Cannae Q4 2024 Earnings Report

Cannae EPS Results

• Actual EPS: -$0.45
• Consensus EPS: -$0.42
• Beat/Miss: Missed by -$0.03
• One Year Ago EPS: N/A

Cannae Revenue Results

• Actual Revenue: $109.90 million
• Expected Revenue: $105.90 million
• Beat/Miss: Beat by +$4.00 million
• YoY Revenue Growth: N/A

Cannae Announcement Details

• Quarter: Q4 2024
• Date: 2/24/2025
• Time: After Market Closes
• Conference Call Date: Monday, February 24, 2025
• Conference Call Time: 5:00PM ET

Cannae (NYSE:CNNE) (NYSE: CNNE) is a publicly traded diversified holding company that focuses on partnering with and investing in businesses across a range of industry sectors. The company seeks to identify attractive opportunities in both private and public markets, leveraging its capital resources and management expertise to support operational growth and value creation. Cannae’s investment strategy emphasizes companies in data and analytics, marketing services, healthcare technology, and payment processing.

Through its portfolio, Cannae holds controlling or significant minority stakes in companies that provide critical software, data and services to corporate clients. Notable among these is a majority interest in Data Axle, a data and marketing services firm that offers comprehensive business and consumer information to support customer acquisition and retention programs. Cannae’s investments also extend to healthcare IT platforms that automate administrative and clinical workflows, as well as payment-processing businesses that enable secure transaction throughput for merchants and financial institutions.

Founded in early 2017 by Executive Chairman William P. Foley II, Cannae was established to consolidate investment opportunities uncovered by Foley’s family of businesses. Headquartered in Irving, Texas, the company maintains a hands-on approach, working closely with portfolio management teams to drive strategic and operational improvements. Cannae serves a primarily North American client base, while supporting the international growth of select holdings. Its management team combines private equity veterans and operating executives who bring specialized industry experience to each investment partnership.

Cannae Q4 2024 Earnings Call Transcript

Key Takeaways

• Portfolio Optimization: Worked with Alight on a $1.2B divestiture, a management overhaul, and drove AFC Bournemouth to 14% revenue growth, its highest-ever sixth-place Premier League finish, plus a new training facility.
• New Investments: Acquired a 20% stake in Jana Partners and a majority interest in Watkins Company, both expected to yield high returns and provide interim cash distributions.
• Shareholder Returns: Returned $222M through a Dutch auction share repurchase and $23M in dividends in 2024, with the quarterly dividend continued and share buybacks prioritized in 2025.
• Q4 2024 Financials: Operating revenue fell 8% due to restaurant closures and sector headwinds, partially offset by a 300 bps improvement in restaurant operating expenses and net debt of ~$60M.
• Capital Allocation Plan: Plans to rebalance away from certain public investments, use proceeds for share buybacks and debt reduction, and invest in high-return opportunities to grow NAV.

Presentation

[Operator]

Good afternoon, ladies and gentlemen, and welcome to the Cannae Holdings Fourth Quarter twenty twenty four Financial Results Conference Call. During today's presentation, all parties will be in a listen only mode. Following the company's prepared remarks, the conference will be open for questions with instructions to follow at that time. As a reminder, this conference call is being recorded and a replay is available through 11:59PM Eastern Time on 03/10/2025. With that, I would like to turn the conference over to Jamie Lois of Solberry Strategic Communications. Please go ahead.

[Jamie Lillis, Investor Relations-Solebury Trout at Cannae]

Thank you, operator, and all of you for joining us. On the call today, we have Cannae's President, Brian Caswell and Brian Coy, our Chief Financial Officer. But before we begin, I would like to remind listeners that this conference call and the Q and A following our remarks may contain forward looking statements that involve a number of risks and uncertainties. Statements that are not historical facts, including statements about Cannae's expectations, hopes, intentions or strategies regarding the future are forward looking statements. Forward looking statements are based on management's beliefs as well as assumptions made by and information currently available to management.

[Jamie Lillis, Investor Relations-Solebury Trout at Cannae]

Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. The company undertakes no obligation to update any forward looking statements, whether as a result of new information, future events or otherwise. The risks and uncertainties which forward looking statements are subject to include, but are not limited to, the risks and other factors detailed in our quarterly shareholder letter, which was released this afternoon and in our other filings with the SEC. Today's remarks will also include references to non GAAP financial measures. Additional information including a reconciliation between non GAAP financial information to the GAAP financial information is provided in our shareholder letter.

