Boyd Group Services Inc.

Good morning, everyone. Welcome to the Boyd Group Services, Inc. Second Quarter 2025 Results Conference Call. Listeners are reminded that certain matters discussed in today's conference call or answers that may be given to questions asked could constitute forward-looking statements that are subject to risks and uncertainties related to Boyd's future financial or business performance. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are detailed in Boyd's Annual Information Form and other periodic filings and registration statements, and you can access these documents at CDER's database found at cderplus.ca. I would like to remind everyone that this conference call is being recorded today, Wednesday, August 13, 2025. I would now like to introduce Mr. Brian Kaner, President and Chief Executive Officer of Void Group Services, Inc. Please go ahead, Mr. Kaner.

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, our Executive Vice President and Chief Financial Officer. We released our second quarter. 2025 results before markets open today. You can access our news releases as well as our complete financial statements and management discussion and analysis on our website at BoydGroup.com. Our news release, financial statements, and MD&A have also been filed on CR Plus this morning. On today's call, we will discuss the financial results of the quarter ended June 30, 2025 and provide a general business update. We will then open the call for questions. The Boyd team has been focused on improving profitability, deepening our customer relationships, and strengthening our go-to-market strategy for new location growth. I'm pleased to report that we've begun to see the results of the team's hard work in our second quarter results. Throughout the second quarter, we continued to gain market share despite industry headwinds and expanded our growth margins by 120 basis points on the back of continued internalization of scanning and calibration, improved performance-based pricing, and improved parts margins. We also made headway with Project 360, which helped increase adjusted EBITDOT margins to 12%, the highest quarterly adjusted EBITDOT margin performance since 2023. In addition, early in the second quarter, we closed our first MSO acquisition since 2021 and surpassed the 1,000th location milestone. During the second quarter, we successfully executed the indirect staffing model, which was the first major initiative of Project 360. We are on track to generate $30 million in annual run rate savings from this initiative starting in Q2 and expect to achieve $40 million in incremental savings between Q3 of 2025 and the end of 2026 with incremental key initiatives focused on direct and indirect procurement spending. The remaining $30 million of our $100 million cost savings goal will be realized between 2027 and 2029. In addition to Project 360, there are several other important initiatives that we have been working on to strengthen our customer relationships, gain market shares, and improve the cadence and strategic fit of our new location growth. To further strengthen our customer relationships, we've taken our long-standing while operating way one step closer to our insurance company clients. While this enabled Boyd to achieve above industry performance in net promoter score, total cycle time, and average cost of a repair, we've expanded this initiative to focus on each of our insurance company clients' unique performance indicators, striving to provide all vehicle owners with an exceptional customer service experience. We have linked the compensation structure of our regional and field management to these custom performance metrics and believe this initiative has played an important role in our same-store sales industry outperformance. We have augmented our go-to-market strategy. We have undergone a comprehensive analysis of each of our regions to enable the company to take a more strategic approach to our new location growth with an emphasis on strengthening our position in our core markets. This will enable Boyd to generate enhanced revenue synergies and operating leverage, provide a more predictable cadence of new startup locations, and position our self-serve insurance company clients. In early 2025, we shifted our approach to the development of new startup locations. On a go-forward basis, the development of startup facilities will be primarily outsourced, and upon completion, ownership will transfer directly to a leasing company. This approach will streamline the development process, deliver greater cost certainty, and enable the company to build a robust pipeline of new location growth. We have seen great progress in building this pipeline, and beginning Q3 2025, we are now on track to open an average of 8 to 10 new startup locations per quarter going forward. While the industry volumes continue to be challenged in the second quarter, over the past six months we've seen an improvement in several factors that contributed to the industry decline, namely a return to positive growth in used car pricing and moderating growth rates in insurance premiums. While we expected to take time for the industry volumes to normalize and customers to adjust to higher insurance costs, we did experience some initial signs in our business late in the second quarter. We have thus far in the quarter an increase This has continued thus far in the third quarter, enabling the company to post a modest amount of same-store sales growth in July. While we are pleased to see the initial signs of improvement in our volumes, We will continue to maintain our steadfast focus on executing our growth strategy, enhancing our profitability, and generating strong returns for our shareholders. I will now turn the call over to Jeff to run through our future results in more detail.

