Cannae Holdings, Inc. Third Quarter 2026 Earnings Call - CANNAE HOLDINGS INC

Financial Performance:

• Total operating revenues were $68 million for Q3 2026, a decline from $81 million in the prior year quarter, primarily due to the sale of Versada Ranch ($10 million impact).
• Total operating expenses rose to $95 million in Q3 2026 (vs. $89 million in 2025), driven by $18 million in non-cash impairment charges (mostly goodwill at the restaurant group) compared to less than $1 million the prior year.
• Corporate holding company expenses decreased 70% to $25 million year-to-date (from $84 million in 2025), reflecting cost management and the elimination of management fees; additional annualized savings of $3 million identified.
• Recognized gains were $30 million in Q3 2026, including $15 million from the Watkins sale, $9 million from Versada, and a $20 million bargain purchase gain on Exeter, offset by an unrealized mark-to-market loss on SpaceX.
• Black Knight Football (reported on a quarter lag) generated $118 million in revenue for the quarter ended June 30, 2026 (up 34% YoY); trailing 12-month revenue reached $312 million (up 32%).
• Black Knight adjusted EBITDA (excluding player trading profit) was $6.6 million for the quarter ended June 30, 2026, down from $15.8 million the prior year; trailing 12-month EBITDA including player trading is $84 million (up 250% since acquisition).
• AFC Bournemouth revenue for fiscal year 2026 reached a record $287 million (up 21% YoY).
• Ending cash balance was $90 million; $45 million federal tax refund received; $18 million in additional share repurchases executed in October/November.
• Total capital returned to shareholders year-to-date: $131 million ($111 million in buybacks, $20 million in dividends), including 7.7 million shares repurchased (16% of outstanding).

Guidance and Future Outlook:

• Management expects annualized cash savings of approximately $16 million following the closure of O'Charlie's.
• Black Knight Football's Phase 2 stadium renovation at AFC Bournemouth is targeted to open next year, aiming to increase opacity to 17,600 and generate an additional $10 million in match-day revenue.
• The company remains committed to a dual capital allocation strategy of disciplined share buybacks and quarterly dividends.
• Continued focus on monetizing non-core assets to fund share buybacks and new investments in sports and entertainment.
• Exeter Rugby results will first be reported in the Q4 2026 filing (lagged reporting); current focus is on commercial/hiring transformation.
• Management anticipates finding a solution for the 99 (casual dining) transaction despite market challenges and delays.

Business Segments and Product Lines:

• Sports & Entertainment: Represents 91% of new investment capital; core focus includes AFC Bournemouth, FC Lorient, Morise FC, and Exeter Rugby.
• New Investments: $28 million allocated in Q3, specifically $22 million for a Black Knight Football capital raise (at a 20% premium) and $4 million to the Restaurant Group for O'Charlie's closure and cash losses.
• O'Charlie's: Operations closed in September 2026; results now presented as discontinued operations with all material wind-down expenses recognized.
• Asset Sales: Closed sale of 49% stake in The Watkins Company and 87% interest in Versada Ranch (sold to Vice Chairman Bill Foley for put-right termination).
• Stadium Renovation: Phase 1 at Bournemouth completed (hospitality covers doubled); Phase 2 focuses on capacity expansion to 17,600.

Market and Competitive Landscape:

• AFC Bournemouth is performing competitively: 8-game winning streak, leading in Europa League (2nd place), 7th in Premier League, and in Carabao Cup quarterfinals.
• Management cites "strong macroeconomic tailwinds" for the sports and entertainment sector supporting long-term value creation.
• Casual dining market for 99 is described as "challenged," contributing to transaction delays.
• Black Knight Football is executing a player development and commercial strategy across its portfolio of clubs.

Risks and Challenges:

• Asset Monetization: The 99 transaction remains complex and delayed due to performance issues and a challenging market environment.
• Restaurant Group: O'Charlie's struggled to return to profitability post-COVID, resulting in a write-down and closure.
• Impairments: Significant non-cash impairment charges ($18 million) impact current earnings.
  Forward-Looking Risks: General risks associated with forward-looking statements, market volatility, and the successful integration of new sports assets.

Management Commentary and Tone:

• Tone is confident and execution-focused, emphasizing a successful portfolio transformation toward sports/entertainment.
• Management expressed optimism regarding Black Knight's valuation upside and Bournemouth's financial trajectory (EBITDA up 250% since acquisition).
• Firm commitment to shareholder returns, evidenced by aggressive buybacks and dividend consistency.
• Proactive governance updates included reducing the board size to 10 members and removing two directors.
• Transparency maintained regarding the delays in the 99 sale and the reasons for O'Charlie's closure.

Analyst Questions and Answers:

• 99 Transaction Status: Confirmed O'Charlie's is closed; the 99 transaction is split into a separate deal, ongoing but delayed due to market conditions; management remains resolute in finding a solution.
• Buyback Authority: $7.6 million of authorization remains under the current program; the framework for capital allocation between buybacks and investments remains unchanged.
• Black Knight Capital Raise: Funds are earmarked for club operations and specific capital projects, with the majority allocated to Bournemouth's stadium renovation (Phase 2) and ongoing operational needs.

Other Key Points:

• Exeter Rugby: Consolidated on a lag; Q3 is the first full quarter of ownership; initial transformation focus is on commercial, marketing, and fan experience improvements.
• Governance: Two board members (Mark Linehan, Woody Tyler) declined re-election; board size reduced to 10.
• Financial Presentation: O'Charlie's results now classified as discontinued operations; Versada Ranch results included in continuing operations through the sale date.
• Capital Deployment: $47 million deployed in Q3 for repurchases, dividends, and Black Knight investment.