Q2 2024 Boyd Group Services Inc Earnings Call

August 8, 2024

Good morning, everyone. Welcome to the Boyd Group Services, Inc. 2nd Quarter 2024 Results Conference Call.

Operator: Order 2024 Results Conference Call. Listeners are reminded that certain matters discussed in today's conference call or answers that may be given to questions asked could constitute forward-looking statements that are subject to risks and uncertainties related to Boyd's future financial or business performance. Actual results could differ materially from those anticipated in this forward-looking statement. 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 in the CDERplus database found at cderplus.ca.

Operator: 2024 Results Conference Call. Listeners are reminded that certain matters discussed in today's conference call are answers that may be given to questions and 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 this forward-looking statement. 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 the cedarplusdatabase, found at cedarplus.ca.

Speaker Change: Listeners are reminded that certain matters discussed in today's conference call are answers that may be given to questions as, could constitute forward-looking statements that are subject to risks and uncertainties related to VOID's future financial or business performance.

Actual results could differ materially from those anticipated in these forward-looking statements.

Derek Lessard: There is factors that may affect results are detailed in Voids and will information form and other periodic filings and registration statements, and you can access this document at CedarPlus database found at CedarPlus.TA.

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 CDERplus database found at cderplus.ca.

Operator: I'd like to remind everyone that this conference call is being recorded today, Thursday, August 8, 2024. I would now like to introduce Mr. Tim O'Day, President and Chief Executive Officer of Boyd Group Services, Inc. Please go ahead, Mr. O'Day.

Operator: I'd like to remind everyone that this conference call is being recorded today, Thursday, August 8, 2024.

Tim O'Day: I'd like to remind everyone that this conference call is being recorded today, Thursday, August 8, 2024. I would now like to introduce Mr. Tim O'Day, President and Chief Executive Officer of Boyd Group Services, Inc. Please go ahead, Mr. O'Day.

Derek Lessard: I would now like to introduce Mr. Team O'Day, President and Chief Executive Officer of Void Group Services Inc. These go ahead, Mr. O'Day.

Timo O'Day: Thank you, operator, and good morning everyone, and thanks for joining us for today's call. On the call with me today is Jeff Murray, our Executive Vice President and Chief Financial Officer, and Brian Kaner, who I'm pleased to announce has been appointed President and Chief Operating Officer of Void Group Services Inc. In his expanded role, Brian will have operating responsibility for the entire company.

Tim O'Day: Thank you, operator. And good morning, everyone.

Tim O'Day: Thank you, operator, and good morning, everyone, and thanks for joining us for today's call. On the call with me today is Jeff Murray, our Executive Vice President and Chief Financial Officer, and Brian Kaner, who I'm pleased to announce has been appointed President and Chief Operating Officer of Boyd Group Services, Inc.

Tim O'Day: And thanks for joining us for today's call. On the call with me today is Jeff Murray, our Executive Vice President and Chief Financial Officer, and Brian Kaner, who I'm pleased to announce has been appointed President and Chief Operating Officer of Boyd Group Services, Inc. In his expanded role, Brian will have operating responsibility for the entire company. Concurrent with this change, I will remain President, however, I will relinquish the title of President.

Speaker Change: In his expanded role, Brian will have operating responsibility for the entire company. Concurrent with this change, I will remain Chief Executive Officer, however, relinquish the title of President.

Timo O'Day: Concurrent with this change, I will remain Chief Executive Officer; however, we're linked with the title of President. This change is being made to position Brian with company-wide operating oversight, responsibility, and influence.

Tim O'Day: This change is being made to position Bryan with company-wide operating oversight, responsibility, and employment. We've released our 2024 second quarter results before markets open today. You can access our news release, 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 CDAR Plus this morning. On today's call, we'll discuss the financial results for the three and six months ended June 30, 2024 and provide a general business update.

Tim O'Day: This change is being made to position Bryan with company-wide operating oversight, responsibility, and influence. We released our 2024 second quarter results before markets open today. You can access our news release, 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 CDAR Plus this morning. On today's call, we'll discuss the finance results for the three and six month periods and June 30, 2024 and provide a general business update. We'll then open the call for questions.

Tim O'Day: This change is being made to position BRAM with company-wide operating oversight, responsibility, and influence.

Timo O'Day: We've released our 2024 second quarter results before markets open today. You can access our news release as well as our complete financial statements and management discussion and analysis on our website at VoidGroup.com. Our news release, financial statements and MDNA have also been filed on Cedar Plus this morning.

Tim O'Day: During the second quarter of 2024, Boyd recorded sales of $779.2 million, adjusted EBITDA of $89.6 million, and net earnings of $10.8 million. As reported by industry sources, repairable claims continued to be down approximately 7% during the second quarter of 2024. By contrast, the company's same-store sales experienced a decline of only 3.2%, demonstrating Boyd's ability to gain market share even in a difficult environment. Under normal conditions, the decline in repairable appraisals due to ADAS and higher total loss rates would be more than offset by the increased miles driven and increased costs of repair. However, weather-related factors, changes in consumer behavior due to economic uncertainty, and higher insurance premiums resulted in the deferral and non-filing of claims, which further negatively impacted repairable appraisals in the second quarter.

Tim O'Day: We released our 2024 second quarter results before markets opened today. You can access our news release as well as our complete financial statements and management discussion and analysis on our website at boydgroup.com.

Tim O'Day: Our news release, financial statements, and MD&A have also been filed on CDAR Plus this morning.

Tim O'Day: We'll then open the call for questions. During the second quarter of 2024, Boyd recorded sales of $779.2 million, adjusted EBITDA of $89.6 million, and net earnings of $10.8. As reported by industry sources, repairable claims continued to be down approximately 7% during the second quarter of 2024. By contrast, the company's same store sales experienced a decline of only 3.2%, demonstrating Boyd's ability to gain market share, even in a difficult environment. Under normal conditions, the decline in repairable appraisals due to ADAS and higher total loss rates would be more than offset by the increased miles driven and increased costs of repair. However, weather-related factors, changes in consumer behavior due to economic uncertainty, and higher insurance premiums resulted in the deferral and non-filing of claims, which further negatively impacted repairable appraisals in the second quarter.

Timo O'Day: On today's call, we'll discuss the financial results for the three and six month period and the June 30, 2024, and provide a general business update.

Speaker Change: On today's call, we'll discuss the financial results for the three- and six-month period ended June 30, 2024, and provide a general business update. We'll then open the call for questions.

Timo O'Day: We'll then open the call for questions. During the second quarter of 2024, Void recorded sales of $779.2 million, adjusted EBITDA of $89.6 million, and net earnings of $10.8 million. As reported by industry sources, repairable claims continued to be down approximately 7% during the second quarter of 2024. By contrast, the company's same-source sales experience declined of only 3.2%, demonstrating void stability to gain market share even in a difficult environment. Under normal conditions, the decline in repairable appraisals due to ADAS and higher total loss rates would be more than offset by the increased miles driven and increased costs of repair.

Speaker Change: During the second quarter of 2024, Boyd recorded sales of $779.2 million, adjusted EBITDA of $89.6 million, and net earnings of $10.8 million.

Speaker Change: As reported by industry sources, repairable claims continued to be down approximately 7% during the second quarter of 2024.

Speaker Change: By contrast, the company's same-store sales experienced a decline of only 3.2 percent, demonstrating Boyd's ability to gain market share even in a difficult environment.

Speaker Change: under normal conditions the decline in reparable appraisals due to aas and higher total loss rates will be more than offset by the increased miles driven in increased costs of repair

Timo O'Day: However, weather-related factors, changes in consumer behavior due to economic uncertainty, and higher insurance premiums resulted in the deferral and non-violation of claims, which further negatively impacted repairable appraisals in the second quarter. The internalization of scanning and calibration services, progress, and void repair for strategy, and focus on the use of cost-effective alternative parts delivered strong value by lowering repair costs for the company's customers and consequently reduced sales that could have otherwise been achieved while benefiting gross margin percentage. This resulted in a significant sequential improvement in gross margins and adjusted EBITDA as a percentage of sales, moving from 44.8% and 10.4% in the first quarter to 45.6% and 11.5% in the second quarter, respectively.

Speaker Change: However, weather-related factors, changes in consumer behavior due to economic uncertainty and higher insurance premiums resulted in the deferral and non-filing of claims, which further negatively impacted repairable appraisals in the second quarter.

Tim O'Day: The internalization of scanning and calibration services, progress in Boyd's repair-first strategy, and focus on the use of cost-effective alternative parts delivered strong value by lowering repair costs for the company's customers and consequently reduced sales that could have otherwise been achieved while benefiting gross margin percentage. This resulted in a significant sequential improvement in gross margins and adjusted EBITDA as a percentage of sales, moving from 44.8% and 10.4% in the first quarter to 45.6% and 11.5% in the second quarter, respectively.

Speaker Change: The Internalization of Scanning and Calibration Services

Speaker Change: progress em boye's repair for strategy and focus on the use of cost effective alternativedeparts delivered strong value by lowering repair costs for the company's customers and consequently reduced sales that could have otherwise been achieved while benefiting gross margin percentage

Speaker Change: This resulted in a significant sequential improvement in gross margins and adjusted EBITDA as a percentage of sales.

Speaker Change: moving from 44.8% and 10.4% in the first quarter to 45.6% and 11.5% in the second quarter respectively.

Timo O'Day: For the second quarter of 2024, sales were 779.2 million, a 3.4% increase when compared to the same period of 2023. This reflects 50.9 million of incremental contribution from 109 new locations. As mentioned earlier, our same source sales, excluding foreign exchange, decreased by 3.2% in the quarter; although repairable claims continued to be down approximately 7%. The second quarter recognized the same number of selling and production days when compared to the same period of 2023. Gross margin was 45.6% in the second quarter of 2024 compared to 45.5% achieved in the same period of 2023. Gross margin percentage benefited from increased scanning and calibration, higher parts margins, improved glass margins, and improvements in performance-based pricing.

Tim O'Day: For the second quarter of 2024, sales were $779.2 million, a 3.4% increase when compared to the same period of 2023. This reflects $50.9 million of incremental contribution from 109 new locations. As mentioned earlier, our same-store sales, excluding foreign exchange, decreased by 3.2% in the quarter, although repairable claims continued to be down approximately 7%. The second quarter also recognized the same number of selling and production days when compared to the same period of 2023.

Speaker Change: For the second quarter of 2024, sales were $779.2 million, a 3.4% increase when compared to the same period of 2023.

Speaker Change: This reflects $50.9 million of incremental contribution from 109 new locations.

Speaker Change: As mentioned earlier, our same-store sales, excluding foreign exchange, decreased by 3.2% in the quarter, although repairable claims continued to be down approximately 7%.

Speaker Change: The second quarter recognized the same number of selling and production days when compared to the same period of 2023.

Tim O'Day: Gross margin was 45.6% in the second quarter of 2024, compared to 45.5% achieved in the same period of 2023. Gross Margin Percentage benefited from increased Scanning and Calibration, Higher Parts Margins, Improved Glass Margins, and Improvements in Performance-Based Pricing. Labor rate increases have added to sales and gross profit dollars; however, margins remain below historical levels.

Tim O'Day: Gross margin was 45.6% in the second quarter of 2024, compared to 45.5% achieved in the same period of 2023. Gross Margin Percentage Benefited from Increased Scanning and Calibration, Higher Parts Margins, Improved Glass Margins, and Improvements in Performance-Based Pricing. Labor rate increases have added to sales and gross profit dollars; however, margins remain below historical levels. Operating expenses for the second quarter of 2024 were $265.9 million, or 34.1% of sales, compared to $247.3 million, or 32.8% of sales, in the same period of 2023.

Speaker Change: Gross margin was 45.6% in the second quarter of 2024, compared to 45.5% achieved in the same period of 2023.

Speaker Change: Gross Margin Percentage benefited from increased Scanning and Calibration, Higher Parts Margins, Improved Glass Margins, and improvements in Performance Based Pricing.

Timo O'Day: Laborate increases have added sales and gross profit dollars; however, margins remain below historical levels. Operating expenses for the second quarter of 2024 were 265.9 million, or 34.1% of sales, compared to 247.3 million, or 32.8% of sales in the same period as 2023. Operating expenses as a percentage of sales was negatively impacted by the decline in same source sales and new locations, which contributed sales but with a higher operating expense ratio. Adjusted EBITDA or EBITDA adjusted per fair value adjustments to financial instruments and costs related to acquisitions and transactions was 89.6 million, a 6.1% decrease over the same period in 2023.

Speaker Change: Labor rate increases have added to sales and gross profit dollars. However, margins remain below historical levels.

Tim O'Day: Operating expenses for the second quarter of 2024 were $265.9 million, or 34.1% of sales, compared to $247.3 million, or 32.8% of sales, in the same period of 2023. Operating expenses as a percentage of sales was negatively impacted by the decline in same-store sales and new locations, which contributed sales, but with a higher operating expense ratio. Adjusted EBITDA, or EBITDA adjusted for fair value adjustments to financial instruments and costs related to acquisitions and transactions, was $89.6 million, a 6.1% decrease over the same period in 2023.

Speaker Change: operating expenses for the second quarter of two thousand and twenty-four were two hundred and sixty five point nine million or thirty four point one percent of sales compared to two hundred and forty seven point three million or thirty two point eight percent of sales in the same period as two thousand and twenty- three

Tim O'Day: Operating expenses as a percentage of sales was negatively impacted by the decline in same store sales and new locations, which contributed sales but with a higher operating expense ratio. Adjusted EBITDA, or EBITDA adjusted for fair value adjustments to financial instruments and costs related to acquisitions and transactions, was $89.6 million, a 6.1% decrease over the same period in 2023. The decrease was the result of lower same-store sales, partially offset by improvements in gross margin percentage.

Speaker Change: operating expenses as a percentage of sales was negatively impacted by the decline in same-store sales and new locations which contributed sales but a higher operating expense ratio

Speaker Change: Adjusted EBITDA, or EBITDA adjusted for fair value adjustments to financial instruments and costs related acquisitions and transactions, was $89.6 million, a 6.1% decrease over the same period in 2023.

Timo O'Day: The decrease was a result of lower same source sales, partially offset by improvements in gross margin percentage. Net earnings for the second quarter of 2024 was 10.8 million compared to 26.3 million in the same period of 2023. Excluding fair value adjustments and acquisition and transaction costs, adjusted net earnings for the second quarter of 2024 was 11.9 million or 56 cents per share, compared to 27 million or $1.26 per share in the same period of the prior year. Net earnings and adjusted net earnings for the period was negatively impacted, but the decrease in adjusted EBITDA as well as the increased finance costs and increased depreciation related to location growth.

Speaker Change: The decrease was a result of lower same-store sales, partially offset by improvements in gross margin percentage.

Tim O'Day: Net earnings for the second quarter of 2024 were $10.8 million, compared to $26.3 million in the same period of 2023. Excluding fair value adjustments and acquisition and transaction costs, adjusted net earnings for the second quarter of 2024 were $11.9 million, or $0.56 per share, compared to $27 million, or $1.26 per share, in the same period of the prior year.

Speaker Change: net earnings for the second quarter of two thousand and twenty four was ten point eight million compared to twotwenty-six point three million in the same period of two thousand and twenty three

Speaker Change: excluding fair value adjustments and acquisition and transaction costs

Speaker Change: Adjusted net earnings for the second quarter of 2024 was $11.9 million, or $0.56 per share, compared to $27 million, or $1.26 per share in the same period of the prior year.

