Q4 2024 Boyd Group Services Inc Earnings Call
Good morning, everyone and welcome to the Boyd Group Services, Inc, fourth quarter and year end 2024 results conference call.
Listeners are reminded that certain matters discussed in today's conference call or answers that maybe given to questions.
Could constitute forward looking statements that are subject to risks and uncertainties related to boyd's future financial or business performance.
Actual results could differ materially from those anticipated in these forward looking statements. The risk factors that may affect results are detailed in boyd's annual information form and other periodic filings and registration statements and you can access these documents at SEDAR database.
And with that surplus that CA I'd.
Speaker Change: I'd like to remind everyone that this conference call is being recorded today Wednesday March 19, 2024, I would now like to introduce Mr. Tim O D Chief Executive Officer of both services Inc. Please go ahead Mr. O'day.
Tim O'Day: Thank you operator, good morning, everyone and thank you for joining us on today's call on the call with me today is Brian Khater, our President and Chief operating Officer, and Jeff <unk>, Our executive Vice President and Chief Financial Officer.
Tim O'Day: We released our 2020 for fourth quarter and year end results before markets opened today, you can access our news release as well as our complete financial statements and management's discussion and analysis on our website at Boyd group Dotcom, Our news release financial statements and MD&A have also been filed on SEDAR.
Tim O'Day: This morning.
Tim O'Day: On today's call, we'll discuss the financial results for the three month period ended December 31, 2020 Board provide a general business update and discuss our long term growth strategy. We will then open the call for questions.
Tim O'Day: Throughout 2020 for Voip consistently posted market share gains in a challenging environment characterized by low claims volumes driven by significant insurance premium inflation and overall economic uncertainty as well as the mild winter weather in 2024 would it be in the war.
Tim O'Day: Most winter in over 149 years.
Tim O'Day: These factors and which industry sources reported a year over year decrease in repairable claims of 9% for all losses and seven 9%. Excluding comprehensive claims boy posted year over year same store sales declines of only one 8% demonstrating boyd's ability to.
Tim O'Day: <unk> market share in this very challenging environment.
Speaker Change: I would now like to turn the call over to Jeff Burt to discuss our 2020 for yearend and fourth quarter financial results Jeff.
Speaker Change: Thanks, Tim for the year ended December 31, 2024, we reported sales of $3 1 billion, an increase of four 2% over the prior year driven by contributions from 155, new locations that had not been in operation for the full comparative period, partially offset by same store sales declines of one.
Speaker Change: 8%.
Speaker Change: Gross margin stayed consistent at 45, 5% of sales compared to the prior period.
Speaker Change: The internalization of scanning and calibration contributed to an increase in gross margin percentage as did improved performance based pricing.
Speaker Change: However, these gains were offset by labor rate margins, which remained below historical levels.
Speaker Change: Operating expenses increased $89 9 million when compared to the same period of the prior year, primarily as a result of growth and inflationary increases.
Speaker Change: Operating expenses as a percentage of sales were 34, 6% for the year ended December 31, 2024 compared to 33% for the same period in 2023.
Speaker Change: Operating expenses as a percentage of sales was negatively impacted by the decline in same store sales and new locations, which contributed sales, but with a higher operating expense ratio of 36, 9%.
Speaker Change: Operating expenses as a percentage of sales was positively impacted by reductions in staffing made to better align with current levels of demand as well as reduced incentive compensation and recruiting costs. These impacts were more than offset by fixed cost on existing and new locations.
Speaker Change: Adjusted EBITDA for the year ended December 31, 2024 was $334 8 billion compared to $368 2 million in the same period of the prior year.
Speaker Change: $33 $4 million decrease was a result of the declines of our payable claims volumes for services, which resulted in same store sales declines at a higher ratio of operating expenses as a percentage of sales.
Speaker Change: As we noted as part of our growth goal announcement on February 26 in partnership with a leading global consulting firm Boy does launch project 360, our company wide transformation.
Speaker Change: Cost initiatives project 360 is expected to result in a $100 million in annual recurring cost savings over the coming years with upfront investment and transition costs incurred to achieve these benefits estimated to be in the $20 million to $23 million range over the coming quarters.
Speaker Change: During the fourth quarter expenses related to the transformational cost initiatives, a $4 4 million were incurred which have been added back in arriving at adjusted EBITDA.
Speaker Change: No similar transformation costs were incurred in 2023.
Speaker Change: While project 360 was launched during the first fourth quarter of 2020 for reduced operating expenses and improved operating expense leverage are expected to be realized gradually beginning in the second quarter of 2025.
