INNOVATE Corp.

Previous wording

For additional information on our business, refer to Note 1. Organization and Business to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Current wording

For additional information on our business, refer to Note 1. Organization and Business included in the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Previous wording

Examples of other items that may cause our results or demand for our services to fluctuate materially from quarter to quarter include: weather or project site conditions; financial condition of our customers and their access to capital; margins of projects performed during any particular period; rising interest rates and inflation; and economic, political and market conditions on a regional, national or global scale.

Current wording

Examples of other items that may cause our results or demand for our services to fluctuate materially from quarter to quarter include: weather or project site conditions; the spending patterns, including seasonal trends, and financial condition of our customers and their access to capital; our profit margins on projects performed during any particular period; rising interest rates and inflation; and regulatory, economic, political and market conditions on a regional, national or global scale.

Previous wording

We continually evaluate strategic and business alternatives within our operating segments, which may include the following: operating, growing or acquiring additional assets or businesses related to current or historical operations; or winding down or selling our existing operations. In the longer-term, we may evaluate opportunities to acquire assets or businesses unrelated to our current or historical operations. In the event we were to enter into a strategic transaction to sell any of our existing operations, our intention is to use available proceeds from such transaction to address our capital structure at our Non-Operating Corporate and Spectrum segments.

Current wording

We continually evaluate strategic and business alternatives within our operating segments, which may include the following: operating, growing or acquiring additional assets or businesses related to current or historical operations; or winding down or selling our existing operations. In the longer-term, we may evaluate opportunities to acquire assets or businesses unrelated to our current or historical operations. In the event we were to enter into a strategic transaction to sell any of our existing operations, our intention is to use available proceeds from such transaction to address our capital structure.

Previous 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.

Current wording

In 2025, 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

In addition to the Rights Offering and Concurrent Private Placement at the Non-Operating Corporate segment discussed above, during 2024 thus far, we have refinanced some of our debt and obtained new capital financing at the subsidiary level. This financing helped us provide needed capital for our operations and the operations of our subsidiaries.

Current wording

During 2025 thus far, we have refinanced some of our debt, including at the subsidiary level. This financing helped us provide needed capital for our operations and the operations of our subsidiaries.

Previous 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. Refer to Note 11. Debt Obligations of the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for additional information.

Current wording

R2 Technologies has a short-term note with Lancer Capital. The stated interest on the note, as amended, is 20% and is payable monthly in arrears, in cash or, if not paid in cash, accrued and unpaid interest is capitalized monthly into the principal balance. During the first quarter of 2025, with an effective date of December 31, 2024, the maturity date of the note was extended to August 1, 2025, and another additional exit fee of $1.0 million was incurred under the amendment, which continues to increase by $1.0 million each month until maturity. The base exit fee, as amended, and as of March 31, 2025, was equal to 12.41% of the principal amount being repaid and continues to increase by 0.17% each month until maturity. The total new exit fees associated with the notes have been recorded as an original issue discount of $8.7 million and are being amortized over the remaining life of the note, which is assumed to be the maturity date. A corresponding liability for the new exit fees of $8.7 million was recorded for total accrued exit fees amount of $16.5 million which are included within Accrued liabilities in the Condensed Consolidated Balance Sheet as of March 31, 2025. 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. In addition, under the recent amendment, a new $5.0 million default fee will be payable on August 1, 2025, in the event all obligations under the note, including principal, any accrued and unpaid interest, and exit fees, are not repaid in full prior to the August 1, 2025, maturity date. The $5.0 million default fee will only be recognized in the event of a default on August 1, 2025.

Previous wording

On May 6, 2024, we extended the maturity date of our Revolving Line of Credit with MSD from March 16, 2025 to May 16, 2025.

Current wording

On March 6, 2025, we extended the maturity date of our Revolving Line of Credit with MSD from May 16, 2025, to August 1, 2025, with all other terms substantially unchanged. Refer to Note 11. Debt Obligations included in the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for additional information on our Revolving Line of Credit with MSD.

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 nine months ended September 30, 2024, as compared to the three and nine months ended September 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 months ended March 31, 2025, as compared to the three months ended March 31, 2024.

Previous 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.

