Cannae Holdings, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Portfolio Rebalancing: Continued to rebalance portfolio away from public company securities. Closed acquisition of Dun & Bradstreet to Clearlake Capital, generating $630 million in proceeds. Sold $1.1 billion in public company securities, transitioning portfolio from 70% public investments to 20% public investments.
• Capital Deployment: Closed acquisition of an additional 30% stake in JANA Partners for $67.5 million, taking ownership to 50%; invested remaining $30 million commitment in JANA Funds. Invested $25 million in Black Knight Football after DNB sale.
• Shareholder Returns: Returned over $500 million to shareholders since 2024 strategic plan, including $275 million in share buybacks, repaying $141 million margin loan, and distributing $8 million in dividends. Remaining $25 million of $300 million committed share repurchases and $52 million earmarked for future dividends.
• Portfolio Company Value Creation: Worked with portfolio companies to create value. AFC Bournemouth had revenue growth, successful transfer season, and stadium renovation. Moreirense SC in sixth position. Alight improved adjusted metrics but reduced 2025 forecasts.

Segment Performance

• Alight: Third quarter total revenue was $533 million, down 4% year over year. Adjusted EBITDA, adjusted EBITDA margin, and free cash flow improved in 2025 compared to prior year third quarter, but management reduced 2025 forecast ranges for revenue, adjusted EBITDA, and free cash flow. Alight repurchased $25 million of common stock and paid $22 million in dividends during the quarter.
• Watkins Company: Third quarter was slightly softer than anticipated, but fourth quarter started strong. The business has seasonality, and the fourth quarter is critical for full-year results. A new head of sales was hired.
• Restaurant Group: Operating revenue was $107 million in 2025, down $7 million from the prior year's third quarter. This was driven by reduced guest counts on a same-store basis and 10 fewer restaurant locations, partially offset by higher average checks per guest. Total operating expenses decreased by $12 million.
• Black Knight Football: In the third quarter, Cannae invested $25 million in Black Knight Football after closing the DNB sale. At AFC Bournemouth, fiscal year ended with double-digit revenue increases, had a successful summer transfer season, and stadium renovation phase 1 is expected to be completed by the start of the 2026-2027 season. Moreirense SC of the Primeira Liga in Portugal was in sixth position after 11 matches.

Guidance

• Tax Benefits and Asset Monetization: Plan to sell certain non-core assets over next few months to take advantage of expiring tax benefits, potentially generating up to $55 million in cash tax refunds.
• Share Repurchases and Dividends: Remaining $25 million of $300 million committed share repurchases and $52 million earmarked for future quarterly dividends.
• Strategic Focus: Board directed management to concentrate efforts in sports and sports-related assets, leveraging networks for opportunities in teams and related ecosystem.

Risks

• Forward-Looking Statements: Risks and uncertainties detailed in quarterly shareholder letter and SEC filings. Actual results may differ materially from projected due to various factors.

Q: About the potential tax benefits and investment monetizations.

A: The tax assets refer to historical gains where losses can be utilized for tax refunds. Will focus on realizing unrealized losses to generate tax refunds and monitor broader portfolio for non-strategic assets.

Q: About new investments in SpaceX, Brasada Resorts.

A: Investments in SpaceX and Brasada Resorts are not new. Focus on monetizing less strategic assets.

Q: Risk of AI on fintech/software investments.

A: Businesses have defensible moats. Leveraging AI to improve processes, not making businesses obsolete.

Q: Divesting non-core assets and capital return vs investing in sports.

A: Focused on capital returns. Evaluate merits of buybacks vs new investments each time.

Q: Update on AFC Bournemouth stadium renovation.

A: First phase of renovation to complete by start of 2026-2027 season, increasing seating capacity to 17,000. Second phase next season to reach 20,000. On track with planning and approval processes.