Q3 2020 Boyd Group Services Inc Earnings Call
Thank you operator, good morning, everyone and thank you for joining us for today's call.
On the call with me today are Pat Patted, Patty, our executive Vice President and Chief Financial Officer, and Brock Bulldog, our executive chair.
We released our 2023rd quarter results before markets opened today, you can access our news release as well as our complete financial statements and management's discussion and analysis on our website at Boyd group Dotcom.
Our news release financial statements and Mdna have also been filed on SEDAR. This morning.
On today's call, we will discuss the financial results for the three and nine month periods ended September Thirtyth 2020 provide a general business update and discuss our long term growth strategy. We will then open the call for questions.
As was expected the third quarter of 2020 continued to be significantly impacted by the COVID-19 pandemic, although the impact was less severe than we experienced in the second quarter.
We continue to focus on health and safety practices, such as contact free customer drop off and pick up enhanced vehicle and facility cleaning practices, social distancing and wearing a profit per.
Personal protective equipment, teekay, our employees and customers safe.
We continue to Paul key practices that include deep cleaning facilities, where an employee with a potential for confirmed case of COVID-19 is identified as well as defined processes for quarantine and testing in situations and potential exposure to help prevent the spread of the virus.
During the third quarter, we recorded sales of 508.3 million adjusted EBITDA of $84.5 million and net earnings of $21.1 million.
Sales at $508.3 million showed a 10.3% decrease when compared to the same period of 2019.
This reflects a $22.7 million contribution from 68 new locations.
Our same store sales, excluding foreign exchange decreased by 15% in the third quarter.
Same store sales declines in Canada continued to be significantly higher than same store sales declines in the us which reflects the continued slower economic reopening in Canada when compared to the us.
Foreign exchange increased sales by $3.6 million due to the translation of same store sales at a higher us dollar exchange rate.
Gross margin was 47.2% in the third quarter of 2020 compared to 45.3% achieved in the same period of 2019.
The gross margin percentage improved as a result of higher labor margins, primarily due to the recognition of the Canada emergency wage subsidy of approximately $3.9 million, which more than offset the incremental COVID-19 related labor costs.
Labor margins were also positively impacted by prudent cost controls such as a cautious approach to bringing back resources as revenue grew in the U.S. The gross margin was positively impacted by a favorable mix of higher margin retail glass sales and normal variability in GRP pricing.
Operating expenses for the third quarter of 2020 or $155.5 million or 30.6% of sales compared to 31.7% in the same period of 2019.
The decrease as a percentage of sales was impacted by the Canada emergency wage subsidy as well as lower wages as a result of temporary layoffs and reduced management compensation.
Boyd took a cautious approach to bringing back resources as revenue grew which resulted in lower Q3 expenses, but it is not sustainable.
While many operating expenses were managed in relation to the decline in sales certain expenses could not be reduced such as property taxes and utility costs, which increased as a percentage of sales.
Adjusted EBITDA or EBITDA adjusted for fair value adjustments to financial instruments and costs related to acquisitions and transactions was $84.5 million an increase of 9.2% over the same period in 2019.
The increase was primarily due to improvements in gross margin percentage. In addition, adjusted EBITDA in the third quarter benefited from the Canada emergency wage subsidy and the amount of $9.9 million.
However, it should be noted as is the objective of this program, we continue to employ and incur costs for employees that would otherwise have been laid off or furloughed at absent the subsidy.
Net earnings for the third quarter of 2020 was $21.1 million compared to $14.8 million in the same period of 2019.
Excluding fair value adjustments and acquisition and transaction costs adjusted net earnings for the third quarter of 2020 was $21.8 million or $1 or two cents per share compared to adjusted net earnings of $20.7 million or $1.84 cents per share in the same period of the prior year.
The decrease in adjusted net earnings per share is primarily attributable to a higher number of weighted average shares in 2020 due to the equity offering completed in the second quarter of this year.
For the nine month period ended September Thirtyth 2020, we reported sales of $1.6 billion, a decrease of 7.9% over the same period of the prior year driven by same store sales declines of 16.5% or 17% on a days adjusted basis partially.
To offset by contributions from new locations that had not been in operation for the full comparative period.
