Cannae Holdings, Inc. [CNNE] Filings

10-Q 1 cnne-20230630.htm 10-Q cnne-20230630

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 June 30, 2023


☐						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 July 31, 2023 there were 73,371,918 shares of the Registrant's common stock outstanding.

FORM 10-Q

QUARTERLY REPORT

QUARTER ENDED JUNE 30, 2023

TABLE OF CONTENTS



			Page
Part I: FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
A. Condensed Consolidated Balance Sheets as of June 3 0 , 2023 and December 31, 2022			1
B. Condensed Consolidated Statements of Operations for the three and six -month periods ended June 30 , 2023 and 2022			2
C. Condensed Consolidated Statements of Comprehensive (Loss) Earnings for the three and six -month periods ended June 30 , 2023 and 2022			3
D. Condensed Consolidated Statements of Equity for the three and si x -month periods ended June 30 , 2023 and 2022			4
E. Condensed Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2023 and 2022			6
F. Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
Item 3. Quantitative and Qualitative Disclosure About Market Risk			28
Item 4. Controls and Procedures			28
Part II: OTHER INFORMATION
Item 1. Legal Proceedings			29
Item 1A. Risk Factors			29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			29
Item 3. Defaults Upon Senior Securities			30
Item 5. Other Information			30
Item 6. Exhibits			31

Table of Contents

Part I: FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

CANNAE HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)


	June 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	112.7	$	247.7
Short-term investments	53.6		34.9

Other current assets	23.8		26.1


Income taxes receivable	—		1.9


Total current assets	190.1		310.6
Investments in unconsolidated affiliates	1,972.5		1,950.7
Equity securities, at fair value	334.9		384.9
Lease assets	150.0		156.0
Property and equipment, net	78.6		87.5
Goodwill	53.4		53.4
Deferred tax asset	47.6		22.7
Other intangible assets, net	22.2		23.5

Other long-term investments and non-current assets	146.3		136.2

Total assets	$	2,995.6	$	3,125.5
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and other accrued liabilities, current	$	86.9	$	79.0
Lease liabilities, current	20.5		22.8
Deferred revenue	14.2		18.6
Notes payable, current	5.0		2.3
Income taxes payable	1.3		—

Total current liabilities	127.9		122.7
Lease liabilities, long-term	146.6		151.0
Notes payable, long-term	98.3		95.1



Accounts payable and other accrued liabilities, long-term	40.8		41.8

Total liabilities	413.6		410.6
Commitments and contingencies - see Note H
Equity:
Cannae common stock, 0.0001 par value; authorized 115,000,000 shares as of June 30, 2023 and December 31, 2022; issued of 92,820,862 and 92,583,280 shares as of June 30, 2023 and December 31, 2022, respectively and outstanding of 73,423,951 and 76,254,972 shares as of June 30, 2023 and December 31, 2022, respectively,	—		—
Preferred stock, 0.0001 par value; authorized 10,000,000 shares; issued and outstanding, none as of June 30, 2023 and December 31, 2022	—		—
Retained earnings	1,123.4		1,214.7
Additional paid-in capital	1,957.0		1,936.2
Less: Treasury stock, 19,396,911 and 16,328,308 shares as of June 30, 2023 and December 31, 2022, respectively, at cost	(474.5)		(414.0)
Accumulated other comprehensive loss	(13.9)		(18.1)
Total Cannae shareholders' equity	2,592.0		2,718.8
Noncontrolling interests	(10.0)		(3.9)
Total equity	2,582.0		2,714.9
Total liabilities and equity	$	2,995.6	$	3,125.5

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 June 30,				Six months ended June 30,
	2023		2022		2023		2022

Revenues:
Restaurant revenue	$	145.2	$	166.7	$	293.7	$	328.8
Other operating revenue	7.6		7.8		13.4		13.1
Total operating revenues	152.8		174.5		307.1		341.9
Operating expenses:
Cost of restaurant revenue	128.3		147.9		259.9		293.3
Personnel costs	11.3		16.0		26.9		37.1
Depreciation and amortization	4.6		6.2		9.7		12.0
Other operating expenses	28.2		31.4		52.9		102.1

