Savaria Corp
TSX:SIS
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
14.35
23.72
|
| Price Target |
|
We'll email you a reminder when the closing price reaches CAD.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Savaria Corp
You don't have any saved screeners yet
Good day. My name is Jess, and I will be your conference operator today. At this time, I would like to welcome everyone to Savaria Corporation’s Q4 2022 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [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 March 07, 2023, with respect to its Q4 2022 results.
Mr. Bourassa, you may begin your conference.
Thank you, Jessica. This is Marcel and I am very happy about our results of 2022, very, very happy with the business occasions since quite the beginning. And even if we have some turbulence, our – I repeat what – I repeat so many years that our business is on mobility. Mobility, the people are aging every day and one problem was there 10 years ago, and it is there – it is the accessibility, accessibility to the house or to the public buildings. So our business is like 50:50 to commercial and residential. And I can tell you that our backlog, we – sometimes to see if company is helping, I will say to the company, hey, tell me your backlog.
Our backlog is the best as ever Why? Because people need mobility. We can be in – unfortunately in war in some sector and the market seems to be nervous. But the people are at home that they are a certain age. And they need the mobility to go at their bedroom on the second floor [indiscernible] impact them at all. Just maybe they’ll say, oh, we’re nervous a little bit. We will postpone a couple of months our decision. But this decision is there, they need mobility. So when I decide to go in this kind of business, 30 years ago and more, I decide because it was great 30 years ago, but even right now with the population that we see more that it is apparent, the aging of the population, they need our product. They need our product is why our backlog is so high.
So I am very happy about our mobility across the board. And after the patient handling is – thanks very much to the people and all this division. They reported very good number. And we are – and I am very enthusiastic about the future, and I repeat myself the future is the backlog. We have the best backlog. That’s why 2022 was good, but 2023 that we are in – almost finished the first quarter, we’ll be better and it is better. So I have always my people, my key people with me on the call this morning.
And I will ask Steve to begin and we’ll make a little change. After that Nicolas Rimbert will speak about patient handling and Sebastian about our operation. So that we will speak first and after that we’ll listen to the question. And again I repeat we are good, we will be good and better and the news, thank you to the analyst. They are there this morning and support Savaria. That’s so important. That’s so important that you are there. You were there five years ago, you were there 10 years ago, and thank you very much for that.
So I pass to the guy, who went through all our financials, Steve, please.
Thanks, Marcel, and good morning everyone. I’m going to begin with some remarks regarding our 2022 fiscal year consolidated financial metrics. For the year, the corporation generated revenue of $789.1 million, up $128.1 million, or 19.4%, compared to 2021. The increase was driven by strong organic growth of 12.7% and acquisition growth of 8.9%. This was somewhat offset by foreign exchange headwinds of 2.2% netting out to 19.4% growth overall. Gross profit and gross margins stood at $254.4 million and 32.2% respectively, compared to $215.5 million and 32.6% in 2021.
The increase in gross profit was mainly driven by higher sales volumes, while the decrease in gross margin versus last year was mainly attributable to continued inflationary pressures on the supply chain, especially in the European region, causing material cost increases. These inflationary pressures were somewhat mitigated by initiatives taken to increase customer prices, reduce shipping costs, and also fixed cost absorption. Adjusted EBITDA and adjusted EBITDA margin finished at $120.2 million and 15.2% respectively, compared to $100.2 million and 15.2% in 2021. The increase in adjusted EBITDA dollars is primarily due to increased sales volumes. Adjusted EBITDA margin was held flat as the decrease in gross margin was offset by lower selling and admin costs as a percent of revenue.
Now we’ll move on to our segment results. Revenue from our Accessibility segment was $560 million in 2022, an increase of $75.7 million, or 15.6%, compared to 2021. The increase in revenue was mainly attributable to organic growth of 9.8%, as well as acquisition growth of 8.9% from Handicare. This was offset somewhat by a 3.1% revenue decline due to foreign currency impacts. The weakening of the Euro and the pound overshadowed the strength in the U.S. dollar versus the Canadian dollar in this segment. Our revenue growth was fueled by both residential and commercial sectors, as well as price and volume increases. And we continue to build our backlog.
At December 31, 2022, our accessibility backlog was approximately 5% higher than last quarter Q3 2022. Adjusted EBITDA and adjusted EBITDA margin both before head office costs stood at $97.3 million and 17.4% respectively compared to $86.2 million and 17.8% for 2021.
