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 2024 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'll 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 one and one again. This call may contain forward-looking statements which are subject to the disclosure statement contained in Savaria's most recent press release issued on March 5th, 2025, with respect to its Q4 2024 results. Thank you. Mr. Bourassa, you may begin your conference.

Thank you, Sarah, and good morning, everyone. But today I will start with a small recap of our Q4 and 2024 results. Then Steve will update us on financial, JP on SAVAR1, and then we'll do a small Q&A session. First, I need to say that I'm very proud of our Q4 and 2024 results, as they were exactly in line, especially on EBITDA, with our expectations during this transformation. And they show again that we are stable at this four-good quarter in a row. So thank you to all the team of SAVAR1. Some of the key highlights of Q4 last year. First, a very good performance on the patient care in the fourth quarter. It's their best quarter ever at 23.1% of EBITDA, so good job to the team. A good growth of 20%. Every quarter they were telling me, it's coming, it's coming, it's coming, but they're very good fourth quarter. For sure in 2025 would prefer to be a bit more stable each quarter, but a good end of the year. And it's showing again that we are we have the right structure to do 50 million of sales and more, and it falls at that bottom line. So good job. In North America, good year, 8.4% of growth during the year. Yes, in Q4 it was more flat, but a very strong Q1, Q2, Q3. And again, we have worked very much in 2024 to improve our operation so that we can take more volume in the future. So quite happy with the change. Solid performance from each division from Europe, North America, to Australia. to patient care to improve our EBITDA of 3.1% for the full corporation, so that's a good achievement. Our debt ratio of 1.63, so again, we have improved a lot our working capital, we have improved our EBITDA, and that leave us some available fund of 242 million, which put us in good position for acquisition or investment, especially when there's a bit of turbulence, that can be good to have a good balance sheet. The growth in 2025 for sure is going to be a key focus in the Savara one in R&D. Right now, we're launching a through-the-floor lift, a Luma elevator that we call. It's going to be sold worldwide. It's COD compliant. And we're starting manufacturing this week. So I think in the next few weeks, we'll be able to ramp up the sales. So quite positive about the organic growth in the future on that. And I think everybody at Savara knows that I really like this product. So today we'll try to be proactive and talk right away about tariffs before it comes in question in the Q&A. So this is very fresh and it happened officially last week, excuse me, this week. The rules are still not super clear of what's happening one side to the other. Is it going to affect us on the very short term? Yes. But let's reassure, you know, we are proactive. We have done some good planning in the last few weeks and we're going to act quickly on this. Our operation and supply chain has always been a strength at Savaria. And I think we have demonstrated in the last five years from COVID to supply chain issue with containers, inflation. So I'm feeling quite good about it. And through the Savaria one, I think things just got better. So I think we're ready to overcome those challenges. First, in the coming week, there will be some small price increase to our customer dealer that we'll do in a fair way as our dealer has always been a strength of Savaria for the last 35 years. And it will continue. Under family leadership, we take care of our customers and employees as we're there for the long term. Second, we are very lucky. We have some footprint already in the U.S. We have two factories, one in Greenville, one in St. Louis, and the one in Greenville has 60,000 square foot available empty that we can use to make some assembly lines and finish products. So definitely we are going to put that in exercise to use this extra capacity. We can even expand the building because we own a big land in Greenville. Fourth, as I said earlier, we have the right balance sheet with $242 million available so we can make investments to go through the small challenges or opportunities that might come, because opportunities can come and there's kind of a turbulence with it. And finally, you said that we revised our guidance for the 2025 years. We knew that with the sale of the car division last year that we did not replace the sales. Last year, in 2024, we chose to go for EBITDA in Europe over sales growth. So all this to say that that's why we have revised the volume to $925 million of sales, and we are feeling good about that. And the EBITDA, we have put a bracket from 17% to 20%, because on the short term, we need to readjust on the tariff, but I'm feeling comfortable. The target still, we want to make 20%, but we need to be realistic. That's why we put the bracket. And as you know, just to finish, we know we are a very agile organization. We can overcome some challenges. I think we have the right team, the right employees. So, again, thanks for all your effort that you did last year, and thanks for your effort that you'll do in 2025. I'm sure we'll get through these challenges together. Steve, small update on financial, please.

