Boyd Group Services Inc
TSX:BYD
US |
Fubotv Inc
NYSE:FUBO
|
Media
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
US |
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
|
CN |
NIO Inc
NYSE:NIO
|
Automobiles
|
|
US |
Fluor Corp
NYSE:FLR
|
Construction
|
|
US |
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
|
US |
TopBuild Corp
NYSE:BLD
|
Consumer products
|
|
US |
Abbott Laboratories
NYSE:ABT
|
Health Care
|
|
US |
Chevron Corp
NYSE:CVX
|
Energy
|
|
US |
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
|
US |
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
|
US |
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
|
US |
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
|
US |
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
203.67
321.85
|
Price Target |
|
We'll email you a reminder when the closing price reaches CAD.
Choose the stock you wish to monitor with a price alert.
Fubotv Inc
NYSE:FUBO
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
C
|
C3.ai Inc
NYSE:AI
|
US |
Uber Technologies Inc
NYSE:UBER
|
US | |
NIO Inc
NYSE:NIO
|
CN | |
Fluor Corp
NYSE:FLR
|
US | |
Jacobs Engineering Group Inc
NYSE:J
|
US | |
TopBuild Corp
NYSE:BLD
|
US | |
Abbott Laboratories
NYSE:ABT
|
US | |
Chevron Corp
NYSE:CVX
|
US | |
Occidental Petroleum Corp
NYSE:OXY
|
US | |
Matrix Service Co
NASDAQ:MTRX
|
US | |
Automatic Data Processing Inc
NASDAQ:ADP
|
US | |
Qualcomm Inc
NASDAQ:QCOM
|
US | |
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Good morning, everyone. Welcome to the Boyd Group Services Inc. Second Quarter 2023 Results Conference Call. Listeners are reminded that certain matters discussed on today's conference call or answers that may be given to questions asked could constitute forward-looking statements that are subject to risks and uncertainties related to Boyd's future financial or business performance. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are detailed in Boyd's annual information form and other periodic filings and registration statements and you can access these documents at SEDAR's database found at www.sedar.com. I would like to remind everyone that this conference call is being recorded today, Thursday, August the 10th, 2023.
I would now like to introduce Mr. Tim O'Day, President and Chief Executive Officer of Boyd Group Services Inc. Please go ahead, Mr. O'Day.
Thank you, operator. Good morning, everyone, and thank you for joining us for today's call. On the call with me today is Jeff Murray, who has joined me for a number of calls as Interim CFO. I'm excited to now have him joining me in the permanent role of Executive Vice President and Chief Financial Officer.
We released our 2023 second quarter results before markets opened today. You can access our news release as well as our complete financial statements and management discussion and analysis on our website at boydgroup.com. Our news release, financial statements and MD&A have also been filed on SEDAR this morning.
On today's call, we will discuss the financial results for the three and six month period ended June 30th, 2023 and provide a general business update. We will then open the call for questions.
During the second quarter of 2023, Boyd recorded record sales of $753.2 million, adjusted EBITDA of $95.4 million and net earnings of $26.3 million. The initiatives put in place to improve throughput and increased capacity along with solid execution have resulted in record sales levels and improved profitability during the second quarter.
Our team continues to adapt to a challenging market conditions and to deliver results including doubling the level of adjusted net earnings per share when compared to the same period of the prior year.
While the ability to service demand continues to be constrained by market conditions, new technician training and other initiatives are providing some improved capacity. However, the path to servicing the level of demand requires continuing increases in technician compensation to attract more labor into the industry and company and this will require continued price increases from our customers. As we address this issue, we will be able to reduce cycle times and better serve our customers.
For the second quarter of 2023, sales were $753.2 million, a 22.9% increase when compared to the same period of 2022. This reflects a $29.1 million increase from 64 new locations. Our same-store sales, excluding foreign exchange increased by 18.9% in the second quarter recognizing the same number of selling and production days in both the US and Canada when compared to the same period of 2022.
Same-store sales benefited from high levels of demand for services as well as some increase in production capacity related to technician hiring, growth in the technician development program as well as productivity improvement, although ongoing staffing constraints continued to impact sales and service levels that could otherwise be achieved. Sales also increased based on higher repair costs due to increasing vehicle complexity, increased scanning and calibration services as well as general market inflation.