[Jamie Lillis, Investor Relations-Solebury Trout at Cannae]

I would now like to turn the call over to Ryan.

[Ryan Caswell, President at Cannae]

Thank you, Jamie. On this call one year ago, we laid out a long term strategic plan designed to increase the net asset value or NAV of Cannae and narrow the discount to intrinsic value that our shares trade. The plan consisted of improving the performance and valuation of our portfolio companies making new investments primarily in private companies that will grow NAV and returning capital to our shareholders. We believe this plan will drive an increase in our stock price and I would like to highlight significant actions we have taken in each area before going into a more detailed review of select portfolio companies. I will then turn the call over to Brian Coy to go through our financials. First, we continue to work closely and actively with our existing portfolio companies and management teams to improve their operations, cash flows and long term positioning. For example, we worked with Alight on the $1,200,000,000 sale of its payroll and professional services divisions, which simplified the remaining business and provided capital to allow the company to significantly delever, repurchase shares and initiate a dividend. We also worked with Alight on the transition to a new CEO and added four new experienced board members, all of which we believe better position the business for future success. Another example is we spent significant time with Black Knight Football and AFC Bournemouth with a specific focus on increasing commercial activity and cash flow, improving the on field performance and managing infrastructure improvements. From a commercial perspective, AFC Bournemouth revenues increased nearly million or 14% in fiscal year twenty twenty four and are expected to increase again in 2025.

[Ryan Caswell, President at Cannae]

From a sporting perspective, AFCV sits in sixth place in the Premier League, its highest ranking ever, has achieved the longest unbeaten streak in club history and top traditional Premier League contenders in Arsenal, Tottenham, Manchester City, Newcastle and Manchester United. And from an infrastructure perspective, next month we will open a new world class first team training facility. We are optimistic about our portfolio and its ability to drive future value creation and grow NAV. In 2024, we made several new private investments which we believe will both generate high returns on our investment and provide interim cash flows to Cannae. One of these investments was a 20% equity interest in Jana Partners that we believe has significant upside, provides cash distributions and is strategic for Cannae in terms of working with Jana on potential investments, as well as Jana's ability to help source and create new investment opportunities.

[Ryan Caswell, President at Cannae]

Since our initial investment, we worked with Jana on our first public opportunity and continue to collaborate on multiple live situations regarding potential investment targets. We are optimistic about our partnership and investment opportunities going forward. We also acquired a majority stake in the Watkins Company, a 150 year old flavoring products company with a strong brand that has demonstrated consistent long term growth and profitability. The company ended 2024 with sales up in the mid single digits and EBITDA in the high single digits and expect 2025 results to improve. Additionally, we have received cash distributions related to our preferred security.

[Ryan Caswell, President at Cannae]

We are also excited about Watkins' prospects going forward. Lastly, we returned significant capital to our shareholders through share repurchases and our quarterly dividend, which was instituted in 2024. In the second quarter of twenty twenty four, Cannae repurchased 9,700,000.0 Cannae shares in a Dutch auction returning approximately $222,000,000 to shareholders. The newly initiated quarterly dividend has resulted in returning an additional $23,000,000 to shareholders in 2024 and this dividend will continue in 2025. Finally in 2024, we internalized our external manager and brought Bill Foley back as the CEO of Cannae.

[Ryan Caswell, President at Cannae]

As part of the internalization, key management are now compensated primarily with Cannae shares. We believe these actions further align our management and Cannae shareholders. Going forward, we plan to continue to rebalance our portfolio away from some of our public company investments and plan to prioritize share buybacks as a use of capital is recovered from these public company share sales. Additionally, we plan to use proceeds to pay down outstanding debt and invest the capital in new and existing portfolio companies that we believe hold outsized return potential for our shareholders and will drive growth in NAV. Collectively, the Cannae management team and board hold more than 12% of Cannae shares and we will remain laser focused on executing our plan to increase the NAV of our portfolio and close our share price discount to NAV.

