Q4 2023 Savaria Corp Earnings Call
Good morning, My name is Sarah and I will be your conference operator today at this time I would like to welcome everyone to suburbia corporations Q4, 'twenty to 'twenty three conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session to ask a question. During the session you will need to press star one and one on your telephone you will then have an automated message advising go hand is raised to withdraw your question. Please press star one on one again this.
Cool may contain forward looking statements, which are subject to the disclosure statement contained in Safari is most recent press release issued on March six 2024 with respect with Q4 2023 results.
Mr. Barbassa you may begin your conference.
Thank you Sara it's a mixture of a cool it's a pleasure to be with you.
And that is my Guy.
These step outs and you called out what would take.
So to speak after after me Okay. It was it was a good quarter, okay. Great here, but I think we are in that.
In a very good mood, okay to have a peak this year and next year okay.
Well, it's a game changer, okay that you would see okay.
Right.
The fact that they can speak okay, sorry for that.
People say to me, Okay, what I can speak and I cannot speak okay, but I think I can say, okay that isn't it into any pilot.
Whether an objective bucket.
1 billion of Seattle.
With 20% EBITDA and I'd tell you our gate and you can meet the maxi are better than me to reach okay.
Yeah 1 billion okay.
[noise] would do at the page that even so difficult for sure nothing is easy, okay, and why global Okay.
Across the globe.
Actually we have to see that is the tweak okay, but north America is fairly strong.
So we I can see right now about the idea that 24 up it would just make a forecast about 25 because.
That would be.
It takes some time to be at 25, but we have a very strong okay. Not America shrunk 24, Okay, and we can see that.
Well we are.
<unk> three what we're anybody that 15.5, and we will go to 20% okay.
I can look up even without weather forecast would be that we should be roughly.
Maybe half of that in 'twenty, four and the other half of that 25, So I am.
Think about the number that we put 420 fives.
And then again the pace would be a pleasure for me to do you have some questions for me how you got my people are carefully.
The presentation and after that we are open okay too.
To answer.
And soon after our best how these Jackie what.
What are we doing.
Yeah.
Some big cost cutting out consultation okay.
Yeah.
Okay, and I want to let that beach St advocate, because we are to be to be particular ph be ready for us to quantify after twenty-five what's happened there.
But he is okay. So what this study that would make me just international company.
We we we we would be better in the back end when you speak about what.
What we are doing in that.
But the real came from purchasing to setting too.
A lot of testing.
So I see that future very good culture, it's a big step to be data, but would be there would be there okay.
At the end of 'twenty and I am very happy that whatever opening doors for us.
People Okay in April.
So they will see okay.
Where we are right now.
With present, you my new talent that we have okay.
And you will see that vary.
Good patterns, Okay that we will present to you and you will bid Eva keeps us it's always people people and people. So you will believe more and more and more about our objectives.
24.
$25 eight for the N F 35 so.
But that's okay.
Okay and that wasn't reading and everybody we're right on Saturday.
Our Q4 and for the year and thank you very much oaky, what do you say oh, okay vegetarian, okay, and you understand quite well.
Now, okay with the Scottsville, Kentucky and this.
Yeah.
Okay Paul.
25, Okay. Yeah I just wanted to go to two that just yesterday, okay, well you would see exactly what we have done okay at the back of the door, Okay and you will see.
That they are.
I believe that they are at 20% and 1 billion. Okay. So I.
I Wonder I wouldn't attach the deadline to Steve our CFO and.
Thank you very much a bad everybody to be there today, if you have some question Don.
Don't forget to call me or be it would be on the line during the call so seats for Ya.
Thank you Marcel good morning, everyone and thanks for being on the call today I'm going to begin with some remarks regarding our Q4 2023 consolidated financial metrics.
For the quarter, we generated revenue of $216 8 million, an increase of $4 7 million or two 2% versus last year. This was mainly driven by organic growth of six 2% coming from our accessibility segment.
We also experienced a foreign exchange tailwind of two 3%.
This was partially offset by the divestiture of the vehicle division in Norway earlier this year.
We delivered a strong gross profit and gross margin at $74 3 million and 34, 3%, respectively compared to $66 2 million.
31, 2% for last year.
The increase in gross profit of $8 1 million is explained by better gross margins additional revenue and favorable foreign exchange rates.
The increase in gross margin was mainly attributable to a greater performance from all segments due to better cost absorption.
Product mix and improved pricing.
