Savaria Corporation (SIS) Earnings Call Transcript & Summary

Good morning, good afternoon and good evening. My name is Razia, and I will be your conference operator today. At this time, I would like to welcome everyone to Savaria Corporation's Q2 2023 Conference Call. [Operator Instructions] This call may contain forward-looking statements, which are subject to the disclosure statement contained in Savaria's most recent press release issued on the 9th of August 2023 with respect to its second quarter 2023 results. Mr. Bourassa, you begin your conference.

Thank you very much, Razia. And nice to hear you might explain a bit. And first, I begin to say that thank you to write on Savaria. I read what you say. And for sure a lot of thing was done for computer and the changing of our -- but that's the fact and that's the time of the past right now. We're doing the page. Like it was -- and with Savaria One being a bit, we're 21 years to see that make it go, except in this one time, that's not one. But we see the two -- what do we see or hear from Savaria is the 2. And to continue like that, I have a couple of years of B2C and it will be always, my people know that. After that, we had a forecast to say that we will say for '23, nothing has changed. We think the forecast and the only thing will be work order and maybe other -- so the first thing that I want to mention about that. And what is important because the consultant that we hire and I signed myself, okay, that's for period of 24 months, 2 years to be. That's quite impressive to sign a deal with consultant for 2 years and they will review our operation and our operation base is coming from the sales. We have to begin with the sales. The sales can be better, better price maybe change of strategy, so our strategy to increase price. So we're going -- while going to university right now, and I'm very happy again. They make a very good job. They are people -- they're simple people, and they just want to -- for sure, they want to add them for -- to collect some [indiscernible], but they want to us to set seasonally. And what is important for me when I listen to them, they are not -- they are not speaking about Savaria, it's my people at Savaria, excuse me, -- that they're not improving too much, as you can see, over 21 years. But yes. So what is very important to see that, that is exactly that might be our people who -- we don't change one, our people, want maybe to train them. So that's very important piece. And for sure, we made some projection ourselves, and it's never easy to solve what we can see of [indiscernible]. And I don't want to speak confidential -- speak up and the thing is confidential because it's not just [indiscernible]. So we think it is our consultant, they would review all our activity, a bit in the face of our revenue, after that our expense, our purchasing, everything a bit and at every side of it, and they were in Mexico, they were in Europe. It's I think, enter in the group that we can do that by comparing it's area, but we have a big goal in '21 -- in '25, okay, we want to reach $1 billion of sales, and we want to offer a very good EBITDA, okay with that. So we need some [indiscernible] we can see transformation or the language -- my language is not very strong in English. But very good in French. But we will see in '23, nothing really important will come back from this study. But in '24 and '25, okay, I project, everybody knew that, okay, I project [indiscernible] by 25% each year. So we are better [indiscernible]. So we have to grow Savaria themselves and after that with the study. So you do -- and I am very optimistic that we will reach just this number. But again, that will be our final P&L, our situation that they will study that. They will study -- we have too study within many factor. Everything will be discussed, okay or we have to find a new supplier, they will help us to find a new supplier a bit. I would do for a better price, but the same cost price that -- after that we will see what we can improve in terms of operation. So that's my introduction and maybe some guidance [indiscernible]. And you will see that that's a new Savaria coming. And now for the finance, I pass to Steve.

