Boyd Group Services Aktie

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 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.

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 boydgroup.com. Our news release, financial statements, and MD&A have also been filed at SEDAR+ and EDGAR 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 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 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%. However, adjusting for the weather impact in the South, same-store sales growth would have been approximately 2.6%. 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 0% and 2%, which is now back in line with our long-term growth framework. This framework contemplates average same-store sales growth of 3% to 5%, 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 3% to 4% 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 3 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 start-up 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, 3 single shop acquisitions, and 8 new start-ups. We remain focused on market densification through acquisition and new location growth, aiming to be a #1 or #2 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 start-ups and development and expect to open 5 new start-up locations in the second quarter of 2026 with an additional 17 new start-up locations currently under development for the remainder of the year. We expect start-up 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 9, and I'm pleased to report that the integration and synergy realization remains on track. Subsequent to quarter end, 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 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 continue 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 the South, we estimate that same-store sales growth of 2.6% would have been achieved in the first quarter.

In addition, $203.3 million 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 9, 2026, contributed $168 million in sales, while other new location growth contributed an incremental $35.3 million. As mentioned on our fourth quarter 2025 results conference call, same-store sales and Joe Hudson's 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% 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% compared to 35.8% 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-store 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 margin 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 adjusted EBITDA margin. During the quarter, the company realized an incremental $20 million in cost savings from Project 360 and Joe Hudson's synergies, 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 onetime costs associated with Project 360 and Joe Hudson's 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% to 1.8% of sales. In the first quarter, capital expenditures as a percent of sales were 1.3%, excluding sales achieved by Joe Hudson's locations compared to 1.5% 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 9, 2026, which had a total transaction value of approximately $1.3 billion.

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 2.9x, down from 3.1x at the end of the fourth quarter of 2025. We continue to expect leverage to reach 2.6x 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 are 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?

[Operator Instructions] Your first question comes from Derek Lessard with TD Cowen.

Congrats on the quarter. Just maybe one question for me is, could you maybe highlight the biggest buckets of that $20 million incremental cost savings from the Project 360 and the integration?

Yes. Yes. So one of the largest buckets within there in this quarter is the carryover of the indirect headcount action we took last year in April. So that's probably the largest single bucket that's in there, which obviously rolls off then into the second quarter. Beyond that, it's the procurement savings and the other impact of the initiatives we've talked about previously.

Okay. And good news on the normalization of the claims volumes. It looks like your April same-store sales is getting back towards your targeted range. Just curious if you have or maybe talk about any initiatives that you might have in place that could accelerate that growth?

Yes. I mean, look, the one initiative we've had in place for quite some time is really the strong focus on client performance. And we've talked previously about linking our GM's compensation to the performance of the top 3 clients. We know the strong client performance in this industry actually drives an outsized volume and allows us to take market share in this environment. So 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 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 we've spent a lot of time over the past few years working on staffing models and making sure that the stores are prepared when that volume comes back. And look, thus far, it has provided us meaningful benefit in an environment where claims have been down, where we've been able to deliver outsized performance against them.

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

This is Bhaven on the line for Saba. Can you give an idea of what the landscape and appetite is for tuck-in M&A throughout the second half of this year and onwards?

Can you say that question again? I'm sorry.

Yes. Can you give an idea of what the landscape is and the appetite for tuck-in M&A throughout the second half of this year and onwards?

Yes. I mean, look, we still believe that the opportunities for tuck-in M&A are still obviously very plentiful out in the marketplace. There's over 30,000 locations in the industry. The largest players comprise only a small fraction of that. So the opportunity is still certainly there for tuck-in M&A.

If you look at our acquisition or our unit growth strategy, it's really focused on 3 pillars. It's one, the M&A activity that you just discussed, and that can be single shop M&A as well as some of the smaller MSOs, 5 to 10 store MSOs that are out there that we have an opportunity to continue to buy with the balance sheet that we have. The other is our brownfield greenfield strategy, which is really what we're calling our new-to-industry activity. And you can see that we've already got -- we did 8 of those in this quarter. We've got 5 planned to 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 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.

Your next question is from Daryl Young with Stifel.

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 2 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?

Yes. I mean, look, as we've talked about this in the past, we certainly saw coming out of the-- we saw coming out of the financial crisis, we saw where 2007, '08 claims were depressed, and we ultimately saw in that '11 and '12 time frame that claims kind of came a little bit outsized to the normal range. We saw the same thing happen coming out of COVID, where during COVID, we saw very depressed claims environment, and then we saw really 2 or 3 years of positive claims. So I think we're certainly prepared should that happen. And there's every reason to believe that looking back, history would suggest that, that could happen.

When it happens, I think, is probably a little bit more elusive from our perspective. And we're just pleased that as we look at 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 obviously points us to a place where you'd really argue that there really isn't something more structural happening in the industry. It was really a bit of a cyclical impact of insurance premium increases and people's reluctance or fear to file claims over that period of time. And so we still think the growth algorithm is intact. Could there be an opportunity in the future that we see an outsized year? 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 volumes for those shops?

Yes. I mean I don't know that we'll share -- we're not going to share the specific volume numbers against '19. I will tell you that what our shops are focused on is making sure that -- and every shop 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 maximize the potential of the opportunities that we're getting, and that means that we will fluctuate staffing between stores. Wherever demand is, is where we're making sure there's people. And 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.

Your next question is from Steve Hansen with Raymond James.

So just really quick, what do you think the key factors are that's still keeping the TCOR or the total cost of repair a little more muted here? I'm still a little surprised we haven't started to see the inflationary costs percolating into same-store sales.

Yes. I think there's a couple of factors. One, we are actually seeing -- certainly seeing the labor price movement come into the -- labor price inflation affect the TCOR positively. What continues to mute that is, when you look on a year-over-year basis, we still have elevated total losses 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. They're responding in a way that we would expect them to respond when used car prices actually go up and the total cost of a car actually is going up as well. So we do see total losses and the mix effect of high dollar tickets impacting the average cost of repairs.

The other thing that's impacting the average cost of repairs, we've started to do a lot more work 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 new car sales over the past 5 years coming out of COVID that ultimately still puts us in a position where now the car park age is skewed by about 10 points from that 7 years to newer to 7 years to older. And as you put older cars into the car park, you have a higher propensity for aftermarket part consumption and more repair versus replace and things that when you're repairing a new car, you don't tend to have. You tend to replace a lot more parts, you tend to use OE more frequently. They also will obviously tend to have more calibration services and needs, which pushes the price up.

So I think as we look at that, again, it's a bit of a temporal thing that new car sales have, over the last couple of years, at least has started to respond more positively. But as you look at that, I think we're in this period where we're working our way through this trough in the new car sales that ultimately manifests itself as a slightly older set of vehicles that we're working on.

That's great. And just one follow-up just quickly. Going back to the M&A environment. I just wanted to ask about your perception of sellers out there. I know last year and, to 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 to more of what I call the current environment that should allow you to accelerate that M&A flywheel? I'm just trying to get a sense for the pushback that have been there in getting deals done.

Yes. Look, I think we've talked about in the past, as volume comes back into the marketplace, it comes back to the bigger players fastest. It's the nature of the DRP relationships that we have and the reliance on us from insurance carriers to continue to drive down 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 some of the single shop operators and some of the smaller multi-shop operators feel the pain of the industry longer. And as they feel that pain, they become more susceptible to wanting to sell. We are certainly seeing more of that smaller MSO activity in the space. As you know, we did 4 of those transactions last year. So I think the opportunity for us to continue to consolidate the space is as good as it's ever been. Our balance sheet is well positioned to allow us to continue to do that. And I think we certainly are positioning ourselves as one of the, call it, the buyers of choice.

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

So it seems like most, if not all, forward-looking indicators are pointing to tailwinds on same-store sales growth. So can you walk us through your expectations or anything related to the timing of that recovery towards your long-term range?

Yes. I think, 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 claims environment. And as you look at that, we knew that the drivers that we were watching, as they became less negative, it would positively impact that environment. As we get closer to that, now we're kind of in that 0% to 2% range, which is certainly more normal from a volume perspective. As we get that total cost of repair to start to meaningfully move up, we're still expecting 3% to 4% growth from total cost of repair.

And 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 benefit -- or that muting impact start to continue to wane. And when that happens, you'd expect us to be back into the normal range.

For right now, our focus is on just taking as much volume as we possibly can. And we know, based on what the industry claims environment is against where our arrivals and our volume 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. And for my follow-up, I just want to get some more color on your outlook for April. Was there any carryover backlog from the storm season that was of any benefit to April?

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

Your next question comes from Krista Friesen with CIBC.

Just on the same-store sales growth number for the quarter. Can you give a little bit more color on kind of what changed through the last few weeks of March there? Just given when you had reported Q4, it sounded like you had expected same-store sales to be in line with Q4. And at that point, we already knew about the winter storms in the South.

Yes. I mean, look, we don't and won't comment on monthly results. I'll provide a little bit of clarity. 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. These include things like the timing of the month end. I mean, the month ended, I think, on a Monday or Tuesday, that's typically not favorable for a month end for us. You got holidays, you got weather patterns. So I think one of the reasons we talk about our guide of a long term is we know that those variations will happen month-to-month.

In addition, the difference between 2.2% and 1.7% is really about $3 million of sales, and that $3 million of sales on $1 billion of revenue at this point is quite a small difference, relatively speaking. So that's why we're not guiding to -- we guide to a longer-term objective. We know that -- if you look back to 2008, 40% of the quarters, we were actually below the 3% to 5% range; 44% of the quarters, we were actually above the 3% to 5% range. But if you look back on a 5-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 when we get into this monthly game, there's lots of things that can affect the month end. And again, it's why we focus the guide on a longer-term 3% to 5%.

And if you look back in any buckets of history, I mean, it really is -- or any longer-term buckets of history, it will tell you that we've seen that, and continue to then complement it with new unit growth, which in this quarter was obviously the bigger portion of the positive. Having 28% sales growth in the quarter, driven by both Joe Hudson's and the new locations that we purchased last year is really what makes this business -- the growth algorithm of this business tick. And I think that's where I'll leave it.

I appreciate the color there. And just for my follow-up, any comments or thoughts on how you're thinking about the summer driving season and where gas prices are at the moment? And I'll leave it there.

Yes. It's interesting when you look at -- 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 gas prices were elevated and VMT came down a bit. But 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, which was another period of time where we saw elevated gas prices, the average vehicle miles traveled continued to grow slightly; 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 don't think we will see and haven't seen any negative impacts associated with it.

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Just a couple of quick ones here. You reached your 80% internalization of calibration goal. I know you're not targeting 100%, but how should we think about kind of maybe a continued move upward there? And where do you think it finally shakes out?

Yes. Look, I mean, we've talked about the 80% historically. To your point, we reached it. We're happy we reached it. That doesn't mean we slow down the hiring or slow down the objective of continuing to drive as much internalization as possible. What I would say around where the -- there's a balance between having too much idle capacity to staff for 100% or staff for 95% 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. And as we do that, 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 we possibly can. But we're very pleased that -- and you can see it in the gross margin results, we're very pleased that we've beat the time frame on the expected realization of this particular initiative. And that team has certainly done a fantastic job of capturing the opportunity that we outlined a little over almost 2 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 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's 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?

Yes. I mean I've spent quite a bit of time in the Joe Hudson's locations over the past 4 months. And what I'll tell you is still very encouraged by what we bought and the opportunity that exists. And one of the reasons for us accelerating the conversion process, and I will give a shout out to the team that we had that was really working those conversions. I mean, converting 258 stores in just under a 3-month period of time is no easy feat, and that team did a phenomenal job of accomplishing that. So really appreciate the team that did that.

What that gave us was then the visibility to be able to see what we see in the legacy Boyd and Gerber business, which is a lot more data, a lot more focus on client performance, and I see the opportunity in those locations to be just as good, if not even slightly better than I would have thought when we were buying the transaction. So timing of it will, as we said in the prepared remarks, Q1, obviously impacted by a little bit of weather and then the focus on conversion, 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, focusing on client experience in those locations. And I think that as we do that, we'll see meaningful benefit from a top line perspective in that business.

Our next question is from Gary Ho with Desjardins Capital Markets.

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's is on that platform already. Anything you've learned or conversations with them?

Yes. We continue to have conversations. I would tell you, there really has been no meaningful benefit in the results as we sit here today, which that's, from my perspective, good news. It means there's still a bit of a tailwind for us as we continue to work on that relationship. I still believe the opportunity will be out there as our objective is to just make sure that our stores are prepared when it comes.

So to your point, we've put Mitchell into every location now. We're on a pathway of getting our teams trained on -- in many of our stores, we already use Mitchell. So the training is not something that has to happen everywhere. But as we look at stores that have gaps, where they're not using Mitchell today, we're getting those estimators trained on how to use it and making sure that when we unlock that opportunity, that we're ready to take advantage of it.

Okay. Great. And then my follow-up, more of a capital allocation question. I get that you plan to deleverage back down to 2.6x as early as the end of this year. But given the shares are down 30% year-to-date, is there a path where you'd consider buybacks over slowing down the deleveraging or slowing down the M&A and greenfield/brownfield build-out perhaps?

Gary, it's Jeff here. No, I don't think that's in the cards 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.

Your next question is from Chris Murray with ATB Capital Markets.

Maybe turning back to the margin profile that we've seen over the last couple of quarters. We've seen some meaningful improvement. And I think you guys called out about 200 basis points of improvement this quarter. So I guess a couple of pieces of this question. One, related to the storms, was there any kind of unusual costs that we should maybe be thinking about? I know Q1 is 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'll be able to improve margins on a go-forward basis would be helpful.

Yes. Well, look, I think the objective, as we've laid out, is to continue to work our way towards the 14-plus percent at this point. I mean, you said it earlier in your commentary. We know that Q4 to Q1, if you look over the longer term, we see about 100 basis point dip just based on the resetting of accruals and excess cost that sits in the first quarter. So we saw a number similar to that in this quarter. We obviously saw a little bit of a benefit associated with the incremental projects that were initiated this year, plus the mix effect of bringing Joe Hudson's in, which put us at 12.3% in the quarter.

I'd expect that, as we look at Q1 to Q2, we typically will see that bounce back from -- that 100 basis points essentially bounces back. And so I'd expect that to happen no different than it usually does. If you were to look at that then, if that puts us at a 13.2%, 13.3%, and you look at that against a year ago at 12%, which is where we were in Q2 of 2025, you're seeing that kind of 120, 130 basis point movement year-over-year, and that's coming off of then an 11.5% that would have happened in Q2 of 2024, which then solidifies the incremental 50 basis points or so to get you to 200.

But as we think about just building 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's 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. And then one other question. We talked a little bit about hitting the 80% goal on scanning and calibration. But the other thing 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 needs more scanning and calibration, how do you think about those mobile services playing out there? And in a lot of ways, how do you see those working across your networks? And any benefits that they bring outside of maybe incremental growth at this particular point?

Yes. I mean, look, I think 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 ultimately what will happen is the penetration rate of calibration services goes up and calibration needs per shop go up, 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 we're doing almost 100% of our calibrations as we look out into the future.

That mobile team then can be deployed to work external opportunities with single shop operators that may not have the financial flexibility to be able to invest in the equipment needed to conduct those calibrations. And I think that's where we see in the future an opportunity for us to continue to grow and expand our revenue in the calibration space. As we sit here today, 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, we do expect that to be a revenue stream that, 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% a year, that we will be able to take advantage of externally at some point in time.

Your next question is from Mark Jordan with Goldman Sachs.

First one is focused on follow-up to total cost of repair. You made some comments earlier that you're seeing more, I think, repair versus replace just given the age mix. But if you could share 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 that you're using?

Yes. I mean we certainly continue to see a normal environment of part inflation. I think you probably have heard in some of those reports, or at least I've heard in some of the reports where there's some slight competitive activity taking place in the aftermarket parts space that might be putting a little bit of pressure on aftermarket parts at the moment. But we still have the tariff environment that's out there. We still have kind of the normal impact of inflation.

Obviously, one area where gas prices does impact, frankly, positively impact is you're going to see people having to increase part prices for the cost of moving them around, because gas prices are elevated. So there's no reason to believe that we're going to see anything but positive. Right now, as I said before, the bigger challenge is that 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 working through that kind of post-COVID period where new car sales were slightly depressed and that's now working its way into the latter part of the car park. And as that comes back, we'll expect that, that will continue to -- that the mix will shift us back towards some of those high-dollar tickets that makes that inflation come out more prominently.

And then as a follow-up, just switching to labor. How do you feel about your current labor levels and ability to meet demand if volumes were to continue to improve throughout the remainder of the year? And maybe what you're seeing in terms of technician wage inflation?

Yes. Really, on the last part first, I mean, no real -- I mean, technician wage inflation is really kind of at, call it, normal CPI levels, not last reported. But we're always looking for technicians. And 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, we've got a great sales proposition for the technician, which is we have work right now. We have volume in the shops, which is not a luxury that many of the single shop operators and even some of the MSOs actually have. So when you have work, it's a lot easier for us to recruit. We focus on hiring technicians every single day. And that 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 where the capacity is needed.

