Good day, and welcome to the Kingsway Full Year 2024 Earnings Call. [Operator Instruction]. Please note, this conference is being recorded. With me on the call are J.T. Fitzgerald, Chief Executive Officer and Kent Hansen, Chief Financial Officer. Before we begin, I want to remind everybody that today's conference may contain forward-looking statements. Forward-looking statements include statements regarding the future, including expected revenue, operating margins, expenses and future business outlook. Actual results or trends could materially differ from those contemplated by those forward-looking statements. For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see the risk factors detailed in the company's annual report on Form 10-K and subsequent Forms 10-Q and Forms 8-K filed with the Securities and Exchange Commission. Please note also that today's call may include the use of non-GAAP metrics that management utilizes to analyze the company's performance. A reconciliation of such non-GAAP metrics to the most comparable GAAP measures is available in the most recent press release as well in the company's periodic filings with the SEC. Now I would like to turn the call over to J.T. Fitzgerald, CEO of Kingsway. J.T., please proceed.

Thank you, John. Good afternoon, everyone and welcome to the Kingsway earnings call for full year 2024. 2024 was another year of significant progress in executing our corporate strategy. We delivered financial results largely in line with our expectations, successfully completed the acquisition of Image Solutions, and divested our VA Lafayette subsidiary. At the same time, we made meaningful strides in refining and improving operations across our existing businesses. Overall, 2024 was a productive year, and importantly, we have a proven business model that continues to gain momentum. The sequential improvement in our quarterly results throughout 2024 is a validation of our corporate strategy and is a clear indicator of the progress we are making. Turning first to our financial results. For the full year 2024, consolidated revenue was $109.4 million, up 6% from a year ago, and consolidated adjusted EBITDA was $10.6 million, up 17% compared to 2023. Notably, consolidated adjusted EBITDA improved sequentially in each of the four quarters of the year. Combined adjusted EBITDA for the Extended Warranty and KSX segments, our operating segments was $14.1 million, in line with 2023. Breaking this down by segment. In Extended Warranty, revenue grew modestly for the full year by 1% to $68.9 million from $68.2 million in 2023. While top line growth was modest, we did achieve a 3.6% increase in cash sales during the year, reflecting healthy underlying demand for our warranty products. Geminus and IWS saw increased contract volumes, thanks in part to a higher number of service contracts sold and the onboarding of new credit union partners at IWS. Trinity also contributed slightly higher revenue as growth in warranty product sales offset a small decline in their maintenance services. PWI experienced a minor decline in contract count, but notably achieved stronger cash sales in 2024 than…

Thanks, J.T. Prudent capital allocation and managing our debt levels are critical elements to executing our corporate strategy. I would like to highlight a few of the actions we took in 2024 to achieve our goals. As J.T. mentioned, during the third quarter of 2024, we sold one of our subsidiaries, VA Lafayette. The final adjustment between the net carrying value of the assets and the selling price as well as the loss on disposal are recorded below the operating line in discontinued operations. This sale, which was the last of our leased real estate assets, netted cash proceeds of $1.1 million to Kingsway after expenses. Also in the third quarter of 2024, we completed the purchase of the 10% interest in IWS that we did not previously own. This transaction was immediately accretive to our earnings, and IWS is now a wholly owned subsidiary of the company. In September 2024, we sold and issued 330,000 shares of a new series of Class B convertible preferred stock in a private placement transaction for aggregate proceeds of about $8.3 million. These proceeds were used primarily to fund our acquisition of Image Solutions. Importantly, the successful acquisition of Image Solutions was carried out with a balanced mix of available liquidity and minimal new debt. As a result of our strategic and financing transactions, as of December 31, 2024, we had cash and cash equivalents of $5.5 million compared to $9.1 million at the end of 2023. Subsequent to year-end in February of '25, we issued and sold 240,000 shares of a new series of Class C convertible preferred stock, also in a private placement transaction for total proceeds of $6 million. These proceeds provided us with the cash needed to execute the Bud's Plumbing acquisition. Total debt outstanding of $57.5 million compared…

Thank you. [Operator Instructions] There are currently new questions in queue. I'd like to turn the floor over to James Carbonara for any questions you may have via email.

Thank you, operator. Yes, a few did come in on email. The first one was, could you provide more color on the claims expense moderation you mentioned in the Extended Warranty segment, during the second half of 2024?

Yes, great question. Maybe just sort of baseline 2023, we saw claims increase roughly 10% year-over-year versus 2022. And for full year 2024, claims increased roughly 6.6%. So definitely some moderation there. In Q1 of 2024, claims were actually up like 13% year-over-year. And so in Q2, through Q4 that subsided down to roughly 4.5% with Q4, being only 4.1%. So after 10% in 2023, 6.6% full year. And then if you sort of Q2 through Q4, just north of 4%. So definitely seeing things calm down. Most benefit of declining frequency, but also severity.

Great, thank you. Next one is with the formation of your new skilled trade services platform. What's your vision for growing this vertical within KSX?