Gross margin increased to 46.1% of sales compared to 45.5% in the comparative period.
The gross margin percentage was positively impacted by higher labor margins as a result of the Canada emergency wage subsidy and a cautious approach to bringing back resources as revenue grew in the U.S, along with a favorable mix of retail glass sales and normal variability and TRP pricing.
Operating expenses decreased 31.1 million when compared to the same period of the prior year, primarily due to COVID-19 related cost reductions, so such as staffing reductions salary and other compensation adjustments and reductions to other variable expenses.
Operating expenses benefited from the Canada emergency weight subsidy recorded as an offset to applicable into were indirect wages.
Adjusted EBITDA for the nine month period ended September Thirtyth, 2020 was $215.1 million compared to $235.8 million in the same period of the prior year.
The $20.7 million decrease was primarily the result of the business slowdown caused by the COVID-19 pandemic, including operating expenses that could not be mitigated.
We reported net earnings of $36.7 million compared to $49.9 million in the same period of the prior year.
Adjusted net earnings per unit decreased from 364 to $1.69 cents and adjusted net earnings per share. These amounts were significantly impacted by the COVID-19 pandemic.
At the end of the period, we had total debt net of cash of $672 million compared to 700 and $708.7 million at June Thirtyth 2020, $949.9 million at March 30, Onest 2020, and 893.2 million at the end of 2000.
Team.
At the onset of the pandemic, we faced significant uncertainty regarding the extent and duration of the impact of COVID-19 on our business in.
In addition to acting quickly to reduce our expenses. We further address the uncertainty by drawing down on our credit facility and raising equity to ensure our balance sheet to withstand the impact of the pandemic and still be prepared for growth as conditions stabilized.
As conditions have stabilized and the impact of COVID-19 has become better understood. Boyd has made repayments of $824.3 million. During the nine months ended September thirtyth to reduce the level of outstanding debt.
As a result of the adoption of IRS 16, Boyd reported total debt net of cash including lease liabilities of $672 million compared to $895 million as of September Thirtyth, 2019, and $893.2 million as of December 31.
2019.
Based on the strength of and confidence in our business, we announced today that we are again, increasing our dividend by 2.2% to 56.4 cents per share on an annualized basis from their present level of 55.2 cents beginning in the fourth quarter of 2020.
This is the 13th consecutive year than we've increased dividends to shareholders.
During 2020, the company expects to make cash capital expenditures within the previously guided range of 1.6% to 1.8% of coal that affected sales.
This excludes those capital expenditures related to acquisition and development of new locations.
The investment in led lighting and the investment in the expansion of the while operating way practices through the corporate applications and process improvement efficiency project.
During the first nine months of the year. The company has invested approximately $3.5 million in led lighting of a planned 5 million dollar investment in order to reduce energy consumption and enhance the shop work environment.
This investment will not only provide environmental and social benefits, but also achieve accretive returns on invested capital.
Additionally, the company has begun to expand its while operating way practices to corporate business processes.
The related technology and efficiency project will result in a total of $9 million to $10 million investment over the next 12 months and will also be expected to streamline various processes as well as generate economic returns. After the project is fully implemented.
This initiative began in the third quarter of 2020, and thus far has incurred nominal costs.
Thus far we've been able to successfully adjust and manage through the challenging situation and as of resent arisen as a result of the COVID-19 pandemic. Our efforts have continued to deliver positive operating cash flow during the third quarter notwithstanding the substantial decline in revenues caused by cold.
19.
Following the pause on acquisition activity that occurred during the second quarter. We have added 11 locations during and subsequent to quarter end.
On a year to date basis, we have thus far added 30 locations.
As has been our practice I would now like to comment on some potential for insider selling with the recent changes to the economic and political environment.
That has translated into the potential for tax increases in the not too distant future, including taxes on capital gains. Some insiders may choose to sell some of their bolt void holdings in advance of any such tax increases, but in any event, we will continue to hold ownership and Boyd shares at levels well above.
Those required by the Companys share ownership policies.
The COVID-19 pandemic continues to impact our business thus far in the fourth quarter of 2020 same store sales activity has continued below normal levels, although slightly better than reported in the third quarter with both fewer miles traveled and reduced traffic congestion impacting at.
