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spk01: Good evening. My name is Ali and I will be your conference operator today. At this time, I would like to welcome everyone to the Severia Corporation Q4 2021 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star 2. This call may contain forward-looking statements which are subject to the disclosure statements contained in Saveria's most recent press release issued on March 23, 2022, with respect to its Q4 2021 results. Thank you. Mr. Barassi, you may begin your conference.
spk08: Thank you, Ali. It was a challenging year, but a great year. A great year, and we are very excited, not just me, to this 2022. I think 2021 was a good year, but we prepared a lot of things for 2022. Don't forget that right now with some equations that were made, and the major one is anti-carer. So we will sell, okay, around 800 million, okay. How many you just have to choose the right number, okay, and we just announce you before, okay, at the beginning of the year that we will make between 120 to 130. We made the acquisition one year ago of Indicare. We're thinking that they were good, but they are better than we're thinking, okay. They are better people. And on that, I thank them to come aboard and say we want to work together. It's always in life, teamwork. If you don't believe in teamwork, you're at the wrong place. Because if you want to be successful, you need all the people together. So we have more than 2,200 employees. We are in, with this acquisition, we're in over 40 countries. That's major, okay. And what we have done, okay, we imported technology of curbstone lift from Hendrick and Harrow Europe, okay, to Toronto. We are well advanced in the integration and we are in production, okay, but just the vending machine, okay, will arrive in maybe 45 days, okay. But right now, we take the the curve, okay, for the bedding, okay, the tube, okay, arrived from Europe, okay? So we missed a couple of dollars because it's quite expensive, the freight. But even, okay, it's a challenge, okay? This was a tough year, but you know something? And you know, okay, the materials, okay, was a challenge and is a challenge. The concept freight, okay, was a challenge and it continues to be a challenge, okay? And it's not easy, but that shows that we have a good team. A good team find a problem and just discuss, okay, what we do. And that's the forte of Saveria. We have a good team, and if we have to change people, we change people. We have so nice people who come with us, okay, in 2022. Just an example, in the patient ending, okay, We have a new director down there. That's who is at the end of that. And again, I have a great experience in our industry, and it will bring this division at another level, another level of EBITDA. What is very important, okay, for me and for my people is what kind of EBITDA, what is the percentage? And we want, okay, to be by percentage. 2025, we have a big goal, okay? Our big goal is to reach 1 billion in sales, okay? And with the 1 billion in sales, okay, we have to be around 20%, and we will be around 20%. I cause a synergy with all of the people, okay? So, thank you to be here with us this morning, guys. We need you, because that's you, okay? We're right on that area, and you, the motion, okay, or My English is always bad like it was 15 years ago, but this is a fact. This is what it is. Thank you to follow Severio and to be interested in the history of Severio. I think we have a great history. Coming from when I bought a company, we were like four people. Right now, over 2,000. At the beginning, we were selling 200,000 a year. This year, we will sell... around 800 million. So that's a good, but we are there, okay, because of the people. And we have good customer, and as I repeat what I was doing, telling 15, 20 years ago, so the customer write a check for what they like, with a smile, okay, because that gives them, okay, more liberty to move. And that's so important. So today, we have the pleasure, okay, I will pass the to Steve, okay, that will tell you a bit where we are with our findings. And after that, we will have a question that we will answer to you with pleasure. On the call this morning, we have Nicolas, we have Sébastien, and for sure that I tell you that Steve is the first one to speak. After that, okay, Nicolas and Seb and myself, we will answer the question that you have. So first of all, okay, Steve.
