Q4 2019 Earnings Call
[music].
Welcome to the Boyd Group services Inc. fourth quarter 2019 results conference call listeners I reminded that certain matters discussed in todays conference call or answers that may be given to questions asked.
Could constitute forward looking.
Statements that are subject to risks and uncertainties relating to boyd's future financial purpose. This performance.
<unk> results to differ materially from these those anticipated in these forward looking statements the risk factors that are.
Affect results.
That are detailed in <unk> annual information form and other periodic findings in and registration statement.
You can access these documents at Cedars database sound at Cedar Dot Com.
To remind everyone that this conference call is being recorded today Wednesday March 18th 2020, I would now like to introduce Mr., Tim O'shea, President and Chief Executive Officer of the Board Group Surfaces, Inc. Please go ahead Mr. all day.
Thank you operator, good morning, everyone and thank you for joining us on todays call, especially given the turbulent times associated with coal bed 19, which I'll be commenting on later in the call.
On the call with me today, our Pat Pat the Patty our executive Vice President and Chief Financial Officer brought full book, our executive Chair.
On January 2nd 2020, I was appointed President and CEO avoid group services Inc. and concurrent with this change rock moved into the role of executive Chair. Therefore, it. This is my first opportunity to lead our quarterly call.
Aside from the cobot 19 issues transitions going very well and as planned rock and I continue to work well together and brought continues to provide me with a valuable support, especially during these challenging times.
On January 2nd 2020, we completed the conversion avoid group income fund to a corporate form reporting as Boyd group services like effective January one twentytwenty.
The reasons for and benefit from this conversion include the removal of the restriction on non Canadian ownership as well as adopting a public company structure more typical more easily understood and therefore more accepted by global investors and the capital markets.
This was an important change it does not impact or change the underlying business or operations aboard.
We released our 2019 fourth quarter and your end results before market open today, you can access our news release as well as our complete financial statements and management discussion and analysis.
Our website at Www Dot Boyd Green Dot com.
Our news release financial statements and Mdna have also been filed on SEDAR. This morning.
On today's call, we will discuss the financial results for the three month period and the year ended December 31st 2019, and then provide a general business update including commenting on our coal bed 19 plans. We will then open the call for questions.
[noise] overall, we're pleased with our results in 2009 team during the past year, we saw a meaningful growth in locations sales same store sales adjusted EBITDA and adjusted net earnings.
We added a record 108 locations and entered three New States, California, New York and South Carolina further expanding our market presence will also enhancing our ability to grow and these new geographies.
This year are built on our multi year track record of profitable growth validated by being named in September to the inaugural TSX 30.
Flagship program, recognizing the top 30, performing TSX Sox over a three year period based on dividend adjusted share price appreciation in fact, Boyd has either been the best or the second best performing tenure stock on the TSX for five consecutive years.
At the beginning of 2019, we adopted the new lease standard I, FRS 16, which resulted in the recognition of right abuse assets and the amount of 452.9 billion and lease liabilities and the amount of 480 million on January 1st of 2019.
The adoption of this new standard impacted certain financial metrics with a decrease in operating expenses and increases in depreciation and finance costs.
During 2019, we chose to make adjustments for comparative purposes, and disclosing these metrics whoever we will no longer be making such adjustments beginning with the first quarter 2020.
Our adjusted EBITDA and adjusted net earnings going forward will no longer a jumped out the impacts of I up our S 16.
Also beginning on January one 2020 as part of our conversion to a corporate board, we will no longer be reporting distributable cash metrics and we have moved from a monthly distribution to a quarterly dividend. The first such dividend having been declared yesterday March 17 2020.
Looking at our results for 2019, our total sales were 2.3 billion, a 22.5% increase when compared to 28 team.
This reflects 326.9 billion contribution from 175 new locations.
Our same store sales, excluding foreign exchange increased by 3.3% in 2019.
Foreign exchange increased sales by 38.8 billion due to the translation of same store sales at a higher U.S. dollar exchange rate.
As previously commented on during our second and third quarter earnings reporting will demand for services continued to be healthy in most of our markets 2019 did present, a number of challenges, particularly in the second half of the year, including continuing technician capacity constraints combined with strong.
Hubs, the challenges of vacation and softness in some markets.
Same store sales declined in Canada due to a combination of economic challenges, Melbourne technician and technician capacity constraints and other Canadian markets.
