Kingsway's Q3 Losses Widen Amid Revenue Growth, Acquisition Spree

TL;DR

**KFS is burning cash on acquisitions, and while revenue is up, widening losses mean it's a risky bet for now.**

AI Summary

Kingsway Financial Services Inc. (KFS) reported a significant increase in total assets to $235.133 million as of September 30, 2025, up from $186.616 million at December 31, 2024, driven by acquisitions and growth in service fee receivables. The company experienced a net loss of $2.411 million for the three months ended September 30, 2025, compared to a net loss of $2.311 million in the prior year period. For the nine months ended September 30, 2025, the net loss widened to $8.668 million from $6.825 million in 2024. Despite the losses, total revenues increased to $37.173 million for the quarter and $96.441 million for the nine months, up from $27.136 million and $79.742 million respectively, primarily from service fee and commission revenue. Operating expenses also rose, with general and administrative expenses reaching $17.204 million for the quarter and $44.074 million for the nine months. The company's strategic outlook involves continuing its Search Fund model to acquire and build B2B and B2C services companies, as evidenced by $29.555 million spent on business acquisitions in the nine months ended September 30, 2025.

Why It Matters

Kingsway's continued net losses, despite revenue growth, signal potential challenges in integrating acquisitions and managing operational costs, which could impact investor confidence. The company's aggressive acquisition strategy, spending $29.555 million on businesses in nine months, suggests a focus on expansion, but the widening losses raise questions about the profitability of these ventures. For employees, this growth could mean new opportunities but also integration complexities. Customers might see an expanded service offering, but the financial performance indicates a need for improved efficiency to sustain long-term value. In a competitive market, KFS's ability to turn revenue growth into profit will be crucial for its market position.

Risk Assessment

Risk Level: high — The company reported a net loss of $8.668 million for the nine months ended September 30, 2025, a significant increase from the $6.825 million loss in the prior year. This widening loss, coupled with a substantial increase in bank loans to $55.803 million from $44.128 million, indicates a high reliance on debt to fund operations and acquisitions, posing a significant financial risk.

Analyst Insight

Investors should exercise caution and closely monitor KFS's ability to integrate its recent acquisitions and improve profitability. A wait-and-see approach is advisable until there's clear evidence of net income improvement and a reduction in the reliance on debt financing.

Financial Highlights

debt To Equity

10.69

revenue

$96.441M

operating Margin

N/A

total Assets

$235.133M

total Debt

$127.114M

net Income

-$8.668M

eps

-$0.36

gross Margin

N/A

cash Position

$9.291M

revenue Growth

+20.9%

Revenue Breakdown

Key Numbers

• $235.133M — Total Assets (Increased from $186.616M at Dec 31, 2024, indicating significant growth.)
• $96.441M — Nine-month Revenue (Up from $79.742M in 2024, showing strong top-line growth.)
• $8.668M — Nine-month Net Loss (Widened from $6.825M in 2024, indicating increasing unprofitability despite revenue growth.)
• $29.555M — Acquisition Spending (Cash used for business acquisitions in the nine months ended September 30, 2025, highlighting aggressive expansion.)
• $55.803M — Bank Loans (Increased from $44.128M at Dec 31, 2024, showing higher debt reliance.)
• $17.204M — Q3 General and Administrative Expenses (Increased from $11.867M in Q3 2024, contributing to operating losses.)
• $0.36 — Basic Loss Per Share (9 months) (Increased from $0.28 in 2024, reflecting higher losses for common shareholders.)

Key Players & Entities

• KINGSWAY FINANCIAL SERVICES INC. (company) — registrant
• New York Stock Exchange (regulator) — exchange where KFS common stock is registered
• $235,133 (dollar_amount) — Total Assets as of September 30, 2025
• $186,616 (dollar_amount) — Total Assets as of December 31, 2024
• $37,173 (dollar_amount) — Total revenues for the three months ended September 30, 2025
• $27,136 (dollar_amount) — Total revenues for the three months ended September 30, 2024
• $96,441 (dollar_amount) — Total revenues for the nine months ended September 30, 2025
• $79,742 (dollar_amount) — Total revenues for the nine months ended September 30, 2024
• $8,668 (dollar_amount) — Net loss for the nine months ended September 30, 2025
• $6,825 (dollar_amount) — Net loss for the nine months ended September 30, 2024

FAQ

Risk Factors

• Increasing Net Losses [high — financial]: The company reported a net loss of $8.668 million for the nine months ended September 30, 2025, an increase from $6.825 million in the same period of 2024. This widening loss, despite revenue growth, indicates increasing unprofitability and potential financial strain.
• Growing Debt Levels [medium — financial]: Bank loans increased to $55.803 million as of September 30, 2025, up from $44.128 million at December 31, 2024. This signifies a greater reliance on debt financing to fund operations and acquisitions, increasing financial leverage and risk.
• Rising General and Administrative Expenses [medium — operational]: General and administrative expenses for the nine months ended September 30, 2025, were $44.074 million, a significant increase from the prior year. For the third quarter alone, these expenses were $17.204 million, up from $11.867 million in Q3 2024, impacting profitability.
• Acquisition Strategy Risks [medium — financial]: The company spent $29.555 million on business acquisitions in the nine months ended September 30, 2025. While this aligns with their Search Fund model, aggressive acquisition spending can lead to integration challenges, overpayment, and increased financial risk if acquired businesses do not perform as expected.
• Dependence on Future Profitability [high — financial]: The company's strategy relies on acquiring and building profitable businesses. However, current net losses and increasing operating expenses suggest a significant gap between current performance and the stated goal of compounding long-term shareholder value.

