Full Year 2024 Kingsway Financial Services Inc Earnings Call
Good day and welcome to the Kingsway full year 2024 earnings call. At this time, all participants are in a listen only mode.
Operator: Good day and welcome to the Kingsway full year 2024 earnings call. At this time, all participants are in a listen only mode.
Operator: Question and Answer Session will follow the formal presentation. Please note, this conference is being recorded.
<unk> and answer session will follow the formal presentation.
Please note this conference is being recorded.
John Taylor: With me on the call are J.T. Fitzgerald, Chief Executive Officer, and Kent Hansen, Chief Financial Officer.
Unidentified Moderator/Host: With me on the call are J T Fitzgerald, Chief Executive Officer, and Ken Hanson, Chief Financial Officer before.
Unknown Executive: Before we begin, I want to remind everybody that today's conference may contain forward-looking statements. Forward-looking statements include statements regarding the future, including expected revenue, operating margins, expenses, and future business outcomes. Actual results or trends could materially differ from those contemplated by those forward-looking statements.
Unidentified Moderator/Host: Before we begin I want to remind everybody that today's conference may contain forward looking statements forward looking statements include statements regarding the future, including expected revenue operating margins expenses and future business outlook.
Unidentified Moderator/Host: Actual results or trends could materially differ from those contemplated by those forward looking statements for a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward looking statements.
Unknown Executive: For a discussion of such risks and uncertainties which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see the risk factors detailed in the company's annual report on Form 10-K and subsequent Forms 10-Q and Forms 8-K filed with the Securities and Exchange Commission.
Unidentified Moderator/Host: Please see the risk factors detailed in the company's annual report on Form 10-K, and subsequent forms 10-Q and forms 8-K filed with the Securities and Exchange Commission.
Unknown Executive: Please note also that today's call may include the use of non-GATT metrics that management utilizes to analyze the company's performance. A reconciliation of such non-GAAP metrics to the most comparable GAAP measures is available in the most recent press release as well in the company's periodic filings with the SEC.
Please note also that today's call may include the use of non-GAAP metrics that management utilizes to analyze the company's performance.
Unidentified Moderator/Host: A reconciliation of such non-GAAP metrics to the most comparable GAAP measures is available in the most recent press release as well in the Companys periodic filings with the S E C.
John Taylor: Now I would like to turn the call over to J.T. Fitzgerald, CEO of Kingsway. J.T., please proceed. Thank you, John.
Speaker Change: Now I would like to turn the call over to J P. Fitzgerald C E O of Kingsway J T. Please proceed.
J.P. Fitzgerald: Thank you John.
J.T. Fitzgerald: Good afternoon, everyone and welcome to the Kingsway earnings call for full year 2024. 2024 was another year of significant progress in executing our corporate strategy. We delivered financial results largely in line with our expectations. Successfully completed the acquisition of image solutions. and divested our VA Lafayette subsidiary. At the same time, we made meaningful strides in refining and improving operations across our existing businesses. Overall, 2024 was a productive year. And importantly, we have a proven business model that continues to gain momentum. The sequential improvement in our quarterly results throughout 2024 is a validation of our corporate strategy is a clear indicator of the progress we are making.
J.P. Fitzgerald: Good afternoon, everyone and welcome to the Kingsway earnings call for full year 2024.
J.P. Fitzgerald: 2024, it was another year of significant progress in executing our corporate strategy, we delivered financial results largely in line with our expectations.
J.P. Fitzgerald: Excessively completed the acquisition of image solutions.
J.P. Fitzgerald: And divested our VA Lafayette subsidiary at the same time, we made meaningful strides in refining and improving operations across our existing businesses.
J.P. Fitzgerald: Overall 2024, it was a productive year and importantly, we have a proven business model that continues to gain momentum.
J.P. Fitzgerald: The sequential improvement in our quarterly results throughout 2024 is a validation of our corporate strategy is a clear indicator of the progress we are making.
J.P. Fitzgerald: Turning first to our financial results for the full year 2024 consolidated revenue was $109 4 million up 6% from a year ago and consolidated adjusted EBITDA was $10 6 million up 17% compared to 2023.
J.T. Fitzgerald: Turning first to our financial results for the full year 2024 consolidated revenue was $109.4 million, up 6% from a year ago, and consolidated adjusted EBITDA was $10.6 million, up 17% compared to 2023. Notably, consolidated adjusted EBITDA improves sequentially in each of the four quarters of the year. Combined Adjusted EBITDA for the Extended Warranty and KSX segments, our operating segments was $14.1 million in line with 2023. Breaking this down by segment, in extended warranty, revenue grew modestly for the full year by 1% to $68.9 million from $68.2 million in 2023. While top line growth was modest, we did achieve a 3.6% increase in cash sales during the year reflecting healthy underlying demand for our warranty product.
J.P. Fitzgerald: Notably consolidated adjusted EBITDA improved sequentially in each of the four quarters of the year.
J.P. Fitzgerald: Combined adjusted EBITDA for the extended warranty and <unk> segments are operating segments was $14 1 million in line with 2023.
J.P. Fitzgerald: Yeah.
J.P. Fitzgerald: Breaking this down by segment and extended warranty revenue grew modestly for the full year by 1% to $68 9 million from $68 2 million in 2023.
J.P. Fitzgerald: While top line growth was modest we did achieve a three 6% increase in cash sales during the year, reflecting healthy underlying demand for our warranty products.
Speaker Change: Jim Monessen <unk> saw increased contract volumes. Thanks in part to a higher number of service contracts sold and the Onboarding of New credit Union partners at AWS.
