Earnings call transcript Q1 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day and welcome to Kingsway First Quarter 2023 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. [Operator Instructions]

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

on cause Company's risk or time-to-time XX-K discussion the implied Company form For could forward-looking such annual factors differ other to statements the and and risks results of see detailed with Exchange in the in from report which please as that well uncertainties actual those Securities as the expressed Commission. reports from files

such Please with release, metrics as include our our utilizes non-GAAP the the press note most that is may periodic in most filings Company's management recent today's to metrics too, SEC. call use analyze available of of performance. in metrics well comparable that to GAAP it's non-GAAP the the as reconciliation A

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

J.T. Fitzgerald

Thank Kingsway call. first welcome joining quarter to you, the us. earnings you for Thank and XXXX Good Tom. afternoon

Let solid me operating performance we begin of environment that with very regarding despite rates macro results expectations, met an financial generally our and XXXX to uncertainty by our start inflation. pleased interest saying with were and

simplified liquidity the available. recorded nice and gain. a resources further sheet with cleaned our and debt balance the capital our sheet we and Importantly, balance we all With strengthened preferred repurchase of trust nearly and up have a

future poised We growth. strategy on to are for execute our

period. an increase the XX% March EBITDA consolidated our XX.X As comparable million, adjusted over XX, XX months nearly XXXX, of year ago trailing of was

million rate be to the in XX operating continues trailing businesses XX months our Our of adjusted run million XX EBITDA range. to

XX%. our increased sold warranty Turning by impact segment. auto pro financing revenues adjusted our note basis, And used growth. forma find results which our XXXX. year, first modest prices extended was Despite of that and businesses in first PWSC, over continue exclude to EBITDA pro businesses industry last warranty and quarter increased forma higher Please and our warranty these On conditions, X% on execute pro car demand. forma to a focus QX a warranty opportunities for costs wide have continue increasing to macro

As to particularly of the warranty backlogs chain mechanical higher where borrowing for the new our focus offset equipment used continue pose older expect most and at that HVAC car impact products the to prices prices some declining relevant, supply car begin normalize, And are challenges. used end to spectrum continue ongoing our of we will costs. business of

the installed, those As that supply expect are and growth machines trends. revenues chain the revert freeze and associated will up warranty shipped historical to we

segment, grew million adjusted year our of CSuite, up This by $X.X revenues accelerator segment of operating Ravix, In XX%. and search EBITDA or Services to entities, quarter Nursing and comprised SNS. XXX% last businesses first our or currently Secure the KSX three compared was of

the for As a in agency call, the to performance you full later acquired details by these the but for and we first encouraged financial provide and management XXXX, will XXXX quarter early CSuite leadership firm national vertical. November executive period businesses. includes Kent is more results acquired the entities. two in that are these of of services healthcare QX U.S.; SNS, nursing a we recall, provide and the may in financial staffing

on recognize this capital. from debt all or trust tranches. transaction, that using debt, extinguishment million million. remaining was balance we gain the repurchase nearly preferred TruPs of the call $XX.X of our funds the paid during of working of debt, available for TruPs under six it as XX.X we to five We Turning option sheet, quarter With we the

instrument. debt million XX.X the end of a remaining had the related first carrying of we TruPs value of to quarter, As the

it the one In flexibility of and and XX, capital the good plan in our repurchasing to We board allocate share through stock have repurchase $XX place towards believe shares. a practice to March, a March program million XXXX. approved year of the a is up authorized corporate repurchase to

market intrinsic We capital maximizing repurchases are will value creative acutely per of stock. on share. focused opportunities, And provide conditions our if a to we allocate

Our growth XXXX positive priorities return attractive to our same. a shareholders. and operations for generates from cash business sustainable, provides delivers the an and capital build remain beyond Strategically allocating for that long-term

fit each. new to clearly annualized million acquisitions million generate acquisition three defined $X We and EBITDA of are targeting per adjusted in that will $X.X criteria our two range to year the

retaining in by this do platform. and talent to within part developing class attracting, aim world We our KSX

a defined set great targets our strong. talented acquisition our who actively fit are have team acquisition of professionals that of is for We and pipeline criteria, searching

welcome to us first joins Peter run. Subsequent and OIR quarter, forward we We range a to a or where strategic Operator-in-Residence to for the and Centerview the to added supporting from search the of new the and matters, mergers to his including key Peter in Hearne across and on Peter great he company him advises Mr. acquire companies industries broad KSX platform. of end partners financial look acquisitions. a team

a our to and end, evaluating Joyce a new the investment where Vice KSX he at Company. platform. us from Business was President quarter responsible welcome that joins of subsequent Kingsway, LLC, Development Circle we firm for Also, Charles search announced position This X investment opportunities. to we as Charlie for is sourcing

welcome future out Charlie for We our as sourcing team deal the to we engine to build acquisitions. delighted are

