Shares of Kingsway Financial Services Inc. (KFS) have plunged 12.9% since the company released its third-quarter 2025 results for the period ended Sept. 30, 2025. Over the same post-earnings span, the S&P 500 gained 0.8%. The stock’s performance has also lagged the broader market over the past month, sliding 19.2% while the S&P 500 advanced 3.6%.KFS’ Earnings SnapshotIn the third quarter of 2025, Kingsway Financial generated revenues of $37.2 million, up 36.9% from $27.1 million a year earlier. Growth was d ...

Group 1 - Greenhaven Road Capital reported a third-quarter 2025 return of approximately -9%, resulting in year-to-date returns also at approximately -9% [1] - The portfolio's performance was negatively impacted by a lack of direct investment in AI, no overlap with the S&P 500 and Russell 2000, and insufficient ownership of small, high-growth, yet unprofitable companies [1] - The fund's top 5 holdings can be reviewed to identify its best investment picks for 2025 [1] Group 2 - Kingsway Financial Services Inc. (NYSE:KFS) was highlighted in the investor letter, with a one-month return of -19.28% and a 52-week gain of 45.31% [2] - As of November 7, 2025, Kingsway Financial Services Inc. closed at $13.02 per share, with a market capitalization of $375.932 million [2] - The company has been discussed in previous letters, noting that search funds have historically generated annual returns exceeding 30%, although they are difficult to access at scale and are inherently illiquid [3]

Core Insights - The fund experienced a return of approximately -9% during Q3, leading to a year-to-date return of approximately -9% [2] - The portfolio lacks direct exposure to AI, focusing instead on companies that are integrating AI into their operations, which has affected short-term performance [3][5] - The investment strategy emphasizes long-term growth potential and durable competitive advantages rather than short-term market trends [5][8] Portfolio Analysis - The top five holdings include PAR Technologies, Cellebrite, KKR, LifeCore, and Burford, all of which have faced declines in share price year-to-date [7][32] - LifeCore's share price dropped over 10% following a shelf offering announcement, despite positive business developments [12][15] - Cellebrite's valuation has been impacted by a general decline in software multiples, with a 26% drop in Enterprise Value to Next 12 Months Revenue for medium growth companies [17][18] Company-Specific Developments - LifeCore is expected to ramp up revenues significantly by 2026, driven by new customer wins and favorable regulatory changes [13][15] - Cellebrite is positioned to benefit from AI advancements, with plans to release investigative AI tools in January 2026 [20][22] - KKR's diversified asset management approach remains robust, with significant growth in Fee Related Earnings and a focus on expanding its investor base [25][31] Market Trends and Challenges - The current market environment has led to a compression of software multiples, affecting companies like Cellebrite and PAR Technologies [18][46] - Concerns regarding traditional private equity and private credit have emerged, but KKR's diversified model mitigates some of these risks [24][30] - The investment landscape is characterized by volatility, with a disconnect between share prices and underlying business progress [10][42] Future Outlook - The fund's strategy focuses on long-term value realization, with expectations that current market conditions will eventually improve for the companies held [9][43] - There is potential for significant growth in companies like Hagerty and Kingsway, driven by strategic partnerships and management quality [33][35] - The outlook for PAR Technologies hinges on winning key contracts, which could substantially increase recurring revenue and growth rates [51][60]