spk05: Thanks, Marcel, and good morning, everyone. I will begin with some remarks regarding our 2021 fiscal year consolidated financial metrics. For the year, the corporation generated revenue of $661 million, up $306.5 million, or 86.5% compared to 2020, mainly due to the acquisition of Handicare in March 2021, and also due to organic growth of 4%. Gross profit and gross margin stood at $215.5 million and 32.6% respectively compared to $122.1 million and 34.5% for 2020. The increase in gross profit was mainly attributable to the addition of Handicare. The decrease in gross margin was primarily due to additional costs related to the supply chain, including shipping costs, and also the reduction of COVID-19 employment retention subsidies from the Government of Canada's program. Adjusted EBITDA and adjusted EBITDA margin stood at $100.3 million and 15.2% respectively compared to $59.8 million and 16.9% in 2020. The increase in adjusted EBITDA dollars is again due to the addition of Handicare. The decrease in adjusted EBITDA margin is due most notably to significantly increased shipping costs in 2021 versus 2020, as well as a large reduction in Government of Canada COVID-19 employment retention subsidies. Total subsidies received for 2021 was $3.2 million versus $6.9 million in 2020, reflecting a decrease of $3.7 million year over year. Now I'll move on to our segment results. Revenue from our accessibility segment was $484.3 million for the year, an increase of $227 million, or 88.2%, compared to 2020. The increase in revenue was mainly attributable to the acquisition of Handicare, which provided 87.3% growth. Organic growth of 3.5% was driven by strong demand in the residential sector, and was partially offset by a negative foreign exchange impact of 2.6%. While our residential sales were strong throughout the year, we continued to see weakness in the commercial sector. Adjusted EBITDA and adjusted EBITDA margin, both before head office costs, stood at 86.2 million and 17.8%, respectively, compared to 51.1 million and 19.9% for 2020. The improvement in adjusted EBITDA is mainly due to the acquisition of Handicare. The reduction in adjusted EBITDA margin is partially due to additional costs related to supply chain, including shipping costs, as well as a reduction of the Government of Canada's subsidies. Revenue from our patient care segment was $136.7 million for the year, an increase of $57.4 million, or 72.4% when compared to 2020. Revenue growth was mainly driven by the acquisition of Handicare, which contributed 71.3%. In addition, the segment saw 5.5% of organic growth for the year, which was driven in large part by the last quarter of 2021, which provided 17.1% organic growth. The improvement in organic growth was driven in large part by the easing of pandemic restrictions and improved access to long-term care facilities. Adjusted EBITDA and adjusted EBITDA margin, both before head office costs, stood at $16.7 million and 12.2% respectively compared to $10.4 million and 13.1% for 2020. The increase in adjusted EBITDA was mainly due to the acquisition of Handicare, and the reduction in adjusted EBITDA margin is primarily due to the aforementioned additional costs in the supply chain and a reduction of Government of Canada's subsidies. Revenue generated from the adapted vehicle segment was $40 million, an increase of $22.1 million or 123.4% when compared to 2020. The Handicare Vehicle Division based in Norway provided 119.9% of acquisition growth for the year. The Canadian Auto Division experienced organic growth of 3.5% for the year driven mainly by strong sales in Q4 2021 as a result of some pent-up demand from earlier in the year. Adjusted EBITDA and adjusted EBITDA margin, both beforehand office costs, finished at 3.2 million and 8% respectively, compared to 0.6 million and 3.4% for 2020. The increases in both metrics were mainly due to the acquisition of Handicare, and some recovery from the economic slowdown caused by the global pandemic, partially offset by a reduction of Government of Canada COVID-19 subsidies. For the year, net finance costs amounted to $15.8 million compared to $3.9 million for 2020. The increase is mainly due to higher interest expenses due to additional long-term credit facilities related to the Handicare acquisition. Net earnings reached $11.5 million, or $0.19 per diluted share for the year, compared to $26.5 million, or $0.52 per diluted share for 2020.
spk04: Net earnings was largely impacted by amortization of intangible assets related to the Handicare acquisition. Adjusted net earnings excluding amortization of intangible assets related to acquisitions reached $41.8 million,
spk05: or $0.67 per diluted share compared to $31.8 million or $0.63 per diluted share for 2020. This reflects an increase of 31.3% or 6% on a diluted share basis. Returning now to capital resources and liquidity, Saveria generated cash flows from operating activities of $57.3 million for the year compared to $49.3 million in the prior year. The year-over-year increase is mainly due to increased adjusted net earnings from the addition of Handicare. Strategic investments in inventory caused an increase in non-cash operating items for the year of $13 million versus a decrease of $6.1 million in the prior year. As at December 31, 2021, Severia had a net interest-bearing debt position of $315.4 million, and it was in compliance with all of its covenants. And on a trailing 12-month adjusted EBITDA basis, Severia's debts to adjusted EBITDA ratio was approximately 3.5 times. Severia has funds available of approximately $130 million to support working capital, investments, and growth opportunities. Now looking forward, unpredictable changes in the macroeconomic environment make it difficult to predict future performance. However, considering our recent financial performance and our strategic integration plan with Handicare, we are confident that for fiscal 2022, we will generate revenue in excess of $775 million, with adjusted EBITDA in the range of $120 to $130 million. And with that, this completes my prepared remarks, and I'll turn the call back over to you, Marcel.
spk08: Steve, thank you very much. Very well done, okay? And just to add, okay, an information, okay, that maybe you don't know. Our booking, that is very important, okay, if you want to see what would be the quarter, okay, and what would be the year, okay. Our booking at Saverio, at Tech Saverio in Toronto, okay, is three times that it was last year. Not 20%, okay, three times. You can see the backlog that we have in residential elevators, okay? It's amazing. So now we have another problem, okay? We have to deliver fast, okay? So we upgrade ourselves, okay? Upgrade our people. And we work hard, okay, to make more production than we were doing. So it's another time in our life, okay? We never have the booking to say that we have three times, okay, since it was the year prior. But it's a fact right now. So it's a It's a great interest that I tell you this information, and I think that's validated a little bit what I've said before. So we are ready for all the questions that you can ask. Adi?
