8-K: Cannae Holdings Reports First Quarter 2024 Results, Announces Dividend and Share Repurchase

Cannae Holdings announced its first quarter 2024 financial results, highlighted by a new dividend, a completed tender offer, and strategic portfolio updates.

Summary

• Cannae Holdings released its first quarter 2024 financial results, including a net loss attributable to Cannae common shareholders of $89.9 million, or $1.27 per share.
• The company's book value per share decreased to $31.52 from $33.02 at the end of the previous quarter.
• Cannae's Board of Directors approved a quarterly dividend of $0.12 per share, with the first payment scheduled for June 28, 2024.
• A tender offer was completed in April 2024, repurchasing 9.7 million shares for $222 million, or $22.95 per share.
• The company has approximately 13 million shares remaining on its buyback authorization.
• Cannae is winding down its management services agreement with Trasimene Capital Management, effective July 2, 2024, which will reduce management fees.
• The company sold shares in Dun & Bradstreet and Dayforce during the quarter, generating proceeds to fund the tender offer.
• Cannae's portfolio companies, including Dun & Bradstreet, Alight, Dayforce, and Paysafe, reported their financial results, with some showing revenue growth and improved profitability.
• Black Knight Football's AFC Bournemouth had a successful season, finishing 10th in the Premier League, and the company acquired a 25% interest in Hibernian FC.
• CSI secured 44 core banking deals and increased sales by 30% year-over-year, and also closed on a new third-party investment from TA Associates at a premium of more than 30% to the take-private valuation in the third quarter of 2022.
• The Restaurant Group saw a decrease in revenue due to the closure of O'Charley's locations, but store-level operating cash flow as a percentage of revenues increased.

Sentiment

Score: 6

Explanation: The document presents a mixed picture with some positive developments like the dividend, share repurchase, and strong performance from some portfolio companies, but also includes a net loss and a decrease in book value per share. The sentiment is cautiously optimistic.

Positives

• The establishment of a quarterly dividend provides a direct return of capital to shareholders.
• The completion of the tender offer at a discount to NAV demonstrates a commitment to shareholder value.
• The wind down of the management services agreement will reduce expenses and align management's interests with shareholders.
• Dun & Bradstreet's organic revenue growth is accelerating, and the company is confident in achieving its mid-term target of 5-7%.
• Alight's adjusted EBITDA and margins from continuing operations increased year-over-year.
• Dayforce exceeded expectations with double-digit growth in key metrics and raised full-year guidance.
• Paysafe's revenue and adjusted EBITDA increased, with expanding adjusted EBITDA margins.
• AFC Bournemouth had a successful season, exceeding expectations and securing a spot in the Premier League for the next season.
• CSI's record sales growth and new third-party investment at a premium valuation are positive indicators.
• Minden Mill's successful launch of its first branded product with high ratings is a promising start.

Negatives

• Cannae Holdings reported a net loss attributable to common shareholders of $89.9 million for the first quarter of 2024.
• The company's book value per share decreased from $33.02 to $31.52.
• Alight's total revenue from continuing operations decreased slightly compared to the prior year period.
• The Restaurant Group experienced a decrease in revenue due to the closure of O'Charley's locations, although store-level operating cash flow improved.
• System1 reported a net loss from continuing operations of $25 million for the fourth quarter of 2023.

Risks

• The document contains forward-looking statements that are subject to risks and uncertainties, including changes in economic, business, and political conditions.
• There are risks associated with the Investment Company Act of 1940.
• Cannae faces potential difficulties in finding suitable acquisition candidates and integrating acquisitions.
• Operating subsidiaries face significant competition.
• The externalization of certain management functions to an external manager poses risks.
• The Restaurant Group faces headwinds from inflation, competitive discounting, and severe weather.
• FC Lorient is facing potential relegation from Ligue 1.

Future Outlook

Dayforce raised its full-year 2024 guidance for total revenue, Dayforce recurring revenue, float revenue, and adjusted EBITDA. Paysafe issued 2024 revenue and adjusted EBITDA guidance forecasting revenue growth of 5.5% to 7.0% and adjusted EBITDA margins of 28.0% to 28.5%. Alight has $3.1 billion under contract for 2024, $2.2 billion for 2025, and $1.6 billion for 2026. Dun & Bradstreet reaffirmed previously issued guidance for the full year 2024.

Management Comments

• The Cannae team and I are focused on growing the value of our operating companies, making new investments and closing the gap between where Cannae trades and its intrinsic value.
• We are taking decisive action towards these goals in 2024.
• Cannae continues to be confident in D&B management and the potential for significant value creation.
• The company noted that proceeds from the transaction will be predominantly used to reduce its net leverage ratio to below 3 times.
• Management noted the total company has $3.1 Billion under contract for 2024, $2.2 Billion for 2025, and $1.6 Billion for 2026.

Industry Context

This announcement reflects Cannae's active management of its diverse portfolio, including strategic divestitures, acquisitions, and operational improvements. The focus on recurring revenue, margin expansion, and shareholder returns aligns with broader trends in the technology and financial services sectors. The multi-club football ownership model is an emerging trend in sports investment.

Comparison to Industry Standards

• Dun & Bradstreet's organic revenue growth of 4.3% is solid, but needs to reach the 5-7% mid-term target to drive multiple expansion, compared to peers like Equifax and TransUnion which have seen similar growth rates in their data and analytics segments.
• Alight's adjusted EBITDA margin increase of 160 basis points to 20.8% is a positive sign, but needs to be compared to other HR technology providers like Workday and ADP, which often have higher margins due to their SaaS business models.
• Dayforce's 23% growth in recurring revenue is impressive, and is in line with other high-growth HCM software companies like Paylocity and UKG.
• Paysafe's 8% revenue growth and 13% adjusted EBITDA growth are competitive in the payments industry, but the company needs to continue to expand margins to compete with larger players like PayPal and Adyen.
• AFC Bournemouth's 10th place finish in the Premier League is a significant improvement, but the club's financial performance needs to be compared to other mid-table Premier League clubs like Brighton and Brentford to assess its long-term sustainability.
• CSI's 30% sales growth is exceptional for a fintech company, and the 30% premium on the new investment from TA Associates is a strong validation of its business model, compared to other fintech companies like Fiserv and Jack Henry which have more established market positions.

Management Changes

Stakeholder Impact

• Shareholders will benefit from the new dividend and share repurchase program.
• Employees of portfolio companies may experience changes due to strategic divestitures and operational improvements.
• Customers of portfolio companies may see improvements in products and services.
• Suppliers and creditors of portfolio companies may be affected by changes in business strategy and financial performance.

Next Steps

• Cannae will continue to execute its strategy of growing the value of its operating companies and making new investments.
• The company will utilize the remaining 13 million shares on its buyback authorization at a measured pace.
• The wind down of the management services agreement will be completed on July 2, 2024.
• AFC Bournemouth's new training facility is expected to be completed within the next eight months.
• Minden Mill expects to launch whiskey and coffee liqueur brands by the end of 2024.
• Alight will use proceeds from the sale of its Professional Services segment and its Payroll & HCM Outsourcing businesses to reduce its net leverage ratio.
• Alight plans to be more aggressive and consistent in its return of capital to shareholders.

Key Dates

Keywords

Cannae Holdings, Financial Results, Dividend, Share Repurchase, Tender Offer, Dun & Bradstreet, Alight, Dayforce, Paysafe, System1, AFC Bournemouth, CSI, Minden Mill, Restaurant Group, Management Services Agreement