Q2 2024 Cannae Holdings Inc Earnings Call
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Operator: Please stand by; your program is about to begin. If you should require assistance during your conference call today, please press star zero. Good afternoon, ladies and gentlemen, and welcome to The Cannae Holdings Inc. 2nd Quarter, 2024 Financial Results Conference Call. During today's presentation, all parties will be in a listen-only mode.
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Speaker Change: Good afternoon, ladies and gentlemen, and welcome to the Cani Holdings Inc. second quarter, 2024 financial results conference call.
Operator: 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 will be available through 11:59 p.m. Eastern Time on August 15th, 2024. With that, I would like to turn the call over to Jamie Lillis of Solberry Strategic Communications. Please go ahead. Thank you, Operator, and all of you for joining us
Speaker Change: 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 to 1159 p.m. Eastern Time on August 15th of 2024. With that, I would like to turn the call over to Jamie Lillis, of SoulBerry Strategic Communications. Please go ahead.
Jamie Lillis: Thank you, operator, and all of you for joining us. On the call today we have Ryan Caswell, Cannae's President, and Brian Coy, its Chief Financial Officer. But before we begin, I would like to remind listeners that this conference call, in a Q&A following 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.
Jamie Lillis: Thank you, operator, and all of you for joining us. On the call today, we have Ryan Caswell, can I as President and Bryan Coy are Chief Financial Officer.
Jamie Lillis: Forward-looking statements are based on management's beliefs, as well as assumptions made by 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 statement, 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 findings with the SEC.
Speaker Change: But before we begin, I would like to remind listeners that this conference call and the Q&A following our remarks may contain forward-looking statements that involve a number of risks and uncertainties. Thank you. Thank you.
Statements that are not historical facts, including statements that recognize expectations, hopes, intentions, or strategies regarding the future are forward-looking statements.
Forward-looking statements are based on management's beliefs.
Speaker Change: As well as assumptions made by an information currently available to management because such statements are based on expectations as the future financial and operating results and are not statements effect actual results made differently from those projected.
Speaker Change: The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.
Speaker Change: 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.
Jamie Lillis: Today's remarks will also include references to non-GAAP financial measures. Additional information, including a reconciliation between non-GAAP financial information and GAAP financial information, is provided in our shareholder letter. I would now like to turn the call over to Ryan.
Ryan Caswell: Good afternoon everyone, and thank you for joining us on our second quarter conference call. First off, I want to note that Bill is unable to join the call today as he is traveling. He will be back on the call next week.
Speaker Change: Thank you, Jamie. Good afternoon, everyone. And thank you for joining us on our second quarter conference call.
Speaker Change: First off, I want to note that Bill is unable to join the call today as he is traveling. He will be back on the call next quarter.
Ryan Caswell: Consistent with past earnings calls, we will provide some high-level commentary on strategy and key events during the second quarter before turning to a more detailed discussion of some of our portfolio companies and finishing with some financial details. We continue to focus on executing our strategic plan, designed to grow both the net asset value or nav of our portfolio while also working to close our share price discount to NAV. Our strategy has three main levers, including improving the performance and valuation of our portfolio companies.
Speaker Change: Consistent with past earnings calls, we will provide some high-level commentary on strategy and key events during the second quarter before turning to a more detailed discussion of some of our portfolio companies and finish with some financial details.
Speaker Change: We continue to focus on executing our strategic plan designed to grow both the net asset value or NAV of our portfolio while also working to close our share price discount to NAV.
Speaker Change: Our strategy has three main levers, including improving the performance and valuation of our portfolio companies. Making new investments primarily in private businesses that will produce cash blows and grow NAV.
Ryan Caswell: Making New Investments Primarily in Private Businesses that will produce cash flows and grow any, and providing capital returns to our shareholders through either our recently introduced cash dividend or share repurchase. We believe the combination of these three strategic pillars will close the value gap between our stock price and NAV. We remain optimistic about our portfolio companies and have spent considerable time this quarter working with the management teams of each to enact strategic transactions, Improve Operations, and Drive Additional Casual For example, Alight was able to close on the sale of their payroll and professional services business for up to $1.2 billion in consideration. This required significant time and effort from the Alight management team and board, and we appreciate all of the work from each to get such an instrumental transaction over the line.
Speaker Change: and providing capital returns to our shareholders through either our recently introduced cash dividend or share repurchases.
Speaker Change: We believe the combination of these three strategic pillars will close the value gap between our stock price and NAV.
Speaker Change: We remain optimistic about our portfolio companies and have spent considerable time this quarter working with the management teams of each to enact strategic transactions, improve operations, and drive additional cash flow.
Speaker Change: For example, Alight was able to close on the sale of their payroll and professional services business for up to $1.2 billion of consideration.
Speaker Change: This required significant time and effort from a light's management team in board and we appreciate all of the work from each to get such an instrumental transaction over the line.
Ryan Caswell: With regard to DNB, Bill and the DNB board continue to work with the management team to drive revenue growth, improve free cash flow conversion, and consider strategic transactions, which we believe will drive shareholder value. We also spent considerable time this quarter with the management team of the Restaurant Group and Minden Mill focused on refining their strategic plans with regard to sales targets and optimizing their respective expense bases, which we believe will maximize cash flow and increase their valuation and convergence NAV. Unfortunately, not all of our portfolio companies performed to expectations. And during the second quarter, we took a $141 million impairment on the book value of our site line investment.
