Boyd Group Services Inc (BGSI) 2025 Q1 法說會逐字稿

Good morning, everyone. Welcome to the Boyd Group Services, Inc. first-quarter 2025 results conference call. Listeners are reminded that certain matters discussed in today's conference call or answers that may be 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 SEDAR's database found at sedarplus.ca.

I'd like to remind everyone that this conference call is being recorded today, Wednesday, May 14, 2025. I would now like to introduce Mr. Tim O'Day, President and Chief Executive Officer of Boyd Group Services, Incorporated. Please go ahead, Mr. 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 Kaner, our President and Chief Operating Officer.

We released our 2025 first quarter results before markets open today. You can access our news release as well as our complete financial statements and management discussion and analysis on our website at boydgroup.com. Our news release, financial statements and MD&A have also been filed on SEDAR+ this morning.

On today's call, we'll discuss the financial results for the three-month period ended March 31 and provide a general business update. We'll then open the call for questions. Boyd continued to deliver market share gains during the first quarter of 2025, posting same-store sales declines of only 2.8% in a market where declines in repairable claims were estimated by industry sources to be down in the range of 9% to 10%.

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. Boyd's internalization of scanning and calibration services as well as improvements in performance-based pricing while 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.

I would now like to turn the call over to Jeff Murray to discuss our first quarter financial results.

Thanks, Tim. For the first quarter of 2025, sales were $778.3 million, a 1% increase when compared to the same period of 2024. This reflects a $20.4 million of incremental sales from 58 new locations that were not in operation for the full comparative period. Our same-store sales, excluding foreign exchange, decreased to 2.8% in the first quarter, recognizing one less selling and production day when compared to the same period of 2024.

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 a celebration, improvements to performance-based pricing and improved glass margins.

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. 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 had a higher operating ratio of 38.4%.

In addition, while the internalization of scanning and calibration contributes positively to gross profit and adjusted EBITDA, it does not contribute incremental sales and therefore, increases operating expenses as a percentage of sales.

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.

During the quarter, a new indirect staffing model was piloted and a temporary hiring freeze was placed on nonproduction 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, a decrease of 1.4% over the same period of 2024.

The $1.2 million decrease was primarily the result of a decline in same-store sales and lower contributions from new locations. Market dynamics including continued declines in claims volumes and overall economic uncertainty continued to impact demand for services. However, Boyd continues to outperform the industry consistently demonstrating market share gains and is positioning itself well for when conditions improve.

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 $0.10 per share compared to $9.4 million or $0.44 per share in the same period of the prior year.

Adjusted net earnings for the period was negatively impacted by the decrease in adjusted EBITDA as well as increased depreciation and finance costs. At the end of the period, we had total debt net of cash of $1.3 billion, debt net of cash increased when compared to the prior quarter, primarily a result of acquisition activity and other investments in the business.

I would now like to turn the call over to Brian Kaner 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 included growing revenue to $5 billion and doubling adjusted EBITDA to $700 million by 2029. Early in the second quarter of 2025, we implemented a new indirect staffing model, which has result in annualized run rate savings of approximately $30 million.

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. The model includes a detailed playbook for adding nonproduction staff and alignment with business growth along with robust controls to ensure disciplined execution and adherence.

This represents a significant milestone under Project 360, a company-wide 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.

Market dynamics, including continuing declines in claims volume and overall economic uncertainty continue to impact demand for services. However, Boyd continues to outperform the industry, consistently demonstrating market share gains. While 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 a seasonally higher period and location growth through acquisition as well as start-up continues.

During the second quarter of 2025, the company has eight start-up sites currently scheduled to be opened and an additional 16 start-up locations anticipated to be open 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 dollars and margin relative to the first quarter of 2025.

In addition, the payroll benefits reset, which impacted the first quarter of 2025 does not have the same impact on the second quarter results. In the current environment, we are focused on taking meaningful steps but taking some meaningful steps that we can control that will benefit the company when demand returns.

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 Boyd's existing operations. Accretive growth will remain the company's 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. As a growth company, 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. The company remains confident in its management team, systems and experience.

This, along with a strong financial position and financing options positions Boyd's Wealth for success into the future.

I'd now like to turn the call back over to Tim before opening the call to questions.

Thanks, Brian. At Boyd's Annual Meeting today, I will officially step down from my role as Chief Executive Officer, and I'm pleased that Brian will be succeeding me. It's been a true honor to be part of Boyd since joining the company through the acquisition of Gerber Collision & Glass in 2004. I'm 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 and our leadership team throughout this journey.

