Good morning, good afternoon, and good evening. My name is Razia. I will be your conference operator today. At this time, I would like to welcome everyone to Savaria Corporation's Q2 2023 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. To ask a question during the session, you need to press star one and one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, you can please press star one and one again. This call may contain forward-looking statements, which are subject to the disclosure statement contained in Savaria's most recent press release, issued on the 9th of August, 2023, with respect to its second quarter 2023 results. Thank you. Mr. Bourassa, you may begin your conference.
Right. Thank you very much again, and nice to hear you, my, my dear friend, okay? First, I, I begin to, to say that thank you to, to write on Savaria, okay? I read, okay, what you say, and for sure a lot of thing was done for the computer and the, the changing of our in the Europe, okay? But that's a fact, and that's a time of the past right now we turn the page, okay? It was... With Savaria One thing, okay, we are 21 years, okay, the, the, I made it out, except I miss one time, the, the last last month, okay, 2 months. We say the truth. What we see or hear from Savaria is the truth, and it will continue like that, okay?
It takes. I have a couple of years, years, okay, to see, and it will be always my people know that, okay? After that, okay, we have a forecast, okay, that we, we, we say, okay, for 2023, nothing has changed, okay? We stick the, the, the forecast. The other thing, okay, we will work harder and maybe harder, harder, and harder, okay? First thing that I want to mention about, about that, okay. What is important, okay, the, the consulting, okay, that we are, okay, and I sign myself, okay, we, okay, that's for a period of 24 months, 2 years, okay? That's, that's quite impressive, okay, to sign, okay, with a consultant for 2 years, okay, and they will review all our operation. Our operation, okay, is, is coming from the sales.
We have to begin with the sales. The sales can be better, better price maybe, change of strategies, our strategy to increase price. We are going to university right now, okay, and I am very happy, okay? I meet them, and them, yeah, this noon again. They make a very good job, okay? They are people, okay, they are simple people, and they just want to help us. For sure, they want to help them, for sure, to collect some cash flow, but they want to us to succeed. What is important for me when I listen to them, okay, they are not, they are not speaking about Savaria, okay? It's my people at Savaria, okay, who take... Excuse my English, it's not, it's not improving too much, as you can see, over 21 years.
Yeah, what's that very important, okay, that, that, that exactly, that's my people, okay? Our people who we don't change one, our people, we want maybe to train them. That's very important, okay? You know, for sure, we, we, we make some projection, okay, ourselves, okay? It's never easy in this job, okay, what we can say or can't we can say, okay. It's, what is... It's 21 years, okay, that we start with that, okay? I don't want to take that confidential, okay? Anyway, after the call and I speak, okay, nothing is confidential, okay? Because it's not just my broker, but the street will know exactly, okay?
We think, okay, we think, okay, with our consultant, okay, they will review all our activity, okay. Take the, the, the certain phase, okay, of our revenue, okay, after that, our expense, our purchasing, everything, okay. At every side, okay, and they were in Mexico, they were in Europe, okay. It's, I think, entering the group that we can do that, okay, for company Savaria. We have a big goal in 21, not in 21, but in 25, okay. We want to reach, reach, okay, $1 billion of sales, and we want to offer a very good EBITDA, with that. We need, need some help, okay, to... We can see transformation or other language. My language is not very strong in English. They're very good in French, too.
After that, okay, we will see, okay. In 2023, nothing really important will come back from this study, okay? In 2024 and 2025, okay, I project, okay, everybody know that, okay, I project, okay, an increase of our EBITDA by 25% each year. You are better in math than me, okay? You have the growth on Savaria themselves, and after that, with the study. Using the asset, and I am very optimistic, okay, that we will reach this, this number, okay? Again, okay, that will be all final P&L, okay, all the situation, okay, we will study that, okay? We will study, okay, do we have too many factories, okay? Everything will be discussed, okay? We will have to find a new supplier, okay?