Total operating expenses	172.4		201.5		349.4		444.5
Operating loss	(19.6)		(27.0)		(42.3)		(102.6)
Other income (expense):
Interest, investment and other income	2.7		0.1		5.5		0.1
Interest expense	(4.0)		(2.6)		(8.4)		(5.0)
Recognized (losses) gains, net	(42.2)		(193.6)		9.9		(458.8)
Total other (expense) income	(43.5)		(196.1)		7.0		(463.7)
Loss before income taxes and equity in losses of unconsolidated affiliates	(63.1)		(223.1)		(35.3)		(566.3)
Income tax benefit	(21.8)		(66.5)		(19.2)		(128.4)
Loss before equity in losses of unconsolidated affiliates	(41.3)		(156.6)		(16.1)		(437.9)
Equity in losses of unconsolidated affiliates	(49.1)		(108.0)		(81.2)		(76.1)


Net loss	(90.4)		(264.6)		(97.3)		(514.0)
Less: Net loss attributable to noncontrolling interests	(3.2)		(1.3)		(6.0)		(3.1)
Net loss attributable to Cannae Holdings, Inc. common shareholders	$	(87.2)	$	(263.3)	$	(91.3)	$	(510.9)




Earnings per share
Basic


Net loss per share	$	(1.16)	$	(3.15)	$	(1.21)	$	(6.03)
Diluted


Net loss per share	$	(1.16)	$	(3.15)	$	(1.21)	$	(6.03)
Weighted Average Shares Outstanding
Weighted average shares outstanding Cannae Holdings common stock, basic basis	75.4		83.5		75.7		84.7
Weighted average shares outstanding Cannae Holdings common stock, diluted basis	75.4		83.5		75.7		84.7

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CANNAE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) EARNINGS

(In millions)

(Unaudited)


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022

Net loss	$	(90.4)	$	(264.6)	$	(97.3)	$	(514.0)
Other comprehensive earnings (loss), net of tax:
Unrealized earnings (loss) of investments in unconsolidated affiliates (1)	3.0		(6.4)		4.2		(7.6)




Comprehensive loss	(87.4)		(271.0)		(93.1)		(521.6)
Less: Comprehensive loss attributable to noncontrolling interests	(3.2)		(1.3)		(6.0)		(3.1)
Comprehensive loss attributable to Cannae Holdings, Inc. common shareholders	$	(84.2)	$	(269.7)	$	(87.1)	$	(518.5)

_________________________________

(1)Net of income tax expense (benefit) of $0.8 million and $(1.7) million for the three months ended June 30, 2023 and 2022, respectively, and $1.1 million and $(2.0) million for the six months ended June 30, 2023 and 2022, 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, March 31, 2022	92.5	$	—	$	1,894.4	$	1,395.2	$	(8.4)	7.6	$	(242.5)	$	4.0	$	3,042.7



Other comprehensive earnings — unrealized losses of investments in unconsolidated affiliates, net of tax	—	—		—		—		(6.4)		—	—		—		(6.4)





Treasury stock repurchases	—	—		—		—		—		4.8	(84.7)		—		(84.7)

Stock-based compensation, consolidated subsidiaries	—	—		0.4		—		—		—	—		—		0.4

Stock-based compensation, unconsolidated affiliates	—	—		18.7		—		—		—	—		—		18.7

Net loss	—	—		—		(263.3)		—		—	—		(1.3)		(264.6)
Balance, June 30, 2022	92.5	$	—	$	1,913.5	$	1,131.9	$	(14.8)	12.4	$	(327.2)	$	2.7	$	2,706.1

Balance, March 31, 2023	92.8	$	—	$	1,945.8	$	1,210.6	$	(16.9)	16.3	$	(414.1)	$	(6.8)	$	2,718.6


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




Treasury stock repurchases	—	—		—		—		—		3.1	(60.4)		—		(60.4)

Stock-based compensation, consolidated subsidiaries	—	—		0.9		—		—		—	—		—		0.9

Stock-based compensation, unconsolidated affiliates	—	—		10.3		—		—		—	—		—		10.3


Net loss	—	—		—		(87.2)		—		—	—		(3.2)		(90.4)
Balance, June 30, 2023	92.8	$	—	$	1,957.0	$	1,123.4	$	(13.9)	19.4	$	(474.5)	$	(10.0)	$	2,582.0

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, 2021	92.4	$	—	$	1,888.3	$	1,642.8	$	(7.2)	5.6	$	(188.6)	$	5.8	$	3,341.1