J.T. Fitzgerald: Geminis and IWS saw increased contract volumes, thanks in part to a higher number of service contracts sold and the onboarding of new credit union partners at IWS. Trinity also contributed slightly higher revenue as growth in warranty product sales offset a small decline in their maintenance service. PWI experienced a minor decline in contract count, but notably achieved stronger cash sales in 2024 than in 2023 on better product match mix, which bodes well for future revenue recognition. Extended Warranty Adjusted EBITDA came in at $7.6 million versus $8.4 million in the prior year. The year over year decline was primarily due to an increase in claims costs, as inflation continued to impact parts and labor expenses in our auto warranty line.
Speaker Change: Trinity also contributed slightly higher revenue as growth in warranty product sales offset a small decline in their maintenance services.
Speaker Change: P. W. I experienced a minor decline in contract count, but notably achieved stronger cash sales in 2024, and 2023 on better product mix, which bodes well for future revenue recognition.
Speaker Change: Extended warranty adjusted EBITDA came in at $7 6 million versus $8 4 million in the prior year.
Speaker Change: The year over year decline was primarily due to an increase in claims costs as in fleet is an inflation continued to impact parts and labor expenses in our auto warranty lines.
Speaker Change: We have been proactively adjusting pricing to mitigate these pressures.
J.T. Fitzgerald: We have been proactively adjusting pricing to mitigate these pressures. The good news is that we started to see relief in the back half of the year. The claims cost increases slowed in the second half of 2024, and overall, claims frequency declined. This allowed us to deliver sequential improvement in adjusted EBITDA in each of the four quarters of 2024 in the warranty segment. This trend gives us optimism that our margin pressures are easing. Despite the challenges, the extended warranty business remains solidly profitable and cash generative. The stability and recurring revenue of the extended warranty segment provide a strong foundation for Kingsway, and we're confident in its ongoing performance as we head into 2025.
Speaker Change: The good news is that we started to see relief in the back half of the year. The claims cost increases slowed in the second half of 2024 and overall claims frequency declined.
Speaker Change: Allowed us to deliver sequential improvement in adjusted EBITDA in each of the four quarters of 2024 and the warranty segment.
Speaker Change: This trend gives us optimism that our margin pressures are easing.
Speaker Change: Despite the challenges the extended warranty business remains solidly profitable and cash generative the stability and recurring revenue of the extended warranty segment provide us strong foundation for Kingsway and we're confident in its ongoing performance as we head into 2025.
Speaker Change: Yeah.
Speaker Change: Turning now to our other business segment changes a search accelerator of K FX.
J.T. Fitzgerald: Turning now to our other business segment Kingsway Search Accelerator or KSX. As announced yesterday, we're excited to add BUDS plumbing to our growing portfolio of operating companies. I'll talk more about this acquisition in a few minutes. As a reminder, KSX is currently comprised of seven operating subsidiaries, including BUDS, that were acquired using our entrepreneur led acquisition strategy and platform. For 2024, KSX reported revenue of $40.5 million, an increase of 16% compared to $35 million in 2023. KSX adjusted EBITDA for 2024 was $6.6 million compared to $5.7 million in 2023, an increase of 15%. These increases were primarily driven by the acquisitions of SPI and DDI in September and October of 2023, respectively, and includes approximately three months of image solutions results.
Speaker Change: As announced yesterday, we are excited to add buds plumbing to our growing portfolio of operating companies.
Speaker Change: Talk more about this acquisition in a few minutes.
Speaker Change: As a reminder, <unk> is currently comprised of seven operating subsidiaries, including Budge.
Speaker Change: Were acquired using our entrepreneur led acquisition strategy and platform.
Speaker Change: For 2024, <unk> reported revenue of $40 5 million, an increase of 16% compared to $35 million in 2023.
Speaker Change: <unk> adjusted EBITDA for 2024 was $6 6 million compared to $5 7 million in 2023, an increase of 15%.
Speaker Change: These increases were primarily driven by the acquisitions of Spi and DDI in September and October of 2023, respectively and includes approximately three months of image solutions results.
Speaker Change: I'd like to begin with <unk>, our provider of outsourced finance accounting and human resources consulting services.
J.T. Fitzgerald: I'd like to begin with Ravix, our provider of outsourced finance, accounting and human resources consulting services. Since acquisition in October 2021, Ravix has continued to perform ahead of our original financial model. In 2024, gross margin improved by 200 basis points compared to 2023, despite a modest decline in revenue.
Speaker Change: Since acquisition in October 2021, Raven has continued to perform ahead of our original financial model in.
Speaker Change: In 2020 for gross margin improved by 200 basis points compared to 2023, despite a modest decline in revenue.
J.T. Fitzgerald: EBITDA declined very slightly in the year as gross margin improvements didn't fully offset the lower revenue. Management at Ravix is realigning incentives, targeting their marketing spend and investing in sales training and development to reignite growth in 2025.
Speaker Change: EBITDA declined very slightly in the year as gross margin improvements didn't fully offset the lower revenues.
Speaker Change: Management array VIX is realigning incentives targeting their marketing spend and investing in sales training and development to reignite growth in 2025.
Speaker Change: Similar to rave X C suite as a professional services firm that provides experienced chief financial officers and other finance professionals to its clients.
J.T. Fitzgerald: Similar to Ravix, C-Suite is a professional services firm that provides experienced chief financial officers and other finance professionals to its clients. It's sales are driven in large part by the volume of private equity and M&A transactions. In 2024, leadership effectively managed its gross and operating margins to soften the impact of lower sales due to overall lower deal volume in the capital market. EBITDA for the year was down. However, C-suite finished 2024 with a strong fourth quarter with a nice positive year over year EBITDA variance. and has good momentum entering 2025 as the M&A market is set to improve.
