Q4 2024 Savaria Corp Earnings Call
Sarah: Good morning, my name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to Savaria Corporation's Q4 2024 conference call.
Sarah: or Lions have been placed on mute to prevent any background noise.
Sarah: After the speakers remarks, it will be a question and answer session. To ask a question during the session, you'll need to press star one and one on your telephone. You'll then hear an automated message advising your hand is raised. So withdraw your question, please press star one and one again.
Speaker Change: This call may contain forward-looking statements, which are subject to the disclosure statement contained in Savaria's most recent press release issued on March 5th, 2025, with respect to its Q4 2024 results. Thank you. Mr. Bourassa, you may begin your conference.
Thank you, Sarah, and good morning, everyone.
Bourassa: But today I will start with a small recap of the Q4 and 2024 results, then Steve will update us on financial, GP and Savaria 1, and then we will do a small Q&A session.
Speaker Change: First, I want to say that I'm very proud of the Q4 and 224 results as they were exacting in line, especially on the bit with their expectations during this transformation and it's so again that we are stable at this four-good quarter in a row. So thank you to all the team of Savaria.
Speaker Change: Some of the key highlights of Q4 in the last year. First, very good performance on the patient care in the full quarter. Is there a best quarter ever at twenty-three or one percent of the dust? Good job to the team.
Speaker Change: A good growth of 20%, a record already worth 10,000, it's coming, it's coming, it's coming, but they're very good for a quarter, for sure in 2025 would prefer to be a bit more stable, each quarter but...
Speaker Change: Good End of the Year, and it's show again that we have the right structure to do 50 million of stays and more, and it falls at the bottom line.
So good job.
Speaker Change: In North America, a good year, 8.4% of growth during the year. Yes, Q4 was more flat, but a very strong Q1, Q2, Q3. And again, we have worked very much in 2024 to improve our operation, so that we can take more volume in the future. So quite happy with the change.
Speaker Change: A solid performance from each division, from Europe , North America, to...
Speaker Change: Patience Care to improve very bit of treatment 1% for the full cooperation, so that's a good achievement.
Speaker Change: That way is sure of a 1.63, so again we have improved a lot of working capital, we have improved a bit a lot, and that gave us some available phone of 242 million, which put us in good position for acquisition or investment, especially when it's a bit of turbulence that can be good to have a good balance sheet.
Speaker Change: The growth in 2025 for sure is going to be a key focus. Thank you.
Speaker Change: and the Savaria one, and R&D. Right now we're launching the Trudefloor Lift Luma elevator that we call.
Speaker Change: It's going to be said worldwide, it's caught compliance, and we're starting manufacturing this week, so I think in the next few weeks we'll be able to ramp up the phase. So quite positive about the organic growth in the future on that, and I think everybody at Savaria know that I really like this product. [inaudible]
Speaker Change: So today, we'll try to be proactive in the talk right away about Terry from the forthcoming question in the Q&A. So this is very fresh and it happened on the street last week.
Speaker Change: That's pretty this week. The rules are not super clear of what's happening one side to the other. Is it going to affect us on the very short term? Yes.
Speaker Change: But Lessard, you know we are corrective, we have done some good tanning in the last few weeks and we are going to act quickly on this.
Speaker Change: Our operation and supply chain has always been a strength at Savaria, and I think we have demonstrated in the last five years from COVID to supply chain issue containers, inflation, so I'm feeling quite good about it, and to the Savaria one, I think our teams just got better, so I think we're ready to overcome those challenges.
Speaker Change: First, in the coming week, there will be some small pricing trees to our customer dealer that we do in a fair way as our dealer has always been a strand of Savaria for the last 35 years. And it will continue on their family leadership, we take over our customer and then contribute as we are there for the long term.
Speaker Change: Second, we are very lucky. We have some footprint already in the US. We have two factory, one in Greenville, one in St. Louis, and the one in Greenville has 60,000 square foot, available, empty that we can use to make summer.
Speaker Change: I said we learned some finished products, so definitely we're going to put that in exercise to use this extra capacity. You can even extend the bedding because we want to do it, a big length, you need to do it.
Speaker Change: Fort, as I said earlier, we have the right balance sheet, we're trying to put it in the middle of the available, so we can make investment.
Speaker Change: to go to the small challenges or opportunity that might come, because the opportunity can come and there's kind of a certain answer to that. And finally, you said that we revised our guidance for the 20-25 years.
