Boyd Group Services Inc. (BGSI) Q1 2026 Earnings Call Transcript

Good morning, everyone. Welcome to the Boyd Group Services, Inc. 2026 First Quarter Results Conference Call. Listeners are reminded that certain matters discussed in today's call or answers that may be given to questions asked could constitute forward-looking statements that are subject to risk and uncertainties relating 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 cedarplus.ca and edgar at www.sdc.gov. We released our 2026 first quarter results before markets opened today. You can access our news release as well as our complete financial statements and management discussion and analysis on our website at voidgroup.com. Our news release, financial statements, and MD have also been filed at CDAR Plus and EDGARD this morning. On today's call, we will discuss the financial results for the quarter ended March 31, 2026 and provide a general business update. We will then open the call for questions. I'd like to remind everyone that this conference call is being recorded today, Wednesday, May 13, 2026. I would now like to introduce Mr. Brian Kainer, President and Chief Executive Officer of Void Group Services, Inc. Please go ahead, Mr. Kainer.

Thank you, Operator. 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. Building on the strong foundation that we established in 2025, I'm pleased to report we delivered all-time record first quarter results. We achieved both all-time record revenue and adjusted EBITDA, grew our location footprint by 33%, recorded our third consecutive quarter of positive same-store sales growth, achieved an incremental $20 million in Project 360 and Synergy cost savings, and expanded our adjusted EBITDA margins by 200 basis points. We also successfully closed our Joe Hudson's acquisition, the largest MSO transaction in the company's history, with the integration successfully completed subsequent to quarter end. This success would not have been possible without the hard work and dedication from the entire Boyd team, including our new Joe Hudson's team members. I want to thank all of our employees for their meaningful contributions. Turning to our financial performance, in the first quarter, we generated all-time record revenue of $997 million, an increase of 28% compared to the first quarter of last year, and increased adjusted EBITDA by 52% to an all-time record of $122 million. Adjusted EBITDA margins expanded by 200 basis points to 12.3%, driven by benefits from Project 360 and acquisition synergies, as well as the inclusion of Joe Hudson's, which is accretive to our adjusted EBITDA margins. To date, we have realized over $60 million in cost savings from the combination of Project 360 and acquisition synergies. This is up from $40 million at the end of 2025. We remain on track to realize an additional $30 million in 2026 and the remaining $50 million expected to be achieved between 2027 and 2029 for a total anticipated savings of $140 million. Same-store sales increased 1.7 percent. However, adjusting for the weather impact in the south same store sales growth would have been approximately 2.6 percent our same store sales performance has benefited from continued market share gains and the improvement in repairable claims volumes throughout 2025 and q1 2026. in the first quarter of 2026 based on repairable claims processing data we estimate that repairable claims volumes declined between zero and two percent which is now back in line with our long-term growth framework this framework contemplates average same store sales growth of three to five percent supported by continued incremental market share gains driven by ongoing consolidation within the highly fragmented collision repair industry strong performance with insurance clients and disciplined operational execution this framework also assumes three to four percent annual growth in average total cost of repair, and approximately 1% growth in miles driven, partially offset by an approximate 2% decline in repairable claims due to the impact of collision avoidance systems. It is important to note that this framework represents long-term averages. As a result, performance may vary outside of these ranges over shorter periods of time without impacting our confidence in achieving our long-term growth objectives. During recent quarters, the growth in average total cost of repair has fallen below the expected range required to support our long-term growth framework. We expect total cost of repair will return to levels outlined in our framework, driven by lower total losses from rising vehicle prices, increasing vehicle complexity, and continued inflation in parts and labor costs. The positive same-store sales trends we experienced in our business over the past three quarters has continued thus far in the second quarter, with same-store sales in April approaching the low end of our long-term range. Complementing same-store sales growth, new location growth remains an important driver of our long-term performance as we continue to target 5% to 7% average annual unit growth over the long term. Same-store sales growth generates strong cash flows that we reinvest to expand our footprint through acquisitions and startup locations. Funding expansion through internally generated cash flow has proven to be highly accretive over the long term. In the first quarter, we saw strong contributions from new locations. We increased our location footprint by 33% to 1,312 locations at quarter end, including 258 locations acquired through the Joe Hudson's transactions, three single shop acquisitions, and eight new startups. We remain focused on market densification through acquisition and new location growth, aiming to be a number one or two player in the markets we serve. Market density provides the foundation for market share gains, same-store sales growth, and increased profitability. We continue to have an active pipeline of new startups and development and expect to open five new startup locations in the second quarter of 2026, with an additional 17 new startup locations currently under development for the remainder of the year. We expect startup activity to be complemented by acquisitions of both single shops and small MSOs as we continue to build on the strong momentum we established last year. Turning to Joe Hudson's, we successfully closed the acquisition on January 9th, and I'm pleased to report that the integration and synergy realization remains on track. subsequent to quarter n we have completed the conversion of all joe hudson's locations to our systems and have begun to realize expected synergies we continue to expect to generate approximately 40 million dollars in synergies from the combination of the boyd and joe hudson's businesses with approximately 50 realized in 2026. although joe hudson's locations experienced some sales disruptions from the storms in q1 as well as from the store conversion process through the end of April. The conversions are now complete, which allows sales to return to normal projections shortly. We remain on track to realize 50% of the synergies in 2026 and the balance by 2028. I will now turn it over to Jeff to go through the first quarter financial results in more detail. Jeff?

