Please stand by. Good day, everyone. My name is Shannon, and I will be your conference operator today. At this time, I would like to welcome everyone to Savaria Corporation's Q3 2021 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star and then number two. Today's call is being recorded. This call may contain forward-looking statements which are subject to the disclosure statement contained in Savaria's most recent press release issued on November 10, 2021 with respect to its Q3 2021 results. Thank you. Mr. Bourassa, you may begin your conference.
Shannon, thank you very much for this introduction. Hi, everybody. My name is Marcel Bourassa. I'm the CEO. It's a very interesting, okay, challenging Q3 that we have. I am very happy, very proud of our results, okay, during a period of Q3 that some price increase inflation. I don't call that inflation what that happened in the freight. This brutal increase. I don't know it's fair or not, but we have nothing to say, the price is that. If you're not happy, don't be happy, but they will not ship. So it was that. That was. Another thing, the price of material increase. Labor is not easy to have. We have our...
For Toronto, an example, we have our best booking ever, okay? It's difficult to go through and make some big increase, okay? We can, but it's difficult to have the labor, okay? That's, and plus, Canadian dollar was very strong during Q3. You will see, okay, that I am very confident that we will make our CAD 100 million that we see before that we'll make, okay? We're nearly at the end, and I am very confident. We have just good people around at Savaria, okay? People with talent, okay? An example, I am very happy, okay, that the result of in Handicare. I think people that we have many talents, okay, and produce very well. We are so proud of them, okay?
Proud with all the other division, okay? Some division, okay, we have to be better, okay? I will mention that in 2 minutes. With that, we have some increased price, okay, that we have done. We are very polite, okay? Because we have some dealer that make our living for me for 30 years and our customer, we respect them, okay? I think they respect us. We work. You know, somebody order an elevator to Mr. Smith, we respect the price. For the next order, okay, later, okay, or the beginning of 2022, okay, the increase of price and we would make another increase of price at the beginning of 2022. We go with them, okay. They are our live dealer, okay, and our direct office.
We work with them, okay? I think it's a win-win, okay. They are very happy that we will not increase, okay, like overnight the price, okay? We share that, okay? You will see that we will see in 2022. I am not enthusiastic, but very enthusiastic. Patient handling was very difficult. We were under stress, okay, that we study the people, study a little bit the market. We have Handicare, we have Savaria, and we have Span-America. That represents right now 20% of Savaria at CAD 140 million. That's a lot of dollar. I'm very proud, okay, that we have a new person, okay, Patrick, who is VP Development, North America. This guy, I like the guy.
It will be a complement to our team. He spent the last 20 years with Arjo. If you look at the last statement from Arjo, they have a very good EBITDA. I think this is a great company in our patient handling. We will try to go back to an EBITDA 15% quickly with Patrick. Welcome, Patrick. I will, at the end, if you have some question, I will be very happy to answer to you. If you see what we see in the future, we see a tremendous year in 2022, but we want to finish 2021 in good strength and have our CAD 100 million. We go in finance. Okay, I will pass to Steve.
Thanks, Marcel, and good morning, everyone. I'm gonna begin with some remarks regarding our Q3 2021 consolidated financial results. The Q3 , Savaria generated revenue of CAD 180.8 million, almost double the CAD 90.8 million reported in the Q3 last year, mainly due to the acquisition of Handicare. This is the Q2 of full consolidation of this acquisition. Gross profit and gross margin stood at CAD 58.5 million and 32.4% respectively, compared to CAD 32.6 million and 35.9% for the same period last year. The decrease in gross margin can be attributed to additional costs related to the supply chain, including shipping costs and also the reduction of subsidies from the Canada Emergency Wage Subsidy program.
Adjusted EBITDA and adjusted EBITDA margin stood at CAD 26.3 million and 14.6% respectively, compared to CAD 16.9 million and 18.6% in Q3 2020. The significant increase in adjusted EBITDA was mainly attributable to the Handicare acquisition, excuse me, and cost containment efforts across the company. These factors were partially offset by additional costs related to the supply chain, including shipping costs, and also by a reduction of subsidies from the Canada Emergency Wage Subsidy program. Turning to segmented results. Accessibility revenue reached CAD 135.7 million in Q3 2021, almost double from CAD 68.5 million in Q3 2020. The increase in accessibility revenue is mainly due to the acquisition of Handicare and also organic growth of 2.7%.
