false 0001072627 0001072627 2024-11-06 2024-11-06
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of report (Date of earliest event reported): November 6, 2024
 
KINGSWAY FINANCIAL SERVICES INC.
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
(State or Other Jurisdiction of Incorporation)
001-15204
(Commission File Number)
85-1792291
(IRS Employer Identification No.)
 
10 S. Riverside Plaza, Suite 1520, Chicago IL 60606
(Address of Principal Executive Offices) (Zip Code)
 
Registrant’s Telephone Number, Including Area Code: (312) 766-2138
 
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
KFS
New York Stock Exchange
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). 
 
Emerging growth company    
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
 
 

 
ITEM 2.02           Results of Operations and Financial Condition.
 
On November 6, 2024, Kingsway Financial Services Inc. (the “Company”) issued a press release regarding its financial results for the three and nine-month period ended September 30, 2024. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
 
The information in this Current Report on Form 8-K provided under this Item 2.02 and Exhibit 99.1 attached hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
 
ITEM 9.01    Financial Statements and Exhibits.
 
(d)    Exhibits.
 
Exhibit No.    Exhibit Description    
 
99.1                 Press Release titled “Kingsway Reports Third Quarter 2024 Financial Results”
104                  Cover Page Interactive Data File (embedded within the Inline XBRL document)
 
 

 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
KINGSWAY FINANCIAL SERVICES INC.
Date: November 6, 2024
By:
/s/ Kent A. Hansen
Kent A. Hansen, Chief Financial Officer
 

Exhibit 99.1

 

logo2.jpg

KINGSWAY REPORTS Third QUARTER 2024 FINANCIAL RESULTS

Management to Host Conference Call Today at 5 p.m. ET

 

Chicago - (November 6, 2024) - (NYSE: KFS) Kingsway Financial Services Inc. (“Kingsway” or the “Company”) today announced its operating results for the three and nine months ended September 30, 2024.

 

Third Quarter 2024 Consolidated Financial Highlights

 

 

Consolidated revenue increased 9.5% to $27.1 million for the three months ended September 30, 2024, compared to $24.8 million in the prior year period

 

o

Extended Warranty revenue increased 3.4% to $17.8 million in the third quarter of 2024, compared to $17.3 million in the third quarter of 2023

 

 

o

Kingsway Search Xcelerator (“KSX”) revenue increased by 23.3% to $9.3 million in the third quarter of 2024, compared to $7.5 million in the third quarter of 2023

 

 

Consolidated net loss was $2.3 million for the three months ended September 30, 2024, compared to a net loss of $0.7 million in the prior year period.

 

 

Twelve month run-rate adjusted EBITDA for the operating companies of $18.5 million to $19.5 million (which includes the results of Image Solutions); run-rate is intended to capture the 12-month earnings of what the company currently owns or has recently acquired and is not intended to be forward-looking guidance

 

 

Adjusted consolidated EBITDA increased 27.8% to $2.9 million for the three months ended September 30, 2024, compared to $2.3 million in the prior year period

 

o

Extended Warranty adjusted EBITDA was $2.1 million in the third quarter of 2024 compared to $2.1 million in the year ago period.

 

 

o

KSX adjusted EBITDA was $1.3 million in the third quarter of 2024 (which excludes the results of Image Solutions) compared to $1.1 million in the year ago period. The prior year period excludes DDI and has only a partial month of SPI.

 

Recent Business Highlights

 

 

Purchased Image Solutions LLC (“Image Solutions”), an information technology managed services provider (IT MSP) for $19.5 million, plus transaction expenses and a working capital adjustment, in an all-cash transaction.

 

 

Appointed Rob Casper as the newest Operator-in-Residence (“OIR”) in the Company’s KSX platform.

 

 

Completed the sale of VA Layfette subsidiary, netting cash proceeds of $1.1 million

 

John T. Fitzgerald, President and Chief Executive Officer of Kingsway, said, “Our acquisition pipeline remains healthy and active. In the third quarter, we completed the purchase of Image Solutions, an attractive information technology services business with compelling economics and an established presence in a growing market. We remain disciplined in our pursuit of acquisition targets while we continue to see great interest from exceedingly talented entrepreneurs in joining our KSX platform. With each new acquisition we are building a robust portfolio of great businesses that are delivering results and are poised for growth and additional upside.

 

“For the third quarter, our consolidated revenues increased nearly 10% year-over-year. There are emerging signs of strength in our Extended Warranty segment businesses, and within KSX, solid execution is driving solid operational performance as industry-specific headwinds begin to abate.”