Thanks, Brian. As Brian highlighted, we delivered all-time record first quarter performance with positive same-store sales growth, significant growth from new locations, and strong margin improvement as we continued to execute on Project 360 and began to realize expected synergies from the Joe Hudson's acquisition. During the first quarter, our sales increased by 28.1% year-over-year to an all-time record $996.7 million, with same-store sales excluding foreign exchange increasing by 1.7%. Without the negative impact of storm activity in south we estimate that same store sales growth of 2.6 would have been achieved in the first quarter in addition 203.3 million dollars in incremental sales were generated from 339 new locations that were not in operation for the full comparative period the acquisition of joe hudson's which closed on january 9th 2026 contributed 168 million dollars in sales while other new location growth contributed an incremental 35.3 million dollars as mentioned on our fourth quarter 2025 results conference call same store sales and Joe Hudson sales early in the first quarter were negatively impacted by unusual winter storm activity in the U.S. south region with activity levels returning to normal as the quarter progressed gross profit increased 29.1 percent year over year to 463.7 million. Gross margin was 46.5% in the first quarter of 2026, compared to the 46.2% achieved in the same period of 2025. The gross margin percentage benefited from increased parts and paint margins from Project 360 and Joe Hudson's synergy realization, partially offset by a lower mix of glass sales and variability in performance-based pricing. The gross margin was also impacted by lower gross margins inherent in joe hudson's business turning to operating expenses for the first quarter of 2026 operating expenses as a percent of sales were 34.2 percent compared to 35.8 percent of sales for the same period in 2025 operating expenses were positively impacted by project 360 the inclusion of the joe hudson's acquisition which had a lower operating expense ratio, and the mitigating effect of same-source sales growth, which partially offset typical cost increases. Adjusted EBITDA increased 51.9% year-over-year to an all-time record $122.4 million. Adjusted EBITDA margins improved 200 basis points to 12.3% in the first quarter, up from 10.3% in the same period of the prior year. The increase was primarily the result of Project 360 and Synergy Realization, as well as the acquisition of Joe Hudson's, which is accretive to adjust even the margins. During the quarter, the company realized an incremental $20 million in cost savings from Project 360 and Joe Hudson's Synergy's, bringing the total savings achieved to date to over $60 million. Net loss for the first quarter of 2026 was $7.9 million, compared to a net loss of $2.6 million in the same period of 2025. The net loss was negatively impacted by acquisition and transformational cost initiatives. These costs are expected to decline as integration finalizes. Excluding fair value adjustments, acquisition and transformational cost initiatives, and amortization of intangibles arising from acquisitions, adjusted net earnings for the first quarter of 2026 was $16.1 million, or $0.58 per share, compared to adjusted net earnings of $6.6 million, or $0.31 per share, in the same period of the prior year. The company expects one-time costs associated with Project 360 and Joe Hudson Synergies to total approximately $50 million, of which $26.5 million have been recorded to date. During 2026, the company plans to make cash capital expenditures, excluding those related to acquisition and development, within the range of 1.6 and 1.8 percent of sales. In the first quarter, capital expenditures as a percent of sales were 1.3 percent, excluding sales achieved by Joe Hudson's locations compared to 1.5 percent of sales in the same period of 2025. We continue to expect capital expenditures related to the Joe Hudson's acquisition to total $30 million with $2.6 million incurred in Q1 and most of the remainder to be spent in 2026. At the end of Q1-2026, the company had total debt net of cash of $2 billion compared to $488 million at the end of the fourth quarter of 2025 and $1.3 billion at the end of Q1-2025. Before lease liabilities, Boyd exited Q1 2026 with net debt of $946 million, compared to net cash of $290.1 million at the end of December 2025. The increase in debt compared to the fourth quarter of 2025 reflects the closing of the Joe Hudson's acquisition on January 9th, 2026, which had a total transaction value of approximately $1.3 billion. dollars. Boyd continues to have strong liquidity to support future growth with ample room available under our credit facility complemented by strong cash flow generation from our capital light business model. At the end of the first quarter pro forma debt leverage declined to approximately 2.9 times down from 3.1 times at the end of the fourth quarter of 2025. We continue to expect leverage to reach 2.6 times as early as the end of 2026. I will now pass it back to Brian for closing remarks.

Thanks, Jeff. As we look ahead, we're excited by the significant progress being made across the business through our operational and strategic initiatives. We continue to focus on delivering a high-quality experience for our customers and insurance clients while positioning the company to drive sustainable long-term growth. At the same time, initiatives such as Project 360 and the integration of Joe Hudson's are supporting meaningful operational and cost efficiencies that we expect will contribute to long-term margin expansion. Combined with our proven acquisition capabilities and strong financial position, we believe that Boyd remains well positioned to execute on our strategy and continue to grow in the highly fragmented North American collision industry. With that, I would now like to open the call to questions. operator.

At this time, if you would like to ask a question, press star followed by the number one on your telephone keypad. To withdraw your question, press star one again. We ask that you please limit your questions to one question and one follow-up. We'll pause for a moment to compile the Q&A roster.

Your first question comes from Derek Lessard with TD Cowan. yeah good morning uh brian and jeff and congrats on on the quarter um i just maybe one question for me is could you maybe highlight the biggest buckets of that 20 million dollar uh incremental cost savings from the project 360 and the integration yeah yeah so one of the largest buckets within there in this quarter is that is the carryover of um the the indirect head count action we took last year in april uh so that's the largest that's probably the largest single bucket that's in there which obviously rolls off then into the second quarter uh beyond that it's

it's the procurement savings and the other impact the initiatives we've talked about previously okay um and good news on the the normalization of the claims volumes looks like um it looks like your April same source sales is getting back towards your targeted range. Just curious if you have, or maybe talk about, you know, any initiatives that you might have in place that could accelerate that growth?

