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Kingsway Reports First Quarter 2025 Financial Results

1. First Quarter revenue rose 8.4% to $28.3 million year-over-year. 2. Kingsway Search Xcelerator (KSX) revenue increased by 23.3% in Q1 2025. 3. Consolidated net loss widened to $3.1 million compared to $2.3 million last year. 4. Two acquisitions boost revenue and are expected to enhance EBITDA. 5. Management optimistic about the recovery in the Extended Warranty segment.

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FAQ

Why Bullish?

Strong revenue growth and strategic acquisitions show long-term business health. Previous events with similar revenue increases generally led to positive market responses.

How important is it?

Recent growth and acquisitions establish a positive trend indicating KFS's potential to increase in value. Market conditions improving for Extended Warranty also support stability.

Why Long Term?

New acquisitions will have compounding effects over time, improving future earnings. Similar companies have benefited after consolidations and growth in service sectors.

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KFS
Management to Host Conference Call Today at 5 p.m. ET (NYSE:KFS) Kingsway Financial Services Inc. ("Kingsway" or the "Company"), the only publicly-traded US company employing the Search Fund model to acquire and build great businesses, today announced its operating results for the three months ended March 31, 2025.First Quarter 2025 Consolidated Financial HighlightsConsolidated revenue increased 8.4% to $28.3 million for the three months ended March 31, 2025, compared to $26.2 million in the prior year periodKingsway Search Xcelerator ("KSX") revenue increased 23.3% to $11.7 million in the first quarter of 2025, compared to $9.5 million in the first quarter of 2024, primarily due to the Image Solutions and Bud's Plumbing acquisitionsExtended Warranty revenue remained flat at $16.7 million in the first quarter of 2025, unchanged compared to the first quarter of 2024; however, cash sales were up 3.7% over prior year and up 9.3% sequentiallyConsolidated net loss was $3.1 million for the three months ended March 31, 2025, compared to a net loss of $2.3 million in the prior year periodTwelve month run-rate adjusted EBITDA for the operating companies is $18.0 million to $19.0 million; this number is intended to capture the 12-month trailing adjusted EBITDA of what the company currently owns or has recently acquired and is not intended to be forward-looking guidanceAdjusted consolidated EBITDA decreased $0.7 million to $1.4 million for the three months ended March 31, 2025, compared to $2.1 million in the prior year periodKSX adjusted EBITDA was $1.9 million in the first quarter of 2025 compared to $1.6 million in the year ago period. The prior year period excludes Image Solutions and Bud's PlumbingExtended Warranty adjusted EBITDA was $0.8 million in the first quarter of 2025 compared to $1.4 million in the year ago periodThe Company had total net debt of $53.1 million as of March 31, 2025, compared with $52.0 million as of December 31, 2024Recent Business HighlightsOn March 17, 2025, Kingsway announced the acquisition of M.L.C. Plumbing, LLC (d/b/a Bud's Plumbing Service, "Bud's Plumbing") for $5.0 million. The business is immediately accretive, adding $6.0 million in annual unaudited revenue and $0.8 million in annual unaudited adjusted EBITDA to KingswayOn April 2, 2025, Kingsway announced the appointment of Rob Humble to be President and CEO of Kingsway's dealer warranty businesses, PWI and Penn Warranty. Mr. Humble's background and compensation structure are both more closely aligned with that of Kingsway's Search Xcelerator CEO'sOn April 30, 2025, Kingsway announced the acquisition of @Work International Pty Ltd ("ViewPoint"), a cloud native timeshare software firm headquartered in Australia, by Kingsway's subsidiary Systems Products International Inc. ("SPI Software"), to advance SPI Software's leadership in the vacation ownership software marketManagement Commentary"Kingsway made solid progress in the first quarter of 2025, both financially and strategically," said JT Fitzgerald, Kingsway's President and CEO. "KSX revenue grew 23.3% year-on-year and KSX adjusted EBITDA grew 23.2% year-on-year. Under the surface, our operator CEO's are executing their strategic plans to position their businesses for accelerating growth on both the top and bottom lines."Importantly, Kingsway has already completed two acquisitions this year under the KSX umbrella. In March, Kingsway acquired Bud's Plumbing and established KSX Skilled Trade Services, our third KSX operating platform. In April, SPI Software acquired ViewPoint to accelerate its product roadmap and to open up exciting opportunities for geographic and market expansion. I'm thrilled to welcome Rob Casper, who leads the KSX Skilled Trades Services platform, as our newest operator CEO, and to continue supporting Drew Richard, President of SPI Software, who leads the KSX Vertical Market Solutions platform."I'm also encouraged by the momentum building in Kingsway's Extended Warranty segment. Although adjusted EBITDA declined year-over-year in the first quarter, the business has returned to growth in cash sales, and key forward-looking indicators of profitability are now solidly positive. After two challenging years marked by industry headwinds and cyclical pressures, Extended Warranty appears