Good morning, everyone. Welcome to the Boyd Group Services Inc.'s Q1 2022 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 sedar.com. I'd like to remind everyone that this conference call is being recorded today, Wednesday, May 11, 2022. 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 on today's call. On the call with me today is Pat Pathipati, our Executive Vice President and Chief Financial Officer. We released our 2022 Q1 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'll discuss the financial results for the three-month period ending March 31, 2022, and provide a general business update. We will then open the call for questions. During the Q1 of 2022, we saw strong same-store sales growth in both Canada and the U.S. Demand for Boyd's services continued to substantially exceed capacity in all U.S. markets. During the latter part of the Q1, we experienced some modest recovery of demand for services in Canada as the remaining pandemic restrictions were lifted in most provinces. The ability to service demand continues to be constrained by market conditions, including labor availability in the U.S. and parts supply chain issues throughout North America. Early in the Q1 of 2022, Omicron further negatively impacted capacity with increased levels of absenteeism. Throughout the Q1, we continued to experience cost pressures, including wages as well as inflationary increases in certain operating costs. Together, these factors continued to impact the margins that could be achieved in the Q1 of 2022. During the Q1, we recorded sales of $556.8 million, adjusted EBITDA of $53.8 million, and net earnings of $1.6 million. Sales were $556.8 million, a 32% increase when compared to the same period of 2021. This reflects a $74.6 million contribution from 119 new locations. Our same-store sales, excluding foreign exchange, increased by 14.7% in the Q1, recognizing one additional selling and production day in the US and Canada when compared to the same period of 2021, which increased selling and production capacity by approximately 1.6%. Same-store sales growth was a result of pricing increases and high levels of demand for services. Although ongoing staffing constraints and supply chain disruption continued to impact sales levels that could be achieved during the Q1 of 2022. Gross margin was 44.1% in the Q1 of 2022 compared to 46% achieved in the same period of 2021, with the prior period including the recognition of the Canada Emergency Wage Subsidy of approximately $1.5 million. The gross margin percentage was negatively impacted by reduced parts and labor margins as well as a higher mix of parts in relation to labor. During the Q1 of 2022, Boyd continued to face supply chain disruptions, which resulted in a negative impact on margin as a higher percentage of parts were sourced from non-primary suppliers in order to complete repairs and our mix of OE parts relative to alternative parts increased. While pricing increases began to flow through the results in the Q1 of 2022, which resulted in a modest incremental improvement in gross margin from the Q4 of 2021, labor margins were negatively impacted by the extraordinarily tight labor market, which continued to result in increased wage costs to both retain and recruit staff. The shortage of labor also resulted in a higher mix of parts sales in relation to labor. Operating expenses for the Q1 of 2022 were $191.6 million or 34.4% of sales, compared to $141.2 million or 33.5% in the same period of 2021, with the prior period including the recognition of the CEWS of approximately $1.9 million. The increase as a percentage of sales was due to capacity constraints and supply chain disruptions, which impacted the sales levels that could be achieved during the Q1 of 2022, as well as inflationary pressures and increased support costs related to the expansion of our WOW Operating Way practices to corporate business processes. Adjusted EBITDA or EBITDA adjusted for fair value adjustments to financial instruments and costs related to acquisitions and transactions was $53.8 million, an increase of 1.9% over the same period of 2021, with the prior period including the recognition of CEWS of approximately $3.4 million. The increase was primarily the result of increased sales levels from same-store sales growth, as well as new location growth. Adjusted EBITDA for the period was impacted by technician capacity due to the tight labor market and the impact of absenteeism due to Omicron during the Q1. Market conditions, including wage pressure, a tight labor market, and supply chain disruption, are impacting the results that can be achieved in the near term. Net earnings for the Q1 of 2022 was $1.6 million, compared to $7.7 million in the same period of 2021. Excluding fair value adjustments and acquisition and transaction costs, adjusted net earnings for the Q1 of 2022 was $2.1 million or $0.10 per share, compared to $8.3 million or $0.39 per share in the same period of the prior year. The decrease in adjusted net earnings per share is primarily attributed to the lower gross margin percentage and the higher levels of operating expenses. At the end of the period, we had total debt net of cash of $970.1 million, compared to $957.7 million at December 31, 2021. Debt net of cash increased when compared to prior periods, primarily as a result of acquisition activity, which resulted in increased lease liabilities. During 2021, the company