Management to Host Conference Call Today at
5 p.m. ET
CHICAGO, Nov. 10,
2022 /CNW/ - (NYSE: KFS) Kingsway Financial
Services Inc. ("Kingsway" or the "Company") today
announced its operating results for the three and nine months ended
September 30, 2022.
Recent Business Highlights
- Completed the sale of its Professional Warranty Service
Corporation ("PWSC") subsidiary for $51.2
million in base purchase price, resulting in net cash
proceeds of $37.2 million to the
Company and representing an approximate 10x return on its initial
investment of $5 million over roughly
4.5 years
- Entered into option agreements to repurchase five of its six
trust preferred debt instruments ("TruPs") for $59.4 million, representing $75.5 million of TruPs principal and $19.3 million of deferred interest.
- Completed the sale of commercial real estate property, Flower
Portfolio, resulting in net cash to the Company of $5.8 million
- On November 1, 2022, acquired the
privately-held company CSuite Financial Partners ("CSuite"), the
second acquisition completed under the Kingsway Search Xcelerator
Program. CSuite, based in Manhattan
Beach, California (www.csuitefinancialpartners.com), is a
national, financial executive services firm providing financial
management leadership to companies throughout the United States.
"The company posted another strong operating quarter with net
income of $37.3 million and non-GAAP
adjusted income growing more than 20% from the prior year quarter,"
said John T. Fitzgerald, President
and Chief Executive Officer of Kingsway Financial Services. "Our
Extended Warranty segment continues to deliver results, and our
performance at Ravix has once again exceeded our expectations. We
are pleased with the sale of PWSC which, combined with our
continued monetization of non-strategic assets, will provide us
with capital that can be used to improve our balance sheet and make
new acquisitions."
Third Quarter Consolidated Financial Highlights
- Cash provided by operating activities was $9.3 million for the nine months ended
September 30, 2022 compared to cash
used in operating activities of $8.0
million in the same period a year ago
- Net income was $37.3 million,
compared to net loss of ($0.2)
million for the 2021 period
- Non-GAAP adjusted net income was $2.6
million, compared to Non-GAAP adjusted net income of
$2.1 million for the 2021 period
- Extended Warranty segment and Kingsway Search Xcelerator
("KSX") segment operating income was a total of $3.2 million, compared to a total of $1.4 million for the 2021 period
- Non-GAAP pro forma adjusted EBITDA for the Extended Warranty
segment and KSX segment was a total of $3.6
million, compared to a total of $1.0
million for the 2021 period (pro forma excludes the results
of PWSC)
- Cash and cash equivalents of $48.6
million as of September 30,
2022 compared to $12.6 million
as of December 31, 2021
The non-pro forma results above include the results of PWSC
through the date of sale (end of July
2022).
Reconciliations of GAAP to non-GAAP metrics are presented in the
attached schedules. The Company today also filed its third quarter
2022 Quarterly Report on Form 10-Q.
Conference Call and Webcast
Management 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: James@HaydenIR.com.
Conference Call Information
Date:
November 10, 2022
Time:
5 p.m. Eastern time
Toll Free:
877-545-0523; Participant Access Code: 672163
International:
973-528-0016; Participant Access Code: 672163
Live Webcast Link:
https://www.webcaster4.com/Webcast/Page/2928/46844
Conference Call Replay Information
Toll Free:
877-481-4010
International:
919-882-2331
Replay Passcode:
46844
Replay Webcast Link:
https://www.webcaster4.com/Webcast/Page/2928/46844
About the Company
Kingsway is a holding company that owns or controls subsidiaries
primarily in the extended warranty, business services, asset
management and real estate industries. The common shares of
Kingsway are listed on the New York Stock Exchange under the
trading symbol "KFS."
Non U.S. GAAP Financial Measure
The Company believes that non-GAAP adjusted net income (loss)
and non-GAAP adjusted EBITDA, when presented in conjunction with
comparable GAAP measures, provide useful information about the
Company's operating results and enhances the overall ability to
assess the Company's financial performance. The Company uses
non-GAAP adjusted net income (loss) and 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 net
income (loss) and non-GAAP adjusted EBITDA allow investors to make
a more meaningful comparison between the Company's core business
operating results over different periods of time. The Company
believes that non-GAAP adjusted net income (loss) and non-GAAP
adjusted EBITDA, when viewed with the Company's results under GAAP
and the accompanying reconciliations, provide 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, the Company believes that non-GAAP adjusted net
income (loss) and non-GAAP adjusted EBITDA can provide useful
additional basis for comparing the current performance of the
underlying operations being evaluated. Investors should consider
these non-GAAP measures 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 Statements
This press release and/or Shareholder Letter 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, including as a result of the COVID 19 pandemic. 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 2021 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 Information
Additional 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
Kingsway Financial Services Inc.
Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted
Income
(in thousands)
(UNAUDITED)
|
|
Twelve
Months
Ended
|
|
|
For the Three Months
Ended
|
|
|
|
9/30/2022
|
|
|
9/30/2022
|
|
|
6/30/2022
|
|
|
3/31/2022
|
|
|
12/31/2021
|
|
GAAP Net Income
(Loss)
|
|
$
|
33,847
|
|
|
$
|
37,273
|
|
|
$
|
(2,365)
|
|
|
$
|
(2,504)
|
|
|
$
|
1,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized (Gains) Losses
(1)
|
|
|
(851)
|
|
|
|
(549)
|
|
|
|
(36)
|
|
|
|
(26)
|
|
|
|
(240)
|
|
Changes in fair
value (2)
|
|
|
(6,875)
|
|
|
|
(11,982)
|
|
|
|
2,395
|
|
|
|
2,060
|
|
|
|
652
|
|
Gain on sale of PWSC,
net (3)
|
|
|
(26,435)
|
|
|
|
(26,435)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other items
(4)
|
|
|
4,923
|
|
|
|
2,837
|
|
|
|
593
|
|
|
|
501
|
|
|
|
992
|
|
Amortization
expense
|
|
|
5,873
|
|
|
|
1,409
|
|
|
|
1,494
|
|
|
|
1,494
|
|
|
|
1,476
|
|
Total Non-GAAP
Adjustments
|
|
|
(23,365)
|
|
|
|
(34,720)
|
|
|
|
4,446
|
|
|
|
4,029
|
|
|
|
2,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted
Income (7)
|
|
$
|
10,482
|
|
|
$
|
2,553
|
|
|
$
|
2,081
|
|
|
$
|
1,525
|
|
|
$
|
4,323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Includes reduction
due to IWS change in estimate (5)
|
|
$
|
944
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
944
|
|
|
$
|
-
|
|
|
|
Twelve
Months
Ended
|
|
|
For the Three Months
Ended
|
|
|
|
9/30/2021
|
|
|
9/30/2021
|
|
|
6/30/2021
|
|
|
3/31/2021
|
|
|
12/31/2020
|
|
GAAP Net (Loss)
Income
|
|
$
|
(2,061)
|
|
|
$
|
(226)
|
|
|
$
|
(256)
|
|
|
$
|
899
|
|
|
$
|
(2,478)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized (Gain) Loss
(1)
|
|
|
632
|
|
|
|
(97)
|
|
|
|
(71)
|
|
|
|
-
|
|
|
|
800
|
|
Change in fair value
(2)
|
|
|
(763)
|
|
|
|
(760)
|
|
|
|
51
|
|
|
|
1,372
|
|
|
|
(1,426)
|
|
Other items
(4)
|
|
|
7,020
|
|
|
|
782
|
|
|
|
736
|
|
|
|
1,558
|
|
|
|
3,944
|
|
PPP forgiveness
(6)
|
|
|
(2,877)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,494)
|
|
|
|
(383)
|
|
Amortization
expense
|
|
|
3,997
|
|
|
|
2,432
|
|
|
|
496
|
|
|
|
497
|
|
|
|
572
|
|
Total Non-GAAP
Adjustments
|
|
|
8,009
|
|
|
|
2,357
|
|
|
|
1,212
|
|
|
|
933
|
|
|
|
3,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted
Income (7)
|
|
$
|
5,948
|
|
|
$
|
2,131
|
|
|
$
|
956
|
|
|
$
|
1,832
|
|
|
$
|
1,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Includes reduction
due to PWI final purchase accounting (5)
|
|
$
|
1,857
|
|
|
$
|
1,857
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
(1)
|
Includes realized gains
and losses on the Company's non-core investments and loss on the
extinguishment of debt.