Speaker Change: Net earnings and adjusted net earnings for the period was negatively impacted by the decrease in adjusted EBITDA, as well as the increased finance costs and increased depreciation related to location growth.

Timo O'Day: For the six months and a June 30, 2024, sales total 1.6 billion, an increase of 97.5 million or 6.6% when compared to the same period of the prior year. Driven by 109.2 million incremental contributions from 132 new locations that had not been in operation for the full comparative period. Our same-store sales, excluding foreign exchange, decreased by seven tenths of a percent for the six months end of June 30th, recognizing the same number of selling and production days when compared to the same period of the prior year. As reported by industry sources, repairable appraisals were down, declining 7 to 8 percent on a year-over-year basis.

Tim O'Day: Net Earnings and Adjusted Net Earnings for the period were negatively impacted by the decrease in adjusted EBITDA as well as increased finance costs and increased depreciation related to location growth. For the six months ended June 30, 2024, sales totaled $1.6 billion, an increase of $97.5 million or 6.6% when compared to the same period of the prior year, driven by $109.2 million in incremental contributions from 132 new locations that had not been in operation for the full comparative period.

Speaker Change: For the six months ended June 30, 2024, sales totaled $1.6 billion, an increase of $97.5 million, or 6.6 percent, when compared to the same period of the prior year.

Speaker Change: driven by 109.2 million incremental contributions from 132 new locations that had not been in operation for the full comparative period.

Tim O'Day: Our same store sales, excluding foreign exchange, decreased by seven-tenths of a percent for the six months ended June 30th, recognizing the same number of selling and production days when compared to the same period of the prior year. As reported by industry sources, repairable appraisals were down, declining 7 to 8 percent on a year-over-year basis. These negative impacts were modestly offset by the benefit of increased internalization of scanning and calibration and improved glass margin.

Speaker Change: Our same store sales, excluding foreign exchange, decreased by seven-tenths of a percent for the six months ended June 30th, recognizing the same number of selling and production days when compared to the same period of the prior year.

Speaker Change: As reported by industry sources, repairable appraisals were down, declining 7 to 8 percent on a year-over-year basis.

Timo O'Day: Gross margin decreased to 45.2 percent of sales, compared to 45.6 percent of sales in the comparative period. Will gross profit increase to $700 million from $669.7 million when compared to the same period of the prior year. Gross margin percentage decreased due to several factors, including variability due to performance-based pricing and lower contribution margins from a greater number of new locations. Laborate increases have added the sales and gross profit dollars; however, margins remain below historical levels. These negative impacts were modestly offset by the benefit of increased internalization of scanning and calibration, and improved glass margins. Operating expenses increased $47.1 million compared to the same period of the prior year, primarily as a result of location growth and incremental expense investments.

Tim O'Day: Gross margin decreased to 45.2% of sales, compared to 45.6% of sales in the comparative period, while gross profit increased to $708 million from $669.7 million when compared to the same period of the prior year. Gross Margin Percentage decreased due to several factors, including variability due to performance-based prices and lower contribution margins from a greater number of new locations. Labor rate increases have added to sales and gross profit dollars; however, margins remain below historical levels. These negative impacts were modestly offset by the benefit of increased internalization of scanning and calibration and improved glass marking.

Speaker Change: Gross margin decreased to 45.2% of sales, compared to 45.6% of sales in the comparative period, while gross profit increased to $708 million from $669.7 million when compared to the same period of the prior year.

Speaker Change: Gross margin percentage decreased due to several factors, including variability due to performance-based pricing and lower contribution margins from a greater number of new locations.

Speaker Change: Labor rate increases have added to sales and gross profit dollars, however, margins remain below historical levels.

Speaker Change: These negative impacts were modestly offset by the benefit of increased internalization of scanning and calibration and improved glass margins.

Tim O'Day: Operating expenses increased $47.1 million compared to the same period of the prior year, primarily as a result of location growth and incremental expense investment. In addition, new locations contributed sales, but with a higher operating expense ratio, closed locations, lowered operating expenses by $700,000. Adjusted EBITDA for the six months ended June 30 was $171.3 million, compared to $180.1 million in the same period of the prior year. The $8.8 million decrease was primarily the result of declines in repairable claim volumes for services.

Speaker Change: Operating expenses increased 47.1 million compared to the same period of the prior year, primarily as a result of location growth and incremental expense investments.

Timo O'Day: In addition, new locations contributed to sales, but with a higher operating expense ratio. Closed locations lowered operating expenses by $700,000. Adjusted EBITDA for the six months and a June 30th was $171.3 million compared to $180.1 million in the same period of the prior year. The $8.8 million decrease was primarily the result of declines and more parable claim volumes for services. We reported net earnings of $19.2 million compared to $47.1 million in the same period of the prior year. Adjusted end earnings per share decreased from $2.25 to $1. The decrease in adjusted end earnings per share is primarily attributable to the decrease in adjusted EBITDA, as well as increased finance costs and increased depreciation related to new location growth.

Speaker Change: In addition, new locations contributed sales, but with a higher operating expense ratio. Closed locations lowered operating expenses by $700,000.

Tim O'Day: Operating expenses increased $47.1 million compared to the same period of the prior year, primarily as a result of location growth and incremental expense investment. Adjusted EBITDA for the six months ended June 30 was $171.3 million, compared to $180.1 million in the same period of the prior year. Adjusted end earnings per share decreased from $2.25 to $1.00. The decrease in adjusted net earnings per share is primarily attributable to the decrease in adjusted EBITDA, as well as increased finance costs and increased depreciation related to new location growth. At the end of the period, we had total debt, net of cash, of $1.2 billion.

Speaker Change: Adjusted EBITDA for the six months ended June 30th was $171.3 million, compared to $180.1 million in the same period of the prior year. The $8.8 million decrease was primarily the result of declines in repairable claim volumes for services.

Tim O'Day: We reported net earnings of $19.2 million compared to $47.1 million in the same period of the prior year. Adjusted end earnings per share decreased from $2.25 to $1.00. The decrease in adjusted net earnings per share is primarily attributable to the decrease in adjusted EBITDA as well as increased finance costs and increased depreciation related to new location growth. At the end of the period, we had total debt, net of cash, of $1.2 billion.

Speaker Change: We reported net earnings of $19.2 million compared to $47.1 million in the same period of the prior year. Adjusted net earnings per share decreased from $2.25 to $1.

Speaker Change: The decrease in adjusted net earnings per share is primarily attributable to the decrease in adjusted EBITDA, as well as increased finance costs and increased depreciation related to new location growth.

Timo O'Day: At the end of the period, we have total debt net of cash of $1.2 billion. Debt net of cash increased when compared to the prior quarter, primarily as a result of acquisition activity and increased capital expenditures, including new location startups. In addition, startup locations have resulted in an increase in real estate assets. The company's strategy has been not to hold real estate except where necessary for growth opportunities. Certain startup locations necessitate short-term hold in a real estate until the build is complete and operations have begun.

Speaker Change: At the end of the period, we had total debt, net of cash, of $1.2 billion. Debt, net of cash, increased when compared to the prior quarter, primarily as a result of acquisition activity and increased capital expenditures, including new location startups.

Tim O'Day: Debt, net of cash, increased when compared to the prior quarter, primarily as a result of acquisition activity and increased capital expenditures, including new location startup. In addition, startup locations have resulted in an increase in real estate assets. The company's strategy has been not to hold real estate except where necessary for growth operations.

Tim O'Day: In addition, startup locations have resulted in an increase in real estate assets. During 2024, 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 1.8 to 2% of sales. Excluding these expenditures, the company spent approximately $31.9 million, or 2% of sales, on capital expenditures during the six months ended June 30, 2024. The company has a number of initiatives underway to ensure the business is well positioned for long-term success.

Speaker Change: In addition, startup locations have resulted in an increase in real estate assets. The company's strategy has been not to hold real estate except where necessary for growth opportunities.

Tim O'Day: Certain start-up locations necessitate short-term holding of real estate until the build is complete and operations have begun. During 2024, 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 1.8 to 2% of sales. Excluding these expenditures, the company spent approximately $31.9 million, or 2% of sales, on capital expenditures during the six months ended June 30, 2024. The company spent $28.7 million, or 2% of sales, on capital expenditures excluding those related to acquisition and development during the same period in 2020.

Speaker Change: Certain startup locations necessitate short-term holding of real estate until the build is complete and operations have begun.

Timo O'Day: During 2024, 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 1.8 to 2% of sales. Excluding these expenditures, the company spent approximately 31.9 million, or 2% of sales, on capital expenditures during the six months ended June 30, 2024. The company spent 28.7 million, or 2% of sales, on capital expenditures excluding those related to acquisition and development during the same period of 2020.

Speaker Change: During 2024, 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 1.8 to 2% of sales.

Speaker Change: Excluding these expenditures, the company spent approximately $31.9 million, or 2% of sales, on capital expenditures during the six months ended June 30, 2024.

Speaker Change: The company spent $28.7 million, or 2% of sales, on capital expenditures excluding those related to acquisition and development during the same period of 2023.

Timo O'Day: III. The company has a number of initiatives underway to ensure the business is well positioned for long-term success. Boyd has made progress in improving gross margins and keeping costs down for the company's customers in the second quarter of 2024. The continued claim softness has impacted demand for services thus far in the third quarter, which is resulting in similar same-store challenges that we experienced during the second quarter of 2024. Will claim volumes and demand for services are currently below prior year levels. Boyd views these as short-term trends and remains highly confident in the underlying fundamentals of the business over the longer term.

Tim O'Day: The company has a number of initiatives underway to ensure the business is well positioned for long-term success. Boyd has made progress in improving gross margins and keeping costs down for the company's customers in the second quarter of 2024. However, continued claims softness has impacted demand for services thus far in the third quarter, which is resulting in similar same store challenges that we experienced during the second quarter of 2024.

Speaker Change: The company has a number of initiatives underway to ensure the business is well positioned for long term success.

Speaker Change: Boyd has made progress in improving gross margins and keeping costs down for the company's customers in the second quarter of 2024.

Speaker Change: The continued claims softness has impacted demand for services thus far in the third quarter, which is resulting in similar same-store challenges that we experienced during the second quarter of 2024.

Tim O'Day: While claim volumes and demand for services are currently below prior-year levels, Boyd views these as short-term trends and remains highly confident in the underlying fundamentals of the business over the longer term. On a year-to-date basis, Boyd has added or acquired 30 new locations. While this activity is running at a slower pace than was the case one year ago, opportunities and Boyd's commitment to growth remain. The company has a robust pipeline of new location growth, including greenfield and brownfield development sites.

Speaker Change: While claim volumes and demand for services are currently below prior year levels, Boyd views these as short-term trends and remains highly confident in the underlying fundamentals of the business over the longer term.

Timo O'Day: On a year-to-date basis, Boyd has added or required 30 new locations. Will this activity is running at a slower pace than was the case one year ago? Opportunities and Boyd's commitment to growth remain. The company has a robust pipeline of new location growth, including greenfield and brownfield development sites. We'll start up sites, experience a longer development cycle, and ramp up period when compared to single-shop acquisitions. These facilities offer a number of advantages, and as a result, the company plans to continue increasing the proportion of growth using this approach. Despite the recent same-store sales growth challenges, the company remains confident that Boyd is on track to achieve its long-term growth goals, including doubling the size of the business on a constant currency basis from 21 to 25 against 2019 sales.

Tim O'Day: On a year-to-date basis, Boyd has added or acquired 30 new locations. While startup sites experience a longer development cycle and ramp-up period when compared to single-shop acquisitions, these facilities offer a number of advantages, and as a result, the company plans to continue increasing the proportion of growth using this approach.

Speaker Change: On a year-to-date basis, Boyd has added or acquired 30 new locations. While this activity is running at a slower pace than was the case one year ago, opportunities and Boyd's commitment to growth remain.

Speaker Change: The company has a robust pipeline of new location growth, including greenfield and brownfield development sites.

Tim O'Day: While startup sites experience a longer development cycle and ramp-up period when compared to single-shop acquisitions, these facilities offer a number of advantages, and as a result, the company plans to continue increasing the proportion of growth using this approach. Despite the recent Sam's Store sales growth challenges, the company remains confident that Boyd is on track to achieve its long-term growth goals, including doubling the size of the business on a constant currency basis from 21 to 25 against 2019 sales.

Speaker Change: While start-up sites experience a longer development cycle and ramp-up period when compared to single-shop acquisitions, these facilities offer a number of advantages, and as a result, the company plans to continue increasing the proportion of growth using this approach.

Speaker Change: Despite the recent Sam's Store sales growth challenges, the company remains confident that Boyd is on track to achieve its long-term growth goals, including doubling the size of the business on a constant currency basis from 21 to 25 against 2019 sales.

Timo O'Day: In the long term, management reigns confident in its business model and its ability to increase market share by expanding its presence in North America through strategic acquisitions alongside organic growth from Boyd's existing operations. A creative growth will remain the company's long-term focus whether it's through organic growth, new-store development, or acquisitions. The North American collision repair industry remains highly fragmented and offers attractive opportunities for industry leaders to build value through focused consolidation and economies of scale. As a growth company, Boyd's objective continues to be made to maintain a conservative dividend policy that will provide the financial flexibility necessary to support growth initiatives, will gradually increase in dividends over time.

Tim O'Day: In the long term, management remains confident in its business model and its ability to increase market share by expanding its presence in North America through strategic acquisitions alongside organic growth from Boyd's existing operations. Creative growth will remain the company's long-term focus, whether it's through organic growth, new store development, or acquisition. The North American collision repair industry remains highly fragmented and offers attractive opportunities for industry leaders to build value through focused consolidation and economies of scale.

Speaker Change: In the long term, management remains confident in its business model and its ability to increase market share by expanding its presence in North America through strategic acquisitions alongside organic growth from Boyd's existing operations.

Speaker Change: accretive growth will remain the company's long-term focus whetherthere is through organic growth new store development or acquisitions

Speaker Change: The North American collision repair industry remains highly fragmented and offers attractive opportunities for industry leaders to build value through focused consolidation and economies of scale.

Tim O'Day: As a growth company, Boyd's objective continues to be to maintain a conservative dividend policy that will provide the financial flexibility necessary to support growth initiatives while gradually increasing dividends over time. The company remains confident in its management team, systems, and experience. This, along with a strong financial position and financing options, positions Boyd for success well into the future. Operator?

Speaker Change: As a growth company, Boyd's objective continues to be to maintain a conservative dividend policy that will provide the financial flexibility necessary to support growth initiatives while gradually increasing dividends over time.

Timo O'Day: The company remains confident in its management team, systems, and experience. This, along with the strong financial position and financing options, positions Boyd for success well into the future.

Speaker Change: The company remains confident in its management team, systems, and experience.

Speaker Change: This, along with a strong financial position and financing options, positions Boyd for success well into the future.

Timo O'Day: With that, I would now like to open the call for questions.

Operator: Operator? Thank you.

Speaker Change: With that, I would now like to open the call for questions. Operator?

Operator: Thank you. And ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press the star followed by the number one on your telephone keypad. And if you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press the star followed by the number two. One moment, please.

Operator: Ladies and gentlemen, we will now begin the question-and-answer session. To ask a question, you may press a store followed by the number one on your telephone keypad. And if you're using a speaker phone, please pick up your handset, be broadcasting any keys. To withdraw your question, please press a store followed by the number two. One moment, please, for your first question.

