Cannae Holdings, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Portfolio Rebalancing: Sold ~$1.1 billion of public portfolio stakes since Feb 2024, including pending D&B sale. Post-D&B sale, ~22% of assets will be in public company shares.
• Capital Returns: Repurchased 7.6 million shares ($150 million) since May, Board increased quarterly dividend by 25% to $0.15 per share; expects to repurchase at least $300 million of common shares, fully repay $141 million debt on margin loan, and retain $60 million for future dividends.
• Opportunistic Investments: Expect to close acquisition of additional 30% stake in JANA for $67.5 million in third quarter, invest $30 million in JANA funds; ongoing evaluation of other attractive businesses.
• Portfolio Companies Update: Black Knight Football's AFC Bournemouth had strong on-field and financial performance; Alight's adjusted EBITDA improved; Watkins expected sales improvement in latter half; Restaurant Group working on strategies for Ninety Nine and O'Charley's.

Segment Performance

• Black Knight Football: AFC Bournemouth finished 9th in Premier League '24-2025 with 56 points (club record), had double-digit revenue growth, sold players for significant fees; FC Lorient promoted to Ligue 1; Hibernian FC qualified for Europa League; acquired 70% of Moreirense FC for $18 million; strategic affiliation with Orlando City SC. Cannae holds 44% of BKFC with $50 million committed in June 2025 capital raise.
• Alight: Second quarter 2025 total revenue from continuing operations $528 million (2% decrease from prior year), net loss $1 billion (includes $983 million noncash goodwill impairment), adjusted EBITDA $127 million (21% increase vs prior year), leverage 3.1x EBITDA, adjusted EBITDA margin 24.1% (460 basis points increase), free cash flow $102 million in first half 2025. Management lowered full-year 2025 revenue guidance but reaffirmed adjusted EBITDA guidance.
• Watkins: First half 2025 net sales mid-single-digit growth, EBITDA high single-digit growth; expects sales improvement in latter half of 2025, 2025 adjusted EBITDA range $20 million.
• Restaurant Group: First quarter 2025 total operating revenue $110 million (6.6% lower). Ninety Nine Restaurant & Pub same-store sales down less than 1%, guest counts down 2.5%, average checks up 1.7%; O'Charley's faced headwinds with guest count and same-store sales decline, six low-performing locations closed.

Guidance

• Alight: Lowered full-year 2025 revenue guidance midpoint to $2.3 billion but reaffirmed adjusted EBITDA midpoint of $633 million.
• Watkins: Expects sales to further improve in latter half of 2025, 2025 adjusted EBITDA in range of $20 million.
• D&B: Sale expected to close in third quarter, proceeds to be used for share buybacks, debt repayment, and dividends.
• Share Repurchases: Plan to repurchase at least $300 million of common shares.

Risks

• Forward-looking statements subject to risks and uncertainties detailed in quarterly shareholder letter and SEC filings, including potential differences between projected and actual results.

Question and Answer

Q: Any decision on capital return related to D&B being a tender offer and updated time frame?

A: Considering options, will continue active share buybacks, no specific decision on tender yet, plan to use remaining $150 million for buybacks.

Q: How much of share repurchase amounts allocated to public vs Mr. Foley's shares?

A: All repurchases to date through open market, plan to continue buying from third-party shareholders with remaining $150 million.

Q: Further outlook on public portfolio monetizations and private side?

A: Selling public securities as part of strategic plan, no specific timing, D&B sale provides capital for returns and investments.

Q: Near-term outlook on JANA partnership investment opportunities?

A: JANA partnership has introduced a couple of early-stage opportunities, optimistic about capital deployment from these.

Q: Motivation for Cannae being minority in BKFC capital raises and future participation?

A: Important investment, Cannae will continue to participate if future capital calls arise, excited about value creation.

Q: Further portfolio rationalization in restaurant portfolio and long-term fit?

A: Restaurant team working on plans for Ninety Nine and O'Charley's, trend of portfolio rationalization to continue, considering peeling off additional brands over time.