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Cannae(CNNE) - 2024 Q2 - Earnings Call Transcript
CNNECannae(CNNE)2024-08-10 15:03
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Financial Data and Key Metrics Changes - Cannae Holdings reported a second quarter 2024 operating revenue decline of 35millionor2335 million or 23% year-over-year, reflecting a 27% reduction in the number of restaurant locations [18] - The company recognized losses of 145 million in the second quarter, primarily due to a noncash impairment charge related to the Sightline investment [20] - Cannae's aggregate net asset value (NAV) was reported at 2.1billionor2.1 billion or 32.90 per share, compared to a closing price of 19.95 [22] Business Line Data and Key Metrics Changes - Dun & Bradstreet (D&B), Cannae's largest holding, reported second quarter revenue of 576 million, representing 4.3% year-over-year organic growth, an acceleration from 3.9% in the prior year [9] - Alight's second quarter revenue from continuing operations was 538million,down4538 million, down 4% from 561 million in the prior year, with adjusted EBITDA of 105million,representinga19.5105 million, representing a 19.5% margin compared to 21.2% in the previous year [12] - AFC Bournemouth's revenue for the 12 months ended June 30, 2024, grew to approximately 203 million, a 19% increase from 170 million in the prior year [13] Market Data and Key Metrics Changes - D&B's adjusted EBITDA grew by 5.7% in the second quarter, equating to 218 million at a 37.8% margin, up 60 basis points year-over-year [10] - Alight's net leverage decreased to 2.8 times after repaying 740millionofdebtfromthesaleofitsPayrollandProfessionalServicesbusiness[11]CompanyStrategyandDevelopmentDirection−Cannae′sstrategyfocusesonimprovingportfoliocompanyperformance,makingnewinvestmentsinprivatebusinesses,andprovidingcapitalreturnstoshareholdersthroughdividendsandsharerepurchases[4]−ThecompanyaimstoclosethesharepricediscounttoNAVthroughthesestrategicpillars[5]−Cannaeisactivelyseekingnewinvestmentopportunities,particularlyinprivatemarkets,andplanstofundacquisitionsbyredeployingcapitalfrompubliccompanyinvestments[7]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedoptimismaboutportfoliocompaniesandhighlightedeffortstodriverevenuegrowthandimprovecashflow[6]−Thecompanyacknowledgedchallengeswithcertaininvestments,particularlytheimpairmentofSightlineduetolackofmarketadoptionforkeyproducts[6][20]−ManagementremainsconfidentinthestrategicdirectionandpotentialforNAVgrowth[44]OtherImportantInformation−Cannaeplanstopayaseconddividendof740 million of debt from the sale of its Payroll and Professional Services business [11] Company Strategy and Development Direction - Cannae's strategy focuses on improving portfolio company performance, making new investments in private businesses, and providing capital returns to shareholders through dividends and share repurchases [4] - The company aims to close the share price discount to NAV through these strategic pillars [5] - Cannae is actively seeking new investment opportunities, particularly in private markets, and plans to fund acquisitions by redeploying capital from public company investments [7] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about portfolio companies and highlighted efforts to drive revenue growth and improve cash flow [6] - The company acknowledged challenges with certain investments, particularly the impairment of Sightline due to lack of market adoption for key products [6][20] - Management remains confident in the strategic direction and potential for NAV growth [44] Other Important Information - Cannae plans to pay a second dividend of 0.12 per share on September 30, 2024, and has returned over 235milliontoshareholdersin2024throughdividendsandsharebuybacks[9]−Thecompanyhasmadesignificantprogressinitsportfoliocompanies,includingthesuccessfulsaleofAlight′sPayrollandProfessionalServicesbusinessforupto235 million to shareholders in 2024 through dividends and share buybacks [9] - The company has made significant progress in its portfolio companies, including the successful sale of Alight's Payroll and Professional Services business for up to 1.2 billion [5] Q&A Session Summary Question: Update on D&B investment thesis and valuation - Management reiterated that D&B was initially viewed as undervalued with strong data assets and market penetration, and they are frustrated with its current trading position despite operational improvements [25] Question: Investment expectations for AFC Bournemouth - Management indicated that capital needs for Bournemouth are still being assessed due to the ongoing transfer window, but some investment is expected [27] Question: Potential strategic sale of Alight - Management stated that while there is interest in Alight, capital allocation decisions will depend on market conditions and opportunities [31] Question: Capital allocation strategy - Management emphasized a balanced approach to capital allocation, considering both share buybacks and new investments [33] Question: Impairment charge for Sightline - Management clarified that the impairment was driven by lack of traction with legacy products and ongoing development challenges [42]