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 Q2 2025 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 one and one 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 the 6th of August 2025 with respect to its Q2 2025 results. Thank you, Mr. Barassa. You may begin your conference.

Thanks, Sarah, and good morning, everyone. So today, I will start with a small recap of our Q2 results, then Steve will update us on financial and GP on Savaria 1, and then we'll follow up with a Q&A session. First, I'm very proud of our Q2 results as we have reached an important milestone of Savaria 1 with margins over 20%. We have achieved 20.6%. So congratulations to all Savaria employees and thank you for your dedication in this Savaria 1 program.

Results

show that the transformation is stable with a six good quarter in a row in an environment of uncertainty where all our products remain UMSCA compliant, meaning that there's no duty applicable on our finished products. So some of the key highlights fantastic performance of .6% for the entire business with accessibility at .9% combination of Europe and North America and patient care at 20.9%, which is mostly due to some improvement in Savaria 1 program, which GP will talk a bit later. With those results, we decided to update our guidance for 2025 with 20% EBITDA approximately and some size of around 925 million, which is the same as before. So growth has not been fantastic in the second quarter for accessibility, but we think it's mostly due to market context, which is improving. We remain confident to resume growth, especially with some of the launch of the new products such as the Luma, which people are very excited about it, our dealer are happy they like it, so we see a good future with that. And to grow market share with dealer and onboard new dealer is a priority. In Europe, we have a slight negative growth, which is due to some mostly government spending in the UK, which we think is very temporarily. And in Italy, there was some cutback last year in the third quarter, and it still not came back. So the size in the orbit we heard mostly due to some subsidies, but again, with some new products we're bringing on board in Europe, we're confident to be in growth very soon. In North America, it was again a good quarter, but for sure, if we look more at the year to date, .7% growth, which is more in line with what we target. And last year Q2 was a bit against a strong quarter, so I think the game plan still remain good. We focus on the meta, dumb weather, we start to have more traction and they're interested to order dealers. So I'm happy with the progress on that. Patient care, .4% growth, maybe a bit lower than what we would like. But the good news is we have a strong background in the patient care. And I think we're in a very good position for the second half of the year. And also, we have launched the M-series ceiling lift, which is performing well, helping us to win projects. So I remain very confident with that. So overall, I remain very confident with our growth potential as we have the best product portfolio in the industry and we continue to improve it with all the research and development we do. We have 50 people dedicated for improving existing products, launching some new ones, which is very important. Also, we have launched a second phase of 7.01, which is to develop a strategy for the next three years that we are hoping to unveil at the next Investor Day next spring. Our debt ratio continues to improve. Now we're at 1.34 with the available fund of $275 million, which is for us in good positions to make investment or acquisition. One of those latest investments was our project in Greenville, which we started in Q2 to do the expansion of our accessibility product. We currently manufacture 30% of our cyber home elevator in Greenville for the US market, which we started in Q2. Our building expansion is currently in final planning with the architect and permits, and we're still on target to be operational on the second half of next year to continue to localize some production in the US, which is a very important market for us, and also support the growth for the next few years. So on that, thank you very much for all the employees again and all the dealers for this fan text second quarter. Steve, financial please.

Thank you, Sebastian, and good morning, everyone.