Yeah. I mean, look, the one initiative we've had in place for quite some time is really the strong focus on client performance. And, you know, we've talked previously about linking our GM's compensation to the performance of their top three clients. We know that, you know, we know that strong client performance in this industry actually drives, you know, an outsized volume and allows us to take, you know, take market share, you know, in this environment. So, you know, one of the largest things that we're doing is really focusing on how do we make sure that we're performing with clients and getting more opportunities into our stores. And then as we get those opportunities into our stores, the, you know, the stores are really focused on how do we make sure we capture as many of those opportunities as we possibly can. and that all comes down to making sure that we have the right staff inside of our stores and you know we've spent a lot of time over the past few years working on staffing models and making sure that you know the stores are prepared when that volume comes back and and look thus far you know it has you know it has you know provided us meaningful benefit in an environment that has where claims have been down where we've been able to you know deliver outsized performance against then absolutely uh thanks brian yeah thanks sir your next question comes from sabah khan with rbc

capital markets hey saba hi good morning this is bombing on the line for saba can you give an idea of what the landscape and appetite is for tuck and mna throughout the second half of this year and onwards could you say that question again i'm sorry yeah can you give an idea what the landscape is and the appetite for tuck-in M&A throughout the second half of this year and onwards?

Yeah, I mean, look, we still believe that the opportunities for tuck-in M&A are still, you know, obviously very plentiful out in the marketplace. There's, you know, over 30,000 locations in the industry. You know, the largest players comprise only a small fraction of that, so the opportunity is still there for, you know, still certainly there for tuck-in M&A. If you look at our acquisition or our unit growth strategy, it's really focused on three pillars. It's one, the M&A activity that you just discussed, and that can be, you know, single shop M&A as well as some of the smaller MSOs, five to ten store, you know, MSOs that are out there that we have an opportunity to continue to buy with the balance sheet that we have. The other is, you know, our brownfield greenfield strategy, which is, you know, really the, you know, what we're calling our new to industry activity. And you can see that we've already got, you know, we did eight of those in this quarter. We've got five planned for the second. We've got five planned open in the second quarter already. And we've got 17 that are planned for the balance of the year. So, it's a good balance between, you know, us building and putting new locations into markets that are focused on building density in the markets that we participate in today, as well as taking advantage of the opportunities that come to the marketplace from an M&A perspective.

Okay, that's helpful. Thank you. I'll leave it there.

Your next question is from Daryl Young with Cable.

Hey, good morning, everyone. I just wanted to ask around the industry claims activity and the reference to volumes being down 0% to 2% as normalized and indicative of the environment. But claims have been very weak for the last two years. So are we thinking that the absolute number of claims have just stepped lower now and we're going to settle into that? Or is there an argument that claims could actually increase above that 0% to 2% decline?

Yeah, I mean, look, as we've talked about this in the past, we certainly saw coming out of the, you know, we saw coming out of the financial crisis, we saw where, you know, 2007-08 claims were suppressed, and we ultimately saw in that 11 and 12 timeframe that, you know, claims kind of came a little bit outsized to the normal range. We saw the same thing happen coming out of COVID where, you know, during COVID we saw, you know, very depressed claims environment and then you saw, you know, really two or three years of positive claims. So I think, you know, we're certainly, you know, prepared should that happen. You know, and there's every reason to believe that looking back, you know, history would suggest that that could happen when it happens um you know i think is is is probably a little bit more elusive from our perspective and um we're just pleased that as we look at you know what we've been watching is the drivers of what's been driving claims negative as those things have gotten better we've seen the claims environment recover which which obviously points us to a to a place where you know you you really argue that there really isn't something more structural happening in the industry. It was really a bit of a cyclical impact of, you know, insurance premium increases and people's, you know, reluctance or fear to file claims over that period of time. And, you know, so we still think the growth algorithm's intact. You know, could there be an opportunity in the, you know, in the future that we see an outsized year? You know, certainly.

Okay. And just as a follow-up to that, the volumes within your shop, are you able to share where you're at relative to, say, a 2019 level or, I guess, how much latent capacity exists in the network today that could be filled as either claims come back or market share wins drive more volume through those shops?

Yeah, I mean, I don't know that we'll share, you know, we're not going to share the specific, you know, the specific volume numbers against 19. You know, I will tell you that what our shops are focused on is making sure that in every shop is, you know, is unique, What our shops are focused on is making sure that when an opportunity comes in, that we capture as many of those as we possibly can and, you know, maximize the opportunity, maximize the potential of the opportunities that we're getting. And that means that, you know, we will fluctuate staffing between stores where wherever demand is, is where we're making sure there's people. And, you know, as we continue to hone that and master that, we put ourselves in a better position to take advantage of the opportunities that are coming.

Got it. Thanks very much. I'll get back in the queue.

Yeah, thanks, Cheryl.

Your next question is from Steve Hansen with Raymond James.

Hey, Steve.

Steve, your line is open.

Brian, can you hear me? Hello. Hey, Brian, are you there? Yeah, can you hear us? So just really quick, what do you think the key factors are that's still keeping the T-Core, the total cost to repair, a little more muted here? I'm still a little surprised we haven't started to see the inflationary costs percolating into, you know, same sort of sales.

