- Earnings call transcript Q3 2022

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Operator

Good day and welcome to Kingsway Third Quarter 2022 Earnings Call. At this time, all participants have been placed in a listen-only mode and the floor will be open for question-and-comments after the presentation.

If you are listeners in the webcast you will need to dial-in to the number listed in the press release to ask a question or email the address in the press release. With me on the call are J.T. Fitzgerald, Chief Executive Officer and Kent Hansen, Chief Financial Officer.

want forward-looking everyone statements. I call today's begin, contain may we to that remind conference Before

outlook. trends Forward-looking including contemplated margins, business expected include by revenue, results statements statements operating expenses regarding those forward-looking and from materially differ could the statements. future, Actual those or future

non-GAAP Please too, on cause company's the to risk or Exchange well XX-K well the discussion the utilizes implied Form available as in form For call could forward-looking such A numbers annual analyze factors differ subsequent the to press and the with statements periodic most on company's from of with that and GAAP as of risks comparable to that results of in to that note see SEC. numbers time Securities our such detailed as the in non-GAAP the in from recent report filings which please performance. management the time may reports Commission. in is uncertainties today's actual those measures reports contained reconciliation most files use include another our expressed the company fields release, as XX-Q

Fitzgerald, like the over I'd CEO proceed. call Now please of to turn J.T. J.T. Kingsway. to

John Fitzgerald

great years. during be expect so and a a on Thank quarter our subsequent our will many like on the a robust I'd engaging of conference about. It's to quick financial everyone quarter answer going feature a our to call. I question these focus you, activity quarter, of operator. to and a recap talk what be move quarterly and had will then We lot reporting session. XXXX permanent in there Good lot hope aim of Kingsway services forward. This first to and and end, QX I day welcome to call is calls quarterly our Today, make

progress we past and I reiterated for stated our have were of our organizational third the create headway goals. the operating strength shareholders. each of making priorities. are letters, the several value highlight objective. quarter to is One priorities strategic of allocation long In this the company. shareholder three we've advancing pillars the In the made our a towards strategic term on focus key capital There results for Our to these months model annual my on priority significant

aim portfolio we of operating flow our to grow cash positive companies. First,

in to the During million. million cash sold of proceeds Kingsway for quarter we net $XX.X PWSC $XX.X with

to of it may redeploy to to this great portfolio was well pursuit While partners we later of acquiring companies, financial We price. of allocation $X.X We end, capital Subsequent exercise. reducing million. that businesses, debt, our an in contradictory a a our great a feel quarter as the seem prudent asset other on. CSuite now growing talk great little capital will we in cash acquired we can all a which our goal as nice for for transaction sold

order to its run in his be will recurring first took we to operating acquisition CSuite CSuite in for Timi President have Under in his CEO. achieving accelerator accrued. some part the its non-GAAP than and nearly targets, entrepreneurial is that XX% of million partners. a revenue, KSX capital CSuite EBITDA and Search adjusted Kingsway the The the more believe $X.X management by recapitalize recoup in successful as will financial we firm is Okah be search the and related of CSuite loyal growing is of loan our to which the program However, in services fits now business and to acquisition framework this out Manhattan $X near than demands managers. criteria acquisition a talented United leadership able acquisition reportable paid. base. backing program our the business completed low our Beach, second the more our of a with and throughout Ravix its impeccable million the has Kingsway young working as California segment. been Xcelerator cash as began Ravix Timi Ravix generating in such customer we growing national under acquisitions Based with Xcelerators the earn-out financial year, income for States. industry Searcher providing highly through executive reputation leadership, future a gross and financial further in and companies profit we in

scope to complementary highly for are and CSuite go-to-market services stop the of each clients. shop can these offerings entities Ravix broaden one services as and CSuite's of Importantly, Ravix can offer. a

the unaudited non-GAAP adjusted For EBITDA, GAAP XXXX, unaudited before of XXX,XXX XX, had unaudited an million to accretive July of and CSuite $X.X of income taxes months XX revenue, ended it $X.X income U.S. million Kingsway. immediately making

to is structure. our our improve Another of pillar capital allocation focus capital

sheet strengthen delevering. continue our through to We balance

interest and our into is of option sale of of would of debt that of as to in it, of interest meaningful of the our first for $X.X allocation give to million outstanding and accrued at of XXXX debt. to million to repurchase to the amounts substantial of highly our for subsequently at Due Portfolio and August a of August netted in monetize TruPs portfolio generated XX% record we includes pillar internal investments our repurchase capital under our quarter discount the one this September, approximately of This interest the in agreement in progress sale to significant purchase company. we a the have the as announced view statements. principal final of X. investments deferred the is strategic we in accretive passive fully the The in option the option of assets. legacy Flower debt TruPs represents and current call principal We through to will excess or business. XXXX million, this and previously cash towards to properties, investment, $XX.X financial we financial nine $X.X the non-strategic quarter outstanding debt made XX%. and have of described outstanding September an non agreements a reporting the is as five then subordinated investment transaction that of XXX% core capital. few preferred a trust to our holders return proceeds to Kingsway rates, lag fourth such our rate We yield which portion shareholders. principal be total of which Through estimate XXXX, six redeploy the our we still deferred eliminating non us As of currently XX% XXX% the for our a and "TruPs" The TruPs XX.XX% in of Those focus interest statements. agreements our repurchase which instruments, By entering months

As our we expect shareholders. to investments these price monetize a we be at beneficial move forward, to that would

hospital viewed approximately September to we've which segment yard real our and totaled leased of net of XXXX. part of losses, million VA our Additionally are which holdings, always operating our $XXX vehicles monetize as rail estate XX, some as

shareholders. confusion delevering debt our balance equity valuation. created about in this on at would balance our real world associated to balance associated estate generate sheet understand. expect assets to no longer turn focused debt is non attracting, $XXX.X on and that with Debt to which work sheet. balance believe sheet these on and has we able along million, while of sell which finally, our cash able holdings, the real assets talent. class be sheet these is assets, will we these XX, And September non-recourse the carried company If stated easier making our or XX% were with priority our an to developing of has totaled the estate to on total If our assets been sell retaining some We XXXX. allow that as holdings, we these we're We strategies significantly strategic continue valuations be sell would would were that we overhang non-recourse with to debt to us another highly our to beneficial it our

