Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Q1 2019 HC2 Holdings, Inc. Earnings Conference Call. At this time all participants are in a listen-only mode. Following management prepared remarks’ we will host a question and answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call may be recorded for replay purposes. It is now my pleasure to hand the conference over to Mr. Garrett Edson, Senior Vice President of ICR. You may begin.

Thank you, Brian, and good afternoon. We'd like to thank you for joining us to review HC2's first quarter 2019 earnings results. With me today are Phil Falcone, Chairman, President and CEO of HC2; and Mike Sena, HC2's 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 with our webcast presentation, which can be accessed on HC2's website, again, in the IR section. A replay of this call will be available approximately 1 hour after the call. The dial-in for the replay is 1-855-859-2056 with the confirmation code of 2062747. Before I turn the call over to Phil, I'd like to remind everyone that certain statements and assumptions in this earnings call, which are not historical facts, will be forward-looking and are 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 HC2's actual results to differ materially from these forward-looking statements. The risk factors that could cause these differences are more fully discussed 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 measures under the SEC rules, such as but not limited to adjusted EBITDA, insurance adjusted operating income, and insurance pretax adjusted operating income. 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 also 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, Phil Falcone. Phil?

Thank you and good afternoon everyone. Thanks for joining us today. As we did last quarter, I'm going to deliver a more high-level overview of the quarter and then focus in detail on a couple of particular areas about which investors have been inquiring. Our CFO, Mike Sena, will then discuss the quarter's financial performance in more detail and then we'll open up the call for your Q&A. First, I want to take a couple minutes to speak about where we are today. As part of living and breathing everything about this company day in and day out, knowing what needs to be done, understanding what we can do and not do, we also realize that sometimes we may need to provide the market with important details regarding our strategy, which we hope to be able to today. Maximizing the value of our underlying assets and improving our balance sheet for the benefit of all stakeholders clearly remains our top priorities. Most important, however, is that we stay the course as we go down the path and not act hastily and be shortsighted when managing the underlying asset base, which continues to appreciate in value. Keep in mind, in just 4.5 years, we built a diversified permanent capital platform with seven value drivers. We started this from a shell with $40 million of cash and a discontinued telecom operation that was losing %4 million a year and have built it into a platform with nearly $2 billion in sales and growing. I want to emphasize that this is not something we inherited and not something we just stepped in and have been turning around. We created this platform through a pointed acquisition and build strategy and finance the growth with your help, and continue to believe that we will benefit…

Thank you, Phil and let's get right into our first quarter performance. Consolidated total net revenue for the first quarter of 2019 was $491.4 million, an 8.3% increase from $453.7 million in the prior year period, driven by higher revenues from our Construction Insurance and Marine Services segments. Net loss attributable to common and participating preferred stockholders for the first quarter of 2019 was $1.6 million or $0.04 per fully diluted share, compared to a net loss of $35.7 million or $0.81 per fully diluted share in the prior year period. At the company's core operating subsidiaries, which comprises HC2's Construction, Marine Services, Energy, and Telecom segments, adjusted EBITDA for the first quarter of 2019 grew 52% to $14.3 million compared to $9.4 million in the prior year period, driven by improved year-over-year performance at our Construction and Marine Services segments. Total adjusted EBITDA, which excludes our Insurance segment, was $2.8 million in the first quarter of 2019 compared to an adjusted EBITDA loss of $6.9 million in the prior year period. Improvements in year-over-year adjusted EBITDA were mostly spread throughout the portfolio. Now, let's just take a couple of minutes to go into a bit more detail at our largest segments. At construction, we recorded adjusted EBITDA for the first quarter 2019 at $12.4 million, up 24% from the prior year period. Construction continues to perform well for us, driven by several large-scale DBM global commercial fabrication and erection projects in the Western U.S. Most notably, the LA Rams/Chargers stadium and Google Bayview projects, as well as including a full quarter of GrayWolf performance at the segment. As of March 31, 2019, backlog was $559 million, comprised of $494 million of backlog at DBM and $65 million of backlog at GrayWolf. Adjusted backlog, which takes into consideration awarded but…

[Operator instructions] Our first question will come from the line of Sarkis Sherbetchyan with B. Riley FBR.

Thanks for the outline for all the liquidity drivers. I think you mentioned you expect to receive between $69 million and $79 million in cash just from the various components you outlined in the summary. Can you maybe help us understand when you'd be able to call up the cash from the insurance segment?

Those are -- when we talk about $69 million to $79 million, it's dividends, tax sharing, and management fees. The management fees are typically paid in the first month of the quarter. So for instance, in the first quarter -- and then there's a lag time. So we received $1.8 million of a management fee in January of 2019, which was for fourth quarter activity. In April, we received $3.1 million and again that's net of a management fee for the first quarter and that fee is - that increase in the fee was because of the Humana -- as a result of the Humana transaction. And of course, as you see assets continuing to increase with hopefully additional acquisitions along down the road, which we are always working on, this management fee is just kind of a standard fee that's paid the first month of the quarter.

Understood. So I think if we look at it on a pro forma basis, assuming you don't acquire anything else from the insurance side, $12 million seems to be, like, a baseline number that you can call up from the Insurance segment.

Yes, [indiscernible] number and that could move around a little bit. But also, too, keep in mind that we are not at peak on the assets of the insurance. We're collecting premiums daily or monthly and even if we didn't do another transaction, you'll see this portfolio increase in size and hence, large management fee as a result.