Yeah, I think there's, I think there's really, I think there's a couple factors. One, you know, we are actually seeing the, you know, certainly seeing the labor price movement, you know, come into the, you know, into the labor price, labor price inflation affect the T-Corps positively. What continues to mute that is, you know, when you look on a year over year basis, we still have elevated total losses, You know, Q1 of last year to Q1 of this year. Certainly over the last couple of months, you've seen total losses actually start coming down, which is good. You know, they are, you know, they're responding in a way that we would expect them to respond when used car prices actually go up. And, you know, the total cost of a car actually, you know, is going up as well. So we do see total losses and the mixed effect of high dollar tickets impacting the average cost of repair. The other thing that's impacting the average cost of repair is we've started to do a lot more, you know, a lot more work around, you know, around just the aging car park and what's happening with that. is you're seeing a bit of a, we're still seeing a bit of a trough in, you know, new car sales over the past five years, you know, coming out of COVID that ultimately still puts us in a position where now the car park is, the car park age is skewed by about 10 points from that seven to seven years to newer to seven years to older. And as you put older cars into the car park, you have a higher propensity for you know aftermarket park consumption and you know and you know more repair versus replace and things that you know things that when you're when you're repairing a new car uh you don't tend to have you tend to replace a lot more parts you tend to use oe more frequently um they also will obviously tend to have more you know calibration services and needs which you know pushes the price up so i think as we look at that again it's it's a bit of a temporal thing that you know as in new car new car sales have over the last couple of years at least it started to respond more positively but as you look at that I think we're just in this we're in this

kind of we're in this period where we're you know we're working our way through this this trough in the new car sales that's ultimately you know manifests itself as a slightly older you know set of vehicles that we're working on that's great and just just one follow-up just quickly and going back to the m&a environment i just wanted to ask about your your perception of sellers out there i know last year and in a certain degree the year prior there was more deal breakage than ever before given the claims environment do you think that sellers have started to rebaseline their expectations um to the more the what i call the current environment that should allow you to accelerate that that m&a flywheel i'm just going to get sense for the

pushbacks that have been there and getting deals done yeah yeah look i think it as as the you know we've talked about in the past as as volume comes back into the marketplace it comes back to the bigger players fastest you know it's the nature of the drp relationships that we have and you know the the reliance on you know us from insurance carriers to continue to drive down their you know their loss adjustment expenses by taking on the work that maybe an adjuster would so we know that when volume comes back, it comes back to us first, which then means that, you know, some of the single shop operators and some of the smaller multi-shop operators, you know, feel the pain of the industry longer. And as they feel that pain, they become more susceptible to wanting to sell. We are seeing more. We are certainly seeing more of that smaller MSO activity in the space. You know, as you know, we did four of those transactions last year. You know, so I think that the opportunity for us to continue to consolidate the space is as good as it's ever been. You know, our balance sheet is well positioned to allow us to continue to do that. And I think we are, you know, we certainly are positioning ourselves as one of the, you know, call it the buyers of choice. Appreciate it, Adam. Yeah, thank you.

Our next question is from Nathan Poe with National Bank Capital Markets.

Good morning, Ron. Thank you for taking my question. So it seems like most, if not all forward-looking indicators are pointing to tailwinds on same sort of sales growth. So can you walk us through your expectation for anything related to timing of that recovery towards your long-term range?

Yeah, I think the only, I mean, the only indication I would continue to point back to is just the sequential improvement that we've seen quarter after quarter after quarter in the claims environment. And, you know, as you look at that, we knew that the drivers that we were watching, you know, would posit as they became less negative, it would positively impact that environment. You know, as we get closer to that, you know, now we're kind of in that zero to two range, which is certainly more normal from a volume perspective. As we get that total cost of repair to start to meaningfully move up, you know, we're still expecting three to four percent growth from, you know, total cost of repair. And, you know, I do think there's no reason for us to believe that that won't come back. We certainly know that the average labor rates for insurance carriers increase every single year as inflation increases. We know that part prices increase every single year as we see inflation on parts, and that's a simple pass-through from us as an organization. So those things are kind of the tailwinds to average cost of repair. The headwind right now, as I said earlier, is just this mix of total losses. And as we see total losses continue to come down, I think you'll see that muting benefits or that muting impact start to continue to wane. And when that happens, you'd expect us to be back into the, you know, into the normal range. For right now, our focus is on just taking as much volume as we possibly can. And, you know, we know that we know, based on what the industry claims environment is against where our arrivals and our volume, you know, of vehicles that we're seeing is, we know that we're taking share. And we're going to continue to do that in the environment that we're in.

All right. Thank you very much. And for my follow-up, I just want to get some more color on your outlook for April. Were there any carryover backlog from the storm season that was of any benefit to April?

Probably not more than, you know, as we think about, you know, what happened in the first quarter. You know, we saw storm activity in the north partially offset or mostly offset by, you know, storm activity in the south that was – that negatively impacted the business in a number – to a number – to a greater extent than the positive impact we saw in the north. So, I wouldn't – I wouldn't – you know, we're largely through the work that would have come out of that. So, I wouldn't read any more into, you know, carryover on storm activity, both positive or negative.

Thank you very much. Turn it over.

Your next question comes from Krista Freitzen with CIBC.

Hi, thanks for taking my question. Just on the same-store sales growth number for the quarter, can you give a little bit more colour on kind of what changed through the last few weeks of March there?

