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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported):
November 7, 2018

HC2 Holdings, Inc.
 
(Exact name of registrant as specified in its charter)

Delaware
001-35201
54-1708481
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)

450 Park Avenue, 30th Floor
 
10022
New York, NY
 
                     
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code:
 
(212) 235-2690
 
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 ☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 ☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 ☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 ☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
 ☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 ☐





Item 2.02 Results of Operations and Financial Condition

The information set forth in (and incorporated by reference into) this Item 2.02 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that Section. The information in this Item 2.02 shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

On November 7, 2018, HC2 Holdings, Inc. (the “Company”) issued a press release setting forth its results for the three months ended September 30, 2018 (the “Earnings Release”).

A copy of the Earnings Release is attached hereto as Exhibit 99.1 and hereby incorporated by reference.

The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and regardless of any general incorporation language in such filings, except to the extent expressly set forth by specific reference in such a filing.

Item 7.01 Regulation FD Disclosure
  
As previously announced, the Company will conduct a conference call today, Wednesday, November 7, 2018 at 5:00 p.m. The presentation slides to be used during the call, attached hereto as Exhibit 99.2, will be available on the “Investor Relations” section of the Company’s website (http://www.HC2.com) beginning at 5:00 p.m. ET on Wednesday, November 7, 2018.  The conference call and the presentation slides will be simultaneously webcast on the “Investor Relations” section of the Company’s website beginning at 5:00 p.m. ET on Wednesday, November 7, 2018.  The information contained in, or that can be accessed through the Company’s website is not a part of this filing.
         
The information set forth in (and incorporated by reference into) this Item 7.01, including Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that Section. The information in this Item 7.01, including Exhibit 99.2, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
 
Item 9.01 Financial Statements and Exhibits
 
(d)
Exhibits
Exhibit
No.
Description
99.1
99.2





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
HC2 Holdings, Inc.
 
 
November 7, 2018
By:
/s/ Michael J. Sena
 
 
 
 
 
Name: Michael J. Sena
 
 
Title: Chief Financial Officer




Exhibit


https://cdn.kscope.io/410022d460e3434b314bbb3f4ae71666-hc2logoa24.jpg

FOR IMMEDIATE RELEASE                            
                
                
HC2 Holdings Reports Third Quarter 2018 Results
Re-Affirms 2018 Guidance for Construction and Marine Services Segments

New York, November 7, 2018 (GlobeNewswire) - HC2 Holdings, Inc. (“HC2” or the “Company”) (NYSE: HCHC), a diversified holding company, announced today its consolidated results for the third quarter 2018, which ended on September 30, 2018.

“The third quarter was yet another very good quarter across the portfolio,” said Philip Falcone, HC2’s Chairman, Chief Executive Officer and President. “Leading the way, DBM Global had solid quarterly performance, maintained its strong customer backlog and with the recently announced planned acquisition of GrayWolf Industrial, will diversify its revenues and service offering into heavy maintenance and repair in the petrochemical, pulp & paper, oil refinery and power markets. This acquisition is expected to be accretive to DBM’s Adjusted EBITDA by just over $20 million annually, providing what we believe will be stable free cash flow. We also believe GrayWolf will help counter the cyclicality of the commercial construction market and allow DBM to offer a more complete value proposition to existing customers, while also cross-selling to GrayWolf's list of Blue-Chip customers.”

Mr. Falcone continued, “Coming off one of their strongest quarters, Global Marine's results were in-line with our expectations and were driven by continued strong performance in the Huawei Marine Network (“HMN”) equity investment. During the third quarter, Global Marine secured several offshore power contracts, including a new five-year cable repair framework agreement with a leading European offshore wind power developer and operator, and completed key oil and gas market projects in the North Sea. In addition, after many years of delivering value, the HMN shareholders implemented a long-term annual dividend policy that recognizes the business's success and its strong position in the market. Since our acquisition four years ago, the management team at Global Marine has repositioned and strengthened itself by securing and maintaining leadership positions in various key growth markets, including successfully renewing all three of its critical, long-term telecom maintenance agreements, representing approximately half of the world’s contracted telecom maintenance zones. Additionally, they have made tremendous progress towards renewing their fleet of marine assets through strategic acquisitions and re-organized the business to pursue attractive growth opportunities, all while substantially reducing debt that was assumed at the time of acquisition. As such, we believe exploring strategic options now, including a possible sale of Global Marine, would position a potential buyer to strategically capitalize on the next phase of growth of the business, while allowing current investors an opportunity to realize the substantial value creation since the acquisition in 2014.”




Mr. Falcone added, “During the third quarter, our insurance team completed its acquisition of Humana’s long-term care insurance business. This was a pivotal event for our insurance subsidiary as it significantly increased the size of our insurance business as we now have $4.1 billion in cash and invested assets, it more than tripled our total adjusted insurance capital base from approximately $85 million to approximately $330 million, and will significantly increase the investment management fee to approximately $15 million a year. In addition, we continue to be optimistic with the long-term prospects for ANG and are very pleased with the solid improvements in the quarterly results for our Broadcasting business as they remain laser focused on strategically reducing costs and adding valuable content to our nation-wide over-the-air (“OTA”) network, including the recently signed agreement with the Christian Broadcasting Network for their launch of The CBN News Channel, the first 24-hour Christian television news channel, which is being broadcast over our OTA network.”





Third Quarter Financial Highlights
•
Net Revenue: For the third quarter of 2018, HC2 recorded consolidated total net revenue of $501.4 million, as compared to $406.4 million for the year-ago quarter, an increase of $94.9 million or 23.4%. For the first nine months of 2018, HC2 recorded consolidated total net revenue of $1,451.8 million, as compared to $1,175.6 million for the 2017 comparable period, an increase of $276.2 million or 23.5%. For both the three and nine month comparable periods, the increases were primarily driven by higher revenue from the Construction, Insurance and Telecommunications segments, as well as the inclusion of the new Broadcasting segment.

NET REVENUE by OPERATING SEGMENT
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2018
 
2017
 
Increase / (Decrease)
 
2018
 
2017
 
Increase / (Decrease)
Construction
 
$
195,358

 
$
151,697

 
$
43,661

 
$
531,209

 
$
403,325

 
$
127,884

Marine Services
 
44,825

 
42,817

 
2,008

 
149,923

 
123,382

 
26,541

Energy
 
4,561

 
3,919

 
642

 
16,141

 
12,301

 
3,840

Telecommunications
 
187,798

 
167,881

 
19,917

 
580,630

 
520,214

 
60,416

Total Core Operating Subsidiaries
 
$
432,542


$
366,314


$
66,228

 
$
1,277,903


$
1,059,222


$
218,681

Insurance
 
77,229

 
37,737

 
39,492

 
161,179

 
112,032

 
49,147

Broadcasting
 
11,957

 
—

 
11,957

 
33,702

 
—

 
33,702

Other
 
271

 
2,358

 
(2,087
)
 
3,680

 
4,375

 
(695
)
Eliminations (1)
 
(20,643
)
 
—

 
(20,643
)
 
(24,639
)
 
—

 
(24,639
)
Consolidated HC2
 
$
501,356

 
$
406,409

 
$
94,947

 
$
1,451,825

 
$
1,175,629

 
$
276,196

(1) The Insurance segment revenues are inclusive of mark-to-market adjustments in the amount of $20.6 million and $24.6 million for the three and nine months ended September 30, 2018 respectively, recorded on equity securities in accordance with ASU 2016-01. Such adjustments are related to transactions between entities under common control which are eliminated or are reclassified to Other income (expenses), net in consolidation.

