LPP SA

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Good morning, everyone, and welcome to the Boyd Group Services, Inc. Fourth Quarter and Year-end 2024 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'd like to remind everyone that this conference call is being recorded today, Wednesday, March 19, 2024.

I would now like to introduce Mr. Tim O'Day, Chief Executive Officer of Boyd Services, Inc. Please go ahead, Mr. O'Day.

Thank you, operator. Good morning, everyone, and thank you for joining us on today's call. On the call with me today is Brian Kaner, our President and Chief Operating Officer; and Jeff Murray, our Executive Vice President and Chief Financial Officer.

We released our 2024 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 this morning. On today's call, we'll discuss the financial results for the 3-month period ended December 31, 2024, provide a general business update and discuss our long-term growth strategy. We will then open the call for questions.

Throughout 2024, Boyd consistently posted market share gains in a challenging environment characterized by low claims volumes driven by significant insurance premium inflation and overall economic uncertainty as well as a mild winter weather in 2024 with it being the warmest winter in over 129 years. In spite of these factors in which industry sources reported a year-over-year decrease in repairable claims of 9% for all losses and 7.9% excluding comprehensive claims, Boyd posted year-over-year same-store sales declines of only 1.8%, demonstrating Boyd's ability to gain market share in this very challenging environment.

I would now like to turn the call over to Jeff Murray to discuss our 2024 year-end and fourth quarter financial results. Jeff?

Thanks, Tim. For the year ended December 31, 2024, we reported sales of $3.1 billion, an increase of 4.2% over the prior year, driven by contributions from 155 new locations that had not been in operation for the full comparative period, partially offset by same-store sales declines of 1.8%.

Gross margin stayed consistent at 45.5% of sales compared to the prior period. The internalization of scanning and calibration contributed to an increase in gross margin percentage as did improved performance-based pricing. However, these gains were offset by labor rate margins, which remain below historical levels.

Operating expenses increased $89.9 million when compared to the same period of the prior year, primarily as a result of growth and inflationary increases. Operating expenses as a percentage of sales were 34.6% for the year ended December 31, 2024, compared to 33% for the same period in 2023. Operating expenses as a percentage of sales was negatively impacted by the decline in same-store sales and new locations, which contributed sales but with a higher operating expense ratio of 36.9%. Although operating expenses as a percentage of sales was positively impacted by reductions in staffing made to better align with current levels of demand as well as reduced incentive compensation and recruiting costs, these impacts were more than offset by fixed costs on existing and new locations.

Adjusted EBITDA for the year ended December 31, 2024, was $334.8 million compared to $368.2 million in the same period of the prior year. The $33.4 million decrease was the result of declines in repairable claims volumes for services, which resulted in same-store sales declines and a higher ratio of operating expenses as a percentage of sales.

As we noted as part of our growth call announcement on February 26, in partnership with a leading global consulting firm, Boyd has launched Project 360, a company-wide transformation cost initiative. Project 360 is expected to result in $100 million in annual recurring cost savings over the coming years with upfront investment and transition costs incurred to achieve these benefits estimated to be in the $20 million to $23 million range over the coming quarters.

During the fourth quarter, expenses related to the transformational cost initiative of $4.4 million were incurred, which have been added back in arriving at adjusted EBITDA. No similar transformation costs were incurred in 2023. While Project 360 was launched during the fourth quarter of 2024, reduced operating expenses and improved operating expense leverage are expected to be realized gradually beginning in the second quarter of 2025. We reported net earnings of $24.5 million compared to $86.7 million in the prior year.

Adjusted net earnings per share decreased from $4.18 to $1.44. Net earnings and adjusted net earnings for the period were negatively impacted by the decrease in adjusted EBITDA as well as increased depreciation expense and increased finance costs. Depreciation and finance costs increased primarily due to investments in growth and the investment in network technology upgrades.

Now moving on to our Q4 results. During the fourth quarter, we recorded sales of $752.3 million, a 1.7% increase when compared to the same period of 2023. Sales growth of $33.3 million was attributable to incremental sales generated from 86 new locations. However, this increase was more than offset by a same-store sales decline of 2.6%. Industry sources have reported a fourth quarter year-over-year decrease in repairable claims of 6% for all losses and 7.9%, excluding comprehensive claims.

Gross margin was 45.8% in the fourth quarter of 2024 compared to 45.5% achieved in the same period of 2023. The gross margin percentage benefited from internalization of scanning and calibration and improved performance-based pricing, partially offset by lower margins.