Speaker Change: <unk> sales are driven in large part by the volume of private equity and M&A transactions.
Speaker Change: In 2024 leadership effectively managed its gross and operating margins to soften the impact of lower sales due to overall lower deal volume in the capital markets EBITDA.
Speaker Change: EBITDA for the year was down however, C suite finished 2024 with a strong fourth quarter with a nice positive year over year EBITDA variance.
Speaker Change: And has good momentum entering 2025 as the M&A market is set to improve.
Speaker Change: Turning to SNS.
J.T. Fitzgerald: returning to SNS. At SNS, the team recently added new recruiting talent, pardon me, and completed upgrades to its operations to better support its clinician recruiting effort. SNS provides nurse staffing services to hospitals on a travel or per diem basis, primarily in the state of California. The team has done a nice job of lowering its operating costs while building a team and technology to support its anticipated growth as the travel nurse market recovers. SNS also recently acquired several new hospital contracts, which should enable further growth in the number of per diem and travel nurse placement. The improving trend we cited in Q3 continued to accelerate.
Speaker Change: So that's the team recently added new recruiting talent partnering.
Speaker Change: Pardon me.
Speaker Change: And completed upgrades to its operations to better support its clinician recruiting efforts.
Speaker Change: <unk> provides the nurse staffing services to hospitals, how to travel or per diem basis, primarily in the state of California.
Speaker Change: The team has done a nice job of lowering its operating costs, while building a team and technology to support its and anticipated growth.
Speaker Change: The travel nurse market recovers.
Speaker Change: SNS also recently acquired several new hospital contracts, which should enable further growth in the number of per DM and travel nurse placements.
Speaker Change: The improving trend we cited in Q3 continued to accelerate.
Speaker Change: With total shifts increasing eight 5% in the fourth quarter, while travel shifts were up 42% in the quarter.
J.T. Fitzgerald: With total shifts increasing 8.5% in the fourth quarter, while travel shifts were up 42% in the quarter. We remain optimistic about this business.
Speaker Change: We remain optimistic about this business the industry appears to have stabilized in the arm in the long term outlook for nurse staffing is strong given the combination of an aging population and the projected shortage of registered nurses over the next decade.
J.T. Fitzgerald: The industry appears to have stabilized, and the long-term outlook for nurse staffing is strong, given the combination of an aging population and the projected shortage of registered nurses over the next decade.
Speaker Change: Yeah.
Speaker Change: Turning now to DDI DDI revenues grew nearly 20% from the prior year with zero outbound selling efforts as they continued to add new customers through word of mouth referrals.
J.T. Fitzgerald: Turning now to DDI. DDI revenues grew nearly 20% from the prior year with zero outbound selling efforts as they continued to add new customers through word of mouth referrals.
J.T. Fitzgerald: While revenues grew nicely, EBITDA actually decreased slightly for the year as management invests in the company to support anticipated future growth. During the year, DDI opened a second monitoring facility in Salt Lake City and made meaningful investments in new talent to support anticipated volume and to mitigate the risk of having a single point of operation. As a reminder, DDI is a provider of outsourced 24-7 cardiac telemetry monitoring services to long-term acute care and rehabilitation hospitals. This business has a high level of recurring revenue and high customer retention and operates in a fast growing and underpenetrated end market.
Speaker Change: While revenues grew nicely EBITDA actually decreased slightly for the year as management invests in the company to support anticipated future growth.
Speaker Change: During the year DDI opened a second monitoring facility in Salt Lake City, and made meaningful investments in new talent to support anticipated volume.
Speaker Change: And to mitigate the risk of having a single point of operations.
Speaker Change: As a reminder, <unk> is a provider of outsourced $24 seven cardiac telemetry monitoring services to long term acute care and rehabilitation hospitals.
Speaker Change: This business has a high level of recurring revenue and high customer retention and operates in a fast growing and underpenetrated end market.
J.T. Fitzgerald: As the company builds its selling function this year, we expect to see continued growth. and realize the benefit of operating leverage as our talent and new facility are more fully utilized.
Speaker Change: As the company builds its selling function. This year, we expect to see continued growth.
Speaker Change: And realize the benefit of operating leverage as our talent, a new facility or more fully utilized.
Speaker Change: Okay.
Speaker Change: Turning now to Spi Spi is another of our 2023 acquisitions. This business was immediately accretive to our consolidated results and revenue continues to be strong.
J.T. Fitzgerald: Turning now to SPI. SPI is another of our 2023 acquisitions. This business was immediately accretive to our consolidated results and revenue continues to be strong.
J.T. Fitzgerald: Pro forma comparisons are difficult due to the conversion of U.S. GAAP software accounting post-acquisition. SPI provides software products created exclusively to serve the management needs of all types of shared ownership properties. SPI enjoys recurring revenue under long term contracts. low customer churn, strong margins and low capital requirements. Operational metrics at SPI were up across the board in the year with solid ARR growth and excellent gross and net retention dynamics. and rule of 40 metrics exceeding 40%. The company saw impressive gains in EBITDA growth, albeit from a small base, and in its first full year under the KSX umbrella, it exceeded our baseline financial model.
Speaker Change: Pro forma comparisons are difficult due to the conversion of U S. GAAP software accounting post acquisition.
Speaker Change: Spi provides software products created exclusively to serve the management needs of all types of shared ownership properties.
Speaker Change: P I enjoy as recurring revenue under long term contracts.
Speaker Change: Low customer churn strong margins and low capital requirements.
