Greetings! 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 anyone should require operator assistance during the conference, please press star zero on your telephone keypad. 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 formation of Vertical Market Solutions, LLC, or VMS, and the acquisition of Systems Products International, or SPI. With me on the call are J.T. Fitzgerald, Chief Executive Officer, Kent Hansen, Chief Financial Officer, and Drew Richard, the incoming CEO of SPI. 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 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, as well as other reports 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. We are pleased to announce today the formation of Vertical Market Solutions and the acquisition of SPI Software. I'm joined on the call today by Kent Hansen, our CFO, and Drew Richard, our most recent Operator-in-Residence-turned-subsidiary CEO. Holding a shareholder call after an acquisition announcement is a new format for us. We thought it would be a timely and informative way to introduce the transaction and answer any questions you might have about the company. We hope it will also serve as a great way for you to meet Drew. SPI, which is based in Miami, is a preferred partner in the development of software products created exclusively to serve the management needs of all types of shared ownership properties. The SPI platform includes a comprehensive set of modules with software solutions to cover the entire vacation ownership enterprise: sales, property management, loan servicing, receivables management, integrations, and mobile applications. As we mentioned in the press release, this is our fourth acquisition in the Kingsway Search Xcelerator program and our first in the vertical market software sector. SPI meets our criteria of a recurring revenue business model with strong margins and low capital intensity within a large and growing industry. We anticipate an immediate positive impact on earnings. Although smaller in scale compared to our typical acquisitions, we are enthusiastic about SPI, our first addition under VMS, considering its impressive history and future potential under Drew's leadership. I'm sure everyone is eager to hear about the financials, so I'll pass it to Kent to cover that portion now and then turn it over to Drew to share some more details about the opportunity. Thanks, J.T. From my financial highlights perspective and rationale, in the trailing twelve months, SPI had $2.6 million in recurring revenue and roughly $300,000 in adjusted EBITDA. Low customer concentration, extremely low churn, and demonstrated resilience through the COVID-19 pandemic and other challenging times add to our excitement about this acquisition. Valuation represents just over 1x ARR and approximately 9x adjusted EBITDA. We expect the high gross margin business model to help enable realization of our growth plans over the medium term. The purchase was paid in cash. Additional working capital and potential growth funding may be achieved through a future credit facility. Now I'll turn it over to Drew for some industry and company details. Drew? Thank you, Kent. The fractional ownership and timeshare markets are growing, projected to continue outpacing GDP by a wide margin. This is driven by growth in high-net-worth individuals, an enduring desire to vacation, and secular trends towards services, simplification, and consumption through experience. SPI has a 45-year history of serving its customer base in this unique industry. The company has an established and knowledgeable team and an excellent product. Our top priority in the near term is to study and formulate a plan for growth. There are many exciting opportunities, but we will be taking a measured approach to execution. I'm thrilled to be joining the SPI team and legacy at this juncture. The market fits our M&A requirements, as it is characterized by fragmentation, and it is anticipated that its growth will surpass GDP expansion in the foreseeable future. SPI boasts promising avenues for expansion through sales and marketing initiatives. Now I'll turn it back to J.T. for closing comments. Thanks, Drew. We view the formation of Vertical Market Solutions and the acquisition of SPI as our next compelling platform within our Search Xcelerator segment. If you'll recall, our journey began with the introduction of our business services platform, initiated by the acquisition of Ravix and further enriched by the addition of C-Suite. Following that, the initiation of our healthcare services platform took place when we welcomed SNS on board. Today marks the commencement of the Vertical Market Solutions platform, or VMS, as we finalize the acquisition of SPI. One aspect of any deal at KSX is that we lose a searcher as they transition into their operating role, in this case, Drew. He now graduates to lead SPI forward in its optimization and growth. However, today, we are also pleased to announce the addition of Myles Mamone to the KSX platform as our newest operator in residence. We're thrilled to welcome Myles to the KSX team. With increased deal flow and an expanding portfolio of KSX companies, having Myles on board to identify our next promising venture is a valuable addition to our already accomplished team of OIRs. Before joining Kingsway, Myles held the position of vice president at Morgan Stanley, overseeing acquisitions and asset management in the merchant banking and real estate investing group. He initiated his career as an air and missile defense officer in the United States Army. Myles holds a JD and an MBA from Northwestern, and a BA in Economics and Classics, also from Northwestern University. We're really excited to welcome Myles aboard. With that, I'll conclude by reiterating that today marks a significant milestone for Kingsway with a new platform in VMS and fourth acquisition in SPI. Also, with the addition of Myles and our current searchers, we look forward to having more to share regarding M&A activity in future calls. We'll move into Q&A now, and if there are any questions afterward, please feel free to reach out to James at Hayden Investor Relations to schedule a call. Operator, please open the phone lines for Q&A. Certainly. 