Other comprehensive earnings — unrealized losses of investments in unconsolidated affiliates, net of tax	—	—		—		—		(7.6)		—	—		—		(7.6)





Treasury stock repurchases	—	—		—		—		—		6.8	(138.6)		—		(138.6)
Stock-based compensation, consolidated subsidiaries	—	—		0.7		—		—		—	—		—		0.7
Issuance of restricted stock	0.1	—		—		—		—		—	—		—		—
Stock-based compensation, unconsolidated affiliates	—	—		24.5		—		—		—	—		—		24.5

Net loss	—	—		—		(510.9)		—		—	—		(3.1)		(514.0)
Balance, June 30, 2022	92.5	$	—	$	1,913.5	$	1,131.9	$	(14.8)	12.4	$	(327.2)	$	2.7	$	2,706.1

Balance, December 31, 2022	92.5	$	—	$	1,936.2	$	1,214.7	$	(18.1)	16.3	$	(414.0)	$	(3.9)	$	2,714.9


Other comprehensive earnings — unrealized losses of investments in unconsolidated affiliates, net of tax	—	—		—		—		4.2		—	—		—		4.2




Treasury stock repurchases	—	—		—		—		—		3.1	(60.4)		—		(60.4)
Issuance of restricted stock	0.3	—		—		—		—		—	—		—		—
Payment for shares withheld for taxes and in treasury	—	—		—		—		—		—	(0.1)		—		(0.1)
Stock-based compensation, consolidated subsidiaries	—	—		1.5		—		—		—	—		—		1.5

Stock-based compensation, unconsolidated affiliates	—	—		19.3		—		—		—	—		—		19.3
Subsidiary dividends paid to noncontrolling interests	—	—		—		—		—		—	—		(0.1)		(0.1)
Net loss	—	—		—		(91.3)		—		—	—		(6.0)		(97.3)
Balance, June 30, 2023	92.8	$	—	$	1,957.0	$	1,123.4	$	(13.9)	19.4	$	(474.5)	$	(10.0)	$	2,582.0

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CANNAE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Six months ended June 30,
	2023		2022

Cash flows from operating activities:
Net loss	$	(97.3)	$	(514.0)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	9.7		12.0
Equity in losses of unconsolidated affiliates	81.2		76.1
Distributions from investments in unconsolidated affiliates	0.2		14.7
Recognized (gains) losses and asset impairments, net	(5.8)		459.8
Lease asset amortization	9.7		10.3
Stock-based compensation expense	1.5		0.7
Non-cash carried interest expense	—		31.8
Changes in assets and liabilities, net of effects from acquisitions:

Other assets	4.3		11.9
Lease liabilities	(12.4)		(12.4)
Accounts payable, accrued liabilities, deferred revenue and other liabilities	(2.9)		(30.8)
Income taxes	(22.8)		(193.1)
Net cash used in operating activities	(34.6)		(133.0)
Cash flows from investing activities:

Proceeds from sales of Ceridian shares	78.0		285.7



Additions to property and equipment and other intangible assets	(4.7)		(7.6)
Collections of notes receivable	—		0.9


Proceeds from sale of investments in unconsolidated affiliates and other long term investments	—		172.6

Investment in System1	—		(246.5)




Additional investments in unconsolidated affiliates	(96.1)		—


Purchases of other long term investments	(17.4)		(3.4)

Distributions from investments in unconsolidated affiliates	7.9		—
Purchases of short-term investment securities	(130.1)		—
Proceeds from sale and maturity of short-term investment securities	111.4		—


Net cash (used in) provided by investing activities	(51.0)		201.7
Cash flows from financing activities:
Borrowings	7.8		305.7
Debt service payments	(2.0)		(213.8)


Payment for vested shares withheld for taxes and in treasury	(0.1)		—
Treasury stock repurchases	(55.1)		(145.8)

Net cash used in financing activities	(49.4)		(53.9)
Net (decrease) increase in cash and cash equivalents	(135.0)		14.8

Cash and cash equivalents at beginning of period	247.7		85.8
Cash and cash equivalents at end of period	$	112.7	$	100.6

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

The following describes the significant accounting policies of Cannae Holdings, Inc. and its subsidiaries (collectively, "we," "us," "our,” "Cannae," "CNNE," or the "Company"), which have been followed in preparing the accompanying Condensed Consolidated Financial Statements.

