Earnings Call: Q2 2021

Aug 11, 2021

Good morning, everyone. Welcome to The Boyd Group Services, Inc. Second Quarter twenty twenty one 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, and you can access these documents at SEDAR's database found at sedar.com. I'd like to remind everyone that this conference call is being recorded today, Wednesday, 08/11/2021. I would now like to introduce Mr. Tim O'Day, President and Chief Executive Officer of Boy 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 are Pat Pattopatti, our Executive Vice President and Chief Financial Officer and Brock Bulbuck, our Executive Chair. We released our twenty twenty one second quarter results before markets open today. You can access our news release as well as our complete financial statements and management discussion and analysis on our website at voydgroup.com. Our news release, financial statements and MD and A have also been filed on SEDAR this morning. On today's call, we will discuss the financial results for the three six month periods ended 06/30/2021, and provide a general business update. We will then open the call for questions. Comparing the second quarter of twenty twenty one to the same period of 2020 demonstrates how significantly the business was impacted by the pandemic one year ago and how far we've come since that time. During the second quarter, we saw infection numbers and restrictions decrease while vaccination levels increased. We achieved strong same store sales growth in the quarter, which resulted in increased adjusted EBITDA margins and net earnings, both in the quarter and on a year to date basis. Although we continue to experience reduced demand in certain markets at the beginning of the second quarter, demand accelerated in most U. S. Markets as the quarter progressed. By the end of the second quarter, demand in The U. S. Was at meaningfully higher levels than we experienced in Q1 of twenty twenty one. By contrast, demand in Canada remained significantly lower than the pre pandemic levels and below the levels experienced in the first quarter of twenty twenty one. As was previously communicated, beginning 01/01/2021, Boyd is reporting results in U. S. Dollars. This change has been made in order to better reflect the company's business activities given the significance of U. S. Denominated revenues. During the second quarter, we recorded sales of 444,600,000.0 adjusted EBITDA of $58,000,000 and net earnings of $10,500,000 Sales at $444,600,000 showed a 44.4% increase when compared to the same period of 2020. This reflects a $28,300,000 contribution from 72 new locations. Our same store sales, excluding foreign exchange, increased by 34.5% in the second quarter, recognizing the same number of selling and production days in The U. S. And Canada in the second quarter of twenty twenty one when compared to the same period of 2020. Same store sales growth in Canada was much lower than same store sales growth in The U. S. And unfavorable when compared to the first quarter of twenty twenty one. While claim volumes increased meaningfully in The U. S, staffing capacity constraints for location level administrative staff and technicians limited same store sales growth in the second quarter of twenty twenty one. Gross margin was 46.1% in the second quarter compared to 46.8% achieved in the same period of 2020. The gross margin percentage was negatively impacted by reduced parts and labor margins as well as variability in direct repair program pricing. Operating expenses for the second quarter of twenty twenty one were $147,100,000 or 33.1% of sales compared to $108,500,000 or 35.2% of sales in the same period of 2020. The increase in operating expenses was primarily the result of growth in the number of locations as well as the COVID-nineteen related cost reductions that impacted the second quarter of twenty twenty. The decrease as a percentage of sales was primarily due to increased sales in the second quarter of twenty twenty one as compared to the same period of the prior year, which was significantly impacted by the COVID-nineteen pandemic. Increased sales levels provided improved leveraging of certain costs such as property taxes and utilities. Adjusted EBITDA or EBITDA adjusted for fair value adjustments to financial instruments and costs related to acquisitions and transactions was $58,000,000 an increase of 62.7% over the same period of 2020. Adjusted EBITDA was positively impacted by improved sales levels, which also provided improved leveraging of certain operating costs. In total, adjusted EBITDA in the second quarter benefited from the Canadian emergency wage subsidy in the amount of $3,600,000 as compared to $3,400,000 in the same period of the prior year. As is the objective of the program, Boyd continued to employ and incur costs for employees that would have been laid off or furloughed absent the wage subsidy. As a result of the steady progress toward more normal business conditions in The U. S, EBITDA margin percent improved 50 basis points compared to Q1. Net earnings for the second quarter of twenty twenty one was $10,500,000 compared to a net loss of $5,000,000 in the same period of 2020. Excluding fair value adjustments and acquisition and transaction costs, adjusted net earnings for the second quarter of twenty twenty one was $11,400,000 or $0.53 per share compared to an adjusted net loss of $4,800,000 or $0.23 per share in the same period of the prior year. The increase in adjusted net earnings per share is primarily attributed to improved sales levels, which also provided improved leveraging of certain operating costs and other relatively fixed costs, such as depreciation and amortization that could not be reduced in relation to a decline in sales due to the COVID-nineteen pandemic during the second quarter