Speaker Change: so

Speaker Change: Thank you. And ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press star followed by the number one on your telephone keypad. And if you're using a speakerphone, please pick up your handset before pressing any keys.

Speaker Change: To withdraw your question, please press star followed by the number 2. One moment please for your first question.

Sabahat Khan: And your first question comes from the line of Sabaha's con with RBC Capital Markets. Please go ahead.

Operator: And your first question comes from the line of Sabahat Khan with RBC Capital Markets. Please go ahead.

Speaker Change: And your first question comes from the line of Sabahat Khan with RBC Capital Markets. Please go ahead.

Unidentified Analyst: Good morning, this kind of theme of folks not bringing their cars for repair seems to have come up a lot across a couple of calls across the ecosystem and autos. You know, from your perspective, and sort of the confidence that you have on 25, is your expectation that, as the macro improves, whether it's early, mid, kind of just through 25 and onward, the pattern of bringing cars in for repair when damaged and making insurance claims, that sort So is that something that we should read as being just tied to the macro environment and, you know, pocketbooks being a little bit tight?

Sabahat Khan: Great, I think good morning. This kind of theme of folks not bringing in their cars for repair seems to come up a lot about a couple of calls across the ecosystem and autos. You know, from your perspective, answer the conference that you have on 25. Is your expectation that as the macro improves, others early made kind of just through 25 and onward, that the pattern of bringing cars in for repair when damaged and making insurance claims, that sort of normalize? So is that something that we should read as being just tied to the macro environment and, you know, pocket books being a little bit tight?

Sabahat Khan: Good morning. This kind of theme of folks not bringing their cars for repair seems to have come up a lot across a couple of calls across the ecosystem and autos. From your perspective and through the confidence that you have on 25, is there expectation that

Speaker Change: As the macro improves, whether it's early, mid, kind of just through 25 and onward, that the pattern of bringing cars in for repair when damaged and making insurance claims, that sort of normalizes. So is that something that we should read as being just tied to the macro environment and, you know, pocketbooks being a little bit tight?

Timo O'Day: Yeah, absolutely. I think it's a combination of the probably some concern over the economic environment, you know, insurance premiums having gone up significantly over the past couple of years and a reluctance on the part of some vehicles to file a claim, in part for fear that it may further increase their insurance rates.

Tim O'Day: Yeah, absolutely. I think it's probably some concern over the economic environment, you know, insurance premiums haven't gone up significantly over the past couple of years, and a reluctance on the part of some vehicle owners to file a claim, in part for fear that it may further increase their insurance rates. I would say that, you know, as we've seen, in periods of economic uncertainty, it's pretty common for people to defer a claim or to cash out a claim rather than repair it. But generally, that behavior, you know, bounces back in the other direction over time.

Speaker Change: yes absolutely i think it's a combination of the probably some concern over the economic environment

Speaker Change: insurance premiums haven't gone up

Speaker Change: significantly over the past couple of years and a reluctance on the part of some vehicle owners to file a claim in part for fear that it may further increase their insurance rates.

Timo O'Day: I would say that you know, as over the years, as we've seen periods of economic uncertainty, it's pretty common for people to defer a claim or to cash out a claim rather than repair it. But generally, that behavior bounces back the other direction over time. Okay, and then I guess just the impact of this sort of what you're insurance partners, I guess is it making and just the volumes going down because for them may be going down, is that making pricing discussions any easier? How are they reacting to this dynamic? I don't think there's been a significant change in that dynamic; certainly, it would be easier for them to make pricing concessions when they're profitable, and if you look at those that have reported, have had significant swings in profitability.

Speaker Change: I would say that you know as over the years as we've seen

Speaker Change: periods of economic uncertainty. It's pretty common for people to defer a claim or to cash out a claim rather than repair it, but generally that behavior bounces back the other direction over time.

Unidentified Analyst: Okay. And then I guess just the impact of this sort of with your insurance partners, I guess, is it making, you know, just the volumes going down, the cost for them may be going down, is that making pricing discussions any easier, or how are they reacting to this dynamic?

Speaker Change: Okay, and then I guess just the impact of this sort of fund with your insurance partners, I guess, is it making, you know, just the volumes going down, the cost for them may be going down, is that making pricing discussions any easier, or how are they reacting to this dynamic?

Tim O'Day: I don't think there's been a significant change in that dynamic. Certainly, it would be easier for them to make pricing concessions when they're profitable. And if you look at those that have reported, they have had significant swings in profitability.

unknown: I don't think there's been a significant change in that dynamic. Certainly, it would...

Speaker Change: i don't think there's been a significant change in that dynamic certainly it would be easier for them to make pricing concessions when they're profitable in if look at those that have reported to have had a significant swings and profitability

Unidentified Analyst: So we're going to continue to aggressively pursue price increases to make sure that we're treated fairly in the marketplace. And we really have never hesitated on that. That's been ongoing.

Timo O'Day: So we are we're going to continue to aggressively pursue pricing creases to make sure that we're treated fairly in the marketplace, and we really have never hesitated on that. That's been ongoing.

Speaker Change: So we're going to continue to aggressively pursue price increases to make sure that we're treated you know fairly in the marketplace and we really have never hesitated on that, that's been ongoing.

Timo O'Day: Great, and then you know just one last quick one on the scanning of the calibration side as you continue to internalize that. You know, is that something that when we look ahead to the next one to three years, it's something you build at a steady pace, or could there come an inflection point where you maybe dedicate a larger proportion of your cap backs and just maybe op acts to getting that internalization going? Thank you. I would say that we and what we didn't come in at specifically this quarter. Last quarter we did comment on the significant growth and employee count we had in that business, and we continue to grow pretty rapidly. What we've been saying is it'll take us two to three years to get to the point where we're servicing, you know, the vast majority of that business.

Tim O'Day: And then, you know, just one last quick one on the scanning and the calibration side, as you continue to internalize that, is that something that, when we look ahead to the next one, two, three years, is something you build at a steady pace, or could there come an inflection point where you maybe dedicate a larger proportion of your CAPEX and just maybe OPEX to getting that internalization going? Thank you.

Sabahat Khan: And then, you know, just one last quick one on the scanning and the calibration side, as you continue to internalize that, is that something that, when we look ahead to the next one, two, three years, is something you build at a steady pace, or could there come an inflection point where you maybe dedicate a larger proportion of your CAPEX and just maybe OPEX to getting that internalization going? Thank you.

Speaker Change: great and then you just one last quick one on those or the scanning on the calibration side as you continue internalize that

Speaker Change: is that something that when we look ahead to the next one to three years ' something you build at a stead pay or could there inflection point where you maybe dedicate a larger proportion of your capex and this maybe opex to getting that internalization going thank you

Tim O'Day: I would say that we and what we didn't comment on specifically this quarter last quarter, we did comment on the significant growth and employee count we'd had in that business, and we continue to grow pretty rapidly. What we've been saying is it'll take us two to three years to get to the point where we're servicing, you know, the vast majority of that business, and I would say that still holds true, although we're interested in accelerating that Thank you. I appreciate it.

Speaker Change: Yeah, I would say that we, and while we didn't comment at specifically this quarter, last quarter, we did comment on the significant growth and employee count we had in that business.

Speaker Change: And we continue to grow up pretty rapidly. What we've been saying is it'll take us two to three years to get to the point where we're servicing.

Timo O'Day: And I would say that still holds true, although we're interested in accelerating that to the extent that we can probably properly manage that growth. We make a great progress on that.

Speaker Change: you know the vast majority of that business and I would say that still holds true although we're interested in accelerating that to the extent that we can probably properly manage that growth.

Unidentified Analyst: Thank you. I appreciate the color.

Timo O'Day: Thank you. Appreciate the color.

Speaker Change: We make great progress on that.

Christopher Murray: Thank you, and your next question comes from the line of Christopher, similar to the DCT's ahead. Question. I'm just wondering how you are thinking about the Technician Development Program at this point, just in terms of maybe pulling back on it for cost savings or maybe the labor environment isn't as tight. So just how are you thinking about that through this year and next year?

Operator: Thank you. And your next question comes from the line of Krista Friesen with CIBC. Please go ahead.

Speaker Change: Thank you. And your next question comes from the line of Krista Friesen with CIBC. Please go ahead.

Krista Friesen: I think that's my question. I'm just wondering how you are thinking about the technician development program at this point, just in terms of maybe pulling back on it for cost savings, or maybe the labor environment isn't as tight. So just how are you thinking about that this year and next year?

Speaker Change: Hi, thank you for the question.

Krista Friesen: I'm just wondering...

Krista Friesen: how are you thinking about the technician development program at this point just in terms of maybe

Speaker Change: pulling back on it for for cost savings or maybe

Speaker Change: The labor environment isn't as tight, so just how you're thinking about that through this year and next year.

Brian Kaner: Yeah, Chris, and it's Brian. You know, look, we continue to be committed to the Technician Development Program. You know, we have pulled back on the level one portion of that program, which is, as you well know, is where the predominant amount of cost is just based on the environment that we're at right now. But in the long run, we believe that that's still the right way for us to develop the next generation of technicians in our business and remain very committed to, you know, as volume starts to come back, remain very committed to continuing to grow that program.

Brian Kaner: Yeah, Kristen, it's Brian. You know, look, we continue to be committed to the technician development program. You know, we have pulled back on the, you know, the level one portion of that program, which is, as you well know, is where the predominant amount of cost is just based on the environment that we're in right now. But in the long run, we believe that that's still the right way for us to develop the next generation of technicians in our business and remain very committed to, you know, as volume starts to come back, continuing to grow that program.

briant: yeah person it' briant

Speaker Change: we continue to be committed to the technician development program we have pullback on the

Krista Friesen: Okay, great. And just the comment on pulling back kind of on the level one part of it, did that start in Q3 or did you kind of start to pull back a bit in Q2?

Person: the level one portion of that program which is as you well knows is where the predominant amount of cost is just based on the

Speaker Change: the environment that we're in right now. But in the long run, we believe that that's still the right way for us to develop the next generation of technicians in our business and remain very committed to, you know, as volume starts to come back, remain very committed to continuing to grow that program.

Brian Kaner: Okay, great. And just the comments on pulling back kind of in at the level one part of it. Did that start in Q3, or do you kind of start to pull back a bit in Q2? We pulled back a bit in Q2 as well. We're really focused on graduating the, you know, the tutors and threes that we have in the program right now. And you know, right now it's given the volume situation. It's, you know, it's much more, it's better for us to keep feeding the text that we have, you know, our body text that we have in the shops today as opposed to spreading that out across more people.

Speaker Change: Okay great and just the comment on pulling back kind of in at the level one part of it did that start in Q3 or did you kind of start to pull back a bit in Q2?

Brian Kaner: We pulled back a bit in Q2 as well. We're really focused on graduating the, you know, the twos and threes that we have in the program right now. And, you know, right now, given the volume situation, it's, you know, it's much more economical for us to keep feeding the techs that we have, you know, our body techs that we have in the shops today, as opposed to spreading that out across more people.

Speaker Change: We pulled back a bit in Q2 as well. We're really focused on graduating the, you know, the twos and threes that we have in the program right now.

Krista Friesen: and right now given the volume situation it's you know it's much more it's better for us to keep feeding the text that we have in our body text that we have in the shop today as opposed to spreading that out across more people

Tim O'Day: I'd just add to that, Krista, that we talked even throughout last year about the fact that we were dissatisfied with the level of turnover in the first level of the program, which is the most expensive level. So some of the fine-tuning we've done is really to be more selective. You'll recall that when we built this program up three years ago, we went from almost no one in it to several hundred people in a couple of years.

Brian Kaner: I just added that, Chris, that we talked even throughout last year about the fact that we were dissatisfied with the level of turnover in the first level of the program, which is the most expensive level. So some of the fine tuning we've done is really to be more selective. You'll recall that when we built this program up three years ago, we went from almost no one in it to several hundred people over a couple of years. And I think this pause has given us the ability to be more selective at who goes into level one, which will result in more level one trainees getting to level to an ultimately graduating but at a lower, lower overall program cost.

Krista Friesen: I'd just add to that, Krista, that we talked even throughout last year about the fact that we were dissatisfied with the level of turnover in the first level of the program.

Krista Friesen: which is the most expensive level so some of the fine tuning we've done is really to be

Speaker Change: More selective you'll recall that when we built this program up three years ago. We went from

Speaker Change: almost no one in it to several hundred people over a couple of years. And I think this pause has given us the ability to be more selective.

Tim O'Day: And I think this pause has given us the ability to be more selective about who goes into level one, which will result in more level one trainees getting to level two and ultimately graduating, but at a lower overall program cost.

Speaker Change: who goes into Level 1, which will result in more Level 1 trainees getting to Level 2 and ultimately graduating, but at a lower overall program cost.

Brian Kaner: Okay, great. That makes sense.

Krista Friesen: Okay, great. That makes sense. And just one last one for me. On the acquisition front, as you noted, we're running at a bit of a slower pace this year. Should we think of this pace as kind of a good run rate for the rest of the year?

Brian Kaner: And just one last room for me on the acquisition front. As you noted, running at a bit of a slower pace this year, should we think of this pace as kind of a good run rate for the rest of the year? No, I wouldn't say that. I think that, you know, acquisitions have always been lumpy, and it's hard to predict exactly when deals will get done. But I feel really good about our pipeline, and I would expect I would expect to see stronger activity in the last half of the year than we've seen in the first half of the year as we successfully close on deals.

Speaker Change: okay great that makes sense and just one last room from me on the acquisition frentch as you know ' running at a bitdable slower pace this year should we think of this pace as kind of a good run rate for the rest of the year

Tim O'Day: No, I wouldn't say that. I think that acquisitions have always been lumpy, and it's hard to predict exactly when deals will get done. But I feel really good about our pipeline, and I would expect to see stronger activity in the last half of the year than we've seen in the first half of the year as we successfully close on deals. We are also, and I mentioned this in my prepared comments, but we are building our pipeline of greenfield and brownfield facilities, and we feel really good about what that will do for us in the long run in terms of giving us the facilities and the capacity we need to service So we remain very committed to growth and still see great opportunities.

Speaker Change: no i wouldn't say that i think that acquisitions have always been lumpy and it's hard to predict exactly when deals will get done and i feel really good about our pipeline and i would expect

Speaker Change: I would expect to see stronger activity in the last half of the year than we've seen in the first half of the year as we successfully close on deals. We also are, and I mentioned this in my prepare comments, but we are building our pipeline of greenfield and brownfield facilities.

Brian Kaner: We also are, and I mentioned this in my prepared comments, but we are building our pipeline of Greenfield and Brownfield facilities. And we feel really good about what that will do for us in the long run in terms of giving us the facilities and the capacity we need to service all aspects of our business and markets. So we remain very committed to growth and still see great opportunity.

Speaker Change: and we feel really good about what will do offorcourse on the long run in terms of given us the facilities in the capacity we need to service all aspects of our business and markets so we remain very committed to grow can still see great opportunity

Derek Lessard: 2nd quarter, 2024 results conference call. Lessard are reminded that certain matters discussed in today's conference call or answers that may be given to questions as good constituent forward-looking statements that are subject to risk and uncertainties related to Voids future financial or business performance. Actual results could differ in what they really from those anticipated in disforward-looking statements. There is factors that may affect results are detailed in Voids and will information form and other periodic filings and registration statements and you can access this document at CedarPlus database found at CedarPlus. TA.

