Savaria Corporation

Good day, my name is Mary and I'll be your conference operator today. At this time, I would like to welcome everyone to Severia Corporation's Q3 2022 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'd like to ask a question during this time, simply press the star, then the number one on your telephone keypad. If you'd like to withdraw your question, please press the star, then the number two. This call may contain forward-looking statements which are subject to the disclosure statement contained in the most recent press release issued on October 25, 2022, with respect to its Q3 2022 results. Thank you. Mr. Becerria, you may begin your conference.

Thank you very much, Mary. My name is Marcel Bourasson. I am with Sébastien, Nicolas and Steve, our CFO. That's a pleasure, okay, to first of all speak to you about our Q3. I'm very proud of the number of Q3. Booking is strong. Don't forget, we make our projection, okay, in February. If you take, okay, your life like 10 months or nine months back, okay, it was a different world, okay? Completely different world, okay? And the people don't like uncertainty. And uncertainty, okay? So the people don't like that. We like, okay, to be stability. But then, okay, after world projection, okay, here comes the war. Here comes the inflation. Here comes the cost of, okay, of container. Left and right, okay, and inflation was just terrible, okay? And after that, okay, the container, that was not easy, okay, to come to the port in Toronto. So we received, okay, to make our EBITDA guidance, okay, and our EBITDA guidance, okay, we were at the lower of the, we proposed that there would be a lower of the, near the 120 instead of the 130. But when you put that all together, okay, if I was in February, I will tell you, hey, we'll exceed our bracket, okay, because the freight, okay, everything is so expensive, okay. So we have a very strong, my people work hard, okay, and I think we have a great number, okay, and thanks for the analysts who write to us, okay. I think you are very positive about Celaria. Thanks again. So I am ready. My team, okay, is ready. First, we go to Steve, our CFO, that I think is making a tremendous job. Steve, can you take the poll, please?

Thank you, Marcel, and good morning, everyone. I will begin with some remarks regarding our Q3 2022 Consolidated Financial Metrics. For the quarter, the corporation generated revenue of $201.4 million, up $20.6 million, or 11.4%, compared to Q3 2021. The increase was driven by strong organic growth of 15.7% and was somewhat offset by foreign exchange headwinds of 4.3%, netting out to 11.4% growth overall. Gross profit and gross margin stood at $64 million, and 31.8% respectively, compared to 58.6 million and 32.4% for Q3 2021. The increase in gross profit was mainly driven by higher sales volumes, while the decrease in gross margin versus last year was mainly attributable to continued inflationary pressures on the supply chain, especially in the European region, causing material cost increases. These inflationary pressures were somewhat mitigated by initiatives taken to increase customer prices, reduce shipping costs, and also due to improved fixed cost absorption. Adjusted EBITDA and adjusted EBITDA margins stood at 31 million and 15.4% respectively, compared to 26.3 million and 14.6% in 2021. The increase in adjusted EBITDA dollars is primarily due to increased sales volumes while the increase in adjusted EBITDA margin is mainly due to lower selling and admin costs as a percent of revenue, which offset the lower gross margin year over year. Now I'll move on to our segment results. Revenue from our accessibility segment was $145.4 million in Q3 2022, an increase of $9.8 million, or 7.2%, compared to the same period in 2021. The increase in revenue was mainly attributable to organic growth of 13.3%, which was offset by a 6.1% revenue decline due to foreign currency impacts. The weakening of the Euro and pound overshadowed the strength in the US dollar versus the Canadian dollar. Our revenue growth was fueled by both the residential and commercial sectors, as well as price and volume increases, and we continue to build our backlog. At September 30th, our accessibility backlog was approximately 3% higher than Q2, which was already a record quarter for us. Adjusted EBITDA and adjusted EBITDA margin, both before head office costs, stood at 26.1 million and 18%, respectively, compared to 24.7 million and 18.2% for the same period in 2021. The increase in adjusted EBITDA was mainly driven by higher sales volumes, while the slight decrease in adjusted EBITDA margin was mainly due to continued inflationary pressures on the supply chain, especially in the European region, causing material cost increases, which again was partially offset by better fixed cost absorption from the increased revenues. Revenue from our patient care segment was $42.8 million for the quarter, an increase of $8 million, or 23%, when compared to Q3 2021. Revenue growth included organic growth of 21.2%, which was driven in large part by pent-up demand from the last two years of the pandemic. New contracts won and also price increases. Adjusted EBITDA and adjusted EBITDA margin, both before head office costs, stood at 5.9 million and 13.8%, respectively, compared to 3.1 million and 8.8% for Q3 2021. The increase in both metrics was primarily due to the increase in revenues and improvements in gross margins, mainly explained by better cost absorption, price increases, and synergies with Handicare. Revenue generated from the adapted vehicle segment was 13.2 million, an increase of 2.9 million or 27.7% when compared to Q3 2021. Revenue growth for the adapted vehicle segment was driven by 28.8% organic growth and was partially offset by a negative foreign exchange impact of 1.1%. The strong organic growth was driven by increased police and ambulance vehicle adaptations despite continued vehicle supply chain disruptions. Adjusted EBITDA and adjusted EBITDA margin, both the forehead office costs finished at 0.8 million and 6% respectively, compared to 0.6 million and 6.1% for Q3 2021. For the quarter, net finance costs amounted to 2.5 million, essentially equivalent to the Q3 2021 amount. Finance costs in the quarter included 4 million of interest on long-term debt, which was offset by a net foreign currency gain of 2.2 million, most of which was unrealized in nature. Net earnings were $10.6 million or $0.16 per diluted share for the quarter compared to $4.8 million or $0.07 per diluted share for Q3 2021. Adjusted net earnings excluding amortization of intangible assets related to acquisitions reached $15.8 million or $0.25 per diluted share compared to $10.5 million or $0.16 per diluted share for Q3 2021. This reflects an increase of 49.4% or $0.09 on a diluted share basis. Turning now to capital resources and liquidity. Liberia generated cash flows from operating activities of $19.2 million for the quarter compared to $7.7 million in Q3 2021. This large increase was due to increased earnings and less of an investment in working capital than we saw last year as well as last quarter. We continue to make targeted increases in inventory while managing our receivables and payables. As at September 30, 2022, Saveria had a net debt position of $398.3 million and was in compliance with all of its covenants. On a trailing 12-month adjusted EBITDA basis, Saveria's net debt to adjusted EBITDA ratio was 3.3 times. This represents a 0.4 decrease versus Q4 2021. Saveria has funds available of approximately 102 million to support working capital, investments, and other growth opportunities. And looking forward, the current changing macro environment and movements in economic and political fields create uncertainties. However, considering our recent financial performance and our strategic integration plan with Handicare, For 2022, Severia expects to generate revenue of approximately $775 million, with adjusted EBITDA in the low end of our previously stated 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.