Speaker Change: We knew that we were the sound of the car division last year, that we didn't have to place the stage.
Last year in 2024, we chose to go for it. [inaudible]
Speaker Change: David Durin, you know that, Overseas Road, so all of this to see that, that's why we have revised it.
The volume to 925 minutes of space.
Speaker Change: and we're feeling good about that. And the EBITDA, we have put a bracket from 17 to 20% because on the short term we need to be adjusted on the tariff, but I'm feeling comfortable, the targets still want to make 20% but we need to be realistic. That's why we put the bracket.
Speaker Change: Well, as you know, just to finish, you know we are a very agile organization. We can overcome some challenges. I think we are the right team, the right employees. So again, thanks for all your effort that we did last year. And thanks for your 42-22-25. I'm sure we'll get through these challenges together.
Steele, Smarbeton, Farenciot, please.
Speaker Change: Thanks Sebastien and good morning to everyone on the call. I'm excited to share with you today some remarks and highlights regarding our Q4 and full year 2024 financial metrics.
Speaker Change: So the key highlights for the quarter include firstly, as Sebastien mentioned, organic growth of 20.6% in patient care, consolidated gross margin of 37.7%, which is an increase of 340 basis points versus last year, mainly due to improvements generated under Savaria 1.
Speaker Change: Adjusted EBITDA margin of 19.2%, which marks now three quarters in a row of margin at 19 at least or above.
Speaker Change: Strong Cash Flow and Working Capital Performance, resulting in a reduction of our leverage ratio to our leverage ratio of net debt to adjusted EBITDA, to 1.63 is Sebastien noted at the end of the year.
Speaker Change: As previously stated, we have very strong organic growth in our patient care segment of 20.6% to the increased medical bed frame sale, the mattress revenues, as well as sealing lift packages from increased projects closing in the long-term care markets.
Speaker Change: Our accessibility segment had a contraction of 1.9% in the quarter driven by a 7.8% contraction in Europe and flat growth in North America.
Speaker Change: Europe continues to be focused on higher margin sales and we expect to see your return to positive growth in 2025 as we deliver on our customer win-back strategy as well as introduce new products to the market.
Speaker Change: North America had growth of 8.4% for all of 2024 and we saw very strong growth in Q1 through Q3 in which was tempered in Q4.
Speaker Change: The North American backlog remains strong as we look forward to continued sales growth in 2025, aided by the introduction of the Luma, as Sebastien mentioned, which is the new through the floor lift, as well as continuing to drive sales of the Maytop branded dumbladers and material lifts which we acquired earlier in 2024.
Speaker Change: On a full-year basis, the lost revenue from the debestments of then-action and freedom, which were our manufacturing vehicle divisions.
Speaker Change: was greater than the benefit that May thought brought to us in 2024, hence striving the overall negative net acquisition of investment impact of a minus 1.4% for the year.
Speaker Change: Looking now at Gross margins, our consolidated Gross margin for the quarter was 37.7% and 37.1% for the full year.
Speaker Change: As previously stated, this is a significant improvement over a prior year, and as we continue to see benefits under this is a very one program in all of our segments.
Speaker Change: The main drivers of the improvements are lower material costs from procurement improvements, improved pricing.
Speaker Change: and increased operational efficiency as well as leverage as we were able to hold our cost-base relatively stable while increasing sales.
Justin Ibida: Justin Epidow was 42.9 million for the quarter and reached 161.2 million for the year.
Speaker Change: Q4 represents the third quarter in a row about the $40 million threshold.
Speaker Change: The resulting adjusted EBITDA finished at 19.2% for the quarter and 18.6% for the entire year and on a full-year basis this represents a significant improvement of 310 basis points over 2023 something that we were very proud of internally. [inaudible]
Speaker Change: We are clearly well on our way to our goal of 20%
Speaker Change: Old Accessibility and Patient Care, good improvements in Adjusted Depadal Margin, and to provide more detail and accessibility for North America finished with 23.2% margins for the year, and you're improved by a whopping 480 basis points to finish at almost 15% for the entire year.
Speaker Change: Improvements in Adjusted EBITDA margin in all segments and divisions are driven primarily from improvements in gross margin that I previously mentioned, which was powered by Savaria I.
