Boyd Group Services
Annual Report 2021

Plain-text annual report

BOYD GROUP SERVICES INC. 2021 Annual Report BOYD GROUP SERVICES INC. 2021 Annual Report _____________________________________________________________________ Table of Contents 3 Report to Shareholders……..…………………………………………….……..…. Message from the Independent Board Chair………………..……………….…. 5 7-45 Management’s Discussion & Analysis……………………………..………...… 46-49 Certification of Annual Filings …………..……………………………..………… Consolidated Financial Statements 51 Management’s Responsibility for Financial Reporting…………...…… Independent Auditor’s Report………………………………………….… 52-56 Consolidated Statements of Financial Position………………………... 57 58 Consolidated Statements of Changes in Equity….………...…………. 59 Consolidated Statements of Earnings……….…………………………. 59 Consolidated Statements of Comprehensive Earnings………....……. Consolidated Statements of Cash Flows…………………………….… 60 Notes to Consolidated Financial Statements………..……………….… 61-100 Board of Directors…………………………………………………………………. 101-102 103 Corporate Directory……………………………………………………….………. 104 Shareholder Information…………………………………………………………….. BOYD GROUP SERVICES INC. REPORT TO SHAREHOLDERS _____________________________________________________________________________________________ To our Shareholders, Financial results in the first half of 2021 showed steady improvement as demand for services began to recover from the COVID-19 pandemic that emerged in March 2020. However, as demand continued to increase during the second half of 2021 and approached pre-pandemic levels in most of our U.S. markets, Boyd’s ability to service this demand was meaningfully impacted by a tight labor market and supply chain disruptions. The collision repair industry is experiencing significant and unprecedented competition for talent, and, in particular, a limited pool of qualified technicians and estimators. As a result, Boyd experienced increased wage costs in order to both retain and recruit employees, causing pressure on labor margins and operating expenses. We achieved total sales in 2021 of $1.9 billion, an 19.9% increase when compared to the $1.6 billion achieved in 2020, including same-store sales1 increases of 7.0% and contributions from 154 new locations that had not been in operation for the full comparative period. Adjusted EBITDA1 for 2021 was $219.5 million, or 11.7% of sales, compared with $220.0 million, or 14.1% of sales in 2020. Adjusted EBITDA was positively impacted by the Canada Emergency Wage Subsidy (“CEWS”) in the amount of $9.8 million, as compared to $12.7 million in 2020. Adjusted EBITDA was significantly impacted during the second half of 2021 by the tight labor market, wage inflation and supply chain disruption. Boyd posted net earnings of $23.5 million in 2021, or 1.3% of sales, compared to $44.1 million, or 2.8% of sales in 2020 and earnings per share of $1.10 per share for the year ended December 31, 2021 compared to $2.10 for the same period of 2020. Impacting net earnings were fair value adjustments to financial instruments, as well as acquisition and transaction costs (net of tax). After adjusting for these items, Adjusted net earnings1 for 2021 was $28.0 million or 1.5% of sales. This compares to Adjusted net earnings of $41.4 million or 2.6% of sales in 2020. Adjusted net earnings for the year ended December 31, 2021 was $1.30 per share, compared to $1.97 per share in 2020. Adjusted net earnings for the year was impacted by the lower gross margin percentage due to reduced parts and labor margins, a higher mix of parts sales in relation to labor, and higher levels of operating expenses relative to sales, which were impacted by capacity constraints and supply chain disruption. With respect to the balance sheet, at December 31, 2021, BGSI held total debt, net of cash, of $957.7 million, compared to $538.5 million at December 31, 2020. Total debt, net of cash, includes lease liabilities of $543.3 million at December 31, 2021, compared to $419.3 million at December 31, 2020. Debt, net of cash, increased when compared to the prior year primarily as a result of acquisition activity, including draws on the revolving credit facility, as well as increased seller notes and lease liabilities. Based on Boyd’s continued growth, the strength of and confidence in the business, Boyd announced a Canadian dollar dividend increase of 2.1% to 57.6 cents per share annualized, up from 56.4 cents per share. 1 Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, adjusted for the fair value adjustments related to the non-controlling interest call liability and contingent consideration, as well as acquisition and transaction costs), adjusted net earnings, adjusted net earnings per share and same-store sales are non-GAAP financial measures and ratios and are not recognized measures under International Financial Reporting Standards (“IFRS”). Management believes that in addition to net earnings and cash flows, the supplemental measures of adjusted net earnings and Adjusted EBITDA are useful as they provide investors with an indication of earnings from operations and cash available for distribution, both before and after debt management, productive capacity maintenance and non-recurring and other adjustments. Management believes that, in addition to sales, the supplemental measure of same-store sales is useful as it provides investors with an indication of the increase in sales without accounting for location growth and the impact of fluctuations in exchange rates during the period. Investors should be cautioned, however, that Adjusted EBITDA, adjusted net earnings and adjusted net earnings per share should not be construed as an alternative to net earnings determined in accordance with IFRS as an indicator of Boyd's performance. Investors should also be cautioned that same-store sales should not be construed as an alternative to sales in accordance with IFRS as an indicator of Boyd’s performance. Boyd's method of calculating these measures may differ from other public issuers and, accordingly, may not be comparable to similar measures used by other issuers. For a detailed explanation of how Boyd’s non-GAAP financial measures are calculated, please refer to the section titled “Non-GAAP Financial Measures and Ratios” in Boyd’s MD&A filing (dated March 23, 2022) for the period ended December 31, 2021, starting on page 7 of this Annual Report. A copy of Boyd’s MD&A for the period ended December 31, 2021 can be accessed via the SEDAR Web site (www.sedar.com). 3 In November of 2020, we announced our new five year growth strategy, in which Boyd intends to again double the size of the business over the five year period from 2021 to 2025, based on 2019 constant currency revenues, implying a compound annual growth rate of 15 percent. During 2021, we were able to add a record 127 new locations, including 101 locations through acquisition, 10 start-up locations and 16 locations operating as intake centers. Unfortunately, these new locations are also currently experiencing margin challenges as a result of a tight labor market, wage inflation and supply chain disruptions, as well as sales per location levels that are below pre- pandemic levels due to capacity constraints. In the short-term, we are primarily focused on addressing the labor shortage for our core business. In the long-term, we remain confident in our business model and its ability to increase market share by expanding Boyd’s presence in North America through new location and organic growth from Boyd’s existing operations. We are committed to addressing the labor market challenges through initiatives such as our Technician Development Program and are working to more than double the number of trainees in the program to help meet our future needs. We continue to increase recruitment support staff to improve lead generation and follow-up, proactively evaluate compensation levels and make appropriate adjustments to ensure the Company remains competitive in the rapidly changing environment, and drive high levels of execution for on-boarding and orientation programs to increase retention. We continue to work with key suppliers to source parts at normal margins, but will continue to use OE parts in place of after market parts when necessary in order to complete repairs for our clients. We have successfully negotiated an unprecedented number of meaningful rate increases from clients, demonstrating that insurers understand the need for increased pricing in order for us to serve their needs. While we are satisfied with this first round of increases, further increases are required to reflect the current and evolving environment. We continue to actively pursue and push for the necessary pricing increases. Given how significantly and rapidly wage costs have increased, it will take some time to achieve all of the needed price adjustments, and margins will continue to be impacted in the near-term. Throughout 2021, we increased our focus on ESG and are proud to announce the publishing of our first ESG report this month, which outlines priority areas in each of the environmental, social and governance pillars. The report reflects our existing efforts to embed sustainability into our organization, and sets the baseline for future performance as we strive to deliver against our mission to WOW all of our customers with quality work and best in class service. We recognize that we have the potential to deliver significant, positive impacts to society and the environment. Our ESG Report builds on existing strengths to ensure robust environmental, social and governance principles and practices across our operations. Our approach is informed by the priorities of our key stakeholders, including our employees, our investors, our customers, and our communities, as well as the local and global developments that define the context in which we operate. Our Executive Chair and former President & CEO, Brock Bulbuck retired on December 31, 2021. On behalf of our entire Company, as well as all of our Stakeholders, I would like to thank Brock for the many years of dedicated service he provided to Boyd. I look forward to working with Brock as he continues to serve as a Director on our Board. On behalf of myself, the executive team and our Board of Directors, I would like to thank all of our Boyd Group employees for their hard work and dedication, which allowed Boyd to successfully navigate through the impacts of the dynamic economic environment during this unprecedented year. And on behalf of the Directors of Boyd Group Services Inc. and Boyd Group employees, thank you for your continued support. Sincerely, (signed) Timothy O’Day President & Chief Executive Officer 4 BOYD GROUP SERVICES INC. MESSAGE FROM THE INDEPENDENT BOARD CHAIR ______________________________________________________________________________ To our Shareholders, The 2020 fiscal year ended, and the 2021 year began, with optimism that the worst of the COVID-19 pandemic was behind us. And, as expected, demand recovered over the year. However, although U.S. demand approached pre- pandemic levels by the back half of 2021, our results, most notably our margins, were negatively impacted by a number of “pandemic induced” factors. First, significant wage inflation driven by an incredibly tight labor market combined with a major supply chain disruption translated into material gross margin erosion. Second, in the fact of the tight labor market, Boyd has not yet been able to add sufficient technician labor capacity to service U.S. demand. This, coupled with a slower recovery of demand in Canada, has negatively affected fixed cost absorption, which has further compressed Adjusted EBITDA1 margins. The Board has continued to provide appropriate Board level guidance to the Senior Management team as they work through the very real challenges of the current market environment. The Boyd team is committed to addressing and resolving the labor and inflationary challenges through various initiatives, including the Technician Development Program and rate increases from clients. Notwithstanding near-term challenges, the Board and Management remain confident in our business model and the Company’s plan to double the size of the business on a constant currency basis from 2021 to 2025 against 2019 sales. As a Board, we are incredibly proud of the commitment and resilience demonstrated by the Boyd team as they have managed through ever changing and difficult market conditions over the last couple of years. As intended, Tim’s succession to the CEO role and Brock’s transition to Executive Chair provided a seamless transition in the leadership of the Company, notwithstanding incredibly challenging pandemic induced challenges. At the end of 2021, as planned, Brock Bulbuck retired from the Executive Chair position. I am very pleased that Boyd will continue to benefit from Brock’s knowledge and experience as he continues to serve on the Board of Directors. In August, 2021, the Compensation Committee of the Board changed the name and mandate of the committee to broaden the focus on human capital. The People, Culture and Compensation Committee provides oversight of the overall People Strategy and progress against goals in areas such as talent acquisition and management, engagement, retention, culture and Inclusion, Diversity and Equity. The enhanced mandate also expands the review of leadership development and succession planning. The People, Culture and Compensation Committee believes that a broad focus on human capital is critical to success in the current environment and to position Boyd well for the future. Throughout 2021, the Board has continued to actively work with management in the development of a comprehensive strategy with respect to Environmental, Social, and Corporate Governance (“ESG matters”). In the 1 Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, adjusted for the fair value adjustments related to the non-controlling interest call liability and contingent consideration, as well as acquisition and transaction costs), adjusted net earnings, adjusted net earnings per share and same-store sales are not recognized measures under International Financial Reporting Standards (“IFRS”). Management believes that in addition to sales, net earnings and cash flows, the supplemental measures of adjusted net earnings and Adjusted EBITDA are useful as they provide investors with an indication of earnings from operations and cash available for distribution, both before and after debt management, productive capacity maintenance and non-recurring and other adjustments. Management believes that, in addition to sales, net earnings and cash flows, the supplemental measure of same-store sales is useful as it provides investors with an indication of the increase in sales without accounting for location growth and the impact of fluctuations in exchange rates during the period. Investors should be cautioned, however, that Adjusted EBITDA, adjusted net earnings and adjusted net earnings per share should not be construed as an alternative to net earnings determined in accordance with IFRS as an indicator of Boyd's performance. Investors should also be cautioned that same-store sales should not be construed as an alternative to sales in accordance with IFRS as an indicator of Boyd’s performance. Boyd's method of calculating these measures may differ from other public issuers and, accordingly, may not be comparable to similar measures used by other issuers. For a detailed explanation of how Boyd’s non-GAAP measures are calculated, please refer to Boyd’s MD&A filing (dated March 23, 2022) for the period ended December 31, 2021, which can be accessed via the SEDAR Web site (www.sedar.com). Please refer to the section titled “Non-GAAP Financial Measures”. 5 past year, the Governance and Nominating Committee was renamed the Governance and Sustainability Committee to highlight the growing importance of ESG matters. The Committee assists the Board in its oversight responsibilities for the Company’s commitment to ESG matters. The Company has established ten priority ESG matters and has articulated ambition statements and goals for many of these priority areas, as outlined in Boyd’s inaugural ESG Report. In May of 2021, Allan Davis retired from the Board of Directors and from his role as Independent Board Chair. The Board is grateful for the many years of dedicated service Mr. Davis provided to the Company. Coincident with Mr. Davis’ retirement, Boyd announced the election of Robert Espey to the Board of Directors and my appointment to the role of Independent Board Chair. The Board has an ongoing commitment to diversity and renewal, with a focus on ensuring the Board has the necessary skills and expertise to support the growth of Boyd’s business, as defined in the Board Composition, Diversity and Renewal Policy. The Board has also reaffirmed its commitment to diversity, aspiring to increase from its current 22% to a minimum of 30% gender diversity on the Board by the Annual General Meeting of 2024. On behalf of the Board, I would like to thank the management team and all employees for their continued commitment and hard work, and our stakeholders for their continued support. Sincerely, (signed) David G. Brown Independent Chair 6 Management’s Discussion & Analysis OVERVIEW Boyd Group Services Inc. (“BGSI”), through its operating company, The Boyd Group Inc. and its subsidiaries (“Boyd” or the “Company”), is one of the largest operators of non-franchised collision repair centers in North America in terms of number of locations and sales. The Company currently operates locations in Canada under the trade name Boyd Autobody & Glass and Assured Automotive, as well as in the U.S. under the trade name Gerber Collision & Glass. The Company is also a major retail auto glass operator in the U.S. under the trade names Gerber Collision & Glass, Glass America, Auto Glass Service, Auto Glass Authority and Autoglassonly.com. In addition, the Company operates a third party administrator, Gerber National Claims Services (“GNCS”), that offers glass, emergency roadside and first notice of loss services. The following is a geographic breakdown of the collision repair locations by trade name and location. In response to the reduction in demand resulting from the COVID-19 pandemic, certain collision repair locations were temporarily converted to intake locations in order to consolidate collision repair services and to reduce Boyd’s operating costs at the temporary intake locations while at the same time maximizing productivity of the staff at the repair locations. All temporary intake locations in the U.S. have been converted back to production facilities. The number of locations and number of intake centers noted in the chart below does not reflect the remaining temporary conversions from production to intake locations in Canada. British Columbia Alberta Manitoba Saskatchewan Ontario 848 locations 48 locations 17 14 13 4 Michigan Illinois Florida New York Washington 84 locations Indiana Georgia North Carolina 84 Ohio Wisconsin Arizona Oklahoma California Texas Colorado South Carolina 716 locations Louisiana Kansas Maryland Oregon Tennessee Nevada Pennsylvania Alabama Missouri Kentucky Utah Hawaii Arkansas Idaho Iowa 74 71 69 40 38 37 35 32 32 30 27 27 26 26 21 18 16 13 12 12 12 10 9 7 7 4 4 3 2 1 1 The above numbers include 34 intake locations. The above numbers include 34 intake locations and two fleet locations co-located with collision repair centers. Boyd provides collision repair services to insurance companies and individual vehicle owners, with a high percentage of the Company’s revenue being derived from insurance-paid collision repair services. BGSI’s shares trade on the Toronto Stock Exchange under the symbol TSX: BYD.TO. 7 Prior to January 1, 2020, BGSI operated as Boyd Group Income Fund (“BGIF” or the “Fund”). Pursuant to a plan of arrangement agreement (the “Arrangement”), under the Canada Business Corporations Act (“CBCA”), on January 1, 2020, Fund unitholders and Boyd Group Holdings Inc. (“BGHI”) Class A common shareholders received one BGSI common share in exchange for each Fund unit and BGHI Class A common share held by them. As the Arrangement was effective on January 1, 2020, information presented in this MD&A as at, and for periods prior to, or ending December 31, 2019, is provided for the Fund and information provided at January 1, 2020 and later is provided for BGSI. Therefore, as the context requires, references may be made to either the Fund or BGSI. The following review of BGSI’s operating and financial results for the year ended December 31, 2021, including material transactions and events of BGSI up to and including March 22, 2022, as well as management’s expectations for the year ahead, should be read in conjunction with the annual audited consolidated financial statements of BGSI for the years ended December 31, 2021, included on pages 50 to 100 of this report, and as filed on SEDAR at www.sedar.com. SIGNIFICANT EVENTS Effective January 1, 2021, BGSI changed its presentation currency from Canadian dollars to U.S. dollars, to provide shareholders with a better reflection of the Company's business activities. Unless otherwise noted, amounts have been presented in U.S. dollars. On March 17, 2021, the BGSI Board of Directors declared a cash dividend for the first quarter of 2021 of C$0.141 per common share. The dividend was paid on April 28, 2021 to common shareholders of record at the close of business on March 31, 2021. On March 23, 2021, BGSI announced the planned retirement of Allan Davis, Independent Chair of the Board of Directors, subsequent to the Annual General and Special Meeting, to be held on May 12, 2021. On May 13, 2021, BGSI announced the election of Robert Espey to the Board of Directors, and confirmed the retirement of Allan Davis as well as the appointment of David Brown as Independent Chair of the Board of Directors. On June 17, 2021, the BGSI Board of Directors declared a cash dividend for the second quarter of 2021 of C$0.141 per common share. The dividend was paid on July 28, 2021 to common shareholders of record at the close of business on June 30, 2021. On September 17, 2021, the BGSI Board of Directors declared a cash dividend for the third quarter of 2021 of C$0.141 per common share. The dividend was paid on October 27, 2021 to common shareholders of record at the close of business on September 30, 2021. On December 17, 2021, the BGSI Board of Directors declared a cash dividend for the fourth quarter of 2021 of C$0.144 per common share. The dividend was paid on January 27, 2022 to common shareholders of record at the close of business on December 31, 2021. On January 4, 2021, BGSI announced the completion of the CEO Succession Plan, first announced in August 2019. On March 17, 2022, the BGSI Board of Directors declared a cash dividend for the first quarter of 2022 of C$0.144 per common share. The dividend is payable on April 27, 2022 to common shareholders of record at the close of business on March 31, 2022. On March 21, 2022, BGSI proactively entered into an amendment to the Credit Facility to provide additional flexibility to the covenant calculations for the next four quarters. On March 22, 2022, BGSI published Boyd’s inaugural Environmental, Social and Governance Report. 8 During 2021, the Company added 101 locations through acquisition, 10 start-up locations and 16 locations operating as intake centers, for a total of 127 new locations. From January 1, 2021 up to the reporting date of March 22, 2022, the Company has added 106 locations through acquisition, 13 start-up locations and 16 locations operating as intake centers, for a total of 135 new locations. These new locations are as follows: Date January 2, 2021 January 2, 2021 January 6, 2021 January 15, 2021 January 18, 2021 January 29, 2021 January 29, 2021 February 12, 2021 February 19, 2021 February 19, 2021 February 23, 2021 February 23, 2021 March 4, 2021 March 9, 2021 March 12, 2021 March 26, 2021 March 26, 2021 March 31, 2021 March 31, 2021 April 9, 2021 April 9, 2021 April 17, 2021 April 23, 2021 April 27, 2021 April 30, 2021 April 30, 2021 May 1, 2021 May 7, 2021 May 11, 2021 May 14, 2021 May 14, 2021 May 21, 2021 June 11, 2021 June 15, 2021 June 18, 2021 June 19, 2021 June 25, 2021 July 9, 2021 Previously operated as n/a start-up n/a intake center n/a intake center Eureka Body and Fender n/a intake center n/a start-up n/a intake center Jimmy Rivers Boyd Shop Inc. Frankie & Dylan’s, Inc. n/a intake center Plains Chevrolet, Ltd. n/a start-up n/a intake center n/a start-up n/a intake center Star Auto Body, Inc. Universal Collision Center, Inc. Prestige Auto Works, Inc. n/a intake center Perfection Paint and Body n/a intake center n/a intake center Milo Johnson Automotive Service, Inc. Pro Care Collision, LLC Williams Auto Body Shop, Inc. Overton Body Shop Location Cathedral City, CA Schaumburg, IL Henderson, NV Wyandotte, MI Las Vegas, NV Longwood, FL Kirkland, WA Columbia, SC Mentor & Streetsboro, OH (2 locations) Fenton, MI Amarillo, TX Pensacola, FL Bellevue, WA Queen Creek, AZ Mesa, AZ Simi Valley, CA Tallahassee, FL (3 locations) Milwaukee, WI Bellevue, WA Vero Beach, FL Highland, IN Union City, GA Escondido, CA Denton and Flour Mound, TX (2 locations) Green Bay, WI Sanford and Southern Pines, NC (2 locations) Thornhill, ON Kaneohe, Wahiawa & Waipahu, HI (3 locations) Buford, GA Baltimore & Reisterstown, MD (2 locations) Camden Boyd & Fender Amarillo, TX Las Vegas, NV Victor, NY Pittsburgh, PA Austin, TX (2 locations) Gilbert, AZ Georgia & South Carolina (16 locations) La Habra, CA n/a start-up n/a intake center Austin-Spencer Collision Repair Center Wolbert Auto Body, Inc. Austin Capital Collision n/a intake center John Harris Body Shops California Auto Specialist Center n/a intake center Sigs Collision Centers n/a start-up 9 Date July 16, 2021 July 31, 2021 August 7, 2021 August 7, 2021 August 10, 2021 August 13, 2021 Previously operated as Peotter’s Collision Center Location Appleton, WI Oklahoma, Kansas & Missouri (35 locations) Collision Works n/a intake center Pensacola, FL n/a intake center Pensacola, FL n/a start-up Round Rock, TX Quality Collision Center Eagle River, Minocqua, Rhinelander & Tomahawk, WI (4 locations) San Diego, CA Springfield, MO Austin, TX Jacksonville, FL Ankeny, IA Shreveport, LA Qualtech Collision Center St. Louis Street Auto Body Don’s Paint & Body Shop, Inc. n/a start-up Smith’s Collision & Paint Crown Collision, LLC Millenium Auto Exchange, Inc. Jensen’s Target Collision Stevens Collision, LLC Campbell Collision, Inc. South of the Square Collision Center August 13, 2021 August 20, 2021 August 31, 2021 September 7, 2021 September 7, 2021 September 17, 2021 September 17, 2021 Burbank, IL September 27, 2021 October 1, 2021 October 8, 2021 October 15, 2021 October 22, 2021 October 29, 2021 Erie, PA Clarence, NY Brighton, MI Medina & North Ridgeville, OH (2 locations) Sycamore, IL Cornwall, ON Hayes’ Body Shop, Inc. Seaway Chevrolet Cadillac Buick GMC Ltd. n/a intake center n/a start-up Oakridge Ford Sales (1981) Limited Precision Collision Westfield, Inc. Dependable Collision Center T & T Collision Center, Inc. n/a start-up Wallace Conley Collision Autobody Advantage London, ON Amarillo, TX November 8, 2021 November 12, 2021 Carrollton, GA November 12, 2021 November 16, 2021 Westfield, WI November 19, 2021 Verona, WI Hudson, WI December 3, 2021 Valdosta, GA December 6, 2021 Peterborough, ON December 10, 2021 Springhill & Thompson’s Station, TN January 3, 2022 (2 locations) Dallas, TX Indianapolis, IN Temple, TX Signal Hill, CA Bossier City & Shreveport, LA (2 locations) CBS Collision January 5, 2022 January 17, 2022 February 1, 2022 February 11, 2022 March 18, 2022 n/a start-up n/a start-up n/a start-up Alvin’s Auto Body Inc. During the second quarter of 2021, the Company acquired a mobile scanning and calibration business. During the third quarter of 2021, the Company acquired a glass business. 10 OUTLOOK Unlike one year ago, demand for Boyd’s services is continuing to substantially exceed capacity. The ability to service demand continues to be constrained by labor availability and parts supply chain issues, with the accompanying margin pressure continuing into the first quarter of 2022. During the first quarter of 2022, Omicron further negatively impacted capacity constraints with increased levels of absenteeism. In addition, the first quarter is burdened by higher payroll taxes that occur early in the year, while the fourth quarter of 2021 benefited from expense accrual reductions, as certain expense estimates were firmed up at amounts that were lower than previously estimated and accrued. These reduced expenses are not expected to recur in the first quarter of 2022. The Canada Employment Wage Subsidy also ended in the fourth quarter of 2021. Boyd has successfully negotiated an unprecedented number of meaningful rate increases from clients, demonstrating that insurers understand the need for increased pricing in order for Boyd to serve their needs. While the Company is satisfied with this first round of increases, it takes time for these changes to flow through the work in process and further increases are required to reflect the current and evolving environment. By contrast, wage increases are immediately impacting the Company’s costs. Thus far in the first quarter of 2022, the majority of the benefits of price increases have not been realized. Boyd continues to actively pursue and push for the necessary pricing increases. Given how significantly and rapidly wage costs have increased, it will take some time to achieve all of the needed price adjustments and margins will continue to be impacted in the near-term. Boyd is committed to addressing the labor market challenges through initiatives such as the Technician Development Program, including a commitment to more than double the number of trainees in the program to help meet future needs. Boyd continues to increase recruitment support staff to improve lead generation and follow-up, proactively evaluate compensation levels and make appropriate adjustments to ensure the Company remains competitive in the rapidly changing environment, and drive high levels of execution for on-boarding and orientation programs to increase retention. Boyd believes that supply chain disruption is transitory and will normalize as the underlying manufacturing and distribution issues are resolved; however, the Company has not experienced improvement in these conditions during the first quarter of 2022. Boyd continues to work with key suppliers to source parts at normal margins, but will continue to use OE parts in place of aftermarket parts when necessary in order to complete repairs for our clients. In the short-term, Boyd is primarily focused on addressing the labor shortage for our core business. The record number of locations added during 2021 are experiencing the same challenges of a tight labor market, wage inflation and supply chain disruptions, as well as sales per location levels that are below pre-pandemic levels due to capacity constraints. Notwithstanding near-term challenges, Boyd remains confident in the business model and the Company’s plan to double the size of the business on a constant currency basis from 2021 to 2025 against 2019 sales. In the long-term, management remains confident in its business model and its ability to increase market share by expanding its presence in North America through strategic acquisitions alongside organic growth from Boyd’s existing operations. Accretive growth will remain the Company’s long-term focus whether it is through organic growth, new store development, or acquisitions. The North American collision repair industry remains highly fragmented and offers attractive opportunities for industry leaders to build value through focused consolidation and economies of scale. As a growth company, Boyd’s objective continues to be to maintain a conservative dividend policy that will provide the financial flexibility necessary to support growth initiatives while gradually increasing dividends over time. The Company remains confident in its management team, systems and experience. This, along with a strong financial position and financing options, positions Boyd well for success into the future. BUSINESS ENVIRONMENT & STRATEGY The collision repair industry in North America is estimated by Boyd to represent over $37 billion U.S. in annual revenue. The industry is highly fragmented, consisting primarily of small independent family owned businesses operating in local markets. It is estimated that car dealerships have approximately 18% of the total market. It is believed that multi-unit collision repair operators with greater than $20 million in annual revenues (including multi-unit car dealerships), now have approximately 31% of the total market. The collision repair industry is experiencing significant and unprecedented competition for talent, 11 and, in particular, a limited pool of qualified technicians and estimators. This is resulting in a shortage of qualified employees as well as significant wage pressure, which is adversely impacting the volume and pace at which collision repair shops can fix damaged vehicles. Customer relationship dynamics in the Company’s principal markets differ from region to region. In three of the Canadian provinces where Boyd operates, government-owned insurance companies have, by legislation, either exclusive or semi- exclusive rights to provide insurance to automobile owners. Although Boyd’s services in these markets are predominantly paid for by government-owned insurance companies, these insurers do not typically refer insured automobile owners to specific collision repair centers. In these markets Boyd focuses its marketing to attract business from individual vehicle owners primarily through consumer based advertising. Boyd manages relationships in the government-owned insurance markets through active participation in industry associations. In Alberta, British Columbia, Ontario and in the United States, where private insurers operate, a greater emphasis is placed on establishing and maintaining Direct Repair Programs (“DRP’s”) and other referral arrangements with insurance companies. DRP’s are established between insurance companies and collision repair shops to better manage automobile repair claims and increase levels of customer satisfaction. Insurance companies select collision repair operators to participate in their programs based on integrity, convenience and physical appearance of the facility, quality of work, customer service, cost of repair, cycle time and other key performance metrics. There is a continuing trend among insurers in both the public and private insurance markets towards using performance-based criteria for selecting collision repair partners and for referring work to them. Local and regional DRP’s, and national and self-managed DRP relationships, represent an opportunity for Boyd to increase its business. Insurers have also moved to consolidate DRP repair volumes with a fewer number of repair shops. There is some preference among some insurance carriers to do business with multi-location collision repairers in order to reduce the number and complexity of contacts necessary to manage their networks of collision repair providers and to achieve a higher level of consistent performance. Boyd continues to develop and strengthen its DRP relationships with insurance carriers in both Canada and the United States and believes it is well positioned to take advantage of these trends. In addition, Boyd has used consumer based advertising in some of its markets to complement and supplement its DRP growth strategies. The Company believes this strategy is effective in increasing its brand awareness and overall sales. As described further under “Business Risks and Uncertainties”, operating results are expected to be subject to fluctuations or trends due to a variety of factors including availability of qualified employees, availability of parts, pricing by insurance companies, general operating effectiveness, automobile technologies, general and regional economic downturns, unemployment rates and weather conditions. A downturn in the economic climate has the potential to affect results negatively. Boyd has worked to mitigate this risk by continuing to focus on meeting insurance companies’ performance requirements, and in doing so, grow market share. Through these strategies, Boyd expects to generate growth sufficient to double the size of the business on a constant currency revenue basis from 2021 to 2025, based on 2019 revenues, implying a compound annual growth rate of 15 percent. Boyd will continue to pursue accretive growth through a combination of organic growth (same-store sales1 growth) as well as adding new locations to the network in the United States and Canada. 