Kingsway(KFS) - 2025 Q2 - Quarterly Results

Executive Summary Second Quarter 2025 Consolidated Financial Highlights 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 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] - Increased target range for KSX acquisitions from 2-3 per year to 3-5 per year[5] - 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] - 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] - 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] Management Commentary 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] - 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] - KSX revenue grew 42% and KSX adjusted EBITDA grew 31% year-over-year[8] - Extended Warranty revenue increased 3% and cash sales increased 9% year-over-year, marking the sixth consecutive quarter of increased cash sales[8] - Company is executing its public Search Fund strategy to build a portfolio of growing, profitable, and recurring revenue services businesses[8] Company Information Conference Call and Webcast 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] - Time: 5 p.m. Eastern Time[9] - Toll Free: 877-545-0320[9] - International: 973-528-0002[9] - Access Code: 594735[9] - Live Webcast Link: https://www.webcaster4.com/Webcast/Page/2928/52798[10](index=10&type=chunk) - Replay Passcode: 52798[10] - Replay Webcast Link: https://www.webcaster4.com/Webcast/Page/2928/52798[10](index=10&type=chunk) About the Company 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] - Owns and operates a collection of high-quality B2B and B2C services companies that are asset-light, growing, profitable, and have recurring revenues[11] - Seeks to compound long-term shareholder value through a decentralized management model, talented operators, and a tax-advantaged corporate structure[11] Legal & Disclosures Non U.S. GAAP Financial Measure 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] - Used by management to compare relative performance, plan, budget, and review business performance[12] - Allows for more meaningful comparison of core business operating results across different periods by eliminating potential distortions[12] - 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] Forward-Looking Statements 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] - Involve risks and uncertainties that could cause actual results to differ materially from those expected and projected[13] - Identified by words such as "expects," "believes," "anticipates," "intends," "estimates," "seeks," and variations and similar words and expressions[13] - 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] - Company disclaims any intention or obligation to update or revise any forward-looking statements, except as expressly required by applicable securities law[13] Additional Information 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] - Company Inquiries: Kent Hansen, CFO, Kingsway Financial Services Inc., (312) 766-2163, khansen@kingsway-financial.com[16] Financial Reconciliations (Non-GAAP) Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted Consolidated EBITDA 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 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 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 |