Just given when you had reported Q4, it sounded like you'd expected same-store sales to be in line with Q4, and at that point, we already knew about the winter storms in the south? yeah i mean look we don't we won't we don't and won't comment on monthly results you know i i'll provide a little bit of clarity you know one it's important to remember that there is some degree of monthly variability in same store sales that's normal in our business particularly given a number of factors that can influence the results in any period of time um you know these include things like the timing of the month end i mean the month ended on a i think on a tuesday and or monday or tuesday that's that's typically not favorable for a month then for us um you got holidays you got weather patterns so i think one of the reasons we we talk about you know our you know guide of a long term is we know that you know we know that you know those variability those variations will happen month to month um you know in addition the the difference between 2.2 percent and 1.7 percent is really about three million dollars of sales and that you know three million dollars of sales is is you know a is on a billion dollars of revenue at this point is a is quite a a small difference relatively speaking so that's why we're not guiding to you know we guide to a longer term objective you know we know that if you look back if you look back to 2008 40 of the quarters, we were actually below, you know, the 3% to 5% range. 44% of the quarters, we were actually above the 3% to 5% range. So, you know, but if you look back on a, you know, on a five-year basis, we're 8.8% up. On a 10-year basis, we're 4.3% up. On a 15-year basis, we're 4.6% up on same-store sales. So we're not, when we get into this, you know, monthly game, there's lots of things that can affect, you know, the month end. And, and it's, again, it's why we focus the guide on, you know, a longer term three to 5%. And if you look back in, in any buckets of history, I mean, it really is, you know, or any longer term buckets of history, it will tell you that, you know, we've, we've seen that, you know, and, and continue to then complement it with, with new unit growth, which, you know, which in this quarter was obviously the bigger portion of the positive, you know having 28 same or 28 you know sales growth in the quarter driven by you know both joe hudson and you know the new locations that we purchased last year is is really what makes this business you know the the growth algorithm of this business tick and you know i think that's that's where i'll leave it thanks i appreciate the color there um and just for my follow-up um

And any comments or thoughts on how you're thinking about the summer driving season and where gas prices are at the moment? I'll leave it there.

You know, it's interesting. When you look at it, there's a couple of periods of time where you can look back where gas prices were elevated. One was that 2008 period of time where, you know, gas prices were elevated and VMT came down a bit. But, you know, we look at that as probably not the best comparative period because at the same time you had unemployment that was super high. When you look back at 2022, you know, which was another period of time where we saw elevated gas prices, the average vehicle miles traveled continued to grow slightly. You know, vehicle miles traveled per car was $13,500, which is pretty much the normal rate in that period. So I think the other factors come into play when gas prices move the way they've moved, and some of those other factors that have been there historically are not there now, which will tend to be a positive. I think the other benefit on summer travel is I'm not sure if many people have booked plane tickets recently, but as you look at the cost of a plane ticket right now for families that are traveling to vacations, you may actually see a lot more people driving to vacations given the elevated price of fuel on the airlines, which seems to have been caught a little bit flat-footed on hedging of fuel. so i think we're i don't i don't think we'd see we will see and haven't seen any negative impacts associated with it thank you appreciate the uh the comments okay hey good morning everyone thanks for uh taking my questions just a couple of quick ones here you know you reached your 80 internalization of calibration goal uh i know you're not targeting 100 but how should we think about you know kind of maybe a continued move upward there and where do you think it finally shakes out yeah look i mean we've talked about the 80 historically um we to your point we reached it we're happy we reached it um that doesn't mean we we slow down the hiring slow down the the objective of continuing to drive as much internalization as possible um you know what i what i would say around where the you know there's a balance between, you know, having too much idle capacity, you know, to staff for 100% or staff for 95% and, you know, and the margin benefit associated with it. So what we're trying to do is just make sure we keep the techs that we have productive 100% of their day, you know, and as we do that, you know, we will continue to inch up. We have markets that are obviously greater than 80%. We have markets that are in the 90s, so we'll continue to, as a company, focus on hiring the technicians to take care of as much of the demand as they possibly can. But we're very pleased that, and you can see it in the gross margin results, we're very pleased that, you know, we beat the timeframe on the expected realization of this particular initiative. And that team has certainly done a fantastic job of capturing the opportunity that we outlined, you know, a little over almost two years ago.

And, Brian, maybe I'll just add that it is important to remember that the calibration market does continue to expand itself. So even though we've, you know, got the targeted level of technicians now in place that we commented on, the market will continue to expand and grow. So we should still see further benefits coming through our gross margin.

Perfect. I appreciate the color. Maybe one more quick one on the Joe Hudson side. Their stores make a little bit less on average than yours. Can you give us any color on the opportunity there, maybe some revenue synergies and the timing that you could see those?

Yeah, I mean, I've spent quite a bit of time in the Joe Hudson's locations over the past, you know, over the past four months. And, you know, what I'll tell you is, you know, still very encouraged by what we bought and, you know, the opportunity that exists. And, you know, one of the reasons for us accelerating the, you know, the conversion process. And, you know, I will give, you know, a shout out to the team that we had that was really working those conversions. I mean, converting 258 stores in just under a three-month period of time, you know, is no easy feat. And, you know, that team did a phenomenal job of accomplishing that. So, you know, really appreciate the team that did that. You know, what that gave us was then the visibility to be able to see what we see in the legacy Boyd and Gerber business, which, you know, is a lot more data, a lot more focus on client performance. And, you know, I see the opportunity in that in those locations to be, you know, just as good, if not even slightly better than I would have thought when we were buying the transaction. So timing of it is, you know, timing of it will, you know, as we said in the prepared remarks, Q1 obviously impacted by a little bit of weather and then the focus on conversion. You know, that works itself out of the system as we get into Q2. And now the focus is just on the same maniacal focus on driving car count, driving capture rates, you know, focusing on client experience, you know, in those locations. And I think that as we do that, we'll see meaningful benefit, you know, from a top line perspective in that business. Perfect. I appreciate the color. Great. Thank you.