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. So thanks for that, and good morning, everyone on the call. I'm going to begin with some remarks regarding our Q2 2023 consolidated financial metrics. For the quarter, the corporation generated revenue of $198.4 million, up $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 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 U.K. 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 at 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 with the remaining operations of the Adapted Vehicles segment with the Accessibility segment. Starting with Q2, the business is now structured into 2 reportable segments: Accessibility at Patient Care according to their respective addressable markets. Accordingly, some information from previous periods was restated. Revenue from our Accessibility segment was $150.6 million in Q2 2023, an increase of $2.4 million 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 growth was also driven by a positive foreign exchange impact of 3.9%, mainly coming from the U.S. dollar, euro and GDP 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 $7.5 million of revenue. Adjusted EBITDA and adjusted EBITDA margin stood at $21.4 million and 14.2%, respectively, compared to $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 health care 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 margin 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 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 $8.8 million or $0.14 per diluted share compared to $8.9 million or $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 noncash operating items reached $17.7 million versus $29.3 million in the same period in 2022. The decrease mainly reflects the lower EBITDA for the corporation and higher income tax paid related to deferrals from 2022. Net changes in noncash operating items reduced liquidity by $17.5 million compared to $14.7 million a year earlier, mainly impact -- 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 $0.2 million compared to $14.7 million in the same period in 2022. Cash used in investing activities was $4.5 million for Q2 2023 compared to $4.9 million in Q2 2022. The corporation disbursed $4.6 million for fixed intangible assets in 2023 compared to $4.9 million in Q2 2022. Cash used in financing activities was $15 million for Q2 2023 compared to $9.3 million in the same quarter last year. Variation is mainly explained by a drawing of $0.8 million on the credit facility compared to $3.8 million a year earlier and higher interest paid of $2.7 million in Q2 2023 versus the prior year. As at June 30, 2023, Savaria had a net debt position of $372.9 million and it was in compliance with all of its covenants. Trailing 12-month adjusted EBITDA basis, Savaria's net debt to adjusted EBITDA ratio was approximately 2.99x. This represents approximately a 0.0 improvement versus Q4 2022 and an increase of 0.16 versus Q1 of 2023. Savaria has funds available of $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 Auto 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 and 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 the management's plan. And with that, this completes my prepared remarks, and I'm going to turn the call over to Sebastien.

Thank you, Steve. So maybe for the last time for me, and this ERP change has been very disruptive in the second quarter. But I need to say one thing, we have done some very good teamwork between the team in the U.K., in Toronto and the people in the shop floor has worked very, very hard. So thank you very much for everybody. And 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 has a very good team work at least on the recovery. So thank you, everybody. North America, I think in the manufacturing in Vancouver and Toronto for the Accessibility. I think we have a relatively good output. So I thank you for everybody. And what's important is we remain to have a very healthy backlog. So I think the future is still looking very promising for those 2 factories in North America, and also the Savaria One project is going to help us to be better because it's important to improve. We are good, but we want to be better. So that's -- we'll see some good progression in terms of that. And Mexico, I think we have to ramp up. Right now, we have 50 employees in Mexico. Again, no game changer for this year, but leading our capacity for the 2025, you will see that Mexico will have an important impact. And last thing for me, which the supply chain is relatively stable for us. I think we don't talk about supply chain also anymore. So on that, maybe, Nicolas, Patient Care.

Thanks, Sebastien. Our Patient Care segment delivered another terrific quarter in Q2 with an EBITDA margin above 19%. That's a nice follow-up to the record Q1 and the continuation of a positive trend. Our order intake and sales activity remained strong as evidenced by the 5.3% organic growth in the quarter, which is rather impressive given the 20% plus organic growth experienced in Q2 of last year. Although most product categories are performing well, we are seeing a strength within ceiling lifts and services 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 in an area of significant focus for us. Deal activity with our larger corporate accounts and with strategic partners is also driving higher sales. However, 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, low census levels within U.S. long-term care. That said, 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 were also continuing to have a meaningful impact on profitability. And 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. So as you might imagine, there's quite a bit of enthusiasm within the team. And with that, I'll turn the call back over to you, Marcel.

Thank you very much, gentlemen. Okay. So Razia, you can begin the call from our investors. We are ready.

[Operator Instructions] We're now going to proceed with our first question and the question comes from the line of Derek Lessard from TD Cowen.

I hope you're well. I don't want to add salt to the wound because it sounds like the wound is closed, but definitely a rare execution mix 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. And then maybe again, like how confident are you that it's now in the past. So any help or color on what June or July volumes have been would be helpful.

