Q3 2022 Boyd Group Services Inc Earnings Call
Good morning, everyone welcome to the Boyd Group services incorporated third quarter 2022 results conference call.
Listeners are reminded that certain matters discussed in today's conference call or answers that maybe 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 re registration statements and you can access these documents at Cedars database found at Cedar Dot Com. That's S E D. A R dot com.
I'd like to remind everyone that this conference call is being recorded today Wednesday November 9th 2022.
I would now like to introduce Mr. Tim Eau de <unk>, President and Chief Executive Officer of Boyd Group Services incorporated. Please go ahead Mr Day.
Thank you operator, good morning, everyone and thank you for joining us for today's call on the call with me today is Pat <unk>, our executive Vice President and Chief Financial Officer.
We released our third 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 Boyd group Dot Com and our news release financial statements and MD&A have also been filed on SEDAR. This morning.
Today's call, we will discuss the financial results for the three and nine months period ended September 30th.
And provide a general business update we will then open the call for questions.
During the third quarter of 2022, we delivered record sales and adjusted EBITDA for the second quarter in a row. Despite the negative impact of hurricane in near the end of the quarter.
Our results were primarily supported by strong same store sales growth in both Canada and the U S as well as contributions from new location growth.
Demand for Boyd services continued to substantially exceed capacity in all U S markets, where Canadian markets continued to experience recovery of demand as conditions continue to normalize.
The ability to service demand continues to be constrained by market conditions, new technician training and other initiatives are providing some improved capacity.
However, the path to achieving historical levels of performance continues to require additional labor capacity pricing increases and further easing of supply chain pressure.
Over time the improvement in these conditions will result in reduced levels of work in process and improved absorption of fixed costs.
During the third quarter, we recorded record sales of $625 7 million adjusted EBITDA of $73 1 million and net earnings of $11 9 million.
Sales were $625 7 million or 27, 6% increase when compared to the same period of 2021.
This reflects a $35 4 million contribution from 84, new locations, our same store sales, excluding foreign currency exchange increased by 21, 9% in the third quarter, recognizing the same number of selling and production days in both the U S and Canada when compared to the same.
Period of 2021.
Sales benefited from price increases and high levels of demand for services as well as some increase in production capacity related to technician hiring and growth in our technician development program, although ongoing staffing constraints and supply chain disruption continue to impact sales levels that could be achieved during the third.
Quarter of 2022.
Sales also increased based on higher repair costs due to increasing vehicle complexity increased scanning and calibration services as well as general market inflation.
Same store sales in Canada continue to recover, albeit from low comparative during the third quarter, but this recovery has continued to be impacted by supply chain disruption.
Gross margin was 45, 1% in the third quarter of 2022 compared to 44% achieved in the same period of 2021.
The gross margin percentage benefited from price increases, including performance based credit relief to address the constraints caused by current market conditions.
Higher retail glass glass sales margins as well as improved part margins.
These benefits were partially offset by reduced labor margins as well as a higher mix of parts sales in relation to labor.
While pricing increases continue to flow through the results in the third 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.
Increasing vehicle complexity also resulted in a higher mix of parts sales in relation to labor.
Yes.
Operating expenses for the third quarter of 2022, or $209 3 million or 33, 4% of sales.
Compared to $164 2 million or 33, 5% of sales in the same period of 2021.
Operating expenses as a percentage of sales benefited from sales increases, which provided improved leveraging of certain operating costs.
This was partially offset by wage and other inflationary increases as well as increased costs to support related recruitment and training and to support costs related to the expansion of the wall operating way practices to corporate business processes.
Adjusted EBITDA or EBITDA, adjusted prepare value adjustments to financial instruments and costs related to acquisitions and transactions was $73 1 million of 41, 8% increase over the same period of 2021.
The increase was primarily the result of improved sales levels, which also provided improved leveraging of certain operating costs adjusted.
Adjusted EBITDA for the period was constrained by technician capacity due to the tight labor market as well as some minor impact due to hurricane Ian.