Your next question is from Gary Ho with the Jardins Capital Markets.

Hey, good morning. So first question, wondering if we can get an update on the Mitchell platform onboarding. Are you seeing early benefits, market share gains with the key insurer? I believe you mentioned kind of Joe Hudson is on that platform already. Anything you've learned or conversations with him?

Yeah, we continue to have conversations. You know, I would tell you there really has been no meaningful benefit in the results as we sit here today, which that's, you know, from my perspective, good news. It means there's still a bit of a tailwind for us as we as we continue to work on that relationship. I still believe the opportunity will be out there as, you know, our objective is to just make sure that our stores are prepared when it comes. So, you know, to your point, we've put Mitchell into every location. Now we're on the on a pathway of of getting, you know, our teams trained on, you know, in in many of our stores, we already use Mitchell. So the training is not, you know, it's not something that, that is, that is, that has to happen everywhere.

But as we look at stores that have gaps where they're not using Mitchell today, we're, you know, we're getting those, you know, estimators trained on how to use it and making sure that when, when that, you know, when, you know, we unlock that opportunity that, that we're ready to take advantage of it. okay great and then my follow-up um you're more of a capital allocation question uh again that you plan to deliver back down to 2.6 times as early as the end of this year but given the shares are down 30 percent year-to-date is there a path where you'd consider buybacks over slowing down the leveraging or slowing down the m a and greenfield brownfield build out perhaps hi gary it's jeff here no i i don't think that's uh in the cards in the near

in the near term, we've just got so many opportunities to still expand the footprint and take advantage of the growth opportunity that in the long term, we feel that's the best use of our capital.

Okay, great. Those are my two. Thanks.

Our next question is from Chris Murray with ATB Capital Market.

Yeah, thanks, folks. Good morning. Maybe turning back to the margin profile uh that we've seen over the last couple quarters you know we've seen some meaningful improvement um i think you guys called out about 200 basis points of improvement this quarter so i guess a couple pieces of this question one um related to the storms was there any uh kind of unusual costs that we should maybe be thinking about i don't queue once historically a bit lower but just anything to think about there but i guess more importantly as we go through the year. I know you kind of talked to synergies and other improvements, probably guiding to about 150 basis points over the full year, but it looks like we're a little ahead of that pace at this point. So any thoughts around how you think you'll be able to improve margins on a go-forward basis would be helpful.

Yeah, well, look, I think the objective as we've laid out is to continue to work our way towards the 14 you said it earlier that our 14 plus percent at this point i mean you said it earlier um in your commentary we know that q4 to q1 we typically see if you look over the longer term you know we see about 100 basis point dip just based on the resetting of accruals and excess cost that sits in the first quarter so you know we saw a number similar to that in this quarter we we obviously saw a little bit of a benefit you know associated with the incremental projects that were initiated this year plus the you know the mixed effect of bringing joe hudson in which put us at you know 12.3 percent in the in the quarter um you know i i'd expect that uh you know i would expect that you know as we look at q1 to q2 you see we typically will see that bounce back you know from the that hundred basis points essentially bounces back and you know so i'd expect that to happen no different than it usually does if you were to look at that then you know if that puts us at a 13 2 13 3 and you look at that against you know a year ago you know at 12 percent you know which is where we were in q2 of 2025 you're seeing that kind of 100 and you know 20 130 basis point movement year over year and that's And that's coming off of then, you know, in 11-5 that would have happened in Q2 of 2024, which then solidifies the incremental, you know, 50 basis points or so to get you to 200. You know, but that, you know, as we think about just building the, you know, the profitability back, we had $40 million of Project 360 savings realized last year. We expect $30 million of incremental Project 360 savings to be realized this year, and we now expect $20 million of Joe Hudson Synergies to have a total of $90 million of realized benefit over that period of time to be in our financials, which should certainly be pushing us closer to that 14% as we get into the fourth quarter.

Okay, that's helpful. Thank you. And then one other question, we talked a little bit about, you know, hitting the 80% goal on scanning and calibration. But the other thing that I wanted to ask about is sort of your mobile calibration services. You've got the operation in the U.S., operation in Canada. As the market, you know, needs more scanning and calibration, how do you think about those mobile services playing out there? And in a lot of ways, you know, how do you see those working across your networks and any benefits that they bring outside of maybe incremental growth at this particular point?

Yeah, I mean, look, I think that, you know, what we're going to be left with at some point in time is a large collection of mobile assets that can be utilized and deployed to do external work. Because what ultimately will happen is the penetration rate of calibration services goes up and calibration needs per shop go up. You know, the necessity for us to have a calibration tech inside the shop will actually become greater. And at that point in time, you'd assume that, you know, we're doing almost 100% of our calibrations, you know, as we look out into the future. That mobile team then can be deployed to, you know, to, you know, work external opportunities with single shop operators that may not have the financial flexibility to be able to, you know, invest in the equipment needed to conduct those calibrations. And I think that's where we see, yeah, that's where we see in the future an opportunity for us to continue to grow and expand our, you know, our revenue in the calibration space. As we sit here today, that, you know, that opportunity is more focused on continuing to internalize our own work and drive the profitability associated with that. But certainly in the long term, you know, we do expect that to be a revenue stream that, you know, as Jeff has pointed out, continues to grow and continues to grow at an outsized rate to the industry, probably somewhere in the neighborhood of 20 to 25 percent a year, that we will be able to take advantage of, you know, externally at some point in time.

