Kingsway's Q3 2025: Contradictions Emerge on Organic Growth Strategy, Extended Warranty Performance, Image Solutions, and Claims Expenses

Date of Call: November 6, 2025

Financials Results

• Revenue: $37.2M, up 37% YOY (vs $27.1M prior year)

Business Commentary:

* Revenue Growth and KSX Segment Performance: - Kingsway Financial Services reported consolidated revenue of $37.2 million for Q3 2025, up 37% year-over-year. - The KSX segment achieved revenue growth of 104% and adjusted EBITDA growth of 90%. -

- This growth was driven by the successful integration and performance of recent acquisitions.

• Extended Warranty Segment Dynamics:
• The Extended Warranty segment saw revenue increase by 2% to $18.2 million.
• Cash sales in this segment grew from up 9.2% year-over-year in Q2 to up 14.2% in Q3.

• Growth was attributed to strategic investments in sales and new customer acquisitions across different business units.

• Acquisition Activity and Pipeline:

• Kingsway acquired 6 high-quality asset-light services businesses in the first nine months of 2025, exceeding its target of 3 to 5 per year.
• The company completed its 12th KSX acquisition with the purchase of Southside Plumbing for $5.625 million.

• Thisactive acquisition strategy is supported by a robust pipeline of attractive opportunities.

• Operational Performance and Financial Momentum:

• Subsidiaries like Roundhouse and Kingsway Skilled Trades performed above underwriting expectations since acquisition.
• Image Solutions and DDI showed sequential EBITDA growth, indicating exit from their J-curves.
• This momentum is attributed to strategic investments in talent, systems, and operational efficiencies to drive organic growth.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • "I'm pleased to report an excellent third quarter... Revenues were up 37% year-over-year"; "KSX segment achieved stellar results with revenue growth of 104% and adjusted EBITDA growth of 90%"; CFO: "consolidated revenue was $37.2 million, an increase of 37%."

Q&A:

• Question from Mitchell Weiman (Sumner Financial Advisors Inc): JT, congrats on a great quarter. So a question for you. With the current environment with all the uncertainty regarding Medicare and reimbursements and everything, how is that going to affect secure nursing and digital diagnostics? Because you hear a lot of anecdotal evidence that hospitals are going to be having some issues going forward here.
  Response: Management: Hospitals face reimbursement pressure, but SNS is monitoring payer mix/geography and vetting hospital financials; they feel comfortable with SNS's customer mix and DDI has less Medicare/Medicaid exposure — both businesses are being actively monitored for credit risk.

• Question from Scott Miller (Greenhaven Road Investment Management, LP): JT, congratulations on all the progress. Basically, it seems like the key to this business is buying at reasonable multiples, doing it repeatedly and then driving organic growth. And the first 2 pieces, you've been buying at reasonable multiples. You've I think done 7 deals this year. So the repetition seems plausible. The organic growth, you called it out, I think, in the press release. Can you talk a little bit about kind of the type of organic growth you're seeing, what you think is possible, how it might differ across businesses?
  Response: Management: Organic growth is core to the flywheel; they invest to professionalize small businesses and target high-single-digit organic growth across acquisitions after initial J-curve investments in people, systems and sales.

• Question from Scott Miller (Greenhaven Road Investment Management, LP): Got it. That's very helpful. And can you talk a little bit about Image Solutions and what's driving the progress there? And yes.
  Response: Management: Image Solutions exited its J-curve after weathering a hurricane, professionalized IT/MSP operations, added leadership and sales capability, and is now driving recurring revenue growth.

• Question from Scott Miller (Greenhaven Road Investment Management, LP): And how big could a business like that be? Are there any like -- what's the ceiling on something like Image Solutions?
  Response: Management: IT MSP is a large, highly fragmented market growing high single digits; Image Solutions has organic and tuck-in scaling potential but will prioritize equity-capital-efficient expansion.

