Good afternoon, ladies and gentlemen, and welcome to the Cannae Holdings Third 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 November 26, 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, and good afternoon everyone. On our first call this year, Bill outlined a strategic plan designed to increase the net asset value or NAV of our portfolio and 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 companies that will grow NAV and returning capital to shareholders. I believe that we are making progress on all fronts and I will highlight a few items relating to each. As I did last quarter I will then discuss the results of several of our portfolio companies in more detail. We are working to rebalance our portfolio away from some of our public company investments and into new private companies’ investments. As part of this strategy in October, we announced the acquisition of a 53% stake in the Watkins Company. Watkins was founded over 150 years ago and has a strong market position and brand recognition within the fragmented, spices, seasoning and extracts category, one of the highest growth categories within the overall U.S. Food industry. We are excited about the deal structure as the existing owner, one of only two owners in the history of the company, is partnering with us and will own approximately 40% of the business. Additionally, we are partnering with KDSA, an investment firm focused on founder led and family owned businesses in the food and beverage sectors. We believe the company has a substantial opportunity to grow distribution across existing and new retailers, expand into other ancillary products and could be an attractive platform for future acquisitions, all of which will accelerate the company's growth and profitability. Furthermore, we believe this business will provide cash flow to Cannae through preferred dividends and equity distributions.…

Thanks Ryan. Cannae’s third quarter 2024 total revenues were $114 million compared to $144 million in the prior year, primarily comprising our restaurant revenues. Change in revenues is largely in line with the reduction of store locations as the 2024 third quarter results reflect 35 fewer locations than the comparable period in 2023. Our restaurant brands continue to work hard on improving guest traffic and growing revenue, including a focus on value oriented bundling and price reductions, particularly at our O Charley's locations. While the third quarter was tough across the casual dining industry, from a guest count perspective, we are starting to see guest counts improve through the first few weeks of the fourth quarter with the strategy of targeted offerings. Third quarter 2024 operating expenses were $132 million, down 33% from the prior year quarter driven by restaurant items and lower external manager fees. The cost of restaurant revenue in the current year quarter was $93 million which is a 20% decrease from the 2023 quarter attributable to the lower locations. The cost of restaurant revenue was higher as a percentage of restaurant revenue a few percentage points due to the bundling and pricing activities. The guest count strategies discussed above are having the intended effect of increasing traffic but have also increased interim margin performance. As the cost of restaurant revenue contains certain fixed components such as rent and management labor. We believe this can be offset when the other cost rationalization measures that we've put into place are realized in the first half of 2025 and the team has also identified other cost efficiencies in the supply chain, our menu offerings and brand support. While we are not where we want to be from a growth and profitability perspective at Restaurant Group, we're encouraged by what…

[Operator Instructions] The first question comes from Kenneth Lee from RBC Capital Markets. Please go ahead.

Hey, good afternoon and thanks for taking my question. Just the first one on BKFC. What's sort of like the outlook for additional capital or investments for BKFC? And could you perhaps just give us a little bit more detail in terms of any near term outlook in terms of investments such as physical plan, CapEx or player acquisitions. Thanks.

Hey Ken, thank you for the question. So we, there will probably be, I mean as -- the transfer windows are really kind of where player acquisition or sales occur. So the next one occurs in January. We don't believe there will be any capital required ahead of that. But I think at that time we will figure out what the rest of the year budget looks like. There will probably be some capital investment for the second half of the year, but we, but we will not know until the transfer window concludes. In terms of CapEx in the business we are very close to finishing. The real CapEx is at Bournemouth in the training facility which we've discussed before. We are actually very close to being through that and that should be open. I believe it's in the first quarter, I think February timeframe. And so that is really the only CapEx. We continue to look at a stadium in the future, but that is further out and we will either finance that on the balance sheet or we may look to raise third party capital, but that's much further and we'll give you more visibility as we have more visibility in how that plays out.

Got you. Very helpful there. And just one on the JANA Partnership. Looks like there was nothing to report there, but just wanted to get a little bit more color around the outlook for potential private investments. What are you seeing in your pipeline there? And do you see a potential acceleration in terms of potential transactions, especially given the current macro backdrop? Thanks.

Yes, thanks, Ken. So we continue to have very constructive discussions with the JANA team around potential opportunities where we can partner together. They will -- once we identify an opportunity, it will take time to play out. So I wouldn't. I wouldn't expect, in the next couple months there will be anything, but we are very excited and optimistic about the relationship. We think that both parties done through their expertise and us, through our capital, can uncover some very attractive situations for Cannae’s shareholders.

Got you. If I could just squeeze one more in. Just relatedly, if there were to be any kind of new private investments with that partnership, what kind of financing sources or capital sources could you look? Would you consider ever raising equity capital as part of the options there? Thanks.

Okay. Yes, no problem. I think the most obvious places that we would look to create capital for new investments are through the sale of our public securities. We've talked about transitioning out of those public securities into private investments. So that would be option number one. We could potentially look for some other debt financing. I do not believe, especially at the current prices, that we would be looking to do any form of equity offering, if that's what you were referring to, as capital. We would initially, we'd be looking to redeploy capital from our public investments into whatever new investments we find.

Got you. Thank you very much there.

The next question comes from John Campbell from Stephens. Please go ahead.

