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, 2025, filed with the SEC on March 26, 2026 (the "2025 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 2025 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, 2025, filed with the SEC on March 26, 2026 (the "2025 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 2025 Annual Report as well as below in this Form 10-Q and 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

Unless the context otherwise requires, in this Quarterly Report on Form 10-Q, "INNOVATE" means INNOVATE Corp. and the "Company," "we", "us" and "our" mean INNOVATE together with its consolidated subsidiaries. "U.S. GAAP" means accounting principles accepted in the United States of America.

Current wording

Unless the context otherwise requires, in this Quarterly Report on Form 10-Q, "INNOVATE" means INNOVATE Corp. and the "Company," "we", "us" and "our" mean INNOVATE together with its consolidated subsidiaries. "U.S. GAAP" means accounting principles generally accepted in the United States of America.

Previous wording

The 10.50% 2027 Senior Secured Notes Indenture required us to meet certain milestones with respect to strategic alternatives for our operating subsidiaries, including asset sales generating at least $150 million in net proceeds, to be applied to the 10.50% 2027 Senior Secured Notes, such that by September 1, 2025 the Company needed to have a bona fide bid or term sheet related to a potential sale. The September 1, 2025 milestone was not reached, and in accordance with the indenture, we were thus required to commence a sales process for DBMG. The sales process for DBMG, which has been initiated and is proceeding, has separate milestone requirements, which we have either met or extended as of March 31, 2026. Subsequent to quarter end, the April 1, 2026 milestone for an executed purchase agreement was extended to June 1, 2026. We are in compliance with the milestone covenants requirements as of the date of the filing of this Quarterly Report on Form 10-Q.

Current wording

The 10.50% 2027 Senior Secured Notes Indenture required us to meet certain milestones with respect to strategic alternatives for our operating subsidiaries, including asset sales generating at least $150 million in net proceeds, to be applied to the 10.50% 2027 Senior Secured Notes, such that by September 1, 2025 the Company needed to have a bona fide bid or term sheet related to a potential sale. The September 1, 2025 milestone was not reached, and in accordance with the indenture, we were thus required to commence a sales process for DBMG. The sales process for DBMG, which has been initiated and is proceeding, has separate milestone requirements, which we had either met or extended as of June 30, 2026, and we were in compliance with the milestone covenants requirements. Refer to Note 12. 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 10.50% 2027 Senior Secured Notes and other Corporate debt.

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, 2026, as compared to the three months ended March 31, 2025.

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, 2026, as compared to the three and six months ended June 30, 2025.

Previous wording

The following table summarizes our results of operations (in millions):

Current wording

The following table summarizes our results of continuing operations (in millions):

Previous wording

Revenue: Revenue for the three months ended March 31, 2026, increased $90.6 million to $364.8 million from $274.2 million for the three months ended March 31, 2025. The increase was primarily driven by our Infrastructure segment, which was partially offset by decreases at our Life Sciences and Spectrum segments. The increase at our Infrastructure segment was primarily driven by the timing and size of projects at DBMG's commercial structural steel fabrication and erection business, which had increased activity subsequent to the comparable period on certain large construction projects, which was partially offset by a decrease at the industrial maintenance and repair business due to the timing and size of projects, which had increased activity in the comparable period on certain large construction projects that have since been completed. The decrease at our Life Sciences segment was attributable to R2 Technologies, primarily driven by decreases in Glacial fx and Glacial Rx unit sales in North America, which were partially offset by an increase in Glacial Spa unit sales outside North America. The decrease at our Spectrum segment was primarily driven by the termination of a few networks and individual markets subsequent to the comparable period.

Current wording

Revenue: Revenue for the three months ended June 30, 2026, increased $179.6 million to $421.6 million from $242.0 million for the three months ended June 30, 2025. Revenue for the six months ended June 30, 2026, increased $270.2 million to $786.4 million from $516.2 million for the six months ended June 30, 2025. The increases were primarily driven by our Infrastructure segment, which was partially offset by decreases at our Life Sciences and Spectrum segments. The increase at our Infrastructure segment was primarily driven by the timing and size of projects at DBMG's commercial structural steel fabrication and erection business, which had increased activity subsequent to the comparable period on certain large construction projects, which was partially offset by a decrease at the industrial maintenance and repair business due to the timing and size of projects, which had increased activity in the comparable period on certain large construction projects that have since been completed. The decrease at our Life Sciences segment was attributable to R2 Technologies, primarily driven by net decreases in Glacial system unit sales due to liquidity constraints. The decrease at our Spectrum segment was primarily driven by the termination of a few networks and individual markets subsequent to the comparable period, partially offset by the launch of new networks.

Previous wording

Income from operations: Income from operations for the three months ended March 31, 2026, increased $6.6 million to $10.0 million from $3.4 million for the three months ended March 31, 2025. The increase was primarily due to a net increase in gross profit of $8.0 million, and a net decrease in depreciation and amortization of $0.2 million, partially offset by a net increase in selling, general and administrative ("SG&A") expenses of $1.6 million. The net increase in gross profit was primarily driven by our Infrastructure segment due to timing and size of projects in the current period, which had increased activity subsequent to the comparable period, which was partially offset by our Spectrum and Life Sciences segments due to the decreases in revenue. The increase in SG&A was primarily driven by our Infrastructure segment primarily due to an increase in compensation-related expenses due to timing, as well as an increase at our Non-Operating Corporate segment primarily driven by expenses in the current period related to potential dispositions. These increases in SG&A were partially offset by a decrease in SG&A at our Life Sciences segment due to a reduction in compensation-related expenses at R2 Technologies and Pansend.