I'm

excited to share with you today some remarks regarding our Q2 2025 consolidated financial metrics. Key highlights for the quarter include, first and foremost, achieving and surpassing our 20% adjusted EBITDA target. Our Q2 margin of .6% is a new high watermark for us, and our trailing 12 months margin is now 19.5%. First margin increased year over year by 150 basis points to 39% in Q2, mainly through Severia 1. Strong cash flow with operating cash flows up to .4% this quarter compared to last year, contributing to our Q2 ending leverage ratio of 1.34. And now looking at consolidated revenues for the quarter, we generated revenue of 226.7 million, an increase of .4% versus last year. This growth is driven by positive foreign exchange impact of 2.6%, which was primarily driven by the strengthening of the GBP and euro versus CAD and to a lesser extent, the USD. Our acquisition of Western Elevator, a dealer in the lower mainland of British Columbia during the quarter, also provided some growth. Our accessibility segment had growth of 1.9%, including growth of .3% coming from North America, which was partially offset by a contraction of .8% in Europe. Patient care had growth of 4.4%, and the revenue growth there is mainly due to the completion of increased project work in the long-term care sector in Canada during the quarter. As previously noted, our consolidated gross margin for the quarter was 39%. Performance represents a marked improvement of 150 basis points over prior year and 120 basis points over Q1 2025, driven largely by continued operational efficiencies realized under SEVERIA 1 as well as some operating leverage. Both segments contributed to this gross margin improvement, underscoring the effectiveness of the Q2. We also added the effectiveness of our ongoing initiatives to streamline operations, enhance margin quality, and drive sustainable growth. Adjusted EBITDA was 46.7 million for the quarter, representing our highest EBITDA quarter as well as the fifth quarter in a row above the $40 million threshold. Adjusted EBITDA margin finished at .6% for the quarter and includes .9% for accessibility and .9% for patient care. Accessibility margin improved 100 basis points while patient care improved 390 basis points versus the same time last year. This performance enhancement in both segments is driven primarily from improvements in gross margin, which have been powered by SEVERIA 1. During the quarter, we incurred 4.6 million in strategic initiative expenses, which was in line with our expectations. These fees are mainly consulting costs and will repeat for Q3 and Q4 of this year, but will be finished thereafter. The removal of these costs are going to add a significant boost to our cash flow in 2026. Finance costs were 4.7 million for the quarter, compared to 6.8 million last year. Interest on long-term debt decreased by 1.5 million when compared to the same quarter last year due to reduced interest rates on our debt, as well as a lower overall debt balance. Net earnings was 16.3 million for the quarter, compared to 11.4 million last year. And earnings per share was 23 cents for the quarter, a seven cents or 44% improvement over last year. So switching gears, I'm now going to talk about the balance sheet and cash flow. Cash flow from operating activities in Q2 was 30.3 million, which is an increase of 6.7 million versus last year, coming from higher EBITDA. Working capital increased by 4.5 million in the quarter, mainly coming from decreased accounts payable and increased inventories. For the year, we are achieving our working capital targets. CapEx for the quarter finished at 4.8 million, which is .1% of sales, and in our range of 2 to .5% of sales. This includes a mixture of maintenance and also some new expansionary CapEx projects, including new showrooms and new equipment. Free cash flow after debt related costs and dividends was 9.4 million for the quarter, which is a significant improvement of 6.3 million or 204% when compared to last year. The strong free cash flow contributed to a debt repayment of 11 million in the quarter and reduced our leverage ratio to 1.34 at June 30th compared to 1.63 at year end. This puts us in a very healthy position as we eye future growth plans and other opportunities that lie ahead. As Sebastian mentioned, with regards to our guidance, we're still projecting approximately 925 million of revenue for the year, but we have now tightened our EBITDA margin guidance to be approximately 20% for 2025. The margin target was achieved in Q2 and we expect it will be achieved for the remainder of 2025 based on the continued value of Sevaria 1 that we have in front of us. And with that, this completes my prepared remarks. I'll now turn the call over to JP to provide further details on how we're progressing with Sevaria 1.