Gross margin was 45.5% in the second quarter compared to 45.3% achieved in the same period of 2022. Gross margin benefited from improved glass margins, higher part margins and increased scanning and calibration. Labor margins were relatively flat with pricing increases to-date not having been sufficient to attract requisite talent into the industry and offset wage increases experienced. Performance-based programs negatively impacted gross margin during the second quarter of 2023 as compared to the same period of the prior year.
Operating expenses for the second quarter were $247.3 million or 32.8% of sales compared to $205.5 million or 33.5% of sales in the same period of 2022. Operating expenses as a percentage of sales was positively impacted by improved sales levels, which provided improved leveraging of certain operating costs.
Adjusted EBITDA or EBITDA adjusted for fair value adjustments to financial instruments and costs related to acquisitions and transactions was $95.4 million, an increase of 32.5% over the same period of 2022. The increase was primarily the result of improved sales levels and improved leveraging of certain operating expenses.
Net earnings for the second quarter of 2023 was $26.3 million compared to $13.3 million in the same period of 2022. Excluding fair value adjustments and acquisition and transaction costs, adjusted net earnings for the second quarter of 2023 was $27 million or $1.26 per share compared to $13.6 million or $0.63 per share in the same period of the prior year. Adjusted net earnings for the period was positively impacted by increased sales and improved leveraging of operating expenses.
For the six months ended June 30th, 2023 sales totaled $1.5 billion, an increase of $298.6 million or 25.5% when compared to the same period of the prior year, driven by same-store sales growth of 21.9% as well as contributions from new locations that had not been in operation for the full comparative period.
Gross margin increased to 45.6% of sales compared to 44.7% in the comparative period. Gross margin percentage was positively impacted by improved part margins along with increased scanning and calibration services. Labor margins have improved, however, pricing increases to-date have not been sufficient to attract requisite talent into the industry and offset the wage increases experienced.
Performance-based programs negatively impacted gross margin during the first six months of 2023 as compared to the same period of the prior year. Operating expenses increased by $92.5 million when compared to the same period of prior year, primarily as a result of increased sales based on same-store sales growth as well as location growth in addition to inflationary increases.
Adjusted EBITDA for the six months ended June 30th was $180.1 million compared to $125.8 million in the same period of the prior year. The $54.3 million increase was primarily the result of improved sales levels and gross margin percentage which also provided improved leverage of certain operating costs.
We reported net earnings of $47.1 million compared to $14.9 million in the same period of the prior year. Adjusted net earnings per share increased from $0.73 to $2.25. The increase in adjusted net earnings per share is primarily attributed to increased sales and improvements in the gross margin percentage as well as improved leverage of certain operating expenses.
At the end of the period, we had total debt net of cash of just over $1 billion. Debt net of cash decreased when compared to the prior quarter, primarily as a result of increased cash flow from operations. During the second quarter of 2023, the company was able to reduce the level of long-term debt held under its revolving credit facility net of financing costs from $184.1 million to $174.5 million.
During 2023, the company plans to make cash, capital expenditures excluding those related to acquisition and development of new locations within the range of 1.6% to 1.8% of sales. In addition to these capital expenditures, the company plans to invest in network technology upgrades to further strengthen our technology and security infrastructure and prepare for advanced technology needs in the future. The investment in the second half of 2023 is expected to range from $5 million to $6 million with investments expected in '24 and '25 ranging from $5 million to $9 million per year.
We remain focused on the key challenge of building capacity through increased staffing, including negotiation -- negotiating sufficient client price increases to attract talent into the industry and our company and recover lost labor margin from wage pressure. Workforce initiatives are having a positive impact on capacity and ongoing investments in technology, equipment and training to position the company well for continued operational execution.
Boyd remains committed to addressing the labor market challenges so that the company can service additional demand. Relative to the second quarter, the third quarter of 2023 will have one less selling and production day and will also be negatively impacted by seasonal vacations that have a dampening effect on capacity and sales. Thus far in the third quarter, same-store sales increases are approximately half of what we have experienced during the first six months of 2023.
Boyd is pleased to have opened or acquired 57 collision repair locations thus far in 2023 and the pipeline to add new locations and expanding to new markets is robust. Operationally, Boyd's focused on optimizing performance of new locations as well as scanning and calibration services and consistent execution of the Wow Operating Way.