expects to make cash capital expenditures within the previously guided range of 1.6% of sales. This excludes those capital expenditures related to acquisition and development of new locations. Demand for Boyd services is continuing to substantially exceed capacity, which has resulted in high levels of work in process. The ability to service demand continues to be constrained by labor availability in the US and parts and supply chain issues throughout North America, with the accompanying margin pressure continuing into the Q2 of 2022. Thus far in the Q2 of 2022, the company has experienced an improvement in same-store sales growth relative to the prior quarter. Building on the success we achieved in early 2022, Boyd continues to negotiate an unprecedented number of meaningful pricing increases from clients, which contributed to a modest incremental improvement in gross margin percentage from the Q4 of 2021 to the Q1 of 2022, with continuing cost pressure impacting the level of margin we've experienced thus far. We are experiencing pricing differences between clients, which is a key area of focus in continuing pricing discussions. Until these differences are addressed, continuing wage pressure has an impact on Boyd's near-term ability to meaningfully improve labor margins. In addition, supply chain disruption has continued to impact the completion of many repairs and has resulted in a continued growth of work in process. As noted in our fiscal 2021 year-end reporting, it takes time for pricing changes to flow through results. We believe that supply chain disruption is transitory and will normalize as the underlying manufacturing and distribution issues are resolved. However, the company has not experienced an improvement in these conditions thus far during 2022. Given the record level of acquisition and development activity that took place during 2021 and the impact the current market conditions are having on the business, recent growth activity has been more selective, with greater emphasis on brownfield and greenfield development. This does not change our outlook on our long-term growth, but solving for the current business challenges provides a strong platform from which to grow, to continue to grow our business. We remain committed to addressing the labor market challenges through initiatives such as our Technician Development Program, including our commitment to more than double the number of trainees in the program to help meet future needs. We are off to a good start and are confident that we will achieve this goal, which will help build our capacity over the long term as TDPs complete the program after 18 months. We continue to increase recruitment support to improve lead generation and follow-up, proactively evaluate compensation levels, and make appropriate adjustments to ensure the company remains competitive in a rapidly changing environment and drive high levels of execution for our onboarding and orientation programs to increase retention. In the short term, we are primarily focused on addressing the labor shortage for our core business. There is an urgent need to raise wage rates in order to attract talent to the industry, and client pricing needs to reflect this market change. Notwithstanding near-term challenges, Boyd remains confident in the business model and the company's plan to double the size of our business on a constant currency basis from 2021 to 2025 against 2019 sales, with same-store sales being a primary driver of growth in the very near term. With that, I would now like to open the call to questions. Operator? Yes, sir. Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star one if you would like to ask a question. We'll take our first question from Michael Doumet with Scotiabank. Good morning, Michael. Good morning, Michael. Hey, good morning, guys. The first question's on, I guess, the margins really is full focus. I was wondering if, you know, you could talk about having received price increases from insurance companies beyond what you discussed on your Q4 call. Understanding obviously that you're still dealing with inflationary pressures on the labor side, you know, have you seen any sort of moderation, quarter-to-quarter or month-over-month that you can talk about? On the first question, we've continued to receive an unprecedented number of increases after we reported last quarter. You know, the activity continues to be fairly steady on achieving price increases. That has not slowed down. On the wage pressure, we really haven't commented on sizing that up, but you know, there continues to be wage pressure. The industry, not just Boyd, but the industry is short-staffed. We're you know, we're fighting for talent within the industry and to pull talent from other industries. I think we can expect to see some continuing wage pressure, but I don't have a good metric for you, Michael, on you know, the pace of it relative to the prior quarter. Okay. That's really helpful. And understanding there's a lag, obviously, in terms of how the price increases kick into the margins, just trying to get a sense if you're at a point where, you know, the price increases are outpacing the wage inflation and how we should think about the margins going forward. Well, we did comment that we saw a slight improvement in margin for the quarter as a result of the price increases. I think it is important to recognize that there is a lag from the time