Speaker Change: With regards to DNB, Bill and the DNB board continue to work with the management team to drive revenue growth, improve free cash flow conversion, and consider strategic transactions which we believe will drive shareholder value.
Speaker Change: We also spent considerable time this quarter with the management team of the restaurant group and Minden Mill focused on refining their strategic plans with regards to sales targets and optimizing their respective events expense bases.
Speaker Change: which we believe will maximize cash flow and increase their valuation and Cannae's NAV.
Speaker Change: Unfortunately, not all of our portfolio companies performed to expectation, and during the second quarter we took a $141 million dollar impairment on the book's value of our site line investment.
Ryan Caswell: Sightline has been unable to get the expected market adoption for its key products, and while management remains optimistic about the future, we believe that given the results to date and the cash position of the company, we were required to impair our investment. Moving on to our investment pipeline. We continue to look for new attractive investment opportunities that we believe will increase our NAV. We are primarily focused on platform investments in the private market.
Speaker Change: Sightline has been unable to get the expected market adoption on its key products and while management remains optimistic about the future, we believe that given the results to date and cash position of the company, we were required to impair our investment.
Speaker Change: Moving on to our investment pipeline.
Speaker Change: We continue to look for new attractive investment opportunities that we believe will increase our NAV. We are primarily focused on platform investments in the private markets.
Ryan Caswell: As stated before, we plan to fund any new acquisition through redeploying capital from the sale of some of our public company investments. I would now like to provide a bit more detail on our partnership to date with JANA Partners and the resulting potential investment opportunities. Since the announcement in Q1, we have spent considerable time with the team at Jana looking for undervalued public companies where there is a specific catalyst to unlock value, and Cannae can participate in that catalyst as an acquirer or capital solution.
Speaker Change: As stated before, we plan to fund any new acquisition through redeploying capital from the sale of some of our public company investments.
Speaker Change: I would now like to provide a bit more detail on our partnership to date with China of partners in resulting potential investment opportunities.
Speaker Change: Since the announcement in Q1, we spent considerable time with the team at JANA looking for undervalued public companies where there is a specific catalyst to unlock value and Cannae can participate in that catalyst as an acquirer or capital solution.
Ryan Caswell: Cannae's participation, and as a potential capital source, provides Janna an additional tool to push for change at the target company while at the same time creating potential investment opportunities for Cannae. In certain situations, Cannae may take a position in the target company's stock as we see how the process plays out, and if there are any potential larger capital investment opportunities. In Q2, we made our first investment alongside Jamf. While I don't want to discuss the specifics of that situation given its public nature, we remain optimistic that our partnership with JANA will produce attractive acquisition opportunities for Cannae. I would now like to discuss capital returns to shareholders. On September 30th, we will be paying our second dividend of 12 cents a share.
Speaker Change: [inaudible]
Speaker Change: Kanae's participation and as a potential capital source provides Jana an additional tool to push for change at the target company while at the same time creating potential investment opportunities for Kanae. In certain situations, Kanae may take a position in the target company stock as we see how the process plays out and if there are any potential larger capital investment opportunities.
Speaker Change: In Q2, we made our first investment alongside Janna. While I don't want to discuss the specifics of that situation given its public nature, we remain optimistic that our partnership with Janna will produce attractive acquisition opportunities for Cannae.
Ryan Caswell: We also bought back 300,000 shares in the second quarter, following the 9.7 million shares we bought back in our tender and Q1, bringing our year-to-date purchases to 10 million shares. Between the dividend and share buybacks, we have returned over $235 million of capital to our shareholders in 2024. Turning to our portfolio companies, our largest holding, Dunn and Brad Tree, reported second-quarter revenue of 576 million, representing 4.3% year-over-year organic growth, an excellent rate which is an acceleration compared to 3.9% organic growth in the prior year second quarter and the fourth consecutive quarter of mid-single-digit growth.
Speaker Change: I would now like to discuss capital returns to shareholders. On September 30th, we will be paying our second dividend of $0.12 per share.
Speaker Change: We also bought back 300,000 shares in the second quarter following the 9.7 million shares we bought back in our tender in Q1, bringing our year-to-date purchases to 10 million shares.
Speaker Change: Between the dividend and share-by-back, we have returned over 235 million of capital to our shareholders in 2024.
Speaker Change: Turning to our portfolio companies, our largest holding, Dun & Bradstreet, reported second quarter revenue of $576 million, representing 4.3% year-over-year organic growth, which is an acceleration as compared to 3.9% organic growth.
Speaker Change: in the prior year, second quarter, and the fourth consecutive quarter of mid single-digit growth.
Ryan Caswell: The company generated 5.7% growth in adjusted EBDA in the second quarter, which equated to $218 million at a 37.8% margin, up 60 basis points as compared to the year ago second quarter. Leverage at DNB today has moved down to 3.7 times, and management expects it to be at 3.5 times by the end of this year. On Monday, DNB issued a statement acknowledging that it has received inbound interest from third parties and has retained advisors to assist with those incurred. We will not make any comments on this matter going forward.
Speaker Change: The company generated 5.7% growth in adjusted EBITDA in the second quarter, which equated to $218 million at a 37.8% margin, up 60 basis points as compared to the year ago second quarter.
Speaker Change: Leverage at D&B today has moved down to 3.7 times and management expects to be at 3.5 times by the end of this year.
Speaker Change: On Monday, DNB issued a statement acknowledging that it has received inbound interest from third parties and has retained advisors to assist with those inquiries. We will not make any comments on this matter going forward.
