KFS - NYSE
Kingsway Financial Services Inc.
KFS·NYSE
$10.23
-0.098%Consumer CyclicalAuto - Dealerships
Kingsway Financial Services Inc., through its subsidiaries, engages in the extended warranty business services, asset management, and real estate businesses. The company operates through three segments: Extended Warranty, Leased Real Estate, and Kingsway Search Xcelerator. The Extended Warranty segment markets, sells, and administers vehicle service agreements and related products for new and used automobiles, motorcycles, and ATVs. This segment also sells new home warranty products, as well as offers uninsured warrant administration services to homebuilders and homeowners; markets and distributes warranty products to manufacturers, distributors, and installers of heating, ventilation and air conditioning, standby generator, commercial LED lighting, and commercial refrigeration equipment; and provides equipment breakdown and maintenance support services to companies. The Leased Real Estate segment owns a parcel of real property consisting of approximately 192 acres located in the State of Texas. The Kingsway Search Xcelerator offers outsourced finance and human resources consulting services, including operational accounting, such as bookkeeping, accounting, financial reporting, and analysis and strategic finance services; technical accounting comprising initial public offerings, SEC reporting, and international consolidation services; human resources, workforce management, and compliance support services; and advisory services. The company offers its products and services through credit unions, dealers, homebuilders, and consumers. Kingsway Financial Services Inc. was incorporated in 1989 and is based in Itasca, Illinois.
At a Glance
Live SnapshotMarket Cap$292.84M
EPS-0.4300
P/E Ratio-34.92
Earnings Date08/06/2026
Earnings Call Transcript
KFS • 2026 • Q1
Operator
Good day, and welcome to the Kingsway first quarter 2026 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 J.T. Fitzgerald, Chief Executive Officer, and Kent Hansen, Chief Financial Officer. Before we begin, I want to remind everyone that today's conference call 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 of trends could materially differ from those contemplated by those forward-looking statements.
Operator
For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see the risk factors detailed in the company's annual report on the forms 10-K and subsequent forms 10-Q and forms 8-K filed with the Securities and Exchange Commission. Please note also that today's call may include the use of non-GAAP metrics that 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 hand the call over to J.T. Fitzgerald, CEO of Kingsway. J.T., please proceed.
J.T. Fitzgerald
Thank you, Holly. Good afternoon, everyone, welcome to the Kingsway earnings call for the first quarter of 2026. Fund model to acquire and build great businesses. We own and operate a diversified collection of high-quality services companies. Compound long-term shareholder value on a per share basis. We also continue to benefit from significant tax assets that enhance our returns. In short, Kingsway is uniquely positioned within a tax-efficient public company framework. KSX segment and our Extended Warranty Segment. March stood out as a particularly good month, we see clear business momentum across our portfolio entering what are seasonally stronger summer months for many of our businesses. As a result, we are pleased to reiterate our expectation for double-digit organic growth in revenue and profit at both KSX and Extended Warranty.
J.T. Fitzgerald
We are also pleased by our acquisition pipeline, which remains robust. We already have one acquisition under our belt in 2026 with the tuck-in purchase of Ledgers by our subsidiary, Ravix Group. We continue to anticipate completing 3 to 5 acquisitions in 2026 in line with our target. Before turning the call over to Kent for a review of our financials, I would like to provide additional color on three key topics: operating performance, capital markets, and corporate governance. Let's start with operating performance. As mentioned, both our KSX and Extended Warranty segments came in ahead of our internal expectations in the first quarter. I was particularly encouraged, however, by how broad-based the performance was across our portfolio. The KSX segment achieved record quarterly adjusted EBITDA of $3.5 million in Q1.
J.T. Fitzgerald
The first quarter is seasonally lighter for many of our operating companies compared to the stronger summer months, which positions KSX for even better results in the quarters ahead as seasonal tailwinds kick in. Roundhouse had another strong quarter and continues to execute well. Demand from natural gas infrastructure customers is robust, especially in the context of recent geopolitical events, and our team at Roundhouse is racing to keep up. March was record-setting for Roundhouse, with monthly revenue above $2 million for the first time ever under Kingsway's ownership. IS Techonology had a great quarter with substantial top-line and bottom-line gains relative to the year-ago quarter. All three service lines were up year-over-year, and the combination of a fully staffed sales team and a stronger commercial footing are now paying off as business momentum accelerates.
