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Boyd Group Services Inc
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Good morning, everyone. Welcome to the Boyd Group Income Fund First Quarter 2018 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 relating to Boyd's future financial or business performance. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are detailed in Boyd's Annual Information Form and other periodic filings and registration statements, and you can access these documents at SEDAR's database found at www.sedar.com. I'd like to remind everyone that this conference call is being recorded today, Tuesday, May 15, 2018. I would now like to introduce Mr. Brock Bulbuck, Chief Executive Officer of the Boyd Group Income Fund. Please go ahead, Mr. Bulbuck.
Thank you, operator. Good morning, everyone, and thank you for joining us for today's call. With me today are Pat Pathipati, our Executive Vice President and Chief Financial Officer; and Tim O'Day, our President and Chief Operating Officer. We released our 2018 first 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 www.boydgroup.com. Our news release, financial statements and MD&A were also filed on SEDAR this morning. On today's call, we will discuss the Fund's financial results for the 3-month period ended March 31, 2018, and provide a general business update. We will then open up the call for questions. The first quarter of 2018 demonstrated the success we continue to achieve as a result of our proven growth and operational strategies. To date this year, we have once again been able to achieve meaningful growth across all key financial metrics. In terms of location growth, since January 1, 2018, we have successfully added 16 locations in Colorado, Florida, Georgia, Illinois, Indiana, Ontario, Texas and Washington. Of particular note, we entered the state of Texas through the acquisition of 3 collision repair centers in Dallas. Also of note, the acquisition of 4 locations in Sudbury, Ontario, demonstrates meaningful growth generated by our Assured Automotive business in Ontario, Canada. Subsequent to quarter-end, we added 3 locations in Seattle, Washington and 2 intake centers, 1 in Schaumburg, Illinois, and one in Merrillville, Indiana. Looking at our first quarter results, total sales increased 19.6% to $453.3 million compared to $378.9 million achieved in the first quarter of 2017, including same-store sales of $388.9 million. Same-store sales increased 4% compared to the first quarter of 2017, excluding foreign exchange. In addition to same-store sales growth, the 115 locations added since January 1, 2017, contributed an additional $77.2 million in sales for the quarter when compared to the first quarter of 2017. A lower quarter-over-quarter U.S. dollar foreign exchange rate negatively impacted sales by $16.1 million. Adjusted EBITDA in the first quarter of 2018 was $42.1 million or 9.3% of sales compared with $32.8 million or 8.7% of sales in the same period last year. The 28.5% increase in adjusted EBITDA, which represents a 60 basis point improvement in adjusted EBITDA margin, is the result of contributions from same-store sales growth, contributions from new locations and an improvement in our operating expense ratio. This improvement in operating expense ratio primarily reflects the benefit of our growing sales and scale, leveraging fixed operating expenses as well as the impact of lower operating expense ratios associated with the Assured business as a result of their higher capacity utilization. Net earnings in Q1 2018 were $18.3 million compared to $15 million in the same quarter last year. Fair value adjustments negatively impacted net earnings in Q1 2018 as a result of an increase in unit price during the period whereas they positively impacted net earnings in Q1 2017. Excluding fair value adjustments and acquisition and transaction costs, adjusted net earnings increased by 50% to $20.9 million from $13.9 million in Q1 2017. On a per unit basis, adjusted net earnings were $1.06 per unit compared to $0.77 per unit in Q1 2017. The increase is the result of the contributions from same-store sales, new location growth and decreased income tax expense attributable to U.S. tax reform. As you may recall, the corporate tax rate in the U.S. decreased by approximately 13 percentage points effective January 1, 2018. In the quarter, adjusted distributable cash was $29.9 million compared to $15.4 million generated in the first quarter of 2017. This increase is primarily the result of the higher earnings this quarter. Although our capital expenditures during the first quarter of 2018 were low relative to our expected annual spend at approximately 0.9% of sales, as we had previously stated, we do expect to make capital expenditures for the full year 2018 within the range of 1.6% to 1.8% of sales. Emerging vehicle technologies requiring new specialized repair equipment as well as evolving information technology requirements, have resulted in this need for this higher level of expenditure. Making proactive investments will position us to meet anticipated market needs whereas we expect that many other collision repairers may not be making these investments. We paid distributions and dividends of $2.6 