Brian Kaner: Kennedy. Okay, perfect. Thanks, I'll jump back in the queue. Thank you.

Krista Friesen: Okay, perfect. Thanks. I'll jump back in the queue.

Krista Friesen: Okay, perfect. Thanks. I'll jump back in.

Speaker Change: Okay, perfect. Thanks. I'll jump back in the queue.

Speaker Change: thank you

Operator: Thank you. And your next question comes from the line of Steve Hansen with Raymond James. Please go ahead.

Steven Hansen: Thank you, and your next question comes from the line of Steve Hansen with Regan James. Please go ahead.

Speaker Change: Thank you. And your next question comes from the line of Steve Hansen with Raymond James. Please go ahead.

Steven Hansen: Yeah, good morning, guys. The first question is just around the same sort of sales growth. Can you, at the risk of maybe being too granular?

Steven Hansen: Yeah, good morning, guys. Thanks for your time. Um, the first question is just around the themes for sales growth. Can you, at the risk of maybe being too granular, can you maybe just give us a sense for the cadence on how it performed throughout 2Q to try to get a sense for whether it had sort of bottomed earlier in the period or intro period or where, how things have basically trended through that period, just to give us a bit of insight into the third quarter, recognizing, of course, that you're suggesting similar levels?

Speaker Change: Yeah, good morning. Thanks for the time.

Steve Hansen: First question is just around the themes for sales growth, can you, at the risk of maybe being too granular, can you maybe just give us a sense for the cadence?

Timo O'Day: Can you maybe just give us a sense for the cadence on how it performed, wrote to Q to trying to sense for whether it had sort of bottomed earlier in the period or intro period or where your housing is basically trying to through that period just to give us a bit of insight into the third quarter, recognizing the course that you're suggesting some more levels. Yeah, I wouldn't say that we saw a trend that would be a clear down X, down Y, down Z that was favorable. You know, I think the lower claims volume for the reasons that I commented on earlier was fairly stable through the quarter.

Speaker Change: on how it performed throughout 2Q, just trying to get a sense for whether it had sort of bottomed earlier in the period or in the intro period or how things have basically trended through that period, just to give us a bit of insight into the third quarter, recognizing, of course, that you're suggesting similar levels.

Operator: I'd like to remind everyone that this conference call is being recorded today Thursday, August 8, 2024.

Operator: I would now like to introduce Mr. Team O'Day, President and Chief Executive Officer of Void Group Services Inc. These go ahead Mr. O'Day.

Tim O'Day: Yeah, I wouldn't say that we saw a trend that would be a clear down X, down Y, down Z that was favorable. I think the lower claims volume, for the reasons that I commented on earlier, was fairly stable through the quarter.

Sabahat Khan: Yeah, I wouldn't say that we saw...

Team O'Day: Thank you operator and good morning everyone and thanks for joining us for today's call. On the call with me today is Jeff Murray, our Executive Vice President and Chief Financial Officer and Brian Kaner who I'm pleased to announce has been appointed President and Chief Operating Officer of Void Group Services Inc. In his expanded role Brian will have operating responsibility for the entire company.

Speaker Change: trend that would be a clear down X down Y down Z that was favorable. You know I think the the lower claims volume for the reasons that I commented on earlier were fairly stable through the quarter.

Timo O'Day: Okay, that's helpful.

Steven Hansen: Okay, that's helpful. And then just if I'm jumping back over to the margin side, the last quarter of performance-based pricing was a bigger hit, you've recognized that there's less of an impact there, but it sounds like it's still part of a drag on margins. How do we think about sort of that specific element going forward on a margin basis?

Sabahat Khan: Okay, that's helpful. And then just if I'm jumping back over to the margin side, the last quarter of performance-based pricing was a bigger hit, you've recognized that there's less of an impact there, but it sounds like it's still part of a drag on margins. How should we think about sort of that specific element going forward on a margin basis?

Timo O'Day: And then just if I'm jumping back over to the margin side, in the last quarter of performance-based pricing was a bigger hit. You've recognized that there's less of an impact there, but it sounds like it's still part of a drag on margins.

Speaker Change: Okay, that's helpful. And then just if I'm jumping back over to the margin side, in the last quarter, performance based pricing was a bigger hit. You've recognized that there's less of an impact there, but it sounds like it's still part of a drag on margins. How do we think about sort of that specific element going forward on a margin basis?

Team O'Day: Concurrent with this change I will remain Chief Executive Officer however we're linked with the title of President. This change is being made to position Brian with company-wide operating oversight, responsibility and influence.

Timo O'Day: How should we think about sort of that specific element going forward on a margin basis? Yeah, I take the beginning and the third quarter of last year. We had an uptick in performance-based pricing. So there may have been a modest headwind in Q2 as a result of kind of lapping that change year over year. But overall, our performance with clients was excellent in the second quarter, and that had a favorable impact for us.

Tim O'Day: Yeah, I think that beginning in the third quarter of last year, we had an uptick in performance-based pricing, so there may have been a modest headwind in Q2 as a result of kind of lapping that change year over year. But overall, our performance with clients was excellent in the second quarter, and that had a favorable impact on us.

Team O'Day: We've released our 2024 second quarter results before markets open today. You can access our news release as well as our complete financial statements and management discussion and analysis on our website at VoidGroup.com. Our news release, financial statements and MDNA have also been filed on Cedar Plus this morning.

Speaker Change: yeah i think that

Speaker Change: Beginning in the third quarter of last year, we had an uptick in performance-based pricing.

Speaker Change: So, there may have been a modest headwind in Q2 as a result of kind of lapping that change year over year. But overall, our performance with clients was excellent in the second quarter, and that had a favorable impact for us.

Team O'Day: On today's call we'll discuss the financial results for the three and six month period and the June 30, 2024 and provide a general business update.

Timo O'Day: Hopefully, and just one last one if I may, is just around. It strikes me that the performance across the continent is actually quite diverse or variable. And at the same time, it sounds like the larger players, yourselves included, are taking share.

Steven Hansen: Helpful. And just one last one, if I may, it's just around the corner. It strikes me that performance across the continent is actually quite diverse or variable. And at the same time, it sounds like the larger players, yourselves included, are taking share. I'm just trying to get a sense for whether or not you think that creates an opportunity to accelerate M&A as the pressure becomes more apparent on the smaller players. Or does that present too much of a risk in a pausing environment where you might be adding capacity that's not necessarily full and hard to fill? So to try to weigh those two against each other, you know, pressure is building; it should create opportunity. But

Speaker Change: helppeful into justthis one last one if i ed it'the around

Speaker Change: it strakkes me that the performance across

Team O'Day: We'll then open the call for questions.

Speaker Change: The continent is actually quite diverse or variable, and at the same time it sounds like the larger players...

Team O'Day: During the second quarter of 2024 Void recorded sales of $779.2 million, adjusted EBITDA of $89.6 million and net earnings of $10.8 million. As reported by industry sources, repairable claims continued to be down approximately 7% during the second quarter of 2024. By contrast, the company's same-source sales experience declined of only 3.2% demonstrating void stability to gain market share even in a difficult environment. Under normal conditions, the decline in repairable appraisals due to ADAS and higher total loss rates would be more than offset by the increased miles driven and increased costs of repair.

Timo O'Day: I'm just trying to get a sense for whether or not you think that creates an opportunity to accelerate M&A as the pressure becomes more apparent on the smaller players. Or does that present too much of a risk in a pausing environment where you might be adding capacity that's not necessarily full and hard to fill. So to turn away those two off each other, you know, pressure is building. It should create opportunity, but.

Speaker Change: I'm just trying to get a sense for whether or not you think that creates an opportunity to accelerate M&A as the pressure becomes more apparent on the smaller players, or does that present too much of a risk in a pausing environment where...

Sabahat Khan: you might be adding capacity that's not necessarily full and hard to fill. So to try to weigh those two off each other, you know, pressure is building, it should create opportunity.

Tim O'Day: It's a really good question. I think we need to continue at our planned level of growth to build our business and accomplish our goals but be sensitive to the fact that we have a challenging short-term environment. But we're not going to act in a short-term manner as it relates to growth because of what we're facing today. We remain committed to growing units and ultimately to driving organic growth in whatever way we can. So I don't think it really changes our plan at all.

Timo O'Day: It's a really good question. I think we need to continue on our planned level of growth to build our business and accomplish our goals, but be sensitive to the fact that we have a challenging short-term environment. But we're not going to act in a short-term manner as it relates to growth because of what we're facing today. We remain committed to growing units and ultimately to driving organic growth in whatever way we can. So I don't think it really changes our plan at all.

Sabahat Khan: It's a really good question. I think we need to continue on our planned level of growth to build our business and accomplish our goals, but be sensitive to the fact that we have a challenging short-term environment.

Speaker Change: But we're not going to...

Team O'Day: However, weather-related factors, changes in consumer behavior due to economic uncertainty and higher insurance premiums resulted in the deferral and non-violent of claims which further negatively impacted repairable appraisals in the second quarter. The internalization of scanning and calibration services, progress, and void repair for strategy, and focus on the use of cost-effective alternative parts delivered strong value by lowering repair costs for the company's customers and consequently reduced sales that could have otherwise been achieved while benefiting gross margin percentage. This resulted in a significant sequential improvement in gross margins and adjusted EBITDA as a percentage of sales, moving from 44.8% and 10.4% in the first quarter to 45.6% and 11.5% in the second quarter respectively.

Speaker Change: Act in a short-term manner as it relates to growth because of what we're facing today. We we remain committed To growing units and and ultimately to drive an organic growth In in whatever way we can so I don't think it really changes our plan at all

Timo O'Day: Okay, appreciate the time. Thank you.

Steven Hansen: Okay, I appreciate the time. Thank you.

Sabahat Khan: Okay, I appreciate the time. Thank you.

Gary Ho: The next question comes from the line of that will young with the whole piece ahead. I just wanted to touch on margins and specifically, I'm not sure if you can give this level of granularity, but what would the four-wall economics look like for the mature collision repair locations and just trying to get a sense of, you know, how are they trending from a margin and profitability perspective relative to 2019 and I guess what I'm really getting at is just trying to strip out the impacts of a lot of these corporate level initiatives around, you know, green field ramp ups and scanning and calibration and the technician development program but just sort of drilling down to, you know, the four-wall economics of those mature locations.

Operator: And your next question comes from the line of Daryl Young with Steeple. Please go ahead.

Sabahat Khan: it

Speaker Change: And your next question comes from the line of Daryl Young with Stipo. Please go ahead.

Daryl Young: Hey, good morning everyone. I just wanted to touch on margins, and specifically, I'm not sure if you can give this level of granularity, but what would the four-wall economics look like for the mature collision repair locations, and just trying to get a sense of, you know, how are they trending from a margin and profitability perspective relative to 2019, and I guess what I'm really getting at is just trying to strip out the impacts of a lot of these, Corporate level initiatives around greenfield ramp ups and scanning and calibration and the technician development program, but just sort of drilling down to the four wall economics of those mature locations.

Sabahat Khan: Hey, good morning. Morning, Daryl.

Speaker Change: I just wanted to touch on margins, and specifically, I'm not sure if you can give this level of granularity, but what would the four-wall economics look like for the mature collision repair locations? I'm just trying to get a sense of how are they trending from a margin and profitability perspective relative to 2019? And I guess what I'm really getting at is just trying to strip out the impacts of a lot of these.

Speaker Change: Corporate level initiatives around greenfield ramp ups and scanning and calibration and the technician development program, but just sort of drilling down to the four wall economics of those mature locations.

Team O'Day: For the second quarter of 2024, sales were 779.2 million, a 3.4% increase when compared to the same period of 2023. This reflects 50.9 million of incremental contribution from 109 new locations. As mentioned earlier, our same source sales, excluding foreign exchange, decreased by 3.2% in the quarter, although repairable claims continued to be down approximately 7%. The second quarter recognized the same number of selling and production days when compared to the same period of 2023.

Jeff Murray: Yeah, sure, I can take that one. Jeff here. Yeah, I would say certainly it's part of the answer is that the drag from the new locations is affecting. And if you take that out, it does make a difference in terms of getting us back to where we were. If you just look at the four wall on the existing ones, but it wouldn't get us all the way there. I would say it might get us about halfway of the distance, so there's still some work to be done in terms of getting our leverage at the right level for the existing stores.

Jeff Murray: Yeah, sure, I can take that one. It's Jeff here.

Sabahat Khan: yes sure i can take that one jeff here and yeah i would say certainly 's it's part of part of the answer is that the drag from the new locations this is affecting if you take that out it does make a difference in terms of getting us back to where we were if you just to look at the four wall existing months but

Speaker Change: but it wouldn't get us all the waythere i would say it might get it about halfway of the distance so there's still there's still some work to be done in terms of getting our leverage to the right right level for the existing stores

Jeff Murray: Yeah, I would say it's part of the answer is that the drag from the new locations is, is affecting, and if you take that out, it does make a difference in terms of getting us back to where we were, if you just look at the four walls on the existing ones, but it wouldn't get us all the way there, I would say it might get us about halfway. So there's still some work to be done in terms of getting our lever to the right. The right level for for the existing

Team O'Day: Gross margin was 45.6% in the second quarter of 2024 compared to 45.5% achieved in the same period of 2023. Gross margin percentage benefited from increased scanning and calibration, higher parts margins, improved glass margins, and improvements in performance-based pricing. Laborate increases have added sales and gross profit dollars, however margins remain below historical levels.

Daryl Young: And then in terms of Boyd's thinking around the ADAS headwinds, I think in the past you said it's about a hundred basis points impact annually due to the ramp up of the new technology. Is that something you expect to accelerate in the years ahead, or is that sort of a hundred basis points impact annually something you expect to be stable for the next few years?

Jeff Murray: Okay, and then in terms of voids thinking around the eight ass headwinds, I think in the past you said it's about a hundred basis point impact annually of the ramp up of the new technology. Is that something you expect to accelerate in the years ahead, or is that sort of hundred basis point impact annually? Something you expect to be stable for the next few years. Yeah, the hundred basis points is really miles driven going up by about one point a year and a dash for the next several years, having a likely around a two point impact netted out 100 basis points.

Speaker Change: Got it. Okay. And then in terms of

Boyd: Boyd's thinking around the eight <expletive> headwinds. I think in the past you said it's about a hundred basis point impact annually of the ramp up of new technology

Speaker Change: Is that something you expect to accelerate in the years ahead, or is that sort of 100 basis point impact annually, something you expect to be stable for the next few years?

Jeff Murray: Yeah, the 100 basis points is really miles driven, going up by about one point a year, and ADAS for the next several years having likely around a two-point impact, netting to that 100 basis points, and I don't see that accelerating. In some ways, the lack of new car sales may even slow it a bit, but we do expect that as this unfolds, the cost of repair because of those systems will more than offset the decline in claim volume per mile driven.

unknown: Yeah, the 100 basis points is really miles driven, going up by about one point a year, and ADAS for the next several years having likely around a two-point impact netting to that 100 basis points. I don't see that accelerating. In some ways, the lack of new car sales may even slow it a bit, but we do expect that as this unfolds, the cost of repair because of those systems will more than offset the decline in claim volume per mile driven.

unknown: Yeah, the 100 basis points is really miles driven going up by about one point a year and ADAS for the next several years having likely around a two-point impact.

