Kingsway(US:KFS)2023-11-11 22:04Financial Data and Key Metrics Changes - Consolidated revenue for Q3 2023 was $24.8 million, an increase of 11% from the previous year, while consolidated adjusted EBITDA decreased to $2.3 million from $3.6 million in the prior year [22][31] - Loss from continuing operations was $797,000 for Q3 2023 compared to income of $38.9 million in the same quarter last year, which included a one-time net gain of $37.9 million from the sale of PWSC [11] - Trailing 12-month adjusted EBITDA run rate increased to a range of $19 million to $20 million, up from the previous range of $18 million to $19 million [10][36] Business Line Data and Key Metrics Changes - Extended Warranty segment revenue was $17.3 million in Q3 2023, down from pro forma revenue of $17.9 million a year ago, with adjusted EBITDA declining to $2.1 million from $3.8 million [24][12] - KSX segment revenue increased to $7.5 million in the current quarter from $3.8 million a year ago, with adjusted EBITDA rising to $1.1 million from $0.8 million [6][52] - CSuite delivered a gross margin of 35.6% but faced lower-than-expected revenues due to a disrupted pipeline during the acquisition process [14][82] Market Data and Key Metrics Changes - VSA revenues were down only 1.1% from the prior year, attributed to payment pressures on consumers from higher interest rates and used car prices [50] - Claims in the VSA segment increased by $600,000 compared to the prior year, driven by rising labor and parts costs [51] - SNS experienced a shift from higher-margin travel assignments to per diem assignments, with a 20% decrease in total shifts compared to the previous year [53] Company Strategy and Development Direction - The company aims to target 2 to 3 new acquisitions per year that fit its acquisition criteria and generate annualized EBITDA of $1.5 million to $3 million each [29] - The company is focused on operational excellence while strategically deploying capital for sustainable long-term growth and positive cash flow [29] - The company continues to believe in the long-term health of the Extended Warranty business despite current challenges [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged persistent macro-level revenue headwinds impacting consumers, including tighter credit conditions and high used car prices [4] - The management expressed confidence in the long-term demand for nurse staffing despite current challenges in the SNS segment [26] - Management highlighted the importance of maintaining a disciplined approach to acquisitions and ensuring adequate covenant headroom in the current interest rate environment [85] Other Important Information - The company completed the acquisition of SPI in September and DDI in October, with plans to acquire 95% of NICR [7][8][23] - The company repurchased a significant amount of its securities, with $16.7 million received from warrant exercises and $3.3 million from the sale of Limbach stock [35][55] - Total outstanding debt decreased to $40.9 million at the end of Q3 2023, down from $102.1 million at the end of the previous year [16] Q&A Session Summary Question: What is the run rate EBITDA pro forma for the recent acquisitions? - The run rate EBITDA pro forma for recent acquisitions is now in the range of $19 million to $20 million [60] Question: What is the pro forma debt at KFS? - Pro forma debt, including new acquisitions, is estimated at $29.5 million [61] Question: How does management feel about levered acquisitions given the current interest rate environment? - Management indicated a conservative approach to leverage, maintaining a senior funded debt-to-EBITDA ratio of 3x or less at closing [85] Question: Does management have a lower bound for interest coverage? - Management would pull back on acquisitions if interest coverage fell below 1x, emphasizing the importance of maintaining adequate coverage ratios [86]