NYSE:KFS Kingsway Financial Services Q1 2025 Earnings Report $9.00 +0.11 (+1.24%) As of 05/9/2025 03:59 PM Eastern Earnings History Kingsway Financial Services EPS ResultsActual EPS-$0.13Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/AKingsway Financial Services Revenue ResultsActual RevenueN/AExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/AKingsway Financial Services Announcement DetailsQuarterQ1 2025Date5/8/2025TimeAfter Market ClosesConference Call DateThursday, May 8, 2025Conference Call Time5:00PM ETConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Kingsway Financial Services Q1 2025 Earnings Call TranscriptProvided by QuartrMay 8, 2025 ShareLink copied to clipboard.There are 4 speakers on the call. Operator00:00:00Good day, and welcome to the Kingsway First Quarter twenty twenty five Earnings Call. At this time, participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. With me on the call are J. Operator00:00:14T. Fitzgerald, Chief Executive Officer and Kent Hansen, Chief Financial Officer. Before we begin, I want to remind everybody that today's conference may contain forward looking statements. Forward looking statements include statements regarding the future, including expected revenue, operating margins, expenses and future business outlook. Actual results or trends could materially differ from those contemplated by those forward looking statements. Operator00:00:39For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward looking statements, please see the risk factors detailed in the company's annual report on Form 10 ks and subsequent Forms 10 Q and Forms eight ks filed with the Securities and Exchange Commission. Please note also that today's call may include the use of non GAAP metrics that management utilizes to analyze the company's performance. A reconciliation of such non GAAP metrics to the most comparable GAAP measures is available in the most recent press release as well as in the company's periodic filings with the SEC. Now I would like to turn the call over to JT Fitzgerald, CEO of Kingsway. JT, please proceed. Speaker 100:01:26Thank you, Paul. Good afternoon, everyone, and welcome to the Kingsway earnings call for Q1 twenty twenty five. To our knowledge, Kingsway is the only publicly traded U. S. Company employing the search fund model to acquire and build great businesses. Speaker 100:01:41We own and operate a diversified collection of high quality services companies with great growth prospects that generate recurring revenue and that are asset light and profitable. Our goal is to compound long term shareholder value on a per share basis, and we believe our business can scale due to our decentralized management model and our talented team of operator CEOs. We also continue to benefit from significant tax assets that enhance our returns. In short, Kingsway is uniquely positioned to capitalize on the search fund model at scale within a tax efficient public company framework. Since the start of the year, we've made meaningful progress in advancing our long term growth strategy. Speaker 100:02:24In March, we completed the acquisition of privately held MLC Plumbing, known locally as Bud's Plumbing, a 100 plus year old residential and commercial service and repair business based in Evansville, Indiana. The transaction was executed through our newly formed platform, Kingsway Skilled Trades, which was created to capitalize on the large and fragmented universe of high quality trade services businesses across North America. Bud's Plumbing exemplifies the type of high quality, cash generative business we seek to bring into the Kingsway family. We acquired it for $5,000,000 plus transaction expenses and small working capital adjustment. The acquisition was funded with cash on hand and a 1,250,000 seller note. Speaker 100:03:10We're pleased to report that one of our operators in residence, Rob Casper, has assumed the role of CEO of Kingsway Skilled Trades, while BUDS' previous owner, Mark Korn, is staying on as President of BUDS for a one year transition period. The addition of Buds Plumbing contributes approximately $800,000 of annual adjusted EBITDA to our KSX segment on a run rate basis. More recently, one of our wholly owned subsidiaries, SPI Software, acquired Viewpoint, a leading cloud native timeshare software provider focused on the vacation ownership market. Headquartered in Mount Waverley, Australia, Viewpoint strengthens SPI Software's leadership in the vacation ownership software market and expands its ability to deliver innovative cloud based solutions to an even broader client base. This acquisition marks the second company added to our vertical market solutions software platform. Speaker 100:04:09It represents a strong strategic fit, given the complementary nature of SPI and Viewpoint's offerings. And both organizations share a deep commitment to exceptional customer relationships and support. By bringing these two organizations together, we aim to accelerate their joint product roadmap and unlock new opportunities for geographic and market expansion. The Viewpoint acquisition adds over $1,000,000 of unaudited annual recurring revenue and approximately $200,000 of unaudited EBITDA to our KSX segment on a run rate basis. The acquisition was funded with cash on hand at SPI. Speaker 100:04:46On a combined basis, SPI Software and Viewpoint have ARR approaching $5,000,000 double digit EBITDA margins and have achieved rule of 40 status. Our operator CEO, Drew Richard, who is the President of SPI Software, is building a wonderful business, and we think he's just getting started. We're excited for what the future holds for both SPI Software and Viewpoint. Both the Buds Plumbing and Viewpoint acquisitions enhance our KSX platform and provide additional levers for growth and long term value creation. We also took steps to strengthen our leadership in corporate governance. Speaker 100:05:24During the quarter, we appointed two new independent directors to Kingsway's Board, Adam Petinkin and Josh Horowitz. Adam is the founder and managing partner of David Capital Partners and brings deep investment expertise as well as board experience with a high growth private enterprise software company. Josh is a managing director at Palm Management with over twenty three years of experience in portfolio management and public company board service. Both individuals have a wealth of investment and operational experience that aligns well with search accelerator strategy. We believe their addition to the board strengthens our oversight as we continue to scale Kingsway and unlock long term shareholder value. Speaker 100:06:05Turning to our business performance. We are encouraged by the results across both KSX and extended