Q1 2025 Boyd Group Services Inc Earnings Call
Good morning, everyone welcome to the Boyd Group Services, Inc. First quarter 'twenty twenty-five results conference call.
Listeners are reminded that certain matters discussed in today's conference call or answers that maybe given to questions asked 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 Cedars database found that theater plus start see a I'd like to remind everyone that this conference call is being recorded today Wednesday may 14th 22.
Speaker Change: 25, I would now like to introduce Mr. Tim Eau de <unk>, President and Chief Executive Officer of Boyd Group Services incorporated. Please go ahead Mr. O'day.
Tim O'Day: Thank you operator, and good morning, everyone and thank you for joining us for today's call.
On the call with me today is Jeff Murray, our executive Vice President and Chief Financial Officer, and Brian Khater, Our President and Chief operating Officer.
We released our 2025 first quarter results before markets opened today you.
Tim O'Day: 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 Dot Com, Our news release financial statements and MD&A have also been filed on SEDAR plus this morning.
Tim O'Day: On today's call, we will discuss the financial results for the three months period ended March 31, and provide a general business update. We'll then open the call for questions.
Tim O'Day: Boyd continue to deliver market share gains during the first quarter of 2025, posting same store sales declines of only two 8% in a market where declines in repairable claims were estimated by industry sources to be down in the range of 9% to 10%.
Tim O'Day: Gross profit showed an increase of $6 7 million demonstrating significant improvement at 46, 2% an increase of 140 basis points over the same period of the prior year bolstered by internalization of scanning and calibration services as well as improvements in <unk>.
Tim O'Day: <unk> based pricing.
Tim O'Day: Well, we continue to face some market headwinds we are pleased with our ability to continue to outperform the market as well as the improvement in our gross margins and importantly early signs of success from project 360.
Jeff: I'd now like to turn the call over to Jeff <unk> to discuss our first quarter financial results.
Jeff: Thanks, Tim.
Jeff: For the first quarter of 2025 sales were $778 3, million% to 1% increase when compared to the same period of 2024.
Jeff: This reflects a $24 million of incremental sales from 58, new locations that were not in operation for the full comparative period our.
Jeff: Our same store sales, excluding foreign exchange decreased by two 8% in the first quarter, recognizing one less selling a production day when compared to the same period of 2024.
Jeff: Gross margin was 46, 2% in the first quarter of 2025 compared to 44, 8% achieved in the same period of 2024.
Gross margin percentage increased due to several factors, including the benefits of internalization of scanning and calibration improvements to performance based pricing.
Jeff: An improved glass margins.
Jeff: Operating expenses for the first quarter of 2025 were $278 7 million or 35, 8% of sales compared to $270 9 million or 34, 4% of sales in the same period of 2024.
Jeff: Operating expenses as a percentage of sales was negatively impacted by the decline in same store sales and new locations, which contributed positively to sales, but at a higher operating ratio of 38, 4%.
Jeff: In addition, while the internalization of scanning and calibration continued contributes positively to gross profit and adjusted EBITDA. It does not contribute incremental sales and therefore increases operating expenses as a percentage of sales.
Jeff: Lastly, operating expenses were also impacted by additional fixed costs in particular in the area of occupancy costs from new locations.
As Tim mentioned in his opening remarks, we have begun to see some early signs of success with project 360.
Jeff: During the quarter, our new indirect staffing model was piloted at a temporary hiring freeze was placed on non production roles in preparation for the full rollout of the model in the second quarter of 2025.
Adjusted EBITDA or EBITDA adjusted for fair value adjustments to financial instruments and costs related to acquisitions and transformation cost initiatives was $80 5 million.
Jeff: A decrease of one 4% over the same period of 2024.
Jeff: The $1 $2 million decrease was primarily the result of a decline in same store sales and lower contributions from new locations.
Jeff: Market dynamics, including continued declines in claims volumes and overall economic uncertainty continues to impact demand for services.
Jeff: However, buoyed continues to outperform the industry consistently demonstrating market share gains and is positioning itself well for when conditions improve.
Jeff: Net loss for the first quarter of 2025 was $2 6 million compared to net earnings of $8 4 million in the same period of 2024, excluding fair value adjustments and acquisition and transformation costs. Adjusted net earnings for the first quarter of 2025 was $2 2 million or <unk> 10 cents per share compared to $9 4 million.
Jeff: Or <unk> 44 per share in the same period of the prior year.
Jeff: Adjusted net earnings for the period was negatively impacted by the decrease in adjusted EBITDA as well as increased depreciation and finance costs.
Jeff: At the end of the period, we had total debt net of cash of $1 3 billion.
Jeff: Net of cash increased when compared to the prior quarter, primarily a result of acquisition activity and other investments in the business.
Brian: I would now like to turn the call over to Brian to provide a general business update and discuss our long term growth strategy. Thanks, Jeff Boyd is making progress relative to the five year goal announced earlier this year, which includes growing revenue to $5 billion and doubling adjusted EBITDA to $700 million by 2029.
Brian: Early in the second quarter of 2025, we implemented a new indirect staffing model, which is expected to result in annualized run rate savings of approximately $30 million.
Brian: The indirect staffing model allows us to optimize our cost structure driving near term profitability, while more importantly, laying the foundation for sustained operating leverage as we scale.
