HC2 HOLDINGS, INC. © HC2 Holdings, Inc. 2017 Corporate Overview March 2017
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Special Note Regarding Forward-Looking Statements. Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: This presentation contains, and certain oral statements made by our representatives from time to time may contain, forward-looking statements. Generally, forward-looking statements include information describing actions, events, results, strategies and expectations and are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans,” “seeks,” “estimates,” “projects,” “may,” “will,” “could,” “might,” or “continues” or similar expressions. The forward-looking statements in this presentation include without limitation statements regarding our expectation regarding building shareholder value. Such statements are based on the beliefs and assumptions of HC2's management and the management of HC2's subsidiaries and portfolio companies. The Company believes these judgments are reasonable, but you should understand that these statements are not guarantees of performance or results, and the Company’s actual results could differ materially from those expressed or implied in the forward-looking statements due to a variety of important factors, both positive and negative, that may be revised or supplemented in subsequent reports on Forms 10-K, 10-Q and 8-K. Such important factors include, without limitation, issues related to the restatement of our financial statements; the fact that we have historically identified material weaknesses in our internal control over financial reporting, and any inability to remediate future material weaknesses; capital market conditions; the ability of HC2's subsidiaries and portfolio companies to generate sufficient net income and cash flows to make upstream cash distributions; volatility in the trading price of HC2 common stock; the ability of HC2 and its subsidiaries and portfolio companies to identify any suitable future acquisition opportunities; our ability to realize efficiencies, cost savings, income and margin improvements, growth, economies of scale and other anticipated benefits of strategic transactions; difficulties related to the integration of financial reporting of acquired or target businesses; difficulties completing pending and future acquisitions and dispositions; effects of litigation, indemnification claims, and other contingent liabilities; changes in regulations and tax laws; and risks that may affect the performance of the operating subsidiaries and portfolio companies of HC2. These risks and other important factors discussed under the caption “Risk Factors” in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), and our other reports filed with the SEC could cause actual results to differ materially from those indicated by the forward-looking statements made in this presentation . You should not place undue reliance on forward-looking statements. All forward-looking statements attributable to HC2 or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made, and HC2 undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Non-GAAP Financial Measures In this presentation, HC2 refers to certain financial measures that are not presented in accordance with U.S. generally accepted accounting principles (“GAAP”), including Core Operating Subsidiary Adjusted EBITDA, Total Adjusted EBITDA (excluding Insurance) and Insurance AOI. Management believes that Adjusted EBITDA measures provide investors with meaningful information for gaining an understanding of certain results as it is frequently used by the financial community to provide insight into an organization’s operating trends and facilitates comparisons between peer companies, because interest, taxes, depreciation, amortization and the other items for which adjustments are made as noted in the definition of Adjusted EBITDA below can differ greatly between organizations as a result of differing capital structures and tax strategies. Adjusted EBITDA can also be a useful measure of a company’s ability to service debt. In addition, management uses Adjusted EBITDA measures in evaluating certain of the Company’s segments performance because they eliminate the effects of considerable amounts of noncash depreciation and amortization and items not within the control of the Company’s operations managers. While management believes that these non-US GAAP measurements are useful as supplemental information, such adjusted results are not intended to replace our US GAAP financial results and should be read together with HC2’s results reported under GAAP. Management defines Adjusted EBITDA as Net income (loss) adjusted to exclude the impact of depreciation and amortization; amortization of equity method fair value adjustments at acquisition; (gain) loss on sale or disposal of assets; lease termination costs; asset impairment expense; (gain) loss on early extinguishment or restructuring of debt; interest expense; net gain (loss) on contingent consideration; other (income) expense, net; foreign currency transaction (gain) loss included in cost of revenue; income tax (benefit) expense; (gain) loss from discontinued operations; noncontrolling interest; bonus to be settled in equity; share-based compensation expense; acquisition and nonrecurring items; and other costs. Adjusted EBITDA excludes results of our Insurance segment. A reconciliation of Adjusted EBITDA to Net income (loss) is included in the financial tables at the end of this release. Management recognizes that using Adjusted EBITDA as a performance measure has inherent limitations as an analytical tool as compared to net income (loss) or other U.S. GAAP financial measures, as these non-GAAP measures exclude certain items, including items that are recurring in nature, which may be meaningful to investors. As a result of the exclusions, Adjusted EBITDA should not be considered in isolation and do not purport to be alternatives to net income (loss) or other U.S. GAAP financial measures as a measure of our operating performance. Management believes that Insurance AOI measures, used frequently in the insurance industry, provide investors with meaningful information for gaining an understanding of certain results and provides insight into an organization’s operating trends and facilitates comparisons between peer companies. Management defines Insurance AOI as Net income (loss) for the Insurance segment adjusted to exclude the impact of net investment gains (losses), including other-than-temporary impairment losses recognized in operations; asset impairment; intercompany elimination and acquisition and non-recurring items. Management believes that Insurance AOI provides a meaningful financial metric that helps investors understand certain results and profitability. While these adjustments are an integral part of the overall performance of the Insurance segment, market conditions impacting these items can overshadow the underlying performance of the business. Accordingly, we believe using a measure which excludes their impact is effective in analyzing the trends of our operations. By accepting this document, each recipient agrees to and acknowledges the foregoing terms and conditions. Safe Harbor Disclaimers 1
Company Overview
© 2 0 1 7 H C 2 H O L D I N G S , I N C . HC2 Holdings, Inc. 3 W ho W e Are W ha t W e Do Di v ers i f i ed h o l d i n g c omp a n y Pe r man ent c a p i ta l S t r a teg ic a n d f i n a n c i a l p a r tne r Te a m o f v i s ion ar ie s B u y a n d b u i l d c omp a n ies E x e cute b u s in es s p l a n s De l i v e r s u s ta i nab l e v a l ue f o r s h a reh o lders
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Investment Highlights 4 Why Invest in HC2? Leadership team has diverse network resulting in unique deal flow Unique combination of operating entities accessible through one investment – Controlling stakes in leading, stable, cash flow generating businesses – Option value opportunities with significant equity upside potential Long-term strategy allows management teams the ability to execute business plans Diversification across a number of industries Financial flexibility
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Clear focus on delivering sustainable value for all stakeholders Value operator with long-term outlook Acquire controlling equity interests in diverse industries creating value through growth in operating subsidiaries Strong capital base allows funding of subsidiary growth Speed of execution gives HC2 a competitive advantage over traditional private equity firms Env i s ion Execute Empower – Seek to build value over the long-term – Expansive network results in unique deal flow – Target a barbell investment strategy • Stable cash flow generation • Early-stage companies with option value Env i s ion – Partner with experienced management teams – Establish specific operating objectives – Provide financial expertise – Help execute strategy E m p o w e r M a n a g e m e nt – Focus on speed of execution – Capitalize on opportunities – Deliver sustainable value Execute HC2 Value Philosophy 5
© 2 0 1 7 H C 2 H O L D I N G S , I N C . HC2 Company Snapshot 6 Early Stage and Other Holdings Core Operating Subsidiaries One of the largest steel fabrication and erection companies in the U.S. Recently changed name to DBM Global Inc. Offers full suite of integrated steel construction and professional services 92% ownership Construction: DBM GLOBAL (SCHUFF) Leading provider of subsea cable installation, maintenance and protection in telecom, offshore power and oil & gas JV’s with Huawei Marine Networks & S.B. Submarine Systems (China Telecom) Acquired 100% interest in offshore renewables specialist CWind 95% ownership Marine Services: GMSL Premier distributor of natural gas motor fuel throughout the U.S. Currently own or operate ~40 natural gas fueling stations throughout United States; Up from two stations since HC2’s initial investment in August 2014 49.9% ownership Energy: ANG Telecom: PTGI ICS One of the largest International wholesale telecom service companies Global sales presence Internal and scalable offshore back office operations 100% ownership Life Sciences: PANSEND MediBeacon: Unique non-invasive real-time monitoring of kidney function R2 Dermatology: Medical device to brighten skin based on Mass. General Hospital technology BeneVir: Oncolytic viral immunotherapy for treatment of solid cancer tumors Genovel: Novel, Patented, “Mini Knee” and “Anatomical Knee” replacements Triple Ring Technologies: R&D engineering company specializing in medical devices, homeland security, imaging, sensors, optics, fluidics, robotics & mobile healthcare Nervve: Provider of video and image search technology for information extraction and powerful analytics applications Dusenberry Martin Racing: Owns worldwide exclusive licensing rights to NASCAR® simulation style racing titles on interactive entertainment platforms Other: Core Financial Services Subsidiaries Executive Chair: James P. Corcoran Acquisition of American Financial Group’s (“AFG”) long-term care and life insurance businesses 100% ownership ~$77m of statutory surplus ~$93m total adjusted capital ~$2.0b in total GAAP assets Insurance: CIG All data as of December 31, 2016. Construction formerly Manufacturing; Energy formerly Utilities.