They will help us, okay, to find a new supplier, okay, that's always, we check for the price, but always the same quality. Quality first, okay. After that, after that, we listen, okay, what we can improve in term of price. That's my introduction, okay. Maybe I make some guidance that I will receive a call with Suzanne, but anyway, okay. You want the truth, and you have the truth, okay. You will see that that's a new Savaria coming. Now for the finance, okay, I pass to Steve to continue.
Thanks, Marcel, and thanks for outlining and sharing a bit more details about Savaria One. It's a project that we're all excited about internally. Thanks for that, and good morning, everyone, on the call. I'm gonna begin with some remarks regarding our Q2 2023 consolidated financial metrics. For the quarter, the corporation generated revenue of CAD 198.4 million, up CAD 6.3 million or 3.3% compared to Q2 2022. The increase was driven by organic growth of 3.4%, originating from both segments. In addition, the corporation experienced foreign exchange tailwinds of 3.8% and a decrease of 3.9% due to the divestiture of the vehicle division in Norway in the quarter, combining for a 3.3% growth overall.
Our revenues fell short of expectations for the quarter due to a disruption in production and delivery in Europe, caused by the implementation of a new ERP at our key manufacturing sites in the UK in April. We are, however, pleased to report that the implementation challenges have been sorted out, with June being a record month for the organization. Gross profit and gross margin stood at $67.1 million and 33.8% respectively, compared to $65.6 million and 34.1% in Q2 2022. The increase in gross profit of $1.5 million was mainly attributable to higher revenues and, to a lesser extent, favorable foreign exchange rates used in the conversion of the results of subsidiaries.
The decrease in gross margin versus last year was mainly attributable to the previously mentioned system implementation and by year-over-year inflationary impacts in Europe, partially offset by greater profitability coming from the Patient Care segment and North American entities in the Accessibility segment, due to better cost absorption, favorable product mix, and improved pricing. Adjusted EBITDA and Adjusted EBITDA margin finished at $29 million and 14.6%, respectively, compared to $31.5 million and 16.4% in Q2 2022. The reduced profitability is mainly explained by the aforementioned decrease in gross margin and the higher selling and admin expenses as a percentage of revenue. Before I move on to the segment results, it is worth noting that effective April 1, 2023, the corporation consolidated its reporting structure and combined the remaining operations of the Adapted Vehicles segment with the Accessibility segment.
Starting with Q2, the business is now structured into two reportable segments, Accessibility and Patient Care, according to their respective addressable markets. Accordingly, some information from previous periods was restated. Revenue from our Accessibility segment was CAD 150.6 million in Q2 2023, an increase of CAD 2.4 billion or 1.6% compared to the same period in 2022. The increase in revenue was related to organic growth of 2.8%, driven by continued strong demand in both the residential and commercial sectors in North America, and price increases and cross-selling synergies with Handicare. The group was also driven by positive foreign exchange impact of 3.9%, mainly coming from the US dollar, euro, and GBP currencies.
This was partially offset by the divestiture of the Norway business, as well as the decreased production of delivery of stairlift products in Europe during April and May, due to the implementation of a new ERP, as mentioned. For reference, in Q2 2022, the Norwegian vehicle division contributed CAD 7.5 million of revenue. Adjusted EBITDA and adjusted EBITDA margins stood at CAD 21.4 million and 14.2%, respectively, compared to CAD 26.5 million and 17.9% for the same period in 2022. The decrease in adjusted EBITDA and adjusted EBITDA margin was mainly due to the system implementation in Europe, causing production and delivery issues, year-over-year inflationary impacts, resulting in higher material and labor costs, and to a lesser extent, the divestiture of the Norway operations, partially offset by better cost absorption from greater revenues in North America.
Again, for reference, in Q2 2022, the Norwegian vehicle division contributed $0.8 million of Adjusted EBITDA. Revenue from our Patient Care segment was $47.8 million for the quarter, an increase of $3.9 million or 8.9% when compared to Q2 2022. Revenue growth includes organic growth of 5.3%, which was driven in large part by new contracts signed with healthcare facilities, cross-selling synergies with Handicare, and pricing initiatives. For the quarter, foreign currency provided a 3.6% tailwind for this segment. Adjusted EBITDA and Adjusted EBITDA margins stood at $9.3 million and 19.4%, respectively, compared to $6.7 million and 15.3% for the same period in 2022.
