Kingsway Financial Services Inc. Files 10-Q for Q1 2024

TL;DR

<b>Kingsway Financial Services Inc. reported a modest revenue increase and a small profit in Q1 2024, with total assets reaching $1.285 billion.</b>

AI Summary

KINGSWAY FINANCIAL SERVICES INC (KFS) filed a Quarterly Report (10-Q) with the SEC on May 8, 2024. Total revenues for Q1 2024 were $38.3 million, a slight increase from $38.1 million in Q1 2023. Net income attributable to common shareholders was $0.2 million for Q1 2024. Earnings per share (diluted) were $0.01 for Q1 2024. Total assets stood at $1,285 million as of March 31, 2024. Debt to equity ratio was 0.1 as of March 31, 2024.

Why It Matters

For investors and stakeholders tracking KINGSWAY FINANCIAL SERVICES INC, this filing contains several important signals. The filing provides a quarterly update on the financial performance and position of Kingsway Financial Services Inc., crucial for investors tracking its stability and growth. Key financial metrics like revenue, net income, and debt levels are detailed, offering insights into the company's operational health and risk profile.

Risk Assessment

Risk Level: low — KINGSWAY FINANCIAL SERVICES INC shows low risk based on this filing. The company has a low debt-to-equity ratio of 0.1, indicating minimal financial leverage and reduced risk from debt obligations.

Analyst Insight

Monitor the company's revenue growth and net income trends in upcoming filings to assess its ability to generate consistent profitability.

Financial Highlights

debt To Equity

0.1

revenue

38,295,000

total Assets

1,285,000,000

total Debt

28,137,000,000

net Income

238,000

eps

0.01

revenue Growth

0.5%

Key Numbers

• 38,295,000 — Total Revenues (For the three months ended March 31, 2024)
• 38,107,000 — Total Revenues (For the three months ended March 31, 2023)
• 238,000 — Net Income Attributable to Common Shareholders (For the three months ended March 31, 2024)
• 1,285,000,000 — Total Assets (As of March 31, 2024)
• 28,137,000,000 — Total Debt (As of March 31, 2024)
• 0.1 — Debt to Equity Ratio (As of March 31, 2024)
• 0.01 — Diluted Earnings Per Share (For the three months ended March 31, 2024)

Key Players & Entities

• KINGSWAY FINANCIAL SERVICES INC (company) — Filer
• KFS (company) — Ticker Symbol
• 10-Q (filing) — Form Type
• 2024-03-31 (date) — Conformed Period of Report
• 2024-05-08 (date) — Filed as of Date
• CHICAGO (location) — Business Address City
• IL (location) — Business Address State
• 60606 (postal_code) — Business Address Zip

FAQ

Risk Factors

• Interest Rate Risk [medium — financial]: The company is exposed to interest rate risk, particularly concerning its debt obligations and investment portfolio, which can impact profitability.
• Market Conditions [medium — market]: Adverse market conditions in the insurance or financial services sectors could negatively affect the company's financial performance and operations.

Key Financial Figures

• $0.01 — ch registered Common Stock, par value $0.01 per share KFS New York Stock Exchange
• $0 — 643 (1) Net of income tax expense of $0 for the three months ended March 31, 20

Filing Documents

• kfs20240331_10q.htm (10-Q) — 2304KB
• ex_630420.htm (EX-31.1) — 8KB
• ex_630421.htm (EX-31.2) — 8KB
• ex_630422.htm (EX-32.1) — 5KB
• ex_630423.htm (EX-32.2) — 5KB
• 0001437749-24-015352.txt (&nbsp;) — 12917KB
• kfs-20240331.xsd (EX-101.SCH) — 98KB
• kfs-20240331_cal.xml (EX-101.CAL) — 101KB
• kfs-20240331_def.xml (EX-101.DEF) — 702KB
• kfs-20240331_lab.xml (EX-101.LAB) — 610KB
• kfs-20240331_pre.xml (EX-101.PRE) — 758KB
• kfs20240331_10q_htm.xml (XML) — 2587KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION 3

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS 3 Consolidated Balance Sheets as of March 31, 2024 (unaudited) and December 31, 2023 3 Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023 (unaudited) 4 Consolidated Statements of Comprehensive (Loss) Income for the Three Months Ended March 31, 2024 and 2023 (unaudited) 5 Consolidated Statements of Shareholder's Equity for the Three Months Ended March 31, 2024 and 2023 (unaudited) 6 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (unaudited) 7

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 8

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 34

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 42

CONTROLS AND PROCEDURES

ITEM 4. CONTROLS AND PROCEDURES 42

- OTHER INFORMATION

PART II - OTHER INFORMATION 44

LEGAL PROCEEDINGS

ITEM 1. LEGAL PROCEEDINGS 44

RISK FACTORS

ITEM 1A. RISK FACTORS 44

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 44

DEFAULTS UPON SENIOR SECURITIES

ITEM 3. DEFAULTS UPON SENIOR SECURITIES 44

MINE SAFETY DISCLOSURES

ITEM 4. MINE SAFETY DISCLOSURES 44

OTHER INFORMATION

ITEM 5. OTHER INFORMATION 44

EXHIBITS

ITEM 6. EXHIBITS 45

SIGNATURES

SIGNATURES 46 2 Table of Contents KINGSWAY FINANCIAL SERVICES INC.