warranty. As a reminder, the first quarter is seasonally the weakest quarter of the year for a number of our operating subsidiaries. So we would expect to see some benefit from seasonality as we move past Q1. In KSX, revenue and adjusted EBITDA each grew 23% year on year. Speaker 100:06:29More importantly, however, many of our KSX businesses have built a strong foundation to accelerate growth on both the top line and bottom line. This is the classic J curve of search. Post acquisition, there's an investment period as a new operator invests in the business, hiring great people and building the infrastructure to allow the business to scale. The company then reaches an inflection point where the strategic initiatives kick in, the investment pays off and growth accelerates. For businesses like SNS and Image Solutions, it feels like that inflection point is getting awfully close. Speaker 100:07:07This makes me optimistic for the KSX growth path going forward. We also saw encouraging signs in extended warranty. After two challenging years marked by industry headwinds and cyclical pressures, extended warranty appears to be entering a more favorable phase of recovery. Cash sales have returned to growth and were up 3.7% over the prior year and up 9.3% sequentially. Modified cash EBITDA, a commonly used metric in the warranty industry that more closely tracks the cash flow of warranty businesses, showed strong improvement. Speaker 100:07:42Trailing twelve month modified cash EBITDA and extended warranty was 11.7% higher at the end of Q1 twenty twenty five relative to the end of Q1 '20 '20 '4. While it's still early days in the recovery, the fact that Kingsway's extended warranty segment has not just stabilized but is now returning to top line growth is welcome news. As of quarter end, our trailing twelve month adjusted run rate EBITDA for the businesses we own, including the pro form a contributions of recent acquisitions, stands at approximately 18,000,000 to $19,000,000 This figure is intended to illustrate the earnings power of our current portfolio on a twelve month trailing basis and is not meant as forward looking guidance. Overall, we're encouraged by the momentum we're seeing in both KSX and extended warranty, and we remain focused on driving growth and profitability. With that, I'll now turn the call over to Kent for a closer look at our first quarter financial performance. Speaker 200:08:43Thank you, JT, and good afternoon, everyone. For the first quarter, consolidated revenue was $28,300,000 an increase of 8.4% compared to $26,200,000 in the first quarter of twenty twenty four. This growth was driven by our Kingsway Search Accelerator segment. Consolidated adjusted EBITDA declined $800,000 versus the prior year quarter, reflecting lower profitability in our extended warranty segment and higher holdcoat costs, primarily related to M and A expenses, partly offset by improved results at KSX. Breaking down performance by segment. Speaker 200:09:23In KSX, results were in line with our expectations. Revenue was $11,700,000 in the first quarter, up 23.3% compared to $9,500,000 in the same period last year. Adjusted EBITDA for KSX was $1,900,000 an increase of 23.3% year over year. I'll now provide a bit more detail on each of our KSX operating companies, other than SPI software, which has already been discussed. Revix and C Suite, which are operated by common management and provide outsourced finance and CFO services, experienced a small year over year decline in revenue and a small year over year increase in adjusted EBITDA. Speaker 200:10:05We continue to be impressed by operator CEO Timmy Oka and believe there is opportunity for both organic and inorganic growth in this business. At SNS, our nurse staffing business, revenue grew by 7.5%, underpinned by a significant increase in travel nurse shifts that we believe is sustainable. While adjusted EBITDA declined slightly year over year, we are encouraged by the improving revenue momentum, and our view is that operating leverage is not far behind. After a challenging period for nurse staffing businesses over the last couple of years, we believe SNS has positioned itself for growth and is on the road to a significant recovery. DDI, our cardiac monitoring services provider, also delivered solid results. Speaker 200:10:55Revenue increased 10.9% year over year in Q1, driven by the successful addition of new customers. Adjusted EBITDA for DDI trailed the prior year quarter modestly, as the company has been investing in additional talent and infrastructure to support future growth. We view these investments as positioning DDI to scale efficiently as demand increases. Finally, our results this quarter benefited from the inclusion of two businesses that were not in our portfolio a year ago, Image Solutions and Buzz Plumbing. The contributions from these recent acquisitions strengthen our platform and expand our capabilities in both technology enabled services through Image Solutions and skilled trades through Buzz. Speaker 200:11:40We see meaningful potential for these for both of these businesses. Turning now to our extended warranty segment. First quarter revenue was essentially flat at $16,700,000 compared to the first quarter of twenty twenty four. While top line growth was unchanged, it is important to note that cash sales, a leading indicator for future revenue, increased 3.7% year over year in Q1 and were up 9.3% sequentially from year end. This uptick in cash sales reflects healthy underlying consumer demand for our warranty products. Speaker 200:12:18Extended warranty adjusted EBITDA for the first quarter of twenty twenty five was $800,000 as compared to $1,400,000 in the year ago quarter. Despite the dip in reported adjusted EBITDA, we are encouraged by the momentum building in the extended warranty segment. As JT mentioned, the segment has returned to growth in cash sales, and trailing twelve month modified cash EBITDA was up 11.7% year over year. As mentioned, modified cash EBITDA is a commonly used metric to evaluate the performance of warranty businesses as it more closely tracks the cash flows of the business. The recent healthy growth in this metric gives us confidence that GAAP earnings should rebound over time as deferred revenue from cash sales is recognized over future periods. Speaker 200:13:08In short, the extended warranty segment remains profitable, cash generative, and positioned for future success. Let's briefly turn now to these three extended warranty businesses. IWS, our credit union focused auto warranty business, had a strong first quarter with cash sales up more than 20% year over year. While adjusted EBITDA declined year over year, revenue was up and modified cash EBITDA was flat, mainly