SEC Filing | Cannae Holdings, Inc.

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cnne-20210930

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-38300

CANNAE HOLDINGS, INC.

______________________________________________________________________________________________________________________________________________________

(Exact name of registrant as specified in its charter)

Delaware

82-1273460

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)

1701 Village Center Circle,

Las Vegas,

Nevada

89134

(Address of principal executive offices)

(Zip Code)

(702) 323-7330

___________________________________________________________________

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Cannae Common Stock, $0.0001 par value

CNNE

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer," “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☑

As of October 29, 2021 there were 88,912,864 shares of the Registrant's common stock outstanding.

FORM 10-Q

QUARTERLY REPORT

Quarter Ended September 30, 2021

TABLE OF CONTENTS



			Page
Part I: FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
A. Condensed Consolidated Balance Sheets as of Sept ember 30, 2021 and December 31, 2020			1
B. Condensed Consolidated Statements of Operations for the three and nine -month periods ended September 30, 2021 and 2020			2
C. Condensed Consolidated Statements of Comprehensive Earnings (Loss) for the three and nine -month periods ended September 30, 2021 and 2020			3
D. Condensed Consolidated Statements of Equity for the three and nine -month periods ended September 30, 2021 and 2020			4
E. Condensed Consolidated Statements of Cash Flows for the nine -month periods ended September 30, 2021 and 2020			6
F. Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			34
Item 3. Quantitative and Qualitative Disclosure About Market Risk			44
Item 4. Controls and Procedures			44
Part II: OTHER INFORMATION
Item 1. Legal Proceedings			45

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			45
Item 6. Exhibits			46

Table of Contents

Part I: FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

CANNAE HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)


	September 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	234.2	$	724.7
Fixed maturity securities available for sale, at fair value	—		35.2
Other current assets	91.8		84.3





Total current assets	326.0		844.2
Equity securities, at fair value	1,241.7		1,799.1
Investments in unconsolidated affiliates	2,268.2		1,453.0
Lease assets	177.2		202.3
Property and equipment, net	99.7		145.8
Other intangible assets, net	27.8		51.8
Goodwill	53.4		53.4


Other long term investments and non-current assets	119.5		63.8

Total assets	$	4,313.5	$	4,613.4
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and other accrued liabilities, current	$	92.8	$	93.2
Lease liabilities, current	23.8		26.2
Income taxes payable	38.0		47.4
Deferred revenue	14.6		23.9
Notes payable, current	7.4		11.3

Total current liabilities	176.6		202.0
Lease liabilities, long term	169.3		195.6
Deferred tax liability	190.1		325.3

Notes payable, long term	220.4		52.2

Accounts payable and other accrued liabilities, long term	49.3		53.1

Total liabilities	805.7		828.2
Commitments and contingencies - see Note G
Equity:
Cannae common stock, 0.0001 par value; authorized 115,000,000 shares as of September 30, 2021 and December 31, 2020; outstanding of 88,912,864 and 91,651,257 shares as of September 30, 2021 and December 31, 2020, respectively, and issued of 92,381,740 and 92,391,965 shares as of September 30, 2021 and December 31, 2020, respectively	—		—
Preferred stock, 0.0001 par value; authorized 10,000,000 shares; issued and outstanding, none as of September 30, 2021 and December 31, 2020	—		—
Retained earnings	1,752.1		1,929.8
Additional paid-in capital	1,883.7		1,875.8
Less: Treasury stock, 3,468,876 and 740,708 shares as of September 30, 2021 and December 31, 2020, respectively, at cost	(117.6)		(21.1)
Accumulated other comprehensive loss	(18.8)		(4.9)
Total Cannae shareholders' equity	3,499.4		3,779.6
Noncontrolling interests	8.4		5.6
Total equity	3,507.8		3,785.2
Total liabilities and equity	$	4,313.5	$	4,613.4

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CANNAE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020

