HC2 HOLDINGS, INC. Investor Presentation © HC2 Holdings, Inc. 2018 November 2018
HC2’s Diversified Portfolio Core Financial Core Operating Subsidiaries Services Subsidiaries Construction: Marine Services: Energy: Telecommunications: Insurance: DBM GLOBAL (SCHUFF) GMSL ANG PTGI ICS CIG One of the largest steel Leading provider of subsea Premier distributor of natural International wholesale Platform to invest in long-term care fabrication and erection cable installation, gas motor fuel throughout the telecom service company (LTC) portfolio of assets companies in the U.S. maintenance and protection U.S. Global sales presence Initially acquired American Offers full suite of integrated steel in telecom, offshore power Financial Group’s LTC assets Currently own or operate construction and professional and oil & gas Internal and scalable Recently closed acquisition of ~40 natural gas fueling offshore back office services Equity investments in Huawei Humana’s ~$2.4b LTC assets stations throughout United operations Pending acquisition of GrayWolf Marine Networks & S.B. Ring Fenced Liabilities – No Parent States Industrial, entry into heavy Submarine Systems (China 100% ownership Guarantees 67.7% ownership maintenance and repair industry Telecom) LTM 9/30/18 Revenue: 100% ownership Backlog $615m; ~$632m with 72.5% ownership LTM 9/30/18 Revenue: $20.3m $762.3m ~$300m of statutory surplus contracts awarded, not yet ~$330m total adjusted capital GMSL Backlog $358m LTM 9/30/18 Adjusted EBITDA: LTM 9/30/18 Adjusted EBITDA: signed ~$4.1b cash & invested assets HMN Backlog >$350m $5.1m $5.5m 92.5% ownership LTM 9/30/18 Revenue: $196.0m LTM 9/30/18 Revenue: $706.9m LTM 9/30/18 Adjusted EBITDA: LTM 9/30/18 Adjusted EBITDA: $56.6m $41.1m Early Stage and Other Holdings Life Sciences: PANSEND Broadcasting: BeneVir: Oncolytic viral immunotherapy for treatment of solid cancer tumors; Sold to Janssen Biotech (Johnson & Johnson) for up to $1.04 billion 2Q18 HC2 Broadcasting Holdings: Our Vision: Capitalize on the opportunities to bring MediBeacon: Unique non-invasive real-time monitoring of kidney function; MediBeacon recently granted Breakthrough Device designation from the FDA; MediBeacon’s device is intended to valuable content to more viewers over-the-air and position measure GFR in patients with impaired or normal kidney function the company for a changing media landscape R2 Dermatology: Medical device to brighten skin based on Mass. General Hospital technology; The Company has received 2 FDA approvals 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 All data as of September 30, 2018 unless otherwise noted; Humana acquisition closed on 8/9/18 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 14
Significant Value Creation Since inception in 2014, HC2: – Increased market capitalization from ~$46 million to ~$240 million and increased revenues from ~$230 million to ~$1.6 billion – Received ~$200 million in total dividends, distributions, tax share and asset management fees from subsidiaries and investments Since HC2’s acquisition of DBM Global in 2014, DBM: – Increased Adjusted EBITDA by ~93% and increased backlog from ~$400 million to ~$615 million (9/30/18) with a record high of ~$723 million (4Q’17) – DBM’s projects/customers have included the Inglewood NFL Stadium (LA Rams / LA Chargers), Apple, Google, Facebook, Tesla, etc. Since HC2’s acquisition of Global Marine in 2014, Global Marine: – Successfully renewed all three of its critical, long-term telecom maintenance agreements, representing approximately half of the world’s contracted telecom maintenance zones – Significant progress in renewing its fleet of marine assets through strategic acquisitions and substantially reduced debt and pension liabilities by ~31% – Huawei Marine equity investment profit, of which Global Marine owns 49%, increased from ~$2 million in 2014 to ~$40 million in FY17; Increased cash/equivalents/securities from ~$16 million to ~$73 million in the same period – Huawei Marine recently implemented a long-term annual dividend policy Since HC2’s initial investment in American Natural Gas in 2014, ANG: – Increased its Compressed Natural Gas (“CNG”) fueling station footprint to ~40 stations across the United States from two stations at the time of HC2’s initial investment – Increased annual gasoline-gallon equivalents to ~12 million and increased the flow of Renewable Natural Gas (“RNG”) through the ANG stations Since HC2’s acquisition of PTGi-ICS in 2014, PTGi-ICS: – Increased Adjusted EBITDA from a loss generating business at the time of HC2’s acquisition to ~$5.5 million in the LTM period ended 9/30/18 Since HC2’s initial acquisition of the long-term care assets from American Financial Group in 2015, our insurance subsidiary: – Has grown platform assets to approximately $4.1 billion in cash, cash equivalents and invested assets and has more than tripled its total adjusted capital base, through its recently completed acquisition of Humana’s long-term care insurance business – Built a powerful insurance platform, including a team over 100 insurance professionals based in Austin, Texas, which has served as a competitive advantage in acquiring books of business – Provides a valuable fee stream through various asset management fees, providing a source of upstream liquidity to HC2 Since HC2’s initial investment in the Life Sciences Platform in 2014: – BeneVir Biopharm was acquired by Janssen Biotech, Inc., (Johnson & Johnson) for up to $1.04 billion; $140 million upfront cash payment and ~$900 million of pre-determined milestones (Pansend owned ~76% of BeneVir); HC2’s total investment in BeneVir was ~$8 million – MediBeacon recently granted Breakthrough Device designation from the FDA; MediBeacon’s device is intended to measure GFR in patients with impaired or normal kidney function – R2 Dermatology received two U.S. Food and Drug Administration (“FDA”) approvals Since HC2’s initial broadcast acquisitions in 2017: – HC2 has acquired spectrum and licenses to cover a significant part of the U.S. – Currently have 164 operational stations, including 14 full-power stations, 52 Class A stations and 98 low power stations* – Currently have an additional ~400 silent licenses and construction permits in over 130 U.S. Markets including nine of the top 10 markets nationwide *Includes closed and pending transactions © 2 0 1 8 H C 2 H O L D I N G S , I NC. 15
