Q2 2025 Boyd Group Services Inc Earnings Call

Speaker #3: Good morning, everyone. Welcome to the Boyd Group Services Inc second quarter 2025 results conference call. Listeners are reminded that certain matters discussed in today's conference call or answers that may be given to questions asked could constitute forward-looking statements.

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

Speaker #3: There is subject to risks and uncertainties, related to Boyd's future financial or business performance. After results could differ materially from those anticipated in these forward-looking statements.

Speaker #3: 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 cedar's database found at cedarplus.ca.

Speaker #3: I would like to remind everyone that this conference call is being recorded today Wednesday, August 13th, 2025. I would now like to introduce Mr. Brian Kaner.

Speaker #3: President and Chief Executive Officer of Boyd Group Services Inc. Please go ahead, Mr. Kaner.

Speaker #4: Thank you, operator. Good morning, everyone, and thank you for joining us for today's call. On the call today with me or on the call with me today is Jeff Murray, our Executive Vice President and Chief Financial Officer.

Brian Kaner: Thank you, Operator. Good morning, everyone, and thank you for joining us for today's call. On the call with me today is Jeff Murray, our Executive Vice President and Chief Financial Officer. We released our second quarter 2025 results before markets open today. You can access our news releases, as well as our complete financial statements and management discussion and analysis on our website at boydgroup.com. Our news release, financial statements, and MD&A have also been filed on SEDAR Plus this morning. On today's call, we will discuss the financial results of the quarter ended June 30, 2025, and provide a general business update. We will then open the call for questions.

Speaker #4: We released our second quarter 2025 results before markets open today. You can access our news releases as well as our complete financial statements and management discussion and analysis on our website at boydgroup.com.

Speaker #4: Our news release financial statements and MD&A have also been filed on cedarplus this morning. On today's call, we will discuss the financial results for the quarter ended June 30th, 2025, and provide a general business update.

Speaker #4: We will then open the call for questions. The Boyd team has been focused on improving profitability, deepening our customer relationships, and strengthening our go-to-market strategy for new location growth.

Brian Kaner: The Boyd team has been focused on improving profitability, deepening our customer relationships, and strengthening our go-to-market strategy for new location growth. I am pleased to report that we have begun to see the results of the team's hard work in our second quarter results. Throughout the second quarter, we continued to gain market share despite industry headwinds and expanded our gross margins by 120 basis points on the back of continued internalization of scanning and calibration, improved performance-based pricing, and improved parts margins. We also made headway with Project 360, which helped increase adjusted EBITDA margins to 12%, the highest quarterly adjusted EBITDA margin performance since 2023. In addition, early in the second quarter, we closed our first MSO acquisition since 2021 and surpassed the thousandth location milestone.

Speaker #4: I'm pleased to report that we've begun to see the results of the team's hard work in our second quarter results. Throughout the second quarter, we continue to gain market share despite industry headwinds and expanded our gross margins by 120 basis points on the back of continued internalization of scanning and calibration, improved performance-based pricing, and improved parts margins.

Speaker #4: We also made headway with project 360, which helped increase EBIT adjusted EBITDA to adjusted EBITDA margins to 12%. The highest quarterly adjusted EBITDA margin performance since 2023.

Speaker #4: In addition, early in the second quarter, we closed our first MSO acquisition since 2021 and surpassed the $1,000 location milestone. During the second quarter, we successfully executed the indirect staffing model, which was the first major initiative of project 360.

Brian Kaner: During the second quarter, we successfully executed the indirect staffing model, which was the first major initiative of Project 360. We are on track to generate $30 million in annual run rate savings from this initiative starting in Q2 and expect to achieve $40 million in incremental savings between Q3 of 2025 and the end of 2026, with incremental key initiatives focused on direct and indirect procurement spending. The remaining $30 million of our $100 million cost savings goal will be realized between 2027 and 2029. In addition to Project 360, there are several other important initiatives that we have been working on to strengthen our customer relationships, gain market share, and improve the cadence and strategic fit of our new location growth. To further strengthen our customer relationships, we have taken our long-standing while operating way one step closer to our insurance company clients.

Speaker #4: We are on track to generate $30 million in annual run rate savings from this initiative, starting in Q2, and expect to achieve $40 million in incremental savings between Q3 of 2025 and the end of 2026 with incremental key initiatives focused on direct and indirect procurement spending.

Speaker #4: The remaining $30 million of our $100 million cost savings goal will be realized between 2027 and 2029. In addition to project 360, there are several other important initiatives that we have been working on to strengthen our customer relationships and gain market share and improve the cadence and strategic fit of our new location growth.

Speaker #4: To further strengthen our customer relationships, we've taken our long-standing WOW operating way one step closer to our insurance company clients. While this enabled Boyd to achieve above-industry performance and net promoter score, total cycle time, and average cost of a repair, we've expanded this initiative to focus on each of our insurance company clients' unique performance indicators striving to provide all vehicle owners with an exceptional customer service experience.

Brian Kaner: While this enabled Boyd to achieve above industry performance in net promoter score, total cycle time, and average cost of a repair, we have expanded this initiative to focus on each of our insurance company clients' unique performance indicators, striving to provide all vehicle owners with an exceptional customer service experience. We have linked the compensation structure of our regional and field management to these custom performance metrics and believe this initiative has played an important role in our same-store sales industry outperformance. We have augmented our go-to-market strategy. We have undergone a comprehensive analysis of each of our regions to enable the company to take a more strategic approach to our new location growth with an emphasis on strengthening our position in our core markets.

Speaker #4: We have linked the compensation structure of our regional and field management to these custom performance metrics and believe this initiative has played an important role in our same-store sales industry outperformance.

Speaker #4: We have augmented our go-to-market strategy; we have undergone a comprehensive analysis of each of our regions to enable the company to take a more strategic approach to our new location growth with an emphasis on strengthening our position in our core markets.

Speaker #4: This will enable Boyd to generate enhanced revenue synergies and operating leverage, provide a more predictable cadence of new startup locations, and position ourselves to better serve our insurance company clients.

Brian Kaner: This will enable Boyd to generate enhanced revenue synergies and operating leverage, provide a more predictable cadence of new startup locations, and position ourselves to better serve our insurance company clients. In early 2025, we shifted our approach to development of new startup locations. On a go-forward basis, the development of startup facilities will be primarily outsourced, and upon completion, ownership will transfer directly to a leasing company. This approach will streamline the development process, deliver greater cost certainty, and enable the company to build a robust pipeline of new location growth. We have seen great progress in building this pipeline, and beginning Q3 2025, we are now on track to open an average of eight to ten new startup locations per quarter going forward.

Speaker #4: In early 2025, we shifted our approach to development of new startup locations. On a go-forward basis, the development of startup facilities will be primarily outsourced and upon completion, ownership will transfer directly to a leasing company.

Speaker #4: This approach will streamline the development process, deliver greater cost certainty, enable the company to build a robust pipeline of new location growth. We have seen great progress in building this pipeline and beginning Q3 2025, we are now on track to open an average of 8 to 10 new startup locations per quarter going forward.

Speaker #4: While the industry volumes continue to be challenged in the second quarter, over the past six months, we've seen an improvement in several factors that contributed to the industry decline.

Brian Kaner: While the industry volumes continue to be challenged in the second quarter, over the past six months, we have seen an improvement in several factors that contributed to the industry decline, namely a return to positive growth in used car pricing and moderating growth rates in insurance premiums. While we expected it to take time for the industry volumes to normalize and customers to adjust to higher insurance costs, we did experience some initial signs in our business late in the second quarter. We have thus far in the quarter, and this has continued thus far in the third quarter, enabling the company to post a modest amount of same-store sales growth in July.

Speaker #4: Namely, a return to positive growth and used car pricing and moderating growth rates in insurance premiums. While we expect it to take time for the industry volumes to normalize and customers to adjust to higher insurance costs, we did experience some initial signs in our business late in the second quarter.

Speaker #4: We have thus far in the quarter continued thus far in the third quarter enabling the company to post a modest amount of same-store sales growth in July.

Speaker #4: While we are pleased to see the initial signs of improvement in our volumes, we will continue to maintain our steadfast focus on executing our growth strategy, enhancing our profitability, and generating strong returns for our shareholders.

Brian Kaner: While we are pleased to see the initial signs of improvement in our volumes, we will continue to maintain our steadfast focus on executing our growth strategy, enhancing our profitability, and generating strong returns for our shareholders. I will now turn the call over to Jeff Murray to run through our Q2 results in more detail.

Speaker #4: I will now turn the call over to Jeff to run through our Q2 results in more detail.

Speaker #5: Thanks, Brian. During the second quarter, our sales increased 0.2% to $780.4 million, with same-store sales excluding foreign exchange decreasing by 2.1%. This decline was offset by $21 million of incremental revenue from 53 new locations that were not in operation for the full comparative period.

Jeff Murray: Thanks, Brian. During the second quarter, our sales increased 0.2% to $780.4 million with same-store sales, excluding foreign exchange, decreasing by 2.1%. This decline was offset by $21 million of incremental revenue from 53 new locations that were not in operation for the full comparative period. Similar to prior quarters, Boyd Group Services Inc. continued to outperform the industry. Based on claims processing platform data for the second quarter, we estimate that industry volumes were down in the range of 6% to 8%. Gross margin was 46.8% in the second quarter of 2025, up 120 basis points from the 45.6% achieved in the same period of 2024. Gross margin percentage increased due to several factors, including the benefits of internalization of scanning and calibration, improvements to performance-based pricing, and an increase in parts margins.

Speaker #5: Similar to prior quarters, Boyd continued to outperform the industry. Based on claims processing platform data for the second quarter, we estimate that industry volumes were down in the range of 6 to 8%.

Speaker #5: Gross margin was $46.8% in the second quarter of 2025, up 120 basis points from the $45.6% achieved in the same period of 2024. Gross margin percentage increased due to several factors, including the benefits of internalization of scanning and calibration.

