Boyd Group Services Inc (BGSI) 2025 Q2 法說會逐字稿

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 for 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 SEDAR's database found at sedarplus.ca. I would like to remind everyone that this conference call is being recorded today on Wednesday, August 13, 2025.

I would now like to introduce Mr. Brian Kaner, President and Chief Executive Officer of Boyd 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 today with me -- 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 SEDAR+ this morning.

On today's call, we will discuss the financial results for the quarter ended June 30, 2025, and provide a general business update. We will then open the call for questions. The Boys 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 gross 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 EBITDA margins to 12% and the highest quarterly adjusted EBITDA margin performance since 2023.

In addition, early in the second quarter, we closed our first MSO acquisition since 2021 and surpassed the 1,000 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 share and improve the cadence and strategic fit of our new location growth. To further strengthen our customer relationships, we've taken our long-standing WOW Operating Way, one step closer to our insurance company clients. While this enabled boy to achieve above industry performance in Net Promoter Score, total cycle time and average cost of 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 start-up locations and position ourselves to better serve our insurance company clients.

In early 2025, we shifted our approach to development of new start-up locations. On a go-forward basis, the development of start-up 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 enabled 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 start-up 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 expect it 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, and we had -- 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 Q2 results in more detail.

Thanks, Brian. 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. Similar to prior quarters, Boyd continued to outperform the industry.

Based on claims processing platform data for the second quarter, we estimate that 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 enhance direct parts procurement to drive 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. We Operating expenses as a percentage of sales was positively impacted by the introduction of Project 360, the transformational cost initiatives 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 same-store sales causing negative leverage. Quarter-to-quarter variation in certain accruals and an investment in facilities maintenance costs was spent 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 post be positive for gross profit and adjusted EBITDA, it does not contribute 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 costs related to acquisitions and transformational cost initiatives, was $93.8 million an increase of 4.7% over the same period of 2024. Adjusted EBIT margin increased to 12% in the second quarter, up from 11.5% in Q2 2024 and 10.3% in Q1 of 2025.

Their 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 $0.50 per share compared to $11.9 million or $0.56 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 these liabilities increased from $487.2 million at December 31, 2024, to $505.8 million at June 30, 2025. Debt net of cash before lease liabilities increased as a result of location growth.

As noted earlier, during the first quarter of 2025, the company changed its approach, whereby on a go-forward basis, the development of start-up facilities will primarily be outsourced. And upon completion, ownership will transfer directly to a leasing company.

During the first half of 2025, the company completed sale-leaseback transactions for proceeds of $9.2 million. The sale-leaseback transactions allowed the company to replenish capital that can be redeployed to further grow the business.

During 2025, the company plans to make cash capital expenditures, excluding those 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 $11.1 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, our regional Virginia-based MSO with eight locations and surpassed the 1,000 location milestones.

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. (Operator Instructions)

Steve Hansen, Raymond James.

Brian, as you look at your current levels of activity that you described sort of progressing in the positive territory. Is it too early to call sort of the negative period behind us. I'm just trying to get a sense whether we run the risk of dipping back and forth between positive and negative same-store 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.

Yes. 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 continuing into the third quarter. Is that coupled with the commentary around just some of the easing of the pressures that we've been experiencing over the last couple of quarters. Seems to point to positive, but I still think it's too early to tell how sustained that is.

Okay. That's helpful. And just on a similar sort of tax, the small tuck-in on post quarter of eight shops by itself isn't a big needle mover, but it does seem to signal that you're more confident and being willing to go after growth at the location side through M&A. How do you feel about that landscape today 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?

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, I think 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.

We continue to look for those smaller tuck-ins and then the leveraging our brownfield, greenfield strategy to be able to build out density in the existing markets. And I'm actually really pleased with the progress said coming out of the beer at the beginning of this year, we had like -- we would have liked to have been in a pipeline build of 8 to 10 greenfield locations by the time we got to the end of the year. And as we sit here today and look out four quarters, we now have a fairly robust pipeline that's aligned to that 8 to 10 locations. So I think we'll continue to be active in that small regional MSO space as well as continue to build out density in the markets that we participate in today.

Krista Friesen, CIBC.

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?

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

Okay. Great. And then maybe just on the expanding of the WOW Operating Way to your insurance partners. Is that already underway? And how long would you expect kind of the rollout of that to take?

Yes. 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 winning with the customers. And as we said in the release in the prepared remarks, it's not just good enough to win on Net Promoter Score and total cost of repair and length of rental anymore or cycle time.

It's 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, and we've now aligned their compensation to those metrics as well. And it's really given us a -- from the top to the bottom, a very aligned organization around delivering what we do best, which delivering an exceptional customer experience for both our insurance clients and their customers.