of twenty twenty. For the six month period ended 06/30/2021, we reported sales of $866,300,000 an increase of 11.7% over the same period of the prior year, driven by same store sales growth of 4.9% or 5.7% on a days adjusted basis, as well as contributions from new locations that had not been in operation for the full comparative period. Gross margin increased to 46.1% of sales compared to 45.6 in the comparative period. The gross margin percentage was positively impacted by improved retail glass margins and a higher mix of glass sales in relation to collision sales, partially offset by variability in direct repair pricing. Operating expenses increased $30,800,000 when compared to the same period of the prior year, primarily due to the growth in the number of locations as well as the COVID-nineteen related cost reductions that impacted the prior year. Adjusted EBITDA for the six month period ended 06/30/2021 was $110,700,000 compared to $96,100,000 in the same period of the prior year. The $14,600,000 increase was primarily due to improved sales levels, which also provided improved leveraging of certain operating costs compared to the prior year period that was much more significantly impacted the pandemic. We reported net earnings of $18,200,000 compared to $12,000,000 in the same period of the prior year. Adjusted net earnings per share increased from $0.51 to $0.92 These increases are primarily attributed to improved sales levels, which also provided improved leveraging of certain operating costs and other relatively fixed costs, such as depreciation and amortization that could not be reduced in relation to the decline in sales due to the COVID-nineteen pandemic during the second quarter of twenty twenty. At the end of the period, we had total debt net of cash of $671,100,000 compared to $539,900,000 at 03/31/2021. During 2021, the company expects to make cash capital expenditures within the previously guided range of 1.6% to 1.8% of sales. This excludes those capital expenditures related to acquisition and development of new locations, the investment in environmental initiatives such as LED lighting and the investment in the expansion of our wall operating way practices through the Corporate Applications and Process Improvement Efficiency Project. During the first six months of the year, the company has invested approximately $2,400,000 in environmental initiatives. These investments will not only provide environmental and social benefits, but also achieve accretive returns on invested capital. Additionally, the company is expanding its Wow operating way practices to its corporate business processes. The related technology and process efficiency project will result in a total of 2,000,000 to $3,000,000 of additional investment for Ferns after the project is fully implemented. This initiative began in the third quarter of twenty twenty. As has been our practice, I would now like to comment on some potential for insider selling. For personal or estate planning reasons, some insiders, although excluding myself, may choose to sell some of their Boyd holdings during the balance of the year, but in any event, will continue to hold ownership of Boyd shares at levels well above those required by the company's share ownership policies. While the COVID-nineteen pandemic significantly impacted Boyd's business over the past year, we experienced increased demand in most U. S. Markets during the second quarter of twenty twenty one as restrictions continue to ease during this period. Thus far, in the third quarter of twenty twenty one, although still below pre pandemic levels, demand is exceeding our capacity in all U. S. Markets, which has resulted in high levels of work in process. The process of adding location level administrative staff and technician capacity to address this constraint remains a work in process and is resulting in increased waste pressure. By contrast, demand in Canada remains significantly lower than pre pandemic levels. Demand in Canada in Q3 is building very slowly in comparison to Q1 and Q2 as restrictions are eased and removed. Looking to the balance of 2021 and beyond, we continue to be confident that we will maintain progress toward our long term growth targets and operational plans. We have added 100 locations on a year to date basis and our pipeline to add new locations in existing markets and to expand into new markets is healthy. The recent acquisitions of John Harris Body Shops and Collision Works, which added a combined 51 locations with quality leadership are strategically opportunistic and better position us to execute on our comprehensive plans for accretive market build out in and around these platforms. For these reasons, Boyd paid toward the upper end of our historic multiple range for similar strategic growth platforms. In addition to taking time to execute on our build out plans, as with many acquisitions, especially those of larger size, it will also take time to integrate and achieve our expected synergies and the resultant earnings from these acquisitions and other new locations, especially given the continuing impact of the pandemic. We continue to have financial flexibility with our conservative balance sheet and more than $600,000,000 in dry powder to take advantage of opportunities as they arise. Notwithstanding our strong growth and positioning for the future, the previously mentioned factors are contributing to adjusted EBITDA margin pressure with very modest sequential quarterly same store sales gains in the third quarter to date. We are excited and optimistic about our positioning for the future. Our pipeline, including acquisitions as well as greenfield and brownfield locations, is healthy, and we are confident in our ability to achieve our five year plan. As market demand returns to normal