With that, I'd like to open the call to questions. Operator?

Thank you so much, ladies and gentlemen. We'll now begin the question-and-answer session. (Operator Instructions)

Chris Murray, ATB Capital Markets.

Yeah, thanks folks. I was wondering if we could maybe dig into a couple of the parts of the guidance, starting with the same-store sales estimate. I know that when we came out of Q4, you talked about the fact that you expected to see some improvement sequentially 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. And then the other question I have is around kind of the margin profile and the step forward. 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 stuff that's going to accelerate as we go forward?

Yeah, I'll take the -- maybe start off talking about the same-store sales guidance. And so basically, we've seen so far thus far in the quarter, similar same-store sales that we saw in Q1. And I think 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 pick up yet, and so that's still where we're residing.

Yeah, and I guess just one piece to add to that, Chris, is obviously, there was one fewer production day in Q1. There's one -- there's an equal number of days to prior year in but still in an equal number of days to Q1 and Q2.

Yes. So for Q1, on a days adjusted basis, our same-store sales would be closer to 1.2% versus the 2.8%.

Okay, that's helpful, thanks. And then just maybe just some thoughts around the margin progression. And it sounds like there's a lot of moving parts going on right now. So just wondering how we think about maybe scaling your expectation for margin increases and absolute EBITDA dollar increases as we go into the next quarter.

Yeah, well, so I'll take that question. On the gross margin side, I mean, obviously, we're very pleased with the progress we've made, 140 basis points up over prior year, 40 basis points up sequentially and from the fourth quarter. So we're very pleased with the progress we're making. And a lot of that is driven by the scanning and calibration internalization, which right now sits at we sit at 6% of internalized calibrations. So we're pleased with the progress we're making there.

I would say, when you think about our gross margins, there's nothing anomalous that happened in the Q1 results that pushed that number up. So I wouldn't expect us to see anything going backwards from that number.

And then as it relates to in my prepared comments as it relates to the operating expenses. Obviously, we took a $30 million cost savings project or we took a $30 million cost savings in the quarter. And then on top of that, as we said, there is this benefit reset that always happens in Q1 that we have a size, but it's a nominal amount of money that will ultimately push the operating expenses down in the second quarter versus the first.

Okay. One of the questions I was going to ask you is just about acquisition growth and the pace of acquisition growth. I know you talked longer term, it's part of the strategy, but how are you thinking about that over the next few quarters, is it something that you're just trying to maybe protect the balance sheet or you just have a few other things to deal with right now?

Or do you feel comfortable that you could start maybe finding tuck-ins or even smaller MSOs in the near term? 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?

Yeah, I mean, look, I still believe that the pipeline is robust enough for us to be able to deliver on the expectations we had in the five-year plan. You are right that at this point, the pacing is merely a function of our ability to get insurance support for the new locations.

But I do feel like, 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 80 to 100 locations on a manual basis 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 do.

Okay, that's great, and Tim, congratulations on your term.

Thanks, Chris.

Cheryl Zhang, TD Cowen.

Hey, good morning. This is Cheryl calling for Derek. Congratulations team on this, successful career at Boyd, and congrats Brian for the official promotion.

Thank you.

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. And can you maybe comment on what you're seeing so far in Q2 in terms of the repair activity at the shop level?

Yeah, I wouldn't say there was anything. I wouldn't say that there was anything particular that showed us 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 in frankly, in the range that we ended in and that was reflective of what was happening in the claims environment at that time.

And as we sit here today, we've said that the claims volume or our same-store sales is anticipated to be pretty consistent with what 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.

Okay, got it. Thanks for the color. And then on Project 360, you said that you implemented an indirect staffing model I'm curious when do you expect that to be fully rolled out? And for the remaining $40 million of savings by 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?

Yeah, so the $30 million cost savings initiative was actually executed on April 4. So it is, at this point, with the exception of a week two and April fully rolled out. So you can consider that one done. The balance of the $40 million, I would say is there is definitely 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 pay initiatives that we have going on.

So I wouldn't say that we're done with operating expenses, I still believe we've got opportunities to take cost out there. And then as far as how I would I think you can model it how you want over the next two years, but the first big project was really this the indirect staffing model changes that we made. And if there are other big projects, we'll certainly note them throughout the coming quarters to make sure that you understand the nature and size of those opportunities.