Despite these challenges we were able to report meaningful same store sales growth that contributed to double digit increases in sales and adjusted EBITDA compared to 2018.
Gross margin was 45.4% in 2019 compared to 45.2% achieved in 2018.
The slight gross margin percentage increase is primarily due to increased the ERP pricing as well as improved parts and labor margins, partially offset by a higher mix of parts sales in relation to labor.
Operating expenses for 2019 were 716.6 million or 31.4% of sales compared with 35.9% in 2018.
Operating expenses for the year were significantly impacted by the adoption of IRS 16, which removed 104.3 million a property lease expense from our operating expenses.
If we normalize for the adoption of IRS 16 for comparative purposes.
Operating expenses would have been 820.9 billion or 36% of sales.
Adjusted EBITDA or EBITDA adjusted for better fair value adjustments can financial instruments cost related to acquisitions and transactions and the impact could be adoption of IRS 16 was 215.6 billion an increase of 24.3% over 2018.
Adjusted EBITDA growth was primarily due to contributions from no new locations and same store sales growth.
Adjusted EBITDA margin improved 14 basis points from 9.30% to 9.44% in 2019.
As I've already stated for 2019 reporting we've chosen to adjust out the impact to buy up our 16 and our reporting per adjusted EBITDA for comparative purposes. Beginning in Q1, 2020, we will no longer be adjusting out the impact to buy up our a 16.
Have we chosen to exclude the impact by our car 16 been calculated adjusted EBITDA.
Adjusted EBITDA would have been 319.9 million in 2019 or 14% of sales.
Net earnings for 2019 were 64.1 billion compared to 77.6 million in 2018 impacting net earnings in both the current and prior years was the recording a fair value adjustments for exchangeable shares unit options and the non controlling interest to put up.
And as well as the recording of acquisition and transaction costs.
The net earnings of <unk> in 2013 was also negatively impacted by the adoption of higher 16, which reduced net earnings by $4.5 million net of tax or 23 cents per unit.
Excluding these impacts adjusted net earnings for 2018 was 100.5 million or $5.06 per unit compared with adjusted net earnings of 85.6 million or $4.35 per unit in the prior year.
The increase in adjusted net earnings as a result of contributions of new location growth and same store sales growth.
Adjusted net earnings was also impacted by increased finance costs on additional borrowing under our credit facility to fund acquisitions.
Again, you will note we've chosen to adjust out the impact of IR first 16 and reporting our adjusted net earnings for comparative purposes.
Although fair gel fair value adjustments continue to impact that earnings.
Their effect will diminish significantly as a result at the corporate conversion, which will eliminate the fair value adjustment for exchangeable class a shares as well as all unit options, which has now been invested and settled prior to the end of 2019.
In 2019, we generated 141 million in adjusted distributable cash compared to 154 million generated in 2018.
We paid distributions and dividends of 10 point by 9 million, resulting in a payout ratio of 7.7% compared to a payout ratio of 6.8% in 2018.
Our approach to distributions has been to maintain a conservative payout ratio to provide returns for unitholders will preserving capacity to act on growth opportunities based on her continue to grow the strength of and confidence in our business, we increased distributions by 2.2% to 55.2 cents per.
Unit on an annualized basis effective in November of 2018. This was the 12 consecutive year has increased distributions to unit holders.
Now moving onto our Q4 results.
For the three month period ended December 30, Onest 2019, we reported sales of 586 million an increase of 18.3% over the same period of the prior year driven by acquisition growth.
During the fourth quarter 2019 same store sales declined to 10 civil point, primarily due to economic challenges.
In Alberta, and technician capacity constraints and other markets along with continuing technician capacity constraints in many U.S. markets.
Gross margin increased to 45% of sales from 44.3% of sales in the fourth quarter of 2018.
Gross margin percentage increase is due to improved parts and labor margins.
A higher mix of retail glass sales.
As already noted operating expenses were impacted by the adoption of the new leasing standard removing this impact for comparative purposes operating expenses were 35.4% of sales as compared to 34.7% in 2018.
Adjusted EBITDA was 56.4 million compared with 47.6 million when the impacted by a per 16 is removed from the 2019 operating results for comparative purposes, or 84.1 million out a post I have far as 16 basis.
Net earnings were 14.3 million in Q4 compared to 29.9 billion in the same period prior year with the decrease driven by fair value adjustments, primarily due to an increase in our unit price.