 

Balance Sheet Highlights

 

 

Year-to-date through November 1, 2024, repurchased 312,850 shares of common stock at a cost of $2.5 million under its securities repurchase program.

 

 

Purchased the remaining 10% interest in IWS for $2.5 million; the Company now owns 100% of IWS.

 

 

The Company had total net debt of $52.0 million as of September 30, 2024, compared with $35.3 million as of December 31, 2023.

 

 

Issued 330,000 shares of convertible preferred stock for proceeds of $8.25 million, which was used in the purchase of Image Solutions.

 

Conference Call and Webcast

 

Management will host a conference call at 5 p.m. Eastern Time today to discuss the results and host a live Q&A session. Additionally, investors may also submit questions via email to: James@HaydenIR.com.

 

 

 

Conference Call Information

 

Date: Wednesday, November 6, 2024

 

Time: 5 p.m. Eastern Time

 

Toll Free: 888-506-0062; Code: 427731

 

International: 973-528-0011; Code: 427731

 

Live Webcast Link: https://www.webcaster4.com/Webcast/Page/2928/51576

 

Conference Call Replay Information

 

Toll Free: 877-481-4010

 

International: 919-882-2331

 

Replay Passcode: 51576

 

Replay Webcast Link:  https://www.webcaster4.com/Webcast/Page/2928/51576

 

About the Company

 

Kingsway (kingsway-financial.com) is a holding company that owns or controls subsidiaries primarily in the extended warranty and business services industries. The common shares of Kingsway are listed on the New York Stock Exchange under the trading symbol "KFS."

 

The company serves the extended warranty industry through its operating subsidiaries:

 

Auto Warranty

 

 

IWS (iwsgroup.com)

 

Penn Warranty (pennwarranty.com)

 

Preferred Warranties (preferredwarranties.com)

 

HVAC/Facility Warranty

 

 

Trinity Warranty Solutions (trinitywarranty.com)

 

The company serves the business services industry through its operating subsidiaries:

 

B2B Services

 

 

Ravix Group (ravixgroup.com), CSuite Financial (Csuitefinancialpartners.com)

 

Image Solutions (istechology.com)

 

Healthcare Services

 

 

Digital Diagnostic Imaging (ddimagingusa.com)

 

Secure Nursing Services (securenursing.com)

 

Vertical Market Software

 

 

Systems Products International (spisoftware.com)

 

Non U.S. GAAP Financial Measure

 

Management believes that non-GAAP adjusted EBITDA, when presented in conjunction with comparable GAAP measures, provides useful information about the Company's operating results and enhances the overall ability to assess the Company's financial performance. Management uses non-GAAP adjusted EBITDA, together with other measures of performance under GAAP, to compare the relative performance of operations in planning, budgeting and reviewing the performance of its business. Non-GAAP adjusted EBITDA allows investors to make a more meaningful comparison between the Company’s core business operating results over different periods of time. Management believes that non-GAAP adjusted EBITDA, when viewed with the Company's results under GAAP and the accompanying reconciliations, provides useful information about the Company's business without regard to potential distortions. By eliminating potential differences in results of operations between periods caused by the factors listed in the attached schedules, Management believes that non-GAAP adjusted EBITDA can provide useful additional basis for comparing the current performance of the underlying operations being evaluated. Investors should consider this non-GAAP measure in addition to, not as a substitute for or as superior to, financial reporting measures prepared in accordance with GAAP. Investors are encouraged to review the Company's financial results prepared in accordance with GAAP to understand the Company's performance taking into account all relevant factors.

 

 

 

Forward-Looking Statements

 

This press release may include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. Words such as "expects," "believes," "anticipates," "intends," "estimates," "seeks" and variations and similar words and expressions are intended to identify such forward-looking statements; however, the absence of any such words does not mean that a statement is a not a forward-looking statement. Such forward-looking statements relate to future events or future performance, but reflect Kingsway management's current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the section entitled "Risk Factors" in the Company's 2023 Annual Report on Form 10-K and subsequent Form 10-Qs and Form 8-Ks filed with the Securities and Exchange Commission. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

 

Additional Information

 

Additional information about Kingsway, including a copy of its Annual Reports can be accessed on the EDGAR section of the U.S. Securities and Exchange Commission's website at www.sec.gov, on the Canadian Securities Administrators' website at www.sedar.com, or through the Company's website at www.kingsway-financial.com.

 

For Media Inquiries:
Hayden IR
James Carbonara
(646) 755-7412
james@haydenir.com 

For Company Inquiries:

Kingsway Financial Services Inc.