Revenues:
Restaurant revenue	$	175.1	$	129.4	$	532.3	$	398.7
Other operating revenue	10.9		10.3		28.0		16.6
Total operating revenues	186.0		139.7		560.3		415.3
Operating expenses:
Cost of restaurant revenue	154.8		121.7		462.8		375.6
Personnel costs	21.9		16.7		58.3		69.2
Depreciation and amortization	6.3		6.5		20.6		22.2
Other operating expenses	27.8		23.2		115.6		68.0
Goodwill impairment	—		—		—		7.7
Total operating expenses	210.8		168.1		657.3		542.7
Operating loss	(24.8)		(28.4)		(97.0)		(127.4)
Other income (expense):
Interest, investment and other income	18.7		4.7		20.1		15.2
Interest expense	(2.3)		(1.6)		(6.9)		(6.4)
Recognized (losses) gains, net	(186.2)		189.6		(224.7)		1,682.8
Total other (expense) income	(169.8)		192.7		(211.5)		1,691.6
(Loss) earnings before income taxes and equity in earnings (losses) of unconsolidated affiliates	(194.6)		164.3		(308.5)		1,564.2
Income tax (benefit) expense	(34.7)		35.1		(47.4)		335.6
(Loss) earnings before equity in earnings (losses) of unconsolidated affiliates	(159.9)		129.2		(261.1)		1,228.6
Equity in earnings (losses) of unconsolidated affiliates	41.4		(1.2)		86.5		3.6


Net (loss) earnings	(118.5)		128.0		(174.6)		1,232.2
Less: Net earnings (loss) attributable to non-controlling interests	2.5		(3.9)		3.1		(22.7)
Net (loss) earnings attributable to Cannae Holdings, Inc. common shareholders	$	(121.0)	$	131.9	$	(177.7)	$	1,254.9




Earnings per share
Basic


Net (loss) earnings per share	$	(1.36)	$	1.44	$	(1.97)	$	14.97
Diluted


Net (loss) earnings per share	$	(1.36)	$	1.44	$	(1.97)	$	14.94
Weighted Average Shares Outstanding
Weighted average shares outstanding Cannae Holdings common stock, basic basis	88.8		91.3		90.3		83.8
Weighted average shares outstanding Cannae Holdings common stock, diluted basis	88.9		91.6		90.4		84.0

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CANNAE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)

(In millions)

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Net (loss) earnings	$	(118.5)	$	128.0	$	(174.6)	$	1,232.2
Other comprehensive earnings (loss), net of tax:
Unrealized gain on investments and other financial instruments, net (excluding investments in unconsolidated affiliates) (1)	—		0.3		0.5		11.5
Unrealized (losses) gains of investments in unconsolidated affiliates (2)	(3.0)		4.8		(5.7)		(1.7)
Reclassification adjustments for unrealized gains and losses on investments and other financial instruments, net of tax, (excluding investments in unconsolidated affiliates) included in net earnings (3)	—		—		(10.9)		—
Reclassification adjustments for unrealized gains and losses of unconsolidated affiliates, net of tax, included in net earnings (4)	—		1.8		2.2		46.2
Other comprehensive (loss) earnings	(3.0)		6.9		(13.9)		56.0
Comprehensive (loss) earnings	(121.5)		134.9		(188.5)		1,288.2
Less: Comprehensive earnings (loss) attributable to noncontrolling interests	2.5		(3.9)		3.1		(22.7)
Comprehensive (loss) earnings attributable to Cannae Holdings, Inc. common shareholders	$	(124.0)	$	138.8	$	(191.6)	$	1,310.9

_________________________________

(1)Net of income tax expense of $0.1 million for the three months ended September 30, 2020, and $0.1 million and $3.1 million for the nine months ended September 30, 2021 and 2020, respectively.

(2)Net of income tax (benefit) expense of $(0.8) million and $1.3 million for the three months ended September 30, 2021 and 2020, respectively, and $(1.5) million and $(0.4) million for the nine months ended September 30, 2021 and 2020, respectively.

(3)Net of income tax benefit of $2.9 million for the three and nine months ended September 30, 2021.

(4)Net of income tax expense of $0.5 million for the three months ended September 30, 2020, and $0.6 million and $12.3 million for the nine months ended September 30, 2021 and 2020, respectively.

