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Cannae Holdings, inc (NYSE:CNNE)
Q3 2021 Earnings Call
Nov 9, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon ladies and gentlemen and welcome to the Cannae Holdings Inc. Third Quarter 2021 Financial Results Conference Call. [Operator Instructions] As a reminder this conference call is being recorded and a replay is available through 11:59 p.m. Eastern Time on November 23 2021. With that I would like to turn the call over to Jamie Lillis of Solebury Trout.

Jamie Lillis -- Investor Relations

Thank you operator and thank you to all of you joining us today. On the call today we have our Chief Executive Officer Rick Massey; and Cannae's President David Ducommun; and Bryan Coy the company's Chief Financial Officer. Before we begin I would like to remind you that this conference call and the Q&A following our remarks may contain forward-looking statements that involve a number of risks and uncertainties. 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. 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 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 Cannae's CEO Rick Massey who will open with a few brief remarks and then open the line for questions.

Richard N. Massey -- Chief Executive Officer

Okay. Thanks Jamie. Bill is our leader. Bill is momentarily delayed. He's actually off working on he has excused us because he's working on Cannae business or maybe potential piece of Cannae business. So he may join us he may not during the call. So you've got the backup quarter back today. Before we start I just want to refer you to our what we think is a pretty nice document our third quarter quarterly update. It's on our website. It's got a lot more to tell about our numbers our portfolio companies Bill's outlook on the business recent events and so forth. It's going to cover a lot more detail than we're going to be able to on this call. I always want to start off by acknowledging that Duke and Bryan do a really nice job on that. We're an active manager and results of our active management approach began with this quarter with Dun & Bradstreet's third quarterly results which were driven by an acceleration in organic revenue growth which is we believe is a key to improving the company's multiple valuation. We think eventually they're going to get a rerate as their organic revenue continues to accelerate. In the quarter they grew revenues 22%. They had adjusted EBITDA growth of 12% both compared to the third quarter 2020. The best part of the story was that organic revenue growth accelerated to 3.7% in constant currency as compared with about 120 basis points below that in the second quarter. And then that was 33 sorry not 120 basis points. The growth is all in execution of Anthony's Anthony Jabbour strategy which is a continued growth in international. They got low-digit growth in North America and they got that from what he calls the four horseman.

They added new logos. They up-sold new products to their existing enterprise customers they affected price increases and they continue to grow their small- and medium-sized marketing business. They have a lot of organic growth momentum and they we believe that's going to accelerate through 2022. It's been said that D&B is show me stock and we believe they're beginning to show that. So we're happy owners. I'm happy to own it personally and a number of you on the call along me I think you're going to be happy shareholders. It's been sort of some dark days here lately but they're coming out we believe they're coming out of the ditch and it's going to be a great stock to own. We're also pleased with Alight and Ceridian. They posted great results this quarter. Alight reported earlier today 20% revenue growth in their BPaaS revenue which is their enterprise software platform. They had a 42% increase in BPaaS bookings in the third quarter. So incredible growth in the growth engine of Alight. They actually reported that at the end of the third quarter they had achieved already 99% of the revenue that they had originally projected to achieve for the full year. So we obviously we're really happy with this company. They've done a few deals to expand their product offerings. Those are listed in the quarterly report and in their own press release but that was Venafi ConsumerMedical and the Aon Retiree Health Exchange. We think Stephan and his team Katie Cathinka are best-in-class. And we share his vision Stephan's vision with unlocking the power of Alight's BPaaS platform. And it's funny because we were just talking Alight started this year or started out as a public company they talked about organic revenue growth of 1% for 2021.

Then sometime in the second quarter they said "Well we're going to get maybe 3% revenue growth 3% 4% maybe up to 5%. Then today they guided to 5% to 6% in 2021 and that obviously bodes very well. I don't think they guided for '22 but you can expect our revenue to continue to accelerate this company and my own personal opinion is going to be a high single-digit grower in the very near future. That's going to get you a rerate much higher multiple of EBITDA and we think you're going to be a very happy owner there. Ceridian continues to deliver consistent results and continues to gain a wider following as evidenced by their inclusion in the S&P 500. This is an affirmation of their consistent growth and outstanding leadership. Their cloud revenue increased very strongly in the third quarter which supports our belief that Ceridian has a long runway ahead and for value creation and growth. And we're very excited about it Bill in particular is very excited about the prospect of their wallet product and its expanding feature set. CDAY is up almost 3x in the past five years and it represents a MOIC from our original investment of what 11x more than that. I mean I'm sorry I didn't write the number down but it's incredible. We David Ducommun our President here he is the man in charge of our Sightline investment besides Bill. And we're and I particularly and we are all very excited about it. The Sightline is that we put in $240 million on a $1 billion post-money valuation and Cannae now owns 33% of Sightline. It is the provider the lead maybe the only provider of a cashless payment solutions to online and physical casino gaming betting markets. Its solution includes cashless payments methods for slot machines and table games and casinos plus payment methods for iCasinos and online sports betting. We are very impressed with the management team there. We think this ultimately is a public company don't we do. And they're really everybody says transformational.