During Drew at Kingsway served Harvard Chevron. Manager to and of prior School Point Search the is Business a the program. graduate Richard quarter as a Kingsway to Drew we welcomed West Xcelerator and

we're of million have to actively of targeting two acquisition range non-GAAP addition of career revenue criteria. that Businesses talented a our capital acquisitions Ideally, piece. million professionals for base. that Kent recurring that sticky streams turn very generate I'll $X we customer financial view the to adjusted $X.X searching will are now early three results. are defined have set With year light, in that Kent? Drew, our currently EBITDA targets annualized a for of and fit new the per

Kent Hansen

JT. you Thank

adjusted operating non-GAAP we metrics; focus the and net key on income, EBITDA. non-GAAP management net following income As adjusted income,

to complexity investments economic know you in focus Therefore, use our financial non-GAAP business. create may legacy statements. As our metrics on drivers we help of that the debt and these

considered hold credit purposes in taking TruPs Our net mark year loss on the transaction of third accounting quarter and quarter. net million sale. adjusted income options, $XX.X income loss options was are in and the was fair third expenses $XX.X both value to ago on XXXX gain instruments our change unrealized first value in of of This And our required an of third the certain concluded taxes. under for million is to compared costs value. million and information as the in restricted operations $X.X fair new discontinued We taxes finally, of the $X.X change million million. quarter loss fair from When $X.X quarter attributable real we million Mendota quarter TruPs in Any to are indemnities on the and the recorded on net currently of not third the a on as for million of sheet A XXXX a into June sheet. we $XXX,XXX that fair non-GAAP Based the we our operating debt million after the Each second we on gain million net are Non-GAAP that impacting $X.X following; our cash quarter, XXXX. be XXXX, were income the derivative investments. sale is operations. disposal required Significant as in a indemnity late of held the provided These A Also related net be maximum quarter. our that provided amount to instruments included sold the claims under to of at payments paid the million the asset of $XX.X and the of on to ago probable. XX, items are the is quarter. fair in of PWSC estate for which compares update specific $X.X value balance these account debt. we year no arising change adjusted quarter the outstanding was during quarter, statement we $X.X for due in second and cash value $XX.X risk hold until to in value indemnity net balance loss

September JT real we estate As our mentioned, in sold Portfolio. underlying Flower the

received of the third Flower we an the fourth we quarter and one will quarter unrealized This results the in the the cash recorded While realized gain quarter. recorded report as given a in gain we be in quarter. lag,

to extended operating was $X.X quarter, the million warranty million compared million For in second third the in our XXXX. and year the prior in quarter $X.X for income quarter combined KSX of $X.X

year, sold we the pro $X.X which prior quarter XXXX. million PWSC, in compared July in second of the results forma to the this $XXX,XXX operating quarter $X.X of for million income and year the in third excluding was However,

in to and volume of revenue its compared the credit charge XXXX ago service continues extended arising agreements contracts one IWS, were sold. well quarter finalization vehicle $X.X was reminder, segment results strong grow of XX.X% union accounting. relationships Forma through our $X $X.X of adjusted purchase from third Pro million million, segment impacted for its of million or quarter. X.X% revenue year by to our partners, of a non-GAAP or to our our As perform our EBITDA subsidiaries continues segment its PWI warranty a with

which IWS's indicator activity cash over an sales, about by year. is current the grew X% the quarter, prior For of

impacted be new vehicle other chain to issues within used the the service Geminus continue industry. supply Our agreements subsidiaries, PWI and and automobile by

go-to-market He Brian down prior Geminus from of cash has Geminus sales we only year. PWI. to their office businesses. X% is combining discipline combined tap our both Earlier President oversee brought about and expense He year, However, the to this Cosgrove, functions sales the both strategies. actively on and working overhauling already is and back were

XX.X% we which and just excited PWI. a revenue We XX, of Non-GAAP organically reminder Brian's in from KSX, a Ravix both XXXX. Geminus business about in are the $XXX,XXX as of the utmost to and the already of grow the or was coming confidence XXXX leadership, have in Timi business seen is quarter EBITDA for and September as referrals third CSuite. adjusted segment continues future for we've

generated Now increase the sale $XX.X The quarter for compared the At prior of sheet. end cash a million businesses the an to in look of loans in Clinic longer no VA XXXX debt. million Lafayette, increase to at our This in million million Kingsway. mortgage equivalents as third sold CMC secured to cash QX in nonstrategic in million more debt outstanding our ended our debt XX, XX, year a the and those service compared and real is holdings. $X three million XX, XXXX is as companies by million Flower and from and that separately We with note relates $XX.X either And we December $XXX.X Louisiana. our largely with debt by $XXX $XX.X XXXX, X/XX/'XX driven to balance financials. payable additional bad where yard million notes had at million various XXXX. and The cash million, the of Texas. $XXX.X will Bank This that million at at loans, and be debt subordinated X/XX/XX totaled December proceeds real mortgage, XX, respectively. $XXX.X to Notes $XX mortgage end. the sufficient with $XX.X cash our by September and outstanding relate holdings $XXX.X December was which Portfolio estate nearly September was the of beginning the bank LA debt. We and and the estate warranty quarter X/XX/XX of PWSC as The the is categories; extended or to which were our Ravix of and relates rail is view non-recourse XXXX of relates September, XX, we payable, and flows than Flower respectively.