spk01: Thank you. And if you would like to ask a question, please press star 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset and make sure mute function is turned off. so that your signal reaches our equipment. Again, it is star one if you would like to ask a question. And we'll go ahead and take our first question from Frederic Tremblay with the Jardins. Please go ahead.
spk11: Thank you. Good morning. Bonjour, Frédéric.
spk14: Bonjour, Marcel. I believe, Marcel, you mentioned that you'd like to get to 20% EBITDA margin in 2025. That would be, I think, the highest margin in company history on an annual basis. I'm just wondering if you're, are you referring to margin for the entire company or for the accessibility segment? And I guess maybe if you could maybe provide a bit more details on the factors that would allow you to increase margin to around 20%.
spk08: Okay. And Sébastien would complete my answer. My answer is this one. For sure, we have some division that it is We get less EBITDA. But for me, when I see around 20%, it's for all the companies together. And it's why I see when we bring a North America manufacturer, the curve cell lift that Enscare is doing, that's a project that has a better margin. I would not say very high, never too high, but to be reasonable too on the pricing. So for me, okay, it's for all the companies, the 20%, Frédéric. Sébastien, do you have something to add?
spk07: For sure, Fred. As you know, we're under transformation. We have acquired Garavento a few years ago, Span, and now Handicare. So there's a lot of moving pieces, but I think, yeah, accessibility has always been first, patient leave first, and the car division third. But definitely, we have a lot of activities to support this target goal.
spk14: and hopefully we'll be able to deliver in the next few quarter and a few years on that but a lot of opportunities okay um you mentioned the the large backlog in in toronto i'm just curious if um you have any comments on i guess the split between residential and commercial i'm i guess i'm more interested in how the commercial side is evolving in terms of quotes or backlog in the recent months and what you're seeing in terms of the potential recovery from that particular market?
spk08: That's a good question again, Frédéric. For sure, the number of elevators that we have in our backlog is incredible. For sure, COVID affects a lot of commercial activity. Because people work at home. So if we go with an example, downtown Montreal is not the activity it was before. But they have to work home. So they make some adjustments at home. But in reality, we think that all the commercial will get a new push this year. So that's it. Do you have something to add on that?
spk07: For sure the residential sector, Fred, residential is not just home elevators. It's home elevators, it's an inclined platform, it is stairlift. Now we are a big player in the stairlift industry. That's why the syndicare is very interesting because it positions itself in a very good shape in bringing back the technology from Europe to Toronto to manufacture the curved stairlift. It will give us better lead time and we should be able to just continue to accelerate our a growth into the stair lift. Commercial, like Marcel said, it has been slow, but it's recovering. And now the good news, at least we have a good backlog, so we can plan our growth. People are more careful also than it was before. I think with all this pandemic, the supply chain, people try to put the order in advance to make sure that the production will try to hit their date. So I think we are lucky, Fred. Good year in front of us.
spk14: Maybe last question for me, maybe for... Yeah, sorry, go ahead.
spk08: Fred, I just want to add something, okay? With Entcare, okay, we skipped a little bit the territory. Like, we handle more, okay, North America. For sure, we always discuss with our people in Europe. And Europe push, like, they work a lot with Garavento, okay? Garavento is a great company, okay? But I think, okay, to work with somebody directly full-time, okay, in the territory of Europe, I think this segment of Garavento would be better. So we have a lot of loss, okay, coming with this acquisition. And just to mention, at the beginning of this year, we made just a small acquisition, okay, about somebody who make the controller. So we're buying from the guy in Europe the controller, but now we want to be independent, so we buy this guy. So we are always looking what we can do to be better. And as Steve mentioned, we have for sure our ratio is not the It's not what I want it to be, but I think this year we'll have a better ratio to put some little acquisition, just to be always better and deliver the best quality and the best security to the customer.
spk14: Great. That's a great segue into my last question, maybe for Steve, in terms of capital allocation priority for the year. in between CapEx, Debit Payment, and potential M&E. Any comments there?
spk08: Yeah, it's just small M&E, okay? But small M&E, and we're looking everywhere. But now we are looking everywhere around the globe, okay? That's amazing, okay, what this acquisition of Engicare. And I mentioned again, okay, man, they have good people like that. They're the same team that we have good people when we buy Garanto. And... And with all these people that we work together, you will see, okay, that we'll make some small acquisition, but we work a lot of complete reintegration, okay? And sometimes we have to look inside our company, okay, inside of each division, okay? We can be better instead of looking always for acquisition. So no big acquisition this year.
spk05: And just to add to that, Marcel, if I can, I mean, it's, Looking at the deleveraging profile for this past year for 2021, we didn't delever since the date of the acquisition to the end of the year, which was about 10 months. And that was expected because of all of the large one-off costs we had acquisition and integration related. Most of that is behind us. There will be some integration costs ongoing, but we will be delevering. further in 2022 as per our initial plan of at least half return per year, Fred. And we are being diligent with capex spending. We're being very diligent. And as Marcel said, there may be some funding for acquisitions, but they will be on the small sort of tuck-in side.