Brian: Model includes a detailed playbook for adding non production staff in alignment with business growth along with robust controls to ensure disciplined execution and in hair engineers.
Brian: This represents a significant milestone under project 360, a companywide initiative to drive store economics cost leverage and customer satisfaction projected to result in $70 million of cost savings by the end of 2026, and a total of $100 million in cost savings by 2029.
Brian: Market dynamics, including continuing declines in claims volume and overall economic uncertainty continue to impact demand for services. However, buoyed continues to outperform the industry consistently demonstrating market share gains.
Brian: Well, we're still in early innings of the quarter and thus far the same store sales have been consistent with the first quarter. There have been early signs of insurance premium inflation moderating and used car prices, increasing which are positive trends. The glass business is entering its seasonally higher period and location growth through acquisition is.
Brian: Well as startup continues.
Brian: During the second quarter of 2025. The company has eight startup sites currently scheduled to be open and an additional 16 startup locations anticipated book to be opened through the balance of the year in the second quarter the cost savings driven by the implementation of the indirect staffing model will result in an improvement in adjusted EBITDA.
Brian: <unk> dollars and margin relative to the first quarter of 2025.
Brian: In addition, the payroll benefits reset which impacted the first quarter of 2025 does not have the same impact on the second quarter results and the current environment. We are focused on taking meaningful steps, we're taking meaningful steps that we can control that will benefit the company when demand returns.
Brian: In the long term management remains confident in its business model and its ability to increase market share by expanding its presence in North America through strategic acquisitions alongside organic growth from voice existing operations.
Brian: Accretive growth will remain the companys long term focus whether it's through organic growth new store development or acquisitions, the north American collision repair industry remains highly fragmented and offers attractive opportunities for industry leaders to build value through focused consolidation and economies of scale.
Brian: As a growth company Boyd's objective Boyd's objective continues to be to maintain a conservative dividend policy that will provide the financial flexibility necessary to support growth initiatives, while gradually increasing dividends over time.
Brian: The company remains confident in its management team systems and experience.
Tim O'Day: This along with our strong financial position and financing options positions <unk> well for success into the future I would now like to turn the call back over to Tim before opening the call to questions.
Tim O'Day: Thanks, Brian.
Speaker Change: Boyd's annual meeting today, I will officially step down from my role as Chief Executive Officer, and I am pleased that Brian will be succeeding me.
Speaker Change: It's been a true honor to be part of Boyd's since joining the company through the acquisition of Gerber collision and glass in 2004.
Speaker Change: Deeply grateful to our shareholders clients and trading partners for your trust and support over the years I also want to sincerely. Thank the incredible team at Boyd My executive colleagues and our board I'm immensely proud of what we've accomplished and truly appreciate the confidence you have placed in me.
Speaker Change: And our leadership team throughout this journey.
Speaker Change: With that I'd like to open the call to questions operator.
Speaker Change: Thank you so much ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your Touchtone phone, you'll hear a prompt that your hand has been raised.
Speaker Change: Did you wish to remove your hand from the queue. Please press star followed by two.
Speaker Change: You are using a speaker phone please lift the handset before pressing any Keith just a moment for your first question.
Chris Murray: Your first question comes from Chris Murray at ATB Capital markets. Please go ahead.
Chris Murray: Yes, thanks folks.
Chris Murray: Wondering if we could maybe dig into a couple of the parts of the of the guidance starting with the same store sales.
Chris Murray: Estimates.
Chris Murray: When we came out of Q4, you talked about the fact that you.
Speaker Change: Are you expecting to see some improvement sequentially.
Speaker Change: But then there was also the one fewer production days. So just wondering how the production days fit into the guidance that you guys are thinking about right now.
Speaker Change: And then the other question I have is around kind of the margin profile in the step forward.
Speaker Change: Do you think that 140 basis point trend that we're seeing kind of year over year is that the right way to think about this or is there some sort of stuff is going to accelerate as we go forward.
Speaker Change: Yeah, I'll take the maybe to start off talking about the same store sales.
Speaker Change: Same store sales guidance and so.
Speaker Change: Basically we've seen so far thus far in the quarter similar same store sales that we saw.
Speaker Change: In Q1, and I think that's that's.
Speaker Change: And that's been sort of stubbornly in that very small single digit down sort of range and so it's not we haven't seen it's still early in this quarter, but we haven't seen that tick up yet and so that's still where were residing.
Speaker Change: Yes.
Speaker Change: Just one piece to add to that Chris is obviously there was one.
Speaker Change: Fewer production day than in Q1, there is one there is an equal number of days to prior year in Q2, but still at an equal number of days too.
Speaker Change: Q1, and Q2, yes, so for Q for Q1 on a days adjusted basis, our same store sales would be closer to one 2%.
Speaker Change: Versus the two 8%.
Speaker Change: Okay. That's helpful. Thanks.
Speaker Change: And then just maybe just some thoughts around the margin progression.
Speaker Change: And it sounds like Theres, a lot of moving parts going on right now so I'm just wondering how do we think about may.
Speaker Change: Maybe scaling.
Your expectation for margin increases in absolute EBITDA dollar increases as we go into the next quarter.
Speaker Change: Yes, well so I'll take that question on the on the gross margin side I mean, obviously, we're very pleased with the progress we've made 140 basis points.