The large increase in both metrics was primarily due to the increase in revenues and improvements in gross margin, mainly explained by better cost absorption, product mix, pricing initiatives, and synergies with Handicare. For the quarter, net finance costs were $4.5 million, compared to $6.4 million in Q2 2022. Interest on long-term debt increased by $2.6 million when compared to last year, due to the higher market interest rates. Net finance costs were also impacted by a net foreign currency gain of $1.7 million in the quarter, compared to a net loss of $2.5 million in 2022, most of which was unrealized in nature. Net earnings were $8.8 million, or $0.14 per diluted share for the quarter, compared to $8.1 million or $0.13 per diluted share in Q2 2022.
Adjusted net earnings was again CAD 8.8 million or CAD 0.14 per diluted share, compared to CAD 8.9 million or CAD 0.14 per diluted share in Q2 2022. This reflects a relatively flat performance on a year-over-year basis. Turning now to capital resources and liquidity. For the quarter, cash flows related to operating activities before net changes in non-cash operating items reached CAD 17.7 million versus CAD 29.3 million in the same period in 2022. The decrease mainly reflects lower EBITDA for the corporation and higher income tax paid related to deferrals from 2022. Net changes in non-cash operating items reduced liquidity by CAD 17.5 million, compared to CAD 14.7 million a year earlier, mainly sorry, mainly increased by working capital in Europe. Mainly impacted by increased working capital in Europe, excuse me.
As a result, cash generated from operating activities in Q2 2023 stood at CAD 0.2 million, compared to CAD 14.7 million in the same period in 2022. Cash used in investing activities was CAD 4.5 million for Q2 2023, compared to CAD 4.9 million in Q2 2022. The corporation dispersed CAD 4.6 million for fixed and tangible assets in 2023, compared to CAD 4.9 million in Q2 2022. Cash used in financing activities was CAD 15 million for Q2 2023, compared to CAD 9.3 million in the same quarter last year. Variation is mainly explained by a drawing of CAD 0.8 million on the credit facility, compared to CAD 3.8 million a year earlier, and higher interest paid of CAD 2.7 million in Q2 2023 versus the prior year.
As at June 30th, 2023, Savaria had a net debt position of CAD 372.9 million, it 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 2.99 times. This represents approximately a 0.08 improvement versus Q4 2022, an increase of 0.16 versus Q1 2023. Savaria has funds available of CAD 119.5 million to support working capital investments and growth opportunities. Looking forward, for 2023, Savaria continues to expect to generate revenue, which will be approximately 8% to 10% higher than 2022, when normalizing for the divestiture of the Norwegian vehicle division, 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 both the Accessibility and Patient Care segments, supported by high backlog levels, cross-selling initiatives, and strong demand, and continued successful integration of Handicare and progress towards achieving the next strategic phase of synergies in line with management's plan. With that, this completes my prepared remarks, and I'm going to turn the call over to Sebastien.
Thank you, Steve. Maybe for the last time for me again, again, this ERP chain change has been very disruptive in the, in the second quarter. I need to say one thing, there has been some very good teamwork between the team in U.K., Netherlands, and Toronto, and the people on the shop floor has worked very, very hard. Thank you very much for everybody. Again, we have turned the page, it's finished, we have a good June, and the future is looking good. We don't talk about the ERP anymore, but again, we have learned a lot, and it has been a very good teamwork, at least on the recovery. Thank you, everybody. North America, I think in our, the main factory in Vancouver and Toronto for the Accessibility, I think we have the relatively good output.