levels in all areas of our business and we build our staffing capacity, we are well positioned for the future with our leadership position, our growth pipeline and many business initiatives, including our Wow! Operating way, scalable technician development program, scanning and calibration, OE certifications and intake center strategy to name a few. As always, operational excellence remains central to our business model and with ongoing investment in our Wow! Operating way, we continue to work to drive excellence in repair quality, customer satisfaction and repair cycle times to ensure the continued support of our insurance partners and vehicle owners. With that, I would now like to open the call to questions. Operator? Thank you. Ladies and gentlemen, we'll now begin the question and answer session. Okay. And your first question comes from David Newman from Desjardins. David, please go ahead. Good morning, Good morning, Debbie. Just on the same store sales growth, how much do you have an estimate of what you think was left off the table because capacity or labor constraints in the second quarter or was it just deferred into work in progress? And I'm just trying to reconcile the ramp or acceleration that you're talking about in demand versus the tempered sequential outlook. So just trying to get an understanding of what was left on the table, how much the was a work in progress and the kind of mix outlook? We haven't quantified that David. I will say that volumes have not returned to pre pandemic levels, but the labor shortage is making it difficult for us to process the available work. So our work in process has increased. I think there's some risk that as work in process continues at high levels that our capture rates could diminish a bit. So it could impact some of that available revenue. But as I communicated, we're working hard to build our staffing to take advantage of the work that is available. And Tim, just in terms of the just trying to reconcile this acceleration that you're above? I think it's really the labor constraint is really what's tempering our same store sales growth right now. The not so much the market volumes, although market volumes have not yet returned to normal. Okay. And then if you look at sort of supply chain labor challenges, the benefits from Biden are poised to end the September, maybe labor will become less of an issue. But what sort of margin pressure or maybe just a quantum of the upside in labor inflation as you head into the second half here? I would say it's clearly a very tight labor market in The United States right now. And we will remain competitive to attract our fair share of the labor. Historically, as we've had to do that, over a period of time, we've been able to recover any labor rate increases that we've had to provide through pricing with clients. Although, I wouldn't expect that in lockstep, but we've had pretty stable margins over a very long period of time. Okay. And last one for me guys is just if you look at coming out of the pandemic here, any change that you're seeing at all in insurer behavior to concentrate the DRPs of larger players, especially those that have OE certifications, technology, people, etcetera. In other words, you guys enjoy a natural advantage by being a larger player and your greater ability to process work because if you're having difficulties, I have to think a lot of the mom and pops out there are having even more difficulty in terms of securing labor. So any change that you're seeing in insurer behavior at all? Well, I think insurers still have a desire to concentrate their volume with fewer players. It creates benefits for them. And I believe that the investments we're making both in training and in OE certifications will make us more attractive to our partners over time. I think the OE certifications, we've grown our network of certified locations extensively over the past few years. I don't think that's an immediate payback. I think it's a longer term benefit that we can provide. And as we do with other things like our aluminum repair capabilities, we can hub and spoke our OE certifications so that where there's a need or desire for an OE certification, we can move vehicles to an adjacent repair center that has the appropriate certifications. Excellent. Thanks, Pat. Thanks, Tim. Thanks, David. Your next question comes from Jonathan Lamers from BMO Capital Markets. Jonathan, please go ahead. Thanks. Todd and Tim, could you update us on the labor rate situation and whether insurers are prepared to absorb the wage pressures the industry is seeing? Guess, don't have anything specific to comment on that other than, Jonathan, over several years, we've experienced labor rate pressure before and we've been able to recover that over time through market pricing. So I'm we intend to be competitive to attract the labor that we need. And I would expect that over time, we'll recover that incremental cost. Thanks. And Tim, I'm curious about opportunities for automation and collision repair, such as automated inspection systems with cameras or software. Are there any opportunities that you see there longer term, maybe for identifying minor dents or anything else? There is some equipment out there that is not common, although it has grown in its presence. It's primarily used for things like PDR or hail damage to assess quantity of dents on panels. I think there is there will be more automation coming into our industry. I think the early part of it may come on improving the efficiency of the repair planning and estimating process, AI around estimating and looking at maybe some of the technical requirements to properly complete a repair. That could also evolve in scanning and diagnostics to help with the interpretation and the repair procedures necessary to repair or