Q2 2023 Savaria Corporation Earnings Call
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Good morning, and good afternoon or good evening My name is Raphael and I will be your conference operator today at this time I would like to welcome everyone to severity as corporations Q2, 'twenty to 'twenty three conference call.
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After the Speakers' remarks, there will be a question and answer session.
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This call may contain forward looking statements, which are subject to the disclosure statement contained in several areas. Most recent press release issued on the ninth of August 2020 free with respect to its second quarter 'twenty country results. Thank.
Thank you.
Mr. Bourassa, you may begin your conference.
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Steve.
Thanks, Marissa and thanks for outlining the more details about the very long. It's a project that we're all excited about internally.
So thanks for that and good morning, everyone on the call.
To begin with some remarks regarding our Q2 2023 consolidated financial metrics for.
For the quarter. The corporation generated revenue of $198 4 million up $6 3 million or three 3% compared to Q2 2022.
The increase was driven by organic growth of three 4% originating from both segments and.
In addition, the corporation experienced foreign exchange tailwind of three 8% and a decrease of three 9% due to the divestiture of the vehicle division in Norway in the quarter.
Combining for three 3% growth overall.
Our revenues fell short of expectations for the quarter due to a disruption in production and delivery in Europe caused by the implementation of a new ERP at our key manufacturing sites in the U K.
In April .
We are however pleased to report that.
But the implementation challenges have been sorted out June being a record month for the organization.
Gross profit and gross margin stood at $67 1 million and 33, 8%, respectively compared to $65.
$6 million and 34, 1% in Q2 2022.
The increase in gross profit of $1 5 million was mainly attributable to higher revenues and to a lesser extent favorable foreign exchange rates used in the conversion of the results of our subsidiaries.
The decrease in gross margin versus last year was mainly attributable to the previously mentioned system implementation by year over year inflationary impacts in Europe , partially offset by greater profitability coming from the patient care segment, and North American entities and the accessibility segment.
To better cost absorption and favorable product mix and improved pricing.
Adjusted EBITDA and adjusted EBITDA margin finished at $29 million in 2014, 6%, respectively compared to $31 5 million a 16, 4% in Q2 2022.
The reduced profitability is mainly explained by the aforementioned decrease in gross margin and the higher selling and admin expenses as a percentage of revenue.
Before I move on to the segment results. It is worth noting that effective April one 2023, the corporation consolidated its reporting structure and combined that the remaining operations of the adapted vehicle segment with the accessibility segment star.
Starting with Q2 the business is now structured into two reportable segments accessibility of patient care according to their risk.
The respective addressable markets.
Accordingly, some information from previous periods was restated.
Revenue from our accessibility segment was $150 6 million in Q2, 2023, an increase of $2 4 billion or one 6% compared to the same period in 2022.
The increase in revenue was related to organic growth of two 8% driven by continued strong demand in both the residential and commercial sectors in North America.
Price increases and cross selling synergies with handicap.
The growth was also driven by positive foreign exchange impact of three 9% mainly coming from the.
U S dollar euro.
GDP currencies.
This was partially offset by the divestiture of the Norway business as.
As well as the decreased production of delivery of stair lift products in Europe during April and May due to the implementation of a new ERP as mentioned by.
For reference in Q2, 2022, and Norwegian vehicle Division contributed $7 $5 million of revenue.
Adjusted EBITDA and adjusted EBITDA margins stood at $21 4 million.
14, 2%, respectively, compared to $26 5 million and 17, 9% for the same period in 2022.
The decrease in adjusted EBITDA and adjusted EBITDA margin was mainly due to the system implementation in Europe , causing production and delivery issues year over year inflationary impacts, resulting in higher material and labor costs and to a lesser extent the divestiture of the Norway operations, partially offset by better cost absorption.
Greater revenues in North America.
Again for reference in Q2 2022, the Norwegian vehicle Division contributed.
<unk> 8 million of adjusted EBITDA.
Revenue from our patient care segment.
It was $47 8 million for the quarter, an increase of $3 9 million or eight 9% when compared to Q2 2022.
Revenue growth includes organic growth of five 3%, which was driven in large part by new contracts signed with healthcare facilities cross selling synergies with handicapped and pricing initiatives.
For the quarter foreign currency provided a three 6% tailwind for this segment.
Adjusted EBITDA and adjusted EBITDA margins stood at $9 3 billion, and 19, 4%, respectively compared to $6 7 million or 15, 3% for the same period in 2022.