Financial Data and Key Metrics Changes - Consolidated revenue increased by 37% year over year, reaching $37.2 million compared to $27.1 million in the prior year [14][15] - Adjusted consolidated EBITDA was $2.1 million for Q3 2025, down from $3 million in the prior quarter [15] - KSX segment revenue grew by 104% to $19 million, with adjusted EBITDA increasing by 90% to $2.7 million [15] - Extended warranty segment revenue increased by 2% to $18.2 million, but adjusted EBITDA decreased to $800,000 from $2.1 million a year ago [15] Business Line Data and Key Metrics Changes - KSX segment represented the majority of revenue for the first time, achieving 104% revenue growth and 90% adjusted EBITDA growth [4][15] - Extended warranty segment showed stable cash flow with a modest revenue increase of 2% [15][16] - Cash sales in the extended warranty segment accelerated from a 9.2% year-over-year increase in Q2 to a 14.2% increase in Q3 [12] Market Data and Key Metrics Changes - The company is seeing tangible business momentum across its operating subsidiaries, with Roundhouse achieving EBITDA of approximately $500,000 in September [6] - Image Solutions and DDI also showed sequential improvements in EBITDA, indicating potential organic growth [6][7] Company Strategy and Development Direction - The company aims to compound long-term shareholder value through a decentralized management model and a focus on acquiring high-quality, asset-light service businesses [3][4] - Kingsway has completed six acquisitions year-to-date, exceeding its target of three to five per year, indicating a robust pipeline of opportunities [10] - The company is focused on disciplined execution and scaling its KSX portfolio while supporting operator CEOs for sustainable growth [14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges in the healthcare sector, particularly regarding Medicare and Medicaid reimbursements, but expressed confidence in their hospital mix and customer selection [19][20] - The company is optimistic about organic growth potential across its portfolio, targeting high single-digit growth rates for acquired businesses [25][41] - Management emphasized the importance of professionalizing acquired businesses to drive organic growth and improve operational efficiency [24][41] Other Important Information - The company had $9.3 million in cash and cash equivalents as of September 30, 2025, up from $5.5 million at year-end 2024 [16] - Total debt increased to $70.7 million, primarily due to borrowings for recent acquisitions [16][17] - The trailing 12-month adjusted run-rate EBITDA for the businesses owned stands at approximately $20.5 million to $22.5 million [11] Q&A Session Summary Question: How will the current environment affect secure nursing and digital diagnostics? - Management noted that hospitals are under pressure, particularly those reliant on Medicare and Medicaid, but expressed confidence in their hospital mix and customer selection [19][20] Question: Can you discuss the organic growth being seen across businesses? - Management highlighted that organic growth is crucial and varies by industry, with expectations of high single-digit growth across acquired businesses [25][41] Question: How are Roundhouse and the plumbing businesses performing post-acquisition? - Both businesses are performing at or above the original underwriting plan, benefiting from experienced operators who can make an immediate impact [33][41] Question: What is the potential for Image Solutions and DDI as they exit their J-curves? - Image Solutions is expected to pursue tuck-in acquisitions, while DDI has significant organic growth opportunities due to its unique market position [43][44] Question: How does Kingsway view its search strategy moving forward? - The company aims to identify high-quality businesses with strong industry dynamics, with the potential for them to become platforms for further growth [46]

Revenue Growth - Consolidated revenue increased by 37% to $37.2 million for Q3 2025, compared to $27.1 million in Q3 2024[4] - KSX revenue grew by 104.2% to $19.0 million in Q3 2025, up from $9.3 million in Q3 2024[4] - Extended Warranty revenue increased by 2.0% to $18.2 million in Q3 2025, compared to $17.8 million in Q3 2024[4] - The Company acquired Roundhouse Electric & Equipment Co. for $22.4 million, expected to add $16.0 million in annual revenue[5] - The acquisition of AAA Flexible Pipe Cleaning Corp. for $3.5 million is anticipated to contribute $7.0 million in annual revenue[5] - Extended Warranty cash sales increased by 14.2% year-over-year in Q3 2025[4] Profitability and Loss - Consolidated net loss was $2.4 million for Q3 2025, slightly higher than the net loss of $2.3 million in Q3 2024[4] - For the twelve months ended September 30, 2025, GAAP Operating Income for the KSX segment was $7,711,000, an increase from $4,984,000 for the same period in 2024, representing a 55% growth[16] - The Extended Warranty segment reported a GAAP Operating Income of $2,771,000 for the twelve months ended September 30, 2025, down from $6,405,000 in 2024, indicating a decline of 57%[19] EBITDA Performance - Twelve-month run-rate adjusted EBITDA for operating companies is projected between $20.5 million and $22.5 million[4] - KSX operating companies delivered twelve-month run-rate adjusted EBITDA of $15.5 million to $16.5 million, up from $9.0 million to $10.0 million in the prior year[4] - Non-GAAP adjusted EBITDA for the KSX segment for the three months ended September 30, 2025, was $2,660,000, compared to $1,401,000 for the same period in 2024, reflecting an increase of 90%[16] - Non-GAAP adjusted EBITDA for the Extended Warranty segment for the three months ended September 30, 2025, was $762,000, compared to $2,072,000 for the same period in 2024, a decrease of 63%[19] Debt and Financial Position - Total net debt increased to $61.4 million as of September 30, 2025, compared to $52.0 million as of December 31, 2024[4] Adjustments and Costs - Total Non-GAAP adjustments for the KSX segment amounted to $1,194,000 for the twelve months ended September 30, 2025, with acquisition and employee costs contributing $499,000[16] - The Extended Warranty segment's total Non-GAAP adjustments for the twelve months ended September 30, 2025, were $1,811,000, with investment income accounting for a significant portion[19] - Employee costs for the Extended Warranty segment were $352,000 for the three months ended September 30, 2025, compared to no costs reported for the same period in 2024[19] Investment Income - Investment income for the Extended Warranty segment was $1,306,000 for the three months ended September 30, 2025, compared to $1,282,000 for the same period in 2024, showing a slight increase of 2%[19] - The KSX segment's investment income for the twelve months ended September 30, 2025, was $117,000, consistent with the previous year's performance[16] Depreciation - Depreciation for the KSX segment was $578,000 for the twelve months ended September 30, 2025, compared to $378,000 in 2024, representing a 53% increase[16]

