Q1 2025 Kingsway Financial Services Inc Earnings Call

Operator: Good day and welcome to the Kingsway First Quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded.

Good day and welcome to the King's when he first quarter 2025 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note. This conference is being recorded.

Operator: With me on the call are J.T. Fitzgerald, Chief Executive Officer, and Kent Hansen, Chief Financial Officer.

With me on the call are J P Fitzgerald, Chief Executive Officer, and Ken Thompson, Chief Financial Officer.

Operator: Before we begin, I want to remind everybody that today's conference may contain a forward-looking statement. 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.

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.

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. Please see the risk factors detailed in the company's annual report on Form 10-K and subsequent forms.

Operator: 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.

10-Q, and eight forms 8-K filed with the Securities and Exchange Commission.

Operator: 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 as 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.

A reconciliation of such non-GAAP metrics to the most comparable GAAP measures is available in the most recent press release as well as in the company's periodic filings with the SEC now.

Operator: Now I would like to turn the call over to J.T. Fitzgerald, CEO of Kingsway.

Speaker Change: Now I would like to turn the call over to JT Fitzgerald CEO of Kingsway J T. Please proceed.

J.T. Fitzgerald: J.T., please proceed. Thank you, Paul. Good afternoon, everyone and welcome to the Kingsway earnings call for Q1 2025. To our knowledge, Kingsway is the only publicly traded US company employing the search fund model to acquire and build great businesses. We own and operate a diversified collection of high quality services companies with great growth prospects that generate recurring revenue and that are asset light and profit. Our goal is to compound long term shareholder value on a per share basis, and we believe our business can scale due to our decentralized management model and our talented team of operator CEOs.

JT Fitzgerald: Thank you Paul Good afternoon, everyone and welcome to the Kingsway earnings call for Q1 2025.

JT Fitzgerald: To our knowledge, Kingsway is the only publicly traded US company employing the search fund model to acquire and build great businesses.

JT Fitzgerald: We own and operate a diversified collection of high quality services companies with great growth prospects that generate recurring revenue and that are asset light and profitable.

JT Fitzgerald: Our goal is to compound long-term shareholder value on a per share basis and we believe our business can scale due to our decentralized management model and our talented team of operator CEOs. We also continue to benefit from significant tax assets that enhance our returns.

J.T. Fitzgerald: We also continue to benefit from significant tax assets that enhance our return. In short, Kingsway is uniquely positioned to capitalize on the search fund model at scale within a tax-efficient public company framework.

JT Fitzgerald: In short, Kingsway is uniquely positioned to capitalize on the search fund model at scale within a tax-efficient public company framework.

J.T. Fitzgerald: Since the start of the year, we've made meaningful progress in advancing our long-term growth strategy. In March, we completed the acquisition of privately held MLC Plumbing, known locally as Bud's Plumbing, 100 plus year old residential and commercial service and repair business based in Evansville, Indiana. The transaction was executed through our newly formed platform, Kingsway Skilled Trades, which was created to capitalize on the large and fragmented universe of high-quality trade services businesses across North America. Bud's Plumbing exemplifies the type of high quality cash generative business we seek to bring into the Kingsway family. We acquired it for $5 million plus transaction expenses and small working capital adjustments.

JT Fitzgerald: Since the start of the year, we've made meaningful progress in advancing our long-term growth strategy.

JT Fitzgerald: In March, we completed the acquisition of privately held MLC plumbing, known locally as Buds plumbing. A hundred plus year old residential and commercial service and repair business based in Evansville, Indiana.

JT Fitzgerald: The transaction was executed through our newly formed platform, Kingsway skilled trades, which was created to capitalize on the large and fragmented universe of high quality trade services businesses across North America.

JT Fitzgerald: Buds Plumbing exemplifies the type of high-quality, cash-generative business we seek to bring into the Kingsway family. We acquired it for $5 million, plus transaction expenses, and small working capital adjustment.

J.T. Fitzgerald: The acquisition was funded with cash on hand and a $1.25 million seller note. We're pleased to report that one of our operators and residents, Rob Casper, has assumed the role of CEO of Kingsway Skilled Trades, while Bud's previous owner, Mark Korn, is staying on as president of Bud's for a one-year transition period. The addition of Bud's Plumbing contributes approximately $800,000 of annual adjusted EBITDA to our KSX segment on a run rate basis.

JT Fitzgerald: The acquisition was funded with cash on hand and a $1.25 million seller note.

JT Fitzgerald: We're pleased to report that one of our operators and residents, Rob Casper, has assumed the role of CEO of Kingsway skilled trades, while Bud's previous owner, Mark Korn, is staying on as President of Bud's, on as President of Bud's, on as President of Bud's,

JT Fitzgerald: for a one-year transition period. The addition of buds plumbing contributes approximately 800,000 of annual adjusted EBITDA to our KSX segment on a run rate basis.

J.T. Fitzgerald: More recently, one of our wholly owned subsidiaries, SPI Software, acquired Viewpoint, a leading cloud-native timeshare software provider focused on the vacation ownership market. Headquartered in Mount Waverly, Australia, Viewpoint strengthens SPI software's leadership in the vacation ownership software market and expands its ability to deliver innovative cloud-based solutions to an even broader client. This acquisition marks the second company added to our vertical market solution software platform. It represents a strong strategic fit, given the complimentary nature of SPI and Viewpoint's offering.

