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 speaker's remarks, there will be a question- and- answer session. If you would 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 two. 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 7th, 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 result of 2022. Very, very happy. I'm in the business, okay, since quite the beginning, okay? Even, okay, if we have some turbulence, okay, I repeat what I repeat for so many years, okay? That our business is on mobility, okay? Mobility, okay, the people are aging, okay, every day, okay. One problem, okay, was there 10 years ago, and it is there. It is the accessibility, okay. Accessibility to the house, okay, or to the public buildings. Our business, okay, is like 50/50 to commercial and residential.
I can tell you that our backlog, sometimes to see if a company is healthy, 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 unfortunately in war in some sector, and market seems to be nervous. 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. You know, that don't affect them at all. Just maybe they will say, "Oh, we're nervous a little bit, we will postpone at a couple of months our decision." This decision is there. They need mobility.
When I decide to go in this kind of business, okay, 30 years ago and more, I decide because it was great 30 years ago. Even right now, with the population that we see more, okay, that it is apparent the aging of the population, they need our product. They need our product. Is why, okay, our backlog is so high, okay? I am very happy about our mobility across the world, okay? After that Patient Handling, okay, Thanks very much to the people, okay, and all this division, okay. They report very good number. I am very enthusiastic about the future. I repeat myself, okay? The future is the backlog, okay? We are the best backlog, okay?
It's why 22 was good. 23 that we are in, almost finished the first quarter, will be better. It is better. I have always my people, my key people with me on the call this morning. I will ask Steve to begin. We'll make a little change. After that, Nicolas Rimbert will speak about patient handling and Sébastien about operation. We will speak first, and after that, we will listen to the question. Again, I repeat, we are good. We will be good and better. The news, thank you to the analysts. They are there this morning. Support Savaria. That's so important. That's so important that you are there.
You were there five years ago, you are there 10 years ago, and thank you very much for that. I pass the guy who handle our finance. Steve, please.
Thanks, Marcel, and good morning, everyone. I'm gonna begin with some remarks regarding our 2022 fiscal year consolidated financial metrics. For the year, the corporation generated revenue of CAD 789.1 million, up CAD 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 margin stood at CAD 254.4 million and 32.2% respectively, compared to CAD 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 CAD 120.2 million and 15.2% respectively, compared to CAD 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. We'll move on to our segment results.
Revenue from our Accessibility segment was CAD 560 million in 2022, an increase of CAD 75.7 million or 15.6% compared to 2021. The increase in revenue is 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. 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 CAD 97.3 million and 17.4% respectively, compared to CAD 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 CAD 174 million for the year, an increase of CAD 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 CAD 24.9 million and 14.3% respectively, compared to CAD 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 CAD 55.1 million, an increase of CAD 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 CAD 4.3 million and 7.8% respectively, compared to CAD 3.2 million and 8% for 2021. For the year, net finance costs amounted to CAD 16.5 million, an increase of CAD 0.7 million over the CAD 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 the 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 CAD 1.8 million and a loss on a net investment hedge of CAD 0.8 million, which were not repeated in 2022. Net earnings were CAD 35.3 million or CAD 0.55 per diluted share for the year compared to CAD 11.5 million or CAD 0.19 per diluted share in 2021. Adjusted net earnings excluding amortization of intangible assets related to acquisitions reached CAD 57.1 million or CAD 0.89 per diluted share compared to CAD 41.8 million or CAD 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 CAD 1.4 million for the acquisition of Ultron and CAD 20.5 million for fixed and intangible assets, compared to CAD 381 million for the acquisition of Handicare and CAD 15.7 million for fixed and intangible assets in 2021. Cash used in financing activities was CAD 83.3 million for 2022 compared to a cash infusion of CAD 351.8 million in 2021. This year, significant cash outflows include CAD 32.5 million of dividends, CAD 28.1 million of reimbursement on the credit facility, CAD 13.9 million of interest paid, and CAD 11.2 million of lease payments. As at December 31, 2022, Savaria had a net debt position of CAD 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 3x . This represents a 0.7x decrease versus Q4 2021 last year. This reduction is 0.2x over and above our target of 0.5 turns per year. Savaria has funds available of approximately CAD 125.7 million to support working capital investments and growth opportunities. Now looking forward, for 2023, Savaria expects to generate revenue which will be approximately 8%-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. As I mentioned, that will support our increase that we look for 2023, and we're very optimistic. About the good change in the Patient Handl ing, I will have Nicolas Rimbert to present you what we have done in 2022.
