Savaria Corp

TSX:SIS

Earnings Call Transcript 2024-Q1

[Operator]

Good morning, afternoon and evening. My name is Norma. I'll be your conference operator today. At this time, I would like to welcome everyone to Savaria Corporation's First Quarter 2024 conference call. [Operator Instructions] The three speakers for today's conference will be Sebastien Bourassa, President and Chief Executive Officer; Stephen Reitknecht, Chief Financial Officer; and Jean-Philippe De Montigny, Chief Transformation Officer. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] This call may contain forward-looking statements, which are subject to the disclosure statement contained in Savaria's most recent press release issued on May 8, 2024, with respect to its first quarter 2024 results. Thank you. Ms. Bourassa, you may begin your conference.

[Sébastien Bourassa, executive]

Thanks, Norma, and good morning, everyone. So today, I will start with a small recap of our first quarter results. Steve will update us with our financial section, and JP will update you on the progress of the Savaria One, and we are going to have a smaller Q&A session at the end. Unfortunately, overall revenue growth in Q1 was below expectations. First, we will have some sales with the divestitures of Van Action conversion in Canada. Europe had a small decline of 3.4%. But we will see a totally other positive, okay, EBITDA improvement. So good job on that. And we are going against a weak second quarter of 2023. So, we're expecting to have some growth in the second quarter to bring us back to the normal point. Patient Care had a flat first quarter, but we are again at a strong first half of the year in 2023 with a weaker second half. So, we're expecting strong growth for this year. It's part of Savaria One. And remember, in the last two years, we have increased our sales by 30% in that segment. Positively, in North America, we saw a growth of 11% in the first quarter. We have deployed our dealer partner program, name [Access plus]. In North America, the reception was very good, and we had our best quarter ever in terms of booking for Garaventa and Savaria in North America. So quite positive. So ups and downs in the first quarter. But in the long term, we are still very confident in our ability to grow the business to $1 billion by 2025 with the aging population. A unique value proposition for the one-stop shop and a wide range of product that we have with the expansion in R&D, with new products, and bringing some new existing products in Europe. I think we have the tools in our hand in [indiscernible] Overall, Savaria has remained a very attractive business for dealer with in all different market, the one-stop-shop, wide range of product we have, a global footprint and a vertical integrated supply chain. We continue to expand our build-out in Mexico. Now we have 75 employees, which will be there to support the next generation of manufacturing improvement costs, bring some resilience to our supply chain that put us in a good position. Our operation continued to improve in all factor in terms of safety, quality and throughput, so quite positive and that brings us a bit to the next section, which is the EBITDA improvement by 2% in the first quarter to 16.6% in the Easter year weakest quarter of the year, and that showed some very positive sign of operational excellence that we are developing to the Savaria One program. Improvement of 2% and above going from 10% to 12% with lower sales, so that shows some sign of improvement with the Savaria One, and the team is working very hard on this, and JP is going to explain it in this section later. North America Accessibility improvement of 2% going from 17.5% to 19.8% due to a higher output in [indiscernible] and good performance in our direct store. So very happy with that. Patient Care went down to 18.5%. I think it's mainly due to the product mix and lower sales but not very far from our target of 20%. As discussed in our last Investor Day, our target by 2025 is to be a company of approximately $1 billion in sales at 20% EBITDA, and it will be possible with a Savaria One program. Our results in Q1 show that we are moving in the right direction. Savaria is also very well positioned with its balance sheet. It will continue to do some smart tuck-in acquisition to reinforce our product portfolio to continue to improve the margins. In the first quarter, yes, we divestitures of Van Action conversion in Canada, but we have replaced some portion of the sales with [indiscernible] that's going to start from April, and that show a very good example, a small tuck-in to bring some new products to continue to be the first choice for a dealer and be able to integrate that in our supply chain to bring some synergy. Very important, we had a good quarter in terms of cash generation, which Steve would talk about it into details, but I want to highlight that we are generating cash from operation, while we are growing the business, and this is where we want to be. Finally, I would like to thank all our employees, our dealers, our supplier and our customer for this success in the first quarter. And as I travel all the work to the different sites, I was impressed it's a good idea from our employees and I thank them for all their participation in this successful company. I think our employees appreciate the effort that we are getting and some direction on where to go. The participation is good, and we saw that in our last engagement survey in the company. So in closing, keep in mind that Q1 tends to be the slowest quarter of the year, while we have a revenue growth challenge. We are quite pleased with the profitability and improvement in our margins. Steve?

