AGM 2021

May 12, 2021

Slides

Good afternoon, ladies and gentlemen. My name is Al Davis, and I am the Independent Chair of the Board of Directors of Board Group Services, Inc. On behalf of the entire Board, our officers and employees, I would like to thank you for attending our annual and special meeting of shareholders. We are pleased to be hosting our meeting virtually this year. We have adopted this meeting format for two primary reasons. First, we adopted the virtual meeting format due to local public health orders put in place to reduce the spread of COVID-nineteen and to protect the health and safety of Boyd's shareholders, employees, and communities in which they live. Second, virtual shareholder meetings are the future for many companies and are increasing in prevalence. Virtual shareholder meetings also allow us to be more inclusive and reach a greater number of shareholders. I would like to now take a moment to introduce Boyd's executive officers that are in attendance today. Participating today are Brock Bulbuck, Executive Chair of Boyd Tim O'Day, President and Chief Executive Officer Pat Pathapatti, Executive Vice President and Chief Financial Officer of Boyd Jeff Murray, Vice President, Finance and Peter Toney, Corporate Counsel. As is our custom, we will conduct a formal business portion of our meeting first, followed by a presentation from management. The meeting will be conducted in accordance with the rules of conduct and procedures, which is posted under the meeting materials heading on the virtual meeting webpage. The annual and special meeting of the shareholders of Boyd Group Services Inc. Will now officially come to order. I will preside as chair of the meeting and Brock Bulbuck, executive chair, will act as secretary. Boyd has appointed Jerry Trotter and Francine Mabumbo of Broadridge Financial Services to act as scrutineer. The secretary has filed with me proof of mailing of the notice of meeting and accompanying documents to all shareholders of record as of 03/26/2021. The consolidated financial statements of Boyd Group Services, Inc. For the fiscal year ended 12/31/2020, together with the report of the auditors, has been mailed to the shareholders. As it is not a requirement to do so, we do not propose to ask shareholders to approve the financial statements. Copies of the financial statements, along with the auditor's report on the financial statements, are available on Boyd's website. Prior to the meeting, proxies representing 18,126,672 or 18.42% of the outstanding shares were received by Boyd. The requisite quorum of shareholders is present, and I therefore declare that this meeting is properly constituted for the transaction of business. Usually, and this year is no exception, the vast majority of shareholders submit their proxy or voting instructions in advance of the meeting with only a small number of shareholders opting to vote their shares at the meeting. The main differences in how we will conduct today's meeting are first in how voting will occur, and second in how shareholders can ask questions. Normally registered shareholders and duly appointed proxy holders who wish to vote at the meeting would attend the meeting and cast a ballot in person. This year, in order to vote at the meeting, registered shareholders should have logged into the website webcast by entering the 16 digit control number on their proxy form, and proxy holders, including beneficial holders who appointed themselves as proxy holders, should have logged into the webcast by entering their appointee name and eight digit appointee identification number they received from the registered shareholder or beneficial owner who appointed them. If you have logged on properly, when you click the vote here button on your screen, the meeting resolutions will be displayed. To vote, click on one of the voting options. Voting will be open until the end of the formal portion of the meeting. You may vote on all agenda items and change your vote at any time during this period. You must click submit for your vote to be counted. If you have logged on as a guest, you will not be able to vote at the meeting unless you exit the meeting and log back in using your 16 digit control number or appointee name and eight digit appointee identification number. Another difference this year will be the way shareholders and proxy holders ask questions. Although shareholders and proxy holders can't ask their questions in person today, they can still ask questions over the webcast. If you have a question, please click ask a question, and then type in your question in the space provided. Your question will be read aloud at the meeting at the appropriate time. We will address questions that directly relate to the particular motion at the appropriate time of the meeting, and we will save general questions for the question and answer period session following the formal business portion of the meeting. Before we turn to the first voting item, I'd like