Cannae Holdings, Inc. (CNNE) FY 2024 MD&A

Item 7.      Management's Discussion and Analysis of Financial Condition and Results of Operations

For a description of our business, including descriptions of segments and recent business trends, see the discussion under Business in Item 1 of Part I of this Annual Report, which is incorporated by reference into this Part II, Item 7 of this Annual Report. The following discussion should also be read in conjunction with the Consolidated Financial Statements and the Notes thereto included in Item 8 of Part II of this Annual Report.

Recent Developments

Dayforce

In the year ended December 31, 2024, we sold the remaining 4.0 million shares of common stock of Dayforce for gross proceeds of $264.0 million. As of December 31, 2024, we no longer have any holdings of Dayforce.

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

Dun & Bradstreet

On February 8, 2024, April 30, 2024, July 24, 2024, and October 22, 2024, the board of directors of D&B declared quarterly cash dividends of $0.05 per share of D&B common stock. In the year ended December 31, 2024, we received $14.3 million of cash dividends from D&B which are recorded as a reduction to the basis of our recorded asset for D&B.

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As of December 31, 2024, we owned 69.0 million shares of D&B, which represented approximately 15.6% 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.

Paysafe

In January 2024, we purchased 1.6 million shares of common stock of Paysafe for $23.4 million. In November 2024, we sold 0.9 million shares of common stock of Paysafe for $16.0 million which we expect will generate tax savings for the Company.

As of December 31, 2024, we owned 2.5 million shares of Paysafe which represented approximately 4.1% of the outstanding common equity of Paysafe.

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

Alight

On December 3, 2024, we completed the sale of 12.0 million shares of common stock of Alight for aggregate proceeds of $89.0 million.

As of December 31, 2024, we owned 40.5 million shares of Alight, which represented approximately 7.6% of its outstanding common stock.

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

JANA

On February 21, 2024, we issued 1.85 million shares of common stock of the Company from the Company’s treasury and paid $18.3 million in cash, in the aggregate, to certain partners of JANA in exchange for a 19.99% equity interest in JANA. The transaction is valued at $55.5 million based on the closing price of the Company's common stock on February 21, 2024. Cannae also committed to invest $50 million into JANA funds (the "JANA Fund Commitment"). JANA Partners is an investment manager founded in 2001. We account for our ownership interest in JANA as an unconsolidated affiliate using the equity method of accounting and record our ratable share of JANA's net income or loss on a three-month lag. On December 27, 2024, the Company invested $20.0 million into a JANA fund as part of the JANA Fund Commitment. We account for our investment in the JANA fund as an equity security without a readily determinable fair value.

See Note B - Investments for further discussion of our accounting for our ownership interest in JANA and other equity method investments and our accounting for the JANA fund and other equity securities without a readily determinable fair value.

Watkins Holdings

On October 17, 2024, the Company invested approximately $80.0 million for a 52.8% ownership interest in Watkins Holdings, LLC ("Watkins Holdings"), a partnership with KDSA Investment Partners ("KDSA") and Mark Jacobs (the "Watkins Acquisition"). Watkins Holdings concurrently completed the acquisition of The Watkins Company ("Watkins"), a leading producer of high-quality flavoring products. Watkins was founded in 1868 and has grown to be a leading domestic producer of spices, seasonings and extracts. The former majority owner of Watkins, Mark Jacobs, rolled a significant equity stake into Watkins Holdings. We account for our ownership interest in Watkins as an unconsolidated affiliate using the equity method of accounting and record our ratable share of Watkins's net income or loss on a three-month lag.

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

Black Knight Football

In the year ended December 31, 2024, we invested $36.8 million in BKFC and as of December 31, 2024, we held a 47.2% ownership interest.

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

Other Developments

On February 21, 2024, we announced a tender offer to purchase up to $200 million of shares of our common stock at a purchase price of not less than $20.75 per share and not greater than $23.75 per share (the "Tender Offer"). We conducted the Tender Offer through a procedure commonly referred to as a "modified Dutch auction." This procedure allows shareholders to select the price within a price range specified by us at which the shareholders are willing to sell their shares.