Speaker Change: Up over prior year of 40 basis points up sequentially from the fourth quarter. So we're very pleased with the progress we're making in a lot of that is driven by the scanning and calibration internalization, which right now we sit at 60%.
Speaker Change: Of internalized calibration. So we're we're very pleased with the progress we're making there.
Speaker Change: I would say when you think about our gross margins, we there's nothing anomalous that happened in the in the Q1 results that pushed that number up.
Speaker Change: So I wouldn't expect us to see.
Speaker Change: Anything going backwards from that number.
Speaker Change: And then as it relates to in my prepared comments as it relates to the to the operating expenses, obviously, we took a $30 million.
Speaker Change: We took a $30 million cost savings project.
Speaker Change: Doug.
Speaker Change: Took a $30 million cost savings in the in the quarter that on top of that as we said there is benefits reset that always happens in Q1 that we have a size, but it fits or.
Speaker Change: Nominal amount of money that will will ultimately pushed the.
Speaker Change: Operating expenses down in the second quarter versus the first.
Speaker Change: Okay.
Speaker Change: One other question I was going to ask you is just about acquisition growth.
Speaker Change: And the pace of acquisition growth.
Speaker Change: I know you talked you know longer term, it's part of the part of the strategy, but how are you thinking about that over the next few quarters.
Speaker Change: Is it something that Youre, just trying to maybe protect the balance sheet or are you just have a few other things to deal with right now or do you feel comfortable that you could start.
Speaker Change: Finding tuck ins or even smaller msos in the near term.
Speaker Change: And is there anything in the pipeline that you would think that we should be thinking about at least before we get to the end of the year.
Speaker Change: Yes, let me look.
Speaker Change: Still believe that the pipeline is robust enough for us to be able to deliver to deliver on the expectations. We had in the five year plan.
Speaker Change: You are right that red at this point the pacing is is merely a function of our ability to get insurance support for the new locations.
Speaker Change: So, but I do feel like as we've as we've exited the first quarter the robustness of the even some of the smaller msos that are coming into the market puts us in a position where we could accelerate progress as we get towards the end of the year. So we're still we still remain committed to being able to deliver the <unk>.
80 to 100 locations.
Speaker Change: On annual basis.
Speaker Change: Over the five year period, there may be some that are 120, there may be some that are 60, but we still remain committed to the acquisition strategy and are also then using our greenfield strategy to infill the markets that we need to.
Tim O'Day: Okay, that's great and Tim Congratulations on.
Tim O'Day: Near term.
Speaker Change: Thanks, Chris.
Speaker Change: Thanks, guys. Our next question comes from Charles Zhang with TD Cowen. Please go ahead.
Cheryl: Hey, good morning. This is cheryl calling in for Derik Congratulations team on this.
Speaker Change: So it sounds like you're Athleta and congrats Brian first of all Blue Ocean.
Speaker Change: Thank you.
Speaker Change: So our first question is just wanted to add on the previous question on same store sales could you maybe provide a bit of color on how the same store sales trended during Q1 from January to March.
Speaker Change: Can you maybe comment on what Youre seeing so far in Q2 in terms of their repair activity at the shop level.
Speaker Change: Yes, I wouldn't say there was anything.
Speaker Change: So I wouldn't say that there was.
Speaker Change: Anything particular that showed us.
Speaker Change: Any meaningful change month to month in the first quarter I mean, as we reported late in the first quarter, our fourth quarter earnings and as we came out we gave guidance that we would be down and frankly in the in the range that we ended up in and that was reflective of what was happening in the claims environment at that time.
Speaker Change: As we sit here today, we have.
Speaker Change: We've just we've said that the claims volume or that our same store sales is anticipated to be pretty consistent with what our same store sales decline is pretty consistent with what we saw in Q1, which would indicate that the claims environment is probably similar to what we saw in Q1.
Speaker Change: Okay got it thanks for the color.
Speaker Change: And then on progress through <unk>, you said that you implemented the indirect staffing model.
Speaker Change: Curious when do you expect that to be fully rolled out and for the remaining 40 million of savings.
Speaker Change: At the end of 2026 is that primarily targeting the gross margin I think you called out procurement savings and how should we be thinking about the cadence.
Speaker Change: Yes, so the $30 million cost savings initiative was actually executed on April 4th.
Speaker Change: So it is at this point.
Speaker Change: With the exception of a week or two in April fully rolled out.
Speaker Change: So you can consider that one done.
Speaker Change: Balance of the $40 million I would say is.
Speaker Change: There is definitely some some actions that are targeted at gross margin, but there are also still remaining actions on operating expenses, particularly relative to indirect procurement savings and some other.
Speaker Change: Some other pay initiatives that we have going on so I wouldn't say that.
Speaker Change: We are done with operating expenses, we still believe we've got opportunities to take cost out there.
Speaker Change: And then as far as how I would.
Speaker Change: I think you can model it how you want over the next two years, but the first Big project was really this.
Speaker Change: The indirect staffing model changes that we made and if there are other big projects. We will certainly note them throughout the coming quarters to make sure that you understand.
Speaker Change: The nature and size of those those opportunities, but beyond that I, probably think about it ratably over the next over the next.
Speaker Change: The quarters, leading up to the end of 2026.
Speaker Change: Okay got it that's very helpful. Thank you I'll re queue.
Okay. Thank you.
Speaker Change: Your next question comes from Steve Hansen with Raymond James. Please go ahead.