Current wording

Income from operations: Income from operations for the three months ended June 30, 2026 increased $29.6 million to $34.5 million from $4.9 million for the three months ended June 30, 2025. The increase was due to a net increase in gross profit of $33.9 million, a decrease in other operating losses of $1.2 million and a decrease in depreciation and amortization of $0.9 million, partially offset by a net increase in selling, general and administrative ("SG&A") expenses of $6.4 million. The net increase in gross profit was primarily driven by our Infrastructure segment due to timing and size of projects in the current period, which had increased activity subsequent to the comparable period, combined with changes in the estimate of the cost to complete those projects recognized in the ordinary course driven by efficiencies recognized around certain projects, partially offset by our Life Sciences segment due to the decrease in revenue. The decrease in other operating losses was driven by our Infrastructure segment due to unrepeated losses on the sales of various properties and an unrepeated loss on lease modification in the comparable period. The decrease in depreciation and amortization was primarily driven by the Spectrum segment's cessation of depreciation and amortization on its long-lived assets subsequent to its classification as held for sale on May 29, 2026. The increase in SG&A was primarily driven by our Infrastructure segment, primarily due to the timing of compensation-related expenses, and an increase at our Spectrum segment primarily driven by transaction-related expenses incurred in the current period. These increases in SG&A were partially offset by a decrease in SG&A at our Life Sciences segment due to reductions in compensation-related expenses at R2 Technologies and Pansend.

Previous wording

Interest expense: Interest expense for the three months ended March 31, 2026, increased $4.3 million to $24.5 million from $20.2 million for the three months ended March 31, 2025. The increase in interest expense was primarily driven by our Non-Operating Corporate segment due to the indebtedness refinancing transactions completed subsequent to the comparable period, which resulted in increased principal balances due to the capitalization of fees and interest, and certain increases in interest rates, leading to increased interest expense including amortization of fees. The increase was partially offset by our Life Sciences segment due to the refinancing of their debt subsequent to the comparable period, which removed certain exit and default fees and decreased the stated interest rate, which was partially offset by the higher outstanding principal amount. 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 indebtedness refinancing transactions.

Current wording

Interest expense: Interest expense for the three months ended June 30, 2026 increased $6.2 million to $27.6 million from $21.4 million for the three months ended June 30, 2025. Interest expense for the six months ended June 30, 2026, increased $10.5 million to $52.1 million from $41.6 million for the six months ended June 30, 2025. The increase in interest expense was primarily driven by our Non-Operating Corporate and Spectrum segments. The increase at our Non-Operating Corporate segment was due to the indebtedness refinancing transactions completed subsequent to the comparable period, which resulted in increased principal balances due to the capitalization of fees and interest, and certain increases in interest rates, leading to increased interest expense including amortization of fees. The increase at our Spectrum segment was primarily due to the New Spectrum Loan Agreement entered into in the current period, under which the effective interest rate includes the stated interest rate and accretion of a contractually specified minimum return on the New Spectrum Loan Agreement through its stated maturity. These increases were partially offset by our Life Sciences segment due to the refinancing of their debt subsequent to the comparable period, which removed certain exit and default fees and decreased the stated interest rate, which was partially offset by the higher outstanding principal amount. The increase in interest expense was also partially offset by our Infrastructure segment primarily driven by the net decrease in principal balance.

Previous wording

Loss from equity investees: Loss from equity investees for the three months ended March 31, 2026, decreased $5.9 million to zero from $5.9 million for the three months ended March 31, 2025. The decrease was due to a decrease in losses recognized from MediBeacon. During the three months ended March 31, 2025, as a result of the unrepeated equity transactions that occurred upon FDA approval of MediBeacon's TGFR in the comparable period, 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. As of both March 31, 2026 and March 31, 2025, 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.

Current wording

Loss from equity investees: Loss from equity investees for the six months ended June 30, 2026, decreased to zero from $5.9 million for the six months ended June 30, 2025. The decrease was due to a decrease in losses recognized from MediBeacon. During the six months ended June 30, 2025, as a result of the unrepeated equity transactions that occurred upon FDA approval of MediBeacon's TGFR in the comparable period, 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. As of both June 30, 2026 and June 30, 2025, Pansend's net carrying amount of its investment in MediBeacon was zero, and Pansend had unrecognized losses from this investment. Refer to Note 7. 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, net: Other income, net for the three months ended March 31, 2026, decreased $3.7 million to $0.3 million from $4.0 million for the three months ended March 31, 2025. The decrease was primarily driven by the unrepeated $4.4 million step-up gain following MediBeacon's FDA approval in the comparable period, which was partially offset by an unrepeated legal settlement expense at our Non-Operating Corporate segment in the comparable period. Refer to Note 20. Supplementary Financial Information to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for additional information on other income, net.

Current wording

Other income, net for the six months ended June 30, 2026, decreased $3.5 million to $0.5 million from $4.0 million for the six months ended June 30, 2025. The decrease was primarily driven by the unrepeated $4.4 million step-up gain following MediBeacon's FDA approval in the comparable period and a decrease in unrealized fair value gains on marketable securities at our Non-Operating Corporate segment. These decreases were partially offset by an unrepeated legal settlement expense at our Non-Operating Corporate segment in the comparable period, as well as an increase in interest income and a decrease in foreign currency translation losses from our Infrastructure segment. Refer to Note 21. Supplementary Financial Information to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for additional information on other income, net.