Adjusted EBITDA was $83.4 million, a decrease of 11.5% over the same period of 2023. The decrease was primarily the result of lower same-store sales at a higher ratio of operating expenses as a percentage of sales for both existing and new stores.

Net earnings for the fourth quarter of 2024 was $2.4 million compared to $19.1 million in the same period of 2023. Excluding fair value adjustments and acquisition and transformational cost initiatives, adjusted net earnings for the fourth quarter of 2024 was $6.3 million or $0.29 per share compared to adjusted net earnings of $20 million or $0.93 per share in the same period of the prior year. Net earnings and adjusted net earnings for the period was negatively impacted by the decrease in adjusted EBITDA as well as increased depreciation expense and increased finance costs. Depreciation and finance costs experienced increases primarily driven by investments in growth and the investment in network technology upgrades during a period of lower sales and adjusted EBITDA.

At the end of the year, we had total debt net of cash of $1.2 billion compared to $1.2 billion at September 30, 2024, and $1.1 billion at the end of 2023. Debt net of cash increased when compared to December 31, 2023, primarily as a result of location growth.

Based on the confidence we have in our business, we announced an increase to our dividend of 2% to $0.612 per share on an annualized basis in Canadian dollars beginning in the fourth quarter of 2024. During 2025, the company plans to make capital expenditures, excluding those related to 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. During 2024, the company spent approximately $18.1 million on network technology upgrades. The investment expected in 2025 is in the range of $10 million to $12 million, with an investment in 2026 in the range of $2 million to $4 million. These investments align with Boyd's sustainability road map to responsibly address data privacy and cybersecurity.

I would now like to turn the call over to Brian Tanner to provide a general business update and discuss our long-term growth strategy.

Thanks, Jeff. Boyd is pleased to have announced a new 5-year goal, which includes growing revenue to $5 billion in 2029, doubling adjusted EBITDA dollars from '24 to '29, returning to an adjusted EBITDA margin of 14%, expanding market share and retaining a leadership position in all markets served and achieving top-tier profitability in the North American collision industry.

In the near term, the market dynamics that impacted results throughout 2024, including a decline in claims volumes due to insurance premium inflation and overall economic uncertainty with repairable claims experiencing a greater year-over-year decline during the first 2 months of 2025 than was experienced in the fourth quarter. Despite this fact, thus far in the first quarter of 2025, same-store sales have improved compared to the fourth quarter, but are not yet positive, continuing to demonstrate market share gains.

As in prior years, -- the first quarter is burdened by higher payroll taxes that occur early in the year, while the fourth quarter of 2024 benefited from expense accrual reductions as certain expense estimates were firmed up at the amounts that were previously or lower than previously estimated and accrued. These factors, along with the challenging claims environment are resulting in an adjusted EBITDA dollars thus far in the quarter trending slightly below levels achieved in the first quarter of last year.

While it's still too early to tell if claims volumes have bottomed out, Boyd remains confident in the industry's long-term outlook and believes the transformational cost savings initiatives will drive improved margins in the coming quarters. We remain committed to improving gross margins through initiatives such as internalization of scanning and calibration. The need for scanning and calibration services continues to grow and Boyd's ability to internalize these services continues to scale.

Growth through acquisition as well as through start-up sites continues. Although start-up sites have a longer development cycle and ramp period, these locations offer a number of advantage and as a result, the company plans to continue increasing the proportion of growth using this approach. Over the long term, the proportion of acquisition to start-up sites is expected to be approximately even.

The pipeline for start-up sites currently includes scheduled openings of 7 locations in Q1 of 2025 and an additional 21 locations throughout the balance of the year. While the company has been successful in executing on Boyd's long-term growth goal of doubling the size of the business on a constant currency basis from '21 to '25 against 2019 sales, over the past year and into '25, the market has experienced challenging economic and industry conditions. The company -- the company is focused on increasing value to our customers and shareholders and has consistently performed above industry with a focus on emerging from these conditions in a strong position.

In spite of the initiatives in place, current market conditions may cause a slight delay in Boyd achieving its long-term growth goal of doubling the size of the business on a constant currency basis from '21 to 2025 against 2019 sales.

In summary and in closing, we continue to be incredibly proud of our team who are working hard to position us well for the future.

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

[Operator Instructions] First, we will hear from Chris Murray at ATB Capital.

