Participants

John Fitzgerald; Chief Executive Officer and Director; Kingsway Financial Services Inc

Kent Hansen; Chief Financial Officer, Executive Vice President; Kingsway Financial Services Inc

James Carbonara; Investor Relations; Kingsway Financial Services Inc

Adam Patinkin; Analyst; David Capital Partners LLC

Presentation

Operator

Good day and welcome to the Kingsway first-quarter 2024 earnings call. (Operator Instructions)
Please note this conference is being recorded. With me on the call are JT. Fitzgerald, Chief Executive Officer, and Kent Hansen, Chief Financial Officer.
Before we begin, I want to remind everyone that today's conference 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 8-Ks 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.
Now I would like to turn the call over to JT Fitzgerald, CEO of Kingsway. JT, please proceed.

John Fitzgerald

Thank you, Holly. Good afternoon, everybody, and welcome to the Kingsway earnings call for the first quarter of 2024. It's only been a short time since our last earnings call in March, so thank you all for joining us again today.
We finished the first quarter of 2024 with financial results that are largely in line with our expectation expectations, particularly in light of current market conditions that are impacting certain of our operating entities. Most importantly, our strategy and investment thesis remain the same execution at our operating businesses while growing through acquisitions to deliver sustainable long-term growth and cash flows and generating attractive returns for our shareholders.
Let's first look at the conduct consolidated financial results for the first quarter of 2024. Consolidated revenue was $26.2 million, roughly in line with the prior year quarter. And adjusted consolidated EBITDA was $2.1 million compared to $2.4 million in the year ago quarter for the extended warranty segment and the KSX. segment combined adjusted EBITDA was $3 million compared to $3.5 million for the year ago quarter.
In our extended warranty segment, our vehicle service agreement, or VSA companies were again impacted by an increase in average claims expense and persistent macroeconomic conditions, namely tighter credit conditions and lower loan volumes compared compared to the same period last year, making for a challenging year-over-year comparison.
Despite the revenue headwinds facing the industry, we were able to sell more contracts in Q1 2024 and at a higher average revenue per contract than last year. However, the claims severity we saw moderating as we exited 2023 ticked back up in Q1 with higher labor costs driving higher claims expenses in the quarter. I would note that we didn't see claims inflation really pick up until Q2 and Q3 last year. So we expect more favorable comparisons in the quarters ahead.
All in all challenges faced by the businesses in our extended warranty segment are moderating. And importantly, we remain focused on controlling what we can improve in contract production and managing our costs. We are seeing positive improvement thus far in 2024 with performance in March, better than when we started the year. And importantly, we continue to expect improving financial results in 2024 compared to last year.
Moving to our search accelerator or KFX segment, higher revenues were primarily driven by the recent acquisitions of SPI. and DDI. in the second half of 2023. Raven mix has continued to perform ahead of our original investment thesis and in the first quarter, adjusted EBITDA improved compared to last year despite a slight decrease in revenue.
Strong utilization and higher gross margins, combined with tight expense management delivered improved EBITDA margins in the quarter at C-suite revenue and adjusted EBITDA were lower than prior year. However, gross margins continue to be strong and expenses are down from prior year.
Looking ahead, the private equity and M&A environment is showing signs of reinvigoration and the team is bolstering its pipeline of new deals. While it is early in the year, we have begun to see business activity improve and both robotics and C-suite have added business development talent to accelerate revenue growth and S. and S. consistent with market trends.
The per diem business continues to perform well. While market demand for travel nurses has continued to be challenging. This has resulted in much lower revenue and adjusted EBITDA in Q1 2024 than a year ago. However, our travel business is rebuilding and industry intelligence supports our view that travel demand is stabilizing and long-term demand for nurse staffing will be strong given the projected persistent shortage of registered nurses over the next several years.
We remain bullish on this business for the long term IT systems products, international or SPI. The team is developing and executing a strategy to grow annual recurring revenue or ARR. Since acquisition, the Company has signed eight new clients who are at various stages of implementation. Once onboarded. These customers should provide a nice lift to ARR.
Additionally, SPI. is executing several promising strategies to increase penetration and grow market share in its core market. The company is also expanding its high-value partnerships to bring innovative solutions. So they're new and long-standing customers at Digital diagnostics, imaging or DDI. revenue continues to grow both month-over-month and year over year with several new hospital customer adds in the quarter. Q1 revenue exceeded the prior year by over 20%.
EBITDA trailed the prior year slightly as the company is investing to support the growth they're seeing DDI. is focused on building the internal infrastructure, infrastructure and processes to scale alongside the high level of demand they are seeing while also ensuring continued excellent levels of quality and care.
Now turning to KSX search activities. Growth through acquisitions remains central to our corporate strategy, targeting opportunities that deliver predictably high returns on tangible capital in large and growing end markets. While the timing of completing a transaction is challenging to predict, we are encouraged by the strength of our pipeline and continue to target the completion of two to three deals over the next year that can each generate one to $3 million in annualized EBITDA.
Given the recent performance noted above our 12 month run rate adjusted EBITDA for the operating companies is now $16 million to $17 million. As a reminder, run rate is intended to capture the last 12 months EBITDA of the businesses we currently own, including those we've recently acquired, it is not intended to be forward-looking.
As a reminder, we currently have four highly talented operators and residents who are actively searching for opportunities and evaluating a number of potential acquisition targets. Our deal pipeline is the most robust that I've seen it, reflecting both the hard work of our OIR.s as well as the systems and processes. We have put in place for effective sourcing.
That combined with an improving overall M&A environment, it gives us confidence in our ability to execute our plan. We are also actively recruiting our next cohort of OIR.s, we received interest from over 60 qualified candidates in the first quarter alone. As always, we will remain highly selective about who we bring into the program. We are focused on delivering long-term results for you, our shareholders. We continue to make great progress.
With that, I'll now turn the call over to Kent for a deeper review of our financials.