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On April 1, 2024, the Tender Offer expired and the Company accepted for purchase an aggregate of 9,672,540 shares of its common stock that were properly tendered and not properly withdrawn at or below a purchase price of $22.95 per share for an aggregate cost of $222.0 million, excluding fees and expenses. Included in the 9,672,540 shares of Cannae common stock we accepted for purchase in the Tender Offer are 957,943 shares that Cannae elected to purchase pursuant to its right to purchase up to an additional 2% of its outstanding common stock.

On February 26, 2024, the Company, Cannae LLC and Trasimene entered into a Third Amended and Restated Management Services Agreement (the "Third Amended MSA"). The Third Amended MSA amends the management services agreement primarily to (i) provide for a termination of the agreement by the Company effective June 30, 2027, (ii) reduce the management fee to a fixed amount of $7.6 million annually effective beginning July 2, 2024 and (iii) provide for payment of the termination fee under the agreement of $20 million to be paid by the Company to Trasimene in installments of $6.7 million annually over the 3-year period ended July 1, 2026. The Third Amended MSA has a termination date of June 30, 2027 unless earlier terminated by the Company or Trasimene.

The following dividends were declared by our Board in 2024:

Subsequent to December 31, 2024, the Board declared cash dividends of $0.12 per share, payable on March 31, 2025, to Cannae common shareholders of record as of March 17, 2025.

Related Party Transactions

Our financial statements for all years presented reflect transactions with our Manager and certain members of our Board. See Note O - Related Party Transactions to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for further discussion.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP. See Note A - Basis of Financial Statements to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for discussion of all our significant accounting policies.

The accounting policies and estimates described below are those we consider critical in preparing our Consolidated Financial Statements. Management is required to make estimates and assumptions that can affect the reported amounts of assets and liabilities and disclosures with respect to contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates.

Investments in unconsolidated affiliates - applicability of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 323. Investments in unconsolidated affiliates are recorded using the equity method of accounting. If an investor does not possess a controlling financial interest over an investee but has the ability to exercise significant influence over the investee’s operating and financial policies, the investor must account for such an investment under the equity method of accounting. For investments in common stock or in-substance common stock of an investee, which an investor does not control, the general but rebuttable presumption exists that an ownership of greater than 20% of the outstanding common stock of an investee indicates the investor has significant influence. For investments in partnerships and similar entities for which an investor does not control, equity method of accounting for the investment is generally required unless the investor's interest is so minor that the investor has virtually no influence.

In the ordinary course of our business, we make investments in companies that provide us with varying degrees of control and influence over the underlying investees through our level of ownership of the outstanding equity of the investee, participation in management of the investee, participation on the board of directors of the investee, and/or legal agreements with other investors with control implications. As a result, our analysis of the appropriate accounting for our various ownership interests often requires judgment regarding the level of control, significant influence or lack thereof the Company has over each investee. If we are required to account for certain of our ownership interests in which we have concluded the Company has significant influence resulting in the application of the equity method of accounting at fair value, the impact of such change could significantly impact the Company's Consolidated Financial Statements.

As of December 31, 2024, we held less than 20% of the outstanding common equity of Dun & Bradstreet but continue to account for our ownership interest under the equity method because (i) we continue to exert significant influence through, and in connection with, our 15.6% ownership and (ii) certain of our senior management and directors serve on Dun & Bradstreet's

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board of directors, including our Chief Executive Officer, Chief Investment Officer and Chairman of our Board, Bill Foley, who is also the chairman of D&B's board of directors.

As of December 31, 2024, the book value of our investment in D&B accounted for under the equity method of accounting is $691.9 million. Based on quoted market prices, the aggregate fair market value of our ownership of Dun & Bradstreet common stock was $860.3 million as of December 31, 2024.

As of December 31, 2024, we held less than 20% of the outstanding common equity of Alight but we account for our ownership under the equity method because we exert significant influence: (i) through, and in connection with, our 7.6% ownership, (ii) because certain of our senior management and directors serve on Alight's board of directors, including our Chief Executive Officer, Chief Investment Officer and Chairman of our Board, Bill Foley, who is also the chairman of Alight's board of directors, and (iii) because we are party to an agreement with Alight pursuant to which we have the ability to appoint or be consulted on the election of certain of the directors of Alight.