Speaker #5: Improvements to performance-based pricing, and an increase in parts margins. Improvements to parts margins are the result of project 360 initiatives to enhance direct parts procurement to drive cost efficiencies.

Jeff Murray: Improvements to parts margins are the result of Project 360 initiatives to enhance direct parts procurement to drive cost efficiencies. To date, the company has not experienced any material impact as a result of tariffs. Operating expenses for the second quarter of 2025 were $271.7 million, or 34.8% of sales, compared to $265.9 million, or 34.1% of sales in the same period of 2024. Operating expenses as a percentage of sales was positively impacted by the introduction of Project 360, the transformational cost initiative launched during the fourth quarter of 2024. During the quarter, the company successfully rolled out the indirect staffing model and is on track to realize an annualized cost savings run rate of $30 million as a result.

Speaker #5: To date, the company has not experienced any material impact as a result of tariffs. Operating expenses for the second quarter of 2025 were $271.7 million, or 34.8% of sales.

Speaker #5: Compared to $265.9 million, or 34.1% of sales, in the same period of 2024, operating expenses as a percentage of sales were positively impacted by the introduction of Project 360.

Speaker #5: The transformational cost initiative launched during the fourth quarter of 2024. During the quarter, the company successfully rolled out the indirect staffing model. And is on track to realize an annualized cost savings run rate of $30 million as a result.

Speaker #5: More than offsetting this positive impact were lower same-store sales causing negative leverage. Quarter-to-quarter variation in certain accruals and an investment in facilities maintenance costs were spent in the quarter, being elevated due to pent-up demand from deferred work.

Jeff Murray: More than offsetting this positive impact were lower same-store sales, causing negative leverage, quarter-to-quarter variation in certain accruals, and an investment in facilities' maintenance costs with spend in the quarter being elevated due to pent-up demand from deferred work. The company also experienced incremental costs associated with the internalization of scanning and calibration and higher information technology expenses related to additional licensing and security costs. While the internalization of scanning and calibration continues to be positive for gross profit and adjusted EBITDA, it does not contribute incremental sales and therefore increases operating expenses as a percentage of sales. Despite the challenges faced this quarter, the company remains on track to realize its margin enhancement objectives. Adjusted EBITDA, or EBITDA adjusted for fair value adjustments to financial instruments and cost-related acquisitions and transformational cost initiatives, was $93.8 million, an increase of 4.7% over the same period of 2024.

Speaker #5: The company also experienced incremental costs associated with the internalization of scanning and calibration, and higher information technology expenses related to additional licensing and security costs.

Speaker #5: While the internalization of scanning and calibration continues to positively be positive for gross profit and adjusted EBITDA, it does not contribute incremental sales. And therefore increases operating expenses as a percentage of sales.

Speaker #5: Despite the challenges faced this quarter, the company remains on track to realize its margin enhancement objectives. Adjusted EBITDA or EBITDA adjusted for fair value adjustments to financial instruments and costs related to acquisitions and transformational cost cost initiatives was $93.8 million, an increase of 4.7% over the same period of 2024.

Speaker #5: Adjusted EBITDA margins increased to 12% in the second quarter, up from 11.5% in Q2 2024, and 10.3% in Q1 of 2025. Their year-over-year increase in adjusted EBITDA was a result of improvements in gross margin as well as lower operating costs and shop labor as a result of the rollout of project 360.

Jeff Murray: Adjusted EBITDA margins increased to 12% in the second quarter, up from 11.5% in Q2 2024 and 10.3% in Q1 of 2025. The year-over-year increase in adjusted EBITDA was a result of improvements in gross margin, as well as lower operating costs and shop labor as a result of the rollout of Project 360. Net earnings for the second quarter of 2025 were $5.4 million compared to $10.8 million in the same period of 2024. Excluding fair value adjustments and acquisition and transformational cost initiatives, adjusted net earnings for the second quarter of 2025 were $10.8 million, or $0.50 per share, compared to $11.9 million, or $0.56 per share in the same period of the prior year. Net earnings and adjusted net earnings for the period benefited from higher adjusted EBITDA but were negatively impacted by increased depreciation expense and increased finance costs.

Speaker #5: Net earnings for the second quarter of 2025 were $5.4 million, compared to $10.8 million in the same period of 2024. Excluding fair value adjustments, and acquisition and transformational cost initiatives, adjusted net earnings for the second quarter of 2025 was $10.8 million, or $0.50 per share, compared to $11.9 million or $0.56 per share in the same period of the prior year.

Speaker #5: Net earnings and adjusted net earnings for the period benefited from higher adjusted EBITDA but were negatively impacted by increased depreciation expense and increased finance costs.

Speaker #5: The increase in depreciation expense was primarily due to growth in locations, investment in network technology upgrades, as well as growth related to the calibration business.

Jeff Murray: The increase in depreciation expense was primarily due to growth in locations, investment in network technology upgrades, as well as growth related to the calibration business. At the end of the period, we had total debt net of cash of $1.2 billion. Debt net of cash before lease liabilities increased from $487.2 million at December 31, 2024, to $505.8 million at June 30, 2025. Debt net of cash before lease liabilities increased as a result of location growth. As noted earlier, during the first quarter of 2025, the company changed its approach, whereby on a go-forward basis, the development of startup facilities will primarily be outsourced, and upon completion, ownership will transfer directly to a leasing company. During the first half of 2025, the company completed sale-leaseback transactions for proceeds of $9.2 million.

Speaker #5: At the end of the period, we had total debt, net of cash of $1.2 billion. Debt net of cash before lease liabilities increased from $48.487.2 million at December 31st, 2024, to $505.8 million at June 30th, 2025.

Speaker #5: Debt net of cash before lease liabilities increased as a result of location growth. As noted earlier during the first quarter of 2025, the company changed its approach.

Speaker #5: Whereby on a go-forward basis, the development of startup facilities will primarily be outsourced and upon completion, ownership will transfer directly to a leasing company.

Speaker #5: During the first half of 2025, the company completed sale leaseback transactions for proceeds of $9.2 million. The sale leaseback transactions allowed the company to replenish capital that can be redeployed to further grow the business.

Jeff Murray: The sale-leaseback transactions allowed the company to replenish capital that can be redeployed to further grow the business. During 2025, the company plans to make cash capital expenditures, excluding those related to network technology upgrades and acquisition and development of new locations, within the range of 1.6% and 1.8% of sales. In addition to these capital expenditures, the company plans to invest in network technology upgrades to further strengthen our technology and security infrastructure and prepare for advanced technology needs in the future. Excluding expenditures related to network technology upgrades and acquisition and development, the company spent approximately $11.1 million, or 1.4% of sales on capital expenditures during the second quarter of 2025. The company spent $16.1 million, or 2.1% of sales on capital expenditures, excluding expenditures related to acquisition and development during the same period of 2024. I will now pass it back to Brian for closing remarks.

Speaker #5: During 2025, the company plans to make cash capital expenditures excluding those related to network technology upgrades and acquisition and development of new locations within the range of $1.6% and $1.8% of sales.

Speaker #5: In addition to these capital expenditures, the company plans to invest in network technology upgrades to further strengthen our technology and security infrastructure and prepare for advanced technology needs in the future.

Speaker #5: Excluding expenditures related to network technology upgrades and acquisition and development, the company spent approximately $11.1 million or $1.4% of sales on capital expenditures during the second quarter of 2025.

Speaker #5: The company spent $16.1 million or $2.1% of sales on capital expenditures excluding expenditures related to acquisition and development during the same period of 2024.

Speaker #5: I will now pass it back to Brian for closing remarks.

Speaker #4: Thanks, Jeff. As I mentioned in my initial remarks, the Boyd team has put forward great efforts to improve our business and to put us in the best possible position as demand for services increases.

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

Speaker #4: I want to thank them for their hard work and dedication. We had a busy start to the third quarter, and as we completed the acquisition of L&M Body Shop, a regional Virginia-based MSO with eight locations and surpassed the $1,000 location milestone.

Speaker #4: Over the past two quarters, we've seen an increase in acquisition opportunities and thanks to our strong balance sheet and disciplined approach to acquisitions, through the downturn, we are well positioned to take advantage of those opportunities.

Speaker #4: As we look forward, we will continue to remain focused on delivering our project 360 targets, realizing the benefits of our enhanced go-to-market strategy, and expanding our customer performance metrics and executing our proven growth strategy.

Speaker #4: With that, I'd now like to open the call to questions. Operator?

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

Speaker #3: Thank you, ladies and gentlemen. We will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your telephone keypad.

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

Speaker #3: Should you wish to cancel your request, please press the star followed by the two. If you're using a speakerphone, please lift your handset before pressing any keys.

Speaker #3: Once again, that is star one. Should you wish to ask a question? And your first question is from Steve Hansen from Raymond James. Your line is now open.

Speaker #2: Good morning, Steve.

Brian Kaner: Morning, Steve.

Speaker #6: Yeah, good morning, guys. Thanks for the time. Brian, as you look at your current levels of activity, that you described sort of progressing in a positive territory, you know, is it too early to call sort of the negative period behind us?

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

Speaker #6: I'm just trying to get a sense of whether we run the risk of dipping back and forth between positive and negative same-store sales here.

Speaker #6: I know the comps do get easier as the year progresses, but I'm just trying to get a sense for your confidence here and how things have progressed thus far.

Speaker #4: Yeah, I mean, look, one month doesn't make a trend. But we had seen, as we said, positive momentum coming out of the second quarter and that, you know, continuing into the third quarter, does that, that coupled with, you know, the commentary around just some of the, you know, the easing of the pressures that we've been experiencing over the last couple of quarters, you know, seems to point to positive.

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

Speaker #4: But, you know, I still think it's too early to, too early to tell how sustained that is.

