Skip to content
    KWY
    Earnings call· Jun 2026(Q2 FY26)

    KINGSWAY Q2 FY26 earnings call KWY

    Aug 6, 2026 Source

    Executive summary

    Kingsway Q2 FY26 — Record Operating Performance and Strategic Acquisitions

    Kingsway reported an exceptional second quarter, driven by record adjusted EBITDA in its KSX segment and strong performance in Extended Warranty. The company continues to execute its Search Fund model, completing a strategic acquisition and divesting a non-core asset, while reaffirming its acquisition and organic growth targets for the year. Management emphasized its long-term vision as a compounder, focusing on high cash flow return on capital and reinvestment opportunities.

    Highlights

    5

    • Kingsway Search Xcelerator (KSX) delivered a quarterly record $4.3 million in adjusted EBITDA, more than tripling over the last 8 quarters.

    • Consolidated revenue increased 27.6% to $39.4 million compared to $30.9 million in Q2 FY25.

    • Portfolio EBITDA reached a new quarterly record of $7.2 million.

    • Consolidated adjusted EBITDA was $5.2 million, up from $1.7 million in Q2 FY25.

    • Image Solutions acquired Romeo Computer Company (RCC), adding $2.5 million in pro forma revenue and $0.5 million in pro forma adjusted EBITDA.

    Concerns

    4

    • Extended Warranty revenue decreased 3.1% to $17.1 million, though pro forma for Trinity sale it increased 6.5%.

    • Roundhouse and Kingsway Skilled Trades reported flat quarter-over-quarter adjusted EBITDA from Q1 to Q2 FY26.

    • Southside (Kingsway Skilled Trades) faced a headwind from a legacy construction project, resulting in a low 6-figure write-down in Q2 FY26.

    • Three operating subsidiaries, representing under 10% of LTM portfolio EBITDA, were out of covenant compliance during the quarter.

    Guidance & targets

    3
    CategoryTargetConfidence
    Acquisitions
    3 to 5 acquisitions
    high materiality
    High
    Organic growth
    double-digit organic growth
    high materiality
    High
    LTM Portfolio EBITDA trajectory
    positive trajectory
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Consolidated
    Consolidated revenue increased significantly year-over-year.
    		$39.4 million27.6%——
    Kingsway Search Xcelerator (KSX)
    Delivered a quarterly record in adjusted EBITDA, with broad-based performance across the portfolio, particularly from Ravix and SPI. Adjusted EBITDA has more than tripled over the last 8 quarters.
    Adjusted EBITDA: $4.3 millionAdjusted EBITDA growth YoY: 77.9%
    		$22.3 million68.3%—$4.3 million adjusted EBITDA
    Extended Warranty
    Had a strong quarter with robust performance at IWS and Penn, PWI. Penn, PWI showed tangible progress towards profitable growth. Revenue decreased year-over-year, but on a pro forma basis for the sale of Trinity, revenue increased 6.5%.
    Adjusted EBITDA: $1.1 millionLender-defined modified cash adjusted EBITDA: $2.9 millionPro forma revenue (ex-Trinity): $16.1 millionPro forma revenue growth (ex-Trinity): 6.5%Pro forma cash sales growth (ex-Trinity): 6.9%Pro forma adjusted EBITDA (ex-Trinity): $1 million
    		$17.1 million-3.1%—$1.1 million adjusted EBITDA

    Operational metrics

    15
    Consolidated Net Income
    $200,000vs net loss of $3.2 million in Q2 FY25
    Q2 FY26

    Compared to a net loss in the prior year quarter.

    Consolidated Adjusted EBITDA
    $5.2 millionvs $1.7 million in Q2 FY25
    Q2 FY26

    Significant increase from the prior year quarter.

    Portfolio EBITDA
    $7.2 millionnew quarterly record
    Q2 FY26

    Evaluated as adjusted EBITDA in KSX plus modified cash adjusted EBITDA in Extended Warranty.

    Portfolio LTM EBITDA
    $22 million to $23 millionstable relative to last quarter
    LTM ended Jun 30, 2026

    This metric subtracts Trinity's contribution and includes RCC's contribution. It is viewed as a useful measure of trailing earnings capacity.

