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Q1/25 FIRST LOOK: MARGIN OUTPERFORMANCE SHOULD OUTWEIGH INDUSTRY SOFTNESS
THE TD COWEN INSIGHT
There is no doubt that the collision industry recovery is taking longer than investors (and management) would like. However, we believe that investors, as they wait for industry conditions to improve, will appreciate the margin recovery driven by internal initiatives and share gains as Boyd begins to flex its scale and build out its one-stop hub network.
Impact: SLIGHTLY POSITIVE Boyd reported Q1/25 adj. EBITDA of $80.5mm (IFRS 16), a ~2% beat to consensus estimates of $79.3mm. Revenue was 2% below consensus. The key initial takeaways, in our view, are:
SSSG of -2.8% came in below TD Cowen/cons estimates of -1.5%/-1.9%, including the impact of one less production day. Demand continued to decline (North American repairable claims down 9-10%) as consumers chose to delay or not file for claims given the substantial cumulative insurance premium inflation and economic uncertainty. Still, BYD outperformed the industry and gained share.
Near-term outlook remains soft, but there are early signs of industry improvement. Thus far in Q2 (April), BYD sees SSSG trending consistent with Q1. However, management noted positive developments in the industry including moderating insurance premium inflation and rising used car pricing (see our recent note here). Also, despite ongoing topline pressures, BYD's QTD EBITDA dollar/% has improved from Q1 thanks to cost savings (details below).
Adj. EBITDA margin of 10.3%, flat y/y (~30bps > cons). Despite topline pressures, BYD is executing well to control the controllables. Gross margin +140bps y/y as the internalization of high-margin scanning/calibration services continues to yield benefits. Opex, while elevated as expected due to sales deleveraging and the ramp-up of new locations, benefited from the recently commenced Project 360. Specifically, the indirect staffing model is yielding initial benefits and, once fully rolled out, would achieve $30mm out of the $70mm annual run-rate savings targeted by YE2026.
Balanced network expansion organically and through M&A. BYD added 9 locations (3 acquisitions and 6 start-ups, <10 TD Cowen est) during Q1 and 3 thus far in Q2. The start-up pipeline is healthy, with an additional 18 openings scheduled in the rest of 2025 (including 8 in Q2, 2 of which are completed).
FCF (after rent, pre w/c): $19.1mm ($16.3mm after w/c), below TD Cowen's $23.4mm from lower-than-expected revenue and EBITDA.
Strong balance sheet: Net Debt (ex-leases) of $510.4mm. Leverage of ~2.3x (historical target 2.0-2.5x).
Conference call at 10 am ET (1-888-699-1199).
