Good afternoon and welcome to the HC2 Holdings First Quarter 2017 Earnings Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this call is being recorded. I would now like to turn the call over to Mr. Andrew Backman, HC2’s Managing Director of Investor Relations and Public Relations. Please go ahead.

Great Sarah, and good afternoon, everyone. And thank you for joining us to review HC2’s first quarter 2017 earnings. With me today are Philip Falcone, Chairman, President and CEO of HC2; and Mike Sena, our Chief Financial Officer. This afternoon’s call is being webcast on our website at hc2.com in the Investor Relations section. We also invite you to follow along our webcast presentation, which can also be accessed on the Investor Relations page of our website. A replay of this call will be available approximately one to two hours after the call. The dial-in for the replay is 1855-859-2056 with the confirmation code of 13442870. Before I turn the call over to Phil, I would like to remind everyone that certain statements and assumptions in this earnings call, which are not historical facts, will be forward-looking, and are being made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain assumptions and risk factors that could cause actual HC2 results to differ materially from these forward-looking statements. The risk factors that could cause these differences are more fully disclosed in our filings with the SEC. In addition, the forward-looking statements included in this conference call are only made as of the date of this call, and as stated in our SEC reports. HC2 disclaims any intent or obligation to update or revise these forward-looking statements, except as expressly required by law. During the call, management will provide certain information that will constitute non-GAAP financial measurements under the SEC rules, such as pro forma net revenue, adjusted EBITDA and operating income, or AOI. 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, which is available on our website. And finally as a reminder, this call cannot be taped or otherwise duplicated without the Company’s prior consent. Now, I’d like to turn the call over to HC2’s Chairman, CEO and President, Philip Falcone. Phil?

Thank you Andy. On the agenda today I'll start with a brief recap of the results for the quarter. Provide a few operational highlights from our core subs. And then finish up with a quick M&A. Hopefully, I'll try to move this along pretty quickly as I think the numbers pretty much speak for themselves here. And we're very excited about that. Let me start with a quick review of the quarter on Slide 4. As a general comment I would say the first quarter marked a very solid start to the year in a continuation of the many successes we had in 2016. During the quarter our portfolio performed very well, with many subs achieving significant milestones and accomplishments. In particular Rustin and the team at DBM had a another very solid quarter. And again posted near record backlog of almost $500 million, or $800 million inclusive of contracts awarded but not yet signed. And that's the benchmark that we like to monitor and that we've been talking about in the past. Dick, Ian and Global Marine team experienced very robust operating results for the quarter with solid performance from the core maintenance and power businesses, in addition to very strong results from their JV with Huawei Marine, which continues to perform very well. Needless to say we're very excited about what we've seen from both of these entities. Just continuing on Craig and the PTGi team continue to expand their business growing traffic volumes and increasing their roster of customers. We continue to see small dividends out of that entity which is quite promising considering that again, this was a business that we had when we acquired the entity. When we acquired the Shell, was discontinued ops. So the team has done really well here. Drew and American…

Thank you. [Operator Instructions] Our first question comes from the line of Sarkis Sherbetchyan from B. Riley Company. Please go ahead.

Yes good afternoon

Yes Sarkis, how are you?

Well thank you first Phil on the construction segment so you did talk about the design changes causing some delays. Can you maybe help us understand the timing as for those delays?

Yeah as typical this is not a – there's a little bit of seasonality here but some times depending on who the contractor is or who you're dealing with, they may take longer than what you would like on certain – in a certain situation. We fully expect that over the next quarter, we will see that back in-line and even above kind of a catch-up to where we kind of expected to be. So this is not a year delay. This is just like month or two month type of thing. Just so happened to, some of the changes that we expected were delayed by weeks or a month or so its nothing lengthy from a timing perspective.

That’s certainly helpful, you also noted the adjusted backlog figure, which is near $800 million, pretty impressive amount. With regards to the additional $350 million in potential new projects and if you were to receive any of those that's not included in the adjusted backlog of $800 million is that correct?

That is that is correct. Yeah it’s a very important point that that 350 as you could assume that we were we may have been thinking that we would get to 300 of the 350 and get to 500 - get to 800 but that 350 is not included in the 800 so you could see the backlog take another spike up. But obviously there's no guarantees there but you know there's no reason to believe that we shouldn't be. Participating in some of those ventures.

Done. That's very helpful. So one quick point also on the construction segment. Your competitor Canam is potentially going private here in a pretty significant valuation multiple any big differences as to what your construction segment does or kind of generates from a margin perspective versus what they do and you know maybe can you just talk about valuation disparity.

Yeah, I mean listen. Canam is very good company, we know them relatively well. There's no reason to believe that their business is dramatically different than ours. I would argue that we have a better run business quite frankly. So I think, from a core perspective, now they – everything that they can do with that jingle everything they can do we can do better. But now there are a very high quality firm. And very similar to what – their capabilities are very similar to ours and ours are very similar to theirs, so on and so forth. So we don't think it should be dramatically different.

And moving on to Marine if I may, you mentioned a figure of backlog over $330 million there, does that include the HMN JV and other JV or is that just for your piece of the business.

