Q3 2021 Cannae Holdings Inc Earnings Call

Good afternoon.

Ladies and gentlemen, and welcome to the Tonight Holdings, Inc. Third quarter 2021 financial results Conference call.

During today's presentation, all parties will be in a listen only mode.

Following the company's brief 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 59 P. M. Eastern time on November 23rd 2021.

With that I would like to turn the call over to Jamie Lewis of Strawberry drought.

Thank you operator, and thank you to all of you joining us today on the call today, we have our Chief Executive Officer, Rick Messy, and I was president David Ducommun and Brian Coy.

Companies Chief Financial Officer, before we begin I would like to remind you that this conference call and the Q&A falling or remarks may contain forward looking statements involve a number of risks and uncertainties.

Eight minutes that are not historical facts, including statements about tonight expectations hopes intentions or strategies regarding the future are forward looking statements.

Forward looking statements are based on management's beliefs as well as the assumptions made by an information currently available to management.

Because such statements are based on expectations as to future financial and operating results.

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 then our other filings with the SEC. Today's remarks will also include references to non-GAAP financial measures.

Additional information, including their reconciliation between non-GAAP financial information to the GAAP financial information is provided in our shareholder letter.

I would now like to turn the call over to can I see Rick Nasty will open with a few brief remarks, and then open the line for questions. Okay. Thanks, Jamie.

Bill is our leader Bill is momentarily the ladies actually off working on.

He hasn't she's asking is cause he's working on a cannot business or maybe potential pizza cannot business. So he may join us she may not during the call. So you've got this backup quarterback today before we start I just wanted to refer you to our what we think is a pretty nice.

Documents are third quarter quarterly update it's on our website. It's got a lot more detail about our numbers are portfolio companies bills outlook on the business recent events and so forth. It's gonna cover a lot more detailed and we're gonna be able to on the skull.

I always wanted to start off by acknowledging that Bob Duke and Brian do a really nice job on that.

You know, where an actor manager and a result of our active management approach began with this quarter with Dunn and Bradstreet third quarterly root develops which were.

Driven by an acceleration in organic revenue growth.

Richard We believe is a key to improving the company's multiple valuation we think eventually they're going to get a rewrite as their organic revenue continues to accelerate.

And a quarter. They agree revenue is 22% they had adjusted EBITDA growth of 12%.

<unk> compared to the third quarter of 2020.

The best part of the story was there organic revenue growth accelerated or 3.7% in constant currency.

As compared with about 120 basis points below that in the second.

Second quarter.

And.

Andy and yeah that was three three sorry 920 basis points. The Grove is is all and execution of Anthony Anthony Jubouri strategy, which is.

Ah continued growth and international they got low digit growth in North America, and they got that from what he what he calls the four horsemen they added new logos.

So new products to their existing enterprise customers, they affected price increases and they continue to grow they're small and medium sized marketing business.

They have a lot of organic growth momentum and they they were you believe that's going to accelerate through 2022.

It's been said that Dnb's show me stock and what you believe they are beginning to show yeah. So we're happy owners I'm happy to own it personally on the Ah now review on the call along it I think you're gonna be happy shareholders expand fan sort of some dark days.

Here lately, but they're coming out we we believe they're coming out of the ditch and it's gonna be a great stock to home. We're also pleased with a light and ceridian.

They posted great results this quarter.

A light reported earlier today.

20% revenue growth and there be passed revenue, which is their their enterprise their enterprise software platform.

They had a 42% increase and be passed bookings in the third quarter, so incredible growth and and the growth engine of a life.

They actually reported that at the at the end of the third quarter. They had achieved already 99%.

The revenue that they had originally projected to achieve for the four year. So we're obviously, we're really happy with with this company they.

They've they've known a few deals to expand their product offerings.

Those are listed in the quarterly report in it and then their own.

Press release, but that was <unk> consumer medical and they a on retiree health exchange.

We think step and his team Katie could take a R. R.

Best in class and we share his vision Stfan division with the unlocking the power of Ah likes be passed platform.

And it's funny, because we were just talking a light started this year or started out as a public company. They talk about organic revenue growth of 1% for.

Four 2021 then.

Some time in the second quarter, they said well, we're going to get maybe 3% revenue growth three four maybe maybe up to five per cent and then today. They they got it to 5% to 6% and 2021 and that obviously boats very well I don't think they got it for 22, but you can expect a revenue to <unk>.

Send you to accelerate this company and my own personal opinion is going to be a high single digits grower.

In the very near future. That's gonna get you a re rate much higher multiple of EBITDA and we think you are going to be a very happy owner. There Ceridian continues to labour consistent results and continues to gain a water following as evidenced by their inclusion in the SMP 500.

This is an affirmation of their consistent growth and outstanding leadership, there cloud revenue increased very strongly in the third quarter, which supports our belief that ceridian have a long runway ahead and for value creation and growth.