as XX, that principal and options of million of for the December and $XX.X subordinated was debt our XX, million This respectively. we Finally, to have TruPs which $XX the September XXXX also to sheet XXXX, XX. is sheet XX% at on and continue balance the fair accrue of million excludes our on interest. debt This carried deferred is of value $XX.X our balance and as this interest deferred we September repurchase

the and all $XXX to and successfully interest income adjusted would EBITDA able million reduce warranty XX% XX, in operating the JT be our $XX.X strategies by have As If monetize assets and we KSX outstanding by September able approximately or XXXX repurchase that of our our our debt payable, deferred to segments. pursuing million, these, retaining by mentioned, to extended the we of while significant majority execute back subordinated notes then we to a debt. are we were remaining options

compared XXXX impacted first KSX company the shown million for our comparable year of in cash comparison, factoring $X.X With questions. will open XXXX strong nine turn monetization for Finally, financing the of CMC by cash outflow a businesses. the the to warranty call the was the after of to million this is related operations inflow extended was into I as XXXX used for corresponding period been has operating of result call in operator in a to the cash $X to Even back activities. that, the a months lease and operations $XX.X but period. stream, XXXX from The million the

Operator

have [Operator do questioners. Instructions]. We

David from LLC. Our first from Partners, Capital Patinkin comes Adam

Adam Patinkin

Hi, JT how are today? Kent, you and

John Fitzgerald

Adam. Hey,

Kent Hansen

Great, you. Adam. Thank

Adam Patinkin

you. Thank Great.

Adam Patinkin

all you the I with progress of Well, to Kingsway, business. especially the and on want Outstanding. first, congratulate guys in the simplification

And want congratulate on this call. first congratulating a you, is earnings absolutely know to so lot But, your all the congratulate progress think I by I off right on you far. I you go. I also And strategy. start there's the I to more guys

proactive great is myself, communicating you're appreciated. I and like sharing the f the and really Kingsway story that transparency shareholders think the it's for

just wanted So thanking guys for that. by start I to off you

Kent Hansen

Adam. Thanks,

John Fitzgerald

Yes, and like were the were roles expect say bet. the Look, I same. to if Adam. I manager would I Thanks, you you the was the and shareholder, reversed,

forum our questions having think ask and I together supportive come So to to a is for wonderful consistent really important. shareholders management

Adam Patinkin

great. that's you Yes, And for I XXX%. thank And it. agree,

So let's see.

them right. if So three one at that's questions I ask. have to that time to going wanted ask all And I'm a I

So, on my is acquisition question your strategy. business first

these investors, do common? warranty So when businesses. other that in is, the You've have question I I the speak first company with what businesses prospective about or shareholders received got oftentimes

You've got already would you're it's And they are the in my businesses sharing have mind did together? acquire So, Maybe business acquired? and to include businesses maybe what the between characteristics that first which commonalities Kingsway's go seeking you in the portfolio? to Why for? that approach you're what your deciding Ravix. question, what is are looking

John Fitzgerald

history. Maybe bit in unit in I there. industry, I I the to When the the warranty I anything Yes, economics attributes a sure, the had came of first of because came and I extended because liked absolutely. -- knew businesses, about experience and not little very the industry. But the extended unit warranty interested any or fundamental was Kingsway,

that Xcelerator of Kingsway about segment. that these letters I've to warranty it, we the we we're buying a the some those are within of and handful things. Search the And in in shareholder outlined businesses also the what liked of about came So past. kind came that's help ended liked opportunity Kingsway eventually with I and what extended out an build I up And to business acquiring, I to

than market, we we're by are $X billion sort growing, companies addressable First, that fragmented. GDP, think I and targets. areas fragmented, than of mean, lots large, competitive industries two mean, billion or niches, like lots potentially of greater from and of lots to a we greater at and times When acquisition that an sort hide, on of industry are and of focused by perspective, of

of industries, that So set then, for companies have looking within a and those we're attributes.

strong businesses capital. recurring for first capital we be tangible on of margin profile of what or of low at The predictably be which that sort sort all deemed of would of to saying revenue intensity, shorthand returns sort is high reoccurring high with and

looking meet the Search revenue, or we're base, also And so, in and the margin, concentration, customer done, attributes, sticky intensity. those growing warranty, if that large low you at customer low industries we've look segment businesses acquisitions Xcelerator and within but and high for no recurring capital

Adam Patinkin

And the great. helpful. sense And really that's businesses some fit why makes in in portfolio. these would that That's of of terms maybe all

So next is think to let's profitability. question, which how you Kingsway's move my about about

I $XX pro of I'm somewhere forma $XX getting plus acquisition, your warranty the Ravix high-teens million CSuite if into plus million. just the adjusted per So, take and year, kind millions from maybe EBITDA between

pro So $X.X you take EBITDA. the forma million of adjusted

You it's multiply million. four, $XX.X that by

to the your from with that million getting be there. Is making? CSuite that about $XX million Or to there's should and to general, do $XX for million in just growth EBITDA the adjustments add range right that you annualized number You opportunities of hopefully, think that on you're inorganic businesses? there further kind runway then I profitability And to basis. that how of are of $X.X operating think organic you And use? an between and

John Fitzgerald

Right. definitely. Yes,

sort we internal use. metric of that EBITDA So the

bullshit metric. EBITDA call people Some

case, We're depreciate businesses an to amortization. there's I think depreciation all not accounting. in asset. and In intensity. comes the -- there where purchase very It's capital A, is true. all little our of It wasting that's from some

is EBITDA think flow. cash good tax our case, cash very also after because our NOLS proxy In pre a of tax for I So flow.

a better we modified revenue added EBITDA where In for the businesses, it's And something as permitted think recognition different see a is it flow. to But revenue. EBITDA. economic for value we're a cash use proxy period deferred business there in disclose it, statements. you we in accepted internally financial is use because the GAAP. called cash it not from that warranty under would we our proxy a what little So than significant deviates rules And in

million. Adam, method holdings, X.XX for warranty XX-K exhibit the that under can total and quarter debt at end our CIBC our X times. I in loan $XX. senior is which outstanding CIBC agreement, find that ratio facility that an can believe filed our calculating as say, at And You our XXXX was Form was leverage the to what loan was senior under I agreement

think can you sort the does all So warranty. about do we of say. Ravix can not revenue. where are That's we deferred Right. on have I probably math, that's That's it. how

