Good day, ladies and gentlemen and welcome to the HC2 Holdings Q4 and Full Year 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference Ms. Ashleigh Douglas, Director of Investor Relations. Ma'am you may begin.

Thank you, Kelly and good morning everyone. Welcome to HC2’s conference call. We also invite you to follow along with our webcast presentation, which can be accessed on HC2’s website under the Investor Relations section. With me today are Philip Falcone, Chairman, President and CEO of HC2; Mike Sena, Chief Financial Officer; and Keith Hladek, Chief Operating Officer. As a reminder, this call cannot be taped or otherwise duplicated without the company’s prior consent. Before we begin, I will remind everyone that this presentation may contain forward-looking statements and as such are subject to risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically the most recent reports on Form 10-K, Form 10-Q and Form 8-K, which identify important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements. During the call, management will provide certain information that will constitute non-GAAP financial measures under the SEC rules such as pro forma adjusted EBITDA. Certain information required to be disclosed about these non-GAAP measures, including reconciliations with the most comparable GAAP measures, is available in the most recent earnings press release. With that, we’ll begin the call by turning it over to Philip Falcone.

Thank you, Ashleigh, and good morning, everybody and thank you for joining the call today. 2015 was a year of significant milestones for HC2. We are pleased to update you on the continued progress we've made building out our diversified holding company. On the agenda today I will start with a brief recap of the results for the quarter and for the year and we will also provide a few operational highlights from our primary operating subsidiaries and we will then finish with the Q&A. I am assuming that people have the presentation in front of them, so I'll be walking people through the presentation this morning that we put up on the site. So if you turn to Slide 4, which is the beginning of our presentation today, the year ended very strong. We are very happy about where we are and about what we've done for the year. The net revenues totaled $361 million for the fourth quarter and we reached a milestone of over $1.1 billion for the fiscal year, net revenues for fiscal 2015 increased nearly 105% when compared to fiscal 2014. And I think it's important for people to understand is how we think of our businesses and the key focus for us is the adjusted EBITDA from our Core Operating Subsidiaries, which totaled $26.7 million in the fourth quarter and $96.9 million for the full year. Those Core Operating Subs include Schuff which is in the Manufacturing segment, the Global Marine which is in Marine Services, ICS which is in Telecommunications, American Natural Gas which is in the Utilities and Continental which is in the Insurance. We view that as our core platform and of course we expect to expand on that platform over time. We do have Early-Stage, the Early-Stage investments which will…

[Operator Instructions] Our first question comes from the line of Umesh Bhandary with Jefferies. Your line is open.

Thank you for taking the questions. Maybe on the first and fourth operating businesses there, it obviously seems like those businesses have performed very well. Focusing on Schuff, you said the backlog is kind of flat sequentially, your revenue was pretty strong in the quarter. So can you maybe talk about a little bit in terms of the trends for booking in the quarter and how do you see that trend going forward in terms of bookings?

I think the guys will tell you there's more opportunity than you can kind of shake a stick out there and we are looking at and we continue to book as we moved into 2016. I think one of the beauties of this is that these guys have a successful track record of stadiums, focusing on stadiums and if you think of opportunity set in and of itself of stadium builds there is only a few people that can do that. I heard the other day or was reading the other day that the Phoenix Suns are looking at building a stadium in the Arena. The Sacramento Kings building, the Golden State is building, the new Los Angeles Rams are building a stadium. So just in that entertain -- sports and entertainment segment alone there is huge opportunity. We are seeing some movement in Las Vegas and these guys cut their teeth in Las Vegas in the 80s. We are seeing some opportunities there. And the technology in healthcare market is strong as -- is extremely strong. Now that they are focused on building the right projects, they are focused on building and bidding on the right things. So we are exceedingly happy with that pipeline there and we also are looking at expanding into different parts geographically. We are typically not as strong in the Midwest. We looked at some acquisitions in the Midwest but people want too big a multiples. We are trying to be disciplined. We don't need to do that. We can build organically if we can't buy right. So the combination of moving into areas geographically as well as some of the very high-end projects that we are seeing is very, very exciting. So we are pleased with the opportunity set there and look forward to a big 2016 from these guys.

