Q3 2024 Savaria Corp Earnings Call
Saverio Corporation quarter, three 2024 conference call.
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After the Speakers' remarks, there will be a question and answer session.
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Speaker Change: This call may contain forward looking statements, which are subject to the disclosure statement contained in <unk>. Most recent press release issued on November six 2024 with respect to its quarter three 2024 results.
Speaker Change: Thank you Mr.
Speaker Change: Mr. Brown you may begin your conference.
Speaker Change: Thank you Whitney and good morning, everyone.
Speaker Change: Starting with gross margin coupled with.
Speaker Change: Results than I will.
Steve: Steve for the financial update and you'd be willing to update us with some of our one ultra small Q&A session.
Speaker Change: Listen it's figured I am very proud of our Q3 results as it shows that the transformation is stable with the third good quarter in a row and fortunate to have marginal improvement towards our objective of 1 billion of sales and 20% EBITDA by 2025.
Speaker Change: So some of the key highlights for the first time, we have reached 19, 5% of EBITDA, which is slightly better than Q2, and it's our best quarter. So far.
Speaker Change: Sure that we continue to have a good traction so.
Of our one transformation and <unk> will talk more about it.
Speaker Change: The first segment of exclusivity.
Speaker Change: North America together was 21, 3%.
Speaker Change: Patient care stood at $17 four at all beyond our target of 20%, but I'm pretty sure that we'll catch up soon.
Speaker Change: Q3 results.
5% away from 20% or approximately $1 million of EBITDA to reach that so I'm pretty sure was <unk> 11 of juice in our transformation together. So we're feeling good about the 20th.
Speaker Change: Growth.
We had a good quarter in North America, with 8% and the Euro is at 11, 3%, which show that the demand remains very strong core residential sector in North America.
Speaker Change: Europe was down six 6% in Q3, which is of course with fantastic, but this year. Our main objective was to improve EBITDA margins in Nova.
Speaker Change: Remember at our Investor Day in April.
Speaker Change: 10% to 12% EBITDA and now we're up $15 six so very good job from the team there. Thank you.
Speaker Change: You can see we have been more selective this year on our contract on some of our partnership in Nevada.
And wherever and put some emphasis on margins.
Speaker Change: And that soon we will be back with some growth in Europe with some new products, we're launching and the one stop shop with Australia and client platform of a vertical platform and some early returns eventually so the future is looking positive.
Speaker Change: Patient care was more or less flat, what order intake and backlog is.
Speaker Change: He is very good.
Speaker Change: Just a bit of delay on some execution of the project I'm pretty sure, which a good Q4 and a good 2025 as we're launching some new products. In this segment also in the sales team is making very good efforts on Facebook.
Speaker Change: Overall, I remain very confident with our 8% to 10% of organic growth target for the <unk> one as we operate in a growing industry with the aging of the population.
Density of the residential housing, which is helping on elevators and a large product offering as we add that to make us a very attractive partner.
Speaker Change: Also the first part of the transformation was more operation procurement pricing as we needed to build the infrastructure of the company, if we want to be able to expand our sales.
Speaker Change: I think now Im quite happy with the development that we have done in the first half with the operation.
Speaker Change: The second part of the transformation will be definitely more of an hour on sales growth.
Speaker Change: <unk>, our share of wallet with existing and funding some new dealers launching some new products, which are a team of 50 people dedicated on R&D.
Speaker Change: Also in this quarter, we have continued to deliver age now we have a net debt to EBITDA.
169, and available and funnel was $247 million. So we are very well positioned to do some small and mid size.
Speaker Change: To Jake acquisition that can bring some growth to suburbia and.
Speaker Change: And intrastate law and that we are ready to make some acquisition again, because a foundation of San Juan and the team is better than ever.
Speaker Change: Thank you again to auto dealers and employee for the success in the third quarter, So Steve financial fees.
Speaker Change: Thanks, <unk> good morning, everyone and thanks for joining our Q3 conference call I am pleased to share some remarks regarding our Q3 2024 financial results.
So key highlights for the quarter include continued improvements in profitability, both in gross margin and adjusted EBITDA margin.
Speaker Change: Revenue growth of 8% in North America, accessibility coming mainly from elevators and lifts.
Speaker Change: Cash from operating activities increased liquidity by $35 8 million with positive effects from working capital items, which has allowed us to repay $26 million of debt year to date and increase our funds available under our credit facility by $24 million this year.
Speaker Change: And correspondingly our ratio of net debt to adjusted EBITDA reached $1 6 million at the end of the quarter a decrease from two 7% at year end.
Speaker Change: So for the quarter, we generated revenue of $213 six.
Speaker Change: Million, an increase of $3 5 million or one 7% versus last year.
Overall, the increase came from organic growth of 2% and the acquisition of <unk>, partially offset by the divestitures of inaction and freedom Motors earlier this year.
Speaker Change: We also experienced positive foreign exchange fluctuations.
Speaker Change: I am pleased to report that the corporation achieved an impressive quarterly adjusted EBITDA, surpassing the $40 million threshold for a second consecutive quarter, reaching $41 7 million in Q3.
Speaker Change: We also delivered strong gross profit and gross margin of 79.
Speaker Change: Excuse me $79 1 million and 37% compared to $72 6 million and 34, 5% a year ago.
Speaker Change: The increase in gross profit of $6 6 million is explained by improved gross margins in both segments due to operating leverage improved pricing and lower material costs.