Previous wording

Income tax expense: Income tax expense for the three months ended March 31, 2026, decreased $4.2 million to $2.9 million from $7.1 million for the three months ended March 31, 2025. The movement in tax expense was primarily driven by the impact of projected pre-tax results on the annual effective tax rate including 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: Income tax expense for the three months ended June 30, 2026 increased $8.9 million to $13.1 million from $4.2 million for the three months ended June 30, 2025. Income tax expense for the six months ended June 30, 2026, increased $4.7 million to $16.0 million from $11.3 million for the six months ended June 30, 2025. The increases in tax expense were primarily driven by higher pre-tax income combined with an increase in the annual effective tax rate, including as a result of limitations on the utilization of net operating losses ("NOL") by INNOVATE's U.S. consolidated group under Internal Revenue Code Section 382 and the Tax Cuts and Jobs Act's 80 percent limitation on NOLs incurred after 2017.

Previous wording

Revenue: Revenue for the three months ended March 31, 2026, increased $93.0 million to $357.9 million from $264.9 million for the three months ended March 31, 2025. The increase was primarily driven by the timing and size of projects at DBMG's commercial structural steel fabrication and erection business which had increased activity subsequent to the comparable period on certain large construction projects, and to a lesser extent, at the new modular business and the construction modeling and detailing business. The increases were partially offset by a decrease at the industrial maintenance and repair business due to the timing and size of projects, which had increased activity in the comparable period on certain large construction projects that have since been completed.

Current wording

Revenue: Revenue for the three months ended June 30, 2026 increased $180.9 million to $414.0 million from $233.1 million for the three months ended June 30, 2025. Revenue for the six months ended June 30, 2026, increased $273.9 million to $771.9 million from $498.0 million for the six months ended June 30, 2025. The increases were primarily driven by the timing and size of projects at DBMG's commercial structural steel fabrication and erection business, which had increased activity subsequent to the comparable period on certain large construction projects, combined with changes in the estimate of the cost to complete those projects recognized in the ordinary course driven by efficiencies recognized around certain projects, and to a lesser extent, at the construction modeling and detailing business and the new modular business. The increases were partially offset by a decrease at the industrial maintenance and repair business due to the timing and size of projects, which had increased activity in the comparable period on certain large construction projects that have since been completed.

Previous wording

Cost of revenue: Cost of revenue for the three months ended March 31, 2026, increased $83.5 million to $307.0 million from $223.5 million for the three months ended March 31, 2025. The increase was primarily driven by the increase in revenue at DBMG's commercial structural steel fabrication and erection business due to the increased activity subsequent to the comparable period on certain large construction projects, and to a lesser extent, an increase at the new modular business and the construction modeling and detailing business due to the increases in revenue. The increases in cost of revenue were partially offset by a decrease at the industrial maintenance and repair business as a result of the decrease in revenue due to the timing of project activity on certain large construction projects that have been completed subsequent to the comparable period.

Current wording

Cost of revenue for the six months ended June 30, 2026, increased $229.7 million to $644.6 million from $414.9 million for the six months ended June 30, 2025. The increase was primarily driven by the increase in revenue at DBMG's commercial structural steel fabrication and erection business due to the increased activity subsequent to the comparable period on certain large construction projects, and to a lesser extent, an increase at the new modular business and the construction modeling and detailing business due to the increases in revenue. The increases in cost of revenue were partially offset by a decrease at the industrial maintenance and repair business as a result of the decrease in revenue due to the timing of project activity on certain large construction projects that have been completed subsequent to the comparable period.

Previous wording

Revenue: Revenue for the three months ended March 31, 2026, decreased $1.5 million to $1.6 million from $3.1 million for the three months ended March 31, 2025. The decrease in revenue was attributable to R2 Technologies, primarily driven by decreases in Glacial fx and Glacial Rx unit sales in North America, which were partially offset by an increase in Glacial Spa unit sales outside North America.

Current wording

Revenue: Revenue for the three months ended June 30, 2026 decreased $1.0 million to $2.2 million from $3.2 million for the three months ended June 30, 2025. The decrease was attributable to R2 Technologies, primarily driven by decreases in Glacial fx unit sales in North America and Glacial Spa unit sales outside North America due to liquidity constraints.

Previous wording

Cost of revenue: Cost of revenue for the three months ended March 31, 2026, decreased $0.9 million to $1.4 million from $2.3 million for the three months ended March 31, 2025. The decrease in cost of revenue was attributable to R2 Technologies, primarily driven by the decrease in revenue noted above and, to a lesser extent, the related decreases in warranty expenses and royalty expenses.

Current wording

Cost of revenue: Cost of revenue for the three months ended June 30, 2026 decreased $0.8 million to $1.3 million from $2.1 million for the three months ended June 30, 2025. Cost of revenue for the six months ended June 30, 2026, decreased $1.7 million to $2.7 million from $4.4 million for the six months ended June 30, 2025. The decreases in cost of revenue were attributable to R2 Technologies, primarily driven by the decrease in revenue noted above and, to a lesser extent, the related decreases in warranty expenses and royalty expenses.

Previous wording

Selling, general and administrative: Selling, general and administrative expenses for the three months ended March 31, 2026 increased $0.5 million to $3.4 million from $2.9 million for the three months ended March 31, 2025. The increase was primarily driven by $0.9 million of expenses in the current period related to potential dispositions, which was partially offset by a decrease in compensation-related expenses.

Current wording

Selling, general and administrative: Selling, general and administrative expenses for the three months ended June 30, 2026 increased $0.1 million to $2.7 million from $2.6 million for the three months ended June 30, 2025. Selling, general and administrative expenses for the six months ended June 30, 2026 increased $0.6 million to $6.1 million from $5.5 million for the six months ended June 30, 2025. The increases were primarily driven by expenses incurred in the current period related to potential dispositions and strategic transactions, which were partially offset by a decrease in compensation-related expenses.

