Kingsway Financial Services Inc (KFS) 2023 Q4 法說會逐字稿

Good day, and welcome to the Kingsway full year 2023 earnings call at this time, all participants are in a listen-only mode and a question and answer session will follow the formal presentation. And if anyone should require operator assistance during the conference, please press star zero on your telephone keypad. With me on the call are Jay Tim FitzGerald, Chief Executive Officer, and Kent Hansen, Chief Financial Officer.

美好的一天，歡迎參加 Kingsway 2023 年全年財報電話會議，所有參與者都處於僅聽模式，正式演示之後將有問答環節。如果有人在會議期間需要接線員協助，請按下電話鍵盤上的星號零。與我一起參加電話會議的是執行長 Jay Tim FitzGerald 和財務長 Kent Hansen。

Before we begin, I want to remind everyone that today's 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 materially differ from those contemplated by those forward-looking statements. For a 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 and subsequent Form 10 Qs and Form eight K as filed with the Securities and Exchange Commission. Please note also 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 measures is available in the most recent press release as well as in our periodic filings with the SEC.

在開始之前，我想提醒大家，今天的電話會議可能包含前瞻性陳述。前瞻性陳述包括有關未來的陳述，包括預期收入、營業利潤率、費用和未來業務前景。實際結果或趨勢可能與這些前瞻性陳述中預期的結果或趨勢有重大差異。有關可能導致實際結果與前瞻性陳述中明示或暗示的結果不同的此類風險和不確定性的討論，請參閱公司年度報告表10 K 以及隨後的表10 Q 和表8 中詳細說明的風險因素. K 已向美國證券交易委員會提交。另請注意，今天的電話會議可能包括使用管理層用來分析公司績效的非公認會計準則指標。此類非 GAAP 指標與最具可比性的 GAAP 指標的調整可在最新的新聞稿以及我們向 SEC 定期提交的文件中找到。

Now I'd like to turn the call over to J.T. Fitzgerald, CEO of Kingsway JT. Please proceed.

現在我想把電話轉給 J.T.菲茨杰拉德，Kingsway JT 執行長。請繼續。

Thank you, John. Good afternoon, everyone, and welcome to the Kingsway earnings call for the full year 2023. Thank you for joining us. I'd also like to quickly apologize. I know that the earnings release just dropped. We had some technical difficulties with our service provider and then a fairly large queue to get those things out. So I apologize on the short timing here and so let's get started. First, let me start by saying that 2023 was a year of significant accomplishments. We delivered financial results that are largely in line with our expectations given the current market conditions. And we completed two great acquisitions, which is in line with our previously described internal target of two to three acquisitions per year. Also during the year, we repurchased a substantial amount of our warrants and common stock, and we completed the repurchase of a substantial portion of our subordinated debt that resulted in a much more simplified and stronger balance sheet. All in all, 2023 was a great year here at Kingsway and equally important over the course of the year we built a firm foundation to advance our strategy of growth through acquisitions and really energized by the opportunities ahead of us. So we'll start with the financial results for our 1st year are rather our full year financial results include consolidated revenue of 103.2 million, up 11% from a year ago, and consolidated adjusted EBITDA of $9.1 million combined adjusted EBITDA for the extended warranty segment and the KSX. segment was 14.1 million for the year. We break this down our extended warranty segment reported 68.2 million of revenue in 2023 compared to pro forma revenue of $74 million in 2022. Adjusted EBITDA for 2023 was $8.4 million compared to pro forma adjusted EBITDA of 10.7 the year prior. And as a reminder, pro forma results exclude those of PWSC., which was sold in July of 2022 throughout most of the year.

謝謝你，約翰。大家下午好，歡迎參加 Kingsway 2023 全年財報電話會議。感謝您加入我們。我也想趕緊道歉。我知道財報剛剛下降。我們與服務提供者遇到了一些技術困難，然後排了相當長的隊伍才能把這些東西拿出來。所以我對時間太短表示歉意，讓我們開始吧。首先，我首先要說的是，2023年是取得重大成就的一年。鑑於目前的市場狀況，我們的財務表現基本上符合我們的預期。我們完成了兩次偉大的收購，這符合我們之前描述的每年兩到三次收購的內部目標。同樣在這一年中，我們回購了大量的認股權證和普通股，並完成了大部分次級債務的回購，使資產負債表更加簡化和更加強大。總而言之，2023 年對Kingsway 來說是偉大的一年，同樣重要的是，在這一年中，我們為透過收購推進我們的成長策略奠定了堅實的基礎，並為我們面前的機會注入了真正的活力。因此，我們將從第一年的財務表現開始，我們的全年財務表現包括 1.032 億美元的綜合收入，比一年前增長 11%，以及延長保固業務部門的綜合調整後 EBITDA 為 910 萬美元。和KSX。全年營業額為 1410 萬。我們對此進行了細分，我們的延長保固部門報告稱 2023 年收入為 6820 萬美元，而 2022 年預計收入為 7400 萬美元。2023 年調整後 EBITDA 為 840 萬美元，而上一年預計調整後 EBITDA 為 10.7。需要提醒的是，預計業績不包括 PWSC. 的業績，該公司於 2022 年 7 月出售，全年大部分時間均已出售。

As we discussed on the quarterly earnings calls, our vehicle service agreement or VSA companies were impacted by an increase in average claims expense or severity and persistent macro level revenue headwinds that impact consumers primarily tighter credit conditions and high used cars prices. High used car prices in the fourth quarter of claim severity began to moderate as the rate of inflation related to parts and labor began to recede compared to earlier quarters. We've been able to reduce the impact of these headwinds. Through our tight focus on managing operating expenses, we've implemented price increases to reflect the higher claims environment and expect those to begin rolling through the book this year. IWSGM. and S. and PWY. have also been very active on the business development front, IWS. added several new credit union partners during the year and Gemini S. and PDOPPWI. have executed a significant reboot of their sales teams and the corresponding goals and incentives, which are starting to yield results at Trinity maintenance support business revenues were negatively impacted by decreases in its equipment breakdown and maintenance support services due to both smaller average job sizes and generally mild weather conditions, which resulted in fewer service calls. Equipment warranty sales were negatively impacted by softer demand and long lead times on equipment availability and installations with some equipment lead times approaching as much as a year. As a reminder, our revenue from warranty equipment sales is not recognized until the underlying equipment is installed. Thankfully, these backlogs are starting to free up and the Trinity team has also done a nice job adding new distribution partners over the past 12 months. To offset these challenges, we expect positive momentum in 2024 in summary for the extended warranty segment. While it's difficult to predict macroeconomic trends and the resulting impact to our business going forward, our companies remain focused on improving sales force production, strategically adjusting pricing and managing our costs. We have seen significant positive progress thus far in 2024 and expect a better year ahead.