•
Net Income / (Loss): For the third quarter of 2018, HC2 reported Net Income attributable to common and participating preferred stockholders of $152.8 million or $2.97 per fully diluted share, as compared to a Net (Loss) of $(6.7) million or $(0.16) per fully diluted share for the third quarter 2017. For the first nine months of 2018, HC2 reported Net Income attributable to common and participating preferred stockholders of $171.7 million or $3.38 per fully diluted share, as compared to a Net (Loss) of $(40.5) million or $(0.95) per fully diluted share in the 2017 comparable period.

A number of non-recurring transactions took place during the third quarter 2018, which contributed to the significant increase in net income in both the quarter and year-to-date results. Specifically, HC2's insurance subsidiary, Continental General Insurance Company (“Continental”), recognized a bargain purchase gain of $109.1 million during the third quarter related to the recent acquisition of Humana Inc.'s long-term care (“LTC”) business, KMG America Corporation (“KMG”) and, additionally, recognized a $17.7 million gain in the third quarter on the recapture of one of its reinsurance treaties. Further, a change in accounting methodology for the Company's equity investment in Inseego Corp. from equity method accounting to recording the investment at fair value, resulted in a recorded gain of $44.2 million in the quarter.


2



•
Adjusted EBITDA: Adjusted EBITDA for “Core Operating Subsidiaries,” which includes HC2's Construction, Marine Services, Energy and Telecommunications segments, was a combined $26.3 million for the third quarter of 2018, as compared to $27.3 million for the year-ago quarter. For the first nine months of 2018, Adjusted EBITDA for “Core Operating Subsidiaries” was $75.8 million, as compared to $73.0 million for the 2017 comparable period, driven by the Construction and Energy segments, partially offset by decreases in contribution from Marine Services and Telecommunications.

For the third quarter of 2018, Total HC2 Adjusted EBITDA, which excludes the Insurance segment, was $13.7 million as compared to $9.8 million for the year-ago quarter. This was due primarily to decreased losses in the Life Sciences segment and reductions in recurring expenses at the Non-operating Corporate segment, partially offset by the Broadcasting segment. For the first nine months of 2018, Total HC2 Adjusted EBITDA was $29.4 million, as compared to $31.1 million for the 2017 comparable period, driven by the inclusion our Broadcasting segment, offset in part by net increases from our Core Operating Subsidiaries and our Life Sciences and Non-operating Corporate segments.

ADJUSTED EBITDA by OPERATING SEGMENT
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
Increase / (Decrease)
 
2018
 
2017
 
Increase / (Decrease)
Construction
$
15,951

 
$
16,788

 
$
(837
)
 
$
41,453

 
$
36,476

 
$
4,977

Marine Services
7,868

 
8,763

 
(895
)
 
25,824

 
28,758

 
(2,934
)
Energy
1,033

 
288

 
745

 
4,657

 
2,489

 
2,168

Telecommunications
1,475

 
1,483

 
(8
)
 
3,858

 
5,324

 
(1,466
)
Total Core Operating Subsidiaries
$
26,327

 
$
27,322

 
$
(995
)
 
$
75,792

 
$
73,047

 
$
2,745

Life Sciences
(3,004
)
 
(8,155
)
 
5,151

 
(12,209
)
 
(17,141
)
 
4,932

Broadcasting
(2,416
)
 
—

 
(2,416
)
 
(13,684
)
 
—

 
(13,684
)
Other and Eliminations
(1,006
)
 
(1,115
)
 
109

 
(2,180
)
 
(4,436
)
 
2,256

Non-operating Corporate
(6,229
)
 
(8,256
)
 
2,027

 
(18,285
)
 
(20,420
)
 
2,135

Total HC2 Adjusted EBITDA
$
13,672

 
$
9,796

 
$
3,876

 
$
29,434

 
$
31,050

 
$
(1,616
)

•
Balance Sheet: As of September 30, 2018, HC2 had consolidated cash, cash equivalents and investments of $4.2 billion, which includes cash and investments associated with HC2’s Insurance segment. Excluding the Insurance segment, consolidated cash was $82.5 million, of which $44.4 million was at the HC2 corporate level.
Third Quarter Segment Highlights
•
Construction - For the third quarter of 2018, DBM Global Inc. (“DBM”) reported Net Income of $9.2 million, as compared to $7.1 million for the year-ago quarter. For the nine months of 2018, Net Income was $20.1 million, as compared to $14.5 million for the 2017 comparable period.

Adjusted EBITDA was $16.0 million for the third quarter, as compared to $16.8 million for the year-ago quarter. For the first nine months of 2018, DBM Global's Adjusted EBITDA was $41.5 million, as compared to $36.5 million in the 2017 comparable period, primarily driven by the continued ramp-up of several large scale commercial projects including the new Los Angeles Rams / Chargers stadium, Loma Linda Hospital and Google Bayview.

3




Backlog at the end of the third quarter was $615.4 million, as compared to $656.1 million for the year ago third quarter. Taking into consideration awarded, but not yet signed contracts, backlog would have been approximately $632 million.

•
Marine Services - For the third quarter of 2018, Global Marine Systems (“Global Marine”) reported a Net (Loss) of $(0.5) million, as compared to Net Income of $0.8 million for the year-ago quarter. For the first nine months of 2018, Net Income was $4.1 million, as compared to $8.9 million for the 2017 comparable period.

Adjusted EBITDA was $7.9 million for the third quarter, as compared to $8.8 million for the year-ago quarter, due primarily to continued strong performance at HMN, offset by higher than expected costs on a certain offshore power construction project and an increase in un-utilized vessel costs associated with recently acquired marine assets and timing of new project work as these assets are being deployed. For the first nine months of 2018, Global Marine's Adjusted EBITDA was $25.8 million, as compared to $28.8 million in the 2017 comparable period, due primarily to an increase in un-utilized vessel costs associated with recently acquired marine assets and higher than expected costs on a certain offshore power construction project, partially offset by improved profit margins on certain telecom and offshore power installation projects.

During the third quarter, the shareholders of HMN implemented a long-term annual dividend policy. As a result, Global Marine received an approximate $10 million special cash dividend in the third quarter and will receive additional special dividends of approximately $4.9 million in the fourth quarter 2018 and $4.9 million in the second quarter 2019. Going forward, HMN agreed to annually distribute a minimum of 30% of cumulative distributable net profits as dividends.