Thanks for the color on Q1. But as we sort of think about 2025 and maybe what you're seeing in the environment, I think even if you look at the comping of the same-store numbers from late last year, how are you guys thinking kind of near term, the balance of '25 is showing up? And are you seeing any sort of changes in this consumer behavior? I think you mentioned that things seem to be improving a little bit, but I'm just trying to maybe get a focus or a view on the trends that you're seeing.

Well, I think there's a couple of -- we've talked about a couple of things that will drive improvement in the outlook. One was weather, which we did see some meaningful weather in the first couple of months of the year as well as some of the back half of last year. And that weather has positioned us well in the northern markets where we have experienced some same-store sales growth in those markets.

The other thing that we've constantly talked about is the need for used car values to start to creep back up again, which ultimately puts more total losses in our shop or decreases the level of total losses in our shops. Used car pricing has ticked up a little bit, not super meaningful, which leads the last one, which is probably the hardest one for us to predict in terms of the outcome, which is the economic uncertainty and the consumer uncertainty as they face very high levels of insurance premiums.

And as we've said on previous calls, we're looking for the lines of collision claims and liability claims to start to come closer together again for us to be able to see that that's happening in a meaningful way. And thus far, we don't see that. We continue to see liability claims that are in a down kind of down 2% range, which is fairly reasonable considering the loss ratios. But the claims -- collision claims have not yet come back to the levels that they had been historically.

Okay. I'll leave it there. The other question I had was on some of the commentary you had put in the MD&A. Just talking about the ratio of kind of brownfield, greenfield versus start-up stores, which is -- I'm not sure if that's completely new commentary. But essentially, I think if I've got this correctly, what you said is -- the plan, I think, was to open roughly 28 new stores this year.

But then I think there's also commentary to think about that new store, like small store acquisitions would be kind of at a 1:1 ratio of what you open for new stores. So just like any thoughts or maybe this is a further refinement of the strategy, but any more detail that you could maybe put around that would be great.

Well -- yes, just for clarity, the new store pipeline that we have in the commentary for the call today is related to only greenfield locations. So we have 28 greenfield locations that are slated to be opened this year. We have said over time, we'd like to see that get to a 50-50 ratio, 50% of our growth coming from acquisition, 50% coming from greenfield. That's not -- I wouldn't read into that, that we expect the full year to be 56 locations because we're just not at that pace yet. We've started meaningfully building out our greenfield strategy in the mid part of last year. It takes about 18 months for one of those stores to -- 18 to 24 months for one of those stores to open. So as we get to this time next year, I think we'll start to be on a very healthy path of opening 10 to 12 greenfields a year or 10 to 12 greenfields a quarter, which is what we're trying to ultimately get to.

So -- and then the other commentary on just why the greenfield, I think we've addressed that in both today's commentary as well as discussions we've had before, but it's really a focus on building density in markets, so getting into the locations that we want, the building that we want with the size that allows us to be able to put all three, all three lines of business under one roof, our scanning and calibration, our collision business and our glass business all under one roof to get the efficiencies out of that.

And look, I mean, the reality is everybody likes working in a new box with new equipment over time. That reduces our maintenance expense on boxes, which as boxes -- as our stores get older, the amount of maintenance expense that goes into those stores continues to grow. So we've got to, over time, start to change the proportion of our locations that are old versus new.

Next question will be from Sabahat Khan at RBC Capital Markets.

I guess just on some of these cost improvement initiatives, can you maybe just talk about in terms of progression, sort of what are the ones you're still working on early on in the process and those that might maybe contribute to some potential margin improvement this year, if that's maybe what you're targeting?

Yes. Yes. Well, as we said when we announced the plan, we expect 70% of the realization of those savings to be in our run rate by the end of the second year. That does constitute a portion of that being in this year's run rate as well. Obviously, the -- as we've talked about the buckets, we said there was gross margin buckets and there's operating expense, there's costs coming out of the operating expense side of the business.

That -- those expenses, we would expect to be realized earlier in the process. And some of the gross margin -- gross margin opportunities will have a little bit of a longer tail as we get through the negotiations as well as indirect procurement savings, which we've highlighted as well on the operating expense side that also will take time for us to be in the market to RFP those things.

And so I think it's -- the best way to think about it is we expect to have 70% of that in our full run rate by the end of 2026. And I mean, I wouldn't pace it ratably. But as Jeff said, we expect it to start -- those savings to start in Q2 to start really showing meaningful progress in Q2. So the pacing will be starting in Q2 up until the end of 2026.

Okay. Great. And then the second question, just on the M&A landscape. I think some commentary out there that last year expectations were maybe a bit high from the sellers. Maybe a comment on what the expectations are at this point given the macro backdrop? And maybe what you're seeing among your private competitors or peers? Are they being active? How competitive is it out there for transactions, both small ones and large ones?

