INNOVATE Corp

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated annual audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 31, 2025 (the "2024 Annual Report"), and the unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section in our 2024 Annual Report as well as the section below entitled "Special Note Regarding Forward-Looking Statements" for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated annual audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 31, 2025 (the "2024 Annual Report"), and the unaudited condensed consolidated financial statements and related notes to this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section in our 2024 Annual Report as well as the section below entitled "Special Note Regarding Forward-Looking Statements" for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Previous 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.

Current wording

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

Previous 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.

Current wording

In 2025, and subsequent to 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

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.

Current wording

During 2025 thus far, and subsequent to quarter end 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

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, and Note 11. Debt Obligations included in the Consolidated Financial Statements included in our 2024 Annual Report on Form 10-K, which was filed with the SEC on March 31, 2025, for additional details regarding the indebtedness of our Infrastructure segment.

Current wording

Refer to Note 11. Debt Obligations to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference for additional information, regarding the recent refinancing and indebtedness of our Infrastructure segment.

Previous 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.

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 June 30, 2025, was equal to 12.92% 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 of $16.5 million which are included within Accrued liabilities in the Condensed Consolidated Balance Sheet as of June 30, 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. Subsequent to June 30, 2025, the note was further amended. Refer to Note 21. Subsequent Events for additional information.

Previous wording

As of March 31, 2025, the total carrying amount relating to the 20% note was $36.4 million, inclusive of $25.2 million of principal and capitalized interest, partially offset by $5.3 million of unamortized original issue discount, which are included within the Current portion of debt obligations in the Condensed Consolidated Balance Sheet, and $16.5 million in total accrued exit fees which are included within Accrued liabilities in the Condensed Consolidated Balance Sheet.

Current wording

As of June 30, 2025, the total carrying amount relating to the 20% note was $41.6 million, inclusive of $26.5 million of principal and capitalized interest, partially offset by $1.4 million of unamortized original issue discount, which are included within the Current portion of debt obligations in the Condensed Consolidated Balance Sheet, and $16.5 million in total accrued exit fees which are included within Accrued liabilities in the Condensed Consolidated Balance Sheet.

Previous wording

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 the note and the various amendments.

Current wording

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

Previous wording

On February 20, 2025, Pansend closed on a new $3.5 million convertible 13.0% note instrument with R2 Technologies. The principal amount of the note, together with any interest then accrued and unpaid, is convertible at the option of Pansend, into shares of a new Series E Preferred Stock ("Series E") in R2 Technologies upon written notice to R2 Technologies and has a maturity date of the earlier of July 31, 2025, or a change in control of R2 Technologies, as defined in the note. The transaction is eliminated on consolidation. Refer to Note 15. Equity and Temporary Equity 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 R2 Technologies' convertible preferred stock and convertible notes.

Current wording

On February 20, 2025, Pansend closed on a new $3.5 million convertible 13.0% note instrument with R2 Technologies. The principal amount of the note, together with any interest then accrued and unpaid, is convertible at the option of Pansend, into shares of a new Series E Preferred Stock ("Series E") in R2 Technologies upon written notice to R2 Technologies and has a maturity date of the earlier of July 31, 2025, or a change in control of R2 Technologies, as defined in the note. The transaction is eliminated on consolidation. On June 9, 2025, Pansend closed on a new $3.0 million convertible 13.0% note instrument with R2 Technologies, of which $0.6 million had been funded as of June 30, 2025, and an additional $0.8 million was funded subsequent to quarter end in July 2025. The principal amount of the note, together with any interest then accrued and unpaid, is convertible at the option of Pansend into shares of a new Series F Convertible Preferred Stock ("Series F") in R2 Technologies upon written notice to R2 Technologies and has a maturity date of the earlier of July 31, 2025, or a change in control of R2 Technologies, as defined in the note. The transaction is eliminated on consolidation. Subsequent to quarter end, the maturities of these intercompany notes were extended to the earlier of July 31, 2026, or a change in control of R2 Technologies, as defined in the notes.

Previous 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.

