Kingsway Financial Services Inc. (KFS) Earnings

Management highlights

### Core Business Model & Positioning - Kingsway is the only U.S. public company using the scaled search fund model to acquire and operate a diversified portfolio of asset-light, profitable, recurring revenue services businesses, with a goal of compounding long-term per-share shareholder value. - The company benefits from significant existing tax assets that boost returns, operating within a tax-efficient public company framework. ### Q2 2026 Operating Performance - This quarter was the strongest operating performance during CEO J.T. Fitzgerald's tenure, exceeding internal expectations, with broad-based strength across KSX, particularly from Ravix and SPI. - IWS delivered consistent solid growth and cash flow; PennPWI exceeded internal expectations, showing tangible progress toward its 2026 profitable growth goal. - Roundhouse and Kingsway Skilled Trades delivered flat QoQ adjusted EBITDA: Roundhouse was impacted by timing of a large shipment that deferred ~$200,000-$300,000 revenue to Q3, but continues to win new customers. Kingsway Skilled Trades saw strong results from Bud's Plumbing and improvement at AAA, but recorded a low six-figure write-down tied to a legacy Southside construction project that will wrap up imminently. - DDI is in a 2026 transition year, with heavy investment in a second control center, service improvements, and sales expansion. This has built a record customer pipeline, though revenue growth will lag near-term sales investment. - SNS (nurse staffing) has faced post-COVID industry headwinds; former CEO Charles Mokuwalu stepped down in May, and new leadership under Paul Vidal has brought improved operating discipline. The industry appears to be stabilizing, and management is cautiously optimistic SNS is turning a corner. ### Q2 2026 Strategic Updates - Completed the $8 million sale of Trinity Warranty Solutions (9.2x 2025 adjusted EBITDA) via management buyout, with $5 million paid upfront and $3 million deferred. Proceeds are available for redeployment into KSX. - Appointed Coulter Hansen as President of Kingsway Skilled Trades, who has already demonstrated a commitment to operational excellence. - Hosted a well-attended Investor Day at the New York Stock Exchange, and formally changed the company name to Kingsway Corporation with ticker KWY, approved by 99.7% of shareholders. - Added Fletcher Vine as a new Operator in Residence, with deep private sector and military experience, who will search for an asset-light, tech-enabled services acquisition with recurring revenue. - Image Solutions (a KSX portfolio company) closed the acquisition of Romeo Computer Company (RCC), a Michigan-based managed IT and cybersecurity firm, effective August 1, 2026. RCC generated $2.5 million pro forma revenue and $0.5 million pro forma adjusted EBITDA in the 12 months ending April 2026, has delivered double-digit organic growth, and expands Image Solutions' geographic footprint into the upper Midwest.

Guidance

- Management reaffirms the full-year 2026 target of 3 to 5 acquisitions. - Management reaffirms the target of double-digit organic growth for both the KSX and extended warranty segments. - LTM portfolio EBITDA is expected to see positive growth in the second half of 2026, driven by easier year-over-year comparisons after M&A activity earlier in the year. - Resolution of the Southside legacy construction project is expected to provide a financial tailwind for Kingsway Skilled Trades starting in Q3 2026. - DDI is expected to accelerate growth starting in the next several quarters as its sales investment converts to new customer revenue.

Segment performance

1. Kingsway Search Accelerator (KSX): Q2 2026 revenue was $22.3 million, representing a 68.3% year-over-year increase from $13.3 million in Q2 2025. Adjusted EBITDA hit a quarterly record of $4.3 million, a 77.9% year-over-year increase from $2.4 million, and has more than tripled over the past eight quarters. KSX contributed 56.6% of total consolidated Q2 2026 revenue. 2. Extended Warranty: Q2 2026 reported revenue was $17.1 million, a 3.1% year-over-year decrease from $17.6 million; pro forma for the sale of Trinity Warranty Solutions, revenue increased 6.5% year-over-year from $15.1 million to $16.1 million. Adjusted EBITDA was $1.1 million, up from $600,000 year-over-year; pro forma for the Trinity sale, adjusted EBITDA was $1 million, up from $300,000 year-over-year. Lender-defined modified cash adjusted EBITDA for the segment was $2.9 million in Q2. The segment contributed 43.4% of total consolidated Q2 2026 revenue. Consolidated Q2 2026 results: Total revenue increased 27.6% year-over-year to $39.4 million, consolidated adjusted EBITDA was $5.2 million (up from $1.7 million year-over-year), net income was $200,000 (compared to a $3.2 million net loss year-over-year), and total portfolio EBITDA (KSX adjusted EBITDA plus extended warranty modified cash adjusted EBITDA) hit a new quarterly record of $7.2 million. LTM portfolio EBITDA as of June 30, 2026, is $22 to $23 million, stable after net M&A adjustments.

Risks & headwinds

- Forward-looking results are inherently uncertain, and actual outcomes may differ materially from guidance due to the risk factors disclosed in Kingsway's SEC filings (10-K, 10-Q, 8-K). - Three operating subsidiaries representing under 10% of LTM portfolio EBITDA were out of financial covenant compliance during the quarter. Waivers are obtained or in process for all violations; the loans are non-recourse to Kingsway and other subsidiaries, and do not trigger cross-defaults, with management expecting operational improvements to bring the businesses back into compliance over time. - The search fund acquisition space has grown more competitive, with a higher rate of acquisition failure for individual traditional searchers. - SNS has faced an extended post-COVID industry downturn, though conditions are beginning to stabilize.

Analyst Q&A

• Q: Can you share more details on the RCC acquisition, including how it was sourced and why it fits Image Solutions? /

  A: RCC is a high-quality small business with over 80% recurring revenue, strong margins, and organic growth that outpaces the IT managed services industry. It had a retirement-motivated seller and was acquired at an attractive multiple, standing on its own merits. It aligns with Image Solutions' inorganic growth strategy, which was planned from the original investment: Image Solutions has stabilized operations, delevered, and earned management confidence to pursue tuck-ins to expand geographic reach. The deal was sourced through a standard broker channel, with Image Solutions emerging as the preferred buyer due to its strategic fit and alignment with the seller's goals.

• Q: How many active Argo search investments remain, and can we expect future cash distributions from these holdings? /

  A: There are three significant active Argo search investments remaining. The $1.1 million distribution received in Q2 came from two of these holdings, and Kingsway still retains its equity stakes in all active investments. Additional future distributions are expected, either through regular dividends or eventual monetization events.

• Q: Is the current $22 to $23 million LTM portfolio EBITDA range a floor that will grow from here? /

  A: Most acquired businesses (Roundhouse, AAA, Southside) are now fully reflected in the reported figures, with only minor remaining integration items to be finalized over the next few months. Management confirms the range is a fair baseline that should grow going forward.

• Q: With growing competition in search fund acquisitions, are you seeing upward pressure on deal multiples, and how does Kingsway's platform compare to traditional standalone search? /

  A: Competition has increased, and the failure rate for traditional searchers to close an acquisition has risen, but Kingsway has not seen this push up the multiples it pays for acquisitions. Kingsway's platform gives its operators-in-residence a major advantage: it provides an active sourcing engine, pre-built operational infrastructure, and pre-vetted industry targets, which materially improves the probability of closing a successful acquisition. As a result, applicant interest in joining Kingsway has grown, and the company's acquisition pipeline is more active than ever.