Boyd Group Services Inc. (BYD) Earnings Call Transcript

Good morning, everyone. Welcome to the Boyd Group Services, Inc.'s 2026 Second Quarter Results Conference Call. Listeners are reminded that certain matters discussed in today's conference call or answers that may be given to questions asked could constitute forward-looking statements that are subject to risks and uncertainties 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 SEDAR's database found at sedarplus.ca and EDGAR at www.sec.gov. Boyd released its second quarter results before markets open today. You can access the news release as well as the complete financial statements and management discussion and analysis on the company's website at boydgroup.com. The news release, financial statements and MD&A have also been filed on SEDAR Plus and EDGAR this morning. On today's call, Boyd will discuss the financial results for the quarter ended June 30, 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, August 12, 2026. I would now like to introduce Mr. Brian Kaner, President and Chief Executive Officer of Boyd Group Services, Inc. Please go ahead, Mr. Kaner.

Thank you, operator. Good morning, everyone, and thank you for joining us on today's call. On the call with me today is Jeff Murray, our Executive Vice President and Chief Financial Officer; and Steve Savard, who recently joined our team to lead our Investor Relations and capital markets efforts. We look forward to Steve maturing and professionalizing this function and driving direct and meaningful engagement with our shareholders. Our second quarter results reflect deliberate execution across our business, evidenced by strong revenue growth meaningful margin expansion and measurable progress against our strategic priorities. Revenue increased 30% year-over-year exceeding $1 billion for the first time in Boyd's history, while adjusted EBITDA grew 45%. Adjusted EBITDA margin expanded to 13.4%, up from 12% in the second quarter of 2025 and 11.5% in Q2 of '24 prior to the launch of Project 360, our cost transformation program. Our top line performance reflects continued market share gains as well as ongoing execution of our densification strategy, driving a 32% year-over-year expansion of our location footprint, anchored by the acquisition of Joe Hudson's Collision Center alongside new location development. Importantly, this top line expansion was paired with strong margin gains. The 140 basis point year-over-year increase in adjusted EBITDA margin reflects the continued execution of Project 360 alongside accelerated synergy realization from the Joe Hudson's acquisition. As a result, we are raising our 2026 synergy target to $35 million, up from our previous estimate of $20 million. During the quarter, we successfully completed the system conversion across all Joe Hudson's locations. This marks a critical integration milestone establishing a unified operating platform that will drive greater consistency, productivity and margin expansion across the entire business. While the conversion resulted in temporary sales disruption, we have implemented target initiatives to strengthen throughput and local execution. These actions are now gaining traction and driving revenue on a more profitable foundation. Turning to the broader operating environment. Based on second quarter claims processing data, we estimate that repairable claims volumes were flat to down 2% year-over-year. This represents a meaningful improvement compared to the decline seen in Q2 of 2025 and points to the ongoing stabilization consistent with our long-term planning assumptions. Against this backdrop, we generated 2.9% same-store sales growth in the second quarter with limited contribution from total cost of repair. This performance confirms continued market share gains, reflecting the strength of the company's insurer relationships, continued improvement in carrier performance and the benefits of our 2025 regional incentive realignment. In July 2026, same-store sales remained positive in the low single digits, continuing to reflect the aforementioned market share gains, monthly results can vary widely. Consequently, we track same-store sales trends over broader horizons and do not view any single month performance as indicative of full quarter's results. Our continued outperformance relative to the industry repair volumes reflects the strength of our strategy and execution. We remain focused on driving sustainable, profitable growth by improving capacity utilization, capturing local market share and selectively expanding our footprint through disciplined acquisitions and new location development, all while driving profitability and cash flow. Given the highly fragmented nature of our industry, we see a significant runway to expand our market share, both organically and through disciplined M&A while leveraging our network scale to drive further operational efficiencies. I will now pass the call over to Jeff, who will provide a more detailed analysis of our second quarter results. Jeff?