Steve Hansen: Hi, Steve.
Steve Hansen: Good morning, guys. Thanks for the time could we could go back to the gross margin improvements and the lack of flow through into the operating line.
Steve Hansen: To understand what the key oil back Dave I think you referenced volumes in particular, but is there other issues, perhaps the payroll expense maybe quantify that for us just trying understand that flow through and what we need to see I guess from your side to make that leverage that show up a little bit better.
Steve Hansen: Yes.
Steve Hansen: In the quarter I mean, obviously the first quarter, we as we've said we have these.
Steve Hansen: These excess expenses that.
Steve Hansen: It hit Us every single quarter.
Steve Hansen: Every first quarter every first quarters.
Steve Hansen: And beyond that there was there certainly was no. There was no payroll expense that was driving the lack of leverage up.
Steve Hansen: There is a lack of leverage down I should say, we were we did experience declines in our payroll expense in the first quarter as we had implemented a hiring freeze at the beginning of the quarter. There were some other there were some other I would say anomalous things that were happening. Obviously, we had a we did have a on a year over year basis had a much different.
Steve Hansen: Winter season that actually serve to prop up some that serves to prop up some volume in the northern markets, but it but it also serves to drive up occupancy cost, particularly around the maintenance of the plowing and things like that in our facilities, which.
Steve Hansen: Doesn't sound like it could be a lot, but when you spread it across a lot of locations that can be it can be substantive. So I would expect that as we if you do the math on the couple of elements that we've we've articulated for Q2 that we would expect to see pretty significant leverage in Q1.
Speaker Change: Q1 versus Q2, and Brian maybe maybe I'll, just add some context as well around our sales or sales level. If you look at a year ago. Our sales today are very much in line with what sales were at a year ago. Although we've added 58 additional locations during that time and so you've got this cost burden.
Speaker Change: That exists now within the structure with some immature stores that are still developing and not seeing the volume that they would have normally seen in a normal environment and so they're not contributing the same sales that that we would expect and then you've also got the same same store sales declines on the on the mature base of stores.
Speaker Change: That isn't isn't helping their operating expense leverage either so that's really the kind of the dilemma that we're in.
Speaker Change: In the current environment.
Speaker Change: Okay.
Speaker Change: That's very helpful guys. Thanks.
Speaker Change: I appreciate that color and then I just wanted to go back to the the Greenfield.
Speaker Change: Rollout again.
Speaker Change: A key part of the strategic plan here, Brian I think you referenced something your earlier remarks around getting insurance support maybe just walk us through what that means and how you gather that support over time to sort of accelerate sort of the sort of look at those locations.
Speaker Change: It's will they get back holding impact relative to what you expect it to the balance of the year. Thanks.
Speaker Change: I mean look the current claims environment is what holds back particularly on acquisitions on Greenfields, we can be a little bit more forthright with the insurance carriers on where we're going which actually does gives us an opportunity to hedge success and a greenfield location, because we're talking to carriers about where they need support when we're doing an acquisition.
Speaker Change: A little bit tougher because theres a little through certainly has some confidentiality thats needed in that.
Speaker Change: And that type of a transaction that doesn't allow us to get.
Speaker Change: Ahead of the insurance carrier demand expectations.
Speaker Change: It just makes it a more difficult that can make it can slow the maturing of an acquired store.
Speaker Change: Down and I think Thats, certainly what were seeing and Jeff just referenced we've got 58, new locations that are on a year over year basis in our in our infrastructure debt.
Speaker Change: Haven't meaningfully contributed or Havent matured at the same level that we would have seen them mature prior to the claims decline. So that is that's more what I'm referencing it's more on the acquisition side than it is on the Greenfield side.
Speaker Change: Understood. Thanks, guys.
Speaker Change: Thanks.
Speaker Change: Your next question comes from Kate Mcshane with Goldman Sachs. Please go ahead.
Speaker Change: Good morning. This is mark Jordan on for Kate Mcshane, Thank you for taking our questions.
Speaker Change: Can you help us quantify the impact of the claims deferral in.
Speaker Change: Are you seeing or hearing across the industry that trends are improving in that regard because it sounds like the insurance inflation is lessening so should that headwind kind of lessen with that as well.
Speaker Change: Yes.
Speaker Change: Talk.
Speaker Change: The notion of deferral Im not sure as it is the right way to characterize it I mean, we've talked about this this idea that liability claims there's two different parts of the claims theres a liability claim which the person that was on.
Speaker Change: On the receiving end of an accident and then there is the one that was on the giving into the accident that first.
Speaker Change: <unk>.
Speaker Change: What we're seeing in the marketplace as liability claims remain relatively speaking consistent with where they've been down in that 2% to 3%, which as we've said publicly many times now we expect the market to be down 2%.
Speaker Change: From a claims volume perspective, driven by the penetration of Adas, we expect.
Speaker Change: Miles driven to contribute miles driven and frankly growth in the car park to contribute 1% increase in claims.
Speaker Change: And that all of that that negative to be offset by an improvement in the average cost of repair, which is mostly driven by the increase the increasing penetration of aid us in.
Speaker Change: Some other movements on parts and labor pricing. So we expect that's the dynamic we expect in the industry right now that liability claim which is indicative mostly of accident frequency is is that 2% to 3% range. The one area that is not which is more reflective of.
Under insured motorist and consumer confidence is when the collision claims or.