I'd remind I of over Annual General XXth. to immediately the our New Time, at will Eastern Meeting Exchange The we presentation the the that AGM to And X at call hosting finally, are York will before A.M. an Investor next Shareholders a depth begin in Day for the Kent Day with everyone more thereafter. Tuesday, Stock Investor numbers, of turn discussion along and May like follow

the financial to over turn call now of for our Kent Kent? I'll review results.

Kent Hansen

you, J.T. Thank

and subsidiaries, discontinued to and assets its of are executing we quarter sale. Lafayette are operations, shift simplify VA away as as plan the strategic structure. estate, to included the to reminder, from the Lafayette and during assets our included fourth about part began of our get started operations XXXX, a reported I leased real I'm of is Before of liabilities one as a not for separately its our in capital results The held discuss. The and in results VA reported sell

XXXX, million on repurchase through to continuing of interest current six all $XX.X XXXX. was the the includes operations $X million of $XX.X our operations the from period Income continuing quarter tranches on TruPs, of as million the of first date quarter The for a the debt loss of to first repurchase. expense from related gain a as in of extinguishment well compared

excludes XX%. to last sold and quarter of adjusted July $X.X the that EBITDA of of and the quarter quarter quarter million increased for prior was $X first a $X.X in of extended an $X last in the was of million adjusted Combined million million million million for $X.X we EBITDA, year. X.X Consolidated in warranty XXXX in the KSX first the Combined increase was year of million XXXX XXX% XXXX, to year. operating for the compared of or consolidate results or first in compared adjusted of first forma $X.X PWSC first income which quarter pro EBITDA the XXXX

adjusted million, by extended forma XX.X% EBITDA revenue $X.X first last the of was of pro of down extended million, segment. warranty X.X% pro compared this quarter $X.X pro Breaking year. first in In reportable or to or warranty revenue, quarter forma forma XXXX

XXXX of quarter following first the The by was impacted items.

cost variable the winter to parts believe overall of supply Trinity, unseasonably J.T. an availability goods of nature this for in issues, of that there's leadership lower a revenue sectors, lot due by was to has the mild room expenses. at growth its lower the First and expanding was in we of mentioned, sold which warranties and on HVAC due costs, and offset to refrigeration chain Trinity area. partially those focused offerings

general The that higher administrative expenses and higher commission next revenue slightly lowered offset by PWI expenses. partially were and

the in XXXX, implement second As half organization. cost mentioned leadership prior continues on new the to leadership took bringing and sales Cosgrove Brian PWI the while of of discipline, to in strict calls, over

partially that IWS the more offset commission claim. and decrease a by an revenue cost a average in higher increase increase an by finally, expense. claims offset attributed was And to of the than was claims of The latter expense in number

adjusted X.X million to on XX-month warranty period. revenue basis, XX trailing extended a compared pro forma in trailing XX.X% pro XX-month forma was million EBITDA of or pro For or revenue, XX.X% forma previous the of

compared Turning XXX,XXX, to segment year. the of to of XXXX segment XX.X% or first KSX, or XX.X% million $X.X quarter quarter adjusted EBITDA revenue the first of in revenue last of was in

quarter of following first by items. the impacted was The XXXX

positions mainly and in shift and funding. offset activity billing venture decline decline at Ravix, in billable in and attributable hours to higher general to mix hours in lower level an to the is due expenses. that by M&A administrative general a A decline billable rates. increase The revenue lower capital was partially First

However, gross of XX% a margins compared in to the first improved to XXXX ago. year XX%, quarter

adjusted the XXXX, Kingsway has XX%. of next increased number at increased Day headcount. in TTM EBITDA week. all XX%, quarter, Since Ravix increased of XX%, the Investor as of clients has our and XXX,XXX, had more Okah Ravix have For Timi cover will TTM increasing October EBITDA acquired without revenue adjusted

Ravix being upon as benefited from revenue and first leaves KSX its over Gross for impacted the from which was of also margin. results margin Timi financial the revenue full a took Ravix well as also similar CSuite's CSuite of a factors mix quarter lower from at by generally SNS. is XXXX. who is search quarter as of CSuite leadership XX% higher acquisition.