Speaker Change: Supported supported by Saverio wanted to fuel. These strong results, we incurred $5 4 million in strategic initiative expenses this quarter, which is in line with our previously stated expectations at our Investor Day earlier this year.
Speaker Change: J P is going to provide more details on ongoing initiatives shortly.
Adjusted EBITDA and adjusted EBITDA margin finished at $41 7 million and 19, 5% compared to $34 5 million and 16, 4% last year.
I am pleased to report continued improvements in profitability in both segments coming mainly from improved gross margins as we have seen seeing the positive impacts from our procurement pricing and operational initiatives under saverio on.
Speaker Change: Now if we look at our segmented results revenue from our accessibility segment was $169 8 million, an increase of $3 5 million or two 1% compared to last year.
The increase in revenue was due in part to organic growth of 6% made up of 8% growth in North America, and a contraction of six 6% in Europe.
The growth in North America came mainly from elevator and lift products as we have seen continued demand in both residential and commercial sectors.
Speaker Change: As well as from pricing benefits.
Speaker Change: While the market remains challenging in Europe.
Speaker Change: And we are reporting a contraction I will say that we have seen improvements in pricing optimization.
Speaker Change: Our focus continues to be on profitable revenue growth.
Speaker Change: Accessibility segment.
Speaker Change: <unk> benefited from a positive foreign exchange impact of one 8% for the quarter.
Speaker Change: Although we did have a negative impact on revenues from the divestment of the vehicle businesses. In Q1. This was partially offset by contributions from the May top brand. We acquired earlier this year, bringing us both material lifts and <unk>.
Speaker Change: Adjusted EBITDA and adjusted EBITDA margin for accessibility stood at $36 2 million and 21, 3% compared to $29 9 million.
Speaker Change: And 18% last year.
Speaker Change: The increased profitability was mainly due to slightly higher revenues improved pricing.
Speaker Change: And lower material costs in both regions.
Speaker Change: To offer additional insight in our regions. The adjusted EBITDA margin for North America was 25, 5% for the quarter, while the margin in Europe increased to $15 six.
Speaker Change: So in line with our Q2 performance in both materially improved versus a year ago.
Speaker Change: Turning to our patient care segment, we saw our revenues reached $43 9 million for the quarter, which is stable when compared to last year.
Speaker Change: We have observed balancing effects of increased medical bed frame in mattress revenues and lower sales from ceiling lift packages due to a slowdown in new long term care build activity.
Speaker Change: Caused by timing and project delays.
Speaker Change: As a reminder to our listeners today, our patient care business is more affected by project based sales in our accessibility segment.
And while the quarter and year to date growth in patient care has remained relatively flat we are expecting to see some growth in Q4, as we have a healthy and growing backlog.
Speaker Change: Adjusted EBITDA and adjusted EBITDA margin for patient care stood at $7 6 million and 17, 4% compared to $6 1 million in 2014% last year.
Speaker Change: Increased profitability was mainly due to pricing initiatives favorable product mix on certain projects and lower material costs, offset partially offset by higher selling expenses.
Speaker Change: And now on a consolidated basis net finance costs were $4 4 million compared to $5 5 million last year.
Speaker Change: Interest on long term debt decreased by $1 7 million due to the reduced balance of debt and a reduction in the variable interest rates.
Speaker Change: During the quarter, we had a net gain on financial instruments and a net loss on foreign currency foreign currency exchange, which netted to an overall unrealized gain of $5 million impacting finance costs for the quarter.
Speaker Change: Net earnings were $13 million or <unk> 18 per diluted share for the quarter compared to $12 1 million or <unk> 18 per diluted share last year.
Speaker Change: The increase in net earnings was mainly due to higher adjusted EBITDA and lower net finance costs, partially offset by strategic initiative expenses and higher net income tax expense.
Speaker Change: Turning now to capital resources and liquidity for the quarter cash flows from operations before working capital impacts reached $30 5 million compared to $26 9 million last year attributed to the increased EBITDA.
Speaker Change: But partially offset by higher strategic initiative expenses.
Speaker Change: Net changes in working capital items increased liquidity by $5 3 million compared to a decrease of $1 6 million a year earlier.
The favorable change was driven by reduced trade receivables and prepaid expenses, partially offset by higher inventories and lower deferred revenues.
Speaker Change: As a result cash generated from our operating activities in Q3 stood at $35 8 million compared to $25 3 million last year.
Which is an over $10 million increase.
Speaker Change: While Dio days of inventory on hand, slightly increased our days of sales outstanding remained stable and days payable outstanding improved versus Q2 in.
Speaker Change: In line with our initiatives to enhance working capital management across the business.
Speaker Change: We remain committed to being diligent about investments in working capital as we grow.
Speaker Change: Cash used in investing activities was $5 9 million compared to $4 5 million last year, we disbursed 6 million for fixed and intangible assets in the quarter compared to $4 6 million in Q2 2023.
Speaker Change: Some of the larger Capex investments in this most recent quarter include a new welding machine robot and investments in our paint line in our <unk> facility to enhance production efficiency as well as the new bedding machine in Europe.
To foster business growth, we anticipate capital expenditures to remain within our historical range of two to two 5% of revenue for the year for 2024.
Speaker Change: Cash used in financing activities was $15 4 million compared to $20 7 million last year.
Speaker Change: In Q3, we saw reimbursement on a revolving facility of $3 3 million.
