Good afternoon and welcome to the HC2 Holdings, Inc., First Quarter 2020 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I'd now like to turn the conference over to Garrett Edson of ICR. Please go ahead.

Thank you, and good afternoon. We’d like to thank you for joining us to review HC2’s first quarter 2020 earnings results. With me today, are Phil Falcone, President and CEO of HC2; and Mike Sena, HC2’s Chief Financial Officer. This afternoon's call is being webcast on our Web site 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 Web site, again in the IR section. The replay of this call will be available approximately 1 hour after the call. The dial-in for the replay is 1844-512-2921 with confirmation code of 10143550. 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 being made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 including among others statements related to the expected potential impact of the novel coronavirus COVID-19 pandemic and the related responses of the government and HC2 on our business, financial condition and results of operations in any such forward-looking statements whether concerning the COVID-19 pandemic or otherwise involve risks assumptions and uncertainties. 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 thoroughly discussed in our filings with the SEC. In addition, the forward-looking statements are included in this conference call are only made as of the date of this call and as stated in our SEC report. 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 pre-tax 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 Web site. 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 President and CEO, Phil Falcone. Phil?

Thank you, Garrett, and good afternoon everyone. Thank you for joining us and we hope you and your families remain safe and healthy. And it's been a challenging couple of months for everyone since our last call in March as everyone has been touched in some fashion by this pandemic. We're especially proud of the tireless effort and dedication from our employees at HC2 and our subsidiaries as they seamlessly work remotely and on site when necessary to continue executing for our customers. On today's call, I'll walk through the impact of COVID on our businesses, as well as our recent progress on our top priorities of debt reduction and overhead costs. Our CFO, Mike Sena will then provide more details on our first quarter performance. And then we'll take some questions. COVID-19 has had an unprecedented impact on the U.S. and the worldwide economy. We have evolved from when we last spoke in March from an environment that was clearly starting to implement targeted lockdown in select areas to one that saw the virtual shuttering of the U.S. economy and shelter in place fed-ex for the vast majority of Americans. What once looked like a temporary shutdown migrated into a nearly six weeks shutdown in most states. And while we are beginning to see states reopen mainly in the South and Midwest, there are still a number of major states including California, New York that remain on lockdown for the foreseeable future. Well, we are all hoping for a V-shaped recovery, the ultimate impact continues to be increasingly challenging to predict and as such, we and our subsidiaries are keenly focused on liquidity for the near-term future as well as our fundamental priorities of debt and overhead reduction. In terms of our COVID-19 response thus far, we want to…

Thank you, Phil. Let's review our first quarter performance, consolidated total net revenue for the first quarter 2020 was 444.8 million compared to 449 million in the prior year period. As lower revenues from the insurance net of eliminations and construction segments were partially offset by increases in revenue from the telecommunications, energy and broadcasting segments. Net loss attributable to common in participating preferred stockholders for the first quarter of 2020 was 83.5 million, or $1.82 per share compared to a net loss of 1.6 million or $0.05 per share in the prior period. First Quarter 2020, net loss attributable to continuing operations was $0.85 per share, compared to the first quarter net income attributable to continuing operations of $0.04 per share. But the company's core operating subsidiaries, which now comprise of HC2's construction, energy and telecom segments, adjusted EBITDA for the first quarter of 2020 was 13.2 million, compared to 14.2 million in the prior year period, as improvements at energy were more than offset by reduced contributions from construction and telecom. Total adjusted EBITDA, which excludes our insurance segment was 1.4 million in the first quarter of 2020, compared to an adjusted EBITDA loss of 2.2 million in the prior year period, the improvement in year-over-year adjusted EBITDA during the first quarter was driven by reduced losses at the broadcasting and other segments and $1.1 million reduction in non-operating corporate adjusted EBITDA losses. Let's just take a couple minutes to go into a bit more detail in a few of our segments. At construction, we recorded adjusted a budget for the first quarter 2020 of $9 million, compared to $12.4 million in the prior year period. First quarter 2020 results were impacted by the timing of commercial project work under execution and seasonally lower contribution from industrial maintenance…

[Operator Instructions] And our first question comes from Sarkis Sherbetchyan of B. Riley FBR. Please go ahead.