Core Insights - Kingsway Financial Services Inc. reported a revenue growth of 37% to $37.2 million for the three and nine months ended September 30, 2025 [1] - KSX revenue experienced a significant increase of 104% to $19.0 million, marking a notable performance [1] - Extended warranty revenue grew by 2% to $18.2 million, with cash sales in this segment up by 14% [1] - For the first time, KSX represented a majority of the company's revenue [1] - Management will host a conference call on November 6, 2025, at 5 p.m. ET to discuss these results [1]

Financial Performance - Net investment income for the three months ended September 30, 2025 was $431,000, an increase of 7% from $403,000 in the same period of 2024[93]. - For the three months ended September 30, 2025, service fee and commission revenue was $37.173 million, a 37.1% increase from $27.136 million in the same period of 2024[165]. - For the nine months ended September 30, 2025, service fee and commission revenue reached $96.441 million, up 20.9% from $79.742 million in 2024[165]. - The company reported a loss from continuing operations of $2.411 million for the three months ended September 30, 2025, compared to a loss of $2.176 million for the same period in 2024, representing an increase of 10.8%[189]. - Loss from continuing operations before income tax expense was $11,113,000 for the nine months ended September 30, 2025, compared to a loss of $6,435,000 in 2024, representing an increase in loss of 72.5%[236]. Assets and Investments - As of September 30, 2025, the carrying value of limited liability investments totaled $0.6 million, with no impairments recorded during the three and nine months ended September 30, 2025 and 2024[90]. - The carrying value of the company's investments in private companies was $0.6 million as of September 30, 2025, with no adjustments recorded for observable price changes[92]. - Total intangible assets increased to $54.918 million as of September 30, 2025, up from $40.049 million at December 31, 2024[99]. - The fair value of limited liability investments increased from $2,859,000 at December 31, 2024, to $3,148,000 at September 30, 2025[253]. - The company recorded no impairments related to investments in private companies for the three and nine months ended September 30, 2025[255]. Goodwill and Intangible Assets - The company recorded goodwill of $10.6 million related to acquisitions during the nine months ended September 30, 2025, with total goodwill increasing to $69.544 million[95]. - Amortization of intangible assets for the nine months ended September 30, 2025 was $5.8 million, compared to $4.3 million for the same period in 2024[101]. - No goodwill impairment charges were recorded during the three and nine months ended September 30, 2025 and 2024[98]. Debt and Financing - Total debt as of September 30, 2025 was $72.671 million, with bank loans comprising $56.483 million of this total[108]. - The 2021 Ravix Loan had a principal amount of $6.0 million and was due to mature on October 1, 2027[109]. - The 2022 Ravix Loan, part of the acquisition of CSuite, included an additional principal amount of $6.0 million and was due to mature on November 16, 2028[111]. - The Company recorded a principal prepayment of $1.5 million on the 2021 Ravix term loan on July 23, 2024[114]. - The 2025 Ravix Loan was established with a principal amount of $9.1 million, maturing on February 7, 2031, and the 2022 Ravix Revolver was extended to February 7, 2027[116]. Revenue and Service Fees - Revenue from contracts with customers includes various service fees and commissions, with total revenue recognized from sales-type leases of $0.4 million for the three months ended September 30, 2025[164]. - Vehicle service agreement fees for the three months ended September 30, 2025, were $15.504 million, compared to $15.215 million in 2024, reflecting a 1.9% increase[165]. - Maintenance support service fees decreased to $1.203 million in Q3 2025 from $1.300 million