Q1 2021 Cannae Holdings Inc Earnings Call

[music].

Good afternoon, ladies and gentlemen, and welcome to the <unk> Holdings incorporated first quarter 2021 earnings conference call.

I will momentarily open up the conference line for questions until then all parties will remain in a listen only mode with instructions to follow at that time.

As a reminder, this conference is being recorded.

Joining me today are chief Executive offer officer, Rick Massey, President, David Ducommun, and Chief Financial Officer, Brian Coy.

Replay of this call will be available through 11 59 P. M. Eastern time on May 17th to 2021.

Before we begin I would like to remind you that this conference may contain forward looking statements and 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 and informed and information currently available to management.

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 the statement regarding forward looking information risk factors and other sections of <unk> form 10-K, and other filings with the SEC.

We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

If youre using a speakerphone please pick up your handset before pressing the keys if.

If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Okay.

Yes.

Our first question comes from Ian Zaffino from Oppenheimer. Please go ahead.

Hi, guys.

Thank you very much Joe.

And how are you.

Thanks for your coverage and your interest.

Absolutely I I didn't know if you guys could maybe talk a little bit about.

And the wind deal and and.

And and tell us about.

Maybe bill you.

Your role.

When it comes to that.

Thanks.

Sure.

And so probably.

Probably you on Mr Foley and <unk>.

It's not on the call where you announced.

Those of you, who don't know today I'll share one.

Announced a merger agreement with the interactive gaming and sports betting and gambling.

Uh huh.

That went on Accretable set of assets.

And Oh.

Oh from its Warren will be merging and the.

Or what's going on.

190 million of cash.

And the debt will be exactly and to win.

Central and find it.

Blowout and marketing efforts, there and it's going to undertake and the next few months, leading up to the NFL 2021 season.

Kanai.

And I had a forward purchase agreement.

Which is essentially a standby.

On source of capital.

And when we wanted to know more than $690 million.

Our capital so that forward purchase agreement will not affect your weighted.

And the.

The only involvement that can I have.

Is it has agreed to backstop, the full $690 million against redemptions.

And we actually we actually hope there are redemptions growth, we'd love to buy this debt.

And whatever 10 Bucks a share so that's our role.

That's kind of Israel and where.

Good day.

But at this point for the standby, our plus the opportunity to Boston chairs.

That's right.

Three and a quarter million.

Yeah, absolutely and a half.

Sorry.

And and.

So now bill because I know you have an interest and the gaming side on mhm.

If he was going to.

And be involved and the answer is there anything that might be shared as far as knowledge gained from the from the PC side or should we really assume that they are completely separate.

Oh, and you know I'm not sure about the latter question about whether theres something can be done between the two obviously price day because in the vendor side of the business the payment side in particular.

And.

And when as and the front end.

B to C company.

They will be and we look forward to seeing.

And your name on the on the wind batch site and will.

And we'll be following your bets.

But I'm not sure I know plenty of expertise there bill is going to bring to bear based on what he's learned not only with.

With the.

But with that line and other company a small company we invested in that.

And that basically own the brick and mortar payments side of the business.

With the large casinos and.

Bill has got a lot of.

A lot of data now and it's had about how this how this industry works and he's he's already got ideas on the kind of product.

We know from that he's got ideas about the products that we think that he thinks when Mike.

It might be successful at all.

Got you.

And then on the on the Trevi aside and this will be my last question and I'll just jump on.

On the Trevi aside.

And I.

I guess from from the wording of your ladder Youre kind of plain things a little bit closer to the events, but should we assume that the deal that was targeted ship.

And get it work out and now you're on the travel for something something new.

Or is it existing target is still kind of in play.

I don't know if it's appropriate for me to comment on it except to say, we're not looking for something new right now.

How about that for a.

State and around on the answer.

Perfect. Thank you very much of anything else on all fronts.

[laughter].

Everybody else. Our next question comes from John Campbell with Stephens. Please go ahead hi.

This is James Holly stepping in for John Campbell.

Hey, How're you doing I'll congratulate you heard that we heard and Campbell and Theyre going to bail on us.

Oh, and I like that come on.

And congrats on the new deal that's really exciting.

Thank you.

So my first question Tomorrow morning, I would I would get up.

And have breakfast and go down to the trading floor and by as much as this year and you can because it's very reasonably priced it's very reasonable price.

Looks very attractive it's very exciting.

Just the bag pet a little bit, though I just had a couple of questions here on on some of your older deals so given the market kind of and this back and environment.

And in the recent months here ally, it's been kind of lagging a little bit so.

And it's a lot of it is spec related and then it's not necessarily company specific so can you talk a little bit about what youre seeing there and anything that you would.

Comment on versus kind of the overall environment and then.

Allied itself.

I'll have to comment on it and Uh huh.

I'll have to comment from one and I'll make and India, there and if Duke are you on you can make.

So the.

And our alike continue to low.

Blow through it its plan they.

And they had a great.

I had a great fourth quarter, they're going to have a great first quarter.

And.

And we believe that there is a stable on shareholders out there and the world, who really want to own. This thing I don't know if you've noticed we've picked up.

