Cannae Holdings, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Canai Holdings Inc. First Quarter 2023 Financial Results Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the company's brief 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 as a replay and is available through 1159 p.m. Eastern Time on May 16, 2023. With that, I would like to turn the call over to Rory Remore of Silbury Strategic Communications. Please go ahead.

Thank you, Operator, and all of you for joining us this afternoon. On the call today, we have our Chief Executive Officer, Rick Massey, Kenai's President, Ryan Caswell, and Brian 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 Kaniyia'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 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 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 Kenai's Chief Executive Officer, Rick Massey, who will open with a few brief remarks and then open the line for your questions.

Hey, thanks, Rory. It's Rick Massey. Thank you all for joining the call. I'll try to be brief, but I'm going to stand on a soapbox here for a second. Everybody on these calls, including us, listen to a lot of earnings calls, and we've heard a lot of management prognostications on the market and the economy and all that. We're not dumb enough to get out and start making guesses about where Where the economy is headed, I'll say talking to the CEOs of the companies that we deal with, there's a lot of uncertainty out there. What we are convinced of is that our portfolio almost to a company is grossly undervalued. And I'm going to go through just a few examples of companies that have recently reported. Our largest holding, for an example, is Dun & Bradstreet. We've got 79 and change million shares. It's trading at a very low multiple of EBITDA, enterprise value to EBITDA. They reported a overall organic growth of 3%. That may or may not disappoint you, but if you look at their peers, you'll see that there are two U.S. peers in the consumer credit business, the closest peers to Dun & Bradstreet. One of them had revenue growth at 2%, and one had revenue shrinkage of 4.5%. Yet those two companies trade at almost twice the EBITDA multiple of Dun & Bradstreet. We're a little clueless about that. Dun & Bradstreet does not have that much more debt than some of its peers. It has a better margin. And like I said, it has better growth than its peers have shown. And what you'll see if you look under the cover on Dun & Bradstreet is Anthony and the team there have done an incredible job of turning around their marketing services divisions by using essentially a data management platform where customers can use their own data, third-party data, and Dun & Bradstreet data to perfect their account-based marketing. It's going like gangbusters. Hoover's had a 60% churn rate. That is a 40% customer retention rate just a few years ago when they set about to fix Hoopers. And it has a retention rate now in the 80s. So stunning turnaround for Dun & Bradstreet. And yet the market is selling it off. And it's really disappointing to us. We wish that there's more attention to be paid to Dun & Bradstreet because they've done a really nice job Under the covers fixing a very broken company, they've got it back to growth and growth faster than peers, and yet they've not been rewarded for that. Peers trade it, like I said, twice the multiple. I said I'd be brief. I'll try to be a little quicker. Alight reported today 15% revenue growth in the first quarter, 15%. Their BPAS, which is sort of their enterprise offering, multi-application offering, Their BPAS sales were up 50%. Their bookings were a little soft, but that's because they have had all these giant jumbo contracts that they've signed and are now in execution mode like Exxon and GE and others. So ADP, the closest comp to Alight, grew at 9%. This company, Alight, one of my favorites in the whole universe of stocks, grew at 15, and yet Alight's trading at about half the multiple of ADP. Go figure. It's a little depressing. We know that the market was disappointed that Stefan and the team at Alight didn't forecast or upgrade their forecast for 23, and I would just ask all of you and those investors to to listen to a number of calls that have been made in the first quarter and see how many companies who beat their guidance actually for the first quarter actually came out and raised for 23. In my own anecdotal experience, it's a very low percentage because of the uncertainty in the markets out there. And who can blame Stefan and Katie for not sticking their necks out and forecasting increasing growth in a choppy sort of economy. Look at C-Day. C-Day beat the market substantially in terms of its guidance and the stock's down 15% since their earnings call. You go figure. It doesn't make, it makes no sense It's trading in like the mid 50s now. And it's in our last sale, we sold a million chairs and 78 bucks. And that was a good trade. And we probably would sell another million at 78 bucks if it ever gets back there. But at 55, it's dumb. It's just a really dumb price. PaySafe, everybody's whipping child. Paysafe actually turned in high single digits, revenue growth, flat EBITDA growth, which is pretty amazing given the mess that Bruce and the team inherited. The stock's up a little bit, but they did, this is a business that did 420 million of EBITDA and 22. And on track to do even better than that and So it's kind of been thrown out with the bathwater too. So this quarter, we're looking at a lot of things. We are not sure it's timely given all the noise in the capital markets, especially the debt capital markets, and all the uncertainty in the economy on the back half of the year. So, you know, don't be surprised if we don't strike at something in the second quarter. And don't be surprised if we do. We did not buy back any shares in the first quarter. And it's principally because we don't have a lot of extra capital to do so. And in order to raise that capital, We're going to have to sell one of those aforementioned holdings at a very disappointing price. And we're just not that dumb. It doesn't make sense to sell down at Bradstreet at 10 bucks when it's worth 15. And so that you can go buy your shares back at a deep discount too. It just doesn't make sense to me. The math doesn't work. So you may be disappointed. Some of our investors may be disappointed we didn't buy back any shares. But we think it's just prudent portfolio management. Ryan Caswell is our president. He's been busy with our Black Knight Financial. I know there may be some questions about that. Where are we sitting? How's Bournemouth doing? Are they out of the death zone? And what's your view?