Kent Hansen

Thank you, JT. 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 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 since JT. already covered the results of extended warranty and CareFax. I won't rehash those.
Now I'll start with our balance sheet and cash flows at the end of the first quarter of 2024, we had cash and cash equivalents of $12.1 million compared to $9.1 million at the end of 2023. In Q1 2024, we drew $3.5 million on our delayed draw term loan and a $0.5 million on our KWH revolver.
Given the delayed draw term loan expired at the end of February, we felt it prudent to have some some dry powder on our balance sheet. Cash provided by operating activities from continuing operations was $0.2 million for the first three months of 2024 compared to cash used in operating activities of $22.8 million in the year ago period.
A large portion of the cash used in operations of the prior year was related to payment of deferred interest on the trust preferred debt instruments that we repurchased during the first quarter of last year. And payment of deferred interest on the remaining I trust preferred debt instrument that we did not buy back.
We had total outstanding debt, which is comprised of bank loans and trust debt of $47.1 million at the end of the first quarter of 2024 compared to $44.4 million at the end of 2023 net debt decreased to $34.9 million as of March 31, 2024, compared to $35.3 million at the end of 2023.
In March of this year, our securities repurchase repurchase program was extended for one year and through March of 2025. During 2024, we repurchased 8,000 shares of common stock for an aggregate purchase price of approximately $100,000. To date, the company has repurchased securities at a total cost of $7.2 million total under the program.
In summary, the first quarter financial results were largely in line with our expectations. Our balance sheet remains healthy, and we are poised for improving results as we progress throughout 2024. Our annual general meeting of shareholders and Investor Day will be held at the New York Stock Exchange on Monday, May 20, 2024.
The AGM will begin at 9 AM Eastern, and the investor day presentation will begin at 9:30 AM Eastern. We'll turn to Mike has agreed to join us for a fireside chat to share his thoughts on capital allocation, the power of long holding periods and his experience as an original long-term investor and the search fund ecosystem.
Anyone interested in attending the in-person investor day as well as the off-site cocktail reception may ours may RSVP by emailing teams at Hayden IR.com has e-mails in today's press release. We hope to see you there. I'll now turn the call back over to Holly to open the line for questions.

Question and Answer Session

Operator

(Operator Instructions)
Adam Patinkin, David Capital Partners.

Adam Patinkin

Good afternoon, guys. How are you?

John Fitzgerald

Hi Adam. Great.

Adam Patinkin

So, I wanted to ask a few questions about your pipeline of new deals. I think that on the call today, you guys expressed a little bit more enthusiasm than we've heard in the past about what your deal pipeline looks like and how robust it is.
And I'm wondering if you could share a little bit more color about that. So first, maybe if you could share maybe what kind of KPIs you look at when you judge how your platform or how your pipeline is coming along?
And then maybe if you could share a little bit more about kind of what and some systems and processes you've put in place, which I think you also alluded to or mentioned outright on the call, help us just get a better feel for how you've improved your sourcing funnel over time?