due to higher claims and operating expenses in the quarter than a year ago. IWS has been proactively adjusting pricing to mitigate higher claims inflation over the last few years, and we expect the combination of strong cash sales and pricing action to benefit IWS' earnings over time. Speaker 200:13:55Next is PWI and Penn, our dealer focused auto warranty businesses. Both revenue and adjusted EBITDA were down year over year in the first quarter as a decline in earned premiums and higher operating expenses offset the benefit of lower claims incurred. But modified cash EBITDA actually increased in the quarter. At quarter end, we appointed Robbie Humble as the new President and CEO of PWI and Pen excuse me, of PWI and Pen. Robbie brings deep industry experience and a strong leadership track record. Speaker 200:14:28Notably, his background and incentives are aligned more closely with our KSX approach. In the handful of weeks he's been at the helm, Robbie has already attracted new leadership talent to the business. We are confident that under his direction, PWI and Penn will be reinvigorated to drive growth and improve results. Lastly, at Trinity, our mechanical equipment warranty and maintenance business, revenue was up in the first quarter, but this was outweighed by higher expenses in the seasonally low quarter for this business. About a year ago, we brought in a new sales leader for the maintenance business, and we are now seeing positive momentum. Speaker 200:15:06The team at Trinity is focused on improving the sales mix and managing costs, and we remain confident in the prospects for this business. Having recapped each of the businesses, let's now turn to the balance sheet and capital structure. In February, we completed a $6,000,000 private placement issuing 240,000 shares of a new Class C convertible preferred stock. This capital raise provided the funds necessary to execute the Budd's Plumbing acquisition. Then in March, at the closing of the Budd's deal, we financed the portion of the purchase with a $1,250,000 seller note to the former owner. Speaker 200:15:42That note is recorded as a note payable on our 03/31/2025 balance sheet. As of 03/31/2025, we held $6,400,000 in cash and cash equivalents, up from $5,500,000 at year end. Total debt was $59,500,000 at quarter end compared to $57,500,000 as of 12/31/2024. This slight increase in debt primarily reflects the addition of Bud's Plumbing seller note, as well as an increase of the Ravix debt as we refinanced that debt and used the proceeds to pay off the original acquisition earn out in full. Our debt consists of $45,000,000 in bank loans, 1,100,000.0 in notes payable, the seller note, which is held at fair value, and $13,400,000 in subordinated debt. Speaker 200:16:34Net debt, or debt minus cash, at quarter end was $53,100,000 up slightly from $52,000,000 at year end. Let me now turn things back over to JT for a few final thoughts before we open the line for questions. JT? Speaker 100:16:49Thanks, Ken. Before we go to Q and A, I just want to reiterate our excitement about the progress we're making. The addition of Bud's Plumbing and Viewpoint, the continued build out of KSX and the positive sales momentum and extended warranty all reinforce our conviction in our strategy. Our deal pipeline is robust, in fact, the most active it has ever been, which is reflected in the fact that we've already executed two deals in the first four months of the year. I'm excited for what the rest of 2025 holds in store for Kingsway. Speaker 100:17:19Finally, we'd like to remind everyone that we are hosting our Annual Investor Day on Monday, May 19, at the New York Stock Exchange. We look forward to spending time with many of you, walking through the building blocks of our strategy and introducing some of the leaders driving execution across our portfolio. In late breaking news, I'm excited to report that Tom Joyce, the former CEO of Danaher and a member of our KSX advisory board, will be joining us on the nineteenth for a fireside chat. If you haven't already RSVP'd, please reach out to James Carbonara at jameshaydenir dot com. The event will also be webcast if you can't participate in person. Speaker 100:18:05I'll now turn the call back over to Paul to open the line for any questions. Operator00:18:11Thank you. At this time, we'll be conducting a question and answer session. Session. And there were no questions currently from the lines. I'd now like to hand the call over to James Carbonara for some e mail questions. Speaker 300:18:53Thank you, operator. Yes, a handful of questions did come in via email. The first one is the Viewpoint acquisition seems interesting. Could you please provide any color on how the transaction came about and why it might make sense strategically? Speaker 100:19:11Yes, sure. How it came about, it was sourced by Drew at SBI. He developed a relationship with the company and its former owners and advanced the conversation in, I think, probably middle of the fourth quarter last year. In terms of why it makes sense strategically, I think you got to break it down, kind of look at it based on product, customer profile, and geography. And so just sort of to set the table, SPI is a hosted and on prem software solution for enterprise customers, predominantly in North America. Speaker 100:19:54And Viewpoint, very differently, is a cloud native software with smaller customers, single location in many cases, resort operators in Asia Pacific and Australia. And so when Drew was evaluating his strategy, there's a large segment in North America of smaller single location property resort managers who were looking for a cloud native software solution. And looking sort of to expand geographically envied the Asia Pacific region and Australia for larger enterprise clients. So the combination of these two businesses solves a couple of problems. One, it gives Drew a cloud native software solution for a segment that he was going after in North America without having to rewrite write all that code. Speaker 100:20:54And it also gives him access to a new geography for his enterprise solution. So we think it really makes a lot of sense. Speaker 300:21:05Thank you. The next question is, can you please explain what you mean by the J curve with search acquisitions and how it works in practice? Speaker 100:21:15Yeah. I spoke to it a little bit in the prepared remarks. I think that the J curve would be just sort of the shape of a performance curve over time. And typically in a search fund acquisition, there's an element of bringing in, upgrading talent, professionalizing their processes, investing in technology to get the business in a position to grow. And that always has a negative impact on profitability in the