|
(2)
|
Includes 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); and change in the fair value
of the Ravix earn-out (changes in fair value recorded as other
income or expense). The 9/30/22 period includes an unrealized
gain on the change in fair value of the trust preferred security
options of $13.5 million.
|
(3)
|
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. The Company estimates that had the gain not occurred,
the Company would have recorded a tax benefit; therefore taxes of
$6.1 million are included in this line item.
|
|
|
(4)
|
Other items
includes: legal expenses associated with the Company's
defense against significant litigation matters; acquisition-related
expenses; charges relating to severance and consulting agreements
pertaining to former key employees; non-cash expense arising from
the grant and modification of stock-based awards to employees;
expense relating to the settlement of all remaining Amigo claims;
and net expense incurred as a result of legal settlement reached
with DGI in Q1 2021.
The 9/30/22 period also
includes $2.5 million related to an indemnity from the sale of
Mendota in 2018, which is recorded in Loss on disposal of
discontinued operations, net of taxes in the consolidated statement
of operations.
|
(5)
|
The three months ended
3/31/2022 include a non-cash net charge of $0.9 million relating to
change in estimate in accounting for IWS deferred revenue and
deferred contract costs associated with vehicle service contract
administration fees. The three months ended 9/30/2021 include a
$1.9 million non-cash, cumulative reduction to service fee and
commission revenue relating to the finalization of the PWI purchase
accounting.
|
(6)
|
Given the non-recurring
nature of the PPP forgiveness benefit, the Company has concluded
this should be excluded from non-GAAP adjusted net income
(loss).
|
(7)
|
Includes the results of
PWSC through the date of sale (end of July 2022).
|
Kingsway Financial Services Inc.
Reconciliation of Extended Warranty Segment Operating Income to
Non-GAAP Adjusted EBITDA
and Pro Forma Non-GAAP Adjusted EBITDA
(in thousands)
(UNAUDITED)
|
|
Twelve
Months
Ended
|
|
|
For the Three Months
Ended
|
|
|
9/30/2022
|
|
|
9/30/2022
|
|
|
6/30/2022
|
|
|
3/31/2022
|
|
|
12/31/2021
|
GAAP Operating
Income for Extended Warranty segment
|
|
$
|
10,446
|
|
|
$
|
2,461
|
|
|
$
|
2,936
|
|
|
$
|
1,723
|
|
|
$
|
3,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income
(1)
|
|
|
369
|
|
|
|
145
|
|
|
|
96
|
|
|
|
76
|
|
|
|
52
|
Gain (loss) on sale of
core investments (2)
|
|
|
(3)
|
|
|
|
(2)
|
|
|
|
(16)
|
|
|
|
(4)
|
|
|
|
19
|
Depreciation
|
|
|
326
|
|
|
|
70
|
|
|
|
87
|
|
|
|
74
|
|
|
|
95
|
Total Non-GAAP
Adjustments
|
|
|
692
|
|
|
|
213
|
|
|
|
167
|
|
|
|
146
|
|
|
|
166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted
EBITDA for Extended Warranty segment
|
|
$
|
11,138
|
|
|
$
|
2,674
|
|
|
$
|
3,103
|
|
|
$
|
1,869
|
|
|
$
|
3,492
|
PWSC operating
(income) loss (3)
|
|
|
(1,440)
|
|
|
|
147
|
|
|
|
(737)
|
|
|
|
(298)
|
|
|
|
(552)
|
PWSC depreciation
(3)
|
|
|
(55)
|
|
|
|
(8)
|
|
|
|
(25)
|
|
|
|
(11)
|
|
|
|
(11)
|
Pro forma Non-GAAP
adjusted EBITDA for Extended Warranty segment
|
|
$
|
9,643
|
|
|
$
|
2,813
|
|
|
$
|
2,341
|
|
|
$
|
1,560
|
|
|
$
|
2,929
|
Includes reduction
due to IWS change in estimate (4)
|
|
$
|
944
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
944
|
|
|
$
|
-
|
|
|
Twelve
Months
Ended
|
|
|
For the Three Months
Ended
|
|
|
9/30/2021
|
|
|
9/30/2021
|
|
|
6/30/2021
|
|
|
3/31/2021
|
|
|
