Okay, welcome everybody, and thank you for joining us today at the Sidoti September Small-Cap Conference. My name is Brendan McCarthy. I am an Analyst here at Sidoti, and I am very pleased to welcome Kingsway Corporation. The ticker is KWY. Joining us from the firm is J.T. Fitzgerald, the CEO. Before I hand it over, a quick reminder that the Q&A tab is located at the bottom of the screen. Feel free to type in any questions throughout the presentation and we can save time for Q&A at the end. With that said, J.T., take it away.
All right. Thank you, Brendan. Good morning, everyone. Thank you for being here, and thank you to the Sidoti team for having us. As Brendan said, my name is J.T. Fitzgerald, and I am the President and CEO of Kingsway Corporation. As Brendan also said, we trade on the New York Stock Exchange under the ticker KWY. Our tagline here tells you what we do in three words, building through search. As many of you may know, search funds are one of the best returning asset classes, and most investors have never been able to access them. Kingsway is the only public liquid way in, and hopefully over the next 20 to 25 minutes, I will show you why that is worth your attention. With that, let us get into it. Quickly, here are the usual reminders. Some of what I will share today is forward-looking and includes non-GAAP measures.
These reflect our expectations on what we know today and actual results could differ. Please refer to our SEC filings, including the risk factors in our 2025 annual report on Form 10-K for the full discussion. I will not read all of this, but you feel free to go back and review it at your leisure. Here is a quick framing of who we are. To our knowledge, Kingsway is the only publicly traded U.S. company employing the search fund model to acquire and build great businesses. We own and operate a portfolio of high quality, asset light, growing, profitable B2B and B2C services companies with recurring revenues and strong profitability. Importantly, our goal is to compound long-term shareholder value on a per share basis through a decentralized management model, a talented team of operators, and a tax-advantaged corporate structure. Three parts and one simple through line here.
First, the asset class, why search delivers the returns it does, and why the demographics behind it create a long runway for compounding. Then our value proposition, why Kingsway is the right vehicle to own it. Finally, the flywheel, our strategy and the results that show it is working. Let us first start with the asset class. Why search funds? The simplest answer is they work. The Stanford Graduate School of Business has tracked the asset class since 1984, and the annualized return is 35.1% across 681 search funds. Entrepreneurship through acquisition, or ETA as it is known, has a long, well-documented track record of producing outsized returns by backing talented entrepreneurs to buy and grow small businesses. That is the asset class that we play in. The model works in part because it fills a real structural gap in the market.
On one side, you have a retiring small business owner with no real succession plan, no sons or daughters who want to run the business, no obvious internal buyer. They need a financial exit, but they care deeply about their employees and their legacy. Their business is often too small or lacks the management depth for private equity to treat as a standalone platform. To them selling to a strategic competitor or as a tuck-in to a private equity platform can mean layoffs, a loss of legacy, or a poor cultural fit. On the other side, you have a talented, motivated, typically post-MBA operator who can step in, solve the succession problem, and preserve what the founder spent a lifetime building. Search funds are the bridge. It's a genuine win-win, and that alignment is a big part of why sellers choose to sell to Kingsway.
Why does the model outperform? Because a smart, energetic, incentivized operator takes over a business that, quite frankly, isn't often optimized for growth. Founder-led sales becomes a professional sales team. Pen and paper processes become modern systems and technology. A single local market becomes a regional or national footprint. Cash that used to be distributed to the owner gets reinvested into the business. In short, it shifts from a lifestyle business to a growth business. At Kingsway, that's precisely our engine. We target businesses with $1 million-$3 million of EBITDA and pay roughly 4x-6x and finance the acquisition with a roughly 50/50 split of debt and equity. We install a motivated operator with aligned incentives in our business system, KBS, and position the company for growth. The timing couldn't be better.
This is the runway underneath everything we do, and it stretches out for decades. Four pieces define it. Start with the size, nearly $4.8 trillion of net worth changing hands over the next 20 years, the largest intergenerational wealth transfer in U.S. history. Then the volume, more than 2 million small businesses expected to transition leadership over the next 10 years. Look at who isn't there to buy them. The lower middle market private equity is often hesitant to step in when the primary operator wants to exit the day-to-day. Look at who is there. Only a few hundred active searches at any given time. That's the runway. It's enormous. Motivated supply on one side, scarce capable buyers on the other. A supply-demand imbalance that holds for decades. As we like to put it, this is a silver tsunami, and Kingsway is built to ride it.
Outsized returns, a real structural need, and a runway measured in decades. That's the case for the asset class, which raises the obvious question: how do you actually own it? Here's the catch for most investors. This asset class is genuinely hard to access. ETA is a tight-knit world and hard to break into. The best deals flow through close networks to insiders who've spent years there. A newcomer rarely sees the strongest searchers at all, and even if they could, ends up writing small, illiquid, $100,000-$300,000 checks into deals they have to find and vet alone. It's illiquid, hard to access, and difficult to scale. An alternative is a fund of search funds or an accelerator.
