Cannae Holdings, Inc. Q4 FY2025 Earnings Call

Good afternoon, ladies and gentlemen, and welcome to the Cannae Holdings, Inc. Fourth Quarter and Full Year 2025 Financial Results Conference Call. As a reminder, this conference call is being recorded, and a replay is available through 11:59 p.m. Eastern Time on March 9, 2026. With that, I would like to turn the call over to Jamie Lillis of Solebury Strategic Communications. Please go ahead.

Thank you, operator, and all of you for joining us. On the call today, we have Cannae's CEO, Ryan Caswell; and Bryan Coy, our Chief Financial Officer. Before we begin, I would like to remind listeners that this conference call and the Q&A following our remarks may contain forward-looking statements that involve a number of risks and uncertainties. Statements that are not historical facts, including statements about Cannae's expectations, hopes, intentions, or strategies regarding the future are forward-looking statements. These statements are based on management's beliefs, as well as assumptions made by and information currently available to management. Because such statements are based on expectations as to future financial and operating results, actual results may differ materially from those projected. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. The risks and uncertainties to which forward-looking statements are subject include, but are not limited to, the risks and other factors detailed in our quarterly shareholder letter, which was released this afternoon, and in our other filings with the SEC. Today's remarks will also include references to non-GAAP financial measures. Additional information, including a reconciliation between non-GAAP financial information and GAAP financial information is provided in our shareholder letter. I would now like to turn the call over to Ryan.

Thank you, Jamie. Over the last year, we have made substantial progress executing our strategic initiatives outlined in 2024, designed to generate long-term shareholder value. Notable accomplishments in 2025 include the further transformation of our portfolio with the sale of Dun & Bradstreet to Clearlake Capital for total proceeds of $630 million to Cannae. In the fourth quarter, we also sold shares of Paysafe, System1, and Sightline to realize losses, which created a $55 million tax refund that will be paid to us in the summer of 2026. We continued significant returns of capital to shareholders through the repurchase of $323 million of stock, representing 17.4 million shares, or 28% of our shares outstanding. We also increased our dividend by 25% to $0.15 per quarter and paid $30 million in total dividends in 2025. We made new investments in proprietary opportunities where we can help drive value. In 2025, Cannae invested an additional $50 million in Black Knight Football Club and also invested an additional $67.5 million in JANA Partners to increase our ownership from 20% to 50%. With these investments and the sale of public securities like D&B, our portfolio today is primarily investments in proprietary private opportunities that public investors otherwise wouldn't be able to access. We believe it is important to provide our investors with these differentiated investment opportunities and invest in structures where Cannae can drive value. We have also continued to create value in our portfolio companies. This is best evidenced by activity at our largest investment, Black Knight Football, which continues its strong performance across our group of clubs. Today, AFC Bournemouth sits in 8th place in the Premier League with 38 points through 27 matches. This performance is a testament to the coaching and recruiting staff at AFCB. Over the last two transfer windows, AFCB has generated over $400 million in transfer proceeds, which, according to third-party reports, represents the second highest net profit in European football and demonstrates the team's ability to maximize profits while continuing to refresh the squad and drive performance. We also continue to make progress on our stadium expansion. We recently received planning approval from the local council, and Phase 1 of our stadium renovation is expected to be completed by the '26, '27 season. Phase 1 will now increase total capacity by approximately 1,500 seats, but will increase hospitality by 600 seats, or approximately 100%. Phase 2 will be completed by the start of the '27, '28 season and increase capacity to over 20,000 seats, an approximately 80% increase in capacity. In January, we acquired the remaining 60% of FC Lorient for approximately EUR 60 million through a combination of Black Knight Football stock and cash. The value was based roughly on the put call that was structured in the 2023 purchase. BKFC now owns 100% of FC Lorient, and we are excited about the strategic potential of the team within our multi-club structure. The team sits in 9th place in Ligue 1 and is in the quarter-finals of the French Cup. After 23 matches, Moreirense F.C. at Football Club sits in 7th place in the Primeira Liga with 33 points from 10 wins and 3 draws. The success of each team demonstrates the upside of our multi-club operations, and we remain excited about the value we are creating for an eventual monetization. Despite our accomplishments in 2025, the Board and management team are not satisfied with our stock price and believe that it does not reflect the intrinsic value of our assets or the long-term potential of the platform. As a result, based on feedback from our shareholders, the Board has established a new set of strategic priorities designed to provide greater clarity and drive sustained long-term value creation for our shareholders. The tenets of this strategy are as follows: 1. Portfolio transformation and strategic focus. We are accelerating the transformation of our portfolio to concentrate primarily on sports and entertainment-related assets where Cannae has demonstrated a differentiated competitive advantage. We continue to benefit from access to proprietary investment opportunities in these sectors and intend to build a more focused, efficient portfolio of synergistic assets where Cannae can actively drive value creation. As part of this transformation, we will continue to monetize non-strategic assets in a disciplined manner to redeploy capital towards higher returning opportunities. As a result, Cannae is exploring strategic alternatives regarding its restaurant group. 2. Enhanced operating performance and transparency. We are intensifying our efforts on improving the operating performance of our portfolio companies, while increasing the level of disclosure provided to our shareholders. Beginning this quarter, we are broadening our reporting to provide greater visibility into asset-level operating results and value creation initiatives at our portfolio companies. This can be seen from the information provided in our investor letter, and we will also be posting an overview deck of Black Knight Football, our largest investment, on our website that provides more details around the strategy, clubs, and financials. 3. Disciplined capital return. Returning capital to our shareholders remains a priority. We are committed to maintaining a consistent quarterly dividend and, subject to capital availability, may pursue selective and opportunistic share repurchases. In the short term, the Board is prioritizing capital flexibility given our current capital base and the focus on the strategic transformation described earlier. 4. Ongoing governance evolution. The Board remains committed to continuous evaluation and enhancement of our governance policies and procedures consistent with best practices. With four new independent directors joining the Board in 2025, the Board has purposely refreshed committees and continues to focus on areas to improve governance and shareholder alignment. We believe executing on these strategic priorities will lead to growth in Cannae NAV and stock price. With that, I'll turn the call over to Bryan.

Thanks, Ryan. I will walk through our fourth quarter and full year results, followed by a brief note on liquidity. Starting with our fourth quarter results, total operating revenues of Cannae were $103 million in the fourth quarter of 2025, a 6% decrease from $110 million in 2024. This was primarily from lower restaurant revenue, a result of generally lower guest traffic and 9 fewer O'Charley's locations that were closed during the year, abated in part by higher average guest checks. This was also slightly offset by higher lot sales and hospitality revenue at Brasada Ranch, our resort in Oregon. Cannae's total operating expenses of $127 million in the fourth quarter of 2025 were down from $132 million in the prior year. Cannae's current year operating expenses included $12 million of non-cash impairment charges, mainly associated with right-of-use assets at certain O'Charley's locations. Absent that non-cash charge, Cannae operating expenses decreased by approximately $17 million or 13%. That decrease reflects lower cost of restaurant revenue, lower personnel costs, and no external management fees following the termination of the agreement earlier this year, as well as other actions taken to reduce corporate operating expenses, which were offset in part by increased professional fees associated with our recent proxy contest. Of note, below Cannae's operating loss line, recognized net losses decreased $8 million in the fourth quarter of 2025, largely comprising mark-to-market losses on our exit from Paysafe. Equity and losses of unconsolidated holdings was $69 million in the fourth quarter of 2025, and the majority of this represents our share of Alight's fourth quarter results with the large goodwill write-off. Moving to full year numbers, for the full year 2025, total operating revenue was $424 million, compared to $453 million in 2024, reflecting lower restaurant rotations and associated revenue. Our operating loss was $119 million in 2025, compared to $104 million in 2024. The 2025 figure reflects lower cost of revenue, as well as $24 million of nonrecurring management charges, $14 million of non-cash impairment charges at the restaurant group, and $5 million of increased professional fees associated with our recent proxy contest. Without these fees, operating expenses would have declined by approximately 27%. The results below the operating line in 2025 were largely influenced by non-cash impairments associated with Alight, offset in part by increases in the value of our holdings in the CSI partnership. Turning to the year-end balance sheet, Cannae had over $1.3 billion in total assets offset by $330 million of liabilities. At the corporate level, Cannae has over $147 million of cash today, and our only corporate debt outstanding is $48 million of fixed-rate, interest-only term debt that doesn't mature for over 4 years. Additionally, as noted above, we expect to receive $55 million in tax refunds this summer. Operator, we'll now pause and open the line for questions.

The first question will come from Ian Zaffino with Oppenheimer. Pardon me, Kenneth Lee with RBC Capital Markets.

Just in terms of the strategic priorities, the new goals there, you talked about potentially accelerating more to the sports and entertainment side. With that, how do you view the potential monetizations across the portfolio? I think you talked about strategic actions for the Restaurant Group, but should we consider any other non-sports investments as being open for potential monetizations over time?

Ken, thanks for the question. Yes. I mean I think we have started to really transform our portfolio last year with some of the sales of D&B, Dayforce, Paysafe, System1. And then as you rightly pointed out, we announced strategic alternatives related to the Restaurant Group today. The Board, and we are going through each of the individual assets and trying to figure out where we are and does it make sense for monetization. Clearly, some will be more strategic than others. But with the focus of where it is around sports and entertainment-related assets, we will be going through our portfolio and looking at each of our assets and determining the appropriate time. When we make a decision like we did with the restaurants, we will let you know.

Got you. Very helpful there. And one follow-up, if I may. In terms of the JANA partnership there, you've been in partnership for some time now. And obviously, just given the recent market volatility, wondering if there's any change or updated outlook around potential investments associated with that. Or once again, does the recent move towards sports and media kind of not put that on the front burner anymore?

No. We remain very optimistic about our partnership with JANA. They just entered 25 years in business and have had an incredible track record. So we do remain optimistic. We think they will continue to source us different opportunities. Given the strategic direction around sports and entertainment-related assets, the box is maybe a little smaller given the capital base that we have today, but we continue to be optimistic about them, the long-term track record, and our ability to find opportunities with them. But the Board is very focused at the current time on sports and entertainment-related assets, so we would have to find something that fits within that focus with them.

Got you. And just one more follow-up, if I may. When you look across Cannae's current portfolio, across the various fintech and software associated companies within the portfolio, how do you view the risk of AI across that portfolio? And how do you think about potential valuations around there?

Yes. No. We've obviously spent a bunch of time thinking about kind of AI and its impact across the portfolio. I think we're fortunate that our biggest investment around football, while there may be AI things that improve processes in the business, sports is quite a ways away from AI. In terms of the financial services and other businesses that we have, we think they are all incredibly important parts of their customers' processes, with long-term contracts. So we think those are more sheltered. They are trying to implement AI into their businesses, and all of them are going through processes, looking at where they can be more efficient with AI. We feel good about that. But clearly, they and we are aware of all of the AI risks that are out there regarding disintermediation, and we're trying to be proactive in thinking with them about things that they can do to make their business more secure from that.

The next question will come from Ian Zaffino with Oppenheimer.

I wanted to ask about Black Knight Football Club and what you've been doing there. How should we consider the valuation of these businesses? I don't think you've updated the valuations in a while, so what would that look like if you did? Is there a way you could provide a framework? I know there have been several U.S. assets that have changed hands for astronomical prices, so I'm curious how you are thinking about the valuation of these assets, whether from a revaluation perspective or what they could ultimately be worth.

Yes, thanks, Ian. There are a few ways to approach this. Firstly, regarding the sum of the parts, we issued some stock in connection with the acquisition of FC Lorient at approximately a 12.5% premium to its par value, which is the basis for our calculations. When considering the value of the business, we believe that, over time, other Premier League teams have traded around three times. There are some public benchmarks in this area that we consider applicable to our business. Additionally, we have aimed to provide more detailed financial information in our shareholder letter about all our investments, especially Black Knight Football. This approach should give investors better insights into the business's financials, balance sheet, and our ownership stake. Since the acquisition of FC Lorient and Moreirense, there have been some changes that will be reflected as financials are updated, which typically have a one-quarter lag. Our goal has been to provide enhanced detail regarding the financial implications to facilitate a better understanding of the value.

Okay. And then the next question will be on SpaceX. What should we expect there? I know you have a small investment in there, but how do we think about that? And I guess if this does go public, would that be like a use of funds for you guys? Would it be a source of funds? How will we look at that investment?

Yes. If you examine our individual components, we have detailed the SpaceX investment. The value we are utilizing is grounded in the publicly announced merger with xAI. Moving forward, it's clear that the business has performed very well since our acquisition, showing a significant increase in value. Considering the strategy we discussed earlier, it appears that this will be a source of cash for us over time.

This concludes our question-and-answer session. I would like to turn the conference back over to Ryan Caswell for any closing remarks.

Thank you, operator. To conclude, while we made progress in 2025, the Board and management are not satisfied with our stock price performance and are executing a new strategic plan to drive long-term value creation. We thank you for your continued support, and we'll update you on our progress as we move forward.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.