Okay. 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. Look, generally speaking, our -- I would say our employee base wants to do what's right for the customer. 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 pushback from the employee base.

Chris Murray, ATB Capital Markets.

Maybe turning back to the store growth discussion. When you release the strat plan, I think the commentary was kind of a mix of the greenfield brownfield acquisitions. And at the time, at least you had said the goal was maybe 80 to 100 stores a year. I guess the question I've got is, now that we're starting to see maybe look at acquisitions a little bit more, are you still comfortable in that 80 to 100 range? And leverage is still a little bit elevated, just wondering how hard do you think you can press on the balance sheet or if you need to in order to achieve those types of costs?

Yes. Well, I'll comment on the first piece, and then I'll let Jeff comment on the leverage side. On the acquisition side, we do still believe that again, our objective is to get to 1,400 plus locations in our 5-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. I expect that, 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 as you look back obviously, our Q1 earnings were a little bit depressed. And as we look forward, 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 I would expect that level of activity to continue.

And the other thing I would comment on is just part of the reason for the greenfield strategy. As you guys know, it's a very -- the greenfield strategy amongst all the other benefits is a capital-light strategy as well. It's a $1.2 million 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 cost 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.

And Jeff, I don't know if you want to comment on the (inaudible)

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 '23 and '24. 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 from operations that will help give us that capacity to continue to grow as well as the continued success of Project 360 and the additional incremental cash flows that we expect to come from now.

Okay. That's helpful. And then maybe turning back to the same-store sales number and the conditions that you're seeing in the marketplace again, appreciating it's early days. We've heard kind of mixed ideas in the industry about some sort of recovery. What -- I guess the question is, what is it that's starting to give you some confidence that the number is changing?

And maybe this goes. 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? What's kind of pointing to your thoughts that not only you're seeing kind of -- in your words, I think it was a moderate increase in same-store, but that, that could be sustainable.

Yes. I mean, well, look, we pointed to for over a year now, we've pointed to some very specific things that were happening in the macro backdrop that have had negative impacts on the business. One had been the used car pricing, which has a knockout effect to total loss rates as used car prices go down, total loss rates have tended 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 or in the quarter, we saw used car prices up 2.8%. That's actually -- that's a bit of a call it, an inflection point for used car pricing.

And you would expect as tariffs start to more negatively impact us or 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 of -- or the low loss rates we'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 the 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 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 just the claims environment in general. So I think that is a piece of it. And we still have not, as you look at the total cost of repair, we're still not seeing that recover to the levels that it has been historically. And 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 can just squeeze a quick kind of modeling one in. I know I've been asked the question a couple of times. Is there any way you could put some numbers around your expectation on that same-store 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 quarter it's no longer negative. It's moved to any other direction. But I think the way to think about it is that as the sort of headwinds that we faced coming into this, 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 even if you look at some of our history in terms of how we've talked about our results to date and other reports over the years, you'll probably be able to get a good range of what modest been.

Mark Jordan, Goldman Sachs.

Can you talk a little bit about the new Augment go-to-market strategy? And maybe how site selection now might differ from your prior approach? And then this might have any change in your outlook for either unit economics or prospective returns for start-ups.

Yes. So we've taken a market, we've taken a bit of a market-based approach to our development. And what that entails is looking at a lot of different factors in terms of where we want to put new units. And those factors are obviously modeled out, and it allows us to then see where do our insurance clients need one, where do our insurance clients needs new locations, what's the competitive density in the marketplace, what's the car park in the marketplace, 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 a dot on a map. And that dot on the map has been filled with first, we would go out to the marketplace, the fastest path to fill in that space is to go look for an existing repair facility that's in that marketplace and go buy that, 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. So it's a very we leverage CBSAs, which is kind of broader than the market, but there's -- I think there's 311 CBSAs in the US. So we're looking at it in that type of a construct. And 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 sped 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. So -- 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 you.

Okay. Perfect. And then just one quick follow-up on that. I think last quarter, you had expected a start-ups for the second quarter, seeing only 4% in the quarter. But the outlook for the second half at 16 start-ups isn't change.

So is that -- were four locations now being pushed into early '26? Or are these out of the pipeline?

Yes. No, there's nothing out of the pipeline. I mean, it's -- I think we're -- 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 and we'll get to a place where the predictability of that 8 to 10 is far more predictable.

Sabahat Khan, RBC.

A bunch of the other questions sort of focused in on sort of the industry drivers around the inflection in positive same-store sales. So I was hoping to get a bit of an understanding of 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 detailed a lot of the cost savings stuff, but curious whether it'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.

