Management to Host Conference Call Today at
5 p.m. ET
Management to Host Investor Day on
Tuesday, May 16 in New York City
CHICAGO, May 9, 2023
/PRNewswire/ - (NYSE: KFS) Kingsway Financial Services
Inc. ("Kingsway" or the "Company") today announced its
financial results for the three months ended March 31, 2023.
First Quarter 2023 Consolidated Financial Highlights
- Consolidated revenue increased 17% to $26.4 million for the three months ended
March 31, 2023, compared to
$22.5 million in prior year
period
- Extended Warranty revenue was $16.7
million in the first quarter of 2023 compared to
$18.3 million in the first quarter of
2022; however, on a pro forma basis revenue increased by 3% from
the prior year period (pro forma excludes the results of PWSC,
which was sold in July 2022)
- KSX revenue increased by 131% to $9.7
million in the first quarter of 2023, compared to
$4.2 million for the first quarter of
2022, benefitting from the acquisitions of CSuite and SNS in
November 2022
- Consolidated net income was $27.8
million for the three months ended March 31, 2023, compared to a net loss of
$2.5 million in the prior year
period
- Adjusted consolidated EBITDA was $2.4
million for the three months ended March 31, 2023, compared to $1.0 million in the prior year period
- Twelve month run-rate adjusted EBITDA for the operating
companies remains at $18 million to
$19 million
- Extended Warranty segment and KSX segment combined operating
income was a total of $3.0 million
for the three months ended March 31,
2023, compared to $2.5 million
in the prior period
- Adjusted EBITDA for the Extended Warranty segment and KSX
segment combined was $3.5 million for
the three months ended March 31,
2023, compared to $2.7 million
in the prior period
- Combined pro forma adjusted EBITDA for the Extended Warranty
segment and KSX segment was a total of $3.5
million compared to a total of $2.4
million in the first quarter of 2022 (pro forma excludes the
results of PWSC)
"We are pleased with our start to 2023 with solid financial
performance and another strong quarter of operating performance in
the Extended Warranty and KSX segments." said John T. Fitzgerald, President and Chief
Executive Officer of Kingsway. "During the first quarter, we
repurchased the majority of our outstanding TruPs debt and
associated accrued interest to further simplify our capital
structure and better position the company for executing our
strategy and increasing our cash flows."
Reconciliations of GAAP to non-GAAP metrics are presented in the
attached schedules. The Company today also filed its Quarterly
Report on Form 10-Q.
Recent Business Highlights
- Repurchased trust preferred debt to retire $96.7 million in principal and deferred interest,
effectively paying 60.8 cents on the
dollar, realizing an IRR greater than 20%
- Adds Mr. Peter Hearne as an
Operator-in-Residence ("OIR") and Charles
Joyce as a Vice President of Business Development to its
innovative Kingsway Search Xcelerator ("KSX") platform
- Board of Directors approved a share repurchase program of up to
$10 million of the Company's common
stock
"We remain focused on growing and improving our portfolio of
businesses both organically and by acquisition through KSX,"
continued Mr. Fitzgerald. "We added two highly-talented
individuals to our KSX team, and with cash on hand we are
well-equipped to expand our portfolio of operating businesses.
Importantly, we are taking a thoughtful approach to the allocation
of capital and have a defined set of strategies in place
to continue to grow the per share value of our business over
time."
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: Tuesday, May 9, 2023
Time: 5:00 PM Eastern Time
Toll Free: 877-545-0523; Code:
189652
International: 973-528-0016; Code: 189652
Live Webcast Link:
https://www.webcaster4.com/Webcast/Page/2928/48352
Conference Call Replay Information
Toll Free: 877-481-4010
International: 919-882-2331
Replay Passcode: 48352
Replay Webcast Link:
https://www.webcaster4.com/Webcast/Page/2928/48352
Investor Day
The Company will be hosting an in-person and
online Investor Day on Tuesday, May
16 at the New York Stock Exchange. President and Chief
Executive Officer, John T.
Fitzgerald, along with Kent A.
Hansen, Executive Vice President and Chief Financial Officer
and members of the management team will discuss a range of topics
covering the Company's operations, long-term growth strategy and
financial structure. Prepared presentations will begin at
9:30 am ET.
