Good morning, ladies and gentlemen, and welcome to the K-Bro Linen Systems Inc. Fourth Quarter 2022 Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on March 22nd, 2023. I would now like to turn the conference over to Kristy Plaquen. Please go ahead. Thank you, operator. Good morning, everyone. Thank you for joining us today and welcome to our fourth quarter results conference call. On the line with me today is Linda McCurdy, President and Chief Executive Officer. Following our remarks today, we will open it up for questions. I'd like to remind everyone that statements made during our prepared remarks or in the question and answer portion of the conference call with reference to management's expectations or our predictions of the future are forward-looking statements. All statements made today, which are not statements of historical fact, are considered to be forward-looking statements. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in this forward-looking information. Investors are cautioned not to place undue reliance on these statements. Actual results could differ materially from those anticipated. Risk factors that could affect the results are detailed in our public filings. I'll now turn the call over to our CEO, Linda McCurdy, who will provide her insights and remarks from the quarter. Linda. Thank you, Christy. Good morning, everyone. Thank you for joining us today to review our 2022 fourth quarter and annual results. I'll focus on the main highlights of our fourth quarter. Christy will provide more details on our financial performance and balance sheet. I'll come back to you and update you on our outlook for 2023. In terms of the highlights, we reported 2022 revenues of CAD 277 million and EBITDA of CAD 36.5 million for the year. I'm pleased that our annual revenue exceeded pre-COVID levels set in 2019. In 2022, hospitality revenues returned to 90% of pre-pandemic levels. Hospitality represented approximately 37% of consolidated revenue. With a return in hospitality revenue, healthcare revenues represented approximately 63% of consolidated revenue, which is lower compared to approximately 74% of 2021. Consolidated healthcare revenue increased 4.1%, and consolidated hospitality revenue increased a significantly 79.7% as a result of a pickup in tourism and business travel. In 2022, our results reflected a few key factors. While our revenue has returned to pre-COVID levels, our EBITDA margins were impacted by temporary labor inefficiencies and higher inflation-related and energy costs stemming from the COVID pandemic and certain geopolitical events. We're actively managing these factors and working with many of our Canadian U.K. customers to implement price increases to offset higher inflation-related costs. Going forward, we expect to continue to benefit from strong hospitality activity in both Canada and the U.K. and stable healthcare trends. We anticipate achieving the full benefit of our new AHS province-wide contract by the second half of 2023 as transition costs will be eliminated. We continue to benefit from our U.K. natural gas hedge, which we put in place in April of 2022 throughout the end of 2024. We anticipate improvement in our labor recruitment and retention and are managing more challenging regional labor availability with complementary Temporary Foreign Worker programs. We've been successful in working with many of our Canadian and U.K. customers to implement price increases to offset inflation-related costs. We began to see some benefit of these price increases in the fourth quarter, but we'll see the full benefit of these increases in 2023. We remain well-positioned from a balance sheet and liquidity perspective, with $53 million of additional borrowing capacity on our revolving line of credit and with an additional $25 million accordion for growth purposes. Total debt increased in the quarter from CAD 39.1 million to CAD 45.2 million, and our Funded Debt to EBITDA, excluding leases at the end of Q4, remained conservative at just over 1.6 x. I'll now turn the call over to Christy to discuss our detailed financial results for the year, after which I'll return to talk about our outlook for 2023. Christy, over to you. Thanks, Linda. The information we're going to discuss today is also highlighted in our 2022 fourth quarter earnings press release issued yesterday. Detailed supplemental financial information can be found on our investor relations website under the heading Financial Documents. As a result of COVID-19 pandemic restrictions being eased, consolidated hospitality revenue for the 3 months ended December 31st, 2022 increased by 29% over the comparable 2021 period. The corporation saw a 5.8% increase in consolidated healthcare revenue for an overall increase in consolidated revenue of 13.6%. On a year-to-date basis, consolidated revenue increased by 23.5% to CAD 276.6 million, compared to CAD 224 million in the comparative period of 2021. In 2022, approximately 63% of K-Bro's consolidated revenue was generated from healthcare institutions, which is lower than the 74% in 2021, primarily as a result of a return of hospitality activity, which came along with the easing of COVID-19 pandemic restrictions. Consolidated EBITDA