© 2 0 1 7 H C 2 H O L D I N G S , I N C . HC2 Executive Leadership Team 7 Philip A. Falcone Chairman of the Board, Chief Executive Officer and President Michael J. Sena Chief Financial Officer Paul K. Voigt Senior Managing Director Paul L. Robinson Chief Legal Officer & Corporate Secretary Suzi Raftery Herbst Chief Administrative Officer Andrew G. Backman Managing Director
© 2 0 1 7 H C 2 H O L D I N G S , I N C . HC2 Stock Performance & Timeline 8 Note: As a result of the Schuff Tender, HC2’s ownership increased to 89% and subsequently through open market share purchases increased to 92%. $- $2 $4 $6 $8 $10 $12 $14 2014 5/29/2014 HC2 Acquires Schuff (65%) HC2 Acquires Global Marine (97%) 9/22/2014 HC2 Announces Results of Schuff Tender Offer 10/7/2014 $250M Senior Secured Notes Offering Closing 11/20/2014 NYSE Listing Announced 12/23/2014 HC2 forms Continental Insurance Group 4/14/2015 $50M Tack-On to Senior Secured Notes 3/23/2015 HC2 Acquires Interest in Gaming Nation 6/10/2015 HC2 closes LTC and Life Insurance Acquisition 12/24/2015 Global Marine Acquires Majority Interest in CWind 2/3/2016 R2 Dermatology Receives FDA Approval 10/5/2016 2015 2016 2017 $55M Tack- On Senior Secured Notes 1/23/2017 Company Renamed "HC2" 4/14/2014 HRG Group Acquires Majority Interest in "PTGi" 1/8/2014 8/01/2014 HC2 Initial Investment in ANG MediBeacon Awarded Gates Foundation grant 10/18/2016 MediBeacon Completes Pilot Two Testing 3/2/2017 ANG Adds 17 CNG Stations Through Two Transactions 12/15/2016
Segment Detail
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Sacramento Kings Arena DBM Global Inc. (Schuff Intl.) – Company Snapshot 10 DBM Global Inc. is focused on delivering world class, sustainable value to its clients through a highly collaborative portfolio of companies which provide better designs, more efficient construction and superior asset management solutions The Company offers integrated steel construction services from a single source and professional services which include design-assist, design-build, engineering, BIM participation, 3D steel modeling/detailing, fabrication, advanced field erection, project management, and state-of-the-art steel management systems Major market segments include commercial, healthcare, convention centers, stadiums, gaming and hospitality, mixed use and retail, industrial, public works, bridges, transportation, and international projects Business Description: Rustin Roach – President and CEO Michael Hill – CFO and Treasurer Scott Sherman – VP, General Counsel Select Management: Apple World Headquarters Select Customers:
© 2 0 1 7 H C 2 H O L D I N G S , I N C . DBM Global Inc. (Schuff Intl.) – Company Snapshot 11 Core Activities The largest structural steel fabricator and erector in the U.S. In-house structural & design engineering expertise Provides structural steel fabrication & erection services for smaller projects leveraging subcontractors and in- house project managers Manufactures equipment for use in the petrochemical oil & gas industries, such as: pollution control scrubbers, tunnel liners, pressure vessels, strainers, filters & separators A highly experienced global Detailing and 3D BIM Modelling company A global Building Information Modelling (BIM), Steel Detailing and Rebar Detailing firm Products and Service Offerings Structural Steel fabrication Steel erection services Structural engineering & design services Preconstruction engineering services BIM (Building Information Modeling) Project Management (proprietary SIMS plat.) Structural Steel fabrication (subcontracted) Steel erection services (subcontracted) Project Management (proprietary SIMS platform) Design engineering Fabrication services Steel Detailing 3D BIM Modelling BIM Management Integrated Project Delivery (IPD) 3D Animation and Visualization Steel Detailing Rebar Detailing 3D BIM Modelling Connection Design Forensic Modelling & Animation Industries Served Commercial Conv. & Event Centers Energy Government Healthcare Industrial & Mining Infrastructure Leisure Retail Transportation Commercial Government Healthcare Leisure Retail Transportation Petrochemical Oil & gas infrastructure Pipelines Commercial Conv. & Event Centers Energy Government Healthcare Industrial & Mining Infrastructure Leisure Retail Transportation Commercial Conv. & Event Centers Energy Government Healthcare Industrial & Mining Infrastructure Leisure Retail Transportation
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Global Marine Systems (GMSL) – Company Snapshot 12 Leading provider of offshore marine engineering for subsea cable installation, maintenance and cable protection requirements Seeks to position itself as a key player driving convergence of its maintenance services across the telecom, offshore renewables and oil & gas cabling markets Diverse offering to offshore renewables market subsea and topside Has installed roughly 21% of the world's subsea fiber optic cable, amounting to 300,000km Founded in 1850 - Headquartered in UK with major regional hub in Singapore Business Description: In maintenance, Global Marine benefits from long-term contracts with high renewal rates Significant opportunities in Telecom through 49% owned strategic joint ventures with Huawei Technologies (HMN) and China Telecom (SBSS) CWind acquisition presents substantial opportunity within the offshore renewables growth market, delivering a broad spectrum of services to wind farm owners during both the construction and operations & maintenance project phases Competitive advantage due to role in the entire life cycle of cable and offshore power assets and ability to operate across multiple markets utilizing adaptable fleet Company Highlights: Select Customers:
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Global Marine Systems (GMSL) – Company Snapshot 13 Maintenance Installation Core Activities Provision of vessels on standby to repair fiber optic telecom cables in defined geographic zones Location of fault, cable recovery, jointing and re- deployment of cables Operation of depots storing cable and spare parts across the globe Management of customer data through the life of the cable system Provision of turnkey repeated telecom systems via Huawei Marine Networks (“HMN”) joint-venture “Installation only” contracts for telecom customers Services include route planning, route survey, cable mapping, route engineering, laying, trenching and burial at all depths Fiber optic communications and power infrastructure to offshore platforms Inter-platform and subsea well command & control and power Permanent Reservoir Monitoring (“PRM”) systems Maintenance & Repair Installation for inter-array power cables for offshore wind market Maintenance provision, including cable storage, power joint development and vessel availability Offshore wind planning, construction and operations & maintenance support services Interconnector installation Vessels Cable Retriever Pacific Guardian Wave Sentinel Cable Innovator CS Sovereign CS Recorder Networker CS Sovereign CS Recorder Networker CS Sovereign 18 Crew Transfer Vessels CWind Fleet Joint Venture Sino British Submarine Systems in Asia (SBSS); Joint venture (49%) with China Telecom International Cableship Pte Ltd (“ICPL”) Joint venture (30%) with SingTel and ASEAN Cableship SCDPL; Joint venture (40%) with SingTel Huawei Marine Networks; Joint venture (49%) with Huawei Technologies Sino British Submarine Systems in Asia (SBSS); Joint venture (49%) with China Telecom Sino British Submarine Systems in Asia; Joint venture (49%) with China Telecom Sino British Submarine Systems in Asia; Joint venture (49%) with China Telecom
