Boyd Group Services Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 10, 2023

There are 10 speakers on the call.

Operator

Morning, everyone. Welcome to the Boyd Group Services Inc. 2nd 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.

Operator

The risk factors that may affect results are detailed in Boyd's annual information form and other periodic filings and registration statements, and you can access these documents at SEDAR's database found at www.sedar .com. I would like to remind everyone that this conference call is being recorded today, Thursday, August 10, 2023. I would now like to introduce Mr. Tim O'Dea, President and Chief Executive Officer of Boyd Group Services Inc. Please go ahead, Mr.

Operator

O'Dea.

Speaker 1

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.

Speaker 1

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 and A have also been filed on SEDAR this morning. On today's call, we will discuss the financial results During the Q2 of 2023, Boyd recorded record sales of 753,200,000 Adjusted EBITDA of $95,400,000 and net earnings of $26,300,000 The initiatives put in place to improve throughput And increased capacity along with solid execution have resulted in record sales levels and improved profitability during the Q2. 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.

Speaker 1

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 Q2 of 2023, Sales were $753,200,000 a 22.9% increase when compared to the same period of 2022. This reflects a $29,100,000 increase from 64 new locations. Our same store sales, excluding foreign exchange, increased by 18.9% in the 2nd quarter, recognizing the same number of selling and production days in both the U.

Speaker 1

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 Sales also increased based on higher 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 2nd 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.

Speaker 1

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 Q2 of 2023 as compared to the same period of the prior year. Operating expenses for the 2nd quarter were $247,300,000 or 32.8 percent of sales compared to $205,500,000 or 33.5 percent 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 $95,400,000 an increase of 32.5% over the same period of 2022.

Speaker 1

The increase was primarily the result of the improved sales levels and improved leveraging of certain operating expenses. Net earnings for the Q2 of 2023 was $26,300,000 compared to $13,300,000 in the same period of 2022. Excluding fair value adjustments and acquisition and transaction costs, adjusted net earnings for the Q2 of 2023 was 27,000,000 Adjusted net earnings for the period was positively impacted by increased sales and improved leveraging of operating expenses. For the 6 months ended June 30, 2023, sales totaled $1,500,000,000 an increase of $298,600,000 or 25.5 percent when compared to the same period of the prior year, driven by same store sales growth of 21.9 percent as well as contributions from new locations that had not been in operation for the full comparative period. Gross margin increased to 45.6 percent of sales compared to 44.7% in the comparative period.

Speaker 1

Gross margin percentage was positively impacted by improved part margins along with increased scanning and calibration 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 1st 6 months of 2023 as compared to the same period of the prior year. Operating expenses as well as location growth in addition to inflationary increases. Adjusted EBITDA for the 6 months ended June 30th was $180,100,000 compared to $125,800,000 in the same period of the prior year.

Speaker 1

The $54,300,000 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 $47,100,000 compared to $14,900,000 in the same period of the prior year. Adjusted net earnings per share increased from $0.73 to $2.25 The increase in adjusted net earnings per share is primarily attributed to increased sales and improvements in the gross margin percentage as well as improved leverage of certain operating expenses.

Speaker 2

At the end of

Speaker 1

the period, we had total debt, net of cash, of just over $1,000,000,000 Debt, net of cash, decreased when compared to the prior quarter, primarily as a result of increased cash flow from operations. During the Q2 of 2023, the company was able to reduce the level of long term debt held under its revolving credit Net of financing costs from $184,100,000 to 174,500,000 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 The investment in the second half of twenty twenty three is expected to range from $5,000,000 to $6,000,000 with investments expected in 2024 and 2025 ranging from $5,000,000 to $9,000,000 per year. We remain focused on the key challenge of building capacity through increased staffing, including negotiation 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 Technology, equipment and training position the company well for continued operational execution.

Speaker 1

Boyd remains committed to addressing the labor market challenges so that the company can service additional demand. Relative to the Q2, the Q3 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 Q3, same store sales increases are approximately half of what we have experienced during the 1st 6 months of 2023. Boyd is pleased to have opened or acquired 57 Kalismar Repair locations thus far in 2023 And the pipeline to add new locations and expand into new markets is robust. Operationally, Voyage is focused on optimizing 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.

Speaker 1

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

Operator

Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. Your first question will come from Tamy Chen at BMO Capital Markets. Please go ahead.

Speaker 3

Hi. Thanks for taking

Speaker 4

my question. Good

Speaker 3

morning, Sami. Good morning.

