[Q1 2025 Consolidated Financial Highlights](index=1&type=section&id=First%20Quarter%202025%20Consolidated%20Financial%20Highlights) Kingsway's Q1 2025 revenue grew **8.4%** to **$28.3 million**, led by KSX, but net loss widened and adjusted EBITDA declined Q1 2025 Key Financial Metrics | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | Change | | :--- | :--- | :--- | :--- | | Consolidated Revenue | $28.3 | $26.2 | +8.4% | | Consolidated Net Loss | ($3.1) | ($2.3) | +34.8% | | Adjusted Consolidated EBITDA | $1.4 | $2.1 | -33.3% | | Total Net Debt (as of period end) | $53.1 | N/A | N/A | Q1 2025 Revenue by Segment | Segment | Q1 2025 Revenue (in millions) | Q1 2024 Revenue (in millions) | Change | | :--- | :--- | :--- | :--- | | Kingsway Search Xcelerator (KSX) | $11.7 | $9.5 | +23.3% | | Extended Warranty | $16.7 | $16.7 | 0.0% | - The twelve-month run-rate adjusted EBITDA for operating companies is estimated to be between **$18.0 million** and **$19.0 million**, reflecting the trailing performance of currently owned and recently acquired businesses[4](index=4&type=chunk) [Recent Business Highlights](index=1&type=section&id=Recent%20Business%20Highlights) Kingsway executed strategic initiatives including two accretive acquisitions and a key leadership appointment during and after Q1 - On March 17, 2025, Kingsway acquired Bud's Plumbing Service for **$5.0 million**, expected to add **$6.0 million** in annual unaudited revenue and **$0.8 million** in annual unaudited adjusted EBITDA[4](index=4&type=chunk) - On April 30, 2025, Kingsway's subsidiary SPI Software acquired @Work International Pty Ltd (ViewPoint), a cloud-native timeshare software firm, to advance its leadership in the vacation ownership software market[4](index=4&type=chunk) - On April 2, 2025, Rob Humble was appointed President and CEO of Kingsway's dealer warranty businesses, PWI and Penn Warranty[4](index=4&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) CEO JT Fitzgerald highlighted strong KSX segment growth and signs of recovery in Extended Warranty, reaffirming the company's Search Fund acquisition model - The KSX segment demonstrated strong performance with revenue growing **23.3%** and adjusted EBITDA growing **23.2%** year-on-year[4](index=4&type=chunk) - Two acquisitions were completed in early 2025: Bud's Plumbing, establishing the new KSX Skilled Trade Services platform, and ViewPoint, accelerating SPI Software's product roadmap and geographic expansion[6](index=6&type=chunk) - The Extended Warranty segment is showing signs of recovery, with growth in cash sales and positive forward-looking profitability indicators, despite a year-over-year decline in adjusted EBITDA for the quarter[7](index=7&type=chunk) - The company maintains a robust deal pipeline and continues to focus on acquiring asset-light, profitable, recurring revenue service businesses through its Search Fund model[8](index=8&type=chunk) [Financial Reconciliations (GAAP to Non-GAAP)](index=5&type=section&id=Financial%20Reconciliations) This section provides detailed reconciliations from GAAP to Non-GAAP adjusted EBITDA for consolidated and segment results, offering a clearer view of core operational performance [Consolidated GAAP Net Income to Non-GAAP Adjusted EBITDA](index=5&type=section&id=Reconciliation%20of%20GAAP%20Net%20Income%20(Loss)%20to%20Non-GAAP%20Adjusted%20Consolidated%20EBITDA) Q1 2025 GAAP Net Loss of **$3.1 million** reconciled to Non-GAAP Adjusted Consolidated EBITDA of **$1.4 million**, indicating decreased adjusted profitability year-over-year Consolidated EBITDA Reconciliation (in thousands) | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | GAAP Net Income (Loss) | $(3,092) | $(2,328) | | Total Non-GAAP Adjustments | $4,444 | $4,432 | | **Non-GAAP Adjusted Consolidated EBITDA** | **$1,352** | **$2,104** | [Extended Warranty Segment GAAP Operating Income to Non-GAAP Adjusted EBITDA](index=6&type=section&id=Reconciliation%20of%20Extended%20Warranty%20Segment%20Operating%20Income%20to%20Non-GAAP%20Adjusted%20EBITDA) Extended Warranty segment's Q1 2025 GAAP Operating Income of **$0.5 million** reconciled to Non-GAAP adjusted EBITDA of **$0.85 million**, a notable decrease from Q1 2024 Extended Warranty EBITDA Reconciliation (in thousands) | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | GAAP Operating Income | $515 | $1,076 | | Total Non-GAAP Adjustments | $335 | $372 | | **Non-GAAP adjusted EBITDA** | **$850** | **$1,448** | [KSX Segment GAAP Operating Income to Non-GAAP Adjusted EBITDA](index=7&type=section&id=Reconciliation%20of%20KSX%20Segment%20Operating%20Income%20to%20Non-GAAP%20Adjusted%20EBITDA) KSX segment's Q1 2025 GAAP Operating Income of **$1.7 million** reconciled to Non-GAAP adjusted EBITDA of **$1.9 million**, reflecting healthy growth from Q1 2024 KSX Segment EBITDA Reconciliation (in thousands) | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | GAAP Operating Income | $1,743 | $1,343 | | Total Non-GAAP Adjustments | $174 | $212 | | **Non-GAAP adjusted EBITDA** | **$1,917** | **$1,555** | [Company