J.T. Fitzgerald
Within Kingsway Skilled Trades, Bud's Plumbing had an excellent quarter with healthy growth relative to the prior year. Southside and Triple A are still in their investment phase, but we believe both companies are poised to accelerate financial performance as they enter the seasonally strong Q2 and Q3 periods. SPI was up significantly versus the prior year, reflecting both solid execution and healthy demand in the market it serves. Annual recurring revenue increased over 45% from the prior year quarter, and retention metrics were strong with gross revenue retention of 97% and net revenue retention well over 100%, reflecting both pricing and expansion with existing customers. DDI came in ahead of budget and continued to gain traction with new customers. After a period of investment, DDI is poised for a strong second half as DDI converts last year's operational work into this year's commercial momentum.
J.T. Fitzgerald
Ravix Group came in well ahead of budget in Q1. 2025 was a challenging year for Ravix Group, but with a more diversified customer base and a refreshed commercial strategy, we believe Ravix Group has good momentum and will return to growth in Q2 and beyond. We remain confident in the Ravix Group platform and see meaningful long-term opportunity in this business. Overall, this was a strong quarter for the KSX segment, with performance that was broad-based rather dependent on one or two bright spots. KSX is off to a great start in 2026 with more to come. An extended warranty modified cash EBITDA came in ahead of internal expectations, and cash sales were up 11.8% year-over-year. The growth was both volume and price-driven. VSC contracts sold were up low single digits, and revenue per contract increased high single digits year-over-year.
J.T. Fitzgerald
The combination of strong top-line growth and moderating claims growth supports our view that extended warranty is on track for an excellent year. Next, let's touch on capital markets. At the end of March, Kingsway announced that our board of directors had proposed a name change to Kingsway Corporation and a proposed stock ticker change to KWY, which are intended to better reflect the company's business evolution and long-term strategy. The proposed name change is subject to shareholder approval at the company's upcoming annual general meeting of shareholders scheduled for May 18th. We have consistently heard from investors that Kingsway Financial Services no longer accurately describes the company's operations and creates unnecessary confusion in the capital markets, particularly given our exit from the insurance business nearly a decade ago. This change is an important step towards simplifying and clarifying the Kingsway equity story.
J.T. Fitzgerald
Following approval of the proposed name change, we intend to move expeditiously to effectuate both the name change and the stock ticker change to KWY. Importantly, the company's CUSIP number will not change. We also look forward to working closely with the major financial data and index providers to ensure the investment community can quickly and accurately understand Kingsway's business and strategy. In the months ahead, we expect to relaunch Kingsway's brand, corporate identity, and website. Please stay tuned for more details on this exciting update. I would also like to draw attention to an update we made to our face financial statements, starting with our Form 10-Q for this quarter. In the past, Kingsway's face financials have read like those of an insurance company, which has been challenging to decipher for many investors.
J.T. Fitzgerald
As Kent will explain in greater detail, our face financial statements have been updated to better reflect the service business model of our KSX segment, which now represents the majority of the company's revenue and profit. We believe this is a positive change that will make Kingsway's financial statements more readable and accessible to the investment community. Finally, corporate governance. I'm thrilled to share that Adam Patinkin was recently elected chairman of Kingsway's board of directors. Adam has played an important role in Kingsway's evolution and has been a valued partner to the management team and the board. We're pleased to have his continued leadership in this role, and his experience and perspective will be welcome as we seek to build a far larger, more profitable, and more valuable Kingsway.
J.T. Fitzgerald
I'm also delighted that Terry Kavanagh, who served as board chairman the last 12 years, accepted Adam's request to continue to serve as vice chairman of the board. It makes for a smooth transition and positions Kingsway to achieve our financial and strategic ambitions in the months and years ahead. The entire company is thankful for Terry's many years of service as chairman and grateful for the continued wisdom and counsel he provides. With that, I'll turn the call over to Kent to walk through the financial results in more detail.
Kent Hansen
Thanks, J.T., and good afternoon, everyone. For the first quarter of 2026, consolidated revenue increased 37.4% to $39 million, compared with $28.3 million in the first quarter of 2025. Within that total, KSX revenue increased 80.7% to $21.1 million, compared with $11.7 million in the prior year quarter. Extended warranty revenue increased 7.2% to $17.9 million, compared with $16.7 million a year ago. As J.T. mentioned, extended warranty cash sales increased 11.8%, positioning our extended warranty segment for continued double-digit organic top-line growth in 2026. Consolidated net loss for the quarter was $2.2 million, compared with a net loss of $3.1 million in the first quarter of 2025.