正如我們在季度財報電話會議上討論的那樣，我們的車輛服務協議或VSA 公司受到平均索賠費用或嚴重程度增加以及持續的宏觀收入逆風的影響，這些逆風主要影響消費者的是信貸條件收緊和二手車價格高。隨著與零件和勞動力相關的通貨膨脹率與前幾季相比開始回落，第四季二手車高價的索賠嚴重程度開始放緩。我們已經能夠減少這些不利因素的影響。透過我們對管理營運費用的密切關注，我們已經實施了價格上漲，以反映更高的索賠環境，並預計這些價格將在今年開始滾動。IWSGM。和 S. 和 PWY。 IWS 在業務開發方面也非常活躍。年內增加了幾家新的信用合作社合作夥伴以及 Gemini S. 和 PDOPPWI。已對其銷售團隊進行了重大重新啟動，並製定了相應的目標和激勵措施，這些目標和激勵措施已開始在Trinity 取得成果，維護支援業務收入受到設備故障和維護支援服務減少的負面影響，原因是平均工作規模較小，而且整體而言天氣條件溫和，導致服務電話減少。設備保固銷售受到需求疲軟以及設備可用性和安裝交付週期較長的負面影響，某些設備交付週期接近一年。提醒一下，我們的保固設備銷售收入只有在安裝基礎設備後才能確認。值得慶幸的是，這些積壓訂單開始得到釋放，並且 Trinity 團隊在過去 12 個月中在增加新的分銷合作夥伴方面也做得很好。為了應對這些挑戰，我們預計延長保固領域將在 2024 年出現積極勢頭。雖然很難預測宏觀經濟趨勢及其對我們未來業務的影響，但我們的公司仍專注於提高銷售人員的生產力、策略性地調整定價和管理成本。2024 年迄今為止，我們已經看到了重大的積極進展，並期待未來的一年會更好。

Switching now to our search accelerator or KSX. segment, which reported revenue of $35 million in 2023 compared to revenue of $19.2 million in 2022. Adjusted EBITDA for 2023 was $5.7 million compared to $3.8 million in 2022. These increases were driven by the acquisitions of C suite and SNS., which were completed in November 2022, as well as the acquisitions of SPI. in September and DDI. in October.

現在切換到我們的搜尋加速器或 KSX。該部門報告 2023 年收入為 3500 萬美元，而 2022 年收入為 1920 萬美元。2023 年調整後 EBITDA 為 570 萬美元，而 2022 年為 380 萬美元。這些成長是由 2022 年 11 月完成的 C suite 和 SNS 收購以及 SPI 的收購所推動的。九月和DDI。在十月。

Within the segment, Radlinx performed better than expected from a profitability perspective, especially in Q4 as higher operating margins more than offset lower than expected revenues since our acquisition remix has performed very well and ahead of our original underwriting thesis. Since we experienced fewer interim engagements and inconsistent search put placements amidst a challenging private equity and M&A environment, the team has bolstered its pipeline and is advancing new business opportunities to reignite growth. While it is early in the year, we have begun to see the M&A environment saw fit, and both Rayovac's and C-suite have added business development talent accelerate revenue growth for SNFs. The per diem business is performing quite well, partially offsetting an industry-wide decline in the use of travel nurses, which are typically billable at a higher margin to address the industry headwinds. The team recently added new recruiting talent and completed upgrades to its technology and operations to better support its clinician recruiting efforts. The team has done a nice job of building a tech-enabled platform to support its anticipated growth. Importantly, we believe long term demand for nurse staffing will be strong with a projected persistent shortage of risk registered nurses over the next decade. Secular demand for per diem and travel nurses is expected to remain robust. Growth through acquisitions is central to our corporate strategy. We have developed and follow an underwriting framework that evaluates opportunities based on a predefined set of performance criteria that reinforce reinforce the thoughtful and disciplined allocation of capital enable us and enable us to acquire high return cash flow-generating operating companies at reasonable valuations. In short, we are targeting opportunities that deliver predictably high returns on tangible capital in large and growing end markets. In September, we acquired systems products international or SPI., a privately held vertical market software company. It was the fourth acquisition completed under our search accelerator and a great fit to our portfolio with contractual recurring revenue, low customer churn. DDI. is the industry standard bearer for outsourced cardiac monitoring in the long-term acute care and rehab hospital space and has established itself as a trusted partner to its customers through its focus on dependable, high-quality service. This business has a high level of recurring revenue with high customer retention and operates in a fast growing and into an underpenetrated market. DDI. has demonstrated an opportunity to grow at a very fast clip with revenues growing in excess of 30% year over year in our first few months of ownership. The team at DDI. is focused on building the internal infrastructure and processes to scale alongside this high level of demand while ensuring continued excellent levels of service and care. We held separate conference calls to discuss each of the SPI. and DDI. acquisitions. If you missed the original calls, I encourage you to listen to the replays for a more in-depth discussion of those transactions. We are eager to expand our KSX. business, but we are also committed to disciplined decision making the M&A environment is more favorable than it was 12 months ago. And we continue to believe this will translate into the completion of two to three deals over the next year.