And EBITDA same internal be the works for will purposes. true of CSuite. so our GAAP And

Adam Patinkin

makes Got it. sense. That

I'm plus if from more math, doing the So or six call the million on plus bit a side CSuite. five warranty $XX that's little it than Ravix

cash be something to of and a flow, So Is if kind $XX for $XX or grow then suggested that it's maybe I'd higher I'm thinking able about million hopefully, proxy this little like than economic you'll million, there. fair? bit from it

John Fitzgerald

think I fair. Yes. that's

Adam Patinkin

last makes Great. maybe then, my here, And sense. That qualitative Okay. more a question is questions.

key find would the others? executing to partner have more to flywheel look where that little that leads feels businesses, businesses, you're for like what the you cash, and And do growing into you relative really Ravix, again, And faster. capital? like you're your operating in I you the little faster lot with talk building to get about more which deploy to you what profitability a it strategy that where you're on to you kind cash So opportunity of a the maybe key have the continue share that Can allows to a advantages runs metric are, you, allow operating of maybe generating your that, past; to to warranty competitive maybe maybe businesses. of operating add the your to attractive one the bit of it you allows these a wonderful continuing CSuite? transactions, is think and bit walk you transactions, through other the is, sellers at. flywheel of So, What

John Fitzgerald

Yes.

Okay.

two that into I'll parts. break So of kind

to can to And sort effect, is how size the here, opportunity on flywheel effect and the the out getting right continue a So capital? from we're is grow, of things I debt under we --what's set the we obviously, the TruPs focused flywheel there of now, as agree, and redeploy first The right. combination flow generate, but more the to, internal -- and right. of I auto they capital cash right? continue all the delevering need businesses that's that we to provide of of as And the and think own, that that, were speaking acquisitions, you flywheel grow the a that we to do we so the

just have largest in of lower large as Acquisition strategic a of what would a for are them And happen the if And think of They and So for you back middle nervous products, five often to about they a to commonly new actively I translate actively middle history small is program of And, EBITDA those Adam, very is needing reaching three comes Search, the business to founder to market it's owner buy to about hope into other fit. their or private acquisition an hand, buying of, criteria. the and then of acquisition of to three think what selling on at the we has more think differentiate And four sort generating little on acquirers that how lot do differ? we Right. where thinking that employees referred the can what not to players one have then value market, in their liquidity And might other a about not million fit do incumbent be companies So selling typically and in right operator. value business probably like operating That to to a continue Entrepreneurship kind great can what add of it's equity for for the now, strategic. you Kingsway any capital. team. organically businesses of characteristics perfect and still expect is and to probably I of tell, private to why back what that it's now their do would age looking to looks middle brand, are searching final so million Why grow of about that that. the part that differentiate? We is about of then universe $X the of fundamental time Or businesses, lot think to in for Xcelerator without retirement management a great retire, to competitive go successful that lower I'd we two a fear built. would successful. they who entrepreneurs founders asset lower wants ETA, range. think competing so the have that people a if that legacy, of in operators any made our can do their very return And the they're say Through time, sort $X.X market, management Search from kind equity scale reload owner like? we successful for in they're acquisitions. new more what's if we thing the made leery opportunities. founder-led market additional that think their our to has perspective, the and like And employees. And have. we we are with think to also those the They we a would acquisitions percentage And given like getting be businesses. a that we it equity, pretty, some a A be how team. private

ETA shaped businesses to is key where think, a solve lot uniquely liquidity management that's very and the succession. have, of problem I that which is So founder-led a

provide we, what's it even unique as and a call capital, I mean, of we And because I I we think often lower And that's a win and differentiate think I we provide capital, think at say to it things, process and auction of have really it successful. we we we So like because talent. solution. management two at price, succession can made compete that broadly. an ETA When those

confidence to I of company. specific level think of publicly of we are extra imprimatur backed with and sort bring traded Kingsway, an by our a entrepreneurs

And of a deal lot that a in so lends credibility just process.

Adam Patinkin

thank And leave I'll ask it let you. to I'll the Thank questions. guys. Great, next there. you folk

Kent Hansen

Thanks, Adam.

Operator

Freedom from next questioner Our Richard is Gatward Markets. Capital

Richard Gatward

guys. Hello,

Firstly, Adams three topics bring I number a to Adam touched questions actually, on wanted which that asked up. of

want of are those in of for term. the think terms things. grow will clarifying calls over enterprise your having thank So and absolutely showing helpful And to that long I I as ultimately very value these you is transparency the do you earnings reiterate the

So to that. see very glad

Just three couple of do you and have going that owners opportunities out with around Or have you? actually questions these business coming you Are you approaching proactively the highlighted are them? How guys are you small looking And to investment entrepreneurs at a or banks individual opportunities. you looking that opportunities? these Xcelerator. for

John Fitzgerald

right? answer approach. a sort so But guess -- both, of development Yes. mean, I the two quick pronged And is we yes. run I really business

And and mine use contacts level interest our search follow show of subscriptions a a up our target at So in with industry, outbound that and snail mail, for proprietary call. outbound has industries. And we industries campaign meet of our the we criteria. identified private in companies phone to run high that starts that emails entrepreneurs then, of criteria databases the companies those each to one a handful contacts,

we database we do accountants, try have private maybe an kind that make continue everything there's robust a investment that and a that with owner business management, a on opportunity they for in industry, and marketing wealth of of stay intermediaries, brokers of top in drip that effort if have contact whether a with direct But law processed situation. XXXX, from bankers XXXX an fits time consuming to radar firms to they're very campaign sort their to sale not or criteria. also engage our to a to non of way owners with in So

we ways. of it both kind So run

Richard Gatward

on couple of a just the And Okay. questions retirement.