John Fitzgerald

Yes, sure. Happy to chat about that a little bit. I mean, I think that we tried to break down our KPIs between what we call lead measures, which are things that are both influence simple by ROIRs and predictive of what we call our lag metrics and so our lead measures would be a combination of industries identified and qualified Com and then a first instance of outreach to primary business owners. So that could be e-mail campaign linked in mail campaign, snail mail or phone call, and then the lag measures would be and NDAs executed seems received.

Adam Patinkin

That would be unlike broker and intermediary channel or indications of interest issued or conversations with owners and then ultimately letters of intent executed into closed deals, right? So which which sort of track, it's no different than a typical sort of sales pipeline but sort of bifurcated between lead and lag measures going on in all of those data points numerically?

John Fitzgerald

Yes, weekly, monthly quarterly. That's right.
By OYR. Yes. And in terms of the systems, right? So we track all of that in a CRM system. It's called HubSpot, but we know our NDA execution. We have an electronic platform that allows us to outsource some of the legal and track all of our NDAs, and we have internal repositories for it, handling all of that standard forms for NDAs and indications of interest, all of those kinds of things.
And so just like lots of activity, I think in the first quarter, we probably sent We spooled up a new outsourced sort of sales development resource and we'll dig. We'll dig into this in the Investor Day quite a bit more, Adam, but I think in terms of like outbound first instance of contact with business owners in the first quarter, somewhere like 15,000 contacts from a conversion rate that that translates into conversations with owners is low single digit percent, but then dozens and dozens of NDAs executed on down through the funnel. So a lot of activity.

Adam Patinkin

Got it. And you would say this is more activity or the most activity that you've had.

John Fitzgerald

Yes, there's just a lot of structure and rigor around both from tracking and monitoring. And I think what gets measured gets done and the guys are really leaning into maximizing on the lead measures that Neil, that are then hopefully predictive of the lag measure and Got it.

Adam Patinkin

And then that's really helpful. And I look forward to hearing more at the at the annual meeting on the same topics. Then when do you? So I saw that Kingsway recently posted applications for new OIR.s to apply to the company.
And I think you mentioned that you've had over 60 applicants for one seat. I assume you're posting those only when you feel like you're getting closer to transactions or maybe if you could you speak to, obviously without giving away or saying that you're going to deliver a transaction at any point in time. When do you make the decision? Hey, we need to go out start recruiting for the next rounds of OIR.s?

John Fitzgerald

Yes. I mean, I think part of it is ongoing, right? I mean, I think that we firmly believe and I have an expectation that each one of our current guys is going to get a deal done in the normal timeframe. And so we all we want to be thoughtful about knowing that we want to on bring new people on as they move into a President and CEO role that we want to backfill and don't want to be sort of behind the curve. And so it's a lot of it is an ongoing process.
So I wouldn't read too much into the timing, but just know that I think it's indicative of our confidence, right, that we're still recruiting. And so that we bought post those job. Those job descriptions and profile descriptions, I'm sort of quarterly. And then there's some kind of ongoing a little bit more organic development that comes through other channels as well. And we'll speak about that at the Investor Day to that's a big part of our processes, our talent, recruitment pipeline and process as well.

Adam Patinkin

Got it. So then let me ask one last question, which is I saw that you guys added Tyler Gordy to your advisory board for KSM.s. Can you talk about how you utilize your advisory board. So you've got some Tom Joyce, and you've got Tyler, Gordy and you've got well-formed icon there. How do they interact with your OIR.s? Is it mostly before a deal gets done? Is it mostly after a deal gets done or are there some is there a regular line of communication? Is it more structured or informal? Can you just maybe talk through how you utilize that advisory board?

John Fitzgerald

Yes. So the structured part is we meet in person full day three times a year. We met in March. And that is a fairly structured day.
We start with identifying some critical kind of operating areas for new presidents. This year, we focused on talent and talent sort of development and coaching it has the president and a small company, and we focused on time management for a new CEO. And we focused on in investment underwriting and key criteria in search acquisitions and so on those three topics, we'll take one of them. Tom took one and Tyler took one, and they kind of did a workshop on that.
So that was a big chunk of the day from the rest of the day was split between operating updates, key challenges and issues for each one of our KSXCEO.s, a little bit more of like a board meeting, if you will, for each one of those operating companies.
And then the last sort of third of the day was pipeline new opportunities, quick looks at deals we're looking at and key got I believes are important bets to help them think about both the attractiveness of the potential target hand and valuation criteria. So that would be the part sort of three times a year more structured formal gatherings.
And then each one of these advisors has encouraged our guys to develop more informal mentor mentee relationships but I'm not involved in this. And so there is, I think, a lot of natural back and forth via text and phone call whenever they I have something that maybe they don't want to bring to me, but want some advice on that kind of thing. So it's it's pretty amazing they give their time and we have, I think, very impactful gatherings when we all get together.