Current wording

Revenue: Revenue for the three months ended March 31, 2025, decreased $41.0 million to $274.2 million from $315.2 million for the three months ended March 31, 2024. The decrease was primarily driven by our Infrastructure segment, which was partially offset by an increase at our Life Sciences segment. The decrease at our Infrastructure segment was primarily driven by the timing and size of projects at Banker Steel and the industrial maintenance and repair business, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business in the comparable period, which also had increased activity in the prior year on certain large commercial construction projects that have since been completed or are nearing completion in the current period. This was partially offset by an increase at DBMG's commercial structural steel fabrication and erection business as a result of an increase in project work. The increase at our Life Sciences segment was attributable to R2 Technologies, driven by an increase in unit sales of both Glacial fx and Glacial Rx systems and an increase in consumable sales in North America, as well as an increase in Glacial Spa unit sales, consumable sales and Glacial fx unit sales outside North America.

Previous 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.

Current wording

Income from operations: Income from operations for the three months ended March 31, 2025, increased $0.6 million to $3.4 million from $2.8 million for the three months ended March 31, 2024. The improvement was due to a decrease in other operating loss of $2.0 million and a decrease in selling, general and administrative ("SG&A") expenses of $1.7 million, which was partially offset by a net decrease in gross profit of $3.1 million. The net decrease in other operating loss was primarily driven by an unrepeated loss related to a plant closure at our Infrastructure segment in the comparable period. The overall decrease in SG&A was primarily driven by decreases in professional and consulting fees and compensation-related and travel expenses at our Infrastructure segment, which was partially offset by an increase in computer and software related costs in the current period at our Infrastructure segment and an increase in.selling costs at R2 Technologies due to an increase in unit sales. Partially offsetting the above improvements was a net decrease in gross profit, which was primarily driven by our Infrastructure segment due to timing and size of projects that have since been completed or are nearing completion in the current period, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business in the comparable period, which was partially offset by an increase in gross profit at our Life Sciences segment primarily driven by R2 Technologies as a result of an increase Glacial unit sales and consumable sales over the comparable period.

Previous 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.

Current wording

Interest expense: Interest expense for the three months ended March 31, 2025, increased $3.0 million to $20.2 million from $17.2 million for the three months ended March 31, 2024. 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 the capitalization of unpaid interest into the principal balance subsequent to the comparable period, and, to a lesser extent our Spectrum segment. The increase in interest expense was partially offset by our Infrastructure and Non-Operating Corporate segments due to a net decrease in outstanding principal balances.

Previous 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.

Current wording

Loss from equity investees: Loss from equity investees for the three months ended March 31, 2025, increased $4.7 million to $5.9 million from $1.2 million for the three months ended March 31, 2024. The increase in loss was due to an increase in losses recognized from MediBeacon. During the three months ended March 31, 2025, as a result of the equity transactions that occurred upon FDA approval of MediBeacon's TGFR, Pansend's basis in MediBeacon increased by $5.9 million, consisting of a $4.4 million step-up gain and $1.5 million from the conversion of accrued interest on Pansend's convertible notes with MediBeacon, resulting in Pansend recognizing $5.9 million of equity method losses that were previously unrecognized. During the three months ended March 31, 2024, Pansend's basis in MediBeacon increased by $1.2 million due to the issuance of additional convertible note investments, resulting in Pansend recognizing $1.2 million of equity method losses that were previously unrecognized. As of both March 31, 2025 and 2024, Pansend's net carrying amount of its investment in MediBeacon was zero, and Pansend had unrecognized losses from this investment. Refer to Note 6. Investments included in the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for additional information on our equity investments.

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 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.

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 started 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

In the Company's Condensed Consolidated Financial Statements, other operating (income) loss includes: (i) (gain) loss on sale or disposal of assets; (ii) lease termination costs and (gains) losses on lease modifications; (iii) asset impairment expense; (iv) accretion of asset retirement obligations; and (v) FCC reimbursements. Each table summarizes the results of operations of our operating segments (in millions).

Current wording

In the Company's Condensed Consolidated Financial Statements, other operating (income) loss includes: (i) (gain) loss on sale or disposal of assets; (ii) lease termination costs and (gains) losses on lease modifications; (iii) asset impairment expense; (iv) accretion of asset retirement obligations; and (v) Federal Communications Commission (the "FCC") reimbursements, as applicable. Each table summarizes the results of operations of our operating segments (in millions).

Previous 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.