Yes. Interestingly, I mean, from a competitive perspective, we have not -- there's been some activity, but frankly, not a lot as of late. The other thing that we are seeing is, look, if the claims environment remains soft for a long period of time, that puts a lot more pressure on single shop and even some of the five to seven shop operators that are in the market. And that obviously that type of pressure, if it's prolonged, will put many people in a position where their price expectation will start to change. And we are starting to see some opportunities in the marketplace at this point that maybe weren't there last year that we're certainly going to participate in.

Next question will be from Derek Lessard at TD Cowen.

I just maybe wanted to come back to the Q1. I was just wondering maybe if you could talk about some of those margin pressures that you're facing so far despite that year-over-year improvement, I guess, in the weather comp?

Yes. The margin pressures that we experienced in Q1 are typically related to things like payroll tax and expenses that reset at the end of the -- that reset at the beginning of the year, primarily payroll. And we see that every year where we see a falloff from Q4 to Q1. We see an increase in expenses from Q4 to Q1, particularly around areas like payroll. So that's really what's driving the margin pressure. We're not experiencing any compression on gross margins or anything that relates to the volume being run through the register. It's more on the operating expense side.

Okay. And maybe just on the Project 360, could you just maybe add some color around some of the key initiatives that you have or maybe the biggest buckets under the project?

Yes. Yes. Well, one -- I mean -- so one of the larger buckets that we have in the project is resetting our -- is the resetting of our store staffing model that we're in the middle of doing now. We're in the early innings of doing that. So that's one of the larger buckets is looking at the indirect staffing in our stores and making sure that it's sized to the appropriate volume that's going through the locations. The rest of them are -- there's opportunities around paint margins and gross parts margins and increasing labor margins in certain locations.

And then there's another big -- there's another fairly sizable bucket around the indirect expense, the indirect procurement expenses that we have to operate a business. It's things like shop supplies and equipment and those areas are -- that will take a little bit longer for us to get after. So those are the primary large buckets.

Okay. That's great color and helpful. And maybe just one last one for me. I understand the tariff situation remains pretty fluid, but curious on your thoughts around what you think your current tariff exposure might be?

Yes. I mean, as you know, I think we're in a -- on the parts side, we're in a list price environment. So if list prices go up, that actually serves to create same-store sales for us. The inflationary environment will create same-store sales. We work on discounts off of list to drive our gross margin in our business from a parts perspective. The other side of the inflationary or the tariff environment, what it could do is push new car prices higher, which increases demand for used cars and in turn, pushes used car prices up as well, which, as you know, then pushes total losses down.

So I think, generally speaking, the way I've articulated this in the past is it's neutral to positive to us. the tariff environment is neutral or positive from us from an average ticket and a work perspective. The question is, what does it do to this whole notion of consumer uncertainty and economic uncertainty. And if we're thrust into a hyperinflationary environment, does that put further pressure on people's desires to file insurance claims.

Yes, Brian, I absolutely -- it's Jeff here. I absolutely agree. That's the unknown and the big factor to think about is what's going to be the impact on the consumer. But just a couple of other things to highlight would be we're 90% in the U.S. to start with. And essentially, all of our businesses operate in domestic markets. And so the U.S. inputs and outputs are U.S.-based and the same thing in Canada, they're Canadian-based. And so we don't have a lot of cross-border activity. And we're a service business and a big portion of our inputs is actually labor, which wouldn't be subject to tariffs. So that's just a few other, I think, points to keep in mind.

Next question will be from Gary Ho at Desjardins Capital Markets.

Just want to dig through, yes, just continuing with the 1Q outlook here. So you mentioned same-store sales growth slightly better in Q4, minus 2.6%, but not yet positive. However, if I recall, March last year was when we saw an unanticipated drop in repairable claims. So not sure if you can kind of help us bridge if you perhaps extrapolate kind of the current run rate activity, what you're seeing in February, like would those activity imply maybe a flat to maybe slightly positive same-store sales growth for March? I know it's hypothetical, but just wanted to get your read on the cadence from January, February and March.

Yes. Well, I mean, as we got information about the claims truly got information about the claims environment more at a macro level. What we really saw was Q1 of 2023 was the first year we started to see declining claims environment. And that continued into throughout 2023. And March is when some of the information really started to get surfaced at a macro level. So I don't -- there's nothing magical about -- there's really nothing magical about March.

