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Cannae Holdings, Inc. (FNFV)
Q4 2019 Earnings Call
Feb 21, 2020, 12:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning, ladies and gentlemen, and welcome to the Cannae Holdings Fourth Quarter and Full Year 2019 Earnings Conference Call. [Operator Instructions]
I would now like to turn the call over to Jamie Lillis Investor Relations for Cannae Holdings. Please go ahead, sir.
Jamie Lillis -- Managing Director, Solebury Trout
Thank you, operator, and good morning, everyone. We appreciate your participation in our fourth quarter and full year 2019 earnings conference call. Joining me today are Cannae's Chairman, Bill Foley; Chief Executive Officer, Rick Massey; and Chief Financial Officer, Rick Cox. As a reminder, a replay of this call will be available through 11:59 PM Eastern Time on February 28, 2020.
Before we begin, I would like to remind you that this conference call may contain forward-looking statements that involve a number of risks and uncertainties. Statements that are not historical facts, including statements about our 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. We undertake no obligation to update any forward-looking statements, whether as a results 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 press release, which was released this morning, and in the statement regarding forward-looking information, risk factors and other sections of Cannae's Form S-4 and other filings with the SEC.
Let me now turn the call over to Bill.
William P. Foley II -- Chairman
Thank you, Jamie. Cannae continues to successfully execute on a strategy of monetizing legacy investments, nurturing our portfolio companies' growth, making new investments and prospecting for future investment opportunities.
Dun and Bradstreet, or D&B, has made remarkable progress in improving its operations in a very short period of time. To achieve this success, our team quickly realigned the business units to increase focus and accountability. As part of this realignment, 18 of 19 senior executives were replaced. A second priority was to accelerate organic sales growth. To achieve this, we reorganized our sales team and restructured D&B's sales compensation plans. The sales organization now systematically tracks and monitors service metrics and key service performance indicators to more effectively assist clients, improve customer satisfaction and produce new sales and cross sales.
The third priority was to reduce D&B's cost structure and increase operating margins with the goal of removing $200 million of annualized expenses in the first year. I am thrilled to report that our team achieved $208 million of cost saves in 2019, and I see opportunities to achieve even more efficiencies in 2020. Improving the quality and scope of data and buying or building advanced analytics were the other key initiatives that D&B management team has made great progress toward.
D&B's success in achieving these initiatives is evidenced in its fourth quarter results. We achieved organic revenue growth of 6% over the 2018 fourth quarter. Additionally, fourth quarter 2019 EBITDA increased by approximately 18% to $198 million, as compared to adjusted EBITDA of $167 million in the year-ago quarter. EBITDA margins also expanded by 440 basis points to 41.8%.
During the fourth quarter, Cannae made the decision to rebalance our portfolio by selling 5 million shares of Ceridian at a price of $53.08 per share. This resulted in net proceeds of $265.4 million, and we recorded a gain of $188.8 million. During 2019, Cannae sold a total of 9 million Ceridian shares for proceeds of $477.9 million, resulting in book gains of $342.1 million. On February 10 -- on February 19, Cannae sold 3.9 million shares of Ceridian at $72.75 per share and total proceeds achieved were approximately $284 million. Today, Cannae owns 19.8 million shares of Ceridian common stock, representing a 14% ownership position. Based upon Ceridian's closing price of $72.20 per share on February 20, Cannae's stake in Ceridian has a market value of $1.49 billion.
Another fourth quarter achievement was Cannae's public offering of approximately 7.5 million primary shares of stock, in which we raised net proceeds of $236 million.
This offering helped us expand our institutional shareholder base, provide capital for future transactions and reintroduce the Cannae story to the investment community.
Also on January 7, 2020, we agreed to invest up to $125 million for approximately a 25% position in AmeriLife Group. AmeriLife is a large US independent insurance marketing organization and has developed, marketed and distributed life and health insurance, annuities and retirement planning solutions to pre retirees and retirees for nearly 50 years. We are very excited with the opportunity in AmeriLife.
Given our long track record of acquiring companies, bringing the management and capital to bear, achieving operating synergies and restoring growth, we have a strong network and a very active deal pipeline. We are excited with the opportunities that we are seeing, and we remain optimistic that we will grow Cannae's assets and returns.
With that, I will turn the call over to Rick Massey.
Rick Massey -- Chief Executive Officer
Hey, good morning. Thanks Bill. Dun and Bradstreet is just another example of the application of the Bill Foley playbook that we've been telling the investors about here lately. In Dun and Bradstreet, Bill found the deal, put the balance sheet together, raised the capital, found the management team, installed them into their spots, found operating -- massive operating synergies, and now is achieving -- and now, Dun and Bradstreet is achieving growth. I'm really happy to be a part of the Bill Foley team and watching the again -- yet again another application of the Bill Foley playbook.