[Stephen Reitknecht, executive]

Thank you, Sebastian, and good morning to everyone on the call. I'm excited to share some remarks regarding our Q1 2024 results. So starting off some key highlights for the quarter include strong EBITDA margin improvement driven from gross margin improvement. North American Accessibility of revenue growth of 11% and strong cash generation from operations, including from working capital in our seasonally weakest quarter. So over the quarter, we generated revenue of $209.4 million, a decrease of $2.2 million or 1% versus last year. The decrease mainly came from the divestitures of Van Action Freedom Motors and the Norway operations, partially offset by organic growth of 2.6%. We also experienced positive foreign exchange fluctuations. I'm pleased to report that the corporation delivered improved gross margins, not only over Q1 of 2023, but also higher than any quarter in all of 2023. We delivered record gross profit and gross margin of $75.4 million and 36% compared to $72 million and 34% in Q1 2023. The increase in gross profit of $3.4 million is explained by better gross margins in both of our segments due to favorable product mix, improved pricing, favorable -- and favorable cost of material as well. As Savaria One continues to be the major driving force towards our targets, we incurred $5.3 billion for strategic initiative expenses in the quarter, in line with previously stated expectations. Adjusted EBITDA and adjusted EBITDA margin finished at $34.7 million and 16.6% compared to $31.2 million and 14.7% last year. The increased profitability is mainly explained by the increased gross margins as a result from the effective realization of our ongoing Savaria One initiative, and JP is going to speak to this shortly in more detail. Now looking at our segmented results. Revenue from the accessibility segment was $160.4 million, a decrease of $2.4 million or 1.5% compared to last year. The decrease was mainly related to the divestitures. In addition to the execution of some of our pricing initiatives and pricing optimization, we saw strong demand in both residential and commercial sectors, partially reflected in the organic growth of 3.3%. Adjusted EBITDA and adjusted EBITDA margin for accessibility stood at $27.6 million and 17.2% compared to $24 million and 14.8% last year. The increased profitability was mainly due to improved gross margins coming from favorable product mix, improved pricing and favorable cost of materials for both regions in line with our cost efficiency focus. The accessibility backlog remains strong and grew slightly versus where we ended the year. We considered our backlog level to be healthy as we have a good mix between short lead time products such as Stairlifts, which will ship out quickly and longer-term home and commercial lifts, which we'll be shipping out within a few months or longer. To provide some further color on our regions, revenue from our North America accessibility region increased 11% over last year. Adjusted EBITDA margin rose to 19.7%, an improvement of approximately 200 basis points versus a year ago. Revenue from our Europe accessibility region declined 3.4%. The backlog remained stable. Adjusted EBITDA margin improved here to 12.7%, also an increase of approximately 200 basis points over last year. Switching gears to discuss our Patient Care segment. We saw revenues for this segment reached $49 million for the quarter, an increase of $0.2 million or 0.4% compared to last year. We experienced healthy traction inside the United States, which led to increased revenues. While we saw a decrease in Canada explained by certain large construction projects delivered in Q1 2023, not repeating this year as well as reduced government spending. As a reminder to everyone on the call, our Patient Care business is driven in large part by project-based sales, which can be lumpy from time to time. And throughout the quarter, the patient care backlog remained stable. Adjusted EBITDA and adjusted EBITDA margin for Patient Care stood at $9.1 million and 18.5% compared to $9.8 million