Kingsway(US:KFS)2025-05-08 22:02Financial Data and Key Metrics Changes - Consolidated revenue for Q1 2025 was $28.3 million, an increase of 8.4% compared to $26.2 million in Q1 2024 [16] - Consolidated adjusted EBITDA declined by $800,000 year-over-year, reflecting lower profitability in the extended warranty segment and higher holdcoat costs [16] - Trailing twelve month adjusted run rate EBITDA for the businesses, including recent acquisitions, stands at approximately $18 million to $19 million [15] Business Line Data and Key Metrics Changes - In the Kingsway Search Accelerator (KSX) segment, revenue was $11.7 million, up 23.3% year-over-year, with adjusted EBITDA also increasing by 23.3% [18] - Extended warranty segment revenue was flat at $16.7 million compared to Q1 2024, but cash sales increased by 3.7% year-over-year [21] - Adjusted EBITDA for the extended warranty segment was $800,000, down from $1.4 million in the prior year [22] Market Data and Key Metrics Changes - Cash sales in the extended warranty segment showed a sequential increase of 9.3% from year-end [21] - Trailing twelve month modified cash EBITDA for the extended warranty segment was up 11.7% year-over-year [22] Company Strategy and Development Direction - The company aims to compound long-term shareholder value through a decentralized management model and acquisitions of high-quality service companies [5] - Recent acquisitions, including Bud's Plumbing and Viewpoint, are expected to enhance the KSX platform and provide additional growth levers [10][9] - The company is focused on expanding its deal pipeline, which is currently the most active it has ever been [29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth trajectory of the KSX segment, indicating that many businesses are nearing an inflection point for accelerated growth [13] - The extended warranty segment is entering a more favorable phase of recovery, with positive signs of cash sales growth [14] - Management highlighted the importance of patience in realizing value creation from investments in growth [40] Other Important Information - The company appointed two new independent directors to strengthen corporate governance [11] - A $6 million private placement was completed to fund the Bud's Plumbing acquisition, increasing total debt to $59.5 million [28] Q&A Session Summary Question: Can you provide any color on the Viewpoint acquisition and its strategic fit? - The acquisition was sourced by Drew at SPI and strategically fits by providing a cloud-native software solution for smaller resort operators in North America while expanding geographic reach [33] Question: Can you explain the J curve with search acquisitions? - The J curve represents the initial negative impact on profitability due to investments in talent and technology, followed by a period of growth as these investments pay off [37] Question: Can you share more about the robust deal pipeline? - The company has experienced operators building their M&A pipelines and is excited about potential acquisitions in fragmented markets [41] Question: Why is the owner of Bud's staying on for a one-year transition? - This is typical and desirable in search acquisitions to ensure a smooth transition of customer relationships and institutional knowledge [43] Question: Are there other industries targeted for platforms? - The company evaluates industries based on growth potential and operator fit, considering sectors like insurance brokerage and wealth management for future platforms [46]