And we're we're very excited about the bill of particulars very excited about the prospect of their wallet product and it's expanding feature set.

<unk> is up almost three times in the past five years and it represents a moist from our original investment up what 11 times.

More than that.

I'm, sorry, I didn't write the number down but it's it's incredible.

We David Ducommun, our President here is is the man in charge of our satellite investment, Besides bill and where I, particularly and we're all very excited about it the <unk>.

<unk> is that we put in 240 on a $1 billion post money valuation and canine that one is 33% of sightline.

It is the provider the lead may be the only provider of a cashless cashless payment solutions to online and physical casino gaming bedding markets. It's solution includes cashless payment methods for slot machines and table games and casinos plus payment methods for casino.

It was an online sports betting we're very impressed with management team. There. We think this ultimately as a public company don't we do.

And and and they're they're really.

Everybody say is transformational this company is transforming the payments business inside of these casinos from cash and a T M. As in all of this old school cash advances and so forth to a slick.

Digital wallet, it's just it's it's a very exciting business pay safe another one of our portfolio companies announced several Windsor cost digital commerce verticals as well as three acquisitions.

That broadens their position and he cash and open banking and they report Thursday morning, before the market opens.

Try the <unk> merger with system. One continues to move forward that they are in the middle of the registration process. We think that's gonna happen kind of fourth quarter of this year first quarter of next year, we I've been we got a chance to meet I got a chance to meet Michael Bland very impressive very smart guy.

It is not an easy business to understand and we're going to ask you to take to have the patience to study. This business because we think it's it's it's a rule of 40 company it but it also generates a gob of cash and that's pretty rare combination so.

We liked the business within its durable we'd like to management within its gonna be a lot bigger.

So we're encouraged with our progress as we work with our management team stuff unlocked about you within our portfolio, but we know we got a lot more to do and are we in particularly bill will remain engaged in supporting our portfolio companies I can't I'm going to mention this again, but I can't go without mentioning our ports.

Hello Yo Conference next month, all all of our poor all of our significant portfolio companies will be your can eyes.

As well as Black Knight in F&I after tearing Vegas on December 8th.

If you have not been invited R and we'd like an invitation I'm sure Jamie can get you there or Brian Koi are CFO, so with that we're ready operator for Q&A.

Thank you ladies and gentlemen at this time, we will be conducting a question and answer session.

If you'd like to ask a question you May post star one on your telephone keypad.

A confirmation total indicating the lines in a question cute.

You May post start too if you would like to remove your question from the queue.

Four participants using speaker equipment, it may be necessary to pick up your handset before pressing the starkey.

Our first question comes from the line of John Campbell, which Stevens. Please proceed with your question.

Hi, guys good afternoon, Hey, John.

Rick you you mentioned the backup quarterback comments I think Brady coming in for blood. So you know several years ago, and I think that worked out all right.

We're doing good Hal no I would say this is more like bledsoe going in for Romo [laughter] I gotcha in the shareholder letter I I noticed the cash balance you guys mentioned as of yesterday that was 81 million I think you ended the quarter 173 million holding company cash and then you picked up the you know the hundred and 20 million.

Or so of of the C. D. Sure sold a couple of weeks ago. It looked like a pretty big deployment. There. It was that just to pay off the debt does that kind of a short term thing or is that a new investment maybe you can shed some light on John.

John This is Brian Cooley, we eat entirely paid off the margin loan in October all 200 million of it okay.

Okay. The math scores up and then outside of the C D monetization.

You guys did a couple of weeks ago and it looks like you got a couple of more coming you got a partial legendary baking. So and then you've got the Triple tree do you guys have been busy I guess I think you are always busy but just curious about the expected gross proceeds from those deals and any other ones I'm gonna might be missing here.

Hey, John This is Brian <unk>.

Proceeds will get this year on that'll be probably less than 50 million all in we've got some earnouts that will come in in the two or three years ahead and another I think combined with all all of the properties and there you mentioned and maybe another five to 10 million that will come in January.

Got it and then you know a question I I think we we asked quite often.

You know things tend to be fluid. So I think the answer this might change here here and there you guys, probably you're gonna dress. This in a couple of weeks in Vegas, but.

Just talk to me a little bit high level about the investment strategy and just kind of we think about it going forward. I mean, you you guys were really having snacks late last year and then you know the latest large investment was back on the private side was sightline, which looks like a really enticing ideal.

Is that a shift in strategy or is it going to kind of you know like come and go depending on what the market is giving you just any kind of high level thought there you know.

We are opportunistic investors. If you go back and look at 2020 I would say in 2019 at you told US that we were gonna. We're we're going to do what force facts and have two <unk> two amadou deployed into two looking we that would've been a surprise to us.

Where.

Not we're not we're going to get these two that we have open.

We're gonna get those deployed but I'm not sure where we're gonna go back into that.