The large increase in both metrics was primarily due to the increase in revenues and improvements in gross margin, mainly explained by better cost absorption product mix pricing initiatives and synergies synergies with Andy here.
For the quarter net finance costs were $4 5 million compared to $6 4 million in Q2 2022.
Interest on long term debt increased by $2 6 million when compared to last year due to higher market interest rates.
Net finance costs were also impacted by a net foreign currency gain up $1 $7 million in the quarter compared to a net loss of <unk>.
$2 $5 billion in 2022, most of which was unrealized in nature.
Net earnings were $8 8 million or <unk> 14 per diluted share for the quarter compared to $8 1 million or <unk> 13 per diluted share in Q2 2022.
Adjusted net earnings was again, $8 8 million or <unk> 14 per diluted share compared to $8 9 million or 14 cents per diluted share in Q2 2022.
This reflects relatively flat performance on a year over year basis.
Turning now to capital resources and liquidity for the quarter cash flows related to operating activities before net changes in noncash operating items reached $17 7 million.
First is $29 3 million in the same period in 2020.
The decrease mainly reflects lower EBITDA for corporation and higher income tax paid related to deferrals from 2022.
That changes in noncash operating items reduced liquidity by $17 5 million.
<unk> to $14 7 million a year earlier, mainly impacts sorry, mainly increased by working capital in Europe .
And the impacted by increased working capital in Europe excuse me.
As a result cash generated from operating activities in Q2 2023 stood at <unk> two.
$2 million compared to $14 7 million in the same period in 2022.
Cash used in investing activities was $4 5 million.
For Q2, 2023 compared to $4 9 million in Q2 2022.
The Corporation disbursed $4 6 million for fixed intangible assets in 2023.
<unk> to $4 9 million in Q2 2022.
Cash used in financing activities was $15 million for Q2, 2023 compared to $9 3 million the same quarter last year.
Variation is mainly explained by a drawing of $8 million on our credit facility compared to $3 8 million a year earlier and higher interest paid $2 7 million in Q2.
2023 versus the prior year.
As at June 32023, so very at a net debt position of $372 9 million and was in compliance with all of its covenants.
On a trailing 12 month adjusted EBITDA basis, various net debt to adjusted EBITDA ratio was approximately $2 99 times.
This represents approximately a zero point zero.
This improvement versus Q4 of 2022 and an increase.
One six versus Q1 2023.
Various funds available of $119 5 million to support working capital investments and growth opportunities.
Looking forward the 2023 as Saverio continues to expect to generate revenue, which will be approximately 8% to 10% higher than 2022, when normalizing for the divestiture of the Norwegian Auto division with adjusted EBITDA margins of approximately 16%.
In addition for 2023, we are targeting a reduction in our leverage ratio of five turns.
This outlook is based primarily on continued strong organic growth.
From both the accessibility and patient care segments supported by high backlog levels.
Our selling initiatives and strong demand.
<unk> successful integration of Andy Jarrett and progress towards achieving our next strategic phase of synergies in line with managements plan.
And with that this completes my prepared remarks, and I'm going to turn the call over to Sebastian.
Thank you Steve So maybe for the last time communicated in getting this ERP China change that has been a very disruptive in the second quarter, but an interesting. One thing you guys have been some very good teamwork between the team in U K grew net diner adds in Toronto.
On the shop floor has worked very very hard.
Thank you very much for everybody and again, we have turned the page it's finished.
And the picture is looking good we don't talk about the European model, but again.
We have learned a lot and that has been a very good work in Houston, the recoveries and thanks, everybody North America, I think an area.
Manufacturing in Vancouver, and Toronto, or the exclusivity I think relatively good output. So I think.
Thank you everybody and what's important is we remained a very healthy backlog. So I think if we chose to looking very promising for those that do.
Activity in North America and also this summer one project is going to help us to be better because it's important to April where we are good but we want to be better. So thats, we see some good progress.
So in terms of that.
In Mexico.
I think we're happy with our ramp up right now we have 50 employees in Mexico again more game changer for this year, but beginning of capacity for the 225, you will see that Mexico, whatever and important impact and last thing for me.
Light chain has exited to be stable for us I think we don't talk about supply chain also.
So maybe any color on patient care.
Thanks Sebastian.
Our patient care segment delivered another terrific quarter in Q2, with an EBIT margin above 19%, a nice follow up to the record Q1, and the continuation of a positive trend.
Our order intake and sales activity remained strong.