The increase in adjusted EBITDA was mainly driven by higher sales volumes, while the decrease in adjusted EBITDA margin was mainly due to continued inflationary pressures on the supply chain, especially in the European region, causing material cost increases, which was partially offset by better fixed cost absorption from the increased revenues.
Revenue from our Patient Care segment was $174 million for the year, an increase of $37 million, or 27.2% when compared to 2021. Revenue growth includes organic growth of 17.1%, which was driven in large part by pent-up demand from the last two years of the pandemic, new contracts won and pricing optimization.
For the year acquisition growth was 7.7%, and FX provided a 2.4% tailwind. Adjusted EBITDA and adjusted EBITDA margin both before head office costs stood at 200 – excuse me, stood at $24.9 million and 14.3% respectively compared to $16.7 million and 12.2% for 2021.
The increase in both metrics was primarily due to the increase in revenues and improvements in gross margins, mainly explained by better cost absorption, pricing optimization and synergies with Handicare.
Revenue generated from the Adapted Vehicles segment was $55.1 million, an increase of $15.2 million or 38% when compared to 2021. This year-over-year growth was driven by 32.2% organic growth and 12.6% acquisition growth, and was partially offset by a negative foreign currency impact of 6.8%.
The organic growth was driven by increased police and ambulance vehicle adaptations despite continued vehicle supply chain disruption throughout the year. Adjusted EBITDA and adjusted EBITDA margin both before head office costs finished at $4.3 million and 7.8% respectively compared to $3.2 million and 8% for 2021.
For the year, net finance costs amounted to $16.5 million, an increase of $0.7 million over the $15.8 million amount recorded in 2021. The increase was mainly due to higher interest on long-term debt related to the financing of the Handicare acquisition and also higher average market interest rates.
To explain a relatively modest increase in finance costs on significantly higher market interest rates, I note that 2021 also had a loss on an FX contract of $1.8 million and a loss on a net investment hedge of $0.8 million, which were not repeated in 2022.
Net earnings were $35.3 million or $0.55 per diluted share for the year compared to $11.5 million or $0.19 per diluted share in 2021. Adjusted net earnings excluding amortization of intangible assets related to acquisitions reached $57.1 million or $0.89 per diluted share compared to $41.8 million or $0.67 per diluted share last year. This reflects an increase of 32.8% or $0.22 on a diluted share basis.
Turning now to capital resources and liquidity. Savaria generated cash flows from operating activities of $90.7 million for the year compared to $57.3 million in 2021. This large increase was due primarily to increased earnings as level of investment in working capital stayed flat on a year-over-year basis.
Q4 2022 saw cash generated from non-cash working capital of $13.2 million. Cash used in investing activities was $21.6 million for 2022, compared to $396.4 million in 2021. In 2022, the corporation dispersed $1.4 million for the acquisition of Ultron and $20.5 million for fixed and intangible assets compared to $381 million for the acquisition of Handicare and $15.7 million for fixed and intangible assets in 2021.
Cash used in financing activities was $83.3 million for 2022 compared to a cash infusion of $351.8 million in 2021. This year significant cash outflows include $32.5 million of dividends, $28.1 million of reimbursement on the credit facility, $13.9 million of interest paid and $11.2 million of lease payments.
As at December 31, 2022, Savaria had a net debt position of $369.4 million and was in compliance with all of its covenants. On a trailing 12-month adjusted EBITDA basis, Savaria’s net debt to adjusted EBITDA ratio was approximately 3 times. This represents a 0.7 times decrease versus Q4 2021 last year.
This reduction is 0.2 times over and above our target of 0.5 turns per year. Savaria has funds available of approximately $125.7 million to support working capital investments and growth opportunities.
So now looking forward for 2023, Savaria expects to generate revenue, which will be approximately 8% to 10% higher than 2022 with adjusted EBITDA margins of approximately 16%.
In addition for 2023, we are targeting a reduction in our leverage ratio of 0.5 turns. This outlook is based primarily on continued strong organic growth coming from Accessibility and Patient Care segments supported by our current high backlog levels and continued realization of revenue synergies between Savaria and Handicare.
With that, this completes my prepared remarks and I’ll turn the call back over to you, Marcel.
Steve, thank you for this information. We can see that we have a great year in 2022 and as I mentioned that will support our increase that we look for 2023 and we are very optimistic now about good change in the patient in line. I will have Nicolas add to present you what we are done in 2022. So…
Yes. Thank you, Marcel, and good morning. I would like to take a moment to speak about the performance there Patient Care in 2022. Although, first, while I know that analysts and investors are on the call today, we also likely have employees listening in as well. So I think it’s important that everybody know that Patient Care is an integral part of Savaria. And if we’re to achieve our long-term objectives, we’re going to need them to deliver for us as well.
