Good day, and welcome to the HC2 Holdings, Incorporated Second Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Brad Cohen of ICR. Please go ahead.

Thank you, operator, and good afternoon. We'd like to thank you for joining us to review HC2's second quarter 2019 earnings results. With me today are Mr. Philip Falcone, Chairman, President and CEO of HC2; and Mr. 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 invite you to follow along with our webcast presentation, which also can be accessed on the HC2 website, again, in the IR section in the PowerPoint presentation. A replay of this call will be available approximately one hour after the call. Before I turn the call over to Mr. Philip Falcone, 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 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 HC2's actual results to differ materially from those forward-looking statements. The risk factors that could cause differences are more fully discussed in our filings with the Securities and Exchange Commission. 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 the company's 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 not limited to, adjusted EBITDA, insurance adjusted operating income and insurance prepaid tax, adjusted operating income. Certain information required to be disclosed about these non-GAAP measures, including the 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. With that I'd like to turn the call over to HC2's Chairman, CEO and President, Mr. Philip Falcone. Phil?

Thank you. And good afternoon, everyone. Thank you for joining us today. As we did last quarter, I'm going to deliver a more high level overview of the quarter and then highlight a specific segment of our overall business to provide deeper insight into our strategy for that specific segment. 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 let's take a quick look at our overall performance in a newsworthy and successful second quarter. Core Operating Subsidiaries adjusted EBITDA was $34.8 million, led by continued strong performance from our Construction segment, which generated a 49% year-over-year increase in adjusted EBITDA. Another excellent quarter for our Insurance segment, which generated pre-tax adjusted operating income of $33 million bringing our six month total pre-tax operating income to nearly $62 million and net income for that same period to $64 million. In our Life Sciences segment Pansend's portfolio company R2 Dermatology announced it entered into a strategic partnership agreement with Huadong Medicine, a leading pharmaceutical company in China. Huadong now has exclusive distribution rights to sell R2's products in the Chinese and Asia-Pacific markets. Our Energy segment subsidiary American Natural Gas completed the acquisition of ampCNG adding 20 new compressed nat gas or CNG fueling stations located in the southeast and Texas to its portfolio making it one of the largest owners and operators of CNG stations in the U.S. This acquisition was fully funded at the portfolio company level hence HC2 did not incur any new debt at the holdco level or contribute any cash. The ampCNG stations are highly complementary to ANG's existing station network as there is essentially no overlap. It also positions ANG squarely in the growing Southeastern U.S. As we continue…

Thank you, Phil. And let's get right into our second quarter performance. Consolidated total net revenue for the second quarter 2019 was $518.6 million, a 4.4% increase from $496.8 million in the prior year period, driven by higher revenues from our Insurance and Construction segments. Net income attributable to common and participating preferred stockholders for the second quarter of 2019 was $9 million or $0.12 per fully diluted share, compared to net income of $54.7 million or $1.08 per fully diluted share in the prior year period. It's important to know prior period results benefited from $102 million onetime gain from the sale of Pansend's interest in BeneVir. At the company's Core Operating Subsidiaries, which comprises HC2's Construction, Marine Services, Energy and Telecom segments, adjusted EBITDA for the second quarter of 2019 was $34.8 million, compared to $40.2 million in the prior year period as the decline in Marine Services was partially offset by strong improved year-over-year performance at our construction segment. Total adjusted EBITDA, which excludes our Insurance segment grew 22% to $27.7 million in the second quarter of 2019, compared to adjusted EBITDA of $22.7 million in the prior year period. Year-over-year adjusted EBITDA was driven by the improvement at Construction and reduced spend at Life Sciences, Broadcasting and Non-operating Corporate. 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 second quarter 2019 of $23.1 million, up 49% from the prior year period. Construction continues to perform well for us driven by certain large-scale DBM Global commercial fabrication and erection projects as well as contributions from GrayWolf Industrial. As of June 30, 2019, backlog was $468 million comprised of $387 million of backlog at DBM and $81 million of backlog at…

[Operator Instructions] The first question will come from Sarkis Sherbetchyan with B. Riley. Please go ahead.

Good afternoon. And thanks for taking my question here. So you reaffirmed the guide for the Construction segment, now it implies roughly $40 million-plus in EBITDA in the second half. Can you share what you're seeing in your backlog? Maybe changes in the margin profile of your business being booked? Maybe what's kind of going on with regards to the health of the end market served either pluses or minuses? And I have some follow-ups.

Yes. Sure. As we kind of explained in previous calls, we fully expected the backlog to come down as we focus more on the smaller deals, smaller projects. We're not necessarily seeing a margin – any sort of substantial margin increase. But there's just a phenomenal consistency that we're seeing in the number of opportunities out there. And clearly we don't take every project that's put in front of us. And I think we've – Rustin and the team have proven that many times before. So where we could no doubt have a larger backlog, there's just certain projects that we don't want to do that from margin perspective are not doing it for us, but from a visibility perspective things are kind of going as we expected. We haven't seen any deterioration in margin quite frankly at all. So it's just kind of, I don't want to say business as usual at shop, but things are going quite well.

Good. That's helpful. Just kind of switching gears here to Marine Services, I know it's under strategic review, you gave us a little bit of color in the prepared comments. And Mike, I know you mentioned you'd expect the second half EBITDA to improve versus what we saw here in the first half. And if I look at the backlog disclosure it appears the installed projects are up nicely. Can you maybe you help us understand what kind of the second half contribution could look like? And then I have a follow-up as well there.