Description of the Business

We primarily acquire interests in operating companies and are engaged in actively managing and operating a core group of those companies, which we are committed to supporting for the long term. From time to time, we also seek to take meaningful equity ownership stakes where we have the ability to control or significantly influence quality companies, and we bring the strength of our operational expertise to each of our subsidiaries. We are a long-term owner that secures control and governance rights of other companies primarily to engage in their lines of business and we have no preset time constraints dictating when we sell or dispose of our businesses. We believe that our long-term ownership and active involvement in the management and operations of companies helps maximize the value of those businesses for our shareholders. Our primary assets as of June 30, 2023 include our ownership interests in Dun & Bradstreet Holdings, Inc. ("Dun & Bradstreet" or "D&B"); Ceridian HCM Holding, Inc. ("Ceridian"); Alight, Inc. ("Alight"); Paysafe Limited ("Paysafe"); Sightline Payments Holdings, LLC ("Sightline"); System1, Inc. ("System1"); Black Knight Football and Entertainment, LP ("BKFE"); Computer Services, Inc. ("CSI"); AmeriLife Group, LLC ("AmeriLife"); O'Charley's Holdings, LLC ("O'Charley's"); 99 Restaurants Holdings, LLC ("99 Restaurants"); and various other controlled portfolio companies and minority equity ownership interests.

See Note E - Segment Information for further discussion of the businesses comprising our reportable segments.

We conduct our business through our wholly-owned subsidiary Cannae Holdings, LLC ("Cannae LLC"), a Delaware limited liability company. Our board of directors ("Board") oversees the management of the Company, Cannae LLC and its businesses, and the performance of our external manager, Trasimene Capital Management, LLC ("Trasimene" or our "Manager").

Principles of Consolidation and Basis of Presentation

The accompanying Condensed Consolidated Financial Statements are prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and the instructions to Form 10-Q and Article 10 of Regulation S-X and include the historical accounts as well as wholly-owned and majority-owned subsidiaries of the Company. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All adjustments made were of a normal, recurring nature. This report should be read in conjunction with our Annual Report on Form 10-K (our "Annual Report") for the year ended December 31, 2022.

All intercompany profits, transactions and balances have been eliminated. Our ownership interests in non-majority-owned partnerships and affiliates are accounted for under the equity method of accounting or as equity securities. Earnings attributable to noncontrolling interests recorded on the Condensed Consolidated Statements of Operations represents the portion of our majority-owned subsidiaries' net earnings or loss that is owned by noncontrolling shareholders of such subsidiaries. Noncontrolling interest recorded on the Condensed Consolidated Balance Sheets represents the portion of equity owned by noncontrolling shareholders in our consolidated subsidiaries.

Management Estimates

The preparation of these Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management include the fair value measurements (See Note C - Fair Value Measurements). Actual results may differ from estimates.

Recent Developments

Ceridian

In February 2023, we completed the sale of 1.0 million shares of common stock of Ceridian. In connection with the sale, we received proceeds of $78.0 million.

Table of Contents

CANNAE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — continued

We owned 5.0 million shares of Ceridian common stock as of June 30, 2023, which represented approximately 3.2% of its outstanding stock as of June 30, 2023.

Refer to Note B - Investments and Note C - Fair Value Measurements for further discussion of our accounting for our ownership interest in Ceridian and other equity securities.

Dun & Bradstreet

On February 9, 2023 and April 26, 2023, the board of directors of D&B declared a quarterly cash dividend of $0.05 per share of DNB common stock. In the six months ended June 30, 2023, we received $7.9 million of cash dividends from D&B which are recorded as a reduction to the basis of our recorded asset for D&B.

As of June 30, 2023, we owned 79.0 million shares of D&B, which represented approximately 18.0% of its outstanding common stock.

See Note B - Investments for further discussion of our accounting for our ownership interest in D&B and other equity method investments.

Black Knight Football and Entertainment

In the six months ended June 30, 2023, we invested $44.0 million in BKFE. Subsequent to June 30, 2023, we invested another $40.8 million in BKFE. Following the last investment, we have completed the funding of our previously disclosed commitment to invest in BKFE and have no further legal obligation to fund BKFE as of the date of this Quarterly Report on Form 10-Q.