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 would 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. And the first question comes from Michael Demaray with Bard Associates. Please proceed. Hey, guys. Congratulations. Can you expand on the VMS platform and, you know, what you envision for it? Yeah, great question. You know, when Drew came on board, and I'll let Drew speak to this a little bit, too, as a chance to get his thoughts. But when Drew came on board, he was very focused on vertical market software as a great place to search for a great acquisition, and spent the last 12 months doing just that and with the culmination of this acquisition. And so, you know, we feel like we'll use this as a beachhead into vertical market software. We obviously like the attributes of those businesses and hope to, with the learning and getting up the curve of this acquisition, plant the seed for doing future acquisitions of similar type companies. Drew, if you have anything to add? Yeah. Thanks, J.T. I would add, there's tens of thousands of small software companies out there, and many of these companies provide mission-critical products to their customers in their niche markets. One thing all those businesses have in common, regardless of their market, is great unit economics, high gross margins. In addition, many of them are also founder-led, which provides a great fit for our Search Xcelerator platform to provide a succession alternative with a partner who's focused on the long term, like us. So overall, we think there's quite a bit of opportunity out there, and, you know, we look forward to just exploring that potential over time. Great. Thank you. The next question comes from Adam Patinkin with David Capital. Please proceed. Hey, guys. Congratulations on acquisition number four. It's really exciting. Thanks, Adam. Thanks, Adam. All right. I have a few questions, and they are unrelated to one another, so let me jump in. So the first one, I just want to follow up on the question from Michael. Can you talk about, and I'm sorry if you guys haven't fully formulated the strategy yet, but how do you envision VMS working? Is this something where Drew is running it and other searchers could make deals as well, and that they would end up reporting to Drew, and so you kind of see him as leading the unit? Or is this something where Drew will run this business for a while, and then maybe make additional acquisitions of other businesses to kind of slot alongside SPI? I guess it was just interesting that you formed its own kind of discrete unit underneath the Search Xcelerator to focus on vertical software businesses, and I'm just wondering what your plan is from an org chart perspective for how this entity is gonna be run and managed. Yeah, it's a great question, Adam. You know, I think a lot of different ways to answer that. I think that we are broadly open to additional acquisition in vertical Market Software, regardless of OIR. But the point of building and creating VMS with the acquisition of SPI is that it is a platform for Drew to get in, learn SPI, and then evaluate and hopefully do more software acquisitions down the road as sort of like well. And so we'll be flexible, but SPI is a small company, and the goal would be to grow organically and via acquisition under Drew, is how we thought about it. ... Got it. Okay, that's helpful. Maybe then a couple questions for Drew. So first, you know, Drew, nice to meet you. Congratulations. Can you maybe share a little bit about how you found SPI and whether it was a marketed deal or not? Just a little bit of color about how you ended up with SPI. Absolutely, and thanks, Adam. Nice, nice to meet you as well. So, this was a proprietarily sourced deal, came largely through, kind of relationships and, and networking. We first connected with the seller early this year, probably around, seven months ago, so a little bit of a long period of which isn't uncommon necessarily, of, you know, mutually assessing one another, making sure it's the right fit. In particular, making sure that, you know, I and Kingsway were the right fit for kinda her legacy plan for the founder's business. But, yeah, that, that's what I would say. It was not marketed, and so that was, you know, we were fortunate there to come across it. Got it. And then, you know, kind of a second question on that: so then, you know, as you look at the company, maybe can you speak to why you think, you know, your skill set or coming in to run this business, why do you think this business can be better in a year or two versus where it is today? Maybe another way to ask the question is, what are the steps that you're thinking of taking to help improve this business? Yeah, absolutely. So, you know, very fortunate to have had diverse leadership opportunities, from pretty early on in my career. I started off in the armed services, continued on through the corporate world, and so I've been exposed to, you know, lots of different settings with, industries