We also incurred $2 million in strategic initiative expenses in the quarter for the year. These costs amounted to $3 1 million and had been carved out of adjusted EBITDA.
Adjusted EBITDA and adjusted EBITDA margin finished at $35 1 million and 16, 2%, respectively compared to $33 3 million at 15, 7% last year.
The increased profitability is mainly explained by the increased gross margins somewhat offset by higher selling and admin expenses.
On December 22023, as the various signed a sale and purchase agreement with driver to Canada to seller that action and freedom Motors divisions. The transaction closed on February 1st of this year 2024.
And accordingly.
December 31 of last year these assets and liabilities of those businesses were recorded as held for sale.
And now I'm going to provide some commentary on our segmented results.
Revenue from our accessibility segment was $173 7 million, an increase of $7 2 million or four 3% compared to last year.
It was driven by organic growth of nine 5% coming from strong demand in our residential and commercial sectors in North America, and Europe price increases in cross selling synergies.
We also experienced foreign exchange tailwind of two 8%.
And this was partially offset by the divestiture of Norway business as previously mentioned.
Adjusted EBITDA and adjusted EBITDA margins stood at.
$28 7 million and 16, 5%, respectively compared to $27 million at 16, 2% last year.
The increased profitability was mainly due to better cost absorption as well as improved pricing.
Yes.
So looking at patient care revenue from this segment was $43 2 million for the quarter. A decrease of 25 excuse me a decrease of $2 5 million or five 4% compared to last year.
While our backlog remains very healthy revenue decreased due to reduced year end spending from institutional customers.
Mix and to a certain extent largest large orders delivered last year not repeating this year.
As a reminder to our investors are patient care business is driven in large part by project based sales, which can be lumpy from time to time.
For the quarter Foreign exchange provided a 5% tailwind for the patient care segment.
Adjusted EBITDA and adjusted EBITDA margin stood at $7 9 million, an 18, 3%, respectively compared to $7 million and 15, 3% last year. The increase in both metrics was mainly due to improved gross margins explained by the product mix and pricing initiatives.
Looking again at a consolidated basis net finance costs were $4 8 million compared to $6 2 million last year.
Interest on long term debt decreased by <unk> 4 million due to.
The reduced balance of debt.
We also experienced a decrease in net finance costs due to foreign currency gain of $1 million compared to a loss of half a million last year.
And we also incurred a loss on net investment hedges, a point $8 million in the quarter.
Net earnings were $11 million or <unk> 16 per diluted share for the quarter compared to $11 $3 million or <unk> 18 per diluted share last year.
And adjusted net earnings were $12 8 million or <unk> 19 per diluted share compared to $12 6 million or <unk> 19 per diluted share last year.
The decrease in net earnings was mainly due to higher income tax expenses, partially offset by lower finance by lower net finance costs in the quarter.
The slight decrease in net earnings per share is due to the increased number of shares.
So now turning to capital resources and liquidity.
For the quarter cash flows related to operating activities before net changes in noncash operating items reached $30 7 million, which is essentially the same as last year.
That changes in noncash operating items increased liquidity by $6 4 million compared to $13 2 million a year earlier, mainly due to increased receivables.
As a result cash generated from operating activities in Q4 stood at $37 1 million compared to $43 9 million last year.
Cash cash used in investing activities was 5 million for Q4 compared to $7 6 million last year, we disbursed $5 1 million for fixed and intangible assets in Q4, 2023 compared to $7 6 million in 2022.
Cash used in financing activities was $21 1 million for Q4 compared to $35 9 million last year.
The variation is mainly explained by a reimbursement on a revolving facility of $2 6 million this year compared to $20 2 million a year earlier.
As noted our cash balance grew by $10 million.
In the quarter versus last year.
As at December 31, 2023, we were having a net debt position of $269 9 million.
Our ratio of net debt to adjusted EBITDA stood at 2.7 in comparison to three seven at the end of last year.
Saverio has funds of approximately $223 3 million to support working capital investments and growth opportunities.
Looking forward so various future prospects are promising driven by strong market demand the progress of Saverio, one at potential tuck in acquisition opportunities that will enhance our market position.
From a financial standpoint, we anticipate average cost of approximately $5 million per quarter through fiscal 2024, and $2 million per quarter for the first half of 2025 related to Saverio one.
We may see additional fees, depending on the success of the program.
We remain confident that the benefits of this program will increase as the year progresses.
Leading to long term growth in both topline and Bottomline performance.