Interest paid was $3 6 million and that was $2 6 million lower than prior year.
Speaker Change: Dividends amounted to $9 2 million versus $8 4 million in the prior year.
Speaker Change: Overall as at September 30 of 2024, our net debt was $259 1 million and as mentioned the ratio of net debt to adjusted EBITDA stood considered considerably improved at $1 69.
Speaker Change: In comparison to $1 88 at Q2, and two <unk> at the end of last year.
Speaker Change: And now looking forward with regards to guidance as stated on the Q2 call Saverio is not providing guidance for fiscal 2024, as we focus on the achievement of our targets of approximately $1 billion of revenue and 20% adjusted EBITDA margin.
Speaker Change: By 2025.
Speaker Change: The global team is focusing on delivering these 2025 objectives and it remains difficult to pinpoint where we will finish 2024.
Speaker Change: Individual quarters there.
Speaker Change: So various future prospects are promising driven by strong demand macroeconomic tailwind and the progress of Saverio one.
Speaker Change: Our strong cash generation and deleveraging increases our future ability and willingness for acquisitions as we look to wrap up as <unk>, one and 2025.
Speaker Change: And with that this completes my prepared remarks, I will now turn the call over to J P to provide further details on how we're progressing with Saverio one.
J P: Thank you, Steve and good morning, everyone.
J P: Before I dive in I, just wanted to take a moment to thank the hundreds of colleagues who are contributing to saverio on the results. We can speak about today are the results of a team effort.
J P: In Q3 2024 as you just heard Saverio delivered very strong results again, $41 7 million of adjusted EBITDA, which is almost the same as in Q2, while our revenues were about $8 million lower in Q3 than in Q2.
J P: It is quite an achievement to maintain the same profitability with $8 million that's revenues.
J P: We would all prefer to report growing sales, but giving those we continue to improve our profitability this quarter.
J P: Our EBITDA percentage continues to increase from 19% to 19, 5% versus versus prior.
J P: Prior quarter, while ahead of last year.
J P: We're very happy with those results as it shows that we continue to improve the efficiency of our business and we are well set up to generate more profitable growth once they get one sales are up again.
J P: In fact, we view Q3 as the second quarter, where we can clearly measure the impact of severity and one on the business and in our results.
J P: The recurring monthly gains delivered by Saverio on initiatives continued to grow as we implemented for several millions of dollars of improvements in the quarter.
Yes.
J P: Yet this improvement in run rate and in quarter benefit was limited by the negative impact on sales.
J P: We shared earlier this year during the Investor day, our plan to go from $138 million EBITDA in 2023 to 200 million in 2025 overall, we implemented a bit more than half of the value of the initiatives defined for this initial goal by now and we keep adding new initiatives and ideas to our pipeline regularity.
J P: But in principle, we passed the half March.
J P: Let me share a few examples.
J P: So in Q3, we had tenants at about 15 different procurement initiatives. Those include raw material negotiations using competitive quotes but also switching parts between suppliers or substituting parts as well as consolidating purchases between sites and negotiating with suppliers on basis of benchmarks and all.
J P: Of our sites benefited from that.
J P: We also succeeded in transferring production between sites within our network to reduce our overall manufacturing costs for.
J P: For example, we transferred the assembly of elevator controllers to our Mexico facility are we also transfer the assembly of the dry box of our implant platform to our Italian factory.
J P: Finally, we continue to improve our factories for example, Steve mentioned, it but we upgraded our paint line in theory.
J P: Which both reduces the manpower needed to operated but also reduces the usage and increases the recycling on top of enhancing thing quality.
J P: We also implemented other improvements, including a full process and the assembly line of our best manufacturing facility in Gainesville, which increases throughput per shift.
J P: Similarly in field operations, we made major improvements to the productivity of the installation and sales operations teams in Europe.
J P: To date, we have more success on cost reduction and revenue growth efforts, but I want to specify that this does not mean that we did not put any effort and sales growth are made improvements to our business practices. Our systems, we implemented many changes, including equipping our sales associates with better tools and information, providing training and Onboarding new reps.
J P: Across the business. We also have clear plans to cross sell and bring more dealers onboard by leveraging our strong value proposition.
J P: Naturally it takes more time for those changes to materialize.
We also think markets were softer or slower than usual this summer due to factors outside of our control and not related to Saverio. One. So we're still very optimistic about sales growth going forward.
J P: At this point in time, our factories are better organized more efficient and have capacity available to take on more orders.
J P: We also improved the quality and safety of our operations worldwide. So we are better equipped than ever to supply high quality products to our end customers and our dealers.
J P: In any case, our priority for the coming future is to continue to grow sales and we have plans to do so in each business.
J P: This being said, we also continue to pursue initiatives to reduce our cost of material our manufacturing and overhead costs. So we will be pursuing those in parallel.
Furthermore, it is important to know that we have a strong product innovation pipeline and we are preparing for our new product introductions in the coming months for.
For example, <unk> clinical ceiling lift is being launched at the moment. It's an impressive product that has lithium ion batteries as opposed to lead acid. Thus four times more powerful than four times lighter it has digital menu and diagnostics Bluetooth connectivity proprietary and patented tree function emergency.
J P: <unk> function.
J P: And with that we are launching an innovative Gary bar with integrated class III wage scale.
J P: We have more product upgrades.
J P: And new product launches coming up to support our growth aspirations for 'twenty five but this was just one example.
