Core Insights - Kingsway Financial Services Inc. (KFS) reported a consolidated revenue increase of 16.9% year over year to $30.9 million for Q2 2025, primarily driven by a 42.1% surge in the Kingsway Search Xcelerator (KSX) segment [2][3] - Despite revenue growth, the company experienced a widening net loss of $3.2 million compared to $2.2 million a year ago, and adjusted consolidated EBITDA fell by 32.6% to $1.7 million [2][3] Financial Performance - The KSX segment's revenue rose to $13.3 million from $9.3 million, while the Extended Warranty segment saw a modest increase to $17.6 million from $17.1 million, reflecting a 3.1% growth [2] - KSX adjusted EBITDA climbed 31% to $2.4 million, while Extended Warranty adjusted EBITDA dropped 61.8% to $0.6 million [3] - Total net debt decreased to $46.2 million from $52 million, supported by a $15.7 million private placement [4] Management Commentary - CEO JT Fitzgerald described the quarter as a "major inflection point," highlighting the capital infusion from the PIPE transaction and an increased acquisition target for KSX [5][11] - CFO Kent Hansen emphasized that the Extended Warranty segment remains cash generative despite near-term EBITDA pressure [6] Growth Drivers - The strong revenue growth was attributed to KSX's expansion and improved performance in portfolio companies, alongside a one-time legal expense of $0.6 million that will not recur [7] - Management expressed confidence in sustaining growth momentum through the KSX platform and plans to remain active in the M&A market [8] Recent Acquisitions - In Q2 2025, Kingsway Financial closed three acquisitions, including Roundhouse Electric & Equipment Co. for $22.4 million and AAA Flexible Pipe Cleaning Corp. for up to $5 million [10]

Financial Data and Key Metrics Changes - Consolidated revenue for Q2 2025 was $30.9 million, an increase of 16.9% compared to $26.4 million in Q2 2024 [20] - Consolidated adjusted EBITDA for Q2 2025 was $1.7 million, down from $2.5 million in the prior year quarter [20] - Trailing twelve month adjusted run rate EBITDA for the businesses owned was approximately $22 million to $23 million [16] Business Line Data and Key Metrics Changes - In the KSX segment, revenue increased by 42.1% to $13.3 million in Q2 2025, up from $9.3 million in the same quarter a year ago [20] - Adjusted EBITDA for the KSX segment increased by 31% to $2.4 million compared to $1.8 million in the year-ago quarter [20] - Revenue for the Extended Warranty segment increased by 3.1% to $17.6 million in Q2 2025, up from $17.1 million in the prior year period [23] Market Data and Key Metrics Changes - The four largest midstream natural gas pipeline operators expect to increase their capacity by approximately 17% by 2026, indicating strong demand for additional pipeline capacity in the Permian Basin [9] - The shift from combustible engine motors to electric motors in the Permian Basin has increased from an estimated 10% in 2020 to over 20% today, suggesting a significant industry trend [10] Company Strategy and Development Direction - The company aims to accelerate growth through its public search fund strategy, increasing its target for KSX acquisitions from 2-3 per year to 3-5 per year [7] - The company is focused on building a diversified collection of high-quality services companies that are asset-light and generate recurring revenue [5] - The company is positioning itself to efficiently source, acquire, and scale additional businesses that fit its model [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth potential, stating that the second quarter marked significant progress with three acquisitions and increased capital for growth ambitions [19] - The company believes that the earnings power of its KSX segment is at a record high and is optimistic about future performance [19] - Management noted that the extended warranty segment remains cash generative and is well-positioned for continued success despite recent challenges [24] Other Important Information - The company completed a private placement of common shares, raising $15.7 million to support its growth strategy [6] - As of June 30, 2025, the company held $12.1 million in cash and cash equivalents, up from $5.5 million at year-end [24] - The company recorded a $600,000 expense related to a settlement agreement, which will not recur going forward [27] Q&A Session Summary Question: Clarification on run rate EBITDA - Management clarified that the run rate EBITDA of $22 million to $23 million includes both existing businesses and recent acquisitions [32] Question: Future acquisition expectations - Management indicated that they do not plan to stop acquisitions after reaching their target range and will continue to seek opportunities [38][40] Question: Active OIRs and talent pipeline - Management confirmed there are currently two active OIRs and expressed intentions to increase this number, highlighting a strong pipeline of talent [41][42] Question: Learning from acquisitions - Management acknowledged learning from past acquisitions and emphasized a tighter focus on revenue quality and recurring revenue in future deals [44] Question: Attributes of future OIRs - Management stated that while future OIRs may vary, they will continue to seek candidates with specific attributes indicative of success in small company leadership [47]

Executive Summary [Second Quarter 2025 Consolidated Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Consolidated%20Financial%20Highlights) Kingsway Financial Services Inc. reported a 16.9% increase in consolidated revenue to $30.9 million for Q2 2025, driven by strong KSX segment growth, despite recording a consolidated net loss of $3.2 million and a decrease in adjusted consolidated EBITDA Consolidated Financial Highlights (Three Months Ended June 30) | Metric | Q2 2025 (Millions $) | Q2 2024 (Millions $) | Change (%) | | :------------------------------ | :------------------- | :------------------- | :--------- | | Consolidated Revenue | 30.9 | 26.4 | 16.9% | | KSX Revenue | 13.3 | 9.3 | 42.1% | | Extended Warranty Revenue | 17.6 | 17.1 | 3.1% | | Consolidated Net Loss | (3.2) | (2.2) | (45.5%) | | Adjusted Consolidated EBITDA | 1.7 | 2.5 | (32.0%) | | KSX Adjusted EBITDA | 2.4 | 1.8 | 33.3% | | Extended Warranty Adjusted EBITDA | 0.6 | 1.6 | (62.5%) | | Total Net Debt (as of June 30, 2025) | 46.2 | 52.0 (Dec 31, 2024) | (11.2%) | [Recent Business Highlights](index=1&type=section&id=Recent%20Business%20Highlights) Kingsway successfully completed a **$15.7 million** private placement (PIPE) and increased its annual KSX acquisition target, announcing three strategic acquisitions post-quarter-end to significantly expand its portfolio and revenue base - Closed a **$15.7 million** private placement (PIPE) on June 24, 2025, issuing **1,336,264 shares** at **$11.75 per share**, providing financial resources for multi-year growth ambitions[4](index=4&type=chunk) - Increased target range for KSX acquisitions from **2-3 per year** to **3-5 per year**[5](index=5&type=chunk) - Acquired Roundhouse Electric & Equipment Co., Inc. on July 1, 2025, for **$22.4 million**, adding **$16.0 million** in annual unaudited revenue and **$4.2 million** in annual unaudited adjusted EBITDA[5](index=5&type=chunk) - Acquired AAA Flexible Pipe Cleaning Corp on August 1, 2025, for **$3.5 million** (up to **$5.0 million** with earn-out), expected to add **$7.0 million** in unaudited pro-forma annual revenue and **$0.7 million** in unaudited pro-forma annual adjusted EBITDA[5](index=5&type=chunk) - Ravix Group, Inc. (wholly-owned subsidiary) acquired The HR Team, Inc. on August 1, 2025, expected to add **$0.2 million** in unaudited pro-forma annual adjusted EBITDA[5](index=5&type=chunk) [Management Commentary](index=2&type=section&id=Management%20Commentary) CEO JT Fitzgerald highlighted Q2 2025 as a major inflection point, driven by the successful PIPE transaction and the acceleration of the KSX acquisition strategy, with **five** year-to-date KSX transactions meeting the increased target, alongside strong KSX revenue and EBITDA growth and improved Extended Warranty performance - Q2 2025 marked a major inflection point due to the **$15.7 million** PIPE transaction, accelerating growth and enabling the multi-year business plan[6](index=6&type=chunk) - Completed three attractive acquisitions via KSX platform post-quarter, bringing year-to-date total to **five** KSX transactions, at the top end of the recently increased target range[7](index=7&type=chunk) - KSX revenue grew **42%** and KSX adjusted EBITDA grew **31%** year-over-year[8](index=8&type=chunk) - Extended Warranty revenue increased **3%** and cash sales increased **9%** year-over-year, marking the **sixth consecutive quarter** of increased cash sales[8](index=8&type=chunk) - Company is executing its public Search Fund strategy to build a portfolio of growing, profitable, and recurring revenue services businesses[8](index=8&type=chunk) Company Information [Conference Call and