Previous wording

Life Sciences: Loss from equity investees within our Life Sciences segment for the three months ended March 31, 2026, decreased $5.9 million to zero from $5.9 million for the three months ended March 31, 2025. The decrease in loss was due to a decrease in losses recognized from MediBeacon as none were recognized during the three months ended March 31, 2026. Refer to Loss from equity investees in the Results of Operations section above for more information. 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.

Current wording

Life Sciences: Loss from equity investees within our Life Sciences segment for the six months ended June 30, 2026, decreased $5.9 million to zero from $5.9 million for the six months ended June 30, 2025. The decrease in loss was due to a decrease in losses recognized from MediBeacon as none were recognized during the six months ended June 30, 2026. Refer to Loss from equity investees in the Results of Operations section above for more information. Refer to Note 7. 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, and asset impairment expense); interest expense; other (income) expense, net; income tax expense (benefit); non-controlling interests; share-based compensation expense; realignment and exit costs; facility commissioning 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, and asset impairment expense); interest expense; (gain) loss on extinguishment of debt; other (income) expense, net; income tax expense (benefit); non-controlling interests; share-based compensation expense; realignment and exit costs; facility commissioning costs; debt refinancing costs; and acquisition and disposition costs.

Previous wording

Infrastructure: Net income from our Infrastructure segment for the three months ended March 31, 2026, increased $4.7 million to $9.3 million from $4.6 million for the three months ended March 31, 2025. Adjusted EBITDA from our Infrastructure segment for the three months ended March 31, 2026, increased $6.3 million to $23.0 million from $16.7 million for the three months ended March 31, 2025. The increase in Adjusted EBITDA was primarily driven by an increase in gross profit at DBMG's commercial structural steel fabrication and erection business which had increased activity subsequent to the comparable period on certain large construction projects. The increase was partially offset by a decrease in revenue and gross profit at our industrial maintenance and repair business due to timing of certain large construction projects in the comparable period that have since been completed and an increase in recurring SG&A expenses, primarily driven by an increase in compensation-related expenses due to timing.

Current wording

Infrastructure: Net income from our Infrastructure segment for the three months ended June 30, 2026, increased $20.9 million to $26.4 million from $5.5 million for the three months ended June 30, 2025. Adjusted EBITDA from our Infrastructure segment for the three months ended June 30, 2026, increased $29.4 million to $48.7 million from $19.3 million for the three months ended June 30, 2025. The increase in Adjusted EBITDA was primarily driven by an increase in revenue and gross profit at DBMG's commercial structural steel fabrication and erection business, which had increased activity subsequent to the comparable period on certain large construction projects, combined with changes in the estimate of the cost to complete those projects recognized in the ordinary course driven by efficiencies recognized around certain projects, and, to a lesser extent, by an increase in revenue and gross profit at the construction modeling and detailing business. The increase was partially offset by an increase in recurring SG&A expenses, primarily driven by the timing of compensation-related expenses and a decrease in revenue and gross profit at our industrial maintenance and repair business due to timing of certain large construction projects in the comparable period that have since been completed.

Previous wording

Life Sciences: Net loss from our Life Sciences segment for the three months ended March 31, 2026, decreased $4.3 million to $3.3 million from $7.6 million for the three months ended March 31, 2025. Adjusted EBITDA loss from our Life Sciences segment for the three months ended March 31, 2026, decreased $6.7 million to $2.0 million from $8.7 million for the three months ended March 31, 2025. The decrease in Adjusted EBITDA loss was primarily due to a decrease in equity method losses recognized from MediBeacon, as discussed in the Loss from Equity Investees section above, and a decrease in SG&A expenses, primarily driven by decreases in compensation-related expenses at R2 Technologies and Pansend. These decreases were partially offset by a decrease in gross profit at R2 Technologies, driven by the decrease in revenue (as discussed in the Revenue section above).

Current wording

Life Sciences: Net loss from our Life Sciences segment for the six months ended June 30, 2026, decreased $8.5 million to $5.6 million from $14.1 million for the six months ended June 30, 2025. Adjusted EBITDA loss from our Life Sciences segment for the six months ended June 30, 2026, decreased $8.5 million to $2.8 million from $11.3 million for the six months ended June 30, 2025. The decrease in Adjusted EBITDA loss was primarily due to a decrease in equity method losses recognized from MediBeacon, as discussed in the Loss from Equity Investees section above, and a decrease in SG&A expenses, primarily driven by decreases in compensation-related expenses at R2 Technologies and Pansend. These decreases were partially offset by a decrease in gross profit at R2 Technologies, driven by the decrease in revenue (as discussed in the Revenue section above).

Previous wording

Non-Operating Corporate: Net loss from our Non-Operating Corporate segment for the three months ended March 31, 2026, increased $0.2 million to $16.3 million from $16.1 million for the three months ended March 31, 2025. Adjusted EBITDA loss from our Non-Operating Corporate segment for the three months ended March 31, 2026, decreased slightly by $0.2 million to $2.0 million from $2.2 million for the three months ended March 31, 2025.

Current wording

Non-Operating Corporate: Net loss from our Non-Operating Corporate segment for the six months ended June 30, 2026, increased $9.3 million to $38.1 million from $28.8 million for the six months ended June 30, 2025. Adjusted EBITDA loss from our Non-Operating Corporate segment for the six months ended June 30, 2026, decreased slightly by $0.2 million to $4.0 million from $4.2 million for the six months ended June 30, 2025.