1 As defined in the non-GAAP financial measures and ratios section of the MD&A 12 BUSINESS STRATEGY Operational Excellence Operational excellence has been a key component of Boyd’s past success and has contributed to the Company being viewed as an industry leading service provider. Delivering on our customers’ expectations related to cost of repair, time to repair, quality and customer service are critical to being successful and being rewarded with same-store sales2 growth. The Company’s commitment to operational excellence is embodied in its mission and goal, which is condensed into a top of mind cheer for its employees which is ‘Wow every customer, be the best’. In 2015, Boyd rolled out and implemented its Wow Operating Way process improvement initiative which is now in place at all of its locations, except newly acquired locations, where it will be implemented as part of acquisition integration. In 2020, Boyd began to expand its Wow Operating Way practices to corporate business processes. The Wow Operating Way is a series of systems, processes and measurements that drive excellence in customer satisfaction, repair cycle times and operational metrics. Boyd also conducts extensive customer satisfaction polling at all operating locations to assist in keeping customer satisfaction at the forefront of its mandate. Boyd will also continue to invest in its infrastructure, process improvement initiatives and IT systems to contribute to high quality service to its customers and improved operational performance. Expense Management Boyd continues to manage its operating expenses as a percentage of sales. By working continuously to identify cost savings and to achieve same-store sales2 growth, Boyd will continue to manage this expense ratio. Operating expenses have a fixed component and therefore same-store sales2 growth contributes to a lower percentage of operating expenses to sales. 2 As defined in the non-GAAP financial measures and ratios section of the MD&A 13 Same-Store Sales3 / Optimize Returns Increasing same-store sales3 has a positive impact on financial performance. Boyd continues to pursue and execute on strategies to help grow same-store sales3. Boyd is committed to addressing the labor market challenges, that are currently limiting capacity and same-store sales3, through initiatives such as the Technician Development Program, working to more than double the number of trainees in the program to help meet future needs. New Location and Acquisition Growth In line with stated growth strategies, Boyd was successful in opening 127 new locations in 2021. Boyd will continue to pursue accretive growth through a combination of organic growth (same-store sales3 growth) as well as acquisitions and new store development. Acquisitions will include both single-location acquisitions as well as multi-location acquisitions. Through organic growth, acquisitions and new store development, Boyd expects to generate growth sufficient to double the size of its business (measured against its 2019 revenue on a constant currency basis) over the five year period from 2021-2025, implying a compound annual growth rate of 15%. CAUTION CONCERNING FORWARD-LOOKING STATEMENTS Statements made in this annual report, other than those concerning historical financial information, may be forward-looking and therefore subject to various risks and uncertainties. Some forward-looking statements may be identified by words like “may”, “will”, “anticipate”, “estimate”, “expect”, “intend”, or “continue” or the negative thereof or similar variations. Readers are cautioned not to place undue reliance on such statements, as actual results may differ materially from those expressed or implied in such statements. 3 As defined in the non-GAAP financial measures and ratios section of the MD&A 14 The following table outlines forward-looking information included in this MD&A: Forward-looking Information The stated objective of generating growth sufficient to double the size of the business over the five year period from 2021 to 2025, based on 2019 revenues Key Assumptions Most Relevant Risk Factors Timing of anticipated return to pre-COVID levels of activity occurs in the short term Return to pre-COVID levels of activity may occur on a different timeline Opportunities continue to be available and are at acceptable and accretive prices Acquisition market conditions change and repair shop owner demographic trends change Financing options continue to be available at reasonable rates and on acceptable terms and conditions New and existing customer relationships are expected to provide acceptable levels of revenue opportunities Anticipated operating results would be accretive to overall Company results Growth is defined as revenue on a constant currency basis Initiatives to increase production capacity are successful Credit and refinancing conditions prevent or restrict the ability of the Company to continue growth strategies Changes in market conditions and operating environment Significant decline in the number of insurance claims Integration of new stores is not accomplished as planned Increased competition which prevents achievement of acquisition and revenue goals Initiatives to increase production capacity take longer than expected or are not successful Supply chain remains disrupted and the ability to source parts continues to limit sales Boyd remains confident in its business model to increase market share by expanding its presence in North America through strategic and accretive acquisitions alongside organic growth from Boyd’s existing operations Supply chain disruption is temporary and normalizes in the short term Re-emergence of stability in economic conditions and employment rates Pricing in the industry remains stable The Company’s customer and supplier relationships provide it with competitive advantages to increase sales over time Market share growth will more than offset systemic changes in the industry and environment Anticipated operating results would be accretive to overall Company results Stated objective to gradually increase dividends over time Growing profitability of the Company and its subsidiaries The continued and increasing ability of the Company to generate cash available for dividends Balance sheet strength and flexibility is maintained and the dividend level is manageable taking into consideration bank covenants, growth requirements and maintaining a dividend level that is supportable over time 15 Economic conditions deteriorate, or economic recovery post-COVID-19 is slow Loss of one or more key customers or loss of significant volume from any customer Decline in the number of insurance claims Inability of the Company to pass cost increases to customers over time Increased competition which may prevent achievement of revenue goals Changes in market conditions and operating environment Changes in weather conditions Inability to maintain, replace or grow technician capacity could impact organic growth BGSI is dependent upon the operating results of the Company Economic conditions deteriorate, or economic recovery post-COVID-19 is slow Changes in weather conditions Decline in the number of insurance claims Loss of one or more key customers or loss of significant volume from any customer Changes in government regulation The Company plans to make capital expenditures (excluding those related to acquisition and development of new locations) of approximately 1.6% of sales. The Company plans to complete the expansion of its Wow Operating Way practices to corporate business processes. The related technology and process efficiency project will result in an additional $1.0-1.5 million investment before the project is complete in the second quarter of 2022. The project is expected to streamline various processes as well as generate economic returns once fully implemented. The actual cost for these capital expenditures agrees with the original estimate Expected actual expenditures could be above or below 1.6% of sales The purchase, delivery and installation of the capital items is consistent with the estimated timeline No other new capital requirements are identified or required during the period The timing of the expenditures could occur on a different timeline BGSI may identify additional capital expenditure needs that were not originally anticipated All identified capital requirements are required during the period BGSI may identify capital expenditure needs that were originally anticipated; however, are no longer required or required on a different timeline Investment in process efficiency projects will generate positive returns Expected positive returns are not generated due to delays, increased costs, or unanticipated challenges in implementation Boyd believes that margins will return to historical levels, however this may take several quarters. Price increases will be negotiated and agreed upon by key clients Inability of the Company to pass cost increases to customers over time Demand for services will continue to grow, allowing Boyd to focus on higher margin business Wage inflation will return to historical levels and will not outpace pricing increases Decline in the number of insurance claims Loss of one or more key customers or loss of significant volume from any customer Changes in market conditions and operating environment Supply chain disruption is transitory and will normalize as underlying issues are resolved Wage inflation continues in excess of historical levels and outpaces pricing increases Internal training and development programs, including the Technician Development Program, will improve staffing availability Supply chain remains disrupted Internal training and development programs do not improve staffing availability We caution that the foregoing table contains what BGSI believes are the material forward-looking statements and is not exhaustive. Therefore when relying on forward-looking statements, investors and others should refer to the “Risk Factors” section of BGSI’s Annual Information Form, the “Business Risks and Uncertainties” and other sections of our Management’s Discussion and Analysis and our other periodic filings with Canadian securities regulatory authorities. All forward-looking statements presented herein should be considered in conjunction with such filings. 16 SELECTED ANNUAL INFORMATION The following table summarizes selected financial information for BGSI over the prior three years: For the years ended December 31, (thousands of U.S. dollars, except per unit/share amounts) 2021 2020 2019 Sales Net earnings Adjusted net earnings (2) Basic earnings per share/unit Diluted earnings per share/unit Adjusted net earnings per share/unit (2) Cash dividends/distributions per share/unit declared: Share dividends/Trust unit distributions (1) December 31, (thousands of U.S. dollars) Total assets Total long-term financial liabilities $1,872,670 $1,561,224 $1,720,809 $23,540 $28,006 $1.10 $1.10 $1.30 $0.45 $44,114 $41,352 $2.10 $2.00 $1.97 $0.41 $48,299 $72,355 $2.43 $2.35 $3.64 $0.41 2021 2020 2019 $ $ 2,027,127 $ 1,571,547 $ 1,463,839 933,020 $ 553,783 $ 682,899 (1) Dividends and distributions continue to be declared and paid in Canadian dollars. In 2021, the annual dividend declared totaled C$0.567 (2020 - C$0.555, 2019 - C$0.542) (2) As defined in the non-GAAP financial measures and ratios section of the MD&A Financial results, including sales, net earnings, and adjusted net earnings4, were significantly impacted by the COVID-19 pandemic beginning in March 2020 and continuing through 2020 and 2021. In 2021, financial results were further negatively impacted by supply chain disruption and a highly competitive labor market which translated into significant wage pressure and labor margin compression. In addition, a lack of fixed cost absorption due to lower sales per location than pre-pandemic levels impacted financial results in 2021. After a temporary pause on acquisitions from March to August of 2020, acquisition activity resumed; however, new locations experienced the same challenges during 2021, which constrained sales and net earnings levels. The change in total assets and total long-term financial liabilities was significantly impacted by acquisitions from 2019 to 2021. In addition to these changes, fluctuations in total assets from 2019 to 2021 have primarily related to increases in property, plant and equipment, intangible assets and goodwill as a result of new location growth. During this timeframe, long-term financial liabilities were also impacted by financing of acquisitions. The decrease in long-term financial liabilities from 2019 to 2020 was primarily the result of the conversion from an income trust to a public corporation, which resulted in the conversion of the exchangeable Class A common shares to shares of BGSI, and the repayment of long-term debt with proceeds of the public offering which closed on May 14, 2020. Since the end of 2007 through the end of 2021, BGSI increased dividends/distributions to shareholders/unitholders. As of March 22, 2022 the dividend rate is C$0.144 per quarter or C$0.576 on an annualized basis. BOYD GROUP INCOME FUND AND BOYD GROUP SERVICES INC. On January 1, 2020, Boyd Group Income Fund (“BGIF”) was converted from an income trust to a public corporation named Boyd Group Services Inc., pursuant to a plan of arrangement (the “Arrangement”) under the Canada Business Corporations Act. The Arrangement received all required unitholder, trustee, court, TSX and regulatory approvals, as well as approval from the shareholders of Boyd Group Holdings Inc. (“BGHI”). 4 As defined in the non-GAAP financial measures and ratios section of the MD&A 17 As a result of the Arrangement, Fund unitholders and BGHI Class A common shareholders received one BGSI common share in exchange for each Fund unit and BGHI Class A common share held by them. On January 1, 2021, BGHI was amalgamated with the Company. On January 2, 2021, in accordance with the plans detailed in the Arrangement, BGIF was wound up. Immediately prior to the wind-up of BGIF, all property of BGIF was transferred to and all liabilities of BGIF were assumed by, BGSI. The consolidated financial statements of BGSI and their subsidiaries have been prepared in accordance with International Financial Reporting Standards and contain the consolidated financial position, results of operations and cash flows of BGSI, the Company and the Company’s subsidiary companies for the year ended December 31, 2021. NON-GAAP FINANCIAL MEASURES AND RATIOS EBITDA AND ADJUSTED EBITDA Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is not a calculation defined in International Financial Reporting Standards (“IFRS”). EBITDA should not be considered an alternative to net earnings in measuring the performance of BGSI, nor should it be used as an exclusive measure of cash flow. BGSI reports EBITDA and Adjusted EBITDA because they are key measures that management uses to evaluate performance of the business and to reward its employees. EBITDA is also a concept utilized in measuring compliance with debt covenants. EBITDA and Adjusted EBITDA are measures commonly reported and widely used by investors and lending institutions as an indicator of a company’s operating performance and ability to incur and service debt, and as a valuation metric. While EBITDA is used to assist in evaluating the operating performance and debt servicing ability of BGSI, investors are cautioned that EBITDA and Adjusted EBITDA as reported by BGSI may not be comparable in all instances to EBITDA as reported by other companies. CPA Canada’s Canadian Performance Reporting Board defined Standardized EBITDA to foster comparability of the measure between entities. Standardized EBITDA represents an indication of an entity’s capacity to generate income from operations before taking into account management’s financing decisions and costs of consuming tangible and intangible capital assets, which vary according to their vintage, technological age and management’s estimate of their useful life. Accordingly, Standardized EBITDA comprises sales less operating expenses before finance costs, capital asset amortization and impairment charges, and income taxes. Adjusted EBITDA is calculated to exclude items of an unusual nature that do not reflect normal or ongoing operations of BGSI and which should not be considered in a valuation metric or should not be included in an assessment of the ability to service or incur debt. Included in this category of adjustments prior to January 1, 2020 are the fair value adjustments to exchangeable Class A common shares, the fair value adjustments to unit based payment obligations, and the fair value adjustments to the non-controlling interest call liability / put option. Subsequent to January 1, 2020, included in this category of adjustments are the fair value adjustments to the non-controlling interest call liability / put option. These items are adjustments that did not have any cash impact on BGSI or the Fund. Also included as an adjustment to EBITDA are acquisition and transaction costs and fair value adjustments to contingent consideration, which do not relate to the current operating performance of the business units but are typically costs incurred to expand operations. Prior to the adoption of IFRS 16, Leases on January 1, 2019, lease expenses were included in operating expenses and were thereby included in the calculation of both Standardized and Adjusted EBITDA. On adoption of IFRS 16, Leases on January 1, 2019, lease expenses are no longer included in operating expenses. In 2019, these amounts were deducted in arriving at Adjusted EBITDA to enhance comparability with the prior period. Beginning January 1, 2020, these amounts are no longer deducted in arriving at Adjusted EBITDA for the current and for the prior period. From time to time BGSI may make other adjustments to its Adjusted EBITDA for items that are not expected to recur. 18 The following is a reconciliation of BGSI’s net earnings to Standardized EBITDA and Adjusted EBITDA: ADJUSTED EBITDA (thousands of U.S. dollars) Net earnings Add: Finance costs Income tax expense Depreciation of property, plant and equipment Depreciation of right of use assets Amortization of intangible assets Three Months Ended December 31, 2021 2020 Year Ended December 31, 2021 2020 $ 4,901 $ 16,253 $ 23,540 $ 44,114 7,673 1,810 11,723 24,177 5,625 6,370 5,156 9,834 19,639 4,729 27,653 8,674 42,602 88,523 22,569 31,664 14,839 37,183 76,080 18,527 Standardized EBITDA $ 55,909 $ 61,981 $ 213,561 $ 222,407 Add (less): Fair value adjustments Acquisition and transaction costs Adjusted EBITDA ADJUSTED NET EARNINGS — 1,391 (1,961) 374 148 5,835 (3,871) 1,498 $ 57,300 $ 60,394 $ 219,544 $ 220,034 In addition to Standardized EBITDA and Adjusted EBITDA, BGSI believes that certain users of financial statements are interested in understanding net earnings excluding certain fair value adjustments and other items of an unusual or infrequent nature that do not reflect normal or ongoing operations of the Company. This can assist these users in comparing current results to historical results that did not include such items. The following is a reconciliation of BGSI’s net earnings to adjusted net earnings: (thousands of U.S. dollars, except share and per share amounts) Three Months Ended December 31, 2021 2020 Year Ended December 31, 2021 2020 Net earnings Add (less): Fair value adjustments (non-taxable) Acquisition and transaction costs (net of tax) Adjusted net earnings Weighted average number of shares Adjusted net earnings per share $ 4,901 $ 16,253 $ 23,540 $ 44,114 — 1,029 (1,961) 277 148 4,318 (3,871) 1,109 5,930 $ 14,569 $ 28,006 $ 41,352 21,472,194 21,472,194 21,472,194 21,005,596 0.28 $ 0.68 $ 1.30 $ 1.97 $ $ 19 SAME-STORE SALES Same-store sales is a measure of sales that includes only those locations in operation for the full comparative period. Same- store sales is presented excluding the impact of foreign exchange on the current period. Same-store sales is calculated by applying the prior period exchange rate to the current year sales. The following is a reconciliation of BGSI’s sales to same- store sales: (thousands of U.S. dollars) Sales Less: Sales from locations not in the comparative period Sales from under-performing facilities closed during the period Foreign exchange Three months ended December 31, 2021 2020 Year ended December 31, 2021 2020 $ 516,206 $ 403,747 $ 1,872,670 $ 1,561,224 (81,767) (2,718) (224,003) (22,995) (296) (1,329) (1,971) — (2,895) (9,078) (9,056) — Same-store sales (excluding foreign exchange) $ 432,814 $ 399,058 $ 1,636,694 $ 1,529,173 Dividends BGSI declared dividends of C$0.141 per share in the first quarter of 2021, C$0.141 per share in the second quarter of 2021, C$0.141 per share in the third quarter of 2021 and C$0.144 per share in the fourth quarter of 2021 (2020 - C$0.138, C$0.138, C$0.138 and C$0.141 respectively). Dividends to shareholders of BGSI were declared and paid as follows: (thousands of U.S. dollars) Record date March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 (thousands of U.S. dollars) Record date March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020 Payment date April 28, 2021 July 28, 2021 October 27, 2021 January 27, 2022 Payment date April 28, 2020 July 29, 2020 October 28, 2020 January 27, 2021 20 Dividend amount 2,408 2,478 2,389 2,417 9,692 Dividend amount 1,999 2,187 2,240 2,364 8,790 $ $ $ $ RESULTS OF OPERATIONS Results of Operations (thousands of U.S. dollars, except per share amounts) Three months ended December 31, 2020 % change 2021 Year ended December 31, % change 2021 2020 Sales - Total Same-store sales - Total (1) (excluding foreign exchange) Gross margin % Operating expense % Adjusted EBITDA (1) Acquisition and transaction costs Depreciation and amortization Fair value adjustments Finance costs Income tax expense 516,206 27.9 403,747 1,872,670 19.9 1,561,224 432,814 8.5 399,058 1,636,694 7.0 1,529,173 43.5 32.4 57,300 1,391 41,525 — 7,673 1,810 (5.0) 4.9 45.8 30.9 44.8 33.1 (2.6) 3.4 46.0 32.0 (5.1) 271.9 21.4 (100.0) 20.5 (64.9) 60,394 374 34,202 (1,961) 6,370 5,156 219,544 5,835 153,694 148 27,653 8,674 (0.2) 289.5 16.6 (103.8) (12.7) (41.5) 220,034 1,498 131,790 (3,871) 31,664 14,839 Adjusted net earnings (1) 5,930 (59.3) 14,569 28,006 (32.3) 41,352 Adjusted net earnings per share (1) 0.28 (58.8) 0.68 1.30 (34.0) 1.97 Net earnings Basic earnings per share Diluted earnings per share 4,901 0.23 0.23 (69.8) (69.8) (69.7) 16,253 0.76 0.76 23,540 1.10 1.10 (46.6) (47.8) (45.1) 44,114 2.10 2.00 (1) As defined in the non- GAAP financial measures and ratios section of the MD&A. 21 Pandemic Impact The Company moved quickly and decisively at the start of the pandemic to take aggressive action to both preserve liquidity and to reduce expenses in preparation of the demand and revenue decline anticipated as the result of the pandemic. Demand for services increased throughout 2021 and exceeded capacity in all U.S. markets during the third and fourth quarters, which resulted in high levels of work-in-process. Adding and retaining location level administrative staff and technician capacity to address this constraint has been challenging in an extraordinarily tight labor market, exacerbated by COVID related absenteeism. This has resulted in increased wage costs to both retain and recruit, resulting in near-term pressure on labor margins and operating expenses. Demand in Canada increased slowly and gradually during the third and fourth quarters of 2021 as restrictions were eased and removed, but throughout the third and fourth quarters, demand remained well below pre- pandemic levels. In addition to a tight labor market in the U.S. and the slow recovery of demand in Canada, during the third and fourth quarters, Boyd faced supply chain disruptions for OE and aftermarket parts in both the Canadian and U.S. markets, which resulted in a negative impact on margins as a higher percentage of parts had to be sourced from non-primary suppliers in order to complete repairs. Canada Emergency Wage Subsidy The Canada Emergency Wage Subsidy (“CEWS”) was put into place on April 11, 2020 and remained in place until October 23, 2021. As was the objective of the program, Boyd continued to employ and incur cost for employees that would have been laid off or furloughed absent the wage subsidy. Boyd has made applications for the CEWS for the periods commencing on April 12, 2020 to October 23, 2021. The total estimated CEWS for the year ended December 31, 2021 of $9.8 million (2020 - $12.7 million) has been recorded, with $4.0 million (2020 - $5.3 million) being recorded as a reduction to cost of goods sold and $5.8 million (2020 - $7.4 million) being recorded as a reduction to operating expenses. At December 31, 2021, the Company has $3.3 million (2020 - $7.4 million) accrued for amounts to be received under the CEWS program in Accounts Receivable. Sales Sales totaled $1.9 billion for the year ended December 31, 2021 an increase of $311.4 million or 19.9% when compared to the same period of 2020. The increase in sales was the result of the following: • • • Same-store sales5 excluding foreign exchange increased $107.5 million or 7.0%, partially offset by an increase of $9.1 million due to the translation of same-store sales5 at a higher U.S. dollar exchange rate. The improvement in same-store sales5 was the result of the continued return of business following the slow down caused by the COVID-19 pandemic that began in mid-March of 2020. The increase in same-store sales5 percentage was constrained by production challenges, including administrative and technician staffing capacity constraints, and supply chain disruption, which impacted sales levels during the second half of 2021. $201.0 million of incremental sales were generated from 154 new locations that were not in operation for the full comparative period. Sales were affected by the closure of under-performing facilities which decreased sales by $6.2 million. Same-store sales5 are calculated by including sales for locations and businesses that have been in operation for the full comparative period. Gross Profit Gross Profit was $839.3 million or 44.8% of sales for the year ended December 31, 2021 compared to $718.9 million or 46.0% of sales for the same period in 2020. Gross profit increased $120.4 million primarily as a result of new location growth as well as increased sales due to the reduced impact of the COVID-19 pandemic when compared to the prior period. The gross margin percentage was negatively impacted by reduced parts and labor margins, and a higher mix of parts sales in relation to labor. These impacts were partially offset by a higher mix of glass sales in relation to collision sales. During the 5 As defined in the non-GAAP financial measures and ratios section of the MD&A 22 second half of 2021, Boyd faced increasing supply chain disruptions, which resulted in a negative impact on margins as a higher percentage of parts had to be sourced from non-primary suppliers in order to complete repairs. Labor margins were negatively impacted by the extraordinarily tight labor market, which resulted in increased wage costs to both retain and recruit staff. The shortage of labor also resulted in a higher mix of parts sales in relation to labor. The recognition of CEWS related to direct labor was approximately $4.0 million for the year ended December 31, 2021, compared to $5.3 million in the prior year. Operating Expenses Operating Expenses for the year ended December 31, 2021 increased $120.9 million to $619.7 million from $498.8 million for the same period of 2020. The increase in operating expenses was primarily due to the growth in number of locations, as well as COVID-19 related cost reductions that impacted the prior year. Operating expenses benefited from the CEWS of approximately $5.8 million, as compared to $7.4 million in the same period of the prior year, which helped mitigate incremental COVID-19 indirect wage costs. Operating expenses were negatively impacted by the extraordinarily tight labor market, which resulted in increased wage costs to both retain and recruit staff. Excluding the impact of foreign currency translation which increased operating expenses by approximately $3.6 million, expenses increased $124.5 million from 2020. Closed locations lowered operating expenses by $2.4 million. Operating expenses as a percentage of sales were 33.1% for the year ended December 31, 2021, which compared to 32.0% for the same period in 2020. The increase as a percentage of sales was due to capacity constraints and supply chain disruptions, which impacted the sales level that could be achieved during 2021, as well as the addition of new locations that did not perform at the sales level expected due to the aforementioned pressure on sales, putting further pressure on the operating expense percentage. Acquisition and Transaction Costs Acquisition and Transaction Costs for the year ended December 31, 2021 were $5.8 million compared to $1.5 million recorded for the same period of 2020. The costs relate to various acquisitions, including acquisitions from prior periods, as well as other completed or potential acquisitions. Acquisition and transaction costs were lower in 2020 due to the pause on completion of acquisitions from the start of the COVID-19 pandemic until mid-August in 2020. Adjusted EBITDA6 Earnings before interest, income taxes, depreciation and amortization, adjusted for the non-controlling interest call liability and contingent consideration, as well as acquisition and transaction costs (“Adjusted EBITDA6”) for the year ended December 31, 2021 totaled $219.5 million or 11.7% of sales compared to Adjusted EBITDA6 of $220.0 million or 14.1% of sales in the same period of the prior year. The $0.5 million decrease was primarily the result of a lower gross margin percentage and higher levels of operating expenses as well as the impact of location growth. In total, Adjusted EBITDA6 for the year ended December 31, 2021 benefited from the CEWS in the amount of approximately $9.8 million, as compared to $12.7 million in the prior year. Changes in U.S. dollar exchange rates in 2021 increased Adjusted EBITDA6 by $0.8 million. Depreciation and Amortization Depreciation related to property, plant and equipment totaled $42.6 million or 2.3% of sales for the year ended December 31, 2021, an increase of $5.4 million when compared to the $37.2 million or 2.4% of sales recorded in the same period of the prior year. The increase in depreciation expense was primarily due to acquisition growth as well as investments in capital equipment in prior periods. Depreciation related to right of use assets totaled $88.5 million, or 4.7% of sales for the year ended December 31, 2021, as compared to $76.1 million or 4.9% of sales for the same period of the prior year. The increase in depreciation expense was primarily due to acquisition growth. 