Information and Disclosures](index=3&type=section&id=About%20the%20Company) Kingsway Financial Services Inc. is a publicly-traded U.S. company utilizing the Search Fund model to acquire asset-light service businesses, with the report including non-GAAP financial measure disclosures and forward-looking statement disclaimers - Kingsway is the only publicly-traded US company that utilizes the Search Fund model for acquisitions[9](index=9&type=chunk) - The company's strategy is to acquire and operate a collection of asset-light, growing, profitable B2B and B2C services companies with recurring revenue streams[10](index=10&type=chunk) - The report uses non-GAAP adjusted EBITDA to provide investors with a meaningful comparison of the company's core business operating results over different periods[11](index=11&type=chunk) - This press release contains forward-looking statements; investors are advised to consult the 'Risk Factors' section in the Company's SEC filings for a full understanding of potential risks[12](index=12&type=chunk)

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents Kingsway Financial Services Inc.'s unaudited consolidated financial statements for Q1 2025, including balance sheets, income statements, cash flows, and detailed accounting notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets increased to **$192,117 thousand** from **$186,616 thousand**, with liabilities rising and shareholders' equity decreasing Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$192,117** | **$186,616** | | Total Investments | $41,265 | $41,337 | | Goodwill | $57,430 | $56,524 | | Intangible assets, net | $41,883 | $40,049 | | **Total Liabilities** | **$170,650** | **$168,314** | | Deferred service fees | $84,336 | $83,108 | | Bank loans | $45,001 | $44,128 | | **Total Shareholders' Equity** | **$7,217** | **$10,052** | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) For Q1 2025, the company reported a net loss of **$3,092 thousand**, increasing from **$2,328 thousand** in Q1 2024, due to higher operating expenses despite revenue growth Q1 2025 vs Q1 2024 Operating Results (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues | $28,349 | $26,160 | | Total Operating Expenses | $29,063 | $25,393 | | Operating (Loss) Income | $(714) | $767 | | Loss from Continuing Operations | $(3,092) | $(2,115) | | Net Loss | $(3,092) | $(2,328) | | Net Loss Attributable to Common Shareholders | $(3,439) | $(2,485) | | Basic and Diluted Loss Per Share | $(0.13) | $(0.09) | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2025, net cash used in operating activities was **$1,798 thousand**, a shift from cash provided in Q1 2024, with increased cash used in investing and provided by financing Cash Flow Summary (in thousands) | Cash Flow Activity | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(1,798) | $249 | | Net cash used in investing activities | $(3,182) | $(166) | | Net cash provided by financing activities | $5,804 | $2,354 | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the company's accounting policies and financial data, including acquisitions, segment disposals, and preferred stock issuances - On March 14, 2025, the Company acquired 100% of M.L.C. Plumbing, LLC (d/b/a Bud's Plumbing) for approximately **$4.9 million**, as part of the Kingsway Search Xcelerator segment[32](index=32&type=chunk) - The disposal of the Leased Real Estate segment was completed with the sale of VA Lafayette on August 16, 2024, with its results now classified as discontinued operations[44](index=44&type=chunk)[45](index=45&type=chunk) - In February 2025, the Company issued 240,000 shares of Class C Preferred Stock for aggregate proceeds of **$6.0 million**[183](index=183&type=chunk) - A subsequent event occurred on May 8, 2025, with the company closing a private placement of 80,000 shares of Class D Preferred Stock for **$2.0 million**[243](index=243&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=60&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses Q1 2025 performance, highlighting a net loss, varied segment operating income, and sufficient liquidity for the next twelve months Segment Operating Income (in thousands) | Segment | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Extended Warranty | $515 | $1,076 | $(561) | | Kingsway Search Xcelerator | $1,743 | $1,343 | $400 | | **Total segment operating income** | **$2,258** | **$2,419** | **$(161)** | - The Extended Warranty segment's operating income fell due to higher claims and administrative expenses at IWS and lower revenue at Geminus[275](index=275&type=chunk)[277](index=277&type=chunk) - The Kingsway Search Xcelerator segment's growth was primarily driven by the inclusion of Image Solutions (acquired Sept 2024) and Bud's Plumbing (acquired Mar 2025)[276](index=276&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk) - The holding company's liquidity was **$1.4 million** at March 31, 2025, up from **$0.9 million** at year-end 2024, with management believing liquidity is sufficient for the next 12 