As of December 31, 2024, the book value of our investment in Alight accounted for under the equity method of accounting is $374.0 million. Based on quoted market prices, the aggregate fair market value of our ownership of Alight common stock was approximately $280.1 million as of December 31, 2024.

Investments in unconsolidated affiliates - impairment monitoring. On an ongoing basis, management monitors the Company's investments in unconsolidated affiliates to determine whether there are indications that the fair value of an investment may be other-than-temporarily below our recorded book value of the investment. Factors considered when determining whether a decline in the fair value of an investment is other-than-temporary include, but are not limited to: the length of time and the extent to which the market value has been less than book value, the financial condition and near-term prospects of the investee, and the intent and ability of the Company to retain its investment in the investee for a period of time sufficient to allow for any anticipated recovery in market value.

As of June 30, 2024, the aggregate fair market value of our ownership of Sightline equity prior to recording impairment was $154.7 million. Based on a valuation using a hybrid discounted cash flow and market comparison approach and adjusted for the risk of a capital shortfall at the business, the aggregate fair market value of our ownership of Sightline equity was approximately $13.7 million as of June 30, 2024 and management determined the decrease in value of our investment in Sightline was other-than-temporary. The fair value measurement is considered a level 3 fair value measure. The primary inputs in the valuation were the forecasted results of operations of Sightline, the discount rate used in the discounted cash flow analysis and the adjustment for the risk of a capital shortfall. The primary significant unobservable input used was the 35% discount rate used in the discounted cash flow analysis and the 50% adjustment for the risk of capital shortfall. As of December 31, 2024, management determined that the remaining investment in Sightline was impaired as a result of the implied valuation of Sightline it would require for it to raise equity funding. Due to the quantum of the decrease in the fair market value of our ownership interest subsequent to our acquisition, declines in the forecasted results of operations and liquidity of Sightline, and the uncertainty of the ability of Sightline to raise new capital, management determined the decrease in value of our investment in Sightline was other-than-temporary. Accordingly, we recorded an impairment of $149.5 million which is included in Recognized (losses) gains, net, on our Consolidated Statement of Operations for the year ended December 31, 2024.

As of December 31, 2024, the fair value of our ownership interest in Alight based on quoted market prices was $280.1 million and the book value of our recorded asset for Alight was $374.0 million. While the fair value of our interest in Alight is below our book value, the fair value was above book value during the second quarter and there are no other indicators that our interest is other-than-temporarily impaired. Alight has consistently produced positive results from operations and cash flows, has reduced its debt, and initiated a dividend in 2024. There are no indications that the book value of our interest will not be recoverable at this time. Due to these factors, we consider the decline in value to be temporary as of December 31, 2024. Though we do not currently believe our interest in Alight is other-than-temporarily impaired, because the fair value is currently below the book value of our interest in Alight, sustained declines in fair value of the interest, deterioration in Alight's actual or forecasted results of operations or adverse changes in the US macroeconomic environment could result in an impairment charge in future periods to record our asset at fair value.

Accounting for Income Taxes. We recognize deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities and expected benefits of utilizing net operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The impact of changes in tax rates and laws on deferred taxes, if any, is applied to the years during which temporary differences are expected to be settled and reflected in the financial statements in the period enacted.

As of December 31, 2024, we had a net deferred tax asset of $73.9 million, which is primarily attributable to temporary differences for our investments held through partnerships. In the year ended December 31, 2024, we recorded an additional valuation allowance of $47.7 million on the Company's federal net operating loss ("NOL") carryforwards and certain deferred taxes related to our consolidated partnerships. In 2024, we determined it was uncertain whether we would be able to use the Company's available federal NOL carryforwards and certain other deferred taxes. One of the factors used in assessing the need

