decreases were primarily driven by a decrease in salaries and benefits expense as a result of a reduction in headcount.

Current wording

Selling, general and administrative: Selling, general and administrative expense for the three months ended September 30, 2024, decreased $0.9 million to $1.9 million from $2.8 million for the three months ended September 30, 2023. Selling, general and administrative expense for the nine months ended September 30, 2024, decreased $1.5 million to $5.6 million from $7.1 million for the nine months ended September 30, 2023. The decreases were primarily driven by unrepeated severance in the comparable period and a decrease in salaries and benefits expense as a result of a reduction in headcount.

Previous wording

Other operating loss (income): Other operating loss (income) for the six months ended June 30, 2024 decreased $0.4 million to a loss of $0.1 million from income of $0.3 million for the six months ended June 30, 2023. Other income for the six months ended June 30, 2023 was comprised of reimbursements from the Federal Communications Commission (the "FCC") for certain station modification costs.

Current wording

Other operating loss for the nine months ended September 30, 2024, increased $0.4 million to $0.5 million from $0.1 million for the nine months ended September 30, 2023. Other operating loss for the nine months ended September 30, 2024, was primarily comprised of lease termination settlement costs whereas the Other operating loss for the nine months ended September 30, 2023, was driven by asset impairment charges related to certain redundant equipment and associated capitalized costs which were partially offset by reimbursements received from the Federal Communications Commission (the "FCC") for certain station modification costs.

Previous wording

Selling, general and administrative: Selling, general and administrative expenses for the three months ended June 30, 2024 decreased $1.0 million to $2.8 million from $3.8 million for the three months ended June 30, 2023, primarily driven by decreases in compensation-related expenses, including reductions in bonus and stock-based compensation expense due to headcount changes, and a decrease in legal fees.

Current wording

Selling, general and administrative: Selling, general and administrative expenses for the three months ended September 30, 2024, decreased $1.8 million to $3.0 million from $4.8 million for the three months ended September 30, 2023, primarily driven by unrepeated severance expense related to the Company's former Chief Operating Officer in the comparable period and a decrease in stock-based compensation expense from the acceleration of awards related to our former CEO in the comparable period.

Previous wording

Other operating (income) loss: Other operating (income) loss for the six months ended June 30, 2024 increased to a loss of $0.2 million from zero for the six months ended June 30, 2023, primarily driven by lease termination costs for two leases the Company exited in the current period.

Current wording

Other operating loss: Other operating loss for the nine months ended September 30, 2024, increased to a loss of $0.2 million from zero for the nine months ended September 30, 2023, primarily driven by lease termination costs for two leases the Company exited in the current period.

Previous wording

Life Sciences: Loss from equity investees within our Life Sciences segment for the three months ended June 30, 2024 increased $0.8 million to $1.1 million from $0.3 million for the three months ended June 30, 2023. The increase in loss from equity investees was primarily due to an increase in losses from MediBeacon as a result of additional convertible note investments in MediBeacon by Pansend during the three months ended June 30, 2024, which increased Pansend's basis in MediBeacon by $1.1 million and Pansend recognized $1.1 million of equity method losses which were previously unrecognized. Pansend made no convertible note investments during the comparable period. The increase in loss from equity investees from MediBeacon was partially offset by a decrease in loss as a result of the partial sale of Triple Ring subsequent to the comparable period, which resulted in our investment in Triple Ring no longer being accounted for using the equity method of accounting and therefore no equity method losses for Triple Ring were recognized in the current period.