Speaker #6: Okay, that's helpful. And just on a similar sort of tack, you know, the small tuck-in on post-Q2 of eight shops, by itself, isn't a big needle mover, but it does seem to signal that you're more confident in being willing to go after growth at the location side through M&A. How do you feel about that landscape today?

Brian Kaner: Okay, that's helpful. On a similar tact, the small tuck-in of eight shops post-quarter by itself isn't a big needle mover, but it does seem to signal that you are more confident in being willing to go after growth at the location side through M&A. How do you feel about that landscape today, relative to the recent pace, and how quickly do you think you would want to accelerate just given there appears to be some stability showing? Thanks.

Speaker #6: You know, relative to the recent pace and how quickly do you think you'd want to accelerate just given the peers to be some stability showing?

Speaker #6: Thanks.

Speaker #4: Yeah, well, I think the one, the one thing that we are experiencing is an increase in the number of those types of acquisitions or those types of opportunities coming into the pipeline.

Brian Kaner: Yeah, I think the one thing that we are experiencing is an increase in the number of those types of acquisitions, or those types of opportunities coming into the pipeline. As I said, given the strength of our balance sheet, it puts us in a really good position to be able to take advantage of those. We are and still remain very focused on leveraging larger deals like that to be able to get us an entry point into a market, where it actually gives us an established one or two position as we've expressed in our five-year goal. We continue to look for those smaller tuck-ins and then leveraging our brownfield/greenfield strategy to be able to build out density in the existing markets. I am actually really pleased with the progress, as we said, coming out of the bear at the beginning of this year.

Speaker #4: But as I said, given the strength of our balance sheet, it puts us in a really good position to be able to take advantage of those.

Speaker #4: We are still remain very focused on, on leveraging larger deals like that to be able to get us an entry point into a market.

Speaker #4: Where it actually gives us an established one or two positions, as we've expressed in our five-year goal. You know, we continue to look for those smaller tuck-ins and then, you know, leveraging our brownfield and greenfield strategy to be able to build out density in the existing markets.

Speaker #4: And I'm, I'm actually really pleased with the progress, as we said, coming out of the, the, or at the beginning of this year, we had liked, we would have liked to have been in a pipeline build of, you know, 8 to 10 greenfield locations by the time we got to the end of the year.

Brian Kaner: We would have liked to have been at a pipeline build of eight to ten greenfield locations by the time we got to the end of the year. As we sit here today and look out four quarters, we now have a fairly robust pipeline that is aligned to that eight to ten locations. So I think we will continue to be active in that small regional MSO space as well as continue to build out density in the markets that we participate in today.

Speaker #4: And as we sit here today and look out four quarters, you know, we now have a, you know, a fairly robust pipeline that's aligned to that 8 to 10% or 8 to 10 locations.

Speaker #4: So I think we'll continue to be active in that, you know, in that small regional MSO space as well as continue to build out density in the markets that, you know, we've participated in today.

Speaker #6: Very helpful. Thanks. I'll jump back to Q.

Brian Kaner: Very helpful. Thanks. I will jump back to the queue.

Speaker #2: Yep.

Speaker #3: Thank you. And your next question is from Christopher from CIBC. Your line is now open.

Operator: Thank you. Your next question is from Krista Friesen from CIBC. Your line is now open.

Speaker #7: Hi. Thanks for taking my question. And maybe just to follow up on some of the positive trends that you're starting to see, is it broad-based or are there kind of various pockets where you're starting to see more of an improvement in same-store sales?

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

Speaker #4: Yeah, I wouldn't say that there's any, any particular pocket. You know, we have experienced, you know, a pretty equal number, a pretty equal value of, you know, positivity across the market, which, you know, does indicate that some of the more positive signs that we're seeing in the market backdrop, you know, are part of the benefit that we're experiencing.

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

Speaker #7: Okay, great. And then maybe just on the expanding of the WOW operating way to your insurance partners, is that already underway and how long would you expect kind of the rollout of that to take?

Krista Friesen: Okay, great. Then maybe just on the expanding of the WOW operating way to your insurance partners, is that already underway? How long would you expect the rollout of that to take?

Speaker #4: Yeah, it actually is already underway. We changed the compensation structure of our regional and field leadership. At the beginning of the year, and again, we've got the focus, we've got the field really focused on, you know, winning with the customers.

Brian Kaner: Yeah, it actually is already underway. We changed the compensation structure of our regional and field leadership at the beginning of the year. We have got the field really focused on winning with the customers. As we said in the release and the preparative marks, it is not just good enough to win on net promoter score and total cost to repair and length of rental anymore or cycle time. We have to be cognizant of what it means to be successful with each of the individual clients and be able to have a team of people that are out in the field that are educated on what those metrics are and how to win with those particular customers. We have now aligned their compensation to those metrics as well.

Speaker #4: And as we said, you know, in the release, in the preparative remarks, it's not just good enough to win on net promoter score and total cost of repair and length of rental anymore or cycle time.

Speaker #4: It's, we have to be, we have to be cognizant of what it means to be successful with each of the individual clients. And be able to have a team of people that are out in the field that are educated on, you know, what those metrics are and how to win, how to win with those particular customers.

Speaker #4: And we've now aligned, you know, their compensation to those metrics as well. And it's, it's really given us a, you know, from the top to the bottom, a very, aligned organization around delivering what we do best, which is delivering an exceptional customer experience for both our insurance client and their customers.

Brian Kaner: It is really given us, from the top to the bottom, a very aligned organization around delivering what we do best, which is delivering an exceptional customer experience for both our insurance client and their customers.

Speaker #7: Okay, thanks. And if I could just squeeze one more in there, just as you switched over this compensation structure, have you been experiencing much pushback from the employees or maybe some increased turnover just as this shift has occurred?

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

Speaker #4: No. You know, look, generally speaking, our, you know, I would say our employee base wants to do what's right for the customer. You know, it has been a bit of an education opportunity to make sure that they understand what those metrics are and how to move the needle.

Brian Kaner: No. Look, generally speaking, our employee base wants to do what is right for the customer. It has been a bit of an education opportunity to make sure that they understand what those metrics are and how to move the needle, but we have not experienced any increase in turnover or pushback from the employee base.

Speaker #4: But we have not experienced any increase in turnover or pushback from the employee base.

Speaker #7: Okay, great. Congrats on the quarter. I'll pass the line.

Krista Friesen: Okay, great. Congrats on the quarter. I will pass the line.

Speaker #4: Thank you.

Brian Kaner: Thank you.

Speaker #3: Thank you. Your next question is from Chris Murray from ATB Capital Markets. Your line is now open.

Operator: Thank you. Your next question is from Chris Murray from ATB Capital Markets. Your line is now open.

Speaker #8: Yeah, thanks folks. Good morning. You know, maybe turning back to the star growth discussion, when you release a strat plan, I think the commentary was, you know, kind of a mix of the greenfield, brownfield, and the acquisitions.

Chris Murray: Yeah, thanks, folks. Good morning. Maybe turning back to the store growth discussion, when you released the strat plan, I think the commentary was a mix of the greenfield, brownfield, and acquisitions. At the time, at least, you had said the goal was maybe 80 to 100 stores a year. I guess the question I've got is, now that we're starting to look at acquisitions a little bit more, are you still comfortable in that 80 to 100 range? Leverage is still a little bit elevated. Just wondering how hard do you think you can press on the balance sheet, or if you need to, in order to achieve those types of goals?

Speaker #8: And at the time, at least you had said, you know, the goal was maybe 80 to 100 stores a year. I guess the question I've got is, you know, now that we're starting to see maybe look at acquisitions a little bit more, are you still comfortable in that 80 to 100 range?

Speaker #8: And, you know, leverage is still a little bit elevated. I'm just wondering, you know, how far do you think you can press on the balance sheet or if you need to in order to achieve those types of goals?

Speaker #4: Yeah, well, I'll comment on the first piece and then I'll let, I'll let Jeff comment on the leverage side. On the, you know, on the acquisition side, you know, we do still believe that, you know, again, our objective is to get to 1,400 plus locations in our five-year plan.

Brian Kaner: I will comment on the first piece, and then I will let Jeff comment on the leverage side. On the acquisition side, we do still believe that our objective is to get to 1,400-plus locations in our five-year plan. That is what enables us to get to the $5 billion of revenue in the next five years, and what allows us to essentially double our EBITDA. I expect that level is what is going to be required. I still believe we have the balance sheet to be able to do that. I think, as you look back, obviously, our Q1 earnings were a little bit depressed. As we look forward, coming out of this quarter, you would expect the leverage to continue to get better based on the EBITDA improvements that we are seeing. I do not see that as a constraint for us going forward.

Speaker #4: That's what enables us to get to $5 billion in revenue in the next five years and what allows us to essentially double our EBITDA.

Speaker #4: You know, I expect that that, you know, that level is what's going to be required. And I still believe we have the balance sheet to be able to do that.

Speaker #4: I think, you know, as you look back, you know, obviously our Q1 earnings were, you know, were a little bit depressed. And as we look forward, you know, coming out of this quarter, you'd expect the leverage to continue to get better based on the EBITDA improvements that we're seeing.

Speaker #4: So I don't see that as a constraint for us going forward. And, you know, I would expect that level of activity, you know, to continue.

Brian Kaner: I would expect that level of activity to continue. The other thing I would comment on is just part of the reason for the greenfield strategy. As you guys know, it is a very, the greenfield strategy, amongst all the other benefits, is a capital light strategy as well. It is a $1.2 million to $1.4 million investment in the location. It allows, as we have said in the prepared remarks, it allows somebody to take on the development cost and keeps us out of that equation. I do think that having, and I am pleased that we have already gotten to a place where we have got that kind of run rate trajectory that we were expecting in the pipeline. I would expect it to continue. Jeff, I do not know if you want to comment on the.

Speaker #4: And the other thing I would comment on is just part of the reason for the, you know, the greenfield strategy is you guys know it's a very, you know, the greenfield strategy amongst all the other benefits is a capital light strategy as well.

