Boyd Group Services Inc. Reports Third Quarter 2021 Results

Canada NewsWire

WINNIPEG, MB, Nov. 10, 2021

/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

- 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        For the three months ended,     For the nine months ended, 
Operations         September 30,                   September 30, 
(thousands of     2021       % change  2020       2021         % change  2020 
U.S. dollars, 
except per share 
amounts) 
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."