Boyd Group Services Inc.

Good morning, everyone, and welcome to the Boyd Group Services, Inc. fourth quarter and year-end 2024 results conference call. Listeners are reminded that certain matters discussed in today's conference call or answers that may be given to questions asked could constitute forward-looking statements that are subject to risk 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 CDAR's database found at cdarplus.ca. I'd like to remind everyone that this conference call is being recorded today, Wednesday, March 19th, 2024. I would now like to introduce Mr. Tim O'Day, Chief Executive Officer of Board Services, Inc. Please go ahead, Mr. O'Day.

Thank you, operator. Good morning, everyone, and thank you for joining us on today's call. On the call with me today is Brian Kaner, our President and Chief Operating Officer, and Jeff Murray, our Executive Vice President and Chief Financial Officer. We released our 2024 fourth quarter and year-end results before markets opened today. You can access our news release, as well as our complete financial statements and management discussion analysis on our website at boydgroup.com. Our news release, financial statements, and MD&A have also been filed on CEDAR this morning. On today's call, we'll discuss the financial results for the three-month period ended December 31st, 2024, provide a general business update, and discuss our long-term growth strategy. We will then open the call for questions. Throughout 2024, Boyd consistently posted market share gains in a challenging environment characterized by low claims volumes driven by significant insurance premium inflation and overall economic uncertainty, as well as a mild winter weather in 2024, with it being the warmest winter in over 129 years. In spite of these factors, in which industry sources reported a year-over-year decrease in repairable claims, of 9% for all losses and 7.9% excluding comprehensive claims, Boyd posted year-over-year same-store sales declines of only 1.8%, demonstrating Boyd's ability to gain market share in this very challenging environment. I would now like to turn the call over to Jeff Murray to discuss our 2024 year-end and fourth quarter financial results.