Market conditions, including wage pressure, a tight labor market and supply chain disruptions are impacting the results that can be achieved in the near term.
Net earnings for the third quarter of 2022 was $11 9 million compared $2 4 million in the same period of 2021 <unk>.
Excluding fair value adjustments and acquisition and transaction costs adjusted net earnings for the third quarter was $12 1 million or <unk> 56 per share compared to $2 4 million or <unk> 11 per share in the same period of the prior year.
The increase in adjusted net earnings per share was positively impacted by increased sales and improved gross margin percentage.
Net earnings was negatively impacted by the recording of adjustments related to the completion and filing of the prior year U S tax returns, which increased income tax expense by approximately $2 1 million during the third quarter of 2022.
At December 31, 2021, voided recorded approximately $7 6 million and income taxes recoverable.
As returns were finalized and filed this amount was reduced by approximately $2 million, primarily due to certain state and franchise tax payments.
For the nine month period ended September 32022 sales totaled $1 8 billion, an increase of $438 8 million or 32, 3% when compared to the same period of the prior year driven by same store sales growth of 19, 5% as well as contributions from new.
<unk> that had not been in operation for the full comparative period.
Gross margin decreased to 44, 9% compared to 45, 3% in the comparative period.
The prior period included the recognition of <unk> of approximately $3 $2 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 first nine months of 2022, Boyd faced supply chain disruptions, which resulted in a negative impact on margins.
While pricing increases flow through the results in the first second and third quarters of 2022 labor margins were negatively impacted by the extraordinarily tight labor market, which continued to result in increased wage cost to both retain and recruit staff.
The shortage of Labor also resulted in a higher mix of parts sales in relation to labor.
The nine months ended September 32022 benefited from performance based credit relief to address the constraints caused by current market conditions.
Operating expenses increased to $153 9 million when compared to the same period of the prior year, primarily due to increased sales based on same store sales growth as well as location growth.
The prior period included the recognition of <unk> of approximately $4 $3 million.
Operating expenses were negatively impacted by the extraordinarily tight labor market, which resulted in increased wage and benefit costs.
Retain and recruit staff.
Also impacting the first nine months of 2022 were increased support costs related to recruitment and training, including costs associated with the technician development program as well as support costs related to the expansion of the wall operating way practices to corporate business processes.
Adjusted EBITDA for the nine months period ended September 32022 was $198 8 million compared to $162 2 million in the same period of the prior year.
The prior period include recognition of <unk> of approximately $7 $5 million.
$36 6 million increase was positively impacted by improved sales levels, which also provided improved leveraging of certain operating costs.
We reported net earnings of $26 8 billion compared to $18 6 million in the same period of the prior year adjusted.
Adjusted net earnings per share increased from $1 <unk>.
The $1 29.
The increase in adjusted net earnings per share is primarily attributable to increased sales, partially offset by a lower gross margin percentage and higher levels of operating expenses.
At the end of the period, we had total debt net of cash of $940 8 million.
<unk> to $973 7 million at June 32022.
Debt net of cash decreased when compared to prior periods, primarily as a result of higher earnings changes in working capital balances and lower levels of acquisition activity.
During 2022, the company expects to make cash capital expenditures within the previously guided range of one 6% of sales.
This excludes those capital expenditures related to acquisition and development of new locations.
Entering the fourth quarter buoyed continues to experience strong demand for services, however, technician capacity as well as the impact of inflation on costs and ongoing wage pressure continue to impact the results that can be achieved.
Boy continues to negotiate and received price increases which are necessary in order to support the attraction of talent to the industry and the retention of the current talent pool.
Boy continues to make progress that further increases are needed to address ongoing wage pressure.
During recent quarters Boyd has benefited from performance based credibly put into place to address the constraints caused by the current market conditions, which continue to impact the business.
Although it is early in the quarter Boyd is experiencing same store sales growth that is modestly below that experienced during the first nine months of the year.