Team O'Day: Operating expenses for the second quarter of 2024 were 265.9 million or 34.1% of sales, compared to 247.3 million or 32.8% of sales in the same period as 2023. Operating expenses as a percentage of sales was negatively impacted by the decline in same source sales and new locations which contributed sales, but with a higher operating expense ratio. Adjusted EBITDA or EBITDA adjusted per fair value adjustments to financial instruments and costs related to acquisitions and transactions was 89.6 million, a 6.1% decrease over the same period in 2023. The decrease was a result of lower same source sales, partially offset by improvements in gross margin percentage.

Daryl Young: Got it. OK, that's helpful. Thanks, guys.

Jeff Murray: And I don't see that accelerating in some ways. It may be the lack of new car sales may even slow it a bit. But we do expect that, as that unfolds, the cost of repair, because of those systems, will more than offset the decline in claim volume per mile driven. Got it. Okay, that's helpful. Thanks, guys.

unknown: Netting to that 100 basis points and I don't see that accelerating and in some ways the lack of new car sales may Even slow it a bit

unknown: but we do expect that as that unfolds that the cost of repair because of those systems will more than offset the decline in claim volume prmile driven

Timo O'Day: Thank you.

Speaker Change: got it ok that's helpful thanks guys

Operator: Thank you. And your next question comes from the line of Tamy Chen with BMO Capital Markets. Please go ahead.

Tamy Chen: And your next question comes from the line of Tammy Chan with BMO Capital Markets. Please go ahead.

Speaker Change: asjo in the

Speaker Change: thank you and your next question comes from the line of cmy chanl with be ao capital markets please goahead

Tamy Chen: Morning, Tammy. Hi guys. Morning, Tim.

Tamy Chen: Hi guys. Morning, Tim.

Tamy Chen: Yeah, so a couple questions from my end. First is I just curious. Is the volume you saw so so industry claim volume down about seven percent in a quarter. I know your comp was down to three percent, but that would have twice and there are two. So I'm just wondering that. Is it fair to say your volumes into two with similar to the industry decline, or was it not as bad? No, I wouldn't say that. You know that it's interesting to when you take the seven percent reported were parable claims volume. That is further wrote it by claims that are made where people choose not to repair.

Speaker Change: mored jimmy

Speaker Change: Hi guys, morning Tim. Yeah, so a couple questions from my end

Team O'Day: Net earnings for the second quarter of 2024 was 10.8 million compared to 26.3 million in the same period of 2023. Excluding fair value adjustments and acquisition and transaction costs, adjusted net earnings for the second quarter of 2024 was 11.9 million or 56 cents per share compared to 27 million or $1.26 per share in the same period of the prior year. Net earnings and adjusted net earnings for the period was negatively impacted but the decrease in adjusted EBITDA as well as the increased finance costs and increased depreciation related to location growth.

Speaker Change: First is, I'm just curious, um...

Speaker Change: The volume you saw, so industry claimed volume down about 7% in the quarter. I know your comp was down 3%, but that would have price in there too. So I'm just wondering,

Speaker Change: Is it fair to say your volume in Q2 was similar to the industry decline or was it not as bad?

unknown: No, I wouldn't say that. You know, it's interesting that when you take the seven percent reported repairable claims volume, that is further eroded by claims that are made where people choose not to repair. So the seven percent is the repairable claims filed, not necessarily what was offered up to the collision industry for repair to the extent that people choose to defer or not repair at all. We also saw a pretty significant softening of the average repair cost increase during the quarter.

Tim O'Day: Yeah, so a couple questions from my end. First, the volume you saw, so industry claim volume was down about 7% in the quarter. I know your comp was down 3%, but that would have price in there too. So I'm just wondering, is it fair to say your volume in Q2 was similar to the industry decline, or was it not as bad?

unknown: No, I wouldn't say that, you know. It's interesting that when you take the 7% reported repairable claims volume,

Tim O'Day: No, I wouldn't say that. You know, it's interesting that when you take the seven percent reported repairable claims volume, that is further eroded by claims that are made where people choose not to repair. So the seven percent is the repairable claims filed, not necessarily what was offered up to the collision industry for repair to the extent that people choose to defer or not repair at all. We also saw a pretty significant softening of the average repair cost increase during the quarter.

unknown: That is further eroded by claims that are made where people choose not to repair it. So the 7%...

Timo O'Day: So the seven percent is the repairable claims filed, not necessarily what was offered up to the collision industry for repair. If the extent that people choose to defer or not repair at all. We also saw a pretty significant softening of average repair cost increased during the quarter. Some of that was likely market. Some of it was. impacted by our own actions of increasing the use of cost-effectable alternative parts, internalizing scanning and calibration services, which allows us to deliver it at a lower cost for our customers, and an increase in our tendency to repair, particularly as it relates to plastic repairs, which we have a committed initiative that you can see in our ESG report to drive plastic repairs up.

Team O'Day: For the six months and a June 30, 2024, sales total 1.6 billion, an increase of 97.5 million or 6.6% when compared to the same period of the prior year. Driven by 109.2 million incremental contributions from 132 new locations that had not been an operation for the full comparative period. Our same-store sales, excluding foreign exchange, decreased by seven tenths of a percent for the six months end of June 30th, recognizing the same number of selling and production days when compared to the same period of the prior year.

unknown: is the repairable claims filed, not necessarily what was offered up to the collision industry for repair to the extent that people choose to defer or not repair at all.

Tim O'Day: Some of that was likely the market. Some of it was impacted by our own actions of increasing the use of cost-effective alternative parts, internalizing scanning and calibration services, which allows us to deliver them at a lower cost for our customers, and an increase in our tendency to repair, particularly as it relates to plastic repairs, which we have a committed initiative that you can see in our ESG report to drive plastic repairs up.

unknown: impacted by our own actions of increasing the use of cost effect alternative parts

unknown: Internalizing Scanning and Calibration Services which allows us to deliver it at a lower cost for our customers.

Team O'Day: As reported by industry sources, repairable appraisals were down, declining 7 to 8 percent on a year-over-year basis. Gross margin decreased to 45.2 percent of sales, compared to 45.6 percent of sales in the comparative period, will gross profit increase to $700 million from $669.7 million when compared to the same period of the prior year. Gross margin percentage decreased due to several factors, including variability due to performance-based pricing and lower contribution margins from a greater number of new locations.

Speaker Change: and an increase in our tendency to repair, particularly as it relates to plastic repairs, which we have a committed initiative that you can see in our ESG report to drive plastic repairs up. All of those drive costs down for our customer.

Tim O'Day: All of these drive costs down for our customer, although they shift to labor operations or a higher margin alternative part, so it's generally favorable for gross margins. So, you know, in the environment that we were in, while I'm really disappointed with the same store sales decline, I think our teams actually did a pretty good job of taking advantage of what was available in the market.

Timo O'Day: All of those drive cost down for our customer, although they shift to labor operations or a higher margin alternative part, so it's generally favorable for gross margin.

unknown: Although they shift to labor operations.

Speaker Change: or a higher margin alternative part so it's generally favorable for gross margin so

Timo O'Day: So, in the environment that we were in, well, I'm really disappointed with the same store sales decline. I think our teams actually did a pretty good job of taking advantage of what was available in the market. Oh, I see. Okay, so you're evolving, offered up to the repair shops. Sounds like it was lower than that. Okay, that's helpful to understand.

Speaker Change: You know, in the environment that we were in, well, I'm really disappointed with the same store sales decline.

Speaker Change: I think our teams actually did a pretty good job of taking advantage of what was available in the market.

Tamy Chen: Oh, I see. Okay, so you're the volume offered up for repair shops. Sounds like it was lower than that.

Team O'Day: Laborate increases have added the sales and gross profit dollars, however margins remain below historical levels. These negative impacts were modestly offset by the benefit of increased internalization of scanning and calibration and improved glass margins. Operating expenses increased $47.1 million compared to the same period of the prior year, primarily as a result of location growth and incremental expense investments. In addition, new locations contributed to sales, but with a higher operating expense ratio. Closed locations lowered operating expenses by $700,000.

Speaker Change: Oh, I see. Okay, so the volume offered up to the repair shops.

Speaker Change: Sounds like it was lower than that. Okay, that's helpful to understand and I remember

Tamy Chen: And I remember three or so months ago on your Q1 call, I think at the time, you said you weren't really seeing this consumer behavior dynamics; that it was more so that the miles went through weather. So are you saying at some point in the second quarter, your network saw more of this consumer behavior come to fruition? And I noticed you're describing it as deferral. So do you think that this part will come back and we'll have some ketchup when the macro part includes? Yeah, well, there are two questions. One is, did the consumer behavior change starting Q2?

Speaker Change: Just three or so months ago on your Q1 call, I think at the time, you said you weren't really seeing this consumer behavior dynamic that it was

Tim O'Day: Okay, that's helpful to understand. And I remember just three or so months ago on your Q1 call, I think at the time, you said you weren't really seeing this consumer behavior dynamics, that it was more so the mild winter weather. So are you saying that at some point in the second quarter, your network saw more of this consumer behavior come to fruition? And I noticed you're describing it as deferral. So do you think that this part will come back and we'll have some catch up when the macro part improves?

Speaker Change: more so that the miles went through whether it so so are you saying at some point in the second quarter your network saw more of this consumer behavior to come to soluition and i noticice you're describing it as deferral so do you think that this

Team O'Day: Adjusted EBITDA for the six months and a June 30th was $171.3 million compared to $180.1 million in the same period of the prior year. The $8.8 million decrease was primarily the result of declines and more parable claim volumes for services.

unknown: This part, we'll come back and we'll have some catch-up when the macro part improves.

Tamy Chen: Yeah, well, there are two questions. One is, did the consumer behavior change start in Q2? And I would say, looking back now, our assessment is that it started before that, but we couldn't attribute it to that. We didn't have any information that would allow us to do that. So we believed the majority of it was weather-related, which I do think. We still believe that the majority of the impact in Q1 and Q2 was weather-related, but this consumer behavior change is causing some disruption.

unknown: Yeah, well, there are two questions there. One is...

Timo O'Day: And I would say, looking back now, our assessment is that it started before that. But we couldn't attribute it to that. We didn't have any information that would allow us to attribute to it. So we believed the majority of it was weather related, which I do think we still believe that the majority of the impact in Q1 and Q2 was weather related. But this consumer behavior change is causing some disruption. As for deferred or not repaired, I would say historically, some portion of those claims will ultimately be repaired.

Speaker Change: You know, did the consumer behavior change starting Q2? And I would say, looking back now, our assessment is that it started before that.

unknown: But we couldn't attribute it to that. We didn't have any information that would allow us to attribute to it. So we believed the majority of it was weather related, which I do think, we still believe that the majority of the impact in Q1 and Q2

Team O'Day: We reported net earnings of $19.2 million compared to $47.1 million in the same period of the prior year. Adjusted end earnings per share decreased from $2.25 to $1. The decrease in adjusted end earnings per share is primarily attributable to the decrease in adjusted EBITDA as well as increased finance costs and increased depreciation related to new location growth.

unknown: was weather-related, but this consumer behavior change is causing some disruption. As for deferred or not repaired,

Tamy Chen: As for deferred or not repaired, I would say, historically, some portion of those claims will ultimately be repaired, but some will probably just not be repaired, and there will be damaged vehicles that will never be addressed by the collision repair market.

Speaker Change: I would say, historically, some portion of those claims will ultimately be repaired, but some will probably just not be repaired and there will be damaged vehicles that will never be addressed by the collision repair market.

Timo O'Day: But some will probably just not be repaired, and there will be damaged vehicles that will never be addressed by the collision repair market.

Team O'Day: At the end of the period, we have total debt net of cash of $1.2 billion. Debt net of cash increased when compared to the prior quarter, primarily as a result of acquisition activity and increased capital expenditures, including new location startups. In addition, startup locations have resulted in an increase in real estate assets. The company's strategy has been not to hold real estate except where necessary for growth opportunities. Certain startup locations necessitate short-term hold in a real estate until the build is complete and operations have begun.

Tim O'Day: Got it. And last one for me is Q3 so far. So we should take that as it's not gotten worse sequentially. It's a similar pace of headwinds as you saw in Q2. That's what we've seen thus far, yes.

Tamy Chen: And last one for me is the Q3 so far. So we should take that as it's not gotten worse sequentially. It's similar pace of headwinds as you saw in Q2. That's what we've seen thus far. Yes. Okay.

Speaker Change: Got it. And last one for me is the Q3 so far, so we should take that as it's not gotten worse sequentially, it's similar pace of headwinds as you saw in Q2.

unknown: That's what we've seen thus far, yes.

Tamy Chen: Thank you. Great. Thanks, Tammy.

unknown: ok thank you

Derek Lizard: And your next question comes from the line of Derek Lizard with TD Cohen. Please go ahead.

Speaker Change: Great. Thanks, Tamy.

Operator: And your next question comes from the line of Derek Lessard with TD Cohen. Please go ahead.

unknown: And your next question comes from the line of Derek Lessard with T.D. Cohen. Please go ahead.

Derek Lessard: Good morning, everybody. Good morning, Tim. And congratulations, Brian. I actually had a question regarding the management change, and maybe you could add some color to, I guess, the thinking behind that decision.

Derek Lizard: Yeah, good morning. Good morning, Tim. And congratulations, Brian.

Team O'Day: During 2024, 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 1.8 to 2% of sales. Excluding these expenditures, the company spent approximately 31.9 million or 2% of sales on capital expenditures during the six months ended June 30, 2024. The company spent 28.7 million or 2% of sales on capital expenditures excluding those related to acquisition and development during the same period of 2020.

Tim O'Day: Yeah, good morning, everybody. Good morning. Good morning, Tim. And congratulations, Brian . I just – I actually had a question regarding the management change and maybe if you could add some color to, I guess, the thinking behind that decision.

Timo O'Day: I actually had a question regarding the management change, and maybe if you could add some color to, I guess, the thinking behind that. Assistant. Sure. You know, I think just as part of growing Brian's responsibility and impact on the organization, I, as well as the board, felt it was appropriate to expand his area of responsibility to allow him to exert the same influence over our broader business that he has over our US coalition business. And well, you may not feel it in some of our results. I can tell you that we've made some great strides in our collision business over the past couple of years that I'm pretty proud of.

Tim O'Day: Sure. You know, as part of growing Brian's responsibility and impact on the organization, I, as well as the board, felt it was appropriate to expand his area of responsibility to allow him to exert the same influence over our broader business that he has over our U.S. collision business. And while you may not feel it in some of our results, I can tell you that we've made some great strides in our collision business over the past couple of years that I'm pretty proud of. So I think that that's really the primary reason for it, and I'm looking forward to working with Brian in his new role to continue to drive the business.

unknown: Sure, I think just as part of growing Brian's responsibility and impact on the organization.

Speaker Change: I, as well as the board, felt it was appropriate to expand his area of responsibility.

Speaker Change: to allow him to exert the same influence over our broader business that he has over our U.S. collision business and while you may not feel it in some of our results

Team O'Day: III. The company has a number of initiatives underway to ensure the business is well positioned for long-term success. Boyd has made progress in improving gross margins and keeping costs down for the company's customers in the second quarter of 2024. The continued claim softness has impacted demand for services thus far in the third quarter, which is resulting in similar same-store challenges that we experienced during the second quarter of 2024. Will claim volumes and demand for services are currently below prior year levels, Boyd views these as short-term trends and remains highly confident in the underlying fundamentals of the business over the longer term.

unknown: I can tell you that we've made some great strides.