And to that, the Patient Care team really stepped up in 2022. I think as Steve mentioned, delivered a record organic growth of over 17% and a record EBITDA for a full year of over 14%. And it’s really a testament to the strong team we have in place and the fact that they’re full in and really embrace the integration initiatives between Handicare and Span. And so I think what we’re seeing here is the synergies materialize maybe even a bit faster than we had anticipated.
So again, Marcel, I appreciate you asking me to take a brief moment to speak about Patient Care. I’m sure there’s going to be some questions from the analyst on the call, but just wanted to, I guess, congratulate the team and let them know that it was a great performance in 2022. And we fully expect even better in 2023. So thank you, Marcel.
Hey, Nicolas and I will hear you with some question on the patient and then you will answer that. And the last but the least that will be Sébastien, that will be presentation, what we have done in the last year and the last quarter will be a little bit later, but for 2022. Sébastien, can you take the line please?
Yes. Thank you, Marcel. So basically, yes, 2022 was a good year for [indiscernible] production output. We had an interesting growth in Europe and in North America. For sure, Europe was a bit more challenging towards the end of the year in term margins, but there’s just a little short term issue. We’re always working with the team to do some action plan, so that’s not a concern.
After that, we are lucky, yeah, we start the year with a very good backlog, so that continue to put some production pressure to do some improvement. So all the team is working on improvement, I think, in each division. So that will bring some interesting output in 2023. After that for Savaria in 2022 and we have launched the free curve of Handicare in North America and Toronto.
Right now, it is successfully in production. We are approximately two weeks lead time. If you remember a year ago, it was more four to six weeks for North America, it’s two weeks. We target one week, but we need to continue. And then the second quarter of this year, there will be a second product of Handicare, the second curve 2,000 that is going to be manufactured in May 2023 in Brampton. So that would bring another dimension.
I think cross selling efforts is continuing to happen in North America between the sales team of Handicare and Savaria and Garaventa. So that’s in good progress. In Europe, really Garaventa and Handicare are working together on some cross-selling of inclined platform of some view lift. And we hope later this year, we’ll be able to bring some Savaria product in Europe, some vertical platform and port shifts so that we can continue to be for that cross selling.
Mexico is just four months into the story of Savaria. Since November, we’re open, but right now we have 35 employees in Mexico. We’re doing some complete products that we are able to ship to the U.S., so that’s the start. We have already did a lot of some shipment that gives since the beginning of the year. We’re also making some sub-assembly from Mexico to Toronto to help us a bit to rebalance on the long-term or supply chain. And don’t forget, if we have to go to $1 billion, we need more capacity. So it’s always important think a bit ahead. Supply – last thing on supply chain, it’s not perfect, but I will say it’s a big, big, big improvement since a year. So right now, the supplier that has some supply chain issue with us maybe they’re not the right partner to work with Savaria.
On that, Marcel, I will give this back to you.
Thank you, Sébastien. Okay. And my – the follower, you can see that our team know what they are doing, they are aggressive. And for sure, what that help us it’s a segment that we have. But they can delve the operation and the future of this company. So my role is less important. But I have just question, I participate with the vision of Savaria. So we are ready for call, please. Jessica?
Thank you. [Operator Instructions] We’ll go to Derek Lessard with TD Securities. Your line is open, sir. Please go ahead.
Yes, thanks, and good morning, everybody. And I just wanted to congratulate everybody also on a solid year considering the operating challenges. My first question is, I was wondering if you can maybe add some color to your onshore initiatives, particularly, in Mexico and where you are in the startup there and maybe your expectations around margin contribution and or enhancement for 2023. And maybe part two to that question, could you talk about what you’re seeing in terms of inflation and supply chain pressures? I know it’s early in Q1, but wondering if there’s been any improvement on that side.
Best guy for that is Sébastien.
Hi, Derek. So, yes, so basically in New Mexico right now, we have a three assembly line doing some port shifts, some portion of home elevator, and a third one for electrical department. So basically, this is really, again, to help us to support our growth. So I think we have already published our guidance for this year. So I guess somehow Mexico is built into this budget. But again, it’s for the long-term for the $1 billion capacity, now we have a 95,000 square foot, it doesn’t feel okay overnight. And we got to go step by step. So I think we’re happy with the direction we’re going. And also we’re looking direct with vertical integrated in Mexico to make some parts by our set, not just to assemble parts. And again, we have start to receive some machinery to be able to be vertical integrated.