JT Fitzgerald: More recently, one of our wholly owned subsidiaries, SPI Software, acquired viewpoint, a leading, cloud-native time-share software provider focused on the vacation ownership market.

JT Fitzgerald: Headquartered in Mount Waverly, Australia, Viewpoint, Strengthens, SPI, Software's leadership in the vacation ownership software market and expands its ability to deliver innovative cloud-based solutions to an even broader client base.

JT Fitzgerald: This acquisition marks the second company added to our Vertical Market Solutions software platform. It represents a strong strategic fit given the complimentary nature of SPI and viewpoints offerings.

J.T. Fitzgerald: And both organizations share a deep commitment to exceptional customer relationships and By bringing these two organizations together, we aim to accelerate their joint product roadmap and unlock new opportunities for geographic and market expansion. The viewpoint acquisition adds over a million dollars of unaudited annual recurring revenue and approximately 200,000 of unaudited EBITDA to our KSX segment on a run rate based. The acquisition was funded with cash on hand at SPI. On a combined basis, SPI Software and Viewpoint have ARR approaching $5 million, double-digit EBITDA margins, and have achieved Rule of 40 status. Our operator CEO, Drew Richard, who is the president of SPI Software, is building a wonderful business, and we think he's just getting started.

JT Fitzgerald: and both organizations share a deep commitment to exceptional customer relationships and support. By bringing these two organizations together, we aim to accelerate their joint product road map and unlock new opportunities for geographic and market expansion. Thank you very much.

JT Fitzgerald: The viewpoint acquisition adds over a million dollars of unaudited annual recurring revenue and approximately 200,000 of unaudited EBITDA to our KSX segment on a run rate basis.

The acquisition was funded with cash on hand at SPI.

JT Fitzgerald: On a combined basis, SPI software and viewpoint have ARR approaching $5 million, double digit ebita margins and have achieved rule of 40 status.

Speaker Change: Our operator, CEO , Drew Richard, who was the president of SPI software, is building a wonderful business and we think he's just getting started. We're excited for what the future holds for both SPI software and viewpoint.

J.T. Fitzgerald: We're excited for what the future holds for both SPI software and Viewport. Both the BUDS plumbing and viewpoint acquisitions enhance our KSX platform and provide additional levers for growth and long-term value creation.

JT Fitzgerald: Both the Buds Plumbing and Viewpoint Acquisitions enhance our KSX platform and provide additional levers for growth and long-term value creation.

J.T. Fitzgerald: We also took steps to strengthen our leadership in corporate governance. During the quarter, we appointed two new independent directors to Kingsway's board, Adam Patinkin and Josh Horowitz. Adam is the founder and managing partner of David Capital Partners and brings deep investment expertise, as well as board experience with a high growth private enterprise software. Josh is a Managing Director at Palm Management with over 23 years of experience in portfolio management and public company boards. Both individuals have a wealth of investment and operational experience that aligns well with our King with our search accelerator strategy. We believe their addition to the board strengthens our oversight as we continue to scale Kingsway and unlock long-term shareholder value.

JT Fitzgerald: We also took steps to strengthen our leadership and corporate governance. During the quarter, we appointed two new independent directors to Kingsway's board, Adam Patinkin and Josh Horowitz.

JT Fitzgerald: Adam is the founder and managing partner of David Capital Partners and brings deep investment expertise as well as board experience with a high growth private enterprise software company.

JT Fitzgerald: Josh is a managing director at Palm Management with over 23 years of experience in portfolio management and public company board service.

Speaker Change: Both individuals have a wealth of investment and operational experience that aligns well with our search accelerator strategy. We believe their addition to the board strengthens our oversight as we continue to scale Kingsway and unlock long term shareholder value.

J.T. Fitzgerald: Turning to our business performance, we are encouraged by the results across both KSX and extended warranty. As a reminder, the first quarter is seasonally the weakest quarter of the year for a number of our operating subsidiaries, so we would expect to see some benefit from seasonality as we move past Q1. In KSX, revenue and adjusted EBITDA each grew 23% year on year. More importantly, however, many of our KSX businesses have built a strong foundation to accelerate growth on both the top line and bottom. This is the classic J-curve of search. Post-acquisition, there's an investment period as a new operator invests in the business, hiring great people, and building the infrastructure to allow the business to scale.

Speaker Change: Turning to our business performance, we are encouraged by the results across both KSX and extended warranty. As a reminder, the first quarter is seasonally the weakest quarter of the year for a number of our operating subsidiaries, so we would expect to see some benefit from seasonality as we move past Q1.

Speaker Change: In KSX, revenue and adjusted EBITDA, each grew 23% year on year More importantly, however, many of our KSX businesses have built a strong foundation to accelerate growth on both the top line and bottom line.

