Q4 2019 Earnings Call
Good morning, ladies and gentlemen, and welcome to <unk> Holdings fourth quarter and full year 2019 earnings conference call.
During today's presentation, all parties will be enabled us to only mode. Following the presentation of the conference will be open for questions with instructions to follow at that time.
A reminder, today's conference is being called is being recorded I would now like turn the call over to Jamie with Investor Relations for CNI Holdings. Please go ahead Sir.
Thank you operator, and good morning, everyone. We appreciate your participation in our fourth quarter and full year 2019 earnings Conference call. Joining me today are kinda ice Chairman Bill Foley, Chief Executive Officer, written assay and Chief Financial Officer Cogs as a reminder, a replay of this call will be available through 11 59.
PM Eastern time on February 28, 2020.
Before we begin I would like to remind you that this conference call may contain forward looking statements that involve a number of risks and uncertainties statements that are not historical facts, including statements about our 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.
Hi, and information currently available to management, because such statements are based on expectations as to future financial and operating results and are not statements affect actual results may differ materially from those projected.
We undertake no obligation to update any forward looking statements were the 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 press release, what's <unk>, which was released this morning and then the statement regarding forward looking information.
Risk factors and other sections of <unk> form S. Four and other filings with the FCC, Let me now turn the call over to Bell.
Thank you Jamie.
Can I continue to successfully execute on strategy of monetizing legacy investments nurturing our portfolio companies grow, making new investments and prospecting for future investment opportunities.
Dun <unk> bradstreet or Dnbi is made remarkable progress in improving its operations in a very short period of shot.
To achieve this success our team quickly realigned the business units increased focus on a calendar two increased focus and accountability as part of this realignment 18 to 19 senior executives were replaced.
Second priority.
Was to accelerate organic sales growth to cheeses, we reorganized our sales team and research and restructured the in these sales compensation plan.
The sales organization now systematically tracks and monitors service metrics in key service performance indicators to more effectively as this client improved customer satisfaction.
Reduce newfield and cross sale.
The third priority was to reduce the NVS cost structure and increase operating margins with the goal of removing 200 million annualized expenses in the first year.
I am thrilled to report that our team achieved 208 million a cost stays in 2019, and I see opportunities to achieve more efficiencies in 2020.
Improving the quality and scope of data and buying or building advanced analytics work. The other key initiatives Dnbi management team has made great progress towards.
Dnbi success and achieving these initiatives is evidence is evident is fourth quarter results. We achieved organic revenue grew 6% over the 2018 fourth quarter I.
Additionally, fourth quarter 2019 EBITDA.
Increased by approximately 18% to $190 million as compared to adjusted EBITDA of $167 million in a year ago quarter.
EBITDA margins also expanded by 440 basis points to 41.8%.
During the fourth quarter can I made the decision to rebalance our portfolio by selling 5 million shares of Ceridian and he plays a $53 needs. That's for sure. This resulted in net proceeds of 265 million <unk> 265.4 million, we recorded a gain of one of them.
<unk> point Eightmillion.
During 2019 Tonight. So the total of 9 million Ceridian shares for proceeds of $477.9 billion, resulting in booking a $342.1 billion.
On February 10, probably 19.
Tonight, So 3.9 million shares of Ceridian, It's 72.
0.75 for sure and total proceeds.
Oh Gee were approximately $284 million today can I own was 19.8 million shares of Ceridian common stock representing a 14% ownership position.
Based upon some readings closing price of 70 220 for sure on February 20, you can I sneak in ceridian as a market value 1.49 billion.
Another fourth quarter achievement was connived public offering of approximately 7.5 million primary shares of stock, which we raised net proceeds of 236 million.
This offering helped us expand our institutional shareholder base provide capital for future transactions and reader interviews that can I story to the investment community.
Also on January seven 2020, we agreed to invest up to 125 million for approximately a 25% position in a barrel life group a mirror life is a large U.S. independent insurance marketing organization and has developed marketed industry that life and health insurance annuities.
Our plane solutions to pre retirees and retirees for nearly 50 years.
We're very excited with the opportunity in a barrel life.
Given our long track record of acquiring companies, bringing the management and capital there achieving operating synergies and restoring growth.
The strong network and a very active deal pipeline.
Excited with the opportunities that we are seeing and we remain optimistic that we will grow can <unk> assets and returns.
With that I will turn the call over to Rick messy.