Speaker Change: We reported net earnings of $24 5 million compared to $86 7 million in the prior year adjusted net earnings per share decreased from $4 18 to $1.
Speaker Change: Net earnings and adjusted net earnings for the period were negatively impacted by the decrease in adjusted EBITDA as well as increased depreciation expense and increased finance costs.
Speaker Change: Depreciation and finance costs increased primarily due to investments in growth and the investment in network technology upgrades.
Speaker Change: Now moving onto our Q4 results during.
Speaker Change: During the fourth quarter, we recorded sales of $752 3 million or one 7% increase when compared to the same period of 2023.
Speaker Change: Sales growth of $33 3 million was attributable to incremental sales generated from 86, new locations. However, this increase was more than offset by a same store sales decline of two 6%.
Industry sources have reported a fourth quarter year over year decrease in repairable claims of 6% for all losses and seven 9% excluding comprehensive claims.
Speaker Change: Gross margin was 45, 8% in the fourth quarter of 2024 compared to 45, 5% achieved in the same period of 2023.
Speaker Change: The gross margin percentage benefited from internalization of scanning calibration and improved performance based pricing, partially offset by lower payables.
Speaker Change: Adjusted EBITDA was $83 4 million a decrease of 11, 5% over the same period of 2023.
Speaker Change: The decrease was primarily the result of lower same store sales at a higher ratio of operating expenses as a percentage of sales for both existing and new stores.
Speaker Change: Net earnings for the fourth quarter of 2024 was $2 4 million.
Speaker Change: <unk> to $19 1 million in the same period of 2023.
Speaker Change: Excluding fair value adjustments and acquisition and transformational cost initiatives adjusted net earnings for the fourth quarter of 2024 was $6 3 million or <unk> 29 per share compared to adjusted net earnings of $20 million or <unk> 93 per share in the same period of the prior year.
Speaker Change: Net earnings and adjusted net earnings for the period was negatively impacted by the decrease in adjusted EBITDA as well as increased depreciation expense and increased finance costs depreciation.
Speaker Change: Depreciation and finance costs experienced increase was primarily driven by investments in growth and the investment in network technology upgrades during a period of lower sales and adjusted EBITDA.
Speaker Change: At the end of the year, we had total debt net of cash of $1 2 billion compared to $1 2 billion at September 32024, and $1 1 billion at the end of 2023.
Speaker Change: Debt net of cash increased when compared to December 31, 2023, primarily as a result of location growth.
Speaker Change: Based on the confidence we have in our business, we announced an increase to our dividends of 2% to $61 <unk> per share on an annual annualized basis in Canadian dollars beginning in the fourth quarter of 2024.
Speaker Change: During 2025, the company plans to make capital expenditures, excluding those related to acquisition and development of new locations within the range of one six and one 8% of sales.
Speaker Change: In addition to these capital expenditures the company plans to invest in network technology upgrades to further strengthen our technology and security infrastructure and prepare for advanced technology needs in the future.
Speaker Change: During 2024, the company spent approximately $18 $1 million on network technology upgrades.
Speaker Change: The investment expected in 2025 is in the range of 10 to 12 million with an investment in 2026 in the range of $2 million to $4 million. These.
Speaker Change: These investments align with slate sustainability roadmap to responsibly address data privacy and cybersecurity.
Brian: I would now like to turn the call over to Brian catering to provide a general business update and discuss our long term growth strategy. Thanks, Jeff.
Brian Catering: Pleased to have announced a new five year goal, which includes growing revenues of $5 billion in 2029, doubling adjusted EBITDA numbers from 24 to 29, returning to an adjusted EBITDA margin of 14%.
Brian Catering: Spanish market share and retaining a leadership position in all markets served and achieving top tier profitability in the north American collision industry in the near term the market dynamics that impacted results throughout 2024, including a decline in claims volumes due to insurance premium inflation and overall economic.
Brian Catering: Uncertainty.
Brian Catering: With repairable claims experiencing a greater year over year decline during the first two months of 2025 and was experienced in the fourth quarter.
Brian Catering: Might this fact, thus far in the first quarter 2020 of 2025 same store sales have improved compared to the fourth quarter, but are not yet positive.
Brian Catering: Continuing to demonstrate market share gains as in prior years.
Brian Catering: First quarter is burdened by higher payroll taxes that occur early in early in the year, while the fourth quarter of.
Brian Catering: 2024 benefited from expense accrual reductions as certain expense estimates were firmed up at the amounts.
Brian Catering: That were previously are lower than previously estimated and accrued <unk>.