million, resulting in a payout ratio of 8.8%. This compares to a payout ratio of 15.3% a year ago. And on a trailing 12-month basis, our payout ratio stands at 9.1%. In terms of distributions, our approach continues to be to maintain a conservative payout ratio that provides returns for unitholders while preserving capacity to act on growth opportunities. At the end of the quarter, we had total debt, net of cash, of $214.9 million compared to $219.1 million at the end of 2017, and $114.1 million at March 31, 2017. This continues to represent a very conservative leverage that gives us the financial flexibility for future growth. Looking ahead to Q2 and through the rest of 2018, we expect that the technician shortage will continue to be a challenge. We are optimistic about the programs that we have put in place, which focus on recruitment, retention and apprenticeship. However, as we have said in the past, these programs will take time to mature, but we do believe that these initiatives will prove successful in the long term. Given this continuing challenge, our 4% same-store sales growth for Q1 outperformed what we had expected when we provided same-store sales guidance back in March. We attribute this Q1 same-store sales performance to a combination of being up against weak 2017 same-store sales comparatives as a result of the mild and dry winter in 2017, modest growth in our technician capacity and lastly, an increased component of part sales in our sales mix. By contrast, in Q2, we are up against stronger same-store sales comparatives and the higher parts component in our sales mix may not be repeated. In addition to the continuing challenges for same-store sales growth in Q2, we also had the operating expense burden of our enhanced benefits program for U.S. employees start to kick in. You will recall that we are planning to spend approximately 50% of our estimated tax savings from tax reform on enhanced U.S. benefit programs. We also have a meaningful foreign currency headwind in that the average U.S. dollar conversion rate thus far in Q2 is approximately $1.28 whereas in Q2 2017, it was approximately $1.35. At our current size, every $0.01 decline in the U.S. conversion rate translates into approximately $1.1 million reduced adjusted EBITDA annually or $275,000 quarterly.As you've now heard, we had a very positive results in this first quarter for 2018, and we continue to have many opportunities to pursue accretive growth. The components of that growth remain the same. Acquire accretive businesses, develop new stores, execute operationally and grow same-store sales. As we have frequently stated, our goal is to double the business by 2020 on a constant currency basis based on 2015 metrics. We are confident that we are on track to achieve that goal. We continue to have the strategy and the resources in place to continue to grow accretively, and our management team remains committed to delivering value to all stakeholders. With that, I would now like to open the call to questions.
[Operator Instructions] Our first question comes from the line of Steve Hansen with Raymond James.
Just wanted to dig into your outlook commentary a little bit, Brock, if I may. You suggest the macro conditions are driving consolidation -- that are driving consolidation are really intensifying. Are there any in particular that have picked up strength and momentum over the past 12 months? You mentioned in your commentary, the technological drive to invest capital, but is there anything else that you're seeing out there on the macro landscape that is really driving that consolidation?
I guess the only thing that I would comment on in response to that question, Steve, is that we continue to see the larger insurance companies look for opportunities to establish relationships with MSOs. And in fact, more and more insurance companies are establishing direct repair programs that have a multi-shop operator or MSO component to it. So said another way, the macro trends of insurance companies consolidating repair volumes continues. So that would be the only macro trend that I would say that continues.
In addition, just to complement, the other one is the capital. Steve, if we look at both the human capital and the financial capital, as the technology component increases in the vehicle, you need better trained technicians. So larger companies like us can invest in people and make that happen. [ And lastly, look, ] you have to make investments in equipment, and associated infrastructure. So that helps the larger MSOs, so that's now the trend that will help players like us.
Okay, that's helpful. And just one follow-up, if I may. Just on the traction you've seen thus far on your retention and recruitment program, can you give us just a rough sense of how that's gone thus far? I recognize it's been a brief period here, but have you started to see some incremental benefit of new hires in the door? And just maybe give us some relative context to how many you think you'd need? I think last call, you were reluctant to give us any specific metrics, but just some sort of context of how you have been able to build some pipeline, if at all? And where you see that sort of evolving as it matures here in the next 2 or 3 quarters?