In terms of tuck ins these acquisitions would not only aligned strategically and expand our market opportunities, but also help to offset some of the $50 million of annualized revenue loss, resulting from the divestiture of fed action of freedom and the Norwegian vehicle adaptation businesses.
Overall, we have full confidence in our ability to achieve our targets of approximately $1 billion in revenue and an approximate 20% adjusted EBITDA margin in 2025.
We look forward to sharing more detailed information about our initiatives at our upcoming Investor day in April.
And with that this completes my prepared remarks, I'm going to turn the call over to Sebastian.
Okay. Thank you Steve.
A few comments on my side concerning the most of the operation in the summer one so basically I'm quite happy with the growth in the 2023 here in North America.
13, 6%, which was greatly supported by Vancouver, and Toronto factories. So thank you to both factory and what's important is we remain very at T backlog for elevator Division.
Keep some fuel for the next few quarter.
Finally, we have also some improvement in the inventory management. So I think in short Houston, we are trending in the right direction. So I think that's a start and it's all part of this of our one to improve our working capital.
In Mexico now at 70 employees, we have some we keep truck coming to effectively Toronto, starting some shipment to our factory in Vancouver, We now export some finished product in the U S.
Firstly and scientists from OMA Liberator, So I think that we'll get started.
Hopefully some new market or some customer.
We saw the Kenyan car Division as you saw the division in Toronto and Montreal.
What was important for us is to find a good buyer and I think with the company. We found in the U S. Our drivers.
Better for employee type of company that can help to develop the business.
So we're quite happy with the transition.
Any color would talk about it and talking about their patient care, which was a disappointing Q4 to be a transparent and modest growth in 2023, but what's important to not forget is a few years ago, where we are a company of 10% of EBITDA inefficient care and it's now 18%. So when we're talking about 20% for us, but you'll see the patient care is very close to it.
And I'm pretty sure we decided right one.
The work that the team of less than <unk> are doing would be able to achieve.
So we are which is really underway.
Strong participation from our employees, you're super motivated to participate in it and it's even starting to deposit rate in D&A.
So quite happy with that.
I would say we have found some very strong pillar on their procurement production setting a portion to your pricing that will help us to achieve a 12% by 2025 and the most important is whenever a strong foundation for that after a 1 billion I would not give a guidance to you on the after 1 billion, but at least we're very decentralized and.
For many years so for us it was important to take more about their one company you once have out here why don't we offer training for this is really what we're currently doing.
And I'm pretty confident that in the next few quarter you will see a good.
Good improvement step by step towards our goal of 20%.
And so part of this of our one there's a lot of training opening for employees just to make sure we think as a company.
So I will ask strongly investor.
Invite you to register for Investor Day on April nine because we will have a chance to talk more in detail of the <unk> program and also if you would just start you will have the chance to visit our factory in Renton, where you can really see that it's effectively under a transformation with newly argue were to manage the company more digital board.
I think it will be a good example of where we are so we cannot talk about talking about patient care.
Sure.
Our patient care segment delivered a record year in 2023, achieving a $183 million in sales and EBIT margins of 18% for the full year.
Our operational and sales leaders within span handicapping Silverly have really come together in 2023 results are a testament of their efforts to integrate and manage these businesses as one saverio patient care group.
Turning to Q4, our sales in the quarter were weaker than anticipated due to a number of factors.
<unk> that we had some large projects in Q4 2022 that didn't repeat this year as well as the various project delays that pushed some work into Q1.
However, our order intake remained strong in the quarter and our backlog exiting the year was at a record level, which bodes well for 2024.
On the margin front, despite the lower sales in Q4, we maintained a relatively high EBIT margin of 18, 3%.
The margin improvement is mainly attributable to the following.
First we had a favorable product mix in the quarter with good mattress volumes strong you're inferring spending and high margin contracts within handicaps Canadian business.
We continue to focus on selling the entire room, we make better margins when we can bundle our sales and we had good success selling packages in the quarter, namely bid packages to the VA.
Third pricing improvements in 2023 are having a positive effect in particular with respect to bids where we've optimized pricing to preserve minimum margins and gone away from the low end market focus on better and best category of products.
Finally, I'd be remiss, if I Didnt mentioned, the excellent job by our operations teams and improving production efficiencies within our factories and maintaining a diligent control over costs.
To conclude we were a bit cautious throughout the year and tempered expectations with respect to the significant margin improvement we had been observing within patient care.
