Boyd Group Services
Annual Report 2023

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BOYD GROUP SERVICES INC. 2023 Annual Report BOYD GROUP SERVICES INC. 2023 Annual Report _____________________________________________________________________ Table of Contents 3 Report to Shareholders……..…………………………………………….……..…. Message from the Independent Board Chair………………..……………….…. 5 6-45 Management’s Discussion & Analysis……………………………..………...… 46-49 Certification of Annual Filings …………..……………………………..………… Consolidated Financial Statements 51 Management’s Responsibility for Financial Reporting…………...…… Independent Auditor’s Report………………………………………….… 52 Consolidated Statements of Financial Position………………………... 56 57 Consolidated Statements of Changes in Equity….………...…………. 58 Consolidated Statements of Earnings……….…………………………. 58 Consolidated Statements of Comprehensive Earnings………....……. Consolidated Statements of Cash Flows…………………………….… 59 Notes to Consolidated Financial Statements………..……………….… 60-95 Board of Directors…………………………………………………………………. 96-98 99 Corporate Directory……………………………………………………….………. 100 Shareholder Information…………………………………………………………….. BOYD GROUP SERVICES INC. REPORT TO SHAREHOLDERS _____________________________________________________________________________________________ To our Shareholders, In 2023, Boyd was able to achieve record sales levels and meaningful improvement in leverage and profitability when compared to the prior year. We are pleased with the progress we made in 2023 and, in particular, the level of same-store sales growth and the improved Adjusted EBITDA1 delivered consistently throughout the year, alongside the addition of 106 locations. We remain focused on our key challenges and opportunities, including building capacity, negotiating sufficient price increases to recover lost labor margin from wage pressure, growing our calibration business and continuing to add locations. We achieved a high level of growth in sales in 2023, with total sales of $2.9 billion, representing a 21.1% increase when compared to the $2.4 billion achieved in 2022. Same-store sales1 increased 15.8% and contributions from 186 new locations that had not been in operation for the full comparative period added $146.6 million of incremental sales. Same-store sales growth was positively impacted by pricing increases and high levels of demand for services, as well as an increase in production capacity related to technician hiring, increased productivity and growth in the Technician Development Program; however, ongoing staffing constraints continued to impact sales levels that could be achieved. Sales also increased based on higher repair costs due to increasing vehicle complexity, higher part content and cost, increased scanning and calibration services, as well as general market inflation. Adjusted EBITDA1 for 2023 was $368.2 million, or 12.5% of sales, compared with $273.5 million, or 11.2% of sales in 2022. The increase was primarily the result of growth in sales and improvement in gross margin percentage, which also provided improved leveraging of certain operating costs. Boyd posted net earnings of $86.7 million in 2023, or 2.9% of sales, compared to $41.0 million, or 1.7% of sales in 2022 and earnings per share of $4.04 per share for the year ended December 31, 2023 compared to $1.91 for the same period of 2022. Impacting net earnings were fair value adjustments to financial instruments, as well as acquisition and transaction costs (net of tax). After adjusting for these items, Adjusted net earnings1 for 2023 was $89.7 million or 3.0% of sales. This compares to Adjusted net earnings of $42.4 million or 1.7% of sales in 2022. Adjusted net earnings for the year ended December 31, 2023 was $4.18 per share, compared to $1.97 per share in 2022. Adjusted net earnings for the period was positively impacted by increased sales, higher gross margin percentage and improved leverage of certain operating expenses. Certain costs, such as depreciation and amortization, are not variable and same-store sales increases resulted in a decrease in depreciation and amortization expense as a percentage of sales during 2023. Finance costs increased as a result of increased borrowings during 2023 fiscal. With respect to the balance sheet, at December 31, 2023, BGSI held total debt, net of cash, of $1,114.5 million, compared to $963.0 million at December 31, 2022. Total debt, net of cash, includes lease liabilities of $715.3 million at December 31, 2023, compared to $617.9 million at December 31, 2021. Debt, net of cash, increased when 1 Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, adjusted for the fair value adjustments related to contingent consideration, as well as acquisition and transaction costs), adjusted net earnings, adjusted net earnings per share and same-store sales are non-GAAP financial measures and ratios and are not recognized measures under International Financial Reporting Standards (“IFRS”). Management believes that in addition to net earnings and cash flows, the supplemental measures of adjusted net earnings 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. Management believes that, in addition to sales, the supplemental measure of same-store sales is useful as it provides investors with an indication of the increase in sales without accounting for location growth and the impact of fluctuations in exchange rates during the period. Investors should be cautioned, however, that 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. Investors should also be cautioned that same-store sales should not be construed as an alternative to sales 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 financial measures are calculated, please refer to the section titled “Non-GAAP Financial Measures and Ratios” in Boyd’s MD&A filing (dated March 20, 2024) for the period ended December 31, 2023, starting on page 6 of this Annual Report. A copy of Boyd’s MD&A for the period ended December 31, 2023 can be accessed via the SEDAR Web site (www.sedarplus.com). 3 compared to the prior year primarily as a result of an increased acquisition activity and increased capital expenditures, including start-up location growth. Based on Boyd’s continued growth, the strength of and confidence in the business, Boyd announced a Canadian dollar dividend increase of 2.0% to 60.0 cents per share annualized, up from 58.8 cents per share. In November of 2020, we announced our five year growth strategy, in which Boyd intends to again double the size of the business over the five year period from 2021 to 2025, based on 2019 constant currency revenues, implying a compound annual growth rate of 15 percent. Given the high level of location growth in 2021, the strong same-store sales growth during 2022 and the combination of same-store sales growth and location growth in 2023, we are well on the way to achieving this goal. We remain confident in our business model and its ability to increase market share by expanding Boyd’s presence in North America through new location and organic growth from Boyd’s existing operations. On behalf of myself, the executive team and our Board of Directors, I would like to thank all of our Boyd Group employees for their hard work and dedication, which allowed Boyd to successfully navigate through the impacts of the dynamic economic environment. And on behalf of the Directors of Boyd Group Services Inc. and Boyd Group employees, thank you for your continued support. Sincerely, (signed) Timothy O’Day President & Chief Executive Officer 4 BOYD GROUP SERVICES INC. MESSAGE FROM THE INDEPENDENT BOARD CHAIR ______________________________________________________________________________ To our Shareholders, Boyd’s strong and dedicated management team delivered impressive 2023 results. Boyd posted record high sales, profitability and unit growth: sales increased 21% to $2.9 billion and Adjusted EBITDA1 increased by 35% to $368 million. The Board is incredibly proud of the commitment and drive demonstrated by the Boyd team in delivering these results. Demand continued to outstrip production capacity in 2023 and although further improvements are both required and expected, Boyd’s workforce and productivity initiatives are continuing to narrow the gap. These initiatives combined with customer price increases resulted in our Adjusted EBITDA margin increasing 130 basis points to 12.5% of sales. We remain confident in meeting and exceeding our plan to double the size of the business on a constant currency basis over the five-year period ending in 2025 and beyond that to continue to increase market share through a combination of new locations and organic growth. In July of 2023, Jeff Murray was appointed Chief Financial Officer of Boyd after serving as Interim Chief Financial Officer for the first half of the year and having been with Boyd since 2004. Jeff’s significant knowledge of the business along with his strong background in accounting and finance will support the continued execution of our priorities. We look forward to continuing to work with Jeff over the coming years. The Board was pleased to welcome Christine Feuell to the Board at the most recent Annual General Meeting in May of 2023. Christine is the CEO of Chrysler Brand of Stellantis, and she has brought further strength and industry knowledge to our Board. We look forward to Christine’s valuable contribution to our Board. On behalf of the Board, I would like to thank the management team and all employees for their continued commitment and hard work, and our shareholders for their continued support. Sincerely, (signed) David G. Brown Independent Chair 1 Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, adjusted for the fair value adjustments related to contingent consideration, as well as acquisition and transaction costs), adjusted net earnings, adjusted net earnings per share and same-store sales are non-GAAP financial measures and ratios and are not recognized measures under International Financial Reporting Standards (“IFRS”). Management believes that in addition to net earnings and cash flows, the supplemental measures of adjusted net earnings 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. Management believes that, in addition to sales, the supplemental measure of same-store sales is useful as it provides investors with an indication of the increase in sales without accounting for location growth and the impact of fluctuations in exchange rates during the period. Investors should be cautioned, however, that 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. Investors should also be cautioned that same-store sales should not be construed as an alternative to sales 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 financial measures are calculated, please refer to the section titled “Non-GAAP Financial Measures and Ratios” in Boyd’s MD&A filing (dated March 20, 2024) for the period ended December 31, 2023, starting on page 6 of this Annual Report. A copy of Boyd’s MD&A for the period ended December 31, 2023 can be accessed via the SEDAR Web site (www.sedarplus.com). 5 Management’s Discussion & Analysis OVERVIEW Boyd Group Services Inc. (“BGSI”), through its operating company, The Boyd Group Inc. and its subsidiaries (“Boyd” or the “Company”), is one of the largest operators of non-franchised collision repair centers in North America in terms of number of locations and sales. The Company currently operates locations in Canada under the trade name Boyd Autobody & Glass and Assured Automotive, as well as in the U.S. under the trade name Gerber Collision & Glass. The Company is also a major retail auto glass operator in the U.S., under the trade names Gerber Collision & Glass, Glass America, Auto Glass Service, Auto Glass Authority and Autoglassonly.com. In addition, the Company operates a third party administrator, Gerber National Claims Services (“GNCS”), that offers glass, emergency roadside and first notice of loss services. The following is a geographic breakdown of locations by trade name and location as at March 19, 2024. Alberta British Columbia Manitoba Saskatchewan Ontario 942 locations 47 locations 16 14 13 4 82 locations Florida Michigan Illinois California New York Washington Georgia Wisconsin 82 Texas North Carolina Ohio Indiana Oklahoma Arizona Louisiana Colorado South Carolina 813 locations Maryland Missouri Minnesota Tennessee Kansas Oregon Pennsylvania Alabama Nevada Hawaii Kentucky Utah Iowa Arkansas Nebraska Idaho 77 76 66 49 42 39 38 37 37 36 34 34 27 25 23 22 19 13 13 13 12 11 11 11 10 8 6 6 6 5 3 3 1 The above numbers include 33 intake locations. The above numbers include 2 intake locations and two fleet locations co-located with collision repair centers. Boyd provides collision repair services to insurance companies and individual vehicle owners, with a high percentage of the Company’s revenue being derived from insurance-paid collision repair services. BGSI’s shares trade on the Toronto Stock Exchange under the symbol TSX: BYD.TO. The following review of BGSI’s operating and financial results for the year ended December 31, 2023, including material transactions and events of BGSI up to and including March 19, 2024, as well as management’s expectations for the year ahead, should be read in conjunction with the annual audited consolidated financial statements of BGSI for the year ended December 31, 2023, included on pages 51 to 95 of the annual report, and as filed on SEDAR+ at www.sedarplus.com. 6 SIGNIFICANT EVENTS On March 17, 2023, the BGSI Board of Directors declared a cash dividend for the first quarter of 2023 of C$0.147 per common share. The dividend was paid on April 26, 2023 to common shareholders of record at the close of business on March 31, 2023. On May 11, 2023, BGSI announced the election of Christine Feuell to the Board of Directors. On June 16, 2023, the BGSI Board of Directors declared a cash dividend for the second quarter of 2023 of C$0.147 per common share. The dividend was paid on July 27, 2023 to common shareholders of record at the close of business on June 30, 2023. On July 12, 2023, BGSI announced the appointment of Jeff Murray as Executive Vice-President & Chief Financial Officer, effective immediately. On August 10, 2023, BGSI published Boyd’s second Environmental, Social and Governance Report. On September 15, 2023, the BGSI Board of Directors declared a cash dividend for the third quarter of 2023 of C$0.147 per common share. The dividend was paid on October 27, 2023 to common shareholders of record at the close of business on September 30, 2023. On October 3, 2023, BGSI commented on the potential impact of the United Auto Workers strike. On December 15, 2023, the BGSI Board of Directors declared a cash dividend for the fourth quarter of 2023 of C$0.15 per common share. The dividend was paid on January 29, 2024 to common shareholders of record at the close of business on December 31, 2023. During 2023, the Company added 78 locations through acquisition and 28 start-up locations, for a total of 106 new collision repair locations. From January 1, 2024 up to the reporting date of March 19, 2024, the Company added nine locations through acquisition and one start-up location. These new collision repair locations are as follows: Date January 3, 2023 January 6, 2023 January 16, 2023 January 18, 2023 January 18, 2023 February 3, 2023 February 3, 2023 February 3, 2023 February 8, 2023 February 10, 2023 February 10, 2023 February 17, 2023 February 22, 2023 February 27, 2023 Location Cameron Park, CA Abilene, TX Lethbridge, AB Venice, FL Park City, UT Hendersonville, NC Rogers, MN Tontitown, AR Ocala, FL Lansdale, PA Sacramento, CA Murrieta, CA LaBelle, FL Perry, GA Previously operated as Cameron Park Auto Body Gibb’s Paint & Body, LLC n/a start-up n/a start-up CKM Collision Hill's Collision Center Excalibur Collision & Conversion Center n/a start-up n/a start-up Old Forge Collision Center Franklin Collision Center n/a start-up Direct Repair Collision Center Cochran Coach Works 7 Date February 28, 2023 March 17, 2023 March 22, 2023 March 24, 2023 March 24, 2023 March 28, 2023 March 28, 2023 March 28, 2023 March 29, 2023 April 21, 2023 April 21, 2023 April 21, 2023 April 27, 2023 April 28, 2023 April 28, 2023 May 5, 2023 May 9, 2023 May 12, 2023 May 23, 2023 May 26, 2023 May 26, 2023 May 26, 2023 May 31, 2023 June 2, 2023 June 16, 2023 June 16, 2023 June 23, 2023 June 23, 2023 June 27, 2023 June 29, 2023 June 30, 2023 June 30, 2023 July 14, 2023 July 14, 2023 July 21, 2023 July 21, 2023 July 21, 2023 July 28, 2023 July 31, 2023 July 31, 2023 August 15, 2023 August 15, 2023 August 18, 2023 Location New Port Richey, FL Rancho Cucamonga, CA Sacramento, CA Modesto, CA Prattville, AL Longview, TX Charleroi, PA Simpsonville, NC Sharpsburg, GA Griffin, GA Huntsville, AL Baltimore, MD Stockton, CA Lake Charles, LA Kailua-Kona, HI Puyallup, WA Iowa City, IA Mills River, NC Winterville, NC Fort Lauderdale, FL Monroe, MI Chicago, IL Albany, NY Merced, CA Sacramento, Davis & Yuba City, CA (3 locations) Austin, TX Fridley, MN Red Bluff, CA Johnson City, NY Walla Walla, WA Woodstock, IL Ames, IA Wildwood, FL Donaldsonville, LA Perrysburg, OH Redding, CA Lafayette & New Iberia, LA (2 locations) Oroville, CA Toledo, OH Joplin, MO Coon Rapids, MN Chicago, IL Lake Park, FL 8 Previously operated as n/a start-up Proline Auto Collision Center Aries Auto Body The Professionals Auto Body Works Advanced Collision One Stop Automotive Russell’s Body & Frame Service n/a start-up B & B Body Shop Nicolas Auto Repair & Body Shop Sledge Custom Body Shop Moore’s Body Shop Prestige Auto Body n/a start-up Auto Body Hawaii South Hill Collision Arena Auto Body n/a start-up n/a start-up Hi-Teck Collision Paint & Body Shop Auto Body Plant Inc. Paul Ries & Sons Colby Body & Fender Works Rumin’s Auto Body G&R Automotive/Natomas Auto Body & Paint Fix A Wreck Collision Center City Collision & Glass Gary’s Auto body n/a start-up Tietan Auto Body n/a start-up n/a start-up Cartech Collision Wildwood Donaldsonville Glass & Body Works n/a start-up Crossroads Auto Body Repair Louisiana Auto Collision Excel Auto Body n/a start-up n/a start-up McKay Collision Mayer’s Collision Center n/a start-up St. Louis, MO (3 locations) Huntley, IL Pleasant Hill, IA Avon, MN Houston, TX Portage, MI Chico, CA Albertville, MN Redding, CA Springfield, MO Spring, TX Stafford, TX Ft. Wayne, IN Location Alexandria, MN Albion, NY Lincoln Park, MI River Falls, WI Troy, MI Date August 25, 2023 September 6, 2023 September 8, 2023 September 8, 2023 September 12, 2023 September 22, 2023 Kingston, NY September 22, 2023 October 6, 2023 October 13, 2023 October 20, 2023 October 27, 2023 November 3, 2023 November 3, 2023 November 7, 2023 November 8, 2023 November 9, 2023 November 10, 2023 November 10, 2023 November 14, 2023 November 16, 2023 Naples, FL November 17, 2023 North Port, FL November 17, 2023 Walker, LA November 25, 2023 Muskegon, MI November 25, 2023 Owensboro, KY November 27, 2023 Houston, TX November 28, 2023 November 29, 2023 Becker, MN December 1, 2023 December 1, 2023 December 5, 2023 December 6, 2023 December 6, 2023 December 8, 2023 December 15, 2023 December 15, 2023 December 15, 2023 December 19, 2023 December 27, 2023 McDonough, GA Niagara Falls, ON December 27, 2023 December 28, 2023 Columbia, MO December 28, 2023 Winnipeg, MB December 29, 2023 January 3, 2024 January 23, 2024 Sacramento, CA Bloomington, MN Little Falls, MN Lodi, CA Elk River, MN Melrose, MN Turlock, CA Warner Robins, GA Dalton, GA San Antonio, TX (3 locations) Kapolei, HI Golden Valley, MN Shakopee, MN Louisville, KY Previously operated as Countryside Body Shop Waters Auto Body & Paint Down River Collision Hove Auto Body Action Collision Don’s Autobody Wagner Collision Center n/a start-up Pleasant Hill Auto Body Avon Body Shop Corona Paint & Body n/a start-up JP’s Paint & Body Albertville Body Shop Venture II Body & Paint n/a start-up LMC Collision Center Charlton's Body Repair n/a start-up Cars-Medics North Port Auto Body Collision Specialties n/a start-up Greg's Collision Center Elite Collision Center Cherokee Auto Body Becker Collision & Glass Auto-Rec Body Works Loren Pundsack Collision Center Imperiouz Auto Body n/a start-up n/a start-up My Collision Center n/a start-up Boulevard Collision Referral Collision Touch of Color Collision Center n/a start-up Premier Collision n/a start-up n/a start-up Platinum Autoworks Legend Auto Body Hilmerson Collision Center 9 Date January 26, 2024 February 2, 2024 February 2, 2024 February 9, 2024 February 9, 2024 March 1, 2024 Location Cedar Rapids, IA Cypress, TX Lincoln, CA Clearfield, UT Sumner, WA Omaha, NE (3 locations) Previously operated as Golden Hammer Collision Center I.C.A.R. Houston Paint & Body Eddie's Lincoln Auto Body Perks Auto Repair n/a start-up Wreckamended Collision Repair During the twelve months ended December 31, 2023, the Company acquired a two location glass business in Minnesota, a single location glass business in Texas, a single location glass business in New York, a single location glass business in Virginia, a single location glass business in Pennsylvania and opened 22 start up glass locations. 10 OUTLOOK Boyd continues to execute on its growth strategy. During 2023, the Company added 78 locations through acquisition and 28 start-up locations, for a total of 106 new collision repair locations. In addition to location growth, Boyd was able to achieve same-store sales increases of 15.8%. Heading into 2024, the Company is facing strong comparative period same-store sales results. Thus far in the first quarter of 2024, same-store sales increases, while positive, are lower than the average quarterly ten year level of same-store sales growth of 5.9%. Mild winter weather impacted demand for glass services, which are already seasonally low in the fourth and first quarters of the year. The same weather is impacting demand for collision repair services. Performance of the business during the first quarter of 2024 has been challenged by a number of factors. During 2023, Boyd added a record number of new single locations, including 26 locations through acquisition and 11 start-up locations in the fourth quarter. These new locations negatively impact earnings during the first several quarters of operation, and typically mature to align with overall company performance over a two to three year period. While Boyd continues to receive pricing increases, labor margins remain consistent with the previous quarter and below historical levels. This remains a key area of focus for the Company, impacting both the gross margin percentage and Adjusted EBITDA margin percentage that can be achieved in the short term. As in prior years, the first quarter is burdened by higher payroll taxes that occur early in the year, while the fourth quarter of 2023 benefited from expense accrual reductions, as certain expense estimates were firmed up at amounts that were lower than previously estimated and accrued. As a result, thus far in the first quarter, Adjusted EBITDA dollars are trending slightly above levels achieved in the first quarter of the prior year, but below the level achieved in the fourth quarter. Despite these challenges, Boyd remains positive about the future of the business and the opportunities that lie ahead. The pipeline to add new locations and to expand into new markets is robust. Boyd has made investments in resources to support growth through single location, multi-location, or a combination of single and multi-location acquisitions. In addition, investments have been made to support growth through start-up locations. Together, these investments give the Company flexibility on how best to grow. Operationally, Boyd is focused on optimizing performance of new locations, as well as scanning and calibration services, and consistent execution of the WOW Operating Way. Given the high level of location growth in 2021, the strong same-store sales growth during 2022, and the combination of same-store sales growth and location growth in 2023, Boyd remains confident that the Company is on track to achieve its long-term growth goals, including doubling the size of the business on a constant currency basis from 2021 to 2025 against 2019 sales. In the long-term, management remains confident in its business model and its ability to increase market share by expanding its presence in North America through strategic acquisitions alongside organic growth from Boyd’s existing operations. Accretive growth will remain the Company’s long-term focus whether it is through organic growth, new store development, or acquisitions. The North American collision repair industry remains highly fragmented and offers attractive opportunities for industry leaders to build value through focused consolidation and economies of scale. As a growth company, Boyd’s objective continues to be to maintain a conservative dividend policy that will provide the financial flexibility necessary to support growth initiatives while gradually increasing dividends over time. The Company remains confident in its management team, systems and experience. This, along with a strong financial position and financing options, positions Boyd well for success into the future. BUSINESS ENVIRONMENT & STRATEGY The collision repair industry in North America is estimated by Boyd to represent over $47.6 billion U.S. in annual revenue. The industry is highly fragmented, consisting primarily of small independent family owned businesses operating in local markets. It is estimated that car dealerships have approximately 15% of the total market. It is believed that multi-unit collision repair operators with greater than $20 million in annual revenues (including multi-unit car dealerships), now have approximately 36% of the total market. Customer relationship dynamics in the Company’s principal markets differ from region to region. In the United States, Ontario, and Alberta, where private insurers operate, a greater emphasis is placed on establishing and maintaining Direct 11 Repair Programs (“DRP’s”) and other referral arrangements with insurance companies. DRP’s are established between insurance companies and collision repair shops to better manage automobile repair claims and increase levels of customer satisfaction. Insurance companies select collision repair operators to participate in their programs based on integrity, convenience and physical appearance of the facility, quality of work, customer service, cost of repair, cycle time and other key performance metrics. Major insurers use performance-based criteria for selecting collision repair partners. Local and regional DRP’s, and national and self-managed DRP relationships, represent an opportunity for Boyd to increase its business. Insurers have also moved to consolidate DRP repair volumes with a fewer number of repair shops. There is some preference among some insurance carriers to do business with multi-location collision repairers in order to reduce the number and complexity of contacts necessary to manage their networks of collision repair providers and to achieve a higher level of consistent performance. Boyd continues to develop and strengthen its DRP relationships with insurance carriers in both Canada and the United States and believes it is well positioned to take advantage of these trends. Boyd manages relationships in the government-owned insurance markets through active participation in industry associations. In three of the Canadian provinces where Boyd operates, government-owned insurance companies have, by legislation, either exclusive or semi-exclusive rights to provide insurance to automobile owners. Although Boyd’s services in these markets are predominantly paid for by government-owned insurance companies, these insurers do not typically refer insured automobile owners to specific collision repair centers. In these markets, business is driven by performance and through consumer based advertising. As described further under “Business Risks and Uncertainties”, operating results are expected to be subject to fluctuations or trends due to a variety of factors including availability of qualified employees, availability of parts, pricing by insurance companies, general operating effectiveness, automobile technologies, general and regional economic downturns, unemployment rates and weather conditions. A downturn in the economic climate has the potential to affect results negatively. Boyd has worked to mitigate this risk by continuing to focus on meeting insurance companies’ performance requirements, and in doing so, grow market share. Through these strategies, Boyd expects to generate growth sufficient to double the size of the business on a constant currency revenue basis from 2021 to 2025, based on 2019 revenues, implying a compound annual growth rate of 15 percent. Boyd will continue to pursue accretive growth through a combination of organic growth (same-store sales1 growth) as well as adding new locations to the network in the United States and Canada. 