GrayWolf Industrial Inc. (“GrayWolf”) Strategic Rationale: GrayWolf Industrial provides DBM Global with an entry into the heavy maintenance and repair industry, diversifying its revenue stream from large commercial construction projects while capitalizing on strong customer relationships with prime contracts and a culture focused on ROI when bidding and pricing work GrayWolf substantially increases DBM’s exposure to recurring maintenance work, providing increased revenue stability and visibility The acquisition increases the combined business’ exposure to industrial build, diversifying away from more cyclical commercial construction market GrayWolf’s asset light business model requires minimal capital expenditure spend which translates to higher free cash flow conversion DBM management believes the GrayWolf acquisition will allow for the combined company to cross sell its products amongst its current customer base and provide meaningful synergies related to accounting and consolidated back office expenses Transaction Overview: The purchase price for the acquisition is $135.0 million or ~6.9x based on 2017 Adjusted EBITDA(1) of $19.7 million, which represents a compelling multiple given comparable transactions in the sector The acquisition is expected to be financed by an $80.0 million Term Loan financing at DBM Global, $15.0 million from DBM’s existing credit facility and $40.0 million of existing cash from HC2 and certain of our subsidiaries via indirect investment in DBM Global 1. GrayWolf Adjusted EBITDA represents normalized EBITDA view, which excludes certain expenses management believes will not be continuing post-acquisition in order to © 2 0 1 8 H C 2 H O L D I N G S , I NC. 22 better reflect ongoing earnings capacity
PTGi International Carrier Services (“PTGi ICS”) Business Description: 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 ICS Group to acquire Go2Tel.com Inc. a well-established VoIP carrier that offers high-quality termination services, primarily in Latin America, South America and the Caribbean region. 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, CIS, Asia, Romania and the UK. Select Management: Craig Denson – Chief Executive Officer © 2 0 1 8 H C 2 H O L D I N G S , I NC. 26
Continental Insurance Group Business Description: The formation of Continental Insurance Group (“CIG”) in April 2015 to invest in the 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 “Ring Fenced” Liabilities – No Parent Guarantees In December 2015, Continental LTC Inc. (“CLI”), a wholly owned subsidiary of CIG, completed the acquisition of American Financial Group’s long-term care and life insurance businesses, United Teacher Associates Insurance Company (“UTAIC”) and Continental General Insurance Company (“CGIC”) In 2016, HC2 merged UTAIC into CGIC to form a single Texas-domiciled life insurance company, CGIC, and unlock cost and capital efficiencies Recently Completed Acquisition of Humana’s ~$2.4 Billion Long-Term Care Insurance Business [3Q18] Immediately accretive to Continental’s Risk Based Capital ratio and Statutory Surplus Key measures as of September 30, 2018: – Statutory Surplus ~$300 million – Total Adjusted Capital ~$330 million – GAAP Assets of ~$5.5 billion – Cash and Invested Assets ~$4.1 billion Projected ~$15 million investment management fee stream to HC2 Select Management: James P. Corcoran – Executive Chair – James 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 All data as of September 30, 2018 unless otherwise noted; Humana acquisition closed on 8/9/18 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 27
Pansend HC2’s Pansend Life Sciences Segment Is Focused on the Development of Innovative Healthcare Technologies and Products Recently completed sale to Janssen Biotech, Inc. (Johnson & Johnson) for up to $1.04 billion (2Q18); $8m total investment 76% 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) Granted new patent entitled “Oncolytic Herpes Simplex Virus and Therapeutic Uses Thereof”, covering the composition of matter for Stealth-1H, BeneVir’s lead oncolytic immunotherapy, as well as other platform assets (2Q17) 50% equity ownership in company with unique technology and device for monitoring of real-time kidney function The U.S. Food and Drug Administration has granted Breakthrough Device designation to Medibeacon for the company’s Transdermal GFR Measurement System (“TFGR”). The device is intended to measure Glomerular Filtration Rate (“GFR”) in patients with impaired or normal renal function.(1) Under the Breakthrough Devices program, a provision of the 21st Century Act, the FDA works with companies to expedite regulatory review in order to give patients more timely access to diagnostic and therapeutic technologies. The TGFR is designed to provide clinicians real-time measurement of GFR at the point of care with no need for blood sampling or urine collection. The ability to measure GFR is of high clinical interest, especially in patients with or at risk of kidney disease. 74% 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 $20 billion global market Received Food and Drug Administration approval for the R2 Dermal Cooling System (4Q16) Received Food and Drug Administration approval for second generation R2 Dermal Cooling System (2Q17) 80% 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 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 (1) Data on file. Medibeacon, Inc., St. Louis, MO. All data as of September 30, 2018 unless otherwise noted O L D I N G S NC Note: Equity ownership percentages do not reflect fully diluted amounts, except 28 © 2 0 1 8 H C 2 H , I . Benevir, which reflects fully diluted ownership at the time of disposition.
