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spk01: Stand by, we're about to begin. Good day, my name is Jess and I will be your conference operator today. At this time, I would like to welcome everyone to Severia Corporation's Q4 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 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 statement contained in SAVERI's most recent press release issued on March 7, 2023, with respect to its Q4 2022 results. Mr. Barasa, you may begin your conference.
spk04: Thank you, Jessica. This is Marcel, and I am very happy about our result of 2022. Very, very happy. I am in the business since quite the beginning. And even if we have some turbulence, I repeat what I repeat for so many years, that our business is on mobility. Mobility, the people are aging every day. And one problem was there 10 years ago, and it is there. It is the accessibility. Accessibility to the house or to the public buildings. So our business is like 50-50 to commercial and residential. And I can tell you that our backlog... Sometimes to see if a company is healthy, I will say to the company, tell me your backlog. Our backlog is the best as ever. Why? Because people need mobility. We can be, unfortunately, in war in some sector, and the market seems to be nervous. But the people at home, they are a certain age, and they need the mobility to go to their bedroom on the second floor. That doesn't affect them at all. Just maybe they will say, oh, we're nervous a little bit. We will postpone after a couple of months our decision. But this decision is there. They need mobility. So when I decided to go in this kind of business, 30 years ago and more. I decide because it was great 30 years ago, but even right now with the population that we see more, okay, that it is apparent the aging of the population, they need our product. They need our product. It's why, okay, our backlog is so high, okay? So I am very happy about our mobility across the world, okay? And after that patient handling, okay, is Thanks very much to the people, okay, and all this division, okay. They report very good numbers. And I am very enthusiastic about the future. And I repeat myself, okay, the future is the backlog, okay. We're the best backlog, okay. It's why, okay, 22 was good, okay. But 23, okay, that we are in, okay, almost finished the first quarter, okay. will be better, and it is better, okay? So I have always my people, my key people with me on the call this morning, and I will ask Steve to begin, and we'll make a little change, okay? After that, Nicolas Rimbaud will speak about patient handling and Sébastien about operation. So we will speak first, and after that, we will listen to the question. And again, okay, I repeat, okay, We are good. We will be good and better. And the news, okay, thank you to the analysts. They are there this morning, okay, and support Savaria, okay. That's so important. That's so important that you are there. You were there five years ago. You were there 10 years ago. And thank you very much for that. So I pass the guy who will do all our finance. I speak, please.
spk06: Thanks, Marcel, and good morning, everyone. I'm going to begin with some remarks regarding our 2022 fiscal year consolidated financial metrics. For the year, the corporation generated revenue of $789.1 million, up $128.1 million, or 19.4%, compared to 2021. The increase was driven by strong organic growth of 12.7% and acquisition growth of 8.9%. was somewhat offset by foreign exchange headwinds of 2.2%, netting out to 19.4% growth overall. Gross profit and gross margin stood at 254.4 million and 32.2%, respectively, compared to 215.5 million and 32.6% in 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 fix cost absorption. Adjusted EBITDA and adjusted EBITDA margin finished at $120.2 million and 15.2% respectively compared to $100.2 million and 15.2% in 2021. The increase in adjusted EBITDA dollars is primarily due to increased sales volumes. Adjusted EBITDA margin was held flat as the decrease in gross margin was offset by lower selling and admin costs as a percent of revenue. Now we'll move on to our segment results. Revenue from our accessibility segment was $560 million in 2022, an increase of $75.7 million, or 15.6%, compared to 2021. The increase in revenue is mainly attributable to organic growth of 9.8%, as well as acquisition growth of 8.9% from Handicare. This was offset somewhat by a 3.1% revenue decline due to foreign currency impacts. The weakening of the euro and the pound overshadowed the strength in the US dollar versus the Canadian dollar in this segment. Our revenue growth was fueled by both residential and commercial sectors, as well as price and volume increases. And we continue to build our backlog. At December 31, 2022, our accessibility backlog was approximately 5% higher than last quarter, Q3 2022. Adjusted EBITDA and adjusted EBITDA margin both before had office costs stood at 97.3 million and 17.4%, respectively, compared to 86.2 million and 17.8% for 2021. The increase in adjusted EBITDA was mainly driven by higher sales volumes, while the 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 was partially offset by better fixed cost absorption from the increased revenues. Revenue from our patient care segment was $174 million for the year, an increase of $37 million, or 27.2%, when compared to 2021. Revenue growth includes organic growth of 17.1%, which was driven in large part by pent-up demand from the last two years of the pandemic, new contracts won, and pricing optimization. For the year, acquisition growth was 7.7%, and