[Ryan Caswell, President at Cannae]

I'm now going to talk about a few of our portfolio companies in a bit more detail starting with DNB. Dun and Bradstreet reported revenue of $632,000,000 equating to less than 1% constant currency organic growth compared to the prior year's fourth quarter. Adjusted EBITDA was $260,000,000 for the fourth quarter of twenty twenty four, down $600,000 to the prior year's fourth quarter. While these numbers were below consensus, DNB management noted that the quarter was affected by delayed timing of certain deals, a decision to exit unprofitable partnerships and the ongoing strategic process. For the full year 2024, DNB achieved 3% organic revenue growth and expanded adjusted EBITDA to $927,000,000 which is up from the $569,000,000 at the time of our take private.

[Ryan Caswell, President at Cannae]

The company also improved its capital structure by reducing net leverage to 3.6 times and adjusting their fixed versus floating rate debt. Finally, the company announced its ongoing that strategic discussions were ongoing and it expects to share the outcome of those discussions in the first quarter of twenty twenty five. Turning to Alight which posted total revenue from continuing operations of $680,000,000 for the fourth quarter of twenty twenty four, a 0.3% decrease from the twenty twenty three fourth quarter. Adjusted EBITDA was $217,000,000 in the fourth quarter of twenty twenty four, a 5% increase to the fourth quarter twenty twenty three. Alight's net leverage at quarter end was 2.8 times, which which reflects a $740,000,000 debt pay down.

[Ryan Caswell, President at Cannae]

Alite also provided their 2025 outlook and expects mid to high single digit growth in adjusted EBITDA and double digit growth in free cash flow. Computer services or CSI had another solid quarter of growth following record growth in the first half of fiscal year twenty twenty five. On a pro form a basis integrating recent acquisitions, the company grew revenue in the high single digit range and continues to sign new logos building its annual recurring revenue pool. Adjusted EBITDA grew in the mid single digits with higher revenue offset by one time non personnel expenses. Mended mill distilling also continues on plan as it develops, launches and began successfully selling its initial products.

[Ryan Caswell, President at Cannae]

In the second half of twenty twenty four, the company launched Minden Mill Nevada Bourbon, Minden Mill Nevada Rye Whiskey and Evil Bean Coffee Liqueur following High Ground Vodka's release earlier in 2024. These products have seen a claim in both receiving high points ratings of 92 to 99 and several gold and best of class awards. Sales are also starting to track and we expect significant growth in 2025 as the products hit market. I'll now turn the call over to Brian to touch on our financial position.

[Bryan Coy, CFO at Cannae]

Thanks, Ryan. Cannae's fourth quarter total operating revenue was $110,000,000 or 8% lower than the 2023 comparable, primarily on lower restaurant revenue. The aggregate decrease in restaurant revenue reflects store closures in both the prior year fourth quarter and in 2024, as well as general headwinds in the casual dining sector as many brands continue to fight for their portion of a shrinking food away from home budget. Notably, the ninety nine brand, which is much more concentrated geographically, achieved an increase in same store sales as their average guest check exceeded the guest count headwinds resulting in a slight increase in same store revenues for the fourth quarter twenty twenty four. Turning to operations, restaurant operating expenses in the fourth quarter twenty twenty four were 171,000,000 or 81% of the total operating expenses and approximately 300 basis points lower than the fourth quarter twenty twenty three.

[Bryan Coy, CFO at Cannae]

Cost of restaurant revenue of $92,000,000 comprises 89% of restaurant revenue, a 20 basis point improvement over the prior year fourth quarter, but importantly a 200 basis point improvement from the third quarter twenty twenty four. Our team at the restaurant group are focusing on menu rationalization and streamlining staff to further reduce costs at the store level. Management also continues to scrutinize and find savings in brand support and administration costs, including recently negotiated an early exit in 2025 from the support center location. We expect these savings to be more apparent in 2025. Personnel cost of $18,000,000 for the twenty twenty four fourth quarter reflect the wind down of our external management agreement and you'll note the lower management fees reported in other operating expenses.