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CANNAE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In millions)

(Unaudited)


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comp (Loss) Earnings		Treasury Stock			Non-controlling Interests		Total Equity
	Shares	$								Shares	$

Balance, June 30, 2020	92.4	$	—	$	1,868.4	$	1,266.6	$	3.2	0.7	$	(20.3)	$	15.9	$	3,133.8


Other comprehensive earnings — unrealized gain on investments and other financial instruments, net of tax	—	—		—		—		0.3		—	—		—		0.3
Other comprehensive earnings — unrealized losses of investments in unconsolidated affiliates, net of tax	—	—		—		—		4.8		—	—		—		4.8
Reclassification adjustments for unrealized gains and losses on unconsolidated affiliates, net of tax, included in net earnings	—	—		—		—		1.8		—	—		—		1.8




Stock-based compensation, consolidated subsidiaries	—	—		1.2		—		—		—	—		—		1.2
Contribution of CSA services from FNF	—	—		0.3		—		—		—	—		—		0.3
Stock-based compensation, unconsolidated affiliates	—	—		1.8		—		—		—	—		—		1.8

Net earnings (loss)	—	—		—		131.9		—		—	—		(3.9)		128.0
Balance, September 30, 2020	92.4	$	—	$	1,871.7	$	1,398.5	$	10.1	0.7	$	(20.3)	$	12.0	$	3,272.0

Balance, June 30, 2021	92.4	$	—	$	1,880.8	$	1,873.1	$	(15.8)	3.2	$	(110.8)	$	6.2	$	3,633.5


Other comprehensive earnings — unrealized losses of investments in unconsolidated affiliates, net of tax	—	—		—		—		(3.0)		—	—		—		(3.0)




Treasury stock repurchases	—	—		—		—		—		0.2	(6.8)		—		(6.8)
Stock-based compensation, consolidated subsidiaries	—	—		0.6		—		—		—	—		—		0.6

Stock-based compensation, unconsolidated affiliates	—	—		2.3		—		—		—	—		—		2.3
Subsidiary dividends paid to noncontrolling interests	—	—		—		—		—		—	—		(0.3)		(0.3)
Net (loss) earnings	—	—		—		(121.0)		—		—	—		2.5		(118.5)
Balance, September 30, 2021	92.4	$	—	$	1,883.7	$	1,752.1	$	(18.8)	3.4	$	(117.6)	$	8.4	$	3,507.8

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CANNAE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY- CONTINUED

(In millions)

(Unaudited)


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comp (Loss) Earnings		Treasury Stock			Non-controlling Interests		Total Equity
	Shares	$								Shares	$

Balance, December 31, 2019	79.7	$	—	$	1,396.7	$	143.6	$	(45.9)	0.2	$	(5.9)	$	41.3	$	1,529.8
Equity offering, net of offering costs	12.7	—		455.0		—		—		—	—		—		455.0

Other comprehensive earnings — unrealized gain on investments and other financial instruments, net of tax	—	—		—		—		11.5		—	—		—		11.5
Other comprehensive earnings — unrealized losses of investments in unconsolidated affiliates, net of tax	—	—		—		—		(1.7)		—	—		—		(1.7)
Reclassification adjustments for unrealized gains and losses on unconsolidated affiliates, net of tax, included in net earnings	—	—		—		—		46.2		—	—		—		46.2
Restaurant Group reorganization and deconsolidation of Legendary Baking and VIBSQ	—	—		5.2		—		—		—	—		(10.3)		(5.1)

Sale of noncontrolling interest in consolidated subsidiary	—	—		—		—		—		—	—		3.7		3.7
Treasury stock repurchases	—	—		—		—		—		0.5	(14.4)		—		(14.4)
Stock-based compensation, consolidated subsidiaries	—	—		3.3		—		—		—	—		—		3.3
Contribution of CSA services from FNF	—	—		1.1		—		—		—	—		—		1.1
Stock-based compensation, unconsolidated affiliates	—	—		10.4		—		—		—	—		—		10.4

Net earnings (loss)	—	—		—		1,254.9		—		—	—		(22.7)		1,232.2
Balance, September 30, 2020	92.4	$	—	$	1,871.7	$	1,398.5	$	10.1	0.7	$	(20.3)	$	12.0	$	3,272.0

Balance, December 31, 2020	92.4	$	—	$	1,875.8	$	1,929.8	$	(4.9)	0.7	$	(21.1)	$	5.6	$	3,785.2