Webcast](index=3&type=section&id=Conference%20Call%20and%20Webcast) Kingsway Financial Services Inc. hosted a conference call and webcast on August 7, 2025, to discuss its Q2 2025 financial results, providing details for live participation and replay access - Date: Thursday, August 7, 2025[9](index=9&type=chunk) - Time: 5 p.m. Eastern Time[9](index=9&type=chunk) - Toll Free: 877-545-0320[9](index=9&type=chunk) - International: 973-528-0002[9](index=9&type=chunk) - Access Code: 594735[9](index=9&type=chunk) - Live Webcast Link: https://www.webcaster4.com/Webcast/Page/2928/52798[10](index=10&type=chunk) - Replay Passcode: 52798[10](index=10&type=chunk) - Replay Webcast Link: https://www.webcaster4.com/Webcast/Page/2928/52798[10](index=10&type=chunk) [About the Company](index=3&type=section&id=About%20the%20Company) Kingsway Financial Services Inc. is a publicly-traded US company that utilizes the Search Fund model to acquire and develop high-quality B2B and B2C services companies, focusing on asset-light, growing, profitable businesses with recurring revenues to compound long-term shareholder value - Only publicly-traded US company employing the Search Fund model to acquire and build businesses[10](index=10&type=chunk) - Owns and operates a collection of high-quality B2B and B2C services companies that are asset-light, growing, profitable, and have recurring revenues[11](index=11&type=chunk) - Seeks to compound long-term shareholder value through a decentralized management model, talented operators, and a tax-advantaged corporate structure[11](index=11&type=chunk) Legal & Disclosures [Non U.S. GAAP Financial Measure](index=3&type=section&id=Non%20U.S.%20GAAP%20Financial%20Measure) Management uses non-GAAP adjusted EBITDA as a supplementary measure to GAAP, believing it provides useful insights into the Company's core operating results and enhances the ability to assess financial performance over time by eliminating certain distortions - Non-GAAP adjusted EBITDA provides useful information about operating results and enhances assessment of financial performance[12](index=12&type=chunk) - Used by management to compare relative performance, plan, budget, and review business performance[12](index=12&type=chunk) - Allows for more meaningful comparison of core business operating results across different periods by eliminating potential distortions[12](index=12&type=chunk) - Investors should consider this measure in addition to, not as a substitute for or superior to, financial reporting measures prepared in accordance with GAAP[12](index=12&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This press release contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from expectations, with the company disclaiming any obligation to update these statements unless required by law - Includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934[13](index=13&type=chunk) - Involve risks and uncertainties that could cause actual results to differ materially from those expected and projected[13](index=13&type=chunk) - Identified by words such as "expects," "believes," "anticipates," "intends," "estimates," "seeks," and variations and similar words and expressions[13](index=13&type=chunk) - For information identifying important factors that could cause actual results to differ materially, refer to "Risk Factors" in the Company's 2024 Annual Report on Form 10-K and subsequent Forms 10-Q and 8-K[13](index=13&type=chunk) - Company disclaims any intention or obligation to update or revise any forward-looking statements, except as expressly required by applicable securities law[13](index=13&type=chunk) [Additional Information](index=3&type=section&id=Additional%20Information) Further information about Kingsway, including annual reports, is available on the SEC and CSA websites, as well as the company's own website, with contact details provided for investor and company inquiries - Additional information about Kingsway, including Annual Reports, can be accessed on the EDGAR section of the U.S. Securities and Exchange Commission's website (www.sec.gov), on the Canadian Securities Administrators' website (www.sedar.com), or through the Company's website (www.kingsway-financial.com)[14](index=14&type=chunk) - Investor Inquiries: James Carbonara, Hayden IR, (646) 755-7412, james@haydenir.com[15](index=15&type=chunk) - Company Inquiries: Kent Hansen, CFO, Kingsway Financial Services Inc., (312) 766-2163, khansen@kingsway-financial.com[16](index=16&type=chunk) Financial Reconciliations (Non-GAAP) [Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted Consolidated EBITDA](index=5&type=section&id=Reconciliation%20of%20GAAP%20Net%20Income%20(Loss)%20to%20Non-GAAP%20Adjusted%20Consolidated%20EBITDA) This section provides a detailed reconciliation of Kingsway's GAAP Net Income (Loss) to Non-GAAP Adjusted Consolidated EBITDA for the three months ended June 30, 2025, and June 30, 2024, along with trailing twelve-month figures Consolidated EBITDA Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | | :---------------------------------- | :------ | :------ | | GAAP Net Income (Loss) | $(3,165) | $(2,186) | | Non-GAAP Adjustments: | | | | Discontinued operations | — | $(167) | | Changes in fair value; realized gains/losses | $(36) | $145 | | Employee related expenses | $731 | $412 | | Other items | $982 | $590 | | Depreciation, amortization, tax and interest expense | $3,141 | $3,659 | | Total Non-GAAP Adjustments | $4,818 | $4,639 | | Non-GAAP Adjusted Consolidated EBITDA | $1,653 | $2,453 | [Reconciliation of Extended Warranty Segment Operating Income to Non-GAAP Adjusted EBITDA](index=6&type=section&id=Reconciliation%20of%20Extended%20Warranty%20Segment%20Operating%20Income%20to%20Non-GAAP%20Adjusted%20EBITDA) This table reconciles the Extended Warranty segment's GAAP Operating Income to Non-GAAP Adjusted EBITDA for the three months ended June 30, 2025, and June 30, 2024, including specific adjustments like investment income, employee costs, and depreciation Extended Warranty Segment EBITDA Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | | :---------------------------------- | :------ | :------ | | GAAP Operating Income | $(63) | $1,244 | | Non-GAAP Adjustments: | | | | Investment income | $341 | $321 | | Employee costs | $302 | — | | Depreciation | $39 | $56 | | Total Non-GAAP Adjustments | $682 | $377 | | Non-GAAP Adjusted EBITDA | $619 | $1,621 | [Reconciliation of KSX Segment Operating Income to Non-GAAP Adjusted EBITDA](index=7&type=section&id=Reconciliation%20of%20KSX%20Segment%20Operating%20Income%20to%20Non-GAAP%20Adjusted%20EBITDA) This section presents the reconciliation of the KSX segment's GAAP Operating Income to Non-GAAP Adjusted EBITDA for the three months ended June 30, 2025, and June 30, 2024, detailing adjustments for acquisition and employee costs, investment income, and depreciation KSX Segment EBITDA Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | | :---------------------------------- | :------ | :------ | | GAAP Operating Income | $2,049 | $1,441 | | Non-GAAP Adjustments: | | | | Acquisition and employee costs | $204 | $139 | | Investment income | $29 | $68 | | Depreciation | $113 | $180 | | Total Non-GAAP Adjustments | $346 | $387 | | Non-GAAP Adjusted EBITDA | $2,395 | $1,828 |

PART I - FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Presents unaudited consolidated financial statements for periods ended June 30, 2025, and December 31, 2024, including detailed notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Presents the company's financial position at specific dates, detailing assets, liabilities, and equity | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total Assets | $207,697 | $186,616 | | Total Liabilities | $172,089 | $168,314 | | Redeemable Preferred Stock | $16,250 | $8,250 | | Total Shareholders' Equity | $19,358 | $10,052 | - Total Assets increased by **$21,081 thousand** from December 31, 2024, to June 30, 2025, primarily driven by increases in investments, cash and cash equivalents, and other assets[7](index=7&type=chunk) - Shareholders' Equity attributable to common shareholders increased from **$8,413 thousand** at December 31, 2024, to **$17,442 thousand** at June 30, 2025[7](index=7&type=chunk) [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Presents the company's revenues, expenses, and net loss over specific periods | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $30,919 | $26,446 | $59,268 | $52,606 | | Total operating expenses | $32,045 | $26,320 | $61,108 | $51,713 | | Operating (loss) income | $(1,126) | $126 | $(1,840) | $893 | | Net loss | $(3,165) | $(2,186) | $(6,257) | $(4,514) | | Net loss attributable to common shareholders | $(3,628) | $(2,363) | $(7,067) | $(4,848) | | Basic loss per share - net loss | $(0.13) | $(0.08) | $(0.26) | $(0.18) | - Total revenues increased by **$4,473 thousand** (16.9%) for the three months ended June 30, 2025, compared to the same period in 2024, and by **$6,662 thousand** (12.7%) for the six months ended June 30, 