and 20.1% last year. The decrease in both metrics was mainly due to an unfavorable product mix on certain projects versus last year and higher selling expenses, partially offset by pricing initiatives and pricing optimization. We have communicated on previous calls that Q1 and Q2 of 2023 were exceptionally strong and likely not to repeat in the short term. Our EBITDA margin of 18.5% this quarter is higher than what we saw in the previous two quarters, in Q3 and Q4 of 2023 and is a very good start in our progress towards our target of 20% EBITDA margins. On a consolidated basis, net finance costs were $3.1 million compared to $7 million last year. Interest on long-term debt decreased by $1 million, primarily due to the reduced balance of debt, and we also experienced unrealized movements on financial instruments. Net earnings was $11 million or $0.16 per diluted share for the quarter compared to $6 million or $0.09 per diluted share last year. The increase in net earnings and net earnings per share was mainly due to the higher adjusted EBITDA and lower net finance costs, partially offset by higher net income tax expense and strategic initiative expenses. The higher net income tax expense resulted from the bottom-line increase to the increased profitability, but does represent a slight decrease in our effective tax rate from 24.8% for all of 2023 to 24.3% for the current quarter.Turning now to capital resources and liquidity in more detail. For the quarter, cash flows related to operating activities before net changes in noncash operating items reached $23.8 million compared to $18.1 million last year, explained by higher EBITDA generated by the business. The net changes in noncash operating items increased liquidity by $2.7 million compared to a decrease last year of $2.1 million. The increase was mainly due to decreased accounts receivable and increased payables offset by slightly higher inventories. As a result, cash generated from operating activities in Q1 stood at $26.5 million compared to $16 million last year, a very large increase of over $10.5 million. Our DPO and DIO measures improved versus last year end, while DSO remained stable. In line with our efforts to optimize our supply chain and working capital levels across the business, we continue to focus on improving working capital as we grow the company. Cash flows used in investing activities was $2.4 million for the quarter compared to $7.7 million last year. We disbursed $3.8 million for fixed and intangible assets compared to $4.5 million in Q1 2023. Since some investments were delayed to future quarters, we are expecting capital expenditures to stay in our historical range of 2% to 2.5% of revenues for the entire year. We also did receive $6.4 million from the divestments this quarter versus $12.4 million last year. Cash used in financing activities was $29.6 million for Q1 compared to $6.3 million last year. The variation is primarily explained by a reimbursement of the revolving credit facility of $13.5 million following the inflows coming from operations and divestments compared to a draw of $8.5 million last year. Looking at net debt as of March 31, our net debt position was $271.1 million and the ratio of net debt to adjusted EBITDA stood at $2.03 in comparison to 2.07 at the end of 2023.Looking forward with regards to the guidance for the future. As previously stated, Savaria is not providing guidance for fiscal 2024 as we focus on the achievement of our targets of approximately $1 billion in revenue and approximately 20% adjusted EBITDA margin by 2025. The global team is focusing on delivering these 2025 objectives, and it remains difficult to pinpoint exactly where we're going to finish 2024 and the quarters therein. Various future prospects are promising driven by strong market demand, the progress of Savaria One and potential tuck-in acquisition opportunities that will enhance our market position. And with that, this completes my prepared remarks, and I'm going to turn the call over to JP to provide further details on how we're progressing with Savaria One.