Yes, first of all, I think it's a huge opportunity within plumbing service and repair, and mechanical services, and it's just a great fit for Rob's background. We posted his background when we announced him joining as an OIR. His professional background, he did consolidation first in the veterinary care space, and then more recently in the plumbing and HVAC industry. And so, he came with a very sort of precise thesis, around the opportunity for organic and inorganic growth in plumbing and HVAC. And so, I think with Bud's, we're absolutely first focused on organic growth, penetrate - more fully penetrate their existing market, through combination of pricing enhancements, search engine optimization, expanding into an adjacent market that's very nearby. And then move to cross-sell new plumbing services that they don't have, like hydro jetting, and then eventually hopefully service line expansion into HVAC? We'll see about that. But that would be a couple years out. And so, for any one of these plumbing businesses, Rob's thesis would be that plumbing is the beautiful trade. Because of their service level agreements, and the requirements in terms of the amount of time they have, to serve their customer. It's much easier to add complementary trades to a plumbing business than vice versa. So a lot of organic growth opportunities for the businesses we acquire, but also a lot of inorganic growth, potential growth via acquisition, a very large and fragmented industry. And Rob will be focused on opportunities in, what we would call Tier 2 and Tier 3 markets, where we can partner with a number one, or number two incumbent in that market. And so I think that you will see us, in addition to trying to grow organically, the businesses we acquire, a strategy around growing via consolidation, which is a great fit for his background.

Great, thank you. The next one says the earnings release mentioned acquisition opportunities in your pipeline. Are you targeting specific verticals within your existing segments, or is most of the pipeline new industries that you are not currently operating in?

Yes, great question. I would say it's probably a bit of both. I mean so think about the KSX industries. We sort of bucket them into four broad verticals. B2B services, healthcare services, vertical market software, and now skilled trades. And so, our existing OIRs are definitely focused on things in B2B services, like accounting services and IT and cyber MSP. They're focused on opportunities in vertical market software. And maybe not directly plumbing and HVAC, but other skilled trades as well. And maybe some field service stuff like pest control, or fire and life safety.

Great. Looks like there are two more. First one is, can you refresh us on how long each existing OIR has been searching for, and how many you still need to backfill? Is it just Casper?

Yes. So we have three current OIRs. Peter Hearne is probably the longest tenured. He's been here coming up on two years in May. Miles has been here roughly 18 months, and Paul Vidal just over a year. And so obviously with Davide launching and now Rob launching, in order to maintain our current pacing, we'll probably want to be backfilling. Like I mentioned in previous calls, we talked to over 130 prospective OIRs last year. So we have great inbound interest in the platform. And for us, it's about maintaining the discipline around getting the people with the right set of attributes, and competencies and background that are a great fit for - this, what is a really hard entrepreneurial endeavor.

Excellent. And then the last one is, notwithstanding macro factors, were there areas Kingsway did not do well in 2024, and what are your plans to improve them?

Yes, great question. Where do I start? Yes, absolutely. While we had several notable successes, there are always lots of areas we could perform better. One of our core values here at Kingsway, is a culture of kaizen or continuous improvement. And so, we're always looking for opportunities to be better, certainly within warranty. I think an area of focus, and kind of root cause and countermeasure analysis is around pricing. Continuously re-underwriting our book, to make sure that we're getting adequate price to offset this claims inflation, even though that's subsiding, and we have been taking price. That's an area that we will continue to focus, kind of one area really under the hood. A lot of the claims inflation was at one company, Geminus, Penn Warranty in a product called GAP, G-A-P, Guaranteed Asset Protection, which is basically protection against negative equity in your car loan. And just sort of the macro environmental factors of declining used car prices, high loan to value. Going back to 2023, we saw really tough environment for GAP pricing. So we've - that we probably weren't out in front of - and fast enough. We've taken significant price increases, think like 50% price increases that will probably impact volume and revenues in that product, but will protect our earnings in 2025. And then, I think looking at KSX, I think certainly one of the areas that we could always get better at, is around talent. I know SNS and CSuite, both brought on new folks that they were very excited about. In some cases didn't work out quite as well, as we had hoped. And so, we use a process here for talent identification, and screening called top grading. I think that we're just trying to improve our hit ratio on the people that we bring on board, but always room for improvement there. And then finally, I think at KSX, we have a stated goal of two to three acquisitions per year. We only did one, fortunately it was a little chunkier in terms of the size, but certainly had a few misses throughout the year. I think that in some ways is a testament to our discipline. But we would like to improve the velocity of getting things through our deal flow pipeline, from indication of interest through to closing.

Terrific. Yes. I see no further questions on the email at this time. J.T., I'll throw it back to you, for any closing comments.

Okay. Great. Thanks, James. Well, I guess I can say I'd like to thank all of our dedicated employees, across all of our businesses, for their hard work and innovation. They are the driving force behind our success. We also thank our customers and partners, for their trust and importantly, our shareholders for their continued support. Kingsway enters 2025 with momentum and optimism. We remain committed to executing our strategy, serving our customers with excellence, and creating long-term value for our shareholders. So thanks to everyone, who joined us today and for your interest in your company. We look forward, to updating you on our progress in the coming quarters.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.