6 As defined in the non-GAAP financial measures and ratios section of the MD&A 23 Amortization of intangible assets for the year ended December 31, 2021 totaled $22.6 million or 1.2% of sales, an increase of $4.0 million when compared to the $18.5 million or 1.2% of sales expensed for the same period in the prior year. The increase is primarily the result of the addition of new intangible assets from recent acquisitions. Finance Costs Finance Costs of $27.7 million or 1.5% of sales for the year ended December 31, 2021 decreased from $31.7 million or 2.0% of sales for the same period of the prior year. The decrease in finance costs was primarily due to increased borrowing under the credit facility during the prior period. Out of an abundance of caution during the uncertainty created by the COVID-19 pandemic, Boyd fully drew on the credit facilities near the end of March 2020, other than under the swing line credit facilities and an accordion feature. As conditions improved and the impact of COVID-19 was better understood, Boyd made repayments to reduce the level of outstanding debt. Income Taxes Current and Deferred Income Tax Expense of $8.7 million for the year ended December 31, 2021 compared to an expense of $14.8 million for the same period of the prior year. Permanent differences did not have a significant impact on the tax computed on accounting income. Net Earnings and Earnings Per Share Net Earnings for the year ended December 31, 2021 was $23.5 million or 1.3% of sales compared to $44.1 million or 2.8% of sales in the same period of the prior year. The net earnings amount in 2021 was impacted by acquisition and transaction costs of $4.3 million (net of tax). After adjusting for fair value and other unusual items, Adjusted net earnings7 in 2021 was $28.0 million, or 1.5% of sales. This compares to Adjusted net earnings7 of $41.4 million or 2.6% of sales in 2020. Adjusted net earnings7 for the period was impacted by a lower gross margin percentage and higher levels of operating expenses, as well as location growth. These new locations are subject to the same labor and supply challenges Boyd is currently facing across its business. These market conditions are impacting the results that can be achieved in the short-term, while new location growth has resulted in increased levels of depreciation and amortization. Basic Earnings Per Share was $1.10 per share for the year ended December 31, 2021 compared to $2.10 for the same period of 2020. Diluted earnings per share was $1.10 for the year ended December 31, 2021 compared to $2.00 for the same period of 2020. Adjusted net earnings per share7 was $1.30 compared to $1.97 for the same period of 2020. The decrease in adjusted net earnings per share7 is primarily attributed to a lower gross margin percentage and higher levels of operating expenses as well the impact of location growth. 7 As defined in the non-GAAP financial measures and ratios section of the MD&A 24 Summary of Quarterly Results (in thousands of U.S. dollars, except per share amounts) Sales Adjusted EBITDA (1) Net earnings (loss) Basic earnings (loss) per share Diluted earnings (loss) per share $ $ $ $ $ 2021 Q4 2021 Q3 2021 Q2 2021 Q1 2020 Q4 2020 Q3 2020 Q2 2020 Q1 516,206 $ 490,178 $ 444,643 $ 421,643 $ 403,747 $ 381,689 $ 307,951 $ 467,837 57,300 $ 51,500 $ 57,996 $ 52,748 $ 60,394 $ 63,514 $ 35,637 $ 60,489 4,901 $ 434 $ 10,462 $ 7,743 $ 16,253 $ 15,855 $ (4,970) $ 16,976 0.23 $ 0.02 $ 0.49 $ 0.36 $ 0.76 $ 0.74 $ (0.24) $ 0.23 $ 0.02 $ 0.49 $ 0.36 $ 0.76 $ 0.74 $ (0.24) $ 0.84 0.71 Adjusted net earnings (loss) (1) Adjusted net earnings (loss) per share (1) $ (1) As defined in the non-GAAP financial measures and ratios section of the MD&A. 5,930 $ 2,389 $ 0.11 $ 0.28 $ $ 11,375 $ 8,311 $ 14,569 $ 16,403 $ (4,841) $ 15,221 0.53 $ 0.39 $ 0.68 $ 0.76 $ (0.23) $ 0.75 LIQUIDITY AND CAPITAL RESOURCES Cash flow from operations, together with cash on hand and undrawn credit on existing facilities are expected to be sufficient to meet operating requirements, capital expenditures and dividends. At December 31, 2021, BGSI had cash, net of outstanding deposits and cheques, held on deposit in bank accounts totaling $27.7 million (December 31, 2020 - $61.0 million). The decrease in the cash balance as at December 31, 2021 is the result of a decrease in cash flows from operations. The net working capital ratio (current assets divided by current liabilities) was 0.64:1 at December 31, 2021 (December 31, 2020 – 0.67:1). At December 31, 2021, BGSI had total debt outstanding, net of cash, of $957.7 million compared to $896.9 million at September 30, 2021, $671.1 million at June 30, 2021, $539.9 million at March 31, 2021 and $538.5 million at December 31, 2020. Debt, net of cash, increased when compared to December 31, 2020 primarily as a result of acquisition activity, including draws on the revolving credit facility, as well as increased seller notes and lease liabilities. Total debt, net of cash (thousands of U.S. dollars) Revolving credit facility & swing line (net of financing costs) Term Loan A (net of financing costs) Seller notes (1) December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 $ 263,802 $ 204,250 $ 54,173 $ — $ — 124,680 124,667 124,641 123,760 123,705 53,591 56,168 59,452 54,580 56,523 Total debt before lease liabilities $ 442,073 $ 385,085 $ 238,266 $ 178,340 $ 180,228 Cash 27,714 31,228 35,612 61,477 61,041 Total debt, net of cash before lease liabilities Lease liabilities $ 414,359 $ 353,857 $ 202,654 $ 116,863 $ 119,187 543,347 543,046 468,474 423,001 419,311 Total debt, net of cash (1) Seller notes are loans granted to the Company by the sellers of businesses related to the acquisition of those businesses. 957,706 $ 671,128 $ 896,903 $ $ 539,864 $ 538,498 25 The following table summarizes the undiscounted contractual obligations at December 31, 2021 and required payments over the next five years: Contractual Obligations (thousands of U.S. dollars) Bank indebtedness Accounts payable and accrued liabilities Long-term debt Lease liability Purchase Obligations (1) Total $— Within 1 year $— 1 to 2 years $— 258,423 258,423 — 442,073 13,887 628,638 110,408 13,624 99,990 2 to 3 years $— — 17,535 86,810 3 to 4 years $— — 5,135 71,817 4 to 5 years $— — After 5 years $— — 266,892 125,000 54,714 204,899 — unknown unknown unknown unknown unknown unknown $1,329,134 $382,718 $113,614 $104,345 $76,952 $321,606 $329,899 (1) Subject to fulfilling certain conditions such as meeting contractual purchase obligations and no change in control the repayment would be nil Operating Activities Cash flow generated from operations before considering working capital changes, was $210.8 million for the year ended December 31, 2021 compared to $217.4 million in 2020. For the year ended December 31, 2021, changes in working capital items used net cash of $14.1 million compared with providing $13.5 million in the same period of 2020. Changes in accounts receivable, inventory, prepaid expenses, income taxes, accounts payable and accrued liabilities are significantly influenced by timing of collections and expenditures. In addition, supply chain disruption delayed the completion of many repairs and resulted in growing levels of work-in-process inventory at December 31, 2021. Financing Activities Cash provided by financing activities totaled $124.4 million for the year ended December 31, 2021 compared to cash used in financing activities of $134.5 million for the same period of the prior year. During 2021, cash was provided by draws of the revolving credit facility in the amount of $330.5 million offset by cash used to repay draws as well as long-term debt associated with seller notes in the amount of $83.5 million and to fund interest costs on long-term debt of $9.9 million. Cash used by financing activities included $84.9 million in repayments of lease liabilities and cash used to fund interest costs on lease liabilities of $18.1 million. Cash was also used to pay dividends of $9.7 million. During the year ended December 31, 2021 the Company paid $0.1 million in issue costs. During 2020, cash was provided by draws of the revolving credit facility in the amount of $495.5 million offset by cash used to repay draws as well as long-term debt associated with seller notes in the amount of $673.0 million and to fund interest costs on long-term debt of $15.5 million. Cash used by financing activities included $71.2 million used to repay lease liabilities and cash used to fund interest costs on lease liabilities of $16.8 million. Cash was also used to pay dividends of $7.1 million. During 2020, the Company completed a corporate conversion as well as an equity offering, resulting in gross proceeds on the offering of $164.3 million, as well as the payment of $8.0 million in issue costs. The Company also amended the revolving credit facility, resulting in the payment of $1.4 million of financing costs. On July 31, 2020, the call option transaction to acquire the 21.16% non-controlling interest in Gerber Glass LLC was completed for $1.3 million. Debt Financing On March 17, 2020, the Company entered into a third amended and restated credit agreement (“Credit Agreement”), increasing the revolving credit facility to $550 million U.S., with an accordion feature which can increase the facility to a maximum of $825 million U.S. (the “revolving credit facility”, or the “facility”). The revolving credit facility is accompanied by a new seven-year fixed-rate Term Loan A in the amount of $125 million U.S. at an interest rate of 3.455%. The revolving 26 credit facility is with a syndicate of Canadian and U.S. banks and is secured by the shares and assets of the Company as well as guarantees by BGSI, BGIF, BGHI, and subsidiaries, while Term Loan A is with one of the syndicated banks. The interest rate for draws on the revolving credit facility are based on a pricing grid of BGSI’s ratio of total funded debt to EBITDA as determined under the Credit Agreement. The Company can draw the facility in either the U.S. or in Canada, in either U.S. or Canadian dollars. The Company can make draws in tranches as required. Tranches bear interest only and are not repayable until the maturity date but can be voluntarily repaid at any time. The Company has the ability to choose the base interest rate between Prime, Bankers Acceptances (“BA”), U.S. Prime or London Inter Bank Offer Rate (“LIBOR”). The total syndicated facility includes a swing line up to a maximum of $10.0 million U.S. in Canada and $30.0 million U.S. in the U.S. At December 31, 2021, the Company has drawn $264.5 million U.S. (December 31, 2020 - $nil U.S.) and $nil Canadian (December 31, 2020 - $nil Canadian) on the revolving credit facility and swing line and $125.0 million U.S. (December 31, 2020 - $125.0 million U.S.) on the Term Loan A. Under the revolving credit facility, the Company is subject to certain financial covenants which must be maintained to avoid acceleration of the termination of the Credit Agreement. The financial covenants require BGSI to maintain a senior funded debt to EBITDA ratio of less than 3.50 and an interest coverage ratio of greater than 2.75. For four quarters following a material acquisition, the senior funded debt to EBITDA ratio may be increased to less than 4.00. For purposes of covenant calculations, property lease payments are deducted from EBITDA. During the second quarter of 2020, the Company amended certain financial covenants under the revolving credit facility to provide additional covenant headroom, further enhancing the Company’s financial flexibility. While the Company had not breached any covenants, this amendment was intended to prevent the effects of the COVID-19 pandemic from distorting the covenant calculations and distracting the Company or its lenders from the prudent management of the business. The amendments included a suspension to Boyd’s requirement to comply with its leverage and interest coverage covenants from July 1, 2020 to December 30, 2020, as well as providing more flexibility in the calculation of such covenants beginning with the second quarter of 2020 and through the second quarter of 2021. Effective July 1, 2020 to June 30, 2021 inclusive, for the purposes of testing any financial covenants on a trailing twelve month period, the Company was permitted to replace the EBITDA for the second and third quarters of 2020 with the EBITDA for the second and third quarters of 2019. In addition, the senior funded debt to EBITDA ratio was increased to no greater than 4.00 to June 30, 2020. From December 31, 2020 to June 29, 2021, the senior funded debt to EBITDA ratio was to be no greater than 3.75. For four quarters following a material acquisition during the December 31, 2020 to June 29, 2021 timeframe, the senior debt to EBITDA ratio could be increased to no greater than 4.00. During the suspension period, the Company was required to meet a minimum liquidity covenant of $150 million U.S., which, given the Company’s cash position and undrawn facilities, was not burdensome. On March 21, 2022, the Company amended the Credit Agreement to provide for a covenant flex period from January 1, 2022 to March 30, 2023 and to provide for revisions to interest rates, allowing for the use of LIBOR until it is decommissioned and allowing for the use of the Secured Overnight Financing Rate (“SOFR”) at the Company’s election. During the covenant flex period, the financial covenants require BGSI to maintain a senior funded debt to EBITDA ratio of less than 4.00 from March 21, 2022 to March 30, 2022, less than 4.50 from March 31, 2022 to September 29, 2022, less than 4.25 from September 30, 2022 to December 30, 2022 and less than 4.00 from December 31, 2022 to March 30, 2023. For four quarters following a material acquisition during the covenant flex period, the senior funded debt to EBITDA ratio may be increased by up to 0.50, never exceeding 4.50. The Company supplements its debt financing by negotiating with sellers in certain acquisitions to provide financing to the Company in the form of term notes. The notes payable to sellers are typically at favorable interest rates and for terms of one to 15 years. This source of financing is another means of supporting BGSI’s growth, at a relatively low cost. During the year ended December 31, 2021, BGSI entered into 32 new seller notes for an aggregate amount of $14.6 million. Shareholders’ Capital During the first quarter of 2021, the Company instituted a stock option plan for senior management, which was approved by shareholders on May 12, 2021. The Company's stock option plan allows for the granting of options up to an amount of 250,000 Common shares under this plan. Each tranche of the options vests equally over two, three, four and five year periods. The term of an option shall be determined and approved by the People, Culture and Compensation Committee; provided that the term shall be no longer than ten years from the grant date. 27 On March 31, 2021 the Company issued 13,831 options under the stock option plan with a grant date fair value of C$56.99 per option and an exercise price of C$219.21 per option. None of the options are exercisable at period end. Issue costs of $105 were incurred with respect to the stock option plan. On January 2, 2020, BGSI announced the completion of the conversion of the Fund from an income trust to a public corporation, pursuant to the plan of Arrangement under the Canada Business Corporations Act. As a result of the Arrangement, Fund unitholders and BGHI Class A common shareholders received one BGSI common share in exchange for each Fund unit and BGHI Class A common share held by them. On May 14, 2020, BGSI completed an equity offering consisting of 1,265,000 shares at a price of C$183.00 per share, with net proceeds of the offering to fund potential future acquisition opportunities once the impact of COVID-19 is better understood, as well as to further strengthen the Company’s balance sheet through either holding cash or debt repayment, and for general corporate purposes. Investing Activities Cash used in investing activities totaled $354.1 million for the year ended December 31, 2021. This compares to $75.0 million used in the prior period. The investing activity in both periods related primarily to new location growth that occurred during these periods. 28 Acquisitions and Development of Businesses During 2021, the Company added 101 locations through acquisition, 16 locations operating as intake centers and 10 start-up locations, for a total of 127 new locations. From January 1, 2021 up to the reporting date of March 22, 2022, the Company has added 106 locations through acquisition, 13 start-up locations and 16 locations operating as intake centers, for a total of 135 new locations. These new locations are as follows: Date January 2, 2021 January 2, 2021 January 6, 2021 January 15, 2021 January 18, 2021 January 29, 2021 January 29, 2021 February 12, 2021 February 19, 2021 February 19, 2021 February 23, 2021 February 23, 2021 March 4, 2021 March 9, 2021 March 12, 2021 March 26, 2021 March 26, 2021 March 31, 2021 March 31, 2021 April 9, 2021 April 9, 2021 April 17, 2021 April 23, 2021 April 27, 2021 April 30, 2021 April 30, 2021 May 1, 2021 May 7, 2021 May 11, 2021 May 14, 2021 May 14, 2021 May 21, 2021 June 11, 2021 June 15, 2021 June 18, 2021 June 19, 2021 June 25, 2021 July 9, 2021 July 16, 2021 July 31, 2021 August 7, 2021 August 7, 2021 August 10, 2021 Previously operated as n/a start-up n/a intake center n/a intake center Eureka Body and Fender n/a intake center n/a start-up n/a intake center Jimmy Rivers Boyd Shop Inc. Frankie & Dylan’s, Inc. n/a intake center Plains Chevrolet, Ltd. n/a start-up n/a intake center n/a start-up n/a intake center Star Auto Body, Inc. Universal Collision Center, Inc. Prestige Auto Works, Inc. n/a intake center Perfection Paint and Body n/a intake center n/a intake center Milo Johnson Automotive Service, Inc. Pro Care Collision, LLC Williams Auto Body Shop, Inc. Overton Body Shop n/a intake center Sigs Collision Centers Location Cathedral City, CA Schaumburg, IL Henderson, NV Wyandotte, MI Las Vegas, NV Longwood, FL Kirkland, WA Columbia, SC Mentor & Streetsboro, OH (2 locations) Fenton, MI Amarillo, TX Pensacola, FL Bellevue, WA Queen Creek, AZ Mesa, AZ Simi Valley, CA Tallahassee, FL (3 locations) Milwaukee, WI Bellevue, WA Vero Beach, FL Highland, IN Union City, GA Escondido, CA Denton and Flour Mound, TX (2 locations) Green Bay, WI Sanford and Southern Pines, NC Thornhill, ON Kaneohe, Wahiawa & Waipahu, HI (3 locations) Buford, GA Baltimore & Reisterstown, MD (2 locations) Amarillo, TX Las Vegas, NV Victor, NY Pittsburgh, PA Austin, TX (2 locations) Gilbert, AZ Georgia & South Carolina (16 locations) La Habra, CA Appleton, WI Oklahoma, Kansas & Missouri (35 locations) Collision Works n/a intake center Pensacola, FL n/a intake center Pensacola, FL n/a start-up Round Rock, TX n/a start-up Camden Boyd & Fender n/a start-up n/a intake center Austin-Spencer Collision Repair Center Wolbert Auto Body, Inc. Austin Capital Collision n/a intake center John Harris Body Shops California Auto Specialist Center Peotter’s Collision Center 29 Location Eagle River, Minocqua, Rhinelander & Tomahawk, WI (4 locations) San Diego, CA Springfield, MO Austin, TX Jacksonville, FL Ankeny, IA Shreveport, LA Date August 13, 2021 August 13, 2021 August 20, 2021 August 31, 2021 September 7, 2021 September 7, 2021 September 17, 2021 September 17, 2021 Burbank, IL September 27, 2021 October 1, 2021 October 8, 2021 October 15, 2021 Erie, PA Clarence, NY Brighton, MI Medina & North Ridgeville, OH (2 locations) Sycamore, IL Cornwall, ON Amarillo, TX London, ON October 22, 2021 October 29, 2021 November 8, 2021 November 12, 2021 Carrollton, GA November 12, 2021 November 16, 2021 Westfield, WI November 19, 2021 Verona, WI Hudson, WI December 3, 2021 Valdosta, GA December 6, 2021 Peterborough, ON December 10, 2021 Springhill & Thompson’s Station, TN January 3, 2022 (2 locations) Dallas, TX Indianapolis, IN Temple, TX Signal Hill, CA Bossier City & Shreveport, LA (2 locations) January 5, 2022 January 17, 2022 February 1, 2022 February 11, 2022 March 18, 2022 Previously operated as Quality Collision Center Qualtech Collision Center St. Louis Street Auto Body Don’s Paint & Body Shop, Inc. n/a start-up Smith’s Collision & Paint Crown Collision, LLC Millenium Auto Exchange, Inc. Jensen’s Target Collision Stevens Collision, LLC Campbell Collision, Inc. South of the Square Collision Center Hayes’ Body Shop, Inc. Seaway Chevrolet Cadillac Buick GMC Ltd. n/a intake center n/a start-up Oakridge Ford Sales (1981) Limited Precision Collision Westfield, Inc. Dependable Collision Center T & T Collision Center, Inc. n/a start-up Wallace Conley Collision Autobody Advantage n/a start-up n/a start-up n/a start-up Alvin’s Auto Body Inc. CBS Collision The Company completed the acquisition or start-up of 70 locations from the beginning of 2020 until the fourth quarter reporting date of March 23, 2021. Details of these acquisitions can be found in the 2020 Annual Report. Start-ups In 2021, the Company commenced operations in 10 new start-up collision repair facilities. The total combined investment in leaseholds and equipment for these facilities was approximately $5.7 million. The Company commenced operations in five new start-up collision repair facilities in 2020 with a combined investment of approximately $2.0 million. The Company anticipates it will use similar start-up strategies as part of its continued growth in the future. Capital Expenditures Although most of Boyd’s repair facilities are leased, funds are required to ensure facilities are properly repaired and maintained to ensure the Company’s physical appearance communicates Boyd’s standard of professional service and quality. The Company’s need to maintain its facilities and upgrade or replace equipment, signage, computers, software and vehicles 30 forms part of the annual cash requirements of the business. The Company manages these expenditures by annually reviewing and determining its capital budget needs and then authorizing major expenditures throughout the year based upon individual business cases. Excluding expenditures related to acquisition and development, the investment in LED lighting, and the investment in the expansion of the WOW Operating Way practices through the corporate applications and process improvement efficiency project, the Company spent approximately $26.3 million, or 1.4% of sales on capital expenditures, compared to $22.0 million or 1.4% of sales during the same period of 2020. During the year ended December 31, 2021, the Company spent approximately $5.6 million on LED lighting. Additionally, the Company continued expanding its Wow Operating Way practices to corporate business processes. During the year ended December 31, 2021, the Company spent approximately $4.5 million on the Wow Operating Way expansion to corporate business processes. The related technology and process efficiency project will result in an additional $1.0-1.5 million investment before the project is complete in the second quarter of 2022. The project will also be expected to streamline various processes as well as generate economic returns after the project is fully implemented. During 2022, the Company plans to make cash capital expenditures, excluding those related to acquisition and development of new locations, of approximately 1.6% of sales. FOURTH QUARTER Sales for the three months ended December 31, 2021 totaled $516.2 million, a increase of $112.5 million or 27.9% compared to the same period in 2020. Overall same-store sales8 excluding foreign exchange increased $33.8 million, or 8.5% in the fourth quarter of 2021 when compared to the fourth quarter of 2020 and increased a further $1.3 million due to the translation of same-store sales8 at a higher U.S. dollar exchange rate. The improvement in same-store sales8 was the result of the continued return of business following the slow down caused by the COVID-19 pandemic that began in mid-March of 2020. The increase in same-store sales8 percentage was constrained by production challenges, including technician and administrative staffing capacity constraints, as well as supply chain disruption, which impacted sales levels during the fourth quarter of 2021. Sales growth of $79.0 million was attributable to incremental sales generated from 131 new locations. The closure of under-performing facilities accounted for a decrease in sales of $1.7 million. Gross Profit for the fourth quarter decreased to 43.5% from 45.8% in the same period in 2020. The gross margin percentage was negatively impacted by reduced parts and labor margins, and a higher mix of parts sales in relation to labor. During the fourth quarter of 2021, Boyd continued to face supply chain disruptions, which resulted in a negative impact on margins as a higher percentage of parts had to be sourced from non-primary suppliers in order to complete repairs. Labor margins were negatively impacted by the extraordinarily tight labor market, which resulted in increased wage costs to both retain and recruit staff. The shortage of labor also resulted in a higher mix of parts sales in relation to labor. The recognition of CEWS related to direct labor is approximately $0.9 million for the three months ended December 31, 2021 (2020 - $0.8 million). Adjusted EBITDA8 for the fourth quarter of 2021 totaled $57.3 million or 11.1% of sales compared to Adjusted EBITDA8 of $60.4 million or 15.0% of sales in the same period of the prior year. The $3.1 million decrease was primarily the result of a lower gross margin percentage and higher levels of operating expenses, partially offset by proceeds from CEWS. In total, Adjusted EBITDA8 for the three months ended December 31, 2021 benefited from CEWS in the amount of approximately $2.3 million (2020 - $1.9 million). Adjusted EBITDA8 benefited from expense accrual reductions, as certain expense estimates were firmed up at amounts that were lower than previously estimated and accrued. Changes in U.S. dollar exchange rates increased Adjusted EBITDA8 by $0.1 million. Current and Deferred Income Tax Expense for the fourth quarter of $1.8 million in 2021 compared to an expense of $5.2 million in 2020. Permanent differences did not have a significant impact on the tax computed on accounting income. Net Earnings for the fourth quarter was $4.9 million, or 0.9% of sales, or $0.23 per fully diluted share compared to net earnings of $16.3 million, or 4.0% of sales, or $0.76 per fully diluted share for the same period in the prior year. The net earnings amount in the fourth quarter of 2021 was impacted by acquisition and transaction costs of $1.0 million (net of tax). After adjusting for fair value and other unusual items, Adjusted net earnings8 for the fourth quarter of 2021 was $5.9 million, or 1.1% of sales. This compares to Adjusted net earnings8 of $14.6 million or 3.6% of sales in the fourth quarter of 2020. 8 As defined in the non-GAAP financial measures and ratios section of the MD&A 31 Adjusted net earnings8 for the period was impacted by a lower gross margin percentage and higher levels of operating expenses, as well as location growth. These new locations are subject to the same labor and supply challenges Boyd is currently facing across its business. These market conditions are impacting the results that can be achieved in the short-term, while new location growth has resulted in increased levels of depreciation and amortization. LEGAL PROCEEDINGS Neither BGSI, nor any of its subsidiaries are involved in any legal proceedings which are material in any respect. RELATED PARTY TRANSACTIONS In certain circumstances the Company has entered into property lease arrangements where an employee of the Company is the landlord. In most cases, the Company assumes these property lease arrangements initially in connection with an acquisition. The property leases for these locations do not contain any significant non-standard terms and conditions that would not normally exist in an arm’s length relationship, and BGSI has determined that the terms and conditions of the leases are representative of fair market rent values. The following are the lease payment amounts for facilities under lease with related parties (in thousands of U.S. dollars): Landlord Affiliated Person(s) Location Kard Properties Ltd. & D'Silva Real Estate Holdings Inc. Desmond D'Silva Various locations - Ontario Gerber Building No. 1 Ptnrp Eddie Cheskis, & Tim O'Day South Elgin, IL As at December 31, 2020, Desmond D’Silva ceased to be a related party. Lease Expires Various - expiring 2020 to 2037 2023 December 31, 2021 December 31, 2020 $ — $ 2,403 100 86 On July 31, 2020, the call option transaction to acquire the 21.16% non-controlling interest in Gerber Glass LLC held by a member of the U.S. management team was completed, and BGSI acquired the 21.16% non-controlling interest in Gerber Glass LLC. FINANCIAL INSTRUMENTS In order to limit the variability of earnings due to the foreign exchange translation exposure on the income and expenses of the Canadian operations, the Company may at times enter into foreign exchange contracts. These contracts are marked to market monthly with unrealized gains and losses included in earnings. The Company did not have any such contracts in place during 2021 or 2020. Transactional foreign currency risk exists in limited circumstances where U.S. denominated cash is received in Canada. The Company monitors U.S. denominated cash flows to be received in Canada and evaluates whether to use forward foreign exchange contracts. No such foreign exchange contracts were used during 2021 or 2020. 