No that is just for our piece of the business, we do not include and I don't think that HMN backlog is public but it is, we know what it is. It's a pretty sizable number but it is not public but it’s not inclusive, it's not included in that $330 million number.

Right but given the strong performance for HMN, in particular I mean you'd expect to see that kind of flow through into your results over time as well, is that correct.

Yes. No question about it, I think that's a really exciting part of the overall business. You know that being said, I think the one thing that we are very, very, very, excited about is the offshore power market. And you know just reviewing the recent numbers that have come out and the projected. Projected build on that and considering we are how well positioned we are that I think an improved to be a real money maker for us. And again over and above what we ever expected to see, I think it's just the dynamic of what's happening in that market. When we had our recent board meeting, they were talking about, Ian mentioned that there were times when I think on average 30% of the UK power is from – generated from offshore markets today. That's pretty phenomenal and there are days when there are no coal fired facilities operating. Now I think that's what you're seeing in that market and the UK is only one part of it. So there is, I think people are really kind of taken notice and where it was years ago just something that people kind of did from a environmental perspective, I think people realized that hey guys this is a real business now and real opportunity and real potential. And oh by the way it works. So that has really changed, I know years ago I wasn't a big believer in that. But now you see that number of these guys are developing and have developed and what they can actually do and the fact that they're actually generating that much power it's a real business.

Yes, certainly seems like your business is exposed to the right side of the wave if I may. With regards to the Life Sciences component, I mean the patents for bio pharma, I mean that seems like a pretty interesting development. Just given, I guess you would call it the Gen 1 of a similar asset had a transaction a few years back. Any kind of way to frame or think about what that asset needs to go through to maybe commend a similar type of valuation in the marketplace. Just kind of framing your thoughts around that.

Yeah you know a very good question, I think we have to be very careful how we answer that because it is a developing aspect right now. And we are kind of looking at a number of different things in this space from a capital perspective and clearly what's happening there and the excitement around that product is creating inbound phone calls because the results are good. And people know it. And again kind of, by the way where it was a theory years ago, it's proving to be a factual effective way to treat cancer and to fight cancer. Given the fact that we have this, I think people are kind of looking at it and saying wow interesting, how did you do it, how did you get it and again Dave and Cherine kind of partnering up with the guys at BeneVir was a brilliant move. And we would not be able to do that same deal today, put it that way. Not even close. So our timing was right and our thesis of kind of going into this space and allocating some capital. Now obviously there is things that have to take place as we go forward, to really realize some of the value here but it's the type of thing where you don't have to have FDA approval to get real value for these things. And I think that’s the taking it to FDA approval is one thing and there are people certain people that are better at it than others. So will we just have to think about all that not rush to the exits because this is, it’s the real deal and the good news is we are now well aware of what it is, well aware of what it can do and well aware of the value around it and we're being I think very methodical in terms of thinking about what's next for that particular situation. But as I mentioned there are a number of in inbound phone calls that we have received but we're just taking our time and making sure that we do it right. And whether it's partnering with the right people or whatever or the right institution, but just a lot of T crossing and I dotting there. But we are all over it like a wet paper bag in making sure that it's being done the right way and Dave and Cherine have a done a super job with this thing.

Great a final one for me and I'll hop back in. With regards to the opportunity set to lower the cost of capital obviously the strategy as far as what you guys have communicated and kind of performed here with the different business piece are playing out pretty nicely. So any kind of peek at the opportunity set to do so.

Well I think the good news is that we have performed from a operation perspective. I think we are looking at. Certain things happening from I don't want to say a monetization but a real up further realization of our platform that we fully expect will help us ratchet down our cost of capital. In the short term and we're hitting all the right levels and doing all hitting the right things and metrics for operations, I think there are as I mentioned earlier a couple of things that we couple of more things that we have to do and that’s. We're optimistic that we will see some developments on the Pansend side and whether it's in R2 or MediBeacon or BeneVir, those are well ahead of where we expected they would be. And anyone could happen that we believe will be the catalyst or one of the catalysts for getting our capital in a position where we are happy with it. But there it's not just going to happen we have been – we have to actively manage the portfolio of companies in situations that we have. We're making sure that we do that but not being hasty. Just to do it.

Yes thank you for the that.

Thanks Sarkis.

Thanks.

To our next question please.

And our next question comes from the line of Kevin O'Brien from Jefferies. Your line is open.

Good evening. I had a couple of questions and I wanted to start if I could back it DBM. Obviously you've seen a tremendous growth in the backlog as well as, the awarded but not yet signed opportunities, and I was sort of wondering assuming that backlog sort of pulls forward and you can get some of that yet to be awarded into the awarded bucket. How do you manage the capacity going forward for DBM. How big can it be or become before capacity might become an issue if at all.