Prior to the acquisition of Handicare, revenue was split almost equally between residential and commercial. The strong performance on the residential side in Q3 2021 was partially offset by weakness in commercial. Accessibility revenue growth was also partially offset by a negative foreign exchange impact for the quarter. Accessibility adjusted EBITDA and adjusted EBITDA margin before head office costs stood at CAD 24.7 million and 18.2% respectively, compared to CAD 15.3 million and 22.3% in Q3 2020. The significant improvement in accessibility adjusted EBITDA is mainly due to the acquisition of Handicare. While the decrease in adjusted EBITDA margin can be attributed to additional costs related to the supply chain, including shipping costs and also to the reduction in COVID-19 Employment Retention Government of Canada subsidies, these items were partially offset by cost containment efforts.
Patient handling revenue totaled CAD 34.8 million in the Q3 of 2021, an increase of CAD 17.4 million or 100.5% compared to Q3 2020. This increase was mainly related to the Handicare acquisition and also organic growth of 11%, partially offset by negative foreign exchange impact. Patient handling adjusted EBITDA and adjusted EBITDA margin before head office costs stood at CAD 3.1 million and 8.8%, respectively, compared to CAD 2 million and 11.7% in Q3 2020. Likewise, the significant increase in adjusted EBITDA is mainly due to the acquisition of Handicare, while the decrease in adjusted EBITDA margin is partially related to additional supply chain costs and a reduction in the government of Canada's COVID-19 employment retention subsidy. These items were also partially offset by cost containment efforts.
Adapted Vehicles revenue reached CAD 10.3 million in the Q3 of 2021, an increase of CAD 5.4 million or 110% compared to the same period in 2020. Adapted Vehicles adjusted EBITDA and adjusted EBITDA margin before head office costs amounted to CAD 0.6 million and 6.1%, respectively, compared to CAD 0.3 million and 5.8% in Q3 2020. The year-over-year increase in Adapted Vehicles revenue is once again attributable to the Handicare acquisition, partially offset by organic contraction due to timing issues and a shortage of vehicles stock. Increases in adjusted EBITDA and adjusted EBITDA margin for Adapted Vehicles were related to the Handicare acquisition. This was partially offset by a reduction in the government of Canada's COVID-19 employment retention subsidy.
In the Q3 of 2021, net finance costs amounted to CAD 2.5 million, compared to CAD 1.5 million for the same period last year. The increase is mainly due to higher interest expenses due to additional long-term credit facilities related to the Handicare acquisition. Net earnings reached CAD 9.1 million or CAD 0.15 per diluted share in the Q3 of 2021, compared to CAD 8.1 million or CAD 0.16 per diluted share for the same period last year. Adjusted net earnings totaled CAD 9.6 million or CAD 0.15 per share in the Q3 of 2021, compared to CAD 8.2 million or CAD 0.17 per share in Q3 2020. Turning now to capital resources and liquidity.
Savaria generated cash flows from operating activities of CAD 7.7 million in the Q3 of 2021, compared to CAD 16.3 million for the same period in 2020. The year-over-year decrease is mainly due to net changes in non-cash operating items of CAD 12.5 million, including a ramp-up in inventories as well as increases in receivables and other current assets. The ramp-up in inventories was the result of intentional actions taken to minimize any potential supply chain disruptions on the business in Q4. As at September 30, 2021, Savaria had a net interest-bearing debt position of CAD 307.1 million and was in compliance with all of its covenants. On a trailing twelve-month adjusted EBITDA basis, Savaria's debt to adjusted EBITDA ratio was 3.5 times compared to 3.6 times in the prior quarter.
Savaria has funds available of CAD 138 million to support working capital investments and growth opportunities. Looking forward, the uncertainty around the future impact of the ongoing global pandemic makes it difficult to predict future performance. However, considering our financial performance year to date with an adjusted EBITDA of CAD 71 million, combined with current backlog levels and our strategic integration plan with Handicare, we remain confident we will achieve our previously stated goal of generating adjusted EBITDA in excess of CAD 100 million in fiscal 2021. On that note, I'll turn the call over to Sébastien for our business and operational highlights. Sébastien?
Thank you, Steve. My name is Sébastien Bourassa. I'm the Vice President of Operations and Integration at Savaria. I'll be talking about the accessibility, and then our friend Nick will talk about the patient handling. With the inflation and the global supply chain issue, labor shortage, quite acute result of the Q3 . If we talk about the organic growth, 3.5% for the Q3 . For sure it is below expectation, but we expect to rebound in the few coming quarter, because the residential home elevator backlog remained quite strong and we expect better contribution from the commercial segment for the incline platform, vertical platform for 2022, which has impact a lot Garaventa this year.