32 CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements that present fairly the financial position, financial condition and results of operations requires that BGSI make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the balance sheet date and reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates. Impairment of Goodwill and Intangible Assets When testing goodwill and intangibles for impairment, BGSI uses a five year forward looking discounted cash flow of the cash generating unit (“CGU”) or group of CGU’s to which the asset relate. An estimate of the recoverable amount is then calculated as the higher of an asset’s fair value less costs to sell and value in use (being the present value of the expected future cash flows of the relevant asset or CGU). An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The methods used to value intangible assets and goodwill require critical estimates to be made regarding the future cash flows and useful lives of the intangible assets. Goodwill and intangible asset impairments, when recognized, are recorded as a separate charge to earnings, and could materially impact the operating results of BGSI for any particular accounting period. Impairment of Other Long-lived Assets BGSI assesses the recoverability of its long-lived assets, other than goodwill and intangibles, after considering the potential impairment indicated by such factors as business and market trends, BGSI’s ability to transfer the assets, future prospects, current market value and other economic factors. In performing its review of recoverability, management estimates the future cash flows expected to result from the use of the assets and their potential disposition. If the discounted sum of the expected future cash flows is less than the carrying value of the assets generating those cash flows, an impairment loss would be recognized based on the excess of the carrying amounts of the assets over their estimated recoverable value. The underlying estimates for cash flows include estimates for future sales, gross margin rates and operating expenses. Changes which may impact these estimates include, but are not limited to, business risks and uncertainties and economic conditions. To the extent that management’s estimates are not realized, future assessments could result in impairment charges that may have a material impact on BGSI’s consolidated financial statements. Business Combinations Fair value of assets acquired and liabilities assumed in a business combination is estimated based on information available at the date of acquisition and involves considerable judgment in determining the fair values assigned to property, plant and equipment and intangible assets acquired and liabilities assumed on acquisition. The determination of these fair values involves analysis including the use of discounted cash flows, estimated future margins, future growth rates, market rents and capitalization rates. There is estimation in this analysis and actual results could differ from estimates. Fair Value of Financial Instruments BGSI has applied discounted cash flow methods to establish the fair value of certain financial liabilities recorded on the statement of financial position, as well as disclosed in the notes to the financial statements. BGSI also establishes mark-to- market valuations for derivative instruments, which are assumed to represent the current fair value of these instruments. These valuations rely on assumptions regarding future interest and exchange rates as well as other economic indicators, which at the time of establishing the fair value for disclosure, have a high degree of uncertainty. Unrealized gains or losses on these derivative financial instruments may not be realized as markets change. Income Taxes BGSI is subject to income tax in several jurisdictions and estimates are used to determine the provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, BGSI recognizes tax liabilities based on estimates of whether additional taxes and interest will be due. Uncertain tax liabilities may be recognized when, despite BGSI’s belief that its tax return positions are supportable, the 33 Company believes that certain positions are likely to be challenged and may not be fully sustained upon review by tax authorities. BGSI believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. To the extent that the final tax outcome is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made. CHANGES IN ACCOUNTING POLICIES BGSI has adopted the amendments to IFRS 3, Business Combinations. These amendments change the definition of a business and provide entities additional guidance to determine if the set of processes and assets acquired represents a business. The amendments apply to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020. BGSI has determined that there is no material impact on adoption. CERTIFICATION OF DISCLOSURE CONTROLS Management’s responsibility for financial information contained in this Annual Report is described on page 51. In addition, BGSI’s Audit Committee of the Board of Directors has reviewed this Annual Report, and the Board of Directors has reviewed and approved this Annual Report prior to its release. BGSI is committed to providing timely, accurate and balanced disclosure of all material information about BGSI and to providing fair and equal access to such information. As of December 31, 2021, BGSI’s management evaluated the effectiveness of the design and operation of its disclosure controls and procedures, as defined under the rules adopted by the Canadian securities regulatory authorities. Disclosure controls are procedures designed to ensure that information required to be disclosed in reports filed with securities regulatory authorities is recorded, processed, summarized and reported on a timely basis, and is accumulated and communicated to BGSI’s management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosure. BGSI’s management, including the CEO and the CFO, does not expect that BGSI’s disclosure controls will prevent or detect all misstatements due to error or fraud. Because of the inherent limitations in all control systems, an evaluation of controls can provide only reasonable, not absolute assurance, that all control issues and instances of fraud or error, if any, within BGSI have been detected. BGSI is continually evolving and enhancing its systems of controls and procedures. Based on the evaluation of disclosure controls, the CEO and the CFO have concluded that, subject to the inherent limitations noted above, BGSI’s disclosure controls are effective in ensuring that material information relating to BGSI is made known to management on a timely basis, and is fairly presented in all material respects in this Annual Report. CERTIFICATION ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management is responsible for the design and effectiveness of internal control over financial reporting in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian generally accepted accounting principles which incorporates International Financial Reporting Standards for publicly accountable enterprises. BGSI’s management, including the CEO and the CFO, does not expect that BGSI’s internal control over financial reporting will prevent or detect all misstatements due to error or fraud. Because of the inherent limitations in all control systems, an evaluation of controls can provide only reasonable, not absolute assurance, that all control issues and instances of fraud or error, if any, within BGSI have been detected. BGSI is continually evolving and enhancing its systems of internal controls over financial reporting. The CEO and CFO of BGSI have evaluated the design and effectiveness of BGSI’s internal control over financial reporting as at the end of the period covered by the annual filings and have concluded that, subject to the inherent limitations noted above, the controls are sufficient to provide reasonable assurance. In addition, during the fourth quarter of 2021, there have been no changes in BGSI’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, BGSI’s internal control over financial reporting. 34 BUSINESS RISKS AND UNCERTAINTIES The following information is a summary of certain risk factors relating to the business of BGSI and its subsidiaries, and is qualified in its entirety by reference to, and must be read in conjunction with, the detailed information appearing elsewhere in this Annual Report and the documents incorporated by reference herein. BGSI and its subsidiaries are subject to certain risks inherent in the operation of the business. BGSI and its subsidiaries manage risk and risk exposures through a combination of management oversight, insurance, systems of internal controls and disclosures and sound operating policies and practices. The Board of Directors has the responsibility to identify the principal risks of BGSI’s business and ensure that appropriate systems are in place to manage these risks. The Audit Committee has the responsibility to discuss with management BGSI's major financial risk exposures and the steps management has taken to monitor and control such exposures, including BGSI's risk assessment and risk management policies. In order to support these responsibilities, management has a risk and sustainability management committee which meets on an ongoing basis to evaluate and assess BGSI’s risks. The process being followed by the risk and sustainability management committee is a systematic one which includes identifying risks; analyzing the likelihood and consequence of risks; and then evaluating risks as to risk tolerance and control effectiveness. This approach stratifies risks into four risk categories as follows: Extreme Risks: High Risks: Moderate Risks: Low Risks: Immediate/ongoing action is required – involvement of senior management is required. Avoidance of the item may be necessary if risk reduction techniques are insufficient to address the risk. Risk item is significant and management responsibility should be specified and appropriate action taken. Managed by specific monitoring or response procedures. Additional risk mitigation techniques could be considered if benefits exceed the cost. Management by routine procedures. No further action is required at this time. Risks can be reduced by limiting the likelihood or the consequence of a particular risk. This can be achieved by adjusting the Company’s activities, implementing additional control/monitoring processes, or insuring/hedging against certain outcomes. Residual risk remains after mitigation and control techniques are applied to an identified risk. Awareness of the residual risk that BGSI ultimately accepts is a key benefit of the risk management process. The following describes the risks that are most material to BGSI’s business; however, this is not a complete list of the potential risks BGSI faces. There may be other risks that BGSI is not aware of, or risks that are not material today that could become material in the future. Employee Relations and Staffing Boyd currently employs approximately 10,145 people, of which 1,250 are in Canada and 8,895 are in the U.S. The current workforce is not unionized, except for approximately 30 employees located in the U.S. who are subject to collective bargaining agreements. The collision repair industry is experiencing significant and unprecedented competition for talent, and, in particular, a limited pool of qualified technicians and estimators. This is resulting in a shortage of qualified employees as well as significant wage pressure, which is adversely impacting the volume and pace at which collision repair shops can fix damaged vehicles and the Company’s financial results. Attracting, training, developing and retaining employees at all levels of the organization are required to effectively manage Boyd’s operations. The Company has rolled out various retention and recruitment initiatives to mitigate this risk. Failure to attract, train, develop and retain employees at all levels of the organization could lead to a lack of production capacity, knowledge, skills and experience required to effectively manage the business and could have a material adverse effect on the Company’s business, financial condition and future performance. 35 The outbreak of a contagious illness, such as the COVID-19 pandemic, causes disruption of staffing and impacts the volume and pace at which collision repair shops can fix damaged vehicles. Such disruption results in temporary closure of collision repair facilities. A significant outbreak of contagious disease, such as the COVID-19 pandemic, results in a widespread health crisis that could again adversely affect the financial performance of the Company. Margin Pressure and Sales Mix Changes The Company’s costs to repair vehicles, including the cost of labor, parts and materials are market driven and can fluctuate. Disruptive events have negatively impacted supply chains, which is adversely impacting Boyd’s ability to complete repairs due to availability of original equipment and aftermarket parts. This is resulting in high levels of work-in-process and decreased margins as parts are sourced from non-primary suppliers in order to complete repairs. In addition, the collision repair industry is experiencing significant and unprecedented competition for talent, and, in particular, a limited pool of qualified technicians and estimators. This has resulted in a shortage of qualified employees as well as significant wage pressure. Both of these issues adversely impact the Company’s financial results. Increasing vehicle complexity due to advances in technology is also increasing the cost associated with vehicle repair. The Company is not always able to pass these cost increases on to end users in the form of higher selling prices to its customers and/or its insurance company clients. As a result, there can be no assurance that increases in the costs to repair vehicles will ultimately be recoverable from its insurance company clients and customers. While negotiations with insurance companies and other influencing factors over time can result in selling price increases, the timing and extent of such increases is not determinable. In addition, some DRP relationships contain performance based pricing, which can impact margins. There can be no assurance that increases in the costs to repair vehicles will ultimately be recoverable from the Company’s clients or customers. The Company’s margin is also impacted by the mix of collision repair, retail glass and glass network sales as well as the mix of parts, labor and materials within each business area. There can be no assurance that changes to sales mix will not occur that could negatively impact the financial performance of the Company. The Company currently makes its own part sourcing decisions for parts used in the provision of vehicle repair services. The Company’s clients could, in the future, decide to source products directly, impose the use of certain parts suppliers on the Company or otherwise change the parts sourcing process. Such a decision could have an adverse effect on the Company’s margin. Supply Chain Risk The Company requires access to parts, materials and paint in order to complete repairs. Disruptive events have negatively impacted supply chains, which has adversely impacted Boyd’s ability to complete repairs due to the lack of availability of original equipment and aftermarket parts. This is resulting in increased repair cycle time, high levels of work-in-process and decreased margins as parts are sourced from non-primary suppliers in order to complete repairs, and is adversely impacting the Company’s financial results. Certain of the Company’s suppliers operate in unionized environments, where their workers are subject to collective bargaining agreements. A prolonged strike at a supplier could adversely impact Boyd’s ability to complete repairs. It is possible that a prolonged strike could disrupt the Company’s supply chain, which could have a material impact on the Company’s financial results. The Company sources certain parts and materials from overseas vendors. Global issues, such as outbreaks and the spread of contagious diseases, political instability, war or other disruptive events can negatively impact global supply chains, which could adversely impact Boyd’s ability to complete repairs. It is possible that global issues could further disrupt the Company’s supply chain, which could have a material impact on the Company’s financial results. Pandemic Risk & Economic Downturn A local, regional, national or international outbreak of a contagious disease, including the COVID-19 coronavirus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, H1N1 influenza virus, avian flu or any other similar illness, could decrease the willingness of the general population to travel or customers to patronize the Company’s facilities, 36 cause shortages of employees to staff the Company’s facilities, interrupt supplies from third parties upon which the Company relies, result in governmental regulation adversely impacting the Company’s business and otherwise have a material adverse effect on the Company’s business, financial condition and results of operations. Disruptions in financial markets, regional economies and the world economy have been caused by the COVID-19 pandemic. There can be no assurance that this disruption in financial markets, regional economies and the world economy will not continue to negatively affect the financial performance of the Company. Historically the auto collision repair industry has proven to be resilient to typical economic downturns along with the accompanying unemployment, and while the Company works to mitigate the effect of current economic downturn on its operations, economic conditions, which are beyond the Company’s control, have led to a decrease in accident repair claims volumes due to fewer miles driven or due to vehicle owners being less inclined to have their vehicles repaired. It is difficult to predict the severity and the duration of the decrease in claims volumes resulting from this economic downturn and the accompanying unemployment and what affect it may have on the auto collision repair industry, in general, and the financial performance of the Company in particular. There can be no assurance that the economic downturn will not continue to negatively affect the financial performance of the Company. Acquisition and New Location Risk The Company plans to continue to increase revenues and earnings through the acquisition and start-up of additional collision repair facilities and other businesses. The Company follows a detailed process of due diligence and approvals to limit the possibility of acquiring or building out a non-performing location or business. There can be no assurance that the Company will be able to find suitable acquisition targets at acceptable pricing levels, or that the Company will be able to find and buildout locations without incurring cost overruns, or that the new locations will achieve sales and profitability levels to justify the Company’s investment. Boyd views the United States and Canada as having significant potential for further expansion of its business. There can be no assurance that any market for the Company’s services and products will develop either at the local, regional or national level. Economic instability, laws and regulations, increasing acquisition valuations and the presence of competition in all or certain jurisdictions may limit the Company’s ability to successfully expand operations. The Company has grown rapidly through multi-location acquisitions as well as single location growth opportunities and new location development. Rapid growth can put a strain on managerial, operational, financial, human and other resources. Risks related to rapid growth include administrative and operational challenges such as the management of an expanded number of locations, the assimilation of financial reporting systems, technology and other systems of acquired companies, increased pressure on senior management and increased demand on systems and internal controls. The ability of the Company to manage its operations and expansion effectively depends on the continued development and implementation of plans, systems and controls that meet its operational, financial and management needs. If Boyd is unable to continue to develop and implement these plans, systems or controls or otherwise manage its operations and growth effectively, the Company will be unable to maintain or increase margins or achieve sustained profitability, and the business could be harmed. A key element of the Company’s strategy is to successfully integrate and manage new locations in order to sustain and enhance profitability. There can be no assurance that the Company will be able to profitably integrate and manage additional locations. Successful integration and management can depend upon a number of factors, including the ability to establish, maintain and grow DRP relationships, the ability to attract, retain and motivate certain key management and staff, establishing, retaining and leveraging client and supplier relationships and implementing standardized procedures and best practices. In the event that new location growth cannot be successfully integrated into Boyd’s operations or performs below expectations, the business could be materially and adversely affected. To the extent that the prior owners of businesses acquired by Boyd failed to comply with or otherwise violated applicable laws, the Company, as the successor owner, may be financially responsible for these violations and any associated undisclosed liability. The Company seeks, through systematic investigation and due diligence, and through indemnification by former owners, to minimize the risk of material undisclosed liabilities associated with acquisitions. The discovery of any material liabilities, including but not limited to tax, legal and environmental liabilities, could have a material adverse effect on the Company’s business, financial condition and future prospects. 37 Operational Performance In order to compete in the marketplace, the Company must consistently meet the operational performance metrics expected by its insurance company clients and its customers. Failing to deliver on metrics such as cycle time, quality of repair, customer satisfaction and cost of repair can, over time, result in reductions to pricing, repair volumes, or both. The Company has implemented processes as well as measuring and monitoring systems to assist it in delivering on these key metrics. However, there can be no assurance that the Company will be able to continue to deliver on these metrics or that the metrics themselves will not change in the future. The Company’s principal source of funds is cash generated from operations. Fluctuations in required capital expenditures, the need to maintain productive capacity, required funding to meet growth targets, and debt repayments expected to be funded by cash flows generated from operations may potentially impact the amount of cash available for dividends to be declared and paid by the Company or its subsidiaries in the future. Brand Management and Reputation The Company’s success is impacted by its ability to protect, maintain and enhance the value of its brands and reputation. Brand value and reputation can be damaged by isolated incidents, particularly if the incident receives considerable publicity or if it draws litigation. Incidents may occur as a result of events beyond the Company’s control or may be isolated to actions that occur in one particular location. Demand for the Company’s services could diminish significantly if an incident or other matter damages its brand or erodes the confidence of its insurance company clients or directly with the vehicle owners themselves. With the advent of the Internet and the evolution of social media there is an increased ability for individuals to adversely affect the brand and reputation of the Company. There can be no assurance that past or future incidents will not negatively affect the Company’s brand or reputation. Market Environment Change The collision repair industry is subject to continual change in terms of regulations, repair processes and equipment, technology and changes in the strategic direction of clients, suppliers and competitors. The Company endeavors to stay abreast of developments and preferences in the industry and make strategic decisions to manage through these changes and potential disruptions to the traditional business model. In certain situations, the Company is involved in leading change by anticipating or developing new methods to address changing market needs. The Company however, may not be able to correctly anticipate the need for change, may not effectively implement changes, or may be required to increase spending on capital equipment to maintain or improve its relative position with competitors. There can be no assurance that market environment changes will not occur that could negatively affect the financial performance of the Company. Reliance on Technology As is the case with most businesses in today’s environment, there is a risk associated with Boyd’s reliance on computerized operational and reporting systems. Boyd makes reasonable efforts to ensure that back-up systems and redundancies are in place and functioning appropriately. Boyd has disaster recovery programs to protect against significant system failures. Although a computer system failure would not be expected to critically damage the Company in the long term, there can be no assurance that a computer system crash or like event would not have a material impact on its financial results. Reliance on technology in order to gain or maintain competitive advantage is becoming more significant and therefore the Company is faced with determining the appropriate level of investment in new technology in order to be competitive. There can be no assurance that the Company will correctly identify or successfully implement the appropriate technologies for its operations. The Company is currently expanding its Wow Operating Way practices to corporate business processes by leveraging a cloud-based application solution. The project is expected to streamline various processes as well as generate economic returns once fully implemented; however, there can be no assurance that the expected positive returns will be generated as the project may be delayed, costs may increase, or unanticipated challenges could arise during implementation. 38 Increased reliance on computerized operational and reporting systems also results in increased cyber security risk, including potential unauthorized access to customer, supplier and employee sensitive information, corruption or loss of data and release of sensitive or confidential information. Disruptions due to cyber security incidents could adversely affect the business, results of operations and financial condition of the Company. Cyber security incidents could result in operational delays, disruption to work flow and reputational harm. There can be no assurance that Boyd will be able to anticipate, prevent or mitigate rapidly evolving types of cyber-attacks. Changes in Client Relationships A high percentage of the Company’s revenues are derived from insurance companies. Over the past 25+ years, many private insurance companies have implemented customer referral arrangements known as Direct Repair Programs (DRP’s) with collision repair operators who have been recognized as consistent high quality, performance based repairers in the industry. The Company’s ability to continue to grow its business, as well as maintain existing business volume and pricing, is largely reliant on its ability to maintain these DRP relationships. The Company continues to develop and monitor these relationships through ongoing measurement of the success factors considered critical by insurance clients. The loss of any existing material DRP relationship, or a material component of a significant DRP relationship, could have a material adverse effect on Boyd’s operations and business prospects. Of the top five insurance companies that the Company deals with, which in aggregate account for approximately 49% (2020 – 46%) of total sales, one insurance company represents approximately 14% (2020 – 13%) of the Company’s total sales, while a second insurance company represents approximately 10% (2020 – 10%). DRP relationships are governed by agreements that are usually cancellable upon short notice. These relationships can change quickly, both in terms of pricing and volumes, depending upon collision repair shop performance, cycle time, cost of repair, customer satisfaction, competition, insurance company management, program changes and general economic activity. To mitigate this risk, management fosters close working relationships with its insurance company clients and customers and the Company continually seeks to diversify and grow its client base both in Canada and the U.S. There can be no assurance that relationships with insurance company clients will not change in the future, which could impair Boyd’s revenues and/or margins, and result in a material adverse effect on the Company’s business. Decline in Number of Insurance Claims The automobile collision repair industry is dependent on the number of accidents which occur and, for the most part, become repairable insurance claims. The volume of accidents and related insurance claims can be significantly impacted by technological disruption and changes in technology such as ride sharing, collision avoidance systems, driverless vehicles and other safety improvements made to vehicles. Other changes which have and can continue to affect insurance claim volumes include, but are not limited to, weather, general economic conditions, unemployment rates, changing demographics, vehicle miles driven, new vehicle production, insurance policy deductibles and auto insurance premiums. In addition, repairable claims volumes have been and can continue to be impacted by an increased number of non-repairable claims or total loss. There can be no assurance that a continued decline in insurance claims will not occur, which could reduce Boyd’s revenues and result in a material adverse effect on the Company’s business. Environmental, Health and Safety Risk The nature of the collision repair business means that hazardous substances must be used, which could cause damage to the environment or individuals if not handled properly. The Company’s environmental protection policy requires environmental site assessments to be performed on all business locations prior to acquisition, start-up or relocation so that any existing or potential environmental situations can be remedied or otherwise appropriately addressed. It is also Boyd’s practice to secure environmental indemnification from landlords and former owners of acquired collision repair businesses, where such indemnification is available. Boyd also engages a private environmental consulting firm to perform regular compliance reviews to ensure that the Company’s environmental and health and safety policies are followed. To date, the Company has not encountered any environmental protection requirements or issues which would be expected to have a material financial or operational effect on its current business and it is not aware of any material environmental issues that could have a material impact on future results or prospects. No assurance can be given, however, that the prior activities 39 of Boyd, or its predecessors, or the activities of a prior owner or lessee, have not created a material environmental problem or that future uses or evolving regulations will not result in the imposition of material environmental, health or safety liability upon Boyd. The outbreak of a contagious illness, such as the recent COVID-19 pandemic, could require the Company to develop and execute revised operating procedures intended to mitigate safety and health risks in the work environment. However, there can be no assurance that the enhanced protocols put in place will protect against an outbreak that could result in lost time and negatively affect the financial performance of the Company. Climate Change and Weather Conditions Climate change is exacerbated in part by the burning of fossil fuels in order to generate electricity for consumers and industry. Greenhouse gasses from fossil fuels is leading to climate change and global warming, which is leading to increased frequency and severity of natural disasters and extreme weather condition events. The collision repair industry is not particularly carbon intensive. The business is focused on the auto repair industry and as such its primary product is providing a service. In providing this service, major inputs include replacement parts, water-based paint, skilled labor, and energy to run spray booths, compressors, lighting, HVAC and other equipment. The industry is highly fragmented with many independent owner operators who are not able to operate at scale. There are efforts to consolidate the industry and the Company is a leader in this effort. By doing so, the industry can operate more efficiently and have the central coordination and capital to invest in sustainability areas to reduce the impact the industry has on the environment. Transitioning to a low carbon environment and sustainable business model will require additional investments in the long- term. Capital investments in energy saving or renewable energy technologies to operate the shop, can reduce or offset the contribution to carbon emissions that the Company currently emits. Transitioning the various vehicles used by business to electric instead of internal combustion engine based is another action that can be taken by the Company to reduce carbon emissions. Investments could be necessary for sensors and other systems to manage electricity usage or identify future opportunities. Facility management and landscape management are areas of opportunity to improve the impact Boyd’s locations have on global warming. The primary climate related risks for the business relate to the expected increase in extreme weather events, such as blizzards, hurricanes, torrential rain, and tornadoes. These events can cause physical damage to shops or hinder Boyd’s ability to process work and also tend to result in higher damage levels that result in more vehicles being non-repairable. Extreme weather can also slow or halt delivery of parts and in some cases prevent employees from attending work which slows down cycle-time and therefore sales. A number of initiatives related to climate change can benefit the Company. For example investing in LED lighting improves the working conditions for our technicians and can improve the quality of the work they do, as well as lowering operating costs and reducing emissions. Continuous improvement and efficiency gains can improve quality and reduce repair cycle time, causing less waste, higher customer satisfaction and generating higher sales with the same level of inputs. A greater focus on repairing damaged parts as opposed to replacing those parts reduces waste and in some cases can improve profitability. Alignment with vehicle owner, insurance company and original equipment manufacturer objectives improves Boyd’s customer relationships and demonstrates an ability to align and partner with these stakeholders. There is good alignment between climate change initiatives and the Company’s strategy. Core strategies of operational excellence, expense management and optimizing the business as well as new location and acquisition growth have overlap with sustainability. Being efficient, reducing waste and bringing corporate resources and investment to a fragmented industry supports a long-term alignment with sustainability. Environment, social and governance objectives are being integrated into the Company’s strategic projects. There is often a dimension of each business initiative that relates to sustainability. Boyd is committed to identifying those dimensions and bringing awareness throughout the company so that business objectives naturally contribute to our sustainability goals, which have been outlined in Boyd’s first Environmental, Social and Governance Report, which is available on the Boyd website at www.boydgroup.com/sustainability. The Board is investing more time on sustainability issues and has assigned the oversight responsibility for sustainability, including climate change risk management and disclosure to the Governance & Sustainability Committee. The topic is a 40 standing agenda item with internal metrics and reporting being