Mixed results vs. consensus estimates; Q2 SSS trending similar to Q1, but margins to improve
TSX: BYD | CAD 207.54 | Outperform | Price Target CAD 277.00
Sentiment: Neutral
Initial take – Neutral to modestly negative. Q1 results were mixed vs. consensus estimates (revenue modestly below, Adjusted EBITDA modestly ahead, Adjusted EPS below), with SSS growth in the quarter coming in at -2.8% (vs. RBCe of -2.0% YoY). Q1/25 results were impacted by one less selling and production day vs. Q1/24. The modestly negative bias on results reflects outlook commentary that points to SSS trends from Q1 continuing in Q2 thus far, which we expect to be a key focus area on the conference call. The slight offset is the commentary on Adjusted EBITDA margin, where Project360 cost saving initiatives are expected to result in QoQ improvement. Location additions in the quarter were also soft relative to historical levels (though on pace with 2024), but Boyd continues to have an active pipeline for the remainder of 2025.
Results recap – Q1 revenue was $778.3MM (-1.0% YoY; -2.8% SSS growth, noting Q1/25 had 1 fewer selling and production day) vs. RBC/consensus of $802.1MM/$795.7MM. Gross Profit was $359.3MM (46.2% margin) vs. RBC forecast of $359.5MM (44.8% margin), with the margin +134bps YoY and +32bps sequentially (supported by the internalization of scanning/calibration services and improvements in performance-based pricing). Adjusted EBITDA of $80.5MM (10.3% margin; -5bps YoY, -74bps QoQ) was modestly ahead of RBC forecast of $76.1MM (9.5% margin) and consensus of $79.4MM (10.0% margin).
Boyd noted that repairable claims were down in the range of 9-10% YoY across the industry in Q1 (in line with what we have heard from LKQ at Q1 reporting), against which Boyd's SSS growth of -2.8% implies that the company has continued to gain share amidst the current operating backdrop.
Outlook commentary points to SSS trends continuing in Q2, but margins likely to improve – While Boyd noted that there have been early signs of insurance premium inflation moderating and used car prices increasing (two directional positives for collision repair volumes), SSS in Q2 has been relatively consistent with Q1 thus far. On margins, Boyd implemented a new indirect staffing model post-Q1 (i.e., introduces a playbook for adding non-production staff and adding controls to ensure execution/adherence), which is expected to result in annualized run-rate savings of ~$30MM (recall that Boyd outlined a plan to meaningfully improve profitability with the recent release of its 5-year targets, where a further $40MM of run-rate savings are expected to be rolled out by the end of 2026; see here for more). Thus far in Q2, this cost saving initiative has resulted in an improvement in Adjusted EBITDA dollars/margin QoQ. We also note that the payroll benefits that impacted Q1 results reset and are not expected to have the same impact on Q2 results.
9 collision repair locations added in the quarter – Boyd added 9 collision repair locations in Q1 (3 acquisitions + 6 start-ups, while 2 glass businesses were also acquired; an additional 3 collision repair locations were added subsequent to quarter-end), compared to 13 location additions in Q1/24 and 13 in Q4/24. Looking ahead, Boyd has 8 start-up sites scheduled to be open for Q2 and 16 for the balance of the year, bringing the total to 30 start-up site openings for 2025 (vs. 28 previously).