Yes, Steve, first of all, I would say that we will -- we'll reiterate the commentary that we made in our press release, and that is that we have some modest increase in technician capacity. So we have some net gains in the quarter and really, that's all that we're comfortable saying at this point. It's a short period of time to draw any conclusions. As we've stated, it continues to be a challenge. We have implemented a number of programs that we believe will be successful long term. But it's too soon to draw conclusions from what are really modest gains in this quarter.
Your next question comes from the line of Chris Murray with AltaCorp Capital.
A couple of quick ones for me. Just looking at that cost of sales and the gross profit number. So a bit lower than in the past. Would you say that some of those changes to your technician compensation may have had an impact in Q1? Or I'm just trying to make sure that I'm understanding kind of the margin profile relative to even kind of Q4, Q3 type thing.
No. The primary drivers to the lower margin quarter over -- year-over-year margin would be, number one, the impact of Assured, which has a lower gross margin, more than offset by a lower operating expense ratio, and that's attributable to the fact that they have higher or increased customer acquisition costs associated with the dealer service centers. The other impact on margin this quarter would have been some impact from the higher parts component, which as you know, part sales has lower margins than labor sales. So those are the primary drivers.
[ It's a bit of a mix thing ]. And then I guess that brings me to my next question, so you had some success with I guess 2 new dealer intake centers that you've established, I think in Illinois. Can you give us a flavor of how some of those discussions have gone with dealerships as you start to roll out this process? And any early thoughts on what's been working in terms of the discussions on why dealers should actually partner with you guys?
Chris, we don't want to provide too much commentary on this because as we've stated before, we think that this is a very highly competitive area of our business, and we don't want to provide extensive commentary on the nuts and bolts of that strategy. So as we've stated in the past, we think that the dealer service center strategy gives us another tool in our toolbox for achieving organic or same-store sales growth where the characteristics of our surrounding locations makes sense. So we were pleased to be able to add 2 intake centers this quarter, and we would plan to continue to add more over the balance of this year. But really don't want to talk about the nuts and bolts of conversations with dealerships and how those are going.
Okay, fair enough. One last one, if I might. Just in terms of CapEx, you mentioned the fact that you're going to hit kind of your target. Just wondering, should we just expect like the rest of the year will be for the most part, just a step up and then flat? Or is there one particular quarter where you have some large capital spending plan, say for an IT system or something like that?
I wish we could provide you with better guidance on when the spend will come within which quarter this year. Unfortunately, that's a little hard to predict. It's sometimes related -- we generally record the CapEx when we pay for product and sometimes, invoicing is delayed on product -- or on equipment or other capital goods that we buy. I really can't provide guidance on what quarter the spend will come, but do have a fairly high level of confidence that we are going to spend to the level that we guided in that 1.6% to 1.8%.
Quick, lastly you'd also like -- if you look at Q1, we had a CapEx as a percentage of sales of 1% and we ended the year at 1.5%. So this year, we're at 0.9% and we are guiding out towards 1.6% to 1.8%.
Your next question comes from the line of Mark Petrie with CIBC.
I just wanted to ask a high-level question with regards to the transactions that you have done. In terms of the motivation of the sellers, and to the extent that you are able to sort of discern that, are you seeing any change? And I guess my question sort of relates to the comment of these macro conditions being -- continuing to be more favorable for you guys. Are you seeing that as a factor in sellers deciding to exit the business?
It's really -- we have a difficult time commenting or confirming that. It's -- I would say generally, that we don't really see any change at least in the positioning that sellers are bringing to the discussions that we're having with them. I would say that our pipeline today is like it was when we reported in March, it's good. And we continue to be confident in our ability to continue to add M&A growth as we have planned. And maybe there is some increased motivation on the part of sellers to engage in discussions because of some of those macro trends. But they're not openly sharing a higher level interest in selling, not sharing those comments or thoughts directly with us.
Okay. And then just in terms of the pipeline. Any change in terms of the mix of single locations versus multi site chains up for sale?
Our pipeline would include a similar mix to what it has over the course of the last several quarters. So no real change.