Thanks, Ryan. During the second quarter, our sales increased 0.2% to $780.4 million with same-store sales, excluding foreign exchange, decreasing by 2.1%. This decline was offset by $21 million of incremental revenue from 53 new locations that were not in operation for the full comparative period. Over the next four quarters, Boyd continued to outperform the industry. Based on claims processing platform data for the second quarter, the industry volumes were down in the range of 6% to 8%. Gross margin was 46.8% in the second quarter of 2025, up 120 basis points from the 45.6% achieved in the same period of 2024. Gross margin percentage increased due to several factors, including the benefits of internalization of scanning and calibration, improvements to performance-based pricing, and an increase in parts margins. Improvements to parts margins are the result of Project 360 initiatives to improve cost efficiencies. To date, the company has not experienced any material impact as a result of tariffs. Operating expenses for the second quarter of 2025 were $271.7 million, or 34.8% of sales, compared to $265.9 million, or 34.1% of sales in the same period of 2024. Operating expenses as a percentage of sales were positively impacted by the introduction of Project 360, the transformational cost initiative launched during the fourth quarter of 2024. During the quarter, the company successfully rolled out the indirect staffing model and is on track to realize an annualized cost savings run rate of $30 million as a result. More than offsetting this positive impact were lower Saints Row sales causing negative leverage, quarter-to-quarter variation in certain accruals, and an investment in facilities maintenance costs, with spend in the quarter being elevated due to pent-up demand from deferred work. The company also experienced incremental costs associated with the internalization of scanning and calibration, and higher information technology expenses related to additional licensing and security costs. While the internalization of scanning and calibration continues to be positive for gross profit and adjusted EBITDA, it does not contribute to incremental sales. and therefore increases operating expenses as a percentage of sales. Despite the challenges faced this quarter, the company remains on track to realize its margin enhancement objectives. Adjusted EBITDA or EBITDA adjusted for fair value adjustments to financial instruments and cost-related acquisitions and transformational cost initiatives was $93.8 million, an increase of 4.7% over the same period of 2024. Adjusted EBITDA margins increased to 12% in the second quarter, up from 11.5% in Q2 2024 and 10.3% in Q1 of 2025. The year-over-year increase in adjusted EBITDA was a result of improvements in gross margin as well as lower operating costs and shop labor as a result of the rollout of Project 360. Net earnings for the second quarter of 2025 were $5.4 million compared to $10.8 million in the same period of 2024. Excluding fair value adjustments and acquisition and transformational cost initiatives, adjusted net earnings for the second quarter of 2025 was $10.8 million, or 50 cents per share, compared to $11.9 million, or 56 cents per share, in the same period of the prior year. Net earnings and adjusted net earnings for the period benefited from higher adjusted EBITDA, but were negatively impacted by increased depreciation expense and increased finance costs. The increase in depreciation expense was primarily due to growth in locations, investment in network technology upgrades, as well as growth related to the calibration business. At the end of the period, we had total debt, net of cash of $1.2 billion. Debt net of cash before lease liabilities increased from $487.2 million at December 31, 2024 to $505.8 million at June 30, 2025. Debt-headed cash-to-lease liability increased as a result of location growth. As noted earlier during the first quarter, the company has changed its approach, whereby on a go-forward basis, the development of startup facilities will primarily be outsourced, and upon completion, ownership will transfer directly to a leasing company. During the first half of 2025, the company completes sale-leaseback transactions for proceeds of back $2 million. The sale-leaseback transactions allow for a re-fledged capital that can be redeployed to further grow business. During 2025, the company plans to make cash capital expenditures related to network technology upgrades and acquisition and development of new locations within the range of 1.6% and 1.8% of sales. In addition to these capital expenditures, the company plans to invest in network technology upgrades to further strengthen our technology and security infrastructure and prepare for advanced technology needs in the future. Excluding expenditures related to network technology upgrades and acquisition and development, the company spent approximately $1 million or 1.4% of sales on capital expenditures during the second quarter of 2025. The company spent $16.1 million or 2.1% of sales on capital expenditures, excluding expenditures related to acquisition and development during the same period of 2024. I will now pass it back to Brian for closing remarks.

Thanks, Jeff. As I mentioned in my initial remarks, the Boyd team has put forward great efforts to improve our business and put us in the best possible position as demand for services increases. I want to thank them for their hard work and dedication. We had a busy start to the third quarter, and as we completed the acquisition of L&M Body Shop, a regional Virginia-based MSO with eight locations and surpassed the thousand-location milestone, Over the past two quarters, we've seen an increase in acquisition opportunities, and thanks to our strong balance sheet and disciplined approach to acquisitions through the downturn, we are well positioned to take advantage of this opportunity. As we look forward, we will continue to remain focused on delivering our Project 360 targets, realizing the benefits of our enhanced go-to-market strategy, and expanding our customer performance metrics, and executing our proven growth strategy. With that, I'd now like to open the call to questions. Operator?

Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press the star followed by the one in a touchstone phone. Should you wish to cancel your request, please press the star followed by the two. If you're using a speakerphone, please lift a handset before pressing any keys. Once again, that is star one should you wish to ask a question. And your first question is from Steve Hansen from Raymond James. Your line is now open.

Good morning. Yeah, good morning, guys. Thanks for the time. Brian, as you look at your current levels of activity that you described sort of progressing in a positive territory, You know, is it too early to call sort of the negative period behind this? I'm just trying to get a sense whether we run the risk of dipping back and forth between positive and negative since our sales here. I know the comps do get easier as the year progresses, but I'm just trying to get a sense for your confidence here and how things have progressed thus far.

Yeah, I mean, look, one month doesn't make a trend, but we had seen, as we said, positive momentum coming out of the second quarter and that, you know, continuing into the third quarter. Does that, is that coupled with, you know, the commentary around just some of the, you know, the easing of the pressures that we've been experiencing over the last couple of quarters, you know, seems to point to positives. But, you know, I still think it's too early to tell how sustained that is.