key that's stating and sheet forward guys. Firstly, the [ph] success obvious. is the bleed for to going deleveraging mean, you balance think But I obvious. I

be So, I just want clear. to

cost the accurate? retired So props average of that effectively deferred on including $X, you six $X.XX is at have interest, an of five

John Fitzgerald

Generally accurate.

of Let kind me nitpick bit. just little just a maybe

the of as outstanding cumulative XX.XX%, TruPs deferred on and which We August to the is that deferred up at until sort X/XX. the retire for of on XX% have interest of balance sheet between series what debt five was options the showing and is principal six less our than slightly Xnd,

Richard Gatward

of debt Is terms in the that sheet Is is estate you've your there? of buyers something And engaged on for have sale What something executing in is Is the about? that assets, potential process? that real out? thinking process Okay. the you're a those? non-recourse balance with that the

John Fitzgerald

that our now maybe say guess, Yes. return we're on the right is working right. can, we to best all I I Richard, can strategies achieve

Richard Gatward

conference are guys call about understand growing out of are business see you it you a focused do I having engaging more to the you're your talking to and to results the And for first your you Alright. and you But fact first? first discussing pretty while, quite running with story guys your base. are on time mean, in that finally, that. narrow just position,I feel that and as investors, give Do Or a the the in guys story a in firm? I I focused priority really IR you think have the you terms getting that your you shareholder opportunity know the just talk that on business.

John Fitzgerald

about we I know now. Richard. We on little No. the bit or IR And James is a call firms. It's switched so ago. a month great this a recently question, talked

company calls I mean, the long the haul. you by we work, questions. Do to group Kingsway. quality And like expand shareholders doing where, of high the quarterly term, said, not understand so, at their at short both long term, point these the very focused want to calls, but are And for high to earnings in addition engaged. the it And now come really in great on with we quality, the

And our shareholder. process would what will, out in the of story we're if get a and so, campaign, a to tell we be developing high believe try to to you quality

Unidentified Analyst

Okay, very appreciate answers you on JT. I much. that. All Thank right. the

Kent Hansen

wanted Yes. clarify. Richard, I to just

Xnd, we the options and have debt expire that yet, until May haven't options We repurchase. any execute those repurchased time so to under

Richard Gatward

Okay, yes.

you. Okay, thank

Operator

Solberg Christian from Partners. comes Sun question next from Our Mountain

Christian Solberg

Ken, Hey, JT, hey, how are you?

John Fitzgerald

Christian great.

Kent Hansen

Thank you.

Christian Solberg

Excellent.

metric. your you churn different definitions, any for provide of to Churn businesses, businesses? for has question. look is it. to color the it? are a ways those many important various Are Obviously, at at able rough it First churn look really to on best levels way What

John Fitzgerald

Yes.

want recurring how on to you everyone things have leaky that it revenue for bucket recurring one a is listening, the buy do and business, not. else So focus is or you a of you when

lot. churn. publish about so there's lot don't And for definitions we a churn different a We because of it, think

And so, three look at we kind ways. it of

of that by first what's kind year that that in your revenue. just small of might customers as X% percentage a of started total the churn. a usually credit total kind kind lost customers through relation, of with. lose the basically XX have of they a the standing and sort customers just acquired. the is The year, customers, total which logo has you lost And is a union or any we we look number of And And from are you may as look one of kind Company exclusive like of credit year, like one. of IWS the that X% a result of And is walk of I'll long they a given like which next churn, level. that revenue customer, at mean customer company dollars they the lost the switch have, churn, contractual, we of year like individual But number sort gross at basically of that even at with like logo that at where lose this for year also percentage union, no you. both We -- revenue are though quickly relationships the real churn. kind thing, IWS, getting type they of

sure I you continuing walk relationships. -- stick you're like, of the just IWS, revenue revenue kind is percentage no which you of on as then that those from And kept net churn, they to prior revenue year growing customers at we gross look make And have will sort so are essentially churn. through your maintained to or and revenue their it. -- of then a the And

And revenue have of little bit negative different right. being net thing IWS, country. all like it's over and dealerships the growing they're so, X.X%, churn, of They hundreds we PWI at hundreds auto have a negative good and [ph], a story, PAN

relationships. around churn switching. always aren't logo are hop from Dealers their actually different different pretty product exclusive These high. so to is They And providers.

ones. And so But churn of still the XX%, smaller those XX%. churn in customers the they businesses logo are the is that a lot out

is on talking then I'm that same are of customers existing about business Logo small. they existing year. anywhere Their And other net which small about so actually from about basis, percent of The the high which very churn is gross churned has its customers, that gross XX%. a did level warranty they in the this our turns on revenue, revenue focus which their of sort PAN, zero. means are are some about we car X% less And of where Churn revenue. bit then kind the at metrics. doing basically net business. of side, Gross challenges churn customers. their last about teens to business eight customers warranty of just is is lose doing revenue churn market PWI And talked year. again, the And churn And its is net a used the little inventory. we with Trinity, with

So then revenue gross And churn to X.X% about by is revenue negative about net X.X%. X%. again, churn

this So customers year. are existing growing their

to So extended I and the of warranty. gross great of think with the These dynamics recurring power no speak profile to low those really attributes revenue net churn.

Christian Solberg

like breaking Ravix about for helpful. Thanks it really businesses That's down CSuite? and like great. How that. for That's

John Fitzgerald

Yes.

XX% revenue is churn logo churn. gross Their So X.X%. about about Ravix

So I year, that smaller. typically churn speaks logos to churn Ravix X%. this again, actually negative are And to is that revenue at then net out just guess the X.X% the

but we retained will dissect way dive to So the do that they the don't haven't CSuite, back. -- customers this I like able the are to growing. I report at that we full been deep

Christian Solberg

sounds a like Right, business. type well, of it similar

So, that will - definitely

John Fitzgerald

I would expect similar.