Speaker Change: This is the classic J-curve of search post acquisition there's an investment period as a new operator invests in the business hiring great people and building that [inaudible]

J.T. Fitzgerald: The company then reaches an inflection point where the strategic initiatives kick in, the investment pays off, and growth accelerates. For businesses like SNS and Image Solutions, it feels like that inflection point is getting awfully close. This makes me optimistic for the KSX growth path going forward.

infrastructure to allow the business to scale.

Speaker Change: The company then reaches an inflection point where the strategic initiatives kick kick.

Speaker Change: Excuse me, kick in, the investment pays off and growth accelerates. For businesses like SNS and image solutions, it feels like that inflection point is getting awfully close. This makes me optimistic for the KSEX growth path going forward.

J.T. Fitzgerald: We also saw encouraging signs and extended warranty. After two challenging years marked by industry headwinds and cyclical pressures, extended warranty appears to be entering a more favorable phase of recovery. Cash sales have returned to growth and were up 3.7% over the prior year and up 9.3% sequentially. Modified cash EBITDA, a commonly used metric in the warranty industry that more closely tracks the cash flow of warranty businesses, showed strong improvement. Trailing 12 months, modified cash EBITDA and extended warranty was 11.7% higher at the end of Q1 2025, relative to the end of Q1 2024. While it's still early days in the recovery, the fact that Kingsway's extended warranty segment has not just stabilized, but is now returning to top line growth is welcome news.

Speaker Change: We also saw encouraging signs and extended warranty. After two challenging years marked by industry headwinds and cyclical pressures, extended warranty appears to be entering a more favorable phase of recovery.

Speaker Change: Cash sales have returned to growth and were up 3.7% over the prior year and up 9.3% sequentially.

Speaker Change: Modified cash EBITDA, a commonly used metric in the warranty industry that more closely tracks the cash flow of warranty businesses showed strong improvement.

Speaker Change: Trailing 12-month modified Kashivita in extended warranty was 11.7% higher at the end of Q1 2025 relative to the end of Q1 2024.

Speaker Change: While it's still early days in the recovery, the fact that Kingsway's extended warranty segment has not just stabilized but is now returning to top line growth is welcome news.

J.T. Fitzgerald: As of quarter end, our trailing 12-month adjusted run rate EBITDA for the businesses we own, including the pro forma contributions of recent acquisitions, stands at approximately $18 to $19 million. This figure is intended to illustrate the earnings power of our current portfolio on a 12-month trailing basis and is not meant as forward-looking guidance. Overall, we're encouraged by the momentum we're seeing in both KSX and extended warranty, and we remain focused on driving growth and profitability.

Speaker Change: As of quarter end, our trailing 12-month adjusted run rate EBITDA for the businesses we own including the pro forma contributions of recent acquisitions stands at approximately 18 to 19 million dollars.

Speaker Change: This figure is intended to illustrate the earnings power of our current portfolio on a 12-month trailing basis is not meant as forward-looking guidance.

Speaker Change: Overall, we're encouraged by the momentum we're seeing in both KSX and extended warranty, and we remain focused on driving growth and profitability. With that, I'll now turn the call over to Kent for a closer look at our first quarter financial performance.

Kent Hansen: With that, I'll now turn the call over to Kent for a closer look at our first quarter financial Thank you, JT, and good afternoon, everyone. For the first quarter, consolidated revenue was $28.3 million, an increase of 8.4%, compared to $26.2 million in the first quarter of 2024. This growth was driven by our Kingsway Search Accelerator segment. Consolidated Adjusted EBITDA declined $800,000 versus the prior year quarter, reflecting lower profitability in our extended warranty segment and higher hold code costs, primarily related to M&A expenses. Partly offset by improved results at KSX.

Kent: Thank you, JT, and good afternoon everyone. For the first quarter, Consolidated Revenue was 28.3 million, an increase of 8.4% compared to 26.2 million in the first quarter of 2024.

This growth was driven by our Kingsway search accelerators, Accelerator's segment.

Kent: Consolidated adjusted EBITDA declined 800,000 versus the prior year quarter, reflecting lower profitability in our extended warranty segment and higher hold code costs, primarily related to M&A expenses.

Partly offset by improved results at KSX.

Kent Hansen: Breaking down performance by segment. In KSX, results were in line with our expectations. Revenue was $11.7 million in the first quarter, up 23.3% compared to $9.5 million in the same period last year. Adjusted EVTA for KSX was $1.9 million, an increase of 23.3% year-over-year.

Kent: Breaking down performance by segment, and KSX results were in line with our expectations. Revenue was 11.7 million in the first quarter, up 23.3% compared to 9.5 million in the same period last year.

Kent: Adjusted to EVATA for KSX's 1.9 million, an increase of 23.3% year-over-year

Kent Hansen: I'll now provide a bit more detail on each of our KSX operating companies, other than SPI software, which has already been discussed. Ravix and C-suite, which are operated by Common Management and provide outsource finance and CFO services, experienced a small year-over-year decline in revenue and a small year-over-year increase in adjusted EBITDA. We continue to be impressed by Operators CEO Timi Oka and believe there is opportunity for both organic and inorganic growth in this business. At SNS, our nurse staffing business, revenue grew by 7.5%, underpinned by a significant increase in travel nurse shifts that we believe is sustainable.

