Kingsway Financial (Soon to be Kingsway Corporation)
A unique business advised by William Thorndike
Key Info
Ticker: KFS 0.00%↑ , $KWY after re-branding
Share price: ~$11.12
Market cap: ~$318m
EV/EBITDA (2026): 16.5x
Net leverage: 2.8x
Portfolio decision: < 1% position/ watchlist
30 second thesis
The basic thesis is that Kingsway is an early stage compounder with an excellent management team and advisory board, that includes Will Thorndike and an executive from Danaher.
The company is aiming for a Danaher type operating philosophy layered onto a search fund acquisition platform, with some early evidence of a decentralized M&A framework. The market began pricing in “the next Danaher” narrative last year as revenue grew, but the company saw margin pressures in its Extended warranty business from higher labor and parts costs. Investors began to sour on unprofitability, increased debt, and a rich valuation, so the stock is down 35% from its high in 2025.
The bull case is a business transitioning toward a higher-quality, acquisition-driven platform with strong NOL tax shields from the old insurance days. The bear case is that it’s an unprofitable acquisition platform that will need to continue financing via debt and equity.
Company History
Kingsway was originally a niche non-standard auto insurer in Canada and the U.S. It grew recklessly during the early 2000s, and the 2008 financial crisis exposed severe underwriting flaws and an over-leveraged balance sheet. The book value was basically wiped out after massive losses, and the share price collapsed from ~$90 down to ~$2. The company was left with ~$800m in NOLs, and the shares went nowhere for a decade until activist Joseph Stilwell and CEO Larry Swets took control of the distressed entity to salvage the NOLs. However, the company really began its transformation in 2018 when JT Fitzgerald got involved.
JT Fitzgerald, a seasoned search fund investor, restructured the company debt and transformed the company into what it is today, a publicly listed permanent capital search fund.
Kingsway Today
Kingsway is the only publicly traded US company that employs the Search Fund model to acquire and build businesses. For those who aren’t familiar, a Search Fund is a structure invented in the 1980s at Stanford Business School to solve a specific problem, namely, that there are tens of thousands of great small American businesses whose owners want to retire, but they have nobody to hand them to. It’s similar to private equity in some sense, except they find talented operators and then fund them in a two-year search to acquire a business.
Kingsway has some big names involved, including William Thorndike and Tom Joyce from Danaher.
A word on search funds
Search fund economics are another key piece to the thesis as well. Stanford Graduate School of Business has tracked the asset class since 1984 and documents a median pre-tax IRR across all Search Funds of +35.1%.
The reason there aren’t a lot of search funds is because it is a bit more risky than private equity, given that there are multiple points of failure (search phase and operating phase). It also requires deep access to networks at elite business schools since that’s typically where operators are found.
Tailwinds for Search— The “Silver Tsunami”
Tailwinds are largely driven by demographic shifts happening right now. The retirement of Baby Boomers implies a massive transfer of private businesses in the coming years. By 2030, the entire baby boomer cohort will be at least 65 years old and hitting retirement age. Something like 58% of Boomers Business owners plan to sell their business over the next 5 years 1. However, only about 30% of family businesses successfully transition to the second generation2, so there is going to be a very large number of smb businesses being sold in the coming years. Some estimates say 6 million by 2035 (Mckinsey) 3 and some estimates at 12 million4. Regardless, it’s safe to say that there will be so many coming to market.
Private equity is largely uninterested in sub-$5M EBITDA businesses. With only a few hundred active Search Funds at any given time, supply outpaces demand, creating a favorable market for disciplined search acquirers.
Segments
1. Extended Warranty
FY 2025 financials: Revenue of $70.8M (up 2.8% YoY), cash sales up 9% for the year. The segment is recovering nicely after two years of inflated claims.