Speaker Change: We incurred 5.5 million in strategic initiative expenses for the quarter and 21.6 for the year in line with our expectations and these fees are mainly consulting costs as we've been noting all year long.
Speaker Change: Finance costs were 2.4 million for the quarter, and excuse me 18.5 for the year compared to 4.8 million and 21.8 respectively last year.
Speaker Change: The main drivers of the quarterly and yearly decreases is lower interest rates on our debt, as well as the lower overall debt balance as we repaid that debt throughout the year during my strong cash flows.
Speaker Change: Net earnings was $14.3 million for the quarter compared to $11 million last year.
Speaker Change: and for the full year net earnings was $49 million versus $37.8 million and $20.3, which is a large improvement of approximately 30%.
Speaker Change: I'm now going to provide commentary on her balance sheet and cash flow.
Speaker Change: and Casual from Operations in Q4 with 34.2 million, including a reduction in working capital of 1.2 million compared to Q3.
Speaker Change: We were able to reduce inventory by 6.3 million in a few of our key manufacturing facilities, as well as increase our payables globally.
Speaker Change: Our trade AR increased in the quarter, but finished below last year.
Speaker Change: Overall, we improved our working capital by 11 days, versus 2023, which is above our internal target for the year.
Speaker Change: CapEx for the Year finished at 20.1 million, which is, which equates to 2.3% of sales and is in line with our guided range of two to two and a half percent of sales.
Speaker Change: Free cash flow after debt related costs and dividends was 34.9 million for the year which is 43.2 million and better than 2023, a significant improvement.
Speaker Change: The strong free cash flow helped us to repaid debt and reduce our leverage ratio to 1.63 and helps us ensure a strong balance sheet to start 2025 so that we can be prepared for any opportunities or challenges that come our way.
Speaker Change: and for 2025 guidance, due to uncertainties around tariffs and retaliatory tariffs, we did revise our guidance that Sebastien noted. We are going to be guiding to approximately 925 million of revenues with the necessity to be done margin between 17 and 20%.
Speaker Change: At this point, it remains very difficult to estimate the total upside or downside from tear-related impacts.
Speaker Change: And with that, this completes my prepared remarks, so I'm now going to turn the call over to John Faleed to provide further details on how we're progressing with Savaria 1.
Thank you, Steve, and good morning everyone.
Speaker Change: While the US air situation was certainly trigger actions and set new priorities for the months ahead, the plan we were executing with Savaria won is still highly relevant.
Speaker Change: The terrorists will increase pressure on our results for some time while we adapt, as Seb mentioned, but our business is diversified both geographically and in terms of market segments.
Speaker Change: and the majority of our business is not affected by terrorists. [inaudible]
Speaker Change: Therefore, the impact on Savaria 1 will be limited and involve only a handful of colleagues who must now put in place mitigation measures while the rest of us carry on our work.
Speaker Change: In the long run, Savaria will succeed because of its great products, an excellent dealer value proposition, a sound customer experience, a competitive supply chain, and safe and reliable manufacturing facilities.
Speaker Change: Those are all things that we are focusing on with Savaria 1.
Speaker Change: 2024 was our first full year in Savaria 1 as we launched the effort towards the end of 2023.
Speaker Change: I'm happy to report that we reached the objective we had set for ourselves and delivered more than 30 million of in-year EBITDA improvements in 2024, through a combination of commercial, operational and supply chain improvements.
Speaker Change: In fact, I was recently looking back at our investor-day presentation from April 2024 to review the plan as we communicated it then, and I was happy to see that we implemented pretty much everything we had line of sight on at that time.
Speaker Change: For example, we talked about cross-selling, and in fact, we grew sales of Garreventa platform lift products to hand-care dealers in Europe .
and we also grew acute care cells in the U.S.
Speaker Change: and Walter Dunst were the far scheming persons valve for the institutionalized CPUS in 2014.
Speaker Change: We also grew the sales of services across accessibility businesses with new commercial offers for maintenance and modernization of existing lifts, both in North America and in Europe .
Speaker Change: We expanded the capacity of our main facilities like Branton and Surrey for Elvators, but also reorganized the Kingsman Furt facility in the UK to a one-shift work schedule, and that was a big success as we now produce as much with one shift in the day as we used with two in the past.
Speaker Change: We nearly doubled the throughput of our Mexico facility, which now supplies Brampton and Surrey, but also Beamsdale, our beds manufacturing facility.