FX provided a 2.4% tailwind. Adjusted EBITDA and adjusted EBITDA margin, both beforehand office costs, stood at 24.9 million and 14.3%, respectively, compared to $16.7 million and 12.2% for 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, pricing optimization, and synergies with Handicare. generated from the adapted vehicle segment was 55.1 million, an increase of 15.2 million or 38% when compared to 2021. This year-over-year growth was driven by 32.2% organic growth and 12.6% acquisition growth and was partially offset by a negative foreign currency impact of 6.8%. The organic growth was driven by increased police and ambulance vehicle adaptations despite continued vehicle supply chain disruption throughout the year. Adjusted EBITDA and adjusted EBITDA margin both forehead office costs finished at 4.3 million and 7.8% respectively compared to 3.2 million and 8% for 2021. For the year, net finance costs amounted to 16.5 million, an increase of 0.7 million over the 15.8 million amount recorded in 2021. The increase was mainly due to higher interest on long-term debt related to the financing of the Handicare Acquisition and also higher average market interest rates. To explain the relatively modest increase in finance costs on significantly higher market interest rates, I note that 2021 also had a loss on an FX contract of $1.8 million and a loss on a net investment hedge of $0.8 million, which were not repeated in 2022. Net earnings were $35.3 million or $0.55 per diluted share for the year compared to $11.5 million or $0.19 per diluted share in 2021. Adjusted net earnings excluding amortization of intangible assets related to acquisitions reached $57.1 million or $0.89 per diluted share compared to $41.8 million or $0.67 per diluted share last year. This reflects an increase of 32.8% or 22 cents on a diluted share basis. Turning now to capital resources and liquidity. Laveria generated cash flows from operating activities of 90.7 million for the year compared to 57.3 million in 2021. This large increase was due primarily to increased earnings as The level of investment in working capital stayed flat on a year-over-year basis. 2024-2022 saw cash generated from non-cash working capital of $13.2 million. Cash used in investing activities was $21.6 million for 2022 compared to $396.4 million in 2021. In 2022, the corporation disbursed $1.4 million for the acquisition of Ultron. and $20.5 million for fixed and intangible assets compared to $381 million for the acquisition of Handicare and $15.7 million for fixed and intangible assets in 2021. Cash used in financing activities was $83.3 million for 2022 compared to a cash infusion of $351.8 million in 2021. This year's significant cash outflows include $32.5 million of dividends, $28.1 million of reimbursement on the credit facility, $13.9 million of interest paid, and $11.2 million of lease payments. As at December 31, 2022, Saveria had a net debt position of $369.4 million and was in compliance with all of its covenants. On a trailing 12-month adjusted EBITDA basis, Severia's net debt to adjusted EBITDA ratio was approximately three times. This represents a 0.7 times decrease versus Q4 2021 last year. This reduction is 0.2 times over and above our target of 0.5 turns per year. Severia has funds available of approximately $125.7 million to support working capital investments and growth opportunities. So now looking forward for 2023, Severia expects to generate revenue which will be approximately 8% to 10% higher than 2022 with adjusted EBITDA margins of approximately 16%. In addition, for 2023, we are targeting a reduction in our leverage ratio of 0.5 terms. This outlook is based primarily on continued strong organic growth coming from accessibility and patient care. segments supported by our current high backlog levels and continued realization of revenue synergies between Severia and Handicare. With that, this completes my prepared remarks and I'll turn the call back over to you Marcel.
spk04: Steve, thank you for this information. We can see that we have a great year in 2022 and as I mentioned, that will support our increase, okay, that we look for, 23, and we're very optimistic, okay. Now, okay, about the good change in the patient and thing, okay, I will have Nicolas, okay, to present you, okay, what we had done in 22, so.
spk09: Yeah, thank you, Marcel, and good morning. I would like to take a moment to speak about the performance there at patient care in 2022. Although first of all, I know that analysts and investors are on the call today. We also likely have employees listening in as well. So I think it's important that everybody know that patient care is an integral part of Severia. And if we're to achieve our long-term objectives, we're going to need them to deliver for us as well. And to that, the patient care team really stepped up in 2022. I think as Steve mentioned, delivered a record organic growth of over 17% and a record EBITDA for a full year of over 14%. And it's really a testament to the strong team we have in place and the fact that they're full in and really embrace the integration initiatives between Handicare and SPAN. And so I think what we're seeing here is the synergies materialize maybe even a bit faster than we had anticipated. So again, Marcel, I appreciate you asking me to take a brief moment to speak about patient care. I'm sure there's going to be some questions from the analysts on the call, but just wanted to I guess congratulate the team and let them know that it was a great performance in 2022, and we fully expect even better in 2023. So thank you, Marcel.