Brian Catering: These factors along with the challenging claims environment, resulting in an adjusted EBITDA dollars, thus far in the quarter trending slightly below levels achieved in the first quarter of last year.
Brian Catering: While it's still too early to tell if claims if claims volumes have bottomed out Lloyd remains confident in the industry's long term outlook and believes the transformational cost savings initiatives will drive improved margins in the coming quarters, we remain committed to improving gross margins through initiatives such as internalization of <unk>.
Brian Catering: Scanning and calibration the need for scanning and calibration services continues to grow in boyd's ability to internalize. These services continues to scale.
Brian Catering: Growth through acquisition as well as through startup sites continues although startup sites have a longer development cycle and ramp periods. These locations offer a number of advantage and as a result, the company plans to continue increasing the proportion of growth using this approach.
Brian Catering: Over the long term the proportion of acquisition to startup sites is expected to be approximately even.
Brian Catering: The pipeline for startup sites. Currently get currently include scheduled openings of seven locations in Q1 of 2025 and an additional 21 locations throughout the balance of the year.
Brian Catering: While the company has been successful in executing on Boyd's long term growth goal of doubling the size of the business on a constant currency basis from 21% to 25% against 2019 sales over the past year and in the 25 the market has.
Brian Catering: As experienced challenging economic and industry conditions the company.
Brian Catering: The company is focused on increasing value to our customers and shareholders and has consistently performed above industry with a focus on emerging from these conditions in a strong position.
Brian Catering: In spite of the initiatives in place and current market conditions may cause a slight delay in boyd achieving its long term growth goal of doubling the size of the business on a constant currency basis from 'twenty, one to 2025 against 2019 sales in summary, and in closing we continue to be incredibly proud of our team who are working hard to.
Brian Catering: Positioned as well for the future with that I would like to so we'd like to open the call to questions operator.
Speaker Change: Thank you Sir.
Speaker Change: Ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your Touchtone phone you're welcome here a prompt that your hand has been raised and should you wish to decline from the polling process. Please press star followed by two.
Speaker Change: If you're using a speaker phone well need to lift the handset first before pressing entities. Please go ahead and press star one now if you have any questions.
Speaker Change: First we will hear from Chris Murray at ATB capital. Please go ahead.
Chris Murray: Yes, thanks, so much good morning.
Speaker Change: Maybe looking hey, thanks for the color on Q1.
Chris Murray: But as we sort of think about <unk>.
Chris Murray: 2025, and maybe what youre seeing in the environment.
Chris Murray: I think even if you look at the Comping of the same store numbers.
Chris Murray: From late last year.
Chris Murray: How are you guys thinking.
Chris Murray: Kind of near term the balance of 25 is showing up and are you seeing any sort of changes in this consumer behavior. I think you mentioned that things.
Chris Murray: Seem to be improving a little bit, but I'm, just trying to maybe get a get a.
Chris Murray: Our focus or our view on the trends that yourself.
Chris Murray: Well I think Theres a couple of we've talked about a couple of things that will drive.
Chris Murray: The improvement in the outlook.
Chris Murray: One was weather, which we did see some meaningful weather in the first and the first couple months of the year as well as some of the back half of <unk>.
Chris Murray: Last year in that weather has positioned us well in the northern markets, where we have experienced we have experienced some same store sales growth in those markets.
Chris Murray: The other thing that we've constantly talked about is the need for used car values to start to creep back up again, which ultimately puts more.
Chris Murray: Total losses and our sharp.
Chris Murray: Decreases the level of total losses in our shops.
Chris Murray: Used car pricing used car pricing has ticked up a little bit not not super meaningful which leads.
Chris Murray: The last one which is probably the hardest one for us to predict in terms of the outcome, which is the.
Chris Murray: The economic uncertainty and the consumer uncertainty as they face very high levels of insurance premiums.
Chris Murray: As we've said.
Chris Murray: On previous calls we're looking for.
Chris Murray: We're looking for the Doe wines of collision claims and liability claims to start to come closer together again.
Chris Murray: For us to be able to see that that's that's happening in a meaningful way and thus far we don't we don't see that we continue to see liability claims that are in it.
Chris Murray: Down to.
Chris Murray: Down, 2% range, which is fairly reasonable considering.
Chris Murray: The loss ratios.
Chris Murray: But the claims collision claims have not yet come back to the levels that they had been historically.
Chris Murray: Okay I'll leave it there.
Speaker Change: Other question I had was on some of the commentary you.
Chris Murray: Put in the <unk>.