Speaker Change: in our collision business over the past couple of years that I'm pretty proud of. So I think that that's really the primary reason for it, and I'm looking forward to working with Brian in his new role to continue to drive the business.

Timo O'Day: So I think that that's really the primary reason for it.

Timo O'Day: And I'm looking forward to working with Brian in his new role to continue to drive the business.

Derek Lessard: Okay, and just maybe one last one for me: I'm curious about how your backlog has trended so far and how you feel about the, you know, the size of your labor force compared to the backlog and volume. Well, we...

Timo O'Day: And just maybe one last one for me as curious about how your backlog has trended so far and how you feel about the size of your labor force compared to the backlog and volume. Well, it pains me to say it, but we have labor capacity that we're not fully utilizing now. And that's a pretty unfamiliar territory with us. Having said that, when we analyze it, I would say that the backlogs that we see in the business are pretty consistent with what we were experiencing prior to the pandemic. So this isn't new territory for us, but we need our teams to focus on taking care of our customers, making sure that we're delivering for our insurance clients and capturing opportunities that come available to us.

Speaker Change: Okay, and just maybe one last one for me, I'm just curious about how your backlog has trended so far and how you feel about the size of your labour force compared to the backlog and volume.

Tim O'Day: It pains me to say it, but we have labor capacity that we're not fully utilizing now, and that's pretty unfamiliar territory for us. Having said that, when we analyze it, I would say that the backlogs that we see in the business are pretty consistent with what we were experiencing prior to the pandemic. This isn't new territory for us, but we need our teams to focus on taking care of our customers, making sure that we're delivering for our insurance clients, and capturing opportunities that come available to us more aggressively than we've had to as we've gone through the significant surge in demand. This is territory where we need to change our behavior to take advantage of it or to make the most of it, but we have good experience.

unknown: We, it pains me to say it, but we have labor capacity that we're not fully utilizing now. And that's a, that's pretty unfamiliar territory for us.

unknown: Well, it pains me to say it, but we have labor capacity that we're not fully utilizing now. And that's pretty unfamiliar territory with us. Having said that, when we analyze it, I would say that the backlogs that we see in the business

Team O'Day: On a year-to-date basis, Boyd is added or required 30 new locations. Will this activity is running at a slower pace than was the case one year ago? Opportunities and Boyd's commitment to growth remain.

unknown: Having said that, when we analyze it, I would say that the backlogs that we see in the business are pretty consistent with what we were experiencing prior to the pandemic. So this isn't new territory for us, but you know, we need our teams to focus on taking care of our customers, you know, making sure that we're delivering for our insurance clients and capturing opportunities that come available to us more aggressively than we've had to as we've gone through the significant surge in demand, but this is territory that we need to change our behavior to take advantage of it or to make the most of it. But we have had good experience.

Team O'Day: The company has a robust pipeline of new location growth, including greenfield and brownfield development sites. We'll start up sites, experience a longer development cycle, and ramp up period when compared to single-shop acquisitions. These facilities offer a number of advantages, and as a result, the company plans to continue increasing the proportion of growth using this approach.

unknown: are pretty consistent with what we were experiencing prior to the pandemic. So this isn't new territory for us, but we need our teams to focus on.

unknown: taking care of our customers, you know, making sure that we're delivering for our our insurance clients.

Timo O'Day: More aggressively than what we've had to as we've gone through to the significant surge in demand, but this is territory that we need to change our behavior to take advantage of it or to make the most of it. But we have good experience in this.

unknown: and capturing opportunities that come available to us more aggressively than what we've had to, you know, as we've gone through the significant surge in demand. But this is territory that we need to change our behavior to take advantage of it or to make the most of it, but we have good experience in this.

Team O'Day: Despite the recent same-store sales growth challenges, the company remains confident that Boyd is on track to achieve its long-term growth goals, including doubling the size of the business on a constant currency basis from 21 to 25 against 2019 sales. In the long-term, management reigns confident in its business model and its ability to increase market share by expanding its presence in North America through strategic acquisitions alongside organic growth from Boyd's existing operations. A creative growth will remain the company's long-term focus whether it's through organic growth, new-store development, or acquisitions.

Timo O'Day: Thank you, everybody. Good luck. Thanks, Derek. Thank you.

unknown: Thanks, everybody, and good luck.

Gary Ho: And your next question comes from the line of Gary Ho; where they are then, please go ahead. Gary?

Operator: And your next question comes from the line of Gary Ho with Daytrotter. Please go ahead.

Operator: And your next question comes from the line of Gary Ho with Daytrotter Antiques. Go ahead.

Speaker Change: Thanks, Derek.

Speaker Change: And your next question comes from the line of Gary Ho with Daytrodden. Please go ahead.

Gary Ho: Hey, Gary. Hey, Gary. Good morning.

Gary Ho: Hey, good morning. So my first question to some going back to the same store sales growth, you still expect that to be down your year and two, three so far. Just wondering what environment do you think it'll take you to move that back to the positive territory? Is it stabilization and the use of prices to loss rates, or stabilization and insurance premiums? Just wondering what variables we should be tracking to see that inflection point. You know, I'm not sure I have a great answer for you on that. I mean, the certainty as we begin to lap the consumer behavior change, you would expect that we would start to see more normal growth in the market.

Gary Ho: So my first question is just on going back to same store sales growth, you still expect that to be down year over year and two, three so far. Just wondering what environment it will take you to move that back to positive territory. Is it stabilization in used car prices, the total loss rate, or stabilization and insurance premiums? Just wondering what variables we should be tracking to see that inflection point.

Gary Ho: Hey, good morning. So my first question is just on going back to same store sales growth. You still expect that to be down year over year and two, three so far. Just wondering what environment you think it will take you to move that back to the positive territory? Is it stabilization in used car prices, or total loss rate? or stabilization and insurance premiums; I was just wondering what variables we should be tracking to see that inflection point.

Gary Ho: during a your

Gary Ho: a goodmorning so my first question just on going back to the same storesales growth

Gary Ho: You still expect that to be down year-over-year and 2-3 so far. Just wondering, what environment do you think it will take you to move that back to the positive territory? Is it stabilization in the used car prices, total loss rates?

Team O'Day: The North American collision repair industry remains highly fragmented and offers attractive opportunities for industry leaders to build value through focused consolidation and economies of scale. As a growth company, Boyd's objective continues to be made to maintain a conservative dividend policy that will provide the financial flexibility necessary to support growth initiatives will gradually increase in dividends over time. The company remains confident in its management team, systems, and experience. This, along with the strong financial position and financing options, positions Boyd for success well into the future.

Gary Ho: or stabilization and insurance premiums. Just wondering what variables we should be tracking to see that inflection point.

Tim O'Day: You know, I'm not sure I have a great answer for you on that. I mean, certainly, as we begin to see the consumer behavior change, you would expect that we would start to see more normal growth in the market. There's no question that the weather impact in Q4 and Q1 was pretty meaningful, and I wouldn't expect that to recur, not even in Q2. We experienced less cat volume, like hail volume, than we had in the prior year.

Speaker Change: i'mthat's sure i have a great answer for you on that i mean the

Speaker Change: certainly as we begin to lap the consumer behavior change

Gary Ho: you would expect that that we would start to see more normal growth in the market

Gary Ho: There's no question that the weather impact in Q4 and Q1 were pretty meaningful, and I wouldn't expect that to recur. Even in Q2, we experienced less cat volume, like hail volume, than we had in the prior year. So there were a few different headwinds that are unusual, but I would expect as we lap the consumer behavior change, which looking back, I think probably began in Q4; maybe was most pronounced in Q1. Then we'll start to see a return to a more normal pattern.

Speaker Change: There is no question that the weather impact in Q4 and Q1 were pretty meaningful and I wouldn't expect that to recur. Even in Q2,

Speaker Change: We experienced less cat volume, like hail volume.

Team O'Day: With that, I would now like to open the call for questions.

Tim O'Day: So there were a few different headwinds that were unusual, but I would expect as we lap the consumer behavior change, which looking back, I think probably began in Q4, maybe it was most pronounced in Q1, that we'll start to see a return to a more normal pattern.

Operator: Operator? Thank you.

Speaker Change: than we had in the prior year. So there were a few different headwinds that are that are unusual. But I would expect as we lap the consumer behavior change, which looking back, I think probably began in Q4, maybe was most pronounced in Q1.

Operator: Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press a store followed by the number one on your telephone keypad. And if you're using a speaker phone, please pick up your handset, be broadcasting any keys. To withdraw your question, please press a store followed by the number two.

Speaker Change: that we'll start to see a return to more normal patterns.

Timo O'Day: Okay, that's helpful. And the next question, just on the location at, I know you did a date, you've added 30 locations with five that are considered start-ups, which is lower than the mix for start-ups last two years. I'm guessing you have some better line site in terms of start-ups, like this more controllable on your side. So as you look out the next time 12 months, should we see more of those looking out? Any color you can provide? Yeah, I think you know, the next 12 months is a pretty short period of time, but we have a number of them in our pipeline that will open up over the next 12 months. But we're also have a very concerted effort to identify and build out more of those.

Gary Ho: Okay, that's helpful. And then my next question just on the location ads, I know you've added 30 locations, with five that are considered startups, which is lower than the mix for startups in the last two years. I'm guessing you have some better line of sight in terms of startups, like this more controllable on your side. So as you look out the next 10-12 months, should we see more of those looking out? Can you provide any color you can?

Operator: One moment please for your first question.

Speaker Change: okaythat's helpful and then next question just on the location that and know you totodayd you've added thirty locations

Sabahat Khan: And your first question comes from the line of Sabaha's con with RBC Capital Markets. Please go ahead. Great, I think good morning. This kind of theme of folks not bringing in their cars for repair seems to come up a lot about a couple of calls across the ecosystem and autos.

Gary Ho: with five that are considered startups, which is lower than the mix for startups in the last two years. I'm guessing you have some better line of sight in terms of startups, like this more controllable on your side. So as you look out the next 10-12 months, should we see more of those looking out? Any color you can provide?

Gary Ho: with five that are considered startups, which is lower than the mix for startups last two years. I'm guessing you have some better line of sight in terms of startups, like that's more controllable on your side. So as you look out the next 10-12 months, should we see more of those looking out? Any color you can provide?

Team O'Day: You know, from your perspective, answer the conference that you have on 25 is your expectation that as the macro improves others early made kind of just through 25 and onward, that the pattern of bringing cars in for repair when damaged and making insurance claims that sort of normalize so is that something that we should read as being just tied to the macro environment and you know pocket books being a little bit tight? Yeah, absolutely.

Tim O'Day: Yeah, I think the next 12 months is a pretty short period of time. We have a number of them in our pipeline that will open up over the next 12 months, but we also have a very concerted effort to identify and build out more of those. I know we've commented on this in the past, but we expect greenfield development and brownfield to be a higher portion of our mix of growth in future years than it has been historically.

Speaker Change: yes i think you thenext twelvemonths is a pretty short period of timeebet we both we have

Speaker Change: a number ofthem inour pipeline that will open upover the nexttweve months but we'll also have a very concerted effort to identify and build out more of those so and i know we've come into this in the past but we expect

Timo O'Day: So, and I know we've come into that on this in the past, but we expect, you know, greenfield development and brownfield to be a higher portion of our mix of growth in the future years than it has been historically.

Team O'Day: I think it's a combination of the probably some concern over the economic environment, you know, insurance premiums having gone up significantly over the past couple of years and a reluctance on the part of some vehicles to file a claim in part for fear that it may further increase their insurance rates. I would say that you know as over the years as we've seen periods of economic uncertainty, it's pretty common for people to defer a claim or to cash out a claim rather than repair it, but generally that behavior bounces back the other direction over time.

Speaker Change: You know, greenfield development and brownfield to be a higher portion of our mix of growth in the future years than it has been historically.

Timo O'Day: Got it. And then just maybe just last one high level, just given the softer, seems to be a school environment, has that impacted the MNA valuation at all, just whether that's single shop or MSOs, any chance, just want to get an update on that front. You know, I would hope that it does, but I can't tell you that we've seen a material impact or change in that. But I also think it takes time for sellers to adjust to a new market. But we'll certainly be disciplined and looking for opportunities to pay fair evaluation, given the market environment.

Gary Ho: Got it. And then maybe just last one, high level, just given the softer Salesforce environment, has that impacted the M&A valuation at all, just whether that's single shop or MSOs by any chance? Just want to get an update on that front.

Tim O'Day: You know, I would hope that it does, but I can't tell you that we've seen a material impact or change in that. But, I also think it takes time for sellers to adjust to a new market, but we'll certainly be disciplined and looking for opportunities to pay fair valuations given the market environment.

unknown: You know, I would hope that it does, but I can't tell you that we've seen a material impact or change in that. But, I also think it takes time for sellers to adjust to a new market, but we'll certainly be disciplined and looking for opportunities to pay fair valuations given the market environment.

unknown: You know, I would hope that it does, but I can't tell you that we've seen a material impact or change in that, but I also think it takes...

unknown: time for sellers to adjust to a new market but will certainly be disciplined looking for opportunities to pay fair evaluations given the market environment

Team O'Day: Okay, and then I guess just the impact of this sort of what you're insurance partners, I guess is it making and just the volumes going down because for them may be going down, is that making pricing discussions any easier? How are they reacting to this dynamic? I don't think there's been a significant change in that dynamic, certainly it would be easier for them to make pricing concessions when they're profitable and if you look at those that have reported have had significant swings in profitability. So we are we're going to continue to aggressively pursue pricing creases to make sure that we're treated fairly in the marketplace and we really have never hesitated on that that's been ongoing.

Timo O'Day: Okay, great.

Gary Ho: Okay, great. Those are my questions.

Timo O'Day: Those are my questions.

Timo O'Day: Thank you. Great.

Gary Ho: Thank you. Great. Thanks, Gary.

Timo O'Day: Thanks, Gary.

Speaker Change: okgreat those of my questions take

Bret Jordan: So, the next question comes from the line of Brett Jordan with Jefferies. Please go ahead.

Operator: And our next question comes from the line of Bret Jordan with Jeffries. Please go ahead.

Operator: And our next question comes from the line of Bret Jordan. Will Jeffrey speak?

Speaker Change: Thanks, Gary.

Operator: And our next question comes from the line of Bret Jordan with Jefferies. Please go ahead.

Bret Jordan: Hey, good morning, guys. Good morning, Brett. How's the, I guess, the consumer demand change? Do you see that a lot of deductibles have been increased to offset the higher insurance premiums, and maybe with a higher deductible, we've just taken it. Now, the low end repair. I didn't get that date of this quarter, but I did get it last quarter, and well, there has been a bit of a creep up in the deductibles, you know, 500 moving to 1000 moving to 2500. It didn't look that significant. So I actually don't think that that's a primary driver, but I think it's more likely that people are either concerned about their jobs or concerned about the economy.

Bret Jordan: On the, I guess, consumer demand change, do you see that a lot of deductibles have been increased to offset the higher insurance premiums, and maybe with a higher deductible, we've just taken out the low-end repair? You know, I didn't get that data this quarter, Bret, but I did get it last quarter, and while there has been a bit of a creep up in the deductibles, you know, 500 moving to 1,000 or moving to 2,500, it didn't look that significant.

Bret Jordan: Hey, good morning, guys.

Bret Jordan: Morning, Bret. On the, I guess, the consumer demand change, do you see that a lot of the deductibles have been increased to offset the higher insurance premiums and maybe with a higher deductible we've just taken out the low-end repair?