And in frequency in.
In addition, the higher margin retail glass business, which had a favorable impact on our gross margin percentage in the seasonally high third quarter is entering a seasonally slower period in the fourth quarter.
The company will continue to make applications under the Canada emergency wage subsidy program as long as it continues to meet eligibility requirements.
However changes have been made to the program such that the subsidy is now determined by a particular employers revenue reduction percentage in each qualifying period, rather than providing a subsidy amount based on a minimum decline in revenues. This change combined with some additional uncertainty as to how the program will work beyond.
Member 20, Onest of 2020, which significantly reduces subsidy subsidy deployed will be entitled to with respect to the fourth quarter of 2020 and comparison to both the second and third quarters of 2020.
Overall, we are well positioned to navigate through this challenging environment and we are pleased to announce our new five year growth strategy.
Our new growth strategy is to double the size of our business on a constant currency revenue basis from 2021 to 2025 based on 2019 revenues, implying an average annual growth rate of 15%.
In order to achieve this we will pursue accretive growth through a combination of organic or same store sales growth as well as adding new locations to our network in the United States and Canada.
New location growth will continue to include single location acquisitions, as well as brownfield and Greenfield startups and multi location acquisitions.
Additionally to reduce volatility from exchange rates effective January 2021 boy, we will begin reporting results in us dollars.
Given almost 90% of our revenues come from the US This makes sense as an appropriate currency for reporting purposes.
As always operational excellence remains central to our business model and continuous improvement investment in our while operating way, we continue to work to drive excellence and repair quality customer satisfaction and repair cycle times to ensure the continued support of our insurance partners.
And vehicle and our customers did.
Additionally, the company has begun to expand its for all operating way practices to corporate business processes and initiatives that began in the third quarter and is expected to streamline various processes as well as generate economic returns.
In summary, and in closing I continue to be incredibly proud of the steps we've taken to adjust to this new environment and position ourselves well for the future we've been able to adjust our business to manage through this challenging situation.
We continue to believe that there will be many opportunities that come from this crisis, both internal extra and external and we put ourselves in a good position to come out of this crisis as a stronger company.
Our priorities remain taking care of the health and safety of our team members and customers as well as preserving financial flexibility and preparing for the opportunities that lie ahead.
With that I would now like to open the call to questions operator.
At this time I would like to advise everyone in order to ask a question. Please press Star then the number one on your telephone keypad again Navistar then the number one on your telephone keypad.
Our first question comes from the line of Steve Hansen with Raymond James. Please go ahead. Your line is open.
Good morning, Steve Yes, good morning.
Guys.
Last one for me to start is on.
I think your commentary seems to suggest.
To be cautious on the gross margin going forward.
He said not as likely not wanting us to extrapolate the recent performance given you're bringing back resources more slowly I am just trying to sense for now you've got two quarters in a row, where you probably have performed most people's expectations over what timeframe should we expect those gross margins to get back to normal as the quarter to Tim or is it three quarters I'm, just trying to get sense by cadence.
Steve We really Havent said, the timing of I think the impact that you saw in the third quarter and actually in the second quarter in part as well.
Was a combination of a few things we did eliminate lots of expense that that was difficult to sustain and we were slow to bring back some of that.
A good example would be our apprenticeship program, which we were growing at the rate that we expected to grow but we now are full steam ahead on that and that does put some downward pressure on margin the other.
Key factors the the wage subsidy that Canadian wage subsidy was fairly meaningful in both Q2 and Q3.
And and Q2 and Q3 are seasonally high for our glass business and with lower collision sales and the glass business as a greater percentage of total sales that has a lift on margin. So.
So we won't get the benefit of the glass.
Seasonality in Q4, we also aren't anticipating the feed.
The benefit of the Canadian wage subsidy at least not at the level that we've seen.
And and we have brought back most of the resources and are really trying to move full steam ahead to to manage the revenue that we have available soon.
Hopefully that answers your question.
Yeah, No that's helpful and just one follow up on that the strategic growth plan to double again quite bold add just curious if you know if you guys map down sort of that pace of acquisitions, you need to make to get there over the five years.