The event will take place at the New York Stock Exchange (RSVP
required) and will also be available virtually at the investors
section on the Company website:
https://vimeo.com/webinars/events/b6f89673-2cac-4779-8d61-e4d3b620b201
Individuals interested in attending or registering for the event
may contact James Carbonara, Hayden
IR at james@haydenir.com or by calling (646) 755-7412.
About the Company
Kingsway 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 IWS (iwsgroup.com), Penn Warranty
(pennwarranty.com), Preferred Warranties (preferredwarranties.com)
and Trinity Warranty Solutions (trinitywarranty.com).
The Company serves the business services industry through its
operating subsidiaries CSuite (csuitefinancialpartners.com), Ravix
(ravixgroup.com) and Secure Nursing Service
(securenursing.com).
Non U.S. GAAP Financial Measure
The Company 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. The Company 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
allow investors to make a more meaningful comparison between the
Company's core business operating results over different periods of
time. The Company 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, the Company
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 and/or Shareholder Letter 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 2022 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.
Kingsway Financial Services Inc.
Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted
EBITDA
(in thousands)
(UNAUDITED)
|
|
Twelve
Months
Ended
|
|
|
For the Three Months
Ended
|
|
|
|
3/31/2023
|
|
|
3/31/2023
|
|
|
12/31/2022
|
|
|
9/30/2022
|
|
|
6/30/2022
|
|
|
GAAP Net Income
(Loss)
|
|
$
|
45,408
|
|
|
$
|
27,839
|
|
|
$
|
(17,339)
|
|
|
$
|
37,273
|
|
|
$
|
(2,365)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations
|
|
|
16,455
|
|
|
|
(107)
|
|
|
|
15,678
|
|
|
|
1,670
|
|
|
|
(786)
|
|
|
Gain on extinguishment
of debt (1)
|
|
|
(31,616)
|
|
|
|
(31,616)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Gain on sale of PWSC
(2)
|
|
|
(26,447)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(26,447)
|
|
|
|
-
|
|
|
Changes in fair value;
realized gains/losses (3)
|
|
|
(12,539)
|
|
|
|
145
|
|
|
|
(1,249)
|
|
|
|
(13,914)
|
|
|
|
2,479
|
|
|
Employee related
expenses (4)
|
|
|
1,881
|
|
|
|
383
|
|
|
|
670
|
|
|
|
321
|
|
|
|
507
|
|
|
Other items
(5)
|
|
|
2,393
|
|
|
|
591
|
|
|
|
1,532
|
|
|
|
184
|
|
|
|
86
|
|
|
Depreciation,
amortization, tax and interest expense
|
|
|
16,008
|
|
|
|
5,164
|
|
|
|
4,053
|
|
|
|
3,573
|
|
|
|
3,218
|
|
|
Total Non-GAAP
Adjustments
|
|
|
(33,865)
|
|
|
|
(25,440)
|
|
|
|
20,684
|
|
|
|
(34,613)
|
|
|
|
5,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted
EBITDA (6)
|
|
$
|
11,543
|
|
|
$
|
2,399
|
|
|
$
|
3,345
|
|
|
$
|
2,660
|
|
|
$
|
3,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve
Months
Ended
|
|
|
For the Three Months
Ended
|
|
|
|
3/31/2022
|
|
|
3/31/2022
|
|
|
12/31/2021
|
|
|
9/30/2021
|
|
|
6/30/2021
|
|
|
GAAP Net Income
(Loss)
|
|
$
|
(1,543)
|
|
|
$
|
(2,504)
|
|
|
$
|
1,443
|
|
|
$
|
(226)
|
|
|
$
|
(256)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations
|
|
|
(4,840)
|
|
|
|
(1,495)
|
|
|
|
(1,755)
|
|
|
|
(1,066)
|
|
|
|
(524)
|
|
|
Changes in fair value;
realized gains/losses (3)
|
|
|
1,570
|
|
|
|
2,035
|
|
|
|
412
|
|
|
|
(857)
|
|
|
|
(20)
|
|
|
Employee related
expenses (4)
|
|
|
3,156
|
|
|
|
1,155
|
|
|
|
692
|
|
|
|
574
|
|
|
|
735
|
|
|
Other items
(5)
|
|
|
(121)
|
|
|
|
(630)
|
|
|
|
300
|
|
|
|
209
|
|
|
|
-
|
|
|
Depreciation,
amortization, tax and interest expense
|
|
|
8,248
|
|
|
|
2,461
|
|
|
|
2,538
|
|
|
|
1,518
|
|
|
|
1,731
|
|
|
Total Non-GAAP
Adjustments
|
|
|
8,013
|
|
|
|
3,526
|
|
|
|
2,187
|
|
|
|
378
|
|
|
|
1,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted
EBITDA (6)
|
|
$
|
6,470
|
|
|
$
|
1,022
|
|
|
$
|
3,630
|
|
|
$
|
152
|
|
|
$
|
1,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other reductions
(7)
|
|
$
|
2,801
|
|
|
$
|
944
|
|
|
$
|
-
|
|
|
$
|
1,857
|
|
|
$
|
-
|
|
|
(1)
|
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.