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 to 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

On January 17, 2025, MediBeacon received approval from the U.S. Food and Drug Administration ("FDA") for its Transdermal GFR Measurement System ("TGFR"). Pursuant to the terms of MediBeacon's convertible notes, upon the FDA approval, Pansend's convertible notes of $11.4 million and the related accrued interest of $1.5 million, together totaling $12.9 million, were converted into Series 3 Preferred Stock. In addition, pursuant to its amended commercial partnership with Huadong and, as a result of FDA approval, a $7.5 million milestone payment from Huadong Medicine Co. Ltd ("Huadong"), a publicly traded company on the Shenzhen Stock Exchange, to MediBeacon for MediBeacon preferred stock was received in the first quarter of 2025. As a result of these transactions, Pansend's ownership in MediBeacon decreased from 45.9% prior to the transactions to 44.7% subsequent to the transactions. On a fully diluted basis, Pansend's ownership in MediBeacon decreased from 40.1% to 39.7%. As a result of these transactions, Pansend recognized a step-up gain of $4.4 million in Other (expense) income, net in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2025, which increased Pansend's carrying amount of its investment in MediBeacon. Concurrently, Pansend recognized equity method losses of $5.9 million, consisting of the $4.4 million step-up gain and $1.5 million of interest from the conversion of the convertible notes, which were previously unrecognized because Pansend's carrying amount of its investment in MediBeacon had been previously reduced to zero.

Current wording

On January 17, 2025, MediBeacon received approval from the U.S. Food and Drug Administration ("FDA") for its Transdermal GFR Measurement System ("TGFR"). Pursuant to the terms of MediBeacon's convertible notes, upon the FDA approval, Pansend's convertible notes of $11.4 million and the related accrued interest of $1.5 million, together totaling $12.9 million, were converted into Series 3 Preferred Stock. In addition, pursuant to its amended commercial partnership with Huadong and, as a result of FDA approval, a $7.5 million milestone payment from Huadong Medicine Co. Ltd ("Huadong"), a publicly traded company on the Shenzhen Stock Exchange, to MediBeacon for MediBeacon preferred stock was received in the first quarter of 2025. As a result of these transactions, Pansend's ownership in MediBeacon decreased from 45.9% prior to the transactions to 44.7% subsequent to the transactions. On a fully diluted basis, Pansend's ownership in MediBeacon decreased from 40.1% to 39.7%. As a result of these transactions, Pansend recognized a step-up gain of $4.4 million in Other (expense) income, net in the Condensed Consolidated Statements of Operations for the six months ended June 30, 2025, which increased Pansend's carrying amount of its investment in MediBeacon. Concurrently, Pansend recognized equity method losses of $5.9 million, consisting of the $4.4 million step-up gain and $1.5 million of interest from the conversion of the convertible notes, which were previously unrecognized because Pansend's carrying amount of its investment in MediBeacon had been previously reduced to zero.

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 months ended March 31, 2025, as compared to the three months ended March 31, 2024.

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 six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024.

Previous 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.

Current wording

Revenue for the six months ended June 30, 2025, decreased $112.1 million to $516.2 million from $628.3 million for the six months ended June 30, 2024. The decrease was primarily driven by our Infrastructure segment and to a lesser extent our Spectrum 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. The decrease at our Spectrum segment was primarily driven by the loss of certain customers and a decrease in direct response advertising, which was partially offset by the launch of new networks subsequent to the comparable period. The increase at our Life Sciences segment was attributable to R2 Technologies, primarily driven by an increase in Glacial fx unit sales and 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 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.

Current wording

Income from operations: Income from operations for the three months ended June 30, 2025, decreased $23.9 million to $4.9 million from $28.8 million for the three months ended June 30, 2024. The decrease was due to a net decrease in gross profit of $20.0 million, a decrease in other operating income of $11.7 million, which was partially offset by a decrease in selling, general and administrative ("SG&A") expenses of $7.8 million. The net decrease in gross profit 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. The decrease in other operating income was primarily driven by our Infrastructure segment as a result of unrepeated gains on lease modifications and unrepeated gains on the sale of various properties in the comparable period, as well as various losses on the sale of properties and a loss on lease modification in the current period. Partially offsetting the above decreases was a decrease in SG&A, which was primarily driven by our Infrastructure segment primarily due to a decrease in compensation-related expenses due to timing, and to a lesser extent, decreases in travel expenses and professional and consulting fees.

Previous 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.

Current wording

Interest expense: Interest expense for the three months ended June 30, 2025, increased $4.9 million to $21.4 million from $16.5 million for the three months ended June 30, 2024. Interest expense for the six months ended June 30, 2025, increased $7.9 million to $41.6 million from $33.7 million for the six months ended June 30, 2024. The increases were 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, as well as an increase in interest rates at the Infrastructure 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: 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.