    Trinity Adjusted EBITDA (2025)
    $900,000
    FY25

    Contribution from Trinity in 2025.

    Trinity Adjusted EBITDA (LTM)
    $900,000
    LTM ended Mar 31, 2026

    Contribution from Trinity in the 12 months ended March 31, 2026.

    RCC Adjusted EBITDA (pro forma)
    $500,000
    LTM ended Apr 30, 2026

    Unaudited pro forma adjusted EBITDA for the 12 months ended April 30, 2026.

    Total Net Debt
    $59.9 millionvs $62.4 million at Dec 31, 2025
    Jun 30, 2026

    Decrease in net debt since year-end 2025.

    Gain on disposal of subsidiary
    $1.3 millionone-time gain
    Q2 FY26

    Resulted from the sale of Trinity Warranty Solutions, appearing below the operating income line.

    Cash distributions from Search Fund investments
    $1.1 million
    Q2 FY26

    Received from ARGO-related investments, included in consolidated adjusted EBITDA at the Holdco level.

    Noncash stock-based awards expense
    $1.4 million
    Q2 FY26

    Related to the grant and modification of long-term stock-based awards, ran through the income statement above the operating line. Expected to be lower going forward.

    Legacy legal liability expense
    $600,000one-time expense
    Q2 FY26

    Related to the 2022 sale of a Texas rail yard to BNSF, resolved in Q2 FY26 and ran through the income statement above the operating line.

    Shareholder support for name change
    99.7%
    May 19, 2026

    Support received from shareholders for the official name change to Kingsway Corporation and ticker to KWY.

    RCC Pro Forma Revenue
    $2.5 million
    LTM ended Apr 30, 2026

    Unaudited pro forma revenue for the 12 months ended April 30, 2026.

    Consolidated Leverage Ratio
    $2.7 millionmaybe a little bit lower
    Q2 FY26

    Stated as a dollar amount, likely an ASR error for a ratio. Management believes there is plenty of room for further tuck-in acquisitions.

    Industry KPIs

    1
    MetricValueDetails
    Retention persistencyexcellent

    Deals & partnerships

    2
    Trinity Warranty Solutions management buyoutSale of Trinity Warranty Solutions$8 million

    Kingsway announced the sale of Trinity Warranty Solutions in a management buyout transaction on May 11, 2026. The capital is now available for redeployment in the KSX segment.

    Romeo Computer Company (RCC)Acquisition of managed IT and cybersecurity solutions provider$2.4 million

    Kingsway's wholly owned subsidiary, Image Solutions, closed the acquisition of RCC effective August 1, 2026. RCC is based in Michigan and has achieved double-digit annual organic top-line growth.

    Risks & headwinds

    6
    Timing issues impacting segment performanceQ2 FY26

    Roundhouse Q2 FY26 adjusted EBITDA was flat QoQ; an electric motor shipment deferral moved several hundred thousand dollars of revenue from Q2 to Q3.

    Mitigation: Roundhouse continues to grow, win new customers, and make strategic and operational progress.

    Legacy construction project write-downQ2 FY26, project wrapping up in coming weeks

    Low 6-figure write-down in Q2 FY26.

    Mitigation: Anticipated project completion will serve as a financial tailwind to Kingsway Skilled Trades in Q3 and beyond.

    DDI sales cycle and investment impactFY26 (transition year)

    Sales expense hitting P&L immediately while customer wins filter in over time.

    Mitigation: DDI has invested in its sales motion, resulting in a record customer pipeline, and is well-placed to accelerate growth in the next several quarters.

    Nurse staffing industry down cyclePast years, stabilizing in recent months

    SNS had challenging operating performance since acquisition.

    Mitigation: New leadership at SNS (Paul Vidal) and an improving industry backdrop offer cautious optimism for turning the corner.

    Covenant non-compliance at operating subsidiariesQ2 FY26

    3 operating subsidiaries (under 10% of LTM portfolio EBITDA) were out of covenant compliance.

    Mitigation: Waivers are being obtained; loans are nonrecourse to Kingsway Corp and other subsidiaries; businesses are in transition with line of sight to operational improvement.