Ryan Caswell: Our second largest holding, Alight, announced on Tuesday that Stefan Scholl will step down as CEO and a member of the board, effective after the board names a successor. We want to thank Stefan for his commitment and vision and for the impact he has made as CEO. Post-closing of the sale of the previously referenced payroll and professional services business, Alight used $740 million of the proceeds to repay debt, bringing Alight's net leverage down to 2.8 times. The company repurchased $80 million of Alight shares in the second quarter and announced a $75 million accelerated share repurchase in mid-June, leaving $93 million of share buyback authorization.
Speaker Change: Our second largest holding, Alight, announced Tuesday, that's, the fan troll will step down as CEO and a member of the board, effective after the board names the successor. We want to thank the fan for his commitment and vision, and for the impact he has made as CEO.
Speaker Change: Post-closing of the sale of the previously referenced payroll and professional services business, Alight used $740 million of the proceeds to repay debt, bringing Alight's net leverage down to 2.8 times.
Speaker Change: The company repurchased 80 million of the light shares in the second quarter and announced a $75 million accelerated share repurchase in mid-June, leaving $93 million of share buyback authorization.
Ryan Caswell: We believe this transaction is a positive for Light and that the remaining business is a simpler public equity story that will have more recurring revenue with higher e-bedommer. This is evidenced by management comments that they already have 97% of the 2024 revenue under contract, and the company forecast a second half 2024 adjusted Eva Dalmargin range between 25, and 26% for the full year and reaffirmed a mid-term adjusted EBITDA margin target of 28%.
Speaker Change: We believe this transaction is a positive for a light and that the remaining business is a simpler public equity story that will have more recurring revenue with higher EBITDA margins.
Speaker Change: This is evidenced by management comments that they already have 97% of the 2024 revenue under contract and the company forecasts a second half 2024 adjusted EBITDA margin range between 25 and 26% for the full year.
Speaker Change: and reaffirmed a midterm adjusted EBITDA margin target of 28 percent.
Ryan Caswell: Looking at light second quarter results which exclude discontinued operations, the company generated $538 million from continuing operations in the 2024 quarter, down 4% from the 561 million in the prior year. Second Quarter, 2024 adjusted e-bedoff from continuing operations was 105 million, representing a 19.5% margin, compared to the 119 million, or a 21.2% margin in the 2023. Turning to Black Knight football, in our first full year of ownership at AFC Bournemouth, the team finished in 12th place in the Premier League table and earned 48 points, the most the Cherries have earned in a single Premier League season.
Speaker Change: Looking at a light second quarter results which exclude discontinued operations, the company generated $538 million from continuing operations.
Speaker Change: in the 2024 quarter, down 4% from the 561 million in the prior year.
Speaker Change: Second quarter, 2024, adjusted to the adopt from continuing operations was 105 million, representing a 19.5% margin, compared to the 119 million or a 21.2% margin in the 2023 quarter.
Speaker Change: Turning to black night football, in our first school year of ownership at AFC Bournemouth, the team finished in 12th place in the Premier League table under 48 points. The most the cherries have earned in a Premier League season.
Ryan Caswell: This success is also translating to revenue growth for AFC Bournemouth, as revenue for the 12 months ended June 30, 2024, grew to approximately $203 million, a 19% increase from $170 million for the corresponding period ended June 30, 2023. The Optic was primarily driven by improvements of more than 40% in both sponsorship and hospitality revenue, as well as primarily, as well as higher, primarily income from more than higher placement in the table. Looking forward, we continue to see positive momentum both from... The commercial and sporting perspective
Speaker Change: This success is also translating to revenue growth for AFC Bournemouth, as revenue for the 12 months ended June 30, 2024 grew to approximately $203 million, a 19% increase.
Speaker Change: from the $170 million and the corresponding period ended June 30, 2023.
Ryan Caswell: The uptick was primarily driven by improvements of more than 40% in both sponsorship and hospitality revenue as well as higher Premier League income from Bournemouth's higher placement in the table.
Speaker Change: Looking forward, we continue to see positive momentum both from the commercial and sporting perspective.
Ryan Caswell: At FC Lorient, where we own 40%, the club finished in 17th place and was relegated to Division Two for the upcoming season. While we are frustrated with the results, we believe the team has the resources and talent to quickly return to League One. Furthermore, our put-call arrangement to buy the remaining stake of FC Lorient contemplated this potential scenario, and our valuation for the remaining stake is reduced while the team is in League 2.
Speaker Change: At FC Lorentz, where we own 40%, the club finished in 17 place and was relegated to lead to for the upcoming season. While we are frustrated with the result.
Speaker Change: We believe the team has the resources and talent to quickly return to League Month.
Ryan Caswell: Furthermore, our put-call arrangement to buy the remaining stake of FC Lorian to contemplate this potential scenario. And our valuation for the remaining stake is reduced while the team is in league 2.
Ryan Caswell: Hibernian FC, of which we have a 25% interest, finished the season in 8th place out of 12 clubs in the Scottish Premier League. We continue to build out the BKSC Holdings Company, given our belief that an inter-connected multi-club ownership model can best deliver improved sporting outcomes, create better player pathways, enhance fan and community experiences, and improve commercial revenues and profitability across the group. As part of that strategy, in June, we announced that Tim Bezbenchenko has been hired as BKSC's first press officer. Prior to joining BKFC, Tim enjoyed tremendous success in leadership roles within Major League Soccer.