So different that will be a game changer over time for the margins, at least for the North America since that proximity. And I think the second part of the question was inflationary. So for sure, I think it’s getting better before that’s on increase. I think we have already hopefully receive it. So now I think we’re working on some mid long-term project to be able to decrease some costs or look for some alternative supplier. But I think – and after margins wise, we have different brands that will make some price increase at different time, so they are not all at the same anniversary date and since we have a 80 backlog, but sometime it takes a bit of time to reset the margins. So that’s why I think on the mid long-term, I’m very positive that will continue to improve our margins.
Okay. That’s very helpful, Sébastien. And maybe one for Steve. And just wanted to be clear on the 8% to 10% revenue guide. That excludes the sale of the Norwegian vehicle segment, right? So essentially 8% to 10% in Patient Care and Accessibility.
Yes, exactly. Once that’s final, I mean, the best way of looking at it is to take our 2022 results and carve out that Norway business and we’ll grow 8% to 10% from there. So…
Okay, that’s helpful. And maybe just one more – you guys did and thanks for the color on the accessibility backlog. Wondering if you have any similar color on Patient Care and I know 20% growth forever was not sustainable. But how should we be thinking about growth and some of the growth drivers in that business for 2023?
Yes, well, I mean, I talked about – go ahead, Steve.
No, no, go ahead, Nic. Keep going.
I was just going to say that you’re correct. I mean, I think we had a good run there of 20% in a row, I think it was three quarters. The first, second and third quarter came down a bit in Q4, but for the full year, we finished over 17%, which was a record for that segment. Now going forward, I think that 8% to 10% holds as well for Patient Care to our expectation in 2023 is, we have a good order intake coming in. We’re quite confident about where we are. Here we are kind of midway through March, so we have a good part of Q1 already in the books. The ceiling lift portion of that business, so kind of that Handicare side of things, that is more of a project based.
So there is backlog associated with that on the legacy span side. On the beds, there is backlog, which gives us some visibility and some comfort of where that’s going. The mattress is not as much, it kind of comes in and goes out to relatively quickly. So the backlog is relatively small on that portion of the business just by its nature. But going forward, I mean, I think what’s going to be driving some growth this year along with certain of the pricing initiatives that we had discussed for last year is we’re aggressive in the market. I think the sales teams have really come together and we have more feet on the ground talking about the four – the full portfolio of products that we offer. We’re out there, gaining market share in a time when some of our competitors are scaling back a bit. We’re out there forging ahead and maybe gaining market share in certain segments as well. We’ve been successful on many of our bids. So our win rate has improved.
And then finally, I would say that the cross pollination between the teams is something that’s really now just taking hold, working on strategic accounts that might have been with span and getting the Handicare guys in there and vice versa, making sure that the span guys are having opportunity and leveraging some of those Handicare relationships to really push mattress and bed frame sales.
So I think the cross selling is going to be a big driver over the growth, not only in 2023, but also in 2024, 2025. So very excited about where we are. And so in terms of expectations there maybe not 20% growth per year, again, going forward, but that 8% to 10% growth is where we expect this to be in 2023.
Thanks, Nicolas. That’s it for me.
Hey, Derek. Derek, I was just add Sébastien, just to add. We’ll receive an order from Asia about patient anything about exceedingly. Sébastien, just give me, why we receive that, because we change our approach. We have new people. Tell me.
Marcel, you don’t forget the detail. So yes, we have a new commercial director in Asia since six months and we have tried to do a cleanup a bit of our marketing in terms of exclusivity, Patient Care. And yes, we have some dealer base in Asia. We have started to visit other dealers since COVID is a bit behind in Asia. And we simply we got a nice order for 150 units again hospitals in China with one of our dealers. So again, that’s true that there’s opportunity everywhere. Patient Care has been really North America and UK with Silvalea. But going forward, there’s a lot of good place in the rest of the world that we can expand on our Patient Care also.
What is the value of your orders, Sébastien?
It was US$450,000, Mr. Marcel.
Okay. But that show that in this segment, sometime we receive very good order depending. And we can see this, because the plan is that people need some service – some medical service. They need some patient our project. And so I am very optimistic, when I see order like that coming in and that’s just the beginning of the way that we have a new team lead this division and we have a new that is – that’s so new right now. But I’m very happy with the progress of the people, because the people is the key to succeed. We need enthusiasm. We need to offer the best project and the best service. So thank you, Derek.