Okay, that's helpful. And just on a similar sort of tact, you know, the small tuck-in on post-quarter rate shops by itself isn't a big needle mover, but it does seem to signal that you're more confident in being willing to go after growth at the location side through M&A. You know, how do you feel about that landscape today, you know, relative to the recent pace? And how quickly do you think you'd want to accelerate, just given there appears to be some stability showing?

Thanks. Yes. Well, I think the one thing that we are experiencing is an increase in the number of those types of acquisitions or those types of opportunities coming into the pipeline. And as I said, given the strength of our balance sheet, it puts us in a really good position to be able to take advantage of those. We are and still remain very focused on leveraging larger deals like that to be able to get us an entry point into a market where it actually gives us an established one or two position as we've expressed in our five-year goal. You know, we continue to look for those smaller tuck-ins and that may be to be able to build out density in the existing markets. I'm actually really pleased with the progress, as we said, coming out of the beginning of this year. We would have liked to have been in a pipeline build of eight to ten greenfield locations by the time we got to the end of the year. And if we sit here today and look out four quarters, you know, we now have a, you know, a fairly robust pipeline that's aligned to that eight to ten locations. So I think we'll continue to be active in that, you know, in that small regional MSO space as well as continue to build out the density in the markets that, you know, we participate in today.

Very helpful. Thanks. We'll turn back to Keith.

Thank you. And your next question is from from CIBC.

Your line is now open.

Hi. Thanks for taking my question. And maybe just to follow up on some of the positive trends that you're starting to see, is it broad-based or are there kind of various pockets where you're starting to see more of an improvement in same-store sales?

Yeah, I wouldn't say that there's any particular pocket. You know, we have experienced, you know, a pretty equal number or a pretty equal value of, you know, positivity across the market, which, you know, does indicate that some of the more positive signs that we're seeing in the market backdrop, you know, are part of the benefit that we're experiencing.

Okay, great. Now maybe just on the expanding of the operating way to your insurance partners. Is that already underway? And how long would you expect kind of the rollout of that to take?

Yeah, it actually is already underway. We changed the compensation structure of our regional and field leadership at the beginning of the year. And again, we've got the focus, we've got the field really focused on you know, winning with the customers. And as we said, you know, in the release, in the prepare remarks, it's not just good enough to win on that promoter score and total cost of repair and length of rental anymore or cycle time. We have to be cognizant of what it means to be successful with each of the individual clients. and be able to have a team of people that are out in the field that are educated on what those metrics are and how to win with those particular customers. We've now aligned their compensation to those metrics as well. It's really given us, from the top to the bottom, a very aligned organization around delivering what we do best, which is delivering an exceptional customer experience for both our insurance client and their customers.

Okay, thanks. And if I could just squeeze one more in there. Just as you switched over this compensation structure, have you been experiencing much pushback from the employees or maybe some increased turnover just as this shift has occurred?

No. No. You know, generally speaking, our, you know, I would say our employee base wants to do what's right for the customer. You know, it has been a bit of an education opportunity to make sure that they understand what those metrics are and how to move the needle. But we have not experienced any increase in turnover or pushback from the employee base.

Okay, great. Congrats on the quarter.

I'll pass the line. Thank you.

Thank you. Your next question is from Chris Murray from ATB Capital Markets.

Your line is now open.

Yeah, thanks, Chris. Good morning. You know, maybe turning back to the store group discussion, when you released this draft plan, I think the commentary was, you know, kind of a mix of the Greenfield-Brownfield and acquisitions. And at the time, at least you had said, you know, the goal was maybe 80 to 100 stores a year. I guess the question I've got is, you know, now that we're starting to see you maybe look at acquisitions a little bit more, are you still comfortable in that 80 to 100 range? And, you know, leverage is still a little bit elevated. I'm just wondering, you know, how hard do you think you can press on the balance sheet or if you need to in order to achieve those types of goals?

Yeah, well, I'll comment on the first piece, and then I'll let Jeff comment on the lever side. On the acquisition side, we do still believe that, again, our objective is to get to 1,400-plus locations in our five-year plan. That's what enables us to get to the $5 billion of revenue in the next five years and what allows us to essentially double our EBITDA. You know, I expect that that, you know, that level is what's going to be required. And I still believe we have the balance sheet to be able to do that. I think, you know, if you look back, you know, obviously our Q1 earnings were, you know, were a little bit depressed. And as we look forward, you know, coming out of this quarter, you'd expect the leverage to continue to get better based on the EBITDA improvements that we're seeing. So I don't see that as a constraint for us going forward. And, you know, I would expect that level of activity, you know, to continue. And the other thing I would comment on is just part of the reason for the, you know, the greenfield strategy, as you guys know, it's a very, you know, the greenfield strategy amongst all the other benefits is a capital light. strategy as well. It's a $1.2 to $1.4 million investment in the location. And it allows, as we've said in the prepared remarks, it allows somebody to take on the development costs and keeps us out of that equation. So I do think that having, and I am pleased that we've already gotten to a place where we've got that kind of run rate trajectory that we were expecting in the pipeline. And I'd expect it to continue. Jeff, I don't know if you want to comment on that.

