Kingsway Financial Services Inc

Roundhouse, Advanced Plumbing and Drain, and the HR team. We are excited to welcome all three to the KSX segment and to the Kingsway family. On August 14th, we completed our 12th KSX acquisition with the purchase of Southside Plumbing for a purchase price of $5.625 million plus a potential earn-out of up to $1.125 million for a total maximum purchase price of $6.75 million. At the time of acquisition, Southside Plumbing's unaudited pro forma annual revenue was $4 million, and its unaudited pro forma annual adjusted EBITDA was $900,000. Based in Omaha, Nebraska, Southside Plumbing is a leading provider of commercial and residential plumbing services. This transaction, which was sourced and led by Rob Casper, President of Skilled Trades, marks the third edition under our Kingsway Skilled Trades platform in 2025. We believe that Southside Plumbing has significant potential to accelerate growth through expanded marketing efforts and new service lines and to increase the proportion of sales that are recurring or reoccurring given the strong momentum in its service and repair operations. The Southside team has earned an exceptional reputation in its market for quality and service driving consistently robust growth in its core business. We are thrilled to partner with Josh Gruen, who is remaining with the company as president and maintaining an economic interest, ensuring an alignment of incentives and continuity of leadership. We look forward to supporting Josh and his team in upholding Southside Plumbing's longstanding legacy of excellence and reliability. Subsequent to quarter end, on October 20th, we welcomed Colter Hanson as our newest operator in residence, or OIR. His combination of military leadership, strategic consulting experience, and a passion for entrepreneurship make him an exceptional fit for our platform. Colter will conduct his search out of Minneapolis, where he intends to pursue an acquisition in the testing, inspection, and certification sector with a focus on the Midwest. Year to date, we have now acquired six high-quality asset light services businesses, exceeding our target of three to five per year. While that range remains an important benchmark, it is worth noting that it serves as a target, not a cap. Our primary objective is to remain disciplined investors focused on quality opportunities that meet our strict acquisition criteria and we continue to see a robust pipeline of attractive opportunities. With the addition of Coulter, we currently have three OIRs actively searching for our next platform acquisitions, in addition to our other KSX businesses, which are, in many cases, evaluating potential tuck-ins and inorganic growth opportunities themselves. We are energized by the pace and quality of acquisition activity. Finally, as of quarter end, our trailing 12-month adjusted run rate EBITDA for the businesses we own stands at approximately 20.5 million to 22.5 million. This metric provides a view of how the company would have performed over the last 12 months if Kingsway had owned all of our current businesses for that entire time. Gap results, in contrast, only capture the performance of acquired businesses from their respective close dates onward. We believe this metric is particularly relevant during periods of high M&A activity like the past few years and better reflects the run rate earnings power of our current portfolio of businesses. It's important to call out that in calculating this metric, we are not using modified cash EBITDA for our extended warranty businesses. As we have discussed in previous earnings calls, Many in the extended warranty industry, including our management team here at Kingsway, prefer to use a metric called modified cash EBITDA when assessing and valuing extended warranty businesses. This is because under GAAP accounting, growing extended warranty businesses often see their EBITDA penalized while shrinking extended warranty businesses often see their EBITDA boosted due to timing differences in how revenue and expenses are recognized. Kingsway's extended warranty businesses are in growth mode. Cash sales in our extended warranty businesses accelerated from up 9.2% year-over-year in Q2 to up 14.2% year-over-year in Q3. However, due to these timing differences, a gap has opened up between adjusted EBITDA and modified cash EBITDA, which widened further in the third quarter. This can be seen in the company's financial statements, where deferred service fees from extended warranty are up $2.8 million year over year. In addition, hundreds of thousands of dollars of commission expenses associated with issuing new warranty contracts have been booked up front. Over time, these timing differences even out, and adjusted EBITDA and modified cash EBITDA converge. We expect the same to occur for Kingsway. Our management team at Kingsway assesses the company's earnings power by looking at adjusted EBITDA for our KSX segment and modified cash EBITDA for our extended warranty segment. Using this framework, Kingsway today has the highest earnings power from its operations during my tenure as CEO. It's a remarkable place to be, though in many ways it feels like we're just getting started in our journey. To conclude, this was an excellent quarter for Kingsway. We grew overall revenue by 37%. Our KSX segment roughly doubled its revenue and adjusted EBITDA relative to last year, and our extended warranty segment once again performed well with resilient cash flow and accelerating cash sales. We remain focused on disciplined execution, scaling our KSX portfolio, and supporting our operator CEOs to deliver sustainable long-term growth. With that, I'll turn the call over to Kent for a closer look at our third quarter financial performance. Kent, over to you.

Thank you, JT, and good afternoon, everyone. For the third quarter, consolidated revenue was $37.2 million, an increase of 37% compared to $27.1 million in the prior year. Adjusted Consolidated EBITDA was $2.1 million for the three months ended September 30, 2025, compared to $3 million in the prior quarter. In our KSX segment, revenue increased by 104% to $19 million in Q3, up from $9.3 million in the same quarter a year ago. Adjusted EBITDA for KSX increased 90% to $2.7 million compared to $1.4 million in the year-ago quarter. Moving to our extended warranty segment, revenue increased by 2% to $18.2 million in the quarter, up from $17.8 million in the prior year period. Adjusted EBITDA for extended warranty was $800,000 in the current quarter compared to $2.1 million a year ago. As JT discussed earlier, however, the extended warranty segments modified cash EBITDA, a key industry metric, that more closely reflects the cash flow dynamics of warranty businesses was resilient as our extended warranty businesses continued to perform well. The improvement in cash sales in our extended warranty segment reinforces our confidence that GAAP earnings will recover over time as deferred revenue from our recent cash sales is recognized. Overall, the extended warranty segment remains cash generative and well positioned for continued success. Turning now to the balance sheet and the capital structure. As of September 30, 2025, the company had $9.3 million in cash and cash equivalents, up from $5.5 million at year-end 2024. Total debt was $70.7 million at quarter-end, compared to $57.5 million as of December 30, 2024. Our September 30 debt is comprised of $55.8 million in bank loans, $1 million in notes payable, and $13.1 million in subordinated debt. Net debt, or debt minus cash, at quarter end was $61.4 million, up from $52 million at year end 2024. The increase in net debt is primarily related to additional borrowings related to the recent acquisitions of Roundhouse and Southside Plumbing. I'll now turn the call over to JT for a few final thoughts before we open the line for questions. JT?

Thanks, Ken. To close, I'd like to express my thanks and appreciation to Kingsway's employees, partners, and shareholders. We have an amazing team, a wonderful set of operating businesses, and both KSX and Extended Warranty are performing well. This really was an exceptional quarter. The business and financial momentum is tangible, and we are positioned to finish the year strong. I'll now turn the call back over to the operator to open the line for questions. Morgan?