Good morning, everyone. Welcome to the Boyd Group Services Inc. second quarter 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 on SEDAR's database found at SEDAR.com. I'd like to remind everyone that this conference is being recorded today, Wednesday, August 10, 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 for today's call. On the call with me today is Narendra Pathipati, our Executive Vice President and Chief Financial Officer. We released our 2022 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'll discuss the financial results for the 3- and 6-month period ended June 30, 2022 and provide a general business update. We'll then open the call for questions. During the second quarter of 2022, we delivered record sales and adjusted EBITDA, supported by strong same-store sales growth in both Canada and the U.S., as well as solid contributions from new location growth, glass, and calibration services. Demand for Boyd services continued to substantially exceed capacity in all U.S. markets, while Canadian markets continued to experience recovery of demand for services as conditions began to normalize. The ability to service demand continues to be constrained by market conditions. The path to achieving historical levels of performance requires additional labor capacity, pricing increases, and continued easing of supply chain pressure. These market conditions continued to result in an under-absorption of fixed costs and high levels of work in process at the end of the second quarter. During the second quarter, we recorded record sales of $612.8 million, adjusted EBITDA of $72 million, and net earnings of $13.3 million. Sales were $612.8 million, a 37.8% increase when compared to the same period of 2021. This reflects a $73.4 million contribution from 111 new locations. Our same-store sales, excluding foreign exchange, increased by 22.3% in the second quarter, recognizing the same number of selling and production days in the U.S. and Canada when compared to the same period of 2021. 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 second quarter of 2022. The gross margin was 45.3% in the second quarter of 2022 compared to 46.1% achieved in the same period of 2021, with the prior period including the recognition of the Canada Emergency Wage Subsidy or CEWS of approximately $1.5 million. The gross margin percentage was negatively impacted by reduced labor margins as well as a higher mix of part sales in relation to labor. While pricing increases continued to flow through the results in the second quarter of 2022, 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. The second quarter of 2022 benefited from performance-based credit relief to address constraints caused by current market conditions. Operating expenses for the second quarter of 2022 were $205.5 million or 33.5% of sales, compared to $147.1 million or 33.1% of sales in the same period of 2021, with the prior period including the recognition of CEWS of approximately $2.1 million. The increase as a percentage of sales was due to wage and other inflationary increases, as well as increased support costs related to recruitment and training, including the costs associated with the Technician Development Program and support costs related to the expansion of the WOW Operating Way practices to our corporate business processes. These impacts were partially offset by improved sales levels, which provided improved leveraging of certain operating costs. Operating expenses as a percentage of sales for the period were constrained by technician capacity due to a tight labor market. 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. Adjusted EBITDA or EBITDA adjusted for fair value adjustments to financial instruments and costs related to acquisitions and transactions was $72 million, an increase of 24.2% over the same period of 2021, with the prior period including the recognition of CEWS of approximately $3.6 million. The increase was primarily related to improved sales levels, which also provided improved leveraging of certain operating costs. Adjusted EBITDA for the period was constrained by technician capacity due to a tight labor market. 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 second quarter of 2022 was $13.3 million compared to $10.5 million in the same period of 2021. Excluding fair value adjustments and acquisition and transaction costs, adjusted net earnings for the second quarter of 2022 was $13.6 million or $0.63 per share compared to $11.4 million or $0.53 per share in the same period of the prior year. The increase in adjusted net earnings per share was positively impacted by increased sales, partially offset by lower gross margin and a higher level of operating expenses. Staffing constraints, wage inflation, and supply chain disruption impacted net earnings and adjusted net earnings for the second quarter of 2022. For the six-month period ending June 30, 2022, sales totaled $1.2 billion, an increase of $303.3 million or 35% when compared to the same period of the prior year, driven by same-store sales growth of 18.3% as well as contributions from new locations that had not been in operation for the full comparative period. Gross margin decreased to 44.7% of sales compared to 46.1% in the comparative period. The prior period included the recognition of CEWS of approximately $3 million. The gross margin percentage was impacted by reduced parts and labor margins, as well as a higher mix of part sales in relation to labor. While pricing increases began to flow through the results in the first and second quarters of 2022, 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. The first six months benefited from performance-based credits to address the constraints caused by the current market conditions. Operating expenses increased $108.8 million when compared to the same period of the prior year, primarily the result of increased same-store sales as well as location growth. The prior period included the recognition of CEWS of approximately $4 million. Operating expenses were negatively impacted by the extraordinarily tight labor market, which resulted in increased wage and benefit costs to both retain and recruit staff. Also impacting the first six months of 2022 were increased support costs related to recruitment and training, including costs associated with the Technician Development Program, as well as costs related to the expansion of the WOW Operating Way practices to our corporate business processes. Adjusted EBITDA for the six-month period ending June 30, 2022 was $125.8 million compared to $110.7 million in the same period of the prior year. The prior period included recognition of CEWS of approximately $7 million. The $15 million increase was positively impacted by improved sales levels, which also provided improved leveraging of certain operating costs. We reported net earnings of $14.9 million compared to $18.2 million in the same period of the prior year. The adjusted net earnings per share decreased from $0.92 to $0.73. 