Jeff? Thanks, Tim. For the year ended December 31st, 2024, we reported sales of 3.1 billion, an increase of 4.2% over the prior year, driven by contributions from 155 new locations that had not been in operation for the full comparative period, partially offset by same-store sales declines of 1.8%. Gross margins stayed consistent at 45.5% of sales compared to the prior period. The internalization of scanning and calibration contributed to an increase in gross margin percentage, as did improved performance-based pricing. However, these gains were offset by labor rate margins, which remained below historical levels. Operating expenses increased $89.9 million when compared to the same period of the prior year, primarily as a result of growth and inflationary increases. Operating expenses as a percentage of sales were 34.6% for the year end of December 31, 2024, compared to 33% for the same period in 2023. Operating expenses as a percentage of sales was negatively impacted by the decline in same-store sales and new locations, which contributed sales, but with a higher operating expense ratio of 36.9%. Although operating expenses as a percentage of sales was positively impacted by reductions in staffing, made to better align with current levels of demand as well as reduce incentive compensation and recruiting costs, these impacts were more than offset by fixed costs on existing and new locations. Adjusted EBITDA for the year ended December 31, 2024 was $334.8 million compared to $368.2 million in the same period of the prior year. A $33.4 million decrease was the result of declines in repairable claims volumes for services, which resulted in same-store sales declines and a higher ratio of operating expenses as a percentage of sales. As we noted as part of our growth goal announcement on February 26, in partnership with a leading global consulting firm, Boyd has launched Project 360, a company-wide transformation cost initiative. Project 360 is expected to result in $100 million in annual recurring cost savings over the coming years, with upfront investment and transition costs incurred to achieve these benefits estimated to be in the $20 to $23 million range over the coming quarters. During the fourth quarter, expenses related to the transformational cost initiative of $4.4 million were incurred, which have been added back and arriving at adjusted EBITDA. No similar transformation costs were incurred in 2023. While Project 360 was launched during the fourth quarter of 2024, reduced operating expenses and improved operating expense leverage are expected to be realized gradually beginning in the second quarter of 2025. We reported net earnings of $24.5 million compared to $86.7 million in the prior year. Adjusted net earnings per share decreased from $4.18 to $1.44. Net earnings and adjusted net earnings for the period were negatively impacted by the decrease in adjusted EBITDA as well as increased depreciation expense and increased finance costs. Depreciation and finance costs increased primarily due to investments in growth and the investment in network technology upgrades. Now, moving on to our Q4 results. During the fourth quarter, we recorded sales of $752.3 million, a 1.7% increase when compared to the same period of 2023. Sales growth of $33.3 million was attributable. to incremental sales generated from 86 new locations. However, this increase was more than offset by a same-store sales decline of 2.6%. Industry sources have reported a fourth quarter year-over-year decrease in repairable claims of 6% for all losses and 7.9% excluding comprehensive claims. Gross margin was 45.8% in the fourth quarter of 2024 compared to 45.5% achieved in the same period of 2023. The gross margin percentage benefited from internalization of scanning calibration and improved performance-based pricing partially offset by lower pay margin. Adjusted EBITDA was $83.4 million, a decrease of 11.5% over the same period of 2023. The decrease was primarily the result of lower same-store sales at a high ratio of operating expenses as a percentage of sales for both existing and new stores. Net earnings for the fourth quarter of 2024 was $2.4 million. compared to 19.1 million in the same period of 2023. Excluding fair value adjustments and acquisition and transformational cost initiatives, adjusted net earnings for the fourth quarter of 2024 was 6.3 million, or 29 cents per share, compared to adjusted net earnings of 20 million, or 93 cents per share, in the same period of the prior year. Net earnings and adjusted net earnings for the period was negatively impacted by the decrease in adjusted EBITDA, as well as increased depreciation expense and increased finance costs. Depreciation and finance costs experienced increases primarily driven by investments in growth and the investment in network technology upgrades during a period of lower sales and adjusted EBITDA. At the end of the year, we had total debt net of cash of 1.2 billion compared to 1.2 billion at September 30th, 2024 and 1.1 billion at the end of 2023. Debt net of cash increased when compared to December 31st, 2023, primarily as a result of location growth. Based on the confidence we have in our business, we announced an increase to our dividends of 2% to 61.2 cents per share on an annualized basis in Canadian dollars, beginning in the fourth quarter of 2024. During 2025, the company plans to make capital expenditures, excluding those related to acquisition and development of new locations, within the range of 1.6% and 1.8% of sales. In addition to these capital expenditures, the company plans to invest in network technology upgrades to further strengthen our technology and security infrastructure and prepare for advanced technology needs in the future. During 2024, the company spent approximately $18.1 million on network technology upgrades. The investment expected in 2025 is in the range of $10 to $12 million, with an investment in 2026 in the range of $2 to $4 million. These investments align with Boyd's sustainability roadmap to responsibly address data privacy and cybersecurity. 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 pleased to have announced a new five-year goal, which includes growing revenue to $5 billion in 2029, doubling adjusted EBITDA dollars from 24 to 29, returning to an adjusted EBITDA margin of 14%, expanding market share and retaining a leadership position in all markets served, and achieving top-tier profitability in the North American collision industry. In the near term, the market dynamics that impacted results throughout 2024, including a decline in claims volumes due to insurance premium inflation and overall economic uncertainty, with repairable claims experiencing a greater year-over-year decline during the first two months of 2025 than was experienced in the fourth quarter. Despite this fact, thus far in the first quarter of 2025, same-store sales have improved compared to the fourth quarter but are not yet positive, continuing to demonstrate market share gains. As in prior years, the first quarter is burdened by higher payroll taxes that occur early in the year, while the fourth quarter, of 2024 benefited from expense accrual reductions as certain expense estimates were firmed up at the amounts that were previously or lower than previously estimated and accrued. These factors along with the challenging claims environment are resulting in an adjusted EBITDA dollars thus far in the quarter, trending slightly below levels achieved in the first quarter of last year. While it's still too early to tell if claims volumes have bottomed out, Boyd remains confident in the industry's long-term outlook and believes the transformational cost savings initiatives will drive improved margins in the coming quarters. We remain committed to improving gross margins through initiatives such as internalization of scanning and calibration. The need for scanning and calibration services continues to grow, and Boyd's ability to internalize these services continues to scale. Growth through acquisition as well as through startup sites continues. Although startup sites have a longer development cycle and ramp period, these locations offer a number of advantage, and as a result, the company plans to continue increasing the proportion of growth using this approach. Over the long term, the proportion of acquisition to startup sites is expected to be approximately even. The pipeline for startup sites currently includes scheduled openings of seven locations in Q1 of 2025 and an additional 21 locations throughout the balance of the year. While the company has been successful in executing Envoy's long-term growth goal of doubling the size of the business on a constant currency basis from 21 to 25 against 2019 sales, over the past year and into 25, the market has experienced challenging economic and industry conditions. The company is focused on increasing value to our customers and shareholders and is consistently performed above industry standards. with a focus on emerging from these conditions in a strong position. In spite of the initiatives in place, current market conditions may cause a slight delay in Boyd achieving its long-term growth goals, doubling the size of the business on a constant currency basis from 2021 to 2025 against 2019 sales. In summary, and in closing, we continue to be incredibly proud of our team, who are working hard to position us well for the future. With that, I would like to open the call to questions. Operator?

Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touchtone phone. You will then hear a prompt that your hand has been raised. And should you wish to decline from the polling process, please press star followed by two. And if you're using a speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you have any questions. First, we will hear from Chris Murray at ATB Capital. Please go ahead.

Yeah, thanks, folks. Good morning. Hey, thanks for the color on Q1. But as we sort of think about 2025 and maybe what you're seeing in the environment, I think even if you look at the copying of the same store numbers from late last year, You know, how are you guys thinking kind of near term, the balance of 25 is showing up? And are you seeing any sort of changes in this consumer behavior? I think you mentioned that, you know, things seem to be improving a little bit, but I'm just trying to maybe get a focus or a view on the trends that you're seeing.

Well, I think there's a couple of, we've talked about a couple of things that will drive improvement in the outlook. You know, one was weather, which we did see, you know, some meaningful weather in the first, you know, in the first couple months of the year, as well as some of the back half of, you know, last year. And that weather has positioned us, you know, well in the northern markets where we have experienced, you know, we have experienced some same-store sales growth in those markets. The other thing that we've constantly talked about is, you know, the need for used car values to start to creep back up again, which ultimately puts more total losses in our shop or decreases the level of total losses in our shops. Used car pricing has ticked up a little bit, not super meaningful, which leads the last one, which is probably the hardest one for us to predict in terms of the outcome, which is the economic uncertainty and the consumer uncertainty as they face very high levels of insurance premiums. And as we've said on previous calls, we're looking for the lines of collision claims and liability claims to start to come closer together again for us to be able to see that that's happening in a meaningful way. And thus far, we don't see that. We continue to see liability claims that are in a down kind of two, you know, down 2% range, which is, you know, fairly reasonable considering the loss ratios. But, you know, the claims, collision claims have not yet come back to the levels that they had been historically.

Okay, I'll leave it there. The other question I had was on some of the commentary you put in the MD&A, just talking about, you know, the ratio of kind of brownfield, greenfield versus startup storage, which is, I'm not sure if that's completely new commentary, but essentially, I think if I've got this correctly, what you said is the plan, I think, was to open roughly 28 new stores this year. But then I think there's also commentary to think about that new store, like small store acquisitions, would be kind of at a one-to-one ratio of what you open for new stores. So just, like, any thoughts, or maybe this is a further refinement of the strategy, but any more detail that you could maybe put around that would be great.

Well, yeah, just for clarity, the new store pipeline that we have in the commentary for the call today is related to only Greenfield locations. So we have 28 Greenfield locations that are slated to be open this year. We have said over time we'd like to see that get to a 50-50 ratio, you know, 50% of our growth coming from acquisition, 50% coming from, you know, Greenfield. I wouldn't read into that that we expect the full year to be 56 locations because we're just not at that pace yet. We've started meaningfully building out our greenfield strategy in the mid part of last year. It takes about 18 to 24 months for one of those stores to open. So as we get to this time next year, I think we'll start to be on a very healthy path of opening stores. 10 to 12 greenfields a year, or 10 to 12 greenfields a quarter, which is what we're trying to ultimately get to. And then the other commentary on just why the greenfields, I think we've addressed that in both today's commentary as well as discussions we've had before, but it's really a focus on Building density and market, so getting into the locations that we want, the building that we want, with the size that allows us to be able to put all three lines of business under one roof, our scanning and calibration, our collision business, and our glass business all under one roof to get the efficiencies out of that. You know, and look, I mean, the reality is everybody likes working in a, you know, new box with new equipment over time. That reduces our maintenance expense on boxes, which, you know, as boxes, as our stores get older, they're, you know, the amount of maintenance expense that goes into those stores continues to grow. So we've got to, over time, start to, you know, change the proportion of our locations that are old versus new.