spk04: Okay, Nicolas, and I will hear you, okay, with some questions, okay, on the patient and thing. You will answer that, okay. And the last, but the least, okay, that would be Sebastian, okay, that would be a presentation, okay, for What we have done in the last year and the last quarter will be a little bit later. But for 2022, Sebastian, can you take the line, please?
spk10: Thank you, Marcel. So, basically, yes, 2022 was a good year for accessibility in terms of production output. We had an interesting growth in Europe and in North America. For sure, Europe was a bit more challenging towards the end of the year in terms of margins. That's just a little short-term issue. We're always working with the team to do some action plan, so that's not a concern. After that, we are lucky. Yeah, we start the year with a very good backlog, so that continues to put some production pressure to do some improvement. So all the team is working on improvement, I think, in each division, so that will bring some interesting output in 2023. After that, for sure, in 2022, we have launched the free curve of Endicare in North America and Toronto. Right now, it is successfully in production. We are approximately at two weeks lead time. If you remember a year ago, it was more four to six weeks for North America. It's two weeks. We target one week, but we need to continue. In the second quarter of this year, there will be a second product of Endicare, the second curve, the 2000, that is going to be manufactured in May 2023 in Brampton. That would bring another dimension. I think cross-selling efforts is continuing to happen in North America between the sales team of Endicare and Savaria and Garavento. So that's a good progress. And in Europe, really, the Garavento and Endicare are working together on some cross-selling of inclined platform, of some view lift. And we hope later this year we'll be able to bring some Savaria product in Europe, some vertical platform and port shifts so that we can continue the affordable cross-selling. Mexico. It's just four months into the story of Savario. Since November, we are open. But right now, we have 35 employees in Mexico. We are doing some complete products that we are able to ship to the U.S. So that's a start. We have already did some shipment of kits in the beginning of the year. We are also making some sub-assembly from Mexico to Toronto to help us a bit to rebalance the long-term supply chain. And don't forget, if we have to go to $1 billion, we need more capacity. So it's always important to think a bit ahead. Last thing on supply chain, it's not perfect, but I would say it's a big, big, big improvement since a year. So right now, the supplier that has some supply chain issue with us, maybe they are not the right partner to work with Sabah. So on that, Marcel, I will give this back to you.
spk04: Thank you, Sebastien. And my dear follower, you can see that our team know what they are doing. They are aggressive. And for sure, it will help us. It's a segment that we have. But they can tell the operation and the future of this company. So my role is less important. But I have just a question. I participate with the vision of Severia. So we are ready for call, please. Yes, call.
spk01: Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question. We'll go to Derek Lessard with TD Securities. Your line is open, sir. Please go ahead.
spk12: Yeah, thanks and good morning everybody and I just wanted to congratulate everybody also on a solid year considering the operating challenges. My first question is, I was wondering if you can maybe add some color to your onshore initiatives, particularly in Mexico and where you are in the startup there and maybe your expectations around margin contribution and or enhancement for 2023. And maybe part two to that question, could you talk about what you're seeing in terms of inflation and supply chain pressures? I know it's early in Q1, but wondering if there's been any improvement on that side.
spk10: The first guy for that is Sebastian. Hi, Derek. Basically, in New Mexico right now, we have a three assembly line doing some port shifts, some portion of home elevator, and a third one for electrical department. Basically, this is really, again, to help us to support our growth. I think we have already published our guidance for this year, so I guess somehow Mexico is built into this budget. But again, it's for the long term, for the one billion capacity. Now we have a 95,000 square foot. It doesn't feel okay overnight. And we've got to go step by step. So I think we are happy with the direction we are going. And also we are looking directly vertical integrated in Mexico to make some parts by ourselves, not just to assemble parts. And again, we have started to receive some machinery to be able to be vertical integrated. So definitely that will be a game changer over time for the margins, at least for the North America, since it's at proximity. I think the second part of the question was the inflationary. So for sure, okay, I think it's getting better. People have asked to pass up an increase. I think we have already hopefully received it. So now I think we are working on some mid-long-term project to be able to decrease some costs or look for some alternative supplier. But I think, and I thought margins-wise, you know, we have different brands that will make some price increase at different time. So they are not all at the same anniversary date. And since we have an empty backlog, but Sometimes it takes a bit of time to reset the margins. So that's why I think on the mid-long term, I'm very positive that we continue to improve our margins.