months[316](index=316&type=chunk)[317](index=317&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=74&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is a smaller reporting company and is therefore not required to provide disclosures under this item - As a smaller reporting company defined in Rule 12b-2 of the Exchange Act, the company is exempt from the disclosure requirements of this item[319](index=319&type=chunk) [Controls and Procedures](index=74&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and internal control over financial reporting were effective as of March 31, 2025, excluding a recent acquisition - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective[323](index=323&type=chunk) - Management concluded that as of March 31, 2025, the company's internal control over financial reporting was effective based on the COSO framework[324](index=324&type=chunk) - The acquisition of Bud's Plumbing on March 14, 2025, was excluded from the scope of management's assessment of internal control over financial reporting for the quarter[325](index=325&type=chunk) [PART II - OTHER INFORMATION](index=74&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Legal Proceedings](index=74&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Information regarding legal proceedings is incorporated by reference, detailing a settlement agreement with a remaining maximum reimbursement obligation of **$2.9 million** - The company has a settlement agreement with Aegis Security Insurance Company with a remaining maximum reimbursement amount of **$2.9 million** as of March 31, 2025, though the ultimate amount is not reasonably determinable and no liability has been recorded[241](index=241&type=chunk) [Risk Factors](index=74&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors were reported since the 2024 Annual Report[328](index=328&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=74&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company sold **$6.0 million** in Class C Preferred Stock via private placement and repurchased **$0.3 million** in common stock during the quarter - In February 2025, the company issued 240,000 shares of Class C Preferred Stock for **$6.0 million** in a private placement exempt from registration under Section 4(a)(2) of the Securities Act[331](index=331&type=chunk) Share Repurchases for Quarter Ended March 31, 2025 | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 1 - 31, 2025 | 42,900 | $7.99 | | February 1 - 28, 2025 | — | — | | March 1- 31, 2025 | — | — | | **Total** | **42,900** | **$7.99** | [Defaults Upon Senior Securities](index=76&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The company reported no defaults upon senior securities during the period - None[336](index=336&type=chunk) [Mine Safety Disclosures](index=76&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Not applicable[336](index=336&type=chunk) [Other Information](index=76&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter - No director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter[337](index=337&type=chunk) [Exhibits](index=77&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including preferred stock designations, officer certifications, and XBRL data - Exhibits filed include the Class C Certificate of Designations, Subscription Agreements, CEO/CFO certifications, and XBRL data files[339](index=339&type=chunk)

Core Insights - Kingsway Financial Services Inc. (KFS) reported a net loss of $8.3 million for the year ended December 31, 2024, compared to a net income of $24 million in 2023, despite a revenue increase of 5.9% to $109.4 million [2][4] - The company's stock performance showed a 1.7% gain post-earnings report, contrasting with a 5.6% decline over the past month, aligning with the S&P 500's performance [1] Revenue and Profitability Metrics - Consolidated revenues for 2024 were $109.4 million, up from $103.2 million in 2023, marking a 5.9% increase [2] - Adjusted consolidated EBITDA increased by 16.9% to $10.6 million in 2024 from $9.1 million in 2023 [2] Segment Performance and Operational Trends - Extended Warranty revenues grew slightly to $68.9 million, a 0.9% increase from $68.2 million [3] - KSX revenues rose 15.7% to $40.5 million from $35 million [3] - Combined adjusted EBITDA for both segments remained flat at $14.1 million [3] Extended Warranty Segment Insights - Adjusted EBITDA in the Extended Warranty segment decreased by 10.2% to $7.6 million due to higher claims costs driven by inflation [4] - Claims expense increases moderated in the second half of the year, with a 4.1% rise in Q4 compared to 13% in Q1 [4] - Cash sales increased by 3.6% for the year, indicating underlying demand strength [4] KSX Segment Insights - Adjusted EBITDA for the KSX segment rose 14.9% to $6.6 million, primarily due to acquisitions [5] - DDI revenues grew nearly 20% compared to 2023, while total nurse staffing shifts increased by 8.5% in Q4 [5] Management Commentary - CEO John Fitzgerald emphasized 2024 as a year of progress, highlighting sequential EBITDA growth and diversification through