decreased in the year to CAD 36.5 million from CAD 42.8 million in 2021, which is a decrease of 14.7%. The consolidated EBITDA margin decreased to 13.2% in 2022 compared to 19.1% in 2021. The decrease in margin primarily reflects timing differences related to increases in inflation-related costs in the period, while the full impact of customer price increases will take place in 2023. The corporation's higher costs include higher natural gas prices, particularly in the U.K. The additional labor costs incurred due to temporary inefficiencies from unusually competitive labor markets in certain cities in which we operate. Higher delivery costs related to higher diesel rates, as well as the AHS transition. Repricing of the corporation's existing business in Edmonton and Calgary with AHS, which took effect on August 1, 2021, in advance of the business being fully transitioned, and lower government assistance received in the Canadian division from CAD 0.9 million received in 2021 to nothing in 2022. Net earnings decreased by CAD 4.8 million or 54.6% from CAD 8.7 million in 2021 to CAD 3.9 million in 2022. Net earnings as a% of revenue decreased by 2.5% - 1.4% in 2022 from 3.9% in 2021. The change in net earnings is primarily related to the flow through items in EBITDA, higher finance costs related to increased interest rates for the revolving credit facility and lower income tax expense. Wages and benefits increased by CAD 26.2 million to CAD 111 million, compared to CAD 84.8 million in the comparative period of 2021, and as a percentage of revenue increased by 2.2 percentage points to 40.1%. The increase as a% of revenue is primarily related to a CAD 0.8 million decrease in government assistance received in the Canadian division, escalating wage rates and temporary inefficiencies from unusually competitive labor markets in certain cities in which we operate, as well as the transitioning of the new AHS business. Linen increased by CAD 3.4 million to CAD 31.3 million, compared to CAD 27.9 million in the comparative period of 2021, and as a percentage of revenue, decreased by 1.2 percentage points to 11.3%. The increase in spending is primarily related to the change in the mix of linen and higher hospitality volumes processed compared to the prior year. Utilities increased by CAD 10.3 million to CAD 23.8 million, compared to CAD 13.5 million in the comparative period of 2021. As a% of revenue, increased by 2.6 percentage points to 8.6%. The increase as a% of revenue is primarily related to increased natural gas rates, particularly in the U.K. as well as in British Columbia for the fourth quarter of 2022. Delivery increased by CAD 12.6 million to CAD 37.3 million, compared to CAD 24.7 million in the comparative period of 2021. As a percentage of revenue, increased by 2.5 percentage points to 13.5%. The increase as a% of revenue is primarily related to rising diesel prices and the costs associated with the new rural AHS business, along with delivery route inefficiencies associated with the incremental hospitality volumes processed in the year, as well as a CAD 0.1 million decrease in government assistance received in the Canadian division. Occupancy costs increased by CAD 0.6 million to CAD 4.5 million, compared to CAD 3.9 million in the comparative period of 2021, and as a% of revenue, remained relatively constant at 1.6%. Materials and supplies increased by CAD 1.8 million to CAD 10.9 million, compared to CAD 9.1 million in the comparative period of 2021, and as a% of revenue, remained constant at 4%. R&M increased by CAD 2.7 million to CAD 10.4 million, compared to CAD 7 million in the comparative period of 2021, as a percentage of revenue, increased by 0.4 percentage points to 3.8%. The increase as a% of revenue is primarily related to one-time costs and price increases. Corporate costs increased by CAD 1.5 million to CAD 11 million, compared to CAD 9.5 million in the comparative period of 2021, as a% of revenue, remained constant at 4%. Looking at our capital resources. Distributable cash flow for the fourth quarter of 2022 was CAD 3 million, our payout ratio was 106.9%. The company paid out CAD 0.3 per share in dividends during the quarter for total consideration of CAD 3.2 million. The corporation had net working capital of CAD 36.6 million at December 31, 2022, compared to a working capital position of CAD 30.3 million at December 31, 2021. With regards to credit and liquidity, we have a strong balance sheet and ample undrawn capacity on our credit facility with an operating line of CAD 100 million and a further CAD 25 million accordion for growth purposes. At the end of Q4, we had an undrawn balance of close to CAD 53 million on our operating line, reinforcing our strong liquidity. Debt to total capitalization for the period ended December 31, 2022, was 20.6%. Total debt increased in the quarter from CAD 38 million-CAD 45.2 million and was primarily due to the change in working capital items. As Linda said earlier, our debt to EBITDA ratio excluding leases is just over 1.6x. I'll now turn things back over to Linda for additional commentary. Linda. Thank you, Christy. I can definitely say that we're very excited about our outlook for 2023. We've had strong top-line