[Operator Instructions] We will go next to Michael Glen with Raymond James. Your line is open. Please go ahead.
Thanks for taking the questions. So just want to circle back on Mexico, because it is an area we do receive a number of questions on. Are there any revenue type metrics that you’re able to indicate for Mexico where you would like to get that facility from? Just something that we can – just something a little more tangible that we can speak to.
Michael, so basically, I guess I’ll take this one. So for sure, most of the revenue of Mexico is in third company, so it’s not – doesn’t really affect the external revenue. And again going part of this $1 billion, it is important to our capacity. Right now, we have 35 employee, we hope to have 100 by the end of 2023. And if you – in term of size is probably this year, $10 million range, but it’s all internal sales company.
Okay. Okay. That’s really helpful, thank you. And then just regarding residential elevators, if we think of how that business ties into new home sales building of new homes. Are you seeing any signs out there regarding a softening in demand with regard to the residential elevator product?
I’ll just actually that not at all, we have the best booking is exactly where we are right now is the residential elevators. More and more people can retrofit an elevators or installing a new home. So that’s a best backlog that we have in all our projects is exactly residential elevators. So I don’t know Sébastien have something, but the number speak, and when we see the backlog, it’s months and months ahead. Sébastien, you have to add something on that?
I was just going to say, Michael, everything started with the sales leads and I would say we have attend some exhibition so far this year and the attendance in the U.S. were fantastic with architect and contractor. People want to put elevator, so there’s a lot of inquiry. And then we see it after the leads. We see it with our drawings, our numbers of drawings not go down. So it really show that, hey, our backlog is deep but still the pipeline in the back gate is the market remain very positive. No concern for now.
Cash flow, working capital yet a nice Q4 in terms of working capital. When I’m looking at working capital in 2023, is there still opportunity to take working capital lower or should we – I’m just wondering if there’s some outlook you can give for working capital and then to tie into that as well maybe some CapEx guidance as well.
Sure. And I’ll take this one. Thanks, Marcel. So on the working capital front, yes, we did deliver well in Q4, we basically took out $13.2 million out of working capital and took that basically right to debt repayment in the quarter. As far as 2023 is concerned, there is a little bit more room, but I would – as far as from a modeling perspective, I would probably put in – if I were you put in that we’re going to be holding investment flat. So we’re going to – we’re not going to be investing any dollars in the working capital in 2023 to support the growth. We have ample – we feel we have ample room in current working capital levels to support the 8% to 10% growth that we’re forecasting.
With regards to CapEx, we did see 2022 come in a little bit higher than – slightly higher than where we were anticipating, it came in about 2.6% of revenues. We were expecting more 2.5%, so just a little bit up. With regards to 2023, that number will be closer to 2%. So we’ve always been in that 2% to 2.5% range. And for 2023, it’ll be closer to the 2% range.
Okay. And then free cash, I would think that the priority for capital allocation with free cash it will be debt repayment in 2023.
Exactly. Yes. And so – and we’re – we did deliver 0.7 of a turn in 2022, which was higher than what we were forecasting and expecting or at least guiding towards, I think we were expecting that 0.7 of a turn internally, but we were guiding half a turn. And for 2023, we’re guiding 0.5 a turn as well.
Okay. Perfect. Thanks for taking the questions.
Thank you.
Thank you.
Our next question comes from Michael Doumet with Scotiabank. Your line is open. Please go ahead.
Hi. Good morning everybody.
Hello, Michael.
Hi, Michael.
First question on the guidance. Again, on the organic growth expectation, just at a high level, I’m wondering if you can break it down that 8% to 10%, which again, I think, excludes the divestiture. If you can break that down between price, volume and FX because the one thing I noticed is that the current FX rates, Savaria probably get a lift of about 4% to revenues on translation.
Yes.
Steve?
Yes, I’ll take this one. The 8% of 10% growth, that’s a mix of price – price and volume. So Sébastien mentioned earlier that we’re – we are – we do have price increases across the business. It’s – they are at different times and they do come into effect at different times based on the different levels of backlog that we have. For example, the stairlift business has a much shorter backlog than we see in the residential and commercial home elevator space. So price increases, some of them have already been announced and they’re already in effect and some of them need to take more time to work their way through. But overall, for that 8% to 10% growth, it’s a mix of both price and volume. Without saying exactly how much it’s going to be, I would say we’re expecting a bit more from volume than from price.