Your next question is from Bret Jordan with Jefferies.

On the 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 2, sort of the intermediate term?

Yes. Look, 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 Q1 '26. And what I'm referencing is more of our internal numbers where I do continue to see the total loss rates in the business. We tend to be less than the industry from a total loss position, because many of those total losses never work their way into a store.

So when I think about our internal numbers, I can see that year-over-year were slightly elevated from Q1 of last year. But I have seen those come down around. When you look at the decline that we've seen just month to month to month, I mean, you're still seeing declines that are probably from the peak, which kind of happened in that September time frame of last year. From the peak, we're down 200 to 300 basis points. So there is meaningful change that's happening in total losses as used car prices continue to grow.

Okay. Great. And then I guess contribution from scanning and calibration when you think about the -- 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 as we've talked about it, I think about it as more akin to a labor operation, which carries labor margin associated.

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

Beyond the weather headwinds you highlighted in your southern markets, 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?

Yes. Obviously, the pocket of relative strength is in the North, where in the first quarter, we saw more snow events. As we exited the winter months and got into the spring, we're starting to see some hail events that are happening both across the South and the North, some even impacting what we would call our West. So I think weather was impactful in the South in the first quarter just because when there's snow in the South, it really curtails driving.

When there's snow in the North, people drive and they get into accidents. We know that people are 10 times more likely to get into an accident during a snow event than they are in dry conditions. So we had more snow events in the North in the first quarter than we would have had historically. So that benefits the North. Unfortunately, in the first quarter, that was more than offset by the softness that the 3-day -- there was really a 3-day storm that affected everything from Texas, Oklahoma, all the way up into the Carolinas. And 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. 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 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 $3.5 million can affect 40 basis points or 50 basis points of revenue, an event like that can cost $3.5 million 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?

Yes. I'll give you the latest on used car prices. If you look at Manheim, April data would suggest up 1.8%. So I think that continues to be a positive. What was the second part of the question?

And just insurance premium...

Yes. Insurance premiums at this point are -- I think the last data I saw was 0.8% up. So at this point, insurance premiums are all but completely flat 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.

Your next question is from Jonathan Goldman with Scotiabank.

Maybe just the first one, it looks like the outperformance gap, the spread to the industry narrowed in Q1. You were tracking, I guess, for the past few years, 500 bps plus. It looks like this quarter was maybe 250 bps. Even if you normalize for weather, it still looks like only a 350 bps outperformance. Still impressive, but it does look like it's narrowed. So I was wondering if you had any color on the trend there.

Yes. I don't think there's anything necessarily super notable on that. I think, again, you'll see, as we're starting to lap in the first quarter, we're starting to lap some of that benefit associated with the change in our compensation structure that put a lot more eyes on performance. Again, I think there's still -- you're going to see quarter-to-quarter fluctuations, in particular related to just things like you articulated. The storm impacts obviously affects -- can affect our business. Just based on the concentration of stores now in the South, it can affect our business differently than it affects another business. So I don't think there's anything really to read into that. In the long run, what we expect our long-term growth to contemplate is somewhere in the neighborhood of 100 to 300 basis points of market share gains to achieve that 3% to 5%. The fact that we're still sitting at anywhere from 300 to 500 basis points is, I would take as a positive.

Okay. Fair enough. And then maybe another one. 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 have been getting over the last historically, just even the 3% to 4%, I don't have to do the math for you, but we'd be outside of the range.

Yes, that's fair. And then maybe if I could squeeze one more in. Thinking about the growth algorithm over the long term, does your baking in the 3% to 4% 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 insurance inflation, which is a product of 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 the historical range of claims volumes?

Yes. 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. 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 on average on a ticket, that is what's driving the cost of repair up. It really isn't just a pure inflation equation, which, to your point, I mean, the algorithm still calls for claims volume to be down 2%, but then offset by 3% to 4% combination of price and complexity. And so that price piece is probably -- it may be half of that equation, the complexity piece of it is the other half.

So I think there's a benefit on one side and a cost on the other, which allows for then the marketplace to just continue to grow. So I think it's important not to just think about that as pure inflation, because 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 2 points of the 3 to 4.

At this time, there are no further questions. I'll now turn the call back over to Brian for any closing remarks.

Yes. Thank you. I appreciate that. So look, I want to, again, take the opportunity to thank the team for all the hard work and efforts in the quarter. And with that, 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.

Thank you for standing by, and welcome to the Boyd Group Services Fourth Quarter and Year-End 2025 Earnings Conference Call. [Operator Instructions] I'd now like to turn the call over to Linda Funk, VP, Finance. You may begin.

Good morning, everyone. Welcome to the Boyd Group Services, Inc. 2025 Fourth 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 sec.gov.

I'd like to remind everyone that this conference call is being recorded today, Wednesday, March 18, 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.

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. We released our 2025 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 and analysis on our website at boydgroup.com. Our news release, financial statements and MD&A have also been filed on SEDAR+ and EDGAR this morning.

On today's call, we will discuss the financial results for the 3-month period and the year ended December 31, 2025, provide a general business update and discuss our long-term growth strategy. We will then open the call up for questions. Our 2025 fiscal year was both busy and highly successful for Boyd. In the first half of the year, we focused on implementing a number of key initiatives, including Project 360, an enhanced go-to-market strategy and a more localized customer service approach. As we moved into the second half, we saw strong execution on these initiatives, driving meaningful adjusted EBITDA, margin expansion and industry outperformance.

Combined with the continued improvement in repairable claims, this supported a return to positive same-store sales in the second half of the year, a trend that has continued into early 2026. Alongside these operational improvements, we also took advantage of an improving acquisition environment and our strong balance sheet to complete 4 small MSO acquisitions and announced the acquisition of Joe Hudson's Collision Center. We also listed our shares on the New York Stock Exchange and completed 2 unsecured note offerings, important milestones in Boyd's evolution that we expect to be -- will broaden our access to U.S. investors and further strengthen our capital markets profile.

Before I discuss our results in more detail, I want to thank our employees and senior leadership team. Their dedication and hard work are the foundation of our success, and these results are a direct reflection of their commitment. Turning to our financial performance. In 2025, we delivered $3.1 billion in revenue, representing growth of 2.4% year-over-year. And adjusted EBITDA increased by 12.4% with adjusted EBITDA margins expanding by 110 basis points to 12%, driven by the successful execution of Project 360, our cost transformation plan and the internalization of scanning and calibration. We exited the year with strong momentum. In the fourth quarter, we generated our second consecutive quarter of positive same-store sales growth of 2.2% and grew EBITDA by 24.2% year-over-year.

Our EBITDA margin expanded to 13.1% in the fourth quarter, up from 11.1% in the fourth quarter of 2024. As we've discussed on previous calls, throughout 2025, we saw consistent improvement in several of the industry headwinds that have been negatively impacting repairable claims, namely moderation of insurance premium growth and the increasing used vehicle prices. This resulted in a reduction in estimated declines in claims activity from 9% to 10% in the first quarter down to 2% to 4% by the fourth quarter of 2025. I'm pleased to report that this improvement has continued into 2026. Auto insurance premium growth is now running below CPI levels. Insurance carriers have implemented rate reductions and used car prices are increasing.

These improvements, combined with increased activity levels we've seen in our business since the end of the second quarter, give us confidence that the industry conditions continue to normalize. In the early months of 2026, while winter storms benefited our northern regions, this benefit was partially offset by unusual storm activity in the South. These storms resulted in lower driving activity and therefore, a short-term reduction in volume in our southern locations, including Joe Hudson's.

As the quarter progressed, we've seen the volumes in the South normalize with overall same-store sales thus far tracking similar to fourth quarter levels. Throughout 2025, we also continued to expand our location footprint through the execution of our long-standing growth strategy. During the year, we opened 70 new locations, including 27 start-up locations and 43 through acquisitions.

Looking ahead, we continue to have a robust pipeline of start-up locations under development through 2026. We expect to open 8 new locations in the first quarter with an additional 24 locations in development for the remainder of the year. In addition, 2025 marked a return to MSO acquisitions for Boyd as our strong balance sheet enabled us to capitalize on an improved acquisition landscape. In August, we completed our first small acquisition since 2021 with the acquisition of L&M Body Shop in Virginia. We also completed 3 additional MSO acquisitions in the fourth quarter in Nevada, Hawaii and Nova Scotia, with the Nova Scotia acquisition representing our initial entry into that province and underscores our commitment to continued growth in the Canadian market.

Looking ahead, our pipeline for single shop and small MSO acquisition remains strong and will continue -- will complement our start-up expansion. Our road map focuses on building density in our existing markets and achieving leading positions where we operate. Our goal is to establish a #1 or #2 position in all of our markets, which strengthens our ability to serve our insurance company clients and its customers while driving long-term shareholder value through margin expansion and market share gains.

Turning now to Joe Hudson's. We successfully closed the acquisition in early January, and the integration is progressing well and in line with our expectations despite some softness in activity levels early in the quarter due to the unusual winter storm activity in the Southern region. It's been very -- I've been very encouraged with the Joe Hudson's team. From the outset, they have shown strong enthusiasm about joining Boyd, and the teams have worked well together, combining the strengths of both organizations as we continue to integrate and operate as one team. Our initial focus has been on converting Joe Hudson's location to Boyd's information technology platforms and branding. Similar to the successful rollout of our indirect staffing model in 2025, we began this process gradually to ensure operational stability.

We initially converted 6 stores in our first week and have steadily increased the pace. We are now converting approximately 30 stores per week, which will continue -- which will remain the cadence until the process is completed. To date, we have converted approximately 44% of the stores and expect the remaining locations to be completed early in the second quarter of 2026. We have also begun realizing early synergy capture through direct procurement savings to date in the first quarter. Synergy realization is expected to accelerate once store conversions are complete, and we are able to fully leverage our scale and market position. We remain on track to achieve approximately 50% of the $35 million to $45 million in expected synergies in 2026.

Before turning the call over to Jeff, I'd like to provide a brief update on Project 360. When we launched the $100 million cost transformation plan in the fourth quarter of 2024, we set ambitious targets. I'm pleased to report that we delivered on those targets in 2025. We realized $40 million in annualized cost savings in 2025 from the successful implementation of our indirect staffing model as well as procurement savings.

Going forward, we will report Project 360 savings and Joe Hudson's synergies together as the team will oversee both initiatives. This team has been -- has successfully executed our Project 360 transformation since its launch and will now also lead the realization of Joe Hudson's synergies. As a result, these initiatives will be managed and disclosed as a single integrated cost program totaling $140 million, consisting of $100 million from Project 360 and approximately $40 million in synergies. To date, $40 million of the Project 360 savings were realized in 2025 with an additional $50 million expected in 2026 and the remaining $50 million to be realized between 2027 and 2029.

With that, I'll turn the call over to Jeff.

Thanks, Brian. I will start off with an overview of our fourth quarter results, followed by a brief summary of our full year 2025 results. As Brian highlighted, we had a strong fourth quarter and positive same-store sales growth and solid margin improvement as we continue to execute on Project 360. During the fourth quarter, our sales increased by 5.5% year-over-year to $793.9 million with the same-store sales, excluding foreign exchange, increasing by 2.2%. In addition, $26.9 million in incremental sales were generated from 83 new locations that were not in operation for the full comparative period.

Industry conditions continue to improve in the fourth quarter. Based on claims processing platform data, we estimate that repairable claims declined by approximately 2% to 4%, a meaningful improvement from the first 3 quarters of 2025 with claims volume improving sequentially each quarter. Boyd continued to solidly outperform the industry during the fourth quarter. Gross margin was 46.3% in the fourth quarter of 2025 compared to 45.8% achieved in the same period of 2024. The gross margin percentage benefited from internalization of scanning and calibration, an increase in parts margins and improvements in performance-based pricing. The improvement in parts margin was a result of Project 360 initiatives, while the improvement in performance-based pricing was driven by improved alignment across our regional teams to meet the unique KPIs of their insurance company clients.

Turning to operating expenses. For the fourth quarter of 2025, operating expenses as a percentage of sales were 33.3%, down 150 basis points from 34.8% of sales for the same period in 2024. Operating expenses as a percentage of sales were positively impacted by Project 360 and our return to positive same-store sales growth, which provided improved operating leverage on certain operating costs. Adjusted EBITDA increased 24.2% year-over-year to $103.6 million. Adjusted EBITDA margins improved 200 basis points to 13.1% in the fourth quarter, up from 11.1% in the same period of the prior year. The increase was a result of an improvement in same-store sales, benefits from the internalization of scanning and calibration and cost savings from Project 360. In 2026, we expect to achieve additional cost savings from Project 360, including continued procurement savings and operational efficiencies.

I would like to highlight that as we enter 2026, first year quarter expenses consistent with prior years are impacted by higher payroll taxes that occur early in the year. In addition, the fourth quarter of 2025 benefited from reductions in expense accruals as certain estimates were finalized at amounts lower than previously accrued. These items should be considered when comparing sequential margin performance between the fourth quarter of 2025 and the first quarter of 2026. Net earnings for the fourth quarter of 2025 was $4.8 million compared to $2.4 million in the same period of 2024. Net earnings for the period benefited from higher operating income, partially offset by an increase in depreciation expense due to location growth and acquisition and transformation costs.

Excluding fair value adjustments, acquisition and transformational cost initiatives and amortization of intangibles arising from acquisitions, adjusted net earnings for the fourth quarter of 2025 were $22.8 million or $0.90 per share compared to adjusted net earnings of $10.8 million or $0.50 per share in the same period of the prior year. Commencing in the fourth quarter of 2025 and to align with many other growth companies, the calculation of adjusted net earnings now also excludes amortization of intangibles arising on acquisitions. Comparative periods have been restated for consistency.

Now moving on to our annual results. For the year ended December 31, 2025, we reported sales of $3.1 billion, an increase of 2.4% over the prior year, driven by contributions from 119 new locations that had not been in operation for the full comparative period, partially offset by same-store sales declines of 0.2%. It is important to note that fiscal 2025 included 1 fewer selling and production day compared to fiscal 2024, which reduced capacity by approximately 0.4% and resulted in the decline in same-store sales. I'm pleased to report that we once again outperformed the industry in 2025 with our same-store sales performance exceeding the estimated 5% to 7% decline in repairable claims.

Gross margin increased by 90 basis points year-over-year to 46.4% of sales compared to the prior period, reflecting the benefits from internalization of scanning and calibration, improved parts margins and improvement in performance-based pricing. Operating expenses as a percentage of sales declined 20 basis points to 34.4% for the year ended December 31, 2025, compared to 34.6% for the same period in 2024, primarily driven by Project 360 cost savings. These improvements were partially offset by negative leverage on lower same-store sales, incremental costs from scanning and calibration and an investment in facilities maintenance costs.

Adjusted EBITDA for the year ended December 31, 2025, increased 12.4% year-over-year to $376.3 million, while adjusted EBITDA margins expanded to 12% from 10.9% in the same period of the prior year. The improvement in adjusted EBITDA was a result of an increased sales from new location growth, gross margin improvement and the significant cost savings achieved through Project 360. We reported net earnings of $18.4 million compared to $24.5 million in the prior year.

The decline was driven in part due to acquisition and transformational cost initiatives of $22.6 million, net of tax, including $9.1 million related to the Joe Hudson's acquisition and $9.9 million related to Project 360 implementation. Adjusted net earnings in 2025 increased 28.8% year-over-year to $62.4 million, while adjusted net earnings per share increased to $2.78 in 2025 from $2.26 in 2024. The growth in adjusted net earnings came from increased sales, improvement in gross margins and cost efficiencies from Project 360.

As previously noted, commencing in the fourth quarter, we have begun to exclude amortization of intangibles arising from acquisitions from adjusted net earnings and comparative periods have also been restated. At the end of 2025, we had total debt net of cash of $488.1 million compared to $1.28 billion at the end of the third quarter of 2025. Before lease liabilities, we exited 2025 with net cash of $290.7 million compared to net debt of $521.1 million at the end of September 2025. The decrease in debt net of cash was a result of the proceeds received from the CAD 525 million senior unsecured note offering and the $897 million bought deal initial public offering in the U.S. that reduced draws on the credit facilities and partially offset by location growth. The net proceeds of these offerings were used to fund the $1.3 billion acquisition of Joe Hudson's Collision Center on January 9, 2026.

During 2026, the company plans to make capital expenditures, excluding those related to acquisition development of new locations within the range of 1.6% and 1.8% of sales. In addition to these capital expenditures, the company expects to incur approximately $30 million related to the Joe Hudson's acquisition as well as completing our planned investment in network technology updates. In 2026, we also expect to incur onetime costs related to the Project 360 cost savings initiative and the realization of the synergies from the Joe Hudson's acquisition. For Project 360, the total cost to achieve are expected to be between $20 million to $23 million, of which $13.4 million were incurred in 2025. In 2024, similar transformation costs were incurred totaling $4.4 million. The cost to achieve the Joe Hudson's synergies are estimated at approximately $30 million in onetime costs.