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for a valuation allowance on net deferred tax assets is whether a company is in a three-year cumulative book loss position and for the three years ended December 31, 2024, the Company was in a cumulative book loss position. The Company is relying on deferred tax liabilities, and the ability to carry back capital losses, as sources of income to facilitate the recovery of its remaining deferred tax assets. The Company’s prospective investment strategy, fluctuations in the fair market value of its ownership interests prior to any dispositions and other factors may influence the timing of reversals of deferred tax assets and liabilities and their ultimate impact on taxable income or loss, which could have an effect on the recoverability of deferred tax assets. As of December 31, 2024, the Company has a federal valuation allowance of $47.7 million representing a full valuation allowance on its federal NOL carryforwards and certain other deferred taxes where it is not more likely than not that the tax benefit will be realized. Additionally, the Company has a state valuation allowance of $5.1 million representing certain state NOLs where it is not more likely than not that the tax benefit of certain state NOLs will be realized before the NOLs in those certain states expire. At this time, we consider it more likely than not that we will have sufficient taxable income and available excess capital gain from prior year periods that will allow us to realize our other deferred tax assets. The Company will continue to monitor the recoverability of deferred tax assets on a quarterly basis and may need to record an additional valuation allowance on its net deferred tax asset in future periods.

Refer to Note L - Income Taxes to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for further discussion of our accounting for income taxes.

Recent Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280). The guidance improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments in this ASU enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We have adopted this ASU which resulted in additional disclosures in our consolidated financial statements.

Refer to Note E - Segment Information to our Consolidated Financial Statements included in Item 8 Part II of this Annual Report for further discussion of our segment reporting.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), which requires consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2024. The guidance is to be applied on a prospective basis, though retrospective application is permitted. We do not expect the adoption of this authoritative guidance to have a material impact on our consolidated financial statements.

In January 2025, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires public business entities to disaggregate specific expenses in a tabular presentation. This includes purchases of inventory, employee compensation, depreciation, and other relevant expense captions on the face of the income statement. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. The guidance is to be applied on a prospective basis, though retrospective application is permitted. We do not expect the adoption of this authoritative guidance to have a material impact on our consolidated financial statements.

Certain Factors Affecting Comparability

Year ended December 31, 2024. On March 20, 2024, Alight entered into a definitive agreement to sell its professional services segment and its payroll and human capital management outsourcing businesses (the "Payroll & Professional Services Business"). The transaction closed on July 12, 2024. Beginning with the quarter ended March 31, 2024, Alight began accounting for the assets and liabilities of the disposed businesses as held for sale and its operating results as discontinued operations. Accordingly, Alight's results presented for the periods ended December 31, 2023 and 2022 have been retrospectively revised to reflect the Payroll & Professional Services Business as held for sale and discontinued operations.

Year ended December 31, 2023. In the year ended December 31, 2023, the Restaurant Group undertook a project to renegotiate or terminate leases and close O'Charley's stores with unfavorable store-level cash flow profiles. Through this process they closed 77 O'Charley's stores in the year ended December 31, 2023.

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Results of Operations

Consolidated Results of Operations

Net earnings.  The following table presents certain financial data for the years indicated:

Revenues

Total revenue decreased $117.5 million in 2024 compared to 2023, primarily driven by a decrease in revenue in the Restaurant Group segment. Total revenue in 2023 decreased $92.1 million compared to 2022, primarily driven by a decrease in revenue in the Restaurant Group segment.

The change in revenues from our segments is discussed in further detail at the segment level below.

Expenses

Our operating expenses consist primarily of cost of restaurant revenue, personnel costs, depreciation and amortization, and other operating expenses.

Cost of restaurant revenue includes cost of food and beverage, primarily the costs of beef, groceries, produce, seafood, poultry and alcoholic and non-alcoholic beverages, net of vendor discounts and rebates, payroll and related costs and expenses directly relating to restaurant level activities, and restaurant operating costs including occupancy and other operating expenses at the restaurant level.

Personnel costs include base salaries, commissions, benefits, stock-based compensation and bonuses paid to employees, and are one of our most significant operating expenses. Personnel costs that are directly attributable to the restaurant-level operations of the Restaurant Group are included in Cost of restaurant revenue.

Depreciation and amortization expense consists of our depreciation related to investments in property and equipment as well as amortization of intangible assets.

Other operating expenses include management fees, carried interest fees, professional fees, advertising costs, travel expenses and impairments of operating assets.

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The change in expenses from our segments is discussed in further detail at the segment level below.