Kent Hansen
Consolidated adjusted EBITDA for the quarter was $2.4 million, compared with $1.4 million in the prior year quarter. Turning to segment profitability, KSX adjusted EBITDA increased by 82% to $3.5 million, compared with $1.9 million in the first quarter of 2025. Extended warranty adjusted EBITDA was $0.4 million, compared with $0.9 million a year ago. Portfolio LTM EBITDA for the operating companies was $22 million-$23 million as of March 31, 2026. We continue to view this as a useful measure of the trailing earnings capacity of the operating portfolio and one that aligns with how we assess the business internally. Turning to the balance sheet, total net debt was $63.9 million as of March 31, 2026, compared with $62.4 million at December 31, 2025.
Kent Hansen
As J.T. mentioned, we completed an update of our face financial statements as reported in today's filing with the SEC and Form 10-Q. Specifically, Kingsway's income statement has been updated to better reflect a business services operation by including gross profit, breaking out depreciation, and simplifying other line items. Kingsway's balance sheet has also been updated to a classified balance sheet with a clear breakout between short-term and long-term assets and liabilities. We believe this update better reflects our current operation as KSX is now the majority of Kingsway's revenue and profit and will make our financial statements more readable and accessible to investors. I personally would like to express a big thank you to our Kingsway accounting team, especially Kelly Marchetti and Nancy Voyles, as well as our external service providers, for working together to implement this positive update that should be helpful to investors going forward.
Kent Hansen
With that, I'll turn it back over to J.T., J.T.
J.T. Fitzgerald
Thanks, Kent. Overall, the first quarter came in ahead of our internal expectations, and we're encouraged by our business momentum as we enter the seasonally strong summer months. Our performance was broad-based and provides us with confidence in reaching our 2026 targets. Kingsway is off to a great start with lots more to come. Finally, before moving to Q&A, I'd like to remind everyone that we are hosting our annual Investor Day on Monday, May 18th, at the New York Stock Exchange. The theme of the day is from theory to action, and we plan to tie together the theory of the search fund model and the Kingsway business system to the tangible business results of our operating companies.
J.T. Fitzgerald
To that end, I am pleased to share that joining us at our Investor Day will be Miles Mamon, the CEO of Roundhouse, and Davide
J.T. Fitzgerald
Good question. I would say that I think it starts with the secular tailwinds that we knew were in place when we made the investment. Those being one, increased natural gas activity in the Permian Basin, and continued build-out of the infrastructure to support midstream gas transmission, which were the motors that we service are in place. Combined with an ongoing shift away from legacy gas-powered motors to electric motors. That would be kind of the two secular tailwinds. I think, for the business itself, we saw very strong momentum in the field service service line, which is a unique specialty that Roundhouse has being in Odessa in quick contact with the installed base there.
J.T. Fitzgerald
I think the story with DDI that we talked about in the prepared remarks was kind of speaking to the natural sort of operator journey in these small businesses, which is stabilize and then build the foundation and then grow. You gotta kind of build a foundation that creates reliability and quality and earn the right to grow. Late last year and early this year, starting from zero, basically, the company didn't have any outbound sales function. They have built a sales process and have begun building kind of top of the funnel, mid-funnel, and actually onboarding new hospitals. We're pretty excited about the activity there and have visibility into a nice pipeline that gives us confidence in the second half.
J.T. Fitzgerald
Yeah, well, that's a great plug for our investor day. I think we'll probably dive into that again on the 18th. Yeah, I would say I think that we're learning the value of what I would call compounding learning, which is very valuable. I think we're getting better and better and learn more and more, whether that's on OIR selection, acquisition underwriting and diligence and closing. Operationally, I think the sort of compounding effect over time of the learning engine of both us at the holding company, but more importantly, our very talented young CEOs is just really a powerful force. I think we're also compounding talent, right?
J.T. Fitzgerald
I think that with every new acquisition, you know, every new OIR, both, you know, the kind of their capabilities are compounding, but it is also allowing us to attract an even higher caliber of candidates to the platform. Compounding learning and compounding talent. I think as the portfolio has grown, I think the model works. You know, our decentralized model, as it grows, we'll continue to see, you know, more operating leverage from the kind of hold co expense over a much broader base of businesses, which is exciting. I would say that maybe we didn't fully appreciate this when we first started, but I am seeing now sort of the flywheels within the flywheel, right? We think of Kingsway as a large flywheel.
J.T. Fitzgerald
Okay. Well, thanks, everyone. I appreciate it. I think it was a strong first quarter. Sets us up well for a great year, and I hope to see everybody, or, you know, as many of you as possible at the investor day in New York in a couple of weeks.
Transcript from May 7, 2026
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