2025[9](index=9&type=chunk) - The company reported an operating loss of **$1,126 thousand** for the three months ended June 30, 2025, a significant decrease from an operating income of **$126 thousand** in the prior year period. The six-month operating loss also widened to **$1,840 thousand** from an income of **$893 thousand**[9](index=9&type=chunk) [Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) Details net loss and other comprehensive income/loss components for the periods | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(3,165) | $(2,186) | $(6,257) | $(4,514) | | Other comprehensive (loss) income, net of taxes | $(325) | $64 | $78 | $11 | | Comprehensive loss | $(3,490) | $(2,122) | $(6,179) | $(4,503) | | Comprehensive loss attributable to common shareholders | $(3,642) | $(2,301) | $(6,456) | $(4,834) | - Comprehensive loss attributable to common shareholders increased to **$3,642 thousand** for the three months ended June 30, 2025, from **$2,301 thousand** in the prior year, primarily due to a higher net loss and an increase in other comprehensive loss[11](index=11&type=chunk) [Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) Tracks changes in equity components, including common stock, additional paid-in capital, and accumulated deficit | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------------- | :------------ | :---------------- | | Common Stock (Amount) | $294 | $281 | | Additional Paid-in Capital | $392,853 | $376,503 | | Treasury Stock | $(6,545) | $(6,200) | | Accumulated Deficit | $(368,520) | $(361,453) | | Accumulated Other Comprehensive Loss | $(640) | $(718) | | Shareholders' Equity Attributable to Common Shareholders | $17,442 | $8,413 | | Noncontrolling Interests | $1,916 | $1,639 | | Total Shareholders' Equity | $19,358 | $10,052 | - Shareholders' equity attributable to common shareholders significantly increased by **$9,029 thousand** from December 31, 2024, to June 30, 2025, primarily due to common stock issuance and additional paid-in capital, despite an increase in accumulated deficit[14](index=14&type=chunk)[16](index=16&type=chunk) - Common stock issued at **$11.75 per share**, net, contributed **$15,602 thousand** to additional paid-in capital during the six months ended June 30, 2025[16](index=16&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Categorizes cash movements from operating, investing, and financing activities | Metric (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(1,461) | $806 | | Net cash (used in) provided by investing activities | $(13,676) | $930 | | Net cash provided by (used in) financing activities | $21,458 | $(1,290) | | Net increase in cash and cash equivalents and restricted cash from continuing operations | $6,321 | $458 | | Cash and cash equivalents and restricted cash of continuing operations at end of period | $19,457 | $17,956 | - Operating activities shifted from providing **$806 thousand** in cash in H1 2024 to using **$1,461 thousand** in H1 2025[19](index=19&type=chunk) - Investing activities used significantly more cash in H1 2025 (**$13,676 thousand**) compared to providing cash in H1 2024 (**$930 thousand**), primarily due to business acquisitions[19](index=19&type=chunk) - Financing activities provided substantial cash of **$21,458 thousand** in H1 2025, a reversal from using **$1,290 thousand** in H1 2024, driven by common and preferred stock issuances and bank loan proceeds[19](index=19&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations and additional information supporting the consolidated financial statements [NOTE 1 BUSINESS](index=10&type=section&id=NOTE%201%20BUSINESS) Describes Kingsway Financial Services Inc.'s business and operating subsidiaries - Kingsway Financial Services Inc. is a Delaware holding company with operating subsidiaries primarily in the business services and extended warranty industries[21](index=21&type=chunk) [NOTE 2 BASIS OF PRESENTATION](index=10&type=section&id=NOTE%202%20BASIS%20OF%20PRESENTATION) Outlines accounting principles and assumptions for interim financial statements - The unaudited consolidated interim financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions, and should be read with the 2024 Annual Report on Form 10-K[22](index=22&type=chunk)[23](index=23&type=chunk) - Management's estimates and assumptions affect reported amounts, with critical estimates including revenue recognition, investment valuation, deferred income taxes, business combinations, and intangible asset impairment[25](index=25&type=chunk)[26](index=26&type=chunk) [NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=10&type=section&id=NOTE%203%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Confirms no material changes to the company's significant accounting policies - There have been no material changes to the Company's significant accounting policies as reported in its 2024 Annual Report[28](index=28&type=chunk) [NOTE 4 RECENTLY ISSUED ACCOUNTING STANDARDS](index=10&type=section&id=NOTE%204%20RECENTLY%20ISSUED%20ACCOUNTING%20STANDARDS) Discusses the adoption and expected impact of new accounting pronouncements - The Company adopted ASU 2024-02 (Codification Improvements) effective January 1, 2025, with no impact on consolidated financial statements[29](index=29&type=chunk) - ASU 2023-09 (Improvements to Income Tax Disclosures) is effective for annual periods after December 15, 2024, and is expected to expand annual income tax disclosures[30](index=30&type=chunk) - ASU 2024-03 (Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures) is effective for public companies with annual periods beginning after December 15, 2026, and is expected to result in additional expense disaggregation in footnote disclosures[32](index=32&type=chunk) [NOTE 5 ACQUISITIONS AND DISCONTINUED OPERATIONS](index=12&type=section&id=NOTE%205%20ACQUISITIONS%20AND%20DISCONTINUED%20OPERATIONS) Details recent business acquisitions and the financial impact of discontinued operations - On March 14, 2025, Kingsway acquired Bud's Plumbing for approximately **$5.0 million**, expanding its Kingsway Search Xcelerator segment with recurring revenue and low capital intensity[33](index=33&type=chunk) Bud's Plumbing Preliminary Purchase Price Allocation (March 14, 2025) | Item | Amount (in thousands) | | :-------------------------------------- | :-------------------- | | Total purchase price | $4,960 | | Total identifiable assets and liabilities | $4,021 | | Excess purchase price allocated to goodwill | $939 | - From acquisition to June 30, 2025, Bud's Plumbing generated **$2.0 million** in revenue and **$0.2 million** in net income[38](index=38&type=chunk) - The Leased Real Estate segment (VA Lafayette and CMC Industries Inc.) was classified as discontinued operations due to a strategic shift, with VA Lafayette sold on August 16, 2024, for **$1.3 million** cash plus assumption of **$11.8 million** mortgage[44](index=44&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) Income from Discontinued Operations (Leased Real Estate) (in thousands) | Metric | Three months ended June 30, 2024 | Six months ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :----------------------------- | | Rental revenue | $360 | $733 | | Income from discontinued operations, net of taxes | $167 | $358 | | Loss on disposal of discontinued operations, net of taxes | — | $404 | [NOTE 6 INVESTMENTS](index=16&type=section&id=NOTE%206%20INVESTMENTS) Provides details on the company's investment portfolio, including fixed maturities and net investment income Fixed Maturities at Fair Value (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------------- | :------------ | :---------------- | | U.S. government, government agencies and authorities | $13,715 | $13,354 | | States, municipalities and political subdivisions | $2,249 | $2,775 | | Mortgage-backed | $10,254 | $9,886 | | Asset-backed | $1,455 | $1,326 | | Corporate | $9,857 | $9,622 | | Total fixed maturities | $37,530 | $36,963 | - Total fixed maturities increased slightly to **$37,530 thousand** at June 30, 2025, from **$36,963 thousand** at December 31, 2024[51](index=51&type=chunk)[54](index=54&type=chunk) Net Investment Income (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net investment income | $410 | $308 | $790 | $634 | | Net realized gains | $128 | $277 | $57 | $401 | - Net investment income increased by **$102 thousand** (33.1%) for the three months and **$156 thousand** (24.6%) for the six months ended June 30, 2025, primarily due to increased interest from fixed maturities and less loss from limited liability investments[63](index=63&type=chunk) - Net realized gains decreased significantly from **$277 thousand** to **$128 thousand** for the three months and from **$401 thousand** to **$57 thousand** for the six months ended June 30, 2025[63](index=63&type=chunk) [NOTE 7 GOODWILL](index=22&type=section&id=NOTE%207%20GOODWILL) Outlines changes in goodwill, including additions from acquisitions and impairment assessments Goodwill Activity (in thousands) | Segment | Balance, December 31, 2024 | Acquisition | Measurement period adjustments | Balance, June 30, 2025 | | :-------------------------------------- | :------------------------- | :---------- | :----------------------------- | :--------------------- | | Extended Warranty | $31,153 | — | — | $31,153 | | Kingsway Search Xcelerator | $25,371 | $938 | $85 | $26,394 | | Total | $56,524 | $938 | $85 | $57,547 | - Goodwill increased by **$1,023 thousand** to **$57,547 thousand** at June 30, 2025, primarily due to the acquisition of Bud's Plumbing (**$938 thousand**) and a measurement period adjustment for Image Solutions (**$85 thousand**)[65](index=65&type=chunk)[66](index=66&type=chunk) - No goodwill impairment charges were recorded during the three and six months ended June 30, 2025 and 2024[68](index=68&type=chunk) [NOTE 8 INTANGIBLE ASSETS](index=22&type=section&id=NOTE%208%20INTANGIBLE%20ASSETS) Details the carrying value and changes in intangible assets, including amortization and impairment Intangible Assets, Net Carrying Value (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------------- | :------------ | :---------------- | | Customer relationships | $22,661 | $25,477 | | Developed technology | $541 | $521 | | Trade names | $16,932 | $14,051 | | Total | $40,134 | $40,049 | - Net carrying value of intangible assets increased slightly to **$40,134 thousand** at June 30, 2025, from **$40,049 thousand** at December 31, 2024[69](index=69&type=chunk) - The acquisition of Bud's Plumbing added **$3.6 million** in separately identifiable intangible assets, including **$0.5 million** in amortizable customer relationships and **$3.1 million** in indefinite-lived trade name[71](index=71&type=chunk) - Impairment charges of **$0.1 million** (Q2 2025) and **$0.2 million** (YTD 2025) were recorded for the Ravix indefinite-lived trade name, due to lower-than-projected revenue and higher discount rates[74](index=74&type=chunk) [NOTE 9 PROPERTY AND EQUIPMENT](index=24&type=section&id=NOTE%209%20PROPERTY%20AND%20EQUIPMENT) Presents the net carrying value of property and equipment Property and Equipment, Net Carrying Value (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------------- | :------------ | :---------------- | | Leasehold improvements | $227 | $237 | | Furniture and equipment | $104 | $28 | | Computer hardware | $808 | $801 | | Medical equipment | $353 | $438 | | Vehicles | $187 | $63 | | Total | $1,679 | $1,567 | - Net carrying value of property and equipment increased to **$1,679 thousand** at June 30, 2025, from **$1,567 thousand** at December 31, 2024[75](index=75&type=chunk) [NOTE 10 DEBT](index=26&type=section&id=NOTE%2010%20DEBT) Provides details on the company's debt, including bank loans, notes payable, and subordinated debt Total Debt (in thousands) | Category | Principal (June 30, 2025) | Carrying Value (June 30, 2025) | Principal (December 31, 2024) | Carrying Value (December 31, 2024) | | :-------------------------------------- | :------------------------ | :----------------------------- | :---------------------------- | :----------------------------- | | Bank loans | $43,709 | $43,351 | $44,606 | $44,128 | | Note payable | $1,196 | $1,053 | — | — | | Subordinated debt | $15,000 | $13,928 | $15,000 | $13,409 | | Total | $59,905 | $58,332 | $59,606 | $57,537 | - Total debt increased slightly in principal amount to **$59,905 thousand** at June 30, 2025, from **$59,606 thousand** at December 31, 2024[77](index=77&type=chunk) - A new **$9.1 million** 2025 Ravix Loan was established on February 7, 2025, with proceeds used to repay existing 2021 and 2022 Ravix Loans, resulting in a **$0.1 million** loss on extinguishment of debt[86](index=86&type=chunk)[88](index=88&type=chunk) - SNS was in default under its loan covenants (leverage and fixed charge ratios) from March 31, 2024, through June 30, 2025, but received a waiver for the quarter ended June 30, 2025[94](index=94&type=chunk) - A new **$1.25 million** KPH Note (note payable) was issued as part of the Bud's Plumbing acquisition on March 14, 2025, recorded at an estimated fair value of **$1.1 million**[113](index=113&type=chunk) [NOTE 11 LEASES](index=32&type=section&id=NOTE%2011%20LEASES) Details the company's lease arrangements, including operating lease costs and lease terms Operating Lease Costs (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $218 | $139 | $411 | $282 | | Variable lease cost | $46 | $67 | $102 | $137 | | Short-term lease cost | $29 | $24 | $58 | $49 | - Operating lease costs increased by **$79 thousand** (56.8%) for the three months and **$129 thousand** (45.7%) for the six months ended June 30, 2025, compared to the prior year periods[119](index=119&type=chunk) - The weighted-average remaining lease term for operating leases was **4.99 years**, and the weighted-average discount rate was **6.24%** as of June 30, 2025[121](index=121&type=chunk) - Revenue from sales-type leases was **$0.4 million** for the three months and **$0.7 million** for the six months ended June 30, 2025, compared to zero in the prior year periods[122](index=122&type=chunk) [NOTE 12 REVENUE FROM CONTRACTS WITH CUSTOMERS](index=34&type=section&id=NOTE%2012%20REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS) Breaks down revenue by service type and discusses deferred service fees Service Fee and Commission Revenue by Type (in thousands) | Revenue Type | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Vehicle service agreement fees and GAP commissions | $15,140 | $14,998 | $30,034 | $29,980 | | Maintenance support service fees | $1,170 | $878 | $2,096 | $1,641 | | Warranty product commissions | $1,332 | $1,229 | $2,182 | $2,168 | | Business services consulting fees | $5,723 | $4,382 | $11,931 | $8,932 | | Healthcare services fees | $4,567 | $4,088 | $9,159 | $8,314 | | Software license and support fees | $1,246 | $871 | $1,837 | $1,571 | | Skilled trades repair and service fees | $1,741 | — | $2,029 | — | | Total Service fee and commission revenue | $30,919 | $26,446 | $59,268 | $52,606 | - Total service fee and commission revenue increased by **$4,473 thousand** (16.9%) for the three months and **$6,662 thousand** (12.7%) for the six months ended June 30, 2025[124](index=124&type=chunk) - Skilled trades repair and service fees, primarily from the Bud's Plumbing acquisition, contributed **$1,741 thousand** in Q2 2025 and **$2,029 thousand** YTD 2025[124](index=124&type=chunk) - Deferred service fees increased to **$86,430 thousand** at June 30, 2025, from **$83,108 thousand** at December 31, 2024, due to additions exceeding recognized fees[135](index=135&type=chunk)[136](index=136&type=chunk) [NOTE 13 INCOME TAXES](index=38&type=section&id=NOTE%2013%20INCOME%20TAXES) Details the company's income tax benefit/expense and deferred tax liabilities Income Tax (Benefit) Expense (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax (benefit) expense | $(131) | $104 | $(395) | $188 | | Income tax benefit at U.S. statutory income tax rate | $(692) | $(473) | $(1,397) | $(899) | | Valuation allowance | $510 | $553 | $903 | $1,092 | - The Company reported an income tax benefit of **$131 thousand** for Q2 2025 and **$395 thousand** YTD 2025, a shift from an expense in the prior year, primarily due to the release of its valuation allowance associated with indefinite life business interest expense carryforwards[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk) - Net deferred income tax liabilities were **$3.8 million** at June 30, 2025, and **$4.4 million** at December 31, 2024[144](index=144&type=chunk) [NOTE 14 LOSS PER SHARE](index=40&type=section&id=NOTE%2014%20LOSS%20PER%20SHARE) Presents basic and diluted loss per share attributable to common shareholders Loss Per Share Attributable to Common Shareholders | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic loss per share - net loss | $(0.13) | $(0.08) | $(0.26) | $(0.18) | | Diluted loss per share - net loss | $(0.13) | $(0.08) | $(0.26) | $(0.18) | | Weighted-average basic shares outstanding (in '000s) | 27,196 | 27,309 | 27,150 | 27,223 | - Basic and diluted loss per share increased to **$(0.13)** for Q2 2025 and **$(0.26)** YTD 2025, compared to **$(0.08)** and **$(0.18)** in the prior year periods, respectively[146](index=146&type=chunk) - Potentially dilutive securities (stock options, unvested restricted stock awards, convertible preferred stock) were excluded from diluted EPS calculations due to the Company reporting a loss, making their inclusion anti-dilutive[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) [NOTE 15 STOCK-BASED COMPENSATION](index=43&type=section&id=NOTE%2015%20STOCK-BASED%20COMPENSATION) Details stock-based compensation expense and awards granted - Total stock-based compensation expense was **$0.3 million** for both Q2 2025 and Q2 2024, and **$0.8 million** YTD 2025 compared to **$0.6 million** YTD 2024[153](index=153&type=chunk) - KPH LLC granted **199,000** restricted Class B common unit awards to an officer of Bud's Plumbing in Q1 