J P: Furthermore, the <unk> integration is going well, we started to produce the <unk> and Brandon with three units produced here in September and six in October on track with our plans to produce 100% of thumb leaders and Brent than in Q1 2025.
J P: Also called builder is not set up to process orders made some lawyers.
J P: In conclusion, we're happy with our fundamental progress on scenario one in Q3 and look forward to see the results continue to compound and accelerate especially one sales growth resumes.
Speaker Change: Thank you for your attention, let me hand, it over back to Sebastien for closing remarks, okay. Thank.
Speaker Change: Thank you GP and then Stephen <unk> color on this of our one in on the financials. So I guess, Brittany, where already with some question with our analyst.
Speaker Change: Thank you Jill.
Speaker Change: At this time.
Speaker Change: We will conduct a question and answer session.
Speaker Change: As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced.
Speaker Change: A question.
Speaker Change: Star One again, please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Derek Lessard with TD Cowen. Your line is now open.
Speaker Change: Yes.
Speaker Change: Everybody.
I guess, maybe just wanted to start on you gave some good color on your innovation pipeline can we just maybe talk about.
Speaker Change: How you think about the incremental.
Speaker Change: Margin contribution from from new new product introductions is it higher than the 20% target and maybe on that note is it maybe a little too early to start thinking about you guys potentially exceeding that 20% target goal overtime.
Speaker Change: Well I guess I'll start thanks for the direct part of question. So for sure. Our R&D. Okay. There is a mix of things, but we are always looking to improve current products are key to make actually up to code to make sure. We improve the design is to take and then against the EBITDA cost savings on our product as well, but for sure when we launched some new products okay.
Speaker Change: Launched it at the right margins are we don't launch it.
Speaker Change: One thing for sure after that right now I think that 20% EBITDA target I think we can see it is it does that sugar Bowl and hopefully next year, we'll be there but to say that.
Speaker Change: What does the next after the 20% I think we'll need to wait a bit the next guidance on the next Investor day to see what is the next milestone, but do you can see that the R&D is helping to improve their margins and most importantly, R&D is helping to launch new products that we can get some growth.
Speaker Change: How you think about the incremental margin contribution from from new new product introductions, a bit higher than the 20% target and maybe on that note is it maybe a little too early to start thinking about you guys potentially exceeding that 20% target.
Speaker Change: Okay, that's fair.
Maybe just on M&A.
Speaker Change: Could you just talk about what are some of the criteria youre looking for.
Speaker Change: <unk> goal over time.
Speaker Change: Well I guess I was trying to think through a direct point of question so for sure.
Speaker Change: Is it product sale is it geography is expanding geographies capacity expansion what is it exactly that you might be targeting.
Speaker Change: Does it mean.
<unk>.
Speaker Change: We are always looking to improve current products are keen to make sure you're up to code to make sure. We improve the design is to take and then against the EBITDA cost savings on our product as well, but for sure. When we launched some new products, we launched it at the right margins are we don't launch it.
Speaker Change: I think if we look at the plastic you without talking too much what our future drilling in the past what has been good for us direct.
Speaker Change: Some of our dealers that want to retire second generation, where a natural buyer to dose. This distribution center, who can just sales service and maintenance after that <unk> complementary product that can help us to generate growth and make sure. We remain one of the best source of one stop shop example domain tucked in April was a strategic acquisition that we can bring in.
Speaker Change: One thing for sure after that right now I think that 20% EBITDA target I think we can see it is it does that sugar Bowl and hopefully next year, we'll be there but to say that.
Speaker Change: What does the next after the 20% I think we'll need to wait a bit the next guidance on the next Investor day to see what is the next milestone, but definitely that the R&D is helping to improve their margins and most importantly, R&D is hoping to launch new products that we can get some growth.
Speaker Change: New products in there and maybe use our supply chain, which is pretty strong to improve the costs on this product clients are definitly dealer opportunity if someone wants to retired a strategic acquisition that can bring some products mix to <unk>.
Speaker Change: Europe and North America is definitely what we're looking for.
Speaker Change: Okay, that's fair and maybe just on M&A.
And small to mid size, that's a bit what we can look for.
Speaker Change: Could you just talk about what are some of the criteria youre looking for.
Sebastian: Okay. Thanks, Sebastian I'll re queue.
Speaker Change: Is it product sale is it geography is expanding geographies capacity expansion what is it exactly that you might be targeting.
Speaker Change: Thank you so much our next question.
Speaker Change: I think if we look at the plastic it without talking too much what our future drilling in the past what has been good for us direct.
Speaker Change: Our next question comes from the line of Michael Glen with Raymond James Your line is irrelevant.
Speaker Change: Some of our dealers that want to retire second generation, where a natural buyer to dose distribution center can you just say so I missed and maintenance after that defeat complementary product that can help us to generate growth and make sure. We remain one of the best source of a one stop shop example domain tuck in April was a strategic acquisition that we can bring in.
Speaker Change: Hey, good morning, So I recall, you spoke to your stair lift business in both Europe.
Speaker Change: And North America during the Investor Day can you just.
Speaker Change: Frame are you able to frame for us the opportunity in North America for the <unk> business now that you have.
Speaker Change: New products and then maybe use our supply chain, which is pretty strong to improve costs. On this product clients are definitly dealer opportunity. If someone wants to retired a strategic acquisition that can bring some product mix and fuel up in North America is definitely what we're looking for.