Okay. I'll leave you there. Thanks, folks.

Thanks.

Next question will be from Sabat Khan at RBC Capital Markets. Please go ahead.

Hey, Sabat. Hey, thanks, and good morning. I guess just on some of these cost improvement initiatives, can you maybe just talk about, in terms of progression, sort of what are the ones you're working on early on in the process and those that might maybe contribute to some potential margin improvement this year, if that's maybe what you're targeting? Thanks.

Yeah, well, as we said when we announced the plan, we expect 70% of the realization of those savings to be in our run rate by the end of the second year. That does constitute a portion of that being in this year's run rate as well. Obviously, as we've talked about the buckets, we said there was gross margin buckets and there's operating expense. There's costs coming out of the operating expense side of the business. Those expenses, you know, we would expect to be realized earlier in the process. And some of the gross margin opportunities will have a little bit of a longer tail as we get through the negotiations, as well as indirect procurement savings, which we've highlighted as well on the operating expense side that also will take time for us to be in the market to RFP those things and You know, so I think it's, you know, the best way to think about it is, you know, we expect to have, you know, 70% of that in our full run rate by the end of 2026. And, you know, I mean, I wouldn't pace it radibly, but as Jeff said, we expect it to start those savings to start in Q2, to start really showing meaningful progress in Q2. So the pacing will be starting in Q2 up until the end of 2026.

Okay, great. And then the same question just on the M&A landscape. I think some commentary out there that last year expectations were maybe a bit high on the sellers. Maybe a comment on what the expectations are at this point, given the macro backdrop, and maybe what you're seeing among your private competitors or peers, you know, are they being active? How competitive is it out there for transactions, both small ones and large ones? Thank you.

Yeah, interestingly, I mean, from a competitive perspective, we have not, you know, there's been some activity, but frankly, not a lot as of late. You know, the other thing that we are seeing is, you know, look, if the claims environment remains soft for a long period of time, that puts a lot more pressure on, you know, single shop and even some of the five to seven shop operators that are in the market. You know, and that obviously, you know, that type of pressure, if it's prolonged, will, you know, put many people in a position where their price expectation will start to change. And, you know, we are starting to see some opportunities in the marketplace at this point that that maybe weren't there last year that we're certainly going to participate in. Thanks very much.

Next question will be from Derek Lessard at TD Cowan. Please go ahead.

Yeah, good morning, everybody. I just maybe wanted to come back to the Q1. I was just wondering maybe if you could talk about some of those margin pressures that you're facing so far despite that year-over-year improvement, I guess, in the weather comp?

Yeah, the margin pressures that we experience in Q1 are typically related to things like payroll tax and expenses that reset at the beginning of the year, primarily payroll. And, you know, we see that every year where we see you know, a fall off from Q4 to Q1. We see an increase in expenses from Q4 to Q1, particularly around, you know, around areas like payroll. So that's really what's driving the margin pressure. We're not experiencing any compression on, you know, gross margins or anything that relates to, you know, the volume being rung through the register. It's more on the, you know, the operating expense side.

Okay. And maybe just on the project 360, could you just maybe add some color around, you know, some of the key initiatives that you have or maybe the biggest buckets under the project?

Yeah. Yeah. Well, one, I mean, so one of the larger buckets that we have in the project is resetting our, is the resetting of our store staffing model, right? you know, that we're in the, in the middle of doing now we're in the early innings of, of doing that. So that's one of the larger buckets, you know, is, is looking at the indirect staffing in our stores and making sure that, you know, it's sized, you know, to the appropriate volume that's going through the, going through the locations. You know, the rest of them are, you know, there's, there's opportunities around, you know, paint margins and, you know, There's parts margins and increasing labor margins in certain locations. And then there's another big, you know, there's another fairly sizable bucket around the indirect expense, the indirect procurement expenses that we have to operate a business. Things like shop supplies and equipment and those areas are, they will take a little bit longer for us to get after. So those are the primarily large buckets.