Extended Warranty is a portfolio of four asset-light warranty businesses that sell service contracts to consumers and businesses and generate prepaid recurring revenue. Automobile warranty is the dominant sub-segment at ~81% of Extended Warranty revenue, with Home at 10% and Mechanical at 9%. The segment was built by CEO JT Fitzgerald when he joined Kingsway, drawing on his thesis that warranty businesses have exceptional unit economics and float characteristics similar to insurance.
Most of us have encountered these as consumers when we purchase vehicles, homes, or electronics. Customers prepay for multi-year service contracts, which is recognized over the life of the contract as the performance obligation is satisfied. This creates a deferred revenue pool of cash that sits on the balance sheet (the float) that can be invested. Because of this, the segment’s GAAP EBITDA can diverge from its actual cash generation. So, the company and its lenders evaluate it using “modified cash EBITDA,” which strips out the timing distortion and defers only the portion of premium needed to pay future claims.
The segment operates in a mature industry tied to new and used automobile sales cycles, insurance loss trends, and consumer financing trends. It experienced a jump in claims in 2022–2024 driven by elevated parts and labor costs, which was a headwind that appears to be moderating as sales in Q1 2025 grew +3.7% YoY and were up +9.3% from Q4 2024, with management noting positive forward profitability.
I would guess that this segment will either continue to be a source of cash generation, or management will eventually divest it and re-deploy into the search business.
2. Kingsway Search Xcelerator (KSX)
FY 2025 financials: Revenue of $64.2M (up 58.5% YoY), KSX adjusted EBITDA of $9.5M (up 40.8% YoY). For the first time, KSX represented a majority of both revenue and adjusted EBITDA in Q3 and Q4. Management is targeting double-digit organic growth across both segments in 2026 plus 3–5 additional acquisitions. In Q1 2026, adjusted EBITDA increased by 82%.
KSX is the growth engine and the primary focus going forward, and is expected to become the dominant segment soon. It’s the search fund platform that recruits talented early-career operators (called Operators-in-Residence, or OIRs), funds their search for a small owner-operated business to acquire, and then backs them as CEO of that business post-acquisition.
For business sellers, Kingsway offers a respectful succession solution that preserves the founders’ legacy without the disruption of a strategic sale or the short-term horizon of traditional private equity. For rising talented operators, it provides a platform, infrastructure, and capital to acquire and lead a business.
They have 4-5 talented searchers scouting for businesses at any given time and seeking to do 3-5+ acquisitions per year with ~1.5-$3m EBITDA at 4-6x valuation. This discipline has held and shows in their disclosed 2025 acquisitions, which all ranged in the stated 4-6x framework.
Once acquired, they apply the KBS Kingsway Business system, and much of the framework was borrowed from Danaher and the business system it deployed. The former CEO of Danaher (Tom Joyce) sits on the advisory board of Kingsway and is a major shareholder of Kingsway. The KBS is a variation of a kaizen system (continuous improvements) that carefully tracks and measures improvements as the company grows. It consists of finding and evaluating talent, planning for measurable improvements, enterprise excellence, and growing both organically and inorganically.
They basically install the KBS into an acquired business, the operator internalizes those tools, and eventually that operator has enough pattern recognition to identify and evaluate adjacent acquisitions themselves. Davide Zanchi at Image Solutions is an example that has been cited for an operator who has matured and is now looking at tuck-in m&a. Drew Richard at SPI has also already done one tuck-in (a small Australian VMS competitor) and is being positioned as a potential VMS platform builder. This shows that they are aiming for a decentralized model.
Right now Kingsway is operating on a dual track model where acquisitions come in two forms:
OIR platform acquisitions: (Roundhouse, Bud’s Plumbing) They fund a talented OIR in a 1-2 year search process to find a business to acquire, and then build it out once acquired.
Platform tuck-ins: (Ledgers Inc., Advanced Plumbing & Drain) Once operators are capable enough, they begin sourcing tuck-in acquisitions. These typically have "faster integrations and better returns" according to JT.