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 $973.7 million compared to $970.1 million at the end of March. Debt net of cash increased when compared to prior periods primarily as a result of acquisition activity, which resulted in increased lease liabilities. Prudent financial management allowed Boyd to reduce the level of debt net of cash prior to lease liabilities during both the first and second quarters of 2022. During 2022, 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 the acquisition and development of new locations. Demand for Boyd services continues to substantially exceed capacity in all U.S. markets, while Canadian markets continue to experience recovery of demand for services as conditions began to normalize. The ability to service demand continues to be constrained by market conditions. The path to achieving historical levels of performance requires additional labor capacity, pricing increases, and continued easing of supply chain pressure. These market conditions continue to result in an under absorption of fixed costs and high levels of work in process at the end of the second quarter. Building on the success we achieved in early 2022, Boyd continues to negotiate pricing increases from clients which are necessary in order to support the attraction of talent to the industry and the retention of the current talent pool. We've made good progress with many clients but have not achieved the level of pricing that will return our labor margins to historical levels. In addition, we're experiencing pricing variability between clients which, in addition to receiving sufficient pricing, is overall a key area of focus in our ongoing pricing negotiations. The fact is, a higher level of pricing is critical for our industry to attract and retain the skilled labor that's needed to meet even reduced levels of demand. Supply chain disruption has continued to impact the completion of many repairs and has resulted in high levels of work in process. However, this disruption is showing early signs of normalization as the underlying manufacturing and distribution issues reduce. We remain committed to addressing the labor challenges through initiatives such as our Technician Development Program, including a commitment to double the number of trainees in the program to help meet future needs. We are increasing the number of technicians in the development program from approximately 200 at the beginning of 2022 to 400 by the second quarter of 2023. In the short term, we remain focused on addressing the labor shortage for our core business. Our revenue will continue to be impacted in the near term by continued levels of absenteeism from COVID, which will be further compounded by the challenges of vacation, especially given the already tight workforce. We are focused on optimizing performance of our new locations, as well as scanning and calibration and consistent execution of our WOW Operating Way. Notwithstanding near-term challenges, Boyd remains confident in the business model and the company's ability to double the size of the business on a constant currency basis from 2021 to 2025 against 2019 sales. In the very near term, same-store sales will continue to be an important driver of growth. Thus far, in the third quarter of 2022, the company has experienced same-store sales growth within the range of the first half of 2022. Accretive growth will remain the company's long-term focus, whether it's through organic growth, new store development or acquisitions. Earlier today, we also announced the planned retirement of Narendra Pathipati from the role of Executive Vice President and Chief Financial Officer on December 31, 2022. An executive search process for his successor has commenced. Pat has played an important role in the Boyd Group's growth since joining as Executive Vice President and CFO in 2015. Since then, the company's revenue has tripled. For six consecutive years of his tenure, Boyd was named as either the TSX's number one or number two top performing stock based on performance of the past decade. Under Pat's leadership, the company successfully executed acquisitions of hundreds of stores, doubled the number of research analysts covering the business, completed the conversion from an income fund structure to a corporate share structure, moved from Canadian dollar to US dollar reporting, and increased the credit facility more than six-fold in order to support our rapid growth. While we have every confidence that the company will continue to execute against a solid business strategy supported by an excellent long-tenured leadership team, Pat's contributions have been appreciated throughout his time at Boyd and will certainly be missed as he retires. With that, I would like to open the call to questions. Operator? Thank you. Ladies and gentlemen, if you'd like to ask a question, you may do so by pressing star one on your touch-tone telephone. Star one for questions. Please make sure the mute function on your phone is turned off so the signal can be read by our equipment. Star one for questions. We'll pause a moment to assemble the phone queue. We'll take our first question from Maggie MacDougall with Stifel. Please go ahead. Good morning. Morning, Maggie. Morning, Maggie. Congratulations on an excellent second quarter. Thank you. My question is around the components of