Christian Solberg

more ones. got two I've quick Excellent. Yes.

hurdle you do think to incremental how or you're is, invest your the internal rates about dollar about First thinking when cash. where

So want Xcelerator invest new share about that think in or How redeeming TruPS deal, rate? a if to the or you hurdle do in repurchases? the you in Search

John Fitzgerald

Yes.

we goal would internal XX% goal. XXx kind That goals sort of a it audacious capital all compounding think how type at XX think first this That's of going back thing. we some of be year of hurdle our I a we That's to the set So, for forecast. set way years, of internally, not informs a audacious of hairy, But per sort the big, about right. rate.

unlevered when hurdle. we're return about at XX% And capital. like we looking investments, so, invested And use think on I to an a

we of And leakage XX%, the so, a which quick just TruPS were we pay with and of a of And XX% it have the to business. times at also willing growing one then IRR we business to arrived more Search minimum LBO a then growth for buying flow an look the willing unlevered buying well. no cash that on a hit target Xcelerator, discount, within the when we businesses, for come willing repurchase would five right. sort to that would operating IRR kind percentage we and look be We at our don't not be we're tax, surprisingly, as to pay a calculated as XX% is math, ways pay target. how you're model through at And if

Christian Solberg

are model, in returns. Search that, talking hurdle, so because those we're levered And the Xcelerator XX%

John Fitzgerald

And want levered. to XX% at both I unlevered. equate to XX% that I a ought ways. look a it

Christian Solberg

did look earlier? And final business? one that Was the cash the Yes, How metric you PWSC buyer modified at here. great. EBITDA mentioned the in earnings of okay, that it

John Fitzgerald

coming we income for it $X.X see business $X.X what and it Yes. time to like on that kind at then of on, $XX.X over of expected the X.X, million the PWSC run juicy had you -- had thing, basis rate And still million of so statement, sold, we buyer credits of so million times then kind they come it which GAAP we us kind us annualized we around guys -- multiple. EBITDA sold then, probably also, gave we forma that. XX sold a EBITDA, trailing, through higher like, acquired, was pro for was come cash -- looks the TTM million, And right? that then $XX.X buyer The new modified about on, to already very then TTM X.X.

So, were I XX to paying times say that would thinking forward. about XX times they

Christian Solberg

in see multiples that with arena tick incredible. transactions environment? starting comparable you that them to That's remaining you this transactions seeing in private Are to Are high starting down?

John Fitzgerald

is evidence I and great going out and sorting I so hearing I'm yet. -- don't a -- on. there's tangible any would that what have

we're pause. for say looking have So deals in on reset or that to about there's assets still I there's the a some don't closed PWSC, out space, that to lot yet. high MGA be really know that movement said, like there quality things to maybe get going that would of deployed. like I be capital

still of out to part lot for capital dear leverage, looking of a a pricing and the it's of -- quality think it's function pretty are of And so, I but people, and going -- I be availability them. that the don't to leverage, still obviously, assets, of but, high there's

hope reset but at warranty we buy in yet. they we to some it to so opportunities that assets prices have good haven't would be I willing So pay, seen

Christian Solberg

helpful. it redeeming rational hopefully. But a sell TruPS. the potentially, proceeds was to put into and very And Very, Got like PWSC those decision seems it. it

call. and I'll yes, for great work putting thanks this jump together So back.

John Fitzgerald

amazing that Yes, it. test grow really entrepreneur, he guy our for with had to run that see to was thank. and young of and He out PWSC the business an was management Yes. case know we talented segment. sort We transition into Tyler. it Search a brought the Xcelerator were of first sad didn't He go. relationship we sort

three, interest. had was an in inbound rate. advantage so, Two, power motivations And then One, immediate pretty capital internal excess that of some we model. at returns hurdle of demonstrate were probably the our for aggressive And use threefold. the of take our

Operator

We [Indiscernible] from questions email. has now James turn who to

Unidentified Analyst

guys. Hey,

email. some on did have So in we coming questions

additional and acquisitions First looks time the between about you envision CSuite? for one Ravix two-part. you over do team? a synergies talk Can Ravix like And the

John Fitzgerald

Sure. Yes.

word, of first hate synergies, for rarely all, that So often I materialized. paid

in deal think But the I that with how that businesses. different. they're complementary with definitely we they're didn't start synergies So go into very mind. Maybe said,

you As to lot way support provides at most know, lower can't customers CFO or find interim are looking additional portfolio capital of permanent CFOs. bookkeeper. down services, Ravix a their accounting But fractional including the controller when of accounting, from levels HR And firms. all resource. often an predominantly Ravix companies a customer or and talent CFO And venture is CFO prospect for outsourced

placement. HR of other Ravix. out the of other to all work and equity CFO controller interim on at of CSuite private they companies And hand, and the CFO On offers down firms. refer And clients services are from lower level only level firms, portfolio CSuites competitors their accounting, often customers

offering verticals, each businesses is service comprehensive now that of combination provide venture industry capital sort one in of one and them complementary very private equity. of each a very the can So of their across two these

been to historical any to outside has staffing from be accounting refer to And in referring they that to opportunities CSuite's placement HR return, that level leakage then referred referral lower firms CFO the to other and so, will other CSuite. can Ravix. work used competitors come Ravix And likewise,

that's revenue and sort So sort and service of the of complimentary opportunity. product

businesses. will both On the running cost Timi be side,

it Ravix. part acquisition acquisitions the one model really James, think that was approach I think sort two synergies then, of was cost So eliminates redundancy, additional we standalone. And for a and I but don't if as

I So right? get that did

Unidentified Analyst

Yes. correct. That's

John Fitzgerald

Yes. Okay.