As announced on October 22, 2018, HC2 is exploring strategic alternatives for its Global Marine subsidiary, including a potential sale. As part of this process, Deutsche Bank Securities Inc. and ABN AMRO Bank N.V. have been engaged as joint advisors. HC2 intends to use the net proceeds from a potential sale to reduce its overall debt. There can be no assurance that the exploration of any strategic alternative, including a potential sale, will result in a consummated transaction or other alternative.  Neither HC2 nor Global Marine has set a timetable for completion of the process, and neither intends to comment further regarding the process unless a specific transaction or other alternative is approved by their respective Boards of Directors, the process is concluded or it is otherwise determined that further disclosure is appropriate or required by law.

Energy - For the third quarter of 2018, American Natural Gas (“ANG”) reported a Net Loss of $(0.6) million, as compared to $(0.9) million for the year-ago quarter. For the first nine months of 2018, Net Loss was $(0.6) million, as compared to $(2.0) million for the 2017 comparable period.

Adjusted EBITDA was $1.0 million for the third quarter, as compared to $0.3 million for the year-ago quarter, primarily driven by additional income recognized from renewable tax credits related to the sale of renewable natural gas, as well as from overall growth in compressed natural gas ("CNG") sales across the network. For the first nine months of 2018, ANG's Adjusted EBITDA was $4.7 million, as compared to $2.5 million in the 2017 comparable period, primarily driven by the receipt of a $2.6 million alternative fuel energy tax credit in the second quarter 2018, which was retroactively approved by Congress and applicable to 2017 CNG sales.


4



•
Telecommunications - For the third quarter of 2018, PTGi-ICS reported Net Income of $1.3 million, as compared to $1.3 million for the year-ago quarter. For the first nine months of 2018, Net Income was $3.4 million, as compared to $4.9 million for the 2017 comparable period.

Adjusted EBITDA was $1.5 million for the third quarter, as compared to $1.5 million for the year-ago quarter. For the first nine months of 2018, PTGi-ICS's Adjusted EBITDA was $3.9 million, as compared to $5.3 million in the 2017 comparable period, due primarily to fluctuations in the mix of wholesale voice traffic and termination rates.

•
Insurance - During the third quarter of 2018, the company completed the acquisition of Humana Inc.’s LTC insurance business, KMG. The transaction was immediately accretive to Continental's risk-based and statutory capital. As of September 30, 2018, Continental had cash and invested assets of $4.1 billion, up from $1.5 billion prior to the transaction, $5.5 billion in total GAAP assets, and had approximately $330 million of total adjusted insurance capital base.

INSURANCE SEGMENT ADJUSED OPERATING INCOME (“INSURANCE AOI”) AND
PRE-TAX ADJUSTED OPERATING INCOME (“PRE-TAX INSURANCE AOI”)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in thousands)
 
2018
 
2017
 
Increase / (Decrease)
 
2018
 
2017
 
Increase / (Decrease)
Insurance AOI
 
$
(4,601
)
 
$
3,726

 
$
(8,327
)
 
$
(8,668
)
 
$
5,353

 
$
(14,021
)
Pre-tax Insurance AOI
 
$
(11,342
)
 
$
16,989

 
$
(28,331
)
 
$
(8,668
)
 
$
20,589

 
$
(29,257
)
(1) The Insurance segment revenues are inclusive of mark-to-market adjustments recorded on equity securities in accordance with ASU 2016-01.
Certain of these adjustments related to consolidated subsidiaries are eliminated and others are reclassified to Other income (expenses), net in
consolidation.

For the third quarter of 2018, inclusive of the acquisition of Humana Inc.'s LTC insurance business, the Insurance segment reported Net Income of $141.1 million, as compared to $4.3 million for the year-ago quarter. For the first nine months of 2018, Net Income was $142.9 million, as compared to $3.7 million for the 2017 comparable period. During the quarter, the company recognized a bargain purchase gain of $109.1 million and recognized a $17.7 million gain on the recapture of one of its reinsurance treaties, as noted above.

Pre-tax Insurance AOI was a (Loss) of $(11.3) million for the third quarter of 2018, as compared to Income of $17.0 million for the year-ago quarter. For the first nine months of 2018, Pretax Insurance AOI was a (Loss) of $(8.7) million, as compared to Income of $20.6 million for the 2017 comparable period. Both the quarter and year-to-date Pre-Tax AOI were driven by the addition of Humana’s long-term case business, which saw a higher proportion of new claims, as well as additional claim incidences from the CGI block, partially offset by increases in net investment income, both due to the additional assets acquired in the Humana block, as well as additional reinvestment into higher yielding assets.


5



•
Pansend Life Sciences - As announced on October 22, 2018, the U.S. Food and Drug Administration (FDA) has granted Breakthrough Device designation to Medibeacon, Inc. 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) The ability to measure GFR is of high clinical interest, especially in patients with or at risk of kidney disease. Under the Breakthrough Devices program, a provision of the 21st Century Cures Act, the FDA works with companies to expedite regulatory review in order to give patients more timely access to diagnostic and therapeutic technologies. According to the FDA, a Breakthrough Device like the TGFR is a product that has the potential to be more effective at diagnosing a life-threatening or irreversibly debilitating disease or condition compared to the current standard of care.(2) 

•
Broadcasting - For the third quarter of 2018, the recently created Broadcasting segment reported a Net (Loss) of $(4.7) million and an Adjusted EBITDA loss of $(2.4) million, a $3.8 million sequential improvement in Adjusted EBITDA compared to the prior quarter. For the first nine months of 2018, the Broadcasting segment reported a Net (Loss) of $(29.2) million and an Adjusted EBITDA loss of $(13.7) million. There were no results for the Broadcasting segment in the comparable 2017 periods as the first Over the Air (“OTA”) broadcasting assets were acquired in the fourth quarter of 2017.

As the result of a series of current and pending transactions, HC2’s Broadcasting subsidiary has approximately 164 operational stations, including 14 full-power stations, 52 Class A stations and 98 LPTV stations. In addition, Broadcasting has an additional ~400 silent licenses and construction permits. The total Broadcasting footprint currently covers approximately 60 percent of the U.S. population, in over 130 U.S. markets, including 9 of the top 10 markets across the United States.

During the third quarter, HC2 Broadcasting Holdings, Inc. and two subsidiaries, HC2 Station Group, Inc. and HC2 LPTV Holdings, Inc., obtained a combined $38 million of debt and equity financing from certain institutional investors. The financing included a $35 million one-year secured note issued by HC2 Station Group, Inc. and HC2 LPTV Holdings, Inc., bearing interest at a rate of 8.5% per annum, payable at maturity and secured by certain of HC2 Station Group, Inc. and HC2 LPTV Holdings, Inc.’s assets. In addition, the institutional investors purchased 2.0% of the outstanding common stock of HC2 Broadcasting Holdings, Inc. for an aggregate purchase price of approximately $3.1 million at a pre-money equity valuation of approximately $150 million. HC2 Broadcasting Holdings, Inc. also issued a warrant to the institutional investors to purchase an additional 2.0% of the common stock of HC2 Broadcasting Holdings, Inc. outstanding immediately after consummation of the Equity Purchase for what would be an aggregate purchase price of approximately $3.7 million if exercised as of the issuance date, and as may be adjusted at any future exercise of the Warrant pursuant to its terms.  The Warrant has a five-year term and is immediately exercisable. The net proceeds from the financing are being used for pending and future broadcasting acquisitions, distributions to HC2 and working capital purposes at those broadcasting subsidiaries.

