Kingsway(KFS) - 2024 Q3 - Earnings Call Transcript

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]