|
|
|
|
(2)
|
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. The Company estimates that had the gain not occurred,
the Company would have recorded a tax benefit; therefore taxes of
$6.1 million are included in this line item.
|
|
|
|
(3)
|
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).
|
|
|
|
(4)
|
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).
|
|
|
|
(5)
|
Other items
includes: legal expenses associated with the Company's
defense against significant litigation matters; acquisition-related
expenses; expense relating to the settlement of all remaining Amigo
claims; and other non-recurring items.
|
|
|
|
(6)
|
Includes the results of
PWSC through the date of sale (end of July 2022).
|
|
|
|
(7)
|
The three months ended
3/31/2022 include a non-cash net charge of $0.9 million relating to
change in estimate in accounting for IWS deferred revenue and
deferred contract costs associated with vehicle service contract
administration fees. The three months ended 9/30/2021 include
a $1.9 million non-cash, cumulative reduction to service fee and
commission revenue relating to the finalization of the PWI purchase
accounting.
|
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
|
|
|
|
3/31/2023
|
|
|
3/31/2023
|
|
|
12/31/2022
|
|
|
9/30/2022
|
|
|
6/30/2022
|
|
|
GAAP Operating Income for Extended Warranty
segment
|
|
$
|
9,588
|
|
|
$
|
1,432
|
|
|
$
|
2,759
|
|
|
$
|
2,461
|
|
|
$
|
2,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income
(1)
|
|
|
665
|
|
|
|
231
|
|
|
|
193
|
|
|
|
145
|
|
|
|
96
|
|
|
Gain (loss) on sale of
core investments (2)
|
|
|
57
|
|
|
|
98
|
|
|
|
(23)
|
|
|
|
(2)
|
|
|
|
(16)
|
|
|
Depreciation
|
|
|
282
|
|
|
|
64
|
|
|
|
61
|
|
|
|
70
|
|
|
|
87
|
|
|
Total Non-GAAP
Adjustments
|
|
|
1,004
|
|
|
|
393
|
|
|
|
231
|
|
|
|
213
|
|
|
|
167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted EBITDA for Extended Warranty
segment
|
|
$
|
10,592
|
|
|
$
|
1,825
|
|
|
$
|
2,990
|
|
|
$
|
2,674
|
|
|
$
|
3,103
|
|
|
PWSC operating
(income) loss (3)
|
|
|
(590)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
147
|
|
|
|
(737)
|
|
|
PWSC depreciation
(3)
|
|
|
(33)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8)
|
|
|
|
(25)
|
|
|
Pro forma Non-GAAP adjusted EBITDA for Extended
Warranty segment
|
|
$
|
9,969
|
|
|
$
|
1,825
|
|
|
$
|
2,990
|
|
|
$
|
2,813
|
|
|
$
|
2,341
|
|
|
|
|
|
|
|
|
|
|
Twelve
Months
Ended
|
|
|
For the Three Months Ended
|
|
|
|
3/31/2022
|
|
|
3/31/2022
|
|
|
12/31/2021
|
|
|
9/30/2021
|
|
|
6/30/2021
|
|
|
GAAP Operating Income for Extended Warranty
segment
|
|
$
|
9,049
|
|
|
$
|
1,723
|
|
|
$
|
3,326
|
|
|
$
|
1,400
|
|
|
$
|
2,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income
(1)
|
|
|
236
|
|
|
|
76
|
|
|
|
52
|
|
|
|
66
|
|
|
|
42
|
|
|
Gain (loss) on sale of
core investments (2)
|
|
|
(2)
|
|
|
|
(4)
|
|
|
|
19
|
|
|
|
(18)
|
|
|
|
1
|
|