Thank you, Steve, and good morning everyone. Sorry, it's been a feedback. Thank you. So we continue to have very strong results with Sevaria 1 and Q2. While we face more challenging markets in some parts of the business, we're on track with everything that's in our control. We continue to generate recurring EBITDA improvements including cost savings and material in back office costs and in marketing and sales costs. We also maintain good pricing discipline and are growing the top line in parts of the business. As you saw, we managed to expand our EBITDA by 4.8 million with more or less the same sales as this quarter last year. We expect that when sales grow again, we'll further expand this improvement by having operating leverage. Sevaria 1 is still going strong. We implemented more than 50 initiatives across the business in Q2 alone and allow me to share some highlights by business segments. In Europe, we continue to improve the efficiency of our factories. For example, you may remember that in Q1, we implemented a new fabrication method for our free curve stair lift rail named Handy Glocks. This reduced our welding team size and freed up a lot of space in our factory. So we use that space to reorganize the floor and bring a lot of work that was in the past conducted in the night shift to the day shift, reducing overtime, making the work environment better for our team and simplifying our operations. Also in Europe, we've been working relentlessly on many fronts to improve the efficiency of our direct sales business in the UK and in the Netherlands. We've been optimizing our marketing spend, improving the conversion rates on our leads, optimizing the back office costs, and improving the efficiency and work quality of our field engineers. All those efforts, combined with adjustments in our pricing strategies and upgrades to our sales team, had a massive impact on our performance in the direct business over there. In our patient care division, we had a successful combination of sales growth and cost reduction measures hit at the same time. One highlight on the sales side is that our teams have been working over the last two years at reorganizing our sling's portfolio to be complete and avoid duplications between our different brands like Silvally, Stavaria, and Handicare. Now with our clarified portfolio, it's catching momentum and the sales of that business has been growing double digits for the past two years with a record quarter of sling sales this quarter. Another highlight worth mentioning is that our backlog is at an all-time high and we believe that is in part driven by the fact that we introduced a new M-series ceiling lift at the end of last year and that is catching up and generating new demand for sales that are recorded in our backlog because they typically are linked to projects that are a couple months or one or two years out. On the cost side, we've been successfully transferring some production of our sub-assemblies of beds to Mexico and other vendors which yielded substantial cost savings. We've also been scrutinizing our marketing and sales costs in addition to which we finished spending on some major investments in the last year including a new website and a new CRM system. Furthermore, we have been working with a 3PL to optimize our transportation routes and choice of carriers across both Canada and the US and that is also showing great results. In North America accessibility, a highlight in Q2 was with our direct stores which contributed significantly to the RABITDA growth versus last year. Since the acquisition of western elevators, we now have about a dozen direct stores across Sevaria and Garavento brands in North America. Through Sevaria 1, we've been sharing best practices across our stores on topics like how to manage leads, handle the project pipeline and organize our installation crews. We had a lot of management attention on our stores and in the last year it's been really paying off. Another highlight is that we continue to save on material costs by harmonizing our specifications between factories to generate purchasing power. We also continue to automate our processes in the Garavento factory with our welding robot and a new CNC machine that reduces our cost of metal fabrication. In Branton, we also continue to gain efficiency in fabrication and assembly lines by applying lean management. Our factories now have excellent lead times and a great craft position. So all these examples I shared in our view are recurring in nature and that's what gets us excited about the future as they will continue to accrue benefits. Finally, as we're getting towards the end of Sevaria 1, we are putting some time aside in the coming weeks like Sebastian mentioned to work on our plans for the next few years and we expect to present this plan for our investors next year. Thank you all for your attention. I'll hand it over back to Sebastian for closing remarks.

Well, thank you GP and Steve for your comments. I guess Sarah, we are ready for some questions with our analysts that are doing a very good job to cover Sevaria.

Thank you. If you would like to ask a question, you'll need to press star one and one on your telephone and wait for your name to be announced. And to withdraw your question, please press star one and one again. We will now take our first question. Morick Lessard from 2D Cowan. Please go ahead.

Yeah, good morning, Sebastian. Congratulations to you and your team on really getting to that margin target well deserved. I think my first question, I was just wondering if you've seen any sort of consumer or commercial pressure just given the economy and sort of the uncertainty that's out there?

Thank you, Derek. And again, we've got to be careful. We are a public company and we need to report every quarter and sometimes make it a bit difficult. We are there for the mid long term. I think five years has been fantastic for very good growth. And right now, again, it's one quarter a bit softer in different pockets. As we said a little earlier, I think in Europe there's a bit of subsidies that has affected us. We have been more careful in the last year to sell at the right price or don't sell. And R&D, we had a bit of product launch delayed. For example, the Limo has finally launched at the end of the second quarter. We see a good traction. So again, if we look at the mid long term vision, I am very comfortable with the efforts that are made and we see some growth. And when we do M&A, we think about what would be M&A that would bring some synergies to the group. I think if we look at the aging population, it's still there and will continue to be there. We look at each city, the density, everything is going higher and higher. Townhouse are three, four floor. They like to put home elevator because it adds to sales to everybody. So I'm not very concerned, Derek, on the short term. And for sure, look at the first six months, was there a tariff, no tariff, a bit of uncertainties on the stock market. But I think now it's getting settled and we should be in good position for the future.

Absolutely. And I think investors do appreciate how you manage the company for the long term. I guess one other one for myself is, I know you said you will give more details in April on an investor day, but I was wondering if you had any maybe preliminary ideas or opportunities that you could share with us on what you think Samaria 1 part two is going to look like or could entail?

I think again, Samaria 1 is getting to an end as JP said. Again, an end doesn't mean there's no more idea for the future. But again, it's important when you have such an intense program for two years to reenergize the project. And I think again, now all our team has learned a lot in the last two years with our consultant. Now we're able to drive the show by ourselves. And I think we want to get some ideas that has not been implemented for the first two years. Let's bring it back. Let's find some new ones. We have unlocked so much capacity in all our factories in the last two years. Now we can take much more volume. And again, but we need to be better at M&A, which shows to be very selective to make sure it brings strategic growth. And when we want to do M&A, that again, we see that going down. Again, where we want to sit, which level, the things we want to clarify for investors. And after that R&D, again, is super important, but which product you do, what it will bring in in terms of growth. So again, make sure we have a good plan for the next three years on our R&D. That's kind of things we would like to unveil a bit more in the several two months.