Speaker Change: We're also now set up to assemble a new product, the Luma, all in Mexico and for all markets around the globe.
Speaker Change: We completed just north of 50 procurement RFPs or price three negotiations in 2024. We're experiencing negative cross-inflation in multi-businesses thanks to those efforts.
Speaker Change: In patient care, we added new reps to expand the geographic footprint of our acute care business.
Speaker Change: Those reps generated even more cells than what we had planned for in the first year.
Speaker Change: Finally, we scaled up the reconditioning line for used stair lifts in the Netherlands, and this allows us to reduce our environmental footprint while also addressing the needs of local authorities. We are now setting up a similar reconditioning line in the UK so we can better serve that market too.
Speaker Change: Those are just a few examples and in total we implemented about 200 distinct initiatives since starting Savaria 1.
Speaker Change: In terms of impact, we estimate that about half of the gains realized today relate to commercial actions and the other half to operational and supply chain optimization ones.
Speaker Change: The one place where we can still do better is in growing the top line, either by growing share of wallet where our dealers are expanding our network of dealers or growing our direct store operations around the world.
Speaker Change: In 2024, we made conscious trade-offs of volume for better margins, which we believe were appropriate to set the business on stronger economic foundations and instill discipline in our pricing.
Speaker Change: Yet, our goal in 2025 is to cautiously re-energize the top line, especially in Europe where we have the most room to grow in the short term, while preserving those strong profitability foundations.
Speaker Change: I will caution us all that is unclear what kind of growth we make in North America in the very short term given our elevator business is correlated with economic growth and new health starts and at the moment, given all the changes happening in the US, it's hard to predict where those drivers are going to be headed.
Speaker Change: Also, we continue to have momentum. It's important to remember that we will have to play all wins from our 2024 initiative to 2025.
Speaker Change: For example, all the recurring cost reduction measures implemented in the second half of 2024, whether they relate to process changes, headcount reductions, material cost reductions, or other levers will only give us full-year benefits in 2025.
Speaker Change: Furthermore, we continue to add new ideas to our pipeline. Only into four of last year, for example, we added $6 million worth of new ideas, almost all of those related to cost reductions.
Speaker Change: Through our monthly and quarterly business reviews, we continue to identify new opportunities and add initiatives to our pipeline.
Speaker Change: Finally, we plan to watch another round of ideation involving all divisions in Q-3 of this year.
Speaker Change: All this to say that putting aside the disturbances and financial impacts of terrorists will certainly have on our business in the short term, we are continuing to make strong progress with some RU-1 in our expecting sustained improvements to 2025.
Speaker Change: I will repeat what Seb said before, but even in Savaria 1, we are adopting a long-term perspective in our business and continue to make choices that support the long-term growth and the long-term success of Savaria as a global leader in the accessibility space.
Speaker Change: We're excited to see all the progress made and the roadmap ahead of us for 2025 and look forward to see the results materialized in our numbers.
Thank you for your attention. Seb, any closing remarks?
Seb: Thank you, GP and Steve, a very good overview of what's happening in Savaria. Again, we are lucky, good industry, very ageing population, terrible phone up.
Speaker Change: This is not going to change, and as you mentioned, GP Evers, it's not related to TARF, this is not going to change, it can conflict the same game plan.
Speaker Change: The patient care and manufacturing in the USA could be a positive thing for them, so again, I'm feeling good about what's happening in the business. So I think we're ready to have some questions from our analysts, which are making a fantastic job to cover us up. You did some good report yesterday, you understand well the business.
Speaker Change: So let's see if we have some questions about last year or just some terror but we are ready.
Speaker Change: Thank you. If you would like to ask a question, you'll need to press star 1 and 1 on your telephone and wait for your name to be announced. And to withdraw your question, please press star 1 and 1 again.
Speaker Change: Thank you. We'll now go ahead with our first question. First question today is from Derek Lessard from T.D. Cowan, please go ahead.
Derek Lessard: Good morning, and first off, great quarter, everyone, an absolutely great year. Too bad about the political climate.
Derek Lessard: But I did want to address the elephant in the room right off the bat and fully realize that the situation is fluid and...
Speaker Change: and every company Canada is trying to assess the impact. But maybe I'll frame the question a little bit differently. Are you aware of any advocacy groups or lobbyists or lobby groups for that matter in the accessibility industry?