Speaker Change: The product line that you want in the region I'm just trying to understand what is the size of the opportunity for <unk> in North America for severity.
Speaker Change: And it's a good question, so I would say for sure.
Speaker Change: And small to mid size, that's a bit what we can look forward.
Speaker Change: When we acquired <unk>, we brought back some manufacturing <unk> in North America now in our Brampton facilities, we manufactured two product ones as the 4000, which is two <unk> system, and one which is a free curve as a single queue and I would say right now our lead time are outstanding on the curve started to scale, we can do it at <unk>.
Speaker Change: Thanks, Sebastian I'll re queue.
Within a week and I think Thats give us very key advantage will show. Unfortunately, we don't disclose reader growth per products, maybe one data is something we should add.
Speaker Change: And what I've been tourists, but this <unk>, we look at North America, and we had a good year, so far and 11% growth. So I think definitely the Australia is a key element, where we wanted to be better in terms of market size.
Speaker Change: With the goal to give perfect that dealt with differently, Australia, we can be much better in North America, because now we manufacture locally.
Speaker Change: And are you able to give an indication like the size of your north and the size of your European <unk> business relative to the size of your North American scale that business is there a number there.
Speaker Change: I would say just to jump in here, Michael I would say I mean, our Europe business is primarily a stair lift business right in our legacy North America business is primarily elevators and lyft so.
Speaker Change: <unk>.
Speaker Change: With that being said the big.
Speaker Change: <unk> opportunity for us is to grow within our existing dealer base in North America grow with them through stair lift sales.
Speaker Change: When we look to add products such as the main thought line, which which we added in with them waiters and material lifts.
Speaker Change: It gives us one more product in the portfolio and it gives us a bit more leverage on getting share of wallet with our existing dealer base.
Speaker Change: To increase the stair lift portion of that so we have we are a market leader in North America on the elevators and lifts and stair lift is the focus but we think now with Sebastian mentioned the lead times and the production here with that and the complete offering that we have a good opportunity, but but for sure there are.
Speaker Change: Our <unk> sales in Europe.
Speaker Change: I'd say are significantly larger than our sales in North America.
Speaker Change: Okay.
Speaker Change: I just wanted to circle in on the pricing.
Speaker Change: She lives that youre going after as well so.
Speaker Change: Okay.
I recognize there is likely a lot of complexity to how you priced product and it's probably not as easy as saying you just like 5% below where you should be but I'm. Just wondering if you can share any notable takeaways.
Speaker Change: That you've seen as you as you dig into how you price relative to your peers right now I know it might be a little bit competitive sensitive, but any any insight there would be interesting.
Speaker Change: I mean generally on pricing we were not we're a market leader, we're not a market follower.
Speaker Change: We try to be respectful of our dealers and at.
Speaker Change: At the same time to make sure that we're having a good margin come through to the bottom line. So our price increases are different by each region depending on the.
Speaker Change: Factors in that local their local market. So for example, the price increases that we targeted in Europe are different than what we're doing in.
and myself in North America.
Speaker Change: Okay, and I just want to circle in on the pricing initiatives that you're going after as well. So
Speaker Change: In North America, I will say that we.
Speaker Change: <unk> had good good benefits from the pricing impacts its not just from increasing pricing increasing pricing in both markets. It's also from being more diligent around discounting and.
Speaker Change: I recognize there's likely a lot of complexity to how you price product and it's probably not as easy as saying you're just like 5% below where you should be, but I'm just wondering if you can share any notable takeaways.
Speaker Change: Ensuring that we are.
Speaker Change: Not participating in sort of those races to the bottom when it comes to.
Speaker Change: that you've seen as you dig into how you price relative to your peers right now. I know it might be a little bit competitive sensitive, but any insight there would be interesting.
Speaker Change: Some opportunities that.
Speaker Change: Although they come in front of us they are low margin sales. So we're not necessarily going after that were being focused on.
Thank you.
Speaker Change: I mean, generally on pricing, we're a market leader, we're not a market follower. We try to be respectful of our dealers and try, at the same time, to make sure that we're having a good margin come through to the bottom line. So our price increases...
Speaker Change: Focusing on on the more profitable sales and so.
Speaker Change: It's both elements of increasing price, but also making sure that we're not discounting just to just to get the volume.
Speaker Change: Hopefully that provides.
Speaker Change: Yes, no thats an interesting thank you I'll jump back in the queue.
Speaker Change: are different by each region depending on the factors in that local market. So, for example, the price increases that we target in Europe are different than what we're doing in Canada.
Speaker Change: Okay.
Speaker Change: So much our next question please.
Speaker Change: in North America. I will say that, you know, we have had good benefits from the pricing impacts. It's not just from increasing pricing in both markets. It's also from being more diligent around discounting and, you know, ensuring that we're...
Speaker Change: Our next question comes from the line of Frederic Tremblay.
Frederic Tremblay: Just <unk> capital markets.
Speaker Change: Your line is now open.
Speaker Change: Thank you and good morning.
Speaker Change: Okay.
Speaker Change: On the margin in Europe.
Speaker Change: <unk> percent over 15% now over the past two quarters, you feel like you've reached.
Speaker Change: We have the maximum effect from your pricing discipline, there and.
Speaker Change: If so can you maybe go through some of the other drivers that could potentially Europe to higher margins overtime.
Speaker Change: on the more profitable sales. And so it's both elements of increasing price, but also making sure that we're not discounting just to get the volume.