Previous wording

As of March 31, 2026, DBMG's backlog was $1,585.6 million, consisting of $1,561.0 million under contracts or purchase orders and $24.6 million under letters of intent or notices to proceed. Approximately $1,047.7 million, representing 66.1% of DBMG’s backlog as of March 31, 2026, 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's backlog may, from time to time, include additional backlog amounts that are not included in the remaining unsatisfied performance obligations disclosed in Note 3. Revenue and Contracts in Process. This additional backlog may include 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, 2026, DBMG's backlog was $1,901.0 million, consisting of $1,810.2 million under contracts or purchase orders and $90.8 million under letters of intent or notices to proceed. Approximately $1,137.4 million, representing 59.8% of DBMG’s backlog as of June 30, 2026, 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's backlog may, from time to time, include additional backlog amounts that are not included in the remaining unsatisfied performance obligations disclosed in Note 4. Revenue and Contracts in Process. This additional backlog may include 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

The 10.50% 2027 Senior Secured Notes accrue interest at a rate of 10.50% per year, payable semi-annually on February 1 st and August 1 st of each year, commencing on February 1, 2026. Total interest of $18.9 million, incurred from August 4, 2025 through January 31, 2026, was paid in kind and capitalized into the principal balance for the February 1, 2026 payment. All subsequent interest payments are payable in cash. Aggregate interest expense for the new 10.50% 2027 Senior Secured Notes, including the contractual interest coupon and amortization of fees was $13.0 million for the three months ended March 31, 2026.

Current wording

The 10.50% 2027 Senior Secured Notes accrue interest at a rate of 10.50% per year, payable semi-annually on February 1 st and August 1 st of each year, commencing on February 1, 2026. Total interest of $18.9 million, incurred from August 4, 2025 through January 31, 2026, was paid in kind and capitalized into the principal balance for the February 1, 2026 payment.

Previous wording

As of March 31, 2026, the total carrying amount related to the notes was $367.6 million, inclusive of $379.3 million aggregate principal outstanding (which includes capitalized interest), partially offset by $10.9 million of the unamortized OID and $0.8 million of unamortized deferred financing fees. The effective interest rate on the 10.50% 2027 Senior Secured Notes was 14.4% as of March 31, 2026.

Current wording

As of June 30, 2026, the total carrying amount related to the notes was $371.0 million, inclusive of $379.3 million aggregate principal outstanding (which includes capitalized interest), partially offset by $7.7 million of the unamortized OID and $0.6 million of unamortized deferred financing fees. The effective interest rate on the 10.50% 2027 Senior Secured Notes was 14.4% as of June 30, 2026.

Previous wording

If we complete certain assets sales, the terms of the 10.50% 2027 Senior Secured Notes Indenture may require us, in certain circumstances, to make an offer to purchase the 10.50% 2027 Senior Secured Notes with the net cash proceeds from such an asset sale at a price in cash equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase. Additionally, if a Change of Control (as defined in the 10.50% 2027 Senior Secured Notes Indenture) occurs, we will be required to make an offer to purchase the 10.50% 2027 Senior Secured Notes for cash at a price equal to 101% of the aggregate principal amount of such 10.50% 2027 Senior Secured Notes on the date of purchase, plus any accrued and unpaid interest to the date of repurchase.

Current wording

If we complete certain asset sales (an "Asset Sale"), the terms of the 10.50% 2027 Senior Secured Notes Indenture may require us, in certain circumstances, to make an offer to purchase the 10.50% 2027 Senior Secured Notes with the net cash proceeds from such an Asset Sale at a price in cash equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase. For transactions constituting a Change of Control, we will be required to make an offer to purchase the 10.50% 2027 Senior Secured Notes for cash at a price equal to 101% of their aggregate principal amount on the date of purchase, plus any accrued and unpaid interest to the date of repurchase.

Previous wording

The 10.50% 2027 Senior Secured Notes Indenture contains covenants limiting, among other things, our ability, and, in certain cases, our subsidiaries, to incur additional indebtedness; create liens; pay dividends or make distributions in respect of capital stock; make certain restricted payments; sell assets; engage in certain transactions with affiliates; or consolidate or merge with, or sell substantially all of its assets to, another person. Additionally, the 10.50% 2027 Senior Secured Notes Indenture required us to meet certain milestones with respect to strategic alternatives for our operating subsidiaries, including asset sales generating at least $150 million in net proceeds, to be applied to the 10.50% 2027 Senior Secured Notes, such that by September 1, 2025 the Company needed to have a bona fide bid or term sheet related to a potential sale. The September 1, 2025 milestone was not reached, and in accordance with the indenture, we were thus required to commence a sales process for DBMG. The sales process for DBMG, which has been initiated and is proceeding, has separate milestone requirements, which we have either met or extended as of March 31, 2026. Subsequent to quarter end, the April 1, 2026 milestone for an executed purchase agreement was extended to June 1, 2026. We are in compliance with the milestone covenants requirements as of the date of the filing of this Quarterly Report on Form 10-Q.

Current wording

The 10.50% 2027 Senior Secured Notes Indenture contains covenants limiting, among other things, our ability, and, in certain cases, our subsidiaries, to incur additional indebtedness; create liens; pay dividends or make distributions in respect of capital stock; make certain restricted payments; sell assets; engage in certain transactions with affiliates; or consolidate or merge with, or sell substantially all of its assets to, another person. Additionally, the 10.50% 2027 Senior Secured Notes Indenture required us to meet certain milestones with respect to strategic alternatives for our operating subsidiaries, including asset sales generating at least $150 million in net proceeds, to be applied to the 10.50% 2027 Senior Secured Notes, such that by September 1, 2025 the Company needed to have a bona fide bid or term sheet related to a potential sale. The September 1, 2025 milestone was not reached, and in accordance with the indenture, we were thus required to commence a sales process for DBMG. The sales process for DBMG, which has been initiated and is proceeding, has separate milestone requirements, which we had either met or extended as of June 30, 2026, and we were in compliance with the milestone covenants requirements. The June 1, 2026 milestone for an executed purchase agreement was extended to August 28, 2026 and the Company is in compliance with the milestone covenants requirements as of the date of the filing of this Quarterly Report on Form 10-Q.