I think, thank you for everybody. What's important is we remain to have a very empty backlog, so I think the future is still looking very promising for those two factory in North America. Also, this Savaria One project is going to help us be better because it's important to improve. Well, we are good, but we want to be better, so that's, we see some good progression in term of that. Mexico, I think we're at two third right back. Right now, we have 50 employees in Mexico. Again, no game changer for this year, but building our capacity for the 2025, you will see that Mexico will have an important impact. Last thing for me, I would say the supply chain is relatively stable for us.
I think we don't talk about, about supply chain also, anymore. On that, maybe we can have Patient Care.
Yeah, thanks, Sebastian. Our Patient Care segment delivered another terrific quarter in Q2 with an EBITDA margin above 19%. It's a nice follow-up to the record Q1 and the continuation of a positive trend. Our order intake and sales activity remains strong, as evidenced by the 5.3% organic growth in the quarter, which is rather impressive given the 20%+ organic growth experienced in Q2 of last year. Although most product categories are performing well, we're seeing a strength within ceiling lifts and surfaces, where we've been particularly successful bidding on new contracts. In terms of end markets, we've seen continued spend within hospital networks at the VA, which is a big driver of our U.S. business and an area of significant focus for us. Deal activity within our, our larger corporate accounts and with strategic partners is also driving higher sales.
Despite a good performance in the quarter and for the first half of the year, there are still certain industry challenges that we continue to navigate, including funding for new build projects, staffing shortages, namely with respect to nurses, and stubbornl low census levels within U.S. long-term care. Overall, our backlog is in good shape, and as we unlock further revenue synergies between Span and Handicare, we should continue to see a strong top line performance. From a margin perspective, and similar to comments made in Q1, the higher sales volume allowed for a better fixed cost absorption, which contributed to the sustained EBITDA margin in the 19% to 20% range. The pricing initiatives that were put in place last year are also continuing to have a meaningful impact on profitability.
Finally, our Patient Care team, much like the rest of the Savaria group, is highly energized by our Savaria One project. We're doing a deep dive across the entire organization, from procurement and production initiatives to commercial strategies, that will help us achieve the full potential from truly integrating our businesses within the Patient Care segment. As you might imagine, there's quite a bit of enthusiasm within the team. With that, I'll turn the call back over to you, Marcel.
Great. Thank you very much, gentlemen. Okay. as you can begin the call from our investor. We are ready.
Thank you. As a reminder to ask a question, please press star one and one on your telephone and wait for your name to be announced. To wait for your question, please press star one and one again. Once again, please press star one and one if you have any questions or comment. We are now going to proceed with our first question. The questions come from the line of Derek Lessard from TD Cowen. Please ask your question.
Yeah, good morning, everybody. Hope, hope you're well. I don't wanna add, salt to the wound because it sounds like the wound is closed. Definitely a rare execution miss for you guys. Maybe could you just talk about or add some detail or color around what went wrong and sort of the steps that you took to rectify the issues? Maybe, again, like, how confident are you that it's now in the past? Any help or color on, you know, what June or July volumes have been would be helpful.
Well, thank you, Derek. Yeah, we see the, you know, ERP change is always difficult, and we're not the first company to have some difficulty to make some change. Unfortunately, there was gonna be a place, a department where we had a little bit more difficult in the implementation, and this time was operation, so I guess I have a certain responsibility for some of that. Again, we went from our old system, a bit more, if I make an easy example, with paper, with a new system, everything is scanning, ERP, click, click, click. 21 year, I have to make some transaction. If maybe a bill of material is not correct or the inventory allocation, then you cannot close your order. Again, we do strictly, all the jobs are custom, so it's a lot of different options.
It's not that easy, even though we make a good preparation, but we do a very good output each day in England. Basically, it was a lot of different bill of material, BOM, and complexity for the people. Again, we went back to when we went live, we had some help from a consultant, from people in Italians, Toronto, to include a system, to train the people, to fix the bug, and it took us a bit more time than expected. The good news is, since June, we are back to normal.