Okay. And then just a last one. With regards to the tax rate, is it still sort of a 26% rate for the year? It was a little bit lower in Q1, it looks like.
Yes, I think that's a reasonable assumption, Mark.
Your next question comes from Maggie MacDougall with Cormark.
Just going back to your measures that you've taken on attracting more technicians into the company. I'm wondering, on the employee benefits side, if you've seen any competitors take similar measures?
I don't believe that we have. Tim, have you heard any -- do you have any insight into anything that you've heard?
No. Although as everyone knows, this is a fairly recent change that would likely take time for that kind of reaction anyway, but we've seen no direct competitive reaction to it.
Okay, that's interesting. The other question I was wondering, you've noted in your remarks that you expect to incur some additional expense related to the enhanced employee benefit program in Q2, and I was just hoping for the purpose of modeling, if you could, perhaps give us an idea of the magnitude as we go down the P&L, if we should be considering the impact to cost of sales and operating expenses or if you believe that the cost could be borne more in 1 category or another?
Sure. The cost will be in operating expenses and not in cost of sales, and based upon the guidance that we provided last quarter where we said that we expect that the cost of those enhanced benefits will be approximately 50% of our tax savings. If you sort of push through the math, that translates into probably about 30 basis -- potentially, on a full year basis, once fully matured, about 30 basis points in the OpEx ratio. In Q2, we're probably not at the fully mature level of that yet because we're only -- some of the benefits haven't yet kicked in, and others are slowly maturing, like for example, take up in 401(k) plans. It's also a function of how many -- it's not the right word in the U.S., but staff holidays are -- there are within a quarter. In the U.S., I think the term is holiday days, paid holiday days and then how many vacation days our technicians or our employees take as well. So really 30, or approximately 30 basis points on a full year basis, but it's not going to be to that degree in Q2, but it will start -- will start to have some impact. There will be some cost in Q2.
Okay. And just curious, the 30 basis point cost estimation for the year, does that also take into account increased potential same-store sales growth resulting from having more people working? Or is that just, if all stays the same...
No, it does not.
Okay, so no operating leverage in there?
That's correct. That is simply taking approximately 50% of our tax savings, making determination that, that will be incremental expense on sort of run rate sales. So that's...
Okay, and then just one final question. I appreciate you may not be able to answer this, but I'll ask anyway. So we did have quite poor weather well into Q2 this year and I mean, there was an ice storm here in Ontario in April. I'm just wondering if this has led to some pockets of unseasonal strengths in your business, particularly in Assured.
Sorry, led to some pockets of unseasonal strength?
Unseasonal strength in terms of demand so far this spring?
Yes, I would say that certainly, the bad weather or as we like to say, the favorable weather for our business, has increased demand in a number of our markets. Unfortunately, our challenge is being able to process that demand due to the technician capacity constraint. So I would say that given the weather that we've had this winter and the increased demand that, that has translated into in a number of our markets, if we didn't have a constraint of technician capacity, we'd have a pretty bang-up year in the making. But that technician capacity is really acting as a governor to our ability to take advantage of those kinds of circumstances.
Your next question comes from the line of Bret Jordan with Jefferies.
On the part sales strength, is there something strategic going on there or there just happened to be a mix issue this quarter?
Nothing strategic, just a mix issue this quarter.
Okay. And then on M&A valuations, I mean, your first stores in Texas, you've got a big MSO competitor down there. As you enter some of these newer markets, are you seeing any change in valuation expectation from sellers?
Not really. No, the same range of valuation multiples that we've quoted historically really would characterize the marketplace today.
Okay. And then a final question. When you think about the new sort of labor model and paying through some of the tax savings on benefits, roughly, I mean, just to sort of put this into perspective, what kind of impact are we talking, on a per employee basis? How great a lift do you need to give them to incent the new labor?
We don't have at our fingertips sort of the calculation of that anticipated higher spend on a per employee basis, Bret, so I can't -- we can't be that specific. We think that the benefit enhancements are meaningful. We essentially are -- it will translate into, particularly for the technicians where we have changed the way that we're going to pay them for vacation and holiday days off. For those days, it could essentially translate into what could be, in some cases, 50% to 100% more of vacation pay for them, maybe even higher in some cases. And from a 401(k) plan perspective, we're essentially doubling the company match so that's fairly significant from an individual employee perspective as well, should they choose to take advantage of participation in the 401(k), but I apologize, we don't have sort of -- that's an interesting calculation that we might want to do, Pat, but we don't have that calculation in front of us today.