Thanks, Brian. As highlighted, we delivered strong second quarter performance, marked by robust top line growth, positive same-store sales and strong margin expansion. Second quarter revenue increased 30% year-over-year to $1.013 billion. Growth was driven by $211 million in incremental contributions from 340 new locations, not in operation for the full prior year period, alongside 2.9% same-store sales growth as Boyd continued to outperform the broader industry. During the quarter, Joe Hudson's locations contributed $175 million to total sales. Gross profit increased 31% year-over-year to $480 million, representing a gross margin of 47.4%, up 60 basis points compared to 46.8% in the second quarter of 2025. This margin expansion was driven by higher parts margins, supported by accelerated synergies and Project 360 cost savings as well as increased scanning, calibration and solid margins. Turning to operating expenses. For the second quarter of 2026, operating expenses as a percentage of sales improved to 33.9% compared to 34.8% in the prior year period. This 90 basis point improvement was driven by Project 360 and Joe Hudson synergy realization. Adjusted EBITDA grew 45% to $135.9 million, outpacing revenue growth, adjusted EBITDA margin expanded 140 basis points to 13.4%, up from 12% in the prior period. These gains were anchored by approximately $15 million in combined Project 360 cost savings and Joe Hudson synergies realized during the quarter. Net earnings for the second quarter of 2026 were $1.3 million compared to $5.4 million in the same period of 2025. Net earnings were impacted by higher amortization and depreciation costs related to new location growth as well as higher financing costs. An adjustment was made in the quarter to revise the initial purchase price allocation, which negatively impacted amortization in the quarter in the amount of $5 million. Net earnings adjusted for this incremental intangible amortization would have resulted in net earnings of $6.4 million, up $1 million from the same period of 2025. Adjusted net earnings for the second quarter increased 47% year-over-year to $22.4 million and adjusted EPS increased to $0.80 from $0.71 in the same period of the prior year. For full year 2026, the company continues to expect maintenance capital expenditures to range between 1.6% and 1.8% of sales. Additionally, capital expenditures associated with the Joe Hudson's acquisition remain on track at an estimated $30 million, of which approximately $9.8 million has been invested through Q2 of 2026. Boyd's balance sheet remains strong, providing the financial flexibility to fund our future growth initiatives. Robust earnings growth in the first half of the year, combined with our capital-light business model drove an improvement in pro forma net leverage to approximately 2.8x at quarter end, down from 3.1x at the close of fiscal 2025. I will now pass it back to Brian for closing remarks.

Thanks, Jeff. To wrap up, our second quarter performance underscores the strength of our operating model and our ability to deliver profitable, high-quality growth. We are executing well on our strategic priorities, successfully integrating Joe Hudson's and expanding our margins through Project 360 and network synergies. With a strong balance sheet and a clear runway in a highly fragmented market, we remain well positioned to drive long-term value for our shareholders. With that, I would like to open the call to questions. Operator?

[Operator Instructions] Your first question comes from the line of Steven Hansen with Raymond James.

Brian, I wanted to focus on the margin expansion first. It looked pretty solid at 140 basis points. Some of that's coming from Project 360 and faster-than-expected synergy realization. But just trying to get a level set on how you think that sort of journey is going. I know you raised the guidance for the year. But I mean, are you seeing more synergies, where are they coming from specifically? And how you're getting them faster ultimately is the question.

Yes. So first of all, I would say very pleased with the progress around margins. The cadence that we've seen, if you look back to Q2 of last year, 12% in Q2, 12.4% in Q3, 13.1% in Q4. And then as we know, we seasonally kind of dipped down in Q1 to 12.3%, but then bounce right back up to 13.4%. So we're seeing kind of this a 40 basis point expansion on our journey back to the 14% kind of on a quarterly basis. So I expect that to continue. As you know, the Project 360 benefits that we called for -- we called for them to be ratably distributed throughout the balance of the year. And I think the result is evidence of that. As it relates to the synergies, I think we'll talk to them. I'm sure we'll talk more about Joe Hudson, but the pull forward of synergies really has to do with the timing of the pacing of the integration. We were able to integrate Joe Hudson more quickly. I think operationally, that was the right thing for us to do. We needed to get visibility into the operations more deeply than we were able to on their system. So getting them on our systems platform, being able to accelerate the back office synergies much more aggressively put us in a position where we were able to call up the synergy expectation and at the same time, continue to achieve really strong margins in the quarter.

Very helpful. And then just quickly on the July outlook, you're referencing low single on the July mark. I know you don't like to extrapolate a single month. But I mean, how are you viewing the recovery in claims environment and on top of that, your ability to continue to take share.

Yes. Look, the recovery on the claims environment remains -- we're happy that it's kind of stabilized in that 0% to 2% or -- down 2%. And -- that allows us to achieve our long-term growth algorithm. As we've talked about in the release, I mean, we are still seeing limited price which is really the only downside in the market right now. So I do believe that, that stabilization is here to stay. It's evidenced by the -- we had talked about last year, the drivers of that being the heavy insurance premium inflation. As you know, insurance premium inflation at this point has almost turned to a deflationary category. We talked about the impact of total losses in that taking cars out of the consideration set. In our world, total losses are essentially flat on a year-on-year basis at this point. So as we see the things that we said were the drivers of the negative getting better. We continue to see the marketplace just being a much more stable environment for us to operate in. Appreciate that. Thanks, Steve.