Current wording

Loss from equity investees for the six months ended June 30, 2025, increased $3.6 million to $5.9 million from $2.3 million for the six months ended June 30, 2024. The increase in loss was due to an increase in losses recognized from MediBeacon. During the six months ended June 30, 2025as a result of the first quarter 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 six months ended June 30, 2024, Pansend's basis in MediBeacon had increased by $2.3 million due to the issuance of additional convertible note investments in the comparable period, resulting in Pansend recognizing $2.3 million of equity method losses that were previously unrecognized. As of both June 30, 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 to 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

Other income (expense), net: Other income, net for the three months ended March 31, 2025, increased $5.2 million to income of $4.0 million from an expense of $1.2 million for the three months ended March 31, 2024. The increase was primarily driven by the $4.4 million step-up gain following MediBeacon's FDA approval in January 2025 and an unrepeated $2.2 million loss on debt extinguishment at R2 Technologies in the comparable period. These increases were partially offset by a decrease in foreign currency translation gains from our Infrastructure segment, and a legal settlement at our Non-Operating Corporate segment in the current period.

Current wording

Other income (expense), net for the six months ended June 30, 2025, increased $4.7 million to income of $3.7 million from an expense of $1.0 million for the six months ended June 30, 2024. The increase was primarily driven by the $4.4 million step-up gain following MediBeacon's FDA approval in January 2025, a decrease in loss on extinguishment of debt due to $0.3 million related to a refinancing at our Infrastructure segment during the six months ended June 30, 2025 as compared to a $2.2 million loss on debt extinguishment at R2 Technologies in the comparable period, and an increase in unrealized fair value gains on marketable securities at our Non-Operating Corporate segment. These increases were partially offset by an increase in foreign currency translation losses from our Infrastructure segment, a decrease in interest income at our Life Sciences segment and a legal settlement expense at our Non-Operating Corporate segment in the current period.

Previous wording

Income tax expense: Income tax expense for the three months ended March 31, 2025, increased $3.8 million to $7.1 million from $3.3 million for the three months ended March 31, 2024. The increase was primarily driven by the impact of projected pre-tax results on the annual effective tax rate and the limitations on the utilization of net operating losses ("NOL") by INNOVATE's U.S. consolidated group as a result of the Internal Revenue Code Section 382 and the Tax Cuts and Jobs Act's 80 percent limitation on NOLs incurred after 2017.

Current wording

Income tax (expense) benefit: Income tax expense for the three months ended June 30, 2025, increased $6.7 million to an expense of $4.2 million from a benefit of $2.5 million for the three months ended June 30, 2024. Income tax expense for the six months ended June 30, 2025, increased $10.5 million to $11.3 million from $0.8 million for the six months ended June 30, 2024. The increases in tax expense were primarily driven by the impact of projected pre-tax results on the annual effective tax rate and the limitations on the utilization of net operating losses ("NOL") by INNOVATE's U.S. consolidated group as a result of the Internal Revenue Code Section 382 and the Tax Cuts and Jobs Act's 80 percent limitation on NOLs incurred after 2017.

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) Federal Communications Commission (the "FCC") reimbursements, as applicable. 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; and (iv) accretion of asset retirement obligations; as applicable. Each table summarizes the results of operations of our operating segments (in millions).

Previous 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.

Current wording

Revenue for the six months ended June 30, 2025, decreased $115.1 million to $498.0 million from $613.1 million for the six months ended June 30, 2024. The decrease was primarily driven by the timing and size of projects at Banker Steel, the industrial maintenance and repair business, and the construction modeling and detailing 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.

Previous 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.

Current wording

Cost of revenue for the six months ended June 30, 2025, decreased $91.7 million to $414.9 million from $506.6 million for the six months ended June 30, 2024. The decrease was primarily driven by the decrease in revenues at Banker Steel, the industrial maintenance and repair business and the construction modeling and detailing business from the timing of project activity on certain large commercial construction projects and decreases in costs as they are completed or are were nearing completion in the current period, which was partially offset by an increase in costs associated with DBMG's commercial structural steel fabrication and erection business.

Previous 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.

Current wording

Revenue for the six months ended June 30, 2025, increased $3.6 million to $6.3 million from $2.7 million for the six months ended June 30, 2024. The increase in revenue was attributable to R2 Technologies, primarily driven by an increase in Glacial fx unit sales and 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 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.

Current wording

Cost of revenue: Cost of revenue for the three months ended June 30, 2025, increased $1.0 to $2.1 million from $1.1 million for the three months ended June 30, 2024. Cost of revenue for the six months ended June 30, 2025, increased $2.7 million to $4.4 million from $1.7 million for the six months ended June 30, 2024. The increases in cost of revenue were attributable to R2 Technologies, primarily driven by the increase in revenue from the additional unit 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

Selling, general and administrative: Selling, general and administrative expense for the three months ended March 31, 2025, increased $0.2 million to $3.7 million from $3.5 million for the three months ended March 31, 2024. The increase was primarily driven by R2 Technologies as a result of an increase in selling costs due to an increase in unit sales.