Ryan Caswell: Tyburnian FC, which we have a 25% interest, finished the season in a place out of 12 clubs in the Scottish Premier League.
Ryan Caswell: We continue to also build out the BKFC holding company, given our belief that an interconnected, multi-club ownership model can best deliver improved sporting outcomes.
Ryan Caswell: create better player pathways, enhance fan and community experiences, and improve commercial revenues and profitability across the group. As part of that strategy, in June , we announced that Tim Vesbenschenko has been hired as BKFC's first president.
Speaker Change: Prior to BKFC, Tim enjoyed tremendous success in leadership roles within Major League Soccer.
Ryan Caswell: Kim will work with our portfolio and clubs to standardize and improve player recruiting and development to enhance player pathways and optimize commercial opportunities across the growth. Lastly, I would like to provide a few updates on Minden Mill and the restaurant group given the work during the previous quarter. We continue to make progress at Mind and Mel, and at release, its first product, an ultra-premium vodka called High Ground vodka, which was well received by the Mark.
Ryan Caswell: Tim will work with our portfolio, clubs to standardize and improve player recruiting and development to enhance player pathways and optimize commercial opportunities across the group.
Ryan Caswell: Lastly, I would like to provide a few updates on Minden Mill and the restaurant group given the work during the previous quarter.
Ryan Caswell: We continue to make progress at Minden Mill, and it released its first product, an ultra-premium vodka called High Ground Vodka, which was well-received by the market.
Ryan Caswell: The distillery is on track for a fourth quarter release of Minden Mill bourbon, rye, and American single malt whiskey brands from inventory acquired in the May 2023 acquisition and has already begun a more scaled development of additional brown liquors that require four plus years of age.
Ryan Caswell: The distillery is on track for a fourth quarter release of Minden Mill Burbent, Rye, and American single malt whiskey brands from inventory acquired in the May 2023 acquisition and has already begun a more scaled development of additional brown liqueurs that require four plus years of aging.
Ryan Caswell: Moving on to the restaurant. Following the strategic reduction in store locations discussed last quarter, we have continued with our realignment in our reducing corporate overhead. This quarter, we laid off approximately 20% of the corporate employees and are in the process of reducing third-party spending and downsizing the group's record. Our work has already produced positive results, as second quarter 2021 adjusted EBITDA was more than twice that of the prior year second quarter. Our management team is focused on improving cash flow and increasing guest counts at our locations, which is key to long-term profitability at the store and corporate level. We believe the actions of both Minden Mill and the Restaurant Group will improve cash flows and increase their respective values. I will now turn the call over to Bryan.
Bryan: Moving on to the restaurant group.
Ryan Caswell: Following the strategic reduction in store locations, discussed last quarter, we have continued with our realignment in our reducing corporate overhead. This quarter, we laid off approximately 20% of the corporate employees are in the process of reducing third-party spending and downsizing the group's quarters.
Ryan Caswell: Our work has already produced positive results as second quarter, 20 or 24, adjusted EBDOT, was more than twice that of the prior year, second quarter.
Bryan: Our management team is focused on improving cash flow and increasing the guest counts at our locations, which is key to long-term profitability at the store and corporate levels.
Ryan Caswell: We believe the actions that both mended male and the restaurant group will improve cash close and increase their respective values. I will now turn the call over to Bryan.
Bryan Coy: Thanks, Ryan. I'll briefly cover the P&L balance sheet in liquidation. Second quarter 2024 operating revenues were down $35 million, or 23%, compared to the prior quarter, reflecting a 27% reduction in the number of restaurant locations year over year. However, same store sales on the remaining locations were down slightly with lower guest counts offset by higher average checks. The cost of restaurant revenues fell at a greater pace than revenues, dropping to 85.6% of restaurant revenues in the second quarter of 2024 compared to 88.4% in the second quarter of 23, a 280 basis point improvement resulting from the reduction of four-wall or on-site costs. The remainder of operating expenses comprise personnel costs, depreciation, and other operating expenses.
Bryan Coy: Thanks, Ryan. I'll briefly cover the P&L balance sheet and liquidity.
Bryan Coy: Second quarter 2024 operating revenues were down $35 million or 23% compared to the prior quarter, reflecting a 27% reduction in the number of restaurant locations year-over-year.
Bryan Coy: Same store sales on the remaining locations were down slightly, with lower guest counts offset by higher average checks.
Bryan Coy: Cost of restaurant revenues fell at a greater pace than revenues.
Bryan Coy: Dropping to 85.6% of restaurant revenues in the second quarter of 2024 compared to 88.4% in the second quarter of 23. A 280 basis point improvement resulting from the reduction of four-wall or on-site costs.
Bryan Coy: The remainder of operating expenses comprise personnel costs, depreciation and other operating expenses.
Bryan Coy: These expenses, which include the restaurant and the real estate business as well as Cannae Corporate, increased $4.8 million in the aggregate, or approximately 11% quarter over quarter. The drivers for this increase include an ISIP bonus related to sales of Dayforce shares during the 2024 quarter, notably on which Cannae realized a $27 million gain over the pre-IPO base, as well as hire.com and termination. These were offset by significant decreases in restaurant group impairments and expenses, as well as a reduction in professional fees at the Cannae corporate level.
Bryan Coy: These expenses, which include the restaurant and the real estate business as well as can I corp it, increased 4.8 million in the aggregate, or approximately 11% quarter over quarter.
