Good day, and welcome to the Kingsway Financial Services Inc. First Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. With me on the call are JT Fitzgerald, Chief Executive Officer, and Kent Hansen, Chief Financial Officer. Before we begin, I want to remind everybody that today's conference may contain forward-looking statements. Forward-looking statements include statements regarding the future, including expected revenue, operating margins, expenses, and future business outlook. Actual results or trends could materially differ from those contemplated by those forward-looking statements. For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied, the forward-looking statements. Please see the risk factors detailed in the company's annual report on Form 10-Ks and subsequent Forms 10-Q and 8-K filed with the Securities and Exchange Commission. Please note also that today's call may include the use of non-GAAP metrics, which management utilizes to analyze the company's performance. A reconciliation of such non-GAAP metrics to the most comparable GAAP measures is available in the most recent press release as well as in the company's periodic filings with the SEC. Now I would like to turn the call over to JT Fitzgerald, CEO of Kingsway Financial Services Inc. JT, please proceed.

Thank you, Paul. Good afternoon, everyone, and welcome to the Kingsway Financial Services Inc. earnings call for Q1 2025. To our knowledge, Kingsway Financial Services Inc. is the only publicly traded US company employing the search fund model to acquire and build great businesses. We own and operate a diversified collection of high-quality service companies with great growth prospects, generate recurring revenue, and that are asset-light and profitable. Our goal is to compound long-term shareholder value on a per-share basis and we believe our business can scale due to our decentralized management model and our talented team of operator CEOs. We also continue to benefit from significant tax assets that enhance our returns. In short, Kingsway Financial Services Inc. is uniquely positioned to capitalize on the search fund model at scale within a tax-efficient public company framework. Since the start of the year, we've made meaningful progress in advancing our long-term growth strategy. In March, we completed the acquisition of privately held MLC Plumbing, known locally as Bud's Plumbing. A hundred-plus-year-old residential and commercial service and repair business based in Evansville, Indiana. The transaction was executed through our newly formed platform Kingsway Skilled Trades, which was created to capitalize on the large and fragmented universe of high-quality trade services businesses across North America. Bud's Plumbing exemplifies the type of high-quality cash-generative business we seek to bring into the Kingsway Financial Services Inc. family. We acquired it for $5 million plus transaction expenses and a small working capital adjustment. The acquisition was funded with cash on hand and a $1.25 million seller note. We're pleased to report that one of our operators in residence, Rob Casper, has assumed the role of CEO of Kingsway Skilled Trades while Bud's previous owner, Mark Korn, is staying on as president of Bud's for a one-year transition period. The addition of Bud's Plumbing contributes approximately $800,000 of annual adjusted EBITDA to our KSX segment on a run-rate basis. More recently, one of our wholly-owned subsidiaries, SPI Software, acquired Viewpoint, a leading cloud-native timeshare software provider focused on the vacation ownership market. Headquartered in Mount Waverley, Australia, Viewpoint strengthens SPI Software's leadership in the vacation ownership software market and expands its ability to deliver innovative cloud-based solutions to an even broader client base. This acquisition marks the second company added to our vertical market solutions software platform. It represents a strong strategic fit given the complementary nature of SPI and Viewpoint's offerings. Both organizations share a deep commitment to exceptional customer relationships and support. By bringing these two organizations together, we aim to accelerate their joint product roadmap and unlock new opportunities for geographic and market expansion. The Viewpoint acquisition adds over $1 million of unaudited annual recurring revenue and approximately $200,000 of unaudited EBITDA to our KSX segment on a run-rate basis. The acquisition was funded with cash on hand at SPI. On a combined basis, SPI Software and Viewpoint have ARR approaching $5 million, double-digit EBITDA margins, and have achieved rule of 40 status. Our operator CEO, Drew Richard, who is the president of SPI Software, is building a wonderful business, and we think he's just getting started. We're excited for what the future holds for both SPI Software and Viewpoint. Both the Bud's Plumbing and Viewpoint acquisitions enhance our KSX platform and provide additional levers for growth and long-term value creation. We also took steps to strengthen our leadership in corporate governance. During the quarter, we appointed two new independent directors to Kingsway Financial Services Inc.'s board, Adam Patinkin and Joshua Horowitz. Adam is the founder and managing partner of David Capital Partners and brings deep investment expertise as well as board experience with a high-growth private enterprise software company. Joshua is a managing director at Palm Management with over 23 years of experience in portfolio management and public company board service. Both individuals have a wealth of investment and operational experience that aligns well with our search accelerator strategy. We believe their addition to the board strengthens our oversight as we continue to scale Kingsway Financial Services Inc. and unlock long-term shareholder value. Turning to our business performance, we are encouraged by the results across both KSX and extended warranty. As a reminder, the first quarter is the seasonally weakest quarter of the year for a number of our operating subsidiaries. So we would expect to see some benefit from seasonality as we move past Q1. In KSX, revenue and adjusted EBITDA each grew 23% year on year. More importantly, however, many of our KSX businesses have built a strong foundation to accelerate growth on both the top line and bottom line. This is the classic J-curve of search. Post-acquisition, there's an investment period where a new operator invests in the business, hires great people, and builds the infrastructure to allow the business to scale. The company then reaches an inflection point where the strategic initiatives kick in, the investment pays off, and growth accelerates. For businesses like SNS and Image Solutions, it feels like that inflection point is getting awfully close. This makes me optimistic for the KSX growth path moving forward. We also saw encouraging signs in extended warranty. After two challenging years marked by industry headwinds and cyclical pressures, extended warranty appears to be entering a more favorable phase of recovery. Cash sales have returned to growth and were up 3.7% over the prior year and up 9.3% sequentially. Modified cash EBITDA, a commonly used metric in the warranty industry that more closely tracks the cash flow of warranty businesses, showed strong improvement. Trailing twelve months modified cash EBITDA in extended warranty was 11.7% higher at the end of Q1 2025 relative to the end of Q1 2024. While it's still early days in the recovery, the fact that Kingsway Financial Services Inc.'s extended warranty segment has not just stabilized but is now returning to top-line growth, is welcome news. As of quarter-end, our trailing twelve-month adjusted run-rate EBITDA for the businesses we own, including the pro forma contributions of recent acquisitions, stands at approximately $18 million to $19 million. This figure is intended to illustrate the earnings power of our current portfolio on a twelve-month trailing basis and is not meant as forward-looking guidance. Overall, we're encouraged by the momentum we're seeing in both KSX and extended warranty, and we remain focused on driving growth and profitability. With that, I'll now turn the call over to Kent for a closer look at our first-quarter financial performance.