developed. Management has an Enterprise Risk Management Committee that has been renamed the Risk and Sustainability Committee after being tasked with developing sustainability objectives and processes for the company. Its current mandate is to work with the various operating groups to identify the key sustainability metrics for future reporting and target setting. These key metrics and targets will be focused on the priority areas defined for each of the environmental, social and governance pillars that have been outlined in Boyd’s first Environmental, Social and Governance Report. The effect of global warming and its impact on weather conditions may reduce collision repair volume and represent an element of risk to the Company’s ability to maintain sales. Historically, extremely mild winters and dry weather conditions have had a negative impact on collision repair sales volumes. Natural disasters resulting in business interruption, or supply chain interruption could also negatively impact the Company’s operations. Even with market share gains, weather-related decline in market size can result in sales declines which could have a material impact on the Company’s business. Business interruption due to natural disasters and extreme weather condition events, including supply chain interruption, may result in temporary store closures or limit production volume and could adversely impact Boyd’s ability to complete repairs, which could have a material adverse effect on the Company’s business. Competition The collision repair industry in North America, estimated at almost $37 billion U.S. is very competitive. The main competitive factors are cost of repair, cycle time, quality, customer satisfaction and adherence to various insurance company processes and performance requirements. There can be no assurance that Boyd’s competitors will not achieve greater market acceptance due to pricing or other factors. Although competition exists mainly on a regional basis, Boyd competes with a small number of other multi-location collision repair operators in multiple markets in which it operates. Given these industry characteristics, existing or new competitors, including other automotive-related businesses, may become significantly larger and have greater financial and marketing resources than Boyd. Competitors may compete with Boyd in rendering services in the markets in which Boyd currently operates and also in seeking existing facilities to acquire, or new locations to open, in markets in which Boyd desires to expand. There can be no assurance that the Company will be able to maintain or achieve its desired market share. Access to Capital The Company grows, in part, through future acquisitions or start-up of collision and glass repair and replacement businesses. There can be no assurance that Boyd will have sufficient capital resources available to implement its growth strategy. Inability to raise new capital, in the form of debt or equity, could limit Boyd’s future growth through acquisition or start-up. The Company will endeavor, through a variety of strategies, to ensure in advance that it has sufficient capital for growth. Potential sources of capital that the Company has been successful at accessing in the past include public and private equity placements, convertible debt offerings, using equity securities to directly pay for a portion of acquisitions, capital available through strategic alliances with trading partners, lease financing, seller financing and both senior and subordinate debt facilities or by deferring possible future purchase price payments using contingent consideration and call or put options. There can be no assurance that the Company will be successful in accessing these or other sources of capital in the future. The Company and its subsidiaries use financial leverage through the use of debt, which have debt service obligations. The Company’s ability to refinance or to make scheduled payments of interest or principal on its indebtedness will depend on its future operating performance and cash flow, which are subject to prevailing economic conditions, prevailing interest rates, and financial, competitive, business and other factors, many of which are beyond its control. The Company’s revolving credit facilities contain restrictive covenants that limit the discretion of the Company’s management and the ability of the Company to incur additional indebtedness, to make acquisitions of collision repair businesses, to create liens or other encumbrances, to pay dividends, to redeem any equity or debt, or to make investments, capital expenditures, loans or guarantees and to sell or otherwise dispose of assets and merge or consolidate with another 41 entity. In addition, the revolving credit facilities contain a number of financial covenants that require BGSI and its subsidiaries to meet certain financial ratios and financial condition tests. A failure to comply with the obligations under these credit facilities could result in an event of default, which, if not cured or waived, could permit acceleration of the relevant indebtedness. If the indebtedness were to be accelerated, there can be no assurance that the assets of the Company and its subsidiaries would be sufficient to repay the indebtedness in full. There can also be no assurance that the Company will be able to refinance the credit facilities as and when they mature. The revolving credit facility is secured by the assets of the Company. Dependence on Key Personnel The success of the Company is dependent on the services of a number of members of management. The experience and talent of these individuals is a significant factor in Boyd’s continued success and growth. The loss of one or more of these individuals could have a material adverse effect on the Company’s business operations and prospects. The Company has entered into management agreements with key members of management in order to mitigate this risk. Tax Position Risk BGSI and its subsidiaries account for income tax positions in accordance with accounting standards for income taxes, which require that the Company recognize in the financial statements, the impact of a tax position, if that position is more likely than not of being sustained on examination by taxation authorities, based on the technical merits of the position. Inherent risks and uncertainties can arise over tax positions taken, or expected to be taken, with respect to matters including but not limited to acquisitions, transfer pricing, inter-company charges and allocations, financing charges, fees, related party transactions, tax credits, tax based incentives and stock based transactions. In addition, there are inherent risks and uncertainties with respect to government assistance received through various programs developed to support the business during the economic downturn brought about by the COVID-19 pandemic. Management uses tax experts to assist in correctly applying and accounting for tax and government assistance program rules, however there can be no assurance that a position taken will not be challenged by the taxation authorities that could result in an unexpected material financial obligation. Expenses incurred by BGSI and its subsidiaries are only deductible to the extent they are reasonable. There can be no assurance that the taxation authorities will not challenge the reasonableness of certain expenses. If such a challenge were successful, it may materially and adversely affect the financial results of BGSI and its subsidiaries. BGSI’s shares are qualified investments for a Registered Plan under the Tax Act as the Shares are listed on a “designated stock exchange” (as defined in the Tax Act). There can be no assurance that additional changes to the taxation of corporations or changes to other government laws, rules and regulations, either in Canada or the U.S., will not be undertaken which could have a material adverse effect on BGSI’s share price and business. There can be no assurance BGSI will benefit from these rules, that the rules will not change in the future or that BGSI will avail itself of them. Corporate Governance Securities law imposes statutory civil liability for misrepresentations in continuous disclosure documents including failure to make timely disclosure. Investors have a right of action if they are harmed by a misrepresentation in an issuer’s disclosure document or in a public oral statement relating to an issuer, or the failure of an issuer to make timely disclosure of a material change. Potentially liable parties include the issuer, each officer, and each Director of the issuer who authorizes, permits or acquiesces in the release of the document containing a misrepresentation, the making of the public statement containing a misrepresentation or in the failure to make a timely disclosure. Under the Ontario Securities Act, section 138.4(6), a due diligence defense is available. The due diligence defense requires the following items to be addressed: 42 • • • the issuer must have a system designed to ensure the issuer is meeting its disclosure obligations; the defendant must have conducted a reasonable investigation to support reliance on the system; and defendants must have no reasonable grounds to believe that the document or a public oral statement contained a misrepresentation or that the failure to make the required disclosure would occur. BGSI is keenly aware of the significance of these laws and the interrelationships between civil liability, disclosure controls and good governance. BGSI has adopted policies, practices and processes to reduce the risk of a governance or control breakdown. A statement of BGSI’s governance practices is included in its most recent information circular which can be found at www.sedar.com. Although BGSI believes it follows good corporate governance practices, there can be no assurance that these practices will eliminate or mitigate the impact of a material lawsuit in this area. The area of governance is growing to encompass not only traditional governance matters, but also environmental and social matters. This area is often referred to as Environmental, Social and Governance, or “ESG”. Increased awareness and attention by investors to ESG matters means that the Company needs to become more transparent in developing and reporting on ESG initiatives and increase or add ESG initiatives where there are significant gaps. BGSI is developing and enhancing ESG reporting and initiatives. Boyd has recently published an ESG report, which complements previously adopted policies on reporting and anti-retaliation, occupational health and safety, non-discrimination, human rights, diversity and anti- corruption. These policies, along with the ESG Report, are available on the Boyd website at www.boydgroup.com/ sustainability. Increased Government Regulation and Tax Risk BGSI and its subsidiaries are subject to various federal, provincial, state and local laws, regulations and taxation authorities. Various federal, provincial, state and local agencies as well as other governmental departments administer such laws, regulations and their related rules and policies. New laws governing BGSI or its business could be enacted or changes or amendments to existing laws and regulations could be enacted which could have a significant impact on Boyd. For example, privacy legislation continues to evolve rapidly and tariff changes are being introduced with greater frequency. BGSI utilizes the services of professional advisors in the areas of taxation, environmental, health and safety, labor and general business law to mitigate the risk of non-compliance. Failure to comply with the applicable laws, regulations or tax changes may subject BGSI to civil or regulatory proceedings and no assurance can be given that this will not have a material impact on financial results. A number of jurisdictions in which the Company operates have regulations to limit emissions and pollutants. The Company has adapted its processes in an effort to comply with these regulations. Although to date, there have been no negative consequences as a result of these regulations, there can be no assurance that these regulations will not have a material adverse impact on BGSI’s business or financial results. Future emission or pollutant regulation compliance requirements may have a material adverse impact on BGSI’s business or financial results. Fluctuations in Operating Results and Seasonality The Company’s operating results have been and are expected to continue to be subject to quarterly fluctuations due to a variety of factors including changes in customer purchasing patterns, pricing paid to insurance companies, general operating effectiveness, automobile technologies, general and regional economic downturns, unemployment rates, employee vacation timing and weather conditions. These factors can affect Boyd’s ability to fund ongoing operations and finance future activities. 43 Risk of Litigation BGSI and its subsidiaries could become involved in various legal actions in the ordinary course of business. Litigation loss accruals may be established if it becomes probable that BGSI will incur an expense and the amount can be reasonably estimated. BGSI’s management and internal and external experts are involved in assessing the probability of litigation loss and in estimating any amounts involved. Changes in these assessments may lead to changes in recorded litigation loss accruals. Claims are reviewed on a case by case basis, taking into consideration all information available to BGSI. The actual costs of resolving claims could be substantially higher or lower than the amounts accrued. In certain cases, legal claims may be covered under BGSI’s various insurance policies. Execution on New Strategies New initiatives are introduced from time to time in order to grow Boyd’s business. Initiatives such as entering new markets, introducing and improving related products and services, or identifying new strategies to capture additional market share have the potential to be accretive to the Company’s business when the opportunity is accurately identified and executed. There can be no assurance that the Company identifies new strategies that are accretive to the business or that it is successful in implementing such initiatives. Insurance Risk BGSI insures its property, plant and equipment, including vehicles, through insurance policies with insurance carriers located in Canada and the U.S. Included within these policies is insurance protection against property loss and general liability. BGSI also insures its directors and officers against liabilities arising from errors, omissions and wrongful acts. Management uses its knowledge, as well as the knowledge of experienced brokers, to ensure that insurable risks are insured appropriately under terms and conditions that would protect BGSI and its subsidiaries from losses. There can be no assurance that all perils would be fully covered or that a material loss would be recoverable under such insurance policies. Interest Rates The Company occasionally fixes the interest rate on its debt using interest rate swap contracts or other provisions available in its debt facilities. There can be no guarantee that interest rate swaps or other contract terms that effectively turn variable rate debt into fixed rates will be an effective hedge against long-term interest rate fluctuations. The Company has not fixed interest rates within its revolving credit facility. There can be no assurance that interest rates either in Canada or the U.S. will not increase in the future, which could result in a material adverse effect on the Company’s business. U.S. Health Care Costs and Workers Compensation Claims BGSI accrues for the estimated amount of U.S. health care claims and workers compensation claims that may have occurred but were not reported at the end of the reporting period under its health care and workers compensation plans. The accruals are based upon the Company’s knowledge of current claims as well as third party estimates derived from past experience. Significant claim occurrences which remain unreported for a number of months could materially impact this accrual. In addition, as U.S health care costs increase, there can be no assurance given that the Company can continue to offer health care insurance to its employees at a reasonable cost. 44 Foreign Currency Risk A substantial portion of Boyd’s revenue and cash flow are now, and are expected to continue to be, generated in U.S. dollars. Fluctuations in the exchange rates between the Canadian dollar and the U.S. currency may have a material adverse effect on BGSI’s share price, which is denominated and trades in Canadian dollars as well as BGSI’s ability to make future Canadian dollar cash dividends. Low Capture Rates Sales growth can be enhanced if the Company is effective at booking repair orders for all sales opportunities that are identified. The Company is exposed to missed jobs when capacity is constrained and to the extent that employees are ineffective at capturing all sales opportunities. Measurement of capture rates, management support and training are methods that are employed to enhance capture rates. Efforts to increase capacity are limited by availability of qualified labor. It is possible that the Company may not be able to capture sales effectively enough to maximize sales. Capital Expenditures The business of the Company requires ongoing capital maintenance. Moreover, opportunities may arise for capital upgrades providing returns or cost savings that may not be realized in the immediate future, but rather over several years. As vehicle technology advances and market needs change, the capital intensity of the industry is changing, requiring expenditures in excess of historical capital maintenance levels. To the extent that capital expenditures are in excess of amounts budgeted, the amounts of cash available for dividends may decrease. Energy Costs The Company is exposed to fluctuations in the price of energy. These costs not only impact the costs associated with occupying and operating collision repair facilities but may also affect costs of parts and materials used in the repair process as well as miles driven by automobile owners. There can be no assurance that escalating costs which cannot be offset by energy conservation practices, price increases to clients and customers or productivity gains, would not result in materially lower operating margins. As well, there can be no assurance that escalating energy costs will not materially reduce automobile miles driven and in turn reduce the number of collisions. ADDITIONAL INFORMATION BGSI’s shares trade on the Toronto Stock Exchange under the symbol TSX: BYD.TO. Additional information relating to the BGSI is available on SEDAR (www.sedar.com) and the Company website (www.boydgroup.com). 45 FORM 52-109F1 CERTIFICATION OF ANNUAL FILINGS FULL CERTIFICATE I, Timothy O’Day, Chief Executive Officer, Boyd Group Services Inc., certify the following: 1. Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in the AIF (together, the “annual filings”) of Boyd Group Services Inc. (the “issuer”) for the financial year ended December 31, 2021. 2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the annual filings. 3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with other financial information included in the annual filings present fairly in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the annual filings. 4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer. 5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the financial year end a. designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that i. ii. material information relating to the issuer is made known to us by others, particularly during the period in which the annual filings are being prepared; and information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and b. designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. 5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework (COSO 2013 Framework), published by The Committee of Sponsoring Organizations of the Treadway Commission. 5.2 ICFR – material weakness relating to design: N/A 5.3 Limitation on scope of design: N/A 6. Evaluation: The issuer’s other certifying officer(s) and I have a. b. evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s DC&P at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about the effectiveness of DC&P at the financial year end based on that evaluation; and evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s ICFR at the financial year end and the issuer has disclosed in its annual MD&A i. ii. our conclusions about the effectiveness of ICFR at the financial year end based on that evaluation; and N/A 46 c. N/A 7. Reporting changes in ICFR: The issuer has disclosed in its annual MD&A any change in the issuer’s ICFR that occurred during the period beginning on October 1, 2021 and ended on December 31, 2021 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. 8. Reporting to the issuer’s auditors and board of directors or audit committee: The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of ICFR, to the issuer’s auditors, and the board of directors or the audit committee of the board of directors any fraud that involves management or other employees who have a significant role in the issuer’s ICFR. Date: March 23, 2022 (signed) Timothy O’Day President & Chief Executive Officer 47 FORM 52-109F1 CERTIFICATION OF ANNUAL FILINGS FULL CERTIFICATE I, Narendra Pathipati, Chief Financial Officer, Boyd Group Services Inc., certify the following: 1. Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in the AIF (together, the “annual filings”) of Boyd Group Services Inc. (the “issuer”) for the financial year ended December 31, 2021. 2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the annual filings. 3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with other financial information included in the annual filings present fairly in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the annual filings. 4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer. 5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the financial year end a. designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that i. ii. material information relating to the issuer is made known to us by others, particularly during the period in which the annual filings are being prepared; and information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and b. designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. 5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework (COSO 2013 Framework), published by The Committee of Sponsoring Organizations of the Treadway Commission. 5.2 ICFR – material weakness relating to design: N/A 5.3 Limitation on scope of design: N/A 6. Evaluation: The issuer’s other certifying officer(s) and I have a. b. evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s DC&P at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about the effectiveness of DC&P at the financial year end based on that evaluation; and evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s ICFR at the financial year end and the issuer has disclosed in its annual MD&A i. ii. our conclusions about the effectiveness of ICFR at the financial year end based on that evaluation; and N/A 48 c. N/A 7. Reporting changes in ICFR: The issuer has disclosed in its annual MD&A any change in the issuer’s ICFR that occurred during the period beginning on October 1, 2021 and ended on December 31, 2021 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. 8. Reporting to the issuer’s auditors and board of directors or audit committee: The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of ICFR, to the issuer’s auditors, and the board of directors or the audit committee of the board of directors any fraud that involves management or other employees who have a significant role in the issuer’s ICFR. Date: March 23, 2022 (signed) Narendra Pathipati Executive Vice President & Chief Financial Officer 49 BOYD GROUP SERVICES INC. Consolidated Financial Statements Year Ended December 31, 2021 50 MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING These consolidated financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles. Management is responsible for their integrity, objectivity and reliability, and for the maintenance of financial and operating systems, which include effective controls, to provide reasonable assurance that Boyd Group Services Inc.’s assets are safeguarded and that reliable financial information is produced. The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting, disclosure control and internal control. The Board exercises these responsibilities through its Audit Committee, all members of which are not involved in the daily activities of Boyd Group Services Inc. The Audit Committee meets with management and, as necessary, with the independent auditors, Deloitte LLP, to satisfy itself that management’s responsibilities are properly discharged and to review and report to the Board on the consolidated financial statements. In accordance with Canadian generally accepted auditing standards, the independent auditors conduct an examination each year in order to express a professional opinion on the consolidated financial statements. (signed) (signed) Timothy O’Day President & Chief Executive Officer Narendra Pathipati Executive Vice President & Chief Financial Officer Winnipeg, Manitoba March 22, 2022 51 Deloitte LLP 360 Main Street Suite 2300 Winnipeg MB R3C 3Z3 Canada Tel: 204-942-0051 Fax: 204-947-9390 www.deloitte.ca March 22, 2022 Independent Auditor's Report To the Shareholders of Boyd Group Services Inc., Opinion We have audited the consolidated financial statements of Boyd Group Services Inc. (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2021, December 31, 2020, and January 1, 2020, and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the years ended December 31, 2021 and December 31, 2020, and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the "financial statements"). In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, December 31, 2020 and January 1, 2020, and its financial performance and its cash flows for the years ended December 31, 2021 and December 31, 2020 in accordance with International Financial Reporting Standards ("IFRS"). Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards ("Canadian GAAS"). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2021. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Goodwill and Intangible Assets — Canadian segment— Refer to the Financial Statement Notes 3 and 11 Key Audit Matter Description The Company’s evaluation of goodwill and intangible assets for impairment involves the comparison of the recoverable amount of each cash generating units to their carrying value. The Company used the discounted cash flow model to estimate the value-in-use of both the U.S. Segment and Canadian segment. As a result of the annual assessments of impairment of goodwill and intangible assets for the U.S. segment and Canadian segment, management has determined that there was no impairment of goodwill or intangible assets. The continuing impact of the COVID-19 pandemic in Canada has a resulted in a slower economic re-opening when compared to the U.S., as well as greater restrictions, which has caused a more significant decline in demand for services. As a result, we have identified the evaluation of the goodwill and intangible assets impairment analysis for the Canadian segment as a key audit matter. While there are several estimates and assumptions that are required to determine the recoverable amount of the Canadian segment, the estimates, and assumptions with the highest degree of subjectivity are future revenue forecasts and the selection of the discount rate. Auditing these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the involvement of fair value specialists. How the Key Audit Matter Was Addressed in the Audit Our audit procedures related to the future revenue forecasts and the selection of the discount rate used to determine the recoverable amount for the Canadian segment included the following, among others: • Evaluated management’s ability to accurately forecast future revenues and revenue growth rates by comparing actual results to management’s historical forecasts. • Evaluated the reasonableness of the forecast of future revenues, revenue growth rates and operating margins by comparing the forecasts to: o Historical revenues and operating margins. o Known changes in the Company’s operations and its industry, including the impact of the COVID-19 pandemic, which are expected to impact future operating performance; and Internal communications to management and the Board of Directors. o • With the assistance of fair value specialists, evaluated the reasonableness of the discount rates by testing the source information underlying the determination of the discount rates, developing a range of independent estimates, and comparing those to the discount rate selected by management. Valuation of customer relationship intangible assets within acquisitions - Refer to Financial Statement Notes 3 and 5 Key Audit Matter Description The Company, pursuant to its growth strategy, completes acquisitions of single and multi-shop operators throughout the year. These acquisitions are accounted for using the acquisition method of accounting. The fair values of certain customer relationships are determined using the multi-period excess earning method. This requires management to make significant estimates and assumptions related to discount rates, customer attrition rates and forecasted EBITDA margins attributable to the customer relationships. Given the significant judgments made by management to determine the fair value of these customer relationships, performing audit procedures to evaluate the reasonableness of the estimates and assumptions related to discount rates, customer attrition rates and forecasted EBITDA margins required a high degree of auditor judgments and an increased extent of audit effort, including the need to involve fair value specialists. How the Key Audit Matter Was Addressed in the Audit Our audit procedures related to discount rates, customer attrition rates and forecasted EBITDA margins included the following, among others: • Evaluated the reasonableness of management’s forecasts of EBITDA margins of the acquired company by comparing forecasts to: o Historical EBITDA margins; o Actual cash flows of revenue and EBITDA after acquisition; o Internal communications from management to the board of directors; o Underlying analyses detailing business strategies and growth plans; and o With the assistance of our fair value specialists. • Evaluated the reasonableness of the customer relationships discount rates based on the overall business rates of return (the weighted average cost of capital and the internal rate of return) and the risk of the customer relationships intangible relative to the overall business. • Evaluated the reasonableness of the attrition rates by considering historical customer sales data as available, precedent transaction benchmarking, and qualitative considerations with respect to future customer expectations. Other Information Management is responsible for the other information. The other information comprises: • Management's Discussion and Analysis. • The information, other than the financial statements and our auditor’s report thereon, in the Annual Report. Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard. The Annual Report is expected to be made available to us after the date of the auditor's report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in this independent auditor’s report is Michael Boucher. /s/ Deloitte LLP Chartered Professional Accountants Winnipeg, Manitoba March 22, 2022 BOYD GROUP SERVICES INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As at December 31, (thousands of U.S. dollars) Assets Current assets: Cash Accounts receivable Income taxes recoverable Inventory Prepaid expenses Property, plant and equipment Right of use assets Deferred income tax asset Intangible assets Goodwill Other long-term assets Liabilities and Equity Current liabilities: Accounts payable and accrued liabilities Dividends payable Current portion of long-term debt Current portion of lease liabilities Long-term debt Lease liabilities Deferred income tax liability Unearned rebates Exchangeable Class A common shares Non-controlling interest put option Equity Accumulated other comprehensive earnings Retained earnings Shareholders’ capital Contributed surplus Note $ 2021 2020 January 1, 2020 27,714 $ 103,024 7,576 66,784 29,554 61,041 $ 86,957 6,087 32,079 20,272 234,652 332,189 502,036 1,737 348,727 601,991 5,795 206,436 237,945 381,966 649 276,381 463,734 4,436 27,308 86,808 975 36,889 23,230 175,210 227,579 364,042 — 267,449 427,005 2,554 $ 2,027,127 $ 1,571,547 $ 1,463,839 $ 258,423 $ 2,439 13,887 92,924 210,185 $ 2,364 15,594 77,941 367,673 428,186 450,423 48,602 5,809 — — 1,300,693 65,987 56,720 600,047 3,680 306,084 164,634 341,370 41,355 6,424 — — 859,867 65,157 42,872 600,047 3,604 207,710 717 17,033 84,354 309,814 302,694 310,911 30,036 7,039 28,742 3,477 992,713 47,088 7,548 412,886 3,604 726,434 2,027,127 $ 711,680 1,571,547 $ 471,126 1,463,839 $ 18 6 7 8 9 10 11 12 13 14 15 14 15 9 16 18 18 20 21 22 The accompanying notes are an integral part of these consolidated financial statements Approved by the Board: TIMOTHY O’DAY Director DAVID BROWN Director 57 BOYD GROUP SERVICES INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (thousands of U.S. dollars except share amounts) Balances - January 1, 2020 Issue costs (net of tax of $2,106) Shares issued through public offering Shares issued in connection with conversion to corporate form Other comprehensive earnings Net earnings Comprehensive earnings Dividends to shareholders Balances - December 31, 2020 Issue costs (net of tax of $29) Stock option accretion Other comprehensive earnings Net earnings Comprehensive earnings Dividends to shareholders Balance - December 31, 2021 Shareholders’ Capital Shares Amount Contributed Surplus Accumulated Other Comprehensive Earnings Retained Earnings Total Equity 20,022,381 $ 1,265,000 184,813 412,886 $ (5,871) 164,297 28,735 3,604 $ 47,088 $ 7,548 $ 18,069 18,069 44,114 44,114 (8,790) 471,126 (5,871) 164,297 28,735 18,069 44,114 62,183 (8,790) 21,472,194 $ 600,047 $ 3,604 $ 65,157 $ 42,872 $ 711,680 — — — (76) 152 830 830 21,472,194 $ 600,047 $ 3,680 $ 65,987 $ (76) 152 830 23,540 24,370 (9,692) 726,434 23,540 23,540 (9,692) 56,720 $ Note 21 21 21 13 31 31 13 The accompanying notes are an integral part of these consolidated financial statements 58 BOYD GROUP SERVICES INC. CONSOLIDATED STATEMENTS OF EARNINGS For the years ended December 31, (thousands of U.S. dollars, except share and per share amounts) Sales Cost of sales Gross profit Operating expenses Acquisition and transaction costs Depreciation of property, plant and equipment Depreciation of right of use assets Amortization of intangible assets Fair value adjustments Finance costs Earnings before income taxes Income tax expense Current Deferred Net earnings The accompanying notes are an integral part of these consolidated financial statements Basic earnings per share Diluted earnings per share Basic weighted average number of shares outstanding Diluted weighted average number of shares outstanding BOYD GROUP SERVICES INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS For the years ended December 31, (thousands of U.S. dollars) Net earnings Other comprehensive earnings Items that may be reclassified subsequently to Consolidated Statements of Earnings Change in unrealized earnings on foreign currency translation Other comprehensive earnings Comprehensive earnings The accompanying notes are an integral part of these consolidated financial statements 2021 2020 Note 25 $ 1,872,670 $ 1,033,410 1,561,224 842,345 839,260 619,716 5,835 42,602 88,523 22,569 148 27,653 807,046 32,214 2,499 6,175 8,674 718,879 498,845 1,498 37,183 76,080 18,527 (3,871) 31,664 659,926 58,953 1,955 12,884 14,839 $ 23,540 $ 44,114 $ $ 1.10 $ 1.10 $ 2.10 2.00 21,472,194 21,472,194 21,005,596 21,014,859 7 8 10 17 9 9 30 30 30 30 2021 2020 $ 23,540 $ 44,114 830 830 24,370 $ 18,069 18,069 62,183 $ 59 BOYD GROUP SERVICES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, (thousands of U.S. dollars) Cash flows from operating activities Net earnings Adjustments for Fair value adjustments Deferred income taxes Finance costs Amortization of intangible assets Depreciation of property, plant and equipment Depreciation of right of use assets Other Changes in non-cash working capital items Cash flows from (used in) financing activities Shares issued through public offering Issue costs Increase in obligations under long-term debt Repayment of long-term debt, principal Repayment of obligations under property leases, principal Repayment of obligations under vehicle and equipment leases, principal Interest on long-term debt Interest on property leases Interest on vehicle and equipment leases Acquisition of non-controlling interest Dividends paid Payment of financing costs Cash flows used in investing activities Proceeds on sale of equipment, software and sale / leaseback agreements Equipment purchases and facility improvements Acquisition and development of businesses (net of cash acquired) Software purchases and licensing Increase in other long-term assets Effect of foreign exchange rate changes on cash Net (decrease) increase in cash position Cash, beginning of year Cash, end of year Income taxes paid Interest paid The accompanying notes are an integral part of these consolidated financial statements 60 2021 2020 Note $ 23,540 $ 44,114 17 10 7 8 32 21 14 14 15 15 14 15 15 18 14 7 5 10 148 6,175 27,653 22,569 42,602 88,523 (421) (3,871) 12,884 31,664 18,527 37,183 76,080 858 210,789 217,439 (14,075) 13,467 196,714 230,906 — (105) 330,500 (83,504) 164,297 (7,977) 495,502 (673,009) (82,622) (69,075) (2,275) (9,874) (17,797) (302) — (9,653) — (2,101) (15,499) (16,513) (283) (1,300) (7,132) (1,395) 124,368 (134,485) 1,145 (31,479) (317,488) (4,917) (1,358) (354,097) (312) (33,327) 61,041 $ $ $ 27,714 $ 4,014 $ 27,554 $ 11,097 (24,084) (58,142) (2,038) (1,841) (75,008) 12,320 33,733 27,308 61,041 7,029 31,844 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) 1. GENERAL INFORMATION Boyd Group Services Inc. (“BGSI” or the “Company”) is a Canadian corporation and controls The Boyd Group Inc. and its subsidiaries. Prior to January 1, 2020 BGSI operated as Boyd Group Income Fund (“the Fund”). The Company’s business consists of the ownership and operation of autobody/autoglass repair facilities and related services. At the reporting date, the Company operated locations in Canada under the trade name Boyd Autobody & Glass and Assured Automotive, as well as in the U.S. under the trade name Gerber Collision & Glass. In addition, the Company is a major retail auto glass operator in the U.S. under the trade names Gerber Collision & Glass, Glass America, Auto Glass Service, Auto Glass Authority and Autoglassonly.com. The Company also operates Gerber National Claim Services (“GNCS”), that offers glass, emergency roadside and first notice of loss services. The shares of the Company are listed on the Toronto Stock Exchange and trade under the symbol “BYD.TO”. The head office and principal address of the Company are located at 1745 Ellice Avenue, Winnipeg, Manitoba, Canada, R3H 1A6. The consolidated financial statements for the year ended December 31, 2021 (including comparatives) were approved and authorized for issue by the Board of Directors on March 22, 2022. 2. SIGNIFICANT ACCOUNTING POLICIES a) Basis of presentation The consolidated financial statements of BGSI have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The functional currency of Boyd Group Services Inc. is the Canadian dollar (“CAD”). These consolidated financial statements are presented in thousands of U.S. dollars (“USD”), except share and per share amounts. b) Revenue recognition BGSI is in the business of collision repair. The Company recognizes revenue upon completion and delivery of the repair to the customer, which has been determined to be the performance obligation that is distinct and the point at which control of the asset passes to the customer. Revenue is measured at the fair value of the consideration received. c) Inventory Inventory is valued at the lower of cost and net realizable value. Cost is determined on the first-in, first-out basis. Net realizable value is the estimated selling price in the ordinary course of business less any applicable selling expenses. d) Property, plant and equipment Property, plant and equipment assets are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and equipment consists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use 61 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) and an estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Depreciation is calculated using the declining balance and straight line rates as disclosed in the property, plant and equipment note. Leasehold improvements are amortized on the straight line basis over the period of estimated benefit. An item of property, plant and equipment is reclassified as held for sale or derecognized upon disposal, or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in the Consolidated Statement of Earnings. The Company conducts an annual assessment of the residual balances, useful lives and depreciation methods being used for property, plant and equipment and any changes arising from the assessment are applied by BGSI prospectively. e) Leases At inception, the Company assesses whether a contract is or contains a lease. Leases are recognized as a right of use asset and a lease liability at the lease commencement date. The Company recognizes a right of use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short term leases, defined as leases with a lease term of 12 months or less, and leases of low value assets. For these leases, the Company recognizes the lease payments as operating expenses on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Right of use assets are subsequently measured at cost less accumulated depreciation and impairment losses. Depreciation is recorded on a straight line basis over the term of the lease. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If the interest rate implicit in the leases cannot be readily determined, the Company uses its incremental borrowing rate. In order to calculate the incremental borrowing rate, reference interest rates are derived from the yields of corporate bonds in Canada and the U.S. The reference interest rates are supplemented by a leasing risk premium. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability and by reducing the carrying amount to reflect lease payments made. f) Consolidation The financial statements of the Company consolidate the accounts of the Company and its subsidiaries. All intercompany transactions, balances and unrealized gains and losses from intercompany transactions are eliminated on consolidation. Subsidiaries are those entities which the Company controls by having the power to govern the financial and operating policies. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is obtained by the Company and are de-consolidated from the date that control ceases. 62 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) g) Business combinations, goodwill and other intangible assets Acquisitions of subsidiaries and businesses are accounted for using the acquisition method of accounting. The cost of the acquisition is measured at the aggregate of the fair values (at the acquisition date) of assets transferred, liabilities incurred or assumed, and equity instruments issued by the Company in exchange for control of the acquired company. Acquisition costs are expensed as incurred. The acquired company’s identifiable assets (including previously unrecognized intangible assets), liabilities and contingent liabilities are recognized at their fair values at the acquisition date. Goodwill represents the excess of the cost of an acquisition over the fair value of BGSI’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is carried at cost less accumulated impairment losses. Intangible assets are recognized only when it is probable that the expected future economic benefits attributable to the assets will accrue to the Company and the cost can be reliably measured. Intangible assets acquired in a business combination are recorded at fair value. Intangible assets that do not have indefinite lives are amortized over their useful lives using an amortization method which reflects the economic benefit of the intangible asset. Customer relationships are amortized on a straight-line basis over the expected period of benefit of 20 years. Contractual rights, which consist of non-compete agreements and favourable lease agreements, are amortized on a straight-line basis over the term of the contract. Software is amortized on a straight-line basis over periods of three and five years. Brand names which the Company continues to use in the conduct of its business are considered indefinite life because their value is not expected to degrade over time. To the extent the Company decides to discontinue the use of a certain brand, an estimate of the remaining useful life is made and the intangible asset is amortized over the remaining period. h) Impairment of non-financial assets Property, plant and equipment and definite life intangible assets are tested for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. For the purpose of measuring recoverable amounts, assets are grouped at the lowest levels for which there are separately identifiable cash inflows (cash-generating unit or “CGU”). The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use (being the present value of the expected future cash flows of the relevant asset or CGU). An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. Goodwill and indefinite lived intangible assets are reviewed for impairment annually or at any time if an indicator of impairment exists. As well, newly acquired goodwill is reviewed for impairment at the end of the year in which it was acquired. Goodwill acquired through a business combination is allocated to each CGU, or group of CGUs, that are expected to benefit from the related business combination. A group of CGUs represents the lowest level within the entity at which the goodwill is monitored for internal management purposes, which is not higher than an operating segment. Impairment losses on goodwill are not reversed. The Company evaluates impairment losses, other than goodwill impairment, for potential reversals when events or circumstances warrant such consideration. i) Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held with banks, and other short-term highly liquid investments with original maturities of three months or less. 63 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) j) Income taxes Income tax comprises current and deferred tax. Income tax is recognized in the Consolidated Statement of Earnings except to the extent that it relates to items recognized directly in equity, in which case the income tax is recognized directly in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted, or substantively enacted, at the end of the reporting period, and any adjustment to tax payable in respect of previous years. In general, deferred tax is recognized in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined on a non-discounted basis using tax rates and laws that have been enacted or substantively enacted at the statement of financial position date and are expected to apply when the deferred tax asset or liability is settled. Deferred tax assets are recognized to the extent that it is probable that the assets can be recovered. Deferred income tax is provided on temporary differences arising on investments in subsidiaries except, in the case of subsidiaries, where the timing of the reversal of the temporary difference is controlled by BGSI and it is probable that the temporary difference will not reverse in the foreseeable future. k) Unearned rebates Prepaid purchase rebates are recorded as unearned rebates on the statement of financial position and amortized, as a reduction of the cost of purchases, on a straight-line basis over the term of the contract. l) Shareholders’ capital Common shares are classified as equity. Incremental costs directly attributable to the issuance of shares are recognized as a deduction from equity. Under IAS 32, a financial instrument that gives the holder the right to put the instrument back to the issuer for cash or another financial asset (a ‘puttable instrument’) is a financial liability, except for those instruments that meet the exceptions to be classified as equity instruments. The trust units of the Fund met the puttable equity exceptions and therefore were classified as equity as at January 1, 2020. The Fund’s declaration of trust allowed a unitholder to tender their units for cash redemption. This cash redemption right was restricted, at the Fund’s option, to an aggregate cash amount of $25 per month. The Fund was not asked to redeem units for cash. m) Share-based compensation plans Equity settled plans The Company's stock option plan allows for the granting of options up to an amount of 250,000 Common shares. Each tranche of the options vests equally over two, three, four and five year periods. Options are awarded and vest over a five year period. The term of an option shall be determined and approved by the People, Culture and Compensation Committee; provided that the term shall be no longer than ten years from the grant date. The fair value of each option is measured at the date of grant using the Black-Scholes option pricing model. Compensation expense is recognized over the option vesting period, based on the number of options expected to vest, with the offset credited to contributed surplus. 64 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) Cash settled plans The Company’s Performance Share Units, Restricted Share Units and Directors Deferred Share Unit Plan are cash settled share-based payments. The fair value of each outstanding Performance Share Unit and Restricted Share Unit is estimated based on the fair market value of the Company’s units/shares at the grant date, subsequently adjusted for additional shares granted based on the reinvestment of notional dividends and the market value of the shares at the end of each reporting period. The associated compensation expense is recognized over the vesting period, factoring in the probability of the performance criteria being met during that period. The fair value of each outstanding Director Deferred Share Unit is estimated based on the fair market value of the BGSI’s shares at the grant date, subsequently adjusted for additional shares granted based on the reinvestment of notional dividends and the market value of the shares at the end of each reporting period. n) Earnings per share Basic earnings per share (“EPS”) is calculated by dividing the net earnings for the period attributable to equity owners of the Company by the weighted average number of shares outstanding during the period. Diluted EPS is calculated by adjusting the weighted average number of shares outstanding and corresponding earnings impact for dilutive instruments. The Company’s dilutive instruments comprise non- controlling interest put option and call liability and stock options. The dilutive impact of the non- controlling interest put option and call liability is calculated using the “if converted” method. The dilutive impact of the stock options are calculated using the treasury stock method. o) Foreign currency translation Items included in the financial statements of each subsidiary are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The Company operates with multiple functional currencies. The consolidated financial statements are presented in U.S. dollars as this provides a better reflection of the Company’s business activities, given the significance of revenues denominated in U.S. dollars. Entities that have a functional currency different from that of U.S. dollars are translated into U.S. dollars. BGSI’s functional currency is Canadian dollars. Assets and liabilities are translated into U.S. dollars at the noon rate of exchange prevailing at the statement of financial position dates and income and expense items are translated at the average exchange rate during the period (as this is considered a reasonable approximation to actual rates). The adjustment arising from the translation of these accounts is recognized in other comprehensive earnings (loss) as cumulative translation adjustments. When an entity disposes of its entire interest in a foreign operation, or loses control, joint control, or significant influence over a foreign operation, the foreign currency gains or losses accumulated in other comprehensive earnings (loss) related to the foreign operation are recognized in earnings. If an entity disposes of part of an interest in a foreign operation which remains a subsidiary, a proportionate amount of foreign currency gains or losses accumulated in other comprehensive earnings related to the subsidiary are reallocated between controlling and non-controlling interests. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Generally, foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in currencies other than an operation’s functional currency are recognized in earnings. 65 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) p) Financial instruments Recognition Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Classification BGSI classifies its financial assets and liabilities in the following categories depending on the Company’s business model for managing the financial assets and the contractual terms of the cash flows: • • Those to be measured subsequently at fair value, either through profit or loss (“FVPL”) or through OCI, and Those to be measured at amortized cost Cash and accounts receivable are classified as amortized cost. After their initial fair value measurement, they are measured at amortized cost using the effective interest method, as reduced by appropriate allowances for estimated lifetime expected credit losses. Accounts payable and accrued liabilities, dividends payable, and long-term debt are classified as amortized cost and are net of any related financing fees or issue costs. After their initial fair value measurement, they are measured at amortized cost using the effective interest method. Derivative contracts including the non-controlling interest put option and call liability are classified as financial assets or financial liabilities at FVPL with mark-to-market adjustments being recorded to net earnings at each period end. The Class A common shares of BGHI were exchangeable into units of the Fund until January 1, 2020. As a result of the Fund’s units being redeemable for cash, the exchangeable Class A shares of the Fund’s subsidiary BGHI, were presented as financial liabilities and classified as financial assets or financial liabilities at FVPL. Exchangeable Class A shares were measured at the market price of the units of Fund as of the statement of financial position date. Measurement At initial recognition, BGSI measures a financial asset at its fair value. In the case of a financial asset not measured at FVPL, transaction costs that are directly attributable to the acquisition of the financial asset are included in the initial fair value. Transaction costs of financial assets carried at FVPL are expensed in profit or loss. For those financial instruments where fair value is recognized in the Consolidated Statement of Financial Position the methods and assumptions used to develop fair value measurements have been classified into one of the three levels of the fair value hierarchy for financial instruments: • • • Level 1 includes quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 includes inputs that are observable other than quoted prices included in Level 1 Level 3 includes inputs that are not based on observable market data q) Non-controlling interests The Company accounts for transactions where a non-controlling interest exists, and where a put option has been granted to third parties under IFRS 10 whereby the non-controlling interest is initially recognized at fair value and then immediately derecognized upon the issuance and recognition of the put option. Differences between the put option liability recognized at fair value and the amount of any non-controlling interest derecognized is recognized directly in equity. 66 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) When there is no allocation of profit or loss to non-controlling partners, no non-controlling interest is recognized in the Consolidated Statement of Financial Position. Distributions to non-controlling partners are recognized as an expense when paid or payable based on the distribution formula of the agreement. r) Pensions and other post-retirement benefits The Company contributes to defined contribution pension plans of employees. Contributions are recognized within operating expenses at an amount equal to contributions payable for the period. Any outstanding contributions are recognized as liabilities within accrued liabilities. s) Provisions Provisions are recognized when BGSI has a present legal or constructive obligation that has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation. Provisions are measured at management’s best estimate of the expenditure required to settle the obligation at the end of the reporting period, and are discounted to present value where the effect is significant. The increase in the provision due to the passage of time is recognized as a finance cost. t) Segment reporting The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments and has been identified as the joint responsibility of the President and Chief Executive Officer of BGSI and the Executive Vice President and Chief Financial Officer of BGSI. The Company’s primary line of business is automotive collision and glass repair and related services, with the majority of revenues relating to this group of similar services. This line of business operates in Canada and the U.S. and both regions exhibit similar long-term economic characteristics. In this circumstance, IFRS requires the Company to provide specific geographical disclosure. For the years reported, the Company’s revenues were derived within Canada or the U.S. and all property, plant and equipment, right of use assets, goodwill and intangible assets are located within these two geographic areas. u) Government assistance Government grants are recognized at their fair value in accordance with IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, when there is reasonable assurance that the grant will be received and any specified conditions are met. Grants received in relation to COVID-19 relief are recorded in the Consolidated Statement of Earnings as a reduction of cost of sales, operating expenses and finance costs when it is determined there is reasonable assurance the grants will be received. v) Reporting Interest Paid on the Statement of Cash Flows In accordance with IAS 7 Statement of Cash Flows, the Company has made the accounting policy choice to disclose these amounts as “Financing Activities” in the cash flow statement as this best reflects the nature of these expenses. 67 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. COVID-19 Impact On March 11, 2020, the World Health Organization declared the novel Coronavirus (COVID-19) as a global pandemic. In response, governments worldwide enacted emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses resulting in a global economic slowdown as well as significant volatility in equity markets. The pandemic impacted the demand for collision repair services throughout the remainder of 2020 and 2021. A slower economic re-opening, as well as greater restrictions, caused a more significant decline in demand for services in Canada when compared to the U.S. As at December 31, 2021, BGSI is not able to reliably forecast the severity or duration of the impact that COVID-19 will have on the economy, or on BGSI's operations. The extent to which the impacts of the COVID-19 pandemic affects the judgments and estimates described further in this note depend on future developments, which are highly uncertain and cannot be predicted. Management will continue to monitor and assess the impact of the pandemic on its judgments, estimates, accounting policies and amounts recognized in these consolidated financial statements. Critical accounting estimates BGSI makes estimates, including the assumptions applied therein, concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. Impairment of Goodwill and Intangible Assets When testing goodwill and intangibles for impairment, BGSI uses a five year forward looking discounted cash flow of the cash generating unit (“CGU”) or group of CGU’s to which the asset relate. An estimate of the recoverable amount is then calculated as the higher of an asset’s fair value less costs to sell and value in use (being the present value of the expected future cash flows of the relevant asset or CGU). An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The methods used to value intangible assets and goodwill require critical estimates to be made regarding the future cash flows and useful lives of the intangible assets. Goodwill and intangible asset impairments, when recognized, are recorded as a separate charge to earnings, and could materially impact the operating results of the Company for any particular accounting period. A slower economic re-opening, as well as greater restrictions, caused a more significant decline in demand for services in Canada when compared to the U.S.; however, BGSI concluded that there was no impairment of goodwill or intangible assets as a result of the assessment as at December 31, 2021. Impairment of Other Long-lived Assets BGSI assesses the recoverability of its long-lived assets, other than goodwill and intangibles, after considering the potential impairment indicated by such factors as business and market trends, the Company’s ability to transfer the assets, future prospects, current market value and other economic factors. In performing its review 68 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) of recoverability, management estimates the future cash flows expected to result from the use of the assets and their potential disposition. If the discounted sum of the expected future cash flows is less than the carrying value of the assets generating those cash flows, an impairment loss would be recognized based on the excess of the carrying amounts of the assets over their estimated recoverable value. The underlying estimates for cash flows include estimates for future sales, gross margin rates and operating expenses. Changes which may impact these estimates include, but are not limited to, business risks and uncertainties and economic conditions. To the extent that management’s estimates are not realized, future assessments could result in impairment charges that may have a material impact on the Company’s consolidated financial statements. Business Combinations Fair value of assets acquired and liabilities assumed in a business combination is estimated based on information available at the date of acquisition and involves considerable judgment in determining the fair values assigned to property, plant and equipment and intangible assets acquired and liabilities assumed on acquisition. The determination of these fair values involves analysis including the use of discounted cash flows, estimated future margins, future growth rates, market rents and capitalization rates. There is estimation in this analysis and actual results could differ from estimates. Fair Value of Financial Instruments BGSI has applied discounted cash flow methods to establish the fair value of certain financial liabilities recorded on the Consolidated Statement of Financial Position, as well as disclosed in the notes to the consolidated financial statements. BGSI also establishes mark-to-market valuations for derivative instruments, which are assumed to represent the current fair value of these instruments. These valuations rely on assumptions regarding interest and exchange rates as well as other economic indicators, which at the time of establishing the fair value for disclosure, have a high degree of uncertainty. Unrealized gains or losses on these derivative financial instruments may not be realized as markets change. Income Taxes BGSI is subject to income tax in several jurisdictions and estimates are used to determine the provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the Company recognizes tax liabilities based on estimates of whether additional taxes and interest will be due. Uncertain tax liabilities may be recognized when, despite the Company’s belief that its tax return positions are supportable, the Company believes that certain positions are likely to be challenged and may not be fully sustained upon review by tax authorities. The Company believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made. 4. CHANGES IN ACCOUNTING POLICIES Presentation Currency Effective January 1, 2021, the Company changed its presentation currency from Canadian dollars (“CAD”) to U.S. dollars (“USD”). This change will provide shareholders with a better reflection of the Company's business activities, given the significance of revenues denominated in USD. The change in presentation currency represents a voluntary change in accounting policy. The Company has applied the presentation currency 69 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) change retrospectively. All periods presented in the consolidated financial statements have been translated into the new presentation currency, in accordance with the guidance in IAS 21, The Effects of Changes in Foreign Exchange Rates. The consolidated statements of earnings and the consolidated statements of cash flows have been translated into the presentation currency using the average exchange rates prevailing during each reporting period. In the consolidated statements of financial position, all assets and liabilities have been translated using the period-end exchange rates, and all resulting exchange differences have been recognized in accumulated other comprehensive earnings. Asset and liability amounts previously reported in CAD have been translated into USD as at January 1, 2020, and December 31, 2020 using the period-end exchange rates below and shareholders' equity balances have been translated using historical rates in effect on the date of the transactions. USD/CAD Exchange Rate Closing rate at the reporting date Average rate for the period December 31, 2021 0.7888 0.7979 December 31, 2020 0.7854 0.7456 January 1, 2020 0.7699 0.7537 The change in presentation currency resulted in the following impact on the January 1, 2020, opening consolidated statement of financial position: Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Total equity Previously reported in CAD January 1, 2020 Presentation currency change Reported in USD January 1, 2020 $ $ $ $ $ 227,567 $ 1,673,686 1,901,253 $ 402,381 $ 886,960 1,289,341 $ (52,357) $ (385,057) (437,414) $ (92,567) $ (204,061) (296,628) $ 175,210 1,288,629 1,463,839 309,814 682,899 992,713 611,912 $ (140,786) $ 471,126 70 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) The change in presentation currency resulted in the following impact on the December 31, 2020, consolidated statement of financial position: Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Total equity Previously reported in CAD December 31, 2020 Presentation currency change Reported in USD December 31, 2020 $ $ $ $ $ 262,835 $ 1,738,070 2,000,905 $ 389,701 $ 705,078 1,094,779 $ (56,399) $ (372,959) (429,358) $ (83,617) $ (151,295) (234,912) $ 206,436 1,365,111 1,571,547 306,084 553,783 859,867 906,126 $ (194,446) $ 711,680 The change in presentation currency resulted in the following impact on the year ended December 31, 2020 consolidated statements of statement of earnings and comprehensive income: Previously reported in CAD December 31, 2020 Presentation currency change Reported in USD December 31, 2020 $ Sales Gross profit Operating expenses Net earnings Comprehensive earnings 2,089,115 $ 961,930 668,379 57,734 45,266 (527,891) $ (243,051) (169,534) (13,620) 16,917 1,561,224 718,879 498,845 44,114 62,183 The change in presentation currency resulted in the following impact on the year ended December 31, 2020 basic and diluted earnings per share: Previously reported in CAD December 31, 2020 Presentation currency change Reported in USD December 31, 2020 $2.75 $2.60 $(0.65) $(0.60) $2.10 $2.00 Basic earnings per share for the year ended Diluted earnings per share for the year ended Stock Option Plan During the first quarter of 2021, the Company adopted a stock option plan, which was approved by shareholders on May 12, 2021, for senior management. Options are awarded and vest over a five year period. The fair value of each option is measured at the date of grant using the Black-Scholes option pricing model. Compensation expense is recognized over the option vesting period, based on the number of options expected to vest, with the offset credited to contributed surplus. 