I don't have to any expect. view mean, timing. think on that's reasonable I we

order former can folks some look the And of really of bringing that after Timi have out, CSuite sure plan. business a a out, that job companies several potential into gets his of transition arms and around owner and good of to know family and to XXX acquisition executes months Kingsway first Timi making smoothly group and opportunities. here I think very north of I growth targets. inorganic do the is the we goes identified their year delevering other at Arthur,

often starvation. often thinking So of indigestion, my more But it's businesses about. they're not experience, certainly in die something than not

and prudent all. down That's through and patient. So be one you to took leave then there. get you got I'll it and the just that --

Unidentified Analyst

Ravix Great. this when The due Can how the next earn-out their have of achieved to acquisition. money question meet? release how has the And seller more press from earn-out is most your targets they is on to the works? provide mentioned what do color you

John Fitzgerald

Yes.

So it's I think different.

achieved I think it's important to and distinguish between accrued.

actually can of actually payment doesn't Two earn-out be well, portion achieved. there the was accelerated your timelines -- xcelerators. a So where one net

end first the the of payment at at The first and September, accelerated happened October. end $XXX,XXX of one paid of we the

to And so accrued but achieved. -- back coming just versus

million the gross liability. quarter, over through of a of the based accrued management's excess earn-out in years based $X.X in some hurdle the hurdle things and and projections like is closing. there's that, $X after excess multiplier hurdle the million the of delivers And and a million payout about about of have $X.X at We maximum three cumulative gross think a achievement the that. earn-out upon with it at third But a profit math the profit cap closing time the of that company and that was on

earn earn maximum answered point. of -- did paying not, million if payments. there be opportunity were intermediate if is one still next know think And the time, outsized XXXX. dates; what would one extra that at at captured payment I the but I whatever be one $XXX. able X.X the question? thread for October. if the projecting. there I said, is do sellers an any there. question accelerated have email I kind final $XXX,XXX So The And hurdle would or minus Like of excess you And was paid don't are October I we're lost excess were in in was they to growth accelerated in that they to paid two of whatever fully the James, the of the it an the next first in then it

Unidentified Analyst

It there. No. three-part was Yes. a

was it not the all. them Ravix company? next the and up CEO How was end one of Ravix the The hit standalone deal You first How with CEO. a says, Timi, sourced? search CSuite did

John Fitzgerald

with in and by fit into progress searcher evident find and Charles sourced another Mokuolu, handled found relationship we have. introduced for And opportunity, and Arthur Charles pretty a to the Arthur, the last be shareholder relationship speaks Xcelerator opportunities to that I it closing that platform, opportunity I digging Xcelerator this hit closing already a great CSuite, Search became Search that would year, day Timi model Arthur working the with really think the companies now question. at continue who Charles for actually to of and developed And towards it's interesting together. an seller. Ravix. new the maybe and portfolio on this Timi, That's and post after power we think the the over off to Yes,

was It's interesting one an but of sourced So, originally it entrepreneurs. our through other question. search

Unidentified Analyst

to in existing entrepreneurs? think as the next do Right. search new make CEOs Timi the like continue And Kingsway is, will additional one you to Ravix at grows, potential acquisitions addition the

John Fitzgerald

think I be of broadly, that. do has follow that each mean, we More platform right, return. for on I one Ravix at is grow thesis, acquisitions that Yes. Xcelerator of obviously, be Again, Search to the if one tuck-ins. can under growth evidence its the investment the a to of acquisitions high that business potential have capital the original would high it of rates use it's all to really a of part the

to we lot to of a allocate business But thesis its would think continue standpoint, from I inorganic we there's acquisitions. to capital that these maximize that generally, capital to a organic often growth. growth would allocators

that even Like now And have and that an combination the a more no get and new that year So or looking new should might for the internally said a to cash a yes, two acquisitions. start the that's think point that into question, they to delever, also answer deleveraging our and do is on follow they I earlier hit years generated resources acquisition additional of flywheel capital take I where with learn right. required. they through flow, business, industry, and the work on before CEO in company the growth organic the general feeling

the So model. kind of that's

Unidentified Analyst

Got it.

you uses its income next the then can about Kingsway how And NOLs against Okay. one of the talk subsidiary companies? is, taxable

John Fitzgerald

like for flip to is structure. that all complicated plumbing our over NOLs flow to of how This -- cash you we Well. do I'll use Do among our Kent. our [Indiscernible]. want

Kent Hansen

a since JT give here waters have I so, sip a to Yes. break of

federal So usually when it's we talk about NOLs. our NOLs

tax look XXX do we under just of we for what of of we as end purposes. own, when individual sort each September. that of of We the view we entities have at each our is available standalone federal as million And companies those

to is so And calculate they own were what if tax their company. as we'll do we'll federal their standalone

do we the a with the though for even Kingsway the day, way, that calculating so at we subs. end each consolidated of of return And tax start at

we're some regard, sort that in so, if owe much that then like But of result up IRS And additional benefit holdco providing they'll pay an as burning have by for money Because sort we'll is then the sort cash company. a they companies. our and to that of they benefits, a of remit up off for that, those company. holding that capital as if then [ph] tax way holding it's the and of remitting back. stream But flow those monetizing side of to NOLs

Unidentified Analyst

Great.

John Fitzgerald

of under NOLs payments those is and agreement. to consumption allowed that add just the cashback Kingsway for the would I credit our

a be our way receiving air operating well it's from quote with bank agreement. as being to as businesses our compliant distributions So

So -

Kent Hansen

been it the money of that had just loan, have standalone a it if entity been to with co, they bank the to paying paying a right. IRS instead Because would parent

Unidentified Analyst

it. Got

the how But us then the follow last like before a long And they next looks up. expire? please remind Okay. one NOLs

Kent Hansen

Yes.

NOLs So much XXXXs XXXXs. originated in late of the early and the

a And year XX that had them. they at life time, to so,

or look if can do [ph] out, about then around XXX schedule year But people XX we just is and be it expire XXXX, I at in following So, it's in there. XXXX those to think years in our so you we of somewhere actually expire But that that various XXXX, there's XX-K, I XX last those. big they think -- our But have in begin I NOLs those of in a the expiring year. note we have might XXXX. million where schedule through each amounts almost And the years, believe. see

Unidentified Analyst

And just you. like Thank three there's here. more Great. looks

are identifying The qualified can last is very what that these first you strong talk gives to you search far how has the credentials. And so Can the find entrepreneur you of candidates? confidence educational continue three about you professionals?