Kent: I'll now provide a bit more detail on each of our KSX operating companies other than SPI software which has already been discussed.

Kent: Ravencency Suite, which are operated by common management and provide outsourced finance and CFO services, experience a small year-over-year decline in revenue and a small year-over-year increase in adjusted EBITA.

Kent: We continue to be impressed by operators, CEO , Timeo Ha, and believe there is opportunity for both organic and inorganic growth in this business.

Kent: At SNS, our nurse staffing business, revenue grew by 7.5% underpinned by a significant increase in travel nurse shifts that we believe is sustainable.

Kent Hansen: While adjusted EBITDA declines slightly year over year, we are encouraged by the improving revenue momentum and our view is that operating leverage is not far behind.

Kent: while adjusted EBTA declined slightly year-over-year. We are encouraged by the improving revenue momentum and our view is that operating leverage is not far behind.

Kent Hansen: After a challenging period for nurse staffing businesses over the last couple of years, we believe SNS has positioned itself for growth and is on the road to a significant recovery. DDI, our cardiac monitoring services provider, also delivered solid results. Revenue increased 10.9% year-over-year in Q1, driven by the successful addition of new customers. Adjusted EBITDA for DDI trailed the prior year quarter modestly as the company has been investing in additional talent and infrastructure to support future growth. We view these investments as positioning DDI to scale efficiently as demand increases.

Kent: After a challenging period for nurse staffing businesses over the last couple of years, we believe SNS has positioned itself for growth and is on the road to a significant recovery.

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Kent: DDI, our Cardiac Monitoring Services Provider, also delivered solid results. Revenue increased 10.9% year year in Q1, driven by the successful addition of new customers.

Kent: Adjusted EBITDA for DDI trailed the prior year quarter modestly as the company has been investing an additional talent and infrastructure to support future growth. We view these investments as positioning DDI to scale efficiently as demand increases.

Kent Hansen: Finally, our results this quarter benefited from the inclusion of two businesses that were not in our portfolio a year ago, Image Solutions and Buds Plumbing. The contributions from these recent acquisitions strengthen our platform and expand our capabilities in both technology-enabled services through Image Solutions and skilled trades through Buzz. We see meaningful potential for both of these businesses.

Kent: Finally, our results is quarter benefited from the inclusion of two businesses that were not in our portfolio a year ago, amidst solution and buds plumbing. The contributions from these recent acquisitions strengthen our platform and expand our capabilities and involve technology-enabled services through image solutions and skilled trades through buds.

We see meaningful potential for both of these businesses.

Kent Hansen: Turning now to our extended warranty segment, first quarter revenue was essentially flat at $16.7 million compared to the first quarter of 2024. While top-line growth was unchanged, it is important to note that cash sales, a leading indicator for future revenue, increased 3.7% year-over-year in Q1 and were up 9.3% sequentially from year-end. This uptick in cash sales reflects healthy underlying consumer demand for a warranty product. Extended warranty adjusted EBITDA for the first quarter of 2025 was $800,000, as compared to $1.4 million in the year-ago quarter. Despite the dip in reported adjusted EBITDA, we are encouraged by the momentum building in the extended warranty sector.

Kent: Turning now to our extended warranty segment, first quarter revenue was essentially flat at 16.7 million compared to the first quarter of 2024.

Kent: While top line growth was unchanged, it is important to note that cash sales, a leading indicator for future revenue, increased 3.7% year over year in Q1, and we're up 9.3% sequentially from year end.

Kent: This uptick in cash sales reflects healthy underlying consumer demand for warranty products.

Kent: Extended warranty adjusted EBITDA for the first quarter of 2025 was 800,000 as compared to 1.4 million in a year ago quarter.

Kent: Despite the dip and reported adjusted eBay TA, we are encouraged by the momentum building in the extended warranty segment.

Kent Hansen: As JT mentioned, the segment has returned to growth in cash sales, and trailing 12-month modified cash EBITDA was up 11.7% year-over-year. As mentioned, modified cash EBITDA is a commonly used metric to evaluate the performance of warranty businesses as it more closely tracks the cash flows of the business. The recent healthy growth in this metric gives us confidence that gap earnings should rebound over time as deferred revenue from cash sales is recognized over future periods. In short, the extended warranty segment remains profitable, cash generative, and positioned for future success.

Kent: As JT mentioned, the segment has returned to growth in cash sales, and trailing 12-month modified cash EBITDA was up 11.7% year-over-year.

Kent: As mentioned, Modified Cash EBITDA is a commonly used metric to evaluate the performance of warranty businesses as it more closely tracks the cash flows of the business.

Kent: The recent healthy growth in this metric gives us confidence that gap earning should rebound over time as deferred revenue from cash sales is recognized over future periods.

Kent: In short, the extended warranty segment remains profitable, cash generative, and position for future success.

Kent Hansen: Let's briefly turn now to these three extended warranty businesses. IWS, our credit union focused auto warranty business, had a strong first quarter with cash sales up more than 20% year over year. While adjusted EBITDA declined year-over-year, revenue was up and modified cash EBITDA was flat, mainly due to higher claims and operating expenses in the quarter than a year ago. IWS has been proactively adjusting pricing to mitigate higher claims inflation over the last few years, and we expect the combination of strong cash sales and pricing action to benefit IWS's earnings over time.