So as the company scales and platform level CEO’s can source their own tuck-in acquisitions, there will be less strain on Holdco management to source new talented OIRs and acquisitions.
The J-Curve
The J-curve describes the shape of a KSX business’s profitability over time after acquisition. When Kingsway acquires a middle-market business, it’s typically buying something that has been run for lifestyle and dividends rather than growth. Immediately post-acquisition, Kingsway begins loading costs onto the business, such as new hires, accounting systems, HR infrastructure, technology upgrades, and sales and marketing investment. This is why the initial margin dips for acquired companies, but after a few years, there is an inflection, thus the J-Curve trajectory of margins.
“the company reaches an inflection point where the strategic initiatives kick in, the investment pays off and growth accelerates.” -JT Q1 2025 Earnings call
This basically means that there is a 2-3 year lag before the true performance of the OIR portfolio companies becomes apparent. But this doesn’t apply to tuck in acquisitions, because at the point where tuck-ins are occurring, the operator is already seasoned and the platform has already inflected and is rolling up a vertical.
Current KSX portfolio
Kingsway owns and operates a collection of high-quality B2B and B2C services companies that are asset-light, growing, profitable, and that have recurring revenues. As of end-2025 KSX has now completed 13 acquisitions:
B2B Services / Finance & Professional Services:
Ravix Group: Outsourced CFO and finance services (acquired Oct 2021); recently added Ledgers Inc. (Jan 2026 tuck-in, outsourced bookkeeping for nonprofits)
CSuite Financial Partners: Outsourced human resources and CFO services (acquired Nov 2022); shares management with Ravix
The HR Team: Outsourced HR services, East Coast focus, nonprofit/government verticals (Aug 2025 tuck-in into Ravix)
Healthcare / Staffing:
Secure Nursing Service (SNS): Travel and per-diem nurse staffing (acquired Nov 2022)
Technology / Software:
SPI Software: Vacation ownership / timeshare management software (acquired Sept 2023); acquired ViewPoint (April 2025) as a tuck-in to expand its global client base
Digital Diagnostics Imaging (DDI): Radiology/imaging services (acquired Oct 2023)
Image Solutions: Large-format IT services provider for western North Carolina, 85% recurring revenue (acquired Sept 2024)
Kingsway Skilled Trades Platform (launched 2025):
Buds Plumbing: 100+ year old plumbing services company, Evansville Indiana; market leader in its MSA (acquired March 2025 at 6x EBITDA)
Advanced Plumbing and Drain (AAA): Second-largest commercial plumber in Cleveland metro area (acquired August 2025)
Southside Plumbing: Commercial and residential plumber in Omaha, Nebraska (acquired August 2025 for $5.6M)
Roundhouse Electric & Equipment: Industrial electric motor maintenance, repair, and testing for natural gas pipeline operators, most profitable KSX business; acquired July 2025 for $22.4M at ~5.3x EBITDA
Financials
Growth
The more meaningful growth story is within KSX, which barely existed in 2021. KSX segment adjusted EBITDA grew from $555K in 2021 to $5.7M (TTM June 2024). By full-year 2025, KSX revenue reached $64.2M (+58.5% YoY), and in Q1 2026 alone, KSX produced $21.1M in revenue, up 81% versus the prior year quarter.
Management reiterated a “double-digit organic growth” budget for both KSX and Extended Warranty in 2026, which likely implies KSX has an organic growth layer on top of acquisitions. But we don’t know the actual Q1 organic number. I would be interested to see just how much organic growth the portfolio companies can do.
EBITDA Margins
KSX
EBITDA margins at the KSX segment appear to be in the early stages of the J-Curve trajectory. They began at 18.6%, then dropped to ~14.4% the first years the transformation, and have now clearly begun to recover, now accelerating to ~16.6% in Q1 2026.