organic growth. It was a very strong number for Q2, and in my mind, there's probably a few categories. I know that auto parts costs are up and there's pricing pass through on that. I know that you've also got some price increases from your insurance company customers or partners, which is great. There would be a volume component. There may also be a severity of claim component. I'm not sure. I was hoping maybe you could try to explain a little bit, which of those factors may have been the more meaningful, and how you see that shaping up over the coming months. We don't really have a lot of detail on breaking that out by component, Maggie, but you're right. I mean, there are multiple components that drove the 22.3% same-store sales growth. Some of it is pricing pass-through on parts. CCC reported at the end of the first quarter that part pricing year-over-year was up about 8%. So that's one component. Repair complexity that you alluded to is also increasing. So we are seeing a higher parts content, more parts per repair on average, which would be another contributor. We have been successful getting some increased pricing on labor and paint, as we've commented on previously. Repair severity, and you'll see this in a lot of our client reports, repair severity is also up. That's driven by some of the factors I've already mentioned. High used car prices are also driving repair severity up because it reduces total losses and has us repairing vehicles that, you know, in a more normal environment may not have been repaired. Just a couple of other things is, we are also deriving additional productivity from our workforce, as well as, we are experiencing a higher revenues from calibration scanning, and that's important from quality perspective as well. Thank you, Pat. Another question I have is regarding the propagation of your WOW Operating Way to your corporate locations. Can you just explain to us what does that mean? I know it's a continuous improvement program, but perhaps a little bit of color around what some of those initiatives may be. Absolutely. First of all, in terms of the scope, we have expanded our WOW Operating Way into corporate and strategic support services like finance, IT, HR, and procurement. It has two broad components. There's a technology component that is critical for scaling of the business as we grow. The second one is a transformational big component, which is transforming the existing processes. We use the Workday as a technology platform to drive that WOW Operating Way. Those are the two components. We're pretty optimistic, and as we disclosed, we went live on July first. Okay, perfect. Is it live everywhere or is there a bit of a rollout timeline around- No, I think it. Starting to see some results. It's live everywhere, but as you can imagine from a major implementation, you'll have a transition to attaining a steady state. We just have gone live, and it's gonna take a quarter or two to get to a steady state. Okay. Perfect. Thank you. You know, Pat, congratulations on a successful career at Boyd. It's nice to hear everything that you've accomplished, and I'm sure you're looking forward to your retirement as well. Thanks, Maggie. Appreciate those words. Thank you, Maggie. I'll pass the line over. We'll take our next question from Steve Hansen with Raymond James. Please go ahead. Morning, Steve. Morning, Steve. Yeah, good morning, guys. Thanks for the time. Just a couple, if I may. You've done a pretty good job, it sounds like, at securing the price increases. Although based on your commentary, Tim, it does sound like they tend to be highly variable depending on the carrier. Just curious as to how often and frequent you're going back to the different carriers to make sure that everyone knows what's happening and try to get a more uniform price increase. Are you in regular dialogue with them? Is it quarterly now? I asked a similar question, I think, on the last call, but I'm just trying to get a sense for how frequent the dialogue is so we can understand how quickly the carriers might respond. It's ongoing dialogue. It's not quarterly. It's very frequent. Yeah, there are some complexities with it, Steve. Pricing in our industry isn't uniform across markets, so we're constantly evaluating, you know, pricing across clients on a market by market basis, and then presenting that information to our clients to get more consistent pricing. But also, looking at, you know, what we need in pricing in order to be able to attract and retain labor in our industry. So it's a constant discussion with our clients, and probably will be for, you know, for a number of months. Okay. No, that's fair. And just given the incremental success that you have seen thus far, it does strike me that you're making progress here. You know, do you have a sense for the timeframe to get back to a normalized margin profile? Is it first quarter next year, late next year? I mean. Yeah. You can hazard a guess. We haven't committed a timeframe, and it's really difficult to properly assess that. You know, it's still a very tight competitive labor market. So, you know, even as we're receiving, you know, price relief from our clients, we're still under cost pressure. So it's dependent both upon our success and the timing from getting increases from clients, kinda leveling out client pricing a little bit more and when the wage pressure softens up. I know we've talked about this before, but it's our belief that the industry needs to raise the bar on compensation for skilled labor to retain what we've got and to attract that labor from other industries. Because, you know, there's just not enough capacity right now in the industry in the US to service even reduced levels of demand. We're gonna continue to work hard to, you know, build a value proposition so that we can properly service our clients, and that's gonna take increased compensation to our workforce. Fair enough. Just lastly, if I may, on the broader growth outlook, can you perhaps just comment on, you know, your aspirations for growth here in the, you know, over the next 12-18 months on both an M&A and greenfield basis, just given the context of some recent M&A in the