Current wording

Selling, general and administrative: Selling, general and administrative expense for the three months ended June 30, 2025 decreased $0.7 million to $3.8 million from $4.5 million for the three months ended June 30, 2024. The decrease was primarily driven by R2 Technologies as a result of a decrease in employee commissions.

Previous wording

Depreciation and amortization: Depreciation and amortization for the three months ended March 31, 2025, decreased slightly by $0.1 million to $1.2 million from $1.3 million for the three months ended March 31, 2024.

Current wording

Depreciation and amortization: Depreciation and amortization for the three months ended June 30, 2025, decreased slightly by $0.1 million to $1.2 million from $1.3 million for the three months ended June 30, 2024. Depreciation and amortization for the six months ended June 30, 2025, decreased slightly by $0.2 million to $2.4 million from $2.6 million for the six months ended June 30, 2024.

Previous wording

Selling, general and administrative: Selling, general and administrative expenses for the three months ended March 31, 2025, decreased $0.3 million to $2.9 million from $3.2 million for the three months ended March 31, 2024, primarily driven by a decrease in legal fees due to legal matters settled subsequent to the comparable period, which was partially offset by an increase in share-based compensation expense related to the issuance of equity awards to our Interim-CEO, which awards had not yet been granted in the comparable period.

Current wording

Selling, general and administrative: Selling, general and administrative expenses for the three months ended June 30, 2025, decreased $0.2 million to $2.6 million from $2.8 million for the three months ended June 30, 2024. Selling, general and administrative expenses for the six months ended June 30, 2025 decreased 0.5 million to $5.5 million from $6.0 million for the six months ended June 30, 2024. The decreases were primarily driven by a decrease in legal fees due to legal matters settled subsequent to the comparable period, as well as slight decreases in other employee-related expenses, accounting and other professional expenses and insurance expense, which were partially offset by an increase in share-based compensation expense related to the issuance of equity awards to our Interim-CEO, which awards had not yet been granted in the comparable period.

Previous 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.

Current wording

Other operating loss (income): Other operating income for the three months ended June 30, 2025, decreased to zero from income of $0.1 million for the three months ended June 30, 2024. Other operating loss for the six months ended June 30, 2025, decreased to zero from a loss of $0.2 million for the six months ended June 30, 2024. Other operating loss for the six months ended June 30, 2024 related to lease termination costs for two leases exited by the Company.

Previous 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.

Current wording

Loss from equity investees within our Life Sciences segment for the six months ended June 30, 2025, increased $3.6 million to $5.9 million from $2.3 million for the six months ended June 30, 2024. The increase in loss was due to an increase in losses recognized from MediBeacon. During the six months ended June 30, 2025, as a result of the first quarter 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 six months ended June 30, 2024, Pansend's basis in MediBeacon had increased by $2.3 million due to the issuance of additional convertible note investments in the comparable period, resulting in Pansend recognizing $2.3 million of equity method losses that were previously unrecognized. As of both June 30, 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 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.

Current wording

Refer to Note 6. Investments to 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 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.

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, and asset impairment expense; interest expense; other (income) expense, net; income tax expense (benefit); non-controlling interest; share-based compensation expense; realignment and exit costs; and acquisition and disposition costs.

Previous wording

Spectrum: Net loss from our Spectrum segment for the three months ended March 31, 2025, increased $0.6 million to $5.4 million from $4.8 million for the three months ended March 31, 2024. Adjusted EBITDA from our Spectrum segment for the three months ended March 31, 2025, decreased slightly by $0.2 million to $1.4 million from $1.6 million for the three months ended March 31, 2024. The decrease in Adjusted EBITDA was primarily driven by the termination of a few networks and individual markets, which was partially offset by the launch of new networks subsequent to the comparable period.

Current wording

Spectrum: Net loss from our Spectrum segment for the three months ended June 30, 2025, increased $1.1 million to $6.1 million from $5.0 million for the three months ended June 30, 2024. Adjusted EBITDA from our Spectrum segment for the three months ended June 30, 2025, decreased $0.5 million to $1.0 million from $1.5 million for the three months ended June 30, 2024. The decrease in Adjusted EBITDA was primarily driven by the loss of certain customers and a decrease in direct response advertising, which was partially offset by the launch of new networks subsequent to the comparable period.

Previous 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.