performance over the past year, our results were impacted by a few key factors. We're actively managing these factors and working with many of our Canadian and U.K. customers to implement price increases to offset higher inflation-related costs. We began to see some of the benefit of these price increases in the fourth quarter, we'll see the full impact in 2023. Going forward, we see continued momentum in both hospitality and healthcare. Our healthcare segment remains steady, we expect that to continue as the result of the new AHS volume that has been fully transitioned, permanent conversions to reusable products, as well as efforts by hospitals to reduce the backlog of procedures that have been delayed during the pandemic. Our hospitality segment continues to see good levels of activity compared to 2021, with an ongoing return to business and international travel. COVID restrictions in both Canada and the U.K. have been substantially reduced. Since the pandemic, labor availability remains temporarily constrained. We've focused on retention of existing staff in addition to implementing strategies to recruit and hire new staff. We've achieved some success in certain markets, but are still focusing efforts on our other markets. We anticipate improvements in our labor recruitment and retention and are managing more challenging regional labor availability with complementary Temporary Foreign Worker programs. In the second half of the year, we anticipate returning to historical 2019 margin levels consistent with historical seasonal trends. Our anticipated margin recovery remains dependent on our ability to attract and retain staff in each of the markets in which we operate. On March second, we were delighted to announce the acquisition of Paranet for an enterprise value of CAD 11.5 million and a potential earn-out of CAD 1.9 million. The acquisition was funded with K-Bro's revolving credit facility. Paranet is a high-quality operator with leading market positions in the Quebec healthcare and hospitality market. Paranet enables K-Bro to grow market share in key regions and provides us with additional operating efficiencies, capital expenditure synergies, and significant growth capabilities. Paranet is our first acquisition following the pandemic, and we have an active M&A pipeline. Strategic acquisitions have been an important contributor to our overall growth profile, and with continued momentum in our business, we're refocusing on M&A. We remain well positioned from a balance sheet and liquidity perspective and will continue to be disciplined as we evaluate acquisitions. In summary, we see continued momentum in both healthcare and hospitality. We're actively managing factors that affected our results over the past year and again to see the full benefit of price increases. We anticipate achieving the full benefit of our new AHS province-wide contract in 2023. In the second half of the year, we anticipate returning to historical 2019 margin levels consistent with historical seasonal trends. I'll now open up the line to any questions you have as it relates to the fourth quarter of 2022. 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 that your mute function is turned off to allow your signal to reach our equipment. Again, you may press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal. We'll take our first question with Derek Lessard from TD Securities. Your line is now open. Good morning. This is Cheryl standing in for Derek. Thank you for taking my question. I was curious if you could talk about the challenges that you face in terms of passing on prices. I think most of your contracts contain annual escalators tied to CPI, but this inflation is definitely unprecedented. Maybe talk about the timing and could you give us a sense of the general magnitude where you are in the process? Morning, Cheryl, thank you for your question. Touched on it a little bit in our, in my comments, but it was certainly a key focus in the second half of 2022, was to work with our customers. You quite rightly commented that while most of our contracts have price increases and inflationary price increases, much of the cost increases we saw, and in particular in the U.K. on the energy side, were well in excess of what we've ever seen historically, or what was provided for contractually, price increases to cover those costs. In the back half of 2022 and even into Q4, we worked very diligently to work with our customers to negotiate out of contract price increases. you know, I'm not gonna comment on the magnitude of them for competitive reasons, but we're very pleased with how receptive our customers were to understanding the economic environment in which we're operating. We expect to see the benefit of that in 2023, with the full benefit of that in the second half of 2023. We expect a good solid year in 2023, recognizing with margins returning to historical levels in the back half. When I say historical levels, we're making reference to 2019, given all of the noise and certain factors as the result of the pandemic that impacted results in 2020 and 2021. I can definitely say we are expecting, that for the full year of 23, the price increases to be reflected, and are confident in a good