The next question comes from the line of Mark Jordan with Goldman Sachs.

As we think about total cost repair, how should we think about the second half of the year? And is there any color you can provide on maybe the various components that make up that measure, be it the mix between parts and labor, alternative parts usage, et cetera.

Yes. So I'll say a couple of things on total cost of repair. Relative to timing, I don't really have a point of view on the timing. I do think, structurally, we'll talk in a second about the things that will drive it in the long term. In the short term, I think Steve, actually, the Raymond James hosted a really nice call with Ryan Mandel, they talked about what's happening in the near term. That focus really on a couple of things, higher total loss rates which, as I said earlier, kind of moderating at this point. A little bit of an increase in alternative part usage. And then in times where there's less work in the marketplace, you have a tendency to see technicians doing a lot more repair versus replace. That repair versus replace can have -- can have a negative impact on the TCOR. I think more importantly than that is just the structural the structural tailwinds that still remain behind us. If you look at the cost of repairing a vehicle, that's 0 or 3 years or newer, it's about $2,000 greater than the overall cost of repair. So we're seeing now the cost of repairing a vehicle that's in that 0- to 3-year category, close to $6,000. If you think about the future of this business and you think about the -- how that becomes the older part of the car park in the long run or the older part of the cars that we're actually repairing you can see a place where the ticket is definitely going to continue to blend up as those cars become more of our repair set. So I believe that there's still structural tailwinds in the marketplace I think in the short term, we're controlling what we can control, which is taking market share in a market that's kind of in that 0 to down 2%. And we'll continue to do that. And when price comes back, it will be a nice overlay on top of where we're performing today.

Perfect. And just 1 follow-up, if I could. I think last quarter, you mentioned a bit of a headwind from mix shift to aftermarket parts, just given the older car parts. How does that play out over the coming years? Is that something that should kind of be diminished or as the car park ages with those newer vehicles as you're mentioning?

Yes, I think it just -- it lapse, right? I mean, you get to a place where it's it's the similar thing. So I don't see it accelerating the usage -- I don't see the usage of aftermarket parts accelerating. I see it kind of us getting to a place where it stabilizes and then it doesn't become a headwind. It just becomes a muted impact. .

Your next question comes from the line of Bret Jordan with Jefferies.

Could you talk a little bit about your longer-term expectations on total loss rates? Sort of where do you see the upper boundary there sort of on a maybe 5- or 10-year basis. .

Yes. It's interesting when you think about some of the things that are happening around total loss rates, I think there was a -- CCC came out with something earlier in the quarter that talked about just the impact to the consumer on total losses. So I think -- and it's a very negative impact. And we know that from many perspectives, having a total loss event is one of the worst customer experiences that a consumer will have. So there -- the insurance carriers don't like total losses. The OEMs don't like total losses and certainly, we like to repair people's vehicles and get them back on the road safely. So I think my view is longer term, you can continue to believe that there might be some upward movement. I would say that I don't expect it to be -- I do not expect it to be a very large movement. I think we get more to a cadence where it's a very minimal -- it's a very minimal number. I would -- if I were to peg a number to it, I would expect something in the neighborhood of 3/10 a year of movement, which really isn't -- really isn't a lot. And I do think, as I said, there's a lot of momentum to try to drive total losses down. You even saw some legislature passed in Rhode Island as an example, where they are now -- they're now mandating an 85% threshold for total losses versus the industry that kind of sits at the 70% today. So I think there's more momentum to move it down than there is to move it up. The aging car park might put us in a position where it has -- it will go up based on the car park age, but I think there's some other factors that are suppressing it as well.

And Brian, I would just add that it's important to think about it in the context of the overall market size growth as well because it really is also important to understand how is it changing in relation to the total market size changing because even if the solos increasing, there could still be more cars available to be repaired in that scenario.

Could you talk about regional performance? I mean some of the densification benefits from the Joe Hudson's acquisition, sort of what you're seeing in any sort of market outliers? .

Yes. I mean, we've talked before about we see continued strength in the north right now. Obviously, the South with Joe Hudson was going through a heavy amount of integration in the first -- in the first and second quarter. So we don't see -- I think most of what we're seeing in the the north or a lot of what we're seeing in the north is weather -- weather-related activity that is probably putting it in a position where there's a little bit of outsized growth in the north. But beyond that, I would say that we see the same opportunity across all markets that we operate in. And the most important thing we can do is to continue to perform against our clients' metrics. And as we do that, we know that opens up more opportunities for us. And as we get more opportunities that gives us the ability to then capture more work in the marketplace and take the share that we've talked about. So I think on balance, we still control a lot of -- we still control a lot of what's happening in the regional performance.