And really over what the cadence should we expect that to enforce the bid relatively slow thus far I'd say coming out of the trough relatively few others. So just trying to get a sense for what do you envision some bigger deals to happen. It amongst there if it's just smaller one offs hereafter really accelerate the pace to just maybe walk us through how confident you are in.
Meeting that plan and whether it entails medium and or larger size deals.
Thanks.
Yes.
I feel very good about the opportunity that we have to achieve that goal.
I wouldn't say that it's a quarter by quarter March toward that goal there will be.
Periods of time, when we grow much faster maybe through multi.
Multiple MSO deals that happened over successive period as we've seen in the past.
But but we're we're geared up and ready to grow with both with single shops, and MSO and the single shops will include Bill as we've done in the past single shop acquisitions, but will also put some focus on greenfield and brownfield opportunities.
So I think that I'm comfortable with our our strategy and the resources that we have in place to accomplish that so.
Steve you can look at you made a comment that has been slow and done with a choice. They made we paused because of the uncertainties relating to the COVID-19 pandemic.
So we've not publicly stating that we have put skewing the already commenting that the growth and indices is still highly fragmented and get well position to consolidate so we are very optimistic.
Okay. That's great I appreciate the time.
Thanks, Steve.
Our next question comes from the line of Mike Okine with Scotia Bank. Please go ahead. Your line is open.
Hi, Michael Hey, Good morning, guys, Hi, good morning, Michael Good.
Good morning, I'd like to get a little bit more clarity on the comment regarding the sustainability of the cost actions taken in Q3.
I mean, just in terms of how we're supposed to interpret the comments around sustainability.
Should we assume that margins in Q3.
As a percentage may have peaked at the dollar profit should improve with volumes and you'd asked another way should we expect revenues to come back faster than costs.
Well I think one of the comments I made was that we were slow to bring back resources as revenue ramped up in Q3.
And.
And if I had to do it over I might not be as slow with bringing back those resources.
So I think the.
Q3 benefited from a combination of things that I did describe but one of them was.
A slower response to bringing back resources just out of caution because we really didnt know exactly how the revenue would build.
Got you that's clear and maybe as an offset just as a follow on I mean, if it were not for queues.
What the.
The alternate cost actions that resulted in terms of cost reductions.
Hi, Michael we really haven't tried to assess that we had plans that we laid out at the when the pandemic began in Q did allow us to avoid some furloughs or layoffs.
But because the whole situation evolved in terms of the the decline in revenue and help ramp back up we really don't have the goal and the ability to go back and look at what might have happened had that not occurred.
Yes, Thats fair, Okay, and then just on the second question I mean, obviously, we're not at the top.
The acquisition pace I guess is that 15% CAGR I'd like to get your take on maybe what you think I mean, the obstacles or.
What you think it would take to get back to that desired acting.
The activity level.
Well I think that we have a team that is prepared to accomplish the level of growth that that's required to achieve that.
What you are seeing or what you've seen in 2020 was an intentional halt on growth and what we kept and things that were in the pipeline War.
We've still been relatively cautious with acquisitions and integration.
We are getting more comfortable with the way, we're doing more of the integration activity virtually and having limited resources on the ground but.
But but we're prepared to step up the pace and believe that we have the resources.
Available to us today.
To get on the run rate to accomplish the five year plan.
Okay, Great Alright, well nice adjustment and good performance guys. Thank you.
Thanks, Michael.
Our next question comes from the line of David Newman with today's Chardan. Your line is open.
Great.
Fair line has disconnected. Please press star one if you would like to ask your question. Our next question comes from the line of Sean The New fraught with Goldman Sachs. Please go ahead. Your line is open.
Hey, guys. Thank you for taking my question.
Just going back to your five year plan.
Revenue.
Think about the competition Brock wait legally.
Acquisition.
Thanks, guys sales how should we think about this.
Should we go back to the science side.
So 3.5% to 4% comp sales devices, you can think about agents as we look forward.
We don't really provide specific guidance on that.
Our growth plan includes both organic growth as well as.
Growth through new unit development, whether it's by acquisition or brownfield Greenfield. So of what were what our plan really calls for is 15% annual growth over that period of time, but without defining the organic versus.
And unit growth.
