Kingsway(KFS) - 2024 Q4 - Earnings Call Transcript

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]