12/31/2020
|
GAAP Operating
Income for Extended Warranty segment
|
|
$
|
12,574
|
|
|
$
|
1,400
|
|
|
$
|
2,600
|
|
|
$
|
5,310
|
|
|
$
|
3,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income
(1)
|
|
|
202
|
|
|
|
66
|
|
|
|
42
|
|
|
|
43
|
|
|
|
51
|
Gain (loss) on sale of
core investments (2)
|
|
|
(8)
|
|
|
|
(18)
|
|
|
|
1
|
|
|
|
12
|
|
|
|
(3)
|
PPP forgiveness
(5)
|
|
|
(2,566)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,183)
|
|
|
|
(383)
|
Depreciation
|
|
|
232
|
|
|
|
55
|
|
|
|
53
|
|
|
|
12
|
|
|
|
112
|
Total Non-GAAP
Adjustments
|
|
|
(2,140)
|
|
|
|
103
|
|
|
|
96
|
|
|
|
(2,116)
|
|
|
|
(223)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted
EBITDA for Extended Warranty segment
|
|
$
|
10,434
|
|
|
$
|
1,503
|
|
|
$
|
2,696
|
|
|
$
|
3,194
|
|
|
$
|
3,041
|
PWSC operating income
(3)
|
|
|
(2,029)
|
|
|
|
(503)
|
|
|
|
(500)
|
|
|
|
(403)
|
|
|
|
(623)
|
PWSC depreciation
(3)
|
|
|
(48)
|
|
|
|
(7)
|
|
|
|
(8)
|
|
|
|
(12)
|
|
|
|
(21)
|
PWI operating income
(6)
|
|
|
914
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
914
|
PWI depreciation
(6)
|
|
|
30
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30
|
Pro forma Non-GAAP
adjusted EBITDA for Extended Warranty segment
|
|
$
|
9,301
|
|
|
$
|
993
|
|
|
$
|
2,188
|
|
|
$
|
2,779
|
|
|
$
|
3,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Includes reduction
due to PWI final purchase accounting
(4)
|
|
$
|
1,857
|
|
|
$
|
1,857
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
(1)
|
Investment income
arising as part of Extended Warranty segment's minimum holding
requirements
|
|
|
(2)
|
Realized Gains (losses)
resulting from investments held in trust as part of Extended
Warranty segment's minimum holding requirements
|
|
|
(3)
|
Amounts relating to the
sale of PWSC (end of July 2022) in order to remove PWSC from all
periods presented.
|
|
|
(4)
|
The three months ended
3/31/2022 include a non-cash net charge of $0.9 million relating to
change in estimate in accounting for IWS deferred revenue and
deferred contract costs associated with vehicle service contract
administration fees. The three months ended 9/30/2021 include a
$1.9 million non-cash, cumulative reduction to service fee and
commission revenue relating to the finalization of the PWI purchase
accounting.
|
|
|
(5)
|
Given the non-recurring
nature of the PPP forgiveness benefit, the Company has concluded
this should be excluded from non-GAAP adjusted EBITDA and pro forma
non-GAAP EBITDA.
|
|
|
(6)
|
Includes amounts
related to PWI prior to acquisition (October and November
2020).
|
Kingsway Financial Services Inc.
Reconciliation of KSX Segment Operating Income to Non-GAAP Adjusted
EBITDA
(in thousands)
(UNAUDITED)
|
|
Twelve
Months
Ended
|
|
|
For the Three Months
Ended
|
|
|
|
9/30/2022
|
|
|
9/30/2022
|
|
|
6/30/2022
|
|
|
3/31/2022
|
|
|
12/31/2021
|
|
GAAP Operating
Income for KSX segment
|
|
$
|
2,906
|
|
|
$
|
723
|
|
|
$
|
893
|
|
|
$
|
806
|
|
|
$
|
484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee costs
(1)
|
|
|
236
|
|
|
|
55
|
|
|
|
55
|
|
|
|
55
|
|
|
|
71
|
|
Total Non-GAAP
Adjustments
|
|
|
236
|
|
|
|
55
|
|
|
|
55
|
|
|
|
55
|
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted
EBITDA for KSX segment
|
|
$
|
3,142
|
|
|
$
|
778
|
|
|
$
|
948
|
|
|
$
|
861
|
|
|
$
|
555
|
|
(1) 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).
|
View original
content:https://www.prnewswire.com/news-releases/kingsway-reports-third-quarter-2022-financial-results-301674822.html
SOURCE Kingsway Financial Services Inc.