Bryan Coy: The drivers for this increase include an ICIP bonus related to sales of dayforce, shares during the 2024 quarter, notably on which can I realize the $27 million gain over the pre-IPO basis, as well as higher stock comp and termination fees.
Bryan Coy: These were offset by significant decreases in the restaurant group impairments and expenses, as well as reduction in professional fees at the Cannae corporate level.
Bryan Coy: Recognized losses of $145 million in the second quarter reflect a non-cash impairment charge to the book value of site line, while decreased losses from equity method investments relate to the prior year right down the system one. Also, give you a little bit more detail on the impairment of sightline and the rationale behind it.
Bryan Coy: Recognized losses of $145 million in the second quarter reflect a non-cash impairment charge to the book value of Sightline.
Bryan Coy: While decreased losses from equity method investments relate to the prior year right down the system one.
Bryan Coy: I'll also give you a little bit more detail on the impairment of sightline and the rationale behind it.
Bryan Coy: The lack of traction with their legacy products combined with investments in completing the development of a new product has caused further pressure on their operational results and liquidity through the second quarter. In light of continued negative cash flow from operations, uncertainty and future financial and operational forecasts, and a challenging liquidity position, we had a valuation of the company prepared, and based on those results, we recorded an impairment charge to the book value of our investment. With that said, we're hopeful the company will begin to see better results and will continue to work with site line management.
Bryan Coy: The lack of traction with their legacy products, combined with investments in completing development of a new product, has caused further pressure on their operational results and liquidity through the second quarter.
Bryan Coy: and light up continued negative cash flow from operations on certainty and future financial and operational forecast and a challenge liquidity position. We had a valuation of the company prepared and based on those results we've recorded an impairment charge to the book value of our investment.
Speaker Change: With that said, we're hopeful the company begins to see better results and will continue to work with one man's routine.
Bryan Coy: Cannae's balance sheet and liquidity position remain solid. Since March 31st, we've sold 1 million shares of Dayforce for gross proceeds of $57 million, and we're now down to 500,000 shares remaining out of the 37.1 million shares we held at Dayforce's IPO. We'll use this capital for new investments, investments in the growth of our existing portfolio, as well as capital returns to our shareholders. Cannae has approximately $29 million in corporate cash today and has nothing drawn on its margin loan, leaving $150 million of immediate capacity on that facility.
Bryan Coy: Can I balance sheet and liquidity position remain solid?
Bryan Coy: Since March 31st, we've sold 1 million shares of Dayforce for gross proceeds of $57 million. And we're now down to 500,000 shares remaining out of the 37.1 million shares we held at Dayforce's IPO.
Bryan Coy: We'll use this capital for new investments, investments in the growth of our existing portfolio, as well as capital returns to our shareholders.
Bryan Coy: And I have approximately 29 million in corporate cash today and has nothing drawn in its margin loan, leaving 150 million of immediate capacity on that facility. The only outstanding debt presently is 60 million under the term note that matures near the end of 2025.
Bryan Coy: The only outstanding debt presently is $60 million under the term note that matures near the end of 2025, and I also notably have 1.3 billion of marketable securities that could be utilized for future liquidity. At the close today, Cannae's aggregate NAV was 2.1 billion, or 3290 per Cannae share compared to today's closing price of 1995. With that, I'll now turn the call back to the operator to begin our Q&A session.
Bryan Coy: Cannae also notably has 1.3 billion of marketable securities that could be utilized for future liquidity.
Bryan Coy: At the close today, Canine's aggregate NAV was 2.1 billion, or 3290 per canine share compared to today's closing price of 1995.
Bryan Coy: With that, I'll now turn the call back to the operator to begin our Q&A session.
Operator: Thank you. And at this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star and two. We will pause for a moment to allow questions to queue. And we will take our first question from John Campbell with Stevens. Hey guys,
Operator: Thank you. And at this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star into. And we will pause for a moment to allow questions to queue.
Operator: And we will take our first question from John Campbell with Stevens.
John Campbell: Hey guys, it's Jonathan Bass and John. Thanks for taking my questions. So, you know, I know you can't comment directly on DMB to avoid rumors, but I'd love to hear just a high level refresh on your investment thesis for DMB and, you know, why you guys view the valuation. So it's deeply discounted here.
John Campbell: Hey guys, it's Jonathan Bass, John. Thanks for taking my questions. So, you know, I know you can't comment directly on the DMB to get rumors. So I'd love to hear just at a high level of refresh on your investment thesis for DMB and you know, why you guys?
Speaker Change: View the valuation is so steeply discounted here. Thanks
Ryan Caswell: You know what? So I guess the thesis when we made the investment or, kind of, how we view valuation today. What are you trying to get at? I apologize.
Ryan Caswell: Tom.
Speaker Change: You know what, so I guess the thesis when we made the investment or to kind of how we view valuation today, what are you trying to get at on the ipologize?
John Campbell: Yeah, that's right. What's your date for us when you got into D&B, and you know? Maybe just why. Not why, maybe just your thesis, if you could. Yeah.
John Campbell: Yeah, that's right. Just what your thesis was when you got into D&B and, you know.
Speaker Change: Maybe just why
Ryan Caswell: Yeah, no, thanks for the clarification. You know, when we initially invested in the business, we thought it was an undervalued business that had kind of great data assets and great market penetration. And we believe that there were some, you know, obvious cost savings that we could enact in the business as well as we could invest in products to improve revenue growth. We think we have done a lot of that.
Speaker Change: Not why, maybe just your thesis, if you could.
