Welcome to the Kingsway conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, James Carbonara, with Hayden IR. You may begin.
Thank you, Operator. Welcome once again to Kingsway's conference call to discuss the acquisition of MLC Plumbing LLC. With me on the call are J.T. Fitzgerald, Chief Executive Officer; Charles Joyce, Vice President for Kingsway Search Xcelerator; and Rob Kasper, the incoming CEO of Kingsway Skilled Trades. Before we begin, I want to remind everyone that today's conference call 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 differ materially from those contemplated by those forward-looking statements.
For 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, as well as other reports that the company files from time to time with the Securities and Exchange Commission. Please note too 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 metrics is available in our periodic filings with the SEC. Now, I'd like to turn the call over to J.T. Fitzgerald, CEO of Kingsway. J.T., please proceed.
Thank you, James, and welcome, everyone. We're excited to talk about our recent formation of the Kingsway Skilled Trades platform and our recent acquisition of MLC Plumbing, which operates under the trade name Bud's Plumbing. As we disclosed in a press release last week, we purchased MLC Plumbing LLC for $5 million, plus transaction expenses and a working capital adjustment. We'll talk more about the acquisition structure and rationale during this call and provide investors with an opportunity to ask questions about the transaction. We are excited to announce Bud's Plumbing as our seventh acquisition in the growing Kingsway Search Xcelerator portfolio. The KSX segment is focused on acquiring service businesses operating between $1 million-$3 million of EBITDA that satisfy our investment criteria. Specifically, acquisitions must be with an industry with long-term secular growth trends, with strong recurring customer relationships, high margins, and an asset-light business model.
Bud's Plumbing demonstrates each of these characteristics. Since its founding in 1920, the business has grown to serve over 10,000 residential and commercial customers in the greater Evansville, Indiana, MSA. The business focuses primarily on service and repair and requires minimal working capital and CapEx. We are fortunate to partner in this acquisition with Rob Kasper, who joined Kingsway last year as an Operator in Residence and has transitioned to the role of CEO of Kingsway Skilled Trades. I'll turn the call over to Charlie Joyce for a review of the transaction details, and then we'll ask Rob to share more about the business and the opportunities he sees. Charlie.
Thanks, J.T. The financial results for the business observed during diligence yielded, in the 12 months ending October 2024, $6 million in unaudited revenue and approximately $800,000 in unaudited adjusted EBITDA. Based on our purchase price of $5 million, the valuation represents approximately 0.8 x revenue and approximately 6.0 x adjusted EBITDA. We acquired Bud's Plumbing in a $5 million transaction comprised of $3.75 million in cash and $1.25 million in seller debt financing for 100% of the outstanding and issued membership interest. The funding came primarily from the issuance of Class C preferred stock. Between February 18th and 24th of 2025, Kingsway issued and sold to accredited investors 240,000 shares of newly created Class C preferred stock with a liquidation preference of $25 per share for a total proceeds of $6 million.
The shares of Class C preferred stock were offered and sold without registration under the Securities Act of 1933. Key terms of this issuance include a fixed and cumulative preferential cash dividend of 8%, conversion price of $9.5 per share, and redeemable by Kingsway on February 12th, 2032, for the price of $25 per share. Please refer to the 8-K we filed on February 24th with the SEC for further details of this issuance. The $1.25 million debt financing that was provided by the seller in the form of a five-year promissory note with equal payments of $24,166 representing both principal and interest. I'll turn the call over to Rob for more details about the company and the industry. Rob.
Thank you, Charlie. I'm pleased to have the opportunity to speak with you today and share additional context on how we sourced and evaluated Bud's Plumbing the last week since the closing and the opportunity I see ahead for this storied business. I first wanted to say thank you and to give the real credit to Charlie, Yvonne, Bernadine, Kent, and others on the Kingsway team for getting us across the goal line. This was a team effort, and J.T., thank you for the opportunity to be a part of Kingsway and run Bud's and Kingsway Skilled Trades. I also have to thank you; I also have to say thank you to Mark and Richard. Both were instrumental in getting us there, and thank you, Mark, for entrusting us with your business. We will prove to be capable stewards. On the industry, plumbing is an essential service in industry.
It's a large and growing market with an estimated $120 billion TAM, including nearly $30 billion with service and repair segment, serviced by highly fragmented and local companies nationwide. Kingsway has chosen to focus on mid-sized cities where we believe there's an opportunity for M&A at an attractive valuation and positive long-term economic outlook. We believe Bud's is in the top 5% of plumbing companies nationally, and Bud's plumbers are some of the best in their service area. Bud's is headquartered in Evansville, Indiana, and is a provider of residential and commercial plumbing services. I'll put in a plug for Evansville as the community that we serve. It's some of the best people in the world. They make the MREs that I ate on three deployments, and they built many of the LSTs that our grandfathers came ashore on during World War II.