6



Reaffirms 2018 Guidance for Construction and Marine Services Segments
Earlier this year, in order to provide additional visibility into the Company’s two largest Adjusted EBITDA segment contributors, Construction and Marine Services, the Company initiated a guidance range reflecting its current expectations for full year 2018 Adjusted EBITDA. While the complex nature of certain large-scale DBM Global and Global Marine projects could cause quarterly variability in their financial results, the Company continues to expect the following for the full year 2018:

•
Construction: $60 million and $65 million of Adjusted EBITDA

•
Marine Services: $45 million and $50 million of Adjusted EBITDA

The Company has provided 2018 guidance with regard to the non-GAAP measures of Adjusted EBITDA. These measures exclude from the corresponding GAAP financial measures the effect of special items as described below under “Non-GAAP Financial Measures.” The Company has not provided a reconciliation of such non-GAAP guidance to the most directly comparable GAAP measure because it cannot predict and quantify with a reasonable degree of confidence all of the special items that may occur during 2018.

HC2 does not guarantee future results of any kind. The Company’s guidance is based on numerous assumptions about future events and conditions and, therefore, could vary materially from actual results, and is subject to risks and uncertainties, including, without limitation, those factors outlined in the “Forward Looking Statements” of this release and the “Risk Factors” section of the Company’s annual and quarterly reports filed with the Securities and Exchange Commission (“SEC”).

Conference Call
HC2 Holdings, Inc. will host a live conference call to discuss its third quarter 2018 financial results and operations today, Wednesday, November 7, 2018, at 5:00 p.m. ET. The Company will post an earnings supplemental presentation in the Investor Relations section of the HC2 Website, www.hc2.com, to accompany the conference call.
Dial-in instructions for the conference call and the replay are as follows:
Live Call
Domestic Dial-In (Toll Free): 1-866-395-3893
International Dial-In: 1-678-509-7540
Participant Entry Number: 1949939
Alternatively, a live webcast of the conference call can be accessed by interested parties through the Investor Relations section of the HC2 Website, www.hc2.com.
Conference Replay*
Domestic Dial-In (Toll Free): 1-855-859-2056
International Dial-In: 1-404-537-3406
Conference Number: 1949939
*Available approximately two hours after the end of the conference call through December 7, 2018.

7



About HC2
HC2 Holdings, Inc. is a publicly traded (NYSE:HCHC) diversified holding company, which seeks opportunities to acquire and grow businesses that can generate long-term sustainable free cash flow and attractive returns in order to maximize value for all stakeholders. HC2 has a diverse array of operating subsidiaries across eight reportable segments, including Construction, Marine Services, Energy, Telecommunications, Life Sciences, Broadcasting, Insurance and Other. HC2's largest operating subsidiaries include DBM Global Inc., a family of companies providing fully integrated structural and steel construction services, and Global Marine Systems Limited, a leading provider of engineering and underwater services on submarine cables. Founded in 1994, HC2 is headquartered in New York, New York. Learn more about HC2 and its portfolio companies at www.hc2.com.
For information on HC2 Holdings, Inc., please contact Andrew G. Backman - Managing Director - Investor Relations & Public Relations - abackman@hc2.com - 212-339-5836

Non-GAAP Financial Measures
In this press release, 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 the Insurance segment), Adjusted EBITDA for its operating segments, Adjusted Operating Income for the Insurance segment and Pre-Tax Adjusted Operating Income for the Insurance segment.
Adjusted EBITDA
Management believes that Adjusted EBITDA measures provide investors with meaningful information for gaining an understanding of the Company’s 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. 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 non-cash depreciation and amortization and items not within the control of the Company’s operations managers. While management believes that these non-GAAP measurements are useful as supplemental information, such adjusted results are not intended to replace our GAAP financial results and should be read together with HC2’s results reported under GAAP.
Management defines Adjusted EBITDA as net income (loss), excluding the Insurance segment, 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; interest expense; net gain (loss) on contingent consideration; loss on early extinguishment or restructuring of debt; gain (loss) on sale of subsidiaries; 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; non-recurring items; and acquisition and disposition costs. Total Adjusted EBITDA excludes the results of operations and any consolidating eliminations 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.

8



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 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 GAAP financial measures or a measure of our operating performance.
Adjusted Operating Income - Insurance
Adjusted Operating Income (“Insurance AOI”) and Pre-tax Adjusted Operating Income (“Pre-tax Insurance AOI”) for the Insurance segment are non-U.S. GAAP financial measures frequently used throughout the insurance industry and are economic measures the Insurance segment uses to evaluate its financial performance. Management believes that Insurance AOI and Pretax Insurance AOI measures provide investors with meaningful information for gaining an understanding of certain results and provide insight into an organization’s operating trends and facilitates comparisons between peer companies. However, Insurance AOI and Pre-tax Insurance AOI have certain limitations, and we may not calculate it the same as other companies in our industry. It should, therefore, be read together with the Company's results calculated in accordance with U.S. GAAP.
Similarly to Adjusted EBITDA, using Insurance AOI and Pre-tax Insurance AOI as performance measures have inherent limitations as an analytical tool as compared to income (loss) from operations or other U.S. GAAP financial measures, as these non-U.S. GAAP measures excludes certain items, including items that are recurring in nature, which may be meaningful to investors. As a result of the exclusions, Insurance AOI and Pre-tax Insurance AOI should not be considered in isolation and do not purport to be an alternative to income (loss) from operations or other U.S. GAAP financial measures as a measure of our operating performance.
Management defines Insurance AOI as Net income (loss) for the Insurance segment adjusted to exclude the impact of net investment gains (losses), including OTTI losses recognized in operations; asset impairment; intercompany elimination; bargain purchase gains; reinsurance gains; and acquisition costs. Management defines Pre-tax Insurance AOI as Insurance AOI adjusted to exclude the impact of income tax (benefit) expense recognized during the current period. Management believes that Insurance AOI and Pre-tax Insurance AOI provide meaningful financial metrics that help 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.


9



Cautionary Statement Regarding Forward-Looking Statements
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This press release 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 press release include, without limitation, our 2018 guidance for the Construction and Marine Services segments and statements regarding our expectations regarding building shareholder value and future cash flow and invested assets.  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 statements and reports filed with the Securities and Exchange Commission (“SEC”), including in our 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 or disposition 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. Although HC2 believes its expectations and assumptions regarding its future operating performance are reasonable, there can be no assurance that the expectations reflected herein will be achieved. 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 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 press release.
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 unless legally required, HC2 undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.














