Kingsway Financial Services Inc. Q2 FY2025 earnings call

• Announced a private placement of common shares (PIPE transaction) with 5 institutional investors, raising $15.7 million.
• Increased target range for KSX acquisitions from 2 to 3 per year to 3 to 5 per year.
• Completed 3 acquisitions: Roundhouse Electric & Equipment Co. on July 1, AAA Flexible Pipe Cleaning Corp on August 1, and The HR Team on August 1.
• KSX platform is ready to scale after years of investment.
• Recorded $600,000 expense related to a settlement agreement with Aegis Security Insurance, with reimbursement obligations ending on June 30, 2025.

KSX segment: Revenue increased by 42.1% to $13.3 million in Q2 2025 from $9.3 million in Q2 2024. Adjusted EBITDA increased by 31% to $2.4 million compared to $1.8 million in the year-ago quarter. Extended Warranty segment: Revenue increased by 3.1% to $17.6 million in Q2 2025 from $17.1 million in the prior year period. Adjusted EBITDA was $600,000, down from $1.6 million in the prior year quarter. Trailing 12-month adjusted run rate EBITDA for the businesses owned as of quarter end was approximately $22 million to $23 million, including recent acquisitions.

• Increased acquisition target range for KSX acquisitions from 2-3 per year to 3-5 per year.
• Funds from the PIPE, operating cash flow, and other non-dilutive sources provide financial resources for scaling and achieving multiyear growth ambitions.
• KSX platform is prepared to accelerate growth.

• Legacy legal matter settlement expense of $600,000 recorded in Q2, but reimbursement obligations ended on June 30, 2025.
• Actual results could materially differ from forward-looking statements due to risks and uncertainties detailed in the company's annual report and SEC filings.

Q: With the run rate EBITDA of $22 million to $23 million, was that as of quarter end and did it include the 3 new acquisitions?

A: No, it includes as of quarter end for previously owned businesses and is inclusive of recent acquisitions.

Q: Should we expect Kingsway to be done with transactions for the rest of 2025?

A: No, not a good expectation as they have active Operators-in-Residence and will continue to look for opportunities.

Q: Do you expect the number of Operators-in-Residence to increase?

A: Yes, expect to increase back to normal 4 to 5 and have a great pipeline of talent.

Q: What have you learned between the first acquisition and the recent ones?

A: Tightened focus on revenue quality with higher standard of recurring revenue, and gained comfort in certain verticals like skilled trades.

Q: What have you learned from first to most recent Operators-in-Residence hires?

A: Look for bright, curious, humble, honest, entrepreneurial folks with a demonstrated will to win, and will continue to screen based on criteria.