And do you see, I guess is it bringing new people into the industry? Or is it more of a recruiting tool to bring other collision operators to your business?
We haven't seen it bring new people into the industry. We think that realistically, the objective is to make ourselves a more attractive employer within the context of the collision repair industry and therefore, take advantage of opportunities to attract people from our competitors.
[indiscernible] we intended to bring new people into the industry.
Your next question comes from the line of Michael Glen with Macquarie.
So Brock, just on the technician capacity. You talked about if you didn't have that constraint, you would have had a very -- a much stronger quarter. So does that create sort of a deferred work element that we should take into consideration? What happens to that volume?
Well, that volume in part builds our work in progress, our unprocessed work stuff that we have in the pipeline. We call it WIP, and it typically is scheduled out for repairs, but when you schedule work out, you have greater leakage in the fact that some of those customers ultimately don't -- they find other repairers to fix their cars, or vehicles more quickly. So some of that WIP could be lost through leakage. And maybe more directly in response to your question, the problem of you considering the component that is represented in higher WIP that might ultimately translate into repairs for us, we've got the same issue going into the next period. So we've still got capacity constraints that haven't completely been resolved. We still have the technician capacity issue as a challenge for us. So the only way that you should be bullish on what that pent-up WIP, how that will translate into results for us, is when we ultimately say to you, we completely -- we've solved our technician issue and we don't have that issue anymore. But until we completely solve that, we're going to continue to battle processing all of the available work in progress that we have available to us.
Okay. So in any given period then, how should you -- we think about your same-store sales growth correlating with overall insurance claim activity in the period? Is that the primary contributor to your same-store sales growth? Or are there other factors that we need to probably take into consideration?
Well, I think that's a hard question to answer. Historically, when we didn't have this issue with technicians, the foundation of sort of evaluating market conditions was the claims activity, and then you likely layered on top of that, our ability to increase market share through the macro trends within the industry. Those elements of anticipating our same-store sales performance would still be relevant, but we have the added variable of capacity constraints. So in this particular quarter, for example, if you look at the CCC claims count data, claims nationally were up less than 1%, 0.8%. They were actually -- in the markets that we operate in, they were actually down slightly. Notwithstanding that, we achieved 4% same-store sales growth. So we outperformed the market, but -- and we had opportunity for more. So it's become a little more muddled given this technician capacity issue and really assessing what could impact and what could drive the same-store sales growth number for us.
Okay. And when we look across the cost buckets in the gross margin line, given your size now and your scale, do you think that there's any incremental opportunities there whether it's on parts or perhaps on paint to seek some additional cost savings in the gross margin line?
I hope our paint company is listening. We'll continue to -- we're going to continue to press for those opportunities, Michael. I think the answer is probably yes, there are some. We need to invest the time, energy and resources in really pursuing them. I don't think we're going to see step-change margin impact like we did a number of years ago, when we moved from a back-end paint discount to -- pardon me, from a front-end paint discount to a back-end paint discount, but there's probably incremental gains to be made through scale purchasing advantages.
Got it. I'll just ask one more. Have you made any -- have you added anybody to your corporate development team recently as well to focus on M&A?
Yes, we continue to add resources to our Corporate Development team that we believe to be necessary to achieve our goals.
Your next question comes from the line of Jonathan Lamers with BMO Capital Markets.
Brock, I believe when we last spoke in March, Brock described the acquisition pipeline as being as healthy as it has ever been. My question is have there been any sizable opportunities that have dropped off since then?
Yes, I would say that there have been. I would say the pipeline is still healthy, very healthy, but there has been some opportunities that have dropped off and others that have come on. So it's a fluid pipeline, but to answer the question accurately, yes, some have probably dropped off.
So Jonathan, the acquisition pipeline is like a funnel. We put more to the mix and some go through various screens and some don't. So we're going to be constantly adding other targets to the pipeline.