在該細分市場中，從獲利角度來看，Radlinx 的表現優於預期，尤其是在第四季度，因為更高的營業利潤足以抵消低於預期的收入，因為我們的收購重組表現非常好，並且領先我們最初的承保論文。由於我們在充滿挑戰的私募股權和併購環境中經歷了較少的臨時業務和不一致的搜尋佈局，因此團隊加強了其管道，並正在推進新的商機以重振成長。雖然現在還處於今年年初，但我們已經開始看到併購環境合適，Rayovac 和最高管理層都增加了業務開發人才，加速了 SNF 的收入成長。每日津貼業務表現相當不錯，部分抵消了全行業旅行護士使用量下降的影響，而旅行護士通常會以更高的利潤率計費，以應對行業逆風。該團隊最近增加了新的招募人才，並完成了技術和營運升級，以更好地支援其臨床醫生招募工作。該團隊在建立技術支援的平台以支援其預期成長方面做得很好。重要的是，我們認為對護理人員的長期需求將會強勁，預計未來十年風險註冊護理師將持續短缺。對每日津貼和旅行護士的長期需求預計將保持強勁。透過收購實現成長是我們企業策略的核心。我們開發並遵循一個承銷框架，該框架根據一組預先定義的績效標準來評估機會，這些標準加強了資本的深思熟慮和嚴格配置，使我們能夠以合理的估值收購高回報、產生現金流的運營公司。簡而言之，我們的目標是在大型且不斷成長的終端市場中提供可預測的高有形資本回報的機會。9 月，我們收購了 Systems products International 或 SPI.，這是一家私人垂直市場軟體公司。這是我們的搜尋加速器下完成的第四次收購，非常適合我們的產品組合，具有合約經常性收入和低客戶流失率。直撥。是長期急診和復健醫院領域外包心臟監測的行業標準承擔者，並透過專注於可靠、高品質的服務，成為客戶值得信賴的合作夥伴。該業務具有高水準的經常性收入和高客戶保留率，並且在快速成長和滲透不足的市場中運作。直撥。在我們擁有所有權的頭幾個月裡，營收年增超過 30%，這證明了我們有機會快速成長。DDI 的團隊。專注於建立內部基礎設施和流程，以適應這種高水準的需求，同時確保持續提供卓越的服務和護理水準。我們分別舉行了電話會議來討論每項 SPI。和直撥。收購。如果您錯過了最初的通話，我鼓勵您收聽重播，以更深入地討論這些交易。我們渴望擴大 KSX。業務，但我們也致力於紀律嚴明的決策，使併購環境比 12 個月前更有利。我們仍然相信這將轉化為明年完成兩到三筆交易。

With the addition of Paul Vidal at the start of 2024, we currently have four fantastic operators and residents who are actively scouring the market and evaluating potential target opportunities we remain encouraged by the quality of our pipeline and hold a high degree of confidence in our ours. We continue to believe that the future is extremely bright for our search accelerator platform, given the talent we have on our team, the quality of the opportunities they are pursuing and the rigorous framework through which we evaluate acquisition candidates, inclusive of our recent acquisitions. Our trailing 12 month adjusted EBITDA run rate is 17 million to $18 million. This includes the extended warranty companies, the existing KSX. companies, as well as pro forma results for SPI. and DDI. As a reminder, this metric is intended to capture the 12 month earnings businesses of the Company that we currently own and is not intended to be forward-looking guidance.

隨著Paul Vidal 在2024 年初的加入，我們目前擁有四位出色的營運商和居民，他們正在積極搜尋市場並評估潛在的目標機會，我們仍然對我們的管道品質感到鼓舞，並對我們的管道抱有高度信心。我們仍然相信，鑑於我們團隊中的人才、他們所追求的機會的品質以及我們評估收購候選者（包括我們最近的收購）的嚴格框架，我們的搜尋加速器平台的未來非常光明。我們過去 12 個月調整後的 EBITDA 運作率為 1,700 萬至 1,800 萬美元。這包括延長保固期的公司，即現有的 KSX。公司，以及 SPI 的預估結果。和直撥。提醒一下，該指標旨在捕捉我們目前擁有的公司 12 個月的獲利業務，而不是前瞻性指導。

Looking ahead, our priorities for 2024 and beyond remain the same operational excellence that our companies, while strategically deploying the excess cash flows they generate to grow our portfolio of wonderful businesses. Our goal is to deliver sustainable long-term growth in cash flow from operations and provide an excellent return to our shareholders. We continue to target two to three new acquisitions per year that fit our clearly defined acquisition criteria and will generate annualized EBITDA in the range of one to $3 million each and as we build our acquisition acquisition engine and our cash flows, we believe we are building the flywheel to scale our acquisition pace even further.

展望未來，我們 2024 年及以後的優先事項仍然是我們公司的卓越運營，同時策略性地部署它們產生的多餘現金流來發展我們的精彩業務組合。我們的目標是實現營運現金流的可持續長期成長，並為股東提供豐厚的回報。我們繼續以每年兩到三項符合我們明確定義的收購標準的新收購為目標，並將每次產生100 到300 萬美元的年化EBITDA，隨著我們建立收購引擎和現金流，我們相信我們正在建立飛輪進一步擴大我們的收購步伐。

I'll now turn the call over to Kent for a review of our financials.

我現在將把電話轉給肯特，以審查我們的財務狀況。

Thank you, J.T.

謝謝你，J.T.

As a reminder, during the fourth quarter of 2022, we began executing a plan to sell one of our subsidiaries VA Lafayette, which owns a medical clinic whose sole tenant is the US Veterans Administration. As part of our strategic shift away from the leased real estate segment, VA Lafayette is included in discontinued operations and its assets and liabilities are reported as held for sale. The results of its operations are reported separately and not included in the results. I'm about to discuss given that JT. covered operating results, I would like to focus on holding company expenses, cash flows and some balance sheet highlights. Our ongoing holding company expenses, which include our KSX. search expenses consist mainly of employee costs of our 10 corporate employees and costs associated with being a publicly traded company. Total expense, excluding interest from our last remaining TruPS was $7.7 million in 2023 compared to 7.3 million in 2022. However, 2023 includes the following items, 1 million of stock-based compensation expense, which is non-cash, $1.1 million of expense related to acquisitions and nonrecurring items and about 600,000 in IBNR expense as our employee medical plan was self-insured in 2023. And we have since moved to a fully insured plan in 2024 and at a lower total cost. We continually challenge our holding company expenses which has resulted in significant savings over the past few years. We believe our holding company will be able to scale as our underlying businesses expand and grow our ongoing KSX. search expenses consist of employee costs for our active searchers as well as the tools to support their searches. Total expense was 1.3 million in 2023 compared to about 600,000 in 2022. The increase is mainly due to the average number of OIR.s and to 2023, increasing over 2022 the addition of our VP of business development in 2023 and due to having a full year of the Strategic Advisory Board in 2023, as well as expanding it by one member this year, we would expect KSX. search expenses to fluctuate as we hire new a new OAR.s and existing OIR.s close deals and move into the newly acquired businesses. We view these expenses as a long-term investment that will fuel the growth of the entire Kingsway organization.