1 As defined in the non-GAAP financial measures and ratios section of the MD&A 12 BUSINESS STRATEGY Operational Excellence Operational excellence has been a key component of Boyd’s past success and has contributed to the Company being viewed as an industry leading service provider. Delivering on our customers’ expectations related to cost of repair, time to repair, quality and customer service are critical to being successful and being rewarded with same-store sales2 growth. The Company’s commitment to operational excellence is embodied in its mission and goal, which is condensed into a top of mind cheer for its employees which is ‘Wow every customer, be the best’. In 2015, Boyd rolled out and implemented its Wow Operating Way process improvement initiative which is now in place at all of its locations, except newly acquired locations, where it will be implemented as part of acquisition integration. In 2022, Boyd expanded its Wow Operating Way practices to corporate business processes. The Wow Operating Way is a series of systems, processes and measurements that drive excellence in customer satisfaction, repair cycle times and operational metrics. Boyd also conducts extensive customer satisfaction polling at all operating locations to assist in keeping customer satisfaction at the forefront of its mandate. Boyd will also continue to invest in its infrastructure, process improvement initiatives and IT systems to contribute to high quality service to its customers and improved operational performance. Expense Management Boyd continues to manage its operating expenses as a percentage of sales. Over the last few years, Boyd has made incremental expense investments that are important for the long-term success of the business, including investing in key support functions. While expense management is critical, so is making the right expense investments. By working continuously to identify cost savings and to achieve same-store sales2 growth, Boyd will continue to manage this expense ratio. Operating expenses have a fixed component and therefore same-store sales2 growth contributes to a lower percentage of operating expenses to sales. 2 As defined in the non-GAAP financial measures and ratios section of the MD&A 13 Same-Store Sales3 / Optimize Returns Increasing same-store sales3 has a positive impact on financial performance. Boyd continues to pursue and execute on strategies to help grow same-store sales3 ,including opportunities to grow same-store sales through increased scanning and calibration services in both collision and glass repair. Boyd is committed to addressing the labor market challenges, that are currently limiting capacity and same-store sales3, by focusing on retention and recruitment, investing in the Technician Development Program and focusing on opportunities for productivity improvements. New Location and Acquisition Growth In line with stated growth strategies, Boyd was successful in opening 106 new collision repair locations in 2023. Boyd will continue to pursue accretive growth through a combination of organic growth (same-store sales3 growth) as well as acquisitions and new store development. Acquisitions will include both single-location acquisitions as well as multi-location acquisitions. Through organic growth, acquisitions and new store development, Boyd expects to generate growth sufficient to double the size of its business (measured against its 2019 revenue on a constant currency basis) over the five year period from 2021-2025, implying a compound annual growth rate of 15%. CAUTION CONCERNING FORWARD-LOOKING STATEMENTS Statements made in this annual report, 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. 3 As defined in the non-GAAP financial measures and ratios section of the MD&A 14 The following table outlines forward-looking information included in this MD&A: Forward-looking Information The stated objective of generating growth sufficient to double the size of the business over the five year period from 2021 to 2025, based on 2019 revenues Boyd remains confident in its business model to increase market share by expanding its presence in North America through strategic and accretive acquisitions alongside organic growth from Boyd’s existing operations Key Assumptions Opportunities continue to be available and are at acceptable and accretive prices Most Relevant Risk Factors Acquisition market conditions change and repair shop owner demographic trends change Financing options continue to be available at reasonable rates and on acceptable terms and conditions New and existing customer relationships are expected to provide acceptable levels of revenue opportunities Anticipated operating results would be accretive to overall Company results Growth is defined as revenue on a constant currency basis Initiatives to increase production capacity are successful Credit and refinancing conditions prevent or restrict the ability of the Company to continue growth strategies Changes in market conditions and operating environment Significant decline in the number of insurance claims Integration of new stores is not accomplished as planned Increased competition which prevents achievement of acquisition and revenue goals Initiatives to increase production capacity take longer than expected or are not successful Re-emergence of stability in economic conditions and employment rates Economic conditions deteriorate New and existing customer relationships are expected to provide acceptable levels of revenue opportunities The Company’s customer and supplier relationships provide it with competitive advantages to increase sales over time Market share growth will more than offset systemic changes in the industry and environment Loss of one or more key customers or loss of significant volume from any customer Decline in the number of insurance claims Inability of the Company to pass cost increases to customers over time Increased competition which may prevent achievement of revenue goals Changes in market conditions and operating environment Anticipated operating results would be accretive to overall Company results Changes in weather conditions Inability to maintain, replace or grow technician capacity could impact organic growth Stated objective to gradually increase dividends over time Growing profitability of the Company and its subsidiaries BGSI is dependent upon the operating results of the Company The continued and increasing ability of the Company to generate cash available for dividends Economic conditions deteriorate Changes in weather conditions Balance sheet strength and flexibility is maintained and the dividend level is manageable taking into consideration bank covenants, growth requirements and maintaining a dividend level that is supportable over time Decline in the number of insurance claims Loss of one or more key customers or loss of significant volume from any customer Changes in government regulation 15 During 2024, the Company plans to make cash capital expenditures, excluding those related to acquisition and development of new locations, within the range of 1.8% and 2.0% 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 future. The in investment expected in 2024 is in the range of $14M to $17M, with similar investments expected in 2025. the Boyd has made good progress with many clients, but has not achieved the level of pricing that will return labor margins to historical levels. Further increases are needed to address ongoing wage pressure. The actual cost for these capital expenditures agrees with the original estimate Expected actual expenditures could be above or below 1.8% to 2.0% of sales The purchase, delivery and installation of the capital items is consistent with the estimated timeline No other new capital requirements are identified or required during the period The timing of the expenditures could occur on a different timeline BGSI may identify additional capital expenditure needs that were not originally anticipated All identified capital requirements are required during the period BGSI may identify capital expenditure needs that were originally anticipated; however, are no longer required or required on a different timeline Price increases will be negotiated and agreed upon by key clients Inability of the Company to pass cost increases to customers over time Demand for services will continue to grow, allowing Boyd to focus on higher margin business Wage inflation will return to historical levels and will not outpace pricing increases Decline in the number of insurance claims Loss of one or more key customers or loss of significant volume from any customer Changes in market conditions and operating environment Supply chain disruption is transitory and will normalize as underlying issues are resolved Wage inflation continues in excess of historical levels and outpaces pricing increases Internal training and development programs, including the Technician Development Program, will improve staffing availability Supply chain remains disrupted Internal training and development programs do not improve staffing availability We caution that the foregoing table contains what BGSI believes are the material forward-looking statements and is not exhaustive. Therefore when relying on forward-looking statements, investors and others should refer to the “Risk Factors” section of BGSI’s Annual Information Form, the “Business Risks and Uncertainties” and other sections of our Management’s Discussion and Analysis and our other periodic filings with Canadian securities regulatory authorities. All forward-looking statements presented herein should be considered in conjunction with such filings. 16 SELECTED ANNUAL INFORMATION The following table summarizes selected financial information for BGSI over the prior three years: For the years ended December 31, (thousands of U.S. dollars, except per unit/share amounts) 2023 2022 2021 Sales Net earnings Adjusted net earnings (2) Basic and diluted earnings per share Adjusted net earnings per share (2) Cash dividends per share declared: Share dividends (1) December 31, (thousands of U.S. dollars) Total assets Total long-term financial liabilities $2,945,988 $2,432,318 $1,872,670 $86,656 $89,683 $4.04 $4.18 $40,962 $42,366 $1.91 $1.97 $23,540 $28,006 $1.10 $1.30 $0.44 $0.45 $0.45 2023 2022 2021 $ $ 2,382,416 $ 2,102,832 $ 2,027,127 1,082,067 $ 931,941 $ 933,020 (1) Dividends and distributions continue to be declared and paid in Canadian dollars. In 2023, the annual dividend declared totaled C$0.591 (2022 - C$0.579, 2021 - C$0.567) (2) As defined in the non-GAAP financial measures and ratios section of the MD&A Financial results, including sales, net earnings, and adjusted net earnings4, improved in 2023 compared to 2022 and 2021. The increase in sales, net earnings and adjusted net earnings in 2023 is due to increases in same store sales as well as location growth. In 2021 and 2022, financial results were negatively impacted by the COVID-19 pandemic, supply chain disruption and a highly competitive labor market which translated into significant wage pressure and labor margin compression. In addition, a lack of fixed cost absorption due to lower sales per location than pre-pandemic levels impacted financial results in 2021 and 2022. After a temporary pause on acquisitions from March to August of 2020, acquisition activity resumed; however, new locations experienced the same challenges during 2021 and 2022, which constrained sales and net earnings levels. The change in total assets and total long-term financial liabilities was significantly impacted by acquisitions and new location growth. In addition to these changes, fluctuations in total assets from 2021 to 2023 have primarily related to increases in property, plant and equipment, intangible assets and goodwill as a result of new location growth. During this timeframe, long-term financial liabilities were also impacted by financing of acquisitions and new location growth. Since the end of 2007 through the end of 2023, BGSI increased dividends to shareholders. As of March 19, 2024 the dividend rate is C$0.15 per quarter or C$0.60 on an annualized basis. BOYD GROUP SERVICES INC. The consolidated financial statements of BGSI and its subsidiaries have been prepared in accordance with International Financial Reporting Standards and contain the consolidated financial position, results of operations and cash flows of BGSI, the Company and the Company’s subsidiary companies for the year ended December 31, 2023. 4 As defined in the non-GAAP financial measures and ratios section of the MD&A 17 NON-GAAP FINANCIAL MEASURES AND RATIOS EBITDA AND ADJUSTED EBITDA Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is not a calculation defined in International Financial Reporting Standards (“IFRS”). EBITDA should not be considered an alternative to net earnings in measuring the performance of BGSI, nor should it be used as an exclusive measure of cash flow. BGSI reports EBITDA and Adjusted EBITDA because they are key measures that management uses to evaluate performance of the business and to reward its employees. EBITDA is also a concept utilized in measuring compliance with debt covenants. EBITDA and Adjusted EBITDA are measures commonly reported and widely used by investors and lending institutions as an indicator of a company’s operating performance and ability to incur and service debt, and as a valuation metric. While EBITDA is used to assist in evaluating the operating performance and debt servicing ability of BGSI, investors are cautioned that EBITDA and Adjusted EBITDA as reported by BGSI may not be comparable in all instances to EBITDA as reported by other companies. CPA Canada’s Canadian Performance Reporting Board defined Standardized EBITDA to foster comparability of the measure between entities. Standardized EBITDA represents an indication of an entity’s capacity to generate income from operations before taking into account management’s financing decisions and costs of consuming tangible and intangible capital assets, which vary according to their vintage, technological age and management’s estimate of their useful life. Accordingly, Standardized EBITDA comprises sales less operating expenses before finance costs, capital asset amortization and impairment charges, and income taxes. Adjusted EBITDA is calculated to exclude items of an unusual nature that do not reflect normal or ongoing operations of BGSI and which should not be considered in a valuation metric or should not be included in an assessment of the ability to service or incur debt. Included as an adjustment to EBITDA are acquisition and transaction costs and fair value adjustments to contingent consideration, which do not relate to the current operating performance of the business units but are typically costs incurred to expand operations. From time to time BGSI may make other adjustments to its Adjusted EBITDA for items that are not expected to recur. The following is a reconciliation of BGSI’s net earnings to Standardized EBITDA and Adjusted EBITDA: ADJUSTED EBITDA (thousands of U.S. dollars) Net earnings Add: Three Months Ended December 31, Year Ended December 31, 2023 2022 2023 2022 $ 19,066 $ 14,184 $ 86,656 $ 40,962 Finance costs Income tax expense Depreciation of property, plant and equipment Depreciation of right of use assets Amortization of intangible assets 14,052 8,008 16,224 28,663 6,896 9,967 5,179 12,279 26,035 6,473 51,718 32,865 56,863 109,806 26,182 37,308 17,765 47,902 101,150 26,567 Standardized EBITDA Add: Fair value adjustments Acquisition and transaction costs $ 92,909 $ 74,117 $ 364,090 $ 271,654 (189) 1,487 — 576 (189) 4,346 146 1,700 Adjusted EBITDA $ 94,207 $ 74,693 $ 368,247 $ 273,500 18 ADJUSTED NET EARNINGS In addition to Standardized EBITDA and Adjusted EBITDA, BGSI believes that certain users of financial statements are interested in understanding net earnings excluding certain fair value adjustments and other items of an unusual or infrequent nature that do not reflect normal or ongoing operations of the Company. This can assist these users in comparing current results to historical results that did not include such items. The following is a reconciliation of BGSI’s net earnings to adjusted net earnings: (thousands of U.S. dollars, except share and per share amounts) Three Months Ended December 31, 2023 2022 Year Ended December 31, 2023 2022 Net earnings Add: $ 19,066 $ 14,184 $ 86,656 $ 40,962 Fair value adjustments (non-taxable) Acquisition and transaction costs (net of tax) (189) 1,100 — 426 (189) 3,216 146 1,258 Adjusted net earnings Weighted average number of shares Adjusted net earnings per share $ $ 19,977 $ 14,610 $ 89,683 $ 42,366 21,472,194 21,472,194 21,472,194 21,472,194 0.93 $ 0.68 $ 4.18 $ 1.97 SAME-STORE SALES Same-store sales is a measure of sales that includes only those locations in operation for the full comparative period. Same- store sales is presented excluding the impact of foreign exchange on the current period. Same-store sales is calculated by applying the prior period exchange rate to the current year sales. The following is a reconciliation of BGSI’s sales to same- store sales: (thousands of U.S. dollars) Sales Less: Three months ended December 31, Year ended December 31, 2023 2022 2023 2022 $ 740,014 $ 637,094 $ 2,945,988 $ 2,432,318 Sales from locations not in the comparative period Sales from under-performing facilities closed during the period Foreign exchange Same-store sales (excluding foreign exchange) $ (49,434) (1,360) (180,560) (33,978) (9) (102) 690,469 $ (359) — 635,375 $ — 8,736 2,774,164 $ (2,938) — 2,395,402 19 Dividends BGSI declared dividends of C$0.147 per share in each of the first, second and third quarters of 2023 and C$0.15 per share in the fourth quarter of 2023 (2022 - C$0.144 and C$0.147 respectively). Dividends to shareholders of BGSI were declared and paid as follows: (thousands of U.S. dollars) Record date March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 Payment date April 26, 2023 July 27, 2023 October 27, 2023 January 29, 2024 (thousands of U.S. dollars) Record date March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 Payment date April 27, 2022 July 27, 2022 October 27, 2022 January 27, 2023 Dividend amount 2,306 $ 2,376 2,333 2,397 $ 9,412 Dividend amount 2,441 $ 2,413 2,321 2,324 $ 9,499 20 RESULTS OF OPERATIONS Results of Operations (thousands of U.S. dollars, except per share amounts) Three months ended December 31, 2022 % change 2023 Year ended December 31, % change 2023 2022 Sales - Total Same-store sales - Total (1) (excluding foreign exchange) Gross margin % Operating expense % Adjusted EBITDA (1) Acquisition and transaction costs Depreciation and amortization Fair value adjustments Finance costs Income tax expense 740,014 16.2 637,094 2,945,988 21.1 2,432,318 690,469 8.7 635,375 2,774,164 15.8 2,395,402 45.5 32.7 94,207 1,487 51,783 (189) 14,052 8,008 2.7 0.3 44.3 32.6 45.5 33.0 26.1 158.2 15.6 N/A 41.0 54.6 74,693 576 44,787 — 9,967 5,179 368,247 4,346 192,851 (189) 51,718 32,865 1.8 (1.5) 34.6 155.6 9.8 N/A 38.6 85.0 44.7 33.5 273,500 1,700 175,619 146 37,308 17,765 Adjusted net earnings (1) 19,977 36.7 14,610 89,683 111.7 42,366 Adjusted net earnings per share (1) 0.93 36.8 0.68 4.18 112.2 1.97 Net earnings Basic and diluted earnings per share 19,066 34.4 14,184 86,656 111.6 40,962 0.89 34.4 0.66 4.04 111.6 1.91 (1) As defined in the non- GAAP financial measures and ratios section of the MD&A. 21 Sales Sales totaled $2.9 billion for the year ended December 31, 2023 an increase of $513.7 million or 21.1% when compared to the same period of 2022. The increase in sales was the result of the following: • • • Same-store sales5 excluding foreign exchange increased $378.8 million or 15.8%, partially offset by a decrease of $8.7 million due to the translation of same-store sales5 at a lower Canadian dollar exchange rate. The year ended December 31, 2023 recognized one less selling and production day when compared to the same period of the prior year, which decreased selling and production capacity by approximately 0.4%. Same-store sales benefited from high levels of demand for services, as well as some increase in production capacity related to technician hiring, growth in the Technician Development Program, as well as productivity improvement, although ongoing staffing constraints continued to impact sales and service levels that could be achieved. Sales also increased based on higher repair costs due to increasing vehicle complexity, increased scanning and calibration services, as well as general market inflation. $146.6 million of incremental sales were generated from 186 new locations that were not in operation for the full comparative period. Sales were affected by the closure of under-performing facilities which decreased sales by $2.9 million. Same-store sales are calculated by including sales for locations and businesses that have been in operation for the full comparative period. Gross Profit Gross Profit was $1.3 billion or 45.5% of sales for the year ended December 31, 2023 compared to $1.1 billion or 44.7% of sales for the same period in 2022. Gross profit increased $252.7 million primarily as a result of same-store sales and location growth when compared to the prior period. The gross margin percentage benefited from improved glass margins, higher paint and parts margins and increased scanning and calibration. Client pricing increases resulted in improvement in labor margins; however, margins remain below historical levels. Certain performance based programs, which were suspended during the pandemic and pandemic related disruptions, have been reinstituted, which partially offset improvements to gross margin during 2023 as compared to the same period in 2022. Operating Expenses Operating Expenses for the year ended December 31, 2023 increased $158.0 million to $971.8 million from $813.8 million for the same period of 2022. The increase in operating expenses was primarily the result of increased sales based on same- store sales as well as location growth, in addition to inflationary increases. In addition, Boyd has made incremental expense investments that are important for the long-term success of the business, including investing in key support functions. Closed locations lowered operating expenses by $1.7 million. Operating expenses as a percentage of sales were 33.0% for the year ended December 31, 2023, which compared to 33.5% for the same period in 2022. The decrease as a percentage of sales was impacted by improved sales levels, which provided improved leveraging of certain operating costs. This improvement was moderated by incremental expense investments, including the expansion of certain key support functions, as well as investments to support growth through both acquisition and start-up locations. During 2023, Boyd added a record number of new single locations. These new locations contributed sales but with a higher operating expense ratio. Acquisition and Transaction Costs Acquisition and Transaction Costs for the year ended December 31, 2023 were $4.3 million compared to $1.7 million recorded for the same period of 2022. The costs relate to various acquisitions, including acquisitions from prior periods, as well as other completed or potential acquisitions. Acquisition and transaction costs increased due to increased acquisition activity in 2023 when compared to 2022. 5 As defined in the non-GAAP financial measures and ratios section of the MD&A 22 Adjusted EBITDA6 Earnings before interest, income taxes, depreciation and amortization, adjusted for contingent consideration, as well as acquisition and transaction costs (“Adjusted EBITDA6”) for the year ended December 31, 2023 totaled $368.2 million or 12.5% of sales compared to Adjusted EBITDA6 of $273.5 million or 11.2% of sales in the same period of the prior year. The $94.7 million increase was primarily the result of improved sales levels and gross margin percentage, which also provided improved leveraging of certain operating costs. Depreciation and Amortization Depreciation related to property, plant and equipment totaled $56.9 million or 1.9% of sales for the year ended December 31, 2023, an increase of $9.0 million when compared to the $47.9 million or 2.0% of sales recorded in the same period of the prior year. The increase in depreciation expense was primarily due to location growth as well as investments in capital equipment. Same-store sales increases resulted in a decrease in depreciation expense as a percentage of sales during 2023. Depreciation related to right of use assets totaled $109.8 million, or 3.7% of sales for the year ended December 31, 2023, as compared to $101.2 million or 4.2% of sales for the same period of the prior year. The increase in depreciation expense was primarily due to location growth. Same-store sales increases resulted in a decrease in depreciation expense as a percentage of sales during 2023. Amortization of intangible assets for the year ended December 31, 2023 totaled $26.2 million or 0.9% of sales, a decrease of $0.4 million when compared to the $26.6 million or 1.1% of sales expensed for the same period in the prior year. The decrease in amortization was primarily due to the full amortization of certain non-compete agreements. Same-store sales increases resulted in a decrease in amortization expense as a percentage of sales during 2023. Finance Costs Finance Costs of $51.7 million or 1.8% of sales for the year ended December 31, 2023 increased from $37.3 million or 1.5% of sales for the same period of the prior year. The increase in finance costs was primarily due to higher variable interest rates on the revolving credit facility, as well as increased lease liabilities, as a result of acquisition activity and lease renewals. Income Taxes Current and Deferred Income Tax Expense of $32.9 million for the year ended December 31, 2023 compared to an expense of $17.8 million for the same period of the prior year. Income tax expense was impacted by the recording of state-related adjustments related to the completion and filing of the prior year U.S. tax returns, which increased income tax expense by approximately $1.2 million for the year ended December 31, 2023 (December 31, 2022 - $2.0 million). Permanent differences did not have a significant impact on the tax computed on accounting income. Net Earnings and Earnings Per Share Net Earnings for the year ended December 31, 2023 was $86.7 million or 2.9% of sales compared to $41.0 million or 1.7% of sales in the same period of the prior year. The net earnings amount in 2023 was impacted by acquisition and transaction costs of $3.2 million (net of tax). After adjusting for fair value and other unusual items, Adjusted net earnings7 in 2023 was $89.7 million, or 3.0% of sales. This compares to Adjusted net earnings7 of $42.4 million or 1.7% of sales in 2022. Adjusted net earnings for the period was positively impacted by increased sales, improvements in gross margin percentage as well as improved leveraging of operating expenses. Certain costs, such as depreciation and amortization, are not variable and same- store sales increases resulted in a decrease in depreciation and amortization expense as a percentage of sales during 2023. 6 As defined in the non-GAAP financial measures and ratios section of the MD&A 7 As defined in the non-GAAP financial measures and ratios section of the MD&A 23 Basic and Diluted Earnings Per Share was $4.04 per share for the year ended December 31, 2023 compared to $1.91 for the same period of 2022. Adjusted net earnings per share7 was $4.18 compared to $1.97 for the same period of 2022. The increase in adjusted net earnings per share is primarily attributed to increased sales, improvements in gross margin percentage as well as improved leveraging of operating expenses. Summary of Quarterly Results (in thousands of U.S. dollars, except per share amounts) Sales Adjusted EBITDA (1) Net earnings Basic and diluted earnings per share Adjusted net earnings (1) Adjusted net earnings per share (1) $ $ $ $ $ $ 2023 Q4 2023 Q3 2023 Q2 2023 Q1 2022 Q4 2022 Q3 2022 Q2 2022 Q1 740,014 $ 737,798 $ 753,235 $ 714,941 $ 637,094 $ 625,663 $ 612,806 $ 556,755 94,207 $ 93,972 $ 95,374 $ 84,694 $ 74,693 $ 73,042 $ 72,003 $ 53,762 19,066 $ 20,498 $ 26,269 $ 20,823 $ 14,184 $ 11,872 $ 13,298 $ 1,608 0.89 $ 0.95 $ 1.22 $ 0.97 $ 0.66 $ 0.55 $ 0.62 $ 0.07 19,977 $ 21,483 $ 26,988 $ 21,234 $ 14,610 $ 12,052 $ 13,558 $ 2,145 0.93 $ 1.00 $ 1.26 $ 0.99 $ 0.68 $ 0.56 $ 0.63 $ 0.10 (1) As defined in the non-GAAP financial measures and ratios section of the MD&A. LIQUIDITY AND CAPITAL RESOURCES Cash flow from operations, together with cash on hand and undrawn credit on existing facilities are expected to be sufficient to meet operating requirements, capital expenditures and dividends. At December 31, 2023, BGSI had cash, net of outstanding deposits and cheques, held on deposit in bank accounts totaling $22.5 million (December 31, 2022 - $15.1 million). The increase in the cash balance as at December 31, 2023 is the result of increased cash flows from operations. The net working capital ratio (current assets divided by current liabilities) was 0.63:1 at December 31, 2023 (December 31, 2022 – 0.65:1). At December 31, 2023, BGSI had total debt outstanding, net of cash, of $1,114.5 million compared to $1,048.8 million at September 30, 2023, $1,004.5 million at June 30, 2023, $1,008.8 million at March 31, 2023 and $963.0 million at December 31, 2022. Debt, net of cash, increased when compared to the prior year primarily as a result of an increased acquisition activity and increased capital expenditures, including start-up location growth. 24 Total debt, net of cash (thousands of U.S. dollars) Revolving credit facility & swing line (net of financing costs) Term Loan A (net of financing costs) Seller notes (1) December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 $ 264,046 $ 219,753 $ 174,507 $ 184,094 $ 124,812 124,802 124,783 124,773 32,847 34,274 37,447 40,295 192,343 124,759 43,069 Total debt before lease liabilities $ 421,705 $ 378,829 $ 336,737 $ 349,162 $ 360,171 Cash 22,511 22,059 19,887 11,036 15,068 Total debt, net of cash before lease liabilities Lease liabilities $ 399,194 $ 356,770 $ 316,850 $ 338,126 $ 345,103 715,277 692,078 687,685 670,629 617,926 Total debt, net of cash (1) Seller notes are loans granted to the Company by the sellers of businesses related to the acquisition of those businesses. 