Income tax benefit was $0.4 million, $77.0 million, and $89.9 million for the years ended December 31, 2024, 2023 and 2022, respectively. The effective tax rate for the years ended December 31, 2024, 2023 and 2022 was 0.2%, 37.2%, and 26.8%, respectively. The change in the effective tax rate in all periods is primarily attributable to the varying impact of earnings or losses from unconsolidated affiliates on our consolidated pretax earnings or losses. The fluctuation in income tax benefit as a percentage of loss before income taxes is attributable to our estimate of ultimate income tax liability or benefit and changes in the characteristics of net earnings or loss year to year, such as the weighting of operating income versus investment income. The change in our effective tax rate in the year ended December 31, 2024 compared to 2023 is primarily attributable to the recording of a valuation allowance in the current period of $47.7 million on our federal net operating loss carryforwards and certain deferred taxes within our consolidated partnerships, the impact to the rate of equity in losses of unconsolidated affiliates relative to pre-tax loss and the impairment recorded to our investment in Sightline.

For a detailed breakout of our effective tax rate and further discussion on changes in our taxes, see Note L - Income Taxes to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report.

Equity in (losses) earnings of unconsolidated affiliates for the periods indicated consisted of the following:

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(1) Equity in losses for D&B includes $8.6 million of loss for the years ended December 31, 2024 and 2023, 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 $2.9 million and $7.3 million of loss for the year ended December 31, 2024 and 2023, 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 Sightline.

(3) The amount for the years ended December 31, 2023 and 2022 includes the Company's equity in losses of Paysafe which was no longer accounted for under the equity method of accounting beginning December 31, 2023.

Net Loss

Net loss attributable to Cannae decreased $8.8 million in the year ended December 31, 2024, compared to 2023. Total net loss attributable to Cannae decreased $114.7 million in the year ended December 31, 2023, compared to 2022.

The change in net loss is attributable to the factors discussed above and net loss from the segments is discussed in further detail at the segment level below.

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Segment Results of Operations

Restaurant Group

The following table presents the results from operations of our Restaurant Group segment:

Total revenues for the Restaurant Group segment decreased $116.4 million, or 21.7%, in the year ended December 31, 2024 from 2023. The decrease was primarily attributable to approximately $100.3 million of incremental revenue included in the year ended December 31, 2023 associated with 99 Restaurants and O'Charley's stores that were closed prior to December 31, 2024 and a decline in comparable store sales.

Total revenues for the Restaurant Group segment decreased $94.6 million, or 15.0%, in the year ended December 31, 2023 from 2022. The decrease was primarily attributable to approximately $79.6 million of incremental revenue included in the year ended December 31, 2022 associated with stores that were closed prior to December 31, 2023 and a decline in comparable store sales.

Comparable Store Sales. One method we use in evaluating the performance of our restaurants is to compare sales results for restaurants period over period. A new restaurant is included in our comparable store sales figures starting in the first period following the restaurant's first seventy-eight weeks of operations. Changes in comparable store sales reflect changes in sales for the comparable store group of restaurants over a specified period of time. This measure highlights the performance of existing restaurants, as the impact of new restaurant openings is excluded. Comparable store sales for our 99 Restaurants brand changed (2.2)%, (2.1)%, and 7.5% in the years ended December 31, 2024, 2023 and 2022, respectively, from the prior fiscal years. The decrease in 2024 is primarily attributable to a decrease in guest counts, partially offset by an increase in the average amount spent by customers each visit. The decrease in 2023 is primarily attributable to a decrease in guest counts, partially offset by an increase in the average amount spent by customers each visit. Comparable store sales for our O'Charley's brand changed (8.5)%, (3.4)% and (5.8)% in the years ended December 31, 2024, 2023 and 2022, respectively, from the prior fiscal years. The decrease in 2024 is primarily attributable to a decrease in guest counts, partially offset by an increase in the average amount spent by customers each visit. The decrease in 2023 is primarily attributable to a decrease in guest counts, partially offset by an increase in the average amount spent by customers each visit.