Ryan Caswell: Yeah, no, thanks for the clarification.
Ryan Caswell: You know, when we initially invested in the business, we thought it was an undervalued business that had kind of great, great data assets, great market penetration. And we believe that there was some obvious pos savings that we can enact in the business as well as we could invest in product to improve the revenue growth.
Ryan Caswell: We think Anthony and the team have done a lot of those things. If you look at the growth in EBITDA since our deal, you know, as well as kind of the fact that they've turned what was at the time of the acquisition was kind of a flat revenue business into 4.3 percent organic growth. With that all being said, you know, we were frustrated with where the business is, you know, where the business trades, but, you know, we think the team is on the right path and they're doing kind of the right things to create additional value at DMB.
Ryan Caswell: We think we have done a lot of that. We think Anthony and the team have done a lot of those things. If you look at the growth in the EBITDA since our deal,
Ryan Caswell: as well as they've turned what was at the time of the acquisition was kind of a flat revenue business to 4.3% organic growth without all being said.
Ryan Caswell: We're frustrated where the business is, you know, where the business trades. But...
Ryan Caswell: We think the team is on the right path and they're doing the right things to create additional value at D&B.
John Campbell: Got it, thanks, and then... Turning to Bournemouth here, you know, they had a really nice season finishing at the mid-table of the table, which is a solid improvement from the prior year, and it seems like your guys' strategy is playing out nicely there. So I wanted to touch on two things here. One, could you just speak to the level of investment you guys expect over the course of the next year and as the club looks to start its new season here shortly? And then maybe after that, you know, at this point, given what the club has done, would you guys consider taking some ownership off the table?
John Campbell: Got it, thanks, and then...
John Campbell: Turning to Bournemouth here, you know, that a really nice season finishing at the...
John Campbell: The middle-level of the table, which has solved improvement from the prior year, and it seems like your guys' strategies are playing out nicely there.
John Campbell: So I wanted to touch on two things here.
Speaker Change: One, could you just speak to the level of investment you guys can see?
John Campbell: over the course of the next year. And as the club looks to start its new season here shortly, and then then maybe after that, you know, at this point, given what the club has done, would you guys consider taking some ownership off the table?
Speaker Change: You know, so on the first question, you know, we're still in the middle of the transfer window. So kind of the exact the exact capital needs for the club, given the importance of buying and selling players that
Speaker Change: You know, it so we're still we're still it's still kind of.
Speaker Change: What we eat at the termin'
Speaker Change: Kind of the exact squad makeup before I think we have a real view of what the, what kind of the capital needs or the capital position of the club will be.
Ryan Caswell: So, I think we'll have to, we'll have to hold off on that. I do think there will be some amount of investment at Bournemouth this season. But, but what that is, we're still trying to figure out based on what happens over the next month of the window. And then, in terms of taking ownership off the table, you know, I don't think in the near term.
Ryan Caswell: So I think we'll have to hold off on that. I do think there will, at Bournemouth, there will be some amount of investment over the season, but what that is is, you know, we're still trying to figure out based on what happens over the next month of the window.
Ryan Caswell: And then in terms of taking ownership off the table, you know, I don't think in the near term.
Ryan Caswell: We are looking to do that unless, obviously, if someone came up and offered us an incredible price, we would think about it, but we think there are a lot more changes. There are a lot more things that we can do at Bournemouth and Black Knight Football more broadly to create shareholder value.
Ryan Caswell: We are looking to do that, you know, unless obviously if someone came up and offered us an incredible price, we would think about it. But we think there are a lot more changes. There are a lot more things that we can do at Bournemouth and Black Knight Football more broadly to create shareholder value.
John Campbell: Got it, thank you guys.
Ian Zaffino: Thank you. And we will take our next question from Ian Zaffano with Oppenheimer.
Ian Zaffano: Got it. Thank you guys.
Speaker Change: Thank you. And we will take our next question from Ian Zaffano with Oppenheimer.
Ian Zaffino: Thank you very much. Maybe on a light here, you know, we, like you said, management change, you got the payroll sale. You know, there's a potential strategic sale of this, like, still something you might consider. I guess the way I think about it is if you look at the DMV news and then you look at this. You need to maybe take that money and then, you know, with that capital, do it as you please. Any thoughts there? Thanks.
Ian Zaffino: Thank you very much. You know, maybe on a light here, you know, we, like you said, management change, you got the payroll sale. You know, there's a potential strategic sale of this, like still something you might.
Ian Zaffino: consider. I guess the way I think about it is if you look at like the DMV news and then you look at this, you need maybe to take that money and then you know with that capital do what you please. Any thoughts there? Thanks.
Ryan Caswell: I'll answer that in two ways. In terms of a specific sale or, you know, something like that, I mean, I don't. It's a public company, and obviously, there's a price out there every day for it. So, you know, if people are interested, obviously, they can come talk to them. But in terms of how we think about, you know, capital allocation more broadly, I would say that, you know, we clearly, as we mentioned in some of the prepared remarks, as we think about new investments, we have to reallocate capital from some of our public company investments into those investments or into returns of capital to shareholders.
Ryan Caswell: I'll answer that in two ways. In terms of a specific sale or something like that, it's a public company, obviously, there's a price out there every day for it. So people are interested, obviously, they can come talk to them.
Ryan Caswell: but in terms of how we think about capital.
Ryan Caswell: Allocation more broadly.
Ryan Caswell: I would say that.