1,114,471 $ 1,004,535 $ 1,048,848 $ $ 1,008,755 $ 963,029 The following table summarizes the undiscounted contractual obligations at December 31, 2023 and required payments over the next five years: Contractual Obligations (thousands of U.S. dollars) Bank indebtedness Accounts payable and accrued liabilities Long-term debt Lease liability Purchase Obligations (1) Total $— Within 1 year $— 1 to 2 years $— 2 to 3 years $— 3 to 4 years $— 339,823 339,823 — — — 421,705 22,038 271,553 2,443 125,582 4 to 5 years $— — 89 After 5 years $— — — 883,340 141,905 133,986 117,911 102,699 82,499 304,340 — unknown unknown unknown unknown unknown unknown $1,644,868 $503,766 $405,539 $120,354 $228,281 $82,588 $304,340 (1) Subject to fulfilling certain conditions such as meeting contractual purchase obligations and no change in control the repayment would be nil 25 Operating Activities Cash flow generated from operations before considering working capital changes, was $338.5 million for the year ended December 31, 2023 compared to $265.8 million in 2022. For the year ended December 31, 2023, changes in working capital items provided net cash of $19.1 million compared with using net cash of $1.5 million in the same period of 2022. Changes in accounts receivable, inventory, prepaid expenses, income taxes, accounts payable and accrued liabilities are significantly influenced by timing of collections and expenditures. Financing Activities Cash used in financing activities totaled $105.9 million for the year ended December 31, 2023 compared to cash used in financing activities of $228.4 million for the same period of the prior year. During 2023, cash was provided by draws of the revolving credit facility in the amount of $260.5 million offset by cash used to repay draws as well as long-term debt associated with seller notes in the amount of $205.8 million and to fund interest costs on long-term debt of $19.8 million. Cash used by financing activities included $99.3 million in repayments of lease liabilities and cash used to fund interest costs on lease liabilities of $32.1 million. Cash was also used to pay dividends of $9.4 million. During 2022, cash was provided by draws of the revolving credit facility in the amount of $126.1 million offset by cash used to repay draws as well as long-term debt associated with seller notes in the amount of $211.9 million and to fund interest costs on long-term debt of $15.5 million. Cash used by financing activities included $95.3 million used to repay lease liabilities and cash used to fund interest costs on lease liabilities of $21.8 million. Cash was also used to pay dividends of $9.5 million. The Company amended the revolving credit facility, resulting in the payment of $0.5 million of financing costs. Debt Financing On March 17, 2020, the Company entered into a third amended and restated credit agreement (“Credit Agreement”), increasing the revolving credit facility to $550 million U.S., with an accordion feature which can increase the facility to a maximum of $825 million U.S. (the “revolving credit facility”, or the “facility”). The revolving credit facility is accompanied by a seven-year fixed-rate Term Loan A in the amount of $125 million U.S. at an interest rate of 3.455%. The revolving credit facility is with a syndicate of Canadian and U.S. banks and is secured by the shares and assets of the Company as well as guarantees by BGSI and subsidiaries, while the Term Loan A is with one of the syndicated banks. The interest rate for draws on the revolving credit facility are based on a pricing grid of BGSI’s ratio of total funded debt to EBITDA as determined under the Credit Agreement. The Company can draw the facility in either the U.S. or in Canada, in either U.S. or Canadian dollars. The Company can make draws in tranches as required. Tranches bear interest only and are not repayable until the maturity date but can be voluntarily repaid at any time. The Company has the ability to choose the base interest rate between Prime, Bankers Acceptances (“BA”), U.S. Prime or the Secured Overnight Financing Rate (“SOFR”) at the Company’s election. The total syndicated facility includes a swing line up to a maximum of $10.0 million U.S. in Canada and $30.0 million U.S. in the U.S. At December 31, 2023, the Company has drawn $264.5 million U.S. (December 31, 2022 - $186.5 million U.S.) and $nil Canadian (December 31, 2022 - $9 million Canadian) on the revolving credit facility and swing line and $125.0 million U.S. (December 31, 2022 - $125.0 million U.S.) on the Term Loan A. Under the revolving credit facility, the Company is subject to certain financial covenants which must be maintained to avoid acceleration of the termination of the Credit Agreement. The financial covenants require BGSI to maintain a senior funded debt to EBITDA ratio of less than 3.50 and an interest coverage ratio of greater than 2.75. For four quarters following a material acquisition, the senior funded debt to EBITDA ratio may be increased to less than 4.00. For purposes of covenant calculations, property lease payments are deducted from EBITDA. The Company supplements its debt financing by negotiating with sellers in certain acquisitions to provide financing to the Company in the form of term notes. The notes payable to sellers are typically at favorable interest rates and for terms of one to 15 years. This source of financing is another means of supporting BGSI’s growth, at a relatively low cost. During the year ended December 31, 2023, BGSI entered into 33 new seller notes for an aggregate amount of $6.5 million. 26 Shareholders’ Capital During the first quarter of 2021, the Company instituted a stock option plan for senior management, which was approved by shareholders on May 12, 2021. The Company's stock option plan allows for the granting of options up to an amount of 250,000 Common shares under this plan. Each tranche of the options vests equally over two, three, four and five year periods. The term of an option shall be determined and approved by the People, Culture and Compensation Committee; provided that the term shall be no longer than ten years from the grant date. On March 31, 2021 the Company issued 13,831 options under the stock option plan with a grant date fair value of C$56.99 per option and an exercise price of C$219.21 per option. As at December 31, 2023, 11,232 options remain issued and outstanding, 25% of which have vested. Issue costs of $105 were incurred with respect to the stock option plan. On March 31, 2022, the Company issued an additional 18,878 options under the stock option plan with a grant date fair value of C$47.08 per option and an exercise price of C$164.68 per option. As at December 31, 2023, 16,533 options remain issued and outstanding. None of the options are exercisable at period end. Issue costs of $nil were incurred with respect to the 2022 options issued under the stock option plan. On March 29, 2023 and during the second quarter of 2023 the Company issued 28,292 and 435 options, respectively, under the stock option plan with a grant date fair value of C$71.64 per option and an exercise price of C$211.26 per option.As at December 31, 2023, 26,794 options remain issued and outstanding. None of the options are exercisable at period end. Issue costs of $nil were incurred with respect to the 2023 options issued under the stock option plan. Investing Activities Cash used in investing activities totaled $244.4 million for the year ended December 31, 2023. This compares to $47.9 million used in the prior period. The investing activity in both periods related primarily to new location growth that occurred during these periods. During the year ended December 31, 2022, the Company completed sale leaseback transactions for proceeds of $55.1 million. The increase in start-up locations resulted in a build up of real estate assets. The Company’s strategy has been to not hold real estate in the long term, although the increase in new location development may periodically cause real estate to be held in the short term. The sale leaseback transactions allowed the Company to replenish capital while continuing to use these properties. The remaining investing activity in both periods related primarily to new location growth that occurred during these periods. 27 Acquisitions and Development of Businesses During 2023, the Company added 78 locations through acquisition and 28 start-up locations, for a total of 106 new collision repair locations. From January 1, 2024 up to the reporting date of March 19, 2024, the Company has added nine locations through acquisition and one start-up location. These new collision repair locations are as follows: Date January 3, 2023 January 6, 2023 January 16, 2023 January 18, 2023 January 18, 2023 February 3, 2023 February 3, 2023 February 3, 2023 February 8, 2023 February 10, 2023 February 10, 2023 February 17, 2023 February 22, 2023 February 27, 2023 February 28, 2023 March 17, 2023 March 22, 2023 March 24, 2023 March 24, 2023 March 28, 2023 March 28, 2023 March 28, 2023 March 29, 2023 April 21, 2023 April 21, 2023 April 21, 2023 April 27, 2023 April 28, 2023 April 28, 2023 May 5, 2023 May 9, 2023 May 12, 2023 May 23, 2023 May 26, 2023 May 26, 2023 May 26, 2023 May 31, 2023 June 2, 2023 June 16, 2023 June 16, 2023 June 23, 2023 June 23, 2023 June 27, 2023 June 29, 2023 Location Cameron Park, CA Abilene, TX Lethbridge, AB Venice, FL Park City, UT Hendersonville, NC Rogers, MN Tontitown, AR Ocala, FL Lansdale, PA Sacramento, CA Murrieta, CA LaBelle, FL Perry, GA New Port Richey, FL Rancho Cucamonga, CA Sacramento, CA Modesto, CA Prattville, AL Longview, TX Charleroi, PA Simpsonville, NC Sharpsburg, GA Griffin, GA Huntsville, AL Baltimore, MD Stockton, CA Lake Charles, LA Kailua-Kona, HI Puyallup, WA Iowa City, IA Mills River, NC Winterville, NC Fort Lauderdale, FL Monroe, MI Chicago, IL Albany, NY Merced, CA Sacramento, Davis & Yuba City, CA (3 locations) Austin, TX Fridley, MN Red Bluff, CA Johnson City, NY Walla Walla, WA Previously operated as Cameron Park Auto Body Gibb’s Paint & Body, LLC n/a start-up n/a start-up CKM Collision Hill's Collision Center Excalibur Collision & Conversion Center n/a start-up n/a start-up Old Forge Collision Center Franklin Collision Center n/a start-up Direct Repair Collision Center Cochran Coach Works n/a start-up Proline Auto Collision Center Aries Auto Body The Professionals Auto Body Works Advanced Collision One Stop Automotive Russell’s Body & Frame Service n/a start-up B & B Body Shop Nicolas Auto Repair & Body Shop Sledge Custom Body Shop Moore’s Body Shop Prestige Auto Body n/a start-up Auto Body Hawaii South Hill Collision Arena Auto Body n/a start-up n/a start-up Hi-Teck Collision Paint & Body Shop Auto Body Plant Inc. Paul Ries & Sons Colby Body & Fender Works Rumin’s Auto Body G&R Automotive/Natomas Auto Body & Paint Fix A Wreck Collision Center City Collision & Glass Gary’s Auto body n/a start-up Tietan Auto Body 28 Location Woodstock, IL Ames, IA Wildwood, FL Donaldsonville, LA Perrysburg, OH Redding, CA Lafayette & New Iberia, LA (2 locations) Oroville, CA Toledo, OH Joplin, MO Coon Rapids, MN Chicago, IL Lake Park, FL Alexandria, MN Albion, NY Lincoln Park, MI River Falls, WI Troy, MI Date June 30, 2023 June 30, 2023 July 14, 2023 July 14, 2023 July 21, 2023 July 21, 2023 July 21, 2023 July 28, 2023 July 31, 2023 July 31, 2023 August 15, 2023 August 15, 2023 August 18, 2023 August 25, 2023 September 6, 2023 September 8, 2023 September 8, 2023 September 12, 2023 September 22, 2023 Kingston, NY September 22, 2023 October 6, 2023 October 13, 2023 October 20, 2023 October 27, 2023 November 3, 2023 November 3, 2023 November 7, 2023 November 8, 2023 November 9, 2023 November 10, 2023 November 10, 2023 November 14, 2023 November 16, 2023 Naples, FL November 17, 2023 North Port, FL November 17, 2023 Walker, LA November 25, 2023 Muskegon, MI November 25, 2023 Owensboro, KY November 27, 2023 Houston, TX November 28, 2023 November 29, 2023 Becker, MN December 1, 2023 December 1, 2023 December 5, 2023 December 6, 2023 December 6, 2023 December 8, 2023 December 15, 2023 December 15, 2023 December 15, 2023 December 19, 2023 December 27, 2023 McDonough, GA Niagara Falls, ON December 27, 2023 Columbia, MO December 28, 2023 Lodi, CA St. Louis, MO (3 locations) Huntley, IL Pleasant Hill, IA Avon, MN Houston, TX Portage, MI Chico, CA Albertville, MN Redding, CA Springfield, MO Spring, TX Stafford, TX Ft. Wayne, IN Elk River, MN Melrose, MN Turlock, CA Warner Robins, GA Dalton, GA San Antonio, TX (3 locations) Kapolei, HI Golden Valley, MN Shakopee, MN Louisville, KY 29 Previously operated as n/a start-up n/a start-up Cartech Collision Wildwood Donaldsonville Glass & Body Works n/a start-up Crossroads Auto Body Repair Louisiana Auto Collision Excel Auto Body n/a start-up n/a start-up McKay Collision Mayer’s Collision Center n/a start-up Countryside Body Shop Waters Auto Body & Paint Down River Collision Hove Auto Body Action Collision Don’s Autobody Wagner Collision Center n/a start-up Pleasant Hill Auto Body Avon Body Shop Corona Paint & Body n/a start-up JP’s Paint & Body Albertville Body Shop Venture II Body & Paint n/a start-up LMC Collision Center Charlton's Body Repair n/a start-up Cars-Medics North Port Auto Body Collision Specialties n/a start-up Greg's Collision Center Elite Collision Center Cherokee Auto Body Becker Collision & Glass Auto-Rec Body Works Loren Pundsack Collision Center Imperiouz Auto Body n/a start-up n/a start-up My Collision Center n/a start-up Boulevard Collision Referral Collision Touch of Color Collision Center n/a start-up Premier Collision n/a start-up Location Date December 28, 2023 Winnipeg, MB December 29, 2023 January 3, 2024 January 23, 2024 January 26, 2024 February 2, 2024 February 2, 2024 February 9, 2024 February 9, 2024 March 1, 2024 Sacramento, CA Bloomington, MN Little Falls, MN Cedar Rapids, IA Cypress, TX Lincoln, CA Clearfield, UT Sumner, WA Omaha, NE (3 locations) Previously operated as n/a start-up Platinum Autoworks Legend Auto Body Hilmerson Collision Center Golden Hammer Collision Center I.C.A.R. Houston Paint & Body Eddie's Lincoln Auto Body Perks Auto Repair n/a start-up Wreckamended Collision Repair During the twelve months ended December 31, 2023, the Company acquired a two location glass business in Minnesota, a single location glass business in Texas, a single location glass business in New York, a single location glass business in Virginia, a single location glass business in Pennsylvania and opened 22 start up glass locations. The Company completed the acquisition or start-up of 57 collision repair locations from the beginning of 2022 until the fourth quarter reporting date of March 21, 2023. Details of these acquisitions can be found in the 2022 Annual Report. Start-ups In 2023, the Company commenced operations in 28 new start-up collision repair facilities. The total combined investment in leaseholds and equipment for these facilities was approximately $45.3 million, including incremental investments in the build out of certain start-up locations. The Company commenced operations in 12 new start-up collision repair facilities in 2022 with a combined investment of approximately $11.4 million. A portion of the investment in start-ups during 2023 is a result of timing and will be reimbursed by property owners during 2024. The Company anticipates it will use similar start-up strategies as part of its continued growth in the future. Capital Expenditures Although most of Boyd’s repair facilities are leased, funds are required to ensure facilities are properly repaired and maintained to ensure the Company’s physical appearance communicates Boyd’s standard of professional service and quality. The Company’s need to maintain its facilities and upgrade or replace equipment to meet increased complexity of newer vehicles, signage, computers, software and vehicles forms part of the annual cash requirements of the business. The Company manages these expenditures by annually reviewing and determining its capital budget needs and then authorizing major expenditures throughout the year based upon individual business cases. Excluding expenditures related to network technology upgrades and acquisition and development, the Company spent approximately $57.8 million, or 2.0% of sales on capital expenditures, compared to $33.6 million or 1.4% of sales during the same period of 2022. During 2023, incremental capital expenditures were incurred relative to the expected range for capital expenditures as a percentage of sales for 2023. These capital expenditures included non-routine replacements and repairs. During 2023, the Company spent approximately $1.4 million on network technology upgrades. During 2024, the Company plans to make cash capital expenditures, excluding those related to acquisition and development of new locations, within the range of 1.8% and 2.0% 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. The investment expected in 2024 is in the range of $14M to $17M, with similar investments expected in 2025. These investments align with Boyd’s ESG sustainability roadmap to responsibly address data privacy and cyber security. 30 FOURTH QUARTER Sales for the three months ended December 31, 2023 totaled $740.0 million, an increase of $102.9 million or 16.2% compared to the same period in 2022. Overall same-store sales excluding foreign exchange increased $55.1 million, or 8.7% in the fourth quarter of 2023 when compared to the fourth quarter of 2022 and increased a further $0.1 million due to the translation of same-store sales8 at a higher Canadian dollar exchange rate. The fourth quarter of 2023 recognized the same number of selling and production days when compared to the same period of the prior year. Same-store sales benefited from high levels of demand for services, as well as some increase in production capacity related to technician hiring, growth in the Technician Development Program, as well as productivity improvement, although ongoing staffing constraints continued to impact sales and service levels that could be achieved. Sales also increased based on higher repair costs due to increasing vehicle complexity, increased scanning and calibration services, as well as general market inflation. Sales growth of $48.1 million was attributable to incremental sales generated from 142 new locations. The closure of under-performing facilities accounted for a decrease in sales of $0.3 million. The quarterly same-store sales increase tapered from the levels experienced during the period following the pandemic and pandemic related disruptions during the fourth quarter of 2023. Gross Profit was $336.5 million, or 45.5% of sales in the fourth quarter of 2023 compared to $282.1 million or 44.3% in the same period in 2022. Gross profit increased $54.4 million primarily as a result of increased sales due to same-store sales and location growth when compared to the prior period. The gross margin percentage for the three months ended December 31, 2023 benefited from improved glass margins, higher parts margins and increased scanning and calibration. The margin for the fourth quarter ended December 31, 2023 is within the normal range. Operating expenses as a percentage of sales were 32.7% for the fourth quarter of 2023, which compared to 32.6% for the same period in 2022. Operating expenses benefited from expense accrual reductions, as certain expense estimates were firmed up at amounts that were lower than previously estimated and accrued. During 2023, Boyd added a record number of new single locations. These new locations contributed sales but with a higher operating expense ratio. Adjusted EBITDA8 for the fourth quarter of 2023 totaled $94.2 million or 12.7% of sales compared to Adjusted EBITDA8 of $74.7 million or 11.7% of sales in the same period of the prior year. The $19.5 million increase was primarily the result of higher sales levels and improved gross margins. Current and Deferred Income Tax Expense for the fourth quarter of $8.0 million in 2023 compared to an expense of $5.2 million in 2022. Income tax expense was impacted by the recording of state-related adjustments related to the completion and filing of the prior year U.S. tax returns, which increased income tax expense by approximately $1.2 million for the fourth quarter of 2023. Permanent differences did not have a significant impact on the tax computed on accounting income. Net Earnings for the fourth quarter was $19.1 million, or 2.6% of sales, or $0.89 per fully diluted share compared to net earnings of $14.2 million, or 2.2% of sales, or $0.66 per fully diluted share for the same period in the prior year. The net earnings amount in the fourth quarter of 2023 was impacted by acquisition and transaction costs of $1.1 million (net of tax). After adjusting for fair value and other unusual items, Adjusted net earnings8 for the fourth quarter of 2023 was $20.0 million, or 2.7% of sales. This compares to Adjusted net earnings8 of $14.6 million or 2.3% of sales in the fourth quarter of 2022. Adjusted net earnings8 for the period was positively impacted by higher levels of sales and a higher gross margin percentage. LEGAL PROCEEDINGS Neither BGSI, nor any of its subsidiaries are involved in any legal proceedings which are material in any respect. RELATED PARTY TRANSACTIONS In certain circumstances the Company has entered into property lease arrangements where an employee of the Company is the landlord. In these instances, the Company assumes these property lease arrangements initially in connection with an 8 As defined in the non-GAAP financial measures and ratios section of the MD&A 31 acquisition. The property leases for these locations do not contain any significant non-standard terms and conditions that would not normally exist in an arm’s length relationship, and BGSI has determined that the terms and conditions of the leases are representative of fair market rent values. The following are the lease payment amounts for facilities under lease with related parties (in thousands of U.S. dollars): Landlord Affiliated Person(s) Gerber Building No. 1 Ptnrp Timothy O'Day Location South Elgin, IL Lease Expires 2029 December 31, 2023 December 31, 2022 103 102 FINANCIAL INSTRUMENTS In order to limit the variability of earnings due to the foreign exchange translation exposure on the income and expenses of the Canadian operations, the Company may at times enter into foreign exchange contracts. These contracts are marked to market monthly with unrealized gains and losses included in earnings. The Company did not have any such contracts in place during 2023 or 2022. Transactional foreign currency risk exists in limited circumstances where U.S. denominated cash is received in Canada. The Company monitors U.S. denominated cash flows to be received in Canada and evaluates whether to use forward foreign exchange contracts. No such foreign exchange contracts were used during 2023 or 2022. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Critical accounting estimates BGSI makes estimates, including the assumptions applied therein, concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. Impairment of Goodwill and Intangible Assets When testing goodwill and intangibles for impairment, BGSI uses a five year forward looking discounted cash flow of the cash generating unit (“CGU”) or group of CGU’s to which the asset relate. An estimate of the recoverable amount is then calculated as the higher of an asset’s fair value less costs to sell and value in use (being the present value of the expected future cash flows of the relevant asset or CGU). An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The methods used to value intangible assets and goodwill require critical estimates to be made regarding the future cash flows and useful lives of the intangible assets. Goodwill and intangible asset impairments, when recognized, are recorded as a separate charge to earnings, and could materially impact the operating results of the Company for any particular accounting period. Impairment of Other Long-lived Assets BGSI assesses the recoverability of its long-lived assets, other than goodwill and intangibles, after considering the potential impairment indicated by such factors as business and market trends, the Company’s ability to transfer the assets, future prospects, current market value and other economic factors. In performing its review of recoverability, management estimates the future cash flows expected to result from the use of the assets and their potential disposition. If the discounted sum of the expected future cash flows is less than the carrying value of the assets generating those cash flows, an impairment loss would 32 be recognized based on the excess of the carrying amounts of the assets over their estimated recoverable value. The underlying estimates for cash flows include estimates for future sales, gross margin rates and operating expenses. Changes which may impact these estimates include, but are not limited to, business risks and uncertainties and economic conditions. To the extent that management’s estimates are not realized, future assessments could result in impairment charges that may have a material impact on the Company’s consolidated financial statements. Business Combinations Fair value of assets acquired and liabilities assumed in a business combination is estimated based on information available at the date of acquisition and involves considerable judgment in determining the fair values assigned to property, plant and equipment and intangible assets acquired and liabilities assumed on acquisition. The determination of these fair values involves analysis including the use of discounted cash flows, estimated future margins, future growth rates, market rents and capitalization rates. There is estimation in this analysis and actual results could differ from estimates. Fair Value of Financial Instruments BGSI has applied discounted cash flow methods to establish the fair value of certain financial assets and financial liabilities recorded on the Consolidated Statement of Financial Position, as well as disclosed in the notes to the consolidated financial statements. BGSI also establishes mark-to-market valuations for derivative instruments, which are assumed to represent the current fair value of these instruments. These valuations rely on assumptions regarding interest and exchange rates as well as other economic indicators, which at the time of establishing the fair value for disclosure, have a high degree of uncertainty. Unrealized gains or losses on these derivative financial instruments may not be realized as markets change. Income Taxes BGSI is subject to income tax in several jurisdictions and estimates are used to determine the provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the Company recognizes tax liabilities based on estimates of whether additional taxes and interest will be due. Uncertain tax liabilities may be recognized when, despite the Company’s belief that its tax return positions are supportable, the Company believes that certain positions are likely to be challenged and may not be fully sustained upon review by tax authorities. The Company believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made. Critical judgments in applying the entity’s accounting policies Deferred Tax Assets The assessment of the probability of future taxable income in which deferred tax assets can be utilized is based on BGSI's latest forecasts which are adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. The tax rules in the numerous jurisdictions in which BGSI operates are also carefully taken into consideration. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, that deferred tax asset is recognized in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances. The judgments inherent in these assessments are subject to uncertainty and if changed could materially affect the BGSI’s assessment of its ability to realize the benefit of these tax assets. CHANGES IN ACCOUNTING POLICIES The IASB amendments to IAS 1 - Presentation of Financial Statements and IAS 8 - Changes in Accounting Policies, Changes in Accounting Estimates and Errors require the disclosure of material accounting policy rather than significant accounting policies, and help entities to distinguish between accounting policies and accounting estimates. The amendments are effective 33 for the annual periods beginning on or after January 1, 2023 and do not materially impact the Company’s financial disclosures. The May 2023 IASB amendment to IAS 12 – Income Taxes requires entities to disclose information relating to income taxes arising from implementation of Pillar Two Model Rules published by the Organization for Economic Co-Operation and Development. The amendments are effective for annual reporting periods beginning on or after January 1, 2023. Based on the Company’s assessment and the Pillar Two effective tax rates in all jurisdictions in which the Company is operating, the Company does not expect a material exposure to Pillar Two top up taxes. CERTIFICATION OF DISCLOSURE CONTROLS Management’s responsibility for financial information contained in this Annual Report is described on page 51. In addition, BGSI’s Audit Committee of the Board of Directors has reviewed this Annual Report, and the Board of Directors has reviewed and approved this Annual Report prior to its release. BGSI is committed to providing timely, accurate and balanced disclosure of all material information about BGSI and to providing fair and equal access to such information. As of December 31, 2023, BGSI’s management evaluated the effectiveness of the design and operation of its disclosure controls and procedures, as defined under the rules adopted by the Canadian securities regulatory authorities. Disclosure controls are procedures designed to ensure that information required to be disclosed in reports filed with securities regulatory authorities is recorded, processed, summarized and reported on a timely basis, and is accumulated and communicated to BGSI’s management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosure. BGSI’s management, including the CEO and the CFO, does not expect that BGSI’s disclosure controls will prevent or detect all misstatements due to error or fraud. Because of the inherent limitations in all control systems, an evaluation of controls can provide only reasonable, not absolute assurance, that all control issues and instances of fraud or error, if any, within BGSI have been detected. BGSI is continually evolving and enhancing its systems of controls and procedures. Based on the evaluation of disclosure controls, the CEO and the CFO have concluded that, subject to the inherent limitations noted above, BGSI’s disclosure controls are effective in ensuring that material information relating to BGSI is made known to management on a timely basis, and is fairly presented in all material respects in this Annual Report. CERTIFICATION ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management is responsible for the design and effectiveness of internal control over financial reporting in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian generally accepted accounting principles which incorporates International Financial Reporting Standards for publicly accountable enterprises. BGSI’s management, including the CEO and the CFO, does not expect that BGSI’s internal control over financial reporting will prevent or detect all misstatements due to error or fraud. Because of the inherent limitations in all control systems, an evaluation of controls can provide only reasonable, not absolute assurance, that all control issues and instances of fraud or error, if any, within BGSI have been detected. BGSI is continually evolving and enhancing its systems of internal controls over financial reporting. The CEO and CFO of BGSI have evaluated the design and effectiveness of BGSI’s internal control over financial reporting as at the end of the period covered by the annual filings and have concluded that, subject to the inherent limitations noted above, the controls are sufficient to provide reasonable assurance. On July 1, 2022, as part of the expansion of the Wow Operating Way practices to corporate business processes, the Company transitioned to a new Enterprise Resource Management software system, which resulted in significant changes to the Company’s business processes, procedures and internal controls, including the areas of order to cash, procurement to payment and financial reporting. The implementation did not impact underlying operational systems. The Company followed a robust system design and implementation process which involved experienced advisory resources. The Company replaced multiple internal controls over financial reporting with similar internal controls. 