Removing the impact of fair value adjustments acquisition and transaction costs net of tax and the impact of IHOP Rs 16 adoption net of tax adjusted net earnings per unit increased to $1.25 cents per unit.
From $1.17 cents per unit in Q4 of 18, a 6.8% increase.
While we experienced a small same store sales declined in Q4. It was primarily with the result of same store sales declines in Canada due to a combination of economic challenges in Alberta, and technician capacity constraints and other Canadian markets, along with the continuing constraints in many us markets.
Prior to the more recent disruption of coal bed 19, we were forecasting modest same stores sales growth in both Canada and the us due to a combination of mild winter weather in some northern markets and technician capacity constraints in markets, where demand was strong.
We are addressing the technician capacity challenges through continued deployment of them and execution of previously disclosed initiatives such as standard standardized recruitment processes and new hire onboarding and orientation as well is continued investment and arc technician development program, we remain up to.
Domestic that these programs will have a positive impact on our technician capacity as the year progresses.
At the ended the year, we had total debt net of cash of 893.2 million compared to 232.1 billion at the end of 2018.
Total debt increased significantly in 2019 under the new IRS 16 lease standard which resulted in recording additional lease liabilities of 488 million on January Onest of 2019.
Normalizing for the impact of this new standard total debt net of cash would have been 379.8 billion with the increase over December 31st of 2018 being the result of 2019 acquisition activity.
We therefore continue to have a very strong balance sheet with conservative leverage at the end of 2019 of approximately 1.8 times adjusted EBITDA after removing the impacts of IHOP Rs 16.
As we announced this morning, we have increased and extended our revolving credit facility. The Usfive hundred 50 million with an accordion feature which can increase to fill those facility to a maximum of 825 million.
Accompanied by the addition of a new seven year term loan a the amount of 125 million maturing in March of 2020 by March of 2027, respectively.
With these facilities, we now have over 800 million of dry powder available in cash and existing credit facilities.
Financial flexibility and growth.
No I would like to discuss coal bed 19.
Worldwide, we are all adjusting and adapting to daily changes as result of the coal bed 19 pandemic.
Well the impact on our business. Thus far has now become material this could change quickly.
The outbreak of a contagious illness, such as can impact operations, including staffing and the volume at pace and pace at which collision repair shops can fix damage vehicles and may lead to temporary closure facilities.
The pandemic could also result in decreased demand for services as well as interruptions to supply chain, including temporary closure of supplier facilities.
Over the past few days, we've noted a weakening demand, possibly from customers deferring repairs to avoid exposure and the result of reduced miles driven and less road congestion has fewer people travel to schools offices sporting and other public events in places.
Given this high level of uncertainties surrounding called their 19 impacts were in the process of making proactive changes and contingency plans relating to the current environment and we will continue to work to address quoted 19 challenges as they evolve so as to minimize the risk impact on our employees customers and sure.
Holders, we've taken specific steps to protect the safety of our team members and our customers.
Fortunately, our conservative financial strategy positions us with the strong balance sheet implied financial flexibility that has been further enhanced through the increased an extended credit facility previously noted.
Over and above our financial flexibility from our strong balance sheet and expanded and enhanced credit facilities.
We are taking additional steps to preserve and enhanced financial flexibility.
Long term the company will continue to pursue pursue accretive growth strategy through a combination of organic growth and as well as acquisitions and new store development.
Our immediate focus is on preserving our financial facility.
Flexibility as we deal with the uncertain impacts of coal dead 19.
We will therefore be taken a temporary pause on closing and funding acquisitions that we have greater clarity and conditions that will allow our step to safely integrate acquired businesses.
We're also going to be very careful about near term capital expenditures.
Subject to adjustments the baby, maybe necessary to preserve financial flexibility due to the coal bed 19 pandemic for 2020, the company plans to make capital expenditures, including those related to acquisition and development, excluding those related to the acquisition and development of new locations within the range of one point.
6% to 1.8% of sales.
In addition to normal capital expenditures the company plans to invest $5 billion in led lighting in order to reduce energy consumption and enhance the shop work environment. This investment will not only provided in Panama, environmental and social benefits, but also achieve accretive returns on invested capital.
Additionally, the company plans to expand its while operating way practices.
To incorporate business processes to corporate business processes.