As announced last quarter, we did some price increase on our different products to offset some inflation on raw material and freight. We needed one quarter to flush our backlog and we expect a better contribution in the Q4 . As Marcel said at the beginning, we are planning to make some new price increase in 2022. We have increased our inventory level to help reduce a bit the risk of supply chain for the winter. So we should be in good position to deliver our organic growth. After that, regarding the integration with Handicare, which I'm sure people have a lot of question, I would like to highlight first a very good performance from Handicare in the Q3 . It was a strong performance, so thank you. Regarding the integration, I think it's progressing well.
We have made some adaptations to our new leadership team. We had the opportunity for the first time to meet in person in Netherlands and U.K. a few weeks ago with my brother Alex and Bill. We had the chance to meet Pete, Claire, David, and all the team. It was very nice to see all the different layers of management. I have to say that there's a lot of talent at Handicare. Very good processes, good automation, a very impressive factory. Congrats, Pete and his team. What's the most important is that everybody at Handicare that we met are very excited to be part of this Savaria team.
They want to be part of the family, they want to share their knowledge, and they want to learn from what we do at Savaria, that will be good for the future. Regarding our cross-selling synergy, it has continued in Europe between Garaventa and Handicare, mostly on the stair lift in the Garaventa network and with the incline platform into the dealership of Handicare. Vuelift, that should be a start for 2022. That's definitely on the agenda with the team of Claire, so thank you for looking at that. As far as North America, it will really start in January 2022 with the Freecurve, the single tube manufacturing in Toronto. We have received equipment. Our robots are under installation. People are receiving some training.
We are expecting to make some beta tests in December in order to be live January 3. This will be a game changer for North America in terms of lead time in order to make some custom curves to deliver in a few days. I will say our dealers are quite excited. Please come to visit us in Toronto in January. Overall, we think we are at the right pace to do a CAD 12 million synergy run rate by the end of next year, as we said a bit earlier when we have announced transaction of Handicare. With all those challenges, we remain on track to achieve our CAD 100 million EBITDA in 2021. Nicolas, patient lift.
Yes. Thanks, Sébastien. I'll spend just a minute or two to discuss the integration here with our patient handling segment. It is well underway. As was mentioned previously, travel restrictions have eased, and we've been able to make multiple trips now back and forth between our operations in the U.S. and Canada. Now, these in-person meetings have been important in helping us to get to know one another and to better understand our respective products, sales channels, and organizational structures. One of the main goals of our strategic integration planning is to bring together the businesses of Handicare and Savaria as one cohesive patient handling group. This really starts at the top. Earlier in Q3, we consolidated the leadership of Handicare and Span-America.
Just yesterday, as Marcel alluded to earlier, we announced the arrival of an industry veteran with 20+ years experience to help lead our sales integration efforts and to oversee the commercial strategy for our patient handling activities. Some areas of particular focus are the development of a clear product roadmap, SKU rationalization, and the harmonization of our ceiling lift tracks and accessories. Through these initiatives, we'll be able to optimize purchasing and manufacturing efficiencies, and in doing so, deliver a better experience for our customers. Marcel has made it very clear to us in particular that the patient handling segment is an important part of the Savaria group, with a combined revenue base now of CAD 140 million.
We'll be working very hard over the coming months and quarters to ensure that our integration plan is successful and that patient handling will be a meaningful contributor to Savaria's overall growth going forward. With that, I'll turn it back over to Marcel for any final comments before the Q&A. Marcel?
Yeah. Thank you, Nicolas, and good presentation, Steve, Sebastian, Nicolas. We are so excited to complete this year and go to 2022. Do we have some question, Shannon?
Thank you, sir. Just as a reminder, if you'd like to ask a question, please press star one at this time. Also, if you find that your question has been answered, you may remove yourself from the queue by pressing star two. We'll take our first question from Derek Lessard of TD Securities.
Good morning. This is Cheryl standing in for Derek who's on another earnings call, and thanks so much for taking my questions. I'm wondering if you could talk about your confidence behind maintaining your CAD 100 million EBITDA guidance given the tough operating backdrop, please.
I am very confident. As mentioned before, we have many things going not so good for us in Q3. Even with that, we are satisfied with the final result. As mentioned before, and Sébastien say that, we have all our stock in-house to make our Q4. So we have no problem of shortage. Everything is there. I think everybody will continue to work hard, and we will deliver. Sébastien, you want to add something on that?