Speaker #4: It's, you know, it's a $1.2 to $1.4 million investment in the location. And it allows, as we've said in the prepared remarks, it allows somebody to take on the development cost and keeps us out of that equation.

Speaker #4: So I do think that having, and I am pleased that we've already gotten to a place where we've got, you know, that kind of run rate trajectory that we were expecting in the pipeline.

Speaker #4: And I'd expect it to continue. And Jeff, I don't know if you want to comment on the.

Speaker #2: No, I would echo your response on the balance sheet and, you know, not only with Q1 a challenge, but all of 2024 was really a challenge from a, you know, from a same-store performance perspective as well as all of the growth that we did.

Jeff Murray: I would echo your response on the balance sheet. Not only was Q1 a challenge, but all of 2024 was really a challenge from a same-store performance perspective, as well as all of the growth that we did in 2023 and 2024. It has somewhat been delayed in terms of them being able to achieve what their potential is. The maturation and improvement of overall conditions will generate additional cash from operations. It will help give us that capacity to continue to grow, as well as the continued success of Project 360 and the additional incremental cash flows that we expect will come from that.

Speaker #2: And in '23 and '24, you know, it's somewhat been delayed in terms of them being able to achieve what their potential is. So, you know, the maturation and improvement of overall conditions will generate additional cash from operations that'll help, you know, give us that capacity to continue to grow.

Speaker #2: As well as the, you know, the continued success of project 360 and the additional incremental cash flows that we expect will come from that.

Speaker #8: Okay, that's helpful. Thank you. And then maybe turning back to the same-store sales number and the conditions that you're seeing in the marketplace, again, appreciating in its early days, you know, we've heard kind of mixed ideas in the industry about some sort of recovery.

Chris Murray: Okay, that's helpful. Thank you. Turning back to the same-store sales number and the conditions that you are seeing in the marketplace, appreciating its early days, we have heard mixed ideas in the industry about some sort of recovery. The question is, what is it that is starting to give you some confidence that the number is changing? This goes, Steve asked the question a different way, but is there anything that you are seeing in terms of demand? Is it inventory building or whip building? What is pointing to your thoughts that not only are you seeing a moderate increase in same-store, but that could be sustainable?

Speaker #8: What, I guess the question is, what is it that's starting to give you some confidence that the numbers changing and maybe this goes, you know, I think Steve asked the question maybe a different way.

Speaker #8: But is there anything that you're seeing in terms of demand? Is it inventory building or whip building? You know, what's kind of pointing to, you know, your thoughts that, you know, not only are you seeing kind of a, in your words, I think it was a moderate increase in same-store, but that that could be sustainable?

Speaker #4: Yeah, I mean, well, look, we've pointed to for, you know, for over a year now, we've pointed to some very specific things that were happening in the macro backdrop that have had negative impacts on the business.

Brian Kaner: Yeah, I mean, well, look, we have pointed to, for, you know, for over a year now, we have pointed to some very specific things that were happening in the macro backdrop that have had negative impacts on the business. One had been, you know, the used car pricing, which has a knockout effect to, you know, total loss rates. As used car prices go down, total loss rates have a tendency to come up. As used car prices go up, total loss rates have a tendency to go down. So in the quarter, we saw used car prices up 2.8%. That is actually, you know, a bit of an, you know, call it an inflection point for used car pricing. You would expect as, you know, tariffs start to more negatively impact, you know, new car pricing, you would expect that to kind of continue to move up.

Speaker #4: One had been, you know, the used car pricing, which has a knockout effect to, you know, total loss rates, as used car prices go down, total loss rates have a tendency to come up as used car prices go up, total loss rates have a tendency to go down.

Speaker #4: So in the quarter or in the month, you know, or in the quarter we saw used car prices up 2.8%, that's actually, you know, that's a, you know, a bit of a, you know, call it an inflection point for used car pricing.

Speaker #4: And you would expect as, you know, tariffs start to more negatively impact, you know, used or new car pricing, you'd expect that to kind of continue to move up.

Speaker #4: So I think that's one piece of it. The other piece is, you know, as we sat here a year ago, and auto insurance premium inflation was sitting at 18.6%.

Brian Kaner: So I think that is one piece of it. The other piece is, you know, as we sat here a year ago, and auto insurance premium inflation was sitting at 18.6%. As we sit here today, it is sitting at 5%. Many carriers, you know, there has been some recent research done around carriers that are actually putting premium decreases into the marketplace just because of the high levels of profitability and the low loss rates they are experiencing. So I think that is also starting to, you know, ease its way into the macro backdrop. People are getting, you know, that we have said for a while that it takes time for the consumer base to work these premium increases into their kind of daily budgeting.

Speaker #4: As we sit here today, it's sitting at 5%. And many carriers, you know, there's been some recent research done around carriers that are actually putting premium decreases into the marketplace just because of the high levels of profitability and the high levels of, or the low loss rates they're experiencing.

Speaker #4: So, I think that is also starting to, you know, ease its way into the macro backdrop. And people are getting, you know, we've said for a while that it takes time for the consumer base to work the, you know, to work these premium increases into their kind of daily budgeting.

Speaker #4: And as that happens and as we start to lap that year over year, people start to, you know, they better position themselves to spend money on repairs when needed.

Brian Kaner: As that happens, and as we start to laugh that year over year, people start to, you know, they better position themselves to spend money on repairs when needed. So I do think that we are starting to see a little bit of the macro backdrop help us in terms of, you know, just the claims environment in general. So I think that is a piece of it. You know, we still have not, as you look at, you know, the total cost of a repair, we have still not seen that recover to the levels that it has been historically. You know, I think that is still, that still remains, at least as it is reported by CCC, that still remains an opportunity for us to continue to experience more growth.

Speaker #4: So I do think that we're starting to see a little bit of the macro backdrop help us in terms of, you know, just the, you know, just the claims environment in general.

Speaker #4: So I think that is a piece of it. And, you know, we still have not, as you look at, you know, the total cost of a repair, we've still not seen that recover to the levels that it has been historically.

Speaker #4: And, you know, I think that is still, that still remains, at least as it's reported by CCC, that still remains an opportunity for us to continue to experience more growth.

Speaker #8: Okay, that's helpful. And if I can just squeeze a quick kind of modeling one in. I know I've been asked the question a couple of times.

Chris Murray: Okay, that's helpful. If I can just read a quick kind of modeling one in, I know I've been asked the question a couple of times. Is there any way you can put some numbers around your expectation on that same-store number, at least at this point, in terms of like kind of a numeric range as opposed to just modest?

Speaker #8: Is there any way you can put some numbers around your expectation on that same-store number, at least at this point, in terms of a kind of numeric range, as opposed to just modest?

Speaker #4: I'll let Jeff answer that.

Brian Kaner: I'll let Jeff answer that.

Speaker #2: Well, I think that, I think we wanted to signal certainly that it's, that what we've seen thus far in the quarter is not, it's no longer negative.

Jeff Murray: I think we wanted to signal certainly that what we've seen thus far in the quarter is no longer negative. It has moved in another direction. I think the way to think about it is that as the sort of headwinds that we faced coming into this negative backdrop were gradual, so will the other direction. I think maybe that is probably as much as I am prepared to guide right now in terms of what that would mean. I think if you look, even if you look at some of our history in terms of how we have talked about our results to date in other reports over the years, you will probably be able to get a good range of what modest means.

Speaker #2: It's moved to any other direction. But I think, I think the way to think about it is that, you know, as the sort of headwinds that we faced coming into this, this negative backdrop was, was sort of gradual.

Speaker #2: So will the, so will the other direction. So I think maybe that's probably as much as I'm prepared to guide right now in terms of what that would mean.

Speaker #2: But I think if you look, even if you look at some of our history in terms of how we've talked about, you know, our results to date, in other reports over the years, you'll probably be able to get a good range of what modest means.

Speaker #8: All right. Sounds great. Okay, thanks, folks.

Chris Murray: All right. Sounds great. Okay, thanks, folks.

Speaker #4: Thanks.

Brian Kaner: Thanks.

Speaker #3: Thank you. Your next question is from Mark Jordan from Goldman Sachs. Your line is now open.

Operator: Thank you. Your next question is from Jeff Murray from Goldman Sachs. Your line is now open.

Speaker #6: Hey, thank you very much for taking my question. Can you talk a little bit about the new augmented code of market strategy and maybe how site selection now might differ from your prior approach?

Jeff Murray: Hey, thank you very much for taking my question. Can you talk a little bit about the new augmented go-to-market strategy and maybe how site selection now might differ from your prior approach? Then, if this might have any change in your outlook for either unit economics or prospective returns for startup facilities?

Speaker #6: And then, you know, this might have any change in your outlook for either unit economics or prospective returns for startups?

Speaker #4: Yeah, so, you know, we've taken a market, you know, we've taken a bit of a market-based approach to our development. And, you know, what that entails is us looking at a lot of different factors in terms of where we want to put, you know, new units and, you know, those factors are obviously modeled out and it allows us to then see, you know, where do our insurance clients need, you know, one, where do our insurance clients need new locations?

Brian Kaner: Yeah. So, we have taken a market-based approach to our development. What that entails is looking at a lot of different factors in terms of where we want to put new units. Those factors are obviously modeled out, and it allows us to then see where our insurance clients need new locations, what is the competitive density of the marketplace, what is the car park in the marketplace, what are our relationships with the carrier makeup in that marketplace amongst a bunch of other different factors. That allows us to essentially put a dot on a map. That dot on the map is then filled with, first, we would go out to the marketplace. The fastest path to fill in that space is to go look for an existing repair facility that is in that marketplace and acquire that location.

Speaker #4: What's the competitive density of the marketplace? What's the car park in the marketplace? You know, what's our, what are our relationships with the carrier makeup in that marketplace?