提醒一下，在 2022 年第四季度，我們開始執行一項出售我們子公司 VA Lafayette 的計劃，該公司擁有一家醫療診所，其唯一租戶是美國退伍軍人管理局。作為我們從租賃房地產部門策略轉移的一部分，VA Lafayette 被納入已終止經營業務，其資產和負債報告為持有待售。其經營業績單獨報告，不包含在業績中。鑑於 JT，我將要討論這一點。在談到經營績效時，我想專注於控股公司費用、現金流和一些資產負債表亮點。我們持續的控股公司開支，其中包括我們的 KSX。搜尋費用主要包括我們 10 名企業員工的員工成本以及與上市公司相關的成本。不包括我們最後剩餘的 TruPS 的利息，2023 年的總費用為 770 萬美元，而 2022 年為 730 萬美元。然而，2023 年包括以下項目：100 萬美元的非現金股票補償費用、110 萬美元的與收購和非經常性項目相關的費用以及約60 萬的IBNR 費用，因為我們的員工醫療計劃在2023 年是自我保險的。此後，我們在 2024 年轉向了全額保險計劃，並且總成本更低。我們不斷挑戰我們的控股公司開支，這在過去幾年中節省了大量資金。我們相信，隨著我們的基礎業務的擴展和我們正在進行的 KSX 的發展，我們的控股公司將能夠擴大規模。搜尋費用包括活躍搜尋者的員工成本以及支援他們搜尋的工具成本。2023 年總費用為 130 萬美元，而 2022 年約為 60 萬美元。這一增長主要是由於 OIR.s 的平均數量以及到 2023 年，比 2022 年增加，2023 年增加了我們的業務發展副總裁，以及由於 2023 年戰略諮詢委員會的全年任期以及擴大今年，我們預計將有一名成員加入KSX。當我們僱用新的 OAR.s 和現有的 OIR.s 完成交易並進入新收購的業務時，搜尋費用會出現波動。我們將這些費用視為一項長期投資，將推動整個 Kingsway 組織的發展。

Turning to our balance sheet and cash flows. At the end of 2023, we had cash and cash equivalents of $9.1 million compared to $64.2 million at the end of 2022. Cash used in operating activities from continuing operations was $26.8 million for the 12 months ended December 31st, 2023, compared to 2.6 million a year ago. Our cash balance was impacted by the following significant items in 2023. First, the repurchase of a majority of our trust preferred debt for $56.5 million, which retired 96.7 million in principal and deferred interest that was done in the first quarter, $5 million of payment of TruPS deferred interest in also in the first quarter, 2 million for the release of the Mendota escrow in Q1, 1.8 million of management fees paid in Q1 and Q2 related to the final sale of commercial real estate investments, 7.2 million paid for the repurchase of our warrants in comp and common stock. Principal debt payments of 9.1 million in 2023, excluding the TruPS repurchase. And then also, we had 16.7 million of cash received from holders exercising of warrants and $3.3 million from the sale of Limbach stock. We had total outstanding debt, which is comprised of bank loans and TruPS debt of 44.4 million at the end of 2023 compared to 102.1 million at the end of 2022. Net debt decreased to $35.3 million as of December 31st, 2023 compared to 37.9 million at the end of 2022.

轉向我們的資產負債表和現金流。截至 2023 年底，我們的現金和現金等價物為 910 萬美元，而 2022 年底為 6,420 萬美元。截至 2023 年 12 月 31 日的 12 個月，持續經營業務所使用的現金為 2,680 萬美元，而去年同期為 260 萬美元。2023 年，我們的現金餘額受到以下重大項目的影響。首先，我們以5,650 萬美元回購了大部分信託優先債務，在第一季度償還了9,670 萬美元的本金和遞延利息，在第一季還支付了500 萬美元的TruPS 遞延利息，200萬美元對於第一季Mendota 託管的釋放，第一季和第二季支付的與商業房地產投資最終銷售相關的管理費為180 萬美元，為回購我們的公司和普通股認股權證支付了720萬美元。2023 年本金債務償還額為 910 萬美元，不包括 TruPS 回購。此外，我們還從行使認股權證的持有人那裡收到了 1,670 萬美元現金，從出售林巴赫股票中收到了 330 萬美元。截至 2023 年底，我們的未償債務總額（包括銀行貸款和 TruPS 債務）為 4,440 萬美元，而 2022 年底為 1.021 億美元。截至 2023 年 12 月 31 日，淨債務降至 3,530 萬美元，而 2022 年底為 3,790 萬美元。

As we've mentioned before, in March 2023, the Board approved a one year securities repurchase program. Through February 29th of 2024, we repurchased nearly 1.1 million of our warrants and repurchased just over 400,000 shares of our common stock under this plan. The repurchase of common stock is being held as treasury stock at costs and has been removed from our common shares outstanding.

正如我們之前提到的，2023 年 3 月，董事會批准了為期一年的證券回購計畫。截至 2024 年 2 月 29 日，我們根據該計畫回購了近 110 萬張認股權證，並回購了略多於 40 萬股的普通股。普通股回購以成本作為庫存股持有，並已從我們的已發行普通股中刪除。

In summary, we continue to make progress reducing our net debt. We have shed most of the remaining noncore assets and were able to repurchase a meaningful amount of our securities, all of which we believe will provide a more full provide more flexibility in pursuing our strategic object objectives.

總之，我們在減少淨債務方面繼續取得進展。我們已經剝離了大部分剩餘的非核心資產，並能夠回購大量的證券，我們相信所有這些都將為實現我們的策略目標提供更充分的靈活性。

I'll now turn the call back over to John, the operator to open the line for questions. John?

