Q4 2022 Savaria Corp Earnings Call
Speaker 1: You
Speaker 1: Oh.
Speaker 2: Please stand by. We're about to begin.
Speaker 2: Good day. My name is Jess and I will be your conference operator today.
Speaker 2: At this time, I would like to welcome everyone to the Siberia Corporation Q4 2022 conference call. All lines have been placed on mute to prevent any background noise.
Speaker 2: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad.
Speaker 2: If you would like to withdraw your question, please press star 2.
Speaker 2: This column may contain forward-looking statements with our subject of the disclosure statement contained in the most recent press release issued on March 7, 2023 with respect to its Q4 2022 results.
Speaker 2: Mr. Barasa, you may begin your conference.
Speaker 3: Thank you, Jessica. This is Marcel and I am very happy about our result of 22. Very, very happy. I am in the business since the beginning, okay, and even looking at my family.
Speaker 3: Every day, okay, and one problem, okay, was there 10 years ago, and it is there. It is the accessibility, okay, accessibility to the house, okay, or to the public building.
Speaker 3: Our business is 50-50 to commercial and residential. I can tell you that our backlog, sometimes to see if a company is healthy, I will say to the company, hey tell me your backlog.
Speaker 3: Our background is the best, okay, ever, okay. Why? Because people need mobility. We can be, okay, in unfortunately in war in some sector, okay, and Marquette, okay, seems to be nervous, okay.
Speaker 3: But the people at home, okay, that they are certain age, okay, and they need the mobility to go to their bedroom on the second floor, okay, that doesn't affect them at all, okay. Just maybe they will say, oh, we're nervous a little bit, okay, we will postpone, okay, that a couple of months, okay, our decision, okay.
Speaker 3: But this decision is there. They need mobility. So when I decide to go in this kind of business, okay, 30 years ago and more, I decide because it was great 30 years ago, but even right now, with the population...
Speaker 3: that we see more, okay, that it is apparent the aging of the population, they need our product. They need our product. That is why our backlog is so high. So I am very happy about our mother's team across the world, okay, and after that patient's ending, okay, hereatobia is four different things that she tried.
Speaker 3: Thanks very much to the people and to this division. They report very good numbers. And I am very enthusiastic about the future. And I repeat myself, the future is the backlog. We are the best backlog. It's wild, K22.
Speaker 3: was good, okay, but 23, okay, that we are in, okay, almost finished the first quarter, okay, will be better, and it is better, okay.
Speaker 3: So I have always my people, my key people with me on the call this morning and I will ask Steve to begin and we'll make a little change, okay? After that, Nicolas Rene, we'll speak about patient handling and Sebastian about operation.
Speaker 3: So we will speak first and after that we will listen to the question and again, okay, I repeat, okay. We are. Okay. Okay. Thank you. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay.
Speaker 3: good, we would be good and better and
Speaker 3: The news, okay, thank you to the analysts that are there this morning, okay, and support Savaria, okay. That's so important. That's so important that you are there, you were there five years ago, you were there ten years ago, and thank you very much for that. So I pass the guy who went to all our findings. Steve, please. role?
Speaker 4: Thanks Marcel and good morning everyone. I'm going to begin with some remarks regarding our 2022 Fiscal Year Consolidated Financial Metrics.
Speaker 4: For the year, the corporation generated revenue of $789.1 million, up 128.1 million or 19.4% compared to 2021.
Speaker 4: The increase was driven by strong organic growth of 12.7% and acquisition growth of 8.9%.
Speaker 4: This was somewhat offset by foreign exchange headwinds of 2.2%, netting out to 19.4% growth overall.
Speaker 4: Gross profit and gross margin stood at 254.4 million and 32.2% respectively compared to 215.5 million and 32.6% in 2021.
Speaker 4: The increase in gross profit was mainly driven by higher sales volumes, while the decrease in gross margin versus last year was mainly attributable to continued inflationary pressures on the supply chain, especially in the European region, causing material cost increases.
Speaker 4: These inflationary pressures were somewhat mitigated by initiatives taken to increase customer prices, reduced shipping costs, and also fixed cost absorption.
Speaker 4: Adjust-a-dee-buh-dah and Adjust-a-dee-buh-dah margin finished at 120.2 million and 15.2% respectively, compared to 100.2 million and 15.2% in 2021.
Speaker 4: The increase in adjusted EBITDA dollars is primarily due to increased sales volumes.
Speaker 4: adjusted EBITDA margin was held flat as the decrease in gross margin was offset by lower selling of admin costs as a percent of revenue.