I, just I guess, what I'm trying to understand is coming down it depends on the competition Thats said that said its a big reality now do you see anything changing the underlying giants in the industry.
We should consider.
Let's just say that the vaccine comes out if things get back to normal or do you see anything changing.
Just the underlying dynamics of how we should be thinking about the quota.
I'm not sure I see anything significant obviously this is such a disruptive year. We we would expect as we come out of the pandemic that our organic growth year over year would be substantially higher next year than you would normally see but definitely a recovery as a result of cobot.
It still remains to be seen what's going to happen with miles driven with traffic congestion.
But despite all that I think we have an excellent opportunity to consolidate the industry and to serve insurance clients and participate in the OE certification programs to help gain share as part of our overall strategy to our growth.
Got it and then a follow up question you guys talked about streamlining from corporate practices.
Cdeight can you, perhaps just some more light is what can be expect channel what sort of cost efficiencies can you achieve fair.
We have not disclosed the cost efficiencies relating to that you aren't the only thing would disclose seats. So we'll be competing back to what the next 12 months and also the cost associated with that but you can certainly expect to benefit.
Potentially starting in the 2022, but we have not disclosed that information yet the magnitude of those benefits.
Thank you very much I think that the one thing. We have said is we expected to provide economic return. So soon concept or do you think the great investment from that point of view absolutely.
Great. Thank you thank.
Thank you.
Our next question comes from the line of David Newman with day Jordan. Please go ahead. Your line is open.
David I think I got cut off there can you hear me, yes, yes, okay.
Great Great set of results first off the top on just a couple of questions. One is on the on the margin front again I just want to look at a time that a different way now.
Do you think you will revert to historical levels and coming out of a pandemic on do you think we might look a little different in terms of hub and spoke in take centers any permanent cost reductions or other identified efficiencies beyond the while operating way in the corporate the corporate.
[laughter].
Well the question.
Yes, I think I did that up multiple questions and David I think.
Appealed the on Yemen.
One is relating to the cost structure. The cost cuts you commented in a unique to normalize for the schools.
The second one is that relating to some of the staffing in my commentary. So we might add backs that to the deck they might put some pressure on the margins and the third one is the mix between.
Japan, what's the thought the replaced clinical when you have less pressure on labor.
You tend to use more labor and that has higher margins.
Thats yet to.
Comeback foods team, Doug might change and the rig back so those are the.
The factors I think that that might have an impact on the margins. So I'll go to the way back to the 45.5 in that range. So that because if you don't provide guidance on both things I'd.
I'd like really striving hard to look to enhance the EBITDA margins and again, if you don't want to get specific about the.
The gross margins on the Opex systems like our our focus is to enhance.
EBITDA margins for the period of time, Okay, and just more of a high level, though I mean is this pause from the pandemic.
Afforded many companies and a chance to kind of really looked looked at what they are getting and how they do it.
Was there any revelations for you guys in terms of Uh huh.
How youre operating or any changes I know, you're very very efficient, but was there any any identity you identify any anything that can be used gulfport.
Absolutely I think like in terms of the practices. We told in the past I think Mike will be increasing our focus on the dealers intake center. So I think that it's sort of any one thing I'd also like if we look at our cost structure and we found some opportunities to consolidate.
Some of the functions and did I synergies that related to those things and again, we have not disclosed those things, but yeah in fact.
We have done and if you're not doing those things.
Okay, and any benefit from the right to repair law that was recently passed I know you already have a pre and post diagnostic but anything at the margin any benefit that you guys can see.
I don't think there is an immediate benefit on that although that wasnt important.
An important decision for the automotive aftermarket.
So I think that Massachusetts attended to lead the way on legislation like that so I view that as favorable for the for the aftermarket. Okay last one from me guys a U.S. dollar reporting.
Is it do you think of actually lead into effect potentially to elicit.
I think the rule that make that call at the appropriate time I think no we have that.
Doing this to Greg just want to kind of the.
Because of the exchange rates.
Makes sense, thanks, gentlemen.
Thanks, David Thank you David.
Our next question comes from the line of Maggie Mcdougall with Stifel. Please go ahead. Your line is open.
Good morning.
A quick question on your attention to the extent well operating range of your corporate culture, and and and operations.