[Jean-Philippe De Montigny, executive]

Thank you, Steve. Q1 2024 was the first quarter where we saw the impact of Savaria One. As one can see in our financial results, our adjusted EBITDA increased by approximately $3.5 million versus same quarter last year and $2.2 million less revenues. This is quite a success, especially given Q1 tends to be our slowest quarter in the year. Outside of divestitures, those results can largely be explained by initiatives implemented during Savaria One. Even our Investor Day was just a month ago and the examples shared that they are still recent, let me point to a few examples and link those to our financial results. Our accessibility sales in North America were up 11% versus last year, which is in great part due to our efforts to increase the throughput of our factories in [Surrey] and Brampton for our best-selling products like the Eclipse, for which we closed 8.3 units per day in average last year in this quarter and 10.5 units per day in this quarter in 2024, which is an increase of about 25% year-over-year. Also in North America, in parallel to growing our top line, we made a number of changes to our commercial terms, which increased our contribution margins. Those included the launch of the new dealer partner program, also adjustments to pricing and various commercial tactics that improved our mix and average margins. Note that given the depth of our backlog, we only got partial benefits from the price related adjustments in Q1 and expect those to really materialize in Q2. In Europe, our EBITDA margin increased from 10.8% to 12.7%, while revenues declined by 3.4%. So we generated a higher EBITDA in absolute dollars on a smaller top line. Improving profitability has been our priority within Savaria One in Europe given the lower EBITDA margin of that region. We have plans to stimulate growth and cross-selling but shows to prioritize actions that will improve our profitability even at the expense of revenues in some cases. This improvement in profitability is the result of a mix of commercial and operational changes. I shared during our Investor Day an example of how changing our commercial terms in one business segment in the U.K. improved our margin. This is just an example as we have been reviewing all the lower-margin segments of the business and developing plans to improve their profitability. We also made efforts to reduce cost in our factories and within SG&A. For example, I shared how we reduced the labor costs in Kingswinford, moving to one shift and how we increased the recovery in reconditioning of units in [indiscernible] to our reconditioning initiative there.We also reduced reliance on temporary labor, agency workers and reduced the administrative personnel in Europe over the last quarter. Those initiatives as well as many others of that nature enabled an almost 2% margin expansion on lower revenues in Europe. In Patient Care, our results show flat sales year-over-year in Q1 and lower margins. While we would prefer stronger results, we knew Q1 and Q2 of 2023 were exceptional in the Patient Care division. We did expect the impact of our Savaria One efforts to take longer to materialize in that business as well. In fact, at this stage, our plan consisted mostly investments in strengthening sales and marketing activities, which we expect will accelerate our growth through the back end of 2024 and 2025. So we did not expect Savaria One to impact sales at this point, but knew it would increase our cost in Q1, which is something we see in our results. Finally, as shown during the Investor Day, we are very active in addressing our cost of goods sold through procurement and supply chain optimization initiatives. Whilst we have secured millions of dollars of savings already through RFPs and contract renegotiations, we saw almost no impact from those savings in our Q1 results, given the time needed for us to work through our stock of parts. Yet, we believe that the fact that we were actively sourcing and negotiating prices for many of our goods and services categories enabled us to keep prices constant and even get some concessions. So as a result, while our accessibility business -- within our accessibility business, for example, we saw our material cost as a percentage of sales declined by 2%. At the end of Q1, as per our calculations, we were on track with our plan, both in terms of quantity of initiatives implemented and their financial impact. While this is not the form to expand too much on it, I would also like to mention that through Savaria One, we are continuing to improve our systems, our processes, we're strengthening our organization and building a path to continue to grow past the $1 billion in sales. In that regard, our organization is mobilized more than ever. And as Sebastien mentioned earlier, we do measure the engagement of our employees and just completed an engagement survey now that shows a material improvement versus when we started Savaria One. I would like to thank my colleagues as well as all the managers and employees of Savaria for their leadership, their contribution to our success and for driving the hundreds of initiatives that are making us progress towards our goal with Savaria One. Finally, I just wanted to remind us that the gains we are accruing by implementing Savaria One initiative are recurring in nature that we continue to implement improvements every month as well as add new ideas to our initiatives pipeline every week. With that, we remain confident in our ability to reach our goal of $1 billion in sales as well as approximately 20% EBITDA in 2025. Thank you for your attention. Let me turn it back to Sebastien.

[Sébastien Bourassa, executive]

Thank you, JP, and thank you, Steve, for the color on Savaria One and on financials. So I guess Norma, we are ready for some questions.

[Operator]

[Operator Instructions] Our first question comes from the line of Kyle McPhee with Cormark Securities.

[Kyle McPhee, analyst]

On the accessibility segment, organic revenue growth in North America was very strong, but Europe was down. Can you provide some more detail on the source of the decline in Europe and whether or not this dynamic will repeat a few more quarters before it last.