Got it. And one other thing that you guys have done well in that business is obviously in terms of expanding the margins. So how should we think about the margins going forward and what kind of hedging do you have in terms of EBIT and net margins?

Historically these are not super high-end margin -- it's not a super high-end margin business. We're just bidding on the right projects. You can -- I guess you can -- it depends on which project that you are focused on. The more design and engineering and complicated the project you are going to see a little bit higher margin. We like to think that we can continue with these types of margin businesses, but -- and we are optimistic on continuing with this trend. But it's all about the project that we are bidding on. You are not going to get this kind of margin building the distribution center in the middle of nowhere, but the more complicated projects they are there. I mean you are not going to -- I don’t want to say you are not going to see margins go to 20% but we are very happy with and think that we can be at or close to where we are plus or minus a point or two. I think these guys have no -- they are very technical in how they look at some of these things and pass on a lot of projects because of the margin. So we feel pretty good about that.

Got it. Then just quickly switching over to the Marine business. You have been obviously you are talking about some of the slide coming in from the weakness in the oil and gas industry there. But I'd like to know, should we think of sort of like this $40 million of EBITDA is kind of the trough in that segment or how should we sort of think about that into the potential downside in that business?

Well we don’t want to give forward projections and I want to be upfront about that. But we think with the addition of CWind and with the contracts that we have in place that we could be close to those types of numbers. There is -- one of the areas of growth that we expected when we first bought it was the oil and gas -- obviously the oil and gas offshore market and it's not there. And we had made up for it I think with -- not I think, we have made up for it and have seen improvement in other areas, i.e., the offshore power which is more up -- we think there is more opportunity there than we believe. And also this -- again I don't want to see [parking] on it, but the opportunity set in Huawei and Marine Networks and our relationship there, we could see some pickup and continued pickup there and we expect continued pickup there. So I don't want to tell you that, yes, we are going to be at or close to but I think we believe we should be within a stone's throw. It could be some little bit of volatility there but we are cautious. But we are cautiously optimistic I guess I would say.

Got it. You seem pretty excited about the potential value within the JV. How should we sort of think about it? Is there kind of a framework that you can provide in terms of how to think about the value from that JV?

Well I would encourage you to look at -- I think I can disclose this. The revenue base was like $200 million, almost up from, I don’t want to say nothing, but there -- the numbers were disclosed and we don't disclose the numbers. The numbers were disclosed in the Huawei 10-K, under Huawei Marine Networks. But this business just got started and the -- Huawei is a massive company and they are not doing this to the small players in this industry. So we have a very good -- I believe we have a very good relationship with them and are working very closely with them and they value our approach and our management team and the services that we provide. So we are very value-added to that but we are very excited about it. And believe that they are going to really drive that business. I can't really go into any more details than that, but you can kind of see what they -- how they are looking at the business from their 10-K that is disclosed.

Got it. One final question for me, obviously the Insurance business is somewhat new to the platform here. How are you sort of thinking about how that might contribute this year's earnings and profits maybe especially in '16? I don’t want you to provide the guidance but just maybe just to thinking about that you do expect that to be a somewhat material contributor or is that not going to be the case?

We look at the Insurance business as being as kind of [Biggie the dog] contributor but we fully expect that we will be able to gross that capital which is really the name of the game there and we are doing things in -- I should say the team is doing things a little bit differently and we are seeing some savings and I think it's all about the platform and the synergies of additional books of business. But there is a real opportunity here to really build the value in that unit and also to not only build the value for us but I think as we look at the business differently, I think the people that are on the other side from a claims perspective. Our objective is to really run the business so you don't have to have rate increases. That's that crux of how we are thinking about it. We want to bring something to the table. How can we bring something to the table, we are focused on it. We are doing things a little bit differently but when it's not a core focus you don't pay attention to it. Now I will just have to go back to the regulators and ask for a rate increase. We don't think that should be the case. We are not quite there, but we think that there is an opportunity for us to bring something different to the table. So for us it’s all about building the capital base. That's how we think we can build value and of course we are -- our focus there -- our focus as well on net income with this particular entity and we think we will get there. But it's definitely going to be I think an exciting opportunity because of some of the dislocation in the marketplace. And I like situations like that. I don’t mind volatility, because with volatility comes opportunities.