Speaker Change: Yes, so I'll take this one ask Ed. Thank you for the question. So I don't think we've reached a limit at all I guess, so what we've done to date is improve our cost of goods sold.
I hope that provides some clarity.
Speaker Change: Yeah, no, that's interesting. Thank you. I'll jump back in. Thank you.
Speaker Change: Sourcing initiatives on true, we've been a bit more lean in our operations and in our staff.
Speaker Change: Thank you so much. One moment for our next question, please.
We did improve.
Speaker Change: Improvements in the factories, we looked at our staff and the headquarters.
Speaker Change: But there's more to come again, if you think about them.
Speaker Change: Our next question comes from the line of Frederick Tremblay with Desjardins Capital Markets. Your line is now open.
Speaker Change: What could make a big difference for US is now with the new cost structure, we have an incremental sale is very profitable and so one thing we're working on in Europe now, it's growing again now that we've kind of reset the foundations and the.
Thank you. Good morning.
Frederick Tremblay: On the margin in Europe, 15%, over 15% now over the past two quarters. Do you feel like you've reached the maximum effect from your pricing discipline there? If so, can you maybe go through some of the other drivers that could potentially lead Europe to a higher margin over time?
Infrastructure like <unk>, so that thing was mentioning before so any incremental sale as you can imagine we will increase our margin overall and the average margin. We also have.
Speaker Change: Any opportunities to bring products to Europe. So we're working on certifying our products for Europe now the ones that we make in North America and that we will use the same infrastructure of salespeople. The same infrastructure of manufacturing as you can imagine right. The same whereas the same supply chain, but we can get more revenues from these products that tend to be high margin products. So we still see room for <unk>.
Frederick Tremblay: Yeah, so I'll take this one Fred. Thank you for the question. So, I don't think we've reached the limit at all. Okay, so what we've done to date is improve our cost of goods sold. A lot of sourcing initiatives have flown through.
Speaker Change: Growth in margins in Europe.
Frederick Tremblay: We've been a bit more let's say lean in our operations and in our staff.
Speaker Change: Okay, great and just on the new product introductions into Europe do you have any.
Frederick Tremblay: improvements in the factories. We looked at our staff in the headquarters.
Speaker Change: Comment on the timing of that that the first half of 'twenty five or second half what are we looking at for that.
Frederick Tremblay: But there's more to come, okay? And if you think about what could make a big difference for us, is now with the new cost structure we have, any incremental sale is very profitable. So one thing we're working on in Europe now, it's growing again, now that we've kind of reset the foundations.
Speaker Change: Yes, good question.
Speaker Change: So I always touch a bit to talk about the R&D lounge things that are not public yet, but we are working on it and I will say.
Speaker Change: Differentiation there in the first App of next year, we should be able to have some vertical platform.
infrastructure, like Sébastien was
Frederick Tremblay: So any incremental sale, as you can imagine, will increase our margin overall and the average margin.
Speaker Change: Paul it's difficult or very early next year, and we should have probably your own elevator and therefore in the first half of next year. So I think it is.
Frederick Tremblay: We also have many opportunities to bring products to Europe. So we're working on certifying our products for Europe now, the ones that we make in North America.
Speaker Change: Those will add to get some growth and I think the team is really looking for it because the one stop shop has been one of the success of <unk> So far.
Frederick Tremblay: And that will use the same infrastructure of salespeople, the same infrastructure of manufacturing, as you can imagine, right? We're in the same supply chain, but we can get more revenues from these products that tend to be high-margin products. So we still see a room for growth in margins in Europe.
Okay, great. Thanks for that maybe switching to patient care.
Speaker Change: Bit of a slower growth profile than recent quarters, but I think you did mentioned that Q4 is.
Speaker Change: Shaping up nicely can you maybe just go through some of the factors that are leading to your confidence on that is it.
Speaker Change: And just on those new product introductions into Europe, do you have any comments on the timing of that? Is it the first half of 2025 or the second half, what are we looking at for that?
Speaker Change: Some of the delayed projects starting to.
Speaker Change: The start up or is there something else there.
Speaker Change: Good question, Fred. So it's always touchy a bit to talk about the R&D launch thing that's not public yet, but typically we are working on it.
Speaker Change: Some of them, making you optimistic on the Q4.
Speaker Change: Hey, Brian and I will just say for patient care without giving too much away I mean Q4 is typically their strongest quarter.
and I will see you.
Speaker Change: Differently in the first half of next year, we should be able to have some vertical platform for Portslough more early next year. And we should have probably a home elevator in the first half of next year.
Speaker Change: With that being said, we are expecting it to be a little bit stronger this year.
Speaker Change: Q1, two and three where we're a little bit disappointing to be honest.
Speaker Change: We have been building the backlog and really thrilled this quarter. So we're going to see some of that come through in Q4. So some of its timing on projects. Some of it is just stuff that we have in the pipeline but.
Speaker Change: Definitely those will add to get some growth and I think the team is really looking for it because the one-stop shop has been one of the success of Savara so far.
Speaker Change: Yes, we are expecting patient care to be turning a quarter.
Speaker Change: Okay, great. Thanks for that. Maybe switching to patient care, a bit of a slower growth profile in recent quarters, but I think you did mention that Q4 is...
Speaker Change: Okay, Great. That's all I had thank you.
Speaker Change: Okay.
Speaker Change: Thank you so much.