But beyond that, I probably think about it ratably over the next quarters leading up to the end of 2026.

Got it. That's very helpful. Thank you, and I'll reach you.

Thank you.

Steve Hansen with Raymond James.

Hi Steve.

Yeah, good morning, guys. Thanks for the time. Could we go back to the gross margin improvements and the lack of flow-through into the operating line? Just trying to understand what the key holdback is. I think you referenced volumes in particular. But are there other issues perhaps the payroll wins maybe quantify that for us. Just trying to understand that flow through and what we need to see, I guess, from your side to make that leverage show up a little bit better.

Yeah, I think that in the quarter, I mean, obviously, the first quarter is we have these excess expense that kind of hit us every single quarter every first quarter. And beyond that, there was certainly was no control expense was driving the lack of leverage up or the lack of leverage down, I should say.

We did experience declines in our payroll expense in the first quarter as we had implemented the hiring freeze at the beginning of the quarter. There were some other, I would say, anomalous things that were happening. Obviously, we did have on a year-over-year basis at a much different season that actually served to prop up some that serves to prop up some volume in the northern markets.

But it also serves to drive up occupancy cost, particularly around the maintenance of the plowing and things like that in our facilities, which doesn't sound like it could be a lot when you spread it across a lot of locations. It can be substantive. So I would expect that as we do the math on the a couple of elements that we've articulated for Q2, we expect to see pretty significant leverage in Q1 versus Q2.

And Brian, maybe I'll just add some context as well around our 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 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 we would expect.

And then you've also got the same-store sales declines on the mature base of stores. That isn't helping their operating expense leverage either. So that's really the kind of the dilemma that we're in the current environment.

That's very helpful, guys. Thanks. I appreciate that color. And then I just wanted to go back to the greenfield rollout again. I know that's a key part of the strategic plan here. Brian, I think you referenced something in your earlier remarks around getting insurance support. Maybe just walk us through what that means and how you gather that support over time to accelerate sort of the fill of those locations. Just anything it's holding it back, holding you back relative to what you're expecting through the balance of the year? Thanks.

Yeah, I mean, look, the current claims environment is what holds back particularly on acquisitions. On greenfield, we can be a little bit more forthright with the insurance carriers on where we're going, which actually does give us an opportunity to hedge success in a greenfield location because we're talking to carriers about where they need support.

When we're doing an acquisition, a little bit tougher because there's a little -- there certainly is some confidentiality that's needed in that type of a transaction, it doesn't allow us to get ahead of the insurance carrier demand expectations. And it just makes it a more difficult that can make the it can slow the maturing of an acquired store down.

And I think that's certainly what we're seeing. And Jeff just referenced, we've got new locations that are on a year-over-year basis in our infrastructure that haven't meaningfully contributed or haven't matured at the same level that we would have seen them mature prior to the claims decline. That's more what I'm referencing. It's more on the acquisition side than it is on the greenfield side.

Understood helpful, thanks.

Thanks.

Kate McShane, Goldman Sachs.

Good morning. This is Mark Jordan on for Kate McShane. Thank you for taking our questions. Can you help us quantify the impact of the claims deferral? And 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?

Yeah, we've talked. The notion of deferral, I'm not sure is the right way to characterize it. I mean we've talked about this idea that liability claims, there's two different parts of the claim. There's a liability claim person that was on the receiving end of an accident and then there's the one that was on the giving end of the accident.

What we're seeing in the marketplace is 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% from a claims volume perspective, driven by the penetration of ADAS.

We expect miles driven to contribute miles driven and, frankly, growth in the car park to contribute 1% increase in claims. And then all of that negative to be offset by an improvement in the average cost above repair, which is mostly driven by the increase, the increasing penetration of ADAS and 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 at that 2% to 3% range. The one area that's not, which is more reflective of underinsured motorist and consumer confidence is when the collision claims are 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. At that time, it took a couple of years for that to work itself out. We saw five stores or five quarters of same-store sales decline coming out of the recession in again, I think from our perspective, we were on our we just announced our fourth quarter of same-store sales decline.

And 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 down or should push total losses down. Insurance premiums are moderating, which should be a positive for us. But again, I think what 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 underinsured at this point and need to be able to put themselves in a proper with proper coverage.

So I don't know that I would characterize it as a deferral, I characterize it as the general consumer confidence is down right now, and that's putting pressure on putting pressure on collision claims at the moment.