Got it. Thank you for taking the questions, I will step back in queue.

Our next question comes from the line of Bradd Kern. Your line is open.

The first question is also on GMSL, on China Telecom JV with Huawei. How do you think of that asset being the path there, seeing you are the minority. So you are at 49% as it produces a lot of cash for a lot of the activity there. How do you -- I reckon you can talk about how much actual cash is on the balance of [indiscernible], but how do you actually access that cash balance? First question.

Yes. I mean I can't really talk about how much cash is on the balance sheet, but there is a decent amount of cash on the balance sheet. It's all about from a budgeting perspective we have -- we are not a -- I don’t want to say a silent partner with them. So we have an active say in the business. Clearly we want to continue building that business over the long-term. We never expected to see major cash dividends coming up and now we are in a position where we think over time we could see a lot of value there and you have to be -- believe me you asked a good question, you have to be able to extract it. And we think working closely with Huawei at some point we will be able to. I don’t think that's a concern of ours. But it's not something that we are very focused on now because of the growth that we are seeing and we don’t want to stifle that business. We want to make sure that there's a lot of fuel there and that they have the appropriate flexibility and from a cash wherewithal. So maybe at the right time, I haven't really discussed in detail with Dick and Ian. But we are kind of looking at this long term building value and I guess at the right time you will see some dividend, if that's the way they look at it, but for the time being we are seeing enough growth there where -- and it's something that we didn't expect. We didn't focus on, maybe it's just me. I didn’t really put a lot of value on it in the couple of years ago when we first started looking at this. But I'm not thinking about okay, there is cash there let's take it out. Yes, there is cash. The cash is instrumental in building that business. My guess at some point we will, probably Huawei and the team will be kind of looking at each other, okay, so maybe it's time to take out a dividend or something like that. So I think that's -- I don't know if that answers your question, but that's how I am thinking about it.

That's very helpful. And then moving over to the Life Sciences businesses. When do you expect that value to show up within HC2, where it gets to -- at some point you get to provide people data that that, I mean how would you expect to, nothing [indiscernible] but biotech analysts are waiting to invest, but then you have to hire a biotech analyst. I mean at what point you will be able to say [indiscernible]?

That's a very good question. I am not a biotech analyst, which is why I brought in two people who are clearly smarter than me when it comes to that type of business. But I understand the value when I see it and I am hoping that you will see something in 2016. You can't push these things but -- and without going into too much detail I would suspect that you will see something, one of them in 2016 start really developing and moving and moving pretty rapidly. And there's others that are going to take a little bit of time. But there's one in particular that we are very excited about and ahead of where we thought we'd be. So I'm -- I would suspect you will see something in 2016. I believe by the third quarter.

A couple of housekeeping questions. Can you -- maybe on this, but can you share what the year-to-date [indiscernible] is at Schuff?

I don’t think I can go into that detail, but there again based on what I have said I think we are in very good shape. My guess is it's probably close to what you're seeing, what the fourth quarter was just by virtue of burn and additions. So it's not -- without giving you a number it's not dramatically different and we are -- if you put the existing year-end number as a plug you are not going to be far off.

Then final question, just on adjusted EBITDA for the quarter. What is the $2 million other asset that's in there, sort of the balance?

Which slide is that?

That is -- I am digging out of the press release. It's Slide 16 really at the bottom of that?

That's the $1.9 million.

The $1.93 million.

That's the -- so Life Sciences is obviously a unit and within that unit we have four investments. The non-operating corporate overhead is the $2 million. So it's almost like you have to think of it’s a couple of million bucks a year to run that business, not taking into consideration the EBITDA of the underlying subs. It's almost like a Holding Company for the underlying Life Sciences subsidiaries. That's what that is.

