Q1 2022 Savaria Corp Earnings Call

Speaker 1: Thank you very much. In syv I gentrement, that's that's always interesting to make, to have you on the cloud this morning and that was a special quarter. I would call that special because we had we have the war that's great interest to, and one the people don't F is interested to. We are not really to put more money in the market, maybe take up some money from the market, but several is just, and you know me for 25 that start AR. But right now we have over 2000 members of the and that's great because this company is a resilient, because the people the other war or you have Co. you need one time. You will need project. Thank veryia.

Speaker 1: And so offer the biggest number of projects to help the mobility of the peopleforsure. It's more, the aging of the population is the base of our, our company and everybody in the world. Ok should have access to, to be the mobility OK for the stair OK and our kindof other projects that you need in the hours on or in the church or at work. So we have a countryte client where the only company in the world that offer a line countryte like that. So it's why I was exciting 25 years ago, but I was. I am exciting this morning because when the stock market is very difficult OK, and yesterday night I was in this mor I was looking at the analyst. Thank you at the analyst, So you make a great job. Reports area.

Speaker 1: But we present you the fact. The fact is we will have tremend this year. We are very satisfied, more in sat side, about Q1, the sales of 1, other than 84 millions in this quarter it's. It's very important that will push up maybe to exceed, maybe to exceed the, our selvesal that we project. So So I would pass and go organic growth, just you know we make 12 mill good growth. Well, when I look at the stats of April , the organic growth is there and it is very important. So you take our number and you are better than in mathematic whichish then, and you see that our projectction it's very realistic. We are in good position. We are in good position and you will have the same guy will speak our produjectsand everybody. I think it's very enthusiasts. We have some.

Speaker 1: Some new thing that will fit to you on the car, like a new factory in, and Mexico can say it citing. So we have Mexico, we have China, So that will be more easy. Ok to maybe inventory level. Ok can be a little bit ER when it have be produaditioned than there. But what is important right now, you don't want to miss stuff. Ok, just a couple of millions. Defend that, make a big, defend in a quarter okay, of our delivering products. So for me, I will Thank you to me there. Thank to support me. I will pass the the phone. Ok, to state our CPU.

Speaker 2: Thank you Marcel, and good morning everyone. one I will begin with some remarks regarding our Q1 2022 consolidated financial metricsfor the quarter, the corporation generated revenue of one hundred and eighty three point five million, up seventy one point five million or 64% compared to Q1 2000 andtwentyone due to the acquisition of Handicare in March of 2000 and twenty one and also due to strong organic growth of 12%.

Speaker 2: Q1 2022 will be the last quarter showing any acquisition growth attributable to handicaregross. Profit and gross margins stood at 58.5 million and 32% respectively, compared to 37.4 million and 33% for Q1 2021.

Speaker 2: The increase in gross profit was mainly attributable to the addition of Handicare.

Speaker 2: The decrease in gross margin was primarily due to inflationary pressures on supply chain, including increased shipping costsadjusted EBITDA and adjusted EBITDA margin stood at 24.4 million.

Speaker 2: And 13% respectively, compared to 17.3 million and 15% in 2021.

Speaker 2: The increase in adjusted EBITDA dollars is again due to the addition of Handicare.

Speaker 2: The decrease in adjusted EBITDA margin is due most notably to inflationary pressures on the supply chain, including increased shipping costs, as well as a reduction in government of Canada covvid employment retention subsidies.

Speaker 2: Total subsidies received for Q1 2022 was two thousand, versus one point one million in 2021, reflecting a decrease of nine thousand year-over-year.

Speaker 2: Now I will move on to our segment results.

Speaker 2: Revenue from our accessibility segment was 130.3 million in Q1 2022, an increase of 49.8 million or sixty one point seven percent, compared to the same period in 2021.

Speaker 2: The increase in revenue was mainly attributable to the acquisition of phandicare, which provided 53% growth.

Speaker 2: In addition, the segment experienced organic growth of 9%, which continues to be driven by the strong, by strong demand in the residential sector.