Speaker 4: Now we'll move on to our segment results.
Speaker 4: Revenue from our accessibility segment was $560 million in 2022, an increase of $75.7 million or 15.6% compared to 2021. The increase in revenue is mainly attributable to organic growth of 9.8% as well as acquisition growth of 8.9% from Handicare.
Speaker 4: This was offset somewhat by a 3.1% revenue decline due to foreign currency impacts.
Speaker 4: The weakening of the euro and the pound overshadowed the strength in the US dollar versus the Canadian dollar in this segment.
Speaker 4: Our revenue growth was fueled by both residential and commercial sectors as well as price and volume increases. Our revenue growth was fueled by both residential and commercial sectors as well as price and volume increases.
Speaker 4: and we continue to build our backlog.
Speaker 4: At December 31, 2022, our accessibility backlog was approximately 5% higher than last quarter, Q3 2022.
Speaker 4: In just a deeper down and just a deeper down margin both before head office costs to that 97.3 million and 17.4% respectively compared to 86.2 million and 17.8% for 2021.
Speaker 4: The increase in adjusted EBITDA was mainly driven by higher sales volumes, while the decrease in adjusted EBITDA margin was mainly due to continued inflationary pressures on the supply chain, especially in the European region, causing material cost increases, which was partially offset by better fixed cost absorption from the increased revenues.
Speaker 4: Review from our patient care segment was $174 million for the year, an increase of $37 million, or 27.2%, when compared to 2021.
Speaker 4: Revenue growth includes organic growth of 17.1%, which was driven in large part by pent-up demand from the last two years of the pandemic. New contracts won and pricing optimization.
Speaker 4: For the year, acquisition growth was 7.7% and FX provided a 2.4%.
Speaker 4: 1.7% and FX provided a 2.4% tailwind.
Speaker 4: adjusted deep down margin both the forehead office costs stood at 200 excuse me stood at 24.9 million and 14.3 percent respectively compared to 16.7 million and 12.2 percent for 2021..
Speaker 4: The increase in both metrics was primarily due to the increase in revenues and improvements in gross margins, mainly explained by better cost absorption, pricing optimization, and synergies with handicare.
Speaker 4: Revenue generated from the adapted vehicles segment was $55.1 million, an increase of $15.2 million or 38% when compared to 2021.
Speaker 4: This year over year growth was driven by 32.2% organic growth and 12.6% acquisition growth and was partially offset by a negative foreign currency impact of 6.8%.
Speaker 4: The organic growth was driven by increased police.
Speaker 4: and ambulance vehicle adaptations despite continued vehicle supply chain disruption throughout the year.
Speaker 4: Adjust the DPDA and Adjust the DPDA Margin both forehead office costs finished at 4.3 million and 7.8% respectively compared to 3.2 million and 8% for 2021.
Speaker 4: For the year, net finance costs amounted to $16.5 million, an increase of $0.7 million over the $15.8 million amounts recorded in 2021.
Speaker 4: The increase was mainly due to higher interest on long-term debt related to the financing of the Handicare acquisition and also higher average market interest rates. To explain a relatively modest increase in finance costs on significantly higher market interest rates, I note that 2021 also had a loss on an FXC.
Speaker 4: $11.5 million or $0.19 per diluted share in 2021.
Speaker 4: Adjusted net earnings excluding amortization of intangible assets related to acquisitions reached $57.1 million or $0.89 per diluted share compared to $41.8 million or $0.67 per diluted share last year.
Speaker 4: This reflects an increase of 32.8% or 22 cents on a diluted share basis. Turning now to Capital Resources and Liquidity.
Speaker 4: Varia generated cash flows from operating activities of $90.7 million for the year compared to $57.3 million in 2021. This large increase was due primarily to increased earnings as a result of the current year.
Speaker 4: level of investment in working capital stayed flat on a year-over-year basis.
Speaker 4: In 2024, 2022 saw cash generated from non-cash working capital of $13.2 million. Cash used in investing activities was $21.6 million for 2022 compared to $396.4 million in 2021. In 2022, the corporation dispersed 1.4 million dollars in cash from the United States.
Speaker 4: was $83.3 million for 2022 compared to a cash infusion of $351.8 million in 2021.
Speaker 4: This year's significant cash outflows include 32.5 million of dividends, 28.1 million of reimbursement on the credit facility, 13.9 million of interest paid and 11.2 million of lease payments. resin 0 classy Viking Sign.
Speaker 4: This represents a 0.7 times decrease versus Q4 2021 last year.
Speaker 4: This reduction is 0.2 times over and above our target of 0.5 turns per year.