So why is that -- why doesn't that add back [indiscernible] quarterly costs to the subsidiaries?

Well we didn’t look at it as an add back. We are actually netting it out of just a -- we're actually netting it out as an expense.

I am sorry, the $2.193 million on Page 16 at the bottom.

Page 16 of the press release or Page 16 of the slide.

Of the presentation.

Yes, I am looking at $1.944 million.

The last line of the quarterly -- of the fourth quarter adjusted EBITDA breakdown.

Sorry, I was looking at the $1.944 million, sorry my mistake. Mike do you have the detail on that or can you?

Yes. Those are restructuring related costs related to the layup of vessels for the first part of [2015] that won't recur. So they are non-recurring costs.

Okay. That's helpful. All right. Thanks guys.

Sorry Brad I was looking at the wrong number.

Our next question comes from the line Daniel Gurvich with Beach Point Capital. Your line is open.

Thanks for taking my question. A couple of quick ones. So for Global Marine it seems that this is the second quarter at least according to my calculations that revenues trending down but EBITDA is trending up. Could you give us a little bit of color just on a quarterly, Q4, like what's going on there and what's causing the margin expansion?

Well, you have to think of, when you are looking at the Global Marine business typically in maintenance you are getting slightly better margins and over time you don't have the OpEx associated with actually installation. So you will see a stronger margin business from just the standard maintenance contract that you allocate over time. It's a little bit different than when you're out trenching or drilling where you can run into slowdowns or issues. So I think that mix of business is the rationale for the difference in margin. It just brings up the other point of what I was saying that the installation business has slowed and the maintenance business continues to improve and be strong. And you will see -- if you that trend continuing you will see the top line go down but you'll see margin improvement as a result because of the difference in margin between installation and maintenance.

In terms of the maintenance contract, so should we think of it as kind of substantially replacing the weakness in installation or is that should we think of it more of as an incremental to the current revenue base, like what's the trajectory in terms of the process going off and this one coming on?

Yes. No question about it, it is a very good question. We are a little bit disappointed with the installation and I think that part of the business is still under a little bit of -- I don’t want to say, pressure is probably too strong of a word, but it is not as robust as we expected. I'd like to think that the maintenance contracts that we get and we have received will make up, they are clearly making up for it. We are not quite 100% making up for it. If that makes any sense. So if you lose a $1 from not installing, we like to think that you can make it up with $1 of installation -- maintenance. We are not quite there. We are not quite there. We are close and I think with some of the things that we are seeing in CWind we are going to be close, but we are not quite 100% there. Not awful lot but not quite there.

And when you say replace -- the $1 to $1 replacing is that on top line or is that on EBITDA? Those actually will be -- the maintenance contracts should be very helpful in terms -- more helpful in EBITDA?

Yes. You are 100% right. Not quite there on EBITDA. I think we are pushing hard to get there but we are not quite there.

Last question I had on Global Marine, with the Huawei JV do you currently recognize that EBITDA in the balance sheet or do you not consolidate it and so it's not there [on adding back]?

We have to consolidate it, so we consolidate a piece of it.

Thank you. [Operator Instructions] We have a follow-up from the line of Umesh Bhandary with Jefferies & Company. Your line is open.

Just one quick housekeeping question. In terms of the cash balance seems like the holding company is about [$142 million] but in the balance data you just number of a $158 million and that went up from $81 million last quarter. So how should we sort of think about that cash?

The $158 million is inclusive of cash at the consolidated subsidiaries.

And then really just [indiscernible] amount of cash sitting on the balance sheet, how do you -- I mean I am sure you guys are looking at several potential investments or potential M&A. what is really the kind of minimum cash you think you need to keep on the balance sheet?