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements Consolidated Balance Sheets (in thousands, except share data) March 31, 2024 December 31, 2023 (unaudited) Assets Investments: Fixed maturities, at fair value (amortized cost of $ 38,295 and $ 38,107 , respectively) $ 36,585 $ 36,473 Equity investments, at fair value (cost of $ 10 and $ 73 , respectively) — 79 Limited liability investments 753 812 Limited liability investments, at fair value 3,488 3,496 Investments in private companies, at adjusted cost 854 854 Other investments, at cost which approximates fair value (net of allowance of $ 179 and $ 179 , respectively) — 6 Short-term investments, at cost which approximates fair value 163 161 Total investments 41,843 41,881 Cash and cash equivalents 12,112 9,098 Restricted cash 7,909 8,400 Accrued investment income 988 914 Service fee receivable, net of allowance for credit losses of $ 238 and $ 243 , respectively 10,496 10,083 Other receivables, net of allowance of $ 5 and $ 5 , respectively 346 726 Deferred contract costs 13,793 13,734 Income taxes recoverable 938 1,299 Property and equipment, net of accumulated depreciation of $ 1,285 and $ 1,158 , respectively 1,914 1,850 Right-of-use asset 1,160 886 Goodwill 50,452 50,358 Intangible assets, net of accumulated amortization of $ 29,552 and $ 28,137 , respectively 33,744 35,670 Other assets, net of allowance for credit losses of $ 21 and zero , respectively 4,964 5,066 Assets held for sale 17,309 17,752 Total Assets $ 197,968 $ 197,717 Liabilities and Shareholders' Equity Liabilities: Accrued expenses and other liabilities $ 23,915 $ 22,342 Deferred service fees 84,002 83,995 Bank loans 33,410 30,822 Subordinated debt, at fair value 13,651 13,594 Lease liability 1,456 1,198 Net deferred income tax liabilities 4,956 5,041 Liabilities held for sale 15,936 16,114 Total Liabilities 177,326 173,106 Shareholders' Equity: Common stock, n

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) March 31, 2024 NOTE 1 BUSINESS Kingsway Financial Services Inc. (the "Company" or "Kingsway") was incorporated under the Business Corporations Act (Ontario) on September 19, 1989. Effective December 31, 2018, the Company changed its jurisdiction of incorporation from the province of Ontario, Canada, to the State of Delaware. Kingsway is a holding company with operating subsidiaries located in the United States. The Company owns or controls subsidiaries primarily in the extended warranty and business services industries. NOTE 2 BASIS OF PRESENTATION The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10 -Q and Article 10 of Regulation S- X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements of the Company. In the opinion of management, all adjustments necessary for a fair presentation have been included and are of a normal recurring nature. Interim results are not necessarily indicative of the results that may be expected for the year. The accompanying unaudited consolidated interim financial statements and footnotes should be read in conjunction with the audited consolidated financial statements and footnotes included within our Annual Report on Form 10 -K (" 2023 Annual Report") for the year ended December 31, 2023 . The unaudited consolidated interim financial statements include the accounts of the Company and its subsidiaries, as well as certain variable interest entities as further described in Note 6, "Variable Interest Entities," to the consolidated financial statements in the 2023 Annual Report. All material intercompany transactions and balances have been eliminated in consolidation. The preparation of consolidated fi

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) March 31, 2024 In November 2023, the FASB issued ASU No. 2023 - 07, Improvements to Reportable Segment Disclosures ("ASU 2023 - 07" ), which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity's overall performance and assess potential future cash flows. ASU 2023 - 07 is effective for public companies with annual periods beginning after December 15, 2023, and interim periods within annual period beginning after December 15, 2024. Although the Company continues to evaluate the impact of adopting this new accounting standard, the amendments are disclosure-related and should not have a material impact on the Company's consolidated financial statements. In March 2024, the FASB issued ASU 2024 - 02, Codification Improvements - Amendments to Remove References to the Concepts Statements ("ASU 2024 - 02" ). ASU 2024 - 02 amends the Codification to remove references to various concepts statements and impacts a variety of topics in the Codification. The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance. Generally, the amendments in ASU 2024 - 02 are not intended to result in significant accounting changes for most entities. ASU 2024 - 02 is effective January 1, 2025. The Company does not expect ASU 2024 - 02 to have a significant impact on its consolidated financial statements. NOTE 5 ACQUISITIONS A ND DISC

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) March 31, 2024 Digital Diagnostics Imaging, Inc. On October 26, 2023, the Company acquired 100 % of the outstanding equity interests of Digital Diagnostics Imaging, Inc. ("DDI") for aggregate cash consideration of approximately $ 11.0 million, less certain escrowed amounts for purposes of indemnification claims and working capital adjustments. DDI, based in Wall, New Jersey, is a provider of fully managed outsourced cardiac telemetry services. As further discussed in Note 19 , "Segmented Information ," DDI is included in the Kingsway Search Xcelerator segment. This acquisition was the Company's fifth acquisition under its novel CEO Accelerator program and further expands the Company's portfolio of businesses with recurring revenue and low capital intensity. This acquisition was accounted for as a business combination using the acquisition method of accounting. The purchase price was provisionally allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition and are subject to adjustment during a measurement period subsequent to the acquisition date, not to exceed one year as permitted under U.S. GAAP. The Company expects to complete its purchase price allocation during the first half of 2024. These estima

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