For the rest of my talk, I will touch on our investment in Ceridian, or CDAY, and the restructuring of our Restaurant Group and provide a brief update on the healthcare joint venture that we entered into with Carlyle.
Turning to Ceridian, ticker CDAY, a leader in payroll and human capital business, during the quarter, CDAY delivered growth of 35.4% in Dayforce revenues, which is their software as a service or cloud offering, and that's up 35.7% on a constant currency basis. Ceridian set new records for subscription value of new sales and the subscription value of customers taken live. The results demonstrate that even stronger demand for their solutions and an acceleration in Dayforce revenues is expected. We believe Ceridian is well positioned for future growth.
Turning to our Restaurant Group, American Blue Ribbon Holdings, as we have -- as has been earlier reported, voluntarily filed a petition for Chapter 11 on January 27 of 2020 in order to reorganize its operations and improve it's cash flow and position the brands for monetization. As part of this process, Cannae provided $20 million in debt financing.
The American Blue Ribbon Holding management team and our partner -- Trasimene's partner, Brad Ridgeway, have already closed 33 of its underperforming restaurants out of the Village Inn and Bakers Square brands. And we expect these store closures, combined with other operating initiatives, to positively impact cash flow over the balance of the year and provide optionality for our management team. It's important to note, this filing did not involve or affect the business operations of O'Charley's or 99 Restaurants. And overall, as we've mentioned in the past, our goal is to monetize the Restaurant Group investment.
On December 31, Cannae completed its contribution of its T-System operation, its healthcare coding operation, into a joint venture with The Carlyle Group. The JV includes T-System and two complementary medical coding businesses that were contributed at closing by our other JV partners.
At the closing, Cannae received cash proceeds of approximately $76 million and an approximate $23 million -- 23% equity interest in the joint venture. The JV will seek to acquire, integrate and operate other providers and payer services companies.
I'll now turn the call over to Rick Cox, our CFO, to review the financial results of our portfolio companies in more detail.
Richard L. Cox -- Executive Vice President, Chief Financial Officer
Thanks Rick. To start, we ended 2019 with $465.4 million in holding company cash and undrawn credit capacity of $100 million. Subsequent to year-end, we sold 3.9 million shares at $72.75 per share of CDAY stock for a total of $284 million, which is expected to close today, paid off our margin loan for $75 million and committed $125 million cash to fund our participation in AmeriLife recapitalization and a loan up to $20 million in debtor-in-possession financing that supports the reorganization of American Blue Ribbon Holdings. As a result, we currently have $629 million of cash capacity to execute on future investments.
Dun and Bradstreet successfully repriced their $2.53 billion term loan B facility and realized a 100 basis point reduction in its interest rate with the ability to get 25 basis point step-down upon an initial public offering. Excluding the cost of the transaction, the lower interest rate will save Dun and Bradstreet approximately $25 million in interest costs annually through the maturity of the term loan B.
More detail on Ceridian's fourth quarter financial results, which were released on February 5, can be found on the investor relations section of their website.
The Restaurant Group generated total revenue of $271.3 million in the fourth quarter of 2019, compared to $298.5 million in the fourth quarter of 2018. Total restaurant adjusted EBITDA for the fourth quarter of 2019 increased by $19.2 million to $7.1 million compared to a year ago quarter.
ABRH generated revenues of $192.8 million in the fourth quarter, which is a $27.7 million decline to a year ago quarter. The decline in revenue was largely a result of closing 48 underperforming stores over the last four quarters. ABRH delivered an increase of $19.9 million of adjusted EBITDA to $200,000 from a negative $19.7 million in a year ago quarter. The year-over-year increase of $19.9 million in adjusted EBITDA primarily relates to an increase in same-store operating margins, as well as cost reduction strategies implemented early in 2019.
99 Restaurants generated total revenue of $78.5 million in the fourth quarter of 2019, flat as compared to the quarter of 2018. Adjusted EBITDA was $6.9 million in the fourth quarter of 2019, almost flat as compared to a year ago quarter.
As the management team at ABRH works through this strategic overhaul, which is designed to improve profitability, our management team will continue to stay focused on enhancing the quality of our guest experiences and satisfaction.
On December 31, Cannae's book value was $1.49 billion or $18.72 per share, as compared to $1.125 billion or $15. 58 per share on December 31, 2018. We remain pleased with the progress we continue to make across our portfolio of brands, continuing to position Cannae as a long-term driver of value for our shareholders.
I'll now turn the call back to the operator to begin our question-and-answer session.
