Cannae Holdings, Inc.

Stand by, your program is about to begin. If you should require assistance during your conference today, please press star zero. Good afternoon, ladies and gentlemen, and welcome to the Kenai 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 1159 p.m. Eastern Time on August 15th of 2024. With that, I would like to turn the call over to Jamie Lillis of Sulberry Strategic Communications. Please go ahead.

Thank you, Operator, and all of you for joining us. On the call today, we have Ryan Caswell, Kani's President, and Brian Coy, our Chief Financial Officer. But before we begin, I would like to remind listeners that this conference call and the Q&A following are 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 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 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 transactions 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, and consider strategic transactions which we believe will drive shareholder value. We also spent considerable time this quarter with the management team of the Restaurant Group and Minden Mill focused on refining their strategic plans with regards to sales targets and optimizing their respective expense bases. which we believe will maximize cash flow and increase their valuation and canize NAV. Unfortunately, not all of our portfolio companies performed to expectation, and during the second quarter, we took a $141 million impairment on the book value of our Sightline investment. Sightline has been unable to get the expected market adoption on its key products, And while management remains optimistic about the future, we believe that given the results to date and cash position of the company, we were required to impair our investment. Moving on to our investment pipeline, we continue to look for new attractive investment opportunities that we believe will increase our NAV. We are primarily focused on platform investments in the private markets. As stated before, we plan to fund any new acquisition through redeploying capital from the sale of some of our public company investments. I would now like to provide a bit more detail on our partnership to date with Janna partners and resulting potential investment opportunities. Since the announcement in Q1, we spent considerable time with the team at Janna looking for undervalued public companies where there is a specific catalyst to unlock value. and Canai can participate in that catalyst as an acquirer or capital solution. Canai's participation and as a potential capital source provides Jana an additional tool to push for change at the target company while at the same time creating potential investment opportunities for Canai. In certain situations, Canai may take a position in the target company stock as we see how the process plays out and if there are any potential larger capital investment opportunities. In Q2, we made our first investment alongside Janna. While I don't want to discuss the specifics of that situation given its public nature, we remain optimistic that our partnership with Janna will produce attractive acquisition opportunities for Kenai. I would now like to discuss capital returns to shareholders. On September 30th, we will be paying our second dividend of 12 cents per share. We also bought back 300,000 shares in the second quarter following the 9.7 million shares we bought back in our tender in Q1, bringing our year-to-date purchases to 10 million shares. Between the dividend and share buybacks, we have returned over 235 million of capital to our shareholders in 2024. Turning to our portfolio companies, our largest holding, Dun & Bradstreet, reported second quarter revenue of $576 million, representing 4.3% year-over-year organic growth, which is an acceleration as compared to 3.9% organic growth in the prior year second quarter and the fourth consecutive quarter of mid-single-digit growth. The company generated $5.6 7% growth in adjusted EBITDA in the second quarter, which equated to $218 million at a 37.8% margin, up 60 basis points as compared to the year ago second quarter. Leverage at D&B today has moved down to 3.7 times and management expects to be at 3.5 times by the end of this year. On Monday, DNB issued a statement acknowledging that it has received inbound interest from third parties and has retained advisors to assist with those inquiries. We will not make any comments on this matter going forward. Our second largest holding, Alight, announced Tuesday that Stefan Scholl will step down as CEO and a member of the board, effective after the board names a successor. We want to thanks to Fan for his commitment and vision and for the impact he has made as CEO. Post-closing of the sale of the previously referenced payroll and professional services business, Alight used $740 million of the proceeds to repay debt, bringing Alight's net leverage down to 2.8 times. The company repurchased $80 million of Alight shares in the second quarter, and announced a $75 million accelerated share repurchase in mid-June, leaving $93 million of share buyback authorization. We believe this transaction is a positive for Alight and that the remaining business is a simpler public equity story that will have more recurring revenue with higher EBITDA margins. This is evidenced by management comments that they already have 97% of the 2024 revenue under contract, and the company forecast a second half 2024 adjusted EBITDA margin range between 25% and 26% for the full year, and reaffirmed a midterm adjusted EBITDA margin target of 28%. Looking at Alight's second quarter results, which exclude discontinued operations, the company generated $538 million from continuing operations in the 2024 quarter, down 4% from the $561 million in the prior year. Second quarter, 2024 adjusted EBITDA from continuing operations was $105 million, representing a 19.5% margin compared to the $119 million, or a 21.2% margin in the 2023 quarter. Turning to Black Knights football. In our first full year of ownership at AFC Bournemouth, the team finished in 12th place in the Premier League table and earned 48 points, the most the Cherries have earned in a Premier League season. This success is also translating to revenue growth for AFC Bournemouth, as revenue for the 12 months ended June 30, 2024, grew to approximately $203 million, a 19% increase. from the $170 million in the corresponding period ended June 30, 2023. The uptick was primarily driven by improvements of more than 40% in both sponsorship and hospitality revenue, as well as higher Premier League income from Bournemouth's higher placement in the table. Looking forward, we continue to see positive momentum, both from the commercial and sporting perspective. At FC Lorient, where we own 40%, the club finished in 17th place and was relegated to League 2 for the upcoming season. While we are frustrated with the results, we believe the team has the resources and talent to quickly return to League 1. Furthermore, our put-call arrangement to buy the remaining stake of FC Lorient contemplated this potential scenario, and our valuation for the remaining stake is reduced while the team is in League 2. Hibernian FC, which we have a 25% interest, finished the season in eighth place out of 12 clubs in the Scottish Premier League. We continue to also build out the BKFC holding company, given our belief that an interconnected multi-club ownership model can best deliver improved sporting outcomes, create better player pathways, enhance fan and community experiences, and improve commercial revenues and profitability across the group. As part of that strategy, in June, we announced that Tim Bezbenchenko has been hired as BKFC's first president. Prior to BKFC, Tim enjoyed tremendous success in leadership roles within Major League Soccer. Tim will work with our portfolio clubs to standardize and improve player recruiting and development, enhance player pathways, and optimize commercial opportunities across the group. Lastly, I would like to provide a few updates on Minden Mill and the restaurant group given the work during the previous quarter. We continue to make progress at Minden Mill, and it released its first product, an ultra-premium vodka called High Ground Vodka, which was well-received by the markets. The distillery is on track for a fourth quarter release of Minden Mill bourbon, rye, and American single malt whiskey brands from inventory acquired in the May 2023 acquisition and has already begun a more scaled development of additional brown liquors that require four plus years of aging. Moving on to the restaurant group. Following the strategic reduction in store locations discussed last quarter, we have continued with our realignment in our reducing corporate overhead. This quarter, we laid off approximately 20% of the corporate employees and are in the process of reducing third-party spending and downsizing the group's headquarters. Our work has already produced positive results as second quarter 2024 adjusted EBITDA was more than twice that of the prior year second quarter. Our management team is focused on improving cash flow and increasing the gas counts at our locations, which is key to long-term profitability at the store and corporate levels. We believe the actions of both Minden Mill and the restaurant group will improve cash flows and increase their respective values. I will now turn the call over to Brian.