The investment or the costs for that is that actually an investment in systems or is that more of a restructuring costs and then secondly.
Could you provide us a bit of detail in terms of what you plan on implementing corporately I can imagine that you're on that slow our shop operation implementation of while it is going to be quite a bit different from what you are going to be doing in your in your back office, so well be curious Doug.
Exactly what you have planned there. Thank you show that the two things one is the you're right the wall operating baby and implemented in all patients. It's a different bodies that that's an ongoing process, but we embarked on back four or five years ago, but this this was started in Q3 and the focus is on finance human resources saw procure.
Remained and areas like that the strategic support services and corporate functions and investments of $9 million to $10 million. So you have identified.
Do include a assistance Oh.
So we are implementing a system and the conduct the investment itself pockets.
Okay.
And you.
You know it sounds to me. So this may be something that will help scale over the next five years as you work to work here. Your new revenue target goal is this the type of saying that could enhance operating efficiencies as you continue to add to your platform or is it.
Simply going to be moving a bit of excess cost are creating some new efficiencies within Europe no no I think that.
One of the reasons, we are implementing the systems business to scale up because we do have ambitious plans to grow the business and the disposal I thought I caught quam to enable that growth.
So in addition to that sort of thing that we are going to the NSR cost synergies as Tim pointed out now we are looking for an attractive to come in but the capital.
Mhm.
And then just with regard to the competitive landscape.
Wonder if you could provide any insight into how it may have shifted or changed given the unusual circumstances. This year. It's obviously been a challenging year for the question industry in terms of demand.
You guys and others I imagine.
I have navigated it very efficiently and have you seen this sort of increased pressure on distinct single store operators has there been.
You know a multiplier.
In terms of benefit to the larger groups given that the balance sheet stability you have is it.
Superior <unk> and you have been able to navigate this challenge so well.
They get tickets, we've committed to this in the prior quarter as well.
Immediately after the pandemic there was a fairly significant amount of support in the U.S. provided to small businesses that really allowed.
Those that may have been undercapitalized.
To get through it pretty well I.
I think our industry also has demonstrated a reasonable ability to to manage its cost structure effectively.
And even to generate positive cash flow in a in a tough revenue environment.
Having said that I think that though overtime there could be more single shops that are motivated to sell as a result of what we've gone through or what we're going through.
We're still in the early stages, I would say that but but I'm optimistic that we'll see good opportunities that come from this.
Okay. Thanks, very much guys.
Thanks, Maggie Thanks Maggie.
Our next question comes from the line of Bret Jordan with Jefferies. Please go ahead. Your line is open.
Hey, good morning.
Okay.
When you look at the the the pandemic and I guess the last maybe four or five months did you see a spike in total loss rates that.
Compounded the impact on your on the negative comp I guess, if you could sort of carve out any kind of short term.
Change in the insurance companies.
Thoughts here.
And then I guess the second question I'll ask it all at once as you look at the D. RP impact versus how we certification given years scale and relationships with both OE and insurance companies, which of those do you see as a bigger driver going forward on.
The consolidation of volumes to major players.
But on the first question, but with regard to total losses I think we rely on the data that CCC publishes for that.
And most total losses don't get to a collision repair shop, they will be declared and the insurance companies are motivated to identify those as total losses before they get to a shop.
So we wouldn't necessarily see an increase in total loss rates in our operations, but CCC has reported an increase in total losses.
Used car values are a driver of that as you know and a used car, but prices initially went down because of oversupply, but they but.
Since returned to actually pretty solid levels. So that's a favorable trend for us.
But the total loss rates have been creeping up over the past several years and.
And they won't be that they continue to do that.
On the balance between the ERP and always certifications I actually think that.
That we.
There is balance between that we've invested in many always certification programs to date, we expect to continue to grow our portfolio of always certifications and view that as important most insurers today do not refer business based on an always certification program and most always today don't play a significant.
Role and where cars get repaired, but I think there is the potential for both insurers to recognize certifications and for all used to play a greater influence on work harsco. So that's the reason that I think will maintain strong direct repair relationships, but also continue to invest in the equipment and training and sales.
Process as necessary for OE certifications.
Okay, great. Thank you.
Thanks Frank.