The related technology and process efficiency project would result in a $9 million to $10 million investment and would also be expected to streamline various processes as well as well as generate economic returns. After the project is fully implemented. Although these are our plans, which we believe to be good for our business we will.
Also pause on these planned investments until there is greater clarity on the impact of Cobot 19.
Voice practice of prudent financial management positions the company Favourably to deal with the uncertain environment.
In summary, and in closing well our immediate focus is on preserving financial flexibility to deal with the uncertain aspects of coal that 19.
Industry dynamics continue to drive consolidation that is favorable to our business model long term. The company will continue to pursue accretive growth through a combination of organic growth as well as acquisitions and new store development as a means to enhance shareholder value.
With that I would now like to open the call to questions. Operator at this time, if you'd like to asked a question over the phone lines. Please press Star then one on your telephone keypad will now pause for a moment to compile that you Monday roster.
Your first question comes from line of David Neumann update.
Line is open.
Good morning, David.
Oriented.
Grange times, we're living in.
Just first question is going to be related to activity levels. I know you count the crystal ball for sure.
Not to do any of us, but more along the lines.
Your cost structure on fixed versus variable and any cost that you can lay out if your activity levels.
Diminish.
Pretty significantly here as people arent driving et cetera. So anything that you can do to lay up costs and meeting this kind of give us a sense of the.
The nature of the the labor relationships and if they're at home are you paying them or things like that.
Well first of all we have not closed any facilities at this point in time, nor have we been directly impacted core of our team members been impacted by.
Quoted 19, so we're operating generally as normal we have affective just today reduced our standard operating hours to Monday through Friday to five PM from more extended hours, including Saturday's previously.
That will help us deal with both the.
Likely short term decline in business and to more effectively manage and provide flexibility to our teams.
Our workforce is largely commission based.
So our variable expenses can go down.
Fairly meaningfully.
But obviously, we've got to consider all factors, including the long term relationship in the importance our employees have on our business overtime.
Okay.
Just maybe Tim just looking at.
Mitigants here risk Mitigant overall.
I'm thinking you've got 700 centers, you've got great geographic separations, and I would assume on the shop floor or that you thought social distancing. So operationally how are you guys handling I guess the potential impacts.
Well, we've taken a number of steps many of the following government guidelines and government government advice.
First of all a couple of weeks ago, we cancelled all non essential travel so none of our team members are traveling and for the most part of our operating team leadership is visiting store to store right now in an effort to make sure that we don't do anything the bye.
Spread cobot 19.
Weve shared and educated our staff on the CDC guidelines and specific practices that we have asked them to take to keep our work environment safe, We're obviously practicing social distancing within our shops, our shops tend to be fairly large would not that many people. So that's not an overly.
Significant challenges challenge, we've set up a team that meets twice a day right now to evaluate the environment and provide communications and advice out to the field.
And we've got a number of other protocols set up to respond in the event that we have more impact from it so I feel like to the to the extent that accompany can be prepared to deal. This deal with this I feel as if we're pretty well prepared.
But time will tell us unfold.
Yes, and your balance sheet in terrific shape.
Just last question ill hand over the line.
If you're looking at the sort of insurance relationships that you have today.
The insurers have they had the stuff on I guess some of the criteria that they fall and things like cycle times and things like that I cared they giving you a bit of the break.
In the event it takes.
Longer time to actually get a vehicle fixed.
Now I'd say the conversations we've been having with our clients have enough focused on metrics such as said, it's more our ability to continue to service their customers and do the right thing and have a safe environment. So.
To date, we've had no clients expressed concerns that it might take a couple of days longer to picks cars I think really everybody's pretty focused on a safe work environment and taking care of customers right now okay. So just to reiterate than mid day wont.
They won't hold you to get criteria under some of the performance based agreements.
No I Didnt say that I think the we haven't even had those discussions with them.
And we probably wont have those discussions we really haven't seen an impact yet.
I suppose if were impacted we could consider doing that but our focus right. Now is really on taking care of our team members and our customers and operating as well as we can.
Excellent Thanks, gentlemen, Stacy.
Thank you thanks, Jamie.
Your next question comes from line of Michael to May still shipping line is open.
Good morning, Mike.
Hey, going gentlemen, pretty much.
So just given the prevalence of private equity players and the collision repair business and there.
Higher leverage and as well as a last fall financed mom and Pops I mean, what are your overall thoughts on the ability.
Of the industry to withstand.