Speaker 4: Severia has funds available of approximately $125.7 million to support working capital investments and growth opportunities. So now looking forward for 2023, Severia expects to generate revenue which will be approximately 8 to 10% higher than 2022 with adjusted deeper down margins of approximately 16%.
Speaker 4: In addition, for 2023 we are targeting a reduction in our leverage ratio of 0.5 turns.
Speaker 4: This outlook is based primarily on continued strong organic growth coming from accessibility and patient care segments supported by our current high backlog levels.
Speaker 4: and continued realization of revenue synergies between severity and handicare.
Speaker 4: With that, this completes my prepared remarks and I'll turn the call back over to you, Marcel.
Speaker 3: Steve, thank you for this information. Okay, we can see that we have a great year.
Speaker 3: mention that will support our increase that we look for in 2023 and we are very optimistic. Now about the change in the patient in thing okay I will have Nicola to present
Speaker 3: to present you what we have done in 2022.
Speaker 5: Thank you Marcel and good morning. I would like to take a moment to speak about the performance there at patient care in 2022. Although first, I know that analysts and investors are on the call today.
Speaker 5: We also likely have employees listening in as well. So I think it's important that everybody know that patient care is an integral part of Saveria and if we're to achieve our long-term objectives we're going to need them to deliver for us as well.
Speaker 5: to that the patient care team really stepped up in 2022. I think as Steve mentioned delivered a record organic growth of over 17% and the record EBITDA for a full year of over 14% and it's really a testament to the strong team we have in place and the fact that they're the full in and really embrace the integration initiatives between Handicare and SPAN and so I think what we're seeing here is the synergies
Speaker 5: materialize maybe even a bit faster than we had anticipated.
Speaker 5: So again, Marcel, I appreciate you asking me to take a brief moment to speak about patient care. I'm sure there's going to be some questions from the analysts on the call, but just wanted to congratulate the team and let them know that it was a great performance in 2022, and we fully expect even better in 2023.
Speaker 3: So, thank you, Marcel. Okay, Nicolas, and I will hear you okay with some questions on the patient and then you will answer that, okay? And the last, but the least, okay, that will be Sebastian, okay, that the...
Speaker 3: That will be a presentation, okay, what we have done, okay, in the last year and the last quarter will be a little bit later, okay, but for 2022, okay, the best thing. Can you take the line please?
Speaker 6: Thank you Marcel. So basically yeah, 2022 was a good year for accessibility in terms of production output. We had an interesting growth in Europe and in North America. For sure Europe was a bit more challenging towards the end of the year in terms of margins, but that's just a little short term issue.
Speaker 6: We're always working with the team to do some action plan, so that's not a concern. After that, we are lucky, yeah, we start the year with a very good backlog so that we continue to put some...
Speaker 6: production pressure to do some improvements. So, all the team is working on improvement, I think, in each division. So, that would bring some interesting output in 2023.
Speaker 6: After that for Sury in 2022, we have launched the free curve of ND care in North America and Toronto. Right now it is successfully in production. We are approximately at two weeks lead time. If you remember a year ago it was more four to six weeks for North America. It's two weeks. We target one week but we need to continue. And then the second quarter of this year there will be a second product of ND care, the second curve, the 2000 that is going to be manufactured in May.
Speaker 6: 23 in Grempton so that would bring another dimension. I think cross selling efforts is continuing to happen in North America between the United States team of ND Care and Savaria and Garamantor so that's in good progress. And in Europe really the Garamantor and ND Care are working together on some cross selling of Incline platform of some ViewLift and we hope later this year we'll be able to bring some Savaria product in Europe .
Speaker 6: in the beginning of the year. We are also making some sub-assembly from Mexico to Toronto to help us a bit to rebalance on the long-term supply chain. And don't forget, if we have to go to 1 billion, we need more capacity. So it's always important to think a bit ahead. We need a1965
Speaker 6: It's not perfect, but I would say it's a big, big improvement since a year. So right now the suppliers have some supply chain issues with us, maybe they are not the right partner to work with. So on that, Marcel, I will give this back to you.
Speaker 3: Thank you, Sebastian. And my dear follower, you can see that our team know what they are doing, they are aggressive, and for sure what helps us is the segment that we have, but they can handle the operation and the future of this company.
Speaker 3: So my role is less important, okay, but I have just question, okay, I participate with the vision of Savaria. So we are ready for call, please.
Speaker 2: Yes, go. Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.
Speaker 2: Again, press star 1 to ask a question.
Speaker 2: We'll go to Derek Lestargue with TD Securities. Your line is open, sir. Please go ahead. Thank you.