2025 adj. EBITDA decline to $7.8m, from 10.6m despite 23% revenue growth, which reflects two things,
Extended Warranty's GAAP timing penalty (growing cash sales create deferred revenue that suppresses reported EBITDA in the near term) and
Elevated holdco costs associated with M&A. Management mentioned that portfolio LTM EBITDA, which includes pro-forma from all acquired businesses as if owned for a full year, stood at $22M–$23M at year-end 2025 and as of March 31, 2026.
This framing clearly matters in valuing this company. Management is clear that they believe the $22–23M portfolio figure is the true run-rate earnings power.
Debt Restructuring
This is one of the most important and interesting chapters in the Kingsway story. I’m probably spending way too much time on this section, but it caught my attention because its sophisticated and thoughtful capital allocation. If you aren’t interested in the details, skip to the next section. The summary: They divested assets at a big gain, then used it to knock out a bunch of debt for pennies on the dollar.
Enter JT
JT Fitzgerald entered the picture in 2016, and at this time, the company was distressed and highly levered. He convinced the board to dispose of legacy assets and restructure the business. Then, he was formally appointed CEO in September 2018. By 2020, he launched the CEO accelerator program, and in 2021, the first KSX business was acquired.
However, the company entered this era carrying a bunch of legacy debt ($300M in net debt in 2021), composed of preferred shares and senior notes payable. Net debt was reduced from $305M to ~$35M in two years through a series of divestitures. They sold non-core investment real estate and CMC Rail Yard, which knocked out ~$183M.
How to Retire $98m in Debt With $56m Cash
They sacrificed their most valuable subsidiary in 2022 when they sold Professional Warranty Service Corporation, netting $37.2M in cash. Professional warranty was actually one of Kingsways’ search-fund success stories that had been built under the prior management era. Management described this as a 10x return on invested capital when it was sold. But what is more interesting is how the sale proceeds were used for one of the more clever balance sheet maneuvers I’ve seen.
First a bit of context. Kingsway issued hundreds of millions in Trust Preferred Securities (TruP’s) in the early 2000’s to fund an acquisition spree. TruP’s contain an unusual right where the issuer could voluntarily defer interest payments for up to 20 consecutive quarters (five years) without triggering a default. In late 2018 when Fitzgerald became CEO, Kingsway exercised that right and stopped paying interest entirely for 4+ years.
From the perspective of TruP holders, this was probably looking increasingly uncomfortable by 2022. They held subordinated debt on a financially distressed micro cap that hadn’t paid them interest in over four years, with a deferral window set to expire in Q3 2023 and maturity in 2033. Even if they were to get paid in full at the deferral expiry in 2023, what then? From their perspective, they’d still be holding subordinated debt of a shaky small cap until 2033.
The moment Kingsway had cash from the Professional Warranty sale in 2022, management approached the TruP holders and began negotiating to buy options to repurchase the debt at a steep discount. They paid a $2.3m option premium, which counted against the purchase price, plus all accrued interest during the 7-month option period (August 2022- March 2023) was treated as an offset to the final repurchase price. In March 2023 they repurchased $98.5m ($75.5m principal + $23m deferred interest) for a total cash payment of $56.5m, roughly 57 cents on the dollar. A $31.6m accounting gain was recognized on extinguishment.
Summary
Management preserved cash at a weak moment through an interest deferral agreement embedded the Trust Preferred securities. Then they sold a search portfolio asset at a 10x return, and immediately used the proceeds to buy options to retire the TRuP’s at a significant discount before the deferral window ended, all while accruing interests that counted against the repurchase price during the option period.
The real genius here is turning a position of weakness into a negotiating opportunity. This is exactly how pragmatic capital allocators think and work.
Management and Key Persons
All directors and execute officers hold 41% of the common shares, which is an incredible number.
Thorndike and the advisors
Three of the advisory board members, Joyce, Thorndike, and/or Gordy, were confirmed as Class B Preferred shareholders, but the filings don’t break out in what amounts, nor do they identify whether they also participated in the Class C or Class D. I’ve read elsewhere that Thorndike’s firm, Sun Mountain Partners, owns an estimated 800k shares in KFS 0.00%↑ which would put him in the top shareholders with a stake worth almost $10 million.