Other comprehensive earnings — unrealized gain on investments and other financial instruments, net of tax	—	—		—		—		0.5		—	—		—		0.5
Other comprehensive earnings — unrealized losses of investments in unconsolidated affiliates, net of tax	—	—		—		—		(5.7)		—	—		—		(5.7)
Reclassification adjustments for unrealized gains and losses on investments and other financial instruments, net of tax, (excluding investments in unconsolidated affiliates) included in net earnings	—	—		—		—		(10.9)		—	—		—		(10.9)
Reclassification adjustments for unrealized gains and losses on unconsolidated affiliates, net of tax, included in net loss	—	—		—		—		2.2		—	—		—		2.2


Treasury stock repurchases	—	—		—		—		—		2.7	(96.5)		—		(96.5)
Stock-based compensation, consolidated subsidiaries	—	—		2.0		—		—		—	—		—		2.0

Stock-based compensation, unconsolidated affiliates	—	—		5.9		—		—		—	—		—		5.9
Subsidiary dividends paid to noncontrolling interests	—	—		—		—		—		—	—		(0.3)		(0.3)
Net (loss) earnings	—	—		—		(177.7)		—		—	—		3.1		(174.6)
Balance, September 30, 2021	92.4	$	—	$	1,883.7	$	1,752.1	$	(18.8)	3.4	$	(117.6)	$	8.4	$	3,507.8

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CANNAE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Nine months ended September 30,

	2021		2020

Cash flows from operating activities:
Net (loss) earnings	$	(174.6)	$	1,232.2
Adjustments to reconcile net (loss) earnings to net cash used in operating activities:
Depreciation and amortization	20.6		22.2
Equity in earnings of unconsolidated affiliates	(86.5)		(3.6)
Distributions from investments in unconsolidated affiliates	5.4		0.5
Recognized losses (gains) and asset impairments, net	225.0		(1,669.7)
Lease asset amortization	15.8		17.4
Stock-based compensation cost	2.0		3.3
Changes in assets and liabilities, net of effects from acquisitions:

Net decrease (increase) in other assets	22.6		(29.9)
Net decrease in lease liabilities	(18.9)		(22.3)
Net (decrease) increase in accounts payable, accrued liabilities, deferred revenue and other liabilities	(11.6)		17.4
Net change in income taxes	(141.4)		241.6
Net cash used in operating activities	(141.6)		(190.9)
Cash flows from investing activities:

Proceeds from partial sale of Ceridian shares	275.0		522.0
Proceeds from partial sale of D&B shares	186.0		—
Additions to property and equipment and other intangible assets	(7.7)		(18.3)
Collections of notes receivable	2.8		—
Additions to notes receivable	(18.6)		(28.9)
Proceeds from sales of property and equipment	10.3		—
Proceeds from sale of other investments in unconsolidated affiliates and other long term investments	18.5		—
Investment in Dun & Bradstreet	—		(200.0)
Investment in Optimal Blue	—		(289.0)
Investments in Paysafe, net of subscription fees earned	(494.4)		—
Investments in Alight, net of subscription fees earned	(446.3)		—
Investments in Sightline	(272.0)		—
Purchase of warrants of Austerlitz II	(29.6)		—
Additional investments in unconsolidated affiliates	(8.5)		(311.5)
Cash proceeds from settlement of fixed maturity securities and equity in Colt	38.7		—
Cash proceeds from sales of VIBSQ, Legendary Baking, and RCI	28.2		—
Purchases of other long term investments	(4.0)		—
Cash deconsolidated through the Blue Ribbon Reorganization	—		(1.1)
Distributions from investments in unconsolidated affiliates	281.3		1.6
Net purchases of short-term investment securities	—		0.5
Net other investing activities	2.6		0.8

Net cash used in investing activities	(437.7)		(323.9)
Cash flows from financing activities:
Borrowings	206.5		37.0
Debt service payments	(21.2)		(94.3)
Sale of noncontrolling interest in consolidated subsidiary	—		3.7
Proceeds from equity offering, net of offering costs	—		455.0

Treasury stock repurchases	(96.5)		(14.4)

Net cash provided by financing activities	88.8		387.0
Net decrease in cash and cash equivalents	(490.5)		(127.8)

Cash and cash equivalents at beginning of period	724.7		533.7
Cash and cash equivalents at end of period	$	234.2	$	405.9

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CANNAE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note A — Basis of Financial Statements