Got it. And would FX be on top of that, Steve, if you get the 8% to 10% from price and volume?
It’s difficult to say what’s going to happen with FX in the next 12 months or in the next, I guess, from this point nine months I wish I knew. We have built a little bit of buffer into our numbers with regards to FX, but we will see how that impacts the business. I mean, we are diversified. We have businesses, quite a big piece of our business is in U.S. dollars and quite a big piece of our business is in Euro and GBP as well. So what we saw last year was although the U.S. dollar strengthened, we saw weakness in the pound and the Euro. And that had mixed impacts, although they were offsetting each other in our 2022 results. So very difficult to say what 2023 is going to bring, but we feel good about having a diversified business.
Okay, understood. Thank you. And then moving on to the Accessibility margins, you’ve had a little bit of an atypical year in 2022 where margins peaked in Q2 and then kind of weakened through the back half. I am not sure if that was due to the price increases that was implemented in Q2 or maybe had something to do with Europe. I heard Sébastien commented on that on Q4. But can you discuss that a little bit in more detail, maybe just for 2023 what we should expect in terms of seasonality on margins?
Sébastien, you will complete my answer, but I just tell you something. Our best project in terms of productivity for sure patient handling push us a little bit in the back and that will be good for my team in Accessibility when you see other people pushing and maybe they try to go in front of us. But that’s our main project, Accessibility. And I can tell you something. The margins are there. We have some increase of price. And that sometimes takes some months that we see that, and you will see that with – I know almost the number of Q1. And we – you will see good number in 2023 about the percentage.
And if – yes, if – Marcel, if you don’t mind if I could just jump in here…
Yes.
…just to add a little bit more color. Yes, we did see some weakness in the Q4 margins, especially in Accessibility, especially in the Europe region. We do price increases and we don’t like to do them. We like to do them once a year, twice a year if we have to. But it’s not something that you can just keep doing on an ongoing basis. So at the time when we put the price increases, we estimate how much we need to do to get the desired margin that we’re going after. And I think it’s fair to say we were probably a little bit light on those estimates in some pockets. And so as we saw continued vendor cost increases throughout the year that had a downward impact on margins.
Obviously, we’re doing what we can to mitigate that. Sébastien talked about it a little bit in his intro words where he talked about looking at other vendors and looking at other opportunities. But we do have action plans in place and we’re focused on increasing the margin. We do have 20% margins in our sites, and we have seen – we do have pockets of 20% and in excess of 20%. And so it’s just a matter of making – getting that 20% across the board. So we are optimistic for margins in 2023.
Perfect. Thanks for the answers guys.
We’ll go next to Justin Keywood with Stifel. Your line is open. Please go ahead.
Good morning. Thanks for taking my call. I just want to circle back to the longer term goal, which is, I guess, more of a medium term goal in achieving a billion sales by 2025. And I see the path to get there just given the strong organic strength. But I also wanted to touch on the goal to have 20% EBITDA margins by that – by then are $200 million, which would be some significant expansion from what the guidance implies for 2023, which I think works out to around just a shy of $140 million in EBITDA. Are you able to help us bridge that that EBITDA expanding from $140 million to $200 million over the next few years?
All Right. Just, first of all, our products, we mentioned that we have a key backlog and we mentioned that that we have price increase for sure some region around the globe was a little bit maybe conservative about the increase on price. But the people know the inflation and they accept that if we are fair they accept an increase of price. And everything is in place to increase our margin. We see why we will push – put from 16% to 20%, Marcel, but man, it’s just a question that to do better in productivity, to do better in designing and to have the right sell price. And this is the key part to be succeeded, to be 20%.
For sure it needs aggressive, but that’s – and I think we’re not very aggressive on our increase of sales, 8% to 10%. You will see in Q1 that we will beat that easily. But this is a little bit conservative. We will work on improving our productivity, as I mentioned. And you will see in this year that, hey, man, we are better than ever. It’s because our people. Our people are good. They can be better. We will add some people to be better. And we are around the globe. We see we sold to the people in 2022 that we are every – about everywhere. And we have this new manufacturing. And this new market that we will sell in Mexico and around that even if it’s not our first goal. And Asia, Asia is very important for us, very important. And we’ll see more development in the coming years. So I am very confident that Savaria will make – for sure will be the guidance in the sales. And about our 20%, that’s a challenge. But we’ll be very near to that with the effort of my people, my key people, but all the people in the company. Sébastien?