to remind you that some of the statements made at this meeting may be considered forward looking. Boyd cautions investors that results of future operations may differ from those anticipated. We urge you to review the cautionary statements and other information contained in Boyd's filings on SEDAR, including our annual report for fiscal twenty twenty, which identifies certain factors that could cause actual results to differ materially from those projected in any forward looking statements made during this meeting. Copies of the annual report and other filings are available through the company or online. There are five proposals to be considered during this meeting, all of which are described in detail in the management information circular furnished to shareholders. In order to expedite matters today, Jeff Murray will move all motions and Peter Toney will second all motions with respect to the business of this meeting. The first item of business is fixing the number of directors to serve on the board of directors of Boyd. Boyd's articles provide for a minimum of three directors and a maximum of 15 directors. It is proposed that the board of directors of Boyd be fixed at nine directors. Will someone please move the resolution? I move the resolution. Thank you, mister Murray. May I have the resolution seconded? I second the resolution. Thank you, Mr. Tony. Are there any questions on this resolution? Mr. Davis, I confirm there are no questions on this resolution. Thank you, Mr. Tony. We will now put the resolution to the meeting. Please vote now. We will now proceed with the second proposal being the election of directors. The persons listed in the information circular for election as directors for the current year, each of whom has agreed to serve as a director if elected are as follows. David Brown, Brock Bullbuck, Robert Espey, Robert Gross, John Hartman, Violet Conkel, Timothy O'Dea, William Onua, and Sally Savoyah. Would someone please make the nomination? I nominate those nine individuals be elected as directors of Boyd to serve until the conclusion of the next annual meeting of Boyd. Thank you, Mr. Murray. May I have the nomination seconded? I second the nominations. Thank you, Mr. Tony. I now declare the nominations closed. Mr. Tony, are there any questions with respect to the election of the directors? Mr. Davis, I confirm there are no questions on this resolution. We will now put the resolution to the meeting. Please vote now. The third item relates to the ratification of the appointment of Deloitte LLP as auditors of Boyd for the fiscal year ended 12/31/2021, and thereafter until the close of the next annual meeting of the Boyd, and to authorize the board of directors to fix the auditor's remuneration. Will someone please move the resolution? I move the resolution. Thank you, mister Murray. May I may I have the resolution seconded? I second the resolution. Thank you, mister Toney. Are there any questions on this resolution? Mr. Davis, I confirm there are no questions on this resolution. We will now put the resolution to the meeting. Please vote now. We will now proceed with the business of the nonbinding advisory resolution on Boyd's approach to executive compensation as described in detail in the management information circular. The Board believes that Boyd shareholders should have an opportunity to understand how and why the Board makes its executive compensation decisions and provide input to the Board on executive compensation. As this is an advisory resolution, the results will not be binding on the Board. However, the board will take the results of the vote into account as appropriate when considering the future compensation policies, procedures, and decisions, and in determining whether there is a need to increase engagement with shareholders on compensation and related matters. Would someone please move the nonbinding advisory resolution on Boyd's approach to executive compensation? I move the resolution. Thank you, Mr. Murray. May I have the resolution seconded? I second the resolution. Thank you, Mr. Tony. Are there any questions on this resolution? Mr. Davis, I confirm there are no questions on this resolution. Thank you, Mr. Tony. We will now put the resolution to the meeting. Please vote now. The fifth proposal relating to the approval of the stock option plan for Boyd. The stock option plan and the reason for it are described in detail in the management information circular, so I will not go over it again at this time. Would someone please move the resolution to approve the stock option plan? I move the resolution. Thank you, Mr. Murray. May I have the resolution seconded? I second the resolution. Thank you, Mr. Tony. Are there any questions on this resolution? Mr. Davis, I confirm there are no questions on this resolution. Thank you, Mr. Tony. We will now put the resolution to the meeting. Please vote now. We will pause for a few moments to allow registered shareholders and duly appointed