71 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) 5. ACQUISITIONS The Company completed 39 acquisitions that added 101 locations during the year ended December 31, 2021 as follows: Acquisition Date January 15, 2021 February 12, 2021 February 19, 2021 February 23, 2021 March 26, 2021 March 26, 2021 March 31, 2021 April 9, 2021 April 23, 2021 April 27, 2021 April 30, 2021 April 30, 2021 May 7, 2021 May 14, 2021 June 11, 2021 June 15, 2021 June 18, 2021 June 25, 2021 July 9, 2021 July 16, 2021 July 31, 2021 August 13, 2021 August 13, 2021 August 20, 2021 August 31, 2021 September 7, 2021 September 17, 2021 September 17, 2021 September 27, 2021 October 1, 2021 October 8, 2021 October 15, 2021 Location Wyandotte, MI Columbia, SC Mentor & Streetsboro, OH (2 locations) Amarillo, TX Simi Valley, CA Tallahassee, FL (3 locations) Milwaukee, WI Vero Beach, FL Escondido, CA Denton and Flour Mound, TX (2 locations) Green Bay, WI Sanford and Southern Pines, NC (2 locations) Kaneohe, Wahiawa & Waipahu, HI (3 locations) Baltimore & Reisterstown, MD (2 locations) Victor, NY Pittsburgh, PA Austin, TX (2 locations) Georgia & South Carolina (16 locations) La Habra, CA Appleton, WI Oklahoma, Kansas & Missouri (35 locations) Eagle River, Minocqua, Rhinelander & Tomahawk, WI (4 locations) San Diego, CA Springfield, MO Austin, TX Ankeny, IA Shreveport, LA Burbank, IL Erie, PA Clarence, NY Brighton, MI Medina & North Ridgeville, OH (2 locations) 72 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) Acquisition Date October 22, 2021 October 29, 2021 November 12, 2021 November 16, 2021 November 19, 2021 December 3, 2021 December 10, 2021 Location Sycamore, IL Cornwall, ON London, ON Westfield, WI Verona, WI Hudson, WI Peterborough, ON During the second quarter of 2021, the Company acquired a mobile scanning and calibration business. During the third quarter of 2021, the Company acquired a glass business. The Company has accounted for the 2021 acquisitions using the acquisition method as follows: Acquisitions in 2021 Identifiable net assets acquired at fair value: Cash Other currents assets Property, plant and equipment Right of use assets Identified intangible assets Customer relationships Non-compete agreements Brand name Liabilities assumed Lease liabilities Identifiable net assets acquired Goodwill Total purchase consideration Consideration provided Cash paid or payable Seller notes Total consideration provided 73 Total acquisitions $ $ $ $ $ 2,258 10,063 44,231 140,273 85,079 3,606 1,077 (10,707) (140,273) 135,607 137,836 273,443 258,873 14,570 273,443 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) The Company completed 12 acquisitions that added 39 locations during the year ended December 31, 2020 as follows: Acquisition Date January 2, 2020 March 6, 2020 March 13, 2020 March 23, 2020 Location Parksville, BC Indiana & Michigan (14 locations) Waukesha, WI Saanichton, BC September 4, 2020 Farmington & Rogers, AR (2 locations) September 25, 2020 Milwaukee & Hales Corners, WI (2 locations) October 30, 2020 November 17, 2020 November 30, 2020 December 4, 2020 December 14, 2020 December 31, 2020 Escanaba, Kingsford & Marquette, MI (3 locations) Oshkosh, WI Pflugerville, TX Riverside & San Bernadino, CA (11 locations including one intake center) Morrow, GA Avon, CO 74 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) The Company has accounted for the 2020 acquisitions using the acquisition method as follows: Acquisitions in 2020 Identifiable net assets acquired at fair value: Other currents assets Property, plant and equipment Right of use assets Identified intangible assets Customer relationships Non-compete agreements Lease liabilities Identifiable net assets acquired Goodwill Total purchase consideration Consideration provided Cash paid or payable Seller notes Total consideration provided Total acquisitions (Note 4) $ $ $ $ $ 798 13,030 22,130 23,025 1,305 (22,130) 38,158 34,711 72,869 33,234 39,635 72,869 The preliminary purchase prices for the 2021 acquisitions may be revised as additional information becomes available. Further adjustments may be recorded in future periods as purchase price adjustments are finalized. Canadian acquisition transactions are initially recognized in U.S. dollars at the rates of exchange in effect on the transaction dates. Subsequently, the assets and liabilities are translated at the rate in effect at the Consolidated Statement of Financial Position date. A significant part of the goodwill recorded on the acquisitions can be attributed to the assembled workforce and the operating know-how of key personnel. However, no intangible assets qualified for separate recognition in this respect. Goodwill recognized during 2021 is expected to be deductible for tax purposes. On the statement of cash flows, included as part of cash used for acquisition and development of business were costs related to the acquisition of businesses, as well as the development of businesses which consisted primarily of property, plant and equipment additions. 75 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) The results of operations reflect the revenues and expenses of acquired operations from the date of acquisition. During 2021, revenue contributed by 2021 acquisitions since being acquired were $130,751. Net losses incurred by 2021 acquisitions since being acquired were $3,626. If 2021 acquisitions had been acquired on January 1, 2021, BGSI’s revenue and net earnings for the year ended December 31, 2021 would have been $2,029,394 and $15,501 (unaudited), respectively. 6. INVENTORY As at Parts and materials Work in process December 31, 2021 December 31, 2020 (Note 4) $ $ 20,837 $ 45,947 66,784 $ 14,796 17,283 32,079 Included in cost of sales for the year ended December 31, 2021 are parts and material costs of $615,418 (2020 – $492,144) and labour costs of $295,671 (2020 – $242,549) with the balance of cost of sales primarily made up of sublet charges. 7. PROPERTY, PLANT AND EQUIPMENT Depreciation rates As at January 1, 2021 Cost Accumulated depreciation Net book value For the year ended December 31, 2021 Acquired through business combinations Additions Proceeds on disposal Gain (loss) on disposal Transfers from right of use assets Depreciation Foreign exchange Net book value As at December 31, 2021 Cost Accumulated depreciation Net book value Land Buildings Shop Equipment Office Equipment Computer Hardware Signage Vehicles 5% 15% 20% 30% 15% 30% Leasehold Improvements 10 to 25 years straight line Total $10,149 $27,212 $183,037 $15,403 $26,314 $13,955 $6,746 $143,144 $425,960 — $10,149 (3,472) $23,740 (87,031) $96,006 (8,998) $6,405 (15,670) $10,644 (6,644) $7,311 (5,435) $1,311 (60,765) $82,379 (188,015) $237,945 2,953 16,434 6,098 13,454 19,383 23,357 — 2,190 — (9) (8) (55) (9) 9 10 (6) 6 — — 2 — 4,226 — (3) (9) — 2,220 — (30) 1 873 498 14,924 30,618 44,231 92,997 (991) (131) (1,145) 409 — 327 328 214 (37) (1,723) (18,857) (1,517) (3,668) (1,300) 8 51 3 — 4 324 (502) 3 (175) (15,035) (42,602) 37 108 $29,538 $41,587 $120,091 $7,035 $11,190 $8,206 $1,925 $112,617 $332,189 $29,538 $46,782 $224,502 $17,437 $30,364 $15,917 $7,430 $187,034 $559,004 — (5,195) (104,411) (10,402) $29,538 $41,587 $120,091 $7,035 (19,174) $11,190 (7,711) $8,206 (5,505) $1,925 (74,417) (226,815) $112,617 $332,189 76 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) (Note 4) Land Buildings Shop Equipment Office Equipment Computer Hardware Signage Vehicles Leasehold Improvements Total Depreciation rates 5% 15% 20% 30% 15% 30% 10 to 25 years straight line As at January 1, 2020 Cost Accumulated depreciation Net book value For the year ended December 31, 2020 Acquired through business combinations Additions Proceeds on disposal Gain (loss) on disposal Transfers from right of use assets Depreciation Foreign exchange Net book value As at December 31, 2020 Cost Accumulated depreciation Net book value $10,240 $25,169 $159,984 $14,172 $21,491 $12,625 $6,706 $129,045 $379,432 — (2,860) (70,381) (7,520) (11,658) (5,487) (5,215) (48,732) (151,853) $10,240 $22,309 $89,603 $6,652 $9,833 $7,138 $1,491 $80,313 $227,579 534 4,591 2,255 3,620 5,250 17,071 (5,009) (4,420) (14) (231) 141 (285) — 1,214 (3) (13) — 4,470 — (8) — — 1,322 — (10) — 205 129 4,786 12,794 13,030 45,211 (403) (1,248) (11,097) 68 (166) (504) 240 (458) 39 (1,294) 491 (12,904) (37,183) 98 418 — — 24 1,160 385 — (1,369) (16,156) (1,457) (3,679) (1,160) 44 152 12 28 21 $10,149 $23,740 $96,006 $6,405 $10,644 $7,311 $1,311 $82,379 $237,945 $10,149 $27,212 $183,037 $15,403 $26,314 $13,955 $6,746 $143,144 $425,960 — (3,472) (87,031) $10,149 $23,740 $96,006 (8,998) $6,405 (15,670) $10,644 (6,644) $7,311 (5,435) $1,311 (60,765) (188,015) $82,379 $237,945 77 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) 8. RIGHT OF USE ASSETS As at Property Vehicles Equipment December 31, 2021 Balance, beginning of period Acquired through business combinations Additions and modifications Depreciation Transfers to property, plant and equipment Foreign exchange Net book value $ 376,105 $ 5,813 $ 48 $ 381,966 140,273 64,467 (86,327) — 182 494,700 $ $ — 3,994 (2,185) (328) 5 7,299 $ — — (11) — — 37 $ 140,273 68,461 (88,523) (328) 187 502,036 Property Vehicles Equipment December 31, 2020 (Note 4) Balance, beginning of period Acquired through business combinations Additions and modifications Depreciation Loss on disposal Transfers to property, plant and equipment Foreign exchange Net book value $ 358,105 $ 5,567 $ 370 $ 364,042 22,130 69,904 (74,365) — — 331 — 2,213 (1,692) (251) 164 (188) — (23) (23) — 327 (603) 22,130 72,094 (76,080) (251) 491 (460) $ 376,105 $ 5,813 $ 48 $ 381,966 9. INCOME TAXES BGSI accounts for deferred income tax assets and liabilities in respect of accounting and tax basis differences. Deferred income tax assets and liabilities which relate to the same jurisdiction are netted on the Consolidated Statement of Financial Position. 78 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) a. The reconciliation between income tax expense and the accounting earnings multiplied by the combined basic Canadian and U.S. federal, provincial and state tax rates is as follows: Earnings before income taxes Combined basic Canadian and U.S. federal, provincial and state tax rates For the years ended December 31, 2021 2020 (Note 4) $ 32,214 $ 58,953 26.36 % 26.02 % Income tax expense at combined statutory tax rates $ 8,492 $ 15,340 Adjustments for the tax effect of: Other non-deductible expenses Non-deductible fair value adjustments Other Income tax expense 130 — 52 282 (1,022) 239 $ 8,674 $ 14,839 b. Deferred income taxes consist of the Canadian and U.S. tax jurisdictions, respectively, as follows: As at Intangible assets Net operating losses carried forward Accrued liabilities Property, plant and equipment Issue costs Right of use assets net of lease liabilities Other Deferred income tax asset December 31, 2021 December 31, 2020 (Note 4) $ $ (4,272) $ 2,430 195 (314) 1,446 1,522 730 1,737 $ (3,607) 1,049 (123) (731) 1,828 1,347 886 649 79 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) As at Intangible assets Non-capital losses carried forward Accrued liabilities Property, plant and equipment Acquisition costs Right of use assets net of lease liabilities Other Deferred income tax liability December 31, 2021 December 31, 2020 (Note 4) $ $ 36,288 $ (8,158) (5,001) 40,038 (3,964) (9,255) (1,346) 48,602 $ 29,004 — (9,916) 34,236 (2,904) (8,485) (580) 41,355 c. The movement in deferred income tax assets and liabilities in Canada and U.S. tax jurisdictions, respectively, during the year is as follows: Deferred income tax asset as at Balance, beginning of year Issue costs Deferred income tax recovery Foreign exchange Balance, end of year Deferred income tax liability as at Balance, beginning of year Deferred income tax expense Foreign exchange Balance, end of year December 31, 2021 December 31, 2020 (Note 4) $ $ 649 $ — 1,072 16 $ 1,737 $ (1,855) 2,106 290 108 649 December 31, 2021 December 31, 2020 (Note 4) $ $ 41,355 $ 7,247 — 48,602 $ 28,180 13,175 — 41,355 d. Deferred income tax assets are recognized to the extent it is probable that sufficient future taxable income will be available to allow a deferred income tax asset to be realized. At December 31, 2021 BGSI has recognized all of its deferred income tax assets with the exception of $5,898 (2020 - $5,898) in capital losses available in Canada. At December 31, 2021 the Company has non-capital losses in Canada of $9,238 (2020 - $3,991) and net operating losses in the U.S. of $31,376 (2020 - $nil). The net operating losses in the U.S. do not expire. 80 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) The losses in Canada expire as follows: Year of expiry 2038 2039 2040 2041 10. INTANGIBLE ASSETS Customer Relationships Brand Name Software Non- compete Agreements Favourable Lease Agreements (Note 4) As at January 1, 2020 Cost Accumulated amortization Net book value For the year ended December 31, 2020 Acquired through business combinations Additions Amortization Foreign exchange Net book value As at December 31, 2020 Cost Accumulated amortization Net book value For the year ended December 31, 2021 Acquired through business combinations Additions Amortization Foreign exchange Net book value As at December 31, 2021 Cost Accumulated amortization Net book value $293,421 (57,001) $236,420 $22,339 (4,962) $17,377 23,025 — (14,737) 847 — — — 217 $5,973 (4,262) $1,711 — 2,038 (861) 30 $245,555 $17,594 $2,918 $317,293 (71,738) $245,555 $22,556 (4,962) $17,594 85,079 — (17,793) 218 1,077 — (208) 48 $313,059 $18,511 $402,598 (89,539) $313,059 $23,681 (5,170) $18,511 $8,041 (5,123) $2,918 — 4,917 (1,138) (55) $6,642 $12,464 (5,822) $6,642 $18,418 (11,101) $7,317 1,305 — (2,509) (3) $6,110 $19,720 (13,610) $6,110 3,606 — (3,010) 22 $6,728 $23,353 (16,625) $6,728 81 $ $ $ $ 301 1,535 8 7,394 Total $346,452 (79,003) $267,449 24,330 2,038 (18,527) 1,091 $6,301 (1,677) $4,624 — — (420) — $4,204 $276,381 $6,301 (2,097) $4,204 $373,911 (97,530) $276,381 — — (420) 3 89,762 4,917 (22,569) 236 $3,787 $348,727 $6,301 (2,514) $3,787 $468,397 (119,670) $348,727 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) 11. GOODWILL As at Balance, beginning of year Acquired through business combination Foreign exchange Balance, end of period December 31, 2021 December 31, 2020 (Note 4) $ 463,734 $ 427,005 137,836 421 34,711 2,018 $ 601,991 $ 463,734 The COVID-19 pandemic has brought significant disruption to the worldwide economy and significantly impacted the Company’s sales as demand for services decreased. COVID-19 continues to have an impact on operations which has resulted in lower financial performance than initial budgeted expectations. As such, the ongoing impact of COVID-19 continues to be a trigger to assess the carrying amount of goodwill as at December 31, 2021. When testing goodwill for impairment, BGSI uses a five year forward looking discounted cash flow of the cash generating unit (“CGU”) or group of CGU’s to which the asset relate. BGSI has used the fair value less costs to sell method to evaluate the carrying amount of goodwill. The key assumptions used in the assessment include an estimate of current and future cash flows, taxes, future acquisition growth, future capital expenditures, a terminal growth rate of 2% and a weighted average cost of capital of 7% to 9%. A slower economic re-opening, as well as greater restrictions, caused a more significant decline in demand for services in Canada when compared to the U.S. There remains judgement and estimation in the timing and degree to which demand for services in Canada recovers to pre-COVID levels. BGSI concluded that there was no impairment to the carrying amount of goodwill as at December 31, 2021. The carrying amount of goodwill for the Canadian segment was $101,149 as at December 31, 2021. Sensitivity testing is conducted as part of the annual impairment tests. After considering all key assumptions, management considers that a reasonably possible change in only the following assumptions would cause the Canadian segment’s carrying amount to exceed its recoverable amount: • • If the discount rate increased by approximately 2.2% If Adjusted EBITDA margins are lower by approximately 2.2% throughout the forecast period, representing a 16-18% decline in Adjusted EBITDA 12. OTHER LONG TERM ASSETS Other long term assets consist primarily of rent deposits in the amount of $3,783 (2020 - $2,895), which are long term in nature. Investments which do not qualify for equity treatment are recorded as other long term assets at cost. Any derivatives associated with such investments are recorded at fair value, with fair value adjustments recorded to earnings. The value of such derivatives was $nil as at December 31, 2021 (2020 - $nil). 82 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) 13. DIVIDENDS The Company’s Directors have discretion in declaring dividends. The Company declares and pays dividends from its available cash from operations taking into account current and future performance amounts necessary for principal and interest payments on debt obligations, amounts required for maintenance capital expenditures and amounts allocated to reserves. The Company declared dividends of C$0.141 per share in the first, second and third quarters of 2021 and C$0.144 in the fourth quarter of 2021. The Company declared dividends of C$0.138 per share in the first, second and third quarter of 2020 and C$0.141 in the fourth quarter of 2020. Dividends to shareholders were declared and paid in thousands of U.S. dollars as follows: Record date March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 Payment date April 28, 2021 July 28, 2021 October 27, 2021 January 27, 2022 Record date Payment date March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020 April 28, 2020 July 29, 2020 October 28, 2020 January 27, 2021 Dividend amount $ $ 2,408 2,478 2,389 2,417 9,692 Dividend amount (Note 4) $ $ 1,999 2,187 2,240 2,364 8,790 83 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) 14. LONG-TERM DEBT The Company has a credit facility agreement expiring in March 2025 which consists of a revolving credit facility of $550,000 with an accordion feature which can increase the facility to a maximum of $825,000 (the “revolving credit facility”, or the “facility”). The revolving credit facility is accompanied by a new seven-year fixed-rate Term Loan A in the amount of $125,000 at an interest rate of 3.455%. The revolving credit facility is with a syndicate of Canadian and U.S. banks and is secured by the shares and assets of the Company as well as guarantees by BGSI and subsidiaries, while Term Loan A is with one of the syndicated banks. The interest rate for draws on the revolving credit facility are based on a pricing grid of BGSI’s ratio of total funded debt to EBITDA as determined under the credit agreement. The Company can draw the facility in either the U.S. or in Canada, in either U.S. or Canadian dollars. The Company can make draws in tranches as required. Tranches bear interest only and are not repayable until the maturity date but can be voluntarily repaid at any time. The Company has the ability to choose the base interest rate between Prime, Bankers Acceptances (“BA”), U.S. Prime or London Inter Bank Offer Rate (“LIBOR”). The total syndicated facility includes a swing line up to a maximum of $10,000 U.S. in Canada and $30,000 in the U.S. At December 31, 2021, the Company has drawn $264,500 U.S. (December 31, 2020 - $nil U.S.) and $nil Canadian (December 31, 2020 - $nil) on the revolving credit facility and swing line and $125,000 (December 31, 2020 - $125,000) on the Term Loan A. Under the revolving credit facility, the Company is subject to certain financial covenants which must be maintained to avoid acceleration of the termination of the credit agreement. The financial covenants require BGSI to maintain a senior funded debt to EBITDA ratio of less than 3.50 and an interest coverage ratio of greater than 2.75. For four quarters following a material acquisition, the senior funded debt to EBITDA ratio may be increased to less than 4.00. For purposes of covenant calculations, property lease payments are deducted from EBITDA. During the second quarter of 2020, the Company amended certain financial covenants under the revolving credit facility to provide additional covenant headroom. While the Company had not breached any covenants, this amendment was intended to prevent the effects of the COVID-19 pandemic from distorting the covenant calculations and distracting the Company or its lenders from the prudent management of the business. The amendments included a suspension to Boyd’s requirement to comply with its leverage and interest coverage covenants from July 1, 2020 to December 30, 2020, as well as providing more flexibility in the calculation of such covenants beginning with the second quarter of 2020 and through the second quarter of 2021. Effective July 1, 2020 to June 30, 2021 inclusive, for the purposes of testing any financial covenants on a trailing twelve month period, the Company will be permitted to replace the EBITDA for the second and third quarters of 2020 with the EBITDA for the second and third quarters of 2019. In addition, the senior funded debt to EBITDA ratio was increased to no greater than 4.00 to June 30, 2020. From December 31, 2020 to June 29, 2021, the senior funded debt to EBITDA ratio will be no greater than 3.75. For four quarters following a material acquisition during the December 31, 2020 to June 29, 2021 timeframe, the senior debt to EBITDA ratio may be increased to no greater than 4.00. During the suspension period, the Company was required to meet a minimum liquidity covenant of $150,000 U.S., which, given the Company’s cash position and undrawn facilities, was not burdensome. 84 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) Deferred finance costs of C$859 were incurred in 2017 to complete the second amended and restated credit agreement. These fees were amortized to finance costs on a straight line basis over the five year term of the second amended and restated credit agreement until March 17, 2020 when the third amended and restated credit agreement was signed. At that time, the unamortized deferred financing costs of $320 were recorded as finance costs. Financing costs of $1,395 incurred during 2020 to complete the third amended and restated credit agreement have been deferred. These fees are amortized to finance costs on a straight line basis over the five year term of the third amended and restated credit agreement and over the seven year term for fees incurred related to Term Loan A. The unamortized deferred financing costs of $1,018 have been netted against the debt drawn as at December 31, 2021. As at December 31, 2021, the Company was in compliance with all financial covenants. Seller notes payable of $53,591 (of which $53,461 are U.S. denominated) on the financing of certain acquisitions are unsecured, at interest rates ranging from 1% to 8%. The notes are repayable from January 2022 to January 2027 in the same currency as the related note. Long-term debt is comprised of the following: As at Revolving credit facility & swing line (net of financing costs) Term Loan A (net of financing costs) Seller notes Current portion December 31, 2021 December 31, 2020 (Note 4) $ $ $ 263,802 $ 124,680 53,591 442,073 $ 13,887 — 123,705 56,523 180,228 15,594 428,186 $ 164,634 85 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) The following is the continuity of long-term debt: As at Balance, beginning of period Consideration on acquisition Draws Repayments Deferred financing costs Amortization of deferred finance costs Foreign exchange December 31, 2021 December 31, 2020 (Note 4) $ 180,228 $ 14,570 330,500 (83,504) — 286 (7) 319,727 39,635 495,502 (673,009) (1,395) 520 (752) Balance, end of period $ 442,073 $ 180,228 The following table summarizes the repayment schedule of the long-term debt: Principal Payments Less than 1 year 1 to 5 years Greater than 5 years December 31, 2021 13,887 303,186 125,000 442,073 $ $ Included in finance costs for the year ended December 31, 2021 is interest on long-term debt of $9,874 (2020 - $15,499). 86 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) 15. LEASE LIABILITIES The following is the continuity of lease liabilities: Balance, beginning of period Assumed on acquisition Additions and modifications Repayments Financing costs Foreign exchange Balance, end of period Current portion December 31, 2021 December 31, 2020 (Note 4) $ 419,311 $ 395,265 140,273 68,461 (102,996) 18,099 199 543,347 $ 92,924 450,423 $ 22,130 72,094 (87,972) 16,796 998 419,311 77,941 341,370 $ $ Lease expenses are presented in the Consolidated Statement of Earnings as follows: Operating expenses Depreciation of right of use assets Finance costs Year ended December 31, 2021 2020 (Note 4) $ $ $ 4,928 $ 88,523 $ 18,099 $ 3,555 76,080 16,796 The following table summarizes the undiscounted repayment schedule of the lease liabilities: Less than 1 year 1 to 5 years Greater than 5 years $ $ 110,408 313,331 204,899 628,638 Included in operating expenses are short-term and low-value asset lease expenses of $4,851 for the year ended December 31, 2021 (2020 - $3,475). 87 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) 16. UNEARNED REBATES In connection with a 2019 acquisition, the Company recognized prepaid rebates received from a trading partner of $7,500. These rebates have been deferred as unearned rebates. Under the terms of this agreement, the Company will amortize the unearned rebate on a straight line basis over a term of 12 years, as a reduction of cost of sales. The Company is obliged to purchase the suppliers’ products on an exclusive basis over this term. In exchange for this exclusive arrangement, and subject to certain conditions, the trading partners are required to continue to price their products competitively to the Company. Termination of the arrangement by the Company, the occurrence of an event of default or a change in control, as defined by the agreement, require the Company to repay all unamortized balances and all other amounts as outlined within the agreement. At December 31, 2021, the Company has unearned rebates of $5,809 (December 31, 2020 – $6,424). 