However, now that we could take a step back and review the full year's performance. We are confident that we have the right team in place and the winning formula for sustained success.
We also know that we need to prioritize sales growth and this will be a key focus for management in 2024.
That I will turn the call back over to you myself.
Okay. Thank you very much gentlemen.
Thank you Kate to be very enthusiastic about that.
And then I think we are a bit conservative but it's.
It's looking very good so Sara I think that's fair.
To you okay too.
If we have some car locate that till we can.
Thank you as a reminder, if you would like to ask a question you will need to press star one and one on your telephone and wait for your name to be announced and so withdraw. Your question. Please press star one on one again.
Thank you, we'll now take the first question.
This is from the line of Derek Lessard from TD Cowen. Please go ahead.
Yes, good morning, everybody.
Sebastian Congrats and good luck on your new role.
<unk>.
I just wanted to maybe hit on.
Marcel if I heard that correctly in your opening remarks, you said that you expect to get halfway to.
To your targets in 2024, do you mean on margin and sales.
Yes.
Maxie Apple Mac.
That doesn't work for me.
Yes at rates at that.
Well, we do it at.
But I wouldn't see that day.
It's done okay, but what I will.
Say that one.
Okay.
<unk>.
Okay, and then I also wanted to touch on most of our year one.
Stan.
You might not want to steal too much of the Thunder from your upcoming Investor day, but maybe could you just highlight some of the.
Bigger initiatives you have in the pipe and when you expect to start offsetting some of the cost of the <unk>.
Program.
So I think as any type of maybe someone can complete so basically I would say directly.
Really I was thinking because a part of procurement procurements that we have been very decentralized. So maybe we have some vendor in Vancouver, Toronto that again, we have never local key to put it is there a national company that good.
Further apart.
To get out and get better pricing due a bit challenged but some of the severity that we work with them to launch <unk>. So that's a good example of a procurement that we have been working on for.
For sure from Europe to North America.
It's not that it was that suddenly come inventory, but yes, we have some for some specialized parts. So I think we have a.
When you look at procurement seriously production, we have been doing the same thing for many areas, sometimes you get a bit lazy. So again knock on wood, we challenged our team to have a better flow of material in the factory to be a bit more productive.
<unk> shown that to do a bit more I put in the factory we have been talking for almost two years of good backlog and brand turned in Vancouver, and they're a bit difficult to execute it but you're sort of growth last.
Last year again, we started inside of one towards the second half, but do you see that start to have a bit of traction on the output for the factory and we should continue this year so quite a few of the change.
Selling opportunity again, we have many different brands how can we look at things are we maximizing the saves and whenever you are another one so a lot of work has been done elsewhere.
About the selling of crossing a opportunity right.
Okay. That's helpful and maybe like on that notes about saying could you maybe talk about shelf Philip in the higher his role of Chief transformation offer officer, and maybe his key accountabilities and maybe even a little bit of background on how he's going to help you guys.
Yes, sure. So basically yes, we saw that when we started this.
Some of our one project it was important for us to have someone that can spend more time than <unk> manager to focus just on the survey are one to make sure. We're very restructure because it's easy to see how I will do disincentive.
I will do it by this date, but you need to do some for lack of the team and a pretty rigorous way. When is the date is of value to confuse a GP as full time on that and he has over 20 years of experience to do some transformation and getting us on their side, that's not a restructuring that is a growth story again, that's quite exciting for all employees. So they are very.
But as these backgrounds do within a very structured way and what's important is what to do we are going to finish what their cost structure. We want what we have done to be sustainable. So that's why we're starting slowly to improve working to make sure. We can be sustainable after the quake and five comp.
Okay.
Okay I'll re queue. Thanks for answering my questions.
Thank you. Thank you.
We will now take our next question.
Yes.
This is from the line of Michael <unk> from Scotiabank. Please go ahead.
Hey, good morning, guys.
For the anticipated cost of about $5 million.
I think per quarter in 'twenty, four and Steve you said two mine in each Q1.
In Q2 of 'twenty five.
So collectively about $25 million to $30 million of costs.
Not a small amount I wanted to get a sense for if you can break that down is it is it all consulting fees or does restructuring and get in there and maybe some technology investments just trying to get a sense for all the costs.
David Your line Sir.
Sure.
Thanks for the question Michael It's the cost that we're expecting that I touched on the $5 million in Q4 and every quarter for 2024.
That's that's.
Really going to be consulting and other another onetime costs related to Saverio, one is going to be some training costs in there.