Got it. And it's nice to see that you're able to pull a dividend from DBM. Saw the press release this afternoon. I guess if we look at just kind of the reiterated guidance, anything to think about as far as seasonality for EBITDA generation?

Listen, the one thing that we've seen is good consistency from that team. They're probably the best operators around in that business and are as solid as one can get. First quarter is typically - has been typically kind of ho-hum and we saw that last year and saw that the year before and the year before that. So we feel just based on the backlog of what Russ and team have under their -- under wraps today. No reason to believe that there's any issue with hitting their projection.

Understood. And if I shift gears to Global Marine, it looks like pretty negligible contribution to EBITDA and I think you mentioned some factors. Can you maybe give us a breakout as to the impact for 1Q given those delayed projects? And then what's the order of magnitude? Maybe we see EBITDA jump here in 2Q or 3Q as those projects get delivered.

I'll let Mike give the details on that. But the one thing with Global that considering the scope of the projects and the dynamic around the projects is there continues to be lumpiness in this marketplace. That being said, it's still a very good business. They've been around for ages. Their backlog, as Mike has indicated, continues to improve. And listen, there have been some fits and starts over the first few years. But I think the company is very well positioned right now. And of course, with the new vessels that we've been able to acquire with these various, or to add to the portfolio with these various acquisitions, I think there was a little bit of pain that we experienced in the earlier years, especially last year. We're going to benefit or the company is going to benefit from that going forward. And so I think despite that lumpiness and despite the kind of seasonality, we feel pretty good about it. But Mike can kind of walk through the details from a numbers perspective.

Yes, Sarkis, I think when you look at where it comes from, typically in the first quarter in the winter, GMSL typically tends to be slower. If you look at where the income and loss came from, if you look at the equity method, investments, i.e. the joint ventures, they had a loss of $3.8 million for the quarter, where the core business had a profit of $3.9 million. And that's sort of where you get to the breakeven. So we know that HMN had some projects that slipped into the latter part of the year and that's what we were trying to explain, combined with the normal sort of seasonality of the Global Marine business. Does that make sense?

Yes, so just to be clear, go ahead.

And just to note on this, the one great thing about Global Marine is these telecom, these maintenance contracts. That's a phenomenal business and it gets a little bit masked from an overall perspective. But that in and of itself is a very, very, very valuable aspect to the business that we're very, you know, continue to be excited about and any potential buyers should be excited about. So what was your question?

Our next question will come from the line of Kurt Hoffman with Imperial Capital.

I wanted to make sure I understood the liquidity discussion. It sounds like excluding the BeneVir payment, which is obviously one-time in nature, we'd expect the holdco to see $60 million to $70 million of cash flow from the subsidiaries versus about $85 million of corporate costs, if I think about $60 million of interest expense at the holdco and $25 million of G&A. So there is an embedded shortfall the way the company is currently situated. Am I missing anything there?

Not necessarily, but keep in mind, there's bonus payments, bonus cash payments that you have to think about that could fluctuate from time to time. And also too, when you think of $69 million to $79 million of dividends, management fees, tax sharing, without going into detail on global on DBM, that entity is, in our projections, $75 million to $80 million of EBITDA. There's not a lot of CapEx there. There's a lot of cash that we could pull out and keep in mind, there's flexibility there. So when we talk about $60 million to $70 million to $69 million to $79 million, we're not squeezing the last couple nickels together.

Do you intend to draw on the remainder of that MSD revolver to pay the bond coupon coming up June 1?

We will draw on it. We plan to.

And during the last conference call, you talked about the ability to take a distribution from the insurance entity of about I think you said 10% of its surplus. Is that still a lever you can pull and is there any sort of regulatory approval that would be required before you could do that?

One of the things when we signed up and did these deals, there was a dividend, there was a structure around the dividends where we couldn't take out dividends. Clearly, when you're dealing with regulatory entities such as insurance companies, you have to, there's a regulatory process. There's no question. There's a regulatory process in nearly everything you do with an insurance entity. So yes, but the beauty of it is that that possibility is there today where 5 months ago it wasn't because of restrictions around it.

But maybe it's more of a last resort given you have to hop through those hurdles.

Yes, but we're not even, quite frankly, contemplating it right now because we don't need to.

And when I look at the DBM performance, $10 million of EBITDA in the first quarter versus $12.5 million in the first quarter of '19. But the first quarter of '18, you didn't have the benefit of GrayWolf, which I think is about a $20 million EBITDA business. So in theory, all else equal, I think we would have hoped to see DBM coming in at more like $15 million. Is there anything material going on there or is it just kind of timing?

Just timing. If you saw the numbers so far to date for the quarter, you wouldn't be asking the question.

And then lastly on the Broadcasting side, the debt deal you're looking at, is there still an intercompany loan running to the holdco from that entity and would that debt deal contemplate that loan being repaid?

Yes, there is still an intercompany loan.

What was that number again?

30.

And do you anticipate that getting repaid as part of a deal down there?

Not in the short-term. Not in this deal. There's no need to.

[Operator Instructions] Ladies and gentlemen, this concludes our question-and-answer session for today. I will now hand the conference back over to Mr. Falcone.

Okay. Thank you everyone again for joining us today. We hope that we provided some clarity on the liquidity and we're happy to give you the numbers for the quarter. And as always, if you have any questions, feel free to follow-up at your convenience. Thanks again for your time and hopefully, we'll be all talking soon. Thanks.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude our program and we may all disconnect. Everybody have a wonderful day.