Speaker Change: Operational metrics at Spi were up across the board in the year with solid <unk> growth and excellent gross and net retention dynamics and rule of 40 metrics exceeding 40%.
Speaker Change: The company saw impressive gains in EBITDA growth, albeit from a small base and in its first full year under the <unk> umbrella it exceeded our baseline financial model.
J.T. Fitzgerald: The company is poised for continued momentum in 2025.
Speaker Change: The company is poised for continued momentum in 2025.
Speaker Change: Okay.
Speaker Change: Turning to image solutions in September 2024, we acquired image solutions. The company provides the information technology managed services for small to medium sized businesses.
J.T. Fitzgerald: Turning to image solutions.
J.T. Fitzgerald: In September 2024, we acquired Image Solutions. The company provides information technology managed services for small to medium-sized businesses.
Speaker Change: Despite the devastating hurricanes that struck the Asheville area of the day. After we acquired the company Derby day and team has delivered strong operating results.
J.T. Fitzgerald: Despite the devastating hurricane that struck the Asheville area the day after we acquired the company, Davide and team have delivered strong operating results. In spite of the short-term crisis, EBITDA during our first quarter of ownership was essentially flat to prior year and no significant customers were lost. Davide is making investments in his team, processes and technology, and we're confident in the prospects for image solutions in the year ahead.
Speaker Change: In spite of the short term crisis EBITDA during our first quarter ownership was essentially flat to prior year and no significant customers were lost davita.
Speaker Change: Every day is making investments in his team processes and technology and we're confident in the prospects for image solutions in the year ahead.
Speaker Change: And finally, as we announced yesterday our latest acquisition is privately held MLC plumbing or buds plumbing is known locally we acquired through our newly created platform Kingsway skilled trades.
J.T. Fitzgerald: And finally, as we announced yesterday, our latest acquisition is privately held MLC plumbing, or buds plumbing, as it is known locally. We acquired this through our newly created platform, Kingsway Skilled Trades. Bud's Plumbing is a 100 plus year old service and repair plumbing company serving residential and commercial customers in Evansville, Indiana. We acquired it for $5 million plus transaction expenses and a working capital adjustment in a transaction funded with cash on hand and a $1.25 million seller note.
Speaker Change: But its plumbing is 100, plus year old service and repair plumbing company, serving residential and commercial customers in Evansville, Indiana.
Speaker Change: We acquired it for $5 million plus transaction expenses, and a working capital adjustment and a transaction funded with cash on hand, and a $1 $25 million seller note.
J.T. Fitzgerald: OIR Rob Casper will be transitioning into the day-to-day operating role as CEO of Kingsway Skilled Trades following the transaction, while the previous owner, Mark Korn, will stay on as President of Bud's Plumbing for a one-year transition period. The strategy is to support Rob to grow skilled trades into a much larger platform through a combination of organic growth and future acquisition. Growth through acquisitions is at the core of our corporate strategy. We follow a disciplined framework to evaluate acquisition opportunities based on a predefined set of operational and financial metrics that drive our decision making. We are targeting businesses that operate in growing, attractive end markets, are asset light, and deliver predictably high rates of return on invested capital.
Speaker Change: Why are Rob Kasper will be transitioning into the day to day operating role as CEO of Kingsway skilled trades following the transaction, while the previous owner of our corn will stay on as president of buds plumbing for a one year transition period.
Speaker Change: Strategy is to support Rob to grow skilled trades into a much larger platform through a combination of organic growth and future acquisitions.
Speaker Change: Growth through acquisitions is at the core of our corporate strategy, we follow a disciplined framework to evaluate acquisition opportunities based on a predefined set of operational and financial metrics that drive our decision making.
Speaker Change: We are targeting businesses that operate in growing attractive end markets are asset light and deliver predictably higher rates of return on invested capital.
Speaker Change: We are eager to expand our <unk> business targeting two to three deals per year, but prioritize strategic fit over speed or pacing, ensuring each transaction aligns with our long term objectives.
J.T. Fitzgerald: We are eager to expand our KSX business, targeting two to three deals per year, but prioritize strategic fit over speed or pacing, ensuring each transaction aligns with our long-term objectives.
J.T. Fitzgerald: In September, Davide Zanchi transitioned from the role of OIR to CEO of Image Solutions.
Speaker Change: In September <unk> transitioned from the <unk> to CEO of image solutions and as of last Friday, Rob Casper transitions from the role of <unk> CEO of Kingsway skilled trades.
J.T. Fitzgerald: And as of last Friday, Rob Casper transitioned from the role of OIR to CEO of Kingsway Skilled Trades. With these acquisitions, we now currently have three full-time OIRs searching for our next target. Our current pipeline, which consists of a growing number of high quality opportunities. The strength of our OIR team and our proven framework give us great confidence in our ability to execute our strategy. Our trailing 12-month adjusted EBITDA run rate for our operating businesses, which includes the pro forma results for image solutions and buds plumbing, is $19 million to $20 million. As a reminder, this metric is intended to capture the last 12 months earnings of what we currently own or recently acquired and is not intended to be forward-looking guidance.
Speaker Change: With these acquisitions. We now currently have three full time OA are searching for our next target or.
Our current pipeline, which consists of a growing number of high quality opportunities.
Speaker Change: The strength of our IR team and our proven framework gives us great confidence in our ability to execute our strategy.
Speaker Change: Our trailing 12 month adjusted EBITDA run rate for our operating businesses, which includes the pro forma results for image solutions and buds plumbing is 19 million to $20 million. As a reminder, this metric is intended to capture the last 12 months.
