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- Strong and growing demand with
results constrained by staffing shortages, wage pressure and supply
disruptions -
WINNIPEG, MB, Nov. 10, 2021 /CNW/ - Boyd Group Services Inc.
(TSX: BYD) ("the Boyd Group", "Boyd" or "the Company") today
announced the results for the three and nine month periods ended
September 30, 2021. The Boyd Group's third quarter 2021
financial statements and MD&A have been filed on SEDAR
(www.sedar.com). This news release is not in any way a substitute
for reading Boyd's financial statements, including notes to the
financial statements, and Boyd's Management's Discussion &
Analysis.
Results and Highlights for the Third Quarter Ended
September 30, 2021:
- Sales increased by 28.4% to $490.2
million from $381.7 million in
the same period of 2020, including same-store sales increases of
10.7%, recognizing the same number of selling and production days
in the U.S. and Canada in the
third quarter of 2021 when compared to the same period of 2020.
Same-store sales increases in Canada were much lower than same-store sales
increases in the U.S.
- Gross Profit increased by 19.6% to $215.7 million or 44.0% of sales from
$180.3 million or 47.2% of sales in
the same period in 2020, including the recognition of the
Canada Emergency Wage Subsidy
("CEWS") of approximately $0.2
million, as compared to $2.9
million in the same period of the prior year
- Adjusted EBITDA1 decreased 18.9% to $51.5 million, or 10.5% of sales, including,
$0.5 million of CEWS, compared with
Adjusted EBITDA of $63.5 million, or
16.6% of sales in the same period of 2020, which included
$7.5 million of CEWS
- Adjusted net earnings1 decreased to $2.4 million, compared with $16.4 million in the same period of 2020 and
adjusted net earnings per share1 decreased to
$0.11, compared with $0.76 in the same period of 2020
- Net earnings decreased to $0.4
million, compared with $15.9
million in the same period of 2020 and net earnings per
share decreased to $0.02, compared
with $0.74 in the same period of
2020
- Net debt of $896.9 million, with
no significant maturities until March
2025
- Declared third quarter dividend in the amount of C$0.141 per share
- Added 52 locations, including 48 through acquisition, two
intake centers and two start-up locations. Included in the
locations added is the acquisition of 35 locations previously
operating as Collision Works in Oklahoma, Kansas and Missouri.
Subsequent to Quarter End
- Added seven locations
- Announced a dividend increase of 2.1% to $0.576 per share annualized from $0.564 per share annualized
"Throughout the third quarter, demand for services exceeded our
capacity in all U.S. markets, which resulted in high levels of
work-in-process. Adding and retaining location level administrative
staff and technician capacity to address this constraint has been
challenging in an extraordinarily tight labor market, exacerbated
by COVID related absenteeism. This has resulted in increased
wage costs to both retain and recruit, resulting in near-term
pressure on labor margins and operating expenses. Demand in
Canada increased slowly and
gradually during the third quarter of 2021 as restrictions were
eased and removed, but remained well below pre-pandemic levels"
added Mr. O'Day. "In addition to a tight labor market and the slow
recovery of demand in Canada,
during the third quarter, we faced rapidly increasing supply chain
disruptions for original equipment and aftermarket parts in both
the Canadian and U.S. markets, which quickly resulted in a negative
impact on margins as a higher percentage of parts had to be sourced
from non-primary suppliers in order to complete repairs."
Results of
Operations
|
For the three
months ended,
September 30,
|
For the nine
months ended,
September 30,
|
(thousands of U.S.