No, I would echo your response on the balance sheet. Not only was Q1 a challenge, but all of 2024 was really a challenge from a same-store performance perspective, as well as all of the growth that we did in 2023 and 2024. It's somewhat been delayed in terms of them being able to achieve what their potential is. So the maturation and improvement of overall conditions will generate additional cash flow operations that will help you know, give us that capacity to continue to grow, as well as the, you know, the continued success of Project 360 and the additional incremental cash flows we expect to come from that. Okay. That's helpful.

Thank you. And then maybe turning back to the same sort of sales number and the conditions that you're seeing in the marketplace, Again, appreciating its early days, you know, we've heard kind of mixed ideas in the industry about some sort of recovery. I guess the question is, what is it that's starting to give you some confidence that the number's changing? And maybe this goes, you know, I think Steve asked the question maybe a different way. But is there anything that you're seeing in terms of demand? Is it inventory building or WIP building? You know, what's kind of pointing to, you know, your thoughts that, you know, not only you're seeing kind of a, in your words, I think it was a moderate increase in same store, but that that could be sustainable.

Yeah, I mean, we've pointed to for, you know, for over a year now, we've pointed to some very specific things that were happening in the macro backdrop that have had negative impact on the business. One had been you know, the used car pricing, which has a knockout effect to, you know, total loss rates. As used car prices go down, total loss rates have a tendency to come up. As used car prices go up, total loss rates have a tendency to go down. So in the quarter or in the month, you know, or in the quarter we saw used car prices up 2.8%, that's actually, you know, that day, you know, a bit of a, you know, call it an inflection point for used car pricing and And you would expect as, you know, tariffs start to more negatively impact, you know, new car pricing, you'd expect that to kind of continue to move up. So I think that's one piece of it. The other piece is As we sat here a year ago, auto insurance premium inflation was sitting at 18.6%. As we sit here today, it's sitting at 5%. In many carriers, there's been some recent research done around carriers that are actually putting premium decreases into the marketplace just because of the high levels of profitability and the high levels for the low loss rates they're experiencing. So I think that is also starting to ease its way into the macro backdrop. And people are getting – we've said for a while that it takes time for the consumer base to work these premium increases into their kind of daily budgeting. And as that happens and as we start to lap that year over year, people start to, you know, they better position themselves to spend money on repairs when needed. So I do think that we're starting to see a little bit of the macro backdrop help us in terms of, you know, just the claims environment. In general, so I think that is a piece of it. And, you know, we still have not, as you look at, you know, the total cost of repair, we've still not seen that recover to the levels that it has been historically. And, you know, I think that still remains, at least as it's reported by CCC, that still remains an opportunity for us to continue to experience more growth.

Okay, that's helpful. And if I could just read a quick kind of modeling went in. I know I've been asked the question a couple times. Is there any way you can put some numbers around your expectation on that same solar number, at least at this point, in terms of like kind of a numeric range as opposed to just modest? I'll let Jeff answer that.

Well, I think that I think we wanted to signal certainly that it's that what we've seen thus far in the court is not it's no longer negative. It's moved to any other direction. But I think I think the way to think about it is that as the sort of headwinds that we faced coming into this negative backdrop was sort of gradual, so will the other direction. So I think maybe that's probably as much as I'm prepared to guide right now in terms of what that would mean. But I think even if you look at some of our history in terms of how we've talked about you know, our results to date and other reports over the years, you'll probably be able to get a good range of what modest means.

All right. Sounds great. Okay. Thanks, folks.

Thank you. Thank you. Your next question is from Mark Jordan from Goldman Sachs.

Your line is now open. Hi.

Thank you very much for taking my question. Can you talk a little bit about the new augmented code of market strategy and maybe how site selection now might differ from your prior approach? And then if this might have any change, your outlook for either unit economics or prospective returns for startups?

Yeah. So, you know, we've taken a market, you know, we've taken a bit of a market-based approach to our development. And, you know, what that entails is looking at a lot of different, factors in terms of where we want to put, you know, new units. And, you know, those factors are obviously modeled out, and it allows us to then see, you know, where do our insurance clients need, you know, what do our insurance clients need, new locations, what's the competitive density of the marketplace, what's the car park in the marketplace, you know, what are our relationships with the carrier makeup in that marketplace, amongst a bunch of other different factors. And that allows us to essentially put, you know, a dot on a map. And that dot on the map is then, you know, filled with, you know, first we would go out to the marketplace as fast as possible to fill in that space and to go look for an existing repair facility that's in that marketplace and go buy that, you know, go acquire that location. If that's not available, then we would move to the next step, which is to look for an existing building that's out there that we might be able to convert to a body shop and then the third phase would be to put a greenfield location in that marketplace. It's just allowed us to get very specific about building out the density and filling in the white space in our markets to really build towards that one to two position in the marketplaces that we're in. We leverage CBSAs, which is broader than the market, but there's I think there's 311 CBSAs in the US. We're looking at it in that type of a construct. It's just allowed us to get very purposeful with our spend, and to your point, it hedges our ability to be successful in those locations. Has it set up the ramp time of these locations? Probably still too early to tell. We're in the very early innings of doing this. We started really meaningfully doing it at the beginning of the year. But I would expect over time that we'll have a better answer to that question. Inherently, you would expect it to speed up those ramp times, but we have not experienced enough activity to be able to tell that yet.