Speaker 2: Adjusted EBITDA. Adjusted EBITDA margin, both before head office cost, to put the accessibility steack segment, stood at 20.5 million and 16% respectively, compared to 13.9 million and sevenvent 0% for the same period of 2021. the improvement in adjusted EBITDA is mainly due to the acquisition of Handicare.

Speaker 2: The reduction in adjusted EBITDA margin is mainly tributable to inflationary pressures on the supply chain, including increased shipping costs.

Speaker 2: Revenue from our patient care segment was 41.7 million for the quarter, an increase of 16.2 million or 64%, when compared to Q1 2021.

Speaker 2: Revenue growth was driven by the acquisition of Handicare, which contributed 42%. In addition, the segment sawought 22% of organic growth for the quarter, which was driven in large part by the easing of pandemic restrictions and improved access to long-term care facilities. Versus last yearadjusted EBITDA, adjusted EBITDA margin for the patient care segment, both before hand office costs, to that five point three million and 12, twentyeight percent respectively, compared to three point seven million and 14% for Q1 2021.

Speaker 2: The increase in adjusted EBITDA was mainly due to the acquisition of Handicare and additional organic revenue coming from the easing of pandemic restrictions and increased access to long-term care facilities.

Speaker 2: And the reduction in adjusted EBITDA margin is primarily due to the aforementioned additional costs in the supply chain.

Speaker 3: Revenue from the adapted vehicle segment was 11.5 million, an increase of five point five million or 92% when compared to Q1 2021.

Speaker 2: The Handicare vehicle division, based in moreway, provided 84% of acquisition growth for the quarter. The Canadian divisions experienced organic growth of 13% in the quarter, driven mainly by some pent-up demand from last year.

Speaker 2: Adjusted EBITDA and adjusted EBITDA margin, both beforehead office costs for the adapted vehicle segment finished at zero six thousand and 5% respectively, compared to a zero six thousand and 10% for Q1 2021.

Speaker 2: The decrease in both metrics was mainly due to a reduction in the government of Canada's COVID-19 employment retention subsidies and the a mentioned inflationary pressures on the supply chain, as well as delays in sourcing key materials.

Speaker 4: For the quarter, net finance costs amounted to one point four million, which is stable when compared to Q1 2021 net finance cost of one point five million.

Speaker 2: Interest on long-term debt was higher by zer nine million due to the financing of the Handicare acquisition. However, this was offset by prior year having a loss of one point eight million on a foreign exchange contract which was used to help secure the Handicare acquisition.

Speaker 2: Net earnings were five point three million, or eight cents per iluted share, for the quarter, compared to three point eight million, or seven cents per diluted share, for Q1 2021.

Speaker 2: Net earnings was largely impacted by amortization of intangible assets related to the Handicare acquisition.

Speaker 2: Adjusted netherings, excluding amortization of intangible assets related to acquisitions, reached 11 million, or 17 cents per diluted share, compared to eight point eight million, or 16 cents per diluted share for Q1. Two thousand andtwenty-one.

Speaker 2: This reflects an increase of 26% or 6% on a diluted share basis.

Speaker 2: Turning now to capital resources and liquidity.

Speaker 2: The VAR generated cash flows from operating activities of 13 million for the quarter, compared to 27.9 million in Q1 2021.

Speaker 2: In the prior year there was a onetime favorable increase in net earnings to net changes in noncash operating items of seven million. Based on the initial consolidation of phandic are results.

Speaker 2: In addition, strategic investments in inventory were made this year, which further decreased cash flow from operations.

Speaker 2: As at March 31 2022, severia had a net interest-bearing debt position of 317.7 million and was in compliance with all of its covenidants. On a trailing 12 -month adjusted EBITDA basis, severia's net debt to adjusted ebitdour ratio was approximately 3.7. this represents a decrease of zero point zero five versus Q4 2021.

Speaker 2: severia has funds available of approximately 128 million to support working capital investments and other growth opportunitieslooking forward. Unpredictable changes in the macroeconomic environment continue to make it difficult to predict future performance.

Speaker 2: However considering our recent financial performance and our strategic integration plan with Handicare, we are confident that for fiscal 2022, we will generate revenue in excess of 775 million, with adjusted EBITDA in a range of 120 to one hundred and thirty million.

