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KF

KINGSWAY FINANCIAL SERVICES INC (KFS)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue rose 37% year over year to $37.2M, with KSX reaching a milestone by representing a majority of consolidated revenue; consolidated net loss was $2.4M, and adjusted consolidated EBITDA was $2.1M .
  • KSX revenue grew 104% YoY to $19.0M and adjusted EBITDA grew 90% to $2.7M, while Extended Warranty revenue rose 2% to $18.2M but adjusted EBITDA declined to $0.8M; Extended Warranty cash sales accelerated to +14.2% YoY, and deferred service fees increased by $2.8M YoY .
  • Sequentially, revenue climbed from $30.9M (Q2) to $37.2M (Q3), and adjusted consolidated EBITDA improved from $1.7M to $2.1M; net debt increased to $61.4M due to acquisition financing, while cash rose to $9.3M versus $5.5M at year-end 2024 .
  • Stock reaction catalysts: KSX majority revenue mix for the first time, visible organic momentum in Roundhouse, Image Solutions, and DDI exiting “J-curves,” and continued M&A pipeline supported by three OIRs; caution on Extended Warranty GAAP timing impacts and higher net leverage tied to acquisitions .

What Went Well and What Went Wrong

What Went Well

  • KSX delivered “stellar results” with 104% revenue growth and 90% adjusted EBITDA growth; KSX majority revenue mix achieved for the first time .
  • Organic momentum: Roundhouse posted ~$0.5M EBITDA in September; Image Solutions sequential EBITDA growth (+$100K Q1→Q2, +$150K Q2→Q3); DDI improved sequentially, suggesting exits from early “J-curves” .
  • Extended Warranty cash sales accelerated (+14.2% YoY) and deferred service revenue grew (+$2.8M YoY), supporting future GAAP revenue recognition and cash generation .

What Went Wrong

  • Extended Warranty adjusted EBITDA declined versus prior year ($0.8M vs $2.1M), reflecting GAAP timing of revenue and upfront commissions despite strong cash sales growth .
  • Consolidated adjusted EBITDA declined YoY ($2.1M vs $3.0M), and net loss remained ($2.4M), indicating profitability pressure even as KSX scaled .
  • Net debt increased to $61.4M (from $52.0M at year-end 2024) primarily due to financing for Roundhouse and Southside Plumbing acquisitions, raising leverage and interest expense sensitivity .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$28.3 $30.9 $37.2
Net Loss ($USD Millions)$3.1 $3.2 $2.4
Adjusted Consolidated EBITDA ($USD Millions)$1.4 $1.7 $2.1
Diluted EPS ($USD)-0.13*-0.13*-0.10*
EBITDA Margin %1.19%*4.90%*1.33%*
EBIT Margin %-5.19%*-1.01%*-5.81%*
  • Values retrieved from S&P Global.

Segment performance

Segment MetricQ1 2025Q2 2025Q3 2025
KSX Revenue ($USD Millions)$11.7 $13.3 $19.0
KSX Adjusted EBITDA ($USD Millions)$1.9 $2.4 $2.7
Extended Warranty Revenue ($USD Millions)$16.7 $17.6 $18.2
Extended Warranty Adjusted EBITDA ($USD Millions)$0.8 $0.6 $0.8

KPIs and balance metrics

KPIQ1 2025Q2 2025Q3 2025
Extended Warranty Cash Sales YoY+3.7% +9.2% +14.2%
Deferred Service Revenue YoY Change ($USD Millions)——+$2.8
Run-rate Adjusted EBITDA (Operating Cos) ($USD Millions)$18.0–$19.0 $22.0–$23.0 $20.5–$22.5
Cash and Cash Equivalents ($USD Millions)$6.4 $12.1 $9.3
Total Debt ($USD Millions)$59.5 $58.3 $70.7
Net Debt ($USD Millions)$53.1 $46.2 $61.4

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal Financial GuidanceFY 2025None None Maintained
Run-rate Adjusted EBITDA (Operating Cos)TTM at quarter-end$22.0–$23.0 (Q2) $20.5–$22.5 (Q3) Metric updated (not forward guidance)