-----------------------------------------------------------
(1) Data on file. Medibeacon, Inc., St. Louis, MO.
(2) U.S. Food and Drug Administration.
https://www.fda.gov/downloads/MedicalDevices/DeviceRegulationandGuidance/GuidanceDocuments/UCM581664.pdf

10


HC2 HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)


 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2018
 
2017
 
2018
 
2017
Revenue
 
$
444,770

 
$
368,672

 
$
1,315,285

 
$
1,063,597

Life, accident and health earned premiums, net
 
25,372

 
20,472

 
65,317

 
60,648

Net investment income
 
31,710

 
16,287

 
68,776

 
48,530

Net realized and unrealized gains (losses) on investments
 
(496
)
 
978

 
2,447

 
2,854

Net revenue
 
501,356

 
406,409

 
1,451,825

 
1,175,629

Operating expenses
 
 
 
 
 
 
 
 
Cost of revenue
 
402,922

 
324,673

 
1,179,205

 
947,751

Policy benefits, changes in reserves, and commissions
 
66,450

 
17,393

 
134,124

 
79,323

Selling, general and administrative
 
50,899

 
45,356

 
160,042

 
126,919

Depreciation and amortization
 
6,256

 
7,896

 
24,969

 
22,588

Other operating (income) expense, net
 
(819
)
 
526

 
(2,886
)
 
(1,294
)
Total operating expenses
 
525,708

 
395,844

 
1,495,454

 
1,175,287

(Loss) income from operations
 
(24,352
)
 
10,565

 
(43,629
)
 
342

Interest expense
 
(17,456
)
 
(13,222
)
 
(53,962
)
 
(39,410
)
Gain on sale and deconsolidation of subsidiary
 
2,965

 
—

 
105,106

 
—

Gain on contingent consideration
 
—

 
6,320

 
—

 
6,001

Income from equity investees
 
8,134

 
971

 
13,655

 
12,667

Gain on bargain purchase
 
109,112

 
—

 
109,112

 
—

Other income (expenses), net
 
63,908

 
(97
)
 
64,032

 
(8,112
)
Income (loss) from continuing operations before income taxes
 
142,311

 
4,537

 
194,314

 
(28,512
)
Income tax benefit (expense)
 
9,230

 
(12,861
)
 
(1,863
)
 
(16,167
)
Net income (loss)
 
151,541

 
(8,324
)
 
192,451

 
(44,679
)
Less: Net (income) loss attributable to noncontrolling interest and redeemable noncontrolling interest
 
1,925

 
2,357

 
(18,615
)
 
6,305

Net income (loss) attributable to HC2 Holdings, Inc.
 
153,466

 
(5,967
)
 
173,836

 
(38,374
)
Less: Preferred stock and deemed dividends from conversions
 
703

 
703

 
2,109

 
2,079

Net income (loss) attributable to common stock and participating preferred stockholders
 
$
152,763

 
$
(6,670
)
 
$
171,727

 
$
(40,453
)
 
 
 
 
 
 
 
 
 
Income (loss) per common share
 
 
 
 
 
 
 
 
Basic
 
$
3.09

 
$
(0.16
)
 
$
3.48

 
$
(0.95
)
Diluted
 
$
2.97

 
$
(0.16
)
 
$
3.38

 
$
(0.95
)
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
44,326

 
43,013

 
44,175

 
42,555

Diluted
 
46,217

 
43,013

 
45,575

 
42,555



11


HC2 HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands, except share amounts)
(Unaudited)


 
 
September 30, 2018
 
December 31, 2017
Assets
 
 
 
 
Investments:
 
 
 
 
Fixed maturity securities, available-for-sale at fair value
 
$
2,985,443

 
$
1,340,626

Equity securities
 
217,153

 
47,500

Mortgage loans
 
87,308

 
52,109

Policy loans
 
20,324

 
17,944

Other invested assets
 
70,965

 
85,419

Total investments
 
3,381,193

 
1,543,598

Cash and cash equivalents
 
831,634

 
97,885

Accounts receivable, net
 
350,864

 
322,446

Recoverable from reinsurers
 
1,305,038

 
526,337

Deferred tax asset
 
1,028

 
1,661

Property, plant and equipment, net
 
369,771

 
374,660

Goodwill
 
127,051

 
131,741

Intangibles, net
 
151,051

 
117,105

Other assets
 
212,367

 
102,258

Total assets
 
$
6,729,997

 
$
3,217,691

 
 
 
 
 
Liabilities, temporary equity and stockholders’ equity
 
 
 
 
Life, accident and health reserves
 
$
4,707,400

 
$
1,693,961

Annuity reserves
 
247,544

 
243,156

Value of business acquired
 
249,979

 
42,969

Accounts payable and other current liabilities
 
353,216

 
347,492

Deferred tax liability
 
33,876

 
10,740

Debt obligations
 
702,220

 
593,172

Other liabilities
 
108,076

 
70,174

Total liabilities
 
6,402,311

 
3,001,664

Commitments and contingencies
 
 
 
 
Temporary equity
 
 
 
 
Preferred stock
 
26,340

 
26,296

Redeemable noncontrolling interest
 
8,839

 
1,609

Total temporary equity
 
35,179

 
27,905

Stockholders’ equity
 
 
 
 
Common stock, $.001 par value
 
45

 
44

Shares authorized: 80,000,000 at September 30, 2018 and December 31, 2017;
 
 
 
 
Shares issued: 45,188,169 and 44,570,004 at September 30, 2018 and December 31, 2017;
 
 
 
 
Shares outstanding: 44,743,273 and 44,190,826 at September 30, 2018 and December 31, 2017, respectively
 
 
 
 
Additional paid-in capital
 
263,887

 
254,685

Treasury stock, at cost: 444,896 and 379,178 shares at September 30, 2018 and December 31, 2017, respectively
 
(2,434
)
 
(2,057
)
Accumulated deficit
 
(43,682
)
 
(221,189
)
Accumulated other comprehensive income (loss)
 
(33,253
)
 
41,688

Total HC2 Holdings, Inc. stockholders’ equity
 
184,563

 
73,171

Noncontrolling interest
 
107,944

 
114,951

Total stockholders’ equity
 
292,507

 
188,122

Total liabilities, temporary equity and stockholders’ equity
 
$
6,729,997

 
$
3,217,691



12


HC2 HOLDINGS, INC.
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(in thousands)
(Unaudited)

 
 
Three Months Ended September 30, 2018
 
 
Core Operating Subsidiaries
 
Early Stage & Other
 
 
 
Total HC2
 
Construction
Marine
 
Energy
 
Telecom
 
Life Sciences
 
Broadcasting
Other & Elimination
Non-operating Corporate
 
Net Income attributable to HC2 Holdings, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
153,466

Less: Net Income attributable to HC2 Holdings Insurance segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
141,068

Less: Consolidating eliminations attributable to HC2 Holdings Insurance segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23,072

Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance Segment
 
$
9,203

 
$
(515
)
 
$
(562
)
 
$
1,302

 
$
(2,636
)
 
$
(4,686
)
 
$
4,487

 
$
(17,267
)
 
$
(10,674
)
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 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 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 costs
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


13


HC2 HOLDINGS, INC.
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(in thousands)
(Unaudited)

 
 