Does your M&A team have the capacity to pursue both an Assured sized acquisition, while also doing tuck-ins at the rate that you have over the past few years?
Yes.
Okay. So I take it we should not read anything into the slowing in tuck-ins over the first half of Q2?
No. Other -- again, acquisitions and M&A activity typically translates into results in a lumpy fashion. And I will remind everyone that, that lumpiness could be quarter-to-quarter. It could even be for many quarters. I think what's important and what we want everyone to focus on is number one, our track record for achieving our targeted level of growth, and our confidence in our ability to achieve the targeted level of growth over a 5-year period, not over a 1-quarter or 2-quarter or 3-quarter period.
Okay, moving on to the Q1 results. Assured sales were notably strong this quarter. Brock, I believe when you acquired Assured, you indicated the seasonality was similar to the rest of the Canadian business where the winter months were the strongest and the spring quarter was the weakest. Now that you own the business, is that still your expectation? And can you kind of comment on how things are going in Q2?
I'm not going to comment on how things are going in Q2 beyond the guidance that we provided in the press release and the MD&A. I would say that the seasonality of the Assured business is similar to the rest of our business. However, we are in this period where we have strong demand in a lot of our markets that we can't take advantage of, and that extends to Assured. Assured has, and I will also maybe repeat some comments that we would have made on, maybe not last call, but maybe the prior call. Assured's sales performance is exceeding our expectations. However, that's being offset by some lower margins. Ultimately, it's achieving expectations at the bottom line, but that's being achieved through higher sales and some lower margins. So we continue to be pleased, thrilled with the acquisition of Assured and strong sales performance, lots of demand, some of the similar challenges that we have across the rest of our business in terms of processing that demand, but overall, really, we haven't had any surprises, any major surprises relative to that acquisition.
Okay. One more question, if I may. I believe that in Q1, industry claims were up year-over-year in the northern snow belt states, but generally down year-over-year in the southern states. My question is have the technician shortages been an issue for you in both the southern states and the northern states?
Yes, they have.
And can you provide us with any sense as to what portion of your markets this is impacting?
I would say that the technician shortage is impacting our ability -- is acting as a bit of a governor in our ability to generate sales in certainly the majority of our markets. I think we should leave it sort of to that degree. And I don't think we want to get more specific than that.
Your next question comes from the line of Ben Jekic with GMP Securities.
Congrats on the very good numbers. I just wanted to ask quickly on -- most of my questions have been answered, but I have just one on Assured. When you talk about strong pipeline that has not changed or has somewhat improved quarter-over-quarter, how does Assured, like if you isolate just Assured's potential pipeline, how does that look compared to the overall company?
Assured, we are targeting for similar growth within the Assured business as we're targeting for our overall company, and I would say that the Assured pipeline is comparable to the pipeline that we would have on an aggregate or consolidated basis.
But when we look at the whole company, when we look at the pipeline and obviously, there are segments within our businesses so there are going to be puts and takes, but we look at the big picture and the pipeline is strong.
Okay, and when you mentioned that the EBITDA margin or that the margin has been slightly lower than you expected, but obviously higher volumes, is that like a one-off occurrence? Or is there something structural within Assured since you acquired it?
It is, we believe it's correctable, but it may take some time to correct it. It's related to actually -- the higher volume is translating into more challenging conditions to achieve cycle time and other operational performance metrics that are translating into some pricing penalties under some of its customer arrangements.
Your next question comes from the line of Elizabeth Johnston with Laurentian Bank Securities.
Just to continue on briefly on the topic of M&A. Is there a way that you could be strategic with respect to acquisitions in the sense of pursuing acquisitions in markets that represent the minority, where there's less of a technician shortage? Is there any way to do something like that, that might be able to alleviate some of the pressure in regional markets?
I'm not sure how to answer that question. There may be some opportunity, but quite honestly, Elizabeth, we haven't uncovered those opportunities. I'm not sure that there are any markets or states where this -- where we wouldn't face to some degree a technician shortage issue, particularly, if we are a company that has growing revenue opportunities through some -- as a result of some of the macro trends in our industry, insurance companies consolidating repair volumes so...