Thanks, Sebastian, and good morning to everyone on the call. I'm excited to share with you today some remarks and highlights regarding our Q4 and full year 2024 financial metrics. So the key highlights for the quarter include, firstly, as Sebastian mentioned, organic growth of 20.6% in patient care, consolidated gross margin of 37.7%, which is an increase of 340 basis points versus last year, mainly due to improvements generated under Solaria 1, adjusted EBITDA margin of 19.2%, which marks now three-quarters in a row of margin at 19 at least or above, Strong cash flow and working capital performance resulting in a reduction of our leverage ratio of net debt to adjusted EBITDA to 1.63, as Sebastian noted, at the end of the year. Starting with consolidated revenues for the quarter, we generated revenues of $223.3 million, which is an increase of 3% versus last year. That growth is driven by 0.9% organic growth and a positive foreign exchange impact of 2.1%. As previously stated, we had very strong organic growth in our patient care segment of 20.6% due to increased medical bed frame sales and mattress revenues, as well as ceiling lift packages from increased projects closing in the long-term care markets. Our accessibility segment had a contraction of 1.9% in the quarter, driven by a 7.8% contraction in Europe and flat growth in North America. Europe continues to be a focus Europe continues to be focused on higher margin sales, and we expect to see a return to positive growth in 2025 as we deliver on our customer win-back strategy, as well as introduce new products to the market. North America had growth of 8.4% for all of 2024, and we saw very strong growth in Q1 through Q3, which was tempered in Q4. The North American backlog remains strong as we look forward to continued sales growth in 2025, aided by the introduction of the Luma, as Sebastian mentioned, which is the new through-the-floor lift, as well as continuing to drive sales of the Maytok-branded dumbwaiters and material lifts, which we acquired earlier in 2024. On a full-year basis, the lost revenue from the divestments of Ben Action and Freedom, which were our manufacturing vehicle divisions, was greater than the benefit that Maytok brought to us in 2024, hence driving the overall negative net acquisition divestment impact of a minus 1.4% for the year. Looking at our gross margins, our consolidated gross margin for the quarter was 37.7% and 37.1% for the full year. As previously stated, this is a significant improvement over a prior year, and as we continue to see benefits under the Severia I program in all of our segments. The main drivers of the improvements are lower material costs from procurement improvements, improved pricing, and increased operational efficiency as well as leverage as we were able to hold our cost base relatively stable while increasing sales. Adjusted EBITDA was $42.9 million for the quarter and reached $161.2 million for the year. Q4 represents the third quarter in a row above the $40 million threshold. The resulting adjusted EBITDA finished at 19.2% for the quarter and 18.6% for the entire year. And on a full year basis, this represents a significant improvement of 310 basis points over 2023, something that we are very proud of internally. We are clearly well on our way to our goal of 20%. Both accessibility and patient care saw good improvements in adjusted EBITDA margin. And to provide more detail on accessibility, North America finished with 23.2% margins for the year, and Europe improved by a whopping 480 basis points to finish at almost 15% for the entire year. Improvements in adjusted EBITDA margin in all segments and divisions are driven primarily from improvements in gross margin that I previously mentioned, which was powered by Saverio 1. We incurred $5.5 million in strategic initiative expenses for the quarter and $21.6 for the year in line with our expectations. And these fees are mainly consulting costs as we've been noting all year long. Finance costs were $2.4 million for the quarter and $18.5 for the year compared to $4.8 million and $21.8 respectively last year. The main drivers of the quarterly and yearly decreases is lower interest rates on our debt as well as the lower overall debt balance as we repaid that debt throughout the year driven by our strong cash flows. Net earnings was $14.3 million for the quarter compared to $11 million last year. And for the full year, net earnings was $49 million versus $37.8 million in 2023, which is a large improvement of approximately 30%. I'm now going to provide commentary on our balance sheet and cash flow. And cash flow from operations in Q4 was $34.2 million, including a reduction in working capital of $1.2 million compared to Q3. We were able to reduce inventory by $6.3 million in a few of our key manufacturing facilities, as well as increase our payables globally. Our trade AR increased in the quarter but finished below last year. Overall, we improved our working capital by 11 days versus 2023, which is above our internal target for the year. CapEx for the year finished at $20.1 million, which equates to 2.3% of sales and is in line with our guided range of 2% to 2.5% of sales. Free cash flow after debt-related costs and dividends was $34.9 million for the year, which is $43.2 million better than 2023, a significant improvement. The strong free cash flow helped us to repay debt and reduce our leverage ratio to 1.63 and helps us ensure a strong balance sheet to start 2025 so that we can be prepared for any opportunities or challenges that come our way. And for 2025 guidance, due to uncertainties around tariffs and retaliatory tariffs, we did revise our guidance. As Sebastian noted, we're guiding to approximately $925 million of revenues with an adjusted EBITDA margin between 17% and 20%. At this point, it remains very difficult to estimate the total upside or downside from tariff-related impacts. And with that, this completes my prepared remarks, and I'm now going to turn the call over to Jean-Philippe to provide further details on how we're progressing with SAVARIA-1.