acquisitions [6] - Management expressed confidence in the KSX model and noted that recent acquisitions were immediately accretive [6] Capital Allocation and Debt Management - CFO Kent Hansen highlighted prudent capital allocation strategies, including debt management and the use of preferred equity for acquisitions [7] - Total net debt rose to $52 million at year-end from $35.3 million in 2023, mainly due to the Image Solutions acquisition [12] Guidance and Future Outlook - Management cited a trailing 12-month adjusted EBITDA run rate of $19 million to $20 million for its operating businesses [10] - Leadership expressed optimism about executing two to three acquisitions per year, supported by a growing pipeline of opportunities [10] Acquisition Strategy - Kingsway Financial continued its acquisition strategy, completing the purchase of Image Solutions and acquiring Bud's Plumbing [11] - The Bud's Plumbing deal is valued at $5 million plus adjustments, adding $6 million in annual revenues and $0.8 million in EBITDA [11] - The company also sold its VA Lafayette subsidiary, generating $1.1 million in net cash proceeds [11]

Financial Data and Key Metrics Changes - For the full year 2024, consolidated revenue was $109.4 million, up 6% from the previous year, and consolidated adjusted EBITDA was $10.6 million, up 17% compared to 2023 [7] - Consolidated adjusted EBITDA improved sequentially in each of the four quarters of the year [8] - The trailing 12-month adjusted EBITDA run rate for operating businesses, including pro forma results for recent acquisitions, is estimated at $19 million to $20 million [34] Business Line Data and Key Metrics Changes - In the Extended Warranty segment, revenue grew by 1% to $68.9 million, with a 3.6% increase in cash sales [9] - KSX reported revenue of $40.5 million, an increase of 16% compared to $35 million in 2023, with adjusted EBITDA rising to $6.6 million from $5.7 million [15] - Extended Warranty adjusted EBITDA decreased to $7.6 million from $8.4 million in the prior year due to increased claims costs [10] Market Data and Key Metrics Changes - Claims costs increased by 6.6% in 2024, down from a 10% increase in 2023, indicating moderation in claims expense [50] - The travel nurse market showed signs of recovery, with total shifts increasing by 8.5% and travel shifts up 42% in the fourth quarter [21] Company Strategy and Development Direction - The company aims to grow its skilled trades platform through organic growth and acquisitions, targeting two to three deals per year [32] - The strategy includes focusing on businesses in growing markets that are asset-light and deliver high returns on invested capital [32] - The company is committed to continuous improvement and enhancing operational efficiency across its segments [66] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the easing of margin pressures in the Extended Warranty segment and the overall stability of the business [12] - The company is focused on executing its strategy and creating long-term value for shareholders, entering 2025 with momentum and optimism [75] Other Important Information - The company completed the acquisition of Image Solutions and Buds Plumbing, enhancing its portfolio and operational capabilities [28][31] - Total debt outstanding increased to $57.5 million, up from $44.4 million at the end of 2023, primarily due to the acquisition of Image Solutions [43] Q&A Session Summary Question: Could you provide more color on the claims expense moderation in the Extended Warranty segment? - Claims increased by 6.6% in 2024, down from 10% in 2023, with moderation observed in the second half of the year [50] Question: What's the vision for growing the skilled trade services platform? - The focus is on organic growth and potential acquisitions in plumbing and HVAC, leveraging existing market opportunities [52][56] Question: Are you targeting specific verticals within your existing segments for acquisition opportunities? - The pipeline includes both existing segments and new industries, focusing on B2B services, healthcare services, and skilled trades [58][60] Question: How long have existing OIRs been searching for acquisitions? - Current OIRs have been with the company for varying lengths, with a need to backfill positions to maintain acquisition pacing [62] Question: Were there areas Kingsway did not perform well in 2024? - Management acknowledged areas for improvement, particularly in pricing strategies and talent acquisition, while emphasizing a culture of continuous improvement [66][70]

Kingsway Financial Services Inc. (NYSE:KFS) Q4 2024 Earnings Conference Call March 18, 2025 5:00 PM ET Company Participants James Carbonara - Investor Relations John Fitzgerald - Chief Executive Officer Kent Hansen - Chief Financial Officer Conference Call Participants Operator Good day, and welcome to the Kingsway Full Year 2024 Earnings Call. [Operator Instruction]. Please note, this conference is being recorded. With me on the call are J. T. Fitzgerald, Chief Executive Officer and Kent Hansen, Chief Fina ...