EBITDA adjusted had CSuite XXX,XXX. quarter the For of

to mix split XXXX. At a staffing, resulting staffing for in from SNS, two have seen of we QX shift a per nearly travel XX/XX in diem

a SNS shifts a average from is are markets. adjusted billing former is of While job the the number expand quarter transitioning higher the XX% nice owner was Gross the the rates first to Charles year, looking slightly level of other about of XXXX margin XXX,XXX. and down geographic from business and EBITDA had doing holding into in than prior is at total anticipated. already

sheet, cash end had to at the largely balance $XX.X of of XXXX, by This first driven compared our we million equivalents $X.X of of XXXX. the decrease XX.X and of the TruPs the at end million. million quarter was approximately to now repurchase Turning cash

cash during exercising receive of quarter. X.X holders also our from warrants in proceeds the million We

As $X.X of remain of million March warrants our outstanding. XX strike $X XXXX,

and as TruPs. for the bank held Lafayette is separate VA our sale. balance Our is with remaining comprised debt associated loans as Debt line on total item reported a of liabilities outstanding sheet

end of at the total XXXX. quarter XXX.X XXXX. we million at As million the a reported the with compared of outstanding the first million at result, And of of end end amount of $XXX.X $XX.X XXXX debt originally had an of

note to debt convert have interest XX,XXX and total like the expected during was the March XX%. since Class elected that And quarter our preferred I second of but remaining quarter. XXXX, reduced shares So as convert all deferred XX,XXX by end A our the first XXXX, during of our are would to zero. of we to XX, also the

As national marketed by note, conversion requires On listed cash by a our actively for reminder, is sale being the side outlay and is VA Clinic quick zero a Company. a broker.

serious the received a have to We XXXX. Clinic during of interest VA have and sold hope lot

summary, the a the as to J.T. and board simplified stock. financials business we approved year repurchase authorized three were we our repurchase have first of delivered the quarter, shares opportunistic performed mentioned, our In No the share March XX, one during deploy the months ended have XXXX. be and selective and As program, capital. substantially well repurchased we in flexibility and financial our

seeing With for call the upcoming back our I'll I And over to to the at operator now, turn forward to line Day. questions. Investor open that, look you

Operator

Patinkin. We proceed. Adam [Operator from Instructions] your Please question Adam, is a line have live.

Adam Patinkin

a quick just few I've guess, I questions. So

what mean is, first bring of conclude role I maybe expand Can team? one hiring for ability OIRs purchases And Charlie in the his the and was what expect might in of to him to your my So on businesses attract Joyce. additional you segment? interested to the you and to that KSX

J.T. Fitzgerald

self-funded So search. background, Charlie, a was great doing

to KSX to the the specific process thought lean very sourcing industries interest. to our in And understands focus so is sourcing really ETA process our here broadly. into allow here direct at OIRs more on And of community

So outreach to we out our are our of Charlie retirement. predominantly on intermediaries, will the search to provide brokers who database accelerator, looking our solution of describe criteria, into and be the and investment and acquisition enhancing business lots transition focused process that owners to building bankers,

platform, engine, lot of a And an are sourcing in so they also acquisition onto be will on accelerator, and that that they and OIRs more search channel get the focus see hope come that can other wires will is the as the to when we provide coming intermediary done. traditional broker that that, new continuity leave contact someone at opportunities able single with through point

recruiting very some ETA community, plugged on He'll in, said. efforts. our focused time as the also spend in He's I

accelerator, will point he conferences, a school for of presence And so at et business be cetera. campuses, the ETA on search

So, if vibrant out very they product on that really out getting through I enhances can offering helped community. and powerful our I pipeline for And think he's board, the think into deal come it of ongoing to a channel. also word OIRs that it step in the flow

Adam Patinkin

That’s great. a to touched to exciting kind person a of to bring really and Maybe transition it That's something like nice board really fit. on on you sounds there.

what seeing two maybe during remarks months to OIR four on, progress quarter know compared acquisitions you have your you Just around acquisitions? still talk business last you're making targeting Can about, love and would OIRs three and I there looks in year. reiterated to out ago? you're any your you Now per market, update prepared pipeline few that the the a how the maybe

J.T. Fitzgerald

Yes, I about general know, I Ravix, think look, was read the and probably solid. end little At a market, lower certainly it CSuite it. think the lower you first we at of slow. the I quarter broadly, that remained and M&A saw In environment you've pretty that think middle the

we little of unthaw expectations, up of broader cost the tightened but are and into mismatch kind as that to valuation probably here and a that to fully sellers a expect sort buyers summer. revert head conditions environment of Credit I of sort expectations the M&A bit, between capital

speed Our pipeline full Drew strong. cranking sort Peter are looks up of pretty and and along. to