現在，我將把電話轉給接線員約翰，以解答問題。約翰？

Thank you. 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 star keys. One moment, please. While we poll for questions. Once again, please press star one if you have a question or comments first question comes from Adam potentially can with David capital. Please proceed.

謝謝。此時我們將進行問答環節。如果您想提問，請按電話鍵盤上的星號一。確認音將表示您的線路已在問題佇列中。如果您想從佇列中刪除您的問題，可以按星號二。對於使用揚聲器設備的與會者，可能需要在按星號鍵之前拿起聽筒。稍等一會兒。當我們投票詢問問題時。再次，如果您有問題或意見，請按星號一號。第一個問題來自 Adam，可能可以與 David Capital 合作。請繼續。

Hey, guys. Congratulations on the good year and on the continued progress being satellite. So let's say I've got a few questions that I wanted to go into. And as granted, I didn't have a ton of time to read through the results. But first, I wanted to ask just about the VA Lafayette process. I know that that asset has been for sale for a little bit and has been held as a under discontinued operations. Can you maybe provide an update on where things stand there?

大家好。祝賀美好的一年和衛星的持續進步。假設我有幾個問題想要探討。當然，我沒有太多時間閱讀結果。但首先，我想問 VA Lafayette 流程。我知道該資產已出售一段時間，並已作為非已終止業務持有。您能否提供有關情況的最新情況？

Yes, Adam, this is Kent. We currently have a VA or an LOI. and so we're progressing through the process at this point.

是的，亞當，這是肯特。我們目前有 VA 或 LOI。所以我們現在正在推進這個過程。

Okay, great. That's really helpful. Tom, the second question I had is just I'm trying to understand the run rate EBITDA metric. So I guess my question, and that is when you and when you do the calculation for run-rate EBITDA for the operating businesses? Are you taking the 12 months trailing operating profit? In other words, does the 17 $18 million? Is that essentially including the depressed warranty results from 2023? Or are you normalizing that to say, hey, in a normal year, once we put through some of the you know, the different things that you mentioned on the call ready to improve the profitability of that business. And are you taking those into account the improvements you're making? Or is it literally just, hey, here's the 12 months trailing, so you're including kind of a depressed warranty EBITDA number?

好的，太好了。這真的很有幫助。湯姆，我的第二個問題是我想了解運行率 EBITDA 指標。所以我想我的問題是，當你計算營運業務的運作率 EBITDA 時？您是否採用 12 個月的追蹤營業利潤？換句話說，17 是 1800 萬美元嗎？這基本上包括 2023 年以來保固期的下降嗎？或者您是否將其標準化為，嘿，在正常的一年中，一旦我們完成了您在電話會議中提到的一些您知道的不同事情，準備提高該業務的盈利能力。您是否將這些考慮到您正在做出的改進？或者它實際上只是，嘿，這是 12 個月的尾隨，所以你包括了一個令人沮喪的保固 EBITDA 數字？

Yes, great question, Adam. This is JT. So run rate EBITDA, the way we define is probably a little bit of a misnomer, right? It is truly the last 12 months of earnings power of the businesses we currently own. So it is the last the trailing 12 months of all of the warranty businesses, plus the trailing 12 months of C suite, Rave X and SNS, and then the last 12 months of operating performance of DDI. and SPI. as if we had owned them for the whole 12 months. The only normalizing adjustment, Adam, we make is to make an estimate of the an increase in investment income we would receive on the warranty flow if we reinvest all of that at current market yields that that normalizing adjustment has compressed over time as we have rolled over a lot of those securities.

是的，很好的問題，亞當。這是JT。那麼，我們定義的 EBITDA 運行率可能有點用詞不當，對吧？這確實是我們目前擁有的企業最近 12 個月的獲利能力。所以它是所有保固業務的最後12個月，加上C suite、Rave X和SNS的過去12個月，然後是DDI的最後12個月的營運表現。和SPI。就好像我們已經擁有它們整整 12 個月了。亞當，我們所做的唯一正常化調整是估計如果我們按照當前市場收益率將所有這些投資收入重新投資，那麼我們將在保固流程中獲得投資收入的增加，而隨著我們滾動，正常化調整隨著時間的推移而壓縮很多這樣的證券。

Got it.

知道了。

That makes sense. So if I'm trying to think about it, and I think the way that most investors think about the companies that they invest in is thinking about what are the prospective cash flows of the business? In other words, what's the earnings power today and going forward?

這就說得通了。因此，如果我嘗試思考這個問題，我認為大多數投資者思考他們所投資的公司的方式是思考該企業的預期現金流量是多少？換句話說，現在和未來的獲利能力是多少？

So if I'm going to think about what kind of a normalized earnings power is here, it actually should be a good bit higher than that number that you've provided just because I think the hope your expectation would be that the warranty business is going to recover from some kind of this depressed year for all the reasons you outlined. And then obviously, each of your businesses, you're continuing to grow them and improve them. You just got SPI. and TDI. under your umbrella, et cetera. Is that a is that a fair comment to make?

因此，如果我要考慮這裡的標準化盈利能力是什麼樣的，它實際上應該比您提供的數字高一些，因為我認為您的期望是保修業務是由於您概述的所有原因，我將從某種沮喪的一年中恢復過來。顯然，你的每一項業務都在繼續發展和改進。你剛剛獲得了 SPI。和TDI。在你的傘下，等等。這是一個公平的評論嗎？

I think that's a very fair comment. I think that you heard in my prepared remarks that we feel pretty good about the where we stand today. Certainly these EV with the hope of several months ago and that there's there are nice things happening. So we believe we have momentum. And I therefore, I think that's a that's a fair comment.

我認為這是一個非常公平的評論。我想你們在我準備好的發言中聽到我們對我們今天的處境感覺很好。當然，這些電動車在幾個月前就充滿了希望，並且有美好的事情發生。所以我們相信我們有動力。因此，我認為這是一個公平的評論。

Okay. Great.