Perfect, thank you very much for that answer. That's very insightful. As we think about maybe inflation cost increases, what impact did that have on operating expense for 1Q? And how should we be thinking about that for the remainder of the year?

Yeah, I wouldn't say that there was anything unique about the inflationary environment on the cost side. It's pretty typical with what you'd see normally in that low single-digit inflationary increases across the board with some things being a little more, but some being less. So there's nothing unique about the inflation itself.

Perfect. Thank you very much.

Gary Ho, Desjardins.

Good morning, Gary.

Thanks. Good morning. First question, just wondering if you're seeing kind of parts pricing increase yet due to some of the tariff noise? And how should we think about that versus early signs of used car pricing rebounding kind of saw the April Manheim data being pretty encouraging there?

Yeah, we have not seen any meaningful movement on list price increases on the park side yet. I do expect that over some period of time as certainty comes into the tariff situation that will or will not have the impact we've articulated. And as you said, I mean we kind of view the tariff situation as a positive to neutral for us. Just driven by the fact that I think a couple of manufacturers have come out with price increases on new cars ranging from $3,000 to $10,000 as those new car prices go up, used car prices should follow as you indicated, Manheim is starting to see that, that will 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 an average cost of repair perspective, is it's been relatively muted. The total losses are muting the benefit of some of the price increases and other normal movement that happens with average cost of repair.

So as we ease on that or we either ease or overlap those total loss ratios, we would expect that to start to return to a more normal level where we'd see 4% or 5% improvement in price every single year, increase in price every single year, partially offset by a claims environment that's down 1% to 2%.

Okay, great. And then my next question, just going back to, I guess, related to the question from the last one. Just the premiums moderating used car pricing increasing comments, when you look back in history, how quickly will you see these kind of come back through the same-store sales growth line? What's typical lag, just assuming these trends persist?

Yeah, I mean, look, we talked about the last time this happened, we were five quarters of decline. We don't give forward-looking guidance, so it's tough to answer that question. It's tough to understand where will we start to see claims declines easing. We don't need them to go positive, right? We don't expect them to go positive.

We expect them to get back to a normal level of negative and then get the pricing back. And again, I think right now, total losses was having a pretty big effect on the average cost of a repair. And as total losses go down, I would expect that the positive side from a premium perspective or pricing perspective to actually go in a positive direction. Insurance premiums right now, I think, are down on a 12-month basis.

They're still the highest category of CPI, but they're certainly way, way down from where they from where they were a year ago. So that's positive for us. But again, I think until people start switching and making different choices on their insurance, which usually does take a cycle that's when we would expect to start to see some changes in the dynamics in the marketplace.

Okay. Great. And then maybe just the last one. I just want to confirm the numbers question. So the minus 1.2% on a production day adjusted basis, so I guess in your outlook, you're gravitating to that number as opposed to the reported 2.8%.

And then second, I think in last quarter, you gave an adjusted EBITDA dollar comment, at least kind of what you saw so far, there's a bunch of moving pieces in Q2 and at the Project 360, the payroll seasonality? Just wondering like maybe qualitatively, If there's anything that you can share?

Yeah, well, maybe I'll just address, all just both questions. In terms of the same-store sales, I think that you've articulated the range, the range of the 2.8% to the 1.2% that's sort of the range that we're referring to. So that's the guidance on what we're seeing so far in Q2. I guess with respect to the other question.

On the margin side, I do expect that there is to your point, there's noise, but we actually feel really good about how we're positioned from a margin perspective at this point. We've taken the cost actions on Project 360. As we said, that's going to give us $30 million of benefit for that particular project, which, again, you can do the math on what a quarter of that looks like and then the incremental benefit on this payroll reset, if you will, it 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 is going to drive 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 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, 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 the second quarter will put us in a good position on that journey.

Okay, great. Thanks for those comments and Tim, congrats again. Enjoy your new chapter.

Thank you.

Daryl Young, Stifel.

Hi, good morning. Just with respect to the glass industry and a bit of a two-part question. Are you starting to see any meaningful uptick in market share from doing repairs in facility as opposed to mobile vans currently? And then secondly, is there anything to make of the recent agreement that Safelite signed with State Farm to be, I believe, an exclusive glass repair provider?

Yeah, 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 need for brick-and-mortar locations. And then on the Safelite question, we were obviously disappointed to see that.

