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KFS Stock Rises Despite Q4 Earnings Decline, EBITDA Improves
KFSKingsway(KFS) ZACKS·2025-03-21 17:50

Core Insights - Kingsway Financial Services Inc. (KFS) reported a net loss of 8.3millionfortheyearendedDecember31,2024,comparedtoanetincomeof8.3 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 109.4million[2][4]−Thecompany′sstockperformanceshoweda1.7109.4 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 103.2millionin2023,markinga5.9103.2 million in 2023, marking a 5.9% increase [2] - Adjusted consolidated EBITDA increased by 16.9% to 10.6 million in 2024 from 9.1millionin2023[2]SegmentPerformanceandOperationalTrends−ExtendedWarrantyrevenuesgrewslightlyto9.1 million in 2023 [2] Segment Performance and Operational Trends - Extended Warranty revenues grew slightly to 68.9 million, a 0.9% increase from 68.2million[3]−KSXrevenuesrose15.768.2 million [3] - KSX revenues rose 15.7% to 40.5 million from 35million[3]−CombinedadjustedEBITDAforbothsegmentsremainedflatat35 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 7.6millionduetohigherclaimscostsdrivenbyinflation[4]−Claimsexpenseincreasesmoderatedinthesecondhalfoftheyear,witha4.17.6 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 52millionatyear−endfrom52 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 19millionto19 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 5millionplusadjustments,adding5 million plus adjustments, adding 6 million in annual revenues and 0.8millioninEBITDA[11]−ThecompanyalsosolditsVALafayettesubsidiary,generating0.8 million in EBITDA [11] - The company also sold its VA Lafayette subsidiary, generating 1.1 million in net cash proceeds [11]