© 2 0 1 7 H C 2 H O L D I N G S , I N C . American Natural Gas – Company Snapshot 14 Designs, builds, owns, operates and maintains compressed natural gas commercial fueling stations for transportation Current ownership 49.9% with ability to increase to 63% In-depth experience in the natural gas fueling industry Building a premier nationwide network of publically accessible heavy duty CNG fueling stations throughout the United States designed and located to serve fleet customers – Recently acquired 18 CNG stations from Questar Fueling Co. and Constellation CNG – Currently ~40 stations owned and/or operated – Expect to expand station footprint via organic and select M&A opportunities American transportation sector is rapidly converting from foreign-dependent diesel fuel to clean burning natural gas: – Dramatically reduces emissions – Extends truck life – Significantly reduces fuel cost Given the cost effectiveness of CNG, its environmental friendliness and the abundance of natural gas reserves in the United States, CNG is the best candidate for alternatives to gasoline and diesel for the motor vehicle market All data as of December 31, 2016.
© 2 0 1 7 H C 2 H O L D I N G S , I N C . PTGi International Carrier Services (“PTGi ICS”) 15 Leading international wholesale telecom service company providing voice and data call termination to the telecom industry worldwide Provides transit and termination of telephone calls through its own global network of next-generation IP soft switches and media gateways, connecting the networks of incumbent telephone companies, mobile operators and OTT companies worldwide Restructured in 2014 PTGi ICS now delivers industry leading technology via best of breed sales and operational support teams – 4Q16: Seventh consecutive quarter of positive Adjusted EBITDA In business since 1997, recognized as a trusted business partner globally Headquartered in Herndon, Virginia with representation across North America, South America, the Middle East and Europe All data as of December 31, 2016.
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Continental Insurance Group – Company Snapshot 16 April 2015: HC2 established Continental Insurance Group (“CIG”) as its insurance platform led by industry veteran Jim Corcoran, as Executive Chairman December 2015: HC2 completed the acquisition of American Financial Group’s long-term care and life insurance businesses, United Teacher Associates Insurance Company and Continental General Insurance Company The formation of Continental Insurance Group (“CIG”) to invest in the long-term care and life insurance sector is consistent with HC2’s overall strategy of taking advantage of dislocated and undervalued operating businesses Through CIG, HC2 intends to build an attractive platform of insurance businesses James P. Corcoran, Executive Chair, has extensive experience in the insurance industry on both the corporate and regulatory side as the former Superintendent of Insurance of the State of New York Combined measures as of December 31, 2016: – Statutory Surplus ~$77 million – Total Adjusted Capital ~$93 million – GAAP Assets of ~$2.0 billion Completed merging CGI and UTA into one legal entity* – Beneficial to statutory capital *Merger and re-domestication as Texas-based company completed 12/16.
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Pansend Life Sciences – Platform Snapshot 17 HC2’s Life Sciences Segment Is Focused on the Development of Innovative Healthcare Technologies and Products 80% equity ownership of company focused on immunotherapy; Oncolytic virotherapy for treatment of solid cancer tumors Founded by Dr. Matthew Mulvey & Dr. Ian Mohr (who co-developed T-Vec); Biovex (owner of T-Vec) acquired by Amgen for ~$1billion Benevir’s T-Stealth is a second generation oncolytic virus with new features and new intellectual property BeneVir holds exclusive worldwide license to develop BV-2711 (T-Stealth) 67% equity ownership of dermatology company focused on lightening and brightening skin Founded by Pansend in partnership with Mass. General Hospital and inventors Dr. Rox Anderson, Dieter Manstein and Dr. Henry Chan Over $10 billion global market 77% equity ownership in company with unique knee replacements based on technology from Dr. Peter Walker, NYU Dept. of Orthopedic Surgery and one of the pioneers of the original Total Knee. “Mini-Knee” for early osteoarthritis of the knee “Anatomical Knee” – A Novel Total Knee Replacement Strong patent portfolio 42% equity ownership in company with unique technology and device for monitoring of real-time kidney function Current standard diagnostic tests measure kidney function are often inaccurate and not real-time MediBeacon’s Optical Renal Function Monitor will be first and only, non-invasive system to enable real-time, direct monitoring of renal function at point-of-care $3.5 billion potential market Profitable technology and product development company Areas of expertise include medical devices , homeland security, imaging systems, sensors, optics, fluidics, robotics and mobile healthcare Located in Silicon Valley and Boston area with over 90,000 square feet of working laboratory and incubator space Contract R&D market growing rapidly Customers include Fortune 500 companies and start-ups All data as of March 7, 2017.
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Nervve 18 In October 2014, HC2 made an initial contribution of $5 million in convertible preferred equity Subsequent financing increased the total to $7.2 million Headquartered in Buffalo, New York Nervve has developed the fastest, most accurate video and image search technology in the world; Able to search an hour of video in less than five seconds The core technology utilizes a search by example methodology to automatically search massive amounts of video and image data for objects of interest. It will potentially change the way people think of search engine capabilities In the era of Big Data, Nervve is revolutionizing the way organizations are able to exploit massive amounts of video and images, benefitting social media platforms, media and entertainment companies, the DoD/Intel Community, public safety and any digital advertising platform In January 2014, Nervve entered into a strategic agreement with In-Q-Tel, the independent investment firm that identifies innovative technology solutions to support the missions of the U.S. Intelligence Community In July 2015, Nervve partnered with Wasserman Media Group, a leading sports and entertainment agency, to bring to market their visual search technology, which will allow brands and properties to easily, quickly and accurately track and analyze brand exposure impact across various sports and entertainment programming All data as of December 31, 2016.