But the majority of it will be consulting fees, there's really not going to be much of an investment in assets and capital assets.
So that the.
Total expenditure of $20 million that we're forecasting between trades, where are most of that is going to go through as an expense line item, it's being carved out as strategic initiative expenses similar to how we recorded for Q4 of.
2023.
Got it okay.
Just to add something on that yes, some people might say always set a very high costs, but to note that shortly and density of their program market again, it's touching out effectively a different place. So very intense factories say as August mentioned, it but before that.
That should bring some confidence at the where last year, we want to go in 2025, but again that would give us a better chance to achieve it.
No I certainly can appreciate the level of investments I guess financially and from a personnel perspective as well I mean.
If I go back to some of the earlier comments I mean, it does feel like Youre doing a lot of heavy lifting here.
24% and 25.
And I guess.
I don't know if theres a way to think about assessing the operational risks and sometimes there is kind of a.
Let's step back for two steps forward.
Type of.
A trend I am just thinking to the earlier comments about expecting half the growth in 'twenty four and the other half of 'twenty five.
Would it help would it be more may be helpful. Just to think that maybe more in margin expansion and 25% just given.
Some of the heavier lifting.
Well I wouldn't say that.
Yeah.
Thank you Michael Okay, and first of all look at don't forget.
The suites when it best industry and they are all Lucky is just about the aging of the population okay.
And in our case and it was good for me a good 40 years ago, when I buy but its continue continue okay.
But.
The steady.
The fundamental is well.
<unk> would be better IP everywhere everywhere, we would be better.
Okay.
And often okay.
It's like 30 or 40 people from the concept and they are a new applicator <unk>.
May God they are in Mexico.
In China Okay.
Have to be everywhere for sure okay.
Yeah.
25 locations should be.
Better in 'twenty four okay, because we would have some.
Sure.
Some subject.
Studied that may compete that it will.
Just look at that too will make that didnt execution at.
For sure Okay, but then I.
I want to pay that we have a little bit Mark C. L. K.
25, okay.
Maybe to be better than 20%, okay, because as you mentioned.
Sure Ken most of them actually.
That would be just in 'twenty, five and nothing to anymore.
Right.
Heiko.
Once complete that.
I'm not just saying as an example in my call no inventory of over 100 days. So when I, if I have a new savings with their new parts, but I have to eat mind meant to read before the savings in the P&L and some time, if I change a supplier I need to approve the new parts with R&D do some correct testing so yes.
Yes, Thanks, two things takes time, but nowhere, where I point that proved in this project as we have.
Okay. That's really helpful commentary guys. Thank you.
Thank you.
We'll now take our next question.
And this is from the line of Tom play from day shutdown capital markets. Please go ahead.
Hey, Mike.
No.
First question I guess just to follow up quickly on the.
On the expenses for strategic initiatives.
On the 5 million is there.
Components in there that is performance based meaning right.
Linked to the.
The savings and improvements of some very one or is it all fixed.
Fixed cost component at this point.
So I'll take this one.
Ed.
I think it's important for everybody to know that.
We have talked about the agreement being fixed and variables there are fixed and variable components.
We have but we have structured this agreement so that our interests are totally aligned with the consults interests.
We're all working to achieve the same goal here without getting into too much details.
How the agreements actually structured for 2024, we are fairly confident that.
The total the total expected expense is going to be $5 million per quarter, where we may see additional fees are in 2025 and beyond as we start to see.
More of the success of the program come through the financials.
Okay. Thanks, that's helpful.
Maybe switching to <unk>.
Tuck in acquisitions to something you mentioned to offset some of the divestitures.
Just curious to see how you think about that I mean past tuck ins were.
In some cases.
There is an accessibility is that.
Is that an option are you looking more at.
On a product that would complement maybe what you have right now.
The interesting thing.
We're not always looking about.
Territory or.
So projects that will come.
Company.
Compete our line, Okay and don't forget when we have tried to ask okay that we can.
Put available to a 1000 dealers IP. So we can buy something at five bucks, but can go to 10 Bucks it very very quickly.
So it's the alloys territory as always.
So in and traded it okay.
Yes.
Good Okay, what are your comments okay.
I read what you what you're right.
And one thing we don't forget about the study.
And then international company.
The assembly on roughly 20%, okay. So before we make a move you imagine that.
20% Okay.
You can look at that Thats, what they would do this with millions of expense. Okay. We just wanted to be better right now and better for the future.