Absolutely. And thanks for taking my questions. Congrats again.

Thank you, Derek.

Thank you. Next question is from Michael Glenn from Raymond James. Please go ahead.

Hi

Michael.

Hey, good morning. Sebastian, maybe just to follow up on something you just said regarding unlocking a lot of capacity at the factory levels. Are you able to give an indication, like what level of sales opportunities still you would see within your current capacity right now?

I would say most of our factories work on one shift. So again, it's up to us to just work on one shift and we have two shifts as the volume grows. Right now, again, we are very happy with the footprint we have. For example, we have opened in Mexico three years ago already. Again, we still have so much more we can do. A good example, if you will have come to see us three years ago in Brampton and Toronto, we will ask you, Sebastian, how can you grow your business? You're very tight in your space, but we have reorganized some of the space, found some new space, be more organized, be 5S, do some Kaizen initiatives. So I think all this together make us in very good shape that potentially if there's no acquisition, we could grow within the same footprint in the next two years growth.

Right. Perfect. And then so the way the sales guidance is structured, I know there were some moving parts around Q2, but your sales guide does factor in an uptick in organic growth in the back half of the year. I'm just wondering how comfortable you are with an expectation for uptick in organic growth in the second half on sales.

I would say I would start maybe to think incomplete, but I would say we see it when we visit a division with all of our one discussion. There's some good initiative to find some new dealer to bring some more volume to the factories. Luma, I think right now we have a lot of quotation that have happened and then sometimes it takes time before we sell some units. So we need to say that Luma will have an impact over time. We have launched a VPL multi-lift in Europe earlier this year. Again, it takes some time to ramp up. Western and in BC, we just had six weeks of revenue in the second quarter, but now we'll be I guess three months in the next quarter and there's some additional volume they can bring to the factory. May top, the early time has not been perfect in the last year, but right now we're getting on top of our production on the May top dumb weather. We do a lot of marketing with architect contractors, so it takes time to spec, but right now I think the May top dumb weather is something we should go a bit earlier. We have some pocket of the word which is going quite well. If we look at the sales in Germany, in Australia, I'm very confident with the future on that. Patient care, we have a very healthy backlog, so I'm expecting a good second half of the year. We saw it last year in the fourth quarter. I'm very positive about the second half of the year.

Okay, and then just one more for me. Can you give an update in terms of your stairlift penetration rates and market share in North America? Has that business had much growth over the past year or so?

Unfortunately, we don't have good stats in our industry, especially on the stairlift because it's not a private bay. I would say for sure nothing is perfect, but this is an area right now where early time is very good in Europe and in North America. So again, I think we can do a bit better in terms of sale of stairlift because right now it's fully in production in North America. We have good new time, good quality, so this is something that I hope in the summer too we'll be able to unlock some new idea on how we are better with our stairlift because definitely there's opportunities

Excellent. Thank you for taking the questions.

Thank you. Next question is from Max Mielewski from Stiefel Financial. Please go ahead.

Good morning, guys. This is Max on for Justin Keywood. Congrats on the margin of the quarter. I just wanted to ask a few questions, namely regarding, you know, you had flagged that input cost and procurement has been a bit of a benefit in the quarter. So I'm curious if you've seen any pricing friction emerge or should we expect gross margin going forward to kind of reflect what we saw in Q2 from that perspective?

Again, I will go start and maybe Steve can complete. I would say again, not so new high in terms of gross margins. Again, could they remain a bit similar until the end of the year or even slightly? I wish we still have a lot of incentive that we can do.

Steve? Yeah, no, I mean, we're not, to Sebastian's point, we're expecting that gross margin to maintain or continue to improve. So I mean, if you're asking specifically if we're seeing price increases coming from suppliers, no, that's not what we're

seeing and that's not our expectation. Okay, thank you. And I guess on some of the strategic price adjustments that you've made, you know, how amenable have customers been to that? And how does that reconcile with the customer win back strategy that you guys have been sort of describing over the past few quarters?

I think again, our pricing adjustment, this is something we do once a year typically in first quarter and usually takes one quarter to flush the backlog in different pockets. I would say this year again, it has been very reasonable. So people are accepting what we have done earlier this year, which was more in a three ish percent approximately. And so I take a, well, but what's important is we always need to bring new services to the customer, new products that again, at the end, we're the best partner to work with them. So I think as long as we're to bring the best things to our customer, that they will support the decision we have to do on that.