Given the high level of location growth in 2021, the strong same-store sales growth during 2022 and the combination of strong same-store sales growth and location growth thus far in 2023, Boyd remains confident that the company is on track to achieve its long-term goals including doubling the size of the business on a constant currency basis from 2021 to 2025 against 2019 sales.
With that, I would now like to open the call to questions. Operator?
Thank you, sir. Ladies and gentlemen we will now begin the question-and-answer session. [Operator Instructions] One moment please for your first question. Your first question will come from Tamy Chen at BMO Capital Markets. Please go ahead.
Hi. Thanks for --
Good morning, Tamy.
Morning. So just to confirm the understanding of so far what the same-store sales growth is like in Q3, are you effectively saying the average same-store sales growth rate in Q, sorry, in the first half of this year divided by two, that's the rate that you're currently seeing?
That's approximately what we have seen quarter-to-date. Yes.
Okay, thank you. And then as a follow-up to the same-store sales trajectory, I guess I'm just wondering if you can talk a little bit about your backlog. I think we can see industry average backlog. I think it recently declined a bit but can you talk a bit about how your backlog is trending, has it seen some decent improvement? I'm just trying to assess how much more this elevated level of comp can continue because it does seem like the underlying collision claim counts in the industry has gone a bit negative here?
A - Tim O'Day
Yeah. I don't see that Tamy, I think the demand remains very, very strong. The constraint is really labor. If you look at our balance sheet, you will see that our investment in work-in-process has been decreasing. But I would attribute that -- much of that to improved supply chain and our ability to finish our jobs that may have been suspended for a period of time rather than -- the same-store sales growth is obviously labor-related and improved capacity, but there is still tremendous demand available in the marketplace.
Okay. And bit more of a bigger picture, I guess a bit more longer-term is, I think historically the way the company has approached investing in new processes or equipment just as the vehicle evolves and get more complex, you talk about this hub-and-spoke model. Can you update us on how you're thinking about this continues to be the appropriate model as we look out in the secular trend of the vehicle just because -- the new vehicle I mean, becoming much more complex whether it's the penetration of electric vehicles as well as more ADAS features in the vehicles. Do you think you may need to accelerate over the next couple of years the investment in capabilities to be able to service these types of vehicles or do you feel your current approach and that hub-and-spoke model is still appropriate for the next couple of years? Thank you.
A - Tim O'Day
Yeah. There's no question that the hub-and-spoke model is still the right way to approach this. You can't -- the vehicle park changes very slowly. So as EVs, for example, come into the market, we'll be well prepared to address the needs that are arising from that on a hub-and-spoke basis and as it becomes more predominant, we'll continue to add to our capacity to service those vehicles. So I think we're very well served by our current hub-and-spoke approach, and I would expect that to continue to evolve that be a good model for servicing the changing car park.
Sounds good. Thank you.
A - Tim O'Day
Thanks, Tamy.
Your next question will come from Steve Hansen at Raymond James. Please go ahead.
Yeah, good morning, guys. Thanks for the time.
A - Tim O'Day
Good morning, Steve.
Congrats on a solid print, actually it's good to see some margin progression here. Tim, first question is just on the price increase backdrop, how confident are you still in negotiating further price increases from your carriers, we're probably six or seven quarters into this process now, and some people suggest that we're starting to get pushed back, but as I look at the backlogs still being deep and capacity constraints in the system that also striking is further price increases are necessary. Maybe just give us a sense for how you're feeling about those discussions and the confidence in further increases?
A - Tim O'Day
Well, we continue to see a steady stream of increases from our clients on an ongoing basis and the trend has been pretty consistent for several quarters and we are still experiencing wage inflation and we don't have enough technicians at Boyd and we don't have enough technicians in the industry to service the demand. So I think that until we can catch up with demand, which is going to require attracting more labor into the industry, I think that we'll continue to be successful at getting price increases.
Okay, great. That's helpful. And just to follow up on the scanning and calibration reference, it continues to be a tailwind as you call out, maybe just give us a sense for what you're doing on the ground thus far in terms of rolling out that additional service packages, is it still focused predominantly on insourcing existing work that's been done in the past on an outsourced basis or where do we stand?
A - Tim O'Day
It's really both. I mean the market for calibration services continues to grow as more vehicles with ADAS come into the market. Our ability to identify what needs to be done continues to improve. So we'll execute on the needed operations and we're growing our separate calibration business to service more of the work internally. I think we've talked about the -- putting the infrastructure in place to grow that business more rapidly. We are in a good position to begin to grow that business a little bit more rapidly now, which will allow us to convert what is frequently done by a third party over to be in service by our own internal calibration business. So that's I think a good tailwind that has a lot of runway left in it.