landscape, some larger MSOs getting larger? Thanks. We continue to be committed to growth. While it's been a little slow as we've focused on our core operations, we're committed to continuing to grow, and we've, you know, reiterated that we are confident in our ability to achieve our 2025 revenue plan. I think if you just back into that, you'll see we will have to step up the pace of growth going forward in order to accomplish that. We're very committed to growth and believe that there are ample opportunities out there available to us to continue to grow at a good pace. Okay. Thank you for the time, guys. Appreciate it. We'll take our next question from Chris Murray, ATB Capital Markets. Please go ahead. Good morning, Chris. Morning, Chris. Good morning, folks. Pat, maybe going back to your comment about pricing, and maybe I just wanna ask you to clarify when you talked about variability. When you're referring to variability, are you talking about maybe differences between what you're getting for price increases between parts and labor, or is it across different types of insurers? Any additional color to help us understand what you mean by that would be helpful. The two primary negotiated components of pricing in our industry are labor rates and paint material rates. What I was really referring to is the fact that as we've, you know, been successful at getting increases on a market by market basis, we review, for large clients, the level of pricing that we've received from large clients in a market, and we compare that to our current pricing from other large clients. What we're seeking is to level that out and minimize the differences in fairness both to, you know, the clients that have moved sooner and in order for us to be able to recover and get back to more normal labor margins. It's really the variability across larger clients. That's helpful. Then just a quick question. One of the things about seeing such a strong same-store number, you know, part of it I would have thought of, especially as you kinda called out the fact that you've had some improved parts supply, is I would have expected WIP inventory to come down. I guess a couple parts of this question. WIP actually was up in the quarter, and I think, you know, if I'm reading this correctly, you guys are calling for something in the 18% range if I look at your H1 same-store print, you know, which would actually be kinda maybe a bit of a deceleration period to period. Just can you help me understand how you're thinking about same store going into Q3 and the unwind of that WIP as things start improving? Is there any chance that perhaps a catch-up on WIP maybe turns that same store number higher until we get it normalized? Yeah, I guess first on the same-store sales growth that you just referred to, what we've commented on was what we'd seen thus far in the quarter, which as you know, is fairly limited. That's typically how we've provided information to the market on what we've seen thus far. As far as the WIP, we have seen while the WIP dollars may have gone up, they didn't go up at the same pace that our revenue increased. We've seen a I'd say a slight improvement, an early improvement in WIP in the ratio of WIP to our completed sales. That's really the component of it. I think there is an opportunity as parts supply improves. A good portion of the WIP that's suspended because it's missing a part has had a fair amount of the labor completed on it. As that frees up, I do think we have some upside same-store sales opportunity. It's pretty early on. I mean, we noted that we'd seen early signs of improvement. As you saw, our investment in work in process actually went up a little bit. The ratio is down. Go ahead. Yeah. Chris, one way of looking at it is you're absolutely right. It has gone up modestly from around $76 million end of last quarter to $77 to around $78 million at the end of Q2. If you look at the sales, we had $556 million versus $612 million. If you take the days in WIP, it has actually gone down. That is a better metric than the absolute dollar amount. Also the other indicator, if you look at the rental for the industry, it has modestly gone down from end of Q1 to end of Q2. Those are the indicators for a slight improvement in top line interruptions. All right. That's helpful. Thanks, folks. Thanks, Chris. Thanks, Chris. We'll take our next question from Michael Doumet with Scotiabank. Please go ahead. Good morning, Mike. Hey, good morning. Good morning, guys. Good morning. You commented on the price increases since Q4, and how that, you know, they take effectively some time to flow through the P&L as we see wages, you know, move to the upside as well. Can you speak to the margin cadence through Q2? And I wonder also if you can expand on the performance-based credit you received in the quarter. Wanna take that? No, yeah. In terms of the margins, Mike, we reported 45.3%, and that's a significant improvement compared to what we reported sequentially. Like Q1, we had 44.1%. Also it compares reasonably well to 2019. If you look at the year as a whole, it was 45.4%. Granted, in Q2 it was slightly elevated. Margins, we are making great progress. In terms of performance based pricing of the credits, we don't get into a lot of details for competitive reasons. Okay, that's helpful. Thanks. Maybe flipping here. OpEx that increased about 7% quarter-over-quarter without a real significant increase to the store count. I'm wondering if you can give us a sense for what, you know, pure inflation is versus maybe some of the growth initiatives that you invested in. Maybe just comment, you know, if you can, to the extent that the corporate WOW Operating Way will drive efficiencies through the second half. Again, if you look at the Q2 of last year, it was 33.1, and we reported 33.5. As you know, last year we had the CEWS, the Canada Emergency Wage Subsidy. You have to back out that particular thing. If you eliminate that, it was actually 33.6% for last year compared to 33.5%. If you're- Yeah. You're talking quarter over quarter or you're talking sequentially? Yeah, sequentially, quarter-over-quarter, the increase was 7%. The store count didn't really