As evidenced by the five 3% organic growth in the quarter, which is rather impressive given the 20% plus organic growth experienced in Q2 of last year.
Although most product categories are performing well.
<unk> strength within ceiling lifts in surfaces.
Been particularly successful bidding on new contracts.
In terms of end markets, we've seen continued spend with and hospital networks at the VA, which is the big driver of our U S business and an area of significant focus for us.
Deal activity with our larger corporate accounts and with strategic partners is also driving higher sales.
However, despite the good performance in the quarter and for the first half of the year. There are still certain industry challenges that we continue to navigate.
<unk> funding for Newbuild projects staffing shortages, namely with respect to nurses and stubbornly low census levels within U S long term care.
That said overall, our backlog is in good shape and as we unlock further revenue synergies between spanning handicap, we should continue to see a strong topline performance.
From a margin perspective, and similar to comments made in Q1, the higher sales volume allowed for better fixed cost absorption, which contributed to the sustained EBIT margin in the 19% to 20% range.
Pricing initiatives that were put in place last year are also continuing to have a meaningful impact on profitability.
And finally, our patient care team much like the rest of this very group is highly energized by our civilian one project, we're doing a deep dive across the entire organization from procurement production initiatives to commercial strategies. They will help us achieve the full potential from truly integrating our businesses within the patient care segment.
So as you might imagine there's quite a bit of enthusiasm within the team.
And with that I'll turn the call back over to you Marcel.
Thank you very much and gentlemen update so.
As you can begin the <unk>.
Our investment.
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As a reminder to ask a question. Please press star one and one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one and one again.
Then please press star one and one if you have any questions or comments.
We are now going to proceed with our first question.
And the question is come from the line of directly said from TD Cowen. Please ask your question.
Hey, good morning, everybody.
Hope you're well.
I don't want to talk to the ruling because it sounds like the one is close but definitely a rare execution met for your guidance maybe could you just.
Talk about or add some detail or color around what went wrong in sort of the steps that you took to rectify the issues and then maybe.
Like how confident are you that it is now.
The past so any help or color on what June or July volumes have been would be helpful.
Welcome and thank you for your direct so yes, no ERP change is always difficult right now the first company to have some difficulties to make some change.
Certainly there was going to be.
Players departmental or who had been a bit more difficult in the implementation and this time was our operation. So I guess I have is looking we're supposed to be at the levels that.
Again, we went from Alex has been a bit more.
Chemical means example paper with the new system everything is scanning ERP typically.
But I have to make some transaction.
It may be a bit materiality it will correct the inventory allocation.
Close your order again, we just truly of the all the jobs are cross status with a lot of different options.
It's not that is even though we can make a good preparation.
We do a very good I'll put each day.
And basically it was a lot of different bill of materials Bom in comp.
<unk> deep other people. So again, we went back to when we went live by we had some <unk> from that.
So kind of a complaint against Toronto to include a sustained to train the people to fix a bug.
A bit more time than expected, but the good news is since June we are back to normal.
Okay, that's helpful and I guess.
The second one.
We will maintain your full year guide and I think those I mean, those sales or loss if I'm not mistaken.
What's your thinking on how you can make it up and order tests sort of still maintain that guidance.
Hey, good morning, Derrick Steve here.
We are still year to date, even with the all the shortfall that we had in Q2 on the sales I mean, we had a very strong Q1 and year to date, we're still at our budget.
And our budget revenue Mark so.
We are confident that.
So we're going to hit our guidance.
Revenue growth.
I would say at this point, we have more confidence than on the EBITDA line, but were still feel that we can climb back and get to approximately 16% EBITDA margins.
While our volumes that we're seeing in June So June for US was a record quarter, we had the highest EBITDA months, although we haven't disclosed the amount we had the highest EBITDA month that we had.
Our organization, we have good momentum in the North American businesses.
Momentum in patient care as you can see in the results and as.
Sebastian and Marcel said, we have turned the page on the ERP implementation challenges in June .
<unk> levels in the U K, where we are.
At least as high as they were prior to the ERP change and for July moving forward, our expectation and what we're seeing is that the numbers are going to be even higher than what we.
We had before so.
Can confidently say that.
Pages turns and we're moving forward.
But we see.
We see strong margins in the rest of the business and now with Europe getting back on track.
How our confidence in maintaining our guidance.
Thanks for that Steven and then maybe one last one for me and obviously it was probably locked in all of the noise.
And you mentioned it in some of your prepared remarks.