Ryan Caswell: You know, we clearly, as we mentioned in some of the prepared remarks.
Ryan Caswell: You know, as we think about new investments, we have to, we have to reallocate capital from some of our public company investments into those investments or into returns of capital to shareholders.
Ryan Caswell: Clearly, you know, Dun & Bradstreet and Light are some of the biggest positions. So just kind of depending on the cadence and when that is, we'll have to think about all the different things that are going on as we think about allocating that capital.
Ryan Caswell: Clearly, Dun and Bradstreet and Light are some of the biggest positions. So just kind of depending on the cadence and when that is, we'll have to think about kind of all the different things that are going on as we think about allocating that capital.
Ian Zaffino: Okay, thank you. And then I guess the other follow-up would be, you know, double allocation. I guess you're buying back stock, but is there a lead into that as far as maybe there might not be as many opportunities, you know, or how you kind of pay your employees? Buying stuff versus returning capital to shareholders.
Ian Zaffino: Okay, thank you. And then I guess the other follow-up would be capital allocation. I guess you're buying back stock, but is there a read into that as far as maybe there might not be as many opportunities? You know, or how do you kind of prioritize?
Ryan Caswell: Yep. Yep.
Ryan Caswell: Buying stuff versus returning capital to shareholders. Thanks.
Ryan Caswell: Look, I think we've returned quite a bit of capital to shareholders over the first two quarters between the tender and the dividend. I think we have liked it. We liked investing in a dividend because it's consistent capital. It's returned to shareholders every quarter. And obviously, in the first quarter, we bought back about 9.7 million shares, which is a big chunk for us. So we're letting that settle out and see where we are.
Ryan Caswell: Yep.
Ryan Caswell: Look, I think we, we've, uh...
Ryan Caswell: We've returned quite a bit of capital to shareholders over the first two quarters between the tender and the young.
Ryan Caswell: and the dividend. I think we like that we like we like the interest rate and the dividend because it's consistent capital that's returned to shareholders on every quarter.
Ryan Caswell: And obviously, in the first quarter, we bought back about 9.7 million shares.
Ryan Caswell: But we believe that the strategy that closes the discount is both a combination of capital returns to shareholders, including share buybacks, as well as basically investments that are growing NAV. And we believe those are most likely private company investments where we can reallocate some of the capital from the public companies into those. I don't have a specific view on the allocation. It's more of I think we look at it on a case by case basis as we have investments. And as we look at kind of where our stock is trading, we make a decision on how we want to allocate that capital. But we believe it's a combination of both of those things.
Speaker Change: So we're, you know, which is a big chunk for us, we're letting that kind of, I'll say, settle out and see how that.
Ryan Caswell: know, see kind of where we are. But we believe that the strategy that closes the discount is both a combination of
Ryan Caswell: Capital Return to Shareholders, including Share Buy Back, as well as basically investments that are growing NAV and we believe those are most likely private company investments where we can reallocate some of the capital from the public companies into those.
Ryan Caswell: I don't have a specific view on the allocation. It's more of I think we look at it on a case-by-case basis as we have investments and as we look at kind of where our stock is trading and we make a decision how we want to allocate that capital. But we believe it's a combination of both of those things.
Ian Zaffino: Okay, thank you very much.
Kenneth Lee: Thank you. And once again, if you would like to ask a question, please press the star and one on your telephone keypad now. And we will take our next question from Kenneth Lee of RBC Capital Markets.
Speaker Change: Okay, thank you very much.
Kenneth Lee: Thank you.
Speaker Change: Thank you. And once again, if you would like to ask a question, please press the star and one on your telephone keypad now.
Speaker Change: And we will take our next question from Kenneth Lee with RBC Capital Markets.
Kenneth Lee: Hey, good afternoon, and thanks for taking my question. Just one follow up on the previous question there and perhaps just put a pointer point on it. And what's going to be realized you can't talk too much about the DMV strategic review, but if there was a potentially sizable monetization of your public portfolio holdings at this point, would you lean towards returning the bulk of that excess cash towards repurchases or allocating towards newer investments just given the current environment?
Kenneth Lee: Hey, good afternoon, and thanks for taking my question. Just one follow-up on the previous question there, and perhaps...
Kenneth Lee: to talk about the DMV Strategic Review. But if there was a potentially sizable monetization of your public portfolio holdings,
Kenneth Lee: At this point, would you lean towards returning the bulk of that excess cash towards repurchases or allocating towards newer investments, just given the current environment? Thanks.
Kenneth Lee: Look, I think we'd have to think about that when something actually comes up and kind of what is going on, but in general, you know, we believe it's a combination of both share buybacks and dividends as well as kind of investments in businesses. So what the percentage allocation is and all of that, I think we'd have to think about that when the situation comes up, but it's a combination of those two things.
Kenneth Lee: Look, I think we'd have to think about that when something actually comes up and kind of what is going on. But in general, you know, we believe it's a combination of both kind of the share buybacks and the dividends as well as kind of investments in
Kenneth Lee: in businesses. So what the percentage allocation is and all of that, I think we'd have to think about that when the situation comes up, but it's a combination of those two things.
Kenneth Lee: And then for my follow-up, and this one is about the JANET partnership here more broadly in the context of the partnership. You know, what sort of the playbook here, you know, what could we expect in terms of a potential transaction or investment going forward and, really, you can't talk too much about the rapid seven investment, but it is a sort of like we could see a potential co-investment where I could make an investment in equity along with some other investment firms just want to get a better sense of how future investments and transactions could immerse you. Thanks. Slide.