Okay, perfect. Thank you very much. And then just one quick follow-up on that. You know, I think last quarter you expected eight startups for the second quarter, seeing only four in the quarter. But the outlook for the second half at 16 startups hasn't changed. So is that, you know, we're four locations now. Are you being pushed into early 26, or are these out of the pipeline?

Yeah, no, there's nothing out of the pipeline. I mean, I think we continue to build. We continue to leverage the methodology I just said to build out the greenfield strategy. We've got plenty of other opportunities identified. From time to time, things will shift from one quarter to the next, but as we get to a place where the process is more mature and you're starting to see that as we get into Q3, 4, and 1 and 2, we'll get to a place where the predictability of that 8 to 10 is far more predictable.

Perfect. Thank you very much. Yep. Thank you.

Thank you. Your next question is from Sabahat Pong from RBC.

Your line is now open.

Great. Hey, thanks and good morning. You know, a bunch of the other questions sort of focused in on sort of the industry drivers around the inflection and positive same sort of sales. So I was hoping to get a bit of an understanding of, you know, the industry overall trends are still sort of down year over year on repairable claims. Just curious on the initiatives you're implementing to perhaps capture share above that industry level to drive this positive inflection? Just, you know, you told a lot of the cost-saving stuff, but curious whether there's productivity or other top-line initiatives that you're working on that are helping to maybe capture share, which is driving sort of this inflection here. Thanks very much.

Yeah, I think as we said in the prepared remarks, the largest reason for outperformance to the market is driven by our performance with our insurance company clients. This alignment of our field leadership with customers, customers' KPIs, I think has really allowed us to put a very focused initiative around just how do we improve you know, based on where our outside of the three main areas, which we do very well, and how do we make sure that we're, you know, what we call majoring in the minors, making sure that we've got all the finer points that our insurance carrier clients, you know, are expecting us to deliver on. and you know i think that has put us in a position where you know we've seen good performance good improvements in you know the relationships that we have with with our insurance clients and that's obviously um you know what's enabled us to continue to see more volume outside of that you know to your point the other piece of that is making sure that we have the capacity in the stores to take care of the volume that's coming in. So we do remain focused on, you know, continuing to hire technicians, continuing to develop technicians through our technician development program, as well as focusing on productivity of our existing workforce to make sure that we've got the capacity to take on the volume that's coming in.

Great.

And then just, I guess, you know, pretty volatile inflation type backdrop. Maybe just talk about discussions with insurance partners on how to maybe address that. I think, you know, obviously your parts call to the bit of a pastor, but just give us a perspective on how you're managing through this tariff and inflation environment and the discussions with your insurance partners. Thanks very much.

Yeah, yeah, look, I mean, to date we have not seen, and I think we said this in the prepared remarks, but we have not seen significant impacts from tariffs. I don't know that that, you know, I don't know that over time that won't change, but You would expect some sort of as the clarity around tariffs becomes more real, I think we may see some version of that starting to creep into the system. But to date, we've not seen any meaningful tariff impact to the cost structure. And as I said earlier, I mean, What we're also not seeing is the average cost of a repair move up in the same fashion it had historically. So I think insurance carriers, the conversations with carriers right now around tariffs are, you know, it will likely have some impact, I think, still early days to be seen around how much impact, you know, it ultimately does have.

Great. Thanks so much. Yep. Thank you.

Thank you. Your next question is from Derek from TD Cowen.

Your line is now open.

Yeah, good morning, everybody. Most of the questions have been asked, but maybe I just want to hit on the M&A angle another time. Obviously, you've seen the acquisition opportunities pick up, so I just want to, you know, ask you guys what's changed in the market. Is it valuation? Is it tariffs? Is it just a tough environment for the smaller players?

Yeah, I think what you said last is probably the most, you know, the most impactful. I mean, you know, as we've said, as to what we've said previously, you know, some of the suppliers, some of our suppliers that supply the balance of the industry would indicate that, you know, midsize, you know, some of these smaller MSOs and some of the single shop operators are down, you you know, double digits in many cases. And, you know, I think they're looking at the sustainability of that against the backdrop of having to make investments to keep up with the changing car park. And, you know, it's created a bit of an inflection point for some of the MSO operators that are out there that, you know, puts them in the market to potentially be looking to sell. I wouldn't say it's necessarily driven by, you know, their expectations on valuation. I would say that it's probably more driven by just their view of their relative position in the market going forward and the sustained kind of claim declines that we've seen for the last, frankly, the last couple of years at this point that's got them just exploring opportunities on the outside.

And maybe just one last one for me, just in terms of the OPEX and the impact from the investment in facility maintenance costs. One, I guess you could, I guess, quantify the magnitude. And two, you did talk about pent-up demand for deferred works. I'm just wondering if you have any color there.

Yeah, you know, I will comment on the exact dollar amount. I will say that, you know, there was, you know, as we, As we're going through a period of softer demand, it is easier for us to get in shops and do some of that work. So there was some deferred work that's out there that we're starting to work through. So I don't think that that's all very manageable for us. So, you know, as we've got time to go in and do things, we'll go in and do things, you know, if the demand environment picks up in a, you know, in a pace that, you know, keeps us from, you know, focusing there, then we'll, you know, focus our attention on getting cars through the shops.