Short term economic shock.
I think thats, it's difficult for us to say I will say that were comforted by our balance sheet at our financial position and.
That's probably all I would say at it.
I guess further to that many of the single shops that we've spoken to in that we've acquired over the years have very little leverage off and on their own properties outright.
But this this situation is going to put a strain on.
Really.
Almost all players probably all players in the industry.
Well, Michael if you look at that number two three if look at sort of the big plans that old probably to fuel and that all highly levered and deleverage radius listening from four to seven and half time. So certainly it's going to put the strain on the balance sheet.
Asked was that a financial condition, so beyond that it's very difficult to handicap because with this puts us.
How they're going to act are they going into more capital. During these uncertain times or not he has got a big white card.
No. That's that's helpful color I mean, presumably.
However, the impact.
It comes out stronger on the other side, but absolutely yes.
Yes, yes, they will position compared to the competition okay.
Just changing topics entirely here, maybe I want to drill down on a quarter, specifically any particular Albert I mean, no 25 in your disclosures.
You can calculate the cadence sales were down 5% Q4.
Her to accounts for approximately 10% and locations in that country. So I'm just wondering how much of those declines were contained specifically to Alberta.
And as a follow up I mean, particularly in light of the lower oil prices, which was at 2020 event I mean.
How should we think about Canada relative to the gas for for 2020.
We really are breaking that out market by market, but.
I think that Alberta has been under significant economic pressure really for some time and its worsened and the decrease in oil prices are likely to help that but the it was really a combination of soft economy in some areas and technician constraints and other areas.
Okay.
Okay, and then maybe just one last question I mean FX.
Thats, presumably a kind to be nice tailwind for you guys are leases and offset I'm just wondering for as it relates to the U.S., Canada translation I mean is that all translation or there is there some transactional benefits as well I mean outside your corporate costs.
Yes.
No I think it's mostly across a whole because our.
Revenues and costs are denominated in.
In the respective dollars.
In the USA, particularly pimples under that having us that's where the cost. So so we havent natural hedge bins 10, so it's mostly conversational, but the other point you made is a true like right now the Canadian dollar it's $1.40 dollars 41, so to the Tech center will have a tailwind compared to the first quadrant for last year.
Okay no. Thanks, very much guys appreciate it.
Thanks, Michael Thanks.
Your next question comes from the line of.
Ahmad of Laurentian Bank Securities. Your line is open.
Hey, good morning, guys.
I'm sorry.
Just first question.
With regards to the drop off in demand that you mentioned over the last couple against what you feel to quantify the magnitude of that.
We're not prepared to do that right now it's we're looking at a very very small amounts of data.
But we have seen a decrease in demand in the short term, we don't know how long that will be sustained or if it's even.
A real trend, it's just too short term to know.
Okay, that's fair.
As I think just on acquisitions.
With regard to the POZEN acquisitions does that mean that you guys.
Just stop closing in funding the acquisitions Oracle to also be a pause in sourcing and having discussions.
With the national acquire queries that.
That's a great question. Thank you.
Our intent is to continue to pursue acquisitions with our business development team as we have.
And once we have greater clarity on the impact of coal bed 19.
And we know we can get team members safely into markets for integration then we'll be prepared to move forward again.
Theres just enough uncertainty right now on both fronts that were pausing for the time being but we're we're going to continue to build relationships and prepare ourselves too.
To move forward again with growth.
The first and I guess ill say.
Sorry, I missed the difficult when it's a difficult to handicap the short term impact of coal with 19 on acquisitions.
Long term pieces for growth remains intact, if any for them, but does situation. So.
Please keep that in my take a longer term you.
Yeah, absolutely and I imagine.
Perhaps the pricing might come down for some of the smaller shops the might have some liquidity concerns.
Given your strong balance sheet those might be more readily available I imagine.
Yes, it could be.
Challenges.
Capital available for financing acquisitions from others. So.
Okay Perfect and last question for me have you seen any weakness in your supply chain for parts thus far.
And just to add to that.
In terms of your inventory levels for parts.
How much over one way do you think you have before you start to Ryan congratulations.
[music].
Yes. So on your first question, we've not yet seen any issue in the availability of parts in the marketplace, nor have we had an issue with delivery of parts to our facilities.
On the the second.
Second point, the so the suppliers.
Really stock the inventory that we need we do not.