[Bryan Coy, CFO at Cannae]

Cannae recognized a $12,500,000 gain on that early exit from the restaurant support center office noted above. This was offset by losses from the sale of 12,000,000 shares of Alight in December and 917,000 shares of Paysafe, from which Cannae harvested significant tax losses and avoiding tax payments from the sale of Dayforce shares in 2024 and allowing Cannae to carry back against gains from Dayforce sales in previous tax years. Net losses from equity method investments were $12,000,000 in the fourth quarter twenty twenty four, a material reduction from the prior year, which included significant losses from System one and Alight, which were not repeated in the current year period, as well as improved results of Black Knight Football. In 2024, we sold select public securities totaling $470,000,000 and received $16,000,000 in dividends from DNB Alight. Additionally, Cannae received $14,000,000 or two times cost from the sale of a division of Wine Direct and still retains its 21 ownership in the remaining fulfillment business.

[Bryan Coy, CFO at Cannae]

Today, Cannae has over $108,000,000 in corporate cash and short term investments, $101,000,000 on our margin loan and $60,000,000 on the F and F note or approximately $60,000,000 of net debt at a weighted average of 7.35%. We also have $49,000,000 of undrawn capacity on our margin loan and hold $1,000,000,000 of listed securities. Our aggregate net asset value of approximately $1,900,000,000 equates to 29.78 per Cannae share on an after tax basis. And K9 shares closed at $19.19 today or a 36% discount to NAV. I'll now turn the call back to the operator to begin our question and answer session.

[Operator]

We will now begin the question and answer session. The first question comes from John Campbell from Stephens. Please go ahead.

[John Campbell, Managing Director at Stephens Inc.]

Hey, guys. Good afternoon.

[Ryan Caswell, President at Cannae]

Hey, John. How are you?

[John Campbell, Managing Director at Stephens Inc.]

Hey, I'm doing well. Thanks. Maybe starting here on Bournemouth, it's been a great season so far. It looks like you guys are just a single point outside of the top five. It looks like the EPL is in a good position to get it looks like maybe five Champions League placements this year.

[John Campbell, Managing Director at Stephens Inc.]

I know there's a lot of season left. You don't want to get ahead of yourself, but just assuming you guys stay where you're at and maybe bump up the top five, just maybe talk to the impact you'd expect to see maybe starting off with the prize or monetary award for the Champions League or Europa League placements and then also just higher level what those European qualifications can mean for the club over time?

[Ryan Caswell, President at Cannae]

Yes. Thanks for the question, John. I think as you stated, Bournemouth has obviously been performing exceptionally well. We are in the mix for all the European competitions. I think those will they could have a significant financial impact.

[Ryan Caswell, President at Cannae]

There's multiple different leagues and each could have a significant financial impact from a revenue perspective on the club both in terms of media additional media dollars that they would receive as well as match day revenues from hosting the additional matches. So I think that's all good. Obviously that's only for one year. I think the bigger question at least as we think about it, just what it means from an enterprise value and from the value of Bournemouth and Black Knight football. We think showing the trajectory and the ability to play in European competition, again assuming that we can get there and there's a lot of season to go, we think it really lends and shows credibility of the plan in our view of Bournemouth being kind of a mid to upper table consistent Premier League which we think has a lot more value than what we've paid or have invested in the team.

[Ryan Caswell, President at Cannae]

So we're really excited about what the team has done, but there's obviously a lot more work and a lot of season to go. So we don't want to get ahead of ourselves on that. But regardless, really impressed with the entire team over there.

[John Campbell, Managing Director at Stephens Inc.]

Yes, great color. I appreciate that. And then two quick ones here on just capital allocation as a whole. I mean, it looks looks like you've got about $30,000,000 or so kind of earmarked for the dividend annually. Maybe starting there, out of the dividends you have from some of your holdings and then just operating cash, how close are you to funding that through cash flow?

[Ryan Caswell, President at Cannae]

Look, I think in the prepared remarks, as we think about investments and as we think about allocating capital and managing the investments that we have, generating cash flow to the holding company is really important. We think both to cover the dividend, but also just as a way for people to think about the cash flow that our investments produce. So we are still a ways away from covering I put the dividend and the operating cash or the operating expenses together, right? And so we still have some more room that we need to work on there. But we are it is a focus of ours.

[Ryan Caswell, President at Cannae]

And I think this wasn't exactly your question, but I think the other point just to flag is, we're definitely as we go through this year and as we look at the portfolio and potentially kind of rebalancing our portfolio away from some of our public companies and thinking about how we use that capital and return it to shareholders primarily in the form of stock buybacks.