Thanks, gentlemen. That's all for me. Yep. Thank you.

Thank you. Your next question is from Gary Ho from Dagerthal Capital Markets.

Your line is now open.

Thanks. Thanks. Good morning, guys. Brian, I just want to go back to the discussion on insurance partners. Maybe of the top four large insurance clients that you have relationships with, have your business that you do with them changed over the last, let's call it 24 months or so, or relatively unchanged? I have seen kind of one of your peers doing more work with one particular insurance client. Just wanted to hear your thoughts.

Yeah, I mean, unfortunately, we don't comment on, you know, the one, the makeup, or two, the performance with individual insurance clients. You know, I would say that our focus is, you know, is broadly doing what's right for every one of our clients so that we can continue to deepen the relationships we have with everyone. You know, as you probably, you know, as you're articulating, there are ones that are, there are clients out there that, you know, are, you know, growing more rapidly in the marketplace, and there are ones that that share is coming from, and, you know, obviously our attentions are focused, our attentions are focused to all, you know. So the reality is every store has a different insurance client makeup, you know, and when you've got 1,000 stores, you know, quite frankly, we need to be in a position where, where all of them, where our store associates know how to make sure that, you know, they're delivering on that individual insurance client's expectations. And that is what we're really focused on right now.

Okay, great. And then just going back to that H-Shop MSO acquisition that you completed post-quarter, I'm assuming you can't disclose the multiples that you paid, but any color on how kind of compared to the assured deal that you did a couple years ago, and with the ROIC kind of expectations as well. So it sounds like you're doing, you're seeing smaller MSOs pop up on the radar. Maybe comment on the dynamics and, you know, are they more impacted than you guys or have kind of PEs been less active in the space more recently?

Yeah, what I would, and you're right, we won't comment on the multiple, but what I would more point to is what the market-based strategies that the market-based planning activity has allowed us to do is to take an acquisition like the eight-store deal that we've done and then build around it in a way that we blend the market to a return that's acceptable for us. We've talked about over a long stretch of time against our metric of ROICs and we expect that to be in the north of 20%. What we're doing is we build out a marketplace as we're looking at the other densification opportunities that are out there and how do they then blend the average return on invested capital in a particular market up to the levels that we expect. So, you know, it is, I think that, you know, again, the market-based, you know, strategies that we're deploying are allowing us to get very purposeful with, you know, our capital in any given market. This happens to be a market that, you know, prior to you know, prior to this acquisition and another two-store acquisition that was done in the same market, you know, we had one store in Virginia. As we now continue to build that market out, you'll see us leveraging greenfields and single-shop acquisitions to really tuck in and go after that second position in the marketplace, which will allow us in the long run to get the returns that we expect.

Okay, that makes sense. And then let me just quick one, Jeff. You mentioned the strategy change in terms of construction and how you guys fund the Greenfield-Brownfield build out. Can you maybe elaborate on the financial and cash flow impact as we kind of model these numbers out?

Yeah, I think you've seen an elevated really volatility to some degree in the acquisition and development line of the cash flow as we've, you know, we've been investing in facilities that have not yet been announced or opened. I think that was creating some noise in that line of the cash flow. And then you would occasionally see us do a sale-leaseback, which would show up on a separate line of the cash flow. And so you'd have to kind of take that into account, but the timing isn't consistent on a quarterly basis. So it was creating, you know, I think volatility. So what's going to happen is it's going to take – it's going to just basically take that volatility and noise out of the numbers. So going forward – once we get this plan fully rolled out, you're not going to see us doing as many sale leasebacks. And also the cost, you're not going to see quite as high an acquisition development cash flow line item as well. So it should overall more mimic the way we describe the plan to go through single store acquisitions and brownfield to greenfield development and just take that volatility out.

Okay, great. Okay, thanks for that. Those are my questions. Thank you.

Thank you. Your next question is from Daryl Young from Steeple.

Your line is open.

Hey, good morning, everyone. Just wanted to keep talking about acquisition pipelines and I guess specifically around synergies. So historically and pre-pandemic period, Boyd sort of de-emphasized the potential synergies from MSO acquisitions just given they were already hooked up to DRPs and they were getting supplier discounts. But has that changed as you've scaled? Are there more synergies today than there might have been historically if you were to opportunistically acquire some larger MSOs? Yeah.

I wouldn't say meaningfully. I think, you know, we still find, even with the, you know, with MSOs of this size, you know, we still have pockets of revenue synergy. Right. I mean, our biggest opportunity that we're bringing to these is, you know, is typically a typically results on commercial synergies much more so than cost synergies. As we've said in the investor presentation, over a long stretch of time, we can take a pretty much single-shop acquisition and add 470 basis points of improvement versus the first year of its performance. For these, to your point, it's much more focused on How do we just drive the top line up in those locations, leverage the relationships that we have to add an incremental client to their makeup, and really drive the growth of the business that way? So I would say it's still primarily focused on revenue versus cost. When we do a deal like this, and again, we don't have, you know, take what we just did in Virginia. We don't have, we didn't have superstructure in Virginia. We can obviously leverage a, you know, a region vice president, a division vice president to be able to manage that, but we had a market manager. that's going to manage those locations. So that's where the density really matters. When we're building density in a marketplace, there tends to be a lot more synergy because we've got a lot more infrastructure. When we're entering a market like this, there tends to be a little bit less cost synergy and, frankly, a lot more revenue synergies.