Industry Context

Kingsway Financial Services Inc. operates within the financial services sector, specifically utilizing a Search Fund model to acquire and build B2B and B2C service companies. This model is less common than traditional private equity or venture capital, positioning KFS uniquely. The industry is characterized by intense competition, regulatory oversight, and a constant need for operational efficiency and strategic growth, particularly in asset-light, recurring revenue businesses.

Regulatory Implications

As a financial services company, Kingsway is subject to various regulatory frameworks depending on its operating jurisdictions. Changes in accounting standards (e.g., ASU 2024-03, ASU 2025-05, ASU 2025-06) require careful monitoring and implementation. Compliance with financial reporting regulations (SEC's Regulation S-X and S-K) is critical for maintaining investor confidence and market access.

What Investors Should Do

1. Monitor acquisition integration and performance
2. Analyze expense structure and profitability trends
3. Evaluate debt levels and financing strategy
4. Assess the viability of the Search Fund model at scale

Key Dates

• 2025-09-30: Quarterly Financial Reporting — Reported total assets of $235.133 million and a net loss of $2.411 million for the three months ended. This period reflects significant asset growth driven by acquisitions and increased operational expenses.
• 2025-12-31: Previous Fiscal Year End — Reported total assets of $186.616 million and total liabilities of $168.314 million. This serves as a key comparison point for the current period's growth and debt levels.
• 2024-09-30: Prior Year Comparable Period — Reported a net loss of $2.311 million for the three months and $6.825 million for the nine months. This allows for year-over-year comparison of performance trends, highlighting widening losses.

Glossary

Search Fund model

A strategy where investors (the search fund) raise capital to acquire a company, typically a small to medium-sized business, with the intention of improving its operations and selling it for a profit or holding it for long-term growth. (This is the core business model of Kingsway Financial Services Inc., driving its acquisition strategy and asset growth.)

Service fee receivable, net

Money owed to the company for services rendered but not yet collected, net of an allowance for potential uncollectible amounts. (This account increased significantly to $14.658 million from $9.361 million, indicating growth in service-based revenue streams but also a potential increase in credit risk.)

Goodwill

An intangible asset that arises when one company acquires another for a price greater than the fair market value of its net assets. It represents the value of brand recognition, customer base, etc. (Goodwill increased substantially to $69.544 million from $56.524 million, reflecting the significant acquisition activity undertaken by the company.)

Accumulated deficit

The cumulative net losses of a company that have not been offset by net income since its inception. (The accumulated deficit grew to $371.335 million from $361.453 million, underscoring the company's history of net losses.)

Redeemable preferred stock

Preferred stock that the issuer has the option to buy back from shareholders at a specified price or under specified conditions. (The amount of redeemable preferred stock and its redemption value increased significantly, indicating a growing financial obligation that could require future cash outflows.)

Year-Over-Year Comparison

Compared to the fiscal year ended December 31, 2024, Kingsway Financial Services Inc. has experienced substantial asset growth, with total assets increasing from $186.616 million to $235.133 million, largely due to acquisitions and growth in service fee receivables. However, this growth has been accompanied by widening net losses, which increased from $6.825 million for the first nine months of 2024 to $8.668 million for the same period in 2025. Revenue has shown strong top-line growth, but operating expenses, particularly general and administrative costs, have also risen significantly, contributing to the deteriorating profitability. Debt levels have also increased, with bank loans rising from $44.128 million to $55.803 million, indicating a higher reliance on leverage.

Key Financial Figures

• $0.01 — ch registered Common Stock, par value $0.01 per share KFS New York Stock Exchange
• $0 — Net of income tax (benefit) expense of $0 for the three and nine months ended Sep
• $13.90 — 52 Common stock issued at $ 11.75 and $13.90 per share, net 1,419,001 14 16,746 — —

Filing Documents

• kfs20250930_10q.htm (10-Q) — 3750KB
• ex_856606.htm (EX-31.1) — 8KB
• ex_856607.htm (EX-31.2) — 8KB
• ex_856608.htm (EX-32.1) — 5KB
• ex_856609.htm (EX-32.2) — 5KB
• 0001437749-25-033593.txt ( ) — 19582KB
• kfs-20250930.xsd (EX-101.SCH) — 118KB
• kfs-20250930_cal.xml (EX-101.CAL) — 140KB
• kfs-20250930_def.xml (EX-101.DEF) — 948KB
• kfs-20250930_lab.xml (EX-101.LAB) — 718KB
• kfs-20250930_pre.xml (EX-101.PRE) — 1009KB
• kfs20250930_10q_htm.xml (XML) — 4619KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION 3

