Savaria Corporation

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.

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.

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.