Speaker Change: Gotcha, okay.
Kenneth Lee: and then for my follow-up and...
Kenneth Lee: and this one is about the Janet partnership here, more broadly, in the context of the partnership.
Kenneth Lee: What's the playbook here? What could we expect in terms of a potential transaction or investment going forward? And I realize you can't talk too much about the Rapid 7 investment, but is this sort of like...
Kenneth Lee: We could see a potential co-investment where can I make an investment in equity along with some other investment firms? Just want to get a better sense of how future investments are transactions could emerge. Yeah, thanks.
Ryan Caswell: I think that I mean, look, you understand our capital base. I mean, it kind of depends on the size of the business that we're looking at, you know, what that business needs, whether it's, you know, ideally, it would be, it would be an acquisition opportunity, but could it be another capital solution? And, and then depending on the size, we would look to partner with different firms, similar to, you know, what we did with D&B or other takeovers of businesses in the past, so I, so again.
Ryan Caswell: I think that, I mean, look, I think it's, I mean, you know, you understand our capital base. I mean, so it kind of depends on the size of the business that we're looking at, you know, what, what that business needs, whether it's, you know, ideally it would be, it would be an acquisition opportunity, but couldn't be another capital solution. And, and then depending on the size we would look to partner with different firms, similar to, you know, what we did, what we've done with D&B or other take privates and businesses in the past. So I, so again.
Ryan Caswell: The exact playbook and how it plays out is a bit TBD given the early stage of the partnership, but it's relying on the skills of Janet to enact change and utilizing Cannae as a capital source and essential acquisition partner to find attractive investors.
Ryan Caswell: How the exact playbook and how it plays out is a bit TBD, given the early stage of the partnership, but it's relying on the skills of Janet.
Ryan Caswell: to enact change and utilizing Cannae as a capital source and potential acquisition partner to find attractive investments.
Kenneth Lee: Okay, okay, gotcha. And just one last quick one, if I may, in regards to the impairment chart you took for sightline in the quarter there. And in terms of the specifics driving the impairment, it sounded as if there was a If I got it right, a lack of progress in terms of the development of a new product. Was there any kind of changing industry conditions or anything that changed in terms of potential adoption by the industry that also drove the impairment? I just want to get a better understanding of it there, thanks.
Kenneth Lee: Okay, okay, Gotcha. And just one last quick one, if I may, and this regards to the impairment chart.
Speaker Change: took for Sightline in
Kenneth Lee: And in terms of the specifics driving impairment, it sounded as if there was a
Kenneth Lee: If I got it right, a lack of progress in terms of development of a new product, was there any kind of changing industry conditions or anything that changed in terms of potential adoption by the industry that also drove the impairment? I just want to get a better understanding there. Thanks.
Bryan Coy: I can take that one.
Bryan Coy: I can take that one, Ryan, if you want. It's a little bit backwards, Ken. It's more of some of their legacy products were not getting the traction that they wanted while they were developing. They've got a new product in development as well, but the combination of those two put quite a bit of pressure on them as far as cash flow from operations and profitability in the short run.
Ken: And I can take that one right if you want. It's a little bit backwards, Ken. It's nuts.
Bryan Coy: More of some of their legacy products were not getting the traction that they wanted while they're developing they've got a new product in development as well. But the combination of those two put quite a bit of pressure on them as far as cash flow from operations and profitability in the short run.
Kenneth Lee: Gotcha, gotcha. Okay, helpful there. I think that's it. Thank you very much. Thanks, Ken.
Ryan Caswell: Gotcha, Gotcha, Okay, Helpful Air, Helpful
Kenneth Lee: I think that's it. Well, thank you very much.
Operator: And it appears that we have no further questions at this time. I will now turn the call back to Ryan Caswell for closing remarks.
Ryan Caswell: Thanks, Ken. Thank you, Ken.
Ryan Caswell: Thank you.
Speaker Change: And it appears that we have no further questions at this time. I will now turn the call back to Ryan Caswell for closing remarks.
Speaker Change: Thank you very much for watching this video.
Ryan Caswell: Thank you, operator. To conclude, we have taken significant steps through the first six months of the year to position Cannae for success, which we believe will lead to NAV growth and a narrowing of our share price discount. We remain confident that we are on the right path and are excited with the opportunities that we have in front of us to create value for our shareholders. Thank you again for your time today. Thank you! This does works.
Ryan Caswell: Thank you, operator. To conclude, we have taken significant steps through the first six months of the year to position Cannae for success, which we believe will lead to NAV growth and a narrowing of our share price discount.
Ryan Caswell: We remain confident that we are on the right path and are excited with the opportunities that we have in front of us to create value for our shareholders.
Ryan Caswell: Thank you again for your time today.
Operator: This does conclude today's Cannae Holdings second quarter 2024 earnings call. Thank you for your participation. You may disconnect at any time.
Speaker Change: Thank you.
Operator: This does conclude today's Caniah Holdings 2, 24 earnings call. Thank you for your participation. You may disconnect at any time.
Speaker Change: ["Ransomway The Musical"]
unknown: Thanks for watching! (inaudible)
Ryan Caswell: On the first question, we're still in the middle of the transfer window, so the exact capital needs of the club, given the importance of buying and selling players. You know, it's still, it's still kind of we need to determine the exact squad makeup before I think we have a real view of what the capital needs of the capital position of the club will be.
Ryan Caswell: Thanks.