We -- its just kind of -- it varies. We obviously need cash to fund our operations and we are comfortable where we are now. We will look to building a little bit more cash over the next few months, number of months. But we don't need to sit on a $500 million cash balance, or $100 million cash balance, I think. I tend to try to run as lean as possible and depending on the opportunity set we will look to raise cash by opportunity. But we will look to raise a little bit of cash over the next three, four, five, six months and are kind of looking at a different -- couple of different things and couple of different alternatives. But we also have to make sure that the subs have adequate cash. So it's a delicate balance between extracting cash and making sure that they can run their businesses and don't forego on opportunity because we need to raise -- we need to have cash to be something else. It's accretive for us to think that we could make an acquisition in steel versus going to do something else. It's -- we balance -- that's a constant balance for us because a very important part of our business is going to be bolting-on acquisitions, because that's where -- once you get the platforms then you can steamroll ahead. And we are very focused on that. So the cash is not quite fungible in that sense but it is in a certain -- to a certain extent it is. So it's a little bit of a delicate balancing. We are constantly monitoring it. But it's not like we need cash to go out and make acquisition like the second. Some of the acquisitions, some of the things that we are doing are not small and looking at are not small, so whether we have an extra $20 million or $50 million in cash on the balance sheet is I think for me is kind of irrelevant and doesn't get me where I want to go anyhow.

You alluded to potentially raising some cash opportunistically. Any sort of indication on how you might do that?

I wanted to get this -- our 10-K is done and we had a lot of cleaning up to do. And we have been very varying on this. But now that we have -- now that we can start, I don’t want to say, forward-looking, we are always forward-looking but now we can spend a little bit more time thinking about it and thinking about the right way of doing it and looking at what we have on the table in terms of opportunities and what we need, what we don't need. I don’t want to just go out and raise cash for the sake of raising cash. I do like to think that we -- and you always need some cash to fund your operations. But for the right situation I’d like to think that we could come to the market for the right situation and kind of do a combination. So we are looking at a number of things right now and are kind of balancing the timing of do we go out and raise $5 million or $10 million or $20 million or do we need to look at one of the acquisitions and figure out we need $50 million or $100 million. I am just being theoretical but that's how we kind of look at it. So we try to run it a little bit lean in the short-term just because of the cost to capital.

Thanks so much for taking my questions.

Thank you. Our last question comes from the line of Kurt Hoffman with Imperial Capital. Your line is open.

Can you share any thoughts you might have about timing of when the Holding Company could achieve kind of free cash flow either positive or neutral and do you think you can do that with the current spread of assets or is that you are going to require an additional kind of free cash flowing subsidiary?

It's going to take a little bit of time. We went kind of through this same, I don’t want to say, growing pain, here at HRG, but it just takes time and we have a little bit different cap structure there than we do now. But clearly that is the objective. We are probably one acquisition away from doing that. But we have that on our bulletin board zeroing in on that as a key next step for us. We are not quite there but we have adequate resources, so that we don't have any problems, but ultimately how you want to run this business is dividends or other matching and exceeding your day-to-day liability. So that's one part of running the business that we are very zeroing on and we are not quite there, but I am confident we'll get there. But that's clearly a top priority for how I think about running the business. And you bring up a good point that, one of the criticisms of how we built this thing is we spent too much money on some of the non-cash flowing entities. So -- and that's why as I mentioned kind of that Other, we are not focused on that. We have our kind of just [indiscernible] the water. The focus for us now is we are looking at one or two other things in Healthcare and Life Sciences and I think what those guys are doing is fantastic and hope to be able to extract some value, that will possibly get us to what you’re the point of your question. But from a dividend perspective we are -- from a core perspective we're getting closer but we are not quite there. And how I think about like the next acquisition and the next thing that we are working, we have got of things that we are zeroed in on, that is a key and critical component.

Well best of luck and thanks.

Okay. Thanks.

Thank you. I'd like to turn the call back over to management for closing remarks.

Okay. Well thank you for your time. I know it's taken a little bit longer than we had hoped, but thanks again for your time. We are glad and sorry we waited until the last day, as you know we have a lot of housecleaning to do and we have really taken I think some right steps there and the team has done a super job. We are in a good spot now and thank you for your time. If you guys have any ongoing questions just feel free or give us a shout and hopefully we can help you with any additional information or questions that you have. So thanks again everybody and hopefully we will continue our dialog as we move forward building this business. Thanks.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day.