Welcome to the Kingsway conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. 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. Please note, this conference is being recorded. I will now turn the conference over to your host, James Carbonara, with Hayden IR. You may begin. Thank you, operator, and welcome once again to Kingsway's conference call to discuss the acquisition of Digital Diagnostics Imaging, Inc., or DDI. With me on the call are J.T. Fitzgerald, Chief Executive Officer, Kent Hansen, Chief Financial Officer, and Peter Dausman, the incoming CEO of DDI. Before we begin, I want to remind everyone that today's conference 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 differ materially from those contemplated by those forward-looking statements. For 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 risk factors detailed in the company's annual report on Form 10-K, as well as other reports that the company files from time to time with the Securities and Exchange Commission. Please note, too, 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 metrics is available in our periodic filings with the SEC. Now, I'd like to turn the call over to J.T. Fitzgerald, CEO of Kingsway. J.T., please proceed. Thank you, James, and welcome everyone to the call. We're pleased to announce today the acquisition of Digital Diagnostics Imaging, Inc., or DDI. DDI, which is headquartered in New Jersey, is a provider, excuse me, is a provider of fully managed, outsourced cardiac monitoring telemetry services to long-term acute care and inpatient rehabilitation hospitals throughout the United States. Their business enables remote access to client hospital telemetry systems from an outsourced monitoring station, so that a patient's ECG is always under watch. The company has been operating for over 10 years and currently has a presence in 42 states. DDI has established, established itself as a trusted partner to its customers through its focus on a dependable, high-quality service offering, and our focus will be to support the company's growth while it continues to deliver exceptional value to its customers. We are delighted to welcome the DDI team to the Kingsway family. This is our fifth acquisition in the Kingsway Search Xcelerator Program, which, as a reminder, leverages the proven entrepreneurship through acquisition framework to partner with talented entrepreneurs and support them to acquire and build outstanding businesses within Kingsway. These acquisitions must satisfy a disciplined set of criteria. Specifically, we seek targets in growing industries with an established recurring customer base, with low attrition, strong margins, and proven business models with low capital needs to support their growth. Our ideal target has a founder operator who is looking to transition into retirement and generates between $1.5 million-$3 million in Adjusted EBITDA. DDI fits these criteria to a T. Peter Dausman is the Operator- in- Residence responsible for this transaction and has recently transitioned to the role of CEO of DDI. Tom Corney, the business founder of DDI, will support Peter in a transition period of up to 12 months. We'll hear from Peter in just a bit. We believe that Peter's background makes him uniquely well-suited to run DDI. As a graduate of the U.S. Naval Academy with a degree in Systems Engineering and as a graduate of the prestigious Navy Nuclear Power School, Peter spent the first 8 years of his professional career implementing safety and operational excellence programs in the military and in private industry. A central part of Peter's role in the nuclear industry involved using the Department of Energy's Human Performance Manual to drive reductions in human error in critical nuclear safety environments. Importantly, this human performance manual is the exact same manual that the medical industry uses to reduce human error in hospitals, and so he will be able to directly rely upon this experience in managing high reliability telemetry services at DDI. A fun fact about Peter: In addition to his professional pursuits, he was also the concertmaster and first chair violin for the U.S. Naval Academy Orchestra. We are very excited to announce this acquisition and look forward to continued growth at DDI under Peter's leadership. Importantly, DDI meets our predefined criteria as it operates in a stable and growing industry with solid demand. We're eager to bring the business into our portfolio and expect it will be immediately accretive. I'll turn the call over to Kent for a review of the financials, and then we'll ask Peter to share more about the business and its prospects. Thanks, J.T. For the 12 months ended June 30, 2023, DDI reported $4.2 million in unaudited revenue and approximately $1.8 million in unaudited adjusted EBITDA. Based on our purchase price of $11 million, the valuation represents approximately 2.6x revenue and approximately 6.1x Adjusted EBITDA. The business has delivered operating margins in excess of 40% in each of the last two years. DDI has a bit more fixed assets than our normal acquisition profile, having just under $1 million dollars invested in patient monitors, net of depreciation as of June 30, 2023. Future CapEx is expected to be used for monitor purchases for onboarding new customer hospitals or expanding capacity at current customer hospitals, and is expected to be between $100,000-$200,000 per year, depending on the pace of growth. The business was acquired in an all-cash transaction comprised of $5.4 million in cash on hand and borrowings of $5.6 million, provided by Signature Bank of Illinois, for a total purchase price of $11 million. Terms of the loan include an interest rate of prime plus 0.5%, with a floor of 5%, and is amortized over six years, with the first year being interest only. There's also a revolver for additional borrowings of up to $400,000. The long-term borrowings are nonrecourse to the Kingsway parent and are secured by the assets and cash flows of DDI. I'll turn the call over to Peter now for more details about the company and the industry. Peter? Thank you, Kent. As J.T. mentioned, Digital Diagnostics Imaging is an outsourced cardiac monitoring service provider for hospitals. They provide 24/7 cardiac monitoring, specifically for moderate to high acuity inpatient settings, and those are inpatient rehab hospitals and long-term acute care hospitals. Geographically, DDI's customers are spread across 42 states. They have a customer in Puerto Rico as well, and they provide these services from a single control center facility in New Jersey. The company has been operating in this unique niche for over 10 years. DDI is strategically headquartered in Wall, New Jersey. It leverages its proximity to the New York City metro area for recruitment of ECG staff. It ensures a high level of quality in the service it provides by keeping shift lengths to no more than 8 hours. This is attractive to ECG techs, who may be accustomed to longer, 12-hour shifts in a traditional hospital setting. Currently, the company's operational space is at approximately 30%-50% capacity, and that creates an opportunity to optimize the operating leverage and room for additional growth. There are approximately 1,500 long-term acute care and rehabilitation facilities in the U.S., and DDI currently services only a small fraction of that target market. Rehabilitation hospitals have not historically provided cardiac monitoring, so adding outsourced monitoring ensures continuity of care, so that the patient does not have to be moved to a setting where they do require monitoring. DDI's monitoring services are viewed as an improvement, both in terms of standard of care and against ambulatory costs. In long-term acute care hospitals, almost all reimbursement codes require ECG monitoring. Without it, these hospitals are not reimbursed. The dynamics in both rehab facilities and hospitals create a floor for demand and provide attractive unit economics for DDI services. Furthermore, the industry backdrop and regulatory environment is stable, with no clear disruptors on the horizon. ECG technology is expected to continue to be the sole method for predicting and diagnosing heart-related issues for DDI's core markets, with no changes with biomarkers or any other alternative technology. DDI is the only qualified vendor in its core markets. Its commitment to customer service is evidenced by its high revenue retention rate and its low customer churn. As a result, the company has experienced impressive growth, with revenues growing at greater than 20% CAGR and strong EBITDA and free cash flow margins. In summary, I'm extremely eager to lead DDI. DDI sets the standard in its market, the operational and financial fundamentals are solid, and there is tremendous opportunity for growth, both in our niche and on a macro level. Our hospital customers continue to seek these outsourcing opportunities because of the immediate benefits that come from entrusting a dedicated service provider. The improved quality of care, higher continuity of care, higher diagnostic accuracy, significant cost savings, but most importantly, the unburdening of their medical staff, so the doctors and nurses on-site can focus on achieving the highest quality outcomes that make a real difference in people's lives, which is what this is all about. Now I'll turn it back to J.T. for closing comments. Thanks, Peter. The acquisition of DDI is yet another milestone in the evolution of our accelerator program. We are extremely excited to partner with the DDI team and support them in our decentralized operating structure. DDI is a fast-growing company with attractive economics, and we believe it will further enhance the value of Kingsway for our shareholders. With Peter transitioning out of his role as Operator-in-Residence and into his new role as CEO of DDI, we still have two OIRs that are continuing to seek and evaluate additional M&A opportunities. We are also in active conversations with many more talented entrepreneurs who have an interest in joining the KSX program. While there is no certainty around closing another deal or the timing, we remain encouraged by our OIR's outreach efforts and the activity we are seeing in the market. We'll move into Q&A now, and if there are any questions afterwards, please feel free to reach out to James at Hayden Investor Relations to schedule a call. Operator, please open the lines for Q&A. Absolutely. 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, that's star one if you have a question or a comment. First question comes from Adam Patinkin with David Capital. Adam, please proceed. Hey, J.T. and Kent and Peter, congratulations on this transaction. It's really exciting to see another deal. Thanks, Adam. Thank you. Thanks, Adam. I have three questions that I wanted to ask. Let me jump in with the first one. This first one is for Peter. I'm wondering if you could talk a little bit about how the deal was sourced, and alongside that, I think it would be helpful for me and other investors who are shareholders of Kingsway if you could talk a little bit about your specific search process, 'cause I know you've been a searcher, right? I believe you joined in the middle of 2021, so it's been an almost 2.5-year search process. I know you know I think the goal that Kingsway has is to have it be a little bit shorter than that. So I'm wondering if you could just talk through a little bit your experience within the Kingsway Search Xcelerator, maybe were there other deals that you looked at, how you ended up coming to this one, and if you can just comment about, you know, any lessons learned in that process as well, for ultimately achieving a good deal. Absolutely. So, just some background, a year into the search, we got pretty far down the line with a fire inspection deal, and we ended up backing out of that deal because it ended up not being what we originally thought, specifically in regards to its recurring revenue profile. We probably could have proceeded with that deal, but we made the decision to be disciplined investors and wait for something that's a better fit. And that's directly related to the advice that we give future searchers, is when you start off to develop a rigid set of acquisition criteria, that makes sense. Sticking to that criteria, and it may be hard in the short run to turn down a lot of opportunities that may not be the best fit, but you'll be glad you waited for that ideal set. And this diligence took 7 months, and that was largely indicative of the diligence requirements, understanding the space and the business. Got it. And can you maybe expand on that a little bit? So how did you come across the business, and how did you eventually decide that this one was the right one for you and get it over the line? Absolutely. So this deal was actually a brokered opportunity. However, you know, almost from the beginning, that relationship transitioned to a direct relationship with the seller CEO. And, from the beginning, worked with the CEO to understand the business. We also conducted a thorough, customer and market diligence, interviewed over 20 industry participants, including cardiologists at hospitals to AI and wearable experts at software and hardware manufacturing companies. We also spoke to current, customers of the business. And yep. Got it. And, and in terms of. Was it a competitive bid process, or was it essentially, you guys in there alone, or how, how did you, how did you work that, or how did that play out? It was a competitive bid, and we believed at the beginning that it was very competitive just in terms of the amount of interest in the business. I think the seller saw an overall fit with Kingsway. Our long-term hold model, combined with our Search Fund model, is ideal for CEOs and founders who may want to transition but still want to maintain the legacy of the business. Got it. That makes a lot of sense. I guess that's the search model in action. Can you maybe then, you know, moving to my second one, I'm sorry, I know there were a couple of add-on questions there. But can you maybe talk about, you know, what the competitive moat is to this business or any advantages that it may have that are important for investors on the outside to kind of understand? You know, what allows this business to be successful and, you know, why aren't there, or maybe there are other companies like this competing in the same space? Absolutely. So, yeah, and just to reiterate, so DDI is the only qualified vendor in this niche, which is cardiac monitoring for those two hospital business models, which are long-term acute care and inpatient rehab. And that competitive moat is comprised, I would say, I would put it into four categories. Number one, established assets at the customer sites in the form of the actual cardiac monitors, and that creates a certain level of stickiness. Number two, I would say the, you know, 10+ year experience and expertise of the company and its processes that have been developed over time. Number three, I would say the switching costs to switch to another vendor, and then four, the market position. They're the clear market leader, and that was very clear when we spoke to current and former customers. Got it. That's really helpful. Thanks for sharing that. And then maybe, can you just share a little bit about your value creation plan for the business? So, you know, like with other acquisitions, my assumption is that, you know, you see some opportunities to grow, that Kingsway is there to invest in the business and, and to maybe build it, you know, further on the, off the, great foundation it already has. It sounds like it's a really nicely growing business. I think in your comments, you were saying that it was a 20%+ grower. But I'm wondering, you know, what opportunities do you see, to really, you know, invest in this business and take it to the next level so that, you know, shareholders can, you know, can expect a decent, a decent return? Maybe another way to phrase it is, you know, where do you see this business in 3 years, in 5 years, and 10 years from now? Absolutely. So just some background on the market opportunity. There's a lot of current pipeline just in current hospital system customers. If all we did was execute on that current requested pipeline from the two largest customers, we would see a 40% revenue growth in the 12 months following the transaction. So, that is a great initial indicator, and past that, DDI is currently in 150 hospitals in the core market. We estimate there's another 450 that are potential customers. So after, you know, we wanna expand from the core, and after addressing the needs of our current customers, we would continue to roll out to the rest of the core market, execute that rollout of new customers that we've identified, and then we'd execute a strategy to more fully develop the sales function to expand. Got it. What, what's the sales function that you need to change, or what are the processes you need to change there? That would just be hiring some dedicated sales staff and account management staff to manage the demand that we're seeing. Got it. And that's not something that's already there within the business? Right now, that's just me. Got it. Okay. And then maybe I'll ask a final question, and then I'll hop off the line, and that's simply, you know, when you look at, you know, the kinda growth prospects for the business and where you can take it, it sounds like hiring a sales force might be important, and it sounds like you have a great pipeline. It also sounds like there aren't really any other companies that do a similar thing, and so I assume that the growth plan is entirely organic, or is this the kind of business where down the line, maybe there would be inorganic opportunities to grow this a little bit quicker? Thank you very much, Peter, and I'll step off after this. That's exactly right. We really feel strongly about the organic opportunity, and we will be open to additional opportunities down the line, but that's very clear that we should start with that. Okay. If there are any additional questions, please press star one on your touch tone phone at this time. Okay, we have a question coming from Michael Desmarais with Baird Associates. Please proceed. Hi, guys. Congratulations again. In your script, you mentioned the fact that a lot of these hospitals do not have monitoring and don't monitor, but they need it for coding. Can you talk about that a little bit more and help us understand the customer need a little bit better? Yes. So the core market for DDI is really comes down to two end customer hospital business models. 60% of DDI's revenue is for inpatient rehab hospitals, and the remaining 40% are for long-term acute care hospitals. They also have a small percentage in surgical centers. For inpatient rehab hospitals, they have not historically provided cardiac monitoring, and so adding outsourced monitoring ensures that they can keep additional patients in beds longer at their facility versus having to transfer them to another facility. So that's important because it ensures continuity of care for the patient, and that leads to better medical outcomes. But it's also a cost reduction for the inpatient rehabs because it's a direct elimination of ambulatory costs to move the patient to and from other hospital businesses. And so the services are looked at as an improvement against ambulatory costs as well. And then for the the second segment, the long-term acute care hospitals, which is 40% of revenue, hospitals are reimbursed per patient by diagnosis, and all of the reimbursement codes for LTACs, 99% of them, require ECG monitoring. So without the monitoring, you're not reimbursed for the code. So for the LTACs, it's both a reimbursement requirement and higher quality of service at lower cost. And then for all customers, and this is an important element of the outsource, cardiac monitoring industry, one of the best, one of the benefits of this is that you're unburdening the hospital staff, the nurses and doctors, so they can focus more on the task at hand. Okay, great. And so the LTACs, I assume that they're doing this already themselves, but they're just gonna outsource it. Is that, is that a wrong assumption, or is that correct? I mean, or else they can't get reimbursed. That's exactly right. They have systems installed at their facility, and they have a staff, sometimes in the form of on-site ECG techs, but oftentimes the nurses are carrying that burden to do the ECG monitoring in addition to their normal load. By outsourcing that, you're unburdening the on-site hospital staff. From the business's experience in the past, have they been receptive to that, to that sales proposition or that value proposition, or is this kind of a new market that, that you're looking at? That both the inpatient rehab and the LTAC hospital markets are over 10 years old. The inpatient rehab, in terms of current customer growth, that's growing at 20%, and the long-term acute care is growing at 100%. Okay, great. Thank you. If there are any remaining questions, please press star one. Okay, we have a question coming from Vishal Mishra from Baird Associates. Please proceed. Yeah, hi. So the organic growth is about 20%, and this is the first time there's a little bit of a capital in the business. Earlier acquisitions were more service-oriented without real capital. So what is the return on invested capital for this? And is 20% growth like next three years, five years, or longer duration, or maybe it's too difficult to say? I will get back to you on that. I don't have that number offhand. There is some minimal capital investment requirement. One thing of note is that those expenses are passed to the customer, so the customer is paying for all of the monitors that they're using. Okay. So a $1 million capital investment, that's that the customer bears that investment. They also are responsible for replacement costs as well. Okay, got it. And is EBITDA the right metric, or EBIT is the more relevant metric for this kind of a business? Could you repeat the question? Is EBITDA, you know, which is the multiple, which is here, or is EBIT the more relevant metric to look at for cash flows from the business? Well, it's a good question. I think, you know, I think I would say EBITDA minus, sort of maintenance CapEx, which is very little, right? The CapEx is actually growth CapEx, and so on sort of the non-growth kind of core business, the EBITDA to free cash flow conversion is very high. So we think EBITDA is a good proxy. I get where you're going. You know, when we do purchase accounting on these things, we create, purchase accounting-related intangibles, which then get amortized, and so that's not actually sort of capital related. And so- Right. You know, EBITDA is probably a better metric than EBIT. Right. Okay, I get that. It is only the depreciation which it becomes the amortization as long as the business is stable, is not a real expense. Is there customer concentration so far? Is it two main customers? In terms of customer concentration, at the system level, the largest system-level customer, the decision-making process happens at the individual hospital level. So customer concentration is not material for that customer. It's approximately 52% of revenue. For the second largest system-level customer, which is approximately 44% of revenue, the corporate decision makers curate an authorized vendor list from which the individual sites select a vendor. We believe that any customer concentration risk in that, for that customer is mitigated by several factors. Number one being that DDI is the only qualified vendor. Second, this customer, this system-level customer, has recently requested DDI roll out to the remainder of their facilities. So DDI is now the sole provider for that business. Second, the financial stability, excuse me, third, the financial stability of that customer. That customer is adding another 15 hospitals this year. All those things taken together, we feel very good about the customer concentration risk. Thank you. Yeah. Yeah, this is Kent. Just to add on, we did spend a lot of time looking at the customer base to sort of validate what Peter just said. And so we do feel like, you know, even though there's a couple large system, we'll call them system-wide clients or customers, the decision-making process to onboard or not onboard is actually made at the individual hospital level. So there is a lot of decentralization in that authority. And so we do feel that this does meet our risk profile in terms of, you know, when we talk about customer concentration risk. Okay, great. Perfect. Thank you. If there are any remaining questions, please press star one. Okay, it looks like we have no further questions in queue. I'd like to turn the floor back to James Carbonara for any questions you may have via email. Great. Thank you, operator. So a number of questions came in. Many of them were answered, so I'll just read off the remaining questions that were not answered. The first one is on historic growth rate. It says DDI has been growing over the last few years. Can you give us any metrics which talk about revenue growth or number of hospitals served growth over the last few years? It's gonna be 20% three-year CAGR, and then the hospital number, in terms of hospital count, that's gonna be directly correlated to that, as it's very similar mix of hospitals, and we're currently servicing 150 hospitals. Great. Thank you very much. Next one, this seems to be about the business model. Can you talk about billing for the services at DDI? Is the service fully reimbursed by Medicare, Medicaid, and private insurance? Do the hospitals think of it as a profit center, or is it a service they need to perform to keep their accreditation? Absolutely. So, you know, for the LTAC, you know, there's two markets for the LTAC. You know, we're not subject to reimbursement risk because this is a critical service that's not going away. We get paid by the hospital, and the hospital does not wait to get reimbursed before being paid. And those hospitals, for 99% of their patients, requires ECG monitoring to get reimbursed. And then for the inpatient rehab facilities, there is no reimbursement tied to those facilities. However, it's a critical service that allows us, as I've discussed, allows those hospitals to keep their patients longer. And then for both business models, it allows them to deliver higher quality cardiac monitoring services at a lower cost. Great. Thank you. The next one: Is the DDI primarily drive their business through rural hospitals, or do more urban hospitals also use the service? Within the core market, DDI has historically had a particular focus in the rural segment. Rural hospitals have a little bit harder time staffing ECG techs, and so it's an even better fit. Great. And the next one was on the location being in Wall, New Jersey. Is this where all the technicians do their monitoring work, or are there other locations? Do you have cardiologists involved and on the payroll as well? Is this location a good one for the business? 100% of all monitoring happens at that singular control center location in Wall. It's strategically located near the New York metro area, so great area to recruit additional ECG staff. All the technicians are certified by nationally recognized organizations, such as the Cardiovascular Credentialing International or CCI, and the Certified Rhythm Analysis Technician credential, CRAT. And that's the frontline staff, and then our senior supervisors also have a master's in science and electrophysiology. And they're in frequent communication with the customers to answer questions, and that's a big part of our value proposition, is our ability to be responsive on their specific questions. Great. And the next one seems to revolve around risk. If the business does not work out, you know, what would be one or two of the likely causes of what went wrong? Well, that's hard to say without knowing what those things are. We've thoroughly diligenced the business. We feel confident in its competitive and industry positioning. You know, as I mentioned, we've interviewed over 20 industry participants in every part of the industry, from cardiologists to hospitals to AI experts, to the targets businesses' actual customers, over seven months. And we feel confident that the business is in a very good position, both in terms of industry and in terms of loyal customer base. Great. And then, the next one was, you know, how did you come to this valuation multiple for the deal? For the valuation multiple, we looked at similar hospital outsourcing, recurring services, revenue businesses. We put forward what we believe to be a fair multiple, and that was accepted by the seller. Great. And the last one, you know, forgive me if this is repetitious. It says, what are the opportunities for profit growth? Sorry, second to last one, I should say. What are the opportunities for profit growth available to this business that might not be apparent on first look? So in profit growth, I think, you know, it's just gonna be organic growth within the core market, and we're gonna have to, you know, continue to staff ECG techs in parallel with that growth. If we continue on our current track of 20% CAGR, given the fact that the, you know, the untapped nature of the market and that we've only, you know, serviced 150 hospitals out of approximately 750, we think there's, you know, significant opportunity for growth. Great. And the last one is: What value add can Peter and/or Kingsway bring to this business that maybe wasn't available to the seller? The seller, Tom Corney, he has built, and his wife, Marissa Corney, have built a great business and a wonderful team. So what I can bring is energy and excitement, focused on growth and supporting that existing team, as well as building out some of those additional functions, sales staff, increased frontline staff. I also have a background in processing quality to ensure that we continue to maintain standards and maybe even enhance those standards. Great. You know, that concludes the questions that came in on email. Operator, I'll throw it back to you to close out the call. Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.