Speaker 4: Yeah, thanks and good morning everybody and I just wanted to congratulate everybody also on a solid year considering the operating challenges.
Speaker 7: My first question is,
Speaker 7: I was wondering if you can maybe add some color to your onshore initiatives, particularly in Mexico and where you are in the startup there and maybe your expectations around margin contribution and or enhancement for 2023 and maybe part two to that question.
Speaker 7: Could you talk about what you're seeing in terms of inflation and supply chain pressures? I know it's early in Q1, but I'm wondering if there's been any improvement on that side?
Speaker 3: best guy for that is Sebastian
Speaker 6: Hi, Derek. So, yes, so basically in Mexico right now we have three assembly lines, some port ships, some ports on a bomb elevator, and a third one for our electrical department. So basically this is really again to help us to support our growth. So I think we have already published our guidance for this year, so I guess somehow Mexico is built into this budget.
Speaker 6: But again, it's for the long term, for the 1 billion capacity, we have a 95,000 square foot, it doesn't feel okay overnight, and we've got to go step by step. So we are helping with the direction we are going. And also we are looking directly vertical integrator in Mexico to make some parts by ourself, not just to assemble parts.
Speaker 6: And again, we have started to receive some machinery to be able to be vertical integrated. So, definitely that will be a game changer over time for the margins, at least for the North America since it's at proximity.
Speaker 6: And I think the second part of the question was the inflationary so for sir, okay, I think it's getting better People that has to pass up increase. I think we have already hopefully receive it So now I think we are working on some mid long-term project to be able to decrease some costs Oh, you'll cause some alternative supplier
Speaker 6: But I think, and I thought margins-wise, you know, we have different brands that will make some price increase at different times, so they are not all at the same anniversary date. And since we have a healthy backlog, but sometimes it takes a bit of time to reset the margins. That's why, I think, in the mid-long term, it was positive that we continue to improve our margins.
Speaker 7: Okay, that's very helpful, Sebastian, and maybe one for Steve. Just wanted to be clear on the 8 to 10% revenue guide. That excludes the sale of the Norwegian vehicle segment, right? So essentially 8 to 10% in patient care and accessibility. Anything on the prize table can join in. All is said and done depending on whether you are aAREH Damien Canada.
Speaker 4: Yeah, exactly. Once that's final, I mean, the best way of looking at it is to take our 2022 results and carve out that Norway business and we'll grow 8 to 10% from there.
Speaker 7: Okay, that's helpful. And maybe just one more. Thanks for the colour on the accessibility backlog. Wondering if you have any similar colour on patient care. I know 20% growth forever was not sustainable, but how should we be thinking about?
Speaker 7: growth and some of the growth drivers in that business for 2023.
Speaker 5: Yeah, well, I mean, I talked about – oh, go ahead, Steve.
Speaker 5: Yeah, well, I mean, I talked about – oh, go ahead, Steve. No, no, go ahead, Nick. Keep going.
Speaker 5: I was going to say that you're correct. I mean, I think we had a good run there of 20% in a row. I think it was three quarters, the first, second, and third quarter came down a bit in Q4, but for the full year we finished over 17%, which was a record for that segment. Now, going forward, I think that 8 to 10% holds as well for patient care.
Speaker 5: So our expectation in 2023 is we have a good order intake coming in. We're quite confident about where we are. Here we are kind of midway through March, so we have a good part of Q1 already in the books. The ceiling lift portion of that business, so kind of that handicare side of things, that is more of a...
Speaker 5: project-based so there is you know backlog associated with that on the legacy span side on the beds there is backlog which gives us some visibility and some comfort of where that's going the mattress is not as much it kind of comes in and goes out to relatively quickly so the backlog is relatively small on that portion of the business just by its nature
Speaker 5: But going forward, I mean, I think what's going to be driving some growth this year, along with certain of the pricing initiatives that we had discussed for last year, is we're aggressive in the market. I think that the sales teams have really come together and we have more feet on the ground talking about the full portfolio of products that we offer. We're out there gaining market share in a time when some of our competitors are...
Speaker 5: scaling back a bit, we're out there forging ahead and maybe gaining market share in certain segments as well. We've been successful on many of our bids so our win rate has improved. And then finally I would say that the cross-pollination between the teams is something that's really now just taking hold.
Speaker 5: working on strategic accounts that might have been with SPAN and getting the Handicare guys in there and vice versa making sure that you know that the SPAN guys are having an opportunity and leveraging some of those Handicare relationships to really push mattress and bed frame sales. So I think the cross selling is going to be a big driver for the growth not only in 2023 but also in 2024-25.