Thank you, Derek. So yes, we see there's no ERP changes always difficult, and we're not the first company to have some difficulty to make some change. And for sure, there was going to be a place -- a department where we've been a bit more difficult in the implementation. And this time was a operation. So I guess I have a certain responsibility. Again, we went from our own system a bit more [indiscernible] new system, everything is scanning ERP quickly. What you have to have, to make some transaction if -- it may be a bit of material is not correct, but the inventory allocation then you can close the order. Again, we do study the other jobs are cost down. So it's a lot of different options. So it's not that easy we need to make a good preparation, but we do have a very good output each day in England. And basically, it was a lot of different, below material and complexity for the people. So again, we went back to -- when we went live, but we had some help from the consultant, to include a system, to train the people, to fix the bug and it takes a bit more time than expected. But the good news is since June, we are back to normal.

Okay. That's helpful. And I guess the second one is that still maintain your full year guide, and I think those -- I mean, those sales 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?

Derek, it's Steve here. I mean 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. And year-to-date, we're still at our budget -- at our budget revenue mark. So we are confident that we're going to hit 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 get to approximately 16% EBITDA margins. Our volumes that we're seeing in June -- so June for us was a record quarter. We had the highest EBITDA month, although we haven't disclosed the amount, we had the highest EBITDA month that we had as an entire organization. We have good momentum in the North American businesses, good momentum in Patient Care, as you can see in the results, and we -- as Sebastien and Marcel said, we have turned the page on the ERP implementation challenges and June reduction levels in the U.K. were at least as high as they were prior to the ERP change. And for July moving forward, our expectation and what we're seeing is that the numbers are going to be even higher than what we had before. So we can confidently say that, that pages turns, and we're moving forward. But we see strong margins in the rest of the business. And now with Europe getting back on track, that's how we're confident in maintaining our guidance.

Okay. And maybe one last one for me. And obviously, it was probably lost in all the noise and 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 had a 24-month runway. Anything you can share with us that would be helpful for our models and forecasts.

Yes. I think I can start and maybe Marcel will complete. So basically, we have done a lot of acquisitions 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 [indiscernible] because we have some talent in many different place. So sometimes we do a best thing in there, but we do different in Toronto and Vancouver, but we want to be a bit similar. And also we want to challenge some of our existing process and with the end of some cost structure, we can even what we do right now with allocation can we do better. So it's important for us to improve. This is why we have launched this initiative across all the different department, factory location because we want to be better, a $1 billion company is a big change for Savaria. A few years ago, we were one of the million companies.

We are now going to proceed with our next question. And the questions come from the line of Michael Doumet from Scotiabank.

I wanted to follow up on a question from Derek. Just specifically, can you comment for July in Europe, how sales are trending? And also, I guess, bigger level question here, even if the ERP disruption settled 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, does the ERP push off some of the other initiatives that you guys were considering in the region?

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 July, we have finished a very strong demand for sure it comes on in July, but -- and after that, the ERP, it's a continuous improvement process. Where I'd be 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 at the ERP to get some of the efficiency out, but at least it's not a concern anymore. We don't talk about anymore. We have a good visibility. We are happy with it. And as Savaria One, we have launched it a few weeks after. We don't launch that when people were doing the recovery in the U.K. or with the ERP, but differently now, the teams work on the Savaria One, so the ERP change is not a blockade to work on the Savaria One on some new initiatives.

Perfect. And it sounds like there is confident to the guidance being maintained despite the hiccup, I guess, in Q2. But 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. Should we skew a little bit more into Q4?

I mean, there's no cost from the ERP that are left to come. So now that we're not going to see anything come back from that. We're done on the cost side and on the implementation side, as Sebastien said, there may be some fine-tuning and improvements to make, but 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 strong improvement in EBITDA margins because of the improved leverage of the cost base while we're increasing revenue. So you can see it in the Patient Care margin, and you can't see it so much in Accessibility because we don't disclose North America separately from Europe, but 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. So as we see the revenue recover in Europe, we're going to see -- we're going to see that fixed cost absorption come through and see improved margins. We're expecting that for Q3 and Q4, Michael.