Management reiterated that run-rate adjusted EBITDA is descriptive of trailing earnings power and “not intended to be forward-looking guidance” .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
KSX organic momentum / J-curvesBuilding foundations; SNS and Image Solutions nearing inflection Portfolio momentum; multiple operating improvements, strong pipeline Roundhouse ~$0.5M Sept EBITDA; Image Solutions and DDI exiting J-curves Strengthening
Extended Warranty GAAP vs modified cash EBITDAMod cash EBITDA +11.7% YoY; cash sales +3.7% Mod cash EBITDA +1.9% YoY; cash sales +9.2% Cash sales +14.2%; deferred fees +$2.8M YoY; mod cash vs adjusted EBITDA gap widens Positive sales, GAAP timing headwind
Acquisition cadence & OIR pipelineTwo acquisitions (Bud’s, ViewPoint); board enhancements; 3 OIRs PIPE proceeds; 3 acquisitions (Roundhouse, Advanced Plumbing, HR Team); 2 OIRs Added Southside Plumbing; welcomed new OIR (TIC focus); 3 OIRs searching Accelerating
Skilled Trades platformBud’s added; platform formed Advanced Plumbing acquired; strong progress Southside acquired; faster pacing with experienced operator Scaling
Vertical Market Software (SPI/ViewPoint)ViewPoint acquired; ARR ~$5M, product roadmap acceleration SPI “outstanding quarter”; upgrades; tuck-in validated KSX model Ongoing upgrades; ARR growth; small competitor tuck-in in Australia Expanding
Regulatory/macro (Medicare reimbursement pressure)——Hospital pressure discussed; SNS customer bankruptcy reserve; focus on payer mix and credit selection Monitored risk
Capital structure / leverageNet debt $53.1M; small debt increase Net debt down to ~$46M post PIPE Net debt $61.4M; increase tied to acquisitions Higher leverage near term

Management Commentary

  • “I am pleased to report an excellent quarter for Kingsway, with revenue up 37% year-over-year… our high-growth KSX segment represented a majority of revenue for the first time.” — J.T. Fitzgerald, CEO .
  • “Our KSX segment achieved stellar results with revenue growth of 104% and adjusted EBITDA growth of 90%.” — J.T. Fitzgerald .
  • “Using this framework [Adjusted EBITDA for KSX; modified cash EBITDA for Extended Warranty], Kingsway today has the highest earnings power from its operations during my tenure as CEO.” — J.T. Fitzgerald .
  • “As of September 30, 2025… net debt… was $61.4 million… primarily related to additional borrowings related to the recent acquisitions of Roundhouse and Southside Plumbing.” — Kent Hansen, CFO .
  • “Roundhouse and Kingsway Skilled Trades are performing well and are ahead of budget since acquisition.” — J.T. Fitzgerald .

Q&A Highlights

  • Medicare/reimbursement risk: Management acknowledged hospital pressure; SNS reserved a $325K receivable tied to a client bankruptcy; DDI’s exposure is lower; focus on hospital credit selection and payer mix discipline .
  • Organic growth levers: Targeting high single-digit organic growth across businesses; investing in talent, systems, and sales leadership to scale (J-curve dynamics) .
  • Image Solutions trajectory: Professionalized IT MSP platform; rebuilt sales; sequential EBITDA gains; potential for tuck-in M&A given industry fragmentation .
  • Vertical market software: SPI executed a tuck-in in Australia; continued ARR growth and product upgrades; potential platform for further niche VMS acquisitions .
  • Skilled Trades pacing: Faster cadence possible given an experienced operator; multiple acquisitions in 2025; potential to run ahead of standard pacing .

Estimates Context

  • S&P Global consensus for Q3 2025 EPS and revenue was unavailable; we cannot assess beats/misses vs Street for EPS or revenue. Actual revenue printed $37.2M (vs $30.9M in Q2 and $28.3M in Q1) .
  • Drivers likely to prompt estimate revisions: KSX growth outperformance, Extended Warranty cash sales acceleration and deferred revenue build, and inorganic contributions from recent acquisitions .

Note: Values retrieved from S&P Global for estimates.

Key Takeaways for Investors

  • KSX is now the primary growth engine, driving mix shift and scale with visible organic momentum and tuck-in optionality; expect narrative to focus on KSX compounding and platform-building .
  • Extended Warranty’s GAAP earnings are temporarily dampened by timing effects despite strong cash sales and deferred revenue build; monitor the convergence of modified cash EBITDA and adjusted EBITDA in coming quarters .
  • Acquisition flywheel remains active (Roundhouse, Advanced Plumbing, Southside, HR Team) with three OIRs searching; pipeline and operator bench support continued deal cadence .
  • Near-term leverage increased with acquisition financing; watch interest costs and covenant headroom while KSX and Extended Warranty cash generation offset .
  • Watch Roundhouse and Skilled Trades progress for incremental organic EBITDA; September performance and ahead-of-plan execution are positive leading indicators .
  • Risk monitor: healthcare reimbursement pressures impacting certain KSX subsidiaries (SNS); management is tightening customer selection and credit controls .
  • Trading implications: Near-term positive narrative on KSX outperformance and Extended Warranty cash metrics vs. valuation sensitivity to non-GAAP/GAAP timing, leverage uptick, and lack of formal guidance; catalysts include Q4 full-quarter contributions from Q3 acquisitions and continued KSX organic gains .

Additional Data References

  • Q3 2025 8-K 2.02 press release (Exhibit 99.1) with full reconciliations and segment detail .
  • Q3 2025 earnings call transcripts (prepared and Q&A) with operational and strategic color - -.
  • Q2 2025 8-K 2.02 and earnings call for trend analysis - -.
  • Q1 2025 8-K 2.02 and earnings call for trend analysis - -.
  • Relevant acquisition press release: AAA Flexible Pipe (“Advanced Plumbing & Drain”) transaction overview .