Thank you, JT, and good afternoon, everyone. For the first quarter, consolidated revenue was $28.3 million, an increase of 8.4% compared to $26.2 million in the first quarter of 2024. This growth was driven by our Kingsway Financial Services Inc. search accelerator segment. Consolidated adjusted EBITDA declined $800,000 versus the prior year quarter, reflecting lower profitability in our extended warranty segment and higher holdcoat costs, primarily related to M&A expenses, partly offset by improved results at KSX. Breaking down performance by segment, in KSX, results were in line with our expectations. Revenue was $11.7 million in the first quarter, up 23.3% compared to $9.5 million in the same period last year. Adjusted EBITDA for KSX was $1.9 million, an increase of 23.3% year over year. I'll now provide a bit more detail on each of our KSX operating companies, other than SPI Software, which has already been discussed. Revix and C Suite, which are operated by common management and provide outsourced finance and CFO services, experienced a small year-over-year decline in revenue and a small year-over-year increase in adjusted EBITDA. We continue to be impressed by operator CEO, Timmy Oka, and believe there's opportunity for both organic and inorganic growth in this business. At SNS, our nurse staffing business, revenue grew by 7.5%, underpinned by a significant increase in travel nurse shifts that we believe is sustainable. While adjusted EBITDA declined slightly year over year, we are encouraged by the improving revenue momentum, and our view is that operating leverage is not far behind. After a challenging period for nurse staffing businesses over the last couple of years, we believe SNS has positioned itself for growth and is on the road to a significant recovery. DDI, our cardiac monitoring services provider, also delivered solid results. Revenue increased 10.9% year over year in Q1, driven by the successful addition of new customers. Adjusted EBITDA for DDI trailed the prior year quarter modestly as the company has been investing in additional talent and infrastructure to support future growth. We view these investments as positioning DDI to scale efficiently as demand increases. Finally, our results this quarter benefited from the inclusion of two businesses that were not in our portfolio a year ago: Image Solutions and Bud's Plumbing. The contributions from these recent acquisitions strengthen our platform and expand our capabilities in both technology-enabled services through Image Solutions and skilled trades through Bud's. We see meaningful potential for both of these businesses. Turning now to our extended warranty segment, first-quarter revenue was essentially flat at $16.7 million compared to the first quarter of 2024. While top-line growth was unchanged, it is important to note that cash sales, a leading indicator for future revenue, increased 3.7% year over year in Q1 and were up 9.3% sequentially from year-end. This uptick in cash sales reflects healthy underlying consumer demand for our warranty products. Extended warranty adjusted EBITDA for the first quarter of 2025 was $800,000, as compared to $1.4 million in the year-ago quarter. Despite the dip in reported adjusted EBITDA, we are encouraged by the momentum building in the extended warranty segment. As JT mentioned, the segment has returned to growth in cash sales, and trailing twelve-month modified cash EBITDA was up 11.7% year over year. As mentioned, modified cash EBITDA is a commonly used metric to evaluate the performance of warranty businesses as it more closely tracks the cash flows of the business. The recent healthy growth in this metric gives us confidence that GAAP earnings should rebound over time as deferred revenue from cash sales is recognized over future periods. In short, the extended warranty segment remains profitable, cash-generative, and positioned for future success. Let's briefly turn now to these three extended warranty businesses. IWS, our credit union-focused auto warranty business, had a strong first quarter with cash sales up more than 20% year over year. While adjusted EBITDA declined year over year, revenue was up and modified cash EBITDA was flat, mainly due to higher claims and operating expenses in the quarter than a year ago. IWS has been proactively adjusting pricing to mitigate higher claims inflation over the last few years, and we expect the combination of strong cash sales and pricing action to benefit IWS' earnings over time. Next is PWI and Penn, our dealer-focused auto warranty businesses. Both revenue and adjusted EBITDA were down year over year in the first quarter as a decline in earned premiums and higher operating expenses offset the benefit of lower claims incurred, but modified cash EBITDA actually increased in the quarter. At quarter-end, we appointed Robbie Humble as the new president and CEO of PWI and Penn. Robbie brings deep industry experience and a strong leadership track record. Notably, his background and incentives are aligned more closely with our KSX approach. In the handful of weeks he's been at the helm, Robbie has already attracted new leadership talent to the business. We are confident that under his direction, PWI and Penn will be reinvigorated to drive growth and improve results. Lastly, at Trinity, our mechanical equipment warranty and maintenance business, revenue was up in the first quarter, but this was outweighed by higher expenses in the seasonally low quarter for this business. About a year ago, we brought in a new sales leader for the maintenance business, and we are now seeing positive momentum. The team at Trinity is focused on improving the sales mix and managing costs, and we remain confident in the prospects for this business. Having recapped each of the businesses, let's now turn to the balance sheet and capital structure. In February, we completed a $6 million private placement issuing 240,000 shares of a new Class C convertible preferred stock. This capital raise provided the funds necessary to execute the Bud's Plumbing acquisition. Then in March, at the closing of the Bud's deal, we financed a portion of the purchase with a $1.25 million seller note to the former owner. That note is recorded as a note payable on our 03/31/2025 balance sheet. As of 03/31/2025, we held $6.4 million in cash and cash equivalents, up from $5.5 million at year-end. Total debt was $59.5 million at quarter-end, compared to $57.5 million as of 12/31/2024. This slight increase in debt primarily reflects the addition of the Bud's Plumbing seller note, as well as an increase in the Revix debt as we refinanced that debt and used the proceeds to pay off the original acquisition earn-out in full. Our debt consists of $45 million in bank loans, $1.1 million in notes payable, the seller note, which is held at fair value, and $13.4 million in subordinated debt. Net debt, or debt minus cash, at quarter-end was $53.1 million, up slightly from $52 million at year-end. Let me now turn things back over to JT for a few final thoughts before we open the line for questions.