and roles and companies. I've been fortunate there. You know, I think if you look at kind of any lower middle market type of business, and in particular with software, you know, you could have successful operators that are technicians. You could also have successful operators that are industry specialists, but, eventually, with kind of either of those options, the way we look at it, you, you'll need an integrator or a person who can really kind of bring the pieces together. Often that can be someone who is not an industry or technical expert. So, you know, the way we're looking at this is, you know, come in and, you know, really take our time to learn and build our credibility in the industry. And then from there, kind of bring in what we've learned from, you know, working in other contexts to make this company better. Got it. That makes sense. So then, I guess my last question is kind of building on that a little bit. So during your script or your intro to the business, you mentioned that you saw a lot of growth opportunities, and I'm wondering if you could put a little bit more meat on the bone there in terms of what. Just helping us understand, like, what are the growth opportunities that you see? Is it product innovation? Is it more properties? Is it deeper penetration with existing properties or upselling them? Is it taking pricing? Is it something else? Like, what are the growth opportunities, or at least, you know, what are the two or three biggest growth opportunities you see to maybe to maybe improve this business and invest in it and take it to the next level? Yeah, certainly. So I think if you step back and just kind of look at the key characteristics of, you know, really what we liked about SPI as a target and then an acquisition, very low customer churn and, you know, just a strong demonstrated resilience of profitability. It's truly a mission-critical product. And, you know, you made the question, how does this small company, you know, fulfill such a value add in this industry? If we step back further and look at the timeshare industry, it's a unique subset of the broader travel and hospitality industry. So, you know, that kind of gets at a characteristic of what we like about vertical market software, not just for this acquisition, but for potential future acquisitions. You know, you're looking at a small corner that is underserved by kind of the broader enterprise-grade solutions. Typically, you know, there's some unique characteristics, and in the timeshare world, you know, that's no different. You know, I think we looked first to serving our existing customers, you know, getting to know them. It's an experienced team at SPI. Many of the senior managers have been there for decades, and, you know, so the idea is to just really make sure we're understanding and leveraging those relationships to meet the current customers. Certainly low-hanging fruit could be price. That would be something we'd have to explore, but, I think kind of the more exciting growth opportunities will come, you know, hopefully in a month or two after we can really sink our teeth in and learn more. Got it. And is... Is the idea that this software only serves the timeshare industry, or is this the kind of thing that can serve Airbnb and Vrbo or other verticals alongside that? Or is it really a timeshare-specific solution? It's a great question. That exact question is something, you know, we're considering to see kind of where, you know, where other vertical markets would be close fits, if not exact fits. But that's just something we're gonna have to really assess. The idea isn't to quickly start building new products to address new markets, from, you know, from day one. But certainly if there are characteristics where we could see those types of synergy and overlap, then that would be something we'd look at. ... Got it. Okay, that makes a lot of sense. So basically, you're coming in, gonna learn the business. You think that there's a lot of different opportunities, and you're just gonna work it through and figure out what the best ones are, and it'll probably be a number of those different levers that you pull. But you see a lot of different places you can take this, including potentially to expand it beyond the timeshare into something with a larger TAM? Yes, I think that's a fair summary. Yeah- Okay. Adam, this is J.T. I'll just sort of pile on here. That's a great summary. As you know, every time we do one of these acquisitions, we go into it with preformed theses about what we can do, but recognizing that it's a new CEO in a new company in a new industry. So the marching orders for the first, at least 100 days, are get in, meet with your employees, and learn the business from them. They're the ones that built it. Get out and talk to your customers. Find out what we're doing great, what we could be doing better, and then work on developing a plan to go and execute that. And so hard from, you know, starting at time zero to articulate any growth thesis because we're really here to learn. We buy a very great business with a long, stable history of revenues and profitability. Get in, learn the business, and then formulate your strategy to go execute. Got it. That makes a lot of sense. I appreciate it, J.T. Really nice to meet you, Drew. I'll hop off so that other questioners can participate as well. Thanks so much. Once again, if you have a question or a comment, please indicate so by pressing star one. We have a follow-up question coming from Michael Demaray with Bard Associates. Please proceed. It's just gonna be me and Adam for, like, 40 minutes asking