This company is transforming the payments business inside of these casinos from cash and ATMs and all this old school cash advances and so forth to a slick digital wallet. It's just it's a very exciting business. Paysafe another one of our portfolio companies announced several wins across digital commerce verticals as well as three acquisitions that broadens their position in ecash and open banking and they report Thursday morning before the market opens. Trebia's merger with System1 continues to move forward. They're in the middle of the registration process. We think that's going to happen kind of fourth quarter of this year first quarter of next year. We I've been we got a chance to meet I got a chance to meet Michael Glynn very impressive very smart guy. It is not an easy business to understand. And we're going to ask you to take to have the patience to study this business because we think it's a Rule of 40 company but it also generates a gobacash and that's pretty rare combination. So we like the business. We think it's durable. We like the management. We think it's going to be a lot bigger. So we're encouraged with our progress as we work with our management teams to unlock the value within our portfolio. But we know we have a lot more to do. And our we and particularly Bill will remain engaged and supporting our portfolio companies. I can't I'm going to mention this again but I can't go without mentioning our portfolio conference next month. All of our significant portfolio companies will be at Cannae as well as Black Knight and FNF. It's here in Vegas on December 8. And if you have not been invited and would like an invitation I'm sure Jamie can get you there or Bryan Coy our CFO. So with that we're ready operator for Q&A.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of John Campbell with Stephens. Please proceed with your question.

John Robert Campbell -- Stephens Inc. -- Analyst

Hey guys good afternoon.

Richard N. Massey -- Chief Executive Officer

Hey John.

John Robert Campbell -- Stephens Inc. -- Analyst

Rick you mentioned the backup quarterback comments. I think Brady coming in for blood so several years ago I think that worked out all right. I think we're in good hands.

Richard N. Massey -- Chief Executive Officer

No I would say this is more like blood so going in for Romo.

John Robert Campbell -- Stephens Inc. -- Analyst

I got you. In the shareholder letter I noticed the cash balance you guys mentioned as of yesterday that was $81 million. I think you ended the quarter $173 million holding company cash. And then picked up the $120 million or so of the CDAY shares sold a couple of weeks ago. It looks like a pretty big deployment there. Was that just to pay off the debt? Is that kind of a short-term thing? Or is that a new investment maybe you can shed some light on?

Bryan D. Coy -- Chief Financial Officer

John this is Bryan Coy. We entirely paid off the margin loan in October all $200 million of it.

John Robert Campbell -- Stephens Inc. -- Analyst

Okay. That maths scores up. And then outside of the CDAY monetization you guys did a couple of weeks ago it looks like you got a couple more coming. You got partial Legendary Baking so and then you got the Triple Tree bill. You guys have been busy. I think you're always busy but just curious about the expected gross proceeds from those deals and any other ones I might be missing here?

Bryan D. Coy -- Chief Financial Officer

John this is Bryan. Proceeds we'll get this year on that will be probably less than $50 million all in. We've got some earn-outs that will come in the two or three years ahead and another I think combined with all of the properties in there you mentioned maybe another $5 million to $10 million that will come in January.

John Robert Campbell -- Stephens Inc. -- Analyst

Got it. And then a question I think we ask quite often things tend to be fluid. So I think the answer to this might change here and there. You guys probably are going to address this in a couple of weeks in Vegas. But just help me a little bit high level about the investment strategy and just kind of the way you think about it going forward I mean you guys were very heavy in SPACs late last year. And then the latest large investment was back on the private side was Sightline which looks like a really enticing type deal. Is that a shift in strategy? Or is it going to kind of will it come and go depending on what the market is giving you? Just any kind of high level thoughts there?

Richard N. Massey -- Chief Executive Officer

We're opportunistic investors if you go back and look at 2020 I would say in 2019 as we told this we were going to do what four SPACs and have two of them deployed and two looking that would have been a surprise to us. We're not we're going to get these two that we have open. We're going to get those deployed but I'm not sure we're going to go back into that realm. Our bread and butter has been and probably will continue to be John making private investments in companies having more influence on their management taking more likely taking stuff that looks more like control positions or at least shared control with management or founders. That's kind of where we cut our teeth and that's where I think you'll see us heading. And it's not to say we won't do another SPAC but that gold vein is going to run out eventually.

John Robert Campbell -- Stephens Inc. -- Analyst

Yeah. Makes sense to me. I'm going jump back to queue. Thanks, guys.

Richard N. Massey -- Chief Executive Officer

That's all you had.

John Robert Campbell -- Stephens Inc. -- Analyst

I'll be back.

Operator

Our next question comes from the line of Ian Zaffino with Oppenheimer. Please proceed with your question.

