Kingsway Corporation · NYSE:KWY
Kingsway — Kingsway Financial Services — Investor Presentation (December 2022)
32 slides from Kingsway's investor presentation, December 2022
Slide 1: Investor Presentation
NYSE: KFS Investor Presentation December 2022 Efficient Operations, Thoughtful Capital Allocation
Slide 2: Forward-Looking Statements
Forward-Looking Statements | 2 This presentation includes "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 res
Slide 3: Representatives
Representatives | 3 John T. Fitzgerald Kent Hansen President, CEO, and Director Chief Financial Officer Mr. Fitzgerald has served as CEO of Kingsway since September 2018. Mr. Hansen has served as CFO of Kingsway’s subsidiary, Kingsway Mr. Fitzgerald joined Kingsway as Executive Vice President on Apr
Slide 4: Investment Highlights
Investment Highlights | 4 1 A collection of recurring revenue, high margin, asset-light businesses 2 Adjusted EBITDA Run-rate of approximately $18 to $19 Million(1) 3 Approximately $792 Million(2) in Net Operating Losses (NOLs) for tax-advantaged cash flow 4 Disciplined M&A via Xcelerator “Search Fu
Slide 5: Solid Operating Companies
Solid Operating Companies | 5 Core businesses are asset-light, generate recurring revenue that operate in growing industries Operating Companies Other Assets Extended Warranty Search Xcelerator Leased Real Estate 9/30/22 TTM Revenue 9/30/22 TTM 9/30/22 TTM $76.3M(1) Revenue $15.6M(2) Revenue $14.3M
Slide 6: Strategy
Strategy | 6 Further refining operating businesses to increase Continually search for acquisition opportunities profitability that meet our criteria Organic growth Extended Warranty • Opportunistic M&A of 'add-ons' and new distribution • Leverage existing networks platforms • Use incentives to incre
Slide 7: Extended Warranty
| 7 So Extended Warranty ——————_——$—$——$——__—
Slide 8: Extended Warranty Industry
Extended Warranty Industry | 8 A Scalable, High-Margin, Low Capital Intensity Business = Enduringly High ROTC Warranty Industry Advantages Large and Growing Estimated at over $121B globally and forecast to grow at 7.4% CAGR through 2027(1) Fragmented Management estimates that top companies in indust
Slide 9: Kingsway's Extended Warranty Subsidiaries
Kingsway’s Extended | 9 Warranty Subsidiaries Auto Mechanical iwsgroup.com preferredwarranties.com pennwarranty.com trinitywarranty.com Founded in 1991 Founded in 1992 Founded in 1988 Founded in 2009 Acquired in 2012 Acquired in 2020 Acquired in 2019 Acquired in 2013 IWS is a licensed motor vehicle
Slide 10: Extended Warranty Strategic Outlook
Extended Warranty Strategic Outlook | 10 Continually Searching for Opportunities that Complement Our Existing Offerings Automobile Mechanical Our Businesses PWI, IWS, Geminus TWS Warranty agreements and maintenance support to Services Vehicle Service Agreements consumers and businesses in the HVAC,
Slide 11: Extended Warranty Financial Overview
Extended Warranty | 11 Financial Overview TTM Pro Forma Revenue 9/30/22(1) Warranty Segment Adjusted EBITDA(2) In Thousands Full year Sold PWSC PWI $10,885 $11,138 Full year 44% 27% Geminus; Acquired COVID Geminus $7,108 Full year 3/1/2019 PWSC $5,497 $4,844 15% 2018 2019 2020 2021 TTM 9/30/22 14% (
Slide 12: Extended Warranty Borrowings
Extended Warranty | 12 Borrowings Extended Warranty Interest Amortization Maturity Leverage Borrowings rate $16.7M(1) 5.33%(1) 15% 2025 1.4x(1) (includes $0.5 SOFR + 2.87% 15% per year, November 30, Leverage ratio million revolver) (SOFR floor of 0.75%) paid quarterly 2025 In conjunction with the pu
Slide 13: Kingsway Search Xcelerator
| 13 Kingsway Search Xcelerator
Slide 14: Kingsway Search Xcelerator
Kingsway Search Xcelerator | 14 Entrepreneurship through acquisition Building a great company focused on long-term value creation Partner with great Acquire Apply operational and Compound capital at high entrepreneurs strategic support rates of return Aiming for 4 to 5 active Seeking 2 to 3 acquisit
Slide 15: Xcelerator Executives
Xcelerator Executives | 15 Timi Okah Charles Mokuolu President & CEO, Ravix Financial Inc. President & CEO, Secure Nursing Service, Inc. Mr. Okah serves as CEO of Ravix Financial Inc., a Kingsway subsidiary, Mr. Mokuolu serves as CEO of Secure Nursing Service Inc., a Kingsway following Kingsway's ac
Slide 16: Ravix Acquisition
Ravix Acquisition | 16 Acquired Ravix Financial, Inc. for $11 Million (~4.0X TTM Adjusted EBITDA) Company Profile One Year Post-Acquisition Ravix is a provider of outsourced accounting and One year later, Adjusted EBITDA(1) is up 33% human resources services In Thousands $3,142 $15.6M 17.6% $2,354 T
Slide 17: CSuite Partners Acquisition
CSuite Partners Acquisition | 17 On 11/1/2022 Acquired CSuite Financial Partners for $8.5 Million (~4.5X TTM Adjusted EBITDA) Company Profile Terms of the Transaction CSuite is a national, financial executive services firm that provides financial management leadership $8.5 million paid at close, e