That gives you access, but it adds a second layer of fees on top of the carry the searchers themselves earn, which can take a bite out of the underlying returns, and your capital is still locked up for 10 plus years in a fund. Kingsway is the third option, a publicly traded vehicle that gives you instant liquid access to a diversified portfolio of search fund acquisitions, self-funded at scale, with multiple operating platforms already in place, and with public company transparency and reporting built in. One ticker, no second layer of fees, daily liquidity, and public company transparency. Why are we uniquely well- positioned to succeed? There are nine reasons on this slide, and they reinforce one another.
A proven track record, real infrastructure and support, disciplined investment criteria, top-quality searcher talent, a world-class advisory board, a public company reputation that opens doors with sellers, a long-term mindset, access to debt capital on competitive terms, and a tax-advantaged structure. Each one of these matters on their own. Together, they're very powerful and hard to replicate. Let me draw out a few here. Let's start with talent, because for us, it's not a slogan, it's the core of the whole strategy. In the last 12 months, we've had over 200 qualified applicants for Operator in Residence positions. That kind of funnel lets us be extraordinarily selective about who we back. The roster on this slide is our current operating bench, the CEOs running our platforms today, plus our operators and residents, with more OIRs to be announced soon.
These are the people who chose to bet their careers on building something meaningful inside Kingsway. I encourage you to visit our website and read their bios and watch their presentations at our investor days. I think you'll be astounded by the quality of the people running our businesses. A deepening, high caliber operator bench is the single most important investment we make, because in this model, the operator is, in many ways, what makes it work. Our investment criteria haven't changed, and they won't. We buy B2B or B2C services businesses. We target industries that are large and growing, supported by long-term secular tailwinds. We look for fragmented industries with lots of opportunity for shots on goal, and interesting niches where even a small company with a focused operator can have a competitive advantage.
At the company level, we seek high revenue quality, recurring revenue businesses with low customer concentration, strong margins, and a long history of consistent profitability that are also capital light, meaning the businesses don't need to consume cash to grow. That combination is our margin of safety. We are patient, and we stick to it. Our operators don't go it alone. They have access to an active and engaged advisory board of current shareholders that most companies our size could only dream of. Tom Joyce is the former CEO of Danaher, widely regarded as one of the best run companies in history. Tom was instrumental in building the Danaher Business System, the gold standard our own operating system is modeled on. Will Thorndike, many of you know Will as the author of The Outsiders, the seminal text on capital allocation.
But what many people don't know is that Will's also one of the earliest and most prolific investors in search funds. Decades of pattern recognition built over hundreds of reps that our operators and OIRs get to tap into directly. And finally, Tyler Gordy, the former CEO of PWSC, a Kingsway subsidiary that delivered a 10x return when we sold it. Tyler has operated in our structure, helped build and refine KBS and had tremendous success in the process. That's the caliber of coaching and mentorship behind every one of our CEOs. And now to a genuinely differentiated asset, one most companies our size simply don't have, the tax assets. Kingsway carries approximately $620 million of net operating loss carryforwards left over from our legacy insurance business. These are real usable tax assets that shelter future earnings and capital gains.
So more of every dollar we produce drops to the bottom line and we compound faster. Put it together, elite operators, disciplined underwriting criteria, real coaching and mentorship, and a tax structure that makes every dollar compound faster, all inside a public permanent capital vehicle. That combination is hard to replicate and why we believe Kingsway is the best way to own this asset class. So here's the entire strategy in one picture. Acquire a profitable business, invest to grow it, and yes, that often means working through a short J-curve as we put in systems and people to position the business for its next stage. Then reap the increased cash flow and reinvest it into the next acquisition, and then repeat. More acquisitions create more cash flow, which in turn funds more operators and acquisitions. Talent and capital compounding on each other turn after turn. That's the flywheel.
Does the model actually work in practice, not just in Stanford's data set? Three data points here say yes. First, PWSC, our proof of concept. I spoke earlier about it when I talked about Tyler. It's a home warranty business we acquired for $10 million, funded 50% with preferred equity. And Tyler, a West Point grad, army officer, and Harvard Business School grad, took the helm. Tyler upgraded the team, the processes, and the systems and got it growing. And we sold it for a 10x net return after about four and a half years of ownership. Second, Argo Holdings, the search fund investment firm I founded with a strong record across dozens and dozens of investments. 20-plus years of pattern recognition and a little scar tissue that I've built personally. My investing experience and outcomes are entirely consistent with the Stanford data we showed you earlier.