The pipeline to add new locations in existing markets and to expand into new markets is robust.
Workforce initiatives such as the technician development program are having some impact and ongoing investments in technology equipment and training positioned the company well for continued operational execution.
<unk>.
Boyd remains committed to addressing the labor market challenges through initiatives such as the technician development program, which we have doubled in size since the beginning of 2022.
We now have approximately 400 of premises in this program as of early November .
In addition to addressing the labor shortage for the core business Boyd plans to increase location growth during 2023 and locate in relation to 2022.
Latest focus on optimizing performance of new locations as well as scanning and calibration and consistent execution of the wall operating way.
Given the high level of location growth in 2021 combined with the strong same store sales growth. Thus far in 2022 Boyd remains confident that we are on track to achieve our long term goals, including doubling the size of the business on a constant currency basis from 2021% to 2025.
Against 2019 sales of U S $1 7 billion.
Before we open the call to questions. As this is pads last quarterly conference call.
<unk>, Vice President and CFO .
Like to personally thank him for the important role. He has played and Boyd group's growth and success since joining us in 2015.
While we have every confidence that the company will continue to X again execute against a solid business strategy supported by excellent long tenured leadership pads contributions have been appreciated throughout his time at Boyd and he will certainly be missed when he retires.
At this time, the previously announced surged to succeed Mr. Pet study and the role of Executive Vice President and Chief Financial Officer is proceeding along planned timelines and will be announced upon its conclusion at this time I'd like to turn the call over to Pat to.
To comment on his upcoming retirement, Pat Thanks, Tim I wanted to thank the outstanding team at Boyd that have had the privilege of working with getting my eight years as executive Vice President and CFO .
I would also like to personally thank all of you our shareholders research analysts bankers advisors and other participants and Boyd capital market activities for the support Agwai Trust and confidence in our business you've been wonderful to work with and this has certainly made my job as CFO enjoyable.
It's been a great ride through my eight years at Boyd and I believe the company's very well positioned for continued success, so with that I would like to open the call to questions.
Operator.
Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad.
You are using a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.
Again press Star one to ask a question.
We'll take our first question from the line of Michael <unk> with Scotia Bank.
Good morning, Michael Good morning, Michael Good.
Good morning, guys.
I was just first question I guess on the margin as you think about the <unk>.
Balance of the margin normalization.
Any way you can discuss what you think are the most important variables that specifically.
Is it still largely dependent on external factors.
Higher labor rates versus wage inflation and better parts supply or are the internal factors such as the GDP and corporate initiatives.
Let's drive meaningful improvement as well.
I wouldn't expect GDP to necessarily drive margin improvement that it will increase our capacity and throughput and help absorb our fixed operating costs. So.
It's really more to drive additional same store sales growth and we are seeing signs of that now that we're very pleased with I think to recover margin back to normal levels. We.
We will will require really probably three things one is and this is probably the least impactful, but the normalization of the supply chain will help our margins in <unk>.
And be a part of this solution and we reported last quarter that we were seeing early signs of that but there's still lots of room for that to recover.
More importantly, we need to continue to get price from insurance clients.
Both to recover labor margins, but also to cover continuing cost increases and get margins back to normal.
We have been very successful that I think I'm pleased with the progress we've made.
And I expect it will continue to make progress on that front, yes, one Asia Pac to Michael as in terms of the production capacity at our production capacity exceed so we'll have an opportunity to enhance the mix from repair too.
Place to repair and margins on labor are substantially higher than the <unk> margins. So to that extent, we can improve the gross margins by managing the mix.
And that does tie to your production capacity.
Perfect.
Really helpful. And then you commented that you are receiving performance based credit release data due to market conditions.
Do you still expect those as far as market conditions remain constrained.
I guess Im also asking for clarity on whether the potential removal of that can create kind of a two step forward one step back as conditions improve.
Yes, I think we've always said that the margin improvement won't necessarily be a straight line up.