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Dusenberry Martin Racing (DMi, Inc.) 19 On December 31, 2014, HC2 / DMR completed a $6 million asset purchase agreement to acquire worldwide exclusive licensing rights to NASCAR® simulation style racing titles on interactive entertainment platforms DMi, Inc., doing business as Dusenberry Martin Racing (DMR), owns all the code, artwork and animation previously developed for the games Headquartered in Charlotte, NC in NASCAR® Hall of Fame building Dusenberry Martin Racing’s license also extends to NASCAR® racetracks and all the leading NASCAR® race teams and drivers Developed several games, including all-new NASCAR® racing simulation game, NASCAR® Heat Evolution, for PlayStation 4, Xbox One and PC In April, 2016, DMR secured $8.0 million in addition equity growth capital from consortium of new investors including superstar drivers Joey Logano and Brad Keselowski NASCAR® Heat Evolution Trailer Released in July; Makes television debut as part of NBC’s broadcast of the Coke Zero 400 at Daytona NASCAR® Heat Evolution successfully released on September 13, 2016 NASCAR® Heat Evolution announced 2017 Team Update available February 21, 2017 – Team & Roster Updates, New Drivers, New Paint Schemes, 2017 NASCAR® Schedule, etc. All data as of December 31, 2016.
Appendix: 4Q/FY16 Highlights / Select Financial Data
© 2 0 1 7 H C 2 H O L D I N G S , I N C . 4Q16 and FY16 Highlights and Recent Developments 21 Solid fourth quarter results again highlight the unique value HC2 brings to the market with our diverse, uncorrelated industry holdings – Construction: Continued margin improvement; Record backlog and deal pipeline – Marine Services: Strong joint venture performance; Incremental off shore power installation; Incremental CWind maintenance contribution; Awarded Atlantic Cable Maintenance Agreement extension (“ACMA”) – Telecommunications: Continued growth in wholesale volumes and customer expansion – Energy: Continued executing footprint expansion strategy via acquisition of 18 CNG stations from Questar Fueling Co. and Constellation CNG; Increased delivery of gasoline gallon equivalents Adjusted EBITDA for Core Operating Subsidiaries* – $37.9 million in Fourth Quarter, up 20.3% from $31.5 million in Third Quarter 2016 – $109.1 million for Full Year 2016, up 12.4% from $97.1 million for Full Year 2015 Cash and Investments as of December 31, 2016: – $1.5 billion of consolidated cash, cash equivalents and investments, which includes the Insurance segment; essentially unchanged from prior quarter – $90.9 million in Consolidated Cash (excluding Insurance segment) Cumulative outstanding amount of Preferred Equity reduced to $30.0 million from $42.7 million at end of 3Q16, and from $55.0 million of total preferred issued * Core Operating Subsidiaries include Construction, Marine Services, Telecommunications and Energy. Construction formerly Manufacturing: Energy formerly Utilities.
© 2 0 1 7 H C 2 H O L D I N G S , I N C . HC2 Segment Overview 22 Early Stage and Other Holdings Core Operating Subsidiaries FY16 Revenue: $502.7m FY16 Adjusted EBITDA: $59.9m Record Backlog $503m Solid long-term pipeline with additional [~$300-$400] million in potential project value that could be awarded over next several quarters Construction: DBM GLOBAL (SCHUFF) FY16 Revenue: $161.9m FY16 Adjusted EBITDA: $41.2m Strong joint venture and off shore power installation; Solid maintenance performance Positive long-term telecom installation opportunities Marine Services: GMSL FY16 Revenue: $6.4m FY16 Adjusted EBITDA: $2.5m Delivered 1,349,000 Gasoline Gallon Equivalents (GGEs) in 4Q16 vs. 646,000 GGEs in 4Q15 ~40 stations currently owned and / or operated vs. 17 stations in 3Q16 and two stations at time of HC2’s initial investment in 3Q14 Energy: ANG Telecom: PTGI ICS FY16 Revenue: $735.0m FY16 Adjusted EBITDA: $5.6m Continued growth in wholesale traffic volumes, in part, delivered by the changing regulatory environment throughout Europe, combined with continued business growth in the Middle East Life Sciences: PANSEND MediBeacon: Completed “Pilot Two” Clinical Study at Washington University in St. Louis (1Q/17) R2 Dermatology: Received FDA Approval for R2 Dermal Cooling System (4Q/16) BeneVir: Oncolytic viral immunotherapy for treatment of solid cancer tumors Genovel: Novel, Patented, “Mini Knee” and “Anatomical Knee” replacements Triple Ring Technologies: R&D engineering company specializing in medical devices, homeland security , imaging, sensors, optics, fluidics, robotics & mobile healthcare Nervve Provider of video and image search technology for information extraction and powerful analytics applications Dusenberry Martin Racing NASCAR® Heat Evolution released 9/16; Recently announced 2017 Team Update available February 21, 2017 Other: Core Financial Services Subsidiaries ~$77m of statutory surplus ~$93m total adjusted capital ~$2.0b in total GAAP assets Recently completed merging CGI and UTA into one legal entity; meaningful cost savings, lower required statutory capital Platform for growth through additional M&A Insurance: CIG All data as of December 31, 2016. Construction formerly Manufacturing; Energy formerly Utilities.
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Segment Financial Summary 23 Adjusted EBITDA for Core Operating Subsidiaries $37.9m for Q4 2016 All data as of December 31, 2016 Construction formerly Manufacturing; Energy formerly Utilities. ($m) FY 2016 Q4 2016 Q3 2016 Q2 2016 Q1 2016 Adjusted EBITDA Core Operating Subsidiaries Construction $59.9 $20.7 $14.5 $13.2 $11.5 Marine Services 41.2 14.8 14.1 11.8 0.5 Energy 2.5 0.9 0.7 0.5 0.4 Telecom 5.6 1.5 2.2 1.5 0.3 Total Core Operating $109.1 $37.9 $31.5 $27.1 $12.7 Early Stage and Other Holdings Life Sciences ($12.0) ($3.8) ($2.9) ($2.7) ($2.6) Other (11.2) 0.9 (4.8) (3.3) (4.0) Total Early Stage and Other ($23.2) ($2.9) ($7.7) ($6.0) ($6.6) Non-Operating Corporate ($25.7) ($8.6) ($5.5) ($5.9) ($5.7) Total HC2 (excluding Insurance) $60.2 $26.5 $18.2 $15.2 $0.3 Adjusted Operating Income Core Financial Services Insurance ($15.9) ($6.9) ($1.7) ($4.7) ($2.6) Note: Reconciliations of Adjusted EBITDA and Adjusted Operating Income to U.S. GAAP Net Income in appendix. Table may not foot due to rounding. Adjusted Operating Income for Q1 2016 has been adjusted to exclude certain intercompany eliminations to better reflect the results of the Insurance segment, and remain consistent with internally reported metrics. Additional details in appendix. Q1 and Q3 2016 benefitted from the release of valuation allowance impacting the net tax provision for each quarter.