Chris Murray: In the MD&A just talking about.
Chris Murray: The ratio of kind of brownfield greenfield versus startup storage, which is im not sure. If that's completely new commentary, but essentially I think if I got this correctly. What you said is the plan is to open roughly 28 new stores this year.
Chris Murray: But then I think there is also a common carrier to think about that.
Chris Murray: New store like small store acquisitions would be kind of at a one to one ratio.
Chris Murray: Of what you're open for new sources, just like any thoughts or maybe this is a further refining the strategy, but any more detail that you could maybe.
Put around that would be great well, yeah, just just for clarity the new store pipeline that we have in the in the commentary for the call today is related to only greenfield locations. So we have 28 greenfield locations that are slated to be open this year.
Chris Murray: We have said over time, we'd like to see that get to a 50 50 ratio, 50% of our growth coming from ACA.
Chris Murray: Acquisitions, and 50% coming from Greenfield.
Chris Murray: That's not I wouldn't read into that that we expect the full year to be 56 locations because we're just not at that pace yet.
Chris Murray: We've started meaningfully building out our greenfield strategy in the mid part of last year. It takes about 18 months for one of those stores.
Chris Murray: 18 to 24 months for one of those stores to open so as we get to you.
Chris Murray: This time next year I think we will start to be at a very healthy very healthy path of opening.
Chris Murray: 10 to 12, Greenfields, a year or 10 to 12, Greenfields a quarter, which is what we're trying to ultimately get to.
Chris Murray: <unk>.
Chris Murray: Yes.
Chris Murray: And then the other commentary on just why the Greenfield I think we've addressed that.
Chris Murray: Both today's commentary as well as discussions we've had before but it's really a focus on building density in markets. So getting into the locations that we want the building that we won with the size that allows us to be able to put all three all three lines of business under one roof, our scanning and calibration are clear.
Chris Murray: Business in our glass business, all under one roof to get the efficiencies out of that.
Chris Murray: And look I mean, the reality is everybody likes working in a new box with new equipment over time that reduces our maintenance expense on boxes, which.
Chris Murray: As boxes as our stores get older there.
Chris Murray: The amount of maintenance expense that goes into those stores continues to grow so we've got over time start to.
Chris Murray: Change the proportion of our locations that are old versus new.
Chris Murray: Okay I'll leave it there thanks.
Chris Murray: Thanks.
Speaker Change: Next question will be from Bob <unk> RBC capital markets. Please go ahead.
Chris Murray: Yes.
Bob: Hey, Thanks, and good morning.
Just on some of these cost improvement initiatives can you maybe just talk about.
Bob: In terms of progression sort of what are the ones that are sort of working on early on in the process and those maybe contribute to some potential margin improvement. This year, if that's maybe what you're targeting thanks.
Bob: Yeah, Yeah, well it was we said when we announced the plan, we expect 70% of the realization of those savings to be in our run rate by the end of the second year.
Bob: That does constitute a portion of that being in this year's run rate as well.
Bob: Obviously, the as we've talked about the buckets. We said there was gross margin buckets in operating expense.
Bob: Costs coming out of the operating expense side of the business that those expenses.
Bob: We would expect to be realized earlier in the process.
Bob: And.
Bob: Some of the gross margin expense <unk> gross margin opportunity as we will have a little bit of a longer tail as we get through the negotiations.
Bob: As well as indirect indirect procurement savings, which we've highlighted as well on the operating expense side that that also will take time for us to be in the market to RFP those things in.
Bob: So I think it's the.
Bob: The best way to think about it as you know.
Bob: We expect to have.
Bob: 70, 70% of that in RSA in our full run rate by the end of by the end of 2026.
Bob: And you know I mean I.
Bob: I Wouldnt pace, it ratably, but as Jeff said, we expect it to start those savings to start in Q2 to start really showing meaningful progress in Q2, so the pacing will be starting in Q2 up until.
Bob: Up until the end of 2026.
Speaker Change: Okay, Great and then the second question just on the M&A landscape I think some commentary out there that last your expectations or maybe a bit higher on the salaries, maybe a comment on what.
Speaker Change: What the expectations are at this point, given the macro backdrop and maybe what you're seeing among your private competitors or peers are they being active how competitive is it out there for transactions, both smaller and larger ones. Thank you.
Speaker Change: Yes, Interestingly I don't mean from a competitive perspective, we have not there's been some activity, but frankly not a lot as of late.
Speaker Change: The other thing that the other thing that we are seeing is you know look if the claims environment remains.
Speaker Change: Remains soft for a long period of time that puts them a lot more pressure on.