solid year. Okay, that's great. Thank you for the color. I was wondering how has the customer feedback been so far? Sorry, how has? The customer feedback been? Customer feedback? Yeah. Listen, I don't think anyone likes price increases, but their understanding of the environment that the unprecedented inflationary pressures that exist, I would say they have all been exceptionally cooperative. Okay. That's good to hear. I know that it's a challenge, but you've talked about pricing in Q2 and Q3. We're just curious, what were your assumptions for inflation since then? If you could talk about your confidence, that you've taken up enough price going forward. You know, we have definitely seen tapering off of the increases. I think it's definitely stabilized at much higher input cost levels. Where we're seeing that certainly is on the delivery line, cost line, and on the utility cost line. We have fixed our natural gas prices in the U.K., which creates stability, and we've seen increases in Canada, but nowhere near what we saw in the U.K. Again, we've seen a stabilizing of those increases. We still do struggle with labor shortages, although again, we've seen some stabilization of that. We have put in place or moved to put in place access to Temporary Foreign Workers. That process is underway with the caveat that implementing that program takes time. It's, it's typically, you know, a 6-8 month timeframe from application to being able to access Temporary Foreign Workers. We expect that to happen later in the year. All that to say, you know, the back half of 2023, we're confident in margins restoring to historical levels. Just being mindful of the fact that, you know, there's seasonality in the business and Q1, because of seasonality is always our weakest quarter. Okay. That's very helpful. Thank you. Just one more, before I queue. We're getting close to the end of Q1 already, and I was curious if you would be able to provide us a sense of where the inflationary trends are trending so far. Are they better or worse than Q4? Thank you. You know, just consistent with my previous comments, you know, Q1 is always our seasonally weakest quarter as the result of hospitality revenues being the weakest. Again, we see stabilization in the input cost lines, in particular labor, delivery, and utilities. Okay. That's helpful. Thank you so much. Thank you. If you find that your question has been answered, you may remove yourself from the queue by pressing star two. We'll take our next question from Michael Glen with Raymond James. Please go ahead. Hey, Linda, and Kristy. First question, just in terms of the AHS transition, that's something that you've been talking about for a while. When we look back to the original expectations for this transition and the increased level of cost versus where we are now, like what have been the big factors that have pushed that timeframe out? The biggest factor is somewhat related to supply chain and receiving the distribution cart, the carts that we use to distribute linen on, again, receiving those new carts to replace old carts that are at the end of their useful life, which we have been using and somewhat inherited from AHS, which are not as efficient and impact operations in both our plant as well as the distribution function, delivery, not being able to cube the trucks out as effectively. I would say that that has been an impact and impacted both plant operations as well as distribution. It's taken longer to receive the carts and transition the volume into the most efficient way to deliver our service would be the biggest impact. Again, I would say labor has played a factor in that. We are feeling more confident in being able to access labor and to reduce turnover. It was particularly bad in or volatile in 2022. We are seeing, as the result of inflationary pressures and, you know, the verge of a recession, we are seeing some of our markets becoming more stable. Those would be the biggest impacts, Michael. Okay. Then just to drill in maybe a bit more on the labor situation in Alberta, can you just give an update as to what you see happening there right now in terms of availability? Is it moving meaningfully, right now in Alberta? Is it getting more favorable? It's certainly getting more favorable. You know, I would say in 2022, in certain months in 2022, we really were having a difficult time attracting people. We are getting people applying and people through our door. The turnover still remains high, but at least we're able to get people through the door. We are seeing positive trend lines that are helping us to achieve efficiencies that we weren't seeing in 2022. It's not perfect by any trestch, but it is a definite improvement from what we saw in 2022. Okay. You're referencing a return to historical levels in the back half of 2023, but I'm just hoping that you can, and you've given us some degree of information regarding how to think about Q1. I'm just hoping that when we're thinking about the lift in margin profile into the back half of the year from the front half of the year, like, what's realistic to think about for the front half of the year? Should we think about something that looks more like 2022 margins in the front half of the year, and then we lift higher to the back half of the year? I'm just trying to understand the magnitude of the delta there. I think that's. I think you're spot on. I think the front half of 2022 will be similar. 