And one or two.

Sell side research analysts and they are kind of and like 20 $20 price target. So it's you know.

Double.

And we think you're right.

Really really cool company and it's got the best management and that industry.

So you know.

And we're still very excited about it we have no reason to believe investors won't be but youre right. This is more spec specific.

And it is.

Uh huh.

And then it is sort of a company specific.

One thing that Duke has done this is a smart dude and eat.

We did a bunch of what we.

And we started and we start when we see your stock trading at 10 or slightly below we worry about redemptions.

And this debt a piece of research that I'm sure he'd be glad to share with you a regression about really what factored into.

Two the redemption risks do you mind would you mind here and this yes sure go ahead whats been ex.

You're saying, it's probably going to be interesting for you on others backs.

On the line and would you mind addressing yeah, yeah happy to walk through it so.

We saw a light trading around 10 blocks, we got a little worried internally.

Could be redemptions and and the deal even though we love the business.

Continue to outperform and what we found with three day is its first if the stock is trading above and box there were $12, let's say, there's no redemption risk. So this only applies to stocks and the $10 range. Once you get into the $10 range Theres really two things you look at it's the size of the stack and more importantly, the.

Mountain turnover so in general just larger stacks and to get redeemed glass there were bigger books to fill out and if you get more sophisticated investors.

We've found even both your plan for example, like didn't get redeemed. It was a very large back it may not have been.

The debt.

The best for Steve deal, but still didn't get for games. Despite performance issues that are fairly large.

More instructive and rebound was turnover.

So our light tariff turned over almost 200%.

And three announced the deal which means the shares are now held in the hands of long term investors, who know the company, thereby and are comfortable with the assets. So those of shareholders. We expect would not redeem it's when theres really light turnover and maybe you know 20% 30% of the shares turnover post deal announcement.

But your share from still really held by the original hedge funds and they bought and gears back and may or may not like the underlying assets.

That's a quick explanation does that makes sense I'm happy to dive into some more of this but when you looked at average back deal that's been done and kind of lot of death and spent a lot of time with it on the on a deal by deal basis as well.

Yeah. That's really helpful that gave a lot of color that was definitely helpful.

And just to switch and I don't want to stay on for too long here, So give someone else a chance just one other quick one here.

Any thoughts again on recent buybacks and any appetite for that going forward here.

Yeah.

Oh gosh.

It's cheap it would make and ex below book.

And make total sense to buy it back but we've got.

You can probably tail.

Right now, it's all about capital allocation and we think we get better returns at this stage.

Investing and some of these portfolio companies.

And then we were buying back around share. So although it is a it's very tempting and that's not to say we wouldn't bill.

And bill Wouldnt want to pull the trigger on it tomorrow because it is frustrating how low it is trading despite all that great.

Wins, we've had just this year.

So it idiots.

You're right to ask and I'd say its on the drawing board. It is not something we forget about.

Do you would you agree with that.

I agree with that.

Absolutely agree with that.

Okay. Thanks, guys I appreciate the time and congrats again, Germany.

Thanks for your interest.

As a reminder, if you have a question. Please press star then one to be joined the queue.

The next question is a follow up from Ian Zaffino with Oppenheimer. Please go ahead.

Great.

Maybe a question for Brian and.

And I guess why are you guys.

How are we thinking about.

Hum.

Not like per se current liquidity, but maybe like access to liquidity.

And obviously that this is the big kind of a debt and announcing on the ambulance side.

The other facts out there.

Should we expect sort of like the same deal size on.

And these other stacks as as this wind deal now and how are we thinking Brian again on on the liquidity side and.

Access to that and maybe what we should expect.

Thanks.

No fair question.

I'll start with the.

So this was part of it and maybe.

But Richard do you want to jump in on the other side as far as deal size as far as liquidity, we ended the quarter with nearly $400 million and corporate cash.

And still have not drawn on any of our credit lines we have.

Millions still with the FNF from Oliver and and up to 500 under the margin loan we entered into last year and neither of those have been drawn on.

In addition to that we still have quite a sizable chunk, we stopped 14 million shares of ceridian, even even at today's price that's about $1 two.

Powder sitting there Ian.

Rick do you want to talk about the deal size are part of that question.

So how about predict here, if you don't mind day.

Yeah, I'm happy to say, we're going to approach it on a on a case by case basis, I think that our appetite for you.

Really large forward purchase agreements has probably waned a little bit, but it's hard to net.

Ever say never just depends on what's in the pipeline and our.

Our degree of conviction and frankly with the transaction, but I think we'll always be judicious with our capital resources as Brian laid out we've got plenty of sources of liquidity for existing and new transactions.

Okay, great. Thanks for the color guys I appreciate that.

Sure Ian.

Okay.

Any more questions operator.

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

Excuse me. Thank you for your interest and our company.

And we appreciate that you understand that it's undervalued and we.

We hope and thank you for helping us tell the story.

Please feel free either of you guys to reach out to Brian or me or Duke.

And with any more questions that you might have.

Have a great rest of the day.

This concludes the conference call. Thank you for attending today's presentation you may now disconnect.

Okay.