spk12: Okay, that's very helpful, Sebastian. And maybe one for Steve. I just wanted to be clear on the 8% to 10% revenue guide. That excludes the sale of the Norwegian vehicle segment, right? So essentially 8% to 10% in patient care and accessibility.
spk06: Yeah, exactly. Once that's final, I mean, the best way of looking at it is to take our 2022 results and carve out that Norway business, and we'll grow 8% to 10% from there.
spk12: Okay, that's helpful. And maybe just one more. You guys did, thanks for the color on the accessibility backlog. I'm wondering if you have any similar color on patient care and And I know, you know, 20% growth forever was not sustainable, but, you know, how should we be thinking about growth and some of the growth drivers in that business for 2023?
spk09: Yeah, well, I mean, I talked about – oh, go ahead, Steve. No, no, go ahead, Nick. Keep going. I was going to say that you're correct. I mean, I think we had a good run there of 20% in a row. I think it was three quarters, the first, second, and third quarter. Came down a bit in Q4, but for the full year, we finished over 17%, which was a record for that segment. Going forward, I think that 8% to 10% holds as well for patient care. Through our expectation in 2023, we have a good order intake coming in. We're quite confident about where we are. Here we are kind of midway through March, so We have a good part of Q1 already in the books. The ceiling lift portion of that business, so kind of that handy care side of things, that is more of a project-based. So there is backlog associated with that on the legacy span side. On the beds, there is backlog, which gives us some visibility and some comfort of where that's going. The mattresses, not as much. It kind of comes in and goes out relatively quickly, so the backlog is relatively small on that portion of the business just by its nature. But going forward, I mean, I think what's going to be driving some growth this year, along with certain of the pricing initiatives that we discussed for last year, is we're aggressive in the market. I think that the sales teams have really come together, and we have more feet on the ground talking about the full portfolio of products that we offer. We're out there gaining market share in a time when some of our competitors are Scaling back a bit, we're out there forging ahead and maybe gaining market share in certain segments as well. We've been successful on many of our bids, so our win rate has improved. And then finally, I would say that the cross-pollination between the teams is something that's really now just taking hold, working on strategic accounts that might have been with SPAN and getting the Handicare guys in there and vice versa, making sure that the SPAN guys are having – and leveraging some of those handicap relationships to really push mattress and bed frame sales. So I think the cross-selling is going to be a big driver for the growth, not only in 2023, but also in 2024, 2025. So very excited about where we are. And so in terms of expectations there, maybe not 20% growth per year again going forward, but that 8% to 10% growth is where we expect this to be in 2023.
spk12: Yeah, thanks, Nikola. That's it for me. Go ahead.
spk04: Derek, just to add, we received an order from AGO about patient and sitting leave. Sebastien, just give me why we received that. Because we changed our approach, we have new people. Tell me.
spk10: Marcel, you don't forget the detail. Yes, we have a new commercial director in AGO since six months, and we have tried to clean up a bit of our marketing in terms of accessibility, patient care. And, yeah, we have some dealer base in Asia. We started to visit other dealers since COVID is a bit behind in Asia. And we said, okay, we've got a nice order for 150 units, okay, in hospitals in China with one of our dealers. So, again, that's true that there's opportunity everywhere. Patient care has been really North America and UK with Sylvelia. But going forward, okay, there's a lot of good place in the rest of the world that we can expand on our patient care also.
spk04: What is the value of your order, Sebastien?
spk10: It was $450,000 U.S. dollars, Mr. Marcel.
spk04: Okay, but that shows that in this segment, okay, sometimes we receive very good orders, okay, depending, okay. And we can see this across the planet, okay, that people need, okay, some service, okay, some medical service. They need some patient, our product, okay. And so I am very optimistic, okay, when I see an order like that, okay, coming in, okay, and that's just the beginning of the way that we have a new team, okay, who lead this division. And we have a new, okay, that's so new right now, okay, but I'm very happy with the progress of the people because the people is the key, okay, to succeed, okay. We need enthusiasm, okay, we need, okay, to offer the best product, okay, and the best service, okay. So, thank you, Director.
spk01: Once again, it was Star 1 if you had a question. We will go next to Michael Glenn with Raymond James. Your line is open. Please go ahead.
spk03: Okay. Thanks for taking the question. So, I just want to circle back on Mexico because it is an area we do receive a number of questions on. revenue-type metrics that you're able to indicate for Mexico, where you would like to get that facility from? Just something that we can, you know, just something a little more tangible that we can speak to.