By parts and stock them for repairs because each repair is unique who were really reliant on the supply chain together for the needed parts as we identify them.
Okay. That's helpful. Thank you.
Thanks Rush.
Thanks Ross.
Your next question comes from line of Bret Jordan of Jefferies. Your line is open.
Hi, good morning, guys.
Good morning.
When you think about the your comment about weakness in the last five days or so.
Is that I think you think thats tied to to lower driving rates I, maybe thinking about the flow through the crash to work for you or is that just people being distracted and using their car to stock while toilet paper as opposed to getting a repair done.
I guess two at what point will you see the impact of miles driven.
Yes to be clear I, we didn't say five days, we said very recent.
And.
And I think in our Mdna, we commented that it's likely.
Related to the fewer people on the roads traveling to work school.
Sporting events public events and things of that nature. There are just fewer miles being driven right now and our business is.
Really predicated upon miles driven so with a slowdown of miles driven I think we can anticipate a slowdown in available opportunities.
Okay, and then I guess, you can sorry, Jim its Brock just to add we did comment as well that.
It is likely Brad in the early going here that we're seeing potentially some people just differ on bringing their vehicle in for service because people are staying home people are.
Attending as you point out there being distracted with other things and they're not going about their their daily life in a normal fashion and that's causing we suspect that would be causing some of the recent activity that we're seeing as well we're not sure that that she had a flow through wells a reduction in miles driven old although.
So that certainly could be part of it as well.
Okay, and then I guess in past quarters, the comment about labor shortage, driving more parts replacement and repair and a negative impact on margin is there a tipping point, where a little bit lower volume would be beneficial to your margin three or.
5% reduction is that a positive in the sense. It is lower sales that better profit.
I'd rather have the sales I think is so I mean it.
It's probably better to have more revenue throughput and.
Repair as much as we can anyway, which is always our focus.
Okay, Great and I think it's had had commented about the or the large competitors leverage ratios are you seeing any.
Changing operation execution with any of the large competitors either.
Labor availability coming from from maybe the third largest player or anything changing in that scenario.
I would say, it's too early to know whether there's any impact like that this is has moved so quickly that.
That has really not been on our radar.
Okay.
Great. Thank you.
Thanks, Greg breadth.
Your next question comes from the line of Zachary ever said of National Bank Finance. Your line is open.
Thank you morning, everyone. Congrats on the water.
Good morning, good morning.
Can you run us through with how your backlog changed over Q4, and how its acting in Q1, thus far.
I don't know good.
Well.
We don't normally disclose backlog.
So I don't have a specific answer for you on that our backlog is remain healthy, but I'd remind everyone that when we talk about backlog. We don't have a three month backlog our backlog is measured in days not weeks.
So.
We don't have the kind of backlog a manufacturer might have.
Okay.
Thank you and then.
What kind of additional color can you give us on how technician capacity constrain deferred.
Q4 versus the first three quarters of 29.
I would say they were.
They were fairly similar we were up against pretty high comps in the prior year and we were successful in building our workforce up at the same rate we had been in the first half of the year.
But.
I did mentioned in my comments that we've done we have a number of initiatives in place that are ongoing that I'm optimistic will help us, including some of the things to allow people to feel more comfortable when the first joined our company and I'm also very pleased with our technician development program and will that doesn't have an immediate impact.
On capacity.
It does help us grow our pet capacity at a reasonable pace over several months. So I think we've got some good programs in place to address that.
Perfect. Thank you then one last one for me.
What metrics are you guys can be watching to determine when to start M&A machine back up.
Hum.
Pat I don't know if you have a specific comment on that.
Then as to two aspects to the acquisitions, one you said the.
Liquidity, we have ample liquidity. The second one is when we are quite a shop. So we sent people flood intubation and we need to make sure people are safe travel because.
Flight safety is very important to us. So then get comfortable that that's going to happen we're dialing back up.
And that was block just justified might out obviously.
We're all trying to every business is trying to figure out.
The overall impact on demand for services, because that will be a driving factor in determining every companies.
Manner in which you're dealing with.
Liquidity so.
Ill.
We'll slow btwob, obviously watching business activity levels in the stores and.
Extended store closures if any.
Demand levels assignment count levels.
Employee absentee levels all of those things will.
Which are inputs into the over all.
Productivity and financial.
Natural outcome of our business.
So all of those things will be considered as inputs into determining when we feel that we have enough confidence in order to.