Mario One initiative just could you maybe talk about what youre expecting to get out of it and I know you said you you had a 24.
<unk> runway.
Anything you can share with us that would be helpful for our models and forecasts.
Yes, I think I can start and maybe Marcel will complete so basically no. We havent done a lot of acquisitions in the last five to 10 years and we realize today that they are getting to be a 1 billion company, if you're always so decentralized by EMEA support.
We have some talent in many different places so sometimes we'll do it investing in natural animal will be different in Toronto, and Vancouver, but we want to be similar to Alison will want wechat and some of our existing process and that would be as of some costs. Certainly we can even watch we do write thoughtful allocation can we do better. So it's important to foster improved this is why we have launched.
This initiative across all of the defense Department effectively allocation, because we want to be better at 1 billion company is a big chain plus.
A few years ago, when we were one of the company.
Thank you.
Thanks, Craig.
We are now going to proceed with our next question.
And our question comes from the line of Michael <unk> from Scotiabank. Please ask your question.
Hey, good morning, guys I wanted to follow up on a question from Derek just specifically can you comment.
For July in Europe , how sales on training.
And also I.
Bigger level question here, even if the ERP disruption settled out.
How much more is there to do to get the European operations back to the level of North American operations I guess the question is.
Does the ERP push off some of the other initiatives that you guys were considering in the region.
No I think again, it's difficult to talk about July because thats, what we have been forward looking statement, but we are very happy with the way of New Jersey.
So very strong demand continue in July .
The ERP, it's a continuous improvement process.
Right now we are back to achieve the same level of award before but for sure when we start to introduce some improvement.
Be it through it to get some of the efficiency, but that leasing slip. It also anymore without like I bought a bit more.
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When people were doing the recovery <unk> with ERP, but difficult to know if he was working on the Sofia one.
The ERP changes that.
Our block H to organize around one answer.
Yeah.
Perfect and it sounds like there is confidence in the guidance being maintained despite.
The hiccup I guess the cube.
How do you think about the EBITDA margins in Q3 and Q4, just wondering if there are any lingering costs related to the ERP that could flow into Q3 and just how.
How to think about the cadence of EBITDA.
We skew a little bit more into Q4.
I mean theres no cost from the from the ERP the that are left to come so no.
We're not going to see anything come back from that.
We're done on the cost side and on the implementation side as Sebastian said, there's maybe some fine tuning and improvements to make but.
But we're happy we're happy with the production levels now.
As far as Q3 and Q.
Q4 on the EBITDA side, I mean, what we're seeing in North America and in patient care as a strong improvement in EBITDA margins because of the improved leverage.
The cost base.
While we are increasing revenue so.
You can see it in the patient care margin and you can see it so much and accessibility because we don't disclose North America separately from Europe , but really in the North American.
The legacy business, including the Gara events a site in North America, we are seeing really good fixed cost absorption and improved margins. So.
As we see the revenue recover in Europe , we're going to see.
We're going to see that fixed cost absorption and come through it.
The improved margins were expecting that for Q3.
That in Q4, Michael.
Very helpful. Thanks, a lot guys.
We are now going to proceed with our next question.
And our question comes from the line of Frederic <unk> from <unk> capital markets. Please ask your question.
Thank you and good morning.
Our next facility in Europe . Thanks for your comments on production rates.
Was wondering if you could comment on recent order flows in.
Europe .
Specific im wondering if the dealers were.
And why is it then to order from from different currently given the past.
Production issue.
I can take this one as well.
Perfect.
But right now we are back to normal so our again our dealer Dr Park, they're with us for many many years. So yes, we have processed some say isn't there in the second quarter because early time wasn't at correct and one of our two factory, but I think right now we are back to normal. So our sales team is that it's brought back again.
Again, we are happy with.
Order intake in the last few weeks, so I think that is.
As a huge concern for the rest of the year I think we're back to be a good company.
Okay and on the ERP, maybe switching to the benefits of it going forward can you shed a bit more color on the expected benefits from the ERP and just.
I guess qualitative basis if.
If there was any way to.
Define kind of the benefits that you're expecting from that implementation moving forward.
Our CFO said on this one is always a bit difficult capability some time on the ERP.
<unk> becomes very all you need to change it to make sure. We can continue to be operational at good level and in fact I think this is.
This is for sure we see some gains so again, we're a bit Manuel process now with the ERP whatever better busy trying to automate their business. Some process. So I think what we're time differently, we should see some improvement of efficiency and again away from the UK, where our direct cookie and we'd be manufacturing, so Oscar installer as ever better visibility on their orders.
