Cannae Holdings’ Earnings Call: Balancing Growth and Challenges

Cannae Holdings, Inc. ((CNNE)) has held its Q4 earnings call. Read on for the main highlights of the call.

Cannae Holdings’ recent earnings call reflected a mixed sentiment, balancing notable achievements with some challenges. While AFC Bournemouth’s performance and strategic investments were highlighted as positive developments, there were concerns over declines in certain areas such as DNB and restaurant revenues. The call underscored the company’s strategic direction and financial maneuvers aimed at enhancing shareholder value.

AFC Bournemouth Performance

AFC Bournemouth was a standout performer, with revenues increasing by nearly GBP20 million or 14% in fiscal year 2024. The team achieved its highest-ever ranking, sitting in sixth place in the Premier League, and maintained the longest unbeaten streak in its history. This performance not only boosted the club’s financials but also enhanced its brand value and market presence.

New Investments and Partnerships

Cannae Holdings made strategic moves by investing in new ventures, including acquiring a 20% equity interest in JANA Partners, which holds significant upside potential. Additionally, the company acquired a majority stake in Watkins Company, which ended 2024 with sales and EBITDA growth in the mid-to-high single digits, showcasing the potential for future profitability and expansion.

Capital Returns to Shareholders

The company demonstrated its commitment to shareholder value by returning significant capital through a Dutch auction, repurchasing 9.7 million shares worth approximately $222 million. Furthermore, Cannae initiated a quarterly dividend, returning an additional $23 million in 2024, reflecting its robust financial health and focus on rewarding investors.

Corporate Developments

Cannae Holdings underwent significant corporate changes, including the internalization of the external manager and the return of Bill Foley as CEO. Key management is now compensated primarily with Cannae shares, aligning management’s interests closely with those of shareholders, which is expected to drive long-term value creation.

Dun and Bradstreet Performance

Dun and Bradstreet reported a slight revenue increase, with $632 million equating to less than 1% constant currency organic growth compared to the previous year’s fourth quarter. However, adjusted EBITDA saw a slight decline of $600,000, indicating challenges in maintaining profitability amidst a competitive landscape.

Restaurant Revenue Decline

The company’s restaurant segment faced headwinds, with fourth-quarter total operating revenue at $110 million, marking an 8% decrease from the previous year. This decline was primarily attributed to lower restaurant revenue and broader challenges in the casual dining sector, reflecting the need for strategic adjustments.

Alight Revenue Decrease

Alight experienced a marginal revenue decrease, posting $680 million from continuing operations for the fourth quarter of 2024, a 0.3% drop from the previous year. This slight decline highlights the competitive pressures and operational challenges faced by the company in maintaining its revenue streams.

Forward-Looking Guidance

Looking ahead, Cannae Holdings provided optimistic guidance for 2025. AFC Bournemouth’s revenues are expected to continue rising, building on the 14% increase in 2024. Alight projects mid-to-high single-digit growth in adjusted EBITDA and double-digit growth in free cash flow. Dun & Bradstreet aims for ongoing strategic discussions’ outcomes in early 2025, with a focus on organic revenue growth. Cannae also plans to address the 36% discount of its share price to NAV through share buybacks and intends to rebalance its portfolio by reducing public company investments and focusing on high-return private companies.

In conclusion, Cannae Holdings’ earnings call presented a balanced view of its current performance and future prospects. While there were significant achievements, particularly in AFC Bournemouth’s performance and strategic investments, challenges remain in certain areas. The company’s forward-looking guidance reflects a strategic focus on growth and shareholder value enhancement, positioning it for potential future success.