Current wording

Life Sciences: Loss from equity investees within our Life Sciences segment for the three months ended September 30, 2024, decreased $1.5 million to zero from a loss of $1.5 million for the three months ended September 30, 2023. The decrease in loss from equity investees was primarily due to a decrease in losses recognized from MediBeacon, as Pansend had no basis in MediBeacon against which to recognize any losses in the current period, and Pansend's carrying amount of its MediBeacon investment remained at zero. During the comparable period, Pansend made a $1.0 million convertible note investment in MediBeacon, allowing Pansend to recognize previously unrecognized equity method losses due to an increase in basis in the investment. Also contributing to the decrease in loss from equity investees was the partial sale of Triple Ring which was completed subsequent to the comparable period, and resulted in Pansend's investment in Triple Ring no longer being accounted for under the equity method of accounting. Thus, no equity method losses were recognized in the current period.

Previous wording

Loss from equity investees within our Life Sciences segment for the six months ended June 30, 2024 decreased $1.7 million to $2.3 million from $4.0 million for the six months ended June 30, 2023. The decrease in loss from equity investees was primarily due to a reduction in losses from MediBeacon, primarily due to an unrepeated equity transaction with Huadong in the comparable period, which resulted in a $3.8 million increase in Pansend's basis in MediBeacon and a corresponding $3.8 million of additional equity method losses that were previously unrecognized, whereas, during the six months ended June 30, 2024, as a result of additional convertible note investments in MediBeacon by Pansend, Pansend's basis in MediBeacon increased by $2.3 million and Pansend recognized $2.3 million of equity method losses which were previously unrecognized. As of both June 30, 2024 and 2023, Pansend's net carrying amount of its investment in MediBeacon was zero and Pansend had unrecognized losses from this investment. Also contributing to the decrease in loss from equity investees was the partial sale of Triple Ring subsequent to the comparable period, which resulted in our investment in Triple Ring no longer being accounted for under the equity method of accounting and therefore no equity method losses for Triple Ring were recognized in the current period.

Current wording

Loss from equity investees within our Life Sciences segment for the nine months ended September 30, 2024, decreased $3.5 million to $2.3 million from $5.8 million for the nine months ended September 30, 2023. The decrease in loss was primarily due to a decrease in losses recognized from MediBeacon and Triple Ring. During the nine months ended September 30, 2024, as a result of additional convertible note investments in MediBeacon by Pansend, Pansend's basis in MediBeacon increased by $2.3 million and Pansend recognized $2.3 million of equity method losses that were previously unrecognized, whereas during the nine months ended September 30, 2023, as a result of an equity transaction with Huadong, Pansend's basis in MediBeacon had increased by $3.8 million and Pansend had recognized $3.8 million of equity method losses that were previously unrecognized, in addition to other equity method losses recognized for the period. As of both September 30, 2024 and 2023, Pansend's net carrying amount of its investment in MediBeacon was zero, and Pansend had unrecognized losses from this investment. The partial sale of Triple Ring was completed subsequent to the comparable period and resulted in Pansend's investment in Triple Ring no longer being accounted for under the equity method of accounting. Thus, no equity method losses were recognized from Triple Ring in the current period.

Previous wording

Other: Loss from equity investees within our Other segment for the six months ended June 30, 2024 decreased $0.3 million to zero from a loss of $0.3 million for the six months ended June 30, 2023. Loss from equity investees for the six months ended June 30, 2023 was driven by our previous investment in HMN, which was sold on March 6, 2023 and had losses for the approximately two months of ownership in 2023.

Current wording

Other: Loss from equity investees within our Other segment for the nine months ended September 30, 2024, decreased $0.3 million to zero from a loss of $0.3 million for the nine months ended September 30, 2023. Loss from equity investees for the nine months ended September 30, 2023 was driven by our previous investment in HMN, which was sold on March 6, 2023, and had losses for the approximately two months of ownership in 2023.

Previous wording

The calculation of Adjusted EBITDA, as defined by us, consists of Net income (loss) attributable to INNOVATE Corp., excluding: discontinued operations, if applicable; depreciation and amortization; other operating (income) loss, which is inclusive of (gain) loss on sale or disposal of assets, lease termination costs, (gains) losses on lease modifications, asset impairment expense and FCC reimbursements; interest expense; other (income) expense, net; income tax expense (benefit); non-controlling interest; share-based compensation expense; restructuring and exit costs; and acquisition and disposition costs.