Speaker Change: Earnings of what we currently own or recently acquired and is not intended to be forward looking guidance.
Speaker Change: We're excited about the road ahead for Kingsway 2024 was a year of important progress we grew and diversified our revenue base executed on key strategic initiatives and enhanced our platform with new acquisitions.
J.T. Fitzgerald: We're excited about the road ahead for Kingsway. 2024 was a year of important progress. We grew and diversified our revenue base, executed on key strategic initiatives, and enhanced our platform with new acquisitions. The financial performance of our core segments and the early contributions from our acquired businesses give us confidence that we are on the right track. We have built a stronger, more diversified company that is equipped to capitalize on opportunities in 2025 and beyond. Our team is energized and focused on delivering continued growth in revenue and profitability per share. Our corporate strategy and priorities remain the same, operate the businesses we own with excellence, while strategically deploying cash to invest in and acquire a growing portfolio of high quality businesses.
Speaker Change: The financial performance of our core segments and the early contributions from our acquired businesses give us confidence that we're on the right track.
Speaker Change: We have built a stronger and more diversified company that is equipped to capitalize on opportunities in 2025 and beyond our team is energized and focused on delivering continued growth in revenue and profitability per share.
Speaker Change: Our corporate strategy and priorities remain the same.
Speaker Change: Operate the businesses, we own with excellence, while strategically deploying cash to invest in and acquire a growing portfolio of high quality businesses that in combination contribute to a powerful flywheel to scale.
J.T. Fitzgerald: that in combination contribute to a powerful flywheel to scale.
Kent Hansen: I'll now turn the call over to Kent for some additional commentary related to the financial Thanks, JT. Prudent capital allocation and managing our debt levels are critical elements to executing our corporate strategy. I would like to highlight a few of the actions we took in 2024 to achieve our goals. As JT mentioned, during the third quarter of 2024, we sold one of our subsidiaries, VA Lafayette. The final adjustment between the net carrying value of the assets and the selling price, as well as the loss on disposal, are recorded below the operating line in discontinued operation.
Kent: So I'll now turn the call over to Kent for some additional commentary related to the financials.
Kent: Ken Thanks J T.
Kent: Prudent capital allocation and managing our debt levels are critical elements to executing our corporate strategy.
Kent: I'd like to highlight a few of the actions we took in 2020 forward to achieve our goals.
Kent: As J P mentioned during the third quarter of 2024, we sold one of our subsidiaries VA Lafayette.
Kent: Final adjustment between the net carrying value of the assets and the selling price as well as the loss on disposal are recorded below the operating line and discontinued operations.
Kent Hansen: This sale, which was the last of our leased real estate assets, netted cash proceeds of $1.1 million to Kingsway after expenses. Also in the third quarter of 2024, we completed the purchase of the 10% interest in IWS that we did not previously own. This transaction was immediately accreted to our earnings, and IWS is now a wholly owned subsidiary of the company. In September 2024, we sold and issued 330,000 shares of a new series of Class B Convertible Preferred Stock in a private placement transaction for aggregate proceeds of about $8.3 million. These proceeds were used primarily to fund our acquisition of image solutions.
Kent: This sale, which was the last of our leased real estate assets netted cash proceeds of $1 1 million to Kingsway after expenses.
Kent: Also in the third quarter of 2024, we completed the purchase of the 10% interest in AWS that we did not previously own.
Kent: This transaction was immediately accretive to our earnings and <unk> is now a wholly owned subsidiary of the company.
Kent: In September 'twenty 'twenty, four we sold and issued 330000 shares of a new series of class B convertible preferred stock in a private placement transaction for aggregate proceeds of about $8 3 million.
Kent: These proceeds were used primarily to fund our acquisition of image solutions Importantly, the successful acquisition of image solutions was carried out with a balanced mix of available liquidity and minimal new debt.
Kent Hansen: Importantly, the successful acquisition of image solutions was carried out with a balanced mix of available liquidity and minimal new debt. As a result of our strategic and financing transactions, as of December 31, 2024, we had cash and cash equivalents of $5.5 million compared to $9.1 million at the end of 2023. Subsequent to year-end in February of 25, we issued and sold 240,000 shares of a new series of Class C convertible preferred stock, also in a private placement transaction, for total proceeds of $6 million. These proceeds provided us with the cash needed to execute the BUDS plumbing acquisition.
Kent: As a result of our strategic and financing transactions as of December 31, 2024, we had cash and cash equivalents of $5 5 million compared to $9 1 million at the end of 2023.
Kent: Subsequent to year end in February of 'twenty, five we issued and sold 240000 shares of a new series of class C convertible preferred stock.
Kent: So in a private placement transaction for total proceeds of $6 million.
Kent: These proceeds provided us with the cash needed to execute the buds plumbing acquisition.
Kent: Total debt outstanding of $57 5 million compared to $44 4 million at the end of 2023.
Kent Hansen: Total debt outstanding of $57.5 million compared to $44.4 million at the end of 2023. Our debt balance is comprised of $44.1 million of bank loans and $13.4 million of subordinated debt. Net debt increased to $52 million as of December 31, 2024, compared to $35.3 million at the end of 2023, primarily due to the acquisition of image solution. We continue to benefit from our net operating losses, which provide a meaningful tax advantage and enhance our cash flow generation. As of December 31st, 2024, our NOL totaled approximately $622 million. In March of 24, our securities repurchase program was extended for one year through March of 2025.
Kent: Our debt balances comprised of $44 1 million of bank loans, and $13 4 million of subordinated debt.