34 BUSINESS RISKS AND UNCERTAINTIES The following information is a summary of certain risk factors relating to the business of BGSI and its subsidiaries, and is qualified in its entirety by reference to, and must be read in conjunction with, the detailed information appearing elsewhere in this Annual Report and the documents incorporated by reference herein. BGSI and its subsidiaries are subject to certain risks inherent in the operation of the business. BGSI and its subsidiaries manage risk and risk exposures through a combination of management oversight, insurance, systems of internal controls and disclosures and sound operating policies and practices. The Board of Directors has the responsibility to identify the principal risks of BGSI’s business and ensure that appropriate systems are in place to manage these risks. The Audit Committee has the responsibility to discuss with management BGSI's major financial risk exposures and the steps management has taken to monitor and control such exposures, including BGSI's risk assessment and risk management policies. In order to support these responsibilities, management has a risk and sustainability management committee which meets on an ongoing basis to evaluate and assess BGSI’s risks. The process being followed by the risk and sustainability management committee is a systematic one which includes identifying risks; analyzing the likelihood and consequence of risks; and then evaluating risks as to risk tolerance and control effectiveness. This approach stratifies risks into four risk categories as follows: Extreme Risks: High Risks: Moderate Risks: Low Risks: Immediate/ongoing action is required – involvement of senior management is required. Avoidance of the item may be necessary if risk reduction techniques are insufficient to address the risk. Risk item is significant and management responsibility should be specified and appropriate action taken. Managed by specific monitoring or response procedures. Additional risk mitigation techniques could be considered if benefits exceed the cost. Management by routine procedures. No further action is required at this time. Risks can be reduced by limiting the likelihood or the consequence of a particular risk. This can be achieved by adjusting the Company’s activities, implementing additional control/monitoring processes, or insuring/hedging against certain outcomes. Residual risk remains after mitigation and control techniques are applied to an identified risk. Awareness of the residual risk that BGSI ultimately accepts is a key benefit of the risk management process. The following describes the risks that are most material to BGSI’s business; however, this is not a complete list of the potential risks BGSI faces. There may be other risks that BGSI is not aware of, or risks that are not material today that could become material in the future. Employee Relations and Staffing Boyd currently employs approximately 13,475 people, of which 1,541 are in Canada and 11,934 are in the U.S. The current workforce is not unionized, except for approximately 50 employees located in the U.S. who are subject to collective bargaining agreements. The collision repair industry is experiencing significant competition for talent, and, in particular, a limited pool of qualified technicians and estimators. This is resulting in a shortage of qualified employees as well as ongoing wage pressure, which is adversely impacting the volume and pace at which collision repair shops can fix damaged vehicles and the Company’s financial results. Attracting, training, developing and retaining employees at all levels of the organization are required to effectively manage Boyd’s operations. The Company has rolled out various training, retention and recruitment initiatives to mitigate this risk. Failure to attract, train, develop and retain employees at all levels of the organization could lead to a lack of production capacity, knowledge, skills and experience required to effectively manage the business and could have a material adverse effect on the Company’s business, financial condition and future performance. 35 Acquisition and New Location Risk The Company plans to continue to increase revenues and earnings through the acquisition and start-up of additional collision repair facilities and other businesses. The Company follows a detailed process of due diligence and approvals to limit the possibility of acquiring or building out a non-performing location or business. There can be no assurance that the Company will be able to find suitable acquisition targets at acceptable pricing levels, or that the Company will be able to find and build out locations without incurring cost overruns, or that the new locations will achieve sales and profitability levels to justify the Company’s investment. Boyd views the United States and Canada as having significant potential for further expansion of its business. There can be no assurance that any market for the Company’s services and products will develop either at the local, regional or national level. Economic instability, laws and regulations, increasing acquisition valuations and the presence of competition in all or certain jurisdictions may limit the Company’s ability to successfully expand operations. The Company has grown rapidly through multi-location acquisitions as well as single location growth opportunities and new location development. Rapid growth can put a strain on managerial, operational, financial, human and other resources. Risks related to rapid growth include administrative and operational challenges such as the management of an expanded number of locations, the assimilation of financial reporting systems, technology and other systems of acquired companies, increased pressure on senior management and increased demand on systems and internal controls. The ability of the Company to manage its operations and expansion effectively depends on the continued development and implementation of plans, systems and controls that meet its operational, financial and management needs. If Boyd is unable to continue to develop and implement these plans, systems or controls or otherwise manage its operations and growth effectively, the Company will be unable to maintain or increase margins or achieve sustained profitability, and the business could be harmed. A key element of the Company’s strategy is to successfully integrate and manage new locations in order to sustain and enhance profitability. There can be no assurance that the Company will be able to profitably integrate and manage additional locations. Successful integration and management can depend upon a number of factors, including the ability to establish, maintain and grow DRP relationships, the ability to attract, retain and motivate certain key management and staff, establishing, retaining and leveraging client and supplier relationships and implementing standardized procedures and best practices. In the event that new location growth cannot be successfully integrated into Boyd’s operations or performs below expectations, the business could be materially and adversely affected. To the extent that the prior owners of businesses acquired by Boyd failed to comply with or otherwise violated applicable laws, the Company, as the successor owner, may be financially responsible for these violations and any associated undisclosed liability. The Company seeks, through systematic investigation and due diligence, and through indemnification by former owners, to minimize the risk of material undisclosed liabilities associated with acquisitions. The discovery of any material liabilities, including but not limited to tax, legal and environmental liabilities, could have a material adverse effect on the Company’s business, financial condition and future prospects. 36 Operational Performance In order to compete in the marketplace, the Company must consistently meet the operational performance metrics expected by its insurance company clients and its customers. Failing to deliver on metrics such as cycle time, quality of repair, customer satisfaction and cost of repair can, over time, result in reductions to pricing, repair volumes, or both. The Company has implemented processes as well as measuring and monitoring systems to assist it in delivering on these key metrics. However, there can be no assurance that the Company will be able to continue to deliver on these metrics or that the metrics themselves will not change in the future. The Company’s principal source of funds is cash generated from operations. Fluctuations in required capital expenditures, the need to maintain productive capacity, required funding to meet growth targets, and debt repayments expected to be funded by cash flows generated from operations may potentially impact the amount of cash available for dividends to be declared and paid by the Company or its subsidiaries in the future. Brand Management and Reputation The Company’s success is impacted by its ability to protect, maintain and enhance the value of its brands and reputation. Brand value and reputation can be damaged by isolated incidents, particularly if the incident receives considerable publicity or if it draws litigation. Incidents may occur as a result of events beyond the Company’s control or may be isolated to actions that occur in one particular location. Demand for the Company’s services could diminish significantly if an incident or other matter damages its brand or erodes the confidence of its insurance company clients or directly with the vehicle owners themselves. Social media has increased the ability for individuals to adversely affect the brand and reputation of the Company. There can be no assurance that past or future incidents will not negatively affect the Company’s brand or reputation. Market Environment Change The collision repair industry is subject to continual change in terms of regulations, repair processes and equipment, technology and changes in the strategic direction of clients, suppliers and competitors. The Company endeavors to stay abreast of developments and preferences in the industry and make strategic decisions to manage these changes and potential disruptions to the traditional business model. In certain situations, the Company is involved in leading change by anticipating or developing new methods to address changing market needs. The Company however, may not be able to correctly anticipate the need for change, may not effectively implement changes, or may be required to increase spending on capital equipment to maintain or improve its relative position with competitors. There can be no assurance that market environment changes will not occur that could negatively affect the financial performance of the Company. Reliance on Technology As is the case with most businesses in today’s environment, there is a risk associated with Boyd’s reliance on computerized operational and reporting systems. Boyd makes reasonable efforts to ensure that back-up systems and redundancies are in place and functioning appropriately. Boyd has disaster recovery programs to protect against significant system failures. Although a computer system failure would not be expected to critically damage the Company in the long term, there can be no assurance that a computer system crash or like event would not have a material impact on its financial results. Reliance on technology in order to gain or maintain competitive advantage is becoming more significant and therefore the Company is faced with determining the appropriate level of investment in new technology in order to be competitive. There can be no assurance that the Company will correctly identify or successfully implement the appropriate technologies for its operations. In addition, there is a risk that third party provided systems are unable to meet business needs, emerging requirements or provide support of their product, which could adversely impact Boyd’s performance. On July 1, 2022, as part of the expansion of the Wow Operating Way practices to corporate business processes, the Company transitioned to a new Enterprise Resource Management software system, which resulted in significant changes to the Company’s business processes, procedures and internal controls, including the areas of order to cash, procurement to payment and financial reporting. The implementation did not impact underlying operational systems. The Company followed 37 a robust system design and implementation process which involved experienced advisory resources. The Company replaced multiple internal controls over financial reporting with similar internal controls. Increased reliance on computerized operational and reporting systems also results in increased cyber security risk, including potential unauthorized access to customer, supplier and employee sensitive information, corruption or loss of data and release of sensitive or confidential information. Disruptions due to cyber security incidents could adversely affect the business, results of operations and financial condition of the Company. Cyber security incidents could result in operational delays, disruption to work flow and reputational harm. There can be no assurance that Boyd will be able to anticipate, prevent or mitigate rapidly evolving types of cyber-attacks. Supply Chain Risk The Company requires access to parts, materials and paint in order to complete repairs. Disruptive events can negatively impact supply chains, which can adversely impact Boyd’s ability to complete repairs. This may result in increased repair cycle time, high levels of work-in-process and decreased margins, and could adversely impact the Company’s financial results. Certain of the Company’s suppliers operate in unionized environments, where their workers are subject to collective bargaining agreements. A prolonged strike at a supplier could adversely impact Boyd’s ability to complete repairs. It is possible that a prolonged strike could disrupt the Company’s supply chain, which could have a material impact on the Company’s financial results. The Company sources certain parts and materials from overseas vendors. Global issues, such as outbreaks and the spread of contagious diseases, political instability, war or other disruptive events can negatively impact global supply chains, which could adversely impact Boyd’s ability to complete repairs. It is possible that global issues could further disrupt the Company’s supply chain, which could have a material impact on the Company’s financial results. Margin Pressure and Sales Mix Changes The Company’s costs to repair vehicles, including the cost of labor, parts and materials are market driven and can fluctuate. The collision repair industry is experiencing significant competition for talent, and, in particular, a limited pool of qualified technicians and estimators. This has resulted in a shortage of qualified employees as well as wage pressure which has adversely impact the Company’s financial results. The Company’s margin is also impacted by the mix of collision repair, retail glass and glass network sales, scanning and calibration, as well as the mix of parts, labor and materials within each business area. There can be no assurance that changes to sales mix will not occur that could negatively impact the financial performance of the Company. The Company currently makes its own part sourcing decisions for parts used in the provision of vehicle repair services. The Company’s clients could, in the future, decide to source products directly, impose the use of certain parts suppliers on the Company or otherwise change the parts sourcing process. Such a decision could have an adverse effect on the Company’s margin. Pandemic Risk and Economic Downturn Historically the collision repair industry has proven to be resilient to typical economic downturns along with the accompanying unemployment, and while the Company works to mitigate the effect of economic downturn on its operations, economic conditions, which are beyond the Company’s control, could lead to a decrease in accident repair claims volumes due to fewer miles driven, less traffic congestion, or due to vehicle owners being less inclined to have their vehicles repaired. It is difficult to predict the severity and the duration of any decrease in claims volumes resulting from an economic downturn and the accompanying unemployment and what effect it may have on the collision repair industry, in general, and the financial performance of the Company in particular. There can be no assurance that an economic downturn would not negatively affect the financial performance of the Company. 38 A local, regional, national or international outbreak of a contagious disease, such as the COVID-19 coronavirus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, H1N1 influenza virus, avian flu or any other similar illness, could decrease the willingness of the general population to travel or customers to patronize the Company’s facilities, cause shortages of employees to staff the Company’s facilities, interrupt supplies from third parties upon which the Company relies, result in governmental regulation adversely impacting the Company’s business and otherwise have a material adverse effect on the Company’s business, financial condition and results of operations. Changes in Client Relationships A high percentage of the Company’s revenues are derived from insurance companies. Over the past 25+ years, many private insurance companies have implemented customer referral arrangements known as Direct Repair Programs (DRP’s) with collision repair operators who have been recognized as consistent high quality, performance based repairers in the industry. The Company’s ability to continue to grow its business, as well as maintain existing business volume and pricing, is largely reliant on its ability to maintain these DRP relationships. The Company continues to develop and monitor these relationships through ongoing measurement of the success factors considered critical by insurance clients. The loss of any existing material DRP relationship, or a material component of a significant DRP relationship, could have a material adverse effect on Boyd’s operations and business prospects. Of the top five insurance companies that the Company deals with, which in aggregate account for approximately 53% (2022 – 54%) of total sales, one insurance company represents approximately 19% (2022 – 18%) of the Company’s total sales, while a second insurance company represents approximately 11% (2022 – 11%). DRP relationships are governed by agreements that are usually cancellable upon short notice. These relationships can change quickly, both in terms of pricing and volumes, depending upon collision repair shop performance, cycle time, cost of repair, customer satisfaction, competition, insurance company management, program changes and general economic activity. To mitigate this risk, management fosters close working relationships with its insurance company clients and customers and the Company continually seeks to diversify and grow its client base both in Canada and the U.S. There can be no assurance that relationships with insurance company clients will not change in the future, which could impair Boyd’s revenues and/or margins, and result in a material adverse effect on the Company’s business. Decline in Number of Insurance Claims The automobile collision repair industry is dependent on the number of accidents which occur and, for the most part, become repairable insurance claims. The volume of accidents and related insurance claims can be significantly impacted by technological disruption and changes in technology such as ride sharing, collision avoidance systems, driverless vehicles and other safety improvements made to vehicles. Other changes which have and can continue to affect insurance claim volumes include, but are not limited to, weather, general economic conditions, unemployment rates, changing demographics, vehicle miles driven, new vehicle production, insurance policy deductibles and auto insurance premiums. In addition, repairable claims volumes have been and can continue to be impacted by an increased number of non-repairable claims or total loss. There can be no assurance that a continued decline in insurance claims will not occur, which could reduce Boyd’s revenues and result in a material adverse effect on the Company’s business. Environmental, Health and Safety Risk The nature of the collision repair business means that hazardous substances must be used, which could cause damage to the environment or individuals if not handled properly. The Company’s environmental protection policy requires environmental site assessments to be performed on all business locations prior to acquisition, start-up or relocation so that any existing or potential environmental situations can be remedied or otherwise appropriately addressed. It is also Boyd’s practice to secure environmental indemnification from landlords and former owners of acquired collision repair businesses, where such indemnification is available. Boyd also engages a private environmental consulting firm to perform regular compliance reviews to ensure that the Company’s environmental and health and safety policies are followed. To date, the Company has not encountered any environmental protection requirements or issues which would be expected to have a material financial or operational effect on its current business and it is not aware of any material environmental issues that could have a material impact on future results or prospects. No assurance can be given, however, that the prior activities of Boyd, or its predecessors, or the activities of a prior owner or lessee, have not created a material environmental problem or 39 that future uses or evolving regulations will not result in the imposition of material environmental, health or safety liability upon Boyd. The outbreak of a contagious illness, such as the recent COVID-19 pandemic, could require the Company to develop and execute revised operating procedures intended to mitigate safety and health risks in the work environment. However, there can be no assurance that the enhanced protocols put in place will protect against an outbreak that could result in lost time and negatively affect the financial performance of the Company. Climate Change and Weather Conditions Climate change is exacerbated in part by the burning of fossil fuels in order to generate electricity for consumers and industry. Greenhouse gasses from fossil fuels is leading to climate change and global warming, which is leading to increased frequency and severity of natural disasters and extreme weather condition events. The collision repair industry is not particularly carbon intensive. The business is focused on the collision repair industry and as such its primary product is providing a service. In providing this service, major inputs include replacement parts, water-based paint, skilled labor, and energy to run spray booths, compressors, lighting, HVAC and other equipment. The industry is highly fragmented with many independent owner operators who are not able to operate at scale. There are efforts to consolidate the industry and the Company is a leader in this effort. By doing so, the industry can operate more efficiently and have the central coordination and capital to invest in sustainability areas to reduce the impact the industry has on the environment. Transitioning to a low carbon environment and sustainable business model will require additional investments in the long- term. Capital investments in energy saving or renewable energy technologies to operate the shop, can reduce or offset the contribution to carbon emissions that the Company currently emits. Transitioning the various vehicles used by business to electric instead of internal combustion engine based is another action that can be taken by the Company to reduce carbon emissions. Investments could be necessary for sensors and other systems to manage electricity usage or identify future opportunities. Facility management and landscape management are areas of opportunity to improve the impact Boyd’s locations have on global warming. The primary climate related risks for the business relate to the expected increase in extreme weather events, such as blizzards, hurricanes, torrential rain, and tornadoes. These events can cause physical damage to shops or hinder Boyd’s ability to process work and also tend to result in higher damage levels that result in more vehicles being non-repairable. Extreme weather can also slow or halt delivery of parts and in some cases prevent employees from attending work, which slows down cycle-time and therefore sales. A number of initiatives related to climate change can benefit the Company. For example investing in LED lighting improves the working conditions for technicians and can improve the quality of the work they do, as well as lowering operating costs and reducing emissions. Continuous improvement and efficiency gains can improve quality and reduce repair cycle time, causing less waste, higher customer satisfaction and generating higher sales with the same level of inputs. A greater focus on repairing damaged parts as opposed to replacing those parts reduces waste and in some cases can improve profitability. Alignment with vehicle owner, insurance company and original equipment manufacturer objectives improves Boyd’s customer relationships and demonstrates an ability to align and partner with these stakeholders. There is good alignment between climate change initiatives and the Company’s strategy. Core strategies of operational excellence, expense management and optimizing the business as well as new location and acquisition growth have overlap with sustainability. Being efficient, reducing waste and bringing corporate resources and investment to a fragmented industry supports a long-term alignment with sustainability. Environment, social and governance objectives are being integrated into the Company’s strategic projects. There is often a dimension of each business initiative that relates to sustainability. Boyd is committed to identifying those dimensions and bringing awareness throughout the company so that business objectives naturally contribute to our sustainability goals, which have been outlined in Boyd’s Environmental, Social and Governance Report, which is available on the Boyd website at www.boydgroup.com/sustainability. The Board is investing more time on sustainability issues and has assigned the oversight responsibility for sustainability, including climate change risk management and disclosure to the Governance & Sustainability Committee. The topic is a standing agenda item with internal metrics and reporting being developed. Management has a Risk and Sustainability 40 Committee tasked with developing sustainability objectives and processes for the company. Its current mandate is to work with the various operating groups to identify the key sustainability metrics for future reporting and target setting. These key metrics and targets will be focused on the priority areas defined for each of the environmental, social and governance pillars that have been outlined in Boyd’s Environmental, Social and Governance Report. The effect of global warming and its impact on weather conditions may reduce collision repair volume and represent an element of risk to the Company’s ability to maintain sales. Historically, extremely