Cannae Holdings, Inc. (NYSE: CNNE) reported Q4 EPS of ($0.02), $0.07 better than the analyst estimate of ($0.09). Revenue for the quarter came in at $317.2 million versus the consensus estimate of $324 million.

Highlights

• The Company\'s investment in Ceridian HCM Holding, Inc. (NYSE: CDAY) ("Ceridian") is now worth $1.62 billion based on a closing price of $49.67 as of March 13, 2019.
• On November 16, 2018, the Company completed the sale of 4,396,694 shares of common stock of Ceridian as part of an underwritten secondary public offering at a price of $36.00 per share resulting in net proceeds of $152.5 million.
• On February 8, the Company announced the completion of the previously announced acquisition of Dun & Bradstreet ("DNB"). The Company has syndicated $400 million of its total $900 million commitment and invested $500 million in equity into DNB representing a 24.5% position. Cannae funded its equity investment with cash on hand and $250 million in borrowings under its credit facilities.
• On November 7, 2018, the Company entered into a margin loan agreement with various banks pursuant to which Cannae may borrow up to $300.0 million at a rate of LIBOR plus an applicable margin (the "Margin Facility"). The Margin Facility is secured by 25.0 million shares of the Company’s holdings of Ceridian and matures 3 years from the closing date.
• On November 6, 2018, the Company completed a restructuring of its Restaurant Group and now beneficially owns 65.4% of ABRH and 88.5% of 99 Holdings.
• Total book value of portfolio company investments was $1.125 billion, or $15.58 per share, as of December 31, 2018 compared to total book value of $1.059 billion, or $14.95 per share, at December 31, 2017.

Ceridian

• Dayforce revenue increased 34.3% to $122.6 million for the fourth quarter of 2018 as compared with the same period in 2017. Excluding the effect of foreign currency fluctuations, Dayforce revenue increased 35.5% for the fourth quarter of 2018 as compared with the same period in 2017.
• Cloud revenue, which includes both Dayforce and Powerpay, increased 27.5% to $148.3 million for the fourth quarter of 2018 as compared with the same period in 2017. Excluding the effect of foreign currency fluctuations, Cloud revenue increased 29.6% for the fourth quarter of 2018.
• Total revenue, which includes revenue from both our Cloud and Bureau solutions, increased 9.8% to $200.3 million for the fourth quarter of 2018 as compared with the same period in 2017. Excluding the effect of foreign currency fluctuations, total revenue increased 11.3% for the fourth quarter of 2018 as compared with the same period in 2017.
• Operating profit increased 33.5% to $21.5 million for the fourth quarter of 2018 as compared with the same period in 2017.
• Adjusted EBITDA increased 22.2% to $43.5 million for the fourth quarter of 2018 as compared with the same period in 2017.
• 3,718 Dayforce customers were live on the Dayforce platform at the end of 2018, a net increase of 717 customers as compared to 3,001 Dayforce customers at the end of 2017.

Restaurant Group

• $298.5 million in total revenue and a pretax loss of $59.9 million for the fourth quarter, versus $298.6 million in total revenue and a pretax loss of $11.5 million in the fourth quarter of 2017.
• EBITDA of $(43.8) million for the fourth quarter, versus EBITDA of $1.0 million in the fourth quarter of 2017.
• EBITDA of $(43.8) million includes non-cash charges of $26.7 million for goodwill impairment, $14.8 million for a facilitation fee (as further described below), and $13.6 million for fixed asset impairment.
• Same store sales decreased 0.5% in the fourth quarter, as Ninety Nine’s same stores sales increased by 2.5%, O\'Charley\'s declined by 2.4%, Village Inn declined by 1.2% and Bakers Square increased by 0.3%.
• On November 6, 2018, the Company completed a restructuring of its Restaurant Group whereby (i) 99 Holdings assumed all obligations outstanding under Cannae’s intercompany notes with American Blue Ribbons Holdings LLC ("ABRH"), (ii) Cannae exchanged $100 million of this debt for a direct 66.7% equity interest in 99 Holdings thereby leaving 99 Holdings with approximately $33 million of indebtedness under such notes, and (iii) the Company was paid a facilitation fee in the form of additional equity interests in ABRH. Following the restructuring, Cannae now owns 65.4% of ABRH on a direct basis and 88.5% of 99 Holdings on a direct and indirect basis.
• On December 21, 2018, 99 Holdings entered into a $37 million term loan facility with a group of banks, the proceeds of which were used to repay Cannae’s remaining $33 million of indebtedness and for working capital purposes.

T-System

• $13.6 million in total revenue and a pretax loss of $2.8 million for the fourth quarter of 2018.
• EBITDA of $2.6 million and an EBITDA margin of 19.1% for the fourth quarter of 2018.
• Application of ASC 606 reduced both revenue and EBITDA recognition (but not cash flow) by approximately $1.7 million in the fourth quarter of 2018.

“I am pleased with our results and the progress we have achieved, positioning Cannae for future growth and value creation, highlighted by our acquisition of Dun & Bradstreet,” commented Chairman William P. Foley, II. “Dun & Bradstreet expands our portfolio of companies, adding a market leader with unmatched scale and global recognition. Upon closing, Cannae has retained a $500 million equity stake in DNB representing a 24.5% ownership position. We have a new senior leadership team in place and are executing on our early strategic initiatives to reinvigorate DNB’s sales growth while expanding the company’s margins which, we believe, will result in significant value creation for our shareholders.”

Mr. Foley continued, “During the fourth quarter, we also made the decision to prudently rebalance our portfolio by selling a portion of our Ceridian stake to partially fund our acquisition of DNB. We continue to believe that Ceridian is an important platform for growth evident in their solid results this quarter, highlighted by 27.5% cloud revenue growth driven by the addition of 717 Dayforce customers from the year ago period. Cannae currently owns 32.7 million shares in Ceridian representing a 23.5% ownership stake, now worth $1.62 billion based upon Ceridian’s closing price of $49.67 on March 13, 2019.”

“Turning to our restaurant group, the casual dining industry remained challenging during the fourth quarter which proved a headwind to our results as total restaurant sales decreased 2.3%. Of note, our Ninety Nine brand remained the stand out in the group having delivered 2.5% same store sales growth in the fourth quarter. The ABRH management team will continue to rationalize the portfolio with a focus on our stronger locations and brands, reduce expenses, and invest in the customer experience to deliver customer satisfaction and brand relevance. As we successfully implement these initiatives, we expect our cash flow to improve.”

Mr. Foley concluded, “T-System’s new CEO, Bob Wilhelm, has been on board for almost two quarters and has completed a strategic review, designed to produce actionable initiatives with the goal of improving sale efficiencies and growth as well as profitability within the company’s two divisions. Additionally, we will continue to work to identify potential acquisition candidates that enhance T-System’s capabilities with a focus on adding cross-selling opportunities.”

For earnings history and earnings-related data on Cannae Holdings, Inc. (CNNE) click here.