move up to that extent. I'm just trying to get a sense for inflation versus maybe some of the growth initiatives. Yeah. Q1, we reported as a percentage of sales 34.4% compared to Q2, 33.5%. When you say it has gone up, the OpEx ratio sequentially, can you refer to which numbers you are referring to? Sorry. What I'm specifically referring to is the number, so the dollar amount, so $205- Oh, the dollar amount. Okay. dollar amount. Okay. Sure. The dollar amount is. Yeah, absolutely. I think there are a bunch of things that are going through. The first one is, I think that when you add number of locations, so the OpEx goes up. Second one is, as you pointed out, the inflation. The third one is relating to the professional and consulting services relating to the implementation of the WOW Operating Way, as well as, you know, like initial investments we made in recruiting and training people. Those are the drivers. Including the expenses with the Technician Development Program. Absolutely, yes. Which is, you know, growing quarter-over-quarter-over-quarter. Yeah. Okay. We disclosed that we have a pretty aggressive plan to expand the Technician Development Program. That certainly, it's going through OpEx. Okay. Perfect. Just maybe one more. I mean, you and I guess many others, I guess your competitors, have discussed how the collision repair industry needs more competitive wages versus other industries to recruit more sustainably. I mean, can you give us a sense for how much catching up is required for this industry versus the others? You know, we don't have an answer for that. I think that we'll find that out as we, you know, are successful at increasing compensation and more successful with recruitment of people into our industry. I think it's gonna be a, you know, test it out and, you know, continue to try and have a balanced approach so that we put the people in place that we need to service the level of demand that's out there. It's, there's certainly. We know there's a gap. I don't know if it's a 5% gap or a 1% or a 10% gap, but there's a gap because we'd be. I know many industries are challenged with labor right now, but we've got very attractive job opportunities for people that do provide good compensation. We just need to make sure we're competitive against the alternatives for this type of skilled labor. Yeah. Mike, as you know, Fed is aggressively increasing interest rates to slow down the inflation. You'll see a softening, economy softening, and that will reduce the opportunity cost for people who want more of our industry. As you know, our industry is recession resilient and other industries may not. To that extent, and I think, we could get competitive. Again, there's just one perspective. We do need price increases from our clients for the longer term. Perfect. That makes sense. Just lastly, you know, congratulations, Pat, obviously a fantastic career, and I've personally really enjoyed working with you. Likewise. Thank you. Thanks, Mike. We'll take our next question from Gary Ho with Desjardins Capital Markets. Please go ahead. Good morning, Gary. Hi, Gary. Good morning. Yeah, just first question, just wanna go back to the EBITDA margin side of things. Trying to get a sense of how sustainable this quarter's print was, just given the price increases you've asked for and the wage pressure side, that you mentioned. You know, should the 11.7% EBITDA margin be more of a base and kinda grow from here on out, or no? Is that how we should think about it? Well, I would say our longer term objective, Gary, is to get back to the EBITDA margins that we were experiencing prior to the pandemic. It won't happen overnight for all the reasons we've really discussed in the disclosures that we've made. You know, I can't say that it's going to be sequential quarter by quarter by quarter. There could be variability in it, but we feel very good about over a period of time getting back to normal EBITDA margins. As you know, we don't provide guidance, but it doesn't necessarily mean we'll have a straight line up. Okay. Yeah. This is an opportunity, Gary. As you know, certainly hitting like down the road, there's an opportunity for improvement, but we don't provide guidance for the timing of that improvement. Yeah. Okay. Tim, just wanted your thoughts on, you know, the Crash Champions kinda Service King deal from a competitive landscape point of view, and how does a more consolidated environment benefit or hurt your business or, you know, if it impacts your growth strategy looking out? I don't think it impacts our growth strategy. Our growth strategy hasn't really changed other than maybe slowing down a little bit to focus on our core business over the past couple of quarters. You know, I would imagine that it will take some time for those two fairly large businesses to, you know, merge and you know, put in place whatever common practices they need. You know, they may be somewhat distracted doing that for a few quarters, but it doesn't really change our view. We still have a very small share. Again, based on market, they have around $800 million of debt and low EBITDA. Crash Champions, again, has some EBITDA, but they do have substantial amount of debt. If you combine the two, you have a lot of debt and EBITDA, you can make your own assumption. They have very high leverage, so they have to deal with that. As Tim pointed out, they have to go through the integration of the two businesses. That's going to take around. Perhaps potentially take them out of the market for some time. Okay. Yeah, that makes sense. Just the last one for me, just wanna go back to the price increase topic. When you chat with your insurer counterparts, any sense they are maybe starting to get some resistance from the state regulators on their side, when they think about, you know, how much price increases you can get from them, as we look out next couple years? I haven't had conversations along those lines. Certainly, there's gonna be pressure, but there's no question that, you know, the cost of repairing vehicles is increasing, and insurers have to be profitable in, you know, in their policies. I am confident they'll be successful over time, but