Other Developments

On August 3, 2022, our Board authorized a new three-year stock repurchase program, (the "2022 Repurchase Program"), under which the Company may repurchase up to 10.0 million shares of its common stock. Purchases may be made from time to time in the open market at prevailing prices or in privately negotiated transactions through August 3, 2025. The repurchase program does not obligate us to acquire any specific number of shares and may be suspended or terminated at any time.

During the three and six months ended June 30, 2023, we repurchased 3,065,804 shares for approximately $60.4 million, or an average of $19.71 per share. Subsequent to June 30, 2023, we repurchased 54,880 shares for approximately $1.1 million.

On May 22, 2023, we invested $52.1 million for an 89% ownership interest in High Sierra Distillery, LP ("Minden Mill"). Minden Mill, through its wholly owned subsidiaries, owns and operates a farm-to-flask distillery and related hospitality venues. Entities affiliated with our chairman, William P. Foley II, are the general partner of Minden Mill and manage all aspects of its operation. The investment in Minden Mill is accounted for as an investment in an unconsolidated affiliate. See Note B - Investments for further discussion of our investments in unconsolidated affiliates.

Related Party Transactions

During the three and six months ended June 30, 2023, we incurred management fee expenses payable to our Manager of $9.6 million and $18.9 million, respectively, and during the three and six months ended June 30, 2022, we incurred $10.6 million and $21.2 million, respectively. During the three and six months ended June 30, 2022, we incurred $2.2 million and $47.4 million, respectively, of carried interest expense related to the disposition of certain of the Company's assets and ownership interests. These expenses are recorded in Other operating expenses on our Condensed Consolidated Statement of Operations.

Earnings Per Share

Basic earnings per share, as presented on the Condensed Consolidated Statement of Operations, is computed by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding during the period.

In periods when earnings are positive, diluted earnings per share is calculated by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding plus the impact of assumed conversions of potentially dilutive securities. For periods when we recognize a net loss, diluted loss per share is equal to basic loss per share as the impact of assumed conversions of potentially dilutive securities is considered to be antidilutive. We have granted certain shares of restricted stock that have been treated as common share equivalents for purposes of calculating diluted earnings per share for periods in which positive earnings have been reported.

Instruments that provide the ability to purchase shares of our common stock that are antidilutive are excluded from the

Table of Contents

CANNAE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — continued

computation of diluted earnings per share. For the three and six months ended June 30, 2023 and 2022, there were 0.4 million and 0.1 million antidilutive shares of restricted stock outstanding, respectively, that were excluded from the calculation of diluted earnings per share.

Income Taxes

Our effective tax rate was 34.5% and 29.8% in the three months ended June 30, 2023 and 2022, respectively, and 54.4% and 22.7% in the six months ended June 30, 2023 and 2022, respectively. The change in the effective tax rate in the three and six-month period ended June 30, 2023 compared to the corresponding prior year period was primarily attributable to the varying impact of equity in (losses) earnings of unconsolidated affiliates on income tax expense (benefit).

We have a Deferred tax asset of $47.6 million and $22.7 million as of June 30, 2023 and December 31, 2022, respectively. The $24.9 million change in deferred taxes in the six months ended June 30, 2023 is primarily attributable to equity in losses of unconsolidated affiliates partially offset by sales of Ceridian shares and mark to market gains recorded on Ceridian.

Recent Accounting Pronouncements

We have completed our evaluation of the recently issued accounting pronouncements and we did not identify any that are expected to, if currently adopted, have a material impact on our Condensed Consolidated Financial Statements.

Note B — Investments

Investments in Unconsolidated Affiliates

Investments in unconsolidated affiliates recorded using the equity method of accounting as of June 30, 2023 and December 31, 2022 consisted of the following:


	Ownership at June 30, 2023		June 30, 2023		December 31, 2022
			(in millions)
Dun & Bradstreet	18.0	%	$	835.2	$	857.1
Alight	9.7	%	525.1		532.2
Sightline	32.4	%	237.6		247.0
System1	23.7	%	106.5		127.4
BKFE	50.1	%	84.4		52.2
Paysafe	5.5	%	33.3		33.7
Other	various		150.4		101.1
Total			$	1,972.5	$	1,950.7

The aggregate fair value of our direct ownership in the common stock of unconsolidated affiliates that have quoted market prices as of June 30, 2023 consisted of the following:


	June 30, 2023
	(in millions)
Dun & Bradstreet	$	914.6
Alight	484.9
System1	122.1
Paysafe	34.1