Three Months Ended September 30, 2017
 
 
Core Operating Subsidiaries
 
Early Stage & Other
 
 
 
Total HC2
 
Construction
Marine
 
Energy
 
Telecom
 
Life Sciences
 
Broadcasting
Other & Elimination
Non-operating 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 Insurance segment
 
$
7,082

 
$
844

 
$
(939
)
 
$
1,348

 
$
(6,760
)
 
$
—

 
$
(600
)
 
$
(11,222
)
 
$
(10,247
)
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

Gain on contingent consideration
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(6,320
)
 
(6,320
)
Other (income) expense, net
 
(165
)
 
888

 
277

 
12

 
(10
)
 
—

 
(118
)
 
(718
)
 
166

Foreign currency (gain) (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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

14


HC2 HOLDINGS, INC.
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(in thousands)
(Unaudited)

 
 
Nine Months Ended September 30, 2018
 
 
Core Operating Subsidiaries
 
Early Stage & Other
 
 
 
Total HC2
 
Construction
Marine
 
Energy
 
Telecom
 
Life Sciences
 
Broadcasting
Other & Elimination
Non-operating Corporate
 
Net Income (loss) attributable to HC2 Holdings, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
173,836

Less: Net Income (loss) attributable to HC2 Holdings Insurance segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
142,878

Less: Consolidating eliminations attributable to HC2 Holdings Insurance segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19,076

Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance segment
 
$
20,067

 
$
4,096

 
$
(581
)
 
$
3,395

 
$
67,552

 
$
(29,238
)
 
$
3,779

 
$
(57,188
)
 
$
11,882

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 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

Net loss on contingent consideration
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

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 costs
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

15


HC2 HOLDINGS, INC.
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(in thousands)
(Unaudited)

 
 
Nine Months Ended September 30, 2017
 
 
Core Operating Subsidiaries
 
Early Stage & Other
 
 
 
Total HC2
 
Construction
Marine
 
Energy
 
Telecom
 
Life Sciences
 
Broadcasting
Other & Elimination
Non-operating 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 Insurance Segment
 
$
14,464

 
$
8,943

 
$
(2,001
)
 
$
4,910

 
$
(14,276
)
 
$
—

 
$
(9,787
)
 
$
(44,310
)
 
$
(42,057
)
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

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

 
—

 
—

 
—

 
—

 
(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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

16


HC2 HOLDINGS, INC.
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(in thousands)
(Unaudited)

 
 
For the Three Months Ended June 30, 2018
 
 
Core Operating Subsidiaries
 
Early Stage & Other
 
 
 



Total HC2
 
Construction
Marine Services
 
Energy
 
Telecom
 
Life Sciences
 
Broadcasting
Other and Eliminations
Non-operating Corporate
 
Net Income attributable to HC2 Holdings, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
55,366

Less: Net Income attributable to HC2 Holdings Insurance segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
565

Less: Consolidating eliminations attributable to HC2 Holdings Insurance segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2,009
)
Net Income (loss) attributable to HC2 Holdings, Inc., excluding Insurance Segment
 
$
7,397

 
$
10,864

 
$
679

 
$
1,040

 
$
74,124

 
$
(11,816
)
 
$
(552
)
 
$
(24,926
)
 
56,810

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 or restructuring of debt
 
—

 
—

 
—

 
—

 
—

 
2,537

 
—

 
—

 
2,537

Gain on sale 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

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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


17


HC2 HOLDINGS, INC.
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED OPERATING INCOME ("INSURANCE AOI")
AND PRE-TAX OPERATING INCOME ("PRE-TAX INSURANCE AOI")
(in thousands)
(Unaudited)


The table below shows the adjustments made to the reported Net income (loss) of the Insurance segment to calculate Insurance AOI and Pre-Tax Insurance AOI for the three and nine months ended September 30, 2018 and 2017, respectively:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2018
 
2017
 
Increase / (Decrease)
 
2018
 
2017
 
Increase / (Decrease)
Net income (loss) - Insurance segment
 
$
141,068

 
$
4,282

 
$
136,786

 
$
142,878

 
$
3,685

 
$
139,193

Effect of investment (gains) (1)
 
(20,147
)
 
(978
)
 
(19,169
)
 
(27,086
)
 
(2,854
)
 
(24,232
)
Asset impairment expense
 
—

 
—

 
—

 
—

 
3,364

 
(3,364
)
Bargain Purchase Gain
 
(109,112
)
 
—

 
(109,112
)
 
(109,112
)
 
—

 
(109,112
)
Reinsurance Gain
 
(17,715
)
 
—

 
(17,715
)
 
(17,715
)
 
—

 
(17,715
)
Acquisition costs
 
1,305

 
422

 
883

 
2,367

 
1,158

 
1,209

Insurance AOI
 
$
(4,601
)
 
$
3,726

 
$
(8,327
)
 
$
(8,668
)
 
$
5,353

 
$
(14,021
)
Tax expense
 
(6,741
)
 
13,263

 
(20,004
)
 
—

 
15,236

 
(15,236
)
Pre-tax Insurance AOI
 
$
(11,342
)
 
$
16,989

 
$
(28,331
)
 
$
(8,668
)
 
$
20,589

 
$
(29,257
)

(1) The Insurance segment revenues are inclusive of mark-to-market adjustments recorded on equity securities in accordance with ASU 2016-01. Certain of these adjustments related to consolidated subsidiaries are eliminated and others are reclassified to Other income (expenses), net in consolidation.



18

q3earningsdeck
HC2 HOLDINGS, INC. Third Quarter 2018 Conference Call © HC2 Holdings, Inc. 2018

 
Safe Harbor Disclaimers 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, our 2018 guidance for the Construction and Marine Services segments and statements regarding our expectations regarding building shareholder value and future cash [flow] and invested assets. 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 statements and reports filed with the Securities and Exchange Commission (“SEC”), including in our 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 or disposition 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. Although HC2 believes its expectations and assumptions regarding its future operating performance are reasonable, there can be no assurance that the expectations reflected herein will be achieved. 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 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 unless legally required, HC2 undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. © 2 0 1 8 H C 2 H O L D I N G S , I NC. 1