first several quarters. Speaker 100:21:48I'd also say that there's probably a bit of a J curve on sort of the operator. I'm trying to paint a picture. We've talked about this in the past. If you had on the vertical axis performance and on the horizontal axis time and you took two different graphs, one with an experienced operator that would sort of go up into the right at a modest slope. But if you have like a very high attribute inexperienced operator, performance because they don't they're going to make mistakes and things, lag the experienced operator for a period of time. Speaker 100:22:31But those two curves cross, in my experience, somewhere around two to three years. And the high attribute operator outperforms thereafter over time. And so the search J curve is really two things. One is the impact on the company from investing in growth. And the other is the sort of experience curve of the operator, high attribute operator. Speaker 100:22:59And so what that all means is that it requires patience before value creation is evident. So we're certainly seeing that at DDI and had that at Ravix with SNS, all of our businesses, Image Solutions as well as probably in the early stages of its J curve. But we have confidence in the attributes of the operator and the investments they're making in future growth. Speaker 300:23:27Thank you. The next question is, you mentioned a robust deal pipeline. Can you share more about what you're seeing with respect to search M and A? Speaker 100:23:40Yeah. Look, we have three OYRs right now that are all at full stride. They've been doing it a long time. And so they are very good at building their M and A pipelines. And so we're really excited about where they are in their gestation period, if you will. Speaker 100:24:00And then we also have a couple of platforms that are looking for bolt ons. I think Skilled Trades was formed specifically for doing transactions with a more experienced and high attribute operator. We just did an acquisition within VMS. You think about other businesses we own that have been operating for a while where that high attribute entrepreneur has now got experience in a fragmented market, there are also lots of opportunities for tuck in acquisitions there. So yeah, we're very excited. Speaker 300:24:40Thank you. The next question states, can you speak to the reasoning for the owner of BUDS staying on as president for a one year transition period? Could we see that replicated past owners staying on for years president with future acquisitions? Speaker 100:24:57Yeah, I would say in search that's very typical and actually desirable. If you think about the analogy of kind of a horse racing analogy since we just had the Kentucky Derby. The industry is the track, the business is the horse, and the entrepreneur is the jockey. It's really helpful to have someone riding alongside that jockey for their first sort of lap around the track. And so that transition period, transitioning customer relationships, the transfer of all of that institutional knowledge in that organization, very valuable. Speaker 100:25:33So we're really grateful when owners want to hand over their baby, their legacy to a young entrepreneur and work with them over a long transition period. Just really a win win. Yes, hope that we would see that on future acquisitions. Speaker 300:25:53Terrific. And the last question we have is, with vertical market solutions and now skilled trades, you have a couple of platforms. Are there any other industries you might target for platforms? Speaker 100:26:07Yeah. So it's an interesting question. It's a good question. So what is a platform? For us, we sort of evaluate different industries. Speaker 100:26:19We have like an internal game board. We think game selection is very important. And we sort of bifurcate our game board into two different sort of types, taxonomies of industries. One is power law and those are like high organic growth businesses. And the other is rule of 10, which are maybe lower organic growth industry, higher level of recurring revenue and very fragmented. Speaker 100:26:48And so the rule of 10 type industries would be places where we would think would make attractive platforms where most of the growth might come from acquisition, inorganic growth. And so there are a lot of interesting industries that could be compelling places to build a platform. Some that come to mind, insurance brokerage, wealth management RIA, accounting services, we sort of own a platform there already. We don't call it that. And the key there is that it's got to be a great industry that would support growth via acquisition, but also operator fit, right? Speaker 100:27:31That it's got to be an industry where one of our OARs is really keenly interested in spending their life. Speaker 300:27:41Excellent. Thank you, JT. And Paul, that was the last question that we had, coming in on email. I'll throw it back to you to close out the call. Operator00:27:51Thank you. And there were no other questions from the lines either. And that does conclude today's conference. And you may disconnect your lines at this time. Thank you for your participation.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallKingsway Financial Services Q1 202500:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Kingsway Financial Services Earnings HeadlinesKingsway Financial Services, Inc.: Kingsway Reports First Quarter 2025 Financial ResultsMay 9 at 6:23 PM | finanznachrichten.deKingsway Financial Services, Inc.: Kingsway to Report Financial Results for First Quarter 2025 on May 8May 6, 2025 | finanznachrichten.deGold Hits New Highs as Global Markets SpiralWhen Trump took office in 2017, gold was just $1,100 an ounce. By the time he left, it had soared to $1,839. Now… as new tariffs take effect, gold is breaking records again. You've hopefully already seen this in action… but gold is surpassing $3,000 per ounce for the first time EVER.May 10, 2025 | Premier Gold Co (Ad)Kingsway Publishes Updated Investor Presentation to Company WebsiteApril 23, 2025 | gurufocus.comKingsway Financial Services Inc. (NYSE:KFS) Appoints Rob Humble as President and CEO of PWI and Penn WarrantyApril 2, 2025 | finance.yahoo.comKingsway Financial Services Appoints New CEO for Auto Warranty SegmentApril 2, 2025 | tipranks.comSee More Kingsway Financial Services Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Kingsway Financial Services? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Kingsway Financial Services and other key companies, straight to your email. Email Address About Kingsway Financial ServicesKingsway Financial Services (NYSE:KFS), through its subsidiaries, engages in the extended warranty and business services in the United States. The company operates through two segments, Extended Warranty and Kingsway Search Xcelerator. The Extended Warranty segment markets, sells, and administers vehicle service agreements and related products for new and used automobiles, motorcycles, and ATVs. This segment also markets and distributes warranty products to manufacturers, distributors, and installers of heating, ventilation and air conditioning, standby generator, commercial LED lighting, and commercial refrigeration equipment; and provides equipment breakdown and maintenance support services to companies, as well as after-market vehicle protection services. The Kingsway Search Xcelerator offers outsourced finance and human resources consulting services, including operational accounting, such as bookkeeping, accounting, financial reporting, and analysis and strategic finance services; technical accounting comprising initial public offerings, Securities and Exchange Commission reporting, and international consolidation services; human resources, workforce management, and compliance support services; and advisory services. This segment also provides financial executive services for project and interim staffing engagements; search services for permanent placements; healthcare staffing services to acute healthcare facilities for short-term and day-to-day needs of hospitals; software products for the management needs of all types of shared-ownership properties; and fully managed outsourced cardiac telemetry services, as well as provides mobile monitors to the hospitals. The company offers its products and services through credit unions and dealers. Kingsway Financial Services Inc. was incorporated in 1989 and is headquartered in Chicago, Illinois.View Kingsway Financial Services ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Why Nearly 20 Analysts Raised Meta Price Targets Post-EarningsOXY Stock Rebound Begins Following Solid Earnings BeatMonolithic Power Systems: Will Strong Earnings Spark a Recovery?Datadog Earnings Delight: Q1 Strength and an Upbeat Forecast Upwork's Earnings Beat Fuels Stock Rally—Is Freelancing Booming?DexCom Stock: Earnings Beat and New Market Access Drive Bull CaseDisney Stock Jumps on Earnings—Is the Magic Sustainable? 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There are 4 speakers on the call. Operator00:00:00Good day, and welcome to the Kingsway First Quarter twenty twenty five Earnings Call. At this time, participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. With me on the call are J. Operator00:00:14T. Fitzgerald, Chief Executive Officer and Kent Hansen, Chief Financial Officer. Before we begin, I want to remind everybody that today's conference may contain forward looking statements. Forward looking statements include statements regarding the future, including expected revenue, operating margins, expenses and future business outlook. Actual results or trends could materially differ from those contemplated by those forward looking statements. Operator00:00:39For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward looking statements, please see the risk factors detailed in the company's annual report on Form 10 ks and subsequent Forms 10 Q and Forms eight ks filed with the Securities and Exchange Commission. Please note also that today's call may include the use of non GAAP metrics that management utilizes to analyze the company's performance. A reconciliation of such non GAAP metrics to the most comparable GAAP measures is available in the most recent press release as well as in the company's periodic filings with the SEC. Now I would like to turn the call over to JT Fitzgerald, CEO of Kingsway. JT, please proceed. Speaker 100:01:26Thank you, Paul. Good afternoon, everyone, and welcome to the Kingsway earnings call for Q1 twenty twenty five. To our knowledge, Kingsway is the only publicly traded U. S. Company employing the search fund model to acquire and build great businesses. Speaker 100:01:41We own and operate a diversified collection of high quality services companies with great growth prospects that generate recurring revenue and that are asset light and profitable. Our goal is to compound long term shareholder value on a per share basis, and we believe our business can scale due to our decentralized management model and our talented team of operator CEOs. We also continue to benefit from significant tax assets that enhance our returns. In short, Kingsway is uniquely positioned to capitalize on the search fund model at scale within a tax efficient public company framework. Since the start of the year, we've made meaningful progress in advancing our long term growth strategy. Speaker 100:02:24In March, we completed the acquisition of privately held MLC Plumbing, known locally as Bud's Plumbing, a 100 plus year old residential and commercial service and repair business based in Evansville, Indiana. The transaction was executed through our newly formed platform, Kingsway Skilled Trades, which was created to capitalize on the large and fragmented universe of high quality trade services businesses across North America. Bud's Plumbing exemplifies the type of high quality, cash generative business we seek to bring into the Kingsway family. We acquired it for $5,000,000 plus transaction expenses and small working capital adjustment. The acquisition was funded with cash on hand and a 1,250,000 seller note. Speaker 100:03:10We're pleased to report that one of our operators in residence, Rob Casper, has assumed the role of CEO of Kingsway Skilled Trades, while BUDS' previous owner, Mark Korn, is staying on as President of BUDS for a one year transition period. The addition of Buds Plumbing contributes approximately $800,000 of annual adjusted EBITDA to our KSX segment on a run rate basis. More recently, one of our wholly owned subsidiaries, SPI Software, acquired Viewpoint, a leading cloud native timeshare software provider focused on the vacation ownership market. Headquartered in Mount Waverley, Australia, Viewpoint strengthens SPI Software's leadership in the vacation ownership software market and expands its ability to deliver innovative cloud based solutions to an even broader client base. This acquisition marks the second company added to our vertical market solutions software platform. Speaker 100:04:09It represents a strong strategic fit, given the complementary nature of SPI and Viewpoint's offerings. And both organizations share a deep commitment to exceptional customer relationships and support. By bringing these two organizations together, we aim to accelerate their joint product roadmap and unlock new opportunities for geographic and market expansion. The Viewpoint acquisition adds over $1,000,000 of unaudited annual recurring revenue and