好的。偉大的。

I appreciate that. Tom and the clarity around that at just one last question, which is in your press release in your commentary, you noted that the transition has gone smoothly for SPI. and DDI. and you said some positive things about those businesses. Would you mind just providing a little extra color on SPI. and DDI., how those transitions have gone with the new with the OIR.s taking over and on how those deals have been performing so far, just a little bit more granularity. So we can get a feel for for those two kind of new businesses under the KSX. umbrella?

我很感激。湯姆，您在評論中的新聞稿中明確指出了最後一個問題，您指出 SPI 的過渡進展順利。和直撥。您對這些企業說了一些正面的話。您介意在 SPI 上提供一點額外的顏色嗎？以及 DDI.，隨著 OIR.s 的接管，這些轉變是如何進行的，以及這些交易迄今為止的表現如何，只是更詳細一些。這樣我們就可以感受一下 KSX 下的這兩種新業務。傘？

Yes, great. We'll start with SPI.'s, um, that is led by Drew. Richard really talented young guy. You recall this was a sort of a family-owned small software business. We really like the fundamentals of it. The business as is often the case in these small founder-led businesses probably had a lot of unlocked opportunity and particularly around organic growth. And so obviously, first 100 days Drew has to transition in established sort of the new regime and get to know all of the folks there and build rapport and then talk to customers. And based on that sort of our start to begin articulating a vision for the business and the strategy to achieve that vision. And Drew's thesis is that there's ample opportunity to grow this company organically through new customer acquisition in existing market segments. And so we've got a wonderful new head of sales there that had only been on board at the company for a couple of months prior to our closing. And they've been building out their sales process sort of top of the funnel all the way down through and have had some early success on adding new new customers onto the software platform. So that will probably take some time as a kind of starting from scratch to build this this sales team and processes. But so far, things are going really well, and we're very pleased with with the company we bought.

對，很好。我們將從 SPI 開始，嗯，由 Drew 領導。理查德真是個有才華的年輕人。您還記得這是一家家族擁有的小型軟體企業。我們真的很喜歡它的基本原理。在這些由創辦人領導的小型企業中，通常情況下，企業可能有很多未開發的機會，特別是在有機成長方面。很明顯，前 100 天德魯必須在既定的新體制中進行過渡，了解那裡的所有人並建立融洽的關係，然後與客戶交談。在此基礎上，我們開始闡明業務願景以及實現該願景的策略。德魯的論點是，透過在現有細分市場中獲取新客戶，有充足的機會使公司有機發展。因此，我們有一位出色的新銷售主管，他在我們關閉之前才在公司任職幾個月。他們一直在從漏斗頂部一直建立銷售流程，並在將新客戶添加到軟體平台方面取得了一些早期成功。因此，這可能需要一些時間從頭開始建立這個銷售團隊和流程。但到目前為止，一切進展順利，我們對我們購買的公司非常滿意。

Turning to DDI. again, Founder, founder-led business. The founder has largely transitioned out from Peter Dow. Simon is our President there, and this is sort of a unique situation where DDI. has been growing pretty pretty rapidly. As I mentioned in the prepared remarks, in our first couple of months of ownership in 2023 year over year, revenues were up over 30%, and that's through inbound existing customers trying to expand their business in new. We have an LTAC. hospitals and more recently some inbound interest from other hospital systems. So Peter, it is very busy creating the internal processes, structure and team to be able to support a really wonderful opportunity to grow, but do it in a very thoughtful way so that we, most importantly, ensure a very high quality level of service and quality of care for the patients that we're monitoring and so that's the dynamic he's balancing. But I think that he's got a really nice growth runway ahead of us.

轉向DDI。再次，方正，方正主導的企業。創辦人基本上是從 Peter Dow 轉型過來的。西蒙是我們在那裡的總裁，這是 DDI 的獨特情況。一直在快速成長。正如我在準備好的發言中提到的，在 2023 年我們擁有所有權的頭幾個月裡，收入同比增長了 30% 以上，這是透過入境現有客戶試圖擴展新業務實現的。我們有一個 LTAC。醫院以及最近來自其他醫院系統的一些入境興趣。所以彼得，我們非常忙於創建內部流程、結構和團隊，以便能夠支持一個非常好的成長機會，但要以一種非常周到的方式做到這一點，以便我們最重要的是確保高質量的服務水平以及我們正在監測的患者的護理質量，這就是他正在平衡的動態。但我認為他在我們面前有一條非常好的成長跑道。

Great.

偉大的。

I really appreciate the color, guys. I'll step off.

我真的很喜歡這個顏色，夥計們。我會下車。

Thanks.

謝謝。

Adam on both operating free.

亞當對兩者的操作都是免費的。

Take the next question, I just wanted to point out that people on the call that we do do a lot of questions about run rate and we published an investor deck in January of this year. And in the appendix, we did add a slide giving a little bit more color on that. So I encourage people to take a look at that and hopefully it will help us digest what we're trying to communicate with that.

就下一個問題而言，我只是想指出，電話會議中的人們確實提出了很多有關運行率的問題，並且我們在今年 1 月發布了投資者資料。在附錄中，我們添加了一張幻燈片，為其提供了更多的色彩。所以我鼓勵人們看看這個，希望它能幫助我們消化我們試圖與之溝通的內容。

If there are any remaining questions, please indicate so by pressing star one on your touchtone phone.

如果還有任何疑問，請按按鍵式電話上的星號一表示。

Okay.

好的。

It looks like we have no further questions in queue from the lines. I'd like to turn it back to James Carbonara for any questions you may have via e-mail.

看起來我們已經沒有其他問題需要排隊了。如果您有任何問題，我想透過電子郵件將其轉回 James Carbonara。

Thank you.

謝謝。

Operator, on Taipei team count.

接線員，台北隊統計。

Yes, we had a few come in on e-mail. Many were already answered. I'll start with this one that I know you touched on in the prepared remarks, but will go ahead and ask anyway. It is now that we are in March, are you still hoping to close two to three new acquisitions by the end of 2023?