spk11: Very interesting. Thank you. Thank you.
spk01: And we'll go ahead and move on to our next question from Derek Lessard with TD Securities. Please go ahead.
spk03: Yeah, good morning, everybody. And Marcel, your English is perfect. I just wanted to hit on, again, on the bookings being up three times in the backlog there. It's a good problem to have, obviously. Um, maybe if you can just add a little bit more color on, on how you expect to deliver on, on that and, and, and, and clear through the backlog.
spk08: Good. Well, I will give you, and Sebastian will complete my answer because he's the guy responsible for the operation, but I will just, uh, say, okay, like, you know, something we, uh, we can, uh, deliver, okay, like, uh, With the new, we can deliver like 2,000 curves daily with the system of NGIS. And before that, okay, we were jabbed, okay, at maybe 30, 40 a month, okay? So, but now, okay, just in that, if we can talk about the curves daily, we'll find that. About residential elevators, okay, one is good, okay, and it's why the team, okay, it's the team, the team, the teamwork, okay, We have somebody from NG Care come see us, okay? I think they're the same week, Sebastian, I will tell you. And they will work with us, okay? How can we pass, okay, like from six, seven elevators a day, okay, to 10, 12 a day, okay? So new idea, a different experience, and it's all in the group. And when it's all in the same group of you, it's good consulting, okay? But when you have the talent inside that can use that, And that's a valorization for them. They say, hey, I am, I don't know, in Netherlands, okay, but I have these guys in Toronto, okay. And that's everything. Everybody is proud about that. Vasile, you have something to add?
spk07: Yeah, for sure, Derek. Okay, we are lucky we're in a good industry. It has been a very good support last year with the staying at home. The residential has been good and it continues to remain good. Unfortunately, we had a bit of inflation with our sales price with our customer last year. So when you announce some price increase, it is a direct effect on the booking because we try to be respectful with our dealer to give them some time to pass on the order that they already have in hand. So yes, there has been a bit of an overorder because of some deadline on pricing, but which is good because what came in last year as a price increase from the supplier, we had to reset the price with our customer. So that has been done. Last year was challenging. Don't forget, we had a bit of COVID. We had some labour shortage, but I think this year we have made some activities to fill some gaps where we needed to add some people. We are doing some strategic review in April with a key member of Indicare, lead by the team of Pete, that will work with our team here to see how we can improve and review how we can add automation to those processes to be a bit better. I think, yeah, the good news is that at least we have the order in some of our divisions so that we can just execute on the growth plan that we want to have.
spk03: That's helpful. I was just wondering as well, do you have any updates on the Toronto planning expansion and how it's going and maybe some production wins and maybe some areas where you still need to adjust?
spk07: Toronto expansion, yes, on a curved stir leaf. Now we're producing one of the two models of Endicare for the curve. We would like later this year to add in production the second model. All the distributions of the straight stir leaf of Endicare is now done from a span factory in Greenville or from Toronto for the Canadian market. So that has been happening and the rest is really expansion on our do more throughput to our different line, add some key labour at different place. But I think the growth plan is what we are working on.
spk11: Okay, thanks for that. I'll re-queue with somebody else. Thank you, Derek.
spk10: Our next question will come from Michael Downant with Scotiabank. Please go ahead.
spk02: Hey, good morning, guys. You know, I want to start a question with the 2022 revenue guidance. The forecast implies 17% growth year-over-year and I guess if I use the number on the call, it may be up to 21%. You know, I obviously understand Handicare will contribute, you know, two additional months, but I wonder if you can comment just generally on price versus volume dynamic in 2022 and what we should expect there.
spk08: Yeah, I think there's people who will speak about that, but yeah, I just want to tell you that we'll make some increase, okay, because we have to make some increase, so we'll put some increase in 21, okay, another increase at the beginning of 22, and you will see that I think that will help our margin for sure, okay, when all this spring will be in application, and I see that coming at the end of March, okay, and after that for the second quarter, that will be... I would be very surprised if that's not a very good news that you will see in Q2. Can you add a compliment on that, Steve, please?
spk05: Yeah, sure. So good question, Michael. I mean, looking at what we're seeing for 2022, our guidance, our published guidance has been in excess of 775, and it's just obviously it's difficult to peg an exact revenue number. But looking at our forecast and our budgeting for 2022, A significant piece is coming from Handicare. We have two more months, as you pointed out, two more months in 2022 than we had in 2021. And specifically on the organic growth side, what we are forecasting to achieve for 2022 is in line with our $1 billion forecast for 2025. So it's in that approximate same guideline, same approximate percentage increase A good portion of that will come from pricing. You know, we had mentioned that we have done price increases at the end of Q3 in 2021, and we also have price increases in 2022 at the beginning of the year. As Sebastian said, it does take time for those to come through. So, I mean, without specifically pinpointing how much, there's going to be a good portion of that organic growth in 2022 coming from pricing.