[John Campbell, Managing Director at Stephens Inc.]

Yes, that's great. And that's kind of what I was going to second question. So I mean you said I think you guys reported $108,000,000 or so of cash and short term investment balance. You got $30,000,000 on the dividend. So you've got some dry powder on that front.

[John Campbell, Managing Director at Stephens Inc.]

And I guess it just really depends on how active you get on the monetization efforts. But I'm hoping you might be able to expand a little bit on the appetite for buybacks. I don't know if it's something you've considered as a certain level you're looking to get to this year. Is it all just kind of contingent on where the stock sits? Just a little more thoughts on that front?

[Ryan Caswell, President at Cannae]

Yes. It's definitely something that we have considered and are considering. I think part of it is going to be we do have some holding company cash. We also have some debt, right? But we are definitely prioritizing.

[Ryan Caswell, President at Cannae]

We will prioritize using our capital for share buybacks. We continue to think that the stock is cheap. And I think the size of those depends on some of the potential monetization events of some of our biggest holdings. We obviously on a couple of quarters now have talked about Dun and Bradstreet and its ongoing strategic review, which they said there should be an outcome within the first quarter. So can't really speak more to it than that.

[Ryan Caswell, President at Cannae]

But I think we are very aware and we want over time monetize some of our public company investments and use a significant portion of those proceeds to buyback stock. Now exactly what that means and how much it depends on Cannae stock price, it depends on other things that are going on, but share buybacks are something that is definitely a priority for us as it was last year.

[John Campbell, Managing Director at Stephens Inc.]

Okay, great. Thanks for the time guys.

[Ryan Caswell, President at Cannae]

Thank you.

[Operator]

The next question comes from Ian Zaffino from Oppenheimer. Please go ahead.

[Ian Zaffino, Managing Director at Oppenheimer & Co. Inc.]

Okay. Thank you very much. As far as Black Knight football, maybe you could help us think about the capital funding for it and maybe what that could look like? Thanks.

[Ryan Caswell, President at Cannae]

Yes. I think there are a couple of key levers in the capital funding and they are some of them are somewhat dynamic. But probably the biggest that we have funded thus far is the investment in ASC Bournemouth. Well, the acquisition and investment, as we've talked about on this call historically, we believe and we saw this last year and the improvement of the financial performance of ASC Bournemouth. But ASC Bournemouth is dependent on players that we sell in addition to their ongoing commercial revenues.

[Ryan Caswell, President at Cannae]

So we continue to believe we have developed very high quality saleable assets. We don't necessarily want to sell them, but we think that we've created a lot of value there. So that is a lever as we think about the capital needs of AFC Bournemouth. And the other one is kind of the infrastructure which is stadium and the training facility. Those are kind of the big needs and we have some of the other teams, but those are much kind of smaller in comparison.

[Ryan Caswell, President at Cannae]

We do believe that we will look to put some more capital into AFC Bournemouth going forward. It will be less than what we have done historically. But we want to make sure that from a sporting perspective, we are continuing to perform and grow the perform and grow the enterprise value of the team. And so while I don't have a specific number for you, we are very conscious around trying to reduce or kind of reduce the size of what that capital need is and we'll manage kind of the P and L appropriately to do that.

[Ian Zaffino, Managing Director at Oppenheimer & Co. Inc.]

Okay. Thanks. And then maybe a question on the light. Maybe walk us through why Bill stepped down and how are you thinking about your position in the company? Maybe the company is self buying it back or is there an opportunity to do something like that or do you upsell it in the market or alternatively maybe have a strategic sale or something along those lines to kind of monetize the stake? Thanks.

[Ryan Caswell, President at Cannae]

Yes. So Bill stepped down from the Chairman role at Alight. However, he is still on the Board of Alight and is very involved with Alight. Some of the new Board members are people that Bill and the team have known and we believe will be very value additive to the kind of the long term strategic positioning and growth of Alight. In terms of how we think about the investment and how we think about what are the options going forward, I think there was a press release that in Bill's press release and stepping off the Board, he noted we continue to be supporters of Alight and we don't particularly like where the stock of Alight is today.