是的，我們收到了一些電子郵件。很多人已經回答了。我將從這個問題開始，我知道您在準備好的演講中提到了這一點，但無論如何我都會繼續詢問。現在已經是 3 月了，您是否還希望在 2023 年底前完成兩到三項新收購？

Yes, that's certainly the goal right for OIR.s out pounding the pavement every day. And we have a set of sort of what I would call leading measures that we think are both predictive and influenced by our guys and predictive of the lag metric, which is getting these acquisitions done. And so the activity is great. We've been engaged in a lot of conversations with business owners and so standing here today. That's still certainly our hope, again, these things there is some serendipity to them and so it's hard to make a hard target. But based on the level of activity we're seeing, that's definitely our hope.

是的，這確實是 OIR.s 每天在人行道上奔走的目標。我們有一套我稱之為領先的衡量標準，我們認為這些衡量標準既可以預測，也可以受到我們人員的影響，也可以預測落後指標，從而完成這些收購。所以活動很棒。我們與企業主進行了很多對話，所以今天就站在這裡。這仍然是我們的希望，再說一遍，這些事情都有一些偶然性，所以很難制定一個硬性目標。但根據我們所看到的活動水平，這絕對是我們的希望。

Great. And you did touch on this before with Adam but it talks about the warranty business and how do you see it performing in 2024? If you just wanted to reiterate your outlook.

偉大的。您之前確實與 Adam 談過這個問題，但它談到了保固業務，您認為它在 2024 年的表現如何？如果您只是想重申您的觀點。

Yes. Look, at 2023 was a tough, a tough year in the warranty businesses from a revenue standpoint and on the claims severity claim severity seems to have receded a bit. And certainly in terms of the inflation kind of year-over-year inflation. We're starting to see that moderate. And all of those businesses have done a really nice job in spite of some of the revenue headwinds, adding new distribution partners, new distribution channels, increasing activity with existing customers, getting higher conversion and attachment rates. And so we feel pretty sanguine about how their how they're going to do this year now without giving guidance obviously, but fairly optimistic.

是的。從收入的角度來看，2023 年對於保固業務來說是艱難的一年，而且從索賠嚴重程度來看，索賠嚴重程度似乎有所下降。當然，就通貨膨脹而言，是逐年通貨膨脹。我們開始看到這種溫和。儘管存在一些收入阻力，所有這些企業都做得非常好，增加了新的分銷合作夥伴、新的分銷管道，增加了與現有客戶的活動，獲得了更高的轉換率和附著率。因此，我們對他們今年的表現非常樂觀，雖然沒有明顯給予指導，但相當樂觀。

Great. Another question was if you buy businesses for five to seven times EBITDA, why should Kingsley trade at a higher multiple than those acquisition multiples.

偉大的。另一個問題是，如果您以 EBITDA 的五到七倍的價格購買企業，為什麼 Kingsley 的交易倍數會高於收購倍數。

Okay. That's a good question. That's when we get from time to time. First, I would say I'm not going to say why something should or shouldn't it probably not my my just my role to say what someone should or shouldn't do, but I can give you my perspective. And so I think the first is it kind of unpack it from like why are these businesses available to a group of these high-quality businesses acquired and available to acquire for five to seven times EBITDA? And I would say first of every one of these small companies probably has some amount of what I would call hair on them, cash-basis financials filed and QuickBooks, et cetera. In essentially every case, you've got a founder operator leader, who's looking to retire and for that reason. And these and these processes take a very long time and we're sourcing them from, but more often than not proprietarily and that's just really hard to do. And so as a result, there's a relatively small universe of buyers out there relative to the number of companies in that size range that because of the demographics we've discussed in the past are coming available for sale. And on the flip side, why should why should why I think that they should trade at higher multiples. You think about what happens to those businesses when they come in two Kingsway and under the Castex platform first, they get cleaned up right and put them through what we call the Kingsway carwash, right? So consistent, accrual-based audited financials, internal control environments, risk mitigation, et cetera. And then we install really great leadership to unlock that latent growth data that often is there certainly what we're targeting. We shield those cash flows come from taxes because of our NOL, our tax attributes and each one of these small companies also has some risk often there's customer concentration or something like that. I would say that a portfolio of those businesses is probably less risky than buying one individually. It would be hard to reconstruct that portfolio. And then I think my final thought would be that the highest multiples for companies get afforded to those that can reinvest their free cash flow at very high rates of return for a long time. And I think that we're building that with KSX. platform from this demographic, silver tsunami of opportunities to buy great businesses combined with our pipeline of talent and the cash flow to redeploy, I think, creates a really nice flywheel, and that will give us a very long and wide runway.

好的。這是個好問題。那是我們時不時得到的時候。首先，我想說，我不會說為什麼某件事應該或不應該，這可能不是我的職責，我只能說某人應該做什麼或不應該做什麼，但我可以給你我的觀點。因此，我認為第一個問題是，為什麼這些企業可以被一組高品質的企業收購，並且可以以 EBITDA 的五到七倍的價格收購？我想說，首先，這些小公司中的每一家都可能有一定數量的我稱之為頭髮的東西、現金基礎的財務報表和 QuickBooks 等等。基本上在每種情況下，都會有一位創辦人、營運商領導者，他出於這個原因正在尋求退休。這些流程需要很長時間，我們通常是從專有管道採購它們，這真的很難做到。因此，由於我們過去討論過的人口統計數據，與該規模範圍內的公司數量相比，可供出售的買家群體相對較小。另一方面，為什麼我認為他們應該以更高的倍數進行交易。你想一想，當這些企業進入兩個 Kingsway 並首先在 Castex 平台下時，會發生什麼，他們會得到正確的清理，然後通過我們所說的 Kingsway 洗車，對嗎？如此一致的、基於權責發生製的審計財務、內部控制環境、風險緩解等等。然後，我們任命真正出色的領導層來釋放潛在的成長數據，而這些數據通常正是我們的目標。由於我們的 NOL、我們的稅務屬性，我們屏蔽了來自稅收的現金流，而這些小公司中的每一家也都存在一些風險，通常是客戶集中或類似的情況。我想說，這些企業的投資組合可能比單獨購買一個企業的風險要小。重建該投資組合將會很困難。然後我認為我的最終想法是，那些能夠以非常高的回報率長期將其自由現金流再投資的公司可以獲得最高的本益比。我認為我們正在與 KSX 一起建造它。我認為，從這個人口統計、白銀海嘯的機會購買偉大企業的平台，加上我們的人才管道和重新部署的現金流，創造了一個非常好的飛輪，這將為我們提供一條非常長而寬的跑道。

Great. And then the last one just on the software business, it says it's a two parter to do you think you will be able to organically grow the software business? And do you have any concrete examples you are able to offer regarding growth?