Current wording

Revenue: Revenue for the three months ended March 31, 2025, decreased $43.0 million to $264.9 million from $307.9 million for the three months ended March 31, 2024. The decrease was primarily driven by the timing and size of projects at Banker Steel and the industrial maintenance and repair business, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business in the comparable period, which also had increased activity in the prior year on certain large commercial construction projects that have since been completed or are nearing completion in the current period. This was partially offset by an increase at DBMG's commercial structural steel fabrication and erection business as a result of an increase in project work.

Previous 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.

Current wording

Cost of revenue: Cost of revenue for the three months ended March 31, 2025, decreased $39.6 million to $223.5 million from $263.1 million for the three months ended March 31, 2024. The decrease was primarily driven by the decrease in revenues at Banker Steel and the industrial maintenance and repair business from the timing of project activity on certain large commercial construction projects and decreases in costs as they wind down and near completion or were completed in the current period, which was partially offset by an increase in costs associated with DBMG's commercial structural steel fabrication and erection business as a result of an increase in project work.

Previous wording

Revenue: Revenue for the three months ended September 30, 2024 increased $2.4 million to $3.0 million from $0.6 million for the three months ended September 30, 2023. The increase in revenue was attributable to R2 Technologies, primarily due to an increase in Glacial fx system sales in North America, which launched during the comparable period, as well as from an increase in consumables sales both worldwide and in North America. In addition, the increase was partially driven by incremental Glacial Spa unit sales outside North America over the comparable period and from the launch of Glacial fx systems outside North America subsequent to the comparable period, as well as a slight increase in Glacial Rx systems sold in North America over the comparable period.

Current wording

Revenue: Revenue for the three months ended March 31, 2025, increased $2.1 million to $3.1 million from $1.0 million for the three months ended March 31, 2024. The increase in revenue was attributable to R2 Technologies, driven by an increase in unit sales of both Glacial fx and Glacial Rx systems and an increase in consumable sales in North America, as well as an increase in Glacial Spa unit sales, consumable sales and Glacial fx unit sales outside North America.

Previous 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.

Current wording

Cost of revenue: Cost of revenue for the three months ended March 31, 2025, increased $1.7 million to $2.3 million from $0.6 million for the three months ended March 31, 2024. The increase in cost of revenue was attributable to R2 Technologies, primarily driven by the increase in revenue from the additional system and consumables sales noted above, and, to a lesser extent, the related increases in warranty expenses, royalty expenses, and freight costs. The increase in cost of revenue was partially offset by 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.

Previous 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.

Current wording

Other operating loss: Other operating loss for the three months ended March 31, 2025, decreased $0.3 million to zero from $0.3 million for the three months ended March 31, 2024. Other operating loss in the comparable period related to lease termination costs for two leases the Company exited in the comparable period.

Previous 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.

Current wording

Life Sciences: Loss from equity investees within our Life Sciences segment for the three months ended March 31, 2025, increased $4.7 million to $5.9 million from $1.2 million for the three months ended March 31, 2024. The increase in loss was due to an increase in losses recognized from MediBeacon. During the three months ended March 31, 2025, as a result of the equity transactions that occurred upon FDA approval of MediBeacon's TGFR, Pansend's basis in MediBeacon increased by $5.9 million, consisting of a $4.4 million step-up gain and $1.5 million from the conversion of accrued interest on Pansend's convertible notes with MediBeacon, resulting in Pansend recognizing $5.9 million of equity method losses that were previously unrecognized. During the three months ended March 31, 2024, Pansend's basis in MediBeacon increased by $1.2 million due to the issuance of additional convertible notes, resulting in Pansend recognizing $1.2 million of equity method losses that were previously unrecognized. As of both March 31, 2025 and 2024, Pansend's net carrying amount of its investment in MediBeacon was zero, and Pansend had unrecognized losses from this investment.

Previous wording

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

Refer to Note 6. Investments included in the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for additional information on our equity investments.

Previous wording

Management believes that Adjusted EBITDA provides investors with meaningful information for gaining an understanding of our results as it is frequently used by the financial community to provide insight into an organization’s operating trends and facilitates comparisons between peer companies, since interest, taxes, depreciation, amortization and the other items listed in the definition of Adjusted EBITDA below can differ greatly between organizations as a result of differing capital structures and tax strategies. Adjusted EBITDA can also be a useful measure of a company’s ability to service debt. While management believes that non-U.S. GAAP measurements are useful supplemental information, such adjusted results are not intended to replace our U.S. GAAP financial results. Using Adjusted EBITDA as a performance measure has inherent limitations as an analytical tool as compared to net income (loss) or other U.S. GAAP financial measures, as this non-GAAP measure excludes certain items, including items that are recurring in nature, which may be meaningful to investors. As a result of the exclusions, Adjusted EBITDA should not be considered in isolation and does not purport to be an alternative to net income (loss) or other U.S. GAAP financial measures as a measure of our operating performance.