Operator: I didn't get that data this quarter, Bret, but I did get it last quarter.

Speaker Change: And while there has been a bit of a creep up in the deductibles.

Team O'Day: Great and then you know just one last quick one on the scanning of the calibration side as you continue to internalize that you know is that something that when we look ahead to the next one to three years it's something you build at a steady pace or could there come an inflection point where you maybe dedicate a larger proportion of your cat backs and just maybe op acts to getting that internalization going thank you. I would say that we and what we didn't come in at specifically this quarter last quarter we did comment on the significant growth and employee count we had in that business and we continue to grow pretty rapidly what we've been saying is it'll take us two to three years to get to the point where we're servicing you know the vast majority of that business. And I would say that still holds true although we're interested in accelerating that to the extent that we can probably properly manage that growth. We make a great progress on that.

Speaker Change: five moving to a thousand are moving to thousand five hundred it didn't look atthat significant so i actually don't think that that's a

Bret Jordan: So I actually don't think that that's a primary driver of it. I think it's more likely that people are either concerned about their jobs or concerned about the economy or concerned about filing a claim and having higher insurance premiums even more than what they've had to absorb over the past 18 months. I guess on that same sort of trend then, do you see consumers coming in and getting an appraisal and then pocketing the check and not coming back for the repair?

Speaker Change: primary driver of it, I think it's more likely that people are

Speaker Change: Either concerned about their jobs, or concerned about the economy, or concerned about filing a claim and having higher insurance premiums even more than what they've had to absorb over the past 18 months.

Timo O'Day: I've heard about filing a claim and having higher insurance premiums, even more than what they had to absorb over the past 18 months.

Team O'Day: Thank you. Appreciate the color.

Bret Jordan: I guess on that same sort of trend then, do you see consumers coming in and getting an appraisal and then pocketing the check and not coming back for the repair?

Timo O'Day: I guess on that same sort of trend, then do you see consumers coming in and getting an appraisal and then pocketing the check and not coming back for the repair? In talking with our teams and the stores, they are telling me that they're seeing more of that. They're also seeing more customers come in with repairs that are in excess of their deductibles and paying out of pocket to avoid having to file a claim. Okay, those are probably on the edge, but yeah.

Bret Jordan: I guess on that same sort of trend then, do you see consumers coming in and getting an appraisal and then pocketing the check and not coming back for the repair?

Tim O'Day: In talking with our teams in the stores, they are telling me that they're seeing more of that. They're also seeing more customers come in with, you know, repairs that are in excess of their deductibles and paying out of pocket to avoid having to file a claim.

unknown: In talking with our teams in the stores, they are telling me that they're seeing more of that. They're also seeing more customers come in with, you know, repairs that are in excess of their deductibles and paying out of pocket to avoid having to

Bret Jordan: Those are probably, you know, on the edge.

Tim O'Day: you know, on the edge. But yeah, okay. And then alternative parts makes you sort of call out things that were driving margin. What's the dollar spent on alternative parts in average repair now?

unknown: Okay, those are probably on the edge, but yeah

Bret Jordan: Yeah, okay. And then alternative parts makes you sort of call out things that were driving margin. What's the dollar spent on alternative parts in the average repair now?

Timo O'Day: Okay, and then Alternative Parts makes, she's recalled out things that were driving margin. What's the dollar spent in alternative parts in average repair now? We don't disclose that. CCC provides some data on that. We've seen a meaningful increase in our mix of aftermarket, US, over the past quarter year over year in the quarter. Some of that is driven by a large US insurer that shifted their policy toward aftermarket parts or the use of aftermarket parts. Some of it is just our teams are getting even better and identifying and using parts to keep repair costs down for our customers.

Christopher Murray: Thank you and your next question comes from the line of Christopher similar to the DCT's ahead. Question. I'm just wondering how are you thinking about the Technician Development Program at this point, just in terms of maybe pulling back on it for cost savings or maybe the labor environment isn't as tight. So just how are you thinking about that through this year and next year? Yeah, Chris and it's Brian. You know, look, we continue to be committed to the Technician Development Program.

Speaker Change: Okay, and then alternative parts makes you sort of called out things that were driving margin. What what's the dollar spent on alternative parts in in average repair now?

unknown: We don't disclose that, but CCC provides some data on that.

Bret Jordan: We don't disclose that, but CCC provides some data on that.

Speaker Change: We don't disclose that. CCC provides some data on that.

Tim O'Day: We've seen a meaningful increase in our mix of aftermarket use over the past quarter, year over year. Some of that is driven by a large US insurer that shifted their policy toward aftermarket parts or the use of aftermarket parts. Some of it is just our teams are getting even better at identifying and using parts to keep repair costs down for our customers.

unknown: Yeah.

Speaker Change: We've seen a meaningful increase in our mix of aftermarket use over the past quarter, year-over-year in the quarter. Some of that is driven by...

unknown: A large U.S. insurer that shifted their policy toward aftermarket parts or the use of aftermarket parts. Some of it is just our teams are getting even better at identifying and using parts to keep repair costs down for our customers.

Christopher Murray: You know, we have pulled back on the level one portion of that program, which is, as you well know, is where the predominant amount of cost is just based on the environment that we're at right now.

Timo O'Day: Right, thank you. Thanks, Bret. Thank you.

Brian Kaner: But in the long run, we believe that that's still the right way for us to develop the next generation of technicians in our business and remain very committed to, you know, as volume starts to come back, remain very committed to continuing to grow that program. Okay, great. And just the comments on pulling back kind of in at the level one part of it. Did that start in Q3 or do you kind of start to pull back a bit in Q2?

unknown: Thanks, Bret. And you're next, Cole.

Operator: Thank you, and your next question comes from the line of Zachary Evershed with National Bank Prudential. Please go ahead.

Zachary Evershed: And your next question comes from the line of Zachary Evershed with National Bank Financial. Please go ahead. What is that?

Speaker Change: in key and your next question comes from the line of exzactly ever shaed with national bank proninciial teas ahead

Zachary Evershed: Good morning, Zach. So as used vehicle prices come down, what do you think the worst-case scenario is for spiking total loss rates? And how does that play out in Boyd's same store sales growth and margins?

Zachary Evershed: Morning, everyone.

unknown: So as used vehicle prices come down, what do you think the worst-case scenario is for spiking total loss?

Zachary Evershed: So, as used vehicle prices come down, what do you think the worst case scenario is for spiking total loss rates and how does that play out in Boyd, Samster, sales growth, and margins? Well, the higher total loss rates are definitely part of the drop in repairable appraisals. It probably accounts for, I think it was a 1.6 points of the 7-point drop in repairable appraisals. And that's directly tied to the decline in US tar values. So it certainly has an impact. It probably has an impact on our average cost of repair as well because some of those would have been higher-value repairs.

unknown: Good morning, Zach. Good morning, everyone.

Speaker Change: So as used vehicle prices come down, what do you think the worst-case scenario is for spiking total loss rates and how does that play out in Boyd-Sandstore sales growth and margins?

Brian Kaner: We pulled back a bit in Q2 as well. We're really focused on graduating the, you know, the tutors and threes that we have in the program right now. And you know, right now it's given the volume situation. It's, you know, it's much more, it's better for us to keep feeding the text that we have, you know, our body text that we have in the shops today as opposed to spreading that out across more people.

unknown: Well, the higher total loss rates are definitely part of the drop in repairable appraisals. It probably accounts for, I think it was at 1.6 points of the seven-point drop in repairable appraisals, and that's directly tied to the decline in used car values. So it certainly has an impact. It probably has an impact on our average cost of repair as well, because some of those would have been higher-value repairs.

Tim O'Day: Well, the higher total loss rates are definitely part of the drop in repairable appraisals. It probably accounts for, I think it was at 1.6 points of the seven-point drop in repairable appraisals, and that's directly tied to the decline in used car values. So it certainly has an impact.

unknown: well the higher total loss rates are definitely part of the drop and repaparable appraisals it probably accounts for it was at one point six points of the seven point drop and repaparirable appraisals

unknown: And that's directly tied to the decline in used car values. So it certainly has an impact. It probably has an impact on our average cost of repair as well, because some of those would have been higher value repairs.

Zachary Evershed: It probably has an impact on our average cost of repair as well because some of those would have been higher-value repairs. You know, I would expect total loss rates, if you look over a very long period of time, they've kind of crept up gradually. We've gone through a cycle of, you know, a significant downturn in total loss rates as used car values ramped up and then, you know, ticking back up to pretty close to historical levels or pre-pandemic levels now, maybe even slightly above.

Brian Kaner: I just added that, Chris, that the we talked even throughout last year about the fact that we were dissatisfied with the level of turnover in the first level of the program, which is the most expensive level. So some of the fine tuning we've done is really to be more selective. You'll recall that when we built this program up three years ago, we went from almost no one in it to several hundred people over a couple of years.

Timo O'Day: You know, I would expect total loss rates, if you look over a very long period of time, they've kind of crept up gradually. We've gone through a cycle of, you know, a significant downturn in total loss rates as used car values ramped up and then, you know, taking back up to pretty close to historical levels or pre-pandemic levels, not maybe even slightly above. It's hard to predict, but I don't think total loss rates are going to move dramatically. And so I would expect it to continue to have a small, gradual impact, but be offset by an increase in miles driven and an increase in claim cost.

unknown: You know, I would expect total loss rates, if you look over a very long period of time.

Speaker Change: they've kind of crept up gradually. We've gone through a.

unknown: a cycle of, you know, a significant downturn in total loss rates as used car value is ramped up and then, you know, ticking back up to

unknown: Pretty close to historical levels or pre-pandemic levels now, maybe even slightly above.

Zachary Evershed: It's hard to predict, but I don't think total loss rates are going to move dramatically. And so, I would expect them to continue to have a small gradual impact but be offset by increasing miles driven and increasing claim costs.

Brian Kaner: And I think this pause has given us the ability to be more selective at who goes into level one, which will result in more level one trainees getting to level to an ultimately graduating but at a lower, lower overall program cost. Okay, great.

unknown: It's hard to predict, but I don't think total loss rates are going to move dramatically. And so I would expect it to continue to have a small gradual impact, but be offset by increase in miles driven and increase in claim cost.

Timo O'Day: That's good color; thanks.

Tim O'Day: That's a good color, thanks. And then what's the impact on the network of Hurricane Debbie thus far?

Brian Kaner: That makes sense.

Timo O'Day: And then what's the impact on the network of Hurricane Debbie thus far? You know, we haven't fully assessed it. I can tell you that there, it wasn't as impactful from a flood standpoint, I'm told, is what many hurricanes are. There was probably more wind damage, which is; it's probably better for us. You know, flood damage doesn't generate much work for the collision repair industry, but wind damage and trees and debris can impact it. So, yeah, I would expect that it will have some favorable impact on the markets that it came through.

Brian Kaner: And just one last room for me on the acquisition front. As you noted, running at a bit of a slower pace this year, should we think of this pace as kind of a good run rate for the rest of the year? No, I wouldn't say that. I think that, you know, acquisitions have always been lumpy and it's hard to predict exactly when deals will get done. But I feel really good about our pipeline and I would expect I would expect to see stronger activity in the last half of the year than we've seen in the first half of the year as we successfully close on deals.

Speaker Change: That's good color, thanks. And then what's the impact on the network of Hurricane Debbie thus far?

unknown: You know, we haven't fully assessed it, but I can tell you that there it wasn't as impactful from a flood standpoint, I'm told, as many hurricanes are. There was probably more wind damage, which is probably better for us. Flood damage doesn't generate much work for the collision repair industry, but wind damage and trees and debris can impact it. So I would expect that it will have some favorable impact on the market.

Zachary Evershed: You know, we haven't fully assessed it, but I can tell you that there it wasn't as impactful from a flood standpoint, I'm told, as many hurricanes are. There was probably more wind damage, which is It's probably better for us, you know flood damage doesn't generate much work for the collision repair industry, but wind damage and trees and debris can impact it. So yeah, I would expect that it will have some favorable impact on the market.

unknown: You know, we haven't fully assessed it. I can tell you that it wasn't as impactful from a flood standpoint, I'm told, as what many hurricanes are. There was probably more wind damage, which is

unknown: Yeah, it's probably better for us. You know, flood damage doesn't generate much work for the collision repair industry, but wind damage and trees and debris can impact it. So yeah, I would expect that it will have some favorable impact on the markets that it came through.

Brian Kaner: We also are, and I mentioned this in my prepare comments, but we are building our pipeline of Greenfield and Brownfield facilities. And we feel really good about what that will do for us in the long run in terms of giving us the facilities and the capacity we need to service all aspects of our business and markets. So we remain very committed to growth and still see great opportunity.

Timo O'Day: Thank you very much.

Tim O'Day: Thank you very much. And then, on Brian's expanded responsibilities, Tim, do you feel that that frees up bandwidth for you to address other issues?

Timo O'Day: And then last one for me on Brian's expanded responsibilities. Tim, do you feel that freeze up bandwidth for you to address other issues? Yeah, I think it does. It will free up some time for me to focus on kind of our long-term strategic direction. One thing that I plan to spend a lot of time on is our One Company strategy, which is really important to us. And I also think that the way we're organizing ourselves, we're getting the right leadership in place to drive some things that will be very good for our business. We see synergy opportunities both with our auto-glass business and our calibration business.

Speaker Change: Thank you very much. And then last one for me on Brian's expanded responsibilities. Tim, do you feel that frees up bandwidth for you to address other issues?

Tim O'Day: Yeah, I think it does. It'll free up some time for me to focus on our long-term strategic direction. One thing that I plan to spend a lot of time on is our one company strategy, which is really important to us. And I also think that the way we're organizing ourselves, we're getting the right leadership in place to drive some things that will be very good for our business. We see synergy opportunities both with our auto glass business and our calibration business.

Speaker Change: yes i think it does it it ll freeup some time for me to focus on kind of our long-term strategic direction one thing that i planned has spbeen a lot of time on

Brian Kaner: Kennedy. Okay, perfect. Thanks, I'll jump back in the queue. Thank you.

Speaker Change: is our one company strategy, which is really important to us.

unknown: And I also think that the way we're organizing ourselves, we're getting the right leadership in place.

Steve Hansen: Thank you, and your next question comes from the line of Steve Hansen with Regan James. Please go ahead. Yeah, good morning guys. The first question is just around the same sort of sales growth. Can you at the risk of maybe being too granular? Can you maybe just give us a sense for the cadence on how it performed, wrote to Q to trying to sense for whether it had sort of bottomed earlier in the period or intro period or where your housing is basically trying to through that period just to give us a bit of insight into into the third quarter, recognizing the course that you're suggesting some more levels.

unknown: to drive some things that will be very good for our business. We see synergy opportunities both with our auto glass business and our calibration business.

Tim O'Day: And those are key areas that, as you know, we've spent a lot of time talking about over the past couple of years. We've made great progress, and I think we have more room to make progress in those areas, and this will allow us to do that.

Timo O'Day: And those are key areas that, as you know, we've spent a lot of time talking about over the past couple of years. We've made great progress, and I think we have more room to make progress in those areas, and this will allow us to do that.

Speaker Change: And those are key areas that, as you know, we've spent a lot of time talking about over the past couple of years. We've made great progress, and I think we have more room to make progress in those areas, and this will allow us to do that.

Zachary Evershed: That's great, thanks. I'll turn it over.

Timo O'Day: That's great.