Hi, Good morning, Thanks, Bill Oh.
Dun <unk> Bradstreet's, just another example loved the application of the Bill Foley playbook.
That we've been telling very investors about here lately.
Dun <unk> Bradstreet Bill found the deal.
Put the balance sheet together raised the capital found the management team install them into their spots found operating massive operating synergies and now is achieving and now Dun <unk> bradstreet achieving growth I'm really happy to be a part of the bill Foley team and watching the.
Yeah, I get a yet again, another application or they'll probably playbook.
For the rest of my talk I will touch on the our investment in Ceridian, RC day, and the restructuring of our restaurant group.
And provide a brief update on that.
Health care joint venture that we entered into with Carlyle turning to Ceridian ticker see day, a leader in payroll and human capital business.
During the quarter Street, a deliberate growth at 35.4% of Dayforce revenues, which is their software as a service our cloud offering.
And that's up 35.7% on a constant currency basis, So radiata set new records for subscription value of new sales and the subscription value or customers taken like the results.
Straight the even stronger demand for their solutions in an acceleration in Dayforce revenues is expected and we believe ceridian is well positioned for future growth.
Turning to our restaurant group American Blue Ribbon holdings as as we ever as it's been earlier reported voluntarily filed a petition for chapter 11 on January 27 to 2020.
In order to react reorganize its operations afraid of its cash flow.
Position the brands for monetization as part of this process cannot provided a 20 million in debt financing.
The.
American Blue Ribbon opening management team in our and our partner transient means partner, Brad Ridgeway have already closed 30 333 of its underperforming restaurants under the village and.
And Bakers square brands, and we expect the store closures combined with other operating initiatives to positively impact cash flow over the balance of the year and provide optionality for our management team.
It's important to note this filing did not involved or affect the business operations are both charlie's or 99 restaurants.
And overall as we mentioned in the past our goal is to monetize the restaurant group investment.
On December 31st Kenai completed its contribution I did see system operation, It's health care coating operation.
Into a joint venture with our current the Carlyle group. The JP JV includes t. system into complimentary medical coding businesses. They were contributed at closing by rather JV partners at the closing can I received cash proceeds of approximately $76 million and on a pro.
Talks about 23 million at 23% equity interest and a joint venture debt.
JV will seek to acquire integrate and operate other providers and payers services companies I'll now, but now I'll turn the call oversee Rick Cox, our CFO to review the financial results from our portfolio companies in more detail.
Thanks, Rick to start we ended 2019 with $465.4 million in holding company cash and Undrawn credit capacity of $100 million.
Subsequent to year end, we sold 3.9 million shares at $72, a 75 cents per share of see de stock for a total of $284 million, which is expected to close today.
Paid off our margin loan for $75 million and committed 125 million [noise].
Cash to fund our participation in a merit life's recapitalization and alone up to $20 million and debtor in possession financing that support the reorganization of American Blue Ribbon Holdings.
As a result, we currently have $629 million of cash capacity to execute on future investments.
Dun <unk> Bradstreet successfully repriced there are 2.53 billion dollar term loan B facility and realized 100 basis point reduction and its interest rate with the ability to get at 25 basis points step down upon an initial public offering excluding the cost of the transaction the lower interest rate will save Dun <unk> bradstreet approximately.
25 billion <unk> million dollars and interest cost annually through the maturity of the term loan b.
More detail on Ceridian fourth quarter financial results, which are released on February 5th can be found on the Investor Relations section of their website.
The restaurant group generated total revenue of $271.3 million in the fourth quarter at 2019 compared to $298.5 million and the fourth quarter of 2018.
Total restaurant adjusted EBITDA for the fourth quarter of 2019 increased by $19.2 million to $7.1 million compared to a year ago quarter.
80, our age generated revenues of $192.8 million and the fourth quarter, which is a $27.7 million decline two a year ago quarter.
The decline in revenue was largely a result of closing 48 underperforming stores over the last four quarters.
Our age delivered an increase of $19.9 million of adjusted EBITDA to $200000 from a negative $19.7 million in a year ago quarter.
The year over year increase of $19.9 million and adjusted EBITDA, primarily relates to an increase and same store operating margins as well as cost reduction strategies implemented early in 2018.
99 restaurant generated total revenue of $78.5 million and a fourth quarter of 2019 flat as compared to the to the quarter of 2018.