Kent Hansen, CFO

(312) 766-2163

khansen@kingsway-financial.com

 

 

 

Kingsway Financial Services Inc.

Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted Consolidated EBITDA

(in thousands)

(UNAUDITED)

 

   

Twelve Months Ended

   

For the Three Months Ended

 
   

9/30/2024

   

9/30/2024

   

6/30/2024

   

3/31/2024

   

12/31/2023

 

GAAP Net Income (Loss)

  $ (8,310 )   $ (2,311 )   $ (2,186 )   $ (2,328 )   $ (1,485 )
                                         

Non-GAAP Adjustments:

                                       

Discontinued operations

    2,058       135       (167 )     213       1,877  

Changes in fair value; realized gains/losses (1)

    512       (176 )     60       411       217  

Employee related expenses (2)

    2,624       990       412       467       755  

Other items (3)

    2,688       956       590       61       1,081  

Depreciation, amortization, tax and interest expense

    10,459       3,343       3,659       3,280       177  

Total Non-GAAP Adjustments

    18,341       5,248       4,554       4,432       4,107  
                                         

Non-GAAP Adjusted Consolidated EBITDA

  $ 10,031     $ 2,937     $ 2,368     $ 2,104     $ 2,622  

 

 

   

Twelve Months Ended

   

For the Three Months Ended

 
   

9/30/2023

   

9/30/2023

   

6/30/2023

   

3/31/2023

   

12/31/2022

 

GAAP Net Income (Loss)

  $ 8,158     $ (675 )   $ (1,667 )   $ 27,839     $ (17,339 )
                                         

Non-GAAP Adjustments:

                                       

Discontinued operations

    15,339       (122 )     (110 )     (107 )     15,678  

Changes in fair value; realized gains/losses (1)

    (2,155 )     174       (1,225 )     145       (1,249 )

Employee related expenses (2)

    1,900       479       368       383       670  

Other items (3)

    4,090       334       1,633       591       1,532  

Gain on extinguishment of debt (4)

    (31,616 )                 (31,616 )      

Gain on sale of PWSC (5)

    (342 )     (342 )                  

Depreciation, amortization, tax and interest expense

    14,447       2,450       2,780       5,164       4,053  

Total Non-GAAP Adjustments

    1,663       2,973       3,446       (25,440 )     20,684  
                                         

Non-GAAP Adjusted Consolidated EBITDA

  $ 9,821     $ 2,298     $ 1,779     $ 2,399     $ 3,345  

 

 

   

(1)

Includes realized and unrealized gains and losses on non-core investments; change in the fair value of subordinated debt (net of the portion of the change attributable to instrument-specific credit risk); unrealized gain on the change in fair value of the trust preferred security options; and change in the fair value of the Ravix earn-out (changes in fair value recorded as other income or expense).  

(2)

Employee related expenses includes charges relating to severance and consulting agreements pertaining to former key employees; non-cash expense arising from the grant and modification of stock-based awards to employees; and costs associated with employees assisting during a transition period and are not expected to be replaced once transition period has ended (approximately one year from acquisition date).

(3)

Other items include:  legal expenses associated with the Company’s defense against significant litigation matters; acquisition and disposition-related expenses; expense relating to the settlement of all remaining Amigo claims; and other non-recurring items.

(4)

Gain on extinguishment of debt consists of a $31.6 million gain related to the repurchase of TruPs debt having a principal amount of $75.5 million and results from removing the fair value of the debt ($56.1 million), deferred interest payable ($23.0 million) and accumulated other comprehensive income ($27.2 million) liabilities; the trust preferred debt repurchase options ($17.7 million) and accrued income receivable ($0.6 million) assets.  See Note 11 "Debt," to the unaudited consolidated interim financial statements, for further discussion.

(5)

Gain on sale of PWSC, net of transaction expenses that are included in consolidated operating expenses, as well as income taxes associated with the sale.  

 

 

 

 

Kingsway Financial Services Inc.

Reconciliation of Extended Warranty Segment Operating Income to Non-GAAP Adjusted EBITDA

and Pro Forma Non-GAAP Adjusted EBITDA

(in thousands)

(UNAUDITED)

 

   

Twelve Months Ended

   

For the Three Months Ended

 
   

9/30/2024

   

9/30/2024

   

6/30/2024

   

3/31/2024

   

12/31/2023

 

GAAP Operating Income for Extended Warranty segment

  $ 6,405     $ 1,704     $ 1,244     $ 1,076     $ 2,381  
                                         

Non-GAAP Adjustments:

                                       

Investment income (1)

    1,254       327       315       311       301  

Gain (loss) on sale of investments (2)