Previous wording

The 2026 Senior Secured Notes had a stated annual interest rate of 8.50% and had an effective interest rate of 9.3%, which reflected the initial $10.8 million of deferred financing fees in 2021, including underwriting fees. Interest was payable semi-annually in arrears on February 1 stand August 1 st of each year. Aggregate interest expense, including the contractual interest coupon and amortization of the deferred financing fees was $15 thousand for the three months ended March 31, 2026.

Current wording

The 2026 Senior Secured Notes had a stated annual interest rate of 8.50% and had an effective interest rate of 9.3%, which reflected the initial $10.8 million of deferred financing fees in 2021, including underwriting fees. Interest was payable semi-annually in arrears on February 1 stand August 1 st of each year.

Previous wording

The 2027 Convertible Notes accrue interest at a rate of 9.5% per year. Interest on the 2027 Convertible Notes is paid semi-annually on February 1 st and August 1 st of each year, commencing on February 1, 2026. Total interest of $2.5 million, incurred from August 4, 2025 through January 31, 2026, was paid in kind and capitalized into the principal balance for the February 1, 2026 payment. All subsequent interest payments are payable in cash. Aggregate interest expense, including the contractual interest coupon and amortization was $1.5 million for the three months ended March 31, 2026.

Current wording

The 2027 Convertible Notes accrue interest at a rate of 9.5% per year. Interest on the 2027 Convertible Notes is paid semi-annually on February 1 st and August 1 st of each year, commencing on February 1, 2026. Total interest of $2.5 million, incurred from August 4, 2025 through January 31, 2026, was paid in kind and capitalized into the principal balance for the February 1, 2026 payment. Subsequent to quarter end, pursuant to a July 31, 2026 supplemental indenture, interest due on August 1, 2026 on notes held by consenting holders was paid in kind, and those holders received additional notes as a 1.50% consent fee. Notes held by non-consenting holders remained subject to the existing cash interest payment requirements. Refer to Note 22. Subsequent Events to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for additional information.

Previous wording

As of March 31, 2026, the total carrying amount related to the note was $55.2 million, inclusive of $56.0 million aggregate principal outstanding (which includes capitalized interest), partially offset by a remaining unamortized net OID of $0.6 million and unamortized deferred financing fees of $0.2 million.

Current wording

As of June 30, 2026, the total carrying amount related to the note was $55.4 million, inclusive of $56.0 million aggregate principal outstanding (which includes capitalized interest), partially offset by a remaining unamortized net OID of $0.5 million and unamortized deferred financing fees of $0.1 million.

Previous wording

The Company, the guarantors party thereto from time to time and U.S. Bank Trust Company, National Association, as trustee (in such capacity, the “2027 Convertible Notes Trustee”) and collateral trustee, entered into an indenture (the “2027 Convertible Notes Indenture”), dated as of August 4, 2025, governing the 2027 Convertible Notes. If we complete certain assets sales, the 2027 Senior Secured Notes Indenture may require us in certain circumstances to make an offer to purchase the 2027 Convertible Notes with the net cash proceeds from such an asset sale (After the indefeasible repayment and satisfaction in full in cash of all obligations under the 10.50% 2027 Senior Secured Notes, the 10.50% 2027 Senior Secured Notes Indenture, and all other Senior Debt) at a price in cash equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase. Additionally, if we undergo a Fundamental Change (as defined in the 2027 Convertible Notes Indenture), subject to certain conditions, we may be required to purchase all or any portion of the 2027 Convertible Notes for cash. The Fundamental Change purchase price will be 100% of the principal amount of the 2027 Convertible Notes to be purchased, plus any accrued and unpaid interest, including additional interest, if any, to, but excluding, the Fundamental Change Purchase Date (as defined in the 2027 Convertible Notes Indenture). The Fundamental Change definition excludes ownership of our equity by Lancer Capital LLC and its affiliates.

Current wording

The Company, the guarantors party thereto from time to time and U.S. Bank Trust Company, National Association, as trustee (in such capacity, the “2027 Convertible Notes Trustee”) and collateral trustee, entered into an indenture (the “2027 Convertible Notes Indenture”), dated as of August 4, 2025, governing the 2027 Convertible Notes. If we complete certain asset sales, the 2027 Convertible Notes Indenture may require us in certain circumstances to make an offer to purchase the 2027 Convertible Notes with the net cash proceeds from such an asset sale at a price in cash equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase. Additionally, if we undergo a Fundamental Change, subject to certain conditions, we may be required to purchase all or any portion of the 2027 Convertible Notes for cash at 100% of the principal amount to be purchased, plus accrued and unpaid interest, including additional interest, if any, to, but excluding, the applicable purchase date. The Fundamental Change definition excludes ownership of our equity by Lancer Capital LLC and its affiliates.

Previous wording

The 2027 Convertible Notes Indenture contains customary events of default, including cross-default provisions with other INNOVATE debt instruments, which could, subject to certain conditions, cause the 2027 Convertible Notes to become immediately due and payable, including, but not limited to defaults by us in the payment of the principal of any the 2027 Convertible Notes when the same becomes due and payable at maturity, upon acceleration or redemption, or otherwise or in the payment of interest on any note when the same becomes due and payable, and the default continues for a period of 30 days; failure to comply with certain other covenants in the 2027 Convertible Notes Indenture for a period of 60 days following notice by 2027 Convertible Notes Trustee or the holders of at least 25% in aggregate principal amount of the 2027 Convertible Notes then outstanding; failure to pay or otherwise default on material debt; or failure to pay final judgments entered by a court or courts of competent jurisdiction aggregating $20 million or more (excluding amounts covered by insurance), which judgments are not paid, discharged or stayed, for a period of 60 days; and certain events of bankruptcy or insolvency.