I will now pass it back to Brian for closing remarks.

Thank you, Jeff. Throughout 2025, we significantly strengthened our business through improved profitability, a more focused location growth strategy centered on densification, a meaningfully expanded footprint and a stronger capital markets profile. Looking ahead to 2026 and beyond, we believe our strength and position enables us to deliver even greater value as we leverage our leadership in the highly fragmented North American collision repair industry and continue executing the disciplined growth strategy that has driven Boyd's success for more than 3 decades.

With that, I would now like to open the call to questions.

[Operator Instructions] Your first question today comes from the line of Krista Friesen from CIBC.

Can you give a little bit more color on what you're seeing for same-store sales growth right now? I appreciate there were some storms in January. But just curious how you view Boyd exiting Q1 and maybe what the run rate is in March, if you can share that?

Yes. Well, obviously, we won't share the run rate in March. But as we look at the first 2 months of the year, what we saw was what we said, strength in the northern markets, partially offset by just a couple of day period of time where the storms in the South, there was a batch of storms that hit the South late in January that just negatively affected our arrivals for a couple of day period of time, and that partially offset our ability to get back into the range. I think without that, I would suggest we probably would have been talking about something that was more in line with the range, which is reflective of -- which is certainly reflective of the macro backdrop that we're experiencing. We've continued to outperform the market by somewhere around 5 points.

So if the market is down 2% to 4%, you'd expect us to be in that kind of 3 to 3-plus percent range. But with the storms that affected the South, it just -- it put us in a position where we saw that temporarily impact the business. The growth in our northern markets where we've had snow and pretty consistent weather has been very strong. So I think we're -- all we're really flagging there is a short term, very short-term impact from the weather.

Okay. And then maybe just on the Q4 same-store sales growth. I believe when you had reported Q3 in mid-November, you talked about Q4 kind of being back within the target range. And just wondering if you can speak to kind of what caused that difference in the last half of Q4.

Yes. Yes. I mean I think the only thing I can really point to that caused any sort of -- when we had reported, we certainly were in the range that we talked about as we progress throughout the quarter. We saw a little bit more vacation time from the technicians, and that put us slightly behind where we expected to be, really had nothing to do with the work coming into the shops or a slowdown in work coming into the shops. It had more to do with our ability to get through it in light of just the way that the holidays fell. And so nothing really more to note than that.

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

Maybe I guess just kind of continuing on '26, with sort of that operating backdrop you just talked about and the integration of Joe Hudson's, how are you thinking about just run rate M&A of smaller shops? What is kind of the capacity or just the willingness to sort of pursue that over the course of this year while you integrate the Joe Hudson's transaction?

Yes. Well, look, I think as we've said on a couple of different occasions, we intend to integrate the Joe Hudson's business with a separate team of people that's focused on the base business acquisition activity that we do. So we don't expect to see a big slowdown in activity as it relates to acquisitions driven by what we were -- driven by the integration. As I said in the prepared remarks, our intention is to get through the integration of Joe Hudson's by early in the second quarter to have all the shops converted and have that business kind of up on our operating platform and running and ready to go.

The organization is already put in place. So I don't expect it to be distracting throughout the year. The pipeline for activity remains very robust. Our balance sheet still remains very well positioned to be able to take advantage of those opportunities. As I said, we've already got 32 start-up locations already planned for 2026 and would expect to infill the balance of our expected 80 to 100 unit growth with acquisitions or even further start-ups to pull in.

Great. And then I guess just to put a finer point on the same-store sales discussion that you outlined a bit earlier, is I guess, the expectation based on the operating backdrop and how you're sort of evolving through Q1 that you could still be within that sort of 3% to 5% range for the year or too early to sort of comment on that?

Yes. I mean, look, I think we've said we expect to be in a 3% to 5% range over our long term -- over the long-term horizon. I think the market backdrop continues to progress to move positively towards that. The claims environment continues to get better quarter after quarter after quarter, which gives us confidence that we can get back into that range. As I said, without the impact of this couple of day impact of just really odd storm activity that hit the South, we very much would have likely been in that position in the first quarter. So I don't expect us to be out of that range.

Your next question comes from the line of Chris Murray from ATB Cormark Capital Markets.

Maybe, Brian, going back to maybe some of the bigger macro pieces. It sort of feels like you are seeing the improvement in the underlying. So I guess a couple of pieces of this. One, is your expectation that sort of the claims volume numbers, I mean, at least are trending to be positive? And would you expect that the kind of the spread between what Boyd has historically been doing versus the industry to continue?

Yes, I would expect the spread to continue. I don't know that the claims environment is going to go positive. I think it's progressing less negative, which is what we expect it to do. We've always said that based on collision avoidance systems, we expect the underlying marketplace to be negative by 2%. We expect that to be offset by 1% improvement in miles driven as well as a 1% increase in the car park, which leaves the market kind of down 1%. As we suggested in the fourth quarter, we're starting to near that 1%. So we wouldn't expect to give up the share gains that we're getting right now in the down environment. We'd expect that to continue even as the market improves.

And maybe I'd just add to that, Brian, is that we certainly have seen sort of a delay in the maturation of some of the stores we've added over the last few years. So I think that's also something to take into account is that we could benefit just from a maturation of those stores.

Okay. That's helpful. And then maybe just looking at operating expenses, certainly, some really good performance in the quarter. I'm just wondering how you're thinking about it -- there were a lot of things called out. I mean, you talked about scanning and calibration helped you, but it also hurts you a little bit. And then that maturation piece. Like if we were thinking about net-net, that kind of pace of or directionality of margin improvement, if you were to kind of back out the, call it, the onetime accrual adjustments, like how do you -- how are we thinking about kind of progressive margin improvement through the balance of the year?

Well, I think I would go back to our -- looking at our -- just our Project 360 ambition that we've talked about of getting back to 14% by 2029. And we've also really highlighted the improvements in terms of Project 360 and Joe Hudson's that we expect to realize in 2026. And so that number is $50 million. So I would just layer that $50 million improvement into the -- into your assumptions around OpEx, and that will give you your answer.

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

As we think about the same-store sales growth, are you able to talk about the pricing benefit that you're seeing from the pass-through of parts inflation? And maybe how we should think about that tailwind going forward?

Yes. Well, if you look at what's happening with parts prices, as you've highlighted, they continue to go up. Parts pricing CPI in February was 2.6%. We also continue to see labor price increases. We still believe that, that's still partially being offset by the blending down of the overall claims population driven by the elevated total losses. So we still haven't really seen -- I think the tailwind is as total losses continue, as total losses start to come down, reflecting the used car price increases that are now in the marketplace.

And Manheim would suggest those are up 4% in the month of February, which is really probably the first meaningful improvement in or increase in used car prices that we've seen over the past few months. So I'd expect that to kind of come through more -- I'd expect that to come through more visibly as we start to see total losses come down. We haven't yet seen it in our results to date. Right now, if you look at through Q3 of 2025, the industry claims or the industry cost to repair was up about 1.7%. That's still far off of the 3% to 5% that we would expect it to be driven by the factors that you just articulated.

Okay. Perfect. As we think about the synergies that are expected for Joe Hudson's midpoint, $40 million, half are expected to be realized this year, it kind of sounds like you've realized some already, but is it fair to say the majority of that should be more back half weighted?

No. I mean I think some of the savings that we're expecting for 2026 are really largely driven by procurement savings. And those procurement savings were starting to be realized as early as the time we closed on the transaction. We had very good visibility to where those opportunities were at. The team worked very, very quickly to put those best of the best contracts in place. And I think we're -- we'll start to see some of that benefit even in the first quarter. Fair to say that some of the other synergies would be more likely executed towards the back half. But I wouldn't weight it so heavily to the back half.

Your next question comes from the line of Thomas Wendler from Stephens.

We've heard some chatter that OEMs intend to raise their prices with the 2027 model year. As new prices kind of increase, you generally follow suit. Do you think the company could see a bit of a bump up in the back half of the year as the repair versus replace dynamics kind of start leaning towards repairing?

It's very possible. I mean I've been surprised that the used car prices haven't moved more meaningfully even this year as the tariffs have impacted the new car pricing. New car prices are an all-time high even as we sit here today. So it wouldn't surprise me that as total losses or as used car prices go up in a more meaningful way that total losses come down. And I think what -- the way that manifests itself is it just -- it shows itself as a higher average cost to repair. And instead of total losses muting the benefit we're seeing from just the previously mentioned parts price increases and labor price increases, they may actually put us in a position similar to what we saw in 2022 and 2023, where the prices actually elevate greater than that 3% to 5%.

Perfect. And maybe just one more. It's been almost a year since you've kind of aligned the regional field management compensation to key performance metrics from the insurance partners. Can you maybe talk about how this has impacted your volumes, maybe some wins you've seen on the market share side from this?

Yes. I mean, look, I would tell you that I think that's what's driving the outperformance to the market as we sit here today. The client performance metrics have moved very positively over the past 12 months. The team has done a phenomenal job of focusing in on what I call majoring in the miners and making sure that we're not just winning on the big 3 things that are important to insurance carriers, but we're winning on all of the smaller things that are important to them as well. And as we've done that, we've seen meaningful progress with one, our largest carrier, but all of the other carriers as well have benefited by a team that's just uber-focused on driving a great result with our customers.

Your next question comes from the line of Steve Hansen from Raymond James.

Brian, not to beat the same-store horse too hard here, but is it fair to say that the activity levels in March have improved back to the range you would have expected absent the weather stuff you saw earlier in the year? I'm just trying to understand sort of the cadence through the quarter.

Yes. I would say that it's not -- it's less about March and frankly, more about we saw the activity bounce back pretty quickly even as we got into February. It was very much so -- that impact was very much so isolated to a few days of really just a marketplace that got shut down, frankly, from Texas all the way to the Carolinas. And it was just a very odd storm that just had an impact on the southern region that -- but it was very short term in nature. And as we came out of it, we saw the dip and then we saw the bounce back pretty quickly.

Okay. That's helpful. And I just want to circle back on the M&A side again. The small MSOs become more thematic or topical here. I mean, how competitive are they? The broader landscape has had some challenges, of course. But are you having to pay up for these small MSOs? Or are you finding there's still good value to be had there?

Yes. I think there's actually -- as time goes on, there's even more value to be had there. The competitive backdrop is less competitive right now as a few of the major players in the business or in the industry are going through different things. I think it's putting us in a position to be a bit of the acquirer of choice. And as you well can appreciate, as that happens, the competitive environment actually starts to slant more towards the buyer versus the seller.

Your next question comes from the line of Derek Lessard from TD Cowen.

So I want to switch gears here and focus on your strong margin performance in the quarter. Can you just maybe break down how much of the remaining [indiscernible] is driven by...

Derek, you're breaking up there.

Can you hear me now?

Yes, we can hear you now. We heard everything up to how much of the strong performance is driven by -- and then you broke up.

Yes. So how much -- I guess, the remaining path to your 14% target, how much of that is being driven by Project 360 versus mix and scale and Joe Hudson's synergies?

Good question. I mean we still expect the pathway to 14% in the base business to be paved by Project 360. No doubt that Joe Hudson's profit profile enhances and accelerates our ability to get to that objective. So we're not slowing anything down relative to the benefits we would expect Project 360 to deliver and frankly, would expect as we get further out into the plan period, that plus that we have at the end of the 14% to be positively impacted by Joe Hudson's mixing into the business.

Okay. And then -- and when you think about the internalization of your scanning and calibration, I think you put out in the press release, you're at 75% in Q4. Where does this, I guess, ultimately plateau? And how should we be thinking about the incremental margin and competitive benefits from further internalization?

Yes. Well, we've talked about the benefits associated with it are certainly related to shifting that labor or that revenue category from a sublet category, which is our lowest margin category to a labor margin. And we've talked about that being anywhere from 25 to 30 points of difference between those 2 categories. From a customer benefit, what we do know is when we do it internally, we're getting -- we're able to offer better pricing because we offer our menu-based pricing as well as drive down the cycle time for repair because we're not beholden to somebody else to actually complete that repair. So lots of benefits there.

As far as where it plateaus, we said we wanted to be at 80% by the end of -- I believe by the end of this year. We're clearly on track to be able to do that. I don't know that, that's the plateau. I think as the car park continues to require more calibration services, over time, what will happen is that will migrate into a shop. And we've talked about how that migration into a shop will offer up then -- will open up the opportunity for us to leverage the mobile capabilities that we have to expose that more to the external market and maybe even potentially take care of mom-and-pop shops that don't have the financial wherewithal to invest in this type of equipment. So I do believe that over time, you'll see us doing even greater than 80%. But for now, we flagged the 80% until the car park -- as the car park continues to mature.

And Brian, maybe I'd highlight though, there's really -- there is 2 components. There's the internalization piece, which offers a margin uplift, but there is also just the growth in the volume of calibrations, the number of cars that require calibrations since it is a higher-margin category, just higher margin -- or sorry, higher volumes over time is also going to help provide additional margin lift going forward.

Your next question comes from the line of Daryl Young from Stifel.

Just as it relates to the insurance pricing, I know we talk a lot about the macro and pricing coming down. But are you seeing any signs of customer behavior around customer cash pay or any previous deferrals that are starting to come back through the shops? Or is there any green shoots there that you can speak to that kind of corroborate the upside that should come?

I don't know that we're seeing anything differently as it relates to customer pay or obviously, the claims environment is getting less negative, which would indicate that people are more likely to file -- they're more likely filing claims when they get into an accident. Whether or not there's a deferral benefit as we look back to the last 2 times we saw the industry kind of react or behave this way, there was a period of time in the -- coming out of the recession, there was a period of time, I think it was 2 years after the recession ended that we saw an outsized growth in the market.

Certainly, COVID, we saw -- in the year right after COVID, we saw an exact inverse of what we were experiencing in the COVID period and then the period after '20 and 2023, we saw an outsized performance. So if you look at history, you might believe that there's something there. Right now, the focus of our organization is just to make sure that we're taking care of the volume that's coming in and that we're continuing to deepen the relationships we have with our insurance partners. And as we do that, we know that we're continuing to outpace the market and would expect to continue to do that if the market continues to get more positive.

Got it. Okay. And then one other question just around labor rates. Seeing some news headlines around regional pressure on labor rates and actually coming down from insurance companies. Is that something that's more idiosyncratic? Or are you seeing pressure on labor rates from your insurance partners?

We are not seeing pressure from labor rates with our insurance carriers. I mean I think the insurance carriers recognize that the cost of labor continues to move, generally speaking, at inflationary levels. And the cost of a labor hour or the price of a labor hour is going to have to move commensurate with that.

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

Just to [indiscernible] obviously, the impact on arrivals that you had on the very short term. Does the longer-term impact from higher weather-related crash become a net positive? Or do you think the driving reduction makes weather a net negative in Q1?

You broke up on like one piece of your question. I don't know.

I was saying, does the weather-related collision create a net positive in Q1? Or was the timing of the arrivals and lack of driving a negative?

Yes. I think it probably creates a slight net negative in Q1. But the benefit we're seeing in the North probably extends into the second quarter and creates a little bit of a WIP tailwind as we get into the second quarter.

Scanning and calibration, it is outgrowing the underlying market. Do you have a feeling for what the maybe 3-year outlook for scanning and calibration growth might be just as more cars require it?

There's been research reports processed or done on this that would suggest that, that piece of business is growing at 20% to 25% a year. So I think we saw something very early on that said it would grow from $1 billion to $5 billion. I believe the time frame was till 2029.

Your next question comes from the line of Razi Hasan from Paradigm Capital.

Could you maybe just talk about the operating leverage potential as same-store sales grow? And which costs you saw improve in the quarter related to leverage? If any color there would be helpful.

Yes. I think we've always continued to -- well, we've always really discussed what we would expect from an operating leverage perspective in same-store sales based on what you've seen historically. If you see a steady level of same-store sales growth in that 2% to 4% range. Over time, we've seen kind of a 20 basis point improvement in operating leverage. And it really just comes down to -- we do have fixed costs that we can leverage like general manager salaries and other occupancy type costs that don't flex at all with growth. And so that's where we get that leverage from. So you could see a 20% a year, you could see sort of a 1% overall improvement over a 5-year period if you get consistent same-store sales growth.

Okay. Great. That's helpful. And then maybe just your cash position, you expect that to get back to historical levels going forward?

Sorry, could you repeat the question? Our cash flow? Yes. Yes, it certainly this year -- end of this year was an anomaly in terms of the cash on the balance sheet as a result of preparing for the closure of the transaction with Joe Hudson's. So yes, going forward, we would expect to have the cash balances come back to their normal range.

Your next question comes from the line of Tristan Thomas-Martin from BMO Capital Markets.

Brian, I think you called out kind of in a normalized year, basically a 1% benefit for miles driven. Should we think about that for this year as well, given just we've seen such an increase in gas prices recently?