Current wording

The calculation of Adjusted EBITDA, as defined by us, consists of Net income (loss) attributable to INNOVATE Corp., excluding: discontinued operations, if applicable; depreciation and amortization; other operating (income) loss, which is inclusive of (gain) loss on sale or disposal of assets, lease termination costs, (gains) losses on lease modifications, asset impairment expense and FCC reimbursements; interest expense; other (income) expense, net; income tax expense (benefit); non-controlling interest; share-based compensation expense; legacy accounts receivable write-offs; restructuring and exit costs; and acquisition and disposition costs.

Previous wording

Spectrum: Net loss from our Spectrum segment for the three months ended June 30, 2024 decreased $0.3 million to $5.0 million from $5.3 million for the three months ended June 30, 2023. Adjusted EBITDA from our Spectrum segment for the three months ended June 30, 2024 increased $0.7 million to $1.5 million from $0.8 million for the three months ended June 30, 2023. The increase in Adjusted EBITDA was primarily due to an increase in revenue driven by network launches and expanded coverage with existing customers, which was partially offset by the termination of a number of smaller networks and individual markets subsequent to the comparable period.

Current wording

Spectrum: Net loss from our Spectrum segment for the three months ended September 30, 2024, decreased $0.9 million to $5.6 million from $6.5 million for the three months ended September 30, 2023. Adjusted EBITDA from our Spectrum segment for the three months ended September 30, 2024, increased $2.0 million to $1.7 million from an Adjusted EBITDA loss of $0.3 million for the three months ended September 30, 2023. The increase in Adjusted EBITDA was primarily due to an increase in revenue driven by network launches and expanded coverage with existing customers and unrepeated severance in the comparable period, which was partially offset by the termination of a number of smaller networks and individual markets in the comparable period.

Previous wording

The tables below provide reconciliations of net income (loss) attributable to INNOVATE Corp to Adjusted EBITDA for the six months ended June 30, 2024 and 2023:

Current wording

The tables below provide reconciliations of net income (loss) attributable to INNOVATE Corp to Adjusted EBITDA for the nine months ended September 30, 2024 and 2023:

Previous wording

Infrastructure: Net income from our Infrastructure segment for the six months ended June 30, 2024 increased $16.4 million to $25.4 million from $9.0 million for the six months ended June 30, 2023. Adjusted EBITDA from our Infrastructure segment for the six months ended June 30, 2024 increased $11.0 million to $50.8 million from $39.8 million for the six months ended June 30, 2023. The increase in Adjusted EBITDA was primarily driven by higher margins on certain large commercial construction projects that are now at or near completion in the current period at DBMG's commercial structural steel fabrication and erection and the industrial maintenance and repair businesses, which was partially offset by a decrease in margins at Banker Steel due to timing of completion of a large commercial construction project and an increase in recurring SG&A, primarily as a result of compensation-related expenses.

Current wording

Infrastructure: Net income from our Infrastructure segment for the nine months ended September 30, 2024, increased $11.8 million to $31.6 million from $19.8 million for the nine months ended September 30, 2023. Adjusted EBITDA from our Infrastructure segment for the nine months ended September 30, 2024, increased $1.1 million to $71.7 million from $70.6 million for the nine months ended September 30, 2023. The increase in Adjusted EBITDA was primarily driven by higher margins on certain large commercial construction projects that are now at or near completion in the current period at DBMG's commercial structural steel fabrication and erection, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business, despite the decrease in revenue, and increases in revenue and margins at the industrial maintenance and repair businesses, which was partially offset by a decrease in revenue at Banker Steel, despite an increase in margins, due to timing of completion of certain large commercial construction projects, an increase in recurring SG&A, primarily as a result of compensation-related expenses, and decreased margins at the construction modeling and detailing business.