these transitions do take time. While we've been under pressure, I know our clients have also been under pressure. You've seen it if you've looked at earnings releases of some of the major carriers just fairly recently. They've seen a significant uptick in their average cost per claim and their loss ratios. You know, we need to work with them to do what we can to keep their repair costs down through good estimating practices, you know, repairing what can be repaired, using alternative parts. We're very motivated to drive their repair costs down as low as we can get it while still performing a quality repair and having adequate returns for our shareholders. Okay. Yeah, that makes sense. That's it for me. Thank you very much. Thanks, Gary Ho. Thank you. We'll take our next question from Daryl Young with TD Securities. Please go ahead. Morning, Daryl. Hey, good morning, Daryl. Good morning, gentlemen. Pat, congrats on a terrific career. Thank you. First question just around labor. I'm just curious where you guys would stand in terms of your hourly rates you're paying labor versus, say, some of the smaller players in the industry. I guess what I'm trying to vet out is just, you know, are you seeing a net influx of labor from competitors, or are you seeing or making progress on net new technicians coming into the industry? Yeah. It's tough to read on technicians coming into the industry. We know that what we pay our technicians is very competitive. We benchmark that constantly and, you know, as you can see from our labor margins, we've made consistent adjustments over the past several months. I'm confident that we're competitive, and we continue to review that to make sure that we remain competitive. I think the whole industry is challenged with attracting new labor into the industry. You know, it's still a pretty challenging environment. In the long run, the Technician Development Program, and we've now disclosed kind of the quantity that we're expecting to increase that by, that is one of the keys to building industry capacity, is to bring, you know, new talent into the industry and really upskill it over a period of time. I expect that to be a major contributor for us. I know that some of our competitors have similar programs in place. Hopefully, all of our key competitors will double down and invest in entry-level labor to solve the longer term problem. I guess, Daryl, when we talk about the labor, because we make a lot of acquisitions, single shops as well as MSOs like John Harris and Collision Works, so we know what competition pays. That's why we feel very comfortable saying our labor rates are very competitive within the industry. Got it. Okay, thanks. With respect to aftermarket parts, we've been on a long-term trend of increasing usage of aftermarket parts, and I think one of the major insurers just announced plans to investigate further penetration of aftermarket. Just curious if you have any commentary in terms of if you would expect that to be a long-term tailwind for margin growth for yourselves or any implications of insurance further penetrating aftermarket parts. Yeah. I think it has been a positive trend for us for a long time as more clients have embraced it. Over the past year, the challenge has really been the availability of those parts. We've talked about this on prior calls, but we've seen a shift away from aftermarket toward OE because of reduced aftermarket availability. Most of those parts are manufactured in Taiwan, and then obviously exported. Given both manufacturing issues and distribution issues, there's been a more limited supply. LKQ did report when they released that they've seen some improved availability, and they expect it to improve further late this summer and early into fall. They have a lot of parts on the water on the way to the US. We may see some improved aftermarket availability, which would be good for us, and it would be good for our clients because it will reduce the average cost of repair. You did note that there is an insurer exploring increasing or authorizing the use of aftermarket parts. That could be favorable for us as well. Availability has been the challenge with aftermarket over the past really three or four quarters. Got it. Okay. Just one last one. Is there a way to benchmark from a volume perspective how productive the shops are today versus pre-pandemic? Are we at 75% of capacity from a daily throughput? Or, any metrics you can give there? Just the inflation's obviously made the revenue per store come back quite quickly. It's difficult to assess that because the inflation isn't just inflation on parts or labor. Repair complexity has increased, which has actually increased the number of labor hours per repair. We've seen, you know, an increase in the number of labor hours per repair. We've seen increase in parts costs. We've seen increase in labor, paint material prices. We have a higher percentage of vehicles that have scanning and calibration operations. It's pretty difficult to decipher the components of it. We've mentioned this on prior conference calls. There's some industry data that suggests that the capacity of the collision repair industry is meaningfully below where it was prior to the pandemic, probably in the 14%-15% range. Got it. Okay, that's great. Thanks very much, guys. Thanks, Daryl Young. We'll take our next question from Bret Jordan with Jefferies. Please go ahead. Hey, good morning, guys. Morning, Bret. On the, I guess, variability that you see in price increases, what's been your recourse? I guess if you've got limited capacity, you've got more work than you can do and customers paying less than others, can you reject work, or does that create a longer-term relationship issue? I would say that thus far, we've tried to be transparent with clients, share the data that we've got with them, and you know, work with them to get the pricing to levels that are acceptable. You know, these are and I think we've talked about this on prior calls as well, but you know, we have pretty deep long-term relationships with our insurance clients, and they've been with us through good times and through tough times. We're not inclined to disrupt