correct diagnostic or calibration issues with vehicles. I haven't seen anything yet that's really going to greatly improve the efficiency of labor other than things like the investments we make in our Wow! Operating way, which are really more process focused in nature. Thanks. And one follow-up on the recent acquisitions. It's great that things are tracking on target. Would you frame the multiple paid for CollisionWorks as setting a new, benchmark versus Assured and and the other history? No. It is within the range, but it's towards the higher end of that range. Okay. Thank you for your comments. Thanks, Jonathan. Thank you, Jonathan. Your next question comes from Bret Jordan from Jefferies. Bret, please go ahead. Hey. Good morning, guys. Good morning, Bret. Could you give us just a little bit more clarity, I guess, on you talked about variability in DRP pricing a couple of times and maybe the cadence of that variability. Is it just your costs are going up at a faster rate than they're passing through pricing and it will catch up? Or is there anything else going on? No. When we refer to the variability, it has to do more with performance based agreements and pricing adjustments that can happen favorably or unfavorably on a quarter to quarter basis as it relates to our agreements. And it's not these are not large, large adjustments typically, but they do have an impact. Okay. And then I think you mentioned a couple of times that we're still below pre COVID volumes, but picking up. Could you give us a feeling for where we are on a comparable basis to the second quarter of twenty nineteen from a comp standpoint? What I've heard through CCC, and I've actually read it more in the analyst reports directly from CCC, was somewhere the volumes are down about 12% to 15% from twenty nineteen levels, assignment volumes. Okay. But I guess theoretically, you would have gained share of that period. So I and could you talk would you be in the same ballpark? Or would you be doing somewhat better than the market? We don't disclose specifics on that. And it's pretty difficult to measure because we've grown an awful lot since 2019 as well. Brett, if you look at our same store sales decline, and again, this is a proxy, this not perfect. In q two, they were down by 33%, and we are reporting that up by 34.5. So if you compound, it essentially tells me we are down around 10%. Obviously, you have Canada. You have other things, but that's a proxy. And then you can compare that to the CCC benchmark. So it it might give you some hints. Okay. Great. Thank you. Thanks, Maggie. Your next question comes from Maggie MacDougall from Stifel. Maggie, please go ahead. Good morning. Good morning, Maggie. Good morning, Maggie. You made some comments around some initiatives you have to essentially increase operational efficiency or find some cost savings in the business. And I'm wondering if you could provide us with a bit more detail in terms of the opportunities that you see and whether there's costs associated with that. Whether there's investment costs associated with that, Maggie? Yeah, exactly. Yes. I think we're always working on refining our Wow! Operating way processes. We've talked a lot over the past year about what we're doing at a corporate level. But we continue to look at our operating practices in the field as well that would be designed to help us move cars through the process faster and more efficiently. So we continue to make investments there. Those are really largely built into our cost structure. So they're not necessarily incremental. I would say if we had an opportunity that we thought would require a significant expense or significant investment, we would probably speak to that separately. Okay. Okay. Thanks, gentlemen. Thanks, Thanks, Maggie. Next question comes from Daryl Young from TD Securities. Daryl, please go ahead. Good morning, guys. First question is just around the contribution from recent acquisitions. I noticed it looked significantly lower than maybe I would have expected. Is that a reflection of just more greenfield and brownfield locations opening during the period? I think that's part of it, although that's not the lion's share. It's really we're buying businesses that are still impacted by the pandemic, And it takes time to get our synergies, our relationships in place in the current environment. So it's really more related to that than it is to greenfield brownfield. Okay. And then just a longer term question around some of The U. S. Electric vehicle targets that were that have been proposed. Can you just remind us what some of the considerations are in repairing electric vehicles? And I know there's obviously less engine work in your business, but just any consideration there we should keep in mind for future adoption? Yes. I think the vehicles, all newer vehicles are going to come with more technology. And that's true of electric vehicles as probably as well as the general population, although electric may even have more than average. So I think you'll see more ADAS type systems on these vehicles as it becomes a greater share of the market. There are fewer mechanical parts. That's not necessarily bad from a collision repair perspective. The panels that are typically repaired by us would continue to be damaged and be an opportunity. There are safety related matters around electric vehicles. They're high voltage vehicles and in some cases may require some specialized equipment and in many cases do require specialized training. So we would intend to use our hub and spoke network to create those capabilities, whether it's equipment or training or certifications in certain locations and then route vehicles to those locations as needed. That will change as it becomes a greater share of the market. But as it begins to evolve, I think