Cannae Holdings, Inc. Common Stock 2026 Q2 Earnings Call

Please go ahead. Thank you, operator, and good afternoon.

Thank you for joining Cannae Holdings' second quarter 2026 earnings call. On today's call are Ryan Caswell, Chief Executive Officer, and Brett Correia, Interim Chief Financial Officer. But before we begin, I'd like to remind listeners that this call may contain forward-looking statements and references to non-GAAP financial measures. 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. 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. These statements are subject to risks and uncertainties described in our shareholder letter and our SEC filings. We undertake no obligation to update forward-looking statements. With that, I'll turn the call over to Ryan.

Thank you, Jamie, and good afternoon. On the call today, I plan to cover four topics: how we allocated capital during the quarter and our expectations going forward, the sale of non-core assets, the execution of our multi-club sports strategy at Black Knight Football, and how we are managing the holding company. Starting with capital allocation. In the second quarter, we allocated $7 million of capital as returns to shareholders through our quarterly dividend. And year to date through July, we have allocated $58 million to shareholders, of which $44 million is from buybacks and $14 million is dividends. In the second quarter, due to the recently announced transactions, the company did not buy back any stock.

Going forward, we remain committed to share buybacks and expect to pursue buybacks in the second half of the year, especially as a result of the capital we received from the sale of Watkins and the capital freed up from the elimination of the put right. In the second quarter, we allocated approximately $45 million to investments, including both existing investments and new investments. Year to date through July, we have allocated $54 million to investments. When allocating capital to investments, the board and management team analyze the long-term return potential of each investment compared to buying back Cannae stock. This quarter, both the additional investment in BKFC and a new investment in Exeter Rugby presented what we believe an attractive use of capital to deliver long-term shareholder returns and further our ambition of becoming a leading platform focused on sports and entertainment.

Given Exeter Rugby is a new sports-related investment, I wanted to provide more detail on why we are excited about the opportunity. I also ask that you review our website, where we posted a presentation on Exeter with additional information. With Exeter, we acquired a team in one of the world's leading sports with a strong brand, proven fan base, and history of success. Exeter was acquired at an attractive valuation and deal structure. Exeter is also located 80 miles from Bournemouth, and we believe there are a number of opportunities to create commercial and operational synergies across the businesses. We have established a plan to increase commercial revenues at Exeter through a playbook, which is consistent with what we developed for AFC Bournemouth. While our plan will take time, we are excited about the opportunity ahead of us and the returns we can deliver to our shareholders.

Turning to non-core asset monetization, we made significant progress this quarter. On July 30th, we sold our 49% ownership stake in The Watkins Company for $90 million. Including sale proceeds, preferred dividends, and fees received during our ownership, this transaction represents a multiple on invested capital of approximately 1.2 times in less than two years and an IRR of nearly 10%. On July 15th, we closed the sale of our 87% ownership interest in Brasada Ranch to a company owned by Bill Foley, our Vice Chairman, in exchange for the termination of Bill's put right. The sale in exchange for the elimination of put right was attractive as it, one, monetized the non-core asset. Two, eliminated the put right and associated liability, freeing up approximately $47 million of capital. Three, eliminated potential future CapEx at Brasada. Four, demonstrated Bill's support for Cannae shares.

This transaction was reviewed and unanimously approved by both our related person transaction committee and board, with Bill not participating in the deliberations or voting. Both of these transactions demonstrate the importance our board and management team have put on monetizing non-core assets to generate capital for share buybacks and new investments. The strategic process around the restaurant group is continuing, although it's taking longer than anticipated. We are looking at strategies that will likely result in both sale proceeds to Cannae and eliminate negative cash flow to Cannae associated with funding operations. We will update you as soon as possible. Let me turn to our sports and entertainment portfolio, which continues to be the centerpiece of our strategy.

At Black Knight Football, the headline this quarter is AFC Bournemouth finished sixth in the Premier League with 57 points, the highest finish in the club's 127-year history, and qualified for the UEFA Europa League, also for the first time in the club's history. This is a remarkable accomplishment for a club that was fighting relegation in 19th place in 2022 before Black Knight acquired the business. It also comes on the heels of two transfer windows in which we sold key players for more than $350 million. Bournemouth's European qualification meaningfully increases Bournemouth's broadcast revenue, commercial opportunities, and brand relevance. We will also open phase one of AFC Bournemouth's stadium redevelopment later this month, which will increase capacity by 1,000 seats and double hospitality. Importantly, the work completed thus far sets us up for the increase to 17,600 capacity starting next season.

Lastly, we continue to build out the multi-club model to create synergies across each club. The last topic to discuss is the holding company itself. A significant area of focus at the holding company remains on reducing our corporate company costs. I will let Brett expand on the specifics, but our corporate holding company costs are down approximately 76% from last year, which reflects the discipline the board and management have applied. Additionally, the board remains focused on improving our governance policies and procedures consistent with best practices. As an example, last week, our board adopted and posted to the Cannae website a new related person transaction committee policy that further strengthened the review and approval of related person transactions. We would also like to welcome Brett as our interim CFO, who will be presenting momentarily. In summary, this was a very active quarter.

We continue executing our plan, concentrating our portfolio further into sports and entertainment-related assets that can drive outsized investment returns, monetizing non-core assets, and opportunistically returning capital to shareholders at prices we believe are below intrinsic value. We will continue executing on all aspects of this strategy, which we believe will grow our stock price and close the discount to NAV. With that, I will turn the call over to Brett.

Great. Thank you for the warm welcome, Ryan, and good afternoon, everyone. I will briefly review the key aspects of Cannae and Black Knight Football's financial results before closing with the discussion of our balance sheet and liquidity position in the quarter. For the second quarter of 2026, total operating revenues, including restaurants in Brasada, were $102 million, compared to $110 million in the prior year period. The decline was primarily driven by lower revenues at our restaurant group as a result of reduced traffic and store closures at O'Charley's. Total operating expenses, including restaurants in Brasada, were $159 million in the second quarter of 2026, compared to $171 million in the prior year period. Total operating expenses include $45 million of non-cash impairment charges at our restaurant group in 2026, compared to $1 million in 2025.

Operating expenses of the corporate holding company were just under $9 million in the second quarter of 2026, an 85% decrease from $59 million in 2025, and $18 million year to date in 2026, a 76% decrease from $75 million in 2025. The decrease was driven by our board's continued focus on cost management and elimination of the management transition costs and management fees in 2025. Next, a couple of notes on the impact of transactions on our numbers and future reporting. With the SpaceX IPO in June, we began marking our investment to market, resulting in a gain of $83.4 million in the second quarter of 2026. The gain is based on SpaceX trading price on June 30. We expect variability in earnings as we mark the investment to market going forward.