Questions and Answers:
Operator
[Operator Instructions] Our first question is from John Campbell, Stephens. Please proceed with your question.
John Campbell -- Stephens Inc. -- Analyst
Hey, thanks. Good morning, guys.
Rick Massey -- Chief Executive Officer
Hey, John.
John Campbell -- Stephens Inc. -- Analyst
You guys have been busy. I hope you're squeezing in some rest and relaxation here and there. On the D&B organic growth, that has been a really impressive turnaround. You guys -- you seem to be ahead of schedule there. Last quarter, you called out a couple of things that were maybe onetime that maybe spruced that growth up otherwise. But the 6% this quarter, I want to make sure that was organic, and then, if there was any impact from the contract timing, maybe if you pulled forward some revenue last quarter that impacted that number this quarter and it actually would have been a little bit better. I just want to check on my math there.
William P. Foley II -- Chairman
Well, you've kind of hit on the issue. We did pull forward some revenue, some deals that were going to close in the fourth quarter, and they moved into the third quarter. So we were very pleased with the fourth quarter results. The 6% or 6.5% does include the Lattice organization, which is fairly de minimus. It's 1% or so. So you can say that's not organic because we acquired the company last June. It's going to be organic beginning next June. But we had a very good quarter.
The fourth quarter traditionally is the strongest quarter for Dun and Bradstreet. But frankly, we look forward to another strong first quarter because they pulled -- the former management team pulled so much forward into the fourth quarter of '18 that it makes feel -- it'll make our comps fairly easy for the next quarter. The next two quarters will be a little more problematic in that we closed certain operations in the second quarter of last year. And so, we're anticipating our growth path to slow down for a couple of quarters and then reinvigorate.
John Campbell -- Stephens Inc. -- Analyst
Okay. And so, that kind of low-to-mid single-digit is a good target still for the kind of near -- I guess, medium term?
William P. Foley II -- Chairman
That's still a good target.
John Campbell -- Stephens Inc. -- Analyst
Okay. And then, on the investment services business, I know Fiserv, they have a pretty long history of doing JVs with, I guess, good assets that maybe didn't get the attention or the investment they probably deserve. So it looks like this one certainly fit in that mold. I'm just curious what you guys saw or what you're seeing with the investment services business. What attracted you and what you see as kind of long-term opportunity?
William P. Foley II -- Chairman
Well, actually, once we got into the due diligence and we were dealing on that transaction, we decided to pass. So we did not invest in the Fiserv JV with Motive Investments, and I understand they have closed the transaction independent of us. So we just couldn't get on the same page as our partners. And we don't want -- we have limited cash resources, although they're significant, and we just want to make sure that we are picking the right transactions to invest in.
John Campbell -- Stephens Inc. -- Analyst
Okay. And it sounds like you guys have a pretty deep pipeline. Obviously, a lot of -- kind of flush with cash now. On AmeriLife, it sounds like you did close that, is that right, at the end of the quarter?
William P. Foley II -- Chairman
I believe it closed in the first week of March, and we're very excited about it. It's a well run business, but it has terrific opportunities for expansion through acquisition. It's a fractured business. And interestingly, AmeriLife is the fifth largest provider of annuity customers to F&G, the company that FNF just put under contract. So we're really excited about the growth prospects of AmeriLife.
John Campbell -- Stephens Inc. -- Analyst
Okay, that's great to hear. And then, anything to call out as far as the contributions and the ownership?
William P. Foley II -- Chairman
I can't -- I'm sorry.
Rick Massey -- Chief Executive Officer
You mean on AmeriLife?
John Campbell -- Stephens Inc. -- Analyst
Yes.
Rick Massey -- Chief Executive Officer
We're going to put $125 million in it, and we will own, what, about 25% of the equity, yeah.
John Campbell -- Stephens Inc. -- Analyst
Okay, great. That's all I've got. Thanks guys.
William P. Foley II -- Chairman
Thank you.
Operator
We have reached the end of the question-and-answer session, and I will now turn the call back over to Mr. Foley for closing remarks.
William P. Foley II -- Chairman
Thank you. To conclude, we are very pleased with our fourth quarter results and the significant progress we have made, monetizing legacy investments, nurturing our portfolio companies, making new investments and prospecting for deals. Thank you for your time today.
Operator
[Operator Closing Remarks]
Duration: 20 minutes
Call participants:
Jamie Lillis -- Managing Director, Solebury Trout
William P. Foley II -- Chairman
Rick Massey -- Chief Executive Officer
Richard L. Cox -- Executive Vice President, Chief Financial Officer
John Campbell -- Stephens Inc. -- Analyst