The returns are real. And third, the Kingsway Search Xcelerator itself, our live platform, where a number of our businesses are already showing real momentum with the potential for PWSC type outcomes. We're still in the early innings here, but the evidence to date validates the approach. Here's just a scorecard from last year, what we said we would do versus what we did. On the left is what we told the market we'd do last year, and on the right is what we actually delivered. We said we'd target three to five acquisitions per year. We completed six in 2025. Bud's Plumbing, Viewpoint, Roundhouse, Triple A, The HR Team, and Southside Plumbing. We said our run rate adjusted EBITDA was about $18 million-$19 million, and we achieved portfolio LTM EBITDA of $22 million-$23 million as of June 30, 2026.
Six acquisitions instead of three to five, north of 20% EBITDA growth. By the very measures we set for ourselves, we did more than we said we would do, and that's the standard we hold ourselves to. Quick look at those six acquisitions. We built out our skilled trades platform, starting with Bud's, then adding follow-on acquisitions of Triple A and Southside. We acquired Roundhouse Electric, an electric motor service and repair business in the heart of the Permian Basin. We added The HR Team, a B2B services tuck-in inside our Ravix platform, and we acquired Viewpoint, a vertical market software tuck-in inside SPI. The most important thing on this slide isn't the logos, it's that every single one was a high-quality business acquired at a mid-single digit EBITDA multiple, and every one cleared our 30% plus IRR hurdle. We grew the portfolio without loosening our standards. Discipline held.
We have an expanding base for serial tuck-ins in industries we already know. Alongside that, we run an industry game board, a map of attractive, fragmented industries where we are continually sourcing our next new platform acquisitions. We've finally reached the inflection point we've been pointing toward for several years. KSX, our search fund platform, is now a majority of both consolidated revenue and consolidated adjusted EBITDA. Why does that matter? It validates the pivot from a legacy insurance holding company to an operator-led public search platform. It also removes the investor confusion that has dogged our story. KSX's higher growth profile now drives the consolidated equity story, and it's why we retired our old name and became Kingsway Corporation. Put simply, we are no longer a legacy insurance company with a search fund side business.
We are an operator-led serial acquisition platform with a profitable extended warranty franchise running alongside it. That momentum is carried into this year. Four headlines on 2026. One, the first half was strong on the bottom line, with profits at both KSX and extended warranty coming in ahead of our internal targets. Two, KSX delivered record quarterly revenue and record quarterly adjusted EBITDA in Q2, and it did that in what is typically a seasonally light quarter for many of our businesses. Three, we kept executing disciplined M&A. In January, we announced the acquisition of Ledgers by our Ravix Group, and in May, the sale of Trinity Warranty Solutions via management buyout, and in August, the acquisition of Romeo Computer Corporation. Four, we reiterated our expectation of double-digit organic growth at both segments and our target of three to five acquisitions for the year.
Here's the framework in its simplest form: two engines of value creation working together. Organic growth. We're targeting double-digit revenue and EBITDA growth across both segments. Inorganic growth, three to five high-quality acquisitions a year, each underwritten with discipline. Compound those two engines together and what you get is per share value accretion. That's the Kingsway flywheel. It's the same framework we've shown investors for years. The difference now is that it's finally becoming visible in the reported numbers. Let me unpack the organic side briefly. Two segments, two different drivers, both pointing in the same direction. On the right, we have extended warranty, strong cash sales carrying over from the second half of 2025, with warranty claims growth moderating in both frequency and severity. That's a constructive setup for the rest of the year.
At KSX, recurring revenue, capital light with real demand tailwinds, the investments we made in 2024 and 2025 are now poised to accelerate growth through 2026. Both engines are internally targeted for double-digit organic growth. On the inorganic side, three to five acquisitions underwritten with discipline. Our filter is unchanged, a 30% plus IRR underwriting hurdle, mid-single digit EBITDA multiples, capital-light businesses, strong demand tailwinds, and clear operational improvement opportunities. What is new and the reason we are increasingly confident in that three to five number is that KSX is now running two M&A engines in parallel. One, brand new platform creation sourced through our active OIR pipeline, and two, operator-led tuck-ins sourced inside the businesses our operators already run and know intimately. Again, two engines running side by side. That is how we keep the flywheel turning. Here is where we land.
Search is one of the best returning asset classes most investors have never been able to access, and the runway ahead lasts for decades. Kingsway is the only public liquid way to own it, and we have built a set of advantages that are genuinely hard to replicate, and it is already working. Six acquisitions last year. KSX now a majority of revenue and EBITDA are a record first and second quarter, and a 10x already in the books. The 10 boxes on this slide are the reasons why, and to our knowledge, no other public company in the U.S. offers this exact setup. That is the opportunity in KWY. With that, I thank you for your time and would be happy to open up for any Q&A.
Great. Thank you, J.T. We appreciate the overview. We can now open the floor for Q&A. A couple questions from our attendees. Why do not we start off with, can you talk about how you source acquisitions, your ability to raise capital to finance those acquisitions, and what the funding mix ultimately looks like?