Current wording

The 2027 Convertible Notes Indenture contains customary events of default, including cross-default provisions with other INNOVATE debt instruments, which could, subject to certain conditions, cause the 2027 Convertible Notes to become immediately due and payable, including, but not limited to defaults by us in the payment of the principal of any of the 2027 Convertible Notes when the same becomes due and payable at maturity, upon acceleration or redemption, or otherwise or in the payment of interest on any note when the same becomes due and payable, and the default continues for a period of 30 days; failure to comply with certain other covenants in the 2027 Convertible Notes Indenture for a period of 60 days following notice by the 2027 Convertible Notes Trustee or the holders of at least 25% in aggregate principal amount of the 2027 Convertible Notes then outstanding; failure to pay or otherwise default on material debt; or failure to pay final judgments entered by a court or courts of competent jurisdiction aggregating $20 million or more (excluding amounts covered by insurance), which judgments are not paid, discharged or stayed, for a period of 60 days; and certain events of bankruptcy or insolvency.

Previous wording

The original 7.50% convertible notes (the "2026 Convertible Notes") were issued under an indenture dated February 1, 2021, between us and U.S. Bank, as trustee. As discussed above, on August 4, 2025, pursuant to the Exchange Agreements, we exchanged $48.7 million aggregate principal amount of the 2026 Convertible Notes for new 2027 Convertible Notes. Subsequent to the exchanges and, as of March 31, 2026, the we have $0.2 million aggregate principal remaining of the 2026 Convertible Notes.

Current wording

The original 7.50% convertible notes (the "2026 Convertible Notes") were issued under an indenture dated February 1, 2021, between us and U.S. Bank, as trustee. As discussed above, on August 4, 2025, pursuant to the Exchange Agreements, we exchanged $48.7 million aggregate principal amount of the 2026 Convertible Notes for new 2027 Convertible Notes. Subsequent to the exchanges and, as of June 30, 2026, we had $0.2 million aggregate principal remaining of the 2026 Convertible Notes. As of June 30, 2026, the remaining 2026 Convertible Notes had a net carrying value of $0.2 million. The effective interest rate on the remaining 2026 Convertible Notes as of June 30, 2026 was 3.0%.

Previous wording

On August 4, 2025, the Company and MSD entered into an Eighth Amendment to Credit Agreement, which among other things, extended the maturity of the 2020 Revolving Credit Agreement to September 15, 2026, and added a new $0.4 million extension fee that is payable on the earlier of maturity date or date of prepayment of the debt. The $0.4 million extension fee and third-party legal costs of $0.3 million incurred under the amendment are being amortized into interest expense over the term of the Revolving Line of Credit.

Current wording

On August 4, 2025, INNOVATE and MSD entered into an Eighth Amendment to Credit Agreement, which among other things, extended the maturity of the 2020 Revolving Credit Agreement to September 15, 2026, and added a new $0.4 million extension fee that is payable on the earlier of maturity date or date of prepayment of the debt. The $0.4 million extension fee and third-party legal costs of $0.3 million incurred under the amendment are being amortized into interest expense over the term of the Revolving Line of Credit.

Previous wording

For the three months ended March 31, 2026, interest expense recognized relating to the CGIC Note, including the contractual interest coupon and amortization of the discount, was $1.7 million. During the three months ended March 31, 2026, in accordance with the terms of the amended CGIC Note, $1.9 million of interest was capitalized into the principal balance. As of March 31, 2026, the total carrying amount related to the note was $48.5 million, inclusive of $47.8 million of principal (including capitalized interest) and a net unamortized premium of $0.7 million.

Current wording

For the three and six months ended June 30, 2026, interest expense recognized relating to the CGIC Note, including the contractual interest coupon and amortization of the discount, was $1.8 million and $3.5 million, respectively. During the six months ended June 30, 2026, in accordance with the terms of the amended CGIC Note, $3.8 million of interest was capitalized into the principal balance. As of June 30, 2026, the total carrying amount related to the note was $50.3 million, inclusive of $49.7 million of principal (including capitalized interest) and a net unamortized premium of $0.6 million.

Previous wording

The terms of the CGIG Note include a mandatory prepayment requirement which requires us to prepay the CGIC Note (together with all accrued and unpaid interest and all other amounts payable under the CGIC Note), after the indefeasible repayment and satisfaction in full in cash of all obligations under the 10.50% 2027 Senior Secured Notes, the 10.50% 2027 Senior Secured Notes Indenture, the 2027 Convertible Notes, the 2027 Convertible Notes Indenture and all other Senior Debt (or, in each case, under any refinancing indebtedness in respect thereof), upon the occurrence of an Asset Sale (as defined in the agreement), in an amount equal to the Net Cash Proceeds (as defined in the agreement) from such Asset Sale, with such prepayment due no later than two (2) Business Days after the receipt of such Net Cash Proceeds by us(or our subsidiary, if applicable) from such Asset Sale.