Speaker #4: Amongst a bunch of other different factors. And that allows us to essentially put, you know, a dot on a map. And that dot on the map is then, you know, filled with, you know, first we would go out to the marketplace, the fastest path to fill that, to fill in that space is to go look for, in existing repair facility that's in that marketplace and go buy that, you know, go acquire that location.

Brian Kaner: If that is not available, then we would move to the next step, which is to look for an existing building that is out there that we might be able to convert to a body shop. The third phase would be to put a greenfield location in that marketplace. It has just allowed us to get very specific about building out the density and filling in the white space in our markets to really build towards that one to two position in the marketplaces that we are in. So, we leverage CBSAs, which is broader than a market. There are, I think, 311 CBSAs in the U.S. So, we are looking at it in that type of a construct. It has just allowed us to get very purposeful with our spend. To your point, it hedges our ability to be successful in those locations.

Speaker #4: If that's not available, then we would move to the next step, which is to look for an existing building. That's out there that we might be able to convert to a body shop.

Speaker #4: And then the third phase would be, you know, to put a greenfield location in that marketplace. It's just allowed us to get very specific about building out the density and filling in the white space in our, in our markets to really build towards that 1 to 2 position in the marketplaces that we're in.

Speaker #4: So it's a very, you know, we leverage CBSAs, which is, you know, kind of broader than a market, but, you know, there's, I think there's 300 and 11 CBSAs in the US.

Speaker #4: So we're looking at it in that type of a construct. And, you know, it's just allowed us to get very purposeful with our, with our spend.

Speaker #4: And to your point, it has, it hedges our, ability to be successful in those locations. Has it sped up, you know, the, you know, the, you know, the ramp time of these locations?

Brian Kaner: Has it sped up the ramp time of these locations? Probably still too early to tell. We are in the very early innings of doing this. We started really meaningfully doing it at the beginning of the year. I would expect over time that we will have a better answer to that question. Inherently, you would expect it to speed up those ramp times. We have not experienced enough activity to be able to tell that yet.

Speaker #4: Probably still too early to tell. We're in the very early innings of doing this. We started really meaningfully doing it at the beginning of the year.

Speaker #4: So, I would expect that over time we'll have a better answer to that question. You know, inherently, you would expect it to speed up, those ramp times.

Speaker #4: But, you know, we have not, you know, and not experienced enough, enough activity to be able to tell that yet.

Speaker #8: Okay, perfect. Thank you very much. And then just one quick follow-up on that. You know, I think last quarter you'd expected eight startups for the second quarter, seeing only four in the quarter.

Jeff Murray: Okay, perfect. Thank you very much. Just one quick follow-up on that. Last quarter you had expected eight startups for the second quarter, seeing only four in the quarter. The outlook for the second half at 16 startups is not changed. Are those four locations now being pushed into early 2026, or are these out of the pipeline?

Speaker #8: But the outlook for the second half at 16 startups isn't changed. So is that, you know, we're four locations now being pushed into early '26 or are these, out of the pipeline?

Speaker #4: Yeah, no, there's nothing out of the pipeline. I mean, I think we continue to build. You know, we continue to leverage the methodology I just said to build out the greenfield strategy.

Brian Kaner: Yeah, there's nothing, there's nothing out of the pipeline. I mean, I think we continue to build. We continue to leverage the methodology I just said to build out the greenfield strategy. We've got plenty of other opportunities identified. From time to time, things will shift from one quarter to the next. As we get to a place where the process is more mature, and you're starting to see that as we get into Q3, Q4, Q1, and Q2, we'll get to a place where the predictability of that 8 to 10 is far more predictable.

Speaker #4: We've, we've, you know, we’ve got plenty of other opportunities identified. From time to time, things will shift, you know, from one quarter to the next.

Speaker #4: But, you know, as we get to a place where the process is more mature, and you're starting to see that as we get into Q3, 4, and 1 and 2, you know, we'll get to a place where the predictability of that 8 to 10 is far, is far more predictable.

Speaker #8: Perfect. Thank you very much.

Jeff Murray: All right. Thank you very much.

Speaker #4: Yep, thank you.

Brian Kaner: Yep, thank you.

Speaker #3: Thank you. Your next question is from Sabhat Khan from RBC. Your line is now open.

Operator: Thank you. Your next question is from Sabahat Khan from RBC Capital Markets. Your line is now open.

Speaker #2: Hey, Sabhat.

Brian Kaner: Hey, Sabahat.

Speaker #6: Great. Hey, thanks and good morning. You know, a bunch of the other questions sort of focused in on the industry drivers around the inflection and positive same-store sales.

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

Speaker #6: So I was hoping to get a bit of an understanding of, you know, the industry overall trends are still sort of down here, we are on repairable claims.

Speaker #6: Just curious on the initiatives you're implementing to perhaps capture share above that industry level to drive this positive inflection. Just, you know, you detailed a lot of the cost-saving stuff.

Speaker #6: But curious whether these productivity or other top-line initiatives that you're working on that are helping to maybe capture share which is driving sort of this inflection here.

Speaker #6: Thanks very much.

Speaker #4: Yeah, I think as we said in the prepared remarks, the largest reason for outperformance to the market is driven by our performance with our insurance company clients.

Brian Kaner: Yeah, I think as we said in the prepared remarks, the largest reason for outperformance to the market is driven by our performance with our insurance company clients. This alignment of our, you know, our field leadership with customers' KPIs, I think, has really allowed us to put a very focused, a very, you know, kind of focused initiative around just how do we improve, you know, based on what are our, outside of the three main areas, which we do very well, then how do we make sure that we're what we call majoring in the minors, making sure that we've got all the finer points that our insurance carrier clients are expecting us to deliver on. I think that has put us in a position where we've seen good improvements in the relationships that we have with our insurance clients.

Speaker #4: This alignment of our, you know, our field leadership with, you know, customers, customers' KPIs, I think is really allowed us to put a very, you know, a very focused kind of focused initiative around just how do we improve based on where our outside of the three main areas which we do very well in, how do we make sure that we're, you know, what we call majoring in the minors?

Speaker #4: Making sure that we've got all the finer points that our insurance carrier clients are expecting us to deliver on. And, you know, I think that has put us in a position where, you know, we've seen good improvements in, you know, the relationships that we have with our insurance clients.

Speaker #4: And that's obviously, you know, what's enabled us to continue to see more volume. Outside of that, you know, to your point, the other piece of that is making sure that we have the capacity in the stores to take care of the volume that's coming in.

Brian Kaner: That's obviously what's enabled us to continue to see more volume. Outside of that, to your point, the other piece of that is making sure that we have the capacity in the stores to take care of the volume that's coming in. We do remain focused on continuing to hire technicians, continuing to develop technicians through our technician development program, as well as focusing on productivity of our existing workforce to make sure that we've got the capacity to take on the volume that's coming in.

Speaker #4: So we do remain focused on, you know, continuing to hire technicians, continuing to develop technicians through our technician development program as well as focusing on productivity of our existing workforce to make sure that we've got the capacity to take on the volume that's coming in.

Speaker #8: Okay, great. And then, just I guess, you know, pretty volatile inflation and a tight backdrop, can you maybe just talk about discussions with insurance partners on how to maybe address that?

Jeff Murray: Okay, great. Then, just, I guess, a pretty volatile inflation-type backdrop. Can you maybe just talk about discussions with insurance partners on how to maybe address that? I think, obviously, your parts cost is a bit of a pass-through, but just give us a perspective on how you are managing through this tariff and inflation environment and the discussions with your insurance partners. Thanks very much.

Speaker #8: I think, you know, obviously you're parts cost is a bit of a passer, but just give us a perspective on how you're managing through this.

Speaker #8: Tariff and inflation environment and the discussions with your insurance partners. Thanks very much.

Speaker #4: Yeah, yeah, look, I mean, to date, we have not seen, and I think we said this in the prepared remarks as well, we have not seen significant impacts from tariffs.

Brian Kaner: Yeah, look, I mean, to date, we have not seen, and I think we said this in the prepared remarks as well, we have not seen significant impacts from tariffs. I do not know that over time that will not change, but you would expect some sort of, as the clarity around tariffs becomes more real, I think we may see some version of that starting to creep into the system. But to date, we have not seen any meaningful tariff impact to the cost structure. As I said earlier, what we are also not seeing is an average, could the average cost of a repair move up in the same fashion it had historically. So I think insurance carriers, the conversations with carriers right now around tariffs are, it will likely have some impact.

Speaker #4: I don't know that that, you know, I don't know that over time that won't change, but you'd expect some sort of, as the clarity around tariffs becomes more real, you know, I think we may see, you know, may see some version of that starting to creep into the system.

Speaker #4: But to date, we've not seen any meaningful tariff impact to the cost structure. And as I said earlier, I mean, what we're also not seeing is an average, the average cost of a repair move up in the same fashion it had historically.

Speaker #4: So, I think insurance carriers and the conversations with carriers right now around tariffs are, you know, it will likely have some impact. I think it’s still early days to be seen around how much impact, you know, it ultimately does have.

Brian Kaner: I think it is still early days to be seen around how much impact it ultimately does have.

Speaker #8: Great, thanks very much.

Jeff Murray: Great. Thanks very much.

Speaker #4: Yep, thank you.

Brian Kaner: Yep, thank you.

Speaker #3: Thank you. Your next question is from Derek Lazard from TD Cowan. Your line is now open.

Operator: Thank you. Your next question is from Derek Lessard from TD Cowen. Your line is now open.

Speaker #2: Yeah, good morning, everybody. Most of my questions have been asked, but maybe I just want to hit on the M&A angle another time. Obviously, you've seen the acquisition opportunities pick up.

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

Speaker #2: So I just want to, you know, ask you guys what's changed in the market? Is it valuation? Is it tariffs? Is it just a tough environment for the smaller players?

Speaker #4: Yeah, I think what you said last is probably the most, you know, the most impactful. I mean, the, you know, as we've said, just what we've said previously, you know, some of the suppliers that some of our suppliers that supply the balance of the industry would indicate that, you know, mid-sized, you know, some of these smaller MSOs and some of the single shop operators are down, you know, double digits in many cases.