I think you have crossed my list, Marcel, but again, just to highlight, R&D, we have 50 people in R&D in our organization. And when we launch a new product, we have to launch it at the right margins or we’ll not launch it and I will take the Mexico efforts for sure is to help us to lower some of the costs. So I think that will be our answer, Justin.
Great. Great. And I’m sure…
And Justin just an example. Sébastien, tell me the price of a container that you received from China two years ago and right now, or three years ago and right now,
That’s a tough one, Marcel, to answer, but at least for one line, which is China to Toronto. I think we’re back to the pre-level before COVID or the other line in Europe, a different place. There’s always the inland cost that we have to be careful. Now it’s with the gas price, i.e., it’s everything that we move within the country is usually expensive, but, yes, for the container, we are back to US$4,400, US$4,500, which is very close to pre-COVID.
Thank you.
Great. I appreciate that. And then just a question on acquisitions. Now that Handicare is being integrated. Are you looking to bolt on any transactions in 2023? Or is the focus more still on driving synergies with Handicare and in internal operations?
First of all, for sure we’ll make some little acquisition. I will just give you an example that we’re – we can make an acquisition, but we know we’re good. And when we buy a dealer and they sell other kind of projects than Savaria plus we push altogether to grow the business. So that’s something that we will continue, we’ll continue over years and over years because we are very successful. And I just name two names: Premier Lifts and Florida Lifts. They are very good. Unfortunately, our direct sales in Toronto is very good. So we are ready to make this kind of acquisition when we buy some company that they don’t buy our products or just a little dimension of our product or maybe somebody the owner decide to sell. Maybe we are a buyer, but for sure we have little acquisition like that. And do you have to add something, Sébastien?
Just to say Premier Lifts and Florida Lifts is two of the most successful store of Savaria. So they are owned by Savaria.
Understood. I really appreciate that. Thank you very much.
Okay. Thank you to be there.
You’re welcome.
Your next question comes from Nick Agostino from the Laurentian Bank. Your line is open. Please go ahead.
Yes.
Hey bonjour Nick.
Bonjour, Marcel,
And you are with us for how many years, Nick?
I’d say at least eight, nine years, maybe 10.
Yes. Yes, yes, absolutely. You’re in the two number. Yes, that’s good. Thank you very much to be there, Nick.
My pleasure. My pleasure. Quick question on Mexico, and I know there was some prior questions, just trying to understand, I think you mentioned that most of the sales will be intercompany. When I look at the 2023 EBITDA margin guidance, how much of a margin benefit is associated with the Mexican operations? More so not the existing, but at least what you have planned for all of 2023. How much of a lift do you think you’re going to get out of Mexico that’s already baked into that 16% guidance number?
Okay, Sébastien that’s where you will answer. But when you say, I am the oldest guy on the car. But I think my thing it’s good to be like that. We are very conservative, very conservative. And Sébastien, I’ll leave you the answer to Nick.
Yes. So Nick, no, don’t forget, it is a startup that we have done in Mexico. So when you have a factory of 95,000 square foot and you have 30 employees again it takes some time before you become a very efficient and you can really bring some important savings for the organization. So this year for sure, it’s a ramp up.
We talked a bit earlier, that is maybe a $10 million range of intercompany sales, maybe a bit of outside sales. But I think is really for the long-term, and I think if we want to go to 20% going forward, we need some narrow showing opportunity.
Okay. Okay. Thank you for that. And then on the bookings activity and the backlog obviously continues to grow in Q4. Just wondering given the fact that we’re about to close Q1, can you provide any bookings commentary for Q1 itself?
Yes. But don’t forget the Q1 earnings call about booking. Booking is as mentioned that my – the beginning of the call, it’s very, very important. But booking, like on the stairway, straight on a curve, it’s now we can ship a curve in Toronto in the maximum two weeks. So that backlog, two weeks, we don’t see the backlog. We just delivered the order. And – but on the residential elevators, what backlog is on the residential elevators, it’s at least three months, something that we don’t see in the past. But for sure it takes time for the order to arrive because they have to have some planning. But we are very well equipped in Vancouver and for sure in Toronto to manufacture and we’ll get some parts from Mexico already, they are working like to part controller. Controller it’s very important the controller in a product because we need a controller.
And we see how we are the market, how the challenge that happen on controller components. But it’s why we buy a company in Europe that manufactured some parts. It’s why we begin to manufacture in the Mexico. We begin to manufacture the controller. So we are independent. And that’s the key to be A to Z independent of other supplier. So we need supplier. But that’s good that that we can control more our destiny than just the destiny of the suppliers. Sébastien?