Okay, great. Appreciate the color. Thanks.
A - Tim O'Day
Thanks, Steve.
Your next question will come from Gary Ho at Desjardins Capital Markets. Please go ahead.
Good morning. Thanks and good morning. So good progress on the margin front, especially on the operating expense line, I think you mentioned some leverage benefits. Maybe you can elaborate on that and how sustainable that is and have you given out any thought on kind of where that could go in a more normalized environment?
A - Tim O'Day
We haven't provided any guidance on that. What we've said consistently over the past few years, although it's a long road is that we see nothing structural that would prevent us from getting back to the EBITDA margins that we achieved before the pandemic and that will require further leverage of our operating costs, which have been a problem with both cost inflation and then reduced capacity, but I think as we continue to improve capacity, manage expenses effectively and recover our gross margin that we expect over time to be able to get back to historical EBITDA margins.
And maybe I'll just add that what we have commented on is that if you look at our track record over pre-pandemic, five years previous, through same-store sales growth, we had a consistent track record of slowly increasing our operating leverage.
Okay, thanks for the color. And then my next question just on the technician training program, have you disclosed the costs associated with that, like what's the run rate cost? And then I know you're still experiencing technician shortages it sounds like, any thoughts on expanding that to absorb greater demand and how do you balance the cost and the benefits?
A - Tim O'Day
So it's a good question. We have not provided a lot of detail on that, it is a pretty meaningful investment on our part to develop that talent, the program has grown a bit from where we had originally said our goal, but we're continuing to evaluate the trade-off of spending money on training more through our technician development program versus more aggressive recruitment in the marketplace and it's really going to take all avenues to get the labor that we really need to service the available demand.
Okay. And then just my last question, maybe more generic one, many of the US insured went into higher catastrophes this past quarter. Just curious historically how has this played into increased sales, if at all and did you see any with the Q2 results?
A - Tim O'Day
We did have a number of markets that had hail repair in the quarter that was a tailwind for us. One of the big benefits to that type of a catastrophe for us is that the labor that's used to service much of that is a sublet labor. So well, it could dampen margins a bit, it does drive some incremental revenue and profitability, but we see some of that every year. I would say that in Q2, we saw a little bit more of it than what we had seen in the prior year Q2.
Okay. That makes sense. Those are my questions. Thanks very much.
A - Tim O'Day
Thanks, Gary.
Your next question will come from Bret Jordan at Jefferies. Please go ahead.
Hey, good morning, guys.
A - Tim O'Day
Hi, Bret. Good morning.
Talk a little bit more around scanning, I guess maybe sort of what the margin profile is there and as you transition to more in-house versus third-party with that, it could be from a tailwind and I guess would you consider doing third-party scanning for others or is that too much of a competitive conflict?
A - Tim O'Day
We do to third-party scanning for others as well with our calibration business, it is a component of it. We don't really talk about how much is external versus internal, but we intend to continue to service third-parties with our calibration business. In terms of the margin profile, much of the work that we're doing today, we are relying on third-parties to complete, and as we shift that to our own calibration company, we would expect to receive more normal labor margins on that work versus sublet margins and sublet historically has been our lowest margin category and labor, our highest margin category. So there is a benefit to us of converting that labor or that operation from sublet to labor, and it will take us some time to do that, to build the workforce to do that, but we have -- we are underway with that now.
Okay. And then you also talked about parts margin improvement, is that mix more alternative than OE or is it pricing?
A - Tim O'Day
It's both. We have continued to see an improvement in the availability, and as a result, our usage of aftermarket parts which can have a negative impact on revenue because they cost less for the repair, it's good from a customer standpoint, we do reduce the cost of repair, but it has a better margin profile. But we also have been working to negotiate new pricing agreements in markets to improve our OE margins. And I think the other thing that we're seeing is, as supply chain loosens up, we're able to get the parts that we need from our primary suppliers where we get better discounts and we talked a lot over probably starting about two years ago, we talked about the negative impact on our margins of having to buy from suppliers that we didn't have a relationship with. So we're seeing some benefit from that turning around.