That makes sense.
Thanks for that myself.
Maybe just a question on patient care.
On the on the 2020 for outlook and maybe the first part of 2024 and Nick you mentioned that some of the projects have been pushed back to Q1.
Maybe just broadening your expectations in terms of.
Revenue growth I know you mentioned that would be.
Priority for 2024, so maybe just.
Broadly go over.
What youre seeing so far in Q1, and maybe getting into Q2 in that segment.
Yes, I mean.
There was a.
This component to it I think we've talked about that several times.
So we have a very strong backlog and again the backlog is based on certain projects that we expect to deliver over the next several quarters.
Going into Q1, Q1 is going to be tough I'm not going to lie we had a very strong Q1 last year at.
It was 48 or close to $49 million in sales, which was an all time record for us.
Also kind of exiting Covid. So 2022 was also.
Strong years, and so here, we are going into a period in 2023 or exiting 2023 with <unk>.
Sales that maybe were a bit lower than anticipated and lower than market expectations.
We still feel very strong about the business. We have good order intake. It's just a question of when some of these projects will land.
And we're also looking to smooth out some of this lumpiness, but getting better visibility into our pipeline and by that I mean, when we can identify some of these revenue gaps. If some of these projects are getting delayed and theyre looking to see how we might be able to bridge those gaps with quick ship items right. So maybe there is promotions that we might be able to run to help bridge those gaps in certain quarters, where we're seeing some delays in certain.
<unk>.
Smooth out some of that Lumpiness. So all that to say is that we are very confident about the business. We do anticipate.
Similar kind of high single digit growth.
To help get to that $1 billion market does have to come from patient care as well. So we do anticipate good growth next year.
When is it going to land quarter to quarter Thats something thats. Unfortunately, it's a bit more difficult for me to explain.
Okay. That's helpful. Thanks, everyone.
Okay.
Thank you.
We will now take our next question.
This is from the line of Justin <unk> from Stifel. Please go ahead.
Hi, Good morning, Thanks for taking my call just on the comments of weakness in Europe versus strength in North America.
To describe what factors are leading to the different dynamics.
The dynamics in each of the markets and then also are you seeing any indication of strength returning.
In Europe, and maybe in the other regard.
Any potential risk of.
Growth in North America. Thank you.
Okay I can start and then people are complete.
So for starters just turnkey.
Don't forget last year, we had a tough Q2 in Europe, everybody no change of ERP, We don't talk about the European Tomorrow, we announced some good benefit out of it.
Before we had some growth.
But one thing not to forget is we do not have the same portfolio of products and.
And we are in North America.
And then we know we want to expand the port for the portfolio of products that we have.
One stop shop with any read through our platform lift.
Thinking a bit more time than expecting but differently by 'twenty, five oaky, which should have a much better a range of product that we're able to generate some interesting organic growth and thats, where the ASP also their margins. So I would say that that's going to be patient and we have a good game plan and we have a good team in place here in Europe.
That's about one is quite intense also over there so I'm pretty sure we'll see some positive.
If things.
Coming two years.
Yes, yes, yes.
This country that could Justin that.
Yeah that represents <unk>.
The 30% right now in 'twenty three I get your question, 30% of our EBITDA.
In personal care is coming from.
Mainly from the.
Okay, I will be ready.
Okay.
Okay.
If it was the other week.
But.
I just see that we represent in North America, and NEC America net inflation okay.
But there were people in it upward very well located and the work until the.
With the leadership there, okay and she is very good.
She knew what she is doing and should be back okay with that.
Perhaps we thinking.
So the 7% that they represent.
America is very strong is very strong okay and just.
Just wanted to add that to feed that.
I think that just grew when we with Clarion you seem okay.
To be more pet speaking, okay, and EBITDA in the coming years, but.
But we have a team of key one of the team that has some difficulties Lucky day.
We don't speak anymore with the recession then.
And then in North America, but then okay. They are in recession.
So even if we had the bulk.
It proved products okay.
From the economy, but often the people needed variety is okay, but because of the recession, they will say well wait a little bit so we know that.
But it will be this way I'm very confident very very confident that we will.
Meet or exceed our number.
Because it.
The people need our products that people need our products and when I say, okay. That's the seven.
90% of cases going very well I am very activities. Okay. So just to complement.
Got a question.
Thank you really appreciate the context and it sounds like there's some potential underlying strength there that maybe shows a bit later as well.