2025, with a weighted-average grant date fair value of **$0.85 per unit**[152](index=152&type=chunk) [NOTE 16 REDEEMABLE PREFERRED STOCK](index=43&type=section&id=NOTE%2016%20REDEEMABLE%20PREFERRED%20STOCK) Describes the issuance and terms of various classes of redeemable preferred stock - The Company issued **330,000** shares of Class B Preferred Stock in September 2024 for **$8.3 million**, convertible into common shares and redeemable by September 24, 2031[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk) - In February 2025, **240,000** shares of Class C Preferred Stock were issued for **$6.0 million**, convertible into common shares and redeemable by February 12, 2032[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk) - On May 8, 2025, **80,000** shares of Class D Preferred Stock were issued for **$2.0 million**, convertible into common shares and redeemable by May 7, 2032[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) - All preferred stock classes rank senior to common shares and carry a fixed, cumulative preferential cash dividend rate of **8% per year**, increasing to **18%** if dividends are not paid for two consecutive quarters[156](index=156&type=chunk)[162](index=162&type=chunk)[168](index=168&type=chunk) [NOTE 17 SHAREHOLDERS' EQUITY](index=46&type=section&id=NOTE%2017%20SHAREHOLDERS%27%20EQUITY) Details changes in shareholders' equity, including stock issuances, dividends, and repurchases - On June 24, 2025, the Company sold **1,336,264** shares of Common Stock in a private placement for aggregate gross proceeds of **$15.7 million**, with net proceeds of **$15.6 million**[173](index=173&type=chunk) - Cash dividends paid on preferred stock were **$0.2 million** for Q2 2025 and **$0.4 million** YTD 2025[175](index=175&type=chunk) - The Company repurchased **42,900** shares of common stock for **$0.3 million** YTD 2025, fully utilizing its authorized repurchase program which expired in January 2025[176](index=176&type=chunk) [NOTE 18 ACCUMULATED OTHER COMPREHENSIVE LOSS](index=47&type=section&id=NOTE%2018%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) Provides a breakdown of components contributing to accumulated other comprehensive loss Accumulated Other Comprehensive Loss (in thousands) | Component | June 30, 2025 | December 31, 2024 | | :-------------------------------------- | :------------ | :---------------- | | Unrealized Gains (Losses) on Available-for-Sale Investments | $(541) | $(1,157) | | Foreign Currency Translation Adjustments | $(3,286) | $(3,286) | | Change in Fair Value of Debt Attributable to Instrument Specific Credit Risk | $3,187 | $3,725 | | Total Accumulated Other Comprehensive Loss | $(640) | $(718) | - Total accumulated other comprehensive loss decreased to **$(640) thousand** at June 30, 2025, from **$(718) thousand** at December 31, 2024, primarily due to a reduction in unrealized losses on available-for-sale investments[178](index=178&type=chunk)[179](index=179&type=chunk) [NOTE 19 SEGMENTED INFORMATION](index=49&type=section&id=NOTE%2019%20SEGMENTED%20INFORMATION) Presents financial data by reportable segment, including revenues and operating income - Kingsway operates through two reportable segments: Extended Warranty and Kingsway Search Xcelerator (KSX)[183](index=183&type=chunk) - Extended Warranty includes IWS, Geminus, PWI, and Trinity, providing vehicle service agreements, GAP products, and HVAC/generator warranty products[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk) - KSX includes CSuite, Ravix, SNS, SPI, DDI, Image Solutions, and Bud's Plumbing, offering professional services, healthcare staffing, software, IT managed services, and plumbing services[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk) Revenues by Reportable Segment (in thousands) | Segment | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Extended Warranty | $17,642 | $17,105 | $34,312 | $33,790 | | Kingsway Search Xcelerator (KSX) | $13,277 | $9,341 | $24,956 | $18,816 | | Total revenues | $30,919 | $26,446 | $59,268 | $52,606 | Operating Income (Loss) by Reportable Segment (in thousands) | Segment | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Extended Warranty | $(63) | $1,244 | $452 | $2,320 | | Kingsway Search Xcelerator (KSX) | $2,049 | $1,441 | $3,792 | $2,784 | | Total segment operating income | $1,986 | $2,685 | $4,244 | $5,104 | [NOTE 20 FAIR VALUE OF FINANCIAL INSTRUMENTS](index=54&type=section&id=NOTE%2020%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) Explains the fair value hierarchy and valuation techniques for financial instruments - The Company uses a fair value hierarchy (Level 1, 2, 3) to categorize inputs for valuation techniques, with Level 1 being quoted prices in active markets and Level 3 involving significant unobservable inputs[199](index=199&type=chunk)[203](index=203&type=chunk) - Fixed maturities are classified as Level 2, with fair values derived from quoted prices of similar instruments or third-party evidence[200](index=200&type=chunk)[201](index=201&type=chunk) - Limited liability investment at fair value is categorized as Level 3, valued using a market approach with valuation multiples applied to performance metrics[202](index=202&type=chunk)[205](index=205&type=chunk) - Subordinated debt is classified as Level 2, with fair value calculated using a model based on market observable inputs and third-party developed credit spread assumptions[206](index=206&type=chunk) - Contingent consideration liabilities are Level 3, revalued each period using Monte Carlo simulation, with the Ravix contingent liability paid in full in February 2025 and CSuite's estimated fair value at zero[207](index=207&type=chunk)[210](index=210&type=chunk) [NOTE 21 RELATED PARTIES](index=59&type=section&id=NOTE%2021%20RELATED%20PARTIES) Discloses transactions and relationships with related parties, including management and significant shareholders - Company CEO John T. Fitzgerald, his family members, and Board members invested a total of **$5.2 million** in Class B Preferred Stock, **$3.7 million** in Class C Preferred Stock, and **$2.0 million** in Class D Preferred Stock private placements[223](index=223&type=chunk) - The sale of VA Lafayette in August 2024 was to an entity associated with a current holder of the Company's Class B Preferred Stock, determined to be an arms-length transaction[225](index=225&type=chunk) - The **$1.25 million** KPH Note (note payable) for the Bud's Plumbing acquisition was issued to the seller, who is a current employee of Bud's Plumbing[226](index=226&type=chunk) - Blue Riband Fund LP, managed by Mirabella Financial Services LLP (a >5% common shareholder), invested **$3.0 million** in the June 2025 common stock private placement[227](index=227&type=chunk) [NOTE 22 COMMITMENTS AND CONTINGENCIES](index=61&type=section&id=NOTE%2022%20COMMITMENTS%20AND%20CONTINGENCIES) Outlines the company's commitments, contingencies, and subsequent events - The Company's obligation to reimburse Aegis Security Insurance Company for customs bond losses, under a 2020 settlement agreement, terminated on June 30, 2025[228](index=228&type=chunk)[229](index=229&type=chunk) - Restricted cash totaled **$7.4 million** at June 30, 2025, including deposits by subsidiaries and amounts on deposit with state regulatory authorities[230](index=230&type=chunk) - Subsequent events include the acquisition of Roundhouse Electric & Equipment Co., Inc. on July 1, 2025, for **$22.4 million**, and AAA Flexible Pipe Cleaning Corp. on August 1, 2025, for **$2.8 million** plus contingent consideration[231](index=231&type=chunk)[232](index=232&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=63&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Provides management's perspective on financial condition and results, covering segment trends, non-GAAP measures, estimates, investments, debt, and liquidity [FORWARD-LOOKING STATEMENTS](index=63&type=section&id=FORWARD-LOOKING%20STATEMENTS) Cautions that forward-looking statements are subject to risks and uncertainties - The discussion includes forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from expectations[235](index=235&type=chunk) [OVERVIEW](index=63&type=section&id=OVERVIEW) Provides a high-level description of Kingsway's business structure and operating segments - Kingsway is a Delaware holding company with operating subsidiaries in business services and extended warranty industries, structured into two reportable segments: Extended Warranty and Kingsway Search Xcelerator (KSX)[236](index=236&type=chunk) - The Extended Warranty segment includes IWS, Geminus, PWI, and Trinity, offering vehicle service agreements and various warranty products[237](index=237&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk) - The KSX segment comprises CSuite, Ravix, SNS, SPI, DDI, Image Solutions, and Bud's Plumbing, providing diverse services from financial consulting to plumbing[242](index=242&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk)[247](index=247&type=chunk) [NON-U.S. GAAP FINANCIAL MEASURE](index=65&type=section&id=NON-U.S.