2023 will be similar to the front half of 2022, with Q3 and Q4 seeing improvements, seeing most of the improvements as the result of price increases that go into play, as well as improvements in productivity. Improvements in labor. Okay. Okay, thank you for taking my questions. Thank you, Michael. We'll take our next question from Endri Leno with National Bank. Please go ahead. Yeah, good morning. Thanks for taking my questions. I'm sorry if I repeat something. I was a little bit late jumping on the call and good morning. The first question I ask, I mean, Linda, you talked a bit about seeing momentum into 2023. I was wondering if you are able to contextualize that a little bit. In terms of what you're seeing in Q1, how does it compare to 2019 or even the quantum of improvement from 2023 into 2022, how does that compare with, for example, the improvement that you saw in Q4 of last year? Thanks for your call, Endri, your questions. Again, you know, we're very confident that we will return to historical levels. Q1 has always been our seasonally weakest quarter. I would say that margins will be similar to what we saw in 2022 in the first half of the year, with the improvement coming in the back half of the year. Okay. Thank you for that. The other question, I have is it regards foreign labor, and you mentioned it could be 6 to 8 months. I just had a question on the timeline. I mean, is that based on the situations that you've had before when you've brought foreign labor in, or is it kind of on more recent input? As I've seen some kind of, you know, big backlogs on the federal government processing visas and work permits and things of that like. The timelines have expanded to bring Temporary Foreign Workers into the country. We're well down the road in that process, but, you know, it takes anywhere from 6 to 8 months. We would expect that to see the impact of that in, you know, Q2, back half of Q2 and into Q3. Okay, great. Thank you. My other question, it's a bit more kind of bigger picture, and I think there were recently some announcement from Ontario, and I think a bit Alberta as well, to move some of the surgery volumes into private clinics. I think at least in Ontario, that's happening in, I think, 2024. Can you talk a little bit about what your exposure is to private clinics or anything you can share on how they handle their linen and whether you are able to participate in those incremental volumes? Sure. You know, private clinics play a small role in the overall, in our overall volumes. We do service a number of them, but, you know, it's a market and a segment that we will pursue as private clinics open up. Generally, it really tends to be a bit of a rounding error in terms of our expectations of what those volumes will be. It's, it's generally, you know, it's generally not high acuity, so it's routine procedures that wouldn't necessarily require a lot of linen, not a lot of overnight stays, not a lot of changes of linen. We will certainly pursue it, but we wouldn't expect it to be monumental in terms of the volumes that'll be out, that will be shifted to private clinics. Okay. Great. Great. Thank you. My next question is on the Paranet acquisitions, and congrats on that, by the way. When you're talking about it in the press releases and the MD&A, you mentioned significant growth capabilities. I was wondering if you can talk a little bit, where do you expect these to come from? Are you able to provide any metrics around them? Still related to that acquisition, is there something specific to the QC market that you decided to go in there, or was it just opportunistic? I mean, listen, we have a plant in Quebec City, this was a nice additional increase in our market share between ourselves and Paranet. We're the two primary players in the hospitality segment. It's not a new market to us, but we're very happy to acquire Paranet and become the primary provider in that market. We expect there to be synergies in terms of CapEx, in terms of management, in terms of operations. We'll keep two plants operational at this point, and down the road, we'll determine whether we move all the volume into one of the plants, which would be the Paranet plant, or if we continue to operate two separate facilities. That remains to be seen. Paranet processes half of the volume is healthcare volume, we'll continue to pursue additional healthcare volume with the two separate operations. That's great to hear, and thank you for the color. The last one for me, are there any significant contracts that are coming up for renewal in 2023, or are there any significant RFPs that you see upcoming in the market? Nothing significant in 2023. I mean, every year we have a number of contracts. I would say the first year in which a large amount of volume comes up for RFP would be in 2025 in the Vancouver market. Okay. That would be the first major contract up for renewal. Okay, great. Any significant RFPs you see upcoming, or is it steady business as usual? Pretty standard fare. You know, I don't see any