No, I think some pretty good comments. The team know exactly what they have to do to do. They have the order in hand, so we are confident with the forecast we have in place.
Okay.
Thank you. Our next question.
Thank you.
Welcome from Nick Agostino from Laurentian Bank Securities.
Go, Nick.
Bonjour.
Just a quick question. You guys called out labor shortages. Certainly that's something that many companies are experiencing. Just wondering, are you seeing just with the change in government programs on the subsidy side, are you seeing any relief on the labor shortage side? If not, what sort of steps are you guys taking to improve, I guess, your shortage situation? Should we be thinking about higher, I guess, or a margins impact if you guys are having to pay or throw out higher wages to attract the talent?
Nick, thank you for the question, okay, and Sébastien can add a little bit after. It's general. It's not just Savaria. It's general. It's why I am so happy that we have these curves.
For sure, Nick, we started to see the freight decline a bit. We hope it will continue as the economy reopens and maybe the demand, the over-ordering that people did will eventually come back to a normal level. For sure, the Port of Vancouver or L.A. in the U.S., they are congested. But still, that's why we have increased our inventory. Our containers come, I would say at a certain pace, much better than it was in Q2. I think in order to lower the inventory, we have to wait one or two quarters to make sure things stabilize in the winter with storms and everything, that we always have to be quite a bit cautious with our stock level.
Okay, great. Thank you.
Thank you, Nick.
Our next question will come from Zachary Evershed of National Bank Financial.
Bonjour, Zach.
Bonjour.
If you could help me out, how are you thinking about the pace of recovery in commercial end markets in Q4 and over 2022?
Nicolas?
Yes. I mean, the commercial, it has been the drag. I mean, I think in certain of the comments that have been made here, residential is really carrying all of our growth and accessibility. I'm very happy that Handicare's exposure to residential is almost 100%. With their stair lifts, that's been a big boon for us.
As it relates to commercial, it's difficult to know the timing of when, you know, it will come back. Our anticipation is that, you know, 2022 should be. If it's in the Q1 or Q2 , I'm not entirely sure, but we are expecting those orders to come back. It's not a question of, in our minds, of if, but just a question of when. Sounds like I've been repeating myself 'cause I've talked about sustained foot traffic for quite some time now, but we are starting to see that. I mean, some of these landlords, you know, the wage subsidies, the rent subsidies are coming off. You know, they're just starting to break even. They're starting to make money. They're seeing customers come back.
I think it's gonna take a little bit of time for them as well to be comfortable with their own personal balance sheets before they start making some of these investments. We do anticipate it to come back in the next year, but it's difficult, Zach, for me to tell you exactly when the light's gonna turn on there.
That's helpful. Thanks. That's all I had. I'll turn it over.
Thank you. Our next question will come from Matt Buckles of Stifel.
Hey, morning, guys.
Bonjour.
I just have a few questions. First, I know last time we spoke there was some mention of doing some tuck-in acquisitions. I was wondering if you could maybe update us on your deal pipeline in terms of maybe the number of targets or potential revenue. I guess secondly, wondering if multiples have changed at all given, you know, what's going on with the global supply chain.
Just to tell you that for sure, we have a good balance sheet. We have our bank, we're over CAD 130 million, I think, accessible from making some acquisition. We're not looking at the major acquisition, but I am sure in 2022 you will see some small acquisition that will be located at key territory that we are a little bit weak right now or at some products that we want to add on our line. Really, we focus on integration. We have so many good things that can be, but for sure we will make some little acquisition.
Understood. Okay. You mentioned it, but you know, the solid balance sheet. I was wondering if you could maybe provide a little more color in terms of, you know, where the number top few priorities lie in terms of, you know, whether it's spending on supporting working capital, investments. Sounds like M&A may be a little bit later. If you could just outline, you know, where your priorities are, that would be helpful.
Okay. Sébastien, you want to take it?
I can take this one, Marcel.
Okay.
Yeah, thanks for the question. I mean, we are making investments in inventory, absolutely, in working capital, make sure we don't put any of the sales in jeopardy for Q4 and going forward. We'll continue to make investments there where needed. On the CapEx side and investment side, we're obviously investing a large amount in the facility here in Brampton to have the curved stairlift production up and running now in Q4 and up for 2022.