Speaker 2: And with that this completes my prepared remarks. I will turn the call back over to Marcel.

Speaker 1: Steve, Thank you very much. Ok, I feel okay that you mentioned great number. Okay, and what is important, we have the cash flow to make.

Speaker 1: acquisitition, small acquisition and some place in the world that we are not there are with some products early this year. Ok, we buy okay, a company that was manufacturing. Okay, our controller and we have great people. Okay, this company. So I am, I am more than that- okay, right now. ay, about controller, we a little bit atct ourselves OK, by acquiring this great company. So, and the people in this company is great and scare okay.

Speaker 1: Something as a present in irq. Ok, they would take care of the division of getadavent in Iraq. Ok, and we do address same thing from us. Ok, we take care OK Toronto OK, of their products. Ok, in in United state a and Canada, and it's just great. Ok, and you see the patiation endling. Ok, we have got one guy at the timep. Ok, that's a new guy, this is Patrick. Ok, as I turn this experience and working with RO last and feel OK, they put this kind of a number OK, that to give you. So it's just good, good and very good. So we are already OK for your question.

Speaker 4: Yeah Thank you. If you wish to ask a question at this time, please press's one on your telephone K pad. Please ensure the mute function on your telephone is switched off. 2- largeryour signals to reach our equipment.

Speaker 5: So we Ve would magtake our first question from Michael J from the bank. Please go aheadheay good Hey, nice quarter on the organic growth. But the first question I wanted to ask is really on some of the margin compression that we saw and the quarter and you know- I'm assuming you know well first day- a lot of the companies you know we've been covering and been seeing some of pressures in, I'm assuming some of the headwind here are going to moderate, going forward, especially as you get a little bit more price. I'm just trying to pie maybe some of themoving parts here and I was wondering if you can help us. You know, maybe put together expectations.

Speaker 6: For Q2 margins, whether we should see a step up there or if it's more gradual for the balance of the year. You will see a step up Q2 for sure because our increase of price is there and you will see that our volume, like our backlog in Toronto for North America and for the projects that we make, it's three times what this was last year. That's something to have a backlog like that. So we have just to do what we are supposed to do. That would be a great quarter and a great year. So our will last see that if you get a comments on that lease.

Speaker 2: Absolutely's moreself. So to talk to Michael, the price increases the went into effect across the business. We didn't see a large impact in Q1. We are expecting a more significant impact in Q2. Our goal continues to be to increase margins, definitely above where we're seeing in Q1. So we are expecting more of an impact in Q2 and we'll expect an increase for the remainder of the year.

Speaker 7: Top of's guys I guess the second question maybe a little bit of a bigger picture question probably for SAS I LS view the Chinese facility as.

Speaker 6: The competitive advantage for a sevever it's given, 'is given you a cost advantage, it's given you vertical integration. I'm assuming you want something similar here with Mexico, but it don't feel like a significant shift for the company. So I guess my question is: as Mexico intended to support additional growth or transition manufacturing capacity, and I guess what advantages are you looking for a longer term here?

Speaker 8: ashthank you Michael yes, So I think don't forget some alas, 20 years experience in China and China has been at a very good for the company is very stable, very reliable, but in the last two years it takes a bit longer to get container and a bit more disruption. So, and now we have have a target, one billion by 2020 -five. So we have to create some capacity and we thought that mix school was closer in North America, was making sense, is attractive to produ something, a reasonable cost So definly, and now we have a major team and we have more experience. So I think yes, we will be open in September this year, in a few months. So we are both ting a lot of effort in our planning and we make sure that we have the right resources to support this. I don't expect the huge impact this year but I think, differently from the next year, we see some good impact. Ok well, us to increase the output in our factories in North America by suing some standard parts on the Souther semb from there.

Speaker 9: yesand, that's that we will be a great inventure us. That makes a sen seigu ESS. Given the dynamics I ESS just a follow-up, turn it over just potential costs around the construction and the ramp-up and inventory trends that we should expect as a rerelation to that.