questions, I think. Drew, nice to meet you. I, I do wanna follow up. What—obviously, in your search, you, you looked at a lot of companies. What made SPI special, as a business, and why, why do customers choose SPI versus competitors? And then who are, who are the competitors for SPI? Yeah, great, great question. I think I'll, you know, maybe take it in reverse order. It's a highly fragmented and kind of special market, which, you know, the competitors in general are folks you haven't necessarily heard of. Kind of further to my comments earlier, you know, one of the things that makes this company special, you know, like other companies in vertical software, is that the kind of out-of-the-box, broader industry solution isn't necessarily the best solution for the subset that the vertical market company is addressing. So, you know, an example of that in this context would be hotel software. Well, you know, you might ask, "Well, why isn't just a, you know, major hotel software player that does reservation software gonna move in?" And in general, we just - we haven't seen that. It generally is an inferior product. And I think if you step back and you just kind of abstract to the kind of the key characteristics as to why, it's because you have this, you know, this small customer base that, you know, if you, as a company, are willing to go in and be, you know, really dedicated and learn those customer needs and then, you know, do your best to meet those needs, then, you know, you can establish an advantage. The other side of that, and this has come up in the call as well, is that the TAMs are often low to medium in these, you know, in these universes. So a bit of a trade-off there, but I think the key that I'm trying to get at is just kind of the hyper-focus on understanding and serving a small customer base can make you very successful. At least that's how we're thinking about it. Great. And- And then just to follow up there, is the... Oh, oh, I'm sorry. Continue, if you have more to say. Oh, no, I was just gonna, I forgot the first part of your question. I was gonna say, what made it special? You know, it sounds like you kind of answered that in sort of the customization for customer needs. Yeah. I guess I was gonna ask, is Vacasa a competitor or no? Probably not directly. I don't think that I would—I probably wouldn't consider anyone a true head-to-head competitor. There's kind of some differentiating factors among all of them, and it kind of gets into the modules that are offered and the different tools for some of the different key functions that serve this specific companies in this specific industry. Okay, thank you. Okay, the next question comes from Douglas Ott with Andvari Associates. Please proceed. Hi, everyone. Can you hear me? Yeah. Hi, Doug. Yeah. Hi, Doug. This is a question for Drew. And Drew, it's nice to meet you, and congratulations on the acquisition, and I wish you the best of luck on hopefully not a terribly challenging row to hoe. But, my question is, you know, vertical market software is not a category that's terribly new to investors. Many people have seen the success of Constellation Software, who has acquired over 1,000 vertical market software companies. And my general question is: Why didn't Constellation acquire SPI, and what makes you think you are gonna do a better job with managing SPI than Constellation? ... Yeah, great, great question. Constellation's obviously been, you know, they're the elephant in the room, and they've been incredibly successful in, in this market. I think, kind of getting back to the proprietary nature of this deal, and, you know, this is, this is something we've observed at the accelerator level in, you know, other proprietary processes as well. But the relationship dynamic is really important. But in particular, with many of these founder-led businesses, where they may be 4.5-decade-old, they've been in the family for a long time, they've been kind of run as family companies, and the match for not only the capital, but the operator who is gonna most closely be liaising with or, you know, moving in and helping the business grow, that relationship fit is really important. So, you know, the quick analogy I liken it to is like buying a house. You know, some people may just say, "I wanna sell my house for the absolute highest price possible, and, you know, I don't really care if the people come in and ruin it." And other people say, "Well, we've lived in this house a long time. We have memories here, and maybe we will sell it to this nice young family who's gonna take care of it and, you know, get the joy out of it that we envision." So, you know, we think businesses are the same way, and, I mean, this is purely from kind of the deal flow and sourcing perspective. You know, we think we can use that, to an advantage for sellers with which that type of philosophy might resonate. And, and in terms of, in terms of operating, look, we have a really unique structure at KFS, as, you know, you're, you're aware. We've brought in great talent. We're growing. We're looking at doing more deals in the future, and, you know, really, as we kind of grow and build our own competency, you know, one thing that, you know, I, I love about Kingsway and this opportunity is to have the, you know, the scaffolding and, and resources of a larger corporate parent to, you know, to support us as, as we move into these roles. So, I'm, I'm pretty optimistic kind of we're building something special. Well, good. Drew, I've read stories, you know, in the past decade or 15 years about home buyers, home searchers, writing letters