KINGSWAY FINANCIAL SERVICES INC Q1 FY2025 earnings call

• Completed acquisition of Bud's Plumbing in March, part of Kingsway Skilled Trades, funded with cash on hand and a $1.25 million seller note; adds ~$800k annual adjusted EBITDA to KSX.
• SPI Software acquired Viewpoint, a leading cloud-native timeshare software provider, adding over $1M unaudited ARR and ~$200k unaudited EBITDA to KSX; combined SPI and Viewpoint have ARR approaching $5M, double-digit EBITDA margins, and rule of 40 status.
• Appointed two new independent directors to the board; appointed Robbie Humble as president and CEO of PWI and Penn.
• In KSX, Revix and C Suite had small YOY revenue decline but small YOY adjusted EBITDA increase; SNS revenue grew 7.5% with improving momentum; DDI revenue up 10.9% but adjusted EBITDA slightly down due to investment in talent/infrastructure.
• Extended Warranty: IWS had strong cash sales but adjusted EBITDA down; PWI and Penn had revenue and adjusted EBITDA down but modified cash EBITDA up; Trinity had revenue up but outweighed by higher expenses.

KSX Segment: Revenue was $11.7 million in Q1 2025, up 23.3% compared to $9.5 million in Q1 2024. Adjusted EBITDA for KSX was $1.9 million, an increase of 23.3% year over year. The acquisition of Bud's Plumbing contributes approximately $800,000 of annual adjusted EBITDA on a run-rate basis. The Viewpoint acquisition adds over $1 million of unaudited annual recurring revenue and approximately $200,000 of unaudited EBITDA to the KSX segment on a run-rate basis. Extended Warranty Segment: First-quarter revenue was essentially flat at $16.7 million compared to Q1 2024. Extended warranty adjusted EBITDA for Q1 2025 was $800,000, as compared to $1.4 million in the year-ago quarter. Cash sales increased 3.7% year over year in Q1 and were up 9.3% sequentially from year-end.

• Trailing twelve-month adjusted run-rate EBITDA for current portfolio is approximately $18 million to $19 million (not forward-looking).
• Confident in KSX growth path with J curve potential for businesses like SNS and Image Solutions; extended warranty showing signs of recovery with cash sales growth and modified cash EBITDA improvement.
• Deal pipeline is robust with three OYRs at full stride, platforms looking for bolt-ons, and interest in various industries like insurance brokerage and wealth management.

Q: Could you please provide any color on how the Viewpoint acquisition came about and why it makes sense strategically?

A: It was sourced by Drew at SPI, who developed a relationship with Viewpoint's former owners. Strategically, SPI is hosted/on-prem software for enterprise customers in NA, while Viewpoint is cloud-native with smaller customers in APAC/Australia; combination expands SPI's product, customer profile, and geography.

Q: Can you explain what you mean by the J curve with search acquisitions and how it works in practice?

A: The J curve is the performance curve where investing in growth (hiring talent, building infrastructure) initially impacts profitability negatively, but then growth accelerates; applies to businesses like DDI, Revix, SNS where operator investments lead to future growth.

Q: Can you share more about what you are seeing with respect to Search M&A?

A: Have three OYRs at full stride building M&A pipelines, platforms looking for bolt-ons (e.g., Skilled Trades, VMS, Cub Meal), and opportunities for tuck-in acquisitions in fragmented markets.

Q: 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 years president with future acquisitions?

A: Typical in search, desirable as it helps transfer institutional knowledge; likely to be replicated in future acquisitions as it's a win-win for transitioning knowledge and integrating the business.

Q: Are there any other industries you might target for platforms?

A: Industries like insurance brokerage, wealth management RIA, accounting services; must be great industries supporting growth via acquisition and have operator fit.