Brian Kaner: Yeah, I think what you said last is probably the most impactful. The, as we've said historically, we've said previously, some of our suppliers that supply the balance of the industry would indicate that mid-sized, some of these smaller MSOs and some of the single shop operators are down double digits in many cases. I think they're looking at the sustainability of that against the backdrop of having to make investments to keep up with the changing car park. It's created a bit of an inflection point for some of the MSO operators that are out there that puts them in the market to potentially be looking to sell. I wouldn't say it's necessarily driven by their expectations on valuation. I would say that it's probably more driven by just their view of their relative position in the market going forward.

Speaker #4: And, you know, I think they're looking at the sustainability of that against the backdrop of having to make equipment, you know, make investments to keep up with the changing car park. It's created a bit of an inflection point for some of the, you know, MSO operators that are out there that, you know, puts them in the market to potentially be looking to sell.

Speaker #4: I wouldn't say it's necessarily driven by, you know, their expectations on valuation. I would say that it's probably more driven by just their view of the, you know, their relative position in the market going forward.

Speaker #4: And, you know, the sustained kind of claim declines that we've seen for, you know, the last, you know, the last frankly, the last couple of years at this point, you know, that's got them, you know, just exploring opportunities on the outside.

Brian Kaner: The sustained claim declines that we've seen for the last, frankly, the last couple of years at this point, that's got them just exploring opportunities on the outside.

Speaker #8: Great color, Brian. And maybe just one last one for me, just in terms of the OPEX and the impact from the investment in facility maintenance costs.

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

Speaker #8: Just wondering if one, I guess you could, I guess, quantify the magnitude, and two, you did talk about pent-up demand for deferred works, and just wondering if you have any color there.

Speaker #4: Yeah, I, you know, I won't comment on the exact dollar amount. I will say that, you know, there was, you know, as we, you know, as we, you know, were going through a period of, you know, softer demand, it is, it is, you know, easier for us to get into shops and do some of that work.

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

Speaker #4: So there was some deferred work that's out there that we, you know, are starting to, we're starting to work through. And, so I don't, you know, I don't think that, you know, that that's all very manageable for us.

Speaker #4: so, you know, as we've got time to go in and do things, we'll go in and do things. You know, if the demand environment picks up in a, in a, you know, in a pace that, you know, keeps us from, you know, focusing there, then we'll, you know, focus our attentions on getting cars through the shops.

Speaker #8: All right. Thanks, gentlemen. That's all from me.

Chris Murray: All right. Thanks, gentlemen. That's all for me.

Speaker #4: Yep. Thank you.

Brian Kaner: Yep. Thank you.

Speaker #3: Thank you. Your next question is from Gary Ho from DataDawn Capital Markets. Your line is now open.

Operator: Thank you. Your next question is from Gary Ho from Desjardins Capital Markets. Your line is now open.

Speaker #4: Hi, Gary.

Brian Kaner: Hi, Gary.

Speaker #8: Thanks. Thanks. Good morning, guys. Brian, just want to go back to the discussion on insurance partners. maybe of the, maybe top four large insurance clients that you had relationships with, have your business that you do with them changed over the last, let's call it 24 months or so, or relatively, unchanged?

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

Speaker #8: I have seen kind of one of your peers doing more work with one particular insurance client. Just wanted to kind of hear your thoughts.

Speaker #4: Yeah, I mean, unfortunately, we don't comment on, you know, the one, the makeup or two, the performance with individual insurance clients. you know, I would say that our focus is, you know, is broadly doing what's right for every one of our clients so that we can continue to deepen the relationships we have with everyone.

Brian Kaner: Yeah, unfortunately, we do not comment on the makeup or the performance of individual insurance clients. I would say that our focus is broadly doing what is right for every one of our clients so that we can continue to deepen the relationships we have with everyone. As you are articulating, there are clients out there that are growing more rapidly in the marketplace, and there are ones that that share is coming from. Obviously, our attentions are focused to all. The reality is every store has a different insurance client makeup. When you have 1,000 stores, quite frankly, we need to be in a position where all of them, where our store associates know how to make sure that they are delivering on that individual insurance client's expectations. That is what we are really focused on right now.

Speaker #4: you know, as you probably, you know, as you're articulating, there are ones that are, there are clients out there that, you know, are, you know, growing more rapidly in the marketplace and there are ones that that share is coming from.

Speaker #4: And, and obviously our attentions are focused, our attentions are focused to all. you know, the reality is every store has a different comp, has a different insurance client makeup.

Speaker #4: You know, and when you've got a thousand stores, you know, quite frankly, we need to be, we need to be in a position where, where all of them, where our store associates know how to make sure that, you know, they're delivering on the, that individual insurance client's expectations.

Speaker #4: And that is what we're really focused on right now.

Speaker #8: Okay, great. And then maybe just going back to that, eight shop MSO, acquisition that you completed post-quarter. I'm assuming you can't disclose the multiples that you paid, but any color on how kind of compared to the assured deal that you did a couple of years ago, and what's the ROIC kind of expectations as well?

Jeff Murray: Okay, great. Going back to that eight-shop MSO acquisition that you completed post-quarter, I am assuming you cannot disclose the multiples that you paid, but any color on how it compared to the Assured deal that you did a couple of years ago, and what are the ROIC expectations as well? It sounds like you are seeing smaller MSOs pop up on the radar. Maybe comment on the dynamics, and are they more impacted than you guys, or have PEs been less active in the space more recently?

Speaker #8: So it sounds like you're seeing smaller MSOs pop up on the radar. Maybe comments on the dynamics and, you know, are they more impacted than you guys, or have kind of PEs been less active in the space more recently?

Speaker #4: Yeah, what I would, and you're right, we won't comment on the multiple. But what I would, what I would more point to is what the market-based strategies had, the market-based planning activity has allowed us to do is, is to take a, take a an acquisition like the eight-store deal that we've, we've done and then build around it in a way that we blend the market to a, you know, to a return that's acceptable for us, right?

Brian Kaner: What I would, and you are right, we will not comment on the multiple, but what I would more point to is what the market-based strategies that the market-based planning activity has allowed us to do is to take an acquisition like the eight-store deal that we have done and then build around it in a way that we blend the market to a return that is acceptable for us. It is, you know, we have talked about over a long stretch of time against our metric, you know, of ROIC that we expect that to be in the north of 20%. What we are doing as we build out a marketplace is we are looking at the other densification opportunities that are out there and how do they then blend the average return on invested capital in a particular market up to the levels that we expect.

Speaker #4: So it's, you know, we've talked about, you know, over a long stretch of time, against our, against our metric, you know, of ROIC that we expect that to be in the, you know, in the north of 20%.

Speaker #4: So what we're doing is we build out, you know, a marketplace. We're looking at the other densification opportunities that are out there and how do they then blend the average return on invested capital in a particular market up to the levels that we expect.

Speaker #4: So it's, you know, it is, I think the, you know, again, the market-based, you know, strategies that we're deploying are allowing us to, to get very purposeful with, you know, our capital in any given market.

Brian Kaner: It is, I think, again, the market-based strategies that we are deploying are allowing us to get very purposeful with our capital in any given market. This happens to be a market that prior to this acquisition and another two-store acquisition that was done in the same market, we had one store in Virginia. As we now continue to build that market out, you will see us leveraging greenfields and single-shop acquisitions to really tuck in and go after that second position in the marketplace, which will allow us in the long run to get the returns that we expect.

Speaker #4: This happens to be a market that, you know, prior to, you know, prior to this acquisition and another two-store acquisition that was done in the same market, you know, we had one store in Virginia.

Speaker #4: As we now continue to build that market out, you'll see us leveraging greenfields and single-shop acquisitions to really tuck in and go after that second position in the marketplace, which will allow us in the long run to get the returns that we expect.

Speaker #8: Okay, that makes sense. And then maybe just a quick one, Jeff. You mentioned the strategy change in terms of construction or funding how you guys fund the greenfield and brownfield build-out.

Jeff Murray: Okay, that makes sense. Then maybe just a quick one, Jeff. You mentioned the strategy changed in terms of construction or finding how.

Operator: You guys fund the Greenfield Brownfield buildout. Can you elaborate on the financial and cash flow impact as we, as we kind of model these numbers out?

Speaker #8: Can you maybe elaborate on the financial and cash flow impact as we kind of model these numbers out?

Speaker #2: Yeah, I think you've seen an elevated, really volatility to some degree in the acquisition and development line of the cash flow as we've, you know, we've been investing in facilities that have not yet been announced or opened.

Operator: Yeah, I think you've seen an elevated, really, volatility to some degree in the acquisition and development line of the cash flow as we've, you know, we've been investing in facilities that have not yet been announced or opened. I think that was creating some noise in that line of the cash flow. You would occasionally see us do a sale-leaseback, which would show up on a separate line in the cash flow. You would have to kind of take that into account, but the timing isn't consistent on a quarterly basis. So it was creating, you know, I think, volatility. What is going to happen is that is going to take, it is going to just basically take that volatility and noise out of the numbers.

Speaker #2: I think that was creating some noise in that line of the cash flow. And then, and then you would occasionally see us do a sale lease back, which would show up on a separate line in the cash flow.

Speaker #2: And so you'd have to kind of take that into account. But the timing isn't, consistent on a quarterly basis. So it was creating, you know, I think volatility.

Speaker #2: So what we're, what's going to happen is that that's going to take, it's going to just basically take that volatility and noise out of the numbers.

Operator: Going forward, once we get this plan fully rolled out, you are not going to see us doing as many sale-leasebacks, and also as a cost, you are not going to see quite as high an acquisition development cash flow line item as well. So it should overall more mimic the way we describe the plan to go through single store acquisitions and brownfield, greenfield development and just take that volatility out.