Enter that realm, our our bread and butter has been and probably will continue to be John.

Making private investments in companies, having more influence on their management.

Taking more likely taking stuff that looks more like control positions or at least share control with managed matter founders.

That's kind of where we cut our teeth, and that's where I think you'll see US, yes, heading and that's not to say we won't do another spak.

But but.

That gold that gold vein is gonna run out eventually.

Yeah. It makes sense to me I'm gonna jump back a few things kind of.

That's all yet.

I'll be back.

Our next question comes from the line of beans, Zaffino with Oppenheimer. Please proceed with your question.

Oh, great. Thank you very much I, you know I as far as this back comment you made they're still and a smack it hasn't found its target yet right.

What should we expect there as far as the consummation of a deal or announced May have a deal on the ANSI.

ASC.

We have we have identified and have had discussions.

With a number of very attractive targets, we have identified a number of others.

People are still wanting to talk to your bill and partner with us.

And.

We are we are gonna be patient about it.

In part because we've got plenty of time.

The <unk> not even a year old yet.

And.

And we're we're a little nervous about valuations right now.

So we're we're disciplined investors.

And.

So yeah, we're we're not going to let it we're not gonna, let it right and we're not going to get in a hurry.

And <unk> and cut corners, and not do something that that's going to meet bill standards. So but there are there are plenty of companies that there are plenty of companies out there.

I believe it or not is fished out as the spec market might same there still are companies that that will only talked about when we compete we're not competing with other stacks were competing with Ipos and emanate.

So.

Okay, Great and then.

And as far as.

Capital you know you get the private investments now you also the buyback in place how are we thinking about maybe shareholder returns verses alternative investments out there.

Well you know.

We were in a spot I kind of.

Let me, let me I want to answer your question, but I Wanna twist, It just a little bit.

We've got.

Presently we have two backstops out there.

And we are we have the resources to satisfy those backstops.

And.

Within the next few weeks, we're going to have a much better picture of the extent to which those are gonna be called.

And that's gonna give us a much better picture of how much available capital that we have for other investments and how much we have for buybacks, but there are other investments in buybacks are always going to be on the plate and we're always going to think about them and we're always going to think about the return on.

An alternative investment and the return on buying our own stock back.

And and I will say the return up on our own stock back even even at 36 and change still still looks pretty good to me.

Hi, guys. Thank you very much I'll hop back and thank you and thanks for your interest.

Yeah.

Is that John.

John I know you at you may still be on the phone I know you had a question around all of that I hope I answered that one too.

As a reminder, ladies and gentlemen, it has started one now ask you a question. Our next question is a follow up from John Campbell, which yeah, how can I assist you with your question.

Yeah, Yeah, those that'd be back well [laughter]. One last question for me I've got you know kids myself I know, it's impossible to name your favorite child, but in the past you guys are kind of cold out your point of light is one of the the top risk related returned potentials either portfolio. Obviously he's had a really good move it's good to get past these back event and all that stuff.

It feels like it's got a lot more to go but you know considering that moving and considering some of the disconnects you guys are seen across the portfolio I'm curious if a light still holds that thrown or my you know or what what else might kind of stand up you guys. At this age you know, that's just me and not bill and not do you cannot Brian.

But I still love a lie you can see the results you go look at what they reported this morning. There were just knock knock on the thing out of the park, we loved the management team. It's a big idea I do think they're gonna get a rewrite I do think they're gonna hit single digit revenue growth eventually.

And and I think eventually some some big <expletive> company is going to come by.

Hopefully, we'll we'll get a double or a triple and then that that happens.

But I'll say.

Me personally and Duke knows more about this than I do this sightline investment is could be a real a real.

It's growing like a weed. It's it also with a big idea a big total addressable market. It's got the only real product and this whole cashless Cassius gambling.

No gambling business, so I really like that and and look Anthony.

Has all most completely dug his way out on none of Bradstreet. They got behind the eight ball on organic revenue growth for reasons that I'm sure. You are aware and I think he's bowed out I think they are shown a lot of momentum and I think that one's gonna be that one's gonna trade nicely next year.

Lord willing in the in the market to hang on.

Got it thanks for the kind of Guy.

There are no further questions in the queue I'd like to end the call back to management for closing remarks.

Oh I.

I'll take that to me. So thank you operator, we continue to be excited about our opportunities I want to remind you again about our portfolio Company conference in Las Vegas on December 8th and ninth.

Management teams from like I said are substantial portfolio will be hosting presentations group meetings, one on ones and so forth it'll be really fun Bill will give the key the keynote or something like that the introduction bill will be there the whole team will be there you're gonna be very impressed with <unk> with these with these folks so we hope to see you there.

Thank you for your interest in our company I know, it's a lot of work to to understand is why I think I think if you do it will pay off.

Thank you operator.

Ladies and gentlemen. This doesn't include today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.