As I said in the early commentary, we do know that -- or one of the earlier questions, we do know that in the northern markets where we had weather, we've seen a positive impact from that. The southern markets still remain slightly down. And as we look West, the West has probably got some of the most economic uncertainty in certain markets. And I think that's where we've seen a bigger challenge in the recovery. So I don't expect March to -- I expect March will be in line with the guidance that we provided. And so that's where I would see it.

Okay. Great. And then does your softer 1Q year-over-year EBITDA comment perhaps bake in some of the Project 360 costs that are kind of more onetime in nature? Or do you kind of back that out? And maybe just related to that, there is some kind of acquisition and transformational cost initiatives. I think in Q4 it was $5.4 million, $9.9 million for the year. Jeff, if you can -- if you wouldn't mind kind of elaborate the details on that and how we should think about that for 2025?

Yes. As I mentioned, yes, in Q4, we did have $4.4 million of costs related to Project 360. And the plan would be to continue to provide updates on the amount that we're spending on Project 360 and to essentially adjust them out of EBITDA so that the adjusted EBITDA won't be -- well, so that adjusted [ EBIT ] will be sort of on a normalized basis. So that's kind of how we're planning to handle it going forward.

So to answer your initial question for our Q1 sort of guidance is not really affected by those additional costs because we factored them out.

Okay. Got it. And then just lastly, you mentioned greenfield, brownfield, the 28 locations that you highlighted. Are they fairly spread out in terms of geography throughout the U.S.? Or are you trying to densify a certain region one at a time?

Yes. They're actually -- they're not as spread out as they would have been historically. And I think as we think about where we're putting locations, we're very focused on densifying markets. We're very focused on creating a 1 or 2 position in the markets we play in. And we know where the dots on the map are that we need to be to fulfill that objective. So these locations are much more in line with satisfying that objective. So they are a lot more concentrated in certain areas. And those certain areas are where we know that we can establish a 1 or 2 position and get to the position from a profitability perspective that we're looking for.

Next question will be from Steve Hansen at Raymond James.

Brian, I think it was in the prepared remarks that you mentioned that labor margins are still below where they used to be. What's really holding that back? Is it just volume that you need to accrue through the shop to get better throughput? Is it the lack of pricing pass-through from the carriers? And what is it that's really holding back those labor margins?

Yes, there's still a little bit of pricing opportunity that we have out there that we continue to go after on a -- I mean, frankly, on a daily basis. That's really what's holding it back. I think the -- generally speaking, the inflation on wages have come back to normal levels. The availability of technicians in this type of a demand environment is better than it is in a heavy demand environment, as you would know.

So the types of things that we saw coming out of the pandemic have kind of eased, although it set -- at that time, it set a new -- it kind of set a new floor for what techs are paid. And we're catching up -- in some cases, we're catching up to that floor.

Understood. That's helpful. And just on the 360 plan, it sounds like you've got some initiatives already in flight. I mean what's really giving you the confidence that we can start to realize the synergies starting next quarter in Q2 that is? Is it -- just maybe describe to us where you're at on some of those plans just so we can get a sense for how real they are and how quickly they come online.

Yes. Look, my knowledge of the actions that we're taking that will get us there and the stickiness of those actions is what gives me the confidence. Many of the things that we're anticipating rolling out in Q2 are actually in pilot phase now. So we know where they're at in their executional stage. We've got a great process in place to deliver those to our results delivery office that we've set up.

And as we continue to monitor those projects, my confidence level in achieving the savings that we've expected over the next 2 years just continues to grow. So I have tremendous confidence in our ability to deliver the transformation cost, the full $100 million of transformation costs that we've identified.

Okay. Great. And just one last one quickly is just on the single shop acquisition pace, it was referenced earlier in an earlier question, but just is there anything holding you back there? It sounds like the bottom is at least close to being in, if not in, to be debated, I suppose. But I mean, what's holding you back on going after the single shops in a more rigorous pace?

Nothing at this point. I mean -- and as I said, as we think about our market planning exercise, what we're really doing on the market planning exercise is as you put jobs on these maps, the first place we look for if somebody can as we look to get into a market is, is there a quality single shop in the market for us to go purchase? If the answer to that question is no, that's when we start to flip to the greenfield, brownfield options. But as we look to build density, that will become -- that will and is still our first choice to get into a market.

Next question will be from Daryl Young at Stifel.