Speaker Change: Our declining at a much more rapid pace than liability claims and that's what we're seeing right now and that's what we saw coming out of the recession. It took.
It took.
Speaker Change: At that time it took a.
Speaker Change: A couple of years for that to work itself out.
Speaker Change: We saw five store or five quarters of same store sales decline coming out of the recession.
Speaker Change: And.
Speaker Change: Again, I think from our perspective, we were on our we just announced our fourth quarter of same store sales decline.
Speaker Change: With some of the stuff that's happening in the industry as it relates to used car pricing going up that actually pushes total losses Downer should push total losses down insurance premiums are moderating.
Speaker Change: Which should be a positive for us, but again I think what what what.
Speaker Change: Consumers are going to have to do and what they are doing right. Now is switching carriers carrier switching and carrier shopping is at an 18 year high.
Because people are under insured at this point and need to be able to put themselves at a proper.
Speaker Change: With proper coverage so.
Speaker Change: I don't know that I would characterize it as deferral I'd characterize it as the general consumer confidence is down right now.
Speaker Change: That's putting pressure on.
Speaker Change: Putting pressure on collision claims at the moment.
Speaker Change: Perfect. Thank you very much for that answer.
Speaker Change: That's very insightful.
Speaker Change: As we think about maybe inflationary cost increases what impact did that have on operating expenses for <unk> and how should we be thinking about that for the remainder of the year.
Speaker Change: Yes, I wouldn't say that there was anything unique about the inflationary environment for on the cost side its pretty typical with what you would see see normally and that low low single digit inflationary increases across.
Speaker Change: Across the board with some things being a little more but some being less so there's nothing unique about the inflation itself.
Speaker Change: Alright, Thank you very much.
Speaker Change: Okay.
Speaker Change: Your next question comes from Gary Ho with D. Jordan. Please go ahead.
Gary: Good morning, Gary Good morning.
Gary Ho: First question, just wondering if you're seeing kind of parts pricing increase that to some of the tariff noise and how should we think about that versus <unk>.
Gary Ho: Early signs of used car pricing rebounding kind of saw the April Mannheim data being pretty encouraging there.
Gary Ho: Yes, we have not seen any meaningful movement on list price.
Gary Ho: Creases on the park side yet.
Gary Ho: I do suspect that over some period of time as certainty comes into the tariff situation.
Gary Ho: That will or will or will not have the impact we've articulated and as you said I mean, we we kind of view the tariff situation is a.
Gary Ho: It's a positive to neutral for us.
Gary Ho: Just driven by the fact that I think a couple of manufacturers have come out with price increases on new cars, ranging from 3% to $10000 as those new car prices go up used car prices should follow as you indicated manheim is starting to see that that will.
Gary Ho: Over time that will start to drive down total losses, and when total losses go down it puts more expensive tickets into our shops and more tickets.
And as we get more expensive tickets right now one of the things that we've seen from a.
Gary Ho: From an average cost of repair perspective, as it's been relatively muted.
Gary Ho: The total losses are muting, the the benefit of some of the price increases and other normal movement that happens with average cost of repair.
Gary Ho: So as we can as we ease on that or easily either ease or overlap those total loss.
Gary Ho: Ratios, we would expect that to start to return to a more normal level, where we'd see four 5%.
Gary Ho: Improvement in price every single year increase in price every single year, partially offset by our claims environment that's down.
Gary Ho: 1% to 2%.
Speaker Change: Okay, Great and then my next question just going back I guess.
Gary Ho: Related to your question from last one just.
Gary Ho: The premiums moderating used car pricing increasing comments.
Gary Ho: When you look back in history, how quickly will you see these kind of come back to.
Gary Ho: Same store sales growth line, what's the typical lag just assuming these trends persist.
Speaker Change: Yes, I mean look we talked about the last time. This happened we were five quarters of decline.
Gary Ho: <unk>.
Gary Ho: Hi.
Gary Ho: We don't give forward looking guidance. So it's tough to answer that question, it's tough to understand where.
Gary Ho: Where will we start to see.
Gary Ho: Claims declines easing, we don't need them to go positive right.
Gary Ho: Alright, we don't expect them to go positive, we expect them to get back to a normal level of negative.
Gary Ho: And then you get the pricing back and again I think right now total losses was having a pretty big effect on the.
The average cost of a repair and as total losses go down I would expect that the positive side from a premium perspective, or a pricing perspective to actually go.
Gary Ho: A positive direction.
Gary Ho: Premium insurance premiums right now I think are down on a 12 month basis are still the highest category of <unk>.
Gary Ho: CPI.
Gary Ho: But there are certainly way way down from where they are.
From where they were a year ago. So that that's positive for us, but again I think until K until people start switching and making different choices on their insurance, which usually does take a cycle.
Gary Ho: That's when we would expect to start to see some changes in.
Gary Ho: The dynamics in the marketplace.
Gary Ho: Okay, Great and then maybe just the last one.
Gary Ho: I just wanted to confirm the numbers question. So the minus one 2% on a production day adjusted basis. So I guess in your outlook here.
Gary Ho: Navigating to that number as opposed to the reported two 8% and in second.
Gary Ho: I think last quarter, you gave an adjusted EBIT dollar comment at.
Gary Ho: At least kind of what you saw so far.