Pansend: BeneVir / Janssen Acquisition Summary BeneVir: BeneVir was a portfolio company of Pansend, our Life Sciences segment – Focused on the development of a patent-protected oncolytic virus, BV-2711, for the treatment of solid cancer tumors Pansend was the owner of all of BeneVir's outstanding preferred stock, through which Pansend held an approximate 80%, or ~76% on a fully diluted basis, controlling interest in BeneVir On June 11th, 2018, BeneVir completed its sale to Janssen Biotech, Inc. (“Janssen”), one of the Janssen Pharmaceutical Companies of Johnson & Johnson Janssen made an upfront cash payment of $140 million to BeneVir shareholders at the closing, of which HC2 received approximately $73 million, excluding approximately $9 million being held in escrow Janssen will make additional payments of up to $900 million to BeneVir shareholders if achievement of certain predetermined milestones are met HC2 had invested ~$8 million in BeneVir since inception * © 2 0 1 8 H C 2 H O L D I N G S , I NC. 29
HC2 Broadcasting Holdings Inc. Business Description* Broadcast Television Stations: Key Metrics** HC2 Broadcasting Holdings Inc., a subsidiary of HC2 Holdings, has Operational Stations: 164 strategically acquired broadcast assets across the United States – Full-Power Stations: 14 HC2’s broadcast vision is to capitalize on the opportunities to bring – Class A Stations: 52 valuable content to more viewers over-the-air and position the company – LPTV Stations: 98 for a changing media landscape Silent Licenses & Construction Permits: ~400 U.S. Markets: >130 Total Footprint Covers Approximately 60% of the U.S. Population Select Management: Kurt Hanson – Chief Technology Officer, HC2 Broadcasting Holdings Louis Libin – Managing Director, Strategy, HC2 Broadcasting Holdings Les Levi – Chief Operating Officer, HC2 Broadcasting Holdings Rebecca Hanson – General Counsel, HC2 Broadcasting Holdings Manuel Abud – President and CEO, Azteca America * Map based on 2010 population data ** Metrics include pending transactions as of November 6, 2018. © 2 0 1 8 H C 2 H O L D I N G S , I NC. 30
Segment Financial Summary ($m) Q3 2018 Q3 2017 YTD 2018 YTD 2017 Core Operating Subsidiaries Construction $16.0 $16.8 $41.5 $36.5 Marine Services 7.9 8.8 25.8 28.8 Energy 1.0 0.3 4.7 2.5 Telecom 1.5 1.5 3.9 5.3 Total Core Operating $26.3 $27.3 $75.8 $73.0 Adjusted Early Stage and Other Holdings EBITDA Life Sciences ($3.0) ($8.2) ($12.2) ($17.1) Broadcasting (2.4) - (13.7) - Other (1.0) (1.1) (2.2) (4.4) Total Early Stage and Other ($6.4) ($9.3) ($28.1) ($21.6) Non-Operating Corporate ($6.2) ($8.3) ($18.3) ($20.4) Total HC2 (excluding Insurance) $13.7 $9.8 $29.4 $31.1 Pre-Tax Core Financial Services Insurance AOI* Insurance ($11.3) $17.0 ($8.7) $20.6 *Includes results from the long-term care insurance business recently acquired from Humana, Inc. (NYSE: HUM) Note: Reconciliations of Adjusted EBITDA and Pre-Tax Insurance AOI to U.S. GAAP Net Income in appendix. Table may not foot due to rounding. Broadcasting segment was formed in Q1 2018; no comparable results for Q3 and YTD 2017. All data as of September 30, 2018 unless otherwise noted © 2 0 1 8 H C 2 H O L D I N G S , I NC. 31
Third Quarter 2018 Highlights 3Q18 Adjusted EBITDA $16.0m vs. $16.8m for 3Q17; YTD18 Adjusted EBITDA $41.5m vs. $36.5m for YTD17 $615m reported backlog; $632m backlog taking into consideration awarded, but not yet signed contracts; Acquiring GrayWolf Industrial, a specialty maintenance, repair and installation service provider for $135M Construction Provides diversification of revenue and earnings; helps offset cyclicality of commercial construction market Just over $20 million in annual Adjusted EBITDA with minimal capex, strong cash flows and Blue-Chip customer base Reaffirm FY18 Guidance: Continue to expect $60m and $65m of FY18 Adjusted EBITDA 3Q18 Adjusted EBITDA $7.9m vs. $8.8m for 3Q17; YTD18 Adjusted EBITDA $25.8m vs. $28.8m for YTD17 GMSL – Continued solid backlog at $358m -- Huawei Marine equity investment - Continued strong backlog over $350m 3Q18 performance driven by the Huawei Marine Network equity investment, offset by higher than expected costs on a certain offshore power construction project and increases in unutilized vessel costs attributable to timing of new project work Huawei Marine Network implemented a new long-term annual dividend policy after several years of meaningful shareholder value creation: Marine Global Marine received ~US$10m of dividends in 3Q18; Will receive additional special dividends of ~$4.9m in Services 4Q18 and ~$4.9m in 2Q19 Going forward, equity investment partners will annually distribute a minimum of 30% of cumulative distributable net profits as dividends based on audited annual financials Executed five-year cable repair framework agreement with a leading offshore wind power developer covering their European assets Exploring strategic alternatives for the Global Marine business, including a potential sale; proceeds to pay down HC2 Holdco debt Reaffirm FY18 Guidance: Continue to expect $45m and $50m of FY18 Adjusted EBITDA 3Q18 Adjusted EBITDA $1.0m vs. $0.3m for 3Q17; YTD18 Adjusted EBITDA $4.7m vs. $2.5m for YTD17 Energy Seek to increase existing station utilization; Focus on business development and marketing efforts to drive organic sales; Develop preferred fueling agreements with new and existing customers to ramp volumes; Continue to increase flow of Renewable Natural Gas (RNG) through ANG stations 3Q18 Adjusted EBITDA $1.5m vs. $1.5m for 3Q17; YTD18 Adjusted EBITDA $3.9m vs, $5.3m for YTD17 Telecom ICS Group to acquire Go2Tel.com Inc. a well-established VoIP carrier that offers high-quality termination services, primarily in Latin America, South America and the Caribbean region © 2 0 1 8 H C 2 H O L D I N G S , I NC. 32