Just one quick one for me on the insurance side. We're seeing some of the larger insurance carriers maybe get a little more aggressive on trying to take market share. And I was just wondering if you could remind us if there's any difference between, say, the top 5 insurance carriers and the rates that they pay you either on parts markup or labor margins versus the rest of the insurance industry. And I'm just trying to, I guess, sense out if there's any market share -- or sorry, any market share shift that we should be aware of that maybe is a margin headwind over the next year or 2?

Yes. I mean I'm happy to let Tim comment on this as well. I -- in my time here, I haven't seen behaviors by the insurance carriers that are creating that are positioning one versus the other in any better way, but I'm happy to...

Yes. I think the question is, does the shift in carrier market share change our revenue margin profile? And I would say no.

Next question will be from Krista Friesen at CIBC.

Just one for me. The commentary around 2025, not quite hitting the doubling of revenue target that you'd set out previously. What were the assumptions that went into that, specifically, I guess, related to claims volume? Are you assuming that it kind of stays where it is at this point? Or are you assuming a bit of an improvement?

Yes. Krista, I don't think we've said we won't hit it. we've said that there is uncertainty given the claims environment. And we don't know when the claims environment will shift. So that's really the reason that we're just signaling there could be some delay. I would say we're still optimistic we can achieve it in a more normalized claims environment. We just have to look for that to flip to a more normal level.

Yes. And I think, Krista, as you know, leading up to 2024, we were right on track to be able to do that. It's really 2024's claims environment that's put us in a position where we're just -- we're being cautious, and we want to make sure that we're signaling it. But it's a delay. It's not an inability to achieve because obviously, we have to get to $5 billion over the next 5 years.

Next question will be from Tristan Thomas-Martin at BMO Capital Markets.

I just had one quick question. I'm curious if you've seen any change in consumer or maybe insurance company kind of behavior as tariffs seem like they're becoming a little more real and potentially new car values could go up raising used car values. I'm just curious if anyone is trying to get ahead of that or consumers are starting to think like that.

On the insurance, side. The one thing I have seen and have read is J.D. Power actually keeps track of shopping and switching on insurance carriers. They started doing that in 2020. And right now, shopping and switching is at the highest levels it's ever been recorded from an insurance perspective. So people are looking at the premium increases they have and making decisions to now switch. And our hope is that as they make those decisions to switch, they put themselves back in a position where they're either reducing the deductibles that they've increased to mitigate the premium increases. They're putting collision coverage back in place where they may have dropped collision coverage when the premium increases hit.

So the reality is that consumers that are putting themselves in a position where they can't afford to fix their vehicle or don't have coverage to fix their vehicle if they were to get into an accident are really putting themselves at a fair amount of risk and you're putting your livelihood at risk if your car is damaged in a way where it's undrivable and you don't have proper insurance coverage to take care of that, that's a very -- that's a dangerous game to play for a long period of time. So our hope is that switching is driving that back.

Next question will be from Zachary Evershed at National Bank.

A lot of my questions have been answered. So maybe just a broader one here. We're seeing right to repair, labor transparency pushes, tariff impacts, a lot of stuff up in the air here. What do you think the most important potential regulatory or operating environment changes you're following closely are?

Zach, the right to repair has been ongoing for many years. And frankly, for the collision repair industry, we have the tools and the information we need to properly repair vehicles to OE standards. So it's not a really meaningful concern to us.

I would say the uncertainty around tariffs and the impact on consumer behavior that, that could have is probably top of mind for us. But obviously, we don't control that, and it's difficult to predict what will happen. But -- so I guess that's probably the best answer I can give you.

Are there any more questions?

Patrick Buckley at Jefferies.

Could you talk a bit about how alternative parts mix has trended as of late and maybe the outlook there in '25 as we start to think about potential tariff impacts on OE pricing versus alternative?

Yes. I would say that the major -- the last major carrier to really kind of move forward with aftermarket pricing or aftermarket parts took place in the latter half of 2023 and was fully into 2024. So I don't see a lot of movement upward in terms of increases in aftermarket part usage.

The question, I guess, may be because maybe as if there are significant tariffs and those tariffs impact the pricing of aftermarket parts in a way that makes the decision between an aftermarket and an OE part closer, would that actually push more OE part usage? And I think it's too early to tell for us. What we do know is, again, we're putting on parts that a carrier is requesting that we put on and that are the best part for the job, and we'll continue to do that.

And at this time, we have no other questions. I will turn the call back to Mr. O'Day.

Good. Thank you, operator. And thank you all once again for joining our call today, and we look forward to reporting our Q1 results in May. Have a great day.

Thank you.

Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.