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Construction: DBM Global Inc. (Schuff) 24 4Q16 Net Income: $7.3m; FY16 Net Income: $28.0m versus $24.5m in FY15 4Q16 Adjusted EBITDA: $20.7m; FY16 Adjusted EBITDA: $59.9m versus $52.0m in FY15 Continued strong gross margins due to better than bid performance – Pacific region remains strong Record Backlog: $503m versus $318m in third quarter 2016 Continue to see large opportunities totaling ~$400 million that could be awarded over next several quarters including a number of new sporting arenas or stadiums, healthcare facilities, commercial office buildings Completed accretive acquisitions of PDC Global Detailing and Building Information Modeling Business and BDS VirCon Fourth Quarter and Full Year Update Proactively selecting profitable, strategic and “core competency” jobs, not all jobs Solid long-term pipeline of prospective projects; No shortage of transactions to evaluate Commercial / Stadium / Healthcare sectors remain strong Opportunities to add higher margin, value added services to overall product offering Strategic Initiatives Mile High Stadium Loma Linda Hospital $45.8 $52.0 $59.9 $526.1 $513.8 $502.7 2014PF 2015A 2016A Recent Performance Adjusted EBITDA Revenue All data as of December 31, 2016 Construction formerly Manufacturing. 10.1% 11.9% 8.7%
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Marine Services: GMSL 25 S. B. Submarine Systems (SBSS – China Telecom) – 49% ownership Joint Venture established in 1995 with China Telecom China’s leading provider of submarine cable installation Located in Shanghai and possesses a fleet of advanced purpose-built cable ships Source: Huawei Investment & Holding Co., Ltd – 2015 Annual Report Currency Exchange: CNY:USD 1:0.15 All data as of September 30, 2016. 4Q16 Net Income: $8.7m; FY16 Net Income: $17.5m versus $20.9m in FY15 4Q16 Adjusted EBITDA: $14.8m; FY16 Adjusted EBITDA: $41.2m versus $42.1m in FY15 Very strong 4Q16 & FY16 performance from Joint Ventures, in particular Huawei Marine and SBSS Off shore power install revenue contribution again in fourth quarter as a result of re-entry into market Core telecom maintenance performance remained strong throughout the year Awarded five-year contract extension for Atlantic Cable Maintenance Agreement (“ACMA”) in fourth quarter; building on the successful renewal of North America Zone in Q116; Three quarters of maintenance fleet secured for at least five years Recently entered into agreement to charter Maersk Recorder to support expected growth in Huawei Marine Joint Venture Fourth Quarter and Full Year Update Huawei Marine Networks – 49% Ownership Strategic Initiatives Total HMN* 2015 2014 Revenue ~$188m ~$73m Profit ~$14m ~$1.2m Cash / Equivalents ~$26m ~$16m $50.0 $42.1 $41.2 $163.6 $134.9 $161.9 2014PF 2015A 2016A Recent Performance Adjusted EBITDA Revenue Note: 2014 PF Adj. EBITDA inclusive of approx. $10m offshore power installation vs. minimal contribution in 2015 & 1H16 as a result of Prysmian agreement which expired in 2Q16. 29.8% 31.2% 25.4%
© 2 0 1 7 H C 2 H O L D I N G S , I N C . -$0.4 $0.9 $2.5 $1.8 $6.8 $6.4 2014A 2015A 2016A Recent Performance Adjusted EBITDA Revenue Energy: ANG 26 All data as of December 31, 2016. Energy formerly Utilities. 4Q16 Net Loss: ($0.06)m; FY16 Net Income: $0.01m versus ($0.27)m in FY15 4Q16 Adjusted EBITDA: $0.87m; FY16 Adjusted EBITDA: $2.54m versus $0.87m in FY15 Delivered 1,349,000 Gasoline Gallon Equivalents (GGEs) in the fourth quarter versus 937,000 GGEs in the third quarter of 2016 and 646,000 in the year-ago quarter Recently acquired 18 CNG stations from Questar Fueling Co. and Constellation CNG ~40 stations currently owned and / or operated vs. 17 stations in 3Q16 vs. 2 stations at time of initial investments (3Q14) Continue to expand fueling station footprint via organic and M&A opportunities Fourth Quarter and Full Year Update 39.6% 12.8% (14.1%)
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Telecommunications: PTGi-ICS 27 $(1.2) $2.0 $5.6 $162.0 $460.4 $735.0 2014A 2015A 2016A Recent Performance Adjusted EBITDA Revenue All data as of December 31, 2016. Strong quarterly results again due to continued growth in wholesale traffic volumes, in part delivered by the changing regulatory environment throughout the European market combined with growth in the Middle East region, resulting in increased traffic and margin – 4Q16 Net Loss: ($2.6)m; FY16 Net Income: $1.4m versus $2.8m in FY15 – Adjusted EBITDA continues positive trend as the overall business continues to mature post restructuring – 4Q16 Adjusted EBITDA: $1.5m; FY16 Adjusted EBITDA: $5.6m versus $2.0m in FY15 – 7th consecutive quarter of positive Adjusted EBITDA One of the key objectives: leverage the infrastructure and management expertise within PTGi-ICS – Over 800+ wholesale interconnections globally provides HC2 the opportunity to leverage the existing cost effective infrastructure by bolting on higher margin products and M&A opportunities – A focused strategic initiative has been launched within PTGi-ICS to identify potential M&A opportunities Fourth Quarter and Full Year Update 0.8% 0.4% (0.1%)
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Insurance: Continental Insurance Group 28 Note: Reconciliation of Adjusted Operating Income to U.S. GAAP Net Income in appendix. All data as of December 31, 2016. Continental Insurance, Inc. (CII) serves as a platform for run-off LTC books of business and for acquiring additional run-off LTC businesses – 4Q16 Net Loss: ($2.1)m; FY16 Net Loss: ($14.0)m – 4Q16 Adjusted Operating Income: ($6.9)m; FY16 Adjusted Operating Income ($15.9)m – ~$77m statutory surplus at end of fourth quarter – ~$93m total adjusted capital at end of fourth quarter – ~$2.0b in total GAAP assets at December 31, 2016 – Recently completed merging CGI and UTA into one legal entity; Beneficial to statutory capital CII Strategy: – A concentrated focus on LTC and acquisitions of additional books of run-off LTC business – A platform to provide a vehicle for multi-line insurers who do not consider LTC a core business segment to exit the market – Enhancing efficiency and effectiveness through scale and a concentrated focus on LTC Fourth Quarter and Full Year Update
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Pansend Life Sciences 29 HC2’s Life Sciences Segment Is Focused on the Development of Innovative Healthcare Technologies and Products 80% equity ownership of company focused on immunotherapy; Oncolytic virotherapy for treatment of solid cancer tumors Founded by Dr. Matthew Mulvey & Dr. Ian Mohr (who co-developed T-Vec); Biovex (owner of T-Vec) acquired by Amgen for ~$1billion Benevir’s T-Stealth is a second generation oncolytic virus with new features and new intellectual property BeneVir holds exclusive worldwide license to develop BV-2711 (T-Stealth) 67% equity ownership of dermatology company focused on lightening and brightening skin Founded by Pansend in partnership with Mass. General Hospital and inventors Dr. Rox Anderson, Dieter Manstein and Dr. Henry Chan Over $10 billion global market 77% equity ownership in company with unique knee replacements based on technology from Dr. Peter Walker, NYU Dept. of Orthopedic Surgery and one of the pioneers of the original Total Knee. “Mini-Knee” for early osteoarthritis of the knee “Anatomical Knee” – A Novel Total Knee Replacement Strong patent portfolio 42% equity ownership in company with unique technology and device for monitoring of real-time kidney function Current standard diagnostic tests measure kidney function are often inaccurate and not real-time MediBeacon’s Optical Renal Function Monitor will be first and only, non-invasive system to enable real-time, direct monitoring of renal function at point-of-care $3.5 billion potential market Profitable technology and product development company Areas of expertise include medical devices, homeland security, imaging systems, sensors, optics, fluidics, robotics and mobile healthcare Located in Silicon Valley and Boston area with over 90,000 square feet of working laboratory and incubator space Contract R&D market growing rapidly Customers include Fortune 500 companies and start-ups All data as of March 7, 2017.