Kent: Net debt increased to 52 million as of December 31, 2024, compared to $35 3 million at the end of 2023, primarily due to the acquisition of amid solutions.
Kent: We continue to benefit from net operating losses, which provide a meaningful tax advantage and enhance our cash flow generation.
Kent: As of December 31, 2024, our Nols totaled approximately $622 million.
Kent: In March of 'twenty for our Securities repurchase program was extended for one year through March of 2025.
Kent Hansen: During 2024 and through January of this year, the company repurchased 355,750 shares of its common stock for an aggregate aggregate purchase price of $2.8 million, including fees and commissions. With the January repurchases, the company fully utilized the amount of the security repurchase program authorized by the Board of Directors.
Kent: During 2024 and through January of this year the company repurchased 355750 shares of its common stock.
Kent: The aggregate purchase price of $2 8 million, including fees and commissions with.
Kent: With the January repurchases the company fully utilized the amount of the security repurchase program authorized by the board of directors.
Kent: With a prudent debt profile and tax efficient framework, we are well positioned to support future strategic initiatives to increase long term shareholder value.
Kent Hansen: With a prudent debt profile and tax efficient framework, we are well positioned to support future strategic initiatives that increase long term shareholder value. We believe our corporate strategy and financial discipline position, financial discipline position as well for continued success in 2025 and beyond.
Kent: We believe our corporate strategy and financial discipline position financial.
Kent: Discipline position us well for continued success in 2025 and beyond.
John Taylor: I'll now turn the call back over to John to open the line for any questions. John? One moment, please, while we poll for questions. Once again, please press star one if you have a question or a comment. Again, please press star one if you have a question or There are currently no questions in queue.
Kent: I'll now turn the call back over to John to open the line for any questions John.
Speaker Change: Thank you at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star.
Kent: <unk>.
Kent: One moment, please while we poll for questions.
Kent: Once again, please press star one if you have a question or comment.
Kent: Once again, please press star one if you have a question or comment.
Speaker Change: There are currently new questions in queue I'd like to turn the floor over to James Carbonara for any questions you may have via email.
James Carbonara: I'd like to turn the floor over to James Carbonara for any questions you may have via email. Thank you, operator. Yes, a few did come in on email.
Speaker Change: Thank you operator, yes, a few did come in on email.
James Carbonara: The first one was, could you provide more color on the claims expense moderation you mentioned in the extended warranty segment during the second half of 2024? Yeah, great question. Maybe just sort of baseline. 2023, we saw claims increase roughly 10% year over year versus 2020-2022. And for full year 2024, claims increased roughly 6.6%. So definitely some moderation there. In Q1 of 2024. claims were actually up like 13% year over year. And so in Q2 through Q4, that subsided down to roughly four and a half percent with Q4 being only 4.1%. After, you know, 10% in 2023, 6.6% full year, and then if you sort of Q2 through Q4, you know, just north of 4%.
Speaker Change: The first one was could you provide more color on the claims expense moderation you mentioned in the extended warranty segment during the second half of 2024.
Speaker Change: Yeah, Great question.
Speaker Change: Maybe just sort of baseline 2023, we saw claims increase roughly 10% year over year versus 2000 2000 22022.
Speaker Change: And for full year 2024 claims increased roughly six 6% so definitely.
Speaker Change: Some moderation there.
Speaker Change: In Q1 of 2024.
Speaker Change: Claims were actually up like 13% year over year and so in Q2 through Q4.
Speaker Change: That subsided down to roughly four 5% with Q4 being only four 1% so.
After.
Speaker Change: 10% in 2023, 6% six 6% full year and then if you sort of.
Speaker Change: Q2 through Q4, just north of 4%, so definitely seeing things calm down most.
James Carbonara: So definitely seeing things calm down most, you know, benefit of declining frequency, but also severity. Great.
Speaker Change: Benefit of declining frequency, but also severity.
Speaker Change: Great. Thank you.
James Carbonara: Next one is, with the formation of your new skilled trade services platform, what's your vision for growing this vertical within KSX? Yeah, first of all, I think it's a huge opportunity within plumbing service and repair and mechanical services. And it's just a great fit for Rob's background. You know, we posted his background when we announced him joining as an OIR. His professional background, he did consolidation first in the veterinary care space and then more recently in the plumbing and HVAC industry. And so he came with a very sort of precise thesis around the opportunity for organic and inorganic growth in plumbing and HVAC.
Speaker Change: Next one is with the formation of your new skilled trade services platform. What's your vision for growing this vertical with any capex.
Speaker Change: Yeah first of all I think it's a huge opportunity.
Speaker Change: Within plumbing service and repair and mechanical services.
Speaker Change: It's a great fit for Rob's background.
Speaker Change: We posted as background, when we announced him joining us in <unk>.
Speaker Change: His professional background. He did consolidation first in the veterinary care space and then more recently in the plumbing and HVAC industry and so he came with a very sort of precise thesis around the opportunity.
Speaker Change: For organic and inorganic growth in plumbing and HVAC.
Speaker Change: Great.
James Carbonara: And so, you know, I think with buds, we're absolutely first focused on organic growth, you know, penetrate more fully penetrate their existing market through combination of you know, pricing enhancements, search engine optimization, expanding into an adjacent market that's very nearby. And then move to cross-sell new plumbing services that they don't have, like hydrojetting, and then eventually, hopefully, service line expansion into HVAC. You know, we'll see about that. But that would be a couple years out. And so for any one of these plumbing businesses, you know, Rob's thesis would be that plumbing is the beautiful trade because of their service level agreements and The requirements in terms of the amount of time they have to serve their customer, it's much easier to add complementary trades to a plumbing business than vice versa.