    28       -       6       9       13  

Depreciation

    211       41       56       52       62  

Total Non-GAAP Adjustments

    1,493       368       377       372       376  
                                         

Non-GAAP adjusted EBITDA for Extended Warranty segment

  $ 7,898     $ 2,072     $ 1,621     $ 1,448     $ 2,757  

 

 

   

Twelve Months Ended

   

For the Three Months Ended

 
   

9/30/2023

   

9/30/2023

   

6/30/2023

   

3/31/2023

   

12/31/2022

 

GAAP Operating Income for Extended Warranty segment

  $ 7,361     $ 1,778     $ 1,392     $ 1,432     $ 2,759  
                                         

Non-GAAP Adjustments:

                                       

Investment income (1)

    953       273       256       231       193  

Gain (loss) on sale of investments (2)

    101       14       12       98       (23 )

Depreciation

    244       57       62       64       61  

Total Non-GAAP Adjustments

    1,298       344       330       393       231  
                                         

Non-GAAP adjusted EBITDA for Extended Warranty segment

  $ 8,659     $ 2,122     $ 1,722     $ 1,825     $ 2,990  

 

(1)   Investment income arising as part of Extended Warranty segment’s minimum holding requirements.

 

(2)   Realized Gains (losses) resulting from investments either held in trust as part of Extended Warranty segment’s minimum holding requirements or from the deployment of excess cash.

 

 

 

Kingsway Financial Services Inc. 

Reconciliation of KSX Segment Operating Income to Non-GAAP Adjusted EBITDA 

(in thousands) 

(UNAUDITED) 

 

   

Twelve Months Ended

   

For the Three Months Ended

 
    9/30/2024     9/30/2024     6/30/2024     3/31/2024     12/31/2023  

GAAP Operating Income for KSX segment

  $ 4,984     $ 1,144     $ 1,441     $ 1,343     $ 1,056  
                                         

Non-GAAP Adjustments:

                                       

Employee costs (1)

    525       120       139       138       128  

Investment income (2)

    117       27       68       10       12  

Depreciation (3)

    290       22       180       64       24  

Total Non-GAAP Adjustments

    932       169       387       212       164  
                                         

Non-GAAP adjusted EBITDA for KSX segment

  $ 5,916     $ 1,313     $ 1,828     $ 1,555     $ 1,220  

 

 

   

Twelve Months Ended

   

For the Three Months Ended

 
   

9/30/2023

   

9/30/2023

   

6/30/2023

   

3/31/2023

   

12/31/2022

 

GAAP Operating Income for KSX segment

  $ 5,322     $ 1,003     $ 1,616     $ 1,577     $ 1,126  
                                         

Non-GAAP Adjustments:

                                       

Employee costs (1)

    322       87       78       87       70  

Investment income (2)

    43       15       17       11       -  

Total Non-GAAP Adjustments

    365       102       95       98       70  
                                         

Non-GAAP adjusted EBITDA for KSX segment

  $ 5,687     $ 1,105     $ 1,711     $ 1,675     $ 1,196  

 

 

(1)

Costs associated with employees assisting during a transition period and are not expected to be replaced once transition period has ended (approximately one year from acquisition date).

 

(2)

Investment income from interest on client deposits (Ravix, CSuite), as well as imputed interest on long-term software contracts (SPI).

 

(3)

The June 30, 2024 quarter includes a one-time catch-up for depreciation associated with the finalization of the DDI purchase accounting.

 

 
v3.24.3
Document And Entity Information
Nov. 06, 2024
Document Information [Line Items]  
Entity, Registrant Name KINGSWAY FINANCIAL SERVICES INC.
Document, Type 8-K
Document, Period End Date Nov. 06, 2024
Entity, Incorporation, State or Country Code DE
Entity, File Number 001-15204
Entity, Tax Identification Number 85-1792291
Entity, Address, Address Line One 10 S. Riverside Plaza, Suite 1520
Entity, Address, City or Town Chicago
Entity, Address, State or Province IL
Entity, Address, Postal Zip Code 60606
City Area Code 312
Local Phone Number 766-2138
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock
Trading Symbol KFS
Security Exchange Name NYSE
Entity, Emerging Growth Company false
Amendment Flag false
Entity, Central Index Key 0001072627

Kingsway Financial Servi... (NYSE:KFS)
Historical Stock Chart
From Nov 2024 to Dec 2024 Click Here for more Kingsway Financial Servi... Charts.
Kingsway Financial Servi... (NYSE:KFS)
Historical Stock Chart
From Dec 2023 to Dec 2024 Click Here for more Kingsway Financial Servi... Charts.