that we receive a price increase until it's realized in our results. That lag is a function of, you know, two primary factors. One, the pricing on a repair is really set at the time of the initial estimate versus when we bring it in for repair. With a fairly sizable backlog of work, there is a lag time between when we receive an assignment, when we estimate it, and when we bring it in to process the work. That's compounded by the supply chain disruption, which is causing a number of repairs to be started, but then suspended while we await a part. The pricing on that work in process is generally at older levels or prior pricing, which as well takes time then to flow through results and see the full benefit of the negotiated price increases. Michael, if you look at the longer term, we are very confident about getting back to the historical levels. Tim commented on the labor side and on the parts side. As parts supply chain issues improve, that should revert to historical levels. The third one is paint and material, and there, you know, we are realizing good margins. The fourth one, I think, again, you're not gonna see the benefit in the very short term, but over an extended period of time, you'll see margins contributing from scanning and calibration. Given those drivers, we're very confident about getting back to the historical gross margins over a period of time, not in the very short term. Perfect. I have other questions, but I'll get back to you guys. Thank you. Thanks, Michael. Thanks, Michael. We'll take our next question from Gary Ho with Desjardins. Good morning, Gary. Good morning. Just wondering if you can provide a bit more color in terms of the price increases you achieved in Q1. How much did it contribute to the 14.7% same-store sales growth? As well, you know, has those discussions with insurers gotten maybe easier given, you know, they're able to get some rate hikes from state regulators? Yeah. On your first question, it's really difficult to assess the impact of the price change on our overall revenue. Certainly, the price changes have had a positive impact on same-store sales. We're also seeing a mix change toward more parts on vehicles, and that's being driven both by technology, maybe by a lack of some of the alternative parts, and by a change in the mix of vehicles. There have probably been a slight increase in the number of non-drivable vehicles being repaired in the market and fewer total losses because of high used car prices. There are a number of different factors contributing to an increase in the average cost to repair beyond just the labor price or paint material pricing. I don't have a good answer for you on that one, Gary, but it's certainly a contributor to our same-store sales growth. I think your other question really related to the trend that we're seeing in the pricing. I would say that generally, more recent price increases have been higher than prior price increases. That's really a reflection of maybe a delay in some customers implementing price changes. By the time they implemented them, the market had moved further than what we've been seeing previously. Okay, great. Thanks for that. Maybe similar, on the same trend, you know, just curious, maybe in the medium term, you know, are there any appetite from yourself or the industry to renegotiate these contracts with insurers to give you more flexibility in pricing and/or link it to kind of wage growth and/or CPI? Well, there'd certainly be an appetite on our part for that. I'm not sure that we have that power. I would say that based on the conversations that I've had with insurers, they absolutely understand the need for the industry to receive higher rates. As you've probably seen, insurers are filing for rate increases. It does take time for that to flow through. You know, our insurance partners do understand that, you know, we can't serve their needs effectively with the labor force that's currently in our industry, and we're gonna have to pay more as an industry to build our workforce to be able to serve them properly. I don't know that, you know, we're renegotiating contracts. The contracts don't really have set pricing in them as it is today. The pricing is really market by market. As clients move up, the market will move up. Again, it depends on how you define the intermediate term, but certainly in the long term, the industry dynamics are gonna change. Right now, the big eight or the top eight collision repair shops have 30% of the revenues. That will expand over a period of time. That's when industry dynamics are gonna change. Okay. Thanks for that. This is my last question. Just on the locations added this quarter, 11. I think two so far post-Q1. Seems like the pace has slowed. Can you provide a bit more context there, maybe outlook for the second half of this year, and what you need to see to get more comfort with the ramp up on the back end? I think we did comment in my conference call script that, you know, our focus is on our core business right now. We're continuing to grow. We're pretty focused on greenfield, brownfield, and single shop development. I'd say our pipeline is healthy on that. I really want our teams to focus on, you know, increasing our technician capacity, getting the pricing right in the industry, getting the pricing right for our company. We're not slowing down our long-term growth plan, and we're committed to our five-year goal, but we're gonna