spk02: That's helpful. Thank you. And then the second. Sorry. And then the second one, I guess maybe I wanted to focus on the supply chain. I mean, obviously, that's been a challenge in 2021, you know, especially when you're thinking about all the freight costs you guys have had to push through. You know, with that being said, obviously, I think you guys did a good job. I just wonder, you know, given the supply shocks, you know, are you thinking of potentially evolving your own supply chain and maybe your own production capabilities across, you know, the geographies a little bit differently? Or do you think you have... maybe the right formula today.
spk08: I think that you speak with Sébastien recently, okay? So, Sébastien, can you take this question because I know that you know the answer.
spk07: Yeah, for sure, my quote has been very challenging, the supply chain purchasing in the last year. And I would say it remains challenging from one way to the other. There's some small issues, but we try, okay, I have a better planning to make some PO in advance with our key supplier, and we discover who's good and who's not good. When we have some issue, we might work on some equivalent parts and do some testing to make sure we can not stop the production. Supply chain is not just about Asia, but at least in Asia, that's our own factory in Chamin and in Ouija, so at least we control what's happening there. And as of right now, they are doing a very good job, and they continue to ship what they are doing. And an example of much more setback at the beginning of the call is the Ultron acquisition, which was one of our key suppliers of electronics. Electronics is a bit challenging those years, so we did an acquisition in electronics to be more vertical integrated to eliminate some of the risk. And my friend Steve always reminds me that I have a bit too much inventory. So, yes, we have worked to make sure we have the right inventory on the shelf so that we can deliver this growth. And one thing also to remember is in a key factory, we have some machinery, so we are able to manufacture some parts by ourselves, some steel, some painting. So I think this is important to remain flexible. That will be my answer for that, Michael.
spk11: That's helpful. Thanks, guys. Those are my questions. Thank you.
spk01: We'll take our next question from Nick Agostino from Laurentian Bank Securities. Please go ahead.
spk12: Yes, good morning. Bonjour, Nick. Bonjour. On the supply chain side, I guess two questions here. First, if you guys can talk about what impact did the flooding in Vancouver have on your Q4 results? Just trying to understand, was there any revenue opportunities missed as a result or was there any
spk07: uh margin pressures that you may have seen in q4 that that don't show up uh starting q1 yeah so nick for sure was very unfortunate and you know we have a factory in bc so it was not so far from us uh i cannot say that it has huge impact in terms of supply because we have a few weeks always of inventory in stock yes we had some trouble on q4 on the timing of the container Did it cause some additional costs? I think the answer is yes. We air freight a few parts, pay additional money to move your container. But yes, it was not the best event with the flooding.
spk12: Okay. And then just given with the situation in China currently with the shutdowns in Shenzhen, I know your factory is near there. Just wondering if you could provide an update on what you guys have seen out of China and maybe if you're taking any precautions ahead of any further shutdowns within that region. Sebastian, please.
spk07: Yeah, the good news, Nick, that's our own plant. So we have really the truth of what's happening there. And yeah, since the Chinese New Year, things continue to work every day. Yes, there has been so many lockdowns from one city to the other. But as of right now, it did not affect us. We have increased a bit maybe the raw material we have in our own factories to make sure we don't stop the assembly. But as of right now, I did not miss a week of shipping. And at the best of my knowledge, the Shenzhen border has reopened for the shipping. So that should not be an issue. And there's not just one part also in China. And as our second factory in China is quite far from Shenzhen. So I think so far we have been okay, Nick. Okay.
spk12: And then my last question, just wondering on staffing for the growth that you guys are seeing, have you had to incur any, well, first of all, what was the staffing impact in Q1 related to Omicron vaccine? just here in North America, for that matter, in Europe? And then secondly, are you guys incurring any additional staffing costs to keep staff, just given the fact that we're seeing lots of moving parts on the site in general?
spk08: Yeah, Sebastian answered that because, okay, you are there, okay, and you check your thing about all the different places that we manufacture, okay? And so can you answer that, please?
spk07: So fortunately, every year, okay, we try to give some increase to our different staff in our different location. That's always part of our budget. And yes, I think we took care of your employees and we have TASELPOS to fill some of the gap where we had maybe some open position. And after that, 2022 is maybe, I think, yes, we have some maybe minor issue in two, three place, but for one or two weeks. But as of right now, the best of my knowledge, all our location are LT and they are all working.
spk11: Okay. Thanks, guys. Thank you, Nick.
spk01: And as a reminder, this is Star 1. If you would like to ask a question, we'll go ahead and take our next question from Zachary Evershed with the National Bank Financial. Please go ahead.
spk13: Good morning, everyone. Hello, Zach. So I was wondering if you could give us some insight into how the dynamics change in accessibility when we start to see interest rates rise. Do you see any issues on the residential side of things?