spk10: I guess I'll take this one. So, for sure, most of the revenue of Mexico, okay, is the entire company, so it doesn't really affect, okay, the external revenue. And again, Going part of this $1 billion, it is important to have capacity. Right now, we have 35 employees. We hope to have 100 by the end of 2023. And in terms of size, it's probably this year $10 million range, but it's all internal sales company.
spk03: Okay. Okay, that's really helpful. Thank you. And then just regarding residential elevators, If we think of how that business ties into new home sales, building of new homes, are you seeing any signs out there regarding a softening in demand with regard to the residential elevator product?
spk04: I would just say that we have the best booking is exactly where we are. Right now it's residential elevators. More and more people are Can retrofit in elevators or install in a new home? That's the best backlog that we have in all our projects is exactly residential elevators. I don't know, Sebastian, if you have something, but the numbers speak. When we see the backlog, it's months and months ahead. Sebastian, you have to add something on that.
spk10: I was just going to say, Michael, that everything, okay, started with the sales leads, and I would say we have to attend some exhibitions so far this year, and the attendance, okay, in the U.S. were fantastic with architect and contractor. People want to put elevators, so there's a lot of inquiry, and then we see it after the leads. We see it with our drawings. Our numbers of drawings did not go down, so it really showed that, hey, our backlog is empty, but still the pipeline in the back, okay, the market remained very positive.
spk05: No concern for now. Cashflow, working capital, yet a nice Q4 in terms of working capital.
spk03: When I'm looking at working capital in 2023, is there still opportunity to take working capital lower? I'm just wondering if there's some outlook you can give for working capital. And then to tie into that as well, maybe some CapEx guidance as well.
spk06: Yeah, thanks Marcel. So on the working capital front, yeah, we did deliver well in Q4. We basically took out $13.2 million out of working capital and took that basically right to debt repayment in the quarter. As far as 2023 is concerned, there is a little bit more room, but I would, as far as from a modeling perspective, I would probably put in, if I were you, put in that we're going to be holding investment flat. So we're not going to be investing any dollars in the working capital in 2023 to support the growth. We feel we have ample room in current working capital levels to support the 8% to 10% growth that we're forecasting. With regards to CapEx, we did see 2022 come in a little bit higher than... slightly higher than where we were anticipating. It came in about 2.6% of revenues. We were expecting more 2.5%, so just a little bit up. With regards to 2023, that number will be closer to 2%. So we've always been in that 2% to 2.5% range, and for 2023, it'll be closer to the 2% range.
spk03: Okay. And then free cash, I would think that the priority for capital allocation with free cash, it will be debt repayment in 23?
spk06: Exactly. Yep. And so we did deliver 0.7 of a turn in 2022, which was higher than what we were forecasting and expecting, or at least guiding towards. I think we were expecting that 0.7 of a turn internally, but we were guiding half a turn. And for 2023, we're guiding half a turn as well.
spk05: Okay, perfect. Thanks for taking the questions. Thank you. Thank you.
spk01: Our next question comes from Michael Dumais with Scotiabank. Your line is open. Please go ahead.
spk02: Hey, good morning, everybody. Bonjour, Michael. Bonjour. First question on the guidance. Again, on the organic growth expectation, just at a high level, I'm wondering if you can break it down you know, that 8% to 10%, which, again, I think includes the divestiture, if you could break that down between price, volume, and FX, because the one thing I noticed is that, you know, the current FX rates, Severia probably get a lift of about 4% to revenues on translation.
spk05: Yeah, so I can... Yeah, I'll take this one.
spk06: The 8% to 10% growth, that's... That's a mix of price and volume. So Sebastian mentioned earlier that we do have price increases across the business. They are at different times and they do come into effect at different times based on the different levels of backlog that we have. For example, the stairlift business has a much shorter backlog than we see in the residential and commercial elevator space. So price increases, some of them have already been announced and they're already in effect and some of them need to take more time to work their way through. But overall for that 8% to 10% growth, it's a mix of both price and volume. Without saying exactly how much it's going to be, I would say we're expecting a bit more from volume than from price.
spk02: Got it. And would FX be on top of that, Steve, if you get the 8% to 10% front price and volume?