Gary Ho: A bunch of moving pieces in Q2 and make the project 360, the payroll seasonality just wondering like maybe qualitatively. If you can if there is anything that you can share.
Gary Ho: Yeah, well, maybe I'll just I'll just address while just bolts questions in terms of the in terms of the same store sales I think that you've articulated the range the range of the $2 eight to the one two that sort of the range that we're referring to so that's the guidance on on what we're seeing so far in Q2.
Gary Ho: I guess with respect to the other question.
Gary Ho: Yes.
Gary Ho: On the margin side I would I do expect that there is to your point there is noise, but we actually feel really good about how we're positioned from a margin perspective at this point. We're we've taken the cost actions on project 360, as we said that's going to give us $30 million of benefit.
Gary Ho: Over for <unk>.
Gary Ho: That particular project, which again you can you can do the math on what a quarter of that looks like.
Gary Ho: And then the incremental benefit on this this this payroll reset if you will.
Gary Ho: Does does serve to put us in a position all of that coupled with.
Very strong improvement in gross margins a little bit of same store sales growth going back to the system again is going to be it's going to drive.
Gary Ho: A lot of leverage in a really good financial position for us. So we feel like we're taking the actions that we need to take in order to.
Gary Ho: Put ourselves in the best position to take volume when it comes back and I think that margin profile as we've articulated in the five year plan.
Gary Ho: We had a near term objective to get back to 13%. We've got a long term objective to get back to 14% we feel like.
Gary Ho: The second quarter, we will put us in a good position on that on that.
Gary Ho: On that journey.
Speaker Change: Okay, great. Thanks for those comments and Tim Congrats again.
Gary Ho: Your new chapters.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Daryl Young with Stifel. Please go ahead.
Daryl Young: Hey, good morning, everyone.
Daryl Young: Just with respect to the glass industry and a bit of a two part question.
Daryl Young: Are you seeing early to see any meaningful uptick in market share from from doing repairs.
Daryl Young: In facility as opposed to mobile bands.
Daryl Young: Currently and then secondly is there anything to make of the recent agreement that <unk> signed with state farm.
Daryl Young: B I believe an exclusive glass repair provider.
Daryl Young: Okay.
Daryl Young: Yes, as it relates to the first part of your question I would I don't see any real meaningful change in market share gains based on the.
Daryl Young: The need for brick and mortar locations.
Daryl Young: And then on the Safeway question, we were obviously.
Daryl Young: Disappointed to see that.
Daryl Young: But say flight is the.
Daryl Young: I think that.
Daryl Young: That was a.
Daryl Young: There is still we still will benefit from that agreement.
Daryl Young: There is still plenty of retail claims that come out of.
Daryl Young: The lack of capacity that are safelight would have to fulfill that much demand that ends up coming into our system as well anyway.
Daryl Young: There is customer choice and auto glass claims and the relationship the exclusive relationship is with the same with the Tpa owned by Safeway Safeway to retail.
Daryl Young: Our go to market strategy is really.
Daryl Young: Not to the Tpa is through other sources of referral such as insurance agents.
Daryl Young: Got it okay. Thanks, and then one more.
Daryl Young: With respect to your margin profile in the Greenfield ramp up are you able to give us sort of a run rate here's what our margins were or said differently. What the drags quantifiable drag was from the Greenfield ramp ups currently.
Daryl Young: Yes, I wouldn't again I wouldn't classify the.
Daryl Young: The Greenfield ramp up right now is there's much different than the the acquisitive ramp up.
Daryl Young: Because I think that cash kind of a different light on greenfields, we set a greenfields take another an additional year to two.
Speaker Change: <unk> versus <unk> versus an acquisition I think Jeff quantified in his prepared statements some of the negative impacts to each of the line items on the whether it was opex or even talked about the 58 stores relative to the to the somewhat about the growth profile.
Speaker Change: That would be contributing you can do that math the same store sales are down.
Speaker Change: Two 8% and 58 stores 758 stores contributed some number so I think you can back into that math without us providing that clarity looking forward. We have we have provided the opex ratio for new locations. So that you can you can use that as a bit of a guide as well.
Speaker Change: Yes.
Speaker Change: Got it okay. Thanks, very much guys I'll jump back in the queue.
Speaker Change: Thanks.
Speaker Change: Your next question comes from Christof reason with CIBC. Please go ahead.
Christof reason: Thanks for taking my question.
Speaker Change: Maybe if I can just.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: For Q2.
Speaker Change: I appreciate that what Youre seeing right now is similar to what you saw in Q2.
Speaker Change: As we get through this quarter would you expect to see a bit more of an improvement simply because of the comps that you're now lapping from last Q2's negative same store sales Chris. Thanks.
Chris Murray: Yes, let me look at the claims is relative.
Chris Murray: Copying negative number as well so I think we're still in a position where we feel like we're outpacing the marketplace and taking market share based on the current claims backdrop.
Chris Murray: So what we're really looking for is for that to change and we have seen even if you look at the sequential changes that we've experienced over the last.
Chris Murray: Four quarters, it's down three 2% in Q2 of last year down 35 in Q3 down two six.
Chris Murray: And as Jeff said with one less production days in Q1 down one 2%. So we have seen sequential benefits from.
Chris Murray: <unk>.
Chris Murray: Just from our internal actions to drive more of a higher capture rate on the claims that are coming our way.