large, you know, markets that we're not in, you know, up in the next six months that I can think of. Okay. That's great. Thanks very much for the call. Appreciate it. Thank you. We'll take our next question from Kyle McPhee with Cormark Securities. Please go ahead. Hey, everyone. Just starting with Paranet, thanks for the color on the potential synergies. You know, beyond that, what's behind the strategic decision to allocate more capital to Quebec, just from a market perspective? Is there anything particular about the Quebec market that gets you excited in terms of organic runway? I mean, certainly the ability to increase our market share in that market is attractive, and to continue to pursue healthcare. The Paranet facility is more is a, I wouldn't say more modern, but is a better larger facility than our facility in Quebec City. In order for us to grow materially in that market, we would have likely had to move. It enables us to expand capacity and pursue additional growth without having to relocate from our existing facility. Okay. Then, can you speak to the acquired margin profile you got with Paranet? Or maybe at least give us color around if there will be a noticeable margin mix shift when that revenue starts flowing through your statements, all else equal? I would say that, you know, the margin in that business are consistent with K-Bro margins. There's nothing out of the ordinary. Yeah, I would say they're very consistent with K-Bro's margins. Got it. Okay. Again, the revenues, about top line revenue is about CAD 10 million. Okay. Last one from me. You gave a lot of color already on the margin path. Is part of that, like should we expect any benefit from lower gas prices in Canada where you're not fully hedged? If so, can you help quantify that maybe at least relative to the 250 basis points of margin drag previously guided for energy prices? I suspect that's not reflecting any benefit of lower gas prices for your unhedged exposure or hedges in Canada falling off. Christy, I'll ask you for additional color. Most of the increase in the utilities line is reflective of the U.K., where we've locked in last year in April of 2022. Christy, I'll kick it over to you as it relates to impact in Canada of the lower gas prices. Yeah. I'd suggest, you know, to Linda's point, most of the increase is related to the U.K. In Canada, we're about 60% hedged, so there will be some pickup from lower gas prices. In terms of quantifying it, a little bit difficult to do that, but there certainly could be some pickup. Okay. Some pickup. It sounds like the margin path forward, your landing spot for the back half of this year is largely price and labor improvement. You're not really... It's not energy. Okay. Correct. Correct. Yes, that's fair. Correct. That's it. Okay, that's it from me. Thank you. Thanks, Kyle. As a reminder, if you'd like to ask a question, you can press star one on your telephone keypad now. That's star one to ask a question. We'll move to our next question from Justin Keywood with Stifel. Please go ahead. Hi. Good morning. Thanks for taking my call. Just wanna circle back on the margin improvement comments for the back half of this year. I also note that there's been a increase in the federal minimum wage to be implemented on April first, going up by 6% or 7%. Is that factored in for the margin improvement comments in the back half of the year? Yes. definitely. I mean, we don't, we don't pay minimum wage and, we pay above minimum wage, but we have factored in the implications of rising minimum wages in each of the provinces in our margin, forecast. Good to know. Just going back to the 2019 EBITDA margins, there were some moving parts, but we had the margins basically around 19%, if we blend it over Q3 and Q4. Is that a reasonable target for this year? I think that's certainly in the ballpark, yes. Okay, great. Just on the comments of M&A, are you able just to describe your pipeline on what you're potentially looking at, if it's similar to Paranet or if there's some larger assets out there? Is the focus in Canada or in Europe? You know, there's certainly more acquisitions of the Paranet type, both in Canada and the UK. You know, I would say they range anywhere from the size that we've just executed on, anywhere from CAD 10 million. There are larger assets, potentially up to, you know, CAD 50 million-CAD 100 million. They are fewer, but they certainly exist out there. Key focuses, both Canada and the UK. Both are where we're very active. Those are our primary focuses. Okay. Thank you. Maybe a question for Christy. The balance sheet, if you have a pro forma net debt to EBITDA ratio after Paranet, and then also the comfort level as far as net debt and EBITDA for potential M&A? Yes, certainly. I guess in terms of our comfort, and to start maybe with the latter in terms of our comfort level with debt going forward, you know, we don't really have a target that we've set. I would say probably in the 2-3 times range would be where our comfort level is. In terms of the impact of Paranet, you know, it won't be... It'll go up to just under 2 times. I would suggest somewhere in there. Okay. Maybe just one more question for yourself. Just on the working capital, I noticed