Yes. I think because of the sense there – because of the sensitivity around the sales process, we can't really discuss specifically the numbers, but that being said, we are very excited about the second half. I think clearly the install backlog increasing is a big plus. The maintenance business of course is the maintenance business, which continues to perform as expected. We haven't seen much of a pickup in the offshore energy of course because of oil, but at least it's not deteriorating. And there continues to be a what we continue to believe is a sizeable opportunity in offshore power. So it's – I'm kind of trying to give you some insight as to the excitement on the second half without going through numbers and we just can't do that. But we are very pleased of course with the sales process and the changes that we've made there. I think what you're seeing from a activity perspective is indicative of what we expected upon making those adjustments from the first go around. But listen, we're still very excited about this business. It's – it ebbs and flows, but not by virtue of issues in the business, it's just ebbs and flows because of projects and complexity of the projects and the timing of the projects. As you've seen last quarter they had a $20 million quarter – not last quarter, but last year this quarter. That volatility is unfortunately part of this business. And I think the buyers realized that and again, it's the good news is what you have to really focus on is that backlog and the backlog is probably as strong as ever.

And I think just touching on the sales process, you did mention multiple preliminary bids and attracting interest. We have seen that it's been kind of widely reported that Huawei wants to sell their stake in the HMN JV. Can you kind of comment on how that may impact Global Marines' process?

Yes, I think it's from a public perspective we've kind of – everybody has seen who they are in discussions with and the progress there and the – again, the interest around that project, around that company. I can't speak for Huawei and what their plan is, but clearly the HMN JV, if you really look under the hood it's an extremely valuable company. And so there's no question that whether it's the existing buyers at Huawei may or may not have lined up because of the attractiveness of the business and the backlog build and the – just the ongoing demand in that sector, there's no question that – my opinion that they would see interest from others if they didn't have the one entity kind of I don't want to say locked in, but at a point where they are in their discussion. It's just a – it's a great business actually.

And I guess moving to the Energy segment, I think you added some stations here and you did it at the subco level. Can you maybe give us some color or comments on the incremental sales or EBITDA the add-on stations brought to the segment? And maybe if the economics are kind of similar to your existing footprint or if it's better or worse?

Yes. I think one of the things in the ANG business is that you always want to increase your customer-base. And clearly we've increased capacity with the addition of the 20 stations, which means increasing the customer-base. And the possibility of those customers having distribution centers in – now in territories that we – where we have stations. And one of the things that we mentioned is that there's very little, if any overlap. And that could be very accretive if you've got amp having – that has a customer in their existing territory and they also have that customer in our territory, but we don't have the contract with them nor are they doing business with amp because amp doesn't have a station in our territory. So I think you're going to see and you could see some benefit, clearly some benefit from that. You've got your standard synergy because they're almost identical businesses in increasing capacity. And people – the bigger you get in this space, the better quite frankly because of who you're dealing with, they want the wherewithal, they want to be able to know that they can expand to other distribution centers. And while we have our station base today of 60-plus, even though that sounds small, it's one of the top, it's one of the most sizable in the industry and especially as it relates to CNG alone. So we like the model, we like the formula. The margins are very strong. And keep in mind we're not operating anywhere close to capacity and quite frankly not operating at even 50% capacity. So if you can – if you're generating EBITDA, positive EBITDA at 30% capacity or 20% capacity, as you fill up those stations and get more volume, the EBITDA contribution will be pretty phenomenal. So that's the – one of the rationales behind the acquisition. And the fact that we were able to do it and finance it down at the operating level without any means of financing from holdco I think is a big plus. And Anthony, down there has very strong relationships with some of the lenders and I think that's kind of typical of people getting comfortable with that space and looking at those stations and understanding the value behind them. So we think it was a great acquisition. We now are kind of positioned in the top one or two or three of them at the most, but I think you'll see some real excitement there going forward. We're very enthusiastic about that space.

Thanks. We’ll hop back in the queue.

[Operator Instructions] The next question will be from Nick Brown with Zazove Associates. Please go ahead.

Thanks for taking my question. You obviously have spoken on lots of recent conference calls about the importance of paying down holding company debt. I'm just sort of curious, I mean, obviously the Marine Services sale is – the timing sort of not necessarily under your control, but what about – why when you pulled any of the other levers you have at your disposal to reduce the principal of your debt or do you need all those levers just to make the semiannual interest payments?

No. I mean there's no question we have other levers. We feel confident in what's happening at Global Marine. It's a very good business. Clearly there were some nuances out of our control when we first launched. Outside of the market being a horrendous market in December and January, the whole Huawei association quite frankly spooked a lot of people. So we took measures to alleviate any concerns around that. And there's enough interest and enough momentum where we feel pretty comfortable. Now obviously there are no guarantees, but the good thing is we do have a few other levers and quite frankly you asked a good question, there we will do what we have to do to get this debt down. And I know I sound like a broken record on that, but we're determined and we don't feel like we need to announce that we're going down an alternative path just because of the progress we're seeing at Global Marine.

Okay. Thank you for answering that question.

Welcome.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Phil Falcone for any closing remarks.

Great. Well, thank you everybody for participating in the call today. As you know we are always here to answer questions and we will answer however we can within the metrics of what we're able to do. But thanks again and hopefully you'll be hearing from us soon on other exciting things happening here. Thank you.

And thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.