Hey, guys good afternoon. Ryan just going back to the strategic focus on shifting away from the private portfolio. You guys have made steady progress over the last probably year or so. I'm curious about your sense of urgency there. Obviously, you've got the DMV development. You're not going to comment on that. But on the other public investments, I'm thinking mainly where you've got sizable ownership, you've got fundamentals that seem to be kind of on better footing. I think a light is probably the shining example there. But if you can't get the public markets to recognize the value, at what point do you feel compelled to push for strategic sell? And it doesn't have to be just a light. But of any of the entities.

Look, I think a strategic sale of any of those is obviously up to the board of that entity. So I believe that we're going to think about it just more in terms of what is the. What are the near term investment opportunities that we have and how do we get liquidity through the securities that we own? Right. And so, we may start selling down, certain public positions to create liquidity for Cannae. But in terms of full company sales or things like that, we obviously believe they're attractive businesses. But that question is much better directed at the boards and the management teams of those businesses.

Okay, fair enough. I guess you'll still get a Christmas card from them this year. On the Black Knight football investment obviously you guys have the momentum going. I think that's really clear to see at Bournemouth. But within the Cannae stock, I just don't think you're getting any credit for that value you've created. It's probably too small to do a whole lot with right now. It doesn't seem like Bill's going to really look to monetize that anytime soon. So, I mean, a couple of these international clubs do have stock, publicly traded stocks. So I'm just curious if there's a way or if you've explored a way to create a tracking stock or maybe spin out a portion of that value so we can get a public market value and tie it back to Cannae.

I think it's a really good idea, John. We are -- I mean, I think we will think about all different ways to create value or to get value recognized for our securities. And so I don't know if there's a tracking stock or what the specific would be. But you can. We agree with you. And we want to be able to find a mark for the company and whether that's through third party investment, whether that's through a tracking stock, whatever it may be. But trying to find ways to demonstrate the value that we're creating will be very helpful for the business and for Cannae stock.

Yes, agreed there. And then last one for me, just want to circle back on the $0.12 quarterly dividend, just how you're feeling about the sustainability of that level of commitment and then how much of that you're able to actually source through free cash flow versus kind of dipping into the capital pool.

Yes, so right now we are dipping into the capital pool. We do believe it's sustainable. I think one of the interesting things around Watkins, we've also talked about some of the stuff we're doing around the restaurant group. We are starting to get some businesses that are producing cash flow for the holding company of Cannae. And the goal is to get enough of those that it fully covers the dividend. And so that we're not dipping into our capital pool, but that will be a progression. And so today, again, we're dipping into the capital pool, but hopefully six months, 12 months from today will be dipping much less.

So. Okay, that makes sense. Thanks, guys.

Thank you.

[Operator Instructions] The next question comes from Ian Zaffino from Oppenheimer. Please go ahead.

Hi, thank you very much, guys. I wanted to ask you on kind of philosophy on the portfolio construction, right? When you're going to the market and you're looking for deals or deals come to you, what deal size are you kind of looking at? If you had your wish, how many positions would you have? How large would they be? And I just think I kind of look at the sum of the parts. Thanks, Bryan, for updating this. It's just kind of all over the place. You have things that are worth less than a dollar per share, and I just don't see, the focus here. And so maybe you can kind of help me understand, what are you trying to achieve as far as position size, number of positions, etcetera. Thanks.

Hey, and thanks for the question. I do think that we have -- there's probably some outsized positions in our portfolio. Some of those are the amount of capital we invested. Some of those have grown. I would think going forward, investment size would be in the, call it 100 million plus type of range. I think we invested 80 million in Watkins. That seems like a good starting point. I do think we'll look at some bigger stuff, but I don't believe that you'll have some of the larger deals that we did historically. Like, I think we'll continue to be a bit smaller in scale than that, given the capital base that we have today, is how I think about the portfolio construction.

Okay, so I guess to kind of define what you said, maybe 20, 25 positions, something along those lines.

Yes, it's probably less than that, but I think you just did kind of the. At 100, I think it's called 100 to 300 million type positions. So it'll be. I think it'll be less securities than that. And obviously all of that's dependent on our ability to sell down some of the bigger positions that we have and reinvest that capital.

Okay, thanks. And then also on the football side, soccer side, can you talk about maybe some of the synergies you're seeing there between the teams desire to get bigger there, maybe talk about some of the improved performance, I guess maybe both on and off the field. Thanks.

Yes, thanks, Ian. We've actually -- we have been spending a lot of time at what I'm going to call the holding company and trying to create more synergies across the business, both on the. The kind of the football side or the soccer side, as well as on the commercial side. We announced on our last call, we hired Tim Bezbatchenko, who's now the President of Black Knight Football. Under him, we've started to hire additional people and really are building out the kind of the specific recruiting processes, commercial processes, and sporting performance processes so that we. That we are leveraging the expertise and the best practices across the business. And so we believe this is an area of a lot of opportunity that we're just kind of scratching the surface. We think that, probably the biggest and most important point will be on the player acquisition and just creating different teams with different purchase prices of players that we can ideally send through the system. So we're, again, I think we are early in where we're trying to get to, but we're spending a lot of time in trying to build this out such that it becomes a real competitive advantage across each of the different clubs.

All right, thank you very much.

Thanks.

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

Thank you, operator. We will continue to work hard to drive value for our shareholders and look forward to speaking with you again on our fourth quarter 2024 earnings call. Thank you again for your time today.

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