proxy holders to finish submitting their votes. I declare that voting is now closed. Those shares being voted by proxy, consisting of a majority of the shares represented at this meeting, have voted in favor of, number one, the resolution to fix the number of directors at nine number two, to the election of each of the nine directors nominated for election number three, the appointment of the auditors for the ensuing year and the authorization for the boards of directors to fix their remuneration number four, the advisory resolution on BGSI's approach to executive compensation and fifth, the resolution to approve the stock option plan. Accordingly, I declare each of the resolutions to have been passed, each of the nominees for director to have been duly elected, and the auditors to have been duly appointed. The final tabulation of the votes cast at this meeting will appear at our appear in our SEDAR filing tomorrow. This concludes the formal portion of the twenty twenty one annual meeting and special meeting. Before turning over to Mr. O'Day to make his management presentation, there are a few additional items I would like to address. I would like to take a moment to welcome our new Board, Robert Espey. We are excited that Mr. Espey is joining the Board, and the Board and management look forward to working with him. Also, I would like to acknowledge the commitment of the Board and management to the ongoing safety and well-being of Boyd's employees and customers during the COVID-nineteen pandemic. On behalf of the Board, I would like to thank management and Boyd's employees for their extraordinary efforts during this crisis. I will now call on Tim O'Dea, President and Chief Executive Officer of Boyd, to make a management presentation on matters of interest concerning Boyd and its subsidiaries. Thank you, Al. Good afternoon, everyone. Now that the formal portion of the meeting has concluded, let's review our twenty twenty and first quarter twenty twenty one financial results along with our strategy and outlook. Before we get started, I need to briefly remind everyone of the standard disclaimer, which cautions against reliance on forward looking statements included in this presentation. While 2020 began as expected, near the end of the first quarter, the COVID-nineteen pandemic brought uncertain economic and business conditions. The steps our team has taken since the onset of the pandemic have consistently positioned us well during these unprecedented times, and our 2020 results reflect the impact of these efforts. Through prudent management of expenses, a focus on liquidity and our ability to adjust capacity relative to changes in demand, we posted respectable results in spite of the decline in revenues caused by COVID-nineteen. Throughout the year, we continued to adjust our business in accordance with changes in demand for our services, first decreasing and then subsequently adding back production capacity as demand for collision repair services rose. This performance reflects the impact of COVID on key financial performance metrics, including sales, adjusted EBITDA and adjusted net earnings. We were able to post respectable results in spite of the decline in revenues caused by COVID-nineteen through prudent management of expenses, a focus on liquidity and our ability to adjust capacity relative to demand changes. Notwithstanding our growth and the impact of the COVID-nineteen pandemic, we continue to maintain a strong balance sheet. In March, we increased and extended our revolving credit facility to US550 million dollars with an accordion feature that can increase the facility to a maximum of US825 million dollars accompanied by the addition of a new seven year fixed rate term loan A in the amount of US125 million dollars maturing in March of twenty twenty five and March of twenty twenty seven respectively. In May, we chose to strengthen our balance sheet with a $231,500,000 public offering. Our net debt is manageable and represents very conservative leverage of approximately 0.9 times EBITDA. This conservative leverage combined with our new revolving credit facility positioned Boyd with over $1,000,000,000 of available debt for further acquisitions and growth. Growth continued during 2020, although acquisition activity paused from late March to mid August. We opened 54 new locations during the year. In addition to investing in growth, we also increased our dividends by 2.2% in November, which now stands at $0.05 $64 per share annually. We're committed to a conservative dividend policy that will preserve our financial flexibility and support our growth initiatives. We will therefore continue to take a prudent approach in evaluating the appropriateness of dividend increases in the future. The market continued to reward our strong performance as Boyd shares again performed well in 2020 in comparison to the overall market. In 2020, Boyd shares returned 9% on a total return basis being share price appreciation plus