Operator: Okay, great. Okay, thanks for that. Those are my questions.

Operator: Thank you.

Operator: Thank you. Your next question is from Daryl Young from Stifel. Your line is open.

Operator: Hey, good morning everyone. Just wanted to keep talking about acquisition pipelines and I guess specifically around synergies. Historically in the pre-pandemic period, Boyd Group Services Inc. sort of deemphasized the potential synergies from MSO acquisitions, just given they were already hooked up to DRPs and they were getting supplier discounts. Has that changed as you have scaled? Are there more synergies today than there might have been historically if you were to opportunistically acquire some larger MSOs?

Brian Kaner: I wouldn't say meaningfully. I think we still find, even with the MSOs of this size, we still have pockets of revenue synergy. Our biggest opportunity that we're bringing to these is typically a result of commercial synergies, much more so than cost synergies. As we've said in the investor presentation over a long stretch of time, we can take a pretty much a single shop acquisition and add 470 basis points of improvement versus the first year of its performance. For these, to your point, it's much more focused on how do we just drive the top line up in those locations, leverage the relationships that we have to add incremental clients to their makeup, and really drive the growth of the business that way. I would say it's still primarily focused on revenue versus cost when we do a deal like this.

Bolts on Commercial Synergy, is much more so than cost synergies. Um, as we've said in the, you know, in the investor presentation over a long stretch of time, you know, we can take the, you know, we can take a, you know, pretty much a single shot acquisition and add, you know, 470 basis points of improvement versus the first year of its performance. Um, you know, for these to your point, it's much more focused on. How do we just drive the top line up in those locations, leverage? The relationships that we have to to add incremental clients to their, to their makeup and, and really drive the, the growth of the business that way.

Um, so I would say it's still Pro primarily focused on

Brian Kaner: Again, we don't have, take what we just did in Virginia. We didn't have infrastructure in Virginia. We can obviously leverage a Region Vice President, a Division Vice President to be able to manage that. But we add a market manager that then is going to manage those locations. Where we have that, that's where the density really matters. When we're building density in a marketplace, there tends to be a lot more synergy because we've got a lot more infrastructure. When we're entering a market like this, it tends to be a little bit less cost synergy and frankly, a lot more revenue synergy.

You know Revenue versus cost. Um when we do a deal like this, and again we don't have, you know, take a take, what we just did in in Virginia. We don't have we didn't have infrastructure in Virginia, we can obviously leverage a, you know, a region vice president in the division. Vice president to be able to manage that but we add a market manager. Um you know, that that's going to manage those locations. So where we have that, that that's where the density really matters when we build out. When we're building density in a Marketplace or tends to be a lot more synergies because we've got a lot more infrastructure when we're entering a market like this, you know, tends to be a little bit less cost energy and a little. And frankly, a lot, more Revenue, synergy.

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

Brian Kaner: Yeah, I mean, interestingly, I think in the U.S. market, the vacation period probably tends to be more July, which, as we said, and we saw modest same-store sales growth in July. The other thing seasonally that happens in the third quarter for us is a little bit of falloff in the glass business. That type of falloff is still going to happen. But I do not have a tremendous amount of concern that we are going to see something different with the vacation period, which again, I think in the U.S. we have kind of lapped. In Canada, August tends to be a bigger month for vacations. But I do not have any concerns about that going forward.

Got it. Okay, helpful and then 1, 1 other uh just as we look at Q3 historically it's been a a seasonally weak quarter with with vacations. When you look at your commentary on same store sales, does that factor in sort of peak vacation period, or is that not an issue just given we're coming off a lower activity level base.

Yeah, I mean, interestingly I think in the in the in the US market, you know, the vacation period probably tends to be more July which, you know, as you as you as we said, we saw modest same stores, sales growth in July, the other things, seasonally that happens in the third quarter for us is a little bit of fall off in the glass business. Um, you know, that that type of follow-up is is, is still going to happen. Um, but I don't, I don't have, I don't have a tremendous amount of concern that we're going to see something different, you know, with the, the vacation period. Which again, I think in the US we've kind of lapped and or, you know, and, you know, in Canada, you know, tends to be August tends to be a bigger month for vacations, but I, I, I don't have any concerns about that going forward.

Operator: Okay, that's great. Congrats on the quarter. I will get back in the queue.

Brian Kaner: Awesome. Thank you.

Okay, that's great. Congrats on the good quarter. I'll get back in the queue.

Awesome. Thank you.

Operator: Thank you. Your next question is from Zachary Evershed from National Bank Financial. Your line is now open.

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

Jeff Murray: Good morning, everyone. Congrats on the quarter.

Operator: Thank you.

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

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

Beyond, uh, net promoter score, recycle times, and average cost, is there a distinct lack of overlap?

In a specific performance metrics between Insurance Partners.

Brian Kaner: There are different focal points for the individual carriers. I would say that those three are the commons, but carriers are focused on different things. Again, our team needs to be able to understand what those things are, and they need to be able to understand how to influence them and ultimately how to deliver an exceptional experience. That is, there is enough variation that it does put us in a position where we have an education opportunity with the field to make sure they understood what matters most beyond those three to the insurance clients.

Uh, there is there are different focal points for the individual carriers. So yeah, I would say that, you know, those 3 are, you know, those 3 are the commons, um, but you know,

Barriers or, you know, they're focused on different things. And again, our team needs to be able to understand what those things are. And they need to be able to understand how to influence them and ultimately how to deliver an exceptional experience. So that's that is there is enough variation that it, it does put us in a position where we've got, you know, we've got, you know, in education opportunity with the field and or had an education opportunity with the field to make sure they understood what matters most Beyond those 3 to the insurance claims

Jeff Murray: Gotcha. Thanks. When the strategic plan was unveiled, you did make a point to say that it was not reliant on a rebound in claim volumes and did not rely on MSO acquisitions. Now that we are seeing green shoots of positive same-store sales growth and your first MSO acquisition in a number of years, is it fair to say that potential upside to the plan does exist?

Gotcha. Thanks.

and,

When these strategic plan was unveiled, uh, you did make a point to say that it was not reliant on a rebounding claim volumes and didn't rely on MSO acquisitions.

So now that we are seeing green shoots of positive samsar sales growth,

And your first, MSO acquisition in a number of years, is it fair to say that potential upside to the plan does exist?

Brian Kaner: Yeah, I mean, what I would say is what we said on MSOs was large MSOs. I would not necessarily classify an eight-store deal as a large MSO. We do not expect, you know, we would have expected certainly a rebound in the claims environment versus where it had been in the last couple of quarters. We do not expect claims to go positive in order for us to deliver on the plan that we have. Look, I think there are some green shoots out there that do point to positive. Whether or not, you know, whether or not, declaring victory this early in the game is, I think it is probably still too early for us to tell. We have always put, we put pluses on the end of our five-year plan objectives for a reason. You know, 1,400 plus, 14% plus, 5 billion plus.

Yeah, I I mean what I would say is what we said on msos was large msos. I wouldn't necessarily classify a store deal as a as a large MSO. Um

Brian Kaner: So we do believe that there is opportunity to do better than that. Whether or not this is the time to declare victory or not, I would probably say not yet.

Jeff Murray: Totally agree.

We don't expect, you know, we we would have expected certainly a rebound in the claims environment, versus where it had been in the last couple of quarters. Uh, we don't expect claims to go positive in order for us to deliver on the the plan that we have. So look, I think there's some green shoots out there that, you know, the due Point deposited whether or not you know, whether or not, you know, declaring Victory. This early in the game is, is I I think it's probably still too early for us to to tell, we've always put, we put pluses on the, on the end of our 5 year plan objectives, for a reason, you know, 1400 plus 14%, plus 5 billion plus, um, and you know, so we do believe that there's opportunity to do better than that. Um, whether or not this is the the time to declare Victory or not, I would probably say not yet.

Brian Kaner: Happy with the results we have got, but again, still early innings.

Jeff Murray: Understood. Last one for me. Any thoughts on how an IPO of a large competitor, giving them access to public equity markets, might influence industry dynamics?

Totally happy with it, happy with the results we've got. But, um, again, still early innings.

Understood.

then last 1 for me, any thoughts on how an IPO of a large competitor uh giving them access to

Public equity markets might influence industry dynamics.

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

Yeah. Look I actually think we're you know, we're generally optimistic about you know what the knock-on effect. Our business associated with that will be um you know I think we we stack up pretty well. Other than just pure size, we stack up pretty well against you know, the 1 that obviously is filed, uh, you know, filed to go public. Um, so generally speaking we we we would I would believe that, you know, could potentially be a positive for us.

Jeff Murray: Thank you very much. I'll leave it there.

Brian Kaner: Thank you.

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

Thank you.

Operator: Thank you. Your next question is from Tristan Thomas-Martin from BMO Capital Markets. Your line is now open.

Operator: Hey, good morning. How did your repair claims volumes compare to your average ticket in a quarter? How are you kind of thinking about that moving forward?

Thank you, and your next question is from Tristan Thomas Martin from BMO Capital Markets. Your line is now open.

Hey, good morning, sir.

uh,

how did your repair claims volumes compared to your average, ticket in a quarter? And then, how are you kind of thinking about that moving forward?

Brian Kaner: I will not comment specifically on our, because we do not comment specifically on our claims volume versus our average ticket growth. But I will tell you that in the industry, average ticket, the cost, the average ticket growth continues to be depressed versus where it has been. As you know, the growth algorithm for our business has historically been a 2% decline in claims driven by the adoption of ADAS, partially offset by a 1% increase in claims driven by the improvement in miles driven and the number of cars on the road. All of that is offset by a normal kind of 4% to 5% average growth in ticket, which leads the industry to a 3% to 4% growth. We have not seen right now, we are seeing that what we would have expected to be 4% to 5% more looking like 1% to 2%.

I won't I won't comment specifically on our because we don't comment specifically on our claims volume versus our <unk>.