[Ryan Caswell, President at Cannae]

In terms of is there a strategic transaction or something else that they can do? That is probably a question that is better answered by them. But we believe that with the changes in the management team with some of the additions and changes of the Board that strategically the business is very well positioned to basically to succeed in what it has set up. Like we obviously sold the payroll and processing business last year, which simplified the business. So we think everything is set up for them to continue standalone and be very successful.

[Ian Zaffino, Managing Director at Oppenheimer & Co. Inc.]

All right. Thanks for the color guys. Thank you very much.

[Operator]

The next question comes from Kenneth Lee from RBC Capital Markets. Please go ahead.

[Kenneth Lee, Vice President at RBC Capital Markets]

Hey, thanks for taking my question. Just one on the JANET partnership and I think in the prepared remarks you mentioned that there are some discussions on some potential live deals there. I wonder if you could just give a little bit more color in terms of how would you characterize the level of discussions and activity? How active is it in the current environment here? Thanks.

[Ryan Caswell, President at Cannae]

Thanks, Ken. I would say discussions with them are very active. We speak to the principals at Janna regularly. We believe that there are some very a few very specific targets and situations that we have been discussing with them. And again, I don't want to get into the specifics of what they are, but we think some of them could be incredibly additive for Cannae.

[Ryan Caswell, President at Cannae]

And so we are in very active and ongoing dialogue with them. And again, we're optimistic that as we move forward, we will find a material transaction for Cannae. Got you. And then

[Kenneth Lee, Vice President at RBC Capital Markets]

one on the BK, the Black Knight FC there. And you mentioned to the previous question around potential for maybe some incremental capital investment there. Would that be specifically in relation to, for example, like player transfers for the upcoming summer window? Or were there any other areas that you're looking to for capital needs there? Thanks.

[Ryan Caswell, President at Cannae]

Yes. The only other area so those are you hit on the obviously operating cash flow. There is if you recall, we do own 40% of Laureate in lead two. We have a put call arrangement with them going forward such that there is a possibility that this summer that we could buy an additional 40% of the business. We've also looked at a couple other or one other in particular smaller team in another league, much smaller capital dollars.

[Ryan Caswell, President at Cannae]

But both are we believe strategic to black night football where we've been investing a lot of time and developing, hiring the right management team and developing the right infrastructure that connects the teams better together that we believe will drive better performance across all the clubs and reduce the cost at ASC Bournemouth. So those are the two others. And then I think the third one you didn't say, I know I alluded to it earlier, it's just around infrastructure stadium. This is something that we've been thinking about whether we redevelop, whether we do a new stadium. So we continue down that path as well.

[Ryan Caswell, President at Cannae]

And again, some of those are more near term than others, but those are the other buckets besides the what I'll call the operating cash flow of the teams.

[Kenneth Lee, Vice President at RBC Capital Markets]

Got you. And that last one, the stadium plans there potentially for AFC Born What how early are you in the stages there in terms of the planning and the potential financing that's going to be? Is this still relatively early in the stage there? Thanks.

[Ryan Caswell, President at Cannae]

Yes, It is. I mean, I think the first the big question is do we redevelop the existing stadium or do we build a new stadium? And we're honing in on an answer to that question. And then once you determine that the planning and the actual construction there's a long runway. But I would guess within kind of the next on our next call we'll have a better view of whether we're building a new stadium or whether we're redeveloping the existing one.

[Ryan Caswell, President at Cannae]

And again, and then I think the rest kind of fall off from there.

[Kenneth Lee, Vice President at RBC Capital Markets]

Got you. Very helpful there. Thanks again.

[Ryan Caswell, President at Cannae]

Thank you.

[Operator]

This concludes our question and answer session. I would like to turn the conference back over to Ryan Caswell for closing remarks.

[Ryan Caswell, President at Cannae]

Thank you, operator. In conclusion, we are excited with the opportunities ahead and confident in our strategy, which we believe will deliver value to our shareholders. We look forward to speaking with you again on our first quarter twenty twenty five earnings call in May. Thank you again for your time today.

[Operator]

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

Participants

Executives

• Jamie Lillis, Investor Relations-Solebury Trout
• Ryan Caswell, President
• Bryan Coy, CFO

Analysts

• John Campbell, Managing Director at Stephens Inc.
• Ian Zaffino, Managing Director at Oppenheimer & Co. Inc.
• Kenneth Lee, Vice President at RBC Capital Markets