Current wording

The terms of the CGIC Note include a mandatory prepayment requirement which requires us to prepay the CGIC Note (together with all accrued and unpaid interest and all other amounts payable under the CGIC Note), after the indefeasible repayment and satisfaction in full in cash of all obligations under the 10.50% 2027 Senior Secured Notes, the 10.50% 2027 Senior Secured Notes Indenture, the 2027 Convertible Notes, the 2027 Convertible Notes Indenture and all other Senior Debt (or, in each case, under any refinancing indebtedness in respect thereof), upon the occurrence of an Asset Sale (as defined in the agreement), in an amount equal to the Net Cash Proceeds (as defined in the agreement) from such Asset Sale, with such prepayment due no later than two (2) Business Days after the receipt of such Net Cash Proceeds by us (or our subsidiary, if applicable) from such Asset Sale.

Previous wording

The term loan and borrowings under the DBMG Credit Agreement bear interest at a rate per annum equal to a SOFR Rate plus a variable spread based on a Senior Funded Indebtedness to EBITDA Ratio as defined in the agreement with an interest rate floor of 4.25% per annum. Interest is paid monthly on DBMG's revolving loans, and the effective interest rate on DBMG's revolving loans was 6.6% as of March 31, 2026. The DBMG Revolving Facility has an unused commitment fee of 0.50% per annum times the average daily unused availability under the line. Principal payments and interest on DBMG's term loan are paid monthly, and the effective interest rate was 7.2% as of March 31, 2026.

Current wording

The term loan and borrowings under the DBMG Credit Agreement bear interest at a rate per annum equal to a SOFR Rate plus a variable spread based on a Senior Funded Indebtedness to EBITDA Ratio as defined in the agreement with an interest rate floor of 4.25% per annum. Interest is paid monthly on DBMG's revolving loans, and the effective interest rate on DBMG's revolving loans was 6.3% as of June 30, 2026. The DBMG Revolving Facility has an unused commitment fee of 0.50% per annum times the average daily unused availability under the line. Principal payments and interest on DBMG's term loan are paid monthly, and the effective interest rate was 6.9% as of June 30, 2026.

Previous wording

DBMG had availability for revolving loans of $124.2 million as of March 31, 2026.

Current wording

DBMG had availability for revolving loans of $129.2 million as of June 30, 2026.

Previous wording

The DBMG Credit Agreement contains usual and customary restrictive and financial covenants related to debt levels and performance, including a Fixed Charge Coverage Ratio; and a Senior Funded Indebtedness to EBITDA Ratio, both as defined in the DBMG Credit Agreement. The DBMG Credit Agreement contains a Change in Control clause, which would constitute an Event of Default, both as defined in the DBMG Credit Agreement, which could accelerate the maturity of the DBMG debt in the future upon certain events, including a sale of DBMG. As the Change in Control clause has not been triggered, the DBMG debt instruments remain classified as non-current as of March 31, 2026, except amounts due within the next 12 months, as originally defined in the DBMG Credit Agreement. DBMG is in compliance with its debt covenants as of March 31, 2026.

Current wording

The DBMG Credit Agreement contains usual and customary restrictive and financial covenants related to debt levels and performance, including a Fixed Charge Coverage Ratio; and a Senior Funded Indebtedness to EBITDA Ratio, both as defined in the DBMG Credit Agreement. The DBMG Credit Agreement contains a Change in Control clause, which would constitute an Event of Default, both as defined in the DBMG Credit Agreement, which could accelerate the maturity of the DBMG debt in the future upon certain events, including a sale of DBMG. As the Change in Control clause has not been triggered, the DBMG debt instruments remain classified as non-current as of June 30, 2026, except amounts due within the next 12 months, as originally defined in the DBMG Credit Agreement.

Previous wording

On August 4, 2025, Lancer Capital LLC ("Lancer"), a related party, and R2 Technologies entered into an Amended and Restated Senior Secured Promissory Note (the "Lancer Note"), which was previously amended multiple times as further described below, and which, among other things, extended the maturity of the note to the earlier of August 1, 2026, or the occurrence of (i) a Change of Control (as defined in the amended note) or (ii) the sale of all or substantially all of the assets of R2 Technologies. The Lancer Note can be repaid at any time with an optional prepayment of the entire then-outstanding and unpaid principal and accrued interest upon five-days written notice to Lancer Capital. The amended Lancer Note has an interest rate of 12% and removed certain exit and default fees. Accrued and unpaid interest is capitalized monthly into the principal balance.

Current wording

On August 4, 2025, Lancer Capital LLC ("Lancer"), a related party, and R2 Technologies entered into an Amended and Restated Senior Secured Promissory Note (the "Lancer Note"), which was previously amended multiple times as further described below, and which, among other things, extended the maturity of the note to the earlier of August 1, 2026, or the occurrence of (i) a Change of Control (as defined in the amended note) or (ii) the sale of all or substantially all of the assets of R2 Technologies. The Lancer Note can be repaid at any time with an optional prepayment of the entire then-outstanding and unpaid principal and accrued interest upon five-days written notice to Lancer Capital. The Lancer Note has an interest rate of 12% and removed certain exit and default fees. Accrued and unpaid interest is capitalized monthly into the principal balance.

Previous wording

As of March 31, 2026, the effective interest rate on the note, as amended, was 17.0%. Interest expense, including amortization of fees, related to the Lancer Note was $2.0 million for the three months ended March 31, 2026. For the three months ended March 31, 2026, in accordance with the 12% note agreement, $1.5 million of accrued interest, excluding exit fees and extension fees, was capitalized into the principal balance.

Current wording

As of June 30, 2026, the effective interest rate on the note, as amended, was 17.0%. Interest expense, including amortization of fees, related to the Lancer Note was $2.1 million and $4.1 million for the three months and six months ended June 30, 2026, respectively. For the six months ended June 30, 2026, in accordance with the 12% note agreement, $3.0 million of accrued interest, excluding exit fees and extension fees, was capitalized into the principal balance.