Yes. I think as we said in the prepared remarks, the largest reason for outperformance in 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 a very kind of focused initiative around just how do we improve based on where our -- outside of the three main areas, which we do very well in, how do we make sure that we're what we call majoring in the miners, making sure that we've got all the finer points that our insurance carrier clients are expecting us to deliver on. And I think that has put us in a position where we've seen good improvements in the relationships that we have with our insurance clients. And that's obviously what's enabled us to continue to see more volume.

Outside of that, 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 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, pretty volatile inflation type backdrop. Can you maybe just talk about discussions with insurance partners on how to maybe address that. I think, obviously, your parts cost is a bit of a pass-through. But just give us a perspective on how you're managing through this tariff and inflation environment and the discussions with our insurance partners.

Yes. Yes. Look, I mean, to date, we have not seen, and I think we said this in the prepared remarks as well, we have not seen significant impacts from tariffs 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 an average case the average cost of repair move up in the same fashion it had historically. So I think insurance are -- the conversations with carriers right now around tariffs are it will likely have some impact. I think still early days to be seen around how much impact it ultimately does have.

Derek Lessard, TD Cowen.

Most of my 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. I just want to 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?

Yes. I think what you said last is probably the most impactful. I mean the -- as we've said his we've said previously, some of the suppliers, some of our suppliers that supply the balance of the industry would indicate that midsize, some of these smaller MSOs and some of the single shop operators are down double digits in many cases. And 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 it's created a bit of an inflection point for some of the MSO operators that are out there that puts them in the market to potentially be looking to sell.

I wouldn't say it's necessarily driven by their expectations at 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.

Great color, Brian. And maybe just one last one for me. Just in terms of the OpEx and the impact from the investment in facility maintenance costs. Just wondering if, one, I guess, you could, I guess, quantify the magnitude. And two, you did talk about pent-up demand for deferred work.

I'm just wondering if you have any color there.

Yes. I won't comment on the exact dollar amount. I will say that there was -- as we were going through a period of softer demand, it is easier for us to get into shops to do some of that work. So there was some deferred work that's out there that we starting we're starting to work through. And so I don't think that that's all very manageable for us.

So as we've got time to go and do things, we'll go in and do things, the demand environment picks up at a pace that keeps us from focusing there, then we'll focus our attention on getting cars through the shops.

Gary Ho, Desjardins Capital Markets.

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 of 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 clients. Just wanted to kind of hear your thoughts.

Yes. I mean, unfortunately, we don't comment on the one, the makeup or to the performance with individual insurance clients. I would say that our focus 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. As you probably -- as you're articulating, there are ones that are there are clients out there that are growing more rapidly in the marketplace, and there are ones that, that share is coming from. And obviously, our attentions are focused our retentions are focused to all.

The reality is every store has a different insurance client makeup. And when you've got 1,000 stores quite frankly, we need to be in a position where all of them where our store associates know how to make sure that they're delivering on that individual insurance clients' expectations. And that is what we're really focused on right now.

Okay. Great. And then maybe just going back to that 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 of years ago and with the ROIC kind of expectations as well. So it sounds like you're doing -- you're seeing smaller MSOs to pop up on the radar, maybe comments on the dynamics?

And are they more impacted than you guys or have kind of PEs been less active in the space more recently.

Yes. 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 a 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, right? So it's -- we've talked about over a long stretch of time against our metric of ROIC that we expect that to be in the north of 20%. So 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 it is I think that, again, the market-based strategies that we're deploying are allowing us to get very purposeful with our capital in any given market. This happens to be a market that prior to this acquisition and another two store acquisition that was done in the same market, we had one store in 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 maybe just a quick one, Jeff. You mentioned maybe the strategy change in terms of construction or on how you guys fund the greenfield brownfield pilot. Can you maybe elaborate on the financial and cash flow impact as we kind of model these numbers out?

Yes. 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 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 in 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 I think, volatility. So what's going to happen is that'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 as a 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 grow through single-store acquisitions and brownfield greenfield development and just take that volatility out.

Daryl Young, Stifel.

Just wanted to keep talking about acquisition pipelines and I guess, specifically around synergies. So historically in pre-pandemic period, Boyd sort of deemphasized 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?

I wouldn't say meaningfully. I think we still find, even with the -- with MSOs of this size, we still have pockets of revenues that right? I mean our biggest opportunity that we're bringing to these is typically a typically result in 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 the we can take a pretty much a 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 clients 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 -- take what we just did in Virginia. We don't have -- we didn't have infrastructure in Virginia. We can obviously leverage Region Vice President and Division Vice President to be able to manage that, but we add a market manager that he's going to manage those locations. So where we have -- that's where the density really matters. When we build out what we're building density in the marketplace, there tends to be a lot more synergies because we've got a lot more infrastructure when we're entering a market like this tends to be a little bit less cost energy and frankly, a lot more revenue synergy.