Adam Patinkin

Got it. That's great. That's really helpful color. I appreciate it. And I will drop off, but I look forward to seeing you guys in a couple of weeks at the AGM.

John Fitzgerald

Thanks, Adam.

Kent Hansen

Thanks, Adam.

Operator

[Douglas Aught, Ednary Associates].

Hi JT and Kent.

John Fitzgerald

Hi, Doug. Doug.

And my first question is regarding the extended warranty business, even even though there's been current headwinds. And I'd just like for either or both of you to talk about why this is or isn't a good standalone business over the long term?

John Fitzgerald

Yes. I mean, it's a great question. Obviously, when you have companies that whose product sales are tied to the sale of used vehicles, that you have natural exposure to the economic cycle. In this case, you have sort of consumer credit cycle, right?
And so there are there is some cyclicality, and we've been living with that for several quarters, call it, six quarters since the Fed started raising interest rates. So probably even before that with the pandemic and the dislocation in the used car market and all of that. And so start with there is some cyclicality to the business that would be viewed as a negative sign.
But the underlying economic fundamentals of these businesses also tick a lot of boxes for us, right? So it is a diversified contractual revenue at high margin and low working capital requirements, negative negative working capital front. So these are prepaid contracts and so the returns on tangible capital are like infinite because they require negative capital, right? And so we like the economic characteristics a lot.

We don't love the cyclicality and perhaps you could also talk about the pros and cons of the extended warranty business being paired with a business like CancerVax?

John Fitzgerald

Yes. I mean, I think from the beginning, we have always said that the warranty business, they're just like wonderful cash generating businesses. There's obviously a little bit of volatility in that given the cyclicality, but they know they see their profits in cash, right?
And so we have always viewed them has some and we've got wonderful managers running those businesses that are focused on growing them organically. And we've been able to buy a few of you over the years at reasonable prices and in May and in the absence of our ability to redeploy the cash they generate by buying more warranty businesses, which has been very hard.
We have said, well, this is a wonderful source of cash flow that we can allocate to funding our cereal acquisition program by leveraging KSX. right so it is sort of a big cash generator for now. And then as KSX. scales, it will also be, you know, cash generator to fund ongoing acquisitions as well yes.

Well, and maybe I can ask a follow-up on that. And response are all things being equal, whatever that means to you? And is there a preference for funding either Castex or the warranty business? Or would you like to do both as much as you can given attractive opportunities and?

John Fitzgerald

Yes, that the warranty businesses requires zero capital to scale, right? Because the capital-light nature of the businesses. And so any capital required to build more and warranty would be via acquisition. And we have just found these are very attractive businesses and people really like them.
And so we have found that come a good business in the warranty industry is very difficult to buy. The valuations are it's higher than we would be willing to pay they trade at 15 times, right? And so we're just not going to be a good buyer of those businesses. And so all things being equal, except valuation that we would rather direct our capital to backing really talented young people looking for businesses with similar attributes, KT. and the search accelerator.

Got it. Got it.
Next question for the KIF6 segment. I'd like you to remind us of a few of the most important things that you guys continue to do today that are going to benefit shareholders over very long term and it's a great question, right.

John Fitzgerald

So I think it's I think it's a very unique model. Doug, on I've been involved in the search for a long time, but the idea of matching really wonderful talent to go into a small business that otherwise probably couldn't attracted alignment of incentives and then focus on buying the right kind of businesses, right, large and growing industries where that growth is supported by long-term secular trends.
And then within that industry businesses that have great business models, recurring revenue at high margin and low capital intensity and then paying very fair multiples for those businesses.
And our history has proved that we can buy great businesses in growing industries from a founder or retiring founder, four under seven times EBITDA and then take a really talented young entrepreneur and put them in and accelerate growth, right? And that's been the model in search.
That's what we're doing in Kingsway. And I think Kingsway is like a really exciting platform to do that in both the long term nature of our outlook and our ability to hold businesses for a long time and the tax efficiency because of our because of our NOLs.
Got it.

And one last kind of nitty-gritty question. I'm curious from the prior question or when it comes to communications with potential OIR.'s. I'm just curious how much of the communication is outbound versus inbound And has that changed any at all over time?

John Fitzgerald

And I think it's both prioritize as we do outbound just to build awareness, but the best quality inbound through the networks that continue to get stronger and bigger, right? Each one of our current presidents in OIR.'s, have there have large networks, Tyler, no Well, Tom, et cetera. And so week to week, the communication has both directions. I would say the higher quality communication is inbound Yes.

Well, I mean how it makes sense that the VOIR.s that you've attracted, they have their own networks and they wind up becoming brand ambassadors, so to speak?

John Fitzgerald

That's right.

All right. Thank you for your time. I appreciate it.

John Fitzgerald

Yes, no, appreciate the questions. Thanks.

Operator

There are no further questions from the phone lines. I would now like to turn the floor over to James for e-mail questions.

James Carbonara

Thank you, operator. And yes, a number of questions did come in on e-mail. I'll start with the first one. It's as you have talked about how you think the business conditions at many of the Company divisions look to improve over the next six to 12 months. Can you give three anecdotes are signs of improvement in these businesses?

John Fitzgerald

Yes. Thanks, James. Yes, obviously, when you kind of break it apart start with the warranty businesses, I think we mentioned it in the prepared remarks, but I'd point out that cash revenue in the quarter was actually up year over year by 1.5% and our operating expenses were down 4%. And so we're seeing that pricing that we've pushed through at the end of last year starting to come through, and that will come through earned revenue over time.
And then sort of anecdotally from Trinity in the pay. We didn't talk about equipment backlogs and I think those are clearing up and and that business is starting to pick back up, which is great. And then IWS., which is our vehicle service contract company that distributes to credit unions. They recently signed a very large new credit union customer. And I mean they've onboarded several new credit union customers this year and last year, but they recently signed a deal with a very large one, which it's slated to launch late second or early third quarter this year, which could be a really nice needle mover. So we're super excited about that.
And then in KSX., I mean, I think the big drag on performance there for several quarters has been SNS., our nurse staffing business. We think that the industry has sort of found a bottom there. The travel nurse demand has stopped going down and at the same time over the last many months, Charles has first built kind of a tech stack internally and then recruited three new recruiters to bring more nurses onto our platform. And in the first quarter, the number of travel nurses on assignment we called TOA.s was up sort of 40% from the same from year-end and trade. So at the end of March, there were 40% more takeaways than there were at the end of December, and most of that happened in March, and that ramp continues in April as these recruiters get up to speed. And and so the trajectory of TO. is at SNS. was going down last year and going up this year. And we think that those two lines will cross very soon, and we'll have a much better back half of the year.
And then DDI., which we mentioned a significant growth with no corresponding sort of improvement in EBITDA there, onboarding new hospital customers and one every week and a half, I think, and there's pretty significant upfront expense to bring that a new hospital into their system Neose technology expenses and in some cases, they're purchasing monitors and many, many of those on-boarding costs get expensed, but they have a very quick payback period. And so we would see that that business is ramping very significantly. And we're just trying to kind of keep up with the growth while maintaining some very high level of patient care and quality of our services. So we're pretty excited about what's going on.

James Carbonara

Great. And I think you answered a few of the other questions here, but there are some additional ones that came in it it says, yes.
Can you talk about how the first quarter or two of results might look at new businesses we buy you experienced some economic drag in the early financial results. Even if the businesses are doing well and meeting or exceeding competitions?

John Fitzgerald

Yes, I think I think that's a great question, right. I mean, first of all, we have a very long-term view, right. And um, and so one or two quarters is not sort of make-or-break our thesis and we would absolutely expect some. I think the word you use is drag here in the first couple of quarters. If you think about when we buy a small business there and they're generally small and relatively unsophisticated and method more often than that, well, I think we can say I've never been part of a public company reporting on the CapEx side.

James Carbonara

Yes, correct.