Timo O'Day: Thanks.

Timo O'Day: I'll turn it over. Thanks, Zach.

Speaker Change: That's great. Thanks. I'll turn it over.

Operator: Thank you, and I don't have further questions at this time.

Tim O'Day: Thank you, and there are no further questions at this time. I would like to turn it back to Mr. Timo Dey for closing remarks.

Speaker Change: Thanks Jack.

Operator: I would like to turn it back to Mr. Timo Day for closing remarks. All right. Thank you, everybody, for joining us on today's call. I appreciate your questions and your investment in Boyd. And look forward to giving it an update when we report Q3 in November. Have a great day. Thank you, ladies and gentlemen. This concludes today's conference call. Thank you all for participating. You may now disconnect.

Speaker Change: Thank you. And there are no further questions at this time. I would like to turn it back to Mr. Timo Dey for closing remarks.

Steve Hansen: Yeah, I wouldn't say that we saw a trend that would be a clear down X, down Y, down Z that was favorable. You know, I think the lower claims volume for the reasons that I commented on earlier were fairly stable through the quarter.

Tim O'Day: Alright, thank you everybody for joining us on today's call. I appreciate your questions and your investment in Boyd and look forward to giving you an update when we report Q3 in November. Have a great day.

Speaker Change: All right. Thank you, everybody, for joining us on today's call. I appreciate your questions and your investment in Boyd, and I look forward to giving you an update when we report Q3 in November . Have a great day.

Operator: Thank you. And, ladies and gentlemen, this concludes today's conference call. Thank you all for participating.

Operator: Thank you. And, ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect.

Operator: Thank you. And ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect.

Team O'Day: Okay, that's helpful. And then just if I'm jumping back over to the margin side in the last quarter of performance based pricing was a bigger hit. You've recognized that there's less of an impact there, but it sounds like it's still part of a drag on margins. How should we think about sort of that specific element going forward on a margin basis? Yeah, I take the beginning and the third quarter of last year we had an uptick and performance based pricing.

Team O'Day: So there may have been a modest headwind in Q2 as a result of kind of lapping that change year over year. But overall our performance with clients was excellent in the second quarter and that had a favorable impact for us. Hopefully, and just one last one if I may is just around, it strikes me that the performance across the continent is actually quite diverse or variable. And at the same time, it sounds like the larger players yourselves included or taking share.

Team O'Day: I'm just trying to get a sense for whether or not you think that creates an opportunity to accelerate M&A as the pressure becomes more apparent on the smaller players. Or does that present too much of a risk in a pausing environment where you might be adding capacity that's not necessarily full and hard to fill. So to turn away those two off each other, you know, pressure is building. It should create opportunity, but.

Team O'Day: It's a really good question. I think we need to continue on our planned level of growth to build our business and accomplish our goals, but be sensitive to the fact that we have a challenging short term environment. But we're not going to act in a short term manner as it relates to growth because of what we're facing today. We remain committed to growing units and ultimately to driving organic growth in whatever way we can. So I don't think it really changes our plan at all.

Team O'Day: Okay, appreciate the time. Thank you.

Gary Ho: The next question comes from the line of that will young with the whole piece ahead.

Team O'Day: I just wanted to touch on margins and specifically, I'm not sure if you can give this level of granularity, but what would the four wall economics look like for the mature collision repair locations and just trying to get a sense of, you know, how are they trending from a margin and profitability perspective relative to 2019 and I guess what I'm really getting at is just trying to strip out the impacts of a lot of these corporate level initiatives around, you know, green field ramp ups and scanning and calibration and the technician development program but just sort of drilling down to, you know, the four wall economics of those mature locations. Yeah, sure, I can take that one, Jeff here.

Team O'Day: Yeah, I would say certainly it's part of the answer is that the drag from the new locations is affecting. And if you take that out, it does make a difference in terms of getting us back to where we were if you just look at the four wall on the existing ones but it wouldn't get us all the way there. I would say it might get us about halfway of the distance so there's still there's still some work to be done in terms of getting our leverage at the right right level for the existing stores.

Team O'Day: Okay, and then in terms of voids thinking around the eight ass headwinds, I think in the past you said it's about a hundred basis point impact annually of the ramp up of the new technology. Is that something you expect to accelerate in the years ahead or is that sort of hundred basis point impact annually. Something you expect to be stable for the next few years. Yeah, the hundred basis points is really miles driven going up by about one point a year and a dash for the next several years having a likely around a two point impact netted out 100 basis points.

Team O'Day: And I don't see that accelerating in some ways. It may be the lack of new car sales may even slow it a bit. But we do expect that as that unfolds that the cost of repair because of those systems will more than offset the decline in claim volume per mile driven. Got it. Okay, that's helpful. Thanks, guys. Thank you.

Tammy Chan: And your next question comes from the line of Tammy Chan with BMO capital markets. Please go ahead. Morning, Tammy. Hi guys. Morning, Tim. Yeah, so a couple questions from my end. First is I just curious. Is the volume you saw so so industry claim volume down about seven percent in a quarter. I know your comp was down to three percent, but that would have twice and there are two. So I'm just wondering that.

Tammy Chan: Is it fair to say your volumes into two with similar to the industry decline or was it not as bad? No, I wouldn't say that. You know that it's interesting to when you take the seven percent reported were parable claims volume. That is further wrote it by claims that are made where people choose not to repair. So the seven percent is the repairable claims filed not necessarily what was offered up to the collision industry for repair.

Tammy Chan: If the extent that people choose to defer or not repair at all. We also saw a pretty significant softening of average repair cost increased during the quarter. Some of that was likely market. Some of it was, impacted by our own actions of increasing the use of cost-effectable alternative parts, internalizing scanning and calibration services, which allows us to deliver it at a lower cost for our customers, and an increase in our tendency to repair, particularly as it relates to plastic repairs, which we have a committed initiative that you can see in our ESG report to drive plastic repairs up.

Tammy Chan: All of those drive cost down for our customer, although they shift to labor operations or a higher margin alternative part, so it's generally favorable for gross margin. So in the environment that we were in, well, I'm really disappointed with the same store sales decline. I think our teams actually did a pretty good job of taking advantage of what was available in the market. Oh, I see. Okay, so you're evolving, offered up to the repair shops.

Tammy Chan: Sounds like it was lower than that. Okay, that's helpful to understand. And I remember three or so months ago on your Q1 call, I think at the time, you said you weren't really seeing this consumer behavior dynamics that it was more so that the miles went through weather. So are you saying at some point in the second quarter, your network saw more of this consumer behavior come to fruition? And I noticed you're describing it as deferral.

Tammy Chan: So do you think that this part will come back and we'll have some ketchup when the macro part includes? Yeah, well, there are two questions. One is, did the consumer behavior change starting Q2? And I would say looking back now, our assessment is that it started before that. But we couldn't attribute it to that. We didn't have any information that would allow us to attribute to it. So we believed the majority of it was weather related, which I do think we still believe that the majority of the impact in Q1 and Q2 was weather related.

Tammy Chan: But this consumer behavior change is causing some disruption. As for deferred or not repaired, I would say historically, some portion of those claims will ultimately be repaired. But some will probably just not be repaired and there will be damage vehicles that will never be addressed by the collision repair market. And last one for me is the Q3 so far. So we should take that as it's not gotten worse sequentially. It's similar pace of headwinds as you saw in Q2. That's what we've seen thus far. Yes. Okay. Thank you. Great. Thanks, Tammy.

Derek Lizard: And your next question comes from the line of Derek Lizard with TD Cohen. Please go ahead. Yeah, good morning. Good morning, Tim. And congratulations, Brian.

Team O'Day: I actually had a question regarding the management change and maybe if you could add some color to I guess the thinking behind that. Assistant. Sure. You know, I think just as part of growing Brian's responsibility and impact on the organization, I as well as the board felt it was appropriate to expand his area of responsibility to allow him to exert the same influence over our broader business that he has over our US coalition business.

Team O'Day: And well, you may not feel it in some of our results. I can tell you that we've made some great strides in our in our collision business over the past couple of years that I'm pretty proud of. So I think that that's really the primary reason for it. And I'm looking forward to working with Brian in his new role to continue to drive the business.

Team O'Day: And just maybe one last one for me as curious about how your backlog has trended so far and how you feel about the size of your labor force compared to the backlog and volume. Well, it pains me to say it, but we have labor capacity that we're not fully utilizing now. And that's a pretty unfamiliar territory with us. Having said that, when we analyze it, I would say that the backlogs that we see in the business are pretty consistent with what we were experiencing prior to the pandemic.

Team O'Day: So this isn't new territory for us, but we need our teams to focus on taking care of our customers, making sure that we're delivering for our insurance clients and capturing opportunities that come available to us. More aggressively than what we've had to as we've gone through to the significant surge in demand, but this is territory that we need to change our behavior to take advantage of it or to make the most of it, but we have good experience in this.

Team O'Day: Thank you, everybody. Good luck. Thanks, Derek. Thank you.

Gary Ho: And your next question comes from the line of Gary Ho, where they are then please go ahead. Gary? Hey, good morning. So my first question to some going back to the same store sales growth, you still expect that to be down your year and two, three so far. Just wondering what environment do you think it'll take you to move that back to the positive territory? Is it stabilization and the use of prices to loss rates or stabilization and insurance premiums? Just wondering what variables we should be tracking to see that inflection point.

Team O'Day: You know, I'm not sure I have a great answer for you on that. I mean, the certainly as we begin to lap the consumer behavior change, you would expect that we would start to see more normal growth in the market. There's no question that the weather impact in Q4 and Q1 were pretty meaningful, and I wouldn't expect that to recur. Even in Q2, we experienced less cat volume, like hail volume than we had in the prior year.

Team O'Day: So there were a few different headwinds that are unusual, but I would expect as we lap the consumer behavior change, which looking back, I think probably began in Q4 maybe was most pronounced in Q1. Then we'll start to see a return to more normal pattern.

Team O'Day: Okay, that's helpful. And the next question, just on the location at, I know you did a date, you've added 30 locations with five that are considered start-ups, which is lower than the mix for start-ups last two years. I'm guessing you have some better line site in terms of start-ups, like this more controllable on your side. So as you look out the next time 12 months, should we see more of those looking out?

Team O'Day: Any color you can provide? Yeah, I think you know, the next 12 months is a pretty short period of time, but we have a number of them in our pipeline that will open up over the next 12 months, but we're also have a very concerted effort to identify and build out more of those. So, and I know we've come into that on this in the past, but we expect, you know, greenfield development and brownfield to be a higher portion of our mix of growth in the future years than it has been historically.

Team O'Day: Got it. And then just maybe just last one high level, just given the softer, seems to be a school environment, has that impacted the MNA valuation at all, just whether that's single shop or MSOs, any chance, just want to get an update on that front. You know, I would hope that it does, but I can't tell you that we've seen a material impact or change in that, but I also think it takes time for sellers to adjust to a new market, but we'll certainly be disciplined and looking for opportunities to pay fair evaluation, given the market environment.

Gary Ho: Okay, great. Those are my questions. Thank you.

Brett Jordan: Great. Thanks, Gary.

Team O'Day: So, the next question comes from the line of Brett Jordan with Jeffries. Please go ahead. Hey, good morning, guys. Good morning, Brett. How's the, I guess the consumer demand change? Do you see that a lot of deductibles have been increased to offset the higher insurance premiums, and maybe with a higher deductible, we've just taken it. Now, the low end repair. I didn't get that date of this, this quarter, but I did get it last quarter, and well, there has been a bit of a creep up in the deductibles, you know, 500 moving to 1000 moving to 2500.

Team O'Day: It didn't look that significant. So I actually don't think that that's a primary driver, but I think it's more likely that people are either concerned about their jobs or concerned about the economy. I've heard about filing a claim and having higher insurance premiums even more than what they had to absorb over the past 18 months. I guess on that same sort of trend, then do you see consumers coming in and getting an appraisal and then pocketing the check and not coming back for the repair?

Team O'Day: In talking with our teams and the stores, they are telling me that they're seeing more of that. They're also seeing more customers come in with repairs that are in excess of their deductibles and paying out a pocket to avoid having to file a claim. Okay, those are probably on the edge, but yeah. Okay, and then Alternative Parts makes, she's recalled out things that were driving margin. What's the dollar spent in Alternative Parts in average repair now?

Team O'Day: We don't disclose that. CCC provides some data on that. We've seen a meaningful increase in our mix of aftermarket, US over the past quarter year over year in the quarter. Some of that is driven by a large US insurer that shifted their policy toward aftermarket parts or the use of aftermarket parts. Some of it is just our teams are getting even better and identifying and using parts to keep repair costs down for our customers.

Team O'Day: Right, thank you. Thanks, Bret. Thank you.

Zachary Evershed: And your next question comes from the line of Zachary Evershed with National Bank Financial, please go ahead. What is that?

Team O'Day: Morning, everyone. So as used vehicle prices come down, what do you think the worst case scenario is for spiking total loss rates and how does that play out in Boyd, Samster, sales growth and margins? Well, the higher total loss rates are definitely part of the drop in repairable appraisals. It probably accounts for, I think it was a 1.6 points of the 7 point drop in repairable appraisals. And that's directly tied to the decline in US tar values.

Team O'Day: So it certainly has an impact. It probably has an impact on our average cost of repair as well because some of those would have been higher value repairs. You know, I would expect total loss rates, if you look over a very long period of time, they've kind of crept up gradually. We've gone through a cycle of, you know, a significant downturn in total loss rates is use car values ramped up and then, you know, taking back up to pretty close to historical levels or pre-pandemic levels, not maybe even slightly above.

Team O'Day: It's hard to predict, but I don't think total loss rates are going to move dramatically. And so I would expect it to continue to have a small gradual impact, but be offset by increase in miles driven and increase in claim cost.

Team O'Day: That's good color, thanks.

Team O'Day: And then what's the impact on the network of Hurricane Debbie thus far? You know, we haven't fully assessed it. I can tell you that there, it wasn't as impactful from a flood standpoint I'm told, is what many hurricanes are. There was probably more wind damage, which is, it's probably better for us. You know, flood damage doesn't, doesn't generate much work for the collision repair industry, but wind damage and trees and debris can impact it. So, yeah, I would expect that it will have some favorable impact on the markets that it came through.

Team O'Day: Thank you very much.

Team O'Day: And then last one for me on Brian's expanded responsibilities. Tim, do you feel that freeze up bandwidth for you to address other issues? Yeah, I think it does. It will free up some time for me to focus on kind of our long-term strategic direction. One thing that I plan to spend a lot of time on is our one company strategy, which is really important to us. And I also think that the way we're organizing ourselves, we're getting the right leadership in place to drive some things that will be very good for our business. We see synergy opportunities both with our auto-glass business and our calibration business. And those are key areas that, as you know, we've spent a lot of time talking about over the past couple of years.

Operator: We've made great progress, and I think we have more room to make progress in those areas, and this will allow us to do that. That's great. Thanks. I'll turn it over. Thanks, Zach. Thank you, and I don't further questions at this time.

Team O'Day: I would like to turn it back to Mr. Timo Day for closing remarks. All right. Thank you, everybody, for joining us on today's call. I appreciate your questions and your investment in Boyd. And look forward to giving it an update when we report Q3 in November. Have a great day. Thank you, ladies and gentlemen. This concludes today's conference call. Thank you all for participating. You may now disconnect.

Q2 2024 Boyd Group Services Inc Earnings Call

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