Speaker 4

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 Q sorry, in the first half of this year divided by 2, that's the rate that you're currently seeing?

Speaker 1

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

Speaker 4

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?

Speaker 4

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 collision claim count in the industry has gone a bit negative here.

Speaker 1

Yes. 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 investments and work in process has been decreasing.

Speaker 1

But I would attribute that Much of that to improve supply chain and our ability to finish out jobs that may have been suspended for a period of time Rather than the same store sales growth is obviously labor related and improved capacity, But there is still tremendous demand available in the marketplace.

Speaker 4

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. 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 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 So 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.

Speaker 1

Yes. There's no question that the hub and spoke model is still the right way to approach this. You can't 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.

Speaker 1

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.

Speaker 4

Sounds good. Thank you.

Speaker 1

Thanks, Tammy.

Operator

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

Speaker 5

Yes, good morning guys. Thanks for the time. Good morning, Steve. Congrats on the solid print actually. It's good to see some margin progression here.

Speaker 5

Tim, first question is just on the price increase backdrop. How confident are you still in negotiating for the price increases from your carriers? We're Probably 6 or 7 quarters into this process now and some people suggest that we're starting to get pushed back. But as I look at the backlog Still being deep in 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.

Speaker 1

Well, 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.

Speaker 5

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 in sourcing existing work that's been done in the past from an outsourced basis or where do we stand?

Speaker 1

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 the 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 be in service by our own internal calibration business. So that's a I think a good tailwind that has a lot of runway left in it.

Speaker 5

Okay, great. Appreciate the color guys. Thanks.

Speaker 1

Thanks, Steve.

Operator

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

Speaker 6

Thanks, Andrew. 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.

Speaker 6

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?

Speaker 1

We haven't provided any guidance on that. What we've I 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, manage expenses effectively And recover our gross margin that we expect over time to be able to get back to historical EBITDA margins.

Speaker 3

And maybe I'll just add that what we have commented on is that if you look at our track record over pre pandemic, the 5 years previous, Through same store sales growth, we had a consistent track record of slowly increasing our operating leverage.

Speaker 6

Okay. Thanks for the color. 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 cost? 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?

Speaker 1

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 trade off of spending money I'm 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.

Speaker 6

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

Speaker 1

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 It 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.

Speaker 6

Okay. That makes sense. Those are my questions. Thanks very much.

Speaker 3

Thanks, Gary.

Operator

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

Speaker 7

Hey, good morning, guys.

Speaker 1

Hi, Bret.

Speaker 4

Talk a

Speaker 7

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 3rd party, what that And I guess would you consider doing 3rd party scanning for others or is that too much of a competitive conflict?

Speaker 1

So we do 3rd 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 3rd parties with our calibration business. In terms of the margin profile, Much of the work that we're doing today, we are relying on 3rd parties to complete.

Speaker 1

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 Sublett 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 will take us some time to do that, To build the workforce to do that, but we have we are underway with that now.

Speaker 7

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

Speaker 1

It's both. We have Continue 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.

Speaker 1

And we talked a lot over Probably starting about 2 years ago, 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.

Speaker 7

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

Speaker 1

It's hard to tell exactly where that will end up. But the benefit we will get is that The revenue in scanning and calibration is growing. And right now, we're servicing too much of it with 3rd party sublet. So we should be able to at a minimum turn that into normal labor margins, which will be a benefit to us.

Speaker 7

Okay, great. Thank you.

Speaker 1

Thanks, Brett.

Operator

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

Speaker 1

Hi, Jonathan.

Speaker 3

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

Speaker 1

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 because it's a really attractive segment of the business, but it is a people business and We'll 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 is available. We just have to get and train the labor.

Speaker 1

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. So 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.

Speaker 3

Okay. So for a portion of the scanning calibration skills, my understanding is you'll train Those 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?

Speaker 1

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 operated as a very independent business.

Speaker 3

Okay. Thanks for your comments. Thanks, Jonathan.

Operator

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

Speaker 8

Hi. Thanks for taking my question. And congrats on a solid quarter here. I was just wondering, Looking at your margins, I mean margins were pretty good this quarter despite kind of Still not getting all the price increases you need from your insurance partners. How much more operating leverage would you say is Excluding labor is left in the business as we look out just the next 6 months.

Speaker 8

Like if you don't receive The price increases you're looking for, do you think you can still kind of push margins higher here?

Speaker 1

Well, 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.

Speaker 1

So I would expect to see over time continuing improvement to drive us back toward those historical EBITDA margins.