John Fitzgerald

Yes. And so there's a lot of work we have to do right and so we add incremental overhead out of the gate audit, both external and internal. We put them on new accounting systems, new HR and benefits that are maybe enhancements to what was there in the past come you have professionalization of these small businesses and creating a foundation that will support their growth. And so yes, there's a J-curve is probably not the right term, but a couple of quarter drag and then they get going. And let's let's be honest. These are young young managers, first time presidents and day. And we and I make mistakes and work through that to and learn from that and get better. So yes, I think from that would be expected for sure.

James Carbonara

Great. And then continuing along and feel free to say nothing additional to add if you feel like you've already answered it. But the next one is it sounds like the software and cardiac monitoring businesses are doing well but the financials don't yet reflect their upward trajectory. Can you speak to this and tell us when the financials will start to show positive momentum in these two businesses?

John Fitzgerald

Yes, I mean I think I spoke to it, I'll just sort of underscore it SP. I mentioned in the prepared remarks, we added eight new enterprise customers. And once those customers get onboarded. There's a little bit of customization of the software from once they come on will be that we'll see a nice uplift in ARR. Andrew's very focused on continued penetration in his markets and got a great strategy and a great team. And yes, so I'm very happy about that. And software businesses really in his case about growing ARR. We talk about the Rule of 40, right ARR growth plus EBITDA margin greater than 40, and that's he wants to be there. And so right now is leaning into ARR growth as he more fully penetrate this market, the focus may shift towards improving EBITDA margins, but for now, he wants to make it a much larger business.
And Gary, I as I said, you know, there's a lot of upfront investment to onboard these new hospitals, Unitech installations. Those are upfront costs, but they have an extremely fast payback and he's is growing very quickly in terms of new hospital adds.

James Carbonara

Excellent. Okay. And one of the questions is, can you talk about the float at the insurance companies and the size of the portfolio? What is the yield today? And how long will it take to get closer to a market rate at 5% plus?

John Fitzgerald

Yes, I assume they mean warranty, not insurance, important distinction, but.
Yes, so the float. We have roughly $40 million bond portfolio and another $8 million or so in restricted cash and the bond portfolio is externally managed. And right now, we that portfolio sits at about a two year duration.
And that duration has been coming down over the last couple of years and really is trying to match the sweet spot of the yield curve, which is right there at Green kind of two years to pick up the most yield and so on with a two year duration and we've been in this higher interest-rate environment, kind of a year, I would think probably one more year as these maturities come rollover to be fully invested to get back up to that market rate of five plus right now, the market yield on the portfolio is north of 5%. So and as we roll over that should happen by the year when you've taken about a year, I would think so yes, we're currently yielding, you know, let's say, low threes right now.
So in that, that continues to go up as the portfolio continues to turn over.

James Carbonara

Okay. Next question is do you think we will be able to close on two new acquisitions prior to year end 2024?

John Fitzgerald

Well, with all of the Safe Harbor language that Holly gave at the beginning of the call?
Yes. Look, I mean, I think we've demonstrated our ability to do it. I feel really good about both the level of activity we talked about those lead measures that Adam asked about and the amount of ROCs ROIR.s are turning over and in a very healthy pipeline, I feel very good about it, but you know, buying a company buying 100% of a small business is always a very hard endeavor and fraught with risk and things that go wrong and settle with the proper caveat that it's hard to predict.

James Carbonara

Got it.
And then the last one here is without giving guidance, do you think that EBITDA growth will start to turn positive as we move through the next two or three questions?

Kent Hansen

Yes, yes. Just because JJ, you mentioned the warranty side, the claims expense really started to it increase about this time a year ago in Q2 and Q3. So we just believe with the I'm not giving any guidance, but are you keeping at our pace we should have favorable year-over-year comps going forward?

James Carbonara

Great. I see no further e-mail questions, all pass back to the operator.

Operator

There are no further questions from the phone lines. I'll turn the floor over to management for any closing remarks.

John Fitzgerald

Okay. Thank you, Holly. No additional remarks other than we hope to see you all at our Investor Day in New York on May 20th. We'll do kind of management presentation and deep dive on KSX. And under the hood on DDI. Peter document will be there to talk about his business and then a wonderful fireside chat with our KSX. advisory board member will form dyke will be in addition to talking about his book outsiders and his podcast, 50 x will talk about his experience as a search fund investor and some of the research is done around that asset class and the power of long-term holding periods. So I think it will be a really nice way to tie together a bunch of interesting Fed threads and hope you're all there. I think for those that come, I think we have purchased copies of Will's book and probably sign them for yourself and we fund. That's all I have only.

Operator

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