As that market improves I just had one other question on capital allocation, we saw deleveraging in the quarter two times net debt to EBITDA I was just wondering if share buybacks are on the table or potential dividend raise or is the idea to keep some of that capital for some future tuck in acquisitions.
Absolutely okay.
For sure it will be a good thing.
But we're not in a position right now okay, we want to grow and for sure we have to spend some money.
And with the consultants, okay that would be a use of our cash flow debt.
With them, but.
It's better than an acquisition again, because I've been at Gilead.
240 people.
Working with us.
At the same time period for us.
So its major its major so that's the best investment that they can do is why I think that the way to smack.
It has gone away, but we will see the result, you and me to be very soon.
Thank you very much for the detailed response.
Yeah.
Sure.
Thank you.
We will now take our next question.
This is from the line of Zachary <unk> from National Bank Financial. Please go ahead.
Thank you and good morning, everyone.
Hi.
So the very one additional fees payable conditional on the achievement of specified financial outcomes.
Could you clarify for us what margin level does the company have to reach before the performance fees kick in and how much would they add to the total cost at the 20% margin Mark.
Thanks for the question Zack and I appreciate you wanting more detail to that.
Try to forecast cash outflows.
The way that the agreement structured it's at a very detailed level and when we look at all the initiatives that we have.
<unk>.
It's <unk>.
Difficult to say and were not really willing to comment on exactly how much.
The potential is because we're waiting to see.
What the benefits are going to be coming through our financials. So it's.
I mean, we know the 2024 payments of $5 million per quarter, that's exactly what we're expecting for 2025, depending on the success of the program. It could it could end up being more than what we have in that 2 million per quarter.
But we're actually hoping that it's going to be more in the sense that the more that we're paying on the performance side that means the more the better results, we're going to be getting out of the program and out of.
The work that we're doing with our consultants so.
It's too early to comment I think past 2024.
With regard to total fees.
But again I think the comment that I made around.
Fees potentially being higher but the fact that our interests are fully aligned with our consultants interest I think that that.
That's a strong signal.
Got it.
Is that correct okay.
It's complementary.
C J.
Okay.
I don't sign a contract is I don't see a key.
Return on investment that game, and taking 10 years, but taking a couple of piece. So we steady agreed.
The offer and that we signed a deal for it because it's.
Very important okay.
The saving that will make okay.
After the study.
More than that site right now after all.
Nine months one year.
So.
I think that because that was sure.
We are never sure okay, but that was very optimistic that the return will be very good okay and so if it.
Got it.
Okay, but it will bring yet.
They work on everything Okay, Jason purchasing just in purchase imagine okay.
We are looking like.
$400 million of purchasing.
Imagine okay.
Okay that make.
Just kind of city all around the world. Okay didn't exactly okay, where is the best purchase and that with price.
So.
The parser right now Pete.
And Thats major major savings.
And for sure.
Do you do that vacated that today I'd like to do discounting.
Okay, and I am so happy that we have the guts of it too.
To go with this steady okay.
Expensive.
So is that any bidding.
<unk>.
And we Havent we.
I don't see that it.
It wasn't that take six months six months more okay, but maybe then you would see it.
Bottom line Okay.
Okay.
Yes, okay.
We regularly work cookie that we do okay, but.
Who would be better okay, and just in purchasing and repeatedly when you buy a roughly 50% of <unk> with <unk>.
That's where is the ceiling.
Thank you.
For the follow up on that I guess.
It sounds like you guys are very optimistic on the 20%.
Margin achievement, but between the change in CEO, an upcoming Investor day was there any discussion.
Maybe reducing the 20% target to a range or extending the timeline to achieve it beyond 2025.
Thank you.
Yes.
Two.
To be also comfortable with the target that we have put so I think we're going to live with the targets. We just put on the market.
Yesterday night, and I think at the Investor Day will continue so I think.
I'll get it set up and has it changed.
We are all comfortable and Thats right and I am spending.
A good amount of my time on several ones. So I would say what we have put that strongly believe it okay.
Excellent. Thanks, and then just one more if I can sneak it in.
I think you guys were aiming to get the Mexican facility up to about 100 under person head count by the end of the year you guys have 70 is everything going well on that front any reason for the difference in.
Total employee count there.
Yeah.
Again as <unk> said the competition of the numbers of employees that we have in the plan to keep but it's more like the once we get the output out of it. So I would say we are quite happy with that.
First Turkey, if we look what we have in China, which took us like two.