Third Quarter 2018 Highlights (con’t) Completed Acquisition of Humana’s ~$2.4 billion long-term care insurance business – (Closed 8/9/18) 3Q18 Pretax Insurance AOI ($11.3) million vs. $17.0 million 3Q17 YTD18 Pretax Insurance AOI ($8.7) million vs. $20.6 million YTD17 As of September 30, 2018, inclusive of Humana assets: Insurance – Statutory Surplus ~$300 million – Total Adjusted Capital ~$330 million – GAAP Assets of ~$5.5 billion – Cash and Invested Assets ~$4.1 billion ~$15 million annual investment management fee, with potential back-end upside Ring-fenced liabilities / no-parent guarantees The U.S. Food and Drug Administration has granted Breakthrough Device designation to Medibeacon for the company’s Transdermal GFR Measurement System (“TFGR”). The device is intended to measure Glomerular Filtration Rate (“GFR”) in patients with impaired or normal renal function.(1) Under the Breakthrough Devices program, a provision of the 21st Century Act, the FDA works with companies to expedite Pansend regulatory review in order to give patients more timely access to diagnostic and therapeutic technologies. The TGFR is designed to provide clinicians real-time measurement of GFR at the point of care with no need for blood sampling or urine collection. The ability to measure GFR is of high clinical interest, especially in patients with or at risk of kidney disease. R2 Dermatology and MediBeacon remain in discussions with strategic parties for possible monetizations 3Q18 Adjusted EBITDA ($2.4) million; YTD18 Adjusted EBITDA ($13.7) million Operational Stations*: 164 – Full-Power Stations: 14 – Class A Stations: 52 – LPTV Stations: 98 – Silent Licenses & Construction Permits: ~400 Broadcasting U.S. Markets*: >130 Total Footprint Covers Approximately 60% of the U.S. Population* Obtained $38 million debt and equity financing; – $35 million one-year secured note; 8.5% rate payable at maturity and secured by certain of HC2 Station Group, Inc. and HC2 LPTV Holdings, Inc.’s assets – 2.0% of outstanding common stock of HC2 Broadcasting purchased for $3.1 million – Issued warrants to purchase additional 2.0% of common stock of HC2 Broadcasting (1) Data on file. Medibeacon, Inc., St. Louis, MO. * Metrics include pending transactions as of November 6, 2018. © 2 0 1 8 H C 2 H O L D I N G S , I NC. 33
2018 Focus and Priorities – Update Monetization / Value Creation Within Diverse HC2 Portfolio – Sold BeneVir to Janssen Biotech (Johnson & Johnson) for up to $1.04 billion [2Q18] – Closed on the acquisition of Humana’s $2.4 billion long-term care insurance business; Combined Total Adjusted Capital is now approximately $330M [3Q18] – Announced the evaluation of strategic alternatives for Global Marine, including potential sale – Announced DBM Global’s pending acquisition of Graywolf Industrial; diversification of revenue and service offering strong, stable cash flow [4Q18] Continued Focused Expansion of Over-The-Air Broadcast Television Strategy – Expanded market reach by building a nationwide network through strategic acquisitions – Identified significant opportunities to reduce costs and increase efficiencies – Building out and integrating infrastructure to support vision of creating a valuable content distribution “pipeline” Optimization of HC2 Capital Structure – Obtained $38 million new debt and equity financing at Broadcasting subsidiary, validating the Broadcasting strategy and vision Diverse and Meaningful Sources of Liquidity at HC2 Holdco Re-Affirmed 2018 Guidance for Construction & Marine Services – DBM Global: Currently expect $60 million - $65 million of FY18 Adjusted EBITDA – Global Marine: Currently expect $45 million - $50 million of FY18 Adjusted EBITDA HC2 does not guarantee future results of any kind. Guidance is subject to risks and uncertainties, including, without limitation, those factors outlined in the “Forward Looking Statements” of this presentation and the “Risk Factors” section of the company’s annual and quarterly reports filed with the Securities and Exchange Commission (SEC). © 2 0 1 8 H C 2 H O L D I N G S , I NC. 34
Segment Financial Summary ($m) Q3 2018 Q2 2018 Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 FY 2016 Core Operating Subsidiaries Construction $16.0 $15.5 $10.0 $51.6 $15.1 $16.8 $11.1 $8.6 $59.9 Marine Services 7.9 20.4 (2.4) 44.0 15.3 8.8 3.6 16.3 41.2 Energy 1.0 3.0 0.7 2.9 0.4 0.3 1.0 1.2 2.5 Telecom 1.5 1.3 1.1 6.9 1.6 1.5 2.2 1.7 5.6 Total Core Operating $26.3 $40.2 $9.3 $105.5 $32.4 $27.3 $17.9 $27.8 $109.1 Adjusted Early Stage and Other Holdings EBITDA Life Sciences ($3.0) ($4.9) ($4.4) ($22.4) ($5.2) ($8.2) ($4.9) ($4.1) ($12.0) Broadcasting (2.4) (6.2) (5.1) (0.8) (0.8) 0.0 0.0 0.0 0.0 Other (1.0) (1.0) (0.2) (2.3) 2.1 (1.1) (2.2) (1.2) (11.2) Total Early Stage and Other ($6.4) ($12.1) ($9.6) ($25.5) ($3.9) ($9.3) ($7.1) ($5.2) ($23.2) Non-Operating Corporate ($6.2) ($5.4) ($6.7) ($29.2) ($8.7) ($8.3) ($6.3) ($5.9) ($25.7) Total HC2 (excluding Insurance) $13.7 $22.7 ($6.9) $50.8 $19.7 $9.8 $4.6 $16.7 $60.2 Pre-Tax Core Financial Services Insurance AOI* Insurance $(11.3) $0.5 $2.2 $24.2 $3.6 $17.0 $4.1 ($0.5) ($2.7) *Includes results from the long-term care insurance business recently acquired from Humana, Inc. (NYSE: HUM) Note: Reconciliations of Adjusted EBITDA and Pre-Tax Insurance AOI to U.S. GAAP Net Income in appendix. Table may not foot due to rounding. Pre-Tax Insurance Adjusted Operating Income for Q1 2016 was 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. All data as of September 30, 2018 unless otherwise noted © 2 0 1 8 H C 2 H O L D I N G S , I NC. 35
Reconciliations