in Q3 2024, a decline of 7.5%[165]. - Business services consulting fees increased significantly to $5.474 million in Q3 2025 from $4.026 million in Q3 2024, representing a 36.1% growth[165]. Tax and Valuation - The company maintained a valuation allowance for its gross deferred tax assets, reflecting uncertainty about generating taxable income necessary to utilize prior operating losses[186]. - As of September 30, 2025, the company carried net deferred income tax liabilities of $4.6 million, up from $4.4 million at December 31, 2024[187]. - The company recorded an income tax benefit of $(2.050) million for the three months ended September 30, 2025, compared to a tax expense of $21,000 for the same period in 2024[13]. Stock and Dividends - The Company declared cash dividends for Preferred Stock totaling $327,000 for the three months ended September 30, 2025, compared to $13,000 for the same period in 2024, representing a significant increase[211]. - The total accrued dividends for Preferred Stock as of September 30, 2025, amounted to $327,000, up from $166,000 as of December 31, 2024[205]. - The Company has three series of redeemable preferred stock outstanding, with a total redemption value of $16.25 million as of September 30, 2025[200]. Acquisitions and Noncontrolling Interests - The Company acquired a 20% noncontrolling interest in Southside Plumbing for $925,000 on August 14, 2025, with a net loss attributable to this interest of $34,000 for the nine months ended September 30, 2025[206][207]. - The redeemable noncontrolling interest balance as of September 30, 2025, was $925,000, reflecting the acquisition of Southside Plumbing[207]. Segment Performance - The Company operates through two reportable segments: Kingsway Search Xcelerator and Extended Warranty[219]. - Service fee and commission revenue from the KSX segment reached $18,975,000 for the three months ended September 30, 2025, compared to $9,293,000 in 2024, reflecting a 104% growth[231]. - Total segment operating income for the Extended Warranty segment was $401,000 for the three months ended September 30, 2025, down from $1,704,000 in 2024[235]. Fair Value Measurements - The fair value of limited liability investments is categorized in Level 3 of the fair value hierarchy, reflecting the use of valuation multiples based on performance metrics[243]. - The company employs a fair value hierarchy to categorize inputs for valuation techniques, with Level 1 being the highest priority[244]. - The estimated fair value of the seller phantom equity awards is $3,328,000 as of September 30, 2025[253].

Group 1 - The Value Lab focuses on long-only value investment ideas, targeting international mispriced equities with a portfolio yield of approximately 4% [1][2] - Kingsway Financial Services Inc. operates as a search fund, acquiring businesses in private markets and applying private equity growth equity strategies [2] - The Valkyrie Trading Society consists of analysts sharing high conviction investment ideas that are expected to generate non-correlated and outsized returns in the current economic environment [2] Group 2 - The Value Lab provides members with real-time portfolio updates, 24/7 chat support, regular global market news reports, and feedback on stock ideas [2] - The investment approach emphasizes downside protection and aims for high conviction in developed market opportunities [2] - The analysts involved are long-only investors, indicating a strategy focused on buying and holding rather than short selling [2]

Core Insights - Kingsway Financial Services Inc. is the only publicly-traded US company utilizing the Search Fund model to acquire and develop businesses [1] - Colter Hanson has been appointed as the newest Operator-in-Residence within the Kingsway Search Xcelerator Segment [1] - The announcement was made by J.T., indicating a positive outlook for the KSX platform with the addition of Hanson [1]

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]