Okay, I'll leave it there. Thank you.

Your next question is from Mark Jordan with Goldman Sachs.

Hey, good morning, and thank you for taking my question. You know, first one, just focused on follow-up to total cost repair. I mentioned comments earlier they're seeing more, I think, repair versus replace, just given the age mix. But if you could share, you know, anything you might be seeing in terms of parts inflation and how that might be impacted maybe between the mix of OEM and aftermarket parts, do you Yeah, I mean, we certainly continue to see a normal environment of part inflation.

I think, you know, you've heard, you probably have heard in some of those reports, I think, you know, or at least I've heard in some of the reports where there's, you know, there's some slight competitive activity taking place in the aftermarket parts space that might, you know, might be putting a little bit of pressure on aftermarket parts at the moment. But, you know, we still have the tariff environment that's out there. We still have, you know, we still have kind of the normal, you know, the normal impact of inflation. Obviously, gas prices, you know, one area where gas prices does impact, you know, the, frankly, positively impact is you're going to see people, you know, having to, you know, increase park prices for the cost of moving them around because gas prices are elevated. So I don't, there's no reason to believe that, you know, that we're going to see anything but positive right now. What, you know, as I said before, the bigger challenges is, you know, we're seeing that muted by just the shifting age of the car park and shifting age of the vehicles that we're working on. And that's really just a function of, you know, working through that kind of post-COVID period where new car sales were slightly depressed. And, you know, that's now working its way into the, to the latter part of the, of the, you know, car park. And, you know, as we, as, as that comes back, you know, we'll expect that that will continue to, you know, that the mix will shift us back towards some of those high dollar tickets that, that, you know, makes that, makes that inflation come out more prominently.

Perfect. Thanks very much. And then as a follow-up, just switching to labor, you know, how do you feel about your current labor levels and ability to meet demand at volume, sort of, can you, to improve throughout the remainder of the year, and maybe what you're seeing in terms of technician wage inflation?

Yeah, real, on the last part first, I mean, no real, I mean, technician wage inflation is really, you know, kind of at, call it CPI level, so nothing, you know, at normal CPI level is not not last reported um but you know we we you know we're always looking for technicians and you know the the beauty of this industry is technicians want to go where there's work because they get paid for the hours that they produce not the hours that they work so as we look to go you know we've got a great sales proposition for a technician which is we have work right now we have volume in the shops which is not a luxury that many of you know many of the single shop operators and even some of the MSOs actually have. So as you have, when you have work, it's a lot easier for us to recruit. You know, we focus on hiring technicians every single day. And, you know, that remains, you know, still does remain an opportunity for us, but I can tell you that the team is intensely focused on continuing to make sure that we put the capacity in, you know, where the capacity is needed.

Thank you very much. Yep.

Your next question is from Brett Jordan with Jeffries.

Hey, Brett. Good morning. Total loss rates, I guess maybe I missed it, but could you tell us what the number was for the first quarter?

And I guess it sounds from the remarks as if you expect it to continue to come down, but could you maybe give us some color as to where you think we should expect total loss rate ranges to be in the next year or two, sort of intermediate a term yeah look i i won't i won't try to predict that i will tell you that if you look at the industry the industry total loss rate is 23.6 as of the end of q126 um you know and you know what what i'm referencing is more of our internal numbers where i see you know where i do continue to see you know the total loss rates in the business we we tend to be you know less than the industry from a you know from a total loss position because many of those total losses never work their way into a store um you know so when i when i think about our internal numbers i can see you know that year over year um were slightly elevated from q1 of last year uh but i have seen you know those come down you know around you know when you look at the the decline that we've seen just month to month to month i mean you're foreseeing declines that are probably from the peak, you know, which kind of happened in that September timeframe of last year. From the peak, we're down, you know, 20 or 200, 200 to 300 basis points. So, there is meaningful change that's happening in total losses as, you know, as used car prices continue to grow.

Okay, great. And then I guess contribution from scanning and calibration, when you think about, you Is it comparable to labor margin, or are you sort of charging the insurance company for that, getting a better return because there's technology and your equipment involved?

No, I think we've talked about it. I think about it as more akin to a labor operation, which carries labor margin associated. Great.

Your next question is from William Stradinger with BMO Capital Markets.

Hey, good morning.

