Savaria Corporation

Good morning. My name is Sarah and I will be your conference operator today. At this time, I would like to welcome everyone to Savaria Corporation's Q4 2023 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. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. This call may contain forward-looking statements which are subject to the disclosure statement contained in Savaria's most recent pledge release issued on March 6, 2024, with respect to its Q4 2023 results. Thank you. Mr. Barasa, you may begin your conference.

Thank you, Sarah. It's Mr. Lukaku. It's a pleasure to be with you, my analysts and my guys, Steve, Stabas, and Nicolas, who will speak after me. It was a good quarter, a great year, but I think we are in a very good mood to have this year and next year. We had some game changers. that you will see, okay, our objective of 25 that they can speak, okay? Often the people say to me, okay, what I can speak and what I cannot speak, okay? But I think I can say, okay, that in 25, okay, we have an objective, okay, of 1 billion of cells with 20% of EBITDA. And I tell you, okay, and you can meet the max you are better than me to reach, okay, the one billion cells, okay, we will do that, okay? It's not even so difficult. For sure, nothing is easy, okay? And we are global, okay, across the globe, okay? Some have Europe that actually we have to say that is a little bit weak, okay? But North America is very strong, okay? So we, I can see right now that at the end of 24, okay, we just make our forecast for 25 because That would take some time to be at 25, but we have a very strong, okay, in North America, strong at 24, okay? And we can see that we, at the end of the 23, we were only at 15.5, and we go to 20%, okay? I can look, okay, with our forecast, okay, that we should be roughly, maybe half of that, okay, in 24, and the other half of that, okay, in 25. So I am very optimistic about the number that we put for 25. And again, okay, it would be a pleasure for me, okay, to have some questions for me, or you have my people, okay, who will make a little presentation. And after that, we are open, okay, to answer at our best knowledge, okay, what we do, and you see some big cuts of consultation. Just that I signed that, and I was very happy to sign that, because we had to be particular, to be ready for the, after Rwanda, after 25, what happened the following week, following that week, but years. So with this study that we make with this international company, we have – we'll be better, and Sebastian will speak about, okay, what we are doing in that. We will be better, okay, from purchasing to selling to a lot of things. And so I see the future very good. For sure it's a big step to be there, but we will be there. We will be there, okay, at the end of the 25th. And I am very happy that we will have an open door for our people in April. So they will just see where we are right now. I will present you my new talent that we have. And you will see that we have very... good talent, okay, that we will present to you, and you will believe, okay, because it's always people, people, and people. So you will believe more and more and more about our objective of 24 and 25, okay, for the end of 25. So on that, okay, it's a pleasure to have you, okay? And I was reading everybody who writes on several years, 24 and 40 years, And thank you very much, okay, what you say. You are all, okay, very kind, okay? And you understand quite well, Saverio. For sure now, okay, with this consultant, okay, and this big bump, okay, for the end of 25, okay, I just want you to do this yesterday, okay? You will see exactly what we have done, okay, at the back of the door, okay? And you will see it. I believe they are at 20% and $1 billion. So I will pass the line to Steve, our CFO. And thank you very much, everybody, to be there today. If you have some questions, don't forget to call me or I will be on the line during the call. So Steve, for you.