I take very good answer, Marcel. Thank you. And yes, take for the booking of Q1 Nick and start to comments, but it remains strong. We have a good backlog, which is what we need for Q1 execution.
Okay. And then just my last question on the Handicare Norwegian asset sale, just wondering about the thought process there. Obviously Adapted Vehicles in general had a strong quarter good organic growth, good margins out of that business, something you guys were always trying to improve. So just any colors to why you’re selling off those assets when it looks like their contributions including the North American assets are maybe starting to gain some momentum. And I’ll leave there. Thank you.
Okay. Nick, thank you very much. And I will answer this one. Maybe Sébastien can complete that, but – or maybe Steve. Just it’s not in our core business. So I decided, I made the decision to get out of that because they make very nice products. But first of all, it’s quite far. It’s quite far. But – and then they are not in our core business? So not in our core business and then action is more in our core business.
So we decide to sell that. But it was very small sell. I just the money that we have in the company and I wish them good luck. And they are great people down there and – but unfortunately, they are not in our – I repeat, but in our core business. Sébastien?
Good comments. Again, I think there’s special vehicle that they were making that, that it was a standalone division. Now we found a new owner that where we probably have a better future for them. So again, thanks for their work in the past and I think we’re moving on, so.
Okay. Thank you. That was all. Thank you.
[Operator Instructions] We will go next to Zachary Evershed with National Bank Financial. Your line is open. Please go ahead.
Thank you. Good morning, everyone. Thanks for taking my questions. Building on the last question, do you view the remaining Adapted Vehicles segment as a core part of the business? And if not, what do you think you could sell it for?
Hey Zach you put me on the spot with that one. I call Norway. And for sure, we know more with that action. So it will depend. We will try to make some change in the leadership of this company. And it’s always depending what they will deliver. If you tell me about patient ending, for sure, it’s a different thing. And to be polite, I will say just that it’s a better thing. But we try to improve an action on the leadership and if they deliver what they can deliver. Maybe in my language, what will be different, so ask me this question in six months.
Deal. Thank you. And then a follow-up on the commentary around shipping costs from Asia, with the freight costs coming down so rapidly, do you have any regrets around the timing or the startup of the Mexico facility, are you still happy that you did it?
Sébastien?
Sure. We are very happy to have set up a factory. And I think differently what we see from Mexico going forward, it will be different from China. For sure, China, we make some finished product that we can send to Australia. We can sell within Asia, but really from Mexico, how can we complete more some finished products to serve our customer in the Southwest of U.S. I think it’s far from Toronto. It’s far from Vancouver. So I think it’s a very good position for the future to build a key capacity for North America. So very happy Zach, that’s good for the long-term.
Understood. Thanks. And just one last one. Can you tell us more about the product development roadmap under the Ignite initiative?
Okay. Now we concentrate what is very important. It’s put our products on cost compliance for Europe. All our team work that may – we have to make some change at PC and that’s very important if you want set a project, first of all, you have to meet the code. So we work on the code.
And you will see that that’s a very important thing of our R&D. The – they make some change. Sometime we’ll make some change that to add a better products and less costly product. It’s always very independent. And for going out with new products it’s not priority for us right now. First, I repeat, meet the code that we can sell in Europe. That’s very important. That’s our concentration. Sébastien?
I think the new list of products, I’ll say which we are doing some new products, I think we cannot disclose it. That’s priority information. But definitely to improve our products a key for the future to make it more aesthetic appealing for our customer is always a priority to put our product C compliance, right now we are playing a catch up game at our product worldwide going forward, which when we will launch a product, it’ll be worldwide compliance from the beginning, but right now, this is our main priority to make sure we are compliance with – so that we can do some cross setting.
Great color. Thanks. I’ll turn it over.
Thank you.
We have no other questions holding. [Operator Instructions] And no other signaled. I’ll turn it back for any closing remarks.
Okay. Thank you very much, Jessica. And that’s a very important this call that we meet – that we answered the question where we are going. So we know that we’re working hard but that’s a beautiful market that we’re in. And we have some good growth coming. And so thank you to – for the people, thank you for my employee to support this growth and they support this growth with a smile. So thank you very much to listen to us. Thank you, Jessica.
Thank you. Ladies and gentlemen, that will conclude today’s call. We thank you for your participation. You may disconnect at this time.