Okay, that's great, color and helpful. And maybe just one last one for me. I understand the tariff situation remains pretty fluid, but curious on your thoughts around what you think your current tariff exposure might be.

Yeah, I mean, as you know, I think we're in a, on the part side, we're in a list price environment. So if list prices go up, that actually serves to create you know, same store sales for us. The inflationary environment will create same store sales. We work on discounts off of lists to drive our gross margin in our business from a parts perspective. The other side of the inflationary or the tariff environment, what it could do is push new car prices higher, which increases demand for used cars and in turn pushes used car prices up as well, which as you know then pushes total losses down. So I think generally speaking, the way I've articulated this in the past is it's neutral to positive to us. The tariff environment is neutral to positive from us from an average ticket and a work perspective. The question is, what does it do to this whole notion of consumer uncertainty and economic uncertainty? And if we're thrust into a hyperinflationary environment, does that put further pressure on you know, people's desires to file insurance claims.

Yeah, Brian, I absolutely, it's Jeff here, I absolutely agree that that's the unknown and the big factor to think about is what's going to be the impact on the consumer. But just a couple other things to highlight would be, you know, we're 90% in the U.S. to start with, and essentially all of our businesses operate in domestic markets, and so the U.S. inputs and outputs are U.S.-based, and the same thing in Canada. They're Canadian-based, and so we don't have a lot of cross-border activity, and we're a service business, and a big portion of our inputs is actually labor, which wouldn't be subject to tariffs. So that's just a few other, I think, points to keep in mind.

Yeah, thanks for that, gentlemen. Thank you.

Thank you. Next question will be from Gary Ho at Desjardins Capital Markets. Please go ahead.

Hi, Gary. Thanks, Katie. Good morning, guys. Just want to dig through, yeah, just continuing with the 1Q outlook here. So you mentioned seems for sales growth slightly better in Q4, minus 2.6, but not yet positive. However, if I recall, March last year was when we saw an unanticipated drop in repairable claims. So not sure if you can kind of help us bridge, if you perhaps extrapolate kind of the current run rate activity, what you're seeing in February, like would those activity imply maybe a flat, maybe slightly positive same-store sales growth for March? I know it's hypothetical, but just wanted to get your read on the cadence from January, February, and March.

Yeah, well, I mean, as we got information about the claims, you know, truly got information about the claims environment more at a macro level, what we really saw was Q1 of 2023 was the first year we started to see declining claims environment. And that continued into, you know, throughout 2023. And, you know, in March is when some of the information really started to get surfaced at a macro level. So I don't, there's nothing magical about, there's really nothing magical about March. You know, as I said in the early commentary, we do know that, or one of the earlier questions, we do know that in the northern markets where we had weather, we've seen, you know, a positive impact from that. You know, the southern markets still remain, you know, still remain slightly down. And, you know, as we look west, you know, the west is probably got some of the most economic uncertainty in certain markets. And I think that's where you know, that's where we've seen, you know, a bigger challenge in the recovery. So I don't expect March to, you know, I expect, you know, March will be in line with the guidance that we've provided. And so that's where I would see it.

Okay, great. And then does your softer 1Q year-over-year EBITDA comment perhaps dig in some of the Project 360 costs that are kind of more one-time in nature? or do you kind of back that out? And maybe just related to that, there is some kind of acquisition and transformational cost initiatives. I think in Q4 it was $5.4 million, $9.9 million for the year. Jeff, if you wouldn't mind kind of elaborate the details on that and how we should think about that for 2025.

Yeah, as I mentioned, Jeff, in Q4 we did have $4.4 million. of costs related to Project 360. And the plan would be to continue to provide updates on the amount that we're spending on Project 360 and to essentially adjust them out of EBITDA so that the adjusted EBITDA won't be, well, so that adjusted EBITDA will be sort of on a normalized basis. So that's kind of how we're planning to handle it going forward. So to answer your initial question, for our Q1 project, sort of guidance is not really affected by those additional costs because we factored them out.

Okay, got it. And then just lastly, you mentioned Greenfield, Brownfield, the 28 locations that you highlighted. Are they fairly spread out in terms of geography throughout the U.S., or are you trying to densify a certain region one at a time?