Let's briefly turn out to these three extent of warranty businesses.

Kent: IWS, our Credit Union focused auto warranty business, had a strong first quarter with cash sales up more than 20% year over year.

Kent: While adjusted EBTA decline to year over year, revenue was up and modified cash EBTA was flat, mainly due to higher claims and operating expenses in the quarter than a year ago.

Kent: IWS has been proactively adjusting pricing to mitigate higher claims inflation over the last few years and we expect the combination of strong cash sales and pricing action to benefit IWS's earnings over time.

Kent Hansen: Next is PWI and Penn, our dealer focused auto warranty business. Both revenue and adjusted EBITDA were down year over year in the first quarter as a decline in earned premiums and higher operating expenses offset the benefit of lower claims incurred, but modified cash EBITDA actually increased in the quarter.

Next is PWI in Penn, our dealer focused auto warranty businesses.

Kent: Both Revenue and Adjusted Evertier were down year over year in the first quarter as a decline in earned premiums and higher operating expenses offset the benefit of lower claims incurred. But Modify Cash Evertier actually increased in the quarter.

Kent Hansen: At quarter end, we appointed Robbie Humble as the new president and CEO of PWI and Penn. Robby brings deep industry experience and a strong leadership track record. Notably, his background and incentives are aligned more closely with our KSX approach. In the handful of weeks he's been at the helm, Robbie has already attracted new leadership talent to the business. We are confident that under his direction, PWI and Penn will be reinvigorated to drive growth and improve results.

Kent: At quarter end, we have pointed Robbie Humble as the new President and CEO of PWA and PAN, excuse me, PWA and PAN.

Kent: Robbie brings deep industry experience in a strong leadership track record. Notably, his background and incentives are aligned more closely with our KSX approach.

Kent: and the handful of weeks he's been at the helm, Robbie has already attracted new leadership talent to the business.

Kent: We are confident that under his direction, PWI and Penn will be reinvigorated to drive growth and improve results.

Kent Hansen: Lastly, at Trinity, our mechanical equipment warranty and maintenance business, revenue was up in the first quarter, but this was outweighed by higher expenses in the seasonally low quarter for this business. About a year ago, we brought in a new sales leader for the maintenance business, and we are now seeing positive momentum. Team at Trinity is focused on improving the sales mix and managing costs, and we remain confident in the prospects for this business.

Kent: Lastly, Eternity, our mechanical equipment warranty and maintenance business, revenue was up in the first quarter, but this was outweighed by higher expenses in the seasonally low quarter for this business.

Kent: About a year ago we brought in a new sales leader for the maintenance business and we are now seeing positive momentum.

Kent: The team maternity is focused on improving the sales mix and managing costs and we remain confident in the prospects for this business.

Kent Hansen: Having recapped each of the businesses, let's now turn to the balance sheet and capital structure. In February, we completed a $6 million private placement issuing 240,000 shares of a new Class C convertible preferred stock. This capital raise provided the funds necessary to execute the BUDS plumbing acquisition. Then in March, at the closing of the BUDS deal, we financed the portion of the purchase with a $1.25 million seller note to the former owner. That note is recorded as a note payable on our March 31, 2025 balance sheet. As of March 31, 2025, we held $6.4 million in cash and cash equivalents up from $5.5 million at year-end.

Kent: Having recapped each of the businesses, let's now turn to the balance sheet and capital structure.

Kent: In February , we completed a $6 million private placement issuing 240,000 shares of a new class seat convertible preferred stock.

Kent: This capital arrays provided the funds necessary to execute the Buds Plumbing Acquisition.

Kent: Then in March, at the closing of the Buds deal, we finance the portion of the purchase with a $1.25 million dollar seller note to the former owner.

Kent: As of March 31, 2025, we held 6.4 million in cash and cash equivalents, equivalents up from 5.5 million at year-end.

Kent Hansen: Total debt was $59.5 million at quarter end, compared to $57.5 million as of December 31, 2024. This slight increase in debt primarily reflects the addition of Bud's Plumbing, Seller Note, as well as an increase of the Ravix debt as we refinance that debt and use the proceeds to pay off the original acquisition earn out in full. Our debt consists of $45 million in bank loans, $1.1 million in notes payable, the seller note, which is held at fair value, and $13.4 million in subordinated debt. Net debt, or debt minus cash, at quarter end was $53.1 million, up slightly from $52 million at year end.

Kent: Total debt was 59.5 million at quarter-end compared to 57.5 million as of December 31st, 2024.

Kent: This slight increase in debt primarily reflects the addition of Bud's plumbing seller note, as well as an increase of the Ravix debt as we refinance that debt and use the proceeds to pay off the original acquisition earn out in full.

Our debt consists of 45 million in bank loans.

Kent: 1.1 million in notes payable, the seller note, which is held at fair value, and 13.4 million in subordinated debt. Net debt, or debt minus cash, at quarter end, was 53.1 million, up slightly from 52 million at year end.