Start deploying significant amounts of capital.
Towards.
Awards growth again.
Perfect. Thank you very much.
Thanks, Eric.
Hi, good morning.
Your next question comes from a line of China, Jonathan letters of BMO capital markets. Your line is open.
Good morning, good morning.
Good morning, good morning.
And then maybe Brock.
If you think back to prior periods.
We are with Floyd.
And collision claims volumes declined generally.
How and seller multiples declined.
How long did it take before you started to see seller multiples come down in those periods.
[noise] Raquel, maybe I'll start with true at other data sure I think in the early days of our growth pillar multiples were considerably lower.
They increased over a number of years relatively slowly and I think they've been fairly stable since that time.
What impact the.
Current covered.
Prices will have on multiples and.
I guess, we don't know yet, but I would invite you to add anything that you're seeing.
Yeah I.
I think you've outlined sort of.
Devaluation multiples, particularly as it related to sort of the 2008 2009. We were we were a different company at that time, we were emerging from more difficult times.
And being very cautious on our growth.
And we were operating in an environment where valuation multiples.
Had been can had been historically low.
In terms of in terms of.
Recovery on demand for services I I don't.
I don't think any bus.
Seen sort of the unprecedented.
Impact on business that we're now seeing with gold at 19 before so.
I think we're all holes.
You know, where we're all being optimistic that that.
[music].
Globally, we're going to get through this and they.
In sum.
Relatively short period of time, so that business can return and certainly we'll have to deal with some of the velocity the effects of the told that this will take on the economy.
But but I think we really I don't think anyone has visibility into into sort of how.
Oh, how deep demand declines can be and how quickly they can recover.
This is unprecedented.
Understood. Thanks for your comments.
Thanks, Jonathan.
Your next question comes from line of Chris Perry of Altacorp. Your line is open.
Thanks, most good morning.
Good morning, Chris I mean.
Out.
You don't the uncertainty is it fair to think that as you get better clarity that you cannot be able to give us some updates since we as we move through the quarter.
We haven't discussed.
When we would provide updates.
Unclarity, so I I'm not sure that I can answer that right now, Chris if there's something material and meaningful uptick we would we would do that.
Okay.
I'm, sorry pop again, something that you want that are no no I think I think that's what I was going to say that today for should have a mutual impact uncertainty will have an update.
Okay fair enough.
Then just maybe just just going back to.
The new financing package, just how did you give us a couple more points if you don't mind.
Are there any material changes in the in the costing of this debt both the revolver and the term loan a is it summer grade or where we do think that the the pricing is.
Can you give us a rough idea is it the accordion feature is it mainly only for acquisitions or is it something you can talk if necessary.
Because it does I think couple of questions. One is a pricing to pricing due to some more attractive on the pricing grid for the revolving credit facility and for the terminal Navy actually disclosed in the DNA to 60.45 70, your fixed with no prepayment penalties. So it's a very attractive oh.
Loan rehab.
That's question number one and the second one is the income so the use of proceeds for general corporate purposes. So we can exercised the accordion, we don't have to use it for solely.
Acquisitions, so we can use it for general corporate purposes.
Alright, great.
That's helpful. Thank you.
My last question.
All the uncertainty one of the one of the pieces of discussion is up.
This could actually cause a general recession, not just related to.
The totaled 19 period, but even follow on can you remind us.
Maybe going back and thinking about even your eight any figure or even maybe Tim your previous history in the industry.
How should we be thinking about.
Just consumer behavior buyer behavior.
In terms of just the industry as a whole.
Yes, I would say what we experienced in the great recession.
Miles driven decreased.
And that has an impact on the number of available claims and then there was likely a greater tendency for people to did have a claim to consider differ in repair if they weren't working.
Because they may have needed the cash for other purposes. So we did see some same store sales declines based on that back in 2008 nine.
They weren't all that dramatic and.
So I think I would expect a similar pattern.
Although it's difficult to tell exactly what's going to happen with the combination of the cobot 19, and and then whatever economic.
Whatever economic challenges occur as a result of that but that would be the history that we've seen.
Yes in terms of Chris If you go back and look at the greater position I'm not suggesting that its a good proxy for walked a light you'd expedience. Your 2008 actually we had a positive same store sales growth, we had 5.5 plus and the 2009 nine we had a two part us back to back quite a cellphone decline in Q2, a four nine behind.