 
Safe Harbor Disclaimers 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 the Insurance segment), Adjusted EBITDA for its operating segments, Adjusted Operating Income for the Insurance segment and Pre-Tax Adjusted Operating Income for the Insurance segment. Adjusted EBITDA Management believes that Adjusted EBITDA measures provide investors with meaningful information for gaining an understanding of the Company’s 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. 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 non-cash depreciation and amortization and items not within the control of the Company’s operations managers. While management believes that these non-GAAP measurements are useful as supplemental information, such adjusted results are not intended to replace our GAAP financial results and should be read together with HC2’s results reported under GAAP. Management defines Adjusted EBITDA as Net income (loss) as adjusted for 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; interest expense; net gain (loss) on contingent consideration; loss on early extinguishment or restructuring of debt; gain (loss) on sale of subsidiaries; 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; non-recurring items; and acquisition and disposition costs. A reconciliation of Adjusted EBITDA to Net Income (Loss) is included in the financial tables at the end of this presentation. 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 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 GAAP financial measures or a measure of our operating performance. Total Adjusted EBITDA excludes the results of operations and any consolidating eliminations of our Insurance segment. Adjusted Operating Income Adjusted Operating Income ("Insurance AOI") and Pre-tax Adjusted Operating Income (“Pre-tax Insurance AOI”) for the Insurance segment are non- GAAP financial measures frequently used throughout the insurance industry and are economic measures the Insurance segment uses to evaluate its financial performance. Management believes that Insurance AOI and Pretax Insurance AOI measures provide investors with meaningful information for gaining an understanding of certain results and provide insight into an organization’s operating trends and facilitates comparisons between peer companies. However, Insurance AOI and Pre-tax Insurance AOI have certain limitations, and we may not calculate it the same as other companies in our industry. It should, therefore, be read together with the Company's results calculated in accordance with GAAP. Similarly to Adjusted EBITDA, using Insurance AOI and Pre-tax Insurance AOI as performance measures have inherent limitations as an analytical tool as compared to income (loss) from operations or other 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, Insurance AOI and Pre-tax Insurance AOI should not be considered in isolation and do not purport to be an alternative to income (loss) from operations or other GAAP financial measures as measures of our operating performance. Management defines Insurance AOI as Net income (loss) for the Insurance segment adjusted to exclude the impact of net investment gains (losses), including OTTI losses recognized in operations; asset impairment; intercompany elimination; gain on bargain purchase; reinsurance gain; and acquisition costs. Management defines Pre-tax Insurance AOI as Insurance AOI adjusted to exclude the impact of income tax (benefit) expense recognized during the current period. Management believes that Insurance AOI and Pre-tax Insurance AOI provide meaningful financial metrics that help 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. © 2 0 1 8 H C 2 H O L D I N G S , I NC. 2

 
Agenda OVERVIEW AND Philip A. Falcone Chairman, President and CEO FINANCIAL HIGHLIGHTS Philip A. Falcone Chairman, President and CEO Michael J. Sena Chief Financial Officer Q AND A Andrew G. Backman Managing Director © 2 0 1 8 H C 2 H O L D I N G S , I NC. 3

 
Quarterly Overview

 
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. 5

 
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 Services ~$4.9m in 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. 6

 
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 Pansend 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.  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. 7

 
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 – Expect to price and close a new senior secured debt offering to refinance our existing 11% notes – 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. 8

 
Questions and Answers

 
Appendix:

 
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  3Q18 Revenue: $195.4m  3Q18 Revenue: $44.8m  3Q18 Revenue: $4.6m  3Q18 Revenue: $187.8m  ~$300m of statutory surplus  3Q18 Adj. EBITDA: $16.0m  3Q18 Adj. EBITDA: $7.9m  3Q18 Adj. EBITDA: $1.0m  3Q18 Adj. EBITDA: $1.5m  ~$330m total adjusted capital  YTD18 Adj. EBITDA: $41.5m  YTD18 Adj. EBITDA: $25.8m  YTD18 Adj. EBITDA: $4.7m  YTD18 Adj. EBITDA: $3.9m  ~$5.5b total GAAP assets  Backlog $615m; ~$632m with  GMSL Backlog $358m  Delivered 2,977,000 Gasoline  Continued focus on higher  ~$4.1b cash & invested assets contracts awarded, but not  Huawei equity investment Gallon Equivalents (GGEs) in margin wholesale traffic mix  Platform for growth through yet signed Backlog: ~$350m 3Q18 vs. 2,739,000 GGEs in and improved operating additional M&A including  Solid long-term pipeline  3Q17 efficiencies recent acquisition of Humana’s Solid long term telecom and   Pending acquisition of offshore power maintenance ~40 stations currently owned ~$2.4b long-term care portfolio Graywolf Industrial & install opportunities or operated or under  development vs. two stations Evaluating strategic at time of HC2’s initial alternatives including a investment in 3Q14 potential sale 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 valuable  MediBeacon: Unique non-invasive real-time monitoring of kidney function; MediBeacon recently content to more viewers over-the-air and position the company for granted Breakthrough Device designation from the FDA; MediBeacon’s device is intended to a changing media landscape measure GFR in patients with impaired or normal kidney function  R2 Dermatology: Medical device to brighten skin based on Mass. General Hospital technology, including two 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. 11

 
Consolidated Financial Summary ($m) Q3 2018 Q3 2017 YTD 2018 YTD 2017 Total Net Revenue $501.4 $406.4 $1,451.8 $1,175.6 Total Operating Expenses 525.7 395.8 1,495.5 1,175.3 Income (Loss) From Operations (24.4) 10.6 (43.6) 0.3 Statement of Interest Expense (17.5) (13.2) (54.0) (39.4) Operations Income From Equity Investees (Selected Financial Data) 8.1 1.0 13.7 12.7 Income (loss) Before Taxes 142.3 4.5 194.3 (28.5) Net Loss attributable to common $152.8 ($6.7) $171.7 ($40.5) and participating preferred Core Operating Adjusted EBITDA $26.3 $27.3 $75.8 $73.0 Non-GAAP Measures Total Adjusted EBITDA (excl. $13.7 $9.8 $29.4 $31.1 Insurance) Pre-Tax Insurance AOI* ($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. 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. 12

 
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. 13

 
Construction: DBM Global Inc. Third Quarter Update  3Q18 Net Income: $9.2m vs. $7.1m in 3Q17; YTD18 Net Income $20.1m vs. $14.5m for YTD17  3Q18 Adjusted EBITDA: $16.0m vs. $16.8m in 3Q17  YTD18 Adjusted EBITDA: $41.5m vs. $36.5m for the comparable 2017 YTD period  Backlog of $615m at end of 3Q18, vs. $656m in year-ago quarter – ~$632m taking into consideration awarded, but not yet signed contracts  Continued ramp of Inglewood Stadium (LA Rams / Chargers); Loma Linda Hospital; Google Bayview  Acquiring GrayWolf Industrial, a specialty maintenance, repair and installation service provider for $135M  Provides diversification of revenue and earnings; helps offset cyclicality of commercial construction market  Just over $20 million annual Adjusted EBITDA with minimal capex, strong cash flows and Blue-Chip customer base  Reaffirm FY18 Guidance: Continue to expect $60 million and $65 million of FY18 Adjusted EBITDA Strategic Initiatives  Continue to select profitable, strategic and “core competency” jobs, not all jobs  Solid long-term pipeline of prospective projects; No shortage of transactions to evaluate  Commercial / Healthcare sectors remain strong, primarily in West region  Continue to diversify core business to counter cyclicality of commercial construction  Opportunities to add higher margin, value added services to overall product offering (e.g. BDS VirCon/PDC/Candraft)  Expanding U.S. bridge & infrastructure construction opportunities Historical Performance $579.0 $526.1 $513.8 $502.7 $59.9 $52.0 $51.6 $45.8 11.9% 8.9% 10.1% 8.7% 2014PF 2015A 2016A 2017A Loma Linda Hospital Adjusted EBITDA Revenue Los Angeles Rams Stadium 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. 14

