Kingsway Corporation · NYSE:KWY
Kingsway — Kingsway Financial Services — Investor Presentation (January 2023)
37 slides from Kingsway's investor presentation, January 2023
Slide 1: Investor Presentation
NYSE: KFS Investor Presentation January 2023 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, growing 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 “
Slide 5: Strong Track Record of OpCo Adjusted EBITDA Growth
Strong Track Record of OpCo | 5 Adjusted EBITDA Growth In Thousands Annual OpCo Adjusted EBITDA(1)(2)(3) ~$18,000 to $19,000 Sold PWSC end Jul; 12 31.0% CAGR mos Ravix Full year PWI; $14,280 improved Op Inc. $11,440 Full year Geminus; Acquired Geminus COVID Full year PWSC 3/1/2019 $7,108 $5,497 $4,8
Slide 6: Quality Operating Companies
Quality Operating Companies | 6 Core businesses are asset-light, generate recurring revenue operating in growing industries Operating Companies Non-Core 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 $14.3
Slide 7: Strategy
Strategy | 7 Powerful flywheel can significantly grow Adjusted EBITDA both organically and through acquisitions in a tax-advantaged structure Organic Growth Growth through Acquisitions Grow and Improve Portfolio of Businesses Search Xcelerator • Leverage existing networks • Utilizing proven framewor
Slide 8: Extended Warranty
| 8 So Extended Warranty ——————_——$—$——$——__—
Slide 9: Extended Warranty Industry
Extended Warranty Industry | 9 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 10: Kingsway's Extended Warranty Subsidiaries
Kingsway’s Extended | 10 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 11: Extended Warranty Strategic Outlook
Extended Warranty Strategic Outlook | 11 Continually Searching for Opportunities that Complement Our Existing Offerings Automobile Mechanical Our Businesses PWI, IWS, Geminus TWS Warranty agreements and maintenance support to consumers Services Vehicle Service Agreements and businesses in the HVAC,
Slide 12: Extended Warranty Financial Overview
Extended Warranty | 12 Financial Overview TTM Pro Forma Revenue 9/30/22(1) Warranty Segment Adjusted EBITDA(2) In Thousands Full year PWI Sold PWSC $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 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: SNS Acquisition
SNS Acquisition | 18 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 19: Xcelerator OIR's
Xcelerator OIR's | 19 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 Operator- third Operator-in-Residence in the Search Xceler
Slide 20: Xcelerator OIR's
Xcelerator OIR's | 20 Phillip Furbay Operator-in-Residence CEO Accelerator Mr. Furbay joined Kingsway in the winter of 2022 as our fifth Operator-In-Residence in the Search Xcelerator program. Prior to joining Kingsway, he led his own startup efforts and managed a traditional search fund. Phil previ
Slide 21: Strategic Advisory Board
Kingsway Search Xcelerator | 21 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 22: Case Study: PWSC
Kingsway Search Xcelerator | 22 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 23: Kingsway Financial Overview
| 23 Kingsway Financial Overview
Slide 24: Financial Overview: Profitability
Financial Overview: Profitability | 24 Continuing to Generate Value for Our Shareholders In Thousands Sold PWSC; Non-GAAP Adjusted Net Income(1) OpCo 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 Full
Slide 25: Improving the Balance Sheet
Improving the Balance Sheet | 25 Positioning for new acquisitions 1 2 3 Repurchase Subordinated PWSC Real Estate Debt Professional Warranty Investment real estate “TruPs” Services Corp. (PWSC) • Sold Flower Portfolio for • Options to repurchase 5 net cash proceeds of Sold for $51.2M of 6 trust prefe
Slide 26: From Complex to Simple
From Complex to Simple | 26 Simplifying the financial statements and capital structure Challenge(1) Mitigation(1) Continue to sell real estate properties Notes Payable debt was $199.6M, now $16.4M Real estate assets and associated debt are ? Only remaining note payable of $16.4M is non- recourse to
Slide 27: Investment Highlights
Investment Highlights | 27 1 A collection of recurring revenue, high margin, asset-light, growing 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
Slide 28: Appendix
| 28 Appendix
Slide 29: Pro forma Balance Sheet
Pro forma Balance Sheet | 29 To Reflect the Sale of CMC Assets / Liability Assumption 9/30/22 (a) Adjs Pro Forma 9/30/22 (a) Adjs Pro Forma Total investments 70,347 — 70,347 Accrued expenses and other liabilities 53,981 (1,963) (c) 52,018 Cash and cash equivalents 48,640 19,240 (b) 67,880 Income tax
Slide 30: Pro forma Balance Sheet
Pro forma Balance Sheet | 30 To Reflect the Sale of CMC Assets / Liability Assumption (a) Reflects the Company's historical consolidated balance sheet as of 9/30/22. (b) Reflects the net cash proceeds of $21.4 million received by the Company from the sale of CMC less cash on hand at CMC of $2.2 mill
Slide 31: 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 32: 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 33: 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
Slide 34: Extended Warranty Borrowings
Extended Warranty | 34 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 35: Ravix / CSuite Borrowings
Ravix / CSuite | 35 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 36: SNS Borrowing
SNS Borrowing | 36 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 37: Class A Preferred Stock: Redemption Status
Class A Preferred Stock: | 37 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
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