Speaker Change: And so I think with Buzzword Abbey.
Speaker Change: Absolutely first focused on organic growth.
Speaker Change: Penetrate more fully penetrate their existing market through combination of.
Speaker Change: Pricing enhancements search engine optimization expanding.
Speaker Change: Into an adjacent market thats very nearby.
Speaker Change: And then.
Speaker Change: Move to cross sell new plumbing services that they don't have like Hydro Jetting and then eventually hopefully service line expansion into HVAC.
Speaker Change: We'll see about that but that would be a couple of years out.
Speaker Change: And so for any one of these plumbing businesses, Rob stasis would be the plumbing is the beautiful trade because of their service level agreements.
Speaker Change: The requirements in terms of the amount of time they have to to serve their customer it's much easier to add complimentary trades to our plumbing business than vice versa.
Speaker Change: So a lot of organic growth opportunities for the businesses, we acquire but also a lot of inorganic growth potential growth via acquisition to very large and fragmented industry and Rob will be focused on opportunities in what.
James Carbonara: So a lot of organic growth opportunities for the businesses we acquire, but also a lot of inorganic growth potential growth via acquisition. It's a very large and fragmented industry. And, you know, Rob will be focused on opportunities in what we would call tier two and tier three markets. where we can partner with a number one or number two incumbent in that market. And so I think that you will see us, in addition to trying to grow organically the businesses we acquire, a strategy around growing via consolidation, which is a great fit for his background.
Speaker Change: What we would call tier two and tier three markets.
Speaker Change: Sure.
Speaker Change: We can partner with a number one or number two incumbent in that market.
Speaker Change: So I think that Youll see us in addition to trying to grow organically in the businesses, we acquire a strategy around growing via consolidation which is.
Speaker Change: Great fit for his background.
Speaker Change: Great. Thank you.
James Carbonara: Great, thank you.
Speaker Change: The next one says the.
James Carbonara: The next one says the earnings release mentioned acquisition opportunities in your pipeline.
Speaker Change: The earnings release.
Speaker Change: And acquisition opportunities in your pipeline are you targeting specific verticals within your existing segments or is most of the pipeline New industries that you are not currently operating at.
James Carbonara: Are you targeting specific verticals within your existing segments or is most of the pipeline new industries that you are not currently operating in? Yeah, great question. I would say it's probably a bit of both of these sort of think about the KSX industries, we sort of bucket them into four broad verticals, B2B services, healthcare services, vertical market software, and now skilled trade. And so our existing OIRs are definitely focused on things in B2B services like accounting services and IT and cyber MSP. They're focused on opportunities in vertical market software, and maybe not directly plumbing and HVAC, but other skilled trades as well.
Speaker Change: Yes, Great question I would say, it's probably a bit of both sort of think about the K sx.
Speaker Change: Industries, we sort of bucket them into four <unk>.
Speaker Change: Broad verticals BTB services healthcare services vertical market software and now skilled trades.
Speaker Change: And so our existing <unk> are definitely focused on things and <unk> services, like accounting services, and <unk> and cyber MSP and.
Speaker Change: We're focused on.
Speaker Change: <unk> and vertical market software.
Speaker Change: And maybe not directly plumbing and HVAC, but other skilled trades as well.
James Carbonara: And maybe some field service stuff like pest control or fire and life safety.
Speaker Change: And maybe some field service stuff like.
Speaker Change: Pest control or.
Speaker Change: Fire life safety.
Speaker Change: Great.
James Carbonara: Great.
James Carbonara: Looks like there are two more.
Speaker Change: Looks like there are two more first one is can you refresh us on how long each existing OA are has been searching for and how many you still need to backfill as it just kasper.
James Carbonara: First one is, can you refresh us on how long each existing OIR has been searching for and how many you still need to backfill? Is it just CASP? Yeah, so we have three current OIRs. Peter Hearn's probably the longest tenured. He's been here coming up on two years in May. Miles has been here roughly 18 months and Paul Fadal just over a year.
Speaker Change: Okay.
Speaker Change: Yeah. So we have three current <unk>, Peter Hearn, probably the longest tenured he's been here coming up on two years in may.
Speaker Change: Myles who's been here, roughly 18 months and Paul for Dow just over a year.
James Carbonara: And so obviously with Davide launching and now Rob launching, in order to maintain our current pacing we'll probably want to be backfilling. You know like I mentioned in previous calls and we talked to over 130 prospective OIRs last year, so we have great inbound interest in the platform. And for us it's about maintaining the discipline around getting the people with the right set of attributes and competencies. and background that are a great fit for this, you know, what is a really hard entrepreneurial endeavor. Excellent.
Speaker Change: And so obviously with Davita.
Rob: Launching in Rathenau, Rob launching.
Rob: In order to maintain our current pacing will probably want to be back filling.
Rob: Like I mentioned in previous calls.
Speaker Change: We've talked to over 130 prospective OIS last year. So we have great inbound interest in the platform.
Rob: And for US, it's about maintaining the discipline around.
Speaker Change: Getting the people with the right set of attributes and competencies and.
Speaker Change: And background that are a great fit for this what is a really hard entrepreneurial endeavor.
Speaker Change: Excellent.
James Carbonara: And then the last one is, notwithstanding macro factors, were there areas Kingsway did not do well in 2024? And what are your plans to improve them? Yeah, great question. Where do I start? Yeah, absolutely. You know, while we had several notable successes, there are always lots of areas we could perform better. You know, one of our core values here at Kingsway is a culture of Kaizen or continuous improvement. And so we're always looking for opportunities to be better. Certainly within warranty, I think an area of focus and kind of root cause and countermeasure analysis is around pricing.