Current wording

Management believes that Adjusted EBITDA provides investors with meaningful information for gaining an understanding of our results as it is frequently used by the financial community to provide insight into an organization’s operating trends and facilitates comparisons between peer companies, since interest, taxes, depreciation, amortization and the other items listed in the definition of Adjusted EBITDA below can differ greatly between organizations as a result of differing capital structures and tax strategies. Adjusted EBITDA can also be a useful measure of a company’s ability to service debt. While management believes that non-U.S. GAAP measurements are useful supplemental information, such adjusted results are not intended to replace our U.S. GAAP financial results. Using Adjusted EBITDA as a performance measure has inherent limitations as an analytical tool as compared to net income (loss) or other U.S. GAAP financial measures, as this non-U.S. GAAP measure excludes certain items, including items that are recurring in nature, which may be meaningful to investors. As a result of the exclusions, Adjusted EBITDA should not be considered in isolation and does not purport to be an alternative to net income (loss) or other U.S. GAAP financial measures as a measure of our operating performance.

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; legacy accounts receivable write-offs; 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; and realignment and exit costs.

Previous 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.

Current wording

Infrastructure: Net income from our Infrastructure segment for the three months ended March 31, 2025, increased $0.2 million to $4.6 million from $4.4 million for the three months ended March 31, 2024. Adjusted EBITDA from our Infrastructure segment for the three months ended March 31, 2025, decreased $1.6 million to $16.7 million from $18.3 million for the three months ended March 31, 2024. The decrease in Adjusted EBITDA was primarily driven by a decrease in revenue at both Banker Steel and the industrial maintenance and repair businesses due to timing of certain large commercial construction projects that have since been completed or are nearing completion in the current period. The decrease was partially offset by an increase in gross margins at the industrial maintenance and repair business and an increase in gross profit at DBMG's commercial structural steel fabrication and erection business due to an increase in project work, as well as a decrease in recurring SG&A, primarily as a result of decreases in professional and consulting fees and compensation-related and travel expenses, partially offset by an increase in computer and software-related costs in the current period.

Previous wording

Life Sciences: Net loss from our Life Sciences segment for the three months ended September 30, 2024, increased $2.4 million to $6.0 million from $3.6 million for the three months ended September 30, 2023. Adjusted EBITDA loss from our Life Sciences segment for the three months ended September 30, 2024, decreased $1.3 million to $3.0 million from $4.3 million for the three months ended September 30, 2023. The decrease in Adjusted EBITDA loss was primarily due to a decrease in equity method losses recognized from MediBeacon and Triple Ring, as discussed in Loss from Equity Investees above. Additionally contributing to the decrease in Adjusted EBITDA loss was an increase in gross profit at R2 Technologies, 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 decrease in Adjusted EBITDA loss was partially offset by an increase in SG&A expenses at R2 Technologies, primarily as a result of an increase in selling fees.

Current wording

Life Sciences: Net loss from our Life Sciences segment for the three months ended March 31, 2025, increased $3.1 million to $7.6 million from $4.5 million for the three months ended March 31, 2024. Adjusted EBITDA loss from our Life Sciences segment for the three months ended March 31, 2025, increased $4.5 million to $8.7 million from $4.2 million for the three months ended March 31, 2024. The increase in Adjusted EBITDA loss was primarily due to an increase in equity method losses recognized from MediBeacon, as discussed in the Loss from Equity Investees section above, and an increase in selling costs at R2 Technologies due to the increase in unit sales. The increase in Adjusted EBITDA loss was partially offset by an increase in gross profit at R2 Technologies, driven by an increase in unit sales of both the Glacial fx and Glacial Rx systems and an increase in consumable sales in North America, as well as an increase in Glacial Spa unit sales, consumable sales and Glacial fx unit sales outside North America.

Previous wording

Non-Operating Corporate: Net loss from our Non-Operating Corporate segment for the three months ended September 30, 2024, increased $1.9 million to $9.6 million from $7.7 million for the three months ended September 30, 2023. Adjusted EBITDA loss from our Non-Operating Corporate segment for the three months ended September 30, 2024, decreased $1.3 million to $2.8 million from $4.1 million for the three months ended September 30, 2023. The decrease in Adjusted EBITDA loss was primarily driven by unrepeated severance expense related to the Company's former Chief Operating Officer in the comparable period.