Yeah, they're actually – they're not – as spread out as they would have been historically. And I think as we think about where we're putting locations, we're very focused on densifying markets. We're very focused on creating a one or two position in the markets we play in. And we know where the dots on the map are that we need to be to fulfill that objective. So these locations are much more in line with satisfying that objective. So they are a lot more concentrated in certain areas, and those certain areas are where we know that we can establish a one or two position and get to the position from a profitability perspective that we're looking for.

Okay, got that. Okay, thank you very much. Those are my questions. Thanks, Gary.

Next question will be from Steve Hansen at Raymond James. Please go ahead.

Hi, Steve. Yeah, good morning, guys. Thanks for the time. Brian, I think it was in the prepared remarks that you mentioned that labor margins are still below where they used to be. What's really holding that back? Is it just volume that you need to accrue through the shop to get better throughput? Is it the lack of pricing pass-through from the carriers? What is it that's really holding back those labor margins?

Yeah, there's still a little bit of pricing opportunity that we have out there that we continue to go after, frankly, on a daily basis, that's really what's holding it back. I think generally speaking, the inflation on wages have come back to normal levels. The availability of technicians in this type of a demand environment is better than it is in a heavy demand environment, as you would know. So the types of things that we saw coming out of the pandemic have kind of eased, although it's set You know, at that time, it set a new, you know, it kind of set a new floor for what tax are paid. And, you know, we're catching up. In some cases, we're catching up to that floor.

Understood. That's helpful. And just on the 360 plan, it sounds like you've got some initiatives already in flight. What's really giving you the confidence that we can start to realize the synergies starting next quarter in Q2, that is? Just maybe describe to us where you're at on some of those plans, just so we can get a sense for how real they are and how quickly they come online.

Yeah, look, my knowledge of the actions that we're taking that will get us there and the stickiness of those actions is what gives me the confidence. Many of the things that we're anticipating rolling out in Q2 are actually in pilot phase now, so we know where they're at in their executional stage. We've got a great process in place to you know, to deliver those to our results delivery office that we've set up. And as we continue to, you know, monitor those projects, my confidence level in achieving the savings that we've expected over the next two years just continues to grow. So I have tremendous confidence in our ability to deliver the transformation costs, the full $100 billion of transformation costs that we've identified.

Okay, great. Thanks. And just one last one quickly. It's just on the single shop acquisition pace, it was referenced earlier in an earlier question, but is there anything holding you back there? It sounds like the bottom is at least close to being in, if not in, to be debated, I suppose. But, I mean, what's holding you back on going after the single shops in a more rigorous pace?

Nothing at this point. I mean, and as I said, you know, as we think about our market planning, I think that's you know, what we're really doing on the market planning exercises as we put jobs on these maps, you know, the first place we look for if somebody can, you know, as we look to get into a market is, is there a quality single shop in the market for us to go purchase? If the answer to that question is no, that's when we start to flip to the greenfield, brownfield options. But as we look to build density, you know, that will become, you know, that will and is still our first choice to get into a market.

Okay, very helpful.

Thanks.

Yep. Next question will be from Daryl Young at Stifel. Please go ahead.

Hey, good morning, everyone. Just one quick one for me on the insurance side. We're seeing some of the larger insurance carriers maybe get a little more aggressive on trying to take market share. And I was just wondering if you could remind us if there's any difference between, say, the top five insurance carriers and the rates that they pay you either on parts markup or labor margins versus the rest of the insurance industry. And I'm just trying to, I guess, sense out if there's any market share or any market share shift that we should be aware of that maybe is a margin headwind over the next year or two.

Yeah, I mean, I'm happy to let Tim comment on that as well. In my time here, I haven't seen behaviors by the insurance carriers that are creating, that are positioning one versus the other in any better way, but I'm happy to let him.

Yeah, I think the question is, does a shift in carrier market share change our revenue margin profile? And I would say no.

Got it. That's all for me. Thanks, guys.

Next question will be from Krista Friesen at CIBC. Please go ahead.