Speaker Change: shaping up nicely there. Can you maybe just go through some of the factors that are leading to your confidence on that? Is it some of the delayed projects starting to start up or is there something else there that's sort of making you optimistic on the Q4?
Speaker Change: Our next question please.
Speaker Change: Our next question comes from the line of battery ever shared with National Bank Financial Your line is now open.
Speaker Change: Okay.
Speaker Change: Good morning, Congrats on the quarter and so just to dive back into patient care. There on those project delays anything to flag or is it just normal construction hiccups.
Frederick Tremblay: Hey Fred, I will just say for patient care, without giving too much away, Q4 is typically the strongest quarter. With that being said, we are expecting it to be a little bit stronger this year.
I think I saw a nice reports from analysts not too long ago was actually a camera.
Speaker Change: We, you know, Q1, Q2, and Q3 were a little bit disappointing to be honest. And, you know, we have been building the backlog.
Speaker Change: Solar their patient care and the bed. So I would say good reports, so again differentiate patient care case, sometimes it is lumpiness from one quarter to the other.
Speaker Change: really throughout those quarters, so we're going to see some of that come through in Q4. So some of it's timing on projects, some of it's just stuff that we have in the pipeline, but yeah, we are expecting patient care to be turning a corner.
Speaker Change: And I think you will see some of that we have launched some new products. This year, we have improved some new products. So I think differently you will see some growth in the coming quarters.
Okay, great. That's all I have. Thank you.
Speaker Change: Got you thanks.
Thank you.
Speaker Change: And then switching to politics, one of your competitive advantages in sourcing and presumably in China can you tell us about your potential exposure to tariffs given the results of the American election.
Thank you so much.
One moment for our next question please.
Thank you.
Speaker Change: Our next question comes from the line of Zachary Evershed with National Bank Financial. Your line is now open.
Speaker Change: Zach politics is super important and I would say we were always reviewing the news to make sure we know teams.
Good luck.
Speaker Change: Good morning. Congrats on the quarter. So just to dive back into patient care there on those project delays, anything to flag or is it just normal construction hiccups?
Speaker Change: <unk> become available, but we start to be tried to be neutral between one side on the other and I would say that the beauty of several reallocate where vertical integrated in many places we know we're opening a new factory in Mexico, where two years ago to be a bit diversify we know we manufacture some parts into our key factories in North Korea.
Speaker Change: I think I saw a nice report from an analyst not too long ago, Zach, about the potential of the patient care in the beds.
Speaker Change: I would say good report. So again, definitely the patient care, sometimes there's lumpiness from one quarter to the other. And I think you will see some, we have launched some new product this year. We have improved some new products. So I think definitely you will see some growth in the coming quarter.
In Vancouver, and Toronto, So we think we're in pretty good position if the rules of the game change and after that we'll have the exchange rate that some time, maybe do some type of become available may be the exchange rate with Airbus as well, we don't know the future. We will adapt as we can and I think on the patient care by two factor. We are really made in USA. So I think that's.
Gotcha, thanks.
Speaker Change: And then switching to politics, one of your competitive advantages is sourcing and pre-assembly in China. Can you tell us about your potential exposure to tariffs, given the results of the American election?
Completing our advantage also.
Speaker Change: Got you thanks.
Speaker Change: Then last one for me just as you're ramping up severity. One are you seeing any diverging trends between your direct store initiatives versus dealer sale.
Speaker Change: Zach, you know, politics is super important and I would say we're...
Speaker Change: We are always reviewing the news to make sure we know things and when they become available.
Speaker Change: Any difference in your growth or profitability strategies there.
Speaker Change: I don't think so in Turkey, So I'm trying to reflect on so we had a.
Speaker Change: and we start to be try to be neutral between one side or the other and I will say that the beauty of Savarjoki, we are vertical integrated in many places.
Speaker Change: Good success with our direct stores this year, they're not all equal to be fair. So I don't see much difference.
Speaker Change: We know we opened a new factory in Mexico two years ago to be a bit diversified. We know we manufactured some parts into a key factory in North America, in Vancouver and Toronto. So we think we're in pretty good position if the rules of the game change.
Speaker Change: Both businesses are improving.
Speaker Change: Yes, and it's not consistent between when the export to another either but in general are improving so.
Yes, I don't think Theres any particular insight on this one I'm sorry.
Speaker Change: And after that, okay, you always have the exchange rate that sometime if there's some tariff become available, maybe the exchange rate will help us as well. So we don't know the future. We will adapt as we can. And I think on the patient care, our two factories are really made in USA. So I think that can play in our advantage also.
Speaker Change: Yeah.
Speaker Change: No worries. Thank you very much I'll turn it over.
Zack: Thank you Zack.
Zack: Okay.
Speaker Change: Thank you so much my moment for our next question. Please.
Speaker Change: Our next question comes from the line of Justin <unk> with Stifel. Your line is now open.
Gotcha, thanks.
Speaker Change: Good morning, Thanks for taking my call just wondering if theres any change on the competitive <unk>.
Speaker Change: <unk> in any of your segments, if there's been perhaps some exits in the industry or some competitors.
[inaudible]
Speaker Change: I don't think so, JP, so I'm trying to reflect on, so we had a good success with our direct stores this year. They're not all equal to be fair, so I don't see much difference. Both businesses are improving, yeah, and it's not consistent between one direct store to another either, but in general we're improving.
Perhaps getting a bit more aggressive on pricing or are there competitive aspects. Thank you.