have increased emphasis on managing our core business in the near term. You'll probably see less emphasis on growth. We're not projecting the second half of the year at this point, but we're gonna continue to add locations throughout the year. Our focus is on getting the right pricing and staffing in place. Yeah, Gary, let me just substantiate a little more. Our growth target envisions 15% CAGR, compounded annual growth rate. If you look at the same-store sales growth, again, we are not providing any guidance, but if you just take 10% based on what we have done in the last couple of quarters, and that leaves 5% for acquisition growth. On a $2 billion revenue, that translates to $100 million of revenues coming from acquisitions. Depending upon your assumption about revenue per shop, that translates to 33-40 shops. If you look at what we have done, we have done 13 in four months. If you translate, that actually exceeds that level, number one. Number two, we are off to a great start. Last year, we added 127 locations, so that gives us more room. We're highly confident about the longer term, but we feel in the very short term, we have better opportunities on same-store sales growth and the associated contribution margin that brings. Okay, great. Thanks for connecting the dots there. Okay, that's it for me. Thanks, Gary. We'll take our next question from Steve Hansen with Raymond James. Go on, Steve. Yeah, good morning, guys. Just maybe a question on the parts issue specifically. One of the large parts vendors in the industry had recently commented that the China lockdowns have actually had the benefit of freeing up containers to source parts from other regions, and even suggested that the availability was actually on the rise from these other regions. I guess just wanted to clarify that that's not been the case from your shop level discussions thus far. Yeah, I think our parts mix has skewed more toward OE than what we've historically seen. You know, the supply chain improvement, I think, was a relatively temporary impact of shutdowns in China and maybe some cargo ship availability to get the alternative parts into the US. That would still need to get through the distribution channels in the US. There may have been a pickup of the availability of alternative parts. The issue that we face in terms of slowing down repairs has more to do with the OE parts. Because if an aftermarket or alternative part's not available to complete a repair, we can rely on the OE part. If the OE part's not available, we have to set the repair aside and look for other work on. The change that you would see with improved availability of aftermarket would be a reduction in our OE purchases and an increase in our aftermarket, but it wouldn't impact our ability to produce work. Understood. Is there a way to benchmark, Tim, or maybe just give us a sense for the shift that we've seen in OE parts versus aftermarket over the past, you know, 18 months? Are you 10 points higher today in OE parts versus normal? I'm just trying to get a sense for how big of a shift there's been. Yeah. I think CCC actually does publish some data on that, Steve. I don't have it in front of me. Yeah. 10 points would be an overstatement for the industry, though. It's you know, single digits. I don't have the number in front of me. It has an impact because the alternative parts generally are more profitable than the OE parts, so it has a margin impact. It's not a 10-point shift from, you know, from alternative to OE. Sure. Okay. Just one last one then I'll jump in the queue. It's just on your capabilities or your annual capacity to add the brownfield and greenfield sites. You know, it presumably requires almost a different skill set in some regards. You know, is it, what is the capacity to add there on an annual basis right now, given the team that's staffed to it? Yeah, we have very good capacity on the greenfield/brownfield side, so we're not necessarily limited. Some of the work that we do with that can be outsourced. That gives us, you know, pretty good flex capacity on that. We've got very good capacity on greenfield/brownfield. We are not capacity constrained, Steve, on the corporate development front. Understood. Okay, that's great, guys. Appreciate the time. Thanks, Steve. Thanks, Steve. We'll now take a question from Bret Jordan with Jefferies. Hey, good morning, guys. Good morning, Bret. On the comment about non-drivable repairs, more major work driving some of that comp growth, have you seen any shift, I guess, with some slight sequential softening of the Manheim that insurers are maybe opting out of some of those very expensive repairs recently, or is it too soon? It's too soon, and I'm not sure how we would feel that. I can tell you that as I visit our shops and talk to our teams, we're fixing vehicles today that two years ago would have been total losses based on the level of damage, just because of the high cost of, you know, the high value of used cars. I'd say there's no clarity as to when used car prices are going to normalize at this point. We'll likely continue to see some higher average dollar repairs as a result of used car prices. There may be some offset to that because, you know, if there's a serious supply chain issue and there may be a part that, you know, won't be available for six months, an insurer may choose to total vehicle out just because the, you know, cost of maintaining a claimant in