Speaker 10: No but you know that we, we rent down there. Ok, So it's not our building enforce- will do the same thing that we do in China. So the will buy some project from us outside and as a about that. That's the beginning. Ok, we can see. Ok for 22 22 3, and after that we see if we have to have some machine read on that, some equipment. But the su, the CUs, is not very, very high OK, and I think that's a big plus to have something, that project that cannot right here and one week by to Toronto and ST OK of passing three months of the use on the ocean and on the rail. So that's a investigation and I can my people, my friend in China, I can assure you that it's.

Speaker 1: You are very important for us and and you will be, we continue to be very important. But we need a littleigital investigation and Mexico is a great, a great investigation and we know some company down there OK, will make a little bit of efort and the people OK, from class that is a shareholder, pluses on that too, because they are partner with us. So and we have great people and we are already we it some company that they are mexicschool sen, like brpl K in years and years and years and they are very successful to come get a soluation for them. So we will continue, begin with our experience in China. Ok, we will do the same, but closer to for us. So that is a great transduaction.

Speaker 11: Thanks very much, guwe. Would that take your next question from frederick Trump? Play from just starting. Please go aheadious. Did think morning everyone. The first question is on on the patient care segment. Obviously your re benefiting from some pent up the MAN would be, you know, increased access to longterm care facilities. We're just wondering if you add visibility on maybe how long that positive ideite fromump up the then, because last obviouslyyou was that about two years of under investment in that you know from longounm care facilities. So with that, is that something that you would expect to last for for several quarters or is was it more ly the lim what you were it?

Speaker 1: After did several quarter. I would pass the line to to within one minute to Nicola and, but you know that I would back up than there go. That was never before. So that's people, some some caution for our next projection. Or many quarters, and whether a group, a better group than ever that we have in this ion that I see before, we have right now Patrick and one who put Patrick but less and feelil we winning situation combination. So what this I is in that case, Nico. Nico, can you continue and differentend the?

Speaker 12: andthanks. Thanks marceon and thanks Fred, I guess, as Marcel indicated there, I think we feel very confident about the team that we have in place. So it starts at the top, So we have a very strong team there. As you had indicated is we are just taking advantage of some this rebound spending, exggs and COVID-19. So what you saw there in in the first quarter at whatever, was like 22% of organic growth.

Speaker 12: That builds off of, in Q4 think, 17% of organic growth and, I believe, Ve in double digit organic growth in Q3 of last year. So I think it's a continuation of this trend as we're really kind of exiting this. There's more of a lockdown environment. Some of it is related to facility access, for sure. Some of it is capital spending that's happening now that it kind of been allocated towards know other more needy areas during the COVID-19 time. So we are seeing the rebound from that. I think we're also are seeing some market share gains. Our team has been very good and winning, you know, a lot these projects that have been put on the market so well. We have 22% organic growth for the next five years, probably not but, but I would say over the next several quarters we do expect to have similar kind of is kind of double dig growth within the patient care segment. But also longer term, I mean some of these, these trends that we're seeing, you know, coming out of COVID-19 is is is years of under investment here in Canada, for example, there's a lot of these new build activity which has kind of boosting much of our sales here in Canada and that's something that we should see over the next several years.

Speaker 12: So I would say yes. Right now we are in a kind of an advantagage situation here, exiting COVID-19, but I do think longer term there's still some very positive trends as it relates to the organic growth potential of that segment.

Speaker 11: And then a good question for the caital location priority, the mter term, can you just me our data on CapEx expectation than leveraging for 2020? Yes, So we are. We're committed to delevering at least to half a turn this year. Q1 is typically for us our seasonally worst quarter, a weeakk this quarter. So we will. We did delever slightly in Q1, but we will delever more in Q2, Q3 and Q4. I am expecting to exceed that half a turn this year but as far as as far as our published guidance, we're sticking with half a turn. We are remaining diligent with CapEx spend. We are tightening where we can and we're going to be spending under our budget this year. So, evenven with the Mexico investment, we will be spending spending less than initially planned.

Speaker 13: Great Thank youour next question is from Zachary: ever checks from National Bank financial? Please go ahead, or it okay?