Yeah. Thank you, Marcel, and good morning. I would like to take a moment to speak about the performance there at 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. If we're to achieve our long-term objectives, we're going to need them to deliver for us as well. 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%.
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. I think what we're seeing here is the synergies materialize maybe even a bit faster than we had anticipated. Again, Marcel, I appreciate you asking me to take a brief moment to speak about Patient Care. I'm sure there's gonna be some questions from the analysts on the call, but just wanted to, I guess, congratulate the team and let them know that it was a great performance in 2022. We fully expect, you know, even better in 2023. Thank you, Marcel.
Okay, Nicolas, I will hear you, okay, with some question, okay, on the patient, and then you will answer that, okay. The last but the least, okay, that will be Sébastien, okay, that will be presentation, okay, for what we have done, okay, in the last year and the last quarter, and last quarter will be a little bit later, okay. For 2022, okay, Sébastien, can you take the line, please?
Yeah. Thank you, Marcel. Basically, yeah, 2022 was a good year for Accessibility in term of our production output. We had interesting growth, okay, in Europe and in North America. Europe was a bit more challenging towards the end of the year in term of margins, but that's just a little short-term issue. We're always working with the team to do some action plan, that's not a concern. We are lucky, yeah, we started the year with a very good backlog, that continued to put some production pressure to do some improvement. All the team is working on improvement, I think in each division. That's will bring some interesting output in 2023.
After that, for sure, in 2022, I know we have launched the Freecurve of Handicare in North America in Toronto. Right now it is successfully in production. We are approximately at 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. In the second quarter of this year, there will be a second product of Handicare, the second curve, the 2000. That is going to be manufactured in May 2023 in Brampton. 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. That's in a good progress.
In Europe, really, the Garaventa and Handicare are working together on some cross-selling of inclined platform, of some Vuelift. We hope, later this year, we'll be able to bring some Savaria product in Europe, some vertical platform and porch lifts so that we can continue the affordable cross-selling. Mexico. It's just 4 months into the story of Savaria. Since November, we are 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. That's, that's a start. We have already did a lot of shipment, okay, since the beginning of the year. We are also making some sub-assembly from Mexico to Toronto to help us a bit to rebalance in the long term our supply chain.
Don't forget, if we have to go to 1 billion, we need more capacity. It's always important to think a bit ahead. Last thing on supply chain. It's not perfect, but I would say it's a big improvement since a year. Right now, the supplier that has some supply chain issue with us, maybe they are not the right partner to work with Savaria. On that, Marcel, I will give this back to you.
Thank you, Sébast. Okay. My, dear follower, okay, you can see that our team, okay, know what they are doing. They are aggressive, okay. For sure, okay, what that help us, okay, it's a segment that we have, okay. They can handle the operation and the future of this company. My role is, less important, okay, but I have just question, okay. I participate with the vision of Savaria. We are ready for call please. Desk call.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll go to Derek Lessard with TD Securities. Your line is open, sir. Please go ahead.
Yeah, thanks. Good morning, everybody. 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. 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. Basically in New Mexico right now we have, three assembly line, doing some porch lifts, some portion of home elevator and a third one for electrical department. Basically, this is really again, to help us to support our growth. I think we have already published our guidance for this year. I guess somehow Mexico is built into this budget. Again, it's for the long term, for the 1 billion capacity. Now we have a 95,000 sq ft. It doesn't feel okay overnight, we gotta go step by step. I think we are happy with the direction we are going. Also we're looking, directly vertical integrated in Mexico to make some parts by ourself, not just to assemble parts.
We have started to receive some machinery to be able to be vertically integrated. That will be a game changer over time for the margins, at least for North America, since it's at proximity. The second part of the question was the inflationary. I think it's getting better. People that has to pass some increase, I think we have already hopefully received it. I think we are working on some mid long-term project to be able to decrease some costs or look for some alternative supplier. Margins-wise, you know, we have different brands that will make some price increase at different time, so they are not all at the same anniversary date.
Since we have a healthy backlog, but sometime it takes a bit of time to reset the margins. That's why, I think on the mid long-term, I'm very positive that we'll continue to improve our margins.
Okay. That's very helpful, Sébastien. Then maybe one for Steve. Just wanted to be clear on the 8%-10% revenue guide, that excludes the sale to the Norwegian vehicle segment, right? Essentially 8%-10% in Patient Care and Accessibility.
