Kingsway Financial Services Inc. (NYSE:KFS) Q4 2022 Results Conference Call March 8, 2023 5:00 PM ET Company Participants J.T. Fitzgerald - CEO Kent Hansen - CFO Conference Call Participants Adam Patinkin - David Capital Operator Good day and welcome to Kingsway Full Year 2022 Earnings Call. At this time, all participants have been placed in a listen-only mode and the floor will be open for question and comments after the presentation. [Operator Instructions] With me on the call are J.T. Fitzgerald, Chief ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 For the Transition Period from _____ to _____ OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 1-312-766-2138 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Kingsway Financial Services Inc ...

Financial Data and Key Metrics Changes - The net income for Q3 2022 was $37.6 million, compared to a net loss of $226,000 in Q3 2021 and a net loss of $2.4 million in Q2 2022 [29] - Non-GAAP adjusted net income was $2.6 million for Q3 2022, up from $2.1 million in both the year-ago quarter and the second quarter [29] - Cash and cash equivalents increased to $48.6 million, up nearly $36 million compared to the prior year end [39] Business Line Data and Key Metrics Changes - Combined operating income for the extended warranty and KSX segments was $3.2 million, compared to $1.4 million in the prior year quarter and $3.8 million in Q2 2022 [33] - Pro forma operating income, excluding PWSC, was $3.3 million for Q3 2022, compared to $900,000 in the prior year [34] - Pro forma non-GAAP adjusted EBITDA for the extended warranty segment was $2.8 million, or 15.7% of segment revenue, compared to $1 million or 6.4% in the year-ago quarter [35] Market Data and Key Metrics Changes - IWS's cash sales grew by about 9% over the prior year, while other vehicle service agreement subsidiaries experienced a combined cash sales decline of about 2% [36] - CSuite had $9.4 million of unaudited revenue for the 12 months ended July 31, 2022, with $1.8 million of unaudited non-GAAP adjusted EBITDA [17] Company Strategy and Development Direction - The company aims to grow its portfolio of cash flow positive operating companies and improve its capital structure through strategic capital allocation [10][18] - The Kingsway Search Xcelerator program is focused on acquiring businesses with recurring revenue, low working capital demands, and strong reputations [14][16] - The company is also focused on attracting and retaining world-class talent to support its acquisition strategy [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to generate cash flow from operations and pursue further acquisitions without needing additional capital [64] - The company is actively working on strategies to monetize non-strategic assets and reduce debt, which is seen as key to improving the balance sheet [24][43] Other Important Information - The company sold PWSC for $51.2 million, with net proceeds of $37.2 million, which will be redeployed for acquisitions and debt reduction [11][12] - The company has options to repurchase a significant portion of its TruPs debt at a substantial discount, which is expected to yield an internal rate of return in excess of 20% [20][42] Q&A Session Summary Question: What do the businesses have in common? - The CEO explained that the focus is on companies with strong recurring revenue, high margins, and low capital intensity, within large and growing industries [56][57] Question: How does the company view profitability? - The CEO discussed using EBITDA as a proxy for cash flow and mentioned that the adjusted EBITDA from warranty plus Ravix and CSuite could be in the range of $16 million to $17 million annually [58][60] Question: What is the strategy for deploying capital? - The CEO highlighted a flywheel effect where growth in existing businesses generates cash for further acquisitions, emphasizing the importance of managing debt and leveraging internal cash flow [64][66] Question: How are acquisition opportunities sourced? - The CEO mentioned a dual approach of proactive outreach and maintaining relationships with intermediaries to identify potential acquisition targets [73][74] Question: What is the status of the non-recourse debt and asset sales? - Management confirmed they are working on strategies to achieve the best returns from asset sales and are focused on deleveraging the balance sheet [76][78] Question: What are the churn rates for various businesses? - The CEO provided detailed churn metrics for IWS, PWI, and Ravix, indicating low churn rates and strong customer retention [88][90]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from _____ to _____ Commission File Number: 001-15204 Kingsway Financial Services Inc. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended June 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from _____ to _____ Commission File Number: 001-15204 Kingsway Financial Services Inc. (Exact name of registrant as specified in its charter) Delaware (State or other j ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended March 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from _____ to _____ Commission File Number: 001-15204 Kingsway Financial Services Inc. (Exact name of registrant as specified in its charter) Delaware (State or other ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from _____ to _____ Commission File Number 001-15204 Kingsway Financial Services Inc. (Exact name of registrant as specified in its charter) Delaware 85-1792291 (State or other ju ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended September 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from _____ to _____ Commission File Number: 001-15204 Kingsway Financial Services Inc. (Exact name of registrant as specified in its charter) Delaware (State or ot ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended June 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from _____ to _____ Commission File Number: 001-15204 Kingsway Financial Services Inc. (Exact name of registrant as specified in its charter) Delaware (State or other j ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________ FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended March 31, 2021 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from _____ to _____ Commission File Number: 001-15204 Kingsway Financial Services Inc. (Exact name of registrant as specified in its charter) ...