we'll be well prepared to service that segment of the business. Okay, great. I'll hop back in the queue. Thanks guys. Thanks, Gerald. Thanks, Gerald. Your next question comes from Steve Hansen from Raymond James. Steve, please go ahead. Yeah. Good morning, Good morning, morning, Steve. I just wanted to circle back on the John Harris Closing Works deals and the effort in the multiples that you paid. Can you just give us some added context there? Do you think that's just reflective purely of the quality of those two franchises? Or is it more indicative of more competitive M and A environment out there? Well, certainly, it's a competitive environment for M and A right now. But I think it's probably more related to the quality and what we believe we can do with those platforms once they were under our ownership. While they were both decent sized businesses, we assessed it carefully and identified lots of fill in market opportunities in and around these platforms that we can use our single shop and greenfield brownfield strategy to grow those networks out. They both also came with high quality leadership that was accustomed to and experienced in a growing business. So we think it added to our capabilities, they were both really good high quality platforms in areas that we intended to grow in as well with lots of room for further growth. So that was really how we came to the conclusion that it was a good investment for us. Steve, we would characterize these as strategic growth platforms and the multiple way accorded reflects that. Okay. That's helpful. And maybe let me ask it another way. Do you see any multiple inflation in the smaller single and maybe double type shop acquisitions out there at the moment? The the market is right now, as we discussed before, know, there there is ample supply. So we are able to acquire those things at a very attractive valuations, and we consistently told we underwrite to 25% pretax ROIC basis, and we're able to get that those valuations. Okay. That's helpful. And and just just one last one, if I may, is on the the emerging technician and people shortage issue. Right? I guess reemerging, it feels like that was a big issue prior to the pandemic as well. But, you know, how do you feel like you're positioned relative to the industry? I'm just I'm just thinking back to your strategic decision last quarter or even until late December last year to restaff or repopulate many of your skeleton operations. It strikes me that might have given you an advantage relative to some of the other parties that might have been more flat footed on restaffing. Do you have a sense for how you're positioned relative to others out there and whether that could benefit you in the back half? There is no real industry data. My sense is that most in the industry right now are feeling the same pressure that we are. So it's a very tight labor market and business has picked up over the past few months. So I think it's probably we're not in an unusual position. I do think we've continued to make investments over the past few quarters to grow our technician development program. And we've talked a lot about this in the past. That's not an immediate fix. We've been doing that for a while now, and we do see graduates coming out of that program with greater frequency now. And we've expanded the program as well. So, you know, I think we're this is not an easy thing to address, but it's our intent to invest in people to grow their skills and capabilities to solve the problem longer term and be competitive in the marketplace in the near term. Okay. Thank you for that. Appreciate it. Next question comes from Nauman Fatih from Laurentian Bank. Please go ahead. Hi. Good morning, Good morning. Good morning. So my first question is, I remember in the last call, I think you mentioned that not all shops in Canada were open. So I'm just wondering if that has changed or are there still shops that are closed on the Canada front? We we still have some locations in Canada that are intake only at this time. Okay. But but in the near term, do you expect them opening up soon? Or is it gonna stay that way? No, I expect them to open up. I don't have a timeframe and we're going to base it on the recovery of the business. I'm hopeful that with the reduced restrictions in Canada that we'll start to see a pickup in volume there relatively soon. I think as most people know, Canada has done an outstanding job with vaccinations and pretty recently has begun to reopen the economy in a way that is very positive. So we'll just have to wait for that to unfold into improved business conditions. Fair enough. And just on the cost side, I know you've mentioned about technician pressures and wage pressures, but I'm just wondering that last year you guys had taken out some cost. Were there any permanent cost reductions that can sort of offset these cost pressures? Or are those costs are also coming back? We've really brought a lot of the cost back in Q4 and in Q1 so that we were prepared for the increase in business. Where we have fallen short of where I would like to be is with the specific level shop staffing. So we did identify some permanent savings, but our focus has been on preparing ourselves for the recovery and the growth of our business. And I think that's the right place for us to be. We're seeing positive signs that we need the people to take advantage of. Okay. Thanks for that color. And maybe just the last one from my end. This is more like a big picture, long term question, I would say. You've mentioned the hub and scope framework where you could, you know, take in a car and then move to another location. I'm just wondering at what stage are you in that? Because you have, you know, close to 700 locations. Is that something which is widely available within your network? Or