dollars, except per share amounts)
|
2021
|
% change
|
2020
|
2021
|
% change
|
2020
|
|
|
|
|
|
|
|
Sales –
Total
|
490,178
|
28.4
|
|
381,689
|
1,356,464
|
17.2
|
|
1,157,477
|
Same-store sales –
Total
(excluding foreign
exchange)
|
419,979
|
10.7
|
|
379,271
|
1,215,545
|
6.7
|
|
1,139,416
|
|
|
|
|
|
|
|
Gross margin
%
|
44.0
|
%
|
(6.8)
|
|
47.2
|
%
|
45.3
|
%
|
(1.7)
|
|
46.1
|
%
|
Operating expense
%
|
33.5
|
%
|
9.5
|
|
30.6
|
%
|
33.4
|
%
|
3.4
|
|
32.3
|
%
|
|
|
|
|
|
|
|
Adjusted EBITDA
1
|
51,500
|
(18.9)
|
|
63,514
|
162,244
|
1.6
|
|
159,640
|
Acquisition and
transaction costs
|
2,574
|
878.7
|
|
263
|
4,444
|
295.4
|
|
1,124
|
Depreciation and
amortization
|
41,038
|
23.0
|
|
33,367
|
112,169
|
14.9
|
|
97,588
|
Fair value
adjustments
|
50
|
(85.8)
|
|
353
|
148
|
N/A
|
(1,910)
|
Finance
costs
|
7,198
|
(5.3)
|
|
7,598
|
19,980
|
(21.0)
|
|
25,294
|
Income tax
expense
|
206
|
(96.6)
|
|
6,078
|
6,864
|
(29.1)
|
|
9,683
|
|
|
|
|
|
|
|
Adjusted net earnings
1
|
2,389
|
(85.4)
|
|
16,403
|
22,076
|
(17.6)
|
|
26,783
|
Adjusted net earnings
per share 1
|
0.11
|
(85.5)
|
|
0.76
|
1.03
|
(19.5)
|
|
1.28
|
|
|
|
|
|
|
|
Net
earnings
|
434
|
(97.3)
|
|
15,855
|
18,639
|
(33.1)
|
|
27,861
|
Basic earnings per
share
|
0.02
|
(97.3)
|
|
0.74
|
0.87
|
(35.1)
|
|
1.34
|
Diluted earnings per
share
|
0.02
|
(97.3)
|
|
0.74
|
0.87
|
(29.3)
|
|
1.23
|
1. Standardized
EBITDA, Adjusted EBITDA (earnings before interest, income taxes,
depreciation and amortization, adjusted for the non-controlling
interest call liability and contingent consideration, as well as
acquisition and transaction costs), adjusted net earnings and
adjusted net earnings per share are not recognized measures
under International Financial Reporting Standards ("IFRS").
Management believes that in addition to revenue, net earnings and
cash flows, the supplemental measures of adjusted net earnings,
Standardized EBITDA and Adjusted EBITDA are useful as they provide
investors with an indication of earnings from operations and cash
available for distribution, both before and after debt management,
productive capacity maintenance and non-recurring and other
adjustments. Investors should be cautioned, however, that
Standardized EBITDA, Adjusted EBITDA, adjusted net earnings and
adjusted net earnings per share should not be construed as an
alternative to net earnings determined in accordance with IFRS as
an indicator of Boyd's performance. Boyd's method of calculating
these measures may differ from other public issuers and,
accordingly, may not be comparable to similar measures used by
other issuers. For a detailed explanation of how Boyd's non-GAAP
measures are calculated, please refer to Boyd's MD&A filing for
the period ended September 30, 2021, which can be accessed via
the SEDAR Web site (www.sedar.com).
|
Outlook
"While the COVID-19 pandemic significantly
impacted Boyd's business over the past year, demand for services is
exceeding capacity in all U.S. markets and demand in Canada is increasing slowly and gradually,
although remaining well below pre-pandemic levels. The
ability to service this demand has been constrained by labor
availability and parts supply chain issues. These transitory
market conditions caused a rapid reduction to the margins we were
able to deliver in the third quarter and is continuing to cause
margin pressure into the fourth quarter thus far" added Mr. O'Day.
"Thus far, in the fourth quarter of 2021, we have continued to
experience a tight labor market and resulting wage pressure as well
as supply chain disruption. We are committed to aggressively
addressing these challenges. Historically, Boyd and the
industry generally, have recovered labor cost increases through
selling rate increases from clients. However, to retain and recruit
talent in the current labor environment it has been necessary to
rapidly adjust wages at levels not previously experienced.
Management is committed to aggressively addressing this challenge
and is having constructive discussions with large key clients about
the urgent need for price increases to reflect the current
environment. However, given how significantly and rapidly wage
costs have increased and the key business relationships these
clients represent, it may take some time to achieve all of the
needed price adjustments and margins may therefore continue to be
impacted in the near-term, however we are moving with a great sense
of urgency on this matter. In the meantime, we are not relying
solely on these key client price increases. Given our excessive
levels of work, we are endeavoring to prioritize our production
towards higher margin business, as well as raising prices where
possible and suspending business relationships with a few lower
margin clients that are not willing to increase pricing, in order
to better serve our core clients and accelerate our margin recovery
efforts. We believe that these actions will result in our labor
margins returning to historical levels, however this may take
several quarters."
"The long-term solution to the staffing shortage is through
internal training and development programs" continued Mr. O'Day.