Okay, that's helpful. I guess the second one is that you still maintain your full year guide. And I think those, I mean, those sales are, are lost, if I'm not mistaken, but what's your thinking on how you can make it up in order to sort of still maintain that guide?
Yeah. Hey, good morning, Derek. Steve here. I mean, we, we are still year to date, even with the whole, the shortfall that we had in Q2 on the sales. I mean, we had a very strong Q1. Year to date, we're, we're still at our budget, at our budget revenue mark. You know, we are confident that we're gonna hit our, our guidance, the revenue growth. We-- I would say we're, at this point, we have more confidence than on the EBITDA line, but we still feel that we can climb back and, and get to...
... approximately 16% EBITDA margins. Our volumes that we're seeing in June, so June for us was a record quarter. We, we had the highest EBITDA month. Although we haven't disclosed the amount, we had the highest EBITDA month than we had as, as an entire organization. We have good momentum in the North American businesses, good momentum in, in Patient Care, as, as you can see in the results. We, you know, as Sebastian and Marcel said, we have turned the page on the ERP implementation challenges. June production levels in the U.K. were, were at least as high as, as they were prior to the ERP change. For July moving forward, our expectation and, and what we're seeing is that the numbers are gonna be even higher than what we had before.
You know, we can confidently say that, that, that page is turned, and, and we're moving forward. We see, you know, we see strong margins in the rest of the business. Now with, with Europe getting back on track, that's, that's how we're confident in, in maintaining our guidance.
Okay. Thanks for that, Stephen. Maybe one last one for me, and obviously, it was probably lost in, in all the noise. You mentioned it in some of your prepared remarks on the Savaria One initiative. Just, could you maybe talk about what you're expecting to get out of it? I know you said you, you had a 24 month runway. Anything you can share with us that would be helpful for our, our models and, and forecasts?
Yeah, I think I can start, and maybe Marcel will complete. Basically, you know, we have done a lot of acquisition in the last 5 to 10 years, and we realized today that, again, to be a 1 billion company, if you're always so decentralized by you miss opportunity. We have some talent in many different places, so sometimes we do a best thing in the Netherlands, but we do different in Toronto or in Vancouver. We want to be a bit similar. We want to rechallenge some of our existing process, and with the help of some consultants, we can do even what we do right now in some of our location, can we do better? It's important for us to improve.
This is why we have launched this initiative across all the different departments, factory, location, because we want to be better. A $1 billion company is a big change for Savaria. A few years ago, you know, we were a $100 million company.
Thank you.
Thanks, sir.
We are now going to proceed with our next question. The question comes from the line of Michael Dumais, from Scotiabank. Please ask your question.
Hey, good morning, guys. I wanted to follow up on a question from Derek. Just specifically, can you comment, you know, for July in Europe, how sales were trending? Also, I guess, bigger level question here. You know, even if the ERP disruption settles out, how much more is there to do to get the European operations back or to the level of North American operations? I guess, the question is, you know, does the ERP push off some of the other initiatives that you guys were considering in the region?
Okay. Thank you. No, I think, again, it's difficult to talk about July because that will be a bit forward-looking statement, but we are very happy with the way of June. We have finished a very strong month. For sure, it continued in July. And after that, the ERP, it's a continuous improvement process. We're happy right now. We are back to at least the same level we were before, but for sure, we need to continue to do some improvements, particularly in the ERP, to, to get some of the efficiency out. At least it's not a concern anymore. We don't talk about it anymore. We have a good visibility. We are happy with it. And the Savaria One, we have launched it a few weeks after.
We did not launch that, when people were doing the recovery, in U.K. or with the ERP, but definitely now the team is working on the Savaria One. The ERP change is not a blockade to work on the Savaria One on some new initiative.
Perfect. It sounds like there's confidence in the guidance, being maintained despite, you know, the hiccup, I guess, in Q2. Just how to think about the EBITDA margins in Q3, in Q4? Just wondering if there are any lingering costs related to the ERP that could flow into Q3, and just how to think about the cadence of EBITDA? You know, should we skew a little bit more into Q4?