Thanks, Kent. Before we go to Q&A, I just want to reiterate our excitement about the progress we're making. The addition of Bud's Plumbing and Viewpoint, the continued build-out of KSX, and the positive sales momentum in extended warranty all reinforce our conviction in our strategy. Our deal pipeline is robust. In fact, the most active it has ever been, which is reflected in the fact that we've already executed two deals in the first four months of the year. I'm excited for what the rest of 2025 holds in store for Kingsway Financial Services Inc. Finally, we'd like to remind everyone that we are hosting our annual investor day on Monday, May 19 at the New York Stock Exchange. We look forward to spending time with many of you walking through the building blocks of our strategy and introducing some of the leaders driving execution across our portfolio. In late-breaking news, I'm excited to report that Tom Joyce, the former CEO of Danaher and a member of our KSX advisory board, will be joining us on the nineteenth for a fireside chat. If you haven't already RSVP'd, please reach out to James Carbonara at [email protected]. The event will also be webcast if you can't participate in person. I'll now turn the call back over to Paul to open the line for any questions.

Thank you. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. You may press star 2 if you would like to remove the star keys. Once again, please press star 1 on your phone at this time if you wish to ask a question. And there were no questions currently from the line. So now I'd like to hand the call over to James Carbonara for some email questions.

Thank you, operator. Yes. A handful of questions did come in via email. The first one is the Viewpoint acquisition seems interesting. Could you please provide any color on how the transaction came about and why it might make sense strategically?