those relationships rapidly. Over time, we'll have to service if a client is really out of line, we'll have to prioritize work so that we can you know, get the returns that we need to invest further in our business. That's not something that we would do rapidly, and we would be pretty transparent and have open conversation with our clients before we would make that kind of a move. Okay. Then a little bit of follow-up on the last question. I think in your prepared remarks, you talked about supply chain improving. Is that skewed one way or the other, OE versus alternative parts? Are you seeing one picking up more than the other? You know, we didn't look at it that way. We really just know because the ratio of our, you know, work in process at the end of the month compared to our revenue has improved modestly. That's really been the metric we focused on. We didn't break it down by OE versus aftermarket. I think, you know, LKQ has reported some improvement in aftermarket part availability, so it's probably a combination of the two. Okay, great. Thank you. Thanks, Bret. Thanks, Bret. We'll take our next question from Zachary Evershed with National Bank Financial. Please go ahead. Good morning, Zach. Morning, Zach. Congrats on the quarter. Thank you. Thank you. Some carriers have increased rates more than others, and obviously, the bottom end has to catch up. What about the top end, those who've increased the most? Are they at levels that would allow Boyd to operate at historical margin levels, or is there still more to come? Well, I guess one thing we've talked about is the fact that the target continues to move. We continue to see, you know, wage pressure and need to attract more talent to our industry. We have carriers that are smaller carriers that likely have or generally have higher rates than what we would get from major carriers. We do see a gap for smaller carriers, for larger carriers. Our focus is really on our major clients, those that have, you know, reasonable to substantial market share in each area to balance out pricing to the best of our ability among those clients. Really the top 10 carriers have over 75% of the collision of the insurance market in the United States. That's really our focus. That makes sense. Thanks. In either percentage terms or in terms of catching up to inflation up to a period of time, how much have you secured on average in your rate increases at this point in time? We aren't able to provide details on that. One thing we have said in the past is that when we receive a rate increase from a client and implement it does take time for that to flow through to our revenue because the jobs are priced at the time of the initial estimate. If we're backlogged on repair work, we have old pricing in some files that has to flow through our revenue. We don't have an exact metric on the timing of catching up from an inflation standpoint. Because that's a moving target, Zachary. I think the inflation is a moving target. The wage pressures are a moving target, so we can't give a static answer. We were successful in getting price increases, but we need more to serve our clients better. Gotcha. Given that it's a moving target, and that's where your focus is right now in the core business, do you have a period in time where you plan to refocus on M&A, or is it on the back burner until this has been resolved? We've been pretty focused on our core business. You know, we've got work to do in our core business, but I'm very pleased with the progress we've made. We have reiterated our expectation of achieving our 2025 goal. That really requires that we, you know, step up and focus on M&A as well as our core business. It's not on the back burner. We see lots of opportunity to continue with our growth strategy. Great. Okay, thanks. Just one last one. Do you think labor tightness increasing from vacation season is likely to see margins decline quarter-over-quarter? Or do you think rate hikes will more than offset that impact? I think the real issue that we're faced with in the third quarter is, you know, we are still seeing plenty of people out for a week or so as a result of COVID illnesses. I think everybody, you know, can see that the infection rates are still quite high. While the illnesses aren't as severe, it has impacted our production. That combined with the fact that July and August, and to a lesser extent, September, are the heaviest vacation seasons, will continue to pressure us from a capacity standpoint. That's it for me. I'll turn it over. Congrats, Pat. Happy trails. Thanks, Zach. We'll take our next question. Sabahat Khan with RBC Capital Markets, please go ahead. Good morning, Saba. Good morning. Good morning. Just I guess it's a question on some of the discussion earlier around the different pricing that you're seeing from insurers. To the extent that you can comment, I guess, should we assume, you know, the pricing that you're getting from insurers is somewhat directionally tied to their combined ratios? I guess, you know, if you think about a single market, how do two different insurers justify giving you different pricing? I guess, is it purely just a function of the profitability they're seeing, or are there other puts and takes you can maybe share? I don't think it has to do with their combined ratio, although I said earlier that I know our clients are feeling significant pressure because of their combined ratios. You know, our clients need collision repair capacity. While we're pretty patient, and we wanna work with everybody to get rates in line with, you know, what's fair in the market, their loss ratios aren't really what's driving it. I mean, they need to have competitive rates in order to, you know, to take the capacity that's available in the market to service their clients. I would say, no, it's not tied to their loss ratios. Okay, thanks. Just the commentary that you shared around the number of people that you're looking to put through your Technician Development Program. Can you give some perspective on how many people have been, you know, graduated, how many people have graduated through that program? Also in terms of the intake, I guess, how are you going to