to be entering a more favorable phase of recovery, with early signs pointing to both healthy top-line growth and renewed operating leverage."Kingsway is well-positioned for the months and years ahead, and the first quarter was another step in the right direction," concluded Mr. Fitzgerald. "Our KSX deal pipeline is robust, and we remain committed to employing the Search Fund model to acquire and grow asset-light, profitable, and recurring revenue services businesses that can deliver compelling returns for our shareholders."Conference Call and WebcastManagement 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: [email protected].Conference Call InformationDate: Thursday, May 8, 2025Time: 5 p.m. Eastern TimeToll Free: 877-545-0523; Code: 131755International: 973-528-0016; Code: 131755Live Webcast Link: https://bit.ly/3YykRi9Conference Call Replay InformationToll Free: 877-481-4010International: 919-882-2331Replay Passcode: 52464Replay Webcast Link: https://bit.ly/3YykRi9About the CompanyKingsway Financial Services Inc. ("Kingsway") (NYSE:KFS) is the only publicly-traded US company employing the Search Fund model to acquire and build great businesses.Kingsway owns and operates a collection of high-quality B2B and B2C services companies that are asset-light, growing, profitable, and that have recurring revenues. Kingsway seeks to compound long-term shareholder value on a per share basis via its decentralized management model, its talented team of operators, and its tax-advantaged corporate structure.Non U.S. GAAP Financial MeasureManagement 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 StatementsThis 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 2024 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 InformationAdditional 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 IRJames Carbonara(646) 755-7412[email protected]For Company Inquiries:Kingsway Financial Services Inc.Kent Hansen, CFO(312) 766-2163[email protected]Kingsway Financial Services Inc.Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted Consolidated EBITDA(in thousands)(UNAUDITED)Twelve Months EndedFor the Three Months Ended3/31/20253/31/202512/31/20249/30/20246/30/2024GAAP Net Income (Loss)$(9,059)$(3,092)$(1,470)$(2,311)$(2,186)Non-GAAP Adjustments:Discontinued operations(31)-1135(167)Changes in fair value; realized gains/losses (1)(173)(22)(35)(176)60Employee related expenses (2)2,287495390990412Other items (3)2,8661,095225956590Depreciation, amortization, tax and interest expense13,9952,8764,1173,3433,659Total Non-GAAP Adjustments18,9444,4444,6985,2484,554Non-GAAP Adjusted Consolidated EBITDA$9,885$1,352$3,228$2,937$2,368Twelve Months EndedFor the Three Months Ended3/31/20243/31/202412/31/20239/30/20236/30/2023GAAP Net Income (Loss)$(6,155)$(2,328)$(1,485)$(675)$(1,667)Non-GAAP Adjustments:Discontinued operations1,8582131,877(122)(110)Changes in fair value; realized gains/losses (1)(423)411217174(1,225)Employee related expenses (2)2,069467755479368Other items (3)3,109611,0813341,633Gain on sale of PWSC (4)(342)--(342)-Depreciation, amortization, tax and interest expense8,6873,2801772,4502,780Total Non-GAAP Adjustments14,9584,4324,1072,9733,446Non-GAAP Adjusted Consolidated EBITDA$8,803$2,104$2,622$2,298$1,779(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 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; and other non-recurring items.(4)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 toNon-GAAP Adjusted EBITDA and Pro Forma Non-GAAP Adjusted EBITDA(in thousands)(UNAUDITED)Twelve Months EndedFor the Three Months Ended3/31/20253/31/202512/31/20249/30/20246/30/2024GAAP Operating Income for Extended Warranty segment$5,381$515$1,918$1,704$1,244Non-GAAP Adjustments:Investment income (1)1,289247394327321Employee costs5050---Depreciation17438394156Total Non-GAAP Adjustments1,513335433368377Non-GAAP adjusted EBITDA for Extended Warranty segment$6,894$850$2,351$2,072$1,621Twelve Months EndedFor the Three Months Ended3/31/20243/31/202412/31/20239/30/20236/30/2023GAAP Operating Income for Extended Warranty segment$6,627$1,076$2,381$1,778$1,392Non-GAAP Adjustments:Investment income (1)1,189320314287268Depreciation23352625762Total Non-GAAP Adjustments1,422372376344330Non-GAAP adjusted EBITDA for Extended Warranty segment$8,049$1,448$2,757$2,122$1,722(1) Investment income arising as part of Extended Warranty segment's minimum holding requirements, as well as realized gains and 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 EndedFor the Three Months Ended3/31/20253/31/202512/31/20249/30/20246/30/2024GAAP Operating Income for KSX segment$6,062$1,743$1,734$1,144$1,441Non-GAAP Adjustments:Acquisition and employee costs (1)3765265120139Investment income (2)15325332768Depreciation48897101110180Total Non-GAAP Adjustments1,017174199257387Non-GAAP adjusted EBITDA for KSX segment$7,079$1,917$1,933$1,401$1,828Twelve Months EndedFor the Three Months Ended3/31/20243/31/202412/31/20239/30/20236/30/2023GAAP Operating Income for KSX segment$5,018$1,343$1,056$1,003$1,616Non-GAAP Adjustments:Acquisition and employee costs (1)4311381288778Investment income (2)5410121517Depreciation (3)886424--Total Non-GAAP Adjustments57321216410295Non-GAAP adjusted EBITDA for KSX segment$5,591$1,555$1,220$1,105$1,711(1)Costs associated with acquisitions and 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 accountingSOURCE: Kingsway Financial Services, Inc.

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