spk11: My answer is no.
spk08: Not at all. No, no, no, no, not at all, okay? First of all, okay, they want to be at home, okay? They want maybe, okay, to... By elevators, as I mentioned before, okay, the backlog on elevators has never been in all my life, okay, so great, okay. So I see that the people, okay, work and work very well, okay, passing, okay, some time to be in the office and some time at home.
spk11: Do you have something to add, maybe, Nicolau?
spk00: No, Zach, I mean, I would say the products that we offer are more necessary, you know, as opposed to, you know, an extra deck that you might put on the back of your house or something. I mean, if somebody needs mobility in their home, whether it be a stair lift or a platform lift or what have you, I do think you'll see that it's a priority spending. Most of these individuals, it is private pay. So, I mean, whether it be from their own cash or maybe they have a line of credits that they tap – So I would say no. In the current environment with what we're seeing in terms of interest rates on the rise, and again, I'm not an economist. I don't want to predict where they might go. But for the moment, we don't see an impact. And again, given the necessity of these products for these individuals to maintain their mobility, it is a priority for them. So as Marcel had mentioned, we don't see a big impact given the current interest rate environment and where it might go.
spk08: Yeah. And congratulations. Thank you. And congratulations to the Canadian government. I think during this crisis, they were very good to push for money in the consumer, in the person. So it was hard the last two years, but people have some, they don't have some cash. So they have a lot of projects, and it's why I see this year will be a great year and maybe it's very good to see that there will be a road to make our $1 billion in sales in 2025 or maybe a little later a year. Yes, thank you for the answer.
spk13: Thank you very much. And then for my second question, can you give us an update on your outlook and objectives for the view lift, please?
spk08: For the view lift, that's an interesting question, okay? And a good guy to answer that, okay, would be Sebastian. Just add a note, okay, that Enzecare is very excited about selling the view lift in Europe. And they already begin to sell that. And they believe, okay, the aesthetic is there. First of all, you are in a house and you are accessible on two or three levels. It's not something that is hidden in the corner. You can put that in the center of a room and that's an art. It works quite well. Maybe the price is not affordable for everyone, but we have all kinds of people in this society. So the people who don't want to have that, maybe they will take a regular elevator. So I see the future of this product, and that's good. It's why our growth will be there and better, because this is a product that will sell more and more each after year, because the people begin to see that. What is important, the architects around the world know more about Salvaria, know more about this fantastic product, So, Sébastien, you have something on that?
spk07: I guess yes. So, yes, so basically, Zach, so for sure, ViewLift, if you remember, it's always a flagship product. We do a lot of marketing effort on the ViewLift, and it's always hard to evaluate also the exact success on the ViewLift because it has a big influence on the other home elevator. And as Marcel said, the backlog is very nice on the home elevator. I guess part of it, the numbers of leads, it is derived by the ViewLift. And now, for sure, we... And it takes time to do the project, you know, sometimes. Yes, if it is a renovation, it might be a bit faster, but with the new construction, we have to put a view lift just at the end of the construction. Yeah, now we have some demo in Europe, okay, in our own offices in Swiss, in Germany, in UK. And I think Garavento Europe, because we started a bit like one and a half years, two years ago, start to have an interesting trend, especially in Germany. And now we have trained the team of Endicare, and through that, the dealer of Endicare, and this is something that we'll expect to have a nice growth with VULIF in Europe. And if you remember, VULIF is called compliant for Europe, so we did that two years ago. So there's no reason why we cannot accelerate our growth of VULIF over there. And I think the team of care put a lot of efforts also on the marketing and on training the people on VULIF.
spk11: Thank you very much. I'll turn it over. Thank you.
spk10: We'll take our next question from with Eight Capital.
spk01: Please go ahead.
spk09: Thanks, and good morning. On the patient care segment, can you characterize the thinking behind the change of name from patient handling, and does it open you up to new product lines?
spk08: Okay. I am very happy, okay, that you touched this segment, okay, that it is 40. Yeah, that's a good question, and you will see that we make, he will explain that we'll make some change, okay, that will change this division this year. So, Nicola?
spk00: Sure. I wouldn't read too much into the name change of patient care to patient handling. Essentially, you know, SPAN, or I guess prior to Handicare, was the big driver of our legacy patient handling business. Again, more in the pressure care, so in terms of those therapeutic support services and the bed frame, so we had the pressure care side. And then with Handicare, obviously more in the safe patient handling with their lift products, we thought that patient care was maybe a better name that encompasses the entirety of that group. The opportunities, I think, in front of us for patient care won't necessarily come from the name change, but really from certain changes that we've made internally to that organization. Again, Handicare brought with us a very, very strong team. And then again, combining that with SPAN, as well as we brought on board a new commercial lead back in the fall, who's really kind of spearheaded much of the integration that's going on on kind of the sales strategy, the pricing strategy, our product rationalization that's ongoing. So I think those are more of the initiatives that we're doing that are gonna have an impact on that division. Unless you have any further questions as it relates to the name, I would say don't read too much into it.