Speaker Change: and maybe can you just talk about what you're hearing from them on the ground and maybe from some of your US clients and maybe your partners and dealers.
Speaker Change: Thank you, Derek. For sure, again, it's very, very new key. Again, it has been officialized this week that it will be terrier from Canada going to the U.S. key.
and a very small observatory on the other side. [inaudible]
Speaker Change: Again, we have the medical industry for many of our products. Thanks for your time, and I'll see you in the next one.
Speaker Change: Yes, so hopefully people will do their job but again it's very new and I think this is a different kind of a list of to-do to work with them to see how we can make maybe an impact on Ontario. We saw yesterday they have removed something for 30 days on the car industry and started with that one.
Thank you very much.
Yeah, absolutely. Okay, that's fair. So just maybe switching gears.
Speaker Change: I just wanted to dig in a little bit more on sort of residential and commercial demand in North American accessibility. If you did mention in your remarks that it was flat this quarter and that you said it was a more difficult US market. Could you just maybe talk about some of that what you're seeing in terms of near-term demand, obviously irrespective of tariff implications.
Speaker Change: Thank you. So for sure, like the person that has started hours a few months ago.
Speaker Change: and the tariffs are coming out, but they are continuing to build, so I think. [inaudible]
Speaker Change: Again, I don't see any impact on the short-term, we're busy, we're building all elevators [inaudible]
Speaker Change: The order to come in is quite good. It's good that sometimes we're at growth from one quarter to the other, is it?
Speaker Change: Again, it can be challenging. You know, we have some deadline on pressing freeze. We're going to have a spike in our backlog.
We did a lot of effort last year, okay? [inaudible]
Speaker Change: to push, push, push our production to understand, again, what is our capacity.
Speaker Change: to free up some volume for the future. So yes, we have read the data back up in Q1, Q2, Q3. That's why Q4 was a bit more flat in turn over.
Speaker Change: Mrs. M. Schollman, Thomas or Accessivity. It's not necessarily because there's no permits or there's no construction. I think it's just a result of all we have executed our background last year. And Stephen, we want to add maybe something?
Steve: What that means for the future. Typically our direct store backlog is anywhere from within a few weeks but that can reach out to a year and a half to two years, depending on the construction timeline. So...
Steve: The really positive sign for us is that backlog, that backlog has never been higher so good indicator for us for 2025 and going forward.
Speaker Change: Flora Deluma, and this is a growing segment. This is something a dinner with requesting a why don't have a Trudeau-Florre.
Steve: And this is a product that is going to be installed in the day of the day, very fast to install. So this is going to add to generate some growth. So again, we're creating quite good about the future in North America and in New York. Thank you very much.
Speaker Change: Yeah, I appreciate the color, that's a great color, and maybe just one housekeeping for Steve in terms of your expectations for AS Working Capital in 2025 and maybe a word on your CapEx Plans.
Steve: Sure, yeah, so working capital, we did very well in 2024. We reduced our working capital days by 11. That was...
That was over and above our budget to be transparent.
Steve: We're likely not going to get another 11-day reduction in 2025, but we are still targeting a reduction. We still think there's a few pockets where it can do better on inventory. AP days are pretty good and AR days are pretty good, but we still think we can do a little bit better there as well, so there will be improvement.
Steve: We'll see on a dollar basis, it depends on how much reaction grows grow sales, but on a working capital day basis, 2025 should be better than 2024.
Your second part of the question around CAPEX.
Steve: 2025, depending on what happens with operations in the US, we're probably going to be closer that 2.5% mark, Derek. So I think if you're putting in your model, I would say 2.5 is probably a safe way to go.
Okay, thanks for that, and again, great year, everybody, congratulations.
Thank you, Derek, for two.
Thank you.
So now move to our next question.
Speaker Change: This is from the line of Frederic Tremblay from Desjardins Capital Markets. Please go ahead.
Thank you. Good morning.
Speaker Change: I just wanted to start with the margin range provided for 2025, just on the 17% anchors to really hear your thoughts on what the main assumptions are there. Specifically, I know you can prepare remarks to mention a small price increase. Is that included in there? Is there any?
Speaker Change: Other mitigating actions that are in that 17% just a bit of more color on that please.
Speaker Change: I think that was happening, but he had a terrifull to bring some short-term challenges and again we have solution and we're going to act quickly in a both price increase. We're going to reduce terrier by assembling locally. I think we have a good game plan.