spk06: It's difficult to say what's going to happen with FX in the next 12 months or in the next, I guess, from this point, nine months. I wish I knew. We have built a little bit of buffer into our numbers with regards to FX, but we will see how that impacts the business. I mean, we are diversified. We have quite a big piece of our business is in U.S. dollars and quite a big piece of our business is in Euro and GBP as well. So what we saw last year was although the U.S. dollar strengthened, we saw weakness in the pound and the Euro, and that had mixed impacts, although they were offsetting each other in our 2022 results. So very difficult to say what 2023 is going to bring, but we feel good about having a diversified business.
spk02: Okay, I understand. Thank you. And then moving on to the accessibility margins, you know, you've had a little bit of an atypical year in 2022 where margins peaked in Q2 and then kind of weakened through the back half. You know, not sure if that was due to the price increases that was implemented in Q2 or, you know, maybe had something to do with Europe. I heard Sebastian comment on that on Q4, but can you discuss that a little bit in more detail, maybe just for 2023, what we should expect in terms of seasonality on margins?
spk04: Sebastian, you will complete my answer, but I'll just tell you something. Our best project in terms of profitability, for sure, patient handling, push us a little bit in the back. That would be good for my team in accessibility when you see other people. and maybe they try to go in front of us. But that's our main project, accessibility. And I can tell you something. The margins are there. We have some increase of price. And that sometimes takes some months that we see that. You will see a good number in 2023 about the percentage. Marcel, if you don't mind, if I could just jump in here, just to add a little bit more color.
spk06: Yeah, we did see some weakness in the Q4 margins, especially in accessibility, especially in the Europe region. You know, we do price increases and we don't like to do them. We like to do them once a year, you know, twice a year if we have to, but it's not something that you can just keep doing on an ongoing basis. So at the time when we put in price increases, we estimate how much we need to do to get the desired margin that we're going after. And I think it's fair to say we were probably a little bit light on those estimates in some pockets. And so as we saw continued vendor cost increases throughout the year, that had a downward impact on margins. Obviously, we're doing what we can to mitigate that. Sebastian talked about it a little bit in his intro words, where he talked about looking at other vendors and looking at other opportunities. But we do have action plans in place, and we're focused on increasing the margin. We do have 20% margins in our sites and we have seen, you know, we do have pockets of 20% and in excess of 20%. And so it's just a matter of getting that 20% across the board. So, you know, we are optimistic for margins in 2023.
spk05: Perfect. Thanks for the answers, guys. We'll go next to Justin Keywood with Stifel.
spk01: Your line is open. Please go ahead.
spk07: Good morning. Thanks for taking my call. I just want to circle back to the longer-term goal, which is, I guess, more of a medium-term goal in achieving a billion sales by 2025. And I see the path to get there just given the strong organic strength, but I also wanted to touch on the goal to have 20% EBITDA margins by then, or $200 million. which would be some significant expansion from what the guidance implies for 2023, which I think works out to around just shy of $140 million in EBITDA. Are you able to help us bridge that EBITDA expanding from $140 to $200 million over the next few years?
spk04: First of all, our projects, we mentioned that we have a key backlog, okay? And we mentioned that we have price increase. Also, some region around the globe was a little bit maybe conservative about the increase in price. But the people know the inflation, and they accept that if we are fair, they accept an increase of price. And everything is in place to increase our margin. We see why we put from 16% to 20%, Marcel. But man, it's just a question that to do better in productivity, to do better in designing, and to have the right sell price. And this is the key part to succeed, to be 20%. For sure, it's aggressive. And I think we are not very aggressive. on our increase of sales, okay, 8% to 10%. You will see Q1, okay, that would be that easy, okay? But this is a little bit conservative, okay? We work on improving our productivity, as I mentioned. And you will see, okay, in this year, okay, that, hey, man, okay, we are better than ever. It's because of our people, okay? Our people are good. They can be better. We will have some people to be better. And we are around the globe. We showed to the people in 2022 that we are about everywhere. And we have this new manufacturing and these two markets that we will sell in Mexico and around that, even if it's not our first goal. In Asia, Asia is very important for us. Very important, and we will see more development in the coming years. So I am very confident that we will make it. For sure, we will meet the guidance and the sales. And about our 20%, that's a challenge. But we'll be very near that with the effort of my people, my key people, but all the people in the company. Sébastien?
spk10: I think you have crossed my list, Marcel, but again, just to highlight, R&D, we have 50 people in the R&D organization. When we launch a new product, we have to launch it at the right margins or we'll not launch it. And I think the Mexico effort for sure is to help us to lower some of the costs. So I think that will be our answer, Justin.
spk08: Great, great.
spk04: Just an example, okay, Sebastian. Tell me the price of a container that you receive, okay, from China two years ago and right now, or three years ago and right now?