But.
But I think we've been getting an adequate number of increases in labor rates and paint material rates to continue to build margin.
Spect that continue to happen.
It won't necessarily be a straight line.
Historically, we've reported we've seen margin variation quarter to quarter.
And I think that what we're.
We're not.
Projecting that those conditions still exist in our business and could be the case.
That's helpful and just the last comments or Pat.
The majority of our conversations best of luck going forward.
Thank you very much Michael.
If you find that your question has been answered you may remove remove yourself from the queue by pressing the star key followed by the digit too we will take our next question from the line of Kate Mcshane with Goldman Sachs.
Hi, Casey.
Good morning, Congratulations again to you Pat.
Thank you.
Two quick questions.
And I'm, sorry, if I missed this but just on.
The quarter to date and the fact that it is under pacing a little bit what you saw for the first nine months of the year. What you think is.
Some of that.
Driver of that but what is the driver of that.
I guess.
We.
Are you talking about the EBITDA margin.
I think you mentioned that same store sales were trending slightly below that of the first of all yes.
My comment was that in Q4.
To date quarter to date, which is obviously very early in the quarter. Our same store sales that we realized are running modestly below what we have experienced on a year to date basis.
But I think we were also building our sales as we progress through the year last year.
Yes Kate.
You measure the same store sales as you know, we basically compared to the prior year.
And also like if you look at the second and third quarter. We had very strong same store sales growth year to date is $19 five and we are comparing to 19, 5%.
The rate.
So this isn't a top off.
What we accomplished in Q4 of last year, so it's going to be still very healthy.
It's not going to be like what we did in Q3, which is 21, 9% my guess its going to be it's still very healthy very robust.
Okay. Thank you and then our second question was.
Just how much of a tailwind was pricing during the quarter and how should we think about the benefit in the fourth.
Pricing was certainly one of the benefits I think there are a number of things that are driving same store sales growth.
We did comment that we have increased our production capacity. So we've been able to grow our workforce and we're building our TDP program.
I think an important milestone was getting the PDP program up to our target number of 400 and will that group doesn't produce.
Initially as that program as they mature and the program they do add to our capacity.
So a component of it is that there is some price inflation.
Labor rate increases that we've seen would be part of that.
The other piece is mostly related to parts and some paint materials, we've seen price inflation on paint materials on the parts and the overall repair complexity, we're seeing non inflationary benefits related to repair complexity more complex parts more hours to install those.
Arts.
And we're also seeing.
Increases in our scanning and calibration revenue, which is also related to repair complexity.
Thank you.
Thanks, Kate Thanks, Kate.
We'll take our next question from the line of Steve Hansen with Raymond James.
Good morning, Steve.
Yes, good morning, guys. Thanks for the time.
Maybe I'll just dovetail on your last comment there Tim My understanding is the calibration opportunity is one that could be sizable for the industry over time.
Do you want to maybe just give us a sense for where you're at in that strategy.
Maybe just anything terms are we in the second inning here at <unk> I'm, just going to get a sense for where youre at and how big of an opportunity do you. Ultimately think that is as you sort of cast out a couple of years.
We haven't publicly sized the opportunity Steve but.
As vehicles have more Adas technology on them and really everything being produced today.
<unk> <unk> technology in fact, most vehicles produced over the past several years have had at least some form of data, but thats going to continue to grow those systems are more complex.
Require both a scan, which we do virtually every vehicle we pre imposed scan.
And often they require calibration services, so as the car park matures and more Adas comes into the car Park that segment of our revenue will continue to grow.
We did make an investment about a year and a half ago.
In a.
Mobile service company.
Many of these calibrations are complex and requires different technical skills.
So we've made an investment in that company and we continue to grow their company.
To make sure that we're able to capture as much of that service work internally.
And we do have opportunity to expand that company across our network.