But Safelite is the we still will benefit from that agreement. And there's still plenty of retail claims that come out of the lack of capacity that a Safelite would have to fulfill that much demand that ends up coming into our system as well anyway.

And there is customer choice in auto glass claims and the relationship, the exclusive relationship is with -- TPA owned by Safelite, not Safelite retail. And our go-to-market strategy is really not to the TPA, it's through other sources of referrals such as insurance agents.

Got it. Okay, thanks. And then one more. With respect to your margin profile and 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 drag quantifiable drag was from the greenfield ramp-ups currently?

Yeah, again, I wouldn't classify the greenfield ramp-up right now is much different than the acquisitive ramp-up because I think that cash kind of a different light on greenfield. We said the greenfields take another an additional year to ramp 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 somewhat about the growth profile that those would be contributing. You can do that math. The same-store sales are down 2.8% in 58 stores. That means 58 stores contributed some number. So I think you can back into that math without us providing that clarity you're looking for.

We have provided the OpEx ratio for new locations. You can use that as a bit of a guide as well.

Got it. Okay, thanks very much, guys. I'll jump back in the queue.

Krista Friesen, CIBC.

Hi, thanks for taking my question. Maybe if I can just dig a little bit more on the same-store sales go for [Q2]. I appreciate that what you're seeing right now is similar to what you saw in Q2. But 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 growth. Thanks.

Yeah, I mean, look, the claims is relative to comping a 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, 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 four quarters, it's down 3.2% in Q2 of last year, down 3.5% in Q3, down 2.6%. And as Jeff said, with one less production day in Q1, down 1.2%.

So we have seen sequential benefits from the just from our internal actions to drive more of a higher capture rate on the claims that are coming our way. And that's really what's putting us in a position to take market share gains.

Okay, great, thank you. And then I was also just wondering if you can provide us with a bit of context previously before when you noted you saw five consecutive quarters of negative same-store sales growth. How that inflect after those five quarters? Was it a very strong return to growth or just is more incremental, I guess?

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 one period over 10 years ago. And so there are some different dynamics at play here. But to answer your question, there was a bit of a bounce back after.

Thanks, I appreciate it. Congratulations, Tim and Brian, and I'll jump back in the queue.

Thanks, Kristen.

Zachary Evershed, National Bank.

Congrats to him, Brian. Thanks for taking my questions. Could you tell us a bit more about the kind of softer stuff in the indirect staffing model. So there's an established playbook and good rigorous controls. What are the changes that are being made to the model? How does it work?

Well, I would say the primary change to the model is driven off of changing the bands of revenue. And as we all know, the last fighters of the industry, the marketplace has grown not through incremental cars but has grown through incremental ticket. And as you look at what we were driving our staffing model for the indirect side of our business off of it was off of a band.

So if you think about over the last five years, new the average ticket has grown almost 40% from '19 to '24. And as that 40% ticket growth was happening, the stores we're putting more, we were putting more indirect staffing into the locations.

What drives the need front office staff is not the size of the ticket, it's the number of cars that we see. So we reorient the staffing model to be more aligned with the staffing levels that we had in 2019 against that ticket level and essentially boosted the bands at which we put different levels or different resources into the stores. So that's the primary difference. 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 just further refined that model earlier this year.

Got you, thanks. And how shop reaction has been thus far to changes in staffing procedures? Any pushback or bumps in implementation?

Yeah, look, these things are always hard and they're not -- they're certainly not the types of things that we want to do on a frequent basis. But I would say the shop responsiveness has been -- it has been we dealt with what we needed to deal with, with empathy and kind of to the folks that were affected and the shops now are back to business and realizing that the way to not have to do this again is to drive more sales through our systems so that we're getting the leverage out of the sources that we have. So I think it's almost created a renewed focus on driving the top line of our business out in the stores.

Interesting, thank you. And one last one for me. Looking at your acquisition and development of business cash outflows. Was any of that front loaded in Q1 for the scheduled start-ups in Q2 and the rest of the year?

Yes, there's a chunk of that spend that relates to upcoming growth.

And given the pace that you guys are setting for yourselves under the 2029 targets, is there any reason to think that, that will moderate or it should be a pretty steady drumbeat as we go forward?

I wouldn't say that it's outside of a range of what we would expect.

Thank you very much. I'll turn it over.

Thanks.

Bret Jordan, Jefferies.

Hey, good morning, guys.