Speaker 14: margal masays. Good morning everyone for taking my questions. When the flow of good starts to get better, as we see, logistics kind of unsnarled. Do you think there's pricing risk where prices could come back, or are you pretty settled at current levels?

Speaker 13: Question I think that, if you don't, if you remember, we have a multiple grany between indicare haven, span and saveraria and I think when we still make some price increase or there's inflation, I think it's a different Granite difference in SES an entity, when they make a, make new price increase. I think this year we have reset on most of our grands. But again, if there's some effect during the year on inflation, on the incoming material differently, we need to review what need to be done. I think it's ongoing project projects and that's called this all.

Speaker 13: gotyou and with the backlog up three times from where it was last year. Are you happy with your current labor force? So would you prefer to ramp up even ahead of the new Mexico facility in September ?

Speaker 1: We're in pop okay, because we the team in and so not to maybe I'll always want to have more of more and more. Okay, but we have the team OK, and you will see the number of Q2 OK.

Speaker 9: We have a good start with April So, but we have a good start, but we have more booking than over at the beginning of of the month in April . So I think, OK in Mexico will help us. Ok to do a little bit faster and but it's very, very and that is thing. Okay to begin a month or right now we are over roughly 20 mediyears. Ok a booking okay to do. We never had that in our life never never, never that OK, and so we are working hard. Ok to deliver as soon as possiblesible. So it's why I see until the end of the year very, very busyand I said just to add one thing that no, don't forget, if you want to, we have last 7% of our production hours in a forward in factfactory mainance and was in ARD in tenance that did not ever output. If we will ever get all those hours, I think we will ever receive some better organic growthabsolutely in next sense.

Speaker 14: And then just if you could drill down for me on where exactly in the supply chain you're seeing pinch points and how you see that evolving over the course year. But I think right now is Qu? Ate China, for now we not do the week of shippings since the beginning of the year or two factor in chman and we only have been able to perform. Yes, we have a few supply and shangha area, where the other month lck down may be able- just a few small parts. So I think is just like it's award why yousue right now. Even if you have a local supplier or supply new up, it might get some small components in different placees. I think electronics is maybe one of those which is a a bit utter and I think the acquisition of REIT ons that has been pretty key for us so far, rather away from the starty, have been able to manufacture some PC begin now so that we can in of potential challenge But I think important we callroll process. We do a lot of parts in us now a different factortory, So that has possible a bit turn on some of the supplychain issue sometimes.

Speaker 13: That helpful. Thanks, I'll turn it overthank you, thatic. We that take a next question from Nick augustino from LA rentch Bank. Please go ahead. I, I or morning, I guess. First the one point of clarification. You said earlier that all the pricing increases will have the full benefit in Q2, and then I thought you mentioned something about the rest of 2020 two were there any more planned pricing increases over the time being? This is itno just.

Speaker 15: That scares me St. But right now when we see our result OK of Q1, we see the result first month of q,2. Ok, we re not talking about about adjusting pricing from our several and scare would be a little bit differentult Ok. but us 1, a fair price to the consumer, to the dealers and to the manufacturer, everybody as it point, you have to have the products and our dealer as to make make moneyok. So right now, when I see the number that we took out, OK.

Speaker 9: I think we have done what well have to done and don't pro get some time. May be BU in that advance OK and many other MAN factor. We say your price no more good no, I you have price and we stick with our price. So I see some- even ok- idea of the q2- OK and Q3. We will see some, some elevators that would be done and ship OK and then actti that think is just the new price you would be in. So it takes, takes some time, but we have what is POS, where sat ide, where we are right now in percentage, and you had something I'm just going to go some subboptions earlier comment about and you touch on this: two marselves. We do have different divisions, different business units across different markets. So yes, some of some of the price increases in some of those businesses will be done, is are done and we haven't seen the full impact of those and we will.