[Sébastien Bourassa, executive]

So from one quarter to the other, we are judged on every this small [indiscernible] on the financials. So it's always a bit difficult. But if we start with North America, yes, we have seen it in the last year or two, the booking has been very strong. And maybe in the past, we had some issues in our factories with some of the output. But it has been a core focus on the Savaria One to improve the flow effectively, improve the efficiency. So I think we are starting to see some color out of it. So, we're quite happy with that. And in [indiscernible] again it's just one quarter. Right now, we are making a lot of effort on Savaria One on a product mix pricing initiative, dealer initiative. The good news, we are going against a weak second quarter in Europe. I'm expecting things to be back to normal after 6 months in terms of growth. And the teams did know that we need to go to $1 billion of sales, which imply 8% to 10% organic growth. So going forward, we're going to see some growth as well in Europe. And as we bring some new products as well of Savaria because right now, we are mostly a stair lift and climb platform company in Europe as we bring some more vertical platform only better in the future, that should help us also to have some organic growth. So, I'm confident about the future.

[Kyle McPhee, analyst]

When you say you're changing the mix in Europe accessibility, are you implying that maybe you're giving up some sales that's lower margin stuff, and that's part of the reason you're seeing margins shoot way up? Like are you passing on certain sales and that's manifesting as that revenue decline in Q1?

[Sébastien Bourassa, executive]

For sure. Again, since it's not just about growth, growing the top line. It's also taking care of the bottom line. Yes, we're reviewing which channel, which profitability, and that can imply some decision and some choices that we have to make.

[Kyle McPhee, analyst]

And then again, on accessibility, the big 11% organic growth for North America, was there any new price gains feeding that organic growth? Or is it still just the price that I think started to kick in Q2 last year that hasn't been lapped yet?

[Sébastien Bourassa, executive]

[indiscernible] is always a bit complex, right? We have different brands with price increase at different times. So yes, in North America, we did a price increase in the first quarter, but it goes a bit against or your good size backlog. So we're expecting to see some improvement on the margins more in the Q2 towards a price increase of last year. But price increase, no, don't forget, it goes that will be again some additional costs that we have in the business. At one point, we cannot just increase the price of our customer, and we have to work also on the productivity and efficiency to improve the margins.

[Kyle McPhee, analyst]

Is it fair to say though that, that 11% North America accessibility organic growth was still included a good chunk from volume? Or was it heavily related to price?

[Sébastien Bourassa, executive]

It was mostly volume in the first quarter, yes.

[Operator]

Our next question comes from the line of Gabriel Moreau with Scotiabank.

[Gabriel Moreau, analyst]

So like you said, Q1 is usually your weakest quarter and EBITDA margin increased close to 2%. So how should we think about the cadence of margin expansion through the rest of the year? I assume second quarter comp is easier given the ERP, but what about the second half?

[Sébastien Bourassa, executive]

It's a tough question, Gabriel, because again, we -- no we don't give guidance per quarter in terms of EBITDA margins. So, if we go in 2025, we want to be a 20% EBITDA company that's we have been crystal clear on our Investor Day as the mandate. I think as we go with the Savaria One, we know there's a bit of archaistic, we're going to get better as we go okay with the procurement which takes a bit more time in the cross-selling. So I think it's a new stage for us, 16.6%. And we'll expect that this year to the next quarter, hopefully, we'll have the chance to beat that. But again, we're going to be careful we are working on the mid long-term target, but just on a short-term. And just to give you- to add color on the margin expansion.

[Stephen Reitknecht, executive]

And just to echo that point, I mean, we're focused on improving margins sequentially quarter after quarter to reach that 20% target in 2025. So we are expecting incremental growth over the coming quarters.

[Gabriel Moreau, analyst]

And on the pricing, you said you did a price increase early this year. How does that compare to last year? And with the Savaria One, should we think about the pricing opportunity as more progressive throughout the year and maybe more dynamic?