Great. And just one more question. I mean, there was a bit of a slow down in Europe and I know it was detailed a little bit better in the earlier in the call, but I guess, you know, could you shed a bit of light on how Handicare is performing more materially and what sort of growth levers, if any, you expect to pull in Europe with respect to that precisely?

Yeah, I think again, at the end of the year, Europe has been a bit tough on the growth. But performance wise, we don't disclose anymore just Europe and North America from a bit up. But again, if we have achieved 21.6 percent of a bit down for the excessivity, our Europe has contributed a lot on that. So we're quite happy. But Europe, not to forget, we are in the past, we were selling Stirlitz and Incline platform, but now we're bringing the one stop shop with the Luma with the multi-lip. So again, it's all things that will help our growth for the future. So and I remain very confident about this part of the work. So if you have a good team, you know what they have to do. I was there last week. They present us all the game plan that they are working on. I'm feeling quite good with that.

Thank

you very much.

Thank you. Next question is from Zachary Evershed from National Bank Financial. Please go ahead.

Good morning, everyone. Congrats on the quarter. So understandably, in March, you guys didn't have to cut guidance, given all the tariff uncertainty. But with that cleared up and the strong first half that you put out, especially in Q2, is there is there a scenario in your mind where things could go wrong and have to change guidance again? Like what are the risks there?

I'm not a specialist and I have a small crystal ball, Zach. But I think what we see right now, what we control, we're feeling quite good about that. If there's something external that happens, again, it will not be just server, it will be everybody. And I think we'll need to do what we have to do in due time. But right now, we have to make investments in the US with Greenville to localize something there that we have a mid long term vision. If the world is still US and SCA compliant, I would not think to do that. But as we think about mid long term, what is the right thing we should be doing? So that's been my answer for now, Zach. We control what we can control, what we don't control, but we wait and see. And we adjust over time.

Fair answer. And then if we look at your contract mix in accessibility in Europe, how's the progress going on revamping that and dumping the lower merchant contracts and how much for it to go?

JP, you don't speak much. You want to answer this question?

Sure. I think in terms of like revamping or like restructuring our customer portfolio, for example, adjusting pricing, that's behind us. I think we wrapped up most of that last year. So this year, what the situation has been, we stabilized that, we're improving the business, and we're working on growing it again from a much better basis. So I spoke about the improvements we did, for example, in the direct business. But now that we have a very profitable or much more profitable direct business than before, now we can grow again, we can invest again. So that's where our mind is at right now.

Got you. Thank you. And last one for me. Could you go into what it is about the Luma that dealers are excited about?

Again, what is nice about the Luma, again, is such a good floor elevator. So this is good for two floors. It's a growing market. Again, we're not the only one who has that, this competition. All our dealers were requesting that to have this kind of product and we have developed it. And what's good about it is the installation time. And basically, it's one day installed. I don't think every product in the competition is one day installed. So I think it's a very key advantage. If you look at the aesthetic, it's amazing. People like it. So again, this is something that takes time. We have first trainer people, trainer dealer, put some units in different rooms. And then we start to see some sales again growing. So it has not been a, it will not be a game changer in the third quarter. But I see the number of conditions we are doing, the number of drawings. We are in production in Mexico. We think we have the right cost structure on that. So it will be a winner for the future. For sure. We're not finished to talk about the Luma.

Good color. Thanks. I'll turn it over.

Exactly. It is a worldwide product. So that is very important also. So it's not just an alternative product. It is worldwide from the launch. So I think it's very good.

Thank you. Next question is from Jonathan Goldman from Scotiabank. Please go ahead.

Hi. Good morning, team. Nice result. Thanks for taking my question. Maybe just to start off, how are you guys thinking about capital allocation priorities? I mean, leverage is pretty low. I think it's the lowest since you did the transformative deal of Handicare. So you've got lots of options there. And if we drill down on M&A, how are you thinking about the opportunity set there in terms of size or region or products that you may be looking at?