The next question comes from the line of Thomas Wendler with Stephens, Inc.

Solid quarter, you guys kind of highlighted 13 new start-ups for the remainder of the year. How should we be thinking about the acquisitions for the remainder of the year? .

Yes, I wouldn't -- I would think of the acquisition similar to what we've seen historically. We have a tendency to start -- we have a tendency historically to start slow and finish strong. We see a nice robust pipeline of acquisitions that are out there. I think you're going to see an increase in activity as we get into the second half of the year, which is typically what we have seen. We have had a tendency to have a really strong fourth quarter as it relates to acquisitions. Some of that's just timing of when the opportunities come to the marketplace. And when they're there, we obviously take advantage of that. So I would say from an acquisition perspective, expect acceleration as we get into the back half of the year, no different than we've seen historically. And then as you know, we're still working to get our NTI pipeline, our new-to-industry pipeline in a position where there is some more stability. We had a couple of opportunities in the pipeline that actually pushed -- some pushed out in some a couple of projects that we actually canceled because of the Joe Hudson acquisition. So that's why you saw a little bit of erosion of what we were expecting in the third quarter. Some of those just came out of the pipeline because of -- because there -- as we looked at the overlay of them with Joe Hudson, it didn't make sense for us to keep that project going. But we would like to see that continue to get to a more normal kind of or so a quarter. And you can see that as we get into the fourth quarter, we have 10 planned essentially for the -- 10 NTIs planned for the fourth quarter, and we'll layer on acquisitions on top of that.

Perfect. I appreciate the color. And then maybe 1 more for me. mentioned capacity utilization is maybe an opportunity for the back half of the year. Can you maybe help us think about what utilization rates are right now and how the company's fixed costs are probably going to lever as we see a little bit better utilization?

Yes. I mean, obviously, the technician workforce is where we're really talking about capacity utilization. And we look at -- we watch productivity. So we're watching kind of the hours per tech per week. That's our barometer of how the -- how utilized the technician base is. We still see a little bit of upside in the ability to utilize the existing tech. But as you guys know, we're always out looking for additional text add to the workforce, and we'll continue to do so. But I do see a little bit of -- we do have a little bit of capacity utilization still left to to go. But as I said earlier, I mean we're waiting on growth and when we had those conversations historically, we were in a situation where we were in declining environment. And as you look at our position today, as we said, we're really winning on volume. And if you look at that 2.9% that we reported, against the, call it, the down 2% that we were a year ago, that's really about a 5% shift in our -- or 5% swing in our same-store sales, which is really eating up a chunk of that capacity utilization.

Your next question comes from the line of Sabahat Khan with RBC Capital Markets.

Great. Maybe if we can get some color on some of the commentary around the market share gains. I think the algo run rate is x percent industry growth and then you guys capture some share on top of that. Maybe if you can comment on sort of year-to-date and just the outlook. Is it market share broadly nationally speaking? Is it the more densified regions? Maybe if you can just share some thoughts on where typically you're able to capture share about the market growth rates?

Yes. Well, as we talked about before, I mean, market share gains in our world come with outperforming our competitive set. And we continue as you know, we did the regional incentive alignment where we aligned our -- we deliberately aligned our field leadership's compensation to the performance of their top 3 clients. And when we did that, we saw a nice -- we saw a really good movement in our client performance. And when that happens, it gives us the ability to see more opportunities. So I would say that there's not a -- because of the way that we're rolling that out, it's -- there's not a regional difference, so to speak. It's really more broad-based than as we continue to execute on our -- on those initiatives. We continue to see more opportunities coming into the funnel. And then our -- then our obligation then is to make sure that we're capturing as many of those as we possibly can into our stores. So I think there's -- it's very -- it was very deliberate actions to continue to drive market share gains. And I think those deliberate actions are really taking hold as we get into this quarter and the balance of the year.0

Great. And then just for my follow-up, maybe if you can share a bit more color on the synergies related to Joe Hudson, sort of like what's been done. It sounds like the branding is done. Maybe you can talk about on the operations side, supply chain. Are you starting to see the benefits of increased scale and volumes from your suppliers. Maybe you can just talk about what's done -- what's left? And any sort of evolution on the opportunity with the synergies or just areas of opportunity versus your initial take on Joe Hudson.