Yes. I mean, look, over a long term -- over a long period of time, that's what we expect. I don't know that I haven't seen any data relative to what's happened thus far given the gas price movement. I also don't -- wouldn't want to predict how long that's going to be. So it'd be speculatory or be speculative for me to suggest that we're going to see any negative associated with that. People also do tend to drive more when you're also seeing inflation on airline tickets as well, driven by the price of gas, which puts people in their cars more for vacations and things like that particular as we get into these types of months. So I think that might be an offset anyways.

Okay. That makes sense. And then just kind of curious, as you continue to do work on the Joe Hudson's integration, anything that surprised you or any sources of like incremental upside from when you last updated us?

Yes. I mean, Jeff mentioned earlier the notion that there's -- they bought -- they not dissimilar to us have a lot of stores that are in the maturation process. Still believe those stores have good opportunity for -- to be a tailwind to the business. They certainly were purchased. We bought 140 locations over the last 3 years leading up to 2025. So there's probably some untapped value there. But the team has been very positive, very accepting of the Boyd organization. The integration is progressing very well, couldn't, frankly, be happier with the pacing of the integration process at this point in time. And the synergies that we were expecting are real. And so we're very, very positive about what we're seeing thus far.

[Operator Instructions] Your next question comes from the line of Zachary Evershed from National Bank Financial.

Congrats on the quarter. Hoping you could quantify the impact of paint rebates in gross margins? And what are your expectations of changes there as supply consolidates?

I mean when you're talking about rebates, are you talking about rebates from suppliers? Or are you talking about rebates elsewhere?

From suppliers.

Yes. I don't think we'll really talk about what's happening with rebates with suppliers. I mean, obviously, we have some volume triggered rebates that are benefit -- that will benefit from continued growth in the -- in our purchases. And frankly, as we integrate Joe Hudson's, those things can be a benefit for us as well, but nothing on the specific numbers.

And any downdraft expected as supply consolidates?

No. No, I don't -- there's nothing that we would -- nothing that we see from that perspective.

Your next question comes from the line of Jonathan Goldman from Scotiabank.

Maybe just the first one, Brian, I understand all the comments around the weather in Q1 and obviously, no one has a crystal ball. But going back to your comments back on the Q3 earnings call about kind of trending back to the 3% to 5% same-store sales range based on what you saw in October and the industry fundamentals. Did you have any visibility on the vacation schedule and how that would line up for Q4 and the impact on that?

Not good visibility. We made some changes to the way that we pay out vacation. We used to pay out vacation for people that had unused vacation time. We stopped doing that last year, and it probably had a bit of a short-term negative impact on the business, but it would have been difficult for us to see that ahead of time. So no real visibility. As we exited the month of October, we did see -- we had seen a nice bounce back in the activity in the month of October. But nothing really -- nothing from a arrivals perspective really slowed as we got into November, December. It was really more a function of our ability to get through the work that was coming in.

Okay. And then maybe one more for me. So if we were to strip out the noise from vacation schedules and the weather in Q1, would you have seen a sequential improvement in same-store sales in Q4 versus Q3 and then again, sequential improvement from Q1 versus Q4?

Probably, yes. Yes, probably.

And that concludes our question-and-answer session. I will now turn the call back over to Brian for closing remarks.

Okay. All right. Well, thank you all again for joining the call today. We look forward to reporting our first quarter results in May. And thanks again. Have a great day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Good morning, everyone. Welcome to the Boyd Group Services, Inc. Third Quarter 2025 Results Conference Call. Listeners are reminded that certain matters discussed in today's conference call or answers that may be given to questions asked could constitute forward-looking statements that are subject to risks and uncertainties related to Boyd's future financial or business performance. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are detailed in Boyd's annual information form and other periodic filings and registration statements, and you can access these documents at SEDAR's database found at sedarplus.ca and on EDGAR at sec.gov.

I'd like to remind everyone that this conference call is being recorded today, Wednesday, November 12, 2025. 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 I apologize for my voice. I'm fighting off a bit of a cold, but 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. We released our third quarter results before market opened today. You can access our news release as well as our complete financial statements and management discussion and analysis on our website at boydgroup.com. Our news release, financial statements and MD&A have also been filed on SEDAR+ and EDGAR this morning. On today's call, we'll discuss the financial results for the quarter ended September 30, 2025, and provide a general business update. We will then open the call for questions.

It's great to be here today to discuss our third quarter results and what has truly been one of the most exciting and transformative periods in Boyd's history. Since the beginning of the third quarter, we've made significant strides across our business. We announced a return to positive same-store sales on the back of improved industry conditions, executed well on our margin initiatives and reached several exciting milestones, including surpassing our 1,000th location, announcing a definitive agreement to acquire Joe Hudson's Collision Center and listing our stock on the New York Stock Exchange. It's been an exciting quarter, and I'm proud of what the team has accomplished.

Turning to our third quarter results. I'm excited to report that the momentum we experienced in our business in July was sustained throughout the quarter and early into the fourth quarter. For the third quarter, we generated positive same-store sales growth of 2.4%, with growth coming from continued market share gains as well as an improvement in industry conditions. While it remains early in the fourth quarter, same-store sales for October continued to show positive growth, delivering further improvement compared to the third quarter, falling within the range outlined in our 5-year plan.

Over the past year, we've seen an improvement in several headwinds that have been negatively impacting repairable claims. These include a moderation in insurance premium increases, which are now back in line with historical levels as well as a return to growth in used vehicle prices. Most recently, we've begun to see some insurance carriers in the United States seek regulatory approval to decrease insurance premiums. These trends combined with our return to same-store -- positive same-store sales and support our view that the industry conditions are normalizing and that Boyd is well positioned to continue to outperform.

In addition to the top line growth, we generated strong adjusted EBITDA margin improvement during the third quarter, with margins increasing 170 basis points over a year -- on a year-over-year basis to 12.4%. As a result, adjusted EBITDA grew by 22.8% in the third quarter. The margin improvement came from both gross margins and positive operating leverage as we continue to make headway on our Project 360 initiatives, our cost transformation plan and achieved positive operating leverage from the return to same stores -- from the return to positive same-store sales. With Project 360, we've achieved over $30 million in annualized run rate savings and are on track to reach a $70 million run rate by the end of 2026 with the full $100 million of savings expected by 2029.

With the indirect staffing model now fully implemented, we continue to focus on direct and indirect procurement savings through centralization of our procurement spending to fully leverage the benefit of Boyd's scale. We also had a busy quarter with new location growth, adding 24 locations with 17 coming from acquisitions, including the acquisition of L&M Autobody in August as well as 7 new start-up locations. In addition, earlier this week, we completed a 5-location multi-store operator acquisition in Nova Scotia, Canada, which marks our initial entry into this province. We continue to target the opening of an average of approximately 8 to 10 new start-up locations per quarter and currently expect to open 13 start-up locations in the fourth quarter with an additional 18 currently in development through the end of September 2026.

I'd like to take some time on today's call to discuss our definitive agreement to acquire Joe Hudson's Collision Center and the related financing as they mark a significant milestone in our company. Joe Hudson's is a company we've long respected for its strong operational performance, disciplined growth strategy, culture and concentrated regional footprint in the Southeastern portion of the U.S. With 258 locations, Joe Hudson's brings scale, operational excellence and strong local presence to complement our existing footprint. As we've mentioned in previous calls, we've been patient in waiting for the right complementary MSO to come along, one that made sense strategically and financially, and Joe Hudson's checks both boxes.

This acquisition accelerates our growth, solidifies our position as one of the leading players in the highly fragmented North American collision industry and generates meaningful synergies. The anticipated synergies will benefit both Boyd and Joe Hudson's as we look to achieve direct and indirect procurement savings from the combined business as well as achieve operational benefits from our enhanced density. We estimate that these synergies will be between $35 million and $45 million with approximately 50% in the near term and the remainder by 2028. To support the deal, we successfully implemented an $897 million bought deal initial public offering in the U.S. and a CAD 525 million senior unsecured notes offering, which together secured the financing we needed to complete the acquisition.

We also completed a CAD 275 million bond offering to refinance existing debt and strengthen our balance sheet earlier in the third quarter. Through these initiatives and based on the exercise in full by the underwriters of their option to purchase additional common shares as part of the public offering, we have maintained a disciplined financial approach and expect our pre-IFRS debt-to-EBITDA ratio to be at 3.1x at the closing of the acquisition, returning to levels -- returning to current levels as early as the end of 2026.

Lastly, the listing of our shares on the New York Stock Exchange marks a major milestone in Boyd's journey, increasing our visibility and giving us access to a broader pool of investors as we continue to execute our long-standing growth strategy. I'll now turn it over to Jeff to go through our third quarter financial results in more detail. Jeff?

Thanks, Brian. As Brian highlighted, we had a strong third quarter with positive same-store sales growth and solid margin improvement as we continue to execute on Project 360. During the third quarter, our sales increased by 5% to $790.2 million with same-store sales, excluding foreign exchange, increasing by 2.4%. In addition, $22.2 million in incremental sales were generated from 64 new locations that were not in operation for the full comparative period. As these stores mature over the next 2 to 3 years, we expect that they will contribute meaningfully to sales. Over the past 2 quarters, we have begun to see an improvement in industry conditions.

Based on claims processing platform data for the third quarter, we estimate that repairable claims were down in the range of 3% to 5%. This represents a meaningful improvement from both the second quarter of 2025, which experienced an estimated decline of 6% to 8% and the first quarter of 2025 during which claims were down an estimated 9% to 10%. As Brian highlighted, we have seen this strength continue in the early part of the fourth quarter and our same-store sales delivering further improvement when compared to the third quarter, falling within the range outlined in our 5-year plan. Gross margin was 46.3% in the third quarter of 2025, up 60 basis points from the 45.7% achieved in the same period of 2024.

Gross margin percentage increased due to several factors, including the benefits of internalization of scanning and calibration and an increase in parts margins. Improvement in parts margin was a result of Project 360 initiatives to enhance parts procurement to drive cost efficiencies.

Now turning to operating expenses. For the third quarter of 2025, they were $267.6 million compared to $263.4 million in the same period of 2024. As a percentage of sales, operating expenses declined 110 basis points to 33.9% from 35% last year. Operating expenses as a percentage of sales were positively impacted by the indirect staffing model, which was introduced in the second quarter of 2025 as part of our Project 360 initiative. The full cost savings from the indirect staffing model were successfully realized during the third quarter.

Future savings are expected to include additional direct and indirect procurement savings as we focus on a more centralized approach to purchasing in order to fully leverage Boyd's scale. In addition to Project 360, the decrease in operating expenses as a percentage of sales was positively impacted by our return to positive same-store sales growth, which provided improved operating leverage on certain operating costs. Offsetting some of the benefits to operating expenses were incremental costs associated with the internalization of scanning and calibration and new location growth. While the internalization of scanning and calibration contributes positively to gross profit and adjusted EBITDA, it does not contribute incremental sales and therefore, increases operating expenses as a percentage of sales.

Adjusted EBITDA or EBITDA adjusted for fair value adjustments to financial instruments and costs related to acquisitions and transformational cost initiatives was $98.4 million, an increase of 22.8% over the same period of 2024. Adjusted EBITDA margins improved 170 basis points to 12.4% in the third quarter, up from 10.7% in the third quarter of 2024. The year-over-year increase in adjusted EBITDA was the result of improvements in gross margin, realization of the cost savings from the indirect staffing model and direct and indirect procurement cost savings.

Net earnings for the third quarter of 2025 was $10.8 million compared to $2.9 million in the same period of 2024. Excluding fair value adjustments and acquisition and transformational cost initiatives, adjusted net earnings for the third quarter of 2025 was $13.3 million or $0.62 per share compared to $3.2 million or $0.15 per share in the same period of the prior year. Net earnings and adjusted net earnings for the period benefited from higher adjusted EBITDA, which was partially offset by increased depreciation expense and increased finance costs. The increase in depreciation expense was primarily due to the growth in new locations, investments in network technology upgrades as well as growth related to the calibration business.

At the end of the period, we had total debt net of cash of $1.3 billion. Debt net of cash before lease liabilities increased from $487 million at December 31, 2024, to $521 million at September 30, 2025. Debt net of cash before lease liabilities increased as a result of new location growth. During the third quarter of 2025, the company successfully closed a private placement offering of CAD 275 million senior unsecured notes. The net proceeds of the offering were used to repay existing indebtedness. During 2025, the company plans to make cash capital expenditures, excluding those related to network technology upgrades and 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. Excluding expenditures related to network technology upgrades and acquisition and development, the company spent approximately $16.2 million or 2% of sales on capital expenditures during the third quarter of 2025. The company spent $20.5 million or 2.7% of sales on capital expenditures, excluding expenditures related to acquisition development during the same period of 2024. I will now pass it back to Brian for closing remarks.

Thanks, Jeff. Looking forward, our outlook remains strong. With a return to positive same-store sales growth on the back of improved industry conditions, a positive start to the fourth quarter, continued progress on Project 360 and a transformative acquisition, Boyd is well positioned for sustainable growth and continued value creation in the coming years. Before I conclude, I want to thank our entire team from technicians and frontline staff to regional leaders and support teams for their hard work and dedication. It's their commitment and collaboration that makes achievements like this possible. With that, I'd now like to turn the call over to the operator for questions.

[Operator Instructions] Your first question comes from Chris Murray with ATB Capital Markets.

Maybe turning back to the outlook a little bit. Can you maybe give us some more color on what you're starting to see in the industry in terms of the turn? And you talked about same-store sales growth in line with your historical average, but that's kind of -- that 3% to 5% range is a bit wide. I was wondering if you could maybe help us understand kind of the magnitude of the uplift you're seeing and anything that we should be aware of in terms of thinking about how this might extend into 2026.

Sure. Yes. Thanks, Chris. Yes, in terms of what we're seeing, we're really commenting on the fact that the conditions that are improving in terms of seeing the diminishment in the inflation around insurance premiums, stabilization of used car pricing, and those are the dynamics that are helping to -- that we're seeing affect our business. We did see an improvement in the first month of Q4 compared to the Q3, pushing us into that range. And so Q3 was 2.4%. The range -- our long-term outlook range is kind of in that 3% to 5%. So it was only 1 month. It's hard to necessarily provide much clearer guidance than that for just 1 month results. But essentially, we're moving into that 3% to 5% long-term range, which is obviously incredibly positive.

Okay. And any thoughts around anything you're hearing around industry trends as we extend into 2026?

Yes, I'll take that. I mean, look, I think as we've said, the industry drivers around what's happening with used car prices that are up to kind of flat to slightly up, certainly helping the total loss situation. And then I think as insurance premiums come down, our expectation is that people will better insure themselves and put themselves in a better coverage position, which will ultimately result in them being able to file a claim should they get into an accident.

Okay. That's helpful. One question I just wanted to maybe get some explanation on is with the Joe Hudson's acquisition. You talked about it was about a $1.3 billion purchase price, but then you also mentioned briefly that it was kind of net of tax, it's more like $1.15 billion. Can you just walk us through how that delta works and how we should be thinking about your tax rates and kind of like for what duration or how structural is this going to be on a go-forward basis? And I guess the cash tax impact of all that would be helpful, too.

Sure. Yes. Thanks, Chris. So really, what we're talking about is the fact that through the structuring of this transaction, we're able to get full tax shield or tax shelter on approximately $1 billion worth of the purchase price. And so we're going to be able to have tax amortization that's going to shelter not only what we expect to be Joe Hudson's net income, for a period of time to use up that shelter, but also some of Boyd's taxable income as well.

So there's going to be this opportunity where from an accounting perspective, we'll still be recognizing tax -- income tax expense at the same level, but it won't be on current tax. We will actually have cash tax savings. And so we'll pay very little cash taxes as long as we have those deductions over the next period of time. And we've essentially done a DCF on those savings to determine that the $1 billion of shelter, it's approximately $250 million, $260 million of actual tax deductions. And when you present value that, it results in $150 million current benefit.

Your next question comes from Derek Lessard with TD Cowen.

Congrats all around. Just a couple of questions for me. Outside of the Joe Hudson's acquisition, it does look like sort of your bread and butter type SSO, MSO acquisitions have picked up the pace in the last couple of quarters. Just wondering if you can maybe talk about the drivers behind that and sort of the outlook going forward.

Yes. Well, I think, first of all, we've always suggested that we'd get back to a level where we had been historically, where we're planning for 80 to 100 units a year. We did have a slower start to the quarter or to the first half of the year. That was primarily driven by just what was happening in the market itself, tougher to put new locations in the ground when the market backdrop is soft. It's just tougher to get insurance carrier support when we're doing that.

So as the market starts to come back, it comes back to the larger players first. And so what we're seeing is probably a bit of an influx in the pipeline of those kind of smaller MSOs and single shops that are more willing to sell that, coupled with then our confidence in the ability to get those locations ramped to a level that we would expect them to ramp to over our normal maturity curve. That gives us the confidence to be able to turn on the acquisition pipeline a little bit more aggressively. In addition to that, we're starting to see the -- what we've also talked about is half of our growth coming from greenfield locations -- greenfield, brownfield locations, you're starting to see that pipeline mature.