Current wording

Non-Operating Corporate: Net loss from our Non-Operating Corporate segment for the three months ended March 31, 2025, increased $3.6 million to $16.1 million from $12.5 million for the three months ended March 31, 2024. Adjusted EBITDA loss from our Non-Operating Corporate segment for the three months ended March 31, 2025, decreased $0.7 million to $2.2 million from $2.9 million for the three months ended March 31, 2024. The decrease in Adjusted EBITDA loss was primarily driven by a decrease in legal fees due to legal matters settled subsequent to the comparable period.

Previous wording

Projects in backlog consist of awarded contracts, letters of intent, notices to proceed, change orders, and purchase orders obtained. Backlog increases as contract commitments are obtained, decreases as revenues are recognized and increases or decreases to reflect modifications in the work to be performed under the contracts. Backlog is converted to sales in future periods as work is performed or projects are completed. Backlog can be significantly affected by the receipt or loss of individual contracts.

Current wording

Backlog is our estimate of the U.S. dollar amount of future revenues we expect to realize as a result of performing work on projects in backlog. Projects in backlog consist of awarded contracts, letters of intent, notices to proceed, change orders, and purchase orders obtained. Backlog increases as contract commitments are obtained, decreases as revenues are recognized and increases or decreases to reflect modifications in the work to be performed under the contracts. Backlog is converted to sales in future periods as work is performed or projects are completed. Backlog can be significantly affected by the receipt or loss of individual contracts.

Previous wording

As of September 30, 2024, DBMG's backlog was $916.1 million, consisting of $823.7 million under contracts or purchase orders and $92.4 million under letters of intent or notices to proceed. Approximately $418.0 million, representing 45.6% of DBMG’s backlog as of September 30, 2024, was attributable to five contracts, letters of intent, notices to proceed or purchase orders. If one or more of these projects terminate or reduce their scope, DBMG’s backlog could decrease substantially. DBMG includes an additional $12.1 million in its backlog that is not included in the remaining unsatisfied performance obligations disclosed in Note 3. Revenue and Contracts in Process. This additional backlog includes commitments under master service agreements that are estimated amounts of work to be performed based on customer communications, historic performance and knowledge of our customers' intentions.

Current wording

As of March 31, 2025, DBMG's backlog was $1,369.9 million, consisting of $939.0 million under contracts or purchase orders and $430.9 million under letters of intent or notices to proceed. Approximately $714.6 million, representing 52.2% of DBMG’s backlog as of March 31, 2025, was attributable to five contracts, letters of intent, notices to proceed or purchase orders. If one or more of these projects terminate or reduce their scope, DBMG’s backlog could decrease substantially. DBMG includes an additional $12.1 million in its backlog that is not included in the remaining unsatisfied performance obligations disclosed in Note 3. Revenue and Contracts in Process. This additional backlog includes commitments under master service agreements that are estimated amounts of work to be performed based on customer communications, historic performance and knowledge of our customers' intentions.

Previous wording

Our Non-Operating Corporate segment consists of holding companies, and its liquidity needs are primarily for interest payments on its 2026 Senior Secured Notes, 2026 Convertible Notes, Revolving Line of Credit, CGIC Unsecured Note, and dividend payments on its Series A-3 and Series A-4 Preferred Stock and recurring operational expenses.

Current wording

Our Non-Operating Corporate segment's liquidity needs are primarily for interest payments on its 2026 Senior Secured Notes, 2026 Convertible Notes, Revolving Line of Credit, CGIC Unsecured Note, and dividend payments on its Series A-3 and Series A-4 Preferred Stock and recurring operational expenses.

Previous wording

On a consolidated basis, as of September 30, 2024, we had $51.0 million of cash and cash equivalents, excluding restricted cash, compared to $80.8 million as of December 31, 2023. On a stand-alone basis, as of September 30, 2024, our Non-Operating Corporate segment had cash and cash equivalents, excluding restricted cash, of $20.2 million compared to $2.5 million as of December 31, 2023.