John Fitzgerald

is hope to them. can continue find strategy, I Well, we Yes. Hope obviously. not a

I we think the ways. way several different them is probably that source

close Community firm and in And the Acquisition, not only our makes mentioned but First of Argo knit. remain we in partners, that search active which is investments ecosystem of I pretty ETA management funds. earlier. investment that Through through all, the Xcelerator, our Entrepreneurship ecosystem, sort through Search

are word information speak. universe, we And to sort of So so plugged there's sharing and of a mouth to in there. of that lot

We also the business actively of top school. tier recruit campuses on the

that the lunch job at board. on residents learn Universe did Stanford Chicago, and and hope Northwestern, So job spring. a And description post the we their HBS, this Wharton. we've to at internal do and one we recently operator And done here sort of

presentations of just people's postings. a job of overlap and networks. and the sort a get there's learns inbound those through lunch of personal then in lot So interest through and we And lot

get So lot existing our OIRs. referrals a we of from

something is mean to us being broader up And have Point. person, I the ETA, a our But think really little get were through for lowdown. people we're program. HBS. both went to right Acquisition Entrepreneurship shared a universe bit model. the ETA successful in out ends went better. good West to I Kingsway think we've Prospective and it differentiated background that I in searchers, is unique that a of came that think are been that often often reach referral and we're into the got within doesn't They in both Drew to And Tyler. So, They interested to doing people Through have

to it. towards of people It's there's interest of on in just a so gravitate that real And to a business And in thing early want do days. career. lot school ETA become kind school, postgraduate people these tend their campuses

Unidentified Analyst

two Great. And here. last

talk is the which And lenders those multiple the leverage And on about terms? condition the they open you being part. lenders? multi business? of to is hope process place? Are Can what their financing you the for a What for are search of business? First do competitive

John Fitzgerald

Okay.

So a three part here.

is the right So debt-to-equity this balance. structure. XX/XX generally, feel like a we capital we're And targeting

you enhancing returns the of risk your hand leverage, through equity hand, not equity on On the on while -- one make through the your also debt, sweat, the discipline and hand, the other other while introducing insolvency.

And so of right without we returns risk capital equity. the debt somehow structure and through equity think adding balance discipline to that's the enhancing

we've And given been of means pretty lenders able we're through two get those we're working kinds far terms turns that on the like typically attractive And to with so pricing. paying, what half and is, looking traditional to senior on from and up Ravix, we're a of for in leverage. three multiples what thus terms

although anymore. are you have space our or in broadly. with lenders no will, uses the if that sort work one us more ETA and/ familiar We with Several of or Rolodex,

solicit And we've so, a handful got and of go sheets. out term to we firms that

open third competitive. the I so, being and business part is And for guess

seem yes, And a But for pricing the competitive. interest for anyway, terms with hold, the The business. but open think, environment. I now, think changing, business. obviously, can't for I they're be future to will open they predict I think rising rate what are is I

Unidentified Analyst

final the acquisitions? about you is, pipeline And for potential additional question talk can Great. your here

John Fitzgerald

break Xcelerator. into that apart and warranty, extended then Yes. Maybe Search the

a extensive. a questions, I've touched think through this but bit the more I'll on times here couple I little be

lot of is the actually candidates several we warranty my quite before, in It's small. universe And said Kent I within is this So us on importantly, the on. not would channel, terms But valuations comfortable that in or that either great really spent of time with. of fit they're they're they've than product set probably actually year view extended quality industry, and and lot pretty for a are as small. we just or large lots opportunities a be providing but number contracts distribution been companies a that I see a of fragmented for the including higher high attractive more companies, do of service selling what

the be sort Christian that that at sorting then environment may trade said, of the searchers, but residents, at So them one given at talking there new I of think of macro may opportunities. of which that OIRs we various any -- about assets principle event, if you call our opportunities and we of But high acquisitions. the acquisition higher here, suspect IRR backdrop better you of be active end excited I that rate to the episodic. things any be great period so multiples, It's top stages a with the and we of operators need time I the a interested Xcelerator, each in XXX start get was one are interest somewhat pipeline up OIRs sort Search of at sort to with out some very like a internal the XXX our of And funnel. Contrast and to want given targets. in each call in to of universe us it one given will of with always potential with smaller where dozens able them quality maintains hit one

you constantly Probably at And reaching so, NDA to other feels do many I how of talking NDAs? given and a and with in it time to owners, outreach, kind think? fill constantly was XX we're what are how out do brokers thing and intermediaries don't Kent, business like? companies at time when that the about Richard you talking know pipeline any bankers and

Kent Hansen

A lot.

John Fitzgerald

Yes, a lot.

to pitch, there investing. of to are and of no called a goal got to disciplined strikes the going fat lot for one. fat but order be in the see With see We're pitches and wait we a

Unidentified Analyst

Operator? so Excellent. you Thank much.

Operator

be There this queue. questions appear thoughts time? no any to the have at further closing Do you in

John Fitzgerald

from engaging. in appreciate wants and is directly, anyone Kent more. of really you outset, which this up to encourage to to to or to feature we're believe shareholders. website I answer forward reach communication excited dialogue that me a supportive out filings. our email, day our Hopefully, I and happy questions or really investor quarterly on me make the really questions, the our I everyone said like just via either a for great If going time and those with and learn permanent No. great the and follow those really that you ask out come at with my listen their really was of of took And

question in will people about shy sometimes of asking So a front a group.

don't want hesitate. to if talk directly, me So to you

Operator

your This time. does conclude today's good conference. day. and Have participation a your Thank at you lines for you may this disconnect

Kingsway Financial Services (KFS) 13 Nov 222022 Q3 Earnings call transcript