there's few states which in which you're doing it and eventually you're going to roll it out to other states? I'd say it's fairly widely available, but it is evolving. If you take aluminum, which we've had aluminum capabilities for six or seven years now, we would have the hub and spoke capability for structural aluminum repair broadly throughout our network. We would also we have plenty of OE certifications. Most repairs today don't require an OE certification. It's more premium based vehicles that may be routed to a specific shop. But I think that could evolve and we're building our network to be well prepared for that. One of the other benefits of the hub and spoke network is that when we have a location that has enough work or maybe even too much, we can pretty easily move work to adjacent locations to take advantage of available capacity. So it goes beyond just when it's required to properly repair a vehicle, and it allows us to better take advantage of our capacity, which really allows us to deliver better results for our insurance clients by reducing length of rental and increasing customer satisfaction. Okay. That's it for me. Thank you for your time. Your next question comes from Chris Murray from ATB Financial. Chris, please go ahead. Yeah. Thanks, guys. Good morning. Good morning. Turning back to look at some of the larger acquisitions Pat, I think you mentioned earlier that part of this is looking at it on a return on capital basis. When you're looking at doing these larger acquisitions and I appreciate you're talking about paying for higher multiples and maybe that's just the brain damage of getting a larger transaction done as opposed to several small ones. But in order to meet your hurdle rate, are you looking at this from a perspective of just the baseline transaction? Are you looking at it more in the terms of everything that will go with it over the next couple of years in terms of, as you said, expanding the network or synergies or anything like that? Yeah. We do look at the future, Chris. Like when we talk about the single shops, that is, I think, there, the growth is not that critical. But when we talk about these MSOs, we look at what that brings to the table. So these are the strategic acquisitions. We look at the quality of the earnings, quality of the management, the growth opportunities it brings, broadening the relationships, stuff like that. So we do look at the future with these things. So I mean, is it fair to think that, you know, the effective multiple, if we were to go back and look at the kind of on an EBITDA basis or whatever, out further the multiple actually will probably end up being kind of more in the range than that would be just at first blush or when you're talking about the So that higher level multiple you're talking about is just on the base transaction it's not on the Okay. Absolutely. I just want to clarify. And then just sort of thinking about average revenue per store and growth. I think somebody alluded to the fact that maybe the revenue growth wasn't as big as they thought maybe around the store growth. I guess two pieces of this question. One, how do we think about now that you've started to add additional intake centers? Should we be starting to make sure that we're not we're separating those out in terms of revenue generation? Or how should we think about intake centers impacting revenue generation? Or is it just more still kind of a utilization play? And then the other piece of this question is, since you've started really adding intake centers, I guess, maybe in December when we really started seeing it step up, how are you seeing the performance so far maybe over the past six to eight months? Chris, I clarify that the intake center strategy is intended to help us boost same store sales and it ties into our OE certifications. Intake centers are typically in an OE dealer location. So it gives us another point of contact with customers and more of a revenue channel to that brand. In the short term, the labor capacity constraints make that a little bit more challenging. But as we begin to solve the labor problem, I think it can be one of the strategies that we have in place to help us generate incremental same store sales. Okay. And so, but I guess the way to think about it is, when we think about store revenue growth on store basis don't be included in the intake centers is the way to think about it? Yes, we don't count the revenue in the intake center, we count it in the production facility. Okay. That's helpful. Thanks. Thanks, Chris. Thanks, Chris. Your next question comes from Zachary Evershed from National Bank Financial. Zachary, please go ahead. Good morning. Thanks, Lee. Thomas calling in for Zach. Most of my questions have been answered. Maybe one last one. Looking at the M and A pipeline, we've seen a nice little tick up in pace here over q two and now q three. Do you think this space is sustainable? And do you think there could even be a little uptick from from the current pace? No. We we don't, extrapolate the current pace. So we we provide that guidance on a long term basis, and we are sticking to that guidance of doubling our revenues using 2019 as the base, and we'd like to double by 2025. And at any point in time, you may see ebbs and flows because acquisition comes in lumps. We don't want people to get too excited when we do more as well as get detected when, there is a lull in the activity. Sounds good. Thank you. Thank you. There are no further questions at this time. I'll turn it back to Mr. O'Dea for closing remarks. Great. Thank you, operator, and thank you all for once again joining our call today, and we look forward to reporting our third quarter results in November. Thanks, and have a great day. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.