Kingsway Announces $19.5 Million Acquisition of Image Solutions LLC

Rhea-AI Summary

Kingsway Financial Services Inc. (NYSE:KFS) has announced the acquisition of Image Solutions , an IT managed services provider, for $19.5 million. The all-cash transaction was funded with cash on hand and $7.75 million in debt financing. Image Solutions, founded in 2003, is considered one of the largest IT service providers in western North Carolina, offering equipment sales, service, and helpdesk support.

Key highlights of the acquisition include:

• Expected to be immediately accretive
• Adds $9.8 million of annual unaudited revenue and $3.1 million of annual unaudited adjusted EBITDA
• Capital light business with approximately 85% recurring revenue and low churn
• Strong margins and impressive historical organic growth

Davide Zanchi, Kingsway Operator-in-Residence, will transition into the CEO role of Image Solutions. A conference call to discuss the transaction is scheduled for October 16, 2024, at 5 p.m. ET.

Positive

• Acquisition expected to be immediately accretive
• Adds $9.8 million of annual unaudited revenue
• Contributes $3.1 million of annual unaudited adjusted EBITDA
• High recurring revenue (85%) with low churn
• Strong margins and historical organic growth
• Expands Kingsway's presence in the growing IT managed services market

Negative

• Incurred $7.75 million in debt financing for the acquisition

Insights

Financial Analyst

The acquisition of Image Solutions by Kingsway Financial Services for $19.5 million is a significant move that expands Kingsway's portfolio in the IT managed services sector. This deal is expected to be immediately accretive, adding $9.8 million in annual unaudited revenue and $3.1 million in annual unaudited adjusted EBITDA to Kingsway's financials.

Key points to consider:

• The acquisition was funded with cash on hand and $7.75 million in debt financing, indicating a balanced approach to capital allocation.
• Image Solutions boasts 85% recurring revenue with low churn, which provides stability and predictability to future cash flows.
• The company operates in a stable and growing market, potentially offering Kingsway opportunities for organic growth and market expansion.

This strategic move aligns with Kingsway's Xcelerator portfolio growth strategy and could enhance shareholder value through immediate earnings accretion and long-term growth prospects in the IT services sector.

Tech Expert

Image Solutions' acquisition marks Kingsway's entry into the lucrative IT Managed Services Provider (MSP) space. This sector is experiencing robust growth due to increasing reliance on IT infrastructure across industries. Key technological aspects to note:

• Comprehensive IT services covering both hardware and software, indicating a full-stack solution capability.
• Three distinct business units: equipment sales, service and helpdesk, providing a diversified revenue stream within the IT ecosystem.
• Strong local market presence in western North Carolina, with potential for geographical expansion.

The IT MSP model typically offers scalability and recurring revenue, which aligns well with Kingsway's growth strategy. As businesses continue to outsource IT management, this acquisition positions Kingsway to capitalize on the trend towards managed IT services, potentially leading to cross-selling opportunities and technological synergies within their portfolio.

Management to Host Conference Call Wednesday, October 16, at 5 p.m. ET

• Expected to be immediately accretive

• Adds $9.8 million of annual unaudited revenue and $3.1 million of annual unaudited adjusted EBITDA

• Capital light, highly recurring revenue business in stable and growing market

• Latest acquisition under the Kingsway Search Xcelerator platform

CHICAGO, IL / ACCESSWIRE / September 27, 2024 / (NYSE:KFS) Kingsway Financial Services Inc. ("Kingsway" or the "Company") today announced the acquisition of Image Solutions LLC ("Image Solutions"), an information technology managed services provider (IT MSP) for $19.5 million, plus transaction expenses and a working capital adjustment, in an all-cash transaction funded with cash on hand and $7.75 million in debt financing. Management will host a conference call Wednesday, October 16, at 5 p.m. ET to discuss the transaction.

J.T. Fitzgerald, Kingsway President and CEO, said, "The Image Solutions business aligns perfectly with our growing Xcelerator portfolio. It has proven itself a reliable partner for its clients through its dedication to consistent, premium IT hardware and support offerings, and we intend to maintain the delivery of outstanding benefits to the company's customers. Davide Zanchi, the Operator-in-Residence for this transaction, will transition into the CEO role, while the Founder, Garrett Williams, will remain as an advisor during a transition period. We are excited to welcome the Image Solutions team to the Kingsway family."