J.T. Fitzgerald: Let me now turn things back over to JT for a few final thoughts before we open the line for questions. JT? Thanks, Ken. Before we go to Q&A, I just want to reiterate our excitement about the progress we're making. The addition of Bud's Plumbing and Viewpoint, the continued build out of KSX and the positive sales momentum and extended warranty all reinforce our conviction in our strategy. Our deal pipeline is robust. In fact, the most active it has ever been, which is reflected in the fact that we've already executed two deals in the first four months of the year.

JT Fitzgerald: Let me now turn things back over to JT for a few final thoughts before we open the line for questions. JT

JT Fitzgerald: Thanks, Kent. Before we go to Q&A, I just want to reiterate our excitement about the progress we're making. The addition of buds plumbing and viewpoint, the continued build out of KSX and the positive sales momentum and extended warranty, all reinforce our conviction and our strategy.

JT Fitzgerald: Our deal pipeline is robust. In fact, the most active it has ever been, which is reflected in the fact that we've already executed two deals in the first four months of the year. I'm excited for what the rest of 2025 holds in store for Kingsway.

J.T. Fitzgerald: I'm excited for what the rest of 2025 holds in store for Kingsway.

J.T. Fitzgerald: For more information visit www.kingsway.com Finally, we'd like to remind everyone that we're hosting our annual investor day on Monday, May 19th at the New York Stock We look forward to spending time with many of you walking through the building blocks of our strategy and introducing some of the leaders driving execution across our portfolio.

JT Fitzgerald: Finally, we'd like to remind everyone that we're hosting our annual Investor Day on Monday, May 19th at the New York Stock Exchange.

JT Fitzgerald: We look forward to spending time with many of you walking through the building blocks of our strategy and introducing some of the leaders driving execution across our portfolio.

J.T. Fitzgerald: In late breaking news, I'm excited to report that Tom Joyce, the former CEO of Danaher and a member of our KSX advisory board, will be joining us on the 19th for a fireside chat. If you haven't already RSVPed, please reach out to James Carbonara at James at Hayden, H-A-Y-D-E-N-I-R dot com. The event will also be webcast if you can't participate in person.

JT Fitzgerald: In late-breaking news, I'm excited to report that Tom Joyce, the former CEO of Dana Herr and a member of our KSX Advisory Board, will be joining us on the 19th for a Fireside Chat.

Speaker Change: If you haven't already RSVP, please reach out to James Carbonara at James at Hayden, H-A-Y-D-E-N-I-R dot com

JT Fitzgerald: The event will also be webcast if you can't participate in person.

Operator: I'll now turn the call back over to Paul to open the line for any questions. Thank you.

JT Fitzgerald: I'll now turn the call back over to Paul to open the line for any questions.

Operator: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would 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 keys. Once again, please press star 1 on your phone at this time if you wish to ask a question.

JT Fitzgerald: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad.

JT Fitzgerald: A confirmation tone will indicate your lineness in the question cue You may press star 2 if you would like to remove your question from the cue

JT Fitzgerald: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, please press star 1 on your phone at this time if you wish to ask a question.

Operator: And there were no questions currently from the lines.

James Carbonara: I'd now like to hand the call over to James Carbonara for some email. Thank you, operator. Yes, a handful of questions did come in by email.

JT Fitzgerald: And there were no questions currently from the lines and I would like to hand the call over to James Carbonara for some email questions

James Carbonara: Thank you, operator. Yes, a handful of questions did come in by email. The first one is the viewpoint acquisition seems interesting. Could you please provide any color on how the transaction came about and why might make sense strategically? Thank you very much.

Unknown Attendee: The first one is the viewpoint acquisition seems interesting.

J.T. Fitzgerald: Could you please provide any color on how the transaction came about and why it might make sense strategically? Yeah, sure. How it came about, it was sourced by Drew at SPI, he developed a relationship with, with the company and its former owners and advanced the conversation and, and in, I think, probably middle of the fourth quarter last year, in terms of why it makes sense strategically.

Speaker Change: Yeah, sure. How it came about, it was sourced by Drew at SBI, developed a relationship with with the company and its former owners and...

James Carbonara: Advanced Conversation, and I think probably middle of the fourth quarter last year, in terms of why it makes sense strategically

J.T. Fitzgerald: I think you got to break it down, kind of look at it based on product, customer profile and geography. And so just sort of to set the table, SPI, is a hosted and on-prem software solution for enterprise customers, predominantly in North America. And Viewpoint. very differently is a cloud native software. with smaller customers, single location in many cases, resort operators in Asia Pacific and Australia. And so when Drew was evaluating his strategy, there's a large segment in North America of smaller single location managers who were looking for a cloud native software solution. looking sort of to expand geographically envied the Asia-Pacific region and Australia for larger enterprise clients.

James Carbonara: I think you got to break it down kind of look at it based on product, customer profile and geography and so just sort of.

James Carbonara: to set the table. SPI is a hosted and on-prem software solution for enterprise customers, predominantly in North America. And viewpoint,

Very differently is a cloud-native software.