On the put process, how can we do better within the various states. So there's a lot of different step that we're going to see some gain but sometimes you need to see it more changes to make sure your business.
Stable.
So.
Okay and just on the.
On the margin difference that there seems to be between accessibility in.
In North America, and Europe , excluding the ERP is there any sort of.
Actions that you can point to that would need to be.
Implemented for Europe to catch up to the North American margins.
Yes.
<unk>.
You will remember that we've been talking about inflation impacts over the last few quarters in Europe being being stronger than the inflationary impacts in North America, and I mean, we continue to see that so.
We saw that in Q2, we saw that in Q1, and we saw that last year as well. So I mean, we are looking at different ways of.
Combating this some of it is obviously on the price increase side.
One of the easier levers to pull but we're also looking at our vendors.
Talked a little bit about the severity of one project Marcel talk to talk a little bit about on the vendor side as well, but looking at.
Where we can where we can consolidate vendors and find savings that way as well. So we're not just looking to pass on.
Increases.
As we get them, we're trying to find ways to reduce our.
Input costs as well.
Thank you.
We are now going to proceed with our next question.
And the question is come from the line of Zakaria Vishal <unk> from National Bank Financial Please ask your question.
Good morning, everyone. Thanks for taking my question.
I was hoping for a little bit more color around the patient care margins looking forward to the back half is there.
Anything changing that would prevent a repeat of the performance seen in the first half.
Zach.
Well again I think after we had our Q1, we were cautiously optimistic going into Q2 Q2 delivered another strong margin performance.
As we've mentioned myself and I think most Steve a lot of that to do with volume right. So so it's a business that once you get above that 45 million Mark in terms of revenue per quarter, there is quite a bit of.
Leverage in that business.
Following those incremental dollars following more and more to the EBIT line.
So going forward, it's just a question of maintaining.
Strong sales growth.
Order intake is as I said was looking.
Good our backlog is in a good place.
However, I do want to be cautious right to that.
Our expectation for the.
The beginning of the year was the 15% 16% for patient care with for 2020 or I'm, sorry, 2023.
So I don't want to deviate too much from there right. So yes, we had a good start to the year, but I still would want to see a few more quarters.
Continuation of this trend before I really kind of put the stake in there over the span of 19% to 20% business. So I would be still a bit more cautious over the next couple of quarters as we see this trend continue and again there were some and there is still continued to be certain challenges.
From market perspective that we're navigating through so it's not necessarily.
Smooth sailing, but we've been we've been pretty good so far I'm not sure if that helps you or not maybe.
It will be a bit more cautious there I would say going forward as well.
Got you and maybe just digging a little bit deeper on that your employees and this segment do you think that there are stretched in terms of production capacity or they can maintain the current pace without having to add additional costs.
No no I think the team is doing quite well.
It's a continuation of this integration that we've experienced between the handicapping. The sales I guess are handicapping the span, especially on the commercial side.
The operations are going well.
We're better staffed in certain areas I think there was for example in St. Louis our selling line is fully up and staffed and that's been an area, where we're lacking bodies. So I think from an ability perspective, where they're from a capacity perspective, we are there.
It's just a question of continuing going out and winning contracts.
There are certain delays that have happened in some of the newbuild projects. So thats something thats kind of out of our control. There is some lumpiness within the project business within handicap. So there again, we're trying to manage through that.
I would say no.
With the current staffing levels than what we currently have I think we are well prepared to deliver.
Going forward, there's just some things again with in the industry.
We just have to be careful that's all.
That's helpful. Thanks, and then with adapted vehicles being folded into accessibility should we take that as a statement that the remaining JV operations are core or are they still are.
The bubble in terms of having to prove themselves or be divested.
Hey, Zack it's Steve here.
I'll take this question.
Vehicle business.
It's still it's still a piece of Saverio is still it's still an important business for us.
Because we're not reporting on it on it separately in our in our MD&A and financials. It doesn't mean that it's getting any less attention from us.
Have a new leader in place.
For that business, it's been in place now for a couple of quarters, maybe one or two quarters now.
We have a bit of a plan that we're trying to execute to improve profitability. There. So I would say this business is getting more attention over the last couple of quarters than it has maybe in the last couple of years. So actually no. It's still very core for us.
Yes.
It's not large enough to report on the segments.
The management structure of parts of the same management structure.
With Norway now gone, it's such a small piece revenue wise of the overall pie, but it didn't make sense to report separately. So it still core for us.