spk10: That's a tough one, Marcel, to answer, but at least for one line, which is China to Toronto, I think we're back to the pre-level before COVID. Or the other line in Europe, a different place. There's always the inland cost that we have to be careful of. With the gas price high, everything that we move within the country is usually expensive. But yeah, for the container, okay, we are back to $4,400, $4,500, which is very close to pre-COVID.
spk07: Thank you. Great. I appreciate that. And then just a question on acquisitions. Now that HandyCare is being integrated, are you looking to bolt on any transactions in 2023, or is the focus more you know, still on driving synergies with Handicare and internal operations?
spk04: First of all, okay, for sure we'll make, okay, some little, okay, acquisition, okay. I'll just give you an example that's where, you know, we can make an acquisition, okay, but we know we're good, okay, and when we buy a dealer, okay, and they sell other kind of project in that area, plus, okay, we push all together to grow the business. So that's something that will continue. It will continue over years and over years because we are very successful. And I just named two names, Premier Leaf and Solidar Leaf. They are very good. Unfortunately, our direct sales in Toronto is very good. So we are ready to make this kind of acquisition when we buy some company. that they don't buy our products or just a little dimension of our product. Or maybe, okay, somebody, okay, the owner, okay, decide to sell, okay. Maybe we are a buyer, but for sure we have little acquisition like that. And you have to add something, Sebastian?
spk10: Just to say that Premier Leaf and Flagler Leaf is two of the most successful stores of Savaria. So they are owned by Savaria.
spk08: Understood. I really appreciate that. Thank you very much. Thank you to be there.
spk01: Our next question comes from Nick Agostino at Leverage and Bank. Your line is open. Please go ahead.
spk11: Bonjour, Nick. Bonjour, Marcel.
spk04: You are with us for how many years, Nick?
spk11: I'd say at least eight, nine years, maybe ten.
spk04: Okay.
spk11: Yeah, absolutely.
spk04: You're in the two numbers. That's good. Thank you very much to be there, Nick.
spk11: My pleasure. My pleasure. Quick question on Mexico, and I know there were some prior questions. Just trying to understand, I think you mentioned that most of the sales will be intercompany. When I look at the 2023 EBITDA margin guidance, how much of a margin benefit is associated with the Mexican operations fund? more so not the existing, but at least what you have planned for all of 2023. How much of a lift do you think you're going to get out of Mexico that's already baked into that 16% guidance number?
spk04: Okay, so that's who you will answer, but when you say, okay, I am the oldest guy on the call, but I think it's good to be like that. We are very conservative, very conservative. And Sebastien, I'll leave you the answer to Nick.
spk10: Nick, don't forget, it is a startup that we have done in Mexico. When you have a factory of 95,000 square foot and you have 30 employees, again, it takes some time before you become very efficient and you can really bring some important savings for the organization. So this year, for sure, it's a ramp up. We talked a bit earlier that it's maybe in the $10 million range of inter-company sales, maybe a bit of outside sales, but I think it's really for the long term. And I think if we want to go to 20% going forward, we need some narrow-showing opportunities.
spk11: Okay. Okay, thank you for that. And then, On the bookings activity and the backlog, obviously, it continues to grow in Q4. Just wondering, given the fact that we're about to close Q1, can you provide any bookings commentary for Q1 itself?
spk04: Don't forget about booking. Booking, as mentioned at the beginning of the call, is very, very important. But booking, okay, like on the stairway, okay, straight on the curb, okay, now, okay, we can ship a curb, okay, in Toronto, okay, in maximum two weeks, okay. So that backlog, okay, of two weeks, we don't see the backlog. We just deliver the order, okay. But on the residential elevators, okay, our backlog is on the residential elevators at least three months, okay, something that we don't see in the past, okay. But for sure it takes time for the order to arrive because they have to have some planning. But we are very well equipped in Vancouver and for sure in Toronto to manufacture and we'll get some parts from Mexico already. They are working like to parts, controller. Controller is very important, the controller in a product. uh because uh we need a controller okay and we see how we are in the market okay uh how the the challenge that happened okay on controller okay uh components but it's why we buy a company in europe okay that uh manufactures some parts okay it's why we begin to manufacture in mexico we begin to manufacture the controller okay so we are independent okay and that's the key to be a to z independently of other suppliers so we need supplier okay but that's good at that we can control more our destiny okay than just uh the destiny of the suppliers so that's it i think that's a very good answer myself thank you and uh yeah i think for the
spk10: The booking of Q1, Nick, it's hard to comment, but it remains strong. We have a good backlog, which is what we need for Q1 execution.