I mean, there's, there's no costs from the, from the ERP that, that are left to come, so know that, we're not gonna see anything come back from that. We're, we're done on the cost side and on the implementation side. As Sebastian said, there's, there's maybe some fine-tuning and improvements to make, but, but we're happy, we're happy with the production levels now. As far as Q3 and Q4 on the EBITDA side, I mean, what we're seeing in North America and in Patient Care is, is strong improvement in EBITDA margins because of the improved leverage of the cost base, while we're increasing revenue. You can see it in the Patient Care margin. You can't see it so much in Accessibility because we don't disclose North America separately from Europe.
Really, in the North American legacy business, including the Garaventa site in North America, we are seeing really good fixed cost absorption and improved margins. You know, as we see the revenue recover in Europe, we're gonna see, we're gonna see that fixed cost absorption come through and see improved margins. We're expecting that for Q3 and Q4, Michael.
Very helpful, Steve. Thanks a lot, guys.
We are now going to proceed with our next question. The question comes from the line of Frederic Tremblay from Desjardins Capital Markets. Please ask your question.
Thank you. Good morning. On Accessibility in Europe, thanks for the comments on, on production rates. I was wondering-
Uh-
... if you could comment on recent order flows in Europe. Specifically, I'm wondering if dealers were?
... you know, more hesitant to order from, from the facility, given the, the past, production issues?
I can take this one. For sure, Fred, we weren't perfect in COVID, right now we are back to normal. Again, our dealer, they are partnered with us for many, many years. Yes, we have probably lost some sales in the second quarter because lead time wasn't accurate in one of our two factory. I think right now we're back to normal, our sales team is protecting dealer. Again, we are happy with the order intake in the last few weeks. I think I don't see that as a huge concern for the rest of the year. I think we are back to be a good company.
Okay. On the ERP, maybe switching to the benefits of it going forward, can you maybe shed a bit more color on the expected benefits from the ERP and just on a, I guess, qualitative basis, and if there's any way to quantify sort of the benefits that you're expecting from that implementation moving forward?
I would say for, for sure, Fred, on this one, it's always a bit difficult, okay, because sometimes when the ERP becomes very old, you need to change it to make sure you can continue to be operational at a good level in the factory. I think this is, for sure, we see some gain. Now, again, we're a bit manual process. Now, with the ERP, we have a better visibility, try to automate a bit of some process. I think over time, definitely, we should see some improvement of efficiency. Again, we're example, U.K., we're direct, okay, and we do manufacturing. Our installers have a better visibility on their orders, on the full process, how can we be better with invoicing?
There's a lot of different step that we are going to see some gain, but, sometimes you need to see it more, change the ERP to make sure your business is going to be stable, stable.
Okay. Just on the, on the margin difference that there seems to be between Accessibility North America and Accessibility Europe, excluding the ERP, is there any sort of actions that you can point to that would need to be implemented for Europe to catch up to the North American margins?
I mean, yeah, you will remember that we've been talking about inflation impacts over the last few quarters in Europe being, being stronger than the inflationary impacts in, in North America. I mean, we continue to see that. We saw that in Q2, we saw that in Q1, and, and we saw that last year as well. I mean, we, we are looking at different ways of, of, of combating this. Some of it is obviously on the price increase side. That's, that's one of the easier levers to pull. We're also looking at our vendors. You know, we've talked a little bit about the Savaria One project.
Marcel talked a little bit about on the vendor side as well, looking at, you know, where we can, where we can consolidate vendors and find savings that way as well. It's, we're not just looking to pass on increases as we get them. We're trying to find ways to reduce our input costs as well.
Thank you.
We are now going to proceed with our next question. The questions come from the line of Zachary Evershed from National Bank Financial. Please ask your question.
Good morning, everyone. Thanks for taking my questions. I was hoping for a little bit more color around the Patient Care margins. Looking forward to the back half, is there anything changing that would prevent a repeat of the performance seen in the first half?