James Carbonara: with smaller customers, single location in many cases, resort operators in Asia-Pacific and Australia.

James Carbonara: and so when Drew was evaluating his strategy, there's a large segment in North America of smaller single location.

James Carbonara: Property Resort Managers who were looking for a cloud-native software solution and he

looking sort of to expand geographically envied the

James Carbonara: Asia-Pacific Region in Australia for a larger enterprise client. So the combination of these two businesses solves a couple of problems. One, it gives Drew a cloud native.

J.T. Fitzgerald: So the combination of these two businesses solves a couple of problems. One, it gives Drew a cloud-native. software solution for a segment that he was going after in North America without having to rewrite, write all that code. And it also gives him access to a new geography for his enterprise solution. So we think it really makes a lot of sense.

James Carbonara: Software solution for a segment that he was going after in North America without having to rewrite all that code and it also gives him access to a new geography for his enterprise solution. So we think it really makes a lot of sense.

Unknown Attendee: Thank you.

J.T. Fitzgerald: The next question is, can you please explain what you mean by the J curve with search acquisitions and how it works in practice? Yeah, I spoke to it a little bit in the in the prepared remarks. I think that, you know, the J curve would be just sort of the shape of a performance curve over time. And typically, in a search fund acquisition, You know, there's an there's an element of bringing in, upgrading talent, professionalizing their processes, investing in technology, to get the business in a position to grow. And that always has a negative impact on profitability in the first several quarters.

James Carbonara: Thank you. The next question is, can you please explain what you mean by the J-curve with search acquisitions and how it works in practice?

James Carbonara: Yeah, I spoke to it a little bit in the in the prepared remarks. I think that, you know, the J-curve would be just sort of the shape of a performance curve over time and typically in a search fund acquisition.

James Carbonara: There's an element of bringing in upgrading talent, professionalizing their processes, investing in technology to get to business in a position to grow.

James Carbonara: and that always has a negative impact on profitability in the first several quarters.

J.T. Fitzgerald: I'd also say that there's probably a bit of a J-curve on sort of the operator. And I'm trying to paint a picture. We've talked about this in the past. If you had, on the vertical axis, performance and on the horizontal axis, time, and you took two different graphs, you know, one with, you know, kind of an experienced operator that would sort of go up into the right at a modest slope. But if you have like a very high attribute, inexperienced operator, their performance, because they don't, you know, they're going to make mistakes and things, they will, it will lag the experienced operator for a period of time.

James Carbonara: I'd also say that there's probably a bit of a jaker on sort of the operator.

James Carbonara: and I'm trying to paint a picture. We've talked about this in the past if you had on the vertical axis performance and on the horizontal axis time and you took two different, two different.

James Carbonara: Graphs, you know, one with, you know, kind of an experienced operator that would sort of go up into the right at a modest slope.

James Carbonara: But if you have like a very high attribute, inexperienced operator [inaudible]

James Carbonara: that their performance because they don't, you know, they're going to make mistakes and things they will, it will lag the experienced operator for a period of time, but those two curves cross in my experience somewhere around two to three years.

J.T. Fitzgerald: But those two curves cross, in my experience, somewhere around two to three years. And the high attribute operator outperforms thereafter over time. And so it sort of, the search J curve is really two things. One is the impact on the company from investing in growth. And the other is the sort of experience curve of the operator. High Attribute Operator. And so what that all means is that, you know...

James Carbonara: and the high-attribute operator outperforms thereafter over time. And so the search jaker was really two things. One is the impact on the company from investing in

James Carbonara: in growth, and the other is the sort of experience curve of the operator.

High Attribute Operator

J.T. Fitzgerald: It requires patience before value creation is evident. So we're certainly seeing that at DDI and had that at Ravix with SNS, all of our businesses, Image Solutions, as well as probably, you know, in the early stages of its J-Curve. But, you know, we have confidence in the attributes of the operator and the investments they're making in future growth. Thank you.

And so what that all means is that, you know,

James Carbonara: It requires patience before value creation is evident. So we're certainly seeing that at DDI and

James Carbonara: and had that at Ravenics with SNS, all of our businesses, image solutions as well as probably in the early stages of its jaker, but we have confidence in the attributes of the operator and the investments they're making in future growth.

J.T. Fitzgerald: The next question is, you mentioned a robust deal pipeline. Can you share more about what you're seeing with respect to search M&S? Yeah, look, we have three OIRs right now that are all at full stride, right? They've been doing it a long time. And so they, they are very good at building their M&A pipelines. And so we're really excited about where they are in their gestation period, if you will.

Speaker Change: Thank you. The next question is, you mentioned a robust deal pipeline, can you share more about what you are seeing with respect to search M&I?

Speaker Change: Yeah, look, we have three OIRs right now that are all at full stride, right? They've been doing it a long time and so they are very good at building their M&A pipelines and so we're really excited about where they are in there.

J.T. Fitzgerald: And then we also have a couple of platforms that are looking for bolt-ons, right? You know, I think Skilled Trades was formed specifically for doing transactions with a more experienced and high-attribute operator. We just did an acquisition within VMS and, you know, there are a couple, you know, you think about other businesses we own that have been operating for a while where that high-attribute entrepreneur has now got experience in a fragmented market. There are also lots of opportunities for tuck-in acquisitions there. So, yeah, we're very excited.