And as that pipeline matures to that 8 to 10 locations a quarter, it gives us that insulation that we need to really have almost a guaranteed number of new units opening every single quarter and then really the toggle becomes how are we going to do on the M&A side. And so far, the pipeline remains very robust. As we've outlined in the commentary with Joe Hudson's, we still expect -- even with Joe Hudson's, we still expect to acquire 80 to 100 or acquire or open 80 to 100 new locations every single year as part of our 5-year plan. And the leverage positions that we referenced in the material include us continuing to open 80 to 100 new locations every single year.

Great color, Brian. And then one final one for me. Just in terms of returning capital to shareholders, 2% dividend bump. Just how do you think about -- how do you think about that and the balance between growth and acquisitions and buybacks and dividend raises versus your leverage?

Yes, Derek. So we've obviously had a very, very conservative dividend payout ratio for a long time, and we've had a history of a very nominal increase annually really to help support the inclusion in certain funds. And so the vast majority of our free cash flow gets reinvested in the business because there's just lots of really attractive investments to be made to grow the business and expand EBITDA. And we think that, that is still our best use of capital, but this notional dividend and the notional increase are just there as part of inclusion in some funds.

Your next question comes from Mark Jordan with Goldman Sachs.

As we think about the impact of tariffs, I'm wondering if you could give us some insight as to what you're seeing in terms of parts price inflation, maybe how much, if any, of it was a benefit to your same-store sales growth during 3Q? And I guess, how should we think about it going forward?

Yes. So look, I think parts price inflation continues to kind of creep up. If you look at it over the past -- if you look at a run from July to August, it's 2.9% up in July, 3.4% in August, 3.1% in September. As it relates to how much that's actually helping our same-store sales growth, I would tell you that the average cost of repair continues to be much lower or the average -- the increase in the average cost of repair continues to be much lower than it's been historically. If you look at the first half of the year, it's only up 0.9% and we only talk about the first half because it's the mature data that's out there. And that's coming off of '24 that was 3.7%, a '23 that was 7.4%.

So I would tell you right now, what we're benefiting from is taking some market share in a down environment. We're taking market share because we're really focused on the success of our clients. Our stores are really dialed into making sure that they understand how to win with the clients, and that's putting us in a much better position to be able to take share in a down environment.

Perfect. And I guess kind of thinking about that in terms of the repair costs you mentioned, how should we view that going forward in terms of total loss rates? Do you expect used vehicle values to be an offset there to raise the pre-collision values? Or how do you expect the repair costs to increase going forward?

Yes. I mean I think there's no reason to expect that it won't return back to kind of those normal levels where we always say that our growth algorithm contemplates an average repair cost -- our average repair cost growing at 3% to 5% with the market backdrop from a claims perspective that's down roughly 1%. I think we're headed towards a claims environment where we're now starting to see that 3% to 5%. That's coming off a down 6% to 8% and a down 9% to 10% in Q1 and -- Q2 and Q1, respectively. So we're seeing the claims environment start to come back closer to that down 1% to 2%. I would expect as total loss rates start to react accordingly because used car prices are going up.

And I don't think we've seen yet the influx of used car price increases to the extent that I think they will. But as they do continue to go up, I would expect total losses to come down. I'd expect those tickets, those larger tickets to come back into our repair facilities. And as that happens, I'd expect the overall to continue to increase. When you look at what CCC reports the increase in labor rates, that's still up around 4%, 4.5%. So the rates themselves are increasing. The part prices, as I referenced earlier, are still continuing to increase. What's really offsetting that is the larger tickets coming out of the shop and the mix effect of that going backwards.

Your next question comes from Steve Hansen with Raymond James.

Brian and Jeff, your outlook commentary on same-store growth momentum carrying into Q4 is certainly encouraging. I'm just curious if there's any soft spots buried within that just insofar that the weather was a bit slow to emerge through October. It seems to be showing up finally now, but it's still encouraging nonetheless. But do you have any disparity in the regional performance on that recovery?

Nothing that's different than what we've seen even historically. I mean the West still remains a little depressed versus the rest of the country, which -- but it has been depressed. But as the markets returned, we see it returning to the same pace as the rest of the country. And to your point, we got a pretty good snowstorm here across much of the Midwest over the last couple of days, which is quite early in the year for us. So we would hope that some of that actually even provides some incremental tailwind to the business in the fourth quarter.

Very helpful. And just wanted to go back to an enterprise agreement you signed with Mitchell back in October, at least for the Gerber side of your platform. Can you maybe just elaborate on the motivation there and how you think that impacts sort of some of the volume pull into 2026 as you stand that agreement up?

Yes. Yes. Well, a couple of things there. I mean you also saw earlier in the -- I think it was in the third quarter that the largest insurance carrier came out and said that they've agreed to allow for -- to allow service providers to use either platform, CCC or Mitchell. And as you well know, the second largest carrier in the U.S. actually exclusively uses Mitchell. So our agreement with Mitchell is really to make sure that we're continuing to position ourselves to meet our customers where they're at regardless of what platform they want to use, we're going to be amenable to that. And I think this just opens up the possibility for us to continue to grow with both of those carriers.

Your next question comes from Daryl Young with Stifel.

I just wanted to follow on that Mitchell line of thinking and questioning. Is there any added complexity or cost that's going to be associated with running dual systems going forward?

Complexity, yes. I mean it is -- it does create a little bit of complexity. But when we have -- when -- typically, when we have dual platforms in the shops like that, we're really only talking about the estimatics platform, not the shop management. So -- and we do have proficiency in the shop right now to write in Mitchell. We write in Mitchell for other customers as well. And so I don't see that it being an inhibitor to that. And look, at the end of the day, we need to build the proficiency in the shops to make sure that they can write in either platform.

I tell our shops, I don't -- it doesn't matter to me if carriers want us to write estimates in Crayon, we have to be in a position where we can meet the customers where they're at and take care of the volume that comes to us. So complexity, a little bit. From a cost perspective, not substantial. We don't expect to see a lot of incremental costs associated with running both platforms.

Got it. And then one more on margins. The Joe Hudson's platform obviously has very strong margins, and you called out density as a key component. That's also -- density also seems to be a key part of your 5-year plan. Does Joe Hudson's basically lay out the road map for you in terms of what we should expect to see on margins for the Gerber platform in the U.S.? And does this give you optimism you could maybe deliver faster or higher than the 5-year plan on your consolidated margin?

Yes. I would -- I mean, look, we have the road map inside of Boyd as well. We talked about on the -- during the Joe Hudson's calls, the one thing that we see in our own business is if you were to look at our North division, which is where we have the most density, particularly around Illinois, Michigan and in markets like that. We have a similar profit profile as Joe Hudson's. So we have the road map. That's why when we came out with our 5-year plan, we talked a lot about building density because we know that density matters both -- it matters to our relationships with carriers and their reliance on us in the marketplace.

It matters to us with our dealer relationships where we buy our OE parts from. The denser we are, the bigger we are in the marketplace, the more profitable our parts relationships become. And then we're much more stable from a workforce perspective when we're one of the larger players. So those were the drivers of us acknowledging that in our 5-year plan. Joe Hudson's just happens to be a shining example of when you stay disciplined, what happens. And so I think we have the road map internally. We now have the road map with Joe Hudson's as well or we have another point of validation with Joe Hudson's.

Certainly, you would expect that as we blend in 258 new sites at what was reported in the financials at 14.4%, you'd expect that to accelerate our path to -- the timing of our path to 14% because we're blending in a very healthy business and actually have profit to go on top -- have synergies to go on top of that. So yes, I would expect that to be the case.

Your next question comes from Gary Ho with Desjardins Capital Markets.

Hey, Gary.

Yes. So a couple of questions on my side. First, just maybe just go back to the -- put a finer point on the Mitchell question. So I know in your annual filings, you disclosed the top 2 in terms of contribution to revenue. I'm assuming that's neither of them is kind of related to kind of the Progressive that you kind of mentioned in the past. Can you maybe give us a sense its contribution today, it's the third largest player, where would that be? And how quickly can you ramp up to get to that natural penetration do you think? Is it relatively quick? Is it 12 or 24 months? I just want to pick your brain on that.

Yes. Well, look, we're not going to disclose anything more than what we've already disclosed in terms of top carrier relationships. Again, I would just reiterate the point that as one of the larger players in the space, we need to be able to serve our customers the way they want to be served. Opening up Mitchell just gives us the opportunity to do that with -- on a much more broad scale with the second largest -- certainly with the second largest carrier in the U.S.

And as it relates to then the first largest carrier in the U.S. their openness and willingness to be able to use both platforms gives us the ability and the confidence then to be able to leverage that platform in our stores and start to build the proficiency on Mitchell that allows us to then be able to -- regardless of platform, be able to take care of customers. So I think I'll leave it at that. I don't -- there's really nothing more to say than we're making sure that we're being responsive to our customers' needs, and we're going to continue to do that, and we're going to continue to train and educate the organization as fast as we possibly can to make sure that's happening.

Okay. Got it. Okay. And then my next question, I know in your Joe Hudson's kind of presentation, you talked about a pro forma 9.3x multiple that kind of bakes in $19 million of EBITDA for mature store contribution. That does seem sizable to me just relative to the $63 million of EBITDA after rent on an LTM basis. So what has to happen for you to hit that $19 million of contribution?

Yes. Well, look, it's really more reflective of the fact that Joe Hudson's has bought 140 locations in the last 3 years. So when you think about 140 of the 258 coming in the last 3 years, there's just a lot of locations that are maturing. So nothing, I think, special needs to happen other than that those locations need to reach their full scale. The one benefit I would think we have right now is it feels like the market is kind of at a bit of an inflection point. So it might be that we've actually been able to procure or to buy this business with a set of maturing stores that might be able to accelerate in a much more expedient fashion than we were anticipating. So I think that it's nothing more than just the size, the sheer number of locations that are maturing.

Okay. Great. Maybe I can sneak in a quick numbers question for Jeff. Just on your slide on pro forma leverage, 3.4x post close, expected to return to 2.7x as early as '27. Correct me if I'm wrong. I don't believe that takes into account kind of the overallotment of the equity raise. So now you have all the final pieces in place and the debt deal, does that change the 3.4x and the timing to get back to the 2.7x?

Yes, that's a great pickup, Gary. Yes, we've rerun those numbers based on the overallotment that we executed recently. And so yes, now we believe that at closing, we'd be at 3.1x and believe that we would get to approximately 2.6x within the end of 2026.

Your next question comes from Bret Jordan with Jefferies.

I guess when you think about the comps being within the 3% to 5% range, is it realistic to think about them being above that range in the first half of '26, just given the low bar? Or is what you're seeing in a ramp still pretty modest?

Yes. I think it's certainly conceivable given that we're basing it off a lower -- sort of a more challenged environment as a low comp period. A normal level of growth with a low comp could see us exceeding that 3% to 5% for a period of time. We haven't seen that yet. So we're only commenting on what we're seeing thus far this quarter. But we have seen some low comps. And if you look at our history, when you see periods of low comps, they typically are followed by periods of higher same-store sales naturally. But as I said, we can't tell that for sure, but it's a reasonable thing to be considering.

Do you have any color on the Joe Hudson's comp, their relative performance versus yours in the period?

Yes. We think they were slightly behind where we were at in the current period.

And then...

I think they had been stronger, though. I think they had been stronger throughout the first part of the year.

Yes. They were actually up in the first part of the year and then slightly behind where we finished in the third quarter. But I think, look, I mean, there is obviously going through a lot of distractions and a lot of activity in the third quarter as well. So nothing to really read into that.

And then a quick question on the insurance pricing that you were commented on. Do policies need to actually come down on an absolute basis or just moderating or going up less to get the consumer to be either putting deductibles lower or putting comprehensive back on?

Well, I think there's a couple of things that will happen. One, there's a tremendous amount of switching that's happening. So as people switch, I think there's going to be a higher propensity to better position themselves from a coverage perspective. There have been 2 of the large carriers have -- State Farm actually filed to -- with the regulatory environment -- regulatory group to put a 10% premium decrease in the state of Florida. And then you also saw that Progressive announced that they were going to put $1 billion, which is roughly $300 a vehicle into the state of Florida as a decrease.

So our thought is if you can't afford the insurance coverage that you're in, people need to start -- and we saw this. We saw this coming out of the recession as well. People better insure themselves when they start making switches or they start to see the carrier or the pricing decreases, and that's what we're expecting.

Your next question comes from Nathan Po with National Bank Capital Markets.

I just want to pull on that thread a bit more regarding what you saw in the last recession and talk about or ask about kind of the time line that you might expect between insurance companies decreasing rates, people noticing this, better insuring themselves and how that finally translates into more volumes in your repair facilities?

Yes. Well, look, I'd start off by saying the reasons for the softness in those 2 periods was very different. During the recession, people were out of work, unemployment was high. And what really brought it back in line was people actually getting back to work and then kind of getting themselves back into a better financial position in order to be able to better insure themselves. So that took a longer period of time. It took roughly 2 to 3 years for that to really work itself out of the system. And what we've talked about historically is what you see when that's working itself out as you see collision claims, which is the first-party claim, the one that's the at-fault party go down disproportionate to the liability claims, liability claims being the best indication of accident frequency.

So as liability claims have been much more stable in that kind of down 3-ish percent even through this period, the same thing we saw was happening on collision claims, which leads us to believe that when collision claims are filed, it's because the at-fault party can't afford their deductible or they don't have collision coverage. So as the second part of the question, when does it return? The immediacy of nobody would take the premium decrease and then go back later on and add the coverage. So my suspicion is that what's happening is as people go to switch their insurance, the carriers are having conversations around I can save you a couple of hundred dollars.

And at the same time, I can actually put you in a lower deductible plan, and I can add back collision coverage and the consumers are generally making decisions at that point in time. When they get a premium decrease, probably -- look, the point of having insurance is to be able to use it if you need it. So if you have insurance and you put yourself in a position where you can't afford the deductible should you get into an accident, it's kind of pointless to have it. So I think, generally speaking, I would assume that people are trying to educate the agents and the insurance carriers are educating consumers around get yourself in a position to where if something did happen, you can actually use it.

And I think when they've got the ability to have that conversation with decreases coming in, obviously, their objective is going to be to preserve the amount of premium that they can. The way they can preserve some premium is to increase the coverage.

Got you. I'll swap over to M&A. So with Joe Hudson's padding out your Southeastern presence, where does your focus now shift geographically after that's been integrated or in the books?

Yes. Look, I don't see any meaningful shift. There's still plenty of -- given how fragmented the market is, there's still plenty of growth opportunities for us across the Southeast as well as the rest of the United States. So I would expect us to continue to be active in the Southeast. We pick up 2 new states with Joe Hudson's, West Virginia, and Mississippi. So I'd expect to see continued growth. It just really opens up a lot more white space for us to be able to build out density. So it puts us in -- as we talked about on the call, it puts us in the #1 position in 14 new markets and the #2 position in 2 new markets continuing to build out those markets and fill in any white space really is part of our market planning initiative that we kicked off earlier this year.

Excellent. And with Joe Hudson's now out of the MSO pool, are you able to describe what the MSO pipeline looks like now in terms of size?

Yes. Well, I mean, Joe Hudson was one of the assets that was longer in their hold period with private equity. So the pipeline of larger transactions, most of them are fairly immature in their hold period. So the pipeline of larger deals like that is probably pushed out to the, call it, the 2- to 5-year period of time. But there are still plenty of, call it, 3 to 10 store locations that are out there that you're seeing us be a lot more active in right now. Obviously, the L&M transaction gave us 8 new locations. The new -- the business in Nova Scotia gave us five locations.

So we're starting to get a lot more active, and they're starting to see a lot more activity in that kind of, call it, smaller MSO, smaller regional MSO category that we're going to continue to be very active in while the other ones get longer in their hold period and come back to the market again. And if they make sense for us, then we'll continue to be participative at that point in time.

Got you. And one last one for me. With the new entry into Nova Scotia, if you take a step back, are you seeing any major valuation differentials between Canada and the U.S. between like single stores or multi-stores?

Well, I mean, no. And we haven't been as active in Canada recently. But I think as our leader in Canada has really gotten that business back on track, we've seen the Canadian marketplace emerge the same way we've seen some of the benefits we've seen in the U.S., we're really refocusing in on continuing to build out the Canadian market. And I'm really happy that we open up a new province with a lot of white space for us to be able to go build out.

Your next question comes from Tristan Thomas-Martin with BMO Capital Markets.

I think it's kind of been asked in a couple of ways. I was just curious, is there any -- outside of insurance pricing and used car values, is there any correlation between consumer confidence levels and claims volumes?

Probably, but harder to -- certainly harder to quantify. I mean the one thing that we can correlate and we have seen move as the drivers have moved is those drivers being what's happening with premiums and what's happening with used car prices. We've said those were the 2 kind of cyclical things that were happening that were driving the claims softness. And as those things have started to show signs of improvement, so have the claims environment. So I think it gives us a fairly high degree of confidence in the correlation between those 2 drivers and what's happening in the industry. Does it -- is there some incremental positive or negative associated with consumer sentiment, as I said, probably, but much harder to quantify.