OIRs so will one to total Charlie we're so only just a addition end, up that did with have then We subsequent that. expect of And him of part the is OIR joined enhance Peter us, the Hearne at get with going. ways three to still things We and Peter. doing quarter obviously,

Adam Patinkin

topic, helpful noticed on you a XX-Q, And and had that which the shares. it's was or know. question slightly $X.X the like scanning That's Limbach And one that final it, I I related released to unrealized to different notice guys through you looks then maybe just it just an a is, after gain gain, million bunch anytime million Limbach, stock we'd And a maybe price dollar today. plan that you see is? understand that was whole little about on bit a what's there? Can positive gain to what you And more up of do a seems you obviously, comment that? love to what But going with a kind on like thing. and

J.T. Fitzgerald

in expire Yes, in There is related exercise this that they we Limbach. of Limbach, the part available back when public gain Kingsway so strike received they're via XXXX, that warrants reverse back cashless are went in as Limbach and that sponsorship, a merger. way all in to to July. warrants And sponsored, $XXX,XXX

we believe. provided to Limbach the months, exercise monetize so, for And that that we And is restricted stock shares will then be than asset. six for the I will be would cashless higher shares. price strike price, able Those

Adam Patinkin

work does stock could more maybe thing guess I your XX% terms or if or of, or color really good was that's but are? you've that what not it plans you a have today, how whether already a the exercised exercise in up yes, that give So bit little that you on so

J.T. Fitzgerald

timely. the of the and sure We make went the extra do we that just could had through machinations to process exercise a understood that all cashless to test of it

potential a momentum eye not a rustle monitor or and we would a get leverage in I that see go value, that what to was, with the get and is small added the earnings expiration, wait an heading the would to exercised last little if get the it. So the the through in we so and the into week to to they price thinking them we're up, them maximizing And so you by we'll exercising continue stock think view to the so. portion stock on continues keeping of the

Operator

queue time. to are management remarks. there now to would like the turn And Instructions] floor in [Operator further at questions no back for closing I this

J.T. Fitzgerald

make James, if I submitted those? email that did that had sent that address an questions we opportunity were questions to you people have want to sure email? via any via

James Carbonara

Absolutely. come three did Yes, in.

a indefinitely period that into Are exit expectation question for investments in came a compelling hold the these the there for first of targeted unless accelerator investments bid? The segment? entered was. with in Is holding external

J.T. Fitzgerald

capital an an we I would preference think I of asset investment preconceived to hold a with idea our at general do But would said, compound buying exit. We would and return a of realize the that redeploy higher what a That question, I indefinite businesses than say asked and go build return, to that. that an to us a if is a compelling into be goal external we if our don't that horizon. that that is of certainly allowed bid sort like, got like to think great we're with great that rate the here indefinitely. with

James Carbonara

run the Can that Kent EBITDA KFS required came J.T. comment or consolidated of for of on are second rate level the costs What what in and was. currently, Holdco? is cash the to those operating And flow? question

Kent Hansen

thanks Yes, This is James. Kent.

think operations that say Holdco talk as to expenses. the it sort that well run yet. of And hasn't about when the runway and KSX the as I corporate one I team, So, means Holdco, of team the rate migrated I'll

account spend of left. that's So, small are we because if TruPs like of variable, the expense, and that a at not and sort look part cash into only taking interest only it's our

quarter. X.X-ish cash expenses, So, say we're the targeting runway to million X per

James Carbonara

that and targets next forward would online close and What looking to saying came the to are day? investor buybacks? with discussion team engage does to week's need that in It trigger question And see, final would the the management third What was. in them?

J.T. Fitzgerald

comments, on a the my in that the think presentation. little I bit in in I touched

our buybacks be that our would a think share. to that per is way accretive intrinsic of to I value goal in view do

be discount view. And at so any that to would buybacks we do a

would that's to where looking we so be And repurchase shares.

James Carbonara

in you does That that any J.T., the comments. questions online, back to came for to closing throw conclude it

J.T. Fitzgerald

And your for our in York call in week participating afternoon. appreciate to all the attendance. I Day. Investor everyone New seeing Really for Thanks, next you forward this of look

a Thanks afternoon. great have and

Operator

today's concludes you. Thank This conference.

You this your Thank at time. participation. may lines disconnect you for your

Kingsway Financial Services (KFS) 9 May 232023 Q1 Earnings call transcript