Average ticket growth, but I will tell you that in the industry.

Average ticket.

Cost the average ticket growth continues to be depressed versus where it has been as you as you know the the growth algorithm for our business has historically been.

A 2% decline in claims driven by by the adoption of aid us partially offset by 1% increase in claims driven by the improvement in miles driven and the number of cars on the road and that all of that offset by.

A normal kind of 4% to 5% average growth in ticket, which leads the industry too.

3% to 4%.

The growth we have not seen right now we're seeing that what we would've expected to be 4%, 5% more looking like 1% to 2% and that is put.

Brian Kaner: That has put the, that puts incremental pressure on the claims experience to actually grow. I will let you do the, if we are experiencing modest, if we are experiencing modest growth in the early days of the quarter, you could probably do a little bit of math around what that might mean between claims and average cost of repair.

That puts incremental pressure.

The claims experience to actually grow so I'll, let you do the.

We're experiencing modest if we're experiencing modest growth in.

The early days of the quarter, you could probably do a little bit of math around what that might mean between claims and.

Average cost of repair.

Okay.

Operator: Got it. Just adding to that, I think you talked on deferred repairs a little bit, but are you seeing any consumers maybe finally come back to get a repair that they have put off actually repaired?

Got it and then just kind of anecdotally I think you've kind of talked on deferred but there is a little bit are you seeing any consumers maybe.

Finally come back to maybe get a repair that they've put off actually repaired.

Brian Kaner: Yeah, I do not know that I would say that there is this notion of deferred repairs. I think when people make the decision that they are either going to file a claim and not do the repair, which is a cash out, I do not think that they make the determination later on that they are going to come back and do it. So I do not know that I see that there is this pent-up demand so much as what demand will do over time is hopefully return to just more normalized levels.

Yeah, I don't I don't know that I would say that there is.

This notion of deferred repairs.

I think when people make the decision that they're either going to file a claim and not do the repair which is a cash out I don't think that they make the determination later on that theyre going to come back and do it.

So I don't know that I see that there is this pent up demand so much as what demand will do over time is hopefully a return to just more normalized levels.

Brian Kaner: So I do not know that I would say that what we are experiencing right now has anything to do with deferred repairs as much as it does people that are now getting into accidents or more likely to actually file a claim just based on their consumer sentiment that is out there and then some of the other factors that we talked about earlier.

So I don't know that I would say that what we're experiencing right now is that anything to do with.

Deferred.

Deferred repairs as much as it does people that are now getting into accidents are more likely to actually file a claim just based on there.

Consumer sentiment that's out there that some of the other factors that we talked about earlier.

Operator: Makes sense. Thank you.

Makes sense. Thank you.

Brian Kaner: Yep.

Yes.

Operator: Thank you. Your next question is from Razi Hassan from Paradigm Capital. Your line is now open.

Thank you and your next question is from Rajeev <unk> from paradigm capital. Your line is now open.

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

Good morning, Thanks for taking my question just quickly on internal.

Internalizing, the scanning and calibration offering and how difficult it is to implement <unk>.

I think it takes you two to three years to get to that 80% target that you guys mentioned earlier or does that maybe come sooner.

Brian Kaner: Yeah, I mean, we are going to stick with the commitment that we made. I mean, obviously, we are at, you know, we reported that we are at just south of 70% as we sit here today. So there is still a little bit of room to grow. The other factor that plays into there is then keeping up with, keeping up with the growth in, you know, ADAS adoption that we are seeing coming through the store. So it is not just, you know, the, you know, both the numerator and the denominator are moving. So we have to keep up with, one, the changing car park, and then two, you know, get ourselves to a position where we have got coverage in all of our markets. So we will stick with the, we will stick with the timeframe that we have outlined thus far.

Yes.

We're going to stick with the commitment that we made I mean, obviously, where we reported that were just south of 70% as we sit here today.

So there is still a little bit of room to grow the other factor that plays into there has been keeping up with.

Keeping up with the growth in Adas adoption that we're seeing coming through the stores. So it's not just.

Both the numerator and the denominator moving.

So we have to keep up with what the changing car Park, and then to get ourselves to a position where we've got coverage in all of our markets. So we'll stick with the we'll stick with the timeframe that we've outlined thus far but.

Brian Kaner: But, you know, obviously, we are extremely pleased with the progress that we have made on our scanning and calibration business. You know, the leader that runs that business for us and the team has done a phenomenal job, and we are very pleased with where we are at.

Obviously, we're extremely pleased with the progress that we've made on our scanning and calibration business.

The leader that runs that business for us and the team has done a phenomenal job.

We're very pleased with where we're at.

Operator: Thanks. Maybe just lastly, on gross margin, the 46.8%, how sustainable is that in terms of our modeling? Is that a new run rate? Any thoughts there?

Thanks, and maybe just lastly, just on gross margin of 46, 8%.

How sustainable is that in terms of our modeling is that a.

Any run rate any thoughts there.

Brian Kaner: will let Jeff comment on that.

I'll, let I'll, let Jeff comment on that.

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

Yes, I think over the last little while especially with the slowdown in <unk>.

And volumes, we've been able to certainly focus much.

Much more on margin enhancement opportunities trying to have more repair versus replace focusing on client metrics to reduced performance credits. There is a lot of things that I would say are currently.

I would depict as favorable.

And I would say generally we would see offsets that happen.

And so I think that everything thats going on it's more or less sustainable, but it would be probably too optimistic to suggest that we won't face any.

Headwinds in any of the drivers related to gross margin going forward. So I would suggest looking back kind of at our historical band to understand how can it sort of fluctuate depending on timing.

Time of the year and some of the other factors to come up with that with our model estimate.

Operator: Appreciate it. Thanks for the time.

I appreciate it thanks for the time.

Operator: Sure.

Brian Kaner: Thank you.

Sure. Thank you.

Operator: Thank you. Your next question is from Bret Jordan from Jefferies. Your line is now open.

Thank you. Our next question is from Bret Jordan from Jefferies. Your line is now open.

Brian Kaner: Hey, just to follow up on the recent trend of improvement. Is it, in your opinion, more tied to your insurance partners and their relative success in the market, or are you seeing the recent trend across the entire collision ecosystem improving? I wouldn't necessarily say it's trends based on the performance of our clients themselves, meaning that they're experiencing growth in their policies in force. I don't know that it's necessarily tied to that. I think our performance with them is putting us in a position where we're shining a more positive light on our business. A little bit of the macro backdrop assistance is probably helping as well.

Just to follow up on the recent trend of improvement.

Is it in your opinion more tied to your insurance partners and their relative success in the market are you seeing the recent trend across the entire collision ecosystem improving.

I wouldn't necessarily say, it's trends based on the performance of our clients themselves, meaning that they are.

They are experiencing.

Growth in there.

Season, four so I don't know that it's necessarily tied.

To that I think our performance with them.

Is putting us in a position where we're we're shining a more positive light on our business.

And then again a little bit.

A little bit of macro backdrop.

Assistance is probably helping as well great. Thank you.

Operator: Right. Thank you.

Brian Kaner: Yep.

Yes.

Operator: Thank you. Your next question is from Steve Hansen from Raymond James. Your line is now open.

Thank you and your next question is from Steve Hansen from Raymond James Your line is now open.

Yeah.

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

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

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

Yeah.

Yes, I would tell you I mean, we implemented that staffing model and I'll remember the date because it's.

These are tough things to do and they negatively affect People's lives. So we take these things very seriously April 4th was the date that we implemented that plan. So that can tell you that you saw a good chunk of the savings associated with that in the quarter.

So.

Consider that one to be.

Other than the maintenance of making sure that we stay within the bands at this point the big activity associated with that the $30 million that we articulated was implemented all at once.

Jeff Murray: That is great. Just to follow up on to that, as you move into this Phase 2 and sort of the indirect model and the procurement savings, I know you said a ratable move through the tail end of 2026 to get to the target on the 40. How much visibility do you have on that? Is it pretty, is it fairly visible at this point as you enter in some of the discussions on procurement, or how confident are you in getting there?

That's great and just a follow up on to that as you move into this phase two and sort of the indirect model. The procurement savings I know you set a ratable.

Move through the tail end of 2006 to get to the target on the 40, but is there how much visibility do you have on that like is it pretty is it fairly visible at this point as you enter in some of the discussions on procurement or are you. How confident are you in getting there.

Brian Kaner: Yeah, I appreciate that there is a lot of activity around it. We have really good visibility into the activity around it. The timing is what becomes a little bit more elusive. The RDO process, the results delivery office that we are operating to deliver on a lot of these initiatives, it is led by Kim Lerin, who is actually our CHRO, but is doing a phenomenal job with that activity. She has put us in a really good position to be able to continue to have good visibility to where those savings are coming from and then all of the different work streams to deliver it. We have great visibility. As we continue to manifest the savings coming out of that, I think we will continue to refine the way we describe it.

Yeah I appreciate that there is theres just a lot of activity around it. So we've got really good visibility into the.

The activity around the timing is what what becomes a little bit more elusive. So.

The <unk> process the results delivery office that we were operating to deliver on a lot of these initiatives.

It's led by Kim Miranda Who's our actual who is actually our Chr open is doing a phenomenal job with that.

That activity she has put us in a really good position to be able to continue.

We have good visibility to where those savings are coming from and then all of the different work streams to deliver it. So we've got great visibility and as we continue to manifest the savings coming out of that I think we will get we will continue to refine the way we describe it just easier for now as we're in the early days to make sure that you guys.

Brian Kaner: It is just easier for now as we are in the early days to make sure that you guys can model it in a more ratable way.

The model is the more ratable way.

Jeff Murray: Very helpful. Thank you.

Very helpful. Thank you.

Yes.

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

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

Brian Kaner: All right. Thank you, operator. Thank you all once again for joining us for today's call. We look forward to reporting our Q3 results in November. Thanks again and have a very wonderful day. Thank you.

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

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

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