• Question from Scott Miller (Greenhaven Road Investment Management, LP): Got it. I think my last question is actually in vertical market software. Can you talk a little bit about the acquisition you guys made there? It seemed like it was an interesting setup in terms of -- there aren't a lot of players in the industry. I think you just took one out. I think you bought well. Can you talk a little bit about like kind of how that deal came to be and what you think it looks like going forward?
  Response: Management: They acquired a mission‑critical VMS from an operator who transitioned ownership; they're upgrading the application, investing in sales/ARR growth, and have already executed a small tuck-in (Australia) to expand footprint.

• Question from Mitchell Weiman (Sumner Financial Advisors Inc): Two more quick questions. On the OIRs, with the current infrastructure, what is the ideal number in your mind to have on board searching?
  Response: Management: Target is roughly 3–5 OIRs concurrently given support and capital constraints, but they expect to scale that number as systems and capital availability increase.

• Question from Mitchell Weiman (Sumner Financial Advisors Inc): Okay. And then one last question. On the skilled trades platform, we've come out of the gates pretty quick here and made 3 acquisitions. How do we look at that going forward? Is it going to be -- it's safe to assume a couple a year? Am I low in assuming that?
  Response: Management: No firm acquisition count guidance; but they expect a faster cadence in Skilled Trades because of an experienced operator (Rob) who can execute immediately without a steep J-curve.

• Question from James Carbonara (Hayden Ir, LLC): Can you please discuss how Roundhouse and the plumbing businesses are doing in the first quarter or 2 since acquiring them?
  Response: Management: Early results are at or above underwriting; Roundhouse and the plumbing businesses are performing well with experienced operators in place and minimal J-curve disruption.

• Question from James Carbonara (Hayden Ir, LLC): Cash sales are up a lot in Extended Warranty. Can you speak to what is leading to this growth?
  Response: Management: Cash sales growth driven by three dynamics — Trinity's ESA national account push (replacing lost large customers), IWS adding credit union partners (six consecutive quarters of cash‑sales growth), and PWI/Geminus improving rapidly under new management (Robbie Humble).

• Question from James Carbonara (Hayden Ir, LLC): Kingsway has an interesting structure. Why do you think search works in a public vehicle? And what are the advantages versus traditional search?
  Response: Management: Public search-program model brings permanent capital, sourcing/ops infrastructure, lender/seller credibility, repeatable deal flow via OIRs, and the ability to retain businesses long-term — advantages over traditional LP-funded searchers.

• Question from James Carbonara (Hayden Ir, LLC): You mentioned Roundhouse and Kingsway Skilled Trades have performed well since day 1 and are ahead of budget. What do you attribute that to? And is there a key learning that can be applied to the M&A process going forward?
  Response: Management: Outperformance largely due to experienced operators (no steep learning curve) and continuity of ownership/management (e.g., Lee staying at Roundhouse), which enables immediate execution post-close.

• Question from James Carbonara (Hayden Ir, LLC): If Image Solutions and DDI are exiting their J-curves, how do you manage that positive scenario, let them continue to perform, look for tuck-in M&A, increase the investment for organic expansion?
  Response: Management: Strategy is company-specific — Image Solutions (fragmented IT MSP) likely pursues tuck-ins; DDI (unique large addressable market) focuses on organic scaling after stabilization and professionalization.

• Question from James Carbonara (Hayden Ir, LLC): Can you speak to the testing, inspection and certification sector that Colter will be pursuing? Any market sizing and dynamics that you can share? And in success, do you envision that being a platform or non-platform-based strategy?
  Response: Management: TIC is large and fragmented with mid‑ to high‑single‑digit growth, regulatory and aging‑infrastructure tailwinds; it has platform potential depending on target and operator execution.

• Question from James Carbonara (Hayden Ir, LLC): How do you view KSX's search strategy moving ahead to pursue more aggressively platform opportunities or non-platform opportunities? Or do you even view them all as platforms?
  Response: Management: They underwrite for strong industry dynamics and business quality first, with optionality for platform-scale where appropriate (KST was explicit platform strategy; other businesses evaluated for platform potential).

Contradiction Point 1

Organic Growth Strategy and Targets

It involves the company's strategic focus on organic growth and the expected growth rates, which are crucial for projecting future financial performance and investor expectations.

Can you discuss the organic growth across your businesses and how they differ? - Scott Miller (Greenhaven Road Investment Management, LP)

2025Q3: Organic growth is central to our strategy, involving long-term secular trends and operational improvements. We aim for high single-digit organic growth potential. Growth varies by industry, with Image Solutions exiting its J-curve and showing significant potential. - John Fitzgerald(CEO)

Will the number of active Operators-in-Residence increase, and how strong is your OIR talent pipeline? - James Carbonara (Hayden IR)

2025Q2: We continue to believe we can achieve meaningful organic growth across our platform, and we expect to achieve high single-digit organic growth over the long term. - John Fitzgerald(CEO)

Contradiction Point 2

Extended Warranty Segment Performance

It highlights a discrepancy in the company's reported performance of the Extended Warranty segment, which could impact investor perceptions and financial forecasts.

What's driving the growth in cash sales in Extended Warranty? - James Carbonara (Hayden IR, LLC)

2025Q3: Growth is driven by improved sales teams, new accounts, and pricing adjustments. Trinity is performing well despite customer turnover. IWS has maintained growth with new credit union partners, while PWI and Geminus have seen significant growth under new management. - John Fitzgerald(CEO)

Can you explain why the adjusted run rate EBITDA of ~$17M (excluding 3 deals) is below Q1's $18M to $19M run rate EBITDA? - Christian Solberg (Sun Mountain Partners)

2025Q2: The shortfall is primarily due to the Extended Warranty segment's tough year-over-year comparison on a GAAP basis. - John Fitzgerald(CEO)

Contradiction Point 3

Search and Organic Growth Strategy

It involves the company's strategy regarding search and organic growth, which are key aspects of their growth strategy and financial projections.

Can you discuss organic growth trends across businesses and how they differ? - Scott Miller (Greenhaven Road Investment Management, LP)

2025Q3: Organic growth is central to our strategy, involving long-term secular trends and operational improvements. We aim for high single-digit organic growth potential. Growth varies by industry, with Image Solutions exiting its J-curve and showing significant potential. - John Fitzgerald(CEO)

Can you provide more details on the current M&A activity in the search sector? - James Carbonara (Hayden IR)

2025Q1: We have 3 active OIRs who are experienced in building M&A pipelines. In addition to these, we have platforms like Skilled Trades and VMS looking for bolt-on acquisitions. There are also opportunities for tuck-in acquisitions in other established businesses. - John Fitzgerald(CEO)

Contradiction Point 4

Image Solutions Growth and Acquisitions

It involves the company's expectations and strategy for growth for one of its business units, Image Solutions, which is an important part of their overall growth strategy.

How does Image Solutions' growth potential compare to other businesses? - Scott Miller (Greenhaven Road Investment Management, LP)

2025Q3: Image Solutions has potential for scalable organic growth, with a fragmented market and large industry size. It can also pursue tuck-in acquisitions to expand equity efficiently. - John Fitzgerald(CEO)

Are there other industries you might target for platforms? - James Carbonara (Hayden IR)

2025Q1: These are highly fragmented businesses with another, and we see them as being particularly interesting for platform investments, small tuck-in acquisitions in order to expand that equity, and for us to be able to trade up and combine those platforms over time. - John Fitzgerald(CEO)

Contradiction Point 5

Claims Expense Growth Rate

It involves differing explanations for the moderation of claims expenses and the expected growth rate, which impact financial forecasting and investor expectations.

What is the ideal number of OIRs currently in process? - Mitchell Weiman (Sumner Financial Advisors Inc)

2025Q3: Our claims inflation rate is now running below 2%. We're actually seeing a normalization in our claims expense. - John Fitzgerald(CEO)

Why are claims moderating, and what is a normal claims expense growth rate? - James Carbonara (e-mail)

2024Q3: Claims inflation rates were higher than what we had seen historically, and they have moderated back down to a more typical level. We expect our claims expense to mirror CPI increases. - John Fitzgerald(CEO)