Table of Contents

CANNAE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — continued

Equity in (losses) earnings of unconsolidated affiliates for the three and six months ended June 30, 2023 and 2022 consisted of the following:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
Dun & Bradstreet (1)	$	(5.6)	$	(2.6)	$	(13.9)	$	(10.1)
Alight	(7.0)		2.5		(14.1)		9.2
Sightline (2)	(5.0)		(4.2)		(9.1)		(8.5)
System1	(15.7)		(9.1)		(22.6)		3.7
BKFE	(15.6)		—		(16.9)		—
Paysafe	(0.2)		(96.7)		(2.1)		(89.9)
Other	—		2.1		(2.5)		19.5
Total	$	(49.1)	$	(108.0)	$	(81.2)	$	(76.1)

_____________________________________

(1) Equity in losses for D&B includes $2.1 million of loss for the three months ended June 30, 2023 and 2022, respectively, and $4.3 million and $3.2 million of loss for the six months ended June 30, 2023 and 2022, respectively, related to amortization of Cannae's basis difference between the book value of its ownership interest and ratable portion of the underlying equity in net assets of D&B.

(2) Equity in losses for Sightline includes $1.9 million of loss in the three months ended June 30, 2023 and 2022, respectively, and $3.9 million of loss for the six months ended June 30, 2023 and 2022, respectively, related to amortization of Cannae's basis difference between the book value of its investment and ratable portion of the underlying equity in net assets of Sightline.

Dun & Bradstreet

Summarized financial information for D&B for the relevant dates and time periods included in Investments in unconsolidated affiliates and Equity in earnings of unconsolidated affiliates in our Condensed Consolidated Balance Sheets and Statements of Operations, respectively, is presented below.


	June 30, 2023		December 31, 2022
	(In millions)
Total current assets	$	690.1	$	703.9
Goodwill and other intangible assets, net	7,535.7		7,751.4
Other assets	1,041.4		1,016.6
Total assets	$	9,267.2	$	9,471.9

Current liabilities	$	974.6	$	1,102.6
Long-term debt	3,613.0		3,552.2
Other non-current liabilities	1,230.0		1,308.7
Total liabilities	5,817.6		5,963.5
Total equity	3,449.6		3,508.4
Total liabilities and equity	$	9,267.2	$	9,471.9

Table of Contents

CANNAE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — continued


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
	(In millions)
Total revenues	$	554.7	$	537.3	$	1,095.1	$	1,073.3
Operating income	16.5		29.7		24.4		46.1
Loss before income taxes	(37.0)		(0.7)		(82.4)		(40.5)
Net loss	(18.8)		—		(51.6)		(29.8)
Less: net earnings attributable to noncontrolling interest	0.6		1.8		1.5		3.3
Net loss attributable to Dun & Bradstreet	(19.4)		(1.8)		(53.1)		(33.1)

Equity Securities

Gains (losses) on equity securities included in Recognized gains (losses), net on the Condensed Consolidated Statements of Operations consisted of the following for the three and six months ended June 30, 2023 and 2022:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
Net (losses) gains recognized during the period on equity securities	$	(40.3)	$	(152.0)	$	18.9	$	(476.5)
Less: net (losses) gains recognized during the period on equity securities sold or transferred during the period	—		(24.3)		13.8		(132.2)
Unrealized (losses) gains recognized during the reporting period on equity securities held at the reporting date	$	(40.3)	$	(127.7)	$	5.1	$	(344.3)

Equity Security Investments Without Readily Determinable Fair Values

We account for our investments in AmeriLife and certain other ownership interests at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly market transactions. As of June 30, 2023 and December 31, 2022, we have $121.9 million and $114.8 million, respectively, recorded for such investments, which is included in Other long term investments and noncurrent assets on our Condensed Consolidated Balance Sheets.

During the three months ended June 30, 2023, we recorded impairment of $9.0 million to certain of our equity ownership interests without readily determinable fair values. The amount of the impairment was determined based on the valuation of the investee implied by a contemplated sale to a third-party.

Note C — Fair Value Measurements

The fair value hierarchy established by the accounting standards on fair value measurements includes three levels, which are based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial assets and liabilities that are recorded in the Consolidated Balance Sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that we have the ability to access.

Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.

Level 3. Financial assets and liabilities whose values are based on model inputs that are unobservable.

