• Total Revenue: $114 million for Q3 2024, down from $144 million in the prior year.
• Operating Expenses: $132 million, a 33% decrease from the prior year quarter.
• Adjusted EBITDA (D&B): $247 million for Q3, a 5.1% increase over the prior year's third quarter.
• Adjusted EBITDA Margin (D&B): Expanded by 60 basis points to 40.6%.
• Net Leverage (D&B): Maintained at 3.7 times, expected to decrease to 3.5 times by year-end.
• Revenue (Alight): $555 million for Q3 2024, down 0.4% from 2023.
• Adjusted EBITDA (Alight): $118 million for Q3, a 3.5% increase from 2023.
• Net Leverage (Alight): 2.9 times, reflecting a $740 million pay down.
• Net Sales (Watkins): Approximately $75 million over the last 12 months.
• Capital Returned to Shareholders: $243 million through share buybacks and dividends in 2024.
• Recognized Gains: $23 million for Q3 2024, compared to $130 million of losses in the prior year.
• Corporate Cash: $40 million as of the call date.
• Net Asset Value: $2.1 billion or $34.29 per share, with a 37% discount to intrinsic value.

• Warning! GuruFocus has detected 9 Warning Signs with CNNE.

Release Date: November 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Cannae Holdings Inc (NYSE:CNNE) announced the acquisition of a 53% stake in Watkins Company, a well-established brand in the spices and seasoning industry, which is expected to provide growth opportunities and cash flow through preferred dividends and equity distributions.
• The company successfully sold its final shares in Dayforce, realizing $2.8 billion from the sale, marking a successful investment over 17 years.
• Cannae Holdings Inc (NYSE:CNNE) has returned $243 million to shareholders through share buybacks and dividends, demonstrating a commitment to returning capital to shareholders.
• The portfolio company D&B posted revenue growth and improved EBITDA margins, indicating strong operational performance.
• Cannae Holdings Inc (NYSE:CNNE) is actively working on portfolio rebalancing by transitioning from public to private investments, which could potentially unlock more value for shareholders.

Negative Points

• Cannae Holdings Inc (NYSE:CNNE) reported a decrease in total revenues to $114 million from $144 million in the prior year, primarily due to a reduction in store locations.
• The restaurant segment faced challenges with guest traffic and revenue growth, although there are signs of improvement in the fourth quarter.
• The company wrote off the remaining book value for Sightline Payments due to a challenging liquidity situation, indicating potential financial strain in this investment.
• Cannae Holdings Inc (NYSE:CNNE) is currently dipping into its capital pool to sustain its quarterly dividend, which may not be sustainable long-term without increased cash flow from its businesses.
• The market has not fully recognized the value of Cannae Holdings Inc (NYSE:CNNE)'s investments, particularly in Black Knight Football, which may impact the company's stock valuation.

Q & A Highlights

Q: What's the outlook for additional capital or investments for Black Knight Football Enterprises (BKFE), and could you provide more detail on near-term investments like CapEx or player acquisitions? A: Ryan Caswell, President: The next transfer window is in January, and we don't anticipate needing capital before then. We will assess the budget for the rest of the year at that time. CapEx is mainly focused on Bournemouth's training facility, expected to open in February. Future stadium plans are further out and may involve third-party capital.

Q: Can you provide more color on the outlook for potential private investments with Jana Partners (Trades, Portfolio), and do you see a potential acceleration in transactions given the current macro backdrop? A: Ryan Caswell, President: We are having constructive discussions with Jana Partners (Trades, Portfolio) about potential opportunities. While nothing is imminent, we are optimistic about the partnership's prospects. We aim to uncover attractive situations for Cannae shareholders through this collaboration.

Q: If there were new private investments with Jana Partners (Trades, Portfolio), what financing sources would you consider, and would you raise equity capital? A: Ryan Caswell, President: We would primarily look to create capital through the sale of our public securities. We might consider other debt financing but are not looking to do any equity offerings at current prices. Our focus is on redeploying capital from public investments into new opportunities.

Q: Regarding the strategic focus on shifting away from the private portfolio, how urgent is this transition, and what are your thoughts on strategic sales if public markets don't recognize value? A: Ryan Caswell, President: Strategic sales are up to the boards of those entities. We focus on near-term investment opportunities and liquidity through our securities. We may sell down public positions to create liquidity for Cannae, but full company sales are decisions for the respective boards.

Q: On the Black Knight Football investment, have you considered creating a tracking stock or spinning out a portion to get public market value recognition? A: Ryan Caswell, President: It's a good idea, and we are considering ways to create value recognition for our securities. Options like third-party investment or a tracking stock are on the table to demonstrate the value we're creating.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.