Evansville is the heartland of America through and through. Now, Bud's Plumbing was founded in 1920 by Ulysses Bud Grant, so one year after World War I concluded. Since 1920, Bud's Plumbing has expanded its service area, and Mark has done a tremendous job of continuing to build the quality in the service area. They care about what they're doing. You can see our reviews and our reputation, and it's not built overnight. As far as sourcing and diligence goes, we were fortunate to source this opportunity proprietarily. Diligence was straightforward and comprehensive as we covered financial, legal, commercial, and operational areas.
As a result of our diligence process, we were able to validate: one, we had no significant customer concentration; two, we had exceptional revenue quality with almost all service and repair revenue; and three, we had strong technology on the platform and accounting systems that provided for smooth integration. We were fortunate to work with the Bud's team closely throughout the process. Mark is a terrific owner and a man of strong values, which have been instilled throughout the company. On growth, I'm excited by the opportunity within plumbing today. On the organic side, the best way to get growth is to, number one, do the right work in the right way. This is simple but hard to do in practice. Many want shortcuts, and there's no pill. Part two is to be the employer of choice for strong values and highly skilled plumbers.
These two parts feed each other. They form a virtuous circle, and Bud's has been blessed by that now and over the years. This is much to Mark's credit. Building off of this strong foundation, we intend to grow Bud's organically through sales and marketing, specialization of services, and increased workforce service capacity. We have opportunities to implement and execute industry best practices that will drive results. Inorganically, we believe there is a substantial M&A runway for acquisition targets nationwide to facilitate platform growth. Focusing on acquisition of established market leaders within second and third-tier metropolitan areas, we aim to leverage the M&A capabilities of Kingsway and build a scalable acquisition engine in a national platform. I very much look forward to serving our team as Bud's continues to grow, and now I'll turn it over to J.T. for closing comments. J.T.
All right. Thanks, Rob. The acquisition of Bud's Plumbing and the formation of our Skilled Trades holding company is a great milestone for the Kingsway portfolio and our Xcelerator program. Plumbing services, as Rob discussed, are largely non-deferrable and differentiated by service quality. Over its century in operations, Bud's has demonstrated exceptional commitment to customers in the Evansville area, and we feel confident in Rob's ability as an operator to sustain and grow this business in partnership with the Bud's team. With Rob transitioning out of his role as an OIR and into his new role as CEO of Kingsway Skilled Trades, we now have three OIRs that are continuing to seek and evaluate additional M&A opportunities. We plan to add additional OIRs to the team to support our acquisition goals and our active conversations with many more talented entrepreneurs who have an interest in joining the KSX program.
As always, while there is no certainty around closing another deal or the timing, we remain encouraged by our OIRs' outreach efforts and the activity we're seeing in the market. We'll move into Q&A now, and if there are any questions afterward, please feel free to reach out to James at Hayden IR to schedule a call. Operator, please open the lines for Q&A.
Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the st ar keys. One moment, please, while we poll for questions. Once again, please press star one if you have a question or a comment. Once again, please press star one if you have a question or a comment. There are currently no questions in queue. I'd like to turn the floor back to James Carbonara for any questions he may have via email.
Thank you, Operator. Yes, we do have a handful that came in. Some of them seem interrelated, but I'll take them one at a time. The first one is, "I'd like to know more background on Rob's history in the HVAC and plumbing industry."
Perfect. I'll take that. Most recently, I oversaw a total of five businesses while at Orion. We had two large regional HVAC companies whose combined revenue was just over $90 million and served 30-plus states. On the plumbing side, I oversaw three businesses whose combined revenues approached $50 million and operated in five states. As some of you know, Orion as a whole is a combination of 40+ trades and skilled trades businesses with over $1 billion in revenue assembled over approximately five years.
Excellent. I'm not sure if you mentioned this, but there was a follow-up question to that. Was it sold at a premium to what you paid for the individual HVAC businesses?
Great question. When I left Orion, we had not exited the HVAC or plumbing businesses. The businesses were purchased anywhere between 4x-12x, so quite a range.
Excellent. The next one is, "As you make more acquisitions in skilled trades, will each business be run separately, or do you plan to consolidate back-office functions?"
That's a great question. We will consolidate some back-office functions that benefit from either scale or specialization. A great example is recruiting and insurance. However, the overwhelming majority of operations will continue to be run separately and in a decentralized manner.
Great. The last one I'm seeing here on the emailed-in questions is, "Will there be a significant investment needed in back-office infrastructure/IT?"
No. Is the answer. Bud's has implemented what we believe are best-in-class back-office IT systems. Examples include ServiceTitan and Sage Intacct. Hopefully, that's responsive to that question.
Excellent. Thank you, Rob. I'll throw it back to J.T. for any closing comments he may have.
All right. Thanks, James. Thank you, everyone, for joining us here this afternoon to learn a little bit more about Bud's Plumbing and our Skilled Trades platform. I hope you share our enthusiasm for both Rob and the opportunity in skilled trades and the broader plumbing industry. Thank you for your time, and look forward to chatting with you all in the coming days and weeks. Have a good night.
This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.