Speaker 16: sortof Q2 in the rest of the year, but some of the other divisions we're continuing to evaluate. Yes, I just won to, but and then my next question: just going back to the Mexican, it's sounds like it's more of a sourcing of products similar to China, as opposed to just appear assembly plant, and I'm just wondering, if you look at the competitive landscape, thinking more obviously, you've acquired handic, are and ourjo go out there, and I'm just thinking, when it comes to lead times, you guys are obviously strengthening your position within, within the North American market. Can you just speak to what you're seeing out of rjo and their abilities when it comes to lead times? Are they, are they also getting better, or you think that their infrastructure doesn't support what you've done? And then maybe Steve any color on what sort of margin benefit?

Speaker 17: You guys anticipate out of that Mexican facility when you capture lead times workforce lower cost base we're in shipping costs. If we look at 2023 with sort of margin left can we think about for the Mexican plan I you begin and I was struck OK. So I think what of the impact on on the margins make I think it's too soon to comment on it. I think re first. We have to finish our year to set all our self curue there but differently we are doing it or reason which is to have some cost benefit and the most important to be able to attract some planant and to be able to deliver on this one billion capacity that we need to have and I think in terms of thelead timeme. Those Saver areas has always been good at lead time across a different grands OK. If you look at the lead time spanal is just extremely quick and again massive project sseeing very referen sub planning. But if we need a quick turn we are very good. Elevator is yes right right now. It's a bit longer but again the customer you know with they have time to plan it when you make renoation on you using.

Speaker 8: And ter ly that that's why we but then care the other best at lead time and right now, with the development we have brought back in internal to for manufacturing, by the end of Q2 we should have a probably the BAs time theindustry. So I think lead time is to the key for us. I think the mix kenin is more to refinance supply chain, to lower inventory over time. What we have on the water with China, that's a that we might sort, may we must say you want to have something our that's done up, one something. I mean suvbasions touch on our margin expectation. It is a little bit early to to sort of give guidance on that. Yes, we will say safe shipping costs clearly, but there's also another savings and that's on working capital. So bring, bring some of this production closered to our large, our largest market of being North America. We will be able to save, save working capital, investment dollars and be able to allocate that elsewhere.

Speaker 18: okaythat's good, very- and I just just said my second, just to give you an eexample what we are doing. It in Toronto. So we manufactured the figure and, what is very important, in July we would be able to deliver this brother in one week times ay.

Speaker 15: The best in generindustry. And so work we, this Association that this purchasing we have made with end care, Al us that, that partnership that we take, we believe, we believe that we can be the best in America. So, coming Toronto and see our, our manufacturing that in Toronto, you will be azed when you said, don't know what is your in Toronto, but you can see a we are more overto than before and what we want to the dealer and to customer, deliver project as soon as possible when made the order. And we are gaining on that. We are gaining a lot, and so thanks for my people work on that so, and thankks continue to follow us after how many years for.

Speaker 17: I think it's been about eight years give or take. I mean anything yes okay, just just one last question on the ultron acquisition: obviously you're acquiring one of your controller manufacturer and controllers are obviously a key component across your entire product set.

Speaker 17: Similar question to Mexico: what sort of margin benefit do you think you can get, given the fact that these controllers are everywhere in your products?

Speaker 15: P now transser that again. But take care next for this year, for when we are give our guidance. We knew work ING this acquisitition So I don't think Itis changeange for this year. But it was more than just pricing. It was more to make sure we have the parts we control the supply chain to be going to integrated and after that to make sure that right now we have different brands, different type of electronics for similar products. So over time we want to streamline bcb to make sure we have more the latest technology in our elevator, like a blue to Wi-Fi. Name it OK, it's important for us. We need to be ahead of the competition. So by designing our things in us, we should be able to have the best product in terms of electronics in our different products.

Speaker 15: Okay great. Thank you a stthank. You have a reminder to ask a question. Please press Star one we will now take our next question from Derek and letheard from TV Securities. Please go ahead.good good morning and ready morio.

Speaker 10: About todayadian and very happy that you want to look againokay directcurious that any of that was being driven by customers looking to lock in prices ahead of any price increases that were coming upi missed the beginning of your sentence. I don't know it's stru, just me. Are question of the year, all the question? No, we have missed the beginning directly month to start to over the questions.