Image Solutions (www.imagesolutions-online.com/), a provider of IT Managed Services, was founded in 2003 by a veteran in the IT equipment sales industry. Originally, Image Solutions served as a distributor of IT equipment to hospitals and small businesses in North Carolina. Since 2010, Image Solutions has expanded its offerings and now operates three business units: equipment sales, service, and helpdesk. Image Solutions is considered one of the largest IT service providers in western North Carolina, providing comprehensive IT services for both hardware and software and employs 35 people.

Davide Zanchi, Kingsway Operator-in-Residence and newly appointed CEO, said "Image Solutions has built a great business in the field of IT managed services, boasting an impressive track record and enthusiastic client endorsements that drive an expanding roster of fresh prospects. Notably, its operations feature approximately 85% recurring revenue with low churn, strong margins, impressive historical organic growth, and presence in a steady, flourishing sector and geography. While evaluating this purchase, it became evident that Image Solutions sets the industry standard for outsourced IT management. I am enthusiastic about collaborating with the team to gain insights and, using a measured strategy, propel this enterprise to new heights."

The transaction was structured as a purchase of all the issued and outstanding membership interests in Image Solutions. Financing was provided by Avidbank. Holland & Knight LLP served as legal counsel to Kingsway.

Conference Call Information

Date: Wednesday, October 16, 2024
Time: 5 p.m. Eastern Time
Toll Free: 888-506-0062; Code: 846941
International: 973-528-0011; Code: 846941
Live Webcast Link: https://www.webcaster4.com/Webcast/Page/2928/51353

Conference Call Replay Information

Toll Free: 877-481-4010|
International: 919-882-2331
Replay Passcode: 51353
Replay Webcast Link: https://www.webcaster4.com/Webcast/Page/2928/51353

About the Company

Kingsway is a holding company that owns or controls subsidiaries primarily in the extended warranty and business services industries. The common shares of Kingsway are listed on the New York Stock Exchange under the trading symbol "KFS."

The Company serves the extended warranty industry through its operating subsidiaries IWS (iwsgroup.com), Penn Warranty (pennwarranty.com), Preferred Warranties (preferredwarranties.com) and Trinity Warranty Solutions (trinitywarranty.com).

The Company serves the business services industry through its operating subsidiaries CSuite (csuitefinancialpartners.com), Ravix (ravixgroup.com), Secure Nursing Service (securenursing.com), SPI Software (spisoftware.com), Digital Diagnostics, Inc (ddimagingusa.com) and Image Solutions (imagesolutions-online.com).

Additional Information

Additional information about Kingsway, including a copy of its Annual Reports can be accessed on the EDGAR section of the U.S. Securities and Exchange Commission's website at www.sec.gov, on the Canadian Securities Administrators' website at www.sedar.com, or through the Company's website at www.kingsway-financial.com.

For Investor Inquiries: Hayden IR James Carbonara (646) 755-7412 james@haydenir.com

For Company Inquiries: Kingsway Financial Services Inc. Kent Hansen, CFO (312) 766-2163 khansen@kingsway-financial.com

Contact Information

Kent Hansen
CFO
khansen@kingsway-financial.com
312-766-2163

Hayden IR James Carbonara
james@haydenir.com
646-755-7412

SOURCE: Kingsway Financial Services Inc.

View the original press release on accesswire.com

FAQ

What company did Kingsway Financial Services (KFS) acquire?

Kingsway Financial Services (NYSE:KFS) acquired Image Solutions , an information technology managed services provider (IT MSP).

How much did Kingsway Financial Services (KFS) pay for the acquisition of Image Solutions?

Kingsway Financial Services paid $19.5 million for the acquisition of Image Solutions, plus transaction expenses and a working capital adjustment.

What is the expected financial impact of the Image Solutions acquisition on Kingsway Financial Services (KFS)?

The acquisition is expected to be immediately accretive, adding $9.8 million of annual unaudited revenue and $3.1 million of annual unaudited adjusted EBITDA to Kingsway Financial Services.

When will Kingsway Financial Services (KFS) host a conference call to discuss the Image Solutions acquisition?

Kingsway Financial Services will host a conference call on Wednesday, October 16, 2024, at 5 p.m. ET to discuss the Image Solutions acquisition.

What percentage of Image Solutions' revenue is recurring, according to the Kingsway Financial Services (KFS) announcement?

According to the announcement, approximately 85% of Image Solutions' revenue is recurring, with low churn rates.