work towards getting an extra 200 people through this? Is it marketing going out to kind of the right schools? Just some perspective on how you're gonna go about this kind of getting to a 2,400 number. Yeah. We do have dedicated teams both to the recruitment and then the support of the development of those technicians, and we've been pretty effective at that. We recruit both out of trade schools. We also have many team members that work for us in a different role. They may come in in an entry-level parts role or even a porter role, and they have a desire to move into the program, and they've got some experience with us. We know that their work ethic and their commitment, and we would put them into the Technician Development Program. You know, we're finding good success with candidates to bring into the Technician Development Program, and we've made progress throughout thus far this year from where we started the year. In terms of the number of graduates, we really reinitiated this program at the beginning of last year, and it is an 18-month program. We have had graduates. We had some people in the program prior to the beginning of last year. Over the next year, we'll see more and more graduates coming out of the program to meet our needs, and I'm pretty excited about, you know, our future with that. Yeah. We have online sourcing for this program, Saba, and we are confident about hitting that 400 number. Okay, thanks. Just one quick follow-up before I pass it on. Just in terms of, I guess, the investment required to get these extra 200 in. Obviously, you guys have talked about the cadence of profitability as the people in the training program become more accretive. Like, should we expect a bit of a SG&A investment over the, call it, the next 12 months to get these people in the program? We did mention in our disclosures that part of our increase in operating expenses is tied to the Technician Development Program. It is a pretty substantial investment on the company's part to train these people. We do have. It's a mentorship program and, you know, we reward the mentor. The team members are not very productive out of the gate, and we do absorb those expenses. There is significant training expense. I mean, when they come out of our 18-month program, they may not have their proficiency up to journeyman levels, but they've been highly trained after 18 months. There is an expense burden associated with it. Some of that is already reflected in our quarterly results, and there could be some additional expense as we continue to grow the program. It's an expense that, you know, I'm confident is worth the investment. Great. Thanks so much for the call. Thanks so much. We'll take our next question from Krista Friesen with CIBC. Please go ahead. Morning, Krista. Hi, everyone, thanks for taking my question. Hi, and congrats on a great quarter. I was just wondering. Thank you. On the technician program. Is there any sort of commitment that the technicians need to make that they'll stay for a certain number, a certain time period after they kind of graduate from the program? Or if there's financial incentives that are put in place if they do stay for X number of years afterwards? Or just really if there's anything preventing them from leaving to another shop that might offer them a higher paycheck. Well, we do have some ties related to the program, but our focus is not to capture them, it's to incent them and make sure they have a great career opportunity with our company. We're really focused on building their career. In fact, at the conclusion of the 18-month training program, we actually have an additional layer of training that they can go through that will allow them to continue to build their skills and even become mentors to other entry-level technicians. While there are some ties, I think the primary thing we're focused on is making sure that we're a great home for them to build their career. Krista, essentially, we provide mentorship, and we provide excellent career opportunity, provide the right environment with all the tools they need. I think that's what people look for. That's why now we are very optimistic about this program. Great. That makes sense. I was just wondering, kind of at a higher level, as you negotiate with your partners, has there been any sort of discussion around changes to how contracts are structured long term to prevent this sort of catch-up that you've needed to play over the last several months in the future, if you build in any sort of mechanism to automatically increase rates or anything like that? No. There's been I think we're all, you know, working hard just to make sure that the industry can be healthy. Our clients need us. They're, you know, very open to the dialogue, but, you know, what we're going through right now is, at least in my almost 25 years in the industry, it's completely unprecedented. We're all, you know, working hard to be fair with each other to deal with it. There's been no discussion about changing how contracts are done so that maybe they have automatic increases to us that aren't, you know, aren't market driven. It's really a market-driven negotiation. Though there's nothing contractual, it's just a win-win relationship. By giving us the proper pricing, we can sell their customers better, so they can have better retention with with their customers. Customer retention or acquisition costs are pretty high for the insurance companies. We are actually serving them better, and we want to wow them. I think that's what's going to drive more than binding contracts relating to pricing. We are educating them. Perfect. That's great. I'll pass the line and congrats, Pat. Hope you enjoy retirement. Thanks, Krista. Ladies and gentlemen, this concludes today's question and answer session. At this time, for closing remarks, I would like to turn the call over back to Tim O'Day. Good. Thank you, operator. Thanks all of you once again for joining our call today, and we look forward to reporting our third quarter results in November. Have a great day. Thanks, everyone. Ladies and gentlemen, this concludes today's conference. 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