to the, you know, homeowner that they from which they wanna buy the home, and occasionally that works out. But, I'm a little curious on what your thoughts are on what about you personally or Kingsway in general do you think struck the, you know, the founding family or the family members of this, of SPI and why they, why they... You know, what characteristics about you individually and Kingsway generally struck them as attractive? That'd be a great question for them. I know. But- That's probably an unfair question. I'm, I'm sorry to ask that. I mean, I guess it could be- I understand what you're saying. Yeah. I mean, we advertise the legacy preservation and, you know, I would say that we mean it, right? It's not just a talking point for us. Yeah. All right. Well, my next question is, I was wondering if you could get toward, you know, address kind of the level of, you know, concentration or fragmentation within this kind of niche industry as a whole. You know, how many other competitors are there in this market? And, you know, when it comes to SPI specifically, can you share with us any figures on the level of customer concentration you have? Yeah. So we don't have any customer concentration issues. I would say customer concentration is low. If you look at kind of the end market, you know, there are some big name competitors in the timeshare industry, right? Most people have heard of Marriott Vacation Club, Hilton Grand Vacations- Yep ... and the like. But there's a whole other kind of universe on the other end of the spectrum that hasn't been consolidated, and, you know, that could always change. But certainly, you know, you can also just look at real estate in general and say, well, you know, there's a lot of different real estate sitting around in different localities that will probably never be consolidated to a national or a global operator. And, you know, that's a little bit the way to look at timeshares. I mean, there's, you know, multiple operators out there that maybe have one resort, maybe they have three, maybe they have five, you know, maybe they're even bigger, but just not as big as Marriott, right? So, there's quite a bit of, you know, different types of customers when we look at serving the market. And, SPI is actually positioned to serve, you know, all those different customer bases. So that's, you know, that's a real positive. But, you know, if we look kind of stepping back and looking at the industry consolidation trend, you know, that's something we could take advantage of probably in multiple ways, depending on how that continues to unfold or doesn't. Right. Right. And can you just give a... I mean, with the big public timeshare companies that are out there currently, you know, what is the rough% of the total market that they have? I don't want to quote the exact numbers. I think, you know, we probably characterize it as being in kind of the -- We'd probably consider it in, like, phase three of, like, an industry consolidation lifecycle, if we had to put kind of a number estimate on it. All right. All right. That's good. That's all the questions I had. Thank you very much. Appreciate it, Doug. We currently have no further questions from the phone lines. I'd like to turn the floor back to James Carbonara for any questions you may have via email. ... Yes. Thank you, operator. I think most were answered. There were maybe three remaining and maybe a little repetitiveness, but I'll ask them. Why are you attracted to the vertical software industry space? If there are any points you wanted to reiterate there. Yeah, look, I think we've said it in a couple of different ways, but when you, you know, small niche, mission, mission-critical software businesses that have kind of sticky customer base, high, you know, high percentage of recurring revenue, very low customer churn and, and generally high margin, those, those are really nice unit- Got it. And then, you know, within the vertical software sector, are there any particular areas which are most attractive? Well, I think we're sort of agnostic to sector. There are so many small niches with critical market, you know, so many different vertical markets that these companies can go after. So we're probably focused on sort of business fundamentals and unit economics first, and then subsector or in-industry second. Okay. And then lastly, regarding this acquisition, which two or three KPIs should investors focus on to determine if the business is achieving its potential and meeting its financial goals? Yeah, look, I mean, I think, you know, annual recurring revenue and, and ARR growth, right, would be an important one. Obviously, gross and net revenue churn would be important. And then, you know, gross and, and net margin, you know, gross margin and EBITDA and EBITDA margin, would be kind of financial metrics that we're focused on. You know, I'm sure Drew has a bunch of customer-facing metrics that he'll be focused on to make sure that we've got quality first and delighting our customers. That tends to spill through into the financial metrics. Great. That was the last one from the email. Okay, I guess that no further questions. I guess that concludes our call. Thank you all for joining. Fun format. We hope to do this with each of our future acquisitions, get in front of the types of things that that we would anticipate from you, our shareholders and prospective investors, and then give you the opportunity to meet and engage and, and interact with with our OIR turned CEO, Drew. So really engaging, great questions, and appreciate your time. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.