Speaker 8

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 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?

Speaker 1

I would just say generally I think our insurance clients have been very supportive and have You 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.

Speaker 1

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.

Speaker 3

I guess I'll add though that 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.

Speaker 1

Yes. 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. 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.

Speaker 8

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

Speaker 1

Thanks, Christa.

Operator

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

Speaker 1

Good morning, Zachary.

Speaker 9

Good morning, everybody. Thanks for taking my questions and congrats on the quarter.

Speaker 3

Thank you.

Speaker 9

Hoping you could give us an update on the competitive landscape in the M and A sphere with 3 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?

Speaker 1

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 with 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.

Speaker 9

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?

Speaker 1

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 a belief 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 1 category.

Speaker 1

California, I think, has been slower to move rates with some carriers, but progress is being made. I really think that the impact on us should not be significant. I'm not sure there should be any impact on us.

Speaker 9

That's good color. Thanks. I'll turn it over.

Speaker 7

Thanks, Zachary.

Operator

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

Speaker 1

Good morning, Michael.

Speaker 3

Good morning, guys. So maybe I'll start with a clarification question. It feels a little bit deja vu for 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, we'd have implications for operating leverage in the quarter as well. So just to clarify on that, please.

Speaker 1

Yes. 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 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 Q3.

Speaker 1

So I'd say Your assessment as to what we are communicating thus far in the quarter is accurate.

Speaker 3

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, That's moving some costs up into the cost of revenues.

Speaker 1

I'm not sure whether I would say we do make a significant investment in our TDP program. The biggest investment It is when they're in the first level, which is approximately 6 months. They're really fully absorbed as an expense, including a lot of training expense that's outside of wages. 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.

Speaker 2

Okay. That's

Speaker 3

helpful. And maybe last one. I want to talk about the total loss ratio just in terms of collisions in the industry. I mean, Pre pandemic, plus 20%, a trough of 17%, and 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?

Speaker 1

Yes. 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 and more modestly damaged vehicles. So the increase in total loss rates We'll remove some of those vehicles from our repair and move them through the total loss channel.

Speaker 1

Right now, there's So much demand 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.

Speaker 3

That's great color. Thank you, Tim.

Speaker 1

Thanks, Michael.

Operator

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

Speaker 2

Great. Thanks very much. Good morning. You provided some color on kind of the thought process Building out your in house calibration and scanning services. I'm just wondering what that entails.

Speaker 2

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 I guess is there a timeline to when you think that entire business could be brought in house, Assuming that's been intentional to do it 100 percent in house, just some thoughts on where that goes from here?

Speaker 1

Yes. Well, it is a labor intensive business and it's 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.

Speaker 1

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. We just to clarify also, This is a separate business within Boyd.

Speaker 1

And while we service more of our home business, We do service 3rd party business and intend to continue to do that with our mobile calibration business.

Speaker 2

Great. And then on M and 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 has kind of the events of the last year has made some of the larger folks a bit more available for takeout. Obviously, some have transacted, We've seen some of the headlines. I'm 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 will continue on this sort of singles and doubles road for a while here?

Speaker 1

I think that you can expect that we'll continue to focus on these single shops or small acquisitions because there There are plenty out there. We performed 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 Midsize businesses or even larger businesses as long as they make sense from accretion of shareholder value, we're open to that.

Speaker 1

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.

Speaker 2

Great. Thanks very much for the color.

Speaker 3

Thanks, Saba.

Operator

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

Speaker 5

Yes, sorry guys, a quick follow-up. Tim, you referenced an increase in your an intentional increase Your capabilities to process these smaller tuck ins, the onesie twosies. You also just referenced your balance sheet being in sound shape. Is there an ability to accelerate The pace from here that we've seen in the last quarter or 2, it has been accelerating. We're just trying to get a sense for that capability set internally relative to your goals in the 1D2 tuck ins?

Speaker 5

Thanks.

Speaker 1

Yes. I think the model that we built for this It can be expanded. What we have to be conscious of is making sure that operationally we can absorb the growth And if we don't 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.

Speaker 5

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

Speaker 1

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.

Speaker 5

That's really helpful. Appreciate that. Thanks.

Operator

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

Speaker 1

Great. Thank you, operator. And thanks to all of you once again for joining our call and we look forward to reporting our Q3 results to you in November. Thanks again and have a great day.

Operator

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.

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Earnings Conference Call
Boyd Group Services Q2 2023
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