Cost of restaurant revenue decreased $103.7 million, or 21.8%, in the year ended December 31, 2024 from 2023. Cost of restaurant revenue decreased $96.5 million, or 16.9%, in the year ended December 31, 2023 from 2022. Cost of restaurant revenue as a percentage of restaurant revenue was approximately 88.5%, 88.6%, and 90.6% in the years ended December 31, 2024, 2023 and 2022, respectively. The change in cost of restaurant revenue as a percentage of restaurant revenue in 2023 compared to 2022 is primarily attributable to an easing of inflation in the cost of labor, food and supplies relative to customary increases in menu pricing.

Other operating expenses decreased by $49.4 million, or 65.1%, in the year ended December 31, 2024 from 2023. Other operating expenses increased by $39.4 million, or 107.9%, in the year ended December 31, 2023 from 2022. The change in both periods is primarily attributable to $36.8 million of impairment recorded to the Restaurant Group's property and equipment, lease assets and other intangible assets in the year ended December 31, 2023.

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Recognized gains, net, decreased $17.4 million, or 48.3%, in the year ended December 31, 2024 from 2023 and increased $28.2 million, or 361.5%, in the year ended December 31, 2023 from 2022. The changes in both periods is primarily attributable to $30.2 million of gains recorded upon derecognition of O'Charley's lease liabilities associated with stores closed in 2023 and upon conversion of certain stores from a failed sale lease back in previous years to operating leases in 2023. The change in the year ended December 31, 2024 compared to 2023 was partially offset by a gain of $12.5 million recorded in 2024 related to the termination of the lease for the Restaurant Group's corporate headquarters.

Dun & Bradstreet

As of December 31, 2024, we owned approximately 15.6% of the outstanding common stock of Dun & Bradstreet. We account for our ownership interest in D&B under the equity method of accounting; therefore, its results of operations do not consolidate into ours.

Summarized financial information for Dun & Bradstreet for the relevant dates and time periods included in Equity in (losses) earnings of unconsolidated affiliates in our Consolidated Statements of Operations is presented below.

Details relating to the results of operations of Dun & Bradstreet (NYSE: "DNB") can be found in its periodic reports filed with the SEC.

Alight

As of December 31, 2024, we owned approximately 7.6% of the outstanding common stock of Alight. We account for our ownership of Alight under the equity method of accounting; therefore, its results of operations do not consolidate into ours.

Summarized financial information for Alight for the relevant dates and time periods included in Equity in (losses) earnings of unconsolidated affiliates in our Consolidated Statements of Operations is presented below.

Details relating to the results of operations of Alight (NYSE: "ALIT") can be found in its periodic reports filed with the SEC.

Black Knight Football

As of December 31, 2024, we owned approximately 47.2% of the ownership interest of BKFC. We account for our ownership of BKFC under the equity method of accounting and report our equity in the earnings or loss of BKFC on a three-month lag; therefore, its results do not consolidate into ours. Accordingly, our net loss for the year ended December 31, 2024 and December 31, 2023 includes our equity in BKFC’s losses for the year ended September 30, 2024 and for the period from December 13, 2022 (the date we acquired our initial interest in BKFC) through September 30, 2023, respectively.

Summarized financial information for BKFC for the relevant dates and time periods included in Equity in (losses) earnings of unconsolidated affiliates in our Consolidated Statements of Operations is presented below.

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Black Knight Football's total revenue is primarily attributable to Premier League media rights, matchday and sponsorship revenue earned by AFCB. Total revenues for Black Knight Football increased $62.1 million, or 41.7%, in the year ended September 30, 2024, compared to the period from December 13, 2022 through September 30, 2023. The increase in revenue was primarily attributable to the 2023 period including nine and a half months rather than twelve and an increase in matchday and sponsorship revenue.

Personnel costs were $185.7 million and $112.1 million in the year ended September 30, 2024 and the period from December 13, 2022 to September 30, 2023, respectively, an increase of $73.6 million, or 65.7%. The increase was attributable to the acquisition of new players at AFC Bournemouth and the 2023 period including nine and a half months rather than twelve.

Depreciation and amortization expense was $114.0 million and $99.8 million, respectively, in the year ended September 30, 2024 and the period from December 13, 2022 to September 20, 2023, respectively, an increase of $14.2 million, or 14%. The increase was attributable to inclusion of a full year of expense in the 2024 period.