Reconciliation of Net Revenue Last Twelve Months Ended September 30, 2018 (in thousands) Net revenue Twelve Months Ended Nine Months Ended Latest Twelve Months December 31, September 30, September 30, September 30, 2017 2017 2018 2018 Construction $ 578,989 $ 403,325 $ 531,209 $ 706,873 Marine Services 169,453 123,382 149,923 195,994 Energy 16,415 12,301 16,141 20,255 Telecommunications 701,898 520,214 580,630 762,314 Core Operating $ 1,466,755 $ 1,059,222 $ 1,277,903 $ 1,685,436 Insurance 151,577 112,032 161,179 200,724 Broadcasting 4,765 - 33,702 38,467 Life Sciences - - - - Other 11,026 4,375 3,680 10,331 Non-operating Corporate - - - - Consolidating Elimination - - (24,639) (24,639) Total net revenue $ 1,634,123 $ 1,175,629 $ 1,451,825 $ 1,910,319 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 37
Reconciliation of Adjusted EBITDA Last Twelve Months Ended September 30, 2018 (in thousands) Adjusted EBITDA Twelve Months Ended Nine Months Ended Latest Twelve Months December 31, September 30, September 30, September 30, 2017 2017 2018 2018 Construction $ 51,588 $ 36,476 $ 41,453 $ 56,565 Marine Services 44,027 28,758 25,824 41,093 Energy 2,911 2,489 4,657 5,079 Telecommunications 6,929 5,324 3,858 5,463 Core Operating $ 105,455 $ 73,047 $ 75,792 $ 108,200 Broadcasting (849) - (13,684) (14,533) Life Sciences (22,366) (17,141) (12,209) (17,434) Other (2,290) (4,436) (2,180) (34) Non-operating Corporate (29,152) (20,420) (18,285) (27,017) Total $ 50,798 $ 31,050 $ 29,434 $ 49,182 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 38
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Three Months Ended September 30, 2018 (in thousands) Three Months Ended September 30, 2018 Core Operating Subsidiaries Early Stage & Other Non- Life Other & operating Total HC2 Construction Marine Energy Telecom Sciences Broadcasting Elimination Corporate Net Income attributable to HC2 Holdings, Inc. $ 153,466 Less: Net Income attributable to HC2 Holdings Insurance Segment 141,068 Less: Consolidating elim inations attributable to HC2 Holdings 23,072 Insurance segm ent Net Income (loss) attributable to HC2 Holdings, Inc., excluding $ 9,203 $ (515) $ (562) $ 1,302 $ (2,636) $ (4,686) $ 4,487 $ (17,267) $ (10,674) Insurance Segment Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 1,851 6,853 1,389 89 35 827 11 21 11,076 Depreciation and amortization (included in cost of revenue) 1,792 - - - - - - - 1,792 Amortization of equity method fair value adjustment at acquisition - (371) - - - - - - (371) (Gain) loss on sale or disposal of assets (681) (118) - - - (20) - - (819) Interest expense 594 1,221 408 - - 534 - 14,588 17,345 Other (income) expense, net (1,938) (263) 58 (21) (14) 361 (3,606) 1,569 (3,854) Gain on sale and deconsolidation of subsidiary - - - - 22 - (1,540) - (1,518) Foreign currency (gain) loss (included in cost of revenue) - 156 - - - - - - 156 Income tax (benefit) expense 3,842 147 7 - - - - (6,483) (2,487) Noncontrolling interest 750 27 (268) - (463) (1,538) (433) - (1,925) Bonus to be settled in equity - - - - - - - 165 165 Share-based payment expense - 492 1 - 52 1,657 75 1,032 3,309 Non-recurring items - - - - - - - - - Acquisition and disposition costs 538 239 - 105 - 449 - 146 1,477 Adjusted EBITDA $ 15,951 $ 7,868 $ 1,033 $ 1,475 $ (3,004) $ (2,416) $ (1,006) $ (6,229) $ 13,672 Total Core Operating Subsidiaries $ 26,327 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 39
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Three Months Ended September 30, 2017 (in thousands) Three Months Ended September 30, 2017 Core Operating Subsidiaries Early Stage & Other Non- Life Other & operating Total HC2 Construction Marine Energy Telecom Sciences Broadcasting Elimination Corporate Net loss attributable to HC2 Holdings, Inc. $ (5,967) Less: Net Income attributable to HC2 Holdings Insurance segment 4,280 Net Income (loss) attributable to HC2 Holdings, Inc., excluding $ 7,082 $ 844 $ (939) $ 1,348 $ (6,760) $ - $ (600) $ (11,222) $ (10,247) Insurance Segment Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 1,314 6,221 1,247 94 50 - 272 17 9,215 Depreciation and amortization (included in cost of revenue) 1,293 - - - - - - - 1,293 Amortization of equity method fair value adjustment at acquisition - (573) - - - - - - (573) (Gain) loss on sale or disposal of assets 486 - 25 - - - - - 511 Lease termination costs - - - 15 - - - - 15 Interest expense 238 1,021 262 14 - - 1 11,686 13,222 Net loss (gain) on contingent consideration - - - - - - - (6,320) (6,320) Other (income) expense, net (165) 888 277 12 (10) - (118) (718) 166 Foreign currency (gain) loss (included in cost of revenue) - (238) - - - - - - (238) Income tax (benefit) expense 4,481 (137) - - - - - (4,746) (402) Noncontrolling interest 558 43 (763) - (1,506) - (689) - (2,357) Bonus to be settled in equity - - - - - - - 765 765 Share-based payment expense - 394 179 - 71 - 19 718 1,381 Non-recurring items - - - - - - - - - Acquisition and disposition costs 1,501 300 - - - - - 1,564 3,365 Adjusted EBITDA $ 16,788 $ 8,763 $ 288 $ 1,483 $ (8,155) $ - $ (1,115) $ (8,256) $ 9,796 Total Core Operating Subsidiaries $ 27,322 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 40