a rental car for that period of time isn't worth it. Okay. I guess on, you know, just given the sustained squeeze in industry profitability, do you see that having any impact on M&A activity? You know, obviously, the Big Eight have a lot of share, but is there either more interest on the seller side, or less interest on the buyer side, just given the challenges in profitability now? I only know for us and, you know, we see lots of opportunity for growth. We're gonna work our way through that and make sure that we're, you know, selective and, you know, investing in the right growth. There's still plenty of room for growth. At the same time, as we mentioned earlier, we're committed to making sure our management team is very focused on solving the core challenges of our business of pricing and capacity. We've just got to balance those out to make sure that we, you know, do what's right for the company in the short term, while maintaining, you know, a good growth engine for the long term. Okay. If you look at the trends, like if you look at the other seven other than us, they're all owned by private equity. They have high leverage. In a rising interest rate environment, that's going to pose some challenges for them. That talks about on the demand side of these acquisitions. On the supply side, the single shop guys are gonna face more headwinds as we move forward. Opportunities wise, we feel there are gonna be plenty of opportunities, and it's up to us on what we have to choose and when. Okay, great. That's, that's interesting. One quick last question around the comp. Is there a way to sort of think about car count versus price in that? I know somebody earlier asked about, you know, what inflation was doing to that comp tailwind. Is there some way to think about sort of maybe a comparable car count year-over-year? Yeah, we haven't spent a lot of time talking about that in the past. There probably is a way to do that, Brett. The labor hours and the part cost are going up on repairs today. Part cost is up pretty meaningfully. Actually not just the average part cost, but the number of parts on repairs is going up. We really look at it more from a labor capacity standpoint. You know, if labor hours go up, we may fix fewer units but have higher revenue. We haven't really focused on the car count aspect of it. Okay. Thank you. Thanks, Bret. Thank you. Thanks, Bret. We'll now take our next question from Jonathan Lamers with BMO Capital Markets. Good morning. Morning, Jonathan. Good morning, Jonathan. Tim, just to pull on the pricing thread a bit more. Once all the clients that have not yet raised prices do increase prices to the new normal level, will another round of price increases from all the partners be required? Yes. You know, just to clarify, the vast majority, and I mean vast majority of our clients have increased their pricing to us. It's been happening over several months. You know, the level of price increase, more recently, we've been able to identify that the pricing changes have had some variation. The near term opportunity, while we go back and look for further general price relief from the market across clients, the near term or short-term opportunity is really those that maybe moved early or didn't move to market. We need to address them to get them to the new current rate in the market. We continue to seek further increases that are necessary to attract the talent that our industry has to have to properly service our customers. Thanks. As we think about the Q2, and I know you can't give guidance, but just directionally, will the investments in wages that you're making now to improve your capacity, will those have a greater effect than the, you know, these near-term benefits from getting pricing from the remaining partners to catch up? You know, it's really difficult for us to predict exactly, you know, when the price increases will come through and what will happen with the labor pricing in the short term. We wouldn't, I wouldn't have any guidance for you in the short term. I do expect that we will continue to see improving price from our clients, both increases on an ongoing basis as we move forward and the realization of those price increases in our recognized revenue as we move WIP through with old pricing. I think we'll continue to see improvement on the pricing side. That will help drive same-store sales. We're gonna continue to be, you know, as aggressive as we can be to secure the labor we need to complete the repairs because we've got an abundance of work, and we wanna be able to serve our clients properly and process that work. It would be very difficult to predict exactly when, you know, selling price increases and wage increases will balance out. I'm confident that over time they will, but the timing is difficult to assess. Right. Compensation is increasing ahead of the next round of rate increases to address the backlog. Is that right? I don't have good data to give you on that, but we intend to be competitive in the marketplace to both retain the labor that we've got and attract new labor. If pricing doesn't keep up with that, we'll be able to process more work. We're working hard to make sure that our clients understand our need and that we get the pricing we need from them and get it through our recognized revenue so that we improve our margins over time. Okay. A last question. Is there anything you can give us on how quickly your technician