|
Depreciation
|
|
|
277
|
|
|
|
74
|
|
|
|
95
|
|
|
|
55
|
|
|
|
53
|
|
|
Total Non-GAAP
Adjustments
|
|
|
511
|
|
|
|
146
|
|
|
|
166
|
|
|
|
103
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted EBITDA for Extended Warranty
segment
|
|
$
|
9,560
|
|
|
$
|
1,869
|
|
|
$
|
3,492
|
|
|
$
|
1,503
|
|
|
$
|
2,696
|
|
|
PWSC operating income
(3)
|
|
|
(1,853)
|
|
|
|
(298)
|
|
|
|
(552)
|
|
|
|
(503)
|
|
|
|
(500)
|
|
|
PWSC depreciation
(3)
|
|
|
(37)
|
|
|
|
(11)
|
|
|
|
(11)
|
|
|
|
(7)
|
|
|
|
(8)
|
|
|
Pro forma Non-GAAP adjusted EBITDA for Extended
Warranty segment
|
|
$
|
7,670
|
|
|
$
|
1,560
|
|
|
$
|
2,929
|
|
|
$
|
993
|
|
|
$
|
2,188
|
|
|
Other reductions (4)
|
|
$
|
2,801
|
|
|
$
|
944
|
|
|
$
|
-
|
|
|
$
|
1,857
|
|
|
$
|
-
|
|
|
(1)
|
Investment income
arising as part of Extended Warranty segment's minimum holding
requirements
|
|
|
|
(2)
|
Realized Gains (losses)
resulting from investments held in trust as part of Extended
Warranty segment's minimum holding requirements
|
|
|
|
(3)
|
Amounts relating to the
sale of PWSC (end of July 2022) in order to remove PWSC from all
periods presented.
|
|
|
|
(4)
|
The three months ended
3/31/2022 include a non-cash net charge of $0.9 million relating to
change in estimate in accounting for IWS deferred revenue and
deferred contract costs associated with vehicle service contract
administration fees. The three months ended 9/30/2021 include
a $1.9 million non-cash, current period cumulative reduction to
service fee and commission revenue relating to the finalization of
the PWI purchase accounting.
|
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
|
|
|
|
3/31/2023
|
|
|
3/31/2023
|
|
|
12/31/2022
|
|
|
9/30/2022
|
|
|
6/30/2022
|
|
|
GAAP Operating
Income for KSX segment
|
|
$
|
4,319
|
|
|
$
|
1,577
|
|
|
$
|
1,126
|
|
|
$
|
723
|
|
|
$
|
893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee costs
(1)
|
|
|
267
|
|
|
|
87
|
|
|
|
70
|
|
|
|
55
|
|
|
|
55
|
|
|
Total Non-GAAP
Adjustments
|
|
|
267
|
|
|
|
87
|
|
|
|
70
|
|
|
|
55
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted
EBITDA for KSX segment
|
|
$
|
4,586
|
|
|
$
|
1,664
|
|
|
$
|
1,196
|
|
|
$
|
778
|
|
|
$
|
948
|
|
|
|
Six
Months
Ended
|
|
|
For the Three Months
Ended
|
|
|
3/31/2022
|
|
|
3/31/2022
|
|
|
12/31/2021
|
|
|
GAAP Operating
Income for KSX segment
|
|
$
|
1,290
|
|
|
$
|
806
|
|
|
$
|
484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee costs
(1)
|
|
|
126
|
|
|
|
55
|
|
|
|
71
|
|
|
Total Non-GAAP
Adjustments
|
|
|
126
|
|
|
|
55
|
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted
EBITDA for KSX segment
|
|
$
|
1,416
|
|
|
$
|
861
|
|
|
$
|
555
|
|
|
(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).
|
View original
content:https://www.prnewswire.com/news-releases/kingsway-reports-first-quarter-2023-financial-results-301820112.html
SOURCE Kingsway Financial Services Inc.