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Nine Months Ended September 30, 2018 (in thousands) Nine Months Ended September 30, 2018 Core Operating Subsidiaries Early Stage & Other Non- Life Other & operating Total HC2 Construction Marine Energy Telecom Sciences Broadcasting Elimination Corporate Net Income attributable to HC2 Holdings, Inc. $ 173,836 Less: Net Income attributable to HC2 Holdings Insurance Segment 142,878 Less: Consolidating elim inations attributable to HC2 Holdings 19,076 Insurance segm ent Net Income (loss) attributable to HC2 Holdings, Inc., excluding $ 20,067 $ 4,096 $ (581) $ 3,395 $ 67,552 $ (29,238) $ 3,779 $ (57,188) $ 11,882 Insurance Segment Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 5,043 20,110 4,092 262 146 2,275 53 62 32,043 Depreciation and amortization (included in cost of revenue) 5,071 - - - - - - - 5,071 Amortization of equity method fair value adjustment at acquisition - (1,112) - - - - - - (1,112) Asset impairment expense - - 277 - - 104 - - 381 (Gain) loss on sale or disposal of assets (253) (2,779) (223) - - (12) - - (3,267) Interest expense 1,462 3,712 1,154 - - 7,763 2 39,758 53,851 Loss on early extinguishment of debt - - - - - 2,537 - - 2,537 Other (income) expense, net (1,915) (1,296) 190 19 70 379 (3,433) 1,073 (4,913) Gain on sale and deconsolidation of subsidiary - - - - (102,119) - (1,540) - (103,659) Foreign currency (gain) loss (included in cost of revenue) - (366) - - - - - - (366) Income tax (benefit) expense 8,992 149 20 - 1 14 (272) (7,039) 1,865 Noncontrolling interest 1,633 1,693 (277) - 19,469 (2,848) (1,055) - 18,615 Bonus to be settled in equity - - - - - - - 515 515 Share-based payment expense - 1,378 5 - 144 2,319 286 3,970 8,102 Non-recurring items - - - - - - - - - Acquisition and disposition costs 1,353 239 - 182 2,528 3,023 - 564 7,889 Adjusted EBITDA $ 41,453 $ 25,824 $ 4,657 $ 3,858 $ (12,209) $ (13,684) $ (2,180) $ (18,285) $ 29,434 Total Core Operating Subsidiaries $ 75,792 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 41
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Nine Months Ended September 30, 2017 (in thousands) Nine Months Ended September 30, 2017 Core Operating Subsidiaries Early Stage & Other Non- Life Other & operating Total HC2 Construction Marine Energy Telecom Sciences Broadcasting Elimination Corporate Net (Loss) attributable to HC2 Holdings, Inc. $ (38,374) Less: Net Income attributable to HC2 Holdings Insurance Segment 3,683 Net Income (loss) attributable to HC2 Holdings, Inc., excluding $ 14,464 $ 8,943 $ (2,001) $ 4,910 $ (14,276) $ - $ (9,787) $ (44,310) $ (42,057) Insurance Segment Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 4,194 16,561 3,876 285 129 - 933 50 26,028 Depreciation and amortization (included in cost of revenue) 3,835 - - - - - - - 3,835 Amortization of equity method fair value adjustment at acquisition - (1,223) - - - - - - (1,223) Asset impairment expense - - - - - - 1,810 - 1,810 (Gain) loss on sale or disposal of assets 93 (3,500) 39 - - - - - (3,368) Lease termination costs - 249 - 15 - - - - 264 Interest expense 619 3,363 552 37 - - 2,408 32,431 39,410 Net loss (gain) on contingent consideration - - - - - - - (6,001) (6,001) Other (income) expense, net (158) 2,443 1,652 77 (25) - 2,800 (460) 6,329 Foreign currency (gain) loss (included in cost of revenue) - (131) - - - - - - (131) Income tax (benefit) expense 9,792 239 12 - (0) - 0 (9,112) 931 Noncontrolling interest 1,190 381 (2,002) - (3,208) - (2,666) - (6,305) Bonus to be settled in equity - - - - - - - 1,350 1,350 Share-based payment expense - 1,133 361 - 239 - 66 2,207 4,006 Non-recurring items - - - - - - - - - Acquisition and disposition costs 2,447 300 - - - - - 3,425 6,172 Adjusted EBITDA $ 36,476 $ 28,758 $ 2,489 $ 5,324 $ (17,141) $ - $ (4,436) $ (20,420) $ 31,050 Total Core Operating Subsidiaries $ 73,047 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 42
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Three Months Ended June 30, 2018 (in thousands) Three Months Ended June 30, 2018 Core Operating Subsidiaries Early Stage & Other Non- Life Other & operating Total HC2 Construction Marine Energy Telecom Sciences Broadcasting Elimination Corporate Net Income attributable to HC2 Holdings, Inc. $ 55,366 Less: Net Income attributable to HC2 Holdings Insurance Segment 565 Less: Consolidating elim inations attributable to HC2 Holdings (2,009) Insurance segm ent Net Income (loss) attributable to HC2 Holdings, Inc., excluding $ 7,397 $ 10,864 $ 679 $ 1,040 $ 74,124 $ (11,816) $ (552) $ (24,926) $ 56,810 Insurance Segment Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 1,665 6,429 1,359 87 53 743 21 20 10,377 Depreciation and amortization (included in cost of revenue) 1,686 - - - - - - - 1,686 Amortization of equity method fair value adjustment at acquisition - (370) - - - - - - (370) Asset impairment expense - - 277 - - 104 - - 381 (Gain) loss on sale or disposal of assets 13 (25) (192) - - 8 - - (196) Interest expense 458 1,328 426 - - 1,523 - 13,446 17,181 Loss on early extinguishment of debt - - - - - 2,537 - - 2,537 Gain on sale and deconsolidation of subsidiary - - - - (102,141) - - - (102,141) Other (income) expense, net (66) (1,981) 66 99 56 93 121 226 (1,386) Foreign currency (gain) loss (included in cost of revenue) - (420) - - - - - - (420) Income tax (benefit) expense 3,318 68 13 - 1 14 (272) 2,759 5,901 Noncontrolling interest 601 4,030 324 - 20,679 (700) (536) - 24,398 Bonus to be settled in equity - - - - - - - 175 175 Share-based payment expense - 476 2 - 18 349 200 2,660 3,705 Non-recurring items - - - - - - - - - Acquisition and disposition costs 456 - - 49 2,355 928 - 240 4,028 Adjusted EBITDA $ 15,528 $ 20,399 $ 2,954 $ 1,275 $ (4,855) $ (6,217) $ (1,018) $ (5,400) $ 22,666 Total Core Operating Subsidiaries $ 40,156 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 43