spk11: Okay, and then just my last question on the Handicare Norwegian asset sale. Just wondering about the thought process there. Obviously, adaptive vehicles in general had a strong quarter, good organic growth, good margins out of that business, something you guys were always trying to improve. So just any colors to why you're selling off those assets when it looks like their contributions, including North American assets, are maybe starting to gain some momentum. And I'll leave it there. Thank you. Okay.
spk04: Nick, thank you very much. Okay. And I will answer this one. Okay. Maybe Sebastian can complete that. Okay. Or maybe Steve. Okay. Just okay. It's not in our core business. Okay. So I decided, I made the decision to get out of that. Because they make very nice products. But first of all, it's quite far. It's quite far. And then they are not in our core business. So not in our core business. And Van Action is more in our core business, I think. So we decided to sell that, but it was a very small sale. I just had the money that we have in the company, and I wish them good luck, and they are great people down there. But unfortunately, they are not in our, I repeat, but in our core business. Sébastien, you have been there.
spk10: Good comment. Again, I think the special vehicle that they were making, It was a standalone division. Now we found a new owner. We'll probably have a better future for them. So, again, thanks for the work in the past, and I think we're moving on.
spk05: Okay. Thank you. You're welcome. Thank you.
spk01: Once again, it was Star 1 if you had a question. We will go next to Zachary Evershed with National Bank Financial. Your line is open. Please go ahead.
spk00: Thank you. Good morning, everyone. Thanks for taking my question. Just building on the last question, do you view the remaining adapted vehicle segment as a core part of the business? And if not, what do you think you could sell it for?
spk04: You put me on the spot with that one. I call Norway. And for sure, we know more with that action. that action. So it will depend. We will decide to make some changes in the leadership of this company. And it's always depending on what they will deliver. If you tell me about patient handling, for sure it's a different thing. And to be polite, I will say just that it's a better thing. But we try to improve an action on the leadership. And if they deliver what they can deliver, maybe in my language what would be different. So ask me this question in six months.
spk00: Thank you. And then a follow-up on the commentary around shipping costs from Asia. With the freight costs coming down so rapidly, do you have any regrets around the timing or the startup of the Mexico facility, or are you still happy that you did it?
spk10: For sure, we are very happy to have set up a factory, and I think, definitely, what we see from Mexico, going forward, it will be different from China. For sure, China will make some finished products that we can send to Australia, we can sell within Asia, but really, from Mexico, how can we complete more some finished products to serve our customers in the southwest of the U.S.? I think it's far from Toronto, it's far from Vancouver, So I think it's a very good position for the future to build this capacity for North America. So very happy. Zach, that's good for the long term.
spk00: Understood. Thanks. And just one last one. Can you tell us more about the product development roadmap under the IGNITE initiative?
spk04: Now we concentrate what is very important. It's put our products together. on cut compliance okay for europe okay uh all our team okay uh work that may we uh to make some change to pc and that's very important if you want to set a project first of all okay you have to meet the code okay so we'll work on the code okay and you will see that that's a very important uh thing of our r d okay the the They make some changes. Sometimes we make some changes to add better products and less costly products. It's always very dependent. Going out with new products is not a priority for us right now. First, I repeat, meet the code that we can sell in Europe. That's very important. That's our concentration. Sébastien?
spk10: I think the new list of products, Marcel, which we are doing some new products, I think we cannot disclose it. That's prior to information. But definitely, to improve our products, okay, for the future, to make it more aesthetic, appealing for the customer is always a priority. To put our products in compliance, okay, right now we are playing a catch-up game that our products are worldwide. Going forward, once we launch a product, it will be worldwide compliance from the beginning. But right now, this is our main priority. to make sure we are compliant with Europe so that we can do some cross-setting.
spk05: Great, Collier. Thanks. I'll turn it over. Thank you. We have no other questions holding, but just a final reminder, it was Star 1 if you had a question. And no others signaled.
spk01: I'll turn it back for any closing remarks.
spk04: Okay, thank you very much, Jessica. And that's very important, this call, okay, that we meet, okay, that we answer the question, okay, where we are going. So we know that we are working hard, okay, but that's a beautiful market that we're in, okay, and we have some good growth, okay, coming. And so thank you for the people. Thank you for my employee to support this growth, okay. And they support this growth with a smile. So thank you very much to listen to us. Thank you, Driscoll.
spk01: Thank you. Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time.
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