mild winters and dry weather conditions have had a negative impact on collision repair sales volumes. Natural disasters resulting in business interruption, or supply chain interruption could also negatively impact the Company’s operations. Even with market share gains, weather-related decline in market size can result in sales declines which could have a material impact on the Company’s business. Business interruption due to natural disasters and extreme weather condition events, including supply chain interruption, may result in temporary store closures or limit production volume and could adversely impact Boyd’s ability to complete repairs, which could have a material adverse effect on the Company’s business. Competition The collision repair industry in North America, estimated at almost $47.6 billion U.S. is very competitive. The main competitive factors are cost of repair, cycle time, quality, customer satisfaction and adherence to various insurance company processes and performance requirements. There can be no assurance that Boyd’s competitors will not achieve greater market acceptance due to performance or other factors. Although competition exists mainly on a regional basis, Boyd competes with a small number of other multi-location collision repair operators in multiple markets in which it operates. Given these industry characteristics, existing or new competitors, including other automotive-related businesses, may become significantly larger and have greater financial and marketing resources than Boyd. Competitors may compete with Boyd in rendering services in the markets in which Boyd currently operates and also in seeking existing facilities to acquire, or new locations to open, in markets in which Boyd desires to expand. There can be no assurance that the Company will be able to maintain or achieve its desired market share. Access to Capital The Company grows, in part, through acquisition or start-up of collision and glass repair and replacement businesses. There can be no assurance that Boyd will have sufficient capital resources available to implement its growth strategy. Inability to raise new capital, in the form of debt or equity, could limit Boyd’s future growth through acquisition or start-up. The Company will endeavor, through a variety of strategies, to ensure in advance that it has sufficient capital for growth. Potential sources of capital that the Company has been successful at accessing in the past include public and private equity placements, convertible debt offerings, using equity securities to directly pay for a portion of acquisitions, capital available through strategic alliances with trading partners, lease financing, seller financing and both senior and subordinate debt facilities or by deferring possible future purchase price payments using contingent consideration and call or put options. There can be no assurance that the Company will be successful in accessing these or other sources of capital in the future. The Company and its subsidiaries use financial leverage through the use of debt, which have debt service obligations. The Company’s ability to refinance or to make scheduled payments of interest or principal on its indebtedness will depend on its future operating performance and cash flow, which are subject to prevailing economic conditions, prevailing interest rates, and financial, competitive, business and other factors, many of which are beyond its control. The Company’s revolving credit facilities contain restrictive covenants that limit the discretion of the Company’s management and the ability of the Company to incur additional indebtedness, to make acquisitions of collision repair businesses, to create liens or other encumbrances, to pay dividends, to redeem any equity or debt, or to make investments, capital expenditures, loans or guarantees and to sell or otherwise dispose of assets and merge or consolidate with another entity. In addition, the revolving credit facilities contain a number of financial covenants that require BGSI and its subsidiaries to meet certain financial ratios and financial condition tests. A failure to comply with the obligations under these 41 credit facilities could result in an event of default, which, if not cured or waived, could permit acceleration of the relevant indebtedness. If the indebtedness were to be accelerated, there can be no assurance that the assets of the Company and its subsidiaries would be sufficient to repay the indebtedness in full. There can also be no assurance that the Company will be able to refinance the credit facilities as and when they mature. The revolving credit facility is secured by the assets of the Company. Dependence on Key Personnel The success of the Company is dependent on the services of a number of members of management. The experience and talent of these individuals is a significant factor in Boyd’s continued success and growth. The loss of one or more of these individuals could have a material adverse effect on the Company’s business operations and prospects. The Company has entered into management agreements with key members of management and succession plans are in place for key executive positions, in order to mitigate this risk. Tax Position Risk BGSI and its subsidiaries account for income tax positions in accordance with accounting standards for income taxes, which require that the Company recognize in the financial statements, the impact of a tax position, if that position is more likely than not of being sustained on examination by taxation authorities, based on the technical merits of the position. Inherent risks and uncertainties can arise over tax positions taken, or expected to be taken, with respect to matters including but not limited to acquisitions, transfer pricing, inter-company charges and allocations, financing charges, fees, related party transactions, tax credits, tax based incentives and stock based transactions. In addition, there are inherent risks and uncertainties with respect to government assistance received through various programs developed to support the business during the economic downturn brought about by the COVID-19 pandemic. Management uses tax experts to assist in correctly applying and accounting for tax and government assistance program rules, however there can be no assurance that a position taken will not be challenged by the taxation authorities that could result in an unexpected material financial obligation. Expenses incurred by BGSI and its subsidiaries are only deductible to the extent they are reasonable. There can be no assurance that the taxation authorities will not challenge the reasonableness of certain expenses. If such a challenge were successful, it may materially and adversely affect the financial results of BGSI and its subsidiaries. BGSI’s shares are qualified investments for a Registered Plan under the Tax Act as the Shares are listed on a “designated stock exchange” (as defined in the Tax Act). There can be no assurance that additional changes to the taxation of corporations or changes to other government laws, rules and regulations, either in Canada or the U.S., will not be undertaken which could have a material adverse effect on BGSI’s share price and business. There can be no assurance BGSI will benefit from these rules, that the rules will not change in the future or that BGSI will avail itself of them. Corporate Governance Securities law imposes statutory civil liability for misrepresentations in continuous disclosure documents including failure to make timely disclosure. Investors have a right of action if they are harmed by a misrepresentation in an issuer’s disclosure document or in a public oral statement relating to an issuer, or the failure of an issuer to make timely disclosure of a material change. Potentially liable parties include the issuer, each officer, and each Director of the issuer who authorizes, permits or acquiesces in the release of the document containing a misrepresentation, the making of the public statement containing a misrepresentation or in the failure to make a timely disclosure. Under the Ontario Securities Act, section 138.4(6), a due diligence defense is available. The due diligence defense requires the following items to be addressed: 42 • • • the issuer must have a system designed to ensure the issuer is meeting its disclosure obligations; the defendant must have conducted a reasonable investigation to support reliance on the system; and defendants must have no reasonable grounds to believe that the document or a public oral statement contained a misrepresentation or that the failure to make the required disclosure would occur. BGSI is keenly aware of the significance of these laws and the interrelationships between civil liability, disclosure controls and good governance. BGSI has adopted policies, practices and processes to reduce the risk of a governance or control breakdown. A statement of BGSI’s governance practices is included in its most recent information circular which can be found at www.sedarplus.com. Although BGSI believes it follows good corporate governance practices, there can be no assurance that these practices will eliminate or mitigate the impact of a material lawsuit in this area. The area of governance is growing to encompass not only traditional governance matters, but also environmental and social matters. This area is often referred to as Environmental, Social and Governance, or “ESG”. Increased awareness and attention by investors to ESG matters means that the Company needs to become more transparent in developing and reporting on ESG initiatives and increase or add ESG initiatives where there are significant gaps. BGSI is developing and enhancing ESG reporting and initiatives. Boyd publishes an ESG report, which complements previously adopted policies on reporting and anti-retaliation, occupational health and safety, non-discrimination and anti-harassment, human rights, diversity, code of business conduct and ethics, business partner code of conduct and anti-corruption. These policies, along with the ESG Report, are available on the Boyd website at www.boydgroup.com/sustainability. Increased Government Regulation and Tax Risk BGSI and its subsidiaries are subject to various federal, provincial, state and local laws, regulations and taxation authorities. Various federal, provincial, state and local agencies as well as other governmental departments administer such laws, regulations and their related rules and policies. New laws governing BGSI or its business could be enacted or changes or amendments to existing laws and regulations could be enacted which could have a significant impact on Boyd. For example, privacy legislation continues to evolve rapidly and tariff changes are being introduced with greater frequency. BGSI utilizes the services of professional advisors in the areas of taxation, environmental, health and safety, labor and general business law to mitigate the risk of non-compliance. Failure to comply with the applicable laws, regulations or tax changes may subject BGSI to civil or regulatory proceedings and no assurance can be given that this will not have a material impact on financial results. A number of jurisdictions in which the Company operates have regulations to limit emissions and pollutants. The Company has adapted its processes in an effort to comply with these regulations. Although to date, there have been no negative consequences as a result of these regulations, there can be no assurance that these regulations will not have a material adverse impact on BGSI’s business or financial results. Future emission or pollutant regulation compliance requirements may have a material adverse impact on BGSI’s business or financial results. Fluctuations in Operating Results and Seasonality The Company’s operating results have been and are expected to continue to be subject to quarterly fluctuations due to a variety of factors including changes in customer purchasing patterns, pricing paid to insurance companies, general operating effectiveness, automobile technologies, general and regional economic downturns, unemployment rates, employee vacation timing and weather conditions. These factors can affect Boyd’s financial results. Risk of Litigation BGSI and its subsidiaries could become involved in various legal actions in the ordinary course of business. Litigation loss accruals may be established if it becomes probable that BGSI will incur an expense and the amount can be reasonably estimated. BGSI’s management and internal and external experts are involved in assessing the probability of litigation loss and in estimating any amounts involved. Changes in these assessments may lead to changes in recorded litigation loss accruals. Claims are reviewed on a case by case basis, taking into consideration all information available to BGSI. 43 The actual costs of resolving claims could be substantially higher or lower than the amounts accrued. In certain cases, legal claims may be covered under BGSI’s various insurance policies. Execution on New Strategies New initiatives are introduced from time to time in order to grow Boyd’s business. Initiatives such as entering new markets, introducing and improving related products and services, or identifying new strategies to capture additional market share have the potential to be accretive to the Company’s business when the opportunity is accurately identified and executed. There can be no assurance that the Company identifies new strategies that are accretive to the business or that it is successful in implementing such initiatives. Insurance Risk BGSI insures its property, plant and equipment, including vehicles, through insurance policies with insurance carriers located in Canada and the U.S. Included within these policies is insurance protection against property loss and general liability. BGSI also insures its directors and officers against liabilities arising from errors, omissions and wrongful acts. Management uses its knowledge, as well as the knowledge of experienced brokers, to ensure that insurable risks are insured appropriately under terms and conditions that would protect BGSI and its subsidiaries from losses. There can be no assurance that all perils would be fully covered or that a material loss would be recoverable under such insurance policies. Interest Rates The Company occasionally fixes the interest rate on its debt using interest rate swap contracts or other provisions available in its debt facilities. There can be no guarantee that interest rate swaps or other contract terms that effectively turn variable rate debt into fixed rates will be an effective hedge against long-term interest rate fluctuations. The Company has not fixed interest rates within its revolving credit facility. There can be no assurance that interest rates either in Canada or the U.S. will not increase in the future, which could result in a material adverse effect on the Company’s business. U.S. Health Care Costs and Workers Compensation Claims BGSI accrues for the estimated amount of U.S. health care claims and workers compensation claims that may have occurred but were not reported at the end of the reporting period under its health care and workers compensation plans. The accruals are based upon the Company’s knowledge of current claims as well as third party estimates derived from past experience. Significant claim occurrences which remain unreported for a number of months could materially impact this accrual. In addition, as U.S health care costs increase, there can be no assurance given that the Company can continue to offer health care insurance to its employees at a reasonable cost. Foreign Currency Risk A substantial portion of Boyd’s revenue and cash flow are now, and are expected to continue to be, generated in U.S. dollars. Fluctuations in the exchange rates between the Canadian dollar and the U.S. currency may have a material adverse effect on BGSI’s share price, which is denominated and trades in Canadian dollars as well as BGSI’s ability to make future Canadian dollar cash dividends. Capital Expenditures The business of the Company requires ongoing capital maintenance. Moreover, opportunities may arise for capital upgrades providing returns or cost savings that may not be realized in the immediate future, but rather over several years. As vehicle technology advances and market needs change, the capital intensity of the industry is changing, requiring expenditures in excess of historical capital maintenance levels. To the extent that capital expenditures are in excess of amounts budgeted, the amounts of cash available for dividends may decrease. 44 Low Capture Rates Sales growth can be enhanced if the Company is effective at booking repair orders for all sales opportunities that are identified. The Company is exposed to missed jobs when capacity is constrained and to the extent that employees are ineffective at capturing all sales opportunities. Measurement of capture rates, management support and training are methods that are employed to enhance capture rates. Efforts to increase capacity are limited by availability of qualified labor. It is possible that the Company may not be able to capture sales effectively enough to maximize sales. Energy Costs The Company is exposed to fluctuations in the price of energy. These costs not only impact the costs associated with occupying and operating collision repair facilities but may also affect costs of parts and materials used in the repair process as well as miles driven by automobile owners. There can be no assurance that escalating costs which cannot be offset by energy conservation practices, price increases to clients and customers or productivity gains, would not result in materially lower operating margins. As well, there can be no assurance that escalating energy costs will not materially reduce automobile miles driven and in turn reduce the number of collisions. ADDITIONAL INFORMATION BGSI’s shares trade on the Toronto Stock Exchange under the symbol TSX: BYD.TO. Additional information relating to the BGSI is available on SEDAR+ (www.sedarplus.com) and the Company website (www.boydgroup.com). 45 FORM 52-109F1 CERTIFICATION OF ANNUAL FILINGS FULL CERTIFICATE I, Timothy O’Day, Chief Executive Officer, Boyd Group Services Inc., certify the following: 1. Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in the AIF (together, the “annual filings”) of Boyd Group Services Inc. (the “issuer”) for the financial year ended December 31, 2023. 2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the annual filings. 3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with other financial information included in the annual filings present fairly in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the annual filings. 4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer. 5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the financial year end a. designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that i. ii. material information relating to the issuer is made known to us by others, particularly during the period in which the annual filings are being prepared; and information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and b. designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. 5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework (COSO 2013 Framework), published by The Committee of Sponsoring Organizations of the Treadway Commission. 5.2 ICFR – material weakness relating to design: N/A 5.3 Limitation on scope of design: N/A 46 6. Evaluation: The issuer’s other certifying officer(s) and I have a. b. evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s DC&P at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about the effectiveness of DC&P at the financial year end based on that evaluation; and evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s ICFR at the financial year end and the issuer has disclosed in its annual MD&A i. ii. our conclusions about the effectiveness of ICFR at the financial year end based on that evaluation; and N/A c. N/A 7. Reporting changes in ICFR: The issuer has disclosed in its annual MD&A any change in the issuer’s ICFR that occurred during the period beginning on October 1, 2023 and ended on December 31, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. 8. Reporting to the issuer’s auditors and board of directors or audit committee: The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of ICFR, to the issuer’s auditors, and the board of directors or the audit committee of the board of directors any fraud that involves management or other employees who have a significant role in the issuer’s ICFR. Date: March 20, 2024 (signed) Timothy O’Day President & Chief Executive Officer 47 FORM 52-109F1 CERTIFICATION OF ANNUAL FILINGS FULL CERTIFICATE I, Jeff Murray, Chief Financial Officer, Boyd Group Services Inc., certify the following: 1. Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in the AIF (together, the “annual filings”) of Boyd Group Services Inc. (the “issuer”) for the financial year ended December 31, 2023. 2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the annual filings. 3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with other financial information included in the annual filings present fairly in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the annual filings. 4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer. 5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the financial year end a. designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that i. ii. material information relating to the issuer is made known to us by others, particularly during the period in which the annual filings are being prepared; and information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and b. designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. 5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework (COSO 2013 Framework), published by The Committee of Sponsoring Organizations of the Treadway Commission. 5.2 ICFR – material weakness relating to design: N/A 5.3 Limitation on scope of design: N/A 48 6. Evaluation: The issuer’s other certifying officer(s) and I have a. b. evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s DC&P at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about the effectiveness of DC&P at the financial year end based on that evaluation; and evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s ICFR at the financial year end and the issuer has disclosed in its annual MD&A i. ii. our conclusions about the effectiveness of ICFR at the financial year end based on that evaluation; and N/A c. N/A 7. Reporting changes in ICFR: The issuer has disclosed in its annual MD&A any change in the issuer’s ICFR that occurred during the period beginning on October 1, 2023 and ended on December 31, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. 8. Reporting to the issuer’s auditors and board of directors or audit committee: The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of ICFR, to the issuer’s auditors, and the board of directors or the audit committee of the board of directors any fraud that involves management or other employees who have a significant role in the issuer’s ICFR. Date: March 20, 2024 (signed) Jeff Murray Executive Vice President & Chief Financial Officer 49 BOYD GROUP SERVICES INC. Consolidated Financial Statements Year Ended December 31, 2023 50 MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING These consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards. Management is responsible for their integrity, objectivity and reliability, and for the maintenance of financial and operating systems, which include effective controls, to provide reasonable assurance that Boyd Group Services Inc.’s assets are safeguarded and that reliable financial information is produced. The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting, disclosure control and internal control. The Board exercises these responsibilities through its Audit Committee, all members of which are not involved in the daily activities of Boyd Group Services Inc. The Audit Committee meets with management and, as necessary, with the independent auditors, Deloitte LLP, to satisfy itself that management’s responsibilities are properly discharged and to review and report to the Board on the consolidated financial statements. In accordance with Canadian Generally Accepted Auditing Standards, the independent auditors conduct an examination each year in order to express a professional opinion on the consolidated financial statements. (signed) (signed) Timothy O’Day President & Chief Executive Officer Jeff Murray Executive Vice President & Chief Financial Officer Winnipeg, Manitoba March 19, 2024 51 Deloitte LLP 360 Main Street Suite 2300 Winnipeg MB R3C 3Z3 Canada Tel: 1-204-942-0051 Fax: 1-204-947-9390 www.deloitte.ca March 19, 2024 Independent Auditor’s Report To the Shareholders and the Board of Directors of Boyd Group Services Inc. Opinion We have audited the consolidated financial statements of Boyd Group Services Inc. (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2023 and 2022, and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the years ended December 31, 2023 and 2022, and notes to the consolidated financial statements, including a summary of material accounting policies (collectively referred to as the "financial statements"). In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2023 and 2022, and its financial performance and its cash flows for the years ended December 31, 2023 and 2022 in accordance with International Financial Reporting Standards ("IFRS"). Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards ("Canadian GAAS"). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters A key audit matter is a matter that, in our professional judgment was of most significance in our audit of the consolidated financial statements for the year ended December 31, 2023. This matter was addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. 52 Boyd Group Services Inc. March 19, 2024 Page 53 Goodwill and Intangible Assets — Canadian CGU— Refer to the Financial Statement Notes 3 and 11 Key Audit Matter Description The Company’s evaluation of goodwill and intangible assets for impairment involves the comparison of the recoverable amount of each cash generating unit (“CGU”) to their carrying value. The recoverable amount of a CGUs is determined as the greater of the fair value less costs to sell and value in use. The Company used a discounted cash flow model to determine the recoverable amounts of both the U.S. CGU and Canadian CGU, which required management to make estimates and assumptions related to future cash flows, taxes, future acquisition growth, future capital expenditures, terminal growth rate, and discount rate. As a result of the annual assessments of impairment of goodwill and intangible assets for the U.S. CGU and Canadian CGU, management has determined that there was no impairment of goodwill or intangible assets. While there are several estimates and assumptions that are required to determine the recoverable amount of the Canadian CGU, the estimates, and assumptions with the highest degree of subjectivity are future revenue and adjusted EBITDA margins forecasts and the selection of the discount rate. Auditing these estimates and assumptions required a high degree of auditor judgment and an increased extent of audit effort, including the involvement of fair value specialists. How the Key Audit Matter Was Addressed in the Audit Our audit procedures related to the future revenue and adjusted EBITDA margins forecasts and the selection of the discount rate used to determine the recoverable amount for the Canadian CGU included the following, among others: • Evaluated management’s ability to accurately forecast future revenues and Adjusted EBITDA margins by comparing actual results to management’s historical forecasts. • Evaluated the reasonableness of the forecast of future revenues and adjusted EBITDA margins by comparing the forecasts to: o Historical revenues and operating margins. o Known changes in the Company’s operations and its industry, which are expected to impact future operating performance; and Internal communications to management and the Board of Directors. o • With the assistance of fair value specialists, evaluated the reasonableness of the discount rate by testing the source information underlying the determination of the discount rate, developing a range of independent estimates, and comparing those to the discount rate selected by management. Other Information Management is responsible for the other information. The other information comprises: • Management's Discussion and Analysis • The information, other than the financial statements and our auditor’s report thereon, in the Annual Report. Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. 