It's not easy and it is not quick but there is absolutely a very good opportunity there for US yes, just to complement Tim like Steve that there are two components. The first one is the quality. This really enhances the quality of the repair. So I think desktop relocated primarily and other premium is I think what youre talking about <unk>. This is <unk>.
Yes.
Significant opportunity, we have not publicly seismic as a significant opportunity and the margins are excellent ballflower, providing both scanning and calibration.
No. That's helpful. Thank you and maybe just to dovetail on that again a follow up.
Is that the new revenue opportunity and calibration, specifically, but if I think about rate increases to go with that and some other perhaps enhances the business is it fair to say that same store sales growth will remain elevated.
More consistently for a longer period of time is that the way to think about that.
I think repair severity is expected to continue to increase because of the vehicle complexity and there are when you look at repairing a late model car versus a car that's five or six years old late model cars have more parts to be replaced when it gets into an accident and there are more calibration.
<unk>, but they're also more labor hours, so in terms of using our available labor capacity.
Those repairs will take more labor capacity, but I do think there is a tailwind on the average cost of repair and that that will continue to increase I think the other component is that.
It does require some investments in specialization to service some of these vehicles historically, we've talked about.
Aluminum structural damage needed to be.
Those repairs needed to be in a site that has the equipment and the technician talent and training to do that.
As Adas systems are adopted or are more common in the car Park, we will use our hub and spoke network. This would be true with evs as well.
To move vehicles to where they can be properly fixed.
And as a multi shop operator with good density in the markets in which we operate will have the ability to better leverage our investments and service really all repairs.
Versus having to specialize in a segment of the market.
Okay, great appreciate the time thanks.
Thanks, Steve.
We will take our next question from the line of Gary Ho with <unk> capital markets.
Good morning, Gary Gary.
Good morning.
Thanks, just first question just on your comments about M&A picking up next year I guess two part question are you talking about general pick up from last year's levels or something more meaningful in the second what gives you confidence in ramping.
Any backup again better handle on that supply chain labor issues at the vendor evaluation just thoughts.
And that would be helpful.
Yes.
I would say, we don't provide annual guidance on the M&A, but we are committed and confident in our five year goal to double the business by 2025 so.
You'll have to make your own decision as to when that growth occurs.
This year was a light year of growth for us that was intentional as we focused on.
Labor issues in kind of the challenges in our core business.
We have never stopped our business development team. So we still have been growing this year.
We see a very strong pipeline good opportunity.
Reasonable valuations, we also have our greenfield brownfield strategy well in place.
Will those take longer to open we've got a number of those in the pipeline.
So you can definitely expect to see incremental growth next year relative to 'twenty two.
And us tracking toward our 2025 goal.
Okay, and then second question I guess, we've seen a slight pickup in terms of open positions.
You and your peers as well.
Can we can update on this in our house retention been.
And maybe your ability to hire new markets that you operate.
We don't provide.
Specific numbers on that but I did comment and we do have in our MD&A that we have successfully increased our repair capacity.
Both with experienced technicians and through our technician development program.
But it remains a very very competitive market and kind of throughout my comments and throughout our MD&A, we do reference that continuing wage pressure to both retain staff and to recruit.
And the need for further increases from our clients to build our workforce frankly to be able to properly service them length of rental is still at historically high levels.
And it's difficult for our industry right now to provide the level of services really vehicle orders need and expect so.
Yes.
Got it and just to complement and a couple of things. So you're absolutely right. I think no. We are certainly focused on retention we are continuously enhancing our location strategy is to improve that.
In terms of the recruiting we do have normal channels, where we recruit directly.
Patients, but the other one we explicitly commented about the technician development program and we've been successful in hitting that 400 doubling the.
The number from the beginning of the year ahead of the scheduled literally with commentary.
<unk> before the end of second quarter, and we were able to accomplish before the reporting period. So that's going to provide substantial capacity for us moving into next year as graduates.
To become technicians.
And just a reminder, that's an eight hour program is an 18 month program.
When our <unk>.