Yeah, exactly. Once that's final, I mean, the best way of looking at it is to take our 2022 results and carved out that Norway business and we'll grow 8%-10% from there, so.
Okay. That's helpful. Maybe just one more. You guys did. Thanks for the color on the Accessibility backlog. Wondering if you have any similar color on Patient Care. I know, you know, 20% growth forever was not sustainable, but you know, how should we be thinking about growth and some of the growth drivers in that business for 2023?
Yeah. Well, I mean.
I, I-
I talked about... Oh, go ahead, Steve.
No, no, go ahead, Nick. Keep going.
I was just gonna say that you're correct. I mean, I think we had a good run there of 20% in a row. I think it was 3 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. You know, going forward, I think that 8%-10% holds as well for Patient Care. Our expectation in 2023 is, you know, we have a good order intake coming in. You know, we're quite confident about where we are. You know, here we are kind of midway through March, so, you know, we have a good part of Q1 already in the books. The Ceiling Lift portion of that business.
The kind of that Handicare side of things, that is more of a, you know, project-based, so there is, you know, 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 relatively quickly, so the backlog is relatively small on that portion of the business just by its nature. Going forward, I mean, I think what's gonna be driving some growth this year, along with, you know, certain of the pricing initiatives that we had discussed for last year, is we're aggressive in the market. I think that the sales teams have really come together, and we have, you know, more feet on the ground talking about the full portfolio of products that we offer.
We're out there, you know, gaining market share in a time when, you know, some of our competitors are, you know, 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. Finally, I would say that the cross-pollination between the teams is something that's really now just taking hold. They're working on strategic accounts that might have been with Span and getting the Handicare guys in there and vice versa, making sure that, you know, the Span guys are having an opportunity in leveraging some of those Handicare relationships to really push mattresses and bed frame sales.
I think the cross-selling is gonna be a big driver for the growth, not only in 2023, but also in 2024, 2025. Very excited about where we are. In terms of expectations there, maybe not 20% growth per year again going forward, but, you know, that 8%-10% growth is where we expect this to be in 2023.
Yeah. Thanks, Nicola. That's it for me. Ben?
Hey, Derek, I will just, Sébastien, just to add, okay, we received an order, okay, from Asia, okay, about patient handling, about patient lift, okay. Sébastien, just give me, okay, why we receive that, okay? Because we change our approach, we have new people. Tell me.
Marcel, you don't forget the detail, huh? Yes, we have a new commercial director in Asia, okay, since 6 months, we have tried to do a clean up a bit on our marketing in term of Accessibility, Patient Care. We have some dealer base in Asia. We have restarted to visit all our dealers since COVID is a bit behind in Asia. Recently we got a nice order for 150 units, okay, in hospitals in China with one of our dealers. Again, that show that there's opportunity everywhere. The Patient Care has been really North America and U.K. with Silvalea. Going forward, okay, 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 the orders, S é bas? Dollar speak.
It was $450,000,000, Mr. Marcel.
But that show that in this segment, sometime we receive very good order, depending. We can see this across the planet that people need some service, some medical service. They need some patient our product. I am very optimistic when I see an order like that coming in, and that's just the beginning of the way that we have a new team who lead this division. We have a new that is not 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 product and the best service. Thank you, Derek.
Once again, it was star one if you had a question. We will go next to Michael Glen with Raymond James. Your line is open. Please go ahead.
Okay, thanks for taking the questions. Just wanna circle back on Mexico 'cause 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, you know, just something a little more tangible that we can speak to?
Michael, basically, I guess I'll take this one. For sure, most of the revenue of Mexico, okay, is intercompany, doesn't really affect, okay, the external revenue. Again, growing part of this $1 billion, okay, it is important to have capacity. Right now we have 35 employee. We hope to have 100 by the end of 2023. If you in terms of size, okay, it's probably this year $10 million range, but it's all internal sales company.
Okay, that's really helpful. Thank you. 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 would just have to say that not at all, okay. We have the best booking is exactly where we are, okay. Right now is the residential elevators, okay. More and more people, okay, can retrofit an elevators, okay, or install in a new home, okay. That's the best backlog that we have in all our projects. It is exactly residential elevators. I don't know, Sébastien, you have to add something, but the numbers speak, okay, and when we see the backlog, okay, it's months and months, okay, ahead, okay. Sébastien, you have to add something on that?