Ian Alton Zaffino -- Oppenheimer -- Analyst

Hi, Great. Thank you very much. As far as the SPAC comment you made there's still a SPAC that hasn't found its target yet right? What should we expect there as far as the confirmation of a deal or an announcement of a deal on the ASC?

Richard N. Massey -- Chief Executive Officer

ASC we've identified and have had discussions with a number of very attractive targets. We have identified a number of others. People are still wanting to talk to Bill and partner with us. And we're going to be patient about it in part because we've got plenty of time. We the ASC is not even a year old yet. And we're a little nervous about valuations right now. So we're disciplined investors and so yes we're not going to let it right and we're not going to get in a hurry and cut corners and not do something that's going to meet Bill standards. So but there are plenty of companies out there. Believe it or not has fished out as the SPAC market might seem there still are companies that we'll only talk to what. When we compete we're not competing with other SPACs. We're competing with IPOs and M&A. So...

Ian Alton Zaffino -- Oppenheimer -- Analyst

Okay. Great. And then as far as capital the private investments now you also have a buyback in place. How are we thinking about maybe shareholder returns versus alternative investments out there?

Richard N. Massey -- Chief Executive Officer

We're in a spot. I kind of let me I want to answer your question but I want to twist it just a little bit. We've got presently we have two backstops out there. And we are we have the resources to satisfy those backstops. And within the next few weeks we're going to have a much better picture of the extent to which those are going to be called. And that's going to give us a much better picture of how much available capital that we have for other investments and how much we have for buybacks. But their other investments and buybacks are always going to be on the plate. And we're always going to think about them. And we're always going to think about the return on an alternative investment and the return on buying our own stock back. And I'll say the return of buying our own stock back even at $36 and change still looks pretty good to me.

Ian Alton Zaffino -- Oppenheimer -- Analyst

All right, guys. Thank you very much. I'll hop back in the queue.

Richard N. Massey -- Chief Executive Officer

Thank you, Ian. Thanks for your interest. John I know you had -- you may still be on the phone. I know you had a question around all that. I hope I answered that one too.

Operator

[Operator Instructions] Our next question is a follow-up from John Campbell with Stephens. Please proceed with your question.

John Robert Campbell -- Stephens Inc. -- Analyst

Told you I would be back.

Richard N. Massey -- Chief Executive Officer

Yeah well.

John Robert Campbell -- Stephens Inc. -- Analyst

One last question for me. I've got kids myself I know it's impossible to name your favorite child. But in the past you guys have kind of called out you pointed to Alight as one of the top risk related return potentials out of the portfolio. Obviously it's had a really good move. It's good to get past the leaseback event and all that stuff. It feels like it's got a lot more to go but considering that move and then considering some of the disconnects you guys are seeing across the portfolio. Curious if Alight still holds that throne or might or what else might kind of stand out to you guys at this stage?

Richard N. Massey -- Chief Executive Officer

That's just me and not Bill and not Duke and not Bryan. But I still love Alight you can see the results you go look at what they reported this morning. They are just knocking the thing out of the park. We love the management team. It's a big idea. I do think they're going to get a rerate. I do think they're going to hit high single-digit revenue growth eventually. And I think eventually some big company is going to come buy them. So hopefully we'll get a double or a triple and then if that happens. But I'll say me personally and Duke knows more about this than I do this Sightline investment is could be a real it's growing like a weed. It also is a big idea big total addressable market. It's got the only real product in this whole cashless cashless gambling casino gambling business. So I really like that. And look Anthony has all most completely dug his way out on Dun & Bradstreet. They got behind the 8-ball line organic revenue growth for reasons that I'm sure you are aware. And I think he's about out. I think they're showing a lot of momentum. And I think that one is going to be that one is going to trade nicely next year. Lord Will and the markets hang on.

John Robert Campbell -- Stephens Inc. -- Analyst

Got it. Thanks for the color guys.

Operator

There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

Richard N. Massey -- Chief Executive Officer

I think that's me. So thank you operator. We continue to be excited about our opportunities. I want to remind you again about our portfolio company conference in Las Vegas on December eight and 9. Management teams from like I said our substantial portfolio will be hosting presentations group meetings one-on-ones and so forth. It will be really fun Bill will give the keynote or something like that the introduction. Bill will be there the whole team will be there. You're going to be very impressed with these folks. So we hope to see you there. Thank you for your interest in our company. I know it's a lot of work to understand this but I think if you do it it will pay off. Thank you operator.

Operator

[Operator Closing Remarks]

Duration: 23 minutes

Call participants:

Jamie Lillis -- Investor Relations

Richard N. Massey -- Chief Executive Officer

Bryan D. Coy -- Chief Financial Officer

John Robert Campbell -- Stephens Inc. -- Analyst

Ian Alton Zaffino -- Oppenheimer -- Analyst

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