capacity is increasing? Would you have any thoughts on what would need to happen to reduce the repair backlogs back to a normal pre-COVID length? Well, you know, clearly, we've improved our capacity because we've generated good same-store sales gains. We are seeing an improvement in our capacity and our ability to drive revenue, you know, through our business. It is. The industry has a pretty significant challenge, and there's some third-party data that would suggest that the technical capacity of the industry is down, you know, as much as 18% from pre-pandemic to today. You know, I think we've got a more efficient workforce, and we've got some price, and we're getting some gains. I mentioned in my conference call script that I'm very pleased with what we're doing on our Technician Development Program. We've been adding to that steadily for several months now and expect to continue to add to that. I think that's really one of the longer term solutions to the labor problem. It's an industry problem, not just a Boyd problem. I'll pass it there. Thank you. Thanks, Jonathan. Our next question will come from Maggie MacDougall with Stifel. Hi, Maggie. Good morning. Hey. Hey. Good morning, Maggie. Good morning, Pat. A lot of commentary on pricing and, you know, how things could evolve over the next, let's say year plus. I suppose from my perspective, I'm less interested in the near-term sort of pricing/margin question and more interested in your view around the ability to shift the structural labor issue that the industry has faced for some time. It's been obviously compounded by a very low unemployment rate in the United States, which has made the labor market tight across a number of industries. It has been an issue for the collision repair industry even well before that was the case. I know you're doing a lot with regards to talent acquisition and retention, probably a lot more than your competitors. Taking a realistic view, do you think that price increases and wage inflation at this point will be enough to actually make a structural change to that problem that's been around for some time? I don't think we're at pricing levels from the insurance industry today that is going to help the industry draw the talent it needs from competitive industries, but we're working toward that. I think we'll get there. I mean, our insurance clients need a healthy collision repair industry that has the capacity to serve their customers. The backlogs that we have raise their cost, and create levels of dissatisfaction because of, you know, poor speed of repair that does cause policyholders to change insurance companies. It's really in everyone's best interest for the industry to have sufficient capacity. I think that for Boyd, the investments we're making in our Technician Development Program, we've got initiatives underway to improve efficiency in our shops, even absent things like our Technician Development Program that I would expect to help us improve throughput. We're not focused just on recruiting outside talent or even our TDP program. We are looking for opportunities, you know, exploiting the WOW Operating Way, and looking at other solutions that can drive throughput even without necessarily increasing our workforce. We don't spend a lot of time talking about those in part for competitive reasons. We're not solely reliant on TDP or just paying more for technicians. Okay. Thank you very much. Thanks, Maggie. Thanks, Maggie. Our next question will come from Zachary Evershed with National Bank Financial. Good morning, Tim. Morning, Pat. Thanks for taking my questions. Good morning. Morning, Zachary. On the Q4 call, you characterized the rate hike secured as bringing you up to Q3 2021 levels of wage inflation. Where are you now with the latest batch of increases? Well, through what we just reported, we saw only modest improvement in our margins as you know. We're ahead of that from a client negotiation price increase standpoint, because it does take time for those increases to flow through to our recognized revenue for the reasons that I talked about earlier. I would say we're still, you know, we're still behind where we need to be to get to normal labor margins. We did see an acceleration of the level of the increase over the past few months, compared to what we saw in the prior period. I think, you know, our carriers are recognizing that, and some of them were just later to increase, but our carriers are recognizing that the market has moved up more than what was recognized in the prior period. That's helpful. Thanks. Then based on what you've seen in the quarter so far, do you expect same-store sales growth as a percentage in Q2 to significantly outpace Q1's 14.7%? No, we didn't say that. We said that what we've seen to date, and keep in mind that to date is the month of April, that our same-store sales were above what we experienced in Q1. Given that it's only one month, we're not prepared to provide more color on that at this time. Thank you very much. I'll turn it over. Thank you. Thank you. We'll take our next question from Masa Song with Laurentian Bank. Good morning. Thank you for taking my question. Morning. Hi. Yeah. Good morning. I'm just calling for Narendra. My first question is, you know, well, just circling back to the price hikes that were taken in March, will this have or I guess do you anticipate seeing this full impact in Q2, or will only really just, let's