Hey, good afternoon, and thanks for taking my question here. I will start off with the construction segment first. I know, you said the adjusted backlog was 781 million, nearing an all time high there? And how can we kind of reconcile that against the no new backlog awards stated on the call?

Well, that's the number as of March 31. I'm not quite sure how when you talk about reconciling.

So I think I heard in the commentary that you expect higher EBITDA in the second quarter versus the first quarter, is that correct?

Yes. That's typical. That if you look back over the last number of years, that's not a typical, first quarter is typically the lightest from an EBITDA perspective.

Yes. So the reason I'm using the word reconcile is because of the kind of pandemic updates so just trying to understand, I understand what's typical from 2Q versus 1Q, but given kind of the detailed release on construction and the pandemic and the lower, industrial services situation, kind of help us understand this time, the second quarter is going to be in line or better than the first quarter?

Well, I think as it relates to refilling the backlog that is more important for beyond the second quarter and the third quarter, if you get for instance in April, you get something if you're rewarded a contract if not like you start in May. So and that's one of the things with the backlog, there's very good visibility for over the next 12 plus months. But there's a lag time between getting a contract and then starting up that business. So, at some point where we believe we're in good shape now. But at some point, you have to fill up that backlog for future months or future quarters. I think, I'm not sure if that answers your question or not.

No. And then also, if you kind of step back and think about the historical margins that the construction business has generated, do you still think that margin profiles still kind of something that we should take into consideration as an or has that kind of been under pressure? Can you help us there?

Yes. From our best estimates and from our knowledge, we haven't seen any margin contraction per se. Again, it remains to be seen how future months and what that looks like, but there -- we haven't seen anything to give us pause or cause for concern around that.

Okay. Thanks for that. And I'll switch gears here into the broadcasting segment. You mentioned lower advertising kind of from heading into the pre-COVID situation. And if we kind of try to get a sense for when you'd expect the broadcasting to breakeven kind of given this changing environment?

Yes. I think as I mentioned from my first -- as I mentioned, from the perspective of broadcast, one of the reasons you've seen increased -- somewhat increased expenses is the number of stations coming online. For every station that comes online, you have expenses associated with it. You've got your utilities, you've got your tower rent, you've got your backbone expense. So if you bring on a tower or bring on a station today, you're going to be charged, you're going to incur additional expenses today. And by the time you fill that up there's again a lag time. So the business -- from a model perspective, we've actually built a lot more stations than we expected. I think as I mentioned, the number as of March 31 was 218 stations. I think we built maybe 80 to 90 plus stations over the past number of months. And it takes time to fill those up. So, it has slowed down, getting to cash flow breakeven, but that's the reason and our objective is not necessarily -- the key part of this is getting the platform complete and our goals are getting to the 250 station mark. So you will see some added expenses, but that's from a growth perspective and building out the stations, it's from a breakeven perspective. We've got a massive amount of capacity that we've got to fill up and we are doing a number of things, including working with various consultants on that. But there is a tremendous opportunity I don't want to give you a specific date, but that number of -- the negative number is not dramatic and is not unexpected. It is not an aberration from our goal, if anything, it's our engineering department doing much better than we expected. And I got an email today of a number -- few more stations coming online. So I don't think you're going to see anything dramatic on that bottom-line positive or negative over the next number of months. But, if you look at it from, again, from a station build perspective, we've been ahead of schedule on that and as a result, it is slowed down our breakeven number, but we're awfully, awfully close. But I just -- I don't want to be wrong and give you a bad time period. But it's not necessarily an aberration and what we expected internally.

That's fair. And I noticed there is kind of like over 30 active projects underway and if my calculation serves correct, like over 50 stations need to connect to the central cast system upgrade that you've basically been deploying it, maybe if you can kind of state, how much capital you'd expect to spend either kind of here in 2020, for broadcasting to achieve all of that, and then kind of how would that be funded given kind of the lack of cash flow here?