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Notable Financial Updates 30 Collateral Coverage Ratio at quarter end exceeded 2.0x $90.9 million in Consolidated Cash (excluding Insurance segment) – $21.7 million Corporate Cash $41.4 million in Tax Share and Dividends received in 2016 – Subsequent to year end, $9.2 million special dividend from DBM Global received 1/23 Cumulative outstanding amount of Preferred Equity reduced to $30.0 million from $42.7 million at end of 3Q16, and from $55.0 million of total preferred issued $55 million 11% Senior Secured Notes Offering completed subsequent to quarter end – Offering well oversubscribed – Upsized from $45 million – Priced at par – Proceeds used to refinance Bridge Note for ANG acquisitions of Constellation CNG and Questar Fueling All data as of December 31, 2016 unless otherwise noted (1) Market capitalization on a fully diluted basis, excluding preferred equity, using a common stock price per share of $5.40 and shares outstanding of 41.9 million on March 7, 2017 (2) Cash and cash equivalents (3) Enterprise Value is calculated by adding market capitalization, total preferred equity and total debt amounts, less Corporate cash Balance Sheet (at December 31, 2016) Market Cap(1) $226.5 Preferred Equity $30.0 Total Debt $342.0 Corporate Cash(2) $21.7 Enterprise Value(3) $576.8 ($m)
Appendix: Reconciliations
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Reconciliation of Adjusted EBITDA to U.S. GAAP Net Income (Loss) Twelve Months Ended December 31, 2016 32 (in thousands) Construction Marine Services Telecom Energy Life Sciences Other and Eliminations Net Income (loss) attributable to HC2 Holdings, Inc. $ (94,549) Less: Net Income (loss) att ributable to HC2 Holdings Insurance Segment (14,028) Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance Segment 28,002$ 17,447$ 1,435$ 7$ (7,646)$ (24,800)$ (94,966)$ (80,521)$ Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 1,892 22,007 504 2,248 124 1,480 9 28,264 Depreciation and amortization (included in cost of rev enue) 4,370 - - - - - - 4,370 Amortization of equity method fair v alue adjustment at acquisition - (1,371) - - - - - (1,371) (Gain) loss on sale or disposal of assets 1,663 (9) 708 - - - - 2,362 Lease termination costs - - 179 - - - - 179 Interest expense 1,239 4,774 - 211 - 1,164 35,987 43,375 Net loss on contingent consideration - (2,482) - - - - 11,411 8,929 Other (income) expense, net (163) (2,424) (87) (8) (3,213) 9,987 (1,277) 2,815 Foreign currency (gain) loss (included in cost of rev enue) - (1,106) - - - - - (1,106) Income tax (benefit) expense 18,727 1,394 2,803 (535) 1,558 3,250 11,245 38,442 Noncontrolling interest 1,834 974 - (4) (3,111) (2,575) - (2,882) B nus to b settled in equity - - - - - - 2,503 2,503 Share-based payment expense - 1,682 - 597 251 273 5,545 8,348 Acquisition and nonrecurring items 2,296 290 18 27 - - 3,825 6,456 Adjusted EBITDA 59,860$ 41,176$ 5,560$ 2,543$ (12,037)$ (11,221)$ (25,718)$ 60,163$ Total Core Operating Subsidiaries 109,139$ Twelve Months Ended December 31, 2016 Core Operating Subsidiaries Early Stage & Other Non- operating Corporate HC2
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Reconciliation of Adjusted EBITDA to U.S. GAAP Net Income (Loss) Twelve Months Ended December 31, 2015 33 (in thousands) Construction Marine Services Telecom Energy Life Sciences Other and Eliminations Net Income (loss) attributable to HC2 Holdings, Inc. $ (35,565) Less: Net Income (loss) att ributable to HC2 Holdings Insurance Segment 1,327 Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance Segment 24,451$ 20,855$ 2,779$ (274)$ (4,575)$ (18,276)$ (61,852)$ (36,892)$ Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 2,016 18,772 417 1,635 20 1,934 - 24,794 Depreciation and amortization (included in cost of rev enue) 7,659 - - - - - - 7,659 Amortization of equity method fair v alue adjustment at acquisition - (1,516) - - - - - (1,516) Asset impairment expense - 547 - - - - - 547 (Gain) loss on sale or disposal of assets 257 (138) 50 - - 1 - 170 Lease termination costs - - 1,184 - - 1 - 1,185 Interest expense 1,379 3,803 - 42 - - 33,793 39,017 Other (income) expense, net (443) (1,340) (2,304) (42) (1) 5,764 5,242 6,876 Foreign currency (gain) loss (included in cost of rev enue) - (2,039) - - - - - (2,039) Income tax (benefit) expense 15,572 400 (237) (347) (1,037) (7,733) (16,052) (9,434) Loss from discontinued operations 20 - - - - 1 - 21 N nc ntrolling interest 1,136 616 - (267) (1,681) (1) - (197) Share-based payment expense - - - 49 71 - 10,982 11,102 Acquisition and nonrecurring items - 2,181 121 70 23 - 8,362 10,757 Adjusted EBITDA 52,047$ 42,141$ 2,010$ 866$ (7,180)$ (18,309)$ (19,525)$ 52,050$ Total Core Operating Subsidiaries 97,064$ Twelve Months Ended December 31, 2015 Core Operating Subsidiaries Early Stage & Other Non- operating Corporate HC2
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Reconciliation of Adjusted EBITDA to U.S. GAAP Net Income (Loss) Twelve Months Ended December 31, 2014 34 (in thousands) Construction Marine Services Telecom Energy Total Life Sciences Other Total As Reported Net income (loss) (14,391)$ 19,278$ 17,718$ (1,068)$ 236$ 36,164$ (3,759)$ 29,219$ 25,460$ (51,410)$ 10,214$ Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 6,719 4,139 15,161 528 484 20,312 1 - 1 - 20,313 Depreciation and amortization (included in cost of rev enue) 4,350 4,350 - - - 4,350 - - - - 4,350 Amortization of equity method fair v alue adjustment at acquisition (385) - (385) - - (385) - - - - (385) Asset impairment expense 291 - - 291 - 291 - - - - 291 (Gain) loss on sale or disposal of assets (162) (2) 104 (160) - (58) - - - - (58) Lease termination costs - - - - - - - - - - - Interest expense 12,347 1,627 4,708 1 20 6,356 - - - 10,700 17,056 Loss on early extinguishment of debt 11,969 - - - - - - - 11,969 11,969 Other (income) expense, net (702) (476) (2,410) (831) (1,431) (5,148) - 1,610 1,610 217 (3,321) I come tax (benefit) expense (22,869) 13,318 1,069 58 103 14,548 - (31,828) (31,828) (963) (18,243) Loss from discontinued operations 146 35 3,007 - - 3,042 - 157 157 3,199 Noncontrolling interest 2,559 3,569 3,059 - 229 6,857 (1,038) 1 (1,037) - 5,820 Share-based payment expense 11,028 - - - - - - - - 11,028 11,028 Acquisition related costs 13,044 - 7,966 - - 7,966 - - - 5,078 13,044 Other costs - - - - - - - - - - - Adjusted EBITDA 23,944$ 45,838$ 49,997$ (1,181)$ (359)$ 94,295$ (4,796)$ (841)$ (5,637)$ (13,381)$ 75,277$ Pro Forma Twelve Months Ended December 31, 2014 HC2 Holdings, Inc. Core Operating Early Stage and Other Non- operating Corporate HC2 Holdings, Inc.