Beyond the weather headwinds you highlight in your southern market, can you just comment on trends you saw across your other regions and if there's any pockets of relative strength you want to call out? yeah you know obviously the pocket of relative strength is in the north where you know in the first quarter we saw you know more snow events we saw you know we're starting to see as we exited you know as we exited the winter months and got into the spring you're starting to see some you know some hail events that are that are happening both across the south and the and the north some even impacting you know what we would call our west uh so you know i think you know whether you know weather was impactful in the south in the first quarter just because when you know there's weather in the south when there's there's snow in the south that it really curtails driving you know when there's snow in the north people drive and they get into accidents we know that times more likely to get into an accident during a snow event than they are in a you know on in dry conditions so you know we had more snow events in the north you know in the first quarter than we would have had, you know, historically. So that's benefited the north. Unfortunately, in the first quarter, that was, you know, more than upset by, you know, the softness that the three-day, you know, there was really a three-day storm that affected everything from Texas, Oklahoma, all the way up into the Carolinas. And, you know, as you know, we've got quite a few stores down in that area. There was a point in time where there were close to 100 locations shut down just because people couldn't get into work. So that has a negative impact on the business. The good news is that's behind us. And, you know, but that is part of the reason we will call for 3% to 5% in the long term because those types of things can happen in any given quarter. And, you know, it's just important to note that those things are temporal and they don't indicate anything about what's happening in the underlying business itself. They're just things that will happen. And when, you know, when three and a half million dollars can affect 40 basis points or 50 basis points of margin or of revenue, you know, an event like that can cost three and a half million dollars, you know, very easily.

Okay, great. And then can you just give us an update on what you saw with used car prices and insurance premiums within the quarter?

Yeah, I'll give you the latest on, you know, used car prices. If you look at Mannheim, you know, April data would suggest up 1.8%. You know, so I think that continues to be a positive. What was the second part of the question? Insurance premiums at this point are, yeah, I think the last data I saw was 0.8% up. So, you know, at this point, insurance premiums are all but, you know, completely flat, you know, against the CPI that actually they were 0.2% up in the month of April. So auto insurance premiums are all but kind of like flat at this point. Okay, great. Thank you.

Yep.

Your next question is from Jonathan Goldman with Scotiabank.

Hey, good morning, team, and thanks for taking my questions. Maybe just the first one, it looks like the outperformance gap spread to the industry narrowed in Q1.

You were tracking, i guess for the past few years 500 plus looks like this quarter was you know maybe 250 even if you normalize for weather it still looks like only 350 bit um you know outperformance you know still impressive but it does look like it's narrowed so i was wondering if you had any color on the trend there yeah i don't think there's anything you know necessarily super notable on on that i think again you'll you'll see you know as we're we're starting to laugh you know in the first quarter we're starting to lapse some of that that associated with with the you know change compensation structure that put a lot more eyes on performance you know again I think there's still you're gonna see quarter to quarter fluctuations and in particular related to just things like you articulated the storm impact obviously affects you know can affect our business you know just based on the concentration of stores now in the south that can affect our business differently than, you know, it affects another business. So I don't think there's anything really to read into that. In the long run, what you'd expect are, you know, what we expect our long-term growth to contemplate is somewhere in the neighborhood of 100 to 300 basis points of market share gains, you know, and to achieve that 3% to 5%, you know, the fact that we're still sitting at, you know, anywhere from 300 to 500, you know, basis points is I would take as a positive.

Okay, fair enough. And then maybe another one, you know, Brian, I think on the Q3 call last year, you were saying it could be certainly conceivable that we can be above the 3% to 5% same-store sales range in the early part of this year, as you were lapping easier comps. I mean, you did offer some color earlier in the call about TCOR and price of cost of repair being held back a bit. I mean, that would probably fill in the delta there. But is there anything else that was different versus your expectations back then to how things played out this quarter?

No, I mean, that fills in all and then some of the delta. I mean, if we had the normal price that we had been getting over the last, you know, historically, just even the 3% to 4%, you know, I don't have to do the math for you, but we'd be outside of the range.

Yep, that's fair. And then maybe if I can squeeze one more in, you know, thinking about the growth algorithm over the long term, does your baking in of the three to four percent increase in average cost of repair come at the expense of repairable claims volumes? I mean, one of the headwinds the industry has been dealing with is, you know, insurance inflation, which is a product of, you know, cost of repair and parts inflation that obviously had an impact on claims volumes. What gives you confidence that we can get back to this 3% to 4% inflation and still maintain a historical range of claims volumes?

Yeah, I think probably what's most notable about that commentary is it's really not 3% to 4% that's driven by pure inflation. It's 3% to 4% that's driven by the complexity of the repair. You know, if you think about the fact that as more cars require a calibration service, and that calibration service is roughly just north of $500 a calibration for, you know, on average on a ticket that it, you know, that is what's driving the total cost or the cost of repair up. It really isn't, you know, just, you know, a pure inflation equation, which to your point, I mean, the algorithm calls for, you know, a down, the algorithm still calls for a claims volume to be down 2%, but then offset by 3% to 4%, you know, combination of price and complexity. and you know so that price piece is probably you know it may be half of that equation the quest the complexity piece of it's the other half um so i i think there's a benefit on one side and a cost on the other which you know which allows for then the marketplace to just continue to grow um so i i you know i i think it's important not to just think about that as pure inflation because it's a lot of it has to do with the complexity of the repair the hours are increasing the calibration services are increasing. And frankly, as those things happen, the cost of a labor hour is increasing at probably normal CPI. The cost of parts is increasing at normal CPI. But that would only give you about two points of the three to four.

Yeah, that's a good distinction. Thanks for taking my questions look at that, thank you. Yep, thank you.

At this time, there are no further questions.

I'll now turn Nicole back over to Brian for any closing remarks. yeah thank you appreciate that um you know sorry about that so look as we uh you know i want to you know again take the opportunity to thank the uh the team you know um you know for all the hard work and efforts in the in the quarter and you know with that i i thank you operator and thank you all once again for joining the call today and we look forward to reporting 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 participating. You may now disconnect.