Revenue Performance - Consolidated revenue increased by 5.9% to $109.4 million for the 12 months ended December 31, 2024, compared to $103.2 million in the prior year[4] - Extended Warranty revenue was $68.9 million in 2024, a slight increase from $68.2 million in 2023, driven by an increase in the number of contracts sold and average price per contract[4] - KSX revenue rose by 15.7% to $40.5 million in 2024, compared to $35.0 million in 2023, primarily due to acquisitions of SPI, DDI, and Image Solutions[4] Profitability and Loss - Consolidated net loss was $8.3 million for the 12 months ended December 31, 2024, compared to net income of $24.0 million in the prior year[4] - Adjusted consolidated EBITDA was $10.6 million for the 12 months ended December 31, 2024, up from $9.1 million in the prior year[4] - Extended Warranty adjusted EBITDA decreased to $7.6 million in 2024 from $8.4 million in the previous year due to higher claims expenses[4] - KSX adjusted EBITDA increased by 14.9% to $6.6 million in 2024, compared to $5.7 million for 2023, driven by the inclusion of recent acquisitions[4] Debt and Share Repurchase - The company repurchased 355,750 shares of its common stock for an aggregate purchase price of $2.8 million during 2024[11] - Total net debt increased to $52.0 million as of December 31, 2024, compared to $35.3 million as of December 31, 2023[11] Future Outlook - The company is encouraged by potential acquisition opportunities and remains confident in its ability to acquire cash flow generating businesses[5] GAAP and Non-GAAP Metrics - GAAP Net Income for the twelve months ended December 31, 2024, was $(8,295) million, compared to $24,012 million for the same period in 2023[19] - Non-GAAP Adjusted Consolidated EBITDA for the three months ended December 31, 2024, was $10,637 million, up from $9,098 million for the same period in 2023, reflecting a year-over-year increase of 17%[19] - Total Non-GAAP Adjustments for the twelve months ended December 31, 2024, amounted to $18,932 million, compared to $(14,914) million for the same period in 2023[19] Segment Performance - GAAP Operating Income for the Extended Warranty segment for the three months ended December 31, 2024, was $5,942 million, a decrease from $6,983 million in the same period of 2023[20] - Non-GAAP adjusted EBITDA for the KSX segment for the three months ended December 31, 2024, was $6,563 million, compared to $5,711 million for the same period in 2023, indicating a growth of 15%[22] - Investment income for the Extended Warranty segment for the three months ended December 31, 2024, was $1,276 million, compared to $1,061 million in the same period of 2023[20] - Non-GAAP adjusted EBITDA for the Extended Warranty segment for the three months ended December 31, 2024, was $7,569 million, up from $8,426 million in the same period of 2023[20] Employee Expenses and Other Items - Employee-related expenses for the twelve months ended December 31, 2024, were $2,259 million, compared to $1,985 million for the same period in 2023, reflecting a 14% increase[19] - The company recorded a total of $1,832 million in other items for the twelve months ended December 31, 2024, compared to $3,639 million in the same period of 2023[19]

Acquisitions - Kingsway Financial Services Inc. acquired Image Solutions, LLC for $20.4 million, financed through $7.75 million in debt and cash on hand[21][22][23]. - The company completed the acquisition of a business for $20,054,000, net of cash acquired, in 2024, compared to $13,633,000 in 2023[323]. - The company acquired Systems Products International, Inc. for an aggregate cash consideration of $2.8 million, marking its fourth acquisition under the CEO Accelerator program[404]. - The acquisition of Digital Diagnostics Imaging, Inc. was completed for approximately $11.0 million, further expanding the company's portfolio of businesses with recurring revenue[409]. - The preliminary allocation of the Image Solutions purchase price was $20.354 million, with total identifiable assets and liabilities valued at $13.868 million, resulting in goodwill of $6.486 million[403]. - From the acquisition date through December 31, 2024, Image Solutions generated revenue of $2.5 million and incurred a net loss of $0.1 million[403]. - The final goodwill recorded for the acquisition of Digital Diagnostics Imaging, Inc. was $4.9 million, reflecting the premium paid over the fair value of net tangible and intangible assets acquired[413]. - The company recorded a measurement period adjustment that increased goodwill by $0.2 million for Digital Diagnostics Imaging, Inc. due to changes in estimated fair values[412]. Financial Performance - Kingsway's revenue for the year ended December 31, 2023, exceeded $100 million, qualifying it as an accelerated filer[20]. - Total revenues for 2024 increased to $109,382 thousand, up from $103,244 thousand in 2023, representing a growth of 5.2%[315]. - Operating income rose to $2,162 thousand in 2024, compared to $954 thousand in 2023, marking a significant increase of 126.3%[315]. - The net loss for 2024 was $8,295 thousand, a decline from a net income of $24,012 thousand in 2023, indicating a negative shift of 134.5%[318]. - Basic loss per share attributable to common shareholders for continuing operations was $(0.34) in 2024, down from earnings of $0.97 in 2023[315]. - Total operating expenses increased to $107,220 thousand in 2024, compared to $102,290 thousand in 2023, reflecting a rise of 4.8%[315]. - Comprehensive loss attributable to common shareholders was $8,421 thousand in 2024, compared to a loss of $4,586 thousand in 2023, representing an increase of 83.5%[318]. - The company reported an accumulated deficit of $361.5 