Okay. And then just one more. The $35 million to $45 million of potential synergies, my understanding is it's all operational. Is there any way to think about maybe potential top line synergies or market share from this densification?

There certainly is probably synergy opportunity as it relates to revenue. We haven't baked any of that into our thinking at this point. But we certainly believe that there's a benefit to densification and would anticipate that being upside to the transaction.

Your next question comes from Razi Hasan with Paradigm Capital.

Could you maybe just highlight the added relationships with insurance carriers that Joe Hudson's brings and the net new opportunities for Boyd? Is there much overlap between the 2 companies?

There's -- from an overlap of insurance carrier relationships, I mean, they're doing business with all the same carriers that we do business with. So there's no meaningful difference in the carrier makeup. So we don't see anything kind of anomalous there.

Okay. Great. And then just moving on to operating expenses as a percentage of sales. You mentioned indirect and direct procurement savings going forward. Could you maybe quantify that a bit just in terms of the impact in the coming quarters?

Yes. I guess we'll stick to our -- the guidance that we've been providing all along that we sort of expect to get to $70 million worth of run rate benefit by the end of 2026. The indirect staffing model that we put through in Q2 of 2025 resulted in approximately $30 million of that $70 million. So we are expecting to be factoring another $40 million between the end of Q2 of 2025 and the end of 2026 is kind of the way we're thinking kind of in a ratable way is how we're modeling out so that by the end of 2026, you've got a run rate of $70 million.

Okay. And that would impact the operating expense line, right?

Yes, primarily. There'll still be a little bit of wins on the gross margin side as well, but the majority of it would be coming from the OpEx line.

Okay. Great. And maybe just lastly, I think on your presentation deck, you mentioned with Joe Hudson's acquisition, market share in the U.S. close to 7.6%. Do I have that number right?

Yes, that is what we referenced in the materials.

[Operator Instructions] Your next question comes from Sabahat Khan with RBC Capital Markets.

Just on the Project 360 kind of the execution and as you look ahead to the integration of Joe Hudson's, I think there were some comments that it could be similar teams that execute this. Can you maybe just talk about the team that's going to deliver the synergies? Will you just sort of beef up your existing team? Will it be a separate integration team as we sort of work through 2026 to deliver on these targets and the synergies?

Yes. So there are 2 things I'd add to that. One is, as part of Project 360, we opened up what's called a results delivery office to execute on those initiatives. What we're doing with Joe Hudson's is we're combining the results delivery office with an integration management office, and we're going to have that team responsible for going after now not just the $100 million that we committed to from a Project 360 perspective, but now the incremental $35 million to $45 million of synergies that we're anticipating from the Joe Hudson's transaction.

So that team and that process is very, very robust. The results delivery office, obviously, has proven that we can get the type of traction that we need. So many of the same resources that we're working on that are going to be what's now helping us with the actual synergy realization of the Joe Hudson's transaction. The leader of that, which is Kim Morin, who's done a phenomenal job of managing through the RDO process is also going to lead the IMO process now. That will be a much more fulsome approach to not just synergy realization, but making sure that we integrate the Joe Hudson's transaction properly.

The most important thing that we need to do in the short term is preserve the base business that we just bought and make sure that we keep the team stable in that organization because really our desire is to put the best of the best people on the field when we're done with the transaction. So the team has really dialed into making sure that happens. And I couldn't have any -- I couldn't be more confident in the leader that we have running it.

Great. And then just continuing on that discussion, particularly as it relates to the procurement savings and maybe consolidating some of the purchasing, are the agreements with your vendors and the suppliers? Is there sort of a time line to these? Is it something you can following a major transaction, sort of call them all to the table? Understanding the Project 360 savings are quite front-end loaded. Just wondering if the procurement savings related to Joe Hudson's could also maybe come a bit sooner than the rest of the synergies.

Yes. I mean we've talked about slightly more than 50% of the savings coming in the first year when we talked about the Joe Hudson's transaction and our confidence in that really comes from the fact that we know that some of those procurement relationships will have an immediate benefit. So yes, you're right. We do expect some of that to be front-end loaded, and we expect the kind of more of the back-end synergies to be really more realized at the -- towards the tail end of the integration process.

There are no further questions at this time. I will now turn the call over to Brian for closing remarks.

All right. Well, thank you, operator, and thank you all once again for joining our call today, and we look forward to reporting our fourth quarter results in March. Thanks again, and have a great day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Good afternoon. My name is Constatine, and I will be your conference operator today. At this time, I would like to welcome everyone to the Boyd investor call. [Operator Instructions] Linda Funk you may begin your conference.

Thank you for listening to the Boyd Group Services, Inc's call. Listeners are reminded that certain matters discussed on today's call 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.

At this time, I'll pause on Slide 2 and remind you that we will be referring to forward-looking information during today's presentation. By its nature, this information contains forecast assumptions and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in our public disclosure filings. We'll also be referring to non-GAAP measures summarized on Slide 4, which are reconciled to their most directly comparable GAAP measures in the appendices to this presentation and in our public filings.

On the call with us today is Mr. Brian Kaner, President and Chief Executive Officer; and Mr. Jeff Murray, Chief Financial Officer. Please go ahead, Mr. Kaner.

Hello all. Thank you for joining our call today. I'm excited to announce that Boyd Group has entered into a definitive agreement to purchase Joe Hudson's Collision Center, a leading player in the North American collision industry for $1.3 billion. As highlighted on Slide 6, Boyd Group was founded in 1990, and since that time, has grown to become the third largest player in the $50 billion North American collision industry with over 1,000 locations and $3 billion in revenue for the trailing 12 months ended June 30, 2025. Over the past 10 years, we have grown our revenue at a 15% compound annual growth rate and our outlook remains strong as we continue to focus on expanding our footprint, achieving scale to enhance our operations and better serve our customers. Before we discuss Joe Hudson's acquisition, I would like to take a few minutes to share our estimated preliminary third quarter results for the period ending September 30, 2025.

As you can see on Slide 7 of today's presentation, Boyd generated strong results during the third quarter with a key highlight coming from an expected return to positive same-store sales growth. For the quarter, we expect revenue to increase approximately 5% from a year ago, driven by the expectation of 2% to 2.5% same-store sales growth, with the remainder coming from new location growth. Alongside revenue growth, we anticipate an improvement in adjusted EBITDA margin expected to be between 12.3% to 12.5% during the quarter, increasing approximately 170 basis points over the same period last year.

This increase is expected to generate 21% to 23% growth in adjusted EBITDA in the quarter. Over the past year, we have witnessed a rise in used car prices and moderation in auto insurance premiums, both of which are important drivers of industry volumes. It's been exciting to see these trends translate into an improving repairable claims environment over the past quarter, enabling us to start generating positive same-store sales growth. This backdrop, coupled with the successful execution of Project 360 and additional progress on internalization of scanning and calibration were all important contributors to our strong results in the quarter.

With a strong foundation in place, alongside an improvement in industry conditions, it is an opportune time for Boyd to accelerate our growth, which we are doing today with our acquisition of Joe Hudson's Collision Center. As summarized on Slide 9 and 10, this is a highly strategic acquisition for Boyd. It increases our location count by 25% to 1,273 locations, densifies the regions in which we operate. Enhances our margins and solidifies our position as one of the leading players in the North American collision industry. In addition, given the anticipated synergies and attractive purchase multiple, we expect to be able to complete the acquisition while maintaining our strong balance sheet.

Turning to Slide 11. Joe Hudson's was founded in 1989 in Alabama and now operates 258 collision locations across 18 states. Throughout its history, Joe Hudson's has successfully executed a highly strategic growth strategy, which has seen it concentrate its growth within the U.S. Southeast region. Currently, approximately 85% of its locations are situated in only 10 states, and its larger states include Texas, Florida, Alabama and South Carolina. This strategy has provided Joe Hudson's with a strong industry position, including providing exposure to the growing U.S. Southeast markets.

As highlighted on Slide 12, the states in which Joe Hudson operates have benefited from positive demographic drivers, resulting in an above-average population growth over the past 4 years and above-average growth in vehicle miles traveled between August of 2019 and August of 2025. In addition to these positive market conditions, this concentrated focus also provides densification benefits including margin expansion opportunities through operational improvements and the ability to provide superior customer service to both the consumer and insurance customer clients.

Moving on to Slide 13. Over its history, Joe Hudson's has established a strong track record of growth and profitability. Since 2020, Joe Hudson's has grown its location count by a 20% compounded annual growth rate with the growth coming from both acquisitions and new start-up locations. For the trailing 12 months ended June 30, 2025, Joe Hudson's has generated $722 million in sales and a strong adjusted EBITDA margin of 8.7%. Once adjusted for lease payments, which provides a more consistent comparison to Boyd Group's reported financial results, Joe Hudson's EBITDA margin over the same period was 14.4%.

Slide 14 of today's presentation provides an overview of the strong strategic rationale for the acquisition. As you can see from the table, the transaction increases our locations by 25%. The majority of this growth is coming from our existing markets with only 2 new states being added through the combination of our 2 businesses. In addition, the acquisition solidifies our position as a leading player in the North American market, while at the same time, providing us a significant potential for long-term growth given our combined estimated revenue share of only 7.6%.

Lastly, as a result of Joe Hudson's strong profitability and meaningful expected synergies, this transaction is accretive to our adjusted EBITDA margins and positions us well for future margin expansion through continued execution of our Project 360 initiatives. As we turn to Slide 15, the map summarizing our combined locations highlights the complementary and strategic nature of today's transaction. These include densification within the U.S. Southeast region, as well as the concentration of our locations on the eastern half of the U.S. While this greater density enhances our margin potential through operational improvements, it also provides us the opportunity to better service insurance company clients, providing the opportunity for continued sales growth.

In terms of our growth, as seen on Slide 16, Boyd has a long history of unit growth with acquisitions being a key contributor to this growth. Since our founding in 1990, we have grown our locations through a combination of single shop and large multi-shop operator acquisitions as well as the opening of new start-up locations. What we have grown to learn since starting our discussions with Joe Hudson is that it has adopted a very similar growth strategy to Boyd in terms of new location growth. Since the end of 2020, Joe Hudson's has acquired 123 locations and opened 17 new start-up locations.

In addition, the company has more than doubled its location count since 2020. Our established long-term track record of both acquisitions and integration, give us the confidence in our ability to successfully integrate the Joe Hudson's team into our operations while at the same time, generating strong synergies and shareholder value.

I will now pass it over to Jeff to provide more details on the expected synergies as well as the transaction details and financing summary.

Thanks, Brian, and thank you everyone, for joining us today. As Brian mentioned, it is an exciting day for Boyd as we announced the acquisition of Joe Hudson's. As we have mentioned on previous earnings conference calls, we would be patient to watch for an opportunity to buy a larger scale, multi-shop operator that was the right partner at the right time. We believe both objectives will be achieved with this acquisition. Joe Hudson's has a strong track record of growth and profitability and is also highly complementary to our business. This alignment spans geographic presence, growth strategy, operational discipline and culture. In terms of timing, we believe that the improvement in industry conditions, which began to evolve late in the second quarter and continued in the third quarter, positions Boyd well for future success.

Ultimate funding of the transaction is described on Slide 17 is anticipated through a combination of equity and debt securities as well as bank facilities. Financing will be structured to ensure Boyd maintains a strong balance sheet, consistent with it's long track record of financial discipline. In the meantime, we have secured fully committed financing to fund the acquisition. At time of closing of the transaction, we expect our net debt before lease liabilities to adjusted EBITDA after lease payments to be 3.4x, up from 2.7x at the end of the second quarter of 2025. We expect to see this leverage ratio decline to our current levels as early as the end of 2027.

As we have highlighted in Slide 18, we expect to generate meaningful potential synergies from this transaction. Identified synergies totaled $35 million to $45 million. We target achieving these synergy goals by 2028 with 50% of these synergies targeted for completion in the near term. There are several different avenues from which we expect to achieve these synergies, including both direct and indirect procurement savings, the internalization of Joe Hudson's scanning and calibration services, efficiencies achieved through increased densification as well as operational and administrative cost savings. A number of these synergies, namely procurement savings and internalization of scanning and calibration are 2 initiatives that are underway today within Boyd, providing us with a high level of confidence in our ability to achieve these synergy targets.

In addition, as Brian highlighted, the complementary nature of our combined location footprint enhances our density in several geographic markets. Providing visibility into potential efficiency improvements across both businesses. The purchase price of the transaction is $1.3 billion or approximately $1.15 billion net of tax benefits. The purchase price, net of expected tax benefits represents a purchase multiple of 13.3x Joe Hudson's last 12 months ended June 30, 2025, adjusted EBITDA, assuming run rate adjustments. When incorporating the anticipated synergies, this purchased multiple decreases to 9.3x. The acquisition is expected to be accretive to adjusted net earnings per share after synergies in the first full year. We expect to close the acquisition in the fourth quarter of 2025, subject to satisfaction of customary closing conditions and regulatory approvals.

Before I turn it over to Brian for closing remarks, I want to thank everyone once again for participating on the call today, and we look forward to providing a further update on our business during our third quarter earnings call on November 12. Brian?

Thanks, Jeff. As I highlighted in my opening remarks, this is a significant milestone for Boyd. Today's transaction is fully aligned with our goal of solidifying our position as one of the leading players in the highly fragmented North American collision industry, densifying our regional presence and accelerating our profitability. I believe the many initiatives that have been underway at Boyd over the last several years, including Project 360, our new go-to-market strategy and expanded WOW Operating Way position us well to take advantage of the improvement in industry conditions. These initiatives complemented by Joe Hudson's strong profitability and strategic growth strategy, positions Boyd to continue executing on its long-term growth strategy while generating strong long-term value creation for shareholders.

Thank you for your time, and we look forward to engaging with you as we embark on this next exciting chapter.

Good morning, everyone. Welcome to the Boyd Group Services, Inc. Second Quarter 2025 Results Conference Call. Listeners are reminded that certain matters discussed in today's conference call or answers that may be given to questions asked could constitute forward-looking statements that are subject to risks and uncertainties related to Boyd's future financial or business performance.

Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are detailed in Boyd's annual information form and other periodic filings and registration statements, and you can access these documents at SEDAR's database found at sedarplus.ca.

I would like to remind everyone that this conference call is being recorded today, Wednesday, August 13, 2025. 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 for today's call. On the call today with -- on the call with me today is Jeff Murray, our Executive Vice President and Chief Financial Officer. We released our second quarter 2025 results before markets opened today. You can access our news releases as well as our complete financial statements and management discussion and analysis on our website at boydgroup.com.

Our news release, financial statements and MD&A have also been filed on SEDAR+ this morning. On today's call, we will discuss the financial results for the quarter ended June 30, 2025, and provide a general business update. We will then open the call for questions.

The Boyd team has been focused on improving profitability, deepening our customer relationships and strengthening our go-to-market strategy for new location growth. I'm pleased to report that we've begun to see the results of the team's hard work in our second quarter results.

Throughout the second quarter, we continued to gain market share despite industry headwinds and expanded our gross margins by 120 basis points on the back of continued internalization of scanning and calibration, improved performance-based pricing and improved parts margins.

We also made headway with Project 360, which helped increase adjusted EBITDA -- adjusted EBITDA margins to 12%, the highest quarterly adjusted EBITDA margin performance since 2023. In addition, early in the second quarter, we closed our first MSO acquisition since 2021 and surpassed the 1,000th location milestone.

During the second quarter, we successfully executed the indirect staffing model, which was the first major initiative of Project 360. We are on track to generate $30 million in annual run rate savings from this initiative starting in Q2 and expect to achieve $40 million in incremental savings between Q3 of 2025 and the end of 2026 with incremental key initiatives focused on direct and indirect procurement spending. The remaining $30 million of our $100 million cost savings goal will be realized between 2027 and 2029.

In addition to Project 360, there are several other important initiatives that we have been working on to strengthen our customer relationships, gain market share and improve the cadence and strategic fit of our new location growth. To further strengthen our customer relationships, we've taken our long-standing WOW Operating Way one step closer to our insurance company clients.

While this enabled Boyd to achieve above-industry performance in Net Promoter Score, total cycle time and average cost of repair, we've expanded this initiative to focus on each of our insurance company clients' unique performance indicators, striving to provide all vehicle owners with an exceptional customer service experience.

We have linked the compensation structure of our regional and field management to these custom performance metrics and believe this initiative has played an important role in our same-store sales industry outperformance. We have augmented our go-to-market strategy. We have undergone a comprehensive analysis of each of our regions to enable the company to take a more strategic approach to our new location growth with an emphasis on strengthening our position in our core markets.

This will enable Boyd to generate enhanced revenue synergies and operating leverage, provide a more predictable cadence of new start-up locations and position ourselves to better serve our insurance company clients.

In early 2025, we shifted our approach to development of new start-up -- on a go-forward basis, the development of start-up facilities will be primarily outsourced and upon completion, ownership will transfer directly to a leasing company. This approach will streamline the development process, deliver greater cost certainty and enable the company to build a robust pipeline of new location growth.