So I think I will start first. And we know we continue to invest in the business in terms of CapEx. It's more 2, .5% of the year. Again, maybe before the Green Good Project, but 2.5%, which is machinery to continue to bring the best machinery into a factory that we are more productive and we do good quality R&D. We have 50 people in R&D. It's important for us to continue to innovate. And yes, now the leverage is going down a bit, but we're waiting a bit to see what's happening with the tariff. And again, to find in SAVARA 2 what are the best M&A we can do that can bring some synergies to the group. So I think again, we're very lucky where the leverage is going down, which has put us in a very good position for the future,

right? Definitely. That makes a lot of sense. And I guess you teased us with the potential sister area, 1.2 or 2.0. But I know you'll probably get more color on that. I need to have an encore here. But what are the areas of the business where you see the most opportunity to improve or maybe optimize, whether that's on the top line or the margin side? What are the different ways you can keep going after margin here?

Miss Tim, you want to go first?

Probably a question better suited for JP. I mean, I think we've done a good job increasing margin to where we're at right now at 20.6. I think we have increased quite a bit over the last couple years. I think while there's definitely room to grow, we're not going to be growing margin at the same pace that we have over the last couple of years. Maybe JP, you want to talk a bit about different areas where we still think there's room in front of us?

Yeah, I just build on what Steve said. And we'll continue to look at how we can improve margins. For example, in procurement, there's still room to improve. And even in our production costs, we continue to have ideas on how we can improve our factories, for example, to reduce our unit costs. So that's going to keep on going. But I guess what we're putting more attention on now is going to be how do we grow the top line organically. And Seth mentioned one way to do it is through having great products. So we're going to put a lot of emphasis on the R&D pipeline and what we want to bring to market next. And the second thing is, I think it was a question on M&A. So for sure, we're going to look at M&A. So we're looking at all levers to grow the business. And at this stage, I wouldn't provide any particular guidance on where it's going to come from. So we're working on this. We're building the plans. We'll present to you a plan when we have it. But expect there would be, in our mind, at least our expectation is we keep looking at the margins, but we'll spend maybe a bit more energy on how we grow the top line. That's a great color.

Maybe one thing to add, Jonathan, is just the operating leverage. We've done a really good job on our fixed cost basis. And as we continue to grow the top line, we've talked about it being a little bit soft right now. But as that grows, a lot of our cost base is fixed. And that's going to maintain. So we're going to see gross margin improvement just through operating leverage as we grow the top line, whether it's the back half of this year and into next year and years beyond. So we're going to get some gross margin uptake that way. Now, that's

a really great point. Thanks for taking my questions, guys. Thank you.

Thank you. As a reminder, if there are any further questions, please press star one and one on your telephone and wait for your name to be announced.

We have one question coming through. Please stand by.

Question is from Frodrige Tromblou from Desjardins Capital Markets. Please go ahead.

Good morning. Good morning. I just wanted to come back on your comments on the strong backlog in patient care. Just given your optimism on the second half of this year, can you feel like based on the current backlog, you can generate the level of revenue that's necessary to keep the margins and the high levels that we saw in Q2? I know volume plays a big role in generating that margin.

Again, it's a bit always tough to answer, Fred, because again, there's always a product mix aspect. Again, patient care, they were over 20%. We know the recipe now for the patient care. This is something that I will expect for the second half of the year that they are at 20%. So are they going to be at both corners at 20%? I think it's too soon to answer, but I think the total of the two I think could be a nice target.

Okay, great. Maybe a question for Steve on just the pace of CAPEX deployment on the $30 million project in South Carolina. How should we think about CAPEX in the coming quarters? Is that $30 million more of a 2026 or are we expecting a ramp up in the second half of 2025?

There will be some this year, but it's going to be very light. Most of it's going to come into next year. We're in the planning phase right now and we are incurring some costs, but with that said, we're still going to, we're still planning on being in line with our 2025 budget of 2% to 2.5%, closer to that .5% mark for sure. But as we look at this project for next year, most of the spend will be in 2026 and we'll be adjusting our CAPEX plans at other sites to make sure that we have funding for this. I mean, it's not that it's going to be over and above our 2.5%. We're going to be squeezing in certain areas to make sure that we're not spending more than we actually need to. So to answer your question, it will be 2026 and as we go through the strap plan and budgeting process for next year, I'll be able to give you a better idea of exactly what our plan is.

That's all I had. Thanks and congrats on the great quarter.

Thank you. There are no further questions at this time, so I will hand the conference back to Mr. Barassa for closing comments.

Thank you very much Sarah. Thank you for all the analysts for your good question. So as you see it this morning, let's celebrate first the margins achievement. I think that was the highlight of the second quarter, which was the work of the last two years and next will be the growth and the strap plan for the next three years. So that's what we're going to work. So thank you very much for your confidence with us. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.