Yeah, it's a good question and its one thing that we've. Watched very closely, but the key aspect is around, what we call the swing capacity and when you're running an operation like this, you can do it one of two ways. You either have the fixed cost on the fixed capacity, that is great, and your margins might be a little bit higher. But then if it slows down or something happens, you're stuck with an over – with a higher overhead and I think that's one of the things that Chuck has been exceedingly well over the last number of years that the company has put in place from day one. And that's really the swing capacity working with other entities and other individuals. I won't say individuals, but facilities that have the capacity and the capability of maybe not doing the entire Wilshire building job that could do pieces and it's really piecing out certain business that Rustin and the team called the swing capacity, which allows a phenomenal expansion of the ability to capture, to grow the backlog from $800 million to $1 billion because people might say. Do you have plants all over the place?" No, you have the swing capacity because there is a number of guys in the industry and if you can do it effectively, you still get very attractive margins and it gives you tremendous flexibility where you're not just stuffing your plant to cover overheads. So you can really – if you were just operating in your one facility, how you think about it. You some time, some of these guys in a typical manufacturing companies they want a fill up the capacity and they made bid on jobs and not bid on jobs effectively and make some money just to fill capacity to cover over ahead. Well then when that jobs comes online that is exceedingly attractive with exceedingly excellent margins, you can't bid on it because your plant is full. So you kind of get stuck and that's the one beauty of how at least how Chuck runs their business. And it's kind of part and parcel to the ability to – really the part and parcel to the answering your question is really a function of the swing capacity. Now this, at some point, does that – do you fill up your swing capacity? Sure. But I don't think there's any cause for concern with that. But there's supply and demand dynamics and there's no issue right now that we see from even increasing another 20% or 30% of backlog basis. But that's the genesis of how we think about it and the ability to increase our book of business and really take revenue base from where it is to – or EBITDA base, from where it is to $70 million, $80 million, $90 million, without having that fixed capacity or fixed CapEx capacity.

Great. Thank you appreciate that. I wonder if you could go back to Global Marine as well, I wonder if you could expand upon or offer a little more color as to sort of what surprise you that actually you exceeded sort of the internal projections, if you will? Was it really the return into the power market? I think you've said on the last call that you expected 2017 to be somewhat soft on the telecom install, did the return of that market sort of offset some of that softness and how do we think about that going forward? Is it – obviously, it sounds like a great opportunity set, is that really the growth driver going forward?

Yes, it is in the short-term. I think that is – I think the power, the ability from just the maintenance perspective in the Power segment proven to be a bigger kicker than what we expected. And, of course, HMN had a very solid quarter as well but I think kind of just the combination of the two where we were a bit surprised on the upside was really more in the power sector. And, again, kind of look at the dynamics of what's happening in that business is kind of eye-opening. So we are very, very thrilled with just the fact that we positioned. I like to think that the management team had great foresight to step in and acquire CWind, which positioned us well for that marketplace on both the transportation and maintenance part. So yes, that power segment was very good.

Great. And maybe one last question, if I might. Back into life sciences, maybe using MediBeacon as sort of an example. Obviously, you've hit some important milestones and are continuing with additional Pilot work. Wondering if you could refresh what you're thinking might be – I know you had mentioned that there was some JV interests in potentially partnering up. Is it something you might be looking it to be more near-term as it progresses through the additional testing? Or is it more beneficial to sort of wait until a commercial viability is proven before you look to monetize that and I guess, wrapped up in that question is, is there additional funding that would be required for the testing going forward and that sort of precipitates the JV to step in?

One of the key aspects here and it's a very good question because one of the things that we didn't want to do when we looked at building out this area is being the ones who took it from point A to commercial. Because that could be – sometimes be a decent amount of capital and we have to – when we set out in this space, that wasn't the objective. The objective was to be a – I don't want to say an incubator from day 1, but maybe kind of step in early and step in where some of the bigger institutions are not there where their strengths are and kind of take it through one or two phases of development and then bring from a financial perspective, bring a partner into the picture. And that's exactly how were thinking about the business because we don't want to get into a position where we are funding, from a capital perspective, a commercial buildout of our two or MediBeacon. And it has nothing to do with our belief in the product or not belief in the product, it's just the strategy. And I think that's really important to understand that it is not the type of thing, from a capital perspective, that we are going to go down the path. And you know, hopefully from the one of the beauties of the setup we have, is that the financing characteristics of this setup and the structure we have will prove to be valuable to that strategy of finding, negotiating and closing the second kind of – or third stage groups, and they are out there that we'll take – help take it to the next level. Whether that means debt financing, preferred or additional equity is – it depends…

That’s great thanks I appreciate that insight, I think I’ll hop back out and allow some other questions and congratulations on the move up to the next.

Okay, thanks Kevin.

Thanks

Thank you, I’m showing no further question in queue. I would now like to turn the call over to Mr. Backman

Great thank you so much Sarah. And thank you Phil and thank you to everyone again for joining us this afternoon. As always our management team is available to speak with you. In fact, we will be participating in a couple of weeks at the B. Riley conference on the West Coast, so if some of you are there, please stop by. Should you have any follow-up questions, please do not hesitate to contact me directly at 212-339-5836. And Sarah could you please provide the conference replay instructions once again. Gave great day everybody.

Thank you.