We have seen great progress in building this pipeline and beginning Q3 2025, we are now on track to open an average of 8 to 10 new start-up locations per quarter going forward. While the industry volumes continue to be challenged in the second quarter, over the past 6 months, we've seen an improvement in several factors that contributed to the industry decline, namely a return to positive growth in used car pricing and moderating growth rates in insurance premiums.

While we expect it to take time for the industry volumes to normalize and customers to adjust to higher insurance costs, we did experience some initial signs in our business late in the second quarter. We have thus far in the quarter, we have -- this has continued thus far in the third quarter, enabling the company to post a modest amount of same-store sales growth in July.

While we are pleased to see the initial signs of improvement in our volumes, we will continue to maintain our steadfast focus on executing our growth strategy, enhancing our profitability and generating strong returns for our shareholders. I will now turn the call over to Jeff to run through our Q2 results in more detail.

Thanks, Brian. During the second quarter, our sales increased 0.2% to $780.4 million with same-store sales, excluding foreign exchange, decreasing by 2.1%. This decline was offset by $21 million of incremental revenue from 53 new locations that were not in operation for the full comparative period.

Similar to prior quarters, Boyd continued to outperform the industry. Based on claims processing platform data for the second quarter, we estimate that industry volumes were down in the range of 6% to 8%. Gross margin was 46.8% in the second quarter of 2025, up 120 basis points from the 45.6% achieved in the same period of 2024.

Gross margin percentage increased due to several factors, including the benefits of internalization of scanning and calibration, improvements to performance-based pricing and an increase in parts margins. Improvements to parts margins are the result of Project 360 initiatives to enhance direct parts procurement to drive cost efficiencies. To date, the company has not experienced any material impact as a result of tariffs.

Operating expenses for the second quarter of 2025 were $271.7 million or 34.8% of sales compared to $265.9 million or 34.1% of sales in the same period of 2024. Operating expenses as a percentage of sales was positively impacted by the introduction of Project 360, the transformational cost initiative launched during the fourth quarter of 2024.

During the quarter, the company successfully rolled out the indirect staffing model and is on track to realize an annualized cost savings run rate of $30 million as a result. More than offsetting this positive impact were lower same-store sales causing negative leverage, quarter-to-quarter variation in certain accruals and an investment in facilities maintenance costs with spend in the quarter being elevated due to pent-up demand from deferred work.

The company also experienced incremental costs associated with the internalization of scanning and calibration and higher information technology expenses related to additional licensing and security costs. While the internalization of scanning and calibration continues to be positive for gross profit and adjusted EBITDA, it does not contribute incremental sales and therefore, increases operating expenses as a percentage of sales.

Despite the challenges faced this quarter, the company remains on track to realize its margin enhancement objectives. Adjusted EBITDA or EBITDA adjusted for fair value adjustments to financial instruments and costs related to acquisitions and transformational cost initiatives was $93.8 million, an increase of 4.7% over the same period of 2024.

Adjusted EBITDA margins increased to 12% in the second quarter, up from 11.5% in Q2 2024 and 10.3% in Q1 of 2025. The year-over-year increase in adjusted EBITDA was a result of improvements in gross margin as well as lower operating costs and shop labor as a result of the rollout of Project 360.

Net earnings for the second quarter of 2025 were $5.4 million compared to $10.8 million in the same period of 2024. Excluding fair value adjustments and acquisition and transformational cost initiatives, adjusted net earnings for the second quarter of 2025 was $10.8 million or $0.50 per share compared to $11.9 million or $0.56 per share in the same period of the prior year.

Net earnings and adjusted net earnings for the period benefited from higher adjusted EBITDA, but were negatively impacted by increased depreciation expense and increased finance costs. The increase in depreciation expense was primarily due to growth in locations, investment in network technology upgrades as well as growth related to the calibration business. At the end of the period, we had total debt net of cash of $1.2 billion.

Debt net of cash before lease liabilities increased from $487.2 million at December 31, 2024, to $505.8 million at June 30, 2025. Debt net of cash before lease liabilities increased as a result of location growth. As noted earlier, during the first quarter of 2025, the company changed its approach, whereby on a go-forward basis, the development of start-up facilities will primarily be outsourced and upon completion, ownership will transfer directly to a leasing company.

During the first half of 2025, the company completed sale-leaseback transactions for proceeds of $9.2 million. The sale-leaseback transactions allowed the company to replenish capital that can be redeployed to further grow the business. During 2025, the company plans to make cash capital expenditures, excluding those related to network technology upgrades and 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.

Excluding expenditures related to network technology upgrades and acquisition and development, the company spent approximately $11.1 million or 1.4% of sales on capital expenditures during the second quarter of 2025. The company spent $16.1 million or 2.1% of sales on capital expenditures, excluding expenditures related to acquisition and development during the same period of 2024. I will now pass it back to Brian for closing remarks.

Thanks, Jeff. As I mentioned in my initial remarks, the Boyd team has put forward great efforts to improve our business and put us in the best possible position as demand for services increases. I want to thank them for their hard work and dedication. We had a busy start to the third quarter and as we completed the acquisition of L&M Body Shop, a regional Virginia-based MSO with 8 locations and surpassed the 1,000th location milestone.

Over the past 2 quarters, we've seen an increase in acquisition opportunities -- and thanks to our strong balance sheet and disciplined approach to acquisitions through the downturn, we are well positioned to take advantage of this opportunity.

As we look forward, we will continue to remain focused on delivering our Project 360 targets, realizing the benefits of our enhanced go-to-market strategy and expanding our customer performance metrics and executing our proven growth strategy. With that, I'd now like to open the call to questions. Operator?

[Operator Instructions] And your first question is from Steven Hansen from Raymond James.

Brian, as you look at your current levels of activity that you described sort of progressing into positive territory, is it too early to call sort of the negative period behind us? I'm just trying to get a sense whether we run risk of dipping back and forth between positive and negative same-store sales here. I know the comps do get easier as the year progresses, but I'm just trying to get a sense for your confidence here and how things have progressed thus far.

Yes. I mean, look, 1 month doesn't make a trend, but we had seen, as we said, positive momentum coming out of the second quarter and that continuing into the third quarter. Does that -- that coupled with the commentary around just some of the easing of the pressures that we've been experiencing over the last couple of quarters. It seems to point to positive, but I still think it's too early to tell how sustained that is.

Okay. That's helpful. And just on a similar sort of tact, the small tuck-in on post quarter of 8 shops by itself isn't a big needle mover, but it does seem to signal that you're more confident in being willing to go after growth at the location side through M&A. How do you feel about that landscape today relative to the recent pace? And how quickly do you think you'd want to accelerate just given there appears to be some stability showing?

Yes. Well, I think the one thing that we are experiencing is an increase in the number of those types of acquisitions or those types of opportunities coming into the pipeline. And as I said, given the strength of our balance sheet, it puts us in a really good position to be able to take advantage of those. We are and still remain very focused on leveraging larger deals like that to be able to get us an entry point into a market where it actually gives us an established 1 or 2 position as we've expressed in our 5-year goal.

We continue to look for those smaller tuck-ins and then the -- leveraging our brownfield greenfield strategy to be able to build out density in the existing markets. And I'm actually really pleased with the progress, as we said, coming out of the -- at the beginning of this year, we had -- we would have liked to have been in a pipeline build of 8 to 10 greenfield locations by the time we got to the end of the year.

And as we sit here today and look out 4 quarters, we now have a fairly robust pipeline that's aligned to that 8 to 10 locations. So I think we'll continue to be active in that small regional MSO space as well as continue to build out density in the markets that we participate in today.

And your next question is from Krista Friesen from CIBC.

Maybe just to follow-up on some of the positive trends that you're starting to see. Is it broad-based? Or are there kind of various pockets where you're starting to see more of an improvement in same-store sales?

Yes, I wouldn't say that there's any particular pocket. We have experienced a pretty equal number or pretty equal value of positivity across the market, which does indicate that some of the more positive signs that we're seeing in the market backdrop are part of the benefit that we're experiencing.

Okay. Great. And then maybe just on the expanding of the WOW Operating Way to your insurance partners. Is that already underway? And how long would you expect kind of the rollout of that to take?

Yes. It actually is already underway. We changed the compensation structure of our regional and field leadership at the beginning of the year. And again, we've got the focus -- we've got the field really focused on winning with the customers.

And as we said in the release, in the prepared remarks, it's not just good enough to win on Net Promoter Score and total cost to repair and length of rental anymore or cycle time. It's -- we have to be cognizant of what it means to be successful with each of the individual clients.

And be able to have a team of people that are out in the field that are educated on what those metrics are and how to win with those particular customers, and we've now aligned their compensation to those metrics as well. And it's really given us a -- from the top to the bottom, a very aligned organization around delivering what we do best, which is delivering an exceptional customer experience for both our insurance clients and their customers.

Okay. And if I could just squeeze one more in there. Just as you switched over this compensation structure, have you been experiencing much pushback from the employees or maybe some increased turnover just as this shift has occurred?

No. Look, generally speaking, our -- I would say our employee base wants to do what's right for the customer. It has been a bit of an education opportunity to make sure that they understand what those metrics are and how to move the needle. But we have not experienced any increase in turnover or pushback from the employee base.

Your next question is from Chris Murray from ATB Capital Markets.

Maybe turning back to the store growth discussion. When you released the strat plan, I think the commentary was kind of a mix of the greenfield, brownfield and acquisitions. And at the time, at least you said the goal was maybe 80 to 100 stores a year.

I guess the question I've got is, now that we're starting to see you maybe look at acquisitions a little bit more, are you still comfortable in that 80 to 100 range? And leverage is still a little bit elevated. Just wondering how hard do you think you can press on the balance sheet or if you need to in order to achieve those types of goals?

Yes. Well, I'll comment on the first piece, and then I'll let Jeff comment on the leverage side. On the acquisition side, we do still believe that, again, our objective is to get to 1,400-plus locations in our 5-year plan. That's what enables us to get to the $5 billion of revenue in the next 5 years and what allows us to essentially double our EBITDA.

I expect that, that level is what's going to be required. And I still believe we have the balance sheet to be able to do that. I think as you look back, obviously, our Q1 earnings were a little bit depressed. And as we look forward, coming out of this quarter, you'd expect the leverage to continue to get better based on the EBITDA improvements that we're seeing. So I don't see that as a constraint for us going forward.

And I would expect that level of activity to continue. And the other thing I would comment on is just part of the reason for the greenfield strategy, as you guys know, it's a very -- the greenfield strategy amongst all the other benefits is a capital-light strategy as well. It's a $1.2 million to $1.4 million investment in the location.

And it allows, as we've said in the prepared remarks, it allows somebody to take on the development cost and keeps us out of that equation. So I do think that having -- and I am pleased that we've already gotten to a place where we've got that kind of run rate trajectory that we were expecting in the pipeline, and I'd expect it to continue. And Jeff, I don't know if you want to comment on that.

No, I would echo your response on the balance sheet. Not only was Q1 a challenge, but all of 2024 was really a challenge from a same-store performance perspective as well as all of the growth that we did in '23 and '24 has somewhat been delayed in terms of them being able to achieve what their potential is.

So the maturation and improvement of overall conditions will generate additional cash from operations. It will help give us that capacity to continue to grow as well as the continued success of Project 360 and the additional incremental cash flows that we expect to come from that.

Okay. That's helpful. And then maybe turning back to the same-store sales number and the conditions that you're seeing in the marketplace. Again, appreciating it's early days, we've heard kind of mixed ideas in the industry about some sort of recovery. What -- I guess the question is, what is it that's starting to give you some confidence that the number is changing? And maybe this goes -- I think Steve asked the question maybe a different way.

But is there anything that you're seeing in terms of demand? Is it inventory building or WIP building? What's kind of pointing to your thoughts that not only you're seeing kind of -- in your words, I think it was a moderate increase in same-store, but that, that could be sustainable?

Yes. I mean, well, look, we've pointed to -- for over a year now, we've pointed to some very specific things that were happening in the macro backdrop that have had negative impacts on the business. One had been the used car pricing, which has a knock-on effect to total loss rates. As used car prices go down, total loss rates have a tendency to come up. As used car prices go up, total loss rates have a tendency to go down.

So in the quarter or in the month or in the quarter, we saw used car prices up 2.8%. That's actually -- that's a bit of a, call it, an inflection point for used car pricing. And you would expect as tariffs start to more negatively impact used or new car pricing, you'd expect that to kind of continue to move up. So I think that's one piece of it.

The other piece is, as we sat here a year ago, auto insurance premium inflation was sitting at 18.6%. As we sit here today, it's sitting at 5%. In many carriers, there's been some recent research done around carriers that are actually putting premium decreases into the marketplace just because of the high levels of profitability and the high levels of -- or the low loss rates they're experiencing.

So I think that is also starting to ease its way into the macro backdrop. And people are getting -- we've said for a while that it takes time for the consumer base to work the to work these premium increases into their kind of daily budgeting. And as that happens and as we start to lap that year-over-year, people start to -- they better position themselves to spend money on repairs when needed.

So I do think that we're starting to see a little bit of the macro backdrop help us in terms of just the claims environment in general. So I think that is a piece of it. And we still have not -- as you look at the total cost of repair, we've still not seen that recover to the levels that it has been historically. And I think that is still -- that still remains, at least as it's reported by CCC, that still remains an opportunity for us to continue to experience more growth.

Okay. That's helpful. And if I can just squeeze a quick kind of modeling one in. I know I've been asked the question a couple of times. Is there any way you could put some numbers around your expectation on that same-store number, at least at this point in terms of like kind of a numeric range as opposed to just modest?

I'll let Jeff answer that.

Well, I think we wanted to signal certainly that it's -- that what we've seen thus far in the quarter is not -- it's no longer negative. It's moved to any other direction. But I think the way to think about it is that as the sort of headwinds that we faced coming into this negative backdrop was sort of gradual, so will the other direction.

So I think maybe that's probably as much as I'm prepared to guide right now in terms of what that would mean. But I think if you look -- even if you look at some of our history in terms of how we've talked about our results to date and other reports over the years, you'll probably be able to get a good range of what modest means.

Your next question is from Mark Jordan from Goldman Sachs.

Can you talk a little bit about the new augmented go-to-market strategy and maybe how site selection now might differ from your prior approach? And then this might have any change to your outlook for either unit economics or prospective returns for start-ups?

Yes. So we've taken a market -- we've taken a bit of a market-based approach to our development. And what that entails is us looking at a lot of different factors in terms of where we want to put new units. And those factors are obviously modeled out, and it allows us to then see where do our insurance clients need, one, where do our insurance clients need new locations, what's the competitive density in the marketplace? What's the car park in the marketplace?

What are our relationships with the carrier makeup in that marketplace, amongst a bunch of other different factors, and that allows us to essentially put a dot on a map -- and that dot on the map is then filled with, first, we would go out to the marketplace. The fastest path to fill in that space is to go look for an existing repair facility that's in that marketplace and go buy that -- go acquire that location.

If that's not available, then we would move to the next step, which is to look for an existing building that's out there that we might be able to convert to a body shop. And then the third phase would be to put a greenfield location in that marketplace. It's just allowed us to get very specific about building out the density and filling in the white space in our markets to really build towards that 1 to 2 position in the marketplaces that we're in.

So it's a very -- we leverage CBSAs, which is kind of broader than the market, but there's -- I think there's 311 CBSAs in the U.S. So we're looking at it in that type of a construct. And it's just allowed us to get very purposeful with our spend. And to your point, it hedges our ability to be successful in those locations. Has it sped up the ramp time of these locations, probably still too early to tell. We're in the very early innings of doing this. We started really meaningfully doing it at the beginning of the year. So -- but I would expect over time that we'll have a better answer to that question. Inherently, you would expect it to speed up those ramp times, but we have not experienced enough activity to be able to tell you.

Okay. Perfect. And then just one quick follow-up on that. I think last quarter, you had expected 8 start-ups for the second quarter, seeing only 4 in the quarter. But the outlook for the second half at 16 start-ups hasn't changed. So is that -- were 4 locations now being pushed into early '26? Or are these out of the pipeline?

Yes. No, there's nothing out of the pipeline. I mean it's -- I think we're -- we continue to build -- we continue to leverage the methodology I just said to build out the greenfield strategy. We've got plenty of other opportunities identified. From time to time, things will shift from one quarter to the next. But as we get to a place where the process is more mature, and you're starting to see that as we get into Q3, 4 and 1 and 2, we'll get to a place where the predictability of that 8% to 10% is far more predictable.

Your next question is from Sabahat Khan from RBC.

A bunch of the other questions sort of focused in on sort of the industry drivers around the inflection in positive same-store sales. So I was hoping to get a bit of an understanding of the industry overall trends are still sort of down year-over-year on repairable claims.

Just curious on the initiatives you're implementing to perhaps capture share above that industry level to drive this positive inflection. Just you detailed a lot of the cost savings stuff. But curious whether it's productivity or other top line initiatives that you're working on that are helping to maybe capture share, which is driving sort of this inflection here.