Yeah. So sort of three parts. How do we source acquisitions? Really two ways. We have a bunch of OIRs that work every day. That is what they do. They are sourcing opportunities in industries that they have identified as attractive. I mentioned our industry game board, where we have done a lot of work on roughly 25 to 30 industries, and so we are doing a lot of active proprietary outreach to business owners, direct to business owners in those industries, and led by our OIRs. We also have a database of roughly 10,000 brokers and intermediaries that we are reaching out to on a consistent cadence to see deal flow where there is a broker or investment banker active in selling a business. So, we see a lot of deal flow. About half of our acquired businesses have been direct proprietarily sourced, and the other half through brokers and intermediaries.
One additional smaller point, as some of our platforms have matured and started doing tuck-ins themselves, they are active in their own industries, talking to different companies that they come across in those industries and sourcing those deals as well. Funding mechanism. Typically, we fund the acquisitions, a combination of cash from Kingsway, the holding company, and a modest amount of traditional bank debt. We think that that helps support our equity returns, but we use 2x- 2.5x leverage, so we want a lot of covenant headroom and optimize the balance between equity capital returns, but not introducing capital structure risk. Then, our ability to finance those acquisitions, sources of funds to the holdco. We are on a path to a self-funding flywheel, where internally generated free cash flow from the businesses we own will fully support that three to five acquisitions.
We are probably not fully there yet, but we are very close. So, it just sort of depends on pacing, but at the current pace, we may need to raise additional outside capital, but not very much.
Understood. Thanks for those answers. When you look at your target market, the $1 million- $3 million EBITDA range, I guess, what is the competitive dynamics in that space? Maybe you can talk about the advantages of really playing in that area versus going above the high end of the range or below the low end.
Yeah. I think you get to $4 million and above, and those businesses become sort of platform acquisition opportunities for private equity. Below that, they are generally too small to be a standalone platform, so private equity is looking at them as tuck-ins, so like a strategic acquisition. So I think where we differentiate is really around the idea of continuity of legacy. So the idea that we can transition a founder out of their business, the founder who wants to retire, while preserving the brand and the people and the legacy of the thing that he or she created, I think is very compelling. As a result, it is just not that competitive in terms of that setup, which is why we are able to buy these businesses at sort of 5x to 5.5x EBITDA.
Got it. What is the current portfolio look like today? How many operating subsidiaries are there and what are the characteristics of those companies?
Yeah. We have 15 businesses in total. Some of those include tuck-in acquisitions. We still have three extended warranty businesses, but the rest of the businesses are at KSX. I do not know that I need to go through all of them, but we have businesses in B2B services, fractional accounting, outsourced CFO type businesses, healthcare services, IT MSP. We have businesses in plumbing, obviously our skilled trades platform, and a really interesting business in Texas in electric motor service and repair. So, all of them, high percentage of revenue from recurring sources, high margin, low capital intensity. What we would say kind of shorthand for predictably enduringly high returns on tangible capital.
Got it. Is there an exit criteria that some companies meet that will ultimately lead to a sale, or are you aiming to hold these companies permanently?
Yeah. I think one of the reasons that I was so drawn to try to build this inside a public vehicle was the permanency of the capital. Right? In my experience, having invested in search funds for the last 20 years, we sort of structurally are required to end up selling those businesses and our best businesses generally too soon. Will Thorndike, who is a friend, has done some primary research on the search fund asset class and did research on the returns to the next owners of those search fund exits that inform the Stanford study. Perhaps surprisingly, the returns are just as good without a single instance of a loss of capital, which means we are definitely selling those businesses too soon. The idea of having an unconstrained holding period was very compelling.
I would say going in, our ideal timeframe is forever, but every business, every day is a capital allocation decision. If you're not buying a business and thinking about selling it, you have to think about it, would you want to buy that business again today? We think about it that way, a capital allocation decision. Could we redeploy that capital in a sale at a higher risk-adjusted rate of return? That's kind of how we evaluate it. But yeah, I think going in, Brendan, generally informed by our experience, we would say that we want to own these businesses for a long time.
That makes sense. One last question here. How would you expect the mix of tuck-in acquisitions versus standalone acquisitions as the business model matures?
Yeah. I think that the tuck-in acquisition has the potential to scale rapidly, right? As those operators mature in the businesses that they own, I think pacing is really important. We intentionally kind of crawl, walk, run, go slow to go fast type of thing. But I think that we'll see that start to ramp up and then we'll continue to maintain an active OIR bench with the idea of adding a couple of new platform acquisitions a year.
Great. Well, J.T., we really appreciate the information and the overview. We'll conclude the conference there.
Awesome. Thanks, Brendan. Thanks, everyone.
Thanks, everybody, for joining us. Take care.