 
Marine Services: Global Marine Group Third Quarter Update  3Q18 Net Income (Loss): Net (Loss) ($0.5)m vs. Net Income $0.8m in 3Q17; YTD18 Net Income $4.1m vs. $8.9m for YTD17  3Q18 Adjusted EBITDA: $7.9m vs. $8.8m in 3Q17; Strong 3Q18 performance from Huawei Marine equity investment, offset by some higher than expected costs on a certain offshore power construction project and an increase in unutilized vessel costs attributable to recently acquired marine assets and the timing of new project work  YTD18 Adjusted EBITDA: $25.8m vs. $28.8m for the comparable 2017 YTD period  Global Marine backlog of $358m at 3Q18 quarter-end -- Huawei Marine equity investment - Continued strong backlog of ~$350m  Huawei Marine Network implemented a new long-term annual dividend policy after several years of meaningful shareholder value creation:  Global Marine received ~US$10m of dividends in 3Q18; Will receive additional special dividends of ~$4.9m in 4Q18 and ~$4.9m in 2Q19  HMN will annually distribute a minimum of 30% of cumulative distributable net profits as dividends based on audited annual financials.  Exploring strategic alternatives for the Global Marine business, including a potential sale; proceeds to pay down HC2 debt  Reaffirm FY18 Guidance: Continue to expect $45 million and $50 million of FY18 Adjusted EBITDA Strategic Initiatives 49% ownership 49% ownership Total HMN* 2017 2016 2015 2014  Equity investment established in 1995 with China Telecom Revenue ~$246m ~$207m ~$203m ~$88m  China’s leading provider of submarine cable installation Profit ~$37m ~$25m ~$14m ~$2m  Cash, Equivalents, & Located in Shanghai and possesses a fleet of advanced purpose-built cable ~$73m ~$48m ~$27m ~$16m AFS Securities ships Historical Performance $163.6 $161.9 $169.5 $134.9 $50.0 $44.0 $42.1 $41.2 29.8% 31.2% 25.4% 26.0 % 2014PF 2015A 2016A 2017A 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 4Q15 *Currency Exchange: CNY:USD 1:0.129 used for illustrative purposes 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. 15

 
Energy: American Natural Gas (ANG) Third Quarter Update  3Q18 Net Income (Loss): Net (Loss) ($0.6)m vs. ($0.9)m in 3Q17; YTD18 Net (Loss) of ($0.6)m vs. ($2.0)m for YTD17  3Q18 Adjusted EBITDA: $1.0m vs. $0.3m in 3Q17  YTD18 Adjusted EBITDA: $4.7m vs. $2.5m for the comparable 2017 YTD period  Delivered 2,977,000 Gasoline Gallon Equivalents (GGEs) in 3Q18 vs. 2,739,000 GGEs in 3Q17  Seek to increase existing station utilization  Continued focus on business development and marketing efforts to drive organic sales  Develop preferred fueling agreements with new and existing customers to ramp volumes and continue to increase flow of Renewable Natural Gas (RNG) through ANG stations  ~40 stations currently owned or operated or under development vs. two stations at time of initial investments (3Q14) Historical Performance Adjusted EBITDA Revenue $16.4 $6.8 $6.4 $2.9 $1.8 $2.5 39.6% 17.7% $0.9 12.8% (14.1%) -$0.4 2014A 2015A 2016A 2017A 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. 16

 
Telecommunications: PTGi-ICS Third Quarter Update  3Q18 Net Income: $1.3m vs. $1.3m in 3Q17; YTD18 Net Income of $3.4m vs. $4.9m for YTD17  3Q18 Adjusted EBITDA: $1.5m vs. $1.5m in 3Q17  YTD18 Adjusted EBITDA: $3.9m vs. $5.3m for the comparable 2017 YTD period  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  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 Historical Performance Adjusted EBITDA $735.0 Revenue $701.9 $6.9 $460.4 $5.6 $162.0 $2.0 1.0% 0.8% 0.4% (0.1%) $(1.2) 2014A 2015A 2016A 2017A 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. 17

 
Insurance: Continental Insurance Group Third Quarter Update  Continental Insurance Group serves as HC2’s insurance platform and, through its wholly owned subsidiary, Continental LTC Inc. (“CLI”), offers a platform for run-off Long Term Care (“LTC”) books of business  “Ring Fenced” Liabilities – No Parent Guarantees – 3Q18 Net Income: $141.1m vs. $4.3m in 3Q17 – 3Q18 Pre-Tax Insurance AOI: ($11.3)m vs. $17.0m in 3Q17 – ~$300m statutory surplus at end of third quarter – ~$330m total adjusted capital at end of third quarter – ~$5.5b in total GAAP assets at September 30, 2018 – ~$4.1b in cash and invested assets at September 30, 2018  Recent acquisition of Humana’s ~$2.4 billion Long-Term Care Insurance Business: (Closed 8/9/18) – Significantly grew the platform and leverages Continental’s insurance operations in Austin, Texas – Opportunity to meaningfully increase investment portfolio yield – Validates and endorses HC2’s insurance platform and strategy – Expected ~$15m annual investment management fee, with potential back-end upside Note: Reconciliation of Pre-Tax Insurance AOI to U.S. GAAP Net Income 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. 18

 
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. O L D I N G S NC Note: Equity ownership percentages do not reflect fully diluted amounts, except All data as of September 30, 2018 unless otherwise noted © 2 0 1 8 H C 2 H , I . Benevir, which reflects fully diluted ownership at the time of disposition. 19

 
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. 20

 
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. 21

 
Notable Financial and Other Updates  Collateral Coverage Ratio Exceeded 2.00x at Quarter End (3Q18)  $82.5 million in Consolidated Cash (excluding Insurance segment) at Quarter End (3Q18) – $44.4 million Corporate Cash at Quarter End  2018 Key Priorities: – Monetization / value creation within diverse HC2 portfolio – Continued focused expansion of Over-the-Air broadcast television strategy – Optimization of HC2 capital structure  Re-Affirmed 2018 Guidance for Construction & Marine Services – DBM Global: Continue to expect $60 million - $65 million of FY18 Adjusted EBITDA – Global Marine: Continue to expect $45 million - $50 million of FY18 Adjusted EBITDA ($m) Balance Sheet (at September 30, 2018) Market Cap(1) $238.5 Preferred Equity $26.7 Total Corporate Debt $510.0 Corporate Cash(2) $44.4 Enterprise Value(3) $730.8 (1) Market capitalization on a fully diluted basis, excluding preferred equity, using a common stock price per share of $5.33 on November 6, 2018 (2) Cash and cash equivalents (3) Enterprise Value is calculated by adding market capitalization, total preferred equity and total debt amounts, less corporate cash 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). 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. 22

 
Reconciliations

 
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. 24

 
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. 25

 
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. 26

 
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. 27

 
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. 28

 
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. 29

 
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. 30

 
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. 31

 
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. 32

 
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. 33

 
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. 34

 
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. 35

 
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