There is a significant investment that's happening there. Other than that, we will continue to make strategic investments in CapEx as required, but any excess funds we're gonna use to de-lever. If something does come up on the acquisition side that the timing is right and the opportunity is right, you know, we will pull the trigger on that. Our plan is to continue to de-lever.
Okay. Last one from me. I was wondering if you could provide any commentary related to or maybe quantify your overall organic growth expectations over these next few quarters?
Sébastien or Steve?
If you go back to the statement that we said before that we want to be a CAD 1 billion company by 2025, that means that we have to be in a 8%-10% range very often. I think for the accessibility, this is definitely the target we are looking for.
Okay, great. I appreciate you taking my questions. I'll hop back in the queue.
Pleasure.
Our next question will come from Frédéric Tremblay of Desjardins.
Bonjour, Frédéric.
Bonjour, Marcel. First question for me is on the price increases. You mentioned, you know, potential for further increases in 2022. I was wondering if it's more on, let's say, categories that weren't increased in 2021, or is it an increase that's gonna be on top of what you've already done for some of your brands here?
Oh, you know, we have some increase in every division, okay, in 2021, and every division, okay, will have a new increase at beginning of next year. That's. The people understand that, okay. They just go make their grocery and they understand that the inflation is there, okay. It's there for them, it's there for us, okay. We want to share a little bit with our customer and our dealer. They understand that we have to have a strong balance sheet, okay, if we want to keep our role to be the best manufacturer around the world about the accessibility product.
Okay. Appreciate the comment on the patient handling initiatives. On the timing of the improvements, I was wondering if patient handling is expected to contribute more meaningfully in Q4 than it did in Q3 to attain the 2021 guidance. Is the improvement in patient handling expected to be more-
Significant in 2020, 2021.
For about Q3, realistically, okay, that it will be easy, okay, to be better, okay, in Q4. Okay. I will see the real action, okay, in the introduction of Patrick, okay, we will see more change, okay, and more EBITDA %, okay, at the Q1 2022.
That's helpful. Thank you for taking the question.
Okay. Thank you, Frédéric.
Our next question will come from [uncertain] of Deutsche Bank.
Michael Dumay.
Hey, good morning, guys.
Yeah, first question, the 2021 EBITDA guidance, like that implies a sequential improvement in EBITDA. Like, I understand the typical seasonality here, but I wanted to get a sense for how much of the sequential increase is expected to be driven from higher sales versus, you know, maybe I would call margin recapture. Just as a follow on the margins, any way you can provide us a sense for how much still needs to get recaptured beyond Q4?
Sébastien, you want to go or I go, or?
If you can start off, maybe Steve can complete.
You know, something, we have some price increase everywhere, but as I mentioned before in the call, that's us in accessibility for elevator, residential elevators, the order that they place with us, we respect the timeline that they will go to install to Mrs. Smith with the same pricing. That is done, that will have an impact in Q4. I know that Handicare and Span-America and our other division make an increase of price, and we will see that in Q4.
We will see that again, we have another one in Q1, at beginning of Q1. You will see that, roughly it will be a little bit more combined 2021 and 2022 more than 10%. That's my way of seeing what I see right now. Everybody is on board with that, and I think it's a fair increase that it will be combined 2021-2022 over 10%.
If I can just add on that, Marcel. Obviously we saw inflationary pressures in Q2 and Q3, and also challenges on the freight cost side. We have done price increases this year already, but nothing compared to what we put in place in Q3. The more widespread price increases that we put in place in Q3, we're gonna see that to come through in the margin in Q4 and going forward. As Marcel said, we're gonna continue to look at price increases. To your question specifically about, you know, margin versus revenue impact in Q4, we're anticipating both. That's really clear, guys.
Most of the catch up versus pricing happens in Q4, but it sounds like there's still some left in 2022. Yeah, no, that's helpful. Maybe Steve, just a question for you. If I look at the consolidated P&L, you know, both gross margin SG&A rates declined quite a bit from Q2. Now, I think there's plenty of reasons, you know, that are understood on the gross margin side. I wonder if you could talk about what drove the SG&A lower quarter-over-quarter and whether or not that's sustainable.
We did have a recast of our financials. Our MD&A was prepared with the recast numbers on a year-to-date basis for Q3. We had to reclass from SG&A into margins. If you're looking at prior MD&A, you'll see that change. Whereas if you look at our Q3 MD&A, the year-to-date numbers, it's more in line. Obviously, we did have some pressures this quarter in gross margin and in SG&A. A lot of that was on subsidies. We saw that in subsidy decrease. We saw that in both gross margin and in SG&A. There was no other real impact to SG&A in the quarter.