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Three Months Ended March 31, 2018 (in thousands) Three Months Ended March 31, 2018 Core Operating Subsidiaries Early Stage & Other Non- Life Other & operating Total HC2 Construction Marine Energy Telecom Sciences Broadcasting Elimination Corporate Net Income (loss) attributable to HC2 Holdings, Inc. $ (34,996) Less: Net Income attributable to HC2 Holdings Insurance Segment 1,245 Less: Consolidating elim inations attributable to HC2 Holdings (1,987) Insurance segm ent Net Income (loss) attributable to HC2 Holdings, Inc., excluding $ 3,467 $ (6,253) $ (698) $ 1,053 $ (3,936) $ (12,736) $ (156) $ (14,995) $ (34,254) Insurance Segment Adjustments to reconcile net income (loss) to Adjusted EBITDA: - Depreciation and amortization 1,527 6,828 1,344 86 58 705 21 21 10,590 Depreciation and amortization (included in cost of revenue) 1,593 - - - - - - - 1,593 Amortization of equity method fair value adjustment at acquisition - (371) - - - - - - (371) (Gain) loss on sale or disposal of assets 415 (2,636) (31) - - - - - (2,252) Interest expense 410 1,163 320 - - 5,706 2 11,724 19,325 Other (income) expense, net 89 948 66 (59) 28 (75) 52 (722) 327 Foreign currency (gain) loss (included in cost of revenue) - (102) - - - - - - (102) Income tax (benefit) expense 1,832 (66) - - - - - (3,315) (1,549) Noncontrolling interest 282 (2,364) (333) - (747) (610) (86) - (3,858) Bonus to be settled in equity - - - - - - - 175 175 Share-based payment expense - 410 2 - 74 313 11 278 1,088 Non-recurring items - - - - - - - - - Acquisition costs 359 - - 28 173 1,646 - 178 2,384 Adjusted EBITDA $ 9,974 $ (2,443) $ 670 $ 1,108 $ (4,350) $ (5,051) $ (156) $ (6,656) $ (6,904) Total Core Operating Subsidiaries $ 9,309 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 44
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Full Year Ended December 31, 2017 (in thousands) Year Ended December 31, 2017 Core Operating Subsidiaries Early Stage & Other Non- operating Total HC2 Life Other & Corporate Construction Marine Energy Telecom Sciences Broadcasting Elimination Net loss attributable to HC2 Holdings, Inc. $ (46,911) Less: Net Incom e attributable to HC2 Holdings Insurance segm ent 7,066 Net Income (loss) attributable to HC2 Holdings, Inc., excluding $ 23,624 $ 15,173 $ (516) $ 6,163 $ (18,098) $ (4,941) $ (13,064) $ (62,318) $ (53,977) Insurance Segment Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 5,583 22,898 5,071 371 186 302 1,206 71 35,688 Depreciation and amortization (included in cost of revenue) 5,254 - - - - - - - 5,254 Amortization of equity method fair value adjustment at acquisition - (1,594) - - - - - - (1,594) Asset impairment expense - - - - - - 1,810 - 1,810 (Gain) loss on sale or disposal of assets 292 (3,500) 247 181 - - - - (2,780) Lease termination costs - 249 - 17 - - - - 266 Interest expense 976 4,392 1,181 41 - 1,963 2,410 44,135 55,098 Net loss (gain) on contingent consideration - - - - - - - (11,411) (11,411) Other (income) expense, net (41) 2,683 1,488 149 (17) 41 6,500 (92) 10,711 Foreign currency (gain) loss (included in cost of revenue) - (79) - - - - - - (79) Income tax (benefit) expense 10,679 203 (4,243) 7 (820) (1,811) 682 (10,185) (5,488) Noncontrolling interest 1,941 260 (681) - (3,936) 755 (1,919) - (3,580) Bonus to be settled in equity - - - - - - - 4,130 4,130 Share-based compensation expense - 1,527 364 - 319 194 85 2,754 5,243 Non-recurring items - - - - - - - - - Acquisition costs 3,280 1,815 - - - 2,648 - 3,764 11,507 Adjusted EBITDA $ 51,588 $ 44,027 $ 2,911 $ 6,929 $ (22,366) $ (849) $ (2,290) $ (29,152) $ 50,798 Total Core Operating Subsidiaries $ 105,455 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 45
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Three Months Ended December 31, 2017 (in thousands) Three Months Ended December 31, 2017 Core Operating Subsidiaries Early Stage & Other Non- operating Total HC2 Life Other & Corporate Construction Marine Energy Telecom Sciences Broadcasting Elimination Net loss attributable to HC2 Holdings, Inc. $ (8,537) Less: Net Incom e attributable to HC2 Holdings Insurance segm ent 3,383 Net Income (loss) attributable to HC2 Holdings, Inc., excluding $ 9,160 $ 6,230 $ 1,485 $ 1,253 $ (3,822) $ (4,941) $ (3,277) $ (18,008) $ (11,920) Insurance Segment Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 1,389 6,337 1,195 86 57 302 273 21 9,660 Depreciation and amortization (included in cost of revenue) 1,419 - - - - - - - 1,419 Amortization of equity method fair value adjustment at acquisition - (371) - - - - - - (371) Asset impairment expense - - - - - - - - - (Gain) loss on sale or disposal of assets 199 - 208 181 - - - - 588 Lease termination costs - - - 2 - - - - 2 Interest expense 357 1,029 629 4 - 1,963 2 11,704 15,688 Net loss (gain) on contingent consideration - - - - - - - (5,410) (5,410) Other (income) expense, net 117 240 (164) 72 8 41 3,700 368 4,382 Foreign currency (gain) loss (included in cost of revenue) - 52 - - - - - - 52 Income tax (benefit) expense 887 (36) (4,255) 7 (820) (1,811) 682 (1,073) (6,419) Noncontrolling interest 751 (121) 1,321 - (728) 755 747 - 2,725 Bonus to be settled in equity - - - - - - - 2,780 2,780 Share-based compensation expense - 394 3 - 80 194 19 547 1,237 Non-recurring items - - - - - - - - - Acquisition costs 833 1,515 - - - 2,648 - 339 5,335 Adjusted EBITDA $ 15,112 $ 15,269 $ 422 $ 1,605 $ (5,225) $ (849) $ 2,146 $ (8,732) $ 19,748 Total Core Operating Subsidiaries $ 32,408 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 46