Speaker Change: And then the last one is notwithstanding macro factors were there areas Kingsway did.
Speaker Change: <unk> did not do well in 2024, and what are your plans to improve them.
Speaker Change:
Speaker Change: Yeah.
Speaker Change: Great question, where do I start yeah, absolutely, while we had several notable successes there are always lots of areas, we could perform better.
Speaker Change: One of our core values here at Kingsway has a culture of kaizen or continuous improvement.
Speaker Change: And so we're always looking for opportunities to be better.
Speaker Change: Certainly within warranty I think an area of focus and kind of root cause and countermeasure analysis is around pricing.
James Carbonara: You know, continuously re-underwriting our book to make sure that we're getting adequate price to to offset his claims inflation. Even though that's subsiding, and we have been taking price, that's an area that we will continue to focus, you know, kind of one area really under the hood. A lot of the claims inflation was at one company, Geminis, pen warranty in a product called GAP, G-A-P, Guaranteed Asset Protection, which is basically David Meltzer, Chairman & founder of Kil breeze Kindergarten & Youth Program at Kingsway protection against negative equity in your car loan and There's sort of the macro environmental factors of declining used car prices, high loan to value, you know, going back to 2023, we saw really tough environment for gap pricing.
Speaker Change: Continuously re underwriting our book to make sure that we're getting adequate price.
Speaker Change: Two.
Speaker Change: To offset this claims inflation.
Speaker Change: <unk>.
Speaker Change: Even though that subsiding and we have been taking place price. That's an area that we will continue to focus one area really under the Hood a lot of the claims inflation was at one company.
Speaker Change: Chairman S pen warranty in a product called gap JP guaranteed asset protection, which is basically.
Speaker Change:
Speaker Change: Protection against negative equity in your car loan and.
Speaker Change: Sort of the macro environmental factors of declining used car prices high loan to value going back to 2023, we saw.
Speaker Change: Really tough environment for GAAP pricing so we've.
James Carbonara: So we've that we probably weren't out in front of and fast enough, we've taken significant price increases, think like 50% price increases, that will probably impact volume and revenues in that product, but will protect our earnings in 2025. And then I think looking at KSX, you know, I think certainly one of the areas that we can always get better at is around talent. You know, I know SNS and C-suite both brought on. new folks that they were very excited about, in some cases didn't work out quite, quite as well as we had hoped.
Speaker Change: <unk>.
Speaker Change: That we probably weren't out in front of them fast enough. We've taken significant price increases think like 50% price increases that will probably impact volume and revenues in that product that will protect our earnings.
Speaker Change: In 2025.
Speaker Change: Okay and then.
Speaker Change: I think looking at K S X.
Yes, I think certainly.
Speaker Change: One of the areas that we.
Speaker Change: Can always get better at it.
Is around talent.
Speaker Change: I know SNS and C suite both brought on.
Speaker Change: New folks that they were very excited about in some cases didn't work out quite quite as well as we had hoped and so we use a process here for talent.
James Carbonara: And so, you know, we use a process here for talent, identification and screening called top grading, I think that, you know, we're just trying to improve our hit ratio on the people that we bring on board, but always room for improvement there. And then finally, I think at KSX, you know, we have a stated goal of two to three acquisitions per year, we only did one. You know, fortunately, it was a little chunkier in terms of the size, but certainly. had a few misses throughout the year.
Speaker Change: Identification and screening called top grading I think that we're just try to improve our hit ratio on the people that we bring onboard but always room for improvement there.
Speaker Change: And then finally I think at <unk>, we say have a stated goal of two to three acquisitions per year, we only did one.
Speaker Change: Fortunately it was a little chunkier in terms of the size, but.
Speaker Change: Certainly.
Speaker Change: Had a few misses throughout the year I think that in some ways is a testament to our disciplined but we would like to improve the velocity of.
James Carbonara: I think that in some ways is a testament to our discipline, but we would like to improve the velocity of, of getting things through our deal flow pipeline from indication of interest through to closing.
Speaker Change: Getting things through our deal flow pipeline from indication of interest through to closing.
Speaker Change: Terrific.
James Carbonara: Terrific. Yeah, I see no further questions on the email at this time.
Speaker Change: I see no further questions on the email at this time J T I'll throw it back to you for any closing comments.
J.T. Fitzgerald: JT, I'll throw it back to you for any closing comments. Okay, great. Thanks, James.
J.P. Fitzgerald: Okay, great. Thanks James.
Operator: Well, I guess I can say I'd like to thank all of our dedicated employees across all of our businesses for their hard work and innovation. They are the driving force behind our success. We also thank our customers and partners for their trust and importantly, our shareholders for their continued support. Kingsway enters 2025 with momentum and optimism. We remain committed to executing our strategy, serving our customers with excellence and creating long-term value for our shareholders. So thanks to everyone who joined us today and for your interest in your company. We look forward to updating you on our progress in the coming quarters.
Speaker Change: Well.
Speaker Change: Uh huh.
Speaker Change: I guess I can say I would like to thank all of our dedicated employees across all of our businesses for their hard work and innovation.
Speaker Change: They are the driving force behind our success. We also thank our customers and partners for their trust in.
Speaker Change: And importantly, our shareholders for their continued support.
Speaker Change: Kingsway enters 2025 with momentum and optimism we remain committed to executing our strategy, serving our customers with excellence and creating long term value for our shareholders.
Speaker Change: So thanks to everyone, who joined US today and for your interest in your company. We look forward to updating you on our progress in the coming quarters.
Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.