Speaker Change: Thats a tough question this morning.
But I would say, yes competent hurricane.
We are in a good industry. There is some anti competition again as Steve said earlier, we don't do the race, Nevada to grow grow grow when they eventually make margins so.
Speaker Change: Yeah, I don't think there's any particular insight on this one. I'm sorry.
No worries. Thank you very much. I'll turn it over.
Speaker Change: I mean, everybody has is the voluntary retirement and we have different product offering different strength. We think we're in a the consolidator of the industry, we are in a better position but.
Thank you, Jacques.
Speaker Change: Thank you so much. One moment for our next question, please.
Speaker Change: Yes. Some of them are companies that are owned by piece. So from time the change to go from one entity.
Speaker Change: Our next question comes from the line of Justin Keywood with Sifle. Your line is now open.
Speaker Change: We saw that maybe some of the deal already tried to expense so they might buy in a dirty there from time to time.
Justin Keywood: Good morning, thanks for taking my call. I'm just wondering if there's any change on the competitive dynamics in any of your segments, if there's been perhaps some exits in the industry or some competitors perhaps getting a bit more aggressive on pricing or other competitive aspects. Thank you.
Speaker Change: <unk>.
Speaker Change: I'll speak more about my competitors or to diesel so good industry.
Speaker Change: Yeah.
Speaker Change: Okay, and then just on <unk>.
Speaker Change: Another question with the incoming U S administration any potential impact on patient care.
Speaker Change: Segment within the U S.
Speaker Change: Again, I think it's a bit a bit similar to the answer before I think it's a bit too early to say okay.
Speaker Change: That's a tough question this morning. But I would say, yeah, competitive hierarchy. We're lucky we're in a good industry. There's some healthy competition.
Speaker Change: Again.
Speaker Change: Without talking too much we know where in the past the Trump administration has been quite good with the VA. So maybe that's one segment that we could benefit from it but other than that I think is way too early to say.
Speaker Change: Again, as Steve said a bit earlier, we don't do the race to the bottom to go, go, go, and eventually make margins.
Speaker Change: So, everybody has his little territory, you know, we have different product offering, different strength. We think we're the consolidator of the industry, we're in a better position. But yes, some of our competitors are owned by PE, so sometimes they change from one end to the other.
Speaker Change: But again with people we need for long term care, we need more beds known the population, Canada and U S has grown up in the last few years, there's probably some shortages of beds. So differently, we should be positioned for the future.
Speaker Change: And just on the exposure to Canada what is the.
Speaker Change: We saw that maybe some of the dealers, they try to expand, so they might buy another dealer from time to time. But I think I will speak more about my competitor today. It's a good industry.
Speaker Change: The overall percentage of sales it is still relatively very minor.
Speaker Change: Inpatient care, there's timing our total sales are in Canada.
Speaker Change: Okay, and then just on another question with the incoming US administration, any potential impact on the patient care segment within the US?
Speaker Change: Both if you have that.
But I mean it is minor.
Speaker Change: So.
Speaker Change: Sales is about.
Speaker Change: Again, I think it's a bit similar to the answer before. I think it's a bit too early to say, okay? Again,
Speaker Change: 20%.
Speaker Change: It's about 20% of our.
Speaker Change: Without talking too much, we know where in the past the Trump administration has been quite good with the VA So maybe that that's one segment that we could benefit from it But other than that, I think it's way too early to say
Speaker Change: Total sales are in Canada.
Speaker Change: And of that how much would be attributed to patient care.
Speaker Change: So I can speak to the numbers in the quarter and the numbers year to date. So in the quarter of the total $44 million of patient care sales of $16 million gain came in Canada.
Speaker Change: But again, we're people who need more long-term care, we need more beds. The population in Canada and the U.S. has grown a lot in the last few years. There's probably some shortage of beds. So definitely, we should be in a good position for the future.
Speaker Change: Okay, so sizable in that regard.
Speaker Change: Thank you very much I appreciate it.
And just on the exposure to Canada, what is the...
Thank you.
The overall percentage of sales is still relatively very minor.
Speaker Change: Thank you so much.
Speaker Change: I am showing no further questions at this time I would now like to turn it back to Sebastian browser for closing remarks.
Speaker Change: Just inpatient care or you're talking our total sales within Canada? Both if you have that.
Sebastian: Thank you Britney and I will say good question. This morning from Audi Enel is a cover US here a very important part to add to the promotion of scenarios. So thank you and I will say thank you for the quarter was a good quarter and I.
I mean it is minor, so...
Sales is about...
20%.
Sebastian: We will go back to work to make sure we have a good Q4, thank you Brittany.
It's about 20% of our total sales are in Canada.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Speaker Change: And of that, how much would be attributed to patient care?
Speaker Change: So, I can speak to the numbers in the quarter and the numbers year-to-date. So, in the quarter of the total 44 million of patient care sales, 16 million came in Canada. Okay. So, sizable in that regard.
Thank you very much, appreciate it. Thank you.
Thank you so much.
Speaker Change: I am showing no further questions at this time. I would now like to turn it back to Sebastien Bourassa for closing remarks.
Sebastien Bourassa: Thank you, Brittany. And I will say good question this morning from all the analysts that cover us. You're very important to add the promotion of Savaria, so thank you. And I will say thank you for the quarter. It was a good quarter in Q3. I will go back to work to make sure we have a good Q4. So thank you, Brittany.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.