Current wording

On a consolidated basis, as of March 31, 2025, we had $33.3 million of cash and cash equivalents, excluding restricted cash, compared to $48.8 million as of December 31, 2024. On a stand-alone basis, as of March 31, 2025, our Non-Operating Corporate segment had cash and cash equivalents, excluding restricted cash, of $3.0 million and $2.3 million of marketable securities, as compared to cash and cash equivalents, excluding restricted cash, of $13.8 million and $1.8 million of marketable securities as of December 31, 2024.

Previous wording

As of September 30, 2024, we had $699.2 million of principal indebtedness on a consolidated basis compared to $722.8 million as of December 31, 2023, a net decrease of $23.6 million, which was primarily due to a $22.0 million net decrease in debt at our Infrastructure segment and a $7.0 million decrease in debt at our Non-Operating Corporate segment, partially offset by the capitalization of unpaid accrued interest at R2 Technologies into the principal amount of $5.4 million.

Current wording

As of March 31, 2025, we had $672.0 million of principal indebtedness on a consolidated basis compared to $668.3 million as of December 31, 2024, a net increase of $3.7 million, which was primarily due to a $2.5 million net increase in debt at our Infrastructure segment, and an increase at our Life Sciences segment due to the capitalization of $1.2 million of unpaid accrued interest at R2 Technologies into their outstanding principal balance.

Previous wording

On a stand-alone basis, our Non-Operating Corporate segment indebtedness was $429.9 million and $436.9 million as of September 30, 2024 and December 31, 2023, respectively, a decrease of $7.0 million driven by a partial redemption payment of $4.1 million of the CGIC Unsecured Note on April 26, 2024 and the repurchase of $2.9 million principal amount of 2026 Convertible Notes during the nine months ended September 30, 2024. The September 30, 2024 indebtedness balance consists of the $330.0 million aggregate principal amount of 2026 Senior Secured Notes, $48.9 million aggregate principal amount of 2026 Convertible Notes, $31.0 million remaining principal amount of the CGIC Unsecured Note and $20.0 million aggregate principal amount drawn on our Revolving Line of Credit. Our Non-Operating Corporate segment is required to make semi-annual interest payments on the 2026 Senior Secured Notes and 2026 Convertible Notes on February 1st and August 1st of each year, quarterly interest payments on the Revolving Line of Credit, and monthly interest payments on the CGIC Unsecured Note. As described below, the interest rate on the CGIC Unsecured Note increased from 9.0% per annum to 16.0% per annum on May 9, 2024, and will increase from 16.0% per annum to 32.0% per annum on May 9, 2025.

Current wording

On a stand-alone basis, our Non-Operating Corporate segment indebtedness was $429.9 million in principal amount as of both March 31, 2025 and December 31, 2024. The March 31, 2025, indebtedness balance consists of the $330.0 million aggregate principal amount of 2026 Senior Secured Notes, $48.9 million aggregate principal amount of 2026 Convertible Notes (which excludes the $2.9 million 2026 Convertible Notes repurchased in 2024 and retired by the Company in 2025), $31.0 million principal amount of the CGIC Unsecured Note and $20.0 million aggregate principal amount drawn on our Revolving Line of Credit. Our Non-Operating Corporate segment is required to make semi-annual interest payments on the 2026 Senior Secured Notes and 2026 Convertible Notes on February 1st and August 1st of each year, quarterly interest payments on the Revolving Line of Credit, and monthly interest payments on the CGIC Unsecured Note. As described below, the interest rate on the CGIC Unsecured Note increased from 9.0% per annum to 16.0% per annum on May 9, 2024, and will increase from 16.0% per annum to 32.0% per annum on May 9, 2025.

Previous wording

Our Non-Operating Corporate segment received $1.4 million and $8.0 million in net tax sharing payments from our Infrastructure segment for the three and nine months ended September 30, 2024, respectively. In addition, DBMG redeemed the intercompany $41.8 million DBMG Series A Preferred Stock from DBMGi on June 28, 2024, for $41.8 million in cash, which was remitted to INNOVATE. DBM Global Intermediate Holdco Inc. ("DBMGi") is a 100% owned subsidiary of INNOVATE and all intercompany transactions are eliminated on consolidation.

Current wording

Our Non-Operating Corporate segment received $15.6 million in net tax sharing payments from our Infrastructure segment for the three months ended March 31, 2025.

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 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.