say, half of the quarter will benefit from it given the lag? Well, we've been receiving price increases steadily for at least six months. They've been flowing into our revenue as we implement them, and then we receive new assignments and estimates and complete those repairs. We've been seeing a steady increase in our selling price for several months now. As the price changes flow through, I would expect we will continue to see increased selling price going forward. I expect to receive additional price increases on an ongoing basis because we're not yet to a labor selling price that is appropriate for where our industry's cost structure is right now. I think we'll continue to see improvement in selling price, and we'll continue to negotiate new increases. Awesome. Thank you for that. My last question is just, you know, given the abundance of work you guys have and also the current demand is higher than the available capacity at your end due to the technician, the labor shortages. How selective are you in terms of the work you take on versus the type of work that you can say no to? Yeah. The work that we've said no to was really low margin, primarily fleet work, that in an economy where we have excess capacity, it makes sense for the incremental revenue. Your question is really related, I think, to if we have insurance clients that are below market relative to their peers, would we defer their work? I would say that, you know, we're working hard to make sure that all of our clients are paying us fairly and competitively so that we do not have to do that. I feel confident that as we demonstrate to our carriers that are not at the current market pricing, I feel confident that they will move their market pricing up to retain access to our capacity. In the long run, or maybe even in the medium term, if we had clients that were unwilling to raise rates to mark current market levels, we'll have no choice but to defer that work at some point. This is a long game. Insurance client relationships are very important to our long-term success. I think we'll take those actions, but we'll be fairly cautious to protect our long-term relationships. Awesome. Thank you very much. I will, jump back to the line. Thank you. We'll now take our next question from Krista Friesen with CIBC. Good morning, Krista. Hi. Good morning. Thanks for taking my question. Sure. Maybe just a follow-up on that, on the comments there. Do you see an opportunity to maybe increase your DRP partnerships because other shops are maybe saying no to them because of their lower margin business or because they haven't increased their rates yet? There could be that opportunity, but our capacity is constrained, and I don't think we'd have great motivation to take on a new client at below market pricing. Right. That makes sense. Are you able to provide us any more detail around what the backlog looks like at the moment? Maybe just either how long it is or how it looks compared to pre-pandemic levels. I can give you some industry data. We don't really provide backlog data on our company, but I believe that CCC reported that prior to the pandemic, the industry backlog was about 1.7 weeks. I think their recent data, and Pat, you can chime in if I'm off on this, I believe it was reported to be 4.5 weeks. There is also a significant amount of work in our business today that we've started repair work on, but because of a missing part that's critical to the repair, we've not been able to complete. Our investment in work in process or our investment in inventory is much higher, partly due to the labor supply challenge, but probably more primarily due to the parts supply issues where we invest in a vehicle, invest in a repair, but can't complete it. That number has actually been growing for the past couple of quarters, probably three quarters now. Great. Thank you. Maybe just on the Canadian market, it sounds like, demand is recovering a little bit more there. What does that look like for you? Is labor as challenged in Canada versus the U.S.? On the first question, we have seen an improvement in our revenue opportunity in our Canadian markets. I'm pleased to finally see some progress there. The labor challenges in Canada are generally. We're not seeing significant labor challenges right now in Canada. You know, that may change as the business continues to recover, but right now, we're generally able to service the available demand in Canada. Okay, perfect. Thanks. I'll jump back in the queue. Thanks, Krista. Once again, that is star one if you would like to ask a question. Our next question will come from Daryl Young with TD Securities. Hey, good morning, guys. Good morning, Daryl. Just one quick one for me around the operating expenses and SG&A base. Looks like we took a bit of a step function higher this period. I'm just wondering if that's reflecting inflation at the corporate level as well and leases or exactly what's going on there and if there's any one-time charges. Then expectations for operating leverage going forward over that operating expense base. There are a few factors there. First one is, as you pointed out, certainly the inflationary pressures on wages and benefits is playing an important role. The second one is the technology costs and fees have gone up meaningfully lately. The third factor is we commented on rolling out the WOW Operating Way, and there are consulting fees associated with that initiative, and