Good afternoon, ladies and gentlemen, and welcome to the Cannae Holdings, Inc. Second Quarter 2024 Financial Results Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the company’s prepared remarks, the conference will be open for questions with instructions to follow at that time. As a reminder, this conference call is being recorded, and a replay is available through 11:59 p.m. Eastern Time on August 15, 2024. 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 Ryan Caswell, Cannae's President; and Bryan Coy, our Chief Financial Officer. But 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. Forward-looking 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 and are not statements of fact, 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, which forward-looking statements are subject to 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 to the GAAP financial information is provided in our shareholder letter. I would now like to turn the call over to Ryan.

Thank you, Jamie. Good afternoon, everyone, and thank you for joining us on our second quarter conference call. First off, I want to note that Bill is unable to join the call today as he is traveling. He will be back on the call next quarter. Consistent with past earnings calls, we will provide some high-level commentary on strategy and key events during the second quarter before turning to a more detailed discussion of some of our portfolio companies and finish with some financial details. We continue to focus on executing our strategic plan designed to grow both the net asset value or NAV of our portfolio while also working to close our share price discount to NAV. Our strategy has three main levers, including: improving the performance and valuation of our portfolio companies; making new investments, primarily in private businesses that will produce cash flows and grow NAV; and providing capital returns to our shareholders through our -- through either our recently introduced cash dividend or share repurchases. We believe the combination of these three strategic pillars will close the value gap between our stock price and NAV. We remain optimistic about our portfolio companies and have spent considerable time this quarter working with the management teams of each to enact strategic transaction, improve operations and drive additional cash flow. For example, Alight was able to close on the sale of their Payroll and Professional Services business for up to $1.2 billion of consideration. This required significant time and effort from Alight's management team and board, and we appreciate all of the work from each to get such an instrumental transaction over the line. With regards to D&B, Bill and the D&B Board continue to work with the management team to drive revenue growth, improve free cash flow conversion…

Thanks, Ryan. I'll briefly cover the P&L, balance sheet and liquidity. Second quarter 2024 operating revenues were down $35 million or 23% compared to the prior year quarter, reflecting a 27% reduction in the number of restaurant locations year-over-year. Same-store sales on the remaining locations were down slightly with lower guest counts offset by higher average checks. Cost of restaurant revenues fell at a greater pace than revenues, dropping to 85.6% of restaurant revenues in the second quarter 2024 compared to 88.4% in the second quarter '23, a 280 basis point improvement resulting from the reduction of 4-wall or on-site costs. The remainder of operating expenses comprised personnel costs, depreciation and other operating expenses. These expenses, which include the restaurant and the real estate business as well as Cannae corporate, increased $4.8 million in the aggregate or approximately 11% quarter-over-quarter. The drivers for this increase include an SIP bonus related to sales of Dayforce shares during the 2024 quarter. Notably, on which Cannae realized a $27 million gain over the pre-IPO basis as well as higher stock comp and termination fees. These were offset by significant decreases in the Restaurant Group impairments and expenses as well as reduction in professional fees at the Cannae corporate level. Recognized losses of $145 million in the second quarter reflect a noncash impairment charge to the book value of Sightline, while decreased losses from equity method investments related to the prior year write-down of System1. I'll also give you a little bit more detail on the impairment of Sightline and the rationale behind it. The lack of traction with their legacy products, combined with investments in completing development of a new product has caused further pressure on their operational results and liquidity through the second quarter. In light of continued negative cash flow from…

Thank you. [Operator Instructions] And we will take our first question from John Campbell with Stephens.

Hey, guys. It's Jonathan Bass on for John. Thanks for taking my questions. So I know you can't comment directly on the D&B takeout rumors. So I'd love to hear just at a high level a refresh on your investment thesis for D&B, and why you guys view the valuation is so deeply discounted here. Thanks.

So I get -- the thesis when we made the investment or kind of how we view valuation today? I'm not -- is that what are you trying to get at? I apologize.

Yeah. That's right. Just what your thesis was when you got in the D&B and maybe just why -- not why, maybe just your thesis, if you could.

Yeah. No, so -- thanks for the clarification. When we initially invested in the business, we thought it was an undervalued business that had kind of great data assets, great market penetration. And we believe that there was some obvious cost savings that we can enact in the business as well as we could invest in product to improve the revenue growth. We think we have done a lot of -- we think Anthony and the team have done a lot of those things. If you look at the growth in the EBITDA since our deal as well as kind of they've turned what was at the time of the acquisition was kind of a flat revenue business to 4.3% organic growth. With that all being said, we're frustrated where the business is -- where the business trades. But we think the team is on the right path and they're doing -- kind of they're doing the right things to create additional value at D&B.

Got it. Thanks. And then turning to Bournemouth here. They had a really nice season finishing at the mid-level of the table, which is a solid improvement from the prior year. And it seems like your guys' strategy is playing out nicely there. So I wanted to touch on two things here. One, could you just speak to the level of investment you guys expect over the course of the next year and as the club looks to start its new season here shortly? And then maybe after that, at this point, given what the club has done, would you guys consider taking some ownership off the table?

So on the first question, we're still in the middle of the transfer window. So kind of the exact capital needs for the club, given the importance of buying and selling players that -- so we're still -- it's still kind of -- we need to determine kind of the exact squad makeup before I think we have a real view of what kind of the capital needs of the capital position of the club will be. So I think we'll have to hold off on that. I do think there will -- at Bournemouth that there will be some amount of investment over the season. But what that is, is we're still trying to figure out based on what happens over the next month of the window. And then in terms of taking ownership off the table, I don't think in the near term, we are looking to do that unless, obviously, if someone came up and offered us an incredible price, we would think about it. But we think there are a lot more changes. There are a lot more things that we can do at Bournemouth and Black Knight Football more broadly to create shareholder value.

Got it. Thank you, guys.

Thank you. And we will take our next question from Ian Zaffino with Oppenheimer.

Great. Thank you very much. Maybe on Alight here, like you've said, management change, you got the payroll sales. The potential strategic sale of this, like still something you might consider? I guess the way I think about it is if you look at like the TMV news and then you look at this, maybe to take that money and then with that capital, do as you please. Any thoughts there? Thanks.

I'll answer that in two ways. In terms of a specific sale or something like that. I mean, I don't -- it's a public company. Obviously, there's a price out there every day for it. So I -- if people are interested, obviously, they can come talk to them. But in terms of how we think about capital allocation more broadly, I would say that we clearly -- as we mentioned in some of the prepared remarks. As we think about new investments, we have to reallocate capital from some of our public company investments into those investments or into returns of capital to shareholders. Clearly, Dun & Bradstreet and Alight are some of the biggest positions. So just kind of depending on the cadence and when that is, we'll have to think about kind of all the different things that are going on as we think about allocating that capital.

Okay. Thank you. And then I guess the other follow-up would be capital allocation. I guess you're buying back stock but is there a read into that as far as maybe there might not be as many opportunities? Or how do you kind of prioritize buying stock versus returning capital to shareholders? Thanks.

Yeah. Look, I think we've returned quite a bit of capital to shareholders over the first two quarters between the tender and the dividend. I think we like instituting the dividend because it's consistent capital, it's return to shareholders on every quarter. And obviously, in the first quarter, we bought back about 9.7 million shares. So we're -- which is a big chunk for us. So we're letting that kind of, I'll say, settle out and see how that -- see kind of where we are. But we believe that the strategy that closes the discount is both a combination of capital returns to shareholders including share buyback, as well as basically investments that are growing NAV. And we believe those are most likely private company investments where we can reallocate some of the capital from the public companies into those. I don't have a specific view on the allocation. It's more of, I think we look at it on a case-by-case basis as we have investments. And as we look at kind of where our stock is trading and we make a decision how we want to allocate that capital. But we believe it's a combination of both of those things.

Okay. Thank you very much.

Thank you.

Thank you. [Operator Instructions] And we will take our next question from Kenneth Lee with RBC Capital Markets.

Hey, good afternoon. And thanks for taking my question. Just one follow-up on the previous question there and perhaps just to put a finer point on it, and once -- kind of realized you can't talk too much about the D&B strategic review. But if there was a potentially sizable monetization of your public portfolio holdings, at this point, would you lean towards returning the bulk of that excess cash towards repurchases or allocating towards newer investments just given the current environment? Thanks.

Look, I think we have to think about that when something actually comes up and kind of what is going on. But in general, we believe it's a combination of both kind of the share buybacks and the dividends as well as kind of investments in businesses. So what the percentage allocation is and all of that, I think we'd have to think about that when the situation comes up, but it's a combination of those two things.

Got you. Okay. And then for my follow-up, and this one is about the JANA partnership here. More broadly in the context of the partnership. What's sort of the playbook here? What could we expect in terms of a potential transaction or investment going forward? And I realize you can't talk too much about the Rapid7 investment. But is this sort of like we could see a potential co-investment where Cannae makes investment in equity along with some other investment firms? Just want to get a better sense of how future investments or transactions could emerge.

Yeah, thanks. No, I think -- I mean, look, I think -- I mean you understand our capital base. I mean, so it kind of depends on the size of the business that we're looking at. What that business needs, whether it's -- ideally, it would be an acquisition opportunity but could it be another capital solution? And then depending on the size, we would look to partner with different firms, similar to what we did -- what we've done with D&B or other take privates of businesses in the past. So I -- so again, how the exact playbook and how it plays out is a bit TBD given the early stage of the partnership, but it's relying on the skills of JANA to enact change and utilizing Cannae as a capital source and potential acquisition partner to find attractive investments.

Okay. Okay. Got you. And just one last quick one, if I may. And with regards to the impairment charge you took for Sightline in the quarter there. And in terms of the specifics driving the impairment, it sounded as if there was a -- if I got it right, a lack of progress in terms of development of a new product. Was there any kind of changing industry conditions or anything that changed in terms of potential adoption by the industry that also drove the impairment? I just want to get a better understanding there. Thanks.

I can take that one, Ryan, if you want. It's a little bit backwards, Ken. It's not -- it's more of some of their legacy products were not getting the traction that they wanted. While they're developing they can get a new product in development as well. But the combination of those two put quite a bit of pressure on them as far as cash flow from operations and profitability in the short run.

Got you, okay. Helpful. I think that’s it. Thank you very much.

Thanks, Ken, again.

Thank you. And it appears that we have no further questions at this time. I will now turn the call back to Ryan Caswell for closing remarks.

Thank you, operator. To conclude, we have taken significant steps through the first six months of the year to position Cannae for success, which we believe will lead to NAV growth and a narrowing our share price discount. We remain confident that we are on the right path and are excited with the opportunities that we have in front of us to create value for our shareholders. Thank you again for your time today.

Thank you. This does conclude today's Cannae Holdings second quarter 2024 earnings call. Thank you for your participation. You may disconnect at any time.