approximately $200,000 of unaudited EBITDA to our KSX segment on a run rate basis. The acquisition was funded with cash on hand at SPI. Speaker 100:04:46On a combined basis, SPI Software and Viewpoint have ARR approaching $5,000,000 double digit EBITDA margins and have achieved rule of 40 status. Our operator CEO, Drew Richard, who is the President of SPI Software, is building a wonderful business, and we think he's just getting started. We're excited for what the future holds for both SPI Software and Viewpoint. Both the Buds Plumbing and Viewpoint acquisitions enhance our KSX platform and provide additional levers for growth and long term value creation. We also took steps to strengthen our leadership in corporate governance. Speaker 100:05:24During the quarter, we appointed two new independent directors to Kingsway's Board, Adam Petinkin and Josh Horowitz. Adam is the founder and managing partner of David Capital Partners and brings deep investment expertise as well as board experience with a high growth private enterprise software company. Josh is a managing director at Palm Management with over twenty three years of experience in portfolio management and public company board service. Both individuals have a wealth of investment and operational experience that aligns well with search accelerator strategy. We believe their addition to the board strengthens our oversight as we continue to scale Kingsway and unlock long term shareholder value. Speaker 100:06:05Turning to our business performance. We are encouraged by the results across both KSX and extended warranty. As a reminder, the first quarter is seasonally the weakest quarter of the year for a number of our operating subsidiaries. So we would expect to see some benefit from seasonality as we move past Q1. In KSX, revenue and adjusted EBITDA each grew 23% year on year. Speaker 100:06:29More importantly, however, many of our KSX businesses have built a strong foundation to accelerate growth on both the top line and bottom line. This is the classic J curve of search. Post acquisition, there's an investment period as a new operator invests in the business, hiring great people and building the infrastructure to allow the business to scale. The company then reaches an inflection point where the strategic initiatives kick in, the investment pays off and growth accelerates. For businesses like SNS and Image Solutions, it feels like that inflection point is getting awfully close. Speaker 100:07:07This makes me optimistic for the KSX growth path going forward. We also saw encouraging signs in extended warranty. After two challenging years marked by industry headwinds and cyclical pressures, extended warranty appears to be entering a more favorable phase of recovery. Cash sales have returned to growth and were up 3.7% over the prior year and up 9.3% sequentially. Modified cash EBITDA, a commonly used metric in the warranty industry that more closely tracks the cash flow of warranty businesses, showed strong improvement. Speaker 100:07:42Trailing twelve month modified cash EBITDA and extended warranty was 11.7% higher at the end of Q1 twenty twenty five relative to the end of Q1 '20 '20 '4. While it's still early days in the recovery, the fact that Kingsway's extended warranty segment has not just stabilized but is now returning to top line growth is welcome news. As of quarter end, our trailing twelve month adjusted run rate EBITDA for the businesses we own, including the pro form a contributions of recent acquisitions, stands at approximately 18,000,000 to $19,000,000 This figure is intended to illustrate the earnings power of our current portfolio on a twelve month trailing basis and is not meant as forward looking guidance. Overall, we're encouraged by the momentum we're seeing in both KSX and extended warranty, and we remain focused on driving growth and profitability. With that, I'll now turn the call over to Kent for a closer look at our first quarter financial performance. Speaker 200:08:43Thank you, JT, and good afternoon, everyone. For the first quarter, consolidated revenue was $28,300,000 an increase of 8.4% compared to $26,200,000 in the first quarter of twenty twenty four. This growth was driven by our Kingsway Search Accelerator segment. Consolidated adjusted EBITDA declined $800,000 versus the prior year quarter, reflecting lower profitability in our extended warranty segment and higher holdcoat costs, primarily related to M and A expenses, partly offset by improved results at KSX. Breaking down performance by segment. Speaker 200:09:23In KSX, results were in line with our expectations. Revenue was $11,700,000 in the first quarter, up 23.3% compared to $9,500,000 in the same period last year. Adjusted EBITDA for KSX was $1,900,000 an increase of 23.3% year over year. I'll now provide a bit more detail on each of our KSX operating companies, other than SPI software, which has already been discussed. Revix and C Suite, which are operated by common management and provide outsourced finance and CFO services, experienced a small year over year decline in revenue and a small year over year increase in adjusted EBITDA. Speaker 200:10:05We continue to be impressed by operator CEO Timmy Oka and believe there is opportunity for both organic and inorganic growth in this business. At SNS, our nurse staffing business, revenue grew by 7.5%, underpinned by a significant increase in travel nurse shifts that we believe is sustainable. While adjusted EBITDA declined slightly year over year, we are encouraged by the improving revenue momentum, and our view is that operating leverage is not far behind. After a challenging period for nurse staffing businesses over the last couple of years, we believe SNS has positioned itself for growth and is on the road to a significant recovery. DDI, our cardiac monitoring services provider, also delivered solid results. Speaker 200:10:55Revenue increased 10.9% year over year in Q1, driven by the successful addition of new customers. Adjusted EBITDA for DDI trailed the prior year quarter modestly, as the company has been investing in additional talent and infrastructure to support future growth. We view these investments as positioning DDI to scale efficiently as demand increases. Finally, our results this quarter benefited from the inclusion of two businesses that were not in our portfolio a year ago, Image Solutions and Buzz Plumbing. The contributions from these recent acquisitions strengthen our platform and expand our capabilities in both technology enabled services through Image Solutions and skilled trades through Buzz. Speaker 200:11:40We see meaningful potential for these for both of these businesses. Turning now to our extended warranty segment. First quarter revenue