Okay. So not much of a read, I guess. No, that's helpful. Then maybe the last one, you know, what do your conversations with your dealer network suggest for the speed of the potential uptake in the stairlift sales, you know, manufactured from Brampton? And I guess the flip side to that, you know, in terms of the stairlifts that do not need to be air freighted from Europe, you know, what's the confidence level that you can now sell those into the European market with speed?
Well, I tell you, our dealer, okay, are very excited that they can propose, okay, a project, curves project or curve stairlift, okay, and they can install that, okay, in two or three days after the order. That will be the best in North America, okay, and other company are very good, okay, but we work hard, okay, to deliver this product. We put a lot of energy dollars, okay, to be sure that we will be in production for North America at the beginning of 2022. That would be major, okay, just on the freight, okay. That right now, Handicare, okay, sell in North America, okay, sends that by air freight. It will be coming from our factory. It's very.
Our dealers like very much, okay, to see that we would have something that we can deliver, I repeat myself, that they can deliver quickly to the customer. Sébastien, you have something to add on that? No, I think, what's important to know is they have been doing it in Netherlands, okay, for years and years. They have perfected their system. It's a well-run system, and we are duplicating the same thing in Toronto. The team has done a very good job to train us, to help us. They will be there at the beginning to make sure we don't make mistakes. I think, it takes years and years to become an expert, and we have the chance to do it from the day number one.
Great. Thanks for the color, guys. I appreciate it.
Thank you.
Once again, if you found that your question has been answered, you may remove yourself from the queue by pressing star two. We do have a follow-up question from Derek Lessard of TD Securities.
Hi.
Hi, Derek.
Hi, this is Cheryl, for Derek again.
Yeah, yeah.
I'm just curious if you have any plans to build any other Handicare products in North America, and if so, what type of CapEx and timeframe would you be anticipating?
Sebastien?
For sure. If you look at Handicare right now, they are expert in stair lift, and that's what they do. Right now, the straight stair lift is already available within North America. There's a double tube, which is currently made also in Europe. Maybe sometime next year, we could look to manufacture the double tube system of Handicare in North America. First, we have to finish with the single tube to make sure we are successful. After that, we can think about the second product. All the other straight stair lift are already available. The double tube is available, but need to be shipped overseas. That's the next opportunity.
Yes. Sébastien, I would just add, okay, that's a major change for us, okay, to manufacture in Toronto, okay, the products, okay, that we have the best EBITDA in terms of percentage. That's something that will be a direct impact, okay, of our EBITDA in 2022. It's why I'm so enthusiastic about this thing, okay? We work hard, okay, with Handicare. As mentioned, they proved that they can deliver this product. We'll have this knowledge or we have right now because it's quite advanced in Toronto. Again, okay, it's our best EBITDA product, okay?
We will be very enthusiastic, okay, to speak to you about when I will speak to you again in the Q1 next year, where we'll give you where we stand with that.
Okay. That's helpful. Maybe one last one from me. Just wondering if you could update us on some of the cross-selling synergies that you'll be able to monetize this closing deal with Handicare?
Steve?
Specifically on the sales side, yes, they're starting to come. The synergies that we looked at with the Handicare deal, we had them in three separate buckets. We had the indirect costs, we had the direct costs, more of the cost of goods section, and then the sales. The indirect piece is obviously coming a little bit faster. I think that's easier to execute. The sales side is starting to come. We're starting to see that come through, absolutely. It's that is more heavily weighted towards the end of the you know one to two years of our integration plan. I mean, the good news is that we're seeing it start to come through.
We have put some leadership changes and realigned the teams to more effectively go after some of those synergies. We're confident we're going to deliver at least what we have set out in our initial expectations.
Okay. Thanks so much for taking my question.
Thank you.
It does appear we have no further questions at this time. I'll turn the conference back over to our speakers for any additional or closing remarks.
Shannon, thank you very much to be there. Thank you to my team, okay. Thank you very much, the analysts, okay, are an important part, okay, of the success of Savaria because you deliver the good news to the buyers. Again, thanks for your very good work, everybody, that we speak this morning. A big thanks, okay, to everybody, all my division, okay. You work hard, okay, and I recognize that, okay. You are very important, okay, for us, our 2,000 employees. Thank you very much. Thank you, Shannon.
Thank you. That does conclude today's teleconference. Thank you all for your participation. You may now disconnect.