spk09: Understood. I just saw patient care. I thought maybe you're broadening maybe into wound care products because I've been reading into kind of pressure products that you had and some of the patient handling solutions you could go into.
spk00: I think right now our main focus is we have a good portfolio of products of lifts, of slings, of bed frames, of mattresses. And again, with the team we have around us, it's a question of I guess, better focus on what we have and getting the best out of our current product portfolio, rationalizing our product portfolio in many cases where there's some overlap between the SPAN and the Handicare divisions. And then from there, yes, there could be an opportunity for us to look to add new products. But right now, I think we have a good mix with what we have now.
spk08: And can you speak a little bit about our guy in MEGA that handled this division right now for us?
spk00: Yes, Pat Mongeau. So a little shout out to Pat. So yes, Pat joined us back in the fall. Again, 20 plus odd years of experience on the sales side, on the product side. He joins kind of our two other leaders within patient care. You have Phil Marmina, who heads up, I guess, the sales front. And then Les Teague there in Greenville, South Carolina, for more of the, I guess, the operational side of things, in charge of the factories, both in Greenville, but also in St. Louis and in Beamsville. So Pat really, when he came on board, he's kind of taken all the commercial activities under his wing, under his direction there. And really, you know, focusing first on, you know, we have these price increases that we've passed on over the past several quarters to kind of combat some of the inflationary pressures that we've been facing. You know, so Pat's done a deep dive and do all of our products. So looking at, you know, all that we offer both on the Span side, the Handicare side, and for Magog there on the Severia side. looking at all of our products, all of the pricing, making sure that we're selling the right products at the right price to the right people. So that's really what he's been, I guess his mandate has been since the start. And, again, it's having, I would say, a very positive effect on the team. I think everybody's kind of buying into this one severia, if you can call it that, as it relates to patient care. So it has been instrumental, and we're very happy and fortunate to have him on board and the rest of the team on board, and we feel very confident about where we're going with that division.
spk09: Understood.
spk08: Just to add on that, you will see that the margin was not satisfied at all. I cannot work with a low margin like that. So Pat is a board, he's working hard with his friend, his colleague, and you will see that we will produce EBITDA at the right ratio. in 22, okay, and we will put to have a very good 23 in term, okay, of EBITDA number. Okay, that's something to have an EBITDA, but we have to be at the right ratio. It's why I focus, okay, to be at 20%, okay, by the end of 2025. I focus on that. My team work hard, and we will deliver.
spk09: Understood.
spk08: And that rate ratio for you is, where is that rate ratio for you right now, basically? Oh, yeah. That's a good thing. Okay. But I think, I think that the accessibility, okay, turn, okay, and we'll turn 23, okay. And I think we will be around 20, okay, on this patient and link. So we are very optimistic, okay, very optimistic about to deliver that. Okay, first is thing we need people motivated and have the right products. For sure, we need that. And we have this combination.
spk09: And I didn't notice there was a slight reduction in your staff from 2,300 to 2,250. Is that just the function of the increased automation? Or are you looking at, and you also mentioned 2,000 staff. Is that just you rounding or are you looking at some staff reductions as a as you increase automation, I guess?
spk08: You know, okay, over the years, okay, our staff, okay, is very stable, okay? It's a question they like to be with us, and for sure, okay, we have a company that will put, okay, our employee at the very big priority, or maybe we pay them a little bit too much, but the people like to work at Saverio, and me, okay, I am a guy, okay, that go in the shop, okay, Now it's a bit less, but my people right now, Sebastian and the others, we go in the shop and we speak with them. It's why it's just going higher, but we don't have a lot of change right now. For sure, Sebastian can add something. He can have an interesting comment about the curbside lift that we make from Savalia, how many numbers he has to make to deliver 150, 200 by the end of the year. a month with how many people, Sebastien?
spk07: For sure, we're always working on our productivity and to bring the IndyCar product here for the curve is to make a big change in terms of productivity output per person. Basically, IndyCar is four times more productive in terms of when it is time versus Savaria to manufacture a curve stairlift. And I think, Steve, you wanted to comment a bit on the total number?
spk05: Yeah, I was just going to say, Seb, it was $2,300 was the initial estimate based on our first consolidation with Handicare. We've just fine-tuned the number down to $2,250. So $2,250 is the number of employees we have. There haven't been any significant changes in headcount. It was more just fine-tuning.
spk09: Understood. Thanks for the insight, Dan. I'll hop back in the queue. Appreciate it. Thank you.
spk01: And we'll go ahead and take a follow-up from Derek with TD Securities. Please go ahead.
