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, 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 services 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…

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…

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 James@HaydenIR.com. 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 and its former owners. And advanced the conversation and in I think, probably middle of the fourth quarter last year. In terms of why it makes sense strategically, I think you gotta break it down, kind of look at it based on product customer profile, and geography. And so just sort of to set the table, SPI is a hosted and on-prem software solution for enterprise customers predominantly in North America. And Viewpoint, very differently is a cloud-native software with smaller customers, single location in many cases, resort operators in Asia Pacific and Australia. And 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. And he looking sort of to expand geographically, envied 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. And 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 sort of the shape of a performance curve over time. And typically in a search fund acquisition, you know, there's an element of bringing in, upgrading talent professionalizing their processes, investing in technology, to get the business in a position to grow. And 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 sort of the operator. And I'm trying to paint a picture. We've talked about this in the past. If you had on the vertical axis performance and on the horizontal axis time. And you took two different two different graphs. One with, you know, kind of an experienced operator that would sort of go up into the right at a modest slope. But if you have like a very high attribute inexperienced operator, their performance because they don't they're gonna make mistakes and things. They will it will lag experienced operator for a period of time. But those two curves cross in my experience, somewhere around two to three years. And high attribute operator outperforms thereafter over time. And 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 sort of experience curve of the operator. High attribute operator. And so what that all means is that it requires patience before value creation is evident. So we're certainly seeing that at DDI and had that at Ravix. SNS. 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. You look. We have three OYRs right now that are all at full stride. Right? They've been doing it a long time. And so they they are very good at building their M&A pipelines. And so we're really excited about where they are in their gestation period, if you will. And then we also have a couple of platforms that are looking for bolt-ons. Right? You know, I think skilled trades were formed specifically for doing transactions with a more experienced and high attribute operator. We just did an acquisition within VMS. And there are Cub Meal. You think about other businesses own that have been operating for a while where that high attribute entrepreneur has now got experience. In a fragmented market. They're there are also lots of opportunities for tuck-in acquisitions there. So, yeah, we're we're we're 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 past owner staying on for years president with future acquisitions?

Yeah. I would say in search, that's that's very typical and and actually desirable. If you think about the analogy of kind 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. You know, it's really helpful to have someone riding alongside that jockey for their first sort of lap around the track. And and so it that transition period, you know, transitioning customer relationships, transfer of all of that institutional knowledge in that in that organization, very valuable. So we're really grateful when owners wanna hand over their their baby, their legacy to a young entrepreneur and work with them over a long transition period. It's just really a win-win. So, yes, I mean, I I mean, hope that we would see that on 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. So it's an interesting question. It's a good question. So, you know, what is a platform for, you know, For us, sort of evaluate different industries And we have, like, an internal game board We think game selection is very important and we we sort of bifurcate our game board into two different sort of types, taxonomies of industries. One is power law and those are like high organic growth businesses. And the other is rule of 10 which are maybe lower organic growth industry higher level of recurring revenue, and and very fragmented. And so the rule of 10 type industries would be places where we would think would make attractive platforms where most of the growth might come from acquisition inorganic growth. And so there are a lot of interesting industries that could be compelling places to build a platform. Some that come to mind, insurance brokerage, wealth management RIA, accounting services. We sort of own a platform there already. We don't call it that. And the key there is that it's got to be a great industry that would support growth via acquisition, but also operator fit. Right? That it's gotta be an industry where one of our OARs is really keenly interested in in 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. And there were no other questions from the lines either. And that does conclude today's conference. And you may disconnect your lines at this time. Thank you for your participation.