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Three Months Ended June 30, 2017 (in thousands) Three Months Ended June 30, 2017 Core Operating Subsidiaries Early Stage & Other Non- operating Total HC2 Life Other & Corporate Construction Marine Energy Telecom Sciences Broadcasting Elimination Net loss attributable to HC2 Holdings, Inc. $ (17,911) Less: Net Incom e attributable to HC2 Holdings Insurance segm ent 164 Net Income (loss) attributable to HC2 Holdings, Inc., excluding $ 4,179 $ (3,053) $ (365) $ 2,060 $ (4,106) $ - $ (3,757) $ (13,033) $ (18,075) Insurance Segment Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 1,240 5,255 1,381 94 41 - 331 16 8,358 Depreciation and amortization (included in cost of revenue) 1,302 - - - - - - - 1,302 Amortization of equity method fair value adjustment at acquisition - (325) - - - - - - (325) Asset impairment expense - - - - - - 1,810 - 1,810 (Gain) loss on sale or disposal of assets (145) - 18 - - - - - (127) Lease termination costs - 55 - - - - - - 55 Interest expense 174 1,040 154 14 - - 16 10,675 12,073 Net loss (gain) on contingent consideration - - - - - - - 88 88 Other (income) expense, net 28 490 255 (9) (11) - 803 214 1,770 Foreign currency (gain) loss (included in cost of revenue) - 83 - - - - - - 83 Income tax (benefit) expense 3,232 (134) (1) - - - - (6,543) (3,446) Noncontrolling interest 369 (156) (492) - (911) - (1,372) - (2,562) Bonus to be settled in equity - - - - - - - 585 585 Share-based compensation expense - 394 91 - 76 - 18 527 1,106 Non-recurring items - - - - - - - - - Acquisition costs 701 - - - - - - 1,168 1,869 Adjusted EBITDA $ 11,080 $ 3,649 $ 1,041 $ 2,159 $ (4,911) $ - $ (2,151) $ (6,303) $ 4,564 Total Core Operating Subsidiaries $ 17,929 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 47
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Three Months Ended March 31, 2017 (in thousands) Three Months Ended March 31, 2017 Core Operating Subsidiaries Early Stage & Other Non- operating Total HC2 Life Other & Corporate Construction Marine Energy Telecom Sciences Broadcasting Elimination Net loss attributable to HC2 Holdings, Inc. $ (14,496) Less: Net loss attributable to HC2 Holdings Insurance segm ent (761) Net Income (loss) attributable to HC2 Holdings, Inc., excluding $ 3,203 $ 11,152 $ (697) $ 1,502 $ (3,410) $ - $ (5,430) $ (20,055) $ (13,735) Insurance Segment Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 1,640 5,085 1,248 97 38 - 330 16 8,454 Depreciation and amortization (included in cost of revenue) 1,240 - - - - - - - 1,240 Amortization of equity method fair value adjustment at acquisition - (325) - - - - - - (325) Asset impairment expense - - - - - - - - - (Gain) loss on sale or disposal of assets (248) (3,500) (4) - - - - - (3,752) Lease termination costs - 194 - - - - - - 194 Interest expense 207 1,302 136 9 - - 2,391 10,070 14,115 Net loss (gain) on contingent consideration - - - - - - - 231 231 Other (income) expense, net (21) 1,065 1,120 74 (4) - 2,115 44 4,393 Foreign currency (gain) loss (included in cost of revenue) - 24 - - - - - - 24 Income tax (benefit) expense 2,079 510 13 - - - - 2,177 4,779 Noncontrolling interest 263 494 (747) - (791) - (605) - (1,386) Bonus to be settled in equity - - - - - - - - - Share-based compensation expense - 345 91 - 92 - 29 962 1,519 Non-recurring items - - - - - - - - - Acquisition costs 245 - - - - - - 693 938 Adjusted EBITDA $ 8,608 $ 16,346 $ 1,160 $ 1,682 $ (4,075) $ - $ (1,170) $ (5,862) $ 16,689 Total Core Operating Subsidiaries $ 27,796 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 48
Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA Full Year Ended December 31, 2016 (in thousands) Year Ended December 31, 2016 Core Operating Subsidiaries Early Stage & Other Non- Life Other & operating Total HC2 Construction Marine Energy Telecom Sciences Elimination Corporate Net loss attributable to HC2 Holdings, Inc. $ (94,549) Less: Net loss attributable to HC2 Holdings Insurance segm ent (14,028) Net Income (loss) attributable to HC2 Holdings, Inc., excluding $ 28,002 $ 17,447 $ 7 $ 1,435 $ (7,646) $ (24,800) $ (94,966) $ (80,521) Insurance Segment Adjustments to reconcile net income (loss) to Adjusted EBITDA: Depreciation and amortization 1,892 22,007 2,248 504 124 1,480 9 28,264 Depreciation and amortization (included in cost of revenue) 4,370 - - - - - - 4,370 Amortization of equity method fair value 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 (gain) on contingent consideration - (2,482) - - - - 11,411 8,929 Other (income) expense, net (163) (2,424) (8) (87) (3,213) 9,987 (1,277) 2,815 Foreign currency (gain) loss (included in cost of revenue) - (1,106) - - - - - (1,106) Income tax (benefit) expense 18,727 1,394 (535) 2,803 1,558 3,250 11,245 38,442 Noncontrolling interest 1,834 974 (4) - (3,111) (2,575) - (2,882) Bonus to be settled in equity - - - - - - 2,503 2,503 Share-based compensation expense - 1,682 597 - 251 273 5,545 8,348 Non-recurring items - - - - - - 1,513 1,513 Acquisition Costs 2,296 290 27 18 - - 2,312 4,943 Adjusted EBITDA $ 59,860 $ 41,176 $ 2,543 $ 5,560 $ (12,037) $ (11,221) $ (25,718) $ 60,163 Total Core Operating Subsidiaries $ 109,139 © 2 0 1 8 H C 2 H O L D I N G S , I NC. 49
Reconciliation of U.S. GAAP Net Income (Loss) to Insurance Adjusted Operating Income (in thousands) Adjusted Operating Income - Insurance ("Insurance AOI") YTD 2018 Q3 2018 Q2 2018 Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 FY 2016 Net Income (loss) - Insurance segment $ 142,878 $ 141,068 $ 565 $ 1,245 $ 7,066 $ 3,381 $ 4,282 $ 164 $ (761) $ (14,028) Effect of inv estment (gains) losses (27,086) (20,147) (4,429) (2,510) (4,983) (2,129) (978) (1,095) (781) (5,019) Asset impairment expense - - - - 3,364 - - 2,842 522 2,400 Bargain Purchase Gain (109,112) (109,112) - - - - - - - - Reinsurance Gain (17,715) (17,715) - - - - - - - - Acquisition costs 2,367 1,305 759 303 2,535 1,377 422 736 - 714 Insurance AOI $ (8,668) $ (4,601) $ (3,105) $ (962) $ 7,982 $ 2,629 $ 3,726 $ 2,647 $ (1,020) $ (15,933) Addback: Tax expense (benefit) - (6,741) 3,560 3,181 16,228 992 13,263 1,461 512 13,196 Pre-tax Insurance AOI $ (8,668) $ (11,342) $ 455 $ 2,219 $ 24,210 $ 3,621 $ 16,989 $ 4,108 $ (508) $ (2,737) © 2 0 1 8 H C 2 H O L D I N G S , I NC. 50
HC2 HOLDINGS, INC. A n d r e w G . B a c k m a n • i r @ h c 2 . c o m • 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 th F l o o r , N e w Y o r k , N Y 1 0 0 2 2 © HC2 Holdings, Inc. 2018 November 2018