Current wording

On March 8, 2024, the Company commenced a rights offering ("Rights Offering"), in which 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”), were granted rights to purchase common stock. In connection with the Rights Offering, the Company entered into an Investment Agreement with Lancer Capital (the "Investment Agreement"), pursuant to which Lancer Capital agreed to purchase up to $19.0 million of Series C Preferred Stock as a backstop to the Rights Offering (the "Backstop Commitment") and to purchase $16.0 million of Series C Preferred Stock in a private placement transaction ("Concurrent Private Placement"). Lancer Capital is an investment fund led by Avram A. Glazer, the Chairman of the Board and the Company’s largest stockholder. 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 (see below) basis) for $3.7 million. In addition, 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 were capitalized into Additional paid in capital ("APIC"). On June 18, 2024, the Company's shareholders approved the conversion of the Series C Preferred Stock into common stock, and 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), and there were no shares of the Series C Preferred Stock outstanding subsequent to their conversion into the Company's common stock.

Previous 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. See Note 15. Equity and Temporary Equity for additional information.

Current wording

INNOVATE utilized 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, and on April 26, 2024, INNOVATE redeemed $4.1 million of the CGIC Unsecured Note. See Note 15. Equity and Temporary Equity for additional information.

Previous wording

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern. However, as of the date of these financial statements, there is substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued.

Current wording

The accompanying Condensed Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern. However, as of the date of these financial statements, there is substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued.

Previous wording

The principal conditions leading to this conclusion are the upcoming maturities of current debt at certain of the Company's subsidiaries as well as from certain cross-default provisions in the Company's Senior Secured Notes. Based on these conditions, the Company may not be able to meet its obligations at maturity and comply with certain cross-default provisions under the Senior Secured Notes over the next 12 months.

Current wording

The principal conditions leading to this conclusion are the upcoming maturities of current debt at our Non-Operating Corporate segment and the Company's subsidiaries as well as from certain cross-default provisions in the Company's Senior Secured Notes. Based on these conditions, the Company may not be able to meet its obligations at maturity and comply with certain cross-default provisions under the Senior Secured Notes over the next twelve months.

Previous wording

Management has evaluated the significance of these conditions in relation to the Company's ability to meet its obligations. The inability to refinance or extend the maturity of the current debt at the Company's subsidiaries, or to obtain additional financing, raises substantial doubt about the Company's ability to continue as a going concern.

Current wording

Management has evaluated the significance of these conditions in relation to the Company's ability to meet its obligations. The potential inability to refinance or extend the maturity of the aforementioned current debt, or to obtain additional financing, raises substantial doubt about the Company's ability to continue as a going concern.

Previous wording

The Company plans to alleviate these conditions through various initiatives it is currently exploring, including refinancing the debt at Broadcasting and DBMG, pursuing asset sales, and raising additional capital. However, there can be no assurance that the Company will have the ability to raise additional capital when needed, be successful in any asset sales, or refinance its existing debt, on attractive terms, or at all nor any assurances that lenders will provide additional extensions, waivers or amendments in the event of future non-compliance with the Company’s debt covenants or other possible events of default. Further, there can be no assurance that the Company will be able to execute a reduction, extension, or refinancing of the debt, or that the terms of any replacement financing would be as favorable as the terms of the debt prior to the maturity date. There can be no assurance that these plans will be successfully implemented or that they will mitigate the conditions that raise substantial doubt about the Company's ability to continue as a going concern.

Current wording

The Company plans to alleviate these conditions through various initiatives it is currently exploring, including potentially refinancing the debt at our Non-Operating Corporate segment and its subsidiaries, pursuing asset sales, and raising additional capital. However, there can be no assurance that the Company will have the ability to raise additional capital when needed, be successful in any asset sales, or refinance its existing debt, on attractive terms, or at all nor any assurances that lenders will provide additional extensions, waivers or amendments in the event of future non-compliance with the Company’s debt covenants or other possible events of default. Further, there can be no assurance that the Company will be able to execute a reduction, extension, or refinancing of the debt, or that the terms of any replacement financing would be as favorable as the terms of the debt prior to the maturity date. There can be no assurance that these plans will be successfully implemented or that they will mitigate the conditions that raise substantial doubt about the Company's ability to continue as a going concern.

Previous wording

The unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q do not include any adjustments to the carrying amounts and classification of assets, liabilities, or expenses that may result if the Company is unable to continue as a going concern.

Current wording

The Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q do not include any adjustments to the carrying amounts and classification of assets, liabilities, or expenses that may result if the Company is unable to continue as a going concern.