Thank you, Marcel. Thank you, Marcel. Good morning, everyone, and thanks for being on the call today. I'm going to begin with some remarks regarding our Q4 2023 consolidated financial metrics. For the quarter, we generated revenue of $216.8 million, an increase of $4.7 million, or 2.2% versus last year. This was mainly driven by organic growth of 6.2% coming from our accessibility segment. We also experienced foreign exchange tailwinds of 2.3%. This is partially offset by the divestiture of the vehicle division in Norway earlier this year. We delivered a strong gross profit and gross margin at $74.3 million and 34.3% respectively compared to $66.2 million and 31.2% for last year. The increase in gross profit of $8.1 million is explained by better gross margins, additional revenue, and favorable foreign exchange rates. The increase in gross margin was mainly attributable to greater performance from all segments due to better cost absorption, favorable product mix, and improved pricing. We also incurred $2 million in strategic initiative expenses in the quarter. For the year, these costs amounted to $3.1 million and have been carved out of adjusted EBITDA. Adjusted EBITDA and adjusted EBITDA margin finished at $35.1 million and 16.2% respectively, compared to $33.3 million and 15.7% last year. The increased profitability is mainly explained by the increased gross margins somewhat offset by higher selling and admin expenses. On December 22nd, 2023, Saveria signed a sale and purchase agreement with Dry Verge Canada to sell our Van Action and Freedom Motors divisions. The transaction closed on February 1st of this year, 2024. And accordingly, at December 31st of last year, these assets and liabilities of those businesses were recorded as held for sale. And now I'm going to provide some commentary on our segmented results. Revenue from our accessibility segment was $173.7 million, an increase of $7.2 million, or 4.3% compared to last year. It was driven by organic growth of 9.5%, coming from strong demand in the residential and commercial sectors in North America and Europe, price increases and cross-selling synergies. We also experienced foreign exchange tailwinds of 2.8%. And this was partially offset by the divestiture of Norway business, as previously mentioned. Adjusted EBITDA and adjusted EBITDA margins stood at 28.7 million and 16.5% respectively, compared to $27 million and 16.2% last year. The increased profitability was mainly due to better cost absorption as well as improved pricing. Looking at patient care, revenue from this segment was $43.2 million for the quarter, a decrease of $2.5 million or 5.4% compared to last year. While our backlog remains very healthy, revenue decreased due to reduced year-end spending from institutional customers, product mix, and to a certain extent, large orders delivered last year not repeating this year. As a reminder to our investors, our patient care business is driven in large part by project-based sales, which can be lumpy from time to time. For the quarter, Foreign Exchange provided a 0.5% tailwind for the patient care segment. Adjusted EBITDA and adjusted EBITDA margins stood at 7.9 million and 18.3% respectively compared to 7 million and 15.3% last year. The increase in both metrics was mainly due to improved gross margins explained by the product mix and pricing initiatives. Looking again at a consolidated basis, net finance costs were 4.8 million compared to 6.2 million last year. Interest on long-term debt decreased by $0.4 million due to the reduced balance of debt. We also experienced a decrease in net finance costs due to foreign currency gain of $1 million compared to a loss of half a million last year. And we also incurred a loss on net investment hedges of $0.8 million and a quarter. Net earnings were $11 million or $0.16 per diluted share for the quarter compared to $11.3 million or $0.18 per diluted share last year. and adjusted net earnings were 12.8 million or 19 cents per diluted share compared to 12.6 million or 19 cents per diluted share last year. The decrease in net earnings was mainly due to higher income tax expenses, partially offset by lower net finance costs in the quarter. The slight decrease in net earnings per share is due to the increased number of shares. And so now turning to capital resources and liquidity, For the quarter, cash flows related to operating activities before net changes in non-cash operating items reached 30.7 million, which is essentially the same as last year. Net changes in non-cash operating items increased liquidity by 6.4 million compared to 13.2 million a year earlier, mainly due to increased receivables. As a result, cash generated from operating activities in Q4 stood at 37.1 million compared to 43.9 million last year. Cash used in investing activities was $5 million for Q4 compared to $7.6 million last year. We dispersed $5.1 million for fixed intangible assets in Q4 2023 compared to $7.6 million in 2022. Cash used in financing activities was $21.1 million for Q4 compared to $35.9 million last year. And the variation is mainly explained by a reimbursement on the revolving facility of $2.6 million this year compared to $20.2 million a year earlier. As noted, our cash balance grew by $10 million in the quarter versus last year. As of December 31, 2023, we were having a net debt position of $269.9 million. The ratio of net debt to adjusted EBITDA stood at 2.07 in comparison to 3.07 at the end of last year. Saveria has funds of approximately $223.3 million to support working capital investments and growth opportunities. Looking forward, Saveria's future prospects are promising. driven by strong market demand, the progress of Severia 1, and potential token acquisition opportunities that will enhance our market position. From a financial standpoint, we anticipate average costs of approximately $5 million per quarter through fiscal 2024 and $2 million per quarter for the first half of 2025 related to Severia 1. We may see additional fees depending on the success of the program. We remain confident that the benefits of this program will increase as the year progresses, leading to long-term growth in both top-line and bottom-line performance. In terms of tuck-ins, these acquisitions would not only align strategically and expand our market opportunities, but also help to offset some of the $50 million of annualized revenue loss resulting from the divestiture of Van Action, Freedom, and the Norwegian vehicle adaptation businesses. Overall, we have full confidence in our ability to achieve our targets of approximately $1 billion in revenue and an approximate 20% adjusted EBITDA margin in 2025. We look forward to sharing more detailed information about our initiatives at our upcoming Investor Day in April. And with that, this completes my prepared remarks. I'm going to turn the call over to Sebastian.