Hi, thanks for taking my question. Just one for me. The commentary around 2025 not quite hitting the doubling of revenue target that you'd set out previously, what were the assumptions that went into that specifically, I guess, related to claims volume? Are you assuming that it kind of stays where it is at this point, or are you assuming a bit of an improvement? Thanks.

Chris, I don't think we've said we won't get it. We've said that there's uncertainty given the claims environment, and we don't know when the claims environment will shift. So that's really the reason that we're just signaling there could be some delay. Like I said, we're still optimistic we can achieve it. in a more normalized claims environment. We just have to, you know, look for that to flip to a more normal level.

Yeah, and I think it's, Chris, as you know, leading up to, you know, leading up to 2024, we were right on track to be able to do that. So it's really 2024's claims environment that's put us in a position where, you know, we're just, we're being cautious and we want to It's a delay. It's not an inability to achieve because obviously we have to get to $5 billion over the next five years.

Fair enough. Thank you. I'll jump back in the queue.

Thanks. Next question will be from Tristan Thomas-Martin at BMO Capital Markets. Please go ahead.

Hey, good morning, Tristan. I just have one quick question. I'm curious if you've seen any change in consumer or maybe insurance kind of behavior as tariffs seem like they're becoming a little more real and potentially new car values could go up raising used car values. I'm just curious if anyone's trying to get ahead of that or consumers are starting to think like that.

Thanks. On the insurance side, The one thing I have seen and have read is J.D. Power actually keeps track of shopping and switching on insurance carriers. They started doing that in 2020. And right now, shopping and switching is at the highest levels that's ever been recorded from an insurance perspective. So people are looking at the premium increases they have and making decisions to now switch. And our hope is that as they make those decisions to switch, you know, they put themselves back in a position where, you know, they're either reducing the deductibles that they've increased to mitigate the premium increases. They're putting collision coverage back in place, you know, where they may have dropped collision coverage when, you know, when the premium increases hit. You know, so the reality is that, you know, consumers that are putting themselves in a position, you know, where they where they can't afford to fix their vehicle or don't have coverage to fix their vehicle if they were to get into an accident are really putting themselves at a fair amount of risk and you're putting your livelihood at risk. If your car is damaged in a way where it's undriveable and you don't have proper insurance coverage to take care of that, that's a dangerous game to play for a long period of time. So our hope is that switching is driving that back.

Okay, thank you.

Next question will be from Zachary Evershed at National Bank. Please go ahead.

Morning, everybody. A lot of my questions have been answered, so maybe just a broader one here. We're seeing right to repair, labor rate transparency pushes, tariff impacts, a lot of stuff up in the air here. What do you think the most important potential regulatory or operating environment changes you're following closely are?

You know, Zach, the right to repair has been ongoing for many years. And frankly, for the collision repair industry, we have the tools and the information we need to properly repair vehicles to OE standards. So it's not a really meaningful concern to us. I would say, you know, the uncertainty around tariffs and the impact on consumer behavior that that could have is probably top of mind for us. But obviously we don't control that and it's difficult to predict what will happen. But so I guess that's probably the best answer I can give you.

Appreciate it. Thanks. I'll turn it over.

Are there any more questions?

Patrick Buckley at Jefferies. Please go ahead.

Hey, good morning, guys. Could you talk a bit about how alternative parts mix has trended as of late and maybe the outlook there in 25 as we start to think about potential tariff impacts on OE pricing versus alternative?

Yeah, I would say that the last major carrier to really kind of move forward with aftermarket pricing or aftermarket parts took place in the latter half of 2023 and was fully into 2024. So I don't see a lot of movement upward in terms of increases in aftermarket part usage. The question I guess may be because maybe, you know, as if there are significant tariffs and those tariffs impact the pricing of, you know, aftermarket parts in a way that that makes the decision between an aftermarket and an OE part closer, you know, would that actually push, you know, more OE part usage? And I think it's too early to tell for us. What we do know is, you know, again, we're putting on parts that, you know, a carrier is requesting that we put on and that are the, you know, the best part for the job. And we'll continue to do that. Great. That's all from me. Thanks. Thanks.

And at this time, we have no other questions. I will turn the call back to Mr. O'Day.

Thank you, Operator. And thank you all once again for joining our call today. And we look forward to reporting our Q1 results in May. Have a great day. Thank you.

Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.