Got it. Okay, helpful. And then one other. Just as we look at Q3, historically, it's been a seasonally weak quarter with vacations. When you look at your commentary on same-store sales, does that factor in sort of peak vacation period, or is that not an issue just given we're coming off a lower activity-level base?

Yeah, I mean, interestingly, I think in the U.S. market, you know, the vacation period probably tends to be more July, which, you know, as we said, we saw modest sales growth in July. The other thing seasonally that happens in the third quarter for us is a little bit of fall off in the glass business. You know, that type of fall off is, is still going to happen. But I don't have a tremendous amount of concern that we're going to see something different, you know, with the vacation period, which, again, I think in the U.S. we've kind of lapped. And, you know, in Canada, you know, August tends to be a bigger month for vacations. But I don't think about that going forward.

Okay. That's great. Congrats on the accord. I'll get back to you. Awesome. Thank you.

Thank you. Your next question is from Zachary Ebershed from National Bank Financial. Your line is now open.

Good morning, everyone. Congrats on the quarter. Thank you.

Beyond net promoter score, cycle times, and average cost, is there a distinct lack of overlap in the specific performance metrics between insurance partners?

There is, there are different focal points for the individual carriers. So yeah, I would say that, you know, those three are, you know, those three are the commons. But, you know, carriers are, you know, they're focused on different things. And again, our team needs to be able to understand what those things are, and they need to be able to understand how to influence them, and ultimately how to deliver an exceptional experience. So that's That is, there is enough variation that it does put us in a position where we've got, you know, we've got, you know, an education opportunity with the field or had an education opportunity with the field to make sure they understood what matters most beyond those three to the insurance clients.

Gotcha. Thanks.

When the strategic plan was unveiled, you did make a point to say that it was not reliant on a rebounding claim volumes and didn't rely on MSO acquisitions. So now that we are seeing green shoots of positive same-store sales growth and your first MSO acquisition in a number of years, is it fair to say that potential upside to the plan does exist?

Yes. I mean, what I would say is what we said on MSOs was,

large MSOs. I wouldn't necessarily classify a store deal as a large MSO. We don't expect, you know, we would have expected certainly a rebound in the claims environment versus where it had been in the last couple of quarters. We don't expect claims to go positive in order for us to deliver on the plan that we have. So, look, I think there are some green shoots out there that, you know, that do point to positive, whether or not, you know, whether or not, you know, declaring victory this early in the game is, I think it's probably still too early for us to tell. We've always put pluses on the end of our five-year plan objectives for a reason. 1,400 plus, 14% plus, 5 billion plus. We do believe that there's opportunity to do better than that. Whether or not this is the time to declare victory or not, I would probably say not yet. Happy with the results we've got, but, again, still early innings.

Understood. And the last one for me, any thoughts on how an IPO of a large competitor, giving them access to public equity markets might influence industry dynamics?

Yeah, look, I actually think we're, you know, we're generally optimistic about, you know, what the knock-on effect to our business associated with that will be. You know, I think we stack up pretty well other than just pure size. We stack up pretty well against, you know, the one that obviously is filed, you know, filed to go public. So generally speaking, I would believe that, you know, could potentially be a positive for us.

Thank you very much. I'll leave it there. Thank you.

Thank you, and your next question is from Tristan from this morning from B&O Capital Markets. Your line is now open.

Hey, good morning. How did your repair claims volume compare to your average ticket in the quarter, and then how are you kind of thinking about that moving forward?

I won't comment specifically on our, because we don't comment specifically on our claims volume versus our average ticket growth, but I will tell you that in the industry, average ticket, because the average ticket growth continues to be depressed versus where it has been, as you know, the growth algorithm for our business has historically been you know, a 2% decline in claims driven by, you know, by the adoption of ADOTs, partially offset by 1% increase in claims driven by, you know, the improvement in miles driven and the number of cars on the road, and then all of that offset by, you know, a normal kind of 4% to 5% average growth in ticket, which leads the industry to a, you know, 3% to 4% growth. We have not seen right now. We're seeing that, you know, what we would have expected to be 45% more looking like, you know, 1% to 2%. And that has put, you know, that puts incremental pressure on, you know, the claims experience to actually grow. So I'll let you do the, you know, if we're experiencing modest, you know, if we're experiencing modest growth in, you know, the the early days of the quarter, you know, you can probably do a little bit of math around what that might mean between claims and, you know, average cost of repair.

Got it. And then just kind of anecdotally, I think you kind of talked on deferred repairs a little bit, but are you seeing any consumers maybe finally come back to maybe get a repair that they've put off actually repaired?