Elizabeth, when we look at acquisitions, we do take a look at the availability of technicians, but that's not the primary driver. We look [ on a highly fixed overall ] footprint, and whether it meets our determined method capital thresholds. So we look strategically [ at the lift ] financially, whether it's fixed and obviously the technician availability comes into the mix too. But we won't make that the criteria whether to go into a market or not.
But as Pat points out, certainly in every investment business case that we look at, one of the questions that we ask the Corporate Development team and the operating team that's bringing it forward is, what is the market for technicians? Is it because to the extent that it is a market where the technician issue is at the extreme level, it may influence our decision. If it's at the normal level, we have to really accept that as a potential risk of making the acquisition.
Okay, great. And then just going back to in terms of technician shortages, is there any kind of seasonality with respect to this labor pressure as in, is it more likely that you feel it in your busy quarters versus your softer quarters? Or is there any kind of a pattern to that?
I think potentially, however as -- I'll maybe remind everyone, we've been in quite a strong cyclical market for a couple of years now. So the conditions for collision repair have been pretty favorable. So we haven't seen the same level of seasonality impact the business during the last couple of years as we might have seen historically.
Just trying to get a sense like for this quarter in particular, do you naturally have less issue with finding labor in a Q1 because there's less sales in Q1 in certain regions or anything like that?
Quite honestly, we're probably going into the periods where the technician issue will become more of an issue because we face vacations when we hit the month of June, July and August. And you'll recall that we spoke fairly extensively, last year, about the impact of the technician shortage, combined with vacation season. So maybe seasonality more due to when people take vacations than seasonality related to demand.
And just last one just to clarify with your comments with respect to the increased benefits being paid. Were any of those benefits starting in Q1? Or is it really -- or the impact we should expect starts in Q2 only?
No impact in Q1.
Your next question comes from the line of Daryl Young with TD Securities.
A couple of quick questions here. So on same-store sales growth, if you were to decouple the impacts of the year-over-year, the weaker year-over-year comparable and the parts mix, which one would be the largest contributor to the 4% same-store sales?
I don't have that calculation or that analysis in front of us, so really can't respond to it. I really can't respond to it. Don't want to guess because we don't have that analysis in front of us.
Okay. And then following on that, in terms of clearly the shops are at about 100% utilization rate now based on labor, but what kind of a utilization do you think each of the stores could get to? And I guess where I'm coming from with this question is looking longer term in terms of same-store sales growth, how much room in each of the existing store networks is available to push higher sales through and more volume?
I would say that if we talk -- if we sort of split capacity constraints into labor on the one hand, and footprint on the other hand, I would say that footprint or premises capacity constraints would not be an issue in many of our locations.
Okay, great. And then just one final question. The change in wording to say highly confident in achieving the targets, was that just driven by the fact that we've progressed a number of years through the 5-year goal? Or is it relating to an increased number of acquisition targets?
Quite honestly, it may have just been another way to say the same thing we believe that we've been saying all along, so I wouldn't read too much into the introduction of the word "highly". I think we may have used it at some points in past discussions, may not have used it last quarter. We continue to be confident. I wouldn't read in any step-change level of confidence into that added word.
Your next question comes from the line of Steve Hansen with Raymond James.
Just we're running long here, it seems like a lot of people like to ask 4, 5 questions each before getting in the queue, but just one quick follow-up here, if I may. One of your large MSO competitors has really started to accelerate the concept of brownfield builds in the last year or 2. This isn't a strategy that you guys have employed just yet, but I'm just curious if that's an approach you might take as a means of better market densification or more efficient means of densification in your key markets.
We think there may be some opportunity for that. We have done some greenfield, brownfield builds in the past and continue to do so. We've done some every year. We think that there may be an opportunity to increase the percentage that, that would represent of our overall M&A activity.
And we have no further questions at this time. I'll turn the call back over to Mr. Bulbuck for closing remarks.
Thank you, operator. And thank you, all again for joining our call today. We look forward to reporting our 2Q results in mid-August and again, thank you, and have a great day. Bye for now.
Thank you.
This does conclude today's conference. You may now disconnect. Have a great day.