偉大的。最後一個關於軟體業務，它說這是兩個合作夥伴，您認為您能夠有機地發展軟體業務嗎？您能提供一些關於成長的具體例子嗎？

Yes, you touched on this briefly with Adam. I do think more importantly, Drew, thanks, C. and I. He is the President of the Company we run a very decentralized operation here, I fundamentally believe in the power of decentralized decentralization and both in the ability to attract and more importantly, retain really great people from Andrew absolutely believes that he has the ability to grow that organically. This is mission critical software for its customers. And so the sales cycle is a little longer. But yes, I think in terms of concrete examples, I think that we have early some early successes with some new client adds that they're onboarding now and some yes, I'm very sanguine about this is there opportunity to grow that organically.

是的，你和亞當簡短地談到這個問題。我確實認為更重要的是，德魯，謝謝C. 和我。他是公司的總裁，我們在這裡經營著一個非常去中心化的業務，我從根本上相信去中心化的力量，以及吸引的能力，更重要的是，安德魯絕對相信他有能力有機地發展人才，留住真正優秀的人才。這是其客戶的關鍵任務軟體。所以銷售週期要長一些。但是，是的，我認為就具體的例子而言，我認為我們已經在一些新客戶中取得了一些早期的成功，他們補充說他們現在正在加入，有些人是的，我對此非常樂觀，是否有有機發展的機會。

Great. I see no further questions coming in on the e-mail. Operator, I'll turn it back to you to close at the Al, I apologize to JT and Kent, if you guys are still there, there is one question on e-mail to say due to the shortage of nursing staff available, how does the demand for nurses, how does the demand for nurses that benefits us, and that's compared with the challenge SNFs faces and hiring travel nurses?

偉大的。我在電子郵件中沒有看到更多問題。接線員，我會將其轉回給您，讓您在 Al 關閉，我向 JT 和 Kent 表示歉意，如果你們還在的話，由於護理人員短缺，有一個電子郵件問題要說，如何處理對護士的需求有什麼好處？與SNF 面臨的挑戰和僱用旅行護理師相比，對護理師的需求對我們有什麼好處？

Yes. So I would say the demand challenge in 2023 was sort of a post pandemic hangover that hospitals during the pandemic. Hospital systems had to be very reliant on contingent labor, which is obviously a lot more expensive and they pushed back very hard to eliminate contingent labor in those hospitals may be overly so from home and that impacted in the near term, the demand for travel nurses for SNFs, they have contracts with several 70 or so hospitals in the state of California, and there is demand that is unmet and so hiring recruiters to bring more nurses onto our platform to satisfy the requirements and criteria for those open positions is Charles is strategy to rebuild the travel business. In the meantime, the per diem business, which is harder to fill, is something that the Company has done very effectively for a very long time and has done a nice job of continuing to grow that per diem business.

是的。因此，我想說 2023 年的需求挑戰有點像是疫情期間醫院的後遺症。醫院系統必須非常依賴臨時勞動力，這顯然要貴得多，而且他們非常努力地消除這些醫院的臨時勞動力可能過於在家，這在短期內影響了對旅行護士的需求對於SNF 來說，他們與加利福尼亞州大約70 家醫院簽訂了合同，而且需求未得到滿足，因此查爾斯的策略是僱用招聘人員將更多護士引入我們的平台，以滿足這些空缺職位的要求和標準重建旅遊業務。同時，較難填補的每日津貼業務是公司長期以來非常有效地開展的業務，並且在繼續發展每日津貼業務方面做得很好。

I don't know if that fully answers the question, but I appreciate that and all of that, Ron, into him. So I'll reply to him and see if it does, there was one that kind of was hanging over from the email questions that you may have answered with Adam, but it asks about the cardiac monitoring business. It says how are you working towards managing the potential strong growth of the business.

我不知道這是否完全回答了問題，但我很欣賞羅恩，對他所做的一切。所以我會回覆他，看看是否有，有一個問題是你可能已經向 Adam 回答的電子郵件問題，但它詢問了心臟監測業務。它說明了您如何努力管理業務的潛在強勁成長。

Yes. So it is I think it's just sort of crawl, walk run there, right? New manager, new company and get in and understand your team, your people, your customers their needs and desires. And we talk a lot about glass balls and rubber balls and just make sure you don't drop any glass bottles and he is building and professionalize his background as a nuclear engineer and <unk>, he is building all kinds of processes and protocols around safety. And so as he builds that foundation, I think that he will be able to lean into that growth that the demand is there and it's about.

是的。所以我認為這只是一種爬行、散步、跑步的方式，對嗎？新經理、新公司，融入並了解您的團隊、員工、客戶的需求和願望。我們談論了很多關於玻璃球和橡膠球的話題，只需確保您不要放任何玻璃瓶，他正在建立和專業化自己的核工程師和的背景，他正在圍繞各種過程和協議來建立各種過程和協定安全。因此，當他建立這個基礎時，我認為他將能夠依靠需求的成長來實現成長。

Yes, sir, being very deliberate about how quickly you want to onboard new hospital locations while still delivering a very high standard of care, given that we have patients' lives are being monitored.

是的，先生，考慮到我們正在對患者的生命進行監控，您需要非常謹慎地考慮您希望以多快的速度進入新的醫院地點，同時仍然提供非常高標準的護理。

Great.

偉大的。

And that does Peter's either background and he's got he's going to do a great job.

彼得的背景就是這樣，他相信他會做得很好。

Perfect. Thank you so much, JT.

完美的。非常感謝你，JT。

And that does conclude the email questions. Operator, I'll turn it back to you to close out the call and thank you.

這確實結束了電子郵件問題。接線員，我會將其轉回給您以結束通話，謝謝您。

Absolutely.

絕對地。

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.

今天的會議到此結束，您現在可以掛斷電話了。感謝您的參與。