Speaker Change: Single shop, and even some of the 5% to seven shop operators that are in the market.
Speaker Change: And that that obviously.
Speaker Change: That type of pressure if it's if it's prolonged will put many people in a position where their price expectation will start to change and we are starting to see some some opportunities in the marketplace. At this point that that that maybe weren't there last year that were certainly going to participate in.
Speaker Change: Thanks very much.
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: Next question will be from Delek Lasalle at TD Cowen. Please go ahead, yes.
Delek Lasalle: Yes, good morning, everybody.
Delek Lasalle: I, just maybe wanted to come back to the to the Q1 I was just wondering.
Delek Lasalle: Maybe if you could talk about some of those margin pressures that you're facing so far despite that year over year improvement I guess in the weather comp.
Delek Lasalle: Yes, the margin pressures that we experienced in Q1 are typically related to things like payroll tax expense.
Expenses that that reset at the end of the deal that reset at the beginning of the year primarily payroll.
Delek Lasalle: We see that every year, where we see.
Delek Lasalle: A falloff from Q4 to Q1, we see an increase in expenses from Q4 to Q1, particularly around you know around areas like payroll. So that's really what's driving the.
Delek Lasalle: The margin pressure, we're not experiencing any compression on gross margins or anything that relates to.
The volume being run through the register its more on the.
Delek Lasalle: The operating expense side.
Delek Lasalle: Okay, and maybe just on the project 368 could you just maybe add some color around.
Delek Lasalle: Some of the key initiatives that you have where maybe the biggest buckets under the project.
Delek Lasalle: Yeah, Yeah, well I mean, so one of the larger buckets that we have and the project is is resetting our is the resetting of our store staffing model.
Delek Lasalle: <unk>.
Delek Lasalle: That we're in in the middle of doing now we are in the early innings of doing that so that's one of the larger buckets.
Looking at the indirect staffing in our stores and making sure that.
Delek Lasalle: <unk>.
Delek Lasalle: To the appropriate volume that's going through the going through the locations.
Delek Lasalle: The rest of them are there is there is opportunities around.
Delek Lasalle: Paint margins.
Delek Lasalle: Gross parts, where parts margins and increasing labor margins in certain locations.
Delek Lasalle: And then there is another big.
Delek Lasalle: There is another fairly sizable bucket around the indirect expense the indirect procurement expenses that we have.
Delek Lasalle: To operate the business things like shop supplies and equipment.
Delek Lasalle: Those areas are they will take a little bit longer for us to.
Delek Lasalle: For us to get after.
Delek Lasalle: <unk>.
So those are those are the primarily primary large buckets.
Delek Lasalle: Okay, that's great color and helpful and maybe just one last one for me understand the tariff situation remains pretty fluid.
Delek Lasalle: Curious on your thoughts around what your what you think your current tariff exposure might be.
Delek Lasalle: Yes, it does.
Delek Lasalle: As you know I think we're in a on the parts side. We're in a list price environments. So of list prices go up that actually serves to create same.
Delek Lasalle: Same store sales for us the inflationary environment will create same store sales we work on discounts off of list to drive our gross margin in our business from a parts perspective.
Delek Lasalle: The other the other side of the inflationary or the tariff environment, what it could do is push new car prices higher which.
Which increases demand for used cars and in turn pushes used car prices up as well, which as you know then pushes total losses.
Delek Lasalle: So I think generally speaking the way I've articulated this in the past is its neutral to positive to us.
Delek Lasalle: Tariff environment is neutral or positive from us from an average ticket and a work perspective. The question is what does it do to this whole notion of consumer uncertainty and economic uncertainty and if we step before thrust into a a hyper inflationary environment does that put further pressure on.
Speaker Change: People's desires to file insurance claims yeah, Brian I, absolutely, it's Jeff here, absolutely agree that that's the.
Delek Lasalle: The unknown and the big factor to think about is what.
Speaker Change: What's going to be the impact on the consumer.
Speaker Change: But just a couple of other things to highlight would be where we are.
Speaker Change: 90%.
Speaker Change: In the U S.
Speaker Change: To start with and essentially all of our businesses operate in domestic markets. So the U S inputs.
Speaker Change: And outputs are U S based and the same thing in Canada Canadian based and so we don't have a lot of cross border activity and where service service business and a big portion of our of our inputs is actually labor, which wouldn't be subject to tariff. So few others I think quite sticky.
Speaker Change: Thanks for that gentlemen.
Speaker Change: Thank you.