dividends. This represents several years of significantly outperforming the market with five year average return excluding distributions of 244%. Boyd has posted best or second best tenure performance on the TSX for six consecutive years. In addition to generating great returns, we've also continued to see enhanced daily trading of our shares, which has translated into improved liquidity. In 2020, on average, million of our shares traded every day. While the pandemic continues to significantly impact our business as additional waves have resulted in increased restrictions and reduced collision demand. We're excited and optimistic about our positioning for the future. We're preparing for a future as restrictions continue to loosen, the economy reopens and vaccination levels increase, and we therefore continue to grow our location count and our workforce. Canada continues to have tighter restrictions and slower economic reopening when compared to The U. S. This has had and continues to have a significant impact on same store sales activity in Canada. These declines have been partially offset by the Canada Emergency Wage Subsidy, which has been extended to June of twenty twenty one. The federal budget for 2021 proposes to extend CEWS until 09/25/2021. It also proposes to gradually decrease the subsidy rate beginning 07/04/2021 in order to ensure an orderly phase out of the program as vaccinations are completed and the economy reopens. The Canada Emergency Wage Subsidy was put in place 04/11/2020. As is the objective of the program, Boyd continued to employ and incur costs for employees that would have been laid off or furloughed absent the wage subsidy. The total estimated SUS for the year ended 12/31/2020 of $16,900,000 has been recorded with $7,100,000 being recorded as a reduction to cost of goods sold and $9,800,000 recorded as a reduction to operating expenses. Now we'll turn to a financial review. For the year ended 12/31/2020, we reported sales of 2,100,000,000.0 a decrease of 8.5% over the prior year. This was driven by same store sales declines of 15.6%, partially offset by contributions from new locations that had not been in operation for the full comparative period. The decrease in the same store sales percentage was impacted by the slowdown caused by the COVID-nineteen pandemic that began in mid March of twenty twenty. Same store declines in Canada were significantly higher than the same store declines in The U. S, which reflects more significant restrictions as well as continued slower economic reopening in Canada when compared to The U. S. Adjusted for the year ended 12/31/2020 was $293,600,000 compared to $319,900,000 in the same period of the prior year. The twenty six point three million dollars decrease was a result of the business slowdown caused by the COVID-nineteen pandemic, including operating expenses that could not be mitigated in relation to the decline in sales, such as property taxes and utility costs. Adjusted net earnings decreased from $96,000,000 to $54,000,000 These amounts were significantly impacted by the COVID-nineteen pandemic, which resulted in reduced sales levels. In addition, fixed levels of depreciation and amortization, as well as increased finance costs negatively impacted adjusted net earnings and adjusted net earnings per share 2020. To reduce volatility from exchange rates, effective January 2021, Boyd began reporting results in U. S. Dollars. Given almost 90% of our revenues come from The U. S, this makes sense as an appropriate currency for reporting purposes. Now let's take a look at Q1. Year over year, sales decreased from 467,800,000 to $421,600,000 or 9.9%. Same store sales decreased 14.2% or 12.6% on a days adjusted basis. Adjusted EBITDA decreased from $60,500,000 to $52,700,000 or 12.8%, and adjusted net earnings decreased 45.4%. Early in the pandemic, the company moved quickly, decisively to take aggressive action to both preserve liquidity and to reduce expenses and preparation for the demand and revenue decline anticipated as a result of the pandemic, including converting a large number of production facilities to skeleton staffed intake centers, in most cases, staff with a single employee. In late Q4 of twenty twenty, Boyd made the strategic decision to prepare for the higher post pandemic demand levels expected in 2021, including converting all of our temporary intake centers in The U. S. Back to full production facilities and adding back most of our indirect and support staffing resources. This was a major factor contributing to our lower Q1 adjusted EBITDA margin versus Q3 and Q4 of twenty twenty. Our first quarter results for 2021 continue to be significantly affected by the pandemic as business restrictions and mobility restrictions continue to impact the demand for collision repair services. Following slow but steady improvement in demand in the last half of twenty twenty, this improvement trend flattened out in Q1 as we experienced a surge in COVID-nineteen