Table of Contents

CANNAE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — continued

Recurring Fair Value Measurements

The following table presents our fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022, respectively:


	June 30, 2023
	Level 1		Level 2		Level 3		Total
	(In millions)
Assets:
Cash and cash equivalents	$	112.7	$	—	$	—	$	112.7
Short-term investments	53.6		—		—		53.6
Ceridian	334.9		—		—		334.9
Total assets	$	501.2	$	—	$	—	$	501.2


	December 31, 2022
	Level 1		Level 2		Level 3		Total
	(In millions)
Assets:
Cash and cash equivalents	$	247.7	$	—	$	—	247.7
Short-term investments	34.9		—		—		34.9
Ceridian	384.9		—		—		384.9
Total assets	$	667.5	$	—	$	—	$	667.5

We had no material assets or liabilities valued on a recurring basis using Level 3 inputs as of or for the six months ended June 30, 2023 and December 31, 2022.

Additional information regarding the fair value of our investment portfolio is included in Note B - Investments.

Note D — Variable Interest Entities

The Company, in the normal course of business, engages in certain activities that involve variable interest entities ("VIEs"), which are legal entities in which a group of equity investors individually lack any of the characteristics of a controlling interest. The primary beneficiary of a VIE is generally the enterprise that has both the power to direct the activities most significant to the economic performance of the VIE and the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. The Company evaluates its interest in certain entities to determine if these entities meet the definition of a VIE and whether the Company is the primary beneficiary and should consolidate the entity based on the variable interests it held both at inception and when there is a change in circumstances that requires a reconsideration. If the Company is determined to be the primary beneficiary of a VIE, it must account for the VIE as a consolidated subsidiary. If the Company is determined not to be the primary beneficiary of a VIE but holds a variable interest in the entity, such variable interests are accounted for under accounting standards as deemed appropriate. As of and for the periods ended June 30, 2023 and December 31, 2022, we are not the primary beneficiary of any VIEs.

Unconsolidated VIEs

The table below summarizes select information related to variable interests held by the Company as of June 30, 2023 and December 31, 2022, of which we are not the primary beneficiary:


		June 30, 2023				December 31, 2022
		Total Assets		Maximum Exposure			Total Assets		Maximum Exposure
	(in millions)
Investments in unconsolidated affiliates		$	220.5	$	220.5		$	138.3	$	138.3

Investments in Unconsolidated Affiliates

As of June 30, 2023 and December 31, 2022, we held variable interests in certain unconsolidated affiliates, which are primarily comprised of our ownership interests in BKFE, CSI and Minden Mill. Cannae does not have the power to direct the

Table of Contents

CANNAE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — continued

activities that most significantly impact the economic performance of these unconsolidated affiliates; therefore, we are not the primary beneficiary.

The principal risk to which these investments and funds are exposed is the credit risk of the underlying investees. Cannae has guaranteed certain payment obligations of BKFE related to investment commitments associated with its acquisitions of interests in football clubs. These BKFE obligations total an estimated amount of approximately $65.2 million in the aggregate as of the date of this Quarterly Report and are potentially payable at various increments over the next five years. The underlying obligation of BKFE to fund these amounts is contingent on the exercise of certain investment options by BKFE or other parties. Cannae is required to fund such payments solely to the extent BKFE is unable to meet these obligations. We do not provide any other implicit or explicit liquidity guarantees or principal value guarantees to these VIEs.

The assets are included in Investments in unconsolidated affiliates on the Condensed Consolidated Balance Sheets and accounted for under the equity method of accounting. See Note B - Investments for further discussion of our accounting for investments in unconsolidated affiliates.

Note E — Segment Information

Summarized financial information concerning our reportable segments is shown in the following tables.