53 Boyd Group Services Inc. March 19, 2024 Page 54 We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard. The Annual Report is expected to be made available to us after the date of the auditor's report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 54 Boyd Group Services Inc. March 19, 2024 Page 55 • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in this independent auditor’s report is Michael Boucher. /s/ Deloitte LLP Chartered Professional Accountants Winnipeg, Manitoba March 19, 2024 55 BOYD GROUP SERVICES INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As at December 31, (thousands of U.S. dollars) Assets Current assets: Cash Accounts receivable Income taxes recoverable Inventory Prepaid expenses Property, plant and equipment Right of use assets Deferred income tax asset Intangible assets Goodwill Other long-term assets Liabilities and Equity Current liabilities: Accounts payable and accrued liabilities Dividends payable Current portion of long-term debt Current portion of lease liabilities Long-term debt Lease liabilities Deferred income tax liability Unearned rebates Equity Accumulated other comprehensive earnings Retained earnings Shareholders’ capital Contributed surplus The accompanying notes are an integral part of these consolidated financial statements Approved by the Board: TIMOTHY O’DAY Director 56 2023 2022 Note 18 9 6 7 8 9 10 11 12 13 14 15 14 15 9 16 19 20 $ $ $ 22,511 $ 145,793 7,721 78,532 41,728 296,285 438,981 654,347 4,316 342,781 633,986 11,720 2,382,416 $ 339,823 $ 2,435 22,038 107,727 472,023 399,667 607,550 70,271 4,579 15,068 139,266 5,666 78,784 36,520 275,304 314,564 568,437 3,815 332,939 601,706 6,067 2,102,832 307,729 2,330 15,365 98,870 424,294 344,806 519,056 62,885 5,194 1,554,090 1,356,235 58,313 165,427 600,047 4,539 54,330 88,183 600,047 4,037 828,326 2,382,416 $ 746,597 2,102,832 $ DAVID BROWN Director BOYD GROUP SERVICES INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (thousands of U.S. dollars except share amounts) Balances - January 1, 2022 Stock option accretion Other comprehensive loss Net earnings Comprehensive earnings Dividends to shareholders Balances - December 31, 2022 Stock option accretion Other comprehensive earnings Net earnings Comprehensive earnings Dividends to shareholders Balance - December 31, 2023 Shareholders’ Capital Shares Amount Contributed Surplus Accumulated Other Comprehensive Earnings Retained Earnings Total Equity 21,472,194 $ 600,047 $ 3,680 $ 357 65,987 $ 56,720 $ (11,657) (11,657) 40,962 40,962 (9,499) 21,472,194 $ 600,047 $ 4,037 $ 502 54,330 $ 88,183 $ 3,983 3,983 21,472,194 $ 600,047 $ 4,539 $ 58,313 $ 86,656 86,656 (9,412) 165,427 $ 726,434 357 (11,657) 40,962 29,305 (9,499) 746,597 502 3,983 86,656 90,639 (9,412) 828,326 Note 20 13 20 13 The accompanying notes are an integral part of these consolidated financial statements 57 BOYD GROUP SERVICES INC. CONSOLIDATED STATEMENTS OF EARNINGS For the years ended December 31, (thousands of U.S. dollars, except share and per share amounts) 2023 2022 Note 23 $ 2,945,988 $ 1,605,924 7 8 10 17 9 9 28 28 28 2,432,318 1,344,998 1,087,320 813,820 1,700 47,902 101,150 26,567 146 37,308 1,028,593 58,727 5,712 12,053 17,765 1,340,064 971,817 4,346 56,863 109,806 26,182 (189) 51,718 1,220,543 119,521 25,872 6,993 32,865 $ 86,656 $ 40,962 $ 4.04 $ 21,472,194 21,475,864 1.91 21,472,194 21,472,194 2023 2022 $ 86,656 $ 40,962 3,983 3,983 90,639 $ (11,657) (11,657) 29,305 $ Sales Cost of sales Gross profit Operating expenses Acquisition and transaction costs Depreciation of property, plant and equipment Depreciation of right of use assets Amortization of intangible assets Fair value adjustments Finance costs Earnings before income taxes Income tax expense Current Deferred Net earnings The accompanying notes are an integral part of these consolidated financial statements Basic and diluted earnings per share Basic number of shares outstanding Diluted weighted average number of shares outstanding BOYD GROUP SERVICES INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS For the years ended December 31, (thousands of U.S. dollars) Net earnings Other comprehensive earnings Items that may be reclassified subsequently to Consolidated Statements of Earnings Statements of Earnings Change in unrealized earnings on foreign currency translation (net of tax of $nil) Other comprehensive earnings (loss) Comprehensive earnings The accompanying notes are an integral part of these consolidated financial statements 58 BOYD GROUP SERVICES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, (thousands of U.S. dollars) Cash flows from operating activities Net earnings Adjustments for Fair value adjustments Deferred income taxes Finance costs Amortization of intangible assets Depreciation of property, plant and equipment Depreciation of right of use assets Other Changes in non-cash working capital items Cash flows used in financing activities Increase in obligations under long-term debt Repayment of long-term debt, principal Repayment of obligations under property leases, principal Repayment of obligations under vehicle and equipment leases, principal Interest on long-term debt Interest on property leases Interest on vehicle and equipment leases Dividends paid Payment of financing costs Cash flows used in investing activities Proceeds on sale of equipment and software Equipment purchases and facility improvements Acquisition and development of businesses (net of cash acquired) Software purchases and licensing Increase in other long-term assets Proceeds on sale / leaseback agreements Effect of foreign exchange rate changes on cash Net increase (decrease) in cash position Cash, beginning of year Cash, end of year Income taxes paid Interest paid The accompanying notes are an integral part of these consolidated financial statements 59 2023 2022 Note $ 86,656 $ 40,962 17 9 10 7 8 30 14 14 15 15 14 15 15 14 7 5 10 12 7 (189) 6,993 51,718 26,182 56,863 109,806 444 338,473 19,072 357,545 260,473 (205,848) (95,441) (3,863) (19,814) (31,328) (728) (9,382) — (105,931) 560 (57,482) (180,293) (1,684) (8,334) 2,832 (244,401) 230 7,443 15,068 22,511 $ 27,909 $ 51,507 $ $ $ $ 146 12,053 37,308 26,567 47,902 101,150 (318) 265,770 (1,523) 264,247 126,093 (211,863) (92,203) (3,047) (15,495) (21,363) (432) (9,545) (514) (228,369) 2,745 (33,370) (71,706) (259) (475) 55,140 (47,925) (599) (12,646) 27,714 15,068 3,857 36,911 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) 1. GENERAL INFORMATION Boyd Group Services Inc. (“BGSI” or the “Company”) is a Canadian corporation and controls The Boyd Group Inc. and its subsidiaries. The Company’s business consists of the ownership and operation of autobody/autoglass repair facilities and related services. At the reporting date, the Company operated locations in Canada under the trade name Boyd Autobody & Glass and Assured Automotive, as well as in the U.S. under the trade name Gerber Collision & Glass. In addition, the Company is a major retail auto glass operator in the U.S. under the trade names Gerber Collision & Glass, Glass America, Auto Glass Service, Auto Glass Authority and Autoglassonly.com. The Company also operates Gerber National Claim Services (“GNCS”), that offers glass, emergency roadside and first notice of loss services. The shares of the Company are listed on the Toronto Stock Exchange and trade under the symbol “BYD.TO”. The head office and principal address of the Company are located at 1745 Ellice Avenue, Unit C1, Winnipeg, Manitoba, Canada, R3H 1A6. The consolidated financial statements for the year ended December 31, 2023 (including comparatives) were approved and authorized for issue by the Board of Directors on March 19, 2024. 2. MATERIAL ACCOUNTING POLICIES a) Basis of presentation The consolidated financial statements of BGSI have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The functional currency of Boyd Group Services Inc. is the Canadian dollar (“CAD”). These consolidated financial statements are presented in thousands of U.S. dollars (“USD”), except share and per share amounts. b) Revenue recognition BGSI is in the business of collision repair. The Company recognizes revenue upon completion and delivery of the repair to the customer, which has been determined to be the performance obligation that is distinct and the point at which control of the asset passes to the customer. Revenue is measured at the fair value of the consideration received. c) Inventory Inventory is valued at the lower of cost and net realizable value. Cost is determined on the first-in, first-out basis. Net realizable value is the estimated selling price in the ordinary course of business less any applicable selling expenses. d) Property, plant and equipment Property, plant and equipment assets are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and equipment consists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an estimate of the costs of dismantling and removing the item and restoring the site on which it is 60 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) located. Construction-in-Progress (CIP) is a component of property, plant and equipment that represents assets or capital projects under construction. Depreciation is calculated using the declining balance and straight line rates as disclosed in the property, plant and equipment note. Leasehold improvements are amortized on the straight line basis over the period of estimated benefit. An item of property, plant and equipment is reclassified as held for sale or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in the Consolidated Statement of Earnings. The Company conducts an annual assessment of the residual balances, useful lives and depreciation methods being used for property, plant and equipment and any changes arising from the assessment are applied by BGSI prospectively. e) Leases At inception, the Company assesses whether a contract is or contains a lease. Leases are recognized as a right of use asset and a lease liability at the lease commencement date. The Company recognizes a right of use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short term leases, defined as leases with a lease term of 12 months or less, and leases of low value assets. For these leases, the Company recognizes the lease payments as operating expenses on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Right of use assets are subsequently measured at cost less accumulated depreciation and impairment losses. Depreciation is recorded on a straight line basis over the term of the lease. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If the interest rate implicit in the leases cannot be readily determined, the Company uses its incremental borrowing rate. In order to calculate the incremental borrowing rate, reference interest rates are derived from the yields of corporate bonds in Canada and the U.S. The reference interest rates are supplemented by a leasing risk premium. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability and by reducing the carrying amount to reflect lease payments made. For sale leaseback transactions, the Company applies the requirements of IFRS 15 Revenue from Contracts with Customers to determine if the transfer qualifies as a sale. If the transfer qualifies as a sale, the Company derecognizes the asset and recognizes a right of use asset equal to the retained portion of the previous carrying amount of the sold asset. The residual is recognized as a gain on sale leaseback. f) Consolidation The financial statements of the Company consolidate the accounts of the Company and its subsidiaries. All intercompany transactions, balances and unrealized gains and losses from intercompany transactions are eliminated on consolidation. Subsidiaries are those entities which the Company controls by having the power to govern the financial and operating policies. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are 61 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) fully consolidated from the date on which control is obtained by the Company and are de-consolidated from the date that control ceases. g) Business combinations, goodwill and other intangible assets Acquisitions of subsidiaries and businesses are accounted for using the acquisition method of accounting. The cost of the acquisition is measured at the aggregate of the fair values (at the acquisition date) of assets transferred, liabilities incurred or assumed, and equity instruments issued by the Company in exchange for control of the acquired company. Acquisition costs are expensed as incurred. The acquired company’s identifiable assets (including previously unrecognized intangible assets), liabilities and contingent liabilities are recognized at their fair values at the acquisition date. Goodwill represents the excess of the cost of an acquisition over the fair value of BGSI’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is carried at cost less accumulated impairment losses. Intangible assets are recognized only when it is probable that the expected future economic benefits attributable to the assets will accrue to the Company and the cost can be reliably measured. Intangible assets acquired in a business combination are recorded at fair value. Intangible assets that do not have indefinite lives are amortized over their useful lives using an amortization method which reflects the economic benefit of the intangible asset. Customer relationships are amortized on a straight-line basis over the expected period of benefit of 20 years. Contractual rights, which consist of non-compete agreements and favourable lease agreements, are amortized on a straight-line basis over the term of the contract. Software is amortized on a straight-line basis over periods of three and five years. Brand names which the Company continues to use in the conduct of its business are considered indefinite life because their value is not expected to degrade over time. To the extent the Company decides to discontinue the use of a certain brand, an estimate of the remaining useful life is made and the intangible asset is amortized over the remaining period. h) Impairment of non-financial assets Property, plant and equipment and definite life intangible assets are tested for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. For the purpose of measuring recoverable amounts, assets are grouped at the lowest levels for which there are separately identifiable cash inflows (cash-generating unit or “CGU”). The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use (being the present value of the expected future cash flows of the relevant asset or CGU). An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. Goodwill and indefinite lived intangible assets are reviewed for impairment annually or at any time if an indicator of impairment exists. As well, newly acquired goodwill is reviewed for impairment at the end of the year in which it was acquired. Goodwill acquired through a business combination is allocated to each CGU, or group of CGUs, that are expected to benefit from the related business combination. A group of CGUs represents the lowest level within the entity at which the goodwill is monitored for internal management purposes, which is not higher than an operating segment. Impairment losses on goodwill are not reversed. The Company evaluates impairment losses, other than goodwill impairment, for potential reversals when events or circumstances warrant such consideration. 62 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) i) Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held with banks, and other short-term highly liquid investments with original maturities of three months or less. j) Income taxes Income tax comprises current and deferred tax. Income tax is recognized in the Consolidated Statement of Earnings except to the extent that it relates to items recognized directly in equity, in which case the income tax is recognized directly in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted, or substantively enacted, at the end of the reporting period, and any adjustment to tax payable in respect of previous years. In general, deferred tax is recognized in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined on a non-discounted basis using tax rates and laws that have been enacted or substantively enacted at the statement of financial position date and are expected to apply when the deferred tax asset or liability is settled. Deferred tax assets are recognized to the extent that it is probable that the assets can be recovered. Deferred income tax is provided on temporary differences arising on investments in subsidiaries except, in the case of subsidiaries, where the timing of the reversal of the temporary difference is controlled by BGSI and it is probable that the temporary difference will not reverse in the foreseeable future. k) Unearned rebates Prepaid purchase rebates are recorded as unearned rebates on the statement of financial position and amortized, as a reduction of the cost of purchases, on a straight-line basis over the term of the contract. l) Shareholders’ capital Common shares are classified as equity. Incremental costs directly attributable to the issuance of shares are recognized as a deduction from equity. m) Share-based compensation plans Equity settled plans The Company's stock option plan allows for the granting of options up to an amount of 250,000 Common shares. The fair value of each option is measured at the date of grant using the Black-Scholes option pricing model. Compensation expense is recognized over the option vesting period, based on the number of options expected to vest, with the offset credited to contributed surplus. Cash settled plans The Company’s Performance Share Units, Restricted Share Units and Directors Deferred Share Unit Plan are cash settled share-based payments. The fair value of each outstanding Performance Share Unit and Restricted Share Unit is estimated based on the fair market value of the Company’s units/shares at the grant date, subsequently adjusted for additional shares granted based on the reinvestment of notional dividends and the market value of the shares at the end of each reporting period. The associated compensation expense is recognized over the vesting period, factoring in the probability of the performance criteria being met during that period. The fair value of each outstanding Director Deferred Share Unit is estimated based 63 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) on the fair market value of the BGSI’s shares at the grant date, subsequently adjusted for additional shares granted based on the reinvestment of notional dividends and the market value of the shares at the end of each reporting period. n) Earnings per share Basic earnings per share (“EPS”) is calculated by dividing the net earnings for the period attributable to equity owners of the Company by the weighted average number of shares outstanding during the period. Diluted EPS is calculated by adjusting the weighted average number of shares outstanding and corresponding earnings impact for dilutive instruments. The Company’s potentially dilutive instruments consist of stock options. The dilutive impact of the stock options are calculated using the treasury stock method. o) Foreign currency translation Items included in the financial statements of each subsidiary are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The Company operates with multiple functional currencies. The consolidated financial statements are presented in U.S. dollars as this provides a better reflection of the Company’s business activities, given the significance of revenues denominated in U.S. dollars. Entities that have a functional currency different from that of U.S. dollars are translated into U.S. dollars. Assets and liabilities are translated into U.S. dollars at the noon rate of exchange prevailing at the statement of financial position dates and income and expense items are translated at the average exchange rate during the period (as this is considered a reasonable approximation to actual rates). The adjustment arising from the translation of these accounts is recognized in other comprehensive earnings (loss) as cumulative translation adjustments. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Generally, foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in currencies other than an operation’s functional currency are recognized in earnings. p) Financial instruments Recognition Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Classification BGSI classifies its financial assets and liabilities in the following categories depending on the Company’s business model for managing the financial assets and the contractual terms of the cash flows: • • Those to be measured subsequently at fair value, either through profit or loss (“FVPL”) or through OCI, and Those to be measured at amortized cost Cash and accounts receivable are classified as amortized cost. After their initial fair value measurement, they are measured at amortized cost using the effective interest method, as reduced by appropriate allowances for estimated lifetime expected credit losses. Investments which do not qualify for equity treatment are recorded as other long term assets at FVPL. As there is no ready secondary market, the fair value is estimated using the discounted cash flow method. 64 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) Accounts payable and accrued liabilities, dividends payable, and long-term debt are classified as amortized cost and are net of any related financing fees or issue costs. After their initial fair value measurement, they are measured at amortized cost using the effective interest method. Derivative contracts are classified as financial assets or financial liabilities at FVPL with mark-to-market adjustments being recorded to net earnings at each period end. Measurement At initial recognition, BGSI measures a financial asset at its fair value. In the case of a financial asset not measured at FVPL, transaction costs that are directly attributable to the acquisition of the financial asset are included in the initial fair value. Transaction costs of financial assets carried at FVPL are expensed in profit or loss. For those financial instruments where fair value is recognized in the Consolidated Statement of Financial Position the methods and assumptions used to develop fair value measurements have been classified into one of the three levels of the fair value hierarchy for financial instruments: • • • Level 1 includes quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 includes inputs that are observable other than quoted prices included in Level 1 Level 3 includes inputs that are not based on observable market data q) Pensions and other post-retirement benefits The Company contributes to defined contribution pension plans of certain employees. Contributions are recognized within operating expenses at an amount equal to contributions payable for the period. Any outstanding contributions are recognized as liabilities within accrued liabilities. r) Provisions Provisions are recognized when BGSI has a present legal or constructive obligation that has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation. Provisions are measured at management’s best estimate of the expenditure required to settle the obligation at the end of the reporting period, and are discounted to present value where the effect is material. The increase in the provision due to the passage of time is recognized as a finance cost. s) Segment reporting The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments and has been identified as the joint responsibility of the President and Chief Executive Officer of BGSI and the Executive Vice President and Chief Financial Officer of BGSI. The Company’s primary line of business is automotive collision and glass repair and related services, with the majority of revenues relating to this group of similar services. This line of business operates in Canada and the U.S. and both regions exhibit similar long-term economic characteristics. In this circumstance, IFRS requires the Company to provide specific geographical disclosure. For the years reported, the Company’s revenues were derived within Canada or the U.S. and all property, plant and equipment, right of use assets, goodwill and intangible assets are located within these two geographic areas. 65 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) t) Reporting Interest Paid on the Statement of Cash Flows In accordance with IAS 7 Statement of Cash Flows, the Company has made the accounting policy choice to disclose these amounts as “Financing Activities” in the cash flow statement as this best reflects the nature of these expenses. 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Critical accounting estimates BGSI makes estimates, including the assumptions applied therein, concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. Impairment of Goodwill and Intangible Assets When testing goodwill and intangibles for impairment, BGSI uses a five year forward looking discounted cash flow of the cash generating unit (“CGU”) or group of CGU’s to which the asset relate. An estimate of the recoverable amount is then calculated as the higher of an asset’s fair value less costs to sell and value in use (being the present value of the expected future cash flows of the relevant asset or CGU). An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The methods used to value intangible assets and goodwill require critical estimates to be made regarding the future cash flows and useful lives of the intangible assets. Goodwill and intangible asset impairments, when recognized, are recorded as a separate charge to earnings, and could materially impact the operating results of the Company for any particular accounting period. Impairment of Other Long-lived Assets BGSI assesses the recoverability of its long-lived assets, other than goodwill and intangibles, after considering the potential impairment indicated by such factors as business and market trends, the Company’s ability to transfer the assets, future prospects, current market value and other economic factors. In performing its review of recoverability, management estimates the future cash flows expected to result from the use of the assets and their potential disposition. If the discounted sum of the expected future cash flows is less than the carrying value of the assets generating those cash flows, an impairment loss would be recognized based on the excess of the carrying amounts of the assets over their estimated recoverable value. The underlying estimates for cash flows include estimates for future sales, gross margin rates and operating expenses. Changes which may impact these estimates include, but are not limited to, business risks and uncertainties and economic conditions. To the extent that management’s estimates are not realized, future assessments could result in impairment charges that may have a material impact on the Company’s consolidated financial statements. Business Combinations Fair value of assets acquired and liabilities assumed in a business combination is estimated based on information available at the date of acquisition and involves considerable judgment in determining the fair values assigned to property, plant and equipment and intangible assets acquired and liabilities assumed on 66 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) acquisition. The determination of these fair values involves analysis including the use of discounted cash flows, estimated future margins, future growth rates, market rents and capitalization rates. There is estimation in this analysis and actual results could differ from estimates. Fair Value of Financial Instruments BGSI has applied discounted cash flow methods to establish the fair value of certain financial assets and financial liabilities recorded on the Consolidated Statement of Financial Position, as well as disclosed in the notes to the consolidated financial statements. BGSI also establishes mark-to-market valuations for derivative instruments, which are assumed to represent the current fair value of these instruments. These valuations rely on assumptions regarding interest and exchange rates as well as other economic indicators, which at the time of establishing the fair value for disclosure, have a high degree of uncertainty. Unrealized gains or losses on these derivative financial instruments may not be realized as markets change. Income Taxes BGSI is subject to income tax in several jurisdictions and estimates are used to determine the provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the Company recognizes tax liabilities based on estimates of whether additional taxes and interest will be due. Uncertain tax liabilities may be recognized when, despite the Company’s belief that its tax return positions are supportable, the Company believes that certain positions are likely to be challenged and may not be fully sustained upon review by tax authorities. The Company believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made. Critical judgments in applying the entity’s accounting policies Deferred Tax Assets The assessment of the probability of future taxable income in which deferred tax assets can be utilized is based on BGSI's latest forecasts which are adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. The tax rules in the numerous jurisdictions in which BGSI operates are also carefully taken into consideration. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, that deferred tax asset is recognized in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances. The judgments inherent in these assessments are subject to uncertainty and if changed could materially affect the BGSI’s assessment of its ability to realize the benefit of these tax assets. 4. CHANGES IN ACCOUNTING POLICIES The IASB amendments to IAS 1 - Presentation of Financial Statements and IAS 8 - Changes in Accounting Policies, Changes in Accounting Estimates and Errors require the disclosure of material accounting policy rather than significant accounting policies, and help entities to distinguish between accounting policies and accounting estimates. The amendments are effective for the annual periods beginning on or after January 1, 2023 and do not materially impact the Company’s financial disclosures. 67 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) The May 2023 IASB amendment to IAS 12 – Income Taxes requires entities to disclose information relating to income taxes arising from implementation of Pillar Two Model Rules published by the Organization for Economic Co-Operation and Development. The amendments are effective for annual reporting periods beginning on or after January 1, 2023. Based on the Company’s assessment and the Pillar Two effective tax rates in all jurisdictions in which the Company is operating, the Company does not expect a material exposure to Pillar Two top up taxes. 5. ACQUISITIONS The Company completed 71 acquisitions that added 78 collision repair locations during the year ended December 31, 2023 as follows: Acquisition Date January 3, 2023 January 6, 2023 January 18, 2023 February 3, 2023 February 3, 2023 February 10, 2023 February 10, 2023 February 22, 2023 February 27, 2023 March 17, 2023 March 22, 2023 March 24, 2023 March 24, 2023 March 28, 2023 March 28, 2023 March 29, 2023 April 21, 2023 April 21, 2023 April 21, 2023 April 27, 2023 April 28, 2023 May 5, 2023 May 9, 2023 May 26, 2023 May 26, 2023 May 26, 2023 May 31, 2023 Location Cameron Park, CA Abilene, TX Park City, UT Hendersonville, NC Rogers, MN Lansdale, PA Sacramento, CA LaBelle, FL Perry, GA Rancho Cucamonga, CA Sacramento, CA Modesto, CA Prattville, AL Longview, TX Charleroi, PA Sharpsburg, GA Griffin, GA Huntsville, AL Baltimore, MD Stockton, CA Kailua-Kona, HI Puyallup, WA Iowa City, IA Ft. Lauderdale, FL Monroe, MI Chicago, IL Albany, NY 68 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) Acquisition Date June 2, 2023 June 16, 2023 June 16, 2023 June 23, 2023 June 23, 2023 June 29, 2023 July 14, 2023 July 14, 2023 July 21, 2023 July 21, 2023 July 28, 2023 August 15, 2023 August 15, 2023 August 25, 2023 September 6, 2023 September 8, 2023 September 8, 2023 September 12, 2023 September 22, 2023 September 22, 2023 October 13, 2023 October 20, 2023 October 27, 2023 November 3, 2023 November 7, 2023 November 8, 2023 November 10, 2023 November 10, 2023 November 16, 2023 November 17, 2023 November 17, 2023 November 25, 2023 November 27, 2023 November 28, 2023 November 29, 2023 December 1, 2023 December 1, 2023 Location Merced, CA Sacramento, Davis, and Yuba City, CA (3 locations) Austin, TX Fridley, MN Red Bluff, CA Walla Walla, WA Wildwood, FL Donaldsonville, LA Redding, CA Lafayette and New Iberia, LA (2 locations) Oroville, CA Coon Rapids, MN Chicago, IL Alexandria, MN Albion, NY Lincoln Park, MI River Falls, WI Troy, MI Kingston, NY Arnold, Imperial, and St. Louis, MO (3 locations) Pleasant Hill, IA Avon, MN Houston, TX Chico, CA Albertville, MN Redding, CA Spring, TX Stafford, TX Naples, FL North Port, FL Walker, LA Owensboro, KY Houston, TX Lodi, CA Becker, MN Elk River, MN Melrose, MN 69 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) Acquisition Date December 5, 2023 December 8, 2023 December 15, 2023 December 15, 2023 December 19, 2023 December 27, 2023 December 29, 2023 Location Turlock, CA San Antonio, TX (3 locations) Golden Valley, MN Shakopee, MN Louisville, KY Niagara Falls, ON Sacramento, CA During the first quarter of 2023, the company acquired a two location glass business in Minnesota and a single location glass business in Texas. During the third quarter of 2023, the company acquired a single location glass business in New York, a single location glass business in Virginia and invested in a long term asset to support the continued growth in the glass business. During the fourth quarter of 2023, the company acquired a single location glass business in Pennsylvania. 70 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) The company has accounted for the 2023 acquisitions using the acquisition method as follows: Total acquisitions $ $ $ $ $ 11 1,818 27,219 49,916 25,158 1,372 6,414 (48) (49,916) 61,944 29,996 91,940 85,393 6,547 91,940 Acquisitions in 2023 Identifiable net assets acquired at fair value: Cash Other currents assets Property, plant and equipment Right of use assets Identified intangible assets Customer relationships Non-compete agreements Intellectual property Current liabilities Lease liabilities Identifiable net assets acquired Goodwill Total purchase consideration Consideration provided Cash paid or payable Seller notes Total consideration provided 71 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) The Company completed 20 acquisitions that added 23 locations during the year ended December 31, 2022 as follows: Acquisition Date January 3, 2022 February 11, 2022 March 18, 2022 March 28, 2022 March 31, 2022 April 29, 2022 May 13, 2022 May 31, 2022 July 8, 2022 July 29, 2022 September 2, 2022 September 6, 2022 September 9, 2022 September 30, 2022 October 7, 2022 November 4, 2022 November 28, 2022 November 28, 2022 December 30, 2022 December 30, 2022 Location Springhill & Thompson’s Station, TN (2 locations) Signal Hill, CA Bossier City & Shreveport, LA (2 locations) New Smyrna Beach, FL Eau Claire and Plover, WI (2 locations) Indian Trail, NC Marion, NC Elkhorn, WI Roseville, CA Orangevale, CA La Crosse, WI Brownwood, TX Yakima, WA Sacramento, CA Tulsa, OK Wausau, WI Sulphur, LA Lake Charles, LA Tallahassee, FL Colorado Springs, CO During the first quarter of 2022, the company also acquired a single location glass business in Minnesota. During the third quarter of 2022, the company opened a single location glass business in California and acquired a four location glass business in Florida. During the fourth quarter of 2022, the company acquired a single location glass business in Wisconsin. 72 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) The company has accounted for the 2022 acquisitions using the acquisition method as follows: Acquisitions in 2022 Identifiable net assets acquired at fair value: Other currents assets Property, plant and equipment Right of use assets Identified intangible assets Customer relationships Non-compete agreements Lease liabilities Identifiable net assets acquired Goodwill Total purchase consideration Consideration provided Cash paid or payable Seller notes Total consideration provided Total acquisitions 960 11,055 18,179 13,903 466 (18,179) 26,384 6,190 32,574 28,699 3,875 32,574 $ $ $ $ The preliminary purchase prices for the 2023 acquisitions may be revised as additional information becomes available. Further adjustments may be recorded in future periods as purchase price adjustments are finalized. Canadian acquisition transactions are initially recognized in U.S. dollars at the rates of exchange in effect on the transaction dates. Subsequently, the assets and liabilities are translated at the rate in effect at the Consolidated Statement of Financial Position date. A significant part of the goodwill recorded on the acquisitions can be attributed to the assembled workforce and the operating know-how of key personnel. However, no intangible assets qualified for separate recognition in this respect. Goodwill recognized during 2023 is expected to be deductible for tax purposes. On the statement of cash flows, included as part of cash used for acquisition and development of business were costs related to the acquisition of businesses, as well as the development of businesses which consisted primarily of property, plant and equipment additions. The results of operations reflect the revenues and expenses of acquired operations from the date of acquisition. During 2023, revenue contributed by 2023 acquisitions since being acquired were $68,171. Net losses incurred 73 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) by 2023 acquisitions since being acquired were $4,809. If 2023 acquisitions had been acquired on January 1, 2023, BGSI’s revenue and net earnings for the year ended December 31, 2023 would have been $3,062,647 and $72,368 (unaudited), respectively. 6. INVENTORY As at Parts and materials Work in process December 31, 2023 December 31, 2022 $ $ 23,864 $ 54,668 78,532 $ 20,734 58,050 78,784 Included in cost of sales for the year ended December 31, 2023 are parts and material costs of $931,089 (2022 – $794,017) and labour costs of $471,451 (2022 – $389,609) with the balance of cost of sales primarily made up of sublet charges. 74 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) 7. PROPERTY, PLANT AND EQUIPMENT Land Buildings Shop Equipment Office Equipment Computer Hardware Signage Vehicles Depreciation rates 5% 15% 20% 30% 15% 30% Leasehold Improvements 10 to 25 years straight line CIP Total As at January 1, 2023 Cost Accumulated depreciation Net book value For the year ended December 31, 2023 Acquired through business combinations Additions Proceeds on disposal Gain (loss) on disposal Transfers from right of use assets Depreciation Foreign exchange $11,114 $19,519 $246,930 $19,406 $35,441 $19,421 $9,218 $201,642 $16,841 $579,532 — (3,160) (122,358) (11,910) (23,058) (9,109) $11,114 $16,359 $124,572 $7,496 $12,383 $10,312 (6,133) $3,085 (89,240) — (264,968) $112,402 $16,841 $314,564 1,086 1,050 4,499 7,066 11,933 53,457 (47) (102) — — 4,431 — (9) — 11 3,316 — (11) — — 2,981 — — — 286 2,932 (568) 195 297 — — — — — — — 12 (1,331) (24,740) (2,008) (4,216) (1,904) (1,302) (21,362) 24 162 9 18 12 2 48 9,404 65,229 — 27,219 16,519 156,981 — (92) — (2,832) (3,447) (38) (57) — — — 297 (56,863) 287 Net book value $13,262 $26,617 $165,235 $9,919 $11,501 $11,401 $4,927 $165,629 $30,490 $438,981 As at December 31, 2023 Cost Accumulated depreciation Net book value $13,262 $31,119 $312,529 $23,828 $38,728 $22,302 $12,051 $275,027 $30,490 $759,336 — (4,502) (147,294) (13,909) (27,227) (10,901) (7,124) (109,398) — (320,355) $13,262 $26,617 $165,235 $9,919 $11,501 $11,401 $4,927 $165,629 $30,490 $438,981 75 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) Land Buildings Shop Equipment Office Equipment Computer Hardware Signage Vehicles Depreciation rates 5% 15% 20% 30% 15% 30% Leasehold Improvements 10 to 25 years straight line CIP Total As at January 1, 2022 Cost $25,774 $46,783 $224,253 $17,437 $30,355 $15,828 $7,430 $176,203 $14,938 $559,001 Accumulated depreciation Net book value For the year ended December 31, 2022 Acquired through business combinations Additions Proceeds on disposal Gain (loss) on disposal Transfers from right of use assets Depreciation — (5,195) (104,415) (10,402) (19,171) (7,715) (5,504) (74,416) — (226,818) $25,774 $41,588 $119,838 $7,035 $11,184 $8,113 $1,926 $101,787 $14,938 $332,183 1,034 — 1,416 1,899 4,326 21,510 — 2,281 — 5,811 — 3,798 253 1,738 4,026 31,421 — 8,758 11,055 77,216 (15,661) (26,282) (27) (373) (17) (460) — — — — (6) 20 — — (22) — — (2) 38 Foreign exchange (33) (69) (456) (26) (50) (36) (1,361) (20,601) (1,810) (4,539) (1,599) (825) (8,229) (6,855) (57,885) 528 369 279 (808) (5) 422 (17,184) (210) — — — — 503 279 (47,902) (885) Net book value $11,114 $16,358 $124,573 $7,494 $12,384 $10,312 $3,086 $112,402 $16,841 $314,564 As at December 31, 2022 Cost $11,114 $19,519 $246,930 $19,406 $35,441 $19,421 $9,218 $201,642 $16,841 $579,532 Accumulated depreciation — (3,160) (122,358) (11,910) (23,058) (9,109) (6,133) (89,240) — (264,968) Net book value $11,114 $16,359 $124,572 $7,496 $12,383 $10,312 $3,085 $112,402 $16,841 $314,564 76 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) 8. RIGHT OF USE ASSETS As at Property Vehicles and Equipment December 31, 2023 Balance, beginning of period Acquired through business combinations Additions and modifications Depreciation Transfers to property, plant and equipment Foreign exchange Net book value $ 559,254 $ 9,183 $ 568,437 49,916 137,892 (106,004) — 1,231 642,289 $ $ — 6,972 (3,802) (297) 2 12,058 $ 49,916 144,864 (109,806) (297) 1,233 654,347 As at Property Vehicles and Equipment December 31, 2022 Balance, beginning of period Acquired through business combinations Additions and modifications Depreciation Loss on disposal Transfers to property, plant and equipment Foreign exchange $ 494,700 $ 7,336 $ 502,036 18,179 148,047 (98,179) — — (3,493) — 5,102 (2,971) — (279) (5) 18,179 153,149 (101,150) — (279) (3,498) Net book value $ 559,254 $ 9,183 $ 568,437 77 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) 9. INCOME TAXES BGSI accounts for deferred income tax assets and liabilities in respect of accounting and tax basis differences. Deferred income tax assets and liabilities which relate to the same jurisdiction are netted on the Consolidated Statement of Financial Position. a. The reconciliation between income tax expense and the accounting earnings multiplied by the combined basic Canadian and U.S. federal, provincial and state tax rates is as follows: For the years ended December 31, 2023 2022 Earnings before income taxes Combined basic Canadian and U.S. federal, provincial and state tax rates $ 119,521 $ 58,727 26.12 % 26.19 % Income tax expense at combined statutory tax rates $ 31,219 $ 15,381 Adjustments for the tax effect of: Additional state tax liability Other non-deductible expenses Other Income tax expense 1,177 289 180 2,039 285 60 $ 32,865 $ 17,765 b. Deferred income taxes consist of the Canadian and U.S. tax jurisdictions, respectively, as follows: As at Property, plant and equipment Intangible assets Right of use assets net of lease liabilities Accrued liabilities Issue costs Director Share Units Non-capital losses carried forward Other Deferred income tax asset December 31, 2023 December 31, 2022 $ $ (409) $ (5,239) 1,969 — 461 1,639 5,473 422 4,316 $ (32) (4,589) 1,630 198 900 969 4,635 104 3,815 78 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) As at Property, plant and equipment Intangible assets Right of use assets net of lease liabilities Accrued liabilities Acquisition costs Other Deferred income tax liability December 31, 2023 December 31, 2022 $ 54,702 $ 52,158 (13,799) (16,796) (4,203) (1,791) $ 70,271 $ 45,808 44,280 (11,224) (10,989) (3,713) (1,277) 62,885 c. The movement in deferred income tax assets and liabilities in Canada and U.S. tax jurisdictions, respectively, during the year is as follows: Deferred income tax asset as at Balance, beginning of year Deferred income tax recovery Foreign exchange Balance, end of year Deferred income tax liability as at Balance, beginning of year Deferred income tax expense Balance, end of year December 31, 2023 December 31, 2022 $ $ 3,815 $ 393 108 $ 4,316 $ 1,737 2,230 (152) 3,815 December 31, 2023 December 31, 2022 $ $ 62,885 $ 7,386 70,271 $ 48,602 14,283 62,885 d. Deferred income tax assets are recognized to the extent it is probable that sufficient future taxable income will be available to allow a deferred income tax asset to be realized. At December 31, 2023 BGSI has recognized all of its deferred income tax assets with the exception of $5,678 (2022 - $5,545) in capital losses available in Canada. At December 31, 2023 the Company has non-capital losses in Canada of $21,019 (2022 - $17,770) and net operating losses in the U.S. of $nil (2022 - $nil). The losses in Canada expire as follows: Year of expiry 2039 2040 2041 2042 2043 $ $ $ $ $ 1,478 — 1,909 15,382 2,250 79 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) 10. INTANGIBLE ASSETS Customer Relationships Brand Name As at January 1, 2022 Cost Accumulated amortization Net book value For the year ended December 31, 2022 Acquired through business combinations Additions Amortization Foreign exchange Net book value As at December 31, 2022 Cost Accumulated amortization Net book value For the year ended December 31, 2023 Acquired through business combinations Additions Amortization Foreign exchange Net book value As at December 31, 2023 Cost Accumulated amortization Net book value $402,598 (89,539) $313,059 13,903 — (20,563) (2,855) $303,544 $412,705 (109,161) $303,544 25,158 — (21,272) 928 $308,358 $439,201 (130,843) $308,358 $23,681 (5,170) $18,511 — — (292) (706) $17,513 $22,974 (5,461) $17,513 — — — 249 $17,762 $23,223 (5,461) $17,762 Non- compete Agreements Favourable Lease Agreements $23,353 (16,625) $6,728 466 7 (2,608) (17) $4,576 $23,203 (18,627) $4,576 1,372 — (1,864) 1 $4,085 $24,722 (20,637) $4,085 $6,301 (2,514) $3,787 — — (420) (3) $3,364 $6,305 (2,941) $3,364 — — (420) (2) $2,942 $6,305 (3,363) $2,942 Total $468,397 (119,670) $348,727 14,369 259 (26,567) (3,849) $332,939 $476,827 (143,888) $332,939 32,944 1,684 (26,182) 1,396 $342,781 $513,274 (170,493) $342,781 Software $12,464 (5,822) $6,642 — 252 (2,684) (268) $3,942 $11,640 (7,698) $3,942 6,414 1,684 (2,626) 220 $9,634 $19,823 (10,189) $9,634 80 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) 11. GOODWILL As at Balance, beginning of year Acquired through business combination Foreign exchange Balance, end of period December 31, 2023 December 31, 2022 $ 601,706 $ 601,991 29,996 2,284 6,190 (6,475) $ 633,986 $ 601,706 When testing goodwill for impairment, BGSI uses a five year forward looking discounted cash flow of the cash generating unit (“CGU”) or group of CGUs to which the asset relate. BGSI has used the fair value less costs to sell method to evaluate the carrying amount of goodwill. The key assumptions used in the assessment include an estimate of current and future cash flows, taxes, future acquisition growth, future capital expenditures, a terminal growth rate of 3% and a weighted average cost of capital of 9% to 11%. BGSI concluded that there was no impairment to the carrying amount of goodwill as at December 31, 2023. The carrying amount of goodwill for the Canadian CGU was $97,044 as at December 31, 2023. Sensitivity testing is conducted as part of the annual impairment tests. After considering all key assumptions, management considers that a reasonably possible change in only the following assumptions would cause the Canadian CGU’s carrying amount to exceed its recoverable amount: • • If the discount rate increased by approximately 2.8%. If Adjusted EBITDA margins are lower by approximately 2.4% throughout the forecast period, representing a 18% decline in Adjusted EBITDA. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is not a calculation defined in IFRS. EBITDA comprises sales less operating expenses before finance costs, amortization and depreciation, and income taxes. Adjusted EBITDA is calculated to exclude acquisition and transaction costs and fair value adjustments to contingent consideration, which do not relate to the current operating performance of the business units but are typically costs incurred to expand operations. 81 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) 12. OTHER LONG TERM ASSETS Other long term assets consist primarily of rent deposits in the amount of $3,720 (2022 - $3,463) and an investment of $8,000 (2022 - $nil) to support the growth of the glass business. Investments which do not qualify for equity treatment are recorded as other long term assets. 13. DIVIDENDS The Company’s Directors have discretion in declaring dividends. The Company declares and pays dividends from its available cash from operations taking into account current and future performance amounts necessary for principal and interest payments on debt obligations, amounts required for maintenance capital expenditures and amounts allocated to reserves. The Company declared dividends of C$0.147 per share in the first, second and third quarters of 2023 and C$0.150 in the fourth quarter of 2023. The Company declared dividends of C$0.144 per share in the first, second and third quarter of 2022 and C$0.147 in the fourth quarter of 2022. The following is the balance of dividends payable: As at December 31, 2023 December 31, 2022 Balance, beginning of period $ 2,330 $ Declared Payments Foreign exchange Balance, end of period 9,412 (9,382) 75 $ 2,435 $ 2,439 9,499 (9,545) (63) 2,330 Dividends to shareholders were declared and paid in thousands of U.S. dollars as follows: Record date March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 Record date March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 Payment date April 26, 2023 July 27, 2023 October 27, 2023 January 29, 2024 Payment date April 27, 2022 July 27, 2022 October 27, 2022 January 27, 2023 82 Dividend amount $ $ 2,306 2,376 2,333 2,397 9,412 Dividend amount $ $ 2,441 2,413 2,321 2,324 9,499 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) 14. LONG-TERM DEBT The Company has a credit agreement maturing in March 2025 which consists of a revolving credit facility of $550,000 with an accordion feature which can increase the facility to a maximum of $825,000 (the “revolving credit facility”, or the “facility”). The revolving credit facility is accompanied by a seven-year fixed-rate Term Loan A in the amount of $125,000 at an interest rate of 3.455%. The revolving credit facility is with a syndicate of Canadian and U.S. banks and is secured by the shares and assets of the Company as well as guarantees by BGSI and subsidiaries, while Term Loan A is with one of the syndicated banks. The interest rate for draws on the revolving credit facility are based on a pricing grid of BGSI’s ratio of total funded debt to EBITDA as determined under the credit agreement. The Company can draw on the facility in either the U.S. or in Canada, in either U.S. or Canadian dollars. The Company can make draws in tranches as required. Tranches bear interest only and are not repayable until the maturity date but can be voluntarily repaid at any time. The Company has the ability to choose the base interest rate between Prime, Bankers’ Acceptances (“BA”), U.S. Prime or Secured Overnight Financing Rate (“SOFR”) at the Company’s election. SOFR was introduced in May 2023, where previously the Company had the option to choose London Inter Bank Offer Rate (“LIBOR”) until it was decommissioned. The total syndicated facility includes a swing line up to a maximum of $10,000 for the Canadian borrower and $30,000 for the U.S. borrower. As at December 31, 2023, the U.S. borrower had drawn $264,500 (December 31, 2022 - $186,500) and the Canadian borrower had drawn $nil (December 31, 2022 - C$9,000) on the revolving credit facility and swing line and $125,000 (December 31, 2022 - $125,000) on the Term Loan A. Under the revolving credit facility, the Company is subject to certain financial covenants which must be maintained to avoid acceleration of the termination of the credit agreement. The financial covenants require BGSI to maintain a senior funded debt to EBITDA ratio of no greater than 3.50 and an interest coverage ratio of not less than 2.75. For four quarters following a material acquisition, the senior funded debt to EBITDA ratio may be increased to less than 4.00. For purposes of covenant calculations, property lease payments are deducted from EBITDA, and EBITDA is further adjusted to reflect pro-forma annualized acquisition results. On March 21, 2022, the Company amended the credit agreement to provide for a covenant flex period from January 1, 2022 to March 30, 2023 and to provide for revisions to interest rates, allowing for the use of LIBOR until it was decommissioned and allowing for the use of the SOFR at the Company’s election. During the covenant flex period, the financial covenants required BGSI to maintain a senior funded debt to EBITDA ratio of no greater than 4.00 from March 21, 2022 to March 30, 2022, no greater than 4.50 from March 31, 2022 to September 29, 2022, no greater than 4.25 from September 30, 2022 to December 30, 2022 and no greater than 4.00 from December 31, 2022 to March 30, 2023. For four quarters following a material acquisition during the covenant flex period, the senior funded debt to EBITDA ratio may be increased by up to 0.50, never exceeding 4.50. Financing fees of $1,909 are amortized to finance costs on a straight-line basis over the five year term of the third amended and restated credit agreement and over the seven year term for fees incurred related to Term Loan A. The unamortized deferred financing costs of $642 have been netted against the debt drawn as at December 31, 2023. As at December 31, 2023, the Company was in compliance with all financial covenants. Seller notes payable of $32,847 on the financing of certain acquisitions are unsecured, at interest rates ranging from 3% to 8%. The notes are repayable from January 2024 to May 2028. 83 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) Long-term debt is comprised of the following: As at Revolving credit facility & swing line (net of financing costs) Term Loan A (net of financing costs) Seller notes Current portion The following is the continuity of long-term debt: As at Balance, beginning of period Consideration on acquisition Draws Repayments Deferred financing costs Amortization of deferred financing costs Foreign exchange December 31, 2023 December 31, 2022 $ $ $ 264,046 $ 124,812 32,847 421,705 $ 22,038 399,667 $ 192,343 124,759 43,069 360,171 15,365 344,806 December 31, 2023 December 31, 2022 $ 360,171 $ 6,547 260,473 (205,848) — 418 (56) 442,073 3,875 126,093 (211,863) (514) 406 101 Balance, end of period $ 421,705 $ 360,171 Included in finance costs for the year ended December 31, 2023 is interest on long-term debt of $19,814 (2022 - $15,495). 84 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) 15. LEASE LIABILITIES The following is the continuity of lease liabilities: As at Balance, beginning of period Assumed on acquisition Additions and modifications Repayments Financing costs Foreign exchange Balance, end of period Current portion December 31, 2023 December 31, 2022 $ 617,926 $ 49,916 145,327 543,347 18,179 155,560 (131,360) (117,045) 32,056 1,412 715,277 $ 107,727 607,550 $ 21,795 (3,910) 617,926 98,870 519,056 $ $ Lease expenses are presented in the Consolidated Statement of Earnings as follows: Operating expenses Depreciation of right of use assets Finance costs Year ended December 31, 2023 2022 $ $ $ 7,808 $ 109,806 $ 32,056 $ 6,037 101,150 21,795 Included in operating expenses are short-term and low-value asset lease expenses of $7,711 for the year ended December 31, 2023 (2022 - $5,908). 85 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) 16. UNEARNED REBATES In connection with a 2019 acquisition, the Company recognized prepaid rebates received from a trading partner of $7,500. These rebates have been deferred as unearned rebates. Under the terms of this agreement, the Company will amortize the unearned rebate on a straight line basis over a term of 12 years, as a reduction of cost of sales. The Company is obliged to purchase the suppliers’ products on an exclusive basis over this term. In exchange for this exclusive arrangement, and subject to certain conditions, the trading partners are required to continue to price their products competitively to the Company. Termination of the arrangement by the Company, the occurrence of an event of default or a change in control, as defined by the agreement, require the Company to repay all unamortized balances and all other amounts as outlined within the agreement. At December 31, 2023, the Company has unearned rebates of $4,579 (December 31, 2022 – $5,194). 17. FAIR VALUE ADJUSTMENTS Contingent consideration Total fair value adjustments Year ended December 31, 2023 2022 $ $ (189) $ (189) $ 146 146 86 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) 18. FINANCIAL INSTRUMENTS Carrying value and estimated fair value of financial instruments December 31, 2023 December 31, 2022 Classification Fair value hierarchy Carrying amount Fair value Carrying amount Fair value Financial assets Cash Amortized cost Accounts receivable Amortized cost Long-term asset FVPL (1) Financial liabilities Accounts payable and accrued liabilities Amortized cost Dividends payable Amortized cost Long-term debt Amortized cost (1) Fair Value Through Profit or Loss n/a n/a 3 n/a n/a n/a 22,511 22,511 15,068 15,068 145,793 145,793 139,266 139,266 8,000 8,000 — — 339,823 339,823 307,729 307,729 2,435 2,435 2,330 2,330 421,705 409,212 360,171 355,815 For the Company’s current financial assets and liabilities, including accounts receivable, accounts payable and accrued liabilities, and dividends payable, which are short term in nature and subject to normal trade terms, the carrying values approximate their fair value. The fair value of BGSI’s long-term debt has been determined by calculating the present value of the interest rate spread that exists between the actual Term Loan A and the rate that would be negotiated with the economic conditions at the reporting date. As there is no ready secondary market for BGSI’s other long-term debt and other long term asset, the fair value has been estimated using the discounted cash flow method. Collateral The Company’s syndicated loan facility is collateralized by a General Security Agreement. The carrying amount of the financial assets pledged as collateral for this facility at December 31, 2023 was approximately $168,304 (December 31, 2022 - $154,334). Interest rate risk The Company’s operating line and syndicated loan facility are exposed to interest rate fluctuations and the Company does not hold any financial instruments to mitigate this risk. Seller notes and Term Loan A are at fixed interest rates. 87 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) Foreign currency risk The Company’s operations in Canada are more closely tied to its domestic currency. Accordingly, the Canadian operations are measured in Canadian dollars and the Company’s foreign exchange translation exposure relates to these operations. When the Canadian operation’s net asset values are converted to U.S. dollars, currency fluctuations result in period to period changes in those net asset values. BGSI’s equity position reflects these changes in net asset values as recorded in accumulated other comprehensive earnings. The income and expenses of the Canadian operations are translated into U.S. dollars at the average rate for the period in order to include their financial results in the consolidated financial statements. Period to period changes in the average exchange rates cause translation effects that have an impact on net earnings. Unlike the effect of exchange rate fluctuations on transaction exposure, the exchange rate translation risk does not affect local currency cash flows. Transactional foreign currency risk also exists in circumstances where U.S. denominated cash is received in Canada. The Company monitors U.S. denominated cash flows to be received in Canada and evaluates whether to use forward foreign exchange contracts. No forward foreign exchange contracts were used during 2023 or 2022. BGSI earns interest on promissory notes issued to The Boyd Group (U.S.) Inc., the parent of the Company’s U.S. operations. As at December 31, 2023 and December 31, 2022, promissory notes denominated in Canadian dollars are as follows: Promissory notes As at December 31, 2023 December 31, 2022 Promissory note at 5.0% due September 29, 2027 $ 108,000 $ 108,000 Promissory note at 5.75% due January 1, 2030 Promissory note at 9.22% due January 1, 2029 Promissory note at 4.3% due December 30, 2030 41,800 61,800 70,000 41,800 61,800 70,000 $ 281,600 $ 281,600 BGSI’s U.S. operations purchase Canadian dollars at market rates to fund the monthly interest payments. Credit risk The carrying amount of financial assets represents the maximum credit exposure. Cash is in the form of deposits on demand with major financial institutions that have strong long-term credit ratings. BGSI is subject to risk of non-payment of accounts receivable; however, the Company’s receivables are largely collected from the insurers of its customers. Accordingly, the Company’s accounts receivable comprises mostly amounts due from national and international insurance companies or provincial crown corporations. Aging of accounts receivable As at Neither impaired nor past due Past due: Over 90 days Allowance for doubtful accounts Accounts receivable December 31, 2023 December 31, 2022 $ $ $ 141,148 $ 132,017 8,159 149,307 $ (3,514) 145,793 $ 10,928 142,945 (3,679) 139,266 88 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) BGSI uses an allowance account to record an estimate of potential impairment for accounts receivables. Allowance for doubtful accounts As at Balance, beginning of period (Decrease) increase in the allowance (net of recoveries and amounts written off) Balance, end of period December 31, 2023 December 31, 2022 $ $ 3,679 $ 2,954 (165) 3,514 $ 725 3,679 Liquidity risk The following table details the Company’s remaining undiscounted contractual maturities for its financial liabilities. Accounts payable and accrued liabilities Long-term debt Lease liabilities Total Within 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years After 5 years $339,823 421,705 883,340 $339,823 22,038 141,905 $1,644,868 $503,766 $— 271,553 133,986 $405,539 $— 2,443 117,911 $120,354 $— 125,582 102,699 $228,281 $— 89 82,499 $82,588 $— — 304,340 $304,340 Obligations of the Company are generally satisfied through future operating cash flows and the collection of accounts receivable. Market Risk and Sensitivity Analysis Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market prices. Components of market risk to which the Company is exposed are interest rate risk and foreign exchange rate risk as discussed above. BGSI has used a sensitivity analysis technique that measures the estimated change to net earnings and equity of a 1% (100 basis points) difference in market interest rates. The sensitivity analysis assumes that changes in market interest rates only affect interest income or expense of variable financial instruments not covered by hedging instruments. For the year ended December 31, 2023 it is estimated that the impact of a 1% increase to market rates would result in a $1,948 decrease (2022 – $2,201 decrease) to net earnings as well as comprehensive earnings. The currency risk sensitivity analysis is based on a 5% strengthening or weakening of the Canadian Dollar against the U.S. Dollar and assumes that all other variables remain constant. Under this assumption, net earnings for the year ended December 31, 2023 as well as comprehensive earnings would have changed by $nil due to no foreign exchange contracts being in place at the end of 2023 and 2022. 89 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) 19. CAPITAL Shareholders’ Capital Authorized: Unlimited number of common shares An unlimited number of common shares are authorized and may be issued pursuant to the Articles of Incorporation of BGSI. All common shares have equal rights and privileges. Each common share is redeemable and transferable. A common share entitles the holder thereof to participate equally in dividends, including the dividends of net earnings and net realized capital gains of BGSI and dividends on termination or winding-up of BGSI, is fully paid and non-assessable and entitles the holder thereof to one vote at all meetings of shareholders for each share held. 20. CONTRIBUTED SURPLUS During the year, stock option accretion (net of issue costs) of $502 (2022 - $357) was credited to contributed surplus. 21. CAPITAL STRUCTURE The Company’s objective when managing capital is to maintain a flexible capital structure which optimizes the cost of capital at acceptable risk. The Company includes in its definition of capital: equity, long-term debt, convertible debentures, convertible debenture conversion features, non-controlling interest put options and call liability, share based payment obligations, non-property obligations under lease liabilities, and unearned rebates, net of cash. The Company manages the capital structure and makes adjustments to it by taking into account changing economic conditions, operating performance and growth opportunities. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends it pays, purchase shares for cancellation pursuant to a normal course issuer bid, issue new shares, issue new debt or replace existing debt with different characteristics, issue convertible debentures, issue share options, expand the revolver, increase or decrease its non-property lease liabilities, pursue alternative structuring of acquisitions, trigger call options on certain acquisition obligations, negotiate unearned rebates, or settle certain acquisition obligations using a greater amount of cash, or shares. The Company monitors capital on a number of bases, including an interest coverage ratio, total debt to Adjusted EBITDA ratios, return on invested capital, a debt to capital ratio, a current ratio, diluted earnings per share and dividends per share. Total debt to Adjusted EBITDA is calculated as the Company’s total debt and non-property lease liabilities but excluding convertible debentures divided by Adjusted EBITDA. Return on invested capital is the ratio of Adjusted EBITDA to average invested capital. Adjusted EBITDA is a non- GAAP financial measure, whose nearest GAAP measure is Cash Flow from Operations. The Company’s strategy has been to maintain a strong statement of financial position including its cash position and financial flexibility while maintaining consistent dividends in order to capitalize on growth opportunities. In addition, the Company believes that, from time to time, the market price of the shares may not fully reflect the underlying value of the shares and that at such times the purchase of shares would be in the best interest of BGSI. Such purchases increase the proportionate ownership interest of all remaining shareholders. 90 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) The Company grows, in part, through the acquisition or start-up of collision and glass repair and replacement businesses, or other businesses. Sources of capital that the Company has been successful at accessing in the past include public and private equity placements, convertible debt offerings, the use of equity securities to directly pay for a portion of acquisitions, capital available through strategic alliances with trading partners, non-property lease financing, seller financing and both senior and subordinate debt facilities or deferring possible future purchase price payments using contingent consideration and call or put options. 22. RELATED PARTY TRANSACTIONS In certain circumstances the Company has entered into property lease arrangements where an employee of the Company is the landlord. In most cases, the Company assumes these property lease arrangements initially in connection with an acquisition. The property leases for these locations do not contain any significant non- standard terms and conditions that would not normally exist in an arm’s length relationship, and the Company has determined that the terms and conditions of the leases are representative of fair market rent values. The following are the lease payment amounts for facilities under lease with related parties: Landlord Gerber Building No. 1 Ptnrp Affiliated Person(s) Location Lease Expires December 31, 2023 December 31, 2022 Timothy O'Day South Elgin, IL 2029 103 102 23. SEGMENTED REPORTING BGSI has one reportable line of business, being automotive collision repair and related services, with all revenues relating to a group of similar services. In this circumstance, IFRS requires BGSI to provide geographical disclosure. For the periods reported, all of BGSI’s sales were derived within Canada or the United States of America. Reportable assets include property, plant and equipment, right of use assets, goodwill and intangible assets which are all located within these two geographic areas. Sales Canada United States Reportable Assets As at Canada United States Year ended December 31, 2023 2022 $ 231,601 $ 194,415 2,714,387 2,237,903 $ 2,945,988 $ 2,432,318 December 31, 2023 December 31, 2022 $ 220,786 $ 213,392 1,849,309 1,604,254 $ 2,070,095 $ 1,817,646 91 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) BGSI’s revenues are largely derived from the insurers of its customers, who are generally automobile owners. Formal relationships with insurance companies such as Direct Repair Programs (“DRPs”) play an important role in generating sales volumes for the Company. Although automobile owners still have the freedom of choice of repair provider, insurance companies may educate the owner on the benefits of choosing a repairer in their DRP network. Of the top five insurance companies that BGSI deals with, which in aggregate account for approximately 53% (2022 – 54%) of total sales, one insurance company represents approximately 19% (2022 – 18%) of the Company’s total sales, while a second insurance company represents approximately 11% (2022 – 11%). 24. COMPENSATION OF KEY MANAGEMENT Salaries and short-term employee benefits Long-term incentive plan Share options For the years ended December 31, 2023 2022 $ $ 7,531 $ 3,155 1,119 11,805 $ 5,264 2,263 399 7,926 Key management includes BGSI’s Directors as well as the most senior officers of the Company and Subsidiary Companies. 25. SHARE-BASED COMPENSATION Certain members of the management team of the Company, as well as the Board of Directors of the Company participate in share-based compensation plans. These plans are cash-settled, with compensation expense determined based on the fair value of the associated liability at the end of the reporting period until the awards are settled. Long-term incentive plan On January 1, 2021, January 1, 2022, and January 1, 2023, Performance Share Unit awards were granted to certain executive officers for the 2021, 2022 and 2023 grant years. Performance Share Units are tied to share value from date of grant to the date of vesting and will be paid out in cash over a three-year period, subject to the terms of the plan. Performance Share Units represent the right to receive payments linked to BGSI’s share value, conditional upon the achievement of one or more objective performance goals. The dividend rate declared by BGSI on issued and outstanding shares of the Company is also applied to the Performance Share Units. The dividend amount on the Performance Share Units is converted into additional Performance Share Units based on the market value of the Company’s shares at the time of the dividend. These additional Performance Share Units vest at the same time as the Performance Share Units that the dividend rate was applied on. The 2021, 2022, and 2023 awards granted include non-market performance conditions. The impact of market and non-market performance conditions is recognized through the adjustment of the award that is expected to vest. At the end of each reporting period, BGSI re-assesses its estimates of the number of Performance Share Units that are expected to vest and recognizes the impact of the revision to compensation expense in earnings over the vesting period. 92 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) The fair value of each outstanding Performance Share Unit is estimated based on the fair market value of the Company’s shares at the grant date, subsequently adjusted for additional shares granted based on the reinvestment of notional dividends and the market value of the shares at the end of each reporting period. The associated compensation expense is recognized over the vesting period, factoring in the probability of the performance criteria being met during that period. On January 1, 2021, January 1, 2022, and January 1, 2023 Restricted Share Units were granted to certain executive officers for the 2021, 2022 and 2023 grant years. Restricted Share Units are valued by reference to share value from date of grant to the date of vesting and will be paid out in cash over a two to three-year period, subject to the terms of the plan. The dividend rate declared by BGSI on issued and outstanding shares of the Company is also applied to the Restricted Share Units. The dividend amount on the Restricted Share Units is converted into additional Restricted Share Units based on the market value of the Company’s shares at the time of the dividend. These additional Restricted Share Units vest at the same time as the Restricted Share Units that the dividend rate was applied on. Directors Deferred Share Unit Plan A Directors Deferred Share Unit Plan (“DSUP”) is administered through BGSI and requires independent Directors to receive at least 60% of their Director compensation in the form of deferred shares, which are essentially notional shares of BGSI and are redeemable for cash on termination. Directors may elect to receive up to 100% of their Director compensation in the form of deferred shares. The number of deferred shares to which a Director is entitled will be adjusted for the payment of dividends. The fair value of each outstanding Director Deferred Share Unit is estimated based on the fair market value of BGSI’s shares at the grant date, subsequently adjusted for additional shares granted based on the reinvestment of notional dividends and the market value of the shares at the end of each reporting period. 26. EMPLOYEE EXPENSES Salaries and short-term employee benefits Post-employment benefits Long-term incentive plan Share options For the years ended December 31, 2023 2022 $ 1,149,282 $ 944,862 5,757 6,025 436 5,017 2,600 399 $ 1,161,500 $ 952,878 93 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) 27. DEFINED CONTRIBUTION PENSION PLANS The Company has defined contribution pension plans for certain employees. The Company matches U.S. employee contributions at rates up to 6.0% of the employees’ salary. The expense and payments for the year were $5,757 (2022 - $5,017). 28. EARNINGS PER SHARE Net earnings Basic weighted average number of shares Add: Stock Option Plan Average number of shares outstanding - diluted basis Basic earnings per share Diluted earnings per share Year ended December 31, 2023 2022 $ 86,656 $ 40,962 21,472,194 21,472,194 3,670 21,475,864 $ $ 4.04 $ 4.04 $ — 21,472,194 1.91 1.91 For the year ended December 31, 2023, the impact of the stock options issued in 2021 and 2022 were included in the diluted average number of shares outstanding. The stock options issued in 2023 could have potentially diluted the basic earnings per share, but their impact was anti-dilutive during this period. For the year ended December 31, 2022, the impact of the stock options issued in 2021 and 2022 could have potentially diluted the basic earnings per share, but their impact was anti-dilutive during this period. 29. STOCK OPTION PLAN During the first quarter of 2021, the Company instituted a stock option plan for senior management, which was approved by shareholders on May 12, 2021. The Company's stock option plan allows for the granting of options up to an amount of 250,000 Common shares under this plan. Each tranche of the options vests equally over two, three, four and five year periods. The term of an option shall be determined and approved by the People, Culture and Compensation Committee; provided that the term shall be no longer than ten years from the grant date. On March 31, 2021 the Company issued 13,831 options under the stock option plan with a grant date fair value of C$56.99 per option and an exercise price of C$219.21 per option. As at December 31, 2023, 11,232 options remain issued and outstanding, 25% of which have vested. Issue costs of $105 were incurred with respect to the stock option plan. On March 31, 2022 the Company issued 18,878 options under the stock option plan with a grant date fair value of C$47.08 per option and an exercise price of C$164.68 per option. As at December 31, 2023, 16,533 options remain issued and outstanding. None of the options are exercisable at period end. Issue costs of $nil were incurred with respect to the 2022 options issued under the stock option plan. 94 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2023 and 2022 (thousands of U.S. dollars, except share and per share amounts) On March 29, 2023 and during the second quarter of 2023 the Company issued 28,292 and 435 options, respectively, under the stock option plan with a grant date fair value of C$71.64 per option and an exercise price of C$211.26 per option. As at December 31, 2023, 26,794 options remain issued and outstanding. None of the options are exercisable at period end. Issue costs of $nil were incurred with respect to the 2023 options issued under the stock option plan. 30. CHANGES IN NON-CASH OPERATING WORKING CAPITAL ITEMS Accounts receivable Inventory Prepaid expenses Accounts payable and accrued liabilities Income taxes, net For the years ended December 31, 2023 2022 $ (5,962) $ 2,288 (5,153) 29,946 (2,047) $ 19,072 $ (37,641) (11,649) (7,062) 52,964 1,865 (1,523) 95 BOARD OF DIRECTORS Boyd Group Services Inc. Board of Directors consists of ten members – two that are officers or retired officers of BGSI and eight that are independent Directors. The Independent Chair of the Board is David Brown. Boyd Group Services Inc. Board of Directors has established three standing committees: The Corporate Governance and Sustainability Committee, The Audit Committee, and the People, Culture and Compensation Committee. The Corporate Governance and Sustainability Committee is chaired by Sally Savoia and includes Robert Espey and William Onuwa. The Audit Committee is chaired by William Onuwa and includes John Hartmann and Christine Feuell. The People, Culture and Compensation Committee is chaired by Violet Konkle and includes Robert Gross and John Hartman. David Brown is an Executive Vice-President of Richardson Financial Group Limited and a Managing Director of RBM Capital Limited (a private investment firm). He was previously the CEO of Richardson Capital Limited, a private equity arm of James Richardson & Sons, Limited, the Corporate Secretary of James Richardson & Sons, Limited, and a partner in the independent law and accounting firm of Gray & Brown. Mr. Brown has considerable experience in private equity investment and management, senior management and in advising and working with family businesses in the areas of taxation, mergers, acquisitions, divestitures, corporate reorganizations, financings, management, ownership transitions and estate planning. Mr. Brown also has considerable public company experience. He currently serves as the Independent Chair of the Board of Boyd Group Services Inc. and serves as a director and Chair of the Audit Committee of Pollard Banknote Limited and a director of RF Capital Group Inc. He previously served on the Manitoba Hydro- Electric Board. He has served various Manitoba charities including acting as a director of the Misericordia Hospital and Pavilion Gallery Museum, Inc. and as Co-chair of Major Donors for the Children’s Hospital Foundation’s Capital Campaign. He is a graduate of the University of Manitoba law school (gold medalist), and is a Chartered Professional Accountant. Brock Bulbuck served as Executive Chair of BGSI from 2020 to 2021. Prior to this role, Mr. Bulbuck served as Chief Executive Officer from 2010 to 2020. After joining Boyd in 1993, Mr. Bulbuck served in many senior leadership roles and played a leading role in the overall development and growth of the business. Mr. Bulbuck also serves as Independent Board Chair of North West Company. He is also a past Chairperson of the Winnipeg Football Club Board of Directors, a past member of the Canadian Football League Board of Governors and a current Director of Pan Am Clinic Foundation. Mr. Bulbuck has a Bachelor of Commerce (Honors) degree from the University of Manitoba and is a Chartered Professional Accountant. Robert Espey was appointed President and Chief Executive Officer in 2011 of Parkland Corporation ("Parkland") and has successfully led the transformation of Parkland from a Western Canadian regional independent into a leading international consolidator of convenience retail and fuel marketing businesses with operations in 25 countries. Under Mr. Espey's leadership, and in addition to network of over 4,000 retail locations, Parkland is a leader in manufacturing low carbon fuels and is rapidly building an ultrafast electric vehicle charging network to serve growing demand in select markets. Mr. Espey has overseen over 60 acquisitions, including of Chevron Canada’s convenience retail and downstream fuel business, the Ultramar retail business from CST brands, the expansion of Parkland into the U.S., and in January 2019 the addition of the Sol which expanded Parkland’s operations into the Caribbean region. Previously, Mr. Espey served as Chief Operating Officer from 2010 to 2011, and Vice President, Retail Markets from 2008 to 2010. Prior to joining Parkland, Mr. Espey held a variety of senior management roles across a diverse group of industry sectors, both internationally and domestically, including as President and Chief Executive Officer of FisherCast Global Corporation. Mr. Espey holds a Bachelor of Engineering (Mechanical) from Royal Military College and a Masters in Business Administration from the University of Western Ontario. Mr. Espey is a senior advisor to Enzinc, an advanced developer of metal air battery technology, a member of the Board of Directors of Parkland Corporation and past Chair of the Canadian Fuels Association. 96 Christine Feuell has nearly 30 years of career experience transforming brands and business units to deliver strong customer value and profitable growth in the automotive, supply chain automation and building technologies industries. Ms. Feuell’s automotive industry experiences include OEMs (Ford, Stellantis) and Tier 1 Suppliers (Johnson Controls, Adient) in which she created and launched innovative products, technologies and services for the OEM and Aftermarket Channels. Since 2021, she has been serving as CEO, Chrysler Brand at Stellantis, a leading global automotive mobility and technology leader, where she is transforming the Chrysler brand to full- electrification and delivering break-through seamlessly connected technologies and experiences. Prior to her role at Chrysler, Ms. Feuell was the Chief Commercial Officer at Honeywell, where she was responsible for creating and delivering advanced automation software and technology solutions for E-Commerce, Retail, Logistics, Health and Pharma industries. Ms. Feuell also serves as an Advisory Board Member for the Michigan State University Broad School of Business, Board Director for Friends of the Children Detroit Chapter Non-Profit, and is a champion for diversity and mentoring programs at Stellantis, Michigan State and her local communities. Ms. Feuell is the Executive Sponsor for the Women of Stellantis and Diversibilities Business Resource Groups. Robert Gross is the past Executive Chair of Monro, Inc., the largest chain of company-operated automotive undercar repair and tire service facilities in the United States. He served as CEO of Monro from 1999 until October 2012 and as Executive Chair from October 2012 to August 2017. Prior to his time at Monro, he served as Chair and CEO at Tops Appliance City, Inc. and before that as President and COO at Eye Care Centers of America, Inc., a Sears, Roebuck & Co. company. John Hartmann is Chief Executive Officer of Ascend Wellness Holdings Inc., a U.S. publicly listed company with assets in seven states. Mr. Hartmann is the former President of buybuyBaby and COO of Bed Bath & Beyond from 2020 to 2022. Previously, from 2013-2020, he was the President & Chief Executive Officer at True Value Company, a privately owned U.S. hardware wholesaler and manufacturer. Mr. Hartmann also led New Zealand-based Mitre 10 as Chief Executive Officer from 2010 to 2013, and held various executive positions at HD Supply, The Home Depot, and Cardinal Health. Prior to his corporate career, he served as a special agent of the Federal Bureau of Investigation. Mr. Hartmann previously served on the Board and Audit Committee of AmeriGas, prior to UGI’s acquisition, and Board of HD Supply. In addition to serving on the Board of BGSI, Mr. Hartmann currently serves as an Independent Director of Freedom VCM Holdings, owners of The Vitamin Shoppe, American Freight, Pet Supplies Plus, amongst others. Violet Konkle is the past President and Chief Executive Officer of The Brick Ltd. Prior to joining The Brick in 2010 as President, Business Support, she held a number of positions with Walmart Canada, including Chief Operating Officer and Chief Customer Officer. Ms. Konkle also held a number of senior executive positions with Loblaw Companies Ltd., including Executive Vice President, Atlantic Wholesale Division. Ms. Konkle is a director of The North West Company Inc. and GFL Environmental, as well as three privately held companies including Bailey Metal Products, Elswood Investment Corporation and Abarta. Ms. Konkle previously served on the Advisory Board of Longo’s Brothers Fruit Markets Inc., a privately held company. She is a past director of Dare Foods, The Brick Ltd., Trans Global Insurance, the Canadian Chamber of Commerce and the National Board of Habitat for Humanity. Timothy O’Day is the President and CEO of BGSI. He joined Gerber Collision & Glass in February 1998. With Boyd Group’s acquisition of Gerber in 2004, he was appointed COO for Boyd’s U.S Operations. In 2008, he was appointed President and COO for U.S. Operations. On January 4, 2017, Mr. O’Day was appointed President and COO of Boyd Group Income Fund, and on January 2, 2020, he was appointed President and CEO of BGSI. In addition, Mr. O’Day serves on the Board of Directors of RB Global, Inc. Earlier in his career, he was with Midas International, where he was elevated to Vice President–Western Division, responsible for a territory that encompassed 500 Midas locations. Mr. O’Day also served on the I-CAR Board as Immediate Past Chair until August 2022 and served on the Board of the Collision Repair Education Foundation until March 2016. 97 William Onuwa is currently EVP and Chief Audit Executive at Royal Bank of Canada (“RBC”). Prior to this role, he was the SVP & Chief Risk Officer for Wealth Management, RBC Georgia and the Insurance Group. He held a number of executive positions for GE Capital Corporation in both the U.S. and the U.K. before joining RBC in 2007. He holds a Doctorate degree from the University of Surrey, U.K. Mr. Onuwa was recently the Chair of two not-for-profit boards, Yonge Street Mission and Holland Bloorview Kids Rehabilitation Hospital, and had also served on the subsidiary boards of various RBC insurance companies as a director from 2007 to 2016. Mr. Onuwa is currently a member of the board of governors at University of Guelph and sits on various committees as well. Sally Savoia is a former Vice President and Chief Human Resource Officer for Praxair Inc. Subsequent to her retirement in 2014, and until 2020, Ms. Savoia served as an independent corporate consultant. Ms. Savoia’s human resources experience includes diversity and inclusion efforts, executive compensation design and implementation, executive level succession planning, global talent management, leadership development, and global benefits design. 98 CORPORATE DIRECTORY COMPANY EXECUTIVE OFFICERS Timothy O’Day President & Chief Executive Officer Jeff Murray Executive Vice President & Chief Financial Officer Brian Kaner* Executive Vice President & Chief Operating Officer, Boyd Group Collision Creighton Warren* Chief Information Officer Jason Hope* Vice President, Corporate Development and Strategic Projects Kim Morin * Vice President & Chief Human Resources Officer John Wysseier * Chief Operating Officer, Glass * *Officers of subsidiary companies only ——————————————————————————————————————— CORPORATE OFFICE 1745 Ellice Avenue, Unit C1 Telephone: (204) 895-1244 Winnipeg, Manitoba, Canada Fax: (204) 895-1283 R3H 1H9 Website: www.boydgroup.com ——————————————————————————————————————— For location information, please visit us at www.boydgroup.com 99 SHAREHOLDER INFORMATION BOYD GROUP SERVICES INC. SHARES AND EXCHANGE LISTING Shares of BGSI are listed on the Toronto Stock Exchange under the symbol BYD.TO. Registrar, Transfer Agents and Distribution Agents Computershare Trust Company 8th Floor, 100 University Avenue Toronto, Ontario M5J 2Y1 Legal Counsel Auditors Thompson Dorfman Sweatman LLP 1700-242 Hargrave Street Winnipeg, Manitoba R3C 0V1 Deloitte LLP 2200 – 360 Main Street Winnipeg, Manitoba R3C 3Z3 Bank Syndicate Lead Member Additional Bank Syndicate Members The Toronto-Dominion Bank TD North Tower 77 King Street West, 25th Floor Toronto, Ontario M5K 1A2 Bank of America N.A. The Bank of Nova Scotia National Bank of Canada Canadian Imperial Bank of Commerce ——————————————————————————————————————— Annual General Meeting www.virtualshareholdermeeting.com/BOYD2024 Wednesday, May 15, 2024 1:00 p.m. (CT) 100

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