I was just going to say, Michael, that everything, okay, started with the sales leads. I would say we have attend some exhibition so far this year, and the attendance, okay, in the U.S. were fantastic with architect and contractor. People want to put elevator, so there's a lot of inquiry. Then we see it after the leads, we see it with our drawings. Our numbers of drawings did not go down, so it really show that, hey, our backlog is empty, but still the pipeline in the back, okay, is the market remain very positive. No, no concern for now.
Cash flow working capital, you had 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. You know, to tie into that as well, maybe some CapEx guidance as well.
Sure. I'll take this one. Yep. Thanks, Marcel. On the working capital front, yeah, we did deliver well in Q4. We basically took out CAD 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, I would, as far as from a modeling perspective, I would probably put in, if I were you, put in that we're gonna be holding investment flat. We're not gonna be investing any dollars into working capital in 2023 to support the growth.
We feel we have ample room in current working capital levels to support the 8%-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%. We've always been in that 2%-2.5% range, and for 2023, it'll be closer to the 2% range.
Okay. Then free cash, I would think that the priority for capital allocation with free cash, it will be debt repayment in 2023?
Exactly, yep. We did delever 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. For 2023, we're guiding half 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.
Hey, good morning, everybody.
Bonjour, Michael.
Bonjour. 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, you know, that 8%-10%, which again, I think excludes the divestiture, if you could break that down between price, volume, and FX. 'Cause the one thing I noticed is that, you know, the current FX rates, Savaria will probably get a lift of about 4% to revenues on translation.
Yeah.
Steve?
I'll take this one. The 8%-10% growth, that's a mix of price and volume. Sébastien mentioned earlier that you know, we do have price increases across the business. 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. 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. Overall, for that 8%-10% growth, it's a mix of both price and volume.
Without saying exactly how much it's gonna be, I would say, we're expecting a bit more from volume than from price.
Got it. Would FX be on top of that, Steve, if you get the 8%-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, 9 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 US dollars and quite a big piece of our business is in euro and GBP as well. What we saw last year was, although the U.S. dollar strengthened, we saw a weakness in the pound and the euro, and that had mixed impacts, although they were offsetting each other in our 2022 results.
Very difficult to say what 2023 is going to bring. We feel good about having a diversified business.
Okay, understood. Thank you. Moving on to the accessibility margins. You know, you had a little bit of an atypical year in 2022, where margins peaked in Q2 and then kinda weakened through the back half. You know, not sure if that was due to the price increases that was implemented in Q2 or, you know, maybe had something to do with Europe. I heard Sébastien comment on that on Q4. 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 complete my answer, but I just tell you something. Our best project in term.
Of productivity, okay. For sure, patient ending, okay, push us a little bit in the back, okay. That will be good for my team in Accessibility when you see other people, okay, pushing and maybe they try to go in front of us, okay? That's our main project, okay? Accessibility, okay? I can tell you something, okay? The margin are there, okay? We have some increase of price, okay? That sometimes takes some months that we see that. You will see that. I know almost the number of Q1, okay? You will see good number in 23 about the percentage.
if Yeah, Marcel, if you don't mind, if I could just jump in here.
Yeah.
just to add a little bit more color. Yeah, we did see some weakness in the Q4 margins, especially in Accessibility, especially in the Europe region. you know, We like to do them once a year, you know, twice a year if we have to, but it's not something that you can just keep doing on an ongoing basis. At the time when we put in 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.
As we saw continued vendor cost increases throughout the year, that had a downward impact on margins. You know, 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, you know, looking at other vendors and looking at other opportunities. We do have action plans in place and we're focused on increasing the margin. We do have 20% margins in our sights, we have seen... You know, we do have pockets of 20% and in excess of 20%, it's just a matter of making, getting that 20% across the board. You know, 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. Just wanna circle back to the longer term goal, which is I guess more of a medium term goal in achieving $1 billion in sales by 2025. I see the path to get there just given the strong organic strength. I also wanted to touch on the goal to have 20% EBITDA margins by then or CAD 200 million, which would be some significant expansion from what the guidance implies for 2023, which I think works out to around just shy of CAD 140 million in EBITDA. Are you able to help us bridge that EBITDA expanding from CAD 140 million to CAD 200 million over the next few years?
Right. Just, first of all, our products, we mentioned that we have a key backlog. We mentioned that we have a price increase. Also some region around the globe was a little bit maybe conservative about the increase on price. People know the inflation. They accept that if we are fair, they accept an increase of price. Everything is in place to increase our margin. We see why we put, from 16% to 20%, Marcel. Man, it's just a question that to do better in productivity, to do better in designing and to have the right sell price.