infections and the reinstatement of restrictions in many of our markets, especially in Canada, where the same store sales decline was more significant in the first quarter of twenty twenty one when compared to the fourth quarter of twenty twenty. Canada also had significantly higher same store sales declines than The U. S. Compounding the demand challenges of COVID-nineteen, we also experienced more than a normal quarterly level production challenges, including technician capacity constraints in select markets, weather events in Southern states and supply chain disruptions. Let's turn to our strategy and outlook. Our strategy going forward will for the most part be the same fairly simple proven strategy that we've utilized to grow thus far. Expense management, optimizing returns from existing operations through same store sales growth, operational excellence and new unit and acquisition growth. These will be our four key areas of focus. And of course, operational excellence will continue to strategy. It is the foundation of our business, a key to both our past success and our future success. Insurance company relationships are performance based and our ability to continue to grow our share of market, which has a direct impact on same store sales growth is linked to our continuing to outperform the industry. For these reasons, over the last number of years, we've been investing significantly in process improvement initiatives, including the Wow! Operating Way. The Wow! Operating Way is now embedded as a part of our operating culture. We will remain focused on continuing to tightly manage operating expenses as a percentage of sales. We will continue to work at identifying cost savings opportunities as well as continue to improve capacity utilization through same store sales growth. These operating expenses have a high fixed component and therefore do not increase variably with the same store sales growth. This slide illustrates our success at achieving same store sales growth, where we have achieved same store sales growth in 31 of our last forty quarters. We've averaged 3.5% growth over the last three years, three point four percent over five years and 4.3% over the past ten years. In 2020, the outbreak of COVID-nineteen resulted in a significant impact to same store sales growth. As such, results for Q2 of twenty twenty to Q2 of twenty twenty one have been removed from the calculation of average same store sales growth. Insurance companies are consolidating their repair supply chain with companies like ours. And we therefore continue to be well positioned to take advantage of these favorable industry trends and to grow market share and achieve same store sales growth. As discussed, same store sales growth is an important component of our growth strategy, as increasing same store sales and running shops at or near capacity has a very positive impact on our bottom line as it leverages our fixed operating expenses. This slide illustrates our five year track record of acquisitions of multi shop operations as well as the acquisition of new startup single locations. In summary, we continue to be extremely well positioned. We have strong operations and a strong operational track record. We have a very healthy balance sheet. We enjoy favorable industry trends. We operate in a large and comparatively stable industry. We offer a high yield through cash dividends. And we have a low cost, low risk, high return on capital growth strategy. These characteristics combine to position us well and to create shareholder value well into the future. On behalf of the Board, I'd like to acknowledge Al Davis' retirement from our Board of Directors. Al served on our Board since 02/2005 and has been Independent Chair since 2011. I personally appreciate the support and guidance that Al has provided to me during my tenure as CEO, and I wish him well in retirement. Thank you. Thank you, Tim. Mr. Tony, were there any questions received from the shareholders? Mr. Davis, I confirm there are no general questions received from the shareholders this afternoon. Thank you, Mr. Tony. Is there any further business to come before this meeting? Hearing none, we will continue. Before we conclude the twenty twenty one annual and special meeting, a couple of personal thoughts. As I am retiring from the Boyd Board, this is my last meeting as a board member of Boyd. I would like to take the opportunity to thank my fellow board members, both past and present, for their support over the years. Also, I have been blessed with the opportunity to work with a very professional management team, a management team who are in turn successful due to a dedicated and hardworking group of employees in Canada and The United States. Thanks for all of your support over the last fifteen plus years. Greatly appreciate it. That concludes this annual meeting annual and special meeting of shareholders. I would like to thank you all for attending. The meeting is adjourned. Thank you.