[Sébastien Bourassa, executive]

Yes. Again, we're going to be careful on pricing because, again, we have different brands, different products. So yes, we did some pricing initiative this year, okay, approximately a 4% to 5% increase in different brands. But when you go after that pricing, sometimes you have some products that you sell at low margins or you have to focus on the product that will be a better margin. So it's a mix of all this and pricing initiative that we're working on finding some new customers, some new segments where there will be a better opportunity. And again, the different brands that is complex, we have our direct store, which has a longer backend and factory. So it's hard to pin point sometimes just in one quarter. And we cannot be just about pricing. It had to be a bit of mix of everything, right.

[Operator]

Our next question comes from the line of Michael Glen with Raymond James.

[Michael Glen, analyst]

I'm just hoping, like the strategic initiative expenses of $5.3 million in the quarter. Are you able to maybe just unpack that expense a little more? Is it cash, noncash? Does it include some restructuring? Just some additional details as to what's included in that specific line item.

[Stephen Reitknecht, executive]

So the $5.3 million in the quarter, this is in line with what we had previously stated at the Investor Day on April 9. So, the $5.3 million is mainly made up of consulting and other training costs. There's really no restructuring costs. This is consulting and training fees that we've incurred and they're all cash cost, Michael.

[Michael Glen, analyst]

And so those as -- like if we think about the Savaria One program coming to an end at some point in the future, like those expenses just completely go away from the company?

[Stephen Reitknecht, executive]

Yes, exactly. So, we are expecting what we saw in Q1 to continue for the remaining quarters of 2024, so expenses of roughly $5.3 million for the remaining quarters. These are onetime costs. These are not ongoing costs that are reflected in the underlying business. So just to reiterate, onetime cost for the benefits from the Savaria One program. We're starting to see that JP has been talking to that we've been talking to the improved margins, gross margin and EBITDA margins, sales as well. Those are all recurring in nature. So the fees for this project are all onetime and the benefits are recurring. We're going to see those year-after-year building on each other.

[Michael Glen, analyst]

And as you progress through the undertaking, do you see -- is there a potential that we could see some like a larger restructuring charge roll through at some point in time as you analyze all of the businesses and all the plants and what's happening there?

[Sébastien Bourassa, executive]

So far, Michael, the Savaria One is about growth. It's about finding some initiatives within the business. It's not a restructuring plan or this kind of project CapEx, Steve mentioned before. We are running the same historical rate. So as of right now, we're not expecting any significant change from the guidance we provided before.

[Michael Glen, analyst]

And then just on inventory, specifically, Stephen, like what do you -- when you look at where inventory was at the end of 1Q, like how should we think about the inventory opportunity within working capital for the business?

[Stephen Reitknecht, executive]

There is -- so there is opportunity there, Michael. We finished Q4 with very -- a large reduction in inventories, right? If we look at Q2, Q3 and then Q4, Q4 inventory really ratcheted down. Q1, it came up a little bit from where we finished Q4, but still lower than where we finished Q2 and Q3 of last year. So we are very focused on inventory as part of our working capital, and we are expecting to decrease that over the coming quarters. And I mean, not only are we expecting a decrease, we're obviously expecting an increase in sales as well. So it's going to be very favorable when we're thinking about DIO metrics. For Q1, DIO was flat versus last year on higher inventories, and we're expecting DIO to decrease as well as inventory over the remaining quarters. So, there's definitely opportunity there, Michael.

[Operator]

And our next question comes from the line of -- Zachary Evershed with National Bank Financial.

[Zachary Evershed, analyst]

So I was hoping you could give us a little bit more color on the recent acquisition of [Matot]. What are the cross-sell opportunities there as you add dumbwaiters to your product portfolio?