Speaker Change: But again, all of this is very fresh. We do not want to remove our guidance and have nothing for an investor that's not their style.
Speaker Change: because we're doing action but it's hard to quantify everything and for sure towards the second half of the year could we try and back again in the 20% that happy the answer is yes but as a full year we're a guy that has a 70 to 20 because this is a uncertainty right on the left.
But last reaction, we're doing things.
Quite quickly, because we don't like cigarettes. [inaudible]
Speaker Change: Okay, that's helpful. And then just I guess maybe as a follow-up to that, you mentioned that 20% with the scenarios and the plans that you put together, do you feel that you have?
Speaker Change: that you will have what you need to get to that 20% level, maybe, I think he said, maybe potentially late 2025, but certainly in 2026 is that would that be the goal for potentially for 2026 to get to that 20% level.
Speaker Change: I think you saw a bit of what finished the year, again, we have been pulled by three points that he last year from 15 to 18 and that for the full year.
Speaker Change: Again, many divisions have done many times over 20%, yes, we need to cover their at-office cost, but at the end I think we have a good game plan, a summer R1, a key GV Super, he is to present, he is to Derek, he is pushing, pushing with the team, so I think we are feeling good about that.
Speaker Change: I did not change the discussion with my team, we still talk about 20%, I'm not going to change the speech to 17, but it's just because that area, we have to moderate guidance, but the mindset did not change Fred is 20%.
Thank you.
Speaker Change: Okay, great. And then the last one before we get back into Q, just on competition. How do you feel about, you know, the brass competitive positioning and the current environment? I'm thinking, you know, obviously about U.S. These competitors, you feel like you're, uh,
You're still well positioned to...
Speaker Change: to keep your market share and potentially improve market share in the coming years.
Speaker Change: Thank you, Fred. But again, no, Savaria, we have 12 factory, they go close to one minute and score a foot of manufacturing some biggest in the industry, and they're a small industry.
Speaker Change: So I think we're, again, in free assurance of the tariff, it's a bit for everybody, but because even the U.S. to manufacture...
Speaker Change: The importance of parts from right hand left, for measure, for measure up, it was a worldwide economy.
Speaker Change: So, definitely it will be affected and it will do some price increase as well.
Speaker Change: Keiden, can we export to the US? Yeah, everybody will need to do some. So I think I'm feeling quite good about our position and I don't think this would change anything. And even we've probably found some way to be stronger. And I think we have always been good with our dealer. They have been good with us. And I think that we just continue. And I think that we're going to be able to do it. We're going to be able to do it.
Thank you, Sebastien.
Thank you.
We'll now take our next question.
Speaker Change: This is from Zachary Evershed from National Bank Financial, please go ahead [inaudible]
Thank you. Thank you. Good morning, everyone.
Good morning, Zach. Good morning.
Speaker Change: Really impressive growth, organic growth out of patient care, and I heard you mentioned more reps serving the acute care market. Do you think you can continue pushing the patient care segment to grow at a similar organic rate in the quarter's head?
Speaker Change: I think, again, Zachary, we have seen it. No, and we saw the patient care after COVID, they had two good quarters, two on two, two on two percent. Again, they did a 20 percent again and three four. And I wish we would do 20 percent in scorer, but it's not realistic, right?
Speaker Change: I think everybody knows that the awards are getting 8-10% gross, so it is just that it was a net commissioner project and everything has happened so long, true for it, due for delivery, for delivery and installs. This is just this, so send some quick, turn out on products.
Speaker Change: So I think differently for the year again, we're expecting a modest growth as we all get our division to do what we want.
Speaker Change: Hopefully it will surprise us again and do the same thing, but I think we'll give you up state.
Speaker Change: It was a very special corner, it was because Q-1, Q-2, Q-3 was flat-way.
Good color, thanks [inaudible]
Speaker Change: and then I was kind of surprised to hear that you're experiencing lower raw material costs in both segments again. Any color on what's driving that and how sustainable you think it is?
Speaker Change: Yeah, so it's not happening, it's not happening out of luck, or it's not because just the commodities are going down because...
Speaker Change: Charles Eng, because it's not been challenge for a long time, we did. So I think at the end of the day, when we did the negotiate process, we got very steep reductions.