17. FAIR VALUE ADJUSTMENTS Non-controlling interest call liability / put option Contingent consideration Year ended December 31, 2021 2020 (Note 4) — 148 (2,177) (1,694) Total fair value adjustments $ 148 $ (3,871) 88 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) 18. FINANCIAL INSTRUMENTS Carrying value and estimated fair value of financial instruments December 31, 2021 December 31, 2020 (Note 4) Classification Fair value hierarchy Carrying amount Fair value Carrying amount Fair value Financial assets Cash Amortized cost Accounts receivable Amortized cost Financial liabilities Accounts payable and accrued liabilities Amortized cost Dividends payable Amortized cost Long-term debt Amortized cost n/a n/a n/a n/a n/a 27,714 27,714 61,041 61,041 103,024 103,024 86,957 86,957 258,423 258,423 210,185 210,185 2,439 2,439 2,364 2,364 442,073 437,717 180,228 180,251 For the Company’s current financial assets and liabilities, including accounts receivable, accounts payable and accrued liabilities, and dividends payable, which are short term in nature and subject to normal trade terms, the carrying values approximate their fair value. The fair value of BGSI’s long-term debt has been determined by calculating the present value of the interest rate spread that exists between the actual Term Loan A and the rate that would be negotiated with the economic conditions at the reporting date. As there is no ready secondary market for BGSI’s other long-term debt, the fair value has been estimated using the discounted cash flow method. Collateral The Company’s syndicated loan facility is collateralized by a General Security Agreement. The carrying amount of the financial assets pledged as collateral for this facility at December 31, 2021 was approximately $130,738 (December 31, 2020 - $147,998). Interest rate risk The Company’s operating line and syndicated loan facility are exposed to interest rate fluctuations and the Company does not hold any financial instruments to mitigate this risk. Seller notes and Term Loan A are at fixed interest rates. Foreign currency risk The Company’s operations in Canada are more closely tied to its domestic currency. Accordingly, the Canadian operations are measured in Canadian dollars and the Company’s foreign exchange translation exposure relates to these operations. When the Canadian operation’s net asset values are converted to U.S. 89 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) dollars, currency fluctuations result in period to period changes in those net asset values. BGSI’s equity position reflects these changes in net asset values as recorded in accumulated other comprehensive earnings. The income and expenses of the Canadian operations are translated into U.S. dollars at the average rate for the period in order to include their financial results in the consolidated financial statements. Period to period changes in the average exchange rates cause translation effects that have an impact on net earnings. Unlike the effect of exchange rate fluctuations on transaction exposure, the exchange rate translation risk does not affect local currency cash flows. Transactional foreign currency risk also exists in circumstances where U.S. denominated cash is received in Canada. The Company monitors U.S. denominated cash flows to be received in Canada and evaluates whether to use forward foreign exchange contracts. No forward foreign exchange contracts were used during 2021 or 2020. BGSI earns interest on promissory notes issued to The Boyd Group (U.S.) Inc., the parent of the Company’s U.S. operations. As at December 31, 2021 and December 31, 2020, promissory notes denominated in Canadian dollars are as follows: Promissory notes As at December 31, 2021 December 31, 2020 Promissory note at 5.0% due September 29, 2027 $ 108,000 $ 108,000 Promissory note at 5.75% due January 1, 2030 Promissory note at 8.58% due January 1, 2024 Promissory note at 8.58% due January 1, 2024 Promissory note at 8.58% due January 1, 2024 Promissory note at 4.3% due December 30, 2030 41,800 6,800 25,000 30,000 70,000 41,800 6,800 25,000 30,000 50,000 $ 281,600 $ 261,600 BGSI’s U.S. operations purchase Canadian dollars at market rates to fund the monthly interest payments. Credit risk The carrying amount of financial assets represents the maximum credit exposure. Cash is in the form of deposits on demand with major financial institutions that have strong long-term credit ratings. BGSI is subject to risk of non-payment of accounts receivable; however, the Company’s receivables are largely collected from the insurers of its customers. Accordingly, the Company’s accounts receivable comprises mostly amounts due from national and international insurance companies or provincial crown corporations. Aging of accounts receivable As at Neither impaired nor past due Past due: Over 90 days Allowance for doubtful accounts Accounts receivable December 31, 2021 December 31, 2020 (Note 4) $ $ $ 97,804 $ 83,656 8,174 105,978 $ (2,954) 103,024 $ 5,226 88,882 (1,925) 86,957 90 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) BGSI uses an allowance account to record an estimate of potential impairment for accounts receivables. Allowance for doubtful accounts As at Balance, beginning of period Increase in the allowance (net of recoveries and amounts written off) Balance, end of period December 31, 2021 December 31, 2020 (Note 4) $ $ 1,925 $ 1,066 1,029 2,954 $ 859 1,925 Liquidity risk The following table details the Company’s remaining undiscounted contractual maturities for its financial liabilities. Accounts payable and accrued liabilities Long-term debt Lease liabilities Total Within 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years After 5 years $258,423 442,073 628,638 $258,423 13,887 110,408 $1,329,134 $382,718 $— 13,624 99,990 $113,614 $— 17,535 86,810 $104,345 $— 5,135 71,817 $76,952 $— 266,892 54,714 $321,606 $— 125,000 204,899 $329,899 Obligations of the Company are generally satisfied through future operating cash flows and the collection of accounts receivable. Market Risk and Sensitivity Analysis Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market prices. Components of market risk to which the Company is exposed are interest rate risk and foreign exchange rate risk as discussed above. BGSI has used a sensitivity analysis technique that measures the estimated change to net earnings and equity of a 1% (100 basis points) difference in market interest rates. The sensitivity analysis assumes that changes in market interest rates only affect interest income or expense of variable financial instruments not covered by hedging instruments. For the year ended December 31, 2021 it is estimated that the impact of a 1% increase to market rates would result in a $2,215 decrease (2020 – $2,694 decrease) to net earnings as well as comprehensive earnings. The currency risk sensitivity analysis is based on a 5% strengthening or weakening of the Canadian Dollar against the U.S. Dollar and assumes that all other variables remain constant. Under this assumption, net earnings for the year ended December 31, 2021 as well as comprehensive earnings would have changed by $nil due to no foreign exchange contracts being in place at the end of 2021 and 2020. Exchangeable Class A Common Shares The Class A common shares of BGHI were exchangeable into units of the Fund until January 1, 2020. To facilitate the exchange, BGHI issued one Class B common share to the Fund for each Class A common share 91 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) that had been retracted. The Fund in turn issued a trust unit to the Class A common shareholder. The exchangeable feature resulted in the Class A common shares of BGHI being presented as financial liabilities of the Fund. Exchangeable Class A shares were measured at the market price of the units of the Fund as at the statement of financial position date. Exchanges were recorded at carrying value. Pursuant to the Arrangement, BGHI Class A common shareholders received one BGSI common share for each BGHI Class A common share held as at December 31, 2019. Non-controlling interest call liability / put option On May 31, 2013, in connection with the acquisition of Glass America, the Company amended and restated the limited liability company agreement of Gerber Glass LLC (the “Gerber Glass Company Agreement”) which provides a member of its U.S. management team the opportunity to participate in the future growth of the Company’s U.S. glass business. Within the agreement was a put option held by the non-controlling member that provided the member an option to put the business back to the Company according to a valuation formula defined in the agreement. On October 31, 2016, the Company amended the Gerber Glass Company Agreement. The put option held by the non-controlling member continued to provide the member an option to put the business back to the Company according to a valuation formula defined in the Gerber Glass Company Agreement until June 26, 2020 when the Company provided notice of exercise of the call option. All fair value changes in the estimated liability are recorded in earnings. On July 31, 2020, the call option transaction to acquire the 21.16% non-controlling interest in Gerber Glass LLC held by a member of the U.S. management team was completed, and BGSI acquired the 21.16% non- controlling interest in Gerber Glass LLC. The change in the non-controlling interest call liability / put option is summarized as follows: Balance, beginning of period Fair value adjustments Payment to non-controlling interests Balance, end of period December 31, 2020 (Note 4) Glass-business operating partner $ $ 3,477 (2,177) (1,300) — During 2021, a fair value adjustment recovery in the amount of $nil (2020 – recovery of $2,177) was recorded to earnings related to the non-controlling interest put option and call liability. 19. CONTINGENCIES BGSI has two letters of credit for $225 (2020 –$225). 92 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) 20. ACCUMULATED OTHER COMPREHENSIVE EARNINGS Balance, beginning of period Unrealized earnings on foreign currency translation Balance, end of period December 31, 2021 December 31, 2020 (Note 4) $ $ 65,157 $ 830 65,987 $ 47,088 18,069 65,157 There is no tax impact of translating the financial statements of the Canadian operations. 21. CAPITAL Shareholders’ Capital Authorized: Unlimited number of common shares An unlimited number of common shares are authorized and may be issued pursuant to the Articles of Incorporation of BGSI. All common shares have equal rights and privileges. Each common share is redeemable and transferable. A common share entitles the holder thereof to participate equally in dividends, including the dividends of net earnings and net realized capital gains of BGSI and dividends on termination or winding-up of BGSI, is fully paid and non-assessable and entitles the holder thereof to one vote at all meetings of shareholders for each share held. On January 2, 2020, BGSI announced the completion of the conversion of the Fund from an income trust to a public corporation, pursuant to the plan of Arrangement under the Canada Business Corporations Act. Issuance costs, net of tax, of $613 have been deducted from equity as a result of the Arrangement. A total of 184,813 BGHI Class A common shares were exchanged for BGSI common shares as a result of the Arrangement increased equity by $28,735. On May 14, 2020, BGSI completed a bought deal public offering where it sold to an underwriting syndicate 1,265,000 common shares out of treasury at a price of C$183.00 per share for gross proceeds of $164,297. Issuance costs, net of tax, of $5,258 were netted against the gross proceeds. 22. CONTRIBUTED SURPLUS Units purchased under the Fund’s Normal Course Issuer Bid for a value below their carrying amount represent a contribution to the benefit of the remaining unitholders and the difference is credited to contributed surplus. The Fund purchased units for cancellation under Normal Course Issuer Bids in 2009, 2008, and 2007. During the year, stock option accretion (net of issue costs) of $76 was credited to contributed surplus. 23. CAPITAL STRUCTURE The Company’s objective when managing capital is to maintain a flexible capital structure which optimizes the cost of capital at acceptable risk. The Company includes in its definition of capital: equity, long-term debt, convertible debentures, convertible debenture conversion features, non-controlling interest put options and call 93 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) liability, share based payment obligations, non-property obligations under lease liabilities, and unearned rebates, net of cash. The Company manages the capital structure and make adjustments to it by taking into account changing economic conditions, operating performance and growth opportunities. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends it pays, purchase shares for cancellation pursuant to a normal course issuer bid, issue new shares, issue new debt or replace existing debt with different characteristics, issue convertible debentures, issue share options, expand the revolver, increase or decrease its non-property lease liabilities, pursue alternative structuring of acquisitions, trigger call options on certain acquisition obligations, negotiate unearned rebates, or settle certain acquisition obligations using a greater amount of cash, or shares. The Company monitors capital on a number of bases, including an interest coverage ratio, total debt to Adjusted EBITDA ratios, return on invested capital, a debt to capital ratio, a current ratio, diluted earnings per share and dividends per share. The fixed charge coverage ratio is the ratio of Adjusted EBITDA, adding back rental expense, less unfunded capital expenditures, less income tax expense, less dividends to debt, rental expense and non-property lease liability payments. Total debt to Adjusted EBITDA is calculated as the Company’s total debt and non-property lease liabilities but excluding convertible debentures divided by Adjusted EBITDA. Return on invested capital is the ratio of Adjusted EBITDA to average invested capital. Adjusted EBITDA is a non-GAAP financial measure, whose nearest GAAP measure is Cash Flow from Operations. The Company’s strategy has been to maintain a strong statement of financial position including its cash position and financial flexibility while maintaining consistent dividends in order to capitalize on growth opportunities. In addition, the Company believes that, from time to time, the market price of the shares may not fully reflect the underlying value of the shares and that at such times the purchase of shares would be in the best interest of BGSI. Such purchases increase the proportionate ownership interest of all remaining shareholders. The Company grows, in part, through the acquisition or start-up of collision and glass repair and replacement businesses, or other businesses. Sources of capital that the Company has been successful at accessing in the past include public and private equity placements, convertible debt offerings, the use of equity securities to directly pay for a portion of acquisitions, capital available through strategic alliances with trading partners, non-property lease financing, seller financing and both senior and subordinate debt facilities or by deferring possible future purchase price payments using contingent consideration and call or put options. 94 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) 24. RELATED PARTY TRANSACTIONS In certain circumstances the Company has entered into property lease arrangements where an employee of the Company is the landlord. In most cases, the Company assumes these property lease arrangements initially in connection with an acquisition. The property leases for these locations do not contain any significant non- standard terms and conditions that would not normally exist in an arm’s length relationship, and the Company has determined that the terms and conditions of the leases are representative of fair market rent values. The following are the lease payment amounts for facilities under lease with related parties: Landlord Affiliated Person(s) Location Lease Expires December 31, 2021 December 31, 2020 (Note 4) Kard Properties Ltd. & D'Silva Real Estate Holdings Inc. Desmond D'Silva Various locations - Ontario Various - expiring 2020 to 2037 $ — $ 2,403 Gerber Building No. 1 Ptnrp Eddie Cheskis, & Tim O'Day South Elgin, IL 2023 100 86 As at December 31, 2020, Desmond D’Silva ceased to be a related party. 25. SEGMENTED REPORTING BGSI has one reportable line of business, being automotive collision repair and related services, with all revenues relating to a group of similar services. In this circumstance, IFRS requires BGSI to provide geographical disclosure. For the periods reported, all of BGSI’s sales were derived within Canada or the United States of America. Reportable assets include property, plant and equipment, right of use assets, goodwill and intangible assets which are all located within these two geographic areas. Sales Canada United States Reportable Assets As at Canada United States Year ended December 31, 2021 2020 (Note 4) $ 148,467 $ 1,724,203 159,263 1,401,961 $ 1,872,670 $ 1,561,224 December 31, 2021 December 31, 2020 (Note 4) $ 233,024 $ 1,551,919 231,751 1,128,275 $ 1,784,943 $ 1,360,026 95 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) BGSI’s revenues are largely derived from the insurers of its customers, who are generally automobile owners. Formal relationships with insurance companies such as Direct Repair Programs (“DRPs”) play an important role in generating sales volumes for the Company. Although automobile owners still have the freedom of choice of repair provider, insurance companies may educate the owner on the benefits of choosing a repairer in their DRP network. Of the top five insurance companies that BGSI deals with, which in aggregate account for approximately 49% (2020 – 46%) of total sales, one insurance company represents approximately 14% (2020 – 13%) of the Company’s total sales, while a second insurance company represents approximately 10% (2020 – 10%). 26. COMPENSATION OF KEY MANAGEMENT For the years ended December 31, 2021 2020 (Note 4) Salaries and short-term employee benefits $ 4,136 $ Post-employment benefits Long-term incentive plan Share options 86 2,217 352 $ 6,791 $ 4,045 77 2,160 — 6,282 Key management includes BGSI’s Directors as well as the most senior officers of the Company and Subsidiary Companies. 27. SHARE-BASED COMPENSATION Certain members of the management team of the Company, as well as the Board of Directors of the Company participate in share-based compensation plans. These plans are cash-settled, with compensation expense determined based on the fair value of the associated liability at the end of the reporting period until the awards are settled. Long-term incentive plan On January 1, 2019, January 1, 2020, and January 1, 2021, Performance Share Unit awards were granted to certain executive officers for the 2019, 2020 and 2021 grant years. Performance Share Units are tied to unit/ share value from date of grant to the date of vesting and will be paid out in cash over a three-year period, subject to the terms of the plan. Performance Share Units represent the right to receive payments linked to BGSI’s share value, conditional upon the achievement of one or more objective performance goals. The dividend rate declared by BGSI on issued and outstanding shares of the Company is also applied to the Performance Share Units. The dividend amount on the Performance Share Units is converted into additional Performance Share Units based on the market value of the Company’s shares at the time of the dividend. These additional Performance Share Units vest at the same time as the Performance Share Units that the dividend rate was applied on. The 2019, 2020, and 2021 awards granted include non-market performance conditions. The impact of market and non-market performance conditions is recognized through the adjustment of the award that is expected to vest. At the end of each reporting period, BGSI re-assesses its estimates of the number of Performance Share 96 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) Units that are expected to vest and recognizes the impact of the revision to compensation expense in earnings over the vesting period. The fair value of each outstanding Performance Share Unit is estimated based on the fair market value of the Company’s units/shares at the grant date, subsequently adjusted for additional shares granted based on the reinvestment of notional dividends and the market value of the shares at the end of each reporting period. The associated compensation expense is recognized over the vesting period, factoring in the probability of the performance criteria being met during that period. On January 1, 2021, Restricted Share Units were granted to certain executive officers for the 2021 grant year. Restricted Share Units are valued by reference to share value from date of grant to the date of vesting and will be paid out in cash over a three-year period, subject to the terms of the plan. The dividend rate declared by BGSI on issued and outstanding shares of the Company is also applied to the Restricted Share Units. The dividend amount on the Restricted Share Units is converted into additional Restricted Share Units based on the market value of the Company’s shares at the time of the dividend. These additional Restricted Share Units vest at the same time as the Restricted Share Units that the dividend rate was applied on. Directors Deferred Share Unit Plan A Directors Deferred Share Unit Plan (“DSUP”) is administered through BGSI and requires independent Directors to receive at least 60% of their Director compensation in the form of deferred shares, which are essentially notional shares of BGSI and are redeemable for cash on termination. Directors may elect to receive up to 100% of their Director compensation in the form of deferred shares. The number of deferred shares to which a Director is entitled will be adjusted for the payment of dividends. The fair value of each outstanding Director Deferred Share Unit is estimated based on the fair market value of BGSI’s shares at the grant date, subsequently adjusted for additional shares granted based on the reinvestment of notional dividends and the market value of the shares at the end of each reporting period. 28. EMPLOYEE EXPENSES For the years ended December 31, 2021 2020 (Note 4) Salaries and short-term employee benefits $ 723,003 $ 583,230 Post-employment benefits Long-term incentive plan Share options 86 2,721 352 77 2,639 — $ 726,162 $ 585,946 During the year ended December 31, 2021, the Company was eligible for the Canada Emergency Wage Subsidy (“CEWS”). The total estimated CEWS for the year ended December 31, 2021 of $9,822 (2020 - $12,749) has been recorded, with $4,018 (2020 - $5,336) being recorded as a reduction to cost of sales and $5,804 (2020 - $7,413) being recorded as a reduction to operating expenses. At December 31, 2021, the Company has $3,347 accrued for amounts to be received under the CEWS program in Accounts Receivable. 97 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) 29. DEFINED CONTRIBUTION PENSION PLANS The Company has defined contribution pension plans for certain employees. The Company matches U.S. employee contributions at rates up to 6.0% of the employees’ salary. The expense and payments for the year were $4,329 (2020 - $2,942). The Company has established a Retirement Defined Contribution Arrangement Trust Agreement for the Executive Chair which qualifies as retirement compensation arrangement as defined in the Income Tax Act (Canada), RSC 1985, c.1 (5th Supplement), as amended. The agreement specifies that quarterly contributions are to be made until the end of 2024. During 2021, $86 (2020 - $77) was paid related to these arrangements. 30. EARNINGS PER SHARE Net earnings Less: Non-controlling interest call liability / put option Net earnings - diluted basis Basic weighted average number of shares Add: Non-controlling interest call liability / put option Average number of shares outstanding - diluted basis Basic earnings per share Diluted earnings per share Year ended December 31, 2021 2020 (Note 4) $ 23,540 $ 44,114 — $ 23,540 $ (2,177) 41,937 21,472,194 21,005,596 — 9,263 21,472,194 $ $ 1.10 $ 1.10 $ 21,014,859 2.10 2.00 Stock options are instruments that could have potentially diluted basic earnings per share for the years ended December 31, 2021, but were not included in the calculation of diluted earnings per share because they were anti-dilutive for the period. 31. STOCK OPTION PLAN During the first quarter of 2021, the Company instituted a stock option plan for senior management, which was approved by shareholders on May 12, 2021. The Company's stock option plan allows for the granting of options up to an amount of 250,000 Common shares under this plan. Each tranche of the options vests equally over two, three, four and five year periods. The term of an option shall be determined and approved by the People, Culture and Compensation Committee; provided that the term shall be no longer than ten years from the grant date. On March 31, 2021 the Company issued 13,831 options under the stock option plan with a grant date fair value of C$56.99 per option and an exercise price of C$219.21 per option. None of the options are exercisable at period end. Issue costs of $105 were incurred with respect to the stock option plan. 98 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) 32. CHANGES IN NON-CASH OPERATING WORKING CAPITAL ITEMS Accounts receivable Inventory Prepaid expenses Accounts payable and accrued liabilities Income taxes, net For the years ended December 31, 2021 2020 (Note 4) $ (10,397) $ (30,821) (8,760) 37,407 (1,504) $ (14,075) $ (58) 5,571 2,947 10,110 (5,103) 13,467 33. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES As at Non-cash changes December 31, 2020 (Note 4) Cash Flows Acquisition Other items Fair value changes Foreign exchange December 31, 2021 Long-term debt Lease liabilities Dividends Issue costs $ 180,228 419,311 2,364 — 237,122 (102,996) (9,653) (105) 14,570 140,273 — — 10,160 86,560 9,692 — $ 601,903 124,368 154,843 106,412 — — — — — (7) $ 199 36 — 442,073 543,347 2,439 — 228 $ 987,859 As at December 31, 2019 (Note 4) Cash Flows Non-cash changes Acquisition Other items Fair value changes Foreign exchange December 31, 2020 (Note 4) Long-term debt $ 319,727 (194,401) 39,635 16,019 Lease liabilities Dividends Non-controlling interest put option and call liability Issue costs Shares issued through public offering 395,265 706 (87,972) (7,132) 22,130 — 88,890 8,790 3,477 — — (1,300) (7,977) 164,297 — — — — — — (2,177) — — — — — (752) $ 180,228 998 — — — — 419,311 2,364 — — — $ 719,175 (134,485) 61,765 113,699 (2,177) 246 $ 601,903 34. SUBSEQUENT EVENTS On March 21, 2022, the Company amended the Credit Agreement to provide for a covenant flex period from January 1, 2022 to March 30, 2023 and to provide for revisions to interest rates, allowing for the use of LIBOR 99 BOYD GROUP SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2021 and 2020 (thousands of U.S. dollars, except share and per share amounts) until it is decommissioned and allowing for the use of the Secured Overnight Financing Rate (“SOFR”) at the Company’s election. During the covenant flex period, the financial covenants require BGSI to maintain a senior funded debt to EBITDA ratio of less than 4.00 from March 21, 2022 to March 30, 2022, less than 4.50 from March 31, 2022 to September 29, 2022, less than 4.25 from September 30, 2022 to December 30, 2022 and less than 4.00 from December 31, 2022 to March 30, 2023. For four quarters following a material acquisition during the covenant flex period, the senior funded debt to EBITDA ratio may be increased by up to 0.50, never exceeding 4.50. 100 BOARD OF DIRECTORS Boyd Group Services Inc. Board of Directors consists of nine members – two that are officers or retired officers of BGSI and seven that are independent Directors. The Independent Chair of the Board is David Brown. Boyd Group Services Inc. Board of Directors has established three standing committees: The Corporate Governance and Sustainability Committee, The Audit Committee, and the People, Culture and Compensation Committee. The Corporate Governance and Sustainability Committee is chaired by Sally Savoia and includes Robert Espey and William Onuwa. The Audit Committee is chaired by William Onuwa and includes John Hartmann and Violet Konkle. The People, Culture and Compensation Committee is chaired by Violet Konkle and includes Robert Gross and John Hartman. David Brown is an Executive Vice-President of Richardson Financial Group Limited and a Managing Director of RBM Capital Limited (a private investment firm). He was previously the CEO of Richardson Capital Limited, a private equity arm of James Richardson & Sons, Limited, the Corporate Secretary of James Richardson & Sons, Limited, and a partner in the independent law and accounting firm of Gray & Brown. Mr. Brown has considerable experience in private equity investment and management, senior management and in advising and working with family businesses in the areas of taxation, mergers, acquisitions, divestitures, corporate reorganizations, financings, management, ownership transitions and estate planning. Mr. Brown also has considerable public company experience. He currently serves as the Independent Chair of the Board of Boyd Group Services Inc. and serves as a director and Chair of the Audit Committee of Pollard Banknote Limited and a director of RF Capital Group Inc. He has served various Manitoba charities including acting as a director of the Misericordia Hospital and Pavilion Gallery Museum, Inc. and as Co-chair of Major Donors for the Children’s Hospital Foundation’s Capital Campaign. He is a graduate of the University of Manitoba law school (gold medalist), and is a Chartered Professional Accountant. Brock Bulbuck acted as Executive Chair of BGSI from 2020 to 2021. Prior to this role, Mr. Bulbuck served as Chief Executive Officer from 2010 to 2020. After joining Boyd in 1993, Mr. Bulbuck served in many senior leadership roles and played a leading role in the overall development and growth of the business. Mr. Bulbuck also serves as a Director on the Board of The North West Company. He is also a past Chairperson of the Winnipeg Football Club Board of Directors, a past member of the Canadian Football League Board of Governors and a current Director of Pan Am Clinic Foundation. Mr. Bulbuck has a Bachelor of Commerce (Honors) degree from the University of Manitoba and is a Chartered Professional Accountant. Robert Espey was appointed President and Chief Executive Officer in 2011 of Parkland Corporation ("Parkland") and has successfully led the transformation of Parkland from a Western Canadian regional independent into a leading international consolidator of convenience retail and fuel marketing businesses with operations in 25 countries. Under Mr. Espey's leadership, and in addition to network of over 3,200 retail locations, Parkland is a leader in manufacturing low carbon fuels and is rapidly building an electric vehicle charging network to serve growing demand in select markets. Mr. Espey has overseen over 60 acquisitions, including of Chevron Canada’s convenience retail and downstream fuel business, the Ultramar retail business from CST brands, the expansion of Parkland into the U.S., and in January 2019 the addition of the Sol which expanded Parkland’s operations into the Caribbean region. Previously, Mr. Espey served as Chief Operating Officer from 2010 to 2011, and Vice President, Retail Markets from 2008 to 2010. Prior to joining Parkland, Mr. Espey held a variety of senior management roles across a diverse group of industry sectors, both internationally and domestically, including as President and Chief Executive Officer of FisherCast Global Corporation. Mr. Espey holds a Bachelor of Engineering (Mechanical) from Royal Military College and a Masters in Business Administration from the University of Western Ontario. Mr. Espey serves as Chair of the Board of Directors for the Canadian Fuels Association and is a member of the Board of Directors of Parkland Corporation. Robert Gross is the past Executive Chair of Monro, Inc., the largest chain of company-operated automotive undercar repair and tire service facilities in the United States. He served as CEO of Monro from 1999 until October 101 2012 and as Executive Chair from October 2012 to August 2017. Prior to his time at Monro, he served as Chair and CEO at Tops Appliance City, Inc. and before that as President and COO at Eye Care Centers of America, Inc., a Sears, Roebuck & Co. company. John Hartmann is currently the COO of Bed Bath & Beyond and President of buybuyBaby. Prior to recently joining Bed Bath & Beyond in 2020, he held the position of President & Chief Executive Officer at True Value Company, a privately owned U.S. hardware wholesaler for seven years. Mr. Hartmann also led New Zealand-based cooperative Mitre 10 as Chief Executive Officer from 2010 to 2013. Mr. Hartmann recently served on the Audit Committee of AmeriGas, prior to UGI’s acquisition. Violet Konkle is the past President and Chief Executive Officer of The Brick Ltd. Prior to joining The Brick in 2010 as President, Business Support, she held a number of positions with Walmart Canada, including Chief Operating Officer and Chief Customer Officer. Ms. Konkle also held a number of senior executive positions with Loblaw Companies Ltd., including Executive Vice President, Atlantic Wholesale Division. Ms. Konkle is a director of The North West Company Inc. and GFL Environmental, as well as three privately held companies including Bailey Metal Products, Elswood Investment Corporation and Abarta. Ms. Konkle previously served on the Advisory Board of Longo’s Brothers Fruit Markets Inc., a privately held company. She is a past director of Dare Foods, The Brick Ltd., Trans Global Insurance, the Canadian Chamber of Commerce and the National Board of Habitat for Humanity. Timothy O’Day is the President and CEO of BGSI. He joined Gerber Collision & Glass in February 1998. With Boyd Group’s acquisition of Gerber in 2004, he was appointed COO for Boyd’s U.S Operations. In 2008, he was appointed President and COO for U.S. Operations. On January 4, 2017, Mr. O’Day was appointed President and COO of Boyd Group Income Fund, and on January 2, 2020, he was appointed President and CEO of BGSI. Earlier in his career, he was with Midas International, where he was elevated to Vice President–Western Division, responsible for a territory that encompassed 500 Midas locations. Mr. O’Day also serves on the I-CAR Board as Immediate Past Chair and served on the Board of the Collision Repair Education Foundation until March 2016 for a period of six years. William Onuwa is currently EVP and Chief Audit Executive at Royal Bank of Canada (“RBC”). Prior to this role, he was the SVP & Chief Risk Officer for Wealth Management, RBC Georgia and the Insurance Group. He held a number of executive positions for GE Capital Corporation in both the U.S. and the U.K. before joining RBC in 2007. He holds a Doctorate degree from the University of Surrey, U.K. Mr. Onuwa was recently the Chair of two not-for-profit boards, Yonge Street Mission and Holland Bloorview Kids Rehabilitation Hospital, and had also served on the subsidiary boards of various RBC insurance companies as a director from 2007 to 2016. Sally Savoia is a former Vice President and Chief Human Resource Officer for Praxair Inc. Subsequent to her retirement in 2014, and until 2020, Ms. Savoia served as an independent corporate consultant. Ms. Savoia’s human resources experience includes diversity and inclusion efforts, executive compensation design and implementation, executive level succession planning, global talent management, leadership development, and global benefits design. 102 CORPORATE DIRECTORY COMPANY OFFICERS & PRIMARY SUBSIDIARY COMPANY OFFICERS Timothy O’Day President & Chief Executive Officer Brock Bulbuck Executive Chair (until December 31, 2021) Jeff Murray Vice President, Finance Eddie Cheskis * Chief Executive Officer, Glass America and Gerber National Claim Services Srikanth Venkataraman* Vice President, Information Services Gary Bunce * Senior Vice President, Sales US Operations Vince Claudio * Senior Vice President, U.S. Collision Narendra (Pat) Pathipati Executive Vice President, Chief Financial Officer & Secretary-Treasurer Kevin Burnett * Chief Operating Officer, U.S. Collision Eric Olhava* Senior Vice President, U.S. Collision Susie Frausto* Vice President, Marketing Kim Morin * Vice President & Chief Human Resources Officer Peter Toni Corporate Counsel & Assistant Secretary Tony Canade* Chief Operating Officer, Canadian Operations Jason Hope * Vice President, Corporate Development and Strategic Projects Mark Miller* Vice President, OEM and Quality * *Officers of subsidiary companies only ——————————————————————————————————————— CORPORATE OFFICE 1745 Ellice Avenue, Unit C1 Telephone: (204) 895-1244 Winnipeg, Manitoba, Canada Fax: (204) 895-1283 R3H 1H9 Website: www.boydgroup.com ——————————————————————————————————————— For location information, please visit us at www.boydgroup.com 103 SHAREHOLDER INFORMATION BOYD GROUP SERVICES INC. SHARES AND EXCHANGE LISTING Shares of BGSI are listed on the Toronto Stock Exchange under the symbol BYD.TO. Registrar, Transfer Agents and Distribution Agents Computershare Trust Company 8th Floor, 100 University Avenue Toronto, Ontario M5J 2Y1 Legal Counsel Auditors Thompson Dorfman Sweatman LLP 1700-242 Hargrave Street Winnipeg, Manitoba R3C 0V1 Deloitte LLP 2200 – 360 Main Street Winnipeg, Manitoba R3C 3Z3 Bank Syndicate Lead Member Additional Bank Syndicate Members Toronto-Dominion Bank TD North Tower 77 King Street West, 25th Floor Toronto, Ontario M5K 1A2 Bank of America N.A. The Bank of Nova Scotia National Bank of Canada ——————————————————————————————————————— Annual General Meeting www.virtualshareholdermeeting.com/BOYD2022 Wednesday, May 11, 2022 1:00 p.m. (CT) 104 

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