<unk> graduate there they are very competent technicians and they build those skills throughout that 18 month period.
Got it Okay and then just last one for me.
A spike in used car prices back half last year early this year and then.
That's pretty.
<unk> drop.
Sitting at roughly 10% lower year over year.
Can you can make quick refresher on how this may benefit.
Back to your business if this trend continues.
Yes.
If used car prices dropped meaningfully it would increase total loss rates.
It would reduce the number of repairable vehicles.
And I am sure there are different forecasts out there on it but the supply of new vehicles has been pretty low for the past few years.
Which is part of what's been driving used car prices up.
And that supply is not expected to improve significantly in the near future. So while we've seen some decline in the price of used cars, they're still pretty elevated and that's making more vehicles repairable.
As we've been commenting dimmed.
Demand is not really an issue for our business, we have excessive amounts of demand available to us.
Okay great.
Pat Congrats on your retirement again and best of luck.
Thanks, Gary Thanks, Gary.
We will take our next question from the line of Bret Jordan with Jefferies.
Hey, good morning, guys.
So guys give a little bit more detail on the spending for tech development.
Sort of quantifying and then is there a moment where that sort of flips and this 18 months apprentice program becomes productive labor added.
Not only is that tech spend lower but the productivity is higher at some point in 'twenty three.
Yes.
We haven't provided any specific numbers on it but.
We view the program as a three phase program. The first phase is a big investment on our part both in training and in the wage cost of the apprentice. So that's the most expensive phase of it and its when their least productive maybe not at all productive in the early going but.
By the end of phase one they are at least adding to the productivity of the shop that they're located in although not substantially the.
The second phase would be where their productivity is growing.
And there are less impactful on our overall expenses, although we continue to invest in significant training to build their skills, including hands on training, which is relatively expensive to deliver.
The third phase, there generally producing and likely accretive to margin in most cases.
And really preparing to graduate when they graduate our experiences that there while they are not producing at the level of a seasoned technician, they're producing at levels that are very acceptable and we continue to work with them to build their skills in the months. After they graduate. So it is it is a fairly expensive program, but.
It is creating repair capacity for us.
Generally <unk> won that dilutive to Mr to the neutral in <unk> three that accretive the other important thing is the retention for these TDP graduates is substantially better than normal technicians. So thats another benefit to get not only volte quantify technician, but have a mental or within the company and retention is.
Much better.
Okay, Great and then a question on your parts margin you commented. It had improved is that price mix what was the driver on the parts margin improvement.
I think there's probably a little bit of supply chain improvement in there.
Better disciplines around our buying practices.
We're still having supply chain challenges, but when they first came up I think we werent as well prepared to to.
To make sure we were focusing our buying efforts on trusted suppliers.
Okay, and then also implementing some strategies to enhance the parts margins within the company in India.
Right now we are not disclosing bucket, we have instituted some new strategies.
Okay, because I think you were buying more OE parts from non traditional suppliers in the past year is that is your supply chain.
Yes back to may be closer to what it was pre pandemic.
I wouldn't say, it's back to where it was pre pandemic.
We are in better shape with that now partly because we've learned how to manage it more effectively.
But there has been an increase in the OE part mix relative to the aftermarket part mix. Some of that is aftermarket part availability. Some of it is increased repair complexity and the <unk>.
Higher and more complex repairs.
Tend to have.
Fewer if any aftermarket options.
So we're seeing an increase in the OE part mix.
As a percentage of the total <unk>.
It may well continue.
Okay, great. Thank you.
Thanks, Brent Thanks, Brett.
We'll take our next question from the line of Daryl Young with TD Securities.
Hey, good morning, everyone.
Just following up on <unk> last question there. So in terms of the preferred vendor rebates would you be back at a level consistent with try 19 levels or are you still.
Below those vendor rebate levels preferred vendors.
Really im not sure where you get the rebate concept.
We negotiate our pricing is a discount from list.