Speaker Change: and if you add up all these reductions in average, that's why we see some negative inflation. Mind you, suppliers will always come and try to get some price increases but I think our procurement team is doing an excellent job to both counter-disk but also sometimes reduce the cost.
Speaker Change: So it's some of all these efforts that allowed us to reduce our material costs.
Dr.
Axon, thanks.
Speaker Change: and then if you're thinking you can get back to 20% of Justin EBITDA margins in the back half of the year and guiding towards 17 to 20% for the full year, does that mean that you're looking at a pretty substantial drop in Q2 before your actions can work to raise that EBITDA again?
Zach: I think it's a tough question, Zach, again, just happening yesterday that the terrifor official.
Speaker Change: I think we'll be in the next, and they get in January February , there was no tariff, but I think we're going to turn out on in the next few weeks, so can we have a...
Speaker Change: Duff March and April , who will see what we are going to turn out on quickly and again we will focus well there for the mid long term. We are not just for one month or one quarter and we have been in the business for 35 years.
Speaker Change: We target over 70% for the 4.25% but to do the exact what would happen in each quarter, we have never really done that. We don't do guidance per court, sorry Zach.
Speaker Change: Fair enough. And just one last front, one for me. How did January and February go so far in the order?
Speaker Change: My lawyer will not be very happy for looking guidance, we don't like it, but again, we'll just continue a bit, we're planning to have a good year this year.
Speaker Change: The things that we split were four quarters, so I think where I'd be with the beginning of the year, and now we see what happened in the next few weeks, but we're going to turn around with a cookie, as I said on the tariff now. But we'll have a good year, we're busy, so I'm feeling good about it.
and Hugh Halter & Dover
Thank you, Zach.
Thank you.
We'll take our next question.
Speaker Change: This is from the line of Julian Heng from Steeple. Please go ahead.
Hi, good morning. It's Justin Keywood.
Speaker Change: Just some additional questions on the tariff. So we understand there's significant US capacity, 60,000 square feet where production could potentially shift if needed. What are some of the parameters there where you would get increased investment into the US or perhaps
Speaker Change: Price increases, it is the appropriate route. How do you balance those options?
Justin Ibida: I think Justin, if I'm not correct with your questions, I will mitigate that. It is a mix back, right? A bit of price increase to a customer after that, the product that we have to have, if I can mitigate that, maybe do the final lesson in the US.
Justin Ibida: Alken, we find a different supplier in the exact country where we need to do the SMB. So I think we'll be a mixed scenario that will give us some results and be assured that in the next three-quarter, I think we'll be able to review some color on the size of Derek. We've got a niche quarter, what are we doing? I'll just see things. But again, it's very fresh, okay? It just happened yesterday.
Justin Ibida: So now all this scenario we have done in the last few weeks for going to find some of it and we're going to put that into a execution.
Speaker Change: Understood, thank you. And then the balance sheets in a pretty good shape, 1.6 times levered.
Speaker Change: What are some of the capital allocation priorities? Is buybacks or an SIB on the table? I know that Savaria has been a positive in the past. Are there any M&A opportunities perhaps in the US?
Speaker Change: I think, again, good question. Yeah, we're very lucky, we have a good balance sheet, and you see balance sheet is important when there's a bit of more turbulence. The guy that does not have a good balance sheet, make it much more difficult.
Speaker Change: So, again, M&A, our friend Nicolas Tiller working with us is doing some phone calls, so for sure, we're still looking at that. Again, there's a big more some talking than there's some major acquisition. I would want to close one this week, I think we should work to see what happened if it was a tariff. But, differently, this is on the plate. I think Steve said earlier, CapEx.
Speaker Change: And we will continue to make investments in our R&D because it's important to allow some new products to buy equipment to improve our factories and become more productive. So they're differently we're going to continue with the same rate we were doing in the last step.
a few more minutes.
Thank you.
No, not us. Good summary.
Speaker Change: Great, just one final one on Europe and HandiCare. Are there any sales into the US, or is that contained?
Speaker Change: Since we did the acquisition, we've brought back everything to manufacture North America, so now they indicate there's a ship from Europe to the US.
Great. Thank you for taking my questions. Thank you.
Thank you.
Speaker Change: Thank you. We'll take our next question. This is from Jonathan Goldman from Scotiabank, please
Hi, good morning guys and thanks for taking my questions.