Speaker 5: So, very excited about where we are. And so, in terms of expectations there, maybe not 20% growth per year again going forward, that 8 to 10% growth is where we expect this to be in 2023.
Speaker 3: Thanks, Nicola. That's it for me. Derek, I want to ask Sebastian just to add, okay, we received an order from Asia about patient and about sitting leave. Sebastian, just give me why we received that, okay? Because we changed our approach, we have new people. Tell me. Okay.
Speaker 6: Marcel, you don't forget the detail. So yes, we have a new commercial director in Asia since six months, and we have tried to do a clean-up and a bit of an marketing in terms of accessibility, patient care. And yeah, we have some dealer base in Asia. We started to visit other dealers since Covid is a bit behind in Asia. And we said we got a nice order for 150 units in hospitals and hospitals.
Speaker 6: China with one of our dealers. So again, that's so that there's opportunity everywhere. Patient care has been really North America and UK with Sylvia, but they're all going forward. Okay, there's a lot of good place in the rest of the world that we can expand on our patient care also.
Speaker 3: But what is the value of the orders, Vas? It was 450,000 US dollars, Mr. Marcel. Okay, but that shows that in this segment, okay, sometimes we receive very good orders, okay, depending, okay. And we can see that the plan...
Speaker 3: the way that we have a new team that leads this division and we have a new team that is so new right now. But I'm very happy with the progress of the people because the people is the key to succeed. We need enthusiasm. We need to offer the best project and the best service.
Speaker 3: that we have a new team that leads this division, and we have a new team that's new right now. But I'm very happy with the progress of the people because the people is the key to succeed. We need enthusiasm, we need to offer the best projects, and the best service. Thank you, Dereck.
Speaker 2: Once again, it was Star 1 if you had a question. We will go next to Michael Glenn with Raymond James. Your line is open. Please go ahead. Okay. Thanks for taking the question. So just want to circle back on Mexico because it is an area we do... that we would not like to see existed with the
receive a number of questions on. Are there any revenue-type metrics that you're able to indicate for Mexico where you would like to get that facility from? Just something a little more tangible that we can speak to.
I guess I'll take this one. So for sure, most of the revenue of Mexico is in third company, so it doesn't really affect the external revenue. And again, going part of this 1 billion, it is important to our capacity. Right now we have 35 employees, we also have 100 by the United L contin based feel
2023 and if you turn up size it's probably a 10 million dollar range but it's all the internal sales company. Okay, that's really helpful. Thank you. And then just regarding residential elevators, if we think of how that business ties into new home sales, building of new homes, are you seeing any?
Signs out there regarding a softening in demand with regard to the residential elevator product? I would just have to say that another thought, we have the best booking is exactly where we are right now, is the residential elevators. More and more people, okay.
can retrofit the elevators, or install a new home. So that's the best backlog that we have in all our projects. Here is the exact residential elevators.
So a Away, I don't know if the best you have something but the numbers peak. Okay, and when we see the backlog, okay It's months and months. Okay, I had okay I was just going to say my quality everything okay started with the sales leads
I would say we have the attention from exhibitions so far this year and the attendance in the US were fantastic with architect and contractor. People want to put elevators so there's a lot of inquiry. And then we see it after the leads, we see it with our drawings. Our numbers of drawings did not go down so it really showed that backlog is empty but still the pipeline in the back is the market remained very positive.
so far this year and the attendance in the US were fantastic with architect and contractor. People want to put elevators so there's a lot of inquiry and then we see it after the leads we see it with our drawings. Our numbers of drawings did not go down so it really showed that a backlog is empty but still the pipeline in the back is the market remain very positive. No concern for now.
Cash flow, working capital, yet a nice Q4 in terms of working capital. When I'm looking at working capital in 2023, is there still opportunity to take working capital lower or should we, I'm just wondering if there's some outlook you can give for working capital?
And then, you know, to tie into that as well, maybe some CapEx guidance as well. Sure, and I'll just... Yep, thanks, Marcel. So, on the working capital front, yeah, we did deliver well in Q4. We basically took out $13.2 million out of working capital.
and took that basically right to debt repayment in the quarter. As far as 2023 is concerned,
There is a little bit more room, but I would, as far as from a modeling perspective, I would probably put in, if I were you, put in that we're going to be holding investments flat. So we're not going to be investing any dollars in the working capital in 2023 to support the growth. We have ample, we feel we have ample room in current working capital levels to support the growth.
we were expecting more 2.5 so just a little bit up. With regards to 2023 that number will be closer to 2%. So we've always been in that two to two and a half range and for 2023 it'll be closer to the 2% range.