Speaker 16: Yes sure I was. Just I was curious of any of the strong ordinanic growth that you experience that, without being driven by customers looking to lock in prices, you sort of ahead of any price increases that you are putting through. That has a very good question. I am sure a little at pleast maybe to any percent it's for thatok, but that that it's a I looking is very, but little parties for that. They want to reserve that priceand want to be we che the game they don't order to. We need a name of that custommay. We need some information that it is a fake order. We che againmeok. I mean that, what I found.

Speaker 19: soas well in the mdna that you did single out in the exceptability division: synergies with with hand IC care with one of the drivers in the organic growth. Maybe if you can just talk about what you're seeing on that slide in terms of synergiescase of cha, I think if you remember re at the beginning a year ago we said it will have twelvemillion of synergies. That by the end of this year I think where we are on track with that. This is moving curctly and some of the key projects we added was to close this. We don't stostartck off IOUs. This has been done. After that, if we talk was bring back a manufacturing of freer in North America. That has been done. It us to to start the distribution of a stra stly for from one location, serviccentuus in green-vil, now and to merge the team. Right now we want to order stra early in North America by the team of indicer about the upmarg to get only the work together.

Speaker 8: So I think a lot of those indjective on the way, but again there's sum that is still on the agenda for this year. So I we see the time, but that VIE the progress we're having and right now that the travel has is a bit. Defense teams are mixing together earlier we are coming here and a good example of a smsmall project like last month I had forth people from Medicare here to work with us. How can we reventam one of our se line here in tor onto where we are super busy, get some idea from the inside of the company. Again, the team of Pete that done a good job. Ok, keep to come and we challenge that. We would do elevator for the last 20 years. So I think, as just an example of synergy, that we are always working on something.

Speaker 3: Okay and maybe a few more for me in terms of the Mexican initiative, just maybe if you can comment on what you're seeing in terms of labor B quity and maybe the workforce, workforce quality in mexicoas. So I think yes, you think, I think, in term of a labor pricing, so far we did our due diligence and I seem that makes school is little bit more attractive in vers the labor across per hours. So I guess that's a good news. The labor seems to be there and I think when the chance is, when you start from scrapity, you can decide to hire the first that you want. So we are going to start deficsee with a good stab. That is good technical.

Speaker 8: Technical knowledge in the office and that can speak in English and indigent Spanish. So this impry and I think the people would be happy to work for a foreign company right now. If you look at the company we're pping up over there, it will be like there we said droomam factory, we have a good serve the children il. Exactly what we do, that the understanding is exactly So where we're expecting to be work Class manufacturer with itokay and let me just 1, one finid or one for me is curious if you have any visibility or if you're seeing any bro EF right now, maybe on the freight side or shipping side of the supply chain.

Speaker 20: Yes yes, the fate portion. It's not like last summer. Last summer well, was more like a 25 thousand a container. Right now, in the first quarter we saw some 18 to two thousand dollarper containers. So I think it is similar to Q4, but it's not the same as it was last summer. Its a bit better. It's still take a lot of time, it's come on uution, but the term of pricing it's a bit better than it was last summer.

Speaker 21: okaythat's the best ical question. Ok, just to answer where we are going with the manufacturing: the frecurve: Ok. now we are the current P coming from your ad. Ok, but in August who will have the equipment here and we will say much the best simple month of shipping, that will be right. nowyesjust as F. So yes, where the manufacturing of precovering through auto will still, we have a few parts that is still coming from your up. So we're expecting that from this summer, which should be able to save trying to talk a lot of amonth. So that's an example of synergies which is going to helpbus for the second half of the year.

Speaker 11: Thanks about ou good callor. Thank youas there are no further questions at this time, I'd like to turn the call back to your speakers for any additional or closing remarksokay, Thank you very much saying thanks for the people. Please that listen you. This morning, gr AB ID an us yette and you will see that.

Speaker 1: We will drive very, very hardicly and we will succeed. That, you to me, to meet our guideline. That's what is is important. So thank you for writing and see you at the next quarter. Thank youthank you. Ash will conclude today's conference call. Thank for your participation. Ladies and gentlemen, you may net disconnect.

Speaker 4: pu.