was essentially flat at $16,700,000 compared to the first quarter of twenty twenty four. While top line growth was unchanged, it is important to note that cash sales, a leading indicator for future revenue, increased 3.7% year over year in Q1 and were up 9.3% sequentially from year end. This uptick in cash sales reflects healthy underlying consumer demand for our warranty products. Speaker 200:12:18Extended warranty adjusted EBITDA for the first quarter of twenty twenty five was $800,000 as compared to $1,400,000 in the year ago quarter. Despite the dip in reported adjusted EBITDA, we are encouraged by the momentum building in the extended warranty segment. As JT mentioned, the segment has returned to growth in cash sales, and trailing twelve month modified cash EBITDA was up 11.7% year over year. As mentioned, modified cash EBITDA is a commonly used metric to evaluate the performance of warranty businesses as it more closely tracks the cash flows of the business. The recent healthy growth in this metric gives us confidence that GAAP earnings should rebound over time as deferred revenue from cash sales is recognized over future periods. Speaker 200:13:08In short, the extended warranty segment remains profitable, cash generative, and positioned for future success. Let's briefly turn now to these three extended warranty businesses. IWS, our credit union focused auto warranty business, had a strong first quarter with cash sales up more than 20% year over year. While adjusted EBITDA declined year over year, revenue was up and modified cash EBITDA was flat, mainly due to higher claims and operating expenses in the quarter than a year ago. IWS has been proactively adjusting pricing to mitigate higher claims inflation over the last few years, and we expect the combination of strong cash sales and pricing action to benefit IWS' earnings over time. Speaker 200:13:55Next is PWI and Penn, our dealer focused auto warranty businesses. Both revenue and adjusted EBITDA were down year over year in the first quarter as a decline in earned premiums and higher operating expenses offset the benefit of lower claims incurred. But modified cash EBITDA actually increased in the quarter. At quarter end, we appointed Robbie Humble as the new President and CEO of PWI and Pen excuse me, of PWI and Pen. Robbie brings deep industry experience and a strong leadership track record. Speaker 200:14:28Notably, his background and incentives are aligned more closely with our KSX approach. In the handful of weeks he's been at the helm, Robbie has already attracted new leadership talent to the business. We are confident that under his direction, PWI and Penn will be reinvigorated to drive growth and improve results. Lastly, at Trinity, our mechanical equipment warranty and maintenance business, revenue was up in the first quarter, but this was outweighed by higher expenses in the seasonally low quarter for this business. About a year ago, we brought in a new sales leader for the maintenance business, and we are now seeing positive momentum. Speaker 200:15:06The team at Trinity is focused on improving the sales mix and managing costs, and we remain confident in the prospects for this business. Having recapped each of the businesses, let's now turn to the balance sheet and capital structure. In February, we completed a $6,000,000 private placement issuing 240,000 shares of a new Class C convertible preferred stock. This capital raise provided the funds necessary to execute the Budd's Plumbing acquisition. Then in March, at the closing of the Budd's deal, we financed the portion of the purchase with a $1,250,000 seller note to the former owner. Speaker 200:15:42That note is recorded as a note payable on our 03/31/2025 balance sheet. As of 03/31/2025, we held $6,400,000 in cash and cash equivalents, up from $5,500,000 at year end. Total debt was $59,500,000 at quarter end compared to $57,500,000 as of 12/31/2024. This slight increase in debt primarily reflects the addition of Bud's Plumbing seller note, as well as an increase of the Ravix debt as we refinanced that debt and used the proceeds to pay off the original acquisition earn out in full. Our debt consists of $45,000,000 in bank loans, 1,100,000.0 in notes payable, the seller note, which is held at fair value, and $13,400,000 in subordinated debt. Speaker 200:16:34Net debt, or debt minus cash, at quarter end was $53,100,000 up slightly from $52,000,000 at year end. Let me now turn things back over to JT for a few final thoughts before we open the line for questions. JT? Speaker 100:16:49Thanks, Ken. Before we go to Q and A, I just want to reiterate our excitement about the progress we're making. The addition of Bud's Plumbing and Viewpoint, the continued build out of KSX and the positive sales momentum and extended warranty all reinforce our conviction in our strategy. Our deal pipeline is robust, in fact, the most active it has ever been, which is reflected in the fact that we've already executed two deals in the first four months of the year. I'm excited for what the rest of 2025 holds in store for Kingsway. Speaker 100:17:19Finally, we'd like to remind everyone that we are hosting our Annual Investor Day on Monday, May 19, at the New York Stock Exchange. We look forward to spending time with many of you, walking through the building blocks of our strategy and introducing some of the leaders driving execution across our portfolio. In late breaking news, I'm excited to report that Tom Joyce, the former CEO of Danaher and a member of our KSX advisory board, will be joining us on the nineteenth for a fireside chat. If you haven't already RSVP'd, please reach out to James Carbonara at jameshaydenir dot com. The event will also be webcast if you can't participate in person. Speaker 100:18:05I'll now turn the call back over to Paul to open the line for any questions. Operator00:18:11Thank you. At this time, we'll be conducting a question and answer session. Session. And there were no questions currently from the lines. I'd now like to hand the call over to James Carbonara for some e mail questions. Speaker 300:18:53Thank you, operator. Yes, a handful of questions did come in via email. The first one is the Viewpoint acquisition seems interesting. Could you please provide any color on how the transaction came about and why it might make sense strategically? Speaker 100:19:11Yes, sure. How it came about, it was sourced by Drew at SBI. He developed a relationship with the company and its former owners and advanced the conversation in, I think, probably middle of the fourth quarter last year. In terms of why it makes sense strategically, I think you got to break it down, kind of look at it based on product, customer profile, and geography. And