Yeah, I don't know that I would say that there's You know, this notion of deferred repairs, you know, I think when people make the decision that they're either, you know, going to file a claim and not do the repair, which is a cash out, I don't think that they make the determination later on that they're going to come back and do it. You know, so I don't know that I see that there's this pent-up demand so much as what demand will do over time is, you know, hopefully return to just more normalized levels. You know, so I don't know that I would say that what we're experiencing right now has anything to do with, you know, deferred repairs as much as it does people that are now getting into abstinence are more likely to actually file a claim just based on their, you know, the consumer sentiment that's out there and then some of the other factors that we talked about earlier.

Makes sense. Thank you.

Thank you. And your next question is from from Paradigm Capital.

Your line is now open.

Good morning. Thanks for taking my question. Just quickly on internalizing the scanning and calibration offering and how difficult it is to implement. Do you still think it takes you two to three years to get to that 80% target that you guys mentioned earlier, or does that maybe come sooner?

Yeah, we're going to stick with the commitment that we made. I mean, obviously, we reported that we're just south of 70% as we sit here today. So there's still a little bit of room to grow. The other factor that plays into there is then keeping up with keeping up with the growth in, you know, ADOT adoption that we're seeing coming through the store. So it's not just, you know, both the numerator and the denominator are moving. So we have to keep up with, one, the changing car park, and then, two, you know, get ourselves to a position where we've got coverage in all of our markets. So we'll stick with the timeframe that we've outlined thus far. Obviously, we're extremely pleased with the progress that we've made on our scanning and calibration business. The leader that runs that business for us and the team has done a phenomenal job, and we're very pleased with where we're at.

Thanks. And maybe just lastly, just on gross margin, 46.8%, how sustainable is that in terms of our modeling? Is that a new run rate? Any thoughts there? I'll let Jeff comment on this.

Yeah, I think over the last little while, especially with the slowdown in volumes, we've been able to certainly focus much more on margin enhancement opportunities, trying to have more repair versus replace, focusing on client metrics to reduce performance credits. There's a lot of things that I would say are currently I would depict as favorable. And I would say generally we would see offsets that happen. And so I think that everything that's going on is more or less sustainable, but it would be probably too optimistic to suggest that we won't face any headwinds in any of the drivers related to gross margin going forward. So I would suggest looking back kind of at our historical band to understand how can it sort of fluctuate depending on season or time of the year and some of the other factors to come up with a model estimate.

Appreciate it. Thanks for the time. Thank you.

Thank you. Your next question is from Brett Jordan from Jefferies.

Your line is now open.

Hey, just to follow up on the recent trend of improvement, is it in your opinion more tied to your insurance partners and their relative success in the market, or are you seeing the recent trend across the entire collision ecosystem improving?

I wouldn't necessarily say it's trends based on the performance of our clients themselves, meaning that they're experiencing growth in their policies and so forth. So I don't know that it's necessarily tied to that. I think our performance with them is putting us in a position where we're shining a more positive light on our business. And then, again, a little bit of macro backdrop, you know, assistance is probably helping as well.

Great. Thank you. Yep.

Thank you. And your next question is from Steve Hansen from Raymond James.

Your line is open.

Yeah, thanks. Just a quick follow-up. I just wanted to ask about the cadence of the progress on the staffing model progress. Is there a way to think about how much of that was done intra-quarter, by the end of quarter? How much needs to still be done through the back half of this year? Just trying to understand how much ultimately was realized in savings in Q2 specifically and how much more to expect. Thanks.

Yeah, I would tell you, I mean, we implemented that staffing model, and I'll remember the date because it's a, you know, these are tough things to do, and they negatively affect people's lives, so we, you know, we take these things very seriously. April 4th was the date that we implemented that plan, so that can tell you that you saw a good chunk of the savings associated with that in the quarter. So, and let's consider that one to be you know, other than the maintenance of making sure that we stay, you know, within the bands at this point, you know, the big activity associated with that, the $30 million that we articulated was implemented all at once.

That's great. And just to follow up onto that, if you move into the phase two and sort of the indirect model and procurement savings, I know you said a rateable move through the tail end of 26 to get to the target on the 40, but is there, how much visibility do you have on that? Like, is it pretty, Is it fairly visible at this point as you enter in some of the discussions on procurement? Or are you, how confident are you in getting there?

Yeah, I mean, appreciate that there's just a lot of activity around it. So, we've got really good visibility into the, you know, into the activity around it. The timing is what becomes a little bit more elusive. So, you know, the RDO process, the results delivery office that we, you know, we are operating to deliver on a lot of these initiatives. It's led by Kim Marin, who's actually our CHRO, but is doing a phenomenal job with it. you know, with that activity. She's put us in a really good position to be able to continue to have good visibility to where those savings are coming from and then all of the different work streams to deliver it. So we've got great visibility, and as we continue to manifest, you know, the savings coming out of that, I think we'll get, you know, we will continue to refine the way we describe it. It's just easier for now as we're in the early days to make sure that you guys can model it in a more radical way.

Very helpful. Thank you.

Thank you. There are no further questions at this time. I will now hand the call back over to Mr. Brian Kaner for the closing remarks.

All right. Thank you, Operator, and thank you all once again for joining us for today's call. We look forward to reporting our third quarter results in November. Thanks again, and have a very wonderful day. Thank you.

Thank you, ladies and gentlemen. The conference has now ended. Thank you all for joining. You may all disconnect your lines.