[Sébastien Bourassa, executive]

Very good question, Michael, and thanks for reading the news on Savaria. Matot is a very nice small acquisition, a very long history. I think close to 100 years of making dumbwaiter and material lift. Very well --good reputation. They unfortunately had a small dealer network. Now we come into Savaria a bigger dealer network. So, there's opportunity to bring that to some of our existing dealers and some of their existing dealer example maybe we're buying some dumbwaiter from the competition. So over time, we're going to try to convert that to buy from Savaria. And after that, we know we have a great supply chain. We are global. So I think we'll be able to bring it into a supply chain. That's our target by the end of the year, we'd like to manufacture that in Toronto. So, I think we'll be able to begin the one-stop shop that we order it to one location, one sale up to service, one technical department, one shipping, maximize the shipping fees to keep shipping some part at the same time. So, we have a great expectation for the future. And hopefully, we have products will continue to improve our margins. Maybe, Steve or JP you want to complete something on Matot.

[Zachary Evershed, analyst]

On the topic of easing material costs, you mentioned in the commentary. Could you give us some more detail on the trends you're seeing there and in which raw materials?

[Sébastien Bourassa, executive]

Procurement, JP, you want to go because I touched a bit with Savaria One on procurement that we're working on.

[Jean-Philippe De Montigny, executive]

Yes, I don't think we go -- I can go into details of which categories, Zack, to be honest. What we see is two things, right? So through Savaria One we are going through each category of spend, essentially, right? So, we group our spend in different categories, and we organize to go to market and source at the best price possible in those categories. So, we're going through them one by one at the moment. But what we also saw and we see this every day, right? So sometimes in this period, suppliers would normally come in and ask for a price increase, but then as they see that they're putting competition through an RFP, they tend to back up on the price increase, right? And then do the opposite and help us reduce some prices. So, we've seen this across many categories. So -- but I cannot tell you specifically by material what the trends are, unfortunately.

[Zachary Evershed, analyst]

So, fair to say that this is spend internally generated reduction in costs rather than anything market related?

[Jean-Philippe De Montigny, executive]

Yes, to that point, so we don't -- we're not particularly exposed to market prices, right? Because many of the -- even the parts we buy, even the raw materials are transformed. So typically, I think the share of like raw material exposure is relatively demoted.

[Operator]

[Operator Instructions] Our next question will come from the line of Justin Keywood with Stifel.

[Justin Keywood, analyst]

Maybe just to follow up on the M&A commentary. There's mention of pursuing possible tuck-in acquisitions in the press release to replace some of the revenue from the divestitures. I'm just wondering, would these tuck-in acquisitions be margin accretive? I assume there wouldn't be a pursuit for fixer uppers, just given the goal of the 20% EBITDA margins in the near term.

[Sébastien Bourassa, executive]

Again -- we like to have [indiscernible] that will make sense for Savaria, a good product to green okay, to offer more to a dealer, something that we can maybe use our global supply chain dealer network where there to be no succession. We have no -- we have not been good in one area. So, all this makes sense for Savaria. And yes, when it is vertically integrated, that's usually a bus to improve margins. Are we going to buy something one of those that's 0 margins, but we see a benefit to bring in to a supply chain in our product. Everything is possible, we will try to focus on something that could bring some value immediately to our shareholder and the company.

[Justin Keywood, analyst]

And any indication of the amount of targets that you're looking at, potential multiples and size of transaction?

[Sébastien Bourassa, executive]

Right now, we are very focused on Savaria One. I think we have enough under plate for the next two years with the Savaria One, the $1 billion. We get some small tuck-ins in the past, we did some time two or three small tuck-in. So, could we digest that without the disruption of the business? The answer is yes. But a more midsized big acquisition, I think it's under focus for the next two years. In terms of pricing, but I guess you do know more than me, what kind of multiple we usually pay. You can look a bit at the history of our transaction, right?

[Operator]

I'm currently showing no further questions at this time. I'd like to turn the call back to Sebastien Bourassa for closing remarks.

[Sébastien Bourassa, executive]

Thank you, Norma. So, it was a shorter period of question. So I guess it was some good delivering on the message JP and his team. So again, thank you very much for your comments for following Savaria. I think it was a great first quarter, and you will see the next few quarters, we'll have some good things that we're going to deliver as well. Thank you, Norma.

[Operator]

This concludes today's conference call. Thank you for your participation.