Current wording

Non-Operating Corporate: Net income (loss) from our Non-Operating Corporate segment for the three months ended June 30, 2025, decreased $14.8 million to a loss of $12.7 million from income of $2.1 million for the three months ended June 30, 2024. Adjusted EBITDA loss from our Non-Operating Corporate segment for the three months ended June 30, 2025, decreased $0.5 million to $2.0 million from $2.5 million for the three months ended June 30, 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, as well as a slight decrease in employee-related expenses, accounting and other professional expenses and insurance expense.

Previous 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.

Current wording

Infrastructure: Net income from our Infrastructure segment for the six months ended June 30, 2025, decreased $15.3 million to $10.1 million from $25.4 million for the six months ended June 30, 2024. Adjusted EBITDA from our Infrastructure segment for the six months ended June 30, 2025, decreased $14.8 million to $36.0 million from $50.8 million for the six months ended June 30, 2024. The decrease in Adjusted EBITDA was primarily driven by a decrease in gross margins at DBMG's commercial structural steel fabrication and erection business, a decrease revenue at Banker Steel, and a decrease in gross margins and revenue at the construction modeling and detailing business, due to timing of certain large commercial construction projects that have since been completed or are nearing completion in the current period. This decrease was partially offset by an improvement in gross margin at the industrial maintenance and repair business, and a decrease in recurring SG&A expenses, primarily driven by a decrease in compensation-related expenses due to timing, and to a lesser extent, decreases in consulting fees and travel expenses, which were 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 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.

Current wording

Life Sciences: Net loss from our Life Sciences segment for the six months ended June 30, 2025, increased $5.8 million to $14.1 million from $8.3 million for the six months ended June 30, 2024. Adjusted EBITDA loss from our Life Sciences segment for the six months ended June 30, 2025, increased $2.3 million to $11.3 million from $9.0 million for the six months ended June 30, 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. The increase in Adjusted EBITDA loss was partially offset by an increase in gross profit at R2 Technologies, driven by increased revenue (as discussed in the Revenue section above), and a decrease in SG&A expenses primarily driven by a reduction in compensation-related expenses at Pansend.

Previous 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.

Current wording

As of June 30, 2025, DBMG's backlog was $1,254.4 million, consisting of $1,140.8 million under contracts or purchase orders and $113.6 million under letters of intent or notices to proceed. Approximately $737.1 million, representing 58.8% of DBMG’s backlog as of June 30, 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 has included an additional $12.2 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'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.

Current wording

Our Non-Operating Corporate segment's liquidity needs have primarily been for interest payments on its 8.50% 2026 Senior Secured Notes, 2026 Convertible Notes, Revolving Line of Credit, CGIC Unsecured Note, and dividend payments, out of legally available funds, on its Series A-3 and Series A-4 Preferred Stock and recurring operational expenses.

Previous 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.

Current wording

On a consolidated basis, as of June 30, 2025, we had $33.4 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 June 30, 2025, our Non-Operating Corporate segment had cash and cash equivalents, excluding restricted cash, of $3.1 million and $2.6 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 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.

Current wording

As of June 30, 2025, we had $641.3 million of principal indebtedness on a consolidated basis compared to $668.3 million as of December 31, 2024, a net decrease of $27.0 million, due to a $29.5 million decrease in debt at our Infrastructure segment as part of a refinancing transaction, which was partially offset by a net increase at our Life Sciences segment due to the capitalization of $2.5 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 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.

Current wording

On a stand-alone basis, our Non-Operating Corporate segment indebtedness was $429.9 million in principal amount as of both June 30, 2025 and December 31, 2024. The June 30, 2025 indebtedness balance consists of the $330.0 million aggregate principal amount of 8.50% 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 8.50% 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 increased from 16.0% per annum to 32.0% per annum on May 9, 2025.

Previous wording

We are required to make dividend payments on our outstanding Series A-3 Preferred Stock and Series A-4 Preferred Stock on January 15 th, April 15 th, July 15 th, and October 15 th of each year.

Current wording

We are required to make dividend payments, out of legally available funds, on our outstanding Series A-3 Preferred Stock and Series A-4 Preferred Stock on January 15 th, April 15 th, July 15 th, and October 15 th of each year. During the three months ended March 31, 2025, the Company accrued the 7.5% quarterly dividend of $0.3 million and subsequently paid the dividend in April 2025. During the three months ended June 30, 2025, the Company accrued the 7.5% quarterly dividend of $0.3 million but did not declare any cash dividends with respect to its outstanding Series A-3 Preferred Stock and Series A-4 Preferred Stock. In addition, during the three months ended June 30, 2025, the Company recorded the accretion or accrual of additional dividends totaling $1.9 million. See Note 15. Equity and Temporary Equity for additional information.