ITASCA,
Ill., May 6, 2022 /PRNewswire/ - (NYSE: KFS)
Kingsway Financial Services Inc. ("Kingsway" or the "Company")
today announced its operating results for the three months ended
March 31, 2022.
John T. Fitzgerald, President and
Chief Executive Officer, stated, "We had a good start to the year
with results largely exceeding our initial expectations.
Despite the fact that the 2022 first quarter results include some
accounting impacts, we are happy with the underlying economics and
trends in our businesses. Operating cash flow improved to
$3.8 million for the Quarter and we
were able to use those cash flows, in part, to continue to retire
debt incurred as acquisition financing for PWI. We are also pleased
that Ravix, included in KSX, is off to a great start under the
Kingsway umbrella." Mr. Fitzgerald concluded, "we continue to
focus on our core businesses, while also working to monetize our
non-core investments so that we can redeploy that capital to the
benefit of our shareholders."
Financial highlights for the three months ended March 31, 2022 and 2021 include:
- Cash provided by operating activities improved by $5.7 million to $3.8
million, from cash used in operating activities of
($1.9) million in the same period a
year ago;
- Net loss was ($2.5) million for
the 2022 period, compared to net income of $0.9 million for the 2021 period;
- Non-GAAP adjusted income was $1.5
million for the 2022 period, compared to non-GAAP adjusted
income of $1.8 million for the 2021
period;
- Extended Warranty segment operating income was $1.7 million in the 2022 period, compared to
$5.3 million for the 2021
period;
- Non-GAAP adjusted EBITDA for the Warranty Segment was
$1.9 million in the 2022 period,
compared to $3.2 million for the 2021
period; and
- In the first quarter 2022 the Company paid down an additional
$1.7 million in debt related to
borrowings secured by certain warranty companies; combined with the
principal payment made in early April
2022, the Company has paid down $2.6
million of this debt since December
31, 2021.
In addition to the items included in our reconciliations of GAAP
to non-GAAP metrics (see attached schedules), the three months
ended March 31, 2022 include a net
charge of $0.9 million relating to a
change in estimate in accounting for deferred revenue and deferred
contract costs associated with vehicle service contract fees, which
adversely impacted the financial highlights above and remains
included in the non-GAAP metrics.
The Company today also filed its first quarter 2022 Quarterly
Report on Form 10-Q.
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 (Loss) Income to Non-GAAP Adjusted
Income (Loss)
(in thousands)
(UNAUDITED)
|
|
Twelve
Months
Ended
|
|
|
For the Three Months
Ended
|
|
|
|
3/31/2022
|
|
|
3/31/2022
|
|
|
12/31/2021
|
|
|
9/30/2021
|
|
|
6/30/2021
|
|
GAAP Net (Loss)
Income
|
|
$
|
(1,543)
|
|
|
$
|
(2,504)
|
|
|
$
|
1,443
|
|
|
$
|
(226)
|
|
|
$
|
(256)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized (Gains) Losses
(1)
|
|
|
(434)
|
|
|
|
(26)
|
|
|
|
(240)
|
|
|
|
(97)
|
|
|
|
(71)
|
|
Changes in fair
value (2)
|
|
|
2,003
|
|
|
|
2,060
|
|
|
|
652
|
|
|
|
(760)
|
|
|
|
51
|
|
Other items
(3)
|
|
|
3,000
|
|
|
|
490
|
|
|
|
992
|
|
|
|
782
|
|
|
|
736
|
|
Amortization
expense
|
|
|
5,898
|
|
|
|
1,494
|
|
|
|
1,476
|
|
|
|
2,432
|
|
|
|
496
|
|
Total Non-GAAP
Adjustments
|
|
|
10,467
|
|
|
|
4,018
|
|
|
|
2,880
|
|
|
|
2,357
|
|
|
|
1,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted
Income
|
|
$
|
8,924
|
|
|
$
|
1,514
|
|
|
$
|
4,323
|
|
|
$
|
2,131
|
|
|
$
|
956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Includes reduction
due to IWS
change in estimate (4)
|
|
$
|
944
|
|
|
$
|
944
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Includes reduction
due to PWI
final purchase accounting (4)
|
|
$
|
1,857
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,857
|
|
|
$
|
-
|
|
|
|
Twelve
Months
Ended
|
|
|
For the Three Months
Ended
|
|
|
|
3/31/2021
|
|
|
3/31/2021
|
|
|
12/31/2020
|
|
|
9/30/2020
|
|
|
6/30/2020
|
|
GAAP Net (Loss)
Income
|
|
$
|
(4,124)
|
|
|
$
|
899
|
|
|
$
|
(2,478)
|
|
|
$
|
(1,124)
|
|
|
$
|
(1,421)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized (Gain) Loss
(1)
|
|
|
895
|
|
|
|
-
|
|
|
|
800
|
|
|
|
101
|
|
|
|
(6)
|
|
Change in fair value
(2)
|
|
|
(1,092)
|
|
|
|
1,372
|
|
|
|
(1,426)
|
|
|
|
(874)
|
|
|
|
(164)
|
|
Other items
(3)
|
|
|
6,891
|
|
|
|
1,558
|
|
|
|
3,944
|
|
|
|
888
|
|
|
|
501
|
|
PPP forgiveness
(5)
|
|
|
(2,877)
|
|
|
|
(2,494)
|
|
|
|
(383)
|
|
|
|
-
|
|
|
|
-
|
|
Amortization
expense
|
|
|
2,214
|
|
|
|
497
|
|
|
|
572
|
|
|
|
572
|
|
|
|
573
|
|
Total Non-GAAP
Adjustments
|
|
|
6,031
|
|
|
|
933
|
|
|
|
3,507
|
|
|
|
687
|
|
|
|
904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted
Income (Loss)
|
|
$
|
1,907
|
|
|
$
|
1,832
|
|
|
$
|
1,029
|
|
|
$
|
(437)
|
|
|
$
|
(517)
|
|
(1)
|
Includes realized gains
and losses on the Company's non-core investments; net gain from
discontinued operations, net of taxes; 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).