Hey, Zach. Well, well, again, I think after we, we had our, our, our Q1, you know, we were cautiously optimistic going into Q2. Q2 delivered another strong margin performance. As we mentioned, myself, and, and I think both Steve, a lot of that has to do with volume, right? So, you know, it's a business that once you get above that $45 million mark, you know, per, in terms of revenue per quarter, that there is quite a bit of, of, of leverage in that business, and it, it falling, you know, those incremental dollars falling more and more to the EBITDA line. Going forward, it's just a question of, of maintaining, you know, a strong sales growth. You know, our order intake, as, as I said, was, was, you know, looking good. Our backlog is in a good place.
However, I do wanna be cautious, right? That, you know, our expectation, you know, from the beginning of the year was a 15% to 16% for, for Patient Care, with, you know, for 2020 or, I'm sorry, 2023. I don't wanna deviate too much from, from there, right? Yes, we had a good start to the year, but I, I still, you know, would wanna see a few more quarters, you know, continuation of this trend, you know, before I really kind of put the stake in there of this being a 19% to 20% business. I, I would be still a bit more cautious over the next couple of quarters as we see this, this trend continue. Again, there were some, and there still continue to be certain challenges, you know, from a market perspective that we're navigating through.
It's not necessarily, you know, complete smooth sailing, but, you know, we've been pretty good so far. I'm not sure if that helps or not. Maybe, you know, being a bit more cautious there, I, I would say, going forward as well.
Gotcha. Maybe just digging a little bit deeper on that, your employees in the segment, do you think that they're stretched in terms of production capacity, or they can maintain the current pace without having to add additional costs?
No, no, I think the, the team is, is doing quite well. It's a continuation of this integration that we've experienced between, you know, the Handicare and the sales. I guess, the Handicare and the Span, especially on the commercial side. You know, the operations are, are going well. You know, we're, we're better staffed in certain areas. I think there was, for example, in St. Louis, our sewing line is fully up and staffed, and that had been an area where we were lacking bodies. I, I think from a, a, an ability perspective, we're, we're there. From a capacity perspective, we're there. You know, it's just a question of continuing going out and, and winning contracts.
You know, there are certain delays that have happened in, in some of the new build projects, so that's something that's kind of out of our control. You know, there is some lumpiness within the project business within Handicare, so there again, you know, we're trying to, to manage through that. No, I would say, you know, with the current staffing levels and what we currently have, you know, I think we're well prepared to deliver, you know, going forward. There's just some things, again, within the industry, that we, we just have to be careful of. That's all.
That's helpful. Thanks. With Adapted Vehicles being folded into Accessibility, should we take that as a statement that the remaining AV operations are core, or are they still on the bubble in terms of having to prove themselves or be divested?
Hey, Zach, it's, it's Steve here. I'll, I'll take this question. The, the vehicle business, I mean, it's still, it's still a piece of Savaria. It's still, it's still an important business for us. Just because we're not reporting on it, on it separately in our MD&A and financials, it doesn't mean that it's getting any less attention from us. We have a new leader in place that's, for that business, that's been in place now for a couple quarters, maybe one or two quarters now. I mean, we, we have a bit of a plan that we're trying to execute to, to see improved profitability there. I would say this business is getting more attention over the last couple quarters than, than it has maybe in the last couple years.
Actually, no, it's still very core for us. It's just it's not large enough to report on as a segment. The management structure reports in the same management structure, and it's, with Norway now gone, it's such a small piece, revenue-wise, of the overall pie that it didn't make sense to report separately. No, it's still core for us, Zach.
Good color, thanks. Just one last one on the opening remarks. The 25% EBITDA growth targeted through Savaria One, is that in each of 2024 and 2025, or 25 across both years in total?
No, no, no, no. It's 25 okay, each year. Plus, okay, what we do directly with the Savaria that we have right now, and you see the growth, okay, that we expect on that EBITDA will be around 8% to 10%. The 25 is covered the, and then dependent also. That's why it's important, you know? That's why I'm very enthusiastic about what we do since I signed the deal. Also at the beginning, it's just a question of we get a very deep knowledge of our projects, okay. Our new array, our turn, our, as you said. We will see some little things since the, and for the end of the year, but mainly in 2024 and 2025.