Thorndike is a household name in the investing world, but what most people don’t know is that he has a long history of search fund investing going all the way back to the early 1990s. He founded a search fund and really helped institutionalize the model.
JT Fitzgerald
Before Kingsway, JT was the founder and managing partner of Argo Management Partners, a private investment firm using the search fund model. Prior to that, he co-founded Adirondack Capital, a financial futures and derivatives trading firm.
Fitzgerald holds 1.5 million shares, including 8,000 Class B Preferred Shares worth $200,000, generating $16,000/year in dividends (8%), convertible into 21,053 common shares at his option.
Valuation
Consolidated GAAP Adjusted EBITDA was just $7.8M (FY 2025), but there were multiple drags that pulled this below economic reality (pro forma gap, EW deferred services distortion, HoldCo costs).
Management’s preferred earnings metric is portfolio-level adj EBITDA, defined by Kent Hansen in the Q4 2025 call as three adjustments to consolidated GAAP adj. EBITDA:
Pro forma KSX gross-up: Adds the trailing 12 months of EBITDA for all KSX businesses currently owned, as if owned for the full period.
EW Segment Modified Cash adjustment: Replaces GAAP with Modified Cash EBITDA, defers only the claims-related portion of premium (not commissions), aligning with actual cash dynamics and with how lenders assess the business.
HoldCo addback: Corporate/OIR overhead is excluded from the Portfolio LTM figure — it reflects operating company earnings only.
Below is a reconciliation of GAAP EBITDA for LTM portfolio level adjusted EBITDA
I am not comfortable adding back the HoldCo costs personally. So I’m subtracting them from my 2026 EBITDA estimate. Readers are free to use management’s preferred metric and keep that ~7m Holdco add-back, which makes the company look much more compelling.
Based on average EBITDA added and the 3-5 target, we can reasonably assume an additional $3–8m EBITDA added from acquisitions in 2026 (~3-4 deals x ~$1-$2m EBITDA each). So, 2026 EBITDA will likely be closer to ~$20-26m after factoring in management’s stated double-digit organic growth and adjusting for HoldCo costs. If you keep the Holdco add-back, it’s closer to ~$27-$33m.
Putting it together its becomes apparent that this isn’t a very cheap company if you use the formula I used for EBITDA. In fact in a bull case, Kingsway trades at 16.5x 2026 portfolio EBITDA, and in a bear case 20x. However, If you add back the Holdco costs its look much cheaper at 13-15x EBITDA.
It’s clear that investors are looking out a few years and placing a lot of confidence in management. Investors are expecting this company to both grow at a brisk pace, and benefit from margin improvement. Those aren’t unreasonable assumptions given that the management team and advisory board are likely the best search fund guys in the industry.
Final thoughts
I do own a small tracker position in this, but it’s less than 1%. I would be very interested in buying more at a more reasonable price. There is no doubt in my mind that this company has potential. I think there is something unique here that has potential to create real value for shareholders and young ambitious operators. This one checks all my boxes except valuation, so I do want to own some, but I won’t load up the boat.
Hi Kairos. I recommend to look through the slides from their Investor Day today. Every acquisition in 2025 met or exceeded 30% IRR, many are on track for PWSC-like returns (10x net return in 4.5 years). I am however very cautious about Rob Casper leaving the Skilled Trades Platform as President.. He was a big part of my thesis, because he has done this several times before and he did not need to go through the learning curve. They target 2-3 acquisitions/year on the platform, which makes it a sentral part of the company going forward. Now replaced with Colter Hansen, whom I am sure is great, but he is not an operator of plumbing and HVAC, and this increases the execution risk…
Thanks for writing this up! Glad to see the company is getting some more attention!