Okay. And then just a quick follow-up on the scanning question, I guess given the investment in scanning equipment and tools, as you increase the volume, is there potential for a margin tailwind or as scanning basically going to be sort of in line with the labor margin over history?
A - Tim O'Day
It's hard to tell exactly where that will end up, but the benefit we'll get is the revenue and scanning and calibration is going -- is growing, and right now, we're servicing too much of it with third-party sublet. So we should be able to, at a minimum, turn that into normal labor margins which will be a benefit to us.
Okay, great. Thank you.
A - Tim O'Day
Thanks, Brett.
Your next question will come from Jonathan Lamers at Laurentian Bank Securities. Please go ahead.
A - Tim O'Day
Hi, Jonathan.
Good morning. Thanks for taking my question. Tim, just following up on your comments in the press release about efforts to optimize new locations in the scanning and calibration services. I guess just on the scanning and calibration specifically when will your efforts on that be it a run rate, is this something that could take several years to set up or would you expect or should investors be thinking about the benefits being in place for 2024?
A - Tim O'Day
I would not expect that we would complete the build out of that business by the end of 2024, we are going to move as quickly as we can because it's a really attractive segment of the business, but it is a people business and will require that we recruit, train and put that workforce in place. There's an equipment portion of it too, as you would expect, but really the constraint is labor versus equipment, the equipment's available, we just have to get and train the labor and interestingly in this case because that market is growing pretty rapidly we're really going to bring new labor in for that that has not worked in that segment before. It will take some time, we haven't laid out a specific timetable on it yet, but it isn't something that can happen overnight it will take many months to build out that workforce.
Okay. So for a portion of the scanning and calibration skills, my understanding is your training those -- your existing technicians with those skills and then you're planning to bring in additional labor as well. Can you tell us a little bit more about that?
A - Tim O'Day
For the most part, we view this as a separate skill set that requires separate tools and expertise. So it really is a different workforce from our core collision workforce. We operate it as a very independent business.
Okay. Thanks for your comments.
A - Tim O'Day
Thanks, Jonathan.
Your next question will come from Krista Friesen at CIBC. Please go ahead.
A - Tim O'Day
Good morning, Krista.
Hi, thanks for taking my question and congrats on a solid quarter here. I was just wondering, looking at your margins, I mean, margins were pretty good this quarter despite kind of still not getting all the price increases you need from your insurance partners. How much more operating leverage would you say is excluding labor is left in the business as we look out just the next six months. Like if you don't receive the price increases you're looking for do you think you can still kind of crush margins higher here?
A - Tim O'Day
I mean there have been a number of questions on calibration and we're confident that we have an opportunity to improve margin by internalizing the calibration operations. So there's opportunity there. I think we still have opportunity in other categories as well. We do need to increase our labor margins back to historical levels and I think as we grow, we continue to see opportunities to leverage other expenses for other opportunities even on the margin level, so I would expect to see over time continuing improvement to drive us back towards those historical EBITDA margins.
Okay, great. And then maybe if you can just provide a little bit more color on the conversations you're having with your insurance partners. Obviously, I mean they are incentivized to reduce their wait times, but it seems like they're not necessarily giving you everything that you're asking for at this point. Can you provide a little bit more color on the back and forth, there or just what you're hearing?
A - Tim O'Day
I would just say generally, I think our insurance clients have been very supportive and I have worked hard to provide us with increases to allow us to get back to normal levels of profitability and build our workforce. It's a bit of a moving target. We still see tremendous demand for our services and the industry, including Boyd doesn't have the workforce that we need to properly service it. We have seen some improvement in length of rental metrics, I think much of that is related to supply chain improvement, some to probably some improvement in labor capacity, but we're still not at a point as Boyd or as an industry of serving our clients the way that they need to be serviced in order for their customers to be happy. So I think that pressure will continue to allow us to pull in price so that we can build a workforce to properly service the marketplace.
I guess I'll add though that there is a lag, there is a lag and so we're looking at current situations and then working with the insurance partners to get increases based on that set of facts, and by the time that works its way through the system, the costs have changed too. And so that leveling off needs to happen.
A - Tim O'Day
Yeah, and we've talked about that a lot in the past too, that there is a lag time. But we've made improvements and I think we'll continue to make progress with our clients and I think they've been really supportive, I know it's a difficult situation for everybody, we'd like to have a more stable environment where we're not chasing this but everybody sees the need because customers need to be properly serviced.