Our next question comes from the line of Zachary ever said with National Bank Financial. Please go ahead. Your line is open.
Morning, everyone congrats on the quarter.
And a quick effect.
So looking at the potential growth transparency and same store sales growth, obviously, but then we have the acquisitions Greenfield and brownfield.
How do the returns compare on an acquisition it difficult prices versus a greenfield versus brownfield.
I guess, we would generally expect greenfield and brownfield acquisitions or growth to have a higher return on capital than single shop.
So the we Havent I think we've provided information in the past, we'll Pat do you want to comment on that yeah. I think in terms of volatility. If you look at the port of buckets within the same store sales growth has the highest contribution margin.
Then you have the brownfield Greenfield sample code when the single shops, and the last one it though and I suppose I can stop puna the auto and see one has to look at the strategic value. These things brain. So that missiles may have to lower back the desktop yes. It does hide strategic benefits. So portal platform. So you have to talk to that.
But the order of magnitude does have this Tac ops.
Thats helpful. Thanks, and given the current environment, how usually do you think you can staff greenfields and brands Prime field technicians.
Hi.
I don't think I don't view that to be an exceptional challenge I mean it it is.
Probably easier to attract.
Jeff into a newer facility would do.
Very current equipment.
So we don't view that it will require effort on our part, but we're prepared to make that effort.
[noise] that's great. Thanks helpful ill turn it over.
Thank you.
Our next question comes from the line of Jonathan limits with being the IMO. Please go ahead. Your line is open.
Good morning, Jonathan Jonathan.
Good morning, Thanks for taking my question.
Just following up on that last discussion on the Greenfield store plans.
Can you comment as to whether youve secured or real estate development partner to assist you with Todd.
We have various options with that so it's certainly not a barrier for us in terms of.
That method of growth.
When should we be thinking about.
Those greenfield stores.
Beginning to be implemented and thinking about working those into our forecast.
We always talk and.
Focusing on the bunker has been created in fact before the court.
Thank you started but we will increase the focus and that's you know it's going to take time, I liked acquisitions, which will hit ground running so they said copper phase.
Like I said, we don't hospitals, they're knocked a pro whitening and its specific goal backed out that that's part of the mix. So you are going to evaluate the opportunities. The defined gone could been proved to be more meaningful than a strategic location than acquiring a shop. Then we would do it. So that's how we are going to evaluate it depended upon.
Of the mix, it's one of the analysts in the quiver to facilitate the growth.
Okay and last topic on the Q.
Q3 same store sales it seems the U.S. businesses, while outperforming.
The industry claims volumes.
Can you offer any comments as to what you would attribute that to whether it's higher industry severity rates market share gains for Boyd shops or both.
It's probably a combination of that those are pretty difficult numbers for us to clearly assess.
But we we do believe we've gained some share we have strong direct repair relationships with our insurance clients.
There is also a component of severity of the average cost of repair which has been.
Creeping up over the years and and that's continued even through 2020 based on the data we see so.
So it's a it's a combination of those.
Great. Thanks for your comments.
Thanks, Jonathan.
Your next question comes from the line of Steve Hansen with Raymond James. Please go ahead. Your line is open.
Oh, Hey, guys. Just two quick follow ups and I may 1st is on the fourth quarter same store sales trend you commented Tim that things are trending slightly better than the third quarter print, but I'm just curious if if that it have you seen any stayed at all in activity pattern and through November as they start you're assuming they just.
The data suggest that they got a little bit softer here.
Yeah, I think the the only comment we're really provided as a historical look back so up through the.
The very recent time, we've seen a slight improvement from where we were in Q3, but it's pretty difficult to predict exactly what will happen over the next seven weeks with a well obviously there is a pretty significant increase in independent MC and the impact of the pandemic, but we don't don't really have any other guidance for what the Delta Q4 may look like.
Okay, Great that's fine and just one point of clarification on the five year target just to make sure I've got the language correct. It.
Sounds like you're using 2019 as the baseline for your feiger doubling and other workloads like 20 is almost all throw year in a way.
So thats sort of how we're viewing it Steve is that we're basing basin the targets on 2019 revenue.
Okay. That's good.
Yeah, Tim its rock, just maybe a comment to add on that.