Okay, and then free cash, I would think that the priority for capital allocation with free cash will be debt repayment in 23? Exactly, yeah.
And so, we did deliver 0.7 of a turn in 2022, which was higher than what we were forecasting and expecting, or at least guiding towards. I think we were expecting that 0.7 of a turn internally, but we were guiding half a turn. And for 2023, we're guiding half a turn as well.
Okay, perfect. Thanks for taking the question. Thank you. Our next question comes from Michael Dumay with Scotiabank. Your line is open. Please go ahead.
Hey, good morning everybody. First question on the guidance, again on the organic growth expectation, just at a high level, I'm wondering if you can break it down, you know that 8 to 10%, which again I think excludes the divestiture, if you can break that down between price, volume and FX. Because the one thing I noticed is that, you know, the current FX rates, you
So we're probably going to lift about 4% to revenue on translation.
probably get a lift of about 4% to revenues on translation. Yeah, so I can.
Yeah, I'll take this one. The age of 10% growth, that's a mix of price and volume. So Sebastian mentioned earlier that we do have price increases across the business. They are at different times and they do come into effect at different times based on the different levels of backlog that we...
and volume without saying exactly how much it's going to be. I would say we're expecting a bit more from volume than from price.
Got it. Could FX be on top of that Steve if you get the 8-10 firm price and volume?
It's difficult to say what's going to happen with FX in the next 12 months or in the next, I guess, from this point. Nine months, I wish I knew. We have built a little bit of buffer into our numbers with regards to FX. But, um...
we will see how that impacts the business. I mean, we are diversified. We have businesses, quite a big piece of our businesses in US dollars and quite a big piece of our businesses in Euro and GBP as well. So what we saw last year was although...
the US dollar strengthened, we saw weakness in the pound in the euro and that had mixed impacts, although they were offsetting each other in our 2022 results. So very difficult to say what 2023 is going to bring, but we feel good about having a diversified business.
Okay, I missed you. Thank you. And then moving on to the accessibility margins, you know, you had a little bit of an atypical year in 2022 where margins peaked in Q2 and then kind of weakened through the back half. You know, not sure if that was due to the price increases that was implemented in Q2 or...
Maybe it had something to do with the fear of the herd, so I should comment on that on Q4. Can you discuss that in more detail? Maybe just for Q23, what we should expect in terms of seasonality on margins.
Sebastian, you will complete my answer, but I just tell you something. This is our best project in turn.
For sure, patient handling, push us a little bit in the back. That would be good for my team and accessibility. When you see other people pushing, maybe they try to go in front of us. But that's our main project, accessibility. And I can tell you something, the margins are there. We have some increase of price. Okay, and that's
sometimes takes some months that we see that and you will see that with I know most the number of Cuban okay and we you will see good number in 23 about the percentage.
And if, if, yeah, Marcel, if you don't mind, if I could just jump in here just to add a little bit more color.
Yeah, we did see some weakness in the Q4 margins, especially in accessibility, especially in the Europe region. You know, we do price increases and we don't like to do them, we like to do them once a year, you know, twice a year if we have to, but it's not something that you can just keep doing on an ongoing basis. So at the time when we put in pricing...
You know, obviously, we're doing what we can to mitigate that. Sebastian talked about it a little bit in his intro words, where he talked about, you know, looking at other vendors and looking at other opportunities, but we do have action plans in place, and we're focused on increasing the margin. We do have 20% margins in our sites, and we have seen, you know, we do have pockets of...
Your line is open. Please go ahead.
Thanks for taking my call. I just want to circle back to the longer term goal which is I guess more of a medium term goal.
to have 20% EBITDA margins by then or 200 million.
in EBITDA. Are you able to help us bridge that EBITDA expanding from 140 to 200 million over the next few years?
First of all, our projects, we mentioned that we have a key backlog and we mentioned that we have a price increase, okay, also some region around the globe was a little bit...
may be conservative about the increase in price, but the people know the inflation and they accept that if we are fair they accept an increase of price. Everything is in place to increase our margin. We see, okay, why we push...
put from 16% to 20% Marcel, but man, it's just a question that to do better in productivity, to do better in designing and to have the right sale price. And this is the key part to...
percent, you will see Q1 that would be that easy. But this is a little bit conservative. We work on improving our productivity as I mentioned. And you will see again this year that
hey man okay we we we are better than ever it's because our people okay our people are good they can be better we will add some people okay to be better and we are around the globe okay we see we show to the people in 22 okay that we we are every about everywhere okay and we have this new manufacturing okay and this to mark at the case
that we will sell in Mexico and around that, even if it's not our first goal. In Asia, Asia is very important for us. There is a pattern and we will see more development in the coming years. So I am very confident to say that with me.