Great. Thank you. I appreciate your commentary. I'll jump back in the queue.
A - Tim O'Day
Thanks, Krista.
Your next question will come from Zachary Evershed at National Bank. Please go ahead.
A - Tim O'Day
Good morning, Zachary.
Good morning, everybody. Thanks for taking my questions and congrats on the quarter. So I was hoping you could give us an update on the competitive landscape in the M&A's here with three more months of high interest rates. Usually you're sole sourcing these smaller deals but have you received any inbounds from maybe MSOs that are feeling a pinch?
A - Tim O'Day
I wouldn't comment on anything specific. We really began to focus on single-shop acquisitions, probably more than a year ago now. We've been very successful that I think you can see that we've built up a good capacity to process these and we're happy with -- happy both with the pace and with the price that we're paying for those businesses. If multi-shop opportunities come along that are accretive, we're very open to that but also confident about our ability to achieve our revenue goals, our growth goals even without multi-shop acquisitions.
That's right, thanks. Then we're seeing some interesting developments in carrier strategies in Florida and California. If more insurers start to exit markets where they can't get enough pricing to cover costs. What's the impact on Boyd?
A - Tim O'Day
I'm not sure we'll really have much impact on Boyd, insurance is a required product, regulators are going to have to allow carriers. At some point, they have to provide enough rate increase for carriers to be profitable and right in the state. If you look at the exit in Florida was more related to catastrophic risk and maybe an unwillingness to belief that they couldn't get the premiums they needed to underwrite that, and I think that they may have some requirements that you don't pull out of one category. California I think has been slower to move rates with some carriers but progress has been made. So I really think that the impact on us should not be significant. I'm not sure there should be any impact on us.
That's good color. Thanks. I will turn it over.
A - Tim O'Day
Thanks, Zachary.
Your next question will come from Michael Doumet at Scotiabank. Please go ahead.
A - Tim O'Day
Good morning, Michael.
Good morning, guys. So maybe I'll start with a clarification question, it feels a little bit Deja vu for last quarter, but are you suggesting same-store sales growth in Q3 to-date is tracking at 11% year-on-year. Because I mean to me, if I do the math, it's quite a step down if that number -- it does persist through the quarter and reflects a little bit more pronounced seasonality than I would expect which again would have implications for operating leverage in the quarter as well. So just to clarify on that please?
A - Tim O'Day
Yeah, I think there are two factors that we pointed out. One is, if we have one less selling and production day in the quarter than we did in the prior year, which will take away a full days' worth of production and capacity production in revenue in the quarter. And in comparison to Q2, we're faced with much higher seasonal vacation capacity losses, which will have a dampening effect on sales. We would have had that in the prior year as well, but we were really looking at the run rate year-to-date versus what we've seen thus far in the third quarter. So I'd say your assessment as to what we are communicating thus far in the quarter is accurate.
Perfect, thank you. And then maybe just turning to the operating costs, I guess the question is, are you at peak spend here as far as the TDP program is concerned and I guess the thinking behind it is presumably you're at a point where you're seeing technicians graduate, that's moving some costs up into the cost of revenues?
A - Tim O'Day
I'm not sure whether I would say, we do make a significant investment in our TDP program. The biggest investment is when they're in the first level which is approximately six months, they're really fully absorbed as an expense, including a lot of training expense that's outside of wages. I would say that what we've seen in the past couple of quarters reflects the most money that we've spent on TDP whether we will increase that spend or not, we haven't made any decisions but it's an important program and it is producing increased capacity but it does come at a cost, so.
Okay, that's helpful. And maybe last one, I want to talk about the total loss ratio, just in terms of collisions in the industry, I mean pre-pandemic plus 20%, a drop 17% that's bouncing back now with higher repair costs, lower used vehicle prices. Just how to think about the normalization and the impact to your demand and even your mix?
A - Tim O'Day
Yeah, well, I think one of the things we did see when used car prices moved way up and total loss rates went down is that we were repairing vehicles that typically would not have been repaired just because it was economic to repair them because of high used car prices that would tend to skew our sales mix toward parts, which would not be favorable. It also increases the average size of a repair vehicle in our shops, which is also not favorable, we tend to be less productive on heavily damaged vehicles than more modestly damaged vehicles. So the increase in total loss rates will remove some of those vehicles from our repair and move them through the total loss channel. Right now, there is so much demand that I really don't see an increase in total loss rates or a return to more normal levels having an impact on our revenue. It could actually be favorable to our mix although I wouldn't expect that to be all that significant.