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Reconciliation of Adjusted EBITDA to U.S. GAAP Net Income (Loss) Three Months Ended December 31, 2016 35 (in thousands) Construction Marine Services Telecom Energy Life Sciences Other and Eliminations Net Income (loss) attributable to HC2 Holdings, Inc. $ (61,464) Less: Net Income (loss) att ributable to HC2 Holdings Insurance Segment (2,050) Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance Segment 7,292$ 8,667$ (2,572)$ (61)$ (4,655)$ (3,536)$ (64,549)$ (59,414)$ Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 629 5,214 115 769 37 430 5 7,199 Depreciation and amortization (included in cost of rev enue) 1,322 - - - - - - 1,322 Amortization of equity method fair v alue adjustment at acquisition - (325) - - - - - (325) (Gain) loss on sale or disposal of assets 2,626 1 708 - - - - 3,335 Lease termination costs - - - - - - - - Interest expense 322 1,091 - 69 - 1,163 9,116 11,761 Net loss on contingent consideration - (2,482) - - - - 11,411 8,929 Other (income) expense, net (75) (1,234) 487 391 10 99 (966) (1,288) Foreign currency (gain) loss (included in cost of rev enue) - 864 - - - - - 864 Income tax (benefit) expense 6,086 2,150 2,803 (535) 1,558 3,250 32,726 48,038 Noncontrolling interest 594 464 - (253) (809) (513) - (517) B nus to b settled in equity - - - - - - 2,503 2,503 Share-based payment expense - 375 - 490 67 35 712 1,679 Acquisition and nonrecurring items 1,868 24 - - - - 490 2,382 Adjusted EBITDA 20,664$ 14,809$ 1,541$ 870$ (3,792)$ 928$ (8,552)$ 26,468$ Total Core Operating Subsidiaries 37,884$ Three Months Ended December 31, 2016 Core Operating Subsidiaries Early Stage & Other Non- operating Corporate HC2
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Reconciliation of Adjusted EBITDA to U.S. GAAP Net Income (Loss) Three Months Ended September 30, 2016 36 (in thousands) Construction Marine Services Telecom Energy Life Sciences Other and Eliminations Net Income (loss) attributable to HC2 Holdings, Inc. $ (4,558) Less: Net Income (loss) att ributable to HC2 Holdings Insurance Segment (2,189) Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance Segment 6,962$ 8,696$ 1,796$ 27$ (2,285)$ (8,160)$ (9,404)$ (2,368)$ Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 431 5,554 144 582 32 380 4 7,127 Depreciation and amortization (included in cost of rev enue) 1,321 - - - - - - 1,321 Amortization of equity method fair v alue adjustment at acquisition - (329) - - - - - (329) (Gain) loss on sale or disposal of assets (23) - - - - - - (23) Lease termination costs - - (159) - - - - (159) Interest expense 304 1,328 - 119 - - 8,969 10,720 Other (income) expense, net (12) (2,013) 422 (24) (2) 3,892 835 3,098 Foreign currency (gain) loss (included in cost of rev enue) - (283) - - - - - (283) Income tax (benefit) expense 4,672 96 - - - - (7,851) (3,083) N nc ntrolling interest 411 465 - 27 (770) (974) - (841) Share-based payment expense - 546 - 3 128 37 1,088 1,802 Acquisition and nonrecurring items 429 - - - - - 821 1,250 Adjusted EBITDA 14,495$ 14,060$ 2,203$ 734$ (2,897)$ (4,825)$ (5,538)$ 18,232$ Total Core Operating Subsidiaries 31,492$ Three Months Ended September 30, 2016 Core Operating Subsidiaries Early Stage & Other Non- operating Corporate HC2
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Reconciliation of Adjusted EBITDA to U.S. GAAP Net Income (Loss) Three Months Ended June 30, 2016 37 (in thousands) Construction Marine Services Telecom Energy Life Sciences Other and Eliminations Net Income (loss) attributable to HC2 Holdings, Inc. $ 1,935 Less: Net Income (loss) att ributable to HC2 Holdings Insurance Segment (2,293) Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance Segment 9,364$ 6,002$ 1,009$ 68$ (2,004)$ (2,608)$ (7,603)$ 4,228$ Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 303 6,084 140 468 36 336 - 7,367 Depreciation and amortization (included in cost of rev enue) (206) - - - - - - (206) Amortization of equity method fair v alue adjustment at acquisition - (359) - - - - - (359) (Gain) loss on sale or disposal of assets (1,845) 7 - - - 1 - (1,837) Lease termination costs - - 338 - - - - 338 Interest expense 303 1,285 - 14 - 1 8,966 10,569 Other (income) expense, net (32) 211 29 (344) - (10) 465 319 Foreign currency (gain) loss (included in cost of rev enue) - (1,540) - - - - - (1,540) Income tax (benefit) expense 4,524 (212) - - - 1 (9,404) (5,091) N nc ntrolling interest 768 200 - 244 (812) (1,044) - (644) Share-based payment expense - 152 - 90 34 40 1,359 1,675 Acquisition and nonrecurring items - - 18 - - - 313 331 Adjusted EBITDA 13,179$ 11,830$ 1,534$ 540$ (2,746)$ (3,283)$ (5,904)$ 15,150$ Total Core Operating Subsidiaries 27,083$ Three Months Ended June 30, 2016 Core Operating Subsidiaries Early Stage & Other Non- operating Corporate HC2
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Reconciliation of Adjusted EBITDA to U.S. GAAP Net Income (Loss) Three Months Ended March 31, 2016 38 (in thousands) Construction Marine Services Telecom Energy Life Sciences Other and Eliminations Net Income (loss) attributable to HC2 Holdings, Inc. $ (30,462) Less: Net Income (loss) att ributable to HC2 Holdings Insurance Segment (7,496) Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance Segment 4,384$ (5,918)$ 1,202$ (27)$ 1,298$ (10,494)$ (13,409)$ (22,966)$ Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 529 5,155 106 429 19 336 - 6,574 Depreciation and amortization (included in cost of rev enue) 1,933 - - - - - - 1,933 Amortization of equity method fair v alue adjustment at acquisition - (358) - - - - - (358) (Gain) loss on sale or disposal of assets 904 (17) - - - - - 887 Lease termination costs - - - - - - - - Interest expense 310 1,070 - 9 - - 8,937 10,326 Other (income) expense, net (44) 612 (1,025) (31) (3,221) 6,005 (1,611) 686 Foreign currency (gain) loss (included in cost of rev enue) - (147) - - - - - (147) Income tax (benefit) expense 3,445 (640) - - - (1) (4,226) (1,422) N nc ntrolling interest 61 (155) - (22) (720) (44) - (880) Share-based payment expense - 609 - 14 22 160 2,386 3,191 Acquisition and nonrecurring items - 266 - 27 - 1 2,201 2,495 Adjusted EBITDA 11,522$ 477$ 283$ 399$ (2,602)$ (4,038)$ (5,722)$ 319$ Total Core Operating Subsidiaries 12,681$ Three Months Ended March 31, 2016 Core Operating Subsidiaries Early Stage & Other Non- operating Corporate HC2