Adjusted EBITDA was $6.9 million in the fourth quarter 2019, almost flat as compared to a year ago quarter.
The management team at Avior H. works through this country strategic overhaul, which is designed to improve profitability. Our management team will continue to stay focused on enhancing the quality of our guest experiences and satisfaction on December 30, Onest get ice book value was $1.49 billion or $18, a 72 cents per se.
Share as compared to 1.1 to 5 billion or $15.58 per share on December 30, Onest 2018.
We remain pleased with the progress we continue to make across our portfolio of brands continue into position can I as a long term driver a value for our shareholders I'll now turn the call back to the operator to be at our question and answer session.
At this time, we will be conducting a question answer session. If you like to ask your question. Please press star one under telephone keypad, a confirmation tone will indicate your line is in the question Q you made that start to if you would like to remove your question from the Q4 participants using speaker equipment. It maybe not say to pick up or headset before passing this turkeys one moment. Please.
Well, we pull for questions.
Our first question is from John Campbell Stevens.
Please proceed with your question.
Hey, Thanks, Good morning, guys John.
I mean, you guys had been busy I hope you are squeezing in some reston relaxation here in there.
[laughter] on on the Dnbi organic growth that has been a really impressive turnaround, but you guys. You seem to be ahead of schedule. There you know last quarter you called out a couple of things that were maybe one time that maybe.
With that growth up a otherwise, but the 6% this quarter I'll make sure that was organic and then if there was any impact from the contract timing, maybe if you pulled forward some revenue last quarter, if that impacted that number this quarter in actually would have been little bit better economic check them out there.
Well, if you kind of hit on the of on the issue. We did pull forward. Some revenue a some deals that were going to close the fourth quarter and they they moved into the third quarter. So we were very pleased with the fourth quarter results, the 66% or 6.5% does include the let us organization.
Just fairly de minimus, it's a <unk> percent or so.
So you can see that's not forget it because we acquired the company last June and he is going to be organic beginning beginning next June but we had a very good quarter. The fourth quarter. Two traditionally is the strongest quarter for Dun <unk> Bradstreet, but frankly, we look forward to another strong first quarter.
The because the pool the former management team pulled so much forward into the fourth quarter of 18 that it makes it will make or comps fairly easy for the next quarter.
The next two quarters will be a little more problematic in that we if we close certain operations in the second quarter last year, and so we're anticipating growth path to slow down for a couple of quarters than than reinvigorate.
Okay, and so that kind of low to mid single digit is a good target still for the kind of near I guess medium term.
That's there's still a good targets.
Okay, and then on the investment services business, I know feis or they have a pretty long history of doing jvs with I guess good assets. They maybe didn't get the attention or the investment they probably deserves so it looks like this one certainly fit that mold I'm just curious what you guys saw what you're seeing with the investment services business. We know what attracted you and what you see is kind of long term opportunity.
Yeah.
Well actually what's once we get into the due diligence and we were.
Dealing on that transaction, we decided to pass so we did not a distant if I sort of the Pfizer JV with Moody's investments and I understand the of closed the transaction independent of US. So we just we just couldn't get on the same pages are partners and we don't want its we.
We have limited cash resources, although there is significant we just wanted to make sure that we're picking the right transactions invested.
Okay and it sounds like you guys have a pretty deep pipeline, obviously lot of kind of flush with cash now.
On the mirror life. It sounds like you did close that is that right at the end of the quarter.
I believe we closed the first the first week of March and we're very excited about it is the it's a well run business, but it is true terrific opportunities for.
For expansion through acquisition.
It's a it's a fractured business and.
Interestingly a mirror life is the fifth largest provider of annuity customers to F and G. The company that if it if just put under contract. So we're really excited about the growth prospects of a mirror life.
Okay. That's good to hear and then.
Anything to call out as far as the the contributions and ownership.
Touch I'm sorry, you mean on you mean on a mirror life, yes.
Where we're going to put 125 in it and we will own water about 25% of the equity yeah.
Okay, Great. That's all I got thanks, guys.
Thank you.
We have reached the end of the question answer session and that will now turn the call back over to Mr. Foley for closing remarks.
Thank you to conclude we were very pleased with our fourth quarter results in the significant progress we've made monetizing legacy investments nurturing our portfolio companies, making new investments and prospect in for deals. Thank you for your time today.
This concludes today's topic you may disconnect your lines at this time. Thank you for your participation.
Yes.
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