Yeah. Sure. How it came about, it was sourced by Drew at SPI. He developed a relationship with the former owners and advanced the conversation probably in the middle of the fourth quarter last year. In terms of why it makes sense strategically, I think you need to break it down, kind of look at it based on product customer profile and geography. To set the table, SPI is a hosted and on-prem software solution for enterprise customers predominantly in North America. Viewpoint, very differently, is a cloud-native software with smaller customers, in many cases, single-location resort operators in Asia Pacific and Australia. So when Drew was evaluating his strategy, there's a large segment in North America of smaller single-location property resort managers who are looking for a cloud-native software solution. He was looking to expand geographically to the Asia Pacific region and Australia for larger enterprise clients. So the combination of these two businesses solves a couple of problems. One, it gives Drew a cloud-native software solution for a segment that he was going after in North America without having to rewrite or write all that code. It also gives him access to a new geography for his enterprise solution. So we think it really makes a lot of sense. Thank you.

The next question is, can you please explain what you mean by the J curve with search acquisitions and how it works in practice?

Yeah. I spoke to it a little bit in the prepared remarks. I think that the J curve would be just the shape of a performance curve over time. And typically in a search fund acquisition, there's an element of bringing in, upgrading talent, professionalizing their processes, and investing in technology to get the business in a position to grow. That always has a negative impact on profitability in the first several quarters. I'd also say that there's probably a bit of a J curve on the operator. If you had on the vertical axis performance and on the horizontal axis time and you took two different graphs. One with, you know, kind of an experienced operator that would go up into the right at a modest slope. But if you have a very high attribute inexperienced operator, their performance could lag because they're going to make mistakes. However, those two curves cross in my experience somewhere around two to three years. The high attribute operator outperforms thereafter over time. So the search J curve is really two things: one is the impact on the company from investing in growth, and the other is the experience curve of the operator. High attribute operator requires patience before value creation is evident. So we're certainly seeing that at DDI and had that at Revix, SNS, and all of our businesses, Image Solutions as well as probably in the early stages of its J curve. But we have confidence in the attributes of the operator and the investments they're making in future growth.

Thank you. The next question is, you mentioned a robust deal pipeline. Can you share more about what you are seeing with respect to Search M&A?

Yeah. We have three OYRs right now that are all at full stride. They've been doing it a long time, and they are very good at building their M&A pipelines. We are excited about where they are in their gestation period, if you will. We also have a couple of platforms that are looking for bolt-ons. Skilled trades were formed specifically for doing transactions with a more experienced and high attribute operator. We just did an acquisition within VMS. You think about other businesses we own that have been operating for a while where that high attribute entrepreneur has now gained experience. In a fragmented market, there are lots of opportunities for tuck-in acquisitions. So, yeah, we're very excited.

Thank you. The next question states, can you speak to the reasoning for the owner of Bud's staying on as president for a one-year transition period? Could we see that replicated, with past owners staying on for years, as presidents of future acquisitions?

Yeah. I would say in search, that's very typical and actually desirable. If you think about the analogy of a horse racing analogy since we just had the Kentucky Derby, the industry is the track, the business is the horse, and the entrepreneur is the jockey. It's really helpful to have someone riding alongside that jockey for their first sort of lap around the track. That transition period involves transitioning customer relationships and transferring institutional knowledge, which is very valuable. We're grateful when owners want to hand over their baby, their legacy, to a young entrepreneur and work with them over a long transition period; it's a win-win. So, yes, I hope we would see that in future acquisitions.

Terrific. And the last question we have is with vertical market solutions, and now skilled trades, you have a couple of platforms. Are there any other industries you might target for platforms?

Yeah. It's an interesting question. For us, evaluating different industries is important; we have an internal game board. We think game selection is very important, and we sort of bifurcate our game board into two different types, taxonomies of industries. One is power law, which are high organic growth businesses. The other is rule of 10, which are maybe lower organic growth industries with higher levels of recurring revenue and are fragmented. The rule of 10 type industries would be places where we think it would make attractive platforms, where most of the growth might come from acquisition or inorganic growth. So there are a lot of interesting industries that could be compelling places to build a platform. Some that come to mind are insurance brokerage, wealth management RIA, and accounting services. We sort of own a platform there already; we don't call it that. The key is that it's got to be a great industry that would support growth via acquisition, but also have operator fit—that it's an industry where one of our OARs is really keen on spending their life.

Excellent. Thank you, JT, and Paul, that was the last question that we had coming in on email. I'll throw it back to you to close out the call.

Thank you. There were no other questions from the lines either, and that does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.