Well, I wouldn't say there's a lack of -- how you have to look at it as we do have cash on the balance sheet. We do have some flexibility with regards to the build out and slowing down the build out to make sure that one plus one equals two, so there's no cause for concern on that end. But if you look at from a station build perspective, we've got it down to about $160,000 for a station build, which is pretty darn efficient. Incorporating that station or not that necessarily that station but a station that's been online and putting it under central cast is about 15,000 to 20,000. So you're not looking at a lot of money as it relates to the CapEx necessary to get everything under central cash. I mean, there's granted there's no need to -- at this point, slow that down. But there's also no need to speed it up as well. I mean, we can operate just as efficiently under central cash as not, but it's just more -- it's more, I shouldn't say more convenient, but it is a bit more efficient because you're then delivering the content into one -- into one gateway. So it's more efficient to get every station under central cast, but it's not an absolute necessity. So we can manage that part of the business if we need to, if it looks like we need to manage cash flows, just like we can manage our build out. And then some stations are, if you're co-located, there are a lot less than 160,000. So there's things that we could do on that end, but we're getting down to a point where, we've got another 20 to 30 stations to get to our goal of the 250 and It's not necessary that we get that done, in two months or three months or four months, it's a kind of a high class problem to be in a position where we are because we have a pretty substantial amount of capacity. And there's been certain things that have slowed us down just from a pandemic perspective, finding, rigging units and getting everything on time from a labor perspective and making sure the various parties show up. Because there have been certain entities that have slowed down but, we're way ahead a plan on that perspective and we could slow it down accordingly, if need be, but at this point, there's no cause for concern there.

Okay. Thanks for the color. Just moving on to the insurance division. I know you mentioned again kind of in advanced discussions, and it sounds like you granted the party exclusivity. How should investors interpret the context you gave? Advanced discussions exclusivity? I mean, why bother even disclose that if we can't really get much more of an update?

Well, I mean, it's what we can disclose. So obviously, we want to try to be as transparent as possible. We just thought that we would be asked the question and quite frankly, we wouldn't have extended exclusivity, if we didn't believe there was a deal to be done, you don't just extend exclusivity for the sake of it. So I think that's indicative without going into too much detail of, yes, there's a rationale for extending that exclusivity and it's not to waste anybody's time.

Yes. And so you let's assume something happens. For example, in this quarter, right, regarding the insurance, how long would that take to close the sale? Obviously, there's regulatory things and whatnot, is that two quarters, three quarters, four quarters, can you maybe help us frame it, assuming a second quarter close, right?

Yes. Specifically it depends on the regulator's experience or comfort level with the buyer. When you don't have -- like, when we first stepped into it, we didn't have -- we weren't coming with the insurance platform. So it took us a bit longer. You could be looking at, three or four to six months plus or minus. I don't think that's out of the ordinary. The fact I think there's no reason to believe that this group that we're in negotiations with would have any issues over and above what a traditional insurance platform would face from a regulatory perspective, because they do have that experience. So I guess that, gives us comfort that the standard time could be three, four to six months. I wouldn't suspect in a while, I can't put my finger on it and say it'll be done within six months, or it'll be done in three months. I think that's reasonable to assume that one could suspect three to six months within that timeframe.

That's super helpful. And I'm going to switch over to marine real quick, I know that the business was sold, it's not core anymore. I guess on the 30% interest, that's going to be sold to Huadong and close your -- mentioned imminently close. How should we interpret the word eminently close?

Interesting, because we actually discussed that, we feel pretty good that it is going to close imminently that it's going to be in short order. We don't think that, I have to be careful with what I say but it's imminent means pretty soon, I guess.

I suppose the reason I asked is, how does that compare to the last calls, the first two weeks of April?

Well, you had people I think the pandemic kind of was in its relative infancy and clearly people's heads were spinning, but we're in different situation now we're in a different position now. There had to be -- there were certain steps that had to be taken for an app -- for closing, i.e., money transfers, et cetera that takes time. And when you get people out of the office and some entities shut down, you experience delay. I think we're at a point right now where we feel very good about from a timing perspective, where early April, it could have closed in one week, or it could take, four or five, six weeks because there were a lot of things that were unknown at the time from a timing perspective. We knew it was going to close. The question was, was it going to be the first week of April or the first week of June. So now it's to a point where based on what the events that have taken place and what things needed to be done. We're at the one yard line, quite frankly.

At this time, there are no further questions in the queue. I would now like to turn the conference back over to Phil Falcone for any closing remarks.

Okay. Well, again, thank you for your time today. I hope everybody is safe and healthy. And, again, we are very happy about the first quarter and especially that everybody on the team is safe. That is the most important thing. Furthermore, if you have questions that come up, over the next few days, you can always reach Mike or myself. So with that, thank you again and good evening.

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