|
(3)
|
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;
extraordinary audit and audit-related expenses incurred as a result
of the delayed filing of the 2018 and 2019 Kingsway audited
financial statements and related quarterly filings; and net expense
incurred as a result of legal settlement reached with DGI in Q1
2021.
|
(4)
|
The three months ended
3/31/2022, include a 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 fees.
The three months ended 9/30/2021 includes a $1.9 million non-cash,
current period 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 net income
(loss).
|
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
|
|
|
|
3/31/2022
|
|
|
3/31/2022
|
|
|
12/31/2021
|
|
|
9/30/2021
|
|
|
6/30/2021
|
|
GAAP Operating
Income for Extended Warranty
segment
|
|
$
|
9,049
|
|
|
$
|
1,723
|
|
|
$
|
3,326
|
|
|
$
|
1,400
|
|
|
$
|
2,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income (1)
|
|
|
236
|
|
|
|
76
|
|
|
|
52
|
|
|
|
66
|
|
|
|
42
|
|
Gain (loss) on sale of core investments (2)
|
|
|
(2)
|
|
|
|
(4)
|
|
|
|
19
|
|
|
|
(18)
|
|
|
|
1
|
|
Depreciation
|
|
|
277
|
|
|
|
74
|
|
|
|
95
|
|
|
|
55
|
|
|
|
53
|
|
Total Non-GAAP
Adjustments
|
|
|
511
|
|
|
|
146
|
|
|
|
166
|
|
|
|
103
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted
EBITDA for Extended
Warranty segment
|
|
$
|
9,560
|
|
|
$
|
1,869
|
|
|
$
|
3,492
|
|
|
$
|
1,503
|
|
|
$
|
2,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Includes reduction
due to IWS change in estimate (3)
|
|
$
|
944
|
|
|
$
|
944
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Includes reduction
due to PWI final purchase accounting (3)
|
|
$
|
1,857
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,857
|
|
|
$
|
-
|
|
|
|
Twelve
Months Ended
|
|
|
For the Three Months
Ended
|
|
|
|
3/31/2021
|
|
|
3/31/2021
|
|
|
12/31/2020
|
|
|
9/30/2020
|
|
|
6/30/2020
|
|
GAAP Operating
Income for Extended Warranty segment
|
|
$
|
11,064
|
|
|
$
|
5,310
|
|
|
$
|
3,264
|
|
|
$
|
1,205
|
|
|
$
|
1,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income (1)
|
|
|
294
|
|
|
|
43
|
|
|
|
51
|
|
|
|
100
|
|
|
|
100
|
|
Gain (loss) on sale of core investments (2)
|
|
|
46
|
|
|
|
12
|
|
|
|
(3
|
)
|
|
|
29
|
|
|
|
8
|
|
PPP
forgiveness (4)
|
|
|
(2,566)
|
|
|
|
(2,183)
|
|
|
|
(383)
|
|
|
|
-
|
|
|
|
-
|
|
Depreciation
|
|
|
237
|
|
|
|
12
|
|
|
|
112
|
|
|
|
58
|
|
|
|
55
|
|
Total Non-GAAP
Adjustments
|
|
|
(1,989)
|
|
|
|
(2,116)
|
|
|
|
(223)
|
|
|
|
187
|
|
|
|
163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted
EBITDA for Extended Warranty segment
|
|
$
|
9,075
|
|
|
$
|
3,194
|
|
|
$
|
3,041
|
|
|
$
|
1,392
|
|
|
$
|
1,448
|
|
PWI
operating income (5)
|
|
|
4,224
|
|
|
|
-
|
|
|
|
914
|
|
|
|
1,096
|
|
|
|
2,214
|
|
PWI
depreciation (5)
|
|
|
56
|
|
|
|
-
|
|
|
|
30
|
|
|
|
13
|
|
|
|
13
|
|
Pro forma Non-GAAP
adjusted EBITDA for Extended Warranty segment
|
|
$
|
13,355
|
|
|
$
|
3,194
|
|
|
$
|
3,985
|
|
|
$
|
2,501
|
|
|
$
|
3,675
|
|
(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)
|
The three months ended
3/31/2022, include a 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 fees.
The three months ended 9/30/2021 includes a $1.9 million non-cash,
current period cumulative reduction to service fee and commission
revenue relating to the finalization of the PWI purchase
accounting.
|
(4)
|
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.
|
(5)
|
Includes amounts
related to PWI prior to acquisition (October 2019 through November
2020).
|
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content:https://www.prnewswire.com/news-releases/kingsway-reports-first-quarter-2022-results-301542030.html
SOURCE Kingsway Financial Services Inc.