spk03: Yeah, just a few follow-ups for me. It looks like, you know, excluding the government assistance with the SEWS program, you are actually able to keep your margins flat year over year. You did mention things like shipping costs in particular, so I was just wondering how we should be looking at your margins progressing through 2022.
spk08: Okay, you are talking about the gross margin, okay? I think, okay, with the increase, okay, of the price that we have done, okay, we have to be fair, okay, unless everyone, okay, can live and be happy with the price that we get. So us, okay, we'll be very happy, okay, to reach the gross profit of 35%, okay? So I think we will reach that by the end of 2025. And that's the pace for us. And we have the people, we have the territory, we have the number of dealers. Don't forget, we sell the red, but we sell the majority of ourselves through dealers. So we like to work with them, and they are good for so many years. What is good, the dealers, we have roughly the number of dealers that we have a couple of years ago, many years ago, because they don't change. They are happy with us, and what is important, we are the only company that can say to the people, hey, buy with us, and we have all the projects to cover residential and commercial, from the curve, the straight, the lift, to the vertical, to elevators, okay, to the, you know, something to be that gives to your customer an accessibility to the view lift, okay, that's great. So we have all, okay, commercial, residential, okay, at the same place, okay, that's major, and we bring that, okay, this, for sure we have some work to do, okay, that we made the code in Europe, okay, some we are working on that right now, but it's important to arrive down there, and make some modification because the customer in Europe and in North America are different a little bit on aesthetic mainly. So we work on that, but that's major to offer to a dealer, the complete client. So they don't have to look at other place, just buy at one place. Vasim, you have something to add?
spk07: No, I think that was a good answer. Maybe Steve, you want to add something?
spk05: Just, Derek, specifically about the underlying margins. Yes, there was a lot of pressure this year from decreased sues, as I mentioned and you mentioned. I think when we highlight the increased shipping costs, which were significant in the year, I mean, it just goes to show how much better of a year we could have potentially had. You know, we finished the year at 100.3 of adjusted EBITDA, and we saw significant increased freight really from the end of Q2 through the end of the year. And that's, you know, when we look at 2022 and beyond, we're we have planned accordingly to incur similar freight rates. So, you know, yes, we did hit 103. It could have been, sorry, 100.3. It could have been a decent size bigger if it weren't for additional freight costs. But, you know, we did incur them, and we are expecting them to continue in the future. So hopefully that gives you a little bit more color.
spk03: Yeah, so you're – but you're expecting – high rates but flat year-over-year? You're not expecting them to grow?
spk05: Freight costs? No, we're not expecting it to grow on a sort of per-shipment basis. But obviously, as our business ticks up, we're looking at different things, including the manufacturing of the curb stairlift in Brampton, which has a positive impact on freight. So there are changes. But when we look at a per container basis or per shipment basis, we're planning on it continuing at the current level.
spk03: Okay, that's helpful. Another one for me is I was wondering if you're seeing maybe any initial impacts on the European business, maybe just given the conflict that's going on in the area?
spk08: Not right now, Sebastien. We are in touch with them, okay? Better than me, okay? But with my... I thought, okay, when I speak to Claire, okay, it seems that it's not easy, okay? But we wish that it will finish this war, okay? But, Sebastian, okay, you have some update to give?
spk07: No, again, our sales are very unfortunate, but our customer, we did not have a really sales over there, so there's no impact. But in terms of supply chain, so far we haven't been impacted, but we are monitoring that very closely because we have a sales office in Poland, There's a lot of energy going there, so that's something that on the long term could have impact what we're monitoring.
spk03: Okay, and maybe just one last one for me in terms of housekeeping for Steve. You talked about strategic investments and inventory. I'm just wondering what your expectations for Q Capital are this year and maybe along the same lines your CapEx in 2022. That's what's
spk05: Specifically looking at working capital and within that on the inventory piece, we did see a sizable increase in 2021 as we've talked about. That was intentional to buffer ourselves against supply chain challenges. We did see various challenges throughout the year. Vancouver floods were just one of them. Going forward for 2022, we have sufficient inventory on hand right now. We're not On a dollar basis, we're not trying to increase that. We're trying to more redeploy that and keep the investment in inventory relatively flat for 2022. That's our goal. On the CapEx side, we are being diligent with CapEx. Our spending estimate for 2022 is sort of in that 2% to 3% run rate that we have historically had, and that includes some investment in some of our facilities related to some of these projects that we're talking about, whether it's, you know, stairlift manufacturing in different cities or other investments. So we are being very critical on CapEx, and, you know, that is just going to show how focused we are on debt deleverage.
spk11: Thanks, everybody. Thank you very much.
spk01: And with that, that does conclude our question and answer session. I would now like to turn back over to our speakers for any additional closing remarks.
spk08: So, thank you very much, my dear. So, I think that was a great call. And thanks to my team. See you in three months.
spk10: And with that, that does conclude today's call. Thank you for your participation. You may now disconnect.
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