Other income increased $16.4 million in the year ended September 30, 2024 compared to the corresponding period from December 13, 2022 to September 20, 2023. The increase was primarily attributable to increased gain on sale of players by AFCB, partially offset by a non-cash impairment charge of $12.0 million to BKFC's investment in FC Lorient resulting from the club's relegation to Ligue 2.

Corporate and Other

The Corporate and Other segment consists of our share in the operations of certain controlled businesses and other equity investments, activity of the corporate holding company and certain intercompany eliminations and taxes.

The following table presents the results from operations of our Corporate and Other segment:

Personnel costs in our corporate and other segment increased $29.3 million, or 101.4%, in the year ended December 31, 2024 compared to 2023, and decreased $6.4 million, or 18.1%, in the year ended December 31, 2023 compared to 2022. The increase in 2024 compared to 2023 was primarily attributable to increased non-cash stock-based compensation granted in 2024. The decrease in 2023 compared to 2022 is primarily driven by a decrease in investment success bonuses paid related to our sales of shares of Dayforce.

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Other operating expenses decreased $49.5 million, or 42.5%, in the year ended December 31, 2023 compared to 2022. The decrease is primarily attributable to $49.3 million of carried interest expense attributable to our sale of Optimal Blue in 2022, of which $31.8 million was paid in D&B stock.

Interest, investment and other income decreased $9.0 million in the year ended December 31, 2024 compared to 2023 and increased $11.1 million in the year ended December 31, 2023 compared to 2022. The change in both periods was primarily attributable to the change in interest income on our cash and short term investments resulting from changes in our cash balance and market interest rates.

Recognized losses, net in our Corporate and Other segment consists of the following:

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(1) Represents the gain recorded upon the revaluation of our investment to fair value on November 15, 2022.

Liquidity and Capital Resources

Cash Requirements. Our current cash requirements include our corporate operating expenses and funding needs of our Restaurant Group. There are no restrictions on our retained earnings regarding our ability to pay dividends to stockholders. The declaration of any future dividends is at the discretion of our Board of Directors. Additional uses of cash flow may include payment of dividends on our common stock, stock repurchases, acquisitions, additional investment in current investees, and debt repayments.

As of December 31, 2024, we had cash and cash equivalents of $131.5 million, of which $113.2 million was cash held by the corporate holding company, $6.2 million of short term investments, and $49.0 of immediate capacity under our existing holding company credit facilities with the ability to add an additional $500 million of borrowing capacity by amending our 2020 Margin Facility. As of December 31, 2024, we were committed under letters of credit totaling $6.2 million issued primarily in connection with casualty insurance programs for our Restaurant Group employees.

We continually assess our capital allocation strategy, including decisions relating to repurchasing our stock, paying dividends, reducing debt, and/or conserving cash. We believe that all anticipated cash requirements for current operations will be met from internally generated funds, cash dividends or distributions from subsidiaries and holdings, cash generated from short-term investments, potential sales of non-strategic assets, and borrowings on existing credit facilities. Our short-term and long-term liquidity requirements are monitored regularly to ensure that we can meet our cash requirements. We forecast the Company's liquidity needs and periodically review the short-term and long-term projected sources and uses of funds, as well as the asset, liability, investment and cash flow assumptions underlying such forecasts. As part of such forecasting, we actively manage the impact of rising interest rates on both our idle cash and our outstanding debt.

The Company believes the holding company's balances of cash, cash equivalents, short term investments, marketable equity securities, cash generated by its investments and capacity under its credit agreements, will be sufficient to satisfy its cash requirements over the next 12 months and beyond.

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We are focused on evaluating our assets and investments as potential vehicles for creating liquidity. Our intent is to use that liquidity for general corporate purposes, including, funding future investments, other strategic initiatives and/or conserving cash.

Operating Cash Flows. Our cash flows used in operations for the years ended December 31, 2024, 2023 and 2022 were $90.1 million, $87.8 million and $205.1 million, respectively. The increase in cash used in operations of $2.3 million from 2024 compared to 2023 is primarily attributable to lower tax payments and lower cash expenses incurred with our Manager. The decrease in cash used in operations of $117.3 million from 2023 compared to 2022 is primarily attributable to decreased tax payments and no carried interest expense incurred with our Manager in 2023.