Speaker Change: A lot of been asked already, I guess a couple from me on tariffs. The first one, Seb or whoever wants to take this, the last time there was tariffs in North America, you know, specifically on steel and aluminum. Were any of your products exempt at the time? Was there a special car vote for medical devices and were your products classified that way?
Speaker Change: Last time, again, it's really the first time that we have really an impact from Canada going to the U.S. No, before was always a little, it's still an aluminum or something from China to the U.S. So again, we have always been able to figure it out and not been really impacted, but this time it's really the first time that we're...
We have to leave you. What we're doing, I—
Speaker Change: Okay, make sense. And I guess my second question. How easy is it for a dealer to switch between elevator brands or stairlift brands?
Speaker Change: Again, many of our dealer worked with us for many, many years and now they invest some time to train on sub-art product. After that, we always talk about the one stop shop, it's one of the full number of what it says for the tech support.
Speaker Change: So it makes it very easy for them to make business with us. They can go on a contributor to buy their products online to see the status of the order. So yes, they can always twist, but we need to reach rain. They're a sales team, they're independent team, they're installers. So again, I would...
Speaker Change: I would take it a bit more difficult to change. After that, no, sometimes, you're a successful one every year because you sell a one brand, maybe next door, you have a dealer that sell a different brand, so it doesn't mean that the next day you have access to the other brand, right?
Speaker Change: I think again we are comfortable and we work with this with our dealer and that everything will be okay.
Thank you. Bye.
Speaker Change: If it makes sense, maybe one more going back to the M.A. question, how would you think about either shifting production from where you are to excess capacity in the U.S. or maybe buying capacity through a deal? How would you balance the two options versus the financial commitment and the timing of those which would make more sense?
Speaker Change: I think, again, we're going to do an M&A of a competitor. He's not going to manufacture my Savaria product, my dealer want to buy the Savaria product. So, again, for me to shift production into an MP factory where I have a patient care management, or to shift it to M&A, if he for me is the same effort.
Speaker Change: So I take right now, again, one want to continue with the one stop shot, that's one of our strengths, so we'll see how we need to balance things in the next few weeks then.
Okay, thanks to the colour.
Thank you.
Speaker Change: Thank you. We'll now take our next question. This is from Michael Glen from Raymond James. Please go ahead.
Michael Glenn: Hey, good morning. Just maybe a couple questions from me. So you gave some outlook, some that look commentary for the elevator.
Michael Glenn: Segment in North America. I'm just wondering if you can give some thoughts on the stair lift outlook in North America, industry level type numbers in terms of what we should think about for industry organic growth in 2025.
Michael Glenn: Okay, now for sure we don't really disclose it for products, for sure they get the food family, we're targeting approximately 8% growth key.
Michael Glenn: So, but if you use Charlie, if this is an area that since we brought back the manufacturing from Europe's North American to cut,
Michael Glenn: Again, the styrofoam scratchers have a fantastic glow, but the plus, it's a mixed bag. One product goes a bit nut as good, the other one goes better, but the success of Savaria is at the Davor Stephen. [inaudible]
Speaker Change: How would you characterize, I recognize this might be a tough one to answer, Sebastien, but how would you characterize your competitors manufacturing footprint in the sterile of market? Is it primarily domestic based or there's a lot of import product associated with the US sterile of market?
Speaker Change: I think, again, there's a lot of factory established in the US that manufacture locally, but again, Sir Global Supply Chain, so some people might bring some power, some major from Europe is that, so, again, I think it will be inpatient for everybody, and not just for Basararia, but
Okay, that's it for me. Thanks for taking the questions.
Thank you.
Speaker Change: Thank you. As a reminder, if there are any further questions, please press star 1 and 1 on your telephone and wait for your name to be announced. Let's star 1 and 1 to ask any further questions.
Speaker Change: There are no further questions coming through so I will now hand back to the speakers for any closing remarks.
Speaker Change: Okay, thank you all the question for analysis. Again, you're doing a fantastic job to call us Savaria. Thank you again. And Sarah, I will say that was a good call. Thank you very much. And we are trying to give the best color we can. And I'm sure we'll succeed in the next few weeks, three months to work on those short-term challenges. So, thank you very much Sarah. See.
Speaker Change: Thank you. This concludes today's conference call. Thank you for participating and you may now disconnect.
Michael, Michael, Michael, Fred Gatali, Zachary Evershed, Zachary Evershed