Speaker Change: sort of gestation period, if you will. And then we also have a couple of platforms that are looking for both ones, right? You know, I think skilled trades was forms.

Speaker Change: specifically for doing transactions with a more experienced and high-attribute operator.

We just did an acquisition within

VMS, and, you know, there are a couple of you.

Speaker Change: You think about other businesses we own that have been operating for a while where that high attribute entrepreneur has now got experience in a fragmented market. There are also lots of opportunities for tuck-in acquisitions there. So yeah, we're very excited.

J.T. Fitzgerald: Thank you. The next question states, Can you speak to the reasoning for the owner of Bud's staying on as president for a one year transition period? Could we see that replicated past owner staying on for a year as president with future acquisitions? Yeah, I would say in search search, that's, that's very typical and actually desirable.

Speaker Change: Thank you. The next question states, can you speak to the reasoning for the owner of Buds staying on as president for a one year transition period? Could we see that replicated past owner staying on for a year as president with future acquisitions?

Speaker Change: Yeah, I would say in sort of service, that's very typical and actually desirable, you know, if you think about kind of the analogy of

J.T. Fitzgerald: If you think about the analogy of I have a horse racing analogy since we just had the Kentucky Derby. The industry is the track, the business is the horse, and the entrepreneur is the jockey. You know, it's really helpful to have someone riding alongside that jockey for their first sort of lap around the track. And so that transition period, you know, transitioning customer relationships, the transfer of all of that institutional knowledge in that organization, very valuable. So we're really grateful when owners want to hand over their baby, their legacy to a young entrepreneur and work with them over a long transition period.

Speaker Change: kind of a horse racing analogy since we just had the Kentucky Dairy. The industry is the track.

Speaker Change: The business is the horse and the entrepreneurs, the jockey. You know, it's really helpful to have someone riding alongside that jockey for their first sort of lap around the track. And so that transition period, you know, transitioning customer relationships.

Speaker Change: The transfer of all of that institutional knowledge in that organization, very valuable. So we're really grateful when owners want to hand over their baby, their legacy to a young entrepreneur and work with them over a long transition period. It's just really a win-win.

J.T. Fitzgerald: It's just really a win-win. So yes, I would hope that you would see that on future. Terrific.

Speaker Change: So yes, I would, I would hope that you would see that on future acquisitions

J.T. Fitzgerald: And the last question we have is with vertical market solutions and now skilled trades, you have a couple of platforms. Are there any other industries you might target for platforms? Yeah, so it's an interesting question. It's a good question.

Speaker Change: Terrific. And the last question we have is with vertical market solutions and now skilled trades. You have a couple of platforms. Are there any other industries you might target for platforms?

Yeah, so it's an interesting question with you. It's a good question.

J.T. Fitzgerald: you know, what is a platform for, you know, for us, we sort of evaluate different industries, and we have like an internal game board, you know, we think game selection is very important. And we we sort of bifurcate our game board into two different apps and sort of taxonomies of industries. One is power law and those are high organic growth businesses. And the other is rule of 10 which are maybe lower organic growth industry. of recurring revenue and very fragmented. And so the rule of 10 type industries would be places where we would think would make attractive platforms where.

Speaker Change: So, you know, what is a platform for, you know, for us, we sort of evaluate different industries and we have like an internal game board, you know, we think game selection is very important and we sort of bifurcate our game board into two different Athens sort of...

Speaker Change: Types, taxonomies of industries. One is power law and those are like high organic growth businesses. And the other is as rule of 10 which are maybe lower organic growth industry.

J.T. Fitzgerald: most of the growth might come from acquisition, inorganic growth. And so there are a lot of interesting industries that could be compelling places to build a platform, you know. Some that come to mind, you know, insurance, brokerage, wealth management, RIA. Accounting Services. We sort of own a platform there already, we don't call it that. And the key there is that, you know, it's got to be a great industry that would support growth via acquisition, but also operator fit, right, that it's got to be an industry where one of our OARs is really keenly interested in spending their life.

Speaker Change: Most of the growth might come from acquisition in organic growth. And so there are a lot of interesting industries that could be compelling places to build a platform. You know what?

Speaker Change: It's time to come to mind, you know, insurance brokerage, wealth management RIA.

Accounting Services. We sort of own the platform there already, whether we'll call it that.

Speaker Change: And the key there is that it's got to be a great industry that would support growth via acquisition, but also operator fit, right, that it's got to be an industry where one of our OARs is really keenly interested in spending their life.

Unknown Attendee: Excellent.

Operator: Thank you, JT. And Paul, that was the last question that we had coming in on email.

James Carbonara: Excellent. Thank you, JT, and Paul, that was the last question that we had coming in on email. I'll throw it back to you to close up call.

Operator: I'll throw it back to you to close out the call. Thank you and there were no other questions from the lines either and that does conclude today's conference and you may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Thank you, and there were no other questions from the lines either, and that does conclude today's conference and you may disconnect your lines at this time. Thank you for your participation.