For sure we'll meet the guidance in the sales, okay? And about the way to 20 percent, that's a challenge, okay? But we'll be very near that, actually, with the effort of my people, my key people, but all the people in the company.
in the sales, okay? And about the way to 20%, that's a challenge, okay? But we'll be very near that, actually with the effort of my people, my key people, but all the people in the company. Can I keep going?
I think you have crossed my list, Nafsah, but again just to highlight R&D, we have 50 people in the R&D organization. When we launch a new product, we have to launch it at the right margins or we will not launch it. And I think the Mexico efforts for sure is to help us to lower some of the costs. So I think that will be our end, Justin.
Great, great. Just an example, okay, Sebastian, tell me the price of a container that you received from China two years ago and right now or three years ago and right now.
So, that's one assessment. Sorry about that. At least for one line, okay, which is China, Toronto, I think we're back to the pre-level before COVID. All the other lines, you know, up in different place, okay, there's always the inland cost that we have to be careful. Now with the gas price, everything that we move within the country is usually expensive.
But for the container, we are back to $4,400-$4,500 which is very close to pre-COVID. Thank you. Great. I appreciate that. And then just a question on acquisitions now that HandyCare is being integrated. Are you looking to bolt on any transactions in 2023 or is the focus more on the future?
still on driving synergies with Handicare and internal operations? First of all, for sure we will make some little acquisition. Just to give you an example, we can make an acquisition, but we know we are good and when we buy a dealer, they sell other kinds of
Plus, we push all together to grow the business. So that's something that will continue. It will continue over years and over years because we are very successful. And I just named two names, okay, Premier Liff and Sir D'Alyiff. They are very good, okay.
And for sure our direct sales in Toronto is very good. So we are ready to make this kind of acquisition when we buy some company that they don't buy our products or just a little dimensional project or maybe somebody, the owner decides I want to make it sound more like a commercial. ForShoutOut to Graphmaster, I always like to have the proposal business management
They are owned by Savaglia. Understood. Really appreciate that. Thank you very much.
Okay, thank you to be there. Our next question comes from Nick Agostino at Lower Incham Bank. Your line is open. Please go ahead. Yes, I do. Everyone go, Nick. Okay.
Only sure myself. Man, you got with us for how many years, Nick? I'd say at least eight, nine years. Maybe ten. Yeah.
Yeah, yeah, absolutely. You are in the two numbers. That's good. Thank you very much for being there, Rick. My pleasure, my pleasure. Quick question on Mexico, and I know there were some prior questions. Just trying to understand, I think you mentioned that most of the sales will be intercompany. When I look at the 2023 EBITDA margin guidance.
How much of a margin benefit is associated with the Mexican operations? More so, not the existing, but at least what you have planned for all of 2023. How much of a lift do you think you're going to get out of Mexico that's already baked into that 16% guidance number?
I think that's who you will answer but when you say okay I am the oldest guy on the car I think my thing is that we are very conservative.
He is very conservative. And Sébastien, I will leave you the answer to Nick. Sébastien Nick, don't forget, it is a startup that we have done in Mexico. So when you have a factory of 95,000 square foot and you have 30 employees, again, it takes some time before you become very efficient, and you can really bring some important savings for the organization. So this year for sure.
It's a ramp up. We talked a bit earlier that it's maybe in the $10 million range of entire company sales, maybe a bit of outside sales, but that thing is really for the long term. And I think if we want to go to 20% going forward, we need some nourishing opportunity.
Okay, thank you for that. And then on the bookings activity and the backlog obviously continues to grow in Q4. Just wondering given the fact that we're about to close Q1, can you provide any bookings commentary for Q1 itself?
Don't forget about booking. Booking, as mentioned at the beginning of the call, is very, very important. But booking, like on the stairways, straighten the curve. Now we can ship a curve in Toronto in the maximum two weeks.