And when we saw the margin challenges on parts, starting a little over a year ago. It was because we were having to buy a higher percentage of our parts from suppliers that we had either a secondary or in many cases no relationship with dish.
Discount from the list price was.
Nominal.
And that pressured our overall <unk> margins.
Got you, Okay, Yeah, thats great sorry.
What I was referring to rebate wrong word.
That's it for me thanks.
Thanks, Joe Thanks Darryl.
We will take our next question from the line of Zachary ever shed with National Bank financial.
Exactly good morning.
Good morning, everyone and congratulations Pat.
Thank you.
Would there be any value in increasing the size of the technician development program again.
Hi.
We're going to evaluate that now that we've accomplished this goal.
I will say that we're very pleased with what we've accomplished it.
It does come at a cost.
But the.
The industry is woefully short of the number of technicians required to service demand.
And so I think it's important that we evaluate that and continue to look at what's the right thing to do certainly as we grow our company I would expect growth of GDP as we grow our company, but we're going to evaluate kind of look back on what we've accomplished with where we are now and consider whether it's something that we ought to invest for.
Right.
That makes sense and we're really really pleased with the program soon.
And then in terms of the long term view on the dynamics between insurers and collision collision shops customers are going through this period of dissatisfaction with their carriers because its taking so long to get vehicles serviced where does that bring the industry going forward as.
Premiums rise substantially just to get people to come back to the industry and get service levels back to where they should be and your views on that.
It's a question whether views on what premiums are going to do insurance premiums.
What's going to be required.
Whether that will fundamentally change the nature of the relationship with <unk>.
Carriers between collision shops.
I don't think so I mean, we obviously need our insurance partners and they need us to service our customers were going through a difficult period right now with the lack of capacity to properly service them.
We're working hard to build that capacity, but the model of direct repair and insurance referral continues to be a really effective way to service vehicle owners with damage and.
I don't want to overstate the the challenge I mean, our customer satisfaction levels are still quite good.
But theyre not as good as they would be if we had all the capacity we needed.
Got you and then finally, we're hearing some pushback.
Political bodies like insurance commissioners on the rate at which auto premiums are rising.
But of course, you guys arent yet at a level, where you can hire enough to get the needed capacity.
Do you think that will become an issue going forward that will put a cap on how high premiums Kingdom.
Insurers have to be able to underwrite and make a profit on what they do and cars are more expensive theyre more complex and they are going to cost more to repair. So I think it's.
It's hard to stop what's happening right now.
We can work hard to repair what we can repair to keep cost down and be reasonable with judgment times and we do that.
But the insurance companies have to be profitable and if they can't get the rate they need after some period of time, they would probably stop writing in a state or certainly up their underwriting standards.
They can't go on losing money in their book of business. So I don't think its a barrier, but the reality is insurance is going to be more expensive for consumers and also with exactly like this.
While it's under the topline demand at the end of the day.
More demand for our services and the supply it's going to have an impact and thats actually what we are trying to convince the aura insurance partners about the need for our price increases. So we can get assumption capacity and process to work that further enhances the customer satisfaction. So.
They're all interrelated, but we are well positioned to address our customers' needs.
Great color. Thanks.
Thank you.
Our next question comes from the line of Kristen Friesen with CIBC.
Good morning, Chris.
Alright, Thanks for taking my question.
Just a quick one here can you provide us with an update on.
Where where your backlog is sitting in I guess.
How long it's taking.
Rate increases youre getting can flow through.
Yes.
We don't provide we don't disclose our backlog, although we have said that it's elevated.
And Thats.
Across really all U S markets, we are seeing some signs of that in Canada now as well.
I think the some industry publications of <unk>.
Said that the overall backlog for the industry was pet Youll recall was five weeks or so yes, <unk> four to five Bcf four to five weeks. So the industry is fairly backlog right now.
We would we wouldn't vary significantly I don't think from the industry.
Okay, Great and most of my questions have been answered again, congrats Pat that session.