This is the keys, the key part, okay, to be succeed, okay, to be 20%, okay? For sure it's aggressive, okay, but that's. I think we are not very aggressive, okay, on our increase of sales, okay, 8%-10%. You will see in Q1, okay, that will be that easy, okay? This is a little bit conservative, okay? We work on improving our productivity, as I mentioned. You will see, okay, this year, okay, that, hey, man, okay, we are better than ever. It's because our people, okay? Our people are good. They can be better. We will add some people, okay, to be better. We are around the globe, okay?
We see, we show to the people in 22, okay, that we are everywhere, okay? We have this new manufacturing, okay, and these two markets, okay, that we will sell in Mexico and around that, even if it's not our first goal, okay? In Asia, okay, Asia is very important for us, okay? Very important, we will see more development, okay, in coming years, okay? I am very confident, okay, that for sure we'll meet the guidance in the sales, okay? About our 20%, that's a challenge, okay? We'll be very near that, okay, 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. Again, just to highlight, you know, R&D, we have 50 people in R&D in the organization. When we launch a new product, we have to launch it at the right margins, or we'll not launch it. I think the Mexico efforts, for sure is to help us to lower some of the costs. I think that will be our answer, Justin.
Great. Great.
Justin, just an example, okay, Sébastien. Tell me the price of a container that you receive, okay, from China, okay, two years ago and right now or three years ago and right now.
It's a tough one, I said, to answer, but at least for one line, okay, which is, China to Toronto, I think we're back to the pre-level before COVID. All the other line in Europe, a different place, okay, there's always the inland cost that we have to be careful. You know, it's with the gas price high, it's everything that we move within the country is usually expensive. Yeah, for the container, okay, we are back to a $4,400-$4,500, which is very close to pre-COVID.
Thank you.
Great. Appreciate that. 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, you know, still on driving synergies with Handicare and in internal operations?
First of all, for sure we'll make some little acquisition. Or just give you an example that we're... You know, we can make an acquisition, but we know we are good. When we buy a dealer, they sell other kind of project than Savaria, plus, we push all together to grow the business. 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 Lift and Third Lift. They are very good. For sure our [audio distortion] in Toronto is very good.
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 decide to sell. Maybe we are a buyer, but for sure we have little acquisition like that. You have to add some things, Sébas?
Just to say Premier Lift [audio distortion] is two of the most successful store of Savaria. They are owned by Savaria.
Understood. Really appreciate that. Thank you very much.
Okay. Thank you to be there.
Your next question comes from Nick Agostino at Laurentian Bank. Your line is open. Please go ahead.
Yes.
Hey, bonjour, Nick.
Bonjour myself.
You are with us for how many years now, Nick?
I'd say at least eight, nine years, maybe 10.
Yes. Yeah. You are in the 2 number. That's good. Thank you very much to be there, Nick.
My pleasure. My pleasure. Quick question on Mexico, and I know there were 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 gonna get out of Mexico that's already baked into that 16% guidance number?
Take it, Nick. Don't forget... Okay. Sébas, that's you. You will answer. When you say, okay, I am the oldest guy, okay, on the call, okay, I think my thing, okay, and it's good to be like that, we are very conservative, okay. Very conservative. Sébas, okay, I leave you the answer to Nick.
Yeah. Nick, no, don't forget, it is a startup that we have done in Mexico. When you have a factory of 95,000 sq ft and you have 30 employees, again, it takes some time before you become very efficient and you can really bring some important savings for the organization. This year, for sure, it's a ramp-up. We talked a bit earlier that it's maybe in the CAD 10 million range of intercompany sales, maybe a bit of outside sales, but I think it's really for the long term. I think, if we want to go to 20% going forward, we need some nerve-sharing opportunity.
Okay. Thank you for that. 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?
Yeah, don't forget, okay, when you call about booking. Booking is, as mentioned in the beginning of the call, okay, it's very important, okay? Booking, okay, like on the stairway, okay, straight on the curb, okay, it's now, okay, we can ship a curb, okay, in Toronto, okay, in a maximum 2 weeks, okay. That's backlog, okay. 2 weeks, we don't see the backlog. We just deliver the order, okay. On residential elevators, okay, our backlog is on residential elevators is at least 3 months, okay? Something that we don't see in the past, okay? For sure it takes time, okay, for the order to arrive because they have to have some planning.
We are very well equipped, okay, in Vancouver and for sure in Toronto to manufacture and we'll get some parts, okay, from Mexico already. They are working like to parts, okay, controller. Controller, okay, is very important, a controller, okay, in a product because we need a controller, okay? We see how we are in the market, okay, how the challenge that happened, okay, on controller, okay, components. It's why we buy a company in Europe, okay, that manufacture some parts. It's why we begin to manufacture in Mexico. We begin to manufacture the controller, okay? We are independent, okay?
That's the key to be A to Z independent, okay, of other supplier. We need supplier, okay, but that's good at that we can control more our destiny, okay, than just the destiny of the suppliers. Sébastien?
I think that was a very good answer, Marcel. Thank you. Yeah, I think for the booking of Q1, Nick, it's hard to comment, but it remains strong. We have a good backlog, which is what we need for our Q1 execution.
Okay. 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, had a strong quarter, good organic growth, good margins out of that business, something you guys were always trying to improve. Just any colors to why you're selling off those assets when it looks like their contributions, including North American assets, are maybe starting to gain some momentum. I'll leave it there. Thank you.
Okay. Nick, thank you very much, okay. I will answer this one, okay. Maybe Sébastien can complete that, okay, or maybe Steve, okay. Just, okay, it's not in our core business, okay? I decided, okay, I made the decision, okay, to get out of that, okay? Because they make very nice products, okay? They are first of all, okay, it's quite far, okay? It's quite far, okay? They are not in our core business, okay? Not in our core business, Ascension is more in our core business, okay? We decide, okay, to sell that, okay? It was very small sale, okay? I just, the money that we have in the company, and I wish them good luck, okay?
They are a great people down there, but unfortunately, okay, they are not in our, I repeat, but in our core business. Sébastien, you have been there.
Good comment. I think the special vehicle that they were making is that it was a standalone division. We found a new owner that will probably have a better future for them. Again, thanks for their work in the past and I think we're moving on.
Okay, thank you. That was all. Thank you.
Once again, it was star one if you had a question. 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. Just building on the last question, do you view the remaining Adapted Vehicles segment as a core part of the business? If not, what do you think you could sell it for?
You put me on the spot with that one. I call Norway, okay? For sure, okay, we know more, okay, with that Ascension, okay. It would depend, okay. We'll decide to make some change in the leadership of this company. It's always depending, okay, what they will deliver, okay? If you tell me about patient handling, okay, for sure it's a different thing, okay? To be polite, I will say just that it's a better thing, okay? We try to improve an Ascension on the leadership. If they deliver what they can deliver, okay, maybe in my language, what would be different, okay? Ask me this question in 6 months.
Deal. Thank you. 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, or are you still happy that you did it?
Sébastien?
For sure, we are very happy to have set up a factory. I think, definitely what we see from Mexico, okay, going forward, it will be different from China. For sure, China will make some finished product that we can send to Australia, we can sell within Asia. Really from Mexico, okay, how can we complete more some finished products to serve our customer in the southwest of US, okay? I think it's far from Toronto, it's far from Vancouver, I think it's a very good position for the future to build this capacity for North America. Very happy, Zach, that's good for the long term.
Understood. Thanks. 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 CE compliance for Europe. All our team work to make some change at CE. That's very important. If you want to sell a product, first of all, you have to meet the code. We work on the code. You will see that that's a very important thing of our R&D. They make some change. Sometimes we make some change that to have a better products and a less costly product. It's always very independent. For going out with new products is not a priority for us right now.
First, I repeat, meet the code, okay, that we can sell in Europe. That's very important. That's our concentration. Sébastien?
I think the new list of products, Marcel, which we are doing some new products, I think we cannot disclose it. That's priority information. Definitely to improve our products, okay, for the future, to make it more aesthetic appealing for the customer is always a priority. To put our products CE compliance, okay, right now we are playing a catch-up game that our product are worldwide. Going forward, once you want to launch a product, it will be worldwide compliance from the beginning. Right now, this is our main priority to make sure we are compliant with Europe so that we can do some cross-selling.
Great color. Thanks. I'll turn it over.
Thank you.
We have no other questions holding, but just a final reminder, it was star one if you had a question. No other signaled. I'll turn it back for any closing remarks.
Okay. Thank you very much, Jessica. That's a very important, this call, okay, that, we meet, okay, that, we answer the question, okay, where we are going. We know that we are working hard, okay, but that's a beautiful market that we're in, okay, and we have some good growth, okay, coming. For the people, thank you for my employee to support this growth, okay, and they support this growth, okay, with a smile. 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.