So that's backlog, okay, two weeks we don't see the backlog, we just deliver the order, okay. But on the residential elevators, okay, our backlog is on the residential elevators, at least three months, okay, something that we don't see in the past, okay, but for sure it takes time, okay, for the order to arrive.
because they have to have some planning. But we are very well equipped in Vancouver and for sure in Toronto to manufacture and we'll get some parts from Mexico.
a part, okay, controller. Controller, okay, is very important controller, okay, in a product because we need a controller, okay, and we see how we are in the market, okay, how the challenge that happen, okay, on controller, okay, components, but it's why we buy a company in Europe , okay.
that manufactures some parts. Why we begin to manufacture in Mexico? We begin to manufacture the controller. So we are independent, and that's the key to be A to Z independent of other suppliers. So we need suppliers, but that's good at the...
that we can control more our destiny than just the destiny of the suppliers. So that's it. I think that's a very good answer, Marcel. Thank you. And I think for the booking of Q1, Nick, it's hard to comment, but it remains strong. We have a good backlog, which is what we need for Q1 execution. Okay, and then just my last question on the…
the Handicare Norwegian asset sale. Just wondering about the thought process there. Obviously adaptive vehicles in general had a strong quarter, good organic growth, good margins out of that business, something you guys were always trying to improve. So just any colors to why you're selling off those assets.
when it looks like their contributions, including North American assets, are maybe starting to gain some momentum. And I'll leave there. Thank you. Thank you very much. And I will answer just one. Maybe Sibeshi can complete that.
Maybe Steve okay, just okay. It's not in our core business. Okay, so I decided I made I made Decision okay to Get out of that. Okay, because they make very nice products
But first of all, it's quite far. And then they are not in our core business.
So, not in our core business and VanAksen is more in our core business. So, we decided to sell that, but it was a very small sale. I just…
the money that we have in the company and I wish them good luck okay and they are a great people down there and but unfortunately I think they are not in our I repeat but in our core business
that we have in the company and I wish them good luck okay and they are a great people down there and but unfortunately okay they are not in our I repeat but in our core business. Sivasi.
I think the special vehicle that they were making is that it's one of the standalone divisions. Now we found a new owner that will probably have a better future for them. So again, thanks for the work in the past and I think we're moving on. Okay, thank you.
And once again, it was Star 1 if you had a question. We will go next to Zachary Evershed with National Bank Financial. Your line is open. Please go ahead. What do you think?
Thank you. Good morning everyone. Thanks for taking my questions. Just building on the last question, do you view the remaining adapted vehicle segment as a core part of the business and if not what do you think you could sell it for?
You put me on the spot with that one, I call Norway. Now the cock quarter...
with that action. So it will depend. We will decide to make some change in the leadership of this company and it's always depending on what they will deliver. If you tell me about patient envy, for sure it's a...
different thing, okay, and to be polite I would say just that it's a better thing, okay, but we try to improve an action on the leadership and if they deliver what they can deliver, okay, maybe in my language what would be different, okay, so let me just question in there in six months.
Thank you. And then a follow up on the commentary around shipping costs from Asia. With the freight costs coming down so rapidly, do you have any regrets around the timing or the start up of the Mexico facility or are you still happy that you did it?
For sure we are very happy to have set up a factory and I think differently what we see from Mexico going forward is it will be different from China. For sure China will make some finished products that we can send to Australia, we can sell within Asia but really from Mexico.
How can we complete more of some finished products to serve our customers in the Southwest of the U.S.? I think it's far from Toronto, it's far from Vancouver, so I think it's a very good position for the future to build this capacity for North America, so I'm very happy Zach, that's good for the long term.
Understood. Thanks. And just one last one. Can you tell us more about the product development roadmap under the Ignite initiative?
Now we concentrate on what is very important. Put our products on code compliance for Europe . All our teams work to make some changes to PC. That's very important if you want to set a project. First of all, you have to meet the code.
For going out with new products is not a priority for us right now. I repeat, meet the core key that we can sell in Europe . That's very important. That's our concentration. Thank you.
I think the new list of products, which we are doing some new products, I think we cannot disclose it as priority information, but definitely to improve our products for the future to make it more aesthetic, appealing for the customer is always a priority. To put our products to compliance, right now we are playing a catch-up game. Our products are worldwide going forward. Once you launch a product, it will be worldwide compliance from the beginning.
But right now, this is the main priority, to make sure we are compliant with your app, so that we can do some cross-selling. Great, Kallari. Thanks. I'll turn it over. Thank you. We have no other questions holding, but just a final reminder, it was Star 1, if you had a question.
And no other signal. I'll turn it back for any closing remarks. Okay, thank you very much, Jessica. And that's a very important discovery that we meet, okay, that we answer the question, okay, where we are going.
So we know that we are working hard, but that's a beautiful market that we are in. And we have some good growth coming. So thank you for the people, thank you for my employees to support this growth. And they support this growth with a smile. So thank you very much for listening to us.
Thank you, Jessica. Thank you. Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time. Okay.