%20GAAP%20FINANCIAL%20MEASURE) Defines segment operating income as a non-U.S. GAAP financial measure - Segment operating income is presented as a non-U.S. GAAP measure, representing pretax profitability of segments by subtracting direct segment expenses from direct segment revenues[249](index=249&type=chunk) [SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ESTIMATES](index=65&type=section&id=SIGNIFICANT%20ACCOUNTING%20POLICIES%20AND%20CRITICAL%20ESTIMATES) Highlights critical accounting estimates and confirms no material changes - Critical accounting estimates include revenue recognition, investment valuation, deferred income taxes, business combinations, intangible asset impairment, goodwill recoverability, and fair value assumptions for debt and stock-based compensation[251](index=251&type=chunk) - No material changes to significant accounting policies and critical estimates have occurred since December 31, 2024[252](index=252&type=chunk) [RESULTS OF CONTINUING OPERATIONS](index=65&type=section&id=RESULTS%20OF%20CONTINUING%20OPERATIONS) Analyzes financial performance of continuing operations, including segment results and key financial metrics Segment Operating Income and Net Loss (in thousands) | Metric | Q2 2025 | Q2 2024 | Change (QoQ) | YTD 2025 | YTD 2024 | Change (YoY) | | :-------------------------------------- | :------ | :------ | :----------- | :------- | :------- | :----------- | | Extended Warranty Operating Income (Loss) | $(63) | $1,244 | $(1,307) | $452 | $2,320 | $(1,868) | | KSX Operating Income | $2,049 | $1,441 | $608 | $3,792 | $2,784 | $1,008 | | Total Segment Operating Income | $1,986 | $2,685 | $(699) | $4,244 | $5,104 | $(860) | | Net Loss | $(3,165) | $(2,186) | $(979) | $(6,257) | $(4,514) | $(1,743) | - Extended Warranty segment operating income decreased significantly, turning into a loss of **$63 thousand** in Q2 2025 from an income of **$1,244 thousand** in Q2 2024, primarily due to higher commission and general and administrative expenses, including severance costs[259](index=259&type=chunk)[260](index=260&type=chunk) - Kingsway Search Xcelerator (KSX) segment operating income increased by **$608 thousand** (42.2%) in Q2 2025 to **$2,049 thousand**, driven by the inclusion of Image Solutions and growth in SPI, DDI, and CSuite, partially offset by a decrease in Ravix[261](index=261&type=chunk)[263](index=263&type=chunk)[265](index=265&type=chunk) - Net investment income increased by **$102 thousand** (33.1%) in Q2 2025, while net realized gains decreased by **$149 thousand** (53.8%)[264](index=264&type=chunk)[266](index=266&type=chunk) - Interest expense increased by **$103 thousand** (8.9%) in Q2 2025, mainly due to the Image Solutions Loan and KWH Loan amendments, partially offset by lower Ravix and SNS loan interest[267](index=267&type=chunk)[273](index=273&type=chunk) - General and administrative expenses not allocated to segments increased by **$799 thousand** (38.3%) in Q2 2025, primarily due to Aegis reimbursement payments and higher search-related expenses[268](index=268&type=chunk)[269](index=269&type=chunk) - Amortization of intangible assets increased by **$253 thousand** (17.4%) in Q2 2025, mainly due to the Image Solutions acquisition[274](index=274&type=chunk) - Impairment of intangible assets decreased significantly to **$0.1 million** in Q2 2025 from **$0.7 million** in Q2 2024, related to the Ravix trade name[275](index=275&type=chunk) - The Company recorded a **$0.1 million** loss on extinguishment of debt in YTD 2025 related to the Ravix Loan modification[277](index=277&type=chunk) - Income tax benefit of **$0.1 million** was reported in Q2 2025, compared to an expense of **$0.1 million** in Q2 2024, primarily due to the release of valuation allowance on business interest expense carryforwards[279](index=279&type=chunk) [INVESTMENTS](index=71&type=section&id=INVESTMENTS) Discusses the company's investment portfolio, including carrying values and unrealized gains/losses Carrying Value of Investments (in thousands) | Type of investment | June 30, 2025 | % of Total | December 31, 2024 | % of Total | | :-------------------------------------- | :------------ | :--------- | :---------------- | :--------- | | Total fixed maturities | $37,530 | 61.0% | $36,963 | 67.9% | | Limited liability investments | $650 | 1.1% | $650 | 1.2% | | Limited liability investment, at fair value | $3,037 | 4.9% | $2,859 | 5.2% | | Investments in private companies | $628 | 1.0% | $696 | 1.3% | | Short-term investments | $173 | 0.3% | $169 | 0.3% | | Total investments | $42,018 | 68.3% | $41,337 | 75.9% | | Cash and cash equivalents | $12,079 | 19.6% | $5,493 | 10.1% | | Restricted cash | $7,378 | 12.0% | $7,643 | 14.0% | | Total | $61,475 | 100.0% | $54,473 | 100.0% | - Total carrying value of investments, cash, and restricted cash increased to **$61.5 million** at June 30, 2025, from **$54.5 million** at December 31, 2024[280](index=280&type=chunk)[282](index=282&type=chunk) - No impairment losses were recorded related to investments during the three and six months ended June 30, 2025 and 2024[285](index=285&type=chunk) - Gross unrealized losses for fixed maturities amounted to **$0.7 million** at June 30, 2025, down from **$1.2 million** at December 31, 2024[285](index=285&type=chunk) [DEBT](index=73&type=section&id=DEBT) Provides an overview of the company's debt structure, including principal amounts and carrying values Principal and Carrying Value of Debt (in thousands) | Category | Principal (June 30, 2025) | Carrying Value (June 30, 2025) | Principal (December 31, 2024) | Carrying Value (December 31, 2024) | | :-------------------------------------- | :------------------------ | :----------------------------- | :---------------------------- | :----------------------------- | | Total bank loans | $43,709 | $43,351 | $44,606 | $44,128 | | Note payable | $1,196 | $1,053 | — | — | | Subordinated debt | $15,000 | $13,928 | $15,000 | $13,409 | | Total | $59,905 | $58,332 | $59,606 | $57,537 | - Total debt principal increased to **$59,905 thousand** at June 30, 2025, from **$59,606 thousand** at December 31, 2024[286](index=286&type=chunk) - A new **$9.1 million** 2025 Ravix Loan was established, repaying prior Ravix loans and resulting in a **$0.1 million** loss on extinguishment of debt[287](index=287&type=chunk)[288](index=288&type=chunk) - SNS was in default on debt covenants but received a waiver for Q2 2025, with uncertainty regarding future compliance[290](index=290&type=chunk) - A new **$1.25 million** KPH Note was issued as part of the Bud's Plumbing acquisition[293](index=293&type=chunk) - The fair value of subordinated debt increased to **$13.9 million** at June 30, 2025, from **$13.4 million** at December 31, 2024[294](index=294&type=chunk) [RECENTLY ISSUED ACCOUNTING STANDARDS](index=75&type=section&id=RECENTLY%20ISSUED%20ACCOUNTING%20STANDARDS) Refers to Note 4 for details on recently issued accounting standards - The Company refers to Note 4 for discussion of recently issued accounting standards applicable to current and future financial statements[296](index=296&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=75&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Assesses the company's ability to meet its financial obligations and fund operations - Liquidity is primarily met by operations, capital raising, subsidiary disposals, investment maturities, and income[297](index=297&type=chunk) - Extended Warranty companies are required to place a significant portion of cash into restricted trust accounts to fund future expected claims[298](index=298&type=chunk) - Net cash used in operating activities from continuing operations was **$1.5 million** YTD 2025, primarily due to settling the Ravix contingent liability[300](index=300&type=chunk) - Net cash used in investing activities from continuing operations was **$13.7 million** YTD 2025, mainly for the Bud's Plumbing acquisition and pre-funding the Roundhouse acquisition[301](index=301&type=chunk) - Net cash provided by financing activities from continuing operations was **$21.5 million** YTD 2025, driven by common and preferred stock issuances and bank loan proceeds[302](index=302&type=chunk) - Holding company liquidity was **$6.2 million** at June 30, 2025, up from **$0.9 million** at December 31, 2024[307](index=307&type=chunk) - Existing cash, equivalents, investments, and anticipated cash flows are expected to be sufficient for the next twelve months, subject to macroeconomic uncertainties[308](index=308&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=77&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, Kingsway is not required to provide disclosures under this item - The Company is a smaller reporting company and is not required to make disclosures under this item[309](index=309&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=77&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Details the evaluation of disclosure controls and internal