Based on some of the earlier questions that sort of intimated that we were behind that for ink that.
That growth trajectory, well, we're really not be fine because the measurement period really hasn't started yet measurement period is 2021 through 25.
And just as we are basing the baseline on 29 team.
We we really have an end 2020 is therefore, a throw away you are from a baseline perspective, it's also a throwaway year from a gross.
So I just wanted to I think I thought it was important to point out that the measurement period.
The five year period.
That we are giving ourselves to achieve this growth was really doesn't kick in until 2021.
No. That's good commentary that's helpful guys. Okay. Appreciate the time a great results.
Thanks to you thanks, Steve.
Our next question comes from the line of Matt Bank lets see I'd see. Please go ahead. Your line is open.
Good morning, Matt good.
Morning, I want to clarify and make sure that I understood. A comment you made earlier on the call. It sounded like you said that even after you know officially restarting M&A, giving somebody you were cautious on deals, but now you are ready to pick up the pace is that is that a fair way of hearing it and then can you just also.
Comment on on on the pipeline you know any any M&A opportunity available to you and how that books versus you know what you would've seen pre cobot.
Well under first question that I think we are prepared to pick up the pace I would say, we still need to be aware of the fact that the number of cobot cases is increasing and we have a responsibility to keep our teams safe.
So if the environment were too.
Make it more difficult we could slow down some things for that reason, but we're prepared to to pick up the pace in terms of the pipeline I would say, we're comfortable that that our pipeline has.
As we've communicated in the past, we think we have a strong pipeline of potential opportunities to pursue and that that should not be a barrier to achieving our plan.
Matta, our focus from a longer term. So you may see a slightly different based on the very sharp Tom that's sort of providing the guidance for five years, starting 2021 and they are very confident about.
Achieving those goals.
That's it for me thanks, guys.
Thanks.
Our next question comes from the line of Chris Murray with Altacorp. Your line is open.
Yes, Hi, Chris Thanks, Hi, Chris.
Chris you know.
I guess, maybe my question is thinking about it a little bit about the strategic plan and you've talked about the five year revenue target. What I was also curious about is thinking about the composition of how you're going to build that revenue and you talk about you know certainly the same store sales and and and store acquisitions, but just wondering about things like.
How you're going to be thinking about things like intake centers cost management, and what I'm really trying to understand is.
Should we expect not necessarily the revenue growth number we can kind of get there, but the quality of earnings over that curious how do you think that that's going to evolve.
I'm I'm not sure.
Completely understand that.
As much as we can do is to grow that revenue to improve the margin profile of the company other than just straight up absorption.
Yeah.
I think that we'll have to see what the market gives us the opportunity to do on that Chris I think the in the collision repair business right now.
Parts as a percentage of total mix has been increasing because of your greater part content as well as higher part prices.
And as you know our parts margins tend to be lower than our labor margins, but they are lower than our labor margins on the other hand, I think there are opportunities for additional labor operations, particularly as it relates to a das.
It could help to offset that.
And then obviously, we were looking for organic sales growth would drive.
Maybe that gross margin improvement, but EBITDA margin improvement.
To help us improve our profitability during that planning horizon.
I don't know if that answers your question, but yeah, I understand and just maybe you know any thoughts around do you try to look to accelerate using intake centers, which generally buys your margins one way or another or anything like that and you are and again the I guess the other pieces you know.
Your involvement with the RP programs or do you do something different there as well.
Well, we I don't see any significant change in our involvement with direct repair programs. I think those are some of those are a key source of of our revenue and delivering value to our clients from that standpoint, I do think intake centers is something that we will continue to pay attention to we have been and we will continue to do that I'd say.
A good driver for organic growth.
And but I don't think it changes the overall profit profile beyond driving organic growth and.
In June using GRP is operational excellence to drive further organic growth.
Okay. That's fair thanks <unk>. Thanks.
Thanks, Chris.
Well there are no further questions at this time I will now turn the call back to Canada.
Very good. Thank you operator, and thank you all once again for joining our call today, we look forward to reporting our fourth quarter and year end results in March of next year, Thanks, and have a great day.
Thanks, everyone.
This concludes today's conference call. Thank you for your participation you may now disconnect.
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