Speaker Change: Next question will be from Gary Ho at Vishal Bank capital markets. Please go ahead.
Speaker Change: Thanks, Hey, good morning, guys.
Speaker Change: I think too, yes, continuing with the <unk> outlook here. So you mentioned.
Speaker Change: Same store sales growth slightly better than Q4's minus two six but not yet positive. However.
Speaker Change: If I recall March last year was when we saw an unanticipated drop in repairable claims so not not sure. If you can kind of help US bridge. If you, perhaps extrapolate kind of the current run rate activity. What are you seeing in February.
Speaker Change: Those activity imply maybe a flat to maybe slightly positive same store sales growth for March I know, it's hypothetical but just wanted to get your read on the cadence from January February and March.
Speaker Change: Yes, well I mean as we.
Speaker Change: As we got information about the claims.
Speaker Change: It's truly got information about the claims environment at a macro level, what we really saw was.
Speaker Change: Q Q1 of 2023 was the first year, we started to see declining claims environment and that continued into.
Throughout 2023 and in March is when some of the information really started to get surface at a macro level.
Speaker Change: So I don't there's nothing magical about there's really nothing magical about March.
Speaker Change: As I've said in the early commentary, we do know that one of the earlier questions. We do know that in the northern markets, where we had weather we've seen.
Speaker Change: Positive impact from that.
Speaker Change: The southern markets still remain.
Speaker Change: Still remains slightly down and as we look west.
Speaker Change: The West has probably got some of the most economic uncertainty in certain markets and I think that's where.
Speaker Change: That's where we've seen.
Speaker Change: A bigger challenge in the recovery. So I don't I don't expect March I expect March will be in line with the guidance that we provided.
Speaker Change:
Speaker Change: So that's where I would I would see it.
Speaker Change: Okay, Great and then that's your softer <unk> year over year EBIT comment, perhaps take in some of the project 360 costs that are kind of more onetime in nature or do you kind of back that out and maybe just related to that.
Speaker Change: There is some kind of acquisition and transformational cost initiatives I think in Q4 was $5 4 million $9 9 million for the year.
If you wouldn't mind kind of elaborate the details on that and how should how we should think about that for 2025.
Speaker Change: Yes, as I mentioned in Q4, we did have $4 4 million of costs related to project 360, and the plan would be to continue to provide updates on on the amount that we're spending on project 360 and to essentially adjust them out of EBITDA, so that the adjusted EBITDA.
Speaker Change: What won't be it won't be.
Speaker Change: Well, so that adjusted EBITDA will be sort of on a normalized basis. So that's kind of how we're planning to Dan we're going forward. So to answer. Your initial question for our Q1 sort of guidance is not really affected by by those additional costs, because we factored out.
Speaker Change: Okay got it and then just lastly.
Speaker Change: You mentioned Greenfield brownfield.
Speaker Change: 28 locations that you highlighted.
Speaker Change: Are they fairly spread out in terms of geography throughout the U S or are you trying to densify a certain region one at a time.
Speaker Change: Yeah, they're actually there.
Speaker Change: They're not as spread out as they would have been historically.
Speaker Change: As we think about where we're putting locations. We're very focused on intensifying markets. We're very focused on creating a one or two position in the markets we play in.
Speaker Change: And we know what we know where the dots on the map are that we need to be to fulfill that objective.
Speaker Change: So these these these locations.
Speaker Change: <unk> are much more in line with satisfying that objective.
Speaker Change: There are a lot more concentrated.
Speaker Change: Certain areas in those certain areas, where we know that.
We can establish a one or two position and get to the.
Speaker Change: Positioned from a profitability perspective that we're looking for.
Speaker Change: Okay. Okay. Okay. Thank you very much most of my questions.
Gary: Thanks, Gary.
Speaker Change: Next question will be from Steve Hansen at <unk>.
Speaker Change: And James Please go ahead.
James: Yes, good morning, guys. Thanks for the time.
James: Brian I think it was in the prepared remarks that you mentioned that labor margins are still below where they used to be.
James: Its really holding that back is it just volume that you need to accrue through the shop to get better.
Speaker Change: <unk> is it the lack of pricing.
James: Pass through from the carriers and what is it that's where the holding back of labor margins.
James: Yes. There is there are still a little bit of pricing opportunity that we have out there.
James: We continue to go after on a on a frankly on a daily basis.
James: That's really what's holding it back I think the generally the generally speaking the inflation on wages.
James: Have come back to normal levels, the availability of technicians in this type of the demand environment is is better than it is in a heavy demand environment as you would know so.