Yes. I think as we said in the prepared remarks, the largest reason for outperformance to the market is driven by our performance with our insurance company clients. This alignment of our field leadership with customers customer’s KPIs, I think, has really allowed us to put a very kind of focused initiative around just how do we improve based on where our -- outside of the 3 main areas, which we do very well in, how do we make sure that we're what we call majoring in the miners, making sure that we've got all the finer points that our insurance carrier clients are expecting us to deliver on.

And I think that has put us in a position where we've seen good improvements in the relationships that we have with our insurance clients, and that's obviously what's enabled us to continue to see more volume. Outside of that, to your point, the other piece of that is making sure that we have the capacity in the stores to take care of the volume that's coming in.

So we do remain focused on continuing to hire technicians, continuing to develop technicians through our technician development program as well as focusing on productivity of our existing workforce to make sure that we've got the capacity to take on the volume that's coming in.

Great. And then just, I guess, pretty volatile inflation type backdrop. Can you maybe just talk about discussions with insurance partners on how to maybe address that? I think, obviously, your parts cost is a bit of a pass-through. But just give us a perspective on how you're managing through this tariff and inflation environment and the discussions with your insurance partners.

Yes. Yes. Look, I mean, to date, we have not seen, and I think we said this in the prepared remarks as well, we have not seen significant impacts from tariffs. I don't know that -- I don't know that over time that won't change, but you would expect some sort of as the clarity around tariffs becomes more real, I think we may see some version of that starting to creep into the system.

But to date, we've not seen any meaningful tariff impact to the cost structure. And as I said earlier, I mean, what we're also not seeing is an average, could the average cost of repair move up in the same fashion it had historically. So I think insurance -- the conversations with carriers right now around tariffs are -- it will likely have some impact. I think still early days to be seen around how much impact it ultimately does have.

Your next question is from Derek Lessard from TD Cowen.

Most of my questions have been asked, but maybe I just want to hit on the M&A angle another time. Obviously, you've seen the acquisition opportunities pick up. So I just want to ask you guys what's changed in the market? Is it valuation? Is it tariffs? Is it just a tough environment for the smaller players?

Yes. I think what you said last is probably the most impactful. I mean the -- as we've said, we've said previously, some of the suppliers, some of our suppliers that supply the balance of the industry would indicate that midsized, some of these smaller MSOs and some of the single-shop operators are down double digits in many cases.

And I think they're looking at the sustainability of that against the backdrop of having to make investments to keep up with the changing car park, and it's created a bit of an inflection point for some of the MSO operators that are out there that puts them in the market to potentially be looking to sell.

I wouldn't say it's necessarily driven by their expectations on valuation. I would say that it's probably more driven by just their view of their relative position in the market going forward and the sustained kind of claim declines that we've seen for the last -- frankly, the last couple of years at this point that's got them just exploring opportunities on the outside.

Great color, Brian. And maybe just one last one for me. Just in terms of the OpEx and the impact from the investment in facility maintenance costs. Just wondering if, one, I guess you could, I guess, quantify the magnitude. And two, you did talk about pent-up demand for deferred work. So just wondering if you have any color there.

Yes. I won't comment on the exact dollar amount. I will say that there was -- as we were going through a period of softer demand, it is easier for us to get in shops and do some of that work. So there was some deferred work that's out there that we are starting that we're starting to work through.

So I don't think that that's all very manageable for us. So as we've got time to go in and do things, we'll go in and do things. If the demand environment picks up in a pace that keeps us from focusing there, then we'll focus our attention on getting cars through the shops.

Your next question is from Gary Ho from Desjardins Capital Markets.

Brian, I just want to go back to the discussion on insurance partners. Maybe of the top 4 large insurance clients that you have relationships with, have your business that you do with them changed over the last, let's call it, 24 months or so or relatively unchanged? I have seen kind of one of your peers doing more work with one particular insurance clients. Just wanted to kind of hear your thoughts.

Yes. I mean, unfortunately, we don't comment on the -- one, the makeup or two, the performance with individual insurance clients. I would say that our focus is broadly doing what's right for every one of our clients so that we can continue to deepen the relationships we have with everyone. as you probably -- as you're articulating, there are ones that are -- there are clients out there that are growing more rapidly in the marketplace, and there are ones that, that share is coming from. And obviously, our attentions are focused -- our attentions are focused all.

The reality is every store has a different insurance client makeup. And when you've got 1,000 stores, quite frankly, we need to be in a position where all of them, where our store associates know how to make sure that they're delivering on that individual insurance clients' expectations, and that is what we're really focused on right now.

Okay. Great. And then maybe just going back to that [indiscernible] shop MSO acquisition that you completed post quarter. I'm assuming you can't disclose the multiples that you paid, but any color on how kind of compared to the assured deal that you did a couple of years ago?

And what's the ROIC kind of expectations as well. So it sounds like you're doing -- you're seeing smaller MSOs pop up on the radar. Maybe comment on the dynamics? And are they more impacted than you guys? Or have kind of PEs been less active in the space more recently?

Yes. What I would -- and you're right, we won't comment on the multiple. But what I would more point to is what the market-based strategies, the market-based planning activity has allowed us to do is to take an acquisition like the 8-store deal that we've done and then build around it in a way that we blend the market to a return that's acceptable for us, right?

So it's -- we've talked about over a long stretch of time against our metric of ROIC that we expect that to be in the north of 20%. So what we're doing as we build out a marketplace is we're looking at the other densification opportunities that are out there and how do they then blend the average return on invested capital in a particular market up to the levels that we expect.

So it is -- I think that, again, the market-based strategies that we're deploying are allowing us to get very purposeful with our capital in any given market. This happens to be a market that prior to this acquisition and another 2-store acquisition that was done in the same market, we had 1 store in Virginia.

As we now continue to build that market out, you'll see us leveraging greenfields and single shop acquisitions to really tuck in and go after that second position in the marketplace, which will allow us in the long run to get the returns that we expect.

Okay. That makes sense. And then maybe just a quick one, Jeff, you mentioned the strategy change in terms of construction or how you guys fund the greenfield, brownfield build-out. Can you maybe elaborate on the financial and cash flow impact as we kind of model these numbers out?

Yes. I think you've seen an elevated really volatility to some degree in the acquisition and development line of the cash flow as we've been investing in facilities that have not yet been announced or opened. I think that was creating some noise in that line of the cash flow.

And then you would occasionally see us do a sale leaseback, which would show up on a separate line in the cash flow. And so you'd have to kind of take that into account, but the timing isn't consistent on a quarterly basis. So it was creating, I think, volatility.

So what's going to happen is that's going to take -- it's going to just basically take that volatility and noise out of the numbers. So going forward, once we get this plan fully rolled out, you're not going to see us doing as many sale leasebacks.

And also as a consequence, you're not going to see quite as high an acquisition development cash flow line item as well. So it should it should overall more mimic the way we describe the plan to grow through single-store acquisitions and brownfield greenfield development and just take that volatility out.

Your next question is from Daryl Young from Stifel.

Just wanted to keep talking about acquisition pipelines and I guess, specifically around synergies. So historically in pre-pandemic period, Boyd sort of deemphasized the potential synergies from MSO acquisitions just given they were already hooked up to DRPs and they were getting supplier discounts. But has that changed as you've scaled? Are there more synergies today than there might have been historically if you were to opportunistically acquire some larger MSOs?

I wouldn't say meaningfully. I think we still find even with the -- with MSOs of this size, we still have pockets of revenue synergy, right? I mean our biggest opportunity that we're bringing to these is typically results on commercial synergies much more so than cost synergies. As we've said in the investor presentation over a long stretch of time, we can take -- we can take a pretty much a single shop acquisition and add 470 basis points of improvement versus the first year of its performance.

For these, to your point, it's much more focused on how do we just drive the top line up in those locations, leverage the relationships that we have to add incremental clients to their makeup and really drive the growth of the business that way. So I would say it's still primarily focused on revenue versus cost when we do a deal like this.

And again, we don't have -- take what we just did in Virginia. We don't have -- we didn't have infrastructure in Virginia. We can obviously leverage a region Vice President and Division Vice President to be able to manage that, but we add a market manager that then is going to manage those locations.

So where we have -- that's where the density really matters. When we build out -- when we're building density in a marketplace, there tends to be a lot more synergies because we've got a lot more infrastructure. When we're entering a market like this, it tends to be a little bit less cost synergy and frankly, a lot more revenue synergy.

Got it. Okay. Helpful. And then one other. Just as we look at Q3, historically, it's been a seasonally weak quarter with vacations. When you look at your commentary on same-store sales, does that factor in sort of peak vacation period? Or is that not an issue just given we're coming off a lower activity level base?

Yes. I mean, interestingly, I think in the U.S. market, the vacation period probably tends to be more July, which as you -- as we said, we saw modest same-store sales growth in July. The other thing seasonally that happens in the third quarter for us is a little bit of falloff in the glass business. That type of falloff is still going to happen.

But I don't have a tremendous amount of concern that we're going to see something different with the vacation period, which, again, I think in the U.S., we've kind of lapped and in Canada, tends to be -- August tends to be a bigger month for vacations. But I don't have any concerns about that going forward.

Your next question is from Zachary Evershed from National Bank Financial.

Congrats on the quarter. Beyond Net Promoter Score cycle times and average cost, is there a distinct lack of overlap in the specific performance metrics between insurance partners?

There is -- there are different focal points for the individual carriers. So yes, I would say that those 3 are the common. But carriers are -- they're focused on different things. And again, our team needs to be able to understand what those things are, and they need to be able to understand how to influence them and ultimately how to deliver an exceptional experience.

So that is -- there is enough variation that it does put us in a position where we've got an education opportunity with the field or had an education opportunity with the field to make sure they understood what matters most beyond those 3 to the insurance clients.

Got you. And when the strategic plan was unveiled, you did make a point to say that it was not reliant on a rebound in claim volumes and didn't rely on MSO acquisitions. So now that we are seeing green shoots of positive same-store sales growth and your first MSO acquisition in a number of years, is it fair to say that potential upside to the plan does exist?

Yes. I mean what I would say is what we said on MSOs was large MSOs. I wouldn't necessarily classify an 8-store deal as a large MSO. We don't expect -- we would have expected certainly a rebound in the claims environment versus where it had been in the last couple of quarters.

We don't expect claims to go positive in order for us to deliver on the plan that we have. So look, I think there are some green shoots out there that do point to positive, whether or not declaring victory this early in the game is -- I think it's probably still too early for us to tell.

We've always put -- we put pluses on the end of our 5-year plan objectives for a reason, 1,400-plus, 14% plus, $5 billion plus. And so we do believe that there's opportunity to do better than that. Whether or not this is the time to declare victory or not, I would probably say not yet. Happy with the results we've got. But again, still early innings.

Understood. And then last one for me. Any thoughts on how an IPO of a large competitor giving them access to public equity markets might influence industry dynamics?

Yes. Look, I actually think we're generally optimistic about what the knock-on effect to our business associated with that will be. I think we stack up pretty well other than just pure size. We stack up pretty well against the one that obviously has filed to go public. So generally speaking, we would -- I would believe that could potentially be a positive for us.

And your next question is from Tristan Thomas-Martin from BMO Capital Markets.

How did your repair claims volumes compare to your average ticket in the quarter? And then how are you kind of thinking about that moving forward?

I won't double comment specifically on our -- because we don't comment specifically on our claims volume versus our average ticket growth. But I will tell you that in the industry, average ticket -- the cost -- the average ticket growth continues to be depressed versus where it has been.

As you know, the growth algorithm for our business has historically been a 2% decline in claims driven by the adoption of ADAS, partially offset by 1% increase in claims driven by the improvement in miles driven and the number of cars on the road and then all of that offset by a normal kind of 4% to 5% average growth in ticket, which leads the industry to a 3% to 4% growth.

We have not seen right now, we're seeing that what we would have expected to be 4% to 5% more looking like 1% to 2%. And that is -- that puts incremental pressure on the claims experience to actually grow. So I'll let you do the -- if we're experiencing modest growth in the early days of the quarter, you can probably do a little bit of math around what that might mean between claims and average cost of repair.

Got it. And then just kind of anecdotally, I think you kind of talked on deferred repairs a little bit, but are you seeing any consumers maybe finally come back to maybe get a repair that they've put off actually repaired?

Yes. I don't know that I would say that there's this notion of deferred repairs, I think when people make the decision that they're either going to file a claim and not do the repair, which is a cash out, I don't think that they make the determination later on that they're going to come back and do it. So I don't know that I see that there's this pent-up demand so much as what demand will do over time is hopefully return to just more normalized levels.

So I don't know that I would say that what we're experiencing right now has anything to do with deferred repairs as much as it does people that are now getting into accidents are more likely to actually file a claim just based on their -- the consumer sentiment that's out there and then some of the other factors that we talked about earlier.

And your next question is from Razi Hasan from Paradigm Capital.

Just quickly on internalizing the scanning and calibration offering and how difficult it is to implement. Do you still think it takes you 2 to 3 years to get to that 80% target that you guys mentioned earlier? Or does that maybe come sooner?

Yes. I mean we're going to stick with the commitment that we made. I mean, obviously, we're -- we reported that we're at just south of 70% as we sit here today. So there's still a little bit of room to grow. The other factor that plays into there is then keeping up with the growth in ADAS adoption that we're seeing coming through the stores. So it's not just both the numerator and the denominator are moving.

So we have to keep up with, one, the changing car park; and then two, get ourselves to a position where we've got coverage in all of our markets. So we'll stick with the time frame that we've outlined thus far.

But obviously, we're extremely pleased with the progress that we've made on our scanning and calibration business. The leader that runs that business for us and the team has done a phenomenal job, and we're very pleased with where we're at.

And maybe just lastly, just on gross margin, the 46.8%. How sustainable is that? And in terms of our modeling, is that a run rate? Any thoughts there?

I'll let Jeff comment on that.

Yes. I think over the last little while, especially with the slowdown in volumes, we've been able to certainly focus much more on margin enhancement opportunities, trying to have more repair versus replace, focusing on client metrics to reduce performance credits. There's a lot of things that I would say are currently, I would depict as favorable.

And I would say, generally, we would see offsets that happen. And so I think that everything that's going on is more or less sustainable, but it would be probably too optimistic to suggest that we won't face any headwinds if any of the drivers related to gross margin going forward. So I would suggest looking back kind of at our historical band to understand how can it sort of fluctuate depending on the time of the year and some of the other factors to come up with a model estimate.

Your next question is from Bret Jordan from Jefferies.

Just a follow-up on the recent trend of improvement. Is it, in your opinion, more tied to your insurance partners and their relative success in the market? Or are you seeing the recent trend across the entire collision ecosystem improving?

I wouldn't necessarily say it's trends based on the performance of our clients themselves. I mean, meaning that they're experiencing growth in their policies in force. So I don't know that it's necessarily tied to that. I think our performance with them is putting us in a position where we're shining a more positive light on our business. And then, again, a little bit of macro backdrop assistance is probably helping as well.

And your next question is from Steve Hansen from Raymond James.

Just a quick follow-up. I just wanted to ask about the cadence of the progress on the staffing model progress. Is there a way to think about how much of that was done intra-quarter by the end of quarter? How much needs to still be done through the back half of this year? Just trying to understand how much ultimately was realized in savings in Q2 specifically and how much more to expect?

Yes. I would tell you, I mean, we implemented that staffing model, and I'll remember the date because it's -- these are tough things to do and they negatively affect people's lives. So we take these things very seriously. April 4 was the date that we implemented that plan.

So I can tell you that you saw a good chunk of the savings associated with that in the quarter. That's consider that one to be other than the maintenance of making sure that we stay within the bands at this point, the big activity associated with that, the $30 million that we articulated was implemented all at once.

That's great. And just a follow-up on to that. As you move into this Phase 2 and sort of the indirect model and procurement savings, I know you said a ratable move through the tail end of '26 to get to the target on the $40 million. But is there -- how much visibility do you have on that? Like is it pretty -- is it fairly visible at this point as you enter in some of the discussions on procurement? Or are you -- how confident are you in getting there?

Yes. I mean I appreciate that there's just a lot of activity around it. So we've got really good visibility into the activity around it. The timing is what becomes a little bit more elusive. So the RDO process, the results delivery office that we are operating to deliver on a lot of these initiatives. It's led by Kim Morin, who's our actual -- who's actually our CHRO, but is doing a phenomenal job with that activity.

She's put us in a really good position to be able to continue to have good visibility to where those savings are coming from and then all of the different work streams to deliver it. So we've got great visibility. And as we continue to manifest the savings coming out of that, I think we'll get -- we will continue to refine the way we describe it, just easier for now as we're in the early days to make sure that you guys can model it in a more ratable way.

There are no further questions at this time. I will now hand the call back over to Mr. Brian Kaner for the closing remarks.

All right. Thank you, operator, and thank you all once again for joining us for today's call. We look forward to reporting our third quarter results in November. Thanks again, and have a very wonderful day. Thank you.

Thank you, ladies and gentlemen. The conference has now ended. Thank you all for joining. You may all disconnect your lines.