Good color. Thanks, and then just one last one on the opening remarks.
The 25% EBITDA growth targeted through severity and one is that in each of 2024, and 2025 or 25% across both years in total.
No no no.
25 update each year.
Okay, what can we do differently.
With the same idea that we have right now and you'll see that growth would be that there. We expect that this is Doug.
We'll hear on that.
So the 25 sub debt.
And defendable.
So thats why it is important.
Thanks.
It's why I am very enthusiastic about what we do.
I signed the deal and also at the beginning it just a question.
Sure.
That is deep.
<unk>.
Our projects in Hawaii.
We operate our network.
But.
We will see some little thing.
<unk>.
For the end of the year, but mainly in 'twenty four 'twenty five.
I appreciate the clarification, thanks, I'll turn it over.
We are now going to take our next question.
And the question comes from the line of Michael Glen from Raymond James Please ask your question.
Hey, good morning.
Can you remind us or give an update about where things stand from a pricing and input cost perspective.
Commodities are bouncing around a lot.
Just looking.
Looking for an update us to how things have progressed on both of those items.
We cannot say anything to question.
With respect to pricing.
Again, we do have pricing.
Initiatives that we've talked about in the past again trying to keep up with certain inflationary pressures when we do experience to them.
I would say overall as Sebastian mentioned earlier on the call from a supply chain perspective.
These are relatively stable and back to normal there could be some issues.
Possibly within freight over the next little while we've seen some.
Carriers experienced some difficulties there so that's something that we're monitoring to see whether freight is it going to remain stable for the moment, we haven't seen much of an impact but it is something that we're monitoring going forward.
As we've talked about Europe , that's also something that the pricing is.
I live in a more difficult environment and at the same time, there have been some inflationary pressures that we've experienced so I would say that's another area that we're still continuing to monitor.
So I'm not sure if that helps you in terms of the <unk>.
Inputs, but no I think things have been relatively stable in China. For example, that's also an area that.
We haven't seen any sort of inflationary pressures at all coming out of there. So that's a big help so no I think we are.
We're in a pretty good place.
And just if I could just add a couple a couple of additional points Nick.
Specifically within the North American business are price increases went in earlier this year, we have done some other targeted increases.
Yes.
Just in the summer right now actually so our <unk> business, but the price increases in the last month.
No.
It's a continued strategy from what we saw last year in North America typically does it at the beginning of the year with the exception of <unk> they've done a couple of different price increases.
We are monitoring our cost our input cost and we haven't seen the increase in North America continue to what we saw in prior quarters and we haven't.
<unk> seen it in North America to the extent that we've seen in Europe . So Europe .
Excuse me Europe is still weak.
We are still seeing.
High inflationary impacts on our input costs.
Revisiting our pricing strategy there.
And likely going to be targeting price increases, but those those will probably come in not until Q1 2024.
Okay and within accessibility within North America can.
Can you.
And in the MD&A I think youre referencing organic and accessibility North America was about 12% I think that's the number in the MD&A.
Can you break that down or provide some insight across some of that.
Product categories of our.
Is it meaningfully different across product categories.
Yes, so it is about 12% or it was about 12% in the quarter in North America and not that.
That primarily is coming from the legacy elevator and platform business.
We are still seeing strong backlog in both commercial and residential sectors I would say there is some opportunity for us to do a bit better on the on the stair lift side. So I would say more of that 12% comes from legacy <unk> platform and elevate our lift products.
Our backlog remains strong.
Do see further opportunities.
More so on the stair lift side.
Okay and then.
Thinking about that then.
There had been concerns regarding how.
Rising interest rates.
Softer housing market could potentially impact that residential elevator market.
Are you seeing any evidence whatsoever.
Having an impact negative impact.
I think of that.
Answer to that today, our backlog remains very healthy.
So costly.
Hey.
Any slowdown in our incoming orders in North America again, we are looking to decrease our lead times will be more aggressive.
On the market, but if you see our backlog is that Easter, which I've also no impact on our sites as well.
Okay. Thanks for taking my questions.
We have no further questions at this time I will now hand back to Mr. Zhao for closing remarks.
Just one.
And as a.
Thank you to all of that.
The people on the call. This morning, and thanks for that bridge NIM that partner.
So instead of question I think does a great job. Thank you very much.
Three months.
This concludes today's conference call. Thank you for participating you may now disconnect your lines. Thank you.
Okay.
[music].
Yeah.