Chris Murray: And that's really what's putting us in a position to take market share gains.
Chris Murray: Okay.
Chris Murray: Okay, great. Thank you.
Chris Murray: And.
Chris Murray: And then I was also just wondering if you can.
Chris Murray: It's just a bit of context.
Chris Murray: Previously before when you noted your thoughts.
Chris Murray: Consecutive quarters of negative same store sales growth.
Chris Murray: Got it.
Chris Murray: Inflect after those five quarters. So is it at a very strong return to growth or just.
Chris Murray: More.
Chris Murray: It's more incremental I guess.
Chris Murray: It was it was a it was a moderate increase after and so there was a bit of a pickup last time again, it's a small sample size we're talking about.
Chris Murray: <unk>.
One period for over 10 years ago, and so there's there are some different dynamics at play here, but but to answer your question there was a bit of a bounce back after.
Tim O'Day: Thanks, I appreciate it congratulations Tim and Brian and ill jump back in queue.
Chris Murray: Thanks Christopher.
Speaker Change: Your next question comes from Zachary <unk> with National Bank. Please go ahead.
Speaker Change: Congrats Tim and Brian Thanks for taking my questions.
Tim O'Day: Thanks, Eric.
Speaker Change: Could you tell us a bit more.
Speaker Change: The kind of softer stuff in the indirect staffing model. So there is an established playbook and good.
Speaker Change: Rigorous controls.
Speaker Change: What are the changes that are being made to the model how does it how does it work.
Speaker Change: Well I would say the primary change to the model is driven.
Speaker Change: Off of <unk>.
Speaker Change: Changing the bands of revenue and as we all know that the last five years of the industry.
Speaker Change: The marketplace has grown and not through incremental cars, but has grown through incremental ticket.
Speaker Change: And as you look at what were what we were driving our staffing model for the indirect side of our business off of it was off of revenue bands. So.
Speaker Change: We think about over the last five years the revenue the average ticket has grown almost 40% from 19% to 24.
Speaker Change: And as that 40% ticket growth is what's happening the stores, we're putting more we were putting more indirect staffing into the into the locations will drive the need for front office staff does not.
Speaker Change: It's not the size of the ticket as the number of cars that we see so we reoriented the staffing model to be.
Speaker Change: More aligned with the staffing levels that we had in 2019 against that ticket level.
Speaker Change: And essentially boosted the bands.
Speaker Change: At which we put different levels are different resources into the stores. So thats the primary difference.
Speaker Change: We took a we took a crack at this last year as well. So we had taken some costs out last year on the indirect side as we reach the midpoint of the year and we've just further refined.
Speaker Change: That model.
Speaker Change: Earlier this year.
Speaker Change: Yes.
Speaker Change: Got you thanks.
Speaker Change: And how have shop reactions have been thus far to changes in staffing procedures, any pushback or bumps and implementation.
Speaker Change: Yes look these things are always hard and they're not they're certainly not the.
Speaker Change: The types of things that we want to do on a frequent basis, but.
Speaker Change: But I would say the shop responsiveness has been.
Speaker Change: It has been.
Speaker Change: <unk>.
Speaker Change: We dealt with what we needed to deal with with empathy.
Speaker Change: And kindness to the to the folks that were affected in the shops now are back to business and realizing that.
Speaker Change: That the way to not have to do this again is to drive more sales through our system. So that we're getting the leverage out of the resources that we have so I think it's it's almost created a renewed focus on driving the top line of our business out in the stores.
Speaker Change: Interesting. Thank you.
Speaker Change: Last one for me.
Speaker Change: Looking at your acquisition and development of business cash outflows was any of that Frontloaded in Q1 for the scheduled startups in Q2 and the rest of the year.
Yes, yes, there is a chunk of that spend as it relates to upcoming upcoming growth.
And given the pace that you guys are setting for yourselves and for the 2000.
Speaker Change: <unk> 29 targets at is there any reason to think that that will moderate or it should be a pretty steady drumbeat as we go forward.
Speaker Change: I wouldn't say that it's done outside.
Speaker Change: Outside of a range of what we would expect.
Speaker Change: Yes.
Speaker Change: Thank you very much I'll turn it over.
Speaker Change: Thanks, Thanks, Ed.
Speaker Change: Our next question comes from Bret Jordan with Jefferies. Please go ahead.
Bret Jordan: Good morning, guys.
Bret Jordan: Hey, Thanks. Good morning, I think you mentioned in the prepared remarks that rather propped up volume a bit in the quarter feeling sort of for what the weather contribution might have been and does it continue to support the second quarter.
Bret Jordan: Yeah.
Bret Jordan: When we released the fourth quarter results. We did indicate that are at that time, our northern markets. We are seeing positive same store sales growth, which gave us a it did give us.
Bret Jordan: The belief that weather did play a factor in what we experienced.
Bret Jordan: Last year.
Bret Jordan: But we haven't provided any specific numbers around the relative impact of that.
Speaker Change: Okay, and then I think you also mentioned that sort of to get structural change in volumes. This insurance behavior takes a cycle.
Speaker Change: I guess by your best estimate when the cycle began.
Speaker Change: Or when did the change of the shopping of policies start that we might sort of think about.
Speaker Change: When the actual demand might change yes.
Speaker Change: Yes, I think as you know I mean, when I say, it's a cycle of people typically sign up for annual agreements other insurance and I think people probably saw price increases flowing through.