I think you mentioned in the prepared remarks that weather propped up volume a bit in the quarter. Do you have a feeling sort of for what the weather contribution might have been? And does it continue to support the second quarter?

When we released the fourth quarter results, we did indicate that our at that time, our northern markets, we're seeing positive same-store sales growth, which gave us a it did give us the belief that weather did play a factor in what we experienced last year, but we haven't provided any specific numbers around the relative impact of that.

Okay.

Okay. And I think you also mentioned that sort of to get structural change in volumes, this insurance behavior need takes a cycle. I guess by your best estimate, when did the cycle begin or when did the change or the shopping of policy start that we might sort of think about when the actual demand might change.

Yeah, well, I think as you know, I mean, when I say it's a cycle of people typically sign up for annual agreements on their insurance. And I think people probably saw price increases flowing through last year as their contracts came up for renewal and that shock they had to absorb. And the question is, once you absorb that shock, do you build it into your normal monthly spending behavior or do you start to look at a different carrier.

And I think as we sit here now, J.D. Power and others that study what happens in the insurance carrier space, certainly would indicate that the activity around shopping for the carrier or switching is very active right now. And I think in addition to that, you look at the profitability of the interest carriers right now, there's room for some movement there.

And quick sort of anecdotal question. Do you see any change in total loss rates as the quarter progressed? I mean, obviously, you get the quarterly data, but April is a pretty strong month for used vehicle values. Have you seen any change in loss rates as we've progressed here in '25??

Yeah, I mean that data takes it probably a little bit more of a lag on that data as it takes time for it to mature. So I can't really comment that we've seen any real change in the short term, but I think we would expect no different than what happened in coming out of the pandemic when new car -- used car price started to increase, we did see at that time, history would tell us the total losses did start to -- so I think that is one that watchful waiting for us, where we're looking for that to have the same impact it had coming out of the pandemic.

Great. Thank you.

Cheryl Zhang, TD Cowen.

Hi, thanks for taking a follow up and just wanted to follow up on the collision it. Obviously, there are still 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 2026?

Yeah, I think it's tough to comment on that I would. It really goes back to the same statement made earlier. It has a lot to do with the -- how well positioned people are from an insurance perspective and in what happens with consumer confidence.

I mean the person that gets into an accident has a deductible or the person that caused an accident has a deductible to pay when insurance premiums go up, they have attended one they can pull is to raise their deductible, which could put them in a position where they don't have the financial flexibility to pay that deductible to get the repair done.

I think that's the one elusive element for us is when will that ease because what we do know is accidents are still occurring. The liability claims being only down in the 2% to 3% range indicates to us the same level of accident frequency is out there as it was before.

So the notion that something magical have -- ADAS has magically now changed the dynamic of accident frequency. We don't think has happened because liability claims are still -- they're still pretty consistent with where they've been. We just need the collision side to follow suit. And again, we don't need it to turn positive. We just need it to be less negative.

Right, thank you for the comment. And maybe just one more for me. Just looking at the leverage since a little above your long-term target range. Just curious how you think about deleveraging this claim volume continue to be pressured over the coming quarters?

Yeah, I mean, I'll tell you, I think as we've guided on the EBITDA side and as you model that out, you'll see that as our EBITDA improves, you'll start to see the leverage decrease as well. So Jeff, I don't know if you have any anything.

No, I think that's right. We've been under a fairly lengthy duration of challenged EBITDA delivery, and we've underperforming assets, the 58 new locations as when we referenced earlier. So once we see those things come back in line, then so will our leverage.

Got it. Thank you for taking our questions.

Thank you.

Tristan Thomas-Martin, BMO Capital.

Hey, good morning and congrats, Tim and Brian. Just for me. They're just kind of a rule of thumb for consumer does switch their car insurance. So they may be a little more hesitant to come back to the market. So they don't want to immediately file a claim or is it truly a consumer kind of headwind issue where they'd rather maybe build up their piggybank a little bit and then return to the market?

Yeah, I think it's an interesting point. I answered 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 they've gone through a cycle where they've had to renew their insurance. I think everybody has probably experienced the pain of insurance premium increases.

So 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? And does that put them in a position where they can afford to file the claim on the collision side, on the person who caused the accident side.

Okay, thank you.

Great. Thanks.

There are no further questions at this time. I would now like to turn the call over to Brian Kaner. Please go ahead.

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 our second quarter results in August. Thanks again, and have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.