Slide 18: Ravix / CSuite Borrowings
Ravix / CSuite | 18 Borrowings Original Ravix Ravix Ravix Ravix Maturity Borrowing Interest rate Amortization 10%/10%/15% $5.5M(1) 6.00%(1) 20%/20%/25% 2027 $1 million revolver undrawn Prime + 0.50% Starts at 10% October 1, (floor of 3.75%) for first 2 years 2027 In conjunction with the purchase of
Slide 19: SNS Acquisition
SNS Acquisition | 19 On 11/18/2022 Acquired Secure Nursing Service, Inc. for $10.9 Million (~4.0X TTM Adjusted EBITDA) Company Profile Terms of the Transaction SNS employs highly-skilled medical staff for assignment in hospitals located in Southern California $10.9 million paid at close, no earnou
Slide 20: SNS Borrowing
SNS Borrowing | 20 SNS Interest Amortization Maturity Borrowing rate I/O one year; $6.5M 7.50% 20% thereafter 2028 $1 million revolver undrawn Prime + 0.50% Interest only first year; November 18, monthly payments at close (Floor of 5.00%) 2028 thereafter In conjunction with the purchase of SNS on 11
Slide 21: Xcelerator OIR's
Xcelerator OIR's | 21 Peter Dausman Drew Richard Operator-in-Residence Operator-in-Residence CEO Accelerator CEO Accelerator Mr. Dausman joined Kingsway in the summer of 2021 as our Mr. Richard joined Kingsway in August of 2022 as our fourth third Operator-in-Residence in the Search Xcelerator progr
Slide 22: Kingsway Search Xcelerator Strategic Advisory Board
Kingsway Search Xcelerator | 22 Strategic Advisory Board Thomas P. Joyce, Jr. William N. Thorndike, Jr. Mr. Joyce most recently served as President, Chief Executive Officer, Mr. Thorndike is the Managing Partner of The Cromwell Harbor and Director of Danaher Corporation, from which he retired in 202
Slide 23: Case Study: PWSC
Kingsway Search Xcelerator | 23 Case Study: PWSC Investment Details Motivating factors to sell • Acquired the business in November 2017 • Significant inbound interest • Purchase Price: $10 million • Opportunity to redeploy capital immediately and • $5 million preferred equity, $5 million senior debt
Slide 24: Kingsway Financial Overview
| 24 Kingsway Financial Overview
Slide 25: Financial Overview: Profitability
Financial Overview: Profitability | 25 Continuing to Generate Value for Our Shareholders In Thousands Sold PWSC; TTM Non-GAAP Adjusted Net Income(1) TTM Adjusted EBITDA(1)(2) 12 mos Ravix Full year PWI; Sold PWSC $14,280 improved Full year PWI; Operating Inc $10,482 improved Op Inc. $9,242 $11,440 F
Slide 26: Improving the Balance Sheet
Improving the Balance Sheet | 26 Positioning for new acquisitions 1 2 3 Repurchase Subordinated PWSC Flower Portfolio Debt Professional Warranty Investment real estate “TruPs” Services Corp. (PWSC) • Non-core assets • Options to repurchase 5 Sold for $51.2M of 6 trust preferred debt • • Sold for $12
Slide 27: Investment Highlights
Investment Highlights | 28 1 A collection of recurring revenue, high margin, asset-light businesses 2 Adjusted EBITDA Run-rate of approximately $18 to $19 Million(1) 3 Approximately $792 Million(2) in Net Operating Losses (NOLs) for tax-advantaged cash flow 4 Disciplined M&A via Xcelerator “Search F
Slide 28: Appendix
| 29 Appendix
Slide 29: Class A Preferred Stock: Redemption Status
Class A Preferred Stock: | 30 Redemption Status As of September 30, 2022, there are 149,733 shares of the Company’s Class A Preferred Stock issued and outstanding. Any outstanding Preferred Shares were required to be redeemed by the Company on April 1, 2021 ("Redemption Date"), having a current rede
Slide 30: Reconciliation of GAAP Operating Income for Extended Warranty Segment
Reconciliation of GAAP Operating Income for | 31 Extended Warranty Segment (in thousands) TTM For the Year Ended 9/30/22 2021 2020 2019 2018 GAAP Operating Income for Extended Warranty segment (1) $10,446 $12,636 $6,605 $4,611 $4,215 Non-GAAP Adjustments: Investment income, gain (loss) on sale of co
Slide 31: KSX Reconciliation of GAAP Income before Income Taxes to Non-GAAP Adjusted EBITDA
KSX Reconciliation of GAAP Income before | 32 Income Taxes to Non-GAAP Adjusted EBITDA (in thousands) Ravix CSuite SNS 9/30/22 12/31/21(5) 7/31/22 6/30/22 TTM GAAP Income before Income Taxes $2,906 $484 $933 $2,647 Non-GAAP Adjustments: Depreciation and Amortization - - - - Interest - - - - Non-core
Slide 32: Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted Income
Reconciliation of GAAP Net Income (Loss) to | 33 Non-GAAP Adjusted Income (in thousands) For the Twelve Months Ended 9/30/22 2021 2020 2019 GAAP Net Income (Loss) $33,847 $1,860 $(5,416) $(4,313) Non-GAAP Adjustments: Realized (Gains) Losses (1) (851) (408) 835 1,617 Changes in fair value (2) (6,875
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