James: Are things that we saw coming out of the pandemic has kind of eased although it's set.
James: At that time, it set a new.
James: It kind of set a new floor for for what taxes are paid and we're catching up in some cases, we're catching up to that floor.
James: Understood that's helpful and just on the 360 plan it sounds like you've got some initiatives already in flight.
Speaker Change: What's really giving you the confidence that we can start to realize the synergies starting next quarter in Q2 that is.
Speaker Change: Is it just maybe describe to us where youre at on some of those plans just we can get a sense for how real they are how quickly they come online.
Speaker Change: Yes look my knowledge of the actions that we're taking that will get us there and and the stickiness of those actions is what gives me the confidence.
Speaker Change: Many of the things that were we were in.
Speaker Change: Anticipating rolling out in Q2 are actually in pilot phase now so we know where they're at in their execution stage, we've got a great process in place.
Speaker Change: To deliver those results delivery office that we've set up.
Speaker Change: As we continue to monitor those projects by my confidence level in achieving the savings that we've expected over the next two years just continues to grow so I have tremendous confidence in our ability to deliver the transformation costs, but all under $1 billion of transformation costs we've identified.
Speaker Change: Yes.
Speaker Change: Okay, great. Thanks, and just one last one quickly is just on the single shop acquisition pace. It was referenced earlier in an earlier question, but is there anything holding you back there it.
Speaker Change: It sounds like the bottom has at least close to being in its not in.
Speaker Change: To be debated I, suppose, but I mean, what's holding you back on going after the single shops, and a more rigorous base.
Speaker Change: Nothing at this point.
Speaker Change: As I said as we think about our market planning exercise, what we're really doing on the market planning exercise as you put <unk>.
Speaker Change: On these maps.
Speaker Change: The first place we look for.
Speaker Change: If somebody can.
Speaker Change: As we look to get into a market is there a quality single shop in the market for us to go purchase if the answer to that question is no. That's when we start to flip to the Greenfield brownfield options.
Speaker Change: But as we look to build density.
Speaker Change: That will become.
Speaker Change: That will and is still our first choice to get into a market.
Speaker Change: Okay very helpful. Thanks.
Speaker Change: Yep.
Speaker Change: Yes.
Speaker Change: Next question will be from Daryl Young of Stifel. Please go ahead.
Daryl Young: Hey, good morning, everyone.
Daryl Young: Just one quick one for me on the insurance side.
Daryl Young: We're seeing some of the larger insurance carriers, maybe get a little more aggressive on trying to take market share and I was just wondering if you could remind us if theres any difference between say the top five insurance carriers and the rates that they pay you either on parts markup or labor margins versus the rest of the insurance industry and I'm just trying to guess.
Daryl Young: Sets out if there's any market share or any market share shifts that we should be aware of that maybe it's a margin headwind over the next year or two.
Daryl Young: Yes.
Speaker Change: I'm happy to let Tim comment on that as well.
Speaker Change: In my time here I haven't seen behaviors by the insurance carriers.
Speaker Change: That are creating that are positioning one versus the other in any in any better way, but im happy to I think the question is is shifting carrier market share change, our revenue and margin profile and I would say no.
Speaker Change: Got it that's all from me thanks, guys.
Speaker Change: Thanks.
Speaker Change: Next question will be from Christopher Friesen at CIBC. Please go ahead.
Christopher Friesen: Hi, Thanks for taking my question.
Speaker Change: Just one from me the commentary around <unk>.
Christopher Friesen: Yeah.
Christopher Friesen: 2025, not quite hitting the doubling of revenue target that you had set out previously what were the assumptions that went into that and specifically I guess related to <unk>.
Christopher Friesen: Claims volume or are you assuming that it kind of stays where it is at this point or are you assuming a bit of an improvement. Thanks, Chris Chris I don't think we've said we want to hit it.
Christopher Friesen: We've said that there is uncertainty given the claims environment and we don't know when the claims environment will shift.
So thats really the reason that we're just signaling there could be some delay I would say, we're still optimistic we can achieve it.
Christopher Friesen: In a more normalized claims environment, we just have to look for that to flip to a more normal level and I think as Chris as you know leading up to leading up to.
Christopher Friesen: <unk>.
Christopher Friesen: 2024, we were we were right on track to be able to do that.
Christopher Friesen: It's really 2024 claims environment, that's put us in a position where we're just we're caught we're being cautious and we want to make sure that we're signaling it but it's a delay it's not a.
Christopher Friesen: Not an inability to achieve because obviously when you have to get to $5 billion over the next year.