Speaker Change: Flowing through.
Speaker Change: Last year as their contracts came up for renewal.
Speaker Change: That shock they had to absorb.
Speaker Change: And the question is once you absorb that shocked you do build it into your your normal monthly spending behavior or do you start to look at.
Speaker Change: A different carrier and I think as we sit here now.
Speaker Change: J D power and others that study what happens in the insurance carrier space certainly would indicate that.
Speaker Change: The activity around.
Speaker Change: Shopping for a new carrier switching is very active right now and I think in addition to that if you look at the profitability of the insurance carriers right now there is room for there's room for some movement there.
Speaker Change: And then quick.
Speaker Change: Sort of.
Speaker Change: Anecdotal question do you see any change in total loss rates as the quarter progressed I mean, obviously you get the quarterly data.
Speaker Change: April was a pretty strong months per used vehicle values did you see.
Speaker Change: Have you seen any change in loss rates as we've progressed here in 'twenty five.
Speaker Change: Yes, I mean that data it takes us probably a little bit more of a lag on that data because it takes time for it to mature.
Speaker Change: So I can't really comment that we've seen any real change in that in the short term, but but.
Speaker Change: Think we would expect no different than what happened in coming out of the pandemic win.
News cart when new car used car prices started to increase we did see at that time history would tell us the total losses did start to.
Speaker Change: To decline so I think that is that is one that.
Watchful waiting for us where we're looking for that to have the same impact as it had coming out of the pandemic.
Great. Thank you.
Speaker Change: Yes.
Your next question comes from Charles Young with TD Cowen. Please go ahead.
Charles Young: Hi, Thanks for taking a follow up and just wanted to follow up on the collision claims. Obviously there are so many moving parts, but how do you feel about collision claims trends in the back half of the year do you think collision claims coming back would be more likely a second half event or maybe potentially in the 2026.
Speaker Change: Yes.
Speaker Change: I think it's tough to comment on that.
Speaker Change: I would.
Speaker Change: It's really it goes back to the same.
The same statement made earlier is a lot to do with.
Speaker Change: The how well positioned people are from an insurance perspective, and and what happens with consumer confidence I mean, the person that gets into an accident has a deductible or the person that causes that accident has a deductible to pay when insurance premiums go up they have attended one lever. They can pull is to raise their deductible, which.
Speaker Change: Could put them in a position where they're they don't have the financial flexibility to pay that deductible to get the repair done. So that is that's the one I think that's the one elusive element for US is when will that when will that is.
Speaker Change: Because what we do know is accidents are still occurring the liability claims.
Speaker Change: <unk> only down in the 2% to 3% range indicates to us at the same level of accident frequency is out there as it was before so the notion that something magical happened where a das was.
Speaker Change: Aid us is magically now change the dynamic of accident frequency. We don't think has happened because liability claims are still is there still pretty consistent with where they've been we just need the collision side.
Speaker Change: To follow suit and again, we don't need it to turn positive we just need it to be less negative.
Speaker Change: Alright, Thank you for the comment and maybe just one more from me just looking at the Leverages since a little above your long term target range.
Speaker Change: Just curious how you think about.
Speaker Change: Leveraging of claim volumes continued to be pressured over the coming quarters.
Speaker Change: Yes, I mean, I think as we as we've guided on the EBITDA side and as you model that out you will see that.
Speaker Change: Our EBITDA improves youll start to see the leverage the leverage decrease as well so Jeff.
Speaker Change: No I think that's why we've been under fairly.
Speaker Change: Lengthy duration of challenged EBITDA delivery and we've got underperforming assets as a result.
Speaker Change: 58, new locations as the one.
Speaker Change: When we referenced earlier so once we see those things come back in line. Then then similar leverage.
Speaker Change: Got it thank you for taking my questions.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Tristan Thomas Martin with BMO Capital. Please go ahead.
Speaker Change: Hey, good morning, and congrats thank you Brian.
Speaker Change: For me there.
Speaker Change: Is there just kind of a rule of thumb is a consumer does switch their car insurance. So they may be a little more hesitant to come back to the market. They don't want them immediately file a claim or is it truly a consumer kind of headwind issue, where they'd rather maybe build up their piggy bank a little bit and then returned to the markets. Thanks.
Speaker Change: Yes, I think it's an interesting way to answer that question a year ago I, probably would have said that people were deferring claims because they were afraid of insurance price or insurance premium increases, but I think at this point everybody has experienced because they have gone through a.
Speaker Change: They've gone through a cycle, where they've had to renew their insurance I think everybody is probably experienced.
Speaker Change: The pain of insurance premium increases so I don't I don't believe that that dynamic is existing now I think now it's a question of how well positioned are they with the insurance that they have.
Speaker Change: And does that put them in a position where they can afford to file the claim on the collision side on the on the person who caused the accident side.
Speaker Change: Yes.
Speaker Change: Okay. Thank you.
Speaker Change: Sure.
Speaker Change: Great. Thanks.
Speaker Change: There are no further questions at this time I would now like to turn the call over to Brian Keenan. Please go ahead.
Speaker Change: Okay.
Brian Keenan: Well nothing further from us so thank you operator, and thank you all once again for joining our call today and we look forward to reporting our second quarter results in August. Thanks.
Brian Keenan: Thanks, again and have a great day.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Sure.