that is getting expensed through that line item. Those are the primary drivers. Okay, going forward, that OpEx as a percentage of sales, should we view that as a run rate going forward? Or, would you expect that to decline as the same-store sales growth continues to ramp? No, I think as you see a higher volume, so I think the operating expense ratio should come down. These consulting expenses, like once the project is done, I think that should go away. It can normalize out. The technology costs and fees, that will continue. At some point in time, the inflationary pressure on wages and benefits now will abate. You should not expect a huge improvement for a period of time in that ratio. I think we've also commented that during Q1, we do have some expenses that are higher out of the gate at the beginning of the year. Our payroll taxes are significantly higher, and we have some utility costs due to the, you know, northern climates that are seasonally higher in the Q1. Okay, great. That's good color. Thanks, guys. Thanks, Daryl. Thanks. Star one if you would like to ask any question. We will now take a follow-up from Michael Doumet with Scotiabank. Hey, guys. Thanks for taking the follow-up. Hello again. I wanted to follow up on the last question, actually, 'cause pretty relevant. I mean, if you look at the Q1 margins versus pre-pandemic margins, it actually looks like the margin setback comes more from OpEx versus gross. I'm just wondering, you know, in terms of comfort and how recoverable that is, and I'm assuming presumably that comes from same-store sales growth. A second kinda tie-in question. In terms of the four-shop productivity, are the bottlenecks you're feeling more so today on the labor side or the parts side? I'm just trying to think about how that sort of unwinds the next couple quarters. Yeah. I'd say in the U.S. market, it's a combination, but probably more on the labor side. We do have a pretty good investment in work in process that we've not been able to bill because we're missing a part. You know, we've made investments in work in process that aren't coming through in our recognized revenue, but we have invested, you know, the workforce hours in it. In Canada, I would say parts is a bigger constraint. For whatever reason, supply chain challenges in Canada are a bit more acute than they are in the US, probably in part because we have a level of work in the US that when we have to stop working on one vehicle, we've got others lined up that we can work on, and that's less true in Canada. Got it. Okay. I think your question on really the fixed cost issue is one of absorption and growing same-store sales and, you know, pressing through the available work will help us get back to the level of absorption that we need. Michael, I think your observation is pretty straightforward, you're right. If you look at our OpEx ratio, in 2019 it was 31.4%, and we are at 34.4%, so it's like a 300 basis points. If you look at the 44.1% gross margin compared to 45.5%, so 1.4%. So you have a lot of margin. You have it, right? As I said, we should see an improvement on both fronts, pretty meaningfully over a period of time. Got it. That makes sense. I guess tying into that last one in the press release, just as it relates to, you know, the five-year growth plan with strong same-store sales in the very near term, I'm just trying to get a sense for whether, you know, that alludes to, you know, higher volumes, maybe more inflation pass-through or focus on greenfields. Just trying to get a sense for maybe the comment there. I think what we're really communicating is that we're committed to our five-year growth target. In the near term, more of that growth will come from same-store sales gains, given the level of work that we have and the pricing increases that we're, you know, expecting to negotiate. We'll continue to grow unit growth, but in the short term, we'll probably see more of our revenue gains out of same-store sales growth than what you've seen historically. Got it. Just on the sale-leaseback executed in the quarter, was that sort of a one-time thing or are there, you know, potentially other properties you guys are looking to divest as well? No, I think. It's really. Go ahead. You go ahead. Go ahead, Pat. As we've talked about, greenfields and brownfields have been a bigger part of our growth portfolio recently, and we've never intended to hold properties. You know, we're looking for you know higher returns on capital than what you can get with properties. As we'd executed our greenfield/brownfield developments and some single-shop or multi-shop acquisitions that came with properties, we never had any intent to hold those properties long term. Really what we're doing is just normalizing or following our strategy of being more asset light and selling the properties that we've been accumulating as part of our development efforts. Pat, do you have anything to add to that? No, I think you clarified it, Tim. Perfect. Thanks, guys. Thanks, Michael. It appears there are no further telephone questions. I'd like to turn the conference back over to our presenters for any additional or closing remarks. Thank you, operator. Thank you all once again for joining our call today. We look forward to reporting our Q2 results in August. Thanks, and have a great day. Bye-bye. Thank you. Once again, that does. Bye-bye. Once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect.