Boyd Group Services Inc.

Everyone, welcome to the Boyd Group Services, Inc. second quarter 2023 results conference call. Listeners are reminded that certain matters discussed on today's conference call or answers that may be given to questions asked could constitute forward-looking statements that are subject to risks and uncertainties related to Boyd's future financial or business performance. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are detailed in Boyd's Annual Information Form and other periodic filings and registration statements, and you can access these documents at CDAR's database found at www.cdar.com. I would like to remind everyone that this conference call is being recorded today, Thursday, August the 10th, 2023. I would now like to introduce Mr. Tim O'Day, President and Chief Executive Officer of Boyd Group Services Inc. Please go ahead, Mr. O'Day.

Thank you, Operator. Good morning, everyone, and thank you for joining us for today's call. On the call with me today is Jeff Murray, who has joined me for a number of calls as Interim CFO. I'm excited to now have him joining me in the permanent role of Executive Vice President and Chief Financial Officer. We released our 2023 second quarter results before markets opened today. You can access our news release, as well as our complete financial statements and management discussion and analysis, on our website at boygroup.com. Our news release, financial statements, and MD&A have also been filed on CDAR this morning. On today's call, we will discuss the financial results for the three- and six-month period ended June 30, 2023, and provide a general business update. We will then open the call for questions. During the second quarter of 2023, Boyd recorded record sales of $753.2 million, adjusted EBITDA of $95.4 million, and net earnings of $26.3 million. The initiatives put in place to improve throughput and increase capacity along with solid execution have resulted in record sales levels and improved profitability during the second quarter. Our team continues to adapt to challenging market conditions and to deliver results, including doubling the level of adjusted net earnings per share when compared to the same period of the prior year. While the ability to service demand continues to be constrained by market conditions, New technician training and other initiatives are providing some improved capacity. However, the path to servicing the level of demand requires continuing increases in technician compensation to attract more labor into the industry and company, and this will require continued price increases from our customers. As we address this issue, we will be able to reduce cycle times and better serve our customers. For the second quarter of 2023, sales were $753.2 million, a 22.9% increase when compared to the same period of 2022. This reflects a $29.1 million increase from 64 new locations. Our same store sales, excluding foreign exchange, increased by 18.9% in the second quarter, recognizing the same number of selling and production days in both the U.S. and Canada when compared to the same period of 2022. 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 otherwise be achieved. Sales also increased based on high repair costs due to increasing vehicle complexity, increased scanning and calibration services, as well as general market inflation. Gross margin was 45.5% in the second quarter, compared to 45.3% achieved in the same period of 2022. Gross margin benefited from improved glass margins, higher part margins, and increased scanning and calibration. Labor margins were relatively flat, with pricing increases to date not having been sufficient to attract requisite talent into the industry and offset wage increases experienced. Performance-based programs negatively impacted gross margin during the second quarter of 2023 as compared to the same period of the prior year. Operating expenses for the second quarter were $247.3 million, or 32.8% of sales, compared to 205.5 million or 33.5% of sales in the same period of 2022. Operating expenses as a percentage of sales was positively impacted by improved sales levels, which provided improved leveraging of certain operating costs. Adjusted EBITDA or EBITDA adjusted for fair value adjustments to financial instruments and costs related to acquisitions and transactions was 95.4 million, an increase of 32.5% over the same period of 2022. The increase was primarily the result of improved sales levels and improved leveraging of certain operating expenses. Net earnings for the second quarter of 2023 was 26.3 million, compared to 13.3 million in the same period of 2022. Excluding fair value adjustments and acquisition and transaction costs, Adjusted net earnings for the second quarter of 2023 was $27 million or $1.26 per share compared to $13.6 million or $0.63 per share in the same period of the prior year. Adjusted net earnings for the period was positively impacted by increased sales and improved leveraging of operating expenses. For the six months ended June 30, 2023, sales totaled $1.5 billion and an increase of $298.6 million, or 25.5%, when compared to the same period of the prior year, driven by same-store sales growth of 21.9%, as well as contributions from new locations that had not been in operation for the full comparative period. Gross margin increased to 45.6% of sales compared to 44.7% in the comparative period. Gross margin percentage was positively impacted by improved part margins, along with increased scanning and calibration services. Labor margins have improved. However, pricing increases to date have not been sufficient to attract the requisite talent into the industry and offset the wage increases experienced. Performance-based programs negatively impacted gross margin during the first six months of 2023 as compared to the same period of the prior year. Operating expenses increased by $92.5 million when compared to the same period of prior year, primarily as a result of increased sales based on same-store sales growth as well as location growth in addition to inflationary increases. Adjusted EBITDA for the six months ended June 30th was $180.1 million compared to $125.8 million in the same period of the prior year. The $54.3 million increase was primarily the result of improved sales levels and gross margin percentage, which also provided improved leverage of certain operating costs. We reported net earnings of 47.1 million compared to 14.9 million in the same period of the prior year. Adjusted net earnings per share increased from 73 cents to $2.25. The increase in adjusted net earnings per share primarily attributed to increased sales and improvements in the gross margin percentage, as well as improved leverage of certain operating expenses. At the end of the period, we had total debt net of cash of just over $1 billion. Debt net of cash decreased when compared to the prior quarter, primarily as a result of increased cash flow from operations. During the second quarter of 2023, the company was able to reduce net the level of long-term debt held under its revolving credit facility net of financing costs from 184.1 million to 174.5 million. During 2023, the company plans to make cash capital expenditures, excluding those related to acquisition and development of new locations, within the range of 1.6 to 1.8% of sales. In addition to these capital expenditures, The company plans to invest in network technology upgrades to further strengthen our technology and security infrastructure and prepare for advanced technology needs in the future. The investment in the second half of 2023 is expected to range from $5 to $6 million, with investments expected in 2024 and 2025 ranging from $5 to $9 million per year. We remain focused on the key challenge of building capacity through increased staffing, including negotiating sufficient client price increases to attract talent into the industry and our company and recover lost labor margin from wage pressure. Workforce initiatives are having a positive impact on capacity and ongoing investments in technology, equipment, and training position the company well for continued operational execution. Boyd remains committed to addressing the labor market challenges so that the company can service additional demand. Relative to the second quarter, the third quarter of 2023 will have one less selling and production day and will also be negatively impacted by seasonal vacations that have a dampening effect on capacity and sales. Thus far in the third quarter, same-store sales increases are approximately half of what we have experienced during the first six months of 2023. Boyd is pleased to have opened or acquired 57 collision repair locations thus far in 2023, and the pipeline to add new locations and expand to new markets is robust. 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 strong same-store sales growth and location growth thus far in 2023, Boyd remains confident that the company is on track to achieve its long-term goals, including doubling the size of the business on a constant currency basis, from 2021 to 2025 against 2019 sales. With that, I would now like to open the call to questions. Operator?

Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. If your question has been answered and you would like to withdraw from the queue, please press star followed by the number two. And if you are using a speakerphone, please lift your handset before pressing any keys. One moment, please, for your first question. Your first question will come from Tammy Chen at BMO Capital Markets. Please go ahead.

Hi, thank you for the question. Morning, Tammy. Morning. So just to confirm the understanding of so far what the same-store sales growth is like in Q3, are you effectively saying the average same-store sales growth rate in the first half of this year divided by two, that's the rate that you're currently seeing?

That's approximately what we have seen quarter to date, yes.

Okay. Thank you. And then as a follow-up to the same-store sales trajectory, I guess I'm just wondering if you can talk a little bit about your backlog. I think we can see industry average backlog. I think it recently declined a bit. But can you talk a bit about how your backlog is trending? Has it seen some decent improvement? I'm just trying to assess how much more this elevated level of comp can continue because it does seem like the underlying problem Collision claim count in the industry has gone a bit negative here.

Yeah, I don't see that, Tammy. I think the demand remains very, very strong. The constraint is really labor. If you look at our balance sheet, you will see that our investment and work in process has been decreasing. But I would attribute much of that to improved supply chain and our ability to finish out jobs that may have been suspended for a period of time. rather than, you know, the same sort of sales growth is obviously labor-related and improved capacity, but there's still tremendous demand available in the marketplace.

Okay. And a bit more of a bigger picture, I guess a bit more longer term, is I think historically the way the company has approached investing in new processes or equipment just as the vehicle evolves and get more complex you talk about this hub and spoke model um can you update us on how you're thinking about if this continues to be the appropriate model as we look out in the secular trend of the vehicle just become the new vehicle i mean becoming much more complex whether it's the penetration of electric vehicles as well as more ADAS features in the vehicles. Do you think you may need to accelerate over the next couple of years the investment in capabilities to be able to service these types of vehicles, or do you feel your current approach and that hub-and-spoke model is still appropriate for the next couple of years? Thank you.

There's no question that the hub-and-spoke model is still the right way to approach this. The vehicle part changes very slowly. So as EVs, for example, come into the market, we'll be well prepared to address the needs that are arising from that on a hub-and-spoke basis. And as it becomes more predominant, we'll continue to add to our capacity to service those vehicles. So I think we're very well served by our current hub-and-spoke approach, and I would expect that to continue to evolve but be a good model for servicing the changing car park.

Sounds good. Thank you.

Thanks, Tammy.

Your next question will come from Steve Hansen at Raymond James. Please go ahead.

Yeah, good morning, guys. Thanks for the time.

Morning, Steve.

Congrats on a solid print, actually. It's good to see some margin progression here. Tim, first question is just on the price increase. backdrop, how confident are you still in negotiating further price increases from your carriers? We're probably six or seven quarters into this process now, and some people suggest that we're starting to get pushback, but as I look at the backlog still being deep and capacity constraints in the system, it also strikes me as further price increases are necessary. Maybe just give us a sense for how you're feeling about those discussions and the confidence in further increases.

Well, we can... We continue to see a steady stream of increases from our clients on an ongoing basis. And the trend has been pretty consistent for several quarters. And we're still experiencing wage inflation. And we don't have enough technicians at Boyd. And we don't have enough technicians in the industry to service the demand. So I think that until we can catch up with demand, which is going to require attracting more labor into the industry, I think that we'll continue to be successful at getting price increases.

Okay, great. That's helpful. And just to follow up on the scanning and calibration reference, it continues to be a tailwind as you call out. Maybe just give us a sense for what you're doing on the ground thus far in terms of sort of rolling out that additional service package. Is it still focused predominantly on insourcing existing work that's been done in the past from an outsource basis or where do we stand?

It's really both. I mean, the market for calibration services continues to grow as more vehicles with ADAS come into the market. Our ability to identify what needs to be done continues to improve, so we'll execute on the needed operations. And we're growing our separate calibration business to service more of the work internally. I think we've talked about putting the infrastructure in place to grow that business more rapidly. we are in a good position to begin to grow that business a little bit more rapidly now, which will allow us to convert what is frequently done by a third party over to being serviced by our own internal calibration business. So that's, I think, a good tailwind that has a lot of runway left in it.

Okay, great. Appreciate the call, guys. Thanks. Thanks, Steve.

Your next question will come from Gary Ho at Desjardins Capital Markets. Please go ahead.

Thanks, Andrea. Good morning. Thanks, and good morning. So good progress on the margin front, especially on the operating expense line. I think you mentioned some leverage benefits. Maybe you can elaborate on that and how sustainable that is. And have you given out any rule of thumb kind of where that could go in a more normalized environment?

We haven't provided any guidance on that. What we've said consistently over the past few years, although it's a long road, is that we see nothing structural that would prevent us from getting back to the EBITDA margins that we achieved before the pandemic. And that will require further leverage of our operating costs, which have been a problem with both cost, inflation, and then reduced capacity. But I think as we continue to improve capacity and manage expenses effectively, and recover our gross margin that we expect over time to be able to get back to historical EBITDA margins.

And maybe I'll just add that what we have commented on is that if you look at our track record over, you know, pre-pandemic, the five years previous, through same-store sales growth, we had a consistent track record of slowly increasing our operating leverage.

Okay. Thanks for the call, Nick. And then my next question, just on the technician training program, have you disclosed the costs associated with that? Like what's the run rate costs? And I know you're still experiencing technician shortages. Sounds like any thoughts on expanding that to absorb greater demand and how do you balance the cost and the benefits?

It's a good question. We have not provided a lot of detail on that. It is a pretty meaningful investment on our part to develop that talent. The program has grown a bit from where we had originally set our goal. But we're continuing to evaluate the tradeoff of spending money on training more through our technician development program versus more aggressive recruitment in the marketplace. And it's really going to take all avenues to get the labor that we really need to service the available demand.

Okay. And then just my last question, maybe a more generic one. Many of the U.S. insurers wanted to hire catastrophes this past quarter. Just curious, historically, how has this played into increased sales, if at all? And did you see any with the Q2 results?

We did have a number of markets that had hail repair in the quarter that was a tailwind for us. One of the big benefits to that type of a catastrophe for us is that the labor that's used to service much of that is sublet labor. So while it could dampen margins a bit, it does drive some incremental revenue and profitability. But we see some of that every year. I would say that in Q2 we saw a little bit more of it than what we had seen in the prior year Q2.

Okay, that makes sense. Those are my questions. Thanks very much.

Thanks, Kerry.

Your next question will come from Brett Jordan at Jefferies. Please go ahead.

Hey, good morning, guys. Talk a little bit more about scanning. I guess maybe sort of what the margin profile is there, and as you transition to more in-house versus third-party, you know, what that could be for Mateo Wind. And I guess, would you consider doing third-party scanning for others, or is that too much of a competitive conflict?

We do do third-party scanning for others as well with our calibration business. It is a component of it. We don't really talk about how much is external versus internal, but we intend to continue to service third parties with our calibration business. In terms of the margin profile, much of the work that we're doing today, we are relying on third parties to complete. And as we shift that to our own calibration company, We would expect to receive more normal labor margins on that work versus sublet margins. And sublet historically has been our lowest margin category and labor our highest margin category. So there's a benefit to us of converting that labor or that operation from sublet to labor. And it'll take us some time to do that, to build a workforce to do that. But we are underway with that now.

Okay, and then you also talked about parts margin improvement. Is that mix more alternative than OE, or is it pricing?

It's both. We have continued to see an improvement in the availability, and as a result, our usage of aftermarket parts, which can have a negative impact on revenue because they cost less for the repair. It's good from a customer standpoint. We do reduce the cost of repair, but it has a better margin profile. But we also have been working to negotiate new pricing agreements in markets to improve our OE margins. And I think the other thing that we're seeing is as supply chain loosens up, we're able to get the parts that we need from our primary suppliers where we get better discounts. And we talked a lot over probably starting about two years ago about We talked about the negative impact on our margins of having to buy from suppliers that we didn't have a relationship with. So we're seeing some benefit from that turning around.

Okay. And then just a quick follow-up on the scanning question. You know, I guess given the investment in scanning equipment and tools, is as you increase the volume, there a potential for a margin tailwind, or is scanning basically going to be sort of in line with the labor margin over history?

It's hard to tell exactly where that will end up, but the benefit we'll get is that the revenue in scanning and calibration is growing, and right now we're servicing too much of it with third-party sublet, so we should be able to, at a minimum, turn that into normal labor margins, which will be a benefit to us.

Okay, great.

Thank you. Thanks, Brett.

Your next question will come from Jonathan Lemaire at Laurentian Bank Security. Please go ahead.

Hi, Jonathan.

Good morning. Thanks for taking my question. Tim, just following up on your comments in the press release about efforts to optimize new locations and the scanning and calibration services, I guess just on the scanning and calibration, specifically, when will your efforts on that be at a run rate? Is this something that could take several years to set up, or should investors be thinking about the benefits being in place for 2024?

I would not expect that we would complete the build-out of that business by the end of 2024. We are going to move as quickly as we can. as we can because it's a really attractive segment of the business. But it is a people business and will require that we recruit, train, and put that workforce in place. There's an equipment portion of it too, as you would expect, but really the constraint is labor versus equipment. Equipment's available, we just have to get and train the labor. And interestingly in this case, because that market is growing pretty rapidly, We're really going to bring new labor in for that that has not worked in that segment before. It will take some time. We haven't laid out a specific timetable on it yet, but it isn't something that can happen overnight. It will take many months to build out that workforce.

Okay, so for a portion of the scanning calibration skills, my understanding is you'll train your existing technicians with those skills, and then you're planning to bring in additional labor as well. Can you tell us a little bit more about that?

For the most part, we view this as a separate skill set that requires separate tools and expertise. So it really is a different workforce from our core collision workforce. We operate it as a very independent business.

Okay, thanks for your comments.

Thanks, Jonathan.

Your next question will come from Krista Friesen at CIBC. Please go ahead.

Hi, thanks for taking my question and congrats on a solid quarter here. I'm just wondering, looking at your margins, I mean, margins were pretty good this quarter. um despite kind of uh still not getting all the the price increases you need from your insurance partners how much more operating leverage would you say is uh excluding labor is left in the business as we look out just the next six months like if you don't receive um the price increases you're looking for do you think you can still kind of push margins higher here well we

I mean, there have been a number of questions on calibration, and we're confident that we have an opportunity to improve margin by internalizing the calibration operations. So there's opportunity there. I think we still have opportunity in other categories as well. We do need to increase our labor margins back to historical levels. And I think as we grow, we continue to see opportunities to leverage other expenses, or other opportunities even on the margin level. So I would expect to see over time continuing improvement to drive us back toward those historical EBITDA margins.

Okay, great. And then maybe if you can just provide a little bit more color on the conversations you're having with your insurance partners. Obviously, I mean, they're incentivized to reduce their their wait times, but it seems like they're not necessarily giving you everything that you're asking for at this point. Can you provide a little bit more color on the back and forth there or just what you're hearing?

I would just say generally, I think our insurance clients have been very supportive and have worked hard to provide us with increases to allow us to get back to normal levels of profitability and build our workforce. It's a bit of a moving target. We still see tremendous demand for our services, and the industry, including Boyd, doesn't have the workforce that we need to properly service it. We have seen some improvement in length of rental metrics. I think much of that is related to supply chain improvement, some to probably some improvement in labor capacity. But we're still not at a point as Boyd or as an industry of serving our clients the way that they need to be serviced in order for their customers to be happy. So I think that pressure will continue to allow us to pull in price so that we can build a workforce to properly service the marketplace.

I guess I'll add, though, there's a lag. There is a lag, and so we're looking at current situations and then working with the insurance partners to get increases based on that set of facts. And by the time that works its way through the system, the costs have changed too. And so that leveling off needs to happen.

Yeah, and we've talked about that a lot in the past too, that there is a lag time. But we've made improvements, and I think we'll continue to make progress with our clients. And I think they've been really supportive of I know it's a difficult situation for everybody. We'd like to have a more stable environment where we're not chasing this, but everybody sees the need because customers need to be properly serviced.

Great. Thank you. I appreciate your commentary. I'll jump back in the queue.

Thanks, Krista.

Your next question will come from Zachary Evershed at National Bank. Please go ahead.

Morning, Zachary. Good morning, everybody. Thanks for taking my questions and congrats on the quarter. Thank you. I was hoping you could give us an update on the competitive landscape in the M&A sphere with three more months of high interest rates. Usually, you're sole sourcing the smaller deals, but have you received any inbounds from maybe MSOs that are feeling a pinch?

I wouldn't comment on anything specific. We really began to focus on single shop acquisitions probably more than a year ago now. We've been very successful with it. I think you can see that we've built up a good capacity to process these, and we're happy both with the pace and with the price that we're paying for those businesses. If multi-shop opportunities come along that are accretive, we're very open to that, but also confident about our ability to achieve our revenue goals, our growth goals, even without multi-shop acquisitions.

That's right. Thanks. Then we're seeing some interesting developments in carrier strategies in Florida and California. If more insurers start to exit markets where they can't get enough pricing to cover costs, what's the impact on Boyd?

I'm not sure it will really have much impact on Boyd. Insurance is a required product. Regulators are going to have to allow carriers at some point, they have to provide enough rate increase for carriers to be profitable and right in the state. If you look at the exit in Florida was more related to catastrophic risk and maybe an unwillingness to or I believe that they couldn't get the premiums they needed to underwrite that. And I think that state may have some requirements that you don't pull out of one category. California, I think, has been slower to move rates with some carriers, but progress is being made. So I really think that the impact on us should not be significant. I'm not sure there should be any impact on us.

That's good. Thanks.

I'll turn it over. Thanks, Zachary.

Your next question will come from Michael Dumais at Scotiabank. Please go ahead.

Morning, Michael.

Good morning, guys. So maybe I'll start with a clarification question. It feels a little bit deja vu for the last quarter, but are you suggesting same-store sales growth in Q3 to date is tracking at 11% year-on-year? Because, I mean, to me, if I do the math, it's quite a step down if that number does persist through the quarter and reflects a little bit more pronounced seasonality than I would expect, which again would have implications for operating leverage in the quarter as well. So just to clarify on that, please.

Yeah, I think there are two factors that we pointed out. One is that we have one less selling and production day in the quarter than we did in the prior year, which will take away a full day's worth of production and to pass production and revenue in the quarter. And in comparison to Q2, we're faced with much higher seasonal vacation capacity losses, which will have a dampening effect on sales. We would have had that in the prior year as well, but we were really looking at the run rate year-to-date versus what we've seen thus far in the third quarter. So I'd say your assessment as to what we consider are communicating thus far in the quarter is accurate. Perfect.

Thank you. And then maybe just turning to the operating costs. I guess the question is, are you at peak spend here as far as the TDP program is concerned? And I guess the thing behind it is presumably you're at a point where you're seeing technicians graduate, and that's moving some costs up into the cost of revenues.

I'm not sure whether I would say we do make a significant investment in our TDP program. The biggest investment is when they're in the first level, which is approximately six months. They're really fully absorbed as an expense, including a lot of training expense that's outside of wages. You know, I would say that what we've seen in the past couple of quarters reflects the most money that we've spent on TDP. Whether we will increase that spend or not, we haven't made any decisions, but it's an important program and it is producing increased capacity, but it does come at a cost.

Okay. That's helpful. And maybe last one. I want to talk about the total loss ratio, you know, just in terms of collisions in the industry. I mean, pre-pandemic, plus 20%, a chop for 17%. That's bouncing back now with higher repair costs, lower used vehicle prices. Just how to think about the normalization and the impact to your demand and even your mix.

Yeah. Well, I think one of the things we did see when used car prices moved way up and total loss rates went down is that we were repairing vehicles that typically would not have been repaired just because it was economic to repair them because of high used car prices. That would tend to skew our sales mix toward parts, which would not be favorable. It also increases the average size of a repaired vehicle in our shops, which is also not favorable. We tend to be less productive on heavily damaged vehicles than, you know, more modestly damaged vehicles. So the, the increase in total loss rates will remove some of those vehicles from our repair and move them through the total loss channel. Right now there's so much demand that, that I really don't see an increase in total loss rates or a return to more normal levels having an impact on our revenue. It could actually be favorable to our mix, although I wouldn't expect that to be all that significant.

That's great, Keller. Thank you, Tim.

Thanks, Michael.

Your next question will come from Saba Khan at RBC. Please go ahead.

Great. Thanks very much. Good morning. You provided some color on kind of the thought process around building out your in-house calibration and scanning services. I'm just wondering what that entails. Is that also a labor thing as you have to get staff to sort of run that operation? Is it some CapEx? Is it training? And, you know, I guess, is there a timeline to when you think that entire business could be brought in-house, assuming that's even the intention to do it 100% in-house? Just some thoughts on where that goes from here.

It is a labor-intensive business, and it's skilled labor. So we recruit and train. We recruit some people that have the experience. We bring others in that go through a similar program to TDP on the calibration side to grow that workforce. We've really spent the last several months getting infrastructure in place to allow us to grow that business, management systems, things of that nature. We're right about done with that now, and we will plan to grow that business more rapidly. But as I said earlier in the call, it is a business that will require skilled labor, some of which we will have to train. So it will take time to roll it out. We haven't communicated a timetable, but it won't be at the end of this year or even at the end of next year. It will take more time than that to grow it out. Just to clarify also, this is a separate business within Boyd, and while we service more of our own business, we do service third-party business and intend to continue to do that with our mobile calibration business.

Great. And then on M&A, you noted that smaller transactions should get you to your 2025 targets. I'm just wondering, I guess, as you just look at the outlook across the industry, what Has kind of the events of the last few years made some of the larger folks a bit more available for takeout? Obviously, some have transacted, seen some of the headlines. But just wondering, from today onward, do you think there will be some of the larger players that could potentially come up for sale at some point? Or should we expect you to continue on this sort of singles and doubles road for a while here?

I think that... You can expect that we'll continue to focus on these single shops or small acquisitions because there are plenty out there. We perform well with them. It's a great return on our investment, and we're able to absorb them pretty easily into our network. Having said that, if you look at our balance sheet, we certainly have the capacity to do more, and if we can find attractive returns for mid-sized businesses or even small Larger businesses, as long as they make sense from a creation of shareholder value, we're open to that. The point that I've been making is that we can accomplish our revenue goals for 2025 without having to do that. So we're not forced into those. We'll do what's right for our shareholders.

Great. Thanks very much, Brother Kohler.

Thanks, Abba.

Your next question will come from Steve Hansen at Raymond James. Please go ahead.

Yeah, sorry, guys. Tim, you referenced an increase in your, an intentional increase in your capabilities to process these smaller tuck-ins, the onesie twosies. You also just referenced your balancing being in sound shape. Is there an ability to accelerate the pace from here that we've seen in the last quarter or two at it has been accelerating. We're just trying to get a sense for, you know, that capability set internally relative to your, your goals and the onesie twosies. Thanks.

Yeah. I think the, the model that we built for this can be expanded. What we have to be conscious of is making sure that operationally we can absorb the growth and that we don't, you know, push more new unit growth on the field than the field can handle. But, I think the model that we've established for growth is one that is pretty easy to scale up if we were to choose to do that.

Great. And just to follow up to that, there are some new store openings as well, just on a relative mix basis. Will the tuck-in M&A side be more prevalent going forward than Greenfield, or how do you still feel about that mix?

I feel really good about the opportunity that we've got with Greenfield and Brownfield developments, and I think we'll probably increase our mix on those over time. I think one of the things, Steve, that is valuable about those is that we have a building design that allows us to really integrate all aspects of our business and do that in a site that's set up for calibration, for glass, and for collision, and some mix of that I think is important as we look to stay current with our network, stay current with the changing demand.

That's really helpful. Appreciate that. Thanks.

There are no further questions, so at this time I will turn the conference back to Tim O'Day for any closing remarks.

Great. Thank you, Operator, and thanks to all of you once again for joining our call, and we look forward to reporting our third quarter results to you in November. Thanks again, and have a great day.

Ladies and gentlemen, this does conclude your conference call for this morning. We would like to thank you all for participating and ask you to please disconnect your lines.