control over financial reporting, concluding effectiveness as of June 30, 2025, with Bud's Plumbing excluded - The Company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of June 30, 2025[313](index=313&type=chunk) - Management concluded that internal control over financial reporting was effective as of June 30, 2025, based on the COSO framework[314](index=314&type=chunk) - Bud's Plumbing, acquired on March 14, 2025, was excluded from the scope of the quarterly discussion of material changes in internal control over financial reporting[316](index=316&type=chunk) PART II - OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=78&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Legal proceedings information is incorporated by reference from Note 22, 'Commitments and Contingencies' - Legal proceedings information is incorporated by reference from Note 22, 'Commitments and Contingencies'[318](index=318&type=chunk) [ITEM 1A. RISK FACTORS](index=79&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes to risk factors previously disclosed in the 2024 Annual Report - No material changes to risk factors previously disclosed in the 2024 Annual Report[319](index=319&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=79&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) Details unregistered sales of equity securities, including Class D Preferred Stock for $2.0 million and Common Stock for $15.7 million in private placements - On May 8, 2025, the Company issued **80,000** shares of Class D Preferred Stock for **$2.0 million** in a private placement to accredited investors, including Board members[321](index=321&type=chunk) - On June 24, 2025, the Company issued **1,336,264** shares of Common Stock for aggregate gross proceeds of **$15.7 million** (net **$15.6 million**) in a private placement to accredited investors[321](index=321&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=79&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) No defaults upon senior securities were reported - No defaults upon senior securities were reported[322](index=322&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=79&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable - This item is not applicable[322](index=322&type=chunk) [ITEM 5. OTHER INFORMATION](index=79&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter[323](index=323&type=chunk) [ITEM 6. EXHIBITS](index=80&type=section&id=ITEM%206.%20EXHIBITS) Lists all exhibits filed with the Form 10-Q, including certificates, agreements, and certifications - Exhibits include Class D Certificate of Designations, Subscription Agreements, Stock Purchase Agreement, Section 302 and 906 Certifications, and Inline XBRL documents[324](index=324&type=chunk) SIGNATURES The report was signed by John T. Fitzgerald (President, CEO, and Director) and Kent A. Hansen (CFO and Executive VP) on August 7, 2025 - The report was signed by John T. Fitzgerald (President, CEO, and Director) and Kent A. Hansen (CFO and Executive VP) on August 7, 2025[326](index=326&type=chunk)

Investment Highlights - Kingsway has an Adjusted EBITDA run-rate of approximately $18 to $19 million [10, 89] - Kingsway possesses approximately $792 million in Net Operating Losses (NOLs) for tax-advantaged cash flow [10, 89] Extended Warranty Business - The Extended Warranty segment had TTM Pro Forma Revenue of $11138 thousand as of 9/30/22, excluding PWSC revenue [30] - The Extended Warranty segment had Warranty Segment Adjusted EBITDA of $11138 thousand as of TTM 9/30/22 [30] - The extended warranty industry is estimated at over $121 billion globally and forecast to grow at 74% CAGR through 2027 [24] - Extended Warranty Borrowings is $167 million with interest rate of 533% [33] Kingsway Search Xcelerator (KSX) - Ravix Financial, Inc was acquired for $11 million (~40X TTM Adjusted EBITDA) [45] - CSuite Financial Partners was acquired for $85 million (~45X TTM Adjusted EBITDA) [51] - Secure Nursing Service, Inc was acquired for $109 million (~40X TTM Adjusted EBITDA) [62] - Ravix Financial Inc has TTM 9/30/22 Revenue of $156 million [47]

Summary of Kingsway Financial Services Inc (KFS) 2025 Investor Day Company Overview - **Company**: Kingsway Financial Services Inc (KFS) - **Event**: 2025 Investor Day held on May 19, 2025 - **Location**: New York Stock Exchange Core Industry and Business Model - Kingsway operates as a publicly traded U.S. firm leveraging the search fund model to acquire and build businesses, focusing on quality services companies that generate recurring revenue and have strong margins [6][7][45] - The search fund model, also known as entrepreneurship through acquisition (ETA), has historically delivered annual returns in the mid-30% range, with a reported 35% internal rate of return (IRR) [8][9] - The company targets small businesses with EBITDA between $1 million to $3 million, acquiring them at 4.5 to 6.5 times EBITDA [13] Strategic Focus and Growth Opportunities - Kingsway is positioned to capitalize on the "silver tsunami" of retiring business owners, with nearly $4.8 trillion of wealth expected to change hands over the next two decades [14][16] - The company aims to fill the gap left by lower middle market private equity firms that often avoid deals where the owner wants to step away, creating favorable dynamics for search fund entrepreneurs [16] - Kingsway's strategy includes a self-funding growth flywheel: acquiring businesses, investing in growth, and reinvesting cash flow to fund further acquisitions [33][35] Recent Acquisitions and Performance - Recent acquisitions include Image Solutions, Bud's Plumbing, and SPI, with a focus on enhancing operational performance and expanding market reach [50][52][54] - Revenue for KSX was up 23% in Q1 2025 compared to Q1 2024, primarily due to the acquisition of Image Solutions [53] - Adjusted EBITDA also increased by 23%, indicating strong performance across acquired businesses [54] Financial Metrics and Valuation - Kingsway's current run rate adjusted EBITDA is approximately $18 million to $19 million [40] - The company maintains a disciplined approach to acquisitions, typically targeting mid-single-digit EBITDA multiples, ensuring a margin of safety through business quality rather than price paid [42] Kingsway Business System (KBS) - KBS is a framework designed to support newly acquired companies in achieving operational excellence and sustainable growth [63][66] - The system focuses on four pillars: talent acquisition, strategic planning, enterprise excellence, and growth [66][70] - KBS provides tools and resources for CEOs to improve performance, including talent mapping, KPI management, and structured problem-solving methodologies [71][73] Advisory Board and Leadership - Kingsway boasts a world-class advisory board, including seasoned experts like Tom Joyce, former CEO of Danaher Corporation, who provides strategic guidance and mentorship [28][22] - The company emphasizes the importance of attracting top-quality entrepreneurial talent and providing robust support to ensure successful leadership transitions [21][24] Tax Advantages and Financial Structure - Kingsway has accumulated approximately $622 million in net operating loss carryforwards, providing significant tax advantages that enhance cash flow and returns [31][32] - As a public company, Kingsway benefits from permanent equity capital, allowing for long-term investments without the pressure of a fund timetable [23][47] Conclusion - Kingsway Financial Services Inc is uniquely positioned to leverage the search fund model for growth, with a strong track record, disciplined investment criteria, and a comprehensive support system for its operators [46][48] - The company is well-prepared to capitalize on the upcoming wave of business transitions and continues to seek new acquisition opportunities to drive long-term shareholder value [45][39]

Kingsway's Business Model and Strategy - Kingsway Financial Services Inc is the only publicly-traded US company employing the Search Fund model to acquire and build businesses[9, 59] - Kingsway seeks to compound long-term shareholder value through its decentralized management model and tax-advantaged structure[10] - Kingsway employs the traditional Search Fund model to acquire small businesses with EBITDA of $1-3 million for roughly 4-6x EBITDA using a 50/50 split of equity and debt[20] - Kingsway targets 2-3 acquisitions per year with an acquisition IRR hurdle of >30%[50] - Kingsway has $622 million of valuable NOL tax assets[41] Financial Performance and Acquisitions - Kingsway's 12-month run-rate adjusted EBITDA for its operating companies is $18.0-$19.0 million[51] - KSX revenue grew +23.3% year-over-year in Q1 2025[68] - KSX adjusted EBITDA grew +23.2% year-over-year in Q1 2025[68] - Bud's Plumbing was acquired for $5.0 million at a 6.0x EBITDA multiple based on $0.8 million TTM Adj EBITDA[55, 102] Search Fund Model and Market Opportunity - Historical return across all Search Funds tracked by the Stanford Graduate School of Business since 1984 is +35.1%[14] - Nearly $4.8 trillion of net worth will be transferred over the next 20 years due to Baby Boomer business owner retirements[22]