    Increased competition in Search Fund spaceOngoing

    Stanford Search Fund study shows search is getting harder with climbing failure rates.

    Mitigation: Kingsway's platform offers OIRs an active sourcing engine, tech stack, and industry game board, improving success probability. Not seeing multiples creep up in their deal processes.

    What to watch in Q3 FY26

    5

    Roundhouse Q3 Revenue

    Q3 FY26
    CurrentSeveral hundred thousand dollars deferred from Q2
    TargetReflected in Q3 revenue

    Why it matters

    Indicates recovery from Q2 timing issues and continued growth trajectory for the segment.

    Just one example is an electric motor originally expected to ship by the end of June ended up shipping on July 1, deferring several hundred thousand dollars of revenue from Q2 to Q3.

    Q&A highlights

    5

    Can you share more information about the RCC acquisition, how it was found, and why it makes sense for Image Solutions?

    RCC is a high-quality business with over 80% recurring revenue, strong margins, and double-digit organic growth, acquired at an attractive multiple from a retiring founder. It expands Image Solutions' geographic footprint and aligns with its inorganic growth strategy, which was part of the original investment thesis. The deal was sourced through a broker, and Image Solutions differentiated itself through complementary fit and understanding the seller's aspirations.

    “RCC is a really nice little business, greater than 80% recurring revenue, strong margins and a history of really nice organic growth, sort of outpacing the industry. If you combine that with a motivated seller for retirement reasons and an attractive multiple, I think the deal stands alone on its merits.”

    asked by James Carbonara · answered by John Fitzgerald

    2 min read5 chapters

    Detailed Narrative

    01

    Search Fund Model and Strategic Positioning

    Kingsway operates a unique Search Fund model, acquiring and building diversified, asset-light, profitable, and growing services companies with recurring revenue. The company aims to compound long-term shareholder value per share, leveraging its decentralized management and significant tax assets. This model positions Kingsway to capitalize on a vast, fragmented universe of small, high-quality businesses, providing a long runway for acquisitions.

    02

    Segment-Specific Performance and Challenges

    While KSX and Extended Warranty showed strong performance, Roundhouse and Kingsway Skilled Trades reported flat Q1-Q2 adjusted EBITDA. Roundhouse's performance was impacted by timing issues, including a $100k+ revenue deferral to Q3. Kingsway Skilled Trades saw a low 6-figure write-down from a legacy construction project at Southside, expected to be resolved soon. DDI is in a transition year, investing in sales with a record customer pipeline, expecting accelerated growth in coming quarters. SNS, in the nurse staffing industry, is cautiously optimistic💬 about turning the corner under new leadership after a challenging post-COVID down cycle.

    03

    Strategic Initiatives and Personnel Changes

    The second quarter was eventful, including the sale of Trinity Warranty Solutions for $8 million (9.2x 2025 adjusted EBITDA), freeing up capital for redeployment. Colter Hanson was appointed President of Kingsway Skilled Trades, and Fletcher Vynne joined as the newest Operator-in-Residence. The company also officially changed its name to Kingsway Corporation and ticker to KWY, with 99.7% shareholder support.

    04

    Romeo Computer Company (RCC) Acquisition

    Kingsway's subsidiary, Image Solutions, closed the acquisition of RCC, a managed IT and cybersecurity solutions provider, for $2.4 million. RCC generated approximately $2.5 million in pro forma revenue and $0.5 million in pro forma adjusted EBITDA in the LTM ended April 30, 2026. The acquisition expands Image Solutions' geographic footprint in Michigan and the Upper Midwest, aligning with its inorganic growth strategy.

    05

    Accounting Highlights and Balance Sheet

    Key accounting items included a $1.3 million one-time📎 gain from the Trinity sale, $1.1 million in cash distributions from ARGO Search Fund investments, $1.4 million in noncash stock-based compensation expense, and a $600,000 one-time📎 expense to resolve a legacy legal liability. Total net debt decreased to $59.9 million from $62.4 million at year-end 2025. Three operating subsidiaries were out of covenant compliance, but waivers are being obtained, and these loans are nonrecourse.

    AI-generated summary of the company’s earnings call. Not investment advice.