As of and for the three months ended June 30, 2023:


	Restaurant Group		Dun & Bradstreet		Paysafe		Alight		Sightline		Corporate and Other		Affiliate Elimination		Total
	(in millions)
Restaurant revenues	$	145.2	$	—	$	—	$	—	$	—	$	—	$	—	$	145.2
Other operating revenues	—		554.7		387.8		806.0		8.6		7.6		(1,757.1)		7.6
Revenues from external customers	145.2		554.7		387.8		806.0		8.6		7.6		(1,757.1)		152.8
Interest, investment and other income, including recognized gains (losses), net	(0.2)		2.6		2.5		(15.0)		0.1		(39.3)		9.8		(39.5)
Total revenues, other income and realized gains (losses), net	145.0		557.3		390.3		791.0		8.7		(31.7)		(1,747.3)		113.3
Depreciation and amortization	4.3		145.0		63.5		106.0		1.9		0.3		(316.4)		4.6
Interest expense	(1.3)		(56.1)		(37.5)		(33.0)		—		(2.7)		126.6		(4.0)
(Loss) earnings before income taxes and equity in earnings (losses) of unconsolidated affiliates	(6.6)		(37.0)		0.1		(69.0)		(9.6)		(56.5)		115.5		(63.1)
Income tax (benefit) expense	—		(17.5)		3.9		3.0		—		(21.8)		10.6		(21.8)
(Loss) earnings, before equity in (losses) earnings of unconsolidated affiliates	(6.6)		(19.5)		(3.8)		(72.0)		(9.6)		(34.7)		104.9		(41.3)
Equity in earnings (losses) of unconsolidated affiliates	—		0.7		—		—		—		(31.3)		(18.5)		(49.1)
Net (loss) earnings	$	(6.6)	$	(18.8)	$	(3.8)	$	(72.0)	$	(9.6)	$	(66.0)	$	86.4	$	(90.4)
Assets	$	318.4	$	9,267.2	$	5,734.6	$	10,772.0	$	169.1	$	2,677.2	$	(25,942.9)	$	2,995.6
Goodwill	53.4		3,422.4		2,009.1		3,681.0		109.0		—		(9,221.5)		53.4

Table of Contents

CANNAE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — continued

As of and for the three months ended June 30, 2022:


	Restaurant Group		Dun & Bradstreet		Paysafe		Alight		Sightline		Corporate and Other		Affiliate Elimination		Total
	(in millions)
Restaurant revenues	$	166.7	$	—	$	—	$	—	$	—	$	—	$	—	$	166.7
Other operating revenues	—		537.3		367.7		715.0		13.9		7.8		(1,633.9)		7.8
Revenues from external customers	166.7		537.3		367.7		715.0		13.9		7.8		(1,633.9)		174.5
Interest investment and other income (expense), including recognized gains (losses), net	2.0		11.5		3.5		95.0		—		(195.5)		(110.0)		(193.5)
Total revenues, other income and recognized gains (losses), net	168.7		548.8		371.2		810.0		13.9		(187.7)		(1,743.9)		(19.0)
Depreciation and amortization	5.6		147.0		63.4		13.0		1.5		0.6		(224.9)		6.2
Interest expense	(1.1)		(41.9)		(26.0)		(29.0)		—		(1.5)		96.9		(2.6)
(Loss) earnings before income taxes and equity in earnings (losses) of unconsolidated affiliates	(2.5)		(0.7)		(1,214.2)		43.0		(5.9)		(220.6)		1,177.8		(223.1)
Income tax (benefit) expense	—		(0.1)		(43.4)		(9.0)		—		(66.5)		52.5		(66.5)
(Loss) earnings before equity in earnings of unconsolidated affiliates	(2.5)		(0.6)		(1,170.8)		52.0		(5.9)		(154.1)		1,125.3		(156.6)
Equity in earnings (losses) of unconsolidated affiliates	(0.1)		0.6		—		—		—		(6.9)		(101.6)		(108.0)
Net (loss) earnings	$	(2.6)	$	—	$	(1,170.8)	$	52.0	$	(5.9)	$	(161.0)	$	1,023.7	$	(264.6)
Assets	$	359.0	$	9,696.6	$	6,501.3	$	10,878.0	$	176.2	$	2,829.1	$	(27,252.1)	$	3,188.1
Goodwill	53.4		3,437.1		2,712.8		3,624.0		108.9		—		(9,882.8)		53.4

As of and for the six months ended June 30, 2023:


	Restaurant Group		Dun & Bradstreet		Paysafe		Alight		Sightline		Corporate and Other		Affiliate Elimination		Total
	(in millions)
Restaurant revenues	$	293.7	$	—	$	—	$	—	$	—	$	—	$	—	$	293.7
Other operating revenues	—		1,095.1		771.3		1,637.0		17.9		13.4		(3,521.3)		13.4
Revenues from external customers	293.7		1,095.1		771.3		1,637.0