I appreciate the clarification. Thanks. I'll turn it over.
We are now going to take our next question. The question comes from Michael Glen from Raymond James. Please ask your question.
Hey, good morning. Can you remind us or, or give an update about where things stand from a pricing and input cost perspective? Commodities are bouncing around a lot. Just looking for an update as to how things have progressed on both of those items.
Nicolas, can you take the question?
With respect to pricing, again, we, we do have pricing, you know, initiatives that we, we've talked about in the past. Again, trying to keep up with, you know, certain inflationary pressures when we do experience them. I, I would say overall, as Sebastian had mentioned earlier on the call, from a supply chain perspective, you know, things are, you know, relatively stable and back to normal. There could be some issues, you know, possibly, you know, within, within freight over the next little while. We've seen some, some carriers experience some, some difficulties there, so that's something that we're monitoring to see whether, you know, freight is gonna remain stable. For the moment, we haven't seen much of an impact, but it is something that we're monitoring going forward.
As we talked about, you know, Europe, it's also something that, you know, the pricing is a little bit more difficult environment. At the same time, you know, there have been some inflationary pressures, you know, that we've experienced. I would say that's another area that we're still continuing to monitor. Not sure if that, that helps you in terms of, you know, the inputs, no, I think things have been relatively stable in China, for example. That's also an area that, you know, we haven't seen any, you know, sort of inflationary pressures at all coming out of there. That's a big help. No, I think we're in a pretty good place.
Just, if I could just add a couple, a couple additional points, Nick. I mean, specifically within the North American business, our price increases went in earlier this year. We have done some other targeted increases, just this, in the summer right now, actually. You know, our Garaventa business put a price increase in the last month. It's a continued strategy from, from what we saw last year, and North America typically does it at the beginning of the year, with the exception of Garaventa. They've done a couple different price increases.
We are monitoring our, our costs, our input costs, and we haven't seen the increase in North America continue to what we saw in prior quarters, and we haven't seen it in North America to the extent that we've seen it in Europe. Europe, excuse me. Europe, it's still. We are still seeing high inflationary impacts on our input costs, and, you know, we're revisiting our, our pricing strategy there, and likely gonna be targeting price increases, but those, those will probably come in not until Q1 2024.
Okay, and within Accessibility within North America, can you, in the MD&A, I think you're referencing organic and, and Accessibility in North America was about 12%. I think that's the number in the MD&A. Can you break that down or, or provide some insight across some of the product categories about, is it, is it meaningfully different across product, product categories?
Yeah. It is, it is about 12%, or was about 12% in the quarter in North America, and that, that primarily has come from the legacy elevator and platform business. We, we are still seeing strong backlog in both commercial and residential sectors. I would say there is some opportunity for us to, to do a bit better on the, on the stairlift side. I would say more of that 12% comes from legacy platform and elevator lift products, where, where our backlog remains strong. We do see further opportunities to more so on the stairlift side.
Okay. You know, thinking about that, then, I mean, there, there had been concerns regarding how, you know, rising interest rates, softer housing market could potentially impact that residential elevator market. Are, are you seeing any evidence whatsoever that that's, having an impact, negative impact?
I think, Zach, the answer to that, our backlog remain, very healthy. For us, we really not see any, any slowdown in our incoming order in North America. Again, we are looking to decrease lead time, so we will be more aggressive, on the market. Definitely, our, our backlog is at historic level, so no impact on our sides, so far.
Okay. Thanks for taking the question.
We have no further questions at this time. I will now hand back to Mr. Bourassa for closing remarks.
I just want, as I could say, thank you to all the people on the call this morning, and thanks for my partner, my partner in, Savaria, to answer the question. I think it was a great call. Thank you very much. See you in 3 months or less.
This concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you.