so just sort of to set the table, SPI is a hosted and on prem software solution for enterprise customers, predominantly in North America. Speaker 100:19:54And Viewpoint, very differently, is a cloud native software with smaller customers, single location in many cases, resort operators in Asia Pacific and Australia. And so when Drew was evaluating his strategy, there's a large segment in North America of smaller single location property resort managers who were looking for a cloud native software solution. And looking sort of to expand geographically envied the Asia Pacific region and Australia for larger enterprise clients. So the combination of these two businesses solves a couple of problems. One, it gives Drew a cloud native software solution for a segment that he was going after in North America without having to rewrite write all that code. Speaker 100:20:54And it also gives him access to a new geography for his enterprise solution. So we think it really makes a lot of sense. Speaker 300:21:05Thank you. The next question is, can you please explain what you mean by the J curve with search acquisitions and how it works in practice? Speaker 100:21:15Yeah. I spoke to it a little bit in the prepared remarks. I think that the J curve would be just sort of the shape of a performance curve over time. And typically in a search fund acquisition, there's an element of bringing in, upgrading talent, professionalizing their processes, investing in technology to get the business in a position to grow. And that always has a negative impact on profitability in the first several quarters. Speaker 100:21:48I'd also say that there's probably a bit of a J curve on sort of the operator. I'm trying to paint a picture. We've talked about this in the past. If you had on the vertical axis performance and on the horizontal axis time and you took two different graphs, one with an experienced operator that would sort of go up into the right at a modest slope. But if you have like a very high attribute inexperienced operator, performance because they don't they're going to make mistakes and things, lag the experienced operator for a period of time. Speaker 100:22:31But those two curves cross, in my experience, somewhere around two to three years. And the high attribute operator outperforms thereafter over time. And so the search J curve is really two things. One is the impact on the company from investing in growth. And the other is the sort of experience curve of the operator, high attribute operator. Speaker 100:22:59And so what that all means is that it requires patience before value creation is evident. So we're certainly seeing that at DDI and had that at Ravix with SNS, all of our businesses, Image Solutions as well as probably in the early stages of its J curve. But we have confidence in the attributes of the operator and the investments they're making in future growth. Speaker 300:23:27Thank you. The next question is, you mentioned a robust deal pipeline. Can you share more about what you're seeing with respect to search M and A? Speaker 100:23:40Yeah. Look, we have three OYRs right now that are all at full stride. They've been doing it a long time. And so they are very good at building their M and A pipelines. And so we're really excited about where they are in their gestation period, if you will. Speaker 100:24:00And then we also have a couple of platforms that are looking for bolt ons. I think Skilled Trades was formed specifically for doing transactions with a more experienced and high attribute operator. We just did an acquisition within VMS. You think about other businesses we own that have been operating for a while where that high attribute entrepreneur has now got experience in a fragmented market, there are also lots of opportunities for tuck in acquisitions there. So yeah, we're very excited. Speaker 300:24:40Thank you. The next question states, can you speak to the reasoning for the owner of BUDS staying on as president for a one year transition period? Could we see that replicated past owners staying on for years president with future acquisitions? Speaker 100:24:57Yeah, I would say in search that's very typical and actually desirable. If you think about the analogy of kind of a horse racing analogy since we just had the Kentucky Derby. The industry is the track, the business is the horse, and the entrepreneur is the jockey. It's really helpful to have someone riding alongside that jockey for their first sort of lap around the track. And so that transition period, transitioning customer relationships, the transfer of all of that institutional knowledge in that organization, very valuable. Speaker 100:25:33So we're really grateful when owners want to hand over their baby, their legacy to a young entrepreneur and work with them over a long transition period. Just really a win win. Yes, hope that we would see that on future acquisitions. Speaker 300:25:53Terrific. And the last question we have is, with vertical market solutions and now skilled trades, you have a couple of platforms. Are there any other industries you might target for platforms? Speaker 100:26:07Yeah. So it's an interesting question. It's a good question. So what is a platform? For us, we sort of evaluate different industries. Speaker 100:26:19We have like an internal game board. We think game selection is very important. And we sort of bifurcate our game board into two different sort of types, taxonomies of industries. One is power law and those are like high organic growth businesses. And the other is rule of 10, which are maybe lower organic growth industry, higher level of recurring revenue and very fragmented. Speaker 100:26:48And so the rule of 10 type industries would be places where we would think would make attractive platforms where most of the growth might come from acquisition, inorganic growth. And so there are a lot of interesting industries that could be compelling places to build a platform. Some that come to mind, insurance brokerage, wealth management RIA, accounting services, we sort of own a platform there already. We don't call it that. And the key there is that it's got to be a great industry that would support growth via acquisition, but also operator fit, right? Speaker 100:27:31That it's got to be an industry where one of our OARs is really keenly interested in spending their life. Speaker 300:27:41Excellent. Thank you, JT. And Paul, that was the last question that we had, coming in on email. I'll throw it back to you to close out the call. Operator00:27:51Thank you. And there were no other questions from the lines either. And that does conclude today's conference. And you may disconnect your lines at this time. Thank you for your participation.Read morePowered by