20 years to bid I think we are making very good progress in our first year in Mexico was quite happy with that and what's nice is not with the February one I know exactly what they will do in the next two years because all our project our map out and again, we're staffing at our source or again I think just Sherwood differently. When you had 100 employee, but they get at some of the competition of a number of inventory as more.
The output out of the sector.
I appreciate the color. Thank you very much I'll turn it over.
Terry.
Thank you just as a reminder, if there are any further questions at star one and one on your keypad.
We will now take our next question.
Thank you from the line of Chris <unk> from Raymond James. Please go ahead.
Hey, good morning.
On some of these action and freedom modems or sold off is there is there a piece left on that or has the full business rolled off now and thats the vehicles.
Are there any contributions from these businesses.
Businesses in Q1.
Oh.
Sure.
I want to say something.
I was I wasn't there many years ago okay.
Okay.
I was with.
Randy Bryan that's running by participating in that market with <unk> and freedom in Toronto, Okay, and I'd tell you something okay. That's that's why it's hard for me at Pizza.
Yeah, so inventory out okay.
Nathan Banana.
<unk>.
But I would say is that the how much money, we will make its who will buy that so good that they believe leucadia will be good for my annually.
Quick question you beat by.
<unk> okay.
Yes go ahead, Matt.
Right right, Okay, but I am sure that we would have more employees have been action at the end of the year than right now because the buyers okay.
I have a laptop, placing this data when they are.
Okay that they can sell that okay. So they need a key.
And as it plays Danny in this space, Okay to manufacture.
And the visit us and they know us and who made business with them for many years.
So thats the best thing for me and really fine. Okay. My group, you'll find this buyer okay.
From the states.
But that's why it's hard for me Saturday when he's coming at it from that so many years again at the beginning of May.
My life again.
Our debt to add density and they were very good for me, but right now Thats what is the right time of each path leadership to another company that is <unk>.
Unique function is too.
But people with diabetes.
So.
Do you have something for you then.
If I could just actually I had a little bit of color as well Marcello.
Yes, just to clarify on the selling price. So we have disclosed in our financials is the southern prices is seven five.
Canadian dollars are there should be a gain on that or expecting a gain on the sale to be recorded in Q1 of this year. So the deal actually closed on February one.
I did touch on the approximately $50 million of annualized revenues that we've lost through divestments over over 2023, and the beginning of 2020 for about 35 of that safety comes from the Norwegian business and 15 million tons from the vehicle manufacturing businesses.
And freedom, So we still.
Answer your question, specifically, we still do have a piece of the vehicle business. It's the retail side. So we divested of the manufacturing and.
As Marcel was saying we felt that the.
The home was the home for that business was better suited with drivers there.
They're going to be more successful at growing their business at its core to them.
We're going to be taking the proceeds from that and are investing in.
And the rest of our accessibility and patient care businesses.
Okay, Thanks, and just two.
How do you think to get to this $1 billion.
Revenue, how should we think that target.
Being reached through organic growth versus perhaps some additional acquisitions.
We're looking we're looking to reach 1 billion mainly through organic growth.
We.
And I would say without the divestments, we would we would definitely have achieved that so we do have a little bit of a hole to fill with those divestments at $50 million of revenue.
As in.
Providing bridging more of a gap in the 8% to 10% of organic growth that we were.
Roughly anticipating per year, so we do need some tuck ins some tuck in acquisitions to fill that $50 million, but.
That's kind of why we're saying approximately $1 billion in revenue. So there has been some some changes to our business since we provided that target, meaning meaning the divestments of those businesses.
We feel we feel good about the organic growth coming in roughly 8% to 10% still.
In line with in line with what we had said when we first came out with that target I think it was a year or two ago now.
Thanks.
Thank you.
There are no further questions at this time, so I will hand, the conference back to the speakers.
Okay. Thank you very much guys could you be.
With us this morning.
It's very important okay that.
We should have confidence that we have okay too.
To the future okay.
I think really the ball, okay, and I am always very enthusiastic for sure okay.
That is right now and knew that indicate.
And in many averages a bit there.
That dividend or aggregate.
Some somebody on the bench.
I see that.
And then.
My Guy looking at JMP.
And back to Keith.
Good and it will be better Lucky is just because you guys locate you take it.
We follow you look and you put that investment.
And thank you very much for everybody.
For us.
So thank you Sandra.
Thank you. This does conclude the conference for today. Thank you for participating and you may now disconnect.
Okay.
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Okay.
Okay.
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