Thank you.
Thanks Kristen.
We have a follow up question from the line of Steve Hansen with Raymond James.
Hello again, Steve.
Thanks, guys.
Sure if you can answer that Tim but to what degree.
If at all have you been deemphasizing or dropping certain insurance carriers in your program that <unk> been pretty vocal about going after price increases, but my understanding is some carriers are more reluctant than others to offer those increases and so.
Do you have an ability to deemphasize volumes from those laggards have.
Have you been dropping any carrier specifically or how do you manage that tension.
The only significant action, we've taken was to stop doing business with the large fleet companies.
It was relatively low margin business.
Steve overall, I'm very pleased with the increases we've gotten from clients.
There is not a single client that hasnt provided.
At least one and in most cases, two and in a few cases three increases over the past 12 months. So our clients are generally being very responsive there are still gaps.
And we've talked about that before there are fewer gaps today.
There were six months ago. So we're going to continue to work those gaps and <unk>.
Make sure that we.
Maintain productive long term relationships with our clients.
Okay. That's fair and then I'll just sneak in one last one since I have you is just around the M&A environment, you've referred to going after some of our locations next year that sounds logical.
How is the multiples been fairing in the landscape of late there's been some obviously high profile transactions out there. It feels like activity has slowed a little bit are you seeing that reflected in multiples at all.
So far or do you anticipate it thanks.
I think we've said for the past few quarters that our focus on growth is.
Targeted toward Greenfield brownfield developments, and a single shop or not.
We would avoid a multi shop transaction.
But we see lots of opportunity a good valuations on the single shop acquisitions in Greenfield and brownfield.
You would you would expect though that given market conditions and interest rates.
That the bidders are assets that were going at levels that may not have made sense to US you would think that those the pricing on that may normalize in these conditions.
But we don't have anything specific to report on that.
Okay. Thanks, guys appreciate it.
Thanks, Steve.
Our next question comes from the line of <unk> Khan with RBC capital.
We're going to save.
Good morning.
Just a question just on the way the TD World GDP World again, it sounds like it's sort of an apprenticeship type model do you take people and sort of as the comps sort of one at a time or is it something like classes that moves through the system.
<unk> people start at the same time 30, how does that I guess.
Sure.
Program work.
Or is it just pretty quick flying people graduate 18 months after the day one.
It's a very structured program.
With.
Specific training and experience is required.
Throughout the 18 month period, so for somebody to move from level one to level two they need to have completed specific training assignments successfully and they need to demonstrate competency with specific repair tasks and those trainings and competencies.
Increase as they go through the program.
Distributed model that centrally supported so we have a team of people that work with a mentor. The mentors are formally trained in the program.
And there we're selective about the mentors so they need to have the skills to skills and patients to teach.
Our measures are absolutely outstanding.
We do this in every market in which we operate in the U S or Canadian the Canadian system is different.
Apprenticeship program in Canada is a different system, it's based in each province.
But it's a highly structured very effective program and we recruit new people into it every single week.
The concept of graduating class I'm, just thinking as we think about.
The third semester when people start to be accretive to margins.
So the 100 graduates come into the workforce and start adding volume how does though in terms of the graduation is that more structured like classes or.
No. This is based location by location. So when somebody has completed all of the competencies, which should take about 18 months, we might have some people graduate a bit earlier than that we may have some of the drag a little bit later than that but.
But we would see graduates coming out of the program really as it matures. We would see weekly graduate is coming from the program across different parts of the country.
Great. Thanks very much.
Thanks, Alex Thanks Abba.
It appears there are no further questions at this time, Mr. O'day I'd like to turn the conference back to you for any additional or closing remarks.
Thank you operator, and thanks to all of you once again for joining our call.
We look forward to reporting our fourth quarter and year end results in March and once again, congratulations to you. Thanks, Tim and thanks all of you.
Okay.
Have a great day bye bye.
This does conclude today's call. Thank you for your participation you may now disconnect.