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.