million as of December 31, 2024, compared to $346.9 million in 2023, indicating an increase in the deficit of approximately 4.2%[313]. - The company experienced a loss from continuing operations attributable to common shareholders of $9.747 million in 2024, compared to income of $22.942 million in 2023[417]. Assets and Liabilities - Total assets decreased from $197.7 million in 2023 to $186.6 million in 2024, reflecting a decline of approximately 5.6%[313]. - Cash and cash equivalents decreased from $9.1 million in 2023 to $5.5 million in 2024, a reduction of about 39.5%[313]. - Goodwill increased from $50.4 million in 2023 to $56.5 million in 2024, representing an increase of approximately 12.5%[313]. - Total liabilities decreased from $173.1 million in 2023 to $168.3 million in 2024, a decline of about 2.8%[313]. - The company's additional paid-in capital decreased from $379.8 million in 2023 to $376.8 million in 2024, a decrease of about 0.8%[313]. - The total shareholders' equity attributable to common shareholders decreased from $27.7 million in 2023 to $8.4 million in 2024, a decline of approximately 69.6%[313]. - The company has a lease liability of $2.7 million as of December 31, 2024, compared to $1.2 million in 2023, reflecting an increase of approximately 124.6%[313]. - The company’s service fee receivable net of allowance for credit losses decreased from $10.1 million in 2023 to $9.4 million in 2024, a decline of about 6.9%[313]. Revenue Recognition and Business Segments - The Extended Warranty segment includes subsidiaries that provide vehicle service agreements across all 50 states, with IWS serving credit unions in 26 states[27][28]. - IWS, Geminus, and PWI focus on the automotive finance market, offering vehicle service agreements and related products[32][40]. - Trinity markets HVAC warranty products and provides maintenance support services across the United States[31][35]. - The average term of vehicle service agreements ranges from 24 to 36 months, with coverage options varying by vehicle type[34]. - No single customer accounts for 10% or more of Kingsway's consolidated revenues, indicating a diversified customer base[36]. - Kingsway's strategic initiatives include expanding its product offerings and enhancing market competitiveness in the automotive finance sector[42]. - The company recognizes service fee and commission revenue based on various agreements with credit unions, consumers, and businesses[380]. - Vehicle service agreement fees are earned over the duration of the contracts, with revenues recognized based on expected claims[381]. - The company estimates refunds based on historical refund rates, which have averaged between 5.83% to 12.00% of the original vehicle service agreement fee[382][383]. Cash Flow and Investment Activities - Cash provided by operating activities from continuing operations was $605,000 in 2024, a significant recovery from a cash used of $(26,849,000) in 2023[323]. - Total cash and cash equivalents and restricted cash decreased to $13,136,000 at the end of 2024 from $17,498,000 at the end of 2023[324]. - The company incurred an impairment of goodwill and intangible assets amounting to $2,848,000 in 2024[323]. - The company recognized a loss on extinguishment of debt of $160,000 in 2024, contrasting with a gain of $(31,616,000) in 2023[323]. - The company’s cash used in investing activities from continuing operations was $(16,846,000) in 2024, compared to cash provided of $6,468,000 in 2023[323]. - The company reported cash paid for interest of $4,659,000 in 2024, down from $24,581,000 in 2023[324]. Internal Controls and Reporting - The company maintains effective internal control over financial reporting as of December 31, 2024, according to independent auditors[292]. - The company accounts for all financial instruments using trade date accounting and conducts quarterly reviews for possible impairment[349]. - The company recognizes credit losses based on a forward-looking current expected credit losses model, estimating expected credit losses from various factors[359]. - The company reports investments in private companies at cost, adjusted for observable price changes and impairments, with changes included in net change in unrealized gain on private company investments[345]. - Investments in fixed maturities are classified as available-for-sale and reported at fair value, with unrealized gains and losses included in accumulated other comprehensive loss[342]. - The company’s subordinated debt is measured and reported at fair value, with changes in fair value related to credit risk recognized in other comprehensive income[371]. - Contingent consideration liabilities for acquisitions are measured at fair value at the date of acquisition, with changes reported as non-operating other revenue or expense[372]. - Deferred contract costs are amortized over the expected customer relationship period, with costs deferred and recorded in commissions and cost of services sold[360]. Employee and Operational Information - As of December 31, 2024, the company employed 433 full-time personnel, with no collective bargaining agreements in place[73]. - The company actively markets its services through industry events and networking, particularly for its business services and healthcare staffing[56][58]. - The company has a dedicated team of Searchers to identify and acquire businesses, enhancing its competitive advantage in the lower middle market[63]. - Claims management is fundamental to operating results, with a focus on settling claims fairly for policyholders[45]. - The company utilizes proprietary databases for real-time pricing adjustments and strategic decision-making in claims management[46].

Financial Data and Key Metrics Changes - Consolidated revenue for Q3 2024 was $27.1 million, a nearly 10% increase compared to the prior year quarter [9] - Consolidated adjusted EBITDA improved to $2.9 million, a 28% increase from $2.3 million in the same quarter last year [9] - The 12-month run rate adjusted EBITDA improved to between $18.5 million and $19.5 million, including the recently acquired Image Solutions [21] Business Line Data and Key Metrics Changes - The Extended Warranty segment saw a 3.4% increase in revenue driven by higher cash sales and a slight increase in warranty contract sales [10] - Claims expense in the Extended Warranty segment rose by 7.5% year-over-year, which is lower than the 12% increase experienced in the previous year [10] - The KSX segment's revenues increased by 23% compared to the prior year quarter, primarily due to acquisitions made in the previous year [12] Market Data and Key Metrics Changes - The venture market remained slow, but there are signs of recovery with increased marketing efforts generating solid leads [14] - The nurse staffing market is experiencing a persistent shortage of nurses, which is expected to continue driving demand [49] Company Strategy and Development Direction - The company is focused on growth through acquisitions, as evidenced by the acquisition of Image Solutions for $19.5 million [5][26] - Management is optimistic about the opportunities in the Extended Warranty and KSX segments, particularly with the potential for growth in credit union and mechanical businesses [11] - The company is committed to a strategy of penetrating existing markets and cross-selling services between its various business lines [48] Management's Comments on Operating Environment and Future Outlook - Management noted that claims inflation is moderating, which could positively impact the Extended Warranty business [11] - The company is optimistic about the recovery of the nurse staffing market and the potential for growth in the SNS segment [51] - Management believes that the hardware sales and installations for Image Solutions are merely delayed due to Hurricane Helene, not lost [46] Other Important Information - The company completed the sale of a subsidiary, VA Lafayette, which had a cash impact of approximately $1 million [25][57] - The company has repurchased 312,850 shares of common stock for about $2.5 million year-to-date [27] Q&A Session Summary Question: What industries are the most attractive for new acquisitions? - Management indicated a focus on asset-light business services and vertical market software, avoiding manufacturing businesses [30] Question: What is the appropriate time frame to measure success? - Management suggested assessing success around the 3-year mark post-acquisition, as new CEOs transition into their roles [31] Question: Can you provide more details about the new OIR? - The new OIR, Rob Casper, has extensive experience in private equity-backed roll-ups and is expected to target attractive service industries for consolidation [33][34] Question: What is the outlook for DDI's EBITDA? - Management noted that DDI's growth investments are expected to yield profitability improvements as customer onboarding progresses [36][39] Question: What are the attractive dynamics of the SNS market? - The persistent shortage of nurses in the U.S. is expected to drive demand, despite recent market pressures [49][50]

Financial Performance - The Company's revenue for the year ended December 31, 2023, was more than $100 million[281]. - In Q3 2024, Kingsway Financial Services reported segment operating income of $2.8 million, an increase of $0.1 million from Q3 2023, with year-to-date income at $8.0 million, down $0.8 million compared to the prior year[300]. - The company reported a loss from continuing operations of $2.2 million in Q3 2024, compared to a loss of $0.8 million in Q3 2023, with a year-to-date loss of $6.6 million compared to income of $25.2 million in the same period last year[301]. - Kingsway Financial Services experienced a net loss of $2.3 million in Q3 2024, compared to a net loss of $0.7 million in Q3 2023, with a year-to-date net loss of $6.8 million compared to net income of $25.5 million in the prior year[302]. - Extended Warranty service fee and commission revenue was $17.8 million for Q3 2024, up from $17.3 million in Q3 2023, with year-to-date revenue at $51.6 million, compared to $51.0 million in the prior year[303]. - Kingsway Search Xcelerator revenue increased to $9.3 million in Q3 2024 from $7.5 million in Q3 2023, with year-to-date revenue at $28.1 million compared to $26.4 million in the prior year[306]. Segment Information - Kingsway operates through two reportable segments: Extended Warranty and Kingsway Search Xcelerator[282]. - Extended Warranty includes subsidiaries such as IWS, Geminus, PWI, and Trinity, providing various vehicle service agreements and warranty products[283][284][285][286][287]. - Kingsway Search Xcelerator comprises subsidiaries like CSuite, Ravix, and DDI, offering professional services and outsourced financial services[288][289][290][291]. - The operating income for Kingsway Search Xcelerator was $1.1 million in Q3 2024, compared to $1.0 million in Q3 2023, with year-to-date operating income at $3.9 million, down from $4.2 million[306]. - Operating income for the Extended Warranty segment was $1.7 million in Q3 2024, down from $1.8 million in Q3 2023, with year-to-date operating income at $4.0 million compared to $4.6 million in the prior year[304]. Investment and Cash Flow - As of September 30, 2024, the company held cash and cash equivalents, restricted cash, and investments with a carrying value of $56.2 million[334]. - The total carrying value of investments is $56.2 million, a decrease from $59.4 million on December 31, 2023[335]. - The company reported $0.7 million of net cash provided by operating activities from continuing operations for the nine months ended September 30, 2024, a significant improvement from $25.7 million of net cash used in the same period in 2023[355]. - During the nine months ended September 30, 2024, net cash used in investing activities was $16.4 million, primarily due to the acquisition of Image Solutions and purchases of fixed maturities[356]. - Net cash provided by financing activities for the nine months ended September 30, 2024, was $13.3 million, driven by bank loan proceeds of $33.7 million and Class B preferred stock issuance of $8.3 million[357]. Debt and Liabilities - The total bank loans increased to $60.3 million at September 30, 2024, from $46.3 million at December 31, 2023[340]. - The company borrowed $5.5 million under the 2024 KWH DDTL and $1.0 million under the KWH Revolver during the third quarter of 2024[344]. - The carrying value of subordinated debt is $13.7 million as of September 30, 2024, with a principal value of $15.0 million[349]. - The company recorded a loss on extinguishment of debt of $0.2 million for the nine months ended September 30, 2024, related to the 2020 KWH Loan modification[328]. Market and Compliance - The aggregate market value of the Company's shares held by non-affiliate stockholders was between $75 million and $250 million as of the last business day of Q2 2023[281]. - The Company is now deemed an accelerated filer, which requires compliance with auditor attestation requirements under Section 404(b) of the Sarbanes-Oxley Act[281]. - The Company disclaims any intention to update or revise forward-looking statements unless required by applicable securities law[280]. - The company is classified as a smaller reporting company and is not required to make certain market risk disclosures[364].

Core Insights - The ongoing debate in the investment community revolves around whether to focus on the industry (the horse) or the management team (the jockey) of a company [1][2]. Company Analysis: Kingsway Financial Services (KFS) - Kingsway Financial Services operates through two segments: Extended Warranty and Kingsway Search Xcelerator (KSX) [4]. - The Extended Warranty segment generated $68.2 million in service fee and commission revenues in 2023, reflecting a 7.8% decrease from 2022 [4]. - The KSX segment, focusing on business services, achieved $35 million in revenue in 2023, marking an 81.9% increase from 2022 [5]. - The KSX segment is expected to grow as it is based on the "search fund" model, which has shown superior returns from 1984-2021 according to a Stanford Business School study [5]. - Kingsway emphasizes hiring CEOs from top MBA programs and those with proven leadership skills, including military experience [6]. - The stock is trading at 2.1X trailing 12-month EV/Sales TTM, compared to 2.3X for the Zacks sub-industry and 1.2X for the Zacks sector [8]. Company Analysis: TSS Inc. (TSSI) - TSS Inc. operates in the growing data center industry, benefiting from the demand for AI-enabled infrastructure [9]. - The company provides IT solutions, including rack and systems integration, and has seen significant growth due to the surge in demand for AI [10]. - TSS's net income increased by 345% year-over-year to $1.4 million, driven by higher profitability in core businesses [11]. - Adjusted EBITDA rose by 62%, reaching $2 million, indicating improved overall profitability despite revenue declines in some segments [11]. - The stock is currently trading at 1.80X trailing 12-month EV/Sales TTM, compared to 2.10X for the Zacks sub-industry [12].