We are now going to proceed with our next question, and the questions come from the line of Frederic Tremblay from Desjardins Capital Markets.

On Accessibility in Europe, thanks for the comments on production rates. I was wondering if you could comment on recent order flows in Europe. Specifically, I'm wondering if dealers were more hesitant to order from the facility given the past production issues?

I can take this one. So what you've said, we weren't a perfect in a call. But right now, we are back to normal. So again, our dealer or partner with us for many, many years. So yes, we probably lost some sales there in the second quarter because early time wasn't accurate in 1 of our 2 factories. But I think right now, we are back to normal. So our sales team is there, it's contacting dealer. Again, we are happy with the order intake in the last few weeks. So 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. And 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 [indiscernible] on this one is always a bit difficult because sometimes when ERP becomes very old, we need to change it to make sure you can continue to be operational at a good level in a factory. I think this is a very good posture, we see some gain. Again, we were a bit manual process. Now the ERP would have a better visibility, tried to automate a bit of some process. So I think over a time, we should see some improvement of efficiency. And again, on the U.K., we are direct, okay, and we do manufacturing. So installers have a better visibility on their orders, on the full process, how can we be better with invoice sales. So there's a different step that we are going to see some gain, but sometimes we see it more change in the ERP to make sure the business is going to be stable.

Okay. And just on the -- from 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, yes, you will remember that we've been talking about inflation impacts over the last few quarters in Europe being stronger than the inflationary impacts in North America. And I mean, we continue to see that. So we saw that in Q2. We saw that in Q1, and we saw that last year as well. So I mean, we are looking at different ways of combating this. Some of it is obviously on the price increase side. That's one of the easier levers to pull, but we're also looking at our vendors. We've talked a little bit about the Savaria One project. Marcel talked a little bit about on the vendor side as well. But looking at where we can consolidate vendors and find savings that way as well. So 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.

We are now going to proceed with our next question. And the questions come from the line of Zachary Evershed from National Bank Financial.

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?

Zach, again, I think after we -- we had our Q1, we were cautiously optimistic going into Q2. Q2 delivered another strong margin performance. As we mentioned myself, and I think both Steve, a lot of that has to do with volume, right? So it's a business that once you get above that $45 million mark per -- in terms of revenue per quarter, there is quite a bit of leverage in that business and falling -- incremental dollars falling more and more to the EBITDA line. So going forward, it's just a question of maintaining strong sales growth. Order intake, as I said, was looking good. Our backlog is in a good place. However, I do want to be cautious, right, that our expectation from the beginning of the year was a 15%, 16% for Patient Care with -- for 2020 -- or sorry, 2023. So I don't want to deviate too much from there, right? So yes, we had a good start to the year, but I still would want to see a few more quarters, continuation of this trend before I really kind of put the stake in there of this being a 19%, 20% business. So I would be still a little bit more cautious over the next couple of quarters as we see this trend continue. And again, there were some -- and there still continue to be certain challenges from a market perspective that we're navigating through. So it's not necessarily complete smooth sailing, but we've been pretty good so far. I'm not sure if that helps or not maybe being a bit more cautious there, I would say, going forward as well.

Got you. And 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 team is doing quite well. Again, it's a continuation of this integration that we've experienced between the Handicare and the sales, I guess, the Handicare and the Span, especially on the commercial side. The operations are going well. We're better staffed in certain areas. I think there was, for example, in St. Louis, our selling line is fully up and staffed, and that's been an area where we were lacking bodies. So I think from an ability perspective, we're there. From a capacity perspective, we're there. It's just a question of continuing going out and winning contracts. There are certain delays that have happened in some of the new build projects. So that's something that's kind of out of our control. There is some lumpiness within the project business within Handicare. So there again, we're trying to manage through that. But no, I would say with the current staffing levels and what we currently have, I think we're well prepared to deliver going forward. There's just some things, again, within the industry that we just have to be careful of. That's all.