© 2 0 1 7 H C 2 H O L D I N G S , I N C . Reconciliation of Insurance AOI to U.S. GAAP Net Income (Loss) Quarterly and Full Year 2016 39 The calculation of Insurance Net Loss has been revised to exclude adjustments for intercompany eliminations as they are not considered relevant in evaluating the performance of our Insurance segment. For first quarter 2016, this resulted in a change to the previously reported Insurance loss of ($12.3) mil lion for the quarter to a loss of ($7.5) million. The calculation of Insurance AOI has been revised to exclude adjustments for intercompany eliminations as they are not considered relevant in evaluating the performance of our Insurance segment. For first quarter 2016, this resulted in a change to the previously reported Insurance AOI loss of ($3.6) million for the quarter to a loss of ($2.6) million. (in thousands) Three Months Ended December 31, Three Months Ended September 30, Three Months Ended June 30, Three Months Ended March 31, Year Ended December 31, 2016 2016 2016 2016 2016 Net loss - Insurance segment (2,051)$ (2,189)$ (2,293)$ (7,496)$ (14,028)$ Effect of inv estment (gains) losses (7,696) 220 (2,418) 4,875 (5,019) Asset impairment expense 2,400 - - - 2,400 Acquisition and non-recurring items 445 269 - - 714 Insurance AOI (6,901)$ (1,701)$ (4,710)$ (2,621)$ (15,933)$ Adjusted Operating Income - Insurance ("Insurance AOI")
Appendix: Biographies
© 2 0 1 7 H C 2 H O L D I N G S , I N C . HC2 Executive Leadership Team 41 Philip A. Falcone Served as a director of HC2 since January 2014 and Chairman of the Board, Chief Executive Officer and President of HC2 since May 2014 Served as a director, Chairman of the Board and Chief Executive Officer of HRG Group Inc. (“HRG”) from July 2009 to December 2014 From July 2009 to June 2011, served as the President of HRG Chief Investment Officer and Chief Executive Officer of Harbinger Capital Partners, LLC (“Harbinger Capital”) Before founding Harbinger Capital in 2001, managed the High Yield and Distressed trading operations for Barclays Capital from 1998 to 2000 Received an A.B. in Economics from Harvard University Chairman of the Board Chief Executive Officer President
© 2 0 1 7 H C 2 H O L D I N G S , I N C . HC2 Executive Leadership Team 42 Michael J. Sena Chief Financial Officer of HC2 since June 2015 Served as the Chief Accounting Officer of HRG from November 2012 to May 2015 From January 2009 to November 2012, held various accounting and financial reporting positions with the Reader’s Digest Association, Inc., last serving as Vice President and North American Controller Served as Director of Reporting and Business Processes for Barr Pharmaceuticals from July 2007 until January 2009 Held various positions with PricewaterhouseCoopers Mr. Sena is a Certified Public Accountant and holds a Bachelor of Science in Accounting from Syracuse University Chief Financial Officer Paul K. Voigt Senior Managing Director of HC2 since May 2014 Prior to joining HC2, served as Executive Vice President on the sales and trading desk at Jefferies from 1996 to 2013 Served as Managing Director on the High Yield sales desk at Prudential Securities from 1988 to 1996 Mr. Voigt received an MBA from the University of Southern California in 1988 after playing professional baseball. Graduated from the University of Virginia where he received a Bachelor of Science in Electrical Engineering Senior Managing Director
© 2 0 1 7 H C 2 H O L D I N G S , I N C . HC2 Executive Leadership Team 43 Paul L. Robinson Chief Legal Officer & Corporate Secretary of HC2 since March 2016 Served as Executive Vice President, Chief Legal Officer and Corporate Secretary for SEACOR Holdings Inc. for nearly nine years prior to HC2 Held various positions at Comverse Technology, Inc., including Chief Operating Officer, Executive Vice President, General Counsel and Corporate Secretary Served as associate attorney at Kramer, Levin, Naftalis & Frankel, LLP.; Counsel to the United States Senate Committee on Governmental Affairs and associate attorney at Skadden, Arps, Slate, Meagher & Flom LLP Mr. Robinson earned a Bachelor of Arts degree in Political Science and was Phi Beta Kappa from State University of New York at Binghamton and a J.D., cum laude, from Boston University School of Law Chief Legal Officer & Corporate Secretary Andrew G. Backman Managing Director of Investor Relations & Public Relations of HC2 since April 2016 Prior to joining HC2, served as Managing Director of Investor Relations and Public Relations for RCS Capital and AR Capital (now AR Global) from 2014 to 2016 Founder and Chief Executive Officer of InVisionIR, a New York-based advisory and consulting firm from 2011 to 2014 Served as Senior Vice President, Investor Relations & Marketing of iStar Financial from 2004 to 2010 Served as Vice President, Investor Relations and Marketing Communications for Corvis Corporation / Broadwing Communications from 2000 to 2004 Spent first 10 years of career at Lucent Technologies and AT&T Corp. Mr. Backman earned a Bachelor of Arts degree in Economics from Boston College and graduated from AT&T / Lucent Technologies’ prestigious Financial Leadership Program Managing Director
© 2 0 1 7 H C 2 H O L D I N G S , I N C . HC2 Executive Leadership Team 44 Suzi Raftery Herbst Chief Administrative Officer of HC2 since March 2015 with over 17 years of diverse human resources, recruiting, equity and foreign exchange sales experience Prior to joining HC2, served as Senior Vice President and Director of Human Resources of Harbinger Capital and HRG Previously served as Head of Recruiting at Knight Capital Group Previously held various positions in Human Resources, as well as Foreign Exchange Sales at Cantor Fitzgerald after beginning her career in Equity Sales at Merrill Lynch Ms. Herbst earned a Bachelor of Arts degree in Communications and Studio Art from Marist College Chief Administrative Officer
HC2 HOLDINGS, INC. © HC2 Holdings, Inc. 2017 A n d r e w G . B a c k m a n • i r @ h c 2 . c om • 2 1 2 . 2 3 5 . 2 6 9 1 • 4 5 0 P a r k A v e n u e , 3 0 t h F l o o r , N e w Y o r k , N Y 1 0 0 2 2 March 2017