That's great color. Thank you, Tim.
A - Tim O'Day
Thanks, Michael.
Your next question will come from Sabahat Khan at RBC. Please go ahead.
Great. Thanks very much.
A - Tim O'Day
Good morning, Sabahat.
Good morning, you provided some color on kind of the thought process around building out your in-house calibration at scanning services. I'm just wondering what that entails, is that also a labor thing as you have to get staffed to sort of run that operation, is it some CapEx at training and I guess is there a timeline when you think that entire business could be brought in-house, assuming that sort of an intention to do it 100% in-house. Just some thoughts on where that goes from here?
A - Tim O'Day
It is a labor intensive business and it's skilled labor. So we recruit and train, we recruit some people that have the experience, we bring others in that go through a similar program to TDP on the calibration side to grow that workforce. We've really spent the last several months getting infrastructure in place to allow us to grow that business, management systems and things of that nature. We're right about done with that now, and we will plan to grow that business more rapidly, but as I said earlier in the call, it is a business that will require skilled labor, some of which we will have to train. So it will take time to roll it out. We haven't communicated a timetable but it won't be at the end of this year or even at the end of next year, it will take more time than that to grow it out. Just to clarify also this is a separate business within Boyd and while we service more of our own business, we do service third-party business and intend to continue to do that with our mobile calibration business.
All right. Great. And then on M&A, you noted that smaller transactions should get you to your 2025 targets. I was just wondering, I guess as you just look at the outlook across the industry, has kind of the events of the last years made some of the larger folks a bit more available for takeout, obviously some of transacted, we've seen some of the headlines but just wondering from today onward, do you think there'll be some of the larger players that could potentially come up for sale at some point or should we expect you to continue on this sort of singles and doubles road for a while here?
A - Tim O'Day
I think that you can expect that we'll continue to focus on these single shops or small acquisitions because they're plenty out there, we perform well with them, it's a great return on our investment and we're able to absorb them pretty easily into our network. Having said that, if you look at our balance sheet, we certainly have the capacity to do more, and if we can find attractive returns for mid-sized businesses or even larger businesses as long as they make sense from a accretion shareholder value, we're open to that. The point that I've been making is that we can accomplish our revenue goals for 2025 without having to do that, so we're not forced into those, we'll do what's right for our shareholders.
Great. Thanks very much for the color.
A - Tim O'Day
Thanks, Sabahat.
Your next question will come from Steve Hansen at Raymond James. Please go ahead.
Yeah, sorry, quick follow-up guys. Tim, you referenced an increase in your an intentional increase in your capabilities to process the smaller tuck-ins the onesie-twosies, you also did reference you're balancing being in sound shape. Is there an ability to accelerate the pace from here that we've seen in the last quarter or two. It has been accelerating, we're just try to get a sense for that capability set internally relative to your goals and the onesie-twosie tuck-ins? Thanks.
A - Tim O'Day
Yeah, I think the model that we've built for this can be expanded. What we have to be conscious of is making sure that operationally we can absorb the growth and that we don't push more new unit growth on the field than the field can handle. But I think the model that we've established for growth is one that is pretty easy to scale up if we were to choose to do that.
Great. And just a follow-up to that, there is new store openings as well and just on a relative mix basis, will the tuck-in M&A side be more prevalent going forward than the greenfield or how do you still feel about that mix?
A - Tim O'Day
I feel really good about the opportunity that we've got with greenfield and brownfield developments. And I think we'll probably increase our mix on those over time. I think one of the things, Steve, that is valuable about those is that we have a building design that allows us to really integrate all aspects of our business and do that in a site that's set up for calibration, for glass and for collision and some mix of that I think is important as we look to stay current with our network, stay current with the changing demand.
That's really helpful. I appreciate that. Thanks.
There are no further questions. So at this time, I will turn the conference back to Tim O'Day for any closing remarks.
Tim O'Day
Great. Thank you, operator, and thanks to all of you once again for joining our call and we look forward to reporting our third quarter results to you in November. Thanks again and have a great day.
Ladies and gentlemen, this does conclude your conference call for this morning. We would like to thank you all for participating and ask you to please disconnect your lines.