Core Insights - Kingsway Financial Services Inc. (KFS) reported an 8.4% year-over-year increase in consolidated revenues to $28.3 million for Q1 2025, but experienced a net loss of $3.1 million, widening from a loss of $2.3 million in the previous year [2][4] Revenue Growth and Segment Performance - The Kingsway Search Xcelerator (KSX) segment saw revenues rise 23.3% to $11.7 million, driven by acquisitions, while the Extended Warranty segment's revenues remained flat at $16.7 million [3][4] - Adjusted consolidated EBITDA declined to $1.4 million from $2.1 million, reflecting a 35.7% decrease [2] Key Business Metrics - The trailing 12-month run-rate adjusted EBITDA for operating companies is estimated between $18 million and $19 million, indicating potential for future growth [4][11] - Several subsidiaries under KSX, including Ravix and CSuite, showed underlying strength with modest EBITDA gains despite flat revenue [5] Management Commentary - CEO JT Fitzgerald emphasized strategic and financial progress, highlighting recent acquisitions that expanded Kingsway's platforms [7] - CFO Kent Hansen noted that the first quarter is typically the weakest for KFS, but forward-looking indicators suggest strengthening in core segments [7] Factors Influencing Financial Performance - The revenue increase was primarily driven by KSX acquisitions, with Bud's Plumbing contributing approximately $800,000 in annual run-rate adjusted EBITDA [8] - The decline in consolidated adjusted EBITDA was attributed to lower profitability in the Extended Warranty segment and increased corporate overhead costs [8] Recent Developments - Kingsway Financial executed two acquisitions in early 2025, acquiring Bud's Plumbing for $5 million and ViewPoint to enhance its SaaS capabilities [12] - Rob Humble was appointed president and CEO of PWI and Penn Warranty, aligning executive incentives with Kingsway's KSX model [13]

Financial Data and Key Metrics Changes - Consolidated revenue for Q1 2025 was $28.3 million, an increase of 8.4% compared to $26.2 million in Q1 2024 [16] - Consolidated adjusted EBITDA declined by $800,000 year-over-year, reflecting lower profitability in the extended warranty segment and higher holdcoat costs [16] - Trailing twelve month adjusted run rate EBITDA for the businesses, including recent acquisitions, stands at approximately $18 million to $19 million [15] Business Line Data and Key Metrics Changes - In the Kingsway Search Accelerator (KSX) segment, revenue was $11.7 million, up 23.3% year-over-year, with adjusted EBITDA also increasing by 23.3% [18] - Extended warranty segment revenue was flat at $16.7 million compared to Q1 2024, but cash sales increased by 3.7% year-over-year [21] - Adjusted EBITDA for the extended warranty segment was $800,000, down from $1.4 million in the prior year [22] Market Data and Key Metrics Changes - Cash sales in the extended warranty segment showed a sequential increase of 9.3% from year-end [21] - Trailing twelve month modified cash EBITDA for the extended warranty segment was up 11.7% year-over-year [22] Company Strategy and Development Direction - The company aims to compound long-term shareholder value through a decentralized management model and acquisitions of high-quality service companies [5] - Recent acquisitions, including Bud's Plumbing and Viewpoint, are expected to enhance the KSX platform and provide additional growth levers [10][9] - The company is focused on expanding its deal pipeline, which is currently the most active it has ever been [29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth trajectory of the KSX segment, indicating that many businesses are nearing an inflection point for accelerated growth [13] - The extended warranty segment is entering a more favorable phase of recovery, with positive signs of cash sales growth [14] - Management highlighted the importance of patience in realizing value creation from investments in growth [40] Other Important Information - The company appointed two new independent directors to strengthen corporate governance [11] - A $6 million private placement was completed to fund the Bud's Plumbing acquisition, increasing total debt to $59.5 million [28] Q&A Session Summary Question: Can you provide any color on the Viewpoint acquisition and its strategic fit? - The acquisition was sourced by Drew at SPI and strategically fits by providing a cloud-native software solution for smaller resort operators in North America while expanding geographic reach [33] Question: Can you explain the J curve with search acquisitions? - The J curve represents the initial negative impact on profitability due to investments in talent and technology, followed by a period of growth as these investments pay off [37] Question: Can you share more about the robust deal pipeline? - The company has experienced operators building their M&A pipelines and is excited about potential acquisitions in fragmented markets [41] Question: Why is the owner of Bud's staying on for a one-year transition? - This is typical and desirable in search acquisitions to ensure a smooth transition of customer relationships and institutional knowledge [43] Question: Are there other industries targeted for platforms? - The company evaluates industries based on growth potential and operator fit, considering sectors like insurance brokerage and wealth management for future platforms [46]

Financial Data and Key Metrics Changes - Consolidated revenue for Q1 2025 was $28.3 million, an increase of 8.4% compared to $26.2 million in Q1 2024 [16] - Consolidated adjusted EBITDA declined by $800,000 year over year, reflecting lower profitability in the extended warranty segment and higher holdcoat costs [16] - Trailing twelve month adjusted run rate EBITDA for the businesses stood at approximately $18 million to $19 million [15] Business Line Data and Key Metrics Changes - In the Kingsway Search Accelerator (KSX) segment, revenue was $11.7 million, up 23.3% from $9.5 million in the same period last year, with adjusted EBITDA also increasing by 23.3% [17] - The extended warranty segment's revenue was flat at $16.7 million compared to Q1 2024, but cash sales increased by 3.7% year over year [21] - Adjusted EBITDA for the extended warranty segment was $800,000, down from $1.4 million in the prior year quarter [22] Market Data and Key Metrics Changes - Cash sales in the extended warranty segment showed a sequential increase of 9.3% from year-end [21] - Trailing twelve month modified cash EBITDA for the extended warranty segment was up 11.7% year over year [22] Company Strategy and Development Direction - The company aims to capitalize on the search fund model at scale within a tax-efficient public company framework [5] - Recent acquisitions, including Bud's Plumbing and Viewpoint, are expected to enhance the KSX platform and provide additional growth levers [10][11] - The company is focused on driving growth and profitability while maintaining a robust deal pipeline [29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth trajectory in the KSX segment, indicating that many businesses are nearing an inflection point for accelerated growth [13] - The extended warranty segment is entering a more favorable phase of recovery after two challenging years, with signs of returning cash sales growth [14] - The company is excited about the progress made and the potential for future growth in 2025 [30] Other Important Information - The company appointed two new independent directors to strengthen corporate governance [11] - A $6 million private placement was completed to fund the Bud's Plumbing acquisition, increasing cash and cash equivalents to $6.4 million [26][28] Q&A Session Summary Question: Can you provide any color on the Viewpoint acquisition and its strategic fit? - The acquisition was sourced by Drew at SPI and strategically fits by providing a cloud-native software solution for smaller customers in North America while expanding geographic reach [33] Question: Can you explain the J curve with search acquisitions? - The J curve represents the initial negative impact on profitability due to investments in talent and technology, followed by a period of growth as these investments pay off [36] Question: Can you share more about the robust deal pipeline? - The company has experienced operators building their M&A pipelines and is excited about potential tuck-in acquisitions across various platforms [40] Question: Why is the owner of Bud's staying on for a one-year transition? - This is typical in search acquisitions to ensure a smooth transition of customer relationships and institutional knowledge [42] Question: Are there other industries targeted for platforms? - The company evaluates industries based on growth potential and operator fit, considering sectors like insurance brokerage and wealth management for future platforms [46]