Investing Cash Flows. Our cash flows provided by investing activities for the years ended December 31, 2024, 2023 and 2022 were $298.3 million, $53.1 million and $521.2 million, respectively. The increase in cash provided by investing activities of $245.2 million from 2024 compared to 2023 is primarily attributable to proceeds from sales of Dayforce, D&B and Alight in 2024, partially offset by an increase in purchases of new investments. The decrease in cash provided by investing activities of $468.1 million from 2023 compared to 2022 is primarily attributable to primarily attributable to higher proceeds from sales of Dayforce, AmeriLife, Optimal Blue, D&B and CorroHealth in the 2022 period compared to lower proceeds from sales of Dayforce in 2023 period, partially offset by increased proceeds from distributions from unconsolidated affiliates in the 2023 period and the investment in System1 in the 2022 period. See our Consolidated Statement of Cash Flows included in Item 8 of Part II of this Annual Report for a detailed breakout of cash flows from purchases and sales of investments.

Capital Expenditures. Total capital expenditures for property and equipment and other intangible assets were $7.0 million, $10.0 million and $14.3 million for the years ended December 31, 2024, 2023 and 2022, respectively. Capital expenditures in all years primarily consisted of purchases of equipment and leasehold improvements in our Restaurant Group segment and property improvements at our real estate operations.

Financing Cash Flows. Our cash flows used in financing activities for the years ended December 31, 2024, 2023 and 2022 were $182.9 million, $106.8 million and $154.2 million, respectively. The increase in cash used in financing activities of $76.1 million from 2024 compared to 2023 is primarily attributable to the Tender Offer, partial repayment of the FNF Revolver and dividends paid in 2024. The decrease in cash used in financing activities of $47.4 million from 2023 compared to 2022 is primarily attributable to a reduction in treasury stock repurchases in 2023 compared to 2022 and lower proceeds from debt, net of repayments.

Financing Arrangements. For a description of our financing arrangements see Note K - Notes Payable to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report.

Contractual Obligations. Our long-term contractual obligations generally include our credit agreements and debt facilities, lease payments and financing obligations on certain of our premises and equipment, purchase obligations of the Restaurant Group and payments to our Manager.

See Note G - Leases to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for further discussion of our leasing arrangements.

On February 26, 2024, the Company, Cannae LLC and Trasimene entered into a Third Amended and Restated Management Services Agreement (the "Third Amended MSA"). The Third Amended MSA amends the management services agreement primarily to (i) provide for a termination of the agreement by the Company effective June 30, 2027, (ii) reduce the management fee to a fixed amount of $7.6 million annually effective beginning July 2, 2024 and (iii) provide for payment of the termination fee under the agreement of $20 million to be paid by the Company to Trasimene in installments of $6.7 million annually over the three-year period ended July 1, 2026. The Third Amended MSA has a termination date of June 30, 2027 unless earlier terminated by the Company or Trasimene.

Purchase obligations include agreements to purchase goods or services that are enforceable, are legally binding and specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. The Restaurant Group has unconditional purchase obligations with various vendors, primarily related to food and beverage obligations with fixed commitments in regard to the time period of the contract and the quantities purchased with annual price adjustments that can fluctuate. Future purchase obligations are estimated by assuming historical purchase activity over the remaining, non-cancellable terms of the various agreements. For agreements with minimum purchase obligations, at least the minimum amounts we are legally required to purchase are included. These agreements do not include fixed delivery terms. We used both historical and projected volume and pricing as of December 31, 2024 to determine the amount of the obligations.

Restaurant Group financing obligations include its agreements to lease certain O'Charley's restaurant locations that are accounted for as failed sale and leaseback transactions.

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As of December 31, 2024, our required annual payments relating to these contractual obligations were as follows:

Capital Stock Transactions. For information on our 2022 Repurchase Program, 2023 Repurchase Program and the Tender Offer, see discussion under the header Purchases of Equity Securities by the Issuer included in Item 5 of Part II of this Annual Report.