"We have strengthened our people development processes with a
number of formal training programs, including our Technician
Development Program. While we suspended this program during the
pandemic, we have been successful at growing this program during
the past nine months and have recently committed to growing it
further by doubling the number of trainees in the program to help
meet our future needs. We believe that the part availability
and related margin challenges related to the supply chain
disruption is transitory and will normalize as the underlying
manufacturing and distribution issues are resolved. In the
meantime, we are working with key suppliers to source parts at
normal margins, but will continue to use non-primary suppliers when
necessary to complete repairs for our clients."
"Through these actions outlined and along with the normalization
of the supply chain issues, we expect our revenue throughput as
well as gross margins and Adjusted EBITDA margins to recover in the
coming quarters; however, the actions noted are unlikely to have a
material impact on the fourth quarter. We are committed to driving
the needed change aggressively. Despite these near-term market
challenges, our leadership position and strong balance sheet
position us well to successfully execute on our plan to double the
size of our business by 2025 and deliver attractive returns to our
shareholders."
2021 Third Quarter Conference Call & Webcast
As
previously announced, management will hold a conference call on
Wednesday, November 10, 2021, at
10:00 a.m. (ET) to review the
Company's 2021 third quarter results. You can join the call by
dialing 1-866-269-4261 or 647-792-1241. A live audio webcast
of the conference call will be available through
www.boydgroup.com. An archived replay of the webcast will be
available for 90 days. A taped replay of the conference call
will also be available until Wednesday,
November 17, 2021, at midnight by calling 1-888-203-1112 or
647-436-0148, reference number 6283101#.
About Boyd Group Services Inc.
Boyd Group Services
Inc. is a Canadian corporation and controls The Boyd Group Inc. and
its subsidiaries. Boyd Group Services Inc. shares trade on the
Toronto Stock Exchange (TSX) under the symbol BYD.TO. For more
information on The Boyd Group Inc. or Boyd Group Services Inc.,
please visit our website at https://www.boydgroup.com.
To view Boyd Group Services Inc. Q3 2021 financial statements
and notes, please click here.
About The Boyd Group Inc.
The Boyd Group Inc. (the
"Company") is one of the largest operators of non-franchised
collision repair centres in North
America in terms of number of locations and sales. The
Company operates locations in Canada under the trade names Boyd Autobody
& Glass (https://www.boydautobody.com) and Assured Automotive
(https://www.assuredauto.ca) as well as in the U.S. under the trade
name Gerber Collision & Glass
(https://www.gerbercollision.com). In addition, the Company is a
major retail auto glass operator in the U.S. with operations under
the trade names Gerber Collision & Glass, Glass America, Auto
Glass Service, Auto Glass Authority and Autoglassonly.com. The
Company also operates a third party administrator, Gerber National
Claims Services ("GNCS"), that offers glass, emergency roadside and
first notice of loss services. For more information on The Boyd
Group Inc. or Boyd Group Services Inc., please visit our website at
(https://www.boydgroup.com).
Caution concerning forward-looking
statements
Statements made in this press release,
other than those concerning historical financial information, may
be forward-looking and therefore subject to various risks and
uncertainties. Some forward-looking statements may be identified by
words like "may", "will", "anticipate", "estimate", "expect",
"intend", or "continue" or the negative thereof or similar
variations. Readers are cautioned not to place undue reliance on
such statements, as actual results may differ materially from those
expressed or implied in such statements. Factors that could cause
results to vary include, but are not limited to: pandemic risk
& economic downturn; operational performance; acquisition risk;
employee relations and staffing; brand management and reputation;
market environment change; reliance on technology; changes in
client relationships; decline in number of insurance claims; margin
pressure and sales mix changes; environmental, health and safety
risk; climate change and weather conditions; competition; access to
capital; foreign currency risk; dependence on key personnel; tax
position risk; corporate governance; increased government
regulation and tax risk; fluctuations in operating results and
seasonality; risk of litigation; execution on new strategies;
insurance risk; interest rates; U.S. health care costs and workers
compensation claims; low capture rates; supply chain risk; capital
expenditures; and energy costs and the BGSI's success in
anticipating and managing the foregoing risks.
We caution that the foregoing list of factors is not
exhaustive and that when reviewing our forward-looking statements,
investors and others should refer to the "Risk Factors" section of
BGSI's Annual Information Form, the "Risks and Uncertainties" and
other sections of our Management's Discussion and Analysis of
Operating Results and Financial Position and our other periodic
filings with Canadian securities regulatory authorities. All
forward-looking statements presented herein should be considered in
conjunction with such filings.
SOURCE Boyd Group Services Inc.