Christopher Friesen: Over the next five years.
Speaker Change: Fair enough. Thank you I'll jump back in the queue.
Christopher Friesen: Thanks.
Christopher Friesen: Next question will be from Tristan Thomas Martin at BMO Capital markets. Please go ahead.
Hey, good morning.
Christopher Friesen: I just had one quick question I'm curious if you've seen any change in consumer or maybe an insurance.
Christopher Friesen: Company kind of behavior as tariffs seem like they're becoming a little more real and potentially new car values can go up raising the used car values I'm. Just curious if anyone's trying to get ahead of that or consumers are starting to think like that.
Christopher Friesen: On the insurance.
Christopher Friesen: Syed what's the one thing I. The one thing I have seen and have read as J D power actually keeps track of <unk>.
Christopher Friesen: Shopping and switching on insurance carriers and started doing that in 2020 and right now shopping and switching is at the highest levels ever been recorded from an insurance perspective. So people are people are looking at the premium increases they have and making decisions to now switch and our hope is that as they are.
Christopher Friesen: Make those decision to switch.
Christopher Friesen: They put themselves back in a position where they.
Christopher Friesen: They're either reducing the.
Christopher Friesen: Deductibles as they've increased.
Christopher Friesen: To mitigate the premium increases, they're putting collision coverage back in place.
Christopher Friesen: Where they may have dropped collision coverage win win.
Christopher Friesen: When the premium increases hit.
Christopher Friesen: So the reality is that.
Christopher Friesen: Consumers that are putting themselves in a position.
Christopher Friesen: Where they where they cant afford to fix their vehicle or don't have coverage to fix their vehicles. If they were to get into an accident are really putting themselves at a fair amount of risk and youre, putting your livelihood at risk.
Christopher Friesen: Cars damaged in a way, where it's on drivable and.
Christopher Friesen: And you don't have proper insurance coverage to take care of that that's a very that's it.
Christopher Friesen: That's a dangerous game to play for a long period of time. So our hope is that switching is driving that back.
Christopher Friesen: Okay. Thank you.
Christopher Friesen: Yep.
Speaker Change: Next question will be from Zachary Eversheds National Bank. Please go ahead.
Speaker Change: Morning, everybody a lot of my questions have been answered so maybe just a broader one here.
Speaker Change: We're seeing right to repair labor, a transparency pushes tariff impacts a lot of stuff up in the air here. What do you think the most important potential regulatory your operating environment changes you're following closely.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Is that the right to repair has been ongoing for many years and frankly for the closed for parity.
Speaker Change: We have the tools and the information we need to properly repair vehicles to always standards.
Speaker Change: Not really.
Speaker Change: Really meaningful concern to us.
Speaker Change: The uncertainty around tariffs and the impact on consumer behavior.
Speaker Change: That could have is probably top of mind for us.
Speaker Change: But.
Speaker Change: Obviously, we don't control that.
Speaker Change: It's difficult to predict what will happen.
Speaker Change: Right.
Speaker Change: So.
Speaker Change: I guess, that's probably the best answer I can give you.
Speaker Change: I appreciate it thanks, I'll turn it over.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Are there any more questions.
Speaker Change: Patrick Buckley of Jefferies. Please go ahead.
Patrick Buckley: Hey, good morning, guys could you talk a bit about how alternative parts mix has trended as of late and maybe the outlook. There in 25 as we start to think about potential tariff impacts on OE pricing versus alternatives.
Patrick Buckley: Yeah, I would say that the major the last major carrier.
Patrick Buckley: You know to really kind of move forward with aftermarket pricing our aftermarket parts took place in the latter half of 2023 and was fully into 2024, So I don't see a lot of movement.
Patrick Buckley: Upward in terms of increases in aftermarket part usage.
Patrick Buckley: The question I guess, maybe because maybe you know as if there are significant tariffs and those tariffs impact the pricing of.
Patrick Buckley: Aftermarket parts in a way that that makes that the decision between aftermarket and OE part closer would that actually push.
Patrick Buckley: More OE part usage.
Patrick Buckley: I think it's too early to tell for us what about what we do know is you know again, we're we're putting on parts that a carrier is requesting that we put on that or the <unk>.
Patrick Buckley: Best part for the job and we will continue to do that.
Speaker Change: Great. That's all for me thanks.
Patrick Buckley: Yes.
Speaker Change: And at this time, we have no other questions I will turn the call back to Mr. O'day.
Speaker Change: Thank you operator, and thank you all once again for joining our call today and we look forward to reporting our Q1 results in May have a great day.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines.
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