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS 3 Consolidated Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024 3 Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited) 4 Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited) 5 Consolidated Statements of Shareholders' Equity for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited) 6 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 (unaudited) 8

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 9

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 47

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 57

CONTROLS AND PROCEDURES

ITEM 4. CONTROLS AND PROCEDURES 57

- OTHER INFORMATION

PART II - OTHER INFORMATION 58

LEGAL PROCEEDINGS

ITEM 1. LEGAL PROCEEDINGS 58

RISK FACTORS

ITEM 1A. RISK FACTORS 58

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 58

DEFAULTS UPON SENIOR SECURITIES

ITEM 3. DEFAULTS UPON SENIOR SECURITIES 58

MINE SAFETY DISCLOSURES

ITEM 4. MINE SAFETY DISCLOSURES 58

OTHER INFORMATION

ITEM 5. OTHER INFORMATION 58

EXHIBITS

ITEM 6. EXHIBITS 59

SIGNATURES

SIGNATURES 60 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) September 30, 2025 December 31, 2024 (unaudited) Assets Investments: Fixed maturities, at fair value (amortized cost of $ 37,764 and $ 38,117 , respectively) $ 37,400 $ 36,963 Limited liability investments 649 650 Limited liability investment, at fair value 3,148 2,859 Investments in private companies, at adjusted cost 575 696 Short-term investments, at cost which approximates fair value 174 169 Total investments 41,946 41,337 Cash and cash equivalents 9,291 5,493 Restricted cash 7,538 7,643 Accrued investment income 932 841 Service fee receivable, net of allowance for credit losses of $ 1,217 and $ 626 , respectively 14,658 9,361 Other receivables, net of allowance of $ 5 and $ 5 , respectively 1,085 1,000 Deferred contract costs 14,908 13,889 Income taxes receivable — 574 Property and equipment, net of accumulated depreciation of $ 2,179 and $ 1,720 , respectively 5,871 1,567 Right-of-use asset 6,925 2,390 Goodwill 69,544 56,524 Intangible assets, net of accumulated amortization of $ 40,196 and $ 34,442 , respectively 54,918 40,049 Other assets 7,517 5,948 Total Assets $ 235,133 $ 186,616 Liabilities, Redeemable Preferred Stock, Redeemable Noncontrolling Interest and Shareholders' Equity Liabilities: Accrued expenses and other liabilities $ 29,336 $ 20,616 Income taxes payable 75 — Deferred service fees 87,415 83,108 Bank loans 55,803 44,128 Notes payable 1,032 — Subordinated debt, at fair value 13,889 13,409 Lease liability 7,190 2,682 Net deferred income tax liabilities 4,574 4,371 Total Liabilities 199,314 168,314 Redeemable preferred stock, $ 0.01 par value; 650,000 and 330,000 authorized, issued and outstanding at September 30, 2025 and December 31, 2024, respectively; redemption amount of $ 16,250 and $ 8,250 at September 30, 2025 and December 31, 2024, respectively 16

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) September 30, 2025 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 and is the only publicly-traded US company employing the Search Fund model to acquire and build great businesses. The Company owns and operates a collection of high-quality B2B and B2C services companies that are asset-light, growing, profitable, and that have recurring revenues. Kingsway seeks to compound long-term shareholder value on a per share basis via its decentralized management model, its talented team of operators, and its tax-advantaged corporate structure. 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 (" 2024 Annual Report") for the year ended December 31, 2024 . The unaudited consolidated interim financial stateme

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) September 30, 2025 In October 2023, the FASB issued ASU 2023 - 06, Disclosure Improvements: Codification Amendments in Response to the SEC ' s Disclosure Update and Simplification Initiative ("ASU 2023 - 06" ), which amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification. For SEC registrants, the effective date for each amendment will be the date on which the SEC's removal of that related disclosure requirement from Regulation S- X or Regulation S-K becomes effective, with early adoption prohibited. The Company will monitor the removal of various requirements from the current regulations in order to determine when to adopt the related amendments, but does not anticipate the adoption of the new guidance will have a material impact on the Company's consolidated financial statements. The Company will continue to evaluate the impact of this guidance on its consolidated financial statements. In November 2024, the FASB issued ASU 2024 - 03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures ("ASU 2024 - 03" ). ASU 2024 - 03 requires new financial statement disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense caption. Qualitative disclosures about any remaining amounts in relevant expense line items must be provided. Separate disclosures of total selling expenses and an entity's definition of those expenses are also required. ASU 2024 - 03 is effective for public companies with annual periods beginning after December 15, 2026, and interim periods within annual period beginning after December 15, 2027, with early adoption permitted. The Company expects the adoption of the standard to result in additional disaggregation of expense captions within its footnote disclosures. In July 2025, the FASB issued ASU 2025 - 05, Financial Ins

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