That's helpful. And then 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?

Zach, it's Steve here. So I'll take this question. The vehicle business, I mean, it's still a piece of severe. It's still an important business for us. just because we're not reporting 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. It's been in place now for a couple of quarters, maybe 1 or 2 quarters now. And I mean we have a bit of a plan that we're trying to execute to see improved profitability there. So I would say this business is getting more attention over the last couple of quarters than it has maybe in the last couple of years. So actually, no, it's still very core for us. But just it's not large enough to report on the segment. The management structure reports in the same management structure 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. So no, it's still core for us, Zach.

Good color. And then 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% of it each year. Okay. What we do with the Savaria that we have right now. And you see the growth that we will expect on that -- will be around 8% to 10%. So the 25% will be separately independent itself. So that's why it's important. That's why I'm very enthusiastic about what we do since I signed the deal. And for sure, at the beginning, it's just a question of the very deep knowledge of our projects, how we operate, our turnover -- but we will see some little things improve since the year end -- for the end of the year, but mainly in '24 and '25.

We are now going to take our next question. And the questions come from the line of Michael Glen from Raymond James.

Can you remind us 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 do have pricing initiatives that we've talked about in the past, again, trying to keep up with certain inflationary pressures when we do experience them. I would say, overall, as Sebastien mentioned earlier on the call, from a supply chain perspective, things are relatively stable and back to normal. There could be some issues possibly within freight over the next little while. We've seen some carriers experienced some difficulties there. So that's something that we're monitoring to see whether freight is going to 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 Europe, it's also something that the pricing is a little bit more difficult environment. And at the same time, there have been some inflationary pressures that we've experienced. So I would say that's another area that we're still continuing to monitor. So not sure if that helps you in terms of the inputs, but no, I think things have been relatively stable in China, for example. That's also an area that we haven't seen any sort of inflationary pressures at all coming out of there. So that's a big help. So no, I think we're in a pretty good place.

And just -- if I could just add a couple of 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 in the summer right now, actually. So our Garaventa business put a price increase in the last month. So it's a continued strategy from what we saw last year, and North America typically does it at the beginning of the year with the exception of Garaventa again, a couple of different price increases. But we are monitoring our cost -- our input cost, 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 in Europe. So Europe, it's still -- we are still seeing high inflationary impacts on our input costs, and we're visiting our pricing strategy there and likely going to be targeting price increases, but 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 in Accessibility, North America was about 12%. I think that's the number in the MD&A. Can you break that down or provide some insight across some of the product categories, though is it meaningfully different across product categories?

Yes. So it is about 12% or it was about 12% in the quarter in North America, and that primarily has come from the legacy elevator and platform business. We are still seeing strong backlog in both commercial and residential sectors. I would say there is some opportunity for us to do a bit better on the stairlift side. So I would say more of that 12% comes from legacy platform and elevator lift products where our backlog remains strong, and we do see further opportunities to more so on the stairlift side.

Okay. And then thinking of that then -- I mean, there had been concerns regarding how rising interest rates, softer housing market could potentially impact that residential elevator market. Are you seeing any evidence whatsoever that that's having an impact, negative impact?

I think, the answer to that, our backlog remained very healthy, okay. So far, we did not see any slowdown in our incoming order in North America. Again, we are looking to decrease the lead times, so it will be more aggressive, okay, on the market. But definitely, our backlog is historical also, no impact on our side so far.

We have no further questions at this time. I will now hand back to Mr. Bourassa for closing remarks.

So I just want to thank you to all the people on the call this morning, and thanks for my [indiscernible] partner in Savaria to answer the question. I think it was a great job. Thank you very much. See you in 3 months' time.

This concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you.