5.7, plus on decline into Q3 2.6 for the year. This whole declined by 2.4% in 2009 in 2010 again people. It's positive so you could experience.
Small decline, but I said, it's difficult to say, it's going to repeat themselves.
Yes, not yet.
Sorry, Chris I, just might add that in all of our commentary surrounding our same store sales declines for that period of time, all eight or nine.
Well the market based on information that we had the collision market was down.
More significantly than that but the consolidation trends the industry tailwinds that we're serving us well.
Allowed us to outperform the market and and in a meaningful way minimize the same store sales declined relative to what we sort of saw overall industry decline to be.
Okay and along those lines just a quick question quick I mean, do you think there's a possibility that your penetration into de Rps.
As you get a lot of.
Shifting the industry could actually accelerate we could actually capture additional growth are they going to they keep the insurance companies wanting to keep their oil there.
Issues down would accelerate transferring business to you from other providers.
Shops.
As we've discussed before most of the GRP programs, we participate in our performance based so we can earn a greater share of the business by having superior metrics to the competition in the marketplace.
Our while operating way helps us achieve that and so we'll continue to focus on delivering the value to our customers and I think that will allow for share gains. There are some benefits to insurance carriers were concentrating volume.
In terms of their overhead and administration to manage claims through a company like Boyd, which I think also provides a bit of a tailwind. So I think the the opportunity for us to grow our share.
Remains it has been there and I think it remains going into the future.
All right thanks folks.
Well, we'll talk to it.
Thanks, Chris.
Your next question comes from a line of Daryl Young of TD Securities. Your line is open.
Morning.
2.0.
Just one quick one for me on the same store sales growth you'd mentioned that you were forecasting moderate growth ex cobot 19 impact at presumably that is mostly technician weakness, but maybe you could just provide a little bit more color and if that has anything to do with the decline in collision repair claims were seeing industry wide.
But I think the.
The comment that we made was that we were seen.
Lot of same store sales growth before Copa 19 head.
We don't really know where the quarter will end as a result of that.
What we've experienced is in the northern part of North America, including much of Canada, it's been a pretty mild winter.
Which is not great for us.
And and we still have technician capacity constraints in markets that have had good volumes of work and it's really that combination that was you will put us on a path toward modest same store sales growth.
So it's really a combination of those two factors.
Okay, and then on the the general recession discussion for same store sales growth.
You are obviously still outperforming the market today, but given how much larger scale you have would you expect to be closer to the market I guess an in a downturn.
Versus 2008 2009 period.
I don't have any reason to think that we can't continue to outperform the market and take share but.
So no I don't think that we're not really that large in any of our markets Weve our share of the market is still not so large that I think we have to follow the market.
[noise] Dell as to the victory has only 8% of their shops from 60, plus some of the revenues so.
It's not it doesn't represent a substantial chunk of the market.
So as Jim pointed I think no we still believe when will you can Oklahoma market.
Okay, great. Thanks, guys.
Thanks, Thank you.
Okay, and if you'd like to asked a question over the phone lines. Please press Star then one on your telephone keypad.
Your next question comes from line of Steve Hansen of Raymond James Your line is open.
Hey, guys just a single one for me.
Just curious about your to see standard, California earlier, this year and I know, it's early but just any experience you've had thus far in that market given the relatively new operating environment for you and cobot, notwithstanding just maybe perhaps the growth path for market like that it's been.
I absent from your math for so long, it's a big market you're there now just trying understand what that growth plan or trajectory might be in a bigger market like that thanks.
We actually closed on the California acquisition before the end of last year. So it was not a Q1 it was a Q4 acquisition.
I'd say, we've been pleased with the initial entry into California, the businesses operationally are performing quite well.
It's a small footprint nine shops in the state the size of California is pretty insignificant and we look forward to further growth in that market.
I think you noted that it is a different environment.
Certainly.
We knew that going in I think we were well prepared to understand and the deal with the different regulatory business environment that we have in California, and look forward to using that as a platform for growth.
Okay, great. Thanks, a lot guys appreciate it.
Thanks, Steve.
There are no further questions over the phone lines at this time I turn the call back over to the presenters.
Oh.
Very good thank you, operator, and and thanks to all of your once again for joining our call today.
We look forward to reporting our first quarter results view and May.
Thanks, again and have a great day bye bye.
This concludes todays conference call you may now disconnect.
So to us.
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