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

Financial Performance:

• Total operating revenues for Q3 2026 were $68 million, down from $81 million in the prior year, primarily due to the sale of Verada Ranch ($10 million impact).
• Total operating expenses reached $95 million in Q3 2026 (up from $89 million), driven by $18 million in non-cash impairment charges related to the restaurant group, compared to < $1 million in the prior year.
• Holding company expenses decreased 70% year-over-year to $25 million YTD ($18 million in Q3), with an additional $3 million in annualized savings identified.
• Recognized gains totaled $30 million in Q3 2026, including $15 million from the Watkins sale, $9 million from Verada, and a $20 million bargain purchase gain on Exeter Rugby, offset by an unrealized mark-to-market loss on SpaceX.
• Black Knight Football reported $118 million in revenue for the quarter ended June 30, 2026 (34% YoY increase), though EBITDA dropped to $11.6 million from $95.7 million due to reduced player trading profits.
• Black Knight Football's trailing 12-month revenue reached $312 million (32% increase), with AFC Bournemouth generating record fiscal year revenue of $287 million (21% increase).
• Year-to-date capital allocation to shareholders totaled $131 million, comprising $111 million in share buybacks (7.7 million shares) and $20 million in dividends.
• The holding company ended the quarter with $90 million in cash and maintains a corporate cash balance of $68 million as of the call date.

Guidance and Future Outlook:

• Management remains committed to a disciplined strategy of share buybacks and quarterly dividends, noting that 7.6 million shares remain authorized under current buyback programs.
• The company expects to save approximately $16 million annually in cash flow following the closure of O'Charlie's operations.
• Capital allocation will continue to prioritize sports and entertainment assets, with new investments evaluated against the alternative of share buybacks for long-term shareholder value.
• Exeter Rugby results will be consolidated starting in Q4 2026 (reporting the calendar Q3 results).
• Management targets additional annualized cost savings and continues to seek monetization opportunities for non-core assets.

Business Segments and Product Lines:

• Sports & Entertainment (Core): Focus on Black Knight Football; AFC Bournemouth stadium renovation Phase 1 is complete (hospitality doubled, capacity increased), with Phase 2 targeting ~17,600 capacity and an estimated $10 million in incremental match-day revenue.
• Sports & Entertainment (Acquisitions): $28 million invested in Q3 ($22M to Black Knight capital raise, $4M to Restaurant Group); $62 million total allocated to sports assets (91% of new investments excluding restaurant funding).
• Restaurant Group: O'Charlie's operations closed due to sustained post-pandemic struggles; $18 million impairment charge recognized; remaining portfolio is being evaluated under the "99" review.
• Non-Core Assets: Sold 49% stake in The Watkins Company; sold 87% interest in Verada Ranch to Vice Chairman Bill Foley (terminating put-right); ongoing strategic review for the 99 casual dining brand.
• Holding Company: Board reduced to 10 members; two directors (Mark Linehan, Woody Tyler) not standing for re-election; focus on governance improvements and operational efficiency.

Market and Competitive Landscape:

• AFC Bournemouth is performing competitively with an 8-game winning streak, 2nd place in the Europa League, and 7th place in the Premier League.
• Macro-economic tailwinds support the sports and entertainment investment thesis, citing strong long-term value creation potential.
• The casual dining market remains challenged, contributing to delays in the sale of the 99 brand and the decision to close O'Charlie's.
• The sports asset portfolio includes expanding commercial and player development strategies across AFC Bournemouth, FC Lorient, Morisee FC, and Exeter Rugby.

Risks and Challenges:

• Execution risk regarding the delayed sale of the 99 brand due to performance and market conditions.
• Volatility in player trading profits, which significantly impacted Black Knight Football's reported EBITDA (down from $80M to $5M).
• Ongoing integration costs and losses in the restaurant segment prior to closure.
• Forward-looking statements are subject to risks detailed in SEC filings, including market fluctuations and transaction uncertainties.

Management Commentary and Tone:

• Tone is confident regarding the transformation of the portfolio toward sports and entertainment, highlighting Bournemouth's on-field success and financial growth (EBITDA up 250% since acquisition).
• Management expressed resolve in monetizing non-core assets to fund share buybacks and new investments, despite market headwinds in the restaurant sector.
• Commitment to capital discipline is emphasized, with a balanced approach between returning cash to shareholders and investing in high-growth sports assets.
• No further questions were asked during the Q&A session following the initial three inquiries.

Analyst Questions and Answers:

• Oscar Navas (Stevens, Inc.) asked about the status of the 99 transaction and O'Charlie's closure; Management clarified O'Charlie's is closed, 99 sale is ongoing but delayed, and alternatives are being explored.
• Navas inquired about buyback authorization and framework changes; Management confirmed the framework remains unchanged and $7.6 million in authority remains.
• Navas sought details on the Black Knight capital raise; Management confirmed funds will be used primarily for Bournemouth's stadium renovation Phase 2 and operational needs for Lorient and Morisee.

Other Key Points:

• Exeter Rugby was acquired at the end of June; management is replicating the Bournemouth playbook regarding commercial expansion and facility improvements.
• The company recognized all material expenses associated with the O'Charlie's wind-down.
• FC Lorient and Morisee FC are being integrated into a broader commercial and player development strategy.
• The call included references to non-GAAP financial measures and reconciliations available in the shareholder letter.