there was a. Mm-hmm. Usage in Q4. Is that expected to normalize in Q1, or is it to take a bit longer in the? It might take a bit longer. It's really timing, predominantly driven by prepaids and tax and will smooth out over 2023. There's no concern on that working capital I assume it's with high quality customers? No concerns whatsoever. Okay. Thank you very much. Thanks, Justin. For our next question, we'll return to the line of Derek Lessard with TD Securities. Please go ahead. Yeah, thank you for taking my questions. Just have a few on the, like, market competition demand side. Clearly it's a very challenging environment, but was curious how you think about competitive activities here. Do you think you are picking up a share from smaller competition who can't meet the service level at this time? How do you think that might benefit you going forward? Yeah, I mean, one of the I think, Cheryl, your question really validates our growth strategy and growth both organically and through acquisition. You know, Paranet's a good example of that, where owner, operator, been in the business for many years, and decided that it was the right time to contract with K-Bro or to work with K-Bro. The seller will continue on and work with us. I think that is something that we're seeing more and more of out there, where it's a very difficult operating environment with a lot of different pressures, inflationary pressures to hire labor. That provides an opportunity for us. As the result of that, we feel that we will continue to be successful and grow through acquisition. Smaller players are finding it difficult, and we have purchasing power leverage with our suppliers that many smaller operators just don't have. The pressures we're feeling, they're feeling even more acutely. Again, as part of our growth strategy, we expect to be able to take advantage of that and either grow organically through taking customers from smaller operators or acquiring them. Okay, great. Thanks for the color there. I was wondering, are there any developments on the movement of the backlogs on elective surgeries? You know, we are certainly seeing improved volumes from the operating room linen. I would say yes. I think all of the hospitals are continuing to push through surgeries. As commented on earlier in the call, working with private clinics to reduce some of that backlog is certainly a strategy that both BC and Ontario are pursuing. What I will say, as much as there is a desire for health regions and provinces to continue to work to that end, staffing remains an issue for hospitals as well. You know, nursing, doctors, they have many of the same constraints as many businesses and providers are feeling in the market with retirements and, you know, healthcare burnout, which we've all read about. They are struggling with labor as well. Okay, that makes sense. Last one from me. I'm curious how demand for hospitality is trending in Q1 so far, given the macro backdrop. Are you seeing any potential pullback in either leisure or business travel? You know, we're continuing to see strength in that, in that segment. We are very pleased with how it's rebounded, and we certainly expect significant improvements relative to 2022. You know, are expecting a solid 2023. Yeah, for what we're seeing to date, we're still seeing good, solid volumes and activity. Okay. That's great. Thank you so much. Once again, if you would like to ask a question, you may press star one on your telephone keypad. That's star one to ask a question. For our next question, we'll return to Endri Leno with National Bank. Please go ahead. Thank you very much for the follow-up. I think, Linda, you just touched on this briefly on the prior questions, but you also mentioned in one of the answers that as a potential improvement in labor is that if we enter a recession. I was just wondering if you are able to balance that comment with recession potentially also impacting hospitality volumes and any kind of discussions that you might have had with your clients in that regard, as you're looking at for the rest of 2023. You know, any recessionary pressures would impact hospitality the most. As we speak with our customers on that segment, you know, we're still expecting quite a strong year in discussions with them. Business travel has definitely ticked up. I would say it's not at, it's not fully at 2019 levels. I would say it's, you know, in the 90 zip code, though, 90%-95% of 2019 levels. We are still expecting a very strong year, even with inflationary and recessionary pressures, on the hospitality segment in discussions with our customers. Okay. That's great to hear. Thanks. Thank you. Once again, if you would like to ask a question, you may press star one on your telephone keypad now. Again, that's star one if you'd like to ask a question. It appears that there are no further questions at this time. Ms. McCurdy, I'd like to turn the conference back over to you for any additional or closing remarks. Well, thank you everyone for joining today. If there's any additional follow-up, Christy and I will be available. Have a great day, everyone. This concludes today's call. Thank you again for your participation. You may now disconnect and have a great day.