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?

Yes. I mean, interestingly, I think in the US market, the vacation period probably tends to be more July, which as we said, we saw a modest same-store sales growth in July. The other thing seasonally that happens in the third quarter for us is a little bit of a falloff in the glass business. That type of falloff is still going to happen.

But I don't have I don't have a tremendous amount of concern that we're going to see something different with the vacation period, which, again, I think in the US, we've kind of lapped in Canada, tends to be August tends to be a bigger month for vacations. But I don't have any concerns about that going forward.

Zachary Evershed, National Bank Financial.

Congrats on the quarter. 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 yes, I would say that those three are the commons. But carriers are -- 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 is -- there is enough variation that it does put us in a position where we've got 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.

And when the strategic plan was unveiled, you did make a point to say that it was not reliant on our rebound in claim volumes and didn't rely on MSO acquisitions SP1 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 an eight-store deal as a large MSO we don't expect -- 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's some green shoots out there that do point to positive, whether or not declaring victory this early in the game is I think it's probably still too early for us to tell.

We've always put -- we put pluses on the end of our 5-year plan objectives for a reason, 1,400-plus, 14% plus, $5 billion plus. And so 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. Total happy with the results we've got. But again, it's still early innings. Understood.

And then 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? .

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

Tristan Thomas-Martin, BMO Capital Markets.

How did your repair claims volumes compared 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, the cost -- 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 a 2% decline in claims driven by the adoption of ADAS, partially offset by 1% increase in claims driven by the improvement in miles driven and the number of cars on the road and then all of that offset by a normal kind of 4% to 5% average growth in ticket, which leaves the industry to a 3% to 4% growth.

We have not seen right now, we're seeing that what we would have expected to be 4% to 5% more looking like 1% to 2%. And that puts incremental pressure on the claims experience to actually grow. So I'll let you do the -- if we're experiencing modest growth in the early days of the quarter, you can probably do a little bit of math around what that might mean between claims and average cost of repair.

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

Yes. I don't know that I would say that there's this notion of deferred repairs I think when people make the decision that they're either 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. 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 hopefully return to just more normalized levels. So I don't know that I would say that what we're experiencing right now has anything to do with deferred repairs as much as it does people that are now getting into accidents are more likely to actually file a claim just based on their -- the consumer sentiment that's out there and then some of the other factors that we talked about earlier.

Razi Hasson, Paradigm Capital.

Just quickly on internalizing the scanning and calibration offering and how difficult it is to implement 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?

Yes. I mean 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 ADAS adoption that we're seeing coming through the stores.

So it's not just both the numerator and the denominator are moving, so we have to keep up with, one, the changing car park and then two, get ourselves to a position where we've got coverage in all of our markets. So we'll stick with the time frame that we've outlined thus far. But 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.

And maybe just lastly, just on gross margin of 46.8%. How sustainable is that in terms of our modeling, is that any run rate? Any thoughts there?

I'll let Jeff comment on that.

Yes. 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 is 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 time of the year and some of the other factors to come up with the model estimate.

Bret Jordan, Jefferies.

Just a 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, I mean, meaning that they're experiencing growth in their policies in force. 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 -- a little bit of macro backdrop, assistance is probably helping as well. Yes.

Steve Hansen, Raymond James.

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?

Yes. I would tell you, I mean, we implemented that staffing model, and I'll remember the day because it's -- these are tough things to do, and they negatively affect People's life. So we take these things very seriously. April 4 was the date that we implemented that plan. So I can tell you that you saw a good chunk of the savings associated with that in the quarter.

So -- and that's considered that one to be other than the maintenance of making sure that we stay within the bands at this point, the big activity associated with that, the $30 million that we articulated was implemented all at once.

That's great. And just a follow-up on that. As you move into the Phase 2 and sort of the indirect model and procurement savings, I know you said a ratable 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?

Yes. I mean, I appreciate that there's just a lot of activity around it. So we've got really good visibility into the activity around it. The